U.S. Import/Export Compliance Regulations

freeze immigration Customs Enforcement put your hands in the air now place your fingers put your hands in your hair now everyone put your hands in the air now lace your fingers but them on the back of your head all right how many of you have ever experienced that no not you don’t answer that how many of you have seen that happening on TV you everybody has okay Julie’s mentioned you know national security and things like that um that you know the reasons why we control stuff for export and import but for us as exporters the one thing that we want to avoid is that I mean the very first thing we want we want to support our country in national security and etc but that’s the one thing we do not want to have happen is having the Bureau of Immigration Customs Enforcement with their FBI counterparts and Department of Justice coming into our company I actually was hired by a company in Southern California after that happened to them and when that happened to them they did it first thing in the morning they came in guns out and I had 200 employees on campus that day they herded all of the employees into the cafeteria held them there for eight hours the Empowered official for the Department of Defense side of it they produce manufactured both dual use and ITAR controlled items was not on the campus so they they had to hold people there and actually the president of the company wasn’t there either so they held everyone there well the officials went through to make sure that they locked down the computers and lock down the areas to get to get the evidence that they needed they had been warned by the Department of Immigration Customs Enforcement Department of Commerce on I don’t know three different occasion I think was three different occasions in a five-year period for shipping to sanctioned entities in Syria they also um they ignored it they also had a gentleman who was their head of marketing in the they’re named empowered official who is a u.s. permanent resident but a Chinese national and he had ties back to China and he was they were trying to set up a manufacturing plant in China as well as sell to there and there was a defense articles that they could they knew they need an export license for that they got actual emails from his computer that said no let’s let’s send it around this way because they’re you know we can’t get a license for it to ship it he’s now serving time in jail the company itself has spent over 5 million dollars on compliance they hired a big company called vest era which changed the JPMorgan Chase they’re actually cooperating with the Department of Justice and the Department of Defense and they actually helped it with a sting operation in China them two two years ago they started out with no compliance program they had again they just had an app our official name the shipping department was using a DHL as a shipper and they didn’t file any EEI are many export shippers because I thought DHL was doing it they didn’t even provide a shippers letter instruction to tell them to file a EES so today I’m going to give you a lot of information Julie gave you quite a bit on the export regulations for the Department of Commerce and I’ll fly through that portion of it and I don’t mean to overwhelm you I just want to show you how much is out there for export and import and the reasons why you need to come kind of a compliance program making you know lemonade out of lemons you know it may look hard may look like there’s a lot out there but you can boil it down to a compliance manual and processes and procedures and you you know it pretty much can keep you on the right track okay so where is the here it is so I’m going to you’ll see what I’m going to go through I’m going to give you an overview of the government agencies I’ll stop in a few places that I think might be interesting to touch on in the Department of Commerce ahead and talk about anti-boycott provisions because that’s another area of compliance it’s not just about getting licenses or using exceptions or exemptions it’s also complying with the FCC if you’re sending something out on a temporary basis or the Bureau of Alcohol Tobacco and Firearms if you’re sending guns or gunpowder it’s also about HTS harmonized tariff schedules and schedule B’s any one of those things can stop your export or your import you know and that’s the total you know totality of a compliance program then I want to talk a

little bit about sanctions and oh fak then I’ll get into the Department of State information and their penalties and exemptions and penalties and talk a little bit about import regulations and documentation I have a picture of the red flag that we can share and then I have some backup slides because of the Department of Commerce stuff that will go over the export reform a little bit because they’re going to be dumping a whole lot of stuff into the Department of Commerce side that was you know was is controlled by the Department of State right now okay why do you have to be concerned with Export Import controls because you have to comply with all the different US government regulate and agency regulations you do not want to have a visit by any one of those agencies including the Department of the US Customs because they’ll come in and then when they do an assessment audit that’s all they’re they’re a longtime Department of Justice State comes in they’re there three or four days I mean it has a bad effect as well but Customs is is there a really long time the DOJ the Department of Justice and Department of Commerce have increased enforcement since 9/11 the DOJ the Department of Justice launched an eight an apportionment initiative and they right right after that happen is when you saw BAE in the news a lot concerning Saudi Arabia and that was the very first case it was a case that was being tried over in the UK the UK dropped it the prime minister said we’re not going to pursue this any longer and then we picked it up you don’t want your name in the news and then there’s a multi-agency task force around the country the DoD whenever I every company I’ve worked in I’ve had a clearance and you have an audit when you have audits from everybody the IRS can see the the DCA comes in the you know you have internal audits then you have the Department of Defense coming in for your security clearances and they want to know everything that you’ve done with everybody else so all right Julie covered this what is an export it’s at actual treads for goods technology or software by any of these means and it doesn’t matter whether its military commercial or do use she talked about doing use but I’ll give you a really good example how many of you have this phones that when you turn it sideways the view turns with it and inside there is an accelerometer that measures that well that accelerometer can go into a crash cart dummy to measure that movement you can also go into a missile so your your accelerometer in your phone is a dual use item and again we talked about its to a u.s. to a foreign person company or country and or to a national within the United States we don’t call it on the Department of State side it’s not called a deemed export doesn’t matter it’s the same thing and then again it’s also controlled both Commerce and state control for re-export and somebody has to question earlier about that I as a compliance consultant advised that up front in your paperwork when you give a a we respond to a request for information or an RFP for proposal you put in there the the your products are controlled and then the final when you get that final purchase order or contract it does there’s wording in that contract as well that especially for distributors okay under the HR defense articles an item that was originally designed for military purposes or modified for military purposes the in use really doesn’t matter for ITAR controlled items the international traffic and arms regulations under the ear ado leus items is does if it has neither has been designed for military application has been modified or adapted for military it will fall back up into the ITAR these are examples of what’s controlled in the year in the ITAR I mean technical data our marketing descriptions performance system specifications PDR and CDR packages even for your speaker you know if it was controlled your speaker operations manuals because that gives technical information the interface control documents assembly instructions and the hardware platform subsystems assemblies components you know they down to coils you know the little copper things that go into RF microwave products tooling and test equipment when you’re sending equipment over across the border to your maquiladora if you if you want them to manufacture something and you have an extra piece of equipment instead of purchasing a new one you have to that has to comply with all the EM export and import regulations it also has to apply a comply with the regulations for NAFTA down below mean I haven’t put an act in here yet and then these are examples of technical assistance and defense

