Export Control Updates (Monthly) Archives - Page 6 of 8

FEBRUARY 2022 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through February 28, 2022. 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

President

The White House Issues An Updated List Of Critical And Emerging Technologies

Feb 2022: The White House has issued an updated list of Critical and Emerging Technologies that are of particular importance to the national security of the United States:

Advanced Computing;
Advanced Engineering Materials;
Advanced Gas Turbine Engine Technologies;
Advanced Manufacturing;
Advanced and Networked Sensing and Signature Management;
Advanced Nuclear Energy Technologies;
Artificial Intelligence;
Autonomous Systems and Robotics;
Biotechnologies;
Communication and Networking Technologies;
Directed Energy;
Financial Technologies;
Human-Machine Interfaces;
Hypersonics;
Networked Sensors and Sensing; Quantum Information Technologies;
Renewable Energy Generation and Storage;
Semiconductors and Microelectronics; and
Space Technologies and Systems.

https://www.whitehouse.gov/wp-content/uploads/2022/02/02-2022-Critical-and-Emerging-Technologies-List-Update.pdf

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Department of State, Directorate of Defense Trade Controls (DDTC)

DDTC Publishes Proposed Rule To Clarify Definitions

Feb. 2, 2022: 87 Fed. Reg. 5759: The Department of State published a proposed rule to clarify the definitions of export and reexport. Further, the Department of State proposed to replace the term “national” with “person” in the Canadian exemptions (ITAR 126.5); revise the exemption for intra-company, intra-organization, and intra-governmental transfers to dual nationals or third-country nationals; and correct administrative errors in the section on voluntary disclosures. The Department of State will accept comments on this proposed rule until April 4, 2022. Interested parties may submit comments by one of the following methods:

Email: DDTCPublicComments@state.gov with the subject line: “Regulatory Change: ITAR Sections 120, 126 and 127;

Internet: At www.regulations.gov, search for this notice, Docket DOS-2021-0031.

Comments received after that date may be considered if feasible, but consideration cannot be assured. Those submitting comments should not include any personally identifying information they do not desire to be made public or information for which a claim of confidentiality is asserted, because comments and/or transmittal emails will be made available for public inspection and copying after the close of the comment period via the Directorate of Defense Trade Controls website at www.pmddtc.state.gov. Parties who wish to comment anonymously may do so by submitting their comments via www.regulations.gov, leaving the fields that would identify the commenter blank and including no identifying information in the comment itself. https://www.federalregister.gov/documents/2022/02/02/2022-01889/international-traffic-in-arms-regulations-corrections-and-clarifications-for-export-and-reexport

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DDTC Publishes New Agreement Guidelines

Feb 11, 2022: The Directorate of Defense Trade Controls (DDTC) posted its latest version of its Agreement Guidelines, version 5.0, intended to provide clarity to Defense Trade Policy as it pertains to Agreements; and to establish a uniform and standard basis for submissions of Agreements and related correspondence. https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=74705f5edbb4130044f9ff621f961954

Revision 5.0 includes revisions and restructures the Agreement Guidelines in a more logical and orderly fashion. The majority of the text remains unchanged but has been relocated and combined with like topics. Additionally, duplicative guidance has been removed or consolidated. The end result is a 55% reduction in the length of the Guidelines. Updates to the agreement guidelines include:

Under certain circumstances, cover letters are no longer required with executed copies of TAAs and WDAs (see Section 5.2.1);
Expedited Execution is expanded to include the removal of sublicensees (see Section 13.1);
The U.S. Sublicensing statement is no longer required (see Section 9.1);
Optional language when utilizing § 126.18 is now provided (see Section 10.3.1);
Clarification that the description of end-use includes the identification of platforms (throughout Part 1);
Clarification on identifying and documenting foreign end-users (see Section 12);

Clarification on the “deployment clause” (see Section 17);
Update to documentation of space launch territories on the DSP-5 vehicle (see Section 18);
Clarify that the 124.4(b) letter must provide an estimate of the quantity of the articles authorized to be produced; and
MLAs involving the licensed manufacture of defense article abroad should identify the estimated quantity as part of the scope of the agreement (see Section 1.1.1, 2.1.1, and 5.2).

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DDTC Name And Address Changes Posted To Website

Feb. 4 through 23, 2022: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Name from Bruel & Kjaer Sound and Vibration Measurement A/S to

Hottinger Bruel & Kjaer A/S.

Additionally, HBM Danmark ApS merged into Hottinger Bruel & Kjaer A/S.

Change in address for Hottinger Bruel & Kjaer A/S from Skodsborgvej 307, Naerum 2850, Denmark to

Teknikerbyen 28, 2830 Virum, Denmark.

These changes are a change in ownership due to the corporate merger of these two companies;

Change in Name from L3 Micreo Pty Ltd to L3Harris Micreo Pty Ltd due to corporate rebranding;
L3Harris Technologies, Inc. UK subsidiary changes in name due to corporate rebranding:

Old Name	New Name
Autonomous Surface Vehicles Limited	L3Harris Autonomous Surface Vehicles Limited
Harris Systems Limited	L3Harris Systems UK Limited
L3 MAPPS Limited	L3Harris MAPPS Limited

Change in name and ownership from BAE Systems Rokar International Ltd. to Elbit Systems Rokar Ltd. due to acquisition of BAE Systems Rokar International Ltd. by Elbit Systems Ltd.;
L3Harris Technologies, Inc. subsidiary changes in name due to corporate rebranding:

Old Name	New Name
Autonomous Surface Vehicles, LLC	L3Harris Autonomous Surface Vehicles, LLC
EDO Western Corporation	L3Harris EDO Western Corporation
Harris Geospatial Solutions, Inc	L3Harris Geospatial Solutions, Inc
Harris International, Inc.	L3Harris International, Inc.
L3 Aviation Products, Inc.	L3Harris Aviation Products, Inc.
L3 Cincinnati Electronics Corporation	L3Harris Cincinnati Electronics Corporation
L-3 Communications Integrated Systems L.P.	L3Harris Technologies Integrated Systems L.P
L3 Open Water Power, Inc	L3Harris Open Water Power, Inc
L3 Unidyne, Inc.	L3Harris Maritime Services, Inc.

Change in name from Emirates Advanced Investments Group, LLC to Aerospace Investment Company;
Change in name from Capgemini DEMS France S.A.S. to Capgemini Engineering Research and Development S.A.S. due to corporate rebranding;
Change in name and ownership from Babcock Mission Critical Services Offshore Limited to Offshore Helicopter Services UK Limited due to acquisition; and
Change in name and ownership from COM Dev Ltd. to Honeywell Limited due to acquisition.

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

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Department of Commerce – Bureau of Industry and Security (BIS)

BIS Updates The Foreign Direct Product Rules (FDP)

Feb. 3, 2022: 87 Fed. Reg. 6022: The Bureau of Industry and Security (BIS) is clarifying, reorganizing, and making minor corrections to the provisions of the foreign-direct product (FDP) rules. Before this final rule, the FDP rules appeared in parts 736 and 744 of the Export Administration Regulations (EAR). NOW, the rules are consolidated in part 734 of the EAR. These revisions clarify the applicability of the FDP rules and make one correction applicable to the FDP rules as to the term “U.S.-origin technology and software.” Placing the FDP rules in part 734 (Scope of the EAR) clarifies that they are used to determine if a foreign-produced item is subject to, and thus within the scope of, the EAR. To further clarify the FDP rules, this rule moves the license requirement, license review policy, and license exception applicability text for listed entities from the Entity List's Footnote 1 to Supplement No. 4 to part 744 to § 744.11(a), where the overall license requirements pertaining to listed entities are located.

This rule separates the FDP provisions into four paragraphs: The National Security FDP rule, the 9x515 FDP rule, the “600 series” FDP rule, and the Entity List FDP rule. While the product scope of the first three FDP rules is relatively similar in format, the country scopes of each rule are different. This reorganization and naming of the FDP rules do not make substantive changes to the FDP rules. Rather, it facilitates reference to and compliance with the rules.

The original national security-focused FDP rule is now the National Security FDP rule. The provisions of the 9x515 FDP rule and the “600 series” FDP rule are reorganized into separate paragraphs with a description of the product scope followed by the country scope. The provisions of the Entity List FDP rule are organized with a description of the product scope followed by the applicable end-user scope.

Clarification of the FDP Rules

This rule further clarifies the FDP rules by adding double quotation marks around terms that are defined in part 772 of the EAR, e.g., direct product, technology, software, and equipment. In addition, this rule clarifies in § 736.2(b)(3) of the EAR (General Prohibition Three), that foreign-direct products subject to the EAR are not necessarily subject to a license requirement and those license requirements must be determined based on an assessment of the classification, destination, end-user, and end-use of the items.

Lastly, this rule clarifies the circumstances under which the “600 series” FDP rule applies to items described in Export Control Classification Number (ECCN) 0A919.

Correction: U.S.-Origin “technology” and “software”

In this same rule, BIS corrects an earlier revision to General Prohibition Three to clarify when the FDP rules are intended to apply to the direct product of U.S.-origin technology or software. On May 19, 2020, BIS published a rule entitled “Export Administration Regulations: Amendments to General Prohibition Three (Foreign-Direct Product Rule) and the Entity List” (85 FR 29849). This rule removed the word “U.S.” from the heading of § 736.2(b)(3) (Foreign-Direct Product rule) where it had been placed in front of the words “technology and software.”

https://www.federalregister.gov/documents/2022/02/03/2022-02302/foreign-direct-product-rules-organization-clarification-and-correction

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BIS Adds 33 Persons From China To The Unverified List

Feb. 8, 2022: 87 Fed. Reg. 7037: BIS adds thirty-three (33) persons from China to the Unverified List (UVL). The thirty-three persons are added to the UVL on the basis that BIS was unable to verify their bona fides because an end-use check could not be completed satisfactorily for reasons outside the U.S. Government’s control. The thirty-three (33) persons are:

AECC South Industry Co., Ltd., Dongjiaduan, Lusong District, Zhuzhou, Hunan Province, China;
Beijing SWT Science, Yingbinbei Road 36, Yanjiao Economic & Development Zone, Sanhe City, Hebei Province, China;
Beijing Zhonghehangxun Technology Co., Ltd., Room 1705, Kaixuancheng Building E, No. 170 Beiyuan Road, Chaoyang District, Beijing, China;
China National Erzhong Group Deyang Wanhang Die Forging Co., Ltd., No. 460 Zhujiang Road West, Deyang City, Sichuan Province, China;
Chuzhou HKC Optoelectronics Technology Co., Ltd., No.101 Suchu Ave., Economic and Technological Development Zone, Nanqiao District, Chuzhou, Anhui Province 239000, China;
Dongguan Durun Optical Technology Co., Ltd., Building M Shing’ang Industrial Area, Houda Road, Dalingshan, Dongguan, Guangdong Province 523000, China;
Dongguan Huiqun Electronic Co., Ltd., 30 Daling Street, Jiaoyitang, Tangxia Town, Dongguan City, Guangdong Province 523723, China;
Guangdong Guanghua Sci-Tech Co., No. 295 Daxue Road, Shantou, Guangdong Province, China;
Guangxi Intai Technology Co., Ltd., 1 Jianan Road, Liuzhou City, Guangxi Province, China;
Guangzhou Hymson Laser Technology Co., Ltd., No. 2 Shiling Road, Dongchong Town, Nansha District, Guangzhou, Guangdong Province 511453, China;
Harbin Xinguang Feitian, 1717 Chuangxin Yi Road, Harbin, Heilongjiang Province, China;
Hefei Anxin Reed Precision Co., Ltd., No. 15 South Feiyang Road, Dayang Industry Park, Luyang District, Hefei City, Anhui Province 230000, China;
Heshan Deren Electronic Technology Co., Ltd., No. 13 Hongjiang Road, Heshan Industry City, Heshan City, Guangdong Province 529728, China;
Hubei Longchang Optical Co., Ltd., No. 4 Group Lianhuayan Village, Yaojiadian Town, Yidu City, Hubei Province 44300, China;
Hubei Sinophorus Electronic Materials Co., Ltd., No. 66–3, Xiaoting Road, Yichang, Hubei Province, China;
Hunan University, State Key Lab of Chemo/Biosensing & Chemometrics, Lushan Road, Yuelu District, Changsha, Hunan Province, China;
Jinan Bodor CNC Machine Co., Ltd., 1299 Xinluo Ave., Hi-Tech Zone, Jinan, Shandong Province, China; Jiutian Intelligent Equipment Co., Ltd., Woyun Road, Taohue Industry Park, Hefei Economic Zone, Hefei, Anhui Province, China;
Kunshan Heng Rui Cheng Industrial Technology Co., Ltd., No. 1088 Datong Road, Penglang Town, Kunshan Development Zone, Kunshan, Jiangsu 215300, China;
Shanghai Fansheng Optoelectronic Science & Technology Co., Ltd., No. 56 Jungong Road, Yangpu District, Shanghai, China;
Shanghai Micro Electronics Equipment (Group) Co., Ltd., No. 1525 Zhangdong Road, Zhangjiang HiTech Park, Pudong, Shanghai, China;
Shuang Xiang (Fujian) Electronics, No. 158 Jiangbin East Ave., Mawei, Fuzhou, Fujian 350300, China. Southern University of Science and Technology, Department of Mechanical and Energy Engineering, 1088 Xueyuan Ave., Nanshan District, Shenzhen, Guangdong 518055, China;
Suzhou Chaowei Jingna Optoelectric Co., Ltd., No. 97–1 Dongyuan Road, Jinting Town, Wuzhong District, Suzhou, Jiangsu, China;
Suzhou Gyz Electronic Technology Co., Ltd., No. 629 Songjiagang Road, Zhoushi Town, Kunshan City, Jiangsu Province 215314, China;
Suzhou Lylap Mould Technology Co., Ltd., No. 66–26 Linggang Road, Luzhi Town, Wuzhong District, Suzhou, Jiangsu Province, China;
Wuxi Biologics Co., Ltd., No. 108, Warehouse, Meiliang Road, Mashan Binghu, Wuxi, China, and No. 178 West Meiliang Road, Mashan Binghu District, Wuxi, China, and No. 200 Meiling Road, Mashan Town, Binhu District, Wuxi City, China;
Wuxi Biologics (Shanghai) Co., Ltd., Room 701, 7F, No. 02 Huajing Road, Waigaoqiao Free Trade Zone, Shanghai, China, and Bldg. 71–B, 96 Yiwei Road, Waigaoqiao Free Trade Zone, Shanghai, China;
Wuxi Turbine Blade Co., Ltd., 1800 Huishan Avenue, Huishan Economic Development District, Wuxi, Jiangsu Province, China;
Yunnan Fs Optics Co., Ltd., Hongta Industrial Zone, Hongta District, Yuxi, Yunnan Province, China; Yunnan Tianhe Optoelectronic Co., Ltd., Longquan Avenue, Longquan Industrial Zone, Jiangchuan, Yuxi City, Yunnan Province, China;
Zhengzhou Baiwai Intelligent Automation, National University Tech Park, Changchun Road, #11 Hi-Tech District, Zhengzhou City, Henan Province, China; and
Zhuzhou CRRC Special Equipment Technology Co., No. 79 Liancheng Road, Shifeng District, Zhuzhou City, Hunan Province 412001, China. https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2022/2906-87-fr-7037/file

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BIS Adds Seven Entities To The Entity List

Feb. 14, 2022: 87 Fed. Reg. 8180: The U.S. Department of Commerce, Bureau of Industry & Security (BIS) added seven entities to the Entity List. These seven entities have been determined by the U.S. Government to be acting contrary to the foreign policy or national security interests of the United States and will be listed on the Entity List under the destinations of the People’s Republic of China (China), Pakistan, and the United Arab Emirates (UAE). This final rule also modifies four existing entries on the Entity List under the destination of China. The seven entities added to the Entity List are:

China:

Jiangsu Tianyuan Metal Powder Co. Ltd;

Pakistan

Chemtech International (Private) Limited;
Engineering Materials and Equipment Co.;
Inspectech;
Value Additions (Pvt) Ltd.;
X-Cilent Engineering;

United Arab Emirates:

Odyssey General Trading FZC.

https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2022/2910-87-fr-8180/file

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

OFAC Issues Seven New Frequently Asked Questions Regarding Counter Terrorism

Feb. 2, 2022: The Department of the Treasury, Office of Foreign Assets Control (OFAC) issued seven new Frequently Asked Questions (FAQs) regarding Counter-Terrorism.

https://home.treasury.gov/policy-issues/financial-sanctions/faq/added/2022-02-02

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OFAC Amends Its Regulations To Implement The Federal Civil Penalties Inflation Adjustment Act Of 1990 FOR FY 2022

Feb. 9, 2022; 87 Fed. Reg. 7369: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has amended its regulations to implement the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, for the fiscal year 2022. This regulatory amendment adjusts for inflation the maximum amount of the civil monetary penalties that may be assessed under relevant OFAC regulations. The major monetary penalty amounts have been changed to:

TWEA: $97,529;
IEEPA: $330,947;
AEDPA: 87,361;
FNKDA: $1,644,396; and
CDTA: $14,950.

See link for additional civil monetary penalty amounts.

https://www.federalregister.gov/documents/2022/02/09/2022-02736/inflation-adjustment-of-civil-monetary-penalties

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U.S. Customs and Border Protection (CBP)

CBP Deploys First Phase Of The ACE Portal Modernization

Feb. 9, 2022: U.S. Customs and Border Protection (CBP) successfully deployed the first phase of the ACE Portal Modernization. The first phase includes a new login screen, a new home page, an upgraded user account information display and edit features. To access the modernized ACE Portal, users must first create a modernized ACE Portal account. As part of this process, users will complete a one-time sync of existing ACE Portal access by entering their legacy ACE Portal username and password. For more information on this process, please review the ACE Portal Modernization Quick Reference Guide

Beginning February 20, 2022, users will no longer be able to log in from the legacy ACE Portal login page. At that time, the legacy login page will redirect users to the modernized ACE Portal.

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U.S. Census Bureau

Census Backtracks On the Removal Of The Requirement To File Electronic Export Information (EEI) Filing Requirement For Shipments Between The United States And Puerto Rico And The U.S. Virgin Islands

Feb. 7, 2022: 87 Fed. Reg. 6440: The Census Bureau’s Economic Management Division (EMD) through the publication of an Advanced Notice of Proposed Rulemaking (ANPRM) withdrew its prior ANPRM published on September 17, 2020, concerning the possible removal of the requirement to file Electronic Export Information (EEI) for shipments between the United States and Puerto Rico and the U.S. Virgin Islands (USVI). The Census Bureau has decided to continue the current EEI filing requirement for Puerto Rico and the USVI and continue to publish the U.S. Trade with Puerto Rico and U.S. Possessions (FT-895) Publication Series. The decision to withdraw the ANPRM was made after careful consideration based on the feedback received from the ANPRM and discussions between the Census Bureau and several stakeholders. The Census Bureau will continue to collect the EEI because there is no alternative data source that yields the same high-quality data for Puerto Rico and the USVI. https://www.govinfo.gov/content/pkg/FR-2022-02-04/pdf/2022-02341.pdf?utm_campaign=&utm_content=&utm_medium=email&utm_source=govdelivery

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Census Issues Tips On How To Resolve AES Response Messages

Feb. 17, 2022: The U.S. Census Bureau issued tips on how to resolve AES Response Messages. When a shipment is filed to the AES, a system response message is generated and indicates whether the shipment has been accepted or rejected. If the shipment is accepted, the AES filer receives an internal transaction number (ITN) as confirmation. Though the shipment is accepted, the filer may still receive a verify message, compliance alert, informational message, or warning message along with their ITN. However, if the shipment is rejected, a fatal error notification is received and must be corrected to receive a valid ITN. It is important that AES filers correct Fatal Errors as soon as they are received in order to comply with the Foreign Trade Regulations. These errors must be corrected prior to export for shipments filed pre-departure and as soon as possible for shipments filed post departure but not later than five calendar days after departure.

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

The President

Feb. 4, 2022: As indirect American-Iranian talks on reviving the 2015 international nuclear deal with Tehran enter the final stretch, President Biden's administration restored sanctions waivers to Iran to allow international nuclear cooperation projects. The waivers have allowed Russian, Chinese and European companies to carry out non-proliferation work to effectively make it harder for Iranian nuclear sites to be used for weapons development. The waivers were rescinded by the United States in 2019 and 2020 under former President Trump, who pulled out of the nuclear agreement. https://www.reuters.com/world/middle-east/biden-administration-restores-sanctions-waiver-iran-talks-final-phase-2022-02-04/

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Feb. 11, 2022: The President issued new Executive Order protecting certain property of Da Afghanistan Bank for the benefit of the people of Afghanistan. The President found that the widespread humanitarian crisis in Afghanistan including the urgent needs of the people of Afghanistan for food security, livelihoods support, water, sanitation, health, hygiene, shelter and settlement assistance, and COVID-19-related assistance, among other basic human needs and the potential for a deepening economic collapse in Afghanistan constitute an unusual and extraordinary threat to the national security and foreign policy of the United States. The President found that the preservation of certain property of Da Afghanistan Bank (DAB) held in the United States by United States financial institutions is of the utmost importance to addressing this national emergency and the welfare of the people of Afghanistan. Half of the funds will be used "for the benefit of the Afghan people," and half will be made available to settle claims against the Taliban of US victims of terrorism. https://home.treasury.gov/system/files/126/afghanistan_bank_eo.pdf

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Feb. 21, 2022: The President expanded the scope of the national emergency declared in Executive Order 13660 of March 6, 2014, and expanded by Executive Order 13661 of March 16, 2014, and Executive Order 13662 of March 20, 2014, and relied on for additional steps taken in Executive Order 13685 of December 19, 2014, and Executive Order 13849 of September 20, 2018, finding that the Russian Federation’s purported recognition of the so-called Donetsk People’s Republic (DNR) or Luhansk People’s Republic (LNR) regions of Ukraine contradicts Russia’s commitments under the Minsk agreements and further threatens the peace, stability, sovereignty, and territorial integrity of Ukraine, and thereby constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States. The executive order expands the scope of the national emergency declared in Executive Order 13660 of March 6, 2014, and expanded by Executive Order 13661 of March 16, 2014, and Executive Order 13662 of March 20, 2014, and relied on for additional steps taken in Executive Order 13685 of December 19, 2014, and Executive Order 13849 of September 20, 2018, finding that the Russian Federation’s purported recognition of the so-called Donetsk People’s Republic (DNR) or Luhansk People’s Republic (LNR) regions of Ukraine contradicts Russia’s commitments under the Minsk agreements and further threatens the peace, stability, sovereignty, and territorial integrity of Ukraine, and thereby constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States. The Executive Order orders the following prohibitions:

Section 1

(i) new investment in the so-called DNR or LNR regions of Ukraine or such other regions of Ukraine as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State (collectively, the “Covered Regions”), by a United States person, wherever located;

(ii) the importation into the United States, directly or indirectly, of any goods, services, or technology from the Covered Regions;

(iii) the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, services, or technology to the Covered Regions; and

(iv) any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States.

These prohibitions apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or license or permit granted prior to the date of this order.

In addition to the prohibitions of actions of U.S. Persons, the E.O. provides in Section 2 that all property and interests in property that are in the United States, that come within the United States, or are now or in the future in the possession or control of any United States person (including any foreign branch) of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

(i) to operate or have operated since the date of this order in the Covered Regions; (ii) to be or have been since the date of this order a leader, official, senior executive officer, or member of the board of directors of an entity operating in the Covered Regions;

(iii) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order; or

(iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.

Like the first Section of the E.O., exceptions exist if provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order.

In the third section of the E.O., the prohibitions are clarified to specify the prohibitions in section 2 of the order include but are not limited to:

(a) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and

(b) the receipt of any contribution or provision of funds, goods, or services from any such person.

Section 4. stipulates any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited.

Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

Section 5 provides the U.S. Federal government the authority to conduct official business.

Section 6 identifies the suspension of permitting the entry into the U.S. of unrestricted immigrant and nonimmigrant entry of noncitizens determined to meet one or more of the criteria in section 2 of the order as it would be detrimental to the interests of the United States, unless they are deemed not be contrary to the interests of the United States.

Section 7 states the making of donations of the types of articles specified in section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order would seriously impair the Presidents ability to deal with the national emergency declared in Executive Order 13660, expanded in Executive Orders 13661 and 13662, and further expanded by this order, and I hereby prohibit such donations as provided by section 2 of this order.

Section 8 defines the terms used in the E.O.

Section 9. states the President considers this E.O. effective immediately and no prior notice to blocked persons who might have property and interests and who might have a constitutional presence in the United States is necessary based on previously issued E.O.s.

Section 10. authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA, as may be necessary to carry out the purposes of this order. https://home.treasury.gov/system/files/126/20220221_eo_ukraine.pdf

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Department of Commerce, Bureau of Industry and Security (BIS)

Feb. 24, 2022: In response to the Russian Federation’s (Russia’s) further invasion of Ukraine, BIS issued a final rule by adding new Russia license requirements and licensing policies to the Export Administration Regulations (EAR) to protect U.S. national security and foreign policy interests. These new Russia measures: impose the following:

Adds new Commerce Control List (CCL)-based license requirements for Russia;
Adds two new foreign “direct product” rules (FDP rules) specific to Russia and Russian ‘military end-users;’
Specifies a license review policy of denial applicable to all of the license requirements being added in this rule, with certain limited exceptions;
Significantly restricts the use of EAR license exceptions;
Expands existing Russia ‘military end use’ and ‘military end user’ control scope to all items “subject to the EAR” other than food and medicine designated EAR99, or ECCN 5A992.c and 5D992.c unless for Russian “government end-users” and Russian state-owned enterprises (SoEs);
Transfers forty-five Russian entities from the Military End-User (MEU) List to the Entity List with an expanded license requirement of all items subject to the EAR (including foreign-produced items subject to the Russia-MEU FDP rules); and
Adds two new Russia entities and revise two Russia entities to the Entity List.

Lastly, this rule imposes comprehensive export, reexport and transfer (in-country) restrictions for the so-called Donetsk People’s Republic (DNR) and Luhansk People’s Republics (LNR) regions of Ukraine (“Covered Regions of Ukraine”) and makes conforming revisions to export, reexport transfer (in-country) restrictions for Crimea Region of Ukraine provisions. The final rule can be found at the following link and published in the Federal Register on March 3, 2022: https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2022/2915-public-display-version-of-new-export-control-measures-on-russia-final-rule-on-public-display-and-effective-2-24-22-scheduled-to-publish-3-3-22/file

BIS is implementing a new license requirement for Russia on items subject to the EAR and classified under any Export Control Classification Number (ECCN) in Categories 3 through 9 of the Commerce Control List, Supp. No. 1 to part 774 of the EAR (CCL). The new license requirement is added under new § 746.8(a)(1) (Russia sanctions) in part 746 of the EAR (Embargoes and Other Special Controls). License exceptions described in § 746.8(c)(1)-(7) may be used to overcome the license requirement. When a license application is required, applications for such items will be subject to a policy of denial. However, to minimize unintended consequences, a case-by-case review policy applies to applications to export, reexport, or transfer (in-country) items that ensure the safety of flight, maritime safety, meet humanitarian needs, enable government space cooperation, and allow transactions for items destined to specified Western subsidiaries and joint ventures, support civil telecommunications infrastructure in certain countries, and government-to-government activities. The case-by-case review policy will be used to determine whether a transaction that meets the criteria above would benefit the Russian government or the defense sector.

Additionally, BIS is establishing two new foreign “direct product” rules (FDP rules) in § 734.9 of the EAR. The first relates to the entire country of Russia, as described in new § 734.9(f) (the “Russia FDP rule”). Foreign-produced items subject to the EAR under the Russia FDP rule will be subject to the license requirement described in new § 746.8(a)(2) but will be eligible for certain license exceptions described in § 746.8(c)(1)-(7). When a license application is required, such applications will be subject to a general policy of denial but will be subject to case-by-case review for certain circumstances described further in § 746.8(b).

The second new FDP rule targets Russian ‘military end-users,’ as described in new § 734.9(g) (the “Russia-MEU FDP rule”). Foreign-produced items subject to the EAR under the Russia MEU FDP rule will be subject to the license requirement described in new § 746.8(a)(3). No license exceptions are available to overcome this license requirement, except as specified in the Entity List entry for a Footnote 3 entity on the Entity List in supplement no. 4 to part 744 of the EAR, and such items will be subject to a policy of denial for all license applications, as described in § 746.8(b).

BIS also is expanding the scope of the existing ‘military end use’ and ‘military end user’ control under § 744.21 of the EAR for Russia to apply to all items “subject to the EAR” except food and medicine designated EAR99, or ECCN 5A992.c and 5D992.c unless for Russian “government end-users” and Russian state-owned enterprises (SoEs).

This rule removes forty-five Russian entities from the Military End-User (MEU) List in Supplement No. 7 to part 744 and adds them to the Entity List with an expanded license requirement for the export, reexport, and transfer (in-country) of all items “subject to the EAR,” including those items subject to the Russia-MEU FDP rule for ‘military end users’ in Russia. Finally, BIS adds two new Russian entities to the Entity List under this final rule and revises two existing entries for Russian entities on the Entity List.

As a conforming change, this final rule also revises supplement No. 2 to part 734 - Guidelines for De Minimis Rules, by revising the third sentence of paragraph (a)(1), which specifies using the license requirements in part 746 for identifying U.S.-origin controlled content for de minimis content. This final rule adds a parenthetical phrase after part 746 to add the phrase “excluding U.S.-origin content that meets the criteria in § 746.8(a)(5).”

Under new § 746.8(b) (Licensing policy), applications for the export, reexport or transfer (in country) of items that require a license under new paragraph (a)(1) and (2) will be reviewed, with certain limited exceptions, under a policy of denial. License applications for certain categories of exports, reexports, and transfers (in-country) will be reviewed on a case-by-case basis to determine whether the transaction would benefit the Russian government or the defense sector. These categories are as follows:

Applications related to the safety of flight, maritime safety, to meet humanitarian needs, in support of government space cooperation; and
Applications for companies headquartered in Country Groups A:5 and A:6 to support civil telecommunications infrastructure, or involving government-to-government activities.

In addition, applications for items destined to certain companies operating in Russia will be reviewed on a case-by-case basis if the companies are:

(1) wholly-owned U.S. subsidiaries;

(2) foreign subsidiaries of U.S. companies that are joint ventures with other U.S. companies,

(3) joint ventures of U.S. companies with companies headquartered in Country Group A:5 and A:6 in supplement no. 1 to part 740 countries,

(4) wholly-owned subsidiaries of companies headquartered in Country Group A:5 and A:6 in supplement no. 1 to part 740 countries, or

(5) joint ventures of companies headquartered in Country Group A:5 and A:6 with other companies headquartered in Country Groups A:5 and A:6.

The case-by-case review policy does not apply to Russian-headquartered companies. This final rule also specifies in paragraph (b) that license applications required under paragraph (a)(3) will be reviewed under a policy of denial in all cases.

Lastly, under new paragraph (c) (License Exceptions), this final rule specifies that certain license exceptions apply to § 746.8(a)(1) and (2). Specifically, the license exceptions that apply are: certain sections of License Exception TMP for items for use by the news media, § 740.9(a)(9); License Exception GOV, § 740.11(b); License Exception TSU for software updates for civil end-users provided those civil end-users are subsidiaries or joint ventures of companies headquartered in the United States or a country or countries from Country Groups A:5 or A:6, § 740.13(c); License Exception BAG, excluding firearms and ammunition (paragraph (e)), § 740.14; License Exception AVS, § 740.15 (a) and (b); License Exception ENC, excluding Russian “government end-users” and Russian state-owned enterprises (SOEs), § 740.17; and License Exception Commercial Communications Devices (CCD), § 740.19. This final rule also specifies in paragraph (c) that no license exceptions may overcome the license requirements in paragraph (a)(3) except as specified in the Entity List entry for a Footnote 3 entity on the Entity List in supplement no. 4 to part 744 of the EAR, which is consistent with the fact that entities on the Entity List are generally not eligible for license exceptions.

In § 734.9 (Foreign-Direct Product (FDP) Rules), this final rule adds two new Foreign-Direct Product (FDP) rules as part of the new Russia sanctions. The first rule targets Russia as a destination, and the second targets Russian ‘military end-users.’ Addition of the Russia FDP Rule through the Russia FDP rule set out in new paragraph (f) of § 734.9 of the EAR, this rule establishes that a foreign-produced item located outside the United States are subject to the EAR when it meets both the product scope in paragraph (f)(1) of this section and the destination scope in paragraph (f)(2). License requirements, license review policy, and license exceptions applicable to the foreign-produced items that are subject to the EAR pursuant to this paragraph (f) are identified in § 746.8, described above. Product scope for the Russia FDP rule is defined in paragraph (f)(1)(i) (“Direct product” of “technology” or “software”) and paragraph (f)(1)(ii) (“Direct product” of a complete plant or major component of a plant).

