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JUNE 2016 EXPORT CONTROL REGULATION UPDATES

June 2016

This newsletter is a listing of the latest changes in export control regulations through June 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 Publishes Interim Final Rule with EAR Definitions Conformed to ITAR Definitions

June 3, 2016 – 81 Fed. Reg. 35586:  The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding definitions of "access information," "technology," "required," "foreign person," "proscribed person," "published," results of "fundamental research," "export," "reexport," "release," "transfer," and "transfer (in-country)."  Other amendments made in the same action included updating and clarifying the application of controls to electronically transmitted and stored technology and software, including cloud computing.  Transfers of encrypted EAR-controlled technical data will not be considered an export or reexportas long as the data has been encrypted to specified standards before crossing any national boundary and remains encrypted at all times while in transmission.  A similar rule applies to transmissions within a cloud service infrastructure.  These new provisions are part of a larger effort to enhance clarity and consistency with terms that are also used in the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130).  (See item about new ITAR amendments below.)  The effective date of these amendments is Sep. 1, 2016; BIS will welcome comments on a continuing basis.  To learn more about the revised definitions under the EAR, attend one of our upcoming FD Associates export compliance workshops.

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BIS Amends EAR to Change Three ECCNs Related to Chemical Weapon Convention Agreements

June 7, 2016 – 81 Fed. Reg. 36458:  BIS amended the EAR to reflect changes in Export Control Classification Numbers (ECCNs) 1C350, 1C351, and 2B352 that were adopted by the Australia Group during 2015.  Also, BIS amended the EAR and the Chemical Weapons Convention Regulations (CWCR) to reflect the addition of Angola and Burma as states party to the Chemical Weapons Convention.

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BIS Proposes the Removal of Special Iraq Reconstruction License Under the EAR

June 7, 2016 – 81 Fed. Reg. 36481:  BIS proposed amending the EAR to remove the Special Iraq Reconstruction License (SIRL) on the basis that this license is outdated and no longer required, as exporters now have more efficient options for exports and reexports to Iraq and in-country transfers in Iraq.  Comments are due by July 7, 2016.

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36 Parties Added to the EAR’s Unverified List (UVL); License Exceptions Not Permitted to Any Party on the UVL

June 21, 2016 – 81 Fed. Reg. 40169:  BIS added 36 persons in Finland, Hong Kong, India, Latvia, Singapore, Switzerland, and the United Arab Emirates (UAE) to the Unverified List (UVL, Supplement No. 6 to EAR Part 744) on the basis that BIS could not verify their bona fides through an end-use check.  License exceptions may not be used for exports to a party on the UVL, and persons exporting items that do not require an export license to a party on the UVL must first obtain a UVL statement from the listed party. To view the UVL, go to:  http://www.bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern/unverified-list.

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BIS Adds Parties to the Entity List; Such Persons Are Prohibited from Receiving Exports from the US or Otherwise Participating in Export Transactions Involving US-Origin Items

June 21, 2016 – 81 Fed. Reg. 40174:  BIS added 28 persons in Afghanistan, Austria, China, Hong Kong, Iran, Israel, Panama, Taiwan and the UAE to the Entity List (Supplement No. 4 to EAR Part 744).  Twenty of these entities were involved in unlawfully transshipping U.S.-origin parts and components to Iran, and the other 8 were involved in procuring and/or retransferring U.S.-origin items to Israel and Iran without the proper authorization.  For all these entities, BIS imposed a license requirement for all items subject to the EAR and a license review policy of presumption of denial.  In addition, no license exceptions will be available for exports or other transfers to or within these countries.  Three entities in Finland, Pakistan, and Turkey were also removed from the Entity List.  To view the Entity List, go to:  http://www.bis.doc.gov/index.php/policy-guidance/lists-of-parties-of-concern/entity-list.

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BIS Issues Revised Guidance with regard to Charging and Penalty Determinations in Administrative Enforcement Cases

June 22, 2016 – 81 Fed. Reg. 40499:  BIS amended the EAR by rewriting its Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases (Supplement No. 1 to EAR Part 766) to make administrative penalties for violations of the EAR more predictable and to align them with the penalties imposed by the Treasury Department Office of Foreign Assets Control (OFAC).  The base penalty will now depend upon whether the violation is egregious or non-egregious and whether or not the case resulted from a Voluntary Self-Disclosure (VSD), according a 50 percent mitigation for VSDs.  The penalty will then be adjusted based on specified aggravating, general, mitigating, and other factors.  These new guidelines will not apply to cases brought under the antiboycott provisions of the EAR.  While there is no data related to how the new guidance will be interpreted and used by BIS’s Office of Export Enforcement (“OEE”), the guidance establishes an actual system for OEE to use to render fines, rather than the existing system which is amorphous and without underlying principles.  As a result, we can foresee a scenario where more fines are issued by BIS.

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BIS Amends PRC Validated End-User (VEU) Authorization List

June 23, 2016 – 81 Fed. Reg. 40783:  BIS amended the Validated End-User Authorization (VEU) list for People’s Republic of China (Supplement No. 7 to EAR Part 748) by revising details in the listing for VEU Advanced Micro Devices, Inc.

DEPARTMENT OF STATE

DDTC Posts Name and Address Changes to Website

June 1, 7, 27, and 28, 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 for DRS Technologies Canada Ltd.;
  • Change in Name from Sterling Operations, Inc. to Janus Global Operations LLC due to corporate rebranding;
  • Change in Address for General Dynamics Installation Services, LLC and General Dynamics SATCOM Technologies, Inc.;
  • Change in Name from Messier-Dowty Inc. to Safran Landing Systems Canada, Inc. due to corporate rebranding;
  • Change in Name from LightSquared Corp. to Ligado Networks Corp. due to corporate rebranding;
  • Change in Name from SkyTerra (Canada) Inc. to Ligado Networks (Canada) Inc. due to corporate rebranding; and
  • Change in Name from Labinal de Mexico S.A. de C.V. to Safran Electrical & Power Mexico S.A. de C.V. 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 Publishes Interim Final Rule with A Small Number of ITAR Definitions Conformed to EAR Definitions

June 3, 2016 – 81 Fed. Reg. 35611:  As part of the continuing effort to harmonize provisions of the ITAR with those in the EAR, DDTC published an interim final rule providing a few revised definitions of terms.  In particular, the terms "export," "reexport," "release," and "retransfer" have received revised definitions under the ITAR in the interim final rule.  This rule also expands the personal use exemption for temporary transfers of technology and deemed reexports.  DDTC anticipates publishing provisions pertaining to cloud computing and the definitions of "technical data," "directly related," "public domain," and the results of "fundamental research" in a separate proposed rule.  The effective date of this amendment is Sep. 1, 2016; the deadline for comments was July 5, 2016.  (See item about new EAR amendments above.)

To learn more about the revised definitions under the ITAR, attend one of our upcoming FD Associates export compliance workshops.

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DDTC Publishes Rule to Update the Maximum Amount for Penalties for Civil Violations of the ITAR to Adjust for Inflation

June 8, 2016 – 81 Fed. Reg. 36791:  Consistent with legislation passed by Congress in 2015, the Department of State increased the maximum civil monetary penalty (CMP) for a violation of the ITAR to account for inflation since the current CMP of $500,000 was established.  The new CMP per violation will be $1,094,010.  The new CMP will apply to all penalties imposed on or after August 1, 2016, regardless of the date on which the violations occurred.  Annual inflation adjustments will henceforth be published by January 15 of every year.  DDTC continues to have discretion to assess penalties below the CMP should circumstances warrant.  A notice about the new CMP is on the DDTC website at http://www.pmddtc.state.gov/documents/webnotice_CivilPenalty.pdf .

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DDTC Reverses Ground on Accepting Both Old and New Versions of the DSP-83 Form

June 8, 2016:  DDTC announced that it will continue to process expired DSP-83 forms, effective immediately.  In the announcement DDTC rescinded its announcement of May 5, 2016, stating that it would no longer accept expired forms.  Any provisos that directed upload of a new DSP-83 form may be disregarded by citing the revised notice.

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DDTC Requests Comments on New Form DS-7787 for Disclosing Violations of the ITAR Electronically

June 20, 2016 – 81 Fed. Reg. 39994:  DDTC requested public comments on a proposed new electronic Form DS-7787, Disclosure of Violations of the AECA.  DDTC subsequently released instructions for the new form on its website at https://www.pmddtc.state.gov/FR/2016/81FR39994-Draft-DS7787-form.pdf.   The new form is part of a larger IT modernization effort by DDTC.  Deadline for comments is August 19, 2016.**

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DDTC Requests Comments on New Form DS-7788 for All Non-Classified Hardware Exports Under the ITAR; Form Would Replace Existing DSP-5, DSP-6, DSP-61, DSP-62, DSP-73, and DSP-74 Forms and Also Be Used for Agreements and General Correspondence Requests.

June 20, 2016 – 81 Fed. Reg. 39994:  DDTC requested public comments on a proposed new electronic Form DS-7788 Application for the Permanent Export, Temporary Export, or Temporary Import of Defense Munitions, Defense Services, and Related Technical Data.  This form would supersede Forms DSP-5, DSP-6, DSP-61, DSP-62, DSP-73, and DSP-74.  DDTC believes that this electronic system will allow both industry users and DDTC staff to smoothly and securely navigate the submission and review process.  DDTC subsequently released instructions for the new form on its website at https://www.pmddtc.state.gov/FR/2016/81FR3994-Draft-DS7788-Instructions.pdf. Deadline for comments is August 19, 2016.**

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DDTC Requests Comments on New Form DS-7789 for Notifying DDTC of Material Changes in DDTC Registration Information, Mergers and Acquisitions, and Divestments

June 20, 2016 – 81 Fed. Reg. 39992:  DDTC requested public comments on a proposed new electronic Form DS-7789, Statement of Material Change, Merger, Acquisition, or Divestment of a Registered Party.  DDTC subsequently released instructions for the new form on its website at http://www.pmddtc.state.gov/FR/2016/81FR3992-Draft-DS7789-form.PDF.  Deadline for comments is August 19, 2016.**

** NOTE:  The links for the proposed new DDTC forms (DS-7787, DS-7788, and DS-7789) embedded herein may not work when clicking the hyperlinks provided.  To ensure the ability to review the form, please copy the web address into your browser and access directly on the DDTC website.

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DDTC Posts Guidance Instructing Applicants to Submit DSP-5s to D-Trade Instead of Advisory Opinion Requests When Requesting A Determination on Approval for a Proposed Export Transaction

June 22, 2016:  DDTC posted guidance regarding Advisory Opinions (“AOs”) -- ITAR Section 126.9 -- for potential export transactions.  The guidance strongly encourages applicants who are able to submit D-Trade applications to submit a technical data DSP-5 license application for the marketing of a defense article in lieu of a General Correspondence (“GC”) AO request when the request involves whether DDTC would be likely to grant a license or other approval for the export of a particular defense article or defense service to a particular country.  This guidance is on the DDTC website at http://www.pmddtc.state.gov/licensing/documents/AO.pdf.  This guidance was subsequently updated on July 8, 2016, with DDTC bolding the word, “strongly”. The benefit of filing a DSP-5 is that the DSP-5 authorizes the release technical data, the DSP-5 is a legally binding authorization, and the DSP-5 eliminated the paper handling of the GC AO request, which directly results in reduced processing time for the request.

DEPARTMENT OF THE TREASURY

OFAC Issues General Licenses for Balboa Bank & Trust and Balboa Securities Corp. in Panama Authorizing Certain Activities

June 8, 2016:  The Office of Foreign Assets Control (OFAC) published general licenses authorizing certain transactions and activities, including exports, involving Panamanian entities that would otherwise be prohibited under the Kingpin Act.  The Panamanian entities are Balboa Bank & Trust (General License 5A) and Balboa Securities Corp. (General License 6A).  The licenses and relevant FAQs are accessible on the OFAC website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160610_33.aspx.

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 22, 2016 – 81 Fed. Reg. 40654:  BIS denied the export privileges of Jose Orence Cocchiola for 3 years based on his conviction in U.S. District Court for the Southern District of Florida of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting 9mm pistols to Venezuela without the required authorization from the Department of State.  Cocchiola was sentenced to 36 months of imprisonment, one year of supervised release, and a $200 assessment.

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June 22, 2016 – 81 Fed. Reg. 40655:  BIS amended a Temporary Denial Order (TDO) that was originally signed on January 19, 2016, to remove two parties, moreJet Ltd. and Stefan Piotr Kondak.  The TDO remains in force until July 17, 2016 for the remaining parties, Ribway Airlines Company Limited, John Edward Meadows, Jeffrey John James Ashfield, and AC AVIATIE UK Limited.

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June 22, 2016 – 81 Fed. Reg. 40657:  BIS denied the export privileges of Dennis Haag for 3 years based on his conviction in U.S. District Court for the Eastern District of Michigan of violating the AECA by exporting rifle barrels and other parts to South Africa without the required authorization from the Department of State.  Haag was sentenced to 3 years of probation, a $200 assessment, and a criminal fine of $39,000.

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June 22, 2016 – 81 Fed. Reg. 40658:  BIS denied the export privileges of Ismael Reta for 10 years based on his conviction in U.S. District Court for the Southern District of Texas of violating the AECA by conspiring to export, attempting to export, and causing to be exported several rifles and pistols and 312 rounds of ammunition to Mexico without the required authorization from the Department of State.  Reta was sentenced to 37 months of imprisonment, 3 years of supervised release, and a $100 assessment.

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June 28, 2016 – 81 Fed. Reg. 41799:  BIS extended until Aug. 30, 2016 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.  (See March 2016 Regulatory Update for additional details.)

Fines and Penalties

June 2, 2016:  Fokker Services B.V. of Hoofddorp, The Netherlands agreed to pay a civil fine of $10,500,000 to settle charges by BIS of 253 violations of the EAR committed over a period of 5 years involving acting with knowledge of a violation in connection with exports or reexports to Iran of items controlled under the EAR on grounds of national security, missile technology, and anti-terrorism; acting with knowledge of a violation in connection with exports to Iranian military end users; acting contrary to the terms of a Denial Order; and exporting and reexporting items controlled on national security and anti-terrorism grounds to Sudan without the required licenses.  Fokker originally agreed to this penalty in June 2014 to settle cases brought by BIS, OFAC, and the Department of Justice.  However, a judge in Federal District Court for the District of Columbia rejected the settlement as too lenient.  The agreement was finally concluded after a higher court ruled that the judge had overstepped his authority when he rejected the settlement.  (See additional information about this case in June 2014 and February 2015 Regulatory Updates.)

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June 3, 2016:  Weiss Envirotronics, Inc. of Grand Rapids, MI agreed to pay a civil penalty of $575,000 (of which $400,000 will be suspended for 2 years and thereafter waived if the company commits no further violations) to settle charges by BIS of 20 unauthorized exports of items controlled for missile technology reasons to China.  Weiss also agreed to complete two audits of its export controls compliance program.  The items exported were environmental test chambers.

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June 10, 2016:   Wenxia Man, aka Wency Man, of San Diego, CA was convicted by a jury in federal court in the Southern District of Florida of violating the AECA by conspiring to export and causing the export of fighter jet engines, a drone, and related technical data to China without obtaining the required authorization from the State Department.  The items involved included an unmanned aerial vehicle capable of firing Hellfire missiles and engines used in the F-35 Joint Strike Fighter, the F-22 Raptor fighter jet, and the F-16 fighter jet, as well as technical data for each of these articles.

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June 14, 2016:  Amin al-Baroudi, a Syrian-born naturalized U.S. citizen formerly of Irvine, CA, was sentenced in U.S. District Court for the Eastern District of Virginia to 32 months in prison based on his plea of guilty of conspiracy to violate U.S. sanctions by exporting U.S.-origin goods to Syria without the required authorization.  According to court documents, Baroudi and his co-conspirators purchased goods including sniper rifle scopes, night vision rifle scopes, night vision goggles, laser bore sighters, speed loaders, and bullet-proof vests in the U.S., traveled with them on commercial flights to Turkey, and then transported them or provided them to others to transport to Syria for the purpose of supplying them to insurgent groups.

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June 14, 2016:  Asim Fareed of North Brunswick, NJ pleaded guilty in U.S. District Court in Wilkes-Barre, PA to conspiracy to provide false statements regarding the illegal exports of goods to Iran.  As part of a conspiracy to transship items through the United Arab Emirates (UAE) to Iran, Fareed prepared invoices which included false information as to the identity and geographic location of the purchasers of the goods. The items were then to be shipped from the U.S. to the UAE, and thereafter transshipped to customers in Iran.  None of these shipments were actually delivered to Iran.

