EXPORT COMPLIANCE Three Rivers Chapter NPMA January 18, 2012

1. EXPORT COMPLIANCEThree Rivers Chapter NPMAJanuary 18, 2012

2. AGENDA • Purpose – Why is export compliance important? • Exporting Basics • Common Issues • Classifying, Labeling and Shipping • Penalties • Property’s Role • Future Changes – Export Control Reform

3. PURPOSE • To be compliant with U.S. Laws. Non-compliance = high cost • Protects U.S. national security interest • Fines

4. EXPORTING BASICS – What is Export Controlled? • Department of State • International Traffic in Arms Regulations (ITAR) – U.S. Munitions List • Military • Protects defense related information and items on the U.S. Munitions List • http://www.pmddtc.state.gov/regulations_laws/documents/official_itar/ITAR_Part_121.pdf • Department of Commerce • Commerce Control List • Dual Use – can be used for commercial or military purposes • http://www.bis.doc.gov/policiesandregulations/ear/ccl_index.pdf

5. What is export controlled? • Defense Article (Hardware), Technical Data and Services • Hardware – equipment, anything in tangible form • Technical Data – information, drawings, software, photographs, design details • Services – training, performing labor for someone else

6. FOREIGN PERSON • Any person who is not a lawful permanent resident as defined by 8 U.S.C. 1101 (a)(20) or who is not a protected individual as defined by 8 U.S.C. 1324b (a)(3) • Includes: Non – U.S. citizen employees of a U.S. company, as well as foreign national employers of overseas offices. Transfer of defense articles/services/data to these individuals requires prior written government approval • Includes: Foreign corporations, business associations, partnerships, trust, society or any other entity or group that is not incorporated or organized to do business in the U.S., as well as international organizations, foreign governments, and any agency or subdivision of foreign governments • An organization’s affiliate/subsidiary, located outside of the U.S., is considered a foreign company under ITAR

7. DUAL USE • Technical data or hardware which can be used interchangeably for both military and commercial applications • Built with no particular military function, but may have a potential military application • Example: most laptops, metals, fuels, computer equipment, etc.

8. WHAT IS AN EXPORT? • Sending or taking a defense article out of the U.S. in any manner, except by mere travel outside of the U.S. by a person whose personal knowledge includes technical data; or • Transferring registration, control, or ownership to a foreign person of any aircraft, vessel, or satellite on the U.S. Munitions List, whether in the U.S. or abroad; or • Disclosing (including oral or visual) of or transferring in the U.S. any defense article to an embassy, any agency or subdivision of a foreign government; or • Disclosing (including oral or visual) of export controlled information (technical data or technology) to a Foreign Person in the U.S. or abroad • Performing an ITAR controlled defense service for a foreign person, whether in the U.S. or abroad

9. COMMON ISSUES • Laptops. Taking laptops out of the country. How storing drawings and technical data onto a laptop can turn it into a defense article, which is covered by the Dept. of State. • Transferring Property that is export controlled to another company (U.S. or foreign). Need to ensure that the property is labeled correctly and no export licenses are needed. Labeling correctly is a mitigating risk factor. Contact Program Manager, Contracts or your Export Department if you have questions on whether something is export controlled.

10. CLASSIFYING, LABELING AND SHIPPING • Importance of classifying property as export controlled (ITAR – military) or (dual use) • Labeling ITAR Property • Shipping • Shipping to a U.S. person • Shipping to a foreign person or company • Foreign shipments require an export license or using an exemption. • Even if no license is required and the value is over $2,500, the shipper must use the Government’s Automated Export System (AES) to ship. Electronic way to declare an international export to the Customs and Border Patrol.

11. CLASSIFYING, LABELING AND SHIPPING • Important to use a trusted freight forwarder, which is an invaluable asset to staying compliant with the export regulations. Need to work with a company that understands the laws and regulations and does not just move freight. • CTC uses D.T. Gruelle company from Pittsburgh: • Marco Gruelle, Export Manager • T: (USA) 412-262-2755 • Cell: 412-478-9379 • www.dtgruelle.com

12. PENALTIES • Individuals can be fined or imprisoned or both • Companies can be fined and debarred • Examples • 2011 - BAE Systems plc – 2,591 ITAR violations and a civil penalty of $79 million • 2008 – Boeing – 86 violations and a civil penalty of $15 million • QRS – 11 Quartz Sensor – used in the Maverick Missile Guidance System, which is ITAR controlled. Sensor was installed in a commercial plane and exported to other countries. http://www.pmddtc.state.gov/compliance/consent_agreements.html

13. PROPERTY’S ROLE • A key line of defense in your company’s export compliance program. • Work with your Program Manager, Contracts and Export Compliance Department to ensure property is labeled correctly. • If you are asked to ship to a foreign person or foreign country, ask if there is an export license or exemption required prior to shipping.

14. EXPORT CONTROL REFORM • Export regulations for the Dept. of State and Dept. of Commerce are currently under review. • Government is trying to streamline the process, develop a single list of items, rather than 2 different sets of regulations. • Goal: Protect U.S. interest on key technologies and equipment, based on today’s environment rather than an outdated system. Improve U.S. exports. • Still in process. Unsure at this point what the end result will be.

15. THANK YOU FOR ATTENDINGANY QUESTIONS?