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 Amends EAR to Remove Liberia, Cote d’Ivoire, Sri Lanka, and Vietnam from Country Group D; EAR Also Amended to Reflect India’s Accession to MTCR
Nov. 4, 2016 – 81 Fed. Reg. 76859: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to implement the termination of United Nations arms embargoes against Liberia and Cote d’Ivoire by removing footnotes in the entries for these countries in the Commerce Country Chart (Supplement No. 1 to EAR Part 738), removing them from Country Group D in the Country Group List (Supplement No. 1 to EAR Part 740), and amending EAR Sec. 746.1(b)(2). BIS also removed Sri Lanka from Country Group D to reflect the non-renewal of a congressionally-mandated U.S. arms embargo against that country; removed Vietnam from Column D:5 in the Country Group List to implement the termination of the U.S. arms embargo against that country; and amended EAR Sec. 742.5(d) to recognize the accession of India to membership in the Missile Technology Control Regime.
BIS General License for Exports to China’s ZTE and ZTE Kangxun Extended to End of February 2017
Nov. 18, 2016 – 81 Fed. Reg. 81663: BIS extended until Feb. 27, 2017, the temporary general license for exports, reexports, and transfers to Zhongxing Telecommunications Equipment (ZTE) Corporation and ZTE Kangxun Telecommunications Ltd. that was originally scheduled to end on June 30, 2016, and subsequently extended until Aug. 30, 2016 and Nov. 28, 2016. (See March 2016 Regulatory Update for additional details.)
BIS Issues Final Rule to Further Clarify Controls on Military Aircraft and Military Aircraft Engines Controlled Under ECCNs 9X610 and 9X619, along with changes to other ECCNs
Nov. 21, 2016 – 81 Fed. Reg. 83114: In its continuing efforts under the Export Control Reform Initiative (ECRI), BIS issued a final rule modifying the Commerce Control List (CCL, Supplement No. 1 to EAR Part 774) entries for military aircraft and related items and military gas turbine engines and related items. This final rule takes into consideration the public comments received following publication of a proposed rule on Feb. 9, 2016 (81 Fed. Reg. 6791; see February 2016 Regulatory Update). Among other changes, the rule clarifies the descriptions of the types of military aircraft controlled on the CCL; clarifies and expands the list of items subject only to the anti-terrorism reason for control; adds to Export Control Classification Number (ECCN) 9E619.b technology related to ECCNs 9C619.b; and updates ECCN 9A610.w. In addition, changes were also made to the EAR and certain ECCNs, to include, Part 770.2 was amended to add paragraph (n) which identifies that forgings, castings, etc., remain controlled; ECCN 0A604: Removed Note 1 to 0A604.x (forgings, castings, etc., remain controlled via the Interpretation note 770.2(n)) and redesignated Note 2 to 0A604x as Note 1 to 0A604.x; ECCN 0A614: Removed Note 3 to 0A614 (forgings, castings, etc., controlled by any Product Group A ‘‘600 series’’ ECCN are controlled in that ‘‘600 series’’ ECCN via the Interpretation note 770.2(n)); ECCN 3A611: Changed the “List of Items Controlled” section paragraph of 3A611.x to specify that it does not control an item specified in .x paragraph of another 600 Series ECCN. 3A611.y was changed to specify that parts, components, accessories and attachments specially designed for 3A611.y items are themselves caught as 3A611.y items; ECCN 8A992: Changed the “Related Controls” paragraph to include, “Marine gas turbine engines are not controlled in paragraph.g of this entry. See ECCN 9A619 for possible controls on marine gas turbine engines specially designed for a military use. See ECCN 9A002 for possible controls on marine gas turbine engines not specially designed for a military use. Marine gas turbine engines subject to the EAR that are not controlled in ECCNs 9A002 or 9A619 are designated EAR99.”; ECCN 9A115 was revised to read as follows: “Apparatus, devices and vehicles, designed or modified for the transport, handling, control, activation and launching of rockets, missiles, and unmanned aerial vehicles capable of achieving a ‘‘range’’ equal to or greater than 300 km. (Some of these items are controlled in ECCN 9A610; others are ‘‘subject to the ITAR.’’ See 22 CFR parts 120 through 130.)”; ECCN 9A604: Removed Note 1 to 9A604.x (forgings, castings, etc., remain controlled via the Interpretation note 770.2(n)) and redesignated Note 2 to 9A604.x as Note 1 to 9A604.x; and ECCN 9A620: The Note to 9A620.b immediately following paragraph .x is deleted., and the following Effective date of this rule is Dec. 31, 2016. (See article on related amendment below, in State Department section.)
