Sponsored Projects Compliance Certification Program

1. Sponsored Projects Compliance Certification Program U.S. Export Control Laws and Research At Penn

2. Sponsored Projects Compliance Certification Program Welcome to the University of Pennsylvania’s Sponsored Projects Compliance Certification Program. The Program is designed to facilitate compliance with sponsored programs administrative requirements by addressing concepts critical to proper management. This module examines the various federal laws and regulations governing export controls and the conduct of University research.

3. Export Control Laws and Research at Penn What are the Export Control Laws? • Export Control Laws are laws which prohibit the unlicensed “export” of certain controlled technologies to foreign persons for reasons of national security and trade protection • “Export” is defined very broadly to include an oral or written disclosure of information, visual inspection, or actual shipment outside the U.S. of technology, software/code or equipment to a foreign person • Any method of disclosure may apply: email, telephone, websites, tours, training sessions

4. Export Control Laws and Research at Penn What is meant by a “Foreign Person”? • Any Foreign Government • Any Foreign Corporation or group that is not currently incorporated in the United States or organized to do business in the United States • Anyone who is not a lawful permanent resident of the United States.

5. Export Control Laws and Research at Penn What are the various regulations governing Export Control Laws (ECLs)? • Export Administration Regulations (EARs) • International Traffic in Arms Regulations (ITARs) • Office of Foreign Assets Control (OFAC)

6. Export Control Laws and Research at Penn What are the Goals of Export Control Laws? • Prevent Terrorism • Curtail export of technologies that assist the military potential of adversaries • Compliance with Trade Agreements • Prevent development of nuclear, chemical and biological weapons

7. Export Control Laws and Research at Penn Required Reading for all faculty and administrators at the University of Pennsylvania • Memorandum from the Vice Provost for Research and Senior Vice President and General Counsel entitled “A Reminder to Researchers and Administrators Regarding Federal Export Control Laws” • Provides an overview of the issue of Export Controls • Available at ORS website with other information: www.upenn.edu/researchservices/exportcontrols/

8. Export Control Laws and Research at Penn • Federal Agencies with oversight of Export Control Laws • Department of State –ITAR- technologies with inherently military properties • Department of Commerce – EAR – technologies with “dual uses” but primarily commercial • Department of the Treasury – OFAC – prohibits transactions of value with certain countries and individuals

9. Export Control Laws and Research at Penn • EAR: • Enforced by the Department of Commerce through its Export Administration Regulations (EAR). Primarily covers technologies and technical information with both commercial and military applications, the so called “dual use” technologies (chemicals, satellites, software, computers, etc.) • Lists of controlled technologies are found in 15 CFR 774, Supplement I, [referred to as the Commodity Control List (CCL)] • List available on ORS website

10. Export Control Laws and Research at Penn • ITAR: • Enforced by the Department of State under the International Traffic in Arms Regulations (ITAR). Exporters of defense services or related technical data are required to register with the federal government and may need export licenses. • Controlled technologies of an inherently military nature: defense articles, defense services and related technical data listed on the Munitions Control List (MCL). Examples would be explosives, rocket systems, military training equipment, etc. • For a list of controlled technologies see 22 CFR 121.1. • List available on ORS website

11. Export Control Laws and Research at Penn • The Office of Foreign Assets Control ("OFAC") of the US Department of the Treasury administers and enforces economic and trade sanctions against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction. • Regulations target specific nations in controlling significant financial transactions or services. Countries currently sanctioned are the Balkans, Burma, Cuba, Iran, Iraq, Liberia, Libya, North Korea, Sudan, Syria, and Zimbabwe. http://www.treas.gov/offices/enforcement/ofac/

12. Export Control Laws and Research at Penn • Examples of prohibited activities in boycotted countries monitored by OFAC: • Conducting surveys and interviews • Engaging the services of persons to develop new informational materials or support of research activities (i.e., just hiring Iranians to work on an archeological site may be prohibited!) • Providing marketing and business services

13. Export Control Laws and Research at Penn How do these laws impact research at Penn? • If Penn research involves these controlled technologies, Penn may be required to get government approval (a license) before allowing: • Certain foreign researchers and students in the U.S. (including on campus at Penn ) or foreign persons outside the U.S. from participating in research involving the controlled technologies • The sharing of research results with foreign persons • Providing training and other services to foreign persons • Sending equipment or software outside the U.S.

