Export Control Updates (Monthly) Archives - Page 7 of 8

MARCH 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through March 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 To Establish A Union Regime For Export Controls Of Dual-Use Items

March 25, 2021: The European Parliament agreed to adopt a regulation establishing a Union regime for the control of exports, transfer, brokering, technical assistance and transit of dual-use items. This rule, which still requires agreement by the European Council, is on the European Parliament website at https://www.europarl.europa.eu/doceo/document/TA-9-2021-0101_EN.pdf ; a press release describing it is at https://www.europarl.europa.eu/news/en/press-room/20210322IPR00534/parliament-agrees-to-new-eu-export-rules-on-dual-use-items?xtor=AD-78-[Social_share_buttons]-[linkedin]-[en]-[news]-[pressroom]-[control-of-exports-transfer-brokering-technical-assistance.

United Kingdom

The United Kingdom Export Control Joint Unit (ECJU) Published Updated Guidance On Transferring Military And Dual Use Technology

March 24, 2021: The United Kingdom Export Control Joint Unit (ECJU) published updated detailed guidance on the scope of U.K. regulations on transferring controlled military or dual-use technology and the definitions of terms used in those regulations. This information can be accessed at https://www.gov.uk/government/publications/exporting-military-or-dual-use-technology-definitions.

U.S. - Miscellaneous

DOS/ISN, OFAC and BIS Jointly Issued A North Korea Ballistic Missile Advisory

March 11, 2021: The U.S. State Department of State Bureau of International Security and Nonproliferation (ISN), the Treasury Department Office of Foreign Assets Control (OFAC), and the Commerce Department Bureau of Industry and Security (BIS) jointly issued a North Korea Ballistic Missile Advisory identifying key North Korean ballistic missile procurement entities, describing their deceptive procurement techniques, and listing key materials and equipment used in the ballistic missile program. The Advisory is intended to aid persons that produce or trade in these products or provide related services in establishing procedures and making informed decisions to avoid the risk of violating United Nations, U.S., and other sanctions and laws. This 19-page Advisory is on the BIS website at https://www.bis.doc.gov/index.php/documents/policy-guidance/2625-2020-north-korea-ballistic-missile-advisory-005/file.

Department of Commerce – Bureau of Industry and Security

BIS Adds 14 Entities In Germany, Russia and Switzerland To The Entity List

March 4, 2021 -- 86 Fed. Reg. 12529: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 14 entities in Germany, Russia, and Switzerland 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. by engaging in proliferation activities in support of Russia’s weapons of mass destruction programs and chemical weapons activities. The 14 entities are:

Germany
Chimconnect Gmbh;
Pharmcontract Gmbh; and
Riol-Chemie
Russia
27th Scientific Center of the Russian Ministry of Defense;
Chimmed Group;
Femteco;
Interlab;
LabInvest;
OOO Analit Products;
OOO Intertech Instruments;
Pharmcontract GC; and
Rau Farm
Switzerland

Chimconnect AG

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

The rule also corrected one existing Entity List entry for the destination of Germany for the entity “Huawei OpenLab Munich,” and five entries for China.

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BIS Amends The EAR To Apply More Restrictive Treatment To Myanmar (Burma)

March 8, 2021 – 86 Fed. Reg. 13173: In response to the military coup that overthrew the elected government of Myanmar (Burma), BIS made the following amendments to the EAR to apply more restrictive treatment to exports and reexports to, and in-country transfers within, Myanmar:

Moved Burma from Country Group B to Country Group D:1 (EAR Part 740, Supplement No. 1), resulting in –
- Removal or limitation of eligibility for the following License Exceptions:
Shipments of Limited Value (LVS) (EAR Sec. 740.3);
- Shipments to Group B Countries (GBS) (Sec. 740.4);
- Technology and Software under Restriction (TSR) (Sec. 740.6);
- Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP) (Sec. 740.9);
- Servicing and Replacement Parts and Equipment (RPL) (Sec. 740.10);
- Aircraft, Vessels, and Spacecraft (AVS) (Sec.740.15);
- Additional Permissive Reexports (APR) (Sec. 740.16(j)); and
- Encryption Commodities, Software and Technology (ENC) (Sec. 740.17);
Restrictions on the export, reexport, and transfer (in-country) of certain microprocessors and associated “software” and “technology” to “military end uses” and “military end users” in Myanmar;
Restrictions on certain exports and reexports to vessels and aircraft located in ports in Myanmar or owned, operated or controlled by Myanmar or a Myanmar national; and
Imposition of licensing requirements for reexports of foreign-produced direct products of certain U.S.-origin technology and software to Myanmar (General Prohibition Three, EAR Sec. 736.2(b)(3)).
Changes in licensing policy to policies associated with Sec. 744.21 for military end use and end user controls, and with Sec. 742.4(b)(7) for NS-controlled items.

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BIS Added Four Entities To The Entity List

March 8, 2021 – 86 Fed. Reg. 13179: BIS amended the EAR by adding four entities in Myanmar to the Entity List to support U.S. Government efforts to promote a return to democracy in Myanmar and prevent Myanmar’s military and security services from obtaining items subject to the EAR. The four Myanmar entities are:

Ministry of Defence;
Ministry of Home Affairs;
Myanmar Economic Corporation; and
Myanmar Economic Holdings Limited.

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BIS Revises Incorrect Instruction Related To “Military-Intelligence End User” or “Military-Intelligence End Use”

March 17, 2021 – 86 Fed. Reg. 14534: BIS revised an incorrect instruction in the January 15, 2021, rule (86 Fed. Reg. 4865) that created a new license requirement for transactions involving a “military-intelligence end user” (MIEU) or “military-intelligence end use” in certain countries (see January 2021 Regulatory Update). BIS updated an instruction error, which directed the revision of paragraph (a)(3) of § 744.3 of the EAR, rather than only the introductory text of that paragraph, upon its effective date, the January 15 rule would have resulted in the inadvertent deletion of § 744.3(a)(3)(i) and (ii) of the EAR, which describe the license requirements that apply when an exporter, reexporter, or transferor cannot determine the range capabilities of a rocket system or unmanned aerial vehicle (UAV) in certain countries of missile technology concern (Country Group D:4) (see Supplement No. 1 to part 740 of the EAR), or whether such rocket system or UAV will be used in connection with the delivery of certain weapons of mass destruction. Following the incorrect instruction would have resulted in the inadvertent deletion of § 744.3(a)(3)(i) and (ii) restricting certain rocket systems and unmanned aerial vehicles.

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BIS Imposes Sanctions On Russia

March 18, 2021 – 86 Fed. Reg. 14689: BIS issued a Notification of Implementation of sanctions imposed on Russia by the State Department pursuant to a determination under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) that Russia had used chemical or biological weapons in violation of international law or lethal chemical or biological weapons against its own nationals. (See State Department March 2 announcement in State Department section below.) The sanctions imposed by BIS under this State Department determination include a prohibition, subject to a partial waiver, on the export to Russia of national security-controlled goods and technology subject to the EAR. Accordingly, BIS will now review license applications for exports and reexports to Russia of items controlled for national security (NS) reasons under a presumption of denial and will suspend License Exceptions (LEs) Servicing and Replacement Parts and Equipment (RPL), Technology and Software Unrestricted (TSU), and Additional Permissive Reexports (APR) for NS items destined for Russia.

However, a partial waiver will continue to permit the use of the following LEs for such exports and reexports: Temporary Imports, Exports, Reexports, and Transfers (TMP); Governments, International Organizations, International Inspections under the Chemical Weapons Convention and the International Space Station (GOV); Baggage (BAG); Aircraft, Vessels and Spacecraft (AVS), and Encryption Commodities, Software, and Technology (ENC). Also, license applications for the export and reexport to Russia of the following NS-controlled items will be reviewed under the licensing policy in effect prior to these sanctions: items necessary for the safety of flight of civil fixed-wing passenger aviation; deemed exports and reexports to Russian nationals; items destined for wholly-owned U.S. subsidiaries and other foreign subsidiaries of U.S. companies that are located in Russia; items in support of government space cooperation; and (until Sep. 1, 2021 only) items in support of commercial space launch activities.

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BIS Publishes Interim Final Rulemaking, Which Allows The Secretary Of Commerce To Prohibit Certain Information And Communications Technology And Services Supply Chain (ICTS) Transactions

March 29, 2021 – 86 Fed. Reg. 16312: On Jan. 19, 2021 BIS published an interim final rulemaking, effective March 22, 2021 (86 Fed. Reg. 4909 – see January 2021 Regulatory Update), which allowed the Secretary of Commerce to prohibit certain Information and Communications Technology and Services Supply Chain (ICTS) transactions to address national security threats and committed BIS to implement a pre-approval licensing process or similar program that would reduce uncertainty for entities seeking to engage in ICTS transactions.

The March 29, 2021 announcement is an Advance Notice of Proposed Rulemaking (ANPRM) seeking comments on such a pre-clearance process. The announcement includes several detailed questions for which responses would be of particular interest. Deadline for comments is April 28, 2021.

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BIS Amends The Commerce Control List And Related EAR Provisions To Conform With Changes In The Wassenaar Arrangement

March 29, 2021 – 86 Fed. Reg. 16482: BIS amended the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) and related EAR provisions to conform with changes in the Wassenaar Arrangement (WA) dual-use control list that had been agreed upon at the WA 2019 Plenary meeting. The changes include elimination of reporting requirements in some encryption items to reduce the regulatory burden for exporters; changes in various provisions related to CCL Category 5 – Part 2 (Information Security) including LE Encryption Commodities, Software, and Technology (ENC); and changes in the following 22 Export Control Classification Numbers (ECCNs): 0A502, 0A503, 0A606, 1A002, 1A005, 1A006, 1A613, 1B002, 1C001, 1C002, 1C006, 1C010, 2A001, 3B001, 3E002, 5A002, 6A004, 6A005, 6A008, 9A011, 9D515, 9E003. Contact us if your company works in these effected ECCNs to learn more details.

Department of State

Editor’s Notes:

In response to a client inquiry, we learned that the State Department Directorate of Defense Trade Controls (DDTC) accepts digital signatures from U.S.-registered applicants on transmittal letters for Agreements. However, DDTC does not currently accept a digital signature as valid to sign an approved Technical Assistance Agreement or Manufacturing License Agreement. DDTC will accept a PDF copy of a pen-and-ink signature as an acceptable signature for an Agreement.

Annual Sales Reports for 2020 – It’s time to uploaded the Annual Sales reports for your Manufacturing License Agreements and Warehouse Distribution Agreements to DDTC/DECCS.

