ITAR, EAR and Australian Export Controls Training

Transcription

1 ITAR, EAR and Australian Export Controls Training July / Disclaimer Many U.S. and Australian export control topics are not covered in this course. Do not use these slides to make decisions about export control requirements. Read the regulations and ask for guidance from licensing authorities. This presentation is not advice. The regulations may change after this course. You are responsible for knowing the regulations that apply to your operations and transactions. 1

2 3 / Your Presenter Eva Galfi About Eva Galfi Principal, International Trade Advisors Certified ITAR Professional (CIP) Certified U.S. Export Compliance Officer (CUSECO) Masters in International Management, Trade emphasis 15+ years experience in consulting, U.S. and Australia Co-Editor, Australian Best Practices Guide for the Management of Controlled Exports and Technology 4 / Goals of the Training You will learn: An overview of export controls and why US controls are important in Australia An overview of the ITAR An overview of the EAR An overview of Australian export controls, including controls on intangible supplies How to classify an article or item on the ITAR s USML, EAR s CCL or AU s DSGL How to determine jurisdiction (ITAR or EAR) and how to identify transitioned items ITAR, EAR and AU record keeping requirements How to determine whether your transaction needs a license from the US or AU governments Approvals issued by the US and AU governments including when to apply, who can apply, and the application process in the US and AU 2

3 5 / Goals of the Training You will learn: How the ITAR and EAR view dual and third country nationals and how companies comply with the ITAR. How ITAR Agreements work How to make license applications for EAR controlled items in SNAP-R Using EAR license exceptions, when to use NLR, and when to use EAR99 Hands-on classification, license determination and de minimis exercises Understanding where you can go for help with questions about U.S. and Australian export controls Hands on exercises for determining if you need a license for your transfer to a subcontractor or to a business partner or colleague How to work with DoD and subcontractors in an ITAR environment 6 / Resources provided to you as part of this course ITAR ITAR Agreement Guidelines (rev 4.4b) Commodity Jurisdiction Request Guidelines DECO guidance on (Dual and Third Country Nationals) DSP-83 Instructions ITT Charging Letter, FLIR Systems Charing Letter World ECR article on Dual and Third Country Nationals FMS Defence Letter on FMS Policy DTCN Matrix for Bona Fide Employees EAR Deemed Re export Guidance from BIS EAR Section 748 guidelines (for completing a re-export application) EAR Specially Designed Order of Review 3

4 7 / Resources provided to you as part of this course Other Australian Best Practices Guide for the Management of Controlled Exports and Technology Is my non-us origin item subject to US export controls 600 Series non-us items Non 600 series non US made items subject to EAR De minimis for 600 series and non 600 series De Mininis Rules Guidelines Direct Product Series Examples Jurisdiction ITAR v EAR EGAD letter from U.S. export authorities instructing foreign companies to determine jurisdiction BIS re-export controls Definitions Rule harmonisation chart Export Controls A brief overview for Australian Industry 4

5 9 / What are export controls? Export Controls are regulations, overseen by government agencies, put in place to protect national security, promote foreign policy, and in some cases to control short supplies. The U.S., Australia, and many countries around the world implement export controls and maintain lists of Export Controlled Technology The term export can have different meanings depending on how it is defined by a particular piece of legislation Where government approval is not obtained prior to Export, this is constitutes a violation that can lead to financial and reputational consequences. Hardware, software, and technical data are all subject to export controls. 10 / What is an export? Under the ITAR Includes tangible (something you put in a box) or intangible (an or video chat) Not necessarily cross-border, can be sent to a dual/third country national Providing access to a co-worker is an export of that technology to all of the countries of which that person is a national. If no license is in place for that sharing of ITAR controlled technology, it is in violation of the ITAR. Under the EAR Includes tangible or intangible exports cross-border Includes tangible or intangible shipments to another company in Australia Includes providing access to co-workers who are not permanent regular employees under the EAR s definition. Under Australian Legislation Must be cross-border (e.g. from a place in Australia to a place outside of Australia) Can be tangible or intangible 5

6 11 / Key U.S. Export Controls Australian Companies must comply with U.S. Export Controls The International Traffic in Arms Regulations (ITAR), including its US Munitions List (USML) The Export Administration Regulations (EAR), including its Commerce Control List (CCL) UN and Autonomous Sanctions, OFAC regulations (if your AU co is owned or controlled by a US company, then it must comply with US sanctions and embargoes) Why must AU companies comply with U.S. export controls? We need to ensure access to the technology. Over 60% of Australian defence inventory is purchased from the U.S. (Mostly via the FMS program) We don t want coalition military assets falling into the wrong hands If you violate US export controls, you get placed on a list that prevents you from acquiring export controlled assets in the future Significant fines and penalties are levied on companies outside of the U.S. 12 / Penalties for Non-Compliance with the ITAR and EAR Penalties: Willful/Criminal Civil ITAR Up to $1,000,000 per violation Up to $1,094,010 per violation EAR Up to $1,000,000 per violation Up to $120,000 per violation All large Primes have at one stage been fined and have entered into Consent Agreements with DDTC. Examples of fines for ITAR violations: ITT $100 million BAE $78 million Raytheon $16 million Northrop Grumman $31 million Lockheed Martin $12 million 6

7 13 / Penalties for Non-Compliance with Australian Export Controls 14 / Consequences of Non-Compliance Damage relationship with parent company, or business partner Added scrutiny for future authorisation requests Inability to tender for future projects with Australian companies or the Commonwealth Reputational damage even where the issue was corrected Violation of contracts with business partners, leading to financial consequences Unable to access ITAR controlled technology in the future A Voluntary Disclosure made to one or more Government entities can lead to costly and invasive investigations Fines and penalties 7

8 15 / About the ITAR The International Traffic in Arms Regulations is a set of US regulations that strictly control access to certain sensitive technologies (mostly military, certain dual use articles). ITAR controlled technology is listed on the U.S. Munitions List (USML). The hardware, software and technical data listed on the USML are collectively referred to as ITAR articles. Where you have an ITAR article and you want to give someone access to it, retransfer it to another party, re-export it, exhibit it, sell it, etc. you will need State Department approval Any Australian produced hardware, software or technical data that incorporates ITAR controlled technology will itself become subject to the ITAR. This is referred to as ITAR taint. Only persons authorised to receive or access ITAR controlled articles, including technical data may do so. Access by Unauthorised Persons is a violation of the ITAR. Violation of the ITAR can lead to very serious consequences, including fines, inability to access ITAR, and loss of business. If sending ITAR articles to the US, you will need either a DSP-61, exemption (for temporary) or ATFE import permit (for permanent exports). The US importer is responsible. 16 / ITAR Approvals The U.S. State Department s Directorate of Defence Trade Controls (DDTC) is the agency that grants licenses and other approvals for the export of and access to ITAR controlled articles. DDTC can grant single licenses (such as a DSP-5), which allow for a single shipment from the U.S. to Australia DDTC can also grant ITAR Agreements (Such as a Technical Assistance Agreement or TAA) which allow several parties, including often the Commonwealth, to share ITAR controlled technical data with each other. These agreements have a specific scope and time frame. There are various approvals for exporting, retransferring and granting access to ITAR controlled articles. ITAR approvals do not need to be carried with the equipment. Only a U.S. entity can apply for a State Department license, TAA or MLA. Australian companies can apply for approvals under General Correspondence. The application process with the State Department can take months. The ITAR contains a limited number of exemptions which authorize the export of ITAR articles without a license. In many cases exemptions require than an NDA is signed by staff at the foreign entity in order to utilise the exemption. If you receive an article under an exemption, you still need to keep records as if it had arrived under a license or Agreement. 8

9 17 / About the EAR Technology of U.S. origin that is not controlled by the ITAR is controlled by the Export Administration Regulations (EAR). The EAR controls both military and commercial goods. EAR controlled technology are listed on the Commerce Control List (CCL) Any Australian produced hardware, software or technical data that incorporates over a certain threshold of EAR controlled technology will itself become subject to the EAR. A new license may be required to share EAR controlled technology with a subcontractor or business partner in Australia or re-export EAR controlled technology to any destination other than the U.S. Most re-exports and retransfers can occur without a license, but you MUST check whether or not you need one. Recordkeeping is key to compliance and evidencing compliance. Access by unauthorised persons is a violation of the EAR Violation of the EAR can lead to fines and penalties 18 / EAR Licenses There is only one type of approval issued for EAR controlled items. It is simply called a license. The license is issued by the U.S. Bureau of Industry and Security (BIS), which is part of the Department of Commerce. BIS Licenses may be issued as quickly as 14 days and applications can be made on-line by Australian companies. Licenses are valid for four years. Many license exceptions are available in instances where you do need a license for your transaction. In some cases, no license is required for the transaction. You do not need a license to send EAR controlled items to the U.S. 9

10 19 / Australian Export Controls Australian Export Controls The Customs Act 1901 (legislative basis for AU export controls), includes Military End Use Provisions in 112BA for dual use goods Customs Prohibited Export Regulations 1958, Regulation 13E, including the Defence and Strategic Goods List (DSGL) Defence Trade Controls Act 2012 (brokering and intangible supplies such as , server access and presentations containing DSGL technology) Sanctions (UN and Autonomous) Weapons of Mass Destruction Act 1995 Other Export Controls Depending on where you do business and where you source goods and technology, each jurisdiction will have their own export controls. 20 / AU Export Controlled Technology Australia only controls the cross border movement of controlled technology listed on our Defence and Strategic Goods List (DSGL) Sending an overseas or providing server access to a server containing controlled technical data to an overseas recipient constitutes an export in the form of an intangible supply Where permits or licenses are required from the Australian government, they can be granted for the life of the project (typically 5 years) Applications for Australian Government licenses/permits can be submitted on-line and typically take less than one month for approval. Where you have an item that is export controlled for Australia, typically it is also export controlled by another regime (e.g. the ITAR or EAR). The converse is also true. ALL approvals must be in place prior to export. 10