The criteria in paragraph (f)(1)(i) applies to a foreign-produced item that is not designated EAR99 and that is the “direct product” of U.S.-origin “technology” or “software” specified in any ECCN in product groups D or E in Categories 3, 4, 5, 6, 7, 8, or 9 of the CCL. The criteria in paragraph (f)(1)(ii) applies to a foreign-produced item that is not designated EAR99 and is produced by any plant or ‘major component’ of a plant that itself is a “direct product” of U.S.-origin “technology” or U.S.-origin “software” and specified in any ECCN in product groups D or E in Categories 3, 4, 5, 6, 7, 8, or 9 of the CCL. This is an expansive list of “technology” and “software,” which will result in many additional foreign-produced items being considered “subject to the EAR” compared to the other existing FDP rules that applied to Russia prior to the publication of this rule. The additional foreign-produced items that will be “subject to the EAR” will be subject to the new license requirements imposed through this rule under the Sanctions against Russia (new § 746.8), as described above.

For a foreign-produced item to be subject to the EAR under the Russia FDP rule, the criteria in new § 734.9(f)(2) (Destination scope of the Russia FDP rule) must also be met. New paragraph (f)(2) specifies that a foreign-produced item meets the destination scope of the Russia FDP rule if there is “knowledge” that the foreign-produced item is destined to Russia, or will be incorporated into, or used in the “production” or “development” of any “part,” “component,” or “equipment” not designated EAR99 and produced in or destined to Russia.

The Russia-MEU FDP rule set forth in new paragraph (g) targets Russian ‘military end users’ that, as described below, previously were on the MEU List and are being removed from the MEU List and added to the Entity List in Supplement No. 4 to part 744 of the EAR in this final rule. To address the significant support that these ‘military end users’ provide to the Russian military, a new and more expansive FDP rule is warranted for these identified ‘military end users’ under the EAR compared to the FDP rules that apply to certain destinations under the EAR. This final rule adds a new paragraph (g) to impose this new FDP rule targeting these Russian ‘military end users.’ A foreign-produced item located outside the United States is subject to the EAR if it meets both the product scope in paragraph (g)(1) of § 734.9 and the destination scope in paragraph (g)(2). License requirements, license review policy, and license exceptions applicable to the foreign-produced items that are subject to the EAR pursuant to paragraph (g), which are now identified in § 746.8, are described above.

This final rule adds paragraph (g)(1)(i) (“Direct product” of “technology” or “software”) and paragraph (g)(1)(ii) (“Direct product” of a complete plant or major component of a plant) to define the product scope for the Russia-MEU FDP rule. The criteria in paragraph (g)(1)(i) extends to the “direct product” of “technology” or “software” subject to the EAR and specified in any ECCN in product groups D or E in any category of the CCL. Paragraph (g)(1)(ii) applies to a foreign-produced item that is produced by a plant or ‘major component’ of a plant that itself is a “direct product” of U.S.-origin “technology” or U.S.-origin “software” subject to the EAR and specified in any ECCN in product groups D or E in any category of the CCL, which is an expansive list of “technology” and “software.”

This will result in many additional foreign-produced items being considered “subject to the EAR” compared to the other existing FDP rules that applied to these Russian ‘military end users’ prior to the publication of this rule. The additional foreign-produced items that will be “subject to the EAR” will be subject to the new license requirements being imposed as part of the sanctions against Russia set forth in new § 746.8. For a foreign-produced item to be subject to the EAR, the criteria in new paragraph (g)(2) (End-user scope of the Russia MEU FDP rule) must be met. New paragraph (g)(2) specifies that a foreign-produced item meets the destination scope of the Russia MEU FDP rule if there is ‘‘knowledge’’ as specified in new paragraph (g)(2)(i) (Activities involving Footnote 3 designated entities) that a foreign-produced item will be incorporated into, or will be used in the ‘‘production’’ or ‘‘development’’ of any ‘‘part,’’ ‘‘component,’’ or ‘‘equipment’’ produced, purchased, or ordered by any entity with a footnote 3 designation in the license requirement column of the Entity List in supplement No. 4 to part 744 of the EAR.

In a corresponding change, this final rule adds a new footnote 3 to the Entity List for each of the Russian ‘military end users’ that are being removed from the MEU List and added to the Entity List as described below. The new footnote 3 to the Entity List is a key part of the criteria for the Russia-MEU FDP rule and will include a cross-reference back to §§ 734.9(g), 746.8, and 744.21. With the changes described below, forty-five entities on the Entity List now have a footnote 3 designation, as well as two additional entities being added to the Entity List and two existing entities that are being revised in this rule that will also have the footnote 3 designation, for a total of forty-nine entities with a footnote 3 designation. As specified in new paragraph (g)(2) of § 734.9, any entity with a footnote 3 designation in the license requirement column of the Entity List is a party to any transaction involving the foreign-produced item, e.g., as a ‘‘purchaser,’’ ‘‘intermediate consignee,’’ ‘‘ultimate consignee,’’ or ‘‘end-user.” A new Note 3 to paragraph (g) specifies that for purposes of paragraph (g), a ‘military end user’ is any entity listed on the Entity List under Russia with a footnote 3 designation.

These changes are implemented on March 3, 2022, the date on which the Federal Register Notice is published.

Editors Note: The sanctions on Russia reported in this newsletter are evolving on a daily basis. If your company does business in or with any Russian companies, it is imperative that your company stays abreast of the changes daily and considers not only the EAR updates but the OFAC sanctions as well. Combined they make it unlikely that the U.S. will be engaged in commercial transactions with Russian entities.

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

Feb. 3, 2022: OFAC added the World Human Care of Indonesia to its Specially Designated Nationals (SDN) List. World Human Care is a non-governmental organization established by the Indonesia-based designated terrorist group Majelis Mujahidin Indonesia (MMI) to provide financial support for MMI extremists in Syria under the guise of humanitarian aid. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220203

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Feb. 8, 2022: OFAC issues the Ethiopia Sanctions Regulations to implement Executive Order 14046 of September 17, 2021, “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia.” These regulations will take effect on February 9, 2022. OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220208

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Feb. 10, 2022: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is issuing a final rule to remove the Burundi Sanctions Regulations, 31 CFR part 554, from the Code of Federal Regulations. OFAC is taking this action because the national emergency on which part 554 was based was terminated by the President on November 18, 2021. These changes will take effect upon publication in the Federal Register on February 11, 2022. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220210

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Feb. 10, 2022: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated Wilder Emilio Sanchez Farfan and Miguel Angel Valdez Ruiz, Ecuadorian and Mexican Narcotics Traffickers, pursuant to Executive Order (E.O.) 14059 for materially contributing to the illicit activities of major Mexican cartels to traffic cocaine into the United States. The s action is the result of collaboration between OFAC and the Drug Enforcement Administration. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220210

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Feb. 15, 2022: 87 Fed. Reg. 8735: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is adding regulations to implement a November 12, 2020, Executive order related to securities investments that finance Communist Chinese military companies, as amended by a June 3, 2021, Executive order related to the Chinese military-industrial complex and Chinese surveillance technology. These regulations took effect upon publication in the Federal Register on February 16, 2022. OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions. https://home.treasury.gov/system/files/126/fr87_8735.pdf

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Feb. 15, 2022: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is amending the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 CFR part 544, to revise an existing general license authorizing the provision of certain legal services and add a general license authorizing payments for legal services from funds originating outside the United States. This regulatory amendment is currently available for public inspection with the Federal Register and will take effect upon publication in the Federal Register on Wednesday, February 16, 2022. https://home.treasury.gov/system/files/126/20220215_wmd_reg_amendment.pdf

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Feb. 17, 2022: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Sergio Armando Orozco Rodriguez (a.k.a. “Chocho” as a Specially Designated National (SDN). Chocho is a facilitator of Cartel de Jalisco Nueva Generacion (“CJNG”) elicit activities in Mexico. pursuant to Executive Order (E.O.) 14059. CJNG, a violent Mexico-based organization, traffics a significant proportion of fentanyl and other deadly drugs that enter the United States. This action is the result of a collaboration between OFAC, the U.S. Drug Enforcement Administration (DEA), and the Government of Mexico. https://home.treasury.gov/news/press-releases/jy059

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Feb. 21, 2022: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issues Ukraine General Licenses, 17, 18, 19, 20, 21 and 22 related to the President’s expansion (See Article Above) of Executive Order 13661 of March 16, 2014, and Executive Order 13662 of March 20, 2014, and relied on for additional steps taken in Executive Order 13685 of December 19, 2014, and Executive Order 13849 of September 20, 2018, finding that the Russian Federation’s purported recognition of the so-called Donetsk People’s Republic (DNR) or Luhansk People’s Republic (LNR) regions of Ukraine contradicts Russia’s commitments under the Minsk agreements and further threatens the peace, stability, sovereignty, and territorial integrity of Ukraine, and thereby constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States. Treasury’s General Licenses are designed to support the innocent people who live in the so-called DNR and LNR regions who did not have a choice in Russia’s destabilizing and illegitimate actions. The licenses allow a short-term wind-down of activities, as well as for the export to the regions of food, medicine, and medical devices, and ensure personal remittances can continue to flow. The licenses also allow telecommunications and internet services to remain operational, and mail services to continue. The licenses allow international organizations to be able to provide aid to the people in these two regions. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220221_33

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Feb. 22, 2022: The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing Russia-related Directive 1A under Executive Order 14024 and is issuing Russia-related General License 2 and General License 3. OFAC has also published two new Frequently Asked Questions (FAQ 964 and FAQ 965) and updated several Frequently Asked Questions.

In addition, the following names have been added to OFAC's list of Specially Designated Nationals list (SDN List) or the Non-SDN Menu-Based Sanctions list (NS-MBS List):

BORTNIKOV, Denis Aleksandrovich of Russia;
FRADKOV, Petr Mikhailovich of Russia;
KIRIYENKO, Vladimir Sergeevich of Russia.

The following Russian, Belarussian and Chinese entities have been added to OFAC's SDN List:

ALKES TREID OOO of Russia;
ANTARES OOO of Russia;
BANK BELVEB OJSC of Belarus;
ELITNYE DOMA OOO of Russia;
ERA FUND LIMITED LIABILITY COMPANY of Russia;
EXIMBANK OF RUSSIA JSC of Russia;
JSC ANGSTREM-T or Russia;
JSC INFRAVEB of Russia;
JSC PFC CSKA of Russia;
JSC RUSSIAN EXPORT CENTER;
JSC SLAVA of Russia;
JSC VEB.DV of Russia;
KHOLTSVUD OOO of Russia;
KOURF OOO of Russia;
LLC BAIKAL CENTER of Russia;
LLC INFRASTRUCTURE MOLZHANINOVO of Russia;
LLC NM-TEKH of Russia;
LLC PROGOROD of Russia;
LLC SIBUGLEMET GROUP of Russia;
LLC SPECIAL ORGANIZATION FOR PROJECT FINANCE FACTORY OF PROJECT FINANCE of Russia;
LLC TORGOVY KVARTAL-NOVOSIBIRSK of Russia;
LLC VEB SERVICE of Russia;
LLC VEB VENTURES of Russia;
LLC VEB.RF ASSET MANAGEMENT of Russia;
MANAGEMENT COMPANY PROMSVYAZ LLC of Russia;
PASKAL OOO of Russia;
PROMINVESTBANK of Russia;
PROMSVYAZBANK PUBLIC JOINT STOCK COMPANY of Russia;
PSB AVIALIZING OOO or Russia;
PSB BIZNES OOO of Russia;
PSB INNOVATIONS AND INVESTMENTS LIMITED LIABILITY COMPANY of Russia;
PSB LIZING OOO of Russia;
PSB-FOREKS OOO of Russia;
RUSSIAN AGENCY FOR EXPORT CREDIT AND INVESTMENT INSURANCE OJSC of Russia; SAINT-PETERSBURG INTERNATIONAL BANKING CONFERENCE LLC of Russia;
SERGIEVO-POSAD LEND OOO of Russia;
STATE CORPORATION BANK FOR DEVELOPMENT AND FOREIGN ECONOMIC AFFAIRS VNESHECONOMBANK of Russia;
TEKHNOSOFT OOO of Russia;
TRINITEX OOO of Russia;
VEB ASIA LIMITED of China;
VEB CAPITAL of Russia;
VEB ENGINEERING LLC of Russia;

VEB LEASING OJSC of Russia.

The following vessels have been added to OFAC's SDN List:

Baltic Leader of Russia;
Fesco Magadan of Russia;
Fesco Moneron of Russia;
Linda of Russia; and
Pegas of Russia.

The following entities have been added to OFAC's Non-SDN Menu-Based Sanctions List:

Central Bank Of The Russian Federation;
Ministry Of Finance Of The Russian Federation; and
National Wealth Fund Of The Russian Federation.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220222

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Feb. 23, 2022: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designating members of an international network funding the Houthis’ war against the Yemeni government and increasingly aggressive attacks threatening civilians and civilian infrastructure in neighboring states on the OFAC’s SDN list. Led by the U.S.-designated Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and Houthi financier Sa’id al-Jamal, this network has transferred tens of millions of dollars to Yemen via a complex international network of intermediaries in support of the Houthis’ attacks. Despite persistent calls for peace from the international community, the Houthis continue their destructive campaign inside Yemen and have repeatedly launched ballistic missiles and unmanned aerial vehicles that have struck civilian infrastructure in neighboring states, resulting in civilian casualties. This action is taken in close coordination and collaboration with regional Gulf partners.

The following individuals have been added to OFAC's SDN List:

AHMED, Abdo Abdullah Dael;
SINGH, Chiranjeev Kumar; and
STAVRIDIS, Konstantinos.

The following entities have been added to OFAC's SDN List:

AL FOULK TRADING CO. L.L.C. of the UAE;
AL HADHA EXCHANGE CO., of Yemen;
ALALAMIYAH EXPRESS COMPANY FOR EXCHANGE AND REMITTANCE of Yemen;
AURUM SHIP MANAGEMENT FZC of the UAE;
FANI OIL TRADING FZE, of the UAE;
GARANTI IHRACAT ITHALAT KUYUMCULUK DIS TICARET LIMITED SIRKETI of Turkey;
JJO GENERAL TRADING GIDA SANAYI VE TICARET ANONIM SIRKETI, of Turkey;
MOAZ ABDULLA DAEL FOR IMPORT AND EXPORT of Yemen; and
PERIDOT SHIPPING AND TRADING LLC of the UAE.

The following vessel has been added to OFAC's SDN List:

LIGHT MOON.

https://home.treasury.gov/news/press-releases/jy0603

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Feb 23, 2022: The Department of the Treasury's Office of Foreign Assets Control (OFAC) is issuing Russia-related General License 4 ,"Authorizing the Wind Down of Transactions Involving Nord Stream 2 AG".

In addition, the following name has been added to OFAC's list of Specially Designated Nationals list (SDN List):

WARNIG, Matthias of Russia.

The following entity has been added to OFAC's SDN List:

NORD STREAM 2 AG of Switzerland.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220223_33

https://home.treasury.gov/system/files/126/peesa_gl4.pdf

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Feb. 24, 2022: The Department of the Treasury's Office of Foreign Assets Control (OFAC) is issuing Russia-related Directive 2 and Directive 3 under Executive Order 14024 and Russia-related General License 5, General License 6, General License 7, General License 8, General License 9, General License 10, General License 11, and General License 12. OFAC is also issuing Belarus General License 6 and General License 7. In addition, OFAC has published new Frequently Asked Questions and updated several Frequently Asked Questions.

OFAC imposed expansive economic measures, in partnership with allies and partners, that target the core infrastructure of the Russian financial system — including all of Russia’s largest financial institutions and the ability of state-owned and private entities to raise capital — and further bars Russia from the global financial system. The actions also target nearly 80 percent of all banking assets in Russia and will have a deep and long-lasting effect on the Russian economy and financial system.

OFAC is taking action against Russia’s top financial institutions, including sanctioning by far Russia’s two largest banks and almost 90 financial institution subsidiaries around the world. Treasury is also sanctioning additional Russian elites and their family members and imposing additional new prohibitions related to new debt and equity of major Russian state-owned enterprises and large privately-owned financial institutions. This action will fundamentally imperil Russia’s ability to raise capital key to its acts of aggression. These actions are specifically designed to impose immediate costs and disrupt and degrade future economic activity, isolate Russia from international finance and commerce, and degrade the Kremlin’s future ability to project power.

OFAC is taking unprecedented action against Russia’s two largest financial institutions, Public Joint Stock Company Sberbank of Russia (Sberbank) and VTB Bank Public Joint Stock Company (VTB Bank), drastically altering their fundamental ability to operate. On a daily basis, Russian financial institutions conduct about $46 billion worth of foreign exchange transactions globally, 80 percent of which are in U.S. dollars. The vast majority of those transactions will now be disrupted.

Correspondent and Payable-Through Account Sanctions on Sberbank:

OFAC is imposing correspondent and payable-through account sanctions on Sberbank. Sberbank is uniquely important to the Russian economy, holding about a third of all bank assets in Russia. Sberbank is the largest financial institution in Russia and is majority-owned by the Government of Russia. It holds the largest market share of savings deposits in the country, is the main creditor of the Russian economy, and is deemed by the Government of Russia. Within 30 days, OFAC is requiring all U.S. financial institutions to close any Sberbank correspondent or payable-through accounts and to reject any future transactions involving Sberbank or its foreign financial institution subsidiaries.

To implement sanctions on Sberbank, OFAC issued Directive 2 under E.O. 14024, “Prohibitions Related to Correspondent or Payable-Through Accounts and Processing of Transactions Involving Certain Foreign Financial Institutions” (the “Russia-related CAPTA Directive”). This directive prohibits U.S. financial institutions from:

the opening or maintaining of a correspondent account or payable-through account for or on behalf of any entity determined to be subject to the prohibitions of the Russia-related CAPTA Directive, or their property or interests in property; and
the processing of transactions involving any such entities determined to be subject to the Russia-related CAPTA Directive, or their property or interests in property. Accordingly, U.S. financial institutions must reject such transactions unless exempt or authorized by OFAC.

Pursuant to Directive 2 under E.O. 14024, Sberbank and 25 Sberbank foreign financial institution subsidiaries that are 50 percent or more owned, directly or indirectly, by Sberbank were identified in Annex 1 to the Russia-related CAPTA Directive. These subsidiaries include banks, trusts, insurance companies, and other financial companies located in Russia and six other countries.

Sberbank and other affiliated entities determined to be subject to the Russia-related CAPTA Directive have been added to OFAC’s List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List), a reference tool that provides actual notice of OFAC actions with respect to foreign financial institutions for which the opening or maintaining of a correspondent account or a payable-through account in the United States is prohibited or subject to one or more strict conditions. All foreign financial institutions owned 50 percent or more, directly or indirectly, by Sberbank are covered by the prohibitions of the Russia-related CAPTA Directive, even if not identified on OFAC’s CAPTA List.

The prohibitions of the Russia-related CAPTA Directive take effect beginning at 12:01 a.m. eastern daylight time on March 26, 2022. Accordingly, by 12:01 a.m. eastern daylight time on March 26, 2022, U.S. financial institutions must have closed any correspondent or payable-through account maintained for Sberbank all other entities listed in Annex 1 to the Russia-related CAPTA Directive, and all foreign financial institutions owned 50 percent or more by the foregoing. In addition, after 12:01 a.m. eastern daylight time on March 26, 2022, U.S. financial institutions may not process transactions involving those institutions and must reject such transactions, unless exempt or authorized by OFAC.

Full Blocking Sanctions on VTB:

OFAC has imposed full blocking sanctions on VTB Bank, Russia’s second-largest financial institution, which holds nearly 20 percent of banking assets in Russia. VTB Bank is majority-owned by the Government of Russia. This action will sever a critical artery of Russia’s financial system. By imposing these sanctions, assets held in U.S. financial institutions will be instantly frozen and inaccessible to the Kremlin. This is one of the largest financial institutions Treasury has ever blocked and sends an unmistakable signal that the United States is following through on its promise of delivering severe economic costs.

VTB Bank was designated pursuant to E.O. 14024 for being owned or controlled by, or for having acted or purported to act for or on behalf of, directly or indirectly, the Government of Russia, and for operating or having operated in the financial services sector of the Russian Federation economy. In addition, 20 VTB Bank subsidiaries were designated pursuant to E.O. 14024 for being owned or controlled by, directly or indirectly, VTB Bank. These subsidiaries include banks, holding companies, and other financial companies located in Russia and eight other countries. All entities owned 50 percent or more, directly or indirectly, by VTB Bank are subject to blocking, even if not identified by OFAC.

Blocking Other Major Russian Financial Institutions:

OFAC has also imposed blocking sanctions on three additional major Russian financial institutions: Otkritie, Novikom, and Sovcom. These three financial institutions play significant roles in the Russian economy, holding combined assets worth $80 billion. These designations further restrict the Russian financial services sector and greatly diminish the ability of other critical Russian economic sectors from accessing global markets, attracting investment, and utilizing the U.S. dollar.

Debt And Equity Prohibitions Against Major State-Owned And Private Entities:

In a move to limit Russia’s ability to finance its invasion against Ukraine or other priorities of President Putin, OFAC expanded Russia-related debt and equity restrictions to additional key aspects of Russia’s economy. To implement this action, OFAC issued Directive 3 under E.O. 14024, “Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” (the “Russia-related Entities Directive”) to prohibit transactions and dealings by U.S. persons or within the United States in new debt of longer than 14 days maturity and new equity of Russian state-owned enterprises, entities that operate in the financial services sector of the Russian Federation economy, and other entities determined to be subject to the prohibitions in this directive.

To ensure that these sanctions and prohibitions have an impact on the intended targets and to minimize unintended consequences on third parties, OFAC has also issued several general licenses in connection with these actions. In particular, payments for energy are from production to consumption. The sanctions and license package has been constructed to account for the challenges high energy prices pose to average citizens and doesn’t prevent banks from processing payments for them.

Specifically, OFAC issued eight general licenses authorizing certain transactions related to:

international organizations and entities;
agricultural and medical commodities and the COVID-19 pandemic;
overflight and emergency landings;
energy;
dealings in certain debt or equity;
derivative contracts;
the wind-down of transactions involving certain blocked persons; and
the rejection of transactions involving certain blocked persons.

To provide further guidance on these authorizations, OFAC also issued extensive public guidance in the form of Frequently Asked Questions (FAQs).

New Actions Targeting Russian Elites:

Families Close to Putin:

Elites close to Putin continue to leverage their proximity to the Russian President to pillage the Russian state, enrich themselves, and elevate their family members into some of the highest positions of power in the country at the expense of the Russian people. Sanctioned oligarchs and powerful Russian elites have used family members to move assets and to conceal their immense wealth. The following designations target influential Russians in Putin’s inner circle and in elite positions of power within the Russian state. Many of these individuals are believed to participate in, or benefit from, the Russian regime’s kleptocracy, along with their family members. Many serve in leadership roles of companies designated or identified herein:

Sergei Sergeevich Ivanov,son of Sergei Borisovich Ivanov;
Andrey Patrushev, son of Nikolai Platonovich Patrushev; and
Ivan Igorevich Sechin, son ofIgor Ivanovich Sechin.

Financial Sector Elites:

Senior executives at state-owned banks, like Kremlin-linked elites, take advantage of their closeness to the Russian power vertical to advance the interests of the Russian state while maintaining an extravagant standard of living:

Alexander Aleksandrovich Vedyakhin;
Andrey Sergeyevich Puchkov; and
Soloviev’s wife, Galina Olegovna Ulyutina (Ulyutina), was previously implicated in a golden passport scheme.

OFAC designated Puchkov and Soloviev pursuant to E.O. 14024 for being or having been leaders, officials, senior executive officers, or members of the board of directors of the Government of Russia:

Limited Liability Company Atlant S and Limited Liability Company Inspira Invest A

As part of the United States’ serious and expansive response to Russia’s further invasion of Ukraine, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is sanctioning 24 Belarusian individuals and entities due to Belarus’s support for, and facilitation of, the invasion. This action focuses on Belarus’s defense sector and financial institutions, two areas in which Belarus has especially close ties to Russia. Belarus has become increasingly reliant on Russia for economic, political, and military support in recent years as the regime has clung to power following the fraudulent August 2020 presidential election.

The following individuals have been added to OFAC's SDN List:

DMITRY, Pantus Aleksandrovich of Belarus;
IVANOV, Sergei Sergeevich of Russia;
KHRENIN, Viktor Gennadievich of Belarus;
PATRUSHEV, Andrey of Russia;
PUCHKOV, Andrey Sergeyevich of Russia;
RASSALAI, Viachaslau Yevgenyevich of Belarus;
RYMASHEUSKI, Aliaksei Ivanavich of Belarus;
SECHIN, Ivan Igorevich of Russia;
SHATROU, Aliaksandr Yauhenavich of Belarus;
SOLOVIEV, Yuriy Alekseyevich of Russia;
ULYUTINA, Galina Olegovna of Russia;
VEDYAKHIN, Alexander Aleksandrovich of Russia;
VETSIANEVICH, Aliaksandr Piatrovich of Belarus;
VOLFOVICH, Aleksandr Grigorievich of Russia; and
ZAITSAU, Aliaksandr Mikalaevich of Belarus.

The following entities have been added to OFAC's SDN List:

AKTSIONERNOE OBSHCHESTVO FINTENDER of Russia;
AKTSIONERNOE OBSHCHESTVO RTS-KHOLDING of Russia;
AKTSIONERNOE OBSHCHESTVO SOVKOMBANK STRAKHOVANIE of Russia;
BANCO VTB AFRICA SA of Russia;
BANK DABRABYT JOINT STOCK COMPANY of Russia;
BANK NATIONAL FACTORING COMPANY JOINT STOCK COMPANY of Russia;
BANK VTB KAZAKHSTAN JOINT STOCK COMPANY of Russia;
BELARUSSIAN BANK OF DEVELOPMENT AND RECONSTRUCTION
BELINVESTBANK JOINT STOCK COMPANY of Russia;
BEST2PAY LIMITED of Russia;
BM BANK PUBLIC JOINT STOCK COMPANY;
BUSINESS-FINANCE LIMITED LIABILITY COMPANY;
CJSC BELBIZNESLIZING;
GMCS MANAGEMENT LIMITED LIABILITY COMPANY;
INDUSTRIAL-COMMERCIAL PRIVATE UNITARY ENTERPRISE MINOTOR-SERVICE of Belarus;
JOINT STOCK COMMERCIAL BANK NOVIKOMBANK of Russia;
JOINT STOCK COMPANY SAROVBUSINESSBANK of Russia;
JOINT STOCK COMPANY SOVCOMBANK LIFE of Russia;
JSC 558 AIRCRAFT REPAIR PLANT of Belarus;
LIMITED LIABILITY COMPANY ATLANT S of Russia;
LIMITED LIABILITY COMPANY BELINVEST-ENGINEERING of Belarus;
LIMITED LIABILITY COMPANY INSPIRA INVEST A of Russia;
LIMITED LIABILITY COMPANY OZON BANK of Russia;
LIMITED LIABILITY COMPANY VTB DC of Russia;
LLC 24X7 PANOPTES of Belarus;
LLC SYNESIS of Belarus;
MINSK WHEEL TRACTOR PLANT of Belarus;
MOBILNYE PLATEZHI LIMITED LIABILITY COMPANY of Russia;
NPF OTKRITIE GROUP of Russia;
NPF VTB PENSION FUND JOINT STOCK COMPANY of Russia;
OBSHCHESTVO S OGRANICHENNOI OTVETSTVENNOSTYU VTB FOREKS of Russia;
OJSC KB RADAR-MANAGING COMPANY HOLDING RADAR SYSTEM of Belarus;
OKB TSP SCIENTIFIC PRODUCTION LIMITED LIABILITY COMPANY of Belarus;
OOO NAVIGATOR ASSET MANAGEMENT of Russia;
OOO OBORONNYE INITSIATIVY of Belarus;
OOO OTKRITIE ASSET MANAGEMENT of Russia;
OOO OTKRITIE CAPITAL of Russia;
OOO OTKRITIE FACTORING of Russia;
OOO RGS HOLDING of Russia;
OOO SOKHRA of Belarus;
OOO TAMOZHENNAYA KARTA of Russia;
OTKRITIE BROKER GROUP of Russia;
OTKRITIE CAPITAL CYPRUS LIMITED of Russia;
OTKRITIE LTD GROUP of Cyprus;
PAO ROSGOSSTRAKH BANK of Russia;
PUBLIC JOINT STOCK COMPANY BANK FINANCIAL CORPORATION OTKRITIE of

Russia;

PUBLIC JOINT STOCK COMPANY INSURANCE COMPANY ROSGOSSTRAKH of

Russia;

PUBLIC JOINT STOCK COMPANY INTEGRAL of Belarus;
PUBLIC JOINT STOCK COMPANY KB VOSTOCHNY of Russia;
RUSKONSALT of Russia;
SEPTEM CAPITAL LIMITED LIABILITY COMPANY of Russia;
SOLLERS-FINANCE LIMITED LIABILITY COMPANY of Russia;
SOVCOMBANK ASSET MANAGEMENT LIMITED LIABILITY COMPANY of Russia;
SOVCOMBANK FACTORING LIMITED LIABILITY COMPANY of Russia;
SOVCOMBANK OPEN JOINT STOCK COMPANY of Russia;
SOVCOMBANK SECURITIES LIMITED of Cyprus;
SOVCOMBANK TECHNOLOGIES LIMITED LIABILITY COMPANY of Russia;
SOVCOMCARD LIMITED LIABILITY COMPANY of Russia;
SOVKOM FAKTORING of Russia;
SOVKOM LIZING of Russia;
STATE AUTHORITY FOR MILITARY INDUSTRY OF THE REPUBLIC OF BELARUS

of Belarus;

STATE OWNED FOREIGN TRADE UNITARY ENTERPRISE BELSPETSVNESHTECHNIKA of Belarus;
TSIFROVYE TEKHNOLOGII BUDUSHCHEGO LIMITED LIABILITY COMPANY of

Russia;

USM LIMITED LIABILITY COMPANY of Russia;
VIETNAM-RUSSIA JOINT VENTURE BANK of Vietnam;
VTB BANK ARMENIA CLOSED JOINT STOCK COMPANY of Armenia;
VTB BANK AZERBAIJAN OPEN JOINT STOCK COMPANY of Azerbaijan;
VTB BANK BELARUS CLOSED JOINT STOCK COMPANY of Belarus;
VTB BANK EUROPE SE of Germany;
VTB BANK GEORGIA JOINT STOCK COMPANY of Georgia;
VTB BANK PUBLIC JOINT STOCK COMPANY of Russia;
VTB CAPITAL HOLDINGS CLOSED JOINT STOCK COMPANY of Russia;
VTB FACTORING LTD of Russia;
VTB PENSION ADMINISTRATOR LIMITED of Russia;
VTB REGISTRAR CLOSED JOINT STOCK COMPANY of Russia;
VTB SPECIALIZED DEPOSITORY CLOSED JOINT STOCK COMPANY of Russia; and
WEST SIBERIAN COMMERCIAL BANK PUBLIC JOINT STOCK COMPANY of Russia.

The following changes have been made to OFAC's SDN List:

IVANOV, Sergei of Russia;
JSC TRANSAVIAEXPORT AIRLINES of Belarus;
PATRUSHEV, Nikolai Platonovich of Russia; and
SECHIN, Igor or Russia.

Non-SDN Menu-Based Sanctions List Update:

The following entities have been added to OFAC's Non-SDN Menu-Based Sanctions List:

CREDIT BANK OF MOSCOW PUBLIC JOINT STOCK COMPANY of Russia;
GAZPROMBANK JOINT STOCK COMPANY of Russia;
JOINT STOCK COMPANY ALFA-BANK of Russia;
JOINT STOCK COMPANY RUSSIAN AGRICULTURAL BANK of Russia;
JOINT STOCK COMPANY SOVCOMFLOT of Russia;
OPEN JOINT STOCK COMPANY RUSSIAN RAILWAYS of Russia;
PUBLIC JOINT STOCK COMPANY ALROSA of Russia;
PUBLIC JOINT STOCK COMPANY GAZPROM of Russia;
PUBLIC JOINT STOCK COMPANY GAZPROM NEFT of Russia;
PUBLIC JOINT STOCK COMPANY ROSTELECOM of Russia;
PUBLIC JOINT STOCK COMPANY RUSHYDRO of Russia;
PUBLIC JOINT STOCK COMPANY SBERBANK OF RUSSIA of Russia; and
PUBLIC JOINT STOCK COMPANY TRANSNEFT of Russia.

