, Author at FD Associates, Inc.

MAY 2018 EXPORT CONTROL REGULATION UPDATES

May 2018

This newsletter is a listing of the latest changes in export control regulations through May 31, 2018. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

U.K. Ministry of Economy, Trade and Industry (METI) Updates Its End User List

May 2, 2018: The U.K. Ministry of Economy, Trade and Industry (METI) issued an updated End User List (EUL) of 529 foreign entities for which concern cannot be eliminated regarding involvement in activities such as the development of weapons of mass destruction (WMDs). Exporters must apply for a license to export items to listed entities unless it is evident that the exported items will not be used for activities such as the development of WMDs and other items. The updated EUL is on the METI website at http://www.meti.go.jp/press/2018/05/20180502001/20180502001-1.pdf.

The President

U.S. Ends Participation In The Joint Comprehensive Plan of Action (JCPOA) for Iran

May 8, 2018: President Trump issued a Presidential Memorandum (PM) ending U.S. participation in the Joint Comprehensive Plan of Action (JCPOA, the nuclear agreement reached with Iran in 2015) and instructing the Secretary of State and Secretary of the Treasury to take within 180 days the steps necessary to re-impose all sanctions that were waived under the JCPOA, e.g., preparing necessary executive actions, re-listing persons removed from any relevant sanctions lists, issuing limited waivers during the wind-down period, and preparing guidance needed by the business community. The PM further directs that these steps be implemented in a manner that to the extent practicable, shifts the financial burden of re-imposing the sanctions to Iran or the Iranian counterparty. This PM is on the White House website at https://www.whitehouse.gov/presidential-actions/ceasing-u-s-participation-jcpoa-taking-additional-action-counter-irans-malign-influence-deny-iran-paths-nuclear-weapon/. (See below for information about this PM posted by the Treasury Department.)

Department of Commerce – Bureau of Industry and Security

BIS Announces Improvements To Its SNAP-R System

May 11, 2018: The Bureau of Industry and Security (BIS) announced improvements in the Simplified Network Application Process – Redesign (SNAP-R) system designed to make the system more user-friendly. The changes include a new “Login Help” option on the login screen, new “contact person” field on the “List Work Items” page, new format for entering international telephone numbers and telephone extension numbers, and increased character limits in some data fields. The full announcement is on the BIS website at https://www.bis.doc.gov/index.php/all-articles/1420-snap-r-updates-2018.

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BIS Posts Presentations From 2018 Update Conference on Its Website

May 15, 2018: BIS posted 11 presentations from the 2018 Annual Conference on Export Controls and Policy, which was held in Washington, DC May 14-15, 2018. The presentations are on the BIS website at https://www.bis.doc.gov/index.php/all-articles/226-bis-annual-conference-2018/1423-bis-annual-conference-2018-presentations. BIS also posted the prepared remarks of Secretary of Commerce Wilbur Ross and Assistant Secretary for Export Administration Richard Ashooh at https://www.commerce.gov/sites/commerce.gov/files/bis2018_secross_remarks_0511.pdf and https://www.bis.doc.gov/index.php/forms-documents/bis-annual-conference-2018/2217-remarks-of-assistant-secretary-for-export-administration-richard-ashooh-may-15-2018-as-prepared-for-delivery/file, respectively.

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BIS Adds 33 Persons To The Unverified List

May 17, 2018 – 83 Fed. Reg. 22842: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 33 persons in Canada, China, Estonia, Finland, Pakistan, Russia, and the United Arab Emirates (UAE) to the Unverified List (UVL, EAR Part 744, Supp. No. 6) 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. The new persons on the UVL are:

Canada:

Laval Electronics, Laval;
Services GP Tek, a.k.a. Nouvelle Option, Brossard and Montreal;

China:

Changhe Aircraft Industries Group, Jingdezhen City, Jiangxi Province;
Dandong Center for Food Control, Dandong;
Institute of Geology, Chinese Academy of Geological Sciences, Beijing;
Jiangxi Hongdu Aviation Ind. Group, The Nanchang National High & New Technology Development Zone, Jiangxi Province, Yaohu Nanchang;
Jiujiang Jinxin Nonferrous Metals Co, Ltd., Jiujiang City;
Liupanshui Normal University, Liupanshui, Guizhou;
Nanchang University, Nanchang;
Shanxi Hemu Industrial Co., Ltd., Shanxi;
Sino Superconductor Technology Company, a.k.a. Zongyi Superconductor Technologies Co. Ltd., a.k.a. SinoHTS, Beijing;
Xinjiang East Hope New Energy Company Ltd, XinJiang;
Yantai Salvage Bureau, Yantai, Shandong;

Estonia:

Simms Marine Group OU, Tallinn;

Finland:

Net Logistics JVM OY, a.k.a. Net Logistic JVM OY Helsinki and Kotka;

Hong Kong:

Ling Ao Electronic Technology Co. Ltd, a.k.a. Voyage Technology (HK) Co., Ltd. a.k.a. Xuan Qi Technology Co., Ltd., Kowloon Bay, Kwun Tong, Wanchai, Kowloon, and Wanchi;

Pakistan:

Andleeb Associates, Rawalpindi;

Russia:

Alliance EG Ltd., St. Petersburg;
Eltech Ltd., Saint Petersburg;
EFO Ltd., Saint Petersburg;
MT Systems, Saint Petersburg;
Radiofizika OAO, Moscow;
Romona Inc., Yuzhno-Sakhalinsk;
FSUE Rosmorport Far Eastern Basin Branch, Vladivostok;
Sakhalin Energy Investment Company Ltd., Yuzhno-Sakhalinsk;
SIC Dipaul, Saint Petersburg;
Tavrida Microelectronics, Moscow;
VIP Technology Ltd., Saint Petersburg;

United Arab Emirates:

Alsaroud General Trading, a.k.a. Alsaroud Ground Trading Company, a.k.a. Alsarroud General Trading LLC, Sharjah;
Chepstow FZE, Sharjah;
GenX Middle East FZE, a.k.a. GenX Systems LLC, Dubai;
Roudah Al Hayat General Trading FZE, a.k.a. Rudha Al Hayat General Trading, a.k.a. Rouda Al Hayat General Trading, a.k.a. JSB Logistics, Dubai; and
TEM International FZC, Dubai.

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BIS Publishes Proposed Rule Regarding Transition of USML Category I, II and III Items To EAR

May 24, 2018 – 83 Fed. Reg. 24166: BIS published a proposed rule describing how firearms, guns, ammunition, and related articles that are currently controlled under Categories I, II, and III of the U.S. Munitions List (USML, 22 CFR Sec. 121.1) but neither provide the U.S. with a critical military or intelligence advantage nor, in the case of weapons, are inherently for military end use would be controlled under the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). Under the new rule, transferred items currently controlled under USML Category II would be controlled under the CCL in four new “600 series” Export Control Classification Numbers (ECCNs), as these items are of a military nature. Items currently controlled under USML Categories I and III, which for the most part have civil, recreational, law enforcement, or other non-military applications would be covered by new “500 series” ECCNs. Small arms that are currently controlled under USML Category I will be subject to brokering requirements under Arms Export Control Act, even though the items are transferring to control under the EAR which does not presently have any brokering related provisions. The proposed rule also clarifies and renumbers some existing ECCNs. Deadline for comments is July 9, 2018. (See information below about coordinated proposal by Department of State.)

Department of State

DDTC Name and Address Changes Posted To Its Website

May 7 and 21, 2018: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Address for Goodrich Actuation Systems SAS;
Change in Name from Airbus DS Electronics and Border Security SAS (EBS France) to HENSOLDT France SAS due to its acquisition by HENSOLDT;
Change in Address for Fokker Engineering Romania SRL;
Change in Address for Quyntess BV; and
Change in Name from Oculus Info Inc. to Uncharted Software Inc. 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 Proposed Rule Regarding Transition of USML Category I, II and III Items To EAR

May 24, 2018 – 83 Fed. Reg. 24198: DDTC published a proposed rule amending the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by revising USML Categories I (firearms, close assault weapons and combat shotguns), II (guns and armament) and III (ammunition and ordnance) to describe more precisely the articles warranting control on the USML because they provide the U.S. with a critical military or intelligence advantage or, in the case of weapons, are inherently for military end use. Articles removed from the USML would all become subject to the EAR. A link to a list of the key points of these proposed transfers is on the DDTC website at https://www.pmddtc.state.gov, under “Announcements.” As with prior ECR revisions of the ITAR, all 3 categories will include a new paragraph allowing ITAR licensing for items subject to the EAR if they are to be used in or with defense articles and are described in the purchase documentation submitted with the license application. Deadline for comments is July 9, 2018. (See information above about coordinated proposal by Department of Commerce.)

Department of the Treasury

OFAC Issues Ukraine/Russia General Licenses 12B and 13A

May 1, 2018: The Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General Licenses (GLs) 12B and 13A, both expiring June 6, 2018. GL 12B, on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl12b.pdf, replaces GL 12A (see April 2018 Regulatory Update) in its entirety and authorizes certain financial transactions relating to processing funds held by a blocked U.S. person at a U.S. financial institution. GL13A, published at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13a.pdf, replaces GL 13 (see April 2018 Regulatory Update) in its entirety and relates specifically to holdings in EN+ Group, GAZ Group, United Company RUSAL PLC, Irkutskenergo, GAZ Auto Plant, and Rusal Capital Designated Activity Company. OFAC also published 3 new FAQs related to its April 6, 2018, 50 percent rule on its website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#583 and revisions to FAQs as a result of OFAC’s April 6. 2018, 50 percent rule at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#570.

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OFAC Issues 90-180 Wind Down Periods For Transactions With Iran

May 8, 2018: Following up on the President’s Memorandum ending U.S. participation in the JCPOA (see information about the PM above), OFAC announced that Departments and Agencies will begin a process to implement 90-day and 180-day wind-down periods for activities involving Iran that were consistent with the U.S. sanctions relief specified in the JCPOA; that OFAC expects to revoke or amend general and specific licenses issued in connection with the JCPOA “as soon as administratively feasible;” and that these actions will include new authorizations to allow the wind-down of transactions and activities that were authorized by the revoked or amended licenses. At the same time, OFAC also published 16 FAQs covering General Questions, Wind-down, Sanctions Listings, Licensing, and Other. The OFAC statement is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/iran.aspx; the FAQs are at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf.

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Treasury Lists Countries That May Be Involved In An International Boycott

May 16, 2018 – 83 Fed. Reg. 22751: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.

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OFAC Issues Ukraine/Russia General Licenses 12C and 15

May 22, 2018: OFAC issued Ukraine-/Russia-related GL 12C and GL 15. GL 12C, authorizing certain actions by U.S. financial institutions, replaces and supersedes GL 12B (see May 1, 2018, above) in its entirety. GL 15 authorizes U.S. persons to engage in specified transactions related to winding down or maintaining business with GAZ Group and its subsidiaries until Oct. 23, 2018. GL 12C is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl12c.pdf; GL 15 is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl15.pdf; and 6 new FAQs and revisions to existing FAQs about these general licenses are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#586 and https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#576, respectively.

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May 31, 2018: OFAC issued Ukraine-/Russia-related GL 13B, replacing and superseding GL 13A (see May 1, 2018, above) in its entirety and providing a new expiration date of Aug. 5, 2018. GL 13B is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13b.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 State

May 9, 2018 – 83 Fed. Reg. 21333: The State Department, Bureau of International Security and Nonproliferation (ISN) imposed on Rosoboronexport (ROE) (Russia) and any successor, sub-unit or subsidiary thereof nonproliferation measures including a ban on U.S. Government (USG) procurement, a ban on USG sales of any item on the USML and termination of all sales of defense articles, defense services, or design and construction services under the Arms Export Control Act (AECA, 22 USC 2778 et seq.), and a prohibition against the issuance of individual licenses for exports of items whose export is controlled under the EAR. These nonproliferation measures will remain in place for two years unless the Secretary of State determines otherwise.

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May 10, 2018 – 83 Fed. Reg. 21812: ISN imposed nonproliferation measures including a ban on USG procurement, a ban on USG sales of any item on the USML and termination of all sales of defense articles, defense services, or design and construction services under the AECA, and a prohibition against the issuance of individual licenses for exports of items whose export is controlled under the EAR on the following persons:

China:

Abascience Tech Co., Ltd. and any successor, sub-unit, or subsidiary thereof;
Easy Fashion Metal Products Trade Company [aka Easyfashion Industries] and any successor, sub-unit, or subsidiary thereof;
Emily Liu (Chinese individual);
Karl Lee [aka Li Fangwei] (Chinese individual);
Raybeam Optronics Co., Ltd and any successor, sub-unit, or subsidiary thereof;
Shanghai Rotech Pharmaceutical Engineering Company and any successor, sub-unit, or subsidiary thereof;
Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) and any successor, sub-unit, or subsidiary thereof;
Sunway Tech Co., Ltd and any successor, sub-unit, or subsidiary thereof;
T-Rubber Co. Ltd and any successor, sub-unit, or subsidiary thereof;

Egypt:

Sakr Factory for Developmental Industries and any successor, sub-unit, or subsidiary thereof;

Iran:

Mojtaba Ghasemi (Iranian individual);
Islamic Revolutionary Guard Corps Qods Force (IRGC QF) and any successor, sub-unit, or subsidiary thereof;
Pars Aviation Service Company (PASC) and any successor, sub-unit, or subsidiary thereof;
Defense Industries Organization (DIO) and any successor, sub-unit, or subsidiary thereof;

North Korea:

Saeng Pil Trading Corporation (SPTC) and any successor, sub-unit, or subsidiary thereof;
Second Economic Committee (SEC) Korea Ryonbong General Corporation and any successor, sub-unit, or subsidiary thereof;

Russia:

183rd Guard Air Defense Missile Regiment and any successor, sub-unit, or subsidiary thereof;
Instrument Design Bureau (KBP) Tula and any successor, sub-unit, or subsidiary thereof;
Gatchina Surface-to-Air Missile Training Center and any successor, sub-unit, or subsidiary thereof;
Russian General Staff Main Intelligence Directorate (GRU) and any successor, sub-unit, or subsidiary thereof;
18th Central Scientific Research Institute (18th TsNII) Scientific Research Center (NITs) (Kursk) and any successor, sub-unit, or subsidiary thereof;
Russian Research and Production Concern (BARL) and any successor, sub-unit, or subsidiary thereof;

Syria:

Scientific Studies and Research Center (SSRC) and any successor, sub-unit, or subsidiary thereof;
Lebanese Hizballah and any successor, sub-unit, or subsidiary thereof;
Megatrade and any successor, sub-unit, or subsidiary thereof;
Syrian Air Force and any successor, sub-unit, or subsidiary thereof;

Turkey:

Seden Denizcilik Hizmeleri Sanayi de Ticaret Limited and any successor, sub-unit, or subsidiary thereof; and

United Arab Emirates:

Yona Star International and any successor, sub-unit, or subsidiary thereof.

These nonproliferation measures will remain in place for two years unless the Secretary of State determines otherwise.

Department of the Treasury

May 24, 2018: In a notice designating 9 individuals and entities procuring export-controlled, U.S.-origin goods for sanctioned Iranian airlines as Specially Designated Global Terrorists (SDGTs), OFAC also designated as SDGTs 31 individual aircraft in which Caspian Air, Meraj Air, Pouya Air, or Mahan Air, Iranian airlines previously designated as SDGTs, have a property interest. OFAC stated that these identifications serve to give notice to those who grant landing rights and provide general services to these aircraft that they could be exposed to U.S. sanctions. The list of newly designated SDGTs is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20180524.aspx; an explanatory press release is at https://home.treasury.gov/news/press-releases/sm0395.

Fines and Penalties

May 10, 2018: Giovanni Zannoni, an Italian national and member of the Italian military, was removed from the U.S. on a commercial flight and transferred to the custody of Italian law enforcement authorities following his conviction of violating the AECA by exporting night vision equipment and assault rifle components controlled on the USML without the required license from the State Department. As part of his guilty plea, Zannoni agreed to forfeit $436,673, gun parts, and night vision and thermal imaging devices.

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May 15, 2018: Frederik Barbieri, of Port St. Lucie, FL, pleaded guilty in U.S. District Court for the Southern District of Florida of conspiracy and violation of the AECA by possessing firearms with obliterated serial numbers; delivering packages containing those firearms to contract carriers for international shipment without providing notice that the packages contained firearms; and exporting firearms, firearm accessories, and ammunition from the U.S. to Brazil without obtaining the required licenses from the State Department. The violations were discovered when Brazilian law enforcement intercepted a shipment by Barbieri that contained approximately 30 AR-15 and AK-45 rifles and firearm magazines, all concealed in 4 hollowed-out 38-gallon Rheem water heaters. Documentation held by the freight forwarder revealed earlier shipments of 120 water heaters, and U.S. enforcement agents executing a search warrant found an additional 52 rifles with obliterated serial numbers, over 2,000 rounds of ammunition, and packaging materials in a storage unit rented by Barbieri.

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May 16, 2018: Mehmet Hakan Atilla, a resident and citizen of Turkey and Deputy General Manager of International Banking of Turkish Bank-1, was sentenced in federal court in New York City to serve 32 months in federal prison following his conviction in a 5-week jury trial of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by conspiring to use the U.S. financial system to conduct transactions on behalf of the government of Iran and other Iranian entities which were barred by U.S. sanctions and defrauding U.S. financial institutions by concealing these transactions’ true nature. The conspiracy included providing access to restricted oil revenues through international financial networks, including unwitting U.S. financial institutions, to the government of Iran, Iranian entities, and various entities that had been identified by OFAC as Specially Designated Nationals (SDNs). Among other things, Turkish Bank-1 was used in transactions involving billions of dollars of petroleum revenues held by the Central Bank of Iran and the National Iranian Oil Company. The conspirators also used fraudulent documents to disguise prohibited transactions for Iran by making them falsely appear to involve food, making them eligible for humanitarian exceptions to the sanctions regime.

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May 25, 2018: Merit Aerospace, Inc. and its Chief Executive, Yanhong Zhou, a/k/a Joe Zhou, both of Pasadena, CA, agreed to pay a civil penalty of $221,000, complete two audits of Merit’s export controls compliance program, and have their export privileges suspended for 4 years to settle charges by BIS that they violated EAR Sec. 764.2(g) by misrepresenting and concealing facts from BIS. (The penalty will be paid in two installments of $20,000. The remaining $181,000 of the penalty and the suspension of Merit’s export privileges will both be suspended for 4 years and thereafter waived if Merit and Zhou have complied with the terms of the Settlement Agreement and committed no further violations.) After Merit was notified by the BIS Office of Export Enforcement (OEE) that a shipment of aircraft parts had been detained for further investigation, while Merit was in ongoing discussions with OEE about its export business with the customer, Merit arranged to ship replacement parts to the customer by exporting them to a different consignee and arranging for their ongoing shipment to the customer. Accordingly, Merit submitted electronic export information (EEI) for the replacement shipment that falsely identified the ultimate consignee. Merit then violated EAR Sec. 764.2(g) when it deliberately did not inform OEE of this new shipment when it met with OEE the following day.

