[Code of Federal Regulations]
[Title 15, Volume 2]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 15CFR734.12]

[Page 217-224]
 
                  TITLE 15--COMMERCE AND FOREIGN TRADE
 
  CHAPTER VII--BUREAU OF EXPORT ADMINISTRATION, DEPARTMENT OF COMMERCE
 
PART 734--SCOPE OF THE EXPORT ADMINISTRATION REGULATIONS--Table of Contents
 
Sec. 734.12  Effect on foreign laws and regulations.

    Any person who complies with any of the license or other 
requirements of the EAR is not relieved of the responsibility of 
complying with applicable foreign laws and regulations. Conversely, any 
person who complies with the license or other requirements of a foreign 
law or regulation is not relieved of the responsibility of complying 
with U.S. laws and regulations, including the EAR.

  Supplement No. 1 to Part 734--Questions and Answers--Technology and 
                       Software Subject to the EAR

    This Supplement No. 1 contains explanatory questions and answers 
relating to technology and software that is subject to the EAR. It is 
intended to give the public guidance in understanding how BXA interprets 
this part, but is only illustrative, not comprehensive. In addition, 
facts or circumstances that differ in any material way

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from those set forth in the questions or answers will be considered 
under the applicable provisions of the EAR. Exporters should note that 
the provisions of this supplement do not apply to encryption software 
(including source code) transferred from the U.S. Munitions List to the 
Commerce Control List consistent with E.O. 13026 of November 15, 1996 
(61 FR 58767) and pursuant to the Presidential Memorandum of that date. 
See Sec. 742.15 of the EAR. This supplement is divided into nine 
sections according to topic as follows:
    Section A: Publication of technology and exports and reexports of 
technology that has been or will be published.
    Section B: Release of technology at conferences.
    Section C: Educational instruction.
    Section D: Research, correspondence, and informal scientific 
exchanges.
    Section E: Federal contract controls.
    Section F: Commercial consulting.
    Section G: Software.
    Section H: Availability in a public library.
    Section I: Miscellaneous.

                         Section A: Publication

    Question A(1): I plan to publish in a foreign journal a scientific 
paper describing the results of my research, which is in an area listed 
in the EAR as requiring a license to all countries except Canada. Do I 
need a license to send a copy to my publisher abroad?
    Answer: No. This export transaction is not subject to the EAR. The 
EAR do not cover technology that is already publicly available, as well 
as technology that is made public by the transaction in question 
(Secs. 734.3 and 734.7 of this part). Your research results would be 
made public by the planned publication. You would not need a license.
    Question A(2): Would the answer differ depending on where I work or 
where I performed the research?
    Answer: No. Of course, the result would be different if your 
employer or another sponsor of your research imposed restrictions on its 
publication (Sec. 734.8 of this part).
    Question (A)3: Would I need a license to send the paper to the 
editors of a foreign journal for review to determine whether it will be 
accepted for publication?
    Answer: No. This export transaction is not subject to the EAR 
because you are submitting the paper to the editors with the intention 
that the paper will be published if favorably received 
(Sec. 734.7(a)(4)(iii) of this part).
    Question A(4): The research on which I will be reporting in my paper 
is supported by a grant from the Department of Energy (DOE). The grant 
requires prepublication clearance by DOE. Does that make any difference 
under the Export Administration Regulations?
    Answer: No, the transaction is not subject to the EAR. But if you 
published in violation of any Department of Energy controls you have 
accepted in the grant, you may be subject to appropriate administrative, 
civil, or criminal sanctions under other laws.
    Question A(5): We provide consulting services on the design, layout, 
and construction of integrated circuit plants and production lines. A 
major part of our business is the publication for sale to clients of 
detailed handbooks and reference manuals on key aspects on the design 
and manufacturing processes. A typical cost of publishing such a 
handbook and manual might be $500; the typical sales price is about 
$15,000. Is the publication and sale of such handbooks or manuals 
subject to the EAR?
    Answer: Yes. The price is above the cost of reproduction and 
distribution (Sec. 734.7(a)(1) of this part). Thus, you would need to 
obtain a license or qualify for a License Exception before you could 
export or reexport any of these handbooks or manuals.
    Question A(6): My Ph.D. thesis is on technology, listed in the EAR 
as requiring a license to all destinations except Canada, which has 
never been published for general distribution. However, the thesis is 
available at the institution from which I took the degree. Do I need a 
license to send another copy to a colleague overseas?
    Answer: That may depend on where in the institution it is available. 
If it is not readily available in the university library (e.g., by 
filing in open stacks with a reference in the catalog), it is not 
``publicly available'' and the export or reexport would be subject to 
the EAR on that ground. The export or reexport would not be subject to 
the EAR if your Ph.D. research qualified as ``fundamental research'' 
under Sec. 734.8 of this part. If not, however, you will need to obtain 
a license or qualify for a License Exception before you can send a copy 
out of the country.
    Question A(7): We sell electronically recorded information, 
including software and databases, at wholesale and retail. Our products 
are available by mail order to any member of the public, though intended 
for specialists in various fields. They are priced to maximize sales to 
persons in those fields. Do we need a license to sell our products to 
foreign customers?
    Answer: You would not need a license for otherwise controlled 
technology or software if the technology and software are made publicly 
available at a price that does not exceed the cost of production and 
distribution to the technical community. Even if priced at a higher 
level, the export or reexport of the technology or software source code 
in a library accessible to the public is not subject to the EAR 
(Sec. 734.7(a) of this part).

