On June 12, 2013, the Department of Energy (DOE) issued a proposed rule to amend the Department of Energy Acquisition Regulation (DEAR) to explicitly incorporate pre-existing export control requirements into DOE contracts.  See 78 FR 35195. The proposed rule would not impose additional substantive export control requirements on DOE contractors, with the exception of an export restriction notice, discussed below, but would add clauses to DOE contracts to ensure that contractors are reminded of their export control obligations when working on DOE contracts, similar to a rule that was implemented in the DFARS in 2010 following several years of proposed and interim rules. DOE is soliciting written comments on the proposed rule, including whether additional export control laws, regulations, or directives should be added to those listed in the proposed rule. Comments are due by the close of business on July 12, 2013.

The proposed rule would amend parts 925 (Foreign Acquisition), 952 (Solicitation Provisions and Contract Clauses), and 970 (DOE Management and Operating (M & O) Contracts) of the DEAR.  The proposed amendments set forth DOE policy that DOE and its contractors must comply with applicable export control laws, regulations, and directives, including, among others listed, the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR).  The proposed amendments would also add an export control clause to DOE contracts, including to DOE M & O contracts and to any contract that may involve the export of "items" (including unclassified information, materials, technology, equipment, or software).  The export control clauses would require contractors to comply with applicable export control laws, regulations, and directives, noting that such responsibility exists independent of, and is not established or limited by, the DEAR. 

The proposed export control clauses would also require an "Export Restriction Notice" be included in all transfers, sales or other offerings of items pursuant to a DOE contract.  The language of the Export Restriction Notice is provided in the proposed rule and is designed to put a recipient on notice that the use, disposition, export, and re-export of the property attached to the notice are subject to export control laws, regulations, and directives.  The rule also contains a mandatory flowdown.

DOE confirms in the notice of the proposed DEAR amendment that the proposed rule addresses concerns raised in DOE Inspector General reports issued in 2004 and 2007.  Those reports highlighted deficiencies in how DOE contractors were applying export control procedures and recommended expedited actions to ensure compliance with export control rules by DOE contractors.  The rule also is in response to a 2011 Government Accountability Office report identifying weaknesses in government-wide export controls.

As indicated, the proposed rule follows similar rulemaking affecting government contractors by the Department of Defense (DOD) and the DOE proposed rule references the DFARS rule and states that DOE proposes the DEAR amendment for consistency with the 2010 DFARS amendment.  The DOE rule does not supersede existing law or regulation, but it does "contractualize" such requirements, as well as remind contractors of obligations under various orders and directives such as the DOE unclassified foreign visit program.

Over the long term the increased "contractualization" of international compliance requirements in the FAR and DFARS and now the DEAR may have more significant ramifications for government contractors.  For instance, whereas in the past a violation of export control law was not necessarily a violation of a contractual requirement, if the proposed rule is ultimately finalized or used as an interim rule, failure to comply with export control laws could be viewed as a contractual violation, though unlike certain other government contract clauses such as human trafficking, there are no independent contractual remedies specified in the clauses in the interim rule nor in the final rule, and the language of the preliminary rule and discussion in the preamble make clear that the rule is not meant to impose new substantive obligations (or liability risks) on contractors.  In requiring a flowdown, DOE is also signaling to the contractor community that export control compliance is an essential matter to address between prime contractors and subcontractors.

Overall, as we noted with respect to similar changes in the DFARS, the existence of the clause may be a helpful means for primes to remind smaller and perhaps less experienced subcontractors of the need for export control compliance, including in situations where potential export activity may not be so apparent, e.g., when export-controlled technical data, technology or software source code is released to foreign nationals even in the United States.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.