It is generally understood that shipments or transfers of goods or data from the United States to another county represent an export that is subject to U.S. export regulations and may potentially require a license or other authorization. What is less widely understood, however, is that the release of data to a foreign person, even within U.S. borders, is deemed by U.S. export control laws to be an export to the recipient's country of permanent residency or citizenship. Similarly, the delivery of U.S. export-controlled data in a foreign country to a permanent resident or citizen of a third country can be deemed a re-export to that third country. It is important to remember that rules for exports of technology are separate from rules related to deemed exports and re-exports.1
Consequently, to avoid exposure to significant civil liability or potential criminal liability – as well as damage to the organization's reputation and good standing – companies, universities, and other organizations (collectively hereinafter “companies”) should exercise caution in their management and release of export controlled information and technology both inside and outside the territorial United States and implement appropriate policies and procedures.
The export control law regulations govern deemed exports (and deemed re-exports). But export screening must also be conducted consistent with anti-discrimination and privacy laws, both in the U.S. and abroad. Given the nature and complexity of this topic, this alert does not address all aspects of technology transfers, and such transfers should be assessed on a case-by-case basis. This note focuses primarily on the U.S. anti-discrimination provisions most relevant to organizations that must comply with export control regulations.
The Immigrant and Employee Rights Section, Civil Rights Division (IER) (formerly the Office of Special Counsel (OSC) for Immigration-Related Unfair Employment Practices) at the Department of Justice (DOJ) is responsible for enforcing the anti-discrimination provision of the Immigration and Nationality Act (INA), which protects work authorized individuals from employment discrimination on the basis of citizenship status or national origin discrimination, including discrimination in hiring and the employment eligibility verification (Form I-9) process. IER from time to time issues determinations and rulings that have provided guidance on the request and collection of such information. IER has also negotiated settlement agreements with organizations that have violated the INA while attempting to comply with export laws, which provide insight into potential organizational liability in this area.
Overview of Export Control Law Considerations
For the purposes of the deemed export regulations, "U.S. Persons" are those who qualify as "protected individuals" under the Immigration Reform and Control Act (IRCA) of 1986. These individuals are U.S. citizens, U.S. nationals, U.S. legal permanent residents (green card holders), refugees, asylees, and temporary residents under specific IRCA amnesty provisions. U.S. Persons may receive unclassified export-controlled information without triggering deemed export regulations. Anyone who is not a U.S. Person is a “foreign person” under the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR).
The EAR and ITAR have historically differed in their determination of foreign person status in one crucial respect: the identification of the relevant current and former citizenship(s) of the foreign person. The Commerce Department's Bureau of Industry and Security (BIS) guidance on this matter under the EAR has stated that the agency looks only at a person's latest citizenship or legal permanent resident alien status in determining restrictions. The State Department's Directorate of Defense Trade Controls (DDTC), under the ITAR, however, historically has taken into account all of the person's current and former citizenships and imposed controls that correspond to the most restrictive citizenship, and continues to do so. So, for example, a Chinese citizen who subsequently became a Canadian citizen generally will be treated as Canadian by the EAR and as Chinese and Canadian by the ITAR. The Department of Energy (DOE) takes into account all of a person's nationalities and citizenships, similar to the approach taken by DDTC which the DOE documented in its 2015 rule making.
On September 8, 2016, the DDTC issued a rule which in part addressed deemed export compliance.2 As noted above, transfers among U.S. Persons (regardless of dual citizenship) generally do not trigger licensing requirements with respect to unclassified export controlled technology. With respect to foreign persons who are not U.S. Persons, DDTC historically has considered all nationalities, including place of birth and any subsequent or former citizenships. In the September rule, DDTC stated: "The Department confirms that in circumstances where birth does not confer citizenship in the country of birth, it does not confer citizenship or permanent residency in that country for purposes of the ITAR. One commenter noted that the DDTC Agreement Guidelines refer to the country of origin or birth, in addition to citizenship, as a consideration when vetting DN/TCNs [dual nationals/third country nationals]. The Department has updated the Agreement Guidelines consistent with the interim final rule."3 Accordingly in certain cases, countries of birth would no longer be considered by DDTC if the country does not grant citizenship based on mere fact of birth within its territory and the person never acquired such citizenship. This development allowed companies to focus on citizenship in the vast majority of factual scenarios rather than country of birth. Given the BIS focus on the most recent citizenship or permanent resident alien status, companies can calibrate their export screening questionnaires depending on their export compliance risk assessment, including whether they possess solely EAR technology or both ITAR and EAR technology. However, it is important to review all the guidance by DDTC under the ITAR included in the rule, including the requirement to assess all countries where that person holds or has held citizenship or is a permanent resident, and that such authorization(s) must authorize all applicable designations. This inquiry should include all countries where that foreign person has held citizenship, including citizenships a foreign person has renounced.
