Live Webinar – February 16, 2011

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Panel of PresentersPanel of Presenters

Sam Gilston has over 35 years of experience as a journalist in Washington. Starting in 1972, he has reported on U.S. government regulations,international trade policies, foreign relations and legislation. He became editorand publisher of The Export Practitioner in 2003, but he has covered and reportedon U.S. export controls and trade sanctions since 1981 when he founded andBecame editor and publisher of Washington Tariff & Trade Letter, the sisterpublication of The Export Practitioner.

Mr. Gilston has followed the evolution of U.S. export control policies andenforcement activities from their Cold War days to the current focus onterrorism, proliferation and new countries of concern. His reports have providedinsights and analysis of successful and unsuccessful efforts to renew the Export Administration Regulations, as well as the Obama administration’s new plans for major reform of U.S. export controls.

Program ModeratorProgram ModeratorSamuel M. GilstonSamuel M. GilstonEditor & Publisher - The Export PractitionerEditor & Publisher - The Export Practitioner

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Panel of PresentersPanel of Presenters

Steven Brotherton manages the firm's Export Controls Practice Group with locations in Washington, D.C. and San Francisco, CA. He counsels clients on export control laws and regulations, including compliance with the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), and sanctions regulations administered by the Office of Foreign Assets Control (OFAC). He advises a wide variety of clients on export control issues, ranging from Fortune 100 companies to mid-size companies and start ups.

Steven has developed and implemented export compliance programs, led audits, investigations and reviews, prepared export licenses and agreements, and has successfully represented companies in connection with government investigations and enforcement actions. He also leads export control classification projects, working directly with engineers, chemists and scientists toassess the applicability of export controls to a given technology.

Steven Brotherton Steven Brotherton Partner - Fragomen, Del Rey, Bernsen and Loewy, LLPPartner - Fragomen, Del Rey, Bernsen and Loewy, LLP

Tel. (415) 263-8442 - sbrotherton@fragomen.comwww.fragomen.com/exportcontrols

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Panel of PresentersPanel of Presenters

Michael Ferguson has been employed as Export Control Manager forNew Mexico State University, Las Cruces, New Mexico since 2004.

Prior to that, Mr. Ferguson spent over twenty years as a corporateattorney in the energy business. He retired as General Counsel of ElPaso Natural Gas Company, El Paso, Texas in 2001.

Before that, he was employed by the United States Department of Justice in Washington, D.C.

Michael D. FergusonMichael D. FergusonExport Control Manager - New Mexico State UniversityExport Control Manager - New Mexico State University

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Program AgendaProgram AgendaIn-depth review of:In-depth review of:

-- New Deemed Export requirements in Form I-129 Petition for a Nonimmigrant Worker-- Export Administration Regulations (EAR)-- International Traffic in Arms Regulations (ITAR)

-- Fundamental research exception

-- Commerce’s Deemed Export Advisory Committee’s recommendations

-- Advice coming from the BIS Emerging Technology and Research Advisory Committee

University compliance guidance:University compliance guidance:

-- Contracting language-- Information security-- Key compliance program elements

-- Tools to maintain compliance

PLUS:PLUS:Analysis on the impact of the verdict in the J. Reece Roth case on university research

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New Deemed Export New Deemed Export Requirements Requirements in Form I-129in Form I-129 Form I-129 petition

Used for various types of visa petitions for foreign national workers New initiations, amendments and renewals

Numerous changes to I-129 petition New form released to public November 23, 2010 Mandatory as of December 23, 2010 Export control certification mandatory as of February 20, 2011

Requires upfront determination of whether a foreign national will be provided access to controlled technology In the university context, this may not be known at the time the form is completed

Good News: The new Form I-129 requirement imposes no new legal requirement

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Export Control Certification: Export Control Certification: “The Big One”“The Big One”

Various visa types subject to new certification requirement H-1B, H-1B1 L-1 O-1A Certification not required, but deemed export rules still apply to other visa types such

as J-1○ (see attached glossary for visa types and definitions)

Not a new legal requirement; Affirmative review and certification required; In most cases an export license is not required (from I-129 instructions):

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New Export Control CertificationNew Export Control CertificationForm I-129, Part 6Form I-129, Part 6

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Overview:Overview:Deemed Export RuleDeemed Export Rule

BackgroundBackground 2002 Government Accounting Office (GAO) Report

Title: “Department of Commerce Controls over Transfers of Technology to Foreign Nationals Need Improvement”

Goal: GAO was asked to assess Commerce efforts to ensure that organizations (1) apply for these licenses when required to do so; and (2) comply with license conditions.

Key Finding: “Because Commerce does not review all relevant visa and immigration data, it may overlook foreign nationals potentially subject to deemed export licensing requirements.”

