Export Compliance: Graduate Studies at the School of Hard Knocks

1. Export Compliance: Graduate Studies at the School of Hard Knocks David Brady, Director, Office of Export and Secure Research Compliance, Virginia Tech dbrady@vt.edu Elizabeth “Missy” Peloso. Director, Export Compliance, University of Pennsylvania epeloso@upenn.edu Kay Ellis, Export Control Officer, University of Arizona ellisk@email.arizona.edu

2. David Brady David Brady is the Director of the Office of Export and Secure Research Compliance at Virginia Polytechnic Institute and State University (Virginia Tech). He is the Virginia Tech Facility Security Officer and an Empowered Official of the university. David's office is responsible for ensuring university-wide export and trade sanctions compliance and providing export compliance education. These duties include export determinations, export license preparation, submission, and monitoring. David has also served as Virginia Tech's senior contract negotiator for the Office of Sponsored Programs. David is a graduate of the United States Naval Academy and a former naval nuclear propulsion engineer. He is a current member and past chair of the Association of University Export Control Officers.

3. Missy Peloso Missy Peloso is the Director of Export Compliance at the University of Pennsylvania. She is an empowered official for the University, and has responsibility for licensing activities, commodity jurisdiction and classification requests and other interactions with the federal regulatory agencies for export controls. She leads the Penn campus export liaisons, a group of staff from across the university who are tasked to assist in identifying export control concerns and provides training on export controls campus-wide. Missy also heads the Material Transfer negotiation group at Penn and advises and assists the pre-award group within the Office of Research Services on contractual issues that implicate export controls. Prior to joining Penn in 2011, Missy was the Director of Research Compliance at the University of Delaware, where she also had responsibility for the export compliance program.

4. Kay Ellis Kay Ellis is the Export Control Officer at The University of Arizona. She received a Bachelor of Science from Southern Nazarene University and a Master in Human Relations from the University of Oklahoma. Ms. Ellis was with the University of Oklahoma for ten years prior to joining Oklahoma State University in 2002. As Director of University Research Programs, she implemented OSU’s export control compliance program. In March 2008, she became the Associate Director, Office of Sponsored Projects and University Export Controls Officer at the University of Texas in Austin. She was an empowered official and the point of contact for all export control issues. Ms. Ellis joined the University of Arizona in January of 2011. She is an empowered official, provides training in the area of export controls, and oversees the policies and procedures put in place to ensure the UA's compliance with federal export control regulations. 

5. Graduate Studies at the School of Hard Knocks- Export & Sanctions Compliance in Pre-Award “Regulation trumps policy” “The Color of Money” “Mere access…” “ITAR until proven innocent…” “The mysterious case of the satellite in the classroom…” “When you think it’s FR, but it’s not!” “Grants.ITAR” “Will the real restricted party please stand up?” “Follow the money” (preferably before Treasury does) “Tips to avoiding a Bona Fide Full Time Headache” “PR Gone Home” “Yes, Virginia, there are other export regulations…” “Sanctions, why did it have to be sanctions?” “Knock, knock. Who’s there? The FBI. The FBI who?” “Break glass in event of Federal Officer Raid”

6. “Regulation trumps policy” • ITAR, EAR, DoE/NRC export regulations all have the force of law • NNSD 189, DoD Policy Memos on Contracted Fundamental Research do not

7. NSDD 189 Provides definition: • “Fundamental research” means basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community. Where national security requires control, the mechanism for control at universities is classification • No restrictions may be placed on conduct or reporting of federally-funded fundamental research that has not received national security classification except as provided in statutes

8. However…NSDD 189 also states: • No restrictions may be placed upon the conduct or reporting of federally-funded fundamental research that has not received national security classification, except as provided in applicable U.S. Statutes. • Arms Export Control Act, Export Administration Act, Atomic Energy Act, International Economic Emergency Powers Act- are all applicable statutes

9. “The Color of Money” • Roth appellate ruling raises issues as to the scope of fundamental research and its applicability to 6.2 DoD funding

10. “The Color of Money” “Atmospheric submitted the winning Phase I proposal and the Air Force awarded it the contract in May 2004 with Roth working as a consultant for the project. At or around that time, Sherman told Roth that the project would be paid for with “6.2” funds, which Roth knew implied that the research would be subject to export control laws that prohibit allowing access to the research outside of the United States or to foreign nationals unless a license has been obtained.”

