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NOAA Workshop on U.S. Export Controls. June 7-9, 2011 – HCHB June 28-30, 2011 - Seattle. U.S. Department of Commerce Bureau of Industry and Security. Deemed Export Compliance. Bernard Kritzer Director Office of Exporter Services BKritzer@bis.doc.gov. Agenda. Export Controls Overview

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noaa workshop on u s export controls

NOAA Workshop on U.S. Export Controls

June 7-9, 2011 – HCHB

June 28-30, 2011 - Seattle

slide2

U.S. Department of Commerce

Bureau of Industry and Security

Deemed Export Compliance

Bernard Kritzer

Director

Office of Exporter Services

BKritzer@bis.doc.gov

agenda
Agenda
  • Export Controls Overview
  • How to Classify Items on the Commerce Control List
  • Foreign National Visitor and Guest Access Program
  • Deemed Exports Overview
  • NOAA Deemed Export Compliance Program
  • Exercises
  • Show how to navigate and use the EAR
  • Threat Briefing – Office of Export Enforcement
  • ITAR Overview
bis is here to help
BIS is here to help!
  • Outreach Activities
  • Exporter Counseling
  • Advisory Opinions
  • Commodity Classifications
  • Compliance Strategies
need assistance
Bureau of Industry and Security Ph. (202) 482-4811

Outreach & Educational ServicesFax (202) 482-2927

14th St. & Pennsylvania Ave. NW

Washington, DC 20230

Western Regional Offices

3300 Irvine Avenue, Suite 345 Ph. (949) 660-0144

Newport Beach, CA 92660 Fax (949) 660-9347

96 North 3rd Street, Suite 250 Ph. (408) 291-4212

San Jose, CA 95112 Fax (408) 291-4320

Need Assistance?
bureau of industry and security
Bureau of Industry and Security

■ Bureau Mission: to advance U.S. national security, foreign policy, and economic interests

  • Statutory Authority: Export Administration Act (EAA) of 1979, as amended; International Emergency Economic Powers Act, as amended
  • Responsibilities: BIS is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and reexport of most commercial and dual-use items.
slide8

The Threat

■Dangers of illegal technology transfers are very real:

‑ WMD Proliferation

‑ Weapon Design/Manufacture

‑ Industrial Espionage

■U.S. economy damaged by illegal technology transfers.

slide9

The Threat

■Significance: Both national security and U.S. economy can be seriously damaged by illegal technology transfers.

■Damage to the economy can include loss of large amounts of proprietary R&D done over many years.

■Loss of proprietary R&D can result in the establishment and/or enhancement of foreign competitors in leading edge technology sectors.

origin of the threat
Origin of the Threat

■U.S. Intelligence Community has noted:

  • Collection and acquisition activities from over 56 foreign nations
    • 13 countries assessed to be most aggressive collectors of U.S. proprietary economic information and critical technologies
  • Use of clandestine and illegal methods to collect technology
  • U.S. private sector studies estimate loss in the billions every year
what is being targeted
What is being targeted?
  • Nationally
    • Biotechnology
    • Pharmaceuticals
    • Nanotechnology
    • Quantum Computing
    • Advanced Materials
    • Communications and Encryption Technology
    • Weapons Systems yet unclassified
methods used to target technology
Unsolicited emails

Front companies

Liaisons with universities that have ties to defense contractors

Recruitment by foreign intelligence services

National laboratories

Compromise of laptop while traveling overseas

Attending/Hosting conferences

Relocating R&D facilities overseas

Circumventing export control laws

Visiting scientific and research delegations

Hacking

Downloading information from your network

Methods Used to Target Technology
deemed export enforcement facts
Deemed Export Enforcement Facts

■ Since 2004, Export Enforcement has closed over 120 investigations, involving a deemed export. Many of these investigations resulted in action being taken or the issuance of a warning letter.

