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American ShipperLegal issuesTrade and Compliance

Stopping controlled exports that walk and talk

U.S. enforcement agencies are turning up the heat on Chinese nationals who illicitly obtain and attempt to smuggle American-made technologies back to China.

The recent arrest of a 29-year-old Chinese cancer researcher in Boston who allegedly attempted to smuggle laboratory research and samples back to China should be a warning to all American university and corporate laboratories that the federal government is zeroing in on its enforcement against intellectual property and trade secrets theft, an export compliance consultant said.

“This case should serve as a wake-up call to any research organization to properly vet foreign nationals that they hire,” said Paul DiVecchio, principal of Boston-based DiVecchio & Associates.

Zaosong Zheng was arrested on Dec. 10 at Boston’s Logan International Airport before boarding a flight to Beijing. In his luggage allegedly were 21 vials of cancer cells generated in the lab of his former employer, Beth Israel Deaconess Medical Center.

The FBI viewed Zheng’s actions as a form of intelligence gathering for the Chinese government, according to a Dec. 31 article in The New York Times.

Not only are foreign nationals who are caught subject to potential fines and jail time but the organizations that hired them risk significant monetary penalties and restrictions for noncompliance with the nation’s deemed export rules, DiVecchio said.

The Commerce Department’s Bureau of Industry and Security (BIS) and State Department’s Directorate of Defense Trade Controls determine whether an export license is required to release technological know-how to a foreign national working in the United States.

So-called “deemed export” controls were implemented in 1994 to keep a lid on foreign nationals gaining unauthorized access to certain high-tech commercial technologies that could be used in the development of weapons systems in unfriendly countries.

“Dangers of illegal technology transfers are very real,” said BIS officials during a “deemed exports overview” presentation at the agency’s 2019 Annual Conference on Export Controls in Washington, D.C., last summer.

BIS noted that according to the U.S. intelligence community, 56 countries use “clandestine and illegal methods” to gather details on U.S. technology, resulting in billions of dollars lost to American companies and research institutions. China and Iran currently top the agency’s list of countries that carry out these activities.

The key technologies targeted by these countries, according to BIS, include biotechnology and pharmaceuticals, nanotechnology, quantum computing, advanced materials, submersible vehicles, acoustic communications and sensors, communications and encryption technology, satellites and spacecraft, and weapons systems.

During the past 20 years, the Government Accountability Office and congressional lawmakers have been critical of the federal government’s handling of deemed export regulations and policies.

BIS said U.S. organizations that hire foreign nationals should have an “effective technology control plan,” which includes management commitment, a physical security plan, information security plan, personnel screening procedures, training and awareness program, and self-evaluation program.

The Commerce Department agency expects a deemed export license application for a foreign national to include a comprehensive resume and job description, his or her qualifications, letter of explanation, visa status and organizational safeguards to limit access to controlled technologies and data.

BIS approved 846 deemed export license applications in 2018, compared to 1,394 in 2017. The agency returned without action 150 applications in 2018, compared to 107 the year before. The total number of these applications received by the agency in 2018, however, was 1,007, compared to 1,525 in 2017.

“Deemed export compliance benefits from a strong, established and well-maintained technology control plan, successful interaction between internal stakeholders and meaningful annual assessments of its program,” BIS said during its 2019 conference.

“Meaningful deemed export compliance also requires active partnership between government and all affected stakeholders,” the agency added.

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Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.

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