EXPORT CONTROLS: A UNIVERSITY CHALLENGE

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EXPORT CONTROLS A UNIVERSITY CHALLENGE

• Kay Ellis
• Oklahoma State University
• [phone]
• mkellis_at_okstate.edu
• http//www.research.okstate.edu

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TOPICS TO BE COVERED

• Overview of the basic regulations
• The fundamental principles, including the need to
  publish
• Use of foreign nationals
• Issues related to dissemination/access
• Working with the EARs
• Licensing the technology

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WHY REGULATIONS WERE IMPOSED

• Prevent terrorism
• Restricts exports of goods and technology that
  could contribute to the military potential of
  adversaries
• Restricts exports of goods and technology that
  could hamper U.S. economic vitality
• Prevent proliferation of weapons of mass
  destruction

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THE ISSUES

• Culture of free exchange and sharing
• Culture of nationality blindness
• Institutions generally decentralized and
  ill-adapted to controls and restrictions
• Regulations hopelessly complicated, frequently
  changed
• Licensing takes time and interrupts research
• Departments of State/Commerce auditing
  universities for export control policies

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OVERVIEW

• Export controls cover
• Any item in U.S. trade (goods, technology,
  information)
• U.S. items wherever located, even internationally
• Deemed exports
• Excludes
• Items in the public domain
• Artistic or non-technical publications (maps,
  childrens books, sheet music, calendars, film)

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THE BASIC REGULATIONS

• International Traffic in Arms Regulations (ITAR)
  22 CFR Ch.1 Part 120)
• U.S. Munitions List (USML) enumerates the defense
  articles and services which are controlled
• Based primarily on whether an article or service
  is deemed to be inherently military in character
• Licensing handled by the Directorate of Defense
  Trade Controls (DDTC)

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THE BASIC REGULATIONS

• Export Administration Regulations (EAR)
• 15 CFR Parts 730-774)
• -The Commerce Control List (CCL) contains
  commodities, technology, and software subject to
  the EAR identified by an Export Classification
  Control Number (ECCN)
• - Licensing handled by Bureau of Industry and
  Security (BIS), formerly BXA
• The inherent capabilities and design, not the end
  use, determines whether the item falls under the
  ITAR or the EAR

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DIFFERENCES BETWEEN ITAR AND EAR

• ITAR
• covers military items (munitions and defense
  articles)
• Includes most space related technologies because
  of application to missile technology
• Includes technical data related to defense
  articles and services (furnishing assistance
  including design and use of defense articles)
• Very strictnot much latitude, few exemptions

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DIFFERENCES BETWEEN ITAR AND EAR

• EAR
• Covers dual use items
• Regulates items designed for commercial purposes
  but that can have military applications
  (computers, pathogens, civilian aircraft, etc.)
• Covers both the goods and the technology
• DOC easier to work withmore exemptions available

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DIFFERENCES BETWEEN ITAR AND EAR

• ITAR proscribed list/sanctions (the T-7s)
• Differ on ordinarily publishable (EAR) vs.
  published (ITAR)
• ITAR has stricter proprietary review concerns

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KEY ISSUES FOR UNIVERSITIES

• Public Domain
• Fundamental Research Exemption
• Deemed Exports

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PUBLIC DOMAIN

• Includes information that is published and
  generally available to the public
• Through sales at bookstands and stores
• Through subscriptions available without
  restrictions
• At libraries open or available to the public
• Through patents
• Through unlimited distribution at a conference,
  meeting seminar, trade show, generally accessible
  to the public in the U.S.
• Includes technology and software that are
  educational and released by instruction in
  catalog courses and associated labs and
  Universities

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NSDD-189

• 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.

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NSDD-189

• To the maximum extent possible, the products of
  fundamental research should remain unrestricted.
  Where national security requires control, the
  mechanism for control of information generated
  during federally-funded research in science,
  technology and engineering at colleges,
  universities and laboratories is classification.

