Emerging Challenges Under Export Control Laws for the Aerospace and Defense Industry
This lw.com Q&A with Latham & Watkins partner William McGlone and counsel Les Carnegie explores the evolving landscape of export controls and economic sanctions and the compliance challenges facing companies in the aerospace and defense industry.
What trends are you seeing related to export controls and economic sanctions?
McGlone: In my 25 years of practice in this area, I’ve never seen anything like what we are now witnessing in the marketplace: Growing numbers of US government agencies dedicated to enforcement with expanding budgets for enforcement — even in an age of budget cuts, much greater awareness within the Justice Department and among US Attorney Offices across the country of export controls, growing numbers of criminal prosecutions, enhanced interagency coordination and cooperation on enforcement initiatives, improved ability to detect violations from now mandatory electronic export documentation requirements, higher statutory penalties for violations, and over the past five years the biggest settlements ever in the history of OFAC [Office of Foreign Assets Control] sanctions and ITAR [International Traffic in Arms Regulations] controls.
How are these trends impacting the aerospace and defense industry?
McGlone: We are seeing much greater pressure on companies in the aerospace and defense industry to manage internal compliance. The sheer complexity and evolving nature of the regulations require that companies develop sophisticated and nimble processes for ensuring that they have correctly determined export control jurisdiction and classification for their products and technologies – and applied appropriate controls and security measures, both physical and electronic, on all sensitive data.
Can you describe some of the compliance best practices that have emerged?
McGlone: Having systems in place for correctly classifying and determining jurisdiction for products and technology is key. One of the things that we’ve seen is a greater role for engineering at companies in not only providing advice and guidance but actually being full-fledged members of export controls and compliance teams.
In addition, internal systems for protecting proprietary IP can be leveraged and combined with initiatives to protect sensitive technology for export controls reasons. We’ve seen growing efforts to coordinate export and controls compliance functions with the IT infrastructure and security personnel within companies to ensure that there is robust electronic security on sensitive information.
What is the role of the new Export Enforcement Coordination Center or E2C2?
Carnegie: The center, which has been operational since April 2012, is intended to serve as the primary government forum for agencies to coordinate and enhance export control enforcement efforts. Several agencies participate in the work of the center, including Commerce, Defense, Energy, State, Treasury, Homeland Security and the Justice Departments.
The center’s mission is to de-conflict criminal and administrative enforcement operation, to increase coordination of industry enforcement outreach activities, and serve as the primary point of contact between enforcement agencies and export licensing agencies for enforcement and licensing matters. The creation of this center reflects an effort to increase coordination and information sharing between and among agencies that administer and enforce US export control laws.