Export Compliance Workshop for University Folks: The Basics April 2008

1. Export Compliance Workshop for University Folks: The BasicsApril 2008 NCURA Western Regional Conference Adilia F. Koch

2. Overview • Export Basics • What are Strategic Technologies? • What is your Responsibility? • The Myths about Export • Fundamental Research Exclusion (FRE) • Know the limits. • How to keep your faculty out of trouble. • Basic Elements of a University Export Compliance Plan

3. Why do Universities need to comply with the Export Regulations? • It’s the law. • Security around the world changed after 9/11. • Consequences of non compliance can result in negative publicity, penalties, fines or imprisonment. • Violations can range from $250,000 to $1 million per violation.

4. Export Compliance Implementation Basics • Basics for Implementing a University Export Compliance Plan • Campus Risk Assessment • Develop Best Practices Recommendations • Import Issues – Duty, Value, HTS & Duty-Free Shipments • Focused Export Training depending on Role & Responsibility: • Shipping • Procurement • Faculty • Travel Abroad • Encryption Restrictions • Defense Service; FRE Stops at the Border • Handcarried Items • Upper Management Training • Restricted Party Screening

5. ITT & Universities in the Media • ITT – Night vision goggles http://www.msnbc.msn.com/id/21134540/vp/17815796#17815796 • Border Protection – laptops/electronic devices http://www.washingtonpost.com/wp-dyn/content/article/2008/02/06/AR2008020604763_pf.html • University Students – charged with terrorist charges for carrying “explosives” (homemade fireworks) http://www.msnbc.msn.com/id/21134540/vp/20534365#20534365

6. What does “Export Control” mean? • Export controls are U.S. government regulations that govern the export of strategic technologies, equipment, hardware, software or providing technical assistance to Foreign Persons.

7. What is a Foreign Person? • Any person who is not a U.S. citizen or not a lawful U.S. Permanent Resident (green card). • Any U.S. person employed or representing a foreign entity. • Anyone who has not been granted Political Asylum. • Any foreign corporation, entity, partnership or group that is not incorporated or organized to do business in the US. • Any foreign government.

8. What’s an export? • An export is the transfer of export controlled information, commodities or software either inside the U.S. or outside the U.S. States. • Exports can occur in many ways: • Email • Mail • Agent or broker acting on your behalf – i.e., a Freight Forwarder • Face-to-Face • Website • Visual inspection that reveals technical data • Conference • Hand-carried items – laptop, memory devices

9. Why does the government control exports? • The government controls certain technologies that it considers to be strategically important for: • National Security Reasons • Nuclear Non-Proliferation Reasons • Missile Technology Controls • Anti-Terrorism • Chemical & Biological Controls • Regional Stability • Crime Control Measures • Anti-boycott Reasons

10. What is a Restricted or Prohibited Party? • The US Government issues various lists of individuals and entities both in the U.S. and abroad that have committed export violations or other serious offenses. • Financial dealings or export transactions with Restricted or Prohibited parties is prohibited. • Drug Traffickers • Export Violations • Terrorists

11. Sanctioned Countries • Unilateral and bilateral country sanctions. • They change frequently. • Check country lists. (See attached Sanctioned/Embargoed Country Resource page.)

12. What do the Regulations Control? -- Dual Use Items • The EAR (Export Administration Regulations) Commerce Control List (BIS): • Controls technologies and goods that have dual-use: both military and civil application.

13. Where is it going? What will it be used for? Various controls apply: End-use/End-user

14. Sensitive Technologies with Dual-Use Applications Commerce Control List Categories 0 = Nuclear materials, facilities and equipment (and miscellaneous items)1 = Materials, Chemicals, Microorganisms and Toxins2 = Materials Processing3 = Electronics4 = Computers5 = Telecommunications and Information Security6 = Sensors and Lasers7 = Navigation and Avionics8 = Marine9 = Propulsion Systems, Space Vehicles, and Related Equipment

15. ITAR – Military Application or Spacecraft & Associated Equipment • The ITAR (International Traffic in Arms Regulations) controls commodities and technologies that have predominant military use or space application.