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DDTC Name And Address Changes Posted To Website

March 4, 22, and 29, 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 Wajax Industrial Components Limited Partnership to Delom Services Inc., due to corporate rebranding;
Change in Name from CMI Defence S.A. to John Cockerill Defense S.A. due to corporate rebranding;
Change in Name from Geodis USA, Inc., to Geodis USA, LLC, due to corporate restructure;
Change in Name from Rolls-Royce plc to ITP Aero UK Limited due to transfer of business unit (Hucknall, UK, manufacturing plant and personnel) to ITP Aero;
Change in Name from Andoya Test Center AS to Andoya Space Defence AS due to corporate rebranding of Andoya Space subsidiary;
Changes in Name of the following foreign entities resulting in formation of the HTM Technologies Group:

PM Aerotec B.V. to HTM Aerotec B.V.;
PM Precision B.V. to HTM Precision B.V.; and
PM PSM B.V. to HTM PSM B.V.;

Change in Name of the following Maxar Technologies Inc. subsidiaries due to corporate rebranding:

Space Systems/Loral, LLC to Maxar Space LLC;
SSL Robotics LLC to Maxar Space Robotics LLC;
DigitalGlobe, Inc. to Maxar Intelligence Inc.;
DigitalGlobe International Inc. to Maxar International Inc.;
Radiant Missions Solutions Inc. to Maxar Mission Solutions Inc.;
Radiant Analytic Solutions Inc. & Radiant Geospatial Solutions LLC to Maxar Mission Solutions Inc.;
DigitalGlobe International Great Britain Limited to Maxar International Great Britain Limited;
DigitalGlobe International India Private Limited to Maxar International India Private Limited;
DigitalGlobe Australia Pty. Ltd. to Maxar Australia Pty. Ltd;
DigitalGlobe International Asia Pacific Pte. Ltd. to Maxar International Asia Pacific PTE. Ltd.;
GeoEye Middle East Ltd. to Maxar Middle East Ltd.; and
DigitalGlobe International Canada Inc. to Maxar International Canada 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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The State Department Posts A Fact Sheet, “U.S. Sanctions And Other Measures Imposed On Russia In Response To Russia’s Use Of Chemical Weapons”

March 2, 2021: The State Department posted a Fact Sheet, “U.S. Sanctions and Other Measures Imposed on Russia in Response to Russia’s Use of Chemical Weapons,” on its website at https://www.state.gov/u-s-sanctions-and-other-measures-imposed-on-russia-in-response-to-russias-use-of-chemical-weapons/

announcing that the Secretary of State had “determined that the Government of the Russian Federation has used a chemical weapon against its own nationals, in violation of the Chemical Weapons Convention,” and that as a result, specific sanctions (subject to specified full or partial waivers) would be imposed after a 15-day Congressional notification period. The sanctions, which will require implementation by the appropriate government agency actions, include termination of the following with respect to Russia:

Assistance under the Foreign Assistance Act of 1961, except for urgent humanitarian assistance and food or other agricultural commodities;
Sales of defense articles or defense services under the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and licenses for the export of any item on the U.S. Munitions List (USML, 22 CFR Sec. 121.1), except in support of government space cooperation and, for only 6 months, commercial space cooperation;
Foreign military financing under the AECA;
S. Government credit or other financial assistance; and
Exports of goods or technology on the National Security Control List established under 50 App. Sec. 2404(c)(1).

Currently applicable waivers that will remain available, with license applications reviewed on a case-by-case basis include:

Foreign assistance – waived in all respects;
Certain waivers currently available for existing sanctions, including –
- As noted earlier, export license exceptions TMP, GOV, BAG, AVS, or ENC;
- As noted earlier, exports to ensure the safe operation of commercial passenger aviation;
- Exports to wholly-owned subsidiaries of U.S. and other foreign companies in Russia;
- Deemed export licenses for Russian nationals working in the U.S.; and
- Exports in support of government space cooperation.

However, some currently applicable waivers will no longer be available, including:

As noted earlier, EAR export license exceptions RPL, TSU, and APR;
Exports and reexports of EAR NS items to commercial end-users in Russia for civil end-uses; and
After a 6-month transition period, exports of USML and NS items in support of commercial space flight activities in Russia.

In the same Fact Sheet, DDTC also announced new designations by the State Department and the Treasury Department under the Countering America’s Adversaries Through Sanctions Act (CAATSA) Sec. 231 List of Specified Persons; Section 1(a)(ii) of E.O. 13382 (“Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters”); and E.O. 13661 (“Blocking Property of Additional Persons Contributing to the Situation in Ukraine”).

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DDTC Updates Its Website Content Related To The Canadian Exemption

March 15, 2021: DDTC announced that it had refreshed its website content related to Canada, including updated information about the Canadian exemption, key Canadian partners, Canada’s Controlled Goods

Program, a Canadian exemption user guide, and FAQs. The updated content is on the DDTC website in the “Country Policies” section under “Canadian exemption,” or https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=31002473dbb8d300d0a370131f9619b0.

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DDTC Adds Russia As A Sanctioned Destination

March 18, 2021 – 86 Fed. Reg. 14802: Consistent with the March 2, 2021 announcement of the determination by the Secretary of State that Russia had violated international law by its use of chemical weapons (see item above), the Department of State added Russia to the list in Sec. 126.1 of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) of countries that are subject to a policy of denial of exports of defense articles and defense services. Specifically, ITAR Sec. 126.1(d)(2) was amended to subject Russia to a policy of denial for exports of defense articles and defense services with the exception of case-by case review of exports to Russia in support of government space cooperation and – for six months only – exports related to commercial space launches.

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The State Department Issues A Notice Implementing Sanctions Against Russia

March 18, 2021 – 86 Fed. Reg. 14804: The State Department issued a Notice of Sanctions implementing the sanctions against Russia described in its March 2 notice (see item above). The sanctions are based on the authority of the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (22 U.S.C. Sec. 5604 and 5605), with waivers essential to U.S. national security. The sanctions, all specific to Russia and all “to be implemented by the responsible departments and agencies of the U.S. Government,” include:

Foreign Assistance under the Foreign Assistance Act of 1961, except urgent humanitarian assistance and food or other agricultural commodities or products, with application waived because essential to U.S. national security interests;
Arms Sales: Sales under the AECA of defense articles, defense services, or design and construction services, and export licenses of any item on the USML, with waivers relating to certain space activities;

Arms Sales Financing: All foreign military financing under the AECA;
Denial of U.S. Government Credit or Other Financial Assistance: Any credit or other financial assistance by any U.S. Government instrumentality, including the U.S. Export-Import Bank;
Exports of National Security-Sensitive Goods and Technology on control list established under 50 USC 4813(a)(1), with specified full or partial waivers and license requirements for exports and reexports involving –
- EAR License Exceptions GOV, ENC, BAG, TMP, and AVS;
- Safety of Flight: Goods or technology pursuant to new licenses necessary for the safety of flight of civil fixed-wing passenger aviation;
- Deemed Exports/Reexports: Deemed exports to Russian nationals;
- Wholly-Owned U.S. and Other Foreign Subsidiaries in Russia;
- Government Space Cooperation;
- Commercial Space Launches (only until Sep. 21, 2021);
- Goods or technology pursuant to new licenses for commercial end-users civil end-uses; and
- Goods or technology pursuant to new licenses for Russian state-owned or state-funded enterprises.

Department of the Treasury

OFAC Issues Cyber-Related General License 1B Regarding Russia

March 2, 2021: The Treasury Department Office of Foreign Assets Control (OFAC) issued Cyber-related General License 1B "Authorizing Certain Transactions with the Federal Security Service" (https://home.treasury.gov/system/files/126/cyber_gl1b.pdf) authorizing a narrow range of transactions and activities involving the Russian Federal Security Service acting in its administrative and law enforcement capacities. The GL was issued to ensure that U.S. persons engaging in certain business activities in Russia that are not otherwise prohibited are not unduly impacted. OFAC also amended and issued three related FAQs on its website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/501, https://home.treasury.gov/policy-issues/financial-sanctions/faqs /502, and https://home.treasury.gov/policy-issues/financial-sanctions/faqs /503.

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OFAC Adjusts Civil Monetary Penalties

March 17, 2021 – 86 Fed. Reg. 14534: OFAC issued a final rule adjusting civil monetary penalties (CMPs) for violations of the statutes it administers for inflation pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, effective March 17, 2021. The current and new maximum penalties are:

Statute	Existing Maximum CMP Amount	Maximum CMP Amount Effective March 17
Trading With the Enemy Act	$90,743	$91,816
International Emergency Economic Powers Act	$307,922	$311,562
Antiterrorism and Effective Death Penalty Act of 1996	$81,283	$82,244
Foreign Narcotics Kingpin Designation Act	$1,529,991	$1,548,075
Clean Diamond Trade Act	$13,910	$14,074

The rule also includes updated CMPs for violations of recordkeeping requirements.

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

Sanctions

Department of Commerce

March 11, 2021 – 86 Fed. Reg. 13876: BIS denied the export privileges of Alexander Brazhnikov, Jr., of Mountainside, NJ, for 15 years based on his participation in a multi-year conspiracy to export U.S.-origin electronic components to Russia without the required export licenses, including exports to a Russian entity whose public website states that it is a world-class nuclear weapons center. The conspiracy included the use of front companies and falsification of shipping documents to understate the value of the items to evade the requirement of filing Electronic Export Information with the U.S. Government. Brazhnikov pleaded guilty in federal court for the District of New Jersey to charges of smuggling and conspiracy to commit money laundering and was sentenced to 70 months in prison, a $75,000 criminal fine, a $56 million forfeiture, forfeiture of his two houses valued at approximately $500,000 each, and a $200 special assessment.

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March 30, 2021 – 86 Fed. Reg. 16578: BIS denied the export privileges of Alonso Gonzalez-Granados for 5 years based on his March 8, 2019, conviction in U.S. District Court for the Western District of Texas of violating 18 U.S.C. 554(a) by exporting and unlawfully sending from the U.S., and attempting to export and send from the U.S., 50 rifle magazines and two boxes of ammunition without the required State Department licenses. In the criminal case, Gonzalez-Granados was sentenced to 10 months in prison with credit for time served and supervised release for two years.

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March 30, 2021 – 86 Fed. Reg. 16579: BIS denied the export privileges of Mark Hammond based on his conviction in U.S. District Court in Arizona of violating Sec. 38 of the AECA by knowingly and willfully exporting and causing to be exported from the U.S. to Mexico 5 AK-47 Draco Mini Pistols and 5 30-round firearms magazines designated as defense articles on the USML without the required State Department licenses. In the criminal case, Hammond was sentenced to 27 months in prison, two years of supervised release, and a $100 assessment. He was also placed on the U.S. Department of State debarred list.

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March 30, 2021 – 86 Fed. Reg. 16580: BIS denied the export privileges of Claudia Guerra for 10 years based on her conviction in U.S. District Court for the Southern District of Texas of violating Sec. 38 of the

AECA by knowingly and willfully attempting to export to Mexico 18 boxes of 1,020 rounds of 7.62 x 39-mm caliber ammunition which were designated as defense articles on the USML, without the required U.S. Department of State licenses. In the criminal case, Guerra was sentenced to 48 months in prison, three years of supervised release, and a $100 assessment.

