, Author at FD Associates, Inc.

JULY 2017 EXPORT CONTROL REGULATION UPDATES

July 2017

This newsletter is a listing of the latest changes in export control regulations through July 31, 2017. 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

Canada Updates Its Guide To The Canadian Export Control List

Canada

July 12, 2017: The Trade Controls Bureau of Global Affairs Canada announced publication of an updated version of its guide to the Canadian export control list. The guide, a comprehensive, 332-page manual titled “A Guide to Canada’s Export Control List – December 2015” [sic], is at . It will become effective on August 11, 2017.

The U.K. Updates Its Consolidated List of Strategic Military And Dual Use Items

United Kingdom

July 13, 2017: The U.K. Department of International Trade Export Control Organisation (DIT ECO) published a revised and updated version of the Consolidated List of Strategic Military and Dual-Use Items that Require Export Authorization. Most of the changes reflect amendments to the European Union Common Military List, which in turn comply with changes agreed earlier by the Wassenaar Arrangement. The new Consolidated List is at . An ECO Notice to Exporters describing the changes is at . An additional ECO Notice describing changes made in four Open General Export Licenses (OGELs) to comply with the changes in the control lists is at .

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The U.K. Publishes Its Export Controls Annual Report 2016

July 20, 2017: The DIT ECO published its Export Controls Annual Report 2016. The report is at .

Singapore Announces A New Strategic Goods Control Order

Singapore

July 7, 2017: Singapore Customs announced a new Strategic Goods (Control) Order 2017 (“SGCO 2017”) that amends Singapore’s strategic goods control list to make it consistent with the 2016 Wassenaar Arrangement Munitions List and the 2016 European Union List of Dual-Use Items. SGCO 2017 also makes other changes in the control list and the Strategic Goods (Control) Regulations (SGCR), including a modification of the scope of the transshipment controls. The Singapore Customs announcement is at . A 7-page list of “Highlights of Key Changes” made by SGCO 2017 in the control list is at . Effective date of SGO 2017 will be September 1, 2017.

The President Extended Time Regarding Termination Of Sudan Sanctions Until October 12, 2017

The President

July 14, 2017 – 82 Fed. Reg. 32611: In an Executive Order, President Trump extended the period for determining whether to terminate the comprehensive sanctions regime against Sudan until October 12, 2017. Meanwhile, all transactions prohibited by the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) and Executive Orders 13067 and 13412 remain authorized by a General License at 31 CFR Sec. 538.540, which was issued by the Office of Foreign Assets Control (OFAC) pursuant to an Executive Order by President Obama (Jan. 18, 2017 – 82 Fed. Reg. 5331). (See details about the Obama Executive Order in January 2017 Regulatory Update, and see Treasury Department section below for an FAQ about this action.)

BIS Removed Indira Mirchandani From The Entity List

Department of Commerce

June 30, 2017 – 82 Fed. Reg. 29714: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by removing the entry “Indira Mirchandani” from the United Arab Emirates section of the Entity List (EAR Part 744, Supp. No. 4).

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BIS Amended EAR Parts 742, 744, 772, And 744 To Reflect Changes To The MTCR Annex

July 7, 2017 – 82 Fed. Reg. 31442: BIS amended EAR Parts 742, 744, 772, and 744 to reflect changes to the Missile Technology Control Regime (MTCR) Annex that were agreed at MTCR meetings during 2016. This final rule revises Export Control Classification Numbers (ECCNs) 1C107, 1C111, 2B018, 2B109, 5A101, 7A103, 9A101, 9E101, 9E102, 9D101, 9D104, 9E001, and 9E002; adds ECCN 9B104 to control aerothermodynamic test facilities; revises the definitions of “missiles” and “unmanned aerial vehicles”; and makes conforming changes in other EAR provisions.

The Congressional Research Services Publishes A Report On The U.S. Export Control System And The Export Control Reform Initiative

Congressional Research Service

July 24, 2017: The Congressional Research Service (CRS) issued a 26-page report, “The U.S. Export Control System and the Export Control Reform Initiative.” The report provides detailed descriptions of the current U.S. export control system and President Obama’s Export Control Reform Initiative. This CRS report is available at .

DDTC Name and Address Changes Posted To Website

Department of State

July 6, 19, and 28, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at :

Change in Address for Northstar Aviation USA LLC;
Change in Name from Aerolyusa to ALA-Advanced Logistics for Aerospace dba ALA North America due to corporate rebranding; and
Change in Address for Defense Acquisition Program Administration (DAPA), South Korea.

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

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DDTC Issues 2016 Annual Report On Blue Lantern Reviews

June 26, 2017: DDTC issued its 2016 annual report on the Blue Lantern program, which monitors the end-use of defense articles, technical data, services, and brokering activities that are subject to the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and are exported through commercial channels. Among other findings in the report, cases in the Near East had the highest rate of unfavorable results (39%), while cases in Africa had the lowest rate of unfavorable results (9%). Actions on unfavorable Blue Lantern cases included returning or denying license applications, removing parties from licenses, revoking licenses, updating the Watch List, and referring cases to DDTC’s Office of Defense Trade Controls Compliance (DTCC) and/or U.S. law enforcement agencies for appropriate civil and/or criminal enforcement investigation and action. The report is on the DDTC website at .

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DDTC Updates FAQs

July 5, 2017: DDTC published updates to the following Policy FAQs on its website at :

Q: Does saving ITAR controlled technical data on the cloud constitute an export per ITAR § 120.17?
Q: Are public universities eligible to use the ITAR § 125.4(b)(9) exemption?
Q: Which office (DDTC or RSAT) should a foreign end user contact if they are not certain of the original procurement method of a defense article (FMS or DCS) and is seeking a third party transfer or reexport/retransfer authorization?
Q: Is the term "at the company's facilities" in ITAR § 120.39(a)(2) include only a company's headquarters, or also includes travel to other facilities?
Q: What is meant by "commercial invoice" in ITAR § 123.9(b)(1)?

Also, the following FAQs were added under the new subheading “Blue Lantern Program”:

Q: What is the Blue Lantern program?
Q: Is end-use monitoring mandated by U.S. law?
Q: What does the Blue Lantern program entail?
Q: Who manages the Blue Lantern program?

Several references to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 124.16 were also removed from FAQs and replaced by references to Sec. 126.18(d) or omitted entirely.

OFAC Posts FAQ Regarding Sudan Sanctions

Department of the Treasury

July 11, 2017: Following the President’s Executive Order regarding sanctions against Sudan (see above, under The President), OFAC posted an FAQ clarifying that existing sanctions, and the general license that broadly authorizes most prohibited transactions with respect to Sudan, remain in place pending further action on the possible termination of the sanctions. FAQ 506 is on the Treasury Department website at .

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OFAC Posts FAQ Regarding Cuba

July 25, 2017: OFAC updated the FAQs it issued on June 16, 2017 in the wake of President Trump’s June 16, 2017 policy announcement regarding Cuba (see June 2017 Regulatory Update) and added two new FAQs about travel to Cuba. The current FAQs are on the Treasury Department website at .

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

July 3, 2017 – 82 Fed. Reg. 30823: BIS renewed for an additional 6 months the Temporary Denial Order (TDO) denying the export privileges of Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Ali Eslamian, Mahan Air General Trading LLC, Skyco (UK) Ltd., Equipco (UK) Ltd., Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issarn Shammout.

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July 3, 2017 – 82 Fed. Reg. 30830: BIS denied the export privileges of Manuel Morales, currently in the Federal Correctional Institution in Phoenix, AZ, for 10 years based on his conviction of violating the AECA by conspiring to export and causing to be exported 540 rounds of 7.62 x 39 caliber ammunition and seven 7.62 x 39 caliber magazines to Mexico without the required authorization from the Department of State. In the criminal case, Morales was sentenced to 50 months in prison with credit for time served, 36 months of supervised release, and a $100 special assessment.

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July 3, 2017 – 82 Fed. Reg. 30831: BIS denied the export privileges of Edwin Navarro Makasiar II, currently in the D. Ray James Correctional Institution in Folkston, GA, for 10 years based on his conviction of violating the AECA by attempting to export two Glock .40 caliber pistols and approximately 2,500 rounds of .223 caliber and 5.56 mm ammunition to the Philippines without the required authorization from the Department of State. In the criminal case, Makasiar was sentenced to 60 months in prison, a $2,000 criminal fine, and a $200 assessment.

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July 3, 2017 – 82 Fed. Reg. 30832: BIS denied the export privileges of Jose Abraham Benavides-Cira, currently in the Federal Correctional Institution in Big Spring, TX, for five years based on his conviction of violating the AECA by conspiring to export and causing to be exported 5.56 caliber rifles to Mexico without the required authorization from the Department of State. In the criminal case, Benavides-Cira was sentenced to 135 months in prison and a $200 assessment.

Fines and Penalties

July 17, 2017: Joao Pereira da Fonseca, a citizen of Portugal, pleaded guilty in Federal District Court in Washington, D.C. to conspiring to unlawfully export goods and technology to Iran and to defraud the United States. The charges involved a scheme in which Fonseca contracted with a Portuguese engineering company that served as a front company to purchase machinery used in producing sophisticated optical lenses from one unnamed U.S. manufacturer and machinery used to test components of inertial guidance systems from another unnamed U.S. manufacturer. The undisclosed end user was in Iran. Fonseca, a mechanical engineer, was arrested in March 2016 while he was in the U.S. to be trained on how to use the inertial guidance system equipment.

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July 17, 2017: Two Iranian nationals, Mohammed Reza Rezakhah and Mohammed Saeed Ajily, were indicted in federal court in Burlington, VT on charges including violations of the AECA and the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) for a criminal conspiracy in which they conducted unauthorized intrusions into victim networks to steal particular pieces of valuable software including PRODAS (Projectile Rocket Ordnance Design and Analysis System), a proprietary software product controlled under the AECA and used for, among other things, aerodynamics analysis and design for projectiles from bullets to GPS guided artillery shells. The hacked software was then marketed and sold to Iranian entities including universities and military and government entities without authorization from the State Department. The court issued arrest warrants for both defendants.

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July 20, 2017: OFAC assessed a $2,000,000 civil penalty against ExxonMobil Corp. of Irving, TX (including two U.S. subsidiaries) for violating Sec. 589.201 of the Ukraine-Related Sanctions Regulations (31 CFR Part 589). In imposing the fine, OFAC claimed that the presidents of the U.S. subsidiaries dealt in services of a blocked person when they signed 8 legal documents related to oil and gas projects in Russia that were signed on the Russian side by Igor Sechin, the president of Rosneft. Sechin (but not Rosneft) is identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. A 3-page OFAC backgrounder on this case is on the Treasury Department website at . ExxonMobil is challenging the penalty. An ExxonMobil press release about the case is at .

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July 26, 2017: Harold Rinko /Global Parts Supply of Halstead, PA agreed to accept a civil penalty of $100,000 (all of which will be suspended for 5 years and thereafter waived if Rinko has complied with specified quarterly reporting requirements and has not committed a further violation) and a 10-year denial of export privileges (suspended for 10 years and thereafter waived if he has completed the specified reporting requirements and has not committed a further violation) to settle a charge by BIS of conspiracy to procure goods subject to the EAR for export from the U.S. to Syria without the required authorization from BIS. As part of the conspiracy, Rinko/Global Parts Supply concealed the items’ ultimate destination from U.S. suppliers and prepared invoices that listed false purchasers and end users in third countries. This civil settlement took into consideration Rinko’s guilty plea in a related criminal case, including his payment of a forfeiture of $45,698. (See item about the criminal case in October 2016 Regulatory Update.)

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July 27, 2017: William Ali, a Fiji citizen resident in New Zealand, was sentenced in federal court in Seattle, WA to two years in federal prison based on his conviction on Dec. 16, 2016, of conspiracy to violate the AECA by purchasing certain accelerometers that were designed for use in spacecraft and missile navigation in the U.S. and exporting them to China without the required license from the State Department. Ali was arrested April 16, 2016 in a Homeland Security sting operation.

JULY 2017 EXPORT CONTROL REGULATION UPDATES Read More »

JUNE 2017 EXPORT CONTROL REGULATION UPDATES

June 2017

This newsletter is a listing of the latest changes in export control regulations through June 30, 2017. 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 Trump Announced Changes In U.S Policy On Trade With Cuba

June 16, 2017: President Trump announced several changes in the U.S. policy on trade with Cuba. The primary export-related effect of the new policy will be a prohibition of transactions involving Cuba’s Armed Forces Business Enterprises Group (GAESA), which has interests in many sectors of the Cuban economy. A list of the affected Cuban entities will be published by the Department of State. The changes will not become effective until the Departments of Treasury and Commerce adopt changes in the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) and the Export Administration Regulations (EAR, 15 CFR Parts 730-774), respectively. A fact sheet on the new Cuba policy is on the White House website at https://www.whitehouse.gov/blog/2017/06/16/fact-sheet-cuba-policy. (See below for Commerce Department and Treasury Department FAQs on implementation of the new Cuba policy.)

U.S. Federal Courts

U.S. Court of Appeals For D.C. Circuit Ruling On Knowledge Or Reason To Know Related To Iran Transactions and Sanctions Regulations

May 26, 2017: In Epsilon Electronics, Inc. v U.S. Department of the Treasury, the U.S. Court of Appeals for the D.C. Circuit considered a penalty imposed by the Office of Foreign Assets Control (OFAC) on Epsilon Electronics, Inc., for 39 exports to a distributor in the United Arab Emirates (UAE) that OFAC claimed violated Sec. 560.204 of the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Sec. 560.204, in pertinent part, prohibits U.S. persons from exporting an item to Iran or to a third country if the export is undertaken with knowledge or reason to know that the item exported is intended specifically for re-exportation to Iran. The Circuit Court affirmed determinations by OFAC and the D.C. Federal District Court that 34 of the exports violated Sec. 560.204 based on OFAC’s demonstration that Epsilon had reason to know these exports were intended to be re-exported to Iran. The court did not require OFAC to show that the goods actually ended up in Iran. However, it reversed the determination regarding the remaining 5 cases because there was evidence in those cases suggesting that they involved exports that were genuinely intended for the UAE market. Accordingly, the case was remanded to the district court and OFAC for further consideration of the 5 cases and the total monetary penalty.

Department of Commerce

BIS Reminder Of Annual Reporting Requirement For Offset Agreements

June 9, 2017 – 82 Fed. Reg. 26775: The Bureau of Industry and Security (BIS) posted a reminder of the annual requirement for U.S. companies to report information on contracts for the sale of defense articles or defense services to foreign countries or foreign companies that are subject to offsets agreements exceeding $5,000,000 in value. U.S. companies are also required to submit annual reports on offsets transactions completed in performance of existing offsets commitments for which an offsets credit of $250,000 or more has been claimed from the foreign representative. The reports were to be submitted to the Commerce Department Office of Strategic Industries and Economic Security by June 15, 2017.

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Minor Edits To EAR

June 14, 2017 – 82 Fed. Reg. 27108: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct citations, replace text that was inadvertently removed, and correct other errors in the Sep. 20, 2016 rule (82 Fed. Reg. 64656) that amended the EAR to implement changes adopted at the December 2015 Wassenaar Arrangement (WA) plenary. The changes affect EAR Sec. 740.13 (License Exception TSU, Technology and Software Unrestricted); Sec. 740.17 (License Exception ENC, Encryption Commodities, Software, and Technology); and Part 774, Supplement No. 3 (Statements of Understanding).

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BIS Request For Comments On Utility, Clarity, And Burden Of Import, End-User, And Delivery Verification Certificates

June 16, 2017 -- 82 Fed. Reg. 27687: BIS published a request for comments from the public about the utility, clarity, and burden of Import, End-User, and Delivery Verification Certificates, and on ways to minimize the burden imposed by these forms. BIS also issued similar requests for comments on Additional Protocol to the U.S.-IAEA Safeguards Agreement Report Forms (82 Fed. Reg. 27686) and Procedures for Acceptance or Rejection of a Rated Order (82 Fed. Reg. 27687). Deadline for comments is Aug. 15, 2017.

