There are over one million non-U.S. students, scholars and faculty at universities across the U.S, many of which conduct cutting-edge research that greatly contributes to U.S. national and economic security. If such research does not qualify as “fundamental research,” the technology created at universities may constitute export-controlled material and require certain access and publication restrictions, particularly affecting collaboration with non-U.S. persons on- or off-campus. The penalties for violations can be drastic (going as far as jail time). Therefore, universities’ understanding of — and compliance with — export regulations is paramount. University compliance officers, general counsel and faculty should have a handle on overall compliance (see our prior alert) and monitor the recent federal developments summarized in this alert.
With respect to recent government developments, the U.S. Government Accountability Office (“GAO”) published a report in May 2020 recommending that the United States Department of State (“State”) and Department of Commerce (“Commerce”) improve their respective guidance and outreach to universities to better address university-specific export controls.
According to the report, university officials raised concerns that export guidance and outreach from Commerce and State does not adequately address export compliance issues specific to universities. As a result, without additional guidance that addresses these specific issues, universities do not have the requisite information needed to fully comply with export regulations and properly safeguard export-controlled items.
The GAO found that a majority of the U.S. universities have robust export compliance practices that align with both State and Commerce guidelines — especially in the following four areas: (1) Management commitment and organizational structure, (2) Export authorization and tracking export-controlled items, (3) Recordkeeping, and (4) Reporting Violations. The GAO found gaps, however, in other key compliance areas, including risk assessments, internal audits, export compliance manuals and training for its researchers and others involved in implementing export control regulations.
Practice Note: Based on our experience, one common compliance challenge is training faculty, researchers and administrative functions to recognize export control limitations early in the process of a project (e.g., before a non-disclosure agreement is signed with a potential third party partner). This is a significant step because agreeing to restrictions on disclosure may wholly or partially invalidate the “fundamental research” exemption before the project is even off the ground and may limit the university’s flexibility as respects staffing and publication.
Lastly, the GAO further recommended that the Department of Defense (“DOD”) take steps to ensure that its program and contracting officers are interpreting export controls consistent with Commerce and State regulations/guidance, particularly for DOD-funded university research programs.
Next Steps and Recommendations
State, Commerce, and DOD all concurred with the GAO’s recommendations and provided information regarding their respective next steps to align with the GAO’s recommendations. For instance, State noted that it is will expand its outreach to universities and is planning to issue additional guidance to further support universities’ understanding of the ITAR, as well as revising its export compliance guidelines to address periodic risk assessments. We recommend that universities undertake a properly scoped export compliance assessment, with a particular emphasis on the areas that the GAO found deficient among universities, namely export compliance risk assessments, audits, compliance programs and internal training.