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I attended one of the meetings. Specific Encryption Controls were not discussed. The main topics of discussions were:

1. The new reg would become a General Prohibition and the ECCNs listed in Supp#2, thus exempting EAR99 items.

2. How the VEU list was going to gathered - primarily from prior licenses issued from the BIS. The VEU list was also going to be written into the EAR under a supplement. A Chinese entity could apply themselves. A US entity could "sponsor" a Chinese entity via the advisory opinion method. 30 Day processing time for new applicants. The VEU would undergo an annual review.

3. Current commodities covered under CIV could use the VEU list as supporting documentation.

4. CBP training.

5. The AES ECCN field does not accomodate all digits of the suffixes.

6. Early 2007 implementation with an undefined grace period.

7. How to handle replacement parts and service providers.

8. The "offical" China response to this proposal.

All said and done in 45 minutes.....all Q&A.

Strong crypto items would not be exempt under the proposed rule. The reason is because the proposed licensing requirement cannot be overcome by a license exception, except for GOV, per proposed section 744.6(c). 5x002 encryption items require a license for all destinations except Canada per the application of EI controls. Under normal circumstances, without a license or Encryption Licensing Arrangement, export or reexport is authorized only by License Exceptions ENC, TSU, TMP, BAG, and other License Exceptions. See excerpt from proposed reg.

(c) License Exception. The only License Exception that may apply to the prohibitions described in paragraphs (a) and (b) of this section are the provisions of License Exception GOV set forth in § 740.11(b)(2)(i) or (ii) of the EAR.

- DFO

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