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                         Section B: Conferences

    Question B(1): I have been invited to give a paper at a prestigious 
international scientific conference on a subject listed as requiring a 
license under the EAR to all countries, except Canada. Scientists in the 
field are given an opportunity to submit applications to attend. 
Invitations are given to those judged to be the leading researchers in 
the field, and attendance is by invitation only. Attendees will be free 
to take notes, but not make electronic or verbatim recordings of the 
presentations or discussions. Some of the attendees will be foreigners. 
Do I need a license to give my paper?
    Answer: No. Release of information at an open conference and 
information that has been released at an open conference is not subject 
to the EAR. The conference you describe fits the definition of an open 
conference (Sec. 734.7(a) of this part).
    Question B(2): Would it make any difference if there were a 
prohibition on making any notes or other personal record of what 
transpires at the conference?
    Answer: Yes. To qualify as an ``open'' conference, attendees must be 
permitted to take notes or otherwise make a personal record (although 
not necessarily a recording). If note taking or the making of personal 
records is altogether prohibited, the conference would not be considered 
``open''.
    Question B(3): Would it make any difference if there were also a 
registration fee?
    Answer: That would depend on whether the fee is reasonably related 
to costs and reflects an intention that all interested and technically 
qualified persons should be able to attend (Sec. 734.7(a)(4)(ii) of this 
part).
    Question B(4): Would it make any difference if the conference were 
to take place in another country?
    Answer: No.
    Question B(5): Must I have a license to send the paper I propose to 
present at such a foreign conference to the conference organizer for 
review?
    Answer: No. A license is not required under the EAR to submit papers 
to foreign organizers of open conferences or other open gatherings with 
the intention that the papers will be delivered at the conference, and 
so made publicly available, if favorably received. The submission of the 
papers is not subject to the EAR (Sec. 734.7(a)(4)(iii) of this part).
    Question B(6): Would the answers to any of the foregoing questions 
be different if my work were supported by the Federal Government?
    Answer: No. You may export and reexport the papers, even if the 
release of the paper violates any agreements you have made with your 
government sponsor. However, nothing in the EAR relieves you of 
responsibility for conforming to any controls you have agreed to in your 
Federal grant or contract.

                   Section C: Educational Instruction

    Question C(1): I teach a university graduate course on design and 
manufacture of very high-speed 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 (Sec. 734.9 of this part).
    Question C(2): Would it make any difference if some of the students 
were from countries to which export licenses are required?
    Answer: No.
    Question C(3): Would it make any difference if I talk about recent 
and as yet unpublished results from my laboratory research?
    Answer: No.
    Question C(4): Even if that research is funded by the Government?
    Answer: Even then, but you would not be released from any separate 
obligations you have accepted in your grant or contract.
    Question C(5): Would it make any difference if I were teaching at a 
foreign university?
    Answer: No.
    Question C(6): We teach proprietary courses on design and 
manufacture of high-performance machine tools. Is the instruction in our 
classes subject to the EAR?
    Answer: Yes. That instruction would not qualify as ``release of 
educational information'' under Sec. 734.9 of this part because your 
proprietary business does not qualify as an ``academic institution'' 
within the meaning of Sec. 734.9 of this part. Conceivably, however, the 
instruction might qualify as ``release at an open * * * seminar, * * * 
or other open gathering'' under Sec. 734.7(a) of this part. The 
conditions for qualification of such a seminar or gathering as ``open'', 
including a fee ``reasonably related to costs (of the conference, not of 
producing the data) and reflecting an intention that all interested and 
technically qualified persons be able to attend,'' would have to be 
satisfied.

