In the realm of export compliance, most companies focus on tangible goods and technologies leaving national borders. However, not all exports are physical. Deemed exports—when controlled technology or information is shared with foreign nationals within the borders of a country—pose a significant, often overlooked, compliance risk. Understanding deemed exports is crucial for businesses dealing with sensitive technologies, especially those subject to strict export control regulations. Here’s what you need to know to ensure compliance and avoid penalties.
What Are Deemed Exports?
A deemed export occurs when controlled technology, technical data, or source code is transferred to a foreign national within the U.S. or other home country. This can happen through verbal communication, emails, demonstrations, training, or even access to internal systems. When this occurs, the law considers the export to have been made to the individual’s home country, regardless of whether the technology physically leaves the country.
Deemed exports are regulated under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), both of which impose strict controls on sensitive technologies that could have military, strategic, or dual-use applications.
Are You at Risk of a Deemed Export Violation?
Many companies may not realize they are at risk of a deemed export violation until it’s too late. Deemed exports can occur in day-to-day business activities such as:
- Hiring foreign nationals: Employees from countries under export control restrictions may inadvertently receive access to controlled technologies through their work.
- Collaborating with foreign researchers: Research institutions and companies working on joint projects with foreign nationals can share technical data that is subject to export controls.
- Providing access to technology: Allowing foreign nationals to access databases, servers, or shared drives containing sensitive technical data without proper clearance can trigger a deemed export violation.
The key to avoiding violations is recognizing the situations where deemed exports may occur and implementing strategies to safeguard against unauthorized access to controlled information.
How to Ensure Deemed Export Compliance
To minimize the risk of deemed export violations, companies should adopt the following practices:
1. Identify Controlled Technologies and Data
The first step in ensuring compliance is identifying which of your company’s technologies, data, or software is subject to export controls. Under the EAR, items are classified by their Export Control Classification Number (ECCN), which determines if they require a license for deemed exports. Under ITAR, technologies related to defense articles are highly restricted and almost always require a license.
Knowing which products, services, or information in your organization fall under these regulations is critical for staying compliant.
2. Screen Employees and Collaborators
Before hiring or collaborating with foreign nationals, companies must screen individuals to determine if their country of origin is subject to export restrictions. While some foreign nationals may be exempt due to permanent residency or special statuses, many others will require an export license before being granted access to sensitive data or technology.
Implementing a thorough screening process helps ensure that only authorized individuals can access controlled information.
3. Obtain Necessary Export Licenses
In cases where a foreign national needs to work with or access controlled technology, your company will likely need to apply for an export license. The process of obtaining a license involves submitting detailed information to the U.S. Department of Commerce (for EAR-controlled items) or the U.S. Department of State (for ITAR-controlled items).
Licenses take time to process, so plan ahead to ensure that your operations aren’t delayed while waiting for approvals.
4. Implement Access Controls
Restricting access to sensitive data is one of the most effective ways to prevent deemed export violations. Use role-based access controls (RBAC) to ensure that only authorized employees can access controlled technologies and information. Implement cybersecurity measures, such as encrypted databases, to prevent unauthorized access by foreign nationals.
Limiting access to only what is necessary for each individual’s role reduces the likelihood of an accidental deemed export.
5. Train Employees on Deemed Exports
Export compliance training should extend beyond your legal or compliance team. All employees, especially those working with sensitive technologies, should understand the concept of deemed exports and the risks associated with sharing information with foreign nationals. Regular training sessions can raise awareness of compliance risks and ensure that everyone knows the procedures for handling sensitive data.
6. Monitor and Audit for Compliance
Maintaining an ongoing monitoring and audit system helps identify any potential risks or violations before they become a problem. Conduct regular audits of your internal systems to ensure that access to sensitive data is controlled, licenses are up to date, and your compliance processes are effective.
By proactively monitoring for deemed export risks, companies can stay compliant and avoid costly penalties.
Deemed exports are an often overlooked but critical component of export compliance. For businesses handling controlled technologies or sensitive data, understanding the risks of deemed exports and taking steps to mitigate them is essential. By identifying controlled technologies, screening employees, obtaining necessary licenses, and implementing strict access controls, companies can avoid violations and stay on the right side of the law.
Staying compliant with deemed export regulations not only protects your business from hefty fines and penalties, but it also safeguards your reputation and ensures smooth operations when dealing with global markets. As global collaboration increases, understanding and managing the risks of deemed exports is more important than ever.
Does your company need help understanding deemed exports and if you are you at risk? Contact Maribod Global today!
