LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
Dec. 8 and 12, 2016: The Wassenaar Arrangement published the following documents:
- List of Dual-Use Goods and Technologies and Munitions List as of Dec. 2016: <http://www.wassenaar.org/wp-content/uploads/2016/12/WA-LIST-16-1-2016-List-of-DU-Goods-and-Technologies-and-Munitions-List.pdf>
- Summary of Changes to the Lists as of Dec. 2016: <http://www.wassenaar.org/wp-content/uploads/2016/12/Summary-of-Changes-to-2016-Lists-2.pdf>
- Best Practices for Effective Legislation on Arms Brokering <http://www.wassenaar.org/wp-content/uploads/2016/12/Best-Practices-for-Effective-Legislation-on-Arms-Brokering-1.pdf> (as amended at 2016 Plenary)
- Best Practices for Effective Export Control Enforcement <http://www.wassenaar.org/wp-content/uploads/2016/12/Best-Practices-for-Effective-Export-Control-Enforcement-1.pdf> (as amended at 2016 Plenary)
Department of Commerce
BIS Publishes Final Rule to Amend License Exception TMP to Permit Temporary Exports to Mexico for Four Years When Related to Mexico’s IMMEX Program
Dec. 1, 2016 – 81 Fed. Reg. 86571: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by modifying License Exception TMP (Temporary Imports, Exports, Reexports, and Transfers (In-country), EAR Sec. 740.9) to extend the time limit for temporary exports to Mexico for use in Mexico's IMMEX (Decree for the Promotion of Manufacturing, Maquiladora and Export Services) program from one year to 4 years. This matches Mexico's time limit of 4 years for imports under the IMMEX program. This final rule implements without change the rule proposed on Aug. 23, 2016 (81 Fed. Reg. 575705).
BIS Amends EAR to Remove Special Iraq Reconstruction Licenses
Dec. 5, 2016 – 81 Fed. Reg. 87424: BIS amended the EAR to remove the Special Iraq Reconstruction License (SIRL, EAR Part 747) on the basis that this license was outdated and no longer required, as exporters now have more efficient options for exports and reexports to Iraq and in-country transfers in Iraq. This action finalizes an amendment proposed on June 7, 2016 (81 Fed. Reg. 36481).
BIS Amends Validated End User List for China to Remove SMIC
Dec. 5, 2016 – 81 Fed. Reg. 87426: BIS amended the List of Validated End Users in China (EAR Part 748, Supp. No. 7) to remove the Semiconductor Manufacturing International Corporation (SMIC) from the list of VEUs in the People’s Republic of China (PRC). This action was taken at the company’s request.
BIS Entity List Changes for December 2016:
Dec. 15, 2016 – 81 Fed. Reg. 90712: BIS added the following 7 persons, all located in Pakistan, to the Entity List (EAR Part 744, Supp. No. 4):
- Ahad International, Lahore;
- Air Weapons Complex (AWC), Punjab;
- Engineering Solutions Pvt. Ltd., Islamabad;
- Maritime Technology Complex (MTC), Karachi;
- National Engineering and Scientific Commission (NESCOM), Islamabad;
- New Auto Engineering (NAE), Rawalpindi; and
- Universal Tooling Services, a.k.a., the following three aliases: Forward Design and Manufacturing; MSM Enterprises; and Technopak Engineering, Rawalpindi, Lahore, and Taxila.
For these persons, there will be a license requirement for all items subject to the EAR and a license review policy of presumption of denial, and no license exceptions will be available.
BIS Revises Standard Language in Licenses to Reference New DCS Requirement
Dec. 15, 2016: BIS revised the standard language on validated licenses to conform with the revised requirements regarding destination control statements that went into effect Nov. 15, 2016. (See November 2016 Regulatory Update.). The new language directs exporters to “[p]lace a Destination Control Statement on all commercial invoices for shipments of items on the Commerce Control List.”
BIS Revises ECCNs 1C351 and 2B352 to Conform with Changes Made by the Australia Group
Dec. 16, 2016 – 81 Fed. Reg. 90983: BIS amended Export Control Commodity Numbers (ECCNs) 1C351 and 2B352 to implement decisions made by the Australia Group (AG) in 2016. ECCN 1C351 was amended to reflect updates to the AG “List of Human and Animal Pathogens and Toxins for Export Control.” ECCN 2B352 was amended to reflect changes to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software.”
