THANK YOU TO OUR TERRIFIC SPONSORS!Law and Regulations ... ¾Burma (Myanmar) ¾China, People’s...
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THANK YOU TO OUR TERRIFIC SPONSORS!
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MANAGEMENT
GLOBAL LEGAL SERVICES
ITAR – Best Practices Workshop
Compliance in an Outsourcing Environment
Presented by Gary StanleyGlobal Legal Services, PC, Washington, DC
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Four U.S. Agencies Control ExportsState Dept’s Directorate of Defense Trade Controls (DDTC) controls defense articles, defense services, and related technical data, including most space-related articles
Commerce Dept’s Bureau of Industry and Security (BIS) controls “dual-use” items
CubaTreasury Dept’s Office of Foreign Assets Control (OFAC) oversees embargo and sanction lists
Homeland Security Dept’s Bureau of Customs and Border Protection enforces all exports at U.S. borders.
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Law and RegulationsCommerce Department State Department Treasury Department
Export Administration Act Arms Export Control Act Trading with the EnemyExport Administration Act Arms Export Control Act Trading with the Enemy Act, Int’l Emergency
Economic Powers Act, & Others
Export Administration Regulations (“EAR”)
15 C.F.R. Parts 730-774
International Traffic in Arms Regulations (“ITAR”)
22 C.F.R. Parts 120-130
Iraq Sanctions Regulations, Terrorism Sanctions
Regulations, & Others31 C.F.R. Parts 500-598
Commerce Control List U.S. Munitions List List of Specially Designated Nationals & Blocked Persons
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Key Elements of U.S. Export ControlsU.S. controls both goods and technologyg gy
Until Export Control Act of 2002 (effective 1 May 2004), United Kingdom did not control electronic transfers of military technology and software
U S asserts extraterritorial jurisdiction over its exports of goodsU.S. asserts extraterritorial jurisdiction over its exports of goods and technology
Legal principle under which U.S. controls re-exports and retransfers of U.S. goods and technology – “Chain of custody”goods a d tec o ogy C a o custody
Extends to foreign goods incorporating U.S. components and foreign goods manufactured from U.S. technology
No “de minimis” rule under ITARNo de minimis rule under ITAR
U.S. applies “deemed” export and “deemed” re-export rule
Deemed re-export rule is basis for controls on foreign companies’ dual national d h d l l
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and third country national employees
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What Triggers U.S. Export Controls for Your Company?Engaging in the United States in the manufacture of ITAR-controlled PCB i “b k i ti iti ”PCBs or in “brokering activities”
Manufacturing of defense articles or furnishing of defense services requires registration with State Dept. under ITAR Part 122 – applies even if your company doesn’t export
Brokering sale of defense articles or services requires separately registering with State o e g sa e o de e se a t c es o se ces equ es sepa ate y eg ste g t StateDept. under ITAR Part 129
Selling U.S. products and services abroad
Offshore procurement of partsOffshore procurement of partsOutsourcing usually entails exporting specifications and drawings (possibly to multiple foreign suppliers)
Foreign nationals working in U.S. facilitiesg gIs a technology transfer occurring?
Collaboration/joint development with foreign partnersAlmost always involves technical discussions
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Almost always involves technical discussions
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Key Elements to Consider in Selling or Procuring PCBS Overseas
ITAR or EAR? – Are the PCBs specifically designed or modifiedITAR or EAR? Are the PCBs specifically designed or modified for a military or space application?What is entire “chain of custody” through which the PCBs or technical data will pass?p
If selling, includes initial customer and any further customers up supply chain, as well as all subcontractors who may have access to PCBs or technical data and any foreign customs brokers/freight forwarders and other intermediate consignees (brokers)
If procuring, includes foreign supplier and any subcontractors (including your source inspectors) who may have access to specs or related technical data, as well as any foreign customs brokers/freight forwarders and other intermediate consignees (brokers)
Do any foreign parties have any third country national (including dual national)Do any foreign parties have any third country national (including dual national) employees to whom they will allow access to the PCBs or technical data (“deemed re-export”)?