11. “The Color of Money” • 6th Circuit opinion appears to hold that all stages of research relating to items on the Munitions List are subject to export controls • Impact on fundamental research unclear • State takes a very broad view of export regulations when DoD funds are involved Case Study: Voluntary disclosure Case Study: Cooperative agreement

12. “The Color of Money” Voluntary Disclosure Letter from DTCC said….. • “University also indicated that Company X effort was fundamental research as defined in the ITAR,§120.11(a)(8) but failed to consider the funding for Company X was provided by DoD…”.

13. “Mere access…” …to a defense article is a defense service. ITAR 121.1(a) The following articles, services and related technical data are designated as defense articles and defense services pursuant to §§38 and 47(7) of the Arms Export Control Act (22 U.S.C. 2778 and 2794(7)). Changes in designations will be published in the Federal Register. Information and clarifications on whether specific items are defense articles and services under this subchapter may appear periodically through the Internet Web site of the Directorate of Defense Trade Controls.

14. “Mere access…” …to a defense article is a defense service. Licensing of Foreign Persons Employed by a U.S. Person – UPDATED http://www.pmddtc.state.gov/licensing/documents/WebNotice_LicensingForeign2.pdf “A foreign person employee access authorization must be obtained for all foreign persons who require access to ITAR-controlled defense articles and/or technical data in the performance of their job responsibilities.”

15. “ITAR until proven innocent…” DoD: Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)] “DoD does not have authority to issue ``export direction'' regarding contractor responsibilities to comply with the ITAR and the EAR.” BIS: Federal Register Volume 75, Number 147 (Monday, August 2, 2010) “ Thus, this [Commodity Classification] document is not, and may not be relied upon as, a U.S. Government determination that the above-listed items are not, for example, subject to the export control jurisdiction of the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120-130), which are administered by the U.S. Department of State.”

16. “The mysterious case of the satellite in the classroom…” In two recent university advisory opinions, DoS claims jurisdiction over: • Satellite concept design in fundamental research • Educational activities relating to satellites that involve EAR components

17. “When you think it’s FR, but it’s not!” • Watch for: • Contradictory restrictive terms in contracts • Contract terms hidden in the SOW • Restrictive Distribution Statements in CDRLs • Don’t trust small businesses, and some large ones too Case study: Terms found in a DoD grant Case study: Foreign contractor

18. “When you think it’s FR, but it’s not! Voluntary Disclosure because - • University thought SOW was controlled • Foreign National post-doc • Small business said they were not giving University “Government Furnished Information” so it wasn’t controlled • Guess what, it was ITAR controlled!

19. “When you think it’s FR, but it’s not!”* (d) states "The Recipient shall not release to anyone outside the Recipient's organization any unclassified information, regardless of medium (e.g. film, tape, document), pertaining to any part of this contract or any program related to this assistance agreement, unless the Grants Officer has given prior approval." (e) states "Requests for approval shall identify the specific information to be released, the medium to be used, and the purpose for the release. The recipient shall submit its request to the Grants Officer at least 45 days before the proposed date of release. There was also a section (f) that made these mandatory flowdowns. *No real contracts were actually harmed with these publication terms

20. “Grants.ITAR” • Watch out for defense articles being used in financial assistances agreements • DoS Guidance: “A foreign person employment authorization must be obtained for all foreign persons who require access to ITAR-controlled defense articles and/or technical data in the performance of their job responsibilities.” • Case Study: Hearing protection • Case Study: Night vision goggles

21. “Left Behind” • Getting a license is the beginning of your compliance role, not the end • How good is your export license/ technology control plan for tangible exports? • Who pays for the investigation/recovery of items lost, stolen, or …left behind? Case Studies: Tanzania-camera Chile-camera

