Export Controls and Research: A University Challenge

1. Export Controls and Research: A University Challenge Kay Ellis Oklahoma State University (405) 744-9995 kay.ellis@okstate.edu http://www.research.okstate.edu Kay Ellis Oklahoma State University (405) 744-9995 kay.ellis@okstate.edu http://www.research.okstate.edu

2. Need help navigating the Export Control maze???

3. TOPICS TO BE COVERED • Overview of the basic regulations • Differences between EAR and ITAR • Key issues for universities • Application to research • Government audits • Licensing the technology • The EAR process • University/PI responsibilities • Sanctions for noncompliance • Export Control Management Plan

4. WHY REGULATIONS WERE IMPOSED • Prevent terrorism • Restrict exports of goods and technology that could contribute to the military potential of adversaries • Restrict exports of goods and technology that could hamper U.S. economic vitality • Prevent proliferation of weapons of mass destruction

5. OVERVIEW • Export controls cover • Any item in U.S. trade (goods, technology, information) • U.S. items wherever located, even internationally • “Deemed exports” (access to controlled technology or defense service by a foreign national in the U.S.) • Excludes • Items in the public domain • Artistic or non-technical publications (maps, children’s books, sheet music, calendars, film)

6. BASIC REGULATIONS - ITAR • International Traffic in Arms Regulations (ITAR) – 22 CFR Parts 120 – 130) • U.S. Munitions List (USML) enumerates the defense articles and services (furnishing technical assistance - includes design, engineering and use of defense articles) 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)

8. BASIC REGULATIONS - ITAR (cont.) U.S. Munitions List (USML): 22 CFR 121.1 • Firearms, Close Assault Weapons/Combat Shotguns • Artillery Projectors • Ammunition • Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines • Explosives, Propellants, Incendiary Agents • Vessels of War and Special Naval Equipment • Tanks and Military Vehicles • Aircraft and Associated Equipment

9. BASIC REGULATIONS - ITAR (cont.) • Military Training Equipment • Protective Personnel Equipment • Military Electronics • Fire Control, Range Finder, Optical and Guidance and Control Equipment • Auxiliary Military Equipment • Toxicological Agents and Equipment and Radiological Equipment • Space Systems and Associated Equipment

10. BASIC REGULATIONS - ITAR (cont.) • Nuclear Weapons Design and Test Equipment • Classified Articles, Technical Data and Defense Service Not Otherwise Enumerated • Directed Energy Weapons -lasers, pulsed power, etc. • Reserved • Submersible Vessels, Oceanographic & Associated Equipment • Miscellaneous Articles

11. BASIC REGULATIONS - EAR • 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

14. BASIC REGULATIONS – EAR (cont.) Commerce Control List (CCL) Categories: 0. Nuclear Materials, Facilities & Equipment, and Miscellaneous • Materials, Chemicals, Microorganisms & Toxins • Materials Processing (i.e., making plastics, metals) • Electronics Development • Computer (development and programs) • Telecommunications and Information Security • Sensors and Lasers • Navigation and Avionics • Marine • Propulsion Systems, Space Vehicles and Related Equipment

15. BASIC REGULATIONS – OFAC Department of Treasury Office of Foreign Asset Control (OFAC) – Economic sanctions focus on end-user or country and may limit transfer of technologies/assistance to OFAC’s list of embargoed countries • In certain cases, OFAC regulations “trump” other government agencies such as the BIS (for example, shipping items to Iran) • OFAC has a “Specially Designated Nationals and Blocked Persons List” • Prohibits payments or providing “value” to nationals of sanctioned countries and certain entities

17. Confused?

18. DIFFERENCES BETWEEN ITAR/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) • Not much latitude, few exemptions

19. DIFFERENCES BETWEEN ITAR/EAR ITAR: • ITAR will deny a license for exports/sales of defense service or articles to certain countries such as Belarus, Iran, Libya, North Korea, Syria, China, Sudan,etc. • Research must already be published • ITAR has stricter proprietary review concerns • Has exemption for foreign nationals if full-time regular employee of a university

20. DIFFERENCES BETWEEN ITAR/EAR EAR: • Covers dual use items (found on the CCL) • Regulates items designed for commercial purposes but that can have military applications (computers, pathogens, civilian aircraft, etc.) • Covers goods, test equipment, materials and the technology and software

21. DIFFERENCES BETWEEN ITAR/EAR EAR: • Differs on “ordinarily publishable” (EAR) vs. “published” (ITAR) • Not as many license restrictions to certain countries • DOC easier to work with—more exemptions available

22. KEY ISSUES FOR UNIVERSITIES • Public Domain • “Deemed” Exports • Fundamental Research Exemption • Troublesome Clauses

23. KEY ISSUE: 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

24. KEY ISSUE: DEEMED EXPORTS • The EAR defines a deemed export as the release of technology or source code subject to the EAR to a foreign national (no green card) in the U.S. • Such release is “deemed” to be an export to the home country of the foreign national. • Situations that can involve release of U.S. technology or software include: • Tours of laboratories • Foreign students or professors conducting research • Hosting foreign scientists • Emails, visual inspection, oral exchanges • Unless the fundamental research exemption applies, a university’s transfer of controlled technology to a non-permanent resident foreign national may be controlled and/or prohibited