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June 15, 2016:  Erdal Kuyumcu of Woodside, NY, the chief executive officer of Global Metallurgy LLC, a company based in Woodside, pleaded guilty in U.S. District Court in Brooklyn, NY, to violating the International Emergency Economic Powers Act (IEEPA, 50 USC Parts 1701-1708) by conspiring to export specialty metals to Iran without the required authorization from OFAC.  The product involved was a metallic powder composed of cobalt and nickel that can be used to coat gas turbine components and can be used in aerospace, missile production, and nuclear applications.  Kuyumcu and a co-conspirator arranged to hide the true destination of the powder by transshipping it through Turkey.

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June 17, 2016:  Fulfill Your Packages Inc. of Portland, OR, agreed to pay a civil fine of $250,000 (of which $190,000 was suspended for 2 years and thereafter waived if the company commits no further violations) to settle charges by BIS that it evaded the EAR in the process of preparing an export of a FLIR thermal imaging camera valued at approximately $2,617 and controlled for export under ECCN 6A003.b.4.  The export was destined for China and required an export license from BIS.  However, FYP prepared shipping documentation that falsely described the item as “metal parts” and its value as $255.  The export was thwarted by BIS’s Office of Export Enforcement.

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June 17, 2016:  Worthington Products Inc. (“WPI”) of Canton, OH and Paul Meeks of Canton, OH and Massillon, OH were both held responsible for the payment of a civil fine of $250,000 to settle charges by BIS of conspiracy to export a waterway barrier debris system designated as EAR99 and valued at $420,256 to an Iranian Government entity via the UAE, without the required authorization.  WPI and Meeks agreed to complete EAR compliance training annually for 5 years.  Both were also debarred for 5 years, but the debarment will be suspended for 5 years and thereafter waived if they fulfill the requirements of the agreement.

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June 20, 2016:  Microwave Engineering Corporation of North Andover, MA agreed to pay an administrative fine of $100,000 to settle charges by DDTC that it had violated the AECA and the ITAR by providing technical data controlled under the ITAR to a national of China without the required authorization from DDTC.  The Chinese national was a research scientist who was employee of MEC.  The U.S. maintains an embargo on military exports to China.  The unauthorized disclosures were made in 2010.  MEC voluntarily disclosed the violation and subsequently implemented extensive remedial measures.

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June 23, 2016:  HyperBranch Medical Technology, Inc. of Durham, NC agreed to pay $107,691.30 to settle charges by OFAC that it violated the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by shipping medical sealant to its UAE distributor with knowledge and reason to know that the goods were ultimately destined for Iran.  HyperBranch voluntarily disclosed the violation.

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June 30, 2016:  Kan Chen of Ningbo, Zhejiang Province, China was sentenced to 30 months in prison and 3 years of supervised release for conspiring and attempting to violate the AECA and ITAR and violating the IEEPA.  Using a complex web of intermediary addressees, Chen caused the export from the U.S. to China of many products, including rifle scopes and night vision equipment controlled for export under the ITAR.  Chen was arrested by U.S. Customs Enforcement’s Homeland Security Investigation agents on Saipan, Northern Mariana Island in June 2015 and has been in U.S. custody since that time.

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June 30, 2016:  Alexander Brazhnikov, Jr. of Mountainside, NJ was sentenced to 70 months in prison and forfeiture of $65 million based on his plea of guilty of conspiracy to commit money laundering, conspiracy to smuggle electronics from the U.S., and conspiracy to violate the IEEPA.  Through four New Jersey microelectronics export companies that he owned, Brazhnikov conspired with his father, who owned a procurement firm in Moscow, Russia, and shipped large quantities of license-controlled electronic components to Russia using many different routes and falsifying the names of the end users and values of the items.  The conspiracy utilized dozens of overseas bank accounts and foreign shell companies to conceal the proceeds of the illegal sales.  (See additional information on this case in June 2015 Regulatory Update.)

JUNE 2016 EXPORT CONTROL REGULATION UPDATES Read More »

MARCH 2016 EXPORT CONTROL REGULATION UPDATES

March 2016

This newsletter is a listing of the latest changes in export control regulations through March 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

United Nations

UN Expands Sanctions on North Korea as a Result of Nuclear Test and Rocket Launch

March 2, 2016: The United Nations Security Council expanded U.N. sanctions against North Korea in response to a nuclear test and banned rocket launch by North Korea. The new sanctions require inspection of all cargo going to and from North Korea (expanded from requiring inspection only if there were reasonable grounds to believe a shipment contained prohibited goods), broaden the ban on weapons imports and exports to include formerly excluded small arms and light weapons, ban exports to North Korea of all items that could directly contribute to the operational capabilities of the country’s armed forces, ban the supply of all types of aviation fuel to North Korea, and expand the list of banned exports of luxury items to North Korea. (See below for U.S. implementation of the expanded U.N. sanctions by actions of the President and the Treasury Department.)

The President

President Obama Signs Executive Order Pertaining to US Sanctions Against North Korea

March 18, 2016 – 81 Fed. Reg. 14943: The President issued Executive Order 13722 regarding sanctions against North Korea. Included in EO 13722 is a prohibition on the exportation from the U.S. or by a U.S. person of any goods, services, or technology to North Korea.

Department of Commerce

BIS Publishes Final Rule Requiring Reporting of Offset Agreements related to the Sale of “600 Series” Items

March 1, 2016 – 81 Fed. Reg. 10472: The Bureau of Industry and Security (BIS) announced a final rule amending 15 CFR Part 701 to require the reporting of offsets agreements in connection with sales of 600 series Export Control Classification Numbers (ECCNs) other than certain submersible and semi-submersible cargo transport vessels and related items. This final rule is unchanged from the proposed rule published on December 2, 2015 (80 Fed. Reg. 75438; see December 2015 Regulatory Update). BIS did not receive any comments on the proposed rule.

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BIS Adds ZTE and Affiliated Companies to Entity List

March 8, 2016 – 81 Fed. Reg. 12004: BIS added the following persons to the Entity List (15 CFR Part 744, Supplement No. 4):

• China:
(1) Beijing 8-Star International Co., Beijing;
(2) Zhongxing Telecommunications Equipment Corporation, Shenzen (ZTE); and
(3) ZTE Kangxun Telecommunications Ltd., Shenzhen, China (ZTE Kangzun).
• Iran:
(1) ZTE Parsian, Tehran, Iran.

For these persons, BIS specified a license requirement for all items subject to the EAR and a license review policy of presumption of denial and determined that no license exceptions will be available. This action was based on a finding, documented in the announcement, that ZTE Corporation and the listed affiliates had reexported controlled items to sanctioned countries without the required authorization and had also developed a scheme to reexport controlled U.S. items without the required authorizations by using a series of “detached” corporations that would actually be controlled by ZTE.

BIS Issues Temporary General License for Exports to ZTE and ZTE Kangzun

On March 24, 2016, as a result of cooperation by ZTE with the US Government related to exports to Iran, BIS created a Temporary General License, effective until June 30, 2016, permitting exports (essentially returning exporting to the status quo) to tZTE and ZTE Kangxun.

In effect, the general license restores the export control situation that existed prior to March 8, 2016, when ZTE and ZTE Kangxun were added to the Entity List. (See above entry for March 8, 2016.) This temporary general license, which does not apply to the other two ZTE-affiliated companies, , may be renewed by BIS at its discretion. The temporary general license takes the form of a new Supplement No 7 to EAR Part 744.

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BIS Publishes Videos and Transcripts on BIS Website of Webinars Related to (1) Encryption Export Controls and (2) Cuba, Iran, and Russian Sanctions

March 9, 2016: BIS posted links to video recordings, transcripts, and handout materials from two recent webinars: one pertaining to the February 17. 2016 webinar on the export controls on encryption items and the other related to the March 30, 2016 webinar on EAR sanctions on Cuba, Iran, and Russia. See, http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/2013-02-15-13-50-20.

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BIS Publishes FAQ Related to the Prohibition on Exports to ISIL-controlled Facilities and Territories

March 9, 2016: BIS posted a Frequently Asked Question regarding BIS’ prohibition on the shipment of items subject to the EAR to ISIL-controlled facilities or territory.. This FAQ is on the BIS website at http://www.bis.doc.gov/index.php/policy-guidance/faqs?view=category&id=166.

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BIS Amends Sections of the EAR to Facilitate Temporary Sojourns to Cuba By Vessels Carrying Cargo to Other Destinations

March 16, 2016 – 81 Fed. Reg. 13972: BIS amended several sections of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to ease some restrictions affecting exports to Cuba, including authorizing temporary sojourns in Cuba for ships carrying cargo to other destinations, authorizing exports of certain items to persons authorized by the Treasury Department to establish or maintain a physical or business presence in Cuba, and adopting a case-by-case license review policy for exports of items that would facilitate the export of items produced by the Cuban private sector. The revisions appear in EAR Sections 736.2(b)(8), 740.15(d)(6), 740.21(e), and 746.2(b)(3)(i). BIS noted that these modifications do not alter the U.S. comprehensive embargo that continues to require a license from BIS for all items subject to the EAR, unless authorized by a license exception or other specific regulatory provision. These changes were coordinated with other changes made by the Treasury Department Office of Foreign Assets Control (OFAC – see item about OFAC changes below). A joint BIS-OFAC announcement about these changes is on the BIS website at https://www.commerce.gov/news/press-releases/2016/03/commerce-and-treasury-announce-significant-amendments-cuba-sanctions. A link to updated BIS FAQs on the Cuba sanctions is at http://www.bis.doc.gov/index.php/forms-documents/doc_download/1446-bis-cuba-consolidated-faqs.

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BIS Issues FAQ Regarding Authorization Period for Exports to Cuba Under the EAR’s AGR License Exception

March 17, 2016: BIS posted a notice describing the time frames that apply to exports of agricultural commodities to Cuba under the Agricultural Commodities (AGR) license exception. The notice is on the BIS website at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations//1018.

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Various Parties Added to BIS Entity List

March 21, 2016 – 81 Fed. Reg. 14953: BIS added 44 persons from China, Germany, Hong Kong, India, Iran, Malaysia, The Netherlands, Singapore, Switzerland, and the United Arab Emirates (U.A.E.) to the Entity List. For each person, BIS imposed a license requirement for all items subject to the EAR and a license review policy of presumption of denial. Also, no license exceptions will be available for exports to these persons.

In the same announcement, BIS removed the following 5 persons from the Entity List:

• Ukraine:
(1) Ukrspetsexport, Kyiv.
• U.A.E.:
(1) Girish Purushothama, Dubai and Abu Dhabi;
(2) Ivan Desouza, a.k.a., the following one alias: Ivan D’Souza, Dubai;
(3) Zener Marine, Dubai; and
(4) Zener One Net, Dubai.

*******

BIS Publishes Comments Received on Proposed EAR Amendments Affecting ECCNs 9X610 and 9X619

March 29, 2016: BIS posted the responses it received to its request of Feb. 9, 2016 (81 Fed. Reg. 6791) for public comments on its proposed amendments affecting ECCNs 9A610, 9A619, 9C610, 9C619, and 9E619. (See background in February 2016 Regulatory Update.) A link to the public comments is on the BIS website at http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents.

Department of State

Name Changes Published to DDTC Website

March 8, 17, 21, and 24, 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:

• Alion Science and Technology (Canada) Corporation (Alion) Address Change;
• Triumph Actuation Systems - UK, Ltd. Address Change;
• Change in Name from Bruckner Polska Spolka Z Organiczona Odpowiedzialnoscia to WESCO Integrated Supply Polska Spolka Z Organiczona Odpowiedzialnoscia due to acquisition of Bruckner Polska Spolka by WESCO Integrated;
• Change in Name from GE Intelligent Platforms Holdings Limited to Abaco Systems Limited due to corporate divesture;
• Change in Name from GE Intelligent Platforms Technology Corp. to Abaco Systems Technology Corp. due to corporate divesture;
• Change in Name from BAE Systems plc-Turkey to BAE Systems (International) Limited-Turkey due to corporate reorganization;
• Change in Name from BAE Systems Land Systems South Africa (Pty) Ltd to Denel Vehicle Systems (Pty) Ltd due to acquisition of BAE Systems Land Systems by Denel Vehicle Systems;
• Change in Name from GE Intelligent Platforms Embedded Systems, Inc. Name Change to Abaco Systems, Inc. due to corporate divesture;
• Change in Name from Heat Treatment Australia to HTA Aerospace and Defense Pty Ltd due to corporate reorganization; and
• Change in Name from Crane Process Flow Technologies (India) Limited Name Change to Crane Process Flow Technologies (India) Private Limited 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 Publishes Comments Received in Relation to New Agreement Guidelines

March 16, 2016: DDTC posted a response to the industry comments it received following publication of Draft 4.3 of the Agreement Guidelines on January 6, 2016 (see January 2016 Regulatory Update). The DDTC response is on its website at http://pmddtc.state.gov/licensing/documents/IndustryComments%20_Agreement%20Guidelines%204.3.pdf.

*******

DDTC Publishes New Agreement Guidelines

March 28, 2016: DDTC posted new Revision 4.3 of its Guidelines for Preparing Agreements on its website at http://pmddtc.state.gov/licensing/documents/AG_Rev%204.3.pdf.

*******
DDTC Publishes Comments on Proposed Further Revisions to USML Categories VIII and XIX

March 28, 2016: DDTC published the comments it received in response to its request of Feb. 9, 2016 (81 Fed. Reg. 6797), for public comments on its proposed amendments to USML Categories VIII (aircraft and related articles) and XIX (gas turbine engines and associated equipment). (See background in February 2016 Regulatory Update.) The comments are on the DDTC website at http://www.pmddtc.state.gov/regulations_laws/documents/proposed_rules/CategoryVIIIandXIX_Comments.pdf.

Department of the Treasury

OFAC Amends the Cuban Asset Control Regulations In Parallel with BIS to Permit Certain Travel-Related Activities

March 16, 2016 – 81 Fed. Reg. 13989: In an action coordinated with BIS (see item about BIS actions above), OFAC amended the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) to further facilitate travel to Cuba for authorized purposes, expand the range of authorized financial transactions, and authorize additional business and personal presence in Cuba. At the same time, OFAC published new and updated FAQs (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf) and a fact sheet summarizing the changes (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_03152016.pdf).

*******

OFAC Publishes General License 1 for Certain Limited Activities Involving Exports to Iran of Commercial Passenger Aircraft

March 24, 2016: OFAC issued General License 1 under the Iranian Transactions and Sanctions Regulations (31 CFR Part 560) authorizing some activities in connection with implementation of the Statement of Licensing Policy that OFAC had issued in January 2016 regarding activities relating to exports to Iran of commercial passenger aircraft. General License 1 is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_gli.pdf. OFAC also published 4 FAQs (J.9 – J.12) about General License 1 at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf.

This section of our newsletter provides information on the latest sanctions, fines and penalties for export
violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement
agencies. It is provided as a service to exporters and associates of FD Associates to remind them of the
importance of extreme due diligence in all international trade and export compliance matters,
particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your
company! Call us with questions or concerns at 703-847-5801 or email info@fdassociates.net.

Sanctions

Department of Commerce

March 9, 2016 – 81 Fed. Reg. 12459: BIS amended the Temporary Denial Order (TDO) against Ribway Airlines Company et al. (January 26, 2016 -- 81 Fed. Reg. 4251) to add the following parties:

• moreJet Ltd., Bournemouth and Hampshire, United Kingdom;
• Stefan Piotr Kondak, a/k/a Stefan Peter Kondak, Bournemouth and Hampshire, United Kingdom; and
• AC AVIATIE UK Limited, f/k/a Bin Vali Aviation Limited, East Sussex, United Kingdom.

In the same action, BIS removed the following parties from this TDO:

• AF-Aviation Limited, Wolverhampton, United Kingdom and
• Andy Farmer, Wolverhampton, United Kingdom.

*******
March 25, 2016 – 81 Fed. Reg. 16137: BIS denied for 10 years the export privileges of Nutveena Sirirojnananont of Portsmouth, NH, based on her conviction for violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully causing the export from the U.S. to Thailand of firearms controlled under the USML without the required authorization from the Department of State. Sirirojnanont was sentenced in federal court in New Hampshire to 10 months of imprisonment, one year of supervised release, and a $600 assessment.

Department of the Treasury

March 16, 2016: OFAC determined that North Korea sanctions under the President’s E.O. 13722 (see item above) would apply to persons operating in the transportation, mining, energy, and financial services industries in North Korea and issued 9 new general licenses authorizing certain activities involving North Korea. Links to the general licenses and updated FAQs are on Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/nkorea.aspx#gl .

