JULY 2019 EXPORT CONTROL REGULATION UPDATES

July 2019

This newsletter is a listing of the latest changes in export control regulations through July 31, 2019.  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

JAPAN

METI Publishes English Guide To The Japanese Security Export Control System

July 24, 2019:  The Japanese Ministry of Economy, Trade and Industry (METI) published a brief but comprehensive English-language guide to the basic legal structure of the Japanese security export control system covering the export of goods and the regulation of technology transfer under the Foreign Exchange and Foreign Trade Act (FEFTA).  The guide is on the METI website at https://www.meti.go.jp/policy/anpo/englishpage/securityexportcontrolinjapan.pdf.

MISSILE TECHNOLOGY CONTROL REGIME

Updated MTCR Annex Released

July 22, 2019:  The Missile Technology Control Regime (MTCR) released an updated version of the MTCR Equipment, Software, and Technology Annex reflecting changes agreed at the MTCR Technical Experts Meeting in May 2019.  The Annex cover page identifies all amended sections.  Links to the updated MTCR Annex and a tracked changes version of the Annex showing all the changes are on the MTCR website at https://mtcr.info/mtcr-annex/.

UNITED STATES

DEPARTMENT OF COMMERCE – BUREAU OF INDUSTRY AND SECURITY

BIS Posts Presentations From The Annual BIS Update Conference

July 15, 2019:  The Bureau of Industry and Security (BIS) posted presentations from the annual BIS Update Conference July 9-11, 2019 on its website at https://www.bis.doc.gov/index.php/all-articles/228-bis-annual-conference-2019/1577-bis-annual-conference-2019-presentations.

The posted presentations include:

Census Releases List Of HTS Codes That Are No Longer Valid For AES

July 5, 2019:  The Census Bureau released the AES Export Concordance and a list of HTS codes that are not valid for AES, both updated July 3, 2019.   Links to both documents are on the Census Bureau website at https://www.census.gov/foreign-trade/aes/documentlibrary/index.html#concordance.

DEPARTMENT OF STATE

DDTC Name and Address Changes Posted To Website

July 15, 17, and 22, 2019:  The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

• Change in name from Sogeti España, S.L.U. to CapGemini España, S.L. due to acquisition of Sogeti by CapGemini;
• Change in names from Harris Corporation and L3 Corporation, Inc. to L3Harris Technologies, Inc. due to merger of Harris and L3 Corporation;
• Change in name from Spezialtechnik Dresden GmbH, to General Atomics Europe GmbH and change in address due to acquisition of Spezialtechnik Dresden by General Atomics;
• Change in address for Harris Systems Limited;
• Change in name from BAE Systems Global Combat Systems Ltd to Rheinmetall BAE Systems Land Limited due to acquisition of BAE Systems Global Combat Systems by Rheinmetall Defence UK; and
• Changes in name for Singapore Technologies entities due to alignment of ST Engineering brand name:

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 Changes Name Of Its Registration Division

July 15, 2019:  The Directorate of Defense Trade Controls (DDTC) announced that the name of its Registration division will change to the Registration Compliance & Analysis (RCA) division.  The structure of the division will remain unchanged, and all active registration letters issued under the old name will remain valid without change.

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DDTC Announces that All ACES Certificates Will Expire On August 1, 2020

July 17, 2019: DDTC announced that all ACES certificates, which are required to access the DTrade defense export licensing system, must expire before August 1, 2020.  IdenTrust, the provider of ACES certificates, will continue to issue them, but they will be valid only until July 31, 2020.  Further information is available on the IdenTrust website at https://www.identrust.com/support/aces or from the DDTC DTrade Help Desk at dtradehelpdesk@state.gov.

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DDTC Seeks Public Comment On Existing License Exemptions

July 26, 2019 – 84 Fed. Reg. 36040:  DDTC requested public comments on how to consolidate and clarify the existing license exemptions that are located throughout the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130).  Comments on these specific questions are requested:

• Excluding the exemptions currently located in Part 126 of the ITAR:
• Which exemptions, if any, are redundant or could be consolidated?
• Which exemptions, if any, contain language that introduces significant ambiguity or hinders the exemption’s intended use?