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March 30, 2021 – 86 Fed. Reg. 16583: BIS denied the export privileges of Jean Baptiste Kingery for 7 years based on his conviction in U.S. District Court in Arizona of violating Sec. 38 of the AECA by knowingly and willfully attempting to export from the U.S. to Mexico, MK-II, M-67, M-61 Grenade Shells, M213, M228 Detonating Fuse, Winchester .45 Caliber 230 FMJ ammunition, and Speer Lawman .380 Caliber ammunition which were designated as defense articles on the USML without the required U.S. Department of State licenses. In the criminal case, Kingery was sentenced to 60 months in prison, three years of supervised release, and a $100 assessment. He was also placed on the U.S. Department of State debarred list.

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March 30, 2021 – 86 Fed. Reg. 16584: BIS denied the export privileges of Luis Felipe Varela for 5 years based on his conviction in U.S. District Court for the Western District of Texas of violating 18 U.S.C. § 554(a) by fraudulently and knowingly attempting to export two FN M249S, 5.56 caliber rifles from the U.S. to Mexico, designated as defense articles on the USML, without the required U.S. Department of State licenses. In the criminal case, Varela was sentenced to 6 months in prison, three years of supervised release, and a $100 special assessment.

Fines and Penalties

March 5, 2021: MSI Aircraft Maintenance Services International GmbH & Co., of Ruesselsheim, Germany agreed to pay $51,921 and accept a three-year denial of export privileges (suspended and waived if MSI pays the fine, cooperates with BIS and OFAC during the three-year period, and does not commit any further violations of the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.)), to settle charges by BIS that it conspired with a German company and Mahan Airways to procure U.S.-origin aircraft parts and components that were subject to the EAR and export or reexport them to Iran via transshipment through Germany.

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March 5, 2021: In a case involving illegal exports of cesium atomic clocks to Hong Kong without authorization, Alex Yun Cheong Yue of South El Monte, CA was sentenced in U.S. District Court in Boston, MA to time served (one day) and 3 years of supervised release (a year of which must be served in home confinement) during which he will be prohibited from engaging in import or export transactions, based on his plea of guilty to one count of conspiracy to commit export violations, two counts of unlawful exports and attempted exports of U.S. goods to Hong Kong, and one count of smuggling. Yue purchased the atomic clocks by falsely representing to the U.S. seller that they would be used solely in California for cordless phone research and redevelopment; however, he reshipped them from California to Hong Kong without obtaining the required export licenses from BIS, with paperwork that falsely described them and undervalued their worth.

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March 10, 2021: Comtech XiCom Technology, Inc., of Santa Clara, CA agreed to pay an administrative penalty of $122,000 to settle allegations by BIS that on three occasions between 2015 and 2017, Comtech had violated the EAR when it exported Traveling Wave Tubes (TWT) controlled for National Security reasons to Russia, the United Arab Emirates, and Brazil without the required export licenses. According to BIS, in each of these cases Comtech XiCom had correctly identified the appropriate ECCN for the TWTs, but its internal compliance officials had mistakenly determined that the exports did not require licenses.

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March 15, 2021: UniControl, Inc., of Cleveland, OH, a manufacturer of process controls, airflow pressure switches, and other instrumentation, agreed to remit $216,464 to settle potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) for 19 shipments of its goods from the U.S. to two European companies with reason to know that the two companies intended to transfer the goods to Iran, and two shipments with actual knowledge that they would be reexported to Iran. The OFAC announcement of this case, at https://home.treasury.gov/system/files/126/20210315_uc.pdf, includes useful descriptions of warning signs of intended illegal reexports and steps exporters can take to avoid such violations.

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March 26, 2021: OFAC announced that Norddgas, S.r.l., an Italian company that produces and sells components for gas boiler systems and applications, had agreed to remit $950,000 to settle its potential civil liability for apparent violations of the ITSR. OFAC reported that Nordgas knowingly reexported 27 shipments of air pressure switches procured from a U.S. company intended for as many as 10 customers in Iran, obfuscating the reexportation and Iranian customers from the U.S. company and causing the U.S. company to indirectly export its goods to Iran. In view of Nordgas’s cooperation with OFAC, its agreement to implement enhanced compliance commitments, and other circumstances, $650,000 of the settlement amount will be suspended pending satisfactory completion of Nordgas’s compliance commitments.

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March 30, 2021: Oleg Vladislavovich Nikitin, general director of KS Engineering (KSE), a St. Petersburg, Russia-based energy company, and KSE pled guilty in U.S. District Court for the Southern District of Georgia to conspiracy to evade the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) and the Export Control Reform Act of 2018 (ECRA) and to defraud the United States in an effort to purchase a power turbine from a U.S.-based manufacturer for intended use on a Russian Arctic deepwater drilling platform without first obtaining the required license. Nikitin admitted that he and another KSE employee conspired with Gabrielle Villone and his Italian-based company to obtain the turbine from a U.S.-based manufacturer and have it shipped overseas, concealing the true end user from the U.S. manufacturer and the U.S. Government by submitting false documentation that stated it would be used by a U.S. company in Georgia. Nikitin, Villone, and a third conspirator, Dali Bagrou, were arrested in Savannah, GA while attempting to complete the illegal transaction. Villone was sentenced in June 2020 to 28 months in prison after pleading guilty to the conspiracy, and Bagrou remains in custody pending further legal action.

MARCH 2021 EXPORT CONTROL REGULATION UPDATES Read More »

FEBRUARY 2021 EXPORT CONTROL REGULATION UPDATES

February 2021

This newsletter is a listing of the latest changes in export control regulations through February 28, 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 Executive Order 14014, “Blocking Property With Respect to the Situation in Burma.”

Feb. 12, 2021 – 86 Fed. Reg. 9429: President Biden issued Executive Order 14014, “Blocking Property With Respect to the Situation in Burma,” authorizing sanctions on a wide range of persons and government entities found to be involved in the February 1, 2021, coup in which the military overthrew the democratically elected civilian government of Burma (Myanmar) and undermined the country’s democratic transition and rule of law.

Department of Commerce – Bureau of Industry and Security

BIS Limits Exports And Reexports Of Sensitive Goods To Burma’s Military And Security Services

Feb. 18, 2021 – 85 Fed. Reg. 10011: In response to the military coup in Burma (Myanmar), the Bureau of Industry and Security (BIS) took action to limit exports and reexports of sensitive goods to Burma’s military and security services. Specifically, BIS –

announced that it will apply a presumption of denial for items subject to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) requiring a license for export, reexport, or in-country transfers when destined to Burma’s Ministry of Defense, Ministry of Home Affairs, armed forces, and security services, and
suspended the use of the following License Exceptions (LEs) that would otherwise be available to Burma as a result of its current placement in Country Group B:

o Shipments to Country Group B Countries (GBS, EAR Sec. 740.4);

o Technology and Software under Restriction (TSR, EAR Sec. 740.6);

o Shipments of Limited Value (LVS, EAR Sec. 740.3); and

o Computers (APP, EAR Sec. 740.7).

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BIS Posted Two Sets Of FAQs Regarding Changes In The Treatment Of Exports To Hong Kong

Feb. 19, 2021: BIS posted two sets of Frequently Asked Questions (FAQs) regarding changes in the treatment of exports to Hong Kong under the Export Administration Regulations (EAR, 15 CFR Parts 730-774) in light of the shift in Hong Kong’s status under the EAR from being treated as a separate destination to being treated as a part of China. A set of five FAQs clarifying the effects of this change is on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2719-new-china-hong-kong-faqs/file, and a three-page collection of “Revised China/Hong Kong Recordkeeping Frequently Asked Questions (FAQs)” is at https://www.bis.doc.gov/index.php/documents/pdfs/2720-china-hong-kong-recordkeeping-faqs/file.

Government Accountability Office

GAO Report On The Humanitarian Impact Of U.S. Sanctions On Venezuela

Feb. 4, 2021: The U.S. Government Accountability Office released a report on the humanitarian impact of U.S. sanctions on Venezuela titled, “Venezuela: Additional Tracking Could Aid Treasury’s Efforts to Mitigate Any Adverse Impacts U.S. Sanctions Might Have on Humanitarian Assistance” (GAO-21-239, https://www.gao.gov/assets/720/712232.pdf). The report examined how the Venezuelan economy performed before and after sanctions were imposed in 2015, the steps U.S. agencies have taken to identify and mitigate the sanctions’ potential negative humanitarian consequences, and the impact of the sanctions on the U.S. oil industry. As the title of the report indicates, the report was unable to draw broad conclusions, as the agencies involved have not collected adequate data.

Department of State

DDTC Name And Address Changes Posted To Website

Feb. 4, 11, and 16, 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 of Hydroid Inc. to HII Unmanned Systems due to acquisition of Hydroid, Inc. by Huntington Ingalls Industries;
Change in Name of Aeroflex Wichita Inc. to Viavi Solutions LLC due to corporate reorganization;
Change in Name from Fuji Xerox Service Link Co., Ltd. to FUJIFILM Service Link due to corporate rebranding;
Change in Name from Bell Helicopter Co., Ltd. to Bell Textron Co., Ltd. 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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DOD Adjusts The Civil Penalty For Violations Of The ITAR

Feb. 2, 2021 – 86 Fed. Reg. 7804: The State Department made its annual inflationary adjustment of civil monetary penalties (CMPs), based on guidance from the Office of Management and Budget. The maximum CMP for violations of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) was increased from $1,183,736 to $1,197,728. The new amount will apply only to penalties assessed on or after Feb. 2, 2021, regardless of the date on which the violation occurred.

Department of the Treasury

OFAC Issues Venezuela-related General License (GL) 30A, “Authorizing Certain Transactions Necessary to Port and Airport Operations.”

Feb. 2, 2021: The Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 30A, “Authorizing Certain Transactions Necessary to Port and Airport Operations.” GL 30A authorized payments to Instituto Nacional de los Espacios Acuaticos (INEA), Venezuela's major port operator. OFAC’s designation of INEA as a Specially Designated National (SDN) on Jan. 19, 2021, had triggered concerns about humanitarian and other imports into the country. GL 30A is on the Treasury Department website at https://home.treasury.gov/system/files/126/venezuela_gl30a.pdf.

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OFAC Revokes Restrictions On Ansarallah As A Foreign Terrorist Organization And A Specially Designated Global Terrorist

Feb. 16, 2021: In an announcement about actions regarding Yemen (https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210216), OFAC referenced the revocation by the Department of State of the designations of Ansarallah as a Foreign Terrorist Organization and a Specially Designated Global Terrorist (see Feb. 16, 2021, State Department action in Sanctions section below) and noted that U.S. persons no longer require authorization from OFAC to engage in transactions or activities with Ansarallah, provided such activities do not involve blocked persons or otherwise prohibited activities. Accordingly, OFAC revoked the following Counter Terrorism-related general licenses: GL 9, “Official Business of the United States Government,” GL 10, “Official Activities of Certain International Organizations,” GL 11, “Certain Transactions in Support of Nongovernmental Organizations’ Activities in Yemen,” and GL 12, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts, and Components or Software Updates” (all of which OFAC had issued Jan.19, 2021) and GL 13, “Authorizing Transactions Involving Ansarallah,” which it had issued Jan. 25, 2121. OFAC also removed FAQs 875, 876, and 877 from its website.

