This newsletter is a listing of the latest changes in export control regulations through August 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
REGULATORY UPDATES
The President
President Biden Issues Notice Continuing For One Year The National Emergency With Respect To The Expiration Of The Export Administration Act Of 1979, As Amended
Aug. 10, 2021 – 86 Fed. Reg. 43901: President Biden issued a Notice continuing for one year the national emergency with respect to the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States related to the expiration of the Export Administration Act of 1979 (EAA), as amended, which was first declared in Executive Order 13222 of Aug. 17, 2001, pursuant to the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) and amended by EO 13637 of March 8, 2013. President Biden’s Notice, issued in accordance with Sec. 202(d) of the National Emergencies Act (50 USC Sec. 1622(d)), permits the continued implementation under the IEEPA of sanctions authorities that had been authorized under the EAA and otherwise would have expired with the EAA.
Department of Commerce – Bureau of Industry and Security
BIS Issues Final Rule Correcting The January 23, 2020 Rule Transferring Certain Firearms, Guns, Armament, and Ammunition To The EAR
Aug. 9, 2021 – 86 Fed. Reg. 46590: The Bureau of Industry and Security (BIS) issued final rulemaking corrections and clarifications in the rule issued Jan. 23, 2020 (85 Fed. Reg. 4136), in conjunction with a State Department final rule that transferred items that no longer warrant control under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Categories I (firearms, close assault weapons, and combat shotguns), II (guns and armaments), and III (ammunition/ordnance) to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1). The changes made in this rule are intended to make the requirements easier to understand, interpreted consistently, and in accordance with the intent of the Jan. 23 rule. The changes occur in Export Administration Regulations (EAR, 15 CFR Parts 730-774) Parts 740, 742, 748, and 758 and CCL Export Control Classification Numbers (ECCNs) 0A501, 0E501, 0A505, 0B501, and 0E505.
Please contact your consultant if you require further clarification of the rule’s impact on your company.
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BIS And OFAC Issue Joint Fact Sheet Titled “Supporting the Cuban People’s Right to Seek, Receive, and Impart Information through Safe and Secure Access to the Internet.”
Aug. 11, 2021: BIS and the Treasury Department, Office of Foreign Assets Control (OFAC) jointly issued “Supporting the Cuban People’s Right to Seek, Receive, and Impart Information through Safe and Secure Access to the Internet,” a fact sheet describing existing OFAC general licenses (GLs) and BIS license exceptions that facilitate exports of certain telecommunications equipment, software, and services to Cuba without specific U.S. government authorizations while complying with the Cuba Assets Control Regulations (CACR, 31 CFR Part 515) and the EAR. The fact sheet also describes the favorable licensing policies of both OFAC and BIS for activities that benefit the free flow of information to and from Cuba but are not covered by existing GLs and license exceptions. This 5-page Fact Sheet is on the Treasury Department website at https://home.treasury.gov/system/files/126/cuba_fact_sheet_20210811.pdf.
Department of State
DDTC Name And Address Changes Posted To Website
Aug. 2 and 3, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- Change in Address for AeroVironment, Inc.; and
- Change in Address for DRS Sustainment Systems, Inc.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
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DDTC Requested Public Comments Regarding Its Request To OMB To Continue To Use Currently Approved DSP Forms
Aug. 2, 2021 – 86 Fed. Reg. 41530: DDTC requested public comments regarding its request to the Office of Management and Budget (OMB) for approval of extension of the following currently approved forms:
- Form DSP-5, Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data;
- Form DSP-61, Application/License for Temporary Import of Unclassified Defense Articles;
- Form DSP-85, Application/License for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data;
- Form DSP-73, Application/License for Temporary Export of Unclassified Defense Articles;
- Forms DSP-6, DSP-62, and DSP-74, Application for Amendment to License for Export or Import of Classified or Unclassified Defense Articles and Related Classified Technical Data; and
- Form DSP-83, Non-transfer and Use Certificate.
The deadline for comments is Oct. 1, 2021.
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DDTC Is Reviewing Pending And Issued Export Licenses / Approvals For Afghanistan
Aug. 18, 2021: DDTC announced that in light of the “rapidly-evolving circumstances” in Afghanistan, it is reviewing all relevant pending and issued export licenses and other approvals to determine their suitability in furthering world peace, national security, and U.S. foreign policy. Additional updates will be provided soon.
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DDTC Continues Temporary Modification To USML Category XI(b)
Aug. 27, 2021 – 86 Fed. Reg. 48021: DDTC announced the continuation until Aug. 30, 2026, of the temporary modification to USML Category XI(b), first announced July 1, 2014 (79 Fed. Reg. 37536), and later extended through a series of rules to Aug. 30, 2021. DDTC noted that this modification continues to be regarded as temporary and that it is working with its partners to develop a long-term wholesale revision of USML Category XI.
