Export Control Training July 31 2009 Export Experts Llc 9 5 09

EXPORT OF GOODS CONTROLLED BY THE UNITED STATES

DEPARTMENT OF COMMECE AND OTHER GOVERNMENT AGENCIES

INFORMATION PREPARED AND PRESENTED BY

EXPORT EXPERTS LLC

July 2009 Presentation By James Shaw of Export Experts LLC 1

PLEASE PAY ATTENTION…….

THERE WILL BE A TEST AT THE CONCLUSION OF THIS PRESENTATON AND THOSE THAT FAIL TO PASS MAY FIND THEMSELVES SUBJECT TO A FINE AND/OR IMPRISONMENT FOR FAILURE TO COMPLY WITH THE LAWS AND REGULATIONS OF THE UNITED STATES OF AMERICA NO JOKE!

July 2009 Presentation By James Shaw of Export Experts LLC

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July 2009 Presentation By James Shaw of Export Experts LLC 3

All Personnel Must Receive Sufficient Awareness & Compliance Training As

Required By The United States Government For Dealing With Export &

Import Controls, International Trade Activities, And National Security.

EXPORT EXPERTS LLC – Presents Today Important Information on the United States Government’s Code of Federal Regulations; National Security Programs, Export Controls, Import Security Programs, and Material Classifications for Purposes of Control (ECCN) and Taxation (HTS-US).

July 2009 4

THE ELEMENTS WE WILL REVIEW TODAY: Why Are Export Control’s important? What Does The United States Government

Control? The Listing of the Multiple Government Agencies

that have applicable controls. Which Agencies are involved in topics of concern;

including International Trade along with Domestic Sales impact as well.

Applicability of “Export Controls” Special Terminology and Definitions of Terms

used in these activities.

Presentation By James Shaw of Export Experts LLC

THE ELEMENTS WE WILL REVIEW TODAY

Definitions of Terminology Used Applicability of Export Controls by

various Agencies of the United States Government• Department of Commerce

• Bureau of Industry & Security

• Department of State

• Department of Defense

• U.S. Treasury Department• Office of Foreign Asset Control


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More Elements We Will Review…

Development of Corporate Compliance Programs, Setting Policies, Personnel Training and Enforcement Activities.

Ten General Prohibitions To Be Observed.

Understanding “Deemed Export” and “Transfer of Technology” issues.

Exceptions, Exemptions & Exclusions. And more…….


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July 2009 7

Governing Agencies

Several government agencies are involved in the regulation of exports; however, the U.S. Department of Commerce, Bureau of Industry and Security, Department of Homeland Security, Customs and Border Protection, the Treasury Department and the U.S. Department of State regulate most of our export situations,

The Department of State •Implements the International Traffic in Arms Regulations, known as (ITAR)

•ITAR regulates permanent and temporary Export/Import of defense articles, space related technologies, and the performance of defense services on the United States Munitions List

http://www.pmddtc.state.gov/itar_index.htmPresentation By James Shaw of

Export Experts LLC

July 2009 8

Governing Agencies (Continued...)

The Department of Commerce – Bureau of Industry and Security – (Formerly Known As ‘The Export Administration Department’)

•Implements the Export Administration Regulations, referred to as (EAR),

•Regulates the export of commodities found on the Commerce Control List including dual use commodities (goods and services having both military and civilian uses)

These are items that are not inherently military in nature; they are primarily commercial items with potential military useKeep in mind the time factor in determining requirements and then applying for and receiving licenses - could be as long as 90-120 days, or longer or even be denied, depending on an outside agency review

http://www.access.gpo.gov/bis/index.html


July 2009 9

The Department of the Treasury specifically administers both comprehensive and partial embargoes against various foreign countries.

