Comments of President Mote in response to the Advance Notice of Proposed Rulemaking (RIN 0694-AD29)

1. Adopting the OIG's Recommendations Could Negatively Impact the Global Economic and Technological Competitiveness of the United States
   
   Numerous reports issued by The National Academies⁵, National Science Board⁶, the American Electronics Association⁷, the Task Force on the Future of American Innovation8, the Council of Graduate Schools⁹, and the President's Council of Advisors on Science and Technology¹⁰ have documented the critical importance of foreign nationals in developing and sustaining this country's national security and scientific and economic superiority. They have also demonstrated that this superiority is fragile. These reports highlight the following concerns: (1) U.S. technological superiority cannot be taken for granted; (2) foreign countries are working aggressively to improve the quality of science and engineering (S&E) education and increase their international competitiveness in those fields; (3) foreign national students and post-docs are critical contributors to U.S. innovation, and (4) the number of foreign students seeking post-undergraduate S&E degrees outside the U.S. is increasing while the number of U.S. students seeking such degrees is decreasing.
   
   University of Maryland figures support some of these conclusions. Foreign nationals are a vital part of this University's academic and innovation community. Twenty-six percent (26%) or 2,585 of our graduate students are foreign nationals, the 12th largest enrollment of foreign graduate students nationwide. The percentages are highest in the School of Engineering where 52% of the graduate students are foreign nationals and over 50% of the faculty plus the dean are foreign born and in the College of Computer, Mathematical and Physical Sciences where 45% of the graduate students plus the dean are foreign nationals. Sixty-nine percent (69%) of our foreign national graduate students are from Asia, mainly China (36%), India (24%), Taiwan (13%), and Korea (9%). The number of applications from international students to U.S. institutions of higher education has decreased nationally and at the University of Maryland. Applications from foreign nationals decreased nationally 28% for fall 2004 and 37% at the University of Maryland. The decrease for fall 2005 is an additional 5% nationally and at the University.
   
   Our Office of Technology Commercialization collects citizenship information during patent filings from faculty and students who submit invention disclosures. Of the 801 faculty and student inventors between 2000 and 2004, 49% were not U.S. citizens. This percentage increased steadily during that period from 33% in 2000 to 60% in 2004. Fifty percent (50%) of the student inventors between 2000 and 2004 were not U.S. citizens. Our Office of Technology Commercialization also nominates inventions for Invention of the Year awards from fields in life, information and physical sciences and engineering. Again, the contributions of non-U.S. citizens are significant. Of the 50 inventions selected as finalists for that award between 2000 and 2004, 70% had at least one non-U.S. inventor. This percentage increased from a low of 56% in 2000 to a high of 89% in 2004.
   
   In five years, 90% of all scientists and engineers in the world will be in Asia. Right now, the multinational corporation Intel does 75% of its business overseas. It has 5,000 employees in China and also announced this month it is investing $200 million in Chinese technology companies to stimulate Chinese innovation in hardware, software and services and doubling its efforts to train one million Chinese teachers and 45 million Chinese students on using technology to enhance teaching and learning. The same international growth is true for large numbers of other companies such as GE, Cisco, et al. We are not the only game in town anymore. It is vital to U.S. innovation, global technical and economic security, and national security to identify ways to encourage the best and brightest in S&E to study in the U.S., work in the U.S., and stay in the U.S. We need to use extreme caution when imposing unnecessary barriers to our competitive position. And, let us be clear: there has been no demonstrated basis for the proposed barriers.
   
   
2. Adopting the Recommendations Could Very Likely Impede Basic Research at Universities
   
   BIS officials and most other persons with a passing familiarity with the EAR know those regulations are complicated, confusing, and hard to apply to specific facts. They cannot be explained let alone implemented. If BIS were to adopt the OIG recommendations regarding "use" technology in universities, universities would have to undertake the same consuming, complicated analyses industry now performs to assure compliance. The key distinction between industry and universities, however, is that industry is generally affected by only a few commodity categories. This is not true for universities. Universities use technologies that involve all ten CCL categories and many ECCNs. There is little chance the deemed export analysis that a university would conduct in one laboratory would carry over to other laboratories. The list would undoubtedly grow in time for the risk of deleting ECCNs would be too great. The growth of the CCL over time is the appropriate predictor of this outcome.
   
