FDS Export Controls: Overview and Update Lorraine A. McConnell November 14, 2006

FDS

Export Controls:Overview and Update

Lorraine A. McConnell

November 14, 2006

Outline

• Introduction, Overview and Update

• Key Issues for Universities

• Determining the Need for a License Practical Exercises

• Export Control Assistance

• Questions and Answers

Introduction• Except for certain, limited types of research

university researchers and the academic community have not traditionally been impacted by export control regulations. “Fundamental research” has been used to exempt most university activities.

• In the post 9/11 world, control regulations impact a wider range of researchers and research activities.

Overview: Key Export Control Agencies

Three U.S. Export Control and Licensing Programs:1) U.S. Department of Commerce (Bureau of Industry and Security

{BIS}) controls dual-use items (goods and technology with both civilian and military uses).Export Administration Regulations (EAR) – Commerce Control List

2) U.S. Department of State (Office of Defense Trade Controls) controls defense articles, defense services, and related technical data (including most space related articles).International Traffic in Arms Regulations (ITAR) – US Munitions List

3) U.S. Department of the Treasury oversees U.S. trade embargoes (Office of Foreign Assets Control) and enforces all three programs at U.S. borders (Customs Service)List of specifically designated nations, nationals, and individuals

Overview: Purpose of Export Regulations

• Prevent terrorism

• Prevent proliferation of weapons of mass destruction (biological, chemical and nuclear)

• Assist in Compliance with US Trade agreements and sanctions

• Restrict exports of goods and technology that might aid our adversaries

Overview: Export Controls Cover

• ANY shipment, transfer or transmission out of the United States by any means (carried on your person or in luggage): Goods (testing kits, equipment, hardware

and materials) Technology (Technical information and

data) Software/codes (commercial or custom) Deemed Export (Disclosure of specific

information and specific types of services to foreign nationals inside the U.S.

U.S. items wherever located, even internationally

Overview: Export illustrations

• An actual shipment (or transmission) of items subject to the EAR or ITAR out of the U.S. Includes the following biologicals: viruses, bacteria, toxins, sub-units of toxins, plant

pathogens, genetic elements, (be careful) or pathogens, select agents, genetic elements of select agents, biosafety cabinets, fermenters.

• Disclosing (including oral or visual) “technical data” or “technology” (including software source code) to a “foreign person”, whether in the U.S. (deemed export) or abroad.

• Performing technical assistance, training, or other “defense services” for, or on behalf of, a “foreign person” (including foreign corporations) whether in the U.S. (deemed export) or abroad.

• Re-exporting from foreign countries U.S. origin goods, technical data, goods incorporating U.S. components, goods manufactured from U.S. technology, “technical data”, or software.

Overview: Consequences of illegal Export• 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

• OFAC Criminal: up to $1 million per violation and 10 years

imprisonment Civil: $12 K to $55 K per violation

• 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

• Real life example Texas Tech University – Microbiologist receives 2 yr

prison sentence and fines of $58,375

Overview: 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

Overview: 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)

Overview: 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

Key Issues For Universities• National Security vs. Academic Freedom• Exemptions & Exclusions• Fundamental Research• Non-Fundamental Research Concerns• Employment Exemption• Employment Exclusion• Education Exclusion• Public Domain Exclusion• Troublesome Clauses• Applications to Research• University/PI Responsibilities

Key Issues: National Security vs. Academic Freedom

• Finding the appropriate balance between national security and traditional practices that support public access to all University activities.

• Researchers need to be aware that these laws may apply to research whether sponsored or not

• Important to understand the extent to which the regulations do NOT affect normal university activities

Key Issues: Exemptions and Exclusions

• Fundamental Research Exemption (ITAR, EAR) Deemed Export

• Employment Exemption (ITAR only)

• Education Exclusion (ITAR, EAR)

• Public Domain Exclusion

But what about the Fundamental Research Exemption?

Key Issues: Fundamental Research Exemption

• Generally permits US universities to allow foreign members of their communities (e.g. students, faculty and visitors) to participate in research involving export-controlled information on campuses in the U.S. without obtaining a deemed export license.

• Does NOT permit the transfer of export-controlled materials or items abroad, even to research collaborators.

