US Export Control and Non US Companies The basics of compliance

Transcription

1 US Export Control and Non US Companies The basics of compliance Oct 3, 2008 Don Buehler Yokahama IAQG meeting 1

2 The Topics 1. Why should Asian & European companies care? 2. What is an Export? 3. What are the regulations & what do they cover? 4. What are the restrictions & how do I know how to proceed? 5. What are the challenges for the industry? 2

3 Why do countries have these regulations? Countries and companies have a right to protect information and products from other countries or companies as they deem in their best interest. This is done through Export Control regulations and proprietary information. 3

4 Why should Asian & European companies care about US Export laws? 4 1. If you do work on US origin materials, the laws apply to your company 2. Your customer (the US prime) probably has a clause in your P.O. which requires compliance 3. If you violate the regulations, your company may be subject to penalties

5 5 From the DDTC website:

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7 SOME EXAMPLES: South African company fined (January January 1997) Fuchs Electronics of South Africa agreed to pay $5.5 million for the establishment of a national export control compliance program after arranging for the shipment of proximity fuse power supplies from the U.S. to South Africa. In addition, Fuchs agreed to pay $2.25 million in civil penalties to the U.S. Department of State for this violation. 7

8 French company fined & disbarred (July 17, 2008) Cryostar SAS of France agreed to pay $500,000 and be subject to two years of probation for its involvement in a conspiracy to illegally export U.S.-origin cryogenic submersible pumps to Iran. 8

9 Chinese citizens jailed (May 2006) Beijing company Manten Electronics illegally exported national security items in radar & electronic surveillance to state sponsored institutions in China. Four defendants Kevin Wu; Linda Chen; Jenny Chan; Daqing Zhou all received up to 30 months in prison. They also forfeited $391,397 of their revenue. All four have been denied any export privileges up to 20 years. 9

10 Japanese company fined & debarred (February 1992) Japan Aviation Electronics Industry Ltd. (JAE) of Tokyo agreed to pay a civil penalty of $5 million and be subject to three years of statutory debarment, along with internal audits conducted by the U.S. Department of State, for allegedly transferring ITAR-controlled defense articles to Iran. 10

11 Other aspects of penalties 1.) It can wreck your international business 2.) It can ruin your reputation - these penalties are a matter of public record 3.) It can shake the confidence of your other customers 11

12 What is an Export? Any item sent from the United States to a foreign destination (company or person) is an Export. All items and articles leaving the United States are Exports and, therefore, are controlled. Items include hardware (parts, materials, sub assemblies), information (drawings, specifications, test data, calculations) and technologies (eg.. composites) 12

13 What is an Export? An Export can be physical (sending a part to a foreign country or person) aural or verbal (telling someone information about a controlled part) visual (a foreign person sees controlled information even if they see it on your laptop in a public place) 13

14 What is an Export? A foreign destination is any country outside of the United States. A foreign person is anyone who is not a U.S. citizen or green card holder. EXAMPLE: Sharing a drawing of an aircraft engine component with a French citizen is considered the same as sending it to France. This is a deemed export. 14

15 What are the regulations? What do I need to know? The United States controls exports with two major regulations: 1. ITAR: International Traffic In Arms Regulations 2. EAR: Export Administration Regulations 15 Plus the Office of Foreign Assets Control (OFAC)

16 Which agency is responsible? MILITARY Application ITAR State Department Dual-use use (military and commercial) or commercial application - EAR) U.S. Department of Commerce. If the product is going to a sanctioned country, it is under the jurisdiction of the Office of Foreign Assets Control (OFAC) through the US Department of the Treasury and a variety of federal laws. 16

17 The ITAR Broadly defined and tightly controlled includes all items on USML (U.S. Munitions List) If item is on the USML and is going to be exported, then it s s controlled (and requires a license). *unless there is an exemption 17

18 The ITAR: USML example Category VIII Aircraft and Associated Equipment VIII (h) Components, parts, accessories, attachments, and associated equipment (including ground support equipment) specifically designed or modified for the articles in paragraphs (a) through (e) of this category, excluding aircraft tires and propellers used with reciprocating engines. If a defense article is being sent outside the U.S. or a defense service provided to a foreign person or entity, this Export must be licensed by the State Department. 18

19 The EAR Administered by U.S. Department of Commerce Bureau of Industry and Security (BIS) If item is for commercial or dual use (commercial and military), it is controlled by the EAR and administered by BIS. 19

20 The EAR Commerce Control List Includes five product groups Extensive system for categorizing products (Export Control Classification Number) Complex rules about what requires a license (depends on product, technology and end use) 20

21 The EAR The purpose of the ECCN is to clearly identify the component, material, or technology so that proper licenses, restrictions and exemptions may be applied. If you are going to export items under the EAR, the ECCN is critical. 21

22 Office of Foreign Asset Controls (OFAC) U.S. Department of Treasury agency which administers sanctions against targeted foreign governments, individuals, entities and practices. Includes blocked assets, trade restrictions and financial transactions. Jurisdiction applies to all U.S. persons and citizens. 22

23 OFAC Sanctions and programs against: 23 - Balkans - Belarus - Burma - Coite d Ivorie - Cuba** - Diamond Trading - Iran** - Iraq - Liberia - Narcotics Trafficking - Non Proliferation - North Korea - Sudan** - Syria - Terrorism - Zimbabwe ** Indicates comprehensive program If any company works with US exports with any of these countries they are breaking US law

24 What are the restrictions? Basically 2 kinds of restrictions: 1. You must get a license from the appropriate Govt agency before you export the item or material 2. There is a prohibition to export the item to a particular destination/ foreign person 24

25 How do I know if there is a need for a license or a restriction is in place? 1. Basically you need to understand the regulations 2. ITAR - United States Munitions List- identifies items which are under the ITAR 3. EAR - ECCN along with the country of destination identifies when a license or restriction is in effect 25

26 What are the challenges for the US aerospace industry? 1. Flow down of Export Control data to suppliers Pressing need for common method of identification & common terminology 2. Supplier comprehension & compliance 3. Law & regulation simplification we need to lobby Washington to simplify the regulations 26

27 Here are the URLs for the State (ITAR) & Commerce (EAR) & OFAC ITAR EAR: OFAC 27

28 QUESTIONS? COMMENTS? Thank you for attending this IAQG workshop Don Buehler