Correspondent Account Or Payable-Through Account Sanctions List Update:

The following entities have been added to OFAC's CAPTA List:

ARIMERO HOLDING LIMITED of Cyprus;
IKS JOINT STOCK COMPANY of Russia;
INSURANCE COMPANY SBERBANK INSURANCE LIMITED LIABILITY COMPANY of Russia;
INSURANCE COMPANY SBERBANK LIFE INSURANCE LIMITED LIABILITY COMPANY of Russia;
JOINT STOCK COMPANY RASCHETNIYE RESHENIYA of Russia;
JOINT STOCK COMPANY SBERBANK of Russia;
JOINT STOCK COMPANY SBERBANK AUTOMATED TRADE SYSTEM of Russia;
JOINT STOCK COMPANY SBERBANK LEASING of Russia;
JOINT STOCK COMPANY SBERBANK PRIVATE PENSION FUND of Russia;
LIMITED LIABILITY COMPANY MARKET FUND ADMINISTRATION of Russia;
LIMITED LIABILITY COMPANY PROMISING INVESTMENTS of Russia;
LIMITED LIABILITY COMPANY SBERBANK CAPITAL of Russia;
LIMITED LIABILITY COMPANY SBERBANK CIB HOLDING of Russia;
LIMITED LIABILITY COMPANY SBERBANK FACTORING of Russia;
LIMITED LIABILITY COMPANY SBERBANK FINANCIAL COMPANY of Russia;
LIMITED LIABILITY COMPANY SBERBANK INSURANCE BROKER of Russia;
LIMITED LIABILITY COMPANY SBERBANK INVESTMENTS of Russia;
LIMITED LIABILITY COMPANY YOOMONEY of Russia;
OPEN JOINT STOCK COMPANY BPS-SBERBANK of Belarus;
PUBLIC JOINT STOCK COMPANY SBERBANK OF RUSSIA of Russia;
SB SECURITIES SA of Luxembourg;
SBERBANK EUROPE AG of Austria;
SETELEM BANK LIMITED LIABILITY COMPANY of Russia;
SUBSIDIARY BANK SBERBANK OF RUSSIA JOINT STOCK COMPANY of Kazakhstan;
TEKHNOLOGII KREDITOVANIYA LIMITED LIABILITY COMPANY of Russia; and
VYDAYUSHCHIESYA KREDITY MICROCREDIT COMPANY LIMITED LIABILITY COMPANY of Russia;

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220224

https://home.treasury.gov/news/press-releases/jy0608

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Feb. 25, 2022: The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) is issuing Afghanistan-related General License 20 "Authorizing Transactions Involving Afghanistan or Governing Institutions in Afghanistan". OFAC has also published new Afghanistan-related Frequently Asked Questions and amended several Frequently Asked Questions. The General License aims to ensure that U.S. sanctions do not prevent or inhibit transactions and activities needed to provide aid to and support the basic human needs of the people of Afghanistan and underscores the United States’ commitment to working with the private sector, international partners and allies, and international organizations to support the people of Afghanistan. https://home.treasury.gov/news/press-releases/jy0609 https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220225

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Feb. 25, 2022: The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) added additional Russians to the SDN List. The following individuals have been added to OFAC's SDN List:

PUTIN, Vladimir Vladimirovich;
LAVROV, Sergei Viktorovich;
GERASIMOV, Valery; and
SHOIGU, Sergei.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220225_33

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Feb. 28, 2022: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is adding regulations to implement an April 15, 2021 Executive order related to specified harmful foreign activities of the Government of the Russian Federation. In particular, efforts to undermine the conduct of free and fair democratic elections and democratic institutions in the United States and its allies and partners; to engage in and facilitate malicious cyber-enabled activities against the United States and its allies and partners; to foster and use transnational corruption to influence foreign governments; to pursue extraterritorial activities targeting dissidents or journalists; to undermine security in countries and regions important to United States national security; and to violate well-established principles of international law, including respect for the territorial integrity of states—constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with that threat. These regulations took effect on Tuesday, March 1, 2022. OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions. https://home.treasury.gov/system/files/126/fr_2022-04281.pdf

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220228_33

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Feb. 28, 2022: The Department of the Treasury's Office of Foreign Assets Control (OFAC) is issuing Russia-related Directive 4 under Executive Order 14024 and Russia-related General License 8A. In addition, names have been added to OFAC's list of Specially Designated Nationals list (SDN List) or have been updated on OFAC's Non-SDN Menu Based Sanctions List pursuant to Executive Order 14024, Directive 4. OFAC prohibits United States persons from engaging in transactions with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. This action effectively immobilizes any assets of the Central Bank of the Russian Federation held in the United States or by U.S. persons, wherever located.

In addition, OFAC sanctioned a key Russian sovereign wealth fund, the Russian Direct Investment Fund (RDIF), with exposure to the United States financial system and its Chief Executive Officer (CEO), Kirill Dmitriev – a known Putin ally. Recently designated Russian President Vladimir Putin and his inner circle of cronies have long relied on RDIF and Dmitriev to raise funds abroad, including in the United States. By further restricting these persons and entities from the U.S. financial system, the United States continues to demonstrate its unwavering commitment to supporting Ukraine, impose costs on Putin’s inner circle or those connected to Putin and his war of choice, and prevent Putin’s regime from raising capital to fund its invasion of Ukraine and other priorities.

The following names have been added to OFAC's list of Specially Designated Nationals List (SDN List) or have been updated on OFAC's Non-SDN Menu Based Sanctions List pursuant to Executive Order 14024, Directive 4:

The following individual has been added to OFAC's SDN List:

DMITRIEV, Kirill Aleksandrovich of Russia.

The following entities have been added to OFAC's SDN List:

JOINT STOCK COMPANY MANAGEMENT COMPANY OF THE RUSSIAN DIRECT INVESTMENT FUND of Russia;
LIMITED LIABILITY COMPANY RVC MANAGEMENT COMPANY of Russia;
RUSSIAN DIRECT INVESTMENT FUND of Russia.

The following changes have been made to OFAC's Non-SDN Menu-Based Sanctions List:

CENTRAL BANK OF THE RUSSIAN FEDERATION of Russia;
MINISTRY OF FINANCE OF THE RUSSIAN FEDERATION of Russia; and
NATIONAL WEALTH FUND OF THE RUSSIAN FEDERATION of Russia.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220228

https://home.treasury.gov/news/press-releases/jy0612

Fines and Penalties

Feb. 14, 2022: Jonathan Toebbe, pleaded guilty to conspiracy to communicate restricted data related to the design of nuclear-powered warships to a person he believed was a representative of a foreign nation.

Toebbe pleaded guilty to count one of the indictment charging him with conspiracy to communicate Restricted Data which carries a maximum statutory penalty of up to life in prison, a fine up to $100,000, and a term of supervised release not more than five years. Pursuant to his plea agreement, Toebbe will serve a minimum of 151 months, or 12 and a half years, in federal prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Toebbe held an active national security clearance through the Department of Defense, giving him access to “Restricted Data” within the meaning of the Atomic Energy Act. Restricted Data concerns design, manufacture, or utilization of atomic weapons, or production of Special Nuclear Material (SNM), or use of SNM in the production of energy – such as naval reactors. https://www.justice.gov/opa/pr/maryland-nuclear-engineer-pleads-guilty-espionage-related-offense

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Feb. 17, 2022: 87 Fed. Reg. 9030: BIS denied the export privileges of Abdiel Padron Madrid - until June 17, 2030. Madrid was convicted of receiving, concealing, buying, selling, and facilitating the transportation and willfully and knowingly attempting to export and send from the United States to Mexico, six thousand three hundred and eighty (6,380) rounds of various caliber ammunition, which at the time of the attempted export were defense articles as defined under the United States Munitions List, in violation of 18 U.S.C. 554. https://www.federalregister.gov/documents/2022/02/17/2022-03413/order-denying-export-privileges-in-the-matter-of-abdiel-padron-madrid-inmate-number-42167-480-fci-la

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Feb. 17, 2022: 87 Fed. Reg. 9031: BIS denied the export privileges of Bianca Garcia-Rodriguez - until January 8, 2025. Garcia-Rodriguez was convicted of knowingly attempting to export from the United States to Mexico approximately 3,600 rounds of .223 caliber ammunition, defense articles on the U.S. Munitions List, 22 C.F.R. Part 221, in violation of 18 U.S.C. § 554. https://www.federalregister.gov/documents/2022/02/17/2022-03417/in-the-matter-of-bianca-garcia-rodriguez-3134-east-25th-street-brownsville-tx-78521-order-denying

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Feb. 17, 2022: 87 Fed. Reg. 9032: BIS denied the export privileges of Luis Curiel-Trevino - until January 14, 2030. Luis Curiel-Trevino was convicted for fraudulently and knowingly exporting and causing to export approximately 700 rounds of super .38 caliber ammunition and approximately 100 rounds of .45 caliber auto-ammunition, from the United States to Mexico, without having first obtained the required licenses or written authorization from the Department of State, in violation of 18 U.S.C. 554. https://www.federalregister.gov/documents/2022/02/17/2022-03414/order-denying-export-privileges-in-the-matter-of-luis-curiel-trevino-inmate-number-97081-479-giles-w

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Feb. 17, 2022: 87 Fed. Reg. 9031: BIS denied the export privileges of Luis Martin Camarena until September 26, 2029. Luis Martin Camarena was convicted of knowingly and unlawfully concealing, buying, and facilitating the transportation and exportation from the United States to Mexico of two Ruger AR-556 rifles, two Smith and Wesson M&P15 rifles, one Century Arms International Mini-Draco pistol, one Century Arms International C308 rifle, one FNH M249 rifle, and related ammunition. https://www.federalregister.gov/documents/2022/02/17/2022-03415/bureau-of-industry-and-security

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Feb. 17, 2022: 87 Fed. Reg. 9033: BIS denied the export privileges of Ramon Aguilar-Manriquez until July 23, 2029. Ramon Aguilar-Manriquez was convicted of knowingly attempting to export and exporting from the United States to Mexico, approximately 2,070 rounds of assorted ammunition. The ammunition included, 30-06 caliber, .270 caliber, .38 special ammo, .22 caliber, and .22 VMR caliber rounds, in violation of 18 U.S.C. § 554. https://www.federalregister.gov/documents/2022/02/17/2022-03416/in-the-matter-of-ramon-aguilar-manriquez-1655-west-monroe-street-apt-21-brownsville-tx-78520-order

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Feb. 18, 2022: Alejandro Valles, 27, of Aguila, Arizona was sentenced to 15 months in prison for smuggling weapons from the United States into Mexico following an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), special agents from Tucson’s Border Enforcement Security Taskforce (BEST). U.S. Customs and Border Protection assisted in this case. Alejandro Valles joins his co-conspirator David Alberto Duarte-Marquez, 21, a Mexican citizen who was previously sentenced to 33 months in prison – both men pleaded guilty to their offenses. https://www.ice.gov/news/releases/tucson-weapons-smugglers-sentenced-prison-following-ice-hsi-investigation

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Feb. 22, 2022: Jorge Orencel, age 65, of Silver Spring, Maryland, was sentenced to six months in federal prison, followed by one year of supervised release, and a $5,000 fine for federal charges of attempting to smuggle goods out of the United States without the required export license. According to his guilty plea, Orencel owned and operated Sumtech, which advertised itself on the Internet as specializing in the distribution of American merchandise, including “high technology laboratory devices,” to South America, Asia, and the Middle East. https://www.justice.gov/usao-md/pr/owner-maryland-export-business-sentenced-federal-prison-attempting-smuggle-items-out-us

FEBRUARY 2022 EXPORT CONTROL REGULATION UPDATES Read More »

JANUARY 2022 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through January 31, 2022. 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

Editors Notes Regarding Potential Policy Changes Regarding Russia

An astute reader will be aware of the conjecture regarding Russia's potential invasion of the Ukraine and the potential U.S. sanctions on Russia should such an invasion occur, notwithstanding that both countries have been involved in a conflict since Russia's annexation of the Crimea Region of the Ukraine. The potential sanctions would target major Russian banks, savings, and pensions and limit the market for Russia's sovereign debt. The proposed sanctions would also change the Export Administration Regulations (EAR) Direct Product Rule making it difficult for Russia to purchase certain U.S. goods, such as semiconductors, or the machines that make such U.S. goods or for others to sell such goods to them where U.S. manufacturing equipment was used for the production of such items.

Department of Commerce – Bureau of Industry and Security (BIS)

BIS Adjusts Civil Monetary Penalty For Inflation

Jan. 4, 2022: 87 Fed. Reg. 157: The U.S. Department of Commerce has issued a civil monetary penalty adjustment for inflation resulting in an increase for certain export violations described in the Export Administration Regulations:

50 U.S.C. 4819, Export Controls Act of 2018 (ECRA) violation increases the maximum per violation from $308,901 to $328,121.

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BIS Adds Software Specially Designed to Automate the Analysis of Geospatial Imagery to A Highly Controlled ECCN

Jan. 6, 2022: 85 Fed. Reg. 459: BIS amended the Export Administration Regulations (EAR) to formally add Software Specially Designed to Automate the Analysis of Geospatial Imagery to the ECCN 0Y521 Temporary Export Control Classification Numbers (ECCN) Series as ECCN 0D521. BIS initially added this software to EAR as ECCN 0D521 on January 6, 2020, and extended the control for a year on January 6, 2021. The U.S. Government submitted a proposal for multilateral controls on this software, but due to the pandemic, the Wassenaar Arrangement did not formally convene in 2020 and, therefore, was unable to consider acceptance of the proposal. https://www.federalregister.gov/documents/2020/01/06/2019-27649/addition-of-software-specially-designed-to-automate-the-analysis-of-geospatial-imagery-to-the-export

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Department of Commerce – Census Bureau

Census Adjust Civil Monetary Penalty For Inflation

Jan. 4, 2022: 87 Fed. Reg. 157: The U.S. Department of Commerce has adjusted the civil monetary penalty for inflation for, among other things:

13 U.S.C. 304, Collection of Foreign Trade Statistics (2002), each day's delinquency of a violation; total of not to exceed maximum per violation, from $1,436 to $1,525; maximum per violation, from $14,362 to $15,256; and
13 U.S.C. 305(b), Collection of Foreign Trade Statistics (2002), violation, maximum from $14,362 to $15,256

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Department of State, Directorate of Defense Trade Controls (DDTC)

DDTC Name And Address Changes Posted To Website

Jan. 5 through Jan. 31, 2022: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website:

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Name, Address and Ownership of the following Raytheon companies due to their acquisition by Vertex Aerospace LLC:

Former Legal Name And Address

New Legal Name And Address

Raytheon Technical Services International Company

22265 Pacific Blvd.

Dulles, VA 20166

Vertex Technical Services International Company

555 Industrial Drive South

Madison, MS 39110-9073

Raytheon Professional Services LLC

1717 E. Cityline Dr.

Richardson, TX 75082

Vertex Professional Services LLC

555 Industrial Drive South

Madison, MS 39110-9073

Raytheon Systems Israel Company

1801 Hughes Dr.

Fullerton, CA 92834

Vertex Systems Israel Company

555 Industrial Drive South

Madison, MS 39110-9073

Change in Name from SEAKR Engineering, Inc. to SEAKR Engineering, LLC due to Raytheon Technologies Corporation's acquisition of SEAKR Engineering, Inc.;
Change in Address for K Line Logistics, Ltd from 1-8-16, Nihonbashi Honcho, Chuo-ku, Tokyo, 103-0023 Japan to Harumi Island Triton Square Office Tower X 30th Fl., 1-8-10 Harumi Chuo-ku, Tokyo, 104-6030 Japan.
Change in Name of the following Babcock Aviation Nordic Region entities due to corporate rebranding:

Previous Name	Amended Name
Bond Aviation Group Limited	Babcock Mission Critical Services UK Limited
World Helicopters Norway AS	Babcock Norway AS
Scandinavian Air Ambulance Holding AB	Babcock Scandinavia Holding AB
Avincis Mission Critical Services Scandinavia AB	Babcock Mission Critical Services Scandinavia AB
Scandinavian Air Ambulance Norge AS	Babcock Scandinavian AirAmbulance AS
Scandinavian AirAmbulance AB	Babcock SAA FW AB
Scandinavian Medicopter AB (Sweden)	Babcock Scandinavian AirAmbulance AB
Scandinavian Medicopter AB (Finland)	Babcock Scandinavian AirAmbulance AB Filial I Finland

Change in Name from Altran UK Limited to Capgemini UK plc due to merger;
Change in Name from Peraton Canada Corp. to Arcfield Canada Corp. due to divestiture;
Northrop Grumman Integrated Defence Services Pty Limited and Northrop Grumman M5 Network Security Pty Limited are integrated into Northrop Grumman Australia Pty Limited due to corporate restructuring;
Change in Address for AECOM from 300 South Grand Ave., Los Angeles, CA 90071 to 13344 Noel Rd., #400, Dallas, TX 75204;
Change in names of the following L3 Harris Technologies, Inc., subsidiaries due to corporate rebranding:

Previous Name	Amended Name
Power Paragon, Inc.	L3Harris Maritime & Energy Solutions, Inc
Aerosim Flight Academy	L3Harris Aerosim Academy, Inc.
Applied Defense Solutions, Inc.	L3Harris Applied Defense Solutions, Inc.
Electrodynamics, Inc.	L3Harris Electrodynamics, Inc.
ForceX, Inc.	L3Harris ForceX, Inc.
Interstate Electronics Corporation	L3Harris Interstate Electronics Corporation
L3 Applied Technologies, Inc.	L3Harris Applied Technologies, Inc.
L-3 Communications Flight Capital LLC	L3Harris Technologies Flight Capital LLC
L3 Fuzing and Ordnance Systems, Inc.	L3Harris Fuzing and Ordnance Systems, Inc.
L3 Kigre, Inc.	L3Harris Kigre, Inc.
L3 Latitude, LLC	L3Harris Latitude, LLC
L3 Unmanned Systems, Inc.	L3Harris Unmanned Systems, Inc.
L3 Mustang Technology, L.P.	L3Harris Mustang Technology Group, L.P.
NexGen Communications LLC	L3Harris NexGen Communications LLC

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

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The Department of State Adjusts Civil Monetary Penalty For Inflation

Jan. 10, 2022: 87 Fed. Reg. 107: The Department of State adjusts the civil penalty for export violations for inflation, as follows:

22 CFR 127.10(a)(1)(i)) is adjusted from $1,197,728 to $1,272,251; and
22 CFR 127.10(a)(1)(ii)) is adjusted from $870,856 to $925,041, or five times the amount of the prohibited incentive payment, whichever is greater.

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

OFAC Issues New Belarus, Ukraine-Russia Related And Venezuela Related Frequently Asked Question

Jan. 7, 2022: OFAC published new guidance related to Belarus, Ukraine-Russia, and Venezuela in its Frequently Asked Questions related to the discontinuation of the London Interbank Offered Rate (LIBOR), a benchmark reference rate, OFAC is issuing additional guidance.

The Belarus, Ukraine-/Russia-related, and Venezuela-related sanctions programs prohibit U.S. persons from dealing in certain new debt of persons identified as subject to these prohibitions. In various FAQs, OFAC provides examples of new debt, such as "bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper" issued on or after various specified dates. For the Belarus, Ukraine-/Russia-related, and Venezuela-related sanctions programs, OFAC has indicated that certain changes to contractual terms of loans, contracts, or other agreements that were entered into prior to the effective date of the relevant sanctions prohibitions could convert pre-existing debt that was not subject to the sanctions prohibitions into new debt that is subject to the sanctions prohibitions. Loans, contracts, or other agreements that use LIBOR as a reference rate that are modified to replace such benchmark reference rate will not be treated as new debt for OFAC sanctions

purposes, so long as no other material terms of the loan, contract, or agreement are modified.

https://home.treasury.gov/policy-issues/financial-sanctions/faqs/956

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OFAC Issues Venezuela-related General License 51

Jan. 20, 2022: OFAC issues Venezuela-related General License 51, "Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After January 20, 2023." This General License prevents creditors from seizing US-based petroleum refiner CITGO. As a result, during such period, transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited unless specifically authorized by OFAC. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220120_33

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OFAC Issues Ukraine Related Sanctions General License 13Q

Jan. 24, 2022: OFAC issues Ukraine-related sanctions General License 13Q authorizing certain transactions necessary to divest or transfer debt, equity, or other holdings in GAZ Group. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220124#:~:text=U.S.%20Department%20of%20the%20Treasury,-Search&text=OFAC%20is%20issuing%20Ukraine%2Drelated,Certain%20Activities%20Involving%20GAZ%20Group.%22

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OFAC Issues Ukraine Related Sanctions General License 15K

Jan. 24, 2022: OFAC issues Ukraine related sanctions General License 15K authorizing certain activities involving GAZ Group to include:

Research, design, development, production, modification, upgrade, certification, distribution, and marketing;
Provision or receipt of services, including warranty, maintenance, logistics, storage, shipping, insurance, security, brokerage, legal, banking and financial (including financing and renegotiation of debt), technical and engineering, advertising, and customer services;
Entry into joint ventures, contract manufacturing agreements, supplier contracts, and other new contracts associated with activities authorized by paragraph (a);
Payment and receipt of dividends and other funds owed by or to GAZ Group relating to activities authorized by paragraph (a);
The conduct of financial transactions associated with activities authorized by paragraph (a); and Activities necessary for compliance with paragraph (f)(1)(i), including financial auditing services.

https://home.treasury.gov/system/files/126/ukraine_gl15k.pdf

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OFAC Updated Its Ukraine Related Frequently Asked Questions

Jan. 24, 2022: Due to the issuance of Ukraine-related sanctions General Licenses 13Q and 15K referenced above, OFAC has updated it's Ukraine-related Frequently Asked Questions. https://home.treasury.gov/policy-issues/financial-sanctions/faq/updated/2022-01-24

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Department of the Treasury, Internal Revenue Service (IRS)

IRS Published The Current List Of Countries That Require Or May Require Participation In, Or Cooperation With, An International Boycott

Jan. 3, 2022: 87 Fed. Reg. 145: In accordance with section 999(a)(3) of the Internal Revenue Code of 1986, the U.S. Department of the Treasury has published a current list of countries that require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986):

Iraq;
Kuwait;
Lebanon;
Libya;
Qatar;
Saudi Arabia;
Syria; and
Yemen.

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Department of Treasury, as Chair of the Committee on Foreign Investment in the United States (CFIUS)

CFIUS Identifies New Zealand As An Excepted Foreign State And Excepted Real Estate Foreign State

Jan. 5, 2022, CFIUS identified New Zealand as an eligible foreign state under the "excepted foreign state" and "excepted real estate foreign state" regulations (at 31 C.F.R. §§ 800.218 and 802.214, respectively). CFIUS identified New Zealand as eligible based "on its intelligence-sharing relationship with the United States and its collective defense arrangement and cooperation with the United States." https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius/cfius-excepted-foreign-states

CFIUS Publishes Its Determination Related to Australia And Canada Remaining Excepted Foreign States

Jan. 7, 2022: 87 Fed. Reg. 875: CFIUS published the Committee's determination that Australia and Canada have made significant progress toward establishing and effectively utilizing a robust process to analyze foreign investments for national security risks and to facilitate coordination with the United States on matters relating to investment security. This determination satisfies the second criterion in the definition of excepted real estate foreign state under 31 CFR § 802.214 with respect to Australia and Canada. Therefore, Australia and Canada are and will remain excepted real estate foreign states absent further Committee action and notice in the Federal Register. https://www.federalregister.gov/documents/2022/01/07/2022-00234/determination-regarding-excepted-real-estate-foreign-states

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Department of Justice / Alcohol, Tobacco, Firearms and Explosives

ATF Codifies Certain Provisions Of The Omnibus Consolidated And Emergency Supplemental Appropriations Act, 1999

Jan. 4, 2022: 87 Fed. Reg. 182: The U.S. Department of Justice's Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) has amended 27 CFR Part 478 to codify into regulation certain provisions of the Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999. This rule amends ATF's regulations to account for the existing statutory requirement that applicants for Federal firearms dealer

Licenses certify that secure gun storage or safety devices will be available at any place where firearms are sold under the license to non-licensed individuals. This certification is already included in the Application for Federal Firearms License, ATF Form 7/7CR ("Form 7/7CR"). The regulation also requires applicants for manufacturer or importer licenses to complete the certification if the licensee will have premises where firearms are sold to non-licensees. Moreover, the regulation requires that the secure gun storage or safety devices be compatible with the firearms offered for sale by the licensee. Finally, it conforms the regulatory definitions of certain terms to the statutory language, including the definition of "antique firearm," which is amended to include certain modern muzzleloading firearms. These changes are effective Feb. 3, 2022.

ATF has also published the "Best Practices Guide for FFLs" as a resource and reference guide about federal gun laws and regulations. The Best Practices Guide encourages FFLs to provide customers with ATF publications to help firearms owners better understand their legal obligations, as well as practical steps they can take to help keep firearms out of the hands of prohibited persons and facilitate safe storage of firearms. Links to ATF publications addressing the following topics are included in the Best Practices Guide: procedures for FFLs to assist unlicensed firearms owners in conducting background checks for private party transfers; compliance with the Youth Handgun Safety Act; records firearms owners should maintain that can assist law enforcement if the owner's firearms are ever lost or stolen; and the legal consequences and public safety dangers of straw purchasing – which involves purchasing a gun for someone who is prohibited by law from possessing one or for someone who does not want his or her name associated with the transaction. https://www.atf.gov/firearms/federal-firearms-licensee-quick-reference-and-best-practices-guide

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U.S. Census Bureau

Census Publishes Interim Final Rule On New Control On Cyber Security Items And A New License Exception "Authorized Cybersecurity Exports" (ACE)

Jan. 7, 2022: On Thursday, October 21, 2021, the Department of Commerce, Bureau of Industry and Security (BIS) published an interim final rule that became effective January 19, 2022. This interim final rule establishes a new control on cyber security items and a new License Exception "Authorized Cybersecurity Exports" (ACE) that authorizes exports of these items to most destinations except in the circumstances described in the rule. As a result of this rule, the following changes will be made to the Automated Export System (AES) in order for exporters and authorized agents to successfully report Electronic Export Information (EEI) in the AES.

Three Export Control Classification Numbers (ECCN): ECCNs 4A005, 4D004 and 4E001.c are added to the AES ECCN reference table.

A new License Code (C64) has been added to the AES: An update has been made to AES to create a new License Code C64 - Authorized Cybersecurity Exports (ACE) that authorizes exports, reexports, and transfers (in-country) of cybersecurity items and certain IP network surveillance products, which are not also controlled in Category 5—Part 2 of the Commerce Control List (CCL) or for Surreptitious Listening (SL) reasons. License Exception ACE allows the export, reexport, and transfer (in-country) of 'cybersecurity items' to most destinations, except to destinations listed in Country Groups E:1 and E:2 of supplement no. 1 to part 740 of the EAR).

AES filers must adhere to the following new reporting requirements when using C64 (ACE) to prevent the return of fatal errors from AES.

Report License Code: C64 Authorized Cybersecurity Exports (ACE)
Allowable ECCN's: The following ECCNs are eligible 4A005, 4D001, 4D004, 4E001, 5A001, 5B001, 5D001, and 5E001 to the extent permitted under part 740 of the EAR and the respective ECCN entry.
Allowable Export Information Codes: All except UG
Allowable Modes of Transportation: All except '70' (Fixed Transport)

https://www.govinfo.gov/content/pkg/FR-2021-10-21/pdf/2021-22774.pdf

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Other

The FBI Investigates A Chinese Investment In An Aircraft Startup Following Allegations Of Improper Technology Transfer To China

Jan. 18, 2022: The Federal Bureau of Investigation (FBI) and a U.S. investment-screening panel are investigating Chinese investment in an aircraft startup following allegations of improper technology transfer to China. Under review is a Chinese government-backed investment company's nearly 47% stake—the largest of any shareholder—in Icon Aircraft Inc., a California-based maker of small recreational, amphibious planes. A group of U.S. shareholders has accused the Chinese firm of hollowing out Icon and moving its technology, which the Americans say has possible military applications, to China. The Committee on Foreign Investment in the U.S. (CIFIUS), an interagency panel that can recommend that the president block or unwind deals on national-security grounds, began its review in late November after the American shareholders urged it to intervene. The FBI has also initiated a separate probe into possible criminal violations related to the deal and the alleged transfer of technology. https://www.wsj.com/articles/chinese-investment-in-u-s-plane-maker-draws-fbi-national-security-reviews-11642507206?mod=hp_lead_pos4

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of State

Jan. 21, 2022: 87 Fed Reg 3376: The Department of State has determined that the following three People's Republic of China entities have engaged in activities that require the imposition of measures pursuant to the Arms Export Control Act, as amended, and the Export Administration Act of 1979, as amended:

China Aerospace Science and Technology Corporation (CASC) First Academy, and its sub-units and successors;
China Aerospace Science and Industry Corporation (CASIC) Fourth Academy, and its sub-units and successors; and
Poly Technologies Incorporated (PTI) and its sub-units and successors.

