© Goulston & Storrs All rights reserved. MA Export Center Export Expo: Strategic Planning for Export Compliance Operations December 9, 2014 Kerry T. Scarlott, Esq. Goulston & Storrs PC

© Goulston & Storrs All rights reserved. 2 PRINCIPAL EXPORT CONTROL LAWS AND REGS International Traffic in Arms Regulations (“ITAR”) –Controls “military” articles, technical data and services –Administered by Directorate of Defense Trade Controls, Dept. of State (“DDTC”) Export Administration Regulations (“EAR”) –Controls “commercial” articles and technology –Administered by the Bureau of Industry and Security, Dept. of Commerce (“BIS”) Office of Foreign Assets Control (“OFAC”) Regulations –Bars transactions involving embargoed countries or certain individuals and entities –Controls both military and commercial –Administered by OFAC, part of the Dept. of Treasury

© Goulston & Storrs All rights reserved. 3 THE LINE BETWEEN ITAR AND EAR Initial classification is key –Only ITAR or EAR applies to a given article Why does it matter? –If ITAR applies, must have gov’t license to export –If EAR applies, rarely need gov’t license to export IF IN DOUBT, TREAT AS ITAR

© Goulston & Storrs All rights reserved. CJ Considerations Before You Design / Build CJ considerations should be part of earliest product development effort Generally, goal is to minimize application of the ITAR Consider potential commercial applications and document motivation / effort to meet those applications / demands 4

© Goulston & Storrs All rights reserved. Key Aspects of Making Correct Jurisdiction Determinations Consider CJ issue before you design / build Involve the right people / consider committee Consider all of the facts – don’t self blind Follow ITAR Section and Catch and Release If self-determine, document all factors, reasoning and determination Consider formal CJ determination request – it is an art If self-determine, document all factors, reasoning and determination 5

© Goulston & Storrs All rights reserved. Developing an Effective Export Compliance Program Its an old adage, but it all starts from the top (tone, commitment and resources) Take into account all facets of your business (and take into account the type of business - e.g., industry, mfg v. service, etc.) 360 degree review –Internal Departments Subsidiaries / affiliates –External Supply chain Sales channels Delivery channels 6

© Goulston & Storrs All rights reserved. Developing an Effective Export Compliance Program (cont’d) Develop CJ and classification strategy and processes Develop licensing strategy, taking into account license exceptions / exemptions Prepare written compliance plan / procedures General considerations –One size does not fit all –Tailor, and prepare in plain English –Involve all stakeholders –Train, train, and train again 7

© Goulston & Storrs All rights reserved. Developing an Effective Export Compliance Program (cont’d) Key parts of ECP –Corporate Commitment and Policy (maximize export sales while ensuring compliance) –Segregate EAR / ITAR –Detailed procedures, with checks and safeguards –Training / Awareness –Internal Monitoring / Audits –Handling Violations Document with clear standard operating procedures –Situation specific? –R&D, Mfg, Sales, Shipping, etc. 8

© Goulston & Storrs All rights reserved. Developing an Effective Export Compliance Program (cont’d) Be prepared to address odd-ball situations – establish clear lines of communication and authority Consider other trade-related legal regimes and contexts –Anti-boycott –FCPA –Foreign agent / representative / distribution arrangements –Sales contracts Implement / train / refresh (both writings and training) 9

© Goulston & Storrs All rights reserved. THANK YOU Kerry T. Scarlott, Esq. Goulston & Storrs PC T C