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BIS Posts Questions & Answers Regarding The President’s Cuba Policy Announcement

June 16, 2017: BIS posted Questions & Answers Regarding the President’s 06/16/17 Cuba Policy Announcement on its website at https://www.bis.doc.gov/index.php/forms-documents/policy-guidance/1931-2017-commerce-cuba-qs-as-fnl/file.

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BIS Adds 10 Russian and Crimean Region of the Ukraine Entities To The Entity List

June 22, 2017 – 82 Fed. Reg. 28405: BIS added 10 entities in Russia and the Crimea region of Ukraine to the Entity List (EAR Part 744, Supp. No. 4) to ensure the efficacy of existing sanctions on Russia for violating international law and fueling the conflict in eastern Ukraine. There will be a license requirement with a policy of denial for all exports, reexports, or transfers (in-country) of all items subject to the EAR involving these entities as parties. The 10 entities are:

Crimea Region of Ukraine:

(1) Riviera Sunrise Resort & Spa, a.k.a Riviera Sunrise Resort and Spa, Alushta; and

(2) KPSK, OOO, a.k.a. Obshchestvo S Ogranichennoi Otvetstvennostyu ‘Krymskaya Pervaya Strakhovaya Kompaniya’ and OOO ‘Krymskaya Pervaya Strakhovaya Kompaniya’, Simferopol.

Russia:

(1) Bike Center, a.k.a. Baik. V. Tsentr, Baik V Tsentr, OOO, and Bike V. Center, Moscow;

(2) Concord Catering, St. Petersburg and Moscow;

(3) IFDK, ZAO, a.k.a. Closed Joint Stock Company ‘IFD Kapital’, IFD Kapital, IFD Kapital Group, IFD-Capital, IFD-Kapital, and Zakrytoe Aktsionernoe Obshchestvo ‘IFD Kapital’ (f.k.a. Zakrytoe Aktsionernoe Obshchestvo IFD Karital), Moscow;

(4) Limited Liability Company Concord Management and Consulting, a.k.a. Konkord Menedzhment I Konsalting, OOO; LLC Concord Management and Consulting, and Obshchestvo S Ogrannichennoi Otvetstvennostyu Konkord Menedzhment I Konsalting, St Petersburg;

(5) Molot-Oruzhie, OOO, a.k.a. Obshchestvo S Ogranichennoi Otvetstvennostyu ‘Molot-Oruzhie’ (f.k.a. Obshchestvo S Ogranichennoi Otvetstvennostyu Proizvodstvenno Instrument Kachestvo), Kirov;

(6) Oboronlogistika, OOO, a.k.a. Oboronlogistics Limited Liability Company, Oboronlogistics LLC, Oboronlogistika LLC, and Obshchestvo S Ogranichennoi Otvetstvennostyu ‘Oboronlogistika’, Moscow;

(7) Private Military Company ‘Wagner’, a.k.a. Chastnaya Voennaya Kompaniya ‘Vagner’, Chvk Vagner, and PMC Wagner; and

(8) ‘Wolf’ Holding of Security Structures, a.k.a. Defense Holding Structure ‘‘Wolf’’, Holding Security Structure Wolf, Kholding Okhrannykh Struktur Volk, and Wolf Holding Company, Moscow.

Department of State

DDTC Name and Address Changes Posted To Website

June 23, 28, 29, and 30, 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 of IGATE Global Solutions Limited to Capgemini Technology Services India Limited due to acquisition;
Change in Name of Toshiba Corporation to Toshiba Infrastructure Systems & Solutions Corporation due to corporate reorganization;
Change in Name of BAE Systems Electronics Limited to BAE Systems Marine Limited due to corporate reorganization;
Change in Name of Airbus Safran Launchers GmbH to ArianeGroup GmbH due to corporate reorganization;
Change in Name of Airbus Safran Launchers SAS to ArianeGroup SAS due to corporate reorganization;
Change in Name and Address of Titan Engineering & Automation Limited in Tamilnadu, India to Titan Company Limited at Precision Engineering Division in Karnataka, India as part of corporate reorganization; and
Change in Name of Toshiba Defense & Electronics Systems to Toshiba Infrastructure Systems and Solutions due to corporate reorganization.

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

Department of the Treasury

Treasury Seeks Public Comments On Regulations That Can Be Eliminated, Modified, Or Streamlined In Order To Reduce Burdens

June 14, 2017 – 82 Fed. Reg. 27217: In furtherance of Executive Order 13771 of Jan. 30, 2017, which directed agencies to eliminate two regulations for each new regulation issued, the Treasury Department invited public comments on regulations, forms, and guidance documents issued by several Treasury Department agencies including OFAC. The Department particularly desires views and recommendations regarding regulations that can be eliminated, modified, or streamlined in order to reduce burdens. Responses should explain how a regulation can be modified or explain why it should be eliminated and should provide available data and an explanation of regulatory costs and burdens. Deadline for comments is July 31, 2017.

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OFAC Posts FAQs Regarding The President’s Announcement On Changes To U.S. Policy With Cuba

June 16, 2017: OFAC posted 12 new FAQs in connection with the President’s announcement on changes to U.S. policy with respect to Cuba. The FAQs are on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_20170616.pdf.

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

June 8, 2017 – 82 Fed. Reg. 28473: BIS denied the export privileges of Ali Reza Parsa of Waterloo, Ontario, currently of Moshannon Valley Federal Correctional Institution. Phillipsburg, PA, for 10 years based on his conviction in May 2016 of violating the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. § 1701, et seq.) by conspiring to export electronic components from the U.S. to customers of a company he owned in Iran. In the criminal case, Parsa was sentenced to 36 months of imprisonment and ordered to pay a $100 assessment. (See details in May 2016 Regulatory Update.)

Fines and Penalties

June 2, 2017: Imran Khan, of North Haven, CT, pleaded guilty in federal court in the District of Connecticut to violating IEEPA by exporting an Alpha Duo Spectrometer to the Pakistan Atomic Energy Commission (PAEC), an entity listed on the Entity List, without the required export license. Khan allegedly also participated in a scheme to export other items controlled under the EAR to Pakistani end users including two additional entities on the Entity List. When asked by U.S. suppliers about the end users of these products, he allegedly stated that the products would remain in the U.S., including providing end-user certifications stating that the product would not be exported.

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June 9, 2017: Axis Communications, Inc., of Chelmsford, MA, agreed to pay a civil penalty of $700,000 and to have an unaffiliated expert consultant complete an external audit of its export controls compliance program to settle 13 charges by BIS of exporting thermal imaging cameras to Mexico without the required export licenses and two charges of failing to comply with recordkeeping requirements. The cameras were classified under Export Control Classification Number (ECCN) 6A003.b.4 and were valued at $391,819.

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June 9, 2017: Cryomech, Inc., of Syracuse, NY, agreed to pay a civil penalty of $28,000 and undergo a third-party audit of its export controls compliance program to settle charges by BIS that it violated the EAR by exporting an LNP-20 Liquid Nitrogen Plant, an item designated EAR99 and valued at $33,587, from the U.S. to the All-Russian Scientific Research Institute of Experimental Physics (VNIIEF), a.k.a. Russian Federal Nuclear Center – VNIIEF (RFNC-VNIIEF), an entity listed on Entity List, without the required authorization from BIS.

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June 16, 2017: Marlou Mendoza of Long Beach, CA, was sentenced in federal court in Los Angeles, CA, to 6 months of home confinement based on her plea of guilty to 3 counts of failing to provide the required written notice to freight forwarders that she was shipping ammunition to a foreign country. According to the indictment, Mendoza shipped tens of thousands of rounds of .22-caliber ammunition and bullets to her son, Mark Mendoza, in the Philippines. (See additional information in February 2017 Regulatory Update.) Mark Mendoza was indicted separately for eight counts of conspiracy, unlawful export of munitions, smuggling, and money laundering. At last report, Mark Mendoza remained a fugitive.

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June 28, 2017: Hassan Zafari of Brentwood, CA, agreed to pay a civil penalty of $52,500 (of which $45,000 will be suspended for two years and thereafter waived if Zafari has committed no further violations) and accept a two-year denial of export privileges (suspended for two years and thereafter waived if Zafari has committed no further violations) to settle a charge by BIS that he caused, aided, or abetted the export from the U.S. to Iran of a used EAR99 industrial laser system valued at approximately $12,000 without obtaining the required export authorization. Zafari’s alleged actions facilitating this export included hiring a freight forwarding company to ship the system to a company in Dubai, United Arab Emirates (UAE) with instructions to list the UAE company as the consignee with knowledge that the item was actually intended for transshipment to Iran, providing the UAE company with shipping documentation facilitating the transshipment to Iran, and suggesting to the Iranian purchaser that it create a revised bill of lading to the UAE transhipper to facilitate the transshipment.

JUNE 2017 EXPORT CONTROL REGULATION UPDATES Read More »

MAY 2017 EXPORT CONTROL REGULATION UPDATES

May 2017

This newsletter is a listing of the latest changes in export control regulations through May 31, 2017. 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

Department of Commerce

BIS Updates Information Regarding Encryption On Its Website

May 18, 2017: The Bureau of Industry and Security (BIS) updated and enhanced the encryption page of its website. This page provides many resources about encryption, including descriptions of the controls and applicable exceptions; a quick reference guide about Category 5, Part 2 of the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1); an outline and flowcharts describing the analysis to follow for determining if and how the EAR and Cat.5, Part 2 apply to a product incorporating cryptography; and links to the applicable regulations. This resource is at https://www.bis.doc.gov/index.php/encryption-and-export-administration-regulations-ear.

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BIS Adds 16 Entities To The Entity List

May 26, 2017 – 82 Fed. Reg. 24242: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 16 entities to the Entity List (EAR Part 744, Supp. No. 4) for reasons including activities contrary to U.S. national security and foreign policy interests; procuring items on behalf of an entity already on the Entity List; and involvement in the reexportation to Iran of U.S.-origin metal alloy powders with aerospace missile and nuclear applications. The 16 entities are:

Pakistan

(1) Creative Dynamics Engineering, a.k.a., the following one alias: —Creative Dynamics. Karachi, Sindh;

(2) FACO Trading, Karachi, Sindh;

(3) Imam Group, a.k.a., the following one alias: —Pana Communication Inc., Islamabad;

(4) Interscan, Karachi, Singh;

(5) KMA International Import and Export Co., Islamabad;

(6) Makkays Hi-Tech Systems, a.k.a., the following one alias: —Zaib Electronics. Islamabad;

(7) Micado, Karachi, Singh;

(8) MSN International, Wah Cantt;

(9) Oriental Engineers, Lahore;

(10) Premier International, a.k.a., the following one alias: —Align Impex, Lahore, Pakistan; and

(11) Sumico Technologies, Lahore, Islamabad, and Karachi.

Turkey

(1) Cenk Ozturk, Tuzla, Istanbul;

(2) ERA Metalurji San. Ve Tic. Ltd. Sti., Tuzla, Istanbul; and

(3) Mehmet Cingi, Tuzla, Istanbul.

United Arab Emirates

1) Euromoto Middle East FZE, Sharjah, UAE.

For these entities, there is a license requirement for all items subject to the EAR and a license review policy of presumption of denial, and no license exceptions will be available for exports, reexports, or transfers to them. In addition, the name of one entity in two countries – China and Hong Kong – was modified: The former Alpha Lam will now be Xianfa Lin, a.k.a. Alpha Lam.

Customs and Border Protection

CBP Publishes Information On Use of DDTC Licenses For Carnet Imports

May 12, 2017: Customs and Border Protection (CBP) published a notice describing how it will process Directorate of Defense Trade Controls (DDTC) licenses for carnet importations. Special processing is necessary because carnets are not yet automated – they are paper only. The notice, CSMS (Cargo Systems Messaging System) # 17-000274, is on the CBP website at https://apps.cbp.gov/csms/viewmssg.asp?Recid=22676&page=&srch_argv=17-000274&srchtype=all&btype=&sortby=&sby= .

Department of State

DDTC Name and Address Changes Posted To Website

May 10, 11, 12, 17, and 19, 2017: 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 Abacus Innovations Australia Pty Limited to Leidos Australia Pty Limited due to merger of Lockheed Martin (LM) subsidiary Abacus Innovations with Leidos Holdings subsidiary Leidos Australia, as part of LM’s separation of its Information Systems & Global Solutions business through a Reverse Morris Trust transaction;
Change in Name from Rolls-Royce CDS to Rolls-Royce plc due to organizational restructure (consolidation);
Change in Name from HP Enterprise Services LLC to Enterprise Services LLC due to merger of Computer Sciences Corp. (CSC) with Enterprise Services segment of Hewlett Packard Enterprise;
Change in Name from HP Enterprise Services Defence & Security to Enterprise Services Defence & Security UK Ltd. due to merger of Computer Sciences Corp. (CSC) with Enterprise Services segment of Hewlett Packard Enterprise;
Change in Name from Hewlett Packard Enterprise Services UK Ltd to EntServ UK Limited due to merger of Computer Sciences Corp. (CSC) with Enterprise Services segment of Hewlett Packard Enterprise;
Change in Address for Systematic Software Engineering Ltd;
Change in Address for NorthStar Aviation USA LLC;
Change in Name from Airbus DS Optronics GmbH of Germany to HENSOLDT Optronics GmbH due to sale of Airbus’ Electronics and Border Security division to KKR & Co. L.P.;
Change in Name from Airbus DS Optronics (Pty) Ltd. to HENSOLDT Optronics (Pty) Ltd. due to sale of Airbus’ Electronics and Border Security division to KKR & Co. L.P.;
Change in Name from Societe Anonyme to Societe par Actions simplifiee due to change in corporate structure to simplified joint-stock company;
Change in Name from Arianespace SA to Arianespace SAS due to change in corporate structure to simplified joint-stock company; and
Change in Name from Fuji Heavy Industries Ltd. to SUBARU Corporation 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 Updates List of Approved Australian Intermediate Consignees

May 12, 2017: DDTC posted an updated List of Approved Australian Intermediate Consignees on its website at http://pmddtc.state.gov/treaties/documents/AS_IC_List.pdf. This list is maintained pursuant to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 126.16(k)(1)(ii)(B).

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Department of State Notifies Congress That U.S. Will Renew Sanctions Relief For Iran

May 17, 2017: The Department of State notified Congress that the U.S. will renew the sanctions relief that was granted to Iran in the Joint Comprehensive Plan of Action (JCPOA), the nuclear agreement reached with Iran in 2015. The sanctions waiver, which is required to implement the JCPOA, must be renewed every 120 days.

*******

Department of State Identifies Countries Not Fully Cooperating With U.S. Antiterrorism Efforts

May 26, 2017 – 82 Fed. Reg. 24424: The Secretary of State determined that the following countries are not fully cooperating with U.S. antiterrorism efforts:

Eritrea;
Iran;
North Korea;
Syria; and
Venezuela.

*******

DDTC Request Public Comments On Proposed Advisory Opinion Form DS-7786

May 26, 2017 – 82 Fed. Reg. 24425: DDTC invited public comments on a proposed Form DS-7786, Request for Advisory Opinion, which will be used to request advisory opinions on matters including whether DDTC would be likely to grant a license for a particular proposed export, an interpretation of regulatory requirements, and guidance pertaining to brokering. When deployed, the form will allow users to submit requests for advisory opinions using DDTC’s recently acquired electronic case management system. Proposed Form DS-7786 is on the DDTC website at http://www.pmddtc.state.gov/FR/2017/Proposed_Form.PDF or by email request to CanfieldDP@state.gov; proposed instructions are at http://www.pmddtc.state.gov/FR/2017/Proposed_Instructions.PDF; and a supporting statement is at http://www.pmddtc.state.gov/FR/2017/Supporting_Statement.PDF. Deadline for comments is June 26, 2017.

