On December 23, 2010, USCIS issued a revised Form I-129, used for H-1B, L-1, and O-1A workers. The updated forms now require employers to certify their compliance with the U.S. Department of Commerce's "deemed export" rules, which govern the release of controlled technology to foreign persons.
Starting February 20, 2011, employers (petitioners) will need to complete Part 6 of the Form I-129, which is entitled "Certification Regarding the Release of Controlled Technology or Technical Data to Foreign Persons in the U.S”. The new Certification requires the employer to certify that it has reviewed the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”). The employer certifies, with respect to any technology to which the employee will have access on the job, that a license from the Department of Commerce or Department of State is not required to release the technology to the foreign national (or, in the rare case that a license is required, the employer will restrict the beneficiary’s access to the technology until a license is obtained).
The required certification covers technical data and defense services releases in the U.S. related to design, development, production, manufacture, assembly, operation, repair, testing, maintenance or modification of items on the U.S. Munitions List (USML) (items that are specifically designed or adapted for a military end use). In addition, the certification covers releases of technical data and technical assistance related to developing, producing, or using "dual use" products described in the 10 export control categories of the U.S. Commerce Department's 'Commerce Control List' (CCL) (15 C.F.R. 774, Supplement 1).
What Are the EAR and ITAR Regulations?
The EAR regulations (found at 15 CFR Parts 770-774) and the ITAR regulations (found at 22 CFR Parts 120-130) prevent controlled technology with sensitive military, law enforcement, anti-terrorism, or similar applications from being exported or released to other countries. An employer, who releases controlled technology or technical data to a foreign national in the course of his or her employment, even if the employment is in the United States, is deemed to have “exported” that technology to the person’s country or countries of citizenship. The EAR and ITAR regulations require employers to obtain export control licenses before releasing controlled technology or technical data to foreign nationals in the United States.
Virtually everything you see is considered a dual use item—it could be used for a legitimate commercial end use or could be used for a military/terrorist or proliferation end use (e.g. a pencil could be used to write a formula used in making a chemical weapon). The key is to understand that some dual use items and associated technologies are controlled for export, but most are not. The surprising thing to many companies is that they assume their products, software and technology are not controlled, but many are. This false assumption and a resulting failure to explicitly classify products and technology creates the risk of false certification on the I-129 form.
Which Employers Are Likely to Require Licenses?
Employers who are military contractors or subcontractors are most likely to be affected, but both universities and private employers will be affected by the changes to Form I-129. In general, most types of commercially-available technology are not controlled under the EAR and ITAR regulations, or are exempted from the licensing requirement because they are commercially available. However, employers dealing with certain advanced scientific and manufacturing equipment, as well as certain software and software systems, may be subject to licensing requirements for employees from certain countries, depending on whether the technology has military, law enforcement or counterterrorism applications in addition to its normal, civilian uses.
There are 10 CCL categories which include, among other items, a wide variety of products, software and technology related to materials (certain chemicals, metals, graphite, composites, etc.), materials processing equipment of various types (certain pumps, valves, machine tools, coating equipment, etc.), a wide variety of electronics, computers, information security items including encryption, lasers and sensors, navigation and avionics, marine equipment, and aerospace and propulsion equipment.
What Additional Responsibilities Are Required Now of All Petitioning Employers?
With the new I-129, all employers sponsoring H-1B, H-1B1 Chile/Singapore, L-1, and O-1A nonimmigrants must now determine whether an export control license is needed for the nonimmigrant employee before the petition can be prepared. Employers may be able to make such a determination for all employees of a particular type; for example, if an employer only hires physical and occupational therapists on H-1B visas, the employer may be able to consult an export control lawyer, or obtain an advisory opinion from the Department of Commerce, that such employment does not involve controlled technologies. For other employees, a case-by-case assessment with the assistance of an export control lawyer may be necessary.
What Does the Certification Look Like?
Part 6 of the revised Form I-129 has two parts relating to deemed export. See below:
Under U.S. export laws administered by the Department of Commerce and the Department of State, Directorate of Defense Trade Controls, transfer of technology to foreign persons under certain circumstances (including transfer wholly within the United States) may be considered an "export" even if the technology never leaves the United States, or is transferred via electronic means—hence the term "deemed" export. In these cases, if an export license would be required to transfer the technology or technical data to an end user in the country of nationality of the foreign person, an export license is required for a deemed export to that foreign person. In order for an employer to certify that an export license is not required to release technology or technical data to the foreign person, the employer must have previously reviewed the Commerce Control List and the U.S. Munitions List, or have appropriately concluded by an export review that its technology or technical data does not appear on either list. Also, employers must classify not only their own proprietary technology and technical data, but also that of third parties, such as customers or vendors, which the foreign person employee has access to in the course of job performance. This may require obtaining export information from such third parties or, if not available, obtaining further classification guidance or rulings from the Commerce Department or Defense Department, as applicable. Any of these efforts could be time consuming.
