NOAA%20Workshop%20on%20U.S.%20Export%20Controls

1
NOAA Workshop on U.S. Export Controls

• June 10th 11th, 2009 HCHB
• July 21st 22nd, 2009 - Seattle

2
U.S. Department of Commerce Bureau of Industry
and Security
Deemed Export Compliance
Bernard Kritzer Director Office of Exporter
Services BKritzer_at_bis.doc.gov
3
Agenda

• Export Controls Overview
• How to Classify Items on the Commerce Control
  List
• Foreign National Visitor and Guest Access Program
• Deemed Exports Overview
• NOAA Deemed Export Compliance Program
• Exercises
• Show how to navigate and use the EAR

4
BIS is here to help!

• Outreach Activities
• Exporter Counseling
• Advisory Opinions
• Commodity Classifications
• Compliance Strategies

5
Need Assistance?

• Bureau of Industry and Security Ph. (202)
  482-4811
• Outreach Educational Services Fax (202)
  482-2927
• 14th St. Pennsylvania Ave. NW
• Washington, DC 20230
• Western Regional Offices
• 3300 Irvine Avenue, Suite 345 Ph. [phone]
• Newport Beach, CA 92660 Fax (949)
  660-9347
• 96 North 3rd Street, Suite 250 Ph. (408)
  291-4212
• San Jose, CA 95112 Fax [phone]

6
(No Transcript)
7
Bureau of Industry and Security

• Bureau Mission to advance
  U.S. national security,
  foreign policy, and
  economic interests
• Statutory Authority Export Administration Act
  (EAA) of 1979, as amended International
  Emergency Economic Powers Act, as amended
• Responsibilities BIS is responsible for
  implementing and enforcing the Export
  Administration Regulations (EAR), which regulate
  the export and reexport of most commercial and
  dual-use items.

8
The Threat
Dangers of illegal technology transfers are
very real - WMD Proliferation -
Weapon Design/Manufacture - Industrial
Espionage U.S. economy damaged by illegal
technology transfers.
9
The Threat
Significance Both national security and U.S.
economy can be seriously damaged by illegal
technology transfers. Damage to the economy
can include loss of large amounts of proprietary
RD done over many years. Loss of proprietary
RD can result in the establishment and/or
enhancement of foreign competitors in leading
edge technology sectors.
10
Origin of the Threat

• U.S. Intelligence Community has noted
• Collection and acquisition activities from over
  56 foreign nations
• 13 countries assessed to be most aggressive
  collectors of U.S. proprietary economic
  information and critical technologies
• Use of clandestine and illegal methods to collect
  technology
• U.S. private sector studies estimate loss in the
  billions every year

11
What is being targeted?

• Nationally
• Biotechnology
• Pharmaceuticals
• Nanotechnology
• Quantum Computing
• Advanced Materials
• Communications and Encryption Technology
• Weapons Systems yet unclassified

12
Methods Used to Target Technology

• Unsolicited emails
• Front companies
• Liaisons with universities that have ties to
  defense contractors
• Recruitment by foreign intelligence services
• National laboratories
• Compromise of laptop while traveling overseas

• Attending/Hosting conferences
• Relocating RD facilities overseas
• Circumventing export control laws
• Visiting scientific and research delegations
• Hacking
• Downloading information from your network

13
Deemed Export Enforcement Facts

• Since 2004, Export Enforcement has closed over
  120 investigations, involving a deemed export.
  Many of these investigations resulted in action
  being taken or the issuance of a warning letter.
• Since 2004, BIS has issued 19 final orders in 17
  investigations involving deemed export
  violations. This has resulted in over 2
  million in fines.
• Approximately one-half of the cases involved
  Voluntary Self- Disclosures (VSDs) and both
  commodity and technology exports.
• Eight cases involved deemed export violations
  alone.
• Most violations involved unauthorized transfers
  of Category 3 (Electronics) and Category 5
  (telecommunications).