Fines and Penalties

March 2, 2016: Louis Brothers of Covington, KY was sentenced to 93 months in prison and fined $1.1 million in Federal District Court for the Eastern District of Kentucky based on his conviction of conspiracy and aiding and abetting the illegal export of defense articles and conspiracy to launder funds. In a guilty plea, Brothers admitted that he had exported microcircuits to the Peoples Republic of China without the required authorization by labeling the shipments as “computer parts.”

*******
March 10 and 24, 2016: Ali Afif Al Herz, his sons Adam Ben Ali Al Herz and Bassem Al Herz, and his daughter-in-law Sara Zeaiter, all of Cedar Rapids, IA, pleaded guilty in federal court in Cedar Rapids to violating the AECA and other laws in a scheme to export firearms, parts, and ammunition to Lebanon without the required authorization from the State Department. The unlicensed items were shipped illegally in three shipments, concealed in clothing drive items, skid loaders, and Bobcat construction equipment. Federal agents intercepted two of the three shipments.

*******
March 14, 2016: Chemical Partners Europe S.A. of Brussels, Belgium agreed to pay a civil fine of $350,000 to settle charges by BIS that it had acted with the intent to evade the EAR by exporting coatings, pigments, and paints, including goods suitable for use in nuclear facilities or in marine applications, from the U.S. to Iran via Belgium. CPE allegedly concealed the ultimate destination when it purchased the goods, did not obtain the required authorization from OFAC, and falsely listed CPE as the ultimate consignee and Belgium as the country of ultimate destination on the Shipper’s Export Declarations filed for the shipments.

*******
March 15, 2016: Amir Abbas Tamimi, an Iranian citizen resident in Iran, was turned over to Iranian law enforcement authorities in Tehran, Iran, following his release from federal prison in Philipsburg, PA. In November, 2013 Tamimi pleaded guilty to violating the International Emergency Economic Powers Act (IEEPA, 50 USC Secs. 1701-1707) by participating in a scheme to export sensitive components of a helicopter that could be used for military purposes to Iran.

*******
March 23, 2016: Su Bin, a/k/a Stephen Su and Stephen Subin, a citizen and resident of China, pleaded guilty in federal court in Los Angeles, CA to conspiracy to violate the AECA and other laws by hacking into the computer networks of major U.S. defense contractors, stealing sensitive military and export-controlled data, and exporting the stolen data to China. Su’s guilty plea identified the Boeing Company in Orange County, California as a target of the conspiracy. Su allegedly told his co-conspirators what persons, companies, and technologies to target; identified the files and folders that should be stolen after the co-conspirators had gained access to the target computers; and then translated the stolen data from English into Chinese. Su was initially arrested in Canada on a warrant related to this case in July 2014. He waived extradition and agreed to be moved to the U.S. in February 2016.

*******
March 29, 2016: Gilbert Elian, a Lebanese national and naturalized U.S. citizen resident in Grand Rapids, MI, pleaded guilty in federal court in Grand Rapids of conspiracy to violate the AECA. U.S. Customs and Border Protection officers allegedly found 20 disassembled handguns inside an engine and transmission that were being shipped to Beirut, Lebanon by Elian. Elian purchased 93 handguns over a two-year period and told investigators he brought 65 of them to Lebanon. Elian claimed that he did not know the guns required an export license and stated that the guns had been properly checked in with airport security.

MARCH 2016 EXPORT CONTROL REGULATION UPDATES Read More »

APRIL 2016 EXPORT CONTROL REGULATION UPDATES

April 2016

This newsletter is a listing of the latest changes in export control regulations through April 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

“600 Series” Items Must Be Included in Offset Agreement Reports

March 1, 2016 – 81 Fed. Reg. 10472: The Bureau of Industry and Security (BIS) adopted without change its proposed rule from December 2015 to include the sale of EAR-controlled “600 series” items to the requirement to report offsets agreements exceeding $5,000,000 in value in connection with sales of defense articles and defense services to a foreign country or foreign firm.  Certain items controlled under ECCNs 8X620.b are excluded from this reporting requirement.  (See description of this proposal in December 2015 Regulatory Update.)

*******

MTCR-related Amendments to the EAR

April 4, 2016 – 81 Fed. Reg. 19026:  BISamended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to reflect changes in the Missile Technology Control Regime (MTCR) Annex that were agreed to by MTCR member countries in meetings in April and October 2015.  The rule revised Export Control Classification Numbers (ECCNs) 1B101, 1C111, 7A116, 9A102, 9A610, and 9B106; amended EAR Sec. 742.5 to change the licensing policy for MT-controlled items to include certain minimum software and technology; added a paragraph to EAR Sec. 750.7(c)(1) specifying which changes to a license are considered “non-material;” and made additional conforming changes.

*******

BIS Publishes Comments Received in Response to Round 2 of Category XII ECR Revisions

April 6, 2016:  BIS posted the public comments it received on its revised proposed changes to the Commerce Control List (CCL, EAR Part 774, Supplement No. 1) for proposed ECCNs 7A611, 7B611, 7D611, 7E611 and related ECCNs 6A002 and 6A003, corresponding to the changes proposed by the State Department Directorate of Defense Trade Controls (DDTC) in Category XII of the U.S. Munitions List (USML, 22 CFR Part 121).  (See description of these proposals in February 2016 Regulatory Update, and see below for related State Department action.)  A link to the comments is on the BIS website at http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents[OG1] .

*******

EAR-related Offset Agreement Report Deadline is June 15, 2016

April 8, 2016 – 81 Fed. Reg. 20618:  BIS published a notice reminding the public that the deadline for filing the 2015 annual report on offsets agreements is June 15, 2016.  (See item above for details about this requirement.)

DEPARTMENT OF STATE

DDTC Posts Company Name and Address Changes for April 2016 to Website

April 4, 8, 12, 14, 22, 25, 26, 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[OG2] :

  • Change in Name from LightSquared Corp. to Ligado Networks Corp. due to corporate rebranding after LightSquared Bankruptcy filing;
  • Change in Name from New LightSquared LLC to Ligado Networks LLC due to corporate rebranding after New LightSquared Bankruptcy filing;
  • Change in Name for LightSquared acquisition SkyTerra (Canada) Inc. to Ligado Networks (Canada) Inc. due to corporate rebranding after LightSquared Bankruptcy filing;
  • Change in Name from Saab AB (publ.), Electronic Defence Systems to Saab AB (publ.), Surveillance due to corporate rebranding;
  • Change in Name from Airbus India Operations Private Limited to Airbus Group India Private Limited due to corporate rebranding;
  • Change in Name from Asahi Kasei Chemicals to Asahi Kasei Chemicals Corporation due to corporate rebranding;
  • Kent Periscopes Limited Address Change;
  • Change in Name for Mitsubishi Heavy Industries (MHI) subsidiary Ryoin Company, Ltd. to Diamond Office Service Co., Ltd. due to MHI and Fuji Xerox Co. Ltd. partnership;
  • G & B Packing Company, Inc. Address Change; and
  • Interglobal Forwarding Services, Inc. Address Change.

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 Publishes Comments Received in Response to Round 2 of Category XII ECR Revisions

April 6, 2015:  DDTC posted the public comments it received on its revised proposed changes in USML Category XII (Fire control, laser, imaging, and guidance and control equipment).  (See description of these proposals in February 2016 Regulatory Update, and see above for related Commerce Department action.)   The 176 pages of comments are on the DDTC website at www.pmddtc.state.gov/regulations_laws/documents/proposed_rules/CatXIIComments2ndProposed.pdf[OG3] .

*******

DDTC Publishes Webinar on IT Modernization Efforts on DDTC Website

April 6, 2016:  DDTC posted on its website the webinar it presented on March 25, 2016 on DDTC’s IT modernization.  The webinar can be viewed at https://irmedip.adobeconnect.com/p6de821tdhs/[OG4] .  The transcript of the webinar is at www.pmddtc.state.gov/licensing/documents/TransWeb-3.25.16.pdf[OG5] .

DEPARTMENT OF THE TREASURY

Treasury Publishes Quarterly List of Boycott Supporting Countries

April 8, 2016 – 81 Fed. Reg. 20720:  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.

*******

OFAC Publishes Additional FAQs Pertaining to Cuba Regulations

April 21, 2016:  The Office of Foreign Assets Control (OFAC) added 8 FAQs to its Frequently Asked Questions Regarding Cuba.  The Cuba FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf[OG6] .

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 18, 2016 – 81 Fed. Reg. 22575:  BIS denied the export privileges of Paweena Pechner and CheapShop4You LLC, both of Portsmouth, NH, until July 17, 2024, based on Pechner’s conviction of

violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting firearms controlled under the USML to Thailand without the required authorization from DDTC.  In the criminal case Pechner was sentenced to probation for 2 years, assessed a penalty of $600, and fined $3,000.  CheapShop4You, a personal shopping company located at Pechner’s residence that Pechner used to process both legal and illegal exports, was added to the denial order as a related party.

*******

April 18, 2016 – 81 Fed. Reg. 22576:  BIS denied the export privileges of Alexandre Astakhov of Lewisburg, PA, until May 7, 2025, based on his conviction of violating the AECA by attempting to export, and aiding and abetting the attempted export of two L-3 CNVD-T thermal clip-on night vision devices controlled under the ITAR to Russia without the required authorization from DDTC.  In the criminal case, Astakhov was sentenced to 39 months of imprisonment, 3 years of supervised release, 150 hours of community service, an assessment of $200, and a fine of $2,500.

Fines and Penalties

April 4, 2016:  The U.S. Department of Justice announced that Lim Yong Nam, a/k/a Steven Lim, a citizen of Singapore, had been extradited from Indonesia to the U.S. to stand trial for his role in a conspiracy that allegedly involved illegal exports of thousands of radio frequency modules to Iran, claiming that their final destination was Singapore.  Sixteen of the modules were allegedly found in unexploded improvised explosive devices (IEDs) that were used against coalition forces in Iraq.  Nam was indicted on June 23, 2010, and had been detained in Indonesia since 2014 in connection with a U.S. request for extradition.  He will stand trial in Washington, D.C.

*******

April 13, 2016:  David L. Maricola of Southbridge, MA, pleaded guilty in U.S. District Court in Worcester, MA to charges involving unauthorized shipments of hundreds of assault rifle and firearm components controlled under the USML to 22 countries including France, Finland, Indonesia, New Zealand, Thailand, Spain, Australia, and Germany.  The illegal exports included parts for M16, M4, and AR-15 assault rifles, Glock pistols, and Uzi submachine guns.

*******

April 13, 2016:  Fuyi Sun, a/k/a “Frank,” a citizen of the People’s Republic of China (China), was arrested in New York, NY, after traveling to New York from China, allegedly to finalize a deal to procure high-grade carbon fiber having many aerospace and defense applications.  The high-grade carbon fiber was to be exported without the required authorization to China for a user he identified as the Chinese military.  The suppliers with whom Sun negotiated the purchase were actually Department of Homeland Security undercover agents.  Sun was charged with attempting to violate and conspiring to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Secs. 1701-1707).

*******

April 14, 2016:  Hannah Robert of North Brunswick, NJ, was sentenced in New Jersey federal district court to 57 months in prison based on her plea of guilty of conspiracy to violate the AECA by exporting military technical drawings of parts used in the torpedo systems for nuclear submarines, military attack helicopters, and F-15 fighter aircraft to India and the United Arab Emirates (UAE) without the required approval of the U.S. Department of State.  Robert transmitted the military drawings by posting them to

the password-protected website of a Camden County, New Jersey, church where she was a volunteer web administrator.

*******

April 21, 2016: Amin Yu of Orlando, FL, was indicted on charges including failure to file Electronic Export Information (EEI) arising from her alleged participation in a conspiracy to illegally export systems and components for marine submersible vehicles to China.  The illegally exported items were intended for use by Chinese co-conspirators in the development of unmanned underwater vehicles, remotely operated vehicles, and autonomous underwater vehicles for Chinese state-owned entities.  Yu allegedly failed to file required EEI and also filed false EEI in which she significantly undervalued the exported items and provided false end-user information.  The indictment included notification that the U.S. intends to require Yu to forfeit approximately $2.7 million, the alleged traceable proceeds of the offenses.

APRIL 2016 EXPORT CONTROL REGULATION UPDATES Read More »

FEBRUARY 2016 EXPORT CONTROL REGULATION UPDATES

February 2016

This newsletter is a listing of the latest changes in export control regulations through February 29, 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 Proposes Clarifying Amendments to the ECCNs Regulating Military Aircraft and Military Aircraft Engines Not Subject to the ITAR

Feb. 9, 2016 – 81 Fed. Reg. 6791:  The Bureau of Industry and Security (BIS) proposed to amend the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by revising certain items in the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) covering military aircraft and related items and military gas turbine engines and related items. The new proposed amendments affect Export Control Classification Numbers (ECCNs) 9A610, 9A619, 9C610, 9C619, and 9E619.  The items covered by these ECCNs were transferred from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the CCL effective Oct. 15, 2013, as part of the first group of transfers from the USML to the CCL made under the President’s Export Control Reform Initiative (ECRI).  The new changes are intended to ensure that the revisions are clear, do not inadvertently control items in normal commercial use, account for technological developments, and properly implement the national security and foreign policy objectives of the ECRI.  Deadline for comments is March 25, 2016.  (See related proposed amendment in Department of State section below.) 

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BIS Issues Second Proposed Rule for the Transfer of Certain USML Category XII Items to the EAR per Export Control Reform (“ECR”)

Feb. 19, 2016 – 81 Fed. Reg. 8421:  BIS issued a new version of the proposed rule published May 5, 2015 (80 Fed. Reg. 25798), describing how certain fire control, laser, imaging, and guidance and control equipment that no longer requires control under Category XII of the USML would be controlled under the CCL.  The many changes proposed in this rule include revising ECCN 7A611 and adding new ECCNs 7B611, 7D611, and 7E611.  Also, for certain dual-use infrared detection items, the rule would expand controls for certain software and technology, eliminate the use of some license exceptions, revise licensing policy, and expand license requirements for certain transactions that involve foreign military commodities or military end users. The proposal would also harmonize provisions in the EAR by revising controls related to certain quartz rate sensors and uncooled thermal imaging cameras.  BIS particularly requests comments identifying any purely commercial items that would be caught by this proposal.  Deadline for comments is April 4, 2016.  (See related proposed amendment in Department of State section below.) 

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BIS Entity List Updates

Feb. 23, 2016 – 81 Fed. Reg. 8825:  BIS amended the Entity List (EAR Part 744, Supp. No. 4) by adding 8 persons, removing 9 persons, and making several corrections and conforming changes.  For the persons added to the list, a license will be required for all items subject to the EAR, the license review policy will be a presumption of denial, and no license exceptions will be available.  The persons added to the list, all from the United Arab Emirates (UAE), are:

(1) Dow Technology, Dubai;

(2) Euro Vision Technology LLC, Dubai;

(3) FWS Trading FZE, Ajman and Dubai:

(4) Hamed Kianynejad, Ajman and Dubai:

(5) Hassan Dow, Dubai;

(6) Mojtaba Alikhani, Ajman and Dubai;

(7) Noun Nasreddine, a.k.a. N.A. Nasreddine, Dubai; and

(8) Rainbow General Trading Company, Dubai.

The following persons were removed from the Entity List based on a review of the removal requests that they had submitted:

Ireland

(1) Agneet Sky Limited, Dublin

United Arab Emirates

(1) Aeolus FZE, a.k.a. Aeolus Air Group, Sharjah;

(2) Aerospace Company FZE, a.k.a. Aerospace Consortium, Fujairah;

(3) Aircon Beibars FZE, Sharjah;

(4) Indira Mirchandani, Dubai;

(5) Jaideep Mirchandani, a.k.a. Jaidip Mirchandani, Dubai;

(6) Nitin Mirchandani, a.k.a. Nithin Merchandani, Dubai;

(7) Group Sky One, a.k.a. Sky One FZE, Sharjah; and

(8) Veteran Avia LLC, a.k.a. Veteran Airline, Sharjah. (Addresses for this person under Armenia, Greece, India, Pakistan, and U.K. were also revised to reflect the removal of the Sharjah location).

In addition, corrections and conforming changes were made to 6 existing Entity List entries.