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DEEMED EXPORTS

• Export controls cover transfers of good and
  technology within the U.S. to a foreign national
  who is not a U.S. citizen or permanent resident
  (green card holders)
• Applies to technology transfers under the EAR and
  ITARs technical data and defense services
• Unless the fundamental research exemption
  applies, a universitys transfer of controlled
  technology to a non-permanent resident foreign
  national may be controlled and/or prohibited
• Non-immigrant visa holders must satisfy export
  controls (license may be required)
• Examples - Visual inspection, E-mails, oral
  exchanges of information

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ITAR AND THE FUNDAMENTAL RESEARCH EXEMPTION

• Fundamental research exemption recognized, but
  limited, given jurisdiction over goods and
  technologies designed to kill
• Covers information which is published and which
  is generally accessible or available to the
  public through a number of mechanisms including
• Unrestricted publications

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ITAR AND THE FUNDAMENTAL RESEARCH EXEMPTION

• At an accredited institution of higher learning
  in the U.S. where the information is ordinarily
  published and shared broadly in the scientific
  community
• Excludes information restricted for proprietary
  reasons or by specific government access and
  dissemination controls

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ITAR AND THE FUNDAMENTAL RESEARCH EXEMPTION

• Poses three significant issues
• Ordinarily publishable or published
• Proprietary information of sponsor
• Access or dissemination control

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EAR AND THE FUNDAMENTAL RESEARCH EXEMPTION

• Exemptions significantly broader than ITAR
• Prepublication review for inadvertent proprietary
  material does not trigger license
• Prepublication review by a corporate sponsor or
  other restrictions on the publication of
  scientific and technical information generally
  invalidates the exemption
• Access and dissemination controls normally do not
  trigger license as long as university follows
  national security controls imposed in the award
• Some technologies (advanced encryption)
  ineligible for fundamental research exemption and
  require licenses

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APPLICATION TO RESEARCH

• Office of Foreign Assets Control (OFAC) May
  limit transfer of technology/assistance to OFACs
  list of embargoed countries
• May need EAR or ITAR license before approved
• Recently ruled providing editing services to a
  person/journal from embargoed country requires a
  license
• Includes university agreements as well as
  arrangements between faculty members

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APPLICATION TO RESEARCH

• Export of research products
• Underwater research vehicle could require ITAR
  license if designed for military applications
  would require Commerce Department authorization
  if designed for civilian purposes
• Temporary transfer of research equipment abroad
• Carrying scientific equipment to certain
  destinations for research may require
  authorization (e.g., Iran Syria, China, etc.)

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APPLICATION TO RESEARCH

• Software development
• Software that is provided to the public for free
  may not require licenses, but proprietary
  software of controlled technology could require
  licensing
• Encryption technology could require licenses or
  could be prohibited for transfers to certain
  foreign nationals/countries

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APPLICATION TO RESEARCH

• Government grants may limit access by foreign
  nationals
• for any foreign nationals working on the project
• determining whether a restriction is a specific
  access and dissemination control under the ITAR
  (which would invalidate the fundamental research
  exemption) particularly problematic
• Restrictions on certain foreign nationals
  Agencies may preclude or limit access by foreign
  nationals to research based on the export control
  laws
• May require prior approval
• Under ITAR, no license available if a foreign
  national is from an embargoed country

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APPLICATION TO RESEARCH

• Corporate grants may limit access by foreign
  nationals
• Proprietary restrictions or restrictions on
  publication by corporate grant may invalidate
  fundamental research
• Includes MTAs, Non-disclosure agreements
• Try to remove restrictive clauses from
  agreements!!!!
• Conferences
• Potential restrictions on participants
• Inability to co-sponsor with certain countries or
  groups (e.g., restrictions on co-sponsoring
  conference with Iranian government)
• Transfer of defense services
• Potential license requirements for work with
  foreign nationals

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DETERMINING THE NEED FOR A LICENSE

