The U.S. Citizenship and Immigration Service’s requirement for “Certification Regarding the Release of Controlled Technology or Technical Data to Foreign Persons in the United States” will go into effect on February 20, 2011.
The certification applies to employers submitting petitions under the visa categories H-1B (specialty occupation), H-1B1 (specialty occupation professionals from Singapore or Chile), L-1 (intra-company transferees) or O-1A (extraordinary ability). The requirement will impact universities, as well as aerospace, defense, high-tech, and advanced manufacturing businesses and organizations, regardless of size.
The certification requirement was to go into effect on December 23, 2010, but has been delayed for 2 months. The so-called “Part 6” certification is found on Form I-129 (Petition for a Nonimmigrant Worker) and is aimed at enforcing the “deemed export” rule. A “deemed export” refers to the release of technology or technical data that is subject to either the U.S. Department of Commerce Export Administration Regulations (EAR) or the U.S. Department of State International Traffic in Arms Regulations (ITAR). The release of such information to a foreign national inside the U.S. is considered to be a “deemed export” to the foreign national's country of residence or, in some instances, to that person’s country of birth. A “deemed export” may be subject to an export license requirement. Making a “deemed export” without a required license is a violation of the EAR or the ITAR and is subject to administrative, civil, and even criminal penalties.
A “deemed export” can occur in many forms, including visual inspection (such as providing technical specifications, schematics, blueprints, etc.), a verbal exchange of the technology or technical data, or when the information is made available through business practices. Business meetings, conference calls, videoconferences, PowerPoint presentations, trade shows, and email exchanges all present instances in which a “deemed export” could occur.
As of February 20, employers submitting an I-129 petition under one of the covered visa categories will have to certify that: 1) it has reviewed the EAR and the ITAR; and either a) it has determined that an export license is not required for the release of technology or technical data to the beneficiary; or b) if an export license is required, that the beneficiary will not have access to the information until the employer obtains the required license.
Employers should plan now for the additional time needed to assess whether foreign national employees will have access to technology or technical data controlled under the EAR or the ITAR, determine whether an export license is required and, if so, submit a license application. In addition, employers should fully document the decision-making process so that it can be relied upon should questions arise. Failing to take these necessary steps and properly certify the I-129 petition will likely lead to entity-level administrative and civil penalties, as well as the possibility of entity-level and individual criminal penalties being imposed. If an employer becomes concerned that a violation may have already occurred, it should seek assistance to determine whether to make a voluntary self-disclosure (VSD) to all involved agencies.
Showing posts with label Export controls. Show all posts
Showing posts with label Export controls. Show all posts
15 January 2011
13 January 2011
Former NASA Employee in Ohio Charged with ITAR Violation
A former employee of the NASA Glenn Research Center in Cleveland has been charged with one count of violating the Arms Export Control Act (AECA) and the International Traffic in Arms regulations (ITAR).
An Information filed in the U.S. District Court for the Northern District of Ohio alleges that between 2000 and 2005, the defendant violated the AECA and the ITAR by knowingly and willfully exporting defense articles to South Korea without an export license obtained from the Department of State. The Information alleges that the defendant did not obtain a license prior to exporting infra red focal plane array detectors and infra red camera engines, which are on the U.S. Munitions List (USML). A second count of filing a false tax return was also included.
The charges against the former NASA employee come less than a week after the Sixth Circuit Court of Appeals (which has jurisdiction over cases from the federal courts in Kentucky, Michigan, Ohio, and Tennessee) upheld the conviction of former University of Tennessee professor John Roth on multiple counts of violating the AECA and the ITAR. The court of appeals rejected Roth’s argument that the jury in his trial should have been instructed that he could be convicted only if it found that “he knew the data and items he allegedly exported were listed on the United States Munitions List.” The court held that a conviction under the AECA does not require such evidence, but only that the defendant had “knowledge that the underlying action is unlawful.”
The court also rejected Roth’s contention that the ITAR-controlled plasma actuator testing data that he transferred to foreign nationals was not a defense article or defense services. The court ruled that the ITAR export controls extend to “all stages of defense projects that are covered by the [AECA], not just the final stages when military devices are directly involved.” The court noted that “technical data” and “defense articles” recognize that research is performed in multiple stages and that the ITAR applies to each stage. The court found that Roth’s argument ignored “the fact that the final goal of Phase II was to incorporate plasma actuators on military drone aircraft.”