14
Key Compliance Issues

• Since 2004, a central theme that has been
  identified in the course of over 120
  investigations of deemed exports has been the
  poor communications or disconnect between the key
  compliance actors in the private sector
• 1) Export Compliance Personnel
• 2) Human Resources
• 3) Hiring Managers
• There were also issues surrounding foreign
  visitors and the need for enhanced compliance
  training.
• This is significant for high technology companies
  because the investigations identified the fact
  that many companies maintained effective programs
  for commodities but that it did not carry over in
  the area of technology.

15
Technology Control Plan (TCP)

• The key to technology export compliance is an
  effective Technology Control Plan.
• A TCP should contain the following essential
  elements
• Management commitment to export compliance
• Physical security plan
• Information security plan
• Personnel screening procedures
• Training and awareness program
• Self-evaluation program
• Meaningful compliance is win-win because
  it protects national security and allows a
  company to protect its proprietary technical
  data essential to RD and bringing new products
  to market timely.

16
Key Points for Discussion

• Successful deemed export compliance incorporate
  commodities and technologies.
• Successful deemed export compliance also
  represents managements commitment to a holistic
  approach, involving successful interaction
  between the key stakeholders--export compliance
  personnel, hiring managers, and human resources.
• Rarely have we seen a deemed exporter fail that
  established and maintained a strong TCP,
  successful interaction between internal
  stakeholders, and meaningful annual assessments
  of its program.

17
Key Points for Discussion

• The cost of such compliance is small given the
  potential downside loss of millions of dollars of
  proprietary technology and compromises to
  national security.
• Meaningful deemed export compliance also requires
  an active partnership between government and all
  affected stakeholders.

18
Overview of the Export Administration
Regulations(EAR)
19
BIS Mission

• To advance U.S. national security, foreign
  policy, and economic interests.
• BIS is responsible for implementing and enforcing
  the Export Administration Regulations (EAR),
  which regulate the export and reexport of most
  commercial items.

20
How Do We Control Exports?

• Statutory Authority
• Export Administration Act (EAA) of 1979, as
  amended
• International Emergency Economic Powers Act, as
  amended

21
Export Administration Regulations (EAR)

• Implement the Export Administration Act
• Apply to most commercial items

Broad jurisdiction BUT
narrow license requirements
22
Where can you find the EAR

• Code of Federal Regulations
• 15 CFR 730-774
• www.gpoaccess.gov
• Available on-line
• www.bis.doc.gov
• Order from Government Printing Office
• 866-512-1800 (toll-free)
• www.access.gpo.gov

23
Why Do We Control Exports?

• National Security
• Foreign Policy
• Anti-terrorism
• Crime control
• Regional Stability
• Non Proliferation
• Nuclear weapons
• Chemical/biological weapons
• Missiles

24
Who Else is Involved in Export Controls?Other
Regulatory AgenciesPart 730, Supplement 3

• US Dept. of State - Directorate of Defense Trade
  Controls
• US Dept. of Treasury - Office of Foreign Assets
  Control
• US Dept. of Energy
• Nuclear Regulatory Commission
• US Dept. of Commerce Patent Trademark Office
• US Department of Interior
• Food and Drug Administration
• U.S. Department of Commerce records) Bureau of
  the Census (trade statistics and SEDs/AES
• U.S. Department of Homeland Security Border and
  Transportation Security
• U.S. Customs Service (works with BIS to ensure
  compliance)

25
Important EAR Terms

• Dual-Use
• Item
• Export
• Reexport
• Deemed export/reexport
• Commerce Control List (CCL)
• Export Control Classification Number (ECCN)

26
Dual-use Items

• Items that have both commercial and military or
  proliferation applications.
• This term is often used informally to describe
  items that are subject to the EAR.

27
What is an item?Part 772
Commodities
Software
Technology
28
What is an export?

• An export is a shipment or transmission of items
  out of the United States.

29
What is a deemed export?

• The release of technology or source code to
  foreign national in the US is deemed to be an
  export.

Technology or source code
30
What is a reexport?

• A reexport is a shipment or transmission of items
  subject to the EAR from one foreign country to
  another.