Department of the Treasury

OFAC Updates List Of Medical Supplies Authorized For Export/Reexport To Crimea

May 23, 2017 – 82 Fed. Reg. 23716: The Office of Foreign Assets Control (OFAC) published an updated list of items defined as medical supplies that are authorized for export or reexport to the Crimea region of Ukraine without an individual license under General License 4 of the Ukraine-Related Sanctions Regulation (31 CFR Part 589). The list includes additional items and corrects a typographical error in previous versions. The list was actually revised on Aug. 12, 2016, but was not published in the Federal Register at that time. The list is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/med_supplies_ukr.pdf,

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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

[No sanctions this month]

Fines and Penalties

April 28, 2017: Dmitrii Aleksandrovich Karpenko and Alexey Krutilin, both Russian nationals, were sentenced in U.S. District Court in Brooklyn, NY, to time served and agreed to immediate deportation to Russia based on their plea of guilty of conspiring to export microelectronics including devices used in radar and missile guidance systems to Russia without the required authorization from the Commerce Department. They allegedly used U.S.-based front companies to induce suppliers to sell controlled items to them, concealing their ultimate destinations. They were arrested Oct. 6, 2016. (See October 2016 Regulatory Update.)

*******

May 3, 2017: A grand jury in New Haven, CT, indicted Martin Gula, a/k/a MarkWelder, a citizen of the Slovak Republic, on two charges of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) between May 2012 and June 2012 by attempting to arrange the export of night vision goggles and an aviator night vision system from the U.S. to the United Kingdom without the required license from the State Department. Gula was also charged with using a false U.S. passport as proof of U.S. residency and citizenship. Separately, a January 2014 indictment charging Gula with export related offenses is also pending in the Central District of California. Gula is currently being sought by law enforcement.

*******

May 11, 2017: Mark Komoroski of Nanticoke, PA, was arrested based on an indictment in Federal Court for the Middle District of Pennsylvania charging that he attempted to export two riflescopes to Russia without the required authorization. Komoroski was also indicted on charges of unlawfully possessing ammunition as a previously convicted felon.

*******

May 16, 2017: A grand jury in New Haven, CT, indicted Josef Zirnsak, a citizen of the Czech Republic, on two charges of violating the AECA between June 2011 and November 2011 by shipping an infrared dual beam aiming laser and a rifle scope from the U.S. to Germany without obtaining the required authorization from the State Department. Zirnsak is currently being sought by law enforcement.

*******

May 22, 2017: Gregory Allen Justice of Culver City, CA, pleaded guilty in Federal Court in Los Angeles to one count of attempting to violate the AECA and one count of attempting to commit economic espionage. Justice was an engineer who worked on military and commercial satellite programs for a cleared defense contractor. According to the plea agreement, he stole proprietary trade secrets from his employer and provided them to a person he believed was a Russian agent, but who was in fact an undercover FBI employee. The trade secrets were both proprietary and controlled under the ITAR. Justice has been in custody since his arrest in July 2016. His sentencing hearing is scheduled for September 18, 2017.

*******

May 23, 2017: Si Chen, a/k/a Cathy Chen of Pomona, CA, was arrested based on a 14-count indictment for violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.), conspiracy, money laundering, making false statements on an immigration application, and using a forged passport. Chen allegedly purchased and smuggled to foreign countries EAR-controlled components used in military communications “jammers” and communications devices commonly used in space communications applications without obtaining the required authorization from the Department of Commerce. She allegedly removed the export-control warning stickers from the jammers prior to shipping and falsely valued items that were actually worth more than $100,000 at $500 on shipping paperwork.

MAY 2017 EXPORT CONTROL REGULATION UPDATES Read More »

APRIL 2017 EXPORT CONTROL REGULATION UPDATES

April 2017

This newsletter is a listing of the latest changes in export control regulations through April 30, 2017. 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

Department of Commerce

BIS Publishes Updates To The Unverified List

April 6, 2017 – 82 Fed. Reg. 16730: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 6 persons to the Unverified List (UVL, EAR Part 744, Supp. No. 6) and adding or revising the names and addresses of several persons. The following persons were added to the UVL:

Azerbaijan: Caspian Oil Montaj, Baku

China: ARI International, Ltd., Shenzhen;

Jiangsu HNHB Equipment Co., Ltd., Yixing City, Jiangsu Province; and

Shenzhen Winthought Tech., Shenzhen

Lebanon: Al Ghayth Trade and Transport, Beirut

United Arab Emirates: Blue Wing General Trading, Dubai

The following names were added to entries in Hong Kong:

Brilliance Technology Group added to Brilliance Technology Ltd.; and

Xuan Qi Technology Co., Ltd. added to Ling Ao Electronic Technology Co., Ltd.

*******

BIS Publishes Amendments To The Entity List

April 18, 2017 – 82 Fed. Reg. 18217: BIS amended the Entity List (EAR Part 744, Supp. No. 4) by revising the entry for the Russian entity Federal Security Service (a.k.a. Federalnaya Sluzhba Bezopasnosti, or FSB)

to specify that the license requirements that are ordinarily applicable to exports of items subject to the EAR to a listed entity do not apply to exports to the FSB of items that are related to transactions authorized by General License No. 1 issued by the Treasury Department Office of Foreign Assets Control (OFAC). (See description of OFAC General License No. 1 in February 2017 Regulatory Update.) In effect, this amendment eliminates an unintended result of including FSB in the Entity List, which effectively prohibited the exportation of encryption-enabled products to Russia because Russian law requires approval by, or notification of, FSB for the importation of information technology products into Russia.

Department of State

DDTC Name and Address Changes Posted To Website

April 6, 12, 17, 18, 21, and 28, 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 Airbus DS GmbH and Airbus DS Geo GmbH to Airbus Defence and Space GmbH due to corporate reorganization;
Change in Name from Alenia Aermacchi Inc. to Leonardo US Aircraft, Inc. due to corporate rebranding and merging of Leonardo subsidiary Alenia Aermacchi with its parent company, Leonardo;
BAE Systems Marine Limited of the United Kingdom changes address;
Change in Name from Airbus DS Electronics and Border Security GmbH to HENSOLDT Sensors GmbH due to Airbus’ divestment of its Defence Electronics unit to Kohlberg Kravis Roberts & Co. L.P. (KKR);
Change in Name from Airbus DS S.A.S. and Intespace [sic] S.A. to Airbus Defence and Space S.A.S. due to corporate reorganization;
Change in Name from L-3 Communications Corporation to L3 Technologies, Inc. due to corporate reorganization;
Chagne in Name from L-3 Communications Avionics Systems, Inc. to L3 Aviation Products, Inc. due to corporate reorganization;
Change in Name from L-3 Communications Avionics Systems, Inc. - Columbus Office to L3 Aviation Products, Inc. due to corporate reorganization;
Change in Name from L-3 Communications Avionics Systems, Inc. - Phoenix Office to L3 Aviation Products, Inc. due to corporate reorganization;
Change in Name from L-3 Communications Electron Technologies, Inc. to L3 Electron Devices, Inc. due to corporate reorganization;
Change in Name from PacOrd, Inc., Norfolk Operations to L-3 Unidyne, Inc. due to corporate reorganization;
Change in Name from PacOrd, Inc., San Diego Operations to L-3 Unidyne, Inc. due to corporate reorganization;
Change in Name from PacOrd, Inc., Florida Operations to L-3 Unidyne, Inc. due to corporate reorganization;
Mercury Systems (of the United States) changes address;
Change in Name from Meta Archiefbewaarneming B.V. to OASIS Data & Document Management Netherlands B.V. and change of address due to acquisition of Meta B.V. by OASIS; and
Change in Name of Beechcraft Defense Company, LLC to Textron Aviation Defense LLC due to acquisition of Beechcraft Holdings, parent of Beechcraft Defense, by Textron.

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 FAQs re CJs Added to Website

April 21, 2017: DDTC posted 24 FAQs describing the Commodity Jurisdiction (CJ) process at http://www.pmddtc.state.gov/commodity_jurisdiction/documents/CJ-FAQ-04-2017.pdf and 34 FAQs explaining how to complete the updated CJ Application Form (DS-4076) at <http://www.pmddtc.state.gov/dtas-online/documents/DS4076-Instructions-04-2017.pdf.

Department of the Treasury

OFAC Updates FAQs

April 20, 2017: OFAC posted 8 updated FAQs about Filing a Petition for Removal from an OFAC List on its website at https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/petitions.aspx.

*******

No Waviers for Drilling in Russia

April 21, 2017: Treasury Secretary Steven Mnuchin announced that the Treasury Department will not issue waivers to U.S. companies, including Exxon, authorizing drilling prohibited by current U.S. sanctions against Russia.

*******

New OFAC License for Soho Mall Panama

April 27, 2017: OFAC published Kingpin Act General License 4G "Authorizing Certain Transactions involving the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama)”

on its website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl4g.pdf . The activities authorized by General License 4G are detailed in a FAQ at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#472.

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

April 6, 2017 – 82 Fed. Reg. 16786: BIS denied for 10 years the export privileges of Sihai Cheng (a/k/a Alex Cheng, a/k/a Chun Hai Cheng), currently an inmate of Terminal Island Federal Correctional Institution (FCI), San Pedro, CA, based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) by conspiring to export U.S.-origin pressure transducers to the Islamic Republic of Iran without the required authorization from OFAC. In the criminal case, Cheng was sentenced to 9 years in prison and an assessment of $600. (See details in January 2016 Regulatory Update.)

*******

April 6, 2017 – 82 Fed. Reg. 16787: BIS denied for 10 years the export privileges of Juan Jose Estrada, currently an inmate of Big Spring FCI, Big Spring, TX, based on his conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by conspiring to export a Browning Model 1919, .30 caliber, semi-automatic rifle to Mexico without the required authorization from the Department of State. In the criminal case, Estrada was sentenced to 46 months in prison, one year of supervised release, and an assessment of $100.

*******

April 6, 2017 – 82 Fed. Reg. 16788: BIS denied for 10 years the export privileges of Amin Al-Baroudi (a/k/a Abu Al-Jud), currently an inmate of Victorville Medium II FCI, Adelanto, CA, based on his conviction of conspiring to export goods from the U.S. to Syria in violation of U.S. sanctions on Syria without having first obtained the required authorization from the U.S. Department of Commerce. In the criminal case, Al-Baroudi was sentenced to 32 months in prison, 2 years of supervised release, and an assessment of $100. (See details in June 2016 Regulatory Update.)

*******

April 6, 2017 – 82 Fed. Reg. 16789: BIS denied for 10 years the export privileges of Song Il Kim (a/k/a Kim Song Il), currently an inmate of Moshannon Valley FCI, Philipsburg, PA, based on his conviction of violating the AECA by attempting to export or causing to be exported to China PVS-7 and PVVS-14 Night Vision Optics and a THOR 320 Thermal Imaging Weapons Sight without the required authorization from the Department of State. In the criminal case, Kim was sentenced to 40 months in prison, 36 months of supervised release, and a $100 assessment. (See details in February 2016 Regulatory Update.)

*******

April 10, 2017 – 82 Fed. Reg. 17187: BIS denied for 10 years the export privileges of Sam Rafic Ghanem of Springfield, VA, based on his conviction of violating the AECA by attempting to export and causing to be exported firearms parts and accessories to Lebanon without the required authorization from the Department of State. In the criminal case, Ghanem was sentenced to 18 months in prison, 3 years of supervised release, a criminal fine of $70,734, and a $200 assessment. (See details in May 2015 Regulatory Update.)

Fines and Penalties

April 13, 2017: Fadi Yassine, a citizen and resident of Lebanon, pleaded guilty in federal court in Cedar Rapids, IA to conspiring to violate the AECA by brokering guns and transporting them to Lebanon without the required authorization from the State Department. Yassine, who was arrested upon his arrival in New York on an international flight, allegedly purchased guns in Lebanon that had been shipped from the U.S. by Ali Al Herz and members of his family who were subsequently convicted of smuggling weapons from the U.S. to Lebanon. (See details in March 2016 and October 2016 Regulatory Updates.)

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April 14, 2017: BIS issued an order accelerating the two remaining installment payments of a civil penalty levied against Streit USA Armoring, LLC after Streit defaulted on an installment payment that was due Nov. 27, 2016. (See details about the Streit compliance case in September 2015 Regulatory Update.) The order, posted on the BIS website at https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1111-e2498/file, provides BIS’ rationale for accelerating the remaining payments while opting not to exercise the other available options of activating a portion of the fine that was suspended or activating a suspended denial order.

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April 24, 2017: Fuyi Sun, a citizen of the People’s Republic of China, pled guilty in federal court in New York City to attempting to violate IEEPA by exporting extremely high-grade M60 carbon fiber to China without the required authorization. M60 carbon fiber has defense-related applications including aerospace technologies and drones and is controlled for nuclear non-proliferation and anti-terrorism reasons. Sun agreed to purchase the carbon fiber from what he believed was a distributor but was actually an undercover entity created and staffed by undercover special agents of U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI). He was arrested after he traveled to New York and paid the agents $23,000 in cash for the carbon fiber and an additional $2,000 as compensation for the risk he believed the seller was taking in making the illegal export.

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April 28, 2017: Stephen Edward Smith of Tucson, AZ was sentenced in federal court in Phoenix, AZ to 102 months in federal prison and Peter Steve Plesinger of Sahuarita, AZ was sentenced to 87 months in federal prison based on their pleas of guilty to exporting munitions to Hong Kong without the required authorization, dealing firearms without a license, and money laundering. The illegal shipments were discovered when law enforcement authorities in Hong Kong intercepted a package containing 139 rounds of ammunition that had been shipped from Arizona by Plesinger. A search of the intended recipient’s Hong Kong residence resulted in the recovery of weapons and ammunition that Plesinger had shipped previously in packages with innocuous labels.

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April 28, 2017: Naum Morgovsky and Irina Morgovsky, both of Hillsborough, CA were indicted in federal court in San Francisco, CA on charges of conspiracy to violate the AECA by exporting night vision rifle scope parts to Russia. The Morgovskys allegedly purchased the components, which included image intensifier tubes and lenses, through businesses they owned in the U.S. and shipped them to a night vision manufacturing company in Moscow partially owned by Naum Morgovsky without the required authorization from the State Department. The indictment further charges that in an effort to conceal these violations, Naum Morgovsky laundered the $200,000 they were paid for the components through a bank account in the name of a dead person.

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April 28, 2017: Lim Yong Nam, a/k/a Steven Lim, a citizen of Singapore, was sentenced in federal court in Washington, DC to serve 40 months in federal prison based on his plea of guilty to a charge of conspiracy to defraud the U.S. by dishonest means in connection with a conspiracy that shipped 6,000 radio frequency modules with applications in remote detonation systems for improvised explosive devices (IEDs) to Iran. (See report of Lim’s guilty plea in December 2016 Regulatory Update.) Fourteen of the 6,000 modules were later recovered by Allied troops from IED remote detonation systems in Iraq. Lim and his co-conspirators represented to the U.S. supplier and on documents filed with the U.S. government that Singapore was the ultimate destination of the modules.

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APRIL 2017 EXPORT CONTROL REGULATION UPDATES Read More »

MARCH 2017 EXPORT CONTROL REGULATION UPDATES

March 2017

This newsletter is a listing of the latest changes in export control regulations through March 31, 2017. 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

WASSENAAR ARRANGEMENT

Numerous Minor Corrections and Clarifications to the Wassenaar Export Control List

February 17, 2017: The Wassenaar Arrangement (WA) published an updated List of Dual-Use Goods and Technologies and Munitions List as compiled by the Wassenaar Arrangement Secretariat in February 2017 on its website at http://www.wassenaar.org/wp-content/uploads/2016/12/List-of-Dual-Use-Goods-and-Technologies-and-Munitions-List-Corr.pdf. The WA also published a table showing the changes in the List of Dual-Use Goods & Technologies and Munitions List. The table outlines the changes made by the 2016 Plenary to the 2015 List of Dual-Use Goods & Technologies and Munitions. The vast majority of changes made were administrative in nature. No major substantive additions are included in the revision. For a list of all revisions, see: http://www.wassenaar.org/wp-content/uploads/2017/03/Summary-of-Changes-to-2016-Lists.pdf.

