Export Controls: Just the BasicsHow to Keep Your Faculty and

Researchers out of Trouble!

Kay EllisDirector, Export Control Compliance

University of Arizona(520) 626-2437 ellisk@email.arizona.edu

Stephen B. HallSr. Policy Analyst

Department of CommerceOffice of Exporter Services

University Commitment is Key!The export of certain data, technologies, software and hardware is regulated and controlled by Federal law for reasons of national security, foreign policy, prevention of the spread of weapons of mass destruction, and for competitive trade reasons. As University employees, we are required to comply with applicable export control laws and regulations.

We will take a look at how the regulations impact research conducted in the U.S. and abroad. We will look at export control terminology, fundamental research, technology control plans, license exceptions, travel outside the U.S., and the cost of noncompliance.

Export Regulations & Terms

Fundamental Research

TCPs and License Exceptions

Travel Outside the U.S.

Cost of Noncompliance

PresentationOverview

Export 101

Export Regulations

• EAR• ITAR• OFAC

Controlled Technologies• Civil Use• Military or

Space Applications

Terms you should know• Export• Defense

Service• Foreign Person• Technical

Assistance• Technical Data

Fundamental Research Exclusion• Limits• Jeopardizing

or losing the FRE

What export regulations most likely affect your research projects?

• EAR: Export Administration Regulations; U.S. Department of Commerce – Bureau of Industry and Security

• ITAR: International Traffic in Arms Regulations; U.S. Department of State – Directorate of Defense Trade Controls

• OFAC: U.S. Department of Treasury – Office of Foreign Assets Control

COMMERCIAL APPLICATIONSSPACE, ROCKETs & MILITARY APPLICATIONS

Controlled Technologies

EAR

• Covers dual use items• Items regulated have a commercial and a

military use• Covers goods, test equipment, materials and

the software and technology• Each item has an export control classification

number (ECCN)

EAR Commerce Control List (CCL) Categories0 = 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, & Related

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

STEPHEN HALLBIS,

OFFICE OF EXPORTER SERVICES

ITAR

• Covers military items found on the United States Munitions List (USML)

• Includes most space related technologies

• Includes technical data related to defense articles and services

• Policy of denial for exports to certain countrieso See 22 CFR 126.1 for up-to-date list

Long Reach of the ITAR

• ITAR also includes

• Civil application items adapted or modified for military application

• Dual-use items that contain or use ITAR controlled articles/technology

• Public domain info used to modify an ITAR item

ITAR U.S. Munitions List (USML)• I Firearms, Close Assault Weapons and Combat Shotguns• II Guns and Armament• III Ammunition/Ordnance• IV Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines • V Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents• VI Vessels of War and Special Naval Equipment• VII Tanks and Military Vehicles• 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• XIII Auxiliary Military Equipment• XIV Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment• XV Spacecraft Systems and Associated Equipment• XVI Nuclear Weapons, Design and Testing Related Items• XVII Classified Articles, Technical Data and Defense Services Not Otherwise Enumerated• XVIII Directed Energy Weapons• XX Submersible Vessels, Oceanographic and Assoc. Equipment• XXI Miscellaneous Articles (Software, components, etc.)http://www.pmddtc.state.gov/regulations_laws/itar.html

OFAC• Economic sanctions focus on end-user or country

• “Specially Designated Nationals List” – restricted entities and parties

• Providing “something of value”

• Most highly sanctioned countries: Cuba, Iran, North Korea, Sudan, and Syria

www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx

What is a Restricted or Prohibited Party?

U.S. Government [OFAC, BIS, State Dept.] lists of individuals & entities both in the U.S. and abroad that have committed export violations or other offenses. • Financial dealings or export transactions with

Restricted or Prohibited parties is prohibited.

• Violations are subject to severe penalties and fines.

