Case Study: Transfer of Lab Equipment to Canada, Lessons Learned From My First Export Control Review

1. Case Study:Transfer of Lab Equipment to Canada, Lessons Learned From My First Export Control Review Kathleen Reneau Lorenzi, CPCM Senior Grants and Contracts Specialist Office of Sponsored Projects The University of Texas at Austin Export Review - Lessons Learned

2. Ground rules: • This presentation is a true story but the names have not been changed to protect the guilty parties, • Do not assume the presenter is an expert or that everything I did was perfect! I stumbled through my first experience just like everyone else. Hopefully I/we will do a better job on the next one because we learn from shared experiences. • Questions are allowed at any time, if anyone in the room knows the answer, feel free to join in. • If a question cannot be answered, presenter will research the question to the best of their ability and share with you the information found in a follow-up email (please leave your business card with the question written on the back) Export Review - Lessons Learned

3. Problem Statement: You attended the BIS export course and the NCURA conference track on Export Regulations.  In these classes you worked through practice classifications using the EAR.  In fact, the theory of it all is making a bit of sense and you think you have a pretty good handle on things.  Now, you are back at the ranch (e.g. your OSP office).  The Director comes into your office and informs you that you are the designated “expert” on export and a PI is transferring his lab to another university outside the country.   You are provided a list of equipment that he intends to transfer and donated to the Canadian university and you are instructed to do the export review . Oh, by the way, there is a probability that the PI wants to take with him a few hundred chemicals that he has collected over the years.  And a second “Oh, and by the way,” is added - this is a high-profile, priority project on the VPR’s radar so it has to be done ASAP.  Suddenly, you realize that the list of equipment is extraordinarily insufficient in the amount of information you need to do a classification!  It is not like the classification exercise – it’s not easy much less straightforward!  Now what do you do?  Welcome to the reality of practical application of the EAR, a case study in the practical application of your newly acquired knowledge.  Export Review - Lessons Learned

4. “….and don’t forget about the chemicals…” Export Review - Lessons Learned

5. Where do you start? Export Review - Lessons Learned

6. Step 1 You are not alone - Look for allies to add in the process and share the fun… • Who needs be included? • Principal Investigator • Dean / Department Chair • Environmental, Safety and Health Official • Property Manager • Inventory Accounting • Purchasing • Risk Management • The list may vary from place to place depending on the equipment • that needs to be reviewed and the processes of the organization. Export Review - Lessons Learned

7. Step 2 Determine who needs to do what (aka - define roles and responsibilities). Principal Investigator – describe equipment, provide specifications, give you a physical tour of the equipment Dean or Department Chair – approve the donation/sale of the equipment and removal from inventory Environmental, Safety and Health Official – review equipment for contamination and review list of chemicals to determine exportability. Property/Inventory – Identification of property, transfer out of inventory and/or transfer of title. Inventory Accounting – remove from inventory and determine current value Purchasing – purchase history (who, what, when & how much) Risk Management – insurance for shipping Export Review - Lessons Learned

8. Step 3 Determine if any agreements exist that may affect this transfer: • Any contact or agreement that identifies or defines the • equipment transfer (i.e. MOA between University presidents, agreement for sale/transfer.) • Who pays the cost of shipping and insurance? • Source of funds for the purchase of equipment – Does the university actually own the equipment (is the title clear) or is it dispositioned to us under a federal contract or grant. Export Review - Lessons Learned

9. Step 4 Find a good freight forwarder!!!!! Do you have any idea about the amount of paper work that is required to ship a piece of equipment out of the country? For example just to name a few – US Shipper’s Export Declaration, Destination Control Statements, NAFTA Certificates of Origin, invoices (Commercial/Pro-forma) To make matters worse, all countries have their own set of documents that are required for equipment entering or leaving a country. Have an expert help you with this. Export Review - Lessons Learned

10. Now the real fun begins…. Let’s play, classification roulette… Let’s start with identifying what it is we are trying to classify: Export Review - Lessons Learned

11. 11-18-99 Computer, Dell, Microsoft with Windows $1689.00 • 09-10-99 Computer, PC, Ingram BTO P111 450MHZ $1921.00 • 09-13-99 Computer, PC Ingram BTO P 111 450MHZ $11.50 • 09-13-99 Computer, PC Ingram BTO P 111 450MHZ $60.00 • 01-04-01 Computer, Graphite IBook $1859.00 • 12-19-02 Computer, Optiplex GX260 Orig=759937-1 $1647.01 • 12-13-04 M1400 Tablet PC 1.1 GHZ $2809.69 • 02-0-05 1 1 221-6395 1700M.725,1.6GHZ,2MB, • 12.1 WXGA B Pagenkopf CPU $1197.00 • 12-10-04 Dell Latitude X300 Laptop $2071.06 • 02-27-04 Latitude 0505,D505, 1.20GHZ CeleronM, • 14.1XGA, English (221-3 $1381.52 • 7-16-2004 Dell Dimension 2400 CPU $757.97 • It appears that we have a little problem with standardization of equipment records… • What about current market value? Export Review - Lessons Learned

