Thanks and Acknowledgment:

Export Controls ComplianceExport Controls ComplianceIn the University ContextIn the University Context

Effective Compliance Systems in Higher EducationEffective Compliance Systems in Higher Education

Gerard D. SolisGerard D. SolisSenior Associate General CounselSenior Associate General Counsel

University of South FloridaUniversity of South FloridaOffice of the General CounselOffice of the General Counsel

4202 E. Fowler Avenue, ADM 2504202 E. Fowler Avenue, ADM 250Tampa, Florida 33620Tampa, Florida 33620

Telephone: (813) 974-2131Telephone: (813) 974-2131Facsimile: (813) 974-5236Facsimile: (813) 974-5236

[email protected]

J. Scott MaberryFulbright & Jaworski LLPWashington, [email protected]

Division of Sponsored Research

Thanks and Acknowledgment:Thanks and Acknowledgment:

Topics to be CoveredTopics to be Covered

Background: Why Trade Controls Matter Background: Why Trade Controls Matter Now More Than EverNow More Than Ever

Introduction to U.S. Trade Controls: How Introduction to U.S. Trade Controls: How Trade Controls Affect Technology Trade Controls Affect Technology TransferTransfer

Issues Specific to University ResearchIssues Specific to University Research ““Deemed Export” and Technical Data Export Deemed Export” and Technical Data Export

RestrictionsRestrictions Fundamental Research ExemptionFundamental Research Exemption National Security vs. Anti-Discrimination National Security vs. Anti-Discrimination

QuestionsQuestions

Background: Why It MattersBackground: Why It Matters

Increased scrutiny on technology Increased scrutiny on technology transfer, including university transfer, including university researchresearch

Increased regulation of technology Increased regulation of technology transfertransfer

Increased enforcement activity Increased enforcement activity against technology transfersagainst technology transfers

6

Roth was convicted of:Roth was convicted of: Sharing lab reports and draft Sharing lab reports and draft

publications with his graduate studentspublications with his graduate students Teaching a graduate student to use a Teaching a graduate student to use a

piece of test equipmentpiece of test equipment Taking a Small Business Innovation Taking a Small Business Innovation

Phase II Proposal outside of the United Phase II Proposal outside of the United StatesStates

Having his graduate student send Having his graduate student send

research materials to him while on research materials to him while on

international travelinternational travel

Roth was still convicted of 17 feloniesRoth was still convicted of 17 felonies

Alarming Aspects of the Roth CaseAlarming Aspects of the Roth Case

Government presented no Government presented no

evidence:evidence: National security was directly harmedNational security was directly harmed Roth ever accessed or allowed access Roth ever accessed or allowed access

to ITAR-restricted technical data he to ITAR-restricted technical data he took out of the US on his laptoptook out of the US on his laptop

Roth was still convicted of 17 Roth was still convicted of 17 feloniesfelonies


Defense Department witness Defense Department witness concluded:concluded:

Roth’s research was BASIC and APPLIED Roth’s research was BASIC and APPLIED researchresearch

Research results were not significantly Research results were not significantly linked to defense articleslinked to defense articles

DoD would likely have approved research DoD would likely have approved research results for public releaseresults for public release

Roth was still convicted of 17 feloniesRoth was still convicted of 17 felonies


Other than the contractual clause, no Other than the contractual clause, no materials were marked as export materials were marked as export controlledcontrolled

You accept DoD and defense contractor-You accept DoD and defense contractor-provided technical documents at your own provided technical documents at your own riskrisk

Look for DISTRIBUTION STATEMENT:Look for DISTRIBUTION STATEMENT:

Approved for public release, Approved for public release, distribution is unlimiteddistribution is unlimited

DoDD 5230.24 Distribution Statements on Technical DoDD 5230.24 Distribution Statements on Technical DocumentsDocuments


In court:In court: A Small Business Innovative Research A Small Business Innovative Research

(SBIR) contract becomes “the Munitions (SBIR) contract becomes “the Munitions Contract”Contract”

A sponsored research contract becomes a A sponsored research contract becomes a “consulting” contract“consulting” contract

The jury will not be filled with “peer” The jury will not be filled with “peer” academics academics

If you accept a defense contract, expect to If you accept a defense contract, expect to be treated as a defense contractorbe treated as a defense contractor


12

Introduction to Trade ControlsIntroduction to Trade Controls Arms Export ControlsArms Export Controls ““Dual Use” Export ControlsDual Use” Export Controls Sanctions and EmbargoesSanctions and Embargoes Denied Party ScreeningDenied Party Screening Economic Espionage ActEconomic Espionage Act Others Not Covered Here:Others Not Covered Here:

CustomsCustoms Import remediesImport remedies Anti-briberyAnti-bribery Anti-boycottAnti-boycott Trade agreements: WTO, NAFTA, etc.Trade agreements: WTO, NAFTA, etc.

