EXPORT CONTROLS:
Why Do We Care?
Dave Dunbar, Maryland
Bob Hardy, COGR
Catholic University
March 29, 2011
Provided as a general source of information on U.S. export controls. This
presentation is not provided as legal advice or opinion.
2
EXPORT CONTROLS: Here’s Why
We Care?


The U.S. government has stepped up
enforcement in the area of exports and
Universities are particularly vulnerable



Relatively easy target for the government
Many schools don’t have the robust export control
management of the private sector
The Reece Roth case supports this increased
activity, particularly since the appeals court has
upheld the 4 year prison sentence
3
Do I need to be concerned about export controls in this research?
1.
2.
Public domain, and
a) No equipment, encrypted
software, listed-controlled
chemicals, bio-agents or
toxins, or other restricted
technologies are involved,
and
b) Information/software is
already published, and
c) There is no contractual
restriction on export, or
Fundamental Research
(note definitions and caveats
associated with this
exemption)
1.
1.
2.
3.
Equipment or encrypted software
is involved, or
Technology is not in the public
domain, and
Technology may be exposed to
foreign nations (even on campus)
or foreign travel is involved, and
a)
4.
The equipment, software
or technology is on the
Commerce Control List, or
b) Information or instruction is
provided about software,
technology, or equipment
on the CCL, or
c) The foreign nationals are
from or the travel is to an
embargoed country
The contract has terms e.g. a
publication restriction that effect
the Fundamental Research
Exemption
2.
3.
4.
Equipment, software, chemical,
bio-agent, or technology is on
the US Munitions List (ITAR), or
Equipment, software, chemical,
bio-agent or technology is
designed or modified for military
use, use in outer space, or there
is reason to know it will be used
for or in weapons of mass
destruction, or
Chemicals, bio-agents or toxins
on the Commerce Control List
are involved, or
The contract contains a
restriction on export or access
by foreign nationals
Probably
NO
(further review is required)
License May Be
Required
Federal Export Control Laws
YES
License Will Be
Required
4
What is an export?

An export is any oral, written, electronic or
visual disclosure, shipment, transfer, or
transmission of commodities, technology,
information, technical data, assistance, or
software codes to



Anyone outside the U.S. including a U.S. citizen
A “foreign national” whether in the U.S. (a
“deemed” export) or abroad
A foreign embassy or affiliate
5
What is a “deemed” export?

Export controls also cover transfer of goods and
technology within the U.S. (transfer outside the U.S.
is deemed to apply when a non-qualified foreign
national receives the information in the U.S.)



Applies to technology transfers under EAR
Applies to technical data and defense services under ITAR
Unless the fundamental research exclusion applies, a
university’s transfer of controlled technology to a nonpermanent resident foreign national in the U.S. may be
controlled or prohibited (your students!)
6
What is a “deemed” export?

Situations that can trigger a deemed export problem include:









Employees who are foreign nationals involved in specific
research, development, and manufacturing activities subject
to controls
Foreign students or scholars conducting research
Laboratory tours
Face-to-face
Telephone
Email
Fax
Sharing of computer files
Visual inspections
7
Who is a foreign national?
A foreign national is any person who is NOT a:
 U.S. citizen
 U.S. lawful permanent resident (“a green card
holder”)
 Person granted asylum
 Person granted refugee status
8
What types of projects raise
export control concerns?

Projects that involve the actual export or
“deemed” export of any goods, technology, or
related technical data that is either:


“Dual use” (commercial in nature with possible
military applications)
Inherently military in nature
9
What types of projects raise
export control concerns?


Research in the following areas frequently
require export controls: engineering, space
sciences, computer sciences, biomedical
research (especially with lasers), research
with encrypted software, research with
controlled chemicals, biological agents, toxins
Research conducted in certain foreign
countries or where “defense services” (e.g.,
“how to” activities) are provided
10
Scenarios that might require
export licenses






Physical transfer of items of equipment outside the
U.S.
Participation of foreign national faculty, students or
staff in restricted research
Presentations of previously unpublished research at
conferences or meetings where foreign national
scholars might be in attendance
Visits to your laboratory by foreign national scholars
Non-disclosure agreements
Material transfer agreements
11
Export controls cover

