Outsourcing: New Export Rules Ease IT Work in India

Outsourcing to India should become easier for U.S.-based companies thanks to recent actions by the Department of Commerce to loosen export rules and to inaugurate a U.S. and Indian government working group dedicated to improving high-tech commerce between the two countries.

In June, the Commerce Department lifted some arcane and outdated export restrictions, such as one that prevented U.S. citizens from bringing laptops equipped with encryption overseas without its approval, and clarified other provisions, such as protections against software piracy by foreign companies that might modify and resell software from the United States. The United States restricts high-tech exports that officials believe can be used to build nuclear weapons.

The bigger development, however, was the July meeting of the U.S.-India High-Technology Cooperation Group (HTCG), which President Bush and Indian Prime Minister Atal Bihari Vajpayee agreed to form last November in response to the rapid increase in IT outsourcing by U.S. companies. According to Matthew Borman, deputy assistant secretary of commerce for export administration, the United States wants India to reduce or eliminate tariffs on high-tech products and to take other measures to facilitate Indian imports of high-tech goods. India has asked the United States to review restrictions on American exports and business dealings with certain Indian government entities. (For more about how India is changing its laws to support U.S. interests, see “India to Adopt Data Privacy Rules,” Sept. 1, 2003.)

Meanwhile, the group plans to work closely with American and Indian companies to identify next steps on the agenda. “The vast majority of IT trade is not subject to restrictions,” says Borman. “But we are looking to identify barriers the government can deal with,” while still limiting the spread of equipment that can be used for weaponry.