 Section D: Research, Correspondence, and Informal Scientific Exchanges

    Question D(1): Do I need a license in order for a foreign graduate 
student to work in my laboratory?
    Answer: Not if the research on which the foreign student is working 
qualifies as ``fundamental research'' under Sec. 734.8 of this part. In 
that case, the research is not subject to the EAR.
    Question D(2): Our company has entered into a cooperative research 
arrangement

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with a research group at a university. One of the researchers in that 
group is a PRC national. We would like to share some of our proprietary 
information with the university research group. We have no way of 
guaranteeing that this information will not get into the hands of the 
PRC scientist. Do we need to obtain a license to protect against that 
possibility?
    Answer: No. The EAR do not cover the disclosure of information to 
any scientists, engineers, or students at a U.S. university in the 
course of industry-university research collaboration under specific 
arrangements between the firm and the university, provided these 
arrangements do not permit the sponsor to withhold from publication any 
of the information that he provides to the researchers. However, if your 
company and the researchers have agreed to a prohibition on publication, 
then you must obtain a license or qualify for a License Exception before 
transferring the information to the university. It is important that you 
as the corporate sponsor and the university get together to discuss 
whether foreign nationals will have access to the information, so that 
you may obtain any necessary authorization prior to transferring the 
information to the research team.
    Question D(3): My university will host a prominent scientist from 
the PRC who is an expert on research in engineered ceramics and 
composite materials. Do I require a license before telling our visitor 
about my latest, as yet unpublished, research results in those fields?
    Answer: Probably not. If you performed your research at the 
university, and you were subject to no contract controls on release of 
the research, your research would qualify as ``fundamental research'' 
(Sec. 734.8(a) of this part). Information arising during or resulting 
from such research is not subject to the EAR (Sec. 734.3(b)(3) of this 
part).
    You should probably assume, however, that your visitor will be 
debriefed later about anything of potential military value he learns 
from you. If you are concerned that giving such information to him, even 
though permitted, could jeopardize U.S. security interests, the Commerce 
Department can put you in touch with appropriate Government scientists 
who can advise you. Write to Department of Commerce, Bureau of Export 
Administration, P.O. Box 273, Washington, DC 20044.
    Question D(4): Would it make any difference if I were proposing to 
talk with a PRC expert in China?
    Answer: No, if the information in question arose during or resulted 
from the same ``fundamental research.''
    Question D(5): Could I properly do some work with him in his 
research laboratory inside China?
    Answer: Application abroad of personal knowledge or technical 
experience acquired in the United States constitutes an export of that 
knowledge and experience, and such an export may be subject to the EAR. 
If any of the knowledge or experience you export in this way requires a 
license under the EAR, you must obtain such a license or qualify for a 
License Exception.
    Question D(6): I would like to correspond and share research results 
with an Iranian expert in my field, which deals with technology that 
requires a license to all destinations except Canada. Do I need a 
license to do so?
    Answer: Not as long as we are still talking about information that 
arose during or resulted from research that qualifies as ``fundamental'' 
under the rules spelled out in Sec. 734.8(a) of this part.
    Question D(7): Suppose the research in question were funded by a 
corporate sponsor and I had agreed to prepublication review of any paper 
arising from the research?
    Answer: Whether your research would still qualify as ``fundamental'' 
would depend on the nature and purpose of the prepublication review. If 
the review is intended solely to ensure that your publications will 
neither compromise patent rights nor inadvertently divulge proprietary 
information that the sponsor has furnished to you, the research could 
still qualify as ``fundamental.'' But if the sponsor will consider as 
part of its prepublication review whether it wants to hold your new 
research results as trade secrets or otherwise proprietary information 
(even if your voluntary cooperation would be needed for it to do so), 
your research would no longer qualify as ``fundamental.'' As used in 
these regulations it is the actual and intended openness of research 
results that primarily determines whether the research counts as 
``fundamental'' and so is not subject to the EAR.
    Question D(8): In determining whether research is thus open and 
therefore counts as ``fundamental,'' does it matter where or in what 
sort of institution the research is performed?
    Answer: In principle, no. ``Fundamental research'' is performed in 
industry, Federal laboratories, or other types of institutions, as well 
as in universities. The regulations introduce some operational 
presumptions and procedures that can be used both by those subject to 
the regulations and by those who administer them to determine with some 
precision whether a particular research activity is covered. Recognizing 
that common and predictable norms operate in different types of 
institutions, the regulations use the institutional locus of the 
research as a starting point for these presumptions and procedures. 
Nonetheless, it remains the type of research, and particularly the 
intent and freedom to publish, that identifies ``fundamental

