Export Compliance Awareness Scalable Network Technologies October 19

Agenda Overview – – – What is Controlled? Purpose of US Export Laws & Regulations Compliance: Required by Law or Desired? Recent News Definitions Details – – – US Export Laws & Regulations The BIG 3 Export Transactions Recordkeeping Markings Risks for Non-Compliance Wrap Up – ITAR Myths – Q&A 2 © 2012 , Inc. |

What is Controlled? EVERY item or commodity exported from the US is subject to some form of export control. § Includes: § § Technical Data/Technology Software (US Original and commingled) Defense Services Defense Articles/Commercial Commodities and Items § Classified and Unclassified § U. S. Government contracts (including FMS) 4 © 2012 , Inc. |

Purpose of US Export Laws and Regulations The U. S. Government restricts the release of strategically important technology and products to: – Prevent our adversaries from obtaining the capability to threaten U. S. National Security – Limit weapons proliferation – Support U. S. foreign policy – To ensure U. S. Forces have the best available equipment 5 © 2012 , Inc. |

Is compliance Required by Law, or merely Desired? Level I: Required by Law – Risk of Non-compliance = Jail, Fines, Seizures; Loss of Export privileges; Debarment from Contracting Level II: Required by Company Policy – Risk of Non-compliance = Company Concerns – May indicate Level I risk Level III: Industry Best Practices – Non-compliance Risk = Lost efficiency & profits – New Level II policies may be needed © 2012 , Inc. |

Recent News Regulatory Updates – Obama Administration’s Export Control Reform/Initiative – New ITAR Exemptions

Export 22 § CFR 120. 17 Sending or taking a defense article, including technical data, out of the United States Disclosing or transferring technical data to a foreign person whether in the United States or abroad Performing a defense service on behalf of or for the benefit of a foreign person whether in the United States or abroad Controls include “Re-exports” – Re-export: ANY change in end use, end user or destination – Example: A foreign supplier in Canada needs to send specifications to their U. K. facility EAR: Part 772 Export means an actual shipment or transmission of items subject to the EAR out of the United States 9 © 2012 , Inc. |

How does an “Export” occur? Foreign Exchange/Liaison Officers (foreign integrees) Tangible Shipments Hand-carrying products (Foreign Travel) Electronic transmission (Fax, modem, email) Presentations open to the public Publishing articles Oral Conversations Foreign Visitors (meetings, tours) Trade Shows (U. S. and Foreign) Intangible Products (software) 10 © 2012 , Inc. |

22 § CFR 120. 6 Defense Articles Items that: – Are specifically designed, developed, configured, adapted or modified for a military (and generally space) application, and – Do not have predominant civil applications, and – Do not have performance equivalent (defined by form and function) to those of an article or service used for civil applications; – OR: are specifically designed, developed, configured, adapted, or modified for a military application, and have significant military or intelligence applicability Technical Data related to any such items Models, mock-ups and other items that reveal technical data directly relating to USML (U. S. Munitions List) items Unclassified ≠ Uncontrolled 11 © 2012 , Inc. |

Commercial-off-the-Shelf (COTS) COTS does NOT equal NO export control Many COTS items are highly

Technical Data (Information) 22 § 120. 10 Information required for the Design, Development, Production, Manufacture, Assembly, Operation, Repair, Testing, Maintenance or Modification of defense articles Related classified information Related software NOT Tech Data General scientific, mathematical or engineering principles commonly taught in schools Public domain information Basic marketing information on function or purpose General system description of defense article (form, fit, function) 13 © 2012 , Inc. |

Examples of Technical Data Software and its Documentation Design Methodology Engineering methods or design philosophy (i. e. , the “why” or rationale and lessons learned) Design or details of the software or software source code Engineering Analysis Analytical methods and tools (e. g. , mock-ups, computer models and simulations, and test facilities) used to design or evaluate performance against the operational requirements 14 - Test Requirements Interface Control Drawings Build-to-Print Specifications Program Technical Documents Failure Analysis Factors that establish Operational Requirements - Maintenance/Repair Manuals - Top-Level and Detailed Design Information - Component Life Predictions © 2012 , Inc. |