Accordingly, the following sanctions are being imposed on these entities for two years:

Denial of all new individual licenses for the transfer to the sanctioned entities of all items on the U.S. Munitions List and all items the export of which is controlled under the Export Control Reform Act (ECRA) of 2018;
Denial of all U.S. Government contracts with the sanctioned entities; and
Prohibition on the importation into the United States of all products produced by the sanctioned entities.

https://www.federalregister.gov/documents/2022/01/21/2022-01117/imposition-of-missile-proliferation-sanctions-on-three-entities-in-the-peoples-republic-of-china-prc

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Department of Commerce, Bureau of Industry and Security (BIS)

Jan. 12, 2022: BIS has issued Orders Denying Export Privileges of the following four individuals:

Until June 25, 2029 - On June 25, 2019, in the U.S. District Court for the Southern District of Texas, Ernestina Hernandez-Juarez ("Hernandez-Juarez") was convicted of violating 18 U.S.C. § 554(a). Specifically, Hernandez-Juarez was convicted of fraudulently and knowingly exporting and sending or attempting to export and send from the United States to Mexico 40 Level III AR500 steel body armor plates. Hernandez-Juarez was sentenced to 18 months in prison and a $100 assessment. https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2022/1349-e2701/file
Until September 25, 2026 - On September 25, 2019, in the U.S. District Court for the Southern District of Texas, Edna Yaritza Zamarripa ("Edna Zamarripa") was convicted of violating 18 U.S.C. § 554(a). Specifically, Edna Zamarripa was convicted of fraudulently and knowingly exporting and sending 2000 rounds of 7.62 x 39 mm caliber ammunition from the United States to Mexico, in violation of 18 U.S.C. § 554. As a result of her conviction, the Court sentenced Edna Zamarripa to 46 months in prison, three years of supervised release, and a $100 assessment. https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2022/1350-e2702/file

Until September 25, 2024 - On September 25, 2019, in the U.S. District Court for the Southern District of Texas, Consuelo Teresita Zamarripa, a/k/a Consuelo Teresita Ramirez ("Consuelo Zamarripa"), was convicted of violating 18 U.S.C. § 554(a). Specifically, Consuelo Zamarripa was convicted of fraudulently and knowingly exporting and sending 2,000 rounds of 7.62 x 39 mm caliber ammunition from the United States to Mexico, in violation of 18 U.S.C. § 554. As a result of her conviction, the Court sentenced Consuelo Zamarripa to 37 months in prison, three years of supervised release, and a $100 assessment. https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2022/1351-e2703/file
Until October 17, 2024 - On October 17, 2019, in the U.S. District Court for the Southern District of Texas, Irving Aaron Rodriguez-Solis ("Rodriguez-Solis") was convicted of violating 18 U.S.C. § 554(a). Specifically, Rodriguez-Solis was convicted of fraudulently and knowingly exporting and sending or attempting to export and send from the United States to Mexico 3,000 rounds of 7.62x39 caliber ammunition contrary to 22 U.S.C. § 2778 (b)(2) and (c), and Title 22 C.F.R. §§ 121.1, 123.1, 127.1, and 127.3, in violation of 18 U.S.C. § 554(a) and 2. Rodriguez-Solis pled guilty to this offense on August 2, 2019. As a result of his conviction, on October 17, 2019, the Court sentenced Rodriguez-Solis to 30 months in prison and a $100 assessment. https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2022/1352-e2704/file

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Jan. 20, 2022: BIS issued Orders Denying Export Privileges of Khaldoun Hejazi. On March 3, 2020, in the U.S. District Court for the District of Idaho, Khaldoun Hejazi ("Hejazi") was convicted of violating Section 38 of the Arms Export Control Act (22 U.S.C § 2778) ("AECA"). Specifically, Hejazi was convicted of knowingly and willfully conspiring to export, and causing to be exported, firearms from the United States, which were designated as defense articles on the United States Munitions List, without having first obtained the required licenses or written approval from the U.S. Department of State. BIS has denied Hejazi's export privileges under the Export Administration Regulations for a period of five years from the date of Hejazi's conviction. The Office of Exporter Services has also revoked any BIS-issued licenses in which Hejazi had an interest at the time of his conviction. As a result of his conviction, the Court sentenced Hejazi to 30 months in prison, three years of supervised release, a $30,000 criminal fine, and a $100 court assessment. https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2022/1353-e2705/file

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

Jan. 5, 2022: OFAC sanctioned Milorad Dodik (Dodik), who is a member of the Presidency of Bosnia and Herzegovina (BiH), as well as one entity under his control, Alternativna Televizija d.o.o. Banja Luka, in response to Dodik's corrupt activities and continued threats to the stability and territorial integrity of BiH. Dodik has used his official BiH position to accumulate personal wealth through graft, bribery, and other forms of corruption. His divisive ethno-nationalistic rhetoric reflects his efforts to advance these political goals and distract attention from his corrupt activities. Cumulatively, these actions threaten the stability, sovereignty, and territorial integrity of BiH and undermine the Dayton Peace Accords, thereby risking wider regional instability. https://home.treasury.gov/news/press-releases/jy0549

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Jan. 10, 2022: OFAC designates six officials of the Government of Nicaragua pursuant to Executive Order (E.O.) 13851. President Daniel Ortega and Vice President Rosario Murillo were inaugurated following fraudulent national elections orchestrated by their regime in November 2021, further consolidating their control of power to the detriment of the Nicaraguan people. This designation targets officials of the Nicaraguan military, the Nicaraguan Minister of Defense, the Nicaraguan Institute of Telecommunications and Mail (TELCOR), and the state-owned Nicaraguan Mining Company (ENIMINAS). The six officials that have been designated and added to the Specially Designated Nationals (SDN) list are:

Bayardo De Jesus Pulido Ortiz;
Bayardo Ramon Rodriguez Ruiz;
Rosa Adelina Barahona De Rivas;
Celina Delgado Castellon;
Nahima Janett Diaz Flores; and
Ramon Humberto Calderon Vindell.

https://home.treasury.gov/news/press-releases/jy0552

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Jan. 12, 2022: OFAC designated five Democratic People's Republic of Korea (DPRK) individuals and one Russian individual responsible for procuring goods for the DPRK's weapons of mass destruction (WMD) and ballistic missile-related programs. These actions are in line with U.S. efforts to prevent the advancement of the DPRK's WMD and ballistic missile programs and impede attempts by Pyongyang to proliferate related technologies. They also follow the DPRK's six ballistic missile launches since September 2021, each of which violated multiple United Nations Security Council Resolutions (UNSCRs). The individuals designated to the SDN list are:

ALAR, Roman Anatolyevich of Russia;
CHOE, Myong Hyon of North Korea;
KANG, Chol Hak of North Korea;
KIM, Song Hun of North Korea;
O, Yong Ho of North Korea;
PYON, Kwang Chol of North Korea; and
SIM, Kwang Sok of North Korea.

OFAC also added PARSEK LLC of Russia to the SDN list.

https://home.treasury.gov/news/press-releases/jy0555

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Jan. 18, 2022: OFAC added the following three Hizballah-linked financial facilitators and their Lebanon-based travel company to the SDN list:

ALAMAH, Jihad Salim of Lebanon;
DAOUN, Ali Mohamad of Lebanon;
DIAB, Adel of Lebanon; and
DAR AL SALAM FOR TRAVEL & TOURISM of Lebanon.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220118

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Jan. 20, 2022: OFAC sanctioned four individuals engaged in Russian government-directed influence activities to destabilize Ukraine. This is the latest action OFAC has taken to target purveyors of Russian disinformation. The four individuals are:

Taras Romanovych Kozak;
Volodymyr Mykolayovych Oliynyk;
VladimirLeonidovich Sivkovich; and
Oleh Voloshyn.

https://home.treasury.gov/news/press-releases/jy0562

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Jan. 21, 2022: OFAC designated Hizballah-affiliated financial facilitator Adnan Ayad, as well as members of an international network of facilitators and companies connected to him and to Adel Diab,

Adnan Ayad's business partner and fellow Hizballah financier who was designated by OFAC. The three individuals added to the SDN list are:

Adnan Ayad;
Jihad Adnan Ayad; and
Ali Adel Diab.

The ten entities added to the SDN list are:

Al Amir Co. for Engineering, Construction and General Trading SARL;
Golden Group SAL Offshore;
Golden Group Trading SARL;
Hammer and Nail Construction Limited;
Hamidco Investment Limited;
Inshaat Co SARL;
Jammoul and Ayad for Industry and Trade;
Land Metics SARL;
Landmetics SAL Off-Shore; and
Top Fashion Gmbh Konfektionsbügelei.

https://home.treasury.gov/news/press-releases/jy0564

Jan. 31, 2022: OFAC designated 7 Burmese individuals and 2 Burmese entities. The seven individuals added to the SDN list are:

OO, Thida;
OO, Tin;
OO, Tun Tun;
TAY ZA, Htoo Htet;
TAY ZA, Pye Phyo;
THAUNG, Jonathan Myo Kyaw; and
ZA, Tay of Burma and Singapore.

The two entities added to the SDN list are:

Directorate Of Procurement Of The Commander-In-Chief Of Defense Services Army; and
KT Services & Logistics KTSL Company Limited.

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220131

Fines and Penalties

Jan. 3, 2022: The U.S. Treasury Department, Office of Foreign Assets Control (OFAC) reached a settlement agreement with a unit of home rental firm Airbnb, Inc. for violations of U.S. sanctions on Cuba. Airbnb Payments, Inc. agreed to remit $91,172.29 to settle its potential civil liability for apparent violations of sanctions against Cuba. The apparent violations included payments related to guests traveling for reasons outside of OFAC's authorized categories, as well as a failure to keep certain required records associated with Cuba-related transactions, the Treasury Department said. Airbnb Payments' apparent violations were voluntarily self-disclosed and were non-egregious. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220103

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Jan. 6, 2022: Robert Alcantara was charged in a criminal complaint with conspiring to traffic firearms and with making false statements. According to the allegations in the Complaint: From September 2019 up to November 2021, Alcantara and others entered an agreement in which Alcantara purchased the parts for more than 100 "ghost guns," machined the ghost guns at his house in Providence, Rhode Island, and then illegally sold the working and completed ghost guns. On November 20, 2021, law enforcement recovered parts for 45 ghost guns from Alcantara's car. When interviewed by law enforcement, Alcantara falsely told them that he had never sold or transferred ownership of a firearm to any other individual and that he had never transported a firearm to the Dominican Republic. https://www.justice.gov/usao-sdny/pr/rhode-island-man-charged-manhattan-trafficking-ghost-guns

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Jan. 6, 2022: Xiang Haitao, 44, a Chinese national formerly residing in Chesterfield, Missouri, pleaded guilty to conspiracy to commit economic espionage. According to court documents, Xiang conspired to steal a trade secret from Monsanto, an international company based in St. Louis, for the purpose of benefitting a foreign government, namely the People's Republic of China. According to court documents, Xiang was employed by Monsanto and its subsidiary, The Climate Corporation, from 2008 to 2017, where he worked as an imaging scientist. Monsanto and The Climate Corporation developed a digital, online farming software platform that was used by farmers to collect, store and visualize critical agricultural field data and increase and improve agricultural productivity for farmers. A critical component to the platform was a proprietary predictive algorithm referred to as the Nutrient Optimizer. Monsanto and The Climate Corporation considered the Nutrient Optimizer a valuable trade secret and their intellectual property. In June 2017, the day after leaving employment with Monsanto and The Climate Corporation, Xiang attempted to travel to China on a one-way airplane ticket. While he was waiting to board his flight, Federal officials conducted a search of Xiang's person and baggage. Investigators later determined that one of Xiang's electronic devices contained copies of the Nutrient Optimizer. Xiang continued on to China, where he worked for the Chinese Academy of Science's Institute of Soil Science. Xiang was arrested when he returned to the United States. Xiang pleaded guilty to one count of conspiracy to commit economic espionage and is scheduled to be sentenced on April 7. He faces a maximum penalty of 15 years in prison, a potential fine of $5 million, and a term of supervised release of not more than three years. https://www.justice.gov/opa/pr/chinese-national-pleads-guilty-economic-espionage-conspiracy

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Jan. 11, 2022: OFAC Settles with Sojitz (Hong Kong) Limited ("Sojitz HK") for $5,228,298 related to apparent violations of the Iranian Transactions and Sanctions Regulations. Sojitz HK, a Hong Kong, China-based company that engages in offshore trading and cross-border trade financing, has agreed to pay $5,228,298 to settle its potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). The apparent violations occurred when Sojitz HK made U.S. dollar payments through U.S. financial institutions for Iranian-origin high-density polyethylene resin (HDPE) from its bank in Hong Kong to the HDPE supplier's banks in Thailand. In doing so, Sojitz HK caused the U.S. financial institutions that processed the funds to engage in and facilitate prohibited financial transactions related to goods of Iranian origin. The settlement amount reflects OFAC's determination that Sojitz HK's apparent violations were non-egregious and voluntarily self-disclosed and accounts for Sojitz HK's remedial response and cooperation with OFAC. https://home.treasury.gov/system/files/126/20220111_sojitz.pdf

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Jan. 13, 2022: Peter Sotis, 57, of Delray Beach, and Emilie Voissem of Sunrise, FL, were convicted in October 2021 following a one-week jury trial in Miami. Sotis was sentenced to 57 months in prison, and Voissem was sentenced to a split sentence of five months in prison and five months of home confinement. According to court documents, the charges stemmed from the defendants' scheme to cause the illegal export of rebreather diving equipment to Libya in August 2016. Rebreathers enable a diver to operate undetected for long periods of time underwater by producing little to no bubbles and by efficiently re-circulating the diver's own breath after replacing its carbon dioxide with oxygen. Because of these enhanced capabilities, rebreathers have dual-use, with both civilian and military applications, and are specifically included on the EAR Commerce Control List, which is the list of dual-use items that are export controlled and licensed by the U.S. Department of Commerce (DOC). Such restricted items require a Commerce Department license if the rebreathers are to be exported to any countries with national security concerns, such as Libya. https://www.justice.gov/opa/pr/south-florida-residents-sentenced-illegally-exporting-controlled-items-libya

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Jan. 14, 2022: A criminal complaint has been unsealed in federal court in Brooklyn charging Kambiz Attar Kashani, a dual citizen of the United States and Iran, with conspiring to illegally export U.S. goods, technology, and services to end-users in Iran, including the Government of Iran, in violation of the International Emergency Economic Powers Act (IEEPA). Kashani was arrested in Chicago, Illinois. The defendant was remanded pending a detention hearing. As alleged, Kashani orchestrated an elaborate scheme to evade U.S. export laws and use the U.S. financial system in procuring U.S. electronic equipment and technology for the Central Bank of Iran, which has been designated by the United States government as acting for or on behalf of terrorist organizations. The defendant allegedly used two United Arab Emirates companies as fronts to procure items from multiple U.S. technology companies, including a company in Brooklyn. https://www.justice.gov/usao-edny/pr/us-citizen-charged-conspiring-provide-electronic-equipment-and-technology-government

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Jan 21, 2022: The Department of State entered into a three-year consent agreement with Torrey Pines Logic, Inc. (TPL) of San Diego, California, and Dr. Leonid B. Volfson (Dr. Volfson) regarding violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) with a fine of $840,000. TPL and Dr. Volfson voluntarily disclosed portions of the export violations. The AECA and ITAR violations related to unauthorized export of defense articles, unauthorized exports of defense articles to include the People's Republic of China and Lebanon (both prescribed countries pursuant to 22 CFR § 126.1 of the ITAR), engaging in ITAR controlled activities while ineligible, exporting articles without authorization from the Department of State during the CJ review process, making false statements on a CJ request, and failure to maintain and produce records. TPL and Dr. Volfson are debarred from engaging in ITAR controlled activities for 36 months. https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=9a8529c31b5dcd90c6c3866ae54bcb32

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Jan. 27, 2022: Saber Fakih, 46, of the United Kingdom, plead guilty in federal court in the District of Columbia to violations of the International Emergency Economic Powers Act (IEEPA) and Iranian Transactions and Sanctions Regulations. According to his plea, Saber Fakih conspired with Bader Fakih, 41, of Canada, Altaf Faquih, 70, of the United Arab Emirates, and Alireza Taghavi, 46, of Iran, to export and attempt to export an Industrial Microwave System (IMS) and counter-drone system from the United States to Iran, without first obtaining the requisite license from the Department of Treasury's Office of Foreign Assets Control (OFAC). Fakih pleaded guilty to count two of the indictment.

In addition, a related indictment was unsealed in the District of Columbia, charging Iranian national Jalal Rohollahnejad, 44, with smuggling, wire fraud, and related offenses arising from the same scheme. Rohollahnejad was previously added to the Department of Commerce's Bureau of Industry and Security Entity List in March 2020 for acting contrary to U.S. national security or foreign policy interests by procuring goods on behalf of a Specially Designated National (SDN). https://www.justice.gov/usao-dc/pr/indictment-and-guilty-plea-entered-iranian-export-case

JANUARY 2022 EXPORT CONTROL REGULATION UPDATES Read More »

DECEMBER 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through December 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company's international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

President

President Biden Signs The Uyghur Forced Labor Prevention Act Into Law

December 23, 2021: President Biden signed the Uyghur Forced Labor Prevention Act into law, which blocks imports from China's Xinjiang region unless businesses can prove the items were made without forced labor. The new law is the latest in a series of attempts by the U.S to get tough with China over its alleged systemic and widespread abuse of ethnic and religious minorities in its western region, especially Xinjiang's predominantly Muslim Uyghurs. It requires U.S. government agencies to expand their monitoring of the use of forced labor by China's ethnic minorities. Crucially, it creates a presumption that goods coming from Xinjiang are made with forced labor. Businesses will have to prove that forced labor, including by workers transferred from Xinjiang, were not used in manufacturing the product before it will be allowed into the U.S. The House and Senate each passed the measure with overwhelming support from Democrats and Republicans. https://federalnewsnetwork.com/government-news/2021/12/biden-signs-bills-on-forced-labor-in-china-als-research/

Please contact your consultant to discuss steps you should take if doing procurement business pursuant to US Government contracts with companies in Xinjian, China.

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Department of Commerce – Bureau of Industry and Security (BIS)

BIS Amends The EAR Policy Related To Cambodia

December 9, 2021: 86 Fed. Reg. 70015: In response to deepening Chinese military influence in Cambodia, which undermines and threatens regional security, as well as growing corruption and human rights abuses by the Government of Cambodia, in this final rule, the Bureau of Industry and Security (BIS) amends the Export

Administration Regulations (EAR) to apply more restrictive treatment to exports and reexports to and transfers within Cambodia of items subject to the EAR. The amendment adds Cambodia to:

(1) The list of countries subject to the National Security licensing policy in § 742.4(b)(7) (Review to determine the risk of diversion to a military end-user or military end-use);

(2) the list of countries subject to military end-use and end-user controls in § 744.21;

(3) the list of countries subject to military intelligence end-use and end-user controls in § 744.22; and

(4) the list of countries subject to a U.S. arms embargo under Country Group D:5.

BIS revised Country Group D to add Cambodia to Country Group D:5 is consistent with the Department of State's amendment adding Cambodia to ITAR § 126.1 on December 9, 2021. https://www.federalregister.gov/documents/2021/12/09/2021-26633/revision-of-controls-for-cambodia-under-the-export-administration-regulations

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Department of Commerce – Census Bureau

Census Bureau Proposes To Add A Conditional Data Element To Electronic Export Information (EEI) Filings

December 15, 2021: 86 Fed. Reg. 71187: The Census Bureau's Economic Management Division (EMD) is announcing the publication of a Notice of Proposed Rulemaking (NPRM) seeking public comments on its consideration to add a conditional data element, country of origin when the foreign origin is selected in the Foreign/Domestic Origin Indicator field in the Automated Export System (AES). The current Foreign/Domestic Origin Indicator field in the AES, independent of other data, creates significant data challenges and limitations in using the trade statistics because the indicator does not capture the country of origin. As a result, the foreign trade statistics do not provide sufficient insight to identify the gaps in domestic product and supply; evaluate supply chains; and address trade imbalances. Therefore, the Census Bureau is requesting comments to assess the potential impacts of this regulatory change as well as other remedial changes made by this rule. The NPRM can be found in its entirety at https://www.federalregister.gov/documents/2021/12/15/2021-26874/foreign-trade-regulations-ftr-new-filing-requirement-and-clarifications-to-current-requirements

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Department of State, Directorate of Defense Trade Controls (DDTC)

DDTC Amends The ITAR Adding Cambodia As A Proscribed Destination

December 9, 2021: 86 Fed. Reg. 70053: The Department of State issued a final rule to amend the International Traffic in Arms Regulations (ITAR) to add Cambodia to 22 CFR § 126.1(o), and to the list of countries for which it is the policy of the United States to deny licenses and other approvals for exports and imports of defense articles and defense services. It is now the policy of the United States to deny all licenses and other approvals to export and import defense articles and defense services destined for or originating in Cambodia, except as otherwise provided herein. https://www.federalregister.gov/documents/2021/12/09/2021-26590/international-traffic-in-arms-regulations-addition-of-cambodia-to-list-of-proscribed-countries

DDTC Name And Address Changes Posted To Website

Dec. 8, 9, 27, 28 and 29, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Name from Altran Italia S.p.A. to Capgemini Italia S.p.A. due to corporate rebranding;
Change in Address for Dillon Aero Inc., from 8009 East Dillon's Way, Scottsdale, AZ 85260 to 21615 N 7th Avenue, Phoenix, AZ 85027;
Change in Name from TMD Technologies Limited to CPI TMD Technologies Limited due to Communications & Power Industries' acquisition of TMD Technologies Limited;
Northrop Grumman Integrated Defence Services Pty Limited and Northrop Grumman M5 Network Security Pty Limited were integrated into Northrop Grumman Australia Pty Limited due to corporate reorganization; and
Change in Name from LTK 400 Operadores de Logistica Integral S.L.U. to Rhenus LTK Warehousing Solutions S.L.U. due to acquisition by Rhenus Logistics.

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

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

OFAC Issues General Licenses 17, 18 And 19 For Afghanistan

December 22, 2021: OFAC issued General Licenses 17, 18, and 19 for Afghanistan. General License 17: authorizes all transactions and activities involving the Taliban or the Haqqani Network that are for the conduct of the official business of the United States Government by employees, grantees, or contractors thereof, subject to certain conditions. General License 18: authorizes all transactions and activities involving the Taliban or the Haqqani Network that are for the conduct of the official business of certain international organizations and other international entities by employees, grantees, or contractors thereof, subject to certain conditions. General License 19: authorizes all transactions and activities involving the Taliban or the Haqqani Network that are ordinarily incident and necessary to the following activities by nongovernmental organizations (NGOs), subject to certain conditions: humanitarian projects to meet basic human needs; activities to support rule of law, citizen participation, government accountability, and transparency, human rights and fundamental freedoms, access to information, and civil society development projects; education; non-commercial development projects directly benefitting the Afghan people; and environmental and natural resource protection. https://home.treasury.gov/news/press-releases/jy0545

Editor's Note: General Licenses do not override ITAR or EAR obligations that may separately exist for contractors.

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OFAC Amends The Weapons of Mass Destruction Trade Control Regulations

December 27, 2021: 86 Fed. Reg. 73105: OFAC has amended the Weapons of Mass Destruction Trade Control Regulations at 31 C.F.R. Part 539 to add a June 28, 2005, Executive Order (E.O. 13382, Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters) as an authority, remove the appendix to the part, and modify three definitions referencing the appendix. https://www.federalregister.gov/documents/2021/12/27/2021-27868/weapons-of-mass-destruction-trade-control-regulations

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Department of Justice / Alcohol, Tobacco, Firearms, and Explosives (BATFE)

ATF Publishes Revised Explosives List

December 23, 2021: 86 Fed. Reg. 72996: The U.S. Department of Justice's Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) published a revised list of explosives determined to be within the coverage of 18 U.S.C. § 841 et seq. The list covers not only explosives but also blasting agents and detonators, all of which are defined as "explosive materials" in 18 U.S.C. § 841(c). This list supersedes the List of Explosive Materials published in at 85 Fed. Reg. 83999 (Dec. 23, 2020)). The 2021 List of Explosive Materials is a comprehensive list but is not all-inclusive. Accordingly, the fact that an explosive material is not on the annual list does not mean that it is not within the coverage of the law if it otherwise meets the statutory definition of "explosives" in 18 U.S.C. § 841. Subject to limited exceptions in 18 U.S.C. § 845 and 27 C.F.R. § 555.141, only Federal explosives licensees and permittees may possess and use explosive materials, including those on the annual list. https://www.govinfo.gov/content/pkg/FR-2021-12-23/html/2021-27852.htm

Editor's Note: Importers of explosives should review the revised list to confirm if the explosives they import have been added to the revised list or deleted from the revised list.

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Other

The Governments Of The United States, Australia, Denmark And Norway Pledge To Prevent The Proliferation Of Software And Other Technologies Used To Enable Serious Human Rights Abuses

December 10, 2021: The Governments of the United States, Australia, Denmark, and Norway issued a joint statement to commit to working to establish a voluntary, nonbinding written code of conduct around which like-minded states could politically pledge to use export control tools to prevent the proliferation of software and other technologies used to enable serious human rights abuses. The Governments also agreed to consult with industry and academia in regards to these efforts. https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/10/joint-statement-on-the-export-controls-and-human-rights-initiative/.

China Publishes White Paper Titled "China's Export Controls"

December 29, 2021: The State Council Information Office of the People's Republic of China published a white paper titled "China's Export Controls" to give a full picture of related policies and help the international community better understand its position. The full text of the White Paper can be found at: https://news.cgtn.com/news/files/Full-Text-China's-Export-Controls.pdf and https://news.cgtn.com/news/2021-12-29/China-releases-white-paper-on-export-control-16nzXH1BeoM/index.html

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce, Bureau of Industry And Security (BIS)

December 3, 2021: 86 Fed. Reg. 69003 – 69008: BIS has issued orders denying export privileges of the following six individuals:

Hector Mario Delgado-Lerma, until May 14, 2026;
Marco Antonio Sanchez, until June 16, 2025;
Nereyda Carrillo-Montes, until April 24, 2024;
Ali Kourani, until December 3, 2029;
Douglas Glover, until Until April 8, 2029; and
Nicky Lee Quiroz, until September 19, 2029.

https://www.federalregister.gov/documents/2021/12/06/2021-26356/order-denying-export-privileges-in-the-matter-of-ali-kourani-inmate-number-79196-054-usp-marion-us

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Department of the Treasury, Office of Foreign Assets Control (OFAC)

December 2, 2021: OFAC has determined, in consultation with the Department of State, that the Ministry of Finance of the Republic of Belarus and the Development Bank of the Republic of Belarus are political subdivisions, agencies, or instrumentalities of the Government of Belarus, and that the following activities by U.S. persons or within the United States are prohibited, except to the extent provided by law or unless licensed or otherwise authorized by OFAC: all transactions in, provision of financing for, and other dealings in new debt with a maturity of greater than 90 days issued on or after December 2, 2021, by the Ministry of Finance of the Republic of Belarus or the Development Bank of the Republic of Belarus. All other activities with the Ministry of Finance of the Republic of Belarus and the Development Bank of the Republic of Belarus, or involving their property or interests in property, are permitted, provided such activities are not otherwise prohibited pursuant to the Order, any Executive order issued pursuant to the national emergency declared in Executive Order 13405 of June 16, 2006, "Blocking Property of Certain Persons Undermining Democratic Processes or Institutions in Belarus," or any other sanctions program implemented by the Office of Foreign Assets Control. Except to the extent otherwise provided by law or unless licensed or otherwise authorized by the Office of Foreign Assets Control, the following are also prohibited: (1) any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions contained in this Directive; and (2) any conspiracy formed to violate any of the prohibitions in this Directive.

OFAC has issued Belarus General License 5, "Authorizing the Wind Down of Transactions Involving Open Joint Stock Company Belarusian Potash Company or Agrorozkvit LLC."

December 2, 2021: OFAC has published ten new Frequently Asked Questions regarding the Belarus sanctions (FAQ 939, FAQ 940, FAQ 941, FAQ 942, FAQ 943, FAQ 944, FAQ 945, FAQ 946, FAQ 947, and FAQ 948), and updated Frequently Asked Question 918.

OFAC updated the SDN list regarding changes to the Belarus sanctions. https://home.treasury.gov/news/press-releases/jy0512

OFAC Adds 15 Individuals From Iran, Syria And Uganda To Its Specially Designated Nationals List

December 7, 2021: OFAC added 15 individuals from Iran, Syria, and Uganda to its Specially Designated Nationals (SDN) list on allegations of "serious human rights abuse and repressive acts targeting innocent civilians, political opponents, and peaceful protestors." The 15 individuals are:

AL-HASOURI, Muhammad Yousef, of Syria	KANDIHO, Abel, of Uganda	KHODADADI, Soghra, of Iran
AL-HASSAN, Kamal, of Syria	KARAMI, Hassan, of Iran	SAFDARI, Masoud, of Iran
AZAMI, Seyed Reza Mousavi, of Iran	KARAMI, Mohammad, of Iran	SALAMEH, Adeeb Namer, of Syria
EBRAHIMI, Mohsen, of Iran	KHADOUR, Tawfiq Muhammad, of Syria	VASEGHI, Leila, of Iran
HEMMATIAN, Ali, of Iran	KHALIL, Qahtan, of Syria	SOLEIMANI, Gholamreza, of Iran

OFAC also designated four entities the Department of State identified as "responsible for certain gross violations of human rights in Iran." The four entities are:

IRAN'S COUNTER-TERROR SPECIAL FORCES (a.k.a. IRANIAN SPECIAL POLICE FORCES; a.k.a. NIROO-YE VIZHE PASDAR-E VELAYAT; a.k.a. SUPREME LEADER'S GUARDIAN SPECIAL FORCES; a.k.a. "NOPO"; a.k.a. "PROVINCIAL SPECIAL FORCES"; a.k.a. "SPECIAL COUNTER-TERRORISM FORCE")

ISFAHAN CENTRAL PRISON (a.k.a. DASTGERD PRISON; a.k.a. ESFAHAN PRISON)

SPECIAL UNITS OF IRAN'S LAW ENFORCEMENT FORCES (a.k.a. IRANIAN POLICE SPECIAL UNITS; a.k.a. LEF SPECIAL UNITS; a.k.a. NAJA SPECIAL UNITS; a.k.a. YEGAN-E VIZHE)

ZAHEDAN PRISON

https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20211207.

OFAC Updates SDN List Targeting 16 Individuals And 24 Entities Across Several Countries In Europe And The Western Hemisphere

December 8, 2021: OFAC Updates SDN List targeting 16 individuals and 24 entities across several countries in Europe and the Western Hemisphere pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act, and targets perpetrators of corruption and serious human rights abuse. The individuals and entities are:

Zvonko Veselinovic	Sinisa Nedeljkovic	Nautikacentar D. O. O. of Croatia	Sinisa Nedeljkovic B.I., P.T.P. Metal of Kosovo
Milan Rajko Radojcic	Radule Stevic	DOO Rad 028 Zvecan of Serbia	P.P.Robna Kuca Metal B.I. of Kosovo
Zeljko Bojic	Inkop DOO Cuprija (Inkop) of Serbia	Radule Stevic B.I., P.T.P. Rad of Serbia	Farma Izvori B.I. of Kosovo
Marko Rosic	Civija Komerc of Serbia	Rad D.O.O. of Kosovo	Robna Kuca Metal D.O.O. of Kosovo
Andrija Zheljko Bojic	S.Z.T.R. Prizma B.I. of Kosovo	Markom Metal Commerce DOO Zvecan of Serbia	Sinisa Nedeljkovic I.B. of Kosovo
Srdjan Milivoje Vulovic	Ferari Preduzeee Za Usluge I Promet Polovnim Vozilima SH.A of Kosovo	Metal-Robna Kuca of Serbia	Radovan Radic B.I. of Kosovo
Milan Mihajlovic	Betonjerka DOO Aleksinac of Serbia	DOO MM Kom Inter Blue Donji Jasenovik of Serbia	Osiris Luna Meza
Miljan Radisavljevic	Dolly Bell DOO Beograd-Novi Beograd of Serbia	P.P. Babudovac B.I. of Kosovo	Carlos Amilcar Marroquin Chica
Miljojko Radisavljevic	Novi Pazar-Put D.O.O. Novi Pazar of Serbia	DOO Babudovac Brnjak of Serbia	Alma Yanira Meza Olivares
Radovan Radic	Zarko Veselinovic B.I., S.T.R. Kristal of Kosovo	Garac Inzenjering OOD of Bulgaria	Zharko Jovan Veselinovic

https://home.treasury.gov/news/press-releases/jy0519

December 9, 2021: OFAC sanctions two individuals in El Salvador and Guatemala pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of corruption and serious human rights abuse. The Government officials were sanctioned related to suspicious procurement, directing suspicious pandemic-related purchases, reselling personal protective equipment and other medical aid at a significant markup and for personal gain, and/or for favoring companies where family members were officers. https://home.treasury.gov/news/press-releases/jy0523 and https://www.mondaq.com/unitedstates/export-controls-trade-investment-sanctions/1141814/ofac-sanctions-individuals-for-corruption-related-to-covid-19-procurement

December 9, 2021: OFAC designates fifteen individuals and entities across several countries in Central America, Africa, and Europe. Today's actions are taken pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of corruption and serious human rights abuse. The individuals and entities are:

Martha Carolina Recinos De Bernal	Cochan Holdings LLC	Andriy Portnov Fund
Manuel Victor Martinez Olivet	Geni SARL	Leopoldino Fragoso do Nascimento
ARC Resources Corporation Limited	Geni Novas Tecnologias S.A.	Manuel Helder Vieira Dias Junior
Winners Construction Company Limited (Winners)	Baia Consulting Limited	Cochan S.A.
Prince Yormie Johnson	Andriy Portnov	Luisa De Fatima Giovetty

https://home.treasury.gov/news/press-releases/jy0523

OFAC Issues General License 16 For Afghanistan

December 10, 2021: OFAC issued General License 16 for Afghanistan, which authorizes non-commercial, personal remittances to Afghanistan, including through Afghan depository institutions. Noncommercial, personal remittances do not include charitable donations of funds to or for the benefit of an entity or funds transfers for use in supporting or operating a business, including a family-owned business. https://home.treasury.gov/system/files/126/ct_gl16_1.pdf.

OFAC Adds Sensetime Group Limited Of Hong Kong To The Non-SDN List

December 10, 2021: Effective February 8, 2022, OFAC is adding Sensetime Group Limited of Hong Kong to the Non-SDN List for Chinese Military-Industrial Complex Companies per Executive Order 13959. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20211210.

