1 / 28

U.S. Export Controls -- The Challenge for Research Institutions

U.S. Export Controls -- The Challenge for Research Institutions Richard A. Johnson NCURA richard_johnson@aporter.com November 8, 2002 U.S. Export Controls and Trade Sanctions Purposes and Overview Differences Between ITAR and EAR Application to University or Non-profit Research

Audrey
Download Presentation

U.S. Export Controls -- The Challenge for Research Institutions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. U.S. Export Controls -- The Challenge for Research Institutions Richard A. Johnson NCURA richard_johnson@aporter.com November 8, 2002

  2. U.S. Export Controls and Trade Sanctions • Purposes and Overview • Differences Between ITAR and EAR • Application to University or Non-profit Research • Do We Need an Export License? • Compliance and Penalties • Trends to Watch

  3. U.S. Export Controls and Trade SanctionsPurposes • Multiple goals that sometimes conflict • Advance Foreign Policy Goals • Restrict Exports of Goods and Technology That Could Contribute to the Military Potential of Adversaries • Prevent Proliferation of Weapons of Mass Destruction (nuclear, biological, chemical) • Prevent Terrorism • Fulfill International Obligations

  4. U.S. Export Controls and Trade SanctionsOverview • U.S. Export Controls • Cover Any Item in U.S. Trade (goods, technology, information) • U.S.-Origin Items Wherever Located, including the U.S.(Jurisdiction Follows the Item or Technology Worldwide) • Exclude Patents and Patent Applications, Artistic or Non-Technical Publications • Exclude Technology in the Public Domain • Exports of most high-technology and military Items, as well as associated technology, require U.S. export authorization (either a license or an applicable exemption) • Trade Sanctions Focus on Financing, Commodities, and Services in countries posing greatest security or foreign policy threats

  5. U.S. Export Controls and Trade SanctionsAgency Responsibilities • State Department: “Munitions” (the International Traffic in Arms Regulations or “ITAR”) • Under Secretary for International Security (Bolton) • Asst. Sec’y for Political-Military Affairs (Bloomfield) • Licensing: Office of Defense Trade Controls (‘DTC”) • Commerce Department: “Dual-Use” Items (the Export Administration Regulations or “EAR”) • Under Secretary for Industry and Security (Juster) • Licensing: Bureau of Industry and Security (“BIS”), formerly BXA • Nuclear Regulatory Commission: Nuclear Materials and Technology • Treasury Department, Office of Foreign Assets Control (OFAC): Trade Sanctions, Embargoes, Restrictions on Transfers to Certain End-Users, Terrorism, Anti-Narcotics

  6. U.S. Export Controls and Trade Sanctions Differences Between ITAR and EAR • International Traffic in Arms Regulations (ITAR) • Covers military items (“munitions” or “defense articles”) • Regulates goods and technology designed to kill people or defend against death in a military setting (e.g., tank, fighter aircraft, nerve agent defensive equipment) • Includes most space-related technology because of application to missile technology • Includes technical data related to defense articles and defense services (furnishing assistance including design, engineering, and use of defense articles) • Strict regulatory regime • Purpose of regulations is to ensure U.S. security --No balancing of commercial or research objectives

  7. U.S. Export Controls and Trade Sanctions Differences Between ITAR and EAR • Export Administration Regulations (EAR) • Covers dual-use items • Regulates items designed for commercial purpose but that can have military applications (e.g., computers, pathogens, civilian aircraft) • Covers both the goods and the technology • Licensing regime encourages balancing competing interests • Balance foreign availability, commercial and research objectives with national security

  8. U.S. Export Controls and Trade SanctionsSanctions • Sanctions focus on the end-user or country rather than the technology • Embargoes administered by Office of Foreign Assets Control, U.S. Department of Treasury (“OFAC”) • Prohibitions on trade with countries such as Iran, Cuba • Limitations on trade in certain areas of countries or with certain actors (e.g., UNITA, Balkan war criminals, etc.) • OFAC prohibits payments to nationals and of sanctioned countries and to entities designated as terrorist-supporting • Separate prohibitions under the ITAR and EAR • ITAR proscribed list/sanctions (e.g., Syria, Pakistan’s Ministry of Defense or requirement for presidential waiver for China) • EAR restricts exchanges with some entities and universities in India, Israel, Russia, etc. because of proliferation concerns

  9. U.S. Export Controls and Trade SanctionsLimitations for Researchers • Both the ITAR and EAR provide certain exemptions for “full-time, regular” employees who maintain residency during the term of employment • These exemptions may preclude the need for licenses, but often are unavailable for foreign national researchers • Visa restrictions may preclude regular employment status by requiring the visa holder to maintain a foreign residence (e.g., most students with an F or J visa) • Many researchers, particularly post-docs and students, cannot qualify for the exemption because universities have many well-established reasons for not making these individuals full-time employees