Department of State

DDTC Posts Name Changes to Its Website

February 2, 10, 11, 23, 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 Statoil Fuel & Retail Lubricants Poland Sp. z o.o. to FUCHS OIL CORPORATION (PL) Sp z o.o due to acquisition by Fuchs Oil of Statoil Fuel & Retail Lubricants;
  • Change in Name from Raytheon Cyber Products, LLC to Forcepoint Federal LLC due to corporate rebranding;
  • Legacy Sports International, Inc. Address Change;
  • Change in Name from Kongsberg Gallium Ltd. to Kongsberg Geospatial Ltd. due to corporate rebranding;
  • Presagis USA Ltd. Address Change;
  • Change in Name from Emas ROV Pte. Ltd. to EMAS CHIYODA ROV Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas Subsea Services Pte. Ltd. to EMAS CHIYODA Subsea Services Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas-AMC Pte. Ltd. to EMAS CHIYODA Subsea Pte. Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas-AMC (Thailand) Co Ltd to EMAS CHIYODA Subsea (Thailand) Co Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas-AMC AS to EMAS CHIYODA Subsea AS in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas-AMC Inc to EMAS CHIYODA Subsea Inc. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas Marine Base LLC to EMAS CHIYODA Subsea Marine Base LLC in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas-AMC Pty. Ltd. to EMAS CHIYODA Subsea Pty Ltd. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas Marine Base Holding Co. LLC to EMAS CHIYODA Subsea Marine Base Holding Co. LLC in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from Emas Subsea Services (UK) Limited to EMAS CHIYODA Subsea Services (UK) Limited in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings;
  • Change in Name from EMAS Saudi Arabia Ltd. to EMAS CHIYODA Subsea Saudi Arabia Ltd in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings; and
  • Change in Name from EMAS-AMC Services B.V. to EMAS CHIYODA Subsea Services B.V. in accordance with a joint venture between Chiyoda Corporation and Emas corporate parent Ezra Holdings.

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 Published Proposed Rule to Clarify What is Controlled Under USML Category VIII and XIX Post ECR

Feb. 9, 2016 – 81 Fed. Reg. 6797:  DDTC proposed to amend the USML to describe more precisely the items controlled under Categories VIII (aircraft and related articles) and XIX (gas turbine engines and associated equipment).  The proposed changes in Category VIII include, among others, clarification that the controls in this Category apply to all military aircraft described in the USML Category, whether such aircraft are manned, unmanned, remotely piloted, or optionally piloted; details of the features meriting control under the USML; and deletion of the “ship-based” control parameter.  The changes proposed in Category XIX include, among others, clarification of the scope of controlled engines.  Public comment is requested on topics including whether any commercial models exceed the new parameters.  Deadline for comments is March 25, 2016.  (See related proposed amendment in Department of Commerce section above.)  

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DDTC Publishes Second Proposed to Transfer Certain USML Category XII Items to the EAR Per ECR

Feb. 19, 2016 – 81 Fed. Reg. 8438:  DDTC proposed to amend the USML to describe more precisely the items controlled under USML Category XII (fire control, laser imaging, night vision equipment, thermal cameras/sensors, and guidance and control equipment).  This proposed rule replaces, in its entirety, the proposed rule published on May 5, 2015 (80 Fed. Reg.  25821), although some of the concepts addressed in the original proposed rule have been kept.  The most significant matter addressed in this new proposed rule is that articles, components, and partswill be controlled based on the intent of the manufacturer to “specially design” the article, component, and parts for military end use.  (A new note to Category XII defines the term “military end use.”)   Specific control parameters are added to many provisions of Category XII.  Deadline for comments is April 4, 2016.  (See related proposed amendment in Department of Commerce 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 tell us your needs.

Sanctions

Department of Commerce

Feb. 11, 2016 – 81 Fed. Reg. 7304:  BIS denied the export privileges of Qiang Hu of Shanghai, China until July 24, 2024 based upon his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. § 1701, et seq.)  by conspiring to cause the unauthorized export of U.S.-origin pressure transducers to end users in China and elsewhere.  Hu was the sales manager of the Shanghai sales office of MKS Instruments, Inc. of Andover, MA, the manufacturer of the diverted transducers.  However, BIS stated at the time of Hu’s arrest that MKS was not a target of the investigation into Hu’s violations.  Following Hu’s conviction in Federal District Court for the District of Massachusetts, he was sentenced to a prison term of 34 months.

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Feb. 19, 2016 – 81 Fed. Reg. 8478:  BIS denied the export privileges of Viacheslav Zhukov, a Russian citizen and lawful permanent resident of the U.S., until March 5, 2022 based on his conviction of violating the IEEPA by conspiring to cause the unauthorized export of multiple packages containing firearm accessories to Russia.  Following his conviction in Federal Court for the Southern District of Georgia, Zhukov was sentenced to 51 months in prison and 3 years of supervised release.

Fines and Penalties

Feb. 2, 2016:  The Treasury Department Office of Foreign Assets Control (OFAC) issued a Finding of Violation to Johnson and Johnson (Middle East) Inc. (JJME), a wholly owned U.S. subsidiary of Johnson & Johnson, for violating the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) by facilitating the exportation of goods to Sudan when its General Manager for Emerging Markets, Middle East and North Africa coordinated and supervised 5 shipments of goods to Khartoum, Sudan by Johnson and Johnson (Egypt) S.A.E.  The JJME manager had not received any training on compliance with OFAC regulations despite being responsible for sales in the Middle East and North Africa.  OFAC stated that the Finding of Violation was issued in lieu of a civil monetary penalty.

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Feb. 12, 2016:  Hunter Perry of Louisville, KY, pleaded guilty in U.S. District Court in Louisville, to violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting night vision scopes and other items controlled under the USML to persons in the United Kingdom, Poland, and Japan without the required authorization from DDTC.  Payments for the equipment were made through PayPal accounts and bank wire transfers.  Perry falsified customs documents by misidentifying the items he shipped in order to escape detection.

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Feb. 18, 2016:  An indictment charging Richmond Akoto Attah of Charlotte, NC, with violations of the AECA and other federal laws, was unsealed in federal court in the Western District of North Carolina.  According to the indictment, Attah hid 27 firearms, including semi-automatic pistols and revolvers, inside a washer and dryer and 3,500 rounds of ammunition in a barrel; placed the washer, dryer, and barrel in a shipping container; and attempted to ship the container from Charlotte to Ghana without obtaining the required authorization.  U.S. Customs officers recovered the container before it was exported.

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Feb. 22, 2016:  OFAC announced that CGG Services S.A. (formerly known as CGGVeritas S.A.) agreed on behalf of itself and several affiliated companies to pay a civil penalty of $614,250 to settle charges by OFAC of 22 violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515).  The violations involved 2 exports of spare parts and other equipment from the U.S. to vessels operating in Cuba’s territorial waters, 15 exports of U.S.-origin goods to vessels operating in Cuba’s territorial waters, and 5 transactions involving the processing of data from seismic surveys conducted in Cuba’s Exclusive Economic Zone that benefited a Cuban company.

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Feb. 25, 2016:  OFAC announced that Halliburton Atlantic Limited (HAL), a Cayman Island subsidiary of Halliburton Energy Services, Inc., a U.S. company, agreed to pay $304,706 to settle charges by OFAC that HAL and another Cayman Island Halliburton affiliate had violated the CACR by dealing in property in which Cuba or a Cuban national had an interest by exporting goods and services in support of oil and gas exploration and drilling activities in the Cabinda Onshore South Block oil concession in Angola.  OFAC claimed that HAL and its affiliate knew or should have known that Cuba Petroleo, a state-owned Cuban company, held a 5% interest in a consortium that had a direct interest in the Cabinda concession and any oil or gas procured there.

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Feb. 26, 2016:  Song Il Kim, a Cambodian citizen born in North Korea and residing in the People’s Republic of China, was sentenced in federal court in Salt Lake City, UT to serve 40 months in federal prison based on his plea of guilty of violating the AECA by attempting to ship night vision goggles to China after declaring that the box in which they were packed contained used toys and towels.  Kim was arrested in Honolulu, HI in July 2015 in a sting operation conducted by Utah-based Homeland Security Agents.  (See additional information on this case in December 2015 Regulatory Update.)

FEBRUARY 2016 EXPORT CONTROL REGULATION UPDATES Read More »

JANUARY 2016 EXPORT CONTROL REGULATION UPDATES

January 2016

This newsletter is a listing of the latest changes in export control regulations through January 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

EU Removes Most Trade Restrictions Involving Iran

On Jan. 16, 2016  the European Union (EU) removed nearly all of its restrictive measures concerning trade with Iran, after confirming that the International Atomic Energy Agency (IAEA) had ruled that Iran had taken all measures specified in the Joint Comprehensive Plan of Action (JCPOA),

The official EU action is Council Decision (CFSP) 2016/37 of 16 January 2016 (http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.LI.2016.011.01.0001.01.ENG&toc= OJ:L:2016:011I:TOC). A detailed Information Note is on the EU website at http://eeas.europa.eu/top_stories/pdf/iran_implementation/information_note_eu_sanctions_jcpoa_en.pdf.

Department of Commerce

BIS Clarifies Rules Pertaining to Export and Re-exports to Cuba

Jan. 27, 2016 – 81 Fed. Reg. 4580:  The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to modify the general policies of review for applications for exports or re-exports to Cuba (EAR Sec. 746.2).  The changes further expand the scope of permissible trade with Cuba.

The following exports and re-exports will now be subject to a general policy of approval:

  • Items necessary to ensure the safety of civil aviation and commercial aircraft engaged in commercial international air transportation;
  • Under certain circumstances, items intended to strengthen civil society in Cuba;
  • Items for use by U.S. news bureaus;
  • Telecommunications items to improve communications to, from, and among the Cuban people; and
  • Items necessary for the environmental protection of the U.S. and international air quality, waters, or coastlines (including items related to renewable energy or energy efficiency).

A case-by-case review policy will now apply to exports and re-exports of items to meet the needs of the Cuban people, including exports and re-exports for such purposes made to state-owned enterprises and agencies and organizations of the Cuban government that provide goods and services to the Cuban people.

However, a general policy of denial will continue to apply to applications to export or re-export items for use for certain purposes by state-owned enterprises, agencies, or other Cuban government organizations that primarily generate revenue for the state.  Applications for items destined to the Cuban military, police, intelligence, and security services will also remain subject to a general policy of denial.

Department of State

DDTC Name Changes Posted to DDTC Website in January 2016

Jan. 5, 6, 7, 12, 19, 28, 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 Supply Technologies (UKG) Limited to Supply Technologies (UKGRP) Limiteddue to corporate reorganization;
  • Change in Name for International Rectifier Company Great Britain, Ltd., International Rectifier Company (GB) Ltd. (A&D Import Hub), and International Rectifier Co. Ltd. to Infineon Technologies Reigate Ltd. due to acquisition of International Rectifier by Infineon Technologies;
  • Change in Name from NEC AERO to SMS SAS due to corporate reorganization;
  • Paint Services Group Limited Address Change;
  • Change in Name for General Dynamics C4 Systems, Inc. and General Dynamics Advanced Information Systems, Inc. to General Dynamics Mission Systems, Inc. due to corporate reorganization;
  • Change in Name from Advanced System Design (Actel.ru) to "Advanced System Design Actel" Limited (“ASD Actel” Ltd.) due to corporate reorganization and Address Change;
  • Change in Name from Atlantis Systems Corp. to Bluedrop Training & Simulation Inc. due to acquisition of Atlantis Systems by Bluedrop Training & Simulation;
  • Change in Name from Transfield Services Limited and Transfield Services (Australia) Pty Limited to Broadspectrum Limited and Broadspectrum (Australia) Pty Limited due to acquisition of Transfield Services by Broadspectrum;
  • Saab AB (publ) dissolved business area Security and Defence Solutions (SDS) and placed its 4 business units under other Saab business areas under corporate restructure;
  • Change in Name from Airbus DS Limited to Airbus Defence and Space Limited due to corporate reorganization;
  • Change in Name from BAE Systems Deployed Systems Limited to BAE Systems Surface Ship Limited due to corporate reorganization; and
  • Change in Name from BAE Systems Surface Ships Integrated Support Limited to BAE Systems Surface Ship Limited and BAE Systems Integrated System Technologies (Overseas) Limited 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.

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DDTC Published Revisions to Guidelines for Preparing Agreements

Jan. 6, 2016:  DDTC posted proposed revisions to the Guidelines for Preparing Agreements.  The new draft is on the DDTC website at

http://www.pmddtc.state.gov/Licensing/documents/DraftGuidelinesforPreparingAgreementsRev43.pdf.  Comments are requested by February 5, 2016.

Department of the Treasury

OFAC Extends Validity Period for Specific Licenses Related to the Safety of Iran’s Civil Aviation Industry

Jan. 16, 2016:  In connection with JCPOA Implementation Day, the Office of Foreign Assets Control (OFAC) extended to May 31, 2016, the validity of all specific licenses that were issued pursuant to OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry and have an expiration date on or before July 14, 2015.  (See additional actions below and in Sanctions section.)

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OFAC Announces Favorable Licensing Policy for Engagements with Iran Pertaining to Commercial Passenger Aircraft and Parts

Jan. 16, 2016:  Also in connection with JCPOA Implementation Day, OFAC announced a favorable licensing policy under which U.S. and non-U.S. persons may request specific authorization from OFAC to engage in transactions for the sale of commercial passenger aircraft and related parts and services to Iran, provided such transactions do not involve any person on OFAC's Specially Designated Nationals and Blocked Persons List ("SDN List").  The full statement is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/lic_pol_statement_aircraft_jcpoa.pdf.

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OFAC Amends Cuban Sanctions to Facilitate Financial Institutions’ Ability to Engage in Certain Travel-Related Funding Activities

Jan. 27, 2016 – 81 Fed. Reg. 4583:  OFAC amended the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) by removing some payment and financing restrictions for authorized exports and re-exports to Cuba and authorizing various types of travel-related and other additional transactions.  Updated FAQs about the Cuban sanctions are on the Treasury Department website at www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf.  Updated guidance on travel to Cuba is at www.treasury.gov/resource-center/sanctions/Programs/Documents/guidance_cuba_travel.pdf.

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OFAC Issues First Quarter 2016 Lists of Boycott Supporting Countries

Jan. 27, 2016 – 81 Fed. Reg. 4739:  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

Jan. 15, 2016 – 81 Fed. Reg. 2161:  BIS renewed for an additional 180 days a 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 Issam Muhammad.  This TDO, originally issued in 2008, is based on a finding that the denied parties are engaging, and are likely to continue engaging, in unlawful conduct regarding the re-export of aircraft to Iran.

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Jan. 26, 2016 – 81 Fed. Reg. 4250:  BIS entered a 180-day TDO against the following 5 parties:

  • Ribway Airlines Company Limited;
  • Af-Aviation Limited;
  • Andy Farmer;
  • John Edward Meadows; and
  • Jeffrey John James Ashfield.

BIS stated that these 5 parties are attempting to sell two U.S.-origin aircraft to Caspian Airlines, an Iranian airline that was added to the Treasury Department list of Specially Designated Nationals in 2014 because of its support to a terrorist entity.

Department of the Treasury

OFAC Lifts Nuclear-Related Sanctions on Iran; HOWEVER, Most Export Transactions with Iran are Still Prohibited…

Jan. 16, 2016:  On Implementation Day, following the verification by the IAEA that Iran had implemented the key nuclear-related measures called for by the JCPOA, OFAC lifted many nuclear-related sanctions against Iran and removed hundreds of persons from the SDN List and other lists of prohibited parties.  In general, foreign subsidiaries of U.S. companies will now be able to pursue certain opportunities in Iran, while U.S. persons will remain subject to a broad primary embargo against Iran.  The specifics of the actions that now are permitted or are not permitted are very complicated.  OFAC has posted a guide describing all the sanctions changes and their effects on its website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/implement_guide_jcpoa.pdf.  Links to FAQs and other relevant documents are on the OFAC website at  https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/jcpoa_implementation.aspx.

Fines and Penalties

Jan. 7, 2016:  FIMCO, an Iranian corporation, was sentenced in U.S. District Court in Harrisburg, PA to a criminal fine of $100,000 based on its plea of guilty to charges of conspiracy to evade export licensing requirements.  FIMCO earlier agreed in a civil settlement with BIS to pay a fine of $837,500, of which $250,000 would be suspended for two years and waived if FIMCO complies with the terms of the plea agreement and with certain additional conditions.  The case involved a conspiracy to transship a bar peeling machine valued at more than $800,000 and used in the production of high grade steel for the manufacture of automobile and aircraft parts to Iran via the United Arab Emirates (UAE).  (See July 2015 Regulatory Update for additional details of this case.)

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Jan. 18, 2016:  Amin al-Baroudi, a Syrian-born naturalized U.S. citizen formerly of Irvine, CA, pleaded guilty in U.S. District Court for the Eastern District of Virginia of conspiracy to violate U.S. sanctions on Syria by exporting U.S. goods to Syria without the required authorization.  In the plea agreement al-Baroudi admitted that he and his co-conspirators exported U.S. tactical equipment including sniper rifle scopes, night vision goggles, laser bore sighters, speed loaders, and bullet-proof vests to Syria by traveling with the goods on commercial flights to Turkey and then transporting the goods into Syria or providing the goods to others for transport to Syria.