Examples of Technical Data – cont’d Manufacturing Know-How Applied Research Information that provides detailed manufacturing processes and techniques needed to translate a detailed design into a qualified, finished article, such as: • The systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met • Discoveries • Formulas • Materials • Inventions • Processes • Approaches 15 • Concepts • Techniques • Devices • Apparatus • Machines • The systematic application of knowledge toward the production of useful materials, devices, and systems or methods, including: design, development, and improvement of prototypes and new processes to meet specific requirements © 2012 , Inc. |

22 § 120. 9 Defense Services (Labor) Assisting, training or having discussions with foreign persons concerning the…. Design/Development Engineering/Manufacture Production Assembly Modification Testing/Repair/ Maintenance Operation/Use . . . of Defense Articles 16 © 2012 , Inc. |

Public Domain Information (22 CFR 120. 11 and 15 CFR 734. 3(b)(3)) Information which is published and generally accessible or available to the public through: – – – News stands / Bookstores Subscriptions Public Libraries Patents Unlimited Distribution at Conferences/Trade Shows Approved for Public Release by Cognizant U. S. Gov’t Agency’s PAO or FDO, or Do. D’s OSR – Fundamental Research(1) 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. (1) Fundamental research is defined (i. e. , 22 CFR § 120. 11(a)(8)) to mean basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community, as distinguished from research the results of which are restricted for proprietary reasons or specific U. S. Government access and dissemination controls. CAVEAT: A Defense Service can be performed with nothing other than Public Domain information 17 © 2012 , Inc. |

22 § 120. 15 US Person A person who is lawful permanent resident (as defined by 8 U. S. C. 1101(a)(20)) or who is a protected individual (as defined by 8 U. S. C. 1324 b(a)(3)). US citizen Valid Green Card (I-551) Naturalized US citizen Asylee Refugee Includes any corporation, business association, partnership, society, trust, or any other entity, organization or group that is incorporated to do business in the United States. It also includes any governmental (federal, state or local) entity 18 © 2012 , Inc. |

22 § 120. 16 Foreign Person not holding U. S. citizenship or permanent residency (“green card”) Foreign entities that are not incorporated or organized to do business in the U. S. Foreign governments Person authorized to temporarily work in the U. S. via a work permit or visa (e. g. H 1 B visa) – No “green card” (U. S. permanent resident) – No legal protection (not granted asylum) U. S. persons employed by a “Foreign Person” are viewed as “Representing a Foreign Interest” (RFI) and are treated as a Foreign Person 19 © 2012 , Inc. |

US Export Laws & Regulations Representative List of Controlling Agencies Agency Export/Import Organization Department of State (Do. S) Directorate of Defense Trade Controls (DDTC) Department of Commerce (Do. C) Bureau of Industry and Security (BIS) Department of Homeland Security (DHS) Customs and Border Protection (CBP) U. S Census Bureau Foreign Trade Division (FTD) Department of Energy (Do. E) DOE Department of Justice (Do. J) Bureau of Alcohol Tobacco, Firearms & Explosives (ATF) Nuclear Regulatory Commission (NRC) NRC US Treasury Department Office of Foreign Assets Control (OFAC) Department of Defense (Do. D) Defense Technology Security Administration (DTSA) © 2012 , Inc. |

US Export Laws & Regulations: Reason for Complying Law / Regulation Citation Arms Export Control Act (AECA) 22 U. S. C. 2778 International Traffic in Arms Regulations (ITAR) 22 CFR 120 -130 Export Administration Act (EAA) 50 U. S. C. 2401– 2420 International Emergency Economic Powers Act (IEEPA) 50 U. S. C. 1701– 1706 Export Administration Regulations (EAR) 15 CFR 730 -774 Foreign Trade Statistics Regulations (FTSR) 15 CFR 30 Harmonized Tariff Schedule (HTS) of the U. S. 19 USC 1202 Annex. Bureau of Alcohol, Tobacco, Firearms (BATF) 27 CFR 447 Customs Regulations (CR) 19 CFR 0 -192 Foreign Assets Control Regulations (OFAC FACR) 31 CFR 500 -599 © 2012 , Inc. |

