News and Update on Export Controls Certification Requirement in New U.S. Immigration Form I-129

The following guest post, by Brian Graham, an experienced immigration attorney with the law firm of Strasburger & Price LLP in Austin, Texas, discusses the new export control certification requirements contained in the U.S. Citizenship and Immigration Services' (USCIS) new I-129 form that must be used starting tomorrow.

Note that because of concerns and other inquiries raised by immigration attorneys and the business community about this new export certification requirement, USCIS announced today that petitioners will not be required to complete the export control certification contained in the form until February 20, 2011.

IMMIGRATION FORM I-129 UPDATED TO REFERENCE EXPORT CONTROLS

Effective December 23, 2010, a new I-129 Petition for Nonimmigrant Worker form will be required by all employers filing visa petitions with U.S. Citizenship and Immigration Services (USCIS) for foreign workers in the H-1B, H-1B1, L-1 and O-1A categories. These visa categories cover professionals and workers in specialty occupations, intra-company transfers of company executives and people with "extraordinary ability".

Among the key revisions to the I-129 form is a new Part 6 requiring a certification regarding the release of controlled technology or technical data to foreign person in the U.S., which is commonly referred to as the "deemed export" rule. Under the Department of Commerce's Export Administration Regulations (EAR), an export of technology or source code (except encryption source code) is "deemed" to take place when it is released to a foreign national within the United States. A similar concept is contained in the International Traffic in Arms Regulations (ITAR) with respect to ITAR-controlled technical data.

Part 6 of the new I-129 form requires the petitioning employer to attest that it has reviewed the EAR and ITAR and has determined that either: (1) A license is not required from either U.S. Department of Commerce or the U.S. Department of State to release such technology or technical data to the foreign person; or, (2) a license is required from either the U.S. Department of Commerce's Bureau of Industry and Security (BIS) or the U.S. Department of State's Directorate of Defense Trade Controls (DDTC) to release such technology or technical data to the beneficiary and the petitioner will prevent access to the controlled technology or technical data by the beneficiary until and unless the petitioner has received the required license or other authorization to release it to the beneficiary.

Although the EAR and ITAR's export licensing requirements for controlled technical data are certainly not new, the inclusion of this certification requirement in the new I-129 form marks the first time USCIS has made these questions a part of the mainstream immigration process. It is widely believed that the employer's responses to Part 6 of the new I-129 form will be used for data collection and enforcement purposes. The new questions are not expected to change the process of obtaining an employment visa at U.S. consulates abroad, since the consular posts retain independent jurisdiction to investigate whether issuing a visa might trigger a deemed export violation.

Since the export certification is signed by the employer under penalty of perjury, it is imperative that employers filing I-129 petitions for H-1B, H-1B1, L-1, or O-1A workers undertake the review with the assistance of attorneys, consultants or in-house staff who have experience with the EAR and ITAR in order to determine whether an export license is required and, if so, to take the necessary precautions to avoid violating either the ITAR or the EAR prior to receipt of the license.

Editors Note: The "deemed export" rule appears in section 734.2(b)(2)(ii) of the Export Administration Regulations (EAR) and provides that:

"any release of technology or source code subject to the EAR to a foreign national . . . is deemed to be an export to the home country or countries of the foreign national. This deemed export rule does not apply to persons lawfully admitted for permanent residence 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)). Note that the release of any item to any party with knowledge a violation is about to occur is prohibited by 736.2(b)(10) of the EAR."

A similar concept is contained in section 120.17(4) of the ITAR, which states that an export includes "disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States or abroad." As a result, an export license or other authorization is required to be obtained from DDTC in order to permit the disclosure of ITAR controlled technical data to foreign persons in the U.S.

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OFAC Imposes Civil Penalties on Two Financial Institutions and One Individual

The Treasury Department's Office of Foreign Assets Control (OFAC) has issued its monthly enforcement report. The report indicates that OFAC assessed civil penalties on two financial institutions and one individual for alleged violations of OFAC's sanctions programs.

