1. NOAA Workshop on U.S. Export Controls June 7-9, 2011 – HCHB June 28-30, 2011 - Seattle

2. June 20112 U.S. Department of Commerce Bureau of Industry and Security Deemed Export Compliance Bernard Kritzer Director Office of Exporter Services BKritzer@bis.doc.gov

3. June 20113 Agenda Export Controls Overview How to Classify Items on the Commerce Control List Foreign National Visitor and Guest Access Program Deemed Exports Overview NOAA Deemed Export Compliance Program Exercises Show how to navigate and use the EAR Threat Briefing – Office of Export Enforcement ITAR Overview

4. June 20114 BIS is here to help! Outreach Activities Exporter Counseling Advisory Opinions Commodity Classifications Compliance Strategies

5. June 20115 Need Assistance? Bureau of Industry and SecurityPh. (202) 482-4811 Outreach & Educational Services Fax (202) 482-2927 14th St. & Pennsylvania Ave. NW Washington, DC 20230 Western Regional Offices 3300 Irvine Avenue, Suite 345Ph. (949) 660-0144 Newport Beach, CA 92660 Fax (949) 660-9347 96 North 3rd Street, Suite 250 Ph. (408) 291-4212 San Jose, CA 95112Fax (408) 291-4320

6. June 20116

7. 7 Bureau of Industry and Security ■ Bureau Mission: to advance U.S. national security, foreign policy, and economic interests Statutory Authority: Export Administration Act (EAA) of 1979, as amended; International Emergency Economic Powers Act, as amended Responsibilities: BIS is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and reexport of most commercial and dual-use items.

8. 8 June 2011 The Threat Dangers of illegal technology transfers are very real: ■ Dangers of illegal technology transfers are very real: ‑ WMD Proliferation ‑ WMD Proliferation ‑ Weapon Design/Manufacture ‑ Weapon Design/Manufacture ‑ Industrial Espionage ‑ Industrial Espionage ■ U.S. economy damaged by illegal technology transfers.

9. 9 June 2011 The Threat ■ Significance: Both national security and U.S. economy can be seriously damaged by illegal technology transfers. ■ Damage to the economy can include loss of large amounts of proprietary R&D done over many years. ■ Loss of proprietary R&D can result in the establishment and/or enhancement of foreign competitors in leading edge technology sectors.

10. 10 June 2011 Origin of the Threat ■ U.S. Intelligence Community has noted:  Collection and acquisition activities from over 56 foreign nations 13 countries assessed to be most aggressive collectors of U.S. proprietary economic information and critical technologies  Use of clandestine and illegal methods to collect technology  U.S. private sector studies estimate loss in the billions every year

11. 11 June 2011 What is being targeted? Nationally  Biotechnology  Pharmaceuticals  Nanotechnology  Quantum Computing  Advanced Materials  Communications and Encryption Technology  Weapons Systems yet unclassified

12. 12 June 2011 Methods Used to Target Technology Unsolicited emails Unsolicited emails Front companies Front companies Liaisons with universities that have ties to defense contractors Liaisons with universities that have ties to defense contractors Recruitment by foreign intelligence services Recruitment by foreign intelligence services National laboratories National laboratories Compromise of laptop while traveling overseas Compromise of laptop while traveling overseas Attending/Hosting conferences Attending/Hosting conferences Relocating R&D facilities overseas Relocating R&D facilities overseas Circumventing export control laws Circumventing export control laws Visiting scientific and research delegations Visiting scientific and research delegations Hacking Hacking Downloading information from your network Downloading information from your network

13. 13 June 2011 Deemed Export Enforcement Facts ■ Since 2004, Export Enforcement has closed over 120 investigations, involving a deemed export. Many of these investigations resulted in action being taken or the issuance of a warning letter. Since 2004, BIS has issued 19 final orders in 17 investigations involving deemed export violations. This has resulted in over $2 million in fines. Approximately one-half of the cases involved Voluntary Self- Disclosures (VSDs) and both commodity and technology exports. Eight cases involved deemed export violations alone. Most violations involved unauthorized transfers of Category 3 (Electronics) and Category 5 (telecommunications).

14. 14 June 2011 Key Compliance Issues Since 2004, a central theme that has been identified in the course of over 120 investigations of deemed exports has been the poor communications or disconnect between the key compliance actors in the private sector: 1)Export Compliance Personnel 2)Human Resources 3)Hiring Managers There were also issues surrounding foreign visitors and the need for enhanced compliance training. This is significant for high technology companies because the investigations identified the fact that many companies maintained effective programs for commodities but that it did not carry over in the area of technology.