Restricted Party Screenings (RPS) recommended depending on transaction

Debarred Parties

Drug Traffickers

Specially Designate

d Nationals

Terms: Export – what is it and how can it occur?• An export is the transfer of export controlled information,

technical data, technology, commodities or software

• Exports can occur in many ways:• Email• Mail, shipping• Face-to-Face• Visual inspection that reveals technical data• Conferences• Hand-carried items – laptop, memory devices

• Affects non-U.S. citizens working on research

Terms: Defense Service

A defense service means the furnishing of assistance (including training) to a foreign person whether in the U.S. or abroad relative to a defense article. It also includes furnishing technical data relative to a defense article.defense article. It also includes furnishing technical data relative to a defense article.

Terms: Foreign Person is Defined as . . .

Foreign Person

• Any person not a U.S. citizen or legal permanent resident (green card holder)

• Any person not granted political asylum

Foreign Entity

• Any foreign corporation, partnership ,or group not incorporated or organized to do business in the U.S.

• Any foreign government

Terms: Technical Data or Technology• Technical Data or Technology is information required for the

design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of an export controlled item.

• The information can be in the form of • blueprints, drawings, models, photographs, plans,

instructions and documentation; tech data• includes software related to an export controlled item

What’s not covered by the regulations?• Information in the public domain

• Information excluded under the Fundamental Research Exclusion (FRE)

• Basic marketing descriptions

• Artistic or non-technical publications

Published information available to the public:Through sales in bookstores• At public libraries• Through published patents• Through distribution at a conference in the U.S.• Through educational materials related to catalog

courses in associated labs and universities

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 . . . the results of which ordinarily are restricted for proprietary or national security reasons.”

Limits to Fundamental Research Exclusion – Subject to Export Controls or Other Prohibitions

If subject to export controls or other

prohibitions:

Fundamental Research does NOT

cover --

Exports of Hardware, Software,

Technology

Financial Dealings with Prohibited

Parties or Entities

Export Controlled activities – “technical

assistance”

Other Transactions Involving

Sanctioned Countries or

Prohibited Parties

The FRE can be lost if…

• Sponsor approval required prior to publication

• Publication of the results of the project restricted

• Access and dissemination restrictions are in the contract (ITAR controlled)

Non-Sponsored Research

• Research projects conducted with no sponsor could have export control issues

• Proprietary research has export implications• Foreign nationals on projects could be an issue• All research projects need export control

review

Putting it in Perspective – when is a license needed for a research project?

An export license might be needed if….• The researcher plans to employ a non-U.S. citizen

to work on an export controlled research project

• The researcher wants to collaborate with a foreign person or government

So now you need a License!

• Applying for a license takes time!• Requires input from the researcher, foreign grad student, or

foreign collaborator

• License must be in place before work begins• In addition to the license, you will need a technology control

plan• Required export control training must be completed• Agreement will not be signed until a license and/or TCP are in

place and export training completed

Bona fide Employee Exemption (ITAR)

Applies to foreign persons who are full-time regular employees (no grad students regardless of hours worked) of U.S. institutions of higher education with permanent abodes in U.S. throughout employment

Bona fide Employee Exemption (ITAR)

Exemption ONLY applies to the specific university project personnel and not to the project sponsor or another third party!

Technology Control Plan (TCP)

• In some situations it is possible to put a TCP in place instead of applying for a license

• Required export control training must be completed

• A TCP is simply a plan that secures the project information from access by non-U.S. citizens

• TCP template - Export Control website: http://orcr.vpr.arizona.edu/export-control/processes

When do you need a TCP?

• With a DDTC Technical Assistance Agreement (TAA)

• With a BIS Deemed Export license

• When an agreement does not allow foreign nationals

• When a non-disclosure agreement indicates certain controlled information will be discussed, exchanged, or stored on campus

• With ITAR controlled research projects

• In other words, in conjunction with any project or agreement that involves ITAR controlled technology, equipment or information!

Export Controls: Travel and Research Outside the U.S.