Comments will be accepted until Aug. 26, 2019.

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DDTC Published An Updated List Of Restricted Entities And Sub-entities Associated With Cuba

July 26, 2019 – 84 Fed. Reg. 36154:  DDTC published an updated List of Restricted Entities and Sub-entities Associated with Cuba (CRL, Cuba Restricted List).   While this list directly affects financial transactions regulated by the Cuban Assets Control Regulations (CACR, 31 CFR Part 515), it is also considered by BIS in reviewing applications for export licenses to Cuba.  The CRL is on the State Department website at https://www.state.gov/cuba-sanctions/cuba-restricted-list/list-of-restricted-entities-and-subentities-associated-with-cuba-as-of-july-26-2019/.

DEPARTMENT OF THE TREASURY

OFAC Issued An Iran-Related Civil Aviation Industry Advisory

July 23, 2019:  The Office of Foreign Assets Control (OFAC) issued an Iran-Related Civil Aviation Industry Advisory.  This Advisory is targeted at the civil aviation industry, including parties providing services to the industry.  It highlights Iran’s deceptive practices with respect to aviation matters and also includes an extensive description of U.S. sanctions related to Iran.  The Advisory is on the Treasury Department website at

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OFAC Issued An Amended Venezuela-related General License (GL) 8B

July 26, 2019: OFAC issued amended Venezuela-related https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl8b.pdf">General License (GL) 8B, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for Maintenance of Operations for Certain Entities in Venezuela.”  It authorizes certain activities involving the following entities and their subsidiaries:

• Chevron Corporation
• Halliburton
• Schlumberger Limited
• Baker Hughes, a GE Company
• Weatherford International, Public Limited Company.

GL 8B is effective until Oct. 25, 2019.  It is on the Treasury Department website at  https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl8b.pdf.

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 – BUREAU OF INDUSTRY & SECURITY

July 8, 2019 – 84 Fed. Reg. 32413:  BIS issued a 10-year denial order against Olaf Tepper of Moshannon Valley Correctional Institution in Philipsburg, PA, a citizen of Germany, based on his August 3, 2018, conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by willfully conspiring to export gas turbine parts, and, cause them to be exported from the U.S. to Germany, with knowledge and reason to know that they were intended specifically for re-exportation, directly and indirectly, to Iran, without having first obtained the required authorization from OFAC.  In the criminal case Tepper was sentenced to 24 months in prison, a fine of $5,000, and an assessment of $400.  (See related item about guilty plea by Mahin Mojtahedzadeh below.)

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July 16, 2019 – 84 Fed. Reg. 33913:  BIS issued a 10-year denial order against Pouran Aazad, a.k.a. Pouran Azad, a.k.a. Pourandokt Aazad, a.k.a Pourandokt Azad, of Los Altos Hills, CA; Sadr Emad-Vaez, a.k.a. Seid Sadredin Emad Vaez, of Los Altos Hills, CA; and Ghareh Sabz Co., a.k.a. Ghare Sabz Co., a.k.a. GHS Technology, of Tehran, Iran pursuant to an agreement settling civil charges of conspiracy to violate Sec. 764.2(d) of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by purchasing a U.S.-origin micro-drill press, for export to Iran, and, causing the export of this item to Iran, via transshipment through the United Arab Emirates (‘‘UAE’’), without the required U.S. Government authorization.  The settlement agreement also provided that the respondents would be jointly and severally liable for payment of a civil penalty of $300,000.  Action on the respondents’ criminal plea agreements will be taken separately.  The denial order notes that the charges also implicate Sec. 560.204 of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560).

Fines and Penalties

June 13, 2019:  Mitsubishi International Corporation (MIC), a U.S. company doing business in New York, agreed to pay a civil penalty of $5,000 to settle charges, by BIS, that it committed one violation of EAR Sec. 760.2(d) (furnishing information about business relationships with boycotted countries or blacklisted persons) and two violations of EAR Sec. 760.5 (failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S.) in transactions involving the sale, and/or transfer, of goods and services (including information) from the U.S. to Bahrain and Oman.

