Office of Export Enforcement

Transcription

TOM MCVEY: Good Morning, ladies and gentlemen. Thank you and welcome to our briefing today - ITAR for Defense Executives. I'm Tom McVey with the law firm of Williams Mullen in Washington D.C. Our mission today is to tell you what you need to know about ITAR. This is designed for Senior Company Executives, the President, CFO, Marketing Director, the whole senior staff - to help you reduce liability and make good business decisions. If you're involved in any way in the areas of: defense, intelligence, homeland security, aerospace, law enforcement, government-sponsored research; you need to understand this. As you may have heard, the export laws are in the process of being amended. This is called the Export Control Reform. Most of these changes will go into effect in the Fall of 2013 and throughout 2014 on a rolling basis. I'm going to discuss many of these changes today, but just so you know, most of the cornerstone principles that we discuss today in the presentation, will continue even after the Export Control Reform. The reform changes are very technical. Most, or almost all of these cornerstone principles, will continue in effect. There are actually three areas of export laws. ITAR - administered by the State Department - these governed military products. The second is the Export and Administration Regulations administered by the Commerce Department. These cover commercial products and the US Sanctions Laws administered by OFAC - the Office of Foreign Assets Control. We're really are only going to have time to go into detail for ITAR. However, I do have a few slides at the end for the other two areas. You really can't talk about ITAR without at least mentioning these other two areas. You'll see how they all fit together. Alright. Let's start with ITAR. ITAR stands for International Traffic and Arms Regulations. It's administered by the Director of Defense Trade Controls within the State Department. The Department of Defense is also heavily involved. DTSA, the Defense Technology Security Administration. In fact, if you have a case that you send over-- an application that you send over to the State Department, they'll almost immediately send it over to the Department of Defense to process it. So, this is basically regulation by the Department of Defense. It's part of the National Security Laws of the United States. The first cornerstone concept here is ITAR contains a list of products. It's called the U.S. Munitions List. And if your product is on the list, it's subject to these controls. This is a key concept here if you're on the list, everything else flows from that. So, you'll hear us discuss a lot, "Is something is on the list or not," that's the reason for that. Now if you'll look down this list, you'll see a number of the items in the beginning of the list, really are military items - firearms, guns and armament, ammunition - but if you look down the list, you'll see that a number of the items start to overlap with commercial products: training, electronics, chemicals, satellites. Satellites are important in military. But commercial satellites are very commonly used in communication, commercial communication; navigation. Even the weatherman on TV uses satellite. So while this list was originally developed for military products, over time, it's been amended, or over time, it's evolved, to cover commercial products mostly because products that were originally military have found their way into mainstream commercial activity. Alright, another cornerstone concept here. ITAR applies not just to products, but also to software and technical data as well. So, if a product is on the list, let's say a navigational device, software to run that device is also on the list, and technical data related to that device, is on the list: technical data, drawings, algorithms, manuals; any information on the design, manufacturer, or use of the item. So if the item is on the list, if your product is on the list, if the electronic files are on the list, the specification sheets, the technical manuals are all on the list and subject to these controls. How does one export software and technical data? We call these "intangible exports." The State Department has a very broad definition of how one exports technical data and software. If you send it abroad, if you take the disc or the operating manual and put it in a FEDEX envelope and ship it to London, that's the export of technical data. If you go abroad, and release it, you have a speech at a business conference in Stockholm or a private conversation with a foreign national in a meeting in Dubai, that's the export of technical data. Electronic transmissions to a foreign party in an email or a fax or a phone conversation with a foreign party, is the export of technical data. And most important, if the foreign person comes to the United States and has access to the item here, the technical data here - that's considered an export as well. There's something called the Deemed Export Rule which refers to this. This term was actually developed by the Commerce Department under the EAR but it applies effectively the same to ITAR. Under the Deemed Export Rule, if a foreign person comes to the United States, has access to the technical data here, it's considered an export to their home country. There was a case in California called the Suntech Microwave case. It was the first criminal indictment and criminal conviction under the Deemed Export Rule. A company in California was doing research in their lab. Detector log video amplifiers. This is on the list. They had