US Export Laws & Regulations: Comparative Analysis Department of State § (Defense Articles, Defense Services, and Technical Data) U. S. Arms Export Control Act (AECA) (22 U. S. C. 2778) § International Traffic In Arms Regulations (ITAR) (22 CFR 120 -130) § Directorate of Defense Trade Controls (DDTC) § Licenses § Technical Assistance Agreements (TAA) § Exemptions § Commodity Jurisdictions Department of Commerce § Export Administration Act (EAA) (50 U. S. C. app. 2401– 2420) § (Commercial or Dual Use Equipment and Technology) International Emergency Economic Powers Act (IEEPA)(50 U. S. C. 1701– 1706 (IEEPA). § Export Administration Regulations (EAR) (15 CFR 730 -774) § Bureau of Industry and Security (BIS) § Licenses § Exceptions § No License Required (NLR) § Commodity Classifications (CCATS) Decision Tree Analysis to Determine Jurisdiction © 2012 , Inc. |

Types of Export Authorizations (ITAR) License, Agreement or Exemption: – Temporary Export License (DSP-73) – Temporary Import License (DSP-61) – Permanent Export License (DSP-5, DSP-85) – Agreements, primarily: – Technical Assistance Agreement (TAA) – Manufacturing License Agreement (MLA) – Exemptions – many available, qualification depends on transaction-specific details; can only be certified by an Empowered Official 24 © 2012 , Inc. |

TAA Life Cycle STEP (Typical, high-level, process) ACTION RESPONSIBILITY 1 The potential for the requirement to export technical data AND/OR provide a defense service is realized Client 2 It is determined that a TAA is required TASC 3 TAA Questionnaire is completed Client 4 Draft (proposed) TAA package is generated TASC 5 Draft (proposed) TAA package is reviewed and approved Client 6 Final Draft (proposed) TAA is sent to foreign parties for review and approval Client 7 Final revisions are made to (proposed) TAA based on input from Client and foreign parties TASC 8 Proposed TAA package is submitted to Department of State’s DDTC for review and approval via DSP-5 TASC generates DSP-5/DTRADE file and Client’s EO submits to DDTC 9 Proposed TAA is staffed to the Department of Defense Agencies (Army, Air Force, NSA, NGA, etc. ) for review and make recommendation for approval or denial. DDTC; plus Department of Defense (Do. D) 9 a Do. D Agency comments reviewed and a final determination is made (possible outcomes: Approved, Approved with Provisos, Returned Without Action or Denied) DDTC 10 Client retrieves approval from DDTC’s online system (NOTE: While the TAA is approved, IT IS NOT IN FORCE UNTIL ALL PARTIES HAVE EXCEUTED THE AGREEMENT AND ALL PROVISOS HAVE BEEN SATISFIED). Client © 2012 , Inc. |

TAA Life Cycle STEP (cont. ) ACTION RESPONSIBILITY 11 The provisos are reviewed for any show stoppers (i. e. , “Death by Proviso”) 12 Formal proviso challenges are crafted and submitted to DDTC 13 Any proviso requiring an action prior to the TAA being in force is addressed 14 Proposed TAA (and any additional documents required by proviso) is presented to foreign parties for signature 15 Client counter-signs TAA 16 Identify individuals who may export under the TAA 17 Exporters under the Agreement (i. e. , the Client’s employees) are trained 18 Exporters under the Agreement sign internal export certification 19 Written authorization to initiate exports is sent to Program Manager 20 Annual training and assessments conducted to ensure compliance and scope of TAA is sufficient for deliverables © 2012 , Inc. |

