AN OVERVIEW OF U.S. EXPORT CONTROLS & ECONOMIC SANCTIONS

Transcription

1 AN OVERVIEW OF U.S. EXPORT CONTROLS & ECONOMIC SANCTIONS Christine Lee Senior Director, Associate General Counsel United Technologies Corp. Yoshihide Ito Partner Morgan, Lewis & Bockius LLP 1 EXPORT CONTROL BASICS What are Export? Export controls are restrictions imposed by governments on the movement of certain goods, software, and technology ( Controlled Items ) across borders and the provision of services or technical assistance, including brokering, related to certain Controlled Items. Companies must obtain approvals from the relevant national authorities before exporting, reexporting and/or transferring Controlled Items, or providing technical assistance or services related to Controlled Items. Export controls protect NATIONAL SECURITY, prevent PROLIFERATION of weapons of mass destruction, and support the FOREIGN POLICY interests of a country 2 1

2 EXPORT CONTROL BASICS The Four Pillars of Export Item End-Use Export Destination Designated Party 3 U.S. REGULATIONS Export Administration Regulations (EAR) International Traffic in Arms Regulations (ITAR) U.S. Department of State, Directorate of Defense Trade (DDTC) the export, reexport, transfer and brokering of defense articles and defense services on the United States Munitions List U.S. Department of Commerce, Bureau of Industry & Security (BIS) the export, reexport and transfer of military and dual-use items on the Commerce Control List Foreign Asset Control Regulations (FACR) U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) exports and reexports of Controlled Items and activities of U.S. persons involving sanctioned countries, entities and/or individuals 4 Note: U.S. Nuclear Regulatory Agency and Department of Energy also regulate exports and reexports of nuclear reactor vessels and nuclear materials, respectively, but will not be covered in this presentation. 2

3 RAMIFICATIONS OF NON-COMPLIANCE ITAR Civil penalties up to $1,094,010 per violation Criminal penalties $1million and/or 20 years imprisonment EAR Civil up to $289,238 per violation or 2x value of transaction Criminal - $1million and/or 20 years imprisonment Debarment Denial of export privileges License suspensions or denials Seizure/forfeiture of goods Reputational harm and negative publicity 5 KEY TERMS FROM THE UNITED STATES Export: shipment or transmission from the United States (and U.S. territories/possessions) to any other country Deemed Export: release of software or technology to a non-u.s. person in the U.S. OUTSIDE THE UNITED STATES Reexport: shipment or transmission from one foreign country to another foreign country Transfers or Retransfers: change in end-use or end-user within the same country Deemed Re-export: release of software or technology to a non-u.s. third country national outside the U.S. 6 3

4 Four Steps Determine What It Is (and is it subject to U.S. law) Confirm Who Will Access/Use It, Where and Why 3. Get Export Authorization 4. Manage the Process 7 Step 1 1. Determine What It Is (and is it subject to U.S. law) Commodity? Software? Technology? Services? Jurisdiction / Classification? Outside the U.S., is it subject to U.S. controls? 8 4

5 DETERMINE WHAT IT IS (AND IS IT SUBJECT) U.S. export controls apply to ITEMS Items made in the U.S., wherever located (U.S.-origin) Items physically located in the U.S. (regardless of origin) Items made outside the U.S. that contain a certain amount of U.S. content Items made outside the U.S. based on certain U.S. technical data or technology U.S. Origin (or non-u.s. origin subject to U.S. controls) U.S. export controls apply to ACTIVITIES or SERVICES by U.S. persons, wherever located Dealings with certain prohibited end-uses or end-users Training / technical assistance pertaining to defense articles Brokering activities related to defense articles or services U.S. Person (or non-u.s. person in U.S.) 9 DETERMINE WHAT IT IS (AND IS IT SUBJECT) Is it subject to the ITAR or the EAR? Start with the ITAR - Follow the order of review and check the U.S. Munitions List to determine whether your item is on that list If not, go to the EAR - Follow the order of review and check the Commerce Control List to determine whether your item is on that list If not, then it s EAR99 (unless it s publicly available per the process defined in the EAR/ITAR or otherwise identified as exempt from those regulations) Establish Jurisdiction Establish Classification Step 1 ITAR Step 2 EAR USML Category ECCN 10 5

6 Step 2 2. Confirm Who, Where and Why Embargoes? Sanctions? Denied or restricted parties? Prohibited end-uses? 11 CONFIRM WHO, WHERE AND WHY Why does the end-user need the item what will they do with it? What is the stated end-use? Is there a chemical, biological, nuclear or missile activity involved? Is there a military end-use (Russia, China, Venezuela)? 12 6

7 Step 3 3. Get Export Authorization License required or not required (NLR)? License or Agreement? Exemption or Exception? Is scope of authorization sufficient? 13 RED FLAGS Be aware of suspicious information that may indicate a risk of diversion Don t ignore or disregard information Conduct due diligence on the parties to the transaction Make inquiries, where appropriate Document your due diligence 14 7

8 Step 4 4. Manage the Process Stay within scope of authorization Recordkeeping Tracking and reporting 15 8