Homeland Security and Technology Workers ' The New Age of Export Controls

In a time of heightened government concern over foreign terrorists, tightened immigration reviews are creating long lines at U.S. embassies and consulates all over the world, stalling the vital entry visas needed for foreign scientists, engineers and other technical workers to enter this country. Many foreign students already studying at American universities who are seeking permission to remain in the U.S. upon graduation to work for U.S. companies are likewise stuck in these apparently interminable reviews of their suitability to work in the U.S. Today, these immigration petitions need to involve technology lawyers familiar with the U.S. export control rules as much as HR and immigration counsel.

Technology licensing lawyers have long been familiar with the rigors and demands of U.S. export control laws in international deals, including distribution agreements and licenses. Those export control regimes include the International in Arms Regulations (ITAR) of the State Department, 22 C.F.R. Part 120 et seq.; the Export Administration Regulations (EAR) of the Commerce Department, 15 C.F.R. Part 730 et seq.; and the various embargo regulations of the Treasury Department, 31 C.F.R. Part 500 et seq. Today, such technology transactional lawyers need to work more closely than ever before with their counterparts in the HR and immigration fields to assure that companies will be able hire and retain valued foreign technical workers.

If a company's technology is controlled under the ITAR, the EAR or the Treasury Department embargo rules, a two-pronged and coordinated legal strategy is needed to ensure that the foreign technical worker will be able to commence work lawfully. First, a company hiring a non-U.S. person has to obtain a proper non-immigrant visa from the State Department. However, such a company must also consider that, if the foreign worker is originally from a country where exposing that worker to the company's technology would constitute a “deemed export” to that country, then the company must obtain a second government permission from the relevant export control agency, which will necessarily involve the company's export control manager and, very likely, its technology licensing attorney.

Immigration lawyers are already well aware that the State Department has imposed a “Technology Alert List” (TAL) on consular officers that review applications for non-immigrant visas, particularly from the so-called “countries of concern,” which include predominantly Muslim countries such as the Middle Eastern nations, Malaysia, Indonesia and Pakistan but also China and Russia. Given the high number of graduate students from all these countries who attend American universities in the scientific and engineering fields, it should not be surprising that the TAL, which comprises 16 areas of “sensitive technology” that are overlapping with but distinct from either the ITAR or the EAR, has caused many delays and even denials of visas.

But the legal exposure of the employing company may not end once the State Department determines to grant a non-immigrant work visa (eg, an H-1B visa), for example, to a chemical engineering student from Pakistan or China who has just finished her Ph.D. studies at a U.S. university. Assume a hypothetical prospective employer (which we can call “ValveCo”) of this graduating student, for example, develops and manufactures specialty valves for use in the semiconductor industry. Such valves must have special coatings to resist contamination of the super-clean fluids required to make chips and where the fluids themselves may be extremely corrosive to metal valves or pipes. In such a case, ValveCo's technology lawyer will advise ValveCo's management that EAR ECCN 2B350.g places export controls on such valves for exports to Pakistan and China and, accordingly, ECCN 2E001 then places a similar restriction on “deemed exports” of the technology for development of such valves to Pakistan and China. In other words, it is illegal to sell those kinds of specially coated ValveCo valves in Pakistan or China without a Commerce Department export license, and it is therefore equally illegal to disclose ValveCo's technology to a worker from Pakistan or China without such an export license because that would constitute a “deemed export.”

Under the EAR, a “deemed export” occurs if technology (or software) is “released” for export through a) visual inspection by a foreign national, b) an oral exchange with a foreign national or c) application by a foreign national of that technology or software under the guidance of persons with knowledge thereof. A “foreign national” is basically anyone who is not a U.S. citizen, a U.S. permanent resident (so-called “green card” holder) or a lawfully admitted political refugee or asylum seeker. All of these legal categorizations would aptly fit on-the-job training and employment of a newly hired engineer or scientist and, if the graduate student to be hired by ValveCo in the above hypothetical does receive an H-1B visa, the graduate student would surely be a “foreign national.”

Thus, it is quite likely that ValveCo could not use its newly hired Pakistani or Chinese chemist unless it also had obtained, independently of the visa, an export license from the Commerce Department to cover that “deemed export” situation. In other words, the graduate student's receipt of the H-1B visa, by itself, is necessary but not sufficient to permit lawful employment of that individual by ValveCo. (Ironically, if ValveCo's worker received a visa and begins work, ValveCo might have to continue to pay the worker's salary and benefits but be totally unable to use her in the desired capacity if it has not yet obtained an export license.)