• There could be export control issues if you are –• Physically taking items with you on a trip such as

• Laptop• Encryption software products on your laptop• Cell phones/PDAs• Data/technology• Blueprints, drawings, schematics• Other “tools of the trade”

• Shipping items

• Transferring controlled information to a foreign collaborator

Export Controls: Travel and Research Outside the U.S.

The OFAC regulations affect activities in sanctioned countries such as:

•Money transactions

•The exchange of goods and services - Affects teaching, research collaborations, programs, attending or setting up conferences

•Travel to the country and what you take

•Doing business with certain people or entities

What does this mean?

The bad news….•An EAR, ITAR, or OFAC license could be required – it depends on:

oWhat you are taking,oWhere you are going,oWho you will be collaborating with,oAnd your activities in that country

•There are consequences if you violate the regulations!

What does this mean? The good news…•Travel to most countries does not usually constitute an export control problem!•If you do need to work with EAR export controlled information, equipment, etc., there are license exceptions that can be used•Taking a “clean” laptop to most countries – no license required or exception needed

o Issue if taking to Cuba, Syria, Iran, North Korea or Sudan

•Items, software, and presentations should be evaluated before travel

EAR Exceptions

•TMP – “tools of the trade” (UA owned laptops, equipment)

•BAG – baggage (personal laptops, equipment)

NOTE: License exceptions not available for ITAR items orinformation – license required!

Voluntary Disclosures

• If you think the regulations have been violated, immediately notify the Export Control Officer

• It is better to self-disclose than not say anything

• Honest errors are acceptable but gross negligence is punishable

• Violations are civil and criminal---Fines and jail time!

The Cost of Noncompliance - OFAC

• Criminal: $50K TO $10M per violation and 10 to 30 years imprisonment

• Civil: $11K to $1M per violation• Examples:

1. Augsburg College, Minneapolis, MN fined $9,000 for 4 trips to Cuba; attorney negotiated reduction in fine from $36,000

o 2. ING Bank settled for multiple violations - $619,000,000o 3. University fined $100,000 for shipping to denied entity

The Cost of Noncompliance - EAR

• Criminal: $50K to $1 million or 5 times value of export, whichever is greater, per violation, 10 years imprisonment

• Civil: revocation of exporting privilege, fines $10K-$120K per violation

• Examples:1. Bass-Pro - $510K for shipping guns without a license

o 2. ITT fined $100M for exporting night vision materials without license

3. Dr. Thomas Butler, Texas Tech – made fraudulent claims and unauthorized exports (plague bacteria)

The Cost of Noncompliance - ITAR

• Criminal: Up to $1 million per violation and 10 years imprisonment

• Civil: seizure and forfeiture of article, revocation of exporting privilege, up to $500,000 fine per violation

Professor Roth (University of Tennessee) convicted on 9/3/08 and sentenced to four years imprisonment

The Butler Case

• Dr. Thomas Butler, a professor at Texas Tech, reported to the FBI that 30 vials of plague bacteria were missing and presumed stolen from his lab. The investigation proved that Dr. Butler had illegally exported the plague bacteria to Tanzania without a BIS export license. He was convicted of making false and fictitious statements to the FBI and making an unauthorized export to Tanzania.

• Penalty: Dr. Butler was convicted of forty-seven counts of a sixty-nine count indictment that stemmed from BIS's investigation.

• He was sentenced to two years in prison on March 10, 2004, and fired from Texas Tech.

The Roth Case

• Professor John Roth, University of Tennessee, was convicted of illegally exporting ITAR military technical data related to a USAF contract about advanced plasma technology for use on an unmanned air vehicle. He also gave information about the technology to an Iranian and a Chinese student without a license. Roth traveled to China and presented a lecture about the technology. When he returned, the FBI confiscated his laptop and flash drive.

• Penalty: Dr. Roth was sentenced to 48 months in prison for violating the Arms Export Control Act by illegally exporting ITAR controlled technical information.

Questions?