ACI Nuclear Export Control Slides


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ACI Nuclear Export Control Slides

  1. 1. Complying with Export Controls Governing Nuclear Material, Equipment and Technology American Conference Institute’s 13th National Forum on Export Controls Ajay Kuntamukkala, Partner May 19, 2010
  2. 2. Agenda • Overview of Export Control Laws • Nuclear Export Controls – Structure of Legal Regime – Nuclear Regulatory Commission – Department of Energy – Department of Commerce – Department of State • Current Issues • Compliance Programs • Questions? 2 Hogan Lovells
  3. 3. Nuclear Export Controls • Why are they relevant? – U.S. companies may need to work collaboratively with non-U.S. companies during the course of a nuclear power project – U.S. companies may have foreign national employees or consultants – U.S. companies may have foreign affiliates that participate in projects for U.S. nuclear power clients – U.S. companies may have nuclear power projects abroad – International suppliers with projects in the United States may need to receive U.S.-origin controlled technology – International suppliers may also establish U.S. offices 3 Hogan Lovells
  4. 4. Overview of U.S. Export Control Laws • These laws and regulations: – Define whether and under what conditions U.S.-origin goods, software, technology and services may be legally exported or reexported to specific destinations or persons – Prohibit or restrict certain types of activities by U.S. companies and U.S. individuals – Are extra-territorial and follow U.S.-origin goods, software and technology, when located abroad and handled by non-U.S. persons • Support the U.S. Government’s objectives of protecting U.S. national security and furthering foreign policy interests • Controls are administered by various agencies, including the Nuclear Regulatory Commission, Department of Energy, Department of Commerce, and Department of State 4 Hogan Lovells
  5. 5. Penalties • Severe criminal and civil risks are associated with the improper export and reexport of controlled goods, technology, software or services • Regulating agencies have discretion to impose severe penalties, including – Up to $1 million per violation in fines and life imprisonment for individuals – Up to $1 million per violation in fines for companies – Suspension or loss of export privileges, and debarment from government procurements for companies • Reputational risk should also be considered 5 Hogan Lovells
  6. 6. What Transactions Are Controlled? • Transfers of nuclear-related technology to non-U.S. persons located in the United States or worldwide (e.g., transfer of nuclear design information to a foreign national employee or consultant located in the United States) • Consulting and engineering services, technical assistance or training to foreign countries or foreign persons regarding the design, engineering, construction, operation, maintenance and repair of nuclear reactors, other nuclear facilities, related components, or nuclear materials • Export or reexports of nuclear reactors, components, equipment, software, nuclear material, as well as “dual-use” items • Imports of nuclear reactors, components, equipment, software, and nuclear material 6 Hogan Lovells
  7. 7. Structure of U.S. Nuclear Export Controls Nuclear Regulatory Department of Energy Commission Part 110 Regulations Part 810 Regulations Nuclear Nuclear technology reactors, equipment, comp and technical onents and materials assistance Department of Commerce: State Department: Bureau of Industry and Directorate of Defense Trade Security (BIS) Controls (DDTC) Export Administration International Traffic in Arms Regulations (EAR) Regulations (ITAR) Commercial and “dual use” Military items, including commodities and nuclear weapons technology 7 Hogan Lovells
  8. 8. NRC Regulations • The NRC regulates the export and import of nuclear reactors, facilities, equipment and material (10 C.F.R. Part 110) • Exports of related technology and software are subject to DOE not NRC control • In general, the NRC requires that an export license be obtained for the export of nuclear reactors, certain plants or facilities related to the nuclear fuel cycle, related assemblies or components and certain nuclear materials 8 Hogan Lovells
  9. 9. NRC Regulations • The export and import of the following items are regulated by the NRC: – Nuclear reactors and related equipment and components (NSSS); – Plants for certain enrichment, separation, reprocessing and conversion activities and related assemblies and components; – Plants for the fabrication of nuclear reactor fuel elements and related assemblies and components; – Plants for the production, separation, or purification of heavy water, deuterium, and deuterium compounds and related assemblies and components; – Certain plants for the production of special nuclear material; and – Special nuclear material, source material, byproduct material, Deuterium, and nuclear grade graphite for nuclear end use. 9 Hogan Lovells
