Transcript Export Controls Compliance In the University Context

Export Controls Compliance
In the University Context
Effective Compliance Systems in Higher Education
Gerard D. Solis
Senior Associate General Counsel
University of South Florida
Office of the General Counsel
4202 E. Fowler Avenue, ADM 250
Tampa, Florida 33620
Telephone: (813) 974-2131
Facsimile: (813) 974-5236
[email protected]
Thanks and Acknowledgment:
J. Scott Maberry
Fulbright & Jaworski LLP
Washington, DC
[email protected]
202-662-4693
Division of Sponsored
Research
Topics to be Covered
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Background: Why Trade Controls Matter Now
More Than Ever
Introduction to U.S. Trade Controls: How
Trade Controls Affect Technology Transfer
Issues Specific to University Research
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“Deemed Export” and Technical Data Export
Restrictions
Fundamental Research Exemption
National Security vs. Anti-Discrimination
Questions
Background: Why It Matters
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Increased scrutiny on technology
transfer, including university research
Increased regulation of technology
transfer
Increased enforcement activity against
technology transfers
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Alarming Aspects of the Roth Case
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Roth was convicted of:
Sharing lab reports and draft publications with
his graduate students
 Teaching a graduate student to use a piece of
test equipment
 Taking a Small Business Innovation Phase II
Proposal outside of the United States
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Having his graduate student send research
materials to him while on international travel
Roth was still convicted of 17 felonies
Alarming Aspects of the Roth Case
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Government presented no evidence:
National security was directly harmed
 Roth ever accessed or allowed access to
ITAR-restricted technical data he took out of
the US on his laptop
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Roth was still convicted of 17 felonies
Alarming Aspects of the Roth Case
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Defense Department witness concluded:
Roth’s research was BASIC and APPLIED
research
 Research results were not significantly linked to
defense articles
 DoD would likely have approved research results
for public release
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Roth was still convicted of 17 felonies
Alarming Aspects of the Roth Case
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Other than the contractual clause, no
materials were marked as export controlled
You accept DoD and defense contractor-provided
technical documents at your own risk
Look for DISTRIBUTION STATEMENT:
Approved for public release, distribution is
unlimited
DoDD 5230.24 Distribution Statements on Technical Documents
Alarming Aspects of the Roth Case
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In court:
A Small Business Innovative Research (SBIR)
contract becomes “the Munitions Contract”
 A sponsored research contract becomes a
“consulting” contract
 The jury will not be filled with “peer” academics
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If you accept a defense contract, expect to be
treated as a defense contractor
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Introduction to Trade Controls
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Arms Export Controls
“Dual Use” Export Controls
Sanctions and Embargoes
Denied Party Screening
Economic Espionage Act
Others Not Covered Here:
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Customs
Import remedies
Anti-bribery
Anti-boycott
Trade agreements: WTO, NAFTA, etc.
Arms Export Controls
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Main regulator: U.S. Department of State
Directorate of Defense Trade Controls (DTC)
Regulations: International Traffic in Arms
Regulations (ITAR)
Controlled items and related technology
listed on U.S. Munitions List (USML)
Licenses or authorization required for all
destinations; very limited exceptions
Penalties:
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Civil fines
Loss of export privileges (a.k.a. the “death
penalty”)
Criminal fines and imprisonment
Arms Export Controls
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WHAT IS COVERED?
