WEBINAR

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WEBINAR

• UNDERSTANDING
• EXPORT CONTROL
• REQUIREMENTS
• (2006)

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• BACKGROUND

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REASONS FOR CONTROL

• National Security
• Nonproliferation
• Missile Controls and CBW
• Anti-Terrorism
• Crime Control
• Regional Stability
• UN Sanctions

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DIMENSIONS OF CONTROL

• Technological level or characteristics
• Destination
• End-user
• End-use

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• Machine Tools are controlled on the basis of
  their accuracy and the number of axes of
  movement.
• Machine tools clearly are dual use products,
  although there is widespread foreign availability
  which tends to undermine any attempts at
  unilateral control.
• Other than a few isolated incidents over the past
  few decades, most machine tool export control
  problems have been associated with China or India.

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• Since the end of the CoCom, each nation controls
  items according to national discretion
• The Wassenaar Arrangement , which was written to
  deal principally with rogue states, puts U.S.
  exporters at a disadvantage with regard to China
  because there is great disagreement between the
  U.S. and the EU over the threat posed by China.
• U.S. export licensing of machine tools has
  consistently been both slower and more rigorous
  than that of its Wassenaar counterparts,
  particularly those in Europe.

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THE U.S. INTERAGENCY SYSTEM

• More than any other national dual-use control
  system, the US is characterized by intensive
  multi-agency participation
• Each brings both data (technical expertise and
  intelligence) and a particular point of view to
  the table.

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WHAT IS CONTROLLED?

• Hardware
• Software
• Technology and Technical Data (knowledge
  manuals)

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EXPORT CLASSIFICATION LICENSE DETERMINATION
SCREENING

• Objective
• Comply with US country/technology restrictions on
  products and services.
• - Commerce Control List (CCL)
• - Commerce Country Chart
• - Determine whether an individual export license
  is required or license exception applies.
• - License exception does not mean decontrol.

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NONPROLIFERATION SCREENING

• Objective
• Ensure company does not do business with parties
  developing weapons of mass destruction.
• US Government requires licenses for parties
  engaged in the design, development, production,
  stockpiling, or use of nuclear weapons, missiles,
  rocket systems or unmanned air vehicles capable
  of delivering nuclear or chemical-biological
  weapons, or chemical-biological weapons 
• US Government identifies some entities of
  concern but in most cases company is responsible
  for identifying whether customer is engaged in
  proscribed activities

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NATIONALITY SCREENING

• Objective
• Comply with US country/technology export controls
  on technical data
• - Commerce Department deems the export of
  technical data to an individual in the US or
  abroad to be an export to the individuals home
  country
• - Controls apply the companys employees as well
  as visitors to company facilities

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EMBARGOED AND SANCTIONED COUNTRY SCREENING

• Objective
• Compliance with US trade embargoes and sanctions
  (e.g., Cuba, Iran, Sudan, Syria, etc.)
• Treasury and Commerce Department regulations.
• Implementation
• Stop all transactions with
• embargoed and sanctioned countries
• their embassies or diplomatic missions wherever
  located
• aircraft or ocean going vessels operating under
  their flags.
• Screen delivery routes to ensure products don't
  transit through embargoed or sanctioned
  countries.

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DIVERSION RISK SCREENING

• Objective
• Reduce risk that products will be diverted to
  proscribed end-users or destinations.
• Commerce Department has developed a list of
  diversion risk indicators
• Examples include unusual delivery or payment
  terms, inappropriate product for stated end-use,
  etc. 

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ANTI-BOYCOTT SCREENING

• Objective
• Ensure compliance with US regulations prohibiting
  companies from participating in economic boycotts
  (most significantly, the Arab boycott of Israel) 
• Implementation
• Employees are trained to recognize and escalate
  boycott requests (e.g., request for certification
  that no Israeli-origin product is included,
  etc.).
• Such requests are denied.
• Details are reported to the Commerce Department.