  • Since 2004, BIS has issued 19 final orders in 17 investigations involving deemed export violations. This has resulted in over $2 million in fines.
  • Approximately one-half of the cases involved Voluntary Self- Disclosures (VSDs) and both commodity and technology exports.
  • Eight cases involved deemed export violations alone.
  • Most violations involved unauthorized transfers of Category 3 (Electronics) and Category 5 (telecommunications).
key compliance issues
Key Compliance Issues
  • Since 2004, a central theme that has been identified in the course of over 120 investigations of deemed exports has been the poor communications or disconnect between the key compliance actors in the private sector:

1) Export Compliance Personnel

2) Human Resources

3) Hiring Managers

  • There were also issues surrounding foreign visitors and the need for enhanced compliance training.
  • This is significant for high technology companies because the investigations identified the fact that many companies maintained effective programs for commodities but that it did not carry over in the area of technology.
slide15

Technology Control Plan (TCP)

  • ■ The key to technology export compliance is an effective Technology Control Plan.
  • ■ A TCP should contain the following essential elements:
    • Management commitment to export compliance
    • Physical security plan
    • Information security plan
    • Personnel screening procedures
    • Training and awareness program
    • Self-evaluation program
  • ■ Meaningful compliance is “win-win” because it protects national security and allows a company to protect its proprietary technical data essential to R&D and bringing new products to market timely.
key points for discussion
Key Points for Discussion
  • Successful deemed export compliance incorporate commodities and technologies.
  • Successful deemed export compliance also represents management’s commitment to a holistic approach, involving successful interaction between the key stakeholders--export compliance personnel, hiring managers, and human resources.
  • Rarely have we seen a deemed exporter fail that established and maintained a strong TCP, successful interaction between internal stakeholders, and meaningful annual assessments of its program.
key points for discussion17
Key Points for Discussion
  • The cost of such compliance is small given the potential downside loss of millions of dollars of proprietary technology and compromises to national security.
  • Meaningful deemed export compliance also requires an active partnership between government and all affected stakeholders.
slide18

Overview of the Export Administration Regulations(EAR)Mr. Douglas BellSenior Export CounselorOffice of Exporter Services

bis mission
BIS Mission
  • To advance U.S. national security, foreign policy, and economic interests.
    • BIS is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and reexport of most commercial items.
how do we control exports
How Do We Control Exports?

Statutory Authority

  • Export Administration Act (EAA) of 1979, as amended
  • International Emergency Economic Powers Act, as amended
export administration regulations ear
Export Administration Regulations (EAR)
  • Implement the Export Administration Act
  • Apply to most commercial items

Broad jurisdiction BUT… narrow license requirements

where can you find the ear
Where can you find the EAR
  • Code of Federal Regulations
    • 15 CFR 730-774
    • www.gpoaccess.gov
  • Available on-line:
    • www.bis.doc.gov
  • Order from Government Printing Office
    • 866-512-1800 (toll-free)
    • www.access.gpo.gov
why do we control exports
Why Do We Control Exports?
  • National Security
  • Foreign Policy
    • Anti-terrorism
    • Crime control
    • Regional Stability
  • Non Proliferation
    • Nuclear weapons
    • Chemical/biological weapons
    • Missiles
who else is involved in export controls other regulatory agencies part 730 supplement 3
Who Else is Involved in Export Controls?Other Regulatory AgenciesPart 730, Supplement 3
  • US Dept. of State - Directorate of Defense Trade Controls (ITAR)
  • US Dept. of Treasury - Office of Foreign Assets Control
  • US Dept. of Energy
  • Nuclear Regulatory Commission
  • US Dept. of Commerce – Patent & Trademark Office
  • US Department of Interior
  • Food and Drug Administration
  • U.S. Department of Commerce –records) Bureau of the Census (trade statistics and SEDs/AES
  • U.S. Department of Homeland Security – Border and Transportation Security
    • U.S. Customs Service (works with BIS to ensure compliance)
important ear terms
Important EAR Terms
  • Dual-Use
  • Item
  • Export
  • Reexport
  • Deemed export/reexport
  • Commerce Control List (CCL)
  • Export Control Classification Number (ECCN)
dual use items
Dual-use Items
  • Items that have both commercial and military or proliferation applications.
  • This term is often used informally to describe items that are subject to the EAR.
what is an item part 772
What is an item?Part 772

Commodities

Software

Technology

what is an export
What is an export?
  • An export is a shipment or transmission of items out of the United States.
what is a deemed export
What is a deemed export?
  • The release of technology or source code to foreign national in the US is deemed to be an export.