Office of Foreign Assets Control (OFAC) enforces economic and trade sanctions against specific countries and individuals

Focus is on terrorists, narcotics traffickers, proliferation of weapons of mass destruction

Prohibited activities (examples): • Conducting surveys and interviews

• Engaging services to develop informational materials

• Engaging persons to support research activities

• Providing marketing and business services

Governing Agencies (Continued)

http://www.treas.gov/offices/enforcement/ofac/


July 2009 10

In addition to the U.S. Department of Commerce and the U.S. Department of State, these other U.S. governmental agencies are also involved in the regulation of exports:

The U.S. Department of Homeland Security (DHS) administers U.S. tariff and trade laws and enforces export/import laws and regulations, partially through the Customs and Border Protection Service (CBP).

The U.S. Department of Justice enforces laws and regulations relating to alcohol, tobacco products, firearms, explosives, and arson, and receives issues from other Departments and Agencies.

Governing Agencies (Continued)


Export Controls Are Important!

The system of controls is designed for the avoidance of release of data or technology in an unauthorized manner (defined as being “in violation of the Export Administration Regulations [EAR], or any other applicable laws”).

The EAR’s requires record-keeping and reporting requirements to the government.

Potential fines include up to $1,000,000 and up to 10 years in prison per count charged.


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July 2009 12

Federal Export Control Programs are Extensive!

The U.S. Government restricts the release of the following information to foreign nationals within the United States and abroad through the U.S. export regulations and embargoes: • critical technologies,

• technical data/software code,

• equipment,

• chemicals/biological materials, and

• other materials, information and services

Penalties for violating export control regulations include fines, loss of export privileges, personal liability to personnel, and damage to an organization’s business and reputation in the community.


July 2009 13

Federal Export Control Regulations apply to many elements of our daily work activities:

• TA primary reason is “National Security”; to prevent weapons, defense articles, services, or dual use commodities from harming the United States or its allies.

• Designed to prevent controlled articles from being transmitted in any way outside the U.S. or within the U.S. to foreign person, or organization, or to knowingly cause or permit any other person to do so unless the following conditions are fully complied with:

• The information, service or export is lawfully provided and has been covered by an appropriate license, agreement, permit, exception, or exemption.

• Preparation of all appropriate documentation and/or submitted to the cognizant government authority, prepared, records maintained, to permit the communication, service, export, or import, or re-export activity.

• Avoidance of release of data or technology in an unauthorized manner (in violation of the Export Administration Regulations).

• U.S. Government record-keeping and reporting requirements are satisfied as required by the Federal Regulations.

Export Controls ? Why is this important to you?


July 2009 14

It is essential to understand and accept this concept:“Exports” include the following –

•Shipment* of a controlled material, item, or good. •Transmission (including fax, digital or hand-carried) of any controlled information related to a controlled item•Release or disclosure (including verbal or visual) of any controlled technology, software or technical data either abroad, or in the U.S. (e.g. “deemed export”)•Use or application of controlled technology on behalf of, or for the benefit of, any foreign person or entity, either abroad or in the U.S.A.•Specific definitions, regulations, exemptions and exclusions depend upon the governing agency for the exported item.

* Even within the United States!

Export Control Facts:


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And there are trends towards more controls…

As you need to be aware, the increased focus on imports and exports is due to the fact that their potential for use as terrorism tools is a reality.

The United States Government is increasing the focus on enforcement of technical information to persons within the United States that may not be entitled to receive such information (a “deemed export”) FBI’s “College and University Security Effort“

(CAUSE) Program and the Academic Alliance http://www.fbi.gov/page2/april06/

academicalliance040506.htm Gives an increased focus on life sciences and

biological materials.


Controls Also Apply to “Deemed Exports”

What is a “Deemed Export”? • This is an activity wherein goods or

technology may not actually transfer from the United States, but can be information or technology (including educational materials) given to non-resident foreign persons…

NOTE: The “CAUSE” Security Program between the FBI and Educational Institutions is a useful example.