• QUESTIONS TO ASK
• 1. What is the nationality of researchers
  INCLUDING both Professors and Research Assistants
  (grad students/post-docs)?
• 2. Will the results be publicly available?
• 3. Will there be restrictions?
• a) on publications
• b) on access
• c) on dissemination
• d) on proprietary information

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DETERMINING THE NEED FOR A LICENSE

• QUESTIONS TO ASK
• 5. Will I be receiving any restricted
  information?
• 6. Destination Is the research going
  overseas to a foreign company, government or
  individual?
• 7. What do the end-users intend to do with the
  research results?

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DETERMINING THE NEED FOR A LICENSE

• STEPS TO TAKE
• Classify the technology or goods involved (ITAR,
  EAR, OFAC, other?)
• Determine if license is needed for the
  technology/end user/end use
• Determine if license exemption is available
  (public domain, fundamental research, EAR
  exemption from CCL, etc.)

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DETERMINING THE NEED FOR A LICENSE

• Determine whether embargoes, prohibited parties,
  or destinations are involved
• If no exemptions, determine what kind of license
  is needed
• Technical Assistance Agreement
• DSP-5
• Deemed Export License (EAR)
• License

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DETERMINING THE NEED FOR A LICENSE

• Apply promptly, licensing can take months!!
• OURS website export control links
  http//www.research.okstate.edu
• ITAR (State) requirements available at
• http//www.pmdtc.org
• EAR (Commerce) requirements available at
  http//www.bis.doc.gov
• OFAC (Treasury) requirements available
  http//www.treas.gov/offices/eotffc/ofac/

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THE EAR PROCESS IF EAR APPLIES, WHAT NEXT?

• STEP 1 PI must classify the type of technology
  or science being developed on the Commerce
  Control List by determining the ECCN Export
  Control Classification Number
• http//w3.access.gpo.gov/bis/ear/ear_data.html

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COMMERCE CONTROL LIST

• Contains lists of items subject to licensing
  authority of BIS
• Each entry is called Export Control
  Classification Number (ECCN)
• (Five alpha-numeric characters)
• Items listed in terms of technical parameters

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ECCN BREAKDOWNEXAMPLE 3D101

• 3 Category
• D Product Group
• 1 Reason for Control
• 0 Relates to Reasons for Control
• 1 Used for Numerical Ordering

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TEN CATEGORIES IN THE CCL (0 - 4)

• 0. Nuclear Materials, Facilities Equipment
  Miscellaneous
• 1. Materials, Chemicals, Microorganisms
  Toxins
• 2. Materials Processing
• 3. Electronics Design, Development and
  Production
• 4. Computers

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TEN CATEGORIES IN THE CCL (5 9)

• 5. Telecommunications Information Security
• 6. Sensors and Lasers
• 7. Navigation and Avionics
• 8. Marine (ships vessels)
• 9. Propulsion Systems, Space Vehicles and
  Related Equipment

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PRODUCT GROUPS

• A Equipment, Assemblies Components
• B Production, Test Inspection Equipment
• C Materials (raw)
• D Software
• E Technology

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FINDING THE ECCN

• Review general characteristics (technical
  parameters) of items (research) to arrive at
  Category and Product Group
• Match characteristics of item with ECCN and
  subparagraph
• HINT Check the CCL alphabetical index

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GENERAL PROHIBITIONS, PART 736

• STEP 2 Check General Prohibitions
• Prohibit certain exports, re-exports, and other
  conduct, without a license, license exception or
  determination that no license is required
• General Prohibitions 1-10 apply to items having a
  specific ECCN
• General Prohibitions 4-10 apply to items that are
  EAR99 (not found on the CCL)

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GENERAL PROHIBITIONS 1-3

• Apply only if your item is classified under an
  ECCN
• Export and re-export of controlled items to
  listed countries
• Re-export and export from abroad of foreign-made
  items incorporating more than a de minimis amount
  of controlled U.S. Content
• Re-export and export from abroad of the foreign
  produced direct product of U.S. technology and
  software