15. 15 June 2011 Technology Control Plan (TCP) ■ The key to technology export compliance is an effective Technology Control Plan. ■ A TCP should contain the following essential elements: Management commitment to export compliance Physical security plan Information security plan Personnel screening procedures Training and awareness program Self-evaluation program ■ Meaningful compliance is “win-win” because it protects national security and allows a company to protect its proprietary technical data essential to R&D and bringing new products to market timely.

16. 16 June 2011 Key Points for Discussion Successful deemed export compliance incorporate commodities and technologies. Successful deemed export compliance also represents management’s commitment to a holistic approach, involving successful interaction between the key stakeholders--export compliance personnel, hiring managers, and human resources. Rarely have we seen a deemed exporter fail that established and maintained a strong TCP, successful interaction between internal stakeholders, and meaningful annual assessments of its program.

17. 17 June 2011 Key Points for Discussion The cost of such compliance is small given the potential downside loss of millions of dollars of proprietary technology and compromises to national security. Meaningful deemed export compliance also requires an active partnership between government and all affected stakeholders.

18. Overview of the Export Administration Regulations (EAR) Mr. Douglas Bell Senior Export Counselor Office of Exporter Services

19. June 201119 BIS Mission To advance U.S. national security, foreign policy, and economic interests. –BIS is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and reexport of most commercial items.

20. June 201120 How Do We Control Exports? Statutory Authority Export Administration Act (EAA) of 1979, as amended International Emergency Economic Powers Act, as amended

21. June 201121 Broad jurisdiction BUT… narrow license requirements Export Administration Regulations (EAR) Implement the Export Administration Act Apply to most commercial items

22. June 201122 Where can you find the EAR Code of Federal Regulations –15 CFR 730-774 –www.gpoaccess.gov Available on-line: –www.bis.doc.gov Order from Government Printing Office –866-512-1800 (toll-free) –www.access.gpo.gov

23. June 201123 Why Do We Control Exports? National Security Foreign Policy –Anti-terrorism –Crime control –Regional Stability Non Proliferation –Nuclear weapons –Chemical/biological weapons –Missiles

24. June 201124 Who Else is Involved in Export Controls? Other Regulatory Agencies Part 730, Supplement 3 US Dept. of State - Directorate of Defense Trade Controls (ITAR) US Dept. of Treasury - Office of Foreign Assets Control US Dept. of Energy Nuclear Regulatory Commission US Dept. of Commerce – Patent & Trademark Office US Department of Interior Food and Drug Administration U.S. Department of Commerce –records) Bureau of the Census (trade statistics and SEDs/AES U.S. Department of Homeland Security – Border and Transportation Security –U.S. Customs Service (works with BIS to ensure compliance )

25. June 201125 Important EAR Terms Dual-Use Item Export Reexport Deemed export/reexport Commerce Control List (CCL) Export Control Classification Number (ECCN)

26. June 201126 Dual-use Items Items that have both commercial and military or proliferation applications. This term is often used informally to describe items that are subject to the EAR.

27. June 201127 What is an item? Part 772

28. June 201128 What is an export? An export is a shipment or transmission of items out of the United States.

29. June 201129 What is a deemed export? The release of technology or source code to foreign national in the US is deemed to be an export.

30. June 201130 What is a reexport? A reexport is a shipment or transmission of items subject to the EAR from one foreign country to another.

31. June 201131 Technology and Software Exports and Reexports Include transfers regardless of the method or media –Consultations –Phone conversations –Instruction –Conferences –Application of knowledge –Visual inspections –Disks, blueprints, hardcopy, etc. –Internet, E-mail, Fax

32. June 201132 Other Important Concepts Commerce Control List (“CCL”) Export Control Classification Number (“ECCN”)

33. June 201133 What does “Subject to the EAR” mean? §734.2(a) Items and activities under the regulatory jurisdiction of the EAR –Remember there are other government agencies that administer export controls “Subject to EAR” does not mean that a license is automatically required

34. June 201134 What is “Subject to the EAR?” §§734.3-734.5 Items in the United States Some items located outside of the United States Activities of U.S. and Foreign Persons

35. June 201135 What is “Subject to the EAR”? Items in the United States §734.3(a)(1) ALL Items in the United States, except: –Publicly available technology & software (excluding encryption) –Items subject to the exclusive jurisdiction of another federal department or agency –Literary publications, such as newspapers or literary works (non-technical in nature)

36. June 201136 What is “Subject to the EAR”? Items Outside the United States §734.3 Some items located outside the United States : –U.S.-origin items wherever located –Certain foreign-made items, if: The value of the U.S. content exceeds the de minimis percentage The foreign-product item is the direct product of U.S. technology or software

37. June 201137 Overview-Summary BIS regulates exports, reexports and certain transfers of items subject to the EAR in addition to certain activities of U.S. persons. Important terms: Items, export, reexport, deemed export, CCL & ECCN First order of business is to determine whether or not your transaction is subject to the EAR.