  10. 10. NRC Regulations: Licenses • The NRC issues two types of licenses: a General License and a Specific License • Under certain limited circumstance, a General License under the NRC Regulations authorizes selected exports or imports without the need to request written authorization • For all other exports of items subject to NRC jurisdiction, a Specific License is required from the NRC – Unlike the other agencies, Specific License applications to the NRC are available to the public for review and comment 10 Hogan Lovells
  11. 11. DOE Regulations • The DOE administers controls over the export of technology related to “special nuclear materials” • Examples of controlled activities include: – Exports of any technology, software and assistance (including services and training) related to nuclear reactors, and related equipment and components – Exports of any technology, software and assistance related to nuclear fuel cycle facilities, and related equipment and components – Exports of any technology and assistance related to special nuclear materials • Controlled activities require either a General Authorization or Specific Authorization from DOE 11 Hogan Lovells
  12. 12. DOE Regulations: Authorizations • General Authorization - Permits exports or transfers of controlled technology, software or services without prior written authorization from DOE under limited circumstances – Advance notification to the DOE may be required depending on the nature of the activities at issue – Exports of technology, software or services related to nuclear power generation permitted to certain countries without prior written authorization; not available for: • “Restricted countries” (Part 810.8(a) - see next slide) • Nuclear fuel cycle activities and “sensitive nuclear technology” • Specific Authorization - Prior specific authorization required for all other controlled transactions not eligible for General Authorization 12 Hogan Lovells
  13. 13. Part 810 Restricted Countries 13 Hogan Lovells
  14. 14. Commerce Department – Export Administration Regulations (EAR) • The Commerce Department has jurisdiction over the export of “dual-use” commodities, software or technology, including certain items related to nuclear power activities (“balance of plant”) • The DOC controls certain items and technology for nuclear nonproliferation reasons, including: – Certain valves controlled for nuclear nonproliferation reasons (ECCN 2A226) – Generators and other equipment specially designed, prepared, or intended for use with nuclear plants (ECCN 2A290) – Equipment related to nuclear material handling and processing and to nuclear reactors (ECCN 2A291) • Example: N-stamped components – The technology and information related to the development, production, or use of these items are also controlled (e.g., ECCNs 2E001, 2E002, 2E201, and 2E290) 14 Hogan Lovells
  15. 15. Commerce Department – EAR (cont.) • Licensing - Whether a particular commodity, software or technology subject to the EAR requires an export license depends on – the export classification of the item, – its reason for control, and – the destination country or foreign person at issue • Depending on the nature of the commodities, software or technology at issue, they may be controlled at different levels (e.g., NP column 1 or NP column 2) 15 Hogan Lovells
  16. 16. EAR Nuclear End-Use Controls • Unless the export involves only “Nuclear Approved” countries (see next slide), a license is required to export ANY items or services subject to the EAR that will be used directly or indirectly in support of certain nuclear end uses. • Examples: – Almost all activities related to nuclear explosive devices, components or subsystems; – Almost all activities related to unsafeguarded nuclear facilities such as nuclear reactors, critical facilities, facilities for fuel fabrication, and facilities for conversion of nuclear materials; and – Certain activities related to safeguarded and unsafeguarded fuel-cycle facilities or components 16 Hogan Lovells
  17. 17. Countries Not Subject to EAR Nuclear End-Use Controls • Australia • Japan • Austria • Luxembourg • Belgium • Netherlands • Canada • New Zealand • Denmark • Norway • Finland • Portugal • France • Spain • Germany • Greece • Sweden • Iceland • Turkey • Ireland • United Kingdom • Italy (includes San Marino, Holy See) 17 Hogan Lovells
