1. Select Advanced Export Issues Faced Each
Day in the Life of an Overworked Export
Compliance Professional
2014 Upstate New York Trade Conference & Expo
Rochester, New York
June 19, 2014
Law Offices of Jon P. Yormick Co. LPA
An International Law Practice
Attorney Advertising

2. Disclaimer
• The information provided is believed to be accurate
as of the date of the presentation, but is subject to
change without notice
• This presentation is designed for informational
purposes only and is not intended to be, nor should it
be deemed, specific legal advice. If such advice is
required, please consult with qualified legal counsel

3. Selected Export Issues
• Deemed Export Rule
• FCPA/Antibribery
• Economic Sanctions
• Antiboycott Regulations
• Incorporating Export Compliance in T&C and
Commercial Agreements

4. Deemed Export Rule

5. Assumptions
• Jurisdictional analysis performed – ITAR v. EAR
• I-129 Part 6 Certification
• Export Control Classification Number (ECCN)* examples:
– 3E001 (“Technology” for the “development” or “production”
of hard disk drive manufacturing)
– 9E991 (Technology for the development or production of
aircraft parts)
– 9E980 (Technology for the development or production of
monitoring equipment, e.g., electronic bracelets)
*Commerce Control List – 15 CFR Supp. 1 to Part 774

6. Why Talk about Deemed Export Rule?
BIS FY13 Report to Congress:
• “BIS continued increasing its regulatory compliance education
programs in the critical area of deemed exports.”
• “…BIS continued to focus on the enforcement aspects of
expanded outreach and deemed export compliance involving
individuals and companies … BIS’s Office of Export
Enforcement conducted more than 843 enforcement
outreach visits [and] initiated 92 leads and cases involving
allegations of deemed export licensing violations.
-Assistant Secretary for Export Enforcement, David W. Mills

7. Upstate Deemed Export Scenarios
• IT staffing company compliance
• Italian aerospace engineer on H1-B
• German optics engineer on L-1
• Indian optics engineer on H1-B
• Thin film technology PowerPoint presentation

8. I-129 Part 6 Certification
• Box 1: A license is not required from Commerce or
State to release such technology or technical data to
the foreign person; or
• Box 2: A license is required from either Commerce
or State for the release and petitioner will prevent
access to controlled technology or technical data by
beneficiary until and unless the petitioner has
received required license or other authorization…

9. Is a Deemed Export License Required?
• Q: Send an email with export controlled information
to our [citizenship of choice] colleague in Albany?
• Q: If so, we can just let her download it from the
server without a license, right?
• Is a License Exception available? STA?
• Caveats: - Follow documentation requirements
- Not available for China or Russia

10. Where to Find Guidance – www.bis.gov
• Policy Guidance Tab: Deemed Exports
–Deemed Exports FAQs
http://1.usa.gov/1hsOlQm
–Guidelines for Preparing Export License
Applications Involving Foreign Nationals
http://1.usa.gov/Rm3egX

11. What to Keep in Mind:
Points from USG Officials at 2013 BIS Update
• Deemed exports is the fastest growing area of export
controls
• Licensing trigger: private sourcing of research
• No need to correct/update Part 6 certification – get a
license
• Time to license: 30-45 days
• Who gets deemed export licenses? Chinese – 74%,
Iranians, Indians, Russians, Vietnamese
• Currently no routine information sharing

12. Points from USG Officials at 2013 BIS Update
• Ongoing training – HR must understand export
controls during hiring process
• Targets: USML to CCL aka 600 Series
• I-129 Part 6 is “hugely useful” to show knowledge
and intent
– Do not sign unless check was actually performed
– Resist timing pressures

13. This is What $115,000 in Violations Looks Like
• February 19, 2014 – Intevac, Inc. (Santa Clara) – VSD
– Charge 1: Releasing National Security-Controlled Technology to Russian
National Employee – development and production of hard disk drives
• “Release” – technology on server; provided employee with login and
password to access server; view, print, download, create attachments
– Charges 2-4: Acting with Knowledge – 3 more releases while deemed
export license application was pending with BIS
– Charge 5: Exported NS Controlled Technology to China without license –
“export took the form of a transmission that occurred when a Chinese
national employee working at the Chinese subsidiary used a login
identification code and password … to access server” located in Santa
Clara