  10. U.S. Export Controls and Trade SanctionsKey Issues for University and Non-Profit Research • Public Domain • Fundamental Research Exemption • “Deemed” Exports • Other Applications

  11. U.S. Export Controls and Trade SanctionsState Dept. (ITAR) Fundamental Research • Fundamental research exemption recognized, but purposely limited, given jurisdiction over goods and technologies designed to kill people • Covers information “which is published and which is generally accessible or available to the public” through a number of mechanisms including: • Unrestricted publications; • 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 • Excludes information restricted for proprietary reasons or specific U.S. government access and dissemination controls

  12. U.S. Export Controls and Trade SanctionsCommerce (EAR) Fundamental Research • Exemption significantly broader than ITAR • Research conducted by scientists, engineers, or students at a U.S. university normally exempt from licensing • Prepublication review solely to insure no inadvertent release of proprietary information generally does not trigger licensing • Prepublication review by a corporate sponsor or other restrictions on the publication of scientific and technical information generally invalidates the exemption • Exemption still available for work under U.S. government grants involving Commerce-controlled technology even if there are access and dissemination controls provided that university follows national security controls in grant proposal • Some limited technologies ineligible for fundamental research exemption (e.g., advanced encryption)

  13. U.S. Export Controls and Trade Sanctions“Deemed” Exports • U.S. export controls also cover transfers of goods and technology within the U.S. (the transfer outside the U.S. is deemed to apply when a foreign national receives the information in the U.S.) • Applies to technology transfers under the EAR and the provision of ITAR technical data and defense services • Unless the fundamental research exemption applies, a university’s transfer of controlled technology to a non-permanent resident foreign national in the U.S. may be controlled and/or prohibited • Visa status important • Permanent resident (“green card holder”) has same right to controlled information as U.S. citizen (no license required) • Non-immigrant visa holders must satisfy export controls (license may be required)

  14. U.S. Export Controls and Trade SanctionsApplication to University Research • Export of research products • Underwater research vehicle could require ITAR license if designed for military applications; would require Commerce Department authorization if designed for civilian purposes • Specially designed electronic components could be controlled • Temporary transfer of research equipment abroad • Carrying scientific equipment to certain destinations for research may require authorization (e.g., Iran, Syria, China, etc.) • 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

  15. U.S. Export Controls and Trade SanctionsApplication to University Research (cont’d) • Restrictions on certain foreign nationals • March 2002 State Department rule expands fundamental research exemption for foreign nations involved in space-related research, but provides no relief for foreign nationals from certain countries (e.g., China) • IPASS likely to result in foreign nationals from certain countries being prohibited from working on “uniquely available sensitive technology” • Government grants may limit access by foreign nationals • Agencies may preclude or limit access by foreign nationals to research based on the export control laws • Determining whether a restriction is a “specific access and dissemination control” under the ITAR (which would invalidate the fundamental research exemption) particularly problematic

  16. U.S. Export Controls and Trade SanctionsApplication to University Research (cont’d) • Corporate grants may limit access by foreign nationals • Proprietary restrictions or restrictions on publication by corporate grants may invalidate fundamental research • Could trigger licensing requirements for certain foreign nationals • 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 to launch research satellite

  17. U.S. Export Controls and Trade SanctionsApplication to University Research (cont’d) • Foreign national researchers ineligible to use some of the exemptions because they are not “full-time, regular employees” of the university • License processing takes time • Fast approvals in weeks; • Most approvals in months; • The hardest cases can take years

  18. U.S. Export Controls and Trade SanctionsDo We Need an Export License? • Determining whether an export license is necessary is complicated • Literally thousands of pages of regulations could apply • Most organizations develop a compliance plan • Statement from the administration on the importance of compliance • Manual • Training • Audits and independent evaluation • The following process would cover most cases for universities, but to obtain the correct answer in any given case would require a review of the individual facts and circumstances

  19. U.S. Export Controls and Trade SanctionsExport License Steps • Determine whether the exporter is subject to U.S. jurisdiction (U.S. universities are subject to U.S. jurisdiction as are any foreign nationals in the U.S.; overseas operations may be subject to U.S. jurisdiction) • Classify the technology or goods involved (i.e., subject to State Department ITAR controls, Commerce Department EAR controls, or other controls) • Determine if a license is needed for the particular technology and particular end-use and end-user • Determine whether any license exemptions or exceptions are available (e.g., public domain, fundamental research, etc.)

