1. WEBINAR
UNDERSTANDING
EXPORT CONTROL
REQUIREMENTS
(2006)

2. BACKGROUND

3. Missile Controls and CBW Anti-Terrorism Crime Control
REASONS FOR CONTROL
National Security
Nonproliferation
Missile Controls and CBW
Anti-Terrorism
Crime Control
Regional Stability
UN Sanctions

4. Technological level or characteristics Destination End-user End-use
“DIMENSIONS” OF CONTROL
Technological level or characteristics
Destination
End-user
End-use

5. Machine Tools are controlled on the basis of their accuracy and the number of axes of movement.
Machine tools clearly are dual use products, although there is widespread foreign availability which tends to undermine any attempts at unilateral control.
Other than a few isolated incidents over the past few decades, most machine tool export control problems have been associated with China or India.

6. Since the end of the CoCom, each nation controls items according to national discretion
The Wassenaar Arrangement , which was written to deal principally with rogue states, puts U.S. exporters at a disadvantage with regard to China because there is great disagreement between the U.S. and the EU over the threat posed by China.
U.S. export licensing of machine tools has consistently been both slower and more rigorous than that of its Wassenaar counterparts, particularly those in Europe.

7. THE U.S. INTERAGENCY SYSTEM
More than any other national dual-use control system, the US is characterized by intensive multi-agency participation
Each brings both data (technical expertise and intelligence) and a particular point of view to the table.

8. Technology and Technical Data (“knowledge” & manuals)
WHAT IS CONTROLLED?
Hardware
Software
Technology and Technical Data (“knowledge” & manuals)

9. EXPORT CLASSIFICATION & LICENSE DETERMINATION SCREENING
Objective:
Comply with US country/technology restrictions on products and services.
- Commerce Control List (CCL)
- Commerce Country Chart
- Determine whether an individual export license is required or license exception applies.
- License exception does not mean “decontrol.”

10. NONPROLIFERATION SCREENING
Objective:
Ensure company does not do business with parties developing weapons of mass destruction.
US Government requires licenses for parties engaged in the design, development, production, stockpiling, or use of nuclear weapons, missiles, rocket systems or unmanned air vehicles capable of delivering nuclear or chemical-biological weapons, or chemical-biological weapons 
US Government identifies some entities of concern; but in most cases company is responsible for identifying whether customer is engaged in proscribed activities

11. Comply with US country/technology export controls on technical data
NATIONALITY SCREENING
Objective:
Comply with US country/technology export controls on technical data
- Commerce Department “deems” the export of technical data to an individual in the US or abroad to be an export to the individual’s home country
- Controls apply the company’s employees as well as visitors to company facilities

12. EMBARGOED AND SANCTIONED COUNTRY SCREENING
Objective:
Compliance with US trade embargoes and sanctions (e.g., Cuba, Iran, Sudan, Syria, etc.)
Treasury and Commerce Department regulations.
Implementation:
Stop all transactions with:
embargoed and sanctioned countries;
their embassies or diplomatic missions wherever located;
aircraft or ocean going vessels operating under their flags.
Screen delivery routes to ensure products don't transit through embargoed or sanctioned countries.

13. Commerce Department has developed a list of diversion risk indicators
DIVERSION RISK SCREENING
Objective:
Reduce risk that products will be diverted to proscribed end-users or destinations.
Commerce Department has developed a list of diversion risk indicators
Examples include: unusual delivery or payment terms, inappropriate product for stated end-use, etc. 

14. ANTI-BOYCOTT SCREENING
Objective:
Ensure compliance with US regulations prohibiting companies from participating in economic boycotts (most significantly, the Arab boycott of Israel) 
Implementation:
Employees are trained to recognize and escalate boycott requests (e.g., request for certification that no Israeli-origin product is included, etc.).
Such requests are denied.
Details are reported to the Commerce Department.

