Non Disclosure Agreement Legality by anj60002


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Management and Contracts
Flory B. Ellis, Sector Manager, Export/Import Management,
Northrop Grumman Corporation

August 5, 2008

Contracts/Subcontracts and Export
Management – Working Together

• Contracts is the first line of defense
  – Awareness of New Activities
  – Contractual Language
     • Drive Compliance
     • Protect the Company
     • Facilitate Timely Exports

• Contracts
  – Foreign Contracts
     • Foreign Company as a Team-Mate
     • Foreign entity as a Customer
  – USG Contracts
     • USG Customer
     • Foreign Military Sales (FMS)
  – Subcontracts
     • Foreign
     • Domestic
  – Best Practices/Take-Aways

Foreign Contracts

Foreign Company as a Teammate

Non-Disclosure and Teaming
• Should contain language that limits
  the exchanges of information in
  accordance with Export Compliance
• Protective Clauses:
  – Party becomes “ineligible”
  – Country becomes “debarred” or

Technical Assistance Agreements
• With whom are we teaming?
• What do we plan to exchange?
• Do we plan to jointly market? To
• Do they utilize subs with whom we will
  need to interact?
• Will they be marketing our products on
  our behalf? Vice Versa?

Foreign Contracts

Foreign Entity as a Customer

  Contractual Terms
• Should indicate that re-transfer/re-export of
  articles exported to them must be in
  accordance with U.S. Government
• Return/Repair language
• Protective Clauses:
   – Party becomes “ineligible”
   – Country becomes “debarred” or “embargoed”

Technical Assistance Agreements
• Does the Customer use any on-site
  Contractors with whom we will be
  technically exchanging?
• What do we plan to exchange?
• What is the duration of the Contract?
• What is the VALUE of the Contract?

USG Contracts

USG Customer

Interim DFAR rule

• Published Jul-21-08
  – Requires contractors to comply with export
    control laws
  – Requires reporting when access to export
    controlled information/hardware is

Support of U.S. Customer

 The ONLY office authorized to approve
Defense Article exports is the Directorate of
Defense Trade Controls, U.S. Department of

What does this Mean?

• Foreign Exchanges on behalf of out
  U.S. Government customer IS an
  Export and DOES require approval
  under the International Traffic in Arms
  Regulations (ITAR)
  – Foreign Disclosure Approval IS NOT
    Export Approval
  – Government-to-Government Agreements
    ARE NOT Export Approvals

How Can I Export in Support of my USG
 • Via Technical Assistance Agreement
   – Must be signed by the foreign party
   – Export much be within the confines of the
     Scope of Work and the Provisos
 • Via Exemption
   – Contract allows self certification under the
   – Exemption Letter is issued by the

For Example:
• If your company is asked interact with a foreign
  party the following should be addressed:
  – “Are we conducting an export?”
      • See definitions of “export”, “technical data” and “defense services”
  – If the answer is “yes” then ask, “Do we have approval for this
      • Does the Contract allow for self-certification of an ITAR Exemption?
      • Is there an active agreement?
          – Is it valid (scope, etc.)?
          – Are the provisos ok?
      • Is there an exemption letter?
          – Is the scope valid?
          – Are the limitations acceptable?

How can Contracts Help?
• Review the RFP to Determine if there will be any
    foreign interaction. If YES, BEST way to address is with a specific clause in the
    Contract (for example):

•   Contractor will be required to travel outside the United States, and will be
    responsible for temporary imports and exports of defense articles,
    including technical data (loaded via hard drive, CD, etc.) and the
    performance of defense services in support of [Insert the name of the
    operation, cooperative project or sales program (e.g., Operation
    Iraqi Freedom, USCENTCOM CDI, JWFC] and pursuant to 22 CFR
    126.4(a). Contractor will be prepared to perform defense services and
    temporarily import and export to the following foreign persons: [insert all
    the foreign persons (e,g, UK MoD (UK), BAE (UK), Thales
    (France), Alenia Marconi (Italy), with the country in
    parenthesis]. [Or, to foreign persons within the USCENTCOM Area
    of Responsibility, at the express direction of and under the
    supervision of the USCENTCOM.]