In its 2002 annual report, the General Accounting Office issued a highly critical review of the lack of government supervision of such “deemed exports” by he Commerce Department's Bureau of Industry and Security (BIS) (formerly known as the Bureau of Export Administration). In response, the BIS pledged to make deemed export cases an enforcement priority in 2003. It is worth noting that, under the USA PATRIOT Act, bureaucratic barriers that formerly separated the State Department and the Commerce Department (at least in theory) have been broken, and so it is both easier and perhaps more likely now that consular officers will check to see if a visa applicant's employer has applied for an export license and, conversely, licensing officers at BIS will know what is happening on the visa side. Moreover, and perhaps most vital for the many potential ValveCo's who face this regulatory two-step, each company must be certain that what is submitted to one agency for purposes of obtaining a work visa such as an H-1B is consistent with what is submitted to another agency for purposes of obtaining an export license.

Even before the tragic attacks on Sept. 11, 2001, which triggered so much of this “homeland security”-driven scrutiny, the Justice Department has reported at least one formal grand jury indictment in 2000 of a Silicon Valley firm for criminal export control violations of the “deemed export” rule involving employees who were Chinese nationals. It is perhaps only a small coincidence that the U.S. Attorney for the Northern District of California who recorded that indictment was none other than Robert S. Mueller III, now the director of the Federal Bureau of Investigation. It may be expected that all such enforcement agencies ' the State Department, the Commerce Department, the Justice Department and the FBI ' are all now highly cognizant of this Administration's press to prevent unauthorized foreign access to U.S-origin technology, particularly technology that is controlled under the ITAR or the EAR.

Technology transactional lawyers who typically advised only on individual deals or contracts must now forge new working relationships with their colleagues in the employment and immigration bar to ensure coordinated legal planning for their common clients. To the extent that U.S. technology companies depend on a steady flow of technology workers of many nationalities to contribute to future research and development growth, such coordination will be essential to ensure that such diverse workforces do not lead inadvertently to criminal jeopardy under U.S. export control laws.

In a time of heightened government concern over foreign terrorists, tightened immigration reviews are creating long lines at U.S. embassies and consulates all over the world, stalling the vital entry visas needed for foreign scientists, engineers and other technical workers to enter this country. Many foreign students already studying at American universities who are seeking permission to remain in the U.S. upon graduation to work for U.S. companies are likewise stuck in these apparently interminable reviews of their suitability to work in the U.S. Today, these immigration petitions need to involve technology lawyers familiar with the U.S. export control rules as much as HR and immigration counsel.

Technology licensing lawyers have long been familiar with the rigors and demands of U.S. export control laws in international deals, including distribution agreements and licenses. Those export control regimes include the International in Arms Regulations (ITAR) of the State Department, 22 C.F.R. Part 120 et seq.; the Export Administration Regulations (EAR) of the Commerce Department, 15 C.F.R. Part 730 et seq.; and the various embargo regulations of the Treasury Department, 31 C.F.R. Part 500 et seq. Today, such technology transactional lawyers need to work more closely than ever before with their counterparts in the HR and immigration fields to assure that companies will be able hire and retain valued foreign technical workers.

If a company's technology is controlled under the ITAR, the EAR or the Treasury Department embargo rules, a two-pronged and coordinated legal strategy is needed to ensure that the foreign technical worker will be able to commence work lawfully. First, a company hiring a non-U.S. person has to obtain a proper non-immigrant visa from the State Department. However, such a company must also consider that, if the foreign worker is originally from a country where exposing that worker to the company's technology would constitute a “deemed export” to that country, then the company must obtain a second government permission from the relevant export control agency, which will necessarily involve the company's export control manager and, very likely, its technology licensing attorney.

Immigration lawyers are already well aware that the State Department has imposed a “Technology Alert List” (TAL) on consular officers that review applications for non-immigrant visas, particularly from the so-called “countries of concern,” which include predominantly Muslim countries such as the Middle Eastern nations, Malaysia, Indonesia and Pakistan but also China and Russia. Given the high number of graduate students from all these countries who attend American universities in the scientific and engineering fields, it should not be surprising that the TAL, which comprises 16 areas of “sensitive technology” that are overlapping with but distinct from either the ITAR or the EAR, has caused many delays and even denials of visas.