14. Export Control Laws and Research at Penn Why increased concern with impact of ECLs on University research? • Advanced technologies developed at universities may be subject to ECLs • ECLs are applicable to research fields not traditionally associated with the “military” such as life sciences materials (biological agents and toxins) and computers (encryption technology) • University research reliance on Federal funding with increased compliance requirements • Increased “globalization” of University research

15. Export Control Laws and Research at Penn Why Is this issue important? • Export Control Laws (ECLs) present a challenge to the Penn research community • ECLs are the law of the land and apply to all research activities • Failure to comply carries heavy fines and possible imprisonment • Compliance is not easy because ECLs are complicated and confusing • Federal Government has increased enforcement and investigations of universities since 9/11/2001

16. Export Control Laws and Research at Penn General Rule: Penn, its faculty, and employees may not export to foreign persons certain materials and information without a license from the U.S. Government, unless an exclusion applies. Fortunately, the majority of research at Penn will be covered under an exclusion to the ECL requirements. What are the exclusions?

17. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS: A. PUBLIC DOMAIN EXCLUSION: export controls do not apply to information and research results already published and publicly available from: • Libraries, bookstores, or newsstands • Trade shows, meetings, seminars in the U.S. open to the public • Published in certain patent applications • Websites accessible to the public • Courses listed in a university catalog of a general nature

18. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS: B. EDUCATION EXCLUSION: • ITAR: No export controls associated with information (but not technology and materials) which is “general scientific, mathematical or engineering principles commonly taught in . . . universities.” • EAR exclusion for “educational information” released by instruction in catalog courses and associated teaching laboratories. So, in general, no need for a license to share information as part of a regular course being taught at Penn.

19. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS (cont.): C. EMPLOYMENT EXCLUSION: license is not needed to share information subject to export control laws if the foreign national is/has: • A full-time, employee of Penn • Not a national of certain countries • A permanent address in the U.S. while employed at Penn

20. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS (cont.): D. FUNDAMENTAL RESEARCH EXCLUSION (FRE): will cover most research at Penn • Basic or applied research in science or engineering • at an accredited institution of higher learning in the U.S. • resulting information is ordinarily published and shared broadly in the scientific community

21. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS (cont.): BUT, University research will not qualify as FUNDAMENTAL RESEARCH if the university accepts any restrictions on the publication of information resulting from the research, other than limited prepublication reviews by research sponsors to: • Prevent inadvertent divulging of proprietary information provided to the researcher by the sponsor • Insure that publication will not compromise patent rights of the sponsor

22. Export Control Laws and Research at Penn EXCLUSIONS TO ECLS (cont.): The FUNDAMENTAL RESEARCH EXCLUSION (FRE) would be destroyed by a contract clause that: • Gives a sponsor a right to approve publications • Forbids the participation of foreign nationals in the research effort These limitations are applicable to any sponsor, whether federal, private or not-for-profit

23. Export Control Laws and Research at Penn SHIPPING EQUIPMENT OUTSIDE THE UNITED STATES: • If equipment is subject to ITAR regulations, a license is required from the Department of State to ship to any foreign nation. A license can take a long time to obtain so plan ahead! • If equipment is subject to EAR regulations, the necessity of license is dependent on the facts: • where it is being shipped and, • do any exceptions apply • Plan ahead and notify ORS as soon as possible. • It is illegal for equipment to be shipped to a country subject to sanctions/embargo under OFAC

24. Export Control Laws and Research at Penn EXCLUSIONS TO ECL Shipping License: • Under an exception to the need for a license (exception for temporary export), a researcher may be able to take a laptop out of the country for use in fundamental research, provided the laptop does not leave the control of the faculty researcher Note: This exception does not apply to OFAC embargoed countries!!

25. Export Control Laws and Research at Penn EQUIPMENT USE EXCLUSIONS? There are no express exclusions that allow foreign persons to use controlled equipment without a license. -Universities maintain that if controlled equipment is used in most research, such use would be covered by the Fundamental Research Exclusion. If controlled equipment is used in a program of study, the Education Exclusion would apply. These interpretations are being questioned by the Federal Government.