DEPARTMENT OF COMMERCE

BIS Publishes Comments on CCL Revisions for USML Category XII Items Moved to EAR-control on December 31, 2016 Per ECR

March 15, 2017: The Commerce Department Bureau of Industry and Security (BIS) posted the public comments it received in response to its request for comments on Jan. 17, 2017 (82 Fed. Reg. 4287), on the impact of further increasing certain controls on fire control, laser imaging, and guidance equipment that had been transferred to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) from Category XII of the U.S. Munitions List (USML, 22 CFR Sec. 121.1). The comments are on the BIS website at https://efoia.bis.doc.gov/index.php/documents/public-comments/public-comments-2017/1104- increase-of-controls-infrared-detection-items/file. FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 2 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

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China’s ZTE and ZTE Kangxun Removed from Entity List As a Result of Settlement of Criminal and Civil Actions Related to Violations of the EAR…

March 29, 2017 – 82 Fed. Reg. 15458: BIS removed the following persons listed under the destination of China from the Entity List (15 CFR Part 744, Supp. No. 4) in light of their settlement of criminal and civil enforcement actions with the U.S. Departments of Justice, Commerce, and Treasury (see information about these settlements in Fines and Penalties section below):

• Zhongxing Telecommunications Equipment (ZTE) Corporation, Shenzhen

• ZTE Kangxun Telecommunications Ltd., Shenzhen

Shi Lirong, Former CEO of ZTE, Added to Entity List

In the same action, BIS added the following individual to the Entity List under the destination of China:

• Shi Lirong, Shenzhen

Shi Lirong was the Chief Executive Officer of the ZTE companies at the time of the violations involved in the settlement.

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Various Persons/Entities Removed from Entity List

March 29, 2017 – 82 Fed. Reg. 15461: BIS removed the following 7 persons under 10 destinations from the Entity List:

Germany:

• Industrio GmbH, Neumarkt
• Martin Hess, Neumarkt
• Peter Duenker, a.k.a., the following alias: Peter Dunker, Neumarkt
• Wilhelm ``Bill'' Holler, Neumarkt

Hong Kong:

• Frank Genin, a.k.a., the following alias: Franck Genin. Sheung Wang, Hong Kong (See also alternate addresses under U.A.E.)

India

• Beaumont Trading AG, a.k.a., the following alias: -Beaumont Tradex India, New Delhi (See also alternate addresses under Switzerland and U.A.E.)

Singapore:

• Amanda Sng, Singapore

Switzerland:

• Beaumont Trading AG, a.k.a., the following alias: Beaumont Tradex India, Baar (Zug Canton) (See also alternate addresses in India and the U.A.E.)

United Arab Emirates:

• Beaumont Trading AG, a.k.a., the following alias: Beaumont Tradex India, Dubai, U.A.E. (See alternate addresses in India and Switzerland)
• Frank Genin, a.k.a., the following alias: Franck Genin, Dubai, Ras Al Khaimah, and Free Trade Zone RAK (See alternate address under Hong Kong)

FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 3 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

DEPARTMENT OF STATE

DDTC Name and Address Changes Posted to Website

March 1, 10, 20, 21, 22, and 28, 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 Address for Bijlsma Hijs- en Heftechniek Projecten BV;
• Change in Name from HP Enterprise Services LLC to Enterprise Services LLC due to corporate restructuring;
• Change in Name from HP Enterprise Services Defence & Security to EntServ UK Limited due to corporate restructuring;
• Change in Name from Hewlett Packard Enterprise Services UK Ltd to EntServ UK Limited due to corporate restructuring;
• Change in Name from D&R Technology Operaciones Mexico S. de R.L. de C.V. to CTS Electro De Mexico, S. de R.L.de C.V. (CTS Electro de Mexico) due to corporate restructuring;
• Change in Name from Wesco Aircraft Europe Ltd. and Haas Group International SCM Ltd. (inclusive of their operating divisions RD Taylor and Fasteq) (collectively Wesco) to Wesco Aircraft EMEA, Ltd. (Wesco EMEA) due to corporate reorganization;
• Change in Name from Nammo Vanasverken AB to Nammo Sweden due to corporate reorganization;
• Change in Name from Nammo Vingakersverken AB to Nammo Sweden due to corporate reorganization;
• Change in Name from Nammo LIAB BA to Nammo Sweden AB due to corporate reorganization; and
• Chagne in Name from Alsalam Aircraft Company to Alsalam Aerospace Industries Company, Ltd. due to corporate reorganization.

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 Posts Comments from Public Related to Revisions of USML Category

March 17, 2017: DDTC posted the public comments it received in response to its request for comments on Jan. 17, 2017 (82 Fed. Reg. 4287) relating to issues regarding controls on items “specially designed for a military end user,” the scope of controls on certain laser target designators or coded target markers (Cat. XII(b)(1)), and parameters to replace “specially designed” controls. The comments are on the DDTC website at http://www.pmddtc.state.gov/licensing/documents/USML%20Cat%20XII%20NOI%20Public%20Comm ents.pdf . Many industry members lodged comments with details as to how items in normal commercial use will become captured by the revision. FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 4 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

DEPARTMENT OF THE TREASURY

OFAC Issues General Rule Authorizing Transactions with Panamanian Mall and Associates Complex

March 9, 2017: The Office of Foreign Assets Control (OFAC) published General License 4F, “Authorizing Certain Transactions Involving the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama).” This license completely supersedes General License 4E (see January 2017 Regulatory Update). General License 4F is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl4f.pdf. An FAQ describing the authorizations under this General License is on the OFAC website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#472 .

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Treasury Posts Quarterly List of Countries Who Support the Boycott of Israel

March 31, 2017 – 82 Fed. Reg. 15797: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.

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

March 17, 2017 – 82 Fed. Reg. 14200: BIS denied for 5 years the export privileges of Eyad Farah, currently resident at the Federal Correctional Institution in Fort Worth, TX, based on his conviction in U.S. District Court for the Middle District of Florida in December, 2015, of violating the Arms Export Control Act (22 USC Sec. 2778) by conspiring to export and actually exporting firearms without the required authorization. Farah was sentenced to 37 months in prison, 36 months of supervised release, and a $300 assessment, and was also ordered to forfeit 7 firearms traceable to the offense. Farah allegedly was part of a network of individuals who smuggled firearms from the U.S. to Jordan by concealing them in vehicles that had been purchased at used car auctions. FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 5 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

DEPARTMENT OF STATE

March 29, 2017 – 82 Fed. Reg. 15547: The Department of State Bureau of International Security and Nonproliferation (ISN) determined that Rosoboronexport (ROE), a Russian entity, had engaged in activities that warranted imposition of measures under the Iran, North Korea, and Syria Nonproliferation Act (INKSNA, Pub. L. 109-353), which provides for penalties on persons that transfer certain types of sensitive items to, or acquire such items from, these countries after certain dates. Accordingly, ISN imposed the following penalties:

• No U.S. Government (USG) procurements except as the Secretary of State may otherwise determine, and except for procurements for certain specific purposes;

• No USG assistance except as the Secretary of State may otherwise determine;

• No USG sales of any item on the USML and termination of all sales of defense articles or services under the Arms Export Control Act (AECA, 22 USC Sec. 2778); and

• No exports of items controlled under the Export Administration Act of 1979 (EAA) or the Export Administration Regulations (EAR, 15 CFR Parts 730-774) and suspension of any existing such licenses.

These penalties will remain in place for 2 years unless otherwise determined by the Secretary of State.

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March 30, 2017 – 82 Fed. Reg. 15780: ISN determined that 29 individuals and entities in 10 countries had engaged in activities that warranted the imposition of measures under the INSKNA. The sanctioned persons were in Burma, China, Egypt, Eritrea, Iran, North Korea, Russia, Saudi Arabia, Sudan, and the UAE. Similar to the case of Rosoboronexport (see item above), ISN imposed sanctions on these persons prohibiting USG procurements from them and USG assistance to them; prohibiting USG sales to them of any items on the USML and terminating sales to them of any such item; and prohibiting individual licenses for transfer to them of any item controlled under the EAR and suspending any existing such licenses. The penalties will remain in place for 2 years unless otherwise determined by the Secretary of State. The parties are as follows:

• Ministry of Defense Directorate of Defense Industries (DDI) (Burma) and any successor, sub-unit, or subsidiary thereof;

• Beijing Zhong Ke Electric Co., LTD. (ZKEC) (China), and any successor, subunit, or subsidiary thereof;

• Dalian Zhenghua Maoyi Youxian Gongsi (China) and any successor, subunit, or subsidiary thereof;

• Jack Qin (Chinese individual);

• Jack Wang (Chinese individual);

• Ningbo New Company Import and Export Company Limited (China) and any successor, sub-unit, or subsidiary thereof;

• Karl Lee [aka Li Fangwei] (Chinese individual);

• Shanghai Horse Construction [aka Forrisio International Group] (China) and any successor, sub-unit, or subsidiary thereof;

• Shenzhen Yataida High-Tech Company Ltd. (China) and any successor, sub-unit, or subsidiary thereof;

• Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) (China) and any successor, sub-unit, or subsidiary thereof; FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 6 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

• Sky Rise Technology [aka Reekay Technology Limited] (China) and any successor, sub-unit, or subsidiary thereof;

• Sun Creative (Zhejiang) Technologies, Inc. (China) and any successor, sub-unit, or subsidiary thereof;

• T-Rubber Co. Ltd (China) and any successor, sub-unit, or subsidiary thereof;

• Special Defense Research Center (SDRC) (Egypt) and any successor, subunit, or subsidiary thereof;

• Eritrean Navy (Eritrea) and any successor, sub-unit, or subsidiary thereof;

• Aerospace Industries Organization (AIO) (Iran) and any successor, sub-unit, or subsidiary thereof;

• Saeng Pil Trading Corporation (SPTC) (North Korea) and any successor, subunit, or subsidiary thereof;

• 150th Aircraft Repair Plant (Russia) and any successor, sub-unit, or subsidiary thereof; Aviaexport (Russia) and any successor, sub-unit, or subsidiary thereof;

• Bazalt (Russia) and any successor, sub-unit, or subsidiary thereof;

• Kolomna Design Bureau of Machine Building (KBM) (Russia) and any successor, sub-unit, or subsidiary thereof;

• Ulyanovsk Higher Aviation Academy of Civil Aviation (UVAUGA) (Russia) and any successor, sub-unit, or subsidiary thereof;

• Ural Training Center for Civil Aviation (UUTsGA) (Russia) and any successor, sub-unit, or subsidiary thereof;

• Zhukovskiy and Gagarin Academy (Z&G Academy) (Russia) and any successor, sub-unit, or subsidiary thereof;

• Madar Yara Medical Company (Saudi Arabia) and any successor, sub-unit, or subsidiary thereof;

• Giad Heavy Industries (GHI) (Sudan) and any successor, sub-unit, or subsidiary thereof;

• Military Industries Corporation (MIC) (Sudan) and any successor, sub-unit, or subsidiary thereof;

• Muhammad al-Husayn Yusuf (Sudanese individual); and

• Mabrooka Trading (United Arab Emirates) and any successor, sub-unit, or subsidiary thereof.

Fines and Penalties

March 2, 2017: Kolar Rahman Anees Ur Rahman, a resident of the UAE with Indian citizenship, was sentenced in federal court in Salt Lake City, UT to 5 years of probation for violating the AECA by unlawfully and willfully attempting to export ten .308 caliber sniper rifles and ammunition to Belarus without the required authorization from the Department of State, smuggling goods from the U.S., and money laundering. The action resulted from a sting in which Rahman attempted to purchase the rifles and ammunition from an undercover Special Agent of the U.S. Department of Homeland Security. Rahman sent a down payment of $13,357 to the undercover agent and informed the agent that he was aware that an export license would not be available to Belarus and there would be a need to make misrepresentations on the export paperwork. He was arrested after he came from the UAE to Chicago to discuss the rifle shipment and future business in person with the undercover agent. In addition to the sentence of probation, Rahman was also ordered to forfeit the $13,357 down payment. FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 7 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

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March 7, 2017: Zhongxing Telecommunications Equipment Corporation, a telecommunications corporation established in the People's Republic of China, and its subsidiaries and affiliates, as well as ZTE Kangxun Telecommunications Ltd. and its subsidiaries and affiliates (collectively "ZTE") agreed to pay penalties totaling $1.19 billion to settle criminal and civil charges by the U.S. Departments of Justice, Treasury, and Commerce of violating the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560); conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC chap. 35, Sec. 1701 et seq.); violating the EAR; obstruction of justice; and making a material false statement. These violations involved (i) direct or indirect exports to Iran or the Government of Iran; (ii), reexports of EAR-controlled goods with knowledge that the goods were intended specifically for Iran or the Government of Iran; and (iii) activities that evaded or avoided, attempted and/or conspired to violate, and/or caused violations of the prohibitions set forth in the ITSR.

The violations occurred over a period of 6 years, during which the company’s highest-level managers were aware of the illegal activities and knowingly misled U.S. authorities by saying that the company had wound down and ceased its Iran-related activities. The unlawful conduct included carrying out two projects, each worth hundreds of millions of dollars and requiring U.S.-origin components, involving installing cellular and landline network infrastructure in Iran. ZTE carried out these activities using a systemic practice of utilizing third-party companies to surreptitiously supply Iran with U.S.-origin goods, including goods controlled under the CCL.

The $1.19 billion penalty amount included $661 million under the settlement agreement with BIS (with $300 million suspended during a seven-year probationary period and then suspended if ZTE has not violated the agreement), $430.5 million in combined criminal fines and a forfeiture under a plea agreement with the Department of Justice, and $100.9 million under a settlement agreement with OFAC. In addition to the monetary penalties, ZTE also agreed to a suspended 7-year denial of export privileges, to submit to having an independent corporate compliance monitor for 3 years, and to cooperate fully with any criminal investigation by U.S. law enforcement authorities.

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March 23, 2017: ZTE formally pleaded guilty in federal court in Dallas, TX, to one count each of conspiracy to unlawfully export in violation of IEEPA, making a material false statement, and obstruction of justice. In the plea ZTE also agreed to submit to a 3-year period of corporate probation including an independent corporate compliance monitor who will review and report on ZTE’s export compliance program.

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March 15, 2017: Access USA Shipping, LLC of Sarasota, FL agreed to pay a civil penalty of $27 million (with $17 million suspended for two years and then waived if Access has committed no additional violations) to settle 129 charges by BIS involving evading the EAR; 17 charges of exporting or attempting to export items controlled for crime control reasons without the required authorization; and 4 charges of exporting or attempting to export items to a party on the Entity List without the required authorization. The evasion charges involved mis-describing and undervaluing the items on export control documents; allowing foreign customers to place orders through Access employees to avoid export scrutiny; destroying or altering export control documents; and failing to maintain required records related to the exports. FD ASSOCIATES, INC. - EXPORT CONTROLS & COMPLIANCE UPDATE

Page 8 This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at info@fdassociates.net.

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March 17, 2017: Gabriel Rivero of Nogales, AZ, was sentenced in federal court in Phoenix, AZ to 92 months in prison for attempting to export ammunition to Mexico without the required authorization. According to evidence presented at Rivero’s trial, the smuggling attempt came to light when a spare tire fell off the pickup truck Rivero was driving near the Mariposa Port of Entry in Nogales. Initially, Rivero attempted to retrieve the tire, but then he got back into the truck and traveled through the border crossing into Mexico. When U.S. Customs and Border Protection officers inspected the tire, they discovered more than 5,500 rounds of pistol and rifle ammunition hidden inside. Rivero was subsequently identified using surveillance video from the port of entry and arrested.

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March 24, 2017: Kassim Tajideen of Beirut, Lebanon, a Lebanese-Belgian dual citizen, pleaded not guilty in federal court in Washington, D.C. to an 11-count indictment charging him with conspiring to violate IEEPA and the Global Terrorism Sanctions Regulations (GTSR, 31 CFR Part 594), unlawful transactions with a Specially Designated Global Terrorist (SGDT), and conspiracy to launder monetary instruments. After Tajideen was named a SDGT by OFAC in 2009 because of his financial support of the Hizballah terror organization, he allegedly evaded restrictions on transactions with SDGTs by creating new trade names and concealing his ownership in certain entities, enabling his companies to continue to transact business with unwitting U.S. vendors and to utilize the U.S. financial and freight transportation systems, including making wire transfers of approximately $27 million to parties in the U.S. and causing dozens of illegal shipments of goods to leave U.S. ports for Tajideen’s benefit without obtaining the required licenses from the U.S. Department of the Treasury. Newspaper sources reported that Tajideen was extradited to the U.S. after being detained March 12, 2017 at the Casablanca, Morocco airport while enroute from Conakry, Guinea to Beirut.