MAY 2018 EXPORT CONTROL REGULATION UPDATES Read More »

APRIL 2018 EXPORT CONTROL REGULATION UPDATES

April 2018

This newsletter is a listing of the latest changes in export control regulations through April 30, 2018. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

U.K. Publishes Guidance On Latest Version Of The Cryptography Note

April 3, 2018: The Export Control Joint Unit (ECJU) of the U.K. Department for International Trade published detailed guidance on interpreting the latest version of the “Cryptography Note” (Note 3 to Category 5 Part 2, Information Security) as it appears in Annex I to Council Regulation (EC) No. 428/2009 (as last amended by Regulation (EU) No. 2268/2017). The guidance is at https://www.gov.uk/government/publications/notice-to-exporters-201807-guidance-on-the-cryptography-note/notice-to-exporters-201807-guidance-on-the-cryptography-note.

U. S. Congress

The House Of Representatives Foreign Affairs (FA) Committee Passes The Export Control Reform Act Of 2018

April 17, 2018: The House of Representatives Foreign Affairs (FA) Committee passed H.R. 5040, the Export Control Reform Act of 2018, in a version that was a substitute for the bill initially introduced in February 2018. (See February 2018 Regulatory Update.) This bill must now be scheduled for considerations by the House of Representatives. The biggest difference between the current bill and the bill initially introduced in February is that this bill does not define U.S. companies with foreign ownership as foreign persons.

The bill as passed is on the FA Committee website at https://docs.house.gov/meetings/FA/FA00/20180417/108181/BILLS-115-HR5040-R000487-Amdt-101.PDF.

The President

The White House Releases The National Security Presidential Memorandum Regarding U.S. Conventional Arms Transfer Policy

April 19, 2018: The White House released a National Security Presidential Memorandum (NSPM) Regarding U.S. Conventional Arms Transfer Policy aimed at better aligning government actions regarding arms transfers with U.S. national and economic security interests. Noting that the policy will be implemented in compliance with the Arms Export Control Act of 1976 (AECA, 22 USC 2751 et seq.), the document lays out broad policy goals and the considerations to be accounted for in arms transfer decisions and directs the Secretary of State, in coordination with the Secretaries of Defense, Commerce, and Energy, to submit a proposed action plan within 60 days. This NSPM is on the White House website at https://www.whitehouse.gov/presidential-actions/national-security-presidential-memorandum-regarding-u-s-conventional-arms-transfer-policy/. (See below for related State Department memorandum.)

Department of Commerce – Bureau of Industry and Security

BIS Amends Various Parts Of The Export Administration Regulations

April 2, 2018 – 83 Fed. Reg. 13849: The Bureau of Industry and Security (BIS) amended Parts 738, 740, 745, and 774 of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to implement decisions adopted by the Australia Group (AG) in 2017. The amendments include additions and clarifications to Export Control Classification Numbers (ECCNs) 2B350, 2B351, 2B352, 1C353, 1C350, and 1C351 and the addition of India as a participating country in the AG. BIS notes that the rule “only marginally” affects the scope of the EAR controls on chemical weapons precursors, human and animal pathogens/toxins, chemical manufacturing equipment, and equipment capable of use in handling biological materials, and that it is not expected to result in more than 15 additional license applications per year.

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BIS Amends EAR Regarding Production of Tritium

April 5, 2018 – 83 Fed. Reg. 14580: BIS amended the EAR to impose a license requirement on exports and reexports of specified target assemblies for the production of tritium and their specially designed components under new ECCN 1A231. Also, the related “production” technology for 1A231 commodities will be added to existing ECCNs 1E001 and 1E201. These items, which were formerly classified under the OY521 series, were agreed to by the Nuclear Suppliers Group (NSG) in 2017 in response to a proposal by the U.S. Government. They are controlled for nuclear nonproliferation (NP) Column 1 and anti-terrorism (AT) Column 1 reasons. Licenses will be required in most instances.

Department of Homeland Security – Customs and Border Protection

CBP Phases-Out U.S.-Israel Free Trade Agreement Certificate Of Origin

April 6, 2018: U.S. Customs and Border Protection (CBP) announced that the phase-out of the U.S.-Israel Free Trade Agreement certificate of origin after June 30, 2018. Israel will accept only a signed statement on the commercial invoice. The agreement eliminating the certificate of origin is on the website of the U.S. Trade Representative (USTR) at https://ustr.gov/sites/default/files/files/agreements/FTA/israel/US%20IS%20JC%20ED.pdf.

Department of State

DDTC Name and Address Changes Posted To Website

April 2, 3, and 11, 2018: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

· Change in Name from BAE Systems Protection Systems Inc. to BAE Systems Land & Armaments L.P. due to corporate reorganization;
· Change in Name from Hanwha Techwin Co., Ltd. to Hanwha Aerospace Co., Ltd. and changed address due to divestment of security business into new subsidiary;
· Change in Name from Airbus Group Australia Pacific Limited to Airbus Australia Pacific Limited due to corporate reorganization;
· Change in Name from T&M Systems B.V. to C.N. Rood B.V. due to acquisition of T&M Systems by C.N. Rood;
· Change in Address for Korade B.V.; and
· Change in Address for Expeditors International of Washington, 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.

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DDTC Releases Fact Sheet On New Policy Regarding Export Of U.S. Origin Unmanned Aerial Systems

April 20, 2018: DDTC released a Fact Sheet describing a new policy on the export of all U.S.-origin unmanned aerial systems (UAS), including those controlled under both the U.S. Munitions List (USML, 22 CFR Sec. 121.1) and the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). The primary objectives of the policy are to increase trade opportunities for U.S. companies; to bolster partner security and counterterrorism capabilities; to strengthen bilateral relationships; to preserve U.S. military advantage; and to prevent the proliferation of weapons of mass destruction (WMD) delivery systems. The Fact Sheet lays out transfer conditions for armed, unarmed, and civil UAS; end-use assurances and monitoring and additional security conditions; and principles of proper use. This Fact Sheet is on the State Department website at https://www.state.gov/r/pa/prs/ps/2018/04/280619.htm.

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DDTC Statutory Debarments

April 25, 2018 – 83 Fed. Reg. 18112: DDTC imposed statutory debarment on 168 individuals who had been convicted of criminal violations of the AECA. During the term of their debarment, these individuals are prohibited from participating directly or indirectly in exporting, brokering, or participating in any other way in transactions involving items controlled under the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). The standard term of a debarment is three years; however, export privileges may be reinstated only at the request of the debarred person.

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DDTC Releases Fact Sheet Citing The President’s NSPM On Conventional Arms Transfer Policy

April 19, 2018: Citing the President’s NSPM on Conventional Arms Transfer Policy (see description above), DDTC issued a Fact Sheet describing the President’s priorities of 1) preserving peace through strength by reforming regulations to facilitate exports of U.S. military equipment; 2) strengthening partners and allies; and 3) facilitating U.S. economic security and innovation while 4) upholding respect for human rights and U.S. nonproliferation objectives. DDTC encouraged stakeholders to share their perspectives on this initiative. Comments should be emailed to ArmsTransferProcess@state.gov. The Fact Sheet is on the DDTC website at www.pmddtc.state.gov/documents/CAT%20policy.pdf.

Department of the Treasury

OFAC Designates Additional Russians, Russian Companies And Banks To Its Specially Designated Nationals List

April 6 and 23, 2018: On April 6, the Office of Foreign Assets Control (OFAC) designated 7 Russian oligarchs and 12 companies they own or control – including RUSAL PLC, one of the world’s largest aluminum producers, and Rosoboronoeksport, Russia’s state-owned weapons trading company -- as well as 17 senior Russian government officials and a state-owned Russian weapons trading company and its banking subsidiary as Specially Designated Nationals. Concurrently, OFAC issued Ukraine-/Russia-related General License (GL) 12 (replaced on April 23 by GL 12A) and GL 13 temporarily authorizing some transactions to help mitigate the immediate impact of the designations. OFAC also published 8 new FAQs related to these actions, including one stating that U.S. persons are prohibited from continuing their employment or board membership in a designated entity without a specific authorization from OFAC.

On April 23, OFAC issued GL 12A and new GL 14, regarding transactions related to business with RUSAL and its subsidiaries, along with additional FAQs.

General Licenses 12A, 13, and 14 are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl12A.pdf, https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13.pdf, and https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl14.pdf, respectively. The new FAQs are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#567 , ## 567-582.

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OFAC Issued General License 2E Related to Belarus

April 27, 2018: OFAC issued GL 2E authorizing until Oct. 30, 2018, transactions involving 9 Belarusian entities that are blocked pursuant to Executive Order (E.O.) 13405. This GL does not authorize the release of property blocked pursuant to E.O. 13405.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

April 16, 2018 – 83 Fed. Reg. 16286: BIS issued a 10-year denial order against Stephen Edward Smith of Federal Correctional Institution (FCI) LA Tuna, Anthony, NM, based on his conviction in U.S. District Court, in Arizona, of violating the AECA and other laws by exporting and causing to be exported, from the U.S. to Hong Kong, a Tikka Sporter .223 Rem Semi-automatic rifle and two silencers, without the required license from the State Department. Smith was sentenced to 102 months in prison, 3 years of supervised release, a criminal fine of $150,050, and a $300 special assessment and ordered to forfeit $59,550. (See additional information in April 2017 Regulatory Update.)

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April 16, 2018 – 83 Fed. Reg. 16287: BIS issued a 10-year denial order against Peter Steve Plesinger of FCI Terminal Island, San Pedro, CA, based on his conviction in U.S. District Court in Arizona of violating the AECA and other laws by exporting and causing to be exported, from the U.S. to Hong Kong, ammunition and firearms. Including, .22 and .223 caliber ammunition and a Ruger 10/20 rifle, without the required license from the State Department. Plesinger was sentenced to 87 months in prison, 3 years of supervised release, and a $300 special assessment and ordered to forfeit $64,500. (See additional information in April 2017 Regulatory Update.)

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April 16, 2018 – 83 Fed. Reg. 16288: BIS issued a 10-year denial order against Earl Henry Richmond of Green Valley, AZ, based on his conviction in U.S. District Court, in Arizona, of violating the AECA by conspiring to export from the U.S. to Hong Kong two Ruger SR22 semi-automatic pistols, two silencers, and 1000 rounds of ammunition, without the required license from the State Department. Richmond was sentenced to 3 years of probation, a fine of $2,000, and a $100 special assessment.

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April 18, 2018 – 83 Fed. Reg. 17145: BIS issued a 10-year denial order against Erdal Kuyumcu of FCI Fort Dix, NJ, based on his conviction in U.S. District Court, in New York City, of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by conspiring to export from the U.S. to Iran, a metallic powder composed of cobalt and nickel without obtaining the required U.S. Government authorization. Kuyumcu was sentenced to 57 months in prison, 3 years of supervised release, a fine of $7,000, and an assessment of $100. (See additional information in June 2016 Regulatory Update.)

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April 23, 2018 – 83 Fed. Reg. 17644: BIS activated a suspended 7-year denial order against Zhongxing Telecommunications Equipment Corporation and ZTE Kangxun Telecommunications Ltd., both of Shenzhen, China (together, “ZTE”) that had been imposed upon them pursuant to a Settlement Agreement entered into on March 23, 2017. (See March 2017 Regulatory Update.) In the Settlement Agreement, ZTE had agreed to pay a civil penalty of $661 million (including $300,000,000 suspended for 7 years) and to adhere to numerous conditions including, among others, submitting audit reports and making truthful disclosures of any factual information requested by BIS. BIS activated the suspended 7-year denial order after determining that ZTE had made false statements to the U.S. Government during the probationary period.

Fines and Penalties

April 5, 2018: Iulian Petre, a/k/a/ Julian Petre, of Waterville, ME was sentenced in U.S. District Court, in Bangor, ME, to 2 years in prison and 3 years of supervised release for purchasing and receiving firearms from out-of-state sellers, intending to unlawfully export them, and actually shipping them to Romania without the required authorization from the Department of State.

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April 19, 2018: Sadr Emad-Vaez and Pouran Aazad, of Los Altos Hills, CA, and Hassan Ali Moshir-Fatemi, of Tehran, Iran, were indicted and arrested in San Francisco on charges of conspiracy to violate the IEEPA, violating the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), and smuggling. The three defendants allegedly participated in the operation of the Ghare Sabz Company, a/k/a GHS Technology, a large manufacturing corporation in Tehran, and acquired and attempted to acquire automotive parts from manufacturers worldwide, including in the U.S., in order to funnel them to GHS in Tehran.

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April 24, 2018: Joyce Eliabachus, a/k/a/ Joyce Marie Gundran Manangan, of Morristown, NJ, was arrested and charged with conspiracy to violate the ITSR, conspiracy to commit money laundering, and conspiracy to smuggle goods from the U.S. for her alleged role in a network that smuggled over $2 million worth of aircraft components from the U.S. to Iran. Operating through Edsun Equipments LLC, a trading company run out of her residence, and conspiring with an Iranian-based procurement firm, Eliabachus allegedly obtained requested components from U.S. distributors, then re-packaged them and shipped them to shipping companies in the United Arab Emirates (UAE) and Turkey, from where her co-conspirators transshipped them to Iran. In addition to falsifying the true destination and end-users of the components, she allegedly falsified the true value of the components being exported in order to evade the necessity of filing export control forms. Payments for the components were allegedly funneled through Turkish bank accounts and ultimately transferred into Edsun’s U.S.-based accounts.

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April 25, 2018: FLIR Systems, Inc., of Wilsonville, OR, entered into a 4-year consent agreement with the U.S. State Department and agreed to pay $30 million (of which half can instead be used on export control compliance) to settle charges that it committed 347 violations of the AECA and ITAR. The alleged violations included allowing foreign employees from countries such as Iran, Iraq, Lebanon, and Cuba to access sensitive information, issues with export license management and the reporting of political contributions, fees, and commissions on license applications. Compliance measures that FLIR agreed to undertake include appointing a compliance officer who will have access to all records related to regulated activities and will be authorized to take any findings directly to the CEO or the U.S. Government; an annual briefing of the board by the CEO on the findings and recommendations of the compliance officer; strengthening internal policies, procedures, and training; and undergoing 2 independent audits of agreement compliance. The Charging Letter, Agreement, and Order in this case are on the DDTC website at https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=384b968adb3cd30044f9ff621f961941.

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April 26, 2018: Federal Express Corporation, d/b/a FedEx Express, of Memphis, TN, agreed to pay a civil penalty of $500,000 and complete external audits of its export control compliance program, from 2017 through 2020, to settle charges by BIS that it violated EAR Sec. 764.2 on 53 occasions when it facilitated the unauthorized export of civil aircraft parts, and equipment used to manufacture electron microscopes to persons in France and Pakistan that were listed on the Entity List (EAR Part 744, Supp. No. 4). The illegally exported items were classified under ECCN 9A991, ECCN 7A994, and EAR99 and were valued at approximately $58,091.

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April 26, 2018: Weiming Zhang, a.k.a. John Zhang, of Beijing, China, Englewood, NJ, and Huntington, NY, and Seasia Enterprises (USA), Inc. of Huntington, NY, agreed to pay a civil penalty of $100,000 (of which $50,000 will be suspended for 5 years and thereafter waived if the parties commit no further violations of the Order or the EAR) and denial of their export privileges for 5 years (suspended for 5 years and thereafter waived if they commit no further violations) to settle charges by BIS that they violated EAR Sec. 764.2(d) by conspiring to export items controlled for national security reasons to China without the required authorization from BIS. BIS alleged that Zhang and Seasia obtained electronic equipment from U.S. manufacturers in what they made to appear as domestic transactions and then exported the items taking various actions designed to avoid export control scrutiny by U.S. law enforcement, e.g., concealing the type of equipment involved, its value, and/or its ultimate destination, and in some cases transshipping it through a Hong Kong company that Seasia / Zhang owned and controlled.

APRIL 2018 EXPORT CONTROL REGULATION UPDATES Read More »

MARCH 2018 EXPORT CONTROL REGULATION UPDATES

March 2018

This newsletter is a listing of the latest changes in export control regulations through March 31, 2018. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

March 5 and 6, 2018: The Export Control Joint Unit (ECJU) of the U.K. Department for International Trade made a small number of changes to Schedule 2 of the consolidated control list of Strategic Military and Dual-Use Items That Require Export Authorization (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/685044/controllist20180305.pdf) and removed one definition, reflecting amendments made by the European Union in the EU Common Military List. Details are in Notices to Exporters on the ECJU website at https://www.gov.uk/government/publications/notice-to-exporters-201804-export-control-order-2008-amended-and-4-ogels/notice-to-exporters-201804-export-control-order-2008-amended-and-4-four-ogels and https://www.gov.uk/government/publications/notice-to-exporters-201805-consolidated-list-updated/notice-to-exporters-201805-consolidated-list-updated.

Department of Commerce – Bureau of Industry and Security

March 22, 2018 – 83 Fed. Reg. 12475: The Bureau of Industry and Security (BIS) amended the Entity List (15 CFR Part 744, Supp. No. 4) by adding 7 persons in Pakistan, one person in Singapore, and 15 persons in South Sudan; removing one person in Ecuador and one person in the United Arab Emirates (UAE); and correcting the license requirement for 12 persons in Russia.

The following persons were added to the Entity List:

Pakistan:

(1) Akhtar & Munir, Punjab;

(2) Engineering and Commercial Services (ECS), Islamabad;

(3) Marine Systems Pvt. Ltd., Islamabad;

(4) Mushko Electronics Pvt. Ltd., Karachi and Lahore;

(5) Pervaiz Commercial Trading Co. (PCTC), Lahore;

(6) Proficient Engineers, Lahore; and

(7) Solutions Engineering Pvt. Ltd., a.k.a., the following two aliases: —Solutronix Engineering Pvt. Ltd. and —Solutronix Pvt. Ltd., Lahore, Islamabad, and Rawalpindi.

Singapore:

(1) Mushko Logistics Pte. Ltd., Singapore.

South Sudan:

(1) Ascom Sudd Operating Company, a.k.a., the following one alias: —ASOC.;

(2) Dar Petroleum Operating Company, a.k.a., the following one alias: —DPOC.;

(3) DietsmannNile, Juba;

(4) Greater Pioneer Operating Co. Ltd, a.k.a., the following one alias: —GPOC.;

(5) Juba Petrotech Technical Services Ltd;

(6) Nile Delta Petroleum Company, Juba;

(7) Nile Drilling and Services Company, Juba;

(8) Nile Petroleum Corporation, a.k.a., the following one alias: —Nilepet, Juba;

(9) Nyakek and Sons, Juba;

(10) Oranto Petroleum, Juba;

(11) Safinat Group;

(12) SIPET Engineering and Consultancy Services, a.k.a., the following one alias: —SPECS., Juba;

(13) South Sudan Ministry of Mining, Juba;

(14) South Sudan Ministry of Petroleum, Juba; and

(15) Sudd Petroleum Operating Co., a.k.a., the following one alias: —SPOC., Tharjath, Unity State.

