Export/Import Issues & Data
Movement Concerns in CrossBorder Transactions
Todd Taylor
July 23, 2015
Cross-Border Contracting Issues
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Can it be done?
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How should it be done?
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Are there legal restrictions prohibiting the purchase or
sale of the good or service?
Are there special rules relating to the contract or the
business arrangement?
Can it be done?
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Sanction Regimes
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Export Restrictions
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Import Restrictions
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Data Movement Concerns
OFAC Regulations
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The Office of Foreign Asset Control
(“OFAC”), part of the U.S. Dept. of the
Treasury, is the primary U.S. regulator
responsible for administration of a wide
range of U.S. economic and trade sanctions.
OFAC rules are largely found in Executive Orders and
implementing regulations (i.e.,31 CFR Part 501 – 598)
issued pursuant to laws such as the Trading with the
Enemies Act, the International Emergency Economic
Powers Act and the United Nations Participation Act.
OFAC Regulations: Country-Based Rules
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OFAC country-based regulations generally prohibit a
wide range of transactions with or within certain
countries.
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Traditionally, the countries covered by the more
comprehensive country-based restrictions are: Burma,
Cuba, Iran, N. Korea, Sudan & Syria.
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Traditionally, the most onerous OFAC sanction regimes
applied to Cuba, Iran & Sudan.
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But new regulations have eased some Cuban sanctions
(31 CFR Pt. 515) and the P5 +1 Joint Comprehensive Plan
of Action may eventually lead to a lessening of some
Iranian sanctions.
Sanctions may apply to export, re-export and import of
good or services.
OFAC Regulations: List-Based Rules
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OFAC also administers sanction programs
prohibiting transactions with certain persons or
entities.
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So if my contract counter-party is not in or
affiliated with a sanctioned country can I
enter into the contract? -- Not necessarily.
Such programs include enforcement of UN Security Council
resolutions, anti-terrorism and anti-narcotic efforts.
Restricted persons and entities are usually found on the List of
Specially Designated Nationals and Blocked Persons (the
“SDN List”).
OFAC Regulations: Potential Concerns
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“Facilitation”
-- Certain OFAC regulations contain
prohibitions on U.S. persons “facilitating”
transactions that otherwise would be barred under
other OFAC regulations (e.g., 31 CFR §§ 538.206,
538.407 & 560.208).
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Penalties: Violations of OFAC regulations can
lead to civil and criminal penalties.
Export Control Regulations
In the U.S. (outside of OFAC) the primary export
control regulations are:
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The International Traffic in Arms Regulations (the
“ITAR”)
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The Export Administration Regulations (the “EAR”)
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ITAR (22 CFR Parts 120 – 130)
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ITAR implements the Arms Export Control Act.
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Regulates permanent and temporary export of defense articles and defense
services.
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Also addresses temporary imports of defense articles and defense services.
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ITAR is administered by the U.S. Dept. of State, Directorate of Defense Trade
Controls (“DDTC”).
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Defense articles subject to the ITAR are generally set forth on the United States
Munitions List (the “USML”). See 22 CFR Part 121.
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The EAR (15 CFR Parts 730 – 774)
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The EAR was originally promulgated pursuant to the Export
Administration Act (which has since expired), but remains in
effect pursuant to executive order under the authority of the
International Emergency Economic Powers Act.
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Subject to some exceptions, the EAR governs the export of
most items not covered by ITAR or the nuclear related
controls of the Dept. of Energy & the NRC.
The EAR is administered by the Bureau of Industry and
Security (“BIS”), an agency of the U.S. Commerce Dept.
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Understanding the EAR
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The EAR is notoriously complex.
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To better navigate the EAR, an exporter should have
answers for four key questions in connection with every
export:
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What is being exported?
Where will the items be exported to?
Who will receive the exported items?
What will the exported items be used for?
What is being exported?
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Exporter must determine their Export
Classification Control Number (“ECCN”) listed on
the Commerce Control List (“CCL”).
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Items subject to the EAR but not on the CCL are
generally classified as EAR99 – which are
subject to much less stringent controls.
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2A000:Entry heading.
LICENSE REQUIREMENTS
REASON FOR CONTROL: NS, NP, AT
Control(s)
Country Chart
NS applies to entire entry
NS Column 2
NP applies to 2A000.b
NP Column 1
AT applies to entire entry
AT Column 1
LICENSE EXCEPTIONS
LVS: $5,000
GBS: Yes
CIV: N/AL
LIST OF ITEMS CONTROLLED
Unit: Number
Related Definition: N/A
Related Controls: N/A
Items: A. Having X.
