U.S. Citizenship and Immigration Services (“CIS”) is requiring the use of a new version of the Form I-129 (Petition for a Nonimmigrant Worker) for employees in certain visas categories. Most significantly, Part 6 of the revised form will soon require employers to complete the “Certification Regarding the Release of Controlled Technology or Technical Data to Foreign Persons in the United States.” In completing this certification, companies must make an affirmative “deemed export” certification regarding their sponsored employees. This new certification requirement impacts employees holding visas in the following categories: H-1B, H-1B1 Chile/Singapore, L-1, and O-1A. Companies should take affirmative steps now to review their internal export control compliance process to ensure that they can accurately certify export control compliance for each H, L, or O petition they intend to file.
1. New Form I-129 Requirements
The certification in new Part 6 consists of two parts: First, the company must certify that it has reviewed the list of controlled technologies and technical data under the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR). Second, with respect to technology or technical data the petitioner intends to release to the foreign worker, the petitioner must check one of two boxes, stating either that: (1) an export license is not required; or, (2) an export license is required and will be obtained before the employer releases the controlled technology to the foreign employee. Companies submitting petitions postmarked on or after Dec. 23, 2010, are required to use the new Form I-129; however, CIS is not requiring companies to complete Part 6 until Feb. 20, 2011. This extension of time will give companies more time to conduct deemed export internal reviews prior to certifying their status.
2. The Deemed Export Rule and Technology Transfer Prohibitions in a Nutshell
The Export Administration Regulations (EAR) (found at 15 CFR Parts 770-774) is administered by the Commerce Department’s Bureau of Industry and Security (BIS) and restricts the export or transfer of purely commercial or “dual-use” goods, software and technology from the United States. (The term “dual-use” means that an item has both commercial and military applications.) The International Traffic in Arms Regulations (ITAR)(found at 22 CFR Parts 120-130) is administered by the State Department’s Directorate of Defense Trade Controls (DDTC), and restricts the temporary importation, export and transfer of goods, software, technical data (as well as the provision of services) that are specially designed, modified, developed, or enhanced for military end use.
The EAR and ITAR both prohibit (without a license) the export or transfer of controlled technology to foreign persons whether they are in the United States at the time of the transfer or abroad. Under the EAR, a transfer of controlled software or technology (i.e., “know-how”) to foreign persons in the United States is referred to as a “deemed export” –in other words, the transfer is deemed to be an export to the foreign person’s home country. Such transfers may require companies to obtain a license from the Commerce Department’s Bureau of Industry and Security (BIS) or the State Department’s Directorate of Defense Trade Controls (DDTC) prior to the technical data’s release to foreign persons. Transfers of controlled technology or software can occur in a variety of ways, such as throughundefined
• Visual inspection by foreign nationals of U.S.-origin equipment and facilities;
• Oral exchanges of information in the U.S. or abroad;
• The application to situations abroad of personal know-how or technical experience acquired in the US;
• Access to network servers containing data on controlled commodities, technology or software; etc.
Common venues where technology transfers occur include: access to computer network servers containing controlled technology; providing drawings, blueprints, or specifications to an individual; technical training; collaborations with interns, consultants or the foreign national employees of customers; meetings; plant visits; telephone or conference calls; and, emails and faxes.
The “deemed export” or technology transfer rules apply only to “foreign persons,” which are defined under the EAR and ITAR as individuals who are not:
· U.S. citizens;
· Lawful U.S. permanent residents (i.e., Greencard holders);
· Persons granted asylum in the United States;
· Individuals having refugee status in the United States; or,
· Temporary US residents granted amnesty.
With regard to foreign persons who are dual nationals, the BIS considers the last citizenship attained by an individual is the controlling nationality. On the other hand, under the ITAR, the DDTC looks at the citizenship of the most tightly controlled country.
3. What Steps Should Prudent Companies Take Now?
Companies that employ foreign persons are expected to take stock of their operations and assess whether any of the technology or technical data they receive from customers or develop in-house are subject to controls under the EAR and ITAR. Specifically, companies should:
· Identify the workplace technologies required for the various job positions within the company;
· Determine (consistent with equal employment laws and regulations) the home country(ies) of foreign national employees, consultants and interns (including dual citizenships) working with those technologies;
· Ascertain the export classification of the identified technologies and applicable license requirements;
· Obtain licenses, if required, prior to allowing foreign persons to access controlled technical data;
· Implement a formal Technology Control Plan and provide training to company employees;
· Establish additional internal controls and procedures for Human Resources and IT Security to prevent unauthorized access to controlled technology or technical data by foreign persons.
4. Consequences of Non-Compliance
The CIS has provided no guidance as to how it intends to enforce the new certification provisions of the Form I-129. However, since the design intent behind new Part 6 was to increase communication and sharing of information among the various U.S. government agencies for export compliance purposes, the information collected by CIS will undoubtedly be made available to the BIS and DDTC. In signing the Part 6 certification, companies are attesting to the accuracy and validity of the information provided; as a result, providing false or incorrect certification statements could lead to the assessment of severe civil or criminal penalties.
In addition, significant civil and/or criminal penalties may be imposed for violating the deemed export rule or exporting controlled software or technology from the United States without a required license. For exampleundefined
· Civil Penalties: Maximum $500k/violation
· Criminal Penalties: Up to 10 years’ imprisonment; and/or, up to $1 million criminal fines
· Civil Penalties: Greater of $250,000 or twice the value of the transaction
· Criminal Penalties: Up to 20 years’ imprisonment; and/or, up to $1 million criminal fines
· Denial of export privileges
· Debarment from government contracts
· Negative publicity for the company
The number of penalty cases commenced against large and small companies, who were unaware that software, equipment or design/production know-how were controlled under EAR or ITAR, have increased over the past several years. Therefore, it is important for companies who have not previously taken steps to determine the export licensing requirements for their technology or implemented a formal export compliance management program to act now to ensure that they can accurately certify to their export compliance for each I-129 petition they intend to file with CIS.