16. Adapted or Modified • Also includesitems that started out as having civil application but were later adapted or modified for military application.

17. Strategic Technologies – Military or Space Applications USML Categories (The ITAR) IV Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines V Explosives and Energetic Materials, Propellants, IncendiaryAgents, and Their Constituents VI Vessels of War and Special Naval Equipment VIII Aircraft and Associated Equipment IX Military Training Equipment and Training X Protective Personnel Equipment and Shelters XI Military Electronics XII Fire Control, Range Finder, Optical and Guidance and Control Equipment XIV Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment XV Spacecraft Systems and Associated Equipment XX Submersible Vessels, Oceanographic and Assoc. Equipment XXI Miscellaneous Articles (Software, components, etc.)

18. What does all this have to do with my Faculty? • Faculty Expertise Chart • http://pr.caltech.edu/media/expertsguide • AdministrationAeronauticsAnthropologyAstronomyBiologyChemical EngineeringChemistryCivil & Earthquake EngineeringComputation & Neural SystemsComputer ScienceEconomicsElectrical EngineeringEnvironmental EngineeringGeologyGeophysicsHistoryLanguage & LiteratureMaterials ScienceMathematicsMechanical EngineeringNeurosciencePhilosophyPhysicsPlanetary SciencePolitical ScienceSeismologySocial Science

19. Example of Sensitive Emerging Technologies on Campus • RoboFly. Aerodynamic unmanned flight vehicles, especially the size of an insect, is a highly sought after technology by military agencies around the world, including the U.S. • Development of “a flying robot weighing less than a paperclip that could be used in search, rescue, monitoring and reconnaissance” could have dual-use or have . . . • Potential military application: Technology can start out being developed for a civil application (toys or other scientific use) but can later become modified or adapted for DARPA, Army, Navy, DOD under a sponsored research project and be transformed into an item for the military which the government may wish to control for national security reasons.

20. What’s not export controlled? • Information in the public domain. • Information excluded under the Fundamental Research Exclusion (FRE) • Basic marketing and general system description

21. The Fundamental Research Exclusion (FRE) • “Accredited Universities of higher learning conducting basic and applied research the results of which are intended to be published . . . and are not subject to access or publication restrictions.” • It doesn’t cover everything . . . • Exports of Hardware, s/w & Technology • Dealing with Prohibited Parties or Entities • Transactions involving Embargoed-Sanctioned Countries • Encryption Controls • FRE stops at the border

22. DRILLING DOWNNavigating through exclusions and exemptions.What are they and when can you use them? Kathleen Reneau Lorenzi

23. What’s not export controlled? Fundamental Research ( 15 CFR 734.8 .a) (EAR) “The intent behind these rules is to identify as “fundamental research” basic and applied research in science and engineering, where the resulting information is ordinarily published and shared broadly within the scientific community. Such research can be distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary reasons or specific national security reasons.”

24. What is NSDD-189? NSDD 189, September 21, 1985 PURPOSE This directive establishes national policy for controlling the flow of science, technology, and engineering information produced in federally-funded fundamental research at colleges, universities, and laboratories. Fundamental research is defined as follows: • "'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."

25. University Based Research University Based Research (15 CFR 734.8 b)(EAR) • Research conducted by scientists, engineers, or students at a university normally will be considered fundamental research, as described in….. this section. (“University” means any accredited institution of higher education located in the United States.) • Scientific and technical information resulting from the research will nonetheless qualify as fundamental research once all such restrictions have expired or have been removed. • The provisions of §734.11 of this part will apply if a university or its researchers accept specific national security controls (as defined in §734.11 of this part) on a research project or activity sponsored by the U.S. Government.

