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Export/Import Issues & Data Movement Concerns in Cross-
Border TransactionsTodd Taylor
July 23, 2015
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Cross-Border Contracting Issues• Can it be done?
• Are there legal restrictions prohibiting the purchase or sale of the good or service?
• How should it be done?• Are there special rules relating to the contract
or the business arrangement?
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Can it be done?• Sanction Regimes
• Export Restrictions
• Import Restrictions
• Data Movement Concerns
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OFAC Regulations• The Office of Foreign Asset Control
(“OFAC”), part of the U.S. Dept. of the Treasury, is the primary U.S. regulator responsible for administration of a wide range of U.S. economic and trade sanctions.
• OFAC rules are largely found in Executive Orders and implementing regulations (i.e.,31 CFR Part 501 – 598) issued pursuant to laws such as the Trading with the Enemies Act, the International Emergency Economic Powers Act and the United Nations Participation Act.
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OFAC Regulations: Country-Based Rules• OFAC country-based regulations generally
prohibit a wide range of transactions with or within certain countries.
• Traditionally, the countries covered by the more comprehensive country-based restrictions are: Burma, Cuba, Iran, N. Korea, Sudan & Syria.
• Traditionally, the most onerous OFAC sanction regimes applied to Cuba, Iran & Sudan.
• But new regulations have eased some Cuban sanctions (31 CFR Pt. 515) and the P5 +1 Joint Comprehensive Plan of Action may eventually lead to a lessening of some Iranian sanctions.
• Sanctions may apply to export, re-export and import of good or services.
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OFAC Regulations: List-Based Rules
• So if my contract counter-party is not in or affiliated with a sanctioned country can I enter into the contract? -- Not necessarily.
• OFAC also administers sanction programs prohibiting transactions with certain persons or entities.• Such programs include enforcement of UN Security
Council resolutions, anti-terrorism and anti-narcotic efforts.
• Restricted persons and entities are usually found on the List of Specially Designated Nationals and Blocked Persons (the “SDN List”).
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OFAC Regulations: Potential Concerns• “Facilitation” -- Certain OFAC regulations
contain prohibitions on U.S. persons “facilitating” transactions that otherwise would be barred under other OFAC regulations (e.g., 31 CFR §§ 538.206, 538.407 & 560.208).
• Penalties: Violations of OFAC regulations can lead to civil and criminal penalties.
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Export Control Regulations
In the U.S. (outside of OFAC) the primary export control regulations are: • The International Traffic in Arms Regulations
(the “ITAR”)
• The Export Administration Regulations (the “EAR”)
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ITAR (22 CFR Parts 120 – 130)• ITAR implements the Arms Export Control Act.
• Regulates permanent and temporary export of defense articles and defense services.
• Also addresses temporary imports of defense articles and defense services.
• ITAR is administered by the U.S. Dept. of State, Directorate of Defense Trade Controls (“DDTC”).
• Defense articles subject to the ITAR are generally set forth on the United States Munitions List (the “USML”). See 22 CFR Part 121.
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The EAR (15 CFR Parts 730 – 774)• The EAR was originally promulgated pursuant to the
Export Administration Act (which has since expired), but remains in effect pursuant to executive order under the authority of the International Emergency Economic Powers Act.
• Subject to some exceptions, the EAR governs the export of most items not covered by ITAR or the nuclear related controls of the Dept. of Energy & the NRC.
• The EAR is administered by the Bureau of Industry and Security (“BIS”), an agency of the U.S. Commerce Dept.
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Understanding the EAR• The EAR is notoriously complex.
• To better navigate the EAR, an exporter should have answers for four key questions in connection with every export:
• What is being exported?• Where will the items be exported to?• Who will receive the exported items?• What will the exported items be used for?
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What is being exported?• Exporter must determine their Export
Classification Control Number (“ECCN”) listed on the Commerce Control List (“CCL”).
• Items subject to the EAR but not on the CCL are generally classified as EAR99 – which are subject to much less stringent controls.
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2A000:Entry heading.
LICENSE REQUIREMENTS
REASON FOR CONTROL: NS, NP, AT
LICENSE EXCEPTIONSLVS: $5,000GBS: YesCIV: N/AL
LIST OF ITEMS CONTROLLEDUnit: NumberRelated Definition: N/ARelated Controls: N/AItems: A. Having X.B. Having Z.