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of Commerce

Feb. 1, 2021 – 86 Fed. Reg. 7693: BIS denied the export privileges of Issam Hamade of Beirut, Lebanon, for 10 years based on his April 27, 2020 conviction in U.S. District Court for the District of Minnesota of violating 18 U.S.C. 371 by conspiring to export parts and technology, including inclusion in unmanned aerial vehicles from the United States to Lebanon, specifically to Hizballah, without obtaining the required export licenses under the EAR or the ITAR. In the criminal case, Hamade was sentenced to time served and a $100 special assessment.

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Feb. 1, 2021 – 86 Fed. Reg. 7695: BIS denied the export privileges of Irma Lizette Trevizo of Federal Correction Institution Victorville Medium II, Adelanto, CA, for 10 years based on her April 30, 2019, conviction in the U.S. District Court for the Western District of Texas of violating 18 U.S.C. 371 by knowingly and willfully conspiring to smuggle firearms and ammunition from the U.S. to Mexico. In the criminal case, Trevizo was sentenced to 24 months in prison, supervised release for two years, and a $100 special assessment.

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Feb. 24, 2021 – 85 Fed. Reg. 11223: BIS denied the export privileges of Fahad Saleem Kharbey of Federal Medical Center, Lexington, KY for 7 years based on his May 31, 2019 conviction in U.S. District Court for the Middle District of Florida of violating 18 U.S.C. 554(a) (Smuggling goods from the U.S.) by fraudulently and knowingly exporting firearms and magazines, designated as defense articles on the U. S. Munitions List (USML, 22 CFR Sec. 121.1), from the U.S. to Dubai, United Arab Emirates (UAE), without having first obtained a license or other approval from the U.S. Department of State. In the criminal case, Kharbey was sentenced to 36 months in prison, supervised release for three years, a $200 special assessment, and restitution of $755,281.13.

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Feb. 24, 2021 – 85 Fed. Reg. 11224: BIS denied the export privileges of Siddharth Bhatt, of Chicago, IL and Mumbai, India, for 10 years based on his Sep. 16, 2020, conviction in U.S. District Court for the District of Columbia of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by willfully exporting, attempting to export, and causing to be exported a U.S.-origin thermal imaging camera from the U.S. to the UAE without having first obtained the required license from the U.S. Department of Commerce. Bhatt was sentenced to probation for a term of 48 months, a $100 assessment, and a fine of $2,500.

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Feb. 24, 2021 – 86 Fed. Reg. 11225: BIS denied the export privileges of Jesse Rodriguez of Brownsville, TX for 5 years based on his Jan. 16, 2019, conviction in U.S. District Court for the Southern District of Texas of violating 18 U.S.C. 554(a). Specifically, Rodriguez was convicted of fraudulently and knowingly facilitating the transportation, concealment, and sale of merchandise, including .223 and 7.62 caliber ammunition, which were defense articles as defined under the USML, in violation of 18 U.S.C. 554. In the criminal case, Rodriguez was sentenced to 30 months in prison, supervised release for one year, and a $100 special assessment.

Department of State

Feb. 16, 2021 – 86 Fed. Reg. 9568: In a single-sentence notification in the Federal Register, Secretary of State Anthony Blinken revoked the designation of Ansarallah – the formal name of the political and religious armed rebel group in Yemen better known as Houthi – as a Foreign Terrorist Organization, changing a long-standing U.S. policy on the conflict in Yemen. Immediately following this action, Blinken revoked the designations of Ansarallah and three other persons as Specially Designated Global Terrorists.

Fines and Penalties

Jan. 13, 2021: Mediterranean Shipping Company (USA) Inc. of Chicago, IL, agreed to pay a civil penalty of $81,000 and complete an internal audit of its antiboycott compliance program to settle charges by BIS of eight violations of 15 CFR Sec. 760.2(d) (Furnishing Information About Business Relationships With Boycotted Countries or Blacklisted Persons) and two violations of 15 CFR Sec. 760.5 (Failing to Report the Receipt of a Request To Engage in a Restrictive Trade Practice of Foreign Boycott Against a Country Friendly to the U.S.) The charges involved trade with Libya and Oman.

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Feb. 1, 2021: Princeton University of Princeton, NJ agreed to pay a civil penalty of $54,000, complete one external audit and one internal audit of its export compliance program, and, if the audits identify actual or potential violations, provide BIS with a detailed plan of corrective actions, and complete two reports describing enhancements to its compliance with the EAR to settle charges by BIS that on 37 occasions it had exported various strains and recombinants of animal pathogens classified under Export Control Classification Numbers (ECCNs) 1C351, 1C352, or 1C353 to various foreign research institutions without the BIS licenses required by EAR Sec. 742.2. The illegally exported items had a total value of approximately $27,000. The university voluntarily self-disclosed the potential violations and cooperated with the investigation.

FEBRUARY 2021 EXPORT CONTROL REGULATION UPDATES Read More »

JANUARY 2021 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through January 31, 2021. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It summarizes 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

The United Kingdom (UK) Department For International Trade Published Guides On Export Controls Following The End Of The Brexit Transition Period

January 8, 2021: The United Kingdom (UK) Department for International Trade (DIT) published a compendium of guides on export controls following the end of the Brexit transition period. The guides, issued by the Export Control Joint Unit, cover topics including overall key changes, changes to licensing of exports to European Union (EU) countries, changes of rules for exporting specific types of items such as firearms, differences between rules for exports from Great Britain vs. Northern Ireland, UK trade sanctions, changes in general export authorizations (GEAs), and many others. The compendium is on the DIT website at

https://www.gov.uk/government/publications/notice-to-exporters-202101-changes-to-export-control-legislation-and-licensing/nte-202101-changes-to-export-control-legislation-and-licensing

Editor's Note: FD Associates has teamed with a U.K. consultant expert in U.K. export controls. Please contact us for details.

Department of Commerce – Bureau of Industry and Security

BIS Extended ECCN 0Y521 Controls On Software Specially Designed To Automate The Analysis Of Geospatial Imagery, Through January 6, 2022

January 6, 2021 – 86 Fed. Reg. 461: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by extending the existence of temporary Export Control Classification Number (ECCN) 0Y521, Software Specially Designed to Automate the Analysis of Geospatial Imagery, through January 6, 2022. Specifically, ECCN 0Y521 covers Geospatial imagery "software" "specially designed" for training a Deep Convolutional Neural Network to automate the analysis of geospatial imagery and point clouds. ECCN 0Y521 is a unilateral U.S. control; the U.S. has submitted a proposal for multilateral control of such software to the Wassenaar Arrangement (WA), but the WA has not considered acceptance of the proposal because it has not convened due to the pandemic.

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BIS Amended The Chemical Weapons Convention Regulations

January 7, 2021 – 86 Fed. Reg. 936: BIS amended the Chemical Weapons Convention Regulations (CWCR, 15 CFR Parts 710-722) and EAR Part 745 by adding three "Schedule 1" chemical families and one individual "Schedule 1" chemical to CWCR Part 712 and EAR Part 745, consistent with decisions adopted by the States Parties to the Chemical Weapons Convention (CWC) at their Conference in November 2019. The rule also amended the definition of "production" in CWCR Sec. 710.1.

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BIS Amended ECCN 1C991

January 7, 2021 -- 86 Fed. Reg. 944: BIS amended ECCN 1C991 to clarify that it includes vaccines containing, or designed for use against, any item identified in ECCN 1C351, 1C353, or 1C354. (Previously, it had indicated only that it controlled vaccines "against" such items.) This rule also expands the scope of medical products controlled under ECCN 1C991 to include those containing genetically modified organisms and genetic elements described in ECCN 1C353.a.3. In addition, this rule clarifies the definition of 'immunotoxin' that appears in ECCN 1C351 and ECCN 1C991 and removes the definition of 'subunit' from ECCN 1C351.

Finally, this rule renumbers ECCN 1C991.c and .d by listing medical products that are subject to chemical/biological (CB) controls, as well as antiterrorism (AT) controls, under ECCN 1C991.c and listing medical products that are subject only to AT controls under ECCN 1C991.d. A conforming amendment is made to § 742.2(a)(3) of the EAR to reflect this change in paragraph sequencing.

1C991 Vaccines, immunotoxins, medical products, diagnostic and food testing kits, as follows (see List of Items controlled). Medical products that contain any of the following:

c.1. Toxins controlled by ECCN 1C351.d (except for botulinum toxins controlled by ECCN 1C351.d.3, conotoxins controlled by ECCN 1C351.d.6, or items controlled for CW reasons under ECCN 1C351.d.11 or .d.12); or

c.2. Genetically modified organisms or genetic elements controlled by ECCN 1C353.a.3 (except for those that contain, or code for, botulinum toxins controlled by ECCN 1C351.d.3 or conotoxins controlled by ECCN 1C351.d.6);

d. Medical products not controlled by 1C991.c that contain any of the following:

d.1. Botulinum toxins controlled by ECCN 1C351.d.3;

d.2. Conotoxins controlled by ECCN 1C351.d.6.

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The Commerce Department Adjusted The Maximum Civil Monetary Penalties For Inflation

January 11, 2021 – 86 Fed. Reg. 1764: The Commerce Department issued its annual rule adjusting maximum civil monetary penalties (CMPs) for inflation. Adjusted maximum CMPs for violations involving dual-use export controls include the following:

BIS: violations of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1705(b)) – maximum increased from $307,922 to $311,562;
BIS: violations of Export Control Reform Act of 2018 (ECRA, 50 USC Sec. 4819) – maximum increased from $305,292 to $308,901;
Census Bureau: violations of 13 USC Sec. 304 (Collection of Foreign Trade Statistics) – maximum per day increased from $1,419 to $1,436; maximum per violation increased from $14,194 to $14,362;
Census Bureau: violations of 13 USC Sec. 305(b) (Collection of Foreign Trade Statistics) – maximum increased from $14,194 to $14,362.

The new maximum CMPs will apply to violations assessed after January 15, 2021, including violations that occurred prior to that date.

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BIS Removed Three Entities From The Unverified List

January 11, 2021 – 86 Fed. Reg. 1766: BIS removed the following three entities from the Unverified List (UVL, EAR Part 744, Supp. No. 6) on the basis that BIS was able to verify their bona fides (i.e., legitimacy and reliability relating to the end-use and end-user of items subject to the EAR) through successful end-use checks:

DMA Logistics GmbH (Germany);
Halm Elektronik GmbH (Germany); and
Integrated Production and Test Engineering (Mexico).