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COMPANY EXPORT COMPLIANCE MEASURES

• End-user screening (to prevent deliveries to
  sanctioned parties or parties developing weapons
  of mass destruction)
• Diversion risk screening to review suspicious
  transactions
• Screening to prevent deliveries to embargoed or
  sanctioned countries
• Screening to ensure companies do not participate
  in unsanctioned boycotts
• These measures taken regardless whether or not
  the product requires an export license

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• PROCEDURAL
• AND
• OPERATIONAL
• ISSUES

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Outline

• How to find information about Export Control
• Looking at the CCL (Commerce Control List)
• Terminology
• Things to know

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• REASONS FOR CONTROL
• NS National Security
• NP Nuclear Proliferation
• AT Anti-terrorism
• MT Missile Technology
• CC Crime Control
• RS Regional Stability

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• USE OF WORDS
• Having any of the following
• all
• and/or

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Types of Controls

• Types of controls associated with this digit
• 0- National Security reasons (including Dual Use
  and International Munitions List) and Items on
  the NSG Dual Use Annex and Trigger List
• 1- Missile Technology reasons
• 2- Nuclear Nonproliferation reasons
• 3- Chemical and Biological Weapons reasons,
  Anti-terrorism, Crime Control, Regional
  Stability, Short Supply, UN Sanctions, etc.
• 9- Anti-Terrorism

2B001
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Things to Know- Red Flags -
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• Q A

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• EXTRA
• MATERIALS

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BASIC FEATURES OF U.S. EXPORT CONTROLS

• Complex and multidimensional include technical
  controls, end-user controls, end-use controls and
  destination controls, all of which are
  situation-dependent.
• Broad in scope in practice, everything is
  controlled in some sense (e.g., EPCI).
• Includes knowledge criteria reason to know
  that a violation has taken place, and corporate
  knowledge which treats an entire organization as
  a single individual.
• Absolute liability any violation in principle is
  subject to penalty, regardless of circumstances
  or intent.

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• Our Wassenaar allies frequently do not agree
  about machine tools as a military technology in
  need of stricter controls. Most importantly,
  there is a lack of consensus relevance of
  controlling machine tools to China.
• Indeed, there is a lack of consensus about
  whether China is a potential threat or whether it
  simply ought to be treated as a potential market.

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DUAL-USE

• Regulations Export Administration Regulations
  (15 CFR '' 730-774)
• Focus Commodities and technology that are
  primarily civilian, but which may have military
  application
• Statute(s) Export Administration Act (IEEPA)
• Administration Bureau of Industry and Security,
  Departments of Commerce, Defense, and State
• Control Tools License exceptions, validated
  licenses

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UNILATERAL VS. MULTILATERAL

• Most major countries, including former US
  adversaries, have export control systems.
• Control systems are a mix of unilateral controls
  (e.g., foreign policy, regional stability,
  environmental, etc.) multilateral commitments.
• Despite commitment to multilateral lists,
  national controls can vary widely in actual
  administration and impact on domestic exporters.

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MULTILATERAL REGIMES

• Australia Group commodities and technology
  relating to chemical or /biological warfare
• Missile Technology Control Regime dual-use
  missile commodities and technology
• Nuclear Suppliers' Group nuclear fuel and
  nuclear-related dual-use
• Wassenaar Arrangement conventional arms and
  dual-use items

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AGENCY PLAYERS

• Department of Commerce, Bureau of Industry and
  Security
• Department of Defense, Defense Technology and
  Security Administration
• Department of Energy, Office of Nonproliferation
  and National Security
• Department of State, Office of Nonproliferation
• Others, as needed (e.g., CIA, Homeland Security)
• National Security Council has historically played
  a mediating role

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PENALTIES

• High penalties in criminal cases are a
  deterrent.
• Higher penalties in administrative cases have
  been proposed. But the key penalty for most
  companies is the potential loss of export
  privileges, which would shut down much of their
  business.
• Penalties only a part of negative impact of
  administrative violations investigations
  extending into years, extensive legal costs,
  business uncertainty and potential damage to
  stock price among others.

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EXPORT CONTROLS AND COMPETITIVENESS

• Approximately 37 of machine tool revenues is
  from non-US sources and 13 is from China.
• Export controls are costly in terms of
  administration, delay and uncertainty, and
  pervade every aspect of corporate activity.
• Negative effects are both short term and long
  term.

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CURRENT PROBLEMS WITH EXPORT CONTROL PROCESS

• Clarify the commodity classification and the
  commodity jurisdiction process.
• Clarify the inter-agency review process for
  licenses.

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CURRENT PROBLEMS WITH EXPORT CONTROL PROCESS

• Modernize the foreign availability definition
  in Sections 4 and 5 to reflect the overall
  controllability of items on the control list,
  recognizing that such availability renders
  controls ineffective.
• Recognize that, under the Wassenaar Arrangement,
  foreign availability can occur within a regime
  as well outside that regime.