11 21 / Do you have all of your approvals? ITAR EAR AU Export Controls 22 / Summary of Transactions Requiring Government Approval The ITAR and EAR regulate what companies in Australia can do with accessing a piece of data, the performance of a service, the movement of an article. Commodities, software, technical data and defense services are all subject to export controls. U.S. government approval is required to (not exhaustive): Grant access to ITAR controlled technology to staff, contractors, and visitors Transfer ITAR or EAR controlled technology to another company in Australia Physically re-export ITAR or EAR controlled technology from Australia to another country Send an containing ITAR or EAR data to anyone in Australia or outside of Australia, including staff Australian Government approval is required for Cross border s, faxes or granting server password access to an overseas party where DSGL technology is involved Any cross border movement of DSGL listed controlled technology 11

12 23 / Break into groups (5 minutes) Discussion on what you can/do have in place to make sure all of your approvals are being obtained as required - Automation? - Processes and Procedures? - Company culture? - Resources to reach out to if there is an issue or question? 24 / DEEMED EXPORTS & ACCESS RESTRICTIONS 12

13 25 / Deemed Exports A foreign national is a person who is not a U.S. citizen or permanent resident. This term is to be understood from a US perspective. When ITAR/EAR technology is given to a foreign national, that access is deemed to be an export of the technology to the count(ries) that person is a national of. This export must have approval from a US government agency before it can occur. Sending an to the person sitting next to you may be considered an export in violation of US regulations if the contains export controlled technology and that person is not authorised to access that technology. It is important to understand how export is defined under the U.S. and Australian legislation to avoid violations. It is easy to inadvertently make a deemed export. It is also important to understand what controls need to be in place to ensure export controlled articles are only accessed by authorised persons (including staff and business partners) 26 / Deemed Exports Deemed Export Examples with sensitive information or attachments Phone conversation Access to files with technical data (servers, webpages, intranet, manuals, drawings, reports, test procedures or results, processes, people s knowledge, labs, file cabinets, software related to defence articles, demos) Preventing unauthorized deemed exports Many people in your organization can accidentally export controlled technical data (sales, marketing, customer support, engineering, etc.) by accessing it or releasing it to another party. Training on where the line is very important, as is putting procedures/protective measures into place. Remember, with respect to the EAR and ITAR, it does not have to go outside Australia for you to be re-exporting. Releasing/disclosing information to a foreign person (EAR) or foreign national (ITAR) is a deemed export, no matter how it occurs. 13

14 27 / Dual and Third Country Nationals Dual national: Person who holds the same nationality as the licensee, but also has one or more other nationalities. (e.g. AU citizens and permanent residence born elsewhere) Third country national: Person does not hold the same nationality of country where the licensee is located. (e.g. 457 visa holders working for you) (The licensee is the company receiving the ITAR article under a license or other approval) 28 / Dual and Third Country Nationals and the ITAR Approximately 25% of Australians are born overseas, 76% are of working age. UK, NZ, China and India are the top four sources of immigration. The ITAR considers country of birth when assessing whether a natural person should be allowed access to ITAR controlled technology. Certain countries (126.1) are unable to receive ITAR controlled technology. Persons who are or were citizens of that country cannot receive the technology even if they are also Australian residents or citizens. This poses a problem as this type of scrutiny can result in discrimination based on nationality, race, origin. The AU government can grant formal exemptions to anti-discrimination legislation to satisfy ITAR requirements. Clause 124.8(5) should be included in new ITAR Agreements. There are ways to manage this conflict without discriminating against Staff Security Clearances from the AU govt as a job requirement is the most common tool as this meets the requirements of Due to the recent changes to the ITAR and the movement of articles to the EAR, this is less of an issue now than 5 years ago It is important to ensure facilities, rooms, drawers, cabinets, bins, etc. are appropriately labelled as ITAR controlled and access restricted. All Staff must wear ID badges. Staff training is also essential. 14

15 29 / Dual/Third Country Nationals Issue in Australia 30 / ITAR Access Restrictions Simplified Access Restrictions to remember for ITAR compliance: If the person is a current or former citizen or permanent resident of a proscribed country, they generally cannot access ITAR (see , 126.1) If an unauthorised person does access ITAR controlled technology, it is viewed as an export to ALL countries which the person holds or has ever held citizenship or permanent residency. By access, DDTC means viewing or hearing enough ITAR controlled technology to constitute a release. Each facility should have a list of ITAR Authorised Persons and restrict access to only these persons. The IT system needs to be sophisticated enough to prevent inadvertent and willful access to ITAR Controlled technology by unauthorised persons. The EAR is less stringent with respect to dual and third country nationals as it only looks at the last country of citizenship or permanent residency. 15

16 31 / Foreign Persons/Foreign Nationals Example 1 Born in China, Australian Permanent Resident. ITAR: Chinese and Australian, EAR: Australian Example 2 Born in the Australia, Australian Citizen, has previously applied for and received his UK citizenship last week. ITAR: UK and Australian citizen, EAR: UK citizen Example 3 Born in Pakistan, 457 Visa holder ITAR and EAR both: Pakistani 32 / Hands on exercise Access restrictions and the ITAR You have hired two new permanent staff members for your project team. One is an Australian citizen/french national with an AU government baseline security clearance. The other is an Au citizen/chinese national. He also has an AU government baseline security clearance. Can the French national access unclassified ITAR articles? What about the Chinese national? What do you need to check to answer this question? What can you do to comply with the requirements of the ITAR? 16

17 33 / MANAGING EXPORT CONTROLLED TECHNOLOGY 34 / Identifying Export Controlled Technology (ITAR, EAR, AU Controls) You are advised it is export controlled By the supplier By the original equipment manufacturer (OEM) By the Commonwealth You suspect it is export controlled Ask the party you received it from Ask the OEM Ask for advice from a government agency Do your own analysis Ask a subject matter expert You need to advise other parties of applicable export controls when transferring controlled technology to them. 17

18 35 / Managing Export Controlled Technology (the basics) Understand who can and cannot access the technology ITAR is very restricted (nationalities and ties to countries are important factors) EAR less so (generally, anyone that is a bone fide regular employee of the company receiving the items under license may access EAR controlled technology) Other controls may apply (UK, EU, JP, SG, etc) Anyone in Australia can access Australian export controlled technology Ensure export controlled technology is marked as such On documentation itself In the file name/folder name Ensure that records are kept in accordance with the regulations Of access (by staff) Of transfer (to another party) Of receipt and divestiture Of all approvals received from Government agencies 36 / Technical Data / Technology Information which is required for the: o o o o o Design Development Production Manufacture Assembly o o o o o Operation Repair Testing Maintenance or Modification of defense articles or commodities. This includes blueprints, software code, drawings, photographs, plans, instructions or documentation. Even verbal conversations. This does not include scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities, or information in the (U.S.) public domain (see ). It also does not include basic marketing information on function or purpose or general system descriptions of defense articles. 18

19 37 / Common ways to mismanage ITAR materiel Inadvertently providing access to someone not approved for access Stepping out of scope of an existing approval Managing and article as ITAR when it should be classed as an EAR item Storing ITAR data on a server overseas without DDTC approval Allowing staff who are not properly authorised to work on ITAR projects Not understanding how ITAR taint works, particularly when it comes to Australian produced technical data 38 / Ways you may be violating the ITAR (127.1, 127.2) Exporting without a license or other approval from the US State Department This includes stepping out of scope of an existing approval. See the ITT case. Violating the terms and conditions of an approval Making misrepresentations in license applications/approval applications E.g. misrepresenting the end use or end user, omitting facts Misuse of or failing to make records of your use of exemptions It is easy to misinterpret whether or not an exemption applies to your transaction. 19

20 39 / FLIR Systems Charging Letter One key way FLIR systems violated the ITAR: Unauthorised exports to foreign person employees (dual/third country nationals). 1. The Unauthorised Persons were involved in the design, manufacture, repair and sale of thermal imaging camera systems (Cat XII). 2. How did they go wrong? They failed to collect information on nationalities held by staff. D/TCNs who were unauthorised could access ITAR controlled technical data on the IT System. Roughly 1350 Unauthorised Staff had access to over ITAR controlled 1400 files. 3. This resulted in unauthorised exports, failure to comply with terms and conditions of a license, misuse of exemptions, etc. Ordered to pay $30million dollar civil penalty (April 2018) The ITAR U.S. Code of Federal Regulations (CFR) Title 22, Chapter 1, Subchapter M, Parts (consult ecfr.gov) 20

21 41 / ITAR on-line (pmddtc.state.gov/regulations_laws/itar.html) 42 / ITAR on-line (pmddtc.state.gov/regulations_laws/itar.html) 21

22 43 / e-cfr on the GPO website (Select Title 22) 44 / e-cfr on the GPO website 22

23 45 / The Directorate of Defence Trade Controls (DDTC) The ITAR is administered by the State Department DDTC The DDTC issues ITAR Licenses and approves ITAR Agreements Provides advice on Jurisdiction and Classification (ITAR or EAR) Advice on interpreting the regulations (If my business activity is X do I need an approval?) Disclosures of ITAR violations can be made to DDTC Enforcement action by DDTC where warranted (Consent Agreements, fines, debarment) The DDTC is the only authority that can interpret the ITAR. The DDTC is the only agency that can definitively conclude whether an article is subject to the ITAR. However, the DDTC should only be approached to make CJ determinations in cases of extreme grey area. 46 / ITAR Basics The ITAR The International Traffic in Arms Regulations (ITAR) is a set of U.S. regulations that controls the export, re-export and retransfer of articles which provide a critical military or intelligence advantage. This includes hardware, software, technical data, and defense services. Controls are enumerated in the U.S. Munitions List (section 121) and are extraterritorial. Written from a U.S. point of view but applies to everyone handling USML listed articles. Key Sections for Australians Definitions USML General Correspondence, Destination Control 123, 124 (124.8(5)), and 125 Licensing Procedures Proscribed countries FMS Program (c ) Exemption for Dual and Third Country National Employees 127 & 128 Violations and Penalties 129 Brokering Rules 23

