EXPORT COMPLIANCE MANUAL

Transcription

1 EXPORT COMPLIANCE MANUAL Prepared By: John Fusco of Locke Lord LLP (07/21/2015) Approved By: Rick Parent - Export Compliance Mgr. Revision B

2 TABLE OF CONTENTS Page 1. ASTRO-MED INC. REGULATORY COMPLIANCE COMMITMENT... I 2. EXPORT COMPLIANCE MANUAL ASTRO-MED, INC. EXPORT COMPLIANCE POLICY EXPORT COMPLIANCE MANAGER (ECM) EXPORT COMPLIANCE COMMITTEE PRODUCT EXPORT CLASSIFICATION REVIEW FORM DSP-5, APPLICATION/LICENSE FOR THE PERMANENT EXPORT OF UNCLASSIFIED DEFENSE ARTICLES AND RELATED UNCLASSIFIED TECHNICAL DATA FORM DSP-61, APPLICATION/LICENSE FOR TEMPORARY IMPORT OF A UNCLASSIFIED DEFENSE ARTICLES; FORM DSP-73, APPLICATION/LICENSE FOR THE TEMPORARY EXPORT OF UNCLASSIFIED DEFENSE ARTICLES; FORM DSP-85, APPLICATION FOR PERMANENT/TEMPORARY EXPORT OR TEMPORARY IMPORT OF CLASSIFIED DEFENSE ARTICLES AND RELATED CLASSIFIED TECHNICAL DATA EXPORT SCREENING AND ORDER FULFILLMENT EXPORT DOCUMENTS (U.S. COMPANIES) RECORD KEEPING GOVERNMENT VISITS AND INQUIRIES TECHNOLOGY TRANSFER TRAINING AND EDUCATION EXPORT DEALERS AND REPRESENTATIVES APPENDIX A - CERTIFICATE OF UNDERSTANDING - ASTRO-MED APPENDIX B - TRAINING ATTENDANCE LOG ASTRO-MED ECM APPENDIX C - EXPORT COMPLIANCE CONTACTS - ASTRO-MED APPENDIX D - ASTRO-MED COUNTRY GROUP D:2 - D:4 & E:1 END USE SCREENING (EPCI) APPENDIX E - ORDER ENTRY PROCESS NARRATIVE AND DECISION TREE APPENDIX F - FREIGHT FORWARDERS LETTER OF ENGAGEMENT APPENDIX G - ASTRO-MED PRODUCT MATRIX APPENDIX H - RESELLERS COMPLIANCE AGREEMENT AM i-

3 Astro- Med Industrial Park, 600 East Greenwich Avenue West Warwick, RI (401) Fax (401) Astro-Med Inc. Regulatory Compliance Commitment POLICY It is the policy of Astro-Med Inc., without exception, to fully comply with all export control laws of the United States and the countries where Astro-Med Inc. conducts business. This policy applies to the Company, all of its subsidiaries, and all directors, managers and employees of the Company and its affiliates. Trust, integrity and accountability are critical elements of our culture as an organization. These elements are embodied in the Compliance Program. The United States maintains a complex set of laws and regulations administered by several different agencies that govern the export and re-export of goods, technology and services from the U.S. In particular, these laws and regulations may require an export license in order to export certain products and technology and/or restrict the export of products or technology to designated destinations, end users and end uses. Please also note that exports include technical exchanges or discussions with non-u.s. nationals (including employees) regardless of their location (even in the U.S.). Each employee has the principal responsibility for ensuring export compliance in connection with its operations, including dealings with affiliates, consultants, and agents outside of the U.S. Our diligence in making sure our international shipments are handled in accordance with the law is not simply a matter of national interest, but also a matter of Astro-Med's interest, since failure to comply with the regulations could lead to the loss of export privileges and substantial fines. We cannot afford to jeopardize our ability to serve our overseas customers. Failure to comply with U.S. laws and regulations may result in the imposition of criminal and/or civil fines and penalties, including jail time and all Astro-Med employees will be subject to company disciplinary action in the event the employee is found to have willfully violated U.S. laws governing exports. The management of Astro-Med Inc. is fully committed to ensuring export compliance and expects every director, manager and employee to share in that commitment. It is the responsibility of each individual employee to be aware of and comply with the U.S. export control laws in performing their jobs. Ignorance or uncertainty about these laws will not be excused. An important part of the Compliance Program is on-going training. The Export Compliance Manager will be responsible for maintaining the compliance program which includes comprehensive and up-to-date training. If you have any question concerning how these laws apply to you or any Company activity, please contact the Export Compliance manager for guidance. Gregory Woods CEO Astro-Med, Inc. April 14, 2015 AM

4 RECORD OF REVISIONS Revision Description A Original Issuance (10/15/2013) B Manual Review and Revision by John Fusco of Locke Lord LLP (07/21/2015) AM i

