b. Types of licenses

Section 742.15(a)(2) of the EAR describes ELAs. Unlike individual licenses, ELAs are available for unlimited quantities of encryption commodities and software to all destinations, except Country Group E:1 and E:2. Applicants seeking authorization for Encryption Licensing Arrangements must specify the sales territory and class of end-user on their license applications. 

Network infrastructure items described under 740.17(b)(2)(i)(A) require a license to “more sensitive government end-users" outside of the countries listed in Supp. 3 to 742. Exporters may submit ELA applications for these “more sensitive government end users” outside of the Supp. 3 to 742 countries in the form of 2 license applications 1) worldwide excluding the D:1 countries and 2) D:1 countries. These licenses typically include a pre-shipment notification condition and are only available for items described in 740.17(b)(2)(i)(A). 

Other types of ELAs may be authorized under certain circumstances. 

A license may be required in certain circumstances for both deemed exports and deemed reexports. For encryption items, the deemed export rules apply only to deemed exports of technology and to deemed reexports of technology and source code. There are no deemed export rules for transfers of encryption source code to foreign nationals in the United States. This is because of the way that section 734.2 defines exports and reexports of encryption items. 

For transfers of encryption technology within the United States, section 740.17(a)(2) of license exception ENC authorizes the export and reexport of encryption technology “by a U.S. company and its subsidiaries to foreign nationals who are employees, contractors, or interns of a U.S. company...” There is no definition of a “U.S. company” in the EAR, however, BIS has interpreted this to apply to any company operating in the United States. This means that deemed export licenses are generally not required for the transfer or encryption technology by a company in the U.S. to its foreign national employees. A deemed export license may be required if, for example, a company operating in the U.S. were to transfer encryption technology to a foreign national who is not an employee, contractor or intern of a company in the United States. 

For deemed exports, the end-user would have to be an employee, contractor, or intern of a “U.S. Subsidiary” for 740.17(a)(2) to apply, or a ‘private sector end-user' headquartered in a Supplement 3 country for a 740.17(a)(1) to apply. The term ‘contractor’ in this context means a contract employee (i.e. a human person). 

License exception ENC does not authorize deemed exports or reexports to any national of a country listed in Country Group E:1 or E:2.