Overview of Anti-Discrimination Considerations When Making Hiring Decisions
Information regarding citizenship and country of birth must be collected in a process separate from the I-9 employment eligibility process. This is done to avoid any inconsistency with anti-discrimination laws, as based on past IER precedent and existing guidance. The IER has found that requesting specific documents during the I-9 process constitutes discrimination, and has imposed penalties for doing so. However, DOJ has also stated that employers may implement separate procedures to obtain information regarding citizenship or nationality for compliance with export control laws.
Guidance from DOJ
Companies may seek guidance from the IER in the form of letter requests. The IER has made public a number of its responses. Here are a few key guidance points from DOJ on this issue:
2016 Guidance from IER
The IER issued guidance on March 31, 2016 regarding the following proposed screening language for job applicants or newly-hired employees:
The following questions are for the sole purpose of ensuring compliance with U.S. rules concerning the export of controlled or protected technologies or information, including but not limited to U.S. State Department regulations at 22 C.F.R. Subchapter M, U.S. Department of Energy regulations found in 10 C.F.R. Part 810, the U.S. Nuclear Regulatory Commission regulations in 10 C.F.R. Part 110, and the U.S. Department of Commerce's Export Administration Regulations found in 15 C.F.R. Part 730 et seq., as may be amended (collectively, Export Control Laws).
If you do not wish to be considered for positions whose activities are subject to the Export Control Laws, then you may skip the following questions. If you do wish to be considered for positions whose activities are subject to the Export Control Laws, then you must answer these questions:
- I am one of the following: (a) a citizen of the United States; (b) a lawful permanent resident of the United States; or (c) a person admitted into the United States as an asylee or refugee: YES or NO
- If you answered "NO" to Question 1, then please indicate your
- Citizenship:
- U.S. Immigration Status:
To this query, IER indicated that the language above implicated several parts of the anti-discrimination provisions of the INA, and provided the following guidance as summarized:
- The ITAR does not impose requirements on U.S. companies concerning the recruitment, selection, employment, promotion, or retention of a foreign person. Instead, the ITAR requires that employers obtain export licenses for non-U.S. person employees if their positions require access to information governed by the ITAR.
- Assuming an employer is hiring for at least some positions not subject to export control laws, IER discourages asking the proposed questions for positions that are not subject to export control laws to avoid generating confusion among applicants or human resources personnel about the need for this information.
- The term "Admitted" could be confusing to job applicants, as they might have a different understanding of the term than the meaning carries under U.S. immigration laws.
- If an employer were to reject a protected individual's application based on that individual's answers or a staffing agency were to limit the scope of potential assignments based upon a protected individual's answers, the employer may be engaging in citizenship status discrimination.
- The questions above could lead to unlawful hiring decisions by HR personnel who make assumptions about an applicant's eligibility based on his or her country of citizenship or show a preference in hiring based on national origin.
The IER’s guidance also indicated that an employer that implements a document verification process to determine only a new employee's immigration or citizenship status only to comply with export control laws is unlikely to violate the anti-discrimination provision so long as the document verification process is separate and distinct from the employment eligibility verification process.
However, IER cautioned employers that to the extent these separate and distinct processes appear to be integrated – because of proximity in time, for example – applicants and HR personnel may have the impression that the documentary requests are for employment eligibility verification purposes, which could result in INA liability.
2013 DOJ Guidance from IER
On February 25, 2013, the IER issued guidance regarding the following proposed employee verification questions to be included on job applications:
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Are you a national of a country that may require the employer to obtain an export license?
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Are you currently in nonimmigrant status (e.g., F-1, H-1B, L-1), and a national of a country that may require the employer to obtain an export license?
