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.
New UN Sanctions On North Korea
Sep. 11, 2017: The United Nations Security Council adopted new sanctions on North Korea further limiting or prohibiting most remaining exports of goods and labor both to and from North Korea, including joint ventures. These U.N. sanctions cover actions that are already covered by U.S. sanctions, but all U.N. member states will now be required to adopt them. A Fact Sheet on UNSCR Resolution 2375 is on the web site of the U.S. Mission to the U.N. at https://usun.state.gov/remarks/7969 .
President Blocks Sale Of U.S. Semiconductor Manufacturer To Chinese Via CFIUS
Sep. 13, 2017: President Trump issued an order prohibiting the acquisition of Lattice Semiconductor Corporation, an Oregon-based publicly traded manufacturer of semiconductors for the consumer, communications, and industrial markets, by a group of Chinese state-owned entities. Lattice's primary semiconductor product lines are programmable logic devices that customers can program to provide functionality similar to chips that are designed and produced for specific applications. The President’s order was based on a conclusion by the Committee on Foreign Investment in the U.S. (CFIUS) that the takeover presented a risk to U.S. national security that could not be mitigated. The President’s Order is on the White House web site at https://www.whitehouse.gov/the-press-office/2017/09/13/order-regarding-proposed-acquisition-lattice-semiconductor-corporation.
President Trump Issues Executive Order 13810 Regarding New Sanctions On North Korea
Sep. 25, 2017 – 82 Fed. Reg. 44705: President Trump issued Executive Order 13810, further tightening U.S. sanctions on North Korea. The order authorizes the Secretary of the Treasury to adopt far-reaching sanctions on foreign financial institutions and foreign persons in certain industries and directly bans vessels and aircraft that have visited North Korea from visiting the U.S. for 180 days. A White House Fact Sheet is at https://www.whitehouse.gov/the-press-office/2017/09/21/fact-sheet-president-donald-j-trump-increases-pressure-cut-funding-north. See Treasury Department section below for actions relating to this Executive Order.
Department of Commerce Seeks Comments On Foreign Policy Provisions Of The EAR
Department of Commerce
Sep. 7, 2017 – 82 Fed. Reg. 42279: The Bureau of Industry and Security (BIS) invited comments from industry about the effect of export controls based on foreign policy provisions in the Export Administration Regulations (EAR, 15 CFR Parts 730-774). Foreign-policy export controls expire after one year unless renewed, and the comments will aid BIS in determining whether to renew the current controls, effective Jan. 1, 2018. Foreign-policy controls relate to, among others, proliferation, regional stability, terrorism, and crime control items. Specific questions of particular interest, and a full list of foreign-policy controls in the EAR, are in the BIS Request for Comments in the Federal Register at https://www.gpo.gov/fdsys/pkg/FR-2017-09-07/pdf/2017-19010.pdf#page=1. Comments are due Oct. 10, 2017.
BIS Removes 3 Entities In 4 Countries From the Entity List
Sep. 25, 2017 – 82 Fed. Reg. 44514: BIS removed 3 entities in 4 countries from the Entity List (EAR Part 744, Supp. No. 4) based on its analysis of information in requests for removal pursuant to procedures in EAR Sec. 744.16(e). The 3 removed entities are:
Vortex Electronics, Quakers Hill, NSW.
China National Commercial New Tone Trading Company Ltd, Beijing.
FIMCO FZE, Tehran (See alternate address under United Arab Emirates).
United Arab Emirates:
FIMCO FZE, JAFZ (See alternate address under Iran).
In the same ruling, BIS modified the listings of the following 5 entities, all in Pakistan:
(1) IKAN Engineering Services, a.k.a., the following one alias: IKAN Sourcing. Lahore, Islamabad, Karachi, and Shah Rukn-e-Alam Colony Multan;
(2) Iman Group, a.k.a., the following one alias: Pana Communication Inc., Islamabad;
(3) Interscan, Karachi 75400i, Sindh;
(4) Makkays Hi-Tech Systems, a.k.a., the following one alias: Zaib Electronics, Islamabad; and
(5) Micado, Karachi, Sindh.
DHS Posts Update On AES Interface Requirements
Department of Homeland Security
Sep. 15, 2017: Customs and Border Protection (CBP) posted updates of several Automated Export System Trade Interface Requirements (AESTIR) documents on its website at https://apps.cbp.gov/csms/viewmssg.asp?Recid=22972&page=&srch_argv=17-000573&srchtype=all&btype=&sortby=&sby. A 57-page September 2017 Automated Export System
Trade Interface Requirements Summary of Changes is on the CBP website at
DDTC Name and Address Changes Posted To Website
Department of State
Sep. 5, 8, 13, 18, and 25, 2017: 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 DRS Technologies, Inc. to Leonardo DRS, Inc. (US) due to corporate rebranding;
- Change in Name from Easat Antenna Limited to Easat Radar Systems Limited due to corporate rebranding;
- Change in Name from Titan Company Limited to Titan Engineering & Automation Limited due to corporate rebranding and relocation of business units and Change in Address;
- Change in Name from Sigilogic Spółka z Orgraniczoną Odpowiedzialnością (Sigilogic Sp. z.o.o.) to Asseco Data Systems Spółka Akcyjna (Asseco Data Systems S.A.) due to merger; and
- Change in Name from RLC (UK) Limited to RLC Langford Lodge Limited 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 Section 655 Annual Military Assistance Report For FY 2016
Sep. 5, 2017: DDTC posted its Section 655 Annual Military Assistance Report for FY 2016, which lists the defense articles and defense services it licensed under the Arms Export Control Act (AECA, 22 USC 2778 et seq.), broken down by Country/Territory, USML Category, Quantity, Defense Articles and Services, Authorized Value, and Shipped Value. The report is on the DDTC website at http://www.pmddtc.state.gov/reports/documents/2016%20Section%20655%20Report.pdf .