services anything physical that has to do with your export controlled product this is the definition out of the ITAR but you can use it for the the ear as well because you know if you’re testing something and you’re performing a service on something that’s controlled to the you know and allowing that thing you know telling your customer in that country that might be a denied party that this works your kitten’s you’re making a about your violation you’re not in compliance co.design co-development you want to work with somebody across border and i happen to know of a couple of guys that are engineers that are the americans that are down in Rosarita working on software boards designs and they have they have other engineers that are Mexican nationals working with them but stuff the information is being sent down to them across border and by email and things like that and you know when you invited for a customer to a design review or just to visit your plant you and they walk through and you don’t have a compliance program in place and they come up and they look at this and they you know say hey what is this and it’s controlled for the eye towards control for Expo frizam and you start telling them about it you know indeed they’re looking at they’re touching it say that you’ve made an export to them you got to be very very careful okay we talked about public domain a little bit it’s anything it’s published and generally accessible available on arm in libraries at the University it’s any basic fundamental information that you would find in a library or at a university or in newsstands bookstores you got to be real careful though because certain magazines that they publish now defense you know they’re I forget some of the aviation weekly things like that there have been articles that go in there that they didn’t clear and actually gave out information technical information that was controlled yes it is because it’s accessed by but so there’s ways about posting it that you can get it cleared through a government agencies if it’s ITAR control you can go to the certain DoD agencies to run it through to get it cleared for public issuance or if you can go get your sea cats your commodity classic you’re getting a commodity restriction first and then a lottery classification for Department of just calm earth then you can publish it but I wouldn’t just put it out there unless you know it’s a telephone or a ball or a you know something that’s really anak ewis I really hesitate to tell people to self classify on items that might have controls you have to look through the whole thing first equation on what falls under to regulate information for example the name of a program or platform the supply that are exactly when you have a contract like a DoD contract or it doesn’t matter it could be a commercial one but under DoD Department of Defense and the three-letter agencies you might get a contract where they say the non publishing clause and so that it cups it falls outside the actual export controls but they can go ahead I’ll give an example they Department of the Air Force will say you can’t talk about the name of a program you can say there’s a customer but you couldn’t talk about the name of the program and then if you do they can go ahead and say alright we didn’t like what you just did we’re going to debar you freight forwarding companies in the last month and a half there was like six of them we’re debarred by the Department of the Air Force for just price-fixing they had nothing to do with exports and Department of State picked it right up and said ok you can’t do business with these freight forwarders which made them scramble and like three of them have been taken off the list so far the others are working for it so you could be doing something that’s totally not outside the arena of exporting or importing and you go against something that the US government once you not to do and they can stop you from exporting notification that a component in a product let’s say for example a product is manufactured the components are manufactured abroad brought in for assembly for we exportation and you want to know whether any of the components have a dual use will the government

provide you with some notification that it is or is not or are you required to know no the government will you can go in for a commodity restriction for forming product once something hits the US soil it’s under our control so when you go to export it you treat it like it was made in the US for class of jurisdiction classification harmonized tariff schedule everything under the I talked a little bit about harmonized tariff but not much on an import and when you go to re export if you import something from a country you import under there there it’s a permanent import you you import it underneath all their information including their harmonized tariff codes and then when you go to export it then you have to make sure that I mean if it’s a got a laser in it you know there’s a there certain controls when it comes in and when it goes out for both the Department of Commerce or the Department of State depending you’ve got a class if you’ve got to get it classified and you the jurisdiction and classification like Julie spoke about so you have to treat it like you own it when you have when you get it before when you go to re export it zone or zone where you’re deemed to be exempt because these are the nature of the product or you’re doing it just for there’s there’s a bit of the actual title of the zones it’s a warehouse zone but usually it’s a finished good it’s not something that you do anything to it comes in and sits there and and then it goes back out again it doesn’t you don’t do anything to it once you get it in your possession then you have to treat it like as the importer of record you have to treat it like you’re the exporter of record that you own it um all right we talked about the the jurisdiction earlier but I wanted to just give it a good example of it a jambe was originally designed for military purposes but now you can buy a Humvee I mean they’re not the same anymore and they actually went through a process to get it a considered department you know considered changed but so you can’t buy just you know they have these auctions that you go to and if you buy you can buy a Humvee if you want to sell it to somebody in Mexico you have to be you know get the certain the proper export clearance is to do so and you have to know what the jurisdiction of it is before you do that okay are just a little decision tree I think we’re making these slides available somehow well we’ll tell you about that so just a simple one do you know the jurisdiction of a product no then submit a commodity jurisdiction unless it’s a very simple a fork a ball but if it’s got some kind of electronics in it or it can be dual use you need it you should really be safe about it Julie spoke about the fact that once you get something on paper although I have to add a caveat to that you’re you’re pretty much safe and I got a commodity restriction they put it in what they call the miscellaneous category and I tried to ship again I got a license miscellaneous category under the international trafficking arms regulations so I need to get a license work got a license for it tried to ship it and the US Customs and Department of State stopped it because they thought miscellaneous is like what they call other other other in the HTS codes it’s a they don’t like it they think your your you haven’t given them enough information okay so if you do know that jurisdiction is an ear ITAR if it’s ear you go to the decision tree I don’t know how to do this but I had a link here where I have another decision tree that we can go to and with the slides to look at it and if it’s ITAR then you submit a license to the Department of State that’s real simple and I if anybody is of em Indian background please I didn’t mean to make any kind of you know derogatory anything I just want to show you this is a couple about married in the United States so are they a US person or are they a foreign person you don’t know okay what is a US what is a foreign person it’s any foreign government it’s any foreign corporation organization that is not incorporated here to do business in the United States and it’s also an individual who is not a US citizen or permanent resident green card holder the United States doesn’t recognize the other a dual citizenship once you become a u.s. citizen you’re considered a US citizen other countries recognize dual citizenship but the United States doesn’t so this couple here were married here in the United