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July 2009 17

Read The Small Print!•Comply with all export laws and regulations in the US, and of each foreign country in which an activity may take place, except where the law of a foreign country may be inconsistent with U.S. law and in that case the U.S. Law will absolutely prevail!•Only develop and disseminate approved training and compliance-related materials as may be found within the United States’ government’s laws, regulations, policies, processes and controls with regard to such “Export Controls” to persons present in the United State, or in conjunction with persons located outside of the United States (i.e. employees, contractors, or other parties.) •Ensure that all records of Exports, Deemed Exports, & Import records and licenses are maintained in accordance with all U.S. government regulations and treaties.•Ensure all persons; employees, executives, management, supervisors, associates, trainees, academic faculty, administrative staff, and students understand their roles and responsibilities with regard to Export Control, including authorized agents, Import & Export Compliance License requirements (ECLPS), and shipping requirements

Compliance Requirements: (not optional!)


July 2009 18

Export Control Facts (Continued...)

The Government also utilizes the term “Deemed Export” to describe export of technology, data, designs and R&D, or source code when released to a foreign national within the United States.

•“Release” is the making of technology or software available to foreign nationals, either visually, orally or by practice or application, under guidance of persons with knowledge of the technology or software

•Such conditions Includes “use technology” – information on the operation, installation, maintenance, repair, overhaul, and/or refurbishing of controlled equipment and access to proprietary manual.

•Be careful!Presentation By James Shaw of

Export Experts LLC

July 2009 19

Exports can occur when someone provides foreign persons “access” to technical information. For example, in the hosting of a visitor, the hiring of a consultant, and through the use of an outside legal/auditing/translation or other service. Simply giving a factory tour, giving a tour or demonstration in a laboratory, or the publishing or otherwise promulgation of technical data, including the making of presentations, even through casual talk and conversations, and do not overlook the impact of sending emails, faxes, data file transfers, etc.

Export control obligations may well exist if you provide data, drawings, technology or sample commodities to a person or business and/or have a reason to believe it will be passed on subsequently to a foreign country or person.

Export Control Facts (Continued…)


July 2009 20

United States Munitions List (ITAR)

Category I Firearms, Close Assault Weapons and Combat ShotgunsCategory II Materials, Chemicals, Microorganisms, and Toxins Category III Ammunition/OrdnanceCategory IV Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and MinesCategory V Explosives and Energetic Materials, Propellants, Incendiary Agents and Their ConstituentsCategory VI Vessels of War and Special Naval Equipment.Category VII Tanks and Military VehiclesCategory VIII Aircraft and Associated EquipmentCategory IX Military Training EquipmentCategory X Protective Personnel EquipmentCategory XI Military ElectronicsCategory XII Fire Control, Range Finder, Optical and Guidance and Control EquipmentCategory XIII Auxiliary Military EquipmentCategory XIV Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated EquipmentCategory XV Spacecraft Systems and Associated EquipmentCategory XVI Nuclear Weapons, Design and Testing Related ItemsCategory XVII Classified Articles, Technical Data and Defense Services Not Otherwise EnumeratedCategory XVIII Directed Energy WeaponsCategory XX Submersible Vessels, Oceanographic and Associated Equipment


Establish the Export Commodity Control Number:

The “ECCN” is an “intelligent number”, with at least 5 characters.

The first character is a Group Number The second character is an Alpha

designation of the Category of the Commodity

The Third through Fifth are numerical designations and details on the scope of control. Characters beyond #5 mean more strict restrictions may well apply.


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July 2009 22

Commerce Control List (EAR)

FIRST NUMERICAL CHARACTER IN THE ECCN

0 Nuclear Materials, Facilities & Equipment & Misc.1 Materials, Chemicals, “Microorganisms”, and Toxins2 Materials Processing3 Electronics4 Computers5 Telecommunication & Information Security6 Sensors and Lasers7 Navigation and Avionics8 Marine9 Propulsion Systems, Space Vehicles & Related

Equipment


July 2009 24

How to Determine If You Need A License

License requirements are dependent upon:

What you are exporting (item’s characteristics)

Where you are exporting (destination)

Who will receive your item (s) (end-user)

What your item will be used for (end-use)

This determination is according to the regulations and controlled made by your organization’s Export Control and Compliance Manager; assisted by other persons or agencies as may be necessary. All of these processes can take some time and effort.