31
Technology and Software Exports and Reexports

• Include transfers regardless of the method or
  media
• Consultations
• Phone conversations
• Instruction
• Conferences
• Application of knowledge
• Visual inspections
• Disks, blueprints, hardcopy, etc.
• Internet, E-mail, Fax

32
Other Important Concepts

• Commerce Control List (CCL)
• Export Control Classification Number (ECCN)

33
What does Subject to the EAR mean?734.2(a)

• Items and activities under the regulatory
  jurisdiction of the EAR
• Remember there are other government agencies that
  administer export controls

Subject to EAR does not mean that a license is
automatically required
34
What is Subject to the EAR?734.3-734.5

• Items in the United States
• Some items located outside of the United States
• Activities of U.S. and Foreign Persons

35
What is Subject to the EAR? Items in the
United States734.3(a)(1)

• ALL Items in the United States, except
• Publicly available technology software
  (excluding encryption)
• Items subject to the exclusive jurisdiction of
  another federal department or agency
• Literary publications, such as newspapers or
  literary works (non-technical in nature)

36
What is Subject to the EAR? Items Outside the
United States 734.3

• Some items located outside the United States
• U.S.-origin items wherever located
• Certain foreign-made items, if
• The value of the U.S. content exceeds the de
  minimis percentage
• The foreign-product item is the direct product
  of U.S. technology or software

37
Who is Subject to the EAR? U.S. Persons and
Foreign Persons734.5

• Certain activities of U.S. persons (744.6)
• Related to proliferation
• Activities of U.S. or foreign persons prohibited
  by any order issued under the EAR.

38
Overview-Summary

• BIS regulates exports, reexports and certain
  transfers of items subject to the EAR in addition
  to certain activities of U.S. persons.
• Important terms Items, export, reexport, deemed
  export, CCL ECCN
• First order of business is to determine whether
  or not your transaction is subject to the EAR.

39
Classification of Items on the Commerce Control
List

• Darrell Spires
• Engineer
• Office of Nonproliferation and Technology
  Transfer Controls

40
Topics of Discussion

• Determining the Export Control Classification
  Number (ECCN)
• The Commerce Control List (CCL)
• Self-Classification
• Official Commodity Classification Request
• SNAP-R

41
Why are classifications so important?

• Proper classifications prevent
• Delays in exporting
• Potential violations of the EAR

42
Commerce Control List (CCL)Part 774,
Supplement No. 1

• Contains lists of those items subject to the
  licensing authority of BIS
• Each entry is called an Export Control
  Classification Number (ECCN)
• Most items are described in terms of their
  technical parameters

43
What does Export Control Classification Number
(ECCN) tell us?Part 772

• What items are controlled?
• Why BIS controls the item?
• Which destinations will require a license?
• Country Chart in Supp. 1 to part 738,
• What (if any) list-based license exception
  applies?

44
The Structure of the ECCN

• 0 A 018
• 0 Category
• A Product Group
• 018 Type of Control

45
Categories of the Commerce Control List
0 A 018
46
Product Groups of the Commerce Control List
0 A 018
47
Type of Controls Associated with Entry
0 National Security Reasons
1 Missile Technology Reasons
2 Nuclear Nonproliferation Reasons
3 Chemical Biological Weapons Reasons
9 Anti-terrorism
9 Crime Control
9 Regional Stability
9 Short Supply
9 UN Sanctions Surreptitious Listening
0 A 018
48
Most of the time related items are grouped in
series
3A001
Materials
3B001
Equipment, assemblies and components
Technology
3C001
Test, inspection and production equipment
3D001
3E001
Software
49
How to Read an ECCN entry

• Number and Heading
• License Requirements
• Reasons For Control
• License Exceptions (List-based)
• List of Items Controlled
• Units
• Related Controls
• Related Definitions
• Items

50
How to Read an ECCN
Heading ECCN Description
51
How to Read an ECCN
License Requirements Reasons for Control
52
How to Read an ECCN
License Exceptions List-Based
53
How to Read an ECCN
List of Items Controlled Units Related
Controls Related Definitions Items
54
(No Transcript)
55
Technology and Software Classification

• Review Commerce Control List (CCL)
• Identify Export Control Classification Number
  (ECCN)
• In most cases, technology tied directly to
  hardware development, production, or use
• Refer to General Technology and Software Notes
  (Supplement No. 2 to Part 774)

56
General Technology Note

• The export of technology that is required for
  the development, production, or use of
  items on the Commerce Control List is controlled
  according to the provisions in each category.

