• Export Licenses and Their Interplay with the Employment of Foreign Nationals
  • October 10, 2005
  • Law Firm: Dinsmore & Shohl LLP - Cincinnati Office
  • Export Control License Issues May Impede a Visa Application. On March 28, 2005, the U.S. Bureau of Industry and Security ("BIS") within the U.S. Department of Commerce published a proposed regulation aimed at revising and clarifying the "deemed export" regulations. This proposed rule is part of the U.S. government's increased scrutiny of foreign nationals in the post 9/11 era, with regard to monitoring their compliance with U.S. immigration laws and ensuring that they do not have access to technologies that the U.S. government regards as sensitive to U.S. security interests.

    In order to protect national security, the United States controls exports of certain technologies that have both civilian and military uses. These "dual use" export controls also include "deemed export" rules with govern the transfer of information about controlled technologies to foreign nationals who are in the United States.

    As a result of these export controls, U.S. companies that employ, sponsor or engage foreign nationals to work with controlled technologies may be required to obtain an export license before a foreign national can acquire a U.S. work visa to join the company. If the U.S. consular officer determines that a deemed export will occur upon the arrival of a foreign national worker in H-1B, L or any other visa status, the consular officer may refuse to issue the visa due to the company's failure to first obtain an export license. We understand that the U.S. Department of Homeland Security may amend the work visa petition form (I-129) used for work visa petitions in the future in order to specifically ask whether the company needs an export license for such technology and, if so, whether it has an export license relating to the hire of the foreign national. Some U.S. Consulates, particularly those in India and China, have begun to occasionally ask visa applicants if the host U.S. company has an export license relating to its technology.

    The Deemed Export Rule - What It Is. Federal regulations define an export as either an actual shipment of controlled items out of the United States or a release of controlled technology or software to a foreign national in the United States. A release of technology is deemed to be an export to the home country of the foreign national. This type of "deemed export" can occur in a variety of situations, including visual inspection of controlled technology, verbal communication, or the application to circumstances abroad of personal knowledge or technical experience acquired in the United States. An employer must seek an export license if the actual shipment of that technology to the foreign national would require a license. Even a business visitor from a subsidiary or customer site abroad who views a controlled technology could conceivably trigger a deemed export.

    Every situation is unique. Application of export controls to your company depends upon the type of technology at issue and the immigration status and/or citizenship of the foreign national. Some examples of controlled technology that may require an export license include nuclear technologies, chemicals, materials processing, electronics, computers, telecommunications, lasers, and navigation technology.

    Exceptions to the Deemed Export Rule. It is important to note that there are exceptions to the type of technology subject to export controls. For example, technology that is publicly available does not require a license. Publicly available technology includes technology that has been or will be published, results from fundamental research, and certain other information that is disseminated publicly. Information about technology is considered "published" when it is generally accessible to the public. Published information includes material available for general distribution, available at public or university libraries, found in open patent applications or patents, or released at an open conference.

    Under the fundamental research exception, export controls also make a distinction between basic applied research typically published and research that is restricted due to proprietary or national security reasons. Research that is typically published and shared in the scientific community is not subject to the deemed export rule. However, if the public availability of research is restricted or delayed due to certain national security controls or proprietary concerns, then such research may be subject to the deemed export rule.

    The deemed export rule is not applicable to all foreign nationals. Permanent residents, U.S. citizens, refugees and asylees are not subject to the deemed export rule. However, all other visa holders, including but not limited to H-1B, L-1, O-1, TN, E, F, and J visa holders, are subject to the rule.

    What Does A Company Do If A Deemed Export Will Occur? If both the technology and the immigration status/country of citizenship of the foreign national are subject to the deemed export rule, the company must apply for and receive an export license from Bureau of Industry and Security at the U.S. Department of Commerce. The application must include a description of the technology, the reason the technology is controlled, the planned destination, and the proposed end user. Information specific to the foreign national is also required, including the individual's resume, visa type, and a list of the individual's publications. One application may include several foreign nationals. Typically, export licenses are valid for two years.

    Penalties for Noncompliance. Sanctions for violation of export regulations can include civil penalties and denial of export privileges. The sanctions can significantly harm businesses both due to financial losses stemming directly from payment of such penalties and from the losses incurred by businesses' inability to export for a specified length of time. In addition, if a U.S. company willfully violates the export control laws, sanctions can include criminal crimes and/or imprisonment. As noted earlier, the company may also encounter an inability to hire key foreign national workers due a consular refusal to issue a visa. Therefore, it is critical for companies to be cognizant of export controls and their duty under law to properly deal with controlled technology. The attention that this issue is generating is increasing as is its relationship to the visa issuance process.

    Steps for Every Company To Take. The deemed export rule and its exceptions can be difficult to navigate. The above description provides a brief overview of the key issues and does not offer a comprehensive evaluation of the rule's numerous provisions. We strongly recommend that your company contact its intellectual property lawyer to review existing procedures regarding deemed exports including their relationship to the hire of foreign national employees.