For all these entities, BIS imposed a license requirement for all items subject to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) with a license review policy of presumption of denial, and no license exceptions will be available for exports, reexports, or in-country transfers to them. The license requirements apply to any transaction in which items subject to the EAR are to be exported, reexported, or transferred (in-country), to any of the listed entities or in which such an entity acts as purchaser, intermediate consignee, ultimate consignee, or end-user.

The following persons were removed from the Entity List:

Ecuador:

(1) Corporacion Nacional de Telecommunicaciones (CNT), Quito.

United Arab Emirates:

(1) Talaat Mehmood, Sharjah Airport International Free (SAIF) Zone, Sharjah.

For the following persons, which were added to the Entity List February 16, 2018 (see February 2018 Regulatory Update), the license requirement was amended to cover all items subject to the EAR only when used in projects specified in the Russian Industry Section Sanctions (§746.5 of the EAR), for example oil drilling applications:

Russia:

(1) Kaliningradnefteprodukt OOO, a.k.a., the following three aliases: —Kaliningradnefteprodukt LLC, —Limited Liability Company Kaliningradnefteproduct, and —LLC Kaliningradnefteproduct, Kaliningrad;

(2) Kinef OOO, a.k.a., the following three aliases: —Kinef, LLC, —Limited Liability Company Production Association Kirishinefteorgsintez, and —LLC Kinef, Kirishi, Leningradskaya Oblast;

(3) Kirishiavtoservis OOO, a.k.a., the following two aliases: —Limited Liability Company Kirishiavtoservis and —LLC Kirishiavtoservis, St. Petersburg;

(4) Lengiproneftekhim OOO, a.k.a., the following three aliases: —Institut Po Proektirovaniyu Predpriyaty Neftepererabatyvayuschey I Neftekhimicheskoy Promyshlennosti, Limited Liability Company, —Limited Liability Company Oil Refining and Petrochemical Facilities Design Institute, and —LLC Lengiproneftekhim, St. Petersburg;

(5) Media-Invest OOO, a.k.a., the following two aliases: —Limited Liability Company MediaInvest and —LLC Media-Invest, Moscow;

(6) Novgorodnefteprodukt OOO, a.k.a., the following three aliases: —Limited Liability Company Novgorodnefteproduct, —LLC Novgorodnefteproduct, and —Novgorodnefteprodukt LLC, Veliky Novgorod, Novgorodskaya Oblast;

(7) Pskovnefteprodukt OOO, a.k.a., the following two aliases: —Limited Liability Company Marketing Association Pskovnefteproduct and —LLC Pskovnefteproduct, Pskov;

(8) SNGB AO, a.k.a., the following three aliases: —Closed Joint Stock Company Surgutneftegasbank (ZAO SNGB), —Joint Stock Company Surgutneftegasbank, and —JSC BANK SNGB, Surgut;

(9) SO Tvernefteprodukt OOO, a.k.a., the following two aliases: —Limited Liability Company Marketing Association Tvernefteproduct and —LLC MA Tvernefteproduct, Tver;

(10) Sovkhoz Chervishevski PAO, a.k.a., the following three aliases: —OJSC Sovkhoz Chervishevsky, —Open Joint Stock Company Sovkhoz Chervishevsky, and —Sovkhoz Chervishevsky, JSC, Tyumensky Rayon, Tyumensky Oblast;

(11) Strakhovove Obshchestvo Surgutneftegaz OOO, a.k.a., the following three aliases: —Insurance Company Surgutneftegas, LLC, —Limited Liability Company Insurance Company Surgutneftegas, and —LLC Insurance Company Surgutneftegas, Surgut; and

(12) Surgutmebel OOO, a.k.a., the following four aliases: —Limited Liability Company Syrgutmebel, —LLC Surgutmebel, —LLC Syrgutmebel, and —Surgutmebel, LLC, Yugra, Khanty-Mansiysky Autonomous Okrug.

Department of Commerce – Census Bureau

March 8, 2018: The Census Bureau reported that all recent additions to the Harmonized Tariff Schedule (HTS) can now be used in the Automated Export System (AES) and the ACE AESDirect program. The full 2018 Schedule B and HTS tables are available for downloading at http://www.census.gov/foreign-trade/aes/documentlibrary/?eml=gd&utm_medium=email&utm_source=govdelivery#concordance">http://www.census.gov/foreign-trade/aes/documentlibrary/#concordance. The current list of HTS codes that are not valid for AES is available at http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?eml=gd&utm_medium=email&utm_source=govdelivery">http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html.

Department of State

March 15, 2018: The Directorate of Defense Trade Controls (DDTC) posted a notice of the following reorganization and name and address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

GKN plc corporate reorganization involving the combination of the management of the Cowes, Filton, and Western Approach sites of GKN Aerospace Services Ltd. in the United Kingdom (“GKN Aero UK”) and Fokker Technologies Holding B.V. (“Fokker”), as well as Fokker’s subsidiaries, without merging or dissolving these entities, and change in the registered address of GKN Aero UK (but not the address of GKN Aero UK sites).

As a result of this internal reorganization –

Change in the registered address for GKN Aero UK from Ferry Road, East Cowes, Isle of Wight PO32 6RA, UK, to Ipsley House, Ipsley Church Lane, Redditch, Worchestershire B98 0TL, UK;
GKN Aero UK must be added as a signatory to the various ITAR Part 124 agreements in which Fokker Holding or its operating subsidiaries in The Netherlands are a party so that personnel from GKN Aero UK can interact with U.S. signatories and have access to data under those agreements;
Fokker and its operating subsidiary, Fokker Aerostructures B.V., must be added as signatories or sublicensees to the various ITAR Part 124 agreements in which GKN Aero UK is a party or sublicensee;
All currently approved agreements will require an amendment to be executed to reflect this internal corporate reorganization. The agreement holder will be responsible for amending its agreement. The executed amendment will be treated as a minor amendment per 22 CFR 124.1(d) and must be submitted as such;
New DSP-83s must be executed, as applicable;
Pending agreement applications that require amending must be brought to the attention of the assigned Agreements Officer by the agreement holder. The necessary changes will be made prior to issuance when the Agreements Officer has been notified; and
A copy of this website notice must be maintained by the license holder and presented with the relevant license to U.S. Customs and Border Protection at time of shipment.

This internal corporate reorganization does not affect any current or pending ITAR DSP licenses or reexport authorizations.

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March 26, 2018: DDTC posted the following name changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Name from Andøya Rakettskytefelt AS to Andøya Space Center AS (ASC) due to corporate rebranding;
Change in Name from Discovery Air Defence Services Inc. to Top Aces Inc. due to Discovery Air acquisition of Top Aces; and
Change in Name of Bell Helicopter entities to Bell Textron as follows:

Former Entity Name New Legal Entity Name

Bell Helicopter Textron Inc. Bell Textron Inc.

Bell Helicopter Services Inc. Bell Textron Services Inc.

Bell Helicopter Miami Inc. Bell Textron Miami Inc.

Bell Helicopter Rhode Island Inc. Bell Textron Rhode Island Inc.

Bell Helicopter Korea Inc. Bell Textron Korea Inc.

Bell Technical Services Inc. Bell Textron Technical Services Inc.

Bell Helicopter Textron Canada Limited Bell Textron Canada Limited

Bell Helicopter Canada International Inc. Bell Textron Canada International Inc.

Bell Helicopter Co., Ltd. Bell Textron Co., Ltd.

Bell Helicopter LLC Bell Textron LLC

Bell Helicopter Asia (Pte) Ltd. Bell Textron Asia (Pte) Ltd.

Bell Helicopter Supply Center, B.V. Bell Textron Supply Center, B.V.

Bell Helicopter Prague, a.s. Bell Textron Prague, a.s.

Bell Helicopter India Operations, a division Bell Textron India Operations, a division

of TIPL of TIPL

Bell Helicopter Services. – Tainan Branch Bell Textron Services Inc. – Tainan Branch

Bell Helicopter Services Inc. – Abu Dhabi Bell Textron Services Inc. – Abu Dhabi Branch

Branch

Bell Helicopter Services Inc. – Dubai Branch Bell Textron Services Inc. – Dubai Branch

Bell Helicopter Services Inc. – Italy Branch Bell Textron Services Inc. – Italy Branch

Bell Helicopter Services Inc. – Colombia Bell Textron Services Inc. – Colombia Branch

Branch

Bell Helicopter Services Inc. – Turkey Liaison Bell Textron Services Inc. – Turkey Liaison

Office Office

Bell Helicopter Textron Canada Limited – Bell Textron Canada Limited – Korea Branch

Korea Branch

Bell Helicopter Canada International Inc. – Bell Textron Canada International Inc. – Korea Korea Branch Branch

Bell Helicopter Asia (Pte) Ltd. – Thailand Rep. Bell Textron Asia (Pte) Ltd. – Thailand Rep.

Office Office

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

March 5, 2018 – 83 Fed. Reg. 9182: The Office of Foreign Assets Control (OFAC) reissued the North Korea Sanctions Regulations (NKSR, 31 CFR Part 510) in their entirety to implement 3 recent executive orders, reference recent legislation (the North Korea Sanctions and Policy Enhancement Act of 2016 and the Countering America’s Adversaries Through Sanctions Act of 2017 [CAATSA]), incorporate several general licenses that had previously appeared only on OFAC’s website, add several new general licenses, and add and expand provisions to make the regulations more comprehensive and provide better guidance to the public. As before, property or interests in property of the Government of North Korea and the Workers’ Party of Korea is blocked, and all U.S. persons wherever located, all persons within the U.S., and all U.S.-incorporated entities and their foreign branches, are prohibited from engaging in transactions with these entities without authorization from OFAC unless a general license applies.

OFAC also published extensive new FAQs about the new regulation and its effect, including information about general licenses. FAQs 458-465 and 525-558 are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#nk.

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March 15, 2018: OFAC issued General License 1A, Authorizing Certain Transactions with the Russian Federal Security Service, making a technical change in the general license that authorizes certain transactions with the Russian Federal Security Service (FSB, a.k.a. Federalnaya Sluzhba Bezopasnosti) that are necessary and ordinarily incident to requesting, receiving, utilizing, paying for, or dealing in certain licenses and authorizations for the importation, distribution, or use of certain information technology products in the Russian Federation. General License 1A is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber_gl1a.pdf; related FAQs are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#501.

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March 19, 2018 – 83 Fed. Reg. 11876: OFAC issued a final rule making inflation adjustments in its maximum civil monetary penalties (CMPs) for several statutes: violations of the Foreign Narcotics Kingpin Designation Act and Regulations, have a CMP increase from $1,437,153 to $1,466,485; for the Trading with the Enemy Act, the increase is from $85,236 to $86,976; and for the majority of other OFAC sanctions programs and the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707), the increase is from $289,238 to $295,141.

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March 20, 2018: OFAC issued a press release reaffirming its commitment to supporting the Iranian people and fostering internet freedom. The release provides a useful summary of regulatory provisions, general licenses, published guidance, and licensing policies supporting this commitment. The release is on the Treasury Department website at https://home.treasury.gov/news/press-releases/sm0322.

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March 22, 2018 – 83 Fed. Reg. 12513: OFAC invited public comments on the effectiveness of its licensing procedures for exportation of agricultural commodities, medicine, and medical devices to Sudan and Iran during the time period October 1, 2014 to September 30, 2016. The information is needed for a required biennial report to Congress on the operation of these procedures. Comments are due by April 23, 2018.

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of Commerce

March 5, 2018 – 83 Fed. Reg. 9259: BIS denied the export privileges of Trilogy International Associates, Inc., of Altaville, CA, and Trilogy’s President and General Manager, William Michael Johnson, Angels Camp, CA, for 10 years based on their convictions involving the unauthorized export to Russia of an explosives detector and 115 analog-to-digital converters with a total value of approximately $76,035. The explosives detector and converters were controlled under Export Control Classification Numbers (ECCNs) 1A004 and 3A001, respectively. In the criminal cases, Trilogy was convicted of 3 charges of engaging in prohibited conduct and fined $100,000, and Johnson was convicted of 3 charges of causing, aiding, and/or abetting the prohibited conduct and fined $100,000.

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March 20, 2018 – 83 Fed. Reg. 12563: BIS denied the export privileges of Volodymyr Nedoviz of Hudson County Correctional Facility, Kearny, NJ, for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting and attempting to export to Ukraine night vision and thermal imaging equipment controlled under the U.S. Munitions List (USML, 22 CFR Sec. 121.1) without the required authorization from the State Department. In the criminal case Nedoviz was sentenced to time served, 2 years of supervised release, a criminal forfeiture of $2,500, and a special assessment of $100.

Fines and Penalties

March 5, 2018: Muhammad Ismail of Meriden, CT and his son Kamran Khan of Hamden, CT, nationals of Pakistan with lawful permanent U.S. resident status, pleaded guilty to money laundering in federal court in Bridgeport, CT, based on their participation in a scheme in which goods controlled under the EAR were exported to 3 Pakistani government agencies that were listed on the Entity List. Ismail and Khan did not apply for export licenses, although they were aware that such authorization was required, and they completed end-user certifications assuring the U.S. manufacturers that the items would not be exported. In an earlier, related case, another son of Muhammad Ismail, Imran Khan, pleaded guilty, in June 2017, to violating IEEPA by exporting an EAR-controlled item to an entity in Pakistan that was listed on the Entity List. (See June 2017 Regulatory Update.)

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March 14, 2018: Reza Olangian, a dual Iranian-American citizen, was sentenced in federal court, in New York City, to serve 25 years in federal prison and 5 years of supervised release after being found guilty, in November 2016, of conspiring and attempting to export surface-to-air missiles and military aircraft parts to the Government of Iran. From a base in Teheran, Olangian worked to arrange the purchase of “IGLA-S” surface-to-air missiles and various components for the Government of Iran, negotiating with a confidential source (CS) who purported to be a weapons and aircraft broker, but was actually working for the U.S. Drug Enforcement Administration. In covertly recorded meetings, conversations, and emails to the CS, Olanian described his plans for procuring the SAMs, aircraft parts, and other types of weapons and smuggling them to Iran. In October 2012, he traveled to Tallinn, Estonia in connection with the SAMs deal and an additional aircraft deal that he was hoping to arrange in Russia. He was arrested in Tallinn at the request of the U.S. and extradited to the U.S. in 2013. (See October 2013 Regulatory Update.)

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March 16, 2018: Federal prosecutors in Washington, DC, released a criminal information charging Evgeny Viktorovich Spiridonov of Moscow, Russia, a citizen of Russia, with violating U.S export controls by failing to file or submitting false or misleading export information. Spiridonov was arrested at Los Angeles International Airport after attending a gun show in Las Vegas when he attempted to board a flight for Moscow with an unreported restricted tactical rifle scope valued at $2,400 in his checked luggage. U.S. investigators learned of the sale from the dealer, staged a controlled delivery of the scope to Spiridonov’s Las Vegas hotel, used surveillance video to record Spiridonov accepting the shipment at the front desk, and then followed him as he ate breakfast, travelled to Los Angeles, and checked his luggage containing the scope.

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March 20, 2018: Vladimir Nevidomy of Hallandale Beach, FL, plead guilty to exporting USML-listed military-grade night vision and thermal vision devices and ammunition primers to Russia without the required license from the Department of State. After receiving requests from Russian customers by email, Nevidomy obtained at least 3 ATN MARS 4x4 night-vision rifle scopes and an ODIN 61BW thermal multi-purpose monocular from U.S. vendors, falsely claiming that the items were not for export. He then exported them by either concealing them in household goods shipments sent to Russia through a freight forwarding company or using a private Russian postal service that operated in South Florida.

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March 20, 2018: Alireza Jalali of Iran, a part-time employee of a Malaysian company located in Kuala Lumpur, Malaysia, was sentenced in federal court in Minneapolis, MN, to 15 months in prison based on his plea of guilty of conspiring to defraud the U.S. by participating in a scheme whereby his Malaysian employer unlawfully acquired export-controlled technology from the U.S. for Fanavar Moj Khavar (Fana Moj), an Iran-based company specializing in broadcast communications and microwave communications, that was designated by the U.S. Treasury Department as a Specially Designated National. To advance the conspiracy, Jalali and his co-conspirators concealed the ultimate Iranian destination and end users through false statements, unlawful financial transactions, and other means, including, having the U.S. goods delivered to Malaysia, and then repackaging and unlawfully reexporting them to Iran.

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March 22, 2018: Konstantin Chekhovskoi of St. Petersburg, Russia, was sentenced in federal court in Chicago, IL, to 18 months in federal prison and a fine of $100,000 based on his plea of guilty of one count of attempting to fraudulently and knowingly export more than $100,000 in firearm parts, ammunition and accessories, including parts designed for assault rifles. Chekhovskoi was arrested by U.S. Homeland Security Investigations (HSI) special agents at Chicago’s O’Hare International Airport on April 26, 2017, as he attempted to board a flight for Stockholm, Sweden. His 11 checked bags included firearm parts, ammunition and accessories, including bullets, rifle magazines, triggers, stocks, muzzle brakes and scopes, many of which were designed for assault rifles such as AK-47s and M4s. Chekhovskoi lacked the required license for the export-controlled items.

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March 23, 2017: Ross Roggio of Stroudsburg, PA, and Roggio Consulting Company, LLC, a firm with which he was associated, were indicted for conspiracy to violate the AECA and the IEEPA and the the implementing regulations (the ITAR and the EAR) by illegally exporting firearm parts, firearm manufacturing tools including items used to manufacture M4 rifles, and defense services from the United States to Iraq without the required authorizations from the Departments of State and Commerce. The charges also included wire fraud and money laundering. Roggio and his firm allegedly purchased the parts and manufacturing tools in the U.S. and illegally exported them to Iraq, where they were utilized and incorporated in the manufacture and assembly of complete firearms in a firearms manufacturing plant constructed and operated in part by Ross Roggio. The defense services they allegedly provided include the furnishing of assistance to foreign persons in the manufacture of firearms.

MARCH 2018 EXPORT CONTROL REGULATION UPDATES Read More »

FEBRUARY 2018 EXPORT CONTROL REGULATION UPDATES

February 2018

This newsletter is a listing of the latest changes in export control regulations through Feb. 28, 2018. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

U.K. Updates Controls On Information Security Products Using Cryptography

Feb. 26, 2018: The Export Control Joint Unit of the U.K. Department for International Trade published Notice to Exporters 2018/03: Updates to Controls on 'Information Security' Products Using Cryptography on its website at https://www.gov.uk/government/publications/notice-to-exporters-201803-updates-to-controls-on-information-security-products-using-cryptography/notice-to-exporters-201803-updates-to-controls-on-information-security-products-using-cryptography.

Editor’s note: These changes are from an earlier Wassenaar Arrangement Plenary session. The U.S. implemented these changes in September 2016.

U.S. Congress

Export Control Reform Act of 2018 A Potential Replacement Of The Export Administration Act

Feb. 15, 2018: U.S. House of Representatives Foreign Affairs Committee Chairman Ed Royce (R-CA) introduced the Export Control Reform Act of 2018 (ECRA, H.R. 5040). The bill, co-sponsored by Ranking Member Eliot Engel (D-NY), would repeal and replace the lapsed Export Administration Act of 1979 (EAA), but it specifies that all administrative and judicial actions that were made under the EAA, the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707), and the Export Administration Regulations (EAR, 15 CFR Parts 730-774) will continue in effect unless they are changed under its authority.