57
Technology and Software ECCNs
5A101
Telemetry Equipment
5D101
Telemetry Software
Product Groups D and E
5E101
Telemetry Technology
58
Technology and Software Terms

• Development
• Production
• Use
• Required

59
"Development"

• "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, layouts

60
"Production"

• Means all production stages, such as product
  engineering, manufacture, integration, assembly
  (mounting), inspection, testing, quality
  assurance.

61
"Use"

• Operation, installation (including on-site
  installation), maintenance (checking), repair,
  overhaul and refurbishing.

62
"Required"

• As applied to "technology" or "software", refers
  to only that portion of "technology" or
  "software" which is peculiarly responsible for
  achieving or extending the controlled performance
  levels, characteristics or functions. Such
  "required" "technology" or "software" may be
  shared by different products.

63
General Software NoteSupplement No. 2 to Part
774

• Sold from stock at retail selling points without
  restriction, by means of
• Over the counter transactions
• Mail order transactions
• Electronic transactions or
• Telephone call transactions and
• Designed for installation by the user.

64
EAR99 Items

• Items that are not specifically listed on the
  Commerce Control List yet subject to the EAR, use
  the designation EAR99 in place of an ECCN.
• This designation may be found at the end of every
  category of the CCL

EAR99 Items subject to the EAR that are
not elsewhere specified in this CCL Category or
in any other category in the CCL are
designated by the number EAR99.
65
How can you obtain the ECCN of your item?

• Ask the manufacturer, but verify
• Self-classify
• Work with company engineer or someone who knows
  the item
• Submit formal classification request to BIS

66
An Approach to Self-Classifying Items

• Do an index comparison (good starting point)

You need to understand the functions
characteristics of the item!
67
Helpful Hints for Self-Classification

• Get started early classifying your items
• Understand organization of CCL and approaches
  to classifying items
• Understand the technical parameters of your item

68
How to Request a Classification File using
SNAP-R (or BIS-748-P)

• Best guess ECCN
• Maximum of six items per request
• Item details
• Manufacturer
• Model/Part number
• Applications
• Specifications
• Include detailed technical specifications
• Pictorial illustration, e.g. sales brochures

69
Classification- Summary

• Determining an ECCN
• Check with the Manufacturer
• Work with company engineer/someone who knows the
  item
• CCL is organized in a logical manner
• ECCN entries are based on the technical
  parameters of an item and contain a wealth of
  information regarding export controls
• Submit formal classification request to BIS

70
Determining License Requirements based on ECCN
and Destination
71
Commerce Country ChartPart 738, Supplement No. 1

• Reasons for Control/Country Chart
• If there is
• X in the box indicates a license requirement
• No X in the box indicates no license requirement

72
Structure Commerce Country ChartWhen the
Destination and the Reason for Control Meet, Ask
YourselfIs there an X in the box?
73
No License Required (NLR)

• You may use NLR for
• EAR99 items, or
• ECCNs where there is no X on the Country Chart
  under reason(s) for control and
• When the transaction does not require an export
  license based on any other licensing requirement
  (e.g., end-use/user requirements)

74
Summary-Determining Licensing Requirements based
on ECCN Destination

• X in the box indicates a license requirement
• No X in the box indicates no license
  requirement

75
License Exceptions

• Toni Jackson
• Export Administration Specialist
• Office of Exporter Services

76
There is an X in the Box
What do I do?
77
Topics of Discussion

• What is a License Exception?
• Restrictions
• List Based License Exceptions

78
What is a License Exception?Part 740

• An authorization that allows you to export or
  reexport, under stated conditions, items subject
  to the EAR that would otherwise require a license.

