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.
Department of Commerce
BIS Proposes Clarifying Amendments to the ECCNs Regulating Military Aircraft and Military Aircraft Engines Not Subject to the ITAR
Feb. 9, 2016 – 81 Fed. Reg. 6791: The Bureau of Industry and Security (BIS) proposed to amend the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by revising certain items in the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) covering military aircraft and related items and military gas turbine engines and related items. The new proposed amendments affect Export Control Classification Numbers (ECCNs) 9A610, 9A619, 9C610, 9C619, and 9E619. The items covered by these ECCNs were transferred from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the CCL effective Oct. 15, 2013, as part of the first group of transfers from the USML to the CCL made under the President’s Export Control Reform Initiative (ECRI). The new changes are intended to ensure that the revisions are clear, do not inadvertently control items in normal commercial use, account for technological developments, and properly implement the national security and foreign policy objectives of the ECRI. Deadline for comments is March 25, 2016. (See related proposed amendment in Department of State section below.)
BIS Issues Second Proposed Rule for the Transfer of Certain USML Category XII Items to the EAR per Export Control Reform (“ECR”)
Feb. 19, 2016 – 81 Fed. Reg. 8421: BIS issued a new version of the proposed rule published May 5, 2015 (80 Fed. Reg. 25798), describing how certain fire control, laser, imaging, and guidance and control equipment that no longer requires control under Category XII of the USML would be controlled under the CCL. The many changes proposed in this rule include revising ECCN 7A611 and adding new ECCNs 7B611, 7D611, and 7E611. Also, for certain dual-use infrared detection items, the rule would expand controls for certain software and technology, eliminate the use of some license exceptions, revise licensing policy, and expand license requirements for certain transactions that involve foreign military commodities or military end users. The proposal would also harmonize provisions in the EAR by revising controls related to certain quartz rate sensors and uncooled thermal imaging cameras. BIS particularly requests comments identifying any purely commercial items that would be caught by this proposal. Deadline for comments is April 4, 2016. (See related proposed amendment in Department of State section below.)
BIS Entity List Updates
Feb. 23, 2016 – 81 Fed. Reg. 8825: BIS amended the Entity List (EAR Part 744, Supp. No. 4) by adding 8 persons, removing 9 persons, and making several corrections and conforming changes. For the persons added to the list, a license will be required for all items subject to the EAR, the license review policy will be a presumption of denial, and no license exceptions will be available. The persons added to the list, all from the United Arab Emirates (UAE), are:
(1) Dow Technology, Dubai;
(2) Euro Vision Technology LLC, Dubai;
(3) FWS Trading FZE, Ajman and Dubai:
(4) Hamed Kianynejad, Ajman and Dubai:
(5) Hassan Dow, Dubai;
(6) Mojtaba Alikhani, Ajman and Dubai;
(7) Noun Nasreddine, a.k.a. N.A. Nasreddine, Dubai; and
(8) Rainbow General Trading Company, Dubai.
The following persons were removed from the Entity List based on a review of the removal requests that they had submitted:
(1) Agneet Sky Limited, Dublin
United Arab Emirates
(1) Aeolus FZE, a.k.a. Aeolus Air Group, Sharjah;
(2) Aerospace Company FZE, a.k.a. Aerospace Consortium, Fujairah;
(3) Aircon Beibars FZE, Sharjah;
(4) Indira Mirchandani, Dubai;
(5) Jaideep Mirchandani, a.k.a. Jaidip Mirchandani, Dubai;
(6) Nitin Mirchandani, a.k.a. Nithin Merchandani, Dubai;
(7) Group Sky One, a.k.a. Sky One FZE, Sharjah; and
(8) Veteran Avia LLC, a.k.a. Veteran Airline, Sharjah. (Addresses for this person under Armenia, Greece, India, Pakistan, and U.K. were also revised to reflect the removal of the Sharjah location).
In addition, corrections and conforming changes were made to 6 existing Entity List entries.