• 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.

Key Issues: Deemed Export

• 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

Key Issues: Employment Exemption

• ITAR – Bona Fide Employee Exemption (ITAR125.4(10)

• Disclosures of unclassified technical data in the U.S. by U.S. institutions of higher learning to foreign persons who are their bona fide and full time regular employees

Key Issues: Employment Exemption (cont.)

• Applies only if the employee’s permanent abode throughout the period of employment is in the United States

• Applies only if the employee is NOT a national of a country to which exports are prohibited (section 126.1 ITAR)

• Applies only if the institution informs the individual in writing that the technical data may not be transferred to other foreign persons without the prior written approval of the Directorate of Defense Trade Controls.

• The Bona Fide employee portion typically applies to full time regular employees which does not include student and may not include postdoctoral researcher (depending on their funding source)

Key Issues: Education Exclusion• Applies to both U.S. and abroad

locations: Teaching foreign nationals general

science, engineering and math commonly taught at the university

Conveying to foreign nationals information through listed courses in course catalogues and in the associated teaching laboratories

The EAR exclusion does NOT apply to controlled information shared outside the classroom or teaching lab of an academic institution

Key Issues: Public Domain Exclusion• Public Domain (ITAR) and publicly available

(EAR)• 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

Key Issues: Troublesome Areas

• 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


• 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


• 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

Key Issues: Applications 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

Key Issues: Applications to Research Shipping

• Shipping equipment, technology, software, computers, etc.,outside the U.S. may require a license

Key Issues: Applications 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

Key Issues: Applications to Research Equipment Use

• “Use” of controlled equipment by a foreign national 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

Key Issues: Applications 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

Key Issues: University/PI Responsibilities

• Review your research for potential EAR/ITAR issues don’t wait until the contract arrives!

• Check to see if equipment/supplies to be purchased is controlled under EAR/ITAR – find the ECCN

• If you are planning to hire a foreign national, check the regulations to see if a license may be required

• At the contract stage, check for restrictive clauses that would eliminate the Fundamental Research exemption

• Document exemptions• Records must be kept 5 years (license valid 2 years)• Apply for a license BEFORE project begins--process can take

2-6 months or longer!• Honest errors are acceptable but gross negligence is

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

Determining the Need for a License: The EAR Process

• Does activity qualify as an Export?

• Is the item subject to EAR? Handout #1

Determining the Need for a License: The EAR Process

• Export Control Decision Tree Handout #2

Determining the Need for a License

• STEP 1: PI must classify the type of technology or science being developed on the “Commerce Control List” by determining the ECCN – Export Control Classification Number

• http://w3.access.gpo.gov/bis/ear/ear_data.html

Determining the Need for a License: Commerce Control List

• Contains lists of items subject to licensing authority of BIS

• Each entry is called Export Control Classification Number (ECCN)

(Five alpha-numeric characters)

Items listed in terms of technical parameters

Determining the Need for a License: ECCN BREAKDOWN EXAMPLE: 3D101

• 3 – Category

• D – Product Group

• 1 – Reason for Control

• 0 – Relates to Reasons for Control

• 1 – Used for Numerical Ordering

Determining the Need for a License: Commerce Control List (CCL) Categories:

0. Nuclear Materials, Facilities & Equipment, and Miscellaneous

1. Materials, Chemicals, Microorganisms & Toxins2. Materials Processing (i.e., making plastics, metals)3. Electronics Development4. Computer (development and programs)5. Telecommunications and Information Security6. Sensors and Lasers7. Navigation and Avionics8. Marine9. Propulsion Systems, Space Vehicles and Related

Equipment

Determining the Need for a License:CCL Product Groups

• A = Equipment, Assemblies & Components

• B = Production, Test & Inspection Equipment

• C = Materials (raw)

• D = Software

• E = Technology

Determining the Need for a License: Reasons for Control

• 001-099 National Security

• 100-199 Missile Technology

• 200-299 Nuclear Proliferation

• 300-399 Chemical & Biological

• 900-999 Foreign Policy

• 980-989 Short Supply / Crime Control

• 990-999 Anti-Terrorism/ United Nations

Determining the Need for a License: Finding the ECCN

• Review general characteristics (technical parameters) of items to arrive at Category and Product Group

• Match characteristics of item with ECCN and subparagraph

• HINT: Check the CCL alphabetical index

I found the ECCN!

