The Annual Update Conference on Export Controls and Policy is the Department of Commerce’s flagship event pertaining to U.S. export controls. The conference provides an opportunity for exporting companies to interact with U.S. Government officials who implement export regulations, practices and policies that advance U.S. national security, foreign policy, and economic interests.

The report assesses how nine companies see themselves as implementing their own best practices. It does so through a series of carefully structured interviews with 29 of their key export managers and executives providing the first effort at updating the 2000 landmark Nunn-Wolfowitz Report The companies shared views confidentially with MKT and not with each other or with Thales. To read this exclusive white paper click here.

The world post 9/11 is undeniably a very different place for research universities and colleges. The level of risk and potential exposure that research universities and colleges face has increased dramatically, and the penalties associated with noncompliance range from mild to severe. In November of 2001 the Bush Administration reaffirmed that National Security Decision Directive (NSDD) 189 remains in effect. This directive establishes national policy for controlling the flow of science, technolgy, and engineering information produced in federally funded fundamental research at colleges, universities, and laboratories. Fundamental research is defined as follows:

"Fundamental research means basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community, as distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons."

The tragic events of 9/11 only served to heighten security concerns and as there is a renewed interest in ensuring that the existing laws and regulations are enforced as strictly as possible. One of the challenges that research universities and colleges face today is understanding the legal basis for export controls in order to ensure that they are in compliance. The Case for Compliance Several recent high-profile cases have highlighted the need for universities and colleges engaged in research related activities to tighten their compliance controls and establish safeguards for the institutions and its staff members. Among the recent cases that highlight the need for tighter controls is the case of John Reece Roth, 71, a prominent plasma physicist who was sentenced to four years in prison for 18 counts of conspiracy, wire fraud and violations of the Arms Export Control Act, after he allowed a Chinese graduate student to see sensitive information on unmanned aerial vehicles (UAVs), also known as drones.

Roth, a retired professor at the University of Tennessee, helped found the university spin-off, Atmospheric Glow Technologies in 2000. The company won $10 million dollars in government grants to develop a radio-frequency technology to create ionized gas, or plasma, for use in a wide variety of applications, including sterilizing medical devices. In 2004, the company received a U.S. Air Force contract to develop a plasma actuator that could help reduce drag on the wings of drones, such as the ones the military uses. Under the contract, Roth was prohibited from sharing sensitive data with foreign nationals. According to the information released at trial, in 2006, Roth took a laptop containing sensitive plans with him on a lecture tour in China without gaining the proper export controls. Roth also allowed graduate students Xin Dai of China and Sirous Nourgostar of Iran to work on the project, both students are foreign nationals, which violated his contract.

Cases such as this are increasingly being prosecuted and the regulatory environment is both stiffening and becoming more ambiguous. Understanding what constitutes compliance, how to become compliant and to reduce risk is paramount for any university or college engaged in research activities.

Understanding Export Controls

As you can imagine the laws, rules and regulations regarding US export controls can be daunting and wading through all of the applicable laws, rules and regulations can be a complex and time-consuming undertaking. Many research universities and colleges today employ compliance experts and have compliance officers in addition to access to a variety of services and solutions that help the institution remain in compliance with the applicable laws, rules and regulations regarding the export of information or goods deemed to important to our national interests. For the layman it is important to understand the basis for export controls, which can be found in the following:

• The Export Administration Act of 1969
• Export Administration Regulations (EAR)
• 15 CFR §§730-774
• Arms Export Control Act of 1976
• International Traffic in Arms Regulations (ITAR)
• 22 CFR §§120-130

Digging into either the EAA, EAR, AECA or ITAR to fully understand the basis for export controls would take a significant investment in time, which is why we have outlined the following primer on export controls.

The Export Administration Act

The Export Administration Act (EAA) is the statutory authority for the Export Administration Regulations (EAR), which are administered by the Bureau of Industry and Security (BIS)[See Reference 1] located in the Department of Commerce.  These regulations establish the framework for regulating exports of dual-use, potentially sensitive commodities, software, computers, and technology.

Exports are restricted by item, country, and recipient entity. The EAA, which was written and amended during the Cold War, focuses on the regulation of exports of those civilian goods and technology that have military applications (dual-use items).  Export controls under the EAA were based on strategic relationships, threats to U.S. national security, international business practices, and commercial technologies many of which have changed dramatically in the last 20 years.