Department of State
DDTC Posts Name Changes to Its Website
February 2, 10, 11, 23, 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 Statoil Fuel & Retail Lubricants Poland Sp. z o.o. to FUCHS OIL CORPORATION (PL) Sp z o.o due to acquisition by Fuchs Oil of Statoil Fuel & Retail Lubricants;
- Change in Name from Raytheon Cyber Products, LLC to Forcepoint Federal LLC due to corporate rebranding;
- Legacy Sports International, Inc. Address Change;
- Change in Name from Kongsberg Gallium Ltd. to Kongsberg Geospatial Ltd. due to corporate rebranding;
- Presagis USA Ltd. Address Change;
- Change in Name from Emas ROV Pte. Ltd. to EMAS CHIYODA ROV Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas Subsea Services Pte. Ltd. to EMAS CHIYODA Subsea Services Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas-AMC Pte. Ltd. to EMAS CHIYODA Subsea Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas-AMC (Thailand) Co Ltd to EMAS CHIYODA Subsea (Thailand) Co Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas-AMC AS to EMAS CHIYODA Subsea AS in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas-AMC Inc to EMAS CHIYODA Subsea Inc. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas Marine Base LLC to EMAS CHIYODA Subsea Marine Base LLC in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas-AMC Pty. Ltd. to EMAS CHIYODA Subsea Pty Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas Marine Base Holding Co. LLC to EMAS CHIYODA Subsea Marine Base Holding Co. LLC in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from Emas Subsea Services (UK) Limited to EMAS CHIYODA Subsea Services (UK) Limited in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
- Change in Name from EMAS Saudi Arabia Ltd. to EMAS CHIYODA Subsea Saudi Arabia Ltd in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings; and
- Change in Name from EMAS-AMC Services B.V. to EMAS CHIYODA Subsea Services B.V. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings.
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 Published Proposed Rule to Clarify What is Controlled Under USML Category VIII and XIX Post ECR
Feb. 9, 2016 – 81 Fed. Reg. 6797: DDTC proposed to amend the USML to describe more precisely the items controlled under Categories VIII (aircraft and related articles) and XIX (gas turbine engines and associated equipment). The proposed changes in Category VIII include, among others, clarification that the controls in this Category apply to all military aircraft described in the USML Category, whether such aircraft are manned, unmanned, remotely piloted, or optionally piloted; details of the features meriting control under the USML; and deletion of the “ship-based” control parameter. The changes proposed in Category XIX include, among others, clarification of the scope of controlled engines. Public comment is requested on topics including whether any commercial models exceed the new parameters. Deadline for comments is March 25, 2016. (See related proposed amendment in Department of Commerce section above.)
DDTC Publishes Second Proposed to Transfer Certain USML Category XII Items to the EAR Per ECR
Feb. 19, 2016 – 81 Fed. Reg. 8438: DDTC proposed to amend the USML to describe more precisely the items controlled under USML Category XII (fire control, laser imaging, night vision equipment, thermal cameras/sensors, and guidance and control equipment). This proposed rule replaces, in its entirety, the proposed rule published on May 5, 2015 (80 Fed. Reg. 25821), although some of the concepts addressed in the original proposed rule have been kept. The most significant matter addressed in this new proposed rule is that articles, components, and partswill be controlled based on the intent of the manufacturer to “specially design” the article, component, and parts for military end use. (A new note to Category XII defines the term “military end use.”) Specific control parameters are added to many provisions of Category XII. Deadline for comments is April 4, 2016. (See related proposed amendment in Department of Commerce section above.)
LATEST SANCTIONS FINES & PENALTIES
This section of our newsletter provides information on the latest sanctions, fines and penalties for export
violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement
agencies. It is provided as a service to exporters and associates of FD Associates to remind them of the
importance of extreme due diligence in all international trade and export compliance matters,
particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your
company! Call us with questions or concerns at 703-847-5801 or tell us your needs.
Department of Commerce
Feb. 11, 2016 – 81 Fed. Reg. 7304: BIS denied the export privileges of Qiang Hu of Shanghai, China until July 24, 2024 based upon his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. § 1701, et seq.) by conspiring to cause the unauthorized export of U.S.-origin pressure transducers to end users in China and elsewhere. Hu was the sales manager of the Shanghai sales office of MKS Instruments, Inc. of Andover, MA, the manufacturer of the diverted transducers. However, BIS stated at the time of Hu’s arrest that MKS was not a target of the investigation into Hu’s violations. Following Hu’s conviction in Federal District Court for the District of Massachusetts, he was sentenced to a prison term of 34 months.
