Export Controls EXPORT CONTROLS Copyright 2011 We Comply

Export Controls EXPORT CONTROLS Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls WELCOME This training course was developed by We. Comply, a leading provider of ethics and compliance training since 1999. The course is also available online from any Internet-connected computer. We. Comply offers 60+ courses on a wide range of business ethics and compliance topics. Each course helps employees spot key compliance issues and respond appropriately. This course is designed and licensed for classroom use in parallel with We. Comply's online course on the same topic. This course may not be hosted on a learning management system or distributed to employees individually by electronic or other means without We. Comply's prior authorization. For more information about this course or others, whether for classroom use or online access, please e-mail info@wecomply. com or call 1 -866 -We. Comply. Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls MEMORANDUM Thank you for participating in our Export Controls training course. This 45 -minute course is intended to provide an overview of U. S. export controls and to help you recognize "red flags" — situations presenting a risk of legal violations — and deal with them properly. After a brief summary of the history of export controls and the key terms to understand, we'll discuss what might trigger "red flags" for you in different contexts. If you have questions about how any of this material applies to your job responsibilities, please direct them to your supervisor or the Legal Department. 1 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls INTRODUCTION Exporting: The shipment or transmission of items or material outside the U. S. Export controls (federal laws/regulations) — • Affect export of commodities, technology and software from U. S. to other countries • Affect re-export of such U. S. items from one foreign country to another • Affect products made outside U. S. by or for a U. S. company Export controls originated during Cold War for dual-use goods Export controls are used to protect national security, domestic supply of goods and U. S. economy 2 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls OVERVIEW Extent to which item is subject to export controls depends on four factors: • Technical capabilities • Country of destination • Intended end-user • Intended end-use High-technology items generally require a license to be exported Low-tech item that ordinarily would not require license may need one if exported to company involved in weapons activities U. S. government maintains a list of sanctioned countries, entities and individuals with whom U. S. companies are prohibited from doing any business 3 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls IN THE NEWS… Probe Prompts Settlement Satellite Maker Agrees To Pay $20 Million Fine A satellite manufacturer agreed to pay $20 million in fines to settle a federal investigation into charges that it passed sensitive materials to China after an abortive satellite launching there. The government had charged the company with 64 counts of violating rules governing the transfer of sensitive technologies. A company executive portrayed the incident as an error by a single employee who had provided the Chinese with an edited report of an American panel set up to resolve insurance issues. 4 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls EXPORT CONTROL AGENCIES Three government agencies oversee most export-licensing transactions: • Directorate of Defense Trade Controls (DDTC) regulates export of defense articles, services and related technical data through International Traffic in Arms Regulations (ITAR) • Bureau of Industry and Security (BIS) regulates export of commercial and dual-use commodities, technology and software through Export Administration Regulations (EAR) • Office of Foreign Assets Control (OFAC) regulates embargoes and economic sanctions against various foreign countries and entities 5 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls WHAT IS AN "EXPORT"? Many commercial transactions are considered "exports" by the U. S. government Export generally refers to transmission of items or material outside the U. S. , including — • Transfer of information by mail, telephone, fax, e-mail or in proposal • Visual demonstration during plant tour or marketing meeting • Person with knowledge of technology taking leadership role in applying it Re-export is delivery of goods from one foreign country or entity to another Example: U. S. ships product to buyer in France, who sells/ships product to buyer in Brazil 6 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls WHAT IS AN "EXPORT"? (CONT'D) Temporary import refers to — • Item in transit to foreign country through the U. S. • Item brought into U. S. from foreign country that is to be returned later to that country Dual-use commodities are products that may also have nuclear, military or chemical/biological uses or applications Goods are items, material or manufactured products (not technical data) Technical data includes blueprints, models, diagrams, formulae, engineering designs/specifications, manuals, and recorded/written instructions 7 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls POP QUIZ! Which of the following could facilitate an "export" subject to export-control laws and regulations: A. An e-mail message. B. A web site. C. A telephone call. D. A training session. E. All of the above. 8 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls WHAT IS AN "EXPORT"? (CONT'D) Technology: Knowledge and information needed for use and development of goods Technical assistance: Includes instruction, consulting services, know-how, transfer of technical data and education U. S. person: Citizen or national of U. S. or lawfully admitted alien • Includes business and government entities Foreign person: Person who is not a U. S. citizen, national or lawfully admitted alien • Includes foreign corporations, international organizations, and foreign agencies/governments 9 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls DEFENSE EXPORTS UNDER THE ITAR cover export of defense articles, services and related technical data When unsure which regulations apply, we can submit CJ Request from DDTC ITAR use broad definition of export transactions These acts require proper licensing: • Disclosure of listed technological know-how to foreign national within U. S. • Transfer of ownership of listed goods to foreign national while in U. S. • Performance of listed services foreign national while in U. S. 10 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls DEFENSE EXPORTS UNDER THE ITAR (CONT'D) All exporters of items on Munitions List must register with DDTC All brokers must register under ITAR Once registered, company must decide whether export transactions requires license Company may request "advisory opinion" from DDTC License will be denied if end-user is on DDTC List of Debarred Parties License will be denied if defense articles or services are to be sent to countries on DDTC embargo list If you have questions, ask your supervisor or the Legal Department 11 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls POP QUIZ! ITAR covers which of the following? A. The export of commercial and dual-use commodities, technology and software. B. The export of defense articles, services and related technical data. C. Embargoes and economic sanctions against various foreign countries and entities. 12 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls ANTI-BOYCOTT AND EMBARGO RULES Issues concerning boycotts and embargoes: • Anti-boycott laws/regulations encourage or require U. S. companies to avoid participating in foreign boycotts • We have duty to report proposals to join unauthorized boycotts • OFAC administers embargoes and economic-sanctions programs against certain foreign countries and individuals and organizations 13 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls IN THE NEWS… Feds Drop Bomb on Bomb-Maker U. S. Military Contractor Fined $13 Million The Commerce Department has discovered that a U. S. military contractor and its subsidiary sold over 130 tons of an incendiary additive used in cluster bombs produced in Chile and sold to the Iraqi government. Although export license applications showed the additive was for use in explosives for "mining operations, " trial testimony showed that the subsidiary's employees were told the additive was intended for use in cluster bombs rather than mining and that they made several visits to the Chilean facilities where cluster bombs were tested in their presence. The contractor pled guilty to charges of criminal conspiracy, false statements, and violations of the Export Administration Act and the Arms Export Control Act and agreed to fines and penalties of $13 million. The subsidiary was denied export privileges for three years and had its authority to use general licenses suspended for nine months. The subsidiary's Manager for Ordnance Sales was sentenced to a 41 -month prison term and a $25, 000 fine, and he lost export privileges for a period of 10 years. 14 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls ANTI-BOYCOTT AND EMBARGO RULES (CONT'D) Prohibited actions: • Refusing to do business with or in Israel • Discriminating against other persons based on race, religion, sex, national origin or nationality • Implementing letters of credit containing prohibited boycott terms/conditions • Exporting to and importing from sanctioned countries • Entering into business transactions with sanctioned countries, individuals or organizations If a request may be covered by anti-boycott provisions, contact your supervisor or the Legal Department before taking any further action 15 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls RECORDKEEPING AND REPORTING Retention requirements apply to records of export transactions under ITAR or EAR • Records include invoices, copies of EEI documentation, and air waybills or bills of lading • Records required by EAR must be retained for five years • Records concerning defense articles and services must be kept for five years after expiration of relevant license If government agency requests records, those records may not be disposed of without written authorization of the agency 16 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls "RED FLAG" SITUATIONS Certain situations should raise red flags of possible exportcontrol problems • Customer's name is same as or similar to one on BIS, DDTC or OFAC list • Customer/agent is reluctant to state product's end use • Product's capabilities don't match customer's business • Customer is willing to pay cash for expensive product that is normally financed • Customer has minimal business experience 17 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls POP QUIZ! Which of the following describes your duty if you encounter a red -flag situation: A. Investigate the suspicious circumstances and question the customer regarding the product's end-use or final destination. B. Avoid negative information about the transaction if you believe the transaction will be beneficial to our Company. C. Advise the customer about how to avoid red-flag situations in the future. 18 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls "RED FLAG" SITUATIONS (CONT'D) Additional red-flag situations: • Customer is unfamiliar with product's capabilities but still wishes to purchase it • Customer declines installation, routine service or training • Customer requests vague delivery dates or out-of-the-way delivery locations • Freight-forwarding company is listed as product's final destination • Packaging of product is inconsistent with normal shipping methods • Buyer is ambiguous about whether product is for domestic use or export Report these situations to your supervisor or the Legal Department 19 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls PENALTIES Companies may be strictly liable — liable whether violations were intentional or not Penalties: Fines, imprisonment, seizure or forfeiture, and suspension or loss of export privileges • Employees may incur individual penalties • Person who deliberately violates export regulations may incur criminal penalties — fines up to $250, 000 and imprisonment up to 10 years • Company may be fined up to $1, 000, or five times value of exports for each violation • Export privileges may be suspended or revoked • Government may publish information about violation in various publications 20 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls FINAL QUIZ 21 of 21 Copyright © 2011 We. Comply, Inc. All rights reserved.