U.S. Export controls (ITAR, EAR)





Cover any item in U.S. trade (goods, technology,
information)
U.S. origin items, wherever located
Exclude patents and patent applications, artistic or
nontechnical publications
Exclude technology in the public domain
Exports of most high technology and military items,
as well as associated technologies and certain items
of commercial importance require U.S. export
authorization (either license or applicable
exemption)
12
PENALTIES FOR VIOLATION OF
EXPORT REGULATIONS

Violations of Arms Export Control Act (AECA)
or ITAR:
-- Civil Penalties of Up to $500,000 per violation
-- Criminal fines of up to $1 million and/or 20 years
imprisonment
-- AECA Debarment
Denial of export privileges
13
NSDD-189

Provides definition:


“Fundamental research” means basic and applied
research in science and engineering, the results
of which ordinarily are published and shared
broadly within the scientific community. Where
national security requires control, the mechanism
for control at universities is classification
No restrictions may be placed on conduct or
reporting of federally-funded fundamental
research that has not received national security
classification except as provided in statutes
14
NSDD-189 (continued)

University research will not be deemed to
qualify as fundamental research if … the
university or research institution accepts any
restrictions on publications resulting from the
research, other than limited prepublication
reviews by research sponsors to prevent
inadvertent divulging of the sponsor’s
proprietary information or for filing of patent
applications.
15
The Fundamental Research
Exclusion from Export Controls

Applies to:
Unrestricted publicly available technology and
software arising during or resulting from – or NSDD
189 says the “conduct” of -- fundamental
research
undertaken in the U.S. at accredited
academic institutions.
Where the resulting information is ordinarily
shared broadly (EAR 734.3, ITAR
120.11).

published and
Protects most campus-based research at U.S. universities from
export controls.
16
What does this mean for a
university?



Allows U.S. universities to include foreign faculty,
students, visitors in research involving creation of
controlled information on campus in the U.S. without
a license
Once created in fundamental research, the
information may be transferred abroad without
restriction once it is in the public domain
Fundamental research information is public in nature
and is excluded (not just exempted) from controls
17
When May the FRE Not Protect
You?




Contract Terms, Prime or Sub, that contain
restrictions on project access or
dissemination of results.
Off-campus activities, whether or not
associated with on-campus FRE research.
Transition phase(s) when fundamental
research evolves into something else.
Faculty Entrepreneurial activities.
18
Exclusions/Exemptions from
Export Controls




Fundamental Research
Public Domain
Educational Institution activities
Full-time employment (ITAR only)
19
FRE applies to information





Resulting from or arising during basic and applied
research in science and engineering
Conducted at an accredited institution of higher
education (EAR) or higher learning (ITAR)
Located in the U.S.
Ordinarily published and shared broadly in the
scientific community (note that ITAR says “is
published”)
Not subject to proprietary or U.S. government
publication or access dissemination controls
20
Issues surrounding the FRE


Does not apply to items or materials
Publication approval requirements by sponsor
invalidate the FRE



“side deals” are dangerous!
Some technologies (advanced encryption) always
ineligible for fundamental research exclusion
It is an open question whether the FRE exclusion
applies to controlled information that is already
existing and then used during research that
otherwise meets the criteria for a fundamental
research exclusion
21
Exemptions from controls:
publicly available and public
domain

Publicly available (EAR) and public domain
(ITAR) information exclusion:

Applies to information that is already published
through specified means and found in



Libraries open to the public, including most university
libraries
Unrestricted subscriptions, newsstands, or bookstores
for a cost not exceeding reproduction and distribution
costs (including a reasonable profit)
Published patent information (does not apply to
proprietary information not publicly disclosed)
22
Exemptions from controls:
publicly available and public
domain


Conferences, meetings, seminars, trade shows, or exhibits
held in the U.S. (ITAR) or anywhere (EAR), which are
generally accessible by the public for a fee reasonably
related to the cost and where attendees may take notes
and leave with their notes, or
Websites accessible to the public for free and without the
host’s knowledge of or control of who visits or downloads
software/information (clearly acceptable under EAR, and
likely acceptable under ITAR)
23
Exemption from controls:
educational institutions

ITAR: General science, math, and engineering
commonly taught at schools and universities