5 2. EXPORT COMPLIANCE MANUAL Astro-Med, Inc. and its affiliates and subsidiaries are firmly committed to strict adherence to all U.S. export control laws and regulations including the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) as well as other regulations relating to international dealings. In this regard, Astro-Med is committed to full compliance with all applicable export requirements pursuant to U.S. law including, but not limited to, those laws administered and enforced by the U.S. Department of Homeland Security, U.S. Department of State, the U.S. Department of Commerce, Bureau of Industry and Security, as well as the U.S. Department of Treasury, Office of Foreign Asset Control. Under no circumstances should the export of ITAR or EAR-controlled technical data, software, or commodities take place contrary to U.S. export control laws and regulations. Administrative, civil, and criminal penalties exist for violations of export control laws and may be imposed against the Company and/or individual employees. Because of potential serious consequences associated with failing to comply with U.S. export control laws and regulations, all employees must be aware of their obligations for full compliance. In accordance with the various U.S. laws and regulations, Astro-Med has established and implemented an export compliance policy and procedures to comply with the policy and U.S. export controls and regulations. Astro-Med s compliance policy and procedures are detailed in this Manual. Astro-Med s Export Compliance Manual should be used not only as an educational tool, but also as a practical guide in the course of day-to-day order processing and any licensing management for all departments involved. Compliance with the U.S. Export Laws is every employee s job, and each employee involved in international transactions should use this Manual to become educated with respect to his or her responsibilities. Deviation from compliance could jeopardize our Company s ability to export products. Failure to comply may result in disciplinary action by Astro-Med. This Export Compliance Manual will be maintained and distributed by the Export Compliance Manager (and is posted on the Company s Intranet site and available to all employees). The Manual is revised as necessary, due primarily to regulatory changes or changes in Astro-Med s export process. Human Resources will provide all new employees, at time of hire, with a copy of the Regulatory Compliance Commitment issued by Gregory Woods, CEO of Astro-Med, Inc. All new employees associated with export activities will be briefed on this Export Compliance Manual by the Export Compliance Manager, as an introduction, and will be asked to sign a Certificate of Understanding (Appendix A) prior to engaging in an export related activity. Any person currently employed at time of issuing the manual will be trained and documented Training Attendance Log (Appendix B). AM

6 3. ASTRO-MED, INC. EXPORT COMPLIANCE POLICY A. Introduction Exports of goods and services are a significant part of the sales of Astro-Med, Inc. and its subsidiaries (the Company ). Adherence to export control laws and regulations is essential to this process. Failure to comply may subject the Company and/or its employees to penalties, including fines, imprisonment, and loss of export privileges. Such penalties, and the adverse publicity and expense which could result even from an accusation of an export violation, could seriously damage the business of the Company. B. Policy It is the policy of the Company to comply with all export control laws and regulations pertaining to its operations. The Company will conduct all of its export-related activities, including sales and shipments of products and transfers of technology, in a manner intended to satisfy its obligations under export laws and regulations of the United States and of other countries in which it conducts business. C. Applicability This Export Compliance Policy is applicable to all employees and operations of the Company throughout the world. This Policy is particularly important for employees who are directly involved with exports, such as those who participate in the sale or shipment of products, services, or technical data to non- U.S. destinations. Employees also must keep in mind that an export can occur not only by shipping products or technology to another country, but also by other activities - for example, an export from the U.S. can also occur by 1) an employee in possession of U.S. technology engaging in technical discussions with a foreign person (a person who is not a citizen or permanent resident of the United States) - wherever the discussion takes place, or 2) a foreign person touring facilities of a U.S. operating unit, or 3) a foreign person accessing technology of a U.S. operating unit as an employee, consultant, or subcontractor. These other activities result in exports - referred to as deemed exports - because it is assumed that the technology accessed by the foreign person has moved, or inevitably will move, to the country of which he/she is a citizen. D. Responsibility 1. The Export Compliance Manager is responsible for the monitoring of the export process and for application of this Export Compliance Policy. Managers of each department are responsible for assuring development and implementation of procedures to ensure compliance with applicable export laws and regulations. See Section 3 for further details on Export Compliance Manager s responsibilities. 2. The Manager of an operating unit has principal responsibility for developing and implementing procedures for compliance with export compliance requirements. AM

7 3. Any employee who becomes aware of a possible violation of export control laws or regulations shall promptly report these concerns to the Export Compliance Manager. 4. Any employee who condones or permits noncompliance with export control laws or regulations will be subject to disciplinary action by the Company, up to and including termination of employment. 5. The Company has established an Export Compliance Committee which will assist in the facilitation and implementation of Astro-Med s Export Compliance Policy. See Section 4 for further details on Export Compliance Committee s responsibilities. AM