38. Classification of Items on the Commerce Control List Darrell Spires Senior Electronics Engineer Office of Nonproliferation and Technology Transfer Controls

39. June 201139 Topics of Discussion Determining the Export Control Classification Number (“ECCN”) – The Commerce Control List (“CCL”) Self-Classification Official Commodity Classification Request –SNAP-R

40. June 201140 Commerce Control List (“CCL”) Part 774, Supplement No. 1 Contains lists of those items subject to the licensing authority of BIS Each entry is called an Export Control Classification Number (“ECCN”) Most items are described in terms of their technical parameters

41. June 201141 What does Export Control Classification Number (“ECCN”) tell us? Part 772 What items are controlled? Why BIS controls the item? Which destinations will require a license? – Country Chart in Supp. 1 to part 738, What (if any) list-based license exception applies?

42. June 201142 The Structure of the ECCN 0 A 018 0 Category AProduct Group 018Type of Control

43. June 201143 Categories of the Commerce Control List 0 A 018

44. June 201144 Product Groups of the Commerce Control List 0 A 018

45. June 201145 Type of Controls Associated with Entry 0National Security Reasons 1Missile Technology Reasons 2Nuclear Nonproliferation Reasons 3Chemical & Biological Weapons Reasons 9 Anti-terrorism Crime Control Regional Stability Short Supply UN Sanctions Surreptitious Listening 0 A 018

46. June 201146 Most of the time related items are grouped in series Equipment, assemblies and components Test, inspection and production equipment Software Technology Materials

47. June 201147 How to Read an ECCN entry Number and Heading License Requirements –Reasons For Control License Exceptions (List-based) List of Items Controlled – Units –Related Controls –Related Definitions –Items

48. June 201148 How to Read an ECCN Heading: ECCN & Description

49. June 201149 How to Read an ECCN License Requirements: Reasons for Control

50. June 201150 How to Read an ECCN License Exceptions: List-Based

51. June 201151 How to Read an ECCN List of Items Controlled: Units Related Controls Related Definitions Items

52. June 201152

53. June 201153 Technology and Software Classification Review Commerce Control List (CCL) Identify Export Control Classification Number (ECCN) In most cases, technology tied directly to hardware “development”, “production”, or “use” Refer to General Technology and Software Notes (Supplement No. 2 to Part 774)

54. June 201154 General Technology Note The export of “technology” that is “required” for the “development”, “production”, or “use” of items on the Commerce Control List is controlled according to the provisions in each category.

55. June 201155 5A101 5D101 5E101 Technology and Software ECCNs Telemetry Equipment Telemetry Software Telemetry Technology Product Groups D and E

56. 3A292 3 D292 3E292 Digital Oscilloscope Oscilloscope Software Oscilloscope Technology The deemed export rule affects technology and software. Deemed Export ECCNs Analog-digital conversion, greater than 1 giga-sample per second, 8 bits or greater resolution, stores 256 or more samples Production, development or use technology is controlled

57. June 201157 Technology and Software Terms Development Production Use Required

58. June 201158 "Development" "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

59. June 201159 "Production" Means all production stages, such as: product engineering, manufacture, integration, assembly (mounting), inspection, testing, quality assurance.

60. June 201160 "Use" Operation, installation (including on ‑ site installation), maintenance (checking), repair, overhaul and refurbishing.

61. June 201161 "Required" As applied to "technology" or "software", refers to only that portion of "technology" or "software" which is peculiarly responsible for achieving or extending the controlled performance levels, characteristics or functions. Such "required" "technology" or "software" may be shared by different products.

62. June 201162 EAR99 Items Items that are not specifically listed on the Commerce Control List yet subject to the EAR, use the designation EAR99 in place of an ECCN. This designation may be found at the end of every category of the CCL: “EAR99 Items subject to the EAR that are not elsewhere specified in this CCL Category or in any other category in the CCL are designated by the number EAR99.”