26. Export Control Laws and Research at Penn How are Contracts and Grants Impacted by ECLs? • Important Federal funding opportunities (Homeland Security, NSF, NIH, DOD) directly linked to ECLs • Terms and conditions restricting access by foreign nationals or removing research from fundamental research exclusion • Contract requirements from Corporate Sponsors on ECLs • Tech Transfer Issues: disclosure/licensing of technologies and material transfer agreements to foreign nationals

27. Export Control Laws and Research at Penn Contracts and Grants Impacted by ECLs: What should one pay attention to? Proposals and contracts where: • There is a shipment of equipment to a foreign country • Training or collaboration with foreign nationals • Any work with or travel to an OFAC controlled country • Any reference to export controlled technologies in the award

28. Export Control Laws and Research at Penn What changes does Penn need to make in contracts and grants? • Removing from any award terms and conditions that limit the right to publish or present research results • Removing from any award terms or conditions that limit access or participation in the research to foreign nationals

29. Export Control Laws and Research at Penn • Caution! Faculty, staff and students may be held personally liable for violations of EAR and ITAR in the conduct of their research in addition to any liability attaching to the University of Pennsylvania • Penalties for unlawful disclosure or export of export controlled information are very high fines (millions of dollars) and possibly imprisonment.

30. Case Study #1 • A Professor of Engineering has developed a website containing technical information related to high-tech communications technologies with possible military applications. The website may only be accessed through a secured connection requiring a password supplied by the Professor. Several researchers in Norway, South Africa and Turkey have access to the website. The website is: • Not subject to export control laws since only researchers in Norway, South Africa and Turkey have access and none of these countries is regarded as an embargoed country. • Subject to export control laws since the technical information relates to communication technology with possible military applications. Such technical information is always subject to export controls. • Subject to export controls since it allows access to export controlled information by foreign nationals. • Not subject to export controls since there is no actual “export” involved, there is no actual transfer of information.

31. Case Study #1 Analysis • “Export”, as used in the regulations, does not have the common dictionary definition, and has an expansive meaning. Instead, “export” generally means: (1) actual shipment of covered goods or information outside the U.S.; (2) the electronic or digital transmission of covered goods or information outside the U.S.; and (3) release or disclosure, including verbal disclosures or visual inspections, of any covered technology, software or technical data to any foreign national, whether in the U.S. or abroad. This is a summary of a complicated definition, which is set forth at 15 CFR 734.2, and can be found at http://w3.access.gpo.gov/bis/ear/pdf/734.pdf. • Is incorrect since the definition would apply to any foreign national, not just those in an embargoed country. • Is incorrect since technical information related to communication technology with possible military applications is not always subject to export controls (for example, if it were in the public domain). • Is the correct answer. • Is incorrect since the definition of export applicable to export control laws is not just the transfer of an actual “thing” but even just transfer of information. Access to a website is an export.

32. Case Study #2 • A researcher in the Department of Chemistry is working on organic compounds that have possible applications as toxins. The research leading to the characterization of these organic compounds is supported by a grant from the NSF. The researcher asks for your recommendations on sending draft manuscripts describing the organic compounds to foreign researchers outside the U.S. for comment. Sending draft manuscripts: • Would be subject to export control concerns only because research results are being sent outside of the U.S. • Would be subject to export control concerns since it involves research on organic compounds with possible applications as toxins. • Would not be subject to export control concerns since, even if it involves research on organic compounds with possible applications as toxins, since the research was supported by NSF, a federal funding agency, the research would automatically be defined as fundamental. • Would not be subject to export control concerns since, even if it involves research on organic compounds with possible applications as toxins and the research was supported by NSF, since the research results area being sent to foreigners only to allow them to comment on a proposed publication, a scholarly activity.

33. Case Study #2 Analysis • a) Is incorrect since research results being sent outside the U.S. only does not make them subject to export controls. For example, information resulting from research qualifying for the fundamental research exclusion may be sent outside the U.S. • b) Is the correct answer since possible applications as toxins suggests a technology with potential terrorist applications. • c) Is incorrect since Federal agencies may and do fund research subject to export controls. • d) Is incorrect. The facts indicate that export controlled information is being sent to foreign nationals. A benign intent is not part of the analysis.