14. To Disclose or not to Disclose…
Keynote Speech of David W. Mills, BIS, Assistant Secretary for
Export Enforcement, West Coast Forum, February 25, 2014:
“… on January 17, 2014, BIS reached a settlement with
Amplifier Research for a $500,000 penalty. However, BIS
suspended the civil penalty in its entirety because of the VSD
filed by Amplifier Research in 2011 detailing the actions of
Gormley and its substantial cooperation in the course of this
investigation….By filing the VSD, Amplifier Research avoided
criminal charges (against the company itself), and the
suspended fine will be waived at the end of the penalty period
provided all commitments are met.”

15. Foreign Corrupt Practices Act/Antibribery Laws

16. Foreign Corrupt Practices Act
• …”consequences of public corruption can be even more
severe in developing countries.”
• “In today’s global economy, the negative effects of corruption
inevitably flow back to the United States.”
– Economic crises that destabilize the global financial
system
– Opens borders for terrorists to cross
– Raises prices of goods
– Costs American jobs because U.S. companies cannot
compete effectively
Deputy Attorney General James M. Cole, Foreign Corrupt Practices Act Conference, Nov. 19,
2013

17. Foreign Corrupt Practices Act
• Key parts of FCPA
–Antibribery
–Accounting (Book and records)
make/keep books accurately and reflect
transactions
maintain adequate internal accounting
controls

18. Antibribery
• Prohibits “corruptly offering, paying, promising to
pay, or authorizing the payment of any money or
anything of value , directly or indirectly, to a foreign
government official for the purposes of obtaining or
retaining business for, or directing business to, any
person.”
Information, United States v. Weatherford International
Ltd., Court Docket Number: 13-CR-733, Nov. 26, 2013

19. Small Business Case Study: United States v. BizJet International
Sales and Support, Inc., Docket No: 12-CR-061-CVE, N.D. Okla.

20. BizJet International
• MRO provider
• Customer list:
– Mexican Federal Police
– Mexican President’s Fleet
– Mexican State of Sinaloa (Governor’s Fleet)
– Panama Aviation Authority

21. BizJet International
• Paid bribes to officers and other decision-makers
– “commissions”
– “incentives”
– “referral fees”
• Board knowledge and approval
• Benefit - $7M+
• 200-999 employees – about 320

22. BizJet International
• Internal audit
• Voluntary disclosure
• Cooperation
• Termination
• Enhanced compliance
Result: DPA + 4 former employees criminally charged
Penalty: $11.8M
Enhanced compliance – review/report
Mandatory successor liability

23. FCPA Guidance
• Nov. 2012 - A Resource Guide to the U.S. Foreign Corrupt Practices Act
http://www.justice.gov/criminal/fraud/fcpa/guide.pdf
• Opinion Releases Index
http://www.justice.gov/criminal/fraud/fcpa/index/
– Audit rights
– Charitable contributions
– Gifts, Travel & Entertainment
– JVs, M&A
– Reasonable, bona fide expenditures
– Third-party agents

24. DPA – Corporate Compliance Program
• “… has implemented and will continue to
implement a compliance and ethics
program designed to prevent and detect
violations of the FCPA and other
applicable anti-corruption laws
throughout its operation…”

25. UK Bribery Act 2010 (#UKBriberyAct)
• April 8, 2010 – received Royal Assent
• Delayed effective date - July 1, 2011
• New high water mark
• …the UK Bribery Act “finally bring[s] UK rules on
corrupt payments into line with other OECD
countries.”

26. UK Bribery Act 2010
• Key features:
– Commercial bribery
– Prohibits facilitation payments
– Adequate procedures defense
– UK nexus – “close connection”

27. UK Bribery Act 2010
• Active/passive approach
• Section 1 – offering, promising, paying bribes
• Section 2 – agreeing, requesting, receiving
bribes
• Section 6 – bribery of foreign public officials
• Section 7 – corporate liability failing to
prevent bribery
• Section 12 – extraterritorial jurisdiction

28. UK Bribery Act 2010 – Section 7
• Strict liability offence
• Extends to acts of “associated persons” –
anyone performing for or on behalf of
company
• Defense: “adequate procedures” adopted
– Proportionate to risk, scale and complexities of
activities