63. June 201163 How can you obtain the ECCN of your item? 1.Ask the manufacturer, but verify… 2.Self-classify Work with company engineer or someone who knows the item 3.Submit formal classification request to BIS

64. June 201164 An Approach to Self-Classifying Items Do an index comparison (good starting point) You need to understand the functions & characteristics of the item!

65. June 201165 How to Request a Classification File using SNAP-R (or BIS-748-P) “Best guess” ECCN Maximum of six items per request Item details –Manufacturer –Model/Part number –Applications –Specifications Include detailed technical specifications –Pictorial illustration, e.g. sales brochures

66. Commodity Jurisdiction Process 22 CFR 120.4(b) Determines if items are controlled on the U.S. Munitions List (Department of State) or the Commerce Control List (Department of Commerce) Criteria 22 CFR 120.3 –Is the item specifically designed, developed, configured, adapted, or modified for a military application? –Does the tem have a predominant civil application? –Does the item have a performance equivalent to those of an article or service used for civil application? –Is the item designed for military application and has significant military or intelligence applicability? The CJ application is reviewed by the Departments of Defense, State, and Commerce. Defense and Commerce recommend, State makes the final decision June 201166

67. June 201167 Classification- Summary Determining an ECCN 1.Check with the Manufacturer 2.Work with company engineer/someone who knows the item CCL is organized in a logical manner ECCN entries are based on the technical parameters of an item and contain a wealth of information regarding export controls 3.Submit formal classification request to BIS

68. Determining License Requirements based on ECCN and Destination Darrell Spires Senior Electronics Engineer Office of National Security and Technology Transfer Control

69. June 201169 Commerce Country Chart Part 738, Supplement No. 1 Reasons for Control/Country Chart If there is: –“X” in the box indicates a license requirement –No “X” in the box indicates no license requirement

70. June 201170 Structure Commerce Country Chart When the Destination and the Reason for Control Meet, Ask Yourself… Is there an “X” in the box?

71. June 201171 No License Required (“NLR”) You may use NLR for: –EAR99 items, or –ECCNs where there is no “X” on the Country Chart under reason(s) for control; and –When the transaction does not require an export license based on any other licensing requirement (e.g., end-use/user requirements)

72. June 201172 Summary -Determining Licensing Requirements based on ECCN & Destination “X” in the box indicates a license requirement No “X” in the box indicates no license requirement

73. License Exceptions Mr. Douglas Bell Senior Export Counselor Office of Exporter Services

74. June 201174 There is an “X” in the Box… What do I do?

75. June 201175 Topics of Discussion What is a License Exception? Restrictions List Based License Exceptions

76. June 201176 What is a License Exception? Part 740 An authorization that allows you to export or reexport, under stated conditions, items subject to the EAR that would otherwise require a license.

77. June 201177 When can’t you use a License Exception? §740.2 Authorization has been suspended or revoked Export subject to a General Prohibition that is not eligible for License Exceptions. Surreptitious Interception Devices Crime control items to most destinations Most Missile Technology control items Embargoed destinations, in most instances For Full list Refer to §740.2

78. June 201178 The way the EAR sees the world… Country Groups Supplement 1 to Part 740 Group A: Regime Members Group B: Less Restricted Group D: Countries of Concern Group E: Terrorist Supporting

79. June 201179 Some of the possible License Exceptions… Availability Based on transaction details - Shipments to US Government employees (GOV) –Civil End Users (CIV) –Repair, Replace or Service Items (RPL) –Technology and Software Restricted (TSR) – Baggage (BAG)

80. June 201180 Shipments to US Government Personnel §740.11 Shipments to USG employees either military or civilian Items for personal use or official capacity Also includes agencies of cooperating governments found in Country Group A:1 and Argentina, Austria, Finland, Hong Kong, Ireland, New Zealand, Singapore, South Korea, Sweden, Switzerland, and Taiwan. GOV

81. June 201181 CIV Civil End-Users §740.5 Country Group D:1, except North Korea Items that require a license to the ultimate destination for national security reasons only Civil end-uses and end-users –No military or proliferation end- users/uses

82. June 201182 RPL Replacement, Repair and Servicing of Equipment §740.10 All Destinations with some restrictions Commodities One-for-one replacement of a legally exported item Not to be used to stockpile inventory Servicing of the item can not enhance capabilities

83. June 201183 TSR Technology & Software Under Restriction §740.6 Country Group B Technology & software requiring a license to the ultimate destination for national security reasons only Prior to use, written assurance required from consignee