Technology or source code

what is a reexport
What is a reexport?
  • A reexport is a shipment or transmission of items subject to the EAR from one foreign country to another.
technology and software exports and reexports
Technology and Software Exports and Reexports
  • Include transfers regardless of the method or media
    • Consultations
    • Phone conversations
    • Instruction
    • Conferences
    • Application of knowledge
    • Visual inspections
    • Disks, blueprints, hardcopy, etc.
    • Internet, E-mail, Fax
other important concepts
Other Important Concepts
  • Commerce Control List (“CCL”)
  • Export Control Classification Number (“ECCN”)
what does subject to the ear mean 734 2 a
What does “Subject to the EAR” mean?§734.2(a)

Items and activities under the regulatory jurisdiction of the EAR

  • Remember there are other government agencies that administer export controls

“Subject to EAR” does not mean that a license is automatically required

what is subject to the ear 734 3 734 5
What is “Subject to the EAR?”§§734.3-734.5
  • Items in the United States
  • Some items located outside of the United States
  • Activities of U.S. and Foreign Persons
what is subject to the ear items in the united states 734 3 a 1
What is “Subject to the EAR”?Items in the United States§734.3(a)(1)
  • ALL Items in the United States,except:
    • Publicly available technology & software (excluding encryption)
    • Items subject to the exclusive jurisdiction of another federal department or agency
    • Literary publications, such as newspapers or literary works (non-technical in nature)
what is subject to the ear items outside the united states 734 3
What is “Subject to the EAR”? Items Outside the United States§734.3
  • Some items located outside the United States:
    • U.S.-origin items wherever located
    • Certain foreign-made items, if:
      • The value of the U.S. content exceeds the de minimis percentage
      • The foreign-product item is the direct product of U.S. technology or software
overview summary
Overview-Summary
  • BIS regulates exports, reexports and certain transfers of items subject to the EAR in addition to certain activities of U.S. persons.
  • Important terms: Items, export, reexport, deemed export, CCL & ECCN
  • First order of business is to determine whether or not your transaction is subject to the EAR.
classification of items on the commerce control list

Classification of Items on the Commerce Control List

Darrell Spires

Senior Electronics Engineer

Office of Nonproliferation and Technology Transfer Controls

topics of discussion
Topics of Discussion
  • Determining the Export Control Classification Number (“ECCN”)
    • The Commerce Control List (“CCL”)
  • Self-Classification
  • Official Commodity Classification Request
    • SNAP-R
commerce control list ccl part 774 supplement no 1
Commerce Control List (“CCL”)Part 774, Supplement No. 1
  • Contains lists of those items subject to the licensing authority of BIS
  • Each entry is called an Export Control Classification Number (“ECCN”)
  • Most items are described in terms of their technical parameters
what does export control classification number eccn tell us part 772
What does Export Control Classification Number (“ECCN”) tell us?Part 772
  • What items are controlled?
  • Why BIS controls the item?
  • Which destinations will require a license?
    • Country Chart in Supp. 1 to part 738,
  • What (if any) list-based license exception applies?
the structure of the eccn
0 A 018

0 Category

A Product Group

018 Type of Control

The Structure of the ECCN
most of the time related items are grouped in series
Most of the time related items are grouped in series

3A001

Materials

3B001

Equipment, assemblies and components

Technology

3C001

Test, inspection and production equipment

3D001

3E001

Software

how to read an eccn entry
How to Read an ECCN entry
  • Number and Heading
  • License Requirements
    • Reasons For Control
  • License Exceptions (List-based)
  • List of Items Controlled
    • Units
    • Related Controls
    • Related Definitions
    • Items
how to read an eccn
How to Read an ECCN

Heading:

ECCN & Description

how to read an eccn49
How to Read an ECCN

License Requirements:

Reasons for Control

how to read an eccn50
How to Read an ECCN

License Exceptions:

List-Based

how to read an eccn51
How to Read an ECCN

List of Items Controlled:

