Deemed Export Compliance October 22, 2015Oct 22, 2015 · •August 2010: Xe Services LLC (formerly...

Deemed Export Compliance

October 22, 2015

1 Copyright © 2015 Fragomen, Del Rey, Bernsen & Loewy, LLP

Christa MinnickAssociate Attorney

Fragomen, Del Rey, Bernsen & Loewy, PLLC50 W. Big Beaver Road, Suite 200, Troy, MI 48084

Ph. 248-282-5716; Fax [email protected]

This material is copyrighted information intended for the exclusive use of Fragomen, Del Rey, Bernsen & Loewy. This material may not be reproduced or distributed without the express permission of Fragomen, Del Rey, Bernsen & Loewy.

With you today


Overview:

The U.S. Deemed Export Rule


Export Control

•All U.S. employers are required to comply with export control regulations

- Export Administration Regulations (EAR)

- International Traffic in Arms Regulations (ITAR)

•U.S. government approval is required before a company transfers controlled technology to a foreign national


Export Control

•What is an “export” in this context?

- Knowledge, technical information, and other intangibles are treated as exports without ever crossing the U.S. border

•When technical information is released to a foreign national, U.S. export control regulations consider this to be an export to the foreign national’s home country, or a “deemed export”


Export Control

•Technology is generally defined as technical data and know-how related to design, development, production, manufacture, or test of an item

•Whether the technology is controlled and requires a license before transfer to a given foreign national is generally dependent on:

- 1) Export classification of the technology (i.e. level of control); &

- 2) Home country of the foreign national.


Export Control Requirements

•U.S. government approval is required before a company transfers “controlled technology” to a foreign national

•If foreign national will have access to certain restricted technology/know-how, and depending on foreign national’s home country, employer may be required to obtain an EAR license or ITAR license

- License must be granted before relevant technology can be released to the foreign national


Export Control

•Who is a “foreign national” in this context?

•Under U.S. export controls, a foreign national is defined as any individual who is not a:

- U.S. citizen or national

- U.S. lawful permanent resident

- Person granted Asylee/Refugee status or amnesty in the U.S.


Export Control Requirements

•Home Country – the foreign national’s last-in-time citizenship or permanent residency (“home country”) determines the country-specific controls

- Level of control is based on U.S. foreign policy and national security concerns

•Key countries of concern:

- Terrorist Designated Countries (Highest Controls)

- Second Tier (Heightened Controls)

- “Friendly” Countries (Lowest Controls)


Applicable Export Control Regulations


Export Control Regulations

•Export Administration Regulations (EAR)

- Administered by U.S. Department of Commerce, Bureau of Industry and Security

- Covers “dual use” technology that has both commercial and potential military application

• Most Fragomen clients work with technologies that are subject to EAR as it covers civil and dual use technologies

- Controls technologies and source code related to the following, among others:

• Semiconductor; chemical & materials; aerospace; data communications; nuclear; sensors and lasers; computers; manufacturing equipment; encryption; electronic components; toxins and viruses; navigation and avionics


Export Control Regulations

•International Traffic in Arms Regulations (ITAR)

- Administered by U.S. Department of State, Directorate of Defense Trade Controls

- Covers items on the United States Munitions List

• Items that are specifically designed, modified, configured, or adapted for military or space applications

- Military Electronics, Military Aerospace, Satellite/Space, Defense Contractors

• Most Fragomen clients are not heavily involved in ITAR

• Obtaining a license can be very difficult due to existing arms embargoes


Export Control Compliance


Why Compliance Matters

• It’s the law!

• Civil penalties

• Criminal penalties

• Negative PR


Deemed Export Compliance

•As of December 23, 2010, employers are required to certify its compliance with U.S. export control regulations governing the release of technology to foreign nationals in immigration filings

- Form I-129 (H, L, O, and P petitions)

- Form I-129S (L blanket petitions)

•Result of pressure on USCIS, DOS, and DOC from federal government to increase information collection and sharing on these issues to improve ability to enforce the export control regulations


Deemed Export Compliance Certification Language

With respect to the technology or technical data the petitioner will release or otherwise provide access to the beneficiary, the petitioner certifies that it has reviewed the Export Administration Regulations (EAR) and the International Traffic in Arms (ITAR) and has determined that:

� 1. A license is not required from either the US Department of Commerce or the US Department of State to release such technology or technical data to the foreign person; or

� 2. A license is required from the Department of Commerce and/or Department of State to release such technology or technical data to the beneficiary and the petitioner will prevent access to the controlled technology or technical data by the beneficiary until and unless the petitioner has received the required license or other authorization to release it to the beneficiary.


Deemed Export Program

•Key Compliance Elements

- Process to identify controls on workplace technologies

- Candidate screening and licensing decision

- Targeted facility and IT controls on controlled technologies

- Process to identify and accommodate changed circumstances

- Process to address third party considerations

- Training program designed for specific functional areas and audiences

- Internal review/audit program to monitor effectiveness of Deemed Export compliance


Penalties for Failure to Comply with Deemed Export Compliance Regulations

•Foreign national who violates export control rules:

- could be determined to be inadmissible to the United States/visa refusals

•Employers who violate these rules can be subject to fines and penalties:

- civil fines ranging from $250,000 to $500,000 (strict liability)

- criminal penalties of up to $1,000,000 and 20 years imprisonment (willful violation)


Recent Deemed Export Enforcement

•March 2007: ITT - $100 million

- Violations included transfers of ITAR technical data to foreign contractors for production of night vision components

• September 2008: University of Tennessee Professor

- Convicted for transfer of controlled technology to Chinese foreign national student (criminal sentencing)

•October 2008: Maxim - $192,000

- Transfer of controlled encryption technology to Iranian foreign national employee; transfer of electronics technology to Chinese foreign national employee

• December 2008: Qiotiq S.a.r.l - $25M

- Violations included retransfer of technical data to employees in China and Singapore

• August 2010: Xe Services LLC (formerly Blackwater) - $42M

- Numerous violations including unauthorized transfer of technical data to foreign person employees & contractors, including military training


Deemed Export Compliance Resources

Department of Commerce

Bureau of Industry and Security:

- Export Administration Regulations

www.access.gpo.gov/bis/ear/ear_data.html

- Licensing of Foreign Personshttp://www.bis.doc.gov/index.php/licensing

Department of State

Directorate of Defense Trade Controls:

- International Traffic in Arms Regulationswww.pmddtc.state.gov/regulations_laws/itar.html

- Licensing of Foreign Personswww.pmddtc.state.gov/licensing/index.html


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