25. But what about the Fundamental Research Exemption?

26. FUNDAMENTAL RESEARCH: 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.

27. FUNDAMENTAL RESEARCH: 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.

28. KEY ISSUE: FUNDAMENTAL RESEARCH EXEMPTION • Research conducted by faculty and students at a university will normally be considered fundamental research • University based research is not considered “fundamental research” if the university or its researchers accept restrictions on the publication of the results of the project

29. ITAR AND THE FUNDAMENTAL RESEARCH EXEMPTION • Covers information which “is published and which is generally accessible or available to the public” through a number of mechanisms including: • Unrestricted publications • Pending patent applications • At an accredited institution of higher learning in the U.S. where the information is ordinarily published and shared broadly in the scientific community

30. ITAR AND THE FUNDAMENTAL RESEARCH EXEMPTION • Excludes information restricted for proprietary reasons or by specific government access and dissemination controls • Prepublication review and approval for anything other than pending patent applications invalidates the fundamental research exemption under ITAR

31. EAR AND THE FUNDAMENTAL RESEARCH EXEMPTION • Exemptions significantly broader than ITAR • Prepublication review for inadvertent proprietary material does not trigger license • Short delay of publication for pending patent applications okay • Prepublication approval 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

32. KEY ISSUE: TROUBLESOME CLAUSES • Major issue for research awards—can invalidate the Fundamental Research Exemption • COGR/AAU reported to the White House Office of Science and Technology Policy (OSTP) that “troublesome clauses restricting publication and participation by foreign nationals in research awards continued to be a significant problem for universities.” http://www.aau.edu/research/Rpt4.8.04.pdf

33. APPLICATION TO RESEARCH • Corporate contract may limit access by foreign nationals • Proprietary restrictions or restrictions on publication by corporate contract 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

34. APPLICATION TO RESEARCH • Government grants/contracts 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

35. APPLICATION TO RESEARCH: SHIPPING • Shipping equipment, technology, software, computers, etc.,outside the U.S. may require a license • How do we handle this at the various levels within the university? • Awareness of regulations at the time of purchase • OSU requires notification on Quotes and/or Requisitions

36. APPLICATION TO RESEARCH: TRAVEL • Taking equipment, computers, etc., out of the country may require a license • The Office of Foreign Asset Controls (OFAC) has restrictions • The Departments of Commerce, State and OFAC have denied entities/persons lists

37. APPLICATION TO RESEARCH: EQUIPMENT USE • “Use” of controlled equipment by a FN may require a license even if Fundamental Research Exemption is applicable. • The transfer of controlled technology or source code of a controlled item to a FN may require a license, NOT the normal operation or use of the item or piece of equipment

38. APPLICATION TO RESEARCH:SOFTWARE • 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

39. REVIEW The University of Chicago wants to export its findings from research and development performed at the university on new techniques relating to gas turbine engines for aircraft applications. The findings will be presented next month at a symposium that will be open to the public. Is the technology subject to the EAR?

40. CASE STUDY The University received a subcontract from a private company (federal flow-through from DoD) with a restrictive publication clause. The PI is from the PRC (he applied for a green-card and received approval but has not actually received it). The SOW involves making a protective coating for missile domes that will enable the laser to “lock on” to the missile.

41. CASE STUDY, Continued • Does the research fall under EAR or ITAR? • If yes, does the Fundamental Research Exemption apply? • Why or why not? • If a license is required, can the University apply for a license in this case?

42. GOVERNMENT EXPORT AUDITS • Major research universities audited on export control policies • DoD Inspector Generals released initial audit report: http://www.dodig.osd.mil/audit/reports/04report.htm • Key findings • University policies regarding unclassified export-controlled technology are inadequate • Foreign nationals are working with critical technology and information without authorization/export licenses • Universities apply exemptions too broadly – report questions public domain/publication exemption (already published or will be published)

43. GOVERNMENT EXPORT AUDITS • Report questions universities use of the fundamental research exemption and the educational exemption • Report concludes that the use of research equipment and the technology related to it requires a license by the FN even if all the research based around it qualifies for the fundamental research exemption

44. GOVERNMENT EXPORT AUDITS:IF COMMERCE ACTS AS INDICATED • A License will be required for foreign nationals to use controlled equipment • The Education Exemption would not be allowed (affecting what is taught in class) • The EAR exemption would change to what has actually been published • Substantial investment of staff/resources

45. GOVERNMENT EXPORT AUDITS: IF DoD ACTS AS INDICATED • Bottom line: Export control compliance for DoD-funded research will increase considerably • A required DFAR export control clause will be in all DoD grants and contracts, requiring the university to: • Incorporate an export control compliance clause in all subcontracts that may involve any export-controlled technology • Have an export control management plan that will include: • initial and periodic training re: export control compliance for all employees with access to export-controlled technology • Foreign nationals required to wear badges • Performing periodic self-assessments to ensure compliance with all export control laws and regulations

46. 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

47. 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?

48. 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.)

49. 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 (ITAR) • DSP-5 (ITAR) • Deemed Export License (EAR) • License

50. LICENSING THE TECHNOLOGY • EAR – not too complicated, no fee • Foreign nationals will require a “Deemed Export License” • In certain instances can apply for a license electronically • ITAR – very complicated and expensive • Must register before applying for a license • DSP-5/TAA required for foreign nationals working with ITAR export controlled technology • Technology Control Plan required • Recommend hiring export control attorney or consultant