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Slide 2 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 gsolis@admin.usf.edu gsolis@admin.usf.edu Slide 3 J. Scott Maberry Fulbright & Jaworski LLP Washington, DC smaberry@fulbright.com 202-662-4693 Division of Sponsored Research Thanks and Acknowledgment: Slide 4 Topics to be Covered Background: Why Trade Controls Matter Now More Than Ever Background: Why Trade Controls Matter Now More Than Ever Introduction to U.S. Trade Controls: How Trade Controls Affect Technology Transfer Introduction to U.S. Trade Controls: How Trade Controls Affect Technology Transfer Issues Specific to University Research Issues Specific to University Research Deemed Export and Technical Data Export Restrictions Deemed Export and Technical Data Export Restrictions Fundamental Research Exemption Fundamental Research Exemption National Security vs. Anti-Discrimination National Security vs. Anti-Discrimination Questions Questions Slide 5 Background: Why It Matters Increased scrutiny on technology transfer, including university research Increased scrutiny on technology transfer, including university research Increased regulation of technology transfer Increased regulation of technology transfer Increased enforcement activity against technology transfers Increased enforcement activity against technology transfers Slide 6 Slide 7 6 Slide 8 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 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 Slide 9 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 Roth was still convicted of 17 felonies Alarming Aspects of the Roth Case Slide 10 Defense Department witness concluded: Roths 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 Roth was still convicted of 17 felonies Alarming Aspects of the Roth Case Slide 11 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 Slide 12 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 If you accept a defense contract, expect to be treated as a defense contractor Alarming Aspects of the Roth Case Slide 13 12 Slide 14 Introduction to Trade Controls Arms Export Controls Arms Export Controls Dual Use Export Controls Dual Use Export Controls Sanctions and Embargoes Sanctions and Embargoes Denied Party Screening Denied Party Screening Economic Espionage Act Economic Espionage Act Others Not Covered Here: Others Not Covered Here: Customs Customs Import remedies Import remedies Anti-bribery Anti-bribery Anti-boycott Anti-boycott Trade agreements: WTO, NAFTA, etc. Trade agreements: WTO, NAFTA, etc. Slide 15 Arms Export Controls Main regulator: U.S. Department of State Directorate of Defense Trade Controls (DTC) Main regulator: U.S. Department of State Directorate of Defense Trade Controls (DTC) Regulations: International Traffic in Arms Regulations (ITAR) Regulations: International Traffic in Arms Regulations (ITAR) Controlled items and related technology listed on U.S. Munitions List (USML) Controlled items and related technology listed on U.S. Munitions List (USML) Licenses or authorization required for all destinations; very limited exceptions Licenses or authorization required for all destinations; very limited exceptions Penalties: Penalties: Civil fines Civil fines Loss of export privileges (a.k.a. the death penalty) Loss of export privileges (a.k.a. the death penalty) Criminal fines and imprisonment Criminal fines and imprisonment Slide 16 Arms Export Controls WHAT IS COVERED? WHAT IS COVERED? Exports of all defense articles, defense services, and related technical data Exports of all defense articles, defense services, and related technical data DEFINITIONS ARE BROAD: DEFINITIONS ARE BROAD: Export: Export: Transferring registration, control, or ownership to a foreign person, whether in the United States or abroad; 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 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. 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) 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 Foreign Person: Everyone else Slide 17 Arms Export Controls Defense Article: Defense Article: Items specially designed or modified for military use Items specially designed or modified for military use Defense Service: Defense Service: Furnishing assistance or training to foreign persons, wherever located, in design, development, maintenance, modification, operation, use, etc. of defense articles; 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 Furnishing defense tech data to foreign person, wherever located Technical Data: Technical Data: Any information required for design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles 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 Includes information in the form of blueprints, drawings, photographs, plans, instructions, and documentation Software related to defense articles Software related to defense articles Slide 18 Dual Use Export Controls Main Regulator: Department of Commerce, Bureau of Industry and Security (BIS) Main Regulator: Department of Commerce, Bureau of Industry and Security (BIS) Enforcer: Office of Export Enforcement (OEE) Enforcer: Office of Export Enforcement (OEE) Regulations: Export Administration Regulations (EAR) Regulations: Export Administration Regulations (EAR) Controlled goods, software, and technical data listed on Commerce Control List (CCL) Controlled goods, software, and technical data listed on Commerce Control List (CCL) Product / Destination Controls Product / Destination Controls End Use / End User Controls End Use / End User Controls Penalties: Penalties: Civil fines Civil fines Loss of export privileges (a.k.a. the death penalty) Loss of export privileges (a.k.a. the death