Units

Related Controls

Related Definitions

Items

technology and software classification
Technology and Software Classification
  • Review Commerce Control List (CCL)
  • Identify Export Control Classification Number (ECCN)
  • In most cases, technology tied directly to hardware “development”, “production”, or “use”
  • Refer to General Technology and Software Notes (Supplement No. 2 to Part 774)
general technology note
General Technology Note

The export of “technology” that is “required” for the “development”, “production”, or “use” of items on the Commerce Control List is controlled according to the provisions in each category.

slide55

Technology and Software ECCNs

5A101

Telemetry Equipment

5D101

Telemetry Software

Product Groups D and E

5E101

Telemetry Technology

slide56

3A292

Deemed Export ECCNs

Digital Oscilloscope

Analog-digital conversion, greater than 1 giga-sample per second, 8 bits or greater resolution, stores 256 or more samples

3D292

Oscilloscope Software

The deemed export rule affects technology and software.

3E292

Oscilloscope Technology

Production, development or use technology is controlled

technology and software terms
Technology and Software Terms
  • Development
  • Production
  • Use
  • Required
development
"Development"
  • "Development" is related to all stages prior to serial production, such as: design, design research, design analyses, design concepts, assembly and testing of prototypes, pilot production schemes, design data, process of transforming design data into a product, configuration design, integration design, layouts
production
"Production"
  • Means all production stages, such as: product engineering, manufacture, integration, assembly (mounting), inspection, testing, quality assurance.
slide60
"Use"
  • Operation, installation (including on‑site installation), maintenance (checking), repair, overhaul and refurbishing.
required
"Required"
  • As applied to "technology" or "software", refers to only that portion of "technology" or "software" which is peculiarly responsible for achieving or extending the controlled performance levels, characteristics or functions. Such "required" "technology" or "software" may be shared by different products.
ear99 items
EAR99 Items
  • Items that are not specifically listed on the Commerce Control List yet subject to the EAR, use the designation EAR99 in place of an ECCN.
  • This designation may be found at the end of every category of the CCL:

“EAR99 Items subject to the EAR that are not

elsewhere specified in this CCL Category or in

any other category in the CCL are designated

by the number EAR99.”

how can you obtain the eccn of your item
How can you obtain the ECCN of your item?
  • Ask the manufacturer, but verify…
  • Self-classify
    • Work with company engineer or someone who knows the item
  • Submit formal classification request to BIS
an approach to self classifying items
An Approach to Self-Classifying Items
  • Do an index comparison (good starting point)

You need to understand the functions & characteristics of the item!

how to request a classification file using snap r or bis 748 p
How to Request a ClassificationFile using SNAP-R (or BIS-748-P)
  • “Best guess” ECCN
  • Maximum of six items per request
  • Item details
    • Manufacturer
    • Model/Part number
    • Applications
    • Specifications
  • Include detailed technical specifications
    • Pictorial illustration, e.g. sales brochures
commodity jurisdiction process 22 cfr 120 4 b
Commodity Jurisdiction Process 22 CFR 120.4(b)
  • Determines if items are controlled on the U.S. Munitions List (Department of State) or the Commerce Control List (Department of Commerce)
  • Criteria 22 CFR 120.3
    • Is the item specifically designed, developed, configured, adapted, or modified for a military application?
    • Does the tem have a predominant civil application?
    • Does the item have a performance equivalent to those of an article or service used for civil application?
    • Is the item designed for military application and has significant military or intelligence applicability?
  • The CJ application is reviewed by the Departments of Defense, State, and Commerce. Defense and Commerce recommend, State makes the final decision
classification summary
Classification- Summary

Determining an ECCN

  • Check with the Manufacturer
  • Work with company engineer/someone who knows the item
    • CCL is organized in a logical manner
    • ECCN entries are based on the technical parameters of an item and contain a wealth of information regarding export controls
  • Submit formal classification request to BIS
determining license requirements based on eccn and destination