  20. U.S. Export Controls and Trade SanctionsExport License Steps (cont’d) • Determine whether any embargoes apply or whether any prohibited parties or destinations are involved • Determine whether there are any “red flags” or other warning signs of possible diversion of the goods or technology • If a license is required, apply promptly. Keep records in any case • State Department licensing requirements and forms available at: http://www.pmdtc.org • Commerce Department licensing requirements and forms available at: http://www.bis.doc.gov • Treasury (OFAC) licensing requirements available at: http://www.ustreas.gov/offices/enforcement/ofac/

  21. U.S. Export Controls and Trade SanctionsPenalties for Noncompliance • State Department (ITAR) • Criminal violations: up to $1,000,000 per violation, up to 10 years imprisonment • Civil penalties: seizure and forfeiture of the articles and any vessel, aircraft or vehicle involved in attempted violation, revocation of exporting privileges, fines of up to $500,000 per violation • Commerce Department (EAR) • Criminal violations: $50,000-$1,000,000 or five times the value of the export, whichever is greater per violation (range depends on the applicable law), up to 10 years imprisonment • Civil penalties: loss of export privileges, fines $10,000-$120,000 per violation • Ex: DOC levied a $1.76 million fine yesterday on a company that exported biological toxins without a license for research to Europe and Asia

  22. U.S. Export Controls and Trade SanctionsPenalties for Noncompliance (cont’d) • The ticking university time bombs • Corporate sponsored research • Liability if know, or have reason to know, about corporate sponsor violations, EAR General Prohibition Ten, 15 CFR § 736.2(b)(10) • Ex.: corporate departments  university U.S. citizens  release to university foreign researchers  university violations • Material transfer agreements • MTAs often will eliminate the FR exemption • Exports of MTAs increasingly require licenses

  23. U.S. Export Controls and Trade SanctionsPenalties for Noncompliance (cont’d) • Treasury Department (OFAC) • Criminal violations: up to $1,000,000 per violation, up to 10 years imprisonment • Civil penalties: $12,000 to $55,000 fines (depending on applicable law) per violation • Violation of specific sanctions laws may add additional penalties • Most settlements with the Commerce, State or Treasury Departments generally become public. Court cases are always public!

  24. U.S. Export Controls and Trade SanctionsCompliance Risks Faced by Universities • Universities have been largely immune from past export control enforcement. This likely will change -- soon • Increasing scrutiny of all exports, and universities in particular, following 9/11 • Agencies criticized for failure to enforce “deemed exports” (GAO Report slammed DOC for countries including China and Israel) • Acting under a government grant is no defense • Los Alamos and Lawrence Livermore National Labs investigated for their role in providing a 486 computer and other items to a Russian lab to help control Russian material under a U.S. government research program! • State Department officials have told us that universities are not on their “top priority” list but that disclosure of sensitive technology to problematic end-users (e.g., mating a research satellite to a foreign launch vehicle) could change this

  25. U.S. Export Controls and Trade SanctionsSpecial Considerations for Universities • U.S. export controls create significant tensions with university goal of non-discrimination based on nationality and a free and open campus • To avoid discrimination and preserve openness requires active university management of export controls • State Department officials erroneously believe that universities largely placated by March 2002 expansion of fundamental research; NSC and OSTP understand this is not true • This exemption is quite narrow and is only available for a limited number of nationalities • Other university concerns (e.g., exemptions for full-time researchers) remain unaddressed • IPASS likely will further limit access by certain foreign nationals • Increasing linkage of export controls with information controls and IPASS

  26. U.S. Export Controls and Trade Sanctions • Several trends to watch • “National security v. openness” in export controls as a political and media issue. It no longer is only a technical issue • export control hearings planned in new Congress • state legislature pressures on land-grant universities • lots of interagency groups considering “broadening and deepening” export controls and related controls • Keep an eye on biology, biotech and bioengineering (increased threat; most unpredictable; least experience; greatest pressure for new export controls)

  27. U.S. Export Controls and Trade Sanctions • Contracts and funding are becoming as much a lever as new regulations -- federal $$ increasingly linked to compliance with export controls and additional contractual restrictions • A shift from “the right to know” to “the need to know” as an operating principle of government • The Export Administration Act renewal battle next year will be expanded to include many more issues of interest to universities and researchers • University audits and investigations will be initiated

  28. U.S. Export Controls and Trade Sanctions For Further Information Contact: Richard Johnson Arnold & Porter 555 12th Street, NW Washington, DC 20004-1206 202-942-5550 202-942-5999 fax Richard_Johnson@aporter.com

More Related