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June 13, 2019:  Mitsubishi International PolymerTrade Corporation (MIP), a U.S. company doing business in New Jersey, agreed to pay a civil penalty of $15,000 to settle charges, by BIS, that it committed two violations of EAR Sec. 760.2(d) (furnishing information about business relationships with boycotted countries or blacklisted persons) and 9 violations of EAR Sec. 760.5 (failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S.) in transactions involving the sale and/or transfer of goods and services (including information) from the U.S. to Oman and the United Arab Emirates (UAE).

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June 26, 2019:  Yi-Chi Shih, an electrical engineer and part-time resident of Los Angeles, CA, the president of Chengdu GaStone Technology Company (CGTC), a company in China that was on the Commerce Department’s Entity List (EAR Part 744, Supp. No. 4), was found guilty of conspiracy to violate IEEPA and 17 additional charges involving a scheme whereby Shih and co-defendant Kiet Ahn Mai of Pasadena, CA, defrauded a U.S. company out of its proprietary export-controlled items including its design services for monolithic microwave integrated circuits (MMICs) and shipped them to CGTC without obtaining the required export license.  The applications of the MMICs produced by the victim’s company included, among others, missiles, missile guidance systems, fighter jets, and electronic warfare. Shih faces as yet unscheduled hearings on sentencing and on a government request for forfeiture.  Mai pleaded guilty to one felony count of smuggling in December 2018 and will be sentenced in September 2019.

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July 11, 2019:  Cristian German Barrera of Palm Beach County, FL was arrested on charges of conspiring and attempting to violate the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by exporting hundreds of parts and components for AR-15 assault rifles without  obtaining the required licenses from the State Department.  The weapons were allegedly smuggled across international borders by an Argentine weapons trafficking organization.

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July 16, 2019:  The U.S. Attorney for the Southern District of New York announced the unsealing of an indictment charging Behzad Pourghannad, Ali Reza Shokri, and Farzin Faridmanesh, all citizens of Iran, with conspiracy to violate IEEPA and violation and attempted violation of IEEPA by exporting carbon fiber controlled under Export Control Classification Number (ECCN) 1C210, from the U.S. to Iran, without the required authorization.  The announcement also reported the extradition of Pourghannad from Germany to the U.S.  Pourghannad was arrested in Germany on May 3, 2017, and arrived in New York July 15, 2019.  After allegedly arranging the successful illegal export and trans-shipment of carbon fiber to Iran via Europe and Dubai, UAE in 2007-08, the co-defendants allegedly attempted to arrange an export of carbon fiber to Iran via a different third country in 2009.  However, this shipment was interdicted by authorities in the third country.  A third alleged attempt in 2013 involved the purchase and unauthorized trans-shipment to Iran via Tbilisi, Georgia of more than 5 tons of carbon fiber, which was to be described as “acrylic” to evade U.S. controls on the export of carbon fiber.

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July 19, 2019:  Mahin Mojtahedzadeh, a citizen of Iran, pleaded guilty in the Northern District of New York to conspiring to violate IEEPA and the ITSR.  Mojtahedzadeh was President and Managing Director of ETCO-FZC, a supplier of spare and replacement turbine parts for power generation companies in the  Middle East with an office in Dubai, UAE.  She admitted that she violated and evaded U.S. sanctions against Iran by working with companies in Canada and Germany to acquire turbine parts from U.S. distributors, and, assure their re-shipment to ETCO’s customers, in Iran, without obtaining the required U.S. authorization.  Olaf Tepper, a co-conspirator of Mojtahedzadeh, pleaded guilty and was sentenced in 2018 and debarred July 8, 2019 (see article above); another co-conspirator, Mojtaba Biria, a citizen of Germany, pleaded guilty to conspiring to violate IEEPA and is scheduled to be sentenced on Aug. 14, 2019