12. Now, the Alpha Listing of Commerce Control Numbers (CCN) provide the following classifications for computers: Computer, electronic assemblies & equipment & components - 4A001, 4A003, 4A004, 4A994 Computer, electronic components 4A101 Computer, electronic components 4A102 Computer aided design (CAD) equipment for semiconductor devices or integrated circuits 3B991.b.2.c Computer-aided-design (CAD) software for IC's & semiconductors 3D003 Computer interconnect equipment 4A003.g Computer/assemblies/components, neural 4A004.b Computer/assemblies/components, optical 4A004.c Computers, electronic assemblies, and related equipment and components not controlled by 4A001 or 4A003 4A994 Computers, analog & analog ruggedized 4A101 Computers for fingerprint equipment 4A980 Computers, digital ruggedized 4A101 Computers/assemblies/components, systolic array 4A004.a Computers, analog 4A001 Computers, digital 4A003 Computers, digital 4A004 Computers, digital 4A001 Computers, having information security characteristics 4A001.b Computers, hybrid 4A102 Computers and electronic assemblies (hybrid), and specially designed components therefor 4A994.k Computers, with extended operating temperature range 4A001.a.1 Computers, radiation hardened 4A001.a.2 Export Review - Lessons Learned

13. CATEGORY 4 ‑ COMPUTERS Note 1: Computers, related equipment and “software” performing telecommunications or “local area network” functions must also be evaluated against the performance characteristics of Category 5, Part 1 (Telecommunications). Note 2: Control units that directly interconnect the buses or channels of central processing units, “main storage” or disk controllers are not regarded as telecommunications equipment described in Category 5, Part 1 (Telecommunications). N.B: For the control status of “software” specially designed for packet switching, see ECCN 5D001. (Telecommunications). Note 3: Computers, related equipment and “software” performing cryptographic, cryptoanalytic, certifiable multi‑level security or certifiable user isolation functions, or that limit electromagnetic compatibility (EMC), must also be evaluated against the performance characteristics in Category 5, Part 2 (“Information Security”). 4A – Systems, Equipment and Components 4B – Test Inspection and production Equipment 4C – Materials 4D – Software 4E – Technology Ruled out ECCN designations for Category 3, Electronics B-Test, Inspections & Production Equipment, D Software based on information on the PI’s website. PI’s interest is bio-chemistry. Export Review - Lessons Learned

14. Classification of the personal and laptop computers was identified as ECCN 4A994. How did I reach that conclusion? I contacted the computer companies and they told me… Export Review - Lessons Learned

15. 3-1-2000 UNILAB, S/Gas Purification system and Accessories $23,405.80 3-12-2000 UNILAB, W/GAS Purification System Freight $549.71 This is a what?? Actually, it is just a glovebox. Easy, right? ECCN Category - Glove boxes 0B999 Category 0 – Nuclear Materials, Facilities, and Equipment (and Miscellaneous Items) Export Review - Lessons Learned

16. 0B999 Specific processing equipment, as follows (see List of Items Controlled). License Requirements Reason for Control: AT Control(s) Country Chart AT applies to entire entry. A license is required for items controlled by this entry to Iraq and North Korea for anti-terrorism reasons. The Commerce Country Chart is not designed to determine AT licensing requirements for this entry. See §742.19 and §746.3 of the EAR for additional information. License Exceptions LVS: N/A GBS: N/A CIV: N/A List of Items Controlled Unit: $ value Related Controls: N/A Related Definitions: N/A Items: a. Hot cells; b. Glove boxes suitable for use with radioactive materials. Export Review - Lessons Learned

17. And, it gets better…. 7-15-2004 17680900: Breeze HPLC System with detector $22,100.00 7/15/2004 17680900: Breeze HPLC System with Detector $114.95 8-6-2004 17680900: Breeze HPLC System with Detector $2112.55 What does HPLC stand for and what is a BREEZE? HPLC – High Performance Liquid Chromatography The manufacturer is Waters, a Canadian company out of Ontario. Breeze is the title Water’s gave to the system for marketing purposes. It falls into the category of: Laboratory – Analytical Instruments with an SIC code of 3826 Thank you Google! Export Review - Lessons Learned

18. BUT!!! Can I export a Canadian made piece of equipment from the UT to Canada with out an export review? Of course not! Familiarize yourself with the term re-export… • Back to the EAR data base and the alphabetical Index to the CCL • Nothing under Analytical anything… however, I found: • Chromatography analytical instruments 3A999.f • Category 3 – Electronics • Section A – Equipment • Subgroup 999 – Specific processing equipment, Export Review - Lessons Learned