8 4. EXPORT COMPLIANCE MANAGER (ECM) The Export Compliance Manager has responsibility for ensuring day-to-day monitoring of all exports of the operating unit and for its compliance with export compliance procedures. Duties to be performed, either directly or indirectly, include: Reviewing and complying with the requirements of the Company s Export Compliance Policy and this Export Compliance Manual Implementing a procedure/policy to notify the Export Compliance Manager immediately upon learning a situation has occurred which needs to be addressed at the Compliance Manager s level (Ex. Need for a license or license exception, fails a screening or red flag surfaces, any concern regarding the request that does not feel right without having the Compliance Manager review, etc.) Coordinating the determination of the jurisdiction (United States Department of State or Commerce) and/or classification of each item (commodity, software, or technology) which may be exported. The export classification of the product or item subject to the jurisdiction of the Department of Commerce is its Export Control Classification Number (ECCN) under the EAR. The export classification of the product or item under the jurisdiction of the U.S. State Department is its category under ITAR. Ensuring proper Screening process of proposed exports, as per Section 5 of this Manual, and documenting the screening as evidence of export control compliance Applying for and obtaining all necessary licenses and approvals for exports The principal interface with the export regulatory agencies Providing oversight for export compliance education and awareness to all employees involved with export activities Preparation and oversight of export compliance assessments companywide Assuring that contractual agreements that apply to Export Compliance include provisions for compliance with applicable export statutes and regulations and for termination or cancellation if applicable laws or regulations preclude export Ensure export records for all export transactions, including contract, shipping, financing, and all other documents pertaining to each export are maintained and accessible where necessary In the event that the Export Compliance Manager is not available, please refer all inquire/requests to the International Sales Group (see Appendix C). AM

9 5. EXPORT COMPLIANCE COMMITTEE A. General The principal responsibilities of the Committee are to oversee the export compliance process on a top line level and assist the Export Compliance Manager on an ad hoc basis as necessary. B. Membership of Export Compliance Committee The members of the Export Compliance Committee shall be appointed by the Export Compliance Manager of the Company and shall include at least one member of senior management of the Company and one or more members from the finance team. See Appendix C for current Members of the Export Compliance Committee. In addition, the Export Compliance Committee may utilize the assistance of other employees of the Company, retain support staff, and engage outside experts as it deems helpful or necessary in performing its function. All questions concerning the implementation of this policy or its interpretation shall be directed to the Export Compliance Committee. AM

10 6. PRODUCT EXPORT CLASSIFICATION REVIEW To be export compliant, a company must know how its products fit within, and are affected by, export regulations. Each product or item - commodity, technology, or software - must be reviewed to determine which government agency has export jurisdiction over the item, and hence controls the export. Additionally, the proper category or export classification of the item must be determined. Classification of products is important both for U.S. companies and for those non- U.S. companies whose government regulations include lists or annexes of export-controlled items. Both agency jurisdiction and export classification are essential in assessing whether an export license is required in order to ship the item. A. Determining Agency Jurisdiction The U.S. Department of Commerce s Bureau of Industry and Security (BIS or Bureau) is charged with the development, implementation and interpretation of U.S. export control policy for commercial and dual-use commodities, software, and technology (and related technical data). Dual-use items subject to BIS regulatory jurisdiction are mostly for commercial use, but can also have military applications. The regulations governing exports of commercial and dual-use items are included in the Bureau s Export Administration Regulations (EAR). These commercial and dual-use items are listed on the Commerce Control List (CCL) of the EAR. Items which are defense articles and services (and related technical data) are controlled by the U.S. Department of State through its Directorate of Defense Trade Controls (DDTC). Commercial items which have been specially modified for military use, even if the modifications or design changes are minor, may be considered defense articles controlled by the DDTC - even though the products are almost identical to commercial items. A Commodity Jurisdiction (CJ) request may be submitted to the Department of State to obtain an official determination whether an item is controlled for export by the Department of State or the Department of Commerce. Also, certain nuclear-related items are controlled for export from the U.S. by the Nuclear Regulatory Commission (NRC). For example, radioactive materials such as special nuclear materials and byproduct materials, as defined in portions of the Code of Federal Regulations (e.g., 10 C.F.R. 110), are controlled by the NRC. If the item is believed to be a defense product, service, or technical data, or if there is uncertainty whether it is controlled for export purposes by the Commerce Department or instead by the State Department, a Commodity Classification or Commodity Jurisdiction Request should be pursued prior to export. B. Classification of Products There are two principal ways of determining the classification of a U.S. item: Informal (Internal) Review - by review of the item (particularly its technical parameters) in conjunction with the Commerce Control List of the EAR and/or the U.S. Munitions List if the item is military or defense-related in character, or the applicable AM