States but he was born in India and she got a fiancee visa to come over and she was born here so can I transfer control information to her she was born here and he he has a fiancee visa can I transfer information to him not your right um the night party screening that she talked about that a bit there there’s besides there’s seven lists there the seven lists there’s a whole bunch other out there because of the vaasana’ agreements and things like that you eat the US government has actually done a consolidated screen list for the seven and the new the new website called eat customs and you can go there if you can the PowerPoint presentation it will this is a link to it but just put in a customs and you put in consolidated list and you can you can they download something and that it can check those this for you if you are dealing with say your foreign owned like Cobham is and and you want to make sure that you’re complying with other regulations outside just these the there’s companies out there like I’m sorry this is export.gov is the US one eat customs is a one of the examples of a commercial company that does screening for you can screen for travel you can screen so when you’re going to speak at a seminar and you know the people there or visitors coming to your place or whoever your shipping cube embargoed in sanctions countries an embargo is the complete ban or prohibition of trade right that’s a complete prohibition of it so I’m going to have a list that comes up shows you the combination of all of them and sanction countries are trade prohibitions on certain types of products or countries or individuals so that’s the difference between an embargo you usually going to be denied period Iran Syria those are examples of complete denials you’re never going to get a license for there unless there’s some kind of real need then you have to go and get a presidential approval you can’t go through the State Department you have to go straight to the president I combined the list of embargoed in sanction country so you can see where they are they have varying policies when there’s an asterisk you know you get medical supplies into North Korea Lebanon is like element ons yeah Lebanon it’s like to the regime that is trying to bring down the democratic government you can send stuff to Lebanon to a company in Lebanon but if they’re if they’re not on the list that denied party screening you can’t send to them and it’s the same with a Democrat with it Congo now Liberia that’s the the X regime of Charles Taylor so there’s some are just specific to certain areas others you can’t send stuff to Venezuela right now or Sri Lanka without getting some kind of a extra special approval foreign business travel all right you guys have any of you travels and bring your your smartphones or your laptops inside and outside the United States to Canada sometimes you get emails on there and it’s maybe discussing an issue a technology that is an export there are things that we can do and there’s examples of things again the laptop computers the blackboard PDAs any models or mock-ups that are even if they’re a scale if they’re made of the same kind of materials or something like that they would be controlled defense-related software they’re taking your laptop so you can fo demonstrate some kind of great auto routing system for a UAV you need to get an export license at it– our export license for that one and then giveaways you make if it depends you know on what it is it could be in short supply I most the time it is it but you know different examples flyers things like that there they may be controlled if there’s information on them you know if you don’t bet your your data sheets first get them cleared you might be making an export and yes go over there to do training for something that has nothing to do but on your laptop you have information you’re not you’re not transferring you have it in your possession yes you’re taking it into another country but there’s no commercial activity but sometimes on your computer yes it depends on what kind of training you’re doing right but sometimes on your computer you have other work it could be controlled or