Export Controls ABOUT WECOMPLY We. Comply is a leading provider of customized ethics and compliance training solutions. We are committed to providing the best-of-breed training content, technology and customer service. ü Specializing in ethics and compliance training since 1999 ü 60+ ethics and compliance training courses in 42 languages ü Content partners include the Association of Corporate Counsel (ACC), Proskauer Rose and White & Case ü 500+ clients of all sizes and in all industries Copyright © 2011 We. Comply, Inc. All rights reserved. 1 -866 -We. Comply

Export Controls COURSE-DELIVERY OPTIONS We. Comply offers training courses in multiple delivery formats to reach all employees -- not just those with computers: ü Online – available 24/7 from any computer ü Mobile – tablets and smartphones ü Offline options when Internet access is unavailable: Ø Power. Point with presenter notes for classroom training Ø PDF booklets with tear-off certifications Ø CD-ROM/intranet with tracking via e-mail Ø Phone-based training and certification Copyright © 2011 We. Comply, Inc. All rights reserved. 1 -866 -We. Comply

Export Controls ONLINE TRAINING BENEFITS While classroom training has certain advantages, it can be challenging to implement in large and/or geographically dispersed companies. Consider these advantages of online training: ü ü ü ü Better Attendance Higher Completion Rates Less Impact on Productivity Perfect for New Hires Convenient for Remote Locations Available in 42 Foreign Languages Easy Access to Courses Periodic Refreshers Copyright © 2011 We. Comply, Inc. All rights reserved. Blended Benefits Get the best of both worlds by providing classroom training where feasible and online training elsewhere – all centrally tracked and organized for easy monitoring and reporting.