11 NRC regulations if it is nuclear-related. This review should include involvement of inhouse technical personnel with knowledge of the product. Formal Review - by submission of a formal written request to the U.S. Government. The written request to BIS, termed a Commerce Classification Request, requires the submission via the Bureau s on-line system called SNAP. The request should contain a description of the item, a recommended Export Control Classification Number (ECCN) for the item (or EAR99, if applicable), and an analysis of the technical parameters of both the item and the ECCN. Product brochures or data sheets, if available, should be included with the request, and a cover letter is also recommended - containing a description of the item(s) and the requester s views as to why she/he considers a particular ECCN to be the correct category for the item. Assistance in preparing a Commerce Classification Request, or a Commodity Jurisdiction request, needs to be coordinated through the designated product specialist under the direction of the ECM. The ECM will submit these requests to the Department of Commerce or Department of State, as applicable. The Product Classification Sheet (Attachment B) will be used for documenting results of product classifications. This Sheet will also contain the following for each product: ECCN, Schedule B Number, export license symbol, and the countries for which an export license is needed based on product classification / country screening. If there is Software which is to be shipped with a product, (or sent separately), this should also be analyzed, as should technology (e.g., technical manuals, drawings, etc.) the Commerce Control List of the EAR has categories or classifications (ECCN s) for these items as well as for commodities. Commerce Classification Requests are strongly recommended. Official written classifications may help avoid inadvertent errors or misinterpretations, particularly for items that do not fit neatly into a particular ECCN. It can be very helpful to have written, up-to-date evidence of what the Government considers the proper export classification of a product since this avoids the possibility of a dispute with Government export enforcement officials. Owner Responsibility: Engineering (see Appendix C for list of contacts). C. Export Licensing Decisions and Processes 1. Laws Governing Export Controls. The Export Administration Act (EAA) of 1979 as amended 50 U.S.C. app (EAA). EAA grants authority to various Federal agencies to regulate exports. The agencies in question include the United States Department of Commerce via the Bureau of Industry and Security and the U.S. Department of State via the Directorate of Defense Trade Controls. 2. Commercial use items and items that are considered dual-use (i.e., items that have a defense application but may be used in a commercial setting are considered dual-use if they are not specifically designed for the military), are governed by the Export Administration Regulations (EAR). The EAR is located in 15 C.F.R. part 730 et seq. A critical component of the EAR is determining the Company s Product s Export Control Classification Number (ECCN). ECCN numbers are derived from a matrix contained at 15 C.F.R. part 774 sup. 1. AM

12 ECCN numbers are broken down into categories 0 through 9. Further defined by product groups such as equipment assemblies and components, materials, technologies and software. 3. The ECCN denotes the type of export control imposed on an item. Export controls are imposed on items for various policy concerns including national security, technology, nuclear nonproliferation, foreign policy and crime control. 4. Not all products have an ECCN number. Some products are removed from the EAR and are designated EAR 99. EAR 99 is a generic term indicating the government has not imposed a specific Export Control Classification Number. It is important to note that the majority of all products defined as EAR 99, while requiring licensing review, more likely than not, do not have export licensing requirements unless certain prohibitions apply. The prohibitions causing an item defined as EAR99 are listed in 15 C.F.R (b). The following export control decision tree diagram should assist in determining whether or not your item is subject to the EAR and either has an ECCN number or is EAR 99. Once you have determined whether you have an ECCN number for your item, or if it is EAR 99, continue to follow the steps in the decision tree to determine if a license is required. AM

13 Export Control Decision Tree Subject to the EAR? (see ) No Exit the EAR (Supp. No. 1 to Part 732) Yes ECCN Yes Is your item classified under an ECCN on the CCL? (General Prohibitions 1, 2, & 3) (See Supp. No. 1 to Part 774) No EAR99 Do General Prohibitions 4-10 apply? (See 736.2(b)(4-10)) Do General Prohibitions 4-10 apply? (See 736.2(b)(4-10)) Yes No Is there an "X" in the box? (Using the Commerce Country Chart and the CCL) No License Required" (NLR) (See 732.5(a)(I)(ii) & 758.1(a)(3)) Yes Yes Is a License Exception Available? (See Part 740, including "restrictions that apply to all licenses Yes Use License Exception (See 740.1) No Submit an application for license (See Part 748) AM

14 Steps for Using the EAR? N O T Am I involved in an activity described in 734.5, e.g., related to the proliferation of chemical or biologic weapons, nuclear explosive devices or "missiles"; technical assistance with respect to encryption; or activities prohibited by any order issued under the EAR See Section 734.5(a), (b), and (c) No YES S U S U B J E YES YES Is the item I am planning to export or reexport subject to the exclusive jurisdiction of another U.S. Government Federal Department or Agency? See Section 734.3(b)(1) No Does my export or reexport consist of prerecorded phonograph records, printed books, pamphlets & miscellaneous publications as described in the EAR? (See Section 734.3(6)(2) No B J E C T C T YES Is the technology or software I am planning to export or reexport publicly available (excluding encryption items)? (See Section 734.3(b)(3) No T O T O Is my item in the United States? (See Section 734.3(a)(1) No YES T H T Is my item outside of the U.S., but of U.S. origin? (See Section 734.3(a)(2) YES E H E No Does my foreign-made item incorporate controlled U.S. origin items that exceed the de mininis limits defined in section or Supp. No. 2 to part 734 of the EAR, or is it ineligible for de minimis? YES (See Section 734.3(a)(3) YES E A E No R A R No Is the foreign-made item a direct product of U.S. origin technology or software, as described in section 736.2(b)(3) of the EAR, and the destination is Cuba, Libya, or a destination in Country Group D.1? (See Section 734.3(a)(4) and (5) YES AM