   In the light of this reality, faculty and staff at universities and indeed university counsels wishing to be diligent in their efforts to comply with the deemed export rule would be forced to undertake the following reviews:
   • Identify by ECCN every piece of EAR-controlled technology—equipment and software—in every lab; and
   • For each piece of controlled technology identified, determine what "use" technology is controlled; and
   • Identify all foreign national students, post-docs, visitors, interns, part-time scholars, and employees and their home countries (and possibly their country of birth) who have access to or use each piece of controlled technology; and
   • With respect to foreign nationals for whom a license would be required as a condition of receiving controlled technology:
     • Determine if the information they would access qualifies as "Technology"—"specific information necessary for the development, production, or 'use'" of the controlled ECCN; and
     • For each foreign national who would access "Use" technology in CCL Categories 4, 5, 6 and/or 9, determine if that Technology is "Required;" i.e., "peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics or functions;" and
     • Determine if each controlled Technology:
       • Is "Publicly available"; or
       • Is subject to the TSU license exception; i.e., the "minimum necessary for the installation, operation, maintenance (checking), and repair of those products that are eligible for License Exceptions or that are exported under a license." "N.B. The 'minimum necessary' excludes 'development' or 'production' technology and permits 'use' technology only to the extent 'required' to ensure safe and efficient use of the product. Individual ECCNs may further restrict export of 'minimum necessary' information;" or
       • Arose during the course of or resulted from the performance of fundamental research; or
       • Qualifies as "educational information."
   
   Diligent universities would have to conduct these assessments continuously to take into account changes in foreign national student enrollment, the hiring and assignments of foreign national post-docs and employees, and the research projects in which foreign nationals participate, procurements of new equipment, and the expected amendments to the CCL. The need to conduct these complicated assessments would slow down, if not altogether halt in some cases, research on campuses. Conducting the assessments would also have a bone chilling effect on exchanges of unclassified scientific information between students and faculty in laboratories and courses and could possibly create divisive relationships among foreign nationals and U.S. students and faculty.
   
   It is virtually impossible to offer any definitive figures on the personnel and financial impacts to universities to implement the reviews and processes described above. We know too little about what a final rule would say; about what, if any, additional guidance BIS would provide, and whether BIS would implement the recommendations over time or make them effective immediately. The interpretation of the rule and the Control List would also change with time once the principle was established. Nonetheless, the University has attempted to provide a very rough estimate of initial costs to identify the ECCN for capitalized equipment ($5,000 or greater) and determine what "use" technology is controlled for each controlled piece of equipment, assuming that BIS would make clear that information contained in user and equipment manuals provided with equipment and/or available on the Internet would qualify as information in the public domain.
   
   The University of Maryland has over 1,000 research laboratories and related facilities, each of which would be subject to a deemed export audit. As of April 2005, the University inventory listed 22,487 pieces of capitalized equipment (defined as equipment valued at $5,000 or more) and sensitive equipment (defined as computers and audio-visual equipment valued at $1,000 or more and firearms regardless of value). The inventory number does not include common scientific equipment such as GPS systems, radiometers and oscilloscopes, or software that do not qualify as either capitalized or sensitive equipment. Using a commercial rate of $150/hour to determine the ECCN for each piece of equipment, we estimate it would cost roughly $3.3 million to make an initial commodity classification for existing equipment. That decision would be only one of many decisions the University would have to make. Our estimate also does not reflect the costs to develop and maintain a compliance infrastructure.
   
   An export compliance infrastructure would require the creation of an equipment database of each piece of controlled equipment identified by ECCN, location, and CCL controls. Since new equipment is bought year round, we would have to develop, implement and maintain a centralized mechanism for identifying purchases of all new equipment, not just capitalized equipment, and conducting a CCL classification. In addition, the University would have to develop a mechanism to identify each foreign national working in each laboratory on each piece of equipment by current nationality and country of birth, preferably months in advance to allow for applying for licenses should that be necessary. It is possible the University also might have to implement considerably more complex lab security measures than currently exist.
   
