ATTORNEYS AT LAW Deemed Exports - April 27, 2011 The New I-129 Non-Immigrant Visa Certification

ATTORNEYS AT LAW Introduction Deemed Export A release of technology to a foreign person in the U.S. may be “deemed” to be an export to that foreign person’s “home country” May require a license Not a new concept – 3 decades old Has real bite – strict liability, penalties, fines, prison I – 129 certification suggests new era of enforcement Pains and penalty of perjury. Grants permission to audit

ATTORNEYS AT LAW The I-129 Certification Mandatory February 20, 2011 Part 6 of the form requires a petitioner seeking H-1B, H-1B1, H- 1, or O-1A visas to certify that it has reviewed the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”) and determined that: (1) A license is not required to release technology to the beneficiary; or (2) If an export license is required, it will not release controlled technology to the foreign worker until it has received a license or other authorization to do so

ATTORNEYS AT LAW Overview Who is a foreign person Understanding Technology and Technical Data in context of EAR and ITAR Which regime applies What technology / technical data is controlled How does a release occur When is a license required to release technology Penalties, fines, prison, and horror stories

ATTORNEYS AT LAW Foreign Person Any “person” who is not a U.S. citizen, lawful permanent resident; person granted asylum, a refugee, or temporary resident granted amnesty Includes any foreign corporation, business association, partnership, trust, society, or other entity or group not incorporated or organized to do business in the U.S. Same Under EAR and ITAR EAR refers to a “Foreign National” ITAR refers to a “Foreign Person”

ATTORNEYS AT LAW Home Country Nuance between how the ITAR and EAR define a foreign person’s home country The EAR = last place of permanent residency or citizenship The ITAR = place of birth, place(s) of citizenship, and residency Example: Foreign person born in Syria and now a permanent resident of UK. Under EAR, home country is UK. Under ITAR home country is UK and Syria

ATTORNEYS AT LAW U.S. Export Regulations Essentially two regimes: The Export Administration Regulations (“EAR”) The International Traffic in Arms Regulations (“ITAR”) Single export system may be coming, but it isn’t here yet Both impose licensing requirements on the export, reexport, and in country transfer of a variety of items controlled for national security and foreign policy reasons Also govern related controlled technology

ATTORNEYS AT LAW Deemed Exports EAR defines “export” to include: “[a]ny release of technology or source code … subject to the EAR to a foreign national within the United States. Such release is deemed to be an export to the foreign national’s “home country” EAR Part 734.2(b)(2) ITAR defines an export to include “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad” ITAR Part (a)(4)

ATTORNEYS AT LAW INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (“ITAR”) 15 CFR PARTS 120 TO 130

ATTORNEYS AT LAW ITAR Department of State (“DOS”), Directorate of Defense Trade Controls (“DDTC”) Covers items that are listed on the United States Munitions List (“USML”) 15 CFR Part 121 Categories I through XXI Covers defense articles, services, and technical data USML - 20 categories (i) – (xxi) [(xix) reserved] (iv) missiles; (vii) military vehicles; (viii) aircraft and associated equipment; (xi) military electronics; (xii) optical; (xiv) chemical agents; (XV) spacecraft systems; (xxi) miscellaneous [catch all]

ATTORNEYS AT LAW ITAR (Cont.) Includes sub categories for parts, components, accessories, and attachments [e.g. of a military vehicle] Specifically designed, developed, configured, adapted, or modified for a military [or space] application …. 22 CFR Part Even the most insignificant modification likely to be sufficient to invoke ITAR control Toilet seat on military C130 aircraft

ATTORNEYS AT LAW ITAR (Cont.) Technical Data Information … which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles ITAR Includes software directly related to defense articles ITAR (a)(4); ITAR 121.8(f)

ATTORNEYS AT LAW ITAR (Cont.) Examples of Technical Data Blueprints, drawings, photographs, plans, instructions, documentation, test data, reports, even oral disclosure Defense articles themselves Mock-ups Not what it does, but how it does it (conveys know- how)

ATTORNEYS AT LAW ITAR (Cont.) Not Technical Data General scientific, mathematical or engineering principles commonly taught in schools, colleges, universities Basic marketing information on function or purpose / general system descriptions ITAR (a)(5) Public Domain Published and generally accessible or available to the public

ATTORNEYS AT LAW ITAR (Cont.) Public Domain ITAR Newstands and bookstores 2.Unrestricted subscriptions 3.Second class mailing 4.Libraries 5.Patents 6.Unlimited distribution at conferences in the U.S. 7.Public release after approval by cognizant U.S. Government department or agency 8.Through fundamental research Beware the Internet. Beware defense services