What is important to understand is that the EAA has consistently evolved and become increasingly complex particularly post 9/11. Among the changes to the EEA include legislation passed by the House and Senate and signed by the President on November 13, 2000 (P.L. 106-508) extended the EAA of 1979 until August 20, 2001, temporarily removing the need to operate the export control system under International Emergency Economic Powers Act (IEEPA) powers. Since then, export control authority has again been operating under IEEPA provisions pursuant to Executive Order 13222, issued August 17, 2001. The plethora of changes and provisions to the EAA are mind numbing, the important takeaway is that research universities and colleges need to be aware of the potential implications of non-compliance.

Under EAA the penalties associated with export control violations range the gamut from mild to severe. Criminal violations of the export controls can include fines up to $1M, or 5X the value of export, whichever larger, per violation and up to 10 years in federal prison. The penalties for civil violations of export controls are also significant and can include fines up to $120K per violation and the loss of export privileges. The reality is that new legislation is always being proposed to revise the penalty structure and increase penalties for export control violations. There are no anticipated changes in the regulatory environment that will change the nature of EAA compliance for research universities and colleges, compliance is not only mandatory it is essential to maintaining the institutions ability to engage in federally funded research activities.

The Arms Export Control Act & ITAR

Like EAA, the Arms Export Control Act of 1976 is complex and offers a variety of challenges for research universities and colleges regardless of whether they are conducting federally funded research for the United States Department of Defense (DOD) or not. The International Traffic in Arms Regulations (ITAR) implemented provisions of the AECC, described in Title 22 (Foreign Relations), Chapter I (Department of State), Subchapter M of the Code of Federal Regulations. Delving into the AEC or ITAR in depth would take a great deal of time, what is important to understand is that the goal of ITAR is to safeguard US national security and to further US foreign policy objectives, and is enforced by the United States Department of State. As you may have guessed by now, AECA and ITAR are complex and unfortunately somewhat ambiguous, which creates challenges for research universities and colleges.

Among the ambiguities are the definition of “defense services,” and its nexus to the sharing of data already in the public domain, whether information is in the public domain only if it has already been published or if it is in the public domain if there is an intent to publish, and ITAR’s limitation of the definition of fundamental research such that it only covers work conducted at a university. There are important differences in some key definitions between ITAR and the Export Administration Regulations, which are important to understand including the following:

• Under EAR, research at federally funded research and development centers and research conducted by scientists or engineers working for a business entity can be considered fundamental research if the other conditions for fundamental research are met. With that said, ITAR refers to research conducted only at “accredited institutions of higher learning.”
  
• The language of ITAR indicates that the fundamental research exclusion applies to information “which is published” and is generally accessible or available to the public. However, EAR exempts information that is publicly available, that is already published or will be published, or that arises during or results from fundamental research.
  
• EAR explains that no license is needed for classroom or laboratory teaching of foreign nationals in U.S. universities if the information is in the public domain. ITAR handles teaching by saying that “information concerning general scientific, mathematical, or engineering principles commonly taught in schools, colleges, and universities, or information in the public domain” is excluded from the kinds of technical data that are subject to controls.
  
• An EAR exclusion is not lost when a university accepts a temporary delay of publication for prepublication review for proprietary or patent-protection purposes, but ITAR does not contain such language, and so whether this safe haven is available under ITAR is ambiguous.
  
• An EAR exclusion is not lost in a federally funded project when a university accepts specific national-security controls if controls are not violated in exporting the controlled information, but under ITAR the exclusion is lost in a federally funded project if such controls are accepted.
  
• A supplement to EAR provides extensive explanatory questions and answers regarding what is not subject to EAR in the context of university and research laboratory activities. There is no such elaboration in ITAR documents. 
  Conclusions

As you can quickly ascertain the laws, rules and regulations governing the export controls are complex and can be challenging to understand. Export controls are only part of the compliance challenges facing research universities and colleges today. Post 9/11 US based universities and colleges have to remain in compliance with the USA Patriot Act and other rules and regulations governed by the United States Department of Homeland Security. With that said, implementing policies, procedures and processes to protect the institution does not have to be complicated and or expensive. MK Data Services offers a variety of cost effective services and solutions that enable research universities and colleges to screen their staff, students, vendors and partners to determine quickly if a potential risk exists that requires further examination.