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BIS Amended EAR Sec. 742.5(b)(1) To Change The Licensing Review Policy For Certain Unmanned Aerial Systems (UAS) That Are Controlled For Missile Technology (MT) Reasons

January 12, 2021 – 86 Fed. Reg. 2252: BIS amended EAR Sec. 742.5(b)(1) to change the licensing review policy for certain Unmanned Aerial Systems (UAS) that are controlled for Missile Technology (MT) reasons, specifically, UAS that have a range and payload capability equal to or greater than 300 km/500kg and a maximum true airspeed of less than 800 km/hr. Applications to export these UAS, which are identified on the Missile Technology Control Regime (MTCR) Annex as Category I items, will now be considered on a case-by-case basis under the more flexible review policy generally applied to MTCR Category II items, and MT items for the design, development, production, or use in such UAS will now also be reviewed on a case-by-case basis. This action was consistent with a change in U.S. policy regarding the export of UAS announced by President Trump on July 24, 2020. (See July 2020 Regulatory Update.)

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BIS Added One Entity In China To The Entity List, One Entity In China To The Military End-User List And Removed Two Russian Entities From The Military End User List

January 15, 2021 – 86 Fed. Reg. 4862: BIS amended the EAR by adding one entity in China to the Entity List (EAR Part 744, Supp. No. 4) based on a determination that this entity 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 be available for exports, reexports, or in-country transfers to this person of all items subject to the EAR. The entity is:

China National Offshore Oil Corporation Ltd.

In the same action, BIS also added one entity in China to the Military End User (MEU) List pursuant to the criteria set forth in EAR Sec. 744.21. A license requirement with a license review policy of a presumption of denial will apply to the export, reexport, or transfer (in-country) to this entity of any item subject to the EAR listed in Supplement No. 2 to Part 744. Also, no license exceptions will be available for exports, reexports, or transfers (in-country) to this entity of such items. The entity is:

Beijing Skyrizon Aviation Industry Investment Co., Ltd.

Finally, in this action, BIS also removed the following two Russian entities from the MEU List:

Korporatsiya Vsmpo Avisma OAO; and
Molot Oruzhie.

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BIS Issued New License Requirements For Transactions Involving Military-Intelligence End Users or Military-Intelligence End Use in China, Russia, Venezuela Or any Country Group E:1 Or E:2 Country

January 15, 2021 -- 86 Fed. Reg. 4865: BIS issued an interim final rule creating a new license requirement for transactions involving a "military-intelligence end-user" (MIEU) or "military-intelligence end-use" in China, Russia, Venezuela, or any country in Country Group E:1 or E:2 (currently Cuba, Iran, North Korea, and Syria), including (in some circumstances) whether or not the underlying item(s) involved is subject to U.S. export controls. "MIEU" is defined as "any intelligence or reconnaissance organization of the armed services (army, navy, marine, air force, or coast guard); or national guard;" a "military-intelligence end use" is defined as "the design, 'development,' 'production,' use, operation, installation (including on-site installation), maintenance (checking), repair, overhaul, or refurbishing of, or incorporation into, items described on the U.S. Munitions List (USML) (22 CFR part 121, International Traffic in Arms Regulations), or classified under ECCNs ending in "A018" or under "600 series" ECCNs, which are intended to support

the actions or functions of a 'military-intelligence end-user'." The rule includes a non-exclusive list of MIEUs. It is possible that this rule will be rejected or revised by the Biden administration, as it will not become effective until March 16, 2021. The deadline for comments is March 1, 2021. This rule is very complex. Contact us if you believe that any proposed transaction may be subject to this rule.

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BIS Issued Interim Final Rule To Implement "Securing The Information And Communications Technology And Services Supply Chain"

January 19, 2021 – 86 Fed. Reg. 4909: BIS issued an interim final rule to implement Executive Order 13873, "Securing the Information and Communications Technology and Services Supply Chain" (May 15, 2019). It flows from a perception of the criticality of the Information and Communications Technology and Services (ICTS) Supply Chain in the U.S. and aims to protect it from any breach or interference by any "foreign adversaries" – defined as China (including Hong Kong), Cuba, Iran, North Korea, Russia, and Venezuelan politician Nicolas Maduro (Maduro Regime). To accomplish this goal, the rule authorizes the Commerce Department to prohibit or restrict a broad but not universal range of U.S. transactions involving the ICTS supply chain that have a nexus with any foreign adversary. The definitions of "ICTS" and "ICTS Transaction" that largely define the scope of the controls are detailed and sometimes difficult to apply. We recommend that you consult with us if you have questions about whether any proposed action involving a "foreign adversary" will be covered. The rule will go into effect March 22, 2021; deadline for comments is March 1, 2021. (This interim rule supersedes a proposed rule issued November 27, 2019 – 84 Fed. Reg. 65316.)

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BIS Amended The EAR To Remove Sudan From Country Group E:1

January 19, 2021 – 86 Fed. Reg. 4929: BIS amended the EAR to remove Sudan from Country Group E:1 (Terrorist supporting countries) and added Sudan to Country Group B, thereby removing the license requirement for the export and reexport to Sudan of items controlled only for AT reasons, moving Sudan's de minimis level from 10 percent to 25 percent, and potentially making Sudan eligible for several new license exceptions (but excluding License Exceptions Shipments to Country Group B Countries ("GBS") and Technology and Software under Restriction ("TSR")). The change implemented the President's October 2020 decision to rescind Sudan's designation as a State Sponsor of Terrorism (SSOT), based on the certification that Sudan had not provided any support for acts of international terrorism during the preceding six months and that it had provided assurances that it would not support acts of international terrorism in the future.

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BIS Submitted Its Annual Report To Congress For The Fiscal Year 2020

January 25, 2021: BIS submitted its annual report for the Fiscal Year 2020 to Congress. The report includes narrative descriptions of BIS' major actions and other activities, regulatory changes, enforcement actions, industrial base activities, and others, as well as a timeline and statistics on license processing, criminal convictions, administrative enforcement actions, end-use checks, and others. See it at https://www.bis.doc.gov/index.php/documents/pdfs/2711-2020-bis-annual-report-final/file.

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EAR Encryption

Editor's Note: EAR Semi-Annual Encryption reports were due February 1 to BIS and NSA.

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Federal Emergency Management Agency

FEMA Issued A Temporary Final Rule Extending, Modifying, And Clarifying Existing Requirements On Exports Of Certain Critical Health And Medical Supplies, Which Are Needed For Domestic Use In Fighting The COVID-19 Pandemic

December 31, 2020 – 85 Fed. Reg. 86835: The Federal Emergency Management Agency (FEMA) issued a temporary final rule extending, modifying, and clarifying existing requirements on exports of certain critical health and medical supplies which are needed for domestic use in fighting the COVID-19 pandemic. Under the new rule, and subject to exemptions specified in the rule, explicit FEMA approval is required for exports of specifically described subcategories of Surgical N95 Filtering Facepiece Respirators, PPE surgical masks, PPE nitrile gloves, Level 3 and 4 Surgical Gowns and Surgical Isolation Gowns, and syringes and hypodermic needles. Enforcement of this rule will be coordinated with U.S. Customs and Border Protection (CBP). The rule is valid until June 30, 2021.

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Department of State

DDTC Name And Address Changes Posted To Website

Jan. 6, 12, 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 Name from L3 Oceania PTY LTD and L3 Communications Systems-Australia to Mission Systems Australia PTY LTD (a subsidiary of L3 Harris Technologies, Inc.) due to corporate reorganization;
Change in Name from CMI Defence SAS to John Cockerill Defense France due to corporate rebranding;
Change in Name from Patria Land Services Oy and Patria Land Systems Oy to Patria Land Oy due to corporate reorganization;
Change in Name from Aero Parts Australia to Gentex Australia Pty Ltd. due to acquisition of Aero Parts by Gentex;
Change in Name from Research Electro Optics, Inc., to Excelitas Technologies Corp. due to acquisition of Research Electro by Excelitas;
Change in Name from The Ellison Group, Inc., and Ellison Surface Technologies, Inc. (both wholly-owned U.S. subsidiaries of Bodycote USA, Inc.), to Bodycote Surface Technology Group, Inc., and Bodycote Surface Technology, Inc., respectively, due to corporate rebranding;
Change in Name from Broadspectrum (Australia) Pty Ltd. to Ventia Australia Pty Ltd. due to acquisition of Broadspectrum by Ventia; and
Change in Address for BAE Systems (International) Limited-Malaysia.

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 Updated The List Of Restricted Entities And Subentities Associated With Cuba

January 8, 2021 – 86 Fed. Reg. 1561: DDTC published an updated List of Restricted Entities and Subentities Associated With Cuba (Cuba Restricted List) with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515). The announcement noted that the Department of Commerce's BIS will generally deny applications to export or reexport items for use by entities or subentities on the Cuba Restricted List. The Cuba Restricted List and additional information concerning it are on the Department of State website at https://www.state.gov/cuba-sanctions/cuba-restricted-list/.

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DDTC Undertook A Comprehensive Review Of The Criteria Used To Adjudicate Proposed Direct Commercial Sale Transfers Of Precision-Guided Munitions

January 19, 2021: DDTC announced that as part of fulfilling its responsibility to ensure that exports of defense articles and defense services are consistent with all aspects of the Conventional Arms Transfer (CAT) Policy (https://www.state.gov/conventional-arms-transfer-cat-policy/) it had undertaken a comprehensive review of the criteria used to adjudicate proposed direct commercial sale transfers of precision-guided munitions (PGMs), their critical components, and/or related technical data and defense services against the criteria of a partner's advanced targeting infrastructure. The announcement details the PGMs that are subject to this policy (classes of PGMs, crucial components, technical data, and defense services). To ensure that these items are used in a manner consistent with U.S. intent when approving the transfer, the review will specifically include a partner's complete targeting infrastructure, including ability to properly mitigate the risk of civilian casualties and advanced target development capabilities including weaponeering, collateral damage estimation, and target coordinate mensuration. This announcement is on the DDTC home page, https://www.pmddtc.state.gov/ddtc_public.

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The Department Of State Declared Cuba A State Sponsor Of Terrorism

January 22, 2021 – 86 Fed. Reg. 6731 (signed January 12, 2021): In an order signed January 12, 2020, Secretary of State Michael R. Pompeo determined that the Republic of Cuba had repeatedly provided support for acts of international terrorism. Accordingly, pursuant to the Export Administration Act of 1979 (as continued in effect by Executive Order 13222 of August 17, 2001) and other legislation, Cuba is now deemed a State Sponsor of Terrorism.

Department Of State Editor's Reminder:

Annual sales reports for Manufacturing License Agreements and Warehousing Distribution Agreements are due to DDTC.

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Department of the Treasury

OFAC Issued Venezuela General License No. 31A

January 5, 2021: The Office of Foreign Assets Control (OFAC) issued Venezuela General License No. 31A titled, "Certain Transactions Involving the IV Venezuelan National Assembly, the Interim President of Venezuela, and Certain Other Persons Authorized," authorizing transactions and activities involving the current interim president of Venezuela, Juan Gerardo Guaidó Marquez (Guaidó), his staff, many of his appointees, members and staff of the IV Venezuelan National Assembly, and many other domestic and foreign officials. GL 31A, which replaces GL 31, issued on August 6, 2019 (see August 2019 Regulatory Update) is on the OFAC website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/679. Related FAQ No. 679 is on the OFAC website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/679.