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March 28, 2017: Mehmet Hakan Atilla, a resident and citizen of Turkey and Deputy General Manager of International Banking at Halkbank, a Turkish state-owned bank, was arrested at Kennedy Airport and charged with conspiracies to violate the IEEPA and to commit bank fraud. Atilla appeared briefly at a hearing in Federal District Court in New York, but did not enter a plea or make any statements. He and others allegedly conspired to create and use fraudulent documents to disguise prohibited Iranian financial transactions as actions financing food that would qualify under the humanitarian exception to the sanctions regime. In this way they allegedly used U.S. financial institutions to engage in prohibited financial transactions that illegally funneled millions of dollars to Iran.

MARCH 2017 EXPORT CONTROL REGULATION UPDATES Read More »

FEBRUARY 2017 EXPORT CONTROL REGULATION UPDATES

February 2017

This newsletter is a listing of the latest changes in export control regulations through Feb. 28, 2017. 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

UNITED KINGDOM

UK Publishes Revision of Export Control Order to Reflect Waasenaar Arrangement Changes

Feb. 15, 2017: The United Kingdom Export Control Organisation (ECO) amended Export Control Order 2008, the primary U.K. rule controlling exports of military and dual-use goods. The changes include a restatement of Schedule 2, the U.K. military list, to reflect amendments made in the European Union Common Military List in accordance with changes made in the Wassenaar Arrangement. Export Control (Amendment) Order 2017 is on the ECO website at http://www.legislation.gov.uk/uksi/2017/85/contents/made.

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UK Publishes Revised Version of Consolidated List of Export Controlled Items

Feb. 23, 2017: The U.K. ECO published a consolidated list of the strategic military and dual-use items requiring U.K. export authorization. The list is at https://www.gov.uk/government/publications/uk-strategic-export-control-lists-the-consolidated-list-of-strategic-military-and-dual-use-items-that-require-export-authorisation.

DEPARTMENT OF COMMERCE

BIS Pushes Effective Date to March 21, 2017 for EAR Revisions to Remove Nuclear Proliferation Controls on Certain Equipment Usable in Nuclear Reactors

Feb. 1, 2017 – 82 Fed. Reg. 8893: The Bureau of Industry and Security (BIS) delayed until March 21, 2017, the implementation of portions of an amendment of Nov. 25, 2016 (81 Fed. Reg. 85138 -- see November 2016 Regulatory Update), removing ECCNs 2A292, 2A293, 2B290, and 3A292 from the CCL and taking other actions that were scheduled to become effective Jan. 1, 2017. Specifically, "software" "specially designed" for the "development," "production," or "use" of items previously controlled under ECCN 3A292 will continue to be classified and licensed by BIS under the designation EAR99 through a delayed date of March 21, 2017. As of March 22, 2017, such "software" will be classified and licensed by BIS under ECCN 3D991. The postponement resulted from a Jan. 20, 2017, Presidential Memorandum requiring a 60-day postponement of rules that had been published in the Federal Register, but had not yet taken effect.

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BIS Publishes Revised Export Compliance Guidelines on Its Website

Feb. 10, 2017: BIS made available a new export reference, “Export Compliance Guidelines: The Elements of an Effective Export Compliance Program.” The new guide, which includes detailed guidance for an Export Compliance Program (ECP) and an Audit Module, revises and combines earlier guidance. It is on the website of the BIS Export Management and Compliance Division at https://www.bis.doc.gov/index.php/forms-documents/pdfs/1641-ecp/file.

DEPARTMENT OF JUSTICE

DOJ Issues a Summary of Major US Export Enforcement Actions Between January 2014 and February 2017

Feb. 23, 2017: The U.S. Department of Justice (DOJ) published a Summary of Major U.S. Export Enforcement, Economic Espionage, Trade Secret, and Embargo-Related Criminal Cases, (January 2014 to the present: updated February 17, 2017) on its website at https://www.justice.gov/nsd/page/file/940591/download.

DEPARTMENT OF STATE

DDTC Name Changes

Feb. 1, 3, 6, 13, 17, 21, and 22, 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 Address of Hitachi Kokusai Electric;
Change in Name of Ultra Electronics, Precision Air and Land Systems to Ultra Electronics, Precision Control Systems due to corporate rebranding;
Change in Address of Thales Avionics S.A.S.;
Change in Name from Triumph Actuation Systems - UK to Triumph Aerospace Operations UK, Ltd. due to corporate reorganization;
Change in Name from Vectronix AG to Safran Vectronix AG due to Vectronix merger with Safran subsidiary;
Change in Ownership of Airbus DS Electronics and Border Security GmbH, due to acquisition by Kohlberg Kravis Roberts & Co., L.P. and name change to EBS Germany;
Change in Name of OEI Opto AG to Thales Alenia Space Switzerland Ltd or Thales Alenia Space Schweiz AG due to acquisition of OEI Opto AG by Thales Alenia Space SAS;
Change in Name of Cranfield Aerospace Limited to Cranfield Aerospace Solutions Limited due to corporate reorganization;
Change in Name of Night Vision Depot, Inc. to Night Vision Devices, Inc. due to corporate rebranding; and
Change in Address of BAE Systems Surface Ships Limited.

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

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CARC Export Licenses Do Not Require DSP-83s, as DDTC Determined that CARC is Not SME

Feb. 22, 2017: DDTC announced that DSP-5 license applications for Chemical Agent Resistant Coatings (CARC) Paint do not require a DSP-83 Non transfer and Use Certificate, as CARC paint has been determined not to be Significant Military Equipment and was reassigned as category XIV(f)(7) on the United States Munitions List (USML). The announcement provides instructions for submission of a DSP-5 for CARC paint and how to address the DSP-83 issues, as the D-Trade System indicates that a DSP-83 is required. The full text is set forth on the DDTC website at http://www.pmddtc.state.gov/licensing/documents/DSP-83%20Exception%20CARC%20Paint%20Web%20Notice.pdf.

DEPARTMENT OF THE TREASURY

OFAC Publishes Revised List of Medical Devices Permitted for Export to Iran

Feb. 2, 2017: The Office of Foreign Assets Control (OFAC) published a list updating and clarifying the scope of medical devices that are not authorized for export to Iran under the general license for medical devices appearing at Sec. 560.530(a)(3)(ii) of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). The List of Medical Devices Requiring Specific Authorization is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_gl_med_supplies.pdf.

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OFAC Publishes General Licenses Permitting Certain Transactions in Support of the Panamanian Government in Relation to Its Action Against Balboa Bank & Trust

Feb. 2, 2017: OFAC published two General Licenses relating to activities in Panama: https://auth.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl5c.pdf">General License 5C, “Authorizing Certain Transactions and Activities Related to the Panamanian Government Seizure of Balboa Bank & Trust," and https://auth.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl6c.pdf">General License 6C, "Authorizing Certain Transactions and Activities Related to the Intervention by the Superintendency of Securities Markets of Panama in Balboa Securities, Corp." Both licenses extend existing authorizations and expire on April 7, 2017 unless extended or revoked. Updated FAQs related to these actions are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#panama[OG1] (FAQs 473 and 474).

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OFAC Issues General Rule Permitting Interaction with Russia’s FSS/FSB Related to FSS’s/FSB’s Review of Encryption Imports into Russia that Are Intended for Parties Otherwise Eligible to Receive Encryption Commodities from the US

Feb. 2, 2017: OFAC published a General License authorizing certain transactions with the Federal Security Service (a/k/a FSB) of Russia that would otherwise be prohibited by sanctions imposed on FSB under Executive Orders issued April 1, 2015 (EO 13694) and December 29, 2019 (EO 13757). General License 1 corrected an unintended effect of the sanction against FSB: The sanction in effect prohibited exports of encryption-enabled products to Russia, since Russian law requires approval by, or notification of, FSB for the importation of information technology products into Russia. General License 1 is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber_gl1.pdf. This OFAC General License does not affect any limitations on exports to FSB that are imposed by the Export Administration Regulations (EAR, 15 CFR Parts 730-774).

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OFAC Publishes FAQs Related to Permissible Contacts with FSS/FSB

Feb. 8, 2017: OFAC published 4 FAQs relating to the sanctions imposed on FSB in the Dec. 29, 2016 Executive Order and General License 1 of Feb. 2, 2017. The FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#cyber_gl (FAQs 501-504).

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Treasury Adjusts Maximum Civil Monetary Penalty Standard for Federal Cases Based on Inflation

Feb. 10, 2017 – 82 Fed. Reg. 10434: The Treasury Department adjusted its Maximum Civil Monetary Penalties (MCPs) for inflation, as required under the Federal Civil Penalties Inflation Adjustment Act of 1990. The MCP for violations of the Trading with the Enemy Act (currently only the Cuban Assets Control Regulations, 31 CFR Part 315) will be $85,236; the MCP for violations of the Foreign Narcotics Kingpin Sanctions Regulations (31 CFR Part 598) will be $1,437,153; and the MCP for violations of other sanctions programs administered by OFAC will be the greater of $289,238 or twice the amount of the underlying transaction. The new MCPs will be effective for all penalties assessed after Jan. 15, 2017, regardless of the date of the violation.

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

Temporary General License Permitting Exports to ZTE and ZTE Kangxun Extended Until March 29, 2017

Feb. 24, 2017 – 82 Fed. Reg. 11505: BIS extended until March 29, 2017, the temporary general license (TGL) 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, Nov. 28, 2016, and Feb. 27, 2017. (See March 2016 Regulatory Update for details of the initial issuance of this TGL.) This TGL applies only to the two named entities. It does not apply to exports to two other ZTE entities, Beijing 8-Star International Co., (Beijing, China) and ZTE Parsian (Tehran, Iran).

Fines and Penalties

Jan. 31, 2017: A federal grand jury in Buffalo, NY, indicted Agha Muhammad Khan Durrani, of Pakistan, for violations of the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and the International Emergency Economic Powers Act (IEEPA, 50 USC chap. 35, Sec. 1701 et seq.) and making false statements in connection with an attempt to export assault weapons accessories to Canada for subsequent unauthorized export to Pakistan. Durrani allegedly also transferred weapons via Thailand.

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Feb. 3, 2017: OFAC issued a Finding of Violation to B Whale Corporation (BWC) of Taipei, Taiwan, a member of the TMT Group of shipping companies, for violating the Iranian Transactions and Sanctions Regulations (“ITSR”) when its vessel conducted a ship-to-ship transfer during which it received 2,086,486 barrels of condensate crude oil from a vessel owned by the National Iranian Tanker Company, which was identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (the SDN List) at the time. OFAC found that BWC was a U.S. person because at the time of the transfer it was present through bankruptcy proceedings in the U.S. Bankruptcy Court in the Southern District of Texas. Also, the oil transferred to the vessel was an importation into the U.S. under the ITSR because the vessel was property under the jurisdiction of the bankruptcy court.

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Feb. 15. 2017: Marlou Mendoza of Long Beach, CA, pleaded guilty in federal court in Los Angeles, CA, to three counts of failing to provide the required written notice to freight forwarders that she was shipping ammunition to a foreign country. The charges involved three shipments of ammunition and bullets totaling 131,300 rounds of .22-caliber ammunition and bullets that Mendoza admitted that she had sent to the Philippines. Mendoza will be sentenced on April 20, 2017. In a related case unsealed last year Mendoza’s son, Mark Louie Mendoza, was indicted for violations of the AECA and money laundering in connection with unauthorized exports of firearms parts and ammunition to Philippines that were falsely declared as household goods. Marlou Mendoza remains free on bond pending sentencing on April 20, 2017. Mark Mendoza remains a fugitive.

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Feb. 17, 2017: Pelco Inc. of Clovis, CA, agreed to pay a civil penalty of $162,000 to settle charges by BIS that it had violated U.S. antiboycott regulations (EAR Part 762) by knowingly agreeing to refuse to do business with another person with intent to comply with a foreign boycott against a country friendly to the U.S. and failing to report the receipt of requests to engage in such a boycott. The violations occurred in connection with the sale or transfer of goods from the U.S. to the United Arab Emirates (UAE) and Kuwait.

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Feb. 24, 2017: Ali Caby, a/k/a “Alex Caby,” a U.S. permanent resident currently residing in Bulgaria; Arash Caby, a/k/a “Axel Caby,” of Miami, Florida; and Marjan Caby, of Miami, Florida, were arrested and charged with violating IEEPA and the EAR (specifically EAR Sec. 746.9, which sanctions exports to Syria); conspiracy to violate IEEPA, defraud the U.S. Government, and commit money laundering; submitting false or misleading electronic export information; and false statements. They were accused of exporting dual-use parts and equipment to Syrian Arab Airlines (SAA), a Specially Designated Global Terrorist. SAA and 8 other individuals were also indicted. The exports were made through AW-Tronics, a Florida export company with offices in Miami and Bulgaria. Ali Caby, Arash Caby, and Marjan Caby allegedly managed the offices of AW-Tronics and closely supervised and encouraged subordinate employees in the willful exports to SAA.

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Feb. 28, 2017: United Medical Instruments Inc., a California company, agreed to pay a civil fine of $515,400 to settle allegations by OFAC of 56 violations of the ITSR. The alleged violations involved at least 56 sales of medical imaging equipment with knowledge or reason to know that the goods were intended for ultimate delivery to purchasers in Iran and facilitating their sale to Iran by a company located in the UAE. The total value of the equipment was approximately $2,493,597. The obligation to pay the settlement will be satisfied by UMI’s compliance with the terms of its Sep. 24, 2013 settlement with BIS and its payment of $15,400 to the U.S. Treasury Department. (See September 2013 Regulatory Update for details of the settlement with BIS.)

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Feb. 28, 2017: Alexander Posobilov, of Houston, TX, was sentenced in Brooklyn, NY, federal court to 135 months in prison for conspiring to export and illegally exporting controlled microelectronics to Russia and conspiring to launder money. As procurement manager at ARC Electronics, Inc., a now-defunct Texas company, Posobilov managed a team that obtained technologically cutting-edge microelectronics used in military systems including radar and surveillance systems, missile guidance systems, and detonation triggers with a total value of approximately $50 million and exported them to Russia without the required authorization. Posobilov and his co-conspirators provided false end user information to U.S. suppliers and falsely classified the goods on export records submitted to the U.S. Government. In committing these violations, Posobilov was part of a conspiracy involving 10 other individuals, ARC, and Apex System, L.L.C., a Russian company. (See information about the sentencing of co-conspirator Alexander Fishenko in July 2016 Regulatory Update.)

FEBRUARY 2017 EXPORT CONTROL REGULATION UPDATES Read More »

JANUARY 2017 EXPORT CONTROL REGULATION UPDATES

January 2017

This newsletter is a listing of the latest changes in export control regulations through January 31, 2017. 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

EXECUTIVE ORDER (PRESIDENT OBAMA)

President Obama Issues EO Terminating Most Sanctions Against Sudan

Jan. 18, 2017 – 82 Fed. Reg. 5331: President Obama issued Executive Order 13761 which terminates, effective July 12, 2017, most aspects of most sanctions against Sudan that had been ordered under two EOs issued in 1997 and 2006. The termination will become effective only if the Secretary of State has provided a report to the President and, in consultation with the Secretary of the Treasury, the Director of National Intelligence, and the Administrator of the U.S. Agency for International Development, has published a notice stating that the Government of Sudan had sustained the positive actions that gave rise to this EO. (See below for implementation of this order by the Bureau of Industry and Security and the Office of Foreign Assets Control.)

DEPARTMENT OF COMMERCE

Five Russian Entities Added to the Entity List

Jan. 4, 2017 – 82 Fed. Reg. 722: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding the following 5 Russian entities to the Entity List (EAR Part 744, Supp. No. 4):

Autonomous Noncommercial Organization Professional Association of Designers of Data Processing Systems, a.k.a., ANO PO KSI, Andreyevka, Moscow Region;
Federal Security Service (FSB), a.k.a., Federalnaya Sluzhba Bezopasnosti, Moscow;
Main Intelligence Directorate, a.k.a., Glavnoe Razvedyvatel’noe Upravlenie, GRU, and Main Intelligence Department, Moscow;
Special Technology Center, a.k.a., STC, Ltd., St. Petersburg; and
Zorsecurity Center (f.k.a., Esage Lab), a.k.a., TSOR Security, Moscow.