foreign nationals in the lab. They didn't get an export license, and that resulted in criminal conviction. By the way, what exactly is a foreign national? This question comes up and is very important. Under the export laws, if a foreign person is in the United States, and they have permanent resident alien status, if they have a green card, they're treated as if they're a U.S. citizen under the export laws. If they're here on a Visa - a business Visa, a student Visa, H1B, or a L1, they are treated as a foreign person under the export laws and that distinction is very important. We do this analysis even on the employees of your company, as you are sorting through these issues. Another cornerstone principle here. ITAR also applies to services. So if a product is on the list; let's stick with our example of the navigational device performing services related to that device for a foreign party is on the list; installation services, troubleshooting services, warranty repair services. If you are performing those services for a foreign person or a foreign company, those are on the munitions list and subject to ITAR; Engineering services, retro-fitting services, consulting services. Here are some examples of items on the U.S. Munitions List. This is not a complete list, of course. I recommend that every person in these industries review the U.S. Munitions List carefully. In fact if you send me an email, I'll send you a link to the list so that you can go through it. You want to look at every item on the list. But these are some examples of items and how pervasive this is. If you look back at the first slide that I showed of the U.S. Munitions List, it's somewhat deceiving. That's really the table of contents for the USML. It's just the major headings. There's actually much more detailed parts and components and subsystems that are included on the list that don't show up in that table of contents. For example, category six on the USML is naval vessels. Okay. So the naval vessel, the naval destroyer or the submarine or the aircraft carrier is on the munitions list. But also most of it's subsystems, parts, components, attachments are often frequently on the list. So in addition to the ship itself, the electronics, communications gear, navigational system, the computer system and software, training equipment, the high performance materials, carbon fiber, nanotubes and the subsystems of those systems are often on the munitions list. So while the list appears quite short at first, it's actually quite broad; it drills way down. Here's an example of one of the fairly broad munitions list sub-categories: 11-86. Category 11-86 is "Any computer designed or modified for a military use." Now think about it. That is quite broad. "Any computer or design that is modified for any military use. "Any software designed or modified for any military use. "Any computer designed or modified to be used with any other item on the U.S. Munitions List." So it seems quite short, but it's actually quite broad. This particular category may be modified in the Export Control Reform. It's possible it will get moved over to the Commerce Control List. But this will still be very heavily regulated and still controlled. I'll explain how that works. Other examples of items on the list: intelligence and security; products and services are often controlled. People sometimes say, "Well, ITAR applies to military products and services, right? "Well our company does intelligence. "We don't do military. "Or, we do security for private companies. We don't do military so we shouldn't be subject to ITAR." Well, you see as in this example here, sprinkled throughout the categories under the USML are references to intelligence and security products and services. So often these activities are incorporated as part of USML. Also as I mentioned previously, parts and components of an end item are on the munitions list. Typically, the category will say, any part that's specifically designed for that end item under the new Export Control Reform. They're changing that. It will say, "specially designed." The term, "specially designed" has a very detailed meaning. Another area frequently covered are services, all right. I mentioned earlier that if you perform a service for a USML item that's controlled. In addition, there are some services that are controlled in their own right. For example, performing intelligence and security services for a foreign party is on the munitions list. Providing military advice to foreign parties, is on the list. Providing military training for foreign parties; or training of other USML items. The U.S. Department of Defense, does a lot of training for foreign military organizations. They enter treaties and make arrangements to train foreign military. But they don't actually do the training themselves. They hire U.S. contractors to perform those training services for them. So if your company is hired, by the Army, to perform training for the Canadian military, the UK military; even though you are hired by the U.S. Army and paid through the U.S. Army, if you are performing the training for the foreign military forces, that's on the munitions list and covered under ITAR. A threshold question that the State Department officials frequently will ask when they are looking at whether or not if something is on the munitions list, was whether the product was developed with military funding and DOD funding. Was there DOD research grants? SBIR contracts and similar types of funding. If they were, there's a high likelihood that the item would be on the munitions list and subject to