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• Export controls apply if the information/materials appear on either the International Traffic in Arms Regulations, known as ITAR Munitions List or the Export Administration Regulations’, (EAR), Commerce Control List (CCL).

• ITAR places strict controls on the export of “defense articles” and “defense services.” Defense articles include any item or technical data on the United States Munitions List (USML), and defense services include the furnishing of assistance to foreign persons, whether or not in the United States, with respect to defense articles, and the furnishing of any technical data associated with a defense article

• There are exclusions that cover work performed in academic institutions and a license is not required to disseminate information if an exclusion applies

When Do Export Controls Apply?


July 2009 29

Export Control Decision Tree For Sponsored Projects Export Control Decision Tree For Sponsored Projects

Project involves equipment, software,

chemicals, bio-agent or

technology which is on the US

Munitions List

(ITAR)


chemicals, bio-agent or technology

is classified as a defense article

designed or modified for military

use, use in outer space, or weapons

(ITAR)

Project involves

encryption software in source or

object code (EAR)

No No

Yes

Yes

Yes

See Compliance Manager for an Export Export

Control Review;Control Review;Is foreign travel or

shipment of articles under the project

anticipated?

Project involves items on the

Commerce Control List (CCL) that are dual use in nature; having commercial

or military application

(EAR)

Yes

Project meets criteria for

Research Exclusion and Not Subject to ExportNot Subject to Export

Controls

Sponsored Programs and Grants Office shall prepare for required licenses upon award of government grant

Yes

No

Yes

Project involves a

country with US imposed

sanctions stipulated or

restricted travel to an embargoed country by the US

No

Key Research and Review Web Sites

http://www.pmddtc.state.gov/itar_index.htm (ITAR)

http://www.access.gpo.gov/bis/index.html (EAR)

http://www.treas.gov/offices/enforcement/ofac/programs/index.shtml (OFAC)


chemicals, bio-agent or

technology which is on the US

Munitions List

(ITAR)

Project results will be freely

published with no restrictions,

no NDA’s or Confidentiality Agreements

No

Yes

Compliance Manager investigates and evaluates

the nature of Export, foreign travel, license requirements, and any

restrictions – Compliance Manager completes an

Annual Export Certification when traveling abroad


July 2009 30

Definitions

“U.S. Person” is defined by ITAR 22 CFR §120.15 as:

A person who is a lawful permanent resident or who is a protected individual. It also means any corporation, business association, partnership, society, trust, or any other entity, organization, or group that is incorporated to do business in the United States. It also includes any governmental (federal, state, or local) entity. It does not include any foreign person as defined in section ITAR 120.16 below


July 2009 31

“Foreign Person” is defined by ITAR 22 CFR §120.16 as:

Any natural person who is not a lawful permanent resident as defined by 8 USC. 1101(a)(20) or who is not a protected individual as defined by 8 USC. 1324b(a)(3). It also means any foreign corporation, business association, partnership, trust, society, or any other entity or group that is not incorporated or organized to do business in the United States, as well as international organizations, foreign governments, and any agency or subdivision of foreign governments (e.g. diplomatic missions)

Definitions (Continued…)


July 2009 32

“Technical Data” is defined by ITAR 22 CFR §120.10 as: Information, other than software as defined in ITAR 120.10(4), which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles. This includes information in the form of blueprints, drawings, photographs, plans, instructions, and documentation.

This definition does not include information concerning general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities or information in the public domain as defined in 120.11. It also does not include basic marketing information on function or purpose or general system descriptions of defense articles.