24 47 / Defense Article The term defense article is defined in of the ITAR as any item or technical data in (e.g. anything on the USML, even if on the CCL too). Hardware Software Technical data If it is not on the USML, it is not a defense article and not subject to the ITAR. This term includes technical data unfinished products that have reached a stage in manufacturing where they are clearly identifiable as defense articles It does not include basic marketing information on purpose or general system descriptions. 48 / The USML (121.1) U.S. Munitions List Categories 1 Firearms, Close Assault Weapons and Combat Shotguns 2 Guns and Armament 3 Ammunition/Ordnance 4 Launch Vehicles, Guided Missiles, Ballistic Missiles, Rockets, Torpedoes, Bombs, and Mines 5 Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents 6 Surface Vessels of War and Special Naval Equipment 7 Ground Vehicles 8 Aircraft and Related Articles 9 Military Training Equipment and Training 10 Personal Protective Equipment 11 Military Electronics 12 Fire Control, Range Finder, Optical and Guidance and Control Equipment 13 Materials and Miscellaneous Articles 14 Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment 15 Spacecraft and Related Articles 16 Nuclear Weapons Related Articles 17 Classified Articles, Technical Data, and Defense Services Not Otherwise Enumerated 18 Directed Energy Weapons 19 Gas Turbine Engines and Associated Equipment 20 Submersible Vessels and Related Articles 21 Articles, Technical Data, and Defense Services Not Otherwise Enumerated 24

25 49 / USML Categories Control End items (Aircraft, guns, missiles, ground vehicles, etc) Specifically designed or specially designed parts, components, accessories, attachments, equipment for end items Enumerated parts, components, accessories, attachments, equipment for end items Technical data, defense services and software associated with the above. Categories contain notes and definitions that must be read to understand whether or not a category applies. 50 / ITAR Classification Basics Composition of an Entry Each USML category starts with end-platform designations, followed by major systems, and equipment and parts, components and accessories/attachments. Most USML categories contain an entry for technical data (120.10) and defense services (120.9) related to the articles in that entry Entries often have notes with very important information related to the entire entry or the article, including references to other entries, definitions, functional parameters, etc. 25

26 51 / Sample Entry 52 / Finding the correct category number Ask the OEM in the US Ask an engineer to help you Look at all categories to ensure you did not miss anything (e.g. gas turbine engines are in IXX not VIII) Read all the notes and relevant definitions Create an audit trail of how you came to your conclusion Who you spoke to at the OEM or internally Categories you considered and ruled out Opinion of a State Department licensing officer (if you spoke to one) Your interpretation of any regulations or definitions you looked at 26

27 53 / ITAR Classification Basics Classification If it is listed on the USML, it is ITAR, if not, it is not ITAR. Only a few catch-alls remain and the definition of specially designed has been drastically altered (b)(1) outlines the order of review required to classify an article on the ITAR. Follow this for each article. If not on the ITAR, review the EAR s CCL. Order of review First, know your product characteristics and functions Then, identify the appropriate category(ies) Next, look at the entries within the categories Read all the notes and definitions Be sure to refer to the definitions section as ITAR definitions are not the same as dictionary definitions 54 / ITAR Classification Exercise 1 Now that you have some basic information about how the ITAR works, let s classify something. Custom (not off the shelf) cable kits that will be installed into King Air 350 aircraft (non- ITAR) in preparation for the installation of a Star SAFIRE HD thermal imaging system (ITAR controlled). FLIR advises that the Star SAFIRE HD imaging system is classified as Category XII(c)(6)(vii) 1. Classify the cable kits for the system 2. Classify the installation instructions (for this exercise, assume the kits meet the definition of specially designed in the ITAR) 27

28 55 / Recent Changes to the ITAR What does the ITAR Control Now? The ITAR controls those military technologies that are considered the crown jewels of U.S. military technology. Articles not vital to national security have been moved to the jurisdiction of the EAR. USML Structure Changes Not only were items moved off of the ITAR to the EAR, many were moved around within the ITAR. Key Definitions Changes Definitions have been re-written. New definitions have been added. Anytime a definition is referenced in the ITAR, you must review it in Part 120 to ensure you are interpreting the definition correctly. An important definition to have a firm grasp of is specially designed. Changes to Agreements In many cases, Agreements must be re-baselined to comply with recent changes. 56 / ITAR Classification Post-Reform As a result of reform, all ITAR classifications that have not been updated for the changes are wrong. Example Pre-reform VIII(h) controlled all components parts, accessories, attachments, and associated equipment specifically designed or modified for articles in paragraphs (a) through (d) Post-reform, VIII(h) contains a provision for specially designed items in paragraph (1) and also an enumerated list of controlled items (2) (29) Post reform, enumerated controls trump items considered specially designed Post-reform, you must be specific and classify to another level. Keep in mind you need to make sure the article is not anywhere in the ITAR before you move on to the EAR 28

29 57 / Still ITAR? Is the Category VIII article still subject to the ITAR? End items: Check if it is listed in the revised Category VIII(a), (d), (f) or (h). If not, then it may have moved to EAR s ECCN 9A610 (aircraft). Parts, components, accessories and attachments: If it is not listed in VIII(h)(2)-(29), or is not considered specially designed for aircraft listed in VIII(h)(1), then it may have moved to the EAR s ECCN 9A610 (aircraft). If it is an engine it will no longer be in VIII(h), but may have moved to Category XIX(a)-(f). If it is not in XIX(a)-(f), then it may have moved to EAR s ECCN 9A619, 9A991, etc Always review all applicable ITAR categories before moving to the EAR. If you are unable to classify the article yourself, you can always apply for a commodity jurisdiction request. 58 / JURISDICTION DETERMINATION 29

30 59 / Jurisdiction Determination Can I make my own determination (ITAR or EAR)? (Yes and you must!) What are the risks? Benefits? What are the risks of not reviewing jurisdiction? Where can I go for assistance as an Australian person? The OEM State BIS Important points to remember Avoid being led astray- ask questions and do your own analysis. Cover yourself by obtaining classification advice in writing. Prepare audit trails. 60 / Determining Jurisdiction Post-Reform ITAR is now a positive, enumerated list of controlled items. If your article is not listed in the ITAR and not captured by the Specially Designed definition, then it is now under the jurisdiction of the EAR. As a classifier, you make the determination as to the jurisdiction of an article/item but you are able to ask for a Commodity Jurisdiction determination from the DDTC or an Advisory Opinion from BIS to help you with the jurisdiction determination. Any CJs issued pre-reform are invalidated/superseded by the reforms where the Category has undergone changes to move the article to the EAR. No need to request a new CJ unless doubt about jurisdiction exists. 30

31 Morning Tea Break 15 minutes 62 / ITAR DEFINITIONS 31

32 63 / New Definition of Specially Designed ITAR definition (120.41) is written to help you determine if the item should fall into the ITAR or EAR EAR definition (Part 772.1) is written to help you determine if you will end up with an ECCN or EAR99 classification. New definition has a Catch and release approach with a two paragraph structure (catch a great deal, but then release most items) Many USML categories will continue to use the phrase specifically designed, which is not defined 64 / New ITAR Specially Designed Definition (120.41) Paragraph (a) Except for commodities or software described in paragraph (b) of this section, a commodity or software (120.45(f)) is specially designed if it: 1. As a result of development, has properties peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics, or performance functions described in the relevant USML paragraph; or 2. Is a part (120.45(d), component (120.45(b)), accessory (120.45(c ), attachment (120.45(c ), or software for use in or with a defense article. *You only need to look at the definition if your article (e.g. part of a tail hook) contains the term. (i.e. VIII(h)(5) tail hooks and arresting gear) 32

33 65 / How to determine if your article is Specially Designed under the ITAR Does your article meet 1 or 2 of Paragraph (a)? If no, then your article is not specially designed. If yes, then your article is caught and must refer to Paragraph (b) to see if your article can be released. Paragraph (b) has 5 escape clauses that can excuse your article from being specially designed. If any of (b)(1)-(5) apply your article is not considered to be specially designed under the ITAR definition. 66 / Specially Designed Definition Paragraph (b) A part, component, accessory, attachment or software is not specially designed if it: 1. Is subject to the EAR pursuant to a CJ determination 2. Is, regardless of form or fit, a fastener (e.g. screws, bolts, nuts, nut plates, studs, inserts, clips, rivets, pins) washers, spacer, insulator, grommet, bushing, spring, wire, or solder; (e.g. even if only designed for the Tiger helicopter) 3. Has the same function, performance capabilities and the same or equivalent form and fit as a commodity or software used in or with a commodity that: i. either is or was in production (i.e. not in development); and ii. and is not enumerated on the USML Example: O-ring for a P-3 released if there is an equivalent on an EC145, even if bigger or smaller as long as performance capability is no different, released under (b)(3). 4. Was or is being developed with the knowledge that it is or would be in use in or with both defence articles enumerated on the USML and also commodities not on the USML or; 5. Was or is being developed as a general purpose commodity or software i.e., with no knowledge for use in or with a particular commodity (e.g., a F/A-18 or HMMWV) or type of commodity (e.g., an aircraft or machine tool). 33

34 67 / In summary- ITAR definition of Specially Designed Check if your article meets the definition in paragraph (a). If yes, then your item is caught and ITAR controls remain UNLESS, you can escape using any of the releases in paragraph (b)(1-5). Be sure to read all the notes to this definition, and the definitions within the definitions 68 / Order of Review for Specially Designed 1. Check to see if it is enumerated on the USML (121.1(b)(1) (check all categories) 2. If not enumerated, check to see if it meets the Specially Designed definition. 121.(b)(2) 3. If neither applies, then it is not controlled on the USML. Check the EAR s Commerce Control List Example: Wing folding systems for the F-35. Go to Cat VIII(h) of your ITAR. Where would you put it? (h)(4) or (h)(1)? 34