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Jan. 20, 2016:  Ruben Sosa of Mexico City, Mexico was sentenced in U.S. District Court in Brownsville, TX, to serve two years in federal prison for violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting rifle conversion kitsto Mexico without the required authorization.  The conversion kits attach to a Glock pistol, thereby enhancing it in several ways including lengthening the barrel and converting the pistol into a tactical carbine.  Sosa will be deported to Mexico after his release from prison since he entered the U.S. illegally.

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Jan. 20, 2016:  As part of the U.S.-Iran prisoner swap that freed Washington Post reporter Jason Rezaian and other U.S. citizens from Iranian prisons, the U.S. freed 6 U.S.-Iranian dual nationals and one Iranian national who were serving sentences in U.S. prisons based on their convictions of export control charges.  Bahram Mechanic, Tooraj Faridi, and Khosrow Afghahi belonged to a network that allegedly transshipped microelectronics, uninterruptible power supplies, and other commodities valued at over $24 million to Iran via Taiwan and Turkey.  (See April 2015 Regulatory Update.)  Nader Modanlo forfeited a $10 million fee and was serving an 8-year prison sentence for his role in helping Iran launch its first satellite.  (See June 2013 and December 2013 Regulatory Updates.)  Ali Saboonchi was convicted of unauthorized exports of industrial products used in petroleum refineries, nuclear plants, and the oil and gas industry to Iran.  (See February 2015 Regulatory Update.)  Arash Ghahreman was convicted in a case involving a scheme to purchase marine navigation equipment and military electronic equipment for illegal export to Iran.   (See April 2015 Regulatory Update.)

Although these persons have been freed from U.S. prisons, there convictions have not been vacated and export transactions involving these individuals are still prohibited under the ITAR and the EAR.

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Jan. 28, 2015:  Sihai Cheng, a/k/a Chun Hai Cheng, a/k/a Alex Cheng, a citizen of the People's Republic of China (PRC), was sentenced in U.S. District Court in Boston to 9 years in federal prison based on his plea of guilty to two counts of conspiring to commit export violations and smuggle goods from the United States to Iran and four counts of illegally exporting U.S.-manufactured pressure transducers to Iran.  The smuggled goods were to be transshipped to Iran via the PRC.  (See additional information about this case in December 2015 Regulatory Update.)

JANUARY 2016 EXPORT CONTROL REGULATION UPDATES Read More »

DECEMBER 2015 EXPORT CONTROL REGULATION UPDATES

December 2015

This newsletter is a listing of the latest changes in export control regulations through December 31, 2015. 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

Crude Oil Exports Legalized in United States

Dec. 18, 2015: President Obama signed H.R. 2029, the Consolidated Appropriations Act, 2016 (CAA 2016). Among many other actions, CAA 2016 repealed a law (Sec. 103 of the Energy Policy Conservation Act of 1975) which, since 1975, had banned exports of crude petroleum oil, subject only to narrow exceptions that had been rarely invoked. Under CAA 2016, no federal official is permitted to impose or enforce any restriction on the export of crude oil. (See implementation of this law below, under Department of Commerce.)

Department of Commerce

BIS Proposes to Include “600 Series” Items in Offset Reporting Requirements for Foreign Military Sales

Dec. 2, 2015 – 80 Fed. Reg. 75438: The Bureau of Industry and Security (BIS) published a proposal to expand the requirement to report offsets agreements in connection with sales of items controlled under the U.S. Munitions List (USML, 22 CFR Part 121) to include offsets agreements in connection with sales of items controlled in “600 series” Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL, 15 CFR Part 774, Supplement No. 1). The new reporting requirement would exclude certain submersible and semi-submersible cargo transport vessels and related items controlled under ECCNs 8X620.b. The reporting requirement applies only to agreements to provide offsets with a value exceeding $5 million. Comments on this proposal are due by February 1, 2016.

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Various Clean-up Revisions to the EAR Published by BIS

Dec. 3, 2015 – 80 Fed. Reg. 75633: BIS made the following corrections and other changes in the Export Administration Regulations (EAR, 15 CFR Parts 730-774):

  • In the Commerce Country Chart (EAR Part 738, Supplement No. 1), removed Argentina from the RS:2 column and removed South Africa from the NS:2 and RS:2 columns, with the result that Commerce Country Chart Columns NS:2 and RS:2 are now harmonized with Country Group A:1 in the Country Group list (EAR Part 740, Supplement No. 1);
  • In the Country Group list, removed Fiji from Country Group D, including Column D:5 (U.S. Arms Embargoed Countries);
  • Amended EAR Sec. 743.3(b) to restore an exception for Canada that had been inadvertently removed from reporting requirements for exports of thermal imaging cameras;
  • Amended ECCN 8A620.f to implement a 2014 Wassenaar Arrangement agreement pertaining to diving and underwater swimming apparatus specially designed and modified for military use;
  • Amended ECCN 9A004.a to correct the range of reference in the License Requirement Note and revised Note 3 in the Related Controls for clarity; and
  • Amended ECCN 9A010 by removing the reference to the ITAR in the heading and adding a Related Controls paragraph referencing ITAR Categories IV and XV, ECCNs 9A515 and 9A604, and the Order of Review provisions of EAR Part 774, Supplement No. 4.

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BIS Publishes Correction to Country Chart Pertinent to Congo

Dec. 14, 2015 – 80 Fed. Reg. 76629: BIS amended the Commerce Country Chart by moving footnote 1 from Congo (Republic of the) to Congo (Democratic Republic of the) and corrected the List of Items Controlled in ECCN 2B008.a and the List of Items Controlled in ECCN 2B009.a.

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BIS Revises EAR to Remove Certain Defined Terms and Correct Citation Error

Dec. 17, 2015 – 80 Fed. Reg. 78651: BIS amended EAR Sec. 762.1(b) (Persons subject to EAR Part 762, Recordkeeping) by replacing references to Sec. 762.7 and Sec. 762.6 with references to Sec. 762.2 and Sec. 762.7, respectively. BIS also corrected EAR Part 772 (Definition of Terms) by removing the definitions of “fault tolerance”, “laser duration”, and “positioning accuracy”.

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BIS Implements Policy to Reflect Crude Oil Being an EAR99 Item on the CCL

Dec. 22, 2015: BIS implemented the provision of the CAA 2016 repealing the prior ban on exports of crude oil (see description above) by announcing that crude oil is now classified as EAR99 and may ordinarily be exported without an export license from the Department of Commerce. Exports to embargoed or sanctioned countries or persons continue to require authorization.  BIS will soon amend the EAR to implement the new law. The announcement is on the BIS website at http://www.bis.doc.gov/index.php/crude-oil-export-licensing-policy.

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Sixteen Persons Added to the Entity List by BIS

Dec. 28, 2015 – 80 Fed. Reg. 80643: BIS added the following 16 persons to the Entity List (EAR Part 744, Supplement No. 4) to support existing sanctions on Russia for fueling the conflict in eastern Ukraine. A license will be required for any transaction in which the export, reexport, or transfer of items subject to the EAR involves any of these entities. There will be a license review policy of presumption of denial, and no license exceptions will be available.

Crimea Region of Ukraine

  • Aktsionernoe Obschestvo ‘Yaltinskaya Kinodstudiya,’ and 8 aliases, Yalta;
  • Crimean Enterprise Azov Distillery and 5 aliases, Azov;
  • Resort Nizhnyaya Oreanda (formerly known as Federalnoe Gosudarstvennoe Byudzhetnoe Uchrezhdenie Sanatori Nizhnyaya Oreanda Upravleniya), and 3 aliases, Yalta;
  • State Concern National Production and Agricultural Association Massandra, and 4 aliases, Massandra;
  • State Enterprise Factory of Sparkling Wine Novy Svet, and 6 aliases, Sudak;
  • State Enterprise Magarach of the National Institute of Wine, and 5 aliases, Vilino; and
  • State Enterprise Universal-Avia, and 6 aliases, Simferopol.

Cyprus

  • White Seal Holdings Limited, Limasol.

Luxembourg

  • Maples SA, Luxembourg.

Panama

  • Lerma Trading S.A., Este.

Russia

  • Avia Group Terminal Limited Liability Company, and 3 aliases, Khimki;
  • OAO Volgogradneftemash (formerly known as Dochernee Aktsionernoe Obshchestvo Otkrytogo Tipa Volgogradneftemash Rossiiskogo Aktsionernogo Obshchestva Gazprom), and 2 aliases, Volgograd;
  • Otkrytoe Aktsionernoe Obshchestvo Vneshneekonomicheskoe Obedinenie Tekhnopromeksport, and 7 aliases, Moscow; and
  • Transservice LLC, and 3 aliases, Omsk.

Switzerland

  • LTS Holding Limited, Geneva (See alternate address under United Kingdom).

United Kingdom

  • Fentex Properties LTD., Tortola, British Virgin Islands; and
  • LTS Holding Limited, Tortola, British Virgin Islands. (See alternate address under Switzerland).

The rule includes a clarification about the interpretation of references on the Entity List to EAR Sec. 746.5 (Russian Industry Sector Sanctions).

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BIS Proposes Minor Revision to the EAR to Standardize its Policies Pertaining to Charging and Penalty Determinations for Violations of the EAR

Dec. 28, 2015 – 80 Fed. Reg. 80710: BIS proposed to revise the current Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases (EAR Part 766, Supplement No. 1) involving violations of the EAR. The new guidelines aim to make civil penalty determinations more predictable and transparent to the public. They would be aligned with the well-established guidelines used by the Treasury Department’s Office of Foreign Assets Control (OFAC) in administering sanctions programs under the International Emergency Economic Powers Act (IEEPA, 50 USC 1701-1707), the same statute that authorizes the implementation of the EAR by BIS. The revised guidance would establish a base penalty depending on whether the violation is egregious or non-egregious and whether or not the case arose from a voluntary self-disclosure (VSD). Identified aggravating, general, and mitigating factors would then be used to adjust the penalty amount up or down. BIS does not expect the revised guidelines to increase the number of cases that result in administrative action rather than being closed with a warning letter. The proposed guidance takes the form of a rewrite of the current guidance. Comments will be accepted until February 26, 2016.

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BIS Publishes EAR Revision for ECCN 9E003 Along with Revision to Entity List

Dec. 31, 2015 – 80 Fed. Reg. 81744: BIS corrected the CCL entry for ECCN 9E003 to remove the second introductory text of paragraph f.1. BIS also corrected the Entity List (EAR Part 744, Supplement No. 4) to move the entry for “Sergey Grinenko” from Greece to Germany.

Department of State

DDTC Name/Address Changes Published to DDTC Website

December 4, 8, 22, 29, and 30, 2015: 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 Appendix Publishing Inc. and Appendix Sonovision-Itep to Sonovision Canada Inc. due to corporate rebranding;
  • Change in Name from Chromalloy Israel to Turbochrome Ltd. due to acquisition by TAT Technologies Ltd.;
  • Change in Name from Farsound Engineering Limited to Xcel Aerospace due to acquisition and corporate restructure;
  • CoorsTek, Inc. Address Change;
  • Change in Name from FGP Precision Engineering Limited to FGP Systems Limited due to corporate merger;
  • Change in Name from BAE Systems Electronics Limited and BAE Systems Surface Ships Limited to BAE Systems Surface Ships Limited due to corporate rebranding;
  • United Technologies Corporation Address Change; and
  • Airbus Group Reorganization: Airbus DS Electronics and Border Security GmbH, Germany and Airbus DS Electronics and Border Security SAS, France authorized as part of Airbus Defence and Space, GmbH, Germany and Airbus DS SAS, France.

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 Updates Debarment List

Dec. 7, 2015: DDTC updated the statutory debarment list. The updated complete list is on the DDTC website at http://www.pmddtc.state.gov/compliance/debar.html.

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DDTC Further Extends Temporary Modification of USML Category XI(b) Language Pertaining to Military Information Security Devices, as Review of Applicable Controls are Still In Progress

Dec. 16, 2015 – 80 Fed. Reg. 78130: DDTC extended until August 30, 2017, a temporary modification of USML Category XI that added software to the description of items controlled under Category XI(b) and added “or analyze and produce information from” to the purposes for which the controlled electronic systems, equipment, and software were specially designed. This temporary modification, originally made July 2, 2015 (80 Fed. Reg. 37974, see July 2015 Regulatory Update), would otherwise have expired on Dec. 29, 2015. DDTC noted that the new extension will allow the U.S. government to continue to review the controls in Category XI(b).

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DDTC Published Comments Received on Implementation of ECR for USML Cats. VI, VII, XIII, & XX

Dec. 16, 2015: DDTC posted the public comments received on the review of USML Categories VI, VII, XIII, and XX on its website at

http://www.pmddtc.state.gov/regulations_laws/documents/proposed_rules/Category%20VI_VII_XIII_XXComments.pdf.

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Export Licenses No Longer Need to Be Formally Lodged with CBP, as License Information is Automatically Transmitted to CBP through AES/ACE

Dec. 21, 2015: DDTC posted a notice, effective immediately, waiving the requirement for exporters to deposit permanent export licenses with U.S. Customs and Border Patrol (CBP) prior to filing in the Automated Export System (AES) or the Automated Commercial Environment (ACE). CBP no longer needs to receive this information from exporters because DDTC is electronically sending registration and licensing data to CBP on a daily basis. The notice is on the DDTC home page, http://www.pmddtc.state.gov.

DSP-85s will still need to be lodged with CBP as DSP-85s are not transmitted electronically by DDTC to CBP

Department of the Treasury

OFAC Issues 6 Month General License to Permit Certain Trade-Related Transactions Involving Burma

Dec. 7, 2015: The Office of Foreign Assets Control (OFAC) issued a six-month general license (General License No. 20) to authorize most transactions otherwise prohibited by the Burmese Sanctions Regulations (BSR, 31 CFR Part 537) that are ordinarily incident to the export of goods, technology or non-financial services to or from Burma, including trade finance transactions and payment of port fees and shipping and handling charges associated with sending goods to or from Burma. The license does not authorize transactions that directly involve a Specially Designated National (SDN) or an entity in which an SDN has a 50% or greater interest and does not modify any other prohibitions relating to trade with Burma. The general license is intended to foster trade with Burma by permitting U.S. persons to be involved in transactions that go through Burmese ports and facilities that are owned or controlled by SDNs.

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. 3, 2015:   Amin al-Baroudi, a Syrian-born U.S. citizen and former resident of Irvine, CA, was arrested at Washington Dulles International Airport and detained pending further court proceedings based on an indictment charging him with exporting rifle scopes, night-vision goggles, bullet-proof vests, and other items controlled under the EAR from the U.S. to Syria without the required authorization. The goods allegedly went to the insurgent group Ahrar el-Sham, which fights alongside Al-Qaida’s Syrian branch. Among other exports, al-Baroudi allegedly shipped the unlicensed gear in 14 pieces of baggage weighing more than 600 pounds total as accompanied baggage on a February 2013 trip from Los Angeles to Turkey and then transported it to Syria.

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Dec. 9, 2015: Song Il Kim, a citizen of Cambodia who was born in North Korea and resides in the Peoples Republic of China (PRC), pleaded guilty in federal court in Salt Lake City, UT to violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by attempting to purchase military-grade night vision goggles and to illegally export them to the PRC. Kim allegedly agreed to pay an undercover agent $22,000 for 6 military-grade night vision goggles that he would send to his business in the PRC. He was arrested in Honolulu, HI in July 2015 after he met with an undercover agent, provided a $16,000 cash down payment, put 3 of the devices in a box, completed a customs form stating that the box contained used toys and towels, and went with the undercover agent to a post office and had the box shipped to the PRC.

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Dec. 10, 2015: GLS Solutions Inc. of Aventura, FL agreed to pay a civil penalty of $50,000 ($17,500 to be paid within 30 days and the remaining $32,500 suspended for one year and thereafter waived if GLS has committed no further violations) to settle charges that it had violated the EAR by acting with knowledge of a violation of the EAR when it sold or transferred a FLIR high performance infrared camera controlled under ECCN 6A003.b.4 for export to Venezuela with knowledge that a violation of the EAR was occurring, was about to occur, or was intended to occur in connection with the item.

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Dec. 10, 2015: Gregorio L. Salazar, President of GLS Solutions Inc. of Avantura, FL (see related case above), agreed to pay a civil penalty of $50,000 to settle charges that he had violated the EAR by making a false or misleading statement in a disclosure to BIS. In a disclosure letter to BIS describing the unauthorized export by GLS Solutions of a FLIR high performance infrared camera to Venezuela, Salazar allegedly claimed that at the time of the shipment he was unaware that the camera required an export license in order to be shipped to Venezuela. However, in a subsequent interview with BIS Special Agents, he admitted that he knew of the licensing requirement before the camera was exported.