These entities were designated for tampering, altering, or causing a misappropriation of information with the purpose or effect of interfering with the 2016 U.S. election process. A license will be required for all items subject to the EAR to these entities. The licensing policy will be presumption of denial, and no license exceptions will be available.

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BIS Issues Third Final Rule for Spacecraft, With Modifications and Clarifications of USML Category XV and ECCN 9X515

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Five Turkish Entities added to the Entity List, One Indian Entity Removed and One Russian Entity Modified

Jan. 10, 2017 – 82 Fed. Reg. 2883: BIS added the following 5 persons in Turkey to the Entity List based on a determination that they were acting contrary to U.S. national security or foreign policy interests:

AR Kompozit Kimya, a.k.a., AR Composites Company Ltd and AR Kompozit Kimya Muhendislik Taah Dis Tic Ltd., Istanbul;
Fulya Kalafatoglu Oguzturk, a.k.a., Macide Fulya Kalafatoglu, Istanbul;
Murat Taskiran, Istanbul;
Ramor Group, a.k.a., Ramor Construction Food and Furniture Incorporation, Ramor Ins, Ramor Company, and Ramor Ltd. Co., Istanbul; and
Resit Tavan, Istanbul.

BIS also removed Veteran Avia LLC, a.k.a., Veteran Airline, from the entries for India, Armenia, Greece, Pakistan and the United Kingdom. BIS also revised the listing for FAU ‘Glavgosekspertiza Rossii’ under the destination Russia to conform with a new General License No. 11 issued by the Treasury Department Office of Foreign Assets Control (OFAC).

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BIS Requests Comments on Technical Parameters for Control Under USML Category XII and Sensor/Laser ECCNs Under the EAR

Jan. 17, 2017 – 82 Fed. Reg. 4287: BIS requested comments from the public on the impact of further increasing controls on fire control, laser imaging, and guidance equipment that had been determined no longer to warrant control under Category XII (Fire Control, Laser, Imaging, and Guidance Equipment) of the USML, particularly with regard to the ECR rules for USML Category XII that went into effect on December 31, 2016. (See October 2016 Regulatory Update.) The proposed changes affect EAR Sections 734.4 and 740.20 and ECCNs 3E001, 6A993, 6E001, 6E002, and 6E990. Comments are due by March 14, 2017. (See related proposal in State Department section below.)

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BIS Changes Policy of Denial into Policy of Approval for Exports to Sudan Intended for Civil Aviation Safety and Railroad Operation Safety

Jan. 17, 2017 – 82 Fed. Reg. 4781: BIS changed its license application review policy from a general policy of denial to a general policy of approval for exports to Sudan of certain items controlled only for AT reasons that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft and certain items controlled only for AT reasons for use in specified operations relating to railroads. The liberalized review policy applies only to exports for civil uses and does not apply to exports to “sensitive end users,” including Sudan’s military, police, and/or intelligence services. No existing license requirements were removed, and exports of other items to Sudan remain under a general policy of denial. (See related articles in The President section above and Treasury Department section below.)

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US Exporters of Certain Goods to Hong Kong Must Demonstrate that They Have a Hong Kong Import Permit or that the Hong Kong Government has Issued a Written Statement that an Import Permit is Not Required

Jan. 19, 2017 -- 82 Fed. Reg. 6216: BIS amended the EAR to require persons intending to export or reexport to Hong Kong any item controlled for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons to obtain, prior to such export or reexport, a copy of a Hong Kong import license or a written statement from the Hong Kong government that such a license is not required. The rule also requires persons intending to reexport any such item from Hong Kong to obtain a Hong Kong export license or a statement from the Hong Kong government that such a license is not required. This rule will go into effect April 19, 2017. FAQs describing its purpose and effect are on the BIS website at https://www.bis.doc.gov/index.php/forms-documents/pdfs/1637-2017-hong-kong-rule-faqs/file.

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BIS Establishes Policy of Approval for Exports of EAR Items to India, Including “600 Series Items,” When the Items are for Ultimate End Use by the Government of India or Re-export to A:5 Countries or the US, Provided the Items are not for Nuclear, Missile, or Chemical/Biological Weapon End Uses

Jan. 19, 2017 – 82 Fed. Reg. 6218: BIS established a licensing policy of general approval for exports or reexports to, or transfers within, India of items subject to the EAR, including “600 series” items, for civil or military end uses in India, for ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as the items are not for use in nuclear, “missile” or chemical or biological weapons activity. BIS also amended the Validated End User (VEU) authorization (EAR Sec 748.15) to permit items obtained in India under this authorization to be used for both civil and military end uses, so long as the items are not controlled for MT reasons and are not for use in nuclear, “missile” or chemical or biological weapons activities. These amendments, which occur in EAR Sections 742.4, 742.6, and 748.15, reflect a recognition of India as a Major Defense Partner of the U.S.

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BIS Pushes Implementation Date for Removal of Nuclear Proliferation Controls on Certain Equipment Usable in Nuclear Reactors Due to President Trump Postponement of Effective Date of Rules for 60 Days

Feb. 1, 2017 – 82 Fed. Reg. 8893: BIS delayed until March 21, 2017, the implementation of portions of an amendment of Nov. 25, 2016 (81 Fed. Reg. 85138 -- see November 2016 Regulatory Update), removing ECCNs 2A292, 2A293, 2B290, and 3A292 from the CCL and taking other actions that were scheduled to become effective Jan. 1, 2017. Specifically, “software" "specially designed" for the "development," "production," or "use" of items previously controlled under ECCN 3A292 will continue to be classified and licensed by BIS under the designation EAR99 through a delayed date of March 21, 2017. As of March 22, 2017, such "software" will be classified and licensed by BIS under ECCN 3D991. The postponement resulted from a Jan. 20, 2017, Presidential Memorandum requiring a 60-day postponement of rules that had been published in the Federal Register, but had not yet taken effect.

DEPARTMENT OF STATE

DDTC Name and Address Changes Posted to Website

Jan. 17 and 27, 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 Forges De Zeebrugge SA to Thales Belgium SA due to corporate rebranding, and
Change in Name from Bluefin Robotics Corporation to General Dynamics Mission Systems Inc., due to acquisition of Bluefin Robotics by GD Mission Systems

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

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DDTC Publishes Final Rule Implementing ITAR Revisions to Reflect the Current Systems Used to Report Export Information to CBP

Jan. 3, 2017 – 82 Fed. Reg. 15: DDTC amended International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Parts 120, 123, and 126 to implement the International Trade Data System (ITDS), a new government-wide system that allows businesses to electronically submit the data required to import or export cargo. Traders will only need to create and submit a single set of data for each import or export. Information for users is on the Customs and Border Protection (CBP) website at https://www.cbp.gov/trade/automated. (For reference, the implementation of the ITDS in the Automated Commercial Environment ("ACE") will not affect the process by which exporters prepare and submit Electronic Export Information ("EEI") to the Census bureau for qualifying exports. For most ACE users, the revised ITDS interface will be invisible.)

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DDTC Issues Companion to BIS’s Third Final Rule for Spacecraft, With Modifications and Clarifications of USML Category XV and ECCN 9X515

Jan. 10, 2017 -- 82 Fed. Reg. 2889: In an update to an interim rule revising USML Category XV (Spacecraft and Related Articles) (May 13, 2014 -- 79 FR 27180), DDTC amended Category XV to better reflect the intended scope of control with regard to autonomous tracking systems, logistics, propulsion systems, cryocoolers, and vibration suppression systems; to clarify controls on specific electro-optical remote sensing capabilities and space qualified optics; and to limit the controls to items that genuinely warrant controls on the USML. See Commerce Department section above for description of a related rule.

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DDTC Increases Maximum Civil Penalty for ITAR Violations Due to Inflation

Jan. 11, 2017 – 82 Fed. Reg. 3168: The State Department increased the maximum Civil Monetary Penalty (CMP) for violations of the ITAR from $1,094,010 to $1,111,908 based on an inflation adjustment formula mandated by law. The new CMP will apply to penalties assessed on or after Jan. 11, 2017, regardless of the date on which the underlying facts or violations occurred.

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DDTC Requests Comments on Technical Parameters in ECR Revisions to USML Category XII

Jan. 17, 2017 – 82 Fed. Reg. 4226: Following implementation on Dec. 31, 2016, of amendments to USML Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) (see October 2016 Regulatory Update), DDTC requested comments from the public relating to issues regarding controls on items “specially designed for a military end user,” the scope of controls on certain laser target designators or coded target markers (Cat. XII(b)(1)), and parameters to replace “specially designed” controls. Comments are due by March 14, 2017.

DEPARTMENT OF THE TREASURY

OFAC Issues General Licenses Related to La Estrella and El Siglo Newspapers and the Panamanian Mall and Associated Complex

Jan. 5, 2017: OFAC issued two general licenses affecting exports to Panama. General License 3B authorizes “Certain Transactions and Activities to Wind Down Operations Involving La Estrella and El Siglo Newspapers," and General License 4E authorizes “Certain Transactions involving the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama).” FAQs about these general licenses are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#panama (FAQs 471 and 472).

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OFAC Issues New FAQs Related to Transactions Involving Goods on Vessels that Have Entered into Cuban Sovereign Territory

Jan. 6, 2017: OFAC issued five new FAQs about restrictions on transactions involving goods on vessels that have entered a port or place in Cuba. The FAQs are on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf (FAQs 86-90).

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OFAC Advises that US Persons Cannot Provide Legal Advice or Consulting Services to Persons Who Are Specially Designated Nationals (“SDNs”) or Who Have Been Otherwise Restricted from Receiving US Export Services by OFAC

Jan. 17, 2017: OFAC issued Guidance and related FAQs on the provision of legal and other services relating to the requirements of U.S. sanctions laws. The Guidance is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/compliance_services_guidance.pdf; the FAQs are at www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#csg (FAQs 495-499 – titled “Cross-Programmatic Compliance Services Guidance”).

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OFAC Issues General License Authorizing Many Transactions Formerly Prohibited under Sudanese Sanctions Regulations

Jan. 17, 2017 – 82 Fed. Reg. 4793: OFAC published a General License authorizing all transactions prohibited by the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538). This General License, which implements Executive Order 13761 (see description above) takes the form of a new Section 538.540. However, many transactions with Sudan remain subject to statutory restrictions such as time limits on exports to Sudan of agricultural commodities, medicine, or medical devices. Details are described in a Fact Sheet at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#sudan_whole and FAQs 490-494 at the same link above. (See related information in Commerce Department 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 email info@fdassociates.net.

Sanctions

DEPARTMENT OF COMMERCE

Jan. 6, 2017 – 82 Fed. Reg. 1689: BIS denied the export privileges of Dane Francisco Delgado, Eden Correctional Institution, Eden, TX, for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778) in connection with a conspiracy to export defense articles to Mexico without the required authorization. In the criminal case, Delgado was sentenced to 70 months in prison, 3 years of supervised release, and a $100 assessment.

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Jan. 6, 2017 – 82 Fed. Reg. 1690: BIS denied the export privileges of Robert Luba, U.S. Penitentiary Satellite Camp, Waymart, PA, for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting a technical drawing for a part of the torpedo tube of the NSSN Class Submarine to India without the required authorization. In the criminal case, Luba was sentenced to 6 months in prison, 3 years of unsupervised release, $173,737 in restitution, and a $200 assessment.

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Jan. 6, 2017 – 82 Fed. Reg. 1691: BIS denied the export privileges of Kamran Ashfaq Malik, Federal Correctional Institution, Fort Dix, MD, for 5 years based on his conviction of violating the AECA by knowingly and willfully exporting firearms controlled under the USML to Pakistan without the required authorization. In the criminal case, Malik was sentenced to 24 months in prison, 3 years of supervised release, and a $100 assessment.

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Jan. 9, 2017 – 82 Fed. Reg.2312: BIS renewed the Temporary Denial Order (TDO) against Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Ali Eslamian, Mahan Air General Trading LLC, Skyco (UK) Ltd., Equipco (UK) Ltd., Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issarn Shammout for an additional 6 months.

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Jan. 11, 2017 – 82 Fed. Reg. 4842: Berty Tyloo of Morges, Switzerland agreed to a denial of his export privileges for 3 years to settle charges by BIS that he had made false or misleading statements to BIS in the course of an investigation. The investigation involved unlicensed exports of controlled items to Syria.

Fines and Penalties

Jan. 12, 2017: Aban Offshore Limited of Chennai, India, agreed to pay $17,500 to settle potential liability for violating the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). OFAC claimed that Aban violated the ITSR when its Singapore subsidiary placed an order for oil rig supplies from a vendor in the U.S. with the intended purpose of re-exporting these supplies from the United Arab Emirates (UAE) to a drilling rig in Iranian territorial waters.

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Jan. 27, 2017: Milwaukee Electric Tool Corporation agreed to pay $301,000 (of which $31,000 was suspended) to settle charges by BIS that it violated the EAR on 25 occasions by exporting thermal imaging cameras controlled under ECCN 6A003.b.4 to various countries including Hong Kong, Colombia, Ecuador, El Salvador, and Mexico without the required authorization. The total value of the unauthorized exports was $129,284.

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Jan. 30, 2017: Michael Andrew Ryan, aka Brad Jones and GunRunner, of Manhattan, KS, was sentenced in U.S. District Court for the District of Kansas to 52 months in prison for his role in the illegal export of firearms including pistols, revolvers, UZIs, and Glocks as well as magazines and ammunition to Ireland, England, Scotland, and Australia. In his plea agreement Ryan admitted having sold these items using Black Market Reloaded, a hidden Internet marketplace. In addition to the prison sentence, Ryan was also ordered to forfeit all firearms and ammunition seized by law enforcement during the investigation.

JANUARY 2017 EXPORT CONTROL REGULATION UPDATES Read More »

DECEMBER 2016 EXPORT CONTROL REGULATION UPDATES

December 2016

This newsletter is a listing of the latest changes in export control regulations through December 31, 2016. 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

Wassenaar Arrangement

Dec. 8 and 12, 2016: The Wassenaar Arrangement published the following documents:

List of Dual-Use Goods and Technologies and Munitions List as of Dec. 2016: <http://www.wassenaar.org/wp-content/uploads/2016/12/WA-LIST-16-1-2016-List-of-DU-Goods-and-Technologies-and-Munitions-List.pdf>

Summary of Changes to the Lists as of Dec. 2016: <http://www.wassenaar.org/wp-content/uploads/2016/12/Summary-of-Changes-to-2016-Lists-2.pdf>

Best Practices for Effective Legislation on Arms Brokering <http://www.wassenaar.org/wp-content/uploads/2016/12/Best-Practices-for-Effective-Legislation-on-Arms-Brokering-1.pdf> (as amended at 2016 Plenary)

Best Practices for Effective Export Control Enforcement <http://www.wassenaar.org/wp-content/uploads/2016/12/Best-Practices-for-Effective-Export-Control-Enforcement-1.pdf> (as amended at 2016 Plenary)

Department of Commerce

BIS Publishes Final Rule to Amend License Exception TMP to Permit Temporary Exports to Mexico for Four Years When Related to Mexico’s IMMEX Program

Dec. 1, 2016 – 81 Fed. Reg. 86571: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by modifying License Exception TMP (Temporary Imports, Exports, Reexports, and Transfers (In-country), EAR Sec. 740.9) to extend the time limit for temporary exports to Mexico for use in Mexico's IMMEX (Decree for the Promotion of Manufacturing, Maquiladora and Export Services) program from one year to 4 years. This matches Mexico's time limit of 4 years for imports under the IMMEX program. This final rule implements without change the rule proposed on Aug. 23, 2016 (81 Fed. Reg. 575705).

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BIS Amends EAR to Remove Special Iraq Reconstruction Licenses

Dec. 5, 2016 – 81 Fed. Reg. 87424: BIS amended the EAR to remove the Special Iraq Reconstruction License (SIRL, EAR Part 747) on the basis that this license was outdated and no longer required, as exporters now have more efficient options for exports and reexports to Iraq and in-country transfers in Iraq. This action finalizes an amendment proposed on June 7, 2016 (81 Fed. Reg. 36481).