Most University teaching and research falls under one or more of several possible exemptions



July 2009 33

Classified information relating to defense articles and defense services

Information covered by an invention secrecy order

Software as defined in ITAR 121.8(f) directly related to defense articles

Be careful, double check and triple check the information to validate it.

Examples of technical data include:


July 2009 34

Definitions (continued…)

“Technical Data” defined by EAR 15 CFR §772: (Title 15 Code of Federal Regulations Section 772)

May take forms such as 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, or read-only memories (CD, DVD, et al.)


July 2009 35

An “Export” is defined in ITAR 22 CFR §120.17 as: (continued)

Sending or taking a defense article out of the United States in any manner, except by mere travel outside of the United States by a person whose personal knowledge includes technical data

Transferring registration, control, or ownership to a foreign person of any aircraft vessel, or satellite covered by the U.S. Munitions List, whether in the United States or abroad

Disclosing (including oral or visual disclosure) or transferring in the United States any defense article to an embassy, any agency or subdivision of a foreign government (e.g., diplomatic missions)

Disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad

Performing a defense service on behalf of, or for the benefit of, a foreign person, whether in the United States or abroad

A launch vehicle or payload shall not, by reason of the launching of such vehicle, be considered an export. However, for certain limited purposes, controls may apply to any sale, transfer, or proposal to sell or transfer defense articles or defense services



July 2009 36

Further, an “Export” is defined by EAR15 CFR §734.2(b) as:

An actual shipment or transmission of items subject to the EAR out of the United States, or release of technology or software subject to the EAR to a foreign national in the United States, as described in paragraph (b)(2)(ii) of the EAR, and paragraph (b)(9) for exports of encryption source code and object code software subject to the EAR.



July 2009 37

Exclusions Possibly Applicable to“Special Organizations”; Colleges, Universities and Educational Facilities

• Fundamental Research• Public Domain• Educational Information• Employment


July 2009 38

The “Fundamental Research” Exclusion

Is defined in the EAR and ITAR as Basic and applied research in science and engineering where the

resulting information is ordinarily published and shared broadly within the scientific community

University research will not be considered fundamental research if:

(i) The University or its researchers accept restrictions on publication of scientific and technical information resulting

from the project or activity, or

(ii) The research is funded by the U.S. Government and

specific access and dissemination controls apply. Foreign nationals may participate in research projects involving

export-controlled information on campus in the US only, provided the foreign person is not restricted by OFAC rules.

Transfer of export-controlled information including “Materials” or “Items” abroad, even to research collaborators, is still prohibited!


July 2009 39

Exclusions (Continued…)

Information that is in the Public Domain is not subject to export controls (ITAR) and (EAR) if already published through

(a) Libraries open to the public, including most University libraries(b) Unrestricted subscriptions; news-stands, or bookstores(c) Published patents(d) Conferences, meeting minutes seminars, trade shows, or exhibits

held in the US (ITAR) or anywhere (EAR) which are generally accessible to the public for a fee and without the hosts’ knowledge of or control of who visits or downloads software/information

Educational Exclusion from EAR and ITAR • Covers teaching to foreign nationals in the US or abroad general

science, math , and engineering commonly taught in schools and Universities in formal course and in teaching laboratories of academic institutions – including information related to controlled Material or items

• Does not cover controlled information conveyed outside the classroom or teaching lab of an academic institution


July 2009 40

Exclusions (Continued…)

Employment exclusion may apply to individuals who:

(a) are full-time, bona fide corporate or university employees

(b) have permanent addresses in the U.S. while so employed

(c) who are not nationals of embargoed or sanctioned countries (i.e. a Cuban National, etc.)

http://www.treas.gov/offices/enforcement/ofac/programs/

And,

(d) are advised in writing not to share controlled information with other foreign persons (keep records!)

Such persons are not considered foreign nationals under the ITAR definition for exclusion.


