1. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. CHAPTER 13 The Regulation of Exports

2. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 2 Trade Controls Over Arms, Munitions, and Defense Systems The Neutrality Acts (mid-1930’s), gave way to: –The Arms Control Export Control Act prohibits importation without a license. –Administered by the International Traffic in Arms Regulations (ITAR). –See the B-West Imports, Inc. v. United States case: President has wide latitude in enforcing law; this is not a “taking” under the 5 th amendment.

3. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 3 National Security and Foreign Policy Issues Trade Controls for Reasons of National Security. Trade Controls for Reasons of Foreign Policy. What about the Effectiveness of Trade Sanctions? –U.N. Approved Sanctions.

4. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 4 National Security and Foreign Policy Issues Impact of Export Controls on Business and Trade presents a dilemma: how does a nation control exports without harming businesses, jobs, or economic interests? –What is an effective trade sanction? –What about unduly burdening a key economic sector? –Many times national security governs export of software over the internet.

5. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 5 National Security and Foreign Policy Issues Trade Controls for Reasons of Short Supply. Trade Controls for the Protection of Wildlife, the Environment, Public Safety, or of Antiquities.

6. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 6 History of U.S. Export Control Laws Started with Continental Congress in 1775. In early 1960’s export controls toughened. In 1979, Congress passed Export Administration Act of 1979. The Cold War “Cat and Mouse” Game: Spying and Industrial Espionage.

7. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 7 Recent Changes With fall of Berlin Wall in 1989, collapse of Soviet Union in 1991 came three key events: –International terrorist attacks against U.S. –Concerns over nuclear proliferation, especially in North Korea and Iran. –China. Multilateral Cooperation in Controlling Technology. –The Wassenaar Arrangement: best practices –Missile Technology Control Regime: keep information away from rogue nations. –The Nuclear Suppliers Group: share information among members.

8. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 8 Export Controls On Commercial and Dual-Use Goods and Technologies Exports commodities and technical data. Re-exports commodities and technical data. Exports and re-exports from foreign country a product with U.S. parts. Exports and re-exports products from foreign country products based on U.S. technical data.

9. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 9 Export Licensing Process Issued by the Bureau of Industry and Security. Steps in Determining License Applicability: –Locate Item on CCL. –Locate the correct ECCN. –Identify the “reason for control” for that ECCN. –Consult the Country Chart. –Is the item classified as a EAR99? 

10. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 10 Export Licensing Process Steps (continued): –Does the item qualify for a license exception? –Is the end use of the item regulated? –Comply with all end user regulations. –Submit your license application. –Prepare your shipping documents. Special “Comprehensive” Licenses. 2007: China Validated End-User Program.

11. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 11 Deemed Exports Communication or transfer by an American citizen of technology, technical data, software, encryption technology, etc., to a foreign national. Application of the law is not always easy, especially if foreign nationals work within the same company but live in different countries.

12. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 12 Extraterritorial Jurisdiction of Export Control Laws Should a nation be able to extend the power of its export control laws (jurisdiction) over its goods and technology once they have left its territory? Crisis over Soviet Natural Gas Pipeline.

13. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 13 Antiboycott Provisions Illegal to comply with boycott imposed by a foreign country against a country that is friendly to the U.S.. See the Briggs and Stratton Corp. v. Baldridge case: U.S. company thought by saying it had no business with Israel, it would not be violating the law. The court found the company had violated the law.

14. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 14 Compliance and Enforcement Export Management System. Record-Keeping Requirements. Enforcement, Sanctions, and Penalties. –BIS Office of Export Enforcement may bring civil action before administrative law judge. 2007 Proposed Penalties: –Criminal Individual: $1 million/violation. –Corporate Fines: $5 million/violation. –Denial of Export Privileges.

15. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 15 President’s Emergency Powers During Peace and War Trading With The Enemy Act (1917). National Emergencies Act (1976). International Emergency Economic Powers Act. –Economic Sanctions under IEEPA: Libya, South Africa, Burma (Myanmar), Cuba, etc.

16. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 16 USA PATRIOT Act Made significant changes to IEEPA and other U.S. criminal statutes. –Created new federal crimes and penalties. –Allowed assets to be frozen. –Amended U.S. laws on financial transactions and bank secrecy.

17. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 17 Court Challenges to IEEPA 1979 Iranian Revolution: frozen assets and claims by American companies doing business in Iran. Case of the “American Taliban”. See the United States v. Lindh case. Defendant plead guilty and received 20 years.

18. Copyright © 2009 South-Western Legal Studies in Business, a part of South-Western Cengage Learning. 18 U.S. Sanctions on Trade with Cuba 1962: Cuban Assets Control Regulations: banned all trade and financial transactions between Cuba and United States, and froze all Cuban assets in U.S. Also prohibited almost all travel to Cuba. See the Freedom to Travel Campaign v. Newcomb case. 1989 – Soviet Union stopped financial support of Cuba. Have the Cuban sanctions been effective?