How can Contracts Help?
• If the Customer will NOT Accept the clause,
  discuss a Technical Assistance Agreement,
  or other options with your Empowered Official

  – Regulations require that a TAA identify:
     • All Foreign Parties who will have access
       to USG technical information
     • What (specifically) will be transferred
     • The duration

How can Contracts Help?
• If there is neither a Contracts clause OR a
  TAA, and exemption from the Service/Agency
  must be obtained:
  – Once a determination has been made that an exemption is
     • Provide pertinent information regarding the event to SEIM
         – Event title, scope, location, and date (s)
         – Subs involved
         – Foreign countries / organizations involved
              » Will event be limited to foreign government personnel or will foreign
                  contractors participate?
         – What data will be provided
              » Foreign disclosure required?
         – Classification
         – Will there be direct contact w/foreigners or will interface be thru USG
           personnel only?
         – Identify what will be shipped / emailed / hand-carried abroad

USG Contracts

Foreign Military Sales

FMS Requirements
• Sales Agreement between Governments
   – USG is your customer.
   – Consolidates international requirements for greater
     production economy.
   – Assures standardization, interoperability.
   – Generally 120 days from Letter of Request (LOR) to Letter
     of Offer and Acceptance (LOA) for 80% of LOR’s.

• Exports typically controlled/implemented via ITAR
  Article 126.6 Exemptions.
   – LOA and Contract must be consistently structured.
   – May be instances where ITAR 126.6 not applicable and a separate
     TAA/MLA is required.
       • License plan would include a schedule based on need date.



Establishing the Relationship
• Screening or Vetting the Supplier
   – Screen the Company against the USG Denied Lists
     especially the State Department’s Debarred List
   – Cannot participate with a debarred company
• Non-Disclosure Agreement
   – Foreign source of supply, the NDA should include:
       • Re-Export/Re-Transfer language

Moving Forward with the Relationship
• Strategies
     – Export
     – Import
• PO or Subcontract
    – Export
         • Re-export/re-transfer language
         • Sales Reports Responsibility and Other Reporting
         • Protection against debarment/proscription
    – Import
         • INCOTERMS
         • Special instructions for importing



Establishing the Relationship
• Screening or Vetting the Supplier
   – Screen the Company against the USG Denied Lists
     especially the State Department’s Debarred List
   – Cannot participate with a debarred company
• Non-Disclosure Agreement
   – Domestic source of supply, the NDA should include:
       • Notice of the Jurisdiction of the items to be received

Moving Forward with the Relationship
• PO or Subcontract
   – Export
       • Registration Requirement of the Party
       • Information on the Jurisdiction of the items
       • Responsibility to comply with ALL US Export laws
       • If an FMS case, ensure that the appropriate FMS language is
         flowed down to the sub, if required
       • If actual exports are to take place
           – Responsible party for the export approvals
       • Protection language against debarment/proscription
   – Import
       • If actual imports are to take place:
           – INCOTERMS
             Importer of Record

Best Practices and Take

Managing Contract Deliverables
• Licenses and Agreements can take 1-6 months or
  longer depending on:
   – Product maturity (State-of-the-Art vs. 30 Year-Old Technology)
   – Previous Licensing History (Repeat vs. First Time)
   – Level of Data to be Provided (Operators Manual vs. Manufacturing
   – Country of Ultimate Destination (NATO vs. Non-NATO)
   – Complexity of Transaction
     (Hardware Export vs. Software Design)
   – Parties to the Transaction (Military, Government, or Private)
   – End Use (Military vs. Civil Application)
   – Congressional Notification Implications

Other Contracting Pitfalls
• Timing – the earlier Export Management is
  made aware of a Contract, the more able we
  are to assist
• Do NOT assume that a U.S. Government
  contract does NOT have exports!
  – Just because your Customer said it is OK, does
    NOT mean that it is!
• Exports can occur in the United States!
• Exports can be totally intangible

•   Clearly apportion compliance risks & responsibilities
    • Subcontracts Clauses and P.O. language
    • Export/Import plans

•   Don’t get boxed in by a supplier compliance problem
    • Communicate early and often regarding issues
    • Work together to resolve problems expeditiously
    • Be prepared to modify or terminate relationships
       • QUALIFY Second Source Suppliers!

  Other Best Practices
• Screen all parties
• Periodically self-audit/assess compliance
• Consider whether the relationship has

   Export Management and Contracts/Subcontracts
    can work together as a team to strengthen the
      compliance and competitiveness of their


 Department of State vs.
 Department of Commerce
 State Dept                            Commerce Dept


 Defense Articles,                    Commercial or Dual Use
Services, and Data                       Equipment and
                     Dual Use Items

Definitions – Defense Article
• Any item on the USML
  – 21 Categories

• Rule of thumb – if it has been DESIGNED, MODIFIED,
  USE, it is a defense article
  – Examples
     • Seats on Light Armored Vehicles
     • Bathroom installations on Destroyers

  – Exceptions
     • Commercial Communications Satellites
     • Personal Protective Wear