Feb. 19, 2016 – 81 Fed. Reg. 8478: BIS denied the export privileges of Viacheslav Zhukov, a Russian citizen and lawful permanent resident of the U.S., until March 5, 2022 based on his conviction of violating the IEEPA by conspiring to cause the unauthorized export of multiple packages containing firearm accessories to Russia. Following his conviction in Federal Court for the Southern District of Georgia, Zhukov was sentenced to 51 months in prison and 3 years of supervised release.
Fines and Penalties
Feb. 2, 2016: The Treasury Department Office of Foreign Assets Control (OFAC) issued a Finding of Violation to Johnson and Johnson (Middle East) Inc. (JJME), a wholly owned U.S. subsidiary of Johnson & Johnson, for violating the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) by facilitating the exportation of goods to Sudan when its General Manager for Emerging Markets, Middle East and North Africa coordinated and supervised 5 shipments of goods to Khartoum, Sudan by Johnson and Johnson (Egypt) S.A.E. The JJME manager had not received any training on compliance with OFAC regulations despite being responsible for sales in the Middle East and North Africa. OFAC stated that the Finding of Violation was issued in lieu of a civil monetary penalty.
Feb. 12, 2016: Hunter Perry of Louisville, KY, pleaded guilty in U.S. District Court in Louisville, to violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting night vision scopes and other items controlled under the USML to persons in the United Kingdom, Poland, and Japan without the required authorization from DDTC. Payments for the equipment were made through PayPal accounts and bank wire transfers. Perry falsified customs documents by misidentifying the items he shipped in order to escape detection.
Feb. 18, 2016: An indictment charging Richmond Akoto Attah of Charlotte, NC, with violations of the AECA and other federal laws, was unsealed in federal court in the Western District of North Carolina. According to the indictment, Attah hid 27 firearms, including semi-automatic pistols and revolvers, inside a washer and dryer and 3,500 rounds of ammunition in a barrel; placed the washer, dryer, and barrel in a shipping container; and attempted to ship the container from Charlotte to Ghana without obtaining the required authorization. U.S. Customs officers recovered the container before it was exported.
Feb. 22, 2016: OFAC announced that CGG Services S.A. (formerly known as CGGVeritas S.A.) agreed on behalf of itself and several affiliated companies to pay a civil penalty of $614,250 to settle charges by OFAC of 22 violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515). The violations involved 2 exports of spare parts and other equipment from the U.S. to vessels operating in Cuba’s territorial waters, 15 exports of U.S.-origin goods to vessels operating in Cuba’s territorial waters, and 5 transactions involving the processing of data from seismic surveys conducted in Cuba’s Exclusive Economic Zone that benefited a Cuban company.
Feb. 25, 2016: OFAC announced that Halliburton Atlantic Limited (HAL), a Cayman Island subsidiary of Halliburton Energy Services, Inc., a U.S. company, agreed to pay $304,706 to settle charges by OFAC that HAL and another Cayman Island Halliburton affiliate had violated the CACR by dealing in property in which Cuba or a Cuban national had an interest by exporting goods and services in support of oil and gas exploration and drilling activities in the Cabinda Onshore South Block oil concession in Angola. OFAC claimed that HAL and its affiliate knew or should have known that Cuba Petroleo, a state-owned Cuban company, held a 5% interest in a consortium that had a direct interest in the Cabinda concession and any oil or gas procured there.
Feb. 26, 2016: Song Il Kim, a Cambodian citizen born in North Korea and residing in the People’s Republic of China, was sentenced in federal court in Salt Lake City, UT to serve 40 months in federal prison based on his plea of guilty of violating the AECA by attempting to ship night vision goggles to China after declaring that the box in which they were packed contained used toys and towels. Kim was arrested in Honolulu, HI in July 2015 in a sting operation conducted by Utah-based Homeland Security Agents. (See additional information on this case in December 2015 Regulatory Update.)