What ITAR license or other authorization do I need?
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Who Qualifies as a “Dual National”?Holding multiple citizenshipsState and Commerce differ on effect of being born in a different country from where individual now livesa different country from where individual now lives
State = different country of origin = dual national• Note: State does not usually recognize voluntary or involuntary
renunciations of citizenshiprenunciations of citizenship
Commerce = individual is national of country from which he or she most recently acquired citizenship
H i ti i bli ti t tHaving continuing obligations to two or more countriesReceiving benefits from two or more countries
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Receiving benefits from two or more countries
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ITAR § 126.1 “Proscribed Countries”Af h iAfghanistanBelarusBurma (Myanmar)China, People’s Republic ofC D ti R bli f
LiberiaLibyaNorth KoreaRwanda
Congo, Democratic Republic ofCubaCyprusEritreaH iti
SomaliaSudanSyriaVenezuelaHaiti
IranIragIvory Coast (Côte d’Ivoire)L b
VenezuelaVietnamYemenZimbabwe
Lebanon
See http://www pmddtc state gov/country htm
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See http://www.pmddtc.state.gov/country.htm
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Illustration of “Chain of Custody” in Selling PCBs to Foreign Buyer
A DA = U.S. PCB exporterB = Canadian satellite instrument
manufacturerC = Japanese satellite integrator
A
F D
FF SSS
DD
BC Japanese satellite integrator
manufacturerD = Japan Aerospace Exploration
Agency – “End User”
S S b
BF D
F
F SD
TS = SubcontractorF = Freight forwarderB = Broker
D D l ti l l
F
C
D
S FF
T
S
T
T
D = Dual-national employeeT = Third country national
employee F D DD
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D D
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Ill t ti f “Ch i f C t d ” i P i PCB f F iIllustration of “Chain of Custody” in Procuring PCBs from Foreign Manufacturer
A = U.S. PCB companyB = Canadian PCB manufacturer A DD
S = SubcontractorF = Freight forwarderE = E-Mail B
E D
FF SSS
D
I
E = E MailI = Canadian Source Inspector
F D
F ST
D = Dual-national employeeT = Third country national
employee
A
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p y
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Ill t ti f “Ch i f C t d ” i El t i M f t iIllustration of “Chain of Custody” in an Electronic Manufacturing Services Environment.
A = US Defense Contractorl f
AB = Electronic Manufacturing Services
(EMS) Contractor in USC = PCB Fabricator in Singapore
B
E
S = SubcontractorF = Freight forwarderE E Mail
BE D
FF SSS
DD
E = E-Mail
D = Dual national employee
CF
F SD
D = Dual-national employeeT = Third country national employee F
B
DS
T
AF
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BI
A
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Ill t ti f “Ch i f C t d ” i El t i M f t iIllustration of “Chain of Custody” in an Electronic Manufacturing Services Environment.
A = Prime ContractorA B CE E
DSB = Sub Contractor in CanadaC = U.S. Electronic Manufacturing
Services (EMS) ContractorD = EMS Global Purchasing System
DS
DE
E
E = PCB Fabricator Domestic Sales and Prototype Company
F = PCB Company’s Production Center in Taiwan
EE D F SSS
DD
S = SubcontractorF = Freight forwarderE = E-Mail F
D
F
F
F SSS
D
D = Dual-national employeeT = Third country national employee
F
C
D
F ST
B ATechWeek
C BF AF
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What ITAR Export Authorization Do I Need?Selling PCBs to a Foreign Buyer
Technical Assistance Agreement • Only required if you and foreign buyer need to have technical discussions
DSP-5 to cover export of boardsC id ITAR § 126 5 C di E ti if b i i C d• Consider ITAR § 126.5 Canadian Exemption if buyer is in Canada
Distribution Agreement or ITAR § 123.9 Re-Export /Retransfer Request if ultimate end-user is unknown at time of export
Procuring PCBs from Foreign ManufacturerProcuring PCBs from Foreign ManufacturerManufacturing License Agreement for Offshore Procurement
• Only required if you and foreign mfr. need to have technical discussions
DSP-5 under ITAR § 124.13 to export build-to-printDSP 5 under ITAR § 124.13 to export build to print drawings/specs
• Must meet all requirements of ITAR § 124.13• Consider ITAR § 126.5 Canadian Exemption if mfr. is in Canada
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Key Elements to Consider in Using Foreign National Employeesp y
Does the person have a “green card”?If yes, then he or she is considered a “U.S. Person” for ypurposes of both the ITAR and EAR
Does the person come from an ITAR § 126.1 proscribed country? If yes, then you can’t use the person on ITAR-controlled projectscontrolled projectsWhat is the appropriate ITAR licensing authorization?