BIS Revises the Export Restrictions Applicable to Burma
Dec. 27, 2016 – 81 Fed. Reg. 94962: Consistent with the removal of economic and financial sanctions against Burma in October 2016 (see October 2016 Regulatory Update), BIS removed and reserved EAR Sec. 744.22, which imposed license requirements and other restrictions on exports to previously-sanctioned persons in Burma, and moved Burma from Country Group D:1 to Country Group B. However, Burma’s placement in Country Group D:3, Country Group D:5, and Computer Tier 3 remain unchanged.
BIS Bolsters Export Restrictions Applicable to Russia
Dec. 27, 2016 – 81 Fed. Reg. 94963: To ensure the efficacy of existing sanctions on Russia, BIS added 21 entries in Russia and 2 entries in the Crimea region of Ukraine to the Entity List for violating international law and fueling the conflict in eastern Ukraine. You can find these entities at the following link: https://www.gpo.gov/fdsys/pkg/FR-2016-12-27/pdf/2016-31124.pdf The full Entity list is published at Supplement No. 4 to Part 744 of the EAR, and can be found at https://www.bis.doc.gov/index.php/forms-documents/regulations-docs/federal-register-notices/federal-register-2014/957-744-supp-4-1/file.
BIS also amended EAR Sections 742.2, 742.3, and 742.4 to state that it will review license applications to export or reexport to Russia items subject to the EAR and controlled for chemical and biological weapons proliferation (CB), nuclear nonproliferation (NP) or national security (NS) reasons under a presumption of denial, if the items proposed for export or reexport would make a direct and significant contribution to Russia’s military capabilities.
BIS Revises ECCN 2B229 to Reflect Regulatory Changes Agreed by the Nuclear Suppliers Group
Dec. 27, 2016 – 81 Fed. Reg. 94971: BIS amended the Commerce Control List (CCL, EAR Part 774) to reflect understandings reached by the Nuclear Suppliers Group (NSG) in 2015 and 2016. The amendments affect the descriptions of certain linear displacement measuring systems in ECCN 2B206 and certain centrifugal multiplane balancing machines in ECCN 2B229. BIS also corrected an error in the technical parameters of certain radiation-hardened TV cameras in ECCN 6A203.d.
BIS Revises the Maximum Civil Monetary Penalties for IEEPA Violations Due to Inflation
Dec. 28, 2016 – 81 Fed. Reg. 95432: BIS made inflation adjustments to the maximum civil monetary penalties (CMPs) for the regulations it administers, using a formula mandated by law. The new CMP for violations of the International Emergency Economic Powers Act (IEEPA) was increased from $284,582 to $289,238. The new CMP will apply to penalties assessed after Jan. 15, 2017, including those whose associated violation predated the adjustment.
Department of State
DDTC Name and Address Changes
December 5, 12, 13, 14, 15, 22, 27, and 29, 2016: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:
- Change in Name from Textron subsidiaries, Cessna Aircraft Company, Beechcraft Corporation, and Hawker Beechcraft Global Customer Support, LLC to Textron Aviation, Inc. due to corporate rebranding;
- Change in Address for Dutch-Shape B.V.;
- Change in Name from Ultra Electronics, Controls to Ultra Electronics, Precision Control Systems due to corporate reorganization;
- Alcoa Inc. Business Units and Non-U.S. Subsidiaries Name Changes due to corporate reorganization:
- Alcoa Inc. Arconic Inc.
- Alcoa Defense Inc. Arconic Defense Inc.
- Alcoa Global Fasteners Inc. Arconic Global Fasteners & Rings, Inc.
- Alcoa Fixations Simmonds SAS Arconic Fixations Simmonds SAS
- Alcoa Holdings GmbH Arconic Holding GmbH
- Alcoa Kofem Kft Arconic – Kofem Szekesfehervari
Konnyufemmu Korlatolt Felelossegu
- Alcoa Korea Ltd. Arconic Korea Ltd.