35 69 / Some other key definitions export (covers exports from the US) re-export retransfer a change in end use or end user of a defense article within the same foreign country. release Technical data is released through visual or other inspection of a defense article that reveals technical data OR oral or written exchanges or technical data. The EAR has their own definition in End items, components, accessories and attachments, parts, firmware, software, systems and equipment maintenance levels regular employee defense service technical data public domain Foreign defense article or defense service / Foreign defense article or defense service (120.44) Foreign defense article or defense service means any article or service described on the U.S. Munitions List of non-u.s. origin. Unless otherwise provided in this subchapter, the terms defense article and defense service refer to both U.S. and foreign origin defense articles and defense services described on the U.S. Munitions List. A defense article or defense service is determined exclusively in accordance with the Arms Export Control Act and this subchapter, regardless of any designation (either affirming or contrary) that may be attributed to the same article or service by any foreign government or international organization. Translation: even AU made articles are subject to the ITAR when exported from the US to AU. If you export an AU made article to the US and it is on the USML, they will need a State Department license to send it back to you. 35

36 71 / Re export Definition Reexport a) Reexport, except as set forth in or , means: (1) An actual shipment or transmission of a defense article from one foreign country to another foreign country, including the sending or taking of a defense article to or from such countries in any manner; (2) Releasing or otherwise transferring technical data to a foreign person who is a citizen or permanent resident of a country other than the foreign country where the release or transfer takes place (a deemed reexport ); or (3) Transferring registration, control, or ownership of any aircraft, vessel, or satellite subject to the ITAR between foreign persons. (b) Any release outside the United States of technical data to a foreign person is deemed to be a reexport to all countries in which the foreign person has held or holds citizenship or holds permanent residency. If you give an ITAR article (hardware, software, technical data) to someone in Australia who has a citizenship or permanent residency of a country other than Australia, you are re-exporting to that country. Even if the person is sitting right next to you at work. Ensure you have an approval in place! 72 / Retransfer definition Retransfers happen within Australia. For example, you create a retransfer when you hand an ITAR article (including technical data) to a subcontractor. You must have an approval to do so. Retransfer: 1. A change in end use or end user, or a temporary transfer to a third party, of a defense article within the same foreign country (e.g. within Australia) 2. A release of technical data to a foreign person (e.g. not a US person) who is a citizen or permanent resident of the country (e.g. Australia) where the release or transfer takes place. (Translation, giving an ITAR article to another person in Australia who has Australian citizenship only. If they have another citizenship, it s a re-export to whatever country they are a citizen or permanent resident of) 36

37 73 / Technical Data Information that is required for the design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of defense articles. This includes information in the form of blueprints, drawings photographs, plans, instructions or documentation. Can include orally listing steps or visually showing what to do. Technical Data also includes Software directly related to defense articles, Classified information, an invention covered by a secrecy order. Beware of ITAR taint in your projects. DDTC also uses the concept of derived data. This is technical data developed in a country outside the US (eg Australia) using US technology. Your Australian technical data would be subject to the ITAR if tainted. You must have an ITAR approval to release ITAR controlled technical data to a colleague, subcontractor, business partner. Usually, this is done through a TAA. 74 / Release definition Technical data is released through: 1. Visual or other inspection by foreign persons of a defense article that reveals technical data to a foreign person; or 2. Oral or written exchanges with foreign persons of technical data in the US or abroad. The biggest risk of release is not the DHL man peeking into your warehouse. It s staff accidentally cc ing someone they should not have on an containing technical data or including something in a technical conversation that they shouldn t include. 37

38 75 / Qioptiq Consent Agreement Excerpts In 2008, DDTC alleged that Qioptiq violated the ITAR when: retransferred ITAR technical data, original and derivative, without Department authorization to the People s Republic of China, a proscribed country and Singaporean subcontractors in violation of a proviso prohibiting subcontracting. exported to Iran Electronics Industries hardware, manufacturing equipment, technical data, and know-how to manufacture three night vision systems. All of these systems involved derivative design based in part on U.S. origin ITAR technical data exported to Singapore night vision equipment involving derivative designs based in part on U.S. origin ITAR technical data was shipped without authorisation to the Cyprus MOD. without authorisation Thales Singapore shipped to the Cyprus MOD a piece of night vision equipment that included components that were derived from ITAR technical data. State Dept uses the term derived, industry uses the term ITAR taint. 76 / Defense Service (120.9) Definition Defense Service Means 1. The furnishing of assistance to foreign persons (e.g. Anyone in Australia) in the design, development, engineering, manufacture 2. The furnishing to foreign persons of any (ITAR controlled) technical data 3. (The furnishing of) Military training There was a change to the definition of retransfer in Sept Must be a change in end user or release of technical data. If doing the work yourself, no retransfer has occurred. Two interpretations: - If you are not passing technical data to the other party, and not leaving any technical data behind, then you are not providing a defence service. No DDTC approval required. - Even if you are not releasing the technical data, you are furnishing assistance and it is therefore a defense service. DDTC continues to issue approvals. 38

39 77 / ITAR APPROVALS 78 / You need to seek State Department (DDTC) approval when: 1. You are dealing with an article that is listed on the ITAR s USML (an ITAR controlled article) AND 2. You are going to engage in a regulated activity Retransfer (for example to a subcontractor, etc.) Re-export Change in end use Granting access to a previously unauthorised foreign national (even if on staff) Always check if the article you are dealing with is (still) ITAR controlled. Always check if existing approvals you have in place already cover what you want to do before applying to DDTC for approval. 39

40 79 / Agreements Can only be submitted to DDTC by a US registered company. Are not valid until DDTC has approved it and all parties have signed. Foreign (e.g. Australian) entities must work closely with the US party submitting the Agreement to ensure all subcontractors, intermediate consignees and foreign nationals are accounted for. It takes months to obtain DDTC approval for an Agreement. Technical Assistance and Manufacturing License Agreements do not cover hardware shipments. The US applicant will ask for a DSP license in furtherance of an agreement. This is a separate exercise with a 45+ day timeline. 80 / ITAR Agreements (Part 124) Three Basic Types Of Agreements Manufacturing License Agreement (120.21) Permission to manufacture an ITAR article (conveying manufacturing know-how, granting production rights) Technical Assistance Agreement (120.22) Needed to share technical data and to collaborate on design, installation, modifications, assembly, upgrades (Ongoing information exchange amongst parties) Distribution Agreement (120.23) For storage and distribution of ITAR articles outside the U.S. (can be used for aircraft. Aircraft = warehouse) An MLA lets transfer technical data and lets the US party send you manufacturing know how (one way). A TAA allow for back and forth exchanges of technical data amongst parties to the Agreement (multi-channel data sharing) but does not allow for manufacturing. It is possible to get a combination TAA/MLA. 40

41 81 / Major differences between an Agreement and licenses An Agreement can be valid for 10 years and extended for additional 10 years, licenses are valid for four years All parties to the agreement can access what is in the scope, licenses are more specific Licenses are for one off transactions, and TAAs are for projects where there is a lot of back and forth Both can be used to grant one person or more persons access to ITAR articles, but Agreements only specify countries of birth/citizenship. 82 / Technical Assistance Agreements let you move ITAR technical data around DoD ITAR Data AU Prime NZ Repair facility AU Subcontractor ITAR Data ITAR Data Applicant for TAA and originator of technical data. Signatory to TAA Licensee and End user (DoD). End user a Signatory only if to directly receive tech data from US entity. Sublicensee. Not a signatory but listed on TAA Parent company, Can be listed on a TAA. 41

42 83 / Sublicensees v Signatories Signatories Can receive technical data directly from the US exporter Is a party to the TAA. (Signs the TAA and any amendments) Sublicensee Cannot receive data directly from the US exporter Is merely listed in the TAA (is not a party to the TAA) by name, address and role Must execute an NDA in order to receive ITAR controlled technical data (The Agreement Guidelines have a sample NDA) Signatories can only transfer technical data that is within the scope of the TAA/as described in the TAA to Sublicensees. 84 / Scope The scope is very important! Ensure you know the scope of the Agreement and review it against project requirements Only technical data that is within scope can be shared under the agreement. If it is out of scope you need another form of approval. Refer to the ITT Charging letter to see dangers of going out of scope. Changes to the scope of the agreements (modifications, upgrades, extensions) must be submitted for approval Minor amendments only need to be advised to DDTC (e.g. change in address) Update the scope as needed as your project evolved by amending the TAA. The agreements are good for ten years- many changes to commercial arrangements and required technology can occur in that time frame. Review the scope of all of your existing TAAs against what your are delivering. Are you covered?? 42

43 85 / ITT Case What went wrong at ITT? Failed to ensure that temporary exports of ITAR controlled equipment were actually returned They had a TAA and DSP-5s in place from the DDTC, but exported ITAR controlled technical data outside the scope of these authorities to business partners Knowingly exported ITAR controlled articles including technical data to facilitate the manufacture of ITAR controlled articles overseas (to the UK) An employee casually mentioned sourcing classified ITAR controlled equipment from a foreign supplier to DDTC on a telephone call. 86 / How do reforms affect existing approvals? You can continue to use ITAR Agreements If the Agreements only pertain to transitioned items (all are EAR only now), then you can use your existing Agreement for 3 years, or until expiration. Once you reach the three year anniversary of the publication of the final rule, the Agreement is invalid. If the Agreement has both ITAR controlled items and transitioned items, you can use the Agreement until such time as it is amended, expires or three years past the effective date of transition for items in its scope (whichever comes first). DDTC may allow you to use the Agreement longer than 3 years, but you must amend it to include paragraph (x) so that EAR items have a provision in the Agreement. 43

44 87 / USML Categories and Update Status (pmddtc website) 88 / How do reforms affect existing approvals? If you continue to use DDTC approvals, you must continue to comply with ITAR requirements, including complying with provisos, agreement reporting requirements, etc. You can choose to terminate ITAR Agreements and notify DDTC that you will no longer use GC approvals and instead obtain licenses from BIS if it makes sense to do so from a commercial perspective. Using paragraph x in the revised ITAR categories, you can include EAR items in DDTC export approval requests, including GCs 44