The Roth decision is now the backdrop against which the recently charged former NASA employee must attempt to defend himself. While his actions appear to have been unknown to NASA, the case is yet another reminder for aerospace and defense companies and their employees to be knowledgeable about the ITAR regulations and that proper internal controls, starting with a written and enforced compliance policy, are in place to avoid even unknowing violations.
An Information filed in the U.S. District Court for the Northern District of Ohio alleges that between 2000 and 2005, the defendant violated the AECA and the ITAR by knowingly and willfully exporting defense articles to South Korea without an export license obtained from the Department of State. The Information alleges that the defendant did not obtain a license prior to exporting infra red focal plane array detectors and infra red camera engines, which are on the U.S. Munitions List (USML). A second count of filing a false tax return was also included.
The charges against the former NASA employee come less than a week after the Sixth Circuit Court of Appeals (which has jurisdiction over cases from the federal courts in Kentucky, Michigan, Ohio, and Tennessee) upheld the conviction of former University of Tennessee professor John Roth on multiple counts of violating the AECA and the ITAR. The court of appeals rejected Roth’s argument that the jury in his trial should have been instructed that he could be convicted only if it found that “he knew the data and items he allegedly exported were listed on the United States Munitions List.” The court held that a conviction under the AECA does not require such evidence, but only that the defendant had “knowledge that the underlying action is unlawful.”
The court also rejected Roth’s contention that the ITAR-controlled plasma actuator testing data that he transferred to foreign nationals was not a defense article or defense services. The court ruled that the ITAR export controls extend to “all stages of defense projects that are covered by the [AECA], not just the final stages when military devices are directly involved.” The court noted that “technical data” and “defense articles” recognize that research is performed in multiple stages and that the ITAR applies to each stage. The court found that Roth’s argument ignored “the fact that the final goal of Phase II was to incorporate plasma actuators on military drone aircraft.”
The Roth decision is now the backdrop against which the recently charged former NASA employee must attempt to defend himself. While his actions appear to have been unknown to NASA, the case is yet another reminder for aerospace and defense companies and their employees to be knowledgeable about the ITAR regulations and that proper internal controls, starting with a written and enforced compliance policy, are in place to avoid even unknowing violations.
25 October 2010
Bureau of Industry and Security Seeks Comments from SMEs on Export Controls
On October 6, the Department of Commerce, Bureau of Industry and Security (BIS) published a Notice of Inquiry in the Federal Register requesting comments from small and medium enterprises (SMEs) about their “understanding of and compliance with export controls maintained pursuant to the Export Administration Regulations (EAR).
SMEs will now have an opportunity to offer comments and concerns about the EAR’s administration and enforcement against the backdrop of the President’s National Export Initiative (NEI) which calls for U.S. companies to double exports over the next 5 years.
BIS expects the input will “help it administer and enforce export controls in a manner consistent with U.S. national security” while potentially increasing exports from SMEs. All exporting companies favor and support predictability. SMEs particularly need predictability as they begin to slowly emerge from the depths of the Great Recession.
Continuing outreach efforts and programs like The Export Legal Assistance Network, www.exportlegal.org, can assist exporting companies to understand and comply with their obligations under the EAR. When compliance falls short, consistent enforcement and predictability of penalties would be of great benefit, particularly since the maximum administrative civil penalty level is $250,000 per violation. Perhaps a penalty regime similar to the Administrative Monetary Penalty System (AMPS) used by the Canada Border Services Agency (CBSA) can be adopted for SMEs. Or perhaps BIS can issue warnings, without a monetary penalty, for first-time offenders when a violation of the EAR occurred during a prior time when management was not fully appreciative of the need for compliance or the company did not have the resources to implement a more robust compliance program.
The Notice of Inquiry should cause SMEs to feel empowered to "speak" to BIS on these important issues, whether through trade associations, chambers of commerce, or as single companies.