- Alcoa Manufacturing (GB) Arconic Manufacturing (GB) Limited
- Change in Name from CGS S.p.A. Compagnia Generale per lo Spazio to OHB Italia S.p.A. due to corporate rebranding;
- Change in Name from Diehl BGT Defence GmbH & Co KG to Diehl Defence GmbH & Co KG due to corporate reorganization;
- Change in Name and Address from NovAtel Europe Limited to Veripos Limited due to acquisition;
- Change in Name from Lockheed Martin Business Technology Solutions to Leidos Innovations UK Ltd. due to merger;
- Change in Name from Harvan Engineering Ltd. to Harvan Manufacturing Ltd. due to corporate reorganization;
- Change in name from Agusta Westland Ltd., Finmeccanica UK Ltd., and DRS Technologies UK Ltd. to Leonardo MW Ltd. due to corporate rebranding;
- Change in name of Leonardo Panel subsidiary Sirio Panel S.p.a. to Leonardo S.p.a. due to merger; and
- Change in Name from Thales Geodis Freight & Logistics to SCO Aerospace and Defence due to acquisition.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
DDTC Publishes Various Corrections and Amendments to the ITAR to Clarify Regulatory Requirements
Dec. 5, 2016 – 81 Fed. Reg. 87427: DDTC made corrections and additions to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Parts 120, 121, 122, 124, 126, and 127 and 13 U.S. Munitions List (USML, ITAR Sec. 121.1) Categories. Most of the amendments are minor changes and corrections of administrative and typographical errors. Substantive amendments include:
- Thirteen USML categories are amended to clarify that commodities, software, and technology subject to the EAR and related to defense articles in a USML category may be exported or temporarily imported on the same license with defense articles from any category, provided they are to be used in or with that defense article;
- Section 122.4(c)(4) is revised to permit DDTC to approve an alternative timeframe, not less than 60 days, to the current 60-day requirement for registrants to provide a signed amended agreement; and
- Section 124.2(c)(5)(v) is revised to correct errors to the USML category references for gas turbine engine hot sections, from VI(f) and VIII(b) to Category XIX.
State Department’s Bureau of Arms Control Modifies Sanctions Applicable to Rosoboronexport to Permit the USG to Purchase Goods from the Russian Entity related to the Open Skies Treaty
Dec. 15, 2016 – 81 Fed. Reg. 90903: The U.S. Department of State modified sanctions imposed against Rosoboronexport (ROE) in 2015 (Sep. 2, 2015 – 80 Fed. Reg. 53222) and 2016 (July 5, 2016 – 81 Fed. Reg. 43696) to permit the procurement by the U.S. Government of goods, technology, and services for the purchase, maintenance or sustainment of the ROE Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia's Open Skies Treaty compliance, including the purchase of spare parts, supplies, and related services. However, this exception does not apply to private-sector transactions with ROE.
DDTC Publishes Final Rule Implementing ITAR Revisions to Enable CBP to Integrate its International Trade Data System with ITAR Exporting
Dec. 29, 2016: DDTC announced impending ITAR amendments, effective Dec. 31, 2016, subsequently published on January 3, 2017 (82 Fed. Reg. 15), to implement the International Trade Data System (ITDS), a new government-wide system that will allow businesses to electronically submit the data required to import or export cargo. Traders will only need to create and submit a single set of data for each import or export. Information for users is on the Customs and Border Protection (CBP) website at https://www.cbp.gov/trade/automated.
For reference, the implementation of the ITDS in the Automated Commercial Environment (“ACE”) will not affect the process by which exporters prepare and submit Electronic Export Information (“EEI”) to the Census bureau for qualifying exports. For most ACE users, the revised ITDS interface will be invisible.
Department of the Treasury
Treasury Publishes Quarterly List of Countries Supporting Boycotts of Israel
Dec. 2, 2016 – 81 Fed. Reg. 87128: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.
OFAC Amends Two FAQ Answers to Clarify Scenario If Sanctions Are Reinstated Against Iran Pursuant to JCPOA
Dec. 15, 2016: The Office of Foreign Assets Control (OFAC) amended two Frequently Asked Questions (FAQs) regarding the re-imposition of sanctions in the event of a snapback of sanctions under the Joint Comprehensive Plan of Action (JCPOA) against Iran. Updated Questions M.4 and M.5 are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf.
OFAC Issues Revised General License to Permit the Temporary Re-export to Iran of US-Origin Civil Aircraft Not Registered with the FAA, Under Specified Conditions
Dec.15, 2016: OFAC replaced General License J of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) with a new General License J-1, which permits the temporary reexport to Iran of “Eligible Aircraft” that involve code sharing arrangements, subject to certain conditions. General License J-1 is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_glj_1.pdf.