Arms Export ControlsArms Export Controls Main regulator: U.S. Department of Main regulator: U.S. Department of

State Directorate of Defense Trade State Directorate of Defense Trade Controls (DTC)Controls (DTC)

Regulations: International Traffic in Regulations: International Traffic in Arms Regulations (ITAR)Arms Regulations (ITAR)

Controlled items and related Controlled items and related technology listed on U.S. Munitions List technology listed on U.S. Munitions List (USML)(USML)

Licenses or authorization required for Licenses or authorization required for all destinations; very limited exceptionsall destinations; very limited exceptions

Penalties:Penalties: Civil finesCivil fines Loss of export privileges (a.k.a. the “death Loss of export privileges (a.k.a. the “death

penalty”)penalty”) Criminal fines and imprisonmentCriminal fines and imprisonment

Arms Export ControlsArms Export Controls WHAT IS COVERED?WHAT IS COVERED?

Exports of all “defense articles,” “defense services,” and Exports of all “defense articles,” “defense services,” and related “technical data”related “technical data”

DEFINITIONS ARE BROAD:DEFINITIONS ARE BROAD: ExportExport::

Transferring registration, control, or ownership to a Transferring registration, control, or ownership to a foreign person, foreign person, whether in the United States or abroadwhether in the United States or abroad;;

Oral, visual, or electronic disclosure, or transfer of Oral, visual, or electronic disclosure, or transfer of technical data, to a foreign person, technical data, to a foreign person, whether in the U.S. or whether in the U.S. or abroadabroad

U.S. personU.S. person:: U.S. citizens (including companies and other U.S. citizens (including companies and other

organizations incorporated to do business in the U.S.), organizations incorporated to do business in the U.S.), lawful permanent residents (green card holders), and lawful permanent residents (green card holders), and protected individuals under 8 U.S.C. 1101(A)(20) and protected individuals under 8 U.S.C. 1101(A)(20) and 1324B(A)(3) (e.g., asylees)1324B(A)(3) (e.g., asylees)

Foreign PersonForeign Person: : Everyone else Everyone else

Arms Export ControlsArms Export Controls Defense ArticleDefense Article: :

Items specially designed or modified for military use Items specially designed or modified for military use Defense ServiceDefense Service::

Furnishing assistance or training to foreign persons, Furnishing assistance or training to foreign persons, wherever located, in design, development, maintenance, wherever located, in design, development, maintenance, modification, operation, use, etc. of defense articles;modification, operation, use, etc. of defense articles;

Furnishing defense tech data to foreign person, wherever Furnishing defense tech data to foreign person, wherever locatedlocated

Technical DataTechnical Data:: Any information required for design, development, Any information required for design, development,

production, manufacture, assembly, operation, repair, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles testing, maintenance, or modification of defense articles

Includes information in the form of blueprints, drawings, Includes information in the form of blueprints, drawings, photographs, plans, instructions, and documentationphotographs, plans, instructions, and documentation

Software related to defense articlesSoftware related to defense articles

““Dual Use” Export ControlsDual Use” Export Controls Main Regulator: Department of Commerce, Main Regulator: Department of Commerce,

Bureau of Industry and Security (BIS)Bureau of Industry and Security (BIS) Enforcer: Office of Export Enforcement Enforcer: Office of Export Enforcement

(OEE)(OEE) Regulations: Export Administration Regulations: Export Administration

Regulations (EAR)Regulations (EAR) Controlled goods, software, and technical Controlled goods, software, and technical

data listed on Commerce Control List (CCL)data listed on Commerce Control List (CCL) Product / Destination ControlsProduct / Destination Controls End Use / End User ControlsEnd Use / End User Controls

Penalties: Penalties: Civil finesCivil fines Loss of export privileges (a.k.a. the “death Loss of export privileges (a.k.a. the “death

penalty”)penalty”) Criminal fines and imprisonment Criminal fines and imprisonment

Dual Use Export ControlsDual Use Export Controls

““Dual Use” goods, software, and technology Dual Use” goods, software, and technology covered: covered: Essentially, everything not covered by the ITAR Essentially, everything not covered by the ITAR

““License exceptions” License exceptions” Most exports of low-technology items possible without a Most exports of low-technology items possible without a

licenselicense Catchall category EAR99 Catchall category EAR99

covers most everyday items; covers most everyday items; may be exported to most destinations without a licensemay be exported to most destinations without a license