Specifically, MK Data Services provides a web-based denied parties screening solution, bulk screening services, automated batch screening services and a web-services based solution that can be integrated with the university or colleges existing legacy information technology solutions to provide a comprehensive compliance solution for the institution. MK Data Services provides compliance services and solutions to some of the nations premier research universities and colleges, to learn more about how MK Data Services can help your institution maintain compliance please contact us today.

References

The Export Administration Act of 1969, United States Government Printing Office, US Department of Commerce, Bureau of Industry and Security The Arms Export Control Act, US Department of State, Directorate of Trade Controls, http://www.state.gov 

Tennessee physicist sentenced to 4 years for sharing drone plans with foreign students, 2009, Brendan Borrell, 60-Second Science Blog, http://www.scientificAmerican.com

CSR Report for Congress, The Export Administration Act: Evolution, Provisions, and Debate, 2008,Ian F. Fergusson, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division, Congressional Research Service 

Space Science and the International Traffic in Arms Regulations: Summary of a Workshop, 2008, Margaret G. Finarelli, Rapporteur, Joseph K. Alexander, Rapporteur, National Research Council

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Download the White Paper

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[1] This agency was known as the Bureau of Export Administration prior to April 2002.



Where is this fraud coming from? The source of fraud is wide and varied, as is evidenced by a recent case out of Maryland. On September 3, 2009 a federal grand jury indicted April Bell, 35, of Parkville, Md., for producing and transferring Maryland driver's licenses and identification cards without lawful authority. U.S. Immigration and Customs Enforcement (ICE) helped investigate the case. According to the five count indictment, Bell worked at the Mondawmin Mall branch of the Maryland Motor Vehicle Administration (MVA) and was permitted to issue identification documents, such as Maryland driver's licenses.  The indictment alleges that from July 2007 to January 2008, other conspirators contacted prospective MVA identification document applicants and telephoned Bell to inform her of such applicants.  Upon arrival at the Mondawmin Mall branch of the MVA, the conspirators contacted Bell by telephone or text message with a physical description of the prospective applicants.  Bell allegedly processed applications by scanning false information into the MVA database or by inventing false driver's license information from other states.  Bell also allegedly failed to administer required tests to such applicants.

As a result of this scheme and in return for money, Bell unlawfully produced and transferred more than 20 Maryland identification documents. Bell faces a maximum sentence of five years in prison and a $250,000 fine for the conspiracy and 15 years in prison and a $250,000 fine for producing and transferring fraudulent identification documents.  Bell had her initial appearance in federal district court in Baltimore on Sept. 4, 2009 at 11:00 a.m. In a related case, another former MVA employee at the Mondawmin Mall branch and a translator for foreign-born applicants seeking a Maryland identification card was indicted on Aug. 13, 2009 on the same charges.  Former MVA employee, Warren Hall, 46, of Parkville, had his initial appearance in court on Sept. 1, 2009, was released pending trial and was arraigned on Sept. 11, 2009.  The translator, Adalberto Benito Prins, 47, of Baltimore, has not been arrested and is still being sought.

As evidenced by this case document fraud can be found in some of the most seemingly unlikely places and the falsified documents can be of the same quality, made from the same materials as the legitimate documents. It is increasingly important to verify the identities of prospective employees, vendors and trading partners. To learn more about how to ensure that your organization is not only meeting its compliance requirements, but safeguarding its reputation by leveraging the best available technology and data services attend an upcoming webinar. The schedule for the upcoming webinars are available on the MK Data Services website.

Research Universities & Colleges
Controlling Risk & Exposure in a Post 9/11 World 


MK Data Services has published a white paper that details the compliance issues and challenges that research universities and colleges face today. The following is a brief excerpt from the white paper, which can be accessed on the MK Data Services website.
The world post 9/11 is undeniably a very different place for research universities and colleges. The level of risk and potential exposure that research universities and colleges face has increased dramatically, and the penalties associated with noncompliance range from mild to severe. In November of 2001 the Bush Administration reaffirmed that National Security Decision Directive (NSDD) 189 remains in effect. This directive establishes national policy for controlling the flow of science, technology, and engineering information produced in federally funded fundamental research at colleges, universities, and laboratories. Fundamental research is defined as follows:


"Fundamental research means basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community, as distinguished from proprietary research and from industrial development, design, production, and product utilization, the results of which ordinarily are restricted for proprietary or national security reasons."