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Are you currently in nonimmigrant status (e.g., F-1, H-1B, L-1), and a national of one of the following countries [the list would be countries that the employer knows trigger export license requirements]?Do you now or will you in the future require immigration sponsorship to work at [the employer]? If you answered yes to this question, please answer the following question: are you a national of one of the following countries: [the list would be countries that the employer knows trigger export license requirements]?
To these proposed questions, IER cautioned that the above language might deter refugee or asylee (“protected individuals” under the INA) applicants who misunderstand the questions from applying because they deem themselves ineligible to apply. However, “[i]f the information is sought solely for compliance with export licensing requirements, and not for employment eligibility verification or any discriminatory purposes, inquiring about an applicant’s citizenship or country of origin for this purpose would not appear to violate the INA’s anti-discrimination provision as long as the inquiries are made uniformly and without the intent to discriminate on the basis of national origin or citizenship status.”
Additionally, IER addressed several employer concerns regarding export control compliance and anti-discrimination laws:
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IER acknowledged that the INA prohibits citizenship discrimination only against “protected individuals” and permits an employer to consider citizenship status to comply with other laws, regulations, executive orders, or relevant Federal, State, or local government contractual provisions. An employer that routinely rejected applicants outside of the “protected individuals” category would not be in violation of the INA, though possibly with other anti-discrimination laws.
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However, because the INA protects all work-authorized individuals from intentional discrimination on the basis of national origin, document abuse, and retaliation, an employer may still be in violation of the INA on these bases. The IER cautions employers that, routinely screening out or refusing to hire non-protected applicants while complying with export licensing laws, may prompt applicants to allege national origin discrimination resulting in subsequent investigations by IER or EEOC.
2010 DOJ Guidance from IER
The 2016 guidance is similar to prior guidance issued by DOJ's IER on October 6, 2010, which provided that "The anti-discrimination provision of the INA does not prohibit an employer from implementing a separate and distinct verification procedure under the ITAR requiring the presentation of documents establishing citizenship or immigration status necessary to ensure compliance with the ITAR."
It is important that export screening language and procedures avoid the pitfalls flagged above. For example, if required, the language should simply ask if the employee or applicant is a U.S. citizen, U.S. national, lawful permanent resident of the United States ("green card holder"), an asylee, or a refugee and not include any potentially misleading or confusing language. Further, the questionnaire should include an explanatory paragraph that clearly indicates that the purpose of the questions is to ensure compliance with U.S. export control laws, thereby distinguishing the questionnaire and making it distinct in substance from the I-9 employment eligibility verification process.
Recent Cases Involving Export Controls & Anti-Discrimination Liability
DOJ’s IER is tasked with enforcing the INA’s antidiscrimination provisions which prohibit employment discrimination on the basis of national origin or citizenship status. IER investigates complaints of employment discrimination and issues press releases pertaining to ongoing investigations as well as their informal resolutions and settlement agreements reached with companies that have violated the INA. While IER reaches dozens of antidiscrimination settlement agreements annually, the cases below pertain specifically to companies’ violations of the INA in their attempts to comply with ITAR and EAR regulations.
As the following cases demonstrate, companies continue to misunderstand their obligations under the complex interaction of export controls and anti-discrimination laws. This confusion routinely arises in applicant screening and hiring processes within companies subject to EAR and ITAR regulations. These companies frequently violate anti-discrimination laws in an attempt to comply with EAR and ITAR requirements, which, among other things, restricts transfers of certain sensitive technology or technical data to individuals who are not “U.S. Persons”; in many cases, particularly under the EAR, a license may not be required to the country at issue or a license exception may apply. Admittedly, the ability to use exemptions under the ITAR is more limited and generally a license or other authorization would be required. As used in the regulations, however, “U.S. Persons” is not equivalent to “U.S. citizens” – regulatory terms that many companies’ HR personnel often wrongly conflate.
