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ATTORNEYS AT LAW

Deemed Exports - April 27, 2011 The New I-129 Non-Immigrant Visa Certification. ATTORNEYS AT LAW. Introduction Deemed Export A release of technology to a foreign person in the U.S. may be “deemed” to be an export to that foreign person’s “home country” May require a license

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ATTORNEYS AT LAW

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  1. Deemed Exports - April 27, 2011 The New I-129 Non-Immigrant Visa Certification ATTORNEYS AT LAW

  2. Introduction • Deemed Export • A release of technology to a foreign person in the U.S. may be “deemed” to be an export to that foreign person’s “home country” • May require a license • Not a new concept – 3 decades old • Has real bite – strict liability, penalties, fines, prison • I – 129 certification suggests new era of enforcement • Pains and penalty of perjury. Grants permission to audit

  3. The I-129 Certification • Mandatory February 20, 2011 • Part 6 of the form requires a petitioner seeking H-1B, H-1B1, H-1, or O-1A visas to certify that it has reviewed the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”) and determined that: • (1) A license is not required to release technology to the beneficiary; or • (2) If an export license is required, it will not release controlled technology to the foreign worker until it has received a license or other authorization to do so

  4. Overview • Who is a foreign person • Understanding Technology and Technical Data in context of EAR and ITAR • Which regime applies • What technology / technical data is controlled • How does a release occur • When is a license required to release technology • Penalties, fines, prison, and horror stories

  5. Foreign Person • Any “person” who is not a U.S. citizen, lawful permanent resident; person granted asylum, a refugee, or temporary resident granted amnesty • Includes any foreign corporation, business association, partnership, trust, society, or other entity or group not incorporated or organized to do business in the U.S. • Same Under EAR and ITAR • EAR refers to a “Foreign National” • ITAR refers to a “Foreign Person”

  6. Home Country • Nuance between how the ITAR and EAR define a foreign person’s home country • The EAR = last place of permanent residency or citizenship • The ITAR = place of birth, place(s) of citizenship, and residency • Example: Foreign person born in Syria and now a permanent resident of UK. Under EAR, home country is UK. Under ITAR home country is UK and Syria

  7. U.S. Export Regulations • Essentially two regimes: • The Export Administration Regulations (“EAR”) • The International Traffic in Arms Regulations (“ITAR”) • Single export system may be coming, but it isn’t here yet • Both impose licensing requirements on the export, reexport, and in country transfer of a variety of items controlled for national security and foreign policy reasons • Also govern related controlled technology

  8. Deemed Exports • EAR defines “export” to include: “[a]ny release of technology or source code … subject to the EAR to a foreign national within the United States. Such release is deemed to be an export to the foreign national’s “home country” • EAR Part 734.2(b)(2) • ITAR defines an export to include “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad” • ITAR Part 120.17(a)(4)

  9. INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (“ITAR”) • 15 CFR PARTS 120 TO 130

  10. ITAR • Department of State (“DOS”), Directorate of Defense Trade Controls (“DDTC”) • Covers items that are listed on the United States Munitions List (“USML”) 15 CFR Part 121 Categories I through XXI • Covers defense articles, services, and technical data • USML - 20 categories (i) – (xxi) [(xix) reserved] • (iv) missiles; (vii) military vehicles; (viii) aircraft and associated equipment; (xi) military electronics; (xii) optical; (xiv) chemical agents; (XV) spacecraft systems; (xxi) miscellaneous [catch all]

  11. ITAR (Cont.) • Includes sub categories for parts, components, accessories, and attachments [e.g. of a military vehicle] • Specifically designed, developed, configured, adapted, or modified for a military [or space] application …. • 22 CFR Part 120.3 • Even the most insignificant modification likely to be sufficient to invoke ITAR control • Toilet seat on military C130 aircraft

  12. ITAR (Cont.) • Technical Data • Information … which is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance, or modification of defense articles • ITAR 120.10 • Includes software directly related to defense articles • ITAR 120.10(a)(4); ITAR 121.8(f)

  13. ITAR (Cont.) • Examples ofTechnical Data • Blueprints, drawings, photographs, plans, instructions, documentation, test data, reports, even oral disclosure • Defense articles themselves • Mock-ups • Not what it does, but how it does it (conveys know- how)

  14. ITAR (Cont.) • Not Technical Data • General scientific, mathematical or engineering principles commonly taught in schools, colleges, universities • Basic marketing information on function or purpose / general system descriptions • ITAR 120.10(a)(5) • Public Domain • Published and generally accessible or available to the public

  15. ITAR (Cont.) • Public Domain ITAR 120.11 • Newstands and bookstores • Unrestricted subscriptions • Second class mailing • Libraries • Patents • Unlimited distribution at conferences in the U.S. • Public release after approval by cognizant U.S. Government department or agency • Through fundamental research • Beware the Internet. Beware defense services

