U S Export Controls How to Comply with

U. S. Export Controls How to Comply with Commercial, Dual-Use, and Defense Article Regulations and U. S. Trade Sanctions Export Controls Compliance Programs (Including Key Lists to Check) and Voluntary Disclosures May 11, 2016 Copyright Holland & Hart LLP 2016. All Rights Reserved.

Disclaimer This presentation, related materials and subsequent discussion are provided for educational purposes only. They do not constitute legal advice nor do they necessarily reflect the views of Holland & Hart LLP or any of its attorneys other than the speaker. This presentation is not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel. Copyright Holland & Hart LLP 2016. All Rights Reserved. 2

AGENDA Introductions EAR / ITAR Overview Licensing and Commodity Jurisdiction OFAC Compliance Lunch Keynotes § Economic Espionage and Theft of Trade Secrets § Export Regulations Enforcement § Export Control Reform Initiative Update § ITAR Registration Requirements (Including ITAR Part 129 Brokering) § Export Controls Compliance Programs (Including Key Lists to Check) and Voluntary Disclosures 3 § § § Copyright Holland & Hart LLP 2016. All Rights Reserved.

EXPORT COMPLIANCE PROGRAMS Implementing Effective Measures Copyright Holland & Hart LLP 2016. All Rights Reserved. 4

EXPORT COMPLIANCE PROGRAMS At a minimum, a program should include: ♦ Compliance policy and export responsibility ♦ Proper classification, licensing and checks ♦ Screening of denied parties, end-uses/endusers and red flags ♦ Training, audits, and updates ♦ Technology control plan ♦ Safety valve for reporting violations Copyright Holland & Hart LLP 2016. All Rights Reserved. 5

EXPORT COMPLIANCE PROGRAMS Why is a compliance program important? u To rebut regulator’s presumption your company acted with knowledge u To top be effective, it most come from the Copyright Holland & Hart LLP 2016. All Rights Reserved. 6

EXPORT COMPLIANCE PROGRAMS Customer Screening: u Must be centralized and preferably automated q DDTC issues a debarred party list q OFAC - Specially Designated Nationals List (SDNL), Foreign Sanctions Evaders List (FSE), Sectoral Sanctions Identifications List (SSI) q BIS - Denied Parties List, Entity List q Non-Proliferation Sanctions Lists Copyright Holland & Hart LLP 2016. All Rights Reserved. 7

EXPORT COMPLIANCE PROGRAMS ITAR - Destination Screening Ø Licenses Required for All Exports and Re -exports q Unless an exemption is available Ø Embargoed Destinations Ø 126. 1 Countries q Assess where your customer is located early on in transaction Copyright Holland & Hart LLP 2016. All Rights Reserved. 8

UNDERSTANDING THE EXPORT COMPLIANCE PROCESS § Main embargoed countries under OFAC q Other countries are subject to OFAC sanctions Copyright Holland & Hart LLP 2016. All Rights Reserved. 9

UNDERSTANDING THE EXPORT COMPLIANCE PROCESS § All embargo regimes are different ♦ Products and technology ♦ Financial transactions and facilitation ♦ Changes on-going concerning Cuba Copyright Holland & Hart LLP 2016. All Rights Reserved. 10

UNDERSTANDING THE EXPORT COMPLIANCE PROCESS ITAR Section 126. 1 Countries Copyright Holland & Hart LLP 2016. All Rights Reserved. 11

UNDERSTANDING THE EXPORT COMPLIANCE PROCESS ITAR Section 126. 1 Countries Afghanistan, Belarus, Burma, Central African, Cote d‘Ivoire, Cuba, Cyprus, Democratic Republic of Congo, Eritrea, Fiji, Haiti, Iraq, Iran, Lebanon, Liberia, Libya, North Korea, Somalia, Sri Lanka, The Republic of Sudan, Syria, Venezuela, Vietnam, and Zimbabwe ♦ Policy of denial vs. case-by-case review ♦ Immediate obligation to notify DDTC Copyright Holland & Hart LLP 2016. All Rights Reserved. 12