45 89 / Supporting the US applicant How to support the US license/approval applicant (and your project) List all the entities you will work with (or may work with) in the application. Civil aviation authority, IT service providers, off site storage, all parties in the chain of custody All subcontractors who are tendering with you to do work on the project List nationalities of staff who will have access to the ITAR articles (all nationalities and permanent residencies for those who are dual/third country nationals). Exemptions and , a GC or a DSP-5 can also be used to grant access to staff. Describe your activity/what you are producing with the ITAR article or how you are using it (on the PO is sufficient) Describe the end use and end users Keep as broad as possible whilst providing the above critical details. Example: for use in attack helicopters instead of for use in the Blackhawk. Where you need to add entities or make changes later, an Agreement amendment is required and it is a long process that can only be initiated by the US applicant. Pay attention to how hardware is addressed. No hardware? Hardware via DSP-5? Hardware via an exemption? It can impact your ability to receive hardware. 90 / State Department Licenses and Exemptions A DSP-5 is a license for the permanent export (from the US) of unclassified defense articles and/or technical data. A DSP-73 is a license for the temporary export (from the US) of unclassified defense articles and/or technical data. A DSP-61 is a license for the temporary import (into US) of unclassified defense articles and/or technical data. Advise US party you are sending ITAR so they can obtain. A DSP-85 is a license for the export or temporary import (into US) of classified defense articles or classified technical data. The ITAR contains a limited number of exemptions which authorize the export or temporary import of defense articles, technical data, or defense services without a license. Exemptions are largely set out in ITAR 123.4, , 124.2, 125.4, 125.5, 126.4, and There is also an exemption for the US-AU Defence Trade Treaty. Commonly-used exemptions include low-value spare parts, defense articles for trade shows, repairs and returns, and exemptions for exports by or for the U.S. Government's end use. If you receive an article under an exemption, you still need to keep records as if it had arrived under a license or Agreement. Ensure you are made aware of any provisos when you receive articles under a license! 45

46 91 / DSP-5 Where export of U.S. ITAR controlled equipment and technical data to an Australian party occurs under a DSP-5 licence, there are restrictions on dual or third country national employees accessing the ITAR articles, even when the dual or third country nationals are part of a company's bona fide workforce. Section of the ITAR and the FAQ on Dual and Third Country Nationals (available on the U.S. DDTC website) outline these restrictions. Australian companies receiving ITAR controlled articles under a DSP-5 must ensure that either: The dual or third country national employee has a security clearance from the Australian government. The dual or third country national employee has undergone a screening procedure to ensure there is no likelihood of an unauthorised re-export or retransfer to a country. Approval for accessing the ITAR controlled article(s) on the DSP-5 licence is granted to the Australian entity by way of General Correspondence from the DDTC. Where DSP-5 exports from the U.S. are executed in support of an agreement (TAA/MLA/WDA) then it is recommended that the nationality access provisions of the associated agreement also apply to access to equipment or technical data provided via the DSP / DSP-83 Non Transfer and Use Certificate A completed Non-transfer and Use Certificate (DSP-83) may also be required for exports of significant military equipment, or classified equipment or data prior to export from the U.S. The DSP 83 provides an assurance that the sensitive goods will be protected from unauthorised access, including re-export, resale or disposal. Allowing access for employees that are prohibited from accessing the equipment or data under a licence, licence exemption or other authorization is tantamount to an export that violates U.S. export controls. In most cases, the foreign end user on a DSP-83 will be the Commonwealth project office or facility. Within Australia, only Defence Export Control is authorised to sign the foreign government certification block on the DSP-83. The U.S. Department of State requires that this completed form DSP-83 be included as a part of an application for authorisation to export significant military equipment and classified equipment or data. The form DSP-83 must be completed by the appropriate foreign persons (e.g., consignee, end-user, government) and forwarded to the U.S. Department of State through the U.S. person making the application. Guidance on how to complete a DSP-83 can be found in the Australian Best Practices Guide 46

47 93 / General Correspondence Simply put, a letter to the U.S. State Dept s DDTC asking for permission to do something or advice. For a non-u.s. person, this is the mechanism for obtaining approvals to retransfer/reexport ITAR articles to a new end-use, end-user or destination as only registered parties (U.S. Persons) can apply for DDTC licenses. GCs can also be used for obtaining an opinion from DDTC or to ask about their interpretation of the legislation in a particular scenario. A response can take months. DDTC would prefer not to deal with foreign parties at all, but it must See 123.9(c ) for requirements when using a GC to obtain approval from DDTC. You must submit all info that would normally be required for a DSP-5, plus the original export license number/approval, exemption and a full description of the article. If the GC is an approval from DDTC to access/retransfer/re-export ITAR articles, then records must be kept in accordance with the ITAR s basic record keeping requirements 94 / GCs must contain There is no official guidance on how to prepare a GC but you can use the instructions for competing a DSP-5 (available on the DDTC website) and include the same information. Include at least: Article Quantity Value End User End Use Description of what you are intending to do with the article. Names and addresses of all parties who will handle the article. 47

48 95 / Useful Exemptions Australian can use for AU made ITAR tainted products 125.4(b) (technical data) Can be used for technical data being returned to you. Example, you develop a piece of ITAR tainted technical data in Australia. You it to a US partner. When they it back to you they will not need DDTC approval. They will log the transaction and use this exemption to cite their compliance. (They will need DDTC approval to send it to anyone but you though) 123.9(e) (Non-US hardware incorporating ITAR parts received under DDTC approval) Re-exports (to NATO, Israel, Japan, NZ, S. Korea) or retransfers (to other entities in Australia do not need DDTC approvals provided conditions of the exemption (value, provisos, exclusion list) are met. Must notify DDTC via a GC within 30 days of the re-export/retransfer. Must record-keep the details of the transaction and keep the letter for five years. 96 / Exemption You can transfer unclassified ITAR articles within your company to all regular employees (120.39), including dual and third country nationals. (Regular employees must be nationals of NATO, EU Japan, NZ, Switz (only). Regular employees must either be: 1. Screened using a screening process by the company 2. Have an AU gov security clearance (cannot be from a country) Your company must have procedures to prevent diversion AND you must have a TCP. Dual/Third country nationals that do not have a security clearance must sign an NDA. 48

49 97 / AU Government Guidance on Screening 98 / Regular Employee Definition Regular employee. (a) A regular employee means for purposes of this subchapter: (1) An individual permanently and directly employed by the company, or (2) An individual in a long term contractual relationship with the company where the individual works at the company's facilities, works under the company's direction and control, works full time and exclusively for the company, and executes nondisclosure certifications for the company, and where the staffing agency that has seconded the individual has no role in the work the individual performs (other than providing that individual for that work) and the staffing agency would not have access to any controlled technology (other than where specifically authorized by a license). 49

50 99 / Hands on exercise: HR issues - Secondees to Defence Company 1 seconds an employee to Company 2. Company 2 is contracted with the Commonwealth and is party to a TAA with the Commonwealth. The employee does not report back to Company 1. Company 1 only handles administrative items like benefits, salary and leave. Does Company 1 need to be listed on a TAA? Why or why not? They are spending 90% of their time working for Company 2, located at a DoD facility and 10% of their time for Company 1. Does that change your answer? 100 / Australian Best Practices Guide for the Management of Controlled Exports & Tech Contains a pro-forma Technology Control Plan (including a project specific TCP) Contains directions for completing a DSP-83 Explains in simple language how to classify for the ITAR and EAR, how to determine jurisdiction, how to calculate de minimis etc. Explains Australian export controls Contains contact details for both the AU and US Governments Contains many best practices regarding creating a solid compliance program Easy to read summary of everything you are learning today. 50

51 101 / QUESTIONS? Lunch 45 min 51

52 103 / WORKING WITH THE COMMONWEALTH 104 / FMS v DCS and the ITAR Foreign Military Sales The EAR says that if the article was acquired by the Commonwealth through the Foreign Military Sales program, then treat it as ITAR. (see EAR 734.3(b)(1)(vi)) The ITAR says articles can only be retransferred/accessed (without a license using the FMS exemption in 126.6) ONLY IF the LOA implementing the contract(s) is still in effect. Once the LOA and/or contracts have expired you need another form of authorisation such as a GC or license. (see 126.6( c)(1)) Creates complications post reform because an item that is now EAR needs to be treated as ITAR and restricted for access. Direct Commercial Sales If purchased pre June 2016, then analysis is required to determine jurisdiction (ITAR or EAR) and access / licensing requirements. Ask the OEM or do your own analysis. If you don t know how it was procured (FMS or DCS), then do your own jurisdictional analysis and consult your company s risk team. 52

53 105 / Third Party Retransfer Agreements (TPR) Basics about TPR Under U.S. requirements associated with export control of FMS articles, it is only the Commonwealth (the project) that can apply for a specific Department of State approval (known as a Third Party Retransfer [TPR]) to allow industry access to FMS equipment and technical data. Where additional sub-contractors require access to FMS articles beyond those listed on the original TPR approval, the releasing industry party must approach the Commonwealth (project) sponsor of the TPR to obtain approval to add these additional parties before the transfer can occur. Department of State TPR approvals can take upwards of three months. TPRs can only be amended for 12 months post-execution. After this date has passed a new TPR is required or another authority must be sought. 106 / Third Party Retransfer Agreements (TPR) When the Commonwealth submits a TPR approval request, they will ask you to complete a questionnaire and assurance letter. 1. Be sure that the scope of the TPR covers ALL of the work you hope to be doing under this authorisation. 2. Be sure that your correct legal entities are named in the questionnaire, including all addresses or the phrase and all locations in Australia 3. Be sure that any subcontractors you are using to do the work are also named in the TPR approval request 4. A TPR takes up to 90 days for approval from the date of submission. The Commonwealth can request faster approval times but these must be justified in the submission in terms of impact to the project if the approval is not received earlier 53