Definitions – Export
• Sending or taking a defense article out of the United States
• Transferring registration, control or ownership to a foreign
  person of any aircraft, vessel, or satellite covered by the
  USML, whether in the United States or abroad
• Disclosing (including oral or visual disclosure) or transferring
  in the United States any defense article to an embassy, any
  agency or subdivision of a foreign government; or
• Disclosing (including oral or visual disclosure) or transferring
  technical data to a foreign person, whether in the United
  States or abroad; or
• Performing a defense service on behalf of, or for the benefit
  of, a foreign person, whether in the United States or abroad

Definitions – Technical Data
• Information which is required for the design, development,
  production, manufacture, assembly, operation, repair,
  testing, maintenance or modification of defense articles.
  This includes information in the form of blueprints,
  drawings, photographs, plans, instructions and
• Classified information relating to defense articles and
  defense services
• Information covered by an invention secrecy order
• Software directly related to defense articles

NOTE: Does NOT include information in the public domain

Definitions – Public Domain
• Information which is published and is generally
  accessible or available to the public:
  – Through sales at newsstands or bookstores
  – Through subscriptions which are available without restriction to any
    individual who desires to obtain or purchase the published
  – Through second call mailing privileges granted by the USG
  – Libraries
  – Patent information
  – Through unlimited distribution at conferences, meetings, seminars,
    trade shows or exhibitions, generally accessible by the public
  – OFOISR/Public Release
  – Fundamental research

Definitions – Defense Service
• The furnishing of assistance (including training) to foreign
  persons, whether in the United States or abroad in the
  design, development, engineering, manufacture,
  production, assembly, testing, repair, maintenance,
  modification, operation, demilitarization, destruction,
  processing or use of defense articles;
• The furnishing to foreign persons technical data
• Military training of foreign units and forces, regular and
  irregular, including formal or informal instructions of
  foreign persons in the United States or abroad or by
  correspondence courses, technical, educational, or
  information publications and media of all kinds, training
  aid, orientation, training exercise, and military advice

Definitions – US Person

• A lawful permanent resident (i.e. green
  card holder or US citizen)
• Protected individual (i.e. refugee)
• Also covers corporations, business
  associations, partnerships, societies,
  trusts, or any other entity, organization
  or group that is incorporated to do
  business in the United States.
• Includes USG entities

Definitions – Foreign Person
• Any natural person who is NOT a lawful
  permanent resident of the United States
• Any person who is NOT designated a protected
  individual by the United States
• Any foreign corporation, business association,
  partnership, trust, society or any other entity or
  group that is not incorporated or organized to do
  business in the United States.
• Also includes international organizations, foreign
  governments and any agency or subdivision of
  foreign governments

Definitions – Empowered Official
• A US Person who:
   – Is directly employed by the applicant (Northrop Grumman) or a subsidiary in a
     position of having authority for policy or management within the applicants
     organization; and
   – Is legally empowered in writing by the applicant to sign license applications or
     other requests for approval on behalf of the applicant; and
   – Understands the provisions and requirements of various export control
     statutes and regulations, and the criminal liability; civil liability and
     administrative penalties for violating the AECA and ITAR; and
   – Has the independent authority to:
       • Inquire into any aspect of a proposed export or temporary import by the applicant,
       • Verify the legality of the transaction and the accuracy of the information to be
         submitted, and
       • Refuse to sign any license application or other request for approval without
         prejudice or other adverse recourse

Types of export approvals
  –   DSP-5 – for the PERMANENT export of hardware or technical data
  –   DSP-61 – for the TEMPORARY import of hardware
  –   DSP-73 – for the TEMPORARY export of hardware
• Agreements
  – Technical Assistance Agreement – for the transfer of technical data
    AND defense services
  – Manufacturing License Agreement – for the transfer of technical data,
    defense services AND manufacturing rights
• Exemptions
  – Export approval that DOES not require a DSP or an Agreement, but
    DOES require that the exporter meet pre-defined criteria

Commonly used exemptions:
• 125.4(b)(1) – Technical Data Pursuant
  to a written request of DOD
  – Technical Data, including classified
    information, to be disclosed pursuant to an
    official written request or directive from the
    U.S. Department of Defense
     • Usually accomplished through a signed letter from
       the USG citing the exemption
     • ALL limitations on the letter MUST be adhered to

Commonly used exemptions:
• 126.4(a)
  – A license is not required for the temporary
    import, or temporary export, of any
    defense article, including technical data or
    the performance of the defense service,
    by or for any agency of the U.S.
     • For official use by any such agency
     • For carrying out any foreign assistance,
       cooperative project or sales program
       authorized by law and subject to control by the
       President by other means

  Commonly used exemptions
• 126.4(a)
  – Usually issued by USG through a letter
    • All limitations outlines in the letter must be
      adhered to


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