19. 3A999 Specific processing equipment, n.e.s., as follows (see List of Items Controlled). License Requirements Reason for Control: AT Control(s) Country Chart AT applies to entire entry. A license is required for items controlled by this entry to North Korea for anti-terrorism reasons. The Commerce Country Chart is not designed to determine AT licensing requirements for this entry. See §742.19 of the EAR for additional information. License Exceptions LVS: N/A GBS: N/A CIV: N/A List of Items Controlled Unit: $ value Related Controls: See also 0B002, 3A225 (for frequency changes capable of operating in the frequency range of 600 Hz and above), 3A233 Related Definitions: N/A Items: Export Review - Lessons Learned

20. a. Frequency changers capable of operating in the frequency range from 300 up to 600 Hz, n.e.s; • b. Mass spectrometers n.e.s; • c. All flash x-ray machines, and components of pulsed power systems designed thereof, including Marx generators, high power pulse shaping networks, high voltage capacitors, and triggers; • d. Pulse amplifiers, n.e.s.; • e. Electronic equipment for time delay generation or time interval measurement, as follows: • e.1. Digital time delay generators with a resolution of 50 nanoseconds or less over time intervals of 1 microsecond or greater; or • e.2. Multi-channel (three or more) or modular time interval meter and chronometry equipment with resolution of 50 nanoseconds or less over time intervals of 1 microsecond or greater; • f. Chromatography and spectrometry analytical instruments. Export Review - Lessons Learned

21. Export Review - Lessons Learned

22. Information required to perform an export review and complete an invoice/pro-forma invoice for shipment: • name and address of shipper as shown on the address label – include contact person and phone number. • name and address of consignee, as shown on the address label – include contact person and phone number to ensure prompt delivery • invoice date • purchase order nor invoice number if applicable • Name and address of purchaser (importer) if different from the consignee – include contact name and phone number • complete description of item being shipped • What is item made of and what is it used for; how can it be used? • Country of origin (where the item was manufactured) Export Review - Lessons Learned

23. Export Review Information Continued: • Number of units, unit value and total market value of each item – for items of no commercial value, a fair market value must be state for customs purposes. • Transportation charges and insurance • Total value of shipment including currency of settlement • Reason for export (i.e. donation of equipment for research as agreed upon in MOU dated xxx between Dr. Juan Sanchez of UT and Dr. xxx of the University of xxx) • Terms of sale that define the charges included in the value on the invoice. For example CIF is Cost, Insurance and Freight (know Incoterms – International Commercial Terms) • Number of packages and total weight • Shipper’s signature and date • Include the Destination Control Statement (DCS) Export Review - Lessons Learned

24. Suggested Content for an Export Review Report: • What is happening – why is the equipment being exported • Where is the equipment going and for what purpose • Provide EAR rating of country (i.e. Commerce Country Chart • listing, Country Group, membership in various treaties state in EAR) • Develop chart on equipment, ECCN #s and determination of License required/NLR/EAR-99 • Who are the parties shipping the equipment – who will receive • Location and condition of the equipment Export Review - Lessons Learned

25. Content Continued… • Equipment title – who owns it, when was it purchased, what funds were uses? Who has title? When will title pass? Who will end up with Title? • Description of Software that may be included with computers • State type of information you received on which to base your evaluation – what is the source of information and how much did you have to rely on it to do you evaluation. • Identify and describe any chemicals that may be involved in the export. • State the [bad guy] lists reviewed, the search terms used in the review and the date this review was performed Export Review - Lessons Learned

26. Points to ponder: • First rule of government work – disclose and document • You need a good description of the equipment (what is it made of, how can it be used…) • Age of the equipment is not a factor in making your ECCN or licensing determination. • When the EAR refers to value of the equipment, they mean current market value – not depreciated value. • The entity shipping the equipment has the responsibility for making sure that the equipment arrives at the intended destination and is accepted by the intended person. • Records of transactions subject to the EAR must be maintained for 5 years. Export Review - Lessons Learned

27. Points to Ponder continued… • For shipping, use the most secure and direct route to destination. IF it has to stop enroute overnight in another country, make sure it is secure • Try to evaluate equipment as a system – not by piece parts. • Software is also subject to export control. Do an evaluation separate from the hardware carrying the software. • Beware of the content of the documents in the computer – data of documents may be export controlled. • When requesting classification help from a manufacturer, tell them where the item is going. Ask for the person’s name and contact information that you spoke with. • Watch for equipment that may be contaminated with toxic substances! Export Review - Lessons Learned

28. What about the chemicals? I teamed with EHS (love those guys!). They reviewed the chemical list to determine what was in the PI’s inventory. Inventory revealed that most chemicals were common and inexpensive to purchase. The cost of shipping would greatly exceed the value of the chemicals. Toxic/Controlled chemicals the PI just had to have– EHS helped with identification information, packing and gave custody of chemicals to PI to let him worry about the export requirements and cost of shipping. Export Review - Lessons Learned

29. Thank you! Please feel free to call me if you want to talk about a challenge you are facing! We are all in this together. Kathy Lorenzi The University of Texas at Austin 512-471-2335 krlorenzi@mail.utexas.edu Export Review - Lessons Learned