Main Ingredients: The BIG 3 The main ingredients to a robust Trade Compliance (export/import) program are as follows: 1) Jurisdiction: Determine which US Government agency has export/import jurisdiction for your product, system or technology. 2) Classification: Once you have determined the jurisdiction you must classify your product, system or technology under the cognizant set of regulations. 3) Compliance: As soon as you know the classification of your product, system or technology you are ready to use the applicable set of export/import regulations to ensure compliance on a transaction-by-transaction basis…must ensure the article/item, Foreign End User, End Use, Destination and all other parties to the transaction are in compliance with US export/import laws and regulations. © 2012 , Inc. |

Main Ingredients: Jurisdiction Determination © 2012 , Inc. |

Export Classification: ITAR – USML Category (22 CFR 121. 1) Description I Firearms, Close Assault Weapons and Combat Shotguns II Guns and Armament III Ammunition/Ordnance IV Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs and Mines V Explosives and Energetic Materials, Propellants, Incendiary Agents and Their Constituents VI Vessels of War and Special Naval Equipment VII Tanks and Military Vehicles VIII Aircraft and Associated Equipment IX Military Training Equipment and Training X Protective Personnel Equipment and Shelters XI Military Electronics (e. g. , Military Radio Library ) XII Fire Control, Range Finder, Optical and Guidance and Control Equipment XIII Auxiliary Military Equipment XIV Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment XV Spacecraft Systems and Associated Equipment XVI Nuclear Weapons, Design and Testing Related Items XVII Classified Articles, Technical Data and Defense Services Not Otherwise Enumerated XVIII Directed Energy Weapons XIX [Reserved] XX Submersible Vessels, Oceanographic and Associated Equipment XXI Miscellaneous Articles © 2012 , Inc. |

Export Classification: ITAR – USML Cat. XI Category XI — Military Electronics (a)Electronic equipment not included in Category XII of the U. S. Munitions List which is specifically designed, modified or configured for military application. This equipment includes but is not limited to: (1) Underwater sound equipment to include active and passive detection, identification, tracking, and weapons control equipment, (2) Underwater acoustic active and passive countermeasures and counter-countermeasures, (3) Radar systems, with capabilities such as: (i) Search, (ii) Acquisition, (iii) Tracking, (iv) Moving target indication, (v) Imaging radar systems, (vi) Any ground air traffic control radar which is specifically designed or modified for military application; (4) Electronic combat equipment, such as: (i) Active and passive countermeasures, (ii) Active and passive counter-countermeasures, and (iii) Radios (including transceivers) specifically designed or modified to interfere with other communication devices or transmissions; (5) Command, control and communications systems to include radios (transceivers), navigation, and identification equipment, (6) Computers specifically designed or developed for military application and any computer specifically modified for use with any defense article in any category of the U. S. Munitions List, (7) Any experimental or developmental electronic equipment specifically designed or modified for military application or specifically designed or modified for use with a military system. (b)Electronic systems or equipment specifically designed, modified, or configured for intelligence, security, or military purposes for use in search, reconnaissance, collection, monitoring, direction-finding, display, analysis and production of information from the electromagnetic spectrum and electronic systems or equipment designed or modified to counteract electronic surveillance or monitoring. A system meeting this definition is controlled under this subchapter even in instances where any individual pieces of equipment constituting the system may be subject to the controls of another U. S. Government agency. Such systems or equipment described above include, but are not limited to, those: (1) Designed or modified to use cryptographic techniques to generate the spreading code for spread spectrum or hopping code for frequency agility. This does not include fixed code techniques for spread spectrum, (2) Designed or modified using burst techniques ( e. g. , time compression techniques) for intelligence, security or military purposes, (3) Designed or modified for the purpose of information security to suppress the compromising emanations of information-bearing signals. This covers TEMPEST suppression technology and equipment meeting or designed to meet government TEMPEST standards. This definition is not intended to include equipment designed to meet Federal Communications Commission (FCC) commercial electro-magnetic interference standards or equipment designed for health and safety. (c) Components, parts, accessories, attachments, and associated equipment specifically designed or modified for use with the equipment in paragraphs (a) and (b) of this category, except for such items as are in normal commercial use. (d)Technical data (as defined in § 120. 10) and defense services (as defined in § 120. 9) directly related to the defense articles enumerated in paragraphs (a) through (c) of this category. (See § 125. 4 for exemptions. ) Technical data directly related to the manufacture or production of any defense articles enumerated elsewhere in this category that are designated as Significant Military Equipment (SME) shall itself be designated as SME. © 2012 , Inc. |