See FD Associates article published on December 8, 2016 for detailed information on this regulatory change.
BIS Accepts Recommendations of Nuclear Suppliers Group to Remove Nuclear Proliferation Controls on Certain Equipment Usable in Nuclear Reactors
Nov. 25, 2016 – 81 Fed. Reg. 85138: BIS amended the EAR to remove nuclear nonproliferation (NP) Column 2 export license requirements from certain CCL-listed pressure tubes, pipes, fittings, pipe valves, pumps, numerically controlled machine tools, oscilloscopes, and transient recorders. The change will make these requirements more consistent with the requirements of other members of the Nuclear Suppliers Group (NSG). For this purpose, ECCNs 2A292, 2A293, 2B290, and 3A292 were removed from the CCL; however, all items formerly controlled under these ECCNs remain subject to the EAR, and most of them will now be controlled under new or amended ECCNs that require a license for anti-terrorism (AT) or chemical/biological (CB) reasons. Please contact us for additional details if you believe that your product might be affected by this action.
Department of State
DDTC Posts Name and Address Changes on Website
Nov. 1, 4, 8, & 18, 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 Address of Calgon Carbon Asia Pte. Ltd.;
- Change in Name of ESW GmbH to JENOPTIK Advanced Systems GmbH due to corporate rebranding and relocation of one of JENOPTIK’s business units in Germany;
- Change in Name of Rolls-Royce Marine Electrical Systems Ltd (RRMES) to Rolls-Royce Power Engineering PLC (RRPE) due to corporate reorganization;
- Change in Names of Safran-owned global subsidiaries due to corporate rebranding as follows:
- Sagem Defense Securite S.A.S. to Safran Electronics & Defense S.A.S.
- Snecma to Safran Aircraft Engines
- Techspace Aero SA to Safran Aero Boosters SA
- Messier Bugati Dowty S.A.S. to Safran Landing Systems S.A.S.
- Safran Power UK Ltd. to Safran Electrical & Power UK Ltd.
- Labinal Power Systems S.A.S. to Safran Electrical & Power S.A.S.
- Labinal Maroc S.A. to Safran Electrical & Power Morocco S.A.
- Change in Name of Alcoa Ltd/Alcoa LTEE to Howmet Canada (Howmet Canada) due to divestiture;
- Change in Name of SITA Wschod Spolka z ograniczona Odpowiedzialnoscia (SITA Wschod Sp. z o.o.) to SUEZ Wschod Spolka z ograniczona Odpowiedzialnoscia (SUEZ Wschod Sp. z o.o.) due to corporate rebranding; and
- Change in Name of Hanwha Thales Co. to Hanwha Systems Co., Ltd. due to corporate rebranding.
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 Requests Comments from the Public on New Forms for Submitting Material Changes to DS-2032 Registration Statements
Nov. 4, 2016 – 81 Fed. Reg. 76992: DDTC requested public comments on a revised version of a proposed new electronic Form DS-7789, Statement of Material Change, Merger, Acquisition, or Divestment of a Registered Party, in advance of DDTC’s submission of the collection to the Office of Management and Budget. A link to the proposed form is on the DDTC website (http://www.pmddtc.state.gov/) under the following subheading: “Federal Register Notice: 30-Day Notice of Proposed Information Collection: Statement of Material Change, Merger, Acquisition, or Divestment of a Registered Party has been posted.”. Instructions for the proposed new form are at http://www.pmddtc.state.gov/documents/[FINAL]%201405-XXXX%20DS-7789%20Instructions.pdf. DDTC published an initial draft of Form DS-7789 on June 20, 2016 (81 Fed. Reg. 39992 – see additional information in June 2016 Regulatory Update). Deadline for comments in response to the current notice is December 5, 2016.