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OFAC Issued Two New FAQs Relating To Ukraine And Russia Related Sanctions

January 5, 2021: OFAC issued two new FAQs relating to Ukraine and Russia Related Sanctions under the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA, 22 USC 9201 et seq.): FAQ 869, about whether the non-blocking menu-based sanctions described in CAATSA Sec. 235(a) apply to entities owned 50 percent or more by a listed person and FAQ 870, about what is prohibited by the loan and credit-related sanction described in CAATSA Sec. 235(a)(3) (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/869 and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/870 ). OFAC also amended two FAQs related to CAATSA: FAQ 545, defining several terms used in CAATSA (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/545), and FAQ 546 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/546), about the coverage of the law.

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OFAC Issued The Hong Kong Related Sanctions Regulations

January 15, 2021 – 86 Fed. Reg. 3793: OFAC issued the Hong Kong Related Sanctions Regulations (HKSR, 31 CFR Part 585) to implement Executive Order EO 13936 of July 14, 2020, "The President's Executive Order 13936 on Hong Kong Normalization." OFAC stated that it intends to supplement the HKSR with a more comprehensive set of regulations, possibly including additional interpretive and definitional guidance, general licenses, and statements of licensing policy. The HKSR became effective immediately.

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OFAC Issued Four General Licenses In Support Of The U.S. Commitment To Supporting The Provision Of Humanitarian Assistance To The Yemeni People

January 19, 2021: OFAC issued four General Licenses in support of the U.S. commitment to supporting the provision of humanitarian assistance to the Yemeni people: GL 9, "Official Business of the United States Government" (https://home.treasury.gov/system/files/126/ct_gl9.pdf), GL 10, "Official Activities of Certain International Organizations" (https://home.treasury.gov/system/files/126/ct_gl10.pdf), GL 11, "Certain Transactions in Support of Nongovernmental Organizations' Activities in Yemen" (https://home.treasury.gov/system/files/126/ct_gl11.pdf), and GL 12, "Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts, and Components or Software Updates" (https://home.treasury.gov/system/files/126/ct_gl12.pdf). In a further effort to help facilitate the uninterrupted flow of humanitarian assistance, including COVID-19-related assistance, and certain other critical commodities to the people of Yemen, OFAC also issued three FAQs: FAQ 875, about humanitarian efforts involving Ansarallah (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/875), FAQ 876, about the exposure of non-U.S. persons in efforts involving Ansarallah (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/876), and FAQ 877, about assistance in response to the COVID-19 outbreak in Yemen (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/877).

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OFAC Upgraded Its Sanctions List Search Tool To Utilize Fuzzy Logic

January 25, 2021: OFAC announced that it had upgraded its Sanctions List Search tool (https://sanctionssearch.ofac.treas.gov/) with fuzzy logic. Questions about this change can be addressed to OFAC technical support at 1-800-540-6322 Option #8 or O_F_A_C@treasury.gov.

LATEST SANCTIONS FINES & PENALTIES

Fines and Penalties

January 12, 2021: The U.S. Department of Justice announced the indictment of Arash Yousefi Jam, a/k/a Arash Yousefijam of Ontario, Canada, Aminn Yousefi Jam, a/k/a Amin Yousefija of Ontario, Canada, and Abdollah Momeni Roustani, a/k/a Abdollah Momeni, Ab Momeni, and Amir Amiri, thought to live in Iran, all citizens of Iran, for conspiracy to export U.S. goods to Iran in violation of IEEPA and the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), conspiracy to smuggle goods from the U.S., and conspiracy to engage in international money laundering. The three men allegedly conspired to export and send goods including nine electrical discharge boards, one CPU board, two servo motors, and two railroad crankshafts from the U.S. to Iran via the United Arab Emirates (UAE) in violation of the U.S. sanctions, using third parties to arrange for payment and transportation of the goods, intentionally concealing information about their destinations from the U.S. sellers, and exporting the items without obtaining the required licenses.

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January 13, 2021: Mediterranean Shipping Company (USA) Inc. (Chicago) agreed to pay a civil penalty of $81,000 and undergo a 12-month internal audit of all transactions subject to EAR Part 760 (including recordkeeping requirements and an assessment of the company's compliance therewith) to settle charges by BIS of 8 violations of 15 CFR Sec. 760.2(d) (Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons) and two violations of 15 CFR 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.). The boycotting countries involved in these violations were Libya and Oman.

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January 22, 2021: Lionel Chan, previously a resident of Brighton, Mass., and Muhammad Mohd Radzi, previously a resident of Brooklyn, NY, both Malaysian nationals, both pleaded guilty in federal court in Boston to conspiracy to violate the Arms Export Control Act (AECA, 22 USC 2778 et seq.) for a buyer located in Hong Kong. Chan, later joined by Radzi, purchased a variety of U.S.-origin firearm parts, including parts used to assemble AR-15 assault rifles and 9MM semi-automatic handguns online and shipped them via Federal Express to the Hong Kong purchaser without first obtaining the required export licenses, intentionally concealing the contents of the shipments by providing false information about the shipments and concealing the parts inside of each package. The violations were discovered when Hong Kong authorities interdicted two packages, which were found to contain numerous export-controlled firearms parts, including a firing pin and gun sight.

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January 27, 2021: Julian Demurjian of San Francisco, CA, agreed to pay an administrative settlement of $540,000 (of which $480,000 will be suspended for a two-year probationary period) to BIS and accept a two-year suspended denial of export privileges under the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to resolve allegations that he and CIS Project, a company owned and operated by Demurjian, caused, aided, or abetted 7 violations of the EAR. In 6 of the violations, Demurjian/CIS provided a freight forwarder with invoices that vastly understated the value of the items, causing the forwarder to subsequently file Electronic Export Information (EEI) containing these false values in the Automated Export System. The settlement also included a seventh violation in which Demurjian/CIS falsely undervalued the items to be exported so that the stated value did not exceed $2,500 and thus did not trigger an EEI filing requirement.

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January 29, 2021: The U.S. Attorney for the District of Columbia announced the indictment of Cheng Bo, a/k/a Joe Cheng, a Chinese citizen, for criminal conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by shipping export-controlled U.S. power amplifiers from the U.S. to Hong Kong knowing that the goods were intended for subsequent shipment to China. Cheng's former employer, Avnet Asia Pte., Ltd., a Singapore company, admitted responsibility and agreed to pay a penalty of $1,508,000 to the U.S. to settle a criminal liability for the conduct of Cheng and a Singapore-based foreign employee who illegally caused U.S. goods to be shipped to China and Iran without the required license.

At the same time, BIS announced that Avnet Asia had agreed to pay $1,721,000 as part of a $3,229,000 administrative penalty (partially suspended) to settle civil charges alleging that its employees had illegally exported various electronic components, many of which were classified under ECCN 3A001, through Singapore to China and Iran, including to a company on the BIS Entity List.

JANUARY 2021 EXPORT CONTROL REGULATION UPDATES Read More »

DECEMBER 2020 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through December 31, 2020. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It summarizes recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Department of Commerce – Bureau of Industry and Security

BIS Amended The EAR To Correct Errors In Sept 11, 2020 Report Of Decisions Made At The Wassenaar Arrangement 2018 Plenary And Other Revisions Related To National Security Controls

Dec. 4, 2020 – 85 Fed. Reg. 78684: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct errors in Sep. 11, 2020, report of decisions made at the Wassenaar Arrangement 2018 Plenary and other revisions related to national security controls (85 Fed. Reg. 56294). The corrections, which do not change BIS policy, including any applicable licensing requirements, are in Export Control Classification Numbers (ECCNs) 3A001, 3A002, 3A991, 5A002, 7A005, and 9E003.

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BIS Published 26 FAQs About Changes To The Foreign-Produced Direct Product Rule

Dec. 18, 2020: BIS published a compendium of 26 FAQs about an amendment to the Foreign-Produced Direct Product Rule (FDP Rule, General Prohibition Three, EAR Sec. 736.2(b)(3)) issued on August 20, 2020 (85 Fed. Reg. 51596), which revised the control over certain foreign-produced items when there is knowledge that the items will be incorporated into, or will be used in the production or development of, any part, component or equipment produced, purchased or ordered by an entity on the Entity List (EAR Part 744, Supp. No. 4) with a footnote 1 designation or when an entity with a footnote 1 designation is involved in a transaction involving the foreign-produced item. At present, all of the entities with a “Footnote 1” designation in the Entity List are affiliates of Huawei located outside of the United States. The FAQs clarify the manner in which the EAR’s Foreign-Produced Direct Product Rule applies for exports from abroad and re-exports (i.e., export activities involving non-US parties) where the EAR governs the export activity as a result of the foreign product being produced using U.S. origin technology and/or equipment or produced in a plant (or major component of a plant) that is a direct product of U.S. origin technology and/or equipment. The FAQ addresses the scope of the revised FDP Rule and includes the following topics: Types of Items, Prior Exports, Plant/Major Component, De Minimis, Supply Chain, Prior Licenses, Licensing Policy, Item-Specific Questions, and Savings Clause. The FAQs can be found at https://www.bis.doc.gov/index.php/documents/about-bis/2681-2020-fpdp2-faq-120820-ea/file.

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BIS ADDS 77 Entities In 10 Countries to the Entity List

Dec. 22, 2020 – 85 Fed. Reg. 83416: BIS amended the EAR by adding 77 entities in 10 countries to the Entity List based on a determination that each of these entities had acted contrary to the national security or foreign policy interests of the U.S. Over 60 of these entities are in China; the remaining entities are listed in Bulgaria, France, Germany, Hong Kong, Italy, Malta, Pakistan, Russia, and the United Arab Emirates (UAE). A license requirement will now apply to exports, reexports, or in-country transfers to the listed entities of all items subject to the EAR, and no license exceptions will be available to them. A license review policy of presumption of denial will apply to 60 of the persons; license policies for the remaining 17 persons vary.

Most notably, BIS states that Semiconductor Manufacturing International Corporation (SMIC), commercial done manufacturer and retailer, DJI, and SMIC related entities were included in this action as a result of China’s military-civil fusion (MCF) doctrine and evidence of activities between these entities and parties of concern in the Chinese military-industrial complex. The designation under the Entity List will limit SMIC’s, DJI’s, and the other listed parties’ abilities to acquire U.S. technology by requiring exporters, reexporters, and in-country transferors of such technology to apply for a license to export any product subject to the EAR (including EAR99 items) to these companies. All items subject to the EAR will have a presumption of denial for export to DJI, except items necessary to detect, identify, and treat infectious disease. Items destined for SMIC and affiliates that are uniquely required to produce semiconductors at advanced technology nodes (10 nanometers or below, including extreme ultraviolet technology) will be subject to a presumption of denial to prevent such technology from supporting China’s military modernization efforts. Other items subject to the EAR will be subject to a case-by-case review by BIS.