ITAR. Not a 100 percent of the time, but a high level of likelihood. Often your SBIR contracts will say whether an item is controlled under ITAR or not. And if it says that it's not, that's a fairly strong indication that it's not controlled. If the contract is silent, however, that doesn't mean that it's not controlled on the munitions list. That means you've got to search and you've got to determine that yourself independently. This is a big issue for universities. A lot of universities do some technical research using DOD grants and funding. There was a case involving Professor John Reece Roth, the University of Tennessee. He was doing research in his lab controlled on the munitions list, plasma actuators used in UAV's. He had foreign national students participating in the research. He did not get it licensed. He was indicted and convicted to six years imprisonment. So, it's a pretty serious area. Another example is classified information. Category 17 of the U.S. Munitions List is classified technical data and services. So, if you're not sure if your product is on the munitions list, there's a process that the State Department has for determining if it's on the list. It's called the Commodity Jurisdiction Request. And this is a very valuable process. You submit a description of your product to the State Department and they'll review it and they'll come back to you and they'll tell you if it's on the list or not. And they'll do it in writing. So it creates legal certainty. It's a very valuable tool in trying to manage compliance in this area of the law. But I'll give you a warning. When you submit this request, you want to submit it a certain way. You don't want to just simply describe your product, and say - Are we on the munitions list? You want to describe why you think it fits in the standard for not being on the list. There's a standard in the law which specifies how something is on the list or not. And you want to address that standard in your application and make the argument why it shouldn't be on the list. You also want to provide evidence to support your statement of why it's not on the list. You don't want to just submit the statement, but help the analyst reach the conclusion, help do their homework for them. This is probably the single most important thing that we do for our clients in this area is that we prepare these Commodity Jurisdiction Requests and file them with DDTC. Up to now, we're talking about - are we on the list, or not? Let's say your product is on the list. Or your service is on the munitions list. What's all the big deal? What does that mean? There's a number of major requirements and some ancillary requirements that flow from that. The major requirements: number one, for physical products. If you have a physical product on the list, you're not permitted to export that product out of the United States unless you get an export license. For technical data and software, you're not permitted to send it or take it abroad or to disclose it to a foreign national in the United States unless you get an export license. You can't send it or take it out of the United States and you can't disclose it to a foreign national in the United States without getting a license. The licenses here are called "DSP-5" for physical products and for technical data. For services, company is not permitted to perform a service for a foreign party oversees or in the U.S., unless you get an export license. The license for services is called the Technical Assistance Agreement or a TAA. You may hear people say - Gee, do we need a TAA for this or that? ...and all they are asking is is this a defense service for which we need to obtain an export license? So you can't perform services for a foreign party overseas and you can't perform for the foreign party in the United States. Well how do you perform a service for a foreign party in the United States? Well, a telephone call. A company in Rotterdam purchases a defense item from a U.S. supplier and that company in Rotterdam calls you up and they want to hire your company to consult to them on how to integrate this new component into their system. And you talk to them, and you tell them how to do that, you give them advice. That advice, that phone call, is providing defense service even though you're sitting right here in the United States. Another example is our law firm has an office in Norfolk, Virginia. And a lot of foreign Navies send their ships to be retrofitted in Norfolk. These are military vessels. The contractors doing work on those vessels-- that's a defense service. Even though the ship is sitting in Norfolk, Virginia, the beneficiary is the foreign military, so that requires a TAA. The last requirement is imports. If you are importing munitions items, this may require an import license. There's different types of regulation depending on whether it's a temporary or permanent import. I won't go into the details other than to say if you see that you are importing defense items you need to determine if there's an import license required either from the DDTC or from the Bureau of Alcohol, Tobacco and Firearms. Alright, a couple of other requirements that you ought to be aware of under ITAR registration. If a company manufactures an item on the U.S. Munitions List, it's required to register with the Directory of Defense Trade Controls. Registration is fairly simple and only takes a few minutes. You do have to pay a filing fee, $2,250. Why the registration requirement? It gives DDTC the opportunity to see all the companies that make up the U.S. Defense Base. It let's them know who's