22. “Will the real restricted party please stand up?” • How much due diligence restricted party screening is enough? • “Am I too paranoid, or am I paranoid enough?” Case study: The front organization Case study: Scientists from embargoed entity

23. “Will the real restricted party please stand up?” • Case Study: HomiBhabha National Institute • “A “Deemed University” (by act of Indian legislature • “Faculty” mostly from comprehensively embargoed Indian nuclear weapons manufacturers (e.g., BARC, IGCAR)

24. “Follow the money” (preferably before Treasury does) • Banking in or around sanctioned countries, or with sanctioned entities or individuals • Wire transfers Case Studies: Cuba, Sudan, Syria, Iran

25. “Tips to avoiding a Bona Fide Full Time Headache” • ITAR Bona Fide Full Time Employee Exemption –be careful how you use it!

26. “Tips to avoiding a Bona Fide Full Time Headache” • 22 CFR 125.4 (b) (10) Disclosures of unclassified technical data in the U.S. by U.S. institutions of higher learning to foreign persons who are their bona fide and full time regular employees. This exemption is available only if: • (i) The employee's permanent abode throughout the period of employment is in the United States; • (ii) The employee is not a national of a country to which exports are prohibited pursuant to 126.1 of this subchapter; and • (iii) The institution informs the individual in writing that the technical data may not be transferred to other foreign persons without the prior written approval of the Office of Defense Trade Controls; • That’s just the beginning…

27. “Tips to avoiding a Bona Fide Full Time Headache” • Does not apply to graduate students • Applies to disclosure of technical data and internal university technical discussions only • TAA still required for external Technical discussions Case Study: Stanford-DDTC correspondence Case Study: UTxA-DDTC correspondence

28. “Tips to avoiding a Bona Fide Full Time Headache” - Email from DDTC: “Yes, the exemption includes discussions of the tech data with other employees of the University. No, the exemption does not include discussions and interchange of technical data between the foreign national employee and third parties.” Stephen Geis, DDTC

29. “Tips to avoiding a Bona Fide Full Time Headache” • Documentation • 22 CFR 123.26 Recordkeeping requirement for exemptions. • 22 CFR 125.6 Certification requirements for exemptions

30. “PR gone home…” • Permanent residents do not require export licenses to have access to export-controlled items • But what happens when one signals intent to go home- permanently? Case Study: PR from a Sect. 126.1 country

31. “Yes, Virginia, there are other export regulations…” • Export Administration Regulations • 15 CFR §760-766 Antiboycott Regulations • Nuclear Regulatory Commission • 10 CFR §110 Exporting Nuclear Materials & Equip. • Department of Energy • 10 CFR §810 Assistance to Foreign Atomic Energy Activities • Bureau of Alcohol, Tobacco, and Firearms • 27 CFR §444-555 Munitions Import • Office of Patents and Trademarks (PTO) • 37 CFR §5 Patents

32. “Sanctions, why did it have to be sanctions?” • New “Iranian Transactions and Sanctions Regulations”

33. “Sanctions, why did it have to be sanctions?” • Restrictions on Iranian students: • in “energy” and “nuclear” areas of study • Clarification of restrictions on EAR “software” use in educational activities

34. “Knock, knock. Who’s there? The FBI. The FBI who?” • Don’t be caught flatfooted when law enforcement comes calling • Have a plan, designate a POC, know what can or cannot be given without judicial order, set guidelines for dealing with students • Production of documents, emails, etc.

35. “Break glass in event of Federal Officer Raid” • Have a procedure • Record badge number • Get copy of warrant or subpoena • Request that they wait for security or legal personnel • Don't agree to any added scope outside of the judicial order • Don’t consent to anything • Make no statement • Warrants and subpoenas do not authorize disclosures • Don't unlock anything • Send nonessential personnel home • Monitor search, keep notes • Never impede investigation Source: James Bartlett, Northrup Grumman

36. Questions? NCURA 54th Annual Meeting * November 4-7, 2012 * Washington, DC