February 25, 2011

What Do Export Regulations Have to Do With Hiring Foreign Nationals?

Holland & Knight Alert
Neal N. Beaton | Tara L. Vance

On November 23, 2010, the United States Citizenship and Immigration Service (USCIS) published a revised version of Form I-129 (Petition for Nonimmigrant Worker) that includes a new certification for employers relating to expert control regulations. Under the revised form, a U.S. company must seek and receive a license from the U.S. government before it releases controlled technology or technical data to its nonimmigrant workers employed as H-1B, H-1B1, L-1A, L-1B or 0-1A beneficiaries. (An excerpt of the new form and the certification is provided below.)

This new rule applies to employers filing Form I-129 on or after February 20, 2011. The original deadline was December 23, 2010, but after affected parties voiced concerns, the USCIS delayed the effective time until this month. Given that the new rule is now effective, employers, HR personnel and attorneys not experienced with export control regulations likely have questions about the new requirements.

Generally speaking, the principal requirements of the new Form I-129 certification are two-fold:

  • Each employer must certify that it has reviewed the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) regulations and determined whether it will require a U.S. government export license to release controlled technology or technical data to the non-immigrant worker.
  • If an export license is required, the employer must further certify that it will not release or otherwise provide access to controlled technology or technical data to the worker until it has received from the U.S. government the required authorization to do so.

In short, the revised Form I-129 therefore requires employers to evaluate the EAR and ITAR to determine whether the new nonimmigrant worker’s access to the employer’s technology or technical data requires a license under the regulations, a process that can be a complicated and frustrating analysis for companies and corporate professionals.

Six Frequency Asked Questions

1. What are the EAR and ITAR regulations?
The Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) govern what may be exported from the United States to other countries. The controls are designed to restrict access to “dual use” (i.e., having both civil and military applications) technology or software to countries or persons that might use such items contrary to U.S. interests. Most notably, controls are designed to stem the proliferation of nuclear and weapon technologies and limit the military and terrorism support capability of certain countries. Thus, the regulations concern what the technology is and what country or foreign national will be receiving it.

2. What are some examples of controlled technologies?
Examples include telecommunications and information security technology, GPS technology, sensors and lasers, navigation and avionics systems, nanotechnology, biotechnology and high-performance computing capabilities. The EAR provides exceptions for technologies that are, among other things, already “publically available” or educational in nature. Yet purely commercial items without an obvious military might be subject to the EAR (e.g., sonar fish finders), so a proper inquiry requires an evaluation of EAR and ITAR.

The Commerce Department’s Bureau of Industry and Security (BIS) lists controlled technologies on the Commerce Control List (CCL), which is organized by 10 different categories of controlled items and related technologies and by Export Control Classification Numbers (ECCNs) that describe the technical characteristics of the item or technology and any related export restrictions. The U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) administers the ITAR U.S. Munitions List (USML) of technologies designated as defense articles and defense services.

3. Why should compliance be an issue for a company that does not export controlled technologies?
Under the regulations, “export” means more than just shipment overseas. The “deemed export rule” requires companies to seek and receive authorization from the U.S. government before releasing controlled technology or technical data to foreign persons within the United States. Under both the EAR and the ITAR, release of controlled technology or technical data to foreign persons in the United States, even by an employer, is deemed to be an “export” to that person’s country or countries of nationality. The major implication of the new rule is that a U.S. company must seek and receive a license from the U.S. government before it releases controlled technology or technical data to its nonimmigrant workers employed as H-1B, H-1B1, L-1A, L-1B or 0-1A beneficiaries.

4. What are some situations that may trigger the deemed export rule?
Common situations that can involve release of U.S. technology or software include foreign national employees involved in certain research, development and manufacturing activities; foreign students or scholars conducting research; and an employer hosting a foreign scientist.

5. Are certain foreign nationals exempt from the deemed export rule?
The deemed export rule applies to any foreign national, except a person who: (1) is granted permanent residence status (i.e., issued a Green Card); (2) is granted U.S. citizenship; or (3) is granted status as a “protected person” under the regulations.

6. What are the penalties for noncompliance?
While it is unclear how strict the USCIS will be in enforcing this new section of Form I-129, an employer who knowingly makes a false statement or conceals a material fact to the U.S. government is subject not only to a denial of the visa petition, but also to civil and criminal penalties. Not obtaining an export license when required, even if the employer mistakenly believes one is not required, can subject the employer to export enforcement action by the BIS and DDTC, or criminal prosecution by the U.S. Department of Justice. Civil fines can amount to $500,000 per violation and criminal penalties can amount to $1 million per violation and up to 10 years in prison, and the employer can also be subject to a denial of export privileges and debarment from U.S. government contracts.

Looking Ahead

All employers filing Form I-129 for applicable nonimmigrant workers will be required to certify compliance with export control procedures. The new licensing requirements will affect likely only a small percentage of filers because most types of technology are not controlled for export or release to foreign persons. Yet companies inexperienced with export control policies or lacking HR personnel conversant in federal export regulations should begin to notify senior management and staff of the new requirements and put in place procedures for compliance with the new Form I-129. This may require additional training, new record keeping requirements, amended language in offer letters and other internal controls.

How Holland & Knight Can Help

Holland & Knight has experienced immigration and trade attorneys who can assist employers in complying with this new requirement and in evaluating and analyzing the EAR and ITAR regulations to determine whether an export license is required. If a license is required, we can help to obtain it.

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