ITAR is focused on subject matter
EAR: Information conveyed in courses listed in
course catalogues and in their associated teaching
labs or any accredited academic institution


EAR is focused on venue
EAR’s exemption does not cover encryption software
24
Exemption from controls: full-time
employment (ITAR only)

Employment of a foreign national but only if:
 A bona fide full time with benefits employee of the
institution



Not from an ITAR embargoed country (Belarus, Cuba,
Iran, Libya, North Korea, Syria, Vietnam, Burma,
China, Haiti, Liberia, Somalia, Sudan, Iraq,
Afghanistan, Rwanda, D.R. Congo)
Resides at a permanent address in the U.S. while
employed
Is advised in writing not to share covered technical
data with any other foreign nationals without
25
government approval
Repetition for Emphasis: FRE
Fundamental research exclusion applies to
information when the research is:
 Basic or applied (in DoD terms, 6.1 or 6.2)
 At an institution of higher education (EAR) or
learning (ITAR)
 In the U.S., and
 No publication restrictions or access controls
exist for the activity
26
Licensing: Questions to Ask to
Start



Does the award contain any terms or
conditions that would restrict the disclosure or
dissemination of the research results?
Are there any restrictions on access to or
dissemination of information the sponsor or
others will use on this project?
If the answer to 1 or 2 is yes, does the
research project fall under one of the export
controlled technologies?
27
Licensing: Questions to Ask to
Start


Does the project involve training specific
personnel for a special purpose? If so, could
it be considered a defense service?
Will the university need to apply for an export
license?
28
ONE EXAMPLE ONLY….


DFAR 352-204-9014 “Notification of Non-U.S.
citizen participation” states that a university shall
notify the government 30 days in advance of the
employment of a non-U.S. citizen on [this] contract
and the government may restrict the individual from
participation on some or all of the project.
Issues: is this an access restriction? Is it notification
or approval? Is the contract classified? Are there
publication restrictions? Is it funded with 6.1 or 6.2
money?
29
Examples where licenses will be
required

EAR Dual Use/Commercial Technologies on
the CCL:



Terrorist supporting countries: Cuba, Iran, Libya,*
North Korea, Sudan, Syria
Countries of concern: Former soviet republics,
China, Vietnam
Many other countries require licenses, or are
subject to EAR 99 (covered in the CCL but no
license required)
*as of March 3, 2011 all exporting privileges to Libya are suspended
30
Examples where licenses will be
required

ITAR (Military/space technologies) on the MCTL:


Policy of denial
 State sponsors of terrorism: Cuba, Iran, Libya,* North
Korean, Sudan, Syria
 Arms Embargo (Burma, PR China, Haiti, Liberia, Somalia,
Sudan)
 Others (Belarus, Iraq, Vietnam)
Policy of denial (based on item/end-user)
 Afghanistan, Congo, Rwanda
*as of March 3, 2011 all exporting privileges to Libya are suspended
31
What is a temporary export
(TMP)?

There is a license exception for temporary export of
tools of the trade. Reasonable kinds and quantities
of these commodities and software can be taken
overseas (even if controlled) but MUST remain
under your effective control (physical possession) of
the item. It must be with you at all time or locked in
a (central) hotel safe deposit; generally hotel room
safes are not sufficiently guarded.


TMPs must be returned within one year to the U.S.
No tools of the trade may be taken to embargoed countries
32
Current Reform Initiative



Aim is to transform USML and CCL control
lists into parallel tiered “positive” control lists
“Positive” means described by objective
criteria; mostly involves revising ITAR/USML
to make it more like the EAR/CCL list
3 tiers: 1) “crown jewels” (WMD); 2)
“precious metals” (sub. military advantage);
3) sig. contribution to nat. security but more
broadly available (“valuable assets?”)
33
Reform Initiative--continued



Revised USML categories now being rolled
out; 1st was Cat. VII military vehicles
Single license application, single IT system,
Export Enforcement Coordination Ctr. other
key aspects of reform
Notion is that items will move from USML to
CCL and downward through tiers as
technology evolves; concern is how dynamic
will this process be, especially over time
34
Roth Case

