What You Need to Know About

1. What You Need to Know About U.S. Export Controls andEconomic Sanctions Laws Nov. 14, 2006

2. Why is This Important? • Supports the U.S. Government’s objectives of protecting U.S. national security and furthering foreign policy interests • Establishes the university as a “good corporate citizen” • Avoids reputational harm and adverse publicity • Don’t want to see headlines “UofA and its Researcher Caught Releasing Sensitive Technology”

3. Why is This Important? • Avoids severe criminal and civil penalties for the institution and the individuals involved • Civil penalties up to $500,000 • Criminal penalties including fines of up to $1 million and jail time • Suspension/Denial of Export Privileges • Could have an adverse impact on government contracts

4. Are Universities Targeted? • State/Commerce/Defense Depts. are focused on universities • GAO conducted visits • IG report highlighted export control issues • Treasury Dept. has fined universities for sanctions violations involving Cuba, Iran and Sudan • E.g., UCLA, Pace Univ., Frederick Taylor Univ.

5. What are Export Controls? • US laws that regulate the transfer of items, technology, software, and services • Other countries have similar laws • Apply to all activities with foreign persons and foreign countries – not just sponsored research projects

6. How Does This Affect UofA? • Many activities qualify for an exception • National Security Decision Directive (NSDD) 189: • “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, as distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons.”

7. How Does This Affect UofA? • Thus, not all research activities are exempt • Export controls may restrict: • Ability of foreign students or researchers to participate in research • Ability to provide services (including training in the use of equipment) to foreign persons • Ability to send equipment, spare/replacement parts, technology or software to foreign countries • Ability to collaborate with researchers in foreign countries

8. What is an Export? • Physical transfers of tangible items outside the U.S. • Electronic or digital transfers of software or technical data outside the U.S. • Release or disclosure of software or technical data to any foreign person by e-mail, Internet, phone/fax, in-person (oral) communication, or visual inspection • Application of technical data abroad

9. What Else is an Export? • “Deemed Export” -- disclosure of technical data or software source code to a non-U.S. person in the United States (including foreign embassy staff) • This transfer is “deemed” to be an export to his/her home country • Reexport -- an export of a U.S.-origin item, software or technology from one foreign country to another • U.S. laws “follow” the item

10. Who is a U.S. Person? • U.S. person • Everyone who is a U.S. citizen, a U.S. legal permanent resident (“green card” holder) or an asylee/refugee • Not F-1, J-1, H-1B, O-1 visa holders • A U.S. corporation, partnership, trust, society or other entity incorporated or organized to do business in the United States • Everyone else is a “foreign person” • Special rules apply to “dual nationals” • E.g., a citizen of China who also is a Canadian citizen

11. Structure of U.S. Export Controls Treasury Department: Office of Foreign Assets Control (OFAC) Defense Department (DOD) Economic Sanctions: Countries, Entities, and Individuals Federal Acquisition Regulations (FAR) Commerce Department: Bureau of Industry and Security (BIS) State Department: Directorate of Trade Controls (DTC) Export Administration Regulations (EAR) International Traffic in Arms Regulations (ITAR) “dual use”/ commercial military use

12. What is Subject to the ITAR? • Broad restrictions on exports, reexports, imports, proposals to sell and brokering • Defense Articles • Technical Data • Defense Services • Items on the U.S. Munitions List (USML)

13. What is a Defense Article? • Any item listed on the USML • Includes raw materials, components, parts, software, and related technical data (i.e., not just end products) • Any item specifically designed, developed or modified for a military application

14. What are Some Examples? • USML examples include: • Launch vehicles, missiles, rockets • Military aircraft and vehicles • Military training and simulation • Military electronics • Toxicological agents, including chemical and biological agents, and associated equipment • Spacecraft systems and satellites

15. What is Technical Data? • Broad scope • Information required for design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of Defense Articles

16. What is a Defense Service? • Furnishing of assistance or training to a Foreign Person in the design, development, engineering, production, assembly, testing, processing, manufacture, use, operation, overhaul, repair, maintenance, or modification of Defense Articles

17. How Strict are ITAR Controls? • VERY! • Almost all ITAR activities require a license from the US Govt. prior to engaging in the controlled activity • Even proposals are regulated—for example, proposals to a country subject to a U.S. arms embargo are prohibited

18. Which are ITAR Proscribed Countries?

19. What is Subject to the EAR? • Items not on the USML • Items on the Commerce Control List (CCL) including commercial as well as “dual-use” goods, software and technology

20. What is on the CCL? Ten categories: • 0-Nuclear Materials, Facilities & Equipment (and Miscellaneous Items) • 1-Materials, Chemicals, Microorganisms, and Toxins • 2-Materials Processing • 3-Electronics Design, Development and Production • 4-Computers • 5-Telecommunications and Information Security • 6-Sensors and Lasers • 7-Navigation and Avionics • 8-Marine • 9-Propulsion Systems, Space Vehicles and Related Equipment