Export Classification: EAR – CCL (15 CFR Supplement No. 1 to 774) Commerce Control List is Divided into 10 Categories 0 1 2 3 4 5 6 7 8 9 - Nuclear Materials, Facilities and Equipment (Misc. Items) Materials, Chemicals, "Microorganisms" and Toxins Materials Processing Electronics Computers Telecommunications & Information Security Sensors and Lasers Navigation and Avionics Marine Propulsion Systems, Space Vehicles and Related Equipment © 2012 , Inc. |

Export Classification: EAR Items • Once you determine your item is EAR controlled, you need to classify it under the EAR’s CCL (Commerce Control List) • The CCL consists of ECCNs (Export Control Classification Numbers) for items and commodities controlled by the EAR • Each ECCN is Composed of 5 Characters Identifying the: o Category, o Group, o Control Regime, and o Numerical Sequence…within the Specified CCL Category © 2012 , Inc. |

ECCN Format Example: Software 5 D 991 controls software that is specially designed or modified for equipment covered in ECCN 5 A 991 (Telecommunications Equipment which includes Transmitters, receivers, modems and mobile phones) and ECCN 5 B 991 (Telecommunications Test Equipment). 5 Telecommunications and Information Security D Software 9 9 Subject to Anti-Terrorism Controls © 2012 , Inc. | 1 First Entry in Category 5

ECCN - Identifying the CCL Category 5 D 9 9 1 Commerce Control List is Divided into 10 Categories: 0 - Nuclear Materials, Facilities and Equipment (Misc. Items) 1 - Materials, Chemicals, "Microorganisms" and Toxins 2 - Materials Processing 3 - Electronics 4 - Computers 5 – Telecommunications & Information Security 6 - Sensors and Lasers 7 - Navigation and Avionics 8 - Marine 9 - Propulsion Systems, Space Vehicles and Related Equipment © 2012 , Inc. |

ECCN - Identifying the CCL Group 5 D 9 9 A - Systems, Equipment

ECCN - Identifying Reason(s) for Control 5 D 9 9 1 0 - National Security Reasons 1 - Missile Technology Reasons 2 - Nuclear Nonproliferation Reasons 3 - Chemical & Biological Weapons Reasons 9 Anti-terrorism, Crime Control, Regional Stability, Short 9 –- Anti-Terrorism, Crime Control, Regional Short. UN Supply, UN Sanctions, Supply, Sanctions, etc. © 2012 , Inc. |

ECCN - Identifying Location within a Category 5 D 9 9 Numerical Sequence within CCL Category The last digit issued for sequential numbering to differentiate between entries on the CCL © 2012 , Inc. | 1

EAR 99 - At the End of each CCL Category • Items Subject to the EAR that are Not Elsewhere Specified in any Category in the CCL are designated as “EAR 99” CCL undefined o For example, pencils and paperclips are EAR 99 • Generally Speaking, EAR 99 items do not need a license* EAR 99 no license needed* * Except to prohibited (embargoed/sanctioned) countries; and denied persons, companies and organizations © 2012 , Inc. |