Determining the Need for a License:GENERAL PROHIBITIONS, PART 736

• STEP 2: Check General Prohibitions

• Prohibit certain exports, re-exports, and other conduct, without a license, license exception or determination that no license is required

• General Prohibitions 1-10 apply to items having a specific ECCN

• General Prohibitions 4-10 apply to items that are EAR99 (not found on the CCL)


General Prohibitions 1-3 apply only if your item is classified under an ECCN:

1. Export and re-export of controlled items to listed countries

2. Re-export and export from abroad of foreign-made items incorporating more than a de minimis amount of controlled U.S. Content

3. Re-export and export from abroad of the foreign produced direct product of U.S. technology and software

EAR 90-what???


General prohibitions 4-10 apply if your item is classified under a specific ECCN or is “EAR 99” (items not found on the CCL- usually no license required)

4. Engaging in actions prohibited by a denial order (check denied persons/entities lists)

5. Export or re-export to prohibited end-uses or end users (e.g., chemical and biological warfare)

6. Export or re-export to embargoed or special destinations

7. Support of proliferation activities


8. In transit shipments and items to be un-laden from vessels or aircraft

9. Violation of any order, terms, and conditions

10.Proceeding with transactions with knowledge that a violation has occurred or is about to occur

If Prohibitions don’t apply, look for Exceptions

Determining the Need for a License: LICENSE OR EXCEPTION UNDER EAR?

• STEP 3: Try to find the exception!• Using the CCL check reasons for control: Look at

the “Reason for Control” section directly under the category heading and License Requirements.-- E.g.: Reason for control: NS, MT, AT

• Match specific controls to Country Chart column• Look for an “X” in Commerce Country Chart• If an “X” is present, look under the “License

Exceptions” category below the “Control(s)” section

• If no license exception available, license must be obtained (4-6 weeks to process)

Determining the Need for a License: REASON FOR CONTROL • AT= Anti-Terrorism

• CB= Chemical & Biological weapons

• CC= Crime Control

• CW=Chemical Weapons Convention

• EI = Encryption Item

• FC=Firearms Control

• MT=Missile Technology

• NP=Nuclear Proliferation

• NS=National Security

• RS=Regional Stability

• SI=Significant Item

• SS=Short Supply

• UN=United Nations

• XP=Computers

Determining the Need for a License: COMMON LICENSE EXCEPTIONS

• LVS – Limited Value Shipments Pertains to Country Group B Identified by “LVS: $(value)” on the CCL

(e.g.: LVS: $5000)

• GBS – Group B Shipments Pertains to Country Group B Identified by “GBS: Yes” on the CCL

• CIV – Civil End-Users Pertains to Country Group D-1 Identified by “CIV: Yes” on the CCL National Security controlled items only


• TSR – Restricted Technology and Software Pertains to Country Group B Identified by “TSR: Yes” on the CCL National Security Controlled Items only Written Assurance – Letter can be written

stating software will not be released to nationals of certain country groups (e.g. D:1 and E:2)


• TMP -Temporary Exports and Re-exports Tools of trade Replacement parts Exhibition and demo Inspection and calibration Assembly in Mexico To US subsidiary, affiliate or facility in

Country Group B Beta test software Return to US within 1 year

Determining the Need for a License: Deemed Export Exceptions

• CIV: Civil End Use Applies to deemed exports for 3E001/3E002

technology Requires Foreign National Review (FNR)

• TSR: Technology/Software Under Restriction Applies to technology/software under national

security only for country group “B” nationals Requires Letter of Assurance

• APP – Computers Applies to deemed exports for 4D001/4E001

software and technology. (FNR required)

Determining the Need for a License: RECAP

STEPS TO TAKE:

• Determine if it is an export and is subject Classify the technology or goods involved

(ITAR, EAR, OFAC, other?) Determine if license is needed for the

technology/end user/end use Determine whether embargoes, prohibited

parties, or destinations are involved

Determining the Need for a License Determine if license exemption is

available (public domain, fundamental research, EAR exemption from CCL, etc.)