The tragic events of 9/11 only served to heighten security concerns and as there is a renewed interest in ensuring that the existing laws and regulations are enforced as strictly as possible. One of the challenges that research universities and colleges face today is understanding the legal basis for export controls in order to ensure that they are in compliance. 

The full white paper outlines not only the legal basis for export controls, but the major compliance issues and challenges facing research universities and colleges face today. To learn more visit the MK Data Services website and download a PDF copy of the white paper.



Monthly Live Webinar Events

MK Data Services continues to host live webinars every month. During the live webinar the company's consultants will demonstrate and discuss some of MK Data Services innovative and user-friendly compliance solutions and services. Following the solution presentations the consultants field questions from the audience regarding the company's solutions, services and compliance issues in general. Dates for upcoming webinars are available on the MK Data Services website. 


I.E.Canada’s 78th Annual Conference & Trade Show

The global trade compliance team has become a critical part of corporate global trade management. Success in global trade management depends on people, process and technology. Tough economic times provide an ideal opportunity for companies to invest in training their staff and streamlining their business processes, and in strengthening their customer relationships by offering more efficient and timely deliverables. And all this must be done while complying with ever-changing government regulations.

I.E.Canada recognizes the challenges that importers and exporters face today and has designed a three-day conference (one-day, two-day and three-day packages are available) to ultimately help global businesses to achieve long term prosperity. The program features keynotes, plenary sessions, concurrent sessions, workshops, panels and case studies.

Please take a few minutes to review the conference brochure by clicking onto the weblink as indicated on the upper left side of this email notice. By attending this three-day conference, you will learn about the options available for streamlining your import and export processes across all of your business units in order to meet global market demand and incorporate new government regulations while reducing global supply chain costs and minimizing trade compliance risks. You will walk away with the tools that are needed to become, and stay, best-in-class in global trade management.

I.E.Canada’s Inaugural CATIE Awards will be featured at the end of day one and will highlight the best of the best in international trade and customs.

General Highlights of the Conference:

• 60 speakers from across North America representing government officials, industry leaders and service providers
• 25 business sessions including keynotes, general plenary sessions, concurrent sessions, panels, workshops and case studies
• Networking opportunities: Inaugural CATIE Awards, trade show, keynote luncheons, networking breaks, and a reception

Timely and topical subjects currently on the program:

Best Practices to Build a World Class Trade and Customs Compliance Team:

• How to get budget for trade compliance projects
• Staffing considerations – when to outsource
  
• Best technology practices to improve supply chain visibility and logistics control via ERP (Enterprise Resource Planning) systems
• Finance tools and strategies for Canadian importers and exporters
• Case study – the makings of an effective global and Canadian trade compliance organization

Trade Update and Processes

• Canada’s trade opportunities and challenges with the U.S., Europe and Asia
• Proximity sourcing versus low-cost country sourcing – a look at Mexico
• Consumer product safety and customs compliance
• Export Control Regimes from a Canadian and a U.S. Perspective; overview and practical considerations under Canada’s export control regime including Canada’s Controlled Goods Program; why we need CBSA enforcement; Canadian versus U.S. re-export – case studies
• Statistics Canada update: project to reduce the number of HS import codes; the latest on electronic reporting for exporters; new database to provide users with free access to HS 6-digit import and export data

Customs and Import Issues

• Canada Border Services Agency – ACI/eManifest update and walk through; the future of the CSA program and PIP; AMPS review and CBSA’s harmonized system compliance strategy
• U.S. Customs and Border Protection – how to successfully implement the importer security filing (10+2); how to leverage automated commercial environment (ACE) and the reports to enhance your compliance practices
• Extended Producer Responsibility and the impact on Canadian importers and manufacturers
• How to accurately classify your imported product

Keynote Speakers:

Future Direction of Canada-U.S. Border Management
The Honourable Peter Van Loan, Minister of Public Safety

World Economic Outlook – Impact on Canadian Importers and Exporters
Peter Hall, Chief Economist, Export Development Canada

Canada-U.S.Trade Policy – Where Next?
David Jacobson, U.S. Ambassador to Canada Designate (invited)

Green Supply Chain Management – The Path to Profitability
Bob Armstrong, President, Supply Chain & Logistics Association

As you can see, the conference program is packed with information vital to Canada’s trade community. Effective global trade management requires team effort. Any company that registers three people will receive a fourth registration for free (for equal or less value).