OFAC Designates Ali Darassa (Darassa) Of The Central African Republic

December 17, 2021, 86 Fed. Reg. 71557-71568: OFAC designated Ali Darassa (Darassa) for serious human rights abuses stemming from his leadership of the Central African Republic (CAR) based militia group, Union for Peace in the Central African Republic (UPC) pursuant to Executive Order (E.O.) 1366. https://www.marketscreener.com/news/latest/Treasury-Sanctions-UPC-Militia-Leader-in-Central-African-Republic-for-Serious-Human-Rights-Abuse--37362352/ and https://www.federalregister.gov/documents/2021/12/17/2021-27406/addition-of-certain-entities-to-the-entity-list-and-revision-of-an-entry-on-the-entity-list

OFAC Designates Members Of A Brazil-based Network Of Al-Qa'ida-Affiliated Individuals And Their Companies

December 17, 2021, 86 Fed. Reg. 71557-71568: OFAC designated members of a Brazil-based network of al-Qa'ida-affiliated individuals and their companies for providing support to the terrorist group. OFAC targeted three individuals and two entities, including al-Qa'ida operative in Brazil Haytham Ahmad Shukri Ahmad Al-Maghrabi (Al-Maghrabi), as Specially Designated Global Terrorists pursuant to Executive Order (E.O.) 13224, as amended. https://www.federalregister.gov/documents/2021/12/17/2021-27406/addition-of-certain-entities-to-the-entity-list-and-revision-of-an-entry-on-the-entity-list and https://www.newsamericasnow.com/latin-america-brazil-al-qaida-affiliated-individuals-designated-global-terrorists/

OFAC Identifies Eight Chinese Technology Firms Pursuant To Executive Order (E.O.) 13959, As Amended By E.O. 14032

December 16, 2021: OFAC identified eight Chinese technology firms pursuant to Executive Order (E.O.) 13959, as amended by E.O. 14032. These eight entities actively support the biometric surveillance and tracking of ethnic and religious minorities in China, particularly the predominantly Muslim Uyghur minority in Xinjiang. As a result of this action, U.S. persons will be prohibited from purchasing or selling certain publicly traded securities connected with these entities, as described in E.O. 13959, as amended. The entities identified today are:

Cloudwalk Technology Co., Ltd.;
Dawning Information Industry Co., Ltd.;
Leon Technology Company Limited;
Megvii Technology Limited;
Netposa Technologies Limited;
SZ DJI Technology Co., Ltd.;
Xiamen Meiya Pico Information Co., Ltd.; and
Yitu Limited.

https://home.treasury.gov/news/press-releases/jy0538

Fines and Penalties

December 8, 2021: OFAC settles with an unnamed individual for $133,860 for apparent violations of Iranian Transactions and Sanctions Regulations. A natural U.S. person ("U.S. Person-1") has agreed to pay $133,860 to settle their potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations. The apparent violations were committed between February 2016 and March 2016 when the U.S. Person accepted payment in the United States on behalf of an Iran-based company selling Iranian-origin cement clinker to another company for a project in a third country. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20211208_33

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December 13, 2021: Shawn Sabi, 53, of Atlanta, was sentenced to 19 months in prison after pleading guilty to Submitting False or Misleading Export Information for attempting to conceal firearms in overseas shipments of household goods. Sabi also was ordered to serve two years of supervised release after completion of his prison sentence. https://www.justice.gov/usao-sdga/pr/atlanta-man-sentenced-prison-attempting-conceal-firearms-overseas-shipment-household

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December 15, 2021: Jose Rafael Vasquez, a 64-year-old Dallas resident been ordered to federal prison for attempting to export firearms, firearm magazines, and thousands of rounds of ammunition to Mexico. Mr. Vasquez was sentenced to 63 months in federal prison and a three-year term of supervised release. https://www.justice.gov/usao-sdtx/pr/texan-sentenced-attempting-export-weapons

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December 16, 2021: A South Dakota man was arrested on criminal charges related to his alleged espionage attempts. John Murray Rowe Jr., 63, of Lead, allegedly attempted to provide classified national defense information to the Russian government. Rowe was employed for nearly 40 years as a test engineer for multiple cleared defense contractors. In connection with his employment, Rowe held various national security clearances from SECRET to TOP SECRET//SCI (Sensitive Compartmented Information) and worked on matters relating to the U.S. Air Force's aerospace technology, among other things. After committing a number of security violations and revealing a fervent interest in Russian affairs, including whether he could obtain a security clearance from the Russian government, Rowe was identified as a potential insider threat and terminated from employment. https://www.justice.gov/opa/pr/former-defense-contractor-arrested-attempted-espionage

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December 17, 2021: Jorge Orencel, age 65, of Silver Spring, Maryland, pleaded guilty to federal charges of attempting to smuggle ionization chambers and fission chambers for use in gas-filled nuclear radiation detectors out of the United States without the required export license. Orencel owned and operated Sumtech, an export business located in Fulton, Maryland. Orencel faces a maximum sentence of 10 years in prison for attempted smuggling of the referenced goods. https://www.justice.gov/usao-md/pr/owner-maryland-export-business-pleads-guilty-federal-charges-attempting-smuggle-items-out

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December 21, 2021: Ye Sang "Ivy" Wang, a former U.S. Navy sailor who was a Logistics Specialist First Class assigned to the Naval Special Warfare Command, was sentenced to 30 months in custody and ordered to pay a $20,000 fine for conspiring with her husband and co-defendant, Shaohua "Eric" Wang, to illegally export sensitive military equipment to China for profit. Eric Wang pleaded guilty on September 26, 2019, admitting that he illegally sold export-controlled U.S. military equipment to China through his online business and that he enlisted his wife to use her Navy position to purchase the equipment for resale. https://www.justice.gov/usao-sdca/pr/former-us-navy-sailor-sentenced-25-years-selling-export-controlled-military-equipment

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December 23, 2021: OFAC reached a $115,000 settlement with TD Bank NA involving apparent violations of OFAC's sanctions against individuals and North Korea. The apparent violations were voluntarily self-disclosed and were non-egregious. In one case, TD Bank NA processed transactions and maintained accounts on behalf of employees of the North Korean mission to the United Nations without a license from OFAC. In the second case, the bank maintained accounts for a U.S. resident who was listed on OFAC's list of "Specially Designated Nationals and Blocked Persons. https://www.reuters.com/business/finance/us-treasury-dept-says-settlement-reached-over-td-banks-sanctions-violations-2021-12-23/

DECEMBER 2021 EXPORT CONTROL REGULATION UPDATES Read More »

NOVEMBER 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through November 30, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

President

Biden Administration Proposal to Revise The Conventional Arms Transfer Policy

Nov. 29, 2021, The Biden administration is currently revising its conventional arms transfer policy. This policy provides guidance on how the United States approaches weapons sales. The administration is reportedly considering placing a greater emphasis on human rights in the policy’s text and joining and ratifying the Arms Trade Treaty. A key component of the revision to U.S. industry and exporters is the proposal to shift the regulation of firearms and munition sales back to the State Department and the International Traffic in Arms Regulations (ITAR). These revisions, if implemented, would give greater emphasis to human rights considerations when making arms sales, reduce sales of small weapons to governments that may use them on domestic populations, and affirm U.S. support for the Arms Trade Treaty. https://warontherocks.com/2021/11/bidens-conventional-arms-transfer-policy-review-could-be-a-turning-point/

(* Author: Jordan Cohen))

Department of Commerce – Bureau of Industry and Security

BIS Adds Four Entities In Israel, Russia And Singapore To The Entity List

Nov. 4, 2021 – 86 Fed. Reg. 60759: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 4 entities in Israel, Russia, and Singapore to the Entity List (EAR Part 744, Supp. No. 4). The entities are:

Israel

Candiru and
NSO Group;

Russia

Positive Technologies; and

Singapore

Computer Security Initiative Consultancy PTE. LTD.

A license requirement with license review policy of presumption of denial and no license exceptions will now apply to exports, reexports, or in-country transfers to these persons of all items subject to the EAR.

The Israeli entities were added to the Entity List based on evidence that they had developed and supplied spyware to foreign governments that used it to maliciously target government officials, journalists, business people, activists, academics, and embassy workers; the Russian and Singaporean entities were added based on a determination that they trafficked in cyber tools used to gain unauthorized access to information systems, threatening the privacy and security of individuals and organizations worldwide. BIS noted that this effort to combat cyber threats and mitigate unlawful surveillance followed the rule released in October (86 Fed. Reg. 58205, Oct. 21, 2021) establishing controls on exports, reexports, or in-country transfers of certain items that can be used for malicious cyber activities. (See October 2021 Regulatory Update.)

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BIS Publishes FAQs On The Export Of Cybersecurity Items

Nov. 12, 2021: BIS published 29 very detailed FAQs on the export of cybersecurity items, listed under three categories titled (1) “’Cybersecurity Items’ and the Export Administration Regulations (EAR)” (13 questions); (2) “’Vulnerability Disclosure’ and ‘Cyber Incident Response’” (7 questions); and (3) “Penetration testing tools and other ‘cybersecurity items’ overlap with Category 5 - Part 2 ‘encryption items’” (9 questions). These “EAR ‘cyber rule’ FAQs” are in a 16-page document on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2872-cyber-tools-le-ace-faqs-final-version-nov-2021/file.

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BIS Adds Twenty-Seven Entities In The People’s Republic of China, Japan, Pakistan And Singapore To The Entity List

Nov. 26, 2021 – 86 Fed. Reg. 67317: BIS added 27 entities in the People’s Republic of China (PRC), Japan, Pakistan, and Singapore to the Entity List (Supplement No. 4 to EAR Part 744) because they had acted contrary to the national security or foreign policy interests of the U.S. In the same rule, BIS also added one entity in Russia to the Military End-User list (MEU list, Supplement No. 7 to EAR Part 744). The entities added to the Entity List are:

China

Corad Technology (Shenzhen) Ltd.
Hangzhou Zhongke Microelectronics Co., Ltd.
Hefei National Laboratory for Physical Sciences at Microscale
Hunan Goke Microelectronics
New H3C Semiconductor Technologies Co., Ltd.
Peaktek Company Ltd.
Poly Asia Pacific Ltd., (PAPL)
QuantumCTek Co., Ltd.
Shaanxi Zhi En Electromechanical Technology Co., Ltd.
Shanghai QuantumCTek Co., Ltd.
Xi’an Aerospace Huaxun Technology
Yunchip Microelectronics

Japan

Corad Technology Japan K.K.

Pakistan

Al-Qertas
Asay Trade & Supplies
Broad Engineering (Pakistan)
Global Tech Engineers
Jade Machinery Pvt. Ltd.
Jiuding Refrigeration & Air-conditioning Equipment Co (Pvt) Ltd.
K-SOFT Enterprises
Muhammad Ashraf
Muhammad Farrukh
Prime Tech
Q&N Traders
Seljuk Traders (SMC-Private) Limited
U.H.L. Company

Singapore

Corad Technology Pte Ltd.

Russia

Moscow Institute of Physics and Technology (added to MEU List only)

The Federal Register announcement provides the specific reasons for which each of the 27 entities was added to the Entity List (or the MEU List). A license requirement with license review policy of presumption of denial will now apply to all exports, reexports, or in-country transfers of all items subject to the EAR to all the entities added to the Entity List, and no license exceptions will be available.

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BIS Proposes Amendments To The Interim Final Rule On Securing The Information And Communications Technology And Services (ICTS) Supply Chain (Supply Chain Rule)

Nov. 26, 2021 – 86 Fed. Reg. 67379: The Commerce Department proposed to amend the interim final rule on Securing the Information and Communications Technology and Services (ICTS) Supply Chain (Supply Chain Rule) that it published on January 19, 2021 (86 Fed. Reg. 4909 – see January and March 2021 Regulatory Updates). The proposal would revise the definition of ICTS to expressly include “connected software applications” and would provide for additional criteria that the Secretary of Commerce could consider when determining whether ICTS transactions (as defined in the Supply Chain Rule) that involve connected software applications present an undue or unacceptable risk. The notice solicits the public’s

views on specific questions about the additional criteria for connected software applications. The deadline for comments is December 27, 2021.

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BIS Requests Public Comments Regarding Areas And Priorities For U.S. And European Union (EU) Export Control Cooperation

Nov. 30, 2021 – 86 Fed. Reg. 67904: BIS requested public comments regarding areas and priorities for U.S. and European Union (EU) export control cooperation to help inform the work of the U.S–EU Trade and Technology Council (TTC) Export Control Working Group. Comments should address ways in which existing U.S. and/or EU dual-use export control policies and practices may be made more transparent, more efficient, and effective, more convergent, and fit for today’s challenges, in particular with regard to the control of emerging technologies. The deadline for comments is January 14, 2022.

Department of State

DDTC Name And Address Changes Posted To Website

Nov. 16 and 26, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Address for ATI Engineering Services, LLC; and
Change in Address for Parsons Government Services, Inc.

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

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DDTC Adds Ethiopia To 22 CFR § 126.1(n) Of The ITAR And Updates The Entry For Eritrea In § 126.1(h)

Nov. 1, 2021 – 86 Fed. Reg. 60165: DDTC amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) to add Ethiopia to Sec. 126.1(n) and to update the entry for Eritrea in Sec. 126.1(h) to codify the U.S. policy of denial that applies to licenses or other approvals for exports of defense articles or defense services destined to or for the armed forces, police, intelligence, or other internal security forces of either Ethiopia or Eritrea. This final rule became effective on November 1, 2021.

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DDTC Publishes Six FAQS Relating To Debarments, Rescissions, And Reinstatement And Eleven FAQs Relating To Violations And Disclosures

Nov. 19 and 22, 2021: DDTC published six FAQs relating to Debarments, Rescissions, and Reinstatement and eleven FAQs relating to Violations and Disclosures. The FAQs regarding Debarments, Rescissions, and Reinstatement focus on U.S. person status of DACA residents, how to determine if the party you are dealing with is a debarred party, is there an exception so that a statutorily or administratively debarred party can participate in an ITAR-controlled activity, what does DDTC’s debarred parties list mean, is the rescission of statutory debarment under ITAR § 127.7(b) the same as the reinstatement of export privileges and duration administrative debarment or statutory debarment. The FAQs regarding Violations and Disclosures focus on how to respond to DDTC questions regarding a violation, are you required to voluntarily disclose a violation, how does DDTC assign voluntary disclosure case #s, how much time do you have to submit a voluntary disclosure, when should you submit a voluntary disclosure, extension request, how to obtain the status of the review of a voluntary disclosure, who can submit a voluntary disclosure, and do you need to wait for the disclosure to close before you submit a new export license.

All these FAQs are accessible from https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_landing.

Department of the Treasury

OFAC Publishes New Syria FAQ 934 Regarding Stabilization And Early Recovery-Related Activities And Transactions Involving Syria

Nov. 8, 2021: The Treasury Department Office of Foreign Assets Control (OFAC) published new Syria FAQ 934, discussing the scope of the authority granted by the Syrian Sanctions Regulations (SySR, 31 CFR Part 542) to the United Nations and the U.S. Government and their contractors and grantees, to conduct stabilization and early recovery-related activities and transactions involving Syria. FAQ 934 further references Syria FAQ 884 regarding the exposure to U.S. secondary sanctions of non-U.S. persons, including NGOs, private sector entities, and foreign financial institutions facilitating or assisting in the same activities. Syria FAQ 934 is on the OFAC website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/934; FAQ 884 is at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/884.

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OFAC Issues General Licenses And FAQs To Ensure That Humanitarian Assistance Could Flow To The People Of Ethiopia, Eritrea, And The Greater Horn Of Africa Region

Nov. 12, 2021: OFAC took several actions to continue its effort to ensure that humanitarian assistance could flow to the people of Ethiopia, Eritrea, and the greater Horn of Africa region. (See earlier measures in Treasury Department section of September 2021 Regulatory Update.) These actions included the issuance of General License (GL) 4 ( https://home.treasury.gov/system/files/126/ethiopia_gl4.pdf), updated FAQ 927, and new FAQs 935, and 936 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/927, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/935, and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/936, respectively).

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OFAC Updates SDN List Regarding Burundi, Adds Others for Interference With The U.S. Elections and Updates Yemen Designations

Nov. 18, 2021: In response to Presidential Executive Order issued 11/18/21 with respect to “Termination of the Emergency With Respect to the Situation in Burundi” OFAC has updated the Specially Designated Nationals (SDN) list removing parties named in the SDN having property blocked as they were deemed to be contributing to the situation in Burundi.

OFAC also updated the SDN list, adding and removing parties designated for interference with the U.S. elections and situation in Yemen.

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OFAC Issues GL 8I Regarding Petróleos de Venezuela, S.A.

Nov. 24, 2021: OFAC issued GL 8I, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities,” extending the authorization for certain specified activities until June 1, 2022. GL 8I replaces and supersedes GL 8H, which expired Dec. 1, 2021. GL 8I is on the OFAC website at https://home.treasury.gov/system/files/126/venezuela_gl8i.pdf.

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OFAC Amends The Nongovernmental Organization (NGO) GL In SySR Sec. 542.516 To Expand Existing Authorizations For NGOs To Engage In Humanitarian Assistance That Benefit The Syrian People

Nov. 26, 2021 – 86 Fed. Reg. 67324: OFAC amended the nongovernmental organization (NGO) GL in SySR Sec. 542.516 to expand existing authorizations for NGOs to engage in humanitarian assistance that benefits the Syrian people, including certain early-recovery activities. The newly authorized transactions and activities by NGOs include new investment, the purchase of refined Syrian-origin petroleum products, and certain transactions with elements of the Government of Syria, all limited to support of the not-for-profit activities already authorized under the existing GL. This NGO GL also authorizes U.S. financial institutions to process transfers of funds in support of the transactions and activities authorized by the amendment.

New FAQs 937 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/937 ) and 938 (,https://home.treasury.gov/policy-issues/financial-sanctions/faqs/938 ), issued Nov. 24, 2021, provide additional information and guidance about what is authorized by the amended GL in SySR Sec. 542.516.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Nov. 15, 2021 – 86 Fed. Reg. 62986: BIS denied the export privileges of Christopher Daniel Stines of Big Spring Correctional Institution, Big Spring, TX, until March 2, 2030, based on his conviction in the U.S. District Court for the Southern District of Florida of violating 18 USC Sec. 554(a) by knowingly and fraudulently attempting to export firearm parts to Haiti. In the criminal case, Stines was sentenced to 46 months in prison, two years of supervised release, and a $100 assessment.

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Nov. 15, 2021 – 86 Fed. Reg. 62987: BIS denied the export privileges of Hersel Lincoln McKenzie, Jr. of Los Angeles, CA, until January 8, 2025, based on his conviction in the U.S. District Court for the Southern District of Texas of violating 18 USC Sec. 554(a) by knowingly and fraudulently attempting to export and exporting certain merchandise, articles, and objects, namely 7.62 x 39 mm ammunition, from the U.S. to Mexico. In the criminal case, McKenzie was sentenced to 12 months and one day in prison and a $100 assessment.

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Nov. 15, 2021 – 86 Fed. Reg.62988: BIS denied the export privileges of Robert Herman Fleischer of Phoenix, AZ, until August 4, 2024, based on his conviction in the U.S. District Court for the District of Arizona of violating Sec. 38 of the Arms Export Control Act (AECA, 22 USC Sec. 2778 (2012)) by intentionally attempting to knowingly and willfully export and cause to be exported from the U.S. to Mexico 2,999 rounds of 7.62x39 mm caliber ammunition without the required authorization from the Department of State. In the criminal case, Fleischer was sentenced to 21 months in prison with credit for time served, three years of supervised release, and a special assessment of $100. Fleischer was also placed on the U.S. Department of State Debarred List.

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Nov. 15, 2021 – 86 Fed. Reg. 62989: BIS denied the export privileges of Si Mong Park of Tucson, AZ, until September 14, 2027, based on his conviction in the U.S. District Court for the District of Columbia of violating Sec. 38 of the AECA by knowingly and willfully exporting and causing the export from the U.S. to South Korea of defense articles, i.e., technical data related to launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs and mines, and technical data related to enumerated aircraft and aircraft-related articles without the required authorization from the Department of State. In the criminal case, Park was sentenced to 21 months in prison, 36 months of supervised release, and a $100 assessment.

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Nov. 16, 2021 – 86 Fed. Reg. 63333: BIS denied the export privileges of Manuel Valencia-Hermosillo until October 13, 2024, based on his conviction in the U.S. District Court for the District of Arizona of violating Sec. 38 of the AECA by knowingly and willfully attempting to export and cause to be exported from the U.S. to Mexico ammunition and rifle magazines, all of which were designated as defense articles on the U.S. Munitions List, without the required authorization from the Department of State. In the criminal case, Valencia-Hermosillo was sentenced to 15 months in prison with credit for time served, three years of supervised release, and an assessment of $100. Valencia-Hermosillo was also placed on the U.S. Department of State Debarred List.

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Nov. 22, 2021 – 86 Fed. Reg. 66276: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) issued on May 27, 2021, against the following persons:

Mahan Airways, Tehran, Iran;
Pejman Mahmood Kosarayanifard A/K/ A Kosarian Fard, Dubai, United Arab Emirates (UAE);
Mahmoud Amini, Dubai, UAE;
Kerman Aviation A/K/A Gie Kerman Aviation, Paris, France;
Sirjanco Trading LLC, Dubai, UAE;
Mahan Air General Trading LLC, Dubai, UAE;
Mehdi Bahrami, Istanbul, Turkey;
Al Naser Airlines A/K/A Al-Naser Airlines A/K/A Al Naser Wings Airline A/K/A Alnaser Airlines And Air Freight Ltd., Baghdad, Iraq, Dubai, UAE, and Amman, Jordan;
Ali Abdullah Alhay A/K/A Ali Alhay A/K/A Ali Abdullah Ahmed Alhay, Baghdad, Iraq, and Qatif, Saudi Arabia;
Bahar Safwa General Trading, Dubai, UAE;
Sky Blue Bird Group A/K/A Sky Blue Bird Aviation A/K/A Sky Blue Bird Ltd A/K/A Sky Blue Bird FZC Ras Al Khaimah Trade Zone, UAE; and
Issam Shammout A/K/A Muhammad Isam Muhammad Anwar Nur Shammout A/K/A Issam Anwar, Damascus, Syria, Beirut, Lebanon, London, United Kingdom, and Istanbul, Turkey.

Fines and Penalties

Nov. 8, 2021: SP Industries, Inc. (“SP,” doing business as SP Scientific) of Warminster, PA, agreed to pay a civil penalty of $80,000 and submit to audit requirements to settle allegations by BIS that it had committed four violations of the EAR by exporting items to Huawei Technologies Co., Ltd. and two subsidiaries, Huawei Device Co., Ltd. and HISilicon Technologies Co., Ltd., without the required licenses from BIS. The exports were made after these Huawei companies had been designated on the Entity List. SP voluntarily self-disclosed two of the four violations listed in the settlement. After learning of the apparent violations, SP instituted new screening and compliance procedures for all orders. Also, in the settlement, it agreed to conduct two audits of its compliance system over the next two years and submit the results to BIS’ Export Enforcement’s New York Field Office, and when actual or potential violations of the EAR occur, to provide BIS with documentation related to the compliance concerns and a detailed plan of corrective actions and documentation related to these concerns.

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Nov. 9, 2021: Andrew Scott Pierson of Jay, OK, pleaded guilty to conspiracy to violate the AECA for his role in a conspiracy to traffic firearms to Mexico. His role in the conspiracy, which he performed in Nuevo Laredo, Mexico, was to receive counterfeit Colt lower receivers and other parts that were transported to him by an organization in Laredo, TX, and assemble them into functioning automatic weapons for use by two Mexican cartels. According to the U.S. Department of Justice, law enforcement later confirmed that cartel firearm availability was impaired following Pierson’s arrest.

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Nov. 10, 2021: Dali Bagrou, of Alpharetta, GA, was sentenced in U.S. District Court for the Southern District of Georgia to 51 months in prison followed by three years of supervised release based on his plea of guilty to conspiracy, and Bagrou’s company, World Mining and Oil Supply (WMO), of Dacula, GA was sentenced to five years’ probation after pleading guilty to violating the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.). Also, as part of his plea agreement, Bagrou agreed to forfeit his $800,000 home. The sentences and guilty pleas involved a conspiracy to sell a U.S.-manufactured power turbine to a Russian energy company for use on a Russian Arctic deep-water drilling platform -- a use that is expressly prohibited without a license from the U.S. Department of Commerce -- while submitting false documentation to the U.S. Government stating that the turbine would be used by a U.S. company in and around Atlanta. (See August 2021 Regulatory Update and prior issues cited there for additional information about this conspiracy and its journey through the U.S. legal system.)

NOVEMBER 2021 EXPORT CONTROL REGULATION UPDATES Read More »

OCTOBER 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through October 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company's international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

International Organizations

Missile Technology Control Regime (MTCR) Holds A Plenary Meeting In Sochi, Russia

Oct. 4-8, 2021: The Missile Technology Control Regime (MTCR) held a plenary meeting in Sochi, Russia. At the meeting the members adopted an updated Equipment, Software, and Technology Annex. During the meeting, the member nations emphasized that the MTCR Guidelines are not designed to impede technological development, including space programs, as long as such activities cannot contribute to the proliferation of Weapons of Mass Destruction (WMD) delivery systems. The new Equipment, Software, and Technology Annex is on the Internet at http://mtcr.info/wordpress/wp-content/uploads/2021/10/MTCR-TEM-Technical_Annex_2021-10-08.pdf, and a version showing the changes from the previous Annex is at https://mtcr.info/wordpress/wp-content/uploads/2021/10/MTCR-TEM-Technical_Annex_2021-10-08-Track-Changes.pdf.

Department of Commerce – Bureau of Industry and Security

BIS Makes Minor Edits To Multiple Parts Of The EAR

Oct. 5, 2021 – 86 Fed. Reg. 54807: The Bureau of Industry and Security (BIS) made minor editorial revisions in Parts 732, 734, 736, 738, 740, 744, 748, 750, 770, 772, and 774 of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct inadvertent inconsistencies in the language of these parts. The revisions did not change the substance of the EAR.

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BIS Adds ECCN 2D352 To Control "Software" Designed For Nucleic Acid Assemblers And Synthesizers Controlled By ECCN 2B352.j

October 5, 2021 – 86 Fed. Reg. 54814: BIS amended EAR Parts 742 and 774 to add new Export Control Classification Number (ECCN) 2D352 to reflect a decision made by the Australia Group (AG) in May 2021 to modify the AG biological equipment list. Specifically, new ECCN 2D352 controls "software" designed for nucleic acid assemblers and synthesizers controlled by ECCN 2B352.j that is capable of designing and building functional genetic elements from digital sequence data. This "software," which BIS had previously identified as an emerging technology when controlled under new ECCN 2D352, now requires a license for chemical and biological weapons (CB) reasons and anti-terrorism (AT) reasons to the destinations indicated under CB Column 2 and AT Column 1, respectively, on the Commerce Country Chart (Supplement No. 1 to EAR Part 738). BIS also amended ECCN 2E001 to extend controls to the "technology" for the development of this "software."

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BIS Takes Control Over Deuterium From The Nuclear Regulatory Commission Placing Control In ECCN 1C298

Oct. 6, 2021 – 86 Fed. Reg. 55492: BIS published a final rule completing the transfer from the Nuclear Regulatory Commission (NRC) to the Commerce Department for control of exports of deuterium that is intended for use other than in a nuclear reactor. The rule is effective December 6, 2021. (See NRC paragraph below for the NRC's release of control of exports of these items.) Deuterium intended for use other than in a nuclear reactor will now be classified for Nuclear Proliferation (NP) reasons in ECCN 1C298, which currently controls only certain graphite. For purposes of ECCN 1C298, "deuterium" is defined as "deuterium and any deuterium compound, including heavy water, in which the ratio of deuterium atoms to hydrogen atoms exceeds 1:5000."

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BIS Establishes Controls On Certain Items That Can Be Used For Malicious Cyber Activities

Oct. 21, 2021 – 86 Fed. Reg. 58205: BIS issued an interim final rule establishing controls on the export, reexport, or transfer of certain items that can be used for malicious cyber activities by creating new ECCNs. This interim final rule added ECCNs: 4A005; 4D004; 4E001.a; 4E001.c; and 5A001.j. This interim final rule also overlaps with Category 5 – Part 2 when a cybersecurity item also incorporates particular "information security" functionality specified in ECCNs 5A002.a, 5A004.a, 5A004.b, 5D002.c.1, or 5D002.c.3 Category 5 - Part 2 of the CCL in Supplement No. 1 to part 774 of the EAR, these Category 5—Part 2 ECCNs prevail. Additionally, all items subject to the EAR that are controlled for Surreptitious Listening (SL) reasons under another ECCN not added by this rule will continue to be classified under the SL ECCN. This interim final rule also establishes License Exception (LE), LE Authorized Cybersecurity Exports ("ACE"). The announcement requests public comments on the potential cost to the U.S. industry and the cybersecurity community of compliance with the proposed controls. The new rule, in conjunction with LE ACE, will allow the export of "cybersecurity items" to most destinations, while requiring a license for exports to countries of national security or weapons of mass destruction (WMD) concern or countries subject to a U.S. arms embargo, as well as for circumstances where the exporter knows or has reason to know at the time of the export that the "cybersecurity item" will be used to affect the confidentiality, integrity, or availability of information or information systems without authorization by the owner, operator or administrator of the information system. A major goal of this rule is to ensure that U.S. companies are not fueling authoritarian practices. (Contact us for further information about the specific requirements of this rule if you have concerns about any proposed export, reexport, or in-country transfer.) This rule will be effective January 19, 2022; the deadline for comments is December 6, 2021.

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BIS Proposes The Amendment Of License Exception STA For Certain ECCNs And Corrected Inconsistencies Between License Exceptions STA and TSR

Oct. 22, 2021 – 86 Fed. Reg. 58615: BIS issued a proposed rule amending the EAR to clarify restrictions on the availability of LE STA (Strategic Trade Authorization) for ECCNs 9D001, 9D002, 9D004, 9E001, 9E002, and 9E003 and to further restrict the availability of LE STA for certain technology controlled under ECCNs 2E003.f and 1E001. The proposed rules also corrects inconsistencies between LEs STA and Technology Software Restricted (TSR), including the exclusion of the same technologies from eligibility for License Exception TSR; and to make conforming amendments throughout LE STA (Requirements and Limitations, EAR Sec. 740.20(b)) and in affected ECCNs. The deadline for comments is December 6, 2021.

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BIS Issues An Advance Notice Of Proposed Rulemaking Requesting Feedback From The Public And U.S. Industry About The Potential Uses Of Brain-Computer Interface Technology

Oct. 26, 2021 – 86 Fed. Reg. 59070: BIS issued an Advance Notice of Proposed Rulemaking (ANPRM) requesting feedback from the public and U.S. industry about the potential uses of Brain-Computer Interface (BCI) technology, particularly regarding whether BCI technology could provide the U.S. or any of its adversaries with a military or intelligence advantage and whether it would be possible to subject BCI to effective export controls. BCI technology, which includes, inter alia, neural-controlled interfaces, mind-machine interfaces, direct neural interfaces, and brain-machine interfaces, has until now been regarded as an emerging technology. The deadline for comments is December 10, 2021.

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BIS Posts FAQs About the Foreign Direct Product Rule

Oct. 28, 2021: BIS posted an extensive and very useful series of FAQs about the Foreign Direct Product (FDP) Rule titled "Foreign-Produced Direct Product (FDP) Rule as it Relates to the Entity List Sec. 736.2(b)(3)(vi) and footnote 1 to Supplement No. 4 to Part 744" on its website at https://www.bis.doc.gov/index.php/documents/about-bis/2681-2020-fpdp2-faq-120820-ea/file. The FAQs in this 9-page compendium are shown under the following topics:

General Topics
Types of Items
Prior Exports
Plant/Major Component
De Minimis
Supply Chain
Prior Licenses
Licensing Policy
Item-Specific Questions
Savings Clauses

Footnote 1 to Supplement No. 4 to Part 744 identifies entities on the Entity List that exporters may not reexport, export from abroad, or transfer (in-country) without a license or license exception any foreign-produced item specified when there is "knowledge" that the foreign-produced item will be incorporated into, or will be used in the "production" or "development" of any "part," "component," or "equipment" produced, purchased, or ordered by any entity with a footnote 1 designation or any entity with a footnote 1 designation that is a party to any transaction involving the foreign-produced item, e.g., as a "purchaser," "intermediate consignee," "ultimate consignee," or "end-user."

Footnote 1 currently lists Huawei entities from around the world.

Nuclear Regulatory Commission

The Nuclear Regulatory Commission Completes Transfer Of Deuterium To The EAR When Its Intended Use Is Other Than In A Nuclear Reactor

Oct. 6, 2021 – 86 Fed. Reg. 55476: The U.S. Nuclear Regulatory Commission (NRC) issued a final regulation removing the NRC's licensing authority for exports of deuterium for non-nuclear end-use. (See item in BIS section above for regulatory action by BIS placing these items on the Commerce Control List (CCL, EAR Part 774, Supp. No. 1).) The change of jurisdiction over these exports recognizes that exports of deuterium for commercial use have become far more common than exports of deuterium for nuclear end uses. Accordingly, responsibility for the licensing of such exports is being transferred to the Department of Commerce's Bureau of Industry and Security and the Export Administration Regulations ("EAR"). However, exports of deuterium for nuclear end-use will remain under the NRC's export licensing jurisdiction.

