Back to Basics Ammon Hansen Raytheon Missile Systems Jason Prince Holland amp Hart US Export Controls How to Comply with Commercial DualUse and and Defense Article Regulations and US Trade Sanctions ID: 674789
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EAR / ITAR INTRODUCTION Back to BasicsAmmon Hansen – Raytheon Missile SystemsJason Prince – Holland & Hart
U.S. Export Controls
How to Comply with Commercial, Dual-Use, and
and Defense Article Regulations and U.S. Trade SanctionsSlide2
Disclaimer
This presentation, related materials and subsequent discussion are provided for educational purposes only. They do not constitute legal advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the speaker. This presentation is not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel. Slide3
AGENDA
IntroductionsEAR / ITAR Overview Licensing and Commodity JurisdictionOFAC Compliance Lunch KeynotesEconomic Espionage and Theft of Trade Secrets
Export Regulations EnforcementExport Control Reform Initiative Update
ITAR Registration Requirements (Including ITAR Part 129 Brokering
)
Export Controls Compliance Programs (Including Key Lists to Check) and Voluntary DisclosuresSlide4
EXPORTS AND INTERNATIONAL BUSINESS
U.S. export controls apply to all international businessUnderstanding the regulatory schemeThe consequences of failing to comply with the regulationsTaking steps to minimize the risk of violations
Compliance and risk mitigationSlide5
REGULATORY ENVIRONMENT
Enforcement of export controls is a priority for the U.S. governmentNational securityForeign policyRisk of enforcement varies depending on product/destinationDemonstrably effective compliance programs and policies
have become a necessity
Slide6
TRAINING AND CORPORATE COMPLIANCE
Cost Effective MeasureA compliance program designed to protect against inadvertent violations is an effective defensive tool (if implemented)In the event of a potential violation, demonstrable training and good recordkeeping can avert an investigationAvoid expensive legal feesSlide7
UNDERSTANDING THE CONSEQUENCES
Criminal prosecution of executives (up to 20 years in jail).Denial
of U.S. export privileges.For foreign companies, violations can result in denial of entry to U.S. market or access to U.S. technology.
Debarment
from U.S. Government contracts.Slide8
UNDERSTANDING THE CONSEQUENCES
Potential Monetary Penalties in the MillionsCommerce Department/Treasury Department
Up to $250,000 civil penalty per violation
$
1,000,000 for willful violations (criminal) for corporations
(or 5 x the value of the export, whichever is greater).
State
Department =
Up to $500,000
per
violationSlide9
WHY YOU SHOULD CARE ABOUT EXPORT
CONTROLSIn summary:
U.S. export control laws are premised on national security and foreign policy
Risk of enforcement varies depending on
product, international
(or domestic)
developments
Penalties and defense
costs can be
highSlide10
ROADMAP TO THE AGENCIES THAT REGULATE U.S. EXPORTSSlide11
U.S. EXPORT CONTROL LAWS IN GENERAL
With whom do we conduct business?What do we export, i.e., services, know-how, data?How do we conduct business?
How can we demonstrate compliance?Slide12
U.S. EXPORT CONTROL LAWS IN GENERAL
What’s Covered?Physical commodities, products, componentsSoftwareTechnology / technical dataKnow-howServices, including training, teaching, etc.Slide13
THE AGENCIES AND THE REGULATIONS
U.S. Commerce Department Bureau of Industry and Security (BIS)Export Administration Act (Expired)
International Emergency Economic Powers Act (IEEPA)Export
Administration Regulations (EAR)Slide14
Export and reexport of:
items materials software
technologyCommercial vs. Dual-Use
Denied Persons List, Entity List, Unverified List
Antiboycott restrictions
THE AGENCIES AND THE REGULATIONS Slide15
U.S. State Department Directorate of Defense Trade Controls
Arms Export Control Act (AECA)International Traffic in Arms Regulations (ITAR)THE AGENCIES AND THE REGULATIONS Slide16
Export, re-export and temporary import of:
Defense ArticlesTechnical Data Furnishing of:Defense Services
Debarred Parties List Brokering
THE AGENCIES AND THE REGULATIONS Slide17
THE AGENCIES AND THE
REGULATIONSU.S. Treasury Department Office of Foreign Assets Control (OFAC)
International Emergency Economic Powers Act (IEEPA)Trading with the Enemy Act
Foreign Assets Control RegulationsSlide18
Specially Designated Nationals (SDN) and Blocked Persons List
Drug traffickersTerroristsOthersOther sanctioned persons lists
Many sanctions programs/many different restrictionsComprehensive vs. Targeted
ITAR Section 126.1 countries
THE AGENCIES AND THE
REGULATIONSSlide19
THE AGENCIES AND THE REGULATIONS
Other agencies and related controls:U.S. Department of Defense
Defense Technology and Security Administration (DTSA)Homeland Security
Customs and Border Protection
U.S. Department of Energy
Nuclear Regulatory Commission
There are many other agencies playing different roles in international tradeSlide20
THE ITAR AND THE EAR: STRUCTURE, KEY CONCEPTS, AND DEFINITIONSSlide21
CLASSIFICATION - ITAR
PartTopic120
Definitions
121
USML
122
Registration
123
Export
of Articles
124
Export of Services
125
Export of Data
Part
Topic
126
General Policies
127
Violations/Penalties
128
Enforcement Proceedings
129
Brokering
130
Fees,
Commissions and Political
ContributionsSlide22
CLASSIFICATION - EAR
The U.S. Commerce Control List (CCL)
describes items subject to the jurisdiction of the EAR
It consists of 10 general categories divided into 5 more specific categories of items
A. System Equipment and Components
B. Test, Inspection and Production Equipment
C. Materials
D. Software
E. Technology
Export Control Classification Numbers vs. EAR99
EAR Section 738 – the Country ChartSlide23
KEY DEFINITIONS UNDER ITAR AND EAR
ExportForeign Person / Foreign National
Defense Article / Dual-Use ItemTechnical Data / Technology
Defense
ServicesSlide24
EXPORT - ITAR
Under the ITAR, “export” means:Sending or taking defense articles outside the U.S. in any manner
Sending or taking technical data outside the U.S. in any manner Disclosing or transferring technical data to a foreign person whether in the U.S. or abroad
The performance of a defense service on behalf of, or for the benefit of, a foreign person whether in the U.S. or abroad
Slide25
Under the EAR, “export” means: an actual shipment or transmission of items subject to the EAR out of the U.S., or the release of technology or software subject to the EAR to a foreign national in the U.S. “Deemed Export” rule “Sending or taking” (ITAR) vs.
