Association of Corporate Counsel - Williams Mullen

1 Williams Mullen 2013 DEVELOPMENTS IN EXPORT CONTROL LAWS Association of Corporate CounselApril 17, 2013 Thomas McVeyWilliams MullenWashington, DC(202) Williams Mullen 2013 Note Regarding Issuance of Final RegulationsThe material in this presentation is subject to amendment based upon the issuance of final regulations by the Department of State and Department of Commerce related to the subject matter discussed herein on or about the date of this presentation. For questions regarding possible amendments please contact Thomas McVey at Williams Mullen Export Control Laws ITAR - International Traffic In Arms Regulations Export Administration Regulations Sanctions Laws4 Williams Mullen 2013 International Traffic In ArmsRegulations (ITAR) Enabling statute.

2 Arms Export Control Act Regulations - International Traffic In Arms Regulations ( ITAR ) (22 Chapter 1, Subchapter M, parts 120-130) Department of State Directorate of Defense Trade Controls List of Controlled Products - Munitions List Controls Military Items Broad scope encompassing many items originally developed for military use5 Williams Mullen 2013 Defense Articles - Munitions List (USML) Category 1: Firearms, weapons Category 2: Guns and armaments Category 3: Ammunition, ordinance Category 4: Launch vehicles, missiles, rockets Category 5: Explosives, incendiary agents Category 6: Naval vessels Category 7: Military vehicles Category 8: Aircraft and equipment Category 9: Military training services, equipment Category 10: Protective personnel equipment and shelters Category 11: Military electronics Category 12: Optical and guidance control equipment Category 13: Auxiliary equipment (cameras, encryption, camouflage) Category 14: Toxicological, chemical, biological agents, protective equipment Category 15: Space systems and equipment Category 16: Nuclear weapons, technology Category 17: Classified technical data and services Category 18: Directed energy weapons Category 19.

3 Reserved Category 20: Oceanographic equipment Category 21: Other items designed or adapted for military use6 Williams Mullen 2013 ITAR Also Controls Technical Data And SoftwareTechnical Data:Information which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles, and other items. ( see 22 CFR )7 Williams Mullen 2013 Technical Data and Software (Cont d)BlueprintsTraining ManualsDataModels8 Williams Mullen 2013 Methods For Exporting Technical Data and Software Send or take it abroad ( , send disk in the mail) Go abroad and talk about it Electronic transmissions, e-mail, phone call, fax to foreign party Foreign national comes to and has access to it9 Williams Mullen 2013 Defense Services Furnishing of assistance to foreign persons related to Defense Articles.

4 Examples: Consulting Engineering Technical Services Military training Other services Furnishing technical data Requires Technical Assistance Agreement (TAA)10 Williams Mullen 2013 Examples of USML Items Electronic equipment which is specifically designed, modified or configured for military application Drone aircraft Navigation systems for military vessels Command, control and communications systems including radios (transceivers) and identification equipment Military training services and equipment Underwater sound equipment Flight control products, software and technologies Satellites, launch vehicles and ground control equipment, including parts, technologies and software Classified products, technical data and software Anti-gravity and pressure suits, atmosphere diving suits Body armor (certain Types only)

5 Naval vessels and related equipment, parts, technologies and software Protective personnel equipment and shelters Auxiliary military equipment11 Williams Mullen 2013 Items on USML Computers and Software Computers or software designed or modified for military use, or for use with any USML item (XI(a)(6)) Experimental or developmental electronic equipment designed or modified for military use (Category XI(a)(7)) Manufacturing and test equipment for USML items12 Williams Mullen 2013 Itemson USML Parts and Components Parts, components, accessories designed for a USML item are also on USML See-Through Rule End Product that contains a part/component on USML is also on USML13 Williams Mullen 2013 Services on the USML Intelligence and security services often covered under ITAR Military advice to foreign persons is covered under ITAR ( ) Military training for foreign persons ( ) Training in use of USML items (subject to certain exemptions)

6 14 Williams Mullen 2013 Government Sponsored Research Funding SBIR, DOD university research funding and other defense research funding Resulting products, technical data, software and services are often on Munitions List15 Williams Mullen 2013 USML Category XXI: Catch-All Category XXI Miscellaneous Articles:(a) Any article not specifically enumerated in the other categories of the Munitions List which has substantial military applicability and which has been specifically designed, developed, configured, adapted, or modified for military purposes. The decision on whether any article may be included in this category shall be made by the Director, Office of Defense Trade Controls Williams Mullen 2013 Commodity Jurisdiction Requests Procedure for DDTC to determine if item is on Munitions List Binding, written response Can also be used to request removal of item from USML Form DS - 407617 Williams Mullen 2013 Requirements If Item Is On USML Physical articles: Cannot export unless obtain export license ( DSP-5) Technical Data and Software.

7 Cannot send or take out of without export license Cannot transfer to foreign party in without export license18 Williams Mullen 2013 Requirements If Item Is On USML (cont.) Services: Cannot perform defense services for foreign persons overseas or in the United States without license (TAA) Imports: Items on USML and Munitions Import List subject to import restrictions19 Williams Mullen 2013 Other ITAR Requirements Registration Brokering Recordkeeping Temporary Imports Debarred Party Screening20 Williams Mullen 2013 Export Administration Regulations Enabling Statute: Export Administration Act (expired), International Emergency Economic Powers Act Regulations.

8 Export Administration Regulations (EAR) Department of Commerce Bureau of Industry and Security List of Controlled Products Commerce Control List Controls Dual-Use Items21 Williams Mullen 2013 Commerce Control List Examples of Products Covered- encryption- computers, networking- aerospacedevices - lasers - high performance- chemicalsmaterials- power generation - telecom equipment- police equipment - high strength fibers- electronics- nuclear industry products- sensors- high performance pumps,- electronicsgenerators, processing- machine tools equipment- fingerprint/biometrics- others22 Williams Mullen 2013 Commerce Control ListComputersTelecomLasersMachine Tools23 Williams Mullen 2013 Requirements for all exports (even if product is not on CCL): Know Your Customer Requirements 15 CFR Part 732, Supplement No.

9 3 Denied persons list 15 CFR Part 764 Recordkeeping requirements 15 CFR Part 762 Shipment documentation 15 CFR Part 758 Prohibited End-Use Controls 15 CFR Part 74424 Williams Mullen 2013 Due Diligence Requirements> BIS Red Flags> EAR Part 732 Supplement No. 31. The customer or purchasing agent is reluctant to offer information about the end-use of a The product's capabilities do not fit the buyer's line of business; for example, a small bakery places an order for several sophisticated The product ordered is incompatible with the technical level of the country to which the product is being shipped. For example, semiconductor manufacturing equipment would be of little use in a country without an electronics The customer has little or no business The customer is willing to pay cash for a very expensive item when the terms of the sale call for The customer is unfamiliar with the product's performance characteristics but still wants the Routine installation, training or maintenance services are declined by the Delivery dates are vague.

10 Or deliveries are planned for out-of-the-way A freight forwarding firm is listed as the product's final The shipping route is abnormal for the product and Packaging is inconsistent with the stated method of shipment or When questioned, the buyer is evasive or unclear about whether the purchased product is for domestic use, export or Williams Mullen 2013 BIS Denied Parties ListsDenied Persons List Persons denied export privileges and named in denial ordersEntity List Persons identified for antiterrorism, weapons of mass destruction or other reasons 15 Part 744, Supplement No. 4 Unverified List Persons who BIS has been unable to verify in previous transactions Presence in transaction is a Red Flag 26 Williams Mullen 2013 Prohibited End Use and End-Users No exports, reexports or transfers if item used for.