Department of Energy

DOE Rules Address Fundamental Research

DS_FREIssued by President Reagan on September 21, 1985, National Security Decision Directive (“NSDD”) 189 establishes the U.S. Government’s policy that, to the maximum extent possible, the products of fundamental research shall remain unrestricted.

The U.S. Department of Energy (“DOE”) issues awards for basic and applied research, educational activities, conferences, and other activities on the topics of basic energy services, fusion energy, high energy, and nuclear physics. However, until recently, the DOE regulations on Assistance to Foreign Atomic Energy Activities (10 CFR Part 810) did not explicitly address NSDD-189 or define “fundamental research.”

In February of this year, the DOE issued a final rule that added a definition of “fundamental research” to the DOE regulations. [F/N 1] This definition is similar to definitions of the same term used by the Departments of Commerce and State under the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”), which principally focus on freedom to publish research results. [F/N 2]

Last week, the DOE provided further guidance on the scope of its fundamental research exclusion in a final rule amending the DOE Acquisition Regulations (“DEAR”). [F/N 3] Although the stated purpose of this new rule is to add clauses emphasizing contractor responsibilities to comply with U.S. export control laws in the performance of DOE contracts [F/N 4], Subsection (d) of the new DOE clauses cites NSDD-189 and states, “[C]ontracts confined to the performance of unclassified fundamental research generally do not involve any export-controlled activities.” [F/N 5]

The clauses further state that, “if items (e.g., commodities, software or technologies) that are controlled by U.S. export control laws or regulations are used to conduct research or are generated as part of the research efforts, export control laws and regulations apply to the controlled items.” The meaning of this provision is further explained in the preamble to the final rule where the DOE states:

“NSDD 189 is focused on the products of fundamental research and does not exempt access to export-controlled technology used or generated during the conduct of fundamental research. The final rule therefore is consistent with NSDD-189 regarding fundamental research because it does not have an impact on the NSDD-189 exemption for fundamental research and it does not modify restrictions already imposed by U.S. export control laws and regulations on research.”

While the recent DOE rules provide guidance on the DOE’s application of NSDD-189, it is important to note that the DOE regulations already define the terms “Basic Research” and “Applied Research” at 10 CFR Section 600.302. [F/N 6] The DOE also provides specific guidance on application of these terms at 10 CFR Section 605.3:

“Basic and applied research means basic and applied research and that part of development not related to the development of specific systems or products. The primary aim of research is scientific study and experimentation directed toward advancing the state of the art or increasing knowledge or understanding rather than focusing on a specific system or product.”

It is also important to note that the definitions for basic and applied research proposed by the President’s Export Control Reform Initiative for adoption in EAR and ITAR are different than the DOE definitions for these terms. [F/N 7]

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[1] 80 Fed. Reg. 9349 (February 23, 2015), adding definition of “fundamental research” to 48 CFR § 810.3 (“Fundamental research means basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community, as distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons.”).

[2] See 15 CFR § 734.8  and 22 CFR § 120.11.

[3] 80 Fed. Reg. 64361 (October 23, 2015).

[4] The final rule is also published to address concerns on contractor compliance with export control requirements raised in past DOE Inspector General and Government Accountability Office reports on DOE contractor non-compliance with export laws. It also follows Department of Defense amendments to the Defense Federal Acquisition Regulations Supplement (“DFARS”) in 2013, which added similar export control clauses to the DFARS.

[5] See new 48 CFR §§ 952.225-71(d) and 970.5225-1(d) (effective November 23, 2015).

[6] 10 C.F.R. § 600.302 provides the following DOE definitions:

“Basic research means efforts directed solely toward increasing knowledge or understanding in science and engineering.”

“Applied research means efforts that seek to determine and exploit the potential of scientific discoveries or improvements in technology, and is directed toward the development of new materials, devices, methods, and processes.”

[7] See 80 Fed. Reg. 31504 (June 3, 2015); and 80 Fed. Reg. 31525 (June 3, 2015).

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The above is not intended as an exhaustive list of restrictions that may apply to a particular transaction nor advice for a specific transaction because the specifics of an individual case may implicate application of other U.S. laws as well as foreign laws that carry added or different requirements. In addition, U.S. export control and sanctions laws are frequently subject to change. Such changes can affect the continued validity of the information above, which is based on U.S. law existing as of October 30, 2015. For these reasons, assistance from a qualified attorney competent to advise on such matters is highly recommended. Matthew A. Goldstein is an International Trade Attorney in Washington D.C. licensed to practice in the District of Columbia. He can be reached at (202) 550-0040 and Matthew@GoldsteinPLLC.com

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