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Economic Sanctions and Technology Transfers J. Daniel Chapman September 19, 2006

Economic Sanctions

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Economic Sanctions and Technology Transfers J. Daniel Chapman September 19, 2006

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    1. Economic Sanctions and Technology Transfers J. Daniel Chapman September 19, 2006

    2. Economic Sanctions – Regulate people Export and – Regulate goods, Reexport Controls software and technology

    3. Terminology Clearly distinguish “economic sanctions” and “export and reexport controls” Avoid the terms: “embargo” or “embargoed” “trade controls” “trade sanctions”

    4. General principle U.S. economic sanctions forbid: Directly engaging in or Facilitating others engaging in Prohibited dealings with sanctioned countries, governments, persons or activities

    5. Facilitation An expansive and indefinable legal term that has a meaning similar to “enable.” Examples: Providing I.T. support Hosting a server that is used in a sanctioned transaction Referring persons seeking I.T. support to others who can assist

    6. Prohibited Dealings Cuba – No transactions facilitated by U.S. persons or their subsidiaries; no imports North Korea – No imports into U.S.; no owning, leasing, operating or insuring North Korean flagged vessels Iran & Sudan – No transactions facilitated by U.S. persons; no imports; $20 million annual cap on energy investment in Iran Burma/Myanmar – No provision of financial services or new investment by U.S. persons (certain exceptions for subcontracting arrangements); no imports Targeted programs – No transactions facilitated by U.S. persons with parties on the Specially Designated Nationals List or that could support terrorism or the proliferation of weapons of mass destruction

    7. Interaction with export and reexport controls A “deemed” export can become a transaction that triggers the application of U.S. economic sanctions. A violation of export or reexport licensing requirements often is also a direct violation of U.S. economic sanctions.

    8. Exceptions Information exceptions One-way flow of information from sanctioned to non-sanctioned countries (such as financial reports) Pre-existing information Inventory/Distributor exception Sales to the general inventory of non-regulated persons are permissible when the sale to the general inventory is not pursuant to a specific sanctioned country order and resales from this general inventory are not predominantly to a sanctioned country

    9. Applying the inventory exception to singular actions By analogy, actions are permitted that do not have a predominant purpose of facilitating sanctioned transactions and are not pursuant to specific sanctioned transaction order or request.

    10. Hypothetical Examples Uploading information Access to electronic networks Systems maintenance

    11. Questions?

    12. Economic Sanctions and OFAC Import Restrictions

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