there could be software on there that’s encrypted you know and so there could be other parameters that you have to take a look at what you’re caring I have to tell you when I before I got into the business my husband worked for the General Atomics and I went to visit him over in a country over in the Middle East and the and I thought I was being and I hadn’t been involved in export compliance of any kind of import so I went to them and says is there anything I can take over you know it helped out with you know do they need you know anything they gave me some eeproms which are soft like firmware you know the to take and I that had ITAR controlled stuff on it I mean after I became involved in this I thought oh my god I carried it through customs and I went through three countries changed airport you know airports in you know France and this to other countries and the final destination with my seven-year-old son with me which man if that anywhere anyway and that was lightly does stuff that they were doing was I tired licensable and they had what they call a technical assistance agreement if anywhere along that route somebody decided to stop me I would have I don’t know what I would have done because I might where my son would have gone my husband was you know I what that was before they had international cellphones I mean it was like 94 I mean they had him but it was he didn’t you know carry him on a normal basis customs immigration in any one of those countries including us well no it doesn’t matter because they fasten our agreement and other different arrangements and arrangements that we have have export controls as well so you have to consider the totality of the program that you’re in it I have I am Telling You now but this was a long time ago so don’t be reporting me to immigrations customs informatively anyway so laptop letters if you’re carrying a laptop will do a lot of help will be give you a lot of assistance because there are exceptions exceptions that you can use and some exemptions that you can use for personal use under under both the ear and the ITAR that you could make a statement in this letter that you hand to those customs officials all right some interesting points go ahead oh yes I have I oh yeah every right um part of the compliance program is I’ve created them and it where I’ve worked Travel is not only approved by authorized by you know your your your manager and whoever else is in that chain in your company it also goes to the export important person so that they know where you’re going to ask what you’re taking they can create a letter they can check to see if you need any kind of export approval of any kind for what you’re taking as well just thinking practically your company server from the foreign country for VPN if there’s no one looking over your shoulder you’re not making an X you know I mean and I mean there’s other things you weren’t about when you do a travel brief brief is like you don’t know what you don’t know who is accessing you know if it’s Wireless if it’s a you know whatever that you’re using in the room who can access it so you’ve got to be very careful when you might be making an exporting you don’t know it I’ve had the president of one of the one of the companies I work for had his laptop removed from his hotel room they took out the hard drive copied it and put it back in and they found out about it later because he was having issues back when he was back here in the United States when they and they found out how you know that was done in and he had a lot of information on there or knowledge and growth is simple negligence you do it once shame on you enjoy it twice shame on the exporter and incidentally habit I would I would argue that that would not well you know that when they come in and do an investigation they’ll ask you have you

had export training right you know that cut so you I have to say that of a lot of the vol of all the voluntary disclosures I’ve ever made because they made quite a few to Department state because something you know inevitably something happens like that the guy brings back a tool that was controlled that he didn’t you know or he went over there to actually fix the equipment over in a country and came back with a part that was broken and when you bring something back you have to import it in under you know certain export exemptions or licenses so things happen and I’ve never in any of the one of the voluntary disclosures I’ve ever made had any kind of a penalty they’ll give you the letter saying yes we note that you did this and etc etc we’ll just keep this on file I have to say the Department of Commerce does a lot more prosecutions that the Department of State does currently they have more resources I think out there and they do a better job of actually having people in the in all the communities you know representatives and all the communities and making people feel more comfortable about talking about you know by my boss told me I had to you know ship something you’re as an exporter you’re obligated period you have to have them it’s like she said ignorance is not acceptable you’re it’s you again but if you’re it but they usually don’t prosecute for or give a penalty or you know for some something like that it would be if you did it ten times in a row five times in a row then that’s starting to look like gross negligence exactly it goes up me that’s exactly when you’re supposed to work you’re supposed to get training or know that you’re supposed to know exactly under the ITAR you’ll see I don’t think they purr they publish consent they don’t have consent degrees under the Department of Commerce they’ll publish the violation and the results we can go on the site you can go on this site you can actually see a lot of what has taken place most of those are intentional you know like they’re trying to ship a an f-14 engine to Iran you know but on the other side on the ITAR side they have what they call a charging letter and then a consent decree and in that that’s what they’ll say you’re you’re have some penalties up here you’re going to pay four hundred million dollars in penalties but six million or ten million that will be in a compliance program you know so they mandate it Oh which yeah so here’s some interesting and export/import facts you can’t it’s illegal to sell import distribute transport dot dog or cat fur in the United States do you guys know that I mean it could be on the cat or the dog but if you take it off the cat or the dog you can’t do anything with it you’ll get trouble all right kinder eggs are sold all around the world except here in the United States you can’t because there’s a rule regulation and act I should say the Federal Food Drug and Cosmetic Dec that says you can’t embed toys in confectionery so don’t bring that egg in I mean don’t you know they say sell things here so you can have it in a plastic little egg so you can see through it but you can’t bring it into candy that they probably are made manufactured here in the United States or they get some cut here you know you can’t import them alright here’s another interesting fact there’s my last one if you’re going to ship a horse by sea outside the United States you got to get an export license from the Department of Commerce for it but if you send it by air you don’t have to write on the but when you send it to the country like the UK or the European Union it’s going to go compete in the Olympics you need a passport for that horse and then when you bring it out of that country you need an export license to bring it out so you know not trying to overwhelm you just need to have you know knowledge of those things okay own infantry license because they were

exporting horses what was the reason oh no it was for you know the reason why I ship is it’s because they take them for slaughter for food and then you can take carry a lot in a ship it’s cheaper to do it and they’ll take them to another country that eat horse and so it’s really I don’t know I don’t know I that’d be interesting I don’t know that it’s like you can’t spit on the sidewalk and yeah touching yeah so here again she went through the agencies the US government agencies that we deal a lot with a fact I’ll talk about a minute Department of Homeland Security and CBP which Department in the Alcohol Tobacco and Firearms you have to pay attention to that because if you’re shipping a tank howitzer with a gun on it you not only do need to get it Department state licensed under the ITAR you’ll need to get a license from the Bureau of Alcohol Tobacco and Firearms because it’s a gun so I just wanted to give you a picture of the Department of Commerce you didn’t have one of those Julie you know the picture of Department of Commerce on there you did she talked about this the Department of Treasury is where Office of Foreign Assets Control and the Bureau of Alcohol Tobacco and Firearms our Department of State controls the sale at sport and retransfer defense articles that’s what you call she you call them items under the Department of Commerce we call them defense articles so whether it’s physical hardware if it’s software technology they’re put together and then any thing that you do physically training or any kind of service you perform they’re all referred to as defense article Treasury and product or service is being funded by a bank or an institution that may have links to is I mean how does the financing part come into play when you’re going to get a license do they ask questions about how its financed yes oh yes your payment’s your who yes that’s under Foreign Office of Foreign Assets Control which essentially our step away from the actual customer they are they focusing on the banks or are they focusing on the customer in the bank there are some everyone every party to the transaction that’s what right and so that’s why I buy denied party screenings for you need to know every party to the transaction and who said that they are the importer of record and then they send it on in Mexico yeah so you are maybe the importer of record but your react sporting what you’re getting to somewhere else and so so you have to be aware of yeah so you have to be aware of who the parties are who you’re selling into again I saw a video of a ice immigrations customs enforcement bust up in Bakersfield they had f-18 parts and things like that I was working for General Atomics at the time general one of the general atomics divisions makes those machines that bust up kidney stones right and inside it there’s like a laser it was in that it was in that group of things that were the that the in the warehouse that they invested into and I’m looking at it going oh my gosh and we were expecting them to come to ask us where it came from and then they had they never did because I guess they found the trail well the paperwork trail or whatever but that could put the the in the end the guts of that machine could be used for all sorts of purposes other dual use purposes other than and what it was made for okay so we have this this is her I like I took this right off the best site so guys if you’re doing in compliance program they don’t mind that you guys use everything that’s on there I’m when I go through the Export Control reform a lot of the stuff that’s going to come over from the Department of State they’re going to do when she’s saying this is sequential they’re talking about making this like a 600 series like 606 so it identifies it