Complicated fact scenario that involved both
actual exports (laptop/flash drive and papers
pertaining to a controlled defense project
taken by Professor Roth to China) and
deemed exports (foreign nationals working on
Air Force SBIR subcontract to Professor Roth
which involved export controlled plasma
technology and contained restrictions on
foreign national participation and publication)
35
Roth Case--continued



Professor Roth convicted of multiple counts
of export control violations (and
fraud/conspiracy); sentenced to 4 years in
prison
Conviction upheld on appeal
Appeals court ruling raises issues for
universities as to scope of FRE and
relationship to 6.2 DOD funding
36
Roth Circuit Court Decision




6th Circuit opinion (1/11) holds that all stages of
research on defense projects that result in
defense articles are subject to export controls
Seems to conflict with FRE for earlier stage (i.e.
6.1/6.2 funded projects) as well as DoD
guidance on fundamental research
Also states that willfulness needed for ITAR
violations does not require knowledge of specific
provisions—just general knowledge of
unlawfulness (Roth was warned by university)
Binding only in 6th Circuit but troubling precedent
37
Resources


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


Commerce Regulations: www.bis.doc.gov/
State Regulations:
http://pmddtc.state.gov/index.html
Stanford University export control website:
http://export.stanford.edu/
University of Tennessee website:
http://research.utk.edu/exportcontrol/
COGR: www.cogr.edu (Educational Materials)
NACUA: www.nacua.org/
38
Additional Considerations
David M. Dunbar
Export Compliance Officer
Office of Research Administration &
Advancement
University of Maryland, College Park
ddunbar@umd.edu
(301) 405-0187
39
State & Commerce
Considerations



Exclusions from Export Control
New I-129 Certification Requirement
Commerce & State Definitions





Export Administration Regulations (EAR)
International Traffic in Arms Regulations (ITAR)
“Exports” and “Deemed Exports”
Technology and Source Code Definitions
Potential Penalties for Noncompliance
40
Items Not Subject to the EAR


With exception of certain encryption software,
publicly available technology and software is not
controlled under EAR.
Publicly available technology & software:




Published information
Information arising during, or resulting from, fundamental
research
Information released by instruction in catalog courses
and associated teaching laboratories of academic
institutions
Information in patents and in certain patent applications
41
ITAR Definition of “Technical
Data” Does Not Include:



Information concerning general scientific,
mathematical or engineering principles
commonly taught in schools, colleges and
universities;
Information in the “public domain”; and
Basic marketing information on function or
purpose or general system descriptions of
defense articles.
42
ITAR “Public Domain”
Information

Includes information which is published and which is generally
available to the public through:
─ Sales at newstands & bookstores;
─ Subscriptions available without restriction to any individual
desiring to obtain or purchase the published information
─ At libraries open to the public
─ Patents available at any patent office
─ Unlimited distribution at a conference generally accessible to
the public in the U.S.
─ Public release (unlimited distribution) in any form after
approval by the cognizant U.S. Government agency
─ Through fundamental research in science and engineering at
accredited institutions of higher learning in the U.S.
43
I-129 Certification Requirement
for Certain Visa Petitions



The new certification requirement, mandatory as of
February 20, 2011, only applies to the following
nonimmigrant worker petitions: H-1B, H1B1
Chile/Singapore, L-1 and O-1A.
But export license requirements can apply to foreign
persons in other visa categories not subject to new
certification requirement.
N.B.: EAR and ITAR do NOT restrict the release of
technology or technical data to naturalized U.S.
citizens, lawful U.S. permanent residents (i.e.,
“green card” holders) and protected individuals
(e.g., persons granted refugee or asylum status).
44
BIS/DDTC Joint Fact Sheet

The EAR and the ITAR do not control, respectively,
“technology” or “technical data” the regulations define as
“publicly available” or in the “public domain.” Thus, the EAR
and the ITAR do not require licenses to export such publicly
available or public domain information, regardless of
content. (Emphasis added.)

If the only technology or technical data the petitioner/
employer would release to the foreign person beneficiary at
issue in the petition falls within the scope of these
definitions, then the petitioner should check the first box in
Part 6 of the I-129 form because a license will not be
required from either the BIS or DDTC to release the
technology or technical data to the foreign person.
46
Definition of “Export” – the
EAR



An actual shipment or transmission of items
subject to the EAR out of the United States
Any release of technology or software subject
to the EAR in a foreign country
Any release of technology or source code
subject to the EAR to a foreign national

Deemed to be an export to home country or
countries of the foreign national
47
What is “Source Code” under
EAR?