15 ITAR If the Astro-Med product is not subject to the Export Administration Regulations and is either not commercial or a dual-use item, it must reviewed against the International Traffic and Arms Regulations (ITAR) 22 C.F.R. Chapter I, Subchapter M, Parts to determine whether the product is subject to ITAR. Part 121 of the regulations enumerates the items contained on the munitions list. In the event you are manufacturing a product for the defense department or an agency thereof and it is not one of the twenty specifically delineated items on the munitions list, you must consider whether or not your item falls under Category 21, "miscellaneous article". In Paragraph A of Category 21, the miscellaneous articles subject to the U.S. Munitions List is any article not specifically enumerated in other categories of the U.S. Munitions List which has substantial military applicability and which has been specifically designed, developed, configured, adapted or modified for military purposes. To determine whether your item is subject to the EAR or the U.S. Munitions List and therefore ITAR regulations, the Export Control manager may submit a CJ directly to the U.S. Department of State Directorate of Defense Trade Controls. In the event the DDTC determines that the item has an ECCN number or is EAR 99, all licensing applications will be filed with the Department of Commerce. In the event the item is determined to be on the U.S. Munitions List, file the export license application with the United States Department of State, Directorate of Defense Trade Controls or the Defense Technology Security Administration. (Please note the Defense Technology Security Administration, is the licensing review arm of the Directorate Defense Trade Controls, specifically charged with reviewing licenses for the aerospace industry.) Regulation of Manufacturers of Defense Products of Services Registration of manufacturers and exporters; 22 CFR 122.1(a) requires that manufacturers in the United States who engage in the business of manufacturing or exporting defense articles register with DDTC. The section defines engaging in the business of manufacturing or exporting defense articles or furnishing defense service as even one instance of manufacturing or providing defense services. Therefore entities who contract with the U.S. military for services must register. Astro-Med maintains a current registration with DDTC. Fees Along with the registration application and cover letter, Astro-Med pays an annual fee to DDTC in the amount of $2, (22 CFR 122.3). The fee of $2, covers the cost of the annual registration and the first ten ITAR licenses. In the event a company anticipates filing more than ten license applications under ITAR in any twelve month registration period, the registration fee is $2,750 plus $250 per application after twenty applications have been filed and licenses have been granted. Licensing Guidelines and Instructions - ITAR The company will need to determine the type of ITAR license is required for the export. The most common DDTC forms used by U.S. Company s exporting defense articles include: AM

16 1. Form DSP-5, application/license for the permanent export of unclassified defense articles and related unclassified technical data. 2. Form DSP-61, application/license for temporary import of a unclassified defense articles; 3. Form DSP-73, application/license for the temporary export of unclassified defense articles; 4. Form DSP-85, application for permanent/temporary export or temporary import of classified defense articles and related classified technical data. All of the aforementioned forms except for the DSP-85 may be submitted as an electronic filing. The DSP-85 may only be submitted as a hard copy form. Deemed Exports The "Deemed Export Rule" is most often encountered in the employment context when a company releases controlled technology or software to a foreign national. It is important to note that the Deemed Export Rule does not apply to the release of similar technology or software to persons lawfully admitted as permanent residents in the United States and does not apply to persons who are protected individuals under the Immigration and Naturalization Act (8 U.S.C. 1324B(a)(3)). To apply for a deemed export license for Employee who is presently in the U.S. and employed at Astro-Med under an H1B Visa (or other visa program for similarly situated employees), the Sponsoring company will be required to file for a license as usual with the following additions or clarifications: Astro-Med will be required to complete the basic export license application Form BIS 748P. This form can be found on the Department of Commerce website which is accessible through the SNAP-R application likewise situated in the Commerce Department's website. In addition to the basic information on BXA-748P Form, the Sponsoring Company will be required to provide additional information not customarily required when completing license application of a product on the SNAP-R form: (a) Block 2: provide the telephone extension for Employee; (b) Block 6: check the box labeled "letter of explanation" and check the box labeled "other". These two additional requirements will allow sponsoring company to provide a letter of explanation and Employee's resume; (c) Block 9: Special Purpose. Transfer of controlled technology to a foreign national pursuant to section 732.2(b)(i) of the EAR; (d) Block 14: For the applicant please list Employee s full name and his/her address which requires a street address (no P.O. box numbers); AM