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GENERAL PROHIBITIONS 4-10

• Apply if your item is classified under a
  specific ECCN or is EAR 99 (items not found on
  the CCL- usually no license required)
• Engaging in actions prohibited by a denial order
  (check denied persons list)
• Export or re-export to prohibited end-uses or end
  users (e.g., chemical and biological warfare)
• Export or re-export to embargoed or special
  destinations
• Support of proliferation activities

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GENERAL PROHIBITIONS, Continued

• Intransit shipments and items to be unladen from
  vessels or aircraft
• Violation of any order, terms, and conditions
• Proceeding with transactions with knowledge that
  a violation has occurred or is about to occur
• If Prohibitions dont apply, look for Exceptions

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LICENSE OR EXCEPTION UNDER EAR?

• STEP 3 Try to find the exception!
• Using the CCL check reasons for control Look at
  the Reason for Control section directly under
  the category heading and License Requirements.--
  E.g. Reason for control NS, MT, AT
• Match specific controls to Country Chart column
• Look for an X in Commerce Country Chart

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LICENSE OR EXCEPTION UNDER EAR, Continued

• If an X is present, look under the License
  Exceptions category below the Control(s)
  section
• If no license exception available, license must
  be obtained (4-6 weeks to process)

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REASON FOR CONTROL

• AT Anti-Terrorism
• CB Chemical Biological weapons
• CC Crime Control
• CWChemical Weapons Convention
• EI Encryption Item
• FCFirearms Control
• MTMissile Technology
• NPNuclear Proliferation
• NSNational Security
• RSRegional Stability
• SISignificant Item
• SSShort Supply
• UNUnited Nations
• XPComputers

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COMMON LICENSE EXCEPTIONS

• LVS Limited Value Shipments
• Pertains to Country Group B
• Identified by LVS (value) on the CCL (e.g.
  LVS 5000)
• GBS Country Group B
• Identified by GBS Yes on the CCL
• CIV Civil End-Users
• Pertains to Country Group D-1
• Identified by CIV Yes on the CCL
• National Security controlled items only

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COMMON LICENSE EXEPTIONS

• TSR Restricted Technology and Software
• Pertains to Country Group B
• Identified by TSR Yes on the CCL
• National Security Controlled Items only
• Written Assurance Letter can be written stating
  software will not be released to nationals of
  certain country groups (e.g. D1 and E2)

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SANCTIONS FOR NONCOMPLIANCE

• ITAR
• Criminal Up to 1 million per violation and 10
  years imprisonment
• Civil seizure and forfeiture of article,
  revocation of exporting privilege, up to 500,000
  fine per violation

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SANCTIONS FOR NONCOMPLIANCE

• EAR
• Criminal 50K to 1 million or 5 times value of
  export, whichever is greater, per violation, 10
  years imprisonment
• Civil revocation f exporting privilege, fines
  10K-120K per violation
• OFAC
• Criminal up to 1 million per violation and 10
  years imprisonment
• Civil 12 K to 55 K per violation

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UNIVERSITY/PI RESPONSIBILITIES

• Work with the staff in your college
• Review your research for potential EAR/ITAR
  issues dont wait until the contract arrives!
• Classify research - find ECCN (EAR) and/or check
  Munitions List (ITAR)
• If you are planning to hire a foreign national,
  check the regulations to see if a license may be
  required
• At the contract stage, check for restrictive
  clauses that would eliminate the Fundamental
  Research exemption

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UNIVERSITY/PI RESPONSIBILITIES

• Document exemptions
• Records must be kept 5 years (license valid 2
  years)
• Apply for a license BEFORE project
  begins--process can take 2-6 months or longer!
• Honest errors are acceptable but gross negligence
  is punishable
• Violations are civil and criminal---Fines and
  jail time!!!

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