“Source code”. (or source language) (Cat 4, 6, 7,
and 9)--A convenient expression of one or more
processes that may be turned by a programming
system into equipment executable form (“object
code” (or object language)).

“Object code”. (or object language) (Cat 9)—An
equipment executable form of a convenient
expression of one or more processes (“source
code” (or source language)) that has been
converted by a programming system. (See also
“source code”)
48
Publicly Available Source
Code, Software


Question: Is the export or reexport of software in
machine readable code subject to the EAR when
the source code for such software is publicly
available?
Answer: If the source code of a software program is
publicly available, then the machine readable code
compiled from the source code is software that is
publicly available and therefore not subject to the
EAR.
─ EAR Part 734, Supplement No. 1
─ N.B.: Special rules apply for encryption software
49
How is Technology or Software
“Released” for Export?



Visual inspection by foreign nationals of U.S.origin equipment and facilities;
Oral exchanges of information in the United
States or abroad; or
The application to situations abroad of
personal knowledge or technical experience
acquired in the United States.
50
What is “Technology” Under
the EAR?

Specific information necessary for the
“development”, “production”, or “use” of a
product, taking the form of “technical data” or
“technical assistance.”


Technical data may take such forms as blueprints, plans,
diagrams, models, formulae, tables, engineering designs
and specifications, manuals and instructions written or
recorded on other media or devices such as disk, tape,
read-only memories.
Technical assistance may take forms such as
instruction, skills training, working knowledge, consulting
services.
51
“Technology” Under the EAR
(cont’d)

“Development” is related to all stages prior to serial
production, such as: design, design research, design
analyses, design concepts, assembly and testing of
prototypes, pilot production schemes, design data, process
of transforming design data into a product, configuration
design, integration design, layouts.

“Production” means all production stages, such as: product
engineering, manufacture, integration, assembly
(mounting), inspection, testing, quality assurance.

“Use” is defined as “operation, installation (including on-site
installation), maintenance (checking), repair, overhaul and
refurbishing.”
52
The EAR “Required”
Threshold



“Technology” is specific information necessary
for “development”, “production” or “use” of a
product.
Under General Technology Note, the focus is on
technology “required” for development,
production or use of items on the CCL.
“Required” technology refers only to that portion
of technology which is “peculiarly responsible for
achieving or exceeding the controlled
performance levels, characteristics or functions.”
53
BIS Comment


“It should be emphasized that the EAR controls
‘required’ technology. This is the thresholdachieving portion of the technology, or that portion
which is peculiarly responsible for meeting or
exceeding a parameter that causes an item to be
identified by an ECCN on the Commerce Control
List.
“This is a good place to emphasize that simple
operation of technology subject to the EAR is not a
deemed export. Deemed exports occur only when
technology subject to the EAR is released.”
-- BIS Website Deemed Exports Module
54
EAR Control of “Use”
Technology

Per BIS, “All six activities in the definition of ‘use’ must be present to
trigger a license requirement.”
-- May 31, 2006 Policy Statement

So, if you’re NOT providing information on ALL SIX ACTIVITIES –
“operation, installation (including on-site installation), maintenance
(checking), repair, overhaul and refurbishing” – then you probably do
not have a “use” technology problem under the EAR.

Example:
“If the foreign national has access only to the technology that is
necessary to operate the export controlled equipment, a release of ‘use’
technology has not occurred and no deemed export license
requirement is triggered.”
-- BIS Website Guidance
55
ITAR Definition of “Export”
“Export” means, inter alia:
 Sending or taking a defense article out of the U.S. in any
manner
 Disclosing (including oral or visual disclosure) or
transferring in the United States any defense article to an
embassy, any agency or subdivision of a foreign
government (e.g., diplomatic missions)
 Disclosing (including oral or visual disclosure) or
transferring technical data to a foreign person, whether in
the United States or abroad
 Performing a defense service on behalf of, or for the benefit
of, a foreign person, whether in the United States or abroad
56
What Is a Defense Article?