Export Transactions: Restricted Parties & Proscribed Countries • If you are in a due diligence role or function (e. g. , Contracts, Subcontracts, Procurement) you need to perform Denied/Restricted Party Screening. • It is important to verify that entities and individuals with whom you conduct business are not barred from exporting or conducting business with the US Government. • Prohibited Countries - ITAR 126. 1 (e. g. , Cuba, Iran, Lebanon, North Korea, Sudan, Syria and additional countries that are listed in 22 CFR 126. 1) – May not use exemptions – Prohibited Activities: • Exports of defense articles, data or services • Proposals • Brokering 39 © 2012 , Inc. |

Export Transactions: Public Release of Information Any information intended for public release must be cleared for compliance with US export laws and regulations – This might involve receiving prior written authorization from one of the following: § § 40 DDTC BIS (Commerce Department’s Bureau of Industry & Security) OSR (Do. D’s Office of Security Review) Cognizant US Government Agency’s/Department’s PAO (Public Affairs Office) or FDO (Foreign Disclosure Office) © 2012 , Inc. |

Export Transactions: Releasing Technical Data US Persons should not: – Provide technical data when making online inquiries for a quote – Engage in online technical dialogues (e. g. , message boards, chat sessions with online support, etc. ) 41 Such transmissions are not secure/encrypted and you cannot ensure the U. S. Person status of the recipient. © 2012 , Inc. |

Export Transactions: Foreign Person Visits to US Facilities Your corporate policy and procedure requires the following: a. Such visits must be pre-approved by an EO or FSO. b. They must sign in and they will be provided badges indicating they are foreign persons. c. They must be escorted while they are here. d. They cannot have access to any ITAR materials while they are here, unless approved in advance by your EO. NOTE: Utilize your software product from OCR-Inc that performs searches of various US Government lists for Denied/Restricted Parties and Entities. 42 © 2012 , Inc. |

Export Transactions: International Travel Your corporate policy and procedure requires the following: a. Employees must: – notify the FSO prior to any international travel. – not take your laptops overseas. § If you need a laptop overseas then they must get one that has been setup properly for international travel. Ø Question: Can I access my email while outside the US? 43 © 2012 , Inc. |

Export Transactions: Foreign Procurement Purchasing/sourcing anything from a foreign supplier and/or foreign location requires prior review and approval to ensure compliance with US export and import laws and regulations. 44 © 2012 , Inc. |

Export Transactions: International Shipments Be careful! Although Puerto Rico and the US Virgin Islands are US territories, shipments to these locations require an Invoice. – Because the US Census Bureau and US Customs require the filing of an AES (Automated Export System) record for all exports. Canada: Is NOT “Exempt” from the ITAR. – Anything that crosses the border into Canada is an export Ø – There are exemptions that allow some ITAR shipments (“Exports”) to Canada without a license. Ø 45 Remember: the definition of “Export” is not limited to “overseas” transactions. ALWAYS receive prior written authorization from an EO before ANY export. © 2012 , Inc. |

Recordkeeping Requirements Records must be kept for ALL exports, including: – – Licensed (including Agreements) exports Exports under exemption Foreign National Visits Hand carried exports Records must be maintained for a minimum of 5 years after the export or expiration of the authorization, whichever is longer Types of records to be kept: – Export Logs (contains date of export, commodity exported, export authorization used and foreign party), Shipping Documents, Air waybills, Automated Export System (AES) filings, Commercial Invoices, Licenses, Carnets, etc… 46 © 2012 , Inc. |

Export Markings If approved by your Empowered Official, the following marking is highly recommended for documents containing technical data: Place on the title page and on each subsequent page whenever possible: EXPORT CONTROL WARNING “This document contains technical data that is subject to the International Traffic in Arms Regulations (ITAR) controls and may not be exported or otherwise disclosed to any foreign person or firm, whether in the US or abroad, without first complying with all requirements of the ITAR, 22 CFR 120 -130, including the requirement for obtaining an export license if applicable. In addition, this document may contain technology that is subject to the Export Administration Regulations (EAR) and may not be exported or otherwise disclosed to any non-U. S. person, whether in the US or abroad, without first complying with all requirements of the EAR, 15 CFR 730 -774, including the requirement for obtaining an export license if applicable. Violation of these export laws is subject to severe criminal penalties. ” The following statement may be placed on each subsequent page only when you are sure that the document will not be separated from the title page and/or if you have space restrictions: “Use or disclosure of data contained on this page is subject to the restriction(s) on the title page of this document. ” 47 © 2012 , Inc. |

