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Breakout Session # 1309 Steve Brotherton, Managing Attorney

Employing non-U.S. Persons in U.S. Organizations. Breakout Session # 1309 Steve Brotherton, Managing Attorney Fragomen, Del Rey, Bernsen & Loewy, LLP Export Controls Practice Group San Francisco, California April 12, 2006 1:20 – 2:20 pm. What do they all have in common?.

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Breakout Session # 1309 Steve Brotherton, Managing Attorney

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  1. Employing non-U.S. Persons in U.S. Organizations Breakout Session # 1309 Steve Brotherton, Managing Attorney Fragomen, Del Rey, Bernsen & Loewy, LLP Export Controls Practice Group San Francisco, California April 12, 2006 1:20 – 2:20 pm NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  2. What do they all have in common? • Alexander Graham Bell (Inventor) • Werhner Von Braun (Rocket Scientist) • Leo Szilard (Nuclear Scientist) • Gene Simmons (Musician) • Andrew Carnegie (Steel Entrepreneur) • Henry Kissinger (Former U.S. Secretary of State) • Andrew Grove (Founder, Intel) • Bjarne Stroustrup (Inventor, C++ Computer Language) • Madeline Albright (Former U.S. Secretary of State) • John Shalikashvili (Former Chairman, Joint Chiefs of Staff) • Bob Hope (Actor, Comedian) • Albert Einstein (Physicist) * They were originally Non-U.S. Persons * NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  3. Who is a Non-U.S. Person? • Any person who is not: • A “Protected Individual” (8 USC 1324b(a)(3)) • U.S. Citizen or National • U.S. Lawful Permanent Resident • Person Granted Asylum or Refugee Status in U.S. • Temporary Resident granted amnesty in U.S. • A Non-U.S. Person includes visa holders such as H-1B, H-3, L-1, J-1, F-1 Practical Training, L-1 NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  4. What if I want to employ a Non-U.S. Person? • You should consider “The Big 4”: • Immigration (visa/employment authorization) • Export control (export license) • Cleared-facility requirements (classified information) • Contract obligations (notification, security or other contractual requirements) NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  5. The Big 4 #1: Immigration Considerations • Non-U.S. persons must obtain and maintain valid visa status while in the U.S. (process takes 1 – 12 + weeks) • Visa classification must provide employment authorization for job duties • Non-U.S. persons generally accorded same employment status and privileges enjoyed by other employees NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  6. Visa Categories • H-1B “Specialty Occupations” • Professionals with minimum of Bachelor’s degree or equivalent • Limited to 65,000 new H-1B holders per year • L-1 “Intracompany Transferee” • Managers, executive and persons with specialized knowledge transferring from foreign parent, subsidiary or affiliate • Requires one year prior employment with foreign parent, subsidiary or affiliate The Big 4 #1: Immigration Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  7. Visa Categories • O-1 “Extraordinary Ability” • Persons with extraordinary ability in the arts and sciences • Limited to persons at the top of their fields • F-1 “Practical Training” • 12 months of practical training following completion of an academic program in the US • Many convert to H-1B prior to end of practical training The Big 4 #1: Immigration Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  8. Lawful Permanent Residency • Lengthy processing times depending on category and place of birth (1 to 10+ years) • Family-based • Sponsorship by close family member • Employment-based • Generally requires company sponsorship and showing of unavailability of US workers • A lawful permanent resident becomes a “U.S. person” and is no longer subject to export control restrictions The Big 4 #1: Immigration Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  9. The Big 4 #2: Export Control Considerations • Transfer of technical data to a non-U.S. person is considered an “export” • Deemed to be an export to the non-U.S. person’s “Home Country” • May require U.S. government export license NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  10. Export Control Basics EAR(15 CFR Parts 730-774) • “Export Administration Regulations” • Administered by Commerce Department’s Bureau of Industry and Security (BIS) • Controls commercial goods, technology and software • “Dual use” items on Commerce Control List (EAR § 774) • Items not on Commerce Control List (“EAR99”) ITAR(22 CFR Parts 120-130) • “International Traffic in Arms Regulations” • Administered by the State Department’s Directorate of Defense Trade Controls (DDTC) • Items listed on the United States Munitions List (USML) • Controls articles, data, and services specifically designed, developed, produced, or modified for military purposes The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  11. Export Controls for Non-U.S Persons EAR(15 CFR Parts 730-774) • “Export of technology” includes: • “Any release of technology or source code . . . to a foreign national. Such release is deemed to be an export to the home country or countries of the foreign national.” (EAR §730.2(b)(2)(ii) ITAR(22 CFR Parts 120-130) • Definition of “export” includes: • “Disclosing. . technical data to a foreign person, whether in the U.S. or abroad.” (ITAR §120.17(4)) • “Performing a defense service on behalf of, or for the benefit of, a foreign person, whether in the United States or abroad.” (ITAR §120.17(5)) The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  12. Export Licensing EAR(15 CFR Parts 730-774) • License required depending on nature of technology + “Home Country” (few actually required) • “Home Country”: Last acquired citizenship or permanent residency • About 2 months processing time • License Requirement: “Terrorist Supporting Countries” • Cuba, Iran, Libya, North Korea, Sudan, Syria “Countries of Concern” • Examples include former Soviet Republics, China, Vietnam “Friendly Countries” • All others (Europe, Central/South America, etc.) ITAR(22 CFR Parts 120-130) • Export license required in most cases • Requires approval of a “DSP-5” • Technical Assistance Agreement required if providing “defense service” (e.g., technical training) • 2 to 4 + months processing time • " Home Country”: Country of Citizenship/ Permanent Residence of Highest Control • Policy of Denial • Cuba, Iran, Libya, North Korea, Sudan, Syria Burma, PR