By Ajay Kuntamukkala, Partner, and Darshak Dholakia, Associate, Hogan Lovells
As a result of renewed interest in nuclear power worldwide along with an increasingly global supply chain for nuclear power generation, compliance with U.S. and non-U.S. export control laws is a critical issue for the nuclear industry. Driven by growing concerns regarding the proliferation of nuclear weapons, governments increasingly are focusing on enforcing export controls and preventing the spread of technology that can contribute to nuclear weapons programs. One of the most active nations in implementing such laws and regulations is the United States. Pursuant to these laws and regulations, U.S. and non-U.S. companies are restricted from conducting certain types of nuclear activities worldwide, depending on the nature of the activities and the countries involved.
The United States has a complex system of nuclear export controls, with multiple agencies—including the Nuclear Regulatory Commission (NRC), the Department of Energy (DOE), the Department of Commerce, and the Department of State–involved in regulating and approving exports, re-exports and other transfers of nuclear-related commodities, technology and services. Each agency has its own set of regulations and procedures governing activities of U.S. companies, as well as of non-U.S. companies doing business in the United States or dealing with U.S.-origin items or technology globally.
While the primary intent of U.S. export control laws is to regulate the activities of U.S. companies engaged in certain types of nuclear activities abroad, they also affect U.S. and non-U.S. nuclear companies working on nuclear power projects within the United States. U.S. firms also may be restricted from entering into joint ventures or other business arrangements with non-U.S. companies or from hiring certain foreign nationals for positions that involve access to nuclear technology. As the globalization of the nuclear industry accelerates, companies must be aware of these restrictions and should consider compliance programs to mitigate risk in an increasingly complex regulatory environment.
Nuclear Export Control Regime
The U.S. government regulates the export of civil nuclear reactors, equipment, components and related technology, including the provision of related technical assistance, training and services to foreign persons located abroad or in the United States, pursuant to a patchwork of regimes administered by the NRC, DOE, Department of Commerce and Department of State. The U.S. nuclear export control regime is complex and the relevant regulations do not clearly define each agency’s jurisdiction over certain nuclear-related items.
Nuclear Regulatory Commission
The NRC regulates the export and import of nuclear reactors, other nuclear facilities, and related equipment and material. The NRC does not regulate the technology or technical assistance related to these items, which instead is under the jurisdiction of the DOE. In general, the NRC requires that an export license be obtained for the export of specified nuclear reactors, plants, related components, equipment or nuclear material. The NRC issues two types of export licenses: a general license and a specific license. A general license authorizes selected exports or imports of nuclear material or equipment without the need for exporters to file a license application or for the NRC to issue a licensing document to a particular person or entity. Exports of the materials and commodities listed above that are not eligible for a general license require the filing of an application for a specific license from NRC.
Department of Energy
The DOE administers controls over the export of technology related to the production of “special nuclear material.” This authority is interpreted broadly to include technology and technical assistance related to the design, construction, operation, maintenance and repair of nuclear reactors, other nuclear facilities, related equipment and components and special nuclear materials. DOE regulations provide for both general and specific authorizations of exports. General authorization, under which the DOE authorizes the activities without requiring the submission of a license application, is provided for certain activities that do not involve certain “sensitive nuclear technology.” For instance, a broad general authorization exists for the transfer of technology or technical assistance related to nuclear power reactors to foreign countries (and foreign persons) that are not identified on the DOE’s list of “restricted countries.” Specific authorization is required for the export of all other technology under the jurisdiction of DOE, including providing “sensitive nuclear technology” to any foreign country or person. For both general and specific authorizations, there may be additional reporting obligations concerning the authorized activities.
Department of Commerce
Under the Export Administration Regulations (EAR), the Department of Commerce has jurisdiction over the export and re-export of certain “dual-use” commodities, software and technology. In particular, the Department of Commerce has jurisdiction over specified “dual-use” items, including equipment, materials, parts, components, software and technology that could be used in nuclear-related activities. With regard to nuclear power plants, the Department of Commerce generally controls items used in the balance of the plant, certain safety items and items used in the general infrastructure of the plant. These range from certain valves to generators and other equipment specially designed for use with nuclear power plants. These items and their related technology may require export licenses from Commerce depending on the country of destination, the end-user, the nature of end-use and the nature of the commodities, software or technology at issue. In addition, under its “nuclear catch-all controls,” the EAR prohibit unlicensed exports or re-exports of any item subject to the EAR (regardless of its classification) to most countries if the exporter knows or has reason to know at the time of export that the items at issue will be used: (1) in nuclear explosive activities, (2) in unsafeguarded nuclear activities or (3) in any safeguarded or unsafeguarded nuclear fuel cycle activities, such as enrichment or reprocessing.
