According to the BIS, new export license exception Intra-Company Transfers ("ICT") will be introduced hopefully in July 2008. Details are described in below.
In recent weeks, the US Department of Commerce's Bureau of Industry and Security (BIS) has taken long-awaited action to address an area of concern for companies that have an international presence - namely, the need for a license exception to permit intra-company transfers of US-origin software and technology. Under the US Export Administration Regulations (EAR), most cross-border accessing of US-origin software source code or technology is considered to be an export, subject to US regulations and licensing requirements.
In March 2008, BIS Deputy Assistant Secretary Matthew Borman announced BIS's progress on a proposed "intra-company transfer" (ICT) license exception. This license exception would allow companies to share dual-use items and technology with their foreign subsidiaries and foreign nationals without a license. Companies would be required to obtain one-time approval from BIS, which would be based on a company's implementation of a strong internal compliance plan as well as a vetting of foreign end-users and individuals who would be eligible to have access to the technology. An annual audit mechanism would also likely be required. Mr. Borman stated that "if a company meets all the requirements, and that consists of a very tight export control program, then it will be able to transfer within its corporate structure here or abroad a universe of hardware, software and technology." Mr. Borman also indicated that there would be significant flexibility with respect to the types of EAR-controlled items that would be eligible for the license exception.
The proposed intra-company transfer license exception is consistent with the March 2007 recommendations of the Coalition for Security and Competitiveness, which also suggested that BIS use its license exception on encryption (i.e., license exception ENC) as a procedural model. Under the procedure for license exception ENC, a company must first apply to BIS for approval to export the controlled items. If BIS does not make a decision within30 days, the company may proceed with the export under the license exception. It is unknown at this time whether BIS's draft intra-company transfer license exception rule follows this process.
BIS's recent announcement followed on the President's January 2008 statement that his Administration would ensure that dual-use export control policies and practices support the National Security Strategy while facilitating US economic and technological leadership. In connection with increasing US competitiveness, the President highlighted several specific initiatives, including the need to revise controls on intra-company transfers. A license exception for intra-company technology transfers was also recommended in December 2007 by the Deemed Export Advisory Committee (DEAC), which was tasked to advise the US Secretary of Commerce on deemed export policy.
The draft rule relating to license exception ICT has been circulated for interagency feedback, and BIS officials have indicated their intent to publish it for public notice and comment by the end of May 2008. With respect to items that are eligible for license exception ICT, Mr. Borman has said that specific prohibitions on eligible items will not vary from company-to company. However, he has not indicated what will constitute the universe of items that can be freely exchanged among all companies that qualify for this license exception.
Companies that are involved with cross-border transfers of technology and those that seek to centralize multinational business processes and databases will benefit from this new intra-company transfer license exception, as it will make it easier for multinational companies to conduct research and development around the world as well as to facilitate global production and sourcing.
(Source: Client Memorandum by Clifford Chance http://www.cliffordchance.com/ April 2008)