Complying with U.S. Export Controls Bureau of Industry and Security Department of Commerce Bureau of Industry and Security Department of Commerce John Bushnell July 25, 2013 QUE Group 2013 Conference, San Diego, CA

Our Contact Information Bureau of Industry and Security Western Regional Office 2302 Martin Street, Suite 330 Irvine, California 92612 T: 1-949-660-0144 F: 1-949-660-9347 Northern California Branch 160 West Santa Clara Street, Suite 725 San Jose, California 95113 T: 1-408-998-8806 F: 1-408-998-8677 www.bis.doc.gov

Overview BIS Mission Statement To advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership

Transactions we control BIS regulates “exports” and “reexports” of “items” “subject to the EAR” in addition to certain activities of U.S. persons.

Authority to Administer Controls Export Administration Act (EAA) International Emergency Economic Powers Act (IEEPA) Export Administration Regulations (EAR) BIS EAR

Reasons Why We Control Exports National Security Foreign Policy Crime control Anti-terrorism Regional Stability Non Proliferation Nuclear weapons Chemical/biological weapons Missiles

Multilateral Export Control Regimes Wassenaar Arrangement Supplement 1 to Part 743 www.wassenaar.org/ Missile Technology Control Regime (MTCR) Supplement 1 to Part 740 (A:2) www.mtcr.info/ Nuclear Suppliers Group (NSG) Supplement 1 to Part 740 (A:4) www.nuclearsuppliersgroup.org/ Australia Group (AG) Supplement 1 to Part 740 (A:3) www.australiagroup.net

Export Administration Regulations Designed to implement the Export Administration Act Apply to commercial and some military items Items that can be used in both commercial and military/strategic applications Also apply to items that have solely civil uses Other agencies have jurisdiction over some exports

How do I determine my regulatory requirements? Depends upon: 1. What is the product? 2. Where is the product going? 3. Who is the end user? 4. What is the end use?

End use concerns Nuclear Section 744.2 Chemical/Biological Weapons Missile Section 744.4 Support of these activities by a U.S. Person Section 744.6

What is an Item? (Section 734.2) Software Technical Data Commodity

Definitions and Terms What is an export? A shipment out of the United States An electronic transmission out of the United States Release of technology to a foreign national in the United States Technology – specific information necessary for the “development”, “production”, or “use” of a product

What is a Reexport? A shipment of a U.S. origin item from one foreign country to another A shipment of a foreign produced item containing U.S. origin parts, from one foreign country to another Shipment from one foreign country to another of an item manufactured abroad based on U.S. origin technology

Who is the Exporter? (Part 772) The person in the United States who has the authority of a principal party in interest to determine and control the sending of items out of the United States.

IMPORTANT CONCEPT: Having an Export Control Classification Number (ECCN) does NOT automatically mean that a license is required to all destinations Being classified as EAR99 does NOT automatically mean that a license is NOT required to a particular destination

Are You Subject to the EAR? (Continued) U.S. Persons & Foreign Nationals Certain activities of U.S. persons (Part 744) Release of certain technology and source code to foreign nationals in the U.S. (“Deemed Exports” (Part 734))

Deemed Exports (Section 734.2(b)(2)(ii)) The release of technology or source code subject to the EAR to a foreign national in the United States is “deemed” to be an export to the home country of the foreign national.

Deemed Exports (Section 734.2(b)(2)(ii)) Situations that can involve release of U.S technology or software include: Tours of laboratories Foreign national employees involved in certain research, development, and manufacturing activities Foreign students or scholars conducting research Hosting of foreign scientist

Deemed Exports (Section 734.2(b)(2)(ii)) Export Enforcement Note Deemed Export violations are one of the most common types of violations Because the violation typically occurs in the U.S. and all parties are typically in the U.S., this is very often the easiest to prove in a court of law.

Exempted from the Rule (Section 734.2(b)(2)(ii)) Any foreign national is subject to the deemed export rule except: A person granted U.S. citizenship; A person granted permanent residence status (i.e., “Green Card” holders); A person granted status as a “protected individual” under 8 U.S.C. 1324b(a)(3)

What Kind of Authorization is Required to Export? NO LICENSE REQUIRED (NLR) LICENSE EXCEPTION LICENSE or VEU

ON LINE ACCESS www.bis.doc.gov BIS home page E-mail notifications (Seminars, Regulatory changes, etc.) SNAP-R (Online Licensing and other requests)

Commerce Control List & Country Chart

Commerce Control List (Part 738 and Part 774, Supplement No. 1) Contains lists of items subject to licensing authority of BIS Each entry is called Export Control Classification Number (ECCN) Five alpha-numeric characters Items listed in terms of technical parameters

ECCN Structure (Section 738.2) Category Reason for Control 3A001 Sequential Numbering Product Group