DDTC Publishes Rule to Further Revise USML Categories VIII and XIX
Nov. 21, 2016 – 81 Fed. Reg. 83126: In a rule coordinated with BIS (see article above in Commerce Department section), DDTC amended USML Categories VIII (Aircraft and Related Articles) and XIX (Gas Turbine Engines and Associated Equipment) to describe more precisely the articles that continue to warrant control on the USML. This final rule takes into consideration the comments that were received after DDTC published proposed amendments to both categories Feb. 9, 2016 (81 Fed. Reg. 6797). An Industry Notice regarding treatment of items transferred from the CCL to the USML by this action – primarily next-generation platforms that will be controlled principally in USML paragraphs VIII(h)(29) and XIX(f)(12)-- is on the DDTC home page, http://www.pmddtc.state.gov/.
See FD Associates article published on December 8, 2016 for detailed information on this regulatory change.
DDTC Requests Comments from the Public on New Forms for Submitting Voluntary Disclosures
Nov. 28, 2016 – 81 Fed. Reg. 85668: DDTC invited comments on a revised version of a proposed new Form DS-7787, Disclosure of Violations of the Arms Export Control Act. This electronic form would replace the current practice of submitting disclosures to DDTC in writing via hard copy. This proposal takes into consideration the comments DDTC received when it initially proposed a new electronic Form DS-7787 on June 20, 2016 (81 Fed. Reg. 39994 – see additional information in June 2016 Regulatory Update). Deadline for comments is Dec. 28, 2016.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Nov. 18, 2016 – 81 Fed. Reg. 81731: BIS denied the export privileges of Luis Alberto Najera-Citalan, currently in the Federal Correctional Institution (FCI) in Beaumont, TX, for 10 years based on his August 2015 conviction of violating the Arms Export Control Act (AECA, 22 U.S.C. 2778, et seq.) by conspiring to export, attempting to export, and causing to be exported, to Mexico, 5 USML-controlled AR-15 style rifles without the required authorization. Najera-Citalan was sentenced to 60 months in prison, 3 years of supervised release, and a $100 assessment.
Nov. 18, 2016 – 81 Fed. Reg. 81732: BIS denied the export privileges of Jorge Santana Jr., currently in the FCI in Beaumont, TX, for 10 years based on his May 2014 conviction of violating the AECA by attempting to export, and causing to be exported, to Mexico, a .357 caliber magazine, two (2) 9mm magazines, a Smith & Wesson .40 caliber magazine, approximately 5,440 rounds of 7.62 caliber ammunition, 200 rounds of .40 caliber ammunition, and 400 rounds of .38 super caliber ammunition, all of which were controlled under the USML, without the required authorization. Santana was sentenced to 66 months in prison, 3 years of supervised release, 100 hours of community service, and a $100 assessment.
Nov. 18, 2016 – 81 Fed. Reg. 81733: BIS denied the export privileges of Hassan Jamil Salame, currently in the FCI in Elkton, OH, for 10 years based on his November 2015 conviction of violating the AECA by attempting to export, and causing to be exported, to Lebanon, firearms and ammunition, including a Ruger .44 Magnum revolver, two Bushmaster .223 caliber rifles, a Ruger .45 caliber pistol, a Glock .45 caliber pistol, and a Beretta 9mm pistol, all of which were controlled under the USML, without the required authorization. Salame was sentenced to 45 months in prison, 3 years of supervised release, and a $300 assessment.
Nov. 18, 2016 – 81 Fed. Reg. 81734: BIS denied the export privileges of Daniel Miranda-Mendoza, currently in Great Plains Correctional Institution (CI) in Hinton, OK, for 10 years based on his August 2015 conviction of violating the AECA by conspiring to export, attempting to export, and causing to be exported, to Mexico, one Kel-Tec pistol, Model PMR-30, .22 caliber, one Remington rifle, Model 7400, .30-06 caliber, and one Browning rifle, Model X-bolt, .270 caliber, all of which were controlled under the USML, without the required authorization. Miranda-Mendoza was sentenced to 37 months in prison and a $100 assessment.
