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scenarios that would involve the risks above mentioned that
could result from the newly required server and extended
VPN access by the Chinese government. Each U.S. sanction
imposes severe penalties on violators, but the more recent
sanctions that respond to the exportation (including unintentional) of U.S. intellectual property are particularly severe
- imposing fines of up to $1 million and imprisonment of 20
years per violation. Given that nearly all cases involve multiple
alleged violations, these potential penalties are formidable.
POTENT RISKS FOR IMPORTERS AND EXPORTERS
Even though the new Chinese laws are directed at entities
in China, and their global related entities, the risk they
create for U.S. importers and exporters is equally salient.
For instance, many import transactions require sharing
of important technical information by the importer to
facilitate assurance that technical specs associated with the
import product will meet technical requirements. In these
scenarios, the information shared by the importer easily
and often crosses the invisible threshold that divides general
information and intellectual property. When this occurs,
the communication methods (phone, email, faxes, document pouches and others) by which the needed technical
information (supporting the import order) is communicated
constitute exportation of technology. No export transaction
documentation is typically involved, except for document
pouches, but the informality of the export is irrelevant.
The same result can occur with in-person meetings with
Chinese business representatives during their visits with U.S.

customers (wherever located). Discussions with and materials
provided to Chinese nationals (even if they live in the U.S.) trigger the same export violation if the technical information crosses
the "technology" threshold. Although these in-person scenarios
are potentially more difficult to detect and prove, U.S. authorities
have been increasingly successful at building documentary evidence from a variety of corporate recordkeeping sources to pursue
what they suspect to be actionable offenses. Keep in mind, this
applies to U.S. entities and persons importing into non-U.S.
jurisdictions. For instance, a U.S. individual or entity importing
into Canada or Europe under the same fact circumstances would
typically experience the same U.S. enforcement risk.
U.S. exporters (even those located outside the U.S.) face
similar risk to that experienced by U.S. importers. The
technical information typically shared in these prospective
sales often includes details that potentially cross the threshold of exported "technology," simply due to the need for
certainty by the Chinese importer that the export product
will be suitable for the intended use. Even when pre-printed
brochures avoid such details, supplemental responses to
questions can cross the line and create the risk.
The message here, though anything but simple, is clear:
Business in and with China carries much more risk, beginning this month.
Eggenschwiler, an ILMA consultant, is an international
trade attorney and director of global trade for the Redstone
Group, a Trinity Consultants company. He can be reached
at 614-923-7472 or jeggenschwiler@redstonegrp.com.

http://www.crystal-clean.com

ILMA Compoundings - January 2020

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