Control(s) Country Chart
NS applies to entire entry NS Column 2
NP applies to 2A000.b NP Column 1
AT applies to entire entry AT Column 1
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Where is the item being exported to?• Export restrictions will vary depending on the export
location.
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Who & What• Who will receive the exported item?
• Even if exports are permitted to a given country, certain persons and entities are blocked from receiving US exports and licenses may be required to export to other persons and entities.
• Exporters will need to review various restricted lists.
• What will the exported item be used for?
• Certain end uses are blocked or require a license (see e.g., 15 CFR Part 744).
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Export Control Reform• On August 13, 2009, President Obama launched a review of
the U.S. export control system, with a view to simplifying the exporting process.
• The goals of this Export Control Reform Initiative are to:• Develop a single export control licensing agency for dual-use
items, munitions and exports licensed to embargoed destinations;
• A unified control list;• A single enforcement agency; and• A single integrated information technology system (to include a
single database of sanctioned and denied parties).• Primary effect of reform effort so far is to move certain
items off the USML to CCL.
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Foreign Import Restrictions• Even if an export is permitted under U.S. law,
certain countries may restrict the importation of the item.
• China – • Prohibits import of printed matters, films, photographs, audio
tapes and other media that may be detrimental to China’s politics, economy, culture or morality.
• Chinese CEC Regulations require licenses for importation of certain technology with encryption functionality.
• Russia does not recognize Wassenaar personal use exception for encryption products.
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Export Best Practices When Contracting
• If you are exporting an item you are not manufacturing, require (if possible) the manufacturer to provide an ECCN.
• Ensure that you understand your ECCN classification prior to entering into agreements to supply items.
• Obtain appropriate representations from customers (e.g., will not engage in prohibited re-exports, will not use items for prohibited end uses, etc.)
• Engage local counsel if there are concerns about the potential impact of local regulations on the importation of any particular items.
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Cross Border Transactions: Data Privacy Issues• Gramm-Leach-Bliley Act/Information Security
Oversight• HIPAA/Business Associate• Foreign Data Privacy Laws
• EU Data Privacy Directive• Promulgated by the EU in 1995, required member states to
adopt implementing legislation by 1998• Covers personally identifiable data related to a human
person• Sets restrictions on export of data from EU • FTC Safe Harbor• Potential updates to EU Data Privacy Rules?
• Contractual Data Privacy/Information Security
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Cross Border Data Privacy/Security: Best Practices • Understand the data that might be accessible by your foreign
vendor/business partner• Is the data subject to a special legal or regulatory regime (e.g., GLBA, HIPAA, PCI
DSS, contractual restrictions?)
• If the foreign vendor/business partner is handling sensitive data, ensure adequate data protection processes are in place:
• perform due diligence on vendor/business partner’s information security programs;• ensure appropriate contractual provisions are in place (e.g., information security
commitments, BAAs, EU Model Clauses, etc.); • try to only allow data access (no local storage)/use of clean desk policies; and• ensure (a) measures are in place to require investigation assistance, and that (b)
local laws will allow enforcement of NDAs.
• If accepting sensitive data from foreign affiliates/customers/business partners ensure that you have taken necessary steps to comply with local law (e.g., Safe Harbor certification, Model Clauses, approval from DPAs. etc.)
Doing Business in Emerging Markets – IP Considerations
Henry Ward
July 23, 2015
Discussion Topics
• Business Considerations.
• Domain Names.
• Trademarks.
• Patents.
Business Considerations
Business Strategic Plan & IP Audit
• In what countries does the company currently conduct business? In what countries does the company intend to conduct business and what is the time frame?
• What domain name and trademark registrations does the company have in the U.S. and outside the U.S.? What patents and patent applications does the company have in the U.S. and outside the U.S.?
Domain Names
Should the company register country-specific domain names?
• Does the company plan to have physical offices in a country?
• Does the company need to have an internet presence in the local language?
• Does the country want defensive registrations?
Trademarks
What are the business and operative considerations?
• Does the company plan to manufacture or offer for sale products in a country?
• Trademark Searching.
• Trademark Registration and Maintenance.
Patents
What are the business and operative considerations?
• Does the company plan to manufacture or offer for sale products in a country?
• Where are the company’s competitors located and where do they manufacture their products? Do the competitors own patents?
• Patent Searching.
• Patent Application Filing and Maintenance.
QUESTIONS?