79
When cant you use a License Exception? 740.2

• Authorization has been suspended or revoked
• Export subject to a General Prohibition that is
  not eligible for License Exceptions.
• Surreptitious Interception Devices
• Crime control items to most destinations
• Most Missile Technology control items
• Embargoed destinations, in most instances

For Full list Refer to 740.2
80
The way the EAR sees the world Country Groups
Supplement 1 to Part 740
Group A Regime Members Group B Less
Restricted Group D Countries of Concern Group
E Terrorist Supporting
81
Commerce Control List-Based License Exceptions

• Availability Based on ECCN
• Shipments to B Countries (GBS)
• Civil End Users (CIV)
• Limited Value Shipments (LVS)
• Technology and Software Restricted (TSR)
• Computers (APP)

82
GBS Group B Shipments 740.4

• Shipments to Country Group B
• Commodities requiring a license to the ultimate
  destination for national security reasons only

83
CIV Civil End-Users 740.5

• Country Group D1, except North Korea
• Items that require a license to the ultimate
  destination for national security reasons only
• Civil end-uses and end-users
• No military or proliferation end-users/uses

84
LVS Limited Value Shipment 740.3

• Country Group B
• Commodities
• Net value cannot exceed LVS value limit
• Annual value restriction
• 12 x LVS value of same ECCN to same consignee
• Single shipment

NO splitting orders!
85
TSR Technology Software Under Restriction
740.6

• Country Group B
• Technology software requiring a license to the
  ultimate destination for national security
  reasons only
• Prior to use, written assurance required from
  consignee

86
TSR Written Assurance

• Letter, other written communication, licensing
  agreement, fax
• No written assurance -- No TSR

87
Summary-License Exceptions

• Make sure your deemed export requires a license
  (i.e. there is an X in the box), before
  reviewing the License Exceptions.
• Before going to a specific license exception,
  make sure there are no restrictions.
• Each exception is unique, make sure you meet of
  all of the criteria.

88
William ArvinSenior Export Policy
AnalystOffice of Exporter Services

• Deemed Exports

89
Deemed Exports Definition

• Release of
• technology or source code
• that is subject to the EAR
• to a foreign national
• in the United States (EAR
• 734.2(b)(2)(ii)).
• Release is deemed to be an export to
  foreign nationals home country

90
Technology or Source Code Possible Release
Methods

• Tours of laboratories
• Research, development, manufacturing activities
• Foreign students or scholars conducting research
• Hosting a foreign scientist

91
Deemed Export Rule Does Not Apply To

• United States Citizens
• Permanent Resident Aliens
• (i.e., Green Card holders) and
• Protected individuals under 8 U.S.C. 1324b(a)(3).
  Protected individuals include political refugees
  and political asylum holders.

92
Country of Origin (Permanent Residency)
Release of technology to a foreign national of
one country, say India, who has obtained
permanent residency in another, say the U.K., is
treated as if the technology transfer were being
made to the U.K. and licensing requirements would
be the same as for a British national in the U.K.
If the Indian national becomes a British citizen,
transfers of technology would be viewed as
transfers to the U.K.
93
Country of Origin (Dual Citizenship)
As a general principle, a foreign nationals most
recently obtained citizenship governs the
licensing requirement.
If an Indian foreign national becomes a citizen
of the U.K. but retains Indian citizenship, the
most recent citizenship is with the U.K. and
releases of technology would be viewed as
releases to the U.K.
94
Deemed ExportsLicense Requirements

• Is the technology (or source code) subject the
  EAR?
• Is a license required?

95
Technology Not Subject to the EAR

• Publicly available (EAR 734.7)
• Generally accessible to the interested public
• Periodicals, books, print, electronic other media
  forms
• Libraries (university, public etc)
• Released at open conferences

96
Technology Not Subject to the EAR

• Product of fundamental research (EAR 734.8)
• Basic and applied research where resulting
  information is ordinarily published and broadly
  shared within scientific community

97
Technology Not Subject to the EAR

• Educational information (EAR 734.9)
• Released by instruction in catalog courses
• Associated teaching laboratories of academic
  institutions
• Patent information (EAR 734.10)
• Public information available on patent
  application

98
Technology Not Subject to the EAR (Cont.)

• Technology subject to the exclusive export
  licensing jurisdiction of another agency
• Directorate of Defense Trade Controls
• Nuclear Regulatory Commission
• Department of Energy

99
Deemed Export License Requirements

• Usually Commerce Control List Based
• Other license requirements based on
• End use
• Embargoed destinations
• Entity List

100
Deemed Export License Requirements

• Classify the commodity
• Second character of ECCN will be A, B or C
• Look for a related software (D) or technology (E)
  ECCN usually in the same category
• Most software and technology ECCNs apply to
  software or technology for development,
  production, or use.