17 (e) Block 19: Labeled End User. Please provide the evidence of Employee s U.S. immigration status and enter his/her full address in the United States and list his/her home country including the street address; (f) Block 21: Specify how the controlled technology and/or software that Employee receives is to be used in his/he employ and also include a description of the End Use. For example, simply stating for research purposes not sufficient. Sponsoring company will be required to explain the nature of Employee s research or other contributions to this type of technology; (g) Block 22(j): Sponsoring Company must identify the various items as specifically as possible including each item s Export Control Classification Number (ECCN number). If possible, Sponsoring company should provide a copy of the technical specifications of the products Employee will be working on; (h) license; Block 23: List the dollar value for the transfer at a nominal amount, usually $1 per (i) A letter of explanation. In the letter of explanation the Sponsoring company should identify all parties to a transaction, in other words, please try and identify all parties Employee will be working with at Sponsoring company including their full name, their citizenship and if they are here on a U.S. green card, their passport number and green card number. Also Sponsoring company should provide a full description of its products and services stating the types of products Sponsoring company typically manufactures, as well as any limitations imposed on Employee s access to controlled items; (j) As the license will be valid for a two year period, the Sponsoring company should describe all locations including the full address of Employee s employment for the two year period; and (k) The Sponsoring Company should describe any foreign compatible software or technology and availability to foreign nationals outside of the U.S. and therefore not subject to U.S. export controls. In addition to the letter of explanation, Employee will need to provide a resume. The resume should include his/her personal background information, his/her educational and/or vocational background, and his /her previous employment history including the names of all employers and the full address for the same. Included in that employment history should be a brief description of his/her responsibilities at his/her past foreign employer(s). Employee will need to provide his/her prior military service listing the dates and places serviced, his/her highest rank attained and all activities he/she performed. If Employee will have access to ITAR controlled items, in addition to the above filed with the Commerce Department, the Sponsoring company will need to file a license request with the Department of Defense specifically the Directorate of Defense Trade Controls (DDTC) a license form labeled DSP-5. The DSP-5 includes all of the above information to the Commerce Department and additional disclosure of Sponsoring company s internal procedures for controlling release of technical data to foreign persons and controls for preventing unauthorized access to defense articles. This license will be for a period of four years or the termination of AM

18 Employee s employment at Astro-Med if the Employee s term is shorter than 4 years. In the event Astro-Med is required to submit a license to the Directorate of Defense Trade Controls, the Employee will be required to execute a Non-Disclosure Agreement NDA which must be maintained on file and copied to the Directorate of Defense Trade Controls. (Please see draft in list of forms.) Commodity Jurisdiction Request A commodity jurisdiction (CJ) is a request used to determine whether an item or service is subject to export licensing by the Department of Commerce or the Department of State (pursuant to the Directorate of Defense Trade Controls (DDTC)). While the Bureau of Industry and Security is the primary licensing agency under the Commerce Department for commercial use and dual-use exports, the DDTC licenses defense articles and services. In the event a company cannot determine which export licensing body is the proper authority for submitting license applications, the company should request a commodity jurisdiction determination. Note: a company may also submit a Commodity Jurisdiction Request if it believes that the jurisdiction of an item has been incorrectly assigned to the Directorate of Defense Trade Controls and should be assigned to the Commerce Department s Bureau of Industry and Securities. A Commodity Jurisdiction Request and resulting determination is not license approval for the actual export. The end result of the Commodity Jurisdiction Request should be placed on the export license application for the official export license. Commodity Jurisdiction Requests are prepared by the company and filed with the Directorate of Defense Trade Controls pursuant to 22 CFR 120.3, Under 22 CFR entitled Commodity Jurisdiction Request ; the company shall identify the article or service and include a history of the product s design, development and uses. Any supporting documentation such as brochures, specifications, marketing materials or other documentation related to the article or service must be submitted with your Commodity Jurisdiction Request. The company should provide the DDTC all information that it believes will assist the DDTC in determining the proper jurisdiction for the article. At the very least the company must provide the number, variety and availability of civilian use and civilian applications as to the nature, function and capability of the civilian applications and finally, the nature, function and capability of military applications. It is important to note that in the event the information appears to be vague or incomplete, the DDTC policy is generally to require licensing under ITAR. Therefore more detail is always better. Practice Tip: Caution. DDTC has maintained that even an unambiguously civilian end-use item must be treated as an ITAR controlled item while a CJ request is pending. If a company submits a CJ request to the DDTC, it assumes the item is military until proven otherwise. To treat the item as a Commerce Department EAR controlled item runs the risk of an enforcement action for unlicensed exports if in fact DDTC were to rule that the item is controlled under the ITAR. Reasons to submit a CJ Request: (a) It eliminates confusion among the personnel within Astro-Med. AM

19 (b) It makes customers more confident in the product they are buying or having it incorporated into their end item. (c) applications. (d) It eliminates concerns regarding the flow of military technology to commercial It gives comfort to management and high-risk transactions. (e) Eliminates any concerns that your competitors are alleging your item is ITAR controlled and the company is not properly licensing it; and finally, (f) Provides the company with a clear understanding from export enforcement officials as to the nature of the technology and whether or not the Government believes exports for those items should be carefully controlled. Practice Tip: Focus is often whether the item is somehow unique to the military or has only a military use. If the item can be replaced without modification in to a commercial end item, then while used in a military setting it may be a dual use item. If DDTC determines that the item while used specifically in a one-time contractual instance for the military if in other instances the item is interchanged with commercial items, DDTC will usually rule that the item is dual use and subject to the EAR. AM