as coming from the ITAR there’s this this is an example of what you would look at so you’re looking at polygraphs under this EC CN and then the reasons of our control is crime control as you have to look for it under country chart one and then are there any license exceptions for it no and then it talks about you know if there’s anything else that goes along with if it’s if it’s in kilograms or things like that this is a very simple one the ones that are in the air like she said you can it’s very messy straightforward you can say it gives you the parameters of so many degrees of radiation hardened whatever and if it can take so many temperature degrees and if you know if it’s a chemical what the solutions are so you’re it’s really precise and you’re in you it’s easier to actually classify it under the ear that it is the ITAR and here’s example of the country chart so you want to send it to let’s say WA Honduras and crime control and cut in the in the column one there’s an X in there that means you need to get a license for it there was no remember there was no exception we listed it all so you have to apply for a license okay and there’s a general prohibitions again those are very important because not only after you do everything ion Julie said it but after you go through all the other things you knowing what the product is and who it’s going to there might be one more probing under the prohibitions that won’t let you send it there are situations that can involve release of your SEC took technology tour of laboratories for national employees and especially in the Department of Defense side of it but if it’s in then oh and the deemed export of the the commerce side of things you have to get an export license there’s a new changes in the regulations about that that’s why you need to keep you knows you need to know someone who stays on top of it for you if you’re wearing dual hats you know especially contracts and exports you know sometimes it’s hard to stay on top of those things hold seeing of a foreign student interns from universities big time a lot of universities get funding from places called DARPA and the Navy research labs and the Air Force research labs and there’s different layers of funding some layers it starts out with just basic research don’t need to have any kind of export approvals for that usually then it goes in the fundamental research and it starts to get gray and then it goes into application these different layers of funnies like that’s called six point oh six point one six point two got to be very careful when you are going to bring an intern into your company think you know with a bright intern with all this background does great research and and all of a sudden you need an export license or you are you didn’t know that and you’ve already had it working on something these are the penalties it’s a fine of $250,000 per violation for civil penalties and a denial of export privileges or twice the amount of the transaction criminal penalties its I didn’t put enough zeroes did I find out to exceed five times the value of the exports or we exports and $50,000 which is greater I think that’s slipped I’ll get that straight before we actually give it out to you other penalties are listed in the regulations as she talked about and it may relate the resultant secretory sanction seizure and forfeiture debarment oh here is the the chart so this is a really good one as to I know this is like what they call an eye exam chart but it’s something that you can use in your compliance program this again is from the this site and it’s very helpful all right here’s an example a company called Wavelab Inc it was a February in October of 2006 there in Reston Virginia they exported power amplifiers Kaba makes parents of fires to the People’s Republic of China without the required licenses and they were quote controlled for national security reasons which means it was under the Department of Commerce and they got an ad and $15,000 criminal fine with $85,000 criminal forfeiture and they also were denied export privileges for five years unit they in today they might look small but it’s really not with for smaller companies you know armor holdings armor holdings is is actually part of ba systems now in 2001 2004 they set

