the 1-2-3s of complying with u.s. export controls · pdf filecountries • restricted...

5/19/2015

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The 1-2-3’s of Complying with U.S. Export Controls

Jennifer Saak, Ph.D.

SRA International Delaware Valley Chapter Annual Meeting

June 8, 2015

© 2015 Traliance LLC

© 2015 Traliance LLC 2

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Today’s Topics

• Basis and Scope of U.S. Export Controls Regulations

• 3 Key Government Agencies: OFAC, EAR, and ITAR

• Export Control Reform

• Classifications – EAR Commerce Control List

• Controls on Technology and Fundamental Research

• Export Control Compliance Best Practices

• Key-Take Aways


BASIS AND SCOPE OF U.S. EXPORT CONTROLS REGULATIONS


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Multi-lateral Agreements

U.S. belongs to…

• Wassenaar Arrangement

• Chemical Weapons Convention (CWC)

• Missile Technology Control Regime (MTCR)

• Australia Group (AG) – chemical and biological weapons

• Nuclear Suppliers Group (NSG)

5© 2015 Traliance LLC

Wassenaar Arrangement

• Conventional arms

• “Dual-use” items and technologies - Commercial and military use

• Control lists

– Dual-use goods and technologies

– Munitions list


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Overview of Government Agencies

• Department of Treasury

– Office of Foreign Assets Control (OFAC)

– Sanctions and embargoed countries

– Entities and individuals

• Department of Commerce

– Bureau of Industry and Security (BIS)

– Dual-use: commercial & military

• Department of State

– Directorate of Defense Trade Controls (DDTC)

– Military-use


Other Government Agencies

• Department of Homeland Security

– Customs and Border Protection

– Citizenship and Immigration Services

• Department of Commerce - Census Bureau

• Nuclear Regulatory Commission

• Department of Energy


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Fines & Penalties

Department of Commerce

• Civil penalties up to $250,000 per violation or 2x the transaction

• Criminal penalties 20 years imprisonment and up to $1,000,000 per violation

• Denial of export privileges

• Damage to reputation

Department of State

• Maximum civil penalty $500,000 per violation

• Criminal penalties up to $1,000,000 and 20 years imprisonment per violation

• Denial of export privileges

• Damage to reputation


Research-Related Enforcement Cases

University of Massachusetts Lowell (2013)

• Shipping uncontrolled (“EAR99”) antennae and cables

• Recipient – company on the Entity List

• $100,000 civil fine (suspended)

Professor Roth, Univ. of Tennessee (2009)

• Plasma actuators for military drones

• Controlled under specific ECCN

• Export controlled technical data to Iranian and Chinese graduate students

• Exports of tangible goods to China

• 4 year prison sentence


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Enforcement Cases: Personal Liability

Trexim Corporation (2015)

• Illinois-based company

• Thermal imaging camera, carbon fiber, and microwave laminate

• Pakistan - Upper Atmosphere Research Commission (SUPARCO)

• Owner and president - 24 months in federal prison


3 KEY GOVERNMENT DEPARTMENTS


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Office of Foreign Assets Control

• Applies to all U.S. companies or institutions

• “US Persons” – includes organizations, legal entities

• Sanctions & Embargoes, key destination countries

• Restricted Parties List – Specially Designated Nationals (SDN)

• Key countries: Cuba, Iran, North Korea, Sudan, Syria

• Recent changes with Cuba, Russia, and others


Office of Foreign Assets Control

• Overall: http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

• Sanctions Search Tool: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/fuzzy_logic.aspx

• OFAC FAQs: http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx

• Cuba FAQs: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/cuba.aspx


http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/fuzzy_logic.aspx

http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx

http://www.treasury.gov/resource-center/sanctions/Programs/Pages/cuba.aspx

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Cuba Changes

• Cuban Assets Control Regulations (CACR)

• Updates effective January 16, 2015

• Most transactions involving Cuba are still restricted or prohibited

• Certain travel, commerce, and transfers of information

• General license

• Many defined terms

• READ updates carefully


Export Administration Regulations

• Tangible items…related software and technology

• General prohibitions

• EAR-controlled items are either

– Prohibited

– Require a license

– Require a license, but a license exception applies

– Do not require a license (NLR)

• Specific ECCN or “EAR99”


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Is an EAR License Required?

• Commerce Control List

• Reasons for control

– AT: Anti-terrorism

– NP: Nuclear proliferation

– CC: Crime control

– CB: Chemical & biological weapons

• Country Chart

– Reasons for control vs. country matrix

– “X”: license required (unless license exception applies)

• Definitions, definitions, definitions


BIS/Census Bureau Resources

• Commerce Control List: 15 CFR 774 Supplement No. 1

• BIS training

– http://www.bis.doc.gov/index.php/compliance-a-training/current-seminar-schedule

• Census Bureau – International Trade University

– http://www.census.gov/foreign-trade/outreach/index.html


http://www.bis.doc.gov/index.php/compliance-a-training/current-seminar-schedule

http://www.census.gov/foreign-trade/outreach/index.html

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International Traffic in Arms Regulations

• Physical items, technology, software

• Includes technical assistance

• Foreign nationals present in the U.S.

