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Thanks and Acknowledgment:

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Thanks and Acknowledgment:

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  1. Export Controls ComplianceIn the University ContextEffective Compliance Systems in Higher EducationGerard D. SolisSenior Associate General CounselUniversity of South FloridaOffice of the General Counsel4202 E. Fowler Avenue, ADM 250Tampa, Florida 33620Telephone: (813) 974-2131Facsimile: (813) 974-5236gsolis@admin.usf.edu

  2. Thanks and Acknowledgment: J. Scott Maberry Fulbright & Jaworski LLP Washington, DC smaberry@fulbright.com 202-662-4693 Division of Sponsored Research

  3. Topics to be Covered • Background: Why Trade Controls Matter Now More Than Ever • Introduction to U.S. Trade Controls: How Trade Controls Affect Technology Transfer • Issues Specific to University Research • “Deemed Export” and Technical Data Export Restrictions • Fundamental Research Exemption • National Security vs. Anti-Discrimination • Questions

  4. Background: Why It Matters • Increased scrutiny on technology transfer, including university research • Increased regulation of technology transfer • Increased enforcement activity against technology transfers

  5. Alarming Aspects of the Roth Case Roth was convicted of: Sharing lab reports and draft publications with his graduate students Teaching a graduate student to use a piece of test equipment Taking a Small Business Innovation Phase II Proposal outside of the United States Having his graduate student send research materials to him while on international travel Roth was still convicted of 17 felonies

  6. Alarming Aspects of the Roth Case Government presented no evidence: National security was directly harmed Roth ever accessed or allowed access to ITAR-restricted technical data he took out of the US on his laptop Roth was still convicted of 17 felonies

  7. Alarming Aspects of the Roth Case Defense Department witness concluded: Roth’s research was BASIC and APPLIED research Research results were not significantly linked to defense articles DoD would likely have approved research results for public release Roth was still convicted of 17 felonies

  8. Alarming Aspects of the Roth Case Other than the contractual clause, no materials were marked as export controlled You accept DoD and defense contractor-provided technical documents at your own risk Look for DISTRIBUTION STATEMENT: Approved for public release, distribution is unlimited DoDD 5230.24 Distribution Statements on Technical Documents

  9. Alarming Aspects of the Roth Case In court: A Small Business Innovative Research (SBIR) contract becomes “the Munitions Contract” A sponsored research contract becomes a “consulting” contract The jury will not be filled with “peer” academics If you accept a defense contract, expect to be treated as a defense contractor

  10. Introduction to Trade Controls • Arms Export Controls • “Dual Use” Export Controls • Sanctions and Embargoes • Denied Party Screening • Economic Espionage Act • Others Not Covered Here: • Customs • Import remedies • Anti-bribery • Anti-boycott • Trade agreements: WTO, NAFTA, etc.

  11. Arms Export Controls • Main regulator: U.S. Department of State Directorate of Defense Trade Controls (DTC) • Regulations: International Traffic in Arms Regulations (ITAR) • Controlled items and related technology listed on U.S. Munitions List (USML) • Licenses or authorization required for all destinations; very limited exceptions • Penalties: • Civil fines • Loss of export privileges (a.k.a. the “death penalty”) • Criminal fines and imprisonment

  12. Arms Export Controls • WHAT IS COVERED? • Exports of all “defense articles,” “defense services,” and related “technical data” • DEFINITIONS ARE BROAD: • Export: • Transferring registration, control, or ownership to a foreign person, whether in the United States or abroad; • Oral, visual, or electronic disclosure, or transfer of technical data, to a foreign person, whether in the U.S. or abroad • U.S. person: • U.S. citizens (including companies and other organizations incorporated to do business in the U.S.), lawful permanent residents (green card holders), and protected individuals under 8 U.S.C. 1101(A)(20) and 1324B(A)(3) (e.g., asylees) • Foreign Person: Everyone else

  13. Arms Export Controls • Defense Article: • Items specially designed or modified for military use • Defense Service: • Furnishing assistance or training to foreign persons, wherever located, in design, development, maintenance, modification, operation, use, etc. of defense articles; • Furnishing defense tech data to foreign person, wherever located • Technical Data: • Any information required for design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles • Includes information in the form of blueprints, drawings, photographs, plans, instructions, and documentation • Software related to defense articles

  14. “Dual Use” Export Controls • Main Regulator: Department of Commerce, Bureau of Industry and Security (BIS) • Enforcer: Office of Export Enforcement (OEE) • Regulations: Export Administration Regulations (EAR) • Controlled goods, software, and technical data listed on Commerce Control List (CCL) • Product / Destination Controls • End Use / End User Controls • Penalties: • Civil fines • Loss of export privileges (a.k.a. the “death penalty”) • Criminal fines and imprisonment

  15. Dual Use Export Controls • “Dual Use” goods, software, and technology covered: • Essentially, everything not covered by the ITAR • “License exceptions” • Most exports of low-technology items possible without a license • Catchall category EAR99 • covers most everyday items; • may be exported to most destinations without a license • “Export” includes actual shipment or transmission outside the United States • “Deemed” exports: Any “release of technology or source code subject to the EAR to a foreign national … is deemed to be an export to the country or countries of the foreign national

  16. Dual Use Export Controls • “Technology” may include prints, plans, instruction, manuals, know-how • “Release” may be by oral or visual disclosure, or by application abroad of knowledge gained in United States • Three classes of technology; ascending order of control: • “Use” technology • “Production” technology • “Development” technology

  17. Deemed Exports • “Technology” includes data, designs, manuals, know-how, processes • Export of technology occurs by: • Visual inspection • Oral disclosure • Application of knowledge abroad • Export is “deemed” to take place when technology is provided to a foreign national, wherever located • “Foreign national” is anyone who is not A) a citizen of the United States, or B) a lawful permanent resident of the United States C) Protected under asylum or refugee status

  18. Deemed Exports • A foreign national is treated as a foreign country • Authorization to work or study in the United States does not authorize disclosure • License or valid exception must be in place • Examples: • Chinese national employee on a B-1 visa • Meeting in Austin with Indian engineers • Visit to Brazilian research site • What about Chinese graduate students?