ATTORNEYS AT LAW ITAR (Cont.) Fundamental Research Fundamental research in science and engineering at accredited institutions of higher learning in the U.S. where the resulting information is ordinarily published and shared broadly in the scientific community No restrictions for proprietary reasons or U.S. Government access and dissemination controls ITAR (a)(8)

ATTORNEYS AT LAW ITAR Licensing ITAR = license likely to be required ITAR Part 125 License is a DSP-5 for unclassified technical data along with an Non Disclosure Agreement DSP-85 for classified technical data as well as DSP-83 non-transfer and use certificate Examples of exemptions (Limited) ITAR Part 125.4(b) Official request or direction of DOD In furtherance of Manufacturing License Agreement or Technical Assistance Agreement

ATTORNEYS AT LAW ITAR Licensing Examples of exemptions (Cont.) U.S. Government contract permits disclosure [and only if disclosure does not include details of design, development, production or manufacture] Basic operations, maintenance, and training for defense article previously lawfully exported Unclassified technical data in U.S. by U.S. institutions of higher learning to foreign persons who are full time bona fide employees [and only if: living in U.S., not from proscribed country under ITAR 126.1, and institution informs that technical data may not be transferred]

ATTORNEYS AT LAW EXPORT ADMINISTRATION REGULATIONS (“EAR”) 22 CFR PARTS 730 to 774

ATTORNEYS AT LAW The Export Administration Regulations (The “EAR”) Department of Commerce (“DOC”), Bureau of Industry and Security (“BIS”) Covers “dual use” or purely commercial items / software Broadly speaking, if a product or related technology does not fall under the ITAR, then it is “subject to” the EAR Most things “subject to” the EAR – pencils to rocket fuel However, only technology that is listed on Commerce Control List is controlled

ATTORNEYS AT LAW EAR (Cont.) Technology controlled under the EAR is listed in the Commerce Control List (“CCL”) 0.Nuclear 1.Materials 2. materials processing 3.electronics 4.computers 5.(i) telecommunications; (ii) information security 6.sensors and lasers 7.navigation and avionics 8.marine 9.propulsion, space vehicles and related equipment

ATTORNEYS AT LAW EAR (Cont.) Groups within categories: A.Systems, equipment, components B.Test, inspection, and productions equipment C.Materials D.Software E.Technology Example 4A001 Computers 4E001Technology … for the “development,” “production,” or “use” of equipment controlled by 4A ….

ATTORNEYS AT LAW EAR (Cont.) Technology Specific information necessary for the “development”, “production”, or “use” of a product. The information takes the form of “technical data” or “technical assistance” Technical data – blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals, instructions written or recorded on other media … Technical assistance – instructions, skills training, working knowledge, consulting services

ATTORNEYS AT LAW EAR (Cont.) Controlled Technology Development Production Use Needs to be Required Technology

ATTORNEYS AT LAW EAR (Cont.) Development Technology Related to all stages prior to serial production, such as: Design, design research, design analysis, design concepts Assembly and testing of prototypes, pilot production schemes Design data, processes of transforming design data into product, configuration design, integration design, layouts

ATTORNEYS AT LAW EAR (Cont.) Production Technology All production stages (the know-how): Production engineering Manufacture Integration Assembly Inspection Testing, QA

ATTORNEYS AT LAW EAR (Cont.) Use Technology Operation, installation, maintenance, repair, overhaul, and refurbishment Need all six attributes otherwise EAR99 Contrast to ITAR

ATTORNEYS AT LAW EAR (Cont.) Required Technology That portion of technology which is peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or functions Example: to produce uncontrolled product x, production technology a, b, c is used A higher performance version is controlled and uses production technology a, b, c, d, and e. Only d and e is required technology.

ATTORNEYS AT LAW EAR (Cont.) Not Controlled Technology Publically available EAR Part 734.3(b)(3); Includes internet Fundamental research EAR Part 734.3(b)(3); Educational EAR Part 734.3(b)(3); Public patent applications EAR Part 734.3(b)(3);

ATTORNEYS AT LAW EAR Licensing EAR = License only necessary if listed on CCL and license is required to export to home country Common license exception - TSR Technology and Software Under Restriction

ATTORNEYS AT LAW Release / Disclosure Deliberate or inadvertent Access to drawings Shared network drives Collaboration Telephone, fax, Visitors Lunch room

ATTORNEYS AT LAW Implications of Deemed Export Violations License may be required Licenses take time (denial possible) Civil Penalties - $500,000 per violation Criminal $1,000,000 – 20 years in prison Denial of export privileges Debarment from U.S. contracts Possible deportation

ATTORNEYS AT LAW THANK YOU! Ian H. Moss Posternak Blankstein & Lund, LLP Prudential Tower 800 Boylston Street Boston, MA Tel