us trade law regulation of technology exports

EXPORT CONTROLS ON TECHNOLOGY

J IM CHESTER J D / L L . M C H E S T E R & J E T E R , L L P D A L L A S , T E X A S

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Presented by:

I. INTRODUCTION

US Trade Laws When importing, exporting or dealing with foreign affiliates, numerous US trade regulations must be observed. - Certain goods have special rules.

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I. INTRODUCTION

Technology exports are of special concern to US regulators -  Often sensitive/ dangerous

applications/uses -  Easy to send / forward -  Difficult to track

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I. INTRODUCTION The Bureau of Industry and Security (BIS) has primary responsibility for enforcing export control laws § Export Administration Act (EAA) § Export Administration Regulations (EAR)

Other agencies have export-specific regulations that must also be observed. §  (e.g., Department of Defense Trade Controls

(DDTC)

Most export documents are delivered to CBP

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I. INTRODUCTION

What is an Export? §  Physical shipment of EAR-subject goods,

technology, or technical data outside US Customs Territory

§  Downloads and emails of technology and technical data outside US

§  “Sharing” technology with a foreign national, even on US soil (“deemed” export)

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II. STANDARD EXPORT COMPLIANCE 4 Key Questions for Exports

§  What is it? §  description & classification

§  Where is it going? §  country

§  Who will be receiving it? §  person/entity

§  How will it be used? §  dual use

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II. STANDARD EXPORT COMPLIANCE

Pre-Shipment Checks and License Requirements (i.e., “General Prohibitions”) 1.  Determine whether a license is required Step 1: Obtain Export Commodity Classification Number

(ECCN) for product on Commerce Control List (CCL), Step 2: Compare to Country Chart Step 3: If license is required, see if exception applies. Step 4: If license is required and no exception applies, apply

for license from BIS.

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2.   Check the various “bad guy” lists 1.  Denied Parties List - BIS 2.  Specially Designations Nationals and

Narcotics Traffickers - OFAC 3.  Entity List - BIS 4.  Debarred Parties List – State 5.  Unverified List – BIS

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


3. Ensure export would not violate U.S. sanctions. –  See current Office of Foreign Asset Controls (OFAC) Sanctions (http://

www.treas.gov/offices/enforcement/ofac/sanctions)

4. Don’t ignore “Red Flags”

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Penalties for Export Violations §  Up to $1 million §  Up to 5 years in prison §  Denial of export privileges

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II. STANDARD EXPORT COMPLIANCE Common Exporting Pitfalls §  Failure to check “bad guy” lists §  Failure to secure IP abroad §  Unlicensed exports §  Deemed exports §  Recordkeeping §  Incorrect SEDs/documents

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III. INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR)

Prohibits shipments of certain defense articles and technology.

Controls trade in “Munitions” - Including “Mil Spec/Std.”

Requirements - Registration - Licenses - Recordkeeping

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Common ITAR Pitfalls –  No export/re-export license

–  Recordkeeping/Reporting –  Shipments to affiliates –  Dual use items –  “Deemed” export

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ITAR Penalties Criminal & Civil:

§  Up to $1 million per violation for corporations §  Up to $1 million per violation and up to 10 years in

jail for individuals

Other Enforcement Measures:

§  Seizure or forfeiture of goods §  Debarment from licensing for as long as three years §  Potential debarment from Government contracting

for up to three years

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IV. PATENTS § One of the exceptions to when an item is “subject to the EAR”

covers technology that has been made “publicly available” 15 CFR §§ 734.3 & 734.7.

§ BIS opinion from January 2006: technology covered in an issued

patent, a published patent application, or in an application approved for foreign filing, would be considered outside the scope of the EAR •  Prior to publication of the patent, the technology would still be

controlled by EAR. •  In addition, encrypted software is subject to special additional

controls.

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V. KEYS TO COMPLIANCE

-  Know & Follow the Rules -  Implement & update written compliance program -  Periodic compliance training -  “Hands on” management of vendors, agents,

brokers, forwarders, etc. -  Inter-Departmental Cooperation

-  E.g., R&D, Legal, HR, etc.

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V. KEYS TO COMPLIANCE

-  Check your Work -  Periodic compliance

reviews -  Self-awareness cuts off “contingent” liabilities

-  Prior Disclosures reduce/eliminate potential penalties

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VI. CONCLUSION

-  International trade involves numerous rules & agencies

-  Must be aware of rules and ensure compliance through training and internal reviews

-  Rules change frequently -  Self-policing reduces liabilities

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VI. CONCLUSION

Ø Failure to be diligent with trade compliance = Ø Lost opportunities Ø Substantial penalties Ø Interruptions in global supply chain

Ø Companies can budget and plan for compliance, but not for enforcement.

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QUESTIONS? Email [email protected]

Direct 214.382.0755

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