21. What is Export Classification? • If an item appears on the CCL, it will be assigned a five digit alpha-numeric Export Control Classification Number (“ECCN”) • Each ECCN dictates where an item can be exported

22. What are Some Examples? • ECCN Examples: • 3C003 covers the following “organo-inorganic compounds” • Organo-metallic compounds of aluminium, gallium or indium having a purity (metal basis) better than 99.999% • Organo-arsenic, organo-antimony and organo-phosphorus compounds having a purity (inorganic element basis) better than 99.999% • 6A002 covers a number of “optical sensors” including • “Space-qualified” solid-state optical detectors • Pyroelectric detectors using enumerated materials • Non-”space-qualified” focal plane arrays with specified characteristics • Monospectral imaging sensors and multispectral imaging sensors having any of the enumerated characteristics

23. What is Known as “EAR99”? • If an item does not have a specific entry on the CCL, it falls into the basket category, known as “EAR99” • EAR99 items are subject to minimal export controls

24. Who are Restricted Persons? • BIS designates persons and entities with whom certain transactions are restricted (i.e., a license generally is required) or are prohibited altogether: • Entity List • Denied Persons List • Unverified List

25. Who are Restricted Persons? • What do these four entities have in common? • Beijing Huahang Radio Measurements Research Institute in China • Bharat Dynamics Limited in India • Al Kayali Corporation in Richardson, Texas • Arrow Electronics Industries in the UAE

26. Is a License Always Required? • Most items controlled under the EAR do not require an export license • A license to export or reexport items may be required based on: • Export classification of the item or technology • Destination country • Identity of the intended recipient (“end user”)

27. When Do Universities Need an Export License? • When making shipments of controlled items or software outside the U.S. • Transferring controlled technical information and software source code to a foreign person in the U.S. or abroad, unless an exclusion applies

28. What are the Exclusions? • A license is not required if one of four exclusions applies: • Education Exclusion • “Public Domain” Exclusion • “Fundamental Research” Exclusion • Employment Exclusion (ITAR only)

29. 1. Education Exclusion • Information concerning general scientific, mathematical or engineering principles commonly taught in colleges or universities • Applies to information released during catalog-listed courses at UofA (through lectures, course materials, or instruction in laboratories)

30. 2. “Public Domain” Exclusion • Information generally accessible to the public in any form, including information: • readily available at libraries open to the public or at university libraries • in patents and published patent applications available at any patent office • released at an open conference, meeting, seminar, trade show, or other open gathering • published in periodicals, books, print, electronic, or other media available for general distribution (including websites that provide free uncontrolled access) or for distribution to a community of persons interested in the subject matter, such as those in a scientific or engineering discipline, either free or at a price that does not exceed the cost of reproduction and distribution

31. 3. “Fundamental Research” Exclusion • Information arising during or resulting from: • Basic and applied research in science and engineering • At an accredited US institution of higher learning • Where the resulting information is ordinarily published and shared broadly in the scientific community

32. “Fundamental Research” (cont’d) • Distinguished from proprietary research or industrial design or development, where research results are restricted for proprietary or specific national security reasons • Federal government and commercial sponsors of university research increasingly are inserting export-control related clauses in agreements • Prepublication approval, citizenship requests, non-disclosure restrictions

33. The Fundamental Research Exclusion Does Not Apply if UofA accepts any contract clause, for example, that: • Forbids / restricts the participation of foreign persons • Gives the sponsor a right to approve publications resulting from the research • Restricts access to and disclosure of research results

34. U.S. Govt. Funded Research • Special rules apply to research funded by the U.S. Government when there are specific access and dissemination controls protecting information resulting from the research • ITAR-controlled: Not “fundamental research” if such controls are accepted • EAR-controlled: May still qualify for the “fundamental research” exclusion under certain circumstances

35. Prepublication Review • UofA could accept prepublication review provisions and still claim the exclusion for the research results if the review is solely to ensure that publication: • Would not divulge proprietary information that the sponsor provided to UofA researchers • Would not compromise patent rights and it only causes a temporary delay in publication

36. “Fundamental Research” & Input Data • If, however, UofA • accepts such prepublication review, or • agrees that the sponsor may withhold from publication some or all of the information it provided to UofA • Then the information provided by the sponsor to UofA (“input data”) could be export controlled • UofA would have to assess the export classification of the input data and prevent its “deemed” export to a foreign person on the project • E.g., maybe only PI needs access to the input data

37. You Should Watch Out For • “Side deals” between a PI and Sponsor that may destroy the fundamental research exclusion • Presence of or access to “classified information” during research—special rules apply and only U.S. citizens can receive it • Items, software or materials that arise from research do not qualify for this exclusion and a license may be required for export outside the US

38. Case Study # 1 • Q. UofA enters into a cooperative research arrangement with a US company and the research would be conducted at UofA’s lab. UofA has agreed to a prepublication review so that the company could decide whether to hold the research results as trade secrets (or otherwise proprietary) or whether to allow UofA to publish the results. Can my student from China work in the lab?