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research,'' not the institutional locus (Sec. 734.8(a) of this part).
    Question D(9): I am doing research on high-powered lasers in the 
central basic-research laboratory of an industrial corporation. I am 
required to submit the results of my research for prepublication review 
before I can publish them or otherwise make them public. I would like to 
compare research results with a scientific colleague from Vietnam and 
discuss the results of the research with her when she visits the United 
States. Do I need a license to do so?
    Answer: You probably do need a license (Sec. 734.8(d) of this part). 
However, if the only restriction on your publishing any of that 
information is a prepublication review solely to ensure that publication 
would compromise no patent rights or proprietary information provided by 
the company to the researcher your research may be considered 
``fundamental research,'' in which case you may be able to share 
information because it is not subject to the EAR. Note that the 
information will be subject to the EAR if the prepublication review is 
intended to withhold the results of the research from publication.
    Question D(10): Suppose I have already cleared my company's review 
process and am free to publish all the information I intend to share 
with my colleague, though I have not yet published?
    Answer: If the clearance from your company means that you are free 
to make all the information publicly available without restriction or 
delay, the information is not subject to the EAR. (Sec. 734.8(d) of this 
part)
    Question D(11): I work as a researcher at a Government-owned, 
contractor-operated research center. May I share the results of my 
unpublished research with foreign nationals without concern for export 
controls under the EAR?
    Answer: That is up to the sponsoring agency and the center's 
management. If your research is designated ``fundamental research'' 
within any appropriate system devised by them to control release of 
information by scientists and engineers at the center, it will be 
treated as such by the Commerce Department, and the research will not be 
subject to the EAR. Otherwise, you would need to obtain a license or 
qualify for a License Exception, except to publish or otherwise make the 
information public (Sec. 734.8(c) of this part).

                  Section E: Federal Contract Controls

    Question E(1): In a contract for performance of research entered 
into with the Department of Defense (DOD), we have agreed to certain 
national security controls. DOD is to have ninety days to review any 
papers we proposed before they are published and must approve assignment 
of any foreign nationals to the project. The work in question would 
otherwise qualify as ``fundamental research'' section under Sec. 734.8 
of this part. Is the information arising during or resulting from this 
sponsored research subject to the EAR?
    Answer: Under Sec. 734.11 of this part, any export or reexport of 
information resulting from government-sponsored research that is 
inconsistent with contract controls you have agreed to will not qualify 
as ``fundamental research'' and any such export or reexport would be 
subject to the EAR. Any such export or reexport that is consistent with 
the controls will continue to be eligible for export and reexport under 
the ``fundamental research'' rule set forth in Sec. 734.8(a) of this 
part. Thus, if you abide by the specific controls you have agreed to, 
you need not be concerned about violating the EAR. If you violate those 
controls and export or reexport information as ``fundamental research'' 
under Sec. 734.8(a) of this part, you may subject yourself to the 
sanctions provided for under the EAR, including criminal sanctions, in 
addition to administrative and civil penalties for breach of contract 
under other law.
    Question E(2): Do the Export Administration Regulations restrict my 
ability to publish the results of my research?
    Answer: The Export Administration Regulations are not the means for 
enforcing the national security controls you have agreed to. If such a 
publication violates the contract, you would be subject to 
administrative, civil, and possible criminal penalties under other law.