penalty) Criminal fines and imprisonment Criminal fines and imprisonment Slide 19 Dual Use Export Controls Dual Use goods, software, and technology covered: Dual Use goods, software, and technology covered: Essentially, everything not covered by the ITAR Essentially, everything not covered by the ITAR License exceptions License exceptions Most exports of low-technology items possible without a license Most exports of low-technology items possible without a license Catchall category EAR99 Catchall category EAR99 covers most everyday items; covers most everyday items; may be exported to most destinations without a license may be exported to most destinations without a license Export includes actual shipment or transmission outside the United States 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 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 Slide 20 Dual Use Export Controls Technology may include prints, plans, instruction, manuals, know-how 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 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: Three classes of technology; ascending order of control: Use technology Use technology Production technology Production technology Development technology Development technology Slide 21 Deemed Exports Technology includes data, designs, manuals, know-how, processes Technology includes data, designs, manuals, know-how, processes Export of technology occurs by: Export of technology occurs by: Visual inspection Visual inspection Oral disclosure Oral disclosure Application of knowledge abroad Application of knowledge abroad Export is deemed to take place when technology is provided to a foreign national, wherever located Export is deemed to take place when technology is provided to a foreign national, wherever located Foreign national is anyone who is not 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 Slide 22 Deemed Exports A foreign national is treated as a foreign country A foreign national is treated as a foreign country Authorization to work or study in the United States does not authorize disclosure Authorization to work or study in the United States does not authorize disclosure License or valid exception must be in place License or valid exception must be in place Examples: Examples: Chinese national employee on a B-1 visa Chinese national employee on a B-1 visa Meeting in Austin with Indian engineers Meeting in Austin with Indian engineers Visit to Brazilian research site Visit to Brazilian research site What about Chinese graduate students? What about Chinese graduate students? Slide 23 Exemptions Some technical data is narrowly exempted from controls: Some technical data is narrowly exempted from controls: General scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities; General scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities; Basic marketing information on function or purpose; Basic marketing information on function or purpose; General system descriptions of defense articles; General system descriptions of defense articles; Patents available at any patent office; Patents available at any patent office; Information in the Public Domain, including: Information in the Public Domain, including: Data having unlimited distribution at a U.S. seminar, trade show, exhibition, etc. generally accessible to the public; 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; Data released publicly after approval by U.S. Government; Fundamental research in science and engineering at U.S. colleges; Fundamental research in science and engineering at U.S. colleges; Data available to the public through Internet, library, etc. Data available to the public through Internet, library, etc. Slide 24 Fundamental Research Exemption Technology is not subject to the Export Administration Regulations if the result of fundamental research Technology is not subject to the Export Administration Regulations if the result of fundamental research ITAR has similar rule ITAR has similar rule Defined narrowly, many conditions Defined narrowly, many conditions Pre-publication review may invalidate Pre-publication review may invalidate Certain export restrictions may invalidate Certain export restrictions may invalidate Pressure to narrow the exemption Pressure to narrow the exemption Pressure from government agencies Pressure from government agencies Pressure from research sponsors Pressure from research sponsors Troublesome Clauses Troublesome Clauses Slide 25 Fundamental Research "'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." "'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. 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. Slide 26 Troublesome Clauses Innocuous-seeming clauses in research contracts may destroy protection of fundamental research exemptions Innocuous-seeming clauses in research contracts may destroy protection of fundamental research exemptions Examples upon request Examples upon request Subject of much research, review, and legal work 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 The troublesome clauses can be negotiated, contrary to what some sponsors or contracting officers will tell you Slide 27 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 ITAR- controlled 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 Slide 28 Arms Export Controls: Definitions Quiz Generally, technical data on view in the public tour would be considered public domain, and thus exempt from ITAR controls 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 Inspectors General Reports question whether certain use technology should be subject to tighter interpretations of the rules 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? Slide 