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Dec. 10, 2015: Daofu Zhang, Jiang Guanghou “Ben” Yan, and Xianfeng Zuo, all nationals of the PRC, were arrested in Milford, CT on charges that they had violated the IEEPA and other U.S. laws in a scheme that included obtaining and illegally exporting sophisticated semiconductors stolen from the U.S. military. The men were arrested after they traveled to the U.S. to take delivery of what they thought were 22 stolen Xilinx semiconductors from an undercover agent.

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Dec. 16, 2015: Eyad Farah of Barrington, TX, was sentenced in U.S. District Court in Tampa, FL to 37 months in federal prison based on his plea of guilty of conspiring to export and actually exporting firearms without the required authorization. The court also ordered Farah 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.

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Dec. 18, 2015: Sihai Cheng, a/k/a Chun Hai Cheng, a/k/a Alex Cheng, a citizen of the PRC, pleaded guilty in U.S. District Court in Boston, MA to conspiring to export and actually exporting U.S. manufactured pressure transducers via the PRC to Iran without the required authorization. Pressure transducers can be used to produce weapons-grade uranium. They cannot be shipped to the PRC without an export license, and they cannot be shipped to Iran at all. In his plea Cheng admitted that he had caused the unauthorized export of 185 pressure transducers from the U.S. to Iran in 2009. The transducers were exported to the PRC using fraudulently obtained U.S. export licenses. Cheng then removed their U.S. manufacturer’s serial numbers and caused them to be exported to Iran knowing that they were being supplied to the Government of Iran.   Cheng was extradited from the United Kingdom to the U.S. in December 2014 and has remained in U.S. custody since then.

DECEMBER 2015 EXPORT CONTROL REGULATION UPDATES Read More »

NOVEMBER 2015 EXPORT CONTROL REGULATION UPDATES

November 2015

This newsletter is a listing of the latest changes in export control regulations through November 30, 2015. 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 Entity List Changes

Nov. 12, 2015 – 80 Fed. Reg. 69852: The Bureau of Industry and Security (BIS) updated the Entity List (EAR Part 744, Supp. No. 4) by adding 7 persons, removing 2 persons, and adding or modifying the addresses and/or aliases of 10 persons. The following persons were added to the Entity List with a license requirement with presumption of denial for all items subject to the EAR:

  • Sky Rise Technology Ltd., a.k.a. Sky Rise Tech., Beijing, China and Sheung Wan and Kowloon, Hong Kong;
  • TiMi Technologies Co., Ltd., a.k.a. TiMi Technology Co. Ltd., a.k.a. TiMi Tech., Beijing and Shenzhen, China and Sheung Wan and Kowloon, Hong Kong;
  • Wang Wei, a.k.a. Jack Wang, Beijing, China and Sheung Wan and Kowloon, Hong Kong;
  • 32 Group China Ltd., Kowloon, Hong Kong;
  • Caprice Group Ltd., Kowloon, Hong Kong;
  • Kitronix Display, Kowloon, Hong Kong; and
  • Reekay Technology Ltd., a.k.a. Reekay Technology, Sheung Wan, Hong Kong.

The following persons were deleted from the Entity List:

  • Weihai New Era Chemical Industrial Company Limited, China; and
  • Able City Development Limited, Hong Kong.

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BIS Publishes De Minimis and Direct Product Rule Decision Tool on Website

Nov. 13, 2015: BIS posted a De Minimis and Direct Product Rules Decision Tool that can help users determine whether a foreign-made item that has some U.S. content and is located outside the United States is subject to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) under the de minimis rules (EAR Sec. 734.4 and Supplement No. 2 to Part 734) or the direct product rule (EAR Sec. 736.2(b)(3)). The tool is on the BIS website at http://www.bis.doc.gov/index.php/de-minimis-direct-product-rules-decision-tool.

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BIS Adds XBS Epoxy to the Catch-All ECCN for Products with Military Significance not Enumerated on the USML Where Controls Not Clearly Defined in the EAR

Nov. 18, 2015 – 80 Fed. Reg. 70676: BIS amended the EAR to classify the XBS Epoxy system designed to obfuscate critical technology components against x-ray and terahertz microscopy imaging attempts under Export Control Classification Number (ECCN) 0C521, controlled for Regional Stability (RS) Column 1 reasons. This item requires a license to all destinations except Canada, and License Exception GOV will be the only exception available. Like all 0Y521 controls, this is a unilateral classification that will be valid for only one year unless it is extended by the U.S. Government or adopted by a multilateral export control regime. The amendment was effective immediately, but comments will be accepted until January 15, 2016. In the same amendment, BIS also removed ECCNs 0D521 and 0E521 from the Commerce Control List (CCL, EAR Part 774), as the aircraft wing fold system software and technology covered by those items are now classified under ECCNs 9D001 and 9E003, respectively.

Department of State

Name and Address Changes of companies involved with ITAR regulated materials

Nov. 3, 12, 13, 16, 18, and 30, 2015: 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 TRaC Global Ltd. to Element Materials Technology Warwick Ltd. due to acquisition;
  • Change in Name from BAE Systems Operations Limited (Advanced Technology Centre) to BAE Systems Applied Intelligence Limited due to corporate reorganization;
  • Change in Name from Bombardier MAT Inc. and/or Bombardier Inc. (solely as it pertains to the Military Aviation Training Business Unit) to CAE MAT Inc. due to acquisition;
  • Change in Name from Hesco Armor, LLC to Hesco Armor, Inc. due to legal restructuring;
  • AeroVironment, Inc. Address Change;
  • Rockwell Collins UK Limited Address Change; and
  • Change in Name from BAE Systems Integrated System Technologies Limited to BAE Systems Surface Ship Limited and BAE Systems (Operations) Limited 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.

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Contingent Waiver of Certain IRAN Sanctions Issued by State Department; Contingency Tied to Passing IAEA Requirements for Elimination of Nuclear Development Activities

Nov. 2, 2015 – 80 Fed. Reg. 67470: The Secretary of State issued a contingent waiver of sanctions against certain transactions by non-U.S. persons that involve Iran. This waiver will not become effective until Implementation Day, after the International Atomic Energy Agency has certified that Iran has implemented the nuclear-related measures specified in the Joint Comprehensive Plan of Action. The waiver covers certain transactions involving Iran’s financial and banking sectors; underwriting services, insurance, or reinsurance; Iran’s energy and petrochemical sectors; Iran’s shipping sector; trade with Iran in precious metals and other metals and software; and Iran’s automotive sector.

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DDTC Publishes Slightly Revised Guidelines for GCs for Re-transfer of Licenses Affected by Registration Name Changes

Nov. 12, 2015: DDTC issued detailed updated instructions for the submission of General Correspondence (GC) requests seeking amendment of prior ITAR (International Traffic in Arms Regulations, 22 CFR Parts 120-130) authorizations due to changes in the name/address and/or registration code of U.S. entities.  Changes from the original guidance include simplifying the authorization matrix/spreadsheets, adding a time restriction for amending the GC, and clarifying who may submit the GC. The new guidance is at http://www.pmddtc.state.gov/licensing/documents/gl_GCsMandA.pdf. DDTC will entertain comments after the update is implemented.

Department of the Treasury

OFAC Modifies List of Medical Supplies Exportable to IRAN

Nov. 2, 2015: The Office of Foreign Assets Control (OFAC) updated and expanded the list of medical supplies that can be exported or reexported to Iran under the general license set forth in Sec. 560.530(a)(3)(i) of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). The updated list is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_gl_med_supplies.pdf. OFAC’s notice of this amendment also references additional relevant resources on the OFAC website: the FAQs on this general license at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#lic_agmed and guidance on the sale of food, agricultural commodities, medicine, and medical devices by non-U.S. persons to Iran at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_guidance_med.pdf.

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OFAC Publishes FAQ Related to Requirements Pertaining to Travel by U.S. Persons to Cuba

Nov. 25, 2015: OFAC published a new FAQ regarding the processing by financial institutions subject to U.S. jurisdiction of Cuba travel-related transactions. The FAQ notes, among other things, that parties providing travel related services (e.g., airlines, vessel operators, and travel agents) to U.S. persons traveling to Cuba must maintain records for five years with details regarding the legal basis of the U.S. persons’ travel to Cuba under the Cuba Asset Control Regulations. This legal basis for travel to Cuba is to be certified by the traveler and does not require independent verification by the travel service provider. FAQ Nos. 34 and 52 are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.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 State

Nov. 25, 2015 – 80 Fed. Reg. 73865: The Department of State announced a modification of a sanction announced on Sep. 2, 2015, that prohibited U.S. Government procurements from the Russian entity Rosoboronexport (ROE). (See September 2015 Regulatory Update.) As modified, the sanction does not apply to U.S. Government subcontracts at any tier with ROE and any ROE sub-unit or subsidiary for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally, including the purchase of spare parts, supplies, and related services for these purposes.

Fines and Penalties

Nov. 4, 2015: The U.S. Attorney for the Central Division of the District of Utah filed a criminal complaint against Kolar Rahman Anees Ur Rahman, a citizen of India, alleging that he had violated the Arms Export Control Act (AECA, 22 USC Sec. 2778) and the ITAR 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. 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. The complaint was filed after Rahman sent a down payment 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. (Exports of ITAR-controlled items to Belarus are prohibited by ITAR Sec. 126.1.)

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Nov. 16, 2015: Ahmad Feras Diri of London, England, was arraigned in federal court for the Middle District of Pennsylvania and pleaded not guilty to an indictment alleging that he had conspired with two other men to export items from the U.S. to customers in Syria via third countries without the required authorization from the U.S. Department of Commerce. Diri was arrested in London on March 14, 2013, but was not extradited to the U.S. until Nov. 12, 2015. The goods involved in the indictment related to the detection of chemical warfare agents and to oil and gas field operations. One alleged co-conspirator, Harold Rinko, pleaded guilty to the conspiracy charge in September 2014. The third co-conspirator, Mowea Diri, a brother of Ahmad Diri, is a citizen of Syria. (See additional information in April 2014 and September 2014 Regulatory Updates).

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Nov. 23, 2015: EGYPTAIR Airlines Company of Cairo, Egypt agreed to pay $140,000 to settle charges by BIS that it had exported two Boeing 737-566 aircraft to Sudan without the required authorization. The planes were allegedly flown under Sudan Airways flight numbers from August 2010 to February 2011.

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Nov. 23, 2015: Barracuda Networks, Inc. of Campbell, CA (Barracuda U.S.) and its wholly-owned subsidiary, Barracuda Networks, Ltd. of Basingstoke, U.K. (Barracuda U.K.) agreed to pay $1,500,000 to settle charges by BIS of 26 violations of the EAR by Barracuda U.S. and 11 violations of the EAR by Barracuda U.K. All the charges involved acting with knowledge of a violation by selling and/or servicing items controlled under the EAR for encryption and/or antiterrorism reasons to Syria, Iran, and/or Sudan. The exports occurred from April 2009 through May 2012, and the exported commodities included web filters, firewall products, link balancers, server backup software, and subscriptions to software updates. Barracuda U.S. voluntarily disclosed the violation.

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Nov. 24, 2015: OFAC announced that Barracuda U.S. had agreed to pay a civil fine of $38,930 to settle charges by OFAC that it and Barracuda U.K. violated the ITSR, the Sudanese Sanctions Regulations (31 CFR Part 538), and the Syrian Sanctions Regulations (31 CFR Part 542). The OFAC charges alleged that Barracuda U.K. sold web filtering products, internet security products, and related software subscriptions to persons in Iran and Sudan and to persons who were Specially Designated Nationals and Blocked Persons under the Syrian Sanctions Regulations from August 2009 to April 2012, and that Barracuda U.S. provided the firmware and software updates for these and other software subscriptions from August 2009 to May 2012. Barracuda voluntarily self-disclosed the alleged violations to OFAC.

NOVEMBER 2015 EXPORT CONTROL REGULATION UPDATES Read More »

SEPTEMBER 2015 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through September 30, 2015. The newsletter is provided as a complimentary service to assist clients 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 Expands TMP License Exception to Include Temporary Exports of Cell Phones and Wi-Fi Equipped Computers to Sudan for Use in Humanitarian Efforts

Sep. 2, 2015 – 80 Fed. Reg. 52962: The Bureau of Industry and Security (BIS) amended Sec. 740.9(a)(2) of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to expand the coverage of License Exception TMP (temporary imports, exports, reexports and transfers) to authorize employer-owned devices such as cell phones and Wi-Fi-equipped computers to be exported or reexported to Sudan by persons engaged in humanitarian efforts as “tools of trade”. A prior amendment (Feb. 18, 2015 – 80 Fed. Reg. 8520) had unintentionally limited the exception to devices that were donated or sold.

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Various Parties Added to BIS Entity List

Sep. 2, 2015 – 80 Fed. Reg. 52963: BIS added 29 persons to the Entity List (Supp. No. 4 to EAR Part 744) to assure the efficacy of existing sanctions against Russia for violating international law and fueling the conflict in eastern Ukraine.  The new listings appear under 33 entries under the destinations Crimea region of Ukraine, Cyprus, Finland, Romania, Russia, Switzerland, Ukraine, and the United Kingdom. Fourteen of the entities will have a license requirement with presumption of denial for all items subject to the EAR. The remaining 15 entities are all subsidiaries of Rosneft, which was added to the Entity List on September 17, 2014 (79 Fed. Reg. 55612). These persons will be subject to a license requirement with presumption of denial when the exporter, reexporter, or transferor knows that the item will be used, directly or indirectly, in a sanctioned petroleum-related activity in Russia or is unable to determine whether the item will be used in such a project.

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EAR Amendments Permit Expanded Travel to Cuba and Greater Ability to Export Telecomm Equipment

Sep. 21, 2015 – 80 Fed. Reg. 56898: BIS announced new amendments to the EAR further facilitating interchanges with Cuba. These amendments follow earlier amendments affecting exports to Cuba on Jan 16, 2015 (80 Fed. Reg. 2286 and 2291). Among many other changes, the new amendments facilitate some travel to Cuba; expand general licenses for telecommunications and internet-based services; allow certain persons to establish a physical presence and maintain bank accounts in Cuba to use for authorized purposes; create a new licensing policy to help ensure the safety of civil aviation; and modify the license requirements for deemed exports and reexports to Cuba. A list specifying the license exceptions that are now effective for Cuba can be found in EAR Sec. 746.2(a)(1). A detailed list of the changes is on the BIS website at https://www.commerce.gov/news/press-releases/2015/09/commerce-and-treasury-announce-further-amendments-cuba-sanctions, and a link to Frequently Asked Questions (FAQs) is at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba. These amendments were published simultaneously with amendments to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) published by the Treasury Department Office of Foreign Assets Control (OFAC) (see below).

Department of State

DDTC Posts Web Notices Regarding Name Changes of Parties to Licenses/Agreements

Sep. 14, 17, 24, 28, and 29, 2015: 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 for B/E Aerospace Consumables Management GmbH, subsidiary of KLX, Inc., to KLX Aerospace Solutions GmbH due to corporate restructure;
  • Change in name from LSC Group Limited (Company No. 02275471) (LSC Group)to Babcock Information Analytics and Security Limited (Babcock) due to acquisition of LSC Group by Babcock;
  • Change in name from System Planning Corporation to SPC Federal, LLC due to corporate restructure;
  • Change in name from Aeroflex Airflyte (Aeroflex) to Cobham Slip Rings Naples Inc. (Cobham) due to corporate acquisition of Aeroflex by Cobham;
  • Change in name from Airbus DS Limited to Airbus Defence and Space Limited due to corporate rebranding;
  • Change in name from Persides Consultancy Services Limited (Persides) to ERA Technology Limited (ERA) due to corporate acquisition of Persides by ERA;AgustaWestland S.pA., Alenia Aermacchi S.p.A., Selex ES S.p.A., OTO Melara S.p.A., and Whitehead Sistemi Subacquei S.p.A. (the Operating Companies) are merging operations with the parent company, Finmeccanica S.p.A., Italy. AgustaWestland S.p.A, Alenia Aermacchi S.p.A,and Selex ES S.p.A will survive as subsidiaries under Finmeccanica S.p.A.OTO Melara S.p.A. and Whitehead Sistemi Subacquei S.p.A. will change their corporate names to Finmeccanica S.p.A.;
  • Change in name from NewSat Limited (NewSat)to SpeedCast Australia Pty Ltd (SpeedCast) due to corporate acquisition of NewSat by SpeedCast;
  • Change in name from GE Aviation Hydraulic Actuation (GEAHA) to Triumph Actuation Systems-IOM, Ltd. (Triumph) due to corporate acquisition of GEAHA by Triumph;
  • Thales SafarePons S.A.S, France merges with Thales Underwater Systems S.A.S.; and
  • Pearson Engineering Limited changes address.

