Nationality and Export Control: a question that certainly needs a deep dive

Story of the week

SpaceX’s recent legal troubles with the U.S. Justice Department make it the latest employer to allegedly run afoul of federal immigration law by prioritizing compliance with export control rules to the detriment of anti-discrimination provisions.

Some first comments, therefore, here on the impact of nationality in export control, certainly without pretending to be complete. The topic needs deep diving, and RespectUs is willing to participate in that work.


The SpaceX case

The Department of Justice, in its administrative lawsuit filed on 24 August 2023, alleged that the private rocket manufacturer engaged in “routine, widespread, and longstanding” discrimination by refusing to hire asylees and refugees. According to the authorities, Elon Musk’s company was wrong in stating that it could only hire US citizens and lawful permanent residents because export control laws limited access to defense- and national security-related technologies.

The lawsuit is intended to stop SpaceX’s discriminatory practices and seek relief for victims of discrimination. SpaceX’s discriminatory hiring practices were routine, widespread, and longstanding and harmed asylees and refugees.

In online postings and statements by SpaceX’s CEO (who then had approximately 36 million followers on X) and other SpaceX officials and recruiters, SpaceX discouraged asylees and refugees from applying. For example, in September 2020, a SpaceX university recruiter participated in the Georgia Tech Career Fair chat forum titled “SpaceX Full-Time and Internship/Co-Op”. In front of approximately 719 participants, he announced, “Due to US Export Compliance regulations, SpaceX can only offer employment to US Citizens or Lawful Permanent Residents.”

Applicants who were asylees and refugees were refused because of their citizenship status. This happened from September 2018 to May 2022.

According to data provided by SpaceX, during the two years starting from September 2018, SpaceX hired only U.S. citizens and lawful permanent residents. Out of more than 10,000 hires (September 2018 to May 2022), SpaceX hired only one individual who was an asylee, and this was four months after IER notified the company of its investigation.

According to the U.S. Department of Justice, export control laws and regulations do not prohibit or restrict employers from hiring asylees and refugees. Those laws would treat asylees and refugees just like U.S. citizens.

Under ITAR and EAR, “U.S. persons” working for U.S. companies can access export-controlled items without authorization from the U.S. government. A “U.S. person” under ITAR and EAR, includes a U.S. citizen or national, a lawful permanent resident, a refugee, or an asylee.

In contrast, a “foreign person” – anyone who is not a “U.S. person” under ITAR and EAR – may need authorization from the federal government to access export-controlled items. For a “foreign person” employee to access export-controlled items, their employer must apply to the U.S. Department of State or the U.S. Department of Commerce and obtain approval.

The General Motors case

In April 2023, General Motors reached a USD 365,000 settlement with the DOJ over allegations it discriminated against immigrant workers in its efforts to comply with ITAR.

The department’s investigation had determined that until at least September 2021, GM’s export compliance assessments unnecessarily required lawful permanent residents to provide an unexpired foreign passport as a condition of employment, imposing a discriminatory barrier on them in the hiring process. From at least July 2019 until May 2021, GM improperly combined its process for verifying workers’ permission to work in the United States with its export compliance assessment, which resulted in GM unnecessarily requiring that newly hired non-U.S. citizens provide specific and unnecessary documents to prove their permission to work.

Under the terms of the agreement, GM had not only to pay civil penalties but was obliged to train its personnel on these requirements, revise its employment policies, and be subject to departmental monitoring and reporting requirements. Specifically, GM was invited to separate its process of verifying permission to work in the United States from its export compliance assessment process and stop requiring lawful permanent residents to present foreign passports as a condition of employment.

In a factsheet published after this settlement, also in April 2023, the DOJ said the Civil Rights Division investigations had found that employers violated the INA based on a misunderstanding of export control laws. Under the Immigration and Nationality Act (INA), it is generally against the law for employers to make hiring, firing, or recruiting decisions based on workers’ citizenship, immigration status, or national origin or to treat workers differently based on these characteristics when verifying their permission to work.

Under ITAR and EAR Regulations, U.S. persons working for U.S. companies can access export-controlled items without authorization from the U.S. government. In addition to U.S. citizens, U.S. persons include U.S. nationals, lawful permanent residents, refugees, and asylees.

In the EU – what impact does nationality have on export control?

The EU Dual-Use Regulation 2021/821 does not focus on the nationality but more on the residence of the parties implicated.

It refers, for example, in its definition of “export” of dual-use software or technology to “making available in an electronic form such software and technology to natural or legal persons or partnerships outside the customs territory of the Union” (Art. 2). This also includes the oral transmission of technology when the technology is described over a voice transmission medium.

Technical assistance, on the other side, which requires authorization in some instances, means “any technical support related to repairs, development, manufacture, assembly, testing, maintenance, or any other technical service, and may take forms such as instruction, advice, training, the transmission of working knowledge or skills or consulting services, including by electronic means as well as by telephone or any other verbal forms of assistance”.

Such technical assistance is controlled (see Art. 8) where it is provided from the EU customs territory into the territory of a third country, but also when an EU resident or company is providing this assistance within the territory of a third country or to a resident of a third country temporarily present in the EU customs territory.

Based on these rules, a scenario that may trigger export controls is then for example:

  • Teaching, consulting, collaborating, or working on research involving dual-use items with visiting foreign researchers inside an EU Member State;
  • Teaching, consulting, collaborating, or working on research involving dual-use items outside the EU customs territory;
  • Organizing a (virtual) conference/meeting/seminar or presenting at a (virtual) conference/meeting/seminar inside or outside the EU customs territory about dual-use items, software, or technology.

What about Germany?

The addressee of the technical assistance only plays a role for provisions whose scope is limited to the domestic German territory.

German law links the licensing requirement for technical assistance with the fact that it is provided to a foreigner from a non-EU Member State and non-EU001 country or to a foreigner from an arms embargo country.

Foreigners shall mean all persons and partnerships with legal personalities who are not residents (AWG, Section 2(5)). Foreigners shall include such natural persons whose residence or habitual abode in Germany is limited to a maximum of five years (AWV, Section 51).

Residents, on the other side, and when speaking about providers of technical support, mean:

  1. Natural persons resident or habitually resident in Germany,
  2. Legal persons and partnerships with legal personalities legally established or headquartered in Germany,
  3. Branches of foreign legal persons or partnerships with legal personality if the management of the branches is in Germany and separate accounts are kept for them, and
  4. Permanent establishments of foreign legal persons or partnerships with legal personality in Germany if the permanent establishments are administered in Germany (AWG, Section 2(15)).

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