Among significant ECRA provisions that differ from the EAA, U.S. subsidiaries of non-U.S. companies would not be regarded as U.S. persons, and the definition of EAR-controlled “technology” would be broadened to include “foundational information” and “know-how.” The bill also requires that lists of controlled items be published “in a form that facilitates compliance with it, particularly by small- and medium-sized businesses, and academic institutions.”

After its introduction, H.R. 5040 was referred to the House Committee on Foreign Affairs and the House Committee on Oversight and Government Reform. No hearings have been scheduled. The full text of the bill can be found on the U.S. Library of Congress website at https://www.congress.gov/bill/115th-congress/house-bill/5040/text?r=26. Updates about actions on the bill will appear at https://www.congress.gov/bill/115th-congress/house-bill/5040/all-actions?r=26&overview=closed#tabs.

Department of Commerce – Bureau of Industry and Security

BIS Seeks Public Comments On “600 Series ECCNs”

Feb. 12, 2018 – 83 Fed. Reg. 5968: The Bureau of Industry and Security (BIS) requested public comments on matters related to implementation of the “600 series” of the Commerce Control List (CCL, EAR Part 774, Supplement No. 1), which covers items transferred from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) as part of the Obama administration’s Export Control Reform Initiative (ECRI). Specifically, BIS desires comments on the clarity, usability, potential cost savings, and any other matters related to the following “600 series” Export Control Classification Numbers (ECCNs):

- Energetic Materials (ECCNs 1B608, 1C608, 1D608, and 1E608);

- Armored and Protective "Equipment" (ECCNs 1A613, 1B613, 1D613 and 1E613);

- Military Electronics (ECCNs 3A611, 3B611, 3D611 and 3E611); and

- Cryogenic and Superconducting Equipment (ECCNs 9A620, 9B620, 9D620 and 9E620).

This BIS review complements a review by the State Department of the corresponding categories in the USML. (See below, in State Department section.) Deadline for comments is April 13, 2018.

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BIS Adds 21 Entities In 3 Countries To The Entity List

Feb. 16, 2018 – 83 Fed. Reg. 6949: BIS amended the EAR by adding 21 entities in 3 countries to the Entity List (EAR Part 744, Supp. No. 4) based on the determination that they had been involved in activities contrary to the national security or foreign policy interests of the U.S. by violating international law and fueling the conflict in eastern Ukraine. The added entities are:

Georgia:

(1) ZAO Vneshtorgservis, Tskhinval, South Ossetia.

Poland:

(1) Doncoaltrade SP Z O O, Katowice.

Russia:

(1) Evro Polis Ltd., a.k.a., the following two aliases: Evro Polis, OOO and Obshchestvo S Ogranichennoi Otvetstvennostyu Evro Polis, Krasnogorsk;

(2) Instar Lodzhistiks, OOO, a.k.a., the following one alias: Instar Logistics, Moscow;

(3) Kaliningradnefteprodukt OOO, a.k.a., the following three aliases: Kaliningradnefteprodukt LLC, Limited Liability Company Kaliningradnefteproduct, and LLC Kaliningradnefteproduct, Kaliningrad;

(4) Kinef OOO, a.k.a., the following three aliases: Kinef, LLC, Limited Liability Company Production Association Kirishinefteorgsintez, and LLC Kinef, Kirishi, Leningradskaya Oblast;

(5) Kirishiavtoservis OOO, a.k.a., the following two aliases: Limited Liability Company Kirishiavtoservis and LLC Kirishiavtoservis, St. Petersburg;

(6) Kompaniya Gaz-Alyans, OOO, a.k.a., the following three aliases: Company Gaz-Alliance LLC, Kompaniya Gaz-Alyans, OOO, and Obshchestvo S Ogranichennoi Otvetstvennostyu Kompaniya Gaz-Alyans, Nizhni Novgorod;

(7) Lengiproneftekhim OOO, a.k.a., the following three aliases: Institut Po Proektirovaniyu Predpriyaty Neftepererabatyvayuschey I Neftekhimicheskoy Promyshlennosti, Limited Liability Company, Limited Liability Company Oil Refining and Petrochemical Facilities Design Institute, and LLC Lengiproneftekhim, St. Petersburg;

(8) Limited Liability Company Foreign Economic Association Technopromexport, a.k.a., the following three aliases: Obschestvo S Ogranichennoi Otvestvennostyu Vneshneekonomicheskoe Obedinenie Tekhnopromeksport, OOO VO Technopromexport, and OOO VO TPE, Moscow;

(9) Media-Invest OOO, a.k.a., the following two aliases: Limited Liability Company Media-Invest and LLC Media-Invest, Moscow;

(10) Novgorodnefteprodukt OOO, a.k.a., the following three aliases: Limited Liability Company Novgorodnefteproduct, LLC Novgorodnefteproduct, and Novgorodnefteprodukt LLC, Novgorod;

(11) PJSC Power Machines, a.k.a., the following three aliases: Open Joint Stock Company Power Machines-ZTL, LMZ, Electrosila, Energomachexport; Publichnoe Aktsionernoe Obshchestvo Silovye Mashiny-ZTL, LMZ, Elektrosila, Energomasheksport; and -Silovye Mashiny, PAO, St. Petersburg;

(12) Pskovnefteprodukt OOO, a.k.a., the following two aliases: Limited Liability Company Marketing Association Pskovnefteproduct and LLC Pskovnefteproduct, Pskov;

(13) SNGB AO, a.k.a., the following three aliases: Closed Joint Stock Company Surgutneftegasbank (ZAO SNGB), Joint Stock Company Surgutneftegasbank, and JSC BANK SNGB, Surgut;

(14) SO Tvernefteprodukt OOO, a.k.a., the following two aliases: Limited Liability Company Marketing Association Tvernefteproduct and LLC MA Tvernefteproduct, Tver;

(15) Sovkhoz Chervishevski PAO, a.k.a., the following three aliases: OJSC Sovkhoz Chervishevsky, Open Joint Stock Company Sovkhoz Chervishevsky, and Sovkhoz Chervishevsky, JSC, Chervichevsky, Tyumensky Rayon, Tyumensky Oblast;

(16) Strakhovove Obshchestvo Surgutneftegaz OOO, a.k.a., the following three aliases: Insurance Company Surgutneftegas, LLC,Limited Liability Company Insurance Company Surgutneftegas, and LLC Insurance Company Surgutneftegas, Surgut;

(17) Surgutmebel OOO, a.k.a., the following four aliases: Limited Liability Company Syrgutmebel, LLC Surgutmebel, LLC Syrgutmebel, and -Surgutmebel, LLC, Poselok Barsovo, Surgutsky District, Yugra, Khanty-Mansiysky Autonomos Okrug;

(18) Ugolnye Tekhnologii, OOO, a.k.a., the following two aliases: Coal Technologies and Obshchestvo S Ogranichennoi Otvetstvennostyu "Ugolnye Tekhnologii", Rostov-on-Don; and

(19) VAD, AO, a.k.a, the following seven aliases: Aktsionernoe Obshchestvo VAD, -AO, VAD, CJSC VAD-Joint Stock Company VAD, JSC VAD, ZAO VAD, and High-Quality Highways, Vologda and St. Petersburg.

For all these entities BIS imposed a license requirement for all items subject to the EAR with a license review policy of presumption of denial, and no license exceptions will be available for exports, reexports, or in-country transfers to them. The license requirements apply to any transaction in which items subject to the EAR are to be exported, reexported, or transferred (in-country) to any of the listed entities or in which such an entity acts as purchaser, intermediate consignee, ultimate consignee, or end-user.

Department of Commerce – Census Bureau

Census Publishes 2018 Updated 10-digit Schedule B Commodity Classification Codes

Feb. 5, 2018: The Census Bureau noted that updated 10-digit Schedule B commodity classification codes for 2018 have been published. The full list of 2018 codes, including a full list of codes added and deleted since January 2017 and a list of obsolete codes, is on the Census Bureau website at https://www.census.gov/foreign-trade/schedules/b/2018/index.html. Also, the Schedule B Search Engine at https://uscensus.prod.3ceonline.com/ can be used to determine whether any Schedule B number is still valid.

Department of State

DDTC Name and Address Changes Posted To Website

Feb. 1 and 12, 2018: 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:

Angst + Pfister changed address; and
Change in name and address from GSI Group Europe GmbH to Novanta Europe GmbH due to corporate rebranding.

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

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DDTC Requests Public Comments On USML Categories V, X, and XI

Feb. 12, 2018 – 83 Fed. Reg. 5970: DDTC requested public comments on the controls implemented in recent revisions to USML Categories V (Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents), X (Personal Protective Equipment), and XI (Military Electronics). Topics of specific interest to DDTC include emerging and new technologies that would appropriately be controlled in these categories; articles described in the categories that have entered into commercial use or are likely to do so within the next 5 years; drafting or other technical issues in the text of the categories; and potential cost savings to private entities from shifting jurisdiction from the ITAR to the EAR.

This DDTC review complements a review by the Commerce Department of the corresponding items in the CCL. (See above, in Commerce Department section.) Deadline for comments is April 13, 2018.

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DDTC Adds South Sudan To Section 126.1(d)(2) Of The ITAR

Feb. 14, 2018 – 83 Fed. Reg. 6457: DDTC amended the International Traffic Arms Regulations (ITAR, 22 CFR Parts 120-130) by adding South Sudan to the list of countries in Sec. 126.1(d)(2) to which a policy of denial applies and adding a new paragraph 126.1(w) to specify the exceptions to the policy of denial to which applications may be approved on a case-by-case basis. In the announcement DDTC also noted that pursuant to ITAR Sec. 129.7, brokering or proposing to engage in brokering activities subject to the ITAR that involve South Sudan will henceforth require the prior approval of DDTC. The policy of denial was initially announced on Feb. 2, 2018, in a notice with immediate effect on the DDTC home page at http://www.pmddtc.state.gov.

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

Feb. 2, 2018 – 83 Fed. Reg. 4897: BIS issued a 180-day Temporary Restraining Order (TRO) against the following persons, all of Istanbul, Turkey:

Gulnihal Yegane;
Trigron Lojistik Kargo Limited Sirketi;
Ufuk Avia Lojistik Limited Sirketi; and
RA Havacilik Lojistik Ve Tasimacilik Ticaret Limited Sirketi.

Yegane, who is on BIS’ Entity List, owns, controls, or is otherwise affiliated with the remaining three persons. The TRO is based on findings that all of these persons have been involved in illegally procuring U.S.-origin aircraft engines and parts for the Iranian airline Mahan Airways and other Iranian airlines. Mahan Airways is on BIS’ Denied Persons List and has been designated by the Treasury Department Office of Foreign Assets Control (OFAC) as a Specially Designated Global Terrorist.

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Feb. 14, 2018 – 83 Fed. Reg. 6510: BIS denied the export privileges of Justin Gage Jangraw of Key West, FL, until Nov. 21, 2019, based on his conviction in 2014 of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by knowingly and willingly exporting 3 ITAR-controlled Magpul angled fore grips and Magpul battery-assisted device levers to Austria without the required license from the Department of State. In the criminal case, Jangraw was sentenced to 8 months in prison, one year of supervised release, and a $125 assessment.

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Feb. 20, 2018 – 83 Fed. Reg. 7144: BIS denied the export privileges of Irina Cvetkovic of Marianna, FL, until April 26, 2027, based on her conviction, in 2017, of violating the AECA by knowingly and willfully exporting two ITAR-controlled Ruger model SR22 semi-automatic pistols, two silencers, and 1,000 rounds of ammunition to Hong Kong without the required license from the Department of State. In the criminal case, Cvetkovic was sentenced to 10 months in prison with credit for time served, one year of supervised release, and a $100 special assessment.

Fines and Penalties

Feb. 9, 2018: Mitsui Plastics, Inc., of White Plains, NY, agreed to pay a civil penalty of $28,600 to settle charges by BIS that it had violated the Antiboycott Regulations (EAR Part 760) by furnishing information about business relationships with boycotted countries or blacklisted persons (2 violations) and failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. (7 violations). The alleged violations all involved transactions between the U.S. and Bahrain.

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Feb. 16, 2018: The Department of Justice announced the indictment of Usama Darwich Hamade, Samir Ahmed Berro, and Issam Darwich Hamade on charges of violating the IEEPA, the EAR, and the ITAR by conspiring to illegally export goods and technology to Lebanon, specifically to Hizballah, without obtaining the required licenses from the U.S. Departments of Commerce and State. The illegally exported items included inertial measurement units suitable for use in unmanned aerial vehicles, a jet engine, piston engines, and recording binoculars. Usama Hamade and Issam Hamade are currently in custody in South Africa, and the U.S. is seeking their extradition. Berro remains at large.

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Feb. 16, 2018: Scott Douglas Browning, of Fayetteville, NC, was indicted in federal court in Raleigh, NC, for violating the ITAR and other laws by selling unidentified military property stolen from Fort Bragg to the Netherlands without the required authorization from the State Department, as well as selling more than $1.5 million of stolen military equipment in the U.S. Browning allegedly utilized eBay accounts to sell and export the stolen equipment after he had been formally notified that such transactions were in violation of federal export law.

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Feb. 27, 2018: Tengiz Sydykov and Eldar Rezvanov, Kyrgyzstan citizens resident in Alexandria, VA, were arrested and charged with violating the AECA and other laws by attempting to ship over 100 disassembled firearms to Chechnya without the required authorization. Sydykov, who is the son of a former Kyrgyz ambassador to the U.S., and Rezvanov allegedly used false shipping inventories and disguised the disassembled firearms as kitchen utensils.

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Feb. 27, 2018: Frederik Barbieri, of Port St. Lucie, FL, was indicted on several charges relating to the illegal exportation to Brazil of firearms, firearm accessories, and ammunition, including exporting firearms without the required license from the State Department. In an alleged four-year conspiracy, Barbieri and his co-conspirators allegedly purchased firearms, firearm accessories, and ammunition, and then obliterated the serial numbers from the firearms. They then concealed the firearms, firearm accessories, and ammunition in different packages and shipped the packages to Brazil, where Barbieri and his co-conspirators would sell them at a profit. Barbieri was reportedly considered Brazil’s biggest firearms dealer, and the Brazilian government has reportedly requested that he be extradited to Brazil.

FEBRUARY 2018 EXPORT CONTROL REGULATION UPDATES Read More »

JANUARY 2018 EXPORT CONTROL REGULATION UPDATES

January 2018

This newsletter is a listing of the latest changes in export control regulations through January 31, 2018. 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.

ALERT****ALERT****ALERT****ALERT****ALERT****ALERT****ALERT****ALERT

February 2, 2018 **Pursuant to section 38(a) of the Arms Export Control Act and the delegated authority of the Secretary of State thereunder, the Secretary has determined that it is the policy of the Department of State to deny, with limited exceptions, export licenses or other approvals for defense articles and defense services subject to the International Traffic in Arms Regulations (ITAR) and destined for South Sudan. This policy is effective immediately. DDTC will publish a rule in the Federal Register to implement a conforming change to ITAR §126.1.

REGULATORY UPDATES

European Union

EU Updates Its Dual-Use Control List

Jan. 17, 2018: The European Commission issued a Corrigendum to the updated dual-use control list it adopted in September 2017 (see October 2017 Regulatory Update). The Corrigendum, which corrects 5 references to item 0B001, is on the EC website at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R2268R(01)&from=EN. The full EC control list is at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156132.pdf .

U.S. Congressional Research Service

The Congressional Research Service Released Its “The U.S. Export Control System and the Export Control Reform Initiative” Report

Jan. 8, 2018: The Congressional Research Service released “The U.S. Export Control System and the Export Control Reform Initiative,” a 28-page report that will provide background if Congress considers reauthorizing the expired Export Administration Act or enacting replacement legislation. The report describes the legislative authority and operation of current dual-use, military, and nuclear export controls; provides information on each of the four singularities of President Obama’s Export Control Reform Initiative (single licensing agency; unified single control list; unified enforcement structure; and information technology system); and also contains a section on encryption. The report is available at https://fas.org/sgp/crs/natsec/R41916.pdf.

Department of Commerce – Bureau of Industry and Security

BIS Updates Adjusts Civil Monetary Penalties For IEEPA and EAR Violations

Jan. 8, 2018 – 83 Fed. Reg. 706: The Commerce Department adjusted the Civil Monetary Penalties (CMPs) applicable to each law under its jurisdiction to implement the annual inflation adjustment required by federal law. Among these, the maximum penalty for violations of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707), including violations of the EAR, was increased from $289,238 to $295,141. The new CMPs will apply to all penalties assessed after Jan. 15, 2018, including penalties for offenses committed prior to the effective date.

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BIS Corrects Errors In ECCNs

Jan. 8, 2018 – 83 Fed. Reg. 709: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct errors in revisions of the EAR that were published Dec. 27, 2017 (82 Fed. Reg. 61153 – see December 2017 Regulatory Update). The revisions occur in Export Control Classification Numbers (ECCNs) 0D606, 0E606, and 8A609.

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BIS Adds 21 Persons in 6 Countries (Bulgaria, China, Kazakhstan, Russia, Syria, and the United Arab Emirates) to the Entity List

Jan. 26, 2018 – 83 Fed. Reg. 3577: BIS added 21 persons in 6 countries (Bulgaria, China, Kazakhstan, Russia, Syria, and the United Arab Emirates) to the Entity List (EAR Part 744, Supp. No. 4). The reasons for listing these entities included transshipping items to a person on the Entity List in China for an unauthorized military end-use; procuring or transferring items for an entity on the Entity List; procuring U.S.-origin items and transferring them to entities of the Russian military and parties on the Entity List; and conspiring to procure and divert controlled aircraft parts to the Syrian Arab Airlines, a party on the Specially Designated Nationals (SDN) List. For all these entities there will be a license requirement with a presumption of denial for all items subject to the EAR, and no license exceptions will be available to them.

Bulgaria:

Iskren Georgiev, Sofia;

Lyubka Hristova, Sofia;

Mihaela Nenova, a.k.a., Mihaela Nenova-Muhy, Sofia; and

Zhelyaz Andreev, Sofia

China:

Chengdu Spaceon Technology Co., Ltd., a.k.a., Tianao Electronics Co., Ltd., Chengdu

Kazakhstan:

Abtronics, Almaty (see Russia); and

Timofey Telegin (see Russia), Almaty

Russia:

Abtronics, Yekaterinburg; and

Timofey Telegin, Yekaterinburg

Syria:

Adib Zeno, Damascus, Syria;

Rizk Ali, Damascus, Syria.