   Establishing and maintaining the infrastructure and protocols to support such assessments would obviously require significant time and expense. Richard T. Cuppitt, Ph.D., the Associate Director of the Center for International Trade and Security at the University of Georgia, has estimated that a "good [export] compliance program may cost in the neighborhood of $400,000 - $500,000 a year," an estimate that does not take into account deemed export analyses.
   
   The true cost and the most damaging loss, however, would be to the disruption of the research programs and the reduced involvement and contributions of foreign nationals to the security and economic development of the United States. This is the principal problem.
   
   I am aware BIS officials have speculated that were BIS to adopt the OIG recommendations, universities would find, after completing the necessary reviews, a deemed export license was not required in most situations. I tend to think this is wishful thinking on BIS' part. Adopting the OIG's recommendations would not make the regulations any less ambiguous or easier for industry or universities to interpret and apply, to which industry can surely attest. Universities would struggle, as industry does now, to understand and apply to countless factual situations such ambiguous EAR terms as "specially designed," "minimum necessary" and "required." In the face of these ambiguities and strict liability for violations, many universities could decide the risks associated with making self-assessments are too great and, to be on the safe-side, would submit requests to BIS for interpretations, guidance and deemed export licenses. Time will tell. What should be expected as an outcome is that neither our universities nor their students will accept the burden of these license reviews on any substantial scale. The result will be a substantial decline in foreign student and scholar participation in the academy. This is the true cost to our country.
   
   
3. Adopting the Recommendations Would Constitute a Major, and for All Intents and Purposes, Permanent Change in BIS Interpretation and Application of the Deemed Export Rule in Universities
   
   At first glance, changing "or" to "and/or" in the definition of "use" and distinguishing between using controlled equipment and receiving information on how to use that equipment would appear to be a harmless amendment with little or no impact on U.S. universities. The intent could be nothing further from that outcome. The OIG recommendations to modify the application of the deemed export rule to the release of "use" technology in the context of teaching and conducting basic research activities would not simply codify long-standing internal BIS interpretation of the deemed export rule, as some have claimed. On the contrary, adopting the recommendations would constitute a significant and essentially permanent shift in how BIS has interpreted and applied the deemed export rule in the university context for almost 20 years.
   
   Since at least 1989, BIS policy has excluded from the license requirement the release of technical data about designing and manufacturing controlled equipment—information that goes beyond the release of operational or maintenance data—to foreign national students and researchers as "educational information" when the information is released in catalog courses and associated teaching labs at universities. [54 Fed. Reg. 40643 (Oct. 3, 1989)]. BIS guidance on this point remains unchanged in the current version of EAR Part 734, Supplement 1, Question C (1):

   Question C (1): I teach a university graduate course on design and manufacture of very highspeed integrated circuitry. Many of the students are foreigners. Do I need a license to teach this course?
   
   Answer: No. Release of information by instruction in catalog courses and associated teaching laboratories of academic institutions is not subject to the EAR (734.9 of this part [The definition of "Educational Information."]) (emphasis added).

   Prior to the 1994 amendments to the EAR, the deemed export rule applied only to disclosures of technical data to foreign nationals in the United States with "knowledge or intent that [the data] will be shipped from the United States to a foreign country without a general or validated license." [Former EAR § < 779.1(b)(1)(c)] Moreover, general license GTDR, which existed as early as 1982, "permit[ted] the transfer of information concerning almost all nonmilitary industrial process technology throughout the free world." [54 Fed. Reg. 40643 (Oct. 3, 1989)] This position was fully consistent with BIS' long standing interpretation that the fundamental research exclusion exempts University faculty and researchers from obtaining a license as a condition of allowing foreign nationals to work in university laboratories to perform fundamental research and, by implication, learning how to use equipment in those laboratories to conduct that research. [EAR Part 734, Supplement 1, Question D (1)]
   
   Adopting the OIG recommendations would constitute a significant departure from years of unchallenged interpretations of the EAR.