NOAA Workshop on U.S. Export Controls June 7-9, 2011 – HCHB June 28-30, 2011 - Seattle
U.S. Department of Commerce Bureau of Industry and Security Deemed Export Compliance Bernard Kritzer Director Office of Exporter Services BKritzer@bis.doc.gov
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 • Threat Briefing – Office of Export Enforcement • ITAR Overview
BIS is here to help! • Outreach Activities • Exporter Counseling • Advisory Opinions • Commodity Classifications • Compliance Strategies
Bureau of Industry and Security Ph. (202) 482-4811 Outreach & Educational ServicesFax (202) 482-2927 14th St. & Pennsylvania Ave. NW Washington, DC 20230 Western Regional Offices 3300 Irvine Avenue, Suite 345 Ph. (949) 660-0144 Newport Beach, CA 92660 Fax (949) 660-9347 96 North 3rd Street, Suite 250 Ph. (408) 291-4212 San Jose, CA 95112 Fax (408) 291-4320 Need Assistance?
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.
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.
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 R&D done over many years. ■Loss of proprietary R&D can result in the establishment and/or enhancement of foreign competitors in leading edge technology sectors.
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
What is being targeted? • Nationally • Biotechnology • Pharmaceuticals • Nanotechnology • Quantum Computing • Advanced Materials • Communications and Encryption Technology • Weapons Systems yet unclassified
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 R&D facilities overseas Circumventing export control laws Visiting scientific and research delegations Hacking Downloading information from your network Methods Used to Target Technology
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).
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.
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 R&D and bringing new products to market timely.
Key Points for Discussion • Successful deemed export compliance incorporate commodities and technologies. • Successful deemed export compliance also represents management’s 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.
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.
Overview of the Export Administration Regulations(EAR)Mr. Douglas BellSenior Export CounselorOffice of Exporter Services
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.
How Do We Control Exports? Statutory Authority • Export Administration Act (EAA) of 1979, as amended • International Emergency Economic Powers Act, as amended
Export Administration Regulations (EAR) • Implement the Export Administration Act • Apply to most commercial items Broad jurisdiction BUT… narrow license requirements
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
Why Do We Control Exports? • National Security • Foreign Policy • Anti-terrorism • Crime control • Regional Stability • Non Proliferation • Nuclear weapons • Chemical/biological weapons • Missiles
Who Else is Involved in Export Controls?Other Regulatory AgenciesPart 730, Supplement 3 • US Dept. of State - Directorate of Defense Trade Controls (ITAR) • 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)
Important EAR Terms • Dual-Use • Item • Export • Reexport • Deemed export/reexport • Commerce Control List (CCL) • Export Control Classification Number (ECCN)
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.
What is an item?Part 772 Commodities Software Technology
What is an export? • An export is a shipment or transmission of items out of the United States.
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
What is a reexport? • A reexport is a shipment or transmission of items subject to the EAR from one foreign country to another.
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
Other Important Concepts • Commerce Control List (“CCL”) • Export Control Classification Number (“ECCN”)
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
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
What is “Subject to the EAR”?Items in the United States§734.3(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)
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
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.
Classification of Items on the Commerce Control List Darrell Spires Senior Electronics Engineer Office of Nonproliferation and Technology Transfer Controls
Topics of Discussion • Determining the Export Control Classification Number (“ECCN”) • The Commerce Control List (“CCL”) • Self-Classification • Official Commodity Classification Request • SNAP-R
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
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?
0 A 018 0 Category A Product Group 018 Type of Control The Structure of the ECCN
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
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
How to Read an ECCN Heading: ECCN & Description
How to Read an ECCN License Requirements: Reasons for Control
How to Read an ECCN License Exceptions: List-Based