The rule also revises one existing destination in China and one in Pakistan and removes a total of 4 entities in Israel and the United Arab Emirates. A list of all the affected entities is on the BIS website at https://www.federalregister.gov/documents/2020/12/22/2020-28031/addition-of-entities-to-the-entity-list-revision-of-entry-on-the-entity-list-and-removal-of-entities.

Refer to our consultant corners article for more details at https://fdassociates.net/consultants-corner.

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BIS Amends The EAR Removing Hong Kong As A Separate Destination From The People’s Republic of China

Dec. 23, 2020 – 85 Fed. Reg. 83765: BIS amended the EAR to remove the PRC Special Administrative Region of Hong Kong as a separate destination under the EAR. In most cases, it will now be considered a part of China. Accordingly, BIS also removed the entries for Hong Kong in the Commerce Country Chart (EAR Part 738, Supp. No. 1) and the Country Group List (EAR Part 740, Supp. No. 1, Country Groups A:6 and B), and in other provisions that provide differential and preferential treatment for Hong Kong as compared to the treatment of such transactions to or within China. (Provisions specific to Hong Kong that remain in the EAR recognize certain differences but do not provide preferential treatment.) With respect to submissions in the Automated Export System (AES) for the exports of items that are intended for end use in Hong Kong, the Foreign Trade Regulations (FTR) have not been modified to remove Hong Kong. Exporters should still cite HK as the Ultimate Country of Destination in EEI filings where ultimate end-use or the ultimate consignee is located in Hong Kong. While exporters should continue to use HK in EEI submissions as the Ultimate Country of Destination for exports with the ultimate consignment to Hong Kong, the exports will be treated pursuant to the EAR as though they are exports to China. Thus, EEI submissions are required for all exports intended for ultimate consignment to Hong Kong of items on the Commerce Control List (CCL) (e.g., with an ECCN) regardless of value.

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BIS Adds Supplement No. 7 to EAR Part 744 - Military End User List

Dec. 23, 2020 – 85 Fed. Reg. 83793: BIS amended EAR Part 744 by adding a new Supplement No. 7, “Military End User” (MEU) List of entities that have been determined to be “military end-users” for purposes of the “military end user” control that imposes a license requirement on exports, reexports, or transfers (in-country) of specified items to China, Russia, and Venezuela when such items are destined for a “military end-user.” The MEU List is non-exhaustive, i.e., parties not included on the list remain subject to the “military end-use” and “military end user” controls.

This announcement also includes the first tranche of 103 MEUs, consisting of 58 Chinese and 45 Russian companies.

Editor’s note: These additions to the military end-user list impose additional due diligence obligations on exporters to ensure licenses are obtained prior to export, reexport, or in-country transfer.

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BIS Amended The EAR To Change The Country Group Designations For Ukraine, Mexico, And Cyprus

Dec. 28, 2020 – 85 Fed. Reg. 84211: BIS amended the Country Group List (EAR Part 740, Supp. No. 1) to revise the designations for Ukraine, Mexico, and Cyprus. Ukraine is moved from Country Group D:1 to Country Group B but is noted to be ineligible for License Exceptions GBS (Shipments to Country Group B countries) and TSR (Technology and Software Under Restriction); Mexico is added to Country Group A:6; and Cyprus is also added to Country Group A:6. At the same time, however, Cyprus also remains in Country Group D:5 (U.S. Arms Embargoed Countries). The announcement includes a section on the “Impact of the Amendments in this Rule” that specifically describes the impact of the changes for each country at the level of the availability of specific license exceptions and licensing policies that are affected by the changes. The rule also includes conforming changes. A full copy of the Federal Register notice is found here: https://www.federalregister.gov/documents/2020/12/28/2020-26552/amendment-to-country-groups-for-ukraine-mexico-and-cyprus-under-the-export-administration.

Editor’s note: These shifts in-country groups change the requirements for BIS licenses and available EAR license exceptions for exports to Ukraine, Mexico, and Cyprus. When exporting to any of these countries, it is imperative to reconfirm the export obligations after reviewing the ECCNs, the reason for control, the country chart, and EAR general prohibitions.

Department of Commerce – Census Bureau

Census Updated The Schedule B and Harmonized Tariff Schedule

Dec. 30, 2020: In its Global Reach Blog, the Census Bureau noted that the Schedule B and Harmonized Tariff Schedule (HTS) tables had been updated to accept the changes to the Jan. 1, 2021 codes. Shipments with outdated codes will be accepted during a 30-day grace period; an outdated code after Jan. 30, 2021, will result in a fatal error. The ACE AESDirect program has been updated with the 2021 codes.

The 2021 Schedule B and HTS tables are available for download at http://www.census.gov/foreign-trade/aes/documentlibrary/#concordance. The list of HTS codes that are not valid for AES remains unchanged.

Department of State

DDTC Name And Address Changes Posted To Website

Dec. 1, 7, 19, and 23, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at:

Effective November 30, 2020, change in address for Raytheon Saudi Arabia to Riyadh Front, Bldg. S-1, 9054 King Khalid International Airport, Riyadh 13413-3677, Kingdom of Saudi Arabia.
Due to corporate restructuring and reorganization, changes in a name for the following Singapore Technologies Engineering, Ltd., legal entities effective on the following dates:
- Effective January 1, 2021, change in name from ST Engineering Aerospace Aircraft Maintenance Pte. Ltd. to ST Engineering Defence Aviation Services Pte. Ltd.
- Effective November 2, 2020, change in name from ST Synthesis Pte. Ltd. to ST Engineering Synthesis Pte. Ltd.
- Effective January 1, 2021, change in name from SDDA Pte. Ltd. to ST Engineering Land MRO & Services Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics (Info-Software Systems) Pte. Ltd. to ST Engineering Mission Software & Services Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics (Training and Simulation Systems) Pte. Ltd. to ST Engineering Training and Simulation Systems Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics (SatCom & Sensor Systems) Pte. Ltd. to ST Engineering SpaceTech Pte. Ltd.
- Effective January 1, 2021, change in name from ST Engineering Aerospace Ltd., EDC Division to ST Engineering Defence Aviation Services Pte. Ltd.
- Effective January 1, 2021, change in name from ST Engineering Aerospace Supplies Pte. Ltd., part of Logs Division, to ST Engineering Defence Aviation Services Pte. Ltd.
- Effective January 1, 2021, change in name from ST Engineering Electronics Ltd. Part of Large Scale Group Division to ST Engineering Advanced Networks & Sensors Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics (SatCom & Sensor Systems) Pte. Ltd., Defense Division to ST Engineering Advanced Networks & Sensors Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics Engineering Ltd., Defense Division to ST Engineering Unmanned & Integrated Systems Pte. Ltd.
- Effective January 1, 2021, change in name from ST Electronics (Info-Comm Systems) Pte. Ltd., AUV/UW Division to ST Engineering Unmanned & Integrated Systems Pte. Ltd.
- Effective January 1, 2021, change in name from ST Engineering Electronics Ltd., Part of Large Scale Group Division to ST Engineering Unmanned & Integrated Systems Pte. Ltd.
Effective December 17, 2020, change in name from VMS International Pty Ltd. to TR Pty Ltd. Due to corporate reorganization.
Effective January 1, 2021, change in name from Kongsberg Maritime CM AS to Kongsberg Maritime AS and change in address to Strandpromenaden 50, 3183 Horten, Norway due to corporate reorganization.
Effective December 23, 2020, change in name from HII Mission Driven Innovative Solutions, Inc., to HII Defense and Federal Solutions, Inc. due to corporate reorganization.
Effective December 23, 2020, change in name from Nammo Buck GmbH to Nammo Defence Germany GmbH 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 Extended Its Temporary Suspensions, Modifications, And Exceptions To The Requirements Of The ITAR That Are Currently In Effect Due To SARS-COV2

Dec. 11, 2020 – 85 Fed. Reg. 79836: The State Department announced a further extension of temporary suspensions, modifications, and exceptions to the requirements of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) that are currently in effect to permit continuity of operations during the current SARS-COV2 public health emergency and to provide time for DDTC to consider a permanent revision to the ITAR provisions relating to remote work. The following suspensions will continue to apply until June 30, 2021, unless further extended in writing:

The suspension of the requirement that a regular employee work at the company's facilities, to allow the employee to work at a remote location (except Russia or a country listed in ITAR Sec. 126.1); and
The suspension authorizing a regular employee of a licensed entity who is working remotely in a country not currently authorized by a technical assistance agreement, manufacturing license agreement, or exemption to send, receive, or access any technical data authorized for export, reexport, or re-transfer to their employer via a technical assistance agreement, manufacturing license agreement, or exemption (so long as the regular employee is not located in Russia or a country listed in ITAR § 126.1).

These actions were initially authorized May 1, 2020 (85 Fed. Reg. 25287) and were extended to December 31, 2020, on July 29, 2020 (85 Fed. Reg. 45513).

Department of the Treasury

OFAC Enacted A New Non-SDN Menu Based Sanctions List

Dec. 4, 2020: The Office of Foreign Assets Control (OFAC) announced the introduction of a new Non-Specially Designated National Menu Based Sanctions (NS-MBS) List, located on the Treasury Department website at and https://www.treasury.gov/ofac/downloads/mbs/mbslist.pdf and https://www.treasury.gov/ofac/downloads/mbs/mbslist.txt. The NS-MBS List will identify persons subject to menu-based sanctions such as those described in Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA); if the chosen sanctions do not include blocking, that will cause the person to be identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx). Additional information about the NS-MBS List and other OFAC sanctions lists is at https://home.treasury.gov/policy-issues/financial-sanctions/consolidated-sanctions-list/non-sdn-menu-based-sanctions-list-ns-mbs-list.

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OFAC Updated Four FAQs related to EO 13902, "Imposing Sanctions With Respect to Additional Sectors of Iran"

Dec. 7, 2020: OFAC updated four export-related FAQs related to EO 13902, "Imposing Sanctions With Respect to Additional Sectors of Iran" (Jan. 14, 2020 - 85 Fed. Reg. 2003 - See January 2020 and June 2020 Regulatory Updates). The FAQs address the scope of products, services, economic sectors, and activities that are covered under this EO. Updated FAQs 830, 831, 832, and 847 are on the Treasury Department website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/830, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/831, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/832, and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/847.

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OFAC Issued Three New FAQs About The Scope Of Sanctions Under The Syrian Sanctions Regulations

Dec. 22, 2020: OFAC issued three new FAQs about the scope of sanctions under the Syrian Sanctions Regulations (SySR, 31 C.F.R. Part 542) for engaging in transactions with the Central Bank of Syria (CBoS) (FAQ 866, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/866 ); engaging with the CBoS in connection with humanitarian assistance and certain other trade with Syria otherwise authorized by the SySR or exempt from regulation (FAQ 867); and engagement by a non-U.S. person in certain humanitarian-related transactions or activity (FAQ 868).