United Arab Emirates:

Advanced Aerospace Industries, Abu Dhabi;

Ammar Almounajed, a.k.a., Ammar al-Mounjad. Dubai;

Deira General Marketing, Abu Dhabi;

DGL Clearing and Forwarding LLC, Abu Dhabi;

Emitech Middle East FZC, Sharjah;

Eurotech DMCC, Dubai;

Foremost International FZE, Sharjah;

Jazirah Aviation Club, Ras al Khaimah;

Modest Marketing LLC, Dubai;

Pearltrainer FZE, Sharjah;

Sky Gulf Consultancy and Researches LLC, Abu Dhabi; and

Stealth Telecom Sharjah

In the same action, BIS removed the following 3 persons from the Entity List, based on information provided by them in requests for removal and further review conducted by the End-User Review Committee:

Taiwan:

Hosoda Taiwan Limited, Taipei

United Arab Emirates:

Euro Vision Technology, Dubai

Noun Nasreddine, a.k.a. N.A. Nasreddine, Dubai

Department of State

DDTC Name and Address Changes Posted To Website

Jan. 2 and 17, 2018: 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 Thirty-one Computer Sciences Corporation entities as a result of the merger of Computer Sciences Corporation and the Enterprise Services Division of Hewlett Packard Enterprise HPE. These entities include:
- o Entities with names beginning with “CSC” in Korea, Singapore, India, Thailand, Hong Kong, Taiwan, Japan, Vietnam, Malaysia, South Africa, Australia, New Zealand, France, Italy, Luxembourg, and Portugal;
- o Entities with names beginning with “UXC” in Australia and New Zealand;
- o PT. CSC Indonesia;
- o CSC New Asia Holdings Pte. Ltd.;
- o CSC Computer Sciences VOF/SNC; and
- o Computer Sciences Espana, SA.

All the new names begin with “DXC.” The full names are in the announcement at http://www.pmddtc.state.gov/licensing/documents/nc/nc_ComputerSciencesCorporation.pdf.

· Change in Name for Signalis SAS, a subsidiary of Airbus, to Airbus Defence and Space SAS 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 Adjusts Civil Monetary Penalties For ITAR Violations

Jan. 3, 2018 – 83 Fed. Reg. 234: The State Department adjusted the Civil Monetary Penalties (CMPs) applicable to each law under its jurisdiction to implement the annual inflation adjustment required by federal law. The revisions for violations of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) are:

Old New

ITAR Sec. 127.10(a)(1)(i) $1,111,908 $1,134,602

ITAR Sec. 127.10(a)(1)(ii) $ 808,458 $ 824,959

ITAR Sec. 127.10(a)(1)(iii) $ 962,295 $ 982,935

The new CMPs apply to all penalties assessed on or after Jan. 3, 2018, including penalties for offenses committed prior to the effective date.

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Department of the Treasury

Treasury Department Publishes Quarterly List Of Countries Related To International Boycotts

Jan. 8, 2018 (83 Fed. Reg. 966):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

Fines and Penalties

Dec. 21, 2017: Great Lakes Dredge & Dock Company LLC of Oak Brook, IL, agreed to pay a $37,000 civil penalty to settle charges by BIS of violating the Antiboycott Regulations (EAR Part 760) by knowingly agreeing to refuse to do business with a boycotted country (3 violations involving shipments to Bahrain) and failing to report the receipt of a request to engage in a boycott against a country friendly to the U.S. (7 violations involving shipments to Bangladesh, Bahrain, Kuwait, and Lebanon). If the company does not pay the penalty in a timely manner, BIS may deny its export privileges for one year.

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Jan. 8, 2018: Four additional defendants were sentenced in federal court in Nashville, TN, for their participation in a scheme in which military equipment stolen by soldiers from Fort Campbell, KY, was sold over eBay, and by other means, to customers in Russia, China, Thailand, Japan, The Netherlands, Australia, India, Germany and Mexico. (See additional information about this case in December 2017 Regulatory Update.) Charges for which the additional defendants were sentenced included violation of the Arms Export Control Act (AECA, 22 USC 2778 et seq.). Cory Wilson of Clarksville, TN, was sentenced to 44 months in prison and required to pay $500,000 in restitution to the Army; Michael Barlow, a former soldier, was sentenced to 5 years’ probation and required to pay $5,000 in restitution; Kyle Heade, a former soldier, was sentenced to 30 months in prison and required to pay $10,000 in restitution; and Jonathan Wolford of Clarksville was sentenced to 3 years’ probation and required to pay $2,000 in restitution.

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Jan. 11, 2018: MHz Electronics, Inc., of Phoenix, AZ, agreed to be assessed a civil penalty of $10,000 (suspended for 2 years and thereafter waived if MHz commits no further violations) and complete an external audit of its export controls compliance by an unaffiliated third party to settle charges by BIS that it exported pressure transducers controlled for nonproliferation reasons under ECCN 2B230 to China and Taiwan without the required export licenses. If MHz does not submit the audit results to BIS in a timely manner, BIS may deny its export privileges for up to one year. BIS alleged that MHz sold the transducers over eBay without attempting to determine their export control classification and without determining their intended end use and end user, notwithstanding an earlier expression of concern by FBI agents about the sale of another controlled product over eBay. Also, MHz failed to begin implementing a compliance program until after it received an outreach visit and subsequent administrative summons from BIS.

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Jan. 19, 2018: Yi-Chi Shih, an electrical engineer and part-time resident of Los Angeles, CA, and Kiet Ahn Mai, of Pasadena, CA were arrested on charges including violating IEEPA for an alleged scheme to fraudulently obtain export controlled custom designed monolithic microwave integrated circuits (MMICs) and their design technology from a defense contractor in the U.S. and export them without the required export license to a MMIC manufacturer in China that was listed on the Entity List. Shih was president of the company that owned the Chinese manufacturer. Mai allegedly obtained the MMICs and technology from their U.S. producer by posing as a legitimate domestic customer intending to use them solely in the U.S.

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Jan. 24, 2018: Peter Zuccarelli, of Plano, TX, was sentenced in federal court for the Eastern District of Texas to 46 months in prison, 3 years of supervised release, and a $50,000 fine based on his plea of guilty of violating IEEPA by conspiring to smuggle and export radiation hardened integrated circuits (RHICs) for use in the space programs of China and Russia without the required authorization. Zuccarelli allegedly ordered the RHICs from U.S. suppliers, falsely stating that a domestic company was the end user, and then repackaged and exported them, falsely declaring them as “touch screen parts.” (See additional information about this case in August 2017 Regulatory Update.)

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Jan. 25, 2018: Paul Stuart Brunt, of Bellevue, WA, and Rawnd Khaleel Aldalawi, of Seattle, WA, were arrested on charges of conspiring to violate the AECA by exporting ITAR-controlled handguns to Turkey without the required authorization with the intention that they be transferred to Iraq for use by Kurdish forces. The alleged conspiracy was discovered when Turkish officials found the handguns hidden in vehicles. After their arrest, Brunt was released on bond while Aldalawi was remanded to custody as a possible flight risk pending a preliminary hearing.

JANUARY 2018 EXPORT CONTROL REGULATION UPDATES Read More »

DECEMBER 2017 EXPORT CONTROL REGULATION UPDATES

December 2017

This newsletter is a listing of the latest changes in export control regulations through December 31, 2017. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Wassenaar Arrangement

Wassenaar 23^rd Plenary Meeting

Dec. 6-7, 2017: The Wassenaar Arrangement held its 23^rd Plenary meeting. Major actions taken during the meeting included the admission of India as the 42^nd participating state and the adoption of changes in the List of Dual-Use Goods and Technologies and Munitions List. The changes included adoption of new export controls on military explosives and specific electronic components; clarification of existing controls regarding ground stations for spacecraft, submarine diesel engines, technology related to intrusion software, software for testing gas turbine engines, analog-to-digital converters, non-volatile memories, and information security; and relaxation of controls on some mechanical high-speed cameras and digital computers. A summary of the changes to the lists is on the Wassenaar website at http://www.wassenaar.org/wp-content/uploads/2017/12/Summary-of-Changes-to-2017-Lists-Website.pdf, and the complete 2017 lists are at http://www.wassenaar.org/wp-content/uploads/2017/12/2017_List_of_DU_Goods_and_Technologies_and_Munitions_List-1.pdf.

European Union

Annual Update Of The European Union Export Control List

Dec. 16, 2017: The annual update of the European Union export control list (Annex I to Regulation No. 428/2009) came into force. Most of the revisions result from amendments in the export control lists of the Wassenaar Arrangement, the Australia Group, the Nuclear Suppliers Group, and the Missile Technology Control Regime. A Comprehensive Change Note Summary is on the European Commission (EC) website at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156133.pdf. The full list, including an Explanatory Memorandum, is at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156132.pdf.

Department of Commerce – Bureau of Industry and Security

BIS Adds Two Russian Entities To The Entity List

Dec. 20, 2017 – 82 Fed. Reg. 60304: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding two Russian entities to the Entity List (EAR Part 744, Supp. No. 4) based on the finding that they produced for the Russian Federation Ministry of Defense a ground-launched cruise missile system and associated transporter-erector-launcher with a range prohibited by the Intermediate-Range Nuclear Forces Treaty. The two entities are:

Joint Stock Company Experimental Design Bureau Novator, a.k.a. Novator Design Bureau and JSC OKB Novator, Yekaterinburg; and
Joint Stock Company Federal Scientific and Production Center Titan-Barrikady, a.k.a. Federal Research and Production Center Titan Barrikady JSC, Titan Design Bureau, and JSC FNPTS Titan-Barrikady, Volgograd.

For both companies there is an export license requirement for all items subject to the EAR, a license review policy with a presumption of denial, and no license exceptions are available.

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BIS Revises, Clarifies And Makes Technical Corrections To The EAR

Dec. 27, 2017 – 82 Fed. Reg. 61153: BIS made revisions, clarifications, and technical corrections in EAR Parts 732, 734, 738, 740, and 746 and six Export Control Classification Numbers (ECCNs) in the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). BIS stated that all the changes were editorial in nature and did not affect license requirements. Significant among these, several decision “blocks” in the Export Control Decision Tree diagram (EAR Part 732, Supp. No. 1) were amended to replace references to the general prohibitions with citations of specific EAR sections and to correct improper citations. Also in Part 732, Sec. 732.4(b)(7)(ii) was amended to correct the list of aircraft ECCNs that may be eligible for subsequent export or reexport under License Exception STA. In the CCL, misspellings were corrected and conforming changes were made in ECCNs 0A606, 8A609, 9A610, 2B352, 0D606, and 0E606.

Department of Commerce – Census Bureau

Census Bureau Publishes Advice On How To Find A Schedule B Number

Dec. 12, 2017: In its Global Reach Blog, the Census Bureau published advice for exporters on how to find a Schedule B number. A step-by-step demonstration on finding a Schedule B number is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2017/12/finding-your-schedule-b-number.html. The Global Reach Blog is available at https://www.census.gov/newsroom/blogs/global-reach.html.

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Census Bureau Advises Which Schedule B #s, Harmonized Tariff Schedule #s Are Not Valid For AES

Dec. 28, 2017: The Census Bureau advised that Schedule B, the Harmonized Tariff Schedule (HTS), and the table of HTS Codes that are not valid for the Automated Export System (AES) have been updated to reflect the changes to the 2018 codes effective Jan. 1, 2018. The updated list of HTS codes that are not valid for AES is available at http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?eml=gd&utm_medium=email&utm_source=govdelivery">http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html.

Department of Justice

DOJ Publishes Enhanced Security Plan Guidance Regarding Use of Cloud Services And Network Infrastructure

Dec. 11, 2017: The U.S. Department of Justice National Security Division published an Enhanced Security Plan that it stated provides a helpful set of benchmarks and best practices for companies that may be considering the use of cloud services and network infrastructure to house and transmit their most sensitive data. The Plan was developed to satisfy a non-prosecution agreement reached with Netcracker Technology Corp. of Waltham, MA, a wholly-owned subsidiary of NEC Corp in 2015. In releasing the Enhanced Security Plan, the Justice Department recommended that companies doing business with the U.S. government or handling or using export-controlled technology, software, technical data, and cloud and network services should review the policies and procedures therein and consider whether to include them in their own compliance programs. The Enhanced Security Plan for U.S.-Based Customers’ Domestic Communications Infrastructure is on the Justice Department website at https://www.justice.gov/file/1017066/download.

Department of State

DDTC Name and Address Changes Posted To Website

Dec. 5, 7, 21, and 22, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Address for SKY Perfect JSAT Corporation;
Change in Address for BAE Systems (International) Limited;
Change in Address for NorthStar Aviation USA LLC;
Change in Name for Thales subsidiary from Thales Avionics SAS (TAV) to Thales AVS France SAS due to corporate rebranding;
Change in Name for Thales subsidiary from Thales Systemes Aeroportes SAS to Thales DMS France SAS due to corporate rebranding;
Change in Name for Thales subsidiary from Thales Air Systems SAS (TR6) to Thales LAS France SAS due to corporate rebranding;
Change in Name from Airbus Military France SAS to Airbus Defence and Space SAS due to corporate rebranding;
Change in Name from Celestica International Inc. to Celestica International L.P. due to corporate reorganization; and
HENSOLDT Holding Germany GmbH became a party to current DSP authorizations (including agreements) to which HENSOLDT Sensors GmbH and/or HENSOLDT Optronics GmbH, its German operating subsidiaries, are a party to, due to an internal 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.

Treasury Department

OFAC Announces Issuance Of The Magnitsky Act Sanctions Regulations, 31 CFR Part 584

Dec. 21, 2017, 82 Fed. Reg. 60507: The Office of Foreign Assets Control (OFAC) announced the issuance of the Magnitsky Act Sanctions Regulations, 31 CFR Part 584, pursuant to the Sergei Magnitsky Rule of Law Accountability Act of 2012. The Magnitsky Act sanctions block the assets of persons determined by the Secretary of the Treasury to be involved in certain Russia-related human rights violations; they do not generally prohibit trade or the provision of banking or other financial services to the Russian Federation. The regulations lay out the requirements for blocking the property of those designated and freezing their American assets. Pursuant to these regulations, OFAC also added 5 persons to the List of Specially Designated Nationals (SDN List, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx). New OFAC FAQs about the Magnitsky sanctions are at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/12212017_glomag_faqs.pdf.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Dec. 4, 2017 – 82 Fed. Reg. 57203: BIS modified the Temporary Denial Order (TDO) against Mahan Airways and others by removing the following persons from the TDO: Ali Eslamian, Equipco (UK) Ltd., and Skyco (UK) Ltd. The modification was made at the request of the BIS Office of Export Enforcement (OEE).

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Dec. 11, 2017 – 82 Fed. Reg. 58169: BIS amended its denial order against Shantia Hassanshahi a/k/a Shahi a/k/a Shantia Haas a/k/a Sean Haas (see October 2017 Regulatory Update) by updating his address to reflect his release from federal prison.

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Dec. 28, 2017 – 82 Fed. Reg. 61536: BIS denied for 10 years the export privileges of Joseph Esequiel-Gonzalez of Bastrop Federal Correction Institution (FCI), Bastrop, TX, based on his conviction of exporting, attempting to export, and causing to be exported, to Mexico, a .380 caliber pistol designated as a defense article on the U.S. Munitions List (USML) without the required authorization. In the criminal case, Esequiel-Gonzalez was sentenced to 55 months in prison, 3 years of supervised release, and a special assessment of $100.

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Dec. 28, 2017 – 82 Fed. Reg. 61537: BIS denied the export privileges of Hunter Perry of Vine Grove, KY, for 5 years, based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by exporting or causing to be exported, to the United Kingdom, defense articles on the USML including a night vision scope, a thermal scope, a mini-thermal scope, and a night vision binocular without the required authorization. In the criminal case, Perry was sentenced to one day in prison, one year of supervised release and a special assessment of $500.

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Dec. 28, 2017 – 82 Fed. Reg. 61538: BIS denied the export privileges of Gerardo Trevino-Moncivais of the D. Ray James FCI, Folkston, GA, for 10 years based on his conviction of violating the AECA by aiding and abetting the export, attempting to export, and causing to be exported, to Mexico, rifles, pistols, and ammunition on the USML without the required authorization. In the criminal case, Trevino-Moncivais was sentenced to 36 months in prison and a special assessment of $100.

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Dec. 28, 2017 – 82 Fed. Reg. 61539: BIS denied the export privileges of Papa Faal of Brooklyn Park, MN, for 10 years, based on his conviction of violating the AECA by conspiring to export to Gambia semi-automatic rifles listed on the USML without the required authorization. In the criminal case, Faal was sentenced to time served, 3 years of supervised release, and an assessment of $200.

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Dec. 28, 2017 – 82 Fed. Reg. 61540: BIS denied the export privileges of Saeid Yahya Charkhian and Caspian Machinery Supply LLC, both of Dubai, United Emirates (UAE), for 12 years, based on their settlement of criminal charges of violating the EAR by acting with knowledge of a violation (both defendants) and making a false or misleading statement (Charkhian only) in connection with unauthorized exports to Iran of U.S.-origin items including masking wax, lithium batteries, and zirconia crucibles, all designated EAR99 and valued in total at nearly $190,000.

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Dec. 29, 2017 – 82 Fed. Reg. 61745: BIS renewed for an additional 180 days the TDO against Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Mahan Air General Trading LLC, Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issarn Shammout.

Fines and Penalties

Nov. 30, 2017: Seiler Instrument & Manufacturing Company, Inc., of Kirkwood, MO, agreed to forfeit $1,500,000 to settle criminal charges that it improperly certified optical materials imported from China as compliant with the Buy American Act. The imported optical materials were used in weapons sights that Seiler manufactured under a series of contracts with the Department of Defense (DoD). Seiler also agreed to a compliance program to be monitored by DoD. Seiler made these commitments in a pretrial diversion agreement in which the company also agreed to enter a plea of guilty to a false statement charge if it does not meet the full terms of the agreement.

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Dec. 5, 2017: John Roberts of Clarksville, TN, and three U.S. Army soldiers at Fort Campbell, KY, were sentenced in Nashville, TN, federal court for their roles in a scheme in which Army weapons accessories and equipment were stolen from Fort Campbell and sold worldwide over eBay and through other means. (See description in October 2017 Regulatory Update.) Roberts, who purchased the stolen items from the soldiers for cash and then exported them, was sentenced to 15 years in prison for conspiracy, wire fraud, and violating the AECA and ordered to pay $4.2 million in restitution for the stolen equipment. The three soldiers, Alexander Hollibaugh, Dustin Nelson, and Aaron Warner, were sentenced to time served and probation for conspiracy to steal and sell Army property.

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Dec. 6, 2017: Dentsply Sirona Inc. of York, PA, the successor in interest to Dentsply International Inc. (together DSI) agreed to pay $1,220,400 to settle civil charges by OFAC of violating the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) on 37 occasions when two of its subsidiaries exported dental equipment and supplies to distributors in third countries with knowledge or reason to know that the goods were ultimately destined for Iran. Supervisory personnel within the subsidiaries participated in the conduct that led to the claimed violations and appeared to have deliberately concealed their awareness from DSI.

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Dec. 11, 2017: Eric Daniel Doyle of Kalispell, MT, pleaded not guilty to 44 counts of illegal gun exports and related crimes in federal court in Missoula, MT. Doyle was indicted on the charges in 2015 but fled and was a fugitive until his capture in Mexico Nov. 8, 2017. Doyle allegedly set up sales to customers in Australia, Norway, Denmark, and Sweden through the Internet and then shipped them through the U.S. Postal Service.

