1. U.S.-India Dual-Use Export Policies and Procedures November 2004

2. Purpose of U.S. Export Controls Export controls are used to further U.S. –National security, –Foreign policy, and –Economic interests

3. U.S. Export Control Regime Controls on “dual-use” items – commodities, software, and technology that have both commercial and military application – are administered by the U.S. Department of Commerce. Controls on munitions items are administered by the Department of State.

4. Dual-Use Export Controls The U.S. Export Administration Regulations (EAR) set forth a list of dual-use and commercial items that are subject to control – called the Commerce Control List (CCL). Items that are listed in the CCL are controlled for various reasons, including national security (NS), nuclear proliferation (NP), missile technology (MT), chemical/biological (CB), and anti-terrorism (AT) reasons. Depending on the reason for control of the item and the country of destination, a license may be required for an export. A license exception may be available depending on the nature of the transaction. All dual-use items not specifically listed on the CCL are categorized as EAR99 items, which generally do not require a license to most destinations.

5. There are no sanctions currently in place against India. As with exports to other countries, certain exports to India may require licenses. Most dual-use items exported to India do not require licenses. Many commodities controlled on the CCL may be exported to India using a license exception. –Computer technology and software are eligible for certain license exceptions. –More than 75 percent of encryption products are eligible for export to India under a broad license exception. General Licensing Requirements for India

6. EAR99 items (items not specified on the CCL) may be shipped to most end users in India without an export license. The vast majority of U.S. commercial exports fall into this category. –Exports of EAR99 items to end users on the Entity List, except for Indian Space Research Organization subordinates, require a license. –During Fiscal Year 2004, over one third of dual-use license applications processed for India were for EAR99 items. The United States approved approximately 83 percent of these applications that required a license. General Licensing Requirements for India (Cont.)

7. A license is required to export to India items controlled for nuclear (NP), missile (MT), or chemical/biological weapons (CB) proliferation reasons. –Such licenses are reviewed on a “case-by-case” basis and are not subject to a policy of denial. –Such licenses generally are approved unless the export would make a material contribution to nuclear, missile, or chemical/biological programs of concern, or pose an unacceptable risk of diversion to such programs. Nuclear Missile and Chemical Biological Items

8. Items intended for Indian companies on the Entity List still require an export license. –There is 1 primary Indian organization and 14 subordinate Indian organizations on the Entity List. –There is a “presumption of approval” for applications to export EAR99 items to most listed entities. Recent regulatory changes have removed EAR99 license requirements for some Indian entities. –Applications to export other items are subject to a “case- by-case” review. –The complete list of Indian end users identified on the Entity List is located at: http://www.bis.doc.gov/Entities/Default.htm The Entity List

9. On November 8, 2004, a new missile “catch-all” rule that strengthens and expands the current missile end-use/end-user controls was published. The rule eliminates references to specific missile projects of concern. An exporter or reexporter must obtain a license for any item subject to the EAR if the exporter or reexporter knows or is informed that: ─the item is going to a country in group D:4 for use on a rocket or unmanned air vehicle (UAV) capable of achieving a minimum range of 300 kilometers; ─the item is going any where in the world for use on a rocket or UAV to delivery chemical, biological, or nuclear weapons; or ─the item is going to a country in group D:4 for use on a rocket or UAV for which the range and payload characteristics or the intended end use cannot be determined by the exporter. Exports to Indian missile programs of concern will be denied. “Catch-All” Controls for Missile Programs

10. U.S. exporters must apply for a license if they know or have reason to know that their export will be used in certain nuclear activities in India. –Items intended to ensure the safety of safeguarded civilian nuclear power facilities generally will be reviewed favorably. –Exports of all EAR99 items – including “balance of plant” commodities – generally will be reviewed favorably for use in safeguarded facilities. –Exports to specified unsafeguarded nuclear activities and to nuclear weapons programs will be denied. “Catch-All” Controls for Nuclear Programs

