It is common knowledge that the import and export of goods and technology into and out of the U.S. are regulated. At least three separate federal agencies focus on export controls. The Department of State regulates the export of defense and military technologies through the International Traffic in Arms Regulations (ITAR). The Department of Commerce, through the Bureau of Industry and Security (BIS), regulates the export of so-called “dual-use” products, or technology that may have both a military and a civilian use, through the Export Administration Regulations (EAR). Finally, the Department of the Treasury regulates export of any goods to certain individuals, groups or countries included on a Specially Designated Nationals List.
This writing focuses primarily on the EAR and its quirks. For simplicity, the term “goods” used herein refers to tangible products, as well as associated technical information (e.g., software, designs, manuals, etc.).
As you can imagine, many goods could be considered dual-use technology, and the vast majority of these goods do not typically require a license for export. Dual-use goods that typically do not require a license are designated “EAR99.” Examples of EAR99 goods include car tires, pulse oximeters and most daily-use electronics.
Dual-use technology that does require a license for export is catalogued in the Commerce Control List and assigned an Export Control Classification Number (ECCN). Examples of dual-use goods that have been assigned an ECCN and require a license for export are lasers and optical equipment (ECCN 6A005); human and animal pathogens and toxins (ECCN 1C351); and portable electric generators (ECCN 2A994).
The nature of the goods is not the only factor that may trigger a license requirement, however. The country and/or end user, or end use of the goods, are also factors. Whereas dual-use goods being exported to the U.K., for example, may not require a license, but the same goods being exported to Venezuela may require a license.
The EAR also contains an Entity List of certain foreign persons, including businesses, research institutes, individuals and other types of legal persons. Export to any of these foreign persons may require a license, even if the goods are designated as EAR99.
Under the EAR and ITAR, a “foreign person” is anyone who is not a U.S. citizen, U.S. national, lawful permanent resident (i.e., a green card holder), or a narrowly defined “protected person,” including certain categories of asylum seekers or refugees.
The above outline of the EAR is fairly intuitive. What is less so is the idea of the “deemed export.” Paraphrasing a section of the EAR (specifically, 15 C.F.R. § 734.13(b)), disclosure of technology to a foreign person is a deemed export of that technology to the foreign person’s country of nationality. Such a disclosure may require a license.
It’s easy to understand that the export of a physical product to Venezuela may be regulated and require a license. It is less obvious that a conversation occurring in Arkansas with a Venezuelan citizen may also be regulated and require a license when that conversation could be deemed an export to Venezuela if the conversation includes disclosure of information subject to export control.
Implications of the deemed export arise most commonly with research institutes and defense or aerospace contractors, where exposure to technology subject to the EAR is common. Again, the person’s country of citizenship is a factor. Using the same comparison as above, a license may not be required for a U.K. citizen who is a post-doc doing research at MIT on dual-use technology. A license may be required, however, for a post-doc from Venezuela doing the same research. Indeed, a license may be required for a Venezuelan citizen who works as a janitor at the lab where the research is being conducted because she may also be exposed to the controlled technology.
The deemed export of certain technology must be considered not only for the purposes of internal assignment of duties but also for external disclosures. A representative from a research institute may want to present their work at an industry conference, for example. If their presentation includes disclosure of dual-use technology and a foreign person is in the audience, then that technology is deemed exported to that foreign person’s country. Depending on the technology and the foreign person’s country, the disclosure may have required a license and the presenter may have unwittingly violated the EAR.
Violations of the EAR may be subject to both criminal and administrative penalties. Criminal penalties may include up to 20 years in prison and up to $1 million in fines per violation, or both. Administrative penalties may include the greater of up to $300,000 and twice a transaction’s value, per violation. A scientist’s passion for their research findings and eagerness to share them could, therefore, be a very costly mistake.
Compliance with export control laws may sometimes be at odds with anti-discrimination laws. This conflict has been the subject of recent jurisprudence and federal guidelines. Under export control regulations, disclosure of export-controlled technology to a foreign person may require a license from the U.S. government. Under the Immigration and Nationality Act (INA), employers may not make hiring, firing or recruitment decisions based on citizenship, immigration status, or national origin or treat workers differently based on these characteristics when verifying their permission to work.
Catherine Napjus is a member of McLane Middleton’s intellectual property practice group, where she focuses her practice on patent preparation and prosecution and trademark prosecution and enforcement. She can be reached at catherine.napjus@mclane.com.