20 7. EXPORT SCREENING AND ORDER FULFILLMENT A. General Each potential export of an item must be screened against applicable export compliance requirements to determine whether the export can proceed (with a license if necessary). Exports that fail one or more export screening processes should be placed on hold until the failure can be resolved. The requirement to screen applies to all orders for exports, even those involving items which appear - based on their jurisdiction and/or ECCN s - to be eligible for export without a license. The screens processes that must be applied to each export are the following: i) Product Classification / Country Screen (a) U.S. Department of Commerce: Some transactions require that export licenses be obtained due to the nature of the product and the government controls imposed on the product s export to certain countries. The screen associated with that evaluation is referred to as the product classification / country screen. If the item to be exported is controlled by the U.S. Department of Commerce, product classification / country screening is performed by reference to the Commerce Control List (CCL) and the Commerce Country Chart (respectively, Part 774 and Supp. No. 1 to Part 738 of the EAR). The Export Control Classification Number (ECCN) of the product on the CCL indicates the reason(s) for control and some of the license exceptions which apply. The reasons for control are used in conjunction with the Commerce Country Chart to make an initial determination of the need for an export license. If this initial screening indicates an export license is needed ( x in the box for the country and applicable reason for control), then a check should be made whether a license exception is available so as to avoid the need for a list-based export license (See Part 740 of the EAR). If an exception is found or there is no x in the box, then the other screens must be applied - until all screens referred to in Section 5 have been applied and documented. If no exception is found, then a license must be applied for and obtained prior to shipment. Note: This screen can be performed either before or after the other screens listed in Section 5. The products exported by some companies will be in the catch-all category (EAR99) such that no export license appears required to export the product to most destinations (except to customers in embargoed and of concern countries). However, the other screens (as listed ii-v below) must still be performed even if results of product classification / country screening indicate that no license is required. This is because results of one of the other screens (e.g., end use / end user considerations) may prevent the transaction or require that an export license be sought and obtained prior to shipment. AM

21 (b) U.S. Department of State: If the item is controlled by the Department of State or the Nuclear Regulatory Commission, then the regulations of that agency must be followed (see International Traffic in Army Regulations). In most cases, licenses will be required to ship any Department of State-controlled item to any destination. Currently Astro-Med has controlled items under ECCN 3A992 and ECCN 7A994. All other products are EAR99. Batch ECCN 3A992 and ECCN 7A994 are controlled for Anti-Terrorism (AT Column1 of the Country Control Chart). Sudan identified on the Country Control Chart as needing a license to export. There are no license exceptions ii) Consolidated Screening List The objective of the Consolidated Screening List (CSL) screen is to ensure that export transactions do not involve 1) persons whose export privileges have been denied by the U.S. Government, or 2) certain other parties of concern. Among the latter are entities that the U.S. Government has identified as involved in weapons proliferation activities and high risk of diversion; specially designated nationals who are considered to be part of the governments of embargoed or of concern countries; or persons involved in terrorist activities, war crimes, or narcotics trafficking. Note that persons and entities can include individuals, companies, and other organizations. The Consolidated Screening List (CSL) is actually a combination of lists, including the Table of Denial Orders and the Entities List (from BIS), the list of Specially Designated Nationals [from the United States Treasury Department Office of Foreign Assets Control (OFAC)], and certain other lists. The Department of State also imposes trade-related sanctions on certain entities (Statutory Denied and Suspended Parties). Names are added to, and deleted from, the Restricted Parties List periodically, and are published in the Federal Register. In general, denied persons do not have the privilege of making or participating in U.S. exports because they have violated export laws or regulations or are subject to United States embargos. Companies are prohibited from selling products/services to, or otherwise dealing with, a denied person in a transaction involving export or re-export of U.S. - origin items. The specific restrictions imposed on a denied person vary; generally they prohibit any involvement of that person in an export transaction involving a U.S. item. Entities on the Denied Persons/Entities List may not be involved in certain U.S. exports, particularly as consignee or end user of an item exported from the U.S., unless an export license is obtained for the export transaction. Persons, who must be checked against the various lists noted above, include everyone known to be involved in the export - e.g., the ordering party, purchasing party, exporting party (including buyers who plan to export), re-exporting party, intermediate consignees, end-user, parties servicing U.S.-origin goods outside the U.S. banks, and freight forwarders and other transporting parties. Diversion Risk Screen This screen is performed to guard against a shipment being diverted from its initial destination to a prohibited destination - e.g., transshipped or re-exported to a country that is embargoed or to AM

22 which additional authorization would be required (b)(10) of the EAR prohibits a person from exporting or re-exporting an item if the person has knowledge that a violation of the EAR or any license exception or any governmental order has occurred, or is about to occur, or is intended to occur in connection with the item. Prior to shipping an item, certain diversion risk profile factors should be investigated. If any of these is present, further inquiry must be made to assess whether the proposed export can proceed. Below is a list of items to be aware of prior to any shipment: 1. The customer or purchasing agent is reluctant to offer information about the end use (or end user) of a product. 2. The product s capabilities do not fit the buyer s line of business - e.g., a small bakery places an order for several sophisticated lasers. 3. The product ordered is incompatible with the technical level of the country to which it is being shipped - e.g., semiconductor manufacturing equipment is ordered for use in a country without an electronics industry 4. The customer has little or no business background - e.g., information about the customer or its principals is unavailable from normal commercial/trade sources. 5. The customer is willing to pay cash for a very expensive item when the terms of the sale call for financing. 6. The customer is unfamiliar with the product s performance characteristics but still wants the product. 7. Routine installation, training, or maintenance services are declined by the customer. 8. Delivery dates are vague, or deliveries are specified for out-of-the way destinations. 9. A freight forwarding firm is listed as the product s final destination. 10. The shipping route is abnormal for the product and destination. 11. Packaging is inconsistent with the stated method of shipment or destination. 12. When questioned, the buyer is evasive or unclear whether the purchased product is for domestic use export, or re-export. 13. Customer uses only P.O. Box address or has facilities that appear inappropriate for the items ordered. 14. Customer orders parts known to be inappropriate or for which the customer appears to have no legitimate need - e.g., no prior shipment of system for which AM

