Since you are reading this article, chances are you already have a good idea what an exporter does. Most people think an exporter is a person or company who sells to people, companies and/or governments in foreign countries.
But did you know that exporters don’t transfer only physical goods?
You can be an exporter without even knowing it if you are transferring knowledge. That is called a deemed export.
Let’s back up a bit and define a deemed export. The Export Administration Regulations (EAR), define deemed exports this way:
Any release in the United States of "technology" or source code to a foreign person is a deemed export to the foreign person's most recent country of citizenship or permanent residency.
To fully understands the implications of this definition, we need to further define some of the terms used in the EAR.
Release of Technology
Part 734.15 says technology and software is "released" through:
(1) Visual or other inspection by a foreign person of items that reveals "technology" or source code subject to the EAR to a foreign person; or
(2) Oral or written exchanges with a foreign person of "technology" or source code in the United States or abroad.
Part 772 defines "technology" as: "Information necessary for the 'development,' 'production,' 'use,' operation, installation, maintenance, repair, overhaul, or refurbishing (or other terms specified in ECCNs on the CCL that control 'technology) of an item."
In summary, a deemed export occurs when controlled technology is made available to foreign nationals for visual inspection in such forms as technical specifications, plans, blueprints, etc. through electronic media or even by simple visual inspection; when technology is exchanged orally; or when technology is made available by practice or application under the guidance of persons with knowledge of the technology.
You don’t have to cross a border to be an exporter. You don’t even have to leave your couch! Here are a few major examples:
Colleges and Universities
Institutions of higher education are a major category of deemed exporters. Something as simple as hosting a tour of a laboratory that uses controlled technology or telling someone how to use that technology may be considered a transfer.
Commerce and Business
Noteworthy organizations using deemed export licenses include technology research and development institutions, biochemical firms, and medical and computer sectors.
You’ve checked Twitter or Facebook, read a blog, or at least opened an email in the last 10 minutes, so you know just how powerful the internet’s current of information is. It’s called the web for a reason.
The internet is not a pipeline that routes information only from one location to another. For our purposes, that means to be wary of sharing (transferring or disclosing) controlled information.
The global marketplace means that, for many, working internationally is unavoidable. Transferring a computer with controlled information, as well as the oral exchange of controlled information, is considered a violation. For this reason, it’s important to know exactly what files you’re carrying, what you’re presenting, and what you’re permitted to discuss when you travel for business.
Deemed Export Rules and Regulations
Today, it’s critical to understand that even the slightest exposure of technology or information by a company to any foreign national can be considered a deemed export and cause a company to violate U.S. export regulations. Such a release could cause criminal and civil penalties as well as imprisonment for employees involved in the violation. (See our previous article on this topic.)
Deemed exports are complex and require special attention. There’s no one-size-fits-all solution for all exports. However, there’s an incredible amount of information about deemed exports available on the Deemed Exports section of the Bureau of Industry and Security website that we recommend you reference if you have questions.
This Shipping Solutions blog also includes several other informative articles that can help you become better acquainted with deemed exports:
- Deemed Exports: Exporting Without Shipping a Product
- Six Basic Steps for Export Compliance
- Why the Deemed Export Rule Is So Critical: EAR and ITAR
Export Compliance Penalties
You risk harsh penalties if you transfer deemed exports without a license: criminal penalties can reach 20 years imprisonment and fines of $1 million per violation. Additional penalties can reach $11,000 per violation, and $120,000 per violation in cases involving items controlled for national security reasons. (BIS)
So, don’t risk it! Make sure you do your research, follow each regulation, and seek assistance if you come to a question about deemed exports.
This article was first published in September 2014 and has been updated to include current information, links and formatting.