China, Haiti, Liberia, Somalia, Sudan, Belarus, Iraq, Vietnam, Afghanistan, Congo, Iraq, Rwanda Lowest Controls NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  13. ITAR Tips • License may be required for Defense Service even if underlying technical data is in public domain (see §124.1(a)) • “Canadian Exemption” not available for non-U.S. person employee of U.S. company • Certain exemptions only available for use “by accredited institutions of higher learning” • Category XV defense services(ITAR §125.4(d)(1)) • Tech. data to university employee(ITAR §125.4(b)(10) The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  14. Publicly Available/Public Domain Information • Exempt from licensing requirements • Generally includes: • Published information • Open conference/meeting • Educational information • Patents • University fundamental research The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  15. Fundamental ResearchITAR §120.11(8) • Public domain means information which is published and which is generally accessible or available to the public: • (8) Through fundamental research in science and engineering ataccredited institutions of higher learning in the U.S. where the resulting information is ordinarily published and shared broadly in the scientific community. Fundamental research is defined to mean basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U.S. Government access and dissemination controls. University research will not be considered fundamental research if: • The University or its researchers accept other restrictions on publication of scientific and technical information resulting from the project or activity, or • (ii) The research is funded by the U.S. Government and specific access and dissemination controls protecting information resulting from the research are applicable. The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  16. Why Does it Matter? • Significant criminal and civil penalties • Corporate and personal liability • Civil Penalties • Up to $500,000 fine for each violation • Debarment from government contracts • Suspension or denial of export privileges • Criminal Penalties • Applies to “willful” violations • Up to $1,000,000 fine and 10 years in prison for each violation The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  17. Violations: What’s More Likely • Employee discipline • Delay or denial of export license applications • Government requires company to adopt specific compliance measures • Special compliance officer • Subject to government audit The Big 4 #2: Export Control Considerations NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  18. The Big 4 #3: Cleared Facility Requirements • Applies to company locations that have been “cleared” by the U.S. government to receive classified information • Cleared facility safeguard requirements set forth in the National Industrial Security Program Operating Manual (“NISPOM”- DoD 5220.22-M) • Proscribes controls for on-site non-U.S. persons NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  19. NISPOM Requirement • NISPOM 10-509: • “TCP [Technology Control Plan]. A TCP is required to control access by foreign nationals assigned to, or employed by, cleared contractor facilities unless the CSA determines that procedures already in place at the contractor's facility are adequate. The TCP shall contain procedures to control access for all export-controlled information. A sample of a TCP may be obtained from the CSA. “ • Technology Control Plans: • Building access and hard-copy information controls • IT controls • Non-U.S. persons & supervisors acknowledge controls (sign-off) • Audit provisions The Big 4 #3: Cleared Facility Requirements NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  20. The Big 4 #4: Contract Obligations • Contract clauses may restrict participation of non-U.S. persons in contract activity • Restrictions typically include: • Prior notification and approval • Outright prohibition • More commonly found in government contracts NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  21. Examples AFMC 5352.227-9000 Export Controlled Data Restrictions (d) Equipment and technical data generated or delivered under this contract are controlled by the International Traffic in Arms Regulations. An export license is required before assigning any foreign source to perform work under this contract or before granting access to foreign persons to any equipment or technical data generated during performance. H-2 Foreign Nationals (Army) No foreign nationals may work on this contract until approved from the Government (Contracting Officer) have been received. 52.004-4400 Foreign Nationals Performing Under Contract In accordance with Title 8 U.S.C. 1324a, local Foreign Disclosure Officers (FDOs) may approve access by foreign nationals working on unclassified public domain contracts for the duration of the contract, provided the foreign nationals have appropriate work authorization documentation. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  22. Identifying Non-U.S. Persons • Can be done pre-hire • Typically involves two step process: • Identify Non-U.S. Persons • “Protected Individual” and Citizenship Status Discrimination (8 USC 1324b(a)(1)(B)) • 2. Identify Home Country(ies) • Elicit Home Country(ies) to determine applicable export licensing requirements or policy • National Origin Discrimination • National Security Exemption (42 USC 2000e-2(g)(1)) NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  23. National Security Exemption to National Origin Discrimination • 42 USC 2000e-2(g)National security • “. . . It shall not be an unlawful employment practice for an employer to fail or refuse to hire and employ any individual for any position . . . if— • the occupancy of such position, or access to the premises in or upon which any part of the duties of such position is performed or is to be performed, is subject to anyrequirement imposed in the interest of the national security of the United States under any security program in effect pursuant to or administered under any statute of the United States. . . • (2) such individual has not fulfilled or has ceased to fulfill that requirement.” NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

  24. Steve Brotherton, Managing Attorney Fragomen, Del Rey, Bernsen & Loewy, LLP Export Controls Practice Group 100 Spear Street, 10th Floor, San Francisco, CA 94105 Tel. (415) 263-8442 sbrotherton@fragomen.com NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

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