handcuffs right helmets and figure pretty equipment at face shields without obtaining the required licenses from Bureau of Alcohol Tobacco Firearms and international trafficking arms regulations they got a billion dollar a little over a million dollar penalty this company is based in California and they release technology for aircraft parts to Iran so you know it’s raisi yeah I think they were on the list that I didn’t have the that list of countries I had well that list was a combination of all of them alright anti-boycott if there’s a law that says that you can’t do business with any company that asks you to boycott another entity like Israel and that you have to report it and then that’s the nutshell that what that says is really a boycott if here I have a client that I had a higher vision so they were systems it was a rack system our computer stuff going Saudi Arabia that was to use to to identify oil production and it was majoring all that but when it when they shipped it over they packaged the units they repackage it at their warehouse and on one of the boxes they had received they bought apart from Israel that came to them imported that went into the unit right and they we shipped this they we did all this stuff and he shipped the parts and in one of the one of the boxes that they ship it said made on either it made in Israel on the Box so when it gets to Saudi Arabia they stopped it the engineer went over there to help install this equipment right they did everything legally except that this made in Israel sticker was on the box right well the guy got arrested the engineer got arrested in Saudi Arabia’s review because of their laws because of their laws regiment so there’s anti-boycott yet it really wasn’t that but it turned out to be that because of the name his responsibility once his company’s responsibility and once he was released is to report that to you that US government agency that controls it what they had to do is vanity they had to identify that target a single unit ship it back to the US or should another country and then we say they should have stopped work right then they should have they were supposed to have stopped work with it with that right then so these are the conduct prohibited under the regulations refusing to do business taking discriminatory actions furnishing information about a business blacklisting you’re blacklisted persons and firms so you know furnishing information about associations with charitable or fraternal you know there’s other ethics ethics rules as well that go along with this to talk about trying to get a contract by bright by bribing officials and this is the Office of Foreign Assets Control she kind of went over it I’m where I want to get to the ITAR because we’re kind of running late these are the ones that are all the different sanctions that are imposed whether it’s humanitarian or you know like the regime of Charles Taylor in Libya that healed a lot of people these are the civil penalties I won’t go home you can read them when you get it okay the Department of State is responsible for the control and permanent of permanent and temporary export of military defense items need or modified or actually designed for it under the arms Export Control Act and we use what’s called the United States munitions control list to have the just like the the CCL for the items that are controlled you know if an item is on the USML it’s governed by the ITAR and includes items that are defense articles specifically that’s specifically designed or developed for military application I need some water or something the but it’s also by statute commercial satellites or under the Department of State and they are under the Department of Commerce now they’re back at the Department of State and their commercial satellites and one of the reasons is some foreign governments and even

our government agencies DoD agencies will buy space or time or whatever you get off of a satellite on commercial satellites as well okay this is we love triangles don’t we so this is how the amount of things you can share with who you can share them with for a u.s person there’s a lot of stuff that you don’t need an export and you don’t need an export license for and once they’re overseas with a customer or something like that and then as you get into the foreign persons if it’s a non-us person with a temporary u.s. work visa or no right to work in the United States this means above this line you need export licenses or export approvals exemptions to be able to share a defense article with okay so there was nine categories in Department of Commerce the CCL there’s 22 under the ITAR and then inside that they have letters a b c and d kind of like kind of like the CCL but they a is they talk about things like if it’s an airplane if it’s an engine if it’s technical data if it’s you know those things like that they have exemptions and they’re the same as exceptions in the way they work under the ITAR hardware exported pursuant to a manufacturing license agreement our technical assistance agreement those are those export approvals you get to actually perform physical activity of a controlled defense article on spare parts if you’re bringing something in for repair there’s an exemption to bring it in to repair and send it back out there exports to Canada there’s a whole section under the ITR going to let you know less a lot of activity to take place that’s you know defense services and technical data not Hardware without getting an export license so in the same thing you can immediately do it if you can use the exemption and there few more exemptions coming up out of this whole Export Control reform this is an example the repair exemption and you can bring it in period of up to four years and then we repair it and then you have to return it I’m going to have other different examples of it repair replacement enhanced upgraded it has been projected for permanent import so it comes in United States but you say no I don’t want it then there’s an exemption like the use the DoD agencies will issue you that says ok you can share technical information and do sit down and perform a defense service with this got this customer for this reason and it’s usually a in conjunction with a program that you’re working with the DoD agency and you get a letter for that it’s kind of like using a laptop letter but it’s a letter and every time you actually make an export you have to keep your it’s your responsibility to keep a list of those export there’s a foreign military sale exemption so the government goes through this whole work with a foreign country and then they choose a freight forwarder the freight forwarder then does not need to give the export license to ship though there’s no export nice systems needed they just file a thing called a DSP 94 when they’re shipping it these are the examples there’s one license for Department of Commerce right now and there’s more than this there’s the DSP 6 to a DSP 5 a DSP 62 to DSP 61 because when you need to make changes so anything for a permanent export license of hardware or technical data is under DSP 5 a taa and MLA warehouse distribution agreements where you’re sending stuff overseas you know these are the physical agreements that you need a physical activity that you do if you’re temporarily exporting something out for a trade show the site our control you have to have a DSP 73 now when they get the Export Control reform that’s what they’re trying to do is go to the blend single agency which will take a long time but the other stuff that’s right now is really good news I tore penalties it’s up to $1,000,000 for violations up to ten years imprisonment and $500,000 per violation for business unit this is per individual and suspension of export privileges now it says per violation writing the contract sitting down and discussing what the guide the customer wants making it shipping it and then going over there and training on it and then testing it could be considered