Ten Categories in the CCL (0 to 4) 0. Nuclear Materials, Facilities & Equipment and Miscellaneous 1. Materials, Chemicals, Microorganisms & Toxins 2. Materials Processing 3. Electronics Design, Development and Production 4. Computers e.g.: 3A001

Ten Categories in the CCL (5 to 9) 5. Telecommunications (PART 1) and Information Security (PART 2) 6. Sensors and Lasers 7. Navigation and Avionics 8. Marine 9. Propulsion Systems, Space Vehicles and Related Equipment e.g.: 5A001

ECCN Structure- Product Groups 5A101 5B101 5C101 5D101 5E101 Equipment, assemblies & components Test, inspection & production equipment Materials Software Technology

Finding Your ECCN Check the Commerce Control List (CCL) alphabetic index Review general characteristics of item to arrive at Category and Product Group Match characteristics of item with ECCN and subparagraph BIS CCL

Classification Request Requirements (Section 748.3) Use SNAP-R the BIS online request system (discussed in detail later) Identify specific items of concern Attach Detailed Technical Specifications as a .pdf

Working with the Country Chart (Part 738, Supplement No. 1) Contains licensing requirements based on destination and reason for control Used with the CCL to determine if you need a license

DEGREE OF CONCERN REASON FOR CONTROL PDF VERSION

EASIER TO READ WITH TWO WINDOWS OPEN E-CFR VERSION ****** EASIER TO READ WITH TWO WINDOWS OPEN

Using the Commerce Control List with the Country Chart Determine ECCN Check reasons for control Match specific controls to country chart column If a territory, possession, or department of a foreign country is not listed on the country chart, the export or reexport is deemed to be an export to the foreign country of which it is a territory, etc. Is there an “X” in the box under that specific Reason for Control?? If so, there is a license requirement.

EAR99 If an item subject to the EAR is NOT described by any ECCN, it is designated EAR99. In most cases, the export of an EAR99 item can be completed using the license authorization NLR (No License Required), but … Check the General Prohibitions AND the “Lists to Check” for other possible licensing requirements.

TEN GENERAL PROHIBITIONS Part 736 DESCRIBE EXPORTS, REEXPORTS AND CONDUCT IN WHICH YOU MAY NOT ENGAGE WITHOUT A LICENSE, LICENSE EXCEPTION (IF AVAILABLE AND APPLICABLE) OR A DETERMINATION THAT A LICENSE IS NOT REQUIRED.

Ten General Prohibitions Part 736 General Prohibitions 1-10 apply to items having a specific ECCN General Prohibitions 4-10 apply to items that are EAR99

FACTORS DETERMINING LICENSE REQUIREMENTS 1. WHAT IS THE PRODUCT? 2. WHERE IS THE PRODUCT GOING? 3. WHO IS THE END USER? 4. WHAT IS THE END-USE?

LICENSE EXCEPTIONS Part 740

Important Concepts After determining “License Requirements,” determine if there is an available mechanism for OVERCOMING that requirement. This potential mechanism is called a License Exception. When the fire hose of information is turned onto the attendees, they very often miss the most important points. It is very important that they understand that very few products have an ECCN and it was for that reason that the 10% guess was made.

License Exceptions Part 740 Definition: An authorization that allows you to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license. Each license exception bears a three letter symbol used for export clearance purposes.

Can You Use a License Exception? Review general restrictions (Section 740.2) Identify all applicable License Exception(s) List based and transaction based Use least restrictive exception that is available Each “X” (license requirement) must be overcome

Strategic Trade Authorization July 2011 through December 2012 105 companies have exported under STA 1,231 shipments under STA 41% (500) exports worth less than $2,500 $146.2 million worth of exports under STA

Strategic Trade Authorization Top STA product categories (ECCNs) Optical sighting devices (0A987) Cameras (6A003) Components for the International Space Station (9A004) Non-fluorinated polymeric substances (1C008) Electronic components (3A001)

Strategic Trade Authorization: STA (Section 740.20) Authorizes the immediate export, reexport or transfer of most items to 36 specified countries AND the immediate export, reexport or transfer of many items to 8 additional countries. Specifically excludes certain reasons for control AND certain specified ECCN’s in Categories 0, 1 and 9. Review ALL individual ECCN entries for additional restrictions.

36 STA-Eligible Countries Multiple Reasons for Control NS, CB, NP, RS, CC, SI Argentina Australia Austria Belgium, Bulgaria Canada Croatia Czech Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland Italy Japan Latvia Lithuania Luxembourg Netherlands New Zealand Norway Poland Portugal Romania Slovakia Slovenia South Korea Spain Sweden Switzerland Turkey United Kingdom

8 STA-Eligible Countries Reasons for Control NS ONLY Albania Hong Kong India Israel Malta Singapore South Africa Taiwan

Encryption matters please contact the BIS Encryption Hotline For assistance with Encryption matters please contact the BIS Encryption Hotline 1-202-482-0707

Join us tomorrow as the Journey Continues. 49