B. Having Z.
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Where is the item being exported to?
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Export restrictions will vary depending on the export location.
Who & What
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Who will receive the exported item?
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Even if exports are permitted to a given country, certain persons and
entities are blocked from receiving US exports and licenses may be
required to export to other persons and entities.
• Exporters will need to review various restricted lists.
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What will the exported item be used for?
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Certain end uses are blocked or require a license (see e.g., 15 CFR Part
744).
Export Control Reform
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On August 13, 2009, President Obama launched a review of the U.S.
export control system, with a view to simplifying the exporting
process.
The goals of this Export Control Reform Initiative are to:
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Develop a single export control licensing agency for dual-use items,
munitions and exports licensed to embargoed destinations;
• A unified control list;
• A single enforcement agency; and
• A single integrated information technology system (to include a single
database of sanctioned and denied parties).
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Primary effect of reform effort so far is to move certain items off
the USML to CCL.
Foreign Import Restrictions
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Even if an export is permitted under U.S. law, certain
countries may restrict the importation of the item.
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China –
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Prohibits import of printed matters, films, photographs, audio tapes and
other media that may be detrimental to China’s politics, economy, culture or
morality.
Chinese CEC Regulations require licenses for importation of certain
technology with encryption functionality.
Russia does not recognize Wassenaar personal use exception
for encryption products.
Export Best Practices When Contracting
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If you are exporting an item you are not manufacturing, require (if
possible) the manufacturer to provide an ECCN.
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Ensure that you understand your ECCN classification prior to entering
into agreements to supply items.
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Obtain appropriate representations from customers (e.g., will not
engage in prohibited re-exports, will not use items for prohibited end
uses, etc.)
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Engage local counsel if there are concerns about the potential impact of
local regulations on the importation of any particular items.
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Cross Border Transactions: Data Privacy Issues
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Gramm-Leach-Bliley Act/Information Security Oversight
HIPAA/Business Associate
Foreign Data Privacy Laws
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EU Data Privacy Directive
• Promulgated by the EU in 1995, required member states to adopt
implementing legislation by 1998
• Covers personally identifiable data related to a human person
• Sets restrictions on export of data from EU
• FTC Safe Harbor
• Potential updates to EU Data Privacy Rules?
Contractual Data Privacy/Information Security
Cross Border Data Privacy/Security: Best Practices
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Understand the data that might be accessible by your foreign vendor/business
partner
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If the foreign vendor/business partner is handling sensitive data, ensure
adequate data protection processes are in place:
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Is the data subject to a special legal or regulatory regime (e.g., GLBA, HIPAA, PCI DSS,
contractual restrictions?)
perform due diligence on vendor/business partner’s information security programs;
ensure appropriate contractual provisions are in place (e.g., information security commitments,
BAAs, EU Model Clauses, etc.);
try to only allow data access (no local storage)/use of clean desk policies; and
ensure (a) measures are in place to require investigation assistance, and that (b) local laws will
allow enforcement of NDAs.
If accepting sensitive data from foreign affiliates/customers/business partners
ensure that you have taken necessary steps to comply with local law (e.g., Safe
Harbor certification, Model Clauses, approval from DPAs. etc.)
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Todd C. Taylor
(704) 331-1112
toddtaylor@mvalaw.com
Doing Business in Emerging
Markets – IP Considerations
Henry Ward
July 23, 2015
Discussion Topics
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Business Considerations.
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Domain Names.
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Trademarks.
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Patents.
Business Considerations
Business Strategic Plan & IP Audit
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In what countries does the company currently conduct business? In what
countries does the company intend to conduct business and what is the
time frame?
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What domain name and trademark registrations does the company have
in the U.S. and outside the U.S.? What patents and patent applications
does the company have in the U.S. and outside the U.S.?
Domain Names
Should the company register country-specific
domain names?
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Does the company plan to have physical offices in a
country?
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Does the company need to have an internet presence
in the local language?
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Does the country want defensive registrations?
Trademarks
What are the business and operative
considerations?
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Does the company plan to manufacture or offer for sale
products in a country?
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Trademark Searching.
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Trademark Registration and Maintenance.
Patents
What are the business and operative
considerations?
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Does the company plan to manufacture or offer for sale products in
a country?
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Where are the company’s competitors located and where do they
manufacture their products? Do the competitors own patents?
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Patent Searching.
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Patent Application Filing and Maintenance.
QUESTIONS?