34. Case Study #3 • A Professor of Art History is seeking to travel to Iran in order to engage in an archeological dig. None of the equipment she is taking is listed on any export controlled list. The findings of the archeological dig will be published and widely available. Which of the following is a true statement? • The Professor will need to obtain a license to travel to Iran and engage in research activities there since Iran is a sanctioned country. The Professor’s activities will involve payment of funds to Iranian citizens. • The Professor will not need to obtain a license since the research activities involve fundamental research and the results may be published and made publicly available. • The Professor will need to obtain a license since she will be traveling and doing research outside the United States, and this is true regardless of the country involved. • Archeology is clearly an area of research unrelated to any of the issues associated with export controls and a license will not be necessary.

35. Case Study #3 Analysis • The correct answer is a)  OFAC (Office of Financial Assets Control) • The mission of OFAC is to “administer and enforce economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.” • OFAC prohibits payments or providing “value” to nationals of sanctioned countries/activities. Iran is such a country.

36. Case Study #4 • The following contract clause appears in a research contract from DOD for a faculty researcher at Penn. The work covered by the contract is basic research in a scientific field. DOD CONTRACT CLAUSE: Disclosure of Information University shall not release to anyone outside the University’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 contract, unless • The contracting Officer has given prior written approval; or • The information is otherwise in the public domain before the date of release. • Requests for approval shall identify the specific information to be released, the medium to be used, and the purpose for the release. The University shall submit its request to the Contracting Officer at least 45 days before the proposed date for release. • Which of the following is a correct statement about the contract clause? • Since this contract involves work that would qualify for the fundamental research exclusion, we do not need to be concerned with the impact of the clause: the research by definition is not subject to export control concerns. • Any contract involving funding from DOD would necessarily involve the potential for research with military applications. Hence, we do not need to consider the clause; the research by definition is subject to export control concerns. • The clause would be a restriction on publication, removing the research from a fundamental classification and hence would be subject to export control concerns. • Since the clause only requires the submission of the request for approval to publish 45 days before the proposed date of release, the delay on publications is small and, accordingly, the clause does not raise any concerns relating to export control compliance.

37. Case Study #4 Analysis • The publication clause seeks to control any unclassified information that DOD believes may be sensitive and inappropriate for release to the public. Any publication of research results would require prior approval from DOD. Thus, even though the research would qualify as fundamental research, the exclusion is destroyed by the publication restrictions. Transfer of research results to foreign nationals would require a license. • Is incorrect since the publication restrictions destroy the application of the Fundamental research exclusion. • Is incorrect since DOD contracts may involve research not subject to export controls. • Is the correct answer. • Is incorrect because publication requires prior approval, even if the time need to obtain approval is only 45 days.

38. Case Study #5 • Small startup company receives a SBIR grant from the Army. As part of the planned research, the company will be working under a subcontract with a Penn PI on some research. The research may be properly characterized as “basic and applied research” in engineering. As part of the work, the company will be providing technical data subject to export controls. You are working on a subcontract to the grant for a PI. The subcontract contains the following language: Non disclosure There shall be no dissemination or publication, except within and between the Company and Penn, of information furnished to Penn by Company pursuant to this contract without prior written approval of the Company. Information subject to this clause shall be clearly marked as proprietary or export-controlled. • Which of the following statements is true: • This research project is subject to export controls since export controlled information is being provided to the PI by the Company. • If the SBIR grant is funded through the Army, there is clearly the potential for military applications of research results, regardless of the language in the clause, and the proposal is subject to export controls. • This research project is not subject to export controls since any export controlled information being provided to the PI by the Company could not appear in any publications by the PI without Company’s prior written permission. • None of the above.

39. Case Study #5 Analysis • The information generated by the University will not be subject to publication restrictions. The information may be released to the public domain. Since it is basic /applied research, the work qualifies for the fundamental research exclusion. The technical data provided by the Company, subject to export controls above, is Company proprietary information which may be removed after Company review of publications. • c) Is the correct answer.