The temporary modification to USML Category XI(b) includes reinserting the words “analyze and produce information from” and the addition of software to the description of items controlled.
Department of the Treasury
OFAC Issues Iran General License (GL) M-1, “Authorizing The Exportation Of Certain Graduate-Level Educational Services And Software To Iranian Students”
Aug. 24, 2021: OFAC issued Iran General License (GL) M-1, “Authorizing the Exportation of Certain Graduate-Level Educational Services and Software,” authorizing accredited graduate and undergraduate degree-granting U.S. academic institutions to provide certain online educational services and software to Iranian students who are not physically present in the U.S. due to the COVID-19 pandemic, provided that the software is classified as EAR99 under the EAR or is not subject to the EAR. GL M-1 replaces GL M in its entirety. OFAC also issued FAQ 853, describing the extent to which U.S. academic institutions can provide online learning services and technology companies can provide software and services to assist Iranian students in accessing online coursework under GLs G, M-1, and D-1 and Sec. 560.540 of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560).
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OFAC Issues A Statement That It Will Initiate The Annual Renewal Of Its Website www.treasury.gov
Sep. 27, 2021: OFAC issued an “Important Technical Notice for Users of the OFAC Website and Sanctions List Data Files” stating that the Treasury Department will initiate the annual renewal of the public
certificate securing the www.treasury.gov website, including OFAC sanctions list downloads, on Sep 1, 2021, as the current certificate will expire Sep. 9, 2021. Users whose applications trust the existing certificate should update their configuration to trust the renewed certificate. This notice can be accessed through https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210827_33; the renewed public certificate can be downloaded at https://s3.amazonaws.com/www.treasury.gov-2021-certificate/www.treasury.gov-2021-2022-Renewed-Certificate.zip.
| 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 email info@fdassociates.net.
Sanctions
Department of Commerce
Aug. 16, 2021 – 86 Fed. Reg. 45703: BIS denied the export privileges of Roger Sobrado, of Lewisburg U.S. Penitentiary, Lewisburg, PA, until Sep. 5, 2029, based on his conviction in the US. District Court for the District of New Jersey of violating 18 USC Sec. 371 by knowingly and intentionally conspiring and agreeing with others to export ITAR-controlled drawings and technical data to one or more foreign nationals without the required authorization from the Department of State. (See more information in September 2019 Regulatory Update.) In the criminal case, Sobrado was sentenced to 36 months in prison, three years of supervised release, a $300 special assessment, and restitution of $8,043,977.
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Aug. 16, 2021 – 86 Fed. Reg. 45704: BIS denied the export privileges of Oben Cabalceta, of Oakdale Federal Correctional Institution, Oakdale, LA, until Sep. 18, 2029, based on his conviction in the U.S. District Court for the District of New Jersey of violating 18 USC Sec. 371 by knowingly and intentionally conspiring and agreeing with others to export ITAR-controlled technical data to one or more foreign nationals without having obtained the required authorization from the Department of State. (See more information in April 2019 Regulatory Update.) In the criminal case, Cabalceta was sentenced to 42 months in prison, two years of supervised release, a $200 special assessment, and restitution of $1,890,939.
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Aug. 16, 2021 – 86 Fed. Reg. 45705: BIS denied the export privileges of Armando Antonio Perez Cepeda, Jr. until Jan. 10, 2022, based on his conviction in the U.S. District Court for the Middle District of Florida of violating 18 USC Sec. 554 by fraudulently and knowingly buying, selling, and facilitating the transportation and sale of a defense article without having obtained the required authorization, contrary to 22 USC Sec. 2278 and 22 CFR Sec. 127.1(a)(1), knowing the same to be intended for exportation in violation of 18 USC Sec. 554. In the criminal case, Cepeda was sentenced to 48 months of probation and a $100 assessment.
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Aug. 16, 2021 – 86 Fed. Reg. 45706: BIS denied the export privileges of Matteo Taerri, a/k/a Majid Taheri, of Atlanta, GA, until June 4, 2030, based on his conviction in the U.S. District Court for the Northern District of Georgia of violating the IEEPA by knowingly and willfully attempting to export a U.S.-origin Prostak Filter Module to Iran without having obtained the required authorization from OFAC. In the criminal case, Taerri was sentenced to time served, supervised release for three years, and a $200 assessment.
