EMBARGOES AND EXPORT CONTROLS The Challenge for U'S' Universities A Focus for Faculty

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EMBARGOES AND EXPORT CONTROLSThe Challenge for
U.S. UniversitiesA Focus for Faculty

• Julie T. Norris
• Office of Sponsored Programs
• Massachusetts Institute of Technology

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PURPOSES

• Advance foreign policy goals
• Restrict goods and technologies that could
  contribute to military potential/economic
  superiority of adversaries
• Prevent proliferation of weapons of mass
  destruction
• Prevent terrorism
• Fulfill international obligations

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BACKGROUND EMBARGOES

• U.S. Department of the Treasury, Office of
  Foreign Assets Control (OFAC)

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EMBARGOES

• Office of Foreign Assets Control (OFAC)
• Regulates the transfer of items/services of value
  to embargoed nations
• Imposes Trade Sanctions, and Trade and Travel
  Embargoes Aimed at Controlling Terrorism, Drug
  Trafficking and Other Illicit Activities
• Prohibit Payments/Providing Value to Nationals of
  Sanctioned Countries and Some Specified
  Entities/Individuals
• May Prohibit Travel and Other Activities with
  Embargoed Countries and Individuals Even When
  Exclusions to EAR/ITAR Apply

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WHAT OFAC CONTROLS

• OFAC prohibits
• Payments or providing anything of value to
  sanctioned countries, nationals of some countries
  and specified entities/individuals
• Travel to and other activities with embargoed
  countries and individuals/entities
• In general OFAC trumps export controls

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OFAC EMBARGOES

• OFAC Embargoes Apply When
• Payments of compensation, honoraria, contracts/
  services/value to or in embargoed countries or to
  foreign nationals and entities of some embargoed
  countries depends on applicable sanctions
• Attending or planning international conferences
• Travel to Embargoes Countries
• Travel to Cuba allowed if the university has an
  export license and the traveler is a full-time
  employee of the university
• Students may travel under the university license
  if they are students
• enrolled at the university that has the license
  but with conditions
• Payments/Services/Value to specifically listed
  individuals

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OFAC EMBARGOES

• Editing, Reviewing, Authoring Publications
• An OFAC letter dated April 2, 2004 allows peer
  review
• as well as copy and style editing of articles
  written by
• Libyan Nationals
• http//www.treas.gov/offices/enforcement/ofac/ru
  lings/ia040504.pdf
• December 17, 2004 OFAC General License for Cuba,
• Sudan and Iran allows most editing/joint
  authorship with nationals of these countries (but
  not the governments or government employees) (31
  C.F.R. 515, 538, 560)

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EXPORT CONTROLS COVER

• U.S. Export controls (ITAR, EAR)
• Cover any item in U.S. trade (goods, technology,
  information)
• U.S. origin items, wherever located
• Exclude patents and patent applications, artistic
  or nontechnical publications
• Exclude technology in the public domain
• Exports of most high technology and military
  items, as well as associated technologies require
  U.S. export authorization (either license or
  applicable exemption)
• Trade sanctions (OFAC)
• focus on financing, commodities, and services in
  countries posing the greatest security or foreign
  policy threats

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BACKGROUND AND LAW

• Early 1980s export control laws extended to the
  IHEs
• Intense reaction from the university community
• Four universities wrote to describe the
  consequences
• NSDD-189 issued

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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

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NSDD-189 (continued)

• University research will not be deemed to qualify
  as fundamental research if the university or
  research institution accepts any restrictions on
  publications resulting from the research, other
  than limited prepublication reviews by research
  sponsors to prevent inadvertent divulging of the
  sponsors proprietary information or for filing
  of patent applications.

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CONDOLEEZA RICE LETTER

• Reaffirmed NSDD-189
• encourage open and collaborative basic
  research. The linkage between the free exchange
  of ideas and scientific innovation, prosperity,
  and U.S. national security is undeniable.
• policy on the transfer of scientific,
  technical, and engineering information set forth
  in NSDD-189 shall remain in effect and we will
  ensure that this policy is followed.