40. Case Study #6 • A PI at Penn is working with the South Korean Ministry of Science on research supported by NASA. The PI is developing instrumentation that will be placed on a satellite. The results of the research will be publicly available and published. The contracts with NASA and the South Korean Ministry of Science covering the research state that all parties will comply with export control laws. The research is basic and no restricted information will be received by the Penn PI. • Which of the following statements is correct? • Since the research is fundamental and no publication restrictions apply, Penn will not need to apply for a license from the federal government to send the instrumentation from Penn to South Korea. • The instrumentation involves equipment that will be sent into space. Hence, it is covered by ITAR and a license will be necessary to ship the instrumentation to South Korea, even if the research leading to the instrumentation qualifies for the fundamental research exclusion. • Even though the research is fundamental and no restrictions apply, Penn will need to apply for a license from the federal government to send the instrumentation from Penn to South Korea since South Korea is a foreign nation. • None of the above

41. Case Study #6 Analysis • Even though the project qualifies as fundamental research and the technical information / research results will be widely published, since the facts describe the transfer of an actual physical piece of equipment that will be launched into Space, the instrumentation will automatically be subject to export controls under ITAR. • The correct answer is b.

42. Case Study #7 • You have prepared a research proposal in response to a solicitation. One condition in the solicitation is a requirement that only citizens of the United States may participate in the conduct of the research funded under the proposal. Which of the following is a correct statement? • The requirement limiting participation to U.S. citizens means that the research could be subject to export controls and the research proposal should be carefully reviewed to ensure that Penn and the PI can comply with the export control laws or modify the research proposal to remove export controls as a concern. • The condition only involves hiring and participation on the research funded under the proposal at Penn. This is work in the United States and there is nothing to indicate that any sort of “export” will take place, and as such, the research proposal does not need to be carefully reviewed for compliance with export control laws. • The question of whether careful review is needed to ensure compliance with export controls depends on the nature of the funding agency. If a private sponsor, such as a commercial corporation, there is need to review carefully for compliance with export control laws. If the funder is the federal government, the proposal is automatically exempt from export control laws. • None of the above.

43. Case Study #7 Analysis • The correct answer is a. • The solicitation condition is of concern and needs to be carefully reviewed to ensure compliance with export controls. Because participation and access to research results are restricted (based on country of citizenship), the research proposal would not qualify for the fundamental research exclusion and would be subject to export controls. Another concern from a policy point of view would be differential treatment of students and employees at Penn based on country of citizenship and that also would be unacceptable. • b) is incorrect. Even for research activities on campus and even if no specific export is contemplated, limiting access and participation in the research based on country of citizenship would remove the research proposal from the fundamental research exclusion. • c) is incorrect because the nature of the Sponsor is not relevant to the analysis. The solicitation contains an access control. If the University decides to accept the award, the fundamental research exception will not apply.

44. Case Study #8 • A faculty member in Chemistry is teaching a junior level course required to obtain a B.A. degree in chemistry. The course covers in part discussion on the handling and disposition of nuclear materials as part of the course materials. Several students of foreign nationality are enrolled in the class. • Which of the following is a true statement? • Since the course involves instructions on nuclear materials and has enrolled foreign students, the faculty member needs to get a license from the federal government to conduct the course. • Although the course involves instructions on nuclear materials and has enrolled foreign students, the faculty member does not needs to get a license from the federal government to conduct the course since it would falls within the “teaching exclusion” to export control compliance. • Since the course involves instructions on nuclear materials, the requirement of whether or not the faculty member needs to get a license from the federal government to conduct the course is dependent on the actual foreign nationality of the enrolled students. For example, a student from N. Korea would necessitate a license to be enrolled in the course. • None of the above.

45. Case Study #8 Analysis • The correct answer is b). • The “teaching” or “education” exclusion to ITAR exempts information which is “general scientific, mathematical or engineering principles commonly taught in . . . universities.” A closely-related EAR exclusion concerns “educational information” released by instruction in catalog courses and associated teaching laboratories. Generally, this “teaching exclusion” does not apply to non-public domain information and certain information deemed classified or sensitive by the federal government. • b) is incorrect because instruction on nuclear materials is in a standard course described in the catalog. • c) is not correct. The “teaching” or “education” exclusion applies to general course work regardless of the nationality of students enrolled, unless a specific OFAC concern is triggered. This would not be the case for course materials already in the public domain.