                    Section F: Commercial Consulting

    Question F(1): I am a professor at a U.S. university, with expertise 
in design and creation of submicron devices. I have been asked to be a 
consultant for a ``third-world'' company that wishes to manufacture such 
devices. Do I need a license to do so?
    Answer: Quite possibly you do. Application abroad of personal 
knowledge or technical experience acquired in the United States 
constitutes an export of that knowledge and experience that is subject 
to the Export Administration Regulations. If any part of the knowledge 
or experience your export or reexport deals with technology that 
requires a license under the EAR, you will need to obtain a license or 
qualify for a License Exception.

                    Section G: Software 2
---------------------------------------------------------------------------

    \2\ Exporters should note that these provisions do not apply to 
software controlled under the International Traffic in Arms Regulations 
(e.g., certain encryption software).
---------------------------------------------------------------------------

    Question G(1): Is the export or reexport of software in machine 
readable code subject to the EAR when the source code for such software 
is publicly available?

[[Page 222]]

    Answer: If the source code of a software program is publicly 
available, then the machine readable code compiled from the source code 
is software that is publicly available and therefore not subject to the 
EAR.
    Question G(2): Is the export or reexport of software sold at a price 
that does not exceed the cost of reproduction and distribution subject 
to the EAR?
    Answer: Software in machine readable code is publicly available if 
it is available to a community at a price that does not exceed the cost 
of reproduction and distribution. Such reproduction and distribution 
costs may include variable and fixed allocations of overhead and normal 
profit for the reproduction and distribution functions either in your 
company or in a third party distribution system. In your company, such 
costs may not include recovery for development, design, or acquisition. 
In this case, the provider of the software does not receive a fee for 
the inherent value of the software.
    Question G(3): Is the export or reexport of software subject to the 
EAR if it is sold at a price BXA concludes in a classification letter to 
be sufficiently low so as not to subject it to the EAR?
    Answer: In response to classification requests, BXA may choose to 
classify certain software as not subject to the EAR even though it is 
sold at a price above the costs of reproduction and distribution as long 
as the price is nonetheless sufficiently low to qualify for such a 
classification in the judgment of BXA.

                Section H: Available in a Public Library

    Question H(1): Is the export or reexport of information subject to 
the EAR if it is available in a library and sold through an electronic 
or print service?
    Answer: Electronic and print services for the distribution of 
information may be relatively expensive in the marketplace because of 
the value vendors add in retrieving and organizing information in a 
useful way. If such information is also available in a library--itself 
accessible to the public--or has been published in any way, that 
information is ``publicly available'' for those reasons, and the 
information itself continues not to be subject to the EAR even though 
you access the information through an electronic or print service for 
which you or your employer pay a substantial fee.
    Question H(2): Is the export or reexport of information subject to 
the EAR if the information is available in an electronic form in a 
library at no charge to the library patron?
    Answer: Information available in an electronic form at no charge to 
the library patron in a library accessible to the public is information 
publicly available even though the library pays a substantial 
subscription fee for the electronic retrieval service.
    Question H(3): Is the export or reexport of information subject to 
the EAR if the information is available in a library and sold for more 
than the cost of reproduction and distribution?
    Answer: Information from books, magazines, dissertations, papers, 
electronic data bases, and other information available in a library that 
is accessible to the public is not subject to the EAR. This is true even 
if you purchase such a book at more than the cost of reproduction and 
distribution. In other words, such information is ``publicly available'' 
even though the author makes a profit on your particular purchase for 
the inherent value of the information.

                        Section I: Miscellaneous

    Question I(1): The manufacturing plant that I work at is planning to 
begin admitting groups of the general public to tour the plant 
facilities. We are concerned that a license might be required if the 
tour groups include foreign nationals. Would such a tour constitute an 
export? If so, is the export subject to the EAR?
    Answer: The EAR define exports and reexports of technology to 
include release through visual inspection by foreign nationals of U.S.-
origin equipment and facilities. Such an export or reexport qualifies 
under the ``publicly available'' provision and would not be subject to 
the EAR so long as the tour is truly open to all members of the public, 
including your competitors, and you do not charge a fee that is not 
reasonably related to the cost of conducting the tours. Otherwise, you 
will have to obtain a license, or qualify for a License Exception, prior 
to permitting foreign nationals to tour your facilities (Sec. 734.7 of 
this part).
    Question I(2): Is the export or reexport of information subject to 
the EAR if the information is not in a library or published, but sold at 
a price that does not exceed the cost of reproduction and distribution?
    Answer: Information that is not in a library accessible to the 
public and that has not been published in any way, may nonetheless 
become ``publicly available'' if you make it both available to a 
community of persons and if you sell it at no more than the cost of 
reproduction and distribution. Such reproduction and distribution costs 
may include variable and fixed cost allocations of overhead and normal 
profit for the reproduction and distribution functions either in your 
company or in a third party distribution system. In your company, such 
costs may not include recovery for development, design, or acquisition 
costs of the technology or software. The reason for this conclusion is 
that the provider of the information receives nothing for the inherent 
value of the information.