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2002 GAO Report2002 GAO Report Recommendation:

“We recommend that the Secretary of Commerce work with INS to use all existing U.S. government data in its efforts to identify all foreign nationals potentially subject to deemed export licensing requirements.”

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What is a “Deemed What is a “Deemed Export”?Export”? A release or transfer of technology or technical data to a Foreign

Person in the U.S. Physical export out of U.S. is NOT required Transfer takes place in the U.S. “Release” could occur by providing technical data stored on shared

network drives

“Deemed” to be an export to the Foreign Person’s “Home Country”

May require a U.S. government export license or other approval

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How Can a “Deemed How Can a “Deemed Export” Occur?Export” Occur?

Providing drawings to a Foreign Person employee

Technical conversations/ collaboration with Foreign Persons

Telephone conversations

Technical training

Working with Foreign Person interns or consultants

Collaborations w/ U.S. customers’ Foreign Person employees

Access to database that contains controlled technology

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Who is a “Foreign Who is a “Foreign Person”?Person”? Any Person who is not:

A U.S. Citizen; A U.S. Lawful Permanent Resident (Green Card Holder); A Person Granted Asylum; A Refugee; A Temporary Resident granted amnesty.

Foreign National includes persons with status such as H-1B, H-3, L-1, J-1, F-1 Practical Training, L-1, etc.

Tip: Though the deemed export requirements apply more broadly, the I-129 export control certification is only required for H, L and O petitions.

ImplicationsImplications

An export license may be required Limited exceptions and exemptions may apply in a university

setting

License processing times for foreign persons Currently 2-3+ months Denial possible Approval may contain restrictive conditions

Must curtail or modify activities pending license issuance

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Deemed ExportsDeemed Exports

Export Administration Regulations (“EAR”) Agency: U.S. Department of Commerce, Bureau of Industry and Security

(“BIS”)

Covers: “Dual use” or purely commercial technologies

International Traffic in Arms Regulations (“ITAR”) Agency: Department of State, Directorate of Defense Trade Controls

(“DDTC”)

Covers: Items that are specifically designed or modified for military or space application

I-129, Part 6

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EAREAR ITARITAR• “Dual Use”/Commercial

• Controlled items appear on Commerce Control List

• A number of exceptions available

• Examples of EAR Controlled Items:

• semiconductors• telecommunications• high speed computers• manufacturing equipment• encryption• many others

• Military/Space

• Controlled items appear on U.S. Munitions List

• License typically required for foreign person employees

• ITAR controlled items: Specifically,

• designed• modified• adapted• configured

…for military/space application

Typical EAR License Typical EAR License HierarchyHierarchy(Dual Use/Commercial Technologies)(Dual Use/Commercial Technologies)

“Terrorist Supporting Countries”

• Cuba, Iran, North Korea, Sudan, Syria

“Countries of Concern”

• List of approximately 22 countries, including former Soviet Republics, China, Vietnam

“Friendly Countries”

• All others (Europe, Australia, Central/South America, etc.)

Highest Controls

Lowest Controls

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ITAR Licensing PolicyITAR Licensing Policy(Military/Space Technologies)(Military/Space Technologies)

Policy of Denial for nationals from an ITAR Prohibited Country Listed at 22 C.F.R. Part 126.1

Includes, among others:

○ State Sponsors of Terrorism Cuba, Iran, North Korea, Sudan, Syria

○ Arms Embargo PR China, Burma, Liberia, Sudan

○ Cote d’Ivoire, Belarus, Eritrea, Venezuela, others

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ExemptionsExemptions

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The BasicsThe Basics Exemption will alleviate need for export license

Limited in scope and purpose

Must review facts on case-by-case basis

General University Rule: Accepting restrictions on the publication of information may trigger export control requirements

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Publicly Available/Public Publicly Available/Public Domain InformationDomain Information

Published Information

Open Conference/Meeting

Educational Information

Patents

Fundamental Research

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Fundamental ResearchFundamental ResearchEAR EAR §734.8§734.8

“Basic and applied research in science and engineering, where the

resulting information is ordinarily published and shared broadly

within the scientific community. Such research can be distinguished

from proprietary research and from industrial development, design,

production, and product utilization, the results of which ordinarily are

restricted for proprietary reasons . . .”

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University Fundamental University Fundamental ResearchResearchEAR EAR §734.8§734.8• Must be conducted at accredited institutions of higher

learning in U.S.

• University based research is not considered “fundamental research” if the university or its researchers accept (at the request, for example, of an industrial sponsor) restrictions on publication of scientific and technical information resulting from the project or activity.

• Exemption does not apply to the “use” of controlled equipment.