39. Case Study # 1 (cont’d) • A. First, the research would not qualify as “fundamental” because the sponsor has the right prevent publication (there is no intent to publish at the time of entry into the agreement). Second, if UofA received any proprietary or confidential information from the company (input data), you would need to determine the export classification of such data in order to determine whether a license is required, or a license exception is available, for China. Third, perform the same analysis for the research results (even if there was no input data).

40. Case Study # 1 (cont’d) • Q. What if the prepublication review was intended solely to prevent inadvertent disclosure of proprietary information or to avoid compromising patent rights? • A. That changes the outcome. Such prepublication review does not destroy the fundamental research exclusion. You could involve the Chinese student on the project, provided that UofA has not agreed to any other restrictions (e.g., access by foreign persons etc.) and that the input data is not controlled for export to China, if the student even needs access to such data. If the input data is controlled for China, you would need to determine if a license exception is available and, if not, UofA would need to restrict the student’s access to the input data.

41. Case Study # 2 • Q. What if a non-US company is funding the research at UofA and there are no prepublication restrictions but there is a requirement that UofA researchers do some work at the foreign company’s facility abroad?

42. Case Study # 2 (cont’d) • A. You should be very careful. Application abroad of personal knowledge or technical experience acquired in the US constitutes an “export” of that knowledge / experience and such export may be controlled under the EAR. If the project is ITAR-controlled, you could be providing a Defense Service, which generally requires a license. You would need to determine the proper export classification and assess whether a license is required, or a license exception is available, for that particular foreign country.

43. Case Study # 3 • Q. On a DOD-funded project, UofA accepts certain national security controls (90-day prepublication review and DOD approval before any foreign national is assigned to the project). Does the information resulting from the research qualify for the “fundamental research” exclusion? • A. If the project is subject to the ITAR, the exclusion is not available. If, however, the project is subject to the EAR and you abide by the specific controls you have agreed to, the export of information consistent with the controls will still qualify for the “fundamental research” exclusion.

44. Case Study # 3 (cont’d) • Q. What if the agreed controls did not ask for DOD approval prior to assignment of foreign persons but rather had an explicit prohibition on participation of anyone who was not a U.S. citizen? • A. Foreign persons could not participate and must not have access to the data. Fundamental research exclusion does not apply.

45. 4. Employment Exclusion • No license is required to share ITAR-controlled technical information with a foreign person who • Is a full-time, bona fide regular UofA employee (generally not applicable to graduate or undergraduate students) • Has a permanent place of abode in the U.S. while employed • Is not a national of an ITAR proscribed country, and • Is advised in writing not to share ITAR-controlled information with other foreign persons

46. What About Equipment Use? • Use of Equipment vs. “Use” Data • For limited types of equipment, the US Govt. restricts the transfer of information related to its “use” • Commerce Dept.: interprets “use” to mean “operation, installation, maintenance, repair, overhaul and refurbishing” so only data related to all 6 activities would need an EAR license • State Dept.: all “use” data is restricted

47. Case Study # 4 • Q. I work on a research project involving semiconductors and want to involve my students from India and S. Korea. Students will work with me to come up with a solution to a problem that has been identified in literature and we intend to publish all of our results. Do I need an export license to brainstorm with students and have them help me resolve the technical problem? • A. No.

48. Case Study # 4 (cont’d) • Q. I would also like my students to maintain the equipment (a frequency changer operating in the 600-2000 Hz range with total harmonic distortion below 10% and frequency control better than 1%). Can I instruct them on how to operate and maintain the equipment? • A. Yes, provided that you do not also provide the Indian student information on installation, repair, overhaul and refurbishing of the equipment (which would, in total, constitute “use” data). The S. Korean student could even receive use data because it is not controlled for export to S. Korea. • Equipment is listed under 3A225 (subject to NP controls); 3E201 controls technology (“use” data) for such equipment • NP controls do not restrict exports to S. Korea but do restrict to India

49. What If I Do Need to Transfer Abroad? • A license is required to ship or otherwise transfer items, technical data and software, or provide services, controlled by ITAR to any foreign country (few exclusions or exceptions) • A license may be required to transfer items, technology or software controlled under the EAR out of the US depending on the export classification, where it is being sent, who is the end-user, and whether an exception applies • Replacement or spare parts may require a separate license, even if the initial equipment was exported pursuant to a valid license

50. Transfers Abroad cont’d • The process to classify equipment, technology and software under the EAR is tedious, detailed and time consuming • It can take months to obtain a license from State or Commerce