Export Control Compliance Sharing Sensitive Technologies Between International Affiliates General Concepts And Transfer Patterns

In the normal course of operations between U.S. and foreign affiliates, inter-company communications and data conveyances are frequent and occur both intentionally and inadvertently. The U.S.-foreign affiliation can be in the form of a parent company, on one end, and a wholly-owned subsidiary, joint venture, minority interest or other intercompany affiliation, on the other end.

When sensitive technologies are involved in these intercompany exchanges, U.S. export control laws likely apply to the controlled technology transfer and export control law violations can occur. U.S. export control laws include U.S. International Traffic in Arms Regulations (ITAR), U.S. Export Administration Regulations (EAR), and those U.S. Executive Orders, U.S. statutes, and U.S. Treasury Regulations comprising the country, person, and entity sanctions that are administered and enforced by the U.S. Office of Foreign Asset Control (OFAC). While the ITAR applies predominately (but not exclusively) to companies in the defense and aerospace industries, U.S. export control laws under EAR and OFAC apply to companies in the software, IT, telecommunications, and automotive industries and potentially to any transfer (export) of a sensitive technology from the U.S. In other words, U.S. export control laws are not limited in scope to the defense industry.

The intent of this article is to explain how U.S. export control issues affect the sharing of technologies between U.S. and foreign affiliates.

How to Identify Sensitive Technology Transfers that will be Tracked and Controlled by the U.S. Government

The first step is to identify whether a technology is a controlled technology, and thus subject to U.S. export laws upon transfer (export) from the U.S. to a foreign affiliate.

Under ITAR, a controlled technology is one that is listed as one of the 20 general item categories of the ITAR U.S. Munitions List (USML).1

Specifically, ITAR-controlled technology would appear under paragraphs (g), (h), or (i) of each general item category of the USML. ITAR-controlled technologies are identified as either:

"Technical Data," which includes drawings, plans, instructions, documentation for the design, development, production, operation/use, repair, and maintenance of an item listed as a Defense Article under a USML category;2 and

"Defense Services," which includes assistance for design, development, production, operation/use, repair, and maintenance of an item listed as a Defense Article under a USML category.3

Under EAR, a controlled technology is one that is listed as one of the 10 general item categories of the EAR Commerce Control List (CCL).4 Within the 10 general CCL categories, specifically controlled items are further classified in five groups lettered A through E.5 Of these five groups, EAR-controlled technologies are identified as either:

"Software," under product group D, whereby the software may correspond to product groups A (Equipment, Assemblies and Components), B...