54 107 / FMS and dual/third country nationals Refer to the ASDS Letter dated 26 Feb 2016 The US Dept of State (PM/RSAT) has provided the following guidance on dual and third country nationals restrictions that apply to accessing equipment and technical data acquired by the Commonwealth under the Foreign Military Sales (FMS) program when transferred to Australian industry (applies to TPRs submitted post 21 March 2012): applies automatically to employees of Australian third parties to unclassified FMS acquired articles unless restricted by a proviso in the TPR approval letter 2. Where companies do their own vetting in accordance with (c ), DEC s ITAR exemption guidance should be followed, which includes the requirement for a TCP and retention of NDAs. 3. The country specific ADOD security clearance exemption for Australia authorising access to classified FMS articles automatically applies to all regular employees unless the employee is a dual national or deemed dual national of a proscribed country or unless restricted by a TPR proviso. 108 / Working with the Commonwealth Obtain advice on the status of everything received from the Commonwealth: Was it acquired under FMS or DCS? When was it acquired? What is the category/classification? What is the authorisation under which you are receiving it? TPR or TAA or license or GC? Document everything you do with the article Who accesses it What is being done to/with it and by whom Where is it being stored Often, the Commonwealth will not have this information This info is important for risk management and preservation of resources 54

55 109 / ITAR knowledge check (ten minute exercise in teams) You have an widget that requires refurbishing. It was given to you by the Commonwealth as part of an upgrade project your working on. You are a party to a TAA, the widget is within scope. The Commonwealth has told you it was ITAR controlled but the category number they have given you is no longer valid. You have identified a company in Perth that you can subcontract for the repair. They are not listed as a sublicensee on the TAA. You will need to send them the widget and technical data related to the widget. What do you need to do to ensure you are compliant with the requirements of the ITAR? What would be different if they were listed as a sublicensee already? 110 / RECORD KEEPING FOR THE ITAR 55

56 111 / Record keeping for ITAR Approvals Every transaction needs to have an approval or exemption against which it is happening. These must be noted in your record keeping systems. Ensure you are noting the approval/exemption next to the transaction in every instance. This includes: Actual shipments of ITAR Granting password access to servers containing ITAR Visitors to areas containing ITAR controlled technology Moving ITAR controlled technology to a subcontractor s facilities Transferring ITAR controlled technology back to DoD Performing a defense service in accordance with an approval 112 / ITAR Record Keeping Requirements Records must be kept for five (5) years from the date of the ITAR controlled activity/transaction and five (5) years after the expiry of the approval. These are different dates. It is best practice to keep records for 20 years as Agreements can be extended and timelines can therefore get pushed out. The manner in which you keep records is specified in various sections of the ITAR. Best reference is Basically: Records must be easily retrieved and reproduced onto paper Must be kept in a manner that prevents their alteration after creation without a record of the alteration (Excel spreadsheets don t meet this requirement) Must be legible/readable You must keep records related to acquisition, disposition, re-export, retransfer of all ITAR articles (including technical data). You must also record the use of exemptions, the provision of defense services, brokering activities, and access by D/TCNs to ITAR articles. All records must contain the name (and address) of the end user, the approval reference, the date of the transaction or activity, the stated end use, the name of the natural person responsible for the activity and the method of transmission. It is also a good idea to record the classification, the origin of the classification information, how the article was acquired by HP, the value, and the project the article relates to. 56

57 113 / WORKING WITH SUBCONTRACTORS 114 / Working with subcontractors Before you give a subcontractor ITAR controlled technical data, make sure you have a DDTC approval to do so. Ensure your contract(s) reflects export controls requirements. Include a clause about export controls compliance in all contracts. Ensure you have NDAs in place with subcontractors that include an affirmation of their commitment compliance with all applicable export controls Provide some training or resource materials as often small businesses would not have had the training Don t send the , parcel or password without going through the requisite checks for authorised person and within scope of an approval Don t promise what you can t deliver to a customer. Ensure your contracts have sufficient clauses that reference contingency on obtaining approvals from DDTC and BIS Be sure to check the business partner against the denied parties lists, especially in Asia and the Middle East Ensure they are listed on TPR approvals and in ITAR Agreements as sub-licensees where warranted 57

58 115 / US Destination Control Statement (ITAR and EAR) 123.9(b)(1) The exporter must incorporate the following information on the commercial invoice, whenever defense articles are to be (in tangible form) shipped, retransferred, or re-exported pursuant to a license or other approval. 1. The country of ultimate destination 2. The end-user 3. The license or approval number or exemption citation and the following statement: These items are controlled by the U.S. Government for export only to the country of ultimate destination for use by the ultimate consignee or end-users herein identified. They are not to be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorised by U.S. law and regulations. Put this on your AWB, B/L, commercial invoice. Automate this process if possible in SAP or via a desktop procedure. The EAR U.S. Code of Federal Regulations (CFR) Title 15, Commerce and Foreign Trade Parts 300 to

59 117 / Similarities between the ITAR and EAR Both control military hardware, software and technical data Licenses or approvals issued by both State and Commerce have an authorized scope (quantities, values, etc.) and you will need to stay within the authorized scope of a license/approval to avoid violation of the law Both Commerce and State licenses contain conditions/provisos that define the scope of authorized activity You must know the functionality of the product, the end-use, end-user in order to make a license/approval application Licenses are valid for 4 years Both BIS and DDTC license applications go through inter-agency review In both regimes, controlled items/articles are enumerated, but there are also some catch alls such as a provision for specially designed equipment (though the definition of the term varies slightly between the EAR and ITAR) 118 / Key differences between the ITAR and EAR Anyone can apply for a Commerce Department License from BIS No need to register, just create a SNAP-R account License applications have no cost Items subject to the EAR can be self-assessed by industry to determine licensing requirements. Commerce Licenses typically have more (not less) conditions than State Dept approvals. Same is true for Commerce license exceptions. Commerce licenses that are no longer valid do not need to be returned to BIS Commerce Dept is much more likely to visit an Australian facility and ask to see documentation (end-user verification visit) than the State Dept. You may export to and among end users listed on a Commerce Department license BIS licenses are easier/faster to get and you can self-manage the process No such thing as an EAR Agreement 59

60 119 / Where to find the EAR In print (USG Printing Office) Small version easier to handle Large version has lots of resources On Line BIS Website ( Click on tab that says Regulations and you ll be able to see the Regs, search them, access the CCL, country chart and Federal Register notices. BIS website has lots of useful information including free webinars, classification tool, etc. ECFR ( May be better as updated for changes within 48 hours of final rule publication (reduces need to refer to Federal Register for ECR updates) 120 / Where to find the EAR 60

61 121 / Where to find the EAR 122 / EAR Structure EAR is in Parts 732 to 774 of CFR Title 15 Supplement 1 to Part 774 is the Commerce Control List (where all military and dual-use controlled items are listed by ECCN) Other key parts: Steps for using EAR (how to read the EAR) part 732 Scope of the EAR (is your transaction subject to the EAR?) part 734 De minimis U.S. content CCL overview and Country Chart- part 738 Determining whether a license is required part License Exceptions part 740 Recordkeeping part 762 Interpretations- part 770 Definitions- part

62 Classification and Licensing These are inseparable in the EAR 124 / The Commerce Control List (CCL) The CCL is a listing (in Supplement 1 or Part 774 of the EAR) of all EAR controlled items. One hundred percent of items manufactured in the USA are subject to the EAR if not subject to the regulations administered by another government agency. There are over 500 ECCNs in the CCL Where you cannot find an applicable ECCN in the CCL, the item is EAR99 (you must have ruled out all 500+ ECCNs to use EAR99) 62

63 125 / ECCN Structure Controlled items are listed in Categories generally describing their attributes (0-9). Each category has 5 product groups (A-E). The combination of Category, Product Group and numerical distinctions for types of controls make up the ECCN. Types of controls (2nd and 3rd digit) 0- National Security (Wassenaar) 1- Missile Technology Control Regime 2- Nuclear non-proliferation reasons 3- Chemical and biological 6- Formerly USML or WAML 9- AT, Crime control, regional stability, short supply, UN sanctions 126 / Associations within the CCL s ECCNs Electronics- Category 3 Product Group Associations 3A001- Equipment, Assemblies and components 3B001- Test, inspection and production equipment 3C001- Materials 3D001- Software 3E001 - Technology 63

64 127 / Sample ECCN- 7A006 7A006 Airborne altimeters operating at frequencies other than 4.2 to 4.4 GHz inclusive and having any of the following (see list of items controlled). License Requirements Reasons for Control: NS, MT, AT Control(s) Country Chart NS applies to entire entry NS Column 1 MT applies to entire entry..mt Column 1 AT applies to entire entry.at Column 1 License exceptions LVS: N/A GBS: N/A CIV: N/A List of items controlled: Unit: $ value Related Controls: see also 7A106, 7A994 and Category 6 for controls on radar. Related Definitions: N/A Items: a. power management or b. Using phase lift key modulation. Each ECCN has a detailed description of the controlled items; lists the reasons for controls for that ECCN; lists any related controls that should be reviewed; lists any related definitions that should be reviewed; lists license exceptions that may be available for export of the controlled item(s). (Consult part 740 of the EAR for license exception conditions and restrictions and for non-eccn driven license exceptions.) Reasons for control can include (738.2): AT Anti Terrorism CB Chemical and Biological Weapons CC Crime Control CW Chemical Weapons EI Encryption Items FC Firearms Convention MT Missile Technology NS National Security NP Nuclear Nonproliferation RS Regional Stability SS Short Supply UN United Nations Embargo SI Significant Items SL Surreptitious Listening 128 / Sample ECCN 9A610 9A610 Military Aircraft and related commodities, other than those enumerated in 9A991.a License Requirements Reasons for Control: NS, RS, MT, AT, UN Control(s) Country Chart NS applies to entire entry except 9A610.u,.v,.w, and.y. NS Column 1 RS applies to entire entry except 9A610.y..MT Column 1 MT applies to entire entry except 9A610.u.,.v and.w...mt Column 1 AT applies to entire entry AT Column 1 UN applies to entire entry except 9A610.y.. See 746.1(b) for UN Controls Exercise: Find cockpit mirrors for a LearJet modified for use in military training. (use the steps on the next slide) 64