““Export” includes actual shipment or transmission Export” includes actual shipment or transmission outside the United Statesoutside the United States

““Deemed” exports: Any “release of technology or Deemed” exports: Any “release of technology or source code subject to the EAR to a foreign national source code subject to the EAR to a foreign national … is deemed to be an export to the country or … is deemed to be an export to the country or countries of the foreign nationalcountries of the foreign national

Dual Use Export ControlsDual Use Export Controls

““Technology” may include prints, plans, Technology” may include prints, plans, instruction, manuals, know-howinstruction, manuals, know-how

““Release” may be by oral or visual Release” may be by oral or visual disclosure, or by application abroad of disclosure, or by application abroad of knowledge gained in United Statesknowledge gained in United States

Three classes of technology; ascending Three classes of technology; ascending order of control:order of control: ““Use” technologyUse” technology ““Production” technologyProduction” technology ““Development” technologyDevelopment” technology

Deemed ExportsDeemed Exports ““Technology” includes data, designs, Technology” includes data, designs,

manuals, know-how, processesmanuals, know-how, processes Export of technology occurs by:Export of technology occurs by:

Visual inspectionVisual inspection Oral disclosureOral disclosure Application of knowledge abroadApplication of knowledge abroad

Export is “deemed” to take place when Export is “deemed” to take place when technology is provided to a foreign technology is provided to a foreign national, wherever locatednational, wherever located

““Foreign national” is anyone who is notForeign national” is anyone who is notA) a citizen of the United States, or A) a citizen of the United States, or B) a lawful permanent resident of the United StatesB) a lawful permanent resident of the United StatesC) Protected under asylum or refugee statusC) Protected under asylum or refugee status

Deemed ExportsDeemed Exports

A foreign national is treated as a foreign A foreign national is treated as a foreign countrycountry

Authorization to work or study in the United Authorization to work or study in the United States does not authorize disclosureStates does not authorize disclosure

License or valid exception must be in placeLicense or valid exception must be in place Examples:Examples:

Chinese national employee on a B-1 visaChinese national employee on a B-1 visa Meeting in Austin with Indian engineersMeeting in Austin with Indian engineers Visit to Brazilian research siteVisit to Brazilian research site What about Chinese graduate students?What about Chinese graduate students?

ExemptionsExemptions

Some technical data is narrowly exempted Some technical data is narrowly exempted from controls:from controls: General scientific, mathematical, or engineering General scientific, mathematical, or engineering

principles commonly taught in schools, colleges, and principles commonly taught in schools, colleges, and universities;universities;

Basic marketing information on function or purpose;Basic marketing information on function or purpose; General system descriptions of defense articles; General system descriptions of defense articles; Patents available at any patent office;Patents available at any patent office; Information in the Information in the Public DomainPublic Domain, including:, including:

Data having unlimited distribution at a U.S. seminar, trade Data having unlimited distribution at a U.S. seminar, trade show, exhibition, etc. generally accessible to the public;show, exhibition, etc. generally accessible to the public;

Data released publicly after approval by U.S. Government;Data released publicly after approval by U.S. Government; ““Fundamental research” in science and engineering at U.S. Fundamental research” in science and engineering at U.S.

colleges; colleges; Data available to the public through Internet, library, etc.Data available to the public through Internet, library, etc.

Fundamental Research ExemptionFundamental Research Exemption Technology is not subject to the Export Technology is not subject to the Export

Administration Regulations if the result of Administration Regulations if the result of “fundamental research”“fundamental research”

ITAR has similar ruleITAR has similar rule Defined narrowly, many conditionsDefined narrowly, many conditions

Pre-publication review may invalidate Pre-publication review may invalidate Certain export restrictions may invalidateCertain export restrictions may invalidate

Pressure to narrow the exemptionPressure to narrow the exemption Pressure from government agenciesPressure from government agencies Pressure from research sponsorsPressure from research sponsors ““Troublesome Clauses”Troublesome Clauses”

Fundamental ResearchFundamental Research "'Fundamental research' means basic and "'Fundamental research' means basic and

applied research in science and engineering, the applied research in science and engineering, the results of which ordinarily are published and results of which ordinarily are published and shared broadly within the scientific community, shared broadly within the scientific community, as distinguished from proprietary research and as distinguished from proprietary research and from industrial development, design, production, from industrial development, design, production, and product utilization, the results of which and product utilization, the results of which ordinarily are restricted for proprietary or ordinarily are restricted for proprietary or national security reasons."national security reasons."