101
Deemed Export License Requirements

• Development all stages prior to serial
  production
• Production all production stages including
  inspecting and testing
• Use Operation, installation, maintenance,
  repair, overhaul and refurbishing
• E.g., Providing operating instruction for a
  machine by itself is not a transfer of use
  technology for that machine

102
Deemed Export License Requirements

• Determine the classification of the technology or
  software
• Identify reasons for control
• Determine foreign nationals home country
• Check country chart to see if a license is
  required to that country.

103
The Deemed Export Application

• Detailed letter of explanation
• Comprehensive resume
• Complete job description
• Foreign nationals particular qualifications
• Safeguards to restrict access to that approved
  (Technology Control Plan)

104
Letter of Explanation

• Identities of all parties to the transaction
• Exact project location (where the technology or
  software will be used)
• Type of technology and scope
• Availability abroad of comparable foreign
  technology or software
• Form in which the technology will be released and
  the uses for which the technology will be
  employed.
• Applicants internal technology control plan

105
Foreign Nationals Resume

• Include all educational institutions attended
  beyond high school
• Street addresses
• Degrees or certificates received.
• All positions held
• Employers names and street addresses
• Brief description of work done.

106
Foreign Nationals Resume (Cont.)

• Account for all time since from high school
  graduation
• Present in month and year format
• No gaps greater than 30 consecutive days.
• Include brief abstracts of all scientific and
  technical papers published, and presentations at
  scientific and technical conferences.

107
Technology Control Plan

• The requirement for a technology control plans
  are a standard condition found in deemed export
  and technology exports licenses.

108
Technology Control Plan (Cont)

• Essential elements
• Physical security plan
• Information security plan
• Personnel screening procedures
• Training and awareness program
• Self evaluation program
• Corporate commitment to export compliance

109
Helpful Information

• Does the foreign national
• Have strong ties to the U.S. (e.g., family here,
  home ownership, etc.) and / or
• Intend to become a U.S. citizen?
• What ties does the foreign national have to his /
  her country of origin?
• What special benefits or expertise the foreign
  national brings to the applicant?

110
BIS - Application Review

• Verify classification of technology
• Review licensing requirements license
  exceptions based on home country
• Assess appropriateness of job description,
  responsibility, title
• Assess appropriateness of education level and
  field to technology end-use
• Determine reasons for control for correct
  referrals

111
License Exceptions for Deemed Exports

• CIV Civil End Use (EAR 740.5)
• ECCN 3E002 technology.
• APP Adjusted Peak Performance (EAR 740.7)
• ECCNs 4D001 and 4E001 software and technology
• Both require foreign national review

112
Foreign National Review (FNR)Sections 740.5
740.7

• Applicant must submit FNR request before
  disclosing technology under license exceptions
  CIV and APP.
• Request must provide same information on the
  foreign national as a license application.
• Faster review than license applications

113
License Exceptions for Deemed Exports

• TSR Technology and Software Under Restriction
  (EAR 740.6)
• Applies to technology and software under national
  security only for country group B nationals.
• Letter of assurance required

114
Deemed Export Application Statistics FY2008--
Results

• Total applications processed 1252
• Approvals 1147 (91)
• RWAs 101 (8)
• Denials 4 (gt1)

115
Deemed Export Application Statistics FY2008
Nationalities

• 57 Peoples Republic of China
• 10 India
• 7 Russia
• 6 Iran
• 5 United Kingdom
• 1 Germany
• 2 Others

116
Deemed Export Contacts

• Deemed Exports and Electronics Division
• Brian Baker Kurt Franz
• Director Senior Export Policy Analyst
• 202-482-5534 202-482-2278
• bbaker_at_bis.doc.gov kfranz_at_bis.doc.gov
• Bob Juste
• Senior Electrical Engineer
• 202-482-2845
• rjuste_at_bis.doc.gov