Discover Financial Services paid a civil penalty of $8,720.00 to settle allegations that it violated the Foreign Narcotics Kingpin Sanctions Regulations by processing 28 credit card transactions for a person that had been designated by OFAC as a Specially Designated Narcotics Trafficker (“SDNTK”). The value of the transactions processed over three years totaled $23,252.This matter was voluntarily disclosed to OFAC, which reduced the potential penalty by 50% and the penalty was further reduced due to Discover taking steps to strengthen its OFAC compliance program and procedures, assigning a new employee to review the credit card portfolio against SDN list updates, and providing extra training to its employees.

Wells Fargo Bank, N.A. paid a civil penalty of $67,500 to settle allegations that it violated OFAC's
Iranian Transactions Regulations by performing financial services in the U.S. on behalf of an account holder while the account holder was located in Iran. Wells Fargo did not voluntarily disclose this matter to OFAC. In addition, OFAC indicated that it had advised Wells Fargo about this account holder but the bank did not conduct an investigation until several years later. One of the remedial steps undertaken by Wells Fargo was to include the use of Internet Protocol (IP) addresses to identify registered users located in Iran. (Using an IP address tool is a useful, but not foolproof way, to determine the location of users of online banking or other Internet-based services.)

An individual (OFAC does not release the names of penalties imposed on individuals) agreed to pay  $30,000 to settle alleged violations of the Iranian Transactions Regulations for sending and attempting to send funds to Iran for investment in a catering business located there. The individual did not voluntarily disclose the violations to OFAC, however the violations were considered by OFAC to be non-egregious in nature.

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U.S. Export Controls Involving India: A Reality Check

Following the President's trip to India last month there has been a great deal of misinformation in the Indian press regarding the "lifting" and "relaxation" of dual-use export controls on India, including the removal of Indian entities from the Bureau of Industry and Security's Entity List (15 CFR Part 744, Supplement 4). (See previous post on importance of complying with Entity List.)

Although U.S. dual-use export controls affect less than one percent of U.S. trade with India trade, there has been a good deal of misunderstanding on the scope of U.S. export controls involving exports of goods, software and technology to India. An excellent report by the American Enterprise Institute noted that in in 1999 24 percent of total U.S. exports to India required a “dual-use” license from BIS.  That number is less than 0.2 percent today.

Here is a summary of the pending changes to U.S. export controls on India:

First, only the following India companies and organizations will be removed from the Entity List:

• Bharat Dynamics Limited
• Four remaining subordinates of the Defense Research and Development Organization (DRDO): 
• Armament Research and Development Establishment (ARDE)
• Defense Research and Development Lab (DRDL) 
• Missile Research and Development Complex
• Solid State Physics Laboratory
• Four remaining subordinates of the Indian Space Research Organization (ISRO): 
• Liquid Propulsion Systems Center,
• Solid Propellant Space Booster Plant (SPROB)
• Sriharikota Space Center (SHAR), and 
• Vikram Sarabhai Space Center (VSSC).

The entities associated with India's Department of Atomic Energy, including India's nuclear reactors, will remain on the Entity List for the foreseeable future. As a result, an export license is required to export all items "subject to the EAR" to Department of Atomic Energy facilities. BIS has a case-by-case licensing approval policy for controlled items and a presumption of approval for EAR99 items.


Note that the entities listed above will remain on the Entity List until BIS issues a final rule in the Federal Register amending the Entity List, which is expected in the coming weeks.

Second, BIS will “realign” India in the Export Administration Regulations to reflect its status as a strategic partner and therefore treating India similarly to other close allies and partners. This realignment will remove India from categories within the EAR that connote it as a “country of concern”—with a focus on Country Groups A and D. In exchange, India has agreed to undertake to harmonize its national control list with the multilateral regimes and impose reexport controls on certain U.S.-origin items.

Third, the U.S. has agreed to support India’s membership in the four multilateral export control regimes—the Nuclear Suppliers Group, Missile Technology Control Regime, Australia Group, and Wassenaar Arrangement. India will undertake to adopt the multilateral regimes’ export control requirements to reflect its prospective membership. The U.S. has indicated that India should qualify for membership in the Australia Group and the Wassenaar Arrangement once India imposes export controls over all items on these regimes’ control lists.


Exports to India will not be eligible for the proposed Strategic Trade Authorization (STA) License Exception that was recently published by BIS in the Federal Register.