Department of State

DDTC Name And Address Changes Posted To Website

Oct. 6, 15, 19, 20, 22, 25, and 26, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Address for Airbus Helicopters' European Maintenance Repair and Overhaul Logistics Hub;
Change in Name for Babcock UK-owned entities due to corporate rebranding as follows:

From: To:

Bond Air Services Limited Babcock Mission Critical Services Onshore Limited

International Aviation Leasing Limited Babcock Mission Critical Services Leasing Limited

Vastone Limited Babcock Mission Critical Services Leasing Limited;

Change in Name from HENSOLDT Optronics (Pty.) Ltd. to HENSOLDT South Africa (Pty.) Ltd. due to consolidation of subsidiaries GEW Technologies (Pty.) Ltd. and HENSOLDT Optronics (Pty.) Ltd.;
Change in Name from Hawker Pacific Pty. Ltd. to Jet Aviation Australia Pty. Ltd. due to acquisition of Hawker Pacific by Jet Aviation Australia;
Change in Name from Selex ES Saudi Arabia Ltd. to Leonardo Saudi Ltd. due to corporate rebranding;
Change in Name from Harris C4i Pty. Ltd. to C4i Pty. Ltd. due to acquisition by Frequentis Group as part of Frequentis acquisition of L3 Harris ATM voice communications and arrival management product business;
Change in Address for Accenture S.L.; and
Change in Name from ST Engineering Land Systems Ltd., KIS Division, a legal entity of Singapore Technologies Engineering Ltd. to ST Engineering Land MRO & Services Pte. Ltd. due to corporate reorganization.

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

Department of the Treasury

OFAC Published Guidance On "Sanctions Compliance Guidance for the Virtual Currency Industry"

October 15, 2021: The Treasury Department, Office of Foreign Assets Control (OFAC) published "Sanctions Compliance Guidance for the Virtual Currency Industry," which provides an industry-specific overview of OFAC sanctions requirements and procedures, including licensing, enforcement, and sanctions compliance best practices. This 28-page brochure is on the Treasury Department website at https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf. At the same time, OFAC also published Frequently Asked Question (FAQ) 559, defining for OFAC sanctions purposes the terms "digital currency," "digital currency wallet," "digital currency address," and "virtual currency" (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/559) and FAQ 646 on how to block digital currency (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/646).

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of State

October 1, 2021 – 86 Fed. Reg. 54502: The Bureau of Political-Military Affairs (PM) rescinded the statutory debarment imposed on Dennis Haag on April 25, 2018 (83 Fed. Reg. 18112). The debarment was imposed based on Haag's plea of guilty of violating Sec. 38 of the Arms Export Control Act (AECA, 22 USC 2778 et seq.); the rescission was based on a review made in response to a request from Haag in accordance with International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 127.7(b). However, pursuant to ITAR Sec. 127.11, this notice does not reinstate his export privileges.

Fines and Penalties

October 5, 2021: Aydan Sin a/k/a/ Hon Chak Gordon Sin a/k/a Andy a/k/a Bullion of British Columbia, Canada, was sentenced in Federal District Court in Buffalo, NY, to serve 46 months in prison based on his May 17, 2017, a plea of guilty of violating the AECA by conspiring to export USML-listed firearms, suppressors, magazines, and ammunitions to Colombia and Dubai without the required authorization. Sin and co-conspirators Guy Deland and Charan Singh communicated with an undercover law enforcement agent (UCA) and asked him whether he could export firearms from the U.S. to the United Arab Emirates (UAE). In the course of their communications, the UCA advised them that a license from the State Department was required in order lawfully to export the firearms. In response, the conspirators acknowledged the illegality of the exports, provided the UCA with an encrypted Blackberry for the purpose of covert communications, and wired approximately $70,000 as a 50% down payment for the export of the goods. A similar process occurred subsequently with a requested export of firearms, magazines, suppressors, and ammunition to Colombia (via Panama). The invoices for both shipments stated that exporting these products without an export license was prohibited by law. Charges remain pending against Deland and Singh.

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Oct. 12, 2021: VTA Telecom Corporation (VTA) of Milpitas, CA, the U.S. subsidiary of a Vietnam state-owned telecommunications company in Hanoi, Vietnam, agreed to pay $1,869,372 (of which $200,000 will be suspended for two years and thereafter waived if VTA observes the terms of the agreement, including spending $25,000 on additional ongoing compliance efforts within 12 months of the Order and retaining a Director of Trade Compliance to oversee VTA's export activities for two years from the date of the Order, or if VTA has dissolved or ceased its business operations) to settle charges by BIS that it provided false end-use and end-user information to officials of BIS and other U.S. government agencies in connection with export license applications and other export activities to conceal the defense purposes of some of its exports. The alleged violations that were covered by the settlement agreement were:

Charge 1: Evasion (EAR Sec. 764.2(e));
Charges 2-4: False Statements to BIS and/or another U.S. Government Agency and on Export Control Documentation (EAR Sec. 764.2(g));
Charge 5: Acting with Knowledge of a Violation: Unlicensed Export (EAR Sec. 764.2(e)); and
Charge 6: Engaging in Prohibited Conduct: Unlicensed Export (EAR Sec. 764.2(a)).

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Oct. 21, 2021: Peter Sotis, of Delray Beach, FL, and Emilie Voissem, of Sunrise, FL, were convicted by a jury in federal court in Miami, FL, of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707), attempted violation of the IEEPA, and smuggling. Sotis and Voissem willfully attempted to export rebreather diving equipment to Libya after they received an instruction from a Department of Commerce special agent that such items were detained and not to be exported while a license determination was pending. (Rebreathers are specialized equipment that enable a diver to operate undetected for long periods of time underwater and therefore have both civilian and military applications.) Despite this instruction, Sotis and Voissem lied to and misled a shipping company about what the agent had told them and about whether the rebreathers had a military use. Sotis and Voissem will be sentenced on Jan. 6, 2022.

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Oct. 26, 2021: Obaidulllah Syed, of Northbrook, IL, the owner of Pakistan-based Business System International Pvt. Ltd. (BSIP) and Chicago-based BSI USA (BSIUS), both of which provide high-performance computing platforms, servers, and software application solutions, pleaded guilty to conspiracy to export goods from the U.S. without the required license from the Commerce Department and to submit false export information. In the plea agreement, Syed admitted that he conspired with BSIP employees to violate the IEEPA by exporting computer equipment from the U.S. to the Pakistan Atomic Energy Commission (PAEC) – a Pakistani government agency whose responsibilities include designing and testing explosives and nuclear weapons parts – without the required authorization from the U.S. Department of Commerce. Syed also admitted that he and other conspirators falsely represented to U.S.-based computer manufacturers that the illegal exports were intended for Pakistan-based universities or Syed's businesses while knowing that the true end-user of each shipment was either the PAEC or a research institute that trained PAEC engineers and scientists, thereby causing the U.S.-based computer manufacturers to submit shipping documents containing false information to the U.S. Government. BSIP was charged as a corporate defendant in the conspiracy. It has not responded to the charges.

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OCTOBER 2021 EXPORT CONTROL REGULATION UPDATES Read More »

SEPTEMBER 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through September 30, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

European Union

New European Union Export Control Regulation Enters Into Force

Sep. 9, 2021: The new European Union Export Control Regulation controlling trade in dual-use items (Regulation (EU) 2021/821 of May 20, 2021) entered into force, 90 days after it was officially published on June 11, 2021. (See information on the Regulation in November 2020 and May and June 2021 Regulatory Updates.)

Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit, and transfer of dual-use items (recast) is in the EU Official Journal at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:2021:206:FULL&from=EN). A European Commission memorandum on the implementation of the Regulation is at https://trade.ec.europa.eu/doclib/press/index.cfm?id=2296, and the EU Commission’s description of the EU dual-use export control system under the Regulation is at https://ec.europa.eu/trade/import-and-export-rules/export-from-eu/dual-use-controls/

United Kingdom

U.K. Advises The European Union Export Control Regulation Is Directly Applicable To Northern Ireland

Sep. 14, 2021: The Department for International Trade Export Control Joint Unit (ECJU) issued a notice that EU Regulation 2021/821 is directly applicable in Northern Ireland. As a result, any applications for the export of dual-use items submitted to ECJU from 9 September from Northern Ireland will need to comply with this regulation. Notice to Exporters 2021/12 is on the ECJU website at https://www.gov.uk/government/publications/notice-to-exporters-202112-new-dual-use-regulation-eu-2021821/nte-202112-new-dual-use-regulation-eu-2021821.

The President

President Biden Continues The Cuban Assets Control Regulations

Sep. 7, 2021: President Biden exercised his authority under Public Law 95-223 (50 USC Sec. 4305 note), Sec. 101(b) to continue the exercise of the authorities implemented under the Cuban Assets Control Regulations CACR, 31 CFR Part 515, for one year, until Sep. 14, 2022. This action was necessary because the authorities regarding Cuba under the Trading With the Enemy Act which had previously authorized the CACR expired on Sep. 14, 2021. Presidential Determination No. 2021-12 is at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/09/07/memorandum-on-the-continuation-of-the-exercise-of-certain-authorities-under-the-trading-with-the-enemy-act/.

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U.S. Trade Officials Attend Inaugural Meeting Of The Trade And Technology Council

Sep. 29, 2021: U.S. Secretary of State Antony Blinken, Commerce Secretary Gina Raimondo, and U.S. Trade Representative Katherine Tai joined senior European officials in Pittsburgh, PA, at the inaugural meeting of the Trade and Technology Council, a new U.S.-European group launched by President Biden and the Presidents of the European Council and the European Commission, to establish common principles for the 21st-century economy. Regarding export controls, they determined shared principles and areas for cooperation, including assisting third countries in building capacity to support multilateral export control regimes, holding prior consultations on current and upcoming legislative and regulatory developments, and developing convergent control approaches on sensitive dual-use technologies.

Department of Commerce – Bureau of Industry and Security

BIS Posts FAQs On The Classification Of Integrated Circuits For Program Protection Plans

Sep. 21, 2021: The Bureau of Industry and Security (BIS) posted FAQs on the classification of integrated circuits used in connection with U.S. Government programs and the development of Program Protection Plans to prevent the release of controlled technology during the lifetime of an acquisition involving the production of integrated circuits. For Department of Defense acquisition programs relying on onshore foundries for integrated circuit production and which include approved Program Protection Plans, authorized program personnel may rely, as necessary, on existing industry technology control plans to assist in certifying that export of technical data does not occur during the production of integrated circuits. FAQs 1A, 1B, and 2 are on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2838-classification-of-items-subject-to-the-ear/file.

Department of State

DDTC Name And Address Changes Posted To Website

Sep. 3, 23, 24, 27, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Name from L3Harris Technologies, Inc. Combat Propulsion Systems Division (L3Harris CPSD) to RENK America, LLC due to the acquisition of L3Harris CPSD by Renk America;
Change in Name from DigiNext LLC to CS Group – France due to merger of DigiNext into CS Group – France;
Change in Name from Mission Systems Australia Pty Ltd to L3Harris Integrated Mission Systems Australia Pty Ltd due to corporate rebranding;
Change in Address for Improbable LLC; and
Change in Address for Hexadyne Corporation.

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

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The State Department Imposed Sanctions On Russia Under The Chemical and Biological Weapons Control And Warfare Elimination Act Of 1991

Sep. 7, 2021 – 86 Fed. Reg. 50203, corrected Sep. 24 – 86 Fed. Reg. 53137: The State Department imposed sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act, 22 U.S.C. 5604(a)) in addition to the sanctions it had imposed on March 18, 2021 (see March 2021 Regulatory Update), based on its determination that the Government of the Russian Federation had used chemical or biological weapons in violation of international law or lethal chemical or biological weapons against its own nationals. The new sanctions were based on the conclusion that Russia had not met conditions required under the law following the sanctions imposed in March.

The new sanctions prohibit exports to Russia of all other goods and technology (except food and other agricultural commodities and products), subject to significant waivers deemed essential to U.S. national security interests. The waivers include, among others, exports of goods or technology eligible under License Exceptions GOV, ENC, BAG, TMP, and AVS; new licenses issued on a case-by-case basis, consistent with the export licensing policy for Russia prior to the enactment of these sanctions for items controlled for AT, CC, FC, and RS reasons, goods or technology necessary for the safety of flight of civil fixed-wing passenger aviation, deemed exports and reexports, exports to wholly-owned U.S. and other foreign subsidiaries, and government space cooperation; and new licenses subject to a presumption of denial for items controlled for CB, MT, and NP reasons, licenses in support of commercial space launches, licenses for exports for commercial end uses, and exports to Russian state-owned or state-funded enterprises. Also, U.S. banks will be prohibited under most circumstances from making loans or providing credit to the Government of the Russian Federation, and most applications for permanent imports of Russian firearms or ammunition, as defined on the U.S. Munitions Import List (USMIL, 27 CFR 447.21, Categories I and III), will be denied in accordance with Section 38 of the Arms Export Control Act (AECA, 22 U.S.C. 2778) and Executive Order 13637.

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DDTC Extended Temporary Modification Of The ITAR Related To Cyprus

Sep. 30, 2021 – 86 Fed. Reg. 54044: DDTC extended through Sep. 30, 2022, the effective period of the temporary modification of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) that removed prohibitions on exports, reexports, retransfers, and temporary imports of non-lethal defense articles and defense services destined for or originating in the Republic of Cyprus. (See information about reasons for the ban and the authorization of a one-year Presidential waiver in September 2020 Regulatory Update.) During this period, applications for exports of non-lethal defense articles and non-lethal defense services to Cyprus will continue to be reviewed on a case-by-case basis, while applications for lethal defense articles and defense services will continue to be denied.

Department of the Treasury

OFAC Issues General Licenses Related to Humanitarian Exports To Ethiopia, Eritrea, And The Greater Horn Of Africa

Sep. 17, 2021: Concurrent with the issuance by President Biden of an Executive Order Imposing Sanctions on Certain Persons With Respect to the Humanitarian and Human Rights Crisis in Ethiopia (E.O. 14046 of Sep. 17, 2021, 86 Fed. Reg. 52389, Sep. 21, 2021), the Office of Foreign Assets Control issued Ethiopia General License Number 1, “Official Activities of Certain International Organizations and Other International Entities,” Ethiopia General License Number 2, “Certain Transactions in Support of Nongovernmental Organizations' Activities,” and Ethiopia General License Number 3, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates,” all of which were targeted at supporting the U.S. commitment to support the people of Ethiopia, Eritrea, and the greater Horn of Africa region and ensuring that U.S. sanctions do not limit the ability of civilians in Ethiopia and the region to receive humanitarian support from the international community and to participate in certain transactions related to the exportation or reexportation of agricultural commodities, food, medicine, and medical items.

In addition, OFAC published several related frequently asked questions (FAQs 922, 923, 924, 925, 926, and 927). Details are in a White House Fact Sheet at https://www.whitehouse.gov/briefing-room/statements-releases/2021/09/17/fact-sheet-biden-harris-administration-actions-in-response-to-ongoing-crisis-in-northern-ethiopia/.

Also, the Fact Sheet stated that while imposing sanctions under E.O. 14046, the U.S. would take measures to mitigate unintended effects on the people of Ethiopia and the wider region, including seeking to ensure personal remittances to non-sanctioned persons, humanitarian assistance to at-risk populations, and longer-term assistance programs and commercial activities that address basic human needs in Ethiopia and the greater Horn of Africa region through legitimate and transparent channels.

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OFAC Issues Updated Advisory Regarding Malicious Cyber-Enabled Activities

Sep. 21, 2019: OFAC issued an updated advisory to highlight the sanctions risks associated with ransomware payments in connection with malicious cyber-enabled activities and the proactive steps companies can take to mitigate such risks, including actions that OFAC would consider to be “mitigating factors” in any related enforcement action. The advisory is on the Treasury Department website at https://home.treasury.gov/system/files/126/ofac_ransomware_advisory.pdf.

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OFAC Issues General Export Licenses Related To Afghanistan

Sep. 24, 2021: OFAC issued General License (GL) 14, “Authorizing Humanitarian Activities in Afghanistan,” and GL 15, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts, and Components, or Software Updates in Afghanistan.” Both GL 14 and GL 15 authorize transactions involving the Taliban or the Haqqani Network, or any entity in which the Taliban or the Haqqani Network owns, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest that would otherwise be prohibited by OFAC’s terrorism-related sanctions. GL 14, on the Treasury Department website at https://home.treasury.gov/system/files/126/ct_gl14.pdf, authorizes transactions by the U.S. Government, NGOs, and specified international organizations and entities and those acting on their behalf to provide humanitarian assistance or support basic human needs. GL 15, at https://home.treasury.gov/system/files/126/ct_gl15.pdf, authorizes all transactions that are ordinarily incident and necessary to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components for medical devices, or software updates for medical devices to Afghanistan, or to persons in third countries purchasing specifically for resale to Afghanistan.

OFAC also issued four FAQs related to GLs 14 and 15. FAQs 928, 929, 930, and 931 are at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/928, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/929, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/930 and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/931. A press release describing the Treasury Department’s aims regarding exports to Afghanistan is at https://home.treasury.gov/news/press-releases/jy0372.

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OFAC Issues FAQ Regarding Visiting Or Making Donations To The Imam Reza Hold Shrine In Iran

Sep. 30, 2021: OFAC issued a detailed FAQ discussing whether U.S. sanctions prohibit U.S. persons from visiting, or making donations to the Imam Reza Holy Shrine in Mashad, Iran. FAQ 932 is on the Treasury Department website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/932.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Sep. 7, 2021 – 86 Fed. Reg. 50021: BIS denied the export privileges of Luis Lopez of Donna, TX, until Dec. 17, 2029, based on his conviction in the U.S. District Court for the Southern District of Texas of violating 18 USC Sec. 554(a) by fraudulently and knowingly exporting and sending or attempting to export and send five AK-47 semi-automatic rifles from the U.S. to Mexico without the required authorization. In the criminal case, Lopez was sentenced to 37 months in prison, three years of supervised release, and a $100 assessment. BIS also revoked any BIS-issued licenses in which Lopez had an interest at the time of his conviction.

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Sep. 13, 2021 – 86 Fed. Reg. 50874: BIS denied the export privileges of Anastacio San Miguel-Padron of Big Spring Correctional Institution, Big Spring, TX, until Feb. 6, 2027, based on his conviction in the U.S. District Court for the Southern District of Texas of violating 18 USC Sec. 554 by fraudulently and knowingly exporting and sending or attempting to export or send from the U.S. to Mexico .38 super caliber ammunition, .40 caliber ammunition, 9mm caliber ammunition, and a 7.62 x 39 mm drum magazine. In the criminal case, Miguel-Padron was sentenced to 30 months in prison and a $100 assessment.

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Sep. 13, 2021 – 86 Fed. Reg. 50875: BIS denied the export privileges of Samy Jecrois of St. Petersburg, FL, until Feb. 1, 2024, based on his conviction in the U.S. District Court for the Southern District of Florida of violating 18 USC Sec. 554 by knowingly attempting to export and send a firearm from the U.S. to Haiti. In the criminal case, Jecrois was sentenced to 5 months in prison, two years of supervised release, and a $100 assessment.

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Sep. 13, 2021 – 86 Fed. Reg. 50875: BIS denied the export privileges of Akeem Shonari Awer of Big Spring Correctional Institution, Big Spring, TX, until Feb. 14, 2030, based on his conviction in the U.S. District Court for the Southern District of Florida of violating Sec. 38 of the AECA by knowingly and willfully attempting to export firearms and ammunition from the U.S. to Barbados without the required authorization from the State Department. In the criminal case, Awer was sentenced to 46 months in prison, two years of supervised release, and a $100 assessment.

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Sep. 14, 2021 -- 86 Fed. Reg. 51113: BIS denied the export privileges of Tengiz Sydykov of Arlington, VA, until Jan. 11, 2029, based on his conviction in U.S. District Court for the Eastern District of Virginia of violating Sec. 38 of the AECA by knowingly and willfully exporting and causing to be exported from the U.S. to Grozny, Chechnya, Russia, assembled firearms, fully assembled lower receivers, firearm slides, firearm barrels, firearm magazines, stocks, firearm frames, and additional functional firearms, designated as defense articles on the U.S. Munitions List (USML, 22 CFR Sec. 121.1), without the required authorizations from the State Department. In the criminal case, Sydykov was sentenced to 36 months in prison, three years of supervised release, and a $100 assessment.

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Sep. 14, 2021 – 86 Fed. Reg. 51114: BIS denied the export privileges of Rrok Martin Camaj of Federal Correctional Institution Morgantown, Morgantown, WV, until Feb. 28, 2030, based on his conviction in U.S. District Court for Eastern District of Michigan of violating Sec. 38 of the AECA by knowingly and willfully exporting and causing to be exported from the U.S. to Australia pistol frames/receivers, magazines, pistol kits, and other firearm parts which were defense articles on the USML without the required authorizations from the State Department. In the criminal case, Camaj was sentenced to 42 months in prison, three years of supervised release, and a $100 assessment.

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Sep. 14, 2021 – 86 Fed. Reg. 51115: BIS denied the export privileges of Eli Ramirez-Rios of Matamoros, Tamaulipas, MX, until Feb. 26, 2027, based on his conviction in the U.S. District Court for the Southern District of Texas of violating 18 USC Sec. 554(a) by knowingly exporting and sending or attempting to export and send from the U.S. to Mexico, a Palmetto State Armory Build the Wall L10, AR-10 rifle with an obliterated serial number. In the criminal case, Ramirez-Rios was sentenced to 28 months in prison and a $100 assessment.

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Sep. 14, 2021 – 86 Fed. Reg. 51116: BIS denied the export privileges of Katherine O’Neal, of Colorado Springs, CO, based on her conviction in U.S. District Court for Colorado of violating 18 USC Sec. 554 by fraudulently and knowingly exporting firearms from the U.S. to the Dominican Republic. In the criminal case, O’Neal was sentenced to 36 months in prison, three years of supervised release, and a $100 assessment.

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Sep. 14, 2021 – 86 Fed. Reg. 51117: BIS denied the export privileges of Andy Lloyd Huebschmann of Chilton, WI, until Dec. 13, 2029, based on his conviction in the U.S. District Court for the Eastern District of Wisconsin of violating AECA Sec. 38 by knowingly and willfully exporting and causing to be exported from the U.S. to Australia defense articles including a rifle kit with a Model GA 9mm lower receiver, upper receiver, barrel, trigger control group, bolt carrier, and pistol grip. In the criminal case, Huebschmann was sentenced to 24 months in prison, one year of supervised release, a criminal fine of $15,000, and a $100 assessment, and BIS also revoked any BIS-issued licenses in which he had an interest at the time of his conviction.

Fines and Penalties

Sep. 8, 2021: Shuren Qin of Wellesley, MA, a Chinese national, was sentenced in federal court in Boston to a two-year prison sentence, two years of supervised release, and a $20,000 fine after admitting that he had exported at least 60 hydrophones – devices used to monitor sound underwater – valued at more than $100,000 to Northwestern Polytechnical University (NWPU), a military research institute in Xi’an, China that works closely with the Chinese People’s Liberation Army (PLA) on the advancement of its military capabilities, without the required authorization from the Commerce Department. NWPU has been on the Entity List (15 CFR Part 744, Supp. No. 4) since 2001. Qin, a marine biologist, was aided in the illegal exports by LinkOcean Technologies, LTD, a company that he established and used to import into the PRC goods and technology with underwater and marine applications from the U.S., Canada, and Europe. According to prosecutors, Qin and LinkOcean purposely concealed from their U.S. supplier that the hydrophones were going to NWPU, causing false end-user information to be filed with the U.S. Government. Qin will face deportation proceedings upon completion of his sentence.

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Sep. 9, 2021: NewTek, Inc., a company headquartered in San Antonio, Texas that developed and supplied live production and 3D animation hardware and software systems, agreed to pay $189,483 to settle its potential civil liability for 52 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). The apparent violations occurred from 2013 through 2018, when NewTek exported goods, technology, and services from the United States to two third-country distributors that it knew or had reason to know were specifically intended for a reseller located in Iran. The Iranian reseller sold three of the exported products to Islamic Republic of Iran Broadcasting (IRIB), an entity that at that time was included on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”). At least three times NewTek provided support, software updates, reseller training, or other services in support of sales to customers located in Iran. Further, NewTek was a party to a distribution agreement that specifically excluded Iran from the sales territory.

According to OFAC, the base civil monetary penalty amount in this case, taking into consideration that NewTek voluntarily self-disclosed the apparent violations and that OFAC determined that the violations constituted a non-egregious case, was $291,512; however, the penalty was reduced to $189,483 in consideration of mitigating factors, including that NewTek had substantially cooperated with OFAC during the investigation and that it had taken extensive remedial actions. A detailed description of the case, including the factors that influenced the penalty, is on the Treasury Department website at https://home.treasury.gov/system/files/126/20210909_newtek.pdf.

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Sep. 14, 2021: U.S. citizens Marc Baier and Ryan Adams and former U.S. citizen Daniel Gericke, all former employees of the U.S. Intelligence Community (USIC) or the U.S. Military, agreed in a deferred prosecution agreement (DPA) with the U.S. Department of Justice (DOJ) to pay penalties of $750,000, $600,000, and $335,000, respectively, and to accept restrictions on their future employment and activities to resolve a DOJ investigation regarding violations of U.S. export control, computer fraud, and access device fraud laws. Baier, Adams, and Gericke (“the defendants”) worked as senior managers of a team known as Cyber Intelligence-Operations (CIO) at a company based in the United Arab Emirates (“UAE Co.”) that supported and carried out computer network exploitation (CNE) operations (i.e., “hacking”) for the benefit of the UAE Government, including supporting, directing, and supervising UAE Co. employees in creating sophisticated “zero-click” hacking and intelligence-gathering systems that the defendants knew were used to illegally obtain and use access credentials for online accounts issued by the U.S. and other companies, and gain access to computers and mobile phones around the world, including in the U.S. Subsequently, the CIO team expanded the breadth and sophistication of their CNE operations, including creating two additional “zero-click” systems that leveraged servers in the U.S. to obtain unauthorized access to tens of millions of smartphones and mobile devices. The defendants did all this work without a license from the U.S. State Department despite having been informed on several occasions that this work constituted a “defense service” under the ITAR.

Prior to their employment at UAE Co., the defendants had worked for a U.S. company that provided cyber services to a UAE Government agency in compliance with a DDTC-issued Technical Assistance Agreement that specifically required the parties to abide by U.S. export control laws, including not targeting U.S. persons and obtaining preapproval from the U.S. Government prior to releasing information regarding the cryptographic analysis. This company also provided periodic ITAR and TAA training, and prior to the defendants’ departure for UAE Co., it told them that the services they were providing constituted “defense services” under the ITAR which they could not provide to UAE Co. without obtaining a separate TAA.

The DPA signed by the defendants provided, in addition to the monetary penalties, that they would cooperate fully with the relevant DOJ and FBI components; relinquish any foreign or U..S. security clearances and accept a lifetime ban on future U.S. security clearances; accept future employment restrictions including a prohibition on employment that involves CNE activity or exporting defense articles or providing defense services under the ITAR; and restrictions on employment with certain UAE organizations.

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Sep. 14, 2021: Mehrdad Ansari, an Iranian citizen resident in the UAE and Germany, was sentenced to 63 months in prison followed by three years of supervised release based on his conviction of one count each of violating the ITSR, conspiracy to commit wire fraud, conspiracy to defraud the U.S. Department of the Treasury and two counts of aiding and abetting the making of false statements in connection with his attempts to transship to Iran testing equipment obtained from the U.S. by co-defendants Susan Yip, aka Susan Yeh, a citizen of Taiwan, and Mehrdad Foomanie, aka Frank Foomanie, a citizen of Iran, using Ansari’s companies in Dubai, UAE, Gulf Gate Sea Cargo LLC, and Global Merchant LLC.

Yip and Foomanie obtained or attempted to obtain from companies worldwide over 105,000 parts valued at approximately $2,630,800. They did not notify their U.S. sellers that these parts would be shipped to Iran, and neither they nor Ansari ever applied for the license from OFAC or the Department of Commerce that was required to ship any of these goods to Iran.

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Sep. 27, 2021: Cameron International Corporation of Houston, TX, a subsidiary of Schlumberger Limited, agreed to pay $1,423,766 to settle its potential liability for apparent violations of the Ukraine-Related Sanctions Regulations (URSR, 31 CFR Part 589) involving the approval by U.S.-person senior managers at Cameron of contracts for its subsidiary, Cameron Romania S.R.L., to supply oil production or exploration goods to Gazprom-Neft Shelf, a Russian energy firm, for use in an offshore project in the Russian Arctic, a prohibited destination. The contracts that were approved by the Cameron senior managers referenced the oil-related nature of the project and the fact that the Russian Arctic was the destination of the goods.

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Sep. 27, 2021: Schlumberger Rod Lift, Inc. (SRL, now d/b/a Lufkin Rod Lift, Inc.), of Frisco, TX, formerly a subsidiary of Schlumberger Lift Solutions LLC (SLS), which itself was a U.S. subsidiary of Schlumberger Limited (“Schlumberger”) of Curacao, Netherlands, agreed to pay $160,000 to settle its potential liability incurred on one occasion when three U.S.-person employees of SRL – two of whom were senior managers -- facilitated the sale and shipment of oilfield equipment from a Schlumberger subsidiary in Canada to a Schlumberger joint venture in China, for ultimate delivery to Sudan. The facilitation of the export to Sudan was at the time a violation of the since-repealed Sudanese Sanction Regulations (SSR, 31 CFR Part 538). The U.S.-person employees who approved the transaction knew that the equipment was destined for Sudan and that Sudan was a prohibited destination.

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Sep. 27, 2021: Virgil Griffith, a U.S. citizen resident in Singapore, pled guilty in federal court in New York City to conspiring to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by providing services to the Democratic People’s Republic of Korea (DPRK or North Korea) including technical advice on using cryptocurrency and blockchain technology to evade sanctions. Griffith knew that the DPRK could use actions involving cryptocurrency to evade and avoid U.S. sanctions and to fund its nuclear weapons program and other illegal activities. In April 2019 Griffith traveled to the DPRK, despite the State Department’s denial of permission to travel to the DPR, where he delivered presentations at the Pyongyang Blockchain and Cryptocurrency Conference, knowing that this violated U.S. sanctions against the DPRK, and also provided instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money, evade sanctions, and assist with nuclear weapons negotiations with the U.S. Griffith also attempted to broker introductions for the DPRK to other cryptocurrency and blockchain service providers. At no time did he obtain permission from OFAC to provide goods, services, or technology to the DPRK.

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Sep. 28, 2021: Medtronic Mediterranean SAL (Lebanon), a controlled-in-fact foreign affiliate of Medtronic, Inc., a domestic company, agreed to pay a civil penalty of $13,750 to resolve charges by the BIS Office of Antiboycott Compliance that it had committed 11 violations of EAR Sec. 760.5, Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the U.S. If Medtronic Mediterranean does not pay this penalty within 30 days after the entry of the Order, BIS may deny all of its export privileges for one year.

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Sep. 28, 2021: Silicon Space Technology Corporation, d/b/a Vorago Technologies, Inc., of Austin, TX, agreed to pay an administrative penalty of $497,000 (of which $247,000 will be suspended until September 2023 and thereafter waived, if Vorago has paid the full $250,000 and committed no further violation) and accept a suspended denial of export privileges under the Export Administration Regulations (EAR, 15 CFR Parts 730-774) until September 2023 to settle allegations by BIS that it had conspired to export radiation-hardened 16 Mb SRAM silicon wafers controlled on the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) under Export Control Classification Number (ECCN) 9A515.e.1 to Russia via a Bulgarian company without obtaining the required license from the Department of Commerce. The exported goods required an export license for export to Russia, but not for export to Bulgaria. [* Charging Letter and Settlement Agreement: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2021/1333-e2686/file]

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Sep. 29, 2021: Oleg Vladislavovich Nikitin, of St. Petersburg, Russia, the general director of KS Engineering (KSE), a St. Petersburg-based energy company, was sentenced in U.S. Court for the Southern District of Georgia to 28 months in prison and a fine of $5,000 based on his plea of guilty of conspiracy to violate the IEEPA, the Export Control Reform Act (ECRA, 50 USC § 4801 et seq.), and the EAR. Nikitin, KSE, and an Italian company, GVA International Oil and Gas Services, all participated in this conspiracy, which involved obtaining a turbine in the U.S. and exporting it for ultimate use on a sanctioned Russian Arctic deepwater drilling platform. (See additional details about this project in August 2021 Regulatory Update.) In addition to the prison term and fine, Nikitin was also ordered to be subject to deportation upon completion of his prison term, and KSE and GVA were ordered to serve five years’ probation.

