International Law Advisory - BIS Revises Export Controls Restrictions on High-Performance Computers, Computer Exports to Bulgaria

This is to advise you that on Monday, April 24, the Department of Commerce, Bureau of Industry and Security (“BIS”) issued a final rule revising the Export Administration Regulations (“EAR”) export controls regarding high-performance computers (“HPCs”).  See 71 Fed. Reg. 20876. The revisions create new criteria for determining the level of controls for HPCs, which should result in fewer license requests for HPCs to most countries.  These changes are a result, in part, of multilateral discussions in December 2005 among members of the Wassenaar Arrangement, and reflect an updating of U.S. and multinational export controls on HPCs to account for advancements in computer processing technologies over the last several years.  BIS also has revised the EAR to move Bulgaria from Computer Tier 3 to Computer Tier 1.  The Bulgaria revisions are effective June 3, 2006; the balance of the regulation went into effect on April 24.

Under the previous rules, the degree of export controls applicable to HPCs was determined principally by reference to the “composite theoretical performance” or CTP of the computer system.  BIS has determined, however, that the use of CTP no longer serves as the most accurate method for differentiating between generic commodity computer systems and high-end special order computer systems that carry greater national security significance.  Accordingly, the April 24 rule revises the control formula for HPCs to one based on a “double precision floating point” (“DP FP”) computation, with a control formula of “Adjusted Peak Performance” (“APP”) replacing the “Million Theoretical Operations Per Second” (“MTOPS”) methodology previously used in the EAR.  A methodology for calculating APP is set forth in a new technical note at the end of Category 4 of the EAR Commerce Control List.

This change is accompanied by a number of related revisions to the EAR, including terminology changes to License Exception CTP (now “License Exception APP”), removal of the XP “reason for control” in the EAR (as HPCs are adequately controlled under pre-existing national security (“NS”) controls), and removal of missile technology (“MT”) controls from ECCN 4A003.  Most importantly, ECCN 4A003, which is subject to NS and other heightened controls, has been revised to specify that it covers computers having an APP exceeding .75 weighted TeraFLOPS (or trillion floating point operations per second). In addition, ECCN 4A994, which is subject only to anti-terrorism ("AT") controls, has been revised to cover computers exceeding .00001 weighted TeraFLOPS but fewer than .75.  The previous threshold for ECCNs 4A003 and 4A994 had been 190,000 MTOPS and 6 MTOPS, respectively.  As a result of these changes, computers that calculate at less than .75 weighted TeraFLOPS can now generally be exported without a license to countries other than designated terrorist-supporting countries (currently Cuba, Iran, Libya, North Korea, Sudan, and Syria), although certain reporting and record-keeping procedures may apply for those exports.

BIS has noted that the new regulations should result in fewer license applications for HPCs.  In terms of comparing the new to the old calculation methodology, some industry sources have indicated that one million FLOPS approximates roughly to .75 MTOPS, although others note that MTOPS and FLOPS cannot be compared to one another as they measure different functions.  Assuming that the .75 : 1 ratio is reasonable, .75 TeraFLOPS would equate approximately to 562,500 MTOPS, and .00001 TeraFlops would equal roughly 7.5 MTOPS, which would make both the 4A003 and 4A994 thresholds effectively higher than they were under the MTOPS system.

In addition, as noted above, the April 24 rule also shifts Bulgaria from Computer Tier 3 to Computer Tier 1.  This revision eases export controls on computer shipments and the sharing of computer technologies with Bulgaria, as it broadens eligibility under License Exception APP (formerly “CTP”), 15 C.F.R. § 740.7, for exports to Bulgaria.

If you have any questions regarding these revisions to the EAR, please contact Ed Krauland at 202-429-8083 or David Lorello at 202-429-6757.