Determining License Requirements based on ECCN and Destination

Darrell Spires

Senior Electronics Engineer

Office of National Security and Technology Transfer Control

commerce country chart part 738 supplement no 1
Commerce Country ChartPart 738, Supplement No. 1
  • Reasons for Control/Country Chart
  • If there is:
    • “X” in the box indicates a license requirement
    • No “X” in the box indicates no license requirement
slide70
Structure Commerce Country ChartWhen the Destination and the Reason for Control Meet, Ask Yourself…Is there an “X” in the box?
no license required nlr
No License Required(“NLR”)
  • You may use NLR for:
    • EAR99 items, or
    • ECCNs where there is no “X” on the Country Chart under reason(s) for control; and
    • When the transaction does not require an export license based on any other licensing requirement (e.g., end-use/user requirements)
summary determining licensing requirements based on eccn destination
Summary-Determining Licensing Requirements based on ECCN & Destination
  • “X” in the box indicates a license requirement
  • No “X” in the box indicates no license requirement
license exceptions

License Exceptions

Mr. Douglas Bell

Senior Export Counselor

Office of Exporter Services

topics of discussion75
Topics of Discussion
  • What is a License Exception?
  • Restrictions
  • List Based License Exceptions
what is a license exception part 740
What is a License Exception?Part 740

An authorization that allows you to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license.

when can t you use a license exception 740 2
When can’t you use a License Exception? §740.2
  • Authorization has been suspended or revoked
  • Export subject to a General Prohibition that is not eligible for License Exceptions.
  • Surreptitious Interception Devices
  • Crime control items to most destinations
  • Most Missile Technology control items
  • Embargoed destinations, in most instances

For Full list Refer to §740.2

slide78

The way the EAR sees the world…

Country GroupsSupplement 1 to Part 740

Group A:Regime Members

Group B:Less Restricted

Group D:Countries of Concern

Group E:Terrorist Supporting

some of the possible license exceptions
Some of the possibleLicense Exceptions…

Availability Based on transaction details

- Shipments to US Government employees (GOV)

  • Civil End Users (CIV)
  • Repair, Replace or Service Items (RPL)
  • Technology and Software Restricted (TSR)
  • Baggage (BAG)
shipments to us government personnel 740 11

GOV

Shipments to US Government Personnel §740.11
  • Shipments to USG employees either military or civilian
  • Items for personal use or official capacity
  • Also includes agencies of cooperating governments found in Country Group A:1 and Argentina, Austria, Finland, Hong Kong, Ireland, New Zealand, Singapore, South Korea, Sweden, Switzerland, and Taiwan.
civ civil end users 740 5
CIV Civil End-Users§740.5
  • Country Group D:1, except North Korea
  • Items that require a license to the ultimate destination for national security reasons only
  • Civil end-uses and end-users
    • No military or proliferation end-users/uses
rpl replacement repair and servicing of equipment 740 10
RPL Replacement, Repair and Servicing of Equipment§740.10
  • All Destinations with some restrictions
  • Commodities
  • One-for-one replacement of a legally exported item
  • Not to be used to stockpile inventory
  • Servicing of the item can not enhance capabilities
tsr technology software under restriction 740 6
TSR Technology & Software Under Restriction §740.6
  • Country Group B
  • Technology & software requiring a license to the ultimate destination for national security reasons only
  • Prior to use, written assurance required from consignee
tsr written assurance
TSR Written Assurance
  • Letter, other written communication, licensing agreement, fax
  • No written assurance -- No TSR
bag baggage 740 14
BAG Baggage §740.14
  • Personal Effects
  • Household effects
  • Tools of the Trade
tmp temporary imports exports and re exports 740 9
TMP Temporary Imports, Exports and Re-exports §740.9
  • Exhibitions or Demonstrations
  • Tools of the Trade
  • Must Return to US within one year
summary license exceptions
Summary-License Exceptions
  • Make sure your export requires a license (i.e. there is an “X” in the box), before reviewing the License Exceptions.
  • Before going to a specific license exception, make sure there are no restrictions.
  • Each exception is unique, make sure you meet all of the criteria.
deemed exports definition
Deemed Exports: Definition
  • Release of
    • technology or source code
    • that is subject to the EAR
    • to a foreign national
    • in the United States (EAR

§ 734.2(b)(2)(ii)).