Arnold & Porter LLP and Law Resources (2021)
On July 21, 2021, in a private citizenship status discrimination suit against a law firm, Arnold & Porter, Kaye, Scholer LLP, and legal staffing agency, Law Resources, DOJ’s Executive Office of Immigration Review (“EOIR”) ordered both companies to “cease and desist in unfair immigration-related employment practices” and fined them $2,000. This private suit followed an earlier IER investigation and settlement agreement in 2020, in which both companies paid at least $56,000 in civil penalties, were required to institute a join backpay fund for affected workers, and submit to two years of IER monitoring. Similar to the Clifford Chance case in 2018 (see below), Arnold & Porter believed it could only utilize U.S. citizens to review documents in an ITAR-related matter. Though the firm had no direct contact with the potential employee, the company’s project-staffing policies were relayed through the legal staffing agency to the applicant, whose subsequent complaint prompted an IER investigation into the firm’s and staffing agency’s screening and hiring policies.
Aerojet Rocketdyne, Inc. (2021)
Aerojet is a Florida-based company that manufactures and sells advanced propulsion and energetics systems, technologies subject to EAR and ITAR regulations. Misunderstanding its obligations under these regulations, Aerojet limited applicants for 12 mechanic positions to U.S. citizens only and, in the course of its hiring process, refused to consider an INA-protected lawful permanent resident for those roles. IER initiated an investigation into Aerojet’s hiring practices upon a petition by the applicant. In the resulting 2021 settlement agreement, IER indicated that companies are able to comply with export control regulations and still hire lawful permanent residents, who are an INA-protected class. Though the company quickly changed its hiring policies and worked cooperatively with the Department to avoid future discriminatory hiring practices, Aerojet paid a civil penalty and was subject to additional HR training and reporting requirements.
Honda Aircraft Company, LLC (2019)
Honda Aircraft, a subsidiary of Honda Motor Co., Ltd., is a company headquartered in Greensboro, North Carolina that manufactures and sells business jet aircrafts. IER conducted an investigation into the company’s hiring practices and found that in several job listings, which were posted on the company’s website and third party sites, Honda Aircraft had required that all applicants for the positions be either U.S. citizens or Lawful Permanent Residents contrary to INA protections. Honda Aircraft mistakenly believed that because it produces certain export-controlled data and technology that is subject to EAR/ITAR regulations, it had to exclude non-U.S. citizens, even if they were U.S. Persons, from positions involving those technologies. Under Honda’s subsequent settlement agreement with IER, the company paid a civil penalty, had to remove all citizenship requirements from job listings, and ensure HR personnel training regarding INA’s anti-discrimination provisions.
Setpoint Systems, Inc. (2018)
Like the companies above, the Utah-based engineering company mistook its obligations under ITAR regulations and for several years refused to consider non-U.S. citizen applicants and hired only U.S. citizens for Setpoint System’s professional positions. In its IER settlement agreement, the company paid a civil penalty, agreed to educate its HR personnel on INA anti-discrimination requirements, and was subject to additional reporting obligations and IER monitoring to ensure compliance.
Clifford Chance US LLP (2018)
An IER investigation revealed that Clifford Chance US LLP, a law firm, had removed several non-U.S. citizens and dual U.S. citizens from working on a large discovery project or otherwise restricted access to the project based on citizenship status, mistakenly believing such action was necessary to comply with ITAR regulations. Per the terms of its settlement agreement, the firm offered its wrongfully restricted employees lost wages, paid a civil penalty, and was required to ensure adequate anti-discrimination personnel training and inform clients who request staffing restrictions about the INA’s anti-discrimination requirements. The firm was also subject to additional reporting and monitoring obligations by IER.
R-Tronics LLC (2012)
Based in Rome, New York, R-Tronics is a custom cables and electromechanical assemblies manufacturer that is subject to ITAR regulations. IER determined that the company had limited its hiring to U.S. citizens only, in violation of INA regulations. In its settlement agreement, R-Tronics was required to stop its citizenship status-based hiring, to adequately train its HR on related INA requirements, and to submit to three years of monitoring and compliance obligations under IER’s oversight.
BAE Systems Ship Repair, Inc. (2011)
The DOJ imposed penalties against a subsidiary of BAE Systems (BAE) in 2011, finding that the subsidiary engaged in a pattern or practice of discrimination by imposing unnecessary and additional documentary requirements on work-authorized non-U.S. citizens when establishing their eligibility to work in the United States. The BAE case related to the specific requests for particular documents in the context of the I-9 Form and process. DOJ emphasized that the employee has the right to show appropriate List A, or List B and C documents to the employer for identity and employment eligibility verification during the I-9 process. However, the employer cannot dictate the exact documents presented from these Lists for purposes of Form I-9 compliance. Further, DOJ stated that this case does not prevent companies from determining U.S. person status and citizenship/nationality separately as part of their normal export screening process. For additional information, click here.