Comments to BIS are due by December 6, 2010. They should be identified in the subject line as "Notice of Inquiry—SME," and can be delivered by e-mail at publiccomments@bis.doc.gov. Comments can also be faxed to +1.202.482.3355. When faxing, please call the Regulatory Policy Division, at +1.202.482.2440. Comments can also be mailed or sent by courier to: Sheila Quarterman, U.S. Department of Commerce, Bureau of Industry and Security, Office of Exporter Services, Regulatory Policy Division, 14th Street & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230, Attn: "Notice of Inquiry—SME."
SMEs will now have an opportunity to offer comments and concerns about the EAR’s administration and enforcement against the backdrop of the President’s National Export Initiative (NEI) which calls for U.S. companies to double exports over the next 5 years.
BIS expects the input will “help it administer and enforce export controls in a manner consistent with U.S. national security” while potentially increasing exports from SMEs. All exporting companies favor and support predictability. SMEs particularly need predictability as they begin to slowly emerge from the depths of the Great Recession.
Continuing outreach efforts and programs like The Export Legal Assistance Network, www.exportlegal.org, can assist exporting companies to understand and comply with their obligations under the EAR. When compliance falls short, consistent enforcement and predictability of penalties would be of great benefit, particularly since the maximum administrative civil penalty level is $250,000 per violation. Perhaps a penalty regime similar to the Administrative Monetary Penalty System (AMPS) used by the Canada Border Services Agency (CBSA) can be adopted for SMEs. Or perhaps BIS can issue warnings, without a monetary penalty, for first-time offenders when a violation of the EAR occurred during a prior time when management was not fully appreciative of the need for compliance or the company did not have the resources to implement a more robust compliance program.
The Notice of Inquiry should cause SMEs to feel empowered to "speak" to BIS on these important issues, whether through trade associations, chambers of commerce, or as single companies.
Comments to BIS are due by December 6, 2010. They should be identified in the subject line as "Notice of Inquiry—SME," and can be delivered by e-mail at publiccomments@bis.doc.gov. Comments can also be faxed to +1.202.482.3355. When faxing, please call the Regulatory Policy Division, at +1.202.482.2440. Comments can also be mailed or sent by courier to: Sheila Quarterman, U.S. Department of Commerce, Bureau of Industry and Security, Office of Exporter Services, Regulatory Policy Division, 14th Street & Pennsylvania Avenue, NW., Room 2705, Washington, DC 20230, Attn: "Notice of Inquiry—SME."
22 April 2010
DoD Issues Final Rule for Contractors Regarding Export Controls
The Department of Defense (DoD) has issued its final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to include a clause concerning contractor obligations under the ITAR and the EAR.
The final rule requires that a single clause regarding export controls be used in all solicitations and contracts, regardless of whether the contract involves export-controlled items. In addition, flowdowns are mandated at all contracting tiers.
Under the rule, “Export-controlled items” means items subject to the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR) and includes commodities, software and technology. The required clause under DFARS states “The Contractor shall comply with all applicable laws and regulations regarding export-controlled items…” The clause reiterates that compliance with export control laws and regulations exists independent of the DFARS clause.
The DoD rule does not impose new or additional obligations on contractors and simplifies contractual requirements. The flowdown requirement should serve to remind prime contractors and subcontractors of their respective export compliance obligations, including in situations involving technical data, technology or software source code governed by the “deemed export” rule where such information is released to a foreign national (who is not a “green card” holder), even if the release occurs in the U.S.
The final rule requires that a single clause regarding export controls be used in all solicitations and contracts, regardless of whether the contract involves export-controlled items. In addition, flowdowns are mandated at all contracting tiers.
Under the rule, “Export-controlled items” means items subject to the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR) and includes commodities, software and technology. The required clause under DFARS states “The Contractor shall comply with all applicable laws and regulations regarding export-controlled items…” The clause reiterates that compliance with export control laws and regulations exists independent of the DFARS clause.
The DoD rule does not impose new or additional obligations on contractors and simplifies contractual requirements. The flowdown requirement should serve to remind prime contractors and subcontractors of their respective export compliance obligations, including in situations involving technical data, technology or software source code governed by the “deemed export” rule where such information is released to a foreign national (who is not a “green card” holder), even if the release occurs in the U.S.