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Dec. 18, 2017: Ali Soofi, a Canadian-Iranian dual citizen, was sentenced in federal court in New York, NY, to 32 years in prison and one year of supervised release for conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by participating as a broker in the unauthorized export to Iran of military items including helicopters, high-tech machine gun parts, tank parts, and military vehicle technology. In the conspiracy, Soofi worked to fill specific orders from Iranian clients including a high-ranking official in the Iranian Revolutionary Guard Corps.

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Dec. 20, 2017: Three residents of Miami, FL were sentenced in federal court in Miami for their roles in a conspiracy to violate IEEPA by shipping various aircraft parts and equipment to Syrian Arab Airlines without the required authorization. Arash Caby, a/k/a Axel Caby, who managed AW-Tronics, the Miami export company through which the exports were made, was sentenced by 24 months in prison, 2 years of supervised release, and a $10,000 fine. Ali Caby, a/k/a Alex Caby, who ran the Bulgaria office of AW-Tronics and also had a management role in the Miami headquarters office, was sentenced to 24 months in prison and 2 years of supervised release, and Marjan Caby, who as AW-Tronics export compliance officer and auditor facilitated the exports by submitting false and misleading electronic export information to federal agencies, was sentenced to 12 months and one day in prison and 2 years of supervised release.

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Dec. 21, 2017: Giovanni Zannoni of Gavorrano, Italy pleaded guilty in federal court in Brooklyn, NY to violating the AECA by exporting and attempting to export night vision equipment and assault rifle components controlled under the USML to Italy without the required authorization. As part of his plea, Zannoni agreed to forfeit $436,674 and dozens of gun parts and night vision and thermal imaging devices recovered by the U.S. Government in connection with his prosecution. Zannoni was arrested on May 14, 2017, after entering the U.S. at Miami International Airport.

DECEMBER 2017 EXPORT CONTROL REGULATION UPDATES Read More »

NOVEMBER 2017 EXPORT CONTROL REGULATION UPDATES

November 2017

This newsletter is a listing of the latest changes in export control regulations through November 30, 2017. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Department of Commerce – Bureau of Industry and Security

BIS Clarifies License Exceptions GOV and STA

Nov. 1, 2017 – 82 Fed. Reg. 50511: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to clarify the intended use of License Exception GOV (Governments, International Organizations, International Inspections under the Chemical Weapons Convention, and the International Space Station, EAR Sec. 740.11) and License Exception STA (Strategic Trade Authorization, EAR Sec. 740.20). BIS emphasized that the clarifications are based on existing agency interpretations, including Frequently Asked Questions (FAQs), and do not change the applicability or any other requirements for the use of these License Exceptions.

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BIS Implements The National Security Presidential Memorandum on Strengthening The U.S. Policy On Cuba

Nov. 9, 2017 – 82 Fed. Reg. 51983: BIS took action to implement the June 2017 National Security Presidential Memorandum on Strengthening the U.S. Policy on Cuba (Cuba NSPM – see description of this policy in June 2017 Regulatory Update) by establishing a general policy of denial of applications for licenses to export or reexport items for use by entities on a new list established by the State Department (see item in State Department section below) unless the transaction is otherwise consistent with the NSPM. In the same action BIS supported the NSPM’s policy to foster free enterprise in Cuba by simplifying and expanding License Exceptions Support for the Cuban People (SCP, EAR Sec. 740.21), Gift Parcels and Humanitarian Donations (GFT, EAR Sec. 740.12), and Consumer Communications Devices (CCD, EAR Sec. 740.19). These actions were coordinated with actions by the State Department and the Treasury Department (see items below). A joint Fact Sheet describing the actions taken by all three agencies is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_11082017.pdf. A Fact Sheet detailing the new BIS rules and policies on exports and reexports to Cuba is on the BIS website at https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba, and BIS FAQs are at https://www.bis.doc.gov/index.php/forms-documents/pdfs/1568-bis-cuba-consolidated-faqs-3/file. Refer to the article published on FD Associates’ website for additional details.

Department of Commerce – Census Bureau

Census Posts Blog On Routed Export Transactions

Nov. 8, 2017: The Census Bureau published a blog post aimed at combating the fear of routed export transactions (RETs). Titled “A Guide for the U.S. Authorized Agent and U.S. Principal Party in Interest,” it includes sections on Advice for All Parties in a RET, Advice for the U.S. Principal Party in Interest, and Advice for the U.S. Authorized Agent. The post is available on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2017/10/combating_the_fearo.html.

Department of Commerce – Office of Space Commerce

Second Edition Of The U.S. Export Controls for the Commercial Space Industry Has Been Published

November 2017: The Office of Space Commerce (OSC) of the Department of Commerce and the Office of Commercial Space Transportation (OCST) of the Department of Transportation Federal Aviation Administration (FAA) jointly published a second edition of their U.S. Export Controls for the Commercial Space Industry. This 76-page manual is a practical guide covering the entire military and dual-use export control process including classification (incorporating Export Control Reform changes), the use of License Exceptions, the licensing process, and compliance after license authorization. The manual can be accessed at http://www.space.commerce.gov/wp-content/uploads/2017-export-controls-guidebook.pdf.

Department of State

DDTC Name and Address Changes Posted To Website

Nov. 1, 13, and 21, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Name from Icon Polymer to Iocn Aerospace Technology Ltd. due to corporate reorganization;
Change in Names for each of the following, from NEC Engineering, Ltd. (NECE), NEC Network Products, Ltd. (NECNP), NEC Yamanashi, Ltd. (NECY), and NEC Communication Systems, Ltd. (NECCS), respectively, to NEC Platforms, Ltd., due to corporate reorganization;
Change in Name from HS Wroclaw Sp. Z.o.o. to UTC Aerospace Systems Wroclaw Sp. Z.o.o. due to corporate merger;
Change in Name from KMWE Precise Eindhoven B.V. to KMWE Precision B.V. due to corporate rebranding;
Change in Address for Thales Alenia Space UK Ltd.;
Change in Names for each of the following, from Thales Training & Simulation SAS, Thales Avionics LCD SAS, Thales Electron Devices SAS, Thales Underwater Systems SAS, Thales Microelectronics SAS, Thales Angenieux SAS, TDA Armements SAS, Thales Air Operations SAS, Thales Cryogenie SAS, and Thales Optronique SAS, respectively, to Thales LAS France SAS due to corporate reorganization; and
Change in Address for Thales LAS France SAS.

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 Posts New Interpretation Of Category XIV(f)(7)

Nov. 1, 2017: DDTC posted a notice stating that defense articles classified under U.S. Munitions List (USML, 22 USC Part 121) Category XIV(f)(7), including Chemical Agent Resistant Coatings, are designated as Significant Military Equipment (SME), and therefore require a DSP-83 non-transfer and use certificate. The notice is on the DDTC home page, http://www.pmddtc.state.gov/. This notice revises previous published guidance provided by DDTC that CARC was not SME and did not require a DSP-83.

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Department of State Posts Cuba Restricted List

Nov. 9, 2017 – 82 Fed. Reg. 52089: Implementing the Cuba NSPM announced in June 2017 (see Commerce Department section above), the Department of State published a List of Entities and Sub-Entities Associated with Cuba (the Cuba Restricted List) identifying entities and sub-entities that are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel. Direct financial transactions with listed entities will generally be prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515 – see item below in Treasury Department section), and the list will also be considered by BIS when it reviews license applications. The Cuba Restricted List and FAQs about it are on the State Department website at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/index.htm.

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DDTC Will No Longer Accept DSP-119s To Amend DSP-85s

Nov. 14, 2017: DDTC announced that effective Dec. 1, 2017, it will no longer accept form DSP-119 to amend form DSP-85. Amendments to the DSP-85 will now require a completely new DSP-85 with a transmittal letter signed by the Empowered Official explaining the change.

Department of the Treasury

Treasury Implements The National Security Presidential Memorandum on Strengthening The U.S. Policy On Cuba

Nov. 9, 2017 – 82 Fed. Reg. 51998: To implement the Cuba NSPM, the Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR, 31 CFR part 515) to restrict direct financial transactions with entities and sub-entities listed on the Cuba Restricted List, tighten the rules on educational travel to Cuba, and broaden the coverage of the term “prohibited officials of the government of Cuba.” The new provisions are aimed at channeling economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba. To assist exporters in complying with the new rules, OFAC published new and updated FAQs at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf (35, and the Treasury Department published the above-mentioned joint Fact Sheet at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_11082017.pdf.

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OFAC Publishes Guidance On How To Provide Humanitarian Assistance To Iranian People Due To Earthquake

Nov. 17, 2017: In light of the recent earthquake in Iran, OFAC published a new FAQ to highlight the ways in which Americans can provide humanitarian assistance to the Iranian people, consistent with the Iran-related sanctions administered by OFAC. The FAQ describes General License E, issued in 2013 pursuant to the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), which authorizes nongovernmental organizations to export services to Iran in support of activities related to humanitarian projects to meet basic human needs in Iran. FAQ 549 is on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#549.

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

Sep. 29, 2017: BIS posted a warning letter issued to Phillips Specialty Products Inc. of Bartlesville, OK. Phillips allegedly violated Sec. 760.2(d) of the Antiboycott Regulations (EAR Part 760) when, in connection with the sale and/or transfer of goods or services from the U.S. to Libya, it furnished to the letter of credit advising bank a shipping certificate including the following certification: “We hereby state that the carrying vessel is allowed to enter Libyan ports.”

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Nov. 2, 2017: Julian Prezas of San Antonio, TX, a former U.S. Army sergeant, was sentenced in federal court in San Antonio to 200 months in federal prison, 3 years of supervised release, and a $600 special assessment fee based on his guilty plea and conviction of making a false statement during the purchase of firearms and attempting to export defense articles listed on the USML to Mexico without the required authorization. In his guilty plea, Prezas admitted to conspiring to illegally purchase more than 40 assault rifles, actually purchasing the rifles, and delivering them to multiple individuals, one of whom delivered them to members of the Gulf Cartel in Mexico. Prezas made some of the deliveries while in uniform and in a government vehicle.

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Nov. 13, 2017: Bank of America, NA agreed to pay a civil penalty of $44,625 to settle charges by BIS of 15 violations of the Antiboycott Regulations involving refusal to do business, furnishing information about business relationships with boycotted countries or blacklisted persons, and failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. Bank of America voluntarily disclosed the violations, which involved transactions with the United Arab Emirates (UAE) and Kuwait.

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Nov. 21, 2017: Pilot Air Freight, LLC, a/k/a Pilot Air Freight Corp., of Lima, PA, agreed to pay a civil penalty of $175,000 (of which $75,000 will be suspended through March 31, 2020 and thereafter waived if Pilot has committed no further violations) and to complete two external audits of its export control compliance program to settle charges by BIS that it violated EAR Sec. 764.2(b) by aiding or abetting an attempted unlicensed export to an entity listed on the Entity List (EAR Part 744, Supp. No. 4). Pilot, which arranged transportation to the port of export and prepared and submitted shipping documentation including Electronic Export Information (EEI) for the export of items classified under 2B991 and EAR99 to IKAN Engineering Services, a Pakistani entity listed on the Entity List, erroneously stated on the EEI that the export did not require an export license. The error occurred because Pilot had failed to connect its proprietary screening software to the system on which its customers entered and scheduled their shipments.

NOVEMBER 2017 EXPORT CONTROL REGULATION UPDATES Read More »

OCTOBER 2017 EXPORT CONTROL REGULATION UPDATES

October 2017

This newsletter is a listing of the latest changes in export control regulations through October 31, 2017. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

European Union

European Union Updates Its Dual-Use Export Control List

Sep. 26, 2017: The European Commission (EC) adopted the annual Delegated Regulation updating the European Union dual-use export control list to conform with decisions made in 2016 by the Wassenaar Arrangement, the Australia Group, the Missile Technology Regime, and the Nuclear Suppliers Group. The Regulation will be published and enter into force in 2 months, unless the European Union Council and the European Parliament raise objections during this period. A Comprehensive Change Note Summary is on the EC website at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156133.pdf. The full 2017 Commission Delegated Regulation, including an Explanatory Memorandum, is at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156132.pdf .

Department of Commerce – Bureau of Industry and Security

BIS Posts BIS Update Presentations

Oct. 4, 2017: The Bureau of Industry and Security (BIS) posted the presentations made by BIS personnel at the 2017 Export Control Policy Conference (“BIS Update”) held in Washington Oct. 3-5. The presentations are on the BIS website at https://www.bis.doc.gov/index.php/conference-update-2017/225-update-2017/1315-update-2017-presentations.

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BIS Updates Validated End User - Lam Research Service Co., Ltd. Eligible Items and Facilities

Oct. 23, 2017 – 82 Fed. Reg. 48925: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to revise the list of eligible items and Chinese facilities covered under the entry for Lam Research Service Co., Ltd. (“LAM”), in the Validated End User List (EAR Part 748, Supp. No. 7), including adding 6 Lam facilities.

Department of Commerce – Census Bureau

Census Updates Search Features of ACE / AESDirect

Oct. 3, 2017: The Census Bureau enhanced the search functionality of the ACE/AESDirect application by adding a filter feature allowing users to search for previously transmitted ACE/AESDirect Electronic Export Information using any of several search criteria. Full details are in the ACE/AESDirect User Guide, https://www.census.gov/foreign-trade/aes/aesdirect/AESDirect-User-Guide.pdf?eml=gd&utm_medium=email&utm_source=govdelivery .

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Census Seeks Public Comments On Routed Transactions

Oct. 6, 2017 – 82 Fed. Reg. 46739: The Census Bureau invited public comments on the requirements in the Foreign Trade Regulations (FTR, 15 CFR Part 30) for routed transactions (transactions in which the foreign principal party in interest controls the movement of the goods out of the U.S.). Issues of particular interest to the Census Bureau include the definition of “routed export transaction” in FTR Sec. 30.1, clarification of the responsibilities of the parties to a routed transaction as detailed in FTR Sec. 30.3, and how the FTR could be revised to align with the EAR requirements for routed transactions. Comments will be accepted until Dec. 5, 2017.

Department of State

DDTC Name and Address Changes Posted To Website

Oct. 17, 19, 23, and 30, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Name from L-3 Micreo to L3 Micreo Pty Limited due to corporate rebranding;
Change in Name from Manroy Engineering Ltd. FNH UK Ltd. due to Manroy’s acquisition by FN Herstal;
Change in Name from Moog Dublin Ltd. to Nammo Ireland Ltd. due to Nammo’s acquisition of Moog’s In-Space Propulsion businesses in UK and Ireland; and
Change in Name from Norbert Dentressangle Overseas UK Limited to XPO Global Forwarding UK Limited due to XPO Global’s acquisition of Norbert Dentressangle.

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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The Secretary of State Permits Revocation Of Certain Sudan Sanctions

Oct. 11, 2017 – 82 Fed. Reg. 47287: The Secretary of State published a notice certifying that the Government of Sudan had satisfied the criteria that an Executive Order (E.O. 13761, Jan. 13, 2017, amended by EO. 13804, July 11, 2017) specified would permit the revocation of certain economic sanctions on Sudan. The Secretary’s report detailing the positive actions taken by the Government of Sudan is on the State Department website at https://www.state.gov/p/af/rls/2017/274667.htm. The notice confirmed an announcement on Oct. 6, 2017 of the intention to revoke these sanctions. (See actions putting this notice into action in Treasury Department section below.)

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The State Department Posts Guidance On Russia Sanctions

Oct. 27, 2017: The State Department posted Public Guidance regarding implementation of sanctions with respect to Russia’s defense and intelligence sectors that were mandated by the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA or “the Act,” Pub. L. 115-44 -- see August 2017 Regulatory Update) and identified 39 entities in these sectors. The Guidance notes that sanctions under the Act will not become effective before January 29, 2018, that the sanctions will affect only persons that are determined to knowingly engage in a significant transaction with a listed person, and that inclusion on the list does not automatically involve inclusion on the Treasury Department’s List of Specially Designated Nationals and Blocked Persons (“SDN List”) or the Sectoral Sanctions Identification List. The Public Guidance, including interpretive Q&As, is on the State Department website at https://www.state.gov/t/isn/caatsa/275118.htm and the list of entities is at https://www.state.gov/t/isn/caatsa/275116.htm. (See related action in Treasury Department section below.)

Department of the Treasury

OFAC Publishes FAQs Regarding Sudan Sanctions

Oct. 6, 2017: The Office of Foreign Assets Control (OFAC) published 5 Frequently Asked Questions (FAQs) about the revocation, effective Oct. 12, 2017, of the prohibition on all transactions that were previously prohibited under the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538). (See State Department announcement above.) In effect, this revocation made permanent the general license that OFAC issued Jan. 17, 2017. (See January 2017 Regulatory Update.) The FAQs clarified that the revocation applied only to sanctions under the SSR and did not affect Sudan’s status under other sanctions. Accordingly, the revocation does not apply to export control requirements under the EAR, which are maintained as a consequence of Sudan’s inclusion on the State Sponsors of Terrorism List (SST List) under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA, 22 USC Sec. 7205). The FAQs also noted that the revocation of sanctions under the SSA will not affect past, present, or future enforcement actions regarding violations of the SSR that occurred prior to Oct. 12, 2017. The FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/20171006_sudan_faqs.pdf.

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OFAC Publishes Guidance On General License A Under TSRA For Certain Exports To Sudan

Oct. 6, 2017: OFAC issued General License A under the TSRA authorizing all exports and reexports of agricultural commodities, medicine, or medical devices for sale or resale to the Government of Sudan or to any entity in Sudan, effective Oct. 12, 2017. The prohibitions covered under this General License were not covered by the revocation of SSR sanctions because they resulted from Sudan’s inclusion on the State Sponsors of Terrorism List (SST List) under TSRA and therefore were not affected by the revocation of prohibitions imposed under the SSR. A note in the General License cautioned that it did not ease restrictions under other applicable non-SSR provisions of law, including the EAR and the ITAR. General License A is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/tsra_gla.pdf.

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OFAC Removes Certain Sudanese Nationals From The Specially Designated Nationals List

Oct. 26, 2017 – 82 Fed. Reg. 49698: OFAC recorded the removal from the Specially Designated Nationals List (SDN List) of 157 Sudanese individuals and entities, effective Oct. 12, 2017. OFAC explained that the Executive Order pursuant to which the SSR had been revoked (see State Department section above) had also revoked the provisions of earlier Executive Orders that had imposed the SDN designations.