In general, exports to India of items classified as EAR99 (the designation for items not on the Commerce Control List) can take place without having to obtain an export license from BIS. As with all exports, no unlicensed exports can be made to prohibited parties or for prohibited end-uses. An export license is required to export most items to India included on the Commerce Control List.

No change has been made to U.S. exports of defense articles to India subject to the ITAR. An export license from the Directorate of Defense Trade Controls is required to export all items to India that are subject to the jurisdiction of the ITAR and the Arms Export Control Act.

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U.S. Company and Its Chinese Subsidiary Pay $3.75 Million in Criminal and Civil Fines for Export Control Violations Involving Pakistan Nuclear Facility

The Departments of Justice and Commerce announced today that PPG Paints Trading (Shanghai) Co., Ltd., a wholly-owned Chinese subsidiary of United States-based PPG Industries, Inc., pled guilty to conspiring to violate the International Emergency Economic Powers Act and the Export Administration Regulations and other related charges.

In addition to the guilty plea, PPG Paints Trading agreed to pay a $2 million criminal fine and forfeit the $32,319 in gross proceeds of the sale.

PPG Industries and PPG Paints Trading entered into a settlement agreement with BIS in which they agreed to pay civil penalties of $750,000 and $1 million respectively and undergo an audit of 2011 and 2012 export transactions.

The guilty plea resulted from actions allegedly taken by PPG Paints Trading to reexport PPG Industries' high-performance coatings from the U.S. to the Chashma 2 Nuclear Power Plant under construction in Pakistan via a third-party distributor in China without obtaining the required BIS export or reexport licenses from BIS.

A BIS export license is required to export the coatings to the Chasma 2 Nuclear Power Plant since the facility is owned by the Pakistan Atomic Energy Commission, which is included on BIS's Entity List. An export license issued by BIS is required to export or reexport all items "subject to the EAR" to PAEC nuclear facilities. (Note - this illustrates the importance of due diligence in screening end-users against the Entity List and other restricted party lists since this particular facility is not specifically named on the Entity List. Only the parent entity, Pakistan Atomic Energy Commission is named on the Entity List).

In this case, PPG Industries complied with the Entity List requirement by applying to BIS for a license to export their coatings to Chashma 2.  However, the export license was denied by BIS. Following that denial, PPG Paints Trading allegedly agreed to sell the high-performance coatings to a third-party distributor in China which, in turn, would deliver the coatings to the Chashma 2 facility. In its purchase orders for the shipments in question, PPG Paints Trading apparently stated that the coatings were to be used at a nuclear power plant in China that did not require a BIS license.

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Happy Holidays and Happy New Year From International Trade Law News

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U.S. Customs Seizes Thousands of Cuban Cigars

CNN reported today (see video below) on U.S. Customs and Border Protection's recent seizure of thousands of Cuban cigars at Chicago's O'Hare International Airport. The seized Cuban cigars were being shipped to customers (including law firms and other businesses) in the U.S. that had ordered the cigars from various stores in Switzerland.

While some people apparently think that Cuban cigars make great Christmas gifts they are still illegal in the U.S. The long-standing U.S. sanctions imposed on Cuba and administered by the Office of Foreign Assets Control (OFAC) prohibits U.S. citizens, wherever located, from purchasing Cuban-origin cigars and other Cuban-origin products (in addition to the prohibition on most exports to Cuba). In addition, no Cuban origin cigars may be imported into the U.S. either directly or through third countries. This prohibition includes the purchase of Cuban cigars bought from third countries over the Internet.


In addition to seizing the cigars, OFAC can impose civil penalties of up to $65,000 per violation of the U.S. embargo on Cuba.

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Today is International Anti-Corruption Day

Today, December 9th, marks International  Anti-Corruption Day.

In a statement marking International Corruption Day, Secretary of State Clinton said "The United States has made unprecedented strides over the past year to enforce our anticorruption laws and ensure our companies do not practice bribery or unfair practices in countries where they operate."

In order to promote the United Nations' anti-corruption campaign, the U.N.'s Office of Drugs and Crime (UNODC) has previously produced the following 60 second video that promotes the power to say no when confronted with bribery.

The 2010 International Corruption day messages by Secretary of State Clinton, the UN Secretary General and UNODC's Executive Director can be found below: here (Clinton),  here (UN) and here (UNODC).

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