26. EARWhat’s not export controlled?Details, Details, Details… Reference 15 CFR 734, Supplement 1 • Information in the public domain or freely available on the internet; • Basic marketing and general system descriptions; • Published information and software; • Technology already publicly available and technology that is made public by a transaction (planned publication, even in a foreign journal – PI is in charge of where and when); • Software and information published and available for general distribution either for free or at a rice that does not exceed the cost of reproduction and distribution;

27. Examples of what’s allowed: • “Release of information by instruction in catalog courses and associated teaching laboratories of academic institutions not subject to EAR; “ • “General scientific, mathematical or engineering principles commonly taught in colleges and universities;” • Foreign students in a university lab working on fundamental research; • “Patents and open (published) patent applications available at the USPTO;” • Release of information at an open conference, meeting, seminar, trade show or other open gathering; • Thesis available in the university library;

28. Published Information and Software (EAR) Published Information and Software (EAR) (a) “Information is “published” when it becomes generally accessible to the interested public in any form, including: (1) Publication in periodicals, books, print, electronic, or any other media available for general distribution to any member of the public or to a community of persons interested in the subject matter, such as those in a scientific or engineering discipline, either free or at a price that does not exceed the cost of reproduction and distribution .” (b) “Software and information is published when it is available for general distribution either for free or at a price that does not exceed the cost of reproduction and distribution.”

29. University Exemptions - ITAR • Defense Service – 125.4(d)(1) • Limited to certain items, to certain countries and for certain activities -- limited to discussions about assembly and/or integration when conducting fundamental research. • Technical Data – 120.10(5) • Information concerning general scientific, mathematical or engineering principals commonly taught in . . . universities. • Scientific instruments – 123.16(b)(10) • articles fabricated for research purposes only . . . Information will be published or shared w/scientific community • Bona fide Employee – 125.4(b)(10) • transfers of tech data only, no defense services. Permanent abode required.

30. How does the ITAR define Public Domain? Public domain. (ITAR 22 CFR 120.11) Public domain means information which is published and which is generally accessible or available to the public: 1) Through sales at newsstands and bookstores; 2) Through subscriptions which are available without restriction to any individual who desires to obtain or purchase the published information; 3) Through second class mailing privileges granted by the U.S. Government; 4) At libraries open to the public or from which the public can obtain documents;

31. Public Domain (cont’d);Authority to Publish . . . . 5)Through patents available at any patent office; 6) Through unlimited distribution at a conference, meeting, seminar, trade show or exhibition, generally accessible to the public, in the United States; OBTAINING AUTHORITY TO PUBLISH  COGNIZANT U.S. GOVERNMENT: Through public release (i.e., unlimited distribution) in any form (e.g., not necessarily in published form) after approval by the cognizant U.S. government department or agency (see also Sec. 125.4(b)(13) of this subchapter);

32. What’s not export controlled?Details, Details, Details… (8) Through fundamental research in science and engineering at accredited institutions of higher learning in the U.S. where the resulting information is ordinarily published and shared broadly in the scientific community. Fundamental research is defined to mean basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U.S. Government access and dissemination controls.University research will not be considered fundamental research if: The University or its researchers accept other restrictions on publication of scientific and technical information resulting from the project or activity, or The research is funded by the U.S. Government and specific access and dissemination controls protecting information resulting from the research are applicable.

33. And, then there is OFAC Office of Foreign Asset Control – (Department of the Treasury) “administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under Presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under US jurisdiction.”

34. And, then there is OFAC “OFAC was formally created in December 1950, following the entry of China into the Korean War, when President Truman declared a national emergency and blocked all Chinese and North Korean assets subject to U.S. jurisdiction.”