22 January 2010
Ohio Instruments Company Implicated in Entity List Penalty
The Bureau of Industry and Security (BIS) announced a settlement with Keithley Instruments International Corporation (“Keithley International”) on a proposed charge of “Evasion.” The settlement required the company to pay a $125,000 civil penalty. Keithley’s U.S. parent company is based in Ohio.
According to the Order and Settlement Agreement, in early 2003 Keithley International and its manager at the time worked with Rajaram Engineering of Bangalore, India to export electronic instruments to Vikram Sarabhai Space Center (“VSSC”) without required export licenses. VSSC is an Indian Space Research Organization entity and designated on the “Entity List.” The products were classified under ECCN 3A992 and designated as EAR99.
The Order and Settlement Agreement provide some details on the activity that led to the proposed charge. According to BIS, Keithley International and its manager structured the sales so that VSSC would order the goods through Rajaram Engineering , so it would appear that Rajaram was the purchaser and end-user of Keithley’s U.S. parent company’s products, not VSSC. Apparently, Keithley International specifically instructed VSSC to place its orders in this way and not with Keithley Instruments, Inc., the U.S. parent company. The company’s manager even went so far as to explain to Rajaram’s owner and manager that structuring the orders in this way would avoid the export licensing requirements because VSSC would not appear in the transactions as the end-user. When Rajaram inquired about becoming a licensed distributor of the U.S. parent company’s products, it was told that it could not because that would “require export licenses to be obtained for items destined for Indian listed entities.” Instead, Keithley International’s manager advised Rajaram to continue to do business as it was structured.
The Order shows that the U.S. parent company and its Indian subsidiary had clear knowledge that VSSC was on the Entity List and, therefore, export licenses would be required. Apparently the company chose to sell through a third-party, rather than apply for export licenses that would have been reviewed on a case-by-case basis. The Order does not provide information about how many sales were involved or completed or the value of those sales. This was not a voluntary self-disclosure case and the settlement agreement does not include an export compliance audit requirement; so presumably, the company simply chose to not follow their export compliance practices here. Maybe the cost of doing business this way was “worth it” in the short term, but the long-arm of BIS caught the company this time. Likely, the company’s export compliance is more robust today than it was in 2003.
According to the Order and Settlement Agreement, in early 2003 Keithley International and its manager at the time worked with Rajaram Engineering of Bangalore, India to export electronic instruments to Vikram Sarabhai Space Center (“VSSC”) without required export licenses. VSSC is an Indian Space Research Organization entity and designated on the “Entity List.” The products were classified under ECCN 3A992 and designated as EAR99.
The Order and Settlement Agreement provide some details on the activity that led to the proposed charge. According to BIS, Keithley International and its manager structured the sales so that VSSC would order the goods through Rajaram Engineering , so it would appear that Rajaram was the purchaser and end-user of Keithley’s U.S. parent company’s products, not VSSC. Apparently, Keithley International specifically instructed VSSC to place its orders in this way and not with Keithley Instruments, Inc., the U.S. parent company. The company’s manager even went so far as to explain to Rajaram’s owner and manager that structuring the orders in this way would avoid the export licensing requirements because VSSC would not appear in the transactions as the end-user. When Rajaram inquired about becoming a licensed distributor of the U.S. parent company’s products, it was told that it could not because that would “require export licenses to be obtained for items destined for Indian listed entities.” Instead, Keithley International’s manager advised Rajaram to continue to do business as it was structured.
The Order shows that the U.S. parent company and its Indian subsidiary had clear knowledge that VSSC was on the Entity List and, therefore, export licenses would be required. Apparently the company chose to sell through a third-party, rather than apply for export licenses that would have been reviewed on a case-by-case basis. The Order does not provide information about how many sales were involved or completed or the value of those sales. This was not a voluntary self-disclosure case and the settlement agreement does not include an export compliance audit requirement; so presumably, the company simply chose to not follow their export compliance practices here. Maybe the cost of doing business this way was “worth it” in the short term, but the long-arm of BIS caught the company this time. Likely, the company’s export compliance is more robust today than it was in 2003.
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