29. UK Bribery Act Guidance
• Ministry of Justice - UK Bribery Act 2010 Guidance, March
2011, http://www.justice.gov.uk/guidance/docs/bribery-act-2010-
guidance.pdf
• 6 principles (and 11 Case Studies)
1. Proportionate procedures
2. Top-level commitment
3. Risk Assessment
4. Due diligence
5. Communication (including training)
6. Monitoring and review

30. UK Bribery Act Guidance
• Acknowledges how SMEs will comply v. multinationals
• Case studies designed to illustrate SME compliance
Case Study 5 – Principle 3 (Assessing risks)
“A small specialist manufacturer is seeking to expand its business
in one of several emerging markets . . . and is unsure how to go
about assessing the risks of entering a new market. The small
manufacturer could consider any or a combination of the
following:”
Quick Start Guide,
https://www.gov.uk/government/uploads/system/uploads/attach
ment_data/file/181764/bribery-act-2010-quick-start-guide.pdf

31. Corruption of Foreign Public Officials Act
(#CFPOA)
• June 19, 2013 – amendments received Royal Assent
– Intended to close significant loopholes, create new offences
Highlights:
• Extraterritorial jurisdiction – Canadian citizens, residents,
corporations, firms, societies
– Replaced “real and substantial connection” requirement –
significant activities occurring in Canada
– Q: Non-resident importers? Branch offices? Independent
contractors ?

32. Corruption of Foreign Public Officials Act
Highlights
• Facilitation payments – grace period
• Books and records – criminal only
• For-profit requirement – removed
• Double jeopardy – cross-border prosecutions
–But: FCPA does not have reciprocal provision

33. Corruption of Foreign Public Officials Act
• First trial – Ontario Superior Court of Justice, Aug. 15, 2013
– Nazir Karigar – offering bribes (conspiracy)
– USD 450,000 cash/stock to Air India officials and Indian
Minister of Civil Aviation
– RFP - facial recognition software/hardware contract
– Agent for Canadian tech company – 30% revenue stream
– Initial USD 200,000 paid from U.S. parent – to ensure bid
was technically qualified
– Unsuccessful bid

34. Economic Sanctions

35. SDN List
• Specially Designated Nationals List – 30 May update
http://www.treasury.gov/ofac/downloads/t11sdn.pdf
• Individuals and companies owned/controlled by or
acting for/on behalf of targeted countries
• Individuals, groups, and entities, (terrorists and
narco- traffickers)
• Assets are blocked and U.S. persons are generally
prohibited from dealing with SDNs

36. NEW: Foreign Sanctions Evaders List (FSE List)
• Released – 6 February 2014 (no updates)
• Legal authority - Executive Order (E.O.) 13608,
“Prohibiting Certain Transactions With and
Suspending Entry Into the United States of
Foreign Sanctions Evaders With Respect to
Iran and Syria.”
• “Evaders” - foreign persons who have
facilitated deceptive transactions for or on
behalf of persons subject to U.S. sanctions

37. Foreign Sanctions Evaders List (FSE List)
• Prohibits: Transactions by U.S. persons or within the
U.S. involving FSEs
• FSEs by Country – Cyprus, Georgia, Liechtenstein,
Turkey, Ukraine, UAE, Undetermined
• June 9 – Can search as part of upgraded Sanctions
Party with SDN List

38. Sanctions List Search

39. OFAC Licensing
• General v. Specific License – authorization to engage
in transactions otherwise prohibited
• General License (GL) - authorizes performance of
certain types of transactions
• Limitations on performance activities
• Documentation/recordkeeping

40. • OFAC License Application Page – case-by-case
http://www.treasury.gov/resource-
center/sanctions/Pages/licensing.aspx
– Trade Sanctions Reform and Export Enhancement Act
of 2000 (TSRA) – agricultural commodities, medicine,
or medical devices
– Cuba travel
– Blocked funds release – U.S. financial institution
– “Catchall” (including guidance) - Transactional
Specific Licenses

41. License Checklist Highlights
• Copies of documents relating to transaction – technical specs,
CCATS from Commerce, purchase orders, invoices, bills of lading,
payment, passport or other government issued-ID
• Identify any and all Specially Designated Nationals associated with
the transaction
• Identify all sanctions programs involved
• Describe proposed transaction and why believe prohibited
– Is a G.L. available?
– Money flow
• Any prior license numbers
• Is everything in English?