65 129 / CCL Order of Review First, review the ten categories, identify logical choices Next, determine the product group Check the 600 series ECCNs first as they trump other classifications Check if the items is enumerated Check if the item is specially designed If not a 600 series item, check the other applicable ECCNs. Check if the items is enumerated Check if the item is specially designed If no ECCNs apply (did you rule out all 500?), the item is EAR / CCL Order of Review within an ECCN To classify an item, start with reviewing the list of controlled items in the ECCN listed in paragraphs.a -.w.a -.w covers specifically enumerated end items, materials, parts, components, accessories and attachments. Some items may be specially designed and thus require analysis against the EAR definition of the term. If the item is not listed in paragraphs.a -.w, review paragraph.y.y covers specifically enumerated parts, components, accessories and attachments that are specially designed. The items listed in.y have the lowest levels of control on their export, re-export or retransfer, and are often able to be exported without a license to most destinations. Where the item is not found paragraph.y, review paragraph.x..x Paragraph.x covers specially designed parts, components, accessories, and attachments that are not specifically enumerated. 65

66 EAR License, NLR and Exception Determination 132 / CCL Structure- Controls and licensing requirements There are overarching controls called the 10 General Prohibitions listed in An export cannot occur where a General Prohibition is present. Prohibitions include: You cannot export an item requiring a license without having obtained the license You cannot export foreign produced direct products to a Country Group E country (Cuba, Iran, North Korea, Sudan, Syria) You cannot export foreign produced 600 series items to Country Group D:1 (Russia, Tajikistan, Uzbekistan, Vietnam), D:3, D:4, or D:5 or E:1 You may not knowingly export to a prohibited end user (BIS Denied Parties List/Consolidated Screening List) You may not export to a (U.S.) embargoed destination You may not proceed with a transaction if you have knowledge that a violation is about to occur Controls / licensing requirements vary based on destination of the export. Consult the country chart in Part 738, Supp. 1 Country chart headers are the reasons for control Don t forget about the General Prohibitions 66

67 133 / Determining Licensing Requirements Licensing for the EAR is TRANSACTIONAL Not every transaction will need a license. For example, you may be able to send your widget to New Zealand without a license, but not to China. ECCNs must be read in conjunction with the country chart in part 738 to determine licensing requirements If there is no x in the country chart box, no license is required for the export of that item to that country Where a license is required, license exceptions are available in many instances 134 / Country Chart (Supp 1 to Part 738) Reasons for control include (738.2): AT Anti Terrorism CB Chemical and Biological Weapons CC Crime Control CW Chemical Weapons EI Encryption Items FC Firearms Convention MT Missile Technology NS National Security NP Nuclear Nonproliferation RS Regional Stability SS Short Supply UN United Nations Embargo SI Significant Items SL Surreptitious Listening License Requirements Reasons for Control: NS, MT, AT Control(s) Country Chart NS applies to entire entry NS Column 1 MT applies to entire entry..mt Column 1 AT applies to entire entry.at Column 1 67

68 135 / Sample ECCN- 7A006 7A006 Airborne altimeters operating at frequencies other than 4.2 to 4.4 GHz inclusive and having any of the following (see list of items controlled). License Requirements Reasons for Control: NS, MT, AT Control(s) Country Chart NS applies to entire entry NS Column 1 MT applies to entire entry..mt Column 1 AT applies to entire entry.at Column 1 License exceptions LVS: N/A GBS: N/A CIV: N/A List of items controlled: Unit: $ value Related Controls: see also 7A106, 7A994 and Category 6 for controls on radar. Related Definitions: N/A Items: a. power management or b. Using phase lift key modulation. 136 / Country chart for Germany 7A006 License Requirements Reasons for Control: NS, MT, AT Control(s) Country Chart NS applies to entire entry NS Column 1 MT applies to entire entry..mt Column 1 AT applies to entire entry.at Column 1 One or more x in a box, so you need a license or license exception. 68

69 137 / Sample ECCN- 7A006 7A006 Airborne altimeters operating at frequencies other than 4.2 to 4.4 GHz inclusive and having any of the following (see list of items controlled). License Requirements Reasons for Control: NS, MT, AT Control(s) Country Chart NS applies to entire entry NS Column 1 MT applies to entire entry..mt Column 1 AT applies to entire entry.at Column 1 License exceptions LVS: N/A GBS: N/A CIV: N/A If a license exception were available, these would say yes instead of N/A List of items controlled: Unit: $ value Related Controls: see also 7A106, 7A994 and Category 6 for controls on radar. Related Definitions: N/A Items: a. power management or b. Using phase lift key modulation. 138 / Hands on Classification and licensing exercise Find a parachute that is specially designed to be used with aircraft that is controlled by the ITAR. (Assume we have already determined that the parachute itself is not on the USML) 1. What category/categories would you examine? 2. How would you classify this parachute if it was NOT for an aircraft on the USML or a military aircraft on the CCL? 3. Would you need a license from BIS to send this parachute to China? 4. Would you need a license to send it to Switzerland? 69

70 139 / NLR & item based exceptions in the EAR NLR (No License Required) When an item is NOT LISTED ON THE CCL but falls under the scope of the EAR (EAR99) and general prohibitions 4-10 do not (Part 736) apply. When an item IS LISTED ON THE CCL (has an ECCN) but does not require a license to the destination (no X in the country chart) and general prohibitions 4-10 (Part 736) do not apply to the export. LVS (740.3) Low Value Shipments Net value must be below LVS limit in the ECCN. Country Group B shipments only Calendar year limit to each consignee (12x LVS limit for that ECCN) 140 / Using license exceptions Be sure to read the complete text of the exception, including any definitions or references to other sections of the EAR. Document how you came to determine the exception applies Always check Part for restrictions on license exception usage 70

71 141 / License exception STA STA (740.20) Strategic Trade Authorization Available for most 600 series items going to allies Many conditions/restrictions for its use (i.e. certain ECCNs excluded or require BIS approval to use STA) Recipients agrees to comply with conditions on re-export/retransfer, including restrictions on foreign produced end-items incorporating parts shipped under STA. Limitations on STA use are listed in (b)(2) for controlled items, and additional limitations apply for certain destinations. Future shipments of STA eligible items can be requested on a 748P. See (g) and Sup 1 and 2 to 748 para w for instructions on License Exception STA eligibility requests for 600 Series end-items. How STA works: 1. The sending party provides the ECCNs (once per item) 2. The recipient provides consignee statement promising compliance and agreeing to end use checks. The consignee statement is only required one time, not per shipment. 3. The sender provides a written notice (shipment notification) that tells recipient the items are STA. They must do this each time. 142 / EAR Classification and License Determination Jurisdiction First, be sure the item you have is not ITAR controlled. (If it s on the USML it s not on the CCL, even if the CCL says its on the CCL.) Once you ve determined your item is under EAR jurisdiction, then classify it. See Part 732, Supplement 1 for a decision tree. Classification Consider all possibilities before coming to a conclusion on what the ECCN is. Identify the appropriate category(ies) based on item characteristics Compare the ECCN headings to narrow your results Identify the Product Group, then look at items Consult the 600 series items first Apply the most stringent classification to be safe Read the entire classification before identifying the applicable paragraph. Be sure to read applicable related controls and related definitions. Check Part 772 (definitions) and 770 (interpretations) May be EAR99 if not enumerated (but you have to check the entire CCL to be sure!) Ask for assistance where you need it from BIS, a supplier, a trusted advisor Document how you determined the ECCN 71

72 143 / Summary of Classification Steps (see Supp 4 to 774) Jurisdiction (ITAR or EAR) Check the ITAR- find your category (VIII) is it listed in VIII(h)(2)-(29)? If yes, you re done. (important!: Enumerated controls trump specially designed controls, per the new definition of specially designed) If no, does it meet VIII(h)(1)?. If yes, you re done If no, go to the EAR. Check the EAR Review the applicable Categories, then the Product Groups (Remember, 600 series trump others if they enumerate your item) Once you ve found your 600 series ECCN: Check a-w first. (f - j and t- w) Not there? Check enumerated controls in.y (list of parts) Not there? Then read.x and check if you meet the EAR definition of specially designed in part 772 (See Supplement 4 to part 744 for directions or go to on-line decision tool) Decision tool: Not applicable? Then check the rest of the EAR. (Categories, then product groups ) 144 / Summary of steps to determine licensing requirements Check listed reasons for control. Look at your transaction. Where is it going? Consult the Country Chart (Sup. 1 to 738) Requires a license where you see an x, where you don t NLR provided you don t meet general prohibitions Exception available to the licensing requirement, if yes, be sure to check to be sure you can use it. 72

73 145 / EAR Classification Exercise 1 You were contracted to install an upgraded windshield wiper system onto a military helicopter. The helicopter is an EAR controlled aircraft (e.g. not an attack helicopter). The wiper system is specially designed for only this particular helicopter (classified as 9A610.a) What is the ECCN of the windshield wiper system? Would a technician, who is temporarily seconded to you and who is here on a 457 visa from Vietnam, install the windshield wipers as an authorized person? Would a technician who is born in China but now an Australian citizen perform the installation? 146 / 600 SERIES ITEMS 73

74 147 / 600 series ECCNs 9A610 Follow the CCL order of review when re-classifying formerly ITAR controlled items to determine if it has an ECCN or is now EAR99. CCL Category 0-9 Product Group A-E Reasons for Control 600 Series Derives its name from the 3 rd character of the ECCN Most transitioned items will fall into the 600 Series ECCNs and consequently have special controls associated with their export, re-export and retransfer. 148 / How to identify a transitioned item in the EAR Most will be listed as 600 series items Examples: Cockpit mirrors for the F-16 that were formerly classified as USML Category VIII(h) are now 9A610.y.15 Scuba equipment formerly classified as USML Category XIII(c ) now resides in the CCL under 8A610.f 74

75 149 / 600 series example 9A610 9A610 Military Aircraft and Related Commodities Reasons for control: NS, RS, MT, AT, UN Control(s) License exceptions LVS: $1500 GBS: N/A CIV: N/A Country Chart NS applies to entire entry except 9A610.u,.v,.w, and.y NS Column 1 RS applies to entire entry except 9A610.y RS Column 1 MT applies to 9A610.u,.v and.w MT Column 1 AT applies to entire entry AT Column 1 UN applies to entire entry except 9A610.y See 746.1(b) for UN controls STA: (1) Paragraph (c )(1) of license exception STA (740.20(c )(1) of the EAR) may not be used for any item in 9A610.a (i.e., end item military aircraft), unless determined by BIS to be eligible for license exception STA in accordance with (g) (License exception STA eligibility requests for 600 Series end items). (2) Paragraph (c )(2) of License exception STA (740.20(c )(2) of the EAR may not be used for any item in 9A / Country Groups and the EAR (Supp1 to Part 740) Country Group A: Argentina, South Korea, India, Norway, Singapore (long list) Country Group B: Argentina, Chile, Finland, Morocco, Panama (long list) Country Group C: Reserved Country Group D: Afghanistan, Egypt, Libya, Pakistan, Saudi Arabia (long list) Country Group E: Cuba, Iran, North Korea, Sudan, Syria 75