At a minimum, a DSP-5 “employment license”Al d T h i l A i t A t b tAlso may need Technical Assistance Agreement between company and employee and possibly with other companies as parties also if foreign national employee will be having contact and technical discussions with them
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contact and technical discussions with them
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Personality Traits of a Good Export Control Manager
I t ll t ll iIntellectually curiousIf sales manager says he has to meet an Iranian delegation coming in at 2:00 p.m., you want someone whose ears will perk upp p
Attention to detailKey to successful export license applications
Pro-activePro activeShy, withdrawing types need not apply!
Good political skillsInevitably, export control managers must e ab y, e po co o a age s ussometimes say “No!” – Can the person do this and still retain support of senior management and cooperation of peers?
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Element of an Effective Export Control Compliance Program?
E l llExport controls permeate allaspects of company operations
Requires team approach with senior mgt lead
Sales
senior mgt. lead
Can’t depend on guidance from other U.S. companies
E l U S
Legal
Physical Supply
Shipping
ExportEven many large U.S. companies don’t get it right!
Aerospace companies should devote at least as much
PhysicalSecurity
IPHuman
SupplyChain
ExportControls
devote at least as much resources to export control compliance as chemical companies do to environmental compliance
IP
IT
Resources
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Elements of an Effective Export Control Compliance Program
Compliance Program Organization Controls on Foreign National p g g(Enterprise Level)
Management Support
P li D l
gEmployees & Visitors
Record Keeping
Policy Development
Classification of Products & Technology
Reporting
Auditing (including metrics)
Screening for Embargoes & Restricted Parties
License Application
Training (“Some for all, all for some”)
H dli S t d Vi l tiLicense Application
License Implementation & Monitoring
Handling Suspected Violations
Program Review
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Penalties for ExportITAR EAR
(Under New IIEPA Enhancement Act)(Under New IIEPA Enhancement Act)
Civil Up to $500K per violation. Possible “consent decrees” with a variety of possible conditions, including DDTC oversight of business operations
Up to $250K per violation (previously $50k) or twice the amount of the transaction that is the basis of the violation
Criminal Up to $1M per violation.Up to 10 years imprisonment
Up to $1M for corporations, $1M for individuals (previously $250K)Up to 20 years imprisonmentUp to 20 years imprisonment
Other Debarment (possibly permanent) from participating in activities subject to the ITARDenial of export privileges
Denial of export privileges
Denial of export privilegesCustoms seizure
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See http://pmddtc.state.gov/consent_agreements.htm for ITAR consent agreements and fines
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Compliance is Good Business!
Increasingly, companies are choosing collaborative partners based on effectiveness of their export control pcompliance
Violations put project timelines in jeopardyjeopardy
Effective compliance programs = competitive advantage
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Questions?
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Sign up for free daily trade compliance e-mail newsletterp
at
gstanley@glstrade [email protected]
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Thank You!
Gary StanleyGlobal Legal Services, PC
T l (202) 686 4854
Hunter TechnologyTel. (408) 245-5400
E il i f @h bTel. (202) 686-4854E-mail: [email protected]
E-mail: [email protected]
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