1. Deemed Exports by Margaret Jones Hopson September 16, 2008

2. Agenda Fundamentals of Export Controls Exports Deemed Exports Questions and Answers

3. U.S. Export Controls – Coverage and Basic Principles ■ U.S. export controls apply to goods, materials, tests, software and technology (including information and technical data). ■ Under U.S. law, exporting is a privilege and not a right – it can be revoked or conditioned. ■ Exports of a wide range of high-technology and military- related items involved with optics, and associated technology, are subject to export controls. ■ Three principal export control/trade sanctions regimes -- DOC/EAR, State/ITAR, Treasury/OFAC. ■ U.S. export controls and trade sanctions have multiple goals that sometimes conflict.

4. Key Export Terms Subject to the EAR Item Export Re-Export Deemed export ECCN EAR 99

5. Subject to the EAR The EAR do not control all goods, services, and technologies. Most commercial items, often called “dual-use” items that have both commercial and military or proliferation applications. Purely commercial items without an obvious military use are also subject to the EAR. Other U.S. government agencies regulate more specialized exports, e.g. U.S. Department of State has authority over defense articles and defense services. Items on CCL. EAR 99 items.

6. Subject to the EAR Exceptions Items that are subject to exclusive jurisdiction of some other federal agency. Items specifically mentioned as “not subject.” Fundamental research. Publicly available technology and software.

7. Fundamental Technology Basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community. Distinguished from proprietary and industrial research, the results of which ordinarily are restricted for proprietary and/or specific national security reasons. Normally, the results of "fundamental research" are published in scientific literature, thus making it publicly available. Research which is intended for publication, whether it is ever accepted by scientific journals or not, is considered to be "fundamental research."

8. Publicly Available Technology and Software Technology and software that is published and generally accessible to the public through unlimited and unrestricted distribution and is either free or available at a price that does not exceed the cost of reproductions and distribution, is readily available at libraries, available through any patent office, or released at an open conference, seminar, or trade show.

9. Item “Items” include commodities, software or technology, such as clothing, building materials, circuit boards, automotive parts, blue prints, design plans, retail software packages and technical information.

10. Export Any item sent from the U.S. to a foreign destination is an export. How item is transported outside U.S. does not matter. E.g. item sent by regular mail or hand-carried on an airplane. Blueprints sent via facsimile to a foreign destination. Software uploaded to or downloaded from an Internet site. Technology transmitted via e-mail or during a telephone conversation.

11. Export An item is also considered an export even if: Leaving the U.S. temporarily. Leaving the U.S. as a gift. Going to a wholly-owned U.S. subsidiary in a foreign country.

12. Export “Export” can include foreign-origin items: exported from U.S. transmitted or transshipped through U. S. or being returned from U.S. to its foreign country of origin.

13. Re-Export The shipment or transmission of an item subject to the EAR from one foreign country to another foreign country. The "release" of technology or software subject to the EAR in one foreign country to a national of another foreign country.

14. Deemed Export An export of technology or source code released to a foreign national within the U.S.

15. ECCN ECCN, stands for Export Control Classification Number. A key to whether an export license is needed is knowing whether your item has a specific ECCN. ECCNs are accompanied by reasons for control.

16. EAR 99 EAR99 is catch-all designation for items that are covered by the EAR, but not specified on CCL. Majority of commercial exports from the U.S. fall into this category. EAR99 items can be shipped without a license to most destinations under most circumstances. There are limitations on the use of EAR99 (e.g. prohibited destinations, end-uses, end-users)

17. How to Determine If You Need an Export License License requirements are dependent upon an item's technical characteristics, the destination, the end- user, and the end-use. What are you exporting? Where are you exporting? Who will receive your item? What will your item be used for?

18. Deemed Exports – Key Concepts The release of technology or source code to a foreign national within the U.S. Such a release is deemed to be an export to the home country of the foreign national.

19. What is a “release” of technology? Technology is "released" for export when: available to foreign nationals for visual inspection; exchanged orally; or made available by practice or application under guidance of person knowledgeable about the technology.

20. What is “Technology”? "Technology" is specific information required for the "development," "production," or "use" of a product. "Required" technology- that portion of technology particularly responsible for achieving or exceeding controlled characteristics “Development” is related to all stages prior to production, such as: design, research, analyses, assembly and testing of prototypes, production schemes, layouts.

21. What is “Technology”? (cont.) "Production" - all production stages, such as: engineering, manufacture, integration, assembly (mounting), inspection, testing, quality assurance. "Use" - Operation, installation (including on-site installation), maintenance (checking), repair, overhaul and refurbishing.

22. Controlled Technology The use of controlled equipment is not a deemed export. A deemed export occurs only if controlled technology is transferred.

23. Required “Use” Technology All six attributes of the definition of "use" must be present to qualified as controlled "use" technology: operation installation maintenance repair overhaul AND refurbishing. Otherwise, technology is likely EAR99.

24. Foreign Nationals The deemed export rule does not apply to a foreign national who is granted: U.S. citizenship; permanent residence status (Green Card holders) "protected individual" status (political refugees and political asylum holders).

25. How Can We Help You? JW's Export Compliance Assistance Includes: Deemed export licensing, compliance counseling, and representation, including the provision of deemed export solutions incident to the visa processing, recruitment, hiring and deployment of foreign nationals. Representation of clients in export control enforcement actions and government investigations. Internal investigations and preparation of voluntary disclosures. Development of comprehensive export control compliance programs, including a technology control plans. Export control merger and acquisition due diligence. Development of training modules and provision of in-house training.