July 2009 41

• All persons, under any conditions, employees and/or students faced with a potential export situation must:

• Be aware of and comply with all policies, procedures, laws, and regulations concerning the organizations Export/Import activities

• Ensure that no controlled information or equipment is shipped within or to outside the United States except with a license from the Department of Commerce, Department of State or other Agency, and utilizing an approved freight carrier (unless an exclusion applies, such as for a laptop computer used for fundamental research and under owner’s control at all times)

• Always determine nationality of all collaborators, who they work for, and where they are located, before engaging in any controlled activity . Understand the “national identity of the persons under the defined terms.”

• Compliance is a management responsibility, enforcement is required without exception and with no excuses.

Establish A Formal Corporate Policy


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• Ensure NO shipments are made to a country subject to OFAC sanctions or embargoes or Denied Parties,

• The Policy shall be clearly understood that personnel are not to take chances or make assumptions, but consult with the designated Organizational Compliance & Control Chief Official before engaging in any possible Export and/or Import activities

• Established Organizational Policies’ purpose is to seek to protect the fundamental research exemption by negotiating the elimination of clauses that restrict;

Publication Access Participation in research, teaching, or disclosure of

results

Establishment of a Policy (Continued…)


Getting More Information Via The Web

VIEW THE FOLLOWING:

• http://www.fbi.gov/page2/April06/academicalliance040506.htm

OR VIEW RECENT VIOLATIONS:

• http://efoia.bis.doc.gov/ExportControlViolations/TOCExportViolations.htm

“Don’t Let This Happen To You!” http://www.bis.doc.gov/complianceandenforcement/

dontletthishappentoyou-2008.pdf http://www.bis.doc.gov/complianceandenforcement/

majorcaselist/mcl072009.pdfJuly 2009 Presentation By James Shaw of

Export Experts LLC43

July 2009 44

NOW IT IS TEST TIME!! Question #1

Giving facility tours to students or employees of a foreign country may constitute an export. True or False?

True

False


July 2009 45

Answer For Question #1

Giving facility tours to students or employees of a foreign country may constitute an export. Have your specific situation reviewed by the Manager of Export Control and Compliance and ensure that tours do not contain access to areas that contain export controlled material or technologies.

True

False


July 2009 46

Question #2Once a license is obtained for exporting certain equipment, and all of the equipment on the license has been exported, there is no need to obtain additional licensing authority to export the same equipment in the future. True or False?

True

False


July 2009 47

Answer for Question #2Each situation must be reviewed by the Department of Commerce or the Department of State licensing authority even if you intend to export the same equipment in the future.

False


July 2009 48

Question #3You teach a graduate course on solid-state lasers which is listed in the course catalog. Materials on such lasers is available at the Library. Many of the students are foreign persons. You need to obtain a license from the Department of State for each such person before this information is disclosed to these foreign students?

True

False


July 2009 49

Answer for Question #3Release of information by instruction in catalog courses and course laboratories of academic institutions, and in the Library, is not subject to EAR so no export license is (generally) required,

True

False


July 2009 50

Question #4You are traveling abroad to Germany as part of a Government Grant activity. Since the trip abroad is not to an embargoed country there are no restrictions on your travel.

True

False


July 2009 51

Answer for Question #4All personnel, faculty, staff and students traveling abroad must ensure by actual inspection and confirmation that no encrypted software exists on your laptop, PDA or cell phone and that these items are used as tools of the trade only.

True

FalsePresentation By James Shaw of

Export Experts LLC

Conclusion Statement…

There are persons within the United States that are on a “Denied Persons List”, and organizations (e.g. Banks, Corporations, Educational Institutions) that are also on a prohibition list…..

So be aware and be careful that you do not violate the laws and regulations of the United States Government.


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Questions? Now is the time to ask?

This presentation was intended as a primary orientation and not an in-depth course on the scope of all of the controls promulgated by the United States Government.

WHEN IN DOUBT, CHECK IT OUT FIRST! Web site: http://www.Export Experts LLC.com Email: [email protected]


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Export Control Training July 31 2009 Export Experts Llc 9 5 09

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