Export Controls on TechnologyPresentation Transcript
Jim Chester JD, LL.M, CHB, CCS Klemchuk Kubasta, LLP Export Controls on Technology
I. Introduction US Trade Laws When importing, exporting or dealing with foreign affiliates, numerous US trade regulations must be observed. Certain goods have special rules.
I. Introduction Technology exports are of special concern to US regulators Often sensitive/ dangerous applications/uses Easy to send / forward Difficult to track
I. Introduction The Bureau of Industry and Security (BIS) has primary responsibility for enforcing export control laws Export Administration Act (EAA) Export Administration Regulations (EAR) Other agencies have export-specific regulations that must also be observed. (e.g., Department of Defense Trade Controls (DDTC) Most export documents are delivered to CBP
I. Introduction What is an Export? Physical shipment of EAR-subject goods, technology, or technical data outside US Customs Territory Downloads and emails of technology and technical data outside US “Sharing” technology with a foreign national, even on US soil (“deemed” export)
II. Standard Export Compliance 4 Key Questions for Exports: 1. What is it? description & classification 2. Where is it going? country 3. Who will be receiving it? person/entity 4. How will it be used? dual use
II. Standard Export Compliance Pre-Shipment Checks & License Requirements (i.e. “General Prohibitions”) 1. Determine whether a license is required Step 1: Obtain Export Commodity Classification Number (ECCN) for product on Commerce Control List (CCL), Step 2: Compare to Country Chart Step 3: If license is required, see if exception applies. Step 4: If license is required and no exception applies, apply for license from BIS.
II. Standard Export Compliance 2. Check the various “bad guy” lists Denied Parties List - BIS Specially Designations Nationals and Narcotics Traffickers - OFAC Entity List - BIS Debarred Parties List – State Unverified List – BIS http://www.treas.gov/offices/enforcement/ofac/sdn
II. Standard Export Compliance 3.Ensure export would not violate U.S. sanctions See current Office of Foreign Asset Controls (OFAC) Sanctions http://www.treas.gov/offices/enforcement/ofac/sanctions 4.Don’t ignore “Red Flags”
II. Standard Export Compliance Penalties for Export Violations Up to $1 million Up to 5 years in prison Denial of export privileges
II. Standard Export Compliance Common Exporting Pitfalls Failure to check “bad guy” lists Failure to secure IP abroad Unlicensed exports Deemed exports Recordkeeping Incorrect SEDs/documents
III. International Traffic in Arms Regulations (ITAR) Prohibits shipments of certain defense articles and technology. Controls trade in “Munitions” Including “Mil Spec/Std.” Requirements Registration Licenses Recordkeeping
III. International Traffic in Arms Regulations (ITAR) Common ITAR Pitfalls No export/re-export license Recordkeeping/Reporting Shipments to affiliates Dual use items “Deemed” export
III. International Traffic in Arms Regulations (ITAR) ITAR Penalties: Criminal & Civil: Up to $1 million per violation for corporations Up to $1 million per violation and up to 10 years in jail for individuals Other Enforcement Measures: Seizure or forfeiture of goods Debarment from licensing for as long as three years Potential debarment from Government contracting for up to three years
IV. Foreign Corrupt Practices Act (FCPA) Bribery of foreign officials is illegal, even if local custom Any payment made with the intent to secure an unfair advantage or with a conscious disregard of circumstances may violate FCPA Exemptions: payments to expedite or to secure the performance of a routine governmental action” payments explicitly allowed under the host country’s written laws reasonable and bona fide expenditures directly related to the promotion or demonstration of products or the performance of a government contract
IV. Foreign Corrupt Practices Act (FCPA) Foreign Corrupt Practices Act (FCPA) Common Pitfalls: Facilitation payments – recordkeeping Mergers and Acquisitions of foreign subs Foreign agents
IV. Foreign Corrupt Practices Act (FCPA) FCPA Penalties Civil & Criminal Penalties Entities – fine up to $2 million or up to twice the benefit sought/gained Officers, directors, stockholders, employees, and agents - up to $250,000 per violation and imprisonment up to 5 years. Fines imposed on individuals may NOT be paid by their employer. SEC Penalties (accounting): Individuals - Up to $5 million, and imprisonment up to 20 years Entities - Fine up to $25 million or up to twice the benefit sought/gained
V. Keys to Compliance Know & Follow the Rules Implement & update writtencompliance program Periodic compliance training “Hands on” management of vendors, agents, brokers, forwarders, etc. Inter-Departmental Cooperation
E.g., R&D, Legal, HR, etc.
V. Keys to Compliance Check your Work Periodic compliance reviews Self-awareness cuts off “contingent” liabilities Prior Disclosures reduce/eliminate potential penalties
VI. Conclusion International trade involves numerous rules & agencies Must be aware of rules and ensure compliance through training and internal reviews
Rules change frequently
Self-policing reduces liabilities
VI. Conclusion Failure to be diligent with trade compliance Lost opportunities Substantial penalties Interruptions in global supply chain Companies can budget and plan for compliance, but not for enforcement.