out there, that's developing, manufacturing military products. Now it's important to register-- It's important to understand, that you're required to register even if you don't export any products. Companies that simply manufacture and don't export are required to register. In fact, the regulation says, any companies that manufacture or export defense articles or perform defense services are required to register. There's approximately 12,000 companies registered, according to DDTC numbers. About two thirds of those do not export. Two thirds are just manufacturers. Another requirement is record-keeping. This is very important. Companies subject to ITAR are required to maintain copies of all of their records related to their ITAR activity for a period of five years. That period can be extended in certain instances. This is often overlooked. It's a very important component. This applies to paper records, electronic records, emails, drawings, you name it. Another requirement involves brokering. The brokering regulations under ITAR are quite broad. Brokering is negotiating, arranging or facilitating the sale of a USML item. If a company is exporting a product on the munitions list, they hire another company to help them to serve as a consultant or marketing rep or sales agent. Often those independent reps are required to register as brokers under Part 129. So, if you're hiring a sales agent or a consultant, you want to make sure you know if there is a requirement for the sales agent to be registered as a broker. The brokerage regs are being amended. It looks like the amended version will come out on October 25th of 2013 and that will change the technical definitions of how these apply. But the regulations will still be there. Of course, you want to be checking all the parties to the transactions and screening them against the DDTC Debarred Parties List, as well. That is an overview of the major requirements under ITAR. I'm really describing the big picture concepts here. But what happens if something goes wrong? What happens if something goes wrong? The penalties for violations as we've heard-- these are criminal laws. Penalties include criminal sanctions up to twenty years imprisonment or financial fines of up to one million dollars per violation. They will often seek to establish more than one violation out of one particular export transaction. The U.S. Attorney or the Justice Department often will prosecute not just the corporate defendant, but officers and directors, and employees of the company and their personal capacities as well. Another remedy available for enforcement is debarment so if a company does a lot of business with the U.S. Government, it faces the prospects of being debarred. And for certain defense companies that's one of the most serious types of penalties to face in terms of business disruption. Here's some of the major cases. Recent cases over the last couple of years. The IT&T case used to be the largest case. One hundred twenty-eight million combined civil and criminal penalties. But then the BAE Systems case came along. Four hundred seventy-nine million combined civil and criminal penalties for violations. Another practice that's used by DDTC and the Justice Department is if a company is involved in a violation they will put out a press release. It will describe the company and the violation. This goes out to the press, it goes up on their website. This can be worse than almost anything. Anybody that Googles your company, this press release comes up and it describes the violations that you were involved with and it's a very serious by-product that flows from one of these investigations. About a third of the prosecutions-- if you look at both the DDTC and the Justice Department U.S. Attorney of Prosecutions, about a third of them are large companies. Two thirds are medium or small companies. What's the big deal? Why go after medium and small companies? Well, there's really two reasons. Number one, some of the most sophisticated technology in the defense base is being developed by small and mid-sized companies. Companies with these SBIR contracts, companies that are really in the garage, creating the most sophisticated technology at the earliest stages. That's the stuff that the DOD and the state department want to protect most of all. So they're very conscious of small and mid-sized companies because of the sophistication of that technology. The other reason is, they don't want mid-sized companies or small companies to think that they get a free pass, just because of their size. So, at the end of the day they're just as interested in going after mid-sized and small companies as larger companies. So for example here, this case on the screen, Allied Telesis Labs, in Raleigh, North Carolina, I've never heard of those guys, I don't know if you have. The cases are sprinkled with these smaller companies that nobody ever never heard of, but are on the radar screen. Another topic involving enforcement is a voluntary disclosure. This is a very important concept here. This can be a very valuable process. If your company is working along and you think you may have committed an export violation in the past. Perhaps you have disclosed some technical data to a foreign party without a license or performed a service without the TAA. There's a process where you can disclose that to the DDTC and if it's done the right way under certain circumstances, often they will reduce the penalty or take no enforcement action at all. But this only works if you've disclosed this, if you self-disclosed this, to DDTC before they have discovered