DDTC Updates Australian Intermediate Consignee List Per 22 CFR § 126.16
Sep. 14, 2017: DDTC posted an updated list of Australian Intermediate Consignees approved to participate in shipments under the exemption pursuant to the U.S.-Australia Defense Trade Cooperation Treaty, as provided in Sec. 126.16 of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). The list is on the DDTC website at http://pmddtc.state.gov/treaties/documents/AS_IC_List.pdf.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Sep. 14, 2017 – 82 Fed. Reg. 43217 and 82 Fed. Reg. 43218: BIS issued a 5-year denial order against Dmitri Karpenko, a/k/a/ Simon Fox, of Nevinnomyssk, Russia, and a 10-year denial order against Alexey Krutilin, a/k/a/ David Powell, of Ivanovskoe Village, Russia, based on their convictions of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by exporting microelectronics controlled under the EAR to Russia without the required authorization from the Commerce Department. Karpenko and Krutilin allegedly used U.S.-based front companies to induce suppliers to sell controlled items to them, concealing their ultimate destinations. In their criminal cases, Karpenko and Krutilin were each sentenced to time served and an assessment of $100. (See additional information on these cases in October 2016 and May 2017 Regulatory Updates.)
Sep. 14, 2017 – 82 Fed. Reg. 43216: BIS issued a 5-year denial order against Ambar Esther Morales of Federal Medical Center Carswell, Fort Worth, TX, based on her conviction of violating the AECA by knowingly and willfully attempting to export 7,942 rounds of 7.62 x 39mm caliber ammunition to Mexico without the required authorization from the Department of State. In the criminal case, Morales was sentenced to 3 years in prison, 3 years of supervised release, and a $100 assessment.
Department of the Treasury
Sep. 21, 2017: The Office of Foreign Assets Control (OFAC) implemented newly-issued E.O. 13810 (new North Korea sanctions – see description in The President section above) by releasing new and updated FAQs and an updated General License 3-A covering largely financial issues and a new General License 10, “Calling of Certain Vessels and Landing of Certain Aircraft Authorized,” which authorizes exceptions under specified (largely emergency) circumstances to the 180-day ban on visits to the U.S. by vessels and aircraft that have visited North Korea. The FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#nk; General License 3-A is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/nk_gl3a.pdf; and General License 10 is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/nk_gl10.pdf.
Fines and Penalties
Aug. 31, 2017: Fuyi Sun, a/k/a/ Frank Sun, of Shanghai, China was sentenced in U.S. District Court in New York City to 3 years in prison based on his conviction of violating IEEPA by attempting to export high-grade M60 carbon fiber, which has aerospace and military applications, without the required export license. Sun contracted to purchase the carbon fiber from a distributor which was actually a company operated by undercover Homeland Security Investigations special agents. He was arrested when he traveled from China to New York and paid the agents. (See additional information on this case in April 2017 Regulatory Update.)
Aug. 31, 2017: Narender Sharma and Hydel Engineering Products of Rampur Bushahr, India agreed jointly and severally to pay a penalty of $100,000 for violating the EAR by conspiring to export U.S.-origin waterway barrier debris systems and related components to Iran, including to an Iranian Government entity, by transshipping them through the United Arab Emirates (UAE). The transaction also violated the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560, at that time the “Iranian Transactions Regulations”). The systems, valued at $420,256, were designated EAR99. All but $30,000 of the penalty, and also a 5-year denial order, will be suspended for 5 years and thereafter waived if Sharma/Hydel comply with the terms of the Settlement Agreement and commit no further violations of the EAR during that period.
Sep. 8, 2017: Erdal Kuyumcu of Woodside, NY, was sentenced in U.S. District Court in Brooklyn, NY, to 57 months in prison based on his conviction of conspiracy to violate IEEPA by exporting a metallic powder composed primarily of cobalt and nickel to Iran without the required authorization from the Treasury Department. The conspirators intended to transship the powder, which has potential military and nuclear applications, to Iran through Turkey. (See additional information on this case in June 2016 Regulatory Update.)
Sep. 18, 2017: Gregory Allen Justice of Culver City, CA was sentenced in federal district court in Los Angeles, CA to 5 years in prison based on his conviction of violating the AECA and committing economic espionage. The charges against Justice stemmed from his sales of ITAR-controlled satellite information belonging to his employer to undercover FBI investigators who he believed were Russian agents. (See additional information on this case in May 2017 Regulatory Update.)
Sep. 25, 2017: Millitech, Inc., of Northampton, MA agreed to accept a civil penalty of $230,000 to settle charges by BIS that it had violated the EAR on 18 occasions in 2011 and 2014 by exporting active multiplier chains controlled under Export Control Classification Number (ECCN) 3A001.b.4 of the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) to China and Russia without the required authorization. The total value of the unauthorized shipments was approximately $364,947. Millitech will pay $180,000 of the penalty within 30 days after the order. The remaining $50,000 will be suspended and waived after 2 years if Millitech complies with the terms of the settlement agreement and the BIS order.
Sep. 26, 2017: OFAC announced that Richemont North America, Inc., d.b.a. Cartier (“Cartier”), of New York, NY, agreed to pay a civil penalty of $344,800 to settle charges by OFAC that it had violated the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR, 31 CFR Part 598) by exporting four shipments of jewelry in 2010 and 2011 to Shuen Wai Holding Limited in Hong Kong (“Shuen Wai”), an entity designated under the FNKSR that had been added to the List of Specially Designated Nationals and Blocked Persons on November 13, 2008.