US nuclear export controls: preparing Indian companies

By Ajay Kuntamukkala, Hogan & Hartson
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The US and Indian governments are currently working to implement the US-India civil nuclear cooperation agreement. The nuclear industry in both nations is closely watching and involved in this implementation, and commercial interactions have begun between US and Indian companies. While there are substantial opportunities for US suppliers in the Indian civil nuclear market, there are also significant opportunities for Indian civil nuclear companies. When fully implemented, the agreement will permit Indian companies to partner with US companies on projects in India and to pursue work in the US.

It is important that Indian civil nuclear companies that are considering partnerships with US companies fully understand the US legal framework which governs the export, re-export and transfer of nuclear reactors, components, fuel and technology. These laws are complex and have extraterritorial application; they govern not only the activities of US companies, but also of Indian companies that collaborate with US companies on projects in India or in the US. The penalties for violations can be severe.

Understanding agencies’ role

Several agencies are involved in administering US export controls on civil nuclear transactions. It is important for Indian companies that are considering cooperation with US companies to understand which US agencies may exercise jurisdiction over their activities, and to be aware of any restrictions that may apply.

Ajay Kuntamukkala Partner Hogan & Hartson
Ajay Kuntamukkala
Partner
Hogan & Hartson

The Department of Energy controls the export or transfer of technology, software, services and technical assistance related to nuclear power reactors, nuclear fuel-cycle facilities and nuclear materials. The transfer of US technology, software, services and technical assistance for the design, construction, operation, maintenance or repair of nuclear reactors in India or to Indian nationals requires prior specific authorization from the Department of Energy.

The Nuclear Regulatory Commission regulates the export and import of nuclear reactors, plants, equipment and material. In general, the Nuclear Regulatory Commission requires that a licence be obtained for the export of specified reactors, plants, related components, equipment or nuclear materials to India.

The Department of Commerce exercises jurisdiction over the export of certain “dual-use” commodities, software, certain safety equipment and other technology that is used in the general infrastructure of nuclear power plants. Certain “dual-use” commodities, and technology controlled for nuclear non-proliferation reasons, require a prior licence for export or transfer to India or Indian nationals.

Applicability to Indian companies

There are a number of circumstances under which US nuclear export control laws apply to the activities of Indian companies.

1) An Indian company receives or uses US-origin nuclear commodities, software, technology or services for a project in India: US law follows US-origin items worldwide, and Indian companies that receive or use such items are subject to US requirements, including restrictions on re-export, re-transfer or use.

2) An Indian company develops a new product or design derived from US-origin technology or using US-origin parts or components: The co-mingling of US-origin technology and commodities with Indian technology and commodities may “taint” the Indian commodities and technology, making those items subject to US law.

3) An Indian company or employees are engaged to assist with a civil nuclear project in the US: The engagement of the Indian company or use of Indian employees may trigger prior authorization or licensing requirements, depending on the nature of the technology being used in the project and the role of the Indian company or employees.

4) An Indian company establishes civil nuclear operations in the US or acquires a US civil nuclear company: The Indian company’s US operations are subject to US nuclear export control requirements, and the transfer of any US-origin commodities or technology to the Indian parent company or to Indian nationals may require prior authorization or licensing. In addition, the Indian company must consider whether its foreign investment in the US civil nuclear industry requires a national security review by the Committee on Foreign Investment in the US.

With a Congress-led government now having returned to power in India with a stronger mandate, the nuclear industry in both nations is looking to the Indian and US governments alike to fully implement the US-India civil nuclear cooperation agreement. While this agreement is expected to result in significant opportunities for Indian companies, Indian companies need to understand that any cooperation with US companies or operations in the US civil nuclear market must be based on a full understanding of US nuclear export controls requirements.

Ajay Kuntamukkala is a partner at the Washington office of law firm Hogan & Hartson. The firm has 1,100 lawyers in 27 global offices.

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