U.S. Export Controls Getting Started: Exporter, Manufacturer and How to Comply with Commercial, Dual-Use, and and Defense Article Regulations and U.S. Trade Sanctions Getting Started: Exporter, Manufacturer and Brokering Registration Requirements, On-Going Obligations and Empowered Officials May 11, 2016 Copyright Holland & Hart LLP 2.

Disclaimer This presentation, related materials and subsequent discussion are provided for educational purposes only. They do not constitute legal advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the speaker. This presentation is not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.

AGENDA Introductions EAR / ITAR Overview Licensing and Commodity Jurisdiction OFAC Compliance Lunch Keynotes Economic Espionage and Theft of Trade Secrets Export Regulations Enforcement Export Control Reform Initiative Update ITAR Registration Requirements (Including ITAR Part 129 Brokering) Export Controls Compliance Programs (Including Key Lists to Check) and Voluntary Disclosures

REGISTRATION REQUIREMENTS – AN OVERVIEW Any person who engages in the United States in the business of either: manufacturing or exporting defense articles or furnishing defense services is required to register with the Directorate of Defense Trade Controls. Engaging in the business of manufacturing or exporting defense articles or furnishing defense services requires only one occasion of manufacturing or exporting to trigger registration. Manufacturers who do not engage in exporting are still required to register.

REGISTRATION REQUIREMENTS – AN OVERVIEW Registration is not required for: Officers and employees of the United States Government acting in an official capacity. Persons whose pertinent business activity is confined to the production of unclassified technical data only. Persons all of whose manufacturing and export activities are licensed under the Atomic Energy Act of 1954, as amended. Persons who engage only in the fabrication of articles for experimental or scientific purpose, including research and development.

REGISTRATION REQUIREMENTS – AN OVERVIEW Registration is also required for persons engaged in the business of “brokering activities” Applies to both U.S. and foreign persons located in the U.S. or owned or controlled by a U.S. person Brokering activities consist of “any action on behalf of another to facilitate the manufacture, export, permanent import, transfer, reexport or retransfer of a U.S. or foreign defense article or defense services regardless of its origin.” One occasion is sufficient to trigger registration May request written guidance from DDTC if unsure

REGISTRATION REQUIREMENTS – AN OVERVIEW Brokering registration is not required for: Foreign government or international organizations acting in an official capacity Persons exclusively in the business of financing, insuring, transporting, customs brokering or freight forwarding. Policy on embargoes and other prohibitions applies even if exempt from registration Section 126.1 countries DDTC approval required but presumption of denial One occasion is sufficient to trigger registration

REGISTRATION REQUIREMENTS – AN OVERVIEW Registration is primarily a means to provide the U.S. Government with necessary information on who is involved in certain manufacturing and exporting activities. Registration does not confer any export rights, brokering approval, or privileges. A company must be registered to be able to obtain an export license or approval for brokering activities from DDTC. There is no registration requirement under the EAR.

REGISTRATION REQUIREMENTS – AN OVERVIEW Annual Requirement Registration Package Includes: DS 2032 Statement of Registration Signed by a senior officer of the company Certificate of Incorporation, Good Standing or Organization Registration Fee No separate brokering registration required Electronic submission Average review time of registration request is 45 days

REGISTRATION REQUIREMENT – AN OVERVIEW Registration Fee $2,250 annual fee for first year registrants, brokers and registrants who did not submit license application the prior year. Renewal - Tier based fee based on number of license applications submitted each year. Second tier $2,750 – 10 or fewer license application at renewal Third tier - $2,750 + $250 x the total number of applications over 10 Renewal due at least 30 days prior to expiration. DDTC will notify registrant of fees due. Electronic Payment of Registration Fees (http://www.pmddtc.state.gov/registration/epr.html)

REGISTRATION REQUIREMENT – AN OVERVIEW Lapse in Registration Lapsed registration fees apply after a month of failure to renew registration Prorated cost for each month – up to $187.50 per month Reinstating Registration When not Engaged in Defense Trade Must include certification stating company has not in the business of manufacturing/exporting defense articles or defense services during the lapsed period No back fees required. If Company Is no Longer engaged in Defense Trade Must file a notification with DDTC within 30 days prior to expiration of the registration

ON GOING REGISTRATION OBLIGATIONS Required Notification within 5 days Change of Status (e.g., indictment or conviction of a senior officer or ineligibility) Material change of information on Statement of Registration: Change in senior officers Merger/Acquisition/ Change in Control (all U.S. parties) Acquisition or divestment of a subsidiary Change in USML Categories

ON-GOING REGISTRATION OBLIGATIONS Advanced Required Notification within 60 days of any intended sale or transfer to a foreign person of ownership or control of the registrant or any entity Notification does not replace the need for export licenses if required May request a waiver of the 60 day requirement, if needed

ON-GOING REGISTRATION OBLIGATIONS Merger / Change in Control Notifications must include: New firm name and all previous firm names; Registration number that will survive and those that are to be discontinued Before and after organizational charts Organizational charts should include all subsidiaries engaged in ITAR controlled activities Remember – Just one registration statement should be in place if more than one subsidiary is engaged in ITAR activities

ON-GOING REGISTRATION OBLIGATIONS Merger / Change in Control Notifications must include (continued): License numbers of all approvals on which unshipped balances will be shipped under the surviving registration number Failure to provide information will render license invalid Amendments to agreements approved by DDTC to change the name of a party to those agreements

ON-GOING REGISTRATION OBLIGATIONS DDTC has published specific guidance regarding: Who needs to submit notification and when Buyer, Seller or Both? What information needs to be included How the information needs to be presented Guidance can be found at: http://www.pmddtc.state.gov/registration/notificati on_chreg.html

REPORTING REQUIREMENTS Any person registered as a broker must provide DDTC an annual report of brokering activities in the previous year with the registration renewal. The report must describe all brokering activities during the previous year and identify: the broker’s name, address, registration code; all persons who participated in each activity (name address, nationality and country); quantity, description and U.S. dollar value of the defense articles/services other consideration received (type and U.S. value) and the source. Report must be signed and certified as accurate and complete by an empowered official

MAINTENANCE OF RECORDS Registrants are required to maintain Records concerning the manufacture, acquisition and disposition (to include copies of all documentation on exports using exemptions and applications and licenses and their related documentation) of defense articles; of technical data; the provision of defense services….. Records of brokering activities Records must be maintained for 5 years. Electronic records are ok as long as they can be printed, if required. Records must be available if requested by DDTC.

EMPOWERED OFFICIALS DESIGNATION AND RESPONSIBILITIES DDTC Registrants are required to designate one or more empowered officials The Empowered Official must be: A U.S. person in a position having authority for policy or management within the organization Directly employed by the organization Legally empowered in writing by the applicant to sign license applications or other requests for approval on behalf of the applicant

EMPOWERED OFFICIALS DESIGNATION AND RESPONSIBILITIES The Empowered Official must Understand the provisions and requirements of the various export control statutes and regulations, and the criminal liability, civil liability and administrative penalties for violating the Arms Export Control Act and the ITAR If you have been designated as the Empowered Official of your organization, it is you responsibility to understand the ITAR and your obligations as Empowered Official.

EMPOWERED OFFICIALS DESIGNATION AND RESPONSIBILITIES The Empowered Official must: Have the independent authority to: Enquire into any aspect of a proposed export or temporary import by the applicant, and Verify the legality of the transaction and the accuracy of the information to be submitted; and Refuse to sign any license application or other request for approval without prejudice or other adverse recourse. Registrants are required to grant this independent authority to its empowered officials.

Questions?