if the violation. If they've discovered it first, and they are investigating it, then your disclosure doesn't really count. In many cases, if it's done properly and the facts support a positive outcome, often DDTC will receive the disclosure, they'll review it, and then they will send you a response that says they will not take any further action on that matter. So this can be a great methodology for cleaning up past problems, cleaning the slate, and being ready to operate in a compliant way, in activities going forward. Let's say, you're regulated under ITAR. What's your strategy for complying with the laws? We have a three-prong strategy that we recommend: Classification... application... compliance program. Classification is simple. Classification simply means you need to review your products to see if they are on the munitions list, or not. Remember in the beginning we said if the product was on the munitions list and it's regulated under ITAR, and everything flows from that. So, you really need to determine if your product is on the list or not. If you haven't done that assessment, you really can't go with the next step in this analysis and in your compliance activities. It's really first base. If you have products it's fairly straightforward. You make a list of products on a spreadsheet and you go down one by one to determine if it's on the munitions list or not. If your company is a service company, you don't provide products, you perform services, we recommend that for every new contract you review the contract to determine if those services are on the munitions list and subject to ITAR. We typically recommend that at the beginning, and at the end of every new piece of business, whether it's a new contract, a new task order, etc. To really be careful and if you really want to do it right, we recommend doing that review even prior to the award of the contract, at the RFP stage when you are submitting your proposal to get the contract. The second step for your strategy here is application. Application simply means if you need a license, or a TAA, apply for it. In most transactions, if you need an export license and you apply for it properly, the State Department will grant a license. You'll have the license and you'll be able to proceed with the transaction. Many companies think that, oh gee, if my product is subject to ITAR, I can't engage in any international activities. And nothing is farther from the truth. If you're engaged, if you've got ITAR products and you want to do overseas business, you can. You simply need to follow the steps, apply for the license and follow the conditions in the license. In fact, knowing how to get those licenses and knowing how to comply with ITAR, give you a great competitive advantage over other defense companies that don't understand that. The last part of the strategy is an export compliance program. The compliance program, of course, is a management system in your company for complying with the law. You now understand these principles because you are listening to this Webinar. But how do we get the word out from here, to everyone else in your company and to get everyone else to understand this and to follow the requirements? The compliance program is a management system for doing that. Under the compliance program, you appoint a person in your company to be in charge of compliance. We call that the Compliance Administrator, or, sometimes it's the empowered official. You would adopt written policies and procedures for complying with the law - what to to do if you have the a need for TAA, how to deal with foreign nationals; what types of controls to put in your computer system for controlled technical data. You also address training in the compliance program. Your recordkeeping, screening of prohibited parties, etc. If you have a compliance program, if you ever do get involved in an export violation in the future, often the government agencies will mitigate or reduce penalties if you have a compliance program and if you use it, and it in certain cases they will actually have no penalties. Particularly if it's combined with a voluntary disclosure. Also, under the federal criminal sentencing guidelines for criminal prosecutions, courts, judges will reduce penalties in certain instances - criminal penalties, if a corporation has a compliance program. This is probably the second most important thing that we do for our clients is prepare these compliance programs, prepare the policies and procedures, provide the training to these Senior Executives, and get them set up to operate. That's the overview of ITAR. I mentioned at the beginning, I just wanted to take a second or two to discuss the two other areas of export controls. I'll do that right now; we're making good time here, we are almost at the end. So we've got this area called ITAR For Export Controls. But there's this whole second area of regulation called the Export Administration Regulations. Why a whole separate set of regs that do almost the same thing? Well, I'll spare you the details, the boring details of the history and the politics behind it. Suffice to say that ITAR covers military products; the ERA covers commercial products. There's a product called a triggered spark gap. A triggered spark gap is a small little device that makes a very hot spark that's used for blasting kidney stones and gall bladder stones. And it was developed as a medical device. Well, that same product just so happens to be used to detonate a nuclear warhead. I'm not making this up. This is absolute truth. If you are a country in some far away place and