It should be noted that the Fundamental It should be noted that the Fundamental Research Exemption applies only to the Research Exemption applies only to the dissemination of technical data and information, dissemination of technical data and information, not to the transmission of material goods. The not to the transmission of material goods. The exemption is more broadly construed under the exemption is more broadly construed under the EAR than under ITAR.EAR than under ITAR.

““Troublesome Clauses”Troublesome Clauses”

Innocuous-seeming clauses in research Innocuous-seeming clauses in research contracts may destroy protection of contracts may destroy protection of fundamental research exemptionsfundamental research exemptions

Examples upon requestExamples upon request Subject of much research, review, and Subject of much research, review, and

legal worklegal work The troublesome clauses can be The troublesome clauses can be

negotiated, contrary to what some negotiated, contrary to what some sponsors or contracting officers will tell sponsors or contracting officers will tell youyou

Arms Export Controls:Definitions Quiz

Tony Parker, an Airbus engineer (a French national) on a valid work visa in the United States, attends a University design meeting where ITAR-controlled technical data are discussed. Is this an export? Is a license required?

The meeting counts as an export to France

A license will be required, unless the data qualifies as “fundamental research”

Arms Export Controls:Arms Export Controls:Definitions QuizDefinitions Quiz

Generally, technical data on view in the public tour would be Generally, technical data on view in the public tour would be considered “public domain,” and thus exempt from ITAR controlsconsidered “public domain,” and thus exempt from ITAR controls

Inspectors General Reports question whether certain “use” Inspectors General Reports question whether certain “use” technology should be subject to tighter interpretations of the rulestechnology should be subject to tighter interpretations of the rules

Dr. Evil, a former KGB agent and still a Russian citizen, wants to visit the University to take the public tour of the research facilities where work is being performed for the U.S. Army. Is an export license required for Evil to take the tour?

99 QUALIFYINGQUALIFYING QUESTIONS QUESTIONS

EXPORT CONTROLS:EXPORT CONTROLS:

1.1. Are you sharing, shipping, Are you sharing, shipping, transmitting or transferring non-transmitting or transferring non-commercial encryption software in commercial encryption software in source code or object code (including source code or object code (including travel outside the country with such travel outside the country with such software)?software)?

2.2. Do you know or have any reason to Do you know or have any reason to believe that the item, information or believe that the item, information or software to be shared, shipped, software to be shared, shipped, transmitted or transferred will transmitted or transferred will support the design, development, support the design, development, production, stockpiling or use of a production, stockpiling or use of a nuclear explosive device, chemical nuclear explosive device, chemical or biological weapons, or missiles?or biological weapons, or missiles?

3.3. Was the item, information or software Was the item, information or software to be shared, shipped, transmitted or to be shared, shipped, transmitted or transferred developed under a transferred developed under a sponsored agreement imposing sponsored agreement imposing publication restrictions beyond a brief publication restrictions beyond a brief review (up to 90 days) for patent review (up to 90 days) for patent protection and/or inadvertent release protection and/or inadvertent release of confidential/proprietary of confidential/proprietary information?information?

4.4. Did an external sponsor, vendor, Did an external sponsor, vendor, collaborator or other third party collaborator or other third party provide, under a Non-Disclosure provide, under a Non-Disclosure Agreement or a Confidentiality Agreement or a Confidentiality Agreement, the item, information or Agreement, the item, information or software to be shared, shipped, software to be shared, shipped, transmitted or transferred?transmitted or transferred?

5.5. Is the item being shared, shipped, Is the item being shared, shipped, transmitted or transferred a defense transmitted or transferred a defense

article other than information or article other than information or software on the ITAR's US Munition software on the ITAR's US Munition

List (USML)?List (USML)?

6.6. Is the information or software Is the information or software being shared, shipped, transmitted being shared, shipped, transmitted or transferred technical data on the or transferred technical data on the ITAR's US Munition List (USML)?ITAR's US Munition List (USML)?

7.7. Are you shipping or transferring Are you shipping or transferring items on the Commerce Control List items on the Commerce Control List (CCL) of the Export Administration (CCL) of the Export Administration

Regulations (EAR)?Regulations (EAR)?

8.8. Are you sharing, transmitting or Are you sharing, transmitting or transferring technology (information) transferring technology (information) or software code on the Commerce or software code on the Commerce

Control List (CCL)?Control List (CCL)?

9.9. Is the disclosure, shipment, Is the disclosure, shipment, transmission, or transfer to an entity in transmission, or transfer to an entity in a country subject to US economic or a country subject to US economic or

trade sanctions or identified by the US trade sanctions or identified by the US Department of State as a "State Department of State as a "State

Sponsor of Terrorism," namely Iran, Sponsor of Terrorism," namely Iran, Cuba, Sudan, Syria or North Korea?Cuba, Sudan, Syria or North Korea?

