Description of the main controls and legal requirements under US trade law on the transfer and export of products, with special focus on technology or IP-based products and services

1. EXPORT CONTROLS ON
TECHNOLOGY
JIM CHESTERJ D / L L . M
C H E S T E R & J E T E R , L L P
D A L L A S , T E X A S
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Presented by:

2. I. INTRODUCTION
US Trade Laws
When importing, exporting or
dealing with foreign affiliates,
numerous US trade regulations
must be observed.
- Certain goods have special
rules.
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3. I. INTRODUCTION
Technology exports are of special
concern to US regulators
- Often sensitive/ dangerous
applications/uses
- Easy to send / forward
- Difficult to track
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4. I. INTRODUCTION
The Bureau of Industry and Security (BIS)
has primary responsibility for enforcing
export control laws
§ Export Administration Act (EAA)
§ Export Administration Regulations (EAR)
Other agencies have export-specific
regulations that must also be observed.
§ (e.g., Department of Defense Trade Controls
(DDTC)
Most export documents are delivered to CBP
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5. I. INTRODUCTION
What is an Export?
§ Physical shipment of EAR-subject goods,
technology, or technical data outside US Customs
Territory
§ Downloads and emails of technology and
technical data outside US
§ “Sharing” technology with a foreign national, even
on US soil (“deemed” export)
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6. II. STANDARD EXPORT COMPLIANCE
4 Key Questions for Exports
§ What is it?
§ description & classification
§ Where is it going?
§ country
§ Who will be receiving it?
§ person/entity
§ How will it be used?
§ dual use
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7. II. STANDARD EXPORT COMPLIANCE
Pre-Shipment Checks and License Requirements (i.e., “General
Prohibitions”)
1. Determine whether a license is required
Step 1: Obtain Export Commodity Classification Number
(ECCN) for product on Commerce Control List (CCL),
Step 2: Compare to Country Chart
Step 3: If license is required, see if exception applies.
Step 4: If license is required and no exception applies, apply
for license from BIS.
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8. II. STANDARD EXPORT COMPLIANCE
2. Check the various “bad guy” lists
1. Denied Parties List - BIS
2. Specially Designations Nationals and
Narcotics Traffickers - OFAC
3. Entity List - BIS
4. Debarred Parties List – State
5. Unverified List – BIS
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See http://www.treas.gov/offices/enforcement/ofac/sdn

9. II. STANDARD EXPORT COMPLIANCE
3. Ensure export would not violate U.S. sanctions.
– See current Office of Foreign Asset Controls (OFAC) Sanctions (http://
www.treas.gov/offices/enforcement/ofac/sanctions)
4. Don’t ignore “Red Flags”
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10. II. STANDARD EXPORT COMPLIANCE
Penalties for Export Violations
§ Up to $1 million
§ Up to 5 years in prison
§ Denial of export privileges
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11. II. STANDARD EXPORT COMPLIANCE
Common Exporting Pitfalls
§ Failure to check “bad guy” lists
§ Failure to secure IP abroad
§ Unlicensed exports
§ Deemed exports
§ Recordkeeping
§ Incorrect SEDs/documents
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12. III. INTERNATIONAL TRAFFIC IN ARMS
REGULATIONS (ITAR)
Prohibits shipments of certain defense articles
and technology.
Controls trade in “Munitions”
- Including “Mil Spec/Std.”
Requirements
- Registration
- Licenses
- Recordkeeping
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13. III. INTERNATIONAL TRAFFIC IN ARMS REGULATIONS
(ITAR)
Common ITAR Pitfalls
– No export/re-export license
– Recordkeeping/Reporting
– Shipments to affiliates
– Dual use items
– “Deemed” export
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14. III. INTERNATIONAL TRAFFIC IN ARMS
REGULATIONS (ITAR)
ITAR Penalties
Criminal & Civil:
§ Up to $1 million per violation for corporations
§ Up to $1 million per violation and up to 10 years in
jail for individuals
Other Enforcement Measures:
§ Seizure or forfeiture of goods
§ Debarment from licensing for as long as three years
§ Potential debarment from Government contracting
for up to three years
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15. IV. PATENTS
§ One of the exceptions to when an item is “subject to the EAR”
covers technology that has been made “publicly available” 15
CFR §§ 734.3 & 734.7.
§ BIS opinion from January 2006: technology covered in an issued
patent, a published patent application, or in an application approved
for foreign filing, would be considered outside the scope of the EAR
• Prior to publication of the patent, the technology would still be
controlled by EAR.
• In addition, encrypted software is subject to special additional
controls.
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16. V. KEYS TO COMPLIANCE
- Know & Follow the Rules
- Implement & update written compliance program
- Periodic compliance training
- “Hands on” management of vendors, agents,
brokers, forwarders, etc.
- Inter-Departmental Cooperation
- E.g., R&D, Legal, HR, etc.
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17. V. KEYS TO COMPLIANCE
- Check your Work
- Periodic compliance
reviews
- Self-awareness cuts off
“contingent” liabilities
- Prior Disclosures reduce/
eliminate potential
penalties
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18. VI. CONCLUSION
- International trade involves
numerous rules & agencies
- Must be aware of rules and
ensure compliance through
training and internal reviews
- Rules change frequently
- Self-policing reduces liabilities
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19. VI. CONCLUSION
Ø Failure to be diligent with trade compliance =
Ø Lost opportunities
Ø Substantial penalties
Ø Interruptions in global supply chain
Ø Companies can budget and plan for compliance,
but not for enforcement.
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20. QUESTIONS?
Email jim@chester-law.com
Direct 214.382.0755
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