But the legal exposure of the employing company may not end once the State Department determines to grant a non-immigrant work visa (eg, an H-1B visa), for example, to a chemical engineering student from Pakistan or China who has just finished her Ph.D. studies at a U.S. university. Assume a hypothetical prospective employer (which we can call “ValveCo”) of this graduating student, for example, develops and manufactures specialty valves for use in the semiconductor industry. Such valves must have special coatings to resist contamination of the super-clean fluids required to make chips and where the fluids themselves may be extremely corrosive to metal valves or pipes. In such a case, ValveCo's technology lawyer will advise ValveCo's management that EAR ECCN 2B350.g places export controls on such valves for exports to Pakistan and China and, accordingly, ECCN 2E001 then places a similar restriction on “deemed exports” of the technology for development of such valves to Pakistan and China. In other words, it is illegal to sell those kinds of specially coated ValveCo valves in Pakistan or China without a Commerce Department export license, and it is therefore equally illegal to disclose ValveCo's technology to a worker from Pakistan or China without such an export license because that would constitute a “deemed export.”

Under the EAR, a “deemed export” occurs if technology (or software) is “released” for export through a) visual inspection by a foreign national, b) an oral exchange with a foreign national or c) application by a foreign national of that technology or software under the guidance of persons with knowledge thereof. A “foreign national” is basically anyone who is not a U.S. citizen, a U.S. permanent resident (so-called “green card” holder) or a lawfully admitted political refugee or asylum seeker. All of these legal categorizations would aptly fit on-the-job training and employment of a newly hired engineer or scientist and, if the graduate student to be hired by ValveCo in the above hypothetical does receive an H-1B visa, the graduate student would surely be a “foreign national.”

Thus, it is quite likely that ValveCo could not use its newly hired Pakistani or Chinese chemist unless it also had obtained, independently of the visa, an export license from the Commerce Department to cover that “deemed export” situation. In other words, the graduate student's receipt of the H-1B visa, by itself, is necessary but not sufficient to permit lawful employment of that individual by ValveCo. (Ironically, if ValveCo's worker received a visa and begins work, ValveCo might have to continue to pay the worker's salary and benefits but be totally unable to use her in the desired capacity if it has not yet obtained an export license.)

In its 2002 annual report, the General Accounting Office issued a highly critical review of the lack of government supervision of such “deemed exports” by he Commerce Department's Bureau of Industry and Security (BIS) (formerly known as the Bureau of Export Administration). In response, the BIS pledged to make deemed export cases an enforcement priority in 2003. It is worth noting that, under the USA PATRIOT Act, bureaucratic barriers that formerly separated the State Department and the Commerce Department (at least in theory) have been broken, and so it is both easier and perhaps more likely now that consular officers will check to see if a visa applicant's employer has applied for an export license and, conversely, licensing officers at BIS will know what is happening on the visa side. Moreover, and perhaps most vital for the many potential ValveCo's who face this regulatory two-step, each company must be certain that what is submitted to one agency for purposes of obtaining a work visa such as an H-1B is consistent with what is submitted to another agency for purposes of obtaining an export license.

Even before the tragic attacks on Sept. 11, 2001, which triggered so much of this “homeland security”-driven scrutiny, the Justice Department has reported at least one formal grand jury indictment in 2000 of a Silicon Valley firm for criminal export control violations of the “deemed export” rule involving employees who were Chinese nationals. It is perhaps only a small coincidence that the U.S. Attorney for the Northern District of California who recorded that indictment was none other than Robert S. Mueller III, now the director of the Federal Bureau of Investigation. It may be expected that all such enforcement agencies ' the State Department, the Commerce Department, the Justice Department and the FBI ' are all now highly cognizant of this Administration's press to prevent unauthorized foreign access to U.S-origin technology, particularly technology that is controlled under the ITAR or the EAR.

Technology transactional lawyers who typically advised only on individual deals or contracts must now forge new working relationships with their colleagues in the employment and immigration bar to ensure coordinated legal planning for their common clients. To the extent that U.S. technology companies depend on a steady flow of technology workers of many nationalities to contribute to future research and development growth, such coordination will be essential to ensure that such diverse workforces do not lead inadvertently to criminal jeopardy under U.S. export control laws.