SEPTEMBER 2021 EXPORT CONTROL REGULATION UPDATES Read More »

AUGUST 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through August 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

The President

President Biden Issues Notice Continuing For One Year The National Emergency With Respect To The Expiration Of The Export Administration Act Of 1979, As Amended

Aug. 10, 2021 – 86 Fed. Reg. 43901: President Biden issued a Notice continuing for one year the national emergency with respect to the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States related to the expiration of the Export Administration Act of 1979 (EAA), as amended, which was first declared in Executive Order 13222 of Aug. 17, 2001, pursuant to the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) and amended by EO 13637 of March 8, 2013. President Biden’s Notice, issued in accordance with Sec. 202(d) of the National Emergencies Act (50 USC Sec. 1622(d)), permits the continued implementation under the IEEPA of sanctions authorities that had been authorized under the EAA and otherwise would have expired with the EAA.

Department of Commerce – Bureau of Industry and Security

BIS Issues Final Rule Correcting The January 23, 2020 Rule Transferring Certain Firearms, Guns, Armament, and Ammunition To The EAR

Aug. 9, 2021 – 86 Fed. Reg. 46590: The Bureau of Industry and Security (BIS) issued final rulemaking corrections and clarifications in the rule issued Jan. 23, 2020 (85 Fed. Reg. 4136), in conjunction with a State Department final rule that transferred items that no longer warrant control under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Categories I (firearms, close assault weapons, and combat shotguns), II (guns and armaments), and III (ammunition/ordnance) to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1). The changes made in this rule are intended to make the requirements easier to understand, interpreted consistently, and in accordance with the intent of the Jan. 23 rule. The changes occur in Export Administration Regulations (EAR, 15 CFR Parts 730-774) Parts 740, 742, 748, and 758 and CCL Export Control Classification Numbers (ECCNs) 0A501, 0E501, 0A505, 0B501, and 0E505.

Please contact your consultant if you require further clarification of the rule’s impact on your company.

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BIS And OFAC Issue Joint Fact Sheet Titled “Supporting the Cuban People’s Right to Seek, Receive, and Impart Information through Safe and Secure Access to the Internet.”

Aug. 11, 2021: BIS and the Treasury Department, Office of Foreign Assets Control (OFAC) jointly issued “Supporting the Cuban People’s Right to Seek, Receive, and Impart Information through Safe and Secure Access to the Internet,” a fact sheet describing existing OFAC general licenses (GLs) and BIS license exceptions that facilitate exports of certain telecommunications equipment, software, and services to Cuba without specific U.S. government authorizations while complying with the Cuba Assets Control Regulations (CACR, 31 CFR Part 515) and the EAR. The fact sheet also describes the favorable licensing policies of both OFAC and BIS for activities that benefit the free flow of information to and from Cuba but are not covered by existing GLs and license exceptions. This 5-page Fact Sheet is on the Treasury Department website at https://home.treasury.gov/system/files/126/cuba_fact_sheet_20210811.pdf.

Department of State

DDTC Name And Address Changes Posted To Website

Aug. 2 and 3, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Address for AeroVironment, Inc.; and
Change in Address for DRS Sustainment Systems, Inc.

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

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DDTC Requested Public Comments Regarding Its Request To OMB To Continue To Use Currently Approved DSP Forms

Aug. 2, 2021 – 86 Fed. Reg. 41530: DDTC requested public comments regarding its request to the Office of Management and Budget (OMB) for approval of extension of the following currently approved forms:

Form DSP-5, Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data;
Form DSP-61, Application/License for Temporary Import of Unclassified Defense Articles;
Form DSP-85, Application/License for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data;
Form DSP-73, Application/License for Temporary Export of Unclassified Defense Articles;
Forms DSP-6, DSP-62, and DSP-74, Application for Amendment to License for Export or Import of Classified or Unclassified Defense Articles and Related Classified Technical Data; and
Form DSP-83, Non-transfer and Use Certificate.

The deadline for comments is Oct. 1, 2021.

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DDTC Is Reviewing Pending And Issued Export Licenses / Approvals For Afghanistan

Aug. 18, 2021: DDTC announced that in light of the “rapidly-evolving circumstances” in Afghanistan, it is reviewing all relevant pending and issued export licenses and other approvals to determine their suitability in furthering world peace, national security, and U.S. foreign policy. Additional updates will be provided soon.

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DDTC Continues Temporary Modification To USML Category XI(b)

Aug. 27, 2021 – 86 Fed. Reg. 48021: DDTC announced the continuation until Aug. 30, 2026, of the temporary modification to USML Category XI(b), first announced July 1, 2014 (79 Fed. Reg. 37536), and later extended through a series of rules to Aug. 30, 2021. DDTC noted that this modification continues to be regarded as temporary and that it is working with its partners to develop a long-term wholesale revision of USML Category XI.

The temporary modification to USML Category XI(b) includes reinserting the words “analyze and produce information from” and the addition of software to the description of items controlled.

Department of the Treasury

OFAC Issues Iran General License (GL) M-1, “Authorizing The Exportation Of Certain Graduate-Level Educational Services And Software To Iranian Students”

Aug. 24, 2021: OFAC issued Iran General License (GL) M-1, “Authorizing the Exportation of Certain Graduate-Level Educational Services and Software,” authorizing accredited graduate and undergraduate degree-granting U.S. academic institutions to provide certain online educational services and software to Iranian students who are not physically present in the U.S. due to the COVID-19 pandemic, provided that the software is classified as EAR99 under the EAR or is not subject to the EAR. GL M-1 replaces GL M in its entirety. OFAC also issued FAQ 853, describing the extent to which U.S. academic institutions can provide online learning services and technology companies can provide software and services to assist Iranian students in accessing online coursework under GLs G, M-1, and D-1 and Sec. 560.540 of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560).

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OFAC Issues A Statement That It Will Initiate The Annual Renewal Of Its Website www.treasury.gov

Sep. 27, 2021: OFAC issued an “Important Technical Notice for Users of the OFAC Website and Sanctions List Data Files” stating that the Treasury Department will initiate the annual renewal of the public

certificate securing the www.treasury.gov website, including OFAC sanctions list downloads, on Sep 1, 2021, as the current certificate will expire Sep. 9, 2021. Users whose applications trust the existing certificate should update their configuration to trust the renewed certificate. This notice can be accessed through https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210827_33; the renewed public certificate can be downloaded at https://s3.amazonaws.com/www.treasury.gov-2021-certificate/www.treasury.gov-2021-2022-Renewed-Certificate.zip.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Aug. 16, 2021 – 86 Fed. Reg. 45703: BIS denied the export privileges of Roger Sobrado, of Lewisburg U.S. Penitentiary, Lewisburg, PA, until Sep. 5, 2029, based on his conviction in the US. District Court for the District of New Jersey of violating 18 USC Sec. 371 by knowingly and intentionally conspiring and agreeing with others to export ITAR-controlled drawings and technical data to one or more foreign nationals without the required authorization from the Department of State. (See more information in September 2019 Regulatory Update.) In the criminal case, Sobrado was sentenced to 36 months in prison, three years of supervised release, a $300 special assessment, and restitution of $8,043,977.

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Aug. 16, 2021 – 86 Fed. Reg. 45704: BIS denied the export privileges of Oben Cabalceta, of Oakdale Federal Correctional Institution, Oakdale, LA, until Sep. 18, 2029, based on his conviction in the U.S. District Court for the District of New Jersey of violating 18 USC Sec. 371 by knowingly and intentionally conspiring and agreeing with others to export ITAR-controlled technical data to one or more foreign nationals without having obtained the required authorization from the Department of State. (See more information in April 2019 Regulatory Update.) In the criminal case, Cabalceta was sentenced to 42 months in prison, two years of supervised release, a $200 special assessment, and restitution of $1,890,939.

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Aug. 16, 2021 – 86 Fed. Reg. 45705: BIS denied the export privileges of Armando Antonio Perez Cepeda, Jr. until Jan. 10, 2022, based on his conviction in the U.S. District Court for the Middle District of Florida of violating 18 USC Sec. 554 by fraudulently and knowingly buying, selling, and facilitating the transportation and sale of a defense article without having obtained the required authorization, contrary to 22 USC Sec. 2278 and 22 CFR Sec. 127.1(a)(1), knowing the same to be intended for exportation in violation of 18 USC Sec. 554. In the criminal case, Cepeda was sentenced to 48 months of probation and a $100 assessment.

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Aug. 16, 2021 – 86 Fed. Reg. 45706: BIS denied the export privileges of Matteo Taerri, a/k/a Majid Taheri, of Atlanta, GA, until June 4, 2030, based on his conviction in the U.S. District Court for the Northern District of Georgia of violating the IEEPA by knowingly and willfully attempting to export a U.S.-origin Prostak Filter Module to Iran without having obtained the required authorization from OFAC. In the criminal case, Taerri was sentenced to time served, supervised release for three years, and a $200 assessment.

Fines and Penalties

Aug. 2, 2021: World Mining and Oil Supply (WMO) of Dacula, GA, pled guilty to violation of the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) and its owner, Dali Bagrou, pled guilty to conspiracy in U.S. District Court in Savannah, GA for their roles in a conspiracy to procure a power turbine from a U.S.-based manufacturer and ship it overseas for ultimate use by a Russian company on a Russian Arctic deepwater drilling platform, a use expressly prohibited unless a license has been obtained from the Commerce Department. The parties conspired to conceal the true end-user of the turbine from the U.S. manufacturer and the U.S. Government by submitting false documentation stating that the turbine would be used by a U.S. company in and around Atlanta. Bagrou and co-conspirators Oleg Vladislavovich Nikitin, general director of KS Engineering, an energy company based in St. Petersburg, Russia, and Gabrielle Villone were arrested in Savannah in 2019 while attempting to complete the illegal transaction. Villone is currently serving a 28-month prison sentence after pleading guilty to conspiracy. Bagrou and Nikitin are awaiting sentencing. (See June 2020 and March and May 2021 Regulatory Updates for earlier developments in the prosecution of this conspiracy.)

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Aug. 3, 2021: DDTC has entered into a Consent Agreement (Agreement) with Keysight Technologies, Inc. (Keysight), of Santa Rosa, CA, related to multiple violations of the ITAR. Keysight has agreed to pay a civil fine of $6.6 million (of which $2.5 million will be suspended if Keysight applies that amount to agreed remedial compliance costs) to settle 24 charges by DDTC that it had violated the AECA and ITAR by making unauthorized exports of technical data, including software, to 17 countries including the PRC, a proscribed destination. The charges involved unlicensed exports of Multi-Emitter Scenario Generation (MESG) software, which could be used in modeling and simulating multi-emitter electronic warfare threat scenarios for testing radar equipment on fixed or mobile platforms. DDTC expressed concerns to Keysight that the MESG software might be controlled and recommended that Keysight submit a Commodity Jurisdiction (CJ) request, Keysight submitted the request, and DDTC determined that the software was controlled under U.S. Munitions List Category XI(d). While the CJ was pending, Keysight continued to export the software without a license; however, it treated MESG software as ITAR-controlled after it received the determination. Keysight submitted an initial voluntary disclosure within a month after receiving the CJ and followed with a full disclosure two months later. Keysight subsequently submitted a reconsideration request, but DDTC ruled that the MESG software was controlled under USML Category XI(d).

In addition to payment of the fine, the Agreement also requires Keysight to appoint an outside Special Compliance Officer to serve for a minimum of 2 years, conduct at least one third-party audit, and review the classification of all hardware and software pertaining to its ITAR-related business activities and any related technical data or defense services.

See FD Associates’ Article "The Golden Rule" for more thoughts on the Consent Agreement.

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Aug. 16, 2021: Dynatex International of Santa Rosa, CA, agreed to pay a civil penalty of $469,060 (subject to terms described below) to settle a charge by BIS that it had committed one violation of EAR Sec. 764.2(d) (Conspiracy) when it conspired with others to export semiconductor manufacturing equipment (a DTX-150 MDB scribe and break tool and associated consumables and accessories), valued at $234,530 and designated EAR99, to two companies in China -- Chengdu GaStone Technology Company (CGTC), a.k.a. Chengdu HiWafer Semiconductor, and China Electronics Technology Group Corporation 55th Research Institute (CETC 55) – without the license from the Commerce Department that was required because the two companies were on the Entity List (EAR Part 744, Supp. No. 4). Dynatex was aware that the companies were on the Entity List, but even when it was informed that CGTC’s name should not be shown on shipping documents, it erroneously claimed that the shipments were permissible because CGTC was a customer of the distributor, not Dynatex, and that in any event, Dynatex did not understand the license requirement to apply to consumables and accessories.

Under the terms of the agreement, BIS suspended $419,060 of the penalty for a year and agreed to waive that amount entirely (provided that the $50,000 payment had been made) once Dynatex took one of the following actions:

dissolves or ceases its business operations;
is acquired by a U.S.-based company that meets specified export control requirements; or
completes the one-year probationary period with no further export violations.

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Aug. 31, 2021: Anton Perevoznikov of Brooklyn, NY, was sentenced in Federal District Court for the Eastern District of Pennsylvania to 4 years in prison and 3 years of supervised release based on his October 2018 plea of guilty to one count of conspiracy to unlawfully export defense articles. Perevoznikov conspired with 3 Russian co-conspirators to export technologically sensitive imaging devices without first obtaining the required State Department authorization. To implement the conspiracy, Perevoznikov purchased night vision equipment from a U.S. vendor after acknowledging in writing that he understood that these items were legally precluded from export and falsely affirming that he did not intend to export them. Using funds supplied by his Russian co-conspirators, he ultimately purchased more than 30 pieces of night-vision and thermal-imaging devices worth over $100,000, which he then described falsely on shipping documents using terms including “case box,” “case for camera,” “camera, and soft case,” “photo camera,” “camcorder,” and “jacket.”

AUGUST 2021 EXPORT CONTROL REGULATION UPDATES Read More »

JULY 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through July 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

UK Strategic Export Controls Annual Report 2020

July 27, 2021: The Export Control Joint Unit (ECJU) of the U.K. Department for International Trade published the UK Strategic Export Controls Annual Report 2020. The report, which includes a brief section on EU Exit and U.K. Legislation and other policy discussions as well as export licensing data and performance statistics, is at https://www.gov.uk/government/publications/uk-strategic-export-controls-annual-report-2020 .

U.S. Government Agencies

U.S. Government Updates the Xinjiang Supply Chain Business Advisory

July 13, 2021: Six U.S. Government agencies released an updated “Xinjiang Supply Chain Business Advisory” detailing for U.S. industry the risks and considerations for U.S. business and individuals with exposure to entities engaged in forced labor and other human rights abuses linked to Xinjiang, China. The updated advisory describes the various activities that pose opportunities for violations of U.S. laws including export controls that are inherent in participating in the supply chain to the Xinjiang Uyghur Autonomous Region and other areas of China where the Chinese government engages in abuse of Uyghurs and other ethnic groups. The Advisory focuses on topics including four primary risks of possible export control violations:

(1) Assisting in the development of surveillance tools for the Peoples Republic of China (“PRC”) government;

(2) Sourcing labor or goods from Xinjiang, or from entities outside of China that source labor from Xinjiang;

(3) Supplying U.S.-origin commodities, software, and technology to entities engaged in such surveillance and forced labor practices; and

(4) Aiding in the construction and operation of internment facilities used to detain Uyghurs and members of other Muslim minority groups, and/or in construction or operation of possibly related manufacturing facilities.

The Advisory is on the State Department website at https://www.state.gov/wp-content/uploads/2021/07/Xinjiang-Business-Advisory-13July2021-1.pdf ; the participating agencies are the Departments of Labor, State, Treasury, Commerce, and Homeland Security and the Office of the U.S. Trade Representative.

Department of Commerce – Bureau of Industry and Security

BIS Adds Four Entities In Burma To The Entity List

July 6, 2021 – 86 Fed. Reg. 35389: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 4 entities in Burma to the Entity List (EAR Part 744, Supp. No. 4) based on a determination that each of these entities had acted contrary to the national security or foreign policy interests of the U.S. A license requirement with a license review policy of presumption of denial and no license exceptions will now apply to exports, reexports, or in-country transfers to these persons of all items subject to the EAR. The 4 entities are:

King Royal Technologies Co.,, Ltd.;
Myanmar Wanbao Mining Copper, Ltd.;
Myanmar Yang Tse Copper, Ltd.; and
Wanbao Mining, Ltd.

In the same rule, BIS also corrected the address of one already-listed entity, Myanmar Economic Corporation.

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BIS Adds 34 Entities To The Entity List

July 12, 2021 – 86 Fed. Reg. 36496: BIS amended the EAR by adding 34 entities to the Entity List under 43 entries. U.S. companies are prohibited from exporting or transferring any item subject to the EAR to any listed entity without an export license, and no license exceptions are available. The entities are:

Additions to Entity List:

Canada

Karim Daadaa; and Modern Agropharmaceuticals & Trade Establishment

China, People’s Republic of

Armyfly;

Beijing E-science Co., Ltd.;

Beijing Geling Shentong Information Technology Co., Ltd.;

Beijing Hileed Solutions Co., Ltd.;

Beijing Sinonet Science & Technology Co., Ltd.;

Chengdu Xiwu Security System Alliance Co., Ltd.;

China Academy of Electronics and Information Technology;

Hangzhou Hualan Microelectronics Co., Ltd.;

Info Rank Technologies;

Kindroid;

Kyland Technology Co., Ltd.;

Leon Technology Co., Ltd.;

Shenzhen Cobber Information Technology Co., Ltd.;

Shenzhen Hua’antai Intelligent Technology Co., Ltd.;

Suzhou Keda Technology Co., Ltd.;

Tongfang R.I.A. Co., Ltd.;

Urumqi Tianyao Weiye Information Technology Service Co., Ltd.;

Wingel Zhang;

Wuhan Raycus Fiber Laser Technologies Co., Ltd.;

Xinjiang Beidou Tongchuang Information Technology Co., Ltd.;

Xinjiang Lianhai Chuangzhi Information Technology Co., Ltd.;

Xinjiang Sailing Information Technology Co., Ltd.; and

Xinjiang Tangli Technology Co., Ltd.

Iran

Payam Nabavi; and Sina Biomedical Chemistry Company

Lebanon

Karim Daadaa; and Modern Agropharmaceuticals & Trade Establishment

Netherlands

Suzhou Keda Technology Co., Ltd.

Pakistan

Suzhou Keda Technology Co., Ltd.

Russia

Andrey Leonidovich Kuznetsov;

Dmitry Alexandrovich Kravchenko

Margarita Vasilyevna Kuznetsova;

OOO Teson;

OOO Trade-Component; and Radiant Group of Companies

Singapore

Suzhou Keda Technology Co., Ltd

South Korea

Suzhou Keda Technology Co., Ltd.

Taiwan

Hangzhou Hualan Microelectronics Co., Ltd.

Turkey

Suzhou Keda Technology Co., Ltd.

United Arab Emirates

TEM International FZC

United Kingdom

China Academy of Electronics and Information Technology

Removal from Entity List:

Germany:

Maintenance Services International (MSI) GmbH

Revision of Entry in Entity List:

China

Remove Guangqi Science Co., Ltd. as an alias for Kuang-Chi Group

Removal from Unverified List (Supp. No 6 to EAR Part 744)]:

United Arab Emirates:

TEM International FZC

Addition to Military End User List (Supp. No. 7 to EAR Part 744):

Russia:

JSC Kazan Helicopter Plant Repair Service

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BIS Adds Six Entities In Russia To The Entity List

July 7, 2019 – 86 Fed. Reg. 37901: BIS added six entities in Russia to the Entity List based on the determination that that they had acted contrary to U.S. national security or foreign policy interests. A license with a review policy of presumption of denial will be required for exports, reexports, and transfers (in-country) to these entities of all items subject to the EAR, and no license exceptions will be available. The six added entries are:

Aktsionernoe Obshchestvo AST;
Aktsionernoe Obshchestvo Pasit;
Aktsionernoe Obshchestvo Pozitiv Teknolodzhiz;
Federal State Autonomous Institution Military Innovative Technopolis Era;
Federal State Autonomous Scientific Establishment Scientific Research Institute Specialized Security Computing Devices and Automation; and
Obshchestvo S Ogranichennoi Otvetstvennostyu NEOBIT

The action also corrected the Entity List entry for the Federal Security Service (FSB) by changing the License Requirement column to recognize Office of Foreign Assets Control (OFAC) General License 1B and amending the effective date from February 2, 2017, to the current effective date of March 2, 2021.

Department of State

DDTC Name And Address Changes Posted To Website

July 2 12, 14, 16, 22, and 30, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Address for Castalia Systems, LLC;
Change in Name from SCISYS Group PLC to CGI IT UK Limited due to acquisition of SCYSYS by CGI;
Change in Address for Tecnilogica Ecosistemas, S.A.;
Change in Address for Wescam Inc.;
Change in Name from FLIR Systems Inc. to Teledyne FLIR, LLC due to acquisition of FLIR by Teledyne;
Change in Name of FLIR entities due to acquisition of FLIR by Teledyne as follows:
FLIR Detection, Inc. to Teledyne FLIR Detection, Inc. (Incorp. in DE);
FLIR EOC, LLC to Teledyne FLIR EOC, LLC (Incorp. in CA);
FLIR Government Systems, Inc. to Teledyne FLIR Government Systems, Inc. (Incorp. in DE);
FLIR Surveillance, Inc. to Teledyne FLIR Surveillance, Inc. (Incorp. in DE); and
FLIR Unmanned Ground Systems, Inc. to Teledyne FLIR Unmanned Ground Systems, Inc. (Incorp. in DE)
Change in Name from Saudi Prerogative Company to Vision 30 Systems for Military Equipment.

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

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DDTC Posts Its Golden Sentry Report And Blue Lantern Report

July 6, 2021: DDTC posted on its website and provided to Congress two End Use Monitoring (EUM) reports: 1) the Golden Sentry Report – End Use Monitoring of Defense Articles and Services – Government-to-Government Services; and 2) the Blue Lantern Report – End Use Monitoring of Defense Articles. The Golden Sentry Report, on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=5c52d53f1b01b8502b6ca932f54bcbd0, covers actions taken in FY 2020 by the Department of Defense to comply with EUM requirements of the Foreign Assistance Act (FAA) of 1961 or the Arms Export Control Act (AECA, 22 USC 2778 et seq.), Sec. 40A, for defense articles and defense services transferred through the Foreign Military Sales (FMS) program. The Blue Lantern Report, on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=1852993f1b01b8502b6ca932f54bcb66, covers actions taken in FY 2020 by the Department of State to monitor the end-use of defense articles, technical data, defense services, and brokering activities exported through commercial channels and subject to Department of State licenses or other approvals under AECA Sec. 38.

Department of the Treasury

OFAC issues Venezuela-related General License (GL) 40 Regarding Liquefied Petroleum Gas

July 12, 2021: OFAC issued Venezuela-related General License (GL) 40, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela,” and related new Frequently Asked Questions (FAQs) 914 and 915. GL 40 is limited to certain transactions related to the exportation or reexportation of liquefied petroleum gas to Venezuela, involving the Government of Venezuela or Petróleos de Venezuela, S.A. (PdVSA). GL 40 is valid until July 8, 2022.

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OFAC Publishes Ukraine-Related General License (GL) 15J

July 28, 2021 – 86 Fed. Reg. 40310: OFAC published Ukraine-related GL 15J, which authorizes certain transactions and activities otherwise prohibited by the Ukraine-Related Sanctions Regulations, 31 CFR part 589 (URSR), that are ordinarily incident and necessary to the manufacture and sale of existing and new models of vehicles, components, and spare parts, including automobiles, light commercial vehicles, trucks, buses, engines/powertrains, produced by GAZ Group, or any entity in which GAZ Group owns, directly or indirectly, a 50 percent or greater interest. GL 15J, which was originally issued on OFAC’s website on Dec. 23, 2020, expires on Jan. 26, 2022. In the same announcement, OFAC published earlier versions of GL 15, which were previously issued on the OFAC website and subsequently expired. Note: In a similar action on July 28, 2021 (86 Fed. Reg. 40316), OFAC published Ukraine-related GL 13P, covering certain financial transactions relating to GAZ Group, and earlier, since-expired versions of GL 13. GL 13P will expire Jan. 26, 2022.

LATEST SANCTIONS FINES & PENALTIES

Fines and Penalties

July 19, 2021: Ge Songtao of Nanjing, China was sentenced to 3 years and 6 months in federal prison and ordered to forfeit $114,834.27 for conspiring to submit false export information through the Automated Export System (AES) and to export maritime raiding craft and engines to China fraudulently. Ge, the chairman of Shanghai Breeze Technology Co. Ltd. of Shanghai, China, wanted to find a source of supply for U.S.-manufactured combat rubber raiding craft equipped with multi-fuel engines that are used by the U.S. military and can be operated after being launched from a submerged submarine or dropped into the ocean by an aircraft. No comparable engine is manufactured in China. A U.S.-based employee of Ge’s identified a supplier and having been told that a U.S. manufacturer would be more likely to be willing to sell to a customer in Hong Kong than to a customer in mainland China, told the supplier that the purchaser was an entity called United Vision Limited in Hong Kong, thereby causing false information to be entered into the AES. Ge arranged for payment through a Hong Kong entity. However, the plot failed, and Ge and his co-defendant employees were arrested before the raiding craft and engines were exported.

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July 19, 2021: BIS announced an administrative settlement with Alfa Laval US (AL-US) of Richmond, VA and Alfa Laval Middle East Ltd. (AL-ME) of Dubai, United Arab Emirates (UAE) whereby AL-US operations, Alfa Laval Tank, Inc. located in Exton, PA (AL-Tank) and AL-ME will pay a civil penalty of $215,000 to resolve allegations that Alfa operations in the U.S. exported two Alfa Laval Gamajet 10 automated tank cleaning machines used to clean underground storage tanks, valued at approximately $18,585 and designated under the EAR as EAR99, falsely listing a UAE company as the ultimate consignee although they had been informed of the U.S. embargo on Iran and they knew and had reason to know that the items were destined for Iran and would ultimately be shipped there.

The apparent violations were committed between May 2015 and March 2016 when AL Tank, which manufactures and sells storage tank cleaning equipment, referred a known Iranian business opportunity to its foreign affiliate in Dubai, UAE. The foreign affiliate then orchestrated a scheme to export goods from the United States to Iran and did so by using AL Tank to export its Gamajet brand cleaning units to Iran via the “UAE end user”.

The unlicensed shipment was discovered when BIS conducted a post-shipment verification at AL’s distributor in the UAE. Settlement of related charges by OFAC was a condition of this settlement with BIS. (See next item.)

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July 19, 2021: OFAC announced that AL-ME had agreed to pay $415,695 to settle its potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) committed when AL-ME conspired with Dubai- and Iran-based companies to have exported Gamajet storage tank cleaning units from the U.S. to Iran, thereby causing its US.-based affiliate to falsely list a UAE-based company as the end-user on its export documentation.

Separately, OFAC also announced a $16,875 settlement with AL-US to cover AL-US’ potential liability for apparent violations committed by AL-Tank when it referred an Iranian business opportunity to its foreign affiliate in Dubai, and the affiliate then orchestrated a scheme for an illegal export to Iran.

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July 22, 2021: Arash Yousefi Jam, an Iranian national living in Ontario, Canada, pleaded guilty to charges of conspiring to export U.S. goods to Iran in violation of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) and the ITSR. The conspiracy included actual shipments of at least nine electrical discharge boards, one CPU board, two servo motors and two railroad crankshafts to Iran via the UAE. Jam and co-conspirators allegedly also hid the ultimate destination of the shipments by ensuring that payment for the goods came from banks outside Iran.

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July 23, 2021: Yi-Chi Shih, an electrical engineer of Hollywood Hills, CA, was sentenced in U.S. District Court in Los Angeles, CA to 63 months in federal prison and ordered to pay $362,698 in restitution to the Internal Revenue Service and a $300,000 fine based on his conviction of conspiracy to violate the IEEPA, the EAR, and several other federal laws. The conspiracy involved a complex scheme to illegally obtain broadband, high-powered semiconductor chips known as monolithic microwave integrated circuits (MMICs) and export them to AVIC 607, a state-owned entity in China. To accomplish this, he defrauded a U.S. company that manufactured MMICs out of the confidential and proprietary business information that was part of its MMIC manufacturing services, gaining access to the victim company’s web portal through an associate who posed as a domestic customer seeking to obtain custom-designed MMICs that would be used solely in the United States. Shih financed the manufacturing of the MMICs by the victim U.S. company by funneling funds provided by Chinese entities through a U.S. company that he controlled. Shih was convicted in July 2019 after a seven-week jury trial. (See July 2019 Regulatory Update.) An associate, Kiet Mai, pleaded guilty in December 2018 to one felony count of smuggling and was sentenced to 18 months’ probation and a $5,000 fine.

JULY 2021 EXPORT CONTROL REGULATION UPDATES Read More »

JUNE 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through June 30, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

European Union

EU Published New EU Dual-Use Regulation

June 11, 2021: The European Union (EU) published the official version of the new EU Dual-Use Regulation, which will go into effect Sep. 9, 2021. (See background in May 2021 and November 2020 Regulatory Updates.) “Regulation (EU) 2021/821 of the European Parliament and of the Council of 20 May 2021 setting up a Union regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items (recast)” is in the EU Official Journal at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021R0821.

Department of Commerce – Bureau of Industry and Security

BIS Issued A Public Notice Regarding The Reinstatement Of EAR Control Of “Technology” and “Software” Regarding 3D Printing Of EAR Controlled Firearms To BIS

June 1, 2021 -- 86 Fed. Reg. 29189: The Bureau of Industry and Security (BIS) issued a public notice of a decision by the U.S. Court of Appeals for the Ninth Circuit (Washington v. U.S. Dep’t of State, 2021 U.S. App.LEXIS 12448, Apr 27, 2021) that had the effect of reinstating the validity of a State Department Directorate of Trade Controls (DDTC) rule that transferred control of “technology” and “software” that fall

under U.S. Department of Commerce regulations, 15 CFR 732.2(b) and 734.7(c) from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). (Prior to the Circuit Court decision, the transfer of control of these items from the USML to the CCL had been vacated by the decision of a lower federal court – see April 2021 Regulatory Update.) BIS has posted 12 FAQs about the transfer at

https://www.bis.doc.gov/index.php/documents/policy-guidance/2572-faqs-for-the-commerce-category-i-iii-firearms-rule-posted-on-bis-website-7-7-20/file. This rule affects technical data and software directly related to the production of firearms and firearm parts using a 3-D printer or similar equipment and is complicated. Contact us if you believe that your products may be affected.

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BIS Added 8 Pakistan and UAE Entities To The Entity List

June 1, 2021 – 86 Fed. Reg. 29190: BIS amended the EAR by adding 8 entities in Pakistan and the United Arab Emirates (UAE) to the Entity List (EAR Part 744, Supp. No. 4) based on a determination that each of these entities was involved in proliferation of unsafeguarded nuclear activities that are contrary to the national security and/or foreign policy of the United States. A license requirement with license review policy of presumption of denial, and no license exceptions will now apply to exports, re-exports, or in-country transfers to these persons for all items subject to the EAR. The 8 entities are:

Pakistan

Hassan Scientific Corporation;
Mecatech (Private) Limited;
Middle East Automation & Controls Services;
Mirza and Co;
Techno-Commercial; and
TELEC Electronics & Machinery (Pvt) Ltd.

UAE

Delta Engineering Concern FZE; and
Future Trends International, FZE LLC.

In the same notice, BIS revised the entries for DJI and Seajet Company Limited in China; corrected the entry for China State Shipbuilding Corporation, Limited (CSSC) 750^th Test Center in China; and removed the entry for IKAN Engineering Services in Pakistan.