  18. 18. State Department Regulations • The State Department controls certain nuclear- related commodities and technology under the International Traffic in Arms Regulations (ITAR), including: – Category XVI: Nuclear weapons, design and testing related items – Category VI: Naval nuclear propulsion plants and related items – Category XXI: Submersible vessels powered by nuclear propulsion systems 18 Hogan Lovells
  19. 19. Example: Civil Nuclear Power Facility Simplified Rendering of a PWR Nuclear Steam Supply “Balance of Plant” System (NSSS) 19 Hogan Lovells
  20. 20. Jurisdiction Summary • In very summary terms: – NRC: NSSS items - nuclear reactors, other nuclear facilities, materials and related items – DOE: NSSS technology, software and services – DOC: “Balance of plant” technology or items – DOS: Nuclear weapons/explosive technology and items Jurisdictional issues must be reviewed on a case-by-case basis given the ambiguity of the regulations 20 Hogan Lovells
  21. 21. Current Issues: Jurisdictional Issues between Agencies • The regulations do not clearly define each agency’s jurisdiction over certain nuclear-related items • Of special importance is whether the equipment or technology has been “especially designed, modified or adapted for use” for nuclear reactors or fuel fabrication facilities – Example: N-stamped components vs. “especially designed” components • Depending on which agency has jurisdiction, a license or other authorization may be required prior to export/transfer of controlled items or technology • Government agencies can help resolve these issues, but often require detailed specifications and guidance regarding the item at issue 21 Hogan Lovells
  22. 22. Current Issues: Deemed Exports • The transfer of technology or source code or provision of services to a foreign person in the United States is “deemed” to be an export to that person’s home country – Release of controlled technology to Chinese employee on an H- 1B worker visa = export to China • Under the export control laws, a U.S. person is defined as: – U.S. citizen or a U.S. legal permanent resident (“green card” holder) • H-1B and L visa holders do not qualify – U.S. corporation, partnership, trust, society or other entity incorporated or organized to do business in the United States • U.S. companies involved in the nuclear industry should screen contractors, affiliates, suppliers, and customers to confirm that the release of controlled technology or services to these entities or individuals is consistent with U.S. law 22 Hogan Lovells
  23. 23. Current Issues: Americanized Technology • As nuclear cooperation worldwide is growing, U.S. companies may rely on processes and other technology developed abroad • Companies may “Americanize” this technology for use in the United States by conforming it to U.S. standards, codes, and capabilities • DOE takes the view that any “Americanized” technical data is subject to its jurisdiction and may require authorization prior to export of such technology, including back to the originator of the technology • Companies should take steps to protect any “Americanized” technology from unauthorized release 23 Hogan Lovells
  24. 24. Current Issues: New Markets • The U.S. is negotiating or has concluded Section 123 Agreements with a number of countries, including: – India – United Arab Emirates – Vietnam (negotiations to begin in near future) • However, the fact that a Section 123 Agreement has been negotiated does not authorize the release of controlled technology to these countries or foreign nationals of these countries • Licenses or other authorizations may be required from the NRC, DOE or DOC • Substantive discussions with foreign persons can involve the release of controlled technology – Basic marketing information, cost data, or scheduling information generally does not constitute controlled technology 24 Hogan Lovells
  25. 25. Compliance Programs • Given the “globalization” of the nuclear industry and increased enforcement of export control laws, it is critical that U.S. civil nuclear companies implement effective export control compliance programs • Compliance programs are a strong mitigating factor in any enforcement action • Recommended under U.S. sentencing guidelines 25 Hogan Lovells
  26. 26. Compliance Programs: Key Components • Written statement of management commitment • Assignment of export compliance personnel and responsible officials • Export compliance operational procedures/manual (e.g., procedures for screening, classification, and technology control plan) • Compliance training and education • License application and implementation process • Policy and procedures regarding recordkeeping • Internal audit function • Policy and procedures for handling suspected violations 26 Hogan Lovells
  27. 27. QUESTIONS? Ajay Kuntamukkala Partner (202) 637-5552 27 Hogan Lovells