Wednesday, March 1, 2000
Continuing demand for engineers in Silicon Valley and elsewhere in the US has resulted in positions being filled by many engineers from other countries. Although the ins and outs of immigration law requirements are more or less understood, employees and employers both must know U.S. export controls. Restrictions in that area may also have an impact as such engineers in the IT field will have access to software and other technology.
A person with permanent resident status (for example, a green card holder) is not considered a foreign national, but a visitor to the US on a nonimmigrant visa such as an L-1 or H-1 is considered one.
The Export Administration Regulations (EAR) administered by the Department of Commerce provide that software source code (but not the object code) may be considered “exported” even though they may not be actually transmitted or shipped out of the US. For encryption software, the source code and technology may be released without a license to foreign national employees of US companies in the United States, but only for internal company use such as development of new products, according to new regulations announced early this year.
Under the EAR, a release of source code or other technology to a foreign national in the US is considered an “export” to the home country of the foreign national. A “release” is considered allowing any exposure of the foreign national to the code. For example, if a person looks at — or is even privy to conversations about — the code, the code may be considered “released” to that person. Mere use of object code versions of software without access to the source code is not considered an export. The State Department interprets the International Traffic in Arms Regulations (ITAR) the same way.
For example, if a People’s Republic of China (PRC) national is hired to work on a software development project in the US under an H-1 visa, his or her employer must analyze the export licensing requirements for the software since the employee will have access to the source code. If the PRC national will be working on a project to develop relational database software, the source code normally would be exportable to the PRC under a No License Required (NLR) provision. Therefore, the PRC national’s access to the source code in the US would be under NLR.
On the other hand, if the PRC national will be working on a project developing integrated circuit CAD software and will have access to source code that simulates the physical layout of a circuit, the employer must obtain a validated export license prior to allowing access to the PRC national.
An Exception
The classification of software generally will depend on the classification of products for which such software is “specially designed.” An exception to this general rule is computer-aided design (CAD) software for integrated circuits. Production CAD software is classified under ECCN 3D003. The source code for production CAD software may be released to foreign nationals from many countries (excluding, significantly, the PRC) under License Exception Restricted Technology and Software (TSR) provided that a written letter of assurance is obtained prior to the export.
On the other hand, general design software normally is classified under NLR with the result that its source code may be released without a license to foreign nationals from all countries except those described below.
The classification of technology, as distinguished from software, generally will track the classification of products that are developed, produced or utilized by reason of such technology. Export controls on software and technology frequently will be more restrictive than controls on the related products. For example, the primary classification of controlled integrated circuits is ECCN 3A001. Many but not all 3A001 ICs are eligible for License Exception CIV, which authorizes civil end-use exports to most countries including the PRC. The related software (3D001) and technology (3E001) provisions, however, do not authorize utilization of License Exception CIV. As an additional example, the primary classification of controlled telecommunications equipment and components is ECCN 5A001. Most 5A001 items are eligible for CIV, but the related software (5D001) and technology (5E001) are not eligible for CIV.
Encryption software and related technology is a particularly sensitive area and should be carefully evaluated before access by foreign nationals is permitted.
Burden of Compliance
The reason for the stricter policy on software source code and technology than on related products is that the US is less concerned about exports of finished products than about protecting the know-how to make such products. The practical effect of this policy is to make it more difficult to transfer source code and technology to foreign national employees without a license. It is possible, however, to apply for a blanket license for transfers to all employees; if granted, the license may be supplemented as new employees are hired.
The export control requirements associate a significant burden with hiring foreign nationals from Iran, Iraq, Syria and other embargoed destinations (Cuba, Libya, North Korea and Sudan), and, to a lesser extent, the PRC and former Warsaw Pact countries. The compliance burden is not as great for hiring foreign nationals from other countries. Most controlled software and technology is eligible for export under TSR to foreign nationals from Country Group B, which excludes, among other countries, the PRC and the countries named above. Therefore, normally all an employer must do is obtain a signed TSR written assurance from the foreign national.
Each hiring situation must be dealt with on a case-by-case basis, taking into consideration both the US immigration and export laws. Appropriate lead time will be needed in order to effectively deal with these requirements when the foreign national is from a sensitive country. In the case of EAR license applications, the entire process can be expedited – and many potential problems avoided or caught early – if the business prepares and has in place an effective internal plan to ensure compliance with all US export control requirements.