29 9 QUALIFYING QUESTIONS EXPORT CONTROLS: Slide 30 1.Are you sharing, shipping, transmitting or transferring non- commercial encryption software in source code or object code (including travel outside the country with such software)? Slide 31 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? Slide 32 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? Slide 33 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? Slide 34 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)? Slide 35 6.Is the information or software being shared, shipped, transmitted or transferred technical data on the ITAR's US Munition List (USML)? Slide 36 7.Are you shipping or transferring items on the Commerce Control List (CCL) of the Export Administration Regulations (EAR)? Slide 37 8.Are you sharing, transmitting or transferring technology (information) or software code on the Commerce Control List (CCL)? Slide 38 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? Slide 39 IF YOU ANSWERED NO TO ALL OF THE QUESTIONS ABOVE GOOD NEWS!! YOU DO NOT NEED TO OBTAIN AN EXPORT LICENSE (PROBABLY). Slide 40 Sanctions and Embargoes BACKGROUND 26 active sanctions programs; some date from 1950s 26 active sanctions programs; some date from 1950s Post-9/11: a new world of sanctions Post-9/11: a new world of sanctions Main Regulator: U.S. Department of Treasury Office of Foreign Assets Control (OFAC) Main Regulator: U.S. Department of Treasury Office of Foreign Assets Control (OFAC) Penalties: Penalties: Civil fines Civil fines Criminal fines and imprisonment Criminal fines and imprisonment Slide 41 Sanctions and Embargoes All programs have different mixes of many elements All programs have different mixes of many elements Comprehensive embargoes: Comprehensive embargoes: Cuba, Iran, Sudan Cuba, Iran, Sudan Generally includes nationals of these countries. Wherever located. Which is everywhere. Generally includes nationals of these countries. Wherever located. Which is everywhere. Investment prohibitions, e.g., Burma, Iran Investment prohibitions, e.g., Burma, Iran Export/Import prohibitions, e.g., Syria, North Korea Export/Import prohibitions, e.g., Syria, North Korea Asset Freeze, e.g., terrorists, narcotics traffickers Asset Freeze, e.g., terrorists, narcotics traffickers Tailored programs, e.g., rough diamond imports Tailored programs, e.g., rough diamond imports Slide 42 Sanctions and Embargoes Certain persons are subject to separate sanctions (Specially Designated Nationals) Certain persons are subject to separate sanctions (Specially Designated Nationals) Includes companies, organizations, individuals, and vessels Includes companies, organizations, individuals, and vessels Unlawful to conduct any transaction with an SDN Unlawful to conduct any transaction with an SDN Sanctioned persons based in many countries, including U.S. allies (UK, France, etc.) Sanctioned persons based in many countries, including U.S. allies (UK, France, etc.) Slide 43 Sanctions and Embargoes Transactions involving publicly available information may be permitted Transactions involving publicly available information may be permitted But the parameters are different from those under export controls But the parameters are different from those under export controls AND: only applies to work already in existence, not new works AND: only applies to work already in existence, not new works Slide 44 Sanctions and Embargoes Direct export violation: export to a sanctioned party or country Direct export violation: export to a sanctioned party or country Indirect export violation Indirect export violation export to a third party with knowledge or reason to know of export to a sanctioned party export to a third party with knowledge or reason to know of export to a sanctioned party Dont self-blind Dont self-blind Export of services may be prohibited Export of services may be prohibited Facilitation of actions of others may be prohibited Facilitation of actions of others may be prohibited Inventory exception Inventory exception export into third party inventory export into third party inventory no specific order from sanctioned party no specific order from sanctioned party third partys business not predominantly with sanctioned party or country third partys business not predominantly with sanctioned party or country Slide 45 Employment Discrimination Issues Foreign national employees, vendors, contractors, visitors, etc. must be screened in order to avoid prohibited exports Foreign national employees, vendors, contractors, visitors, etc. must be screened in order to avoid prohibited exports Licenses may be required Licenses may be required You may need to gather information about foreign national workers: You may need to gather information about foreign national workers: Country of citizenship Country of citizenship Permanent residence Permanent residence Visa status Visa status Slide 46 Employment Discrimination Issues Under Title VII, certain hiring and other selection decisions are permitted in compliance with national security requirements Under Title VII, certain hiring and other selection decisions are permitted in compliance with national security requirements Conditions: Conditions: duties are subject to any national security law or Executive Order of the President; duties are subject to any national security law or Executive Order of the President; individual does not meet the national security requirement individual does not meet the national security requirement Policies must be adopted for nondiscriminatory reasons and applied in a nondiscriminatory manner Policies must be adopted for nondiscriminatory reasons and applied in a nondiscriminatory manner