After additional non-credit study as an exchange student at Willamette University in Salem, Oregon, Ted Watanabe was selected as a member of the Japan-U.S. Student Conference, of which two former Japanese Prime Ministers have been members.

His career in Mitsui included extensive experience in managing cross-border projects and operations, and extensive knowledge of international-security trade controls. It also included nine years based in Mitsui London, plus five years based in Germany and Belgium, and two years in Hong Kong for Mitsui.

An experienced public speaker, Toshio Watanabe had been a finalist in the All-Japan English Speaking Contest, winning awards from leading Japanese publications. Also at Mitsui, he was a special trainee in an intensive one-year Chinese-language course in the Chinese University of Hong Kong.

From 1997 to 2000, he was Associate Director of Mitsui Europe, and acted as Honorary Secretary of the Japanese Chamber of Commerce in London. In 2001, he was Senior Coordinator in charge of corporate-wide overseas coordination in Western, Northern, Central and Eastern Europe, and from 2002 to 2004 he was General Manager of the International Security Trade Controls Division of Mitsui & Co., Ltd.

From 2003 to 2004, Toshio Watanabe chaired the Internal Compliance Program Subcommittee of the Center for Information on Security Trade Controls (CISTEC). In 2004, he also acted as chairman of the Security Trade Controls Committee of the Japan Foreign Trade Council Inc. (JFTC). Since 2005, he has been Co-Chair of the well-known "Global Trade Controls" conferences in Europe and Asia. He is a member of the new Japan Association of International Security and Trade, which is chaired by Professor Takehiko Yamamoto of Waseda University, whose other leading academic posts have included the University of Oxford, Harvard University: Kennedy School of Government and the University of Georgia's famed Center for International Trade and Security.

The seminars will be held at the Karl Weiss Education & Conference Center, MA Technology Collaborative,75 North Drive, Westborough, Massachusetts.
 
For more information, please contact Julia Dvorko at the Massachusetts Export Center on 508-929-8844.
 

This client specific training opportunity is brought to you by the staff of MK Data Services. This time will be used to help you better understand all the services made available to you through MKdenial.com and how to use them more efficiently.

The Dynamic Screening List services is growing in popularity. If you have not heard about this screening process and how it can dramatically improve your efficiently, please visit the services section of our site to learn more. We will demonstrate this service in detail during the upcoming training programs.

Some of the other areas to be discussed will include:

• How to use the Product License Determination tool
• Main Menu "My Profile" option
• Regulatory Changes for 2th Qtr. 2009

 SAP & MKdenial ECCN Enhancements

• Best Practices Screening Approach
• User Inactivation

The event is on August 26, 2009 and will run from 10:00am-11:30am PST. Please register early to ensure that your spot is reserved!

If you have any questions, or suggestions regarding these client training sessions, please call Cindy Shull at 360 422-7078 or email her at cindy@mkdataservices.com.

Registration for this event is limited to current MK Data Services clients.

MK Data Services Enhances its Customer-Focused Solutions and Services

MK Data Services recently launched an new and enhanced version of its web services solution enabling customers supporting high-volumes of transations to dynamically screen customers, vendors and trading partners directly from their Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and Customer Relationship Management (CRM) platforms including popular solutions such as SAP, Oracle, JD Edwards, BaaN, and numerous others including “homegrown” solutions.

MK Data Services has created an easy to use manual that enables software development professionals and implementation consultants to write custom integrations using an application program interface. In addition to enhancing the Web Services offering MK Data Services has also revised the company’s bulk screening solutions, and improved the breadth and depth of its denied and restricted parties screening solutions. To learn more about web services, dynamic screening or to access the latest documentation in the support library contact your MK Data Services Account Representative. 