35. And, then there is OFAC • “War of 1812, Secretary of the Treasury Gallatin administered sanctions imposed against Great Britain for the harassment of American sailors; • Civil War - Congress approved a law which prohibited transactions with the Confederacy, called for the forfeiture of goods involved in such transactions, and provided a licensing regime under rules and regulations administered by Treasury; • OFAC is the successor to the Office of Foreign Funds Control (“FFC''), which was established at the advent of World War II following the German invasion of Norway in 1940. • administered by the Secretary of the Treasury throughout the war. • purpose was to prevent Nazi use of the occupied countries' holdings of foreign exchange and securities and to prevent forced repatriation of funds belonging to nationals of those countries.” And, then there is OFAC

36. And, then there is OFAC • Lists of Sanctioned Countries • Specially Designated Nationals (SDN) List • Financial Crime Enforcement Network (FinCEN) Advisories

37. And, then there is OFAC International Emergency Economic Powers Act (“IEEPA”) - 50 USC 35 (War & National Defense, International Emergency Economic Powers) OFAC Country Sanctions Programs – Executive Order 13224 Bank Secrecy Act – 31 USC 5311-5314, 5316-5332 “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism. “

38. BRINGING IT HOME • Putting it to Practice

39. Dispelling the Myths #1: The Fundamental Research Exclusion means Caltech is not subject to the Export Regulations. #2: My Faculty can publish anything including export controlled information received from a 3rd party. #3 My freight forwarder or Custom Broker is responsible for the accuracy of the information contained in my shipping documents. #4 I’m not selling anything so my shipment has a zero $ value.

40. Tips on How to keep your Faculty Out of Trouble. • Acceptance of Export Controlled information – Know your responsibility: • Safeguard data in locked cabinet • Cannot publish without export authority or removal • Understand the conditions and restrictions of export licenses, agreements • Travel Abroad faculty briefings advisable • Exports of export controlled hardware, technology or software require export compliance review • Some exports may require an export license. • No Side-deals • Make sure all agreed upon terms are included in the agreement. • Understand the terms of the agreement: • Did you just agree to export an instrument to China that requires a license? Did you allocate enough $$ for the duties and fees? • Export Recordkeeping Requirements – keep for at least 5 years from date of export or expiration of the license whichever occurs last.

41. When to seek expert advice • Enforcement officials visit your student or faculty • Know purpose of the visit • Your shipment has been seized by U.S. Customs. • Accurate export docs: Value, Description & Qty. • Export of export controlled hardware, software or technology. • A license can take months to obtain. • Foreign Procurements • Faculty or student has been asked to sign: • NDA • TAA or • Other Agreement containing access or publication restrictions • Receipt of Export Controlled information . . . marking language; safeguarding of information • Foreign Travel to T-5 Countries: Iran, Sudan, Syria, North Korea, Cuba

42. Develop an Export Compliance Management Plan • Risk Assessment • Stop the Bleeding in Potentially High Risk Areas • Shipping • Procurement • Sponsored Research • Develop “best practices” • Recordkeeping • Hire experts to help you navigate the export control terrain -- It’s the cost of doing business in the international arena.

43. Contact Info Adilia F. Koch Director of Export Compliance California Institute of Technology adilia.koch@caltech.edu Phone: (626) 395-4469 Fax: (626) 795-4571 Kathleen Reneau Lorenzi, CPCM Associate Director The University of Colorado at Boulder Kathleen.Lorenzi@Colorado.edu Phone:  303-492-2692 Fax:      303-735-1899