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ITAR and EAR

• ITAR State Department
• International Traffic in Arms Regulations
  (munitions)
• Licensing done by Directorate of Defense Trade
  Controls (DDTC)
• In March 2002 DDTC revised ITAR regulations with
  regard only to satellite research and only with
  limited applicability
• EAR Commerce Department
• Export Administration Regulations (dual use)
• Licensing done by Bureau of Industry and Security
  (BIS), formerly BXA
• OFAC Treasury Department
• Office of Foreign Assets Control
• Trade sanctions, embargoes, terrorism

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EXPORT CONTROL REGULATIONS

• Statutory must accept in agreements have an
  escape clause!
• Cover virtually all fields of science and
  engineering
• Prohibit the unlicensed export of only certain
  materials or information for reasons of national
  security or trade
• Exclusion for fundamental research when there are
  no publication restrictions, no restrictions on
  foreign nationals, and no access or dissemination
  controls. Exclusions limited to information or
  data, not to shipment of physical items or the
  providing services

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BASIC CONCEPTS TO UNDERSTAND

• Even if an item is on one of the lists of
  controlled technologies, there is generally an
  exclusion for fundamental research (note the need
  for no restrictions on publications or foreign
  nationals)
• Licenses needed not only for the shipment of
  tangible items but also to the research results
  themselves

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BASIC CONCEPTS TO UNDERSTAND

• Export does not necessarily mean out of the
  country concept of deemed export critical and
  will be discussed in more detail later
• The T-7 countries where U.S. policy is normally
  to deny licenses Afghanistan, Belarus, Cuba,
  Iran, Iraq, Libya, North Korea, Syria, Vietnam
  and to countries where U.S. has an arms enbargo
  (Burma, China, Haiti, Liberia, Rwanda, Somalia,
  Sudan, Zaire) and in certain circumstances also
  Armenia and Azerbaijan

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BASIC CONCEPTS TO UNDERSTAND

• If you need a license it takes (a lot of) time
• Penalties for noncompliance

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WHAT IS AN EXPORT?

• Any oral, written, electronic, or visual
  disclosure, shipment, transfer or transmission
• Outside the U.S. to anyone, including a U.S.
  citizen, of any commodity, technology
  (information, technical data, assistance) or
  software codes
• To a non-U.S. entity or individual, wherever
  located
• To a foreign embassy or affiliate
• Export regulations cover only certain
  technologies and, therefore, the great majority
  of research is not in the covered technology
  lists of the State or Commerce departments

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DIFFERENCES BETWEEN ITAR AND EAR

• ITAR 22 CFR 120-130
• Covers military items or defense articles
• Regulates goods and technology designed to kill
  or defend against death in a military setting
• Includes space related technology because of
  application to missile technology
• Includes technical data related to defense
  articles and services

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DIFFERENCES BETWEEN ITAR AND EAR

• EAR 15 CFR 730-774
• Covers dual use items
• Regulates items designed for commercial purpose
  but which could have military applications
  (computers, civilian aircraft, pathogens)
• Covers both the goods and the technology

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Commerce Control List Categories

• 0-Nuclear Materials, Facilities and Equipment
• 1-Materials, Chemicals, Microorganisms and
  Toxins
• 2-Materials Processing
• 3-Electronics
• 4-Computers

• 5-Telecommunications and Information Security
• 6-Lasers and Sensors
• 7-Navigation and Avionics
• 8-Marine
• 9-Propulsion Systems, Space Vehicles and Related
  Equipment

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LIMITATIONS FOR RESEARCHERS

• Both EAR and ITAR provide exemptions for full
  time, regular employees who maintain residency
  during term of employment
• May preclude need for a license, but often
  unavailable to foreign researchers
• Visa restrictions (students with F or J visas)
• Postdocs and students are often not full time,
  regular employees

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KEY ISSUES FOR UNIVERSITIES

• Public domain
• Fundamental research exemption
• Deemed exports

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FUNDAMENTAL RESEARCH

• ITAR Recognizes research exemption, but
  purposely limited
• Covers information which is published and
  generally accessible to the public through
• Unrestricted publications
• Fundamental research in science and engineering
  at accredited institutions of higher learning in
  the U.S. where the resulting information is
  ordinarily published and shared broadly in the
  scientific community
• Excludes proprietary information or that with
  government-imposed access or dissemination
  controls

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FUNDAMENTAL RESEARCH

• EAR
• Allows prepublication review solely to insure no
  inadvertent release of sponsors proprietary
  information or to protect a patent position
• Prepublication approval by sponsor or other
  publication restriction invalidates exemption
  except
• If there are access and dissemination controls
  explicitly provided for national security in
  award
• However, some technologies (advanced encryption)
  always ineligible for fundamental research
  exemption

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DEEMED EXPORT

• Export controls also cover transfer of goods and
  technology within the U.S. (transfer outside the
  U.S. is deemed to apply when a non-qualified
  foreign national receives the information in the
  U.S.)
• Applies to technology transfers under EAR
• Applies to technical data and defense services
  under ITAR
• Unless the fundamental research exemption
  applies, a universitys transfer of controlled
  technology to a non-permanent resident foreign
  national in the U.S. may be controlled or
  prohibited (your students!)
• The issue of equipment use is becoming significant

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EXAMPLES OF COVERED ITEMS

• Export of research products
• Underwater research vehicles, regardless of size,
  covered by ITAR
• Temporary transfer of research equipment abroad
  may require license (GPS equipment to certain
  foreign destinations such as Iran, Syria, China,
  etc)
• Software
• If provided free to public, no license
• If proprietary or encryption technology, may
  require license or be prohibited

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THE ISSUE OF FOREIGN NATIONALS

• March 2002 State Department rule expanded
  fundamental research exemption for some space
  technology (but not all, e.g., China)
• Recently, IPASS has complicated the issue because
  of prohibition from working on uniquely
  available sensitive technology
• Government grants may limit access by foreign
  nationals
• Does approval constitute a specific access and
  dissemination control?