it’s not one that’s like eight violations all right so and they’re getting now it’s not just the physical shipments the physical things that you do if you don’t maintain records like when you get a technical assistance agreement to sit down and actually figure out the design of a product and you don’t keep records of when that meeting was and what you actually passed on they’re getting really they’re really starting to come in and penalize on those things here’s ba systems the four hundred million dollar case where they divided the United States today and made false statements on the Foreign Corrupt Practices Act that Foreign Corrupt Practices Act is the one that says you shan’t you shall not do anything that would enable the contract be made because you’ve influenced the foreign party get them tickets to a football game get their daughter you know a new car you know that kind of thing and they got a four hundred million that was the highest penalty that’s been issued by the Department of State ever this one is kind of a Commerce and a ITAR violations and it was the involved illegal export of u.s electronic items to China and counterfeit items and also the import back into the United States and it was from a company called by these two guys being Jiang and Polycarp o Coronado Ben boa that son he sounds like a gangster yeah and it was in Rancho Cucamonga and they he exported it with Dooley assignments without an export license they were going from us you they were used in US Army tanks so Gameboy pleaded guilty and was sentenced to five years probation was ordered to pay thirteen thousand six hundred dollars and give restitution to the Sony company but the other there’s another issue in here which is counterfeit the US government agencies that do contracting now have a big issue with counterfeit parts a big issue that really isn’t an import or an export issue but it falls under that arena of what the things that you’re doing you know I’m having to be aware of use electronics and Boyd Boeing there’s another company called the rel they were launching a satellite together over in China and that the missile didn’t work and so use corporation before it was owned by Boeing and larell decided to figure out what went wrong with it and shared that information with the Chinese so would happen again so they wouldn’t waste the money have a failed launch you know etc etc and they were the used Boeing was fined 32 million dollars larell was fined twenty million dollars in the VP of engineering for larell was debarred for working in any government program for four years which kind of ended his career all right import compliance here before September 11th you know you hear all I hear all the time well we can never do it that way before well they did once after September 11th happens you the export and import regulations became a lot stricter and vigilance on those regulations what was coming into the United States grew and exponentially where why why do you do import compliance because you need to have the same for the same reasons you do export compliance they’ll stop the product coming in it’ll be seized it’ll be put in a warehouse you’ll be charged for it you can’t might not be able to get it to incorporating to another product and deliver to your customer and you can pay for I’ll give you another example of what happened with General Atomics in a minute so the other things you have to consider we talked about the harmonized tariff code the proper country classification for the country of origin that determines the HTS and how they assess duties and taxes if there’s a license or permit required permanent imports into the United States is governed by the Bureau of Alcohol Tobacco and Firearms for ITAR controlled items there are certain exemptions on there like the airplanes and things like that but there’s a import list United States munitions import list you have to look down it and find it it’s got the same kind of categories as the USML so it’s easy to look easier to look through once you have the knowledge of it to see if you need an import license if you’re bringing in permanently radios military

radios that we buy a lot from our be a bought a lot of military radios from Marconi in Italy to put into f-16 test stations to communicate with the the airplanes they’re controlled and they brought in permanently and even though we didn’t know where the airplanes were going after that under an F M s it was a permanent import and maquiladoras we permanently import things all the time it’s easier some are controlled in some art control under a license and the fines on penalties can can can occur for any of them in important plans so you talk about this to the FCC the FDA if you’re bringing in a TV or something it has a laser in it the FDA is involved you got to you got to clear it to them if you’re bringing in a laptop TV monitor again the FCC’s involved because of the stuff inside and you have to have the proper the proper FCC markings before you can on the documentation before you bring in every person who is in a problem the business of manufacturing has to register if you manufacture a defense article you have to register with the Department state unlike the Department of Commerce and it costs money to register with the Department of State also it costs money to do export licenses for the Department of State in the beginning they charge I think it’s like $250 a license right now and but then as you do licensing they look what you did the previous year and they charge you that for the next year record-keeping you have to keep all items that are imported for six years anybody who’s in a business of I didn’t cover that in the other part but anybody who’s in the business of actually facilitating a sale has to register with the Department of State even if you’re not part of that company so you go help a foreign country sell something to a foreign customer you have to register where the department stays a broker let’s say attorneys who go to countries to try to either manage or dispute resolution they have to register it depends on what they’re doing if it’s like it depends on what they’re doing yeah there’s a definition in the ITAR that talks about what that definition is that you need to be we’re aware of there’s the fines and penalties involved again ten thousand dollars or president for not more than five years that’s very nice so you don’t you only have to go three years to prison instead alright what’s the cost it’s not worth the cost it’s it’s you get your name out there you know ba got their name out there boeing’s you all the time you’re hanging that you know there was a contract for the tankers you know and whenever you get bad publicity people don’t want to do business with you and it develops a reputation for export and import violations which means every time you cross the go to send something out the United States US Customs there are there’s a system there that says check this guy check this individual check this company check their paperwork and again like Julie said exporting and importing is a right not a privilege this talks about export documentation if you need an export license it has to be filed with US Customs you can’t just get the export license and say I got it it has to be filed with US Customs before you can actually ship and you always need a commercial pro forma invoice a bill of lading an air waybill a packing list the country of origin certificate if you’re defending NAFTA on all the documents you need statements if it’s a declaring an exemption or exception under the exemption under the ITR you need to put the statements on there and I recommend them for the Department of Commerce products the EIT a yes you have to file it before it goes there certain exceptions still for ships but I’m not real good up up on that I can get a research that and get up on it you have to follow forever anything that’s over twenty five hundred dollars on the Department of Khan our side and everything is licensable on the ITAR side so you have to file that a EES filing import documentation use the Silva same thing Bill of Lading air waybill carrier certificate a commercial invoice an entry manifest packing list the import license which has to be lodged if you need it in a country of origin certificate if it’s required when do you have one in zip file you know the important indicates a tariff