While these seven settlements occurred over the span of ten years, DOJ continues to aggressively enforce antidiscrimination laws in the context of export controls compliance today. In October 2021, DOJ announced two separate settlements with Facebook, Inc. for discriminating against INA-protected individuals in favor of certain visa-holders in its recruitment and hiring practices. And in 2018 and 2020, IER investigated and then informally resolved potential discriminatory hiring practices by tech companies with job listings that seemingly limited employment eligibility to U.S. citizens only. After investigating potential INA violations, the IER may informally resolve cases by issuing an anonymous letter of resolution, examples of which may be found here. Though IER may informally resolve cases where companies quickly adjust their hiring practices upon IER’s initial investigation and before IER finds sufficient evidence that INA-protected individuals had been denied positions for which they would otherwise be eligible, these investigations and related settlements are indicative of IER’s ongoing enforcement activities.
Export Control and Anti-discrimination Compliance Considerations
As the guidance outlined above suggests, complying with both export controls and anti-discrimination laws can be challenging and complex. In order to navigate the line between export controls and anti-discrimination obligations, companies might consider the following points when developing their screening and hiring processes:
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Ensure the company utilizes or manufactures controlled technology subject to EAR or ITAR regulations and understand the precise nature and level of control(s) at issue (e.g., EAR 99 or more elevated export classifications). If the export classification is not clear, the company should confirm the classification, particularly if the technology may not be subject to export licensing requirements and job applicants are foreign persons.
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Ensure the job position being filled requires or provides access to controlled technical data or technology and cannot otherwise be feasibly restructured to prevent such releases. A technology control plan could resolve the issue in a number of circumstances.
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Ensure all job listings are free of language indicating citizenship or work authorization status preferences.
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Institute a separate I-9 verification procedure and export control compliance screening processes to occur at separate times during hiring and onboarding and use different and distinct forms and questions.
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Ensure HR personnel do not dictate the I-9 documents that must be used for verification.
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Ensure any citizenship or resident-status questions are asked uniformly of all applicants to export controlled technology positions. Assess whether the company does not need to implicate export compliance screening for certain divisions or subsidiaries or defer the timing of such screening post hire.
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Ensure that any screening language is explicit about its use solely for purposes of export control compliance. For example:
Next steps
While companies must be vigilant about export compliance to avoid EAR or ITAR penalties, they must also be careful to avoid over-compliance with these regulations such that they unnecessarily expose the company to anti-discrimination liability under the INA. To the extent that companies do not have highly controlled data or technology, they may not need to institute a company-wide human resources export compliance screening program. In short, companies still need a legal basis – dealing in export controlled information – to inquire about employees’ or potential employees’ citizenship status.
As this is a complex and evolving area of law, companies should consult with counsel in developing these compliance processes.
References
1 See also: "Compliance Best Practices: Employing, Screening, and Collaborating with Non-U.S. Nationals," published in the Practicing Law Institute, Commercial Law and Practice Course Handbook Series, Coping with U.S. Export Controls and Sanctions (September 29, 2015); and "Foreign Nationals in U.S. Technology Programs: Complying with Immigration. Export Control, Industrial Security. and Other Requirements." Immigration Briefings, West Group (October 1, 2000); Complying with Immigration, Export Control, and Industrial Security Requirements When Working Collaboratively with Foreign Nationals: A Case Study." The International Lawyer, Vol. 35, No. 1 (21 MAY 2001).
2 See 81 Fed. Reg. 62004 (Sept. 8, 2016), available at: https://www.federalregister.gov/documents/2016/09/08/2016-21481/international-traffic-in-arms-revisions-to-definition-of-export-and-related-definitions.
3 Id. at 62006; see also DDTC, Guidelines for Preparing Agreements (Oct. 20, 2016), available at: *sys_attachment.do (state.gov).
The authors gratefully acknowledge the assistance of Tabitha Kempf, a summer associate of the firm, in drafting this alert.