Any item or technical data (including software)
designated in the United States Munitions List
(“USML”) of the ITAR
Technical data recorded or stored in any
physical form, models, mockups or other items
that reveal technical data directly relating to
items designated in the USML.
The term “defense article” can also include any
item specifically designed, developed,
configured, adapted, or modified for a military
application.
57
Defense Services Include:


The furnishing of assistance (including training)
to foreign persons, whether in the United States
or abroad in the design, development,
engineering, manufacture, production,
assembly, testing, repair, maintenance,
modification, operation, demilitarization,
destruction, processing or use of defense
articles.
The furnishing to foreign persons of any
technical data controlled under the ITAR,
whether in the United States or abroad.
58
ITAR Controlled Technical
Data

Information “required for the design, development, production,
manufacture, assembly, operation, repair, testing, maintenance
or modification of defense articles,” including information in the
form of blueprints, drawings, photographs, plans, instructions or
documentation;

Classified information relating to defense articles and defense
services;

Information covered by an invention secrecy order;

Software directly related to defense articles, including but not
limited to “the system functional design, logic flow, algorithms,
application programs, operating systems and support software
for design, implementation, test, operation, diagnosis and repair.”
59
BIS Policy on Foreign National’s
“Home Country or Countries”

Look to foreign national’s most recent country
of citizenship or permanent residence

“The current deemed export licensing policy,
based on a foreign national’s most recent country
of citizenship or permanent residency, recognizes
the significance of declarative assertion of
affiliation over the mere geographical
circumstances of birth.”
─ May 31, 2006 BIS Policy Statement
60
State Dept. View on Dual
Nationals


What if the foreign person’s place of birth is different
from the country he/she now resides in and holds
citizenship from?
This would bring into question . . . dual nationality and
whether the individual had ties to his country of birth which
would indicate a degree of loyalty and allegiance to that
country. The license would be considered on the basis that
it could be an export to both countries. Normally, this does
not present a problem unless the country of birth is
proscribed under 22 CFR 126.1 in which case we have to
secure additional information to confirm lack of significant
ties to the country of birth.
-- DDTC Webpage FAQs on Licensing of Foreign Persons,
Guidance as of 9/19/08
61
Potential Penalties for
Noncompliance – Commerce

Violations of EAR:
-- Civil penalties per violation up to the greater of
$250,000 or twice the amount of the transaction
that is the basis of the violation
-- Criminal fines of up to $1 million and/or 20 years
imprisonment
-- Denial of Export Privileges
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Potential Penalties for
Noncompliance – State

Violations of Arms Export Control Act (AECA)
or ITAR:
-- Civil Penalties of Up to $500,000 per violation
-- Criminal fines of up to $1 million and/or 20 years
imprisonment
-- AECA Debarment
63
Do I need to be concerned about export controls in this
research?
1.
2.
Public domain, and
a) No equipment, encrypted
software, listed-controlled
chemicals, bio-agents or
toxins, or other restricted
technologies are involved,
and
b) Information/software is
already published, and
c) There is no contractual
restriction on export, or
Fundamental Research
(note definitions and caveats
associated with this
exemption)
1.
1.
2.
3.
Equipment or encrypted software
is involved, or
Technology is not in the public
domain, and
Technology may be exposed to
foreign nations (even on campus)
or foreign travel is involved, and
a)
4.
The equipment, software
or technology is on the
Commerce Control List, or
b) Information or instruction is
provided about software,
technology, or equipment
on the CCL, or
c) The foreign nationals are
from or the travel is to an
embargoed country
The contract has terms e.g. a
publication restriction that effect
the Fundamental Research
Exemption
2.
3.
4.
Equipment, software, chemical,
bio-agent, or technology is on
the US Munitions List (ITAR), or
Equipment, software, chemical,
bio-agent or technology is
designed or modified for military
use, use in outer space, or there
is reason to know it will be used
for or in weapons of mass
destruction, or
Chemicals, bio-agents or toxins
on the Commerce Control List
are involved, or
The contract contains a
restriction on export or access
by foreign nationals
Probably
NO
(further review is required)
License May Be
Required
Federal Export Control Laws
YES
License Will Be
Required
64