 Exports of all “defense articles,” “defense services,” and related
“technical data”
DEFINITIONS ARE BROAD:
 Export:
 Transferring registration, control, or ownership to a foreign
person, whether in the United States or abroad;
 Oral, visual, or electronic disclosure, or transfer of technical data,
to a foreign person, whether in the U.S. or abroad
 U.S. person:
 U.S. citizens (including companies and other organizations
incorporated to do business in the U.S.), lawful permanent
residents (green card holders), and protected individuals under 8
U.S.C. 1101(A)(20) and 1324B(A)(3) (e.g., asylees)
 Foreign Person: Everyone else
Arms Export Controls
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Defense Article:
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Defense Service:
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Items specially designed or modified for military use
Furnishing assistance or training to foreign persons, wherever
located, in design, development, maintenance, modification,
operation, use, etc. of defense articles;
Furnishing defense tech data to foreign person, wherever located
Technical Data:
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Any information required for design, development, production,
manufacture, assembly, operation, repair, testing, maintenance,
or modification of defense articles
Includes information in the form of blueprints, drawings,
photographs, plans, instructions, and documentation
Software related to defense articles
“Dual Use” Export Controls
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Main Regulator: Department of Commerce,
Bureau of Industry and Security (BIS)
Enforcer: Office of Export Enforcement
(OEE)
Regulations: Export Administration
Regulations (EAR)
Controlled goods, software, and technical
data listed on Commerce Control List (CCL)
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Product / Destination Controls
End Use / End User Controls
Penalties:
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Civil fines
Loss of export privileges (a.k.a. the “death
penalty”)
Criminal fines and imprisonment
Dual Use Export Controls
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“Dual Use” goods, software, and technology covered:
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“License exceptions”
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Most exports of low-technology items possible without a
license
Catchall category EAR99
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Essentially, everything not covered by the ITAR
covers most everyday items;
may be exported to most destinations without a license
“Export” includes actual shipment or transmission
outside the United States
“Deemed” exports: Any “release of technology or
source code subject to the EAR to a foreign national …
is deemed to be an export to the country or countries
of the foreign national
Dual Use Export Controls
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“Technology” may include prints, plans,
instruction, manuals, know-how
“Release” may be by oral or visual disclosure,
or by application abroad of knowledge gained
in United States
Three classes of technology; ascending order
of control:
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“Use” technology
“Production” technology
“Development” technology
Deemed Exports
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“Technology” includes data, designs,
manuals, know-how, processes
Export of technology occurs by:
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Visual inspection
Oral disclosure
Application of knowledge abroad
Export is “deemed” to take place when
technology is provided to a foreign national,
wherever located
“Foreign national” is anyone who is not
A) a citizen of the United States, or
B) a lawful permanent resident of the United States
C) Protected under asylum or refugee status
Deemed Exports
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A foreign national is treated as a foreign country
Authorization to work or study in the United
States does not authorize disclosure
License or valid exception must be in place
Examples:
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Chinese national employee on a B-1 visa
Meeting in Austin with Indian engineers
Visit to Brazilian research site
What about Chinese graduate students?
Exemptions
Some technical data is narrowly exempted from
controls:
General scientific, mathematical, or engineering
principles commonly taught in schools, colleges, and
universities;
 Basic marketing information on function or purpose;
 General system descriptions of defense articles;
 Patents available at any patent office;
 Information in the Public Domain, including:
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Data having unlimited distribution at a U.S. seminar, trade
show, exhibition, etc. generally accessible to the public;
Data released publicly after approval by U.S. Government;
“Fundamental research” in science and engineering at U.S.
colleges;
Data available to the public through Internet, library, etc.
Fundamental Research Exemption
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Technology is not subject to the Export
Administration Regulations if the result of
“fundamental research”
ITAR has similar rule
Defined narrowly, many conditions
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Pre-publication review may invalidate
Certain export restrictions may invalidate
Pressure to narrow the exemption
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Pressure from government agencies
Pressure from research sponsors
“Troublesome Clauses”
Fundamental Research
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"'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."
It should be noted that the Fundamental Research
Exemption applies only to the dissemination of
technical data and information, not to the
transmission of material goods. The exemption is
more broadly construed under the EAR than under
ITAR.
“Troublesome Clauses”
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Innocuous-seeming clauses in research
contracts may destroy protection of fundamental
research exemptions
Examples upon request
Subject of much research, review, and legal
work
The troublesome clauses can be negotiated,
contrary to what some sponsors or contracting
officers will tell you
Arms Export Controls:
Definitions Quiz
Tony Parker, an Airbus engineer (a
French national) on a valid work visa
in the United States, attends a
University design meeting where ITARcontrolled technical data are
discussed. Is this an export? Is a
license required?
 The meeting counts as an export to France
 A license will be required, unless the data
qualifies as “fundamental research”
Arms Export Controls:
Definitions Quiz
Dr. Evil, a former KGB agent
and still a Russian citizen,
wants to visit the University to
take the public tour of the
research facilities where work is
being performed for the U.S.
Army. Is an export license
required for Evil to take the
tour?