IF YOU ANSWERED NO TO ALL OF IF YOU ANSWERED NO TO ALL OF THE QUESTIONS ABOVE…THE QUESTIONS ABOVE…

GOOD NEWS!! GOOD NEWS!!

YOU DO NOT NEED TO OBTAIN AN YOU DO NOT NEED TO OBTAIN AN EXPORT LICENSE EXPORT LICENSE ((PROBABLYPROBABLY))..

Sanctions and EmbargoesSanctions and Embargoes

BACKGROUNDBACKGROUND 26 active sanctions programs; 26 active sanctions programs;

some date from 1950ssome date from 1950s Post-9/11: a new world of Post-9/11: a new world of

sanctionssanctions Main Regulator: U.S. Department Main Regulator: U.S. Department

of Treasury Office of Foreign of Treasury Office of Foreign Assets Control (OFAC) Assets Control (OFAC)

Penalties:Penalties: Civil finesCivil fines Criminal fines and imprisonmentCriminal fines and imprisonment

Sanctions and EmbargoesSanctions and Embargoes All programs have different mixes of many elementsAll programs have different mixes of many elements Comprehensive embargoes: Comprehensive embargoes:

Cuba, Iran, SudanCuba, Iran, Sudan Generally includes nationals of these countries. Wherever Generally includes nationals of these countries. Wherever

located. Which is everywhere.located. Which is everywhere. Investment prohibitions, e.g., Burma, IranInvestment prohibitions, e.g., Burma, Iran Export/Import prohibitions, e.g., Syria, North KoreaExport/Import prohibitions, e.g., Syria, North Korea Asset Freeze, e.g., terrorists, narcotics traffickersAsset Freeze, e.g., terrorists, narcotics traffickers Tailored programs, e.g., rough diamond importsTailored programs, e.g., rough diamond imports


Certain persons are subject to separate Certain persons are subject to separate sanctions (“Specially Designated sanctions (“Specially Designated Nationals”)Nationals”) Includes companies, organizations, Includes companies, organizations,

individuals, and vesselsindividuals, and vessels Unlawful to conduct any transaction with an Unlawful to conduct any transaction with an

SDNSDN Sanctioned persons based in many countries, Sanctioned persons based in many countries,

including U.S. allies (UK, France, etc.)including U.S. allies (UK, France, etc.)


Transactions involving publicly Transactions involving publicly available information may be available information may be permittedpermitted

But the parameters are different from But the parameters are different from those under export controlsthose under export controls

AND: only applies to work already in AND: only applies to work already in existence, not new worksexistence, not new works

Sanctions and EmbargoesSanctions and Embargoes Direct export violation: export to a sanctioned Direct export violation: export to a sanctioned

party or countryparty or country Indirect export violation Indirect export violation

export to a third party with knowledge or reason to export to a third party with knowledge or reason to know of export to a sanctioned partyknow of export to a sanctioned party

Don’t self-blind Don’t self-blind Export of “services” may be prohibitedExport of “services” may be prohibited ““Facilitation” of actions of others may be Facilitation” of actions of others may be

prohibitedprohibited ““Inventory” exceptionInventory” exception

export into third party inventoryexport into third party inventory no specific order from sanctioned partyno specific order from sanctioned party third party’s business not “predominantly” with third party’s business not “predominantly” with

sanctioned party or countrysanctioned party or country

Employment Discrimination IssuesEmployment Discrimination Issues

Foreign national employees, vendors, Foreign national employees, vendors, contractors, visitors, etc. must be contractors, visitors, etc. must be screened in order to avoid prohibited screened in order to avoid prohibited exportsexports

Licenses may be requiredLicenses may be required You may need to gather information You may need to gather information

about foreign national workers:about foreign national workers: Country of citizenship Country of citizenship Permanent residencePermanent residence Visa statusVisa status

Employment Discrimination IssuesEmployment Discrimination Issues

Under Title VII, certain hiring and other Under Title VII, certain hiring and other selection decisions are permitted in selection decisions are permitted in compliance with national security compliance with national security requirementsrequirements

Conditions:Conditions: duties are subject to any national security duties are subject to any national security

law or Executive Order of the President; law or Executive Order of the President; individual does not meet the national security individual does not meet the national security

requirementrequirement Policies must be adopted for Policies must be adopted for

nondiscriminatory reasons and applied in nondiscriminatory reasons and applied in a nondiscriminatory mannera nondiscriminatory manner