© Goulston & Storrs 2014. All rights reserved. MA Export Center Export Expo: Strategic Planning for Export Compliance Operations December 9, 2014 Kerry

© Goulston & Storrs 2014. All rights reserved.

MA Export Center Export Expo:MA Export Center Export Expo:

Strategic Planning for Strategic Planning for Export Compliance OperationsExport Compliance Operations

December 9, 2014

Kerry T. Scarlott, Esq.Goulston & Storrs PC

[email protected]


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PRINCIPAL EXPORT PRINCIPAL EXPORT CONTROL LAWS AND REGSCONTROL LAWS AND REGS

• International Traffic in Arms Regulations (“ITAR”)– Controls “military” articles, technical data and services– Administered by Directorate of Defense Trade Controls, Dept.

of State (“DDTC”)

• Export Administration Regulations (“EAR”)– Controls “commercial” articles and technology– Administered by the Bureau of Industry and Security, Dept. of

Commerce (“BIS”)

• Office of Foreign Assets Control (“OFAC”) Regulations– Bars transactions involving embargoed countries or certain

individuals and entities – Controls both military and commercial– Administered by OFAC, part of the Dept. of Treasury


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THE LINE BETWEENTHE LINE BETWEENITAR AND EARITAR AND EAR

• Initial classification is key

– Only ITAR or EAR applies to a given article

• Why does it matter?

– If ITAR applies, must have gov’t license to export

– If EAR applies, rarely need gov’t license to export

• IF IN DOUBT, TREAT AS ITAR


CJ Considerations CJ Considerations BeforeBefore You Design / Build You Design / Build

• CJ considerations should be part of earliest product development effort

• Generally, goal is to minimize application of the ITAR

• Consider potential commercial applications and document motivation / effort to meet those applications / demands

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Key Aspects of Making Key Aspects of Making Correct Jurisdiction DeterminationsCorrect Jurisdiction Determinations

• Consider CJ issue before you design / build

• Involve the right people / consider committee

• Consider all of the facts – don’t self blind

• Follow ITAR Section 120.4 and Catch and Release

• If self-determine, document all factors, reasoning and determination

• Consider formal CJ determination request – it is an art

• If self-determine, document all factors, reasoning and determination

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Developing an Effective Developing an Effective Export Compliance ProgramExport Compliance Program

• Its an old adage, but it all starts from the top (tone, commitment and resources)

• Take into account all facets of your business (and take into account the type of business - e.g., industry, mfg v. service, etc.)

• 360 degree review– Internal

• Departments• Subsidiaries / affiliates

– External• Supply chain• Sales channels• Delivery channels

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Developing an Effective Developing an Effective Export Compliance Program (cont’d)Export Compliance Program (cont’d)

• Develop CJ and classification strategy and processes

• Develop licensing strategy, taking into account license exceptions / exemptions

• Prepare written compliance plan / procedures

• General considerations – One size does not fit all– Tailor, and prepare in plain English– Involve all stakeholders– Train, train, and train again

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• Key parts of ECP– Corporate Commitment and Policy (maximize export sales

while ensuring compliance)– Segregate EAR / ITAR– Detailed procedures, with checks and safeguards– Training / Awareness– Internal Monitoring / Audits– Handling Violations

• Document with clear standard operating procedures– Situation specific?– R&D, Mfg, Sales, Shipping, etc.

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• Be prepared to address odd-ball situations – establish clear lines of communication and authority

• Consider other trade-related legal regimes and contexts– Anti-boycott– FCPA– Foreign agent / representative / distribution

arrangements– Sales contracts• Implement / train / refresh (both writings and training)

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THANK YOUTHANK YOU

Kerry T. Scarlott, Esq.Goulston & Storrs PC

T 617.574.3572

C 617.823.9069

[email protected]

www.goulstonstorrs.com

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© Goulston & Storrs 2014. All rights reserved. MA Export Center Export Expo: Strategic Planning for Export Compliance Operations December 9, 2014 Kerry