  19. Exemptions Some technical data is narrowly exempted from controls: • General scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities; • Basic marketing information on function or purpose; • General system descriptions of defense articles; • Patents available at any patent office; • Information in the Public Domain, including: • Data having unlimited distribution at a U.S. seminar, trade show, exhibition, etc. generally accessible to the public; • Data released publicly after approval by U.S. Government; • “Fundamental research” in science and engineering at U.S. colleges; • Data available to the public through Internet, library, etc.

  20. Fundamental Research Exemption • Technology is not subject to the Export Administration Regulations if the result of “fundamental research” • ITAR has similar rule • Defined narrowly, many conditions • Pre-publication review may invalidate • Certain export restrictions may invalidate • Pressure to narrow the exemption • Pressure from government agencies • Pressure from research sponsors • “Troublesome Clauses”

  21. Fundamental Research • "'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 and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons." • It should be noted that the Fundamental Research Exemption applies only to the dissemination of technical data and information, not to the transmission of material goods. The exemption is more broadly construed under the EAR than under ITAR.

  22. “Troublesome Clauses” • Innocuous-seeming clauses in research contracts may destroy protection of fundamental research exemptions • Examples upon request • Subject of much research, review, and legal work • The troublesome clauses can be negotiated, contrary to what some sponsors or contracting officers will tell you

  23. 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”

  24. Arms Export Controls:Definitions Quiz 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? • Generally, technical data on view in the public tour would be considered “public domain,” and thus exempt from ITAR controls • Inspectors General Reports question whether certain “use” technology should be subject to tighter interpretations of the rules

  25. EXPORT CONTROLS: 9Qualifying Questions

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

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

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

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

  30. 5. Is the item being shared, shipped, transmitted or transferred a defense article other than information or software on the ITAR's US Munition List (USML)?

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

  32. 7. Are you shipping or transferring items on the Commerce Control List (CCL) of the Export Administration Regulations (EAR)?

  33. 8. Are you sharing, transmitting or transferring technology (information) or software code on the Commerce Control List (CCL)?

  34. 9. Is the disclosure, shipment, transmission, or transfer to an entity in a country subject to US economic or trade sanctions or identified by the US Department of State as a "State Sponsor of Terrorism," namely Iran, Cuba, Sudan, Syria or North Korea?

  35. IF YOU ANSWERED NO TO ALL OF THE QUESTIONS ABOVE…GOOD NEWS!! YOU DO NOT NEED TO OBTAIN AN EXPORT LICENSE (PROBABLY).

  36. Sanctions and Embargoes BACKGROUND • 26 active sanctions programs; some date from 1950s • Post-9/11: a new world of sanctions • Main Regulator: U.S. Department of Treasury Office of Foreign Assets Control (OFAC) • Penalties: • Civil fines • Criminal fines and imprisonment

  37. Sanctions and Embargoes • All programs have different mixes of many elements • Comprehensive embargoes: • Cuba, Iran, Sudan • Generally includes nationals of these countries. Wherever located. Which is everywhere. • Investment prohibitions, e.g., Burma, Iran • Export/Import prohibitions, e.g., Syria, North Korea • Asset Freeze, e.g., terrorists, narcotics traffickers • Tailored programs, e.g., rough diamond imports

  38. Sanctions and Embargoes • Certain persons are subject to separate sanctions (“Specially Designated Nationals”) • Includes companies, organizations, individuals, and vessels • Unlawful to conduct any transaction with an SDN • Sanctioned persons based in many countries, including U.S. allies (UK, France, etc.)

  39. Sanctions and Embargoes • Transactions involving publicly available information may be permitted • But the parameters are different from those under export controls • AND: only applies to work already in existence, not new works

  40. Sanctions and Embargoes • Direct export violation: export to a sanctioned party or country • Indirect export violation • export to a third party with knowledge or reason to know of export to a sanctioned party • Don’t self-blind • Export of “services” may be prohibited • “Facilitation” of actions of others may be prohibited • “Inventory” exception • export into third party inventory • no specific order from sanctioned party • third party’s business not “predominantly” with sanctioned party or country

  41. Employment Discrimination Issues • Foreign national employees, vendors, contractors, visitors, etc. must be screened in order to avoid prohibited exports • Licenses may be required • You may need to gather information about foreign national workers: • Country of citizenship • Permanent residence • Visa status

  42. Employment Discrimination Issues • Under Title VII, certain hiring and other selection decisions are permitted in compliance with national security requirements • Conditions: • duties are subject to any national security law or Executive Order of the President; • individual does not meet the national security requirement • Policies must be adopted for nondiscriminatory reasons and applied in a nondiscriminatory manner

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