Export Controls on Technology
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Export Controls on Technology

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    Export Controls on Technology Export Controls on Technology Presentation 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.
    • Questions?
      Jim.Chester@kk-llp.com
      (214) 367-6000