If no exemptions, determine what kind of license is needed• Technical Assistance Agreement (ITAR)• DSP-5 (ITAR)• Deemed Export License (EAR)• DOC License (EAR)

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

Licensing the Technology Apply promptly, licensing can take

months!!

• ITAR (State) requirements available athttp://www.pmdtc.org

• EAR (Commerce) requirements available at http://www.bis.doc.gov

• OFAC (Treasury) requirements available http://www.treas.gov/offices/eotffc/ofac/

Confused???

Practical Exercises: #1 Is This an Export?

• You email a software program to a research collaborator in Zimbabwe?

Practical Exercises: #1 Is This an Export?

• A: Yes

• Note: Zimbabwe is on the list of sanctioned countries so this is an illegal export.

Practical Exercises: #2 Subject to EAR?

• You export U.S. origin technical data to a manufacturer in Taiwan so they can manufacture a computer. They wil export the foreign manufactured computer, which was produced based on U.S. origin technical data, to Russia. If there are no U.S. origin material used in the manufacture of the computer.

Practical Exercises: #2 Subject to EAR?

• A: YES

Practical Exercises: #3 Regulated/License Required?

• A U.S. Extension Plant Pathologist travels to Syria for a research field trip. She takes a GPS device in her baggage in order to record locations of her plant finds in the field.

Practical Exercises: #3 Regulated/License Required? Is this an export? YES

Subject to the EAR? YESDoes it have an ECCN #? YES General Prohibition 4-10 apply? YES #6

General Order No. 2 to 736General Order No. 2 of May 14, 2004;Sections5(a)(1) and 5(a)(2)(A) of the SyriaAccountability and Lebanese Sovereignty Act of2003 (Public Law 108-175, codified as a note to

22 USC 2151) (the SAA), require (1) aprohibition on the export to Syria of all items onthe Commerce Control List (in 15 CFR Part 774)(CCL) and (2) a prohibition on the export to Syriaof products of the United States, other than foodand medicine.

Practical Exercises: #3 Regulated/License Required?

Syria is also a sanctioned country for OFAC and ITAR

You must submit an application for license.

Note: Even though the License Exception for baggage (740.14) would apply because of the sanctions against Syria a license application is required.

If sent to Canada NS doesn’t apply (NLR)

Practical Exercises: #4 Do You Need a License?

• You are a U.S. Researcher who collaborates with a colleague in Switzerland. You plan on sending isolates of Francisella tularensis (mutant variants that you have made) The German colleague will be testing these mutants out in her biosensor system to see if they are detected. You will not need a CDC Form 2 to ship to Switzerland.

Practical Exercises: #4 Do You Need a License?

• A: YES

Practical Exercises: #5 Public Domain Exemption Apply? / Fundamental Research Exemption Apply?

• A plant pathologist is working on genetic control of Puccinia striiformis. She receives funding from a corporate sponsor who exercises substantive prepublication review. This plant pathologist sends samples of Puccinia striiformis to Canada for analysis.

Practical Exercises: #5 Public Domain Exemption Apply? / Fundamental Research Exemption Apply?

• Public Domain Exemption applies only to information not items.

• Fundamental Research Exemption does not apply because of the sponsor’s pre-publication review stipulation.

Need help navigating the Export Control maze???

Export Control Assistance

Send request for Review to:

Lorraine McConnell WSU BSOEmail: [email protected] Box 643140 Pullman, WA 99164-3140Fax: 509-335-4462Expected Response Time: 24-72 hours.

Extenuating circumstances may cause delay.

Information to Include in the Request• Complete description of item to be shipped,

(e.g. anti-sera is not on the CCL list but immuno-toxins defined in part as antibodies designed to target cancer cells are in fact on the CCL list).

• Full name of person the item is being shipped to.

• Address item is being shipped to. • What the end use of the item is. • Whether the item will be shipped on to any

other location or used by others. If answer to above is yes: the address and name

of these parties is required.

Questions?

Documents

FDS Export Controls: Overview and Update Lorraine A. McConnell November 14, 2006