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Background on U.S. Trade Regulations and Export Laws

Many people say that U.S. foreign policy is a mess. While this point is clearly debatable, it seems clear that the U.S. laws, regulations, and executive orders attempting to implement U.S. foreign policy certainly are a mess. Nowhere is this "mess" more clearly evident in the U.S. regulatory scheme than with the U.S. export laws, which are a veritable maze of statutes, regulatory schemes, and inter- and intra-agency enforcement regimes. For U.S. companies selling in international markets, it is not always easy to figure out what is "right."

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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.

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• Exporting products and technology from the United States is a privilege, not a right.   
• U.S. export laws have a broad reach -- they govern U.S. products and technology, foreign products and technology that reside in the U.S., and foreign products and technology that has any U.S. content, even if overseas.
• Classify your products -- "defense articles" are controlled by State under the ITAR; "dual use" products are generally controlled by Commerce under the EAR.
• Providing a controlled item to a "foreign person" inside the U.S. is an export.
• Know your employees -- "foreign persons" must not be given access to controlled information.
• Permanent resident aliens ("green card" holders) are "U.S. persons" for export purposes.
• Exports can occur through oral and written communication or via access to data and technology -- control your e-mail, control access to your server, and control visits to your facilities.
• Have -- and monitor and enforce -- an export compliance plan that includes training of all employees. 
• Perform basic due diligence on new customers to see if they are problematic -- US Government web sites can help. 
• Violations have consequences -- revocation of export privileges and civil and/or criminal penalties.

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John W. Chierichella and Marko W. Kipa
Legal Times
10-08-2007

Reform is not always popular among those who enjoyed the old regime. The current push to strip away protections afforded to contractors participating in commercial-item acquisitions illustrates this struggle - and why the reforms were valuable in the first place.

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On June 20, 2007, the U.S. Department of Justice announced the appointment of Steven W. Pelak as the first-ever National Export Control Coordinator. Mr. Pelak's job is "to improve the investigation and prosecution of illegal exports of U.S. arms and sensitive technology." The creation of this position follows on a number of recent high profile enforcement actions in which companies and individuals have sold high-end military technology to foreign companies. Most notable among these recent enforcement actions is the guilty plea entered by ITT Corp. earlier this year, in connection with which ITT may be fined up to $100 million for the illegal export of night vision technology to China.  While most enforcement actions for export violations involve administrative fines, with a maximum of $50,000 per violation, criminal convictions can add a $1 million penalty and up to 20 years in prison. Increasingly, the Government is pursuing actions against both the offending company and its management.

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