42. Specific License Conditions
• Licensee shall provide and make records and reports
available for inspection, upon request
• License is a privilege – non-transferrable; limited to
specific facts and circumstances of transaction
described in application; can be revoked or modified
at any time
• Maintenance, replace/repair, installation,
training? Is it “incidental and necessary” to
transaction?

43. Sanctions Update Highlights:
Burma, Iran, Ukraine

44. Burma
• 1 April – updated FAQs
http://www.treasury.gov/resource-
center/faqs/Sanctions/Pages/ques_index.aspx#burma
• State Dept. “Reporting Requirements on Responsible
Investment in Burma”
• $500,000+ “in any period”
• 180 days after hitting threshold; July 1
• FAQs: 280 – 283

45. Iran
• JPOA Guidance -
http://www.treasury.gov/resource-
center/sanctions/Programs/Documents/jpoa
_guidance.pdf
• FAQs on JPOA -
http://www.treasury.gov/resource-
center/sanctions/Programs/Documents/jpoa
_faqs.pdf

46. JPOA FAQ
2. Q: How does the JPOA impact U.S. sanctions on
Iran?
A: Except for the limited, temporary, and reversible
relief provided pursuant to the JPOA, all U.S.
sanctions with respect to Iran, including financial
sanctions, sanctions pertaining to the purchase of
Iranian crude oil, and sanctions on investment in
Iran’s energy and petrochemical sectors, remain in
effect with respect to U.S. and non-U.S. persons.

47. Iran
But we have a Canadian subsidiary…
Query: Is there a legally viable
“Canadian strategy” for Iran?

48. Iran – A Canadian Strategy?
• Iran Threat Reduction and Syria Human Rights Act of
2012 (ITRA) – extends sanctions to non-US subs
• May 2013 – amendments to Canada Special
Economic Measures (Iran) Regulations. Persons in
Canada and Canadians outside of Canada:
-prohibited from exporting, selling, supplying, or
shipping goods … to Iran or to a person for the
purposes of carrying on business in or operated
from Iran

49. Ukraine-Related Sanctions
• March 6 – First Executive Order issued (E.O. 13660) –
blocked property
• March 17 - New Executive Order (E.O. 13661) – expanded
E.O. 13660; SDN Designations
- by extension entities majority owned or controlled
• March 20 – E.O. 13662 and additional SDN designations,
including Bank Rossiya
• April 11 – Additional SDN designations, including
Chernomoreneftegaz (Simferopol, Crimea only)

50. Ukraine-Related Sanctions
Related actions:
• BIS has suspended action on export/reexport license
applications “until further notice”
• BIS added Chernomoreneftegaz to Entity List –
- subsidiary of Naftogaz
- covers EAR99 (NLR) items
- Presumption of Denial
• DDTC suspended review and issuance of export licenses
and agreements “until further notice”

51. OFAC Penalty Settlement – 6 March 2014
Ubiquiti Networks, Inc.
• $504,225 - Iranian Transactions and Sanctions Regulations (the “ITSR”).
• From 2008 - 2010, Ubiquiti appears to have violated ITSR by engaging in
transactions related to the exportation, reexportation, sale or supply,
directly or indirectly, of goods for broadband wireless connectivity to Iran,
and facilitating the reexportation, sale or supply of such goods to Iran
- entered exclusive distributorship agreement with UAE company to
distribute products in Iran, then sold and exported broadband
wireless equipment to distributor then reexported to Iran
• Dec. 2009 – Feb. 2011, Ubiquiti appears to have violated the ITSR by
engaging in 13 exports of broadband wireless equipment to Greek
distributor, with knowledge or reason to know that the goods were
intended specifically for supply, transshipment, or reexportation, directly or
indirectly, to Iran

52. Ubiquiti Networks, Inc. Penalty Settlement
• Not a voluntarily disclosure - base penalty: $560,250
• Factors considered:
– demonstrated reckless disregard for U.S. sanction
requirements;
– on notice that the conduct at issue constituted a violation
of U.S. law;
– members of senior management knew or had reason to
know that products were reexported to Iran;
– conduct resulted in the provision of goods related to
broadband wireless connectivity, worth nearly $600,000 to
entities located in Iran;

53. Ubiquiti Networks, Inc. Penalty Settlement
– had no OFAC compliance program in place at the time of
the apparent violations;
– has no prior sanctions history, including not being the
subject of a penalty notice or Finding of Violation;
– cooperated with OFAC during its investigation of the
apparent violations;
– took remedial action in response to the apparent
violations.