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Generally, technical data on view in the public tour would be
considered “public domain,” and thus exempt from ITAR controls
Inspectors General Reports question whether certain “use”
technology should be subject to tighter interpretations of the rules
EXPORT CONTROLS:
9 QUALIFYING QUESTIONS
1. Are you sharing, shipping,
transmitting or transferring noncommercial encryption software in
source code or object code (including
travel outside the country with such
software)?
2. Do you know or have any reason to
believe that the item, information or
software to be shared, shipped,
transmitted or transferred will
support the design, development,
production, stockpiling or use of a
nuclear explosive device, chemical
or biological weapons, or missiles?
3. Was the item, information or software
to be shared, shipped, transmitted or
transferred developed under a
sponsored agreement imposing
publication restrictions beyond a brief
review (up to 90 days) for patent
protection and/or inadvertent release
of confidential/proprietary
information?
4. Did an external sponsor, vendor,
collaborator or other third party
provide, under a Non-Disclosure
Agreement or a Confidentiality
Agreement, the item, information or
software to be shared, shipped,
transmitted or transferred?
5. Is the item being shared, shipped,
transmitted or transferred a defense
article other than information or
software on the ITAR's US Munition
List (USML)?
6. Is the information or software
being shared, shipped, transmitted
or transferred technical data on the
ITAR's US Munition List (USML)?
7. Are you shipping or transferring
items on the Commerce Control List
(CCL) of the Export Administration
Regulations (EAR)?
8. Are you sharing, transmitting or
transferring technology (information)
or software code on the Commerce
Control List (CCL)?
9. Is the disclosure, shipment,
transmission, or transfer to an entity in
a country subject to US economic or
trade sanctions or identified by the US
Department of State as a "State
Sponsor of Terrorism," namely Iran,
Cuba, Sudan, Syria or North Korea?
IF YOU ANSWERED NO TO ALL OF
THE QUESTIONS ABOVE…
GOOD NEWS!!
YOU DO NOT NEED TO OBTAIN AN
EXPORT LICENSE (PROBABLY).
Sanctions and Embargoes
BACKGROUND
 26 active sanctions programs; some
date from 1950s
 Post-9/11: a new world of sanctions
 Main Regulator: U.S. Department of
Treasury Office of Foreign Assets
Control (OFAC)
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Penalties:
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Civil fines
Criminal fines and imprisonment
Sanctions and Embargoes
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All programs have different mixes of many
elements
Comprehensive embargoes:
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Cuba, Iran, Sudan
Generally includes nationals of these countries.
Wherever located. Which is everywhere.
Investment prohibitions, e.g., Burma, Iran
Export/Import prohibitions, e.g., Syria, North
Korea
Asset Freeze, e.g., terrorists, narcotics traffickers
Tailored programs, e.g., rough diamond imports
Sanctions and Embargoes
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Certain persons are subject to separate
sanctions (“Specially Designated Nationals”)
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Includes companies, organizations, individuals,
and vessels
Unlawful to conduct any transaction with an
SDN
Sanctioned persons based in many countries,
including U.S. allies (UK, France, etc.)
Sanctions and Embargoes
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Transactions involving publicly available
information may be permitted
But the parameters are different from those
under export controls
AND: only applies to work already in
existence, not new works
Sanctions and Embargoes
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Direct export violation: export to a sanctioned party
or country
Indirect export violation
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export to a third party with knowledge or reason to know of
export to a sanctioned party
Don’t self-blind
Export of “services” may be prohibited
“Facilitation” of actions of others may be prohibited
“Inventory” exception
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export into third party inventory
no specific order from sanctioned party
third party’s business not “predominantly” with sanctioned
party or country
Employment Discrimination Issues
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Foreign national employees, vendors,
contractors, visitors, etc. must be
screened in order to avoid prohibited
exports
Licenses may be required
You may need to gather information
about foreign national workers:
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Country of citizenship
Permanent residence
Visa status
Employment Discrimination Issues
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Under Title VII, certain hiring and other
selection decisions are permitted in
compliance with national security
requirements
Conditions:
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duties are subject to any national security law or
Executive Order of the President;
individual does not meet the national security
requirement
Policies must be adopted for
nondiscriminatory reasons and applied in a
nondiscriminatory manner