Nov. 18, 2016 – 81 Fed. Reg. 81735: BIS denied the export privileges of Javier Nenos Rea, currently in the D. Ray James CI in Folkston, GA, for 10 years based on his January 2015 conviction of violating the AECA by attempting to export AK-47 assault rifles and a .40 caliber semi-automatic pistol to Bolivia without the required authorization. Rea was sentenced to 46 months in prison, 2 years of supervised release, and a $100 assessment.
Nov. 18, 2016 – 81 Fed. Reg. 81737: BIS denied the export privileges of Julio Cesar Solis-Castilleja, currently in Victorville FCI in Adelanto, CA, for 10 years based on his June 2014 conviction of violating the AECA by attempting to export, and causing to be exported, to Mexico, a Norinco MAK 90 Sporter 7.62x39mm caliber rifle, a Bushmaster .308 caliber rifle, a DPMS Panther .308 caliber rifle, a FN Herstal .308 caliber rifle, a PTR 91C .308 caliber rifle, four (4) 7.62x51mm magazines, and one (1) 7.62x39mm magazine, all of which were controlled under the USML, without the required authorization. Solis-Castilleja was sentenced to 46 months in prison, 3 years of supervised release, and a $100 assessment.
Fines and Penalties
Nov. 3, 2016: Gilbert Oscar Elian of Grand Rapids, MI was sentenced in federal court in Grand Rapids to a term of a year and a day in federal prison, 3 years on supervised release, and a $10,000 fine based on his plea of guilty of conspiring to violate the AECA. Elian, a U.S. citizen born in Lebanon, allegedly transported dozens of handguns, including some that were disassembled and hidden inside engine blocks and transmissions, to Lebanon without the required authorization. (See additional information in March 2016 Regulatory Update.)
Nov. 8, 2016: National Oilwell Varco (“NOV”) of Houston, TX and its subsidiary, Dreco Energy Services Ltd. of Edmonton, Alberta, Canada, jointly and severally, agreed to pay a civil penalty of $2,500,000 to settle charges by BIS that Dreco had caused, aided, or abetted unauthorized exports to Iran and NOV had acted with knowledge of a violation involving unauthorized exports to Oman. According to the Proposed Charging Letter, Dreco ordered oil and gas equipment valued at $2,315,255 for shipment from the U.S. to Canada without disclosing that the equipment was destined for Iran and then transshipped it to the National Iranian Oil Company. The Proposed Charging Letter also claimed that NOV had exported 21 filament winder mandrels classified under ECCN 1B201 to Oman, whereas it had applied for and received an export license from BIS to ship only 9 of these items to Oman. The unauthorized mandrels were valued at approximately $29,615.
Nov. 8, 2016: NOV, Dreco, and NOV Elmar, another subsidiary of NOV, agreed to pay a civil fine of $5,976,028 to settle charges by OFAC of violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515), the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), and the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) that occurred during the period 2002-2009. The violations included commission payments by Dreco to a U.K.-based entity related to the sale and exportation to Iran of goods with a value of $2,730,091; transactions by NOV involving the direct or indirect sale and exportation to Iran of goods valued at $13,596,980; exports by Dreco filling orders from Iranian customers valued at $526,480; transactions by Dreco involving the sale to Cuba of goods valued at $1,707,964; transactions by Elmar involving the sale to Cuba of goods valued at $103,119; and involvement by NOV in a transaction involving the export to Sudan of goods valued at $20,928.
Nov. 8, 2016: Concurrent with the civil settlements with BIS and OFAC described above, NOV, Dreco, and Elmar entered into a Non-Prosecution Agreement (NPA) with the Office of the U.S. Attorney for the Southern District of Texas. The NPA calls for a fine of $25,000,000 covering the same pattern of conduct covered in the civil settlements. OFAC stated that its settlement amount of $5,976,028 will be deemed to be satisfied by payment of the $25 million settlement with OFAC.