84. June 201184 TSR Written Assurance Letter, other written communication, licensing agreement, fax No written assurance -- No TSR

85. BAG Baggage §740.14 Personal Effects Household effects Tools of the Trade June 201185

86. TMP Temporary Imports, Exports and Re-exports §740.9 Exhibitions or Demonstrations Tools of the Trade Must Return to US within one year June 201186

87. June 201187 Summary- License Exceptions Make sure your export requires a license (i.e. there is an “X” in the box), before reviewing the License Exceptions. Before going to a specific license exception, make sure there are no restrictions. Each exception is unique, make sure you meet all of the criteria.

88. Douglas Bell Senior Export Counselor Office of Exporter Services Deemed Exports

89. June 201189 Deemed Exports: Definition Release of technology or source code that is subject to the EAR to a foreign national in the United States (EAR § 734.2(b)(2)(ii)). Release is “deemed” to be an export to foreign national’s home country

90. June 201190 Technology or Source Code Possible Release Methods Tours of laboratories Research, development, & manufacturing activities Foreign students or scholars conducting research Hosting a foreign scientist

91. June 201191 Deemed Export Rule Does Not Apply To: United States Citizens; Permanent Resident Aliens (i.e., “Green Card” holders); and Protected individuals under 8 U.S.C. 1324b(a)(3). Protected individuals include political refugees and political asylum holders.

92. June 201192 Country of Origin (Permanent Residency) Release of technology to a foreign national of one country, say India, who has obtained permanent residency in another, say the U.K., is treated as if the technology transfer were being made to the U.K. and licensing requirements would be the same as for a British national in the U.K. If the Indian national becomes a British citizen, transfers of technology would be viewed as transfers to the U.K.

93. June 201193 If an Indian foreign national becomes a citizen of the U.K. but retains Indian citizenship, the most recent citizenship is with the U.K. and releases of technology would be viewed as releases to the U.K. As a general principle, a foreign national’s most recently obtained citizenship governs the licensing requirement. Country of Origin (Dual Citizenship)

94. June 201194 Deemed Exports License Requirements Is the technology (or source code) subject the EAR? Is a license required?

95. June 201195 Technology Not Subject to the EAR Publicly available (EAR § 734.7) Generally accessible to the interested public Periodicals, books, print, electronic other media forms Libraries (university, public etc) Released at open conferences

96. June 201196 Technology Not Subject to the EAR Product of fundamental research (EAR § 734.8) Basic and applied research where resulting information is ordinarily published and broadly shared within scientific community

97. June 201197 Technology Not Subject to the EAR Educational information (EAR § 734.9) Released by instruction in catalog courses Associated teaching laboratories of academic institutions Patent information (EAR § 734.10) Public information available on patent application

98. June 201198 Technology Not Subject to the EAR (Cont.) Technology subject to the exclusive export licensing jurisdiction of another agency Directorate of Defense Trade Controls Nuclear Regulatory Commission Department of Energy

99. June 201199 License Exceptions Specifically for Deemed Exports CIV: Civil End Use (EAR § 740.5) ECCN 3E002 technology. Requires Foreign National Review TSR: Technology and Software Under Restriction (EAR § 740.6) Applies to technology and software under national security only for country group “B” nationals. Letter of assurance required

100. June 2011100 Deemed Export License Requirements Usually Commerce Control List Based Other license requirements based on End use Embargoed destinations Entity List

101. June 2011101 Deemed Export License Requirements Classify the commodity Second character of ECCN will be A, B or C Look for a related software (D) or technology (E) ECCN usually in the same category Most software and technology ECCNs apply to software or technology for “development,” “production,” or “use.”

102. June 2011102 BIS - Application Review Verify classification of technology Review licensing requirements & license exceptions based on home country Assess appropriateness of job description, responsibility, title Assess appropriateness of education level and field to technology & end-use Determine reasons for control for correct referrals

103. June 2011103 Foreign National Review (FNR) Sections 740.5 Applicant must submit FNR request before disclosing technology under license exception CIV. Request must provide same information on the foreign national as a license application. Faster review than license applications

104. June 2011104 Deemed Export Contacts Deemed Exports and Electronics Division Brian BakerKurt Franz Director Senior Export Policy Analyst 202-482-5534202-482-2278 bbaker@bis.doc.govkfranz@bis.doc.gov Bob Juste Senior Electrical Engineer 202-482-2845 rjuste@bis.doc.gov