OFAC Issues General License to Permit Transactions Ordinarily Incident to Engagements with FAU Glavgosekspertiza Rossi’s Office in Russia for Design Reviews and Permits
Dec. 20, 2016: OFAC issued Russia/Ukraine-related General License 11, authorizing all transactions and activities that are ordinarily incident and necessary to requesting, contracting for, paying for, receiving, or utilizing a project design review or permit from FAU Glavgosekspertiza Rossii's office(s) in the Russian Federation (not including the Crimea region of Ukraine).
OFAC Amends then Iranian Transactions and Sanctions Regulations to Expand the Medical Devices Eligible for Export to Iran
Dec. 23, 2016 – 81 Fed. Reg. 94254: OFAC amended the Iranian Transactions and Sanctions Regulations (ITSR) to expand the range of “medical devices” covered under a general license; expand authorizations related to training, replacement parts, software, and services for the operation, maintenance, and repair of medical devices; allow the import from Iran of certain U.S.-origin items that are broken or connected to product recalls or other safety concerns; slightly narrow the list of excluded agricultural commodities; and define the terms “goods of Iranian origin” and “Iranian-origin goods.” The amended sections are ITSR Secs. 560.530 and 560.306. New and updated FAQs about the amended rules are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#lic_agmed_amend.
LATEST SANCTIONS FINES & PENALTIES
Fines and Penalties
Dec. 12, 2016: Shantia Hassanshahi, a U.S. citizen born in Iran, was sentenced in federal court in Washington, DC, to one year in prison, based on his plea of guilty of unlawfully conspiring to ship electromechanical relay devices valued at $1 million to Iran without the required authorization. Hassanshahi admitted that he used his company, Hasston, to purchase the devices from a Canadian manufacturer and shipped them for end use in Iran.
Dec. 14, 2016: Mansour Moghtaderi Zadeh, an Iranian national, was sentenced in federal court in Washington, DC, to 18 months in prison and one year of supervised release, and ordered to forfeit $69,159, based on his plea of guilty of conspiring to unlawfully export products, including, aviation parts and aviation supplies to Iran without the required authorization. The products included a fiber optic video transmitter and receiver and aviation course indicators. Earlier, in 2007, BIS had issued a Temporary Denial Order (TDO) against Zadeh (under an alias) and his company, Lavantia, after a shipment by them was detained pending certification of the end user. Notwithstanding the TDO, Zadeh and other conspirators exported and attempted to export goods valued at more than $69,000 to Iran.
Dec. 15, 2016: Lim Yong Nam, aka Steven Lim, a citizen of Singapore, pleaded guilty in federal court in Washington, DC, to a charge of conspiracy to defraud the U.S. by dishonest means, based on his participation in a conspiracy that allegedly caused the unauthorized exportation of thousands of radio frequency modules to Iran. Fourteen of the modules were later recovered in Iraq, where they were used in remote detonation systems for improvised explosive devices (IEDs). Lim was extradited from Indonesia, where he had been detained since October 2014 under a U.S. request for extradition.
Dec. 16, 2016: William Ali, a Fiji citizen resident in New Zealand, was convicted by a jury in federal court in Seattle, WA, of conspiracy to violate the Arms Export Control Act (AECA, 22 U.S.C. 2778 et seq.) involving an effort to purchase ITAR-controlled accelerometers and gyroscopes in the U.S. and export them to China without the required authorization. Ali was arrested in April 2016, when he arrived in Seattle to pick up the devices from an individual he thought was a commercial seller, but who was, in fact, an undercover agent of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).
Dec. 19, 2016: Yu Long, a citizen of China and lawful permanent resident of the U.S., pleaded guilty in federal court in New Haven, CT, of violating the AECA and other offenses related to the theft and subsequent export to China of sensitive military program documents. Long obtained the documents while working on the F119 and F135 engines and other projects as a Senior Engineer/Scientist at United Technologies Research Center (UTRC) in Connecticut. Among other exports, the investigation revealed that Long had taken with him to China a UTRC external hard drive which he had illegally retained after his employment at UTRC ended that contained a substantial body of highly sensitive export controlled data.