Fines and Penalties
Aug. 2, 2021: World Mining and Oil Supply (WMO) of Dacula, GA, pled guilty to violation of the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) and its owner, Dali Bagrou, pled guilty to conspiracy in U.S. District Court in Savannah, GA for their roles in a conspiracy to procure a power turbine from a U.S.-based manufacturer and ship it overseas for ultimate use by a Russian company on a Russian Arctic deepwater drilling platform, a use expressly prohibited unless a license has been obtained from the Commerce Department. The parties conspired to conceal the true end-user of the turbine from the U.S. manufacturer and the U.S. Government by submitting false documentation stating that the turbine would be used by a U.S. company in and around Atlanta. Bagrou and co-conspirators Oleg Vladislavovich Nikitin, general director of KS Engineering, an energy company based in St. Petersburg, Russia, and Gabrielle Villone were arrested in Savannah in 2019 while attempting to complete the illegal transaction. Villone is currently serving a 28-month prison sentence after pleading guilty to conspiracy. Bagrou and Nikitin are awaiting sentencing. (See June 2020 and March and May 2021 Regulatory Updates for earlier developments in the prosecution of this conspiracy.)
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Aug. 3, 2021: DDTC has entered into a Consent Agreement (Agreement) with Keysight Technologies, Inc. (Keysight), of Santa Rosa, CA, related to multiple violations of the ITAR. Keysight has agreed to pay a civil fine of $6.6 million (of which $2.5 million will be suspended if Keysight applies that amount to agreed remedial compliance costs) to settle 24 charges by DDTC that it had violated the AECA and ITAR by making unauthorized exports of technical data, including software, to 17 countries including the PRC, a proscribed destination. The charges involved unlicensed exports of Multi-Emitter Scenario Generation (MESG) software, which could be used in modeling and simulating multi-emitter electronic warfare threat scenarios for testing radar equipment on fixed or mobile platforms. DDTC expressed concerns to Keysight that the MESG software might be controlled and recommended that Keysight submit a Commodity Jurisdiction (CJ) request, Keysight submitted the request, and DDTC determined that the software was controlled under U.S. Munitions List Category XI(d). While the CJ was pending, Keysight continued to export the software without a license; however, it treated MESG software as ITAR-controlled after it received the determination. Keysight submitted an initial voluntary disclosure within a month after receiving the CJ and followed with a full disclosure two months later. Keysight subsequently submitted a reconsideration request, but DDTC ruled that the MESG software was controlled under USML Category XI(d).
In addition to payment of the fine, the Agreement also requires Keysight to appoint an outside Special Compliance Officer to serve for a minimum of 2 years, conduct at least one third-party audit, and review the classification of all hardware and software pertaining to its ITAR-related business activities and any related technical data or defense services.
See FD Associates’ Article "The Golden Rule" for more thoughts on the Consent Agreement.
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Aug. 16, 2021: Dynatex International of Santa Rosa, CA, agreed to pay a civil penalty of $469,060 (subject to terms described below) to settle a charge by BIS that it had committed one violation of EAR Sec. 764.2(d) (Conspiracy) when it conspired with others to export semiconductor manufacturing equipment (a DTX-150 MDB scribe and break tool and associated consumables and accessories), valued at $234,530 and designated EAR99, to two companies in China -- Chengdu GaStone Technology Company (CGTC), a.k.a. Chengdu HiWafer Semiconductor, and China Electronics Technology Group Corporation 55th Research Institute (CETC 55) – without the license from the Commerce Department that was required because the two companies were on the Entity List (EAR Part 744, Supp. No. 4). Dynatex was aware that the companies were on the Entity List, but even when it was informed that CGTC’s name should not be shown on shipping documents, it erroneously claimed that the shipments were permissible because CGTC was a customer of the distributor, not Dynatex, and that in any event, Dynatex did not understand the license requirement to apply to consumables and accessories.
Under the terms of the agreement, BIS suspended $419,060 of the penalty for a year and agreed to waive that amount entirely (provided that the $50,000 payment had been made) once Dynatex took one of the following actions:
- dissolves or ceases its business operations;
- is acquired by a U.S.-based company that meets specified export control requirements; or
- completes the one-year probationary period with no further export violations.
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Aug. 31, 2021: Anton Perevoznikov of Brooklyn, NY, was sentenced in Federal District Court for the Eastern District of Pennsylvania to 4 years in prison and 3 years of supervised release based on his October 2018 plea of guilty to one count of conspiracy to unlawfully export defense articles. Perevoznikov conspired with 3 Russian co-conspirators to export technologically sensitive imaging devices without first obtaining the required State Department authorization. To implement the conspiracy, Perevoznikov purchased night vision equipment from a U.S. vendor after acknowledging in writing that he understood that these items were legally precluded from export and falsely affirming that he did not intend to export them. Using funds supplied by his Russian co-conspirators, he ultimately purchased more than 30 pieces of night-vision and thermal-imaging devices worth over $100,000, which he then described falsely on shipping documents using terms including “case box,” “case for camera,” “camera, and soft case,” “photo camera,” “camcorder,” and “jacket.”