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OFAC Continues Existing Prohibitions And License Requirements For Deepwater, Arctic Offshore Or Shale Projects in Russia

Oct. 31, 2017: OFAC issued a Directive continuing existing prohibitions and license requirements on actions directly or indirectly supporting exploration or production for deepwater, Arctic offshore, or shale projects in Russia and prescribing broader prohibitions affecting actions initiated on or after January 29, 2018. Directive 4 (as amended on Oct. 31, 2017) under Executive Order 13662 is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/eo13662_directive4_20171031.pdf. Details and clarification of the prohibitions in this Directive are in FAQs on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#373 and https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#412.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Oct. 5, 2017 – 82 Fed. Reg. 46476: BIS denied the export privileges of Shantia Hassanshahi (a/k/a Shantia Hassan Shahi, a/k/a Shahi, a/k/a Shantia Haas, a/k/a Sean Haas) of Lompoc, CA, for 5 years, based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC 1701 et seq.) by willfully conspiring to export, to Iran, goods and technology from Canada, and related services from the U.S., without the required license from OFAC. In the criminal case, Hassanshahi was sentenced to 12 months in prison, one year of supervised release, 100 hours of community service, and a $100 assessment.

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Oct. 5, 2017 – 82 Fed. Reg. 46478: BIS denied the export privileges of Shehzad John of Ashland, KY, for 10 years, based on his conviction of violating IEEPA by knowingly and willfully conspiring and attempting to export to Pakistan, a Bushnell Optical Scope, a Monstrum Laser Aimer, an AR 15 30mm red dot sight, and a NcStar red laser sight, without the required license from the Commerce Department. In the criminal case, John was sentenced to 71 months in prison, 3 years of supervised release, a fine of $10,000, and an assessment of $100.

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Oct. 5, 2017 – 82 Fed. Reg. 46479: BIS denied the export privileges of Tayabi Fazal Hussain of Dubai, United Arab Emirates (UAE), for 10 years, based on his conviction of violating IEEPA by conspiring to export and causing the exportation, to Iran, of numerous types of goods including, optical and telescopic equipment and gas turbine mobile generators, without the required U.S. Government authorization. In the criminal case, Hussain was sentenced to 15 months in prison, with credit for time served, and a special assessment of $100.

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Oct. 5, 2017 – 82 Fed. Reg. 46480: BIS denied the export privileges of Mark Henry (a/k/a Weida Zheng, a/k/a Scott Russel, a/k/a Bob Wilson, a/k/a Joanna Zhong) of Minersville, PA, and Related Person Dahua Electronics Corporation (a/k/a Bao An Corporation), of Flushing, NY, for 10 years, based on Henry’s conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778), by exporting ablative materials used as a protective coating for rocket nozzles, to Taiwan, without the required license from the State Department. In the criminal case, Henry was sentenced to 78 months in prison, 3 years of supervised release, and a $200 assessment.

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Oct. 5, 2017 – 82 Fed. Reg. 46481: BIS denied the export privileges of Robert J. Shubert, Sr., of Coleman, FL, for 10 years, based on his conviction of violating the AECA by knowingly and willfully exporting Dual Sensor Night Vision Goggles, designated as defense articles on the U.S. Munitions List (USML, 22 CFR Sec. 121.1), to Japan, without the required license from the State Department. In the criminal case, Shubert was sentenced to 78 months in prison, 36 months of supervised release, a $15,000 fine, and a $300 assessment.

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Oct. 5, 2017 – 82 Fed. Reg. 46482: BIS denied the export privileges of John Francis Stribling of Loretto, PA, for 5 years based on his conviction of knowingly and willfully exporting 2 pistols and 2 rifles designated as defense articles on the USML, to Indonesia, without the required licenses from the Department of State. In the criminal case, Stribling was sentenced to 2 years in prison, 3 years of supervised release, and a $100 assessment.

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Oct. 20, 2017 – 82 Fed. Reg. 48792: BIS denied the export privileges of Adrian Manual Hernandez of Phoenix, AZ, for 5 years based on his conviction of violating the AECA by knowingly and willfully exporting, aiding and abetting the export of, and causing to be exported, to Mexico, one or more firearms designated on the USML without the required license from the State Department. In the criminal case, Hernandez was sentenced to 5 years of probation and a $100 assessment.

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Oct. 20, 2017 – 82 Fed. Reg. 48793: BIS denied the export privileges of Jimmy Rojas (a/k/a Jim Rojas) of Miami, FL, for 10 years based on his conviction of violating the AECA by knowingly and willfully attempting to export, to Jordan, a 6015/PVS14 Series ITT Monocular Night Vision device and a Trijicon Advanced Combat Optical Gunsight (ACOG) Rifle Scope, both designated on the USML, without the required licenses from the Department of State. In the criminal case, Rojas was sentenced to 30 months in prison, 36 months of supervised release, and a $100 assessment, and was ordered to pay $372,505 in restitution to the U.S. Postal Service.

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Oct. 20, 2017 – 82 Fed. Reg. 48794: BIS denied the export privileges of Martin Jan Leff of Bonita Springs, FL, for 10 years based on his conviction of violating the AECA by knowingly and willfully attempting to export and causing to be exported, to Hong Kong, 7 F-4 Phantom fighter jet wheel assemblies designated on the USML, without the required licenses from the Department of State. In the criminal case, Leff was sentenced to 3 years of probation, a criminal fine of $10,000, and a $100 assessment.

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Oct. 20, 2017 – 82 Fed. Reg. 48795: BIS denied the export privileges of Marleen Rochin of Phoenix, AZ, for 5 years based on her conviction of violating the AECA by knowingly and willfully exporting, and aiding and abetting the export, to Mexico, of one or more firearms designated on the USML, without the required license from the Department of State. In the criminal case, Rochin was sentenced to 5 years of probation and a $100 assessment.

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Oct. 20, 2017 – 82 Fed. Reg. 48796: BIS denied the export privileges of Rodrigo Chico-Rodriguez of Pecos, TX, for 10 years based on his conviction of violating the AECA by intentionally and knowingly conspiring, attempting and causing the export, to Mexico, of 2 rifles, a pistol, and 312 rounds of ammunition, without the required license from the Department of State. In the criminal case, Chico-Rodriguez was sentenced to 60 months in prison and a special assessment of $200.

Fines and Penalties

Sep. 25, 2017: Whirlpool Europe Srl (Italy) agreed to pay a civil penalty of $72,450, to settle charges by BIS, that it had committed 21 violations of the of Antiboycott Regulations (EAR Part 760) Secs. 760.2(a), 760.2(d), and 760.5 by knowingly agreeing to refuse to do business with another person at the request of a boycotting country, furnishing information on its business relationships with a boycotted country, and failing to report its receipt of boycott requests. The violations involved shipments to Lebanon, Yemen, and Qatar.

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Sep. 25, 2017: Whirlpool Corporation, the parent of Whirlpool Europe Srl (Italy), agreed to pay a civil penalty of $9,000, to settle charges by BIS, that it had committed 3 violations of Sec. 760.2(d) of the Antiboycott Regulations by furnishing information about another person’s business relationships with another person who is known or believed to be restricted from having any business relationship with, or in, a boycotted country. The countries involved in these violations were Lebanon and Qatar.

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Sep. 28, 2017: Ali Eslamanian of London, United Kingdom (UK), agreed to pay a civil penalty of $250,000 (of which $150,000 will be suspended for 4 years and then waived) and Eslamanian, Equipco (UK) Ltd., and Skyco Ltd., all of London, UK, agreed to accept a 4-year denial of export privileges (suspended for 4 years and thereafter waived if Eslamanian, Equipco, and Skyco have complied with all terms of the settlement agreement), to settle charges by BIS, that they had violated EAR Sec. 764.2(k) by acting contrary to the terms of a Temporary Denial Order (TDO). The alleged violation involved an effort to negotiate the purchase of a U.S.-origin International Aero Engine aircraft engine that was subject to the EAR, an action that violated the many-times-renewed TDO against Mahan Airways and several other respondents including Eslamanian.

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Sep. 28, 2017: Oxyde Chemicals, Inc., of Houston, TX, agreed to pay a civil penalty of $59,600, to settle charges by BIS, of 17 violations of the Antiboycott Regulations involving failure to oppose a condition in letters of credit from customers in the UAE requiring compliance with the Israeli boycott; furnishing information about business relationships with boycotted countries or blacklisted persons in connection with transactions with Lebanon and the UAE; and failure to report boycott requests from customers in Bahrain, Lebanon, Libya, and the UAE.

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Oct. 3, 2017: Ali Caby (a/k/a/ Alex Caby), Arash Caby (a/k/a/ Axel Caby), and Marjan Caby, all of Miami, FL, pleaded guilty to one count of an indictment charging them with conspiracy to defraud the U.S. and to export dual-use aviation parts and equipment to Syrian Arab Airlines (Syrian Air), an entity owned by the Government of Syria and designated as a Specially Designated National, without the required license from OFAC. According to court documents, Arash Caby was manager of AW-Tronics, a Miami export company, Ali Caby ran the Bulgaria office of AW-Tronics, and both men closely supervised and encouraged subordinate employees of AW-Tronics in the shipment of aircraft parts and equipment to Syrian Air. Marjan Caby, AW-Tronics’ export compliance officer and auditor, allegedly facilitated the illegal exports by submitting false electronic export information to federal agencies.

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Oct. 5, 2017: BD White Birch Investment LLC (White Birch USA), of Greenwich, CT, agreed to pay a civil penalty of $372,465, to settle charges by OFAC, that it violated the SSR on 3 occasions when it facilitated the sale and shipment of Canadian-origin paper valued at $354,602 from Canada to Sudan. OFAC alleged that the active involvement of personnel within White Birch USA and its Canadian subsidiary in discussing, arranging, and executing these exports constituted a violation of the SSR.

OCTOBER 2017 EXPORT CONTROL REGULATION UPDATES Read More »

SEPTEMBER 2017 EXPORT CONTROL REGULATION UPDATES

September 2017

This newsletter is a listing of the latest changes in export control regulations through September 30, 2017. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

New UN Sanctions On North Korea

United Nations

Sep. 11, 2017: The United Nations Security Council adopted new sanctions on North Korea further limiting or prohibiting most remaining exports of goods and labor both to and from North Korea, including joint ventures. These U.N. sanctions cover actions that are already covered by U.S. sanctions, but all U.N. member states will now be required to adopt them. A Fact Sheet on UNSCR Resolution 2375 is on the web site of the U.S. Mission to the U.N. at https://usun.state.gov/remarks/7969.

President Blocks Sale Of U.S. Semiconductor Manufacturer To Chinese Via CFIUS

The President

Sep. 13, 2017: President Trump issued an order prohibiting the acquisition of Lattice Semiconductor Corporation, an Oregon-based publicly traded manufacturer of semiconductors for the consumer, communications, and industrial markets, by a group of Chinese state-owned entities. Lattice's primary semiconductor product lines are programmable logic devices that customers can program to provide functionality similar to chips that are designed and produced for specific applications. The President’s order was based on a conclusion by the Committee on Foreign Investment in the U.S. (CFIUS) that the takeover presented a risk to U.S. national security that could not be mitigated. The President’s Order is on the White House web site at https://www.whitehouse.gov/the-press-office/2017/09/13/order-regarding-proposed-acquisition-lattice-semiconductor-corporation.

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President Trump Issues Executive Order 13810 Regarding New Sanctions On North Korea

Sep. 25, 2017 – 82 Fed. Reg. 44705: President Trump issued Executive Order 13810, further tightening U.S. sanctions on North Korea. The order authorizes the Secretary of the Treasury to adopt far-reaching sanctions on foreign financial institutions and foreign persons in certain industries and directly bans vessels and aircraft that have visited North Korea from visiting the U.S. for 180 days. A White House Fact Sheet is at https://www.whitehouse.gov/the-press-office/2017/09/21/fact-sheet-president-donald-j-trump-increases-pressure-cut-funding-north. See Treasury Department section below for actions relating to this Executive Order.

Department of Commerce Seeks Comments On Foreign Policy Provisions Of The EAR

Department of Commerce

Sep. 7, 2017 – 82 Fed. Reg. 42279: The Bureau of Industry and Security (BIS) invited comments from industry about the effect of export controls based on foreign policy provisions in the Export Administration Regulations (EAR, 15 CFR Parts 730-774). Foreign-policy export controls expire after one year unless renewed, and the comments will aid BIS in determining whether to renew the current controls, effective Jan. 1, 2018. Foreign-policy controls relate to, among others, proliferation, regional stability, terrorism, and crime control items. Specific questions of particular interest, and a full list of foreign-policy controls in the EAR, are in the BIS Request for Comments in the Federal Register at https://www.gpo.gov/fdsys/pkg/FR-2017-09-07/pdf/2017-19010.pdf#page=1. Comments are due Oct. 10, 2017.

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BIS Removes 3 Entities In 4 Countries From the Entity List

Sep. 25, 2017 – 82 Fed. Reg. 44514: BIS removed 3 entities in 4 countries from the Entity List (EAR Part 744, Supp. No. 4) based on its analysis of information in requests for removal pursuant to procedures in EAR Sec. 744.16(e). The 3 removed entities are:

Australia:

Vortex Electronics, Quakers Hill, NSW.

China:

China National Commercial New Tone Trading Company Ltd, Beijing.

Iran:

FIMCO FZE, Tehran (See alternate address under United Arab Emirates).

United Arab Emirates:

FIMCO FZE, JAFZ (See alternate address under Iran).

In the same ruling, BIS modified the listings of the following 5 entities, all in Pakistan:

(1) IKAN Engineering Services, a.k.a., the following one alias: IKAN Sourcing. Lahore, Islamabad, Karachi, and Shah Rukn-e-Alam Colony Multan;

(2) Iman Group, a.k.a., the following one alias: Pana Communication Inc., Islamabad;

(3) Interscan, Karachi 75400i, Sindh;

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

(5) Micado, Karachi, Sindh.

DHS Posts Update On AES Interface Requirements

Department of Homeland Security

Sep. 15, 2017: Customs and Border Protection (CBP) posted updates of several Automated Export System Trade Interface Requirements (AESTIR) documents on its website at https://apps.cbp.gov/csms/viewmssg.asp?Recid=22972&page=&srch_argv=17-000573&srchtype=all&btype=&sortby=&sby. A 57-page September 2017 Automated Export System

Trade Interface Requirements Summary of Changes is on the CBP website at

https://www.cbp.gov/sites/default/files/assets/documents/2017-Sep/SUMMARY_OF_CHANGES_09072017.pdf.

DDTC Name and Address Changes Posted To Website

Department of State

Sep. 5, 8, 13, 18, and 25, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Name from DRS Technologies, Inc. to Leonardo DRS, Inc. (US) due to corporate rebranding;
Change in Name from Easat Antenna Limited to Easat Radar Systems Limited due to corporate rebranding;
Change in Name from Titan Company Limited to Titan Engineering & Automation Limited due to corporate rebranding and relocation of business units and Change in Address;
Change in Name from Sigilogic Spółka z Orgraniczoną Odpowiedzialnością (Sigilogic Sp. z.o.o.) to Asseco Data Systems Spółka Akcyjna (Asseco Data Systems S.A.) due to merger; and
Change in Name from RLC (UK) Limited to RLC Langford Lodge Limited due to corporate rebranding.

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

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DDTC Section 655 Annual Military Assistance Report For FY 2016

Sep. 5, 2017: DDTC posted its Section 655 Annual Military Assistance Report for FY 2016, which lists the defense articles and defense services it licensed under the Arms Export Control Act (AECA, 22 USC 2778 et seq.), broken down by Country/Territory, USML Category, Quantity, Defense Articles and Services, Authorized Value, and Shipped Value. The report is on the DDTC website at http://www.pmddtc.state.gov/reports/documents/2016%20Section%20655%20Report.pdf .

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DDTC Updates Australian Intermediate Consignee List Per 22 CFR § 126.16

Sep. 14, 2017: DDTC posted an updated list of Australian Intermediate Consignees approved to participate in shipments under the exemption pursuant to the U.S.-Australia Defense Trade Cooperation Treaty, as provided in Sec. 126.16 of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). The list is on the DDTC website at http://pmddtc.state.gov/treaties/documents/AS_IC_List.pdf.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Sep. 14, 2017 – 82 Fed. Reg. 43217 and 82 Fed. Reg. 43218: BIS issued a 5-year denial order against Dmitri Karpenko, a/k/a/ Simon Fox, of Nevinnomyssk, Russia, and a 10-year denial order against Alexey Krutilin, a/k/a/ David Powell, of Ivanovskoe Village, Russia, based on their convictions of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by exporting microelectronics controlled under the EAR to Russia without the required authorization from the Commerce Department. Karpenko and Krutilin allegedly used U.S.-based front companies to induce suppliers to sell controlled items to them, concealing their ultimate destinations. In their criminal cases, Karpenko and Krutilin were each sentenced to time served and an assessment of $100. (See additional information on these cases in October 2016 and May 2017 Regulatory Updates.)

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Sep. 14, 2017 – 82 Fed. Reg. 43216: BIS issued a 5-year denial order against Ambar Esther Morales of Federal Medical Center Carswell, Fort Worth, TX, based on her conviction of violating the AECA by knowingly and willfully attempting to export 7,942 rounds of 7.62 x 39mm caliber ammunition to Mexico without the required authorization from the Department of State. In the criminal case, Morales was sentenced to 3 years in prison, 3 years of supervised release, and a $100 assessment.

Department of the Treasury

Sep. 21, 2017: The Office of Foreign Assets Control (OFAC) implemented newly-issued E.O. 13810 (new North Korea sanctions – see description in The President section above) by releasing new and updated FAQs and an updated General License 3-A covering largely financial issues and a new General License 10, “Calling of Certain Vessels and Landing of Certain Aircraft Authorized,” which authorizes exceptions under specified (largely emergency) circumstances to the 180-day ban on visits to the U.S. by vessels and aircraft that have visited North Korea. The FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#nk; General License 3-A is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/nk_gl3a.pdf; and General License 10 is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/nk_gl10.pdf.

Fines and Penalties

Aug. 31, 2017: Fuyi Sun, a/k/a/ Frank Sun, of Shanghai, China was sentenced in U.S. District Court in New York City to 3 years in prison based on his conviction of violating IEEPA by attempting to export high-grade M60 carbon fiber, which has aerospace and military applications, without the required export license. Sun contracted to purchase the carbon fiber from a distributor which was actually a company operated by undercover Homeland Security Investigations special agents. He was arrested when he traveled from China to New York and paid the agents. (See additional information on this case in April 2017 Regulatory Update.)

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Aug. 31, 2017: Narender Sharma and Hydel Engineering Products of Rampur Bushahr, India agreed jointly and severally to pay a penalty of $100,000 for violating the EAR by conspiring to export U.S.-origin waterway barrier debris systems and related components to Iran, including to an Iranian Government entity, by transshipping them through the United Arab Emirates (UAE). The transaction also violated the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560, at that time the “Iranian Transactions Regulations”). The systems, valued at $420,256, were designated EAR99. All but $30,000 of the penalty, and also a 5-year denial order, will be suspended for 5 years and thereafter waived if Sharma/Hydel comply with the terms of the Settlement Agreement and commit no further violations of the EAR during that period.

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Sep. 8, 2017: Erdal Kuyumcu of Woodside, NY, was sentenced in U.S. District Court in Brooklyn, NY, to 57 months in prison based on his conviction of conspiracy to violate IEEPA by exporting a metallic powder composed primarily of cobalt and nickel to Iran without the required authorization from the Treasury Department. The conspirators intended to transship the powder, which has potential military and nuclear applications, to Iran through Turkey. (See additional information on this case in June 2016 Regulatory Update.)