you're trying to develop a nuclear capability, you can use a triggered spark gap to ignite your nuclear device. As a result, this product, the triggered spark gap was placed on the Commerce Control List under the Export Administration Regulations. This item was not a military item. It wasn't developed for military use. It was developed by a medical company for healthcare purposes so it's regulated under the Export Administration Regulations. These EAR have many of the same basic concepts as ITAR. The EAR has a list of products called the Commerce Control List. If your product is on the list, it may be subject to export licensing requirements depending on the country, to where it's going. Here's some examples of items on the list - this is not complete; there's about 5,000 items. These controls also are similar to ITAR also apply to technology and software as well, so they're quite extensive. So here's some examples. And you can see, these are really commercial items. This is much different than a military type of product. Also under the EAR, there's a series of requirements that apply to all export transactions even if your product is not on the Commerce Control List or the U.S. munitions list. There's a due diligence requirement under 15 CFR Part 732. You're prohibited from entering transactions with parties listed on the Denied Persons List; There's recordkeeping requirements. There's a host of steps to take for all export transactions and your export compliance administrator will coordinate all of these as part of your export compliance program. This is what the purpose of the program is, is to identify all these requirements, to put them all in one place. And you create your checklist for going through as you pursue these transactions. The third area of controls is the U.S. sanctions laws administered by OFAC. These are a foreign policy controls. A lot of people look at the OFAC sanctions as sort of a list of bad countries and you're not allowed to do business with the bad countries. And that's not a bad way. It's sort of an oversimplification, but it's not a bad way to begin to understand these rules. It used to be in the old days, a sanctioned program for only a small list of the very worst countries: Iran, Iraq, Libya, Cuba, North Korea. But in recent years, the list has exploded. There's over twenty-three separate country programs, or related sanctioned programs on the list. So it's quite extensive. Another component of these OFAC sanctions is that they maintain a list of bad parties at OFAC. It's called the List of Specially Designated Internationals. And U.S. companies are prohibited from entering transactions with parties on this list anywhere in the world. So this is the list of the terrorist organizations. The terrorist individuals. So Al-Qaeda, Osama Bin Laden. If you think about it, if you're trying to create an embargo against Al-Qaeda, to isolate Al-Qaeda, what country do you put this as a freeze in? Do you put it in Pakistan? Do you put it in Afghanistan? Do you put it in Saudi Arabia? Well, Al-Qaeda is in all of those countries. For organizations like Al-Qaeda, you can't really put a ban in a particular country. You've got to put the ban on the person's or entities associated with that organization. So that's the purpose behind this list of specially designated nationals. Again, your compliance administrator will include that as one of the items to be reviewing in each one of your transactions as part of your compliance program. The last part here-- I just want to take a minute and mention this export control reform. This is an important caveat here that goes with the discussion of ITAR and the other export laws. This goes back to 2009. In August 2009, President Obama initiated the Export Control Reform. The purpose, the goal was to streamline and rationalize the U.S. export laws. There were initially a number of very aggressive goals to try to accomplish this task. Unfortunately, they determined early on, that it was probably a little too aggressive to accomplish all the goals. They simplified. They eliminated a number of goals, and kinda simplified this but it still had made progress with a smaller number of goals that are still important in what we're doing. One of the most important themes behind the Export Control Reform is to rationalize and simplify the U.S. Munitions List and the Commerce Control List. So we have these two lists of products and they're really set up differently. And the nomenclature and the organization and the way they describe things is differently. So one of the goals here was to read the two lists consistent to rationalize them and to simplify them. So as part of this process, the State Department and the Defense Department, went through the U.S. Munitions List and they edited it. And they redrafted many of the entries. They made them more technical, what they called "a more positive list." And they actually removed certain items from the munitions list. And so in the course of doing that, they actually made some progress in simplifying the list. Part of that effort was to try to reduce certain very basic generic parts and components from the munitions list as part of the review. So that's the good news. The bad news is, the items that were removed from the list, unfortunately, they're not decontrolled. Rather, those items have been sent over to the Commerce Department to be regulated for controls by the Commerce Department under the Export Administration Regulations. In fact, at Commerce, they set up a new section of the Commerce Control List, called the Series 600. And items that are