  • Release is “deemed” to be an export to foreign national’s home country
technology or source code possible release methods
Technology or Source Code Possible Release Methods
  • Tours of laboratories
  • Research, development, & manufacturing activities
  • Foreign students or scholars conducting research
  • Hosting a foreign scientist
deemed export rule does not apply to
Deemed Export Rule Does Not Apply To:
  • United States Citizens;
  • Permanent Resident Aliens

(i.e., “Green Card” holders); and

  • Protected individuals under 8 U.S.C. 1324b(a)(3). Protected individuals include political refugees and political asylum holders.
slide92

Country of Origin

(Permanent Residency)

Release of technology to a foreign national of one country, say India, who has obtained permanent residency in another, say the U.K., is treated as if the technology transfer were being made to the U.K. and licensing requirements would be the same as for a British national in the U.K.

If the Indian national becomes a British citizen, transfers of technology would be viewed as transfers to the U.K.

slide93

Country of Origin

(Dual Citizenship)

As a general principle, a foreign national’s most recently obtained citizenship governs the licensing requirement.

If an Indian foreign national becomes a citizen of the U.K. but retains Indian citizenship, the most recent citizenship is with the U.K. and releases of technology would be viewed as releases to the U.K.

deemed exports license requirements
Deemed ExportsLicense Requirements
  • Is the technology (or source code) subject the EAR?
  • Is a license required?
technology not subject to the ear
Technology Not Subject to the EAR
  • Publicly available (EAR § 734.7)
    • Generally accessible to the interested public
    • Periodicals, books, print, electronic other media forms
    • Libraries (university, public etc)
    • Released at open conferences
technology not subject to the ear96
Technology Not Subject to the EAR
  • Product of fundamental research (EAR § 734.8)
    • Basic and applied research where resulting information is ordinarily published and broadly shared withinscientific community
technology not subject to the ear97
Technology Not Subject to the EAR
  • Educational information (EAR § 734.9)
    • Released by instruction in catalog courses
    • Associated teaching laboratories of academic institutions
  • Patent information (EAR § 734.10)
    • Public information available on patent application
technology not subject to the ear cont
Technology Not Subject to the EAR (Cont.)
  • Technology subject to the exclusive export licensing jurisdiction of another agency
    • Directorate of Defense Trade Controls
    • Nuclear Regulatory Commission
    • Department of Energy
slide99

License Exceptions Specifically for Deemed Exports

  • CIV: Civil End Use (EAR § 740.5)
    • ECCN 3E002 technology.
  • Requires Foreign National Review
  • TSR: Technology and Software Under Restriction
  • (EAR § 740.6)
    • Applies to technology and software under national security only for country group “B” nationals.
    • Letter of assurance required
deemed export license requirements
Deemed Export License Requirements
  • Usually Commerce Control List Based
  • Other license requirements based on
    • End use
    • Embargoed destinations
    • Entity List
deemed export license requirements101
Deemed Export License Requirements
  • Classify the commodity
    • Second character of ECCN will be A, B or C
  • Look for a related software (D) or technology (E) ECCN usually in the same category
  • Most software and technology ECCNs apply to software or technology for “development,” “production,” or “use.”
bis application review
BIS - Application Review
  • Verify classification of technology
  • Review licensing requirements & license exceptions based on home country
  • Assess appropriateness of job description, responsibility, title
  • Assess appropriateness of education level and field to technology & end-use
  • Determine reasons for control for correct referrals
foreign national review fnr sections 740 5
Foreign National Review (FNR)Sections 740.5
  • Applicant must submit FNR request before disclosing technology under license exception CIV.
  • Request must provide same information on the foreign national as a license application.
  • Faster review than license applications
deemed export contacts
Deemed Export Contacts

Deemed Exports and Electronics Division

Brian Baker Kurt Franz

Director Senior Export Policy Analyst

202-482-5534 202-482-2278

bbaker@bis.doc.govkfranz@bis.doc.gov

Bob Juste

Senior Electrical Engineer

202-482-2845

rjuste@bis.doc.gov