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Sep. 18, 2017: Gregory Allen Justice of Culver City, CA was sentenced in federal district court in Los Angeles, CA to 5 years in prison based on his conviction of violating the AECA and committing economic espionage. The charges against Justice stemmed from his sales of ITAR-controlled satellite information belonging to his employer to undercover FBI investigators who he believed were Russian agents. (See additional information on this case in May 2017 Regulatory Update.)

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Sep. 25, 2017: Millitech, Inc., of Northampton, MA agreed to accept a civil penalty of $230,000 to settle charges by BIS that it had violated the EAR on 18 occasions in 2011 and 2014 by exporting active multiplier chains controlled under Export Control Classification Number (ECCN) 3A001.b.4 of the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) to China and Russia without the required authorization. The total value of the unauthorized shipments was approximately $364,947. Millitech will pay $180,000 of the penalty within 30 days after the order. The remaining $50,000 will be suspended and waived after 2 years if Millitech complies with the terms of the settlement agreement and the BIS order.

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Sep. 26, 2017: OFAC announced that Richemont North America, Inc., d.b.a. Cartier (“Cartier”), of New York, NY, agreed to pay a civil penalty of $344,800 to settle charges by OFAC that it had violated the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR, 31 CFR Part 598) by exporting four shipments of jewelry in 2010 and 2011 to Shuen Wai Holding Limited in Hong Kong (“Shuen Wai”), an entity designated under the FNKSR that had been added to the List of Specially Designated Nationals and Blocked Persons on November 13, 2008.

SEPTEMBER 2017 EXPORT CONTROL REGULATION UPDATES Read More »

AUGUST 2017 EXPORT CONTROL REGULATION UPDATES

August 2017

This newsletter is a listing of the latest changes in export control regulations through August 31, 2017. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Stockholm International Peace Research Institute Good Practice Guides

European Union

Aug. 15, 2017: The Stockholm International Peace Research Institute (SIPRI), an international organization based in Stockholm, Sweden, devoted to arms control and related issues, released a concept paper and a Good Practice Guides for establishing and implementing internal compliance programs in the European Union. Separate guides pertain to nuclear, defense and aerospace, information and communication technology, academic and research, and transport and distribution service sectors. The project was funded by the Export Control and Related Border Security (EXBS) Program of the U.S. Department of State. The concept paper, Challenges And Good Practices In The Implementation of the EU’s Arms And Dual-Use Export Controls, is on the SIPRI website at https://www.sipri.org/sites/default/files/2017-07/1707_sipri_eu_duat_good_practices.pdf. Links to the sector-specific guides are at https://www.sipri.org/news/2017/sipri-study-examines-challenges-associated-implementing-effective-internal-compliance-programmes .

U.K. Financial Sanctions FAQs

United Kingdom

Aug. 27, 2017: HM Treasury and Office of Financial Sanctions Implementation published updated guidance, FAQs, and penalty information on U.K. financial sanctions. Links to the publications “Financial Sanctions: General Guidance” and “Monetary Penalties for Breaches of Financial Sanctions” are on the OFSI website at https://www.gov.uk/government/publications/financial-sanctions-faqs.

President Trump Continues EAR Via IEEPA

The President

Aug. 16, 2017 – 82 Fed. Reg. 39005: President Trump signed Executive Order 13222 continuing the national emergency regarding the unusual and extraordinary threat to the national security, foreign policy and economy of the U.S. that has existed since the expiration of the Export Administration Act of 1979, as amended (50 USC 4601 et seq.) This declaration permits the continued implementation of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) under the authority of the International Emergency Economic Powers Act (IEEPA, 50 USC 1701 et seq.).

President Trump Expands Russia and North Korea Sanctions

U.S. Legislation

Aug. 2, 2017: President Trump signed into law the “Countering America’s Adversaries Through Sanctions Act,” which significantly expands U.S. sanctions against Russia, adds provisions to the sanctions against North Korea and Iran, and codifies existing sanctions on Russia, subjecting efforts by the President to reduce, waive, or eliminate U.S. sanctions against Russia to congressional review. The new provisions primarily affect economic transactions. A significant export-specific provision expands the prohibition on U.S. persons providing goods, services (except financial services), or technology in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil to any such project wherever located, and to any specified entity or any entity that has a controlling interest or a non-controlling ownership interest of at least 33% in such an entity. Also, denial of U.S. export licensing is one of 12 “secondary” sanctions that can be imposed on parties that are not subject to U.S. jurisdiction.

Mira Ricardel Confirmed As Under Secretary of Commerce (Export Administration)

Department of Commerce, Bureau of Industry and Security

Aug. 3, 2017: The U.S. Senate confirmed Mira Ricardel as Under Secretary of Commerce (Export Administration) and Richard Ashooh as Assistant Secretary of Commerce (Export Administration). Ms. Ricardel previously served as a Deputy Assistant Secretary in the Department of Defense, as a legislative assistant to Sen. Bob Dole (R., Kansas), and as a senior executive at Boeing Defense Space and Security. Mr. Ashooh previously served as a senior executive in the aerospace industry.

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Updated SNAP-R Manual Now Available

Aug. 4, 2017: The Bureau of Industry and Security (BIS) posted a revised and updated manual for the SNAP-R (Single Network Application Process – Redesign) system. In addition to clarifying existing processes, the new manual includes updates aimed at making the system more user-friendly and efficient. The updates include the introduction of security questions which will enable users to more readily reset forgotten passwords and request and receive forgotten login IDs and CINs. There is also more flexibility in the format for Work Item reference numbers and the calculation of line item values. BIS stated that additional updates will be added in the future. The new manual is on the BIS website at https://snapr.bis.doc.gov/snapr/docs/fieldHelp.html.

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ECCN Changes Due To Wassenaar Arrangement Plenary In December 2016

Aug. 15, 2017 – 82 Fed. Reg. 38764: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to implement changes agreed at the Wassenaar Arrangement plenary in December 2016 to reflect recent changes in technologies and conditions. Changes were made in the following 50 Export Control Classification Numbers (ECCNs):

1A004, 1A007, 1B001, 1C007, 1C608, 1E001, 1E002,

2A001, 2B001, 2B005, 2B991, 2D992, 2E003,

3A001, 3A002, 3A991, 3B001, 3C001, 3E001, 3E002, 3E003,

4A003, 4D001, 4D993,

5A001, 5B001, 5E001, 5A002, 5A003, 5D002, 5E002,

6A001, 6A003, 6A005, 6A008, 6D003, 6E003,

7D003, 7D004, 7E001, 7E003, 7E004,

8A002, 8C001,

9A001, 9A004, 9A515, 9B002, 9B009, and 9E003.

Also, ECCN 3A001.b.12 was made eligible for License Exception LVS; ECCN 2A001.b.14 was made eligible for License Exception GBS; ECCNs 4D001 and 4E001 were made eligible for License Exceptions TSR and STA; and Burma was moved from computer tier 3 to computer tier 1 for purposes of License Exception APP. In addition, the following definitions were added or modified in Part 772: ‘‘authentication,’’ ‘‘MMIC,’’ ‘‘Monolithic Microwave Integrated Circuit,’’ ‘‘fly-by-light system,’’ ‘‘fly-by-wire system,’’ ‘‘stability,’’ ‘‘three dimensional integrated circuit,’’ ‘‘interposer,’’ “active pixel,” “aircraft,” “fibrous or filamentary materials,” ‘‘frequency hopping,” and “spacecraft,” and modifications were made in the Sensitive List (Supplement No. 6 to EAR Part 774).

Recent Additions To HTS Now Available In AES

Department of Commerce, Census Bureau

Aug. 3, 2017: The Census Bureau announced that all recent additions to the Harmonized Tariff Schedule (HTS) are now available for use in the Automated Export System (AES) and have been updated in the AESDirect program. No additions were made to Schedule B. The current list of HTS codes is at https://www.census.gov/foreign-trade/aes/documentlibrary/concordance/expaes.txt. The current list of HTS codes that are not valid for AES is at http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?eml=gd&utm_medium=email&utm_source=govdelivery">http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html.

DDTC Name and Address Changes Posted To Website

Department of State

August 8, 16, 22, and 28, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in name from Diehl Raytheon Missile Systeme GmbH to Diehl Retrofit Missile Systeme GmbH due to joint venture between Raytheon Missile Systems and Diehl Stiftung & Co.;
Change in name from Thales Electronic Systems GmbH to Thales Deutschland GmbH due to corporate reorganization;
Thales UK Limited address change;
Change in name from Safe Air Limited to Airbus New Zealand Limited due to corporate rebranding;
Change in name from Assystem GmbH to Assystem Germany GmbH and address change due to merger between Assystem GmbH and Berner & Mattner;
Change in name from MHI Information Systems Co., Ltd. to NTT Data MHI Systems Corporation and address change due to share transfer agreement and shareholders agreement between NTT Data Corporation and Mitsubishi Heavy Industries, Ltd.;
Change in name from MHVC Acquisition Corp. to Peraton Corp. due to acquisition by Veritas Capital;
Change in name from Harris IT Services Corporation to Peraton Inc. due to acquisition by Veritas Capital;
Change in name from CapRock Government Solutions, Inc. to Peraton Government Communications Inc. due to acquisition by Veritas Capital;
Change in name from MHVC Canada Acquisition Corp. to Peraton Canada Corp. due to acquisition by Veritas Capital;
BAE Systems Australia Limited address change; and
BAE Systems Marine Limited Weymouth Site 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.

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DDTC Extended Temporary Modification to USML Category XI

Aug. 30, 2017 – 82 Fed. Reg. 41172: DDTC extended until Aug. 30, 2018, a temporary modification of U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category XI (Military Electronics) 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) and most recently extended on December 16, 2015 (80 Fed. Reg. 78130, see December 2015 Regulatory Update) would otherwise have expired on Aug. 30, 2017. On Aug. 30, 2018 this provision will revert to the language that existed prior to July 2, 2015, unless a different long-term solution has been adopted. International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 126.2 provides the authority for these temporary modifications in the interest of the security and foreign policy of the United States.

David Malpass Confirmed As Under Secretary Of The Treasury (International Affairs)

Department of the Treasury

Aug. 3, 2017: The U.S. Senate confirmed David Malpass as Under Secretary of the Treasury (International Affairs). Mr. Malpass previously served as chief economist at Bear Stearns.

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Quarterly List Of Countries That Require Or May Require Participation In, Or Cooperation With, An International Boycott

Aug. 2, 2017 – 82 Fed. Reg. 36076: 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

Sanctions

Department of Commerce

Aug. 17, 2017 – 82 Fed. Reg. 39103: BIS issued a 5-year denial order against David L. Maricola, currently an inmate in Federal Correctional Institution (FCI) Fort Dix, NJ, based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by attempting to export firearm parts controlled under the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to 22 countries including France, Finland, Indonesia, New Zealand, Thailand, Spain, Australia, and Germany without the required authorizations from the State Department. In the criminal case Maricola was sentenced to 33 months in prison, 3 years of supervised release, and a $3,200 assessment.

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Aug. 17, 2017 – 82 Fed. Reg. 39104: BIS issued a 5-year denial order against Alexandre Dos Anjos Oliveira, currently an inmate at McRae FCI, Helena, GA, based on his conviction of violating the AECA by attempting to export firearm barrels, cylinders, receivers, and components, parts, and accessories controlled under the USML to Brazil without the required authorization from the State Department. In the criminal case Oliveira was sentenced to 38 months in prison, one year of supervised release, and a $100 assessment.

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Aug. 17, 2017 – 82 Fed. Reg. 39105: BIS issued a 10-year denial order against Mansour Moghtaderi Zadeh, a/k/a Mansour Zadeh, a/k/a Mita Zarek, a/k/a Mita Zadeh, an inmate at Rivers FCI, Winton, NC, based on his conviction of violating the IEEPA by conspiring to export and causing the export of goods including aviation course indicators, aerospace metal sheets and rods, specialty paints and adhesives, and a fiber optic video transmitter and receiver to Iran without the required authorization. These exports also violated an underlying temporary denial order (TDO) that BIS had issued against Zadeh and a Cyprus company that he controlled. In the criminal case Zadeh was sentenced to 18 months in prison, 12 months of supervised release, a special assessment of $100, and forfeiture of $69,159.

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Aug. 17, 2017 – 82 Fed. Reg. 39106: BIS issued a 10-year denial order against Wenxia Man, a/k/a Wency Man, currently an inmate of FCI Camp Parks, Dublin, CA, based on her conviction of violating the AECA by conspiring to export and cause the export to the People’s Republic of China (PRC) of fighter jet engines and an unmanned aerial vehicle that were controlled under the USML without the required authorization from the State Department. In the criminal case Man was sentenced to 50 months in prison, two years of supervised release, and a $100 assessment.

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Aug. 17, 2017 – 82 Fed. Reg. 39107: BIS issued a 10-year denial order against Yasser Ahmad Obeid, currently an inmate of FCI Yazoo, Yazoo City, MS 39194, based on his conviction of violating the AECA by attempting to export and attempting to cause to be exported firearms controlled under the USML without the required authorization from the State Department. In the criminal case Obeid was sentenced to 51 months in prison, three years of supervised release, and a $300 assessment.

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Aug. 17, 2017 – 82 Fed. Reg. 39109: BIS issued a 5-year denial order against Ricardo Humberto Varela, currently an inmate of Bastrop FCI in Bastrop, TX, based on his conviction of violating the AECA by conspiring and agreeing to export and cause to be exported 5.56 caliber rifles that were controlled under the USML to Mexico without the required authorization from the State Department. In the criminal case

Varela was sentenced to 46 months in prison, three years of supervised release, and a $200 assessment.

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Aug. 17, 2017 – 82 Fed. Reg. 3910: BIS issued a 5-year denial order against Jose Luis Benavides-Cira, currently an inmate at Great Plains FCI, Hinton, OK, based on his conviction of violating the AECA by conspiring and agreeing to export and to cause to be exported 5.56 caliber rifles that were controlled under the USML to Mexico without the required authorization from the State Department. In the criminal case Benavides-Cira was sentenced to 46 months in prison and a $100 assessment.

Department of State

Aug. 2, 2017 – 82 Fed. Reg. 36068: The State Department Bureau of Political-Military Affairs rescinded the statutory debarment of Pratt & Whitney Canada Corporation (PWCC) and reinstated its authority to participate in activities controlled under the AECA. PWCC had been statutorily debarred (with certain exceptions) in June 2012 (77 Fed. Reg. 40140, July 6, 2012), after it pleaded guilty to violating the AECA. The rescission was approved after the State Department consulted with other U.S. agencies and determined that PWCC had taken appropriate steps to address the causes of the violation and to mitigate any law enforcement concerns.

Fines and Penalties

Aug. 1, 2017: Rasheed Al Jijakli, a Syrian-born U.S. citizen, pleaded not guilty in U.S. District Court for the Central District of California of charges that he violated IEEPA by exporting day-and-night-vision rifle scopes, laser boresighters, a bulletproof vest, and other tactical equipment to Syria without the required authorization from BIS. Jijakli, the chief executive officer of a check cashing business in Orange County, CA, and three unnamed individuals allegedly hand-carried the items to Istanbul by air and then transferred them by land to Syria.

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Aug. 2, 2017: Fadi Yassine, a citizen and resident of Lebanon, was sentenced in federal court in Cedar Rapids, IA, to serve 57 months in prison for violating the AECA by conspiring to broker firearms shipments to Lebanon without the required authorization from the Department of State. Four Cedar Rapids residents with ties to Lebanon were sentenced to prison last year for their role in the gun-smuggling scheme. (See additional information on this case in April 2017 Regulatory Update.)

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Aug. 3, 2017: Peter Zuccarelli of Plano, TX, pleaded guilty in Federal District Court for the Eastern District of Texas of violating the IEEPA by conspiring to export radiation hardened integrated circuits (RHICs) for use in the space programs of the PRC and Russia without the required authorization. According to court fillings, Zuccarelli received orders and payments of approximately $1.5 million from a co-conspirator and then obtained the RHICs from U.S. suppliers, certifying that his U.S company was the end user. He then repackaged the RHICs, falsely declared them as “touch screen parts,” and shipped them out of the U.S. without the required licenses using false paperwork.

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Aug. 18, 2017: Blue Sky Blue Sea, Inc. of Los Angeles, CA, d/b/a American Export Lines and International Shipping Company (USA) (“AEL”) agreed to pay a civil fine of $518,063 to settle charges by OFAC that it had violated the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by transshipping used and junked cars and parts from the U.S. to Afghanistan via Iran on 140 occasions.

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Aug. 22, 2017: Carrier Saudi Services Co. Ltd., a controlled-in-fact foreign affiliate of Carrier Corporation, a U.S. company, agreed to pay a civil penalty of $12,000 to settle charges by BIS that it violated the Antiboycott Regulations (EAR Part 760) by failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. (15 CFR 760.5) on two occasions and agreeing to refuse to do business with another person pursuant to an agreement with, a requirement of or a request from a boycotting country (15 CFR 760.2(a)) on two occasions. The charges involved commerce with Saudi Arabia. CSSC voluntarily disclosed the violations.

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Aug. 24, 2017: COSL Singapore Ltd, a Singapore company, agreed to pay a civil fine of $415,350 to settle charges by OFAC that it had violated the ITSR when, through its subsidiary companies, it exported or attempted to export 55 orders of oil rig supplies from the U.S. to Singapore and the United Arab Emirates (UAE), and then re-exported or attempted to re-export these supplies to four separate oil rigs located in Iranian territorial waters. OFAC alleged that the purchase order quotations received from U.S. vendors of some of the supplies involved in these violations included specific warnings that the goods could not be shipped or re-exported to countries subject to U.S. sanctions, including Iran.

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Aug. 24, 2017: Cryofab, Inc. of Kenilworth, NJ, agreed to pay a civil fine of $35,000 and undergo an external audit of its compliance with U.S. export control laws (including recordkeeping requirements) to settle charges by BIS that on two occasions it had exported items to the Bhabha Atomic Research Center (BARC), an Indian Department of Atomic Energy entity located in Mumbai, India, without the authorization from BIS that was required because BARC is a party listed on the Entity List (EAR Part 744, Supp. No. 4). The items shipped to BARC were storage containers for helium and nitrogen and related items, all designated EAR99, with a total value of $21,570. Cryofab failed to screen the Entity List in connection with both these shipments and erroneously listed them as eligible for shipment without a license (“NLR”) on the Shipper’s Letter of Instructions.

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Aug. 24, 2017: C.H. Robinson Freight Services, Ltd. of Indianapolis, IN, agreed to pay a civil penalty of $37,000 to settle charges that it violated the Antiboycott Regulations by furnishing information about business relationships with boycotted countries or blacklisted persons on 7 occasions and failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. on 10 occasions. C.H. Robinson voluntarily disclosed the violations, which involved commerce with the UAE.

AUGUST 2017 EXPORT CONTROL REGULATION UPDATES Read More »