The 7 Dirty Words of Restricted Party Screening

By Ken Harris, Managing Partner MK Data Services 

“ I love words. I thank you for hearing my words. I want to tell you something about words that I uh, I think is important. I love as I say, they're my work, they're my play, they're my passion. Words are all we have really.” -- George Carlin 

The legendary comedian George Carlin, who passed away last year, was famous for his skit on the seven dirty words you cannot say on television (words, of course, that can be heard on any playground across America.)  In honor of Mr. Carlin, let’s discuss the 7 “dirty words” that should never be used in denied/restricted parties screening.  Not dirty in the sense of vulgarity, but dirty in the sense of not providing the customer with desirable results.

Despite its complexities, screening is simply an exercise in matching, a comparison of a particular entity relative to another party.  While there are several challenges unique to the exercise, there are only really two objectives in performing this exercise.  First and most important, you do not want to conduct business, for the most part, with anyone associated on any of the lists. To that end, customers will want to set their screening tools to a sensitivity level that will not allow them to miss screening against these parties.  Balanced against that objective is setting the tool to a level that will not be too sensitive in that it will create volumes of false positives that need to be resolved. 

In order to meet the 2^nd objective and reduce the number of “false hits”, many companies have implemented the use of a common word exclusion list.  This would comprise a list of words that would NOT produce a “hit” due to their inclusion within a particular search string.  Such words might include corporation, company, limited, etc.  For example, a company conducting a search on “Jones Company” would not realize a hit on “Smith Company” simply because of the appearance of the word company.  While this is recognized as a best practice and many customers have created their own unique common word list (a common word list for the banking sector might be quite different then a common word list for a pharmaceutical company), there are many others word to consider for omission when performing a screen. 

“Yeah, there are 400,000 words in the English language, and there are seven of them that you can't say on television. What a ratio that is. 399,993 to seven. They must really be bad. “

--- George Carlin 

Here are is list of the seven words that appear most frequently in a random audit of our sanctioned parties database: 

# 1 - AL# 2 - RIHS# 3 - DE# 4 - Of# 5 - SA# 6 - FOR# 7 - Committee  Other words making frequent appearances included Center (Centre), Foundation, Group, and State. Likewise, proper names can also be problematic. Each of the names below appear in at least 100 unique records: 

• Abu IBRAHIM RODRIGUEZ
• Abdul MUHAMMAD (MOHAMMAD, MOHAMED)
• Ali MARIA
• Ahmed JOSE
• AMED (AHMAD) Carlos

Conference Summary

SAPPHIRE is the one place where senior executives, business managers, and decision makers can come together to explore how innovative business solutions foster long-term, profitable growth.

At SAPPHIRE, you'll discover how to apply the power and flexibility of the cutting-edge solutions that SAP has implemented for businesses of all sizes, in virtually every industry. And, you'll learn how you can benefit from the flexibility of our latest business and technology innovations. Innovations that help you create airtight supply chains. Deepen customer relationships. Empower your workforce. And sustain growth and profitability.

http://www.sap.com/about/events/sapphire/index.epx

MK Data Services will be sharing a booth with one of our valued strategic partners Entry Point Consulting. Please stop by the booth and learn more about the new services and solutions we have to offer.

The Export Control Forum is a full-day program designed to cover recent developments in export control regulations and policies. The one-day format provides a cost-effective way for the export control professional to hear about the latest in the export control field and to interact with key BIS management, licensing, and policy people. The Export Control Forum will conclude with a gala reception, offering you the opportunity to mingle and discuss issues of concern with the presenters and other participants.

http://www.bis.doc.gov/seminarsandtraining/newport_beach_mar_16_09.htm

MK Data Services will be sharing a booth with one of our valued strategic partners Customs Info. Please stop by the booth and learn more about the new services and solutions we have to offer.

The ICPA annual conference is unlike any other offered in the international trade community. This year’s program has been designed to include educational opportunities and discussion on trade topics to meet the needs of novice and experienced compliance professionals. Come join us for a truly unique experience.

http://www.newicpa.digbro.com/

MK Data Services will be sharing a booth with one of our valued strategic partners Customs Info. Please stop by the booth and learn more about the new services and solutions we have to offer.