76 151 / Non-U.S. origin 600 series items The rules are different/ more stringent for 600 series items: If the item is a foreign made item incorporating U.S. origin 600 series item(s) classified in paragraphs.a through.x of an ECCN, there is a 0% de minimis allowance if the item is shipping to Country Group D:5 (734.4(a)(6)) If the item is a foreign made item incorporating U.S. origin 600 series item(s) classified in paragraphs.y of an ECCN, there is a 0% de minimis allowance if the item is shipping to Country Group E:1 or China (734.4(a)(6)) Foreign made 600 series items must have a BIS license if the same transaction for a US origin 600 series item would require a license or is prohibited. 152 / Non-U.S. origin 600 series items cont General Prohibition Three (736.2(b)(3)(iii) and (iv) more stringently applies to foreign direct product 600 series items and technology exported to a D:1, D:3, D:4, D:5 or E:1. The foreign made 600 series product is subject to the EAR where: For foreign made software and technology: The item is a foreign made 600 series technology or software item that is a Direct product of 600 series technology or software AND The foreign made software/technology is itself in the 600 series For foreign made 600 series items, The item is a foreign made 600 series item that is a Direct product of 600 series technology or software OR The foreign made item is itself in the 600 series 76

77 153 / 600 series items are special 600 series items have many restrictions and limits on their export/re-export/retransfer. It is important to understand the regulations for both U.S. origin 600 series items and foreign made 600 series items. It is important to keep tight control over exports of 600 series items and that you keep the required paperwork related to de minimis calculations, license exception determinations, classification determinations, and all exports, re-exports and retransfers. Can use license exception STA for most exports of 600 series to country group A:5 (see Supplement 1 to Part 740) Provided all parties have been U.S. gov vetted (e.g. have shipped an item on a DDTC or BIS license before) and other conditions are met 154 / 600 series items are special cont Where your 600 series item needs a license, reference previous licenses from DDTC in box 24 of your SNAP-R application 600 Series Major Defence Equipment exports may require congressional notification There are special reporting requirements for 600 series exports under license exceptions, including RPL and STA. Exports and re-exports to China of 600 series U.S origin items are very restricted (See Part ) ECCNs of 600 series items must be printed on invoices and shipping documents China Military End Use Rule (744.21). Amended to include all 600 series items. 77

78 155 / When determining if you need approval from a government agency What are the relevant questions to ask: Origin of the items/articles Jurisdiction of the items/articles Classification of the items/articles involved Is controlled technical data involved? Will foreign persons/nationals be involved? Is classified technical data involved? Determine whether or not you need a license for accessing the item/article If a license is required, determine: if you already have one that covers the scope/article/item Which government agencies will be involved and the lead time you need Which type of approval is required and who will make the applications 156 / DEFINITIONS 78

79 157 / Example EAR Definitions can be found in Part 772 Aircraft (Cat 1, 7, and 9) A fixed wing, swivel wing, rotary wing (helicopter), tilt rotor or tilt wing airborne vehicle. See also civil aircraft. Re-export An actual shipment or transmission of items subject to the EAR from one foreign country to another. (If the transaction is happening within Australia, it is a Transfer and you need to refer to Part ) Transfer (in-country) is a change in end use or end user of an item within the same foreign country. Transfer (in-country) is synonymous with In-country transfer. Range (Cat 8) Half the maximum distance a submersible vehicle can cover 158 / Permanent and Regular Employees and the EAR A BIS license authorizing the release of technology to an entity also authorizes the release of the same technology to the entity's foreign persons who are permanent and regular employees (and who are not proscribed persons) of the entity's facility or facilities authorized on the license, except to the extent a license condition limits or prohibits the release of the technology to foreign persons of specific countries or country groups. (translation: your employees can access items authorised to be released to your company under a license, unless they are on a denied parties list) EAR 750.7(a) A Proscribed Person who is prohibited from receiving the items at issue or participating in a transaction that is subject to the EAR without authorisation under the EAR, such as persons on the Entity List or denied persons. EAR

80 159 / DE MINIMIS 160 / Exports and Re-exports of items that are Foreign Direct Product of US Technology General Prohibition Three (736.2(b)(3)) outlines where foreign products made with U.S. technology are subject to the EAR. The foreign produced item is controlled by the EAR where: 1. The foreign produced item is a direct product of U.S. controlled technology. (i.e. the U.S. technology used to make the foreign product requires a license) 2. The foreign produced item s ECCN is subject to National Security Controls Where these conditions are met, the foreign (AU made) product is subject to the EAR, regardless of the amount of U.S. controlled content involved in its manufacture. This means you will need to obtain a license or identify an applicable license exception prior to re-export or transfer if you want to send this to a Country Group D:1 or E:1 country. 80

81 161 / Is your non-u.s. origin item subject to the EAR? Does your item have more than a de minimis amount of U.S. controlled content by value? 25% Generally, the EAR threshold for U.S. origin controlled content 10% U.S. origin controlled content if the export/re-export/retransfer involves an embargoed country (E:1, see Supp 1 to Part 740) Less than 10% U.S. controlled content then generally not subject to the EAR. No de minimis available for foreign made items containing certain ECCNs that are sensitive (see 734.4(a)) For example, aircraft classified 9A991 that incorporate certain types of sensors or flight control systems etc., 600 series items are amongst the sensitive items (734.4(a)(6 ) where de minimis levels do not apply to some destinations (Country Group D:5). Use the delivered cost of the U.S. controlled component item(s) and the sales price of the end item for the calculation. Only include controlled content in the calculation. Non-U.S. controlled content / EAR 99 items (unless going to group E:1) are not included in the calculation. Be sure to document how your percentages were determined as required by the EAR s record keeping requirements in Part 762. Indicate whether the values used were arm s length market prices or otherwise derived. 162 / De minimis calculation hands-on exercises 1. Sub-assembly made in Australia (2A994 portable electric generator) Contains 30% by value U.S. origin content, 9% of the content is controlled. Is it subject to the EAR? Can you export it to China? 2. Sub-assembly made in Australia (9B610.b Test facilities for aircraft) Contains 30% by value U.S. origin content, 10% of the content is EAR 600 series controlled technical data (9E610). Is it subject to the EAR? Can you export it to China? New Zealand? What are the relevant parts of the EAR to examine? 81

82 163 / Sample audit trail 9A003 sub-assembly, is made in Australia. It is comprised of 10% U.S. origin controlled content. (Link to BOM /BOM document number) Contains ECCN 9E003.a.3, which is 5% of the total sub-assembly value No de minimis available according to EAR Part 734.4(a)(4) as this sub-assembly contains 9E003.a component. As this is a sensitive ECCN, it is subject to the EAR despite having less than 25% controlled US origin content. License may be required to some destinations as per General Prohibition 2. Refer to reasons for control listed in ECCN 9A003 and Commerce Country Chart (Supp 1 to Part 738 of the EAR). NLR may be available for exports to New Zealand. Verify transaction against general prohibition and conduct denied parties screening prior to export. (If this item was formerly an ITAR controlled item (e.g. 600 series now), note the former USML classification) 164 / Decision Tree for Non-US 600 Series items 82

83 165 / Non 600 Series and Non-US Subject to the EAR? 166 / Exports and Re-exports of items that are Foreign Direct Product of US Technology General Prohibition Three (736.2(b)(3)) outlines where foreign products made with U.S. technology are subject to the EAR. The foreign produced item is controlled by the EAR where: 1. The foreign produced item is a direct product of U.S. controlled technology. (i.e. the U.S. technology used to make the foreign product requires a license) 2. The foreign produced item s ECCN is subject to National Security Controls Where these conditions are met, the foreign (AU made) product is subject to the EAR, regardless of the amount of U.S. controlled content involved in its manufacture. This means you will need to obtain a license or identify an applicable license exception prior to re-export or transfer if you want to send this to a Country Group D:1 or E:1 country. 83

84 167 / Intangible Exports Hands-On Exercise (5 minutes in teams) You want to a set of technical specifications to a business partner/subcontractor. You are not sure if the technical data is ITAR or EAR controlled. It was produced in Australia. What do you need to do before you send the ? What authorities, if any, do you need to obtain? Do you need to do anything different if your sub-contractor is in New Zealand? 168 / RE EXPORTS AND IN COUNTRY TRANSFERS 84

85 169 / Managing re-exports/retransfers of EAR items First determine whether the item is subject to the EAR For Australian or other foreign produced items, document your de minimis calculation for each transaction and your analysis of meeting the conditions of general prohibition 3. The assign a classification (ECCN) or document where you obtained the ECCN from Be sure to track classifications and the logic behind determining the ECCN in a system such as a classification matrix. Cross reference documentation relied upon Apply for licenses where required in SNAP-R. Document the use of license exceptions and NLR, including the logic in determining their applicability Technical data may require additional approvals from BIS Determine if there are special annual report requirements for your item when using license exceptions 170 / Deemed Re-Export Guidance from BIS re treatment of D/TCNs 85

86 Afternoon Tea Break 15 minutes 172 / USING SNAP-R 86

87 173 / Logging into SNAP-R 174 / Making license applications in SNAP-R 87

88 175 / Creating a Work Item 176 / Search a Work Item 88

89 177 / Re-Export License Application Work Item List 178 / Help with SNAP-R Contact SNAP-R help desk on snapr@bis.doc.gov or phone at (202) (U.S. east coast) 89

90 179 / Re-Export License Application 180 / Re-Export License Application 90