What Are the Consequences?
We have no enforcement guidance yet on how USCIS plans to verify a petitioner's certification that no export license is required for the foreign person (Box No. 1) or a petitioner's certification that it will prevent access to controlled technology or technical data until and unless the required authorization is received (Box No. 2). It can be expected that information will be shared with the Bureau of Industry and Security and the Office of Export Enforcement for verification. USCIS may itself be verifying these representations during on-site audits. On November 9, 2010, the Obama Administration announced the creation of an "Export Enforcement Coordination Center" within the Department of Homeland Security. The purpose is to unite enforcement resources from seven executive departments and other federal agencies to enhance information-sharing about suspected violators of U.S. export controls and to coordinate efforts to investigate and penalize known violators.
In either case, the new certification will constitute a statement to the U.S. Government affirming review of and compliance with the deemed export rule under penalty of perjury. False or incorrect statements could also create a basis for the U.S. Government to impose civil or and/or criminal penalties for export violations by virtue of the failure to comply with the deemed export rule and the licensing requirements.
What Should Employers Do?
Employers should follow the practical steps to comply with the new rules provided below to avoid inaccuracies and potential penalties and/or fines:
- Determine if you have controlled technology by first classifying products or software you produce into the applicable USML or CCL subcategory. If you have an existing export product classification matrix, update and double check it. Remember, virtually every physical asset, software, or technology your company makes or uses to make products or provide services can be classified on these control lists—even if they are classified as "EAR99" items that can generally be exported without licenses. A fundamental step in complying with the new certification is making the export classification of your products and software systematic, explicit, and continuing. (Do not get confused into thinking that 10 digit Schedule B or Harmonized Tariff Numbers are export control classification numbers—they are not. Even some freight forwarders do not understand this distinction.)
- After you have identified controlled products and software, identify the technology associated with those products (on the CCL side, the "how to" information required to develop, produce or use those items that are controlled for export) and then also classify that technology on the USML or CCL—both have explicit subcategories to classify technology. These determinations should be entered on a product and technology export control matrix. A spreadsheet is an excellent tool for compiling this information. This classification process should be systematic and should involve personnel who are intimately familiar with the USML and the CCL and with your products. Typically, a team that includes engineers or product specialists, the individuals responsible for export compliance and outside counsel, is needed to conduct this classification process efficiently. One of the key steps in this process is determining what information is publicly available or in the public domain according to regulatory language. That information is not controlled for export. Moreover, not all production information is necessarily controlled for export. Some information is common to making a controlled and an uncontrolled product. That information may not be controlled for export. It may well be that only the information that is required to push a noncontrolled product into a controlled category is controlled for export. The process of parsing the technology associated with your products to determine what is truly controlled and what is not is a subtle process that requires experience with the regulations. It is worth conducting this process properly, however, because the consequences of misclassification are significant. One fundamental classification error can result in multiple export violations if technology that is controlled is incorrectly released over and over again.
- Check for technology controls that are not associated with a controlled product. For example, certain special deposition technologies (methods of depositing materials on substrates through chemical vapor deposition) are controlled for export, but the final product of that process may not be controlled for export.
- If the process seems too big—you have 10's or 100's of line items and technology items to classify— consult with an experienced export compliance attorney who can help you attack the classification process in an efficient way.
- Label your controlled data or segregate it via storage on separate servers, through password protection or via other means if needed.
- Determine if non-U.S. persons at your facility need deemed export licenses for release of controlled data. Most USML technical data requires an export license for release. Not all dual use technology requires a deemed export however. Determining who needs a deemed export license for dual use technology requires an analysis of the technology control category, the reason for control of that technology assigned by the Dept. of Commerce, and the nationality of the individual. Unless this process is also conducted explicitly and systematically, errors will be made.
- Complete I-129 forms as appropriate. Note that the I-129 certification requirement only applies to certain visa categories at this time. Conducting the classification process needed to make accurate certifications on the I-129 form may reveal other export licensing requirements.
- If you discover the company has released controlled technical data to a non-U.S. person that required a license, think carefully through your next steps in consultation with a qualified export compliance attorney. Penalties for a single unlawful release of controlled technology can lead to fines up to $1,000,000 and imprisonment under U.S. export control rules—irrespective of the 1-129 certification process.
Where can I get more information?
The American Immigration Lawyers Association (AILA) has partnered with True Compliance Group to create an OnDemand employer-client focused training webinar on USCIS Part 6 of the I-129. This training is designed for employer-clients, but is appropriate for attorneys as well. The training is one hour in length, available OnDemand and is $150. You can access it at http://tiny.cc/jh2x9
Alternatively, you can contact attorneys specializing in export license control issues. If we can answer any further questions for you, please do not hesitate to contact your Kuck Immigration Partners Attorney or Paralegal.
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