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    Question I(3): Is the export or reexport of information contributed 
to an electronic bulletin board subject to the EAR?
    Answer: Assume each of the following:
    1. Information is uploaded to an electronic bulletin board by a 
person that is the owner or originator of the information;
    2. That person does not charge a fee to the bulletin board 
administrator or the subscribers of the bulletin board; and
    3. The bulletin board is available for subscription to any 
subscriber in a given community regardless of the cost of subscription.
    Such information is ``publicly available'' and therefore not subject 
to the EAR even if it is not elsewhere published and is not in a 
library. The reason for this conclusion is that the bulletin board 
subscription charges or line charges are for distribution exclusively, 
and the provider of the information receives nothing for the inherent 
value of the information.
    Question I(4): Is the export or reexport of patented information 
fully disclosed on the public record subject to the EAR?
    Answer: Information to the extent it is disclosed on the patent 
record open to the public is not subject to the EAR even though you may 
use such information only after paying a fee in excess of the costs of 
reproduction and distribution. In this case the seller does receive a 
fee for the inherent value of the technical data; however, the export or 
reexport of the information is nonetheless not subject to the EAR 
because any person can obtain the technology from the public record and 
further disclose or publish the information. For that reason, it is 
impossible to impose export controls that deny access to the 
information.

[61 FR 12746, Mar. 25, 1996, as amended at 61 FR 68579, Dec. 30, 1996; 
62 FR 25456, May 9, 1997]

Supplement No. 2 to Part 734--Calculation of Values for De Minimis Rules

    (a) Use the following guidelines in determining values for 
establishing exemptions or for submission of a request for 
authorization:
    (1) U.S. content value.
    (i) U.S. content value is the delivered cost to the foreign 
manufacturer of the U.S. origin parts, components, or materials. (When 
affiliated firms have special arrangements that result in lower than 
normal pricing, the cost should reflect ``fair market'' prices that 
would normally be charged to similar, unaffiliated customers.)
    (ii) In calculating the U.S. content value, do not include parts, 
components, or materials that could be exported from the United States 
to the new country of destination without a license (designated as 
``NLR'') or under License Exception GBS (see part 740 of the EAR) or 
under NLR for items classified as EAR99.
    (2) The foreign-made product value is the normal selling price 
f.o.b. factory (excluding value added taxes or excise taxes).
    (3) To determine the value of the U.S.-origin controlled content, 
you should classify the U.S.-origin content on the Commerce Control 
List, determine those items that would require a license from BXA for 
reexport to the ultimate destination of the foreign-made product if such 
parts, components, or materials were reexported to that destination in 
the form received, and divide the total value of the controlled U.S. 
parts, components, and materials incorporated into the foreign-made item 
by the sale price of the foreign-made item.
    (4) If no U.S. parts, components or materials are incorporated or if 
the incorporated U.S. parts, components, and materials are below the de 
minimis level, then the foreign-made item is not subject to the EAR by 
reason of Sec. 734.4 of this part, the classification of a foreign-made 
item is irrelevant in determining the scope of the EAR, and you should 
skip Step 4 in Sec. 732.2(d) and go on to consider Step 6 in 
Sec. 732.2(f) of the EAR regarding the foreign-produced direct product 
rule.

    Note to paragraph (a)--
    U.S. origin peripheral or accessory devices that are merely rack 
mounted with or cable connected into foreign equipment are not deemed to 
be incorporated components even though intended for use with products 
made abroad. Rather, such items are treated as U.S. items that retain 
their identity and remain subject to the EAR.