EXPORT COMPLIANCE PROGRAMS Jurisdictional Determination u You need to know your product Failure to determine jurisdiction has resulted in many export violations q q Be careful with dual-use vs. ITAR q Origin of the product is fundamental If your product is incorporated into a foreign made product, ITAR jurisdiction remains q Copyright Holland & Hart LLP 2016. All Rights Reserved. 13

EXPORT COMPLIANCE PROGRAMS u Develop internal procedure for jurisdictional determination q Export jurisdictional determination team q Individual with expertise in technology u Alternative - Submit Commodity Jurisdiction Requests to DDTC u Develop an export commodity jurisdiction matrix q Use it, consult it, update it Copyright Holland & Hart LLP 2016. All Rights Reserved. 14

EXPORT COMPLIANCE PROGRAMS Dealing with Risk Areas - Technology Control Plan (TCP): u Facility Access Control u Hiring u Exposed technology in the work area u Visits by Foreign Persons u IT controls u Discussions with Foreign Persons anywhere Copyright Holland & Hart LLP 2016. All Rights Reserved. 15

EXPORT COMPLIANCE PROGRAMS Recordkeeping ♦ If it is not in writing, how can you prove it? ♦ Company policy for record retention essential ♦ Routine destruction of documents, when allowed by law ♦ Record retention will help in the event of the potential inadvertent violation Copyright Holland & Hart LLP 2016. All Rights Reserved. 16

EXPORT COMPLIANCE PROGRAMS § Reporting u Provide a safety valve for reporting violations u Contact information of compliance personnel u Anonymous hotline § Voluntary Disclosure u Credit for voluntary disclosure, remedial measures and cooperation q u Alternative could be directed disclosure, larger penalties Recordkeeping is fundamental for an accurate voluntary disclosure Copyright Holland & Hart LLP 2016. All Rights Reserved. 17

EXPORT COMPLIANCE PROGRAMS § Training u Initial training sessions by outside counsel/ training provider u Web-based training u Face-to-face training u On-going targeted training u Document it! Copyright Holland & Hart LLP 2016. All Rights Reserved. 18

EXPORT COMPLIANCE PROGRAMS § Compliance Audits u Self-Initiated Audit/Assessment q Comprehensive vs. Focused Review q Internal vs. External q On-Going vs. Annual u Develop an audit plan and follow it u Directed Audits q Resulting from Government investigation, settlement, or no-action resolution Copyright Holland & Hart LLP 2016. All Rights Reserved. 19

VOLUNTARY DISCLOSURES What to do if an export control violation occurs? u ITAR § 127. 12 u EAR § 764. 5 u “Strongly Encourage” Disclosure u Mitigating Factor Copyright Holland & Hart LLP 2016. All Rights Reserved. 20

VOLUNTARY DISCLOSURES ■ Disclosures are only voluntary if filed before the U. S. government learns of the violation on its own. ■ Notification should be filed immediately after a potential violation is discovered, and then conduct a through review of the transactions related to the suspected violations. Copyright Holland & Hart LLP 2016. All Rights Reserved. 21

VOLUNTARY DISCLOSURES ■ What Information Should Be Included? ♦ A precise description of the nature and extent of the violation ♦ The exact circumstances of the violation (why, what, where, when, how) ♦ Complete identities of the parties involved ♦ Export license numbers ♦ USML categories ♦ Description of corrective actions undertaken Copyright Holland & Hart LLP 2016. All Rights Reserved. 22

VOLUNTARY DISCLOSURES ♦ Copies of all documentation related to the transaction ♦ Certification of empowered official q “True and correct to the best of my knowledge and belief” Copyright Holland & Hart LLP 2016. All Rights Reserved. 23

WHAT IF…. DDTC/BIS DISCOVERS A POTENTIAL VIOLATION? ■ Remain calm… ■ Contact specialized legal counsel ■ Do not file or sign any documents or make any statements with the U. S. government unless you are absolutely certain of its accuracy ♦ Conduct a thorough investigation before responding to any request for information ■ Cooperate and work towards a resolution Copyright Holland & Hart LLP 2016. All Rights Reserved. 24

QUESTIONS Copyright Holland & Hart LLP 2016. All Rights Reserved. 25