23 parts are sought. 15. Customer is known to have, or is suspected of having, unauthorized dealings with parties and/or destinations in ineligible countries. Please note that the above list is not all-inclusive, in so far as any other suspicious or irregular circumstances in a transaction should also be checked. If follow-up inquiries for more information from the customer do not satisfactorily resolve doubts, the order should be put on hold, and the Export Compliance Manager contacted. If suspicions remain after such inquiries, and there is still interest in pursuing the order, then an export license should be applied for or notification by the Export Compliance Manager to the appropriate U.S. enforcement agency. In cases where Company personnel suspect that illegal activities may have taken place or are planned, and/or a person is asking them to participate in such activities, the Export Compliance Manager should be contacted to discuss further action, including bringing the matter to the attention of government export enforcement authorities. iii) Anti-Boycott Screen This screen is used to ensure that export transactions comply with U.S. anti-boycott laws and regulations. The anti-boycott screen must be performed by all of the Company s operating units. This is because the U.S. anti-boycott laws apply to non-u.s. companies under the U.S. parent if they are controlled by a U.S. company (and control is presumed if there is ownership). The U.S. anti-boycott laws extend to activities in the interstate or foreign commerce of the United States, so would include, for example, certain transactions involving items acquired from the U.S. (a) Anti-Boycott Issues U.S. export control laws and regulations prohibit certain restrictive trade practices or activities which would implement boycotts sponsored or promoted by other countries and to which the U.S. government does not adhere. The regulations also require prompt reporting of certain boycott-related requests (see Part 760 of the EAR). Prohibited activities under U.S. export anti-boycott laws include: A boycott-related refusal, or agreement to refuse to do business, or request that others refuse to do business with a boycotted country (e.g., refusing to do business with Israel in order to avoid being blacklisted by Iran or to obtain business in Iran). Furnishing information about business relationships with boycotted countries or blacklisted persons (e.g., certifying that your company has no representative in Israel as part of a condition of doing business in the United Arab Emirates, where the request for such certification is known to be boycott-related). Discriminating against religion, race, sex, or origin (e.g., agreeing with a Pakistani company that no Indians can assist in installation or servicing of a system to be exported to Pakistan). AM

24 Furnishing information on the religion, race, sex, or national origin of a U.S. person (e.g., providing information as to the religion, or membership in charitable/fraternal organizations, of the Managers or other employees of a U.S. company) in response to a boycott-related request. Implementing a letter of credit containing prohibited boycott language or conditions (e.g., a provision certifying that the company does not do business with Israel). Note that U.S. tax laws also include provisions relating to international boycotts of Israel (see 26 U.S.C. 999). These laws include reporting requirements for U.S. companies and their related (more than 50% owned) companies, both non-u.s. as well as U.S., having operations in, with, or related to boycotting countries and their nationals ( operations is defined quite broadly and includes sales). Reports must be made to the U.S. Department of the Treasury on those operations and also on any participation in, or cooperation with, an international boycott or any request for such participation or cooperation. The U.S. levies large legal and tax penalties if a U.S. (or U.S.-owned) company participates in or cooperates with an illegal boycott; it also denies tax credits if such companies engage in commercial activity with a sanctioned country. Export personnel should also keep in mind that U.S. export laws and tax laws differ as to what specific actions or conduct are reportable/non-reportable and prohibited/permissible. Compliance is required with both export-related and tax-related anti-boycott laws/regulations. (b) Boycotting Countries The U.S. Department of the Treasury is periodically required to list countries which may require participation in, or cooperation with, an international boycott that the U.S. government considers to be illegal. Currently those countries are: Iraq Libya Saudi Arabia Yemen, Republic of Kuwait Oman Syria Lebanon Qatar United Arab Emirates However, note that the U.S. anti-boycott laws are not limited to violations by the above-listed boycotting countries. Also, Israel is not always the targeted or boycotted country. (For example, a request by a Pakistani customer for a negative certification of origin such as No contract items shall be manufactured or originate in India would be an illegal boycott request.) (c) Dealing with Boycott-Related Requests Proposed transactions, especially those involving any of the above-listed countries, should be carefully checked to see whether they contain any boycott-related requests. Particular attention should be given to documents received from potential customers - e.g., inquiries asking for quotes/tenders; sales contracts; letters of credit; and other correspondence. AM