transferred off of the U.S. Munitions List, are sent over to Commerce, and they then are put on the Series 600 in the Commerce Control List. If an item's on the Series 600, it will still require an export license to exports to all destinations, except Canada, it will still be subject to prohibition from going to countries that are subject to U.S. Arms Embargoes. The so-called "prescribed countries" under section 126.1 and will still be subject to many other restrictions under ITAR. But there will be a number of advantages as well. Once regulated at Commerce, the items will be subject to a number of additional license exceptions, so it could make exporting somewhat simpler. One of the most significant exceptions is the Strategic Trade Authorization, or STA. Also, on the CCO you will be able to take advantage of the de minimis rules for foreign manufactured items using U.S. parts and components. Services, the regulation of services, will be reduced significantly as well as part of the reform. So as you can see, the goal is to simplify. Unfortunately they're not decontrolling the items, they are just sending them over to a different regulatory framework and the goal is to hopefully make it a little more simpler as you go through the process. The status of the new regulations, the first round of these changes, the first categories under the USML that have been revised - those changes will go into effect on October 15, 2013, and the remainder of the changes of the various categories of the USML will go into effect on a rolling basis later on through 2013 and throughout 2014. So they are doing a few categories at a time of the U.S. Munitions List on a rolling basis. The purpose of the rolling effective dates is to give companies an opportunity to review these and change their processes to adopt to the new system. One important outcome of the controlled reform is certain parts, components and accessories will be shifted to the Commerce Control List or possibly deregulated completely. Also, there will be very significant changes in the satellite industry. Manufacturers of satellites and of satellite parts, components and systems. This will open up a lot of export opportunities for those manufacturers. And I can explain more about that if you send me an email, I can provide a lot more details on how that's going to affect these industries. As part of the new regulations they'r adopting a new definition of an important term called, "specially designed." This is a new term that's used both in the Munitions List and the Commerce Control List to see if certain parts, components and accessories are included on the list. The definition is quite detailed, so I'm not going to go through it right now. I've included it here, just for you to see what it is, and I recommend that everyone reviewing this take a moment to go through this, at this point as you go through all the categories just to see how this applies to your product. Also, as part of the Export Controlled Reform, there are a number of transition roles included in both ITAR and the EAR. It's sort of what can companies do to deal with licensing during the period that these changes that will be going into effect from October 15th, 2013 through 2014. Once again I'm not going to go through into detail with all of this, but I've laid them out here, and you should recognize that there are some good principles here, there are some devices for you to help manage the transition from one type of control to one another. The last item is just our recommendations for companies. Steps to take for dealing with the Export Control Reform for your company and the steps are listed here. The most important, of course, is review the classifications of your company's products. Classifications on the new categories of the Munitions List as well as the companion sections of the Commerce Control List. You want to review these as they come out. Or preferably review them in advance. Review the earlier versions of the regs so you can have enough time to prepare for the changes. You may need to apply the specially designed test, the test that's referenced in the previous line for analyzing if your parts and components are covered . You might need to apply for commodity jurisdiction or CCATS classifications at BIS, if you're not sure of the classification. If you do have a change in classification, you're going to want it determined in how that impacts your internal policies, your compliance requirements; your requirements for obtaining licenses change, TAA's, import licenses, whenever any of those in change. And you're going to want a plan on how to make this transition during this transition period. The final piece of this, of course, is if you do have changes, you want to amend your export compliance program, to reflect those changes. Communicate those changes to your staff through training. And very important, it is often overlooked, you want to communicate with your supply chain parties, your subcontractors, your prime contractors, to make sure everyone is in agreement on changes in the process as you are working with these other parties. Okay, that's the end of this presentation. Normally in our webinars, I take questions from the audience. Since this is a pre-recorded format here, my recommendation is, you should feel free to send me an email or give me a call. My contact information is here. If you have questions on how this would apply, either now or in the course of the Export Control Reform, please feel free to contact me. At this point, that's the end of our presentation, and I thank you for participating.