classification and pays any estimated duties and taxes and a surety bond everybody has to have a surety bond when they’re importing and if like with the buck EULA doors at the end of it if it’s all estimated you have to file a reconciliation at the end of every year there’s just that we’re talking about the required statements yeah it says say if you’re if you’re temporarily importing for a pair you have to put something like 22 CFR 123 point for a applicable in their compliance programs you should have these processes in place you have the Pala you have the actual manual that says you shall do this you shall do that and then you have processes and procedures that makes it really simple you just go to it you go to you know other requirements if as Isis exception or exemption is utilized there’s the example for it record-keeping for it– are five years regardless of whether it needs an export license or not if you use an exemption you have to keep your everything you need to keep your financial documents your your contracts your shipping bill you know your bills of lading everything it can be kept electronically as long as it can be printed out red flags I have all the frig Flags listed for you she gave examples I have full freight and lit red flags so you can refer to them there’s lots of them how do you see out of trouble no if your potential transaction is controlled for export no the jurisdiction no the classification know who the end-user is know the red flags if it’s a bakery and they’re ordering RF microwave parts you know Jo’s bakery doesn’t usually need those and have a program in place easy easy that’s the hard part is putting it in getting the program in written and the process is written once you have them it’s just like you know an assembly for a bicycle well some people find it hard to put a bicycle together I understand autumn as far as the dual use when you go in for your classification your justification if we had an IP Alexa they actually used it in third chairs far supplier on a program so that they put it was a little speaker that they put a little segment they got sold to somebody else that put it into a radio transmission receiver and then that unit got sold into a subcontractor on our defense program hmm so it was third tier down our cousin yeah it’s not your it’s the final the final integration is entity is the one responsible for obtaining any exporter approvals and the other point I wanted to make was the Department of Commerce will give you a commodity classification if you send something in and they used to know and they would just give it to you you know you they would you fill it out as complete as you knew it all had to be all true information and they were never crushed in a shipment customers wouldn’t question now they do so Department of Commerce puts a disclaimer that says we’re going to give you this classification but this doesn’t mean that it is falls under our jurisdiction you know if you’ve self classified and I’m paraphrasing and partner clauses in all your contracts in fact an average my question is more general with everything that you told us why would someone export you know the bomb administration is trying to double exports and I think clearly there’s a revenue base that is available but everything that you’re saying is a disincentive for anybody who is trying to because the cost associated is significant so I think it would be helpful if you gave you some reasons I think that’s why I was talking about the compliance program if you have a compliance program in place it is not you just do it by rote anybody can come and look at me may take them a little while to read through it and go find the process to do it once you said that get that down on paper and you if it’s a small company in your dual triple quadruple had it you shouldn’t you should be able to go and talk to your management and say let us have a consultant let us have someone we can call but you also the Department of Commerce you can call and you have the response

team international traffic and arms regulations AES has a help desk but you always should have someone pinpointed and with that compliance program in place it makes it a heck of a lot simpler I mean we’ll talk about in a minute I think we’ll leave the Export Control reform go ahead Julie is 95% of the world’s population is outside of the United States so it’s a huge market and once you get your compliance program we talked about so many different things are so many industries it was very wrote for your specific product or industry exactly you know yes you have all these considerations but for your particular RF microwave whatever Golf Club it’s very easy yeah because you’re not making it’s harder for freight forwarders than it is for the Joe export the idea is to simplify make higher walls for fewer products single agency single list single enforcement single IT one and we’re kind of running out of time here so I don’t know if I want to just leave it on the slides or do we want to go through the Export Control reform real quick we can come back and ask questions any one of these about lighting export it is good for the economy is good for your business it sounds this sounds all shaky and a lot it sounds like a lot of ring is a lot you know as a freight forwarder our job is to help you to do that the Department of Commerce job is to help you you know missile is either well there’s a lot of people there’s a lot of help out there World Trade Center we’re here to the World Trade Center is here to help so there are people to help you so you don’t have to do all this yourself you don’t have to spend a lot of money to do it you just have to make sure that you’re getting good information you need a little time and it takes some time and just be aware of a lot of companies just want it good because they think they say that you know and then they don’t do anything it’s not that hard well a good example is IRS you have to you have to comply with the inner and the Internal Revenue Service you have to comply with Human Resources you have to comply with OSHA and they all have a lot of different things and they all in your companies usually have one a person at least identified to handle that right at least to know what that is you should have that in your export in import areas as well because it’s the same kind of regulations that you have to comply with and once you do it by rote it’s it’s it’s not hard I mean with a Makela at Cobham we exported there was at least three to five imports a day and two to ten exports a date to Mexico so that’s what 15 15 a week 60 a week of importing and then exporting about the same and it was all all down to you know procedures processes make real easy so I think what I’m going to do the only thing I want to say about the Export Control reform is writing they’re going to go to a single list but right now what they’re doing is they they’re DoD is it has gone through all of those 22 categories and it was removing out 90% of what’s on there over to the Department of Commerce and they only are required to go to 30 day notification to Congress Congress there’s no regulation that says Congress can stop it so they’re expecting all this to be reported in June and eventually what they’re going to do is they’re going to ice it from what they were talking about they’re going to go to the same kind of five to five digit alphanumeric number right yeah oh yes eventually that’s eventually down the line but right now when they go to a single when they go to a single entity single control list but right now what’s happening is they’re going to a single IT and they’re going to a single licensing form and they’re moving all a lot of products over to they’ll be moving a lot sometime this year they’re anticipating moving a lot of product over to the ear ninety percent will move over to more flexible as 50 percent will be eligible for license fee treatment 35 percent will continue to require an export license but will be eligible for an exception there is an exception exception called sta the strategic trade authorization that was created just for this if there was no other exception available you can probably export under that they have a consolidated screen list we talked about you can go to export.gov and the positive list means it’s generally going to be this much control instead of you know this much of

a triangle controlled that’s just telling you what they’ve looked for satellites are by statute it’s going to take a while for satellite and that’s it I have elements of an export content management program in the backend of these slides so you can you know try to start building your own and if you get mired into it a little bit we there are consulting firms out there that can help you World Trade Center trains can help you and thank you very much