44. RESOURCES • Glossary • Useful Links • The Law and Regulations • Lists to Check

45. Glossary • Commodity: Material, equipment, and services (e.g., instruments, computers, information, tools, assistance). • Dual-Use: EAR-controlled items that can be used both in USML and commercial applications. • End-User: The Foreign Person that receives and ultimately uses the exported commodity. • End-Use: A detailed description of how the Foreign Person intends to use the commodities being exported. • Export: Transfer of a commodity, technology, or software to any person or entity, by physical, electronic, oral, or visual means with the knowledge or intent that the item will be shipped, transferred, or transmitted to a Foreign Person. • License: A legal authority to export (permanent or temporary), re-export, or temporarily import an article controlled by the ITAR or EAR. • Public Domain: Information, which is published and generally accessible or available to the public. • Release: Technology is “released” for export to Foreign Persons through visual inspection of U.S. origin equipment and facilities, or through oral exchanges of information with Foreign Persons, either in the U.S. or abroad. • U.S. Munitions List (USML):Articles, services, and related technical data designated as defense articles and defense services under ITAR. Note: Originally, spacecraft related technology was under EAR. In 1999, by act of Congress it was moved under ITAR and put on the USML.

46. Prohibited/Restricted Party Listshttp://www.bis.doc.gov/complianceandenforcement/liststocheck.htm Lists to Check: The following lists may be relevant to your export or re-export transaction. • Denied Persons ListA list of individuals and entities that have been denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order is prohibited. • Unverified ListA list of parties where BIS has been unable to verify the end use in prior transactions. The presence of a party on this list in a transaction is a “red flag” that should be resolved before proceeding with the transaction. • Entity ListA list of parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations. • Specially Designated Nationals ListA list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC). OFAC’s regulations may prohibit a transaction if a party on this list is involved. In addition, the Export Administration Regulations require a license for exports or re-exports to any party in any entry on this list that contains any of the suffixes "SDGT". "SDT", "FTO" or "IRAQ2". • Debarred ListA list compiled by the State Department of parties who are barred by §127.7 of the International Traffic in Arms Regulations (ITAR) (22 CFR §127.7) from participating directly or indirectly in the export of defense articles, including technical data or in the furnishing of defense services for which a license or approval is required by the ITAR. • Nonproliferation SanctionsSeveral lists compiled by the State Department of parties that have been sanctioned under various statutes. The Federal Register notice imposing sanctions on a party states the sanctions that apply to that party. Some of these sanctioned parties are subject to BIS’s license application denial policy described in §744.19 of the EAR (15 CFR §744.19). • General Order 3 to Part 736(page 9)This general order imposes a license requirement for exports and re-exports of all items subject to the EAR where the transaction involves a party named in the order. This order also prohibits the use of License Exceptions to export or re-export to these parties. These parties are currently located in: Dubai, United Arab Emirates; Germany; Syria; Lebanon; Malaysia; Iran; and Hong Kong.

47. The Export Laws & Regulations • U.S. Department of State: International Traffic in Arms Regulations (ITAR) http://www.treas.gov/offices/enforcement/ofac/ • U.S. Department of Commerce, Bureau of Industry & Security (BIS): Export Administration Regulations (EAR) http://www.access.gpo.gov/bis/ear/ear_data.html • U.S. Department of the Treasury, Office of Financial and Asset Controls (OFAC) http://www.treas.gov/offices/enforcement/ofac/ • U.S. Customs Regulations Imports -- Harmonized Tariff Code (HTS #) http://www.usitc.gov/tata/hts/bychapter/index.htm Schedule B (US Census) http://www.census.gov/

48. Embargoed/Sanctioned Countries & Policies • State Department http://pmddtc.state.gov/country.htm • Office of Foreign Assets Control http://www.treas.gov/offices/enforcement/ofac/

49. Useful Links • The ITAR Regulations http://pmddtc.state.gov/consolidated_itar.htm • Department of Commerce http://www.bis.doc.gov/ • Commerce Control List (CCL) (EAR) http://www.access.gpo.gov/bis/ear/ear_data.html#ccl • US Customs & Border Protection http://www.customs.ustreas.gov/ • Other US Government Links http://www.bis.doc.gov/about/reslinks.htm

50. Travel • US State Department Travel Warnings http://travel.state.gov/travel/cis_pa_tw/tw/tw_1764.html • CIA Factbook https://www.cia.gov/library/publications/the-world-factbook/