Collaborating Between US and China Operations

Say your tech startup has R&D operations in both the US and China. Engineers from both places collaborate on various R&D efforts. These collaborations include collaborations in both hardware and software. And engineers often ship codes and underlying hardware to run to the codes between the US and China. As the founder of your startup, there are some legal implications that you ought to consider.

Generally, in the US, export of commercial items falls under the jurisdiction of the Department of Commerce’s Bureau of Industry and Security (BIS). BIS implements and enforces export regulations, or Export Administration Regulations (EAR). Under EAR, “export” is defined as: (1) transport of items subject to EAR out of the US, or (2) release of technology or software subject to EAR to a foreign national in the US (known as ”deemed export”).

US export regulations may apply to your startup in at least two situations. First situation, say engineers in the US developed a computer board to run particular software developed by engineers in China. To facilitate integration, you want to ship the computer board to China so engineers there can load the software onto the computer board to run tests. In this scenario, you should seek legal advice on whether the computer board can be “exported” to China or you may expose yourself or your startup to civil and, sometimes, criminal liabilities.

Second situation, say your R&D operation in the US hires non-US persons to work on company’s technology. Normally, this isn’t a big deal because most commercial technology does not fall under EAR. However, for technology that has both civil and military uses, the determination of having non-US persons to work on this technology becomes a lot more fuzzy. If handled improperly, you could expose yourself and your startup to civil and criminal liabilities.

Export regulation is a complex area of law and it’s very fluid due to geopolitical tensions, as demonstrated by recent changes to export regulations on GPUs. Please consult with an attorney if export issues arise.

Tags: #export, #commercial