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THE ISSUE OF FOREIGN NATIONALS

• Corporate grants
• Especially SBIR/STTR proprietary or publication
  restrictions generally invalidate exemption
• Position of some government agencies becoming
  less flexible
• Conferences
• May restrict participants or co-sponsorship
• May have an OFAC problem also
• Transfer of defense services
• Teaching foreign collaborators how to use certain
  items may be a defense service requiring a
  license
• Remember the full time regular employee of a
  university requirement

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FUNDAMENTAL RESEARCH EXCLUSION AVAILABLE?

• U.S. Fundamental Research exclusion applies only
  for the creation of fundamental research
  information at an accredited institution of
  higher learning in the U.S.

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HOW LONG DOES IT TAKE TO GET A LICENSE?

• Fast approval in weeks
• Normal approval in months
• Hardest cases can take years

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MISCELLANEOUS ISSUES

• License application requires the signature of the
  empowered official
• The certification includes the existence of an
  export control dissemination plan
• Penalties for violation

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PENALTIES FOR NONCOMPLIANCE

• ITAR
• Criminal up to 1M per violation and up to 10
  years in prison
• Civil seizure and forfeiture of articles,
  revocation of exporting privileges, fines of up
  to 500K per violation
• EAR
• Criminal 50K-1M or five times value of export,
  whichever is greater, per violation, up to 10
  years in prison
• Civil loss of export privileges, fines
  10K-120K per violation
• OFAC
• Criminal Up to 1M and 10 years in jail
• Civil12,000-55,000 per instance

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COMPLIANCE RISKS FACED BY UNIVERSITIES

• U.S. export controls create significant tensions
  with university policies of non-discrimination
  based on nationality and a free and open campus
• State Department believes ITAR revisions largely
  placated universities NSC and OSTP know thats
  not true
• Recent audits/reviews of export control policies
  and understandings at 12 universities agency
  reports issued in March 2004 and an interagency
  report in April 2004. Problems focused now on
  the Commerce Department and the issue of equipment

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WHAT DOES THE FUTURE HOLD?

• It is clear that export control regulations will
  continue to dominate much of the academic
  research community.
• Institutions are becoming more savvy about the
  issues
• Oversight by the government is increasing
• There is every indication that the government
  will increase regulations and audit compliance
  with those regulations in the academic community.

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EQUIPMENT AND THE DEEMED EXPORT ISSUE

• Commerce Department report indicated that access
  to controlled equipment in university
  laboratories may require a deemed export license
  even when the research conducted in that
  laboratory is fundamental.
• Letters from some university research VPs,
  followed by letters from some university
  presidents crystallized the issues

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WHAT ARE THE TICKING TIME BOMBS

• Corporate sponsored research
• Liability if know, or have reason to know, about
  corporate sponsor violations
• Material transfer agreements
• Increasing scrutiny of all exports, universities
  in particular
• Commerce criticized by GAO for failure to enforce
  deemed exports appropriately
• National security vs. openness
• Biology, biotech, and bioengineering under
  increasing threat
• Troublesome clauses

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WHAT MAKES SOME CLAUSES TROUBLESOME?

• Conflicts with institutional policies on openness
  in research and unfettered transmission of
  knowledge
• Most institutions have clear policies on freedom
  to publish fewer on use of foreign nationals and
  there is the problem of granting exceptions to
  the policies or procedures
• May require sponsor approval for publications
• May require sponsor approval of specific
  individuals assigned to selected research
  projects
• Travel and presentations at conferences and
  programs can become difficult
• Exceptions can trigger complicated (and
  expensive) export control requirements

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MAJOR TRUTHS

• Easier to make it public than keep it proprietary
• Beware of equipment, encrypted software,
  listed/controlled chemicals, bio-agents, and
  toxins
• Side deals are dangerous
• Publish or perish!
• Fear works!

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BEST PRACTICES

• Keep it simple!
• Keep it open!
• No side deals!!!
• Centralize administration/oversight
• Support responsible office with legal counsel
• Educate the community
• Provide threshold guidelines