“actual shipment” (EAR) “Defense services” (ITAR) vs. no mention of services (EAR)
EXPORT
-
EARSlide26
FOREIGN PERSON - ITAR
The ITAR define “foreign person” as:Any person, including a company employee, who is not a citizen or national of the United States, or who has not been lawfully admitted for permanent residence in the United States
Includes all visa holders, including those who are employees of U.S. companies, and U.S. or foreign persons who are employees of foreign companies, international organizations, foreign governments, or any agency or subdivision of foreign governments (e.g
., diplomatic missions)
Includes corporations and organizations organized in foreign countriesSlide27
FOREIGN NATIONAL - EAR
Under the EAR, the equivalent term is “foreign national”Any individual who is
not (a) a U.S. legal permanent resident; (2) a U.S. citizen; or (3) a “protected person” under 8 U.S.C. 1324b(a)(3)
Different criteria for foreign person / foreign national:
Country of birth (ITAR)
Country of permanent residence (EAR)
Same definition of “U.S. person” under the ITAR and the EARSlide28
DEFENSE ARTICLE - ITAR
The ITAR define “defense article” as: Any item on the U.S. Munitions List and any technical data directly related to such item
It includes “technical data recorded or stored in any physical form, models, mockups or other items that reveal technical data directly relating to items designated in the U.S. Munitions List” It also includes forgings, castings, and other unfinished products, such as extrusions and machined bodies, that have reached a stage in manufacturing where they are clearly identifiable by mechanical properties, material composition, geometry, or function as defense articles
It does
not
include basic marketing information on function or purpose or general system descriptionsSlide29
DUAL-USE ITEM - EAR
The EAR control the export and re-export of purely commercial and dual-use items “Dual-use” items are:
Items that have both commercial and military or proliferation applications“Dual-use” items present special risks Commodity Jurisdiction Requests may be required to determine if an item is dual-use or a defense articleSlide30
TECHNICAL DATA - ITAR
The ITAR define “technical data” as:
Information which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of “defense articles” (e.g., blueprints, photographs, plans, instructions, documentation)
Classified information
related
to “defense articles”
Information
covered
by an invention secrecy order
Software directly related to “defense articles”Slide31
TECHNOLOGY - EAR
The EAR control the release of “technology” to foreign nationals
“Technology” refers to: Specific information necessary for the “development,” “production,” or “use” of a product and that takes the form of “technical data” or “technical assistance”
Controlled “technology” is defined in the General Technology Note and in the Commerce Control List
It is key to understand the defined terms within the definition of “technology” to determine if a license may be requiredSlide32
TECHNOLOGY - EAR
“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, and layouts
“Production” means:
All production stages, such as product engineering, manufacture, integration, assembly (mounting), inspection, testing, and quality
assuranceSlide33
TECHNOLOGY - EAR
“Use” means: Operation, installation (including on-site installation), maintenance (checking), repair, overhaul and refurbishing
“Technical data” may consist of:
Blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals and instructions written or recorded on other media or devices such as disk, tape, and read-only memories
“Technical assistance” may consist of:
Instruction, skills training, working knowledge, consulting services, and it may involve transfer of “technical data”Slide34
The ITAR define “defense service” as:The furnishing of assistance (including training) to foreign persons, whether in the United States or abroad in the design, development, engineering, manufacture, production, assembly, testing, repair, maintenance, modification, operation, demilitarization, destruction, processing or use of defense articles; The furnishing to foreign persons of any technical data
, whether in the United States or abroad; or Military training of foreign units, whether in U.S. or abroadAgain
, the EAR do not mention the term “defense service”
DEFENSE SERVICE - ITARSlide35
EXPORT CONTROL REFORM
Harmonization of Key DefinitionsDepartment of State and Department of Commerce review/harmonization of key terms in the ITAR and the EAR, including:
Technical DataTechnology
Public Domain
Fundamental Research
Electronic transmission and storage of data (cloud computing)
STATUS – Under Review / Proposed RulesSlide36
QUESTIONS?