15. Diversion risk screening to review suspicious transactions
COMPANY EXPORT COMPLIANCE MEASURES
End-user screening (to prevent deliveries to sanctioned parties or parties developing weapons of mass destruction)
Diversion risk screening to review suspicious transactions
Screening to prevent deliveries to embargoed or sanctioned countries
Screening to ensure companies do not participate in unsanctioned boycotts
These measures taken regardless whether or not the product requires an export license

16. PROCEDURAL
AND
OPERATIONAL
ISSUES

17. Outline How to find information about Export Control
Looking at the CCL (Commerce Control List)
Terminology
Things to know

21. REASONS FOR CONTROL
NS – National Security
NP – Nuclear Proliferation
AT – Anti-terrorism
MT – Missile Technology
CC – Crime Control
RS – Regional Stability

25. USE OF WORDS
Having “any” of the following
“all”
“and”/“or”

26. Types of Controls 2B001 Types of controls associated with this digit
0- National Security reasons (including Dual Use and International Munitions List) and Items on the NSG Dual Use Annex and Trigger List
1- Missile Technology reasons
2- Nuclear Nonproliferation reasons
3- Chemical and Biological Weapons reasons, Anti-terrorism, Crime Control, Regional Stability, Short Supply, UN Sanctions, etc.
9- Anti-Terrorism
2B001

29. Things to Know - Red Flags -

31. Q & A

32. EXTRA
MATERIALS

33. BASIC FEATURES OF U.S. EXPORT CONTROLS
Complex and multidimensional: include technical controls, end-user controls, end-use controls and destination controls, all of which are situation-dependent.
Broad in scope: in practice, everything is controlled in some sense (e.g., EPCI).
Includes “knowledge” criteria: “reason to know” that a violation has taken place, and “corporate knowledge” which treats an entire organization as a single individual.
Absolute liability: any violation in principle is subject to penalty, regardless of circumstances or intent.

34. Our Wassenaar allies frequently do not agree about machine tools as a military technology in need of stricter controls. Most importantly, there is a lack of consensus relevance of controlling machine tools to China.
Indeed, there is a lack of consensus about whether China is a potential threat or whether it simply ought to be treated as a potential market.

35. DUAL-USE
Regulations: Export Administration Regulations (15 CFR '' )
Focus: Commodities and technology that are primarily civilian, but which may have military application
Statute(s): Export Administration Act (IEEPA)
Administration: Bureau of Industry and Security, Departments of Commerce, Defense, and State
Control Tools: License exceptions, validated licenses

36. UNILATERAL VS. MULTILATERAL
Most major countries, including former US adversaries, have export control systems.
Control systems are a mix of unilateral controls (e.g., foreign policy, regional stability, environmental, etc.) + multilateral commitments.
Despite commitment to multilateral lists, national controls can vary widely in actual administration and impact on domestic exporters.

37. MULTILATERAL REGIMES
Australia Group: commodities and technology relating to chemical or /biological warfare
Missile Technology Control Regime: dual-use missile commodities and technology
Nuclear Suppliers' Group: nuclear fuel and nuclear-related dual-use
Wassenaar Arrangement: conventional arms and dual-use items

38. AGENCY PLAYERS Department of Commerce, Bureau of Industry and Security
Department of Defense, Defense Technology and Security Administration
Department of Energy, Office of Nonproliferation and National Security
Department of State, Office of Nonproliferation
Others, as needed (e.g., CIA, Homeland Security)
National Security Council has historically played a mediating role

39. High penalties in criminal cases are a deterrent.
Higher penalties in administrative cases have been proposed. But the key penalty for most companies is the potential loss of export privileges, which would shut down much of their business.
Penalties only a part of negative impact of administrative violations: investigations extending into years, extensive legal costs, business uncertainty and potential damage to stock price among others.

40. Negative effects are both short term and long term.
EXPORT CONTROLS AND COMPETITIVENESS
Approximately 37% of machine tool revenues is from non-US sources and 13% is from China.
Export controls are costly in terms of administration, delay and uncertainty, and pervade every aspect of corporate activity.
Negative effects are both short term and long term.

41. CURRENT PROBLEMS WITH EXPORT CONTROL PROCESS
Clarify the commodity classification and the commodity jurisdiction process.
Clarify the inter-agency review process for licenses.

42. CURRENT PROBLEMS WITH EXPORT CONTROL PROCESS
Modernize the “foreign availability” definition in Sections 4 and 5 to reflect the overall “controllability” of items on the control list, recognizing that such availability renders controls ineffective.
Recognize that, under the Wassenaar Arrangement, “foreign availability” can occur within a regime as well outside that regime.