Risks for Non-Compliance Corporate – – – Fines up to $1 million per violation Seizure or forfeiture of goods Loss of export privileges * Debarment from government contracting * Placement of company on "denied parties list * Employee – Fines up to $1 million per violation – 10 years imprisonment per violation * Applies to Employees (individuals) as well 48 © 2012 , Inc. |

Corporate Misconduct Involving International Business 49 © 2012 , Inc. |

ITAR Myths The presence of a US Government official in a meeting is authorization for an export. The ITAR does not apply to contractors if dealing with USG owned or generated information. My USG contract is my export authorization. If my USG customer directs me to export (via any means) to a foreign person on US soil (or anywhere else), that constitutes my export authorization. For US contractors, International Security Agreements between governments trump the ITAR. Flag officers can not only waive military service regulations, they can waive the ITAR. 51 © 2012 , Inc. |

Resources Bureau of Industry & Security - http: //www. bis. doc. gov/ Directorate of Defense Trade Controls http: //www. pmdtc. org/ Society for International Affairs - http: //www. siaed. org/ 53 © 2012 , Inc. |

FAQs (ITAR) 1. Why do I need to get the U. S. Government’s approval to export and import defense articles and defense services? Because Section 38 of the Arms Exports Control Acts (AECA) authorizes the President of the United States to control the export and import of defense articles and defense services and to establish regulations for that purpose. 2. How do I obtain approval before I export or import defense articles and defense services? The President delegated export control authority to the Directorate of Defense Trade Controls (DDTC) in the State Department’s Bureau of Political. Military Affairs through the Secretary of State. 3. What are the penalties for violating the AECA? The civil penalties are a fine up to $500, 00 per violation and up to five years in jail. The criminal penalties are a fine up to $1 million per violation and up to ten years in jail. In addition, the violator can be debarred for a period of time from obtaining export licenses and possible debarment from receiving any U. S. Government contracts. 4. The civil penalty of up to $500, 000 per violation doesn’t seen too bad. It does when you consider that a single case may involve more than 100+ alleged violations. 5. How does DDTC exercise its authority? By administering the International Traffic in Arms Regulations (ITAR). These regulations are found in Section 22 of the Code of Federal Regulations (C. F. R. ), Parts 120 -130. 6. How do I know whether an article or service is controlled by the ITAR? Defense articles are identified in Part 121. 1 of the ITAR, known as the “U. S. Munitions List” (USML). Incidentally, the term “defense article” includes technical data recorded or stored in any physical form (such as on a computer disc or hard drive). 7. Who determines what items are on the USML? The Department of State makes the determination, with the concurrence of the Department of Defense and in consultation with the Department of Commerce. 8. If I have an item that is not on the munitions list, can I just go ahead and export it without a license? Not necessarily. If the item has dual (military-civilian) use, it is on the “Commerce Control List” (CCL) and may be licensable by the Department of Commerce pursuant to the Export Administration Regulations (EAR). 9. If I’m not sure what list my item is on, USML or CCL, how can I find out? You can submit a request for a commodity jurisdiction (CJ) determination. 10. How long will it take to get an answer? Commodity jurisdiction requests normally require processing times of 4 to 6 months, or even longer. So plan ahead. © 2012 , Inc. |