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Tech. Data to University Tech. Data to University EmployeesEmployeesITAR ITAR §125.4(b)(10)§125.4(b)(10) University may disclose technical data to Foreign

Persons who are bona fide employees if:

Employee permanently resides in U.S. throughout the period of employment;

Employee is not a national of a restricted country; and

University informs employee that data may not be transferred to other foreign persons without U.S. government written approval

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Commerce’s Deemed Export Commerce’s Deemed Export Advisory Committee’s Advisory Committee’s RecommendationsRecommendations DEAC resulted from a 2004 DOC IG Report critical of deemed

export compliance

DEAC was organized in 2006, and recommended broad export control reforms

BIS has increased training and outreach, and has initiated new Rulemakings

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““Use” TechnologyUse” TechnologyEAR Definition Part 772EAR Definition Part 772

“Use” Technology: Operation; Installation (including on-site installation); Maintenance (checking); Repair; Overhaul; and Refurbishing

BIS interprets “use” technology to include all of the elements

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University Compliance University Compliance GuidanceGuidance Contracting language

Screening for restrictive contract clauses that limit publication rights or the use of foreign nationals

Negotiation of restrictive clauses out of contracts

Determination of whether research is “fundamental” or “developmental”

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University Compliance University Compliance GuidanceGuidance Information security

Controlled information must be protected not only from purposeful but also inadvertent disclosure

A particular problem at universities, which frequently have substantial exposure to foreign nationals

Information security is usually implemented through a “Technology Control Plan” covering physical and electronic security

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University Compliance University Compliance GuidanceGuidance

Key compliance program elementsManagement commitment

Training Formal policies and procedures

○ Contract screening process○ Technology Control Plan

Export Control information dissemination○ Webpage, with links○ Contact Information○ Written guidelines, summaries, FAQs

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University Compliance University Compliance GuidanceGuidance Tools to maintain compliance

Ongoing periodic training Information updates Maintenance of updated guidelines, checklists and other tools Maintenance of licensing prerequisites

○ ITAR registration○ Electronic security certificates ○ DTrade and Snap-R certification

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Case StudyCase Study

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The Roth CaseThe Roth Case

Retired University Professor SentencedRetired University Professor Sentenced

to Four Years in Prison for Arms Export to Four Years in Prison for Arms Export

Violations Involving Citizen of ChinaViolations Involving Citizen of China

“John Reece Roth, 72, of Knoxville, Tenn., was sentenced to 48

months in prison for violating the Arms Export Control Act by

conspiring to illegally export, and actually exporting, technical

information relating to a U.S. Air Force (USAF) research and

development contract.”

Source: U.S. Department of Justice, Press Release, Wednesday, July 1, 2009

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The Roth CaseThe Roth Case Key Facts:

Department of Defense contract with Atmospheric Glow Technologies (AGT) to develop advanced plasma technology for use on Air Force Unmanned Aerial Vehicles (“drones”)

AGT entered into a subcontract with Prof. Roth in his individual capacity;

Prof. Roth used University facilities and hired foreign nationals (China and Iran) to serve as graduate assistants;

University Export Compliance Officer informed Prof. Roth that foreign nationals could not receive ITAR Technical Data under the contract

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The Roth Case and It’s The Roth Case and It’s Impact on University Impact on University ResearchResearch

First prosecution of deemed export violation in the context of university research

Limited direct impact on university export compliance○ The research work in the Roth case was only indirectly related

to the affected university’s compliance responsibility○ The individual convicted was unusually recalcitrant

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Visas Mantis ProgramVisas Mantis Program

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Visas Mantis ReviewsVisas Mantis Reviews

• Initiated at U.S. Consulates Abroad

• Review for Technology Alert List (“TAL”) Activity

• If TAL Activity -

– Mandatory Review: Cuba, Iran, North Korea, Sudan, Syria

– Likely Review: China, Russia

– Discretionary Review: If reason to believe entry will result in violation of U.S. export control laws

– I-129 Review: May be triggered if selecting Box 2 (license required)

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Technology Alert List Technology Alert List (last published version)(last published version)

Conventional Munitions Nuclear Technology Rocket Systems Rocket System and Unmanned

Air Vehicle Subsystems Navigation, Avionics and Flight

Control Chemical, Biotechnology, and

Biomedical Engineering Urban Planning

Remote Sensing, Imaging and Reconnaissance

Advanced Computer/Microelectronic Technology

Materials Technology Information Security Laser and Directed Energy

Systems Sensors and Sensor

Technology Marine Technology Robotics

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Visas Mantis ProcessVisas Mantis Process Initiated by Consular Officer

Interagency Review

Potential Referral for Office of Export Enforcement Investigation

Visa Application Held in Abeyance Pending Completion of Mantis Review (20+ days)

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Audience Q&AAudience Q&A Utilize the chat box to the bottom of your

screen to submit a question to the panel. Please address your question to a specific presenter.

OR

Press 01 on your touchtone phone and this will place you into the phone queue.

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Thank Your For Your Thank Your For Your AttendanceAttendance

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