Department of State
The Department of State has jurisdiction over any items, components, materials and technology related to the design, development, fabrication or testing of nuclear weapons or nuclear explosive devices. The State Department’s U.S. Munitions List also identifies naval nuclear propulsion plants and any components, parts and equipment that are used in plants and facilities used to produce such plants, but such items generally are under the joint control of the U.S. Navy and the DOE. Goods and technology related to civil nuclear power programs generally do not fall under the jurisdiction of the Department of State.
There are a number of export control issues that currently affect the international activities of nuclear companies.
In addition to restricting the export of goods or technology, U.S. export control laws also control so-called “deemed exports,” which involve the transfer of technology or provision of services to a non-U.S. person in the United States. Depending on the nationality of the foreign person receiving the technology and the nature of the technology being released, a license or other authorization may be required. As a result, companies handling U.S.-origin technology may be required to collect information regarding the nationalities of their employees and implement technology controls to prevent any unauthorized technology transfers to their foreign person employees. Companies subject to U.S. export control laws also should screen contractors, affiliates, suppliers and customers to confirm that releasing U.S.-origin technology or services to these entities or individuals is consistent with U.S. law.
As noted previously, U.S. nuclear export control regulations do not clearly define which agency has jurisdiction over certain nuclear-related items. For example, items that are used in a nuclear power facility’s balance of plant may be subject to control by either the NRC or the Department of Commerce depending on the nature of the item. The related technology may be controlled by either the DOE or the Department of Commerce. Of special importance is whether the nuclear-related item or technology has been “especially designed, modified or adapted for use” for nuclear reactors or nuclear fuel cycle facilities. If so, that item likely is subject to NRC jurisdiction and the related technology subject to DOE jurisdiction. Depending on which agency has jurisdiction, a license or other authorization may be required prior to the export or transfer of the controlled item or technology. Government agencies can help resolve these issues, but often require detailed specifications and information regarding the items at issue.
Americanization of Foreign Technology
Nuclear power projects in the United States increasingly rely on technology developed abroad, including foreign reactor designs. This technology may need to be “Americanized” for use in the United States by conforming it to U.S. standards, codes and capabilities. The DOE has advised that “Americanized” nuclear technology is subject to its jurisdiction and may require authorization prior to exporting such technology from the United States, including back to the originator. As a result, companies should take steps to protect any “Americanized” technology from unauthorized release.
There are a number of circumstances under which U.S. nuclear export control laws apply to the activities of non-U.S. companies, including to their activities outside the United States:
A non-U.S. company receives or uses U.S.-origin nuclear commodities, software, technology, or services for a project outside the United States – U.S. law follows U.S.-origin items worldwide, and non-U.S. companies that receive or use such items are subject to U.S. requirements, including restrictions on re-export, retransfer or use.
A non-U.S. company develops a new product or design derived from U.S.-origin technology or using U.S.-origin parts or components – The co-mingling of U.S.-origin technology and commodities may “taint” the foreign produced commodities and technology, making those items subject to U.S. law.
Non-U.S. companies or employees are engaged to assist with a civil nuclear project in the United States – Engaging a non-U.S. company and using its non-U.S. employees may trigger prior authorization or licensing requirements, depending on the nature of the technology used in the project and the role of the non-U.S. company or employees.
A non-U.S. company establishes civil nuclear operations in the United States or acquires a U.S. civil nuclear company – The non-U.S. company's U.S. operations are subject to U.S. nuclear export control requirements, and the transfer of any U.S.-origin commodities or technology to the non-U.S. parent company or to non-U.S. persons may require prior authorization or licensing. In addition, the non-U.S. company must consider whether its foreign investment in the U.S. civil nuclear industry requires a national security review by the Committee on Foreign Investment in the United States.
Due to the complexity of the multilateral and domestic regimes governing the export of nuclear-related goods and technology, nuclear companies should implement effective compliance programs to identify and address potential areas of concern at an early stage. In addition to helping a company avoid violations of export control laws, an effective compliance program also is considered to be a strong mitigating factor in any enforcement action in the event that a violation occurs.
At a minimum, a compliance program designed to ensure adherence to nuclear (and other) export control laws should include a written statement of management commitment to compliance with export control laws and operational procedures restricting access to controlled technology. Companies also should provide compliance training and education to key employees, such as sales and engineering personnel. Instilling a culture of compliance at an early stage can help companies avoid costly violations of U.S. export control laws down the road.
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