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BIS Amends Validated End User List for China to Remove SMIC

Dec. 5, 2016 – 81 Fed. Reg. 87426: BIS amended the List of Validated End Users in China (EAR Part 748, Supp. No. 7) to remove the Semiconductor Manufacturing International Corporation (SMIC) from the list of VEUs in the People’s Republic of China (PRC). This action was taken at the company’s request.

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BIS Entity List Changes for December 2016:

Dec. 15, 2016 – 81 Fed. Reg. 90712: BIS added the following 7 persons, all located in Pakistan, to the Entity List (EAR Part 744, Supp. No. 4):

Ahad International, Lahore;
Air Weapons Complex (AWC), Punjab;
Engineering Solutions Pvt. Ltd., Islamabad;
Maritime Technology Complex (MTC), Karachi;
National Engineering and Scientific Commission (NESCOM), Islamabad;
New Auto Engineering (NAE), Rawalpindi; and
Universal Tooling Services, a.k.a., the following three aliases: Forward Design and Manufacturing; MSM Enterprises; and Technopak Engineering, Rawalpindi, Lahore, and Taxila.

For these persons, there will be a license requirement for all items subject to the EAR and a license review policy of presumption of denial, and no license exceptions will be available.

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BIS Revises Standard Language in Licenses to Reference New DCS Requirement

Dec. 15, 2016: BIS revised the standard language on validated licenses to conform with the revised requirements regarding destination control statements that went into effect Nov. 15, 2016. (See November 2016 Regulatory Update.). The new language directs exporters to “[p]lace a Destination Control Statement on all commercial invoices for shipments of items on the Commerce Control List.”

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BIS Revises ECCNs 1C351 and 2B352 to Conform with Changes Made by the Australia Group

Dec. 16, 2016 – 81 Fed. Reg. 90983: BIS amended Export Control Commodity Numbers (ECCNs) 1C351 and 2B352 to implement decisions made by the Australia Group (AG) in 2016. ECCN 1C351 was amended to reflect updates to the AG “List of Human and Animal Pathogens and Toxins for Export Control.” ECCN 2B352 was amended to reflect changes to the AG “Control List of Dual-Use Biological Equipment and Related Technology and Software.”

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BIS Revises the Export Restrictions Applicable to Burma

Dec. 27, 2016 – 81 Fed. Reg. 94962: Consistent with the removal of economic and financial sanctions against Burma in October 2016 (see October 2016 Regulatory Update), BIS removed and reserved EAR Sec. 744.22, which imposed license requirements and other restrictions on exports to previously-sanctioned persons in Burma, and moved Burma from Country Group D:1 to Country Group B. However, Burma’s placement in Country Group D:3, Country Group D:5, and Computer Tier 3 remain unchanged.

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BIS Bolsters Export Restrictions Applicable to Russia

Dec. 27, 2016 – 81 Fed. Reg. 94963: To ensure the efficacy of existing sanctions on Russia, BIS added 21 entries in Russia and 2 entries in the Crimea region of Ukraine to the Entity List for violating international law and fueling the conflict in eastern Ukraine. You can find these entities at the following link: https://www.gpo.gov/fdsys/pkg/FR-2016-12-27/pdf/2016-31124.pdf The full Entity list is published at Supplement No. 4 to Part 744 of the EAR, and can be found at https://www.bis.doc.gov/index.php/forms-documents/regulations-docs/federal-register-notices/federal-register-2014/957-744-supp-4-1/file.

BIS also amended EAR Sections 742.2, 742.3, and 742.4 to state that it will review license applications to export or reexport to Russia items subject to the EAR and controlled for chemical and biological weapons proliferation (CB), nuclear nonproliferation (NP) or national security (NS) reasons under a presumption of denial, if the items proposed for export or reexport would make a direct and significant contribution to Russia’s military capabilities.

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BIS Revises ECCN 2B229 to Reflect Regulatory Changes Agreed by the Nuclear Suppliers Group

Dec. 27, 2016 – 81 Fed. Reg. 94971: BIS amended the Commerce Control List (CCL, EAR Part 774) to reflect understandings reached by the Nuclear Suppliers Group (NSG) in 2015 and 2016. The amendments affect the descriptions of certain linear displacement measuring systems in ECCN 2B206 and certain centrifugal multiplane balancing machines in ECCN 2B229. BIS also corrected an error in the technical parameters of certain radiation-hardened TV cameras in ECCN 6A203.d.

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BIS Revises the Maximum Civil Monetary Penalties for IEEPA Violations Due to Inflation

Dec. 28, 2016 – 81 Fed. Reg. 95432: BIS made inflation adjustments to the maximum civil monetary penalties (CMPs) for the regulations it administers, using a formula mandated by law. The new CMP for violations of the International Emergency Economic Powers Act (IEEPA) was increased from $284,582 to $289,238. The new CMP will apply to penalties assessed after Jan. 15, 2017, including those whose associated violation predated the adjustment.

Department of State

DDTC Name and Address Changes

December 5, 12, 13, 14, 15, 22, 27, 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 Textron subsidiaries, Cessna Aircraft Company, Beechcraft Corporation, and Hawker Beechcraft Global Customer Support, LLC to Textron Aviation, Inc. due to corporate rebranding;
Change in Address for Dutch-Shape B.V.;
Change in Name from Ultra Electronics, Controls to Ultra Electronics, Precision Control Systems due to corporate reorganization;
Alcoa Inc. Business Units and Non-U.S. Subsidiaries Name Changes due to corporate reorganization:

From: To:

Alcoa Inc. Arconic Inc.
Alcoa Defense Inc. Arconic Defense Inc.
Alcoa Global Fasteners Inc. Arconic Global Fasteners & Rings, Inc.
Alcoa Fixations Simmonds SAS Arconic Fixations Simmonds SAS
Alcoa Holdings GmbH Arconic Holding GmbH
Alcoa Kofem Kft Arconic – Kofem Szekesfehervari

Konnyufemmu Korlatolt Felelossegu

Tarasasag

Alcoa Korea Ltd. Arconic Korea Ltd.
Alcoa Manufacturing (GB) Arconic Manufacturing (GB) Limited

Limited

Change in Name from CGS S.p.A. Compagnia Generale per lo Spazio to OHB Italia S.p.A. due to corporate rebranding;
Change in Name from Diehl BGT Defence GmbH & Co KG to Diehl Defence GmbH & Co KG due to corporate reorganization;
Change in Name and Address from NovAtel Europe Limited to Veripos Limited due to acquisition;
Change in Name from Lockheed Martin Business Technology Solutions to Leidos Innovations UK Ltd. due to merger;
Change in Name from Harvan Engineering Ltd. to Harvan Manufacturing Ltd. due to corporate reorganization;
Change in name from Agusta Westland Ltd., Finmeccanica UK Ltd., and DRS Technologies UK Ltd. to Leonardo MW Ltd. due to corporate rebranding;
Change in name of Leonardo Panel subsidiary Sirio Panel S.p.a. to Leonardo S.p.a. due to merger; and
Change in Name from Thales Geodis Freight & Logistics to SCO Aerospace and Defence due to acquisition.

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

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DDTC Publishes Various Corrections and Amendments to the ITAR to Clarify Regulatory Requirements

Dec. 5, 2016 – 81 Fed. Reg. 87427: DDTC made corrections and additions to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Parts 120, 121, 122, 124, 126, and 127 and 13 U.S. Munitions List (USML, ITAR Sec. 121.1) Categories. Most of the amendments are minor changes and corrections of administrative and typographical errors. Substantive amendments include:

Thirteen USML categories are amended to clarify that commodities, software, and technology subject to the EAR and related to defense articles in a USML category may be exported or temporarily imported on the same license with defense articles from any category, provided they are to be used in or with that defense article;
Section 122.4(c)(4) is revised to permit DDTC to approve an alternative timeframe, not less than 60 days, to the current 60-day requirement for registrants to provide a signed amended agreement; and
Section 124.2(c)(5)(v) is revised to correct errors to the USML category references for gas turbine engine hot sections, from VI(f) and VIII(b) to Category XIX.

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State Department’s Bureau of Arms Control Modifies Sanctions Applicable to Rosoboronexport to Permit the USG to Purchase Goods from the Russian Entity related to the Open Skies Treaty

Dec. 15, 2016 – 81 Fed. Reg. 90903: The U.S. Department of State modified sanctions imposed against Rosoboronexport (ROE) in 2015 (Sep. 2, 2015 – 80 Fed. Reg. 53222) and 2016 (July 5, 2016 – 81 Fed. Reg. 43696) to permit the procurement by the U.S. Government of goods, technology, and services for the purchase, maintenance or sustainment of the ROE Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia's Open Skies Treaty compliance, including the purchase of spare parts, supplies, and related services. However, this exception does not apply to private-sector transactions with ROE.

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DDTC Publishes Final Rule Implementing ITAR Revisions to Enable CBP to Integrate its International Trade Data System with ITAR Exporting

Dec. 29, 2016: DDTC announced impending ITAR amendments, effective Dec. 31, 2016, subsequently published on January 3, 2017 (82 Fed. Reg. 15), to implement the International Trade Data System (ITDS), a new government-wide system that will allow businesses to electronically submit the data required to import or export cargo. Traders will only need to create and submit a single set of data for each import or export. Information for users is on the Customs and Border Protection (CBP) website at https://www.cbp.gov/trade/automated.

For reference, the implementation of the ITDS in the Automated Commercial Environment (“ACE”) will not affect the process by which exporters prepare and submit Electronic Export Information (“EEI”) to the Census bureau for qualifying exports. For most ACE users, the revised ITDS interface will be invisible.

Department of the Treasury

Treasury Publishes Quarterly List of Countries Supporting Boycotts of Israel

Dec. 2, 2016 – 81 Fed. Reg. 87128: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.

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OFAC Amends Two FAQ Answers to Clarify Scenario If Sanctions Are Reinstated Against Iran Pursuant to JCPOA

Dec. 15, 2016: The Office of Foreign Assets Control (OFAC) amended two Frequently Asked Questions (FAQs) regarding the re-imposition of sanctions in the event of a snapback of sanctions under the Joint Comprehensive Plan of Action (JCPOA) against Iran. Updated Questions M.4 and M.5 are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf.

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OFAC Issues Revised General License to Permit the Temporary Re-export to Iran of US-Origin Civil Aircraft Not Registered with the FAA, Under Specified Conditions

Dec.15, 2016: OFAC replaced General License J of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) with a new General License J-1, which permits the temporary reexport to Iran of “Eligible Aircraft” that involve code sharing arrangements, subject to certain conditions. General License J-1 is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_glj_1.pdf.

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OFAC Issues General License to Permit Transactions Ordinarily Incident to Engagements with FAU Glavgosekspertiza Rossi’s Office in Russia for Design Reviews and Permits

Dec. 20, 2016: OFAC issued Russia/Ukraine-related General License 11, authorizing all transactions and activities that are ordinarily incident and necessary to requesting, contracting for, paying for, receiving, or utilizing a project design review or permit from FAU Glavgosekspertiza Rossii's office(s) in the Russian Federation (not including the Crimea region of Ukraine).

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OFAC Amends then Iranian Transactions and Sanctions Regulations to Expand the Medical Devices Eligible for Export to Iran

Dec. 23, 2016 – 81 Fed. Reg. 94254: OFAC amended the Iranian Transactions and Sanctions Regulations (ITSR) to expand the range of “medical devices” covered under a general license; expand authorizations related to training, replacement parts, software, and services for the operation, maintenance, and repair of medical devices; allow the import from Iran of certain U.S.-origin items that are broken or connected to product recalls or other safety concerns; slightly narrow the list of excluded agricultural commodities; and define the terms “goods of Iranian origin” and “Iranian-origin goods.” The amended sections are ITSR Secs. 560.530 and 560.306. New and updated FAQs about the amended rules are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#lic_agmed_amend.

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.

Fines and Penalties

Dec. 12, 2016: Shantia Hassanshahi, a U.S. citizen born in Iran, was sentenced in federal court in Washington, DC, to one year in prison, based on his plea of guilty of unlawfully conspiring to ship electromechanical relay devices valued at $1 million to Iran without the required authorization. Hassanshahi admitted that he used his company, Hasston, to purchase the devices from a Canadian manufacturer and shipped them for end use in Iran.

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Dec. 14, 2016: Mansour Moghtaderi Zadeh, an Iranian national, was sentenced in federal court in Washington, DC, to 18 months in prison and one year of supervised release, and ordered to forfeit $69,159, based on his plea of guilty of conspiring to unlawfully export products, including, aviation parts and aviation supplies to Iran without the required authorization. The products included a fiber optic video transmitter and receiver and aviation course indicators. Earlier, in 2007, BIS had issued a Temporary Denial Order (TDO) against Zadeh (under an alias) and his company, Lavantia, after a shipment by them was detained pending certification of the end user. Notwithstanding the TDO, Zadeh and other conspirators exported and attempted to export goods valued at more than $69,000 to Iran.

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Dec. 15, 2016: Lim Yong Nam, aka Steven Lim, a citizen of Singapore, pleaded guilty in federal court in Washington, DC, to a charge of conspiracy to defraud the U.S. by dishonest means, based on his participation in a conspiracy that allegedly caused the unauthorized exportation of thousands of radio frequency modules to Iran. Fourteen of the modules were later recovered in Iraq, where they were used in remote detonation systems for improvised explosive devices (IEDs). Lim was extradited from Indonesia, where he had been detained since October 2014 under a U.S. request for extradition.

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Dec. 16, 2016: William Ali, a Fiji citizen resident in New Zealand, was convicted by a jury in federal court in Seattle, WA, of conspiracy to violate the Arms Export Control Act (AECA, 22 U.S.C. 2778 et seq.) involving an effort to purchase ITAR-controlled accelerometers and gyroscopes in the U.S. and export them to China without the required authorization. Ali was arrested in April 2016, when he arrived in Seattle to pick up the devices from an individual he thought was a commercial seller, but who was, in fact, an undercover agent of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

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Dec. 19, 2016: Yu Long, a citizen of China and lawful permanent resident of the U.S., pleaded guilty in federal court in New Haven, CT, of violating the AECA and other offenses related to the theft and subsequent export to China of sensitive military program documents. Long obtained the documents while working on the F119 and F135 engines and other projects as a Senior Engineer/Scientist at United Technologies Research Center (UTRC) in Connecticut. Among other exports, the investigation revealed that Long had taken with him to China a UTRC external hard drive which he had illegally retained after his employment at UTRC ended that contained a substantial body of highly sensitive export controlled data.

DECEMBER 2016 EXPORT CONTROL REGULATION UPDATES Read More »

NOVEMBER 2016 EXPORT CONTROL REGULATION UPDATES

November 2016

This newsletter is a listing of the latest changes in export control regulations through November 30, 2016. 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

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.

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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.)

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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.

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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.

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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.

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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.

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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

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

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.

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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.

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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.

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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.

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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.

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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.)

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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.

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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.

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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.

NOVEMBER 2016 EXPORT CONTROL REGULATION UPDATES Read More »

OCTOBER 2016 EXPORT CONTROL REGULATION UPDATES

October 2016

This newsletter is a listing of the latest changes in export control regulations through October 31, 2016. 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

European Union

EC Publishes Explanatory Memorandum Related to Dual-Use Export Control Regulation Changes

September, 2016: The European Commission (EC) published its proposed new dual-use export control regulation, including an Explanatory Memorandum, on its website at http://trade.ec.europa.eu/doclib/docs/2016/september/tradoc_154948.pdf). Separately, the EC published a Comprehensive Change Note Summary providing a detailed overview of all the changes to the 2015 EU Dual-Use Control List on its website at http://trade.ec.europa.eu/doclib/docs/2016/october/tradoc_155058.pdf[OG1] (10 pages).

Further information related to these new regulations can be found in our September Newsletter.