FAQs (EAR) 1. What types of items does the Department of Commerce regulate? The Bureau of Industry and Security (BIS) implements and enforces the Export Administration Regulations (EAR). The EAR regulate the export and reexport of most commercial items. We often refer to the items that BIS regulates as "dual-use" items because they have both commercial and military or proliferation applications, but purely commercial items without an obvious military use also are subject to the EAR. 2. What is the Commerce Control List (CCL)? The Commerce Control List is listed in the Export Administration Regulations and includes such "dual use" items as commodities, software and technology which are subject to the export licensing authority of the BXA. The CCL is divided into ten categories and numbered as follows: 0) Nuclear Materials, Facilities, Equipment and Miscellaneous, 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. 3. What is the “deemed export” rule? An export of technology or source code (except encryption source code) is "deemed" to take place when it is released to a foreign national within the United States. 4. Is there a list of restricted countries to which I can’t export? Restrictions vary from country to country and from item to item. The most restricted destinations are the embargoed countries and those countries designated as supporting terrorist activities, including Cuba, Iran, North Korea, Sudan, and Syria. 5. Does My Shipment Require an Export License? Maybe. The first step is knowing your item’s Export Control Classification Number (ECCN). ECCN entries are found on the Commerce Control List (CCL) and identify reasons for control which indicate licensing requirements to certain destinations. Other reasons an export license may be required for your shipment relate to concerns about the parties to the transaction and the end-use of the item. 6. Do all items have an ECCN? Many commercial goods are not on the Commerce Control List and do not have an ECCN. These goods are designated as EAR 99 items generally consist of low-level technology, consumer goods, etc. and do not require a license in most situations. However, if your proposed export of an EAR 99 item is to an embargoed country, to an end-user of concern, or in support of a prohibited end-use, you may be required to obtain an export license. 7. What is the difference between EAR 99 and NLR? EAR 99 is a classification for an item. It indicates that a particular item is subject to the Export Administration Regulations (EAR), but not listed with a specific Export Control Classification Number (ECCN) on the Commerce Control List (CCL). While the classification describes the item, the authorization for shipment of that item may change, depending on the transaction. NLR is the designator of a transaction that stands for the "No License Required" authorization. NLR may be used for either EAR 99 items, or items on the CCL that do not require a license for the destination in question, provided no General Prohibitions apply. © 2012 , Inc. |

Can you Summarize the AECA and ITAR in 300 Words or Less? The U. S. Arms Export Control Act (22 U. S. C. 2778), implemented by the International Traffic in Arms Regulations (“ITAR”) (22 CFR 120 -130), and administered by the State Department's Directorate of Defense Trade Controls (“DDTC”) (ITAR § 120. 12), prohibits the export (ITAR § 120. 17) and temporary import (ITAR § 120. 18) of defense articles (ITAR § 120. 6) and technical data (ITAR § 120. 10) to all persons (ITAR § 120. 14; U. S. and foreign), and the provision of defense services (ITAR § 120. 9) to foreign persons (ITAR § 120. 16) by all persons in the United States (ITAR § 120. 13) and by U. S. persons (ITAR § 120. 15) wherever located, under any type of contract, unless authorized in advance by a corporate Empowered Official and (as required) a DDTC-issued export license (ITAR § 120. 20; ITAR parts 123 and 125) or agreement (ITAR §§ 120. 21, 120. 22, 120. 23; ITAR part 124) or by qualification for an ITAR exemption (ITAR § 123. 1(a)). Any person in the U. S. who manufactures, exports or brokers (ITAR § 129. 2) defense articles to any person or furnishes defense services to foreign persons must register with DDTC (ITAR §§ 122. 1 and 129. 3) and maintain records of regulated activities for 5 years (ITAR §§ 122. 5 and 123. 26). Persons who pay certain fees or commissions to secure the sale of defense articles or services must report those payments to DDTC (ITAR part 130). Violations must be reported and are punishable by fines, imprisonment, and debarment (ITAR 127. 3). Also, 18 U. S. C. A. § 554 prohibits the export of any item from the United States contrary to any law or regulation of the United States, punishable by fine and imprisonment of not more than 10 years. --- Jim Bartlett 56 © 2012 , Inc. |