Export Controls

The U.S. government has made aggressive enforcement of export control laws a top priority, both domestically and extraterritorially, since the launch of the “National Counter-Proliferation Initiative” by the Departments of Justice, Homeland Security, Commerce, Defense and State in 2007.

Export controls can generally be broken into three groups: (1) the Export Administration Regulations (EAR), which cover dual-use goods and technology and are administered by the Department of Commerce’s Bureau of Industry & Security (BIS); (2) the International Traffic in Arms Regulations (ITAR), which cover defense articles and services and administered by the Department of State’s Directorate of Defense Trade Controls (DDTC); and (3) those relating to financial or trade transactions with U.S.-embargoed countries, entities and persons, which are administered by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). These controls overlap in some instances, and each regime is highly technical in nature. Compliance with these laws and regulations is further complicated by the myriad “unwritten rules” created through agency interpretation and administrative practice.

All three sets of controls have extraterritorial application. OFAC controls apply to U.S. persons wherever they are located, even if the U.S. person is dealing in foreign-origin merchandise or technology. Thus, U.S. citizens and resident aliens working abroad are subject to these controls, as are branch offices of U.S. entities. Moreover, sometimes foreign subsidiaries of U.S. entities are within the scope of these controls. In contrast, BIS and DDTC primarily control U.S. merchandise and U.S. origin technology, even if outside the United States. Both the ITAR and EAR also feature provisions that regulate the offshore conduct of U.S. persons and persons otherwise subject to U.S. jurisdiction.

The scope of U.S. export controls and related enforcement activity is increasingly focused not only on the merchandise or technology being exported and its country of destination, but also the ultimate user and end use. Many of these controls are driven by complex anti-proliferation rules, including several lists maintained by the U.S .agencies that identify entities not permitted to receive U.S. goods, technology or services.

Technical collaboration in both the dual use and defense areas can be particularly complex as a regulatory matter and requires expert advance planning to establish the proper compliance structure from the start. Enforcement personnel are looking more closely for unlicensed exports of technology or information to foreign nationals in the United States (so-called “deemed exports”) or abroad over information technology systems or email. As companies restructure business for tax reasons, or to create global collaboration networks, export controls must be part of the planning process.

Further, in corporate mergers and acquisitions, the U.S. government’s position is that export violation liabilities are transferred with the company regardless of whether the transaction is a purchase of stock or assets. Accordingly, the acquisition due diligence of a company with significant exports must be thorough and specialized to ensure that past actions will not adversely affect future business.

Penalties for export control and sanctions violations have never been higher. Violations of the BIS and most OFAC rules can lead to penalties equal to the greater of $250,000 or twice the value of the transaction per violation and also include criminal penalties of up to $1 million in fines and 20 years imprisonment. DDTC can levy penalties of $500,000 per violation. Reputational damage can also be significant.

The lawyers in Alston & Bird’s International Trade and Regulatory Group regularly counsel clients on the requirements of the EAR, ITAR, OFAC and related matters. Our senior lawyers have over 30 years of experience on these issues and extensive contacts at both the staff and political levels throughout the U.S. government.

We provide proactive advice concerning the applicable requirements for the export of specific products and technology, obtain classification and jurisdiction rulings and export licenses and advise on end-use and other screening procedures. We have significant experience obtaining export licenses from the Departments of Commerce and State for technical data and high-technology commodities, such as encryption software, aerospace equipment, computers, advanced medical equipment and defense articles. We likewise have significant experience obtaining export licenses from the Department of Treasury’s OFAC to authorize exports of medicines, medical devices and other items and services that can be exported to embargoed destinations like Cuba, Iran and Syria.

We work with clients to create customized compliance programs and tools that integrate with existing business processes. We offer training programs and assist clients with internal compliance audits and investigations and, where appropriate, voluntary disclosures of past violations. Our lawyers support transactional lawyers in the firm by preparing documentation for commercial licensing of proprietary technology and know-how between U.S. and foreign companies. Finally, we represent clients in government investigations and have defended numerous clients against both civil and criminal penalty actions based on allegations of OFAC and export control violations.

Our partners have served on the President’s Export Council Subcommittees, are frequent writers and speakers on export control and related issues, have contributed to various academic studies of export control reform undertaken by the American Bar Association and Center for Strategic and International Studies, and are listed in Best Lawyers in America and Marquis’ Who’s Who in America.

Our recent export control work includes the following:

• Extensive guidance on U.S. export controls compliance to the aerospace, pharmaceutical, chemicals, automotive, software, consumer products, scientific research, military vehicle and electronics industries, both domestic and foreign.
• Representation of exporters in connection with BIS, DDTC and DOJ subpoenas, investigations and criminal and administrative enforcement settlement negotiations.
• Managing export control crises, including preparing voluntary disclosures and responding to government investigations.
• Development and implementation of U.S. and global technology control strategies for sensitive data environments, including compliance with U.S. restrictions on access to classified and unclassified technical data, Foreign Ownership, Control and Influence (FOCI) issues and other technology control issues arising under the ITAR, BIS and National Industrial Security Program Operating Manual (NISPOM).
• Extensive advice on compliance with re-export and nonproliferation provisions in the EAR, including “catch-all” anti-proliferation controls.
• Representation of companies in commodity jurisdiction requests before DDTC and commodity classification rulings before BIS.
• Preparation of export license applications for commodity and technology exports.
• Negotiation and licensing of Technical Assistance Agreements and Manufacturing License Agreements authorizing cross-border collaboration in defense trade.
• Assistance to exporters in creation and maintenance of compliance programs.
• Advice and implementation of advice concerning handling of routed exports.
• Guidance on the extraterritorial application of U.S. export control laws to foreign-manufacture goods (including de minimis U.S. content analyses).
• Obtaining BIS and OFAC licenses to export permissible goods (e.g., medical devices) to otherwise embargoed destinations.