11. U.S. exporters must apply for a license if they know or have reason to know that their export will be used in certain chemical/biological weapons activities. –A license is required for any export or reexport if at the time of export or reexport you know that the item will be used in the design, development, production, stockpiling, or use of chemical/biological weapons. –License applications will be reviewed to determine if the export or reexport would make a material contribution to a program of concern. “Catch-All” Controls for Chemical/Biological Weapons Activities

12. Technology Exports To India As a Group B Country, India is eligible to receive advanced technology, software, and know-how without a license (e.g., under license exceptions TSR and CTP): –Computer Technology and Software –Semiconductor Design and Manufacturing Technology

13. Deemed Exports A “deemed export” is the release in the United States of controlled technology or source code to a foreign national. Indian nationals can work the United States in high technology firms in many cases without Government approval (under license exception). Where deemed export licenses have been required for Indian nationals, BIS processed 65 cases without a denial during FY2004. The average processing time for new deemed export cases was approximately 46 days during FY2004.

14. Dual-Use License Applications for Exports to India Fiscal Year 2003 (October 2002-September 2003) –Approved: 619 ($57 million) –Denied: 72 ($15 million) –TOTAL: 691 ($72 million) – Returned Without Action: 229 ($36 million) Total Fiscal Year 2003 U.S. trade with India: approximately $4.8 billion Fiscal Year 2004 (October 2003-September 2004) –Approved: 912 ($90 million) –Denied: 103 ($13.6 million) –TOTAL: 1,015 ($103.7 million) – Returned Without Action: 264 ($28.3 million) –Fiscal Year 2004 U.S. trade with India: approximately $5.7 billion

15. Analyzing the Statistics Most trade with India does not require a license. –The United States requires a license for only a small percentage of overall trade with India. Approximately one percent of all U.S. trade with India requires an export license. The United States approves a vast majority of exports that require a license. –In Fiscal Year 2004, the United States approved approximately 90 percent of the applications that required an export license. License application processing is timely and efficient. –Despite the increasing number of applications, dual-use export license applications continue to be processed in approximately 40-45 days.

16. Fewer export license applications are denied for India each year. –Of the export applications that required a license in FY 2003 and 2004, only 10 percent were denied – down from 15 percent in FY 2002. Many submitted applications do not require a license. –Of the cases that are returned without action, most are returned to the applicant because the exports were eligible for shipment under a license exception or no license was required. Analyzing the Statistics (continued)

17. U.S.-India Next Steps in Strategic Partnership (NSSP) In September 2004, the United States published a regulation implementing the Phase One of the NSSP export licensing commitments. The regulatory changes include: –Removing the Indian Space Research Organization (ISRO) Headquarters from the Entity List; –Removing licensing requirements for low-level dual-use items exported to ISRO subordinate entities listed on the Entity List; and –Expanding the “presumption of approval” policy for all dual-use items not controlled by the Nuclear Suppliers Group (NSG), if intended for export to the “balance of plant” portion of an Indian nuclear facility subject to international safeguards.

18. Effect of Phase One Phase One licensing changes are expected to: –Reduce the number of applications for ISRO subordinate entities by approximately 250 applications per year, or approximately 75 to 85 percent. –Reduce the total number of applications for all dual-use exports to India by approximately 20 to 25 percent. –Since the implementation of this new licensing policy in September, the Department of Commerce has returned over 23 license applications for exports to these end users because a license was no longer required.

19. Summary Export licensing requirements apply to only a very small percentage of overall U.S.-India trade. Many items subject to export controls can be exported to India without a license or under a license exception. Exports of controlled items to India will be approved provided that such items do not contribute to or pose a risk of diversion to Indian nuclear or missile programs. Applications for controlled items are reviewed on a “case-by- case” basis; there is no longer any policy of denial. The United States and India are committed to working toward enhancing a qualitatively transformed relationship and continuing efforts to stimulate bilateral high-technology commerce.