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BIS updates the List of Countries Participating In The Arab League Boycott Of Israel by removing the UAE

June 9, 2021 – 86 Fed. Reg. 30535: BIS recognizes the formal termination by the UAE of its participation in the Arab League Boycott of Israel by adding new Supplement No. 17 to the Anti-Boycott provisions of EAR Part 760. Supplement No. 17 is an Interpretation stating that certain requests for information, action or agreement from the UAE, which were presumed to be boycott-related prior to August 16, 2020, the date of issuance of the UAE decree terminating participation in the Arab League Boycott of Israel, would not be presumed to be boycott-related if issued after August 16, 2020, and thus would not be subject to the prohibitions or reporting requirements of Part 760 of the EAR. The Interpretation warns U.S. persons, however, that requests that are on their face boycott-related or that are for action obviously in furtherance or support of an unsanctioned foreign boycott are subject to the rules of EAR Part 760, irrespective of the country of origination. (See April 2021 Regulatory Update for comparable action by the Treasury Department Office of Foreign Assets Control (OFAC).)

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BIS Removed Satori Corporation Of France And The UAE From The Entity List

June 16, 2021 – 86 Fed. Reg. 31909: BIS amended the EAR by removing one entity, Satori Corporation, under destinations for France and the UAE, from the Entity List. This action was based on a review of information provided in a request for removal.

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BIS Added Five Chinese Entities To The Entity List

June 24, 2021 – 86 Fed. Reg. 33119: BIS amended the EAR by adding the following 5 entities to the Entity List under the destination of the People’s Republic of China, based on a determination that they have engaged in or enabled activities contrary to U.S. foreign policy interests, i.e., human rights and other violations against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region of China:

Hoshine Silicon Industry (Shanshan) Co., Ltd.;
Xinjiang Daqo New Energy, Co. Ltd.;
Xinjiang East Hope Nonferrous Metals Co. Ltd.;
Xinjiang GCL New Energy Material Technology, Co. Ltd.; and
Xinjiang Production and Construction Corps.

For these entities, a license requirement with a license review policy of presumption of denial will apply for all items subject to the EAR except several specific items for which there will be a case-by-case license review policy. No license exceptions will be available.

Department of State

DDTC Name And Address Changes Posted To Website

June 7, 10, 14, 16, 22, 24, 28, and 29, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981. The following are included changes to the list:

Change in name for Fights on Logistics Sp. zoo to Alioth Logistics Sp. zoo
Change in name and address for Leonardo MW Ltd to Leonardo UK Ltd.
Change in name from KPN Security B.V. to KPN B.V.
Change in name from CMI Defence Poland Spolka z organiczona odpowiedzialnoscia to John Cockerill Defense Spolka z organiczona odpowiedzialnoscia due to corporate rebranding.
Change in name from ST Engineering Aerospace Supplies Pte Ltd, Aviation Division to ST Engineering Synthesis Pte Ltd due to corporate reorganization.
Change in name from ST Engineering Aerospace Supplies Pte Ltd to ST Engineering Aerospace Systems Pte Ltd due to corporate reorganization.
Change in Name and Address from General Electric International Inc. (Australia Branch) to GE Aviation Systems Australia Pty Ltd due to corporate restructuring.
Change in Name from MTU do Brasil Ltda to Rolls-Royce Solutions Brasil Ltda due to corporate rebranding.
Change in Name from MTU Middle East FZE to Rolls-Royce Solutions Middle East FZE due to corporate rebranding.
Change in Name from MTU France SAS to Rolls-Royce Solutions France SAS due to corporate rebranding.
Change in Name from MTU Reman Technologies GmbH to Rolls-Royce Solutions Magdeburg GmbH due to corporate rebranding.
Change in Name from MTU Israel Ltd to Rolls-Royce Solutions Israel Ltd due to corporate rebranding.
Change in Name from MTU Korea Ltd to Rolls-Royce Solutions Korea Ltd due to corporate rebranding.
Change in Name from MTU Benelux BV to Rolls-Royce Solutions Benelux BV due to corporate rebranding.
Change in Name from MTU Rus LLC to Rolls-Royce Solutions RUS LLC due to corporate rebranding.
Change in Name from MTU Africa Pty Ltd to Rolls-Royce Solutions Africa (Pty) Ltd due to corporate rebranding.
Change in Name from MTU South Africa (Pty) Ltd to Rolls-Royce Solutions South Africa (Pty) Ltd due to corporate rebranding.
Change in Name from MTU Iberica Propulsion y Energia SL to Rolls-Royce Solutions Iberica SLU due to corporate rebranding.
Change in Name from MTU UK Limited to Rolls-Royce Solutions UK Ltd due to corporate rebranding.
Change in Name from MTU Hong Kong Limited to Rolls-Royce Solutions Hong Kong Ltd due to corporate rebranding.
Change in Name from MTU Engineering (Suzhou) Company Limited to Rolls-Royce Solutions China Co. Ltd due to corporate rebranding.
Change in Name from PT MTU Indonesia to PT Rolls-Royce Solutions Indonesia due to corporate rebranding.
Change in Name from MTU Italia SRL to Rolls-Royce Solutions Italia SRL due to corporate rebranding.
Change in Name from MTU Motor Turbin Sanayi ve Ticaret AS to Rolls-Royce Solutions Motor San. Ve Tic. A.S. due to corporate rebranding.
Change in address for Gromelski & Associates.
Change in address for Presagis Europe SAS.
Change in address for Yulista holding LLC and subsidiaries.
Change in address for Presagis Canada Inc.
Change in name from Trelleborg Offshore Norway AS to Vipo AS due to new ownership and rebranding.
Changes in name due to corporate restructuring: Saab AB is dissolving and integrating two-businesses, Support & Services (S&S) and Industrial Products and Services (IPS) into multiple business areas: Aeronautics, Surveillance, and Dynamics. The changes are as follows:
The S&S branch’s Communication and Tactical Solutions will change to BU Tactical Support Solutions.
IPS BU Aerosturctures will change to BU Aerospace Systems.
IPS BU Avionics Systems and Surveillance BU Electronic Warfare will change to BU Electronic Warfare and Aircraft Systems.
BU Airborne ISR will combine into Surveillance BU Radar Solutions.

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

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DDTC Issues A Public Notice Regarding Reinstatement Of The Transfer to the EAR, Control Of “Technology” and “Software” Regarding 3D Printing Of EAR Controlled Firearms

June 1, 2021 – 86 Fed. Reg. 29196: The State Department informed the public of the Circuit Court decision that invalidated a lower court order and thereby restored the effectiveness of the Department of State’s Jan. 23, 2020, rule transferring exclusive control over software and technical data related to 3-D printing of firearms or components to the EAR, administered by the Department of Commerce, effective May 26, 2021. See additional information in Commerce Department section above.

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DDTC Extends Ability Of “Regular Employees” To Work At A Remote Location

June 10, 2021 – 86 Fed. Reg. 30778: The State Department extended until further notice the temporary suspensions, modifications, and exceptions that –

allow persons who are “regular employees” for purposes of International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 120.39(a)(2) to work at a remote work location, and
authorize regular employees who work remotely in a country not currently authorized by a technical assistance agreement (TAA), manufacturing license agreement (MLA), or exemption to send, receive, or access any technical data authorized for export, reexport, or retransfer to their employer via a TAA, MLA, or exemption – provided that the individual is not located in a country listed in ITAR Sec. 126.1, which now includes Russia (see March 2021 Regulatory Update).

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DDTC Posted Its 2020 “Section 655 Report”

June 14, 2021: DDTC posted its 2020 “Section 655 report,” which lists the defense articles and defense services licensed for permanent export to every foreign country and international organization during FY 2020. This 30-page report lists every country and organization separately, showing for each a list of authorized value and shipped value, by USML categories. An introduction to the report is on the DDTC

website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=06f22f571be4bc90c6c3866ae54bcb3c; the full report is at

https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=06f22f571be4bc90c6c3866ae54bcb3e. (This annual report is required by Sec. 655 of the Foreign Assistance Act of 1961 as amended.)

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Department of the Treasury

OFAC Issues The Burma Sanctions Regulations, 31 CFR § 525

June 1, 2021 – 86 Fed. Reg. 29197: OFAC issued the Burma Sanctions Regulations, 31 CFR § 525, to implement President Biden’s Executive Order (EO) 14014, “Blocking Property With Respect to the Situation in Burma,” in response to the Feb. 1, 2021, military coup in that country. (See February 2021 Regulatory Update.) OFAC stated that these regulations are being published in abbreviated form to provide immediate guidance to the public; it intends to publish a more comprehensive set of regulations in the future.

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OFAC Issued GL 8H, "Authorizing Transactions Involving Petróleos De Venezuela, S.A. (Pdvsa) Necessary For The Limited Maintenance Of Essential Operations In Venezuela Or The Wind Down Of Operations In Venezuela For Certain Entities”

June 1, 2021: OFAC issued GL 8H, "Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities,” extending the authorization for certain limited activities until December 1, 2021. GL 8H is on the OFAC website at https://home.treasury.gov/system/files/126/venezuela_gl8h_0.pdf.

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OFAC Issued Covid-19-Related General Licenses Authorizing Transactions And Activities Involving Iran, Syria, And Venezuela

June 17, 2021: The Treasury Department announced that it had issued Covid-19-related General Licenses (GLs) authorizing transactions and activities involving Iran, Syria, and Venezuela to support the work of governments, international organizations, non-governmental organizations, and private sector actors in providing COVID-19-related assistance to the people in these sanctioned jurisdictions. The Treasury Department announcement also states that OFAC prioritizes applications, compliance questions, and other requests related to COVID-19 relief and other humanitarian support and stands ready to provide guidance and respond to sanctions-related questions.

Iran GL N is at https://home.treasury.gov/system/files/126/iran_gln.pdf; Syria GL 21 is at https://home.treasury.gov/system/files/126/syria_gl21.pdf; and Venezuela GL 39 is at https://home.treasury.gov/system/files/126/venezuela_gl39.pdf. The Treasury Department announcement is at https://home.treasury.gov/news/press-releases/jy0234.

At the same time, OFAC issued six FAQs that provide further clarity on what the COVID-19-related GLs authorize, OFAC’s due diligence expectations for U.S. financial institutions facilitating activity authorized by the COVID-19-related GLs, and guidance for non-U.S. persons engaging in activities authorized for U.S. persons under the COVID-19-related GLs. The six FAQs are on the Treasury Department website at 906, 907, 908, 909, 910, and 911.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

June 1, 2021 – 86 Fed. Reg. 29236: BIS denied the export privileges of Behzad Pourghannad, of Tehran, Iran until Nov. 13, 2029, based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by conspiring to export carbon fiber from the U.S. to Iran without having obtained the required U.S. Government authorization. In the criminal case, Pourghannad was sentenced to 20 months in prison and a special assessment of $100. (See additional information in September 2019 and November 2019 Regulatory Updates.)

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June 3, 2021 – 86 Fed. Reg. 29741: BIS denied the export privileges of Chris Rodriguez of Thomasville, NC until Oct. 18, 2026, based on his conviction of violating Section 38 of the AECA by willfully attempting to export, exporting, and causing to be exported from the U.S. to Honduras two firearms and hundreds of rounds of ammunition without having obtained the required authorization from the Department of State. In the criminal case, Rodriguez was sentenced to 18 months in prison and a special assessment of $100.

Department of State

June 4, 2021 – 86 Fed. Reg. 30074: The Bureau of Political-Military Affairs gave notice of the statutory debarment of seven persons convicted in U.S. District Courts of violating, or conspiring to violate, the AECA. The debarred persons are (Name, Date of Judgment; Judicial District; and Year of Birth):

(1) Danso, Ronald Adjei; September 15, 2020; District of Utah; November 1968;

(2) Higuera, Julian Alonso; September 24, 2020; District of Arizona; October 1990;

(3) Li, Qingshan; June 12, 2020; Southern District of California; February 1985;

(4) Park, Si Mong; September 14, 2020; District of the District of Columbia; September 1970;

(5) Rubio, Maritza; June 6, 2019; District of Arizona; February 1979;

(6) Sun, Wei; November 18, 2020; District of Arizona; December 1971; and

(7) Williams, Randy Lew; March 3, 2021; Western District of Oklahoma; August 1963.

These persons will remain debarred unless, after at least three years following the date of conviction, a request for reinstatement from statutory debarment is approved by the Department of State. An updated List of Statutorily Barred Parties is on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=7188dac6db3cd30044f9ff621f961914.

Fines and Penalties

May 28, 2021: Photonics Industries International, Inc., of Ronkonkoma, NY, agreed to pay a civil penalty of $350,000 (with $50,000 payable within 30 days and payment of the remaining $300,000 suspended for

two years and then waived if Photonics has not committed any further violations) to settle charges by BIS of three violations of 15 CFR 764.2(a) by exporting laser systems to China without the required BIS license; one violation of 15 CFR 764.2(c) by attempting to export laser systems to China without the required BIS license; and one violation of 15 CFR 764.2(a) by exporting a laser system to Sichuan University, Chengdu, China, an entity listed on the Entity List (EAR Part 744, Supp. No. 4), without the required BIS license. The settlement agreement also provided that failure to make full and timely payment of the civil penalty could result in a one-year denial of all Photonic’s export privileges under the EAR.

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May 28, 2021: Alsima Middle East General Trading LLC, a/k/a Al Sima Middle East General Trading LLC, of Dubai, UAE, agreed to pay a civil penalty of $25,000 (with $12,500 payable within 30 days and the remaining $12,500 suspended for two years and thereafter waived if the company commits no further violations) to settle charges by BIS that it had violated EAR Sec. 764.2(g) (Misrepresentation and Concealment of Facts) in connection with the submission to BIS of a license application for the export of powder grade nickel to the UAE when it falsely and misleadingly represented that the nickel powder was to be used to manufacture self-lubricating seal rings in the UAE for distribution in the UAE, and that it would not be reexported without further authorization from BIS. The falsity of this representation came to light when, in a Post Shipment Verification (PSV) at Alsima, conducted by BIS, the company’s director stated that the manufactured rings had actually been intended for export to an Azerbaijani company. The settlement agreement also provides that if Alsima fails to comply fully with the terms of the agreement, BIS can deny its export privileges for two years.

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June 16, 2021: USGoBuy, LLC, a packaging company based in Portland, OR, agreed to pay a civil penalty of $20,000 (with $5,000 payable within 30 days and the remaining $15,000 suspended for three years and thereafter waived if the company commits no further violations) and complete an external audit to settle charges by BIS that it had committed two violations of the EAR by exporting riflescopes controlled under Export Control Classification Number (ECCN) 0A987 and associated items valued in total at approximately $1,299.96 to the UAE, Iran, and China without the required authorizations. USGoBuy will also be subject to a 3-year debarment, suspended for 3 years and thereafter waived if it pays the fine, completes the audit, and commits no further violations.

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June 23, 2021: Skyline USA, Inc., of Sanford, FL agreed to pay a civil penalty of $140,000 (the first $10,000 payable in monthly installments of $1,000 each and the remaining $130,000 suspended for two years and thereafter waived if Skyline commits no further violations) to settle charges by BIS that it had committed 15 violations of EAR Sec. 764.2(a) (Engaging in Prohibited Conduct) and one violation of EAR Sec. 764.2(i) (Failure to Comply with Recordkeeping Requirements) when on at least 15 occasions it had

exported stun guns, police batons, handcuffs, and/or pepper spray (the “items”) to Colombia, Guatemala, Mexico, Nigeria, Pakistan, Panama, Trinidad and Tobago, or Uruguay without the required licenses from BIS. The exported items were controlled for crime control reasons under ECCNs 0A978, 0A982, 0A985, and 0A984 and valued at a total of approximately $50,644. If Skyline fails to pay the civil penalty or otherwise fails to comply in full with the terms of the agreement, BIS can issue an order denying its export privileges for two years from the date of issuance of any such denial order.

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June 27, 2021: Patriot 3, Inc., of Fredericksburg, VA agreed to pay a civil penalty of $200,000 (payable in quarterly installments of $50,000 each, with none suspended or waived) to settle a charge of one violation of EAR Sec. 764.2(c), Acting with Knowledge of a Violation, for selling and/or transferring one pair of maritime jet boots with underwater propulsion systems (“JetBoots”) controlled under ECCN 8A992 when at the time of the transfer, Patriot 3 was aware that the JetBoots were intended to be sold and transferred to the Russian Government’s Federal Guard Service (the “FSO”), a military end user in Russia, and that EAR Sec. 744.21 required an export license for exports of items controlled under ECCN 8A992 to military end users or military end uses in Russia. The JetBoots were valued at approximately $329,760. If Patriot 3 fails to comply fully with the terms of the agreement, BIS can issue an order denying its export privileges for two years.

JUNE 2021 EXPORT CONTROL REGULATION UPDATES Read More »

MAY 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through May 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

European Union

EU Revises Its Dual-Use Regulation

May 10, 2021: The Council of the European Union (EU) formally adopted a revised version of the EU’s Dual-Use Regulation. This new Regulation – the first major structural reform since 2009 in the EU regime controlling exports, brokering, technical assistance, transit, and transfer of dual-use items – was approved by the European Parliament on March 26, 2021 and will enter into force 90 days after it is published in the EU Official Journal. Prominent among the goals of the new rules are promotion of human rights compliance (including the addition of new controls on cyber-surveillance) and fostering of cooperation between member states. (See additional information in November 2020 Regulatory Update.) The full text of the new Regulation is at https://data.consilium.europa.eu/doc/document/PE-54-2020-INIT/en/pdf .

Department of Commerce – Bureau of Industry and Security

BIS Released Updated FAQs Regarding Transition Of USML Categories I, II and III To The EAR

May 13, 2021: The Bureau of Industry and Security (BIS) released an updated version of “FAQs for the Commerce Categories I-III (final rule) Control of Firearms, Guns, Ammunition and Related Articles the President Determines No Longer Warrant Control Under the United States Munitions List (USML, 22 CFR Sec. 121.1) (85 FR 4136)^”. The original FAQs were originally published Jan. 23, 2020, effective March 9, 2020, after BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to add 17 new ECCNs to the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) to facilitate the transfer from the ITAR U.S. Munitions List of commercially available firearms and ammunition items that had been determined no longer to require control under USML Categories I, II, and III. (See January 2020 Regulatory Update.)

This detailed 69-page updated document, including 119 FAQs (including 13 FAQs on “3D Printing of Firearms”) and definitions of 14 key terms, is on the BIS website at https://www.bis.doc.gov/index.php/documents/policy-guidance/2572-faqs-for-the-commerce-category-i-iii-firearms-rule-posted-on-bis-website-7-7-20/file.

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BIS Posted FAQs Regarding Exports Of Items Normally Regulated By The EAR Become Not “Subject To The Export Administration Regulations (EAR)” Solely Because They Are Authorized For Export Under The Foreign Military Sales (FMS) Program

May 12, 2021: BIS posted FAQs regarding exports of items that are not “subject to the Export Administration Regulations (EAR)” solely because they are authorized under the Foreign Military Sales (FMS) Program of the Arms Export Control Act (AECA, 22 USC 2778 et seq.) pursuant to a Letter of Offer and Acceptance (LOA). The FAQs were developed jointly by BIS and the U.S. Census Bureau at the Department of Commerce; the Directorate of Defense Trade Controls (DDTC) and the Office of Regional Security and Arms Transfers (RSAT) at the Department of State; the Defense Security Cooperation Agency (DSCA) at the Department of Defense; and U.S. Customs and Border Protection (CBP) at the Department of Homeland Security and relate specifically to the export under FMS authority of items whose control was moved from the USML to the CCL.

See these FAQs on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2756-fms-faqs-dated-5-12-21/file.

Department of State

DDTC Name and Address Changes Posted To Website

May 3, 7, 12, 21, 27, and 28, 2021: DDTC posted the following name and/or address changes on its website at

https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:

Change in Name from Hockley Pattern & Tool Co Ltd to NEOS Technologies Limited due to corporate reorganization/rebranding of subsidiary by NEOS Technologies;
Change in Name from FLIR Systems ATS SAS and FLIR Systems Holding France SAS to FLIR Systems France due to corporate reorganization;
Change of Address for KYB Corporation;
Change in Name of the following MTU entities to listed Rolls Royce entities due to corporate reorganization of subsidiaries by Rolls Royce Power Systems:

- MTU Friedrichshafen GmbH to Rolls-Royce Solutions GmbH;

- MTU Onsite Energy GmbH to Rolls-Royce Solutions Augsburg GmbH;

- MTU Onsite Energy Systems GmbH to Rolls-Royce Solutions Ruhstorf GmbH;

- MTU Asia Pte Ltd to Rolls-Royce Solutions Asia Pte Ltd; and

- MTU America Inc Rolls-Royce Solutions America Inc;

Change in Name of Ausy Engineering GmbH to Ylipson GmbH due to acquisition of AUSY Engineering GmbH by Ylipson;
Change in Name from 3SDL Ltd to Meta Mission Data Ltd. due to acquisition by Meta Mission Data; and
Change in Name from Andoya Space Center AS to Andoya Space AS due to corporate rebranding.

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

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DDTC Proposed Changes To The ITAR’s Definition Of “Regular Employee”

May 27, 2021 – 86 Fed. Reg. 28503: DDTC proposed to amend the definition of “regular employee” in Sec. 120.39 of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) to recognize and take account of the evolving workplace environment. The proposed changes would replace the requirement that a “regular employee” must work at a company’s facilities with clear criteria intended to allow for remote work. The proposal also offers clear criteria that will allow regulated entities to treat certain contractual staff as regular employees for the purposes of the ITAR, provided that the individual remains sufficiently under the employer’s control such that the Department can hold the regulated employer responsible for the individual’s actions. A codification of the meaning of “long term contractual relationship” is also included. Comments on this proposal will be accepted until July 26, 2021.

Editor’s Note: The proposed changes would significantly expand the company obligations when using contractual staff to treat the personnel as regular employee to include validating U.S. person status to ensure ITAR compliance instead of relying on certifications or representations made by the contractor.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

May 5, 2021 – 86 Fed. Reg. 23920: BIS denied the export privileges of Abel Hernandez, Jr. of Pharr, TX until Aug. 29, 2029, based on his conviction of violating 18 U.S.C. 554(a) (Smuggling goods from the United States) by fraudulently and knowingly exporting and sending. or attempting to export and send. from the U.S. to Mexico 2,080 rounds of 7.62X39mm caliber ammunition. In the criminal case, Hernandez was sentenced to 27 months in prison and a special assessment of $100.

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May 5, 2021 – 86 Fed. Reg. 23921: BIS denied the export privileges of Sergio Daniel Serrano-Lopez of Big Spring Correctional Institution, Big Spring, TX, until Aug. 30, 2029 based on his conviction of violating 18 USC 554(a) by fraudulently and knowingly exporting and sending, or attempting to export and send, ammunition and magazines from the U.S. to Mexico. In the criminal case, Serrano-Lopez was sentenced to 40 months in prison and a special assessment of $100.

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May 5, 2021 – 86 Fed. Reg. 23922: BIS denied the export privileges of Mehmet Hakan Atilla of Istanbul, Turkey until May 16, 2028 based on his conviction of violating the International Emergency Economic Powers Act (‘‘IEEPA,”, 50 U.S.C § 1701, et seq.) by knowingly and willfully conspiring with others known and unknown to provide financial services to Iran and to the Government of Iran without obtaining the required approval from the Office of Foreign Assets Control. In the criminal case, Atilla was sentenced to 32 months in prison and a special assessment of $500.

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May 27, 2021 – 86 Fed. Reg. 28540: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) issued on Nov. 24, 2020 against the following persons:

Mahan Airways, Tehran, Iran;
Pejman Mahmood Kosarayanifard A/K/ A Kosarian Fard, Dubai, United Arab Emirates (UAE);
Mahmoud Amini, Dubai, UAE;
Kerman Aviation A/K/A Gie Kerman Aviation, Paris, France;
Sirjanco Trading LLC, Dubai, UAE;
Mahan Air General Trading LLC, Dubai, UAE;
Mehdi Bahrami, Istanbul, Turkey;
Al Naser Airlines A/K/A Al-Naser Airlines A/K/A Al Naser Wings Airline A/K/A Alnaser Airlines And Air Freight Ltd., Baghdad, Iraq, Dubai, UAE, and Amman, Jordan;
Ali Abdullah Alhay A/K/A Ali Alhay A/K/A Ali Abdullah Ahmed Alhay, Baghdad, Iraq, and Qatif, Saudi Arabia;
Bahar Safwa General Trading, Dubai, UAE;
Sky Blue Bird Group A/K/A Sky Blue Bird Aviation A/K/A Sky Blue Bird Ltd A/K/A Sky Blue Bird FZC Ras Al Khaimah Trade Zone, UAE; and
Issam Shammout A/K/A Muhammad Isam Muhammad Anwar Nur Shammout A/K/A Issam Anwar, Damascus, Syria, Beirut, Lebanon, London, United Kingdom, and Istanbul, Turkey.

Fines and Penalties

April 30, 2021: MDA Precisions LLC of Gilroy, CA agreed to pay $60,000 (of which $25,000 is payable within 30 days and the remaining $35,000 will be suspended for two years and thereafter waived if MDA has not committed any further violations) and complete an export compliance training course within one year to resolve charges by BIS that it had violated EAR Sec. 764.2(e) by exporting a five-axis drilling machine that was controlled under the EAR for nuclear nonproliferation and anti-terrorism reasons to the United Arab Emirates (UAE) without a license when it had reason to know that an export license was required.

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May 3, 2021: Honeywell International, Inc. of Charlotte, NC agreed to pay a civil penalty of $13 million (of which $5 million will be suspended if Honeywell uses the funds for specified compliance measures) and take specified compliance measures to settle 34 charges by DDTC of unauthorized exports and retransfers of technical data for parts and components controlled under USML Categories VIII(i), XI(d), and XIX(g) to the People’s Republic of China (PRC) and unauthorized exports of technical data related to aircraft parts and components controlled under USML Categories VIII(i) and XIX(g) to Taiwan, Canada, Ireland, and Mexico. The unauthorized transactions primarily involved exports to affiliated and unaffiliated foreign suppliers of engineering prints – some of which contained technical data designated as Significant Military Equipment (SME) -- showing layouts, dimensions, and geometries for manufacturing castings and finished parts for multiple aircraft, military electronics, and gas turbine engines.

The compliance measures in the settlement – all specified in detail -- require Honeywell to appoint an external Special Compliance Officer for at least 18 months, conduct an external audit of its compliance program, implement additional compliance measures, and facilitate on-site reviews by DDTC with minimum advance notice. The State Department determined not to administratively debar Honeywell because Honeywell voluntarily disclosed the alleged violations, acknowledged their serious nature, cooperated with the Department’s review, and instituted a number of compliance program improvements during the course of the review.

The State Department noted that the settlement demonstrated its role in strengthening U.S. industry by protecting U.S.-origin defense articles, including technical data, from unauthorized exports and that it highlighted the importance of obtaining appropriate authorization for exporting controlled articles.

See our article for more details.

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May 3, 2021: Kleiss & Co. BV of Zwijndrecht, The Netherlands, agreed to pay a civil penalty of $60,000 and have its export privileges denied for two years (suspended for two years and thereafter waived if it pays the $60,000 and has not committed any further violations) to settle charges by BIS that it had twice violated EAR Sec. 764.2(e) (Acting with Knowledge of a Violation) by ordering, buying, and concealing details of a shipment of EAR99 U.S.-origin extruded butyl sealants to Iran in violation of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). After a U.S. freight forwarder stopped an initial shipment of the sealants by Kleiss to a customer in Iran and returned it to Kleiss because of the U.S. sanctions, Kleiss on subsequent occasions in September 2016 and March 2017 ordered the sealants from its U.S. supplier, but provided a new addressee in Dubai, UAE and removed all references to Iran from the invoices and packing list. The 2017 attempted export was discovered and stopped by BIS.

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May 17, 2021: TeleDynamics LLC of Austin, TX agreed to pay a civil penalty of $55,000 to settle 10 charges by BIS of violating EAR Sec. 764.2(b) (Causing, Aiding, or Abetting a Violation) by forwarding rifle scopes classified under Export Control Classification Number (ECCN) 0A987, valued at $1,047, for export from the U.S. to Russia and Ukraine without the required authorization. TeleDynamics had previously been notified by U.S. Customs and Border Protection (CBP) that rifle scopes forwarded by TeleDynamics had been detained because they lacked the required export licenses.

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May 18, 2021: Aerojet Rocketdyne Inc., a rocket and missile propulsion manufacturer, agreed to pay a civil penalty of $37,008 and take actions including training its employees who conduct hiring in its Jupiter, FL location to resolve a charge by the U.S. Department of Justice (DOJ) that it violated the anti-discrimination provision of the Immigration and Nationality Act (INA) by not allowing non-U.S. citizens to apply for 12 mechanic positions, based on their citizenship status. The DOJ investigation found that the violation resulted from a misunderstanding by Rocketdyne of its obligations under federal regulations, including the ITAR, in mistakenly believing that they imposed restrictions on the company’s ability to hire non-U.S. citizens, which the DOJ announcement said they do not. The announcement also noted, however, that while the INA protects U.S. citizens, non-citizen nationals, refugees, asylees, and recent lawful permanent residents from hiring discrimination based on citizenship status, it also includes an exception if an employer or recruiter is required to limit jobs due to a law, regulation, executive order, or government contract.

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May 21, 2021: Tsvetan Kanev of Sofia, Bulgaria, was sentenced in federal court in Denver, CO to 24 months in prison based on his March 2021 plea of guilty of violating the IEEPA by seeking to export export-controlled electronic equipment that is commonly used in satellites from the U.S. to the Russian military and space program without the required export license. Kanev told the U.S. manufacturer that the circuits were sought by the Bulgarian Academy of Science, but the manufacturer was suspicious of this claim and referred the matter to the U.S. Department of Homeland Security, Homeland Security Investigations (HSI) Counter-Proliferation Investigations Center (CPIC). Undercover HSI agents then engaged with Kanev, offered to sell the controlled parts, and learned that Kanev intended to transship the parts from Bulgaria to Finland, and then to reexport them to Russia in a suitcase, which would avoid documenting the ultimate destination. Kanev ultimately confirmed to the HIS agents that the end-users were the Russian military and space program and that he was aware that the transactions were illegal. In transactions in October 2015 and December 2015 Kanev transferred $357,261 to the agents to purchase the items that he planned to export, including clock driver and random-access memory programmable multi-chip modules and a multiple analog-to-digital converter designed for aerospace applications that are controlled for national security reasons. (The money was subsequently seized and forfeited to the U.S.) Kanev was arrested in Germany in January 2020 and then extradited to Colorado.

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May 26, 2021: GVA International Oil and Gas Services, an Italian company, pled guilty in U.S. District Court in Savannah, GA to violating the Export Control Reform Act (ECRA, 50 USC Chapter 58) in a conspiracy to purchase a power turbine from a U.S.-based manufacturer for use by a Russian government-controlled business on a Russian Arctic deepwater drilling platform without first obtaining the export license required by U.S. law. The conspiracy, which included concealing the true end user from the U.S. manufacturer and the U.S. Government by submitting false documentation stating that the turbine would be used by a U.S. company in and around Atlanta, began when a Russian government-controlled business contracted with Oleg Vladislavovich Nikitin, general director of KS Engineering (KSE), a Russia-based energy company, to purchase the turbine. Nikitin then conspired with GVA, GVA’s owner, Gabrielle Villone, and another GVA employee to obtain the turbine. Nikitin and Villone were arrested in Savannah, GA while attempting to complete the illegal transaction. Villone is currently serving a 28-month prison sentence after pleading guilty to conspiracy in the case in 2020 (see June 2020 Regulatory Update); Nikitin and KSE pled guilty to conspiracy to evade U.S. export regulations and to defraud the U.S. on March 30, 2021, and await sentencing (see March 2021 Regulatory Update).

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May 28, 2021: Lionel Chan of Brighton, MA and Muhammad Mohd Radzi of Brooklyn, NY, both Malaysian nationals, were sentenced in federal court in Boston, MA for conspiring to violate the AECA by exporting firearm parts from the U.S. to Hong Kong without the required export licenses, based on guilty pleas they had made Jan. 22, 2021 (see January 2021 Regulatory Update). Both men purchased export-controlled U.S.-origin firearm parts, including parts used to assemble AR-15 assault rifles and 9MM semi-automatic handguns, for a buyer located in Hong Kong and then sent them to Hong Kong via Federal Express, concealing the contents of the shipments by providing Federal Express with false information about the shipments and concealing the parts inside each package. The violations were discovered when Hong Kong authorities intercepted two of these packages and found that they contained numerous export-controlled firearms parts. Chan, who shipped at least 12 of these packages, was sentenced to 8 months in prison, three years of supervised release, and a fine of $10,000. Radzi, who shipped 21 packages, was sentenced to five years of probation with the condition that he leave the United States on or before June 15, 2021 and not return for five years or without a valid visa, and a fine of $10,000.

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