• Restricted parties

• Licensing

• United States Munitions List (USML)

• 21 Categories


USML Categories

Examples

• Category XIII— Materials and Miscellaneous Articles

• Category XIV—Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment

• Category XV— Spacecraft and Related Articles

• Category XXI—Articles, Technical Data, and Defense Services Not Otherwise Enumerated


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ITAR Resources

• Overall ITAR: http://www.pmddtc.state.gov/regulations_laws/itar.html

• USML: http://www.ecfr.gov/cgi-bin/text-idx?SID=86008bdffd1fb2e79cc5df41a180750a&node=22:1.0.1.13.58&rgn=div5#se22.1.121_11

• FAQs: http://www.pmddtc.state.gov/faqs/index.html

• Compliance program guideline: http://www.pmddtc.state.gov/compliance/index.html


EXPORT CONTROL REFORM (ECR)


http://www.pmddtc.state.gov/regulations_laws/itar.html

http://www.ecfr.gov/cgi-bin/text-idx?SID=86008bdffd1fb2e79cc5df41a180750a&node=22:1.0.1.13.58&rgn=div5#se22.1.121_11

http://www.pmddtc.state.gov/faqs/index.html

http://www.pmddtc.state.gov/compliance/index.html

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What’s Happened Already

• “Positive” list

• “600 Series” ECCNs - Category XII recently transitioned

• “Specially designed” definition

• New interpretations

• Consolidated Screening List: http://export.gov/ecr/eg_main_023148.asp


More to Come

• Clarified definitions of Technology, Public Domain, Fundamental Research

• Weekly BIS teleconference: http://www.bis.doc.gov/index.php/about-bis/newsroom/export-control-reform-news/8-bis/33-export-control-reform-ecr

• FAQs: http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/ecr-faqs

• BIS Dashboard and training slides: http://www.bis.doc.gov/index.php/2012-03-30-17-54-11


http://export.gov/ecr/eg_main_023148.asp

http://www.bis.doc.gov/index.php/about-bis/newsroom/export-control-reform-news/8-bis/33-export-control-reform-ecr

http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/ecr-faqs

http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/ecr-faqs

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CLASSIFICATIONS IN THE COMMERCE CONTROL LIST (CCL)


CCL Structure

• Category 0 – Nuclear and Miscellaneous

• Category 1 – Materials / Chemicals / Microorganisms / Toxins

• Category 2 – Materials Processing

• Category 3 – Electronics

• Category 4 – Computers

• Category 5 (Part 1) – Telecommunications

• Category 5 (Part 2) – Information Security

• Category 6 – Sensors and Lasers

• Category 7 – Navigation and Avionics

• Category 8 – Marine

• Category 9 – Aerospace and Propulsion


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CCL Structure


5 Groups

• Group A – Systems, Equipment, and Components

• Group B – Test, Inspection, and Production Equipment

• Group C – Material• Group D – Software• Group E – Technology

Specific Numerical Values

001002003

… to …998

EAR99

Export Control Classification Number


Export control classification number (ECCN)

• 1st character: category

• 2nd character: group

• 3rd/4th/5th character: sequential numerical value

ECCN1C210

Category 1Group 2

Numerical Value 210

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ECCN 1C210


For that particular ECCN…

• Reasons for Control

• License exceptions

• Definitions, other ECCNs to reference and specific things

ECCN 1C210.a


1C210.a

Carbon or aramid “fibrous orfilamentary materials”

“specific modulus” ≥ 12.7 x 106 m

– OR -“specific tensile strength” ≥ 23.5 x 104 m

Except…see CCL

Scientific specifications…

• Properties

• Capabilities

• Upper or lower limits

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EAR CONTROLS ON TECHNOLOGY


Export vs. Deemed Exports

What is a deemed export?

• Release of technology to a foreign located in the U.S.

• Considered an export to home country of foreign national

• Does not apply to legal permanent residents or individuals protected under the Immigration and Naturalization Act

• Referred to as the Deemed Export Rule

• ITAR – “public domain”


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Fundamental Research

• All university or non-profit research is NOT fundamental research

• EAR definition of “publicly available”

• Fundamental research: NSD-189


NSDD-189“‘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.”

Examples: Technology Deemed Exports

Presentfindings at

technical meeting

Uploadtechnical reportto shared drive

Access to a company-wide

database


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EXPORT CONTROLS COMPLIANCE BEST PRACTICES


Be Aware of Key Red Flags

• Foreign national personnel

• Sponsored research or other contracts with access restrictions, publication restrictions

• International shipping

• Interactions with Cuba, Iran, N. Korea, Sudan, Syria, China, India, Russia

• High risk research areas


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Developing Compliance Processes

• Process vs procedure

• Cross-department engagement

– Leadership

– Research teams

– Human resources (visa)

– Shipping

– Travel department

– Procurement / purchasing

• Process owner vs participant

• Don’t rush it


Helpful Compliance Tools

• Leveraging automated software

– Multiple commercial options

• Use checklists/SOPs to standardize processes

• Create decision trees or red flag checklists

– customize

• Provide innovative training/educational materials


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Getting Started

• Compliance policy

• Conduct baseline risk assessment – before engaging other stakeholders

• Compliance program reflects actual risks

• Document risks and mitigation plans


KEY TAKE-AWAYS


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Summary

• All U.S. institutions and research centers are affected by export controls regulations.

• Understand how to comply with regulations around sanctioned/embargoed countries and restricted parties.

• Department of Treasury, State, and Commerce administer the core regulations, but more agencies are involved.

• Tangible items, software, technology, and technical assistance are all captured – understand relevant control lists.

• Ensure compliance program involves all the relevant departments and leverages helpful tools and resources.


Learn More About…

• Immigration Services, I-129 form requirements

• Customs & Border Control

• Nuclear Regulatory Commission

• Department of Energy

• Export Control Reform Initiative


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Questions?

Jennifer Saak, Ph.D.

Founder and Managing Director

215.237.6612

[email protected]

www.traliance.com


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