  16. ITAR (Cont.) • Fundamental Research • Fundamental research in science and engineering at accredited institutions of higher learning in the U.S. where the resulting information is ordinarily published and shared broadly in the scientific community • No restrictions for proprietary reasons or U.S. Government access and dissemination controls • ITAR 120.11(a)(8)

  17. ITAR Licensing • ITAR = license likely to be requiredITAR Part 125 • License is a DSP-5 for unclassified technical data along with an Non Disclosure Agreement • DSP-85 for classified technical data as well as DSP-83 non-transfer and use certificate • Examples of exemptions (Limited) ITAR Part 125.4(b) • Official request or direction of DOD • In furtherance of Manufacturing License Agreement or Technical Assistance Agreement

  18. ITAR Licensing • Examples of exemptions (Cont.) • U.S. Government contract permits disclosure • [and only if disclosure does not include details of design, development, production or manufacture] • Basic operations, maintenance, and training for defense article previously lawfully exported • Unclassified technical data in U.S. by U.S. institutions of higher learning to foreign persons who are full time bona fide employees • [and only if: living in U.S., not from proscribed country under ITAR 126.1, and institution informs that technical data may not be transferred]

  19. EXPORT ADMINISTRATION REGULATIONS (“EAR”) • 22 CFR PARTS 730 to 774

  20. The Export Administration Regulations • (The “EAR”) • Department of Commerce (“DOC”), Bureau of Industry and Security (“BIS”) • Covers “dual use” or purely commercial items / software • Broadly speaking, if a product or related technology does not fall under the ITAR, then it is “subject to” the EAR • Most things “subject to” the EAR – pencils to rocket fuel • However, only technology that is listed on Commerce Control List is controlled

  21. EAR (Cont.) • Technology controlled under the EAR is listed in the Commerce Control List (“CCL”) • 0. Nuclear • Materials • materials processing • electronics • computers • (i) telecommunications; (ii) information security • sensors and lasers • navigation and avionics • marine • propulsion, space vehicles and related equipment

  22. EAR (Cont.) • Groups within categories: • Systems, equipment, components • Test, inspection, and productions equipment • Materials • Software • Technology • Example • 4A001 Computers • 4E001 Technology … for the “development,” “production,” or “use” of equipment controlled by 4A ….

  23. EAR (Cont.) • Technology • Specific information necessary for the “development”, “production”, or “use” of a product. The information takes the form of “technical data” or “technical assistance” • Technical data – blueprints, plans, diagrams, models, formulae, tables, engineering designs and specifications, manuals, instructions written or recorded on other media … • Technical assistance – instructions, skills training, working knowledge, consulting services

  24. EAR (Cont.) • Controlled Technology • Development • Production • Use • Needs to be Required Technology

  25. EAR (Cont.) • Development Technology • Related to all stages prior to serial production, such as: • Design, design research, design analysis, design concepts • Assembly and testing of prototypes, pilot production schemes • Design data, processes of transforming design data into product, configuration design, integration design, layouts

  26. EAR (Cont.) • Production Technology • All production stages (the know-how): • Production engineering • Manufacture • Integration • Assembly • Inspection • Testing, QA

  27. EAR (Cont.) • Use Technology • Operation, installation, maintenance, repair, overhaul, and refurbishment • Need all six attributes otherwise EAR99 • Contrast to ITAR

  28. EAR (Cont.) • Required Technology • That portion of technology which is peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or functions • Example: to produce uncontrolled product x, production technology a, b, c is used • A higher performance version is controlled and uses production technology a, b, c, d, and e. Only d and e is required technology.

  29. EAR (Cont.) • Not Controlled Technology • Publically available EAR Part 734.3(b)(3); 734.7 • Includes internet • Fundamental research EAR Part 734.3(b)(3); 734.8 • Educational EAR Part 734.3(b)(3); 734.9 • Public patent applications EAR Part 734.3(b)(3); 734.10

  30. EAR Licensing • EAR = License only necessary if listed on CCL and license is required to export to home country • Common license exception - TSR • Technology and Software Under Restriction

  31. Release / Disclosure • Deliberate or inadvertent • Access to drawings • Shared network drives • Collaboration • Telephone, fax, email • Visitors • Lunch room

  32. Implications of Deemed Export Violations • License may be required • Licenses take time (denial possible) • Civil Penalties - $500,000 per violation • Criminal $1,000,000 – 20 years in prison • Denial of export privileges • Debarment from U.S. contracts • Possible deportation

  33. THANK YOU! • Ian H. Moss • Posternak Blankstein & Lund, LLP • Prudential Tower • 800 Boylston Street • Boston, MA 02199-8004 • Tel. 617.973.6146 • Email: imoss@pbl.com

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