    (b) One-time report prior to reliance upon the de minimis exclusion. 
Report requirement. Before you may rely upon the de minimis exclusion 
for foreign software and technology commingled with U.S. software or 
technology, you must file a one-time report for the foreign software or 
technology. The report must include the percentage of U.S.-content by 
value and a description of your calculations including relevant values, 
assumptions, and the basis or methodologies for making the percentage 
calculation. The three criteria important to BXA in its review of your 
report will be the export price of the U.S.-content, the assumption 
regarding future sales of software, and the choice of the scope of 
foreign technology. Your methodologies must be based upon the accounting 
standards used in the operation of your business, and you must specify 
that standard in your report. Regardless of the accounting systems, 
standard, or conventions you use in the operation of your business, you 
may not depreciate the fair market values reported or otherwise reduce 
the fair market values by other accounting conventions such as 
depreciation. You may rely

[[Page 224]]

upon the de minimis exclusion from the commingled rule only to the 
extent you have reported the relevant calculations, values, assumptions, 
and the basis or methodologies for the calculations. These values may be 
historic or projected. You may rely on projected values only to the 
extent that and for so long as they remain consistent with your report 
or future values reduce the U.S.-content under your reported 
assumptions, basis, and methodologies. You are not required to file the 
above report if you do not choose to take advantage of the de minimis 
exclusion from the commingled rule.
    (2) Export price. The report must include a description of the U.S.-
content including its classification on the Commerce Control List, its 
performance characteristics and features, and the method of calculating 
its fair market value. The fair market value shall be the arms-length 
transaction price, if it is available. If an arms-length transaction 
price is unavailable, then the report will describe the valuation method 
chosen to calculate or derive the fair market value. Such methods may 
include comparable market prices or costs of production and 
distribution. This rule does not require calculations based upon any one 
accounting system or U.S. accounting standards. However, you must 
specify the accepted accounting standards you have chosen, and cost-
based methods of valuation must be based upon records you maintain in 
the normal course of business. You should also indicate whether reported 
values are actual arms-length market prices or derived from comparable 
transactions or costs of production, overhead, and profit. For example, 
if you chose to make calculations under the transfer pricing rules of 
the United States Internal Revenue Code at section 482, your report 
should indicate that this is the source for your methodology, and you 
should also indicate which of the several methodologies in these 
transfer pricing rules you have chosen.
    (3) Future software sales. For calculations of U.S.-content in 
foreign software, you shall include your historic and estimated future 
software sales in units and value along with the rationale and basis for 
those estimates in the report. Unlike parts incorporated into 
commodities, the cost of U.S. software code will be attributed or 
allocated to the future sales of foreign-made software incorporating the 
U.S. code, to determine the percentage of U.S. controlled content. In 
making this calculation for foreign-made software, you must make an 
estimate of future software sales of that foreign software if it is 
commingled with or incorporated with the U.S. code. The value of the 
U.S. code commingled with or incorporated into the foreign made software 
shall be divided by the total selling price of all foreign-made software 
units already sold, plus the total selling price of all foreign-made 
software units estimated for future sales.
    (4) Foreign technology and software. For calculations of U.S.-
content in foreign technology and software, you shall include in the 
report a description of the foreign technology or software and a 
description of its fair market value along with the rationale and basis 
for the selection and valuation of such foreign software or technology. 
The report does not require information regarding destinations and end 
users for reexport. The purpose of the report is solely to permit the 
U.S. Government to evaluate the reasonableness of U.S.-content 
calculations.
    (5) Report and wait. If you have not been contacted by BXA 
concerning your report within thirty days after filing the report with 
BXA, you may rely upon the calculations in your report and the de 
minimis exclusions for software and technology for so long as you are 
not contacted by BXA. BXA may contact you concerning your report to 
inquire of you further or to indicate that BXA does not accept the 
assumptions or rationale for your calculations. If you receive such a 
contact or communication from BXA, you may not rely upon the de minimis 
exclusions for software and technology in Sec. 734.4 of this part until 
BXA has indicated whether or not you may do so in the future. You must 
include in your report the name, title, address, telephone number, and 
facsimile number of the person BXA may contact concerning your report.

[61 FR 12746, Mar. 25, 1996, as amended at 62 FR 25456, May 9, 1997]