Department of Commerce

BIS Publishes Final Rule Implementing ECR Revision to USML Category XII for Fire Control, Laser, Night Vision, and Imaging Equipment

Oct. 12, 2016 – 81 Fed. Reg. 70320: As part of the President’s ongoing Export Control Reform (ECR) initiative, the Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to add to the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) articles that were previously controlled under Category XII (Fire Control, Laser, Imaging, and Guidance Equipment) of the U.S. Munitions List (USML, 22 CFR Part 121). The transitioned articles will now be controlled under revised Export Control Classification Number (ECCN) 7A611 and new ECCNs 7B611, 7D611, and 7E611. Also, for certain dual-use infrared detection items, the rule expands controls on certain related software and technology, eliminates the use of some License Exceptions, revises licensing policy, and expands license requirements for certain transactions involving military end users or foreign military commodities. Controls on certain quartz rate sensors are also revised. This final rule takes into consideration comments received on earlier proposed rules published on May 5, 2015 (80 Fed. Reg. 25798) and Feb. 19, 2016 (81 Fed. Reg. 8421). The effective date of the ECR revisions to the EAR is Dec. 31, 2016. (See related article below, in State Department section.)

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Anti-boycott Reports Can Now Be Filed Electronically with BIS

Oct. 14, 2016 – 81 Fed. Reg. 70933: BIS amended EAR Section 760.5 to permit the electronic submission of reports that persons subject to the EAR are required to file when they receive requests to take actions in furtherance of or support of any boycott that violates the EAR. No substantive changes were made to the reporting requirement. BIS will continue to accept reports in hard copy, in addition to the new electronic reporting mechanism.

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BIS and Treasury Publish Revision to Cuba Policies – BIS Allows Online Retailers to Sell Directly to Cuban Citizens If They Verify the Citizens are Not Prohibited

Oct. 17, 2016 – 81 Fed. Reg. 71365: As part of the continuing effort to foster permitted trade relations with Cuba, BIS amended License Exception AVS (Aircraft, Vessels and Spacecraft) to allow cargo aboard aircraft to transit Cuba when bound for destinations other than Cuba and liberalized some provisions of License Exceptions SCP (Support for the Cuban People), GFT (Gift Parcels and Humanitarian Donations), and CCD (Consumer Communications Devices). This BIS action was coordinated with new liberalizations of Cuba sanctions by the Treasury Department, Office of Foreign Assets Controls (OFAC). (See description in Treasury Department section below.) In particular, this rule makes exports or reexports of eligible items sold directly to eligible individuals in Cuba for their personal use or their immediate family's personal use eligible for License Exception SCP. To be eligible, the items must be designated as EAR99 or controlled on the Commerce Control List (CCL) (Supplement No. 1 to Part 774 of the EAR) only for anti-terrorism reasons. Additionally, the purchasers and end users must not be members of the Council of Ministers, flag officers of the Revolutionary Armed Forces, or members of the Politburo. This amendment to License Exception SCP facilitates direct sales to individuals in Cuba by online retailers and others that sell eligible consumer products directly to end users. The regulatory changes support the President’s effort to establish a new course in bilateral relations with Cuba; however, BIS stressed that the U.S. continues to maintain a comprehensive embargo on trade with Cuba, and all exports or reexports to Cuba continue to require a license unless authorized by a license exception specified in EAR Sec. 746.2(a)(1) or exempted from license requirements under Sec. 746.2(a)(2). A summary of the BIS amendments is on the BIS website at https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba[OG2] ; updated BIS FAQs are at https://www.bis.doc.gov/index.php/documents/pdfs/1568-bis-cuba-consolidated-faqs-2/file; and a joint Commerce Department and Treasury Department Fact Sheet is at https://www.treasury.gov/press-center/press-releases/Pages/jl0581.aspx[OG3] .

Department of Justice

DOJ Implements New Policy to Encourage Business Organizations to File VSDs for Criminal Conduct Related to Export Law Violations to DOJ

Oct. 2, 2016: The National Security Division of the Department of Justice published Guidance on a new policy to strongly encourage business organizations to voluntary self-disclosure criminal violations of the export control and sanctions provisions of the Arms Export Control Act (AECA, 22 U.S.C. § 2778), and the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. § 1705) to the Counterintelligence and Export Control Section (“CES”) of the Department of Justice. The Guidance describes the requirements that must be met for a CES Voluntary Self-Disclosure (“VSD”) to receive full credit, provides examples of aggravating factors that could limit the credit, and provides sample VSD scenarios. It also notes that the VSD to the CES supplements, and does not replace a disclosure to the appropriate regulatory agency (e.g., BIS, DDTC, or Census). The Guidance is on the DOJ website at http://files.constantcontact.com/4545a8d7301/6536ffe2-60e6-451c-991a-6c6f6c1cdb17.pdf?ver=1476300088000[OG4] . [Note: Do we really want to direct them to our site for the file??]

Department of State

DDTC Posts Name Changes to DDTC Website

Oct. 5, 17, 24, 25, and 28, 2016: 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 of Broadspectrum Limited to Broadspectrum Pty Ltd due to corporate rebranding;
Change in Name of Kyocera America Inc. and Kyocera Industrial Ceramics Corporation to Kyocera International, Inc. due to corporate restructure;
Acquisition of Airbus DS Electronics and Border Security GmbH by Kohlberg Kravis Roberts & Co., L.P.;
BAE Systems Global Combat Systems Limited and BAE Systems Global Combat Systems Munitions Limited to jointly operate as BAE Systems Plc Line of Business within Programmes & Support called BAE Systems Land (UK);
Change in Address of PM-Surface BV;
Change in Name of Aerospace Industrial Maintenance Norway SF to Aerospace Industrial Maintenance Norway AS due to conversion to a private limited company;
Change in Name of Express Engineering (Thompson) Limited to Express Engineering (Group) Limited due to corporate restructure;
Change in Name of Pratt & Whitney Belgium Engine Center SPRL to Belgium Engine Center SPRL due to acquisition by AIM Norway; and
Change in Name of Selex ES (UK) to Leonardo MW Ltd (UK) due to corporate restructure.

Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.

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DDTC Publishes Final Rule Implementing ECR Revision to USML Category XII for Fire Control, Laser, Night Vision, and Imaging Equipment

Oct. 12, 2016 – 81 Fed. Reg. 70340: DDTC amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by revising Category XII (Fire Control, Laser Imaging, and Guidance Equipment) of the U.S. Munitions List (USML, ITAR Sec. 121.1) to transition certain items that no longer required control under the USML to the CCL. Categories VIII, XIII, and XV were also amended to reflect that some items formerly controlled under those categories have now been transferred to Category XII or transitioned to the CCL. Category XI was also revised to transition items to the CCL, consistent with changes to related controls in Category XII. This final rule takes into consideration comments received on earlier proposals to revise Category XII published on May 5, 2015 (80 Fed. Reg. 25821) and Feb. 19, 2016 (81 Fed. Reg. 8438). It will become effective on Dec. 31, 2016. (See related item above, in Commerce Department section.)

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DDTC’s Agreement Guidelines Revised to Reflect Changes to ITAR Section 126.1 and Address Other Clarifications

Oct. 20, 2016: DDTC posted new Revision 4.4b of the Agreement Guidelines on its website at http://www.pmddtc.state.gov/licensing/documents/AgreementGuidelinesRev44b.pdf[OG5] . Revision 4.4b reflects recent amendments to ITAR Secs. 126.1 (prohibitions regarding specified countries) and 123.9 (Destination Control Statement) and makes many other conforming and clarifying changes, including changes in provisions required in Manufacturing License Agreements and Technical Assistance Agreements. It also includes separate summaries of the changes made in Revisions 4.4, 4.4a, and 4.4b.

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No More Paper CJ Submissions After November 16, 2016

Oct. 25, 2016: DDTC announced that after Nov. 16, 2016, it will no longer accept Commodity Jurisdiction (CJ) applications on Form DS-4076 using the Electronic Form Submission (EFS) application. Effective Nov. 21, 2016, CJ applications will be required to be submitted via the Defense Export Control and Compliance (DECCS) CJ application.

Department of the Treasury

OFAC Issues Updated FAQs related to Iran Sanctions

Oct. 7, 2016: OFAC updated its FAQs relating to the sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA). The updated FAQS are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf[OG6] .

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OFAC Lifts Sanctions on Burma

Oct. 12, 2016: OFAC terminated its economic and financial sanctions against Burma. However, exports of military items remain under a policy of denial under ITAR Sec. 126.1(a), and export requirements under the EAR also remain unchanged. A fact sheet on the OFAC action is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/burma_fact_sheet_20161007.pdf[OG7] .

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OFAC Revises Cuban Sanctions in Parallel with BIS Revisions

Oct.17, 2016 – 81 Fed. Reg. 71372: OFAC amended the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) to further expand opportunities for interaction with Cuba under existing statutory restrictions. Changes include authorizations to engage in joint medical research projects, to provide services related to developing and enhancing certain Cuban infrastructure, and to provide civil safety-related services, as well as some related modifications of banking rules. OFAC also added a new general license (CACR Sec. 515.534) authorizing U.S. persons to enter into contingent contracts for transactions currently prohibited by the CACR, if performance is made contingent on receipt of any required authorizations. Updated OFAC Cuba FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf[OG8] ; a fact sheet detailing the updated and current amendments to Cuba sanctions is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_10142016.pdf[OG9] . The amendments were effective upon publication. (See description of coordinated EAR amendments in Commerce Department 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 email info@fdassociates.net.

Sanctions

Department of Commerce

Oct. 6, 2016 – 81 Fed. Reg. 69510: BIS denied the export privileges of Russell Henderson Marshall of North Loxahachee, FL, currently an inmate at McCrae Correctional Institution, McCrae Helena, GA, for 10 years based on his conviction of violating the IEEPA and a Commerce Department denial order by engaging in negotiations involving the export of airplane parts to Thailand and Pakistan. In the criminal case Marshall was sentenced to 41 months of imprisonment, 2 years of supervised release, and a $200 assessment and was ordered to surrender to U.S. Immigration and Customs Enforcement for removal from the U.S. upon completion of incarceration.

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Oct. 26, 2016 – 81 Fed. Reg. 74392: BIS denied the export privileges of Junaid Peerani of Plantation, FL, for 5 years, based on his conviction of violating the IEEPA by knowingly and willfully attempting to export and causing to be exported from the U.S. to Turkey two Inertial Navigation Unit LTN-72s without the required authorization from the Commerce Department.

Fines and Penalties

Sep. 28, 2016: Westlake Vinyls Company LP of Houston, TX, agreed to pay $12,000 to settle charges by BIS of one violation involving furnishing information about business relationships with boycotted countries or blacklisted persons and 3 violations involving failure to report the receipt of a boycott request.

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Sep. 29, 2016: Coty Middle East FZCO (UAE) of Dubai, United Arab Emirates (UAE) agreed to pay $238,000 to settle charges by BIS of violating the EAR on 70 occasions by furnishing information about business relationships with boycotted countries or blacklisted persons. The violations occurred in transactions involving exports from the U.S. to Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia, the UAE, and Yemen.

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Oct. 5, 2016: Marc Turi and Turi Defense Group of Las Vegas, NV, agreed to pay $200,000 (suspended for the 4-year term of the consent agreement) to settle charges by DDTC of unauthorized brokering and proposing to sell and transfer defense articles via Qatar to Libya, a prohibited destination. The respondents were not administratively barred, but agreed to refrain from activities subject to ITAR control for the 4-year period of the consent agreement. The unauthorized activities occurred after DDTC had denied Turi DG’s prior application; however, Turi cooperated with DTCC in its review, and the defense articles were not actually shipped to Libya. DOJ dropped a related criminal case in light of the resolution of the administrative case.

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Oct. 5, 2016: Six U.S. Army soldiers at Fort Campbell, KY, and two civilians, John Roberts and Cory Wilson, a/k/a Jason Cory Wilson, both of Clarksville, TN, were indicted in federal court in Nashville, TN on charges involving the theft from the U.S. Army installation in Fort Campbell of property including night vision helmet mounts, grenade launcher sights, flight helmets, communication headsets, body armor and medical supplies valued at more than $1 million and the resale of the property on eBay to customers located in foreign nations including Russia, China, Hong Kong, Kazakhstan, Ukraine, Lithuania, Moldova, Malaysia, Romania and Mexico. The charges against the 8 defendants included violating the AECA and other offenses including conspiring to steal or receive U.S. Army property and to sell or convey U.S. Army property without authority, wire fraud, money laundering, and selling or conveying U.S. Army property without authority.

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Oct. 6, 2016: Alexey Barysheff of Brooklyn, NY, a naturalized U.S. citizen, was arrested in Brooklyn and two Russian nationals, Dmitrii Aleksandrovich Karpenko and Alexey Krutilin, were arrested in Denver, CO, on charges of conspiracy to transship export-controlled microelectronics including digital-to-analog converters and integrated circuits through Finland to Russia without the required Commerce Department authorizations. Barysheff, Karpenko, and Krutilin allegedly used U.S.-based front companies to induce suppliers to sell them the controlled items, concealing the fact that the items were intended for export, and provided false classifications and destinations on shipping documents.

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Oct. 14 and 31, 2016: Ali Al Herz of Cedar Rapids, IA, was sentenced in federal court in Cedar Rapids to 27 years in prison followed by 3 years of supervised release after prison and a $150,000 fine for violations of the AECA and other laws involving exports of 252 firearms, parts, and more than 6,800 rounds of ammunition to Lebanon without the required State Department authorization. Al Herz’ son Adam Al Herz was sentenced to 20 years in prison; another son, Bassem Herz, still awaits sentencing; and Bassem’s wife, Sarah Zeaiter, was sentenced to 7 years in prison for their roles in the criminal enterprise. The unlicensed items were concealed within Bobcat construction equipment and other items in shipping containers. (See additional information in March 2016 Regulatory Update.)

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Oct. 26, 2016: Ahmad Feras Diri of London, United Kingdom, was sentenced in federal court in Scranton, PA, to 37 months in prison and a $100 special assessment and ordered to forfeit $45,698 and Harold Rinko of Hallstead, PA, was sentenced to time served, 12 months of home confinement, supervised release of 2 years, and a fine of $2,600 and ordered to forfeit $45,698 based on their convictions of conspiring to export to Syria items including a scanner for the detection of chemical warfare agents without the required authorization from the Commerce Department. A third defendant, Maowea Deri, a citizen of Syria, remains at large. Ahmad Diri was arrested in London on March 14, 2013, and extradited to the U.S. on November 12, 2015; Rinko pleaded guilty in September 2014. (See additional information on this case in November 2015 Regulatory Update.)

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Oct. 26, 2016: Zavik Zargarian of Glendale, CA, and Vache Nayirian of Lakeview Terrace, CA, were arrested and pleaded not guilty to charges of conspiracy to violate the IEEPA and the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by exporting jet fighter aircraft parts and other items valued at more than $3 million to Iran without the required authorization. Zargarian’s company, ZNC Engineering, of Glendale, CA, and two Iranian nationals believed to be in Iran were also named in the indictment. On behalf of the conspiracy, Zargarian allegedly negotiated with an undercover Homeland Security Investigations (HSI) agent who posed as an aircraft parts supplier. On behalf of the conspiracy, Nayirian allegedly exported the items to Kuwait and the UAE for subsequent transfer to Iran, undervaluing them and falsifying their ultimate destination on the shipping documents.

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Oct. 27, 2016: Mansour Moghtaderi Zadeh, an Iranian national, pleaded guilty in federal court in Washington, DC, to conspiracy to defraud the U.S. and to unlawfully export goods, technology and services to Iran without the required authorization. According to documents filed with the guilty plea, beginning in 2005, Zadeh and his company, Barsan Aero Chemicals Ltd., procured products to be exported to Iran without the required authorization from OFAC. In March 2007, Zadeh (using an alias) and unnamed co-conspirators, working through a new company, Lavantia Ltd., attempted to export metal sheets and rods used in manufacturing aircraft to Iran without authorization from OFAC. BIS issued a Temporary Denial Order (TDO) against Zadeh (under his alias) and Lavantia in October 2007; however, Zadeh and his co-conspirators subsequently exported and attempted to export various materials valued at more than $69,000.

OCTOBER 2016 EXPORT CONTROL REGULATION UPDATES Read More »