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

OFAC Amends Rules to Permit More Commerce to Be Undertaken in Cuba

Sep. 21, 2015 – 80 Fed. Reg. 56915: OFAC amended the CACR to further ease sanctions against Cuba affecting, among others, travel, telecommunications, internet-based services, business operations in Cuba, remittances, provision of goods and services to Cuban individuals outside Cuba, legal services, and educational activities. These amendments were published simultaneously with amendments to the EAR by BIS (see above). FAQs about the new rules are on the Treasury Department website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.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 clients 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

Sep. 4, 2015 – 80 Fed. Reg. 53489: Air Bashkortostan Ltd. of Moscow, Russia, agreed to the denial of its export privileges for one year and to pay a civil penalty of $350,000 (suspended for one year and thereafter waived if it commits no further EAR violations) to settle charges by BIS that it re-exported four Boeing 757 aircraft valued at a total of $4.5 million and controlled under Export Classification Control Number (ECCN) 9A991.b to Iran without the required authorization. The aircraft were re-exported to Eram Air, an Iran-based airline.

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Sep. 20, 2015 – 80 Fed. Reg. 56439: BIS renewed for 180 days the Temporary Denial Order (TDO) against Flider Electronics, LLC, d/b/a Trident International Corporation (and other names); Pavel Semenovich Flider; and Gennadiy Semenovich Flider. The original TDO was based on an ongoing pattern of unauthorized exports to Russia of items controlled under the EAR involving bank transfers of more than $60 million. (See March 2015 Regulatory Update for more information on this case.)

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Sep. 24, 2015 – 80 Fed. Reg. 57572: BIS imposed denial orders against the following persons in connection with a conspiracy to export and reexport web monitoring and controlling equipment and software to Syria, including to the state-run Syria Telecommunications Establishment:

  • Aiman Ammar, UAE – 5 years;
  • Rashid Albuni, UAE – 6 years;
  • Engineering Construction and Contracting, Syria – 7 years;
  • Advanced Technology Solutions, Syria – 7 years; and
  • iT-Wave FZCO, UAE – 4 years.

The exported goods, which were designed for use in monitoring and controlling internet traffic, were exported with false documentation identifying the destinations as Iraq, Afghanistan, Turkey, Egypt, and the UAE.

Department of State

Sep. 2, 2015 – 80 Fed. Reg. 53222: The Department of State imposed nonproliferation measures including a prohibition on individual export licenses of items controlled under the EAR and suspension of existing licenses against several entities in Iran, North Korea, Sudan, Syria, and the following Chinese, Russian, Turkish, and United Arab Emirates (UAE) Entities:

  • China: BST Technology and Trade Company; Dalian Sunny Industries, a/k/a/ LIMMT; Li Fang Wei, a/k/a Karl Lee; Tianjin Flourish Chemical Company; Polestar Trading Company, Ltd.;
  • Russia: Instrument Design Bureau (KBP); Joint Stock Company Katod; JSC Mic NPO Mashinostroyenia; Rosoboronexport (ROE); Russian Aircraft Corporation (RAC) Mig;
  • Turkey: Multimat Ic ve Dis Ticarete Pazarlama Limited;
  • UAE: Eliya General Trading.

Fines and Penalties

Sep. 9, 2015: Alexander Fishenko of Houston, TX, a dual citizen of the U.S. and Russia, pleaded guilty in federal court in Brooklyn, NY to conspiring to export and illegally exporting analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors and other high-technology products to Russia without the required authorization; money laundering; obstruction of justice; acting as an unregistered agent of the Russian government; and other crimes. The illegal exports were valued at approximately $50 million, and the alleged end users included Russian military and intelligence agencies. Fishenko; 10 other individuals; Apex System, LLC, a firm located in Moscow, Russia; and Arc Electronics, Inc., a Texas company founded by Fishenko, were indicted in 2012. (See details in October 2012 Regulatory Update.) Four members of the conspiracy have pleaded guilty; three were scheduled to commence trial on Sep. 21, 2015; and three remain at large in Russia.

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Sep. 1, 2015: Streit Goup, a UAE corporation, its subsidiaries in the UAE and U.S., and two corporate officers agreed to pay civil penalties totaling $3.5 million, accept a 3-year denial of export privileges (suspended for 3 years), and submit to two audits of each company’s export control compliance programs to settle charges by BIS that they had exported U.S.-origin vehicles retrofitted with ballistic steel and bullet proof glass to end users in the UAE, Venezuela , Afghanistan, Iraq, Nigeria, the Philippines, and Singapore without the required authorizations from the Commerce Department. The fines were $1.6 million ($750,000 suspended for 3 years) on Streit Group, UAE and its subsidiary Streit Middle East, UAE; $1.6 million ($750,000 suspended for 3 years) on Streit USA of South Carolina; $250,000 on Guerman Gouturov, Chairman and CEO of the two UAE companies, and $50,000 on Eric Carlson, President of Streit USA.

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Sep. 25, 2015: Production Products, Inc. of Charlotte Hall, MD agreed to pay a civil penalty of $50,000 (suspended for 2 years and then waived), undergo an audit of its export compliance program, and have three senior officers complete an EAR compliance course to settle charges by BIS that it exported three EAR99 spiral duct production machines and related accessories valued at $500,000 to China National Precision Machinery Import/Export Corporation in Beijing, China, a party listed on the Treasury Department List of Specially Designated Nationals and Blocked Persons, without the required authorization.

SEPTEMBER 2015 EXPORT CONTROL REGULATION UPDATES Read More »

OCTOBER 2015 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through October 31, 2015. 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

EU Lifts Various Nuclear-related Economic and Financial Sanctions Against Iran, Sort of…

October 18, 2015: The Council of the European Union adopted the following legal acts lifting nuclear-related economic and financial EU sanctions against Iran, to be effective on “Implementation Day,” the day when the International Atomic Energy Agency (IAEA) verifies that Iran has implemented the nuclear-related measures specified in the Joint Comprehensive Plan of Action (JCPOA):

Regulations:

-  Council Regulation (EU) 2015/1861 of 18 October 2015 amending Regulation (EU) No 267/2012 concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0001.01.ENG

- Council Implementing Regulation (EU) 2015/1862 of 18 October 2015 implementing Regulation (EU) No 267/2012 concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0161.01.ENG

Decision:       

- Council Decision (CFSP) 2015/1863 of 18 October 2015 amending Decision 2010/413/CFSP concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0174.01.ENG

Note: As “Implementation Day” will only occur once the IAEA has verified that Iran has implemented sufficient measures to reduce its proliferation of nuclear weapons, it is possible that “Implementation Day” will not occur in the near term, if at all.

DEPARTMENT OF COMMERCE

BIS Amends the Unverified List

October 7, 2015 – 80 Fed. Reg. 60529: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 12 persons to the Unverified List (UVL, Supplement No. 6 to EAR Part 744); adding additional addresses for 4 parties already listed on the UVL; and removing 2 persons from the UVL list.

Added to the UVL:

Canada:

Rizma, Inc., Toronto

Czech Republic:

Bonitopto S.R.O., Ostrov

Georgia:

Spars Ltd., a.k.a. Spars Trading Ltd., Tbilisi

Hong Kong:

Foot Electronics Co. Ltd., Kowloon and Wan Chai

GA Industry Co. Ltd., Kowloon

Hua Fu Technology Co. Ltd., Kowloon

Yogone Electronics Co., Kowloon

United Arab Emirates (UAE):

Gulf Modern Solutions Engineering Company, Dubai

Masomi General Trading, Dubai

Recaz Star General Trading LLC, Dubai

Renat International General Trading, Ajman

Trade Star FZC, Dubai and Sharjah

New addresses:

Hong Kong:

AST Technology Group (HK) Ltd.

E-Chips Technology

Ling Ao Electronic Technology Co. Ltd., a.k.a. Voyage Technology (HK) Co. Ltd.

Narpel Technology Co., Limited

Removed from the UVL:

Hong Kong:

Ditis Hong Kong Ltd., Kowloon and New Territories

Pakistan:

Fauji Fertilizer Company Ltd., Rawalpindi

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BIS Seeks Comments on ECR Changes involving USML Categories VI, VII, XIII, and XX

Oct. 9, 2015 – 80 Fed. Reg. 61137: BIS requested public input into their review of the items that were moved from U.S. Munitions List (USML, 22 CFR Sec. 121.1) Categories VI (surface vessels of war and special naval equipment), VII (ground vehicles), XIII (materials and miscellaneous articles), and XX (submersible vessels and related articles) to the Commerce Control List (CCL, EAR Part 774) effective January 6, 2014, as part of the Export Control Reform Program (ECRP). BIS specifically invited comments on the clarity, usability, and other matters related to the following Export Control Classification Numbers (ECCNs): military vehicles (ECCNs 0A606, 0B606, 0C606, 0D606, and 0E606); vessels of war (ECCNs 8A609, 8B609, 8C609, 8D609, and 8E609); submersible vessels and oceanographic equipment (ECCNs 8A620, 8B620, 8D620, and 8E620); and auxiliary and miscellaneous military equipment (ECCNs 0A617, 0B617, 0C617, 0D617, and 0E617). Deadline for comments is Dec. 8, 2015. (See below for coordinated State Department announcement.)  

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BIS Amends List of Validated End Users in China

Oct. 28, 2015 – 80 Fed. Reg. 65931: BIS amended the entries on the List of Validated End Users (EAR Part 748, Supp. No. 7) for Advanced Micro-Fabrication Equipment, Inc., China (AMEC) and Applied Materials (China), Inc. (AMC). ECCN 3B001.a.2 was added to the list of items that may be provided to AMEC’s facility under Authorization VEU, and ECCN 3E001 (limited to technology for the development or production of items controlled by ECCN 3B001) was added to the VEU list for AMC. A new eligible facility in Shanghai was also added for AMC.

DEPARTMENT OF STATE

DDTC Name Changes Posted to Website

October 5, 9, 13, 15, 19, 20, and 23, 2015: 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 International Rectifier Denmark ApS to International Rectifier HiRel Denmark ApS due to corporate reorganization;
  • ESG Elektroniksystem-und Logistik-GmbH merged with E-Sicherheitsbeteiligungen GmbH and changed name to ESG Elektroniksystem-und Logistik-GmbH
  • HCL Logistics Inc. address change;
  • Change in name from Raytheon Microelectronics Espana S.A. to Malaga Aerospace, Defense and Electronics Systems, S.A. due to Raytheon Company’s (US) Spanish subsidiary being acquired by Malaga Aerospace, Defense and Electronics Systems S.A.;
  • Change in name of OTO Melara S.p.A., and Whitehead Sistemi Subacquei to Finmeccanica S.p.A., and decision for AgustaWestland S.pA., Alenia Aermacchi S.p.A., Selex ES S.p.A.to continue to operate as subsidiaries of Finmeccanica S.p.A. due to corporate reorganization;
  • Airbus DS Electronics and Border Security GmbH of Germany and Airbus DS Electronics and Border Security SAS, France established as subsidiaries of Airbus Defence and Space, GmbH, Germany and Airbus DS SAS, France, respectively, due to corporate reorganization; and
  • Change in name from GE Aviation Hydraulic Actuation to Triumph Actuation Systems-UK, Ltd. 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 Grants Extension on Validity Period of Export Licenses Involving Commodities That Transitioned from ITAR Control to EAR Control Due to ECR

Oct. 9, 2015: DDTC extended the validity period of export licenses, authorizations, and agreements covering items transitioning from the USML to the CCL pursuant to the ECRP as follows:

  • Licenses or authorizations that would otherwise expire 2 years after the effective date of the revision of the relevant USML category will remain valid for 48 months from the date of issuance, or as otherwise indicated on the license or authorization, and
  • Agreements containing transitioning items only, or both transitioning and non-transitioning items, that under the prior guidance would expire 2 years after the effective date of the revision will now remain valid for an additional year, until amendment, if required.

The updated guidance is on the DDTC website at http://www.pmddtc.state.gov/documents/IndustryNotice_ECRTransitionPlan.pdf.

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DDTC Also Seeks Comments on ECR Changes involving USML Categories VI, VII, XIII, and XX

Oct. 9, 2015 – 80 Fed. Reg. 61138: In a notice coordinated with the Commerce Department, DDTC requested comments from the public for its review of the items transferred from USML Categories VI, VII, XIII, and XX to the CCL pursuant to the ECRP. (See coordinated announcement in Commerce Department section above.) DDTC especially requested comments about controlled emerging and new technologies that are not sufficiently described in existing categories; defense articles that have entered into normal commercial use since the prior revision, or for which commercial use is anticipated within the next 5 years; and drafting or other technical issues in the text of the control list. Deadline for comments is Dec. 8, 2015.

DEPARTMENT OF THE TREASURY

Quarterly List of Israel Boycott-Supporting Countries Published by Treasury

Oct. 29, 2015 – 80 Fed. Reg. 66621: 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, UAE, and Yemen.

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OFAC Announces that October 18, 2015 is “Adoption Day” for the JCPOA, As Participating Countries Prepare to Implement the Reduction in Sanctions Against Iran in Exchange for a Reduction in Iran’s Nuclear Program

Oct. 18, 2015: The Office of Foreign Assets Control (OFAC) issued a statement noting that October 18, 2015 marked “Adoption Day,” the day on which the JCPOA became effective and participants began to prepare for implementation of their JCPOA commitments. U.S. sanctions remain unchanged from their status before Adoption Day. Actual implementation of the JCPOA will occur only on “Implementation Day,” which will occur, assuming it ever does, only once the IAEA certifies that Iran has taken sufficient steps to implement its commitments under the JCPOA to cease nuclear proliferation activities.  New FAQs relating to “Adoption Day” are on the OFAC website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_adoption_faqs_20151018.pdf.

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OFAC Issues Guidance Cautioning Parties on the Use of “False Hit Lists,” Advising that Such Lists Can Inadvertently Lead to Violations of OFAC Rules as Sanctions on Parties Change Over Time

Oct. 21, 2015: OFAC posted guidance regarding the use and maintenance of “false hit lists” that are maintained by some exporters to reduce the volume of sanction screening-related matches that they have determined do not apply to the persons of the same name who are involved in their transactions. The guidance is on the OFAC website at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/false_hit.pdf.

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OFAC Advises that NON-U.S. PERSONS Can Provide Certain Goods and Services to Diplomatic Missions of the Government of Iran without Becoming Subject to U.S. Law, but U.S. Persons May Not Engage in Such Activities

Oct. 22, 2015: OFAC posted a new FAQ on the provision of goods and services by non-U.S. persons for the conduct of the official business of the diplomatic missions of the Government of Iran located outside the United States or for the personal use of the employees of the missions. A link to this FAQ is at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#diplomatic.

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 clients 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

Sep. 13, 2015 – 80 Fed. Reg. 61358 and 61359: BIS issued 10-year denial orders against Rex Gene Maralit and Wilfredo Maralit based on their convictions of violating the Arms Export Control Act (AECA, 22 USC 2778) by exporting numerous military-style firearms, including high-capacity magazines and other accessories, to the Philippines, where they were re-exported to other countries. The two brothers are currently in federal prison serving 3-year sentences. (See more information about these cases in March 2015 Regulatory Update.)

FINES AND PENALTIES

Sep. 25, 2015: Vinmar International, Ltd. (“International”) and Vinmar Overseas Ltd. (“Overseas”), both foreign concerns doing business in Texas, agreed to pay civil fines to settle charges by BIS that they had violated the Antiboycott Regulations (EAR Part 760) by furnishing information about business relationships with boycotted persons or blacklisted persons and failing to report the receipt of requests to engage in a restrictive trade practice or foreign boycott friendly to the U.S. International agreed to pay $19,800 to settle charges of 7 violations involving transactions with Lebanon, Libya, Oman, UAE, and Yemen. Overseas agreed to pay $41,400 for 13 violations involving transactions with Lebanon, Qatar, Syria, and UAE.

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Oct. 9, 2015: Kirby Santos of the Republic of the Philippines pleaded guilty in U.S. District Court in New Jersey to a charge of conspiracy to violate the AECA and U.S. anti-smuggling laws. According to the criminal complaint, Santos arranged for suppliers to ship firearms parts to co-conspirators in the U.S. to make the sales appear domestic. The co-conspirators then shipped them to the Philippines in packages whose contents were falsely identified.   In this manner Santos purchased and directed the illegal export of more than $200,000 worth of defense articles over a period of almost 5 years. One co-conspirator, Abelardo Delmundo, of Toms River, NJ pleaded guilty to his role in the conspiracy in April 2015.