54. • Is it a potential violation?
– General license
– Specific license
– Applicable law/regulations at time
• Voluntary Self-Disclosure – credit on base penalty
– 50% of transaction value (non-egregious)
– $125,000 cap/violation ($32,500/TWEA)
Economic Sanctions Non-Compliance

55. Antiboycott Regulations

56. Antiboycott Regulations
• Antiboycott regulations (per OAC):
“…prohibit U.S. companies from furthering or
supporting the boycott of Israel sponsored by the
Arab League, and certain other countries, including
complying with certain requests for information
designed to verify compliance with the boycott.”
15 CFR 760

57. Covered Parties
• Regulations apply to:
– “U.S. persons” – home or abroad
– “controlled in fact” affiliates of domestic
concerns
• Ability to control operations, set policies of
affiliate
Q: Foreign commercial agents? JVs?

58. Duties Under Antiboycott Regulations
• Not further or support an unsanctioned foreign
boycott; and
• Report requests to comply with or support an
unsanctioned foreign boycott
• Single transaction – Form BIS15-612P
• Multiple transactions – Form BIS15-6051P 75
requests during a particular period

59. Reporting Antiboycott Requests

60. Antiboycott Requests
• Delete all products, manufactured in Israel as they are banned in
Bahrain
• All Produce of Israel are Banned
• Shipping company or agent was to issue a certificate that the
ship was permitted to enter Muscat or Sultan Qaboos
• Confirming certain parts sold to a UAE party were not made in
Israel
• Sales orders from the UAE and Malaysia - requested U.S.
company cancel portions of order because parts originated from
Israel; requested substitute parts; requested confirmation parts
were not made in Israel; otherwise made clear that Israeli-origin
products were prohibited

61. OAC Assistance is Available
• FY 2013 – over 1,000 requests to BIS for compliance
guidance
• OAC works for U.S. companies to remove boycott
terms from tenders, RFPs, etc.
– Saudi Arabia, UAE, Iraq
http://www.bis.doc.gov/index.php/enforcement/oac

62. Incorporating Export Compliance in T&C and
Commercial Agreements
• Use clear and specific language – incorporate
local law references where possible
• Use mandatory language – shall, must,
required
• Obtain acknowledgments, representations,
warrants, covenants
• Blame the USG and then the lawyers
• FCPA/Antibribery Acknowledgment

63. Food for thought ….
• Do your company’s T&C and commercial agreements:
– have a prohibition on export, disclosure, re-export of goods and technology and
create an affirmative duty on the customer or business partner to comply with
U.S. and applicable foreign export controls laws, regulations, orders, decrees,
etc., including obtaining licenses?
– create a duty of cooperation to ensure export compliance, and address sharing
of compliance and export licensing costs?
– incorporate the minimal DCS from the regulations or incorporate an
affirmative duty that your business partner and customer do not export, re-
export, re-sell, trans-ship, or divert your company’s goods or technology to
named embargoed or sanctioned countries and parties and an affirmative
duty to notify your company of any intended, attempted, or completed
prohibited transaction?

64. More food for thought ….
• Do your company’s commercial agreements:
– incorporate key definitions under the FCPA, UKBA, etc. e.g.,
“government official,” “foreign public official,” and
summarize/highlight key provisions of the applicable laws so
business partners are familiar with these provisions?
– refer to the OECD Anti-Bribery Convention, the United Nations
Convention Against Corruption, and national laws of the territory in
which the business partner is located and is within its sales
territory?
• T&C and commercial agreements can be a shield – further evidence of
compliance

65. Thank you
Jon P. Yormick
Attorney and Counsellor at Law
Law Offices of Jon P. Yormick Co. LPA
Email: jon@yormicklaw.com
Toll Free: +1.866.967.6425 (Canada & U.S.)
Mobile: +1.216.269.5138
Skype: jon.yormick
Twitter: @yormicklaw
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