An effective export control policy – one that addresses all of the applicable export regimes, effectively trains company personnel with respect to the companies’ obligations, and monitors adherence to the requirements set forth in the policy – is an essential element of a comprehensive corporate compliance program. Although the need for such policies may appear to be most obvious with respect to goods and services of a military character, the need is far more pervasive, applying generally to virtually any goods or technology that originate or are modified in the United States. Depending on the regulatory regime, restrictions can apply based on the character of the goods or services, the immediate or ultimate destinations, the uses to which the exports can be put, and, when overseas entities are involved, the extent to which United States persons may have been involved in the transaction. For an overview of the principal export control regulatory regimes, see Export Control Booklet.
Impelled by the desire for increased sales to foreign buyers, but concerned with the erosion of its military and economic advantages, the United States has engaged recently in somewhat conflicting approaches to export control. On the one hand, as explained in a recent memorandum to our clients, the government has loosened restrictions on exports to the People’s Republic of China. See New Rules Govern Exports of Dual-Use Products and Technology to China. At the same time, the United States has increased its scrutiny of dual-use and military technologies, with the Department of Justice’s launching, on October 11, 2007, of the “National Counter-Proliferation Initiative.”
Earlier this year, the DOJ appointed Steven W. Pelak as the first-ever National Export Control Coordinator. Among his immediate tasks at the time were the training of United States Attorneys to undertake complex investigations and prosecutions of export violations, which are typically time consuming and require cooperation among law enforcement officials, federal agencies, and even foreign governments. Other objectives included employing sanctions for non-compliance as a lever to encourage voluntary disclosures.
To that job description is now added the responsibility for implementing the “National Counter-Proliferation Initiative.” Primarily, this initiative seeks to foster an exchange of information between and among responsible agencies and relevant industries, a problem that -- if our nation’s pre- and post-9/11 experience is any indicator – will not be easily or quickly overcome. To this end, the initiative plans to expand the task forces already extant in New York, Connecticut, and Maryland – locations with a high density of technology-oriented businesses and research facilities. The initiative will also implement monthly meetings of agency leadership to coordinate information.
The Government Accountability Office, in reports late last year, emphasized the nation's exposure to illegal exports of sensitive research, especially in and through universities, and of dual-use technology. Terrorists, rogue nations, and foreign rivals have, of course, persistently coveted American military and dual-use technology. An assessment from the National Counterintelligence Executive reports that foreign nationals from 108 countries sought sensitive technology in fiscal year 2005, with a handful of countries (e.g., China and Russia) most aggressive in this regard. Besides soliciting information from businessmen, scientists, engineers, and academia, foreign governments established seemingly benign organizations that have tried, in myriad ways, to export illegally. Citing the weaknesses of current approaches, the GAO urged departments and agencies to overcome the challenges inherent in complex, multi-faceted export enforcement. Greater coordination would be required between the Departments of Defense, Justice, Homeland Security, State, and Defense to prevent – and prosecute – illegal exports.
The National Counter-Proliferation Initiative is supposed to be a solution to the GAO's concerns. But like most “task forces” and “initiatives,” the National Counter-Proliferation Initiative is likely to lurch and stumble in the early going. The message, however, should not be lost on business – the DOJ is serious about export controls. Companies that are currently less than punctilious in controlling technologies or products that have military or dual-use applications should put their houses in order. Prevention is far less problematic than the DOJ “cure.”
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