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Oct. 23, 2015: Mozaffar Khazaee, a dual citizen of the U.S. and Iran, formerly of Manchester, CT was sentenced in U.S. District Court in Connecticut to 97 months in prison and a $50,000 fine based on his plea of guilty to charges violating the AECA by attempting to send to Iran highly sensitive export controlled materials related to the Joint Strike Force Program, the F-22 Raptor, and numerous other U.S. military engine programs, including the V-22 Osprey, the C130J Hercules, and the Global Hawk. Khazaee, who had a Ph.D. in mechanical engineering, had stolen the information while he was employed at U.S. defense contractors Pratt & Whitney, General Electric, and Rolls Royce. (See additional details of this case in February 2015 Regulatory Update.)

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Oct. 26, 2015: Alexander Posobilov, Shavkat Abdullaev, and Anastasia Diatlova were convicted in federal court in Brooklyn, NY of conspiring to export, and illegally exporting, controlled microprocessors and other technology to Russia. All were employees of Arc Electronics Inc., of Houston, TX. The illegally exported items allegedly have applications in military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers, many of which are not produced in Russia.   The president of Arc, Alexander Fishenko, pleaded guilty to related charges in September 2015. (See details in September 2015 Regulatory Update.)

OCTOBER 2015 EXPORT CONTROL REGULATION UPDATES Read More »

FEBRUARY 2015 EXPORT CONTROL REGULATION UPDATES

REGULATORY UPDATES

Federal Courts

Federal District Court Judge Denies Deferred Prosecution Agreement for Fokker Services BV Regarding Export Violations

Feb. 5, 2015: A judge in Federal District Court for the District of Columbia refused to approve a deferred prosecution agreement in which the U.S. Department of Justice, the Treasury Department Office of Foreign Assets Control (OFAC), and the Commerce Department Bureau of Industry and Security (BIS) had proposed to accept a $21 million penalty to settle sanctions violations by Fokker Services B.V., a Netherlands company, involving 1,153 illegal exports of aircraft parts, technology, and services, valued at a total of $21 million, to Iran, Sudan, and Burma. (See description of this case in June 2014 Regulatory Update.) In rejecting the agreement, the judge found the penalty to be “grossly disproportionate” to the gravity of the offenses, which had been committed with the apparent knowledge of the company’s management. The judge stated specifically: “Surely one would expect, at a minimum, a fine that exceeded the amount of revenue generated, a probationary period longer than 18 months, and a monitor trusted by the Court to verify for it and the Government both that this rogue company truly is on the path to complete compliance.” Despite the judge’s strong words, the judge clarified in his closing statements that he remained open to approving a modified plea agreement.

Department of Commerce

BIS Requests that State Department Submit Proposal for Amendment of Wassenaar Arrangement to Remove Anistropic Plasma Dry Etching Equipment

Feb. 9, 2015 – 80 Fed. Reg. 6948: BIS determined that foreign availability exists for anisotropic plasma dry etching equipment controlled for national security reasons under Export Control Classification Number (ECCN) 3B001.c on the Commerce Control List (CCL, 15 CFR Part 774). As a result, BIS has requested the Department of State to submit a proposal to the Wassenaar Arrangement to remove this item from the  Wassenaar Arrangement Dual-Use Control List.

Various Chinese Entities Added to the BIS Entity List Due to Use of EAR Parts in Nuclear Explosive-Related Activities

Feb. 18, 2015 – 80 Fed. Reg. 8524: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 11 entities to the Entity List (Supp. No. 4 to EAR Part 744). The following Chinese entities, added to the list for using U.S.-origin items to produce supercomputers believed to be used in nuclear explosive activities, will now be subject to a license requirement for all items subject to the EAR with a case-by-case licensing policy:

See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.

  • National Supercomputing Center Changsha (NSCC-CS), Changsha City, Hunan Province;
  • National Supercomputing Center Guangzhou (NSCC-GZ), Guangzhou;
  • National Supercomputing Center Tianjin (NSCC-TJ), Tianjin; and
  • National University of Defense Technology (NUDT), Changsha City, Kaifu District, Hunan Province.

Various Pakistani and UAE Entities Added to BIS Entity List for Supporting Terrorist Organizations

The following Pakistani and United Arab Emirates entities, added to the list for engaging in activities in support of terrorist and extremist organizations, will now be subject to a license requirement for all items subject to the EAR with a license review policy of denial and no license exceptions available:

  • Azad Motors Property Choice, a.k.a Peshawar Master Azad Motors; Peshawar Motors Complex; Karakoram Azad Motors; and Azad Cars, Peshawar, Pakistan;
  • Hakim Noor, a.k.a. Hakim Nur, Sarafa Miram Shaw and Sikandar Pura, Pakistan;
  • Hakim Nur Sarafa, a.k.a. Noor Muhammad Market and Haji Hakim Noor Saraf, Miram Shaw, Pakistan;
  • Sher Qadir, Mirim Shaw, Pakistan;
  • Ajab Noor, a.k.a. Ajab Nur. Dubai, UAE;
  • Ajab Trading Co. LLC, Dubai, UAE; and
  • Perfect Tyre Trading Co LLC, Dubai and Abu Dhabi, UAE.

SATCO GmbH Removed from BIS Entity List

In the same action, BIS also removed the following entity from the Entity List:

  • SATCO GmbH, a.k.a. Satco Inc., Bremen, Germany

BIS Amends the EAR to Facilitate Communication and the Free Flow of Information for the Citizens of the Republic of Sudan

Feb. 18, 2015 – 80 Fed. Reg. 8520: BIS amended regulations affecting the export of certain services, hardware, and software incident to personal communications to the Republic of Sudan (Sudan) with the
goal of facilitating communication and the free flow of information among the Sudanese people. Changes include removing the license requirement from software controlled under ECCN 5D992.b or .c, expansion
of License Exception Consumer Communications Devices (CCD, EAR Sec. 740.19) to include exports to Sudan, and revision of the antiterrorism licensing policy in EAR Sec. 742.10 from a general policy of denial to a case-by-case policy for exports and reexports to Sudan of telecommunications equipment and associated computers, software and technology for civil end use, including items useful for the development of civil telecommunications network infrastructure. . It should be noted that the EAR was amended to reflect the July 2011 formal recognition of the Republic of South Sudan (South Sudan) as a new country. Please note that the license requirements and licensing policies are different for South Sudan and Sudan. Sudan continues to be subject to stringent controls, notwithstanding this change with regard to consumer  communications equipment, as a consequence of Sudan’s designation as a State Sponsor of Terrorism. BIS guidance on these issues is at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/13-policy-guidance/country-guidance/191-sudan (See below for related action by OFAC.)

Department of Energy

The National Nuclear Security Administration (NNSA) Updated Its Regulations Pertaining to Assistance for Foreign Atomic Energy Activities

Feb. 23, 2015 – 80 Fed. Reg. 9359: The National Nuclear Security Administration (NNSA) issued a comprehensive update of its regulation on Assistance to Foreign Atomic Energy Activities (10 CFR Part 810), which controls the export of unclassified nuclear technology and assistance. A 16-page publication providing details and guidance on the revised rule is on the NNSA website at http://nnsa.energy.gov/sites/default/files/nnsa/inlinefiles/810guidancedocument022015_0.pdfhttp://nnsa.energy.gov/sites/default/files/nnsa/inlinefiles/810guidancedocument022015_0.pdf.

Department of State

Various Name/Address Changes Posted to the DDTC Website

February 5, 6, 12, 13, and 23, 2015: 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:

  • Airbus Helicopters c/o Daher Address Change;
  • Energy Resources Conservation Board (ERCB) Changing to Alberta Energy Regulator (AER) and Changing Address due to its acquisition by AER;
  • Wojskowe Zaklady Mechaniczne S.A. Changing to ROSOMAK S.A. due to corporate rebranding;
  • B/E Aerospace Consumables Management Changing to KLX Poland due to corporate reorganization;
  • Northrop Electronic Systems Integration Ltd Changing to Northrop Grumman UK Ltd. due to corporate reorganization; and
  • Sensor and Antenna Systems Lansdale, Inc. (SASL) acquired REMEC Defense & Space, Inc., which merged with Cobham Electronic Systems Inc.;
  • SASL is now Changing to Cobham Advanced Electronic Solutions, Inc.

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

Grace Period for Using ITAR Agreements Extended to Two Years After the LAST EFFECTIVE DATE a USML Category in the TAA was Changed by ECR

Feb. 4, 2015: DDTC modified the Agreement Guidelines to clarify how Export Control Reform (ECR) changes will affect agreements (TAAs, MLAs, WDAs, etc.) when the agreement covers multiple categories under the United States Munitions List (USML). DDTC changed the Guidelines to reflect that the USML Category with the latest effective date will govern the grace period for amending agreements to address ECR changes in product classifications. For example, if a TAA covers both USML Category VIII and Category XI technical data, the TAA will remain fully effective without amendment until December 30, 2016, due to the Category XI ECR changes going into effect last, on December 30, 2014. Without this clarification, the applicant for the TAA would have had to seek amendment for their TAA prior to October 13, 2015 for the Category VIII technical data and defense articles covered by their TAA, as the two year period for using existing agreements for Category VIII technical data and defense articles expires on October 13, 2015. Then, the applicant would have had to later seek amendment for USML categories later effected by ECR. Now, applicants can wait and keep existing approvals that cover multiple USML categories until two years after the last effective date that a covered USML Category was modified by ECR. See, http://www.pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.2.pdf.

DDTC Announces New Unmanned Aircraft System (UAS) Export Policies

Feb. 13, 2015: DDTC announced that in support of U.S. policy on the export of military unmanned aerial systems (UAS), it will now require certain assurances of proper use, signed by the foreign end user and the U.S. applicant, in addition to the required DSP-83 Non-Transfer and Use Certificate. The new assurances will be included in an additional form that will be required to be submitted to DDTC at the time of initial  application for every license application for a permanent (not temporary) export of a UAS. The form, an addendum to DSP-83 Block 5, is on the DDTC website at http://www.pmddtc.state.gov/documents/Web%20Notice%20Addendum%20to%20DSP.pdf.

DDTC Announces New Unmanned Aircraft System (UAS) Export Policies

Feb. 17, 2015: The State Department announced a new policy permitting the export of U.S.-origin armed military UAS under stringent conditions, with applications to be considered on a case-by-case basis. Requirements for such exports include that the sales be made through the government-to-government Foreign Military Sales (FMS) program after review under the Department of Defense Technology Security and Foreign Disclosure process and that the recipient nation agree to end-use assurances including use of force only when lawful under international law, end-use monitoring, possible additional security conditions,  adherence to international humanitarian and human rights law, non-use for unlawful surveillance or unlawful force against domestic populations, and appropriate training to reduce risk of unintended injury or  damage. Sales of commercial UAS will continue to be governed by the EAR.

State Department Announces New, As Yet Unreleased Policy regarding the Sale of Armed UAS via the FMS Program

Feb. 26, 2015: DDTC posted an Industry Notice stating that pursuant to International Traffic in Arms Regulations (ITAR, 22 CFR Secs. 120-130) Sec. 126.6(c), the temporary import (and subsequent export) without a license of unclassified and classified defense items transferred under the Department of Defense FMS program and specifically identified in an executed DOD Letter of Offer and Acceptance pursuant to the FMS program is authorized. A Frequently Asked Question (FAQ) on this topic is on the DDTC website at http://www.pmddtc.state.gov/faqs/ECR.html.

Department of the Treasury

Treasury Department Amends the OFAC to Reflect Obama Administration Efforts to Open Communications and the Free Flow of Information to the Citizens of the Republic of Sudan

Feb. 18, 2015 – 80 Fed. Reg. 8531: OFAC amended the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) by issuing a general license expanding the scope of software, hardware, and services incident to
personal communications that may be exported to Sudan without specific authorization. (See above for related action by BIS.) FAQs about this general license are posted on the OFAC website at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx#sud_comm_gl.

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 clients 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

BIS Denies Export Privileges to Maple Pacific Corporation and Andrew Hsu for Unlawfully Exporting Equipment to Iran

Department of Commerce
Feb. 12, 2015 – 80 Fed. Reg. 7839: BIS denied the export privileges of Maple Pacific Corporation and related person Andrew Hsu, both of Mission Viejo, CA, for 10 years based on the 2012 conviction of Maple Pacific of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) by willfully exporting and transshipping industrial parts used to maintain equipment in the steel manufacturing industry from the U.S. to Iran without the required authorization. In the criminal case Maple Pacific was sentenced to probation for 2 years, a $5,000 fine, and a $400 assessment.

BIS Denies Export Privileges to Ernesto Salgado-Guzman for Unlawfully Exporting Firearms to Mexico

Feb. 23, 2015 – 80 Fed. Reg. 9434: BIS denied the export privileges of Ernesto Salgado-Guzman or Raymondville, TX for 10 years based on his conviction in 2014 of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully exporting, causing to be exported, and attempting  to export rifles to Mexico without the required authorization. In the criminal case Salgado-Guzman was sentenced to 46 months imprisonment, 36 months of supervised release, and a $100 assessment.

Department of State

DDTC Removes Chemical and Biological Weapons Proliferation Sanctions on Two Chinese Companies

Feb. 24, 2015 – 80 Fed. Reg. 9846: DDTC waived chemical and biological weapons proliferation sanctions that have been in effect since May 1997 against the following two Chinese entities:

  • Nanjing Chemical Industries Group (NCI) and
  • Jiangsu Yongli Chemical Engineering and Technology Import/Export Company.

Fines and Penalties

Various Persons Convicted of Violating U.S. Export Laws and Regulations

Feb. 3, 2015: Ali Saboonchi of Parkville, MD, a dual citizen of the U.S. and Iran, was sentenced to two years in prison in federal court in Greenbelt, MD based on his conviction of conspiracy and 7 counts of violating IEEPA by exporting industrial parts and components to the UAE and China with knowledge that they would be transshipped to Iran. Working with two Iranian co-conspirators who remain at large in Iran, Saboonchi established a company in Maryland to respond to purchase orders from Iranian customers for items including, among others, various liquid pumps and valves and flow meters.

Feb. 9, 2015: David Kelley of Richmond, TX was sentenced to 18 months in prison followed by 3 years of supervised release based his plea of guilty to charges of violations of the AECA involving unlicensed
exports of ITAR-controlled night-vision equipment to customers in 24 countries including Argentina, Australia, Russia, the Philippines, the United Kingdom, and Japan. Kelley sold the items through a business that operated primarily over eBay. He was caught in a sting operation when an undercover agent of the U.S. Immigration and Customs Enforcement Homeland Security Investigations (ICE-HSI) asked him to export an ATN Generation 4 monocular night vision device. After acknowledging in an email that the export would violate the ITAR and demanding additional payment for risking prosecution, Kelley exported the device to New Zealand without the required authorization from DDTC.

Feb. 17, 2015: The Assistant Attorney General for National Security and U.S. Attorney for the Northern District of Illinois announced the indictment of Vibgyor Optical Systems Inc., of Arlington Heights, IL,
its president Bharat “Victor” Verma, also of Arlington Heights, and a former employee, Urvashi “Sonia” Verma, of Chicago, IL on charges including conspiracy to unlawfully export military articles including components used in night vision systems and in the M1A1 Abrams tank. The alleged unlawful imports and exports occurred as part of a larger conspiracy to defraud the U.S. by misrepresenting the location of manufacture of items it supplied on a subcontract to supply optical components and systems to Defense Department prime contractors. According to the allegations, after falsely representing that the items Vibgyor supplied were made in the U.S. Bharat Varma illegally exported technical data and attempted to export an example of one of the items to a manufacturer in China.

Feb. 25, 2015: Mozaffar Khazaee, formerly of Manchester, CT, pleaded guilty in Federal District Court in Hartford, CT to violating the AECA in connection with his efforts to export to Iran information relating to military jet engines for the F35 Joint Strike Fighter and F-22 Raptor programs. Khazaee had obtained the information during his previous employment by U.S. defense contractors Pratt & Whitney, General Electric, and Rolls Royce. In November 2013 Khazaee sent many boxes of documents and digital media, including thousands of sensitive technical manuals, drawings, and other proprietary material, some of which were labeled as ITAR-controlled, to a freight forwarder for shipment to Iran. Khazaee was arrested in January 2014 at Newark Liberty International Airport before boarding a flight with a final destination of Iran. Search warrants executed on his luggage revealed additional export controlled documents relating to military jet engines. He has been in federal custody since that time. Sentencing is scheduled for May 20, 2015.

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