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

Dec. 23, 2020: OFAC issued Ukraine-related General License (GL) 15J, authorizing certain transactions and activities otherwise prohibited by the Ukraine Related Sanctions Regulations ("URSR", 31 C.F.R. Part 589) that are ordinarily incident and necessary to the manufacture and sale of specified vehicles and components produced by GAZ Group until Jan. 26, 2022, and superseding Ukraine-related GL 15I.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Dec. 1, 2020 – 85 Fed. Reg. 77147: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) against the following persons and when acting for or on their behalf, any successors or assigns agents, or employees:

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.

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Dec. 14, 2020: BIS announced that it had implemented a policy of denial for license applications for exports to the Turkish Presidency of Defense Industries (Savunma Sanayii Baskanligi, or SSB) as a result of Turkey’s acquisition of the S-400 long-range surface-to-air missile system from Russia. This action was coordinated with the Department of State, based on sanctions imposed under the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA, 22 USC 9201 et seq.). See below for State Department imposition of CAATSA sanctions on SSB.

Department of State

Dec. 15, 2020: The Secretary of State, in consultation with the Secretary of the Treasury, imposed 5 sanctions on the Turkish Presidency of Defense Industries (Savunma Sanayii Baskanligi, or SSB), a Turkish government entity, and its President and 4 of its senior officers. The sanctions include a prohibition on the grant of specific authorizations to export or re-export any defense articles, including technical data or defense services where SSB is a party to the transaction. (See Commerce Department section above for action against SSB taken by BIS implementing this sanction.) The sanctions were triggered when Turkey took initial delivery of a Russian S-400 surface-to-air missile system under a contract reportedly worth approximately $2.5 billion. The sanctions were imposed pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA, 22 USC 9201 et seq.), based on a determination that SSB had knowingly engaged in a significant transaction with a person operating on behalf of the defense or intelligence sectors of the Government of the Russian Federation.

Fines and Penalties

Dec. 17, 2020: Colin Fisher, a citizen of the United Kingdom, was sentenced in federal court in Pensacola, FL to 2-1/2 years in federal prison and fined $5,000 based on his September 2020 plea of guilty of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) and attempted smuggling in an effort to violate the Iranian embargo by attempting to export a Solar Mars 90 S turbine core engine and parts from the U.S. to an end-user in Iran. U.S. law enforcement authorities discovered the plan and seized the turbine before its transatlantic journey to a co-conspirator in Iran who was linked to an Iranian energy company. Fisher was arrested on Aug. 7, 2020, when he arrived at the Pensacola International Airport to finalize the illegal transaction. Fisher’s U.S. co-conspirator, James Meharg, is currently serving a 3-1/2 year sentence in federal prison. (See January and September 2020 Regulatory Updates.)

DECEMBER 2020 EXPORT CONTROL REGULATION UPDATES Read More »

NOVEMBER 2020 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through November 30, 2020. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It summarizes 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 Seeks To Replace The Current EU Dual-Use Regulation

Nov. 9, 2020: The European Council announced a provisional agreement on a revised regulation setting out the European Union (EU) regime for the control of exports, brokering, technical assistance, transit, and transfer of dual-use items. This regulation would replace the current EU Dual-Use Regulation (Regulation No. 428/2009), which has been in place since 2009. The main features of the new regulation include –

Subjecting exports of cyber-surveillance technology to stricter controls aimed at promoting human rights compliance;
Establishing an EU-level coordination mechanism concerning the export of cyber-surveillance items;
Introducing new general EU export authorizations to facilitate the licensing process for exports of certain software, technology, and cryptographic goods;
Introducing new controls, including catch-all controls, on exports of items intended for use involving internal repression and/or commission of human rights or humanitarian law violations;
Strengthening enforcement of controls through improved cooperation between licensing and customs authorities, including new mechanisms allowing member states to strengthen their cooperation in this area;
Introducing transmissible controls allowing a member state to impose new export controls on items that are subject to export-control authorizations in another member state;
Harmonizing at the EU level certain rules applicable to technical assistance that is currently regulated at the national level;
Expanding the scope of the definition of a “broker”; and
Introducing reporting rules allowing for more transparency on trade in dual-use items while respecting the confidentiality of business secrets and national security interests.

To become law, the agreement must still be endorsed by the EU Permanent Representatives Committee (Coreper) and then adopted by the European Parliament and the EU Council.

U.S. Department of Commerce – Bureau of Industry and Security

BIS Proposed To Add New ECCN 2D352 To Control Software For The Operation Of Nucleic Acid Assemblers And Synthesizers

Nov. 6, 2020 – 85 Fed. Reg. 71012: The Bureau of Industry and Security (BIS) proposed to amend the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) by adding new Export Control Classification Number (ECCN) 2D352 to control ‘‘software’’ for the operation of nucleic acid assemblers and synthesizers controlled under ECCN 2B352 that is capable of designing and building functional genetic elements from digital sequence data. This software could be exploited for biological weapons purposes, as it could be used to generate pathogens and toxins without the need to acquire controlled genetic elements and organisms. If the control is adopted, this software, which has been identified as an “emerging technology,” would be controlled under the CB2 column on the Commerce Country Chart. This software is not currently included on any of the Australia Group (AG) common control list; consequently, this control will be unilateral, absent adoption of comparable controls by the Australia Group. The deadline for comments on this proposal is Dec. 21, 2020. See the announcement at https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2020/2658-85-fr-71012-commerce-control-list-proposed-controls-on-software-for-the-operation-of-certain-automated-nucleic-acid-assemblers-and-synthesizers-request-for-comments/file for specific topics on which BIS requests comments.

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BIS Amended And Clarified Provisions Of The EAR To Make Them Consistent With The Export Control Reform Act of 2018

Nov. 18, 2020 – 85 Fed. Reg. 73411: In a final rule, BIS amended and clarified many provisions of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to reflect the expanded scope of the export control authority given to the Secretary of Commerce by the Export Control Reform Act of 2018 (ECRA, 50 U.S.C. § 4801 et seq.); update other provisions to make them consistent with ECRA; and make changes not related to ECRA concerning the issuance of licenses and denial orders and the payment of civil penalties. The changes cover, among many other things –

Authority of BIS to conduct pre-license checks (PLCs) and post-shipment verifications (PSVs) outside the U.S. (new Sec. 734.11);
Rules regarding the production of books, records, and other information for inspection, both inside the U.S. (Sec. 762.7(a)) and outside the U.S. (Sec. 762.7(b)), required to be kept pursuant to the EAR by persons located within the US;
Description of the manner in which export enforcement investigations will be conducted outside the U.S. (new Sec. 734.11);
Outline of actions the Office of Export Enforcement (OEE) may take to ensure that exports, reexports, and transfers (in-country) comply with the law (Sec. 758.7(b));
Description of actions a carrier must take to return and unload cargo when ordered by OEE and clarification of OEE’s power to order the return and unloading of cargo to ensure compliance with export laws and regulations (Sec. 758.8(b));
Addition of a prohibition on transfers (in-country) to, or on behalf of, a denied person to the terms of a standard denial order (Supp. No. 1 to Part 764);
Clarification that any license obtained based on a false or misleading misrepresentation or the falsification or concealment of a material fact is void as of the date of issuance (Sec. 750.7(a));
Revision of the maximum time period for payment of civil penalties, as a condition of receiving certain privileges under the EAR, from one year to two years (Sec. 764.3(a)(1)(ii); and
Revised Sec. 764.3(c)(2)(ii)(A) of the EAR, which now states that the Department of State may not issue licenses, or may deny licenses, for the export or reexport of defense articles and defense services to persons convicted of criminal offenses specified at 22 USC 2778(g)(1)(A), or to persons denied export privileges by BIS or another agency (Sec. 764.3(c)(2)(ii)(A).

This rule also renames many EAR provisions, updates many cross-references, deletes references to provisions of the lapsed Export Administration Act of 1979 (EAA) or replaces them with references to the ECRA or other laws, as appropriate, and makes many other technical changes.

Department of State

DDTC Name And Address Changes Posted To Website

Nov. 3 and 13, 2020: 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 UAB Safariland International to UAB Safariland Lithuania due to corporate reorganization and rebranding;
Change in Name for Textron subsidiary Howe and Howe Technologies, Inc., to Howe and Howe, Inc., due to corporate rebranding;
Change in Name from Bullet International S.A. de C.V. to Power Hit S.A. de C.V. due to acquisition of Bullet International by Power Hit;
Change in Name from Thales Services SAS to Thales Services Numériques SAS due to corporate reorganization and rebranding; and
Change in Address for Mitsubishi Heavy Industries, Ltd., subsidiary Churyo Engineering Co., Ltd.

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 Issued General Export License M, Authorizing The Exportation Of Certain Graduate Level Educational Services And Software, Under The Iranian Transactions And Sanctions Regulations

Oct. 29, 2020: To facilitate remote learning by Iranian students during the COVID-19 pandemic, the Office of Foreign Assets Control (OFAC) issued General License (GL) M, Authorizing the Exportation of Certain Graduate Level Educational Services and Software, under the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), authorizing U.S. academic institutions to export online educational services related to graduate educational courses meeting certain requirements, including participation in all activities related to the provision of such online educational services and software meeting certain requirements to students who (a) are individuals located in Iran, or located outside Iran but ordinarily reside in Iran, who are eligible for non-immigrant classification under categories F (students) or M (non-academic students), and have been granted a non-immigrant visa by the U.S. State Department, but are not physically present in the United States due to the COVID-19 pandemic. GL M is on the Treasury Department website at https://home.treasury.gov/system/files/126/iran_gl_M.pdf. At the same time, OFAC also published a new FAQ 853 describing other GLs that authorize certain U.S. academic institutions and other U.S. persons to provide certain services and software to Iranian students. FAQ 853 is at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/853.

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OFAC Issued An Advisory Describing Sanctions Risks That Arise From Dealings In High-value Artwork

Oct. 30, 2020: OFAC issued an advisory describing sanctions risks that arise from dealings in high-value artwork (generally, market value over $100,000) with persons blocked pursuant to OFAC’s authorities. The advisory describes characteristics of the market for high-value artwork that pose sanctions risks and emphasizes the importance of maintaining a “risk-based compliance program” to mitigate such risks. The advisory cautions that it is explanatory only and does not have the force of law. The Advisory and Guidance on Potential Sanctions Risks Arising from Dealings in High-Value Artwork is on the Treasury Department website at https://home.treasury.gov/system/files/126/ofac_art_advisory_10302020.pdf.

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OFAC Issued General Export License 8G Authorizing Transactions Involving Petróleos de Venezuela, S.A.

Nov. 23, 2020: OFAC issued GL 8G, "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 June 3, 2021. GL 8G is on the OFAC website at https://home.treasury.gov/system/files/126/venezuela_gl8g.pdf.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Nov. 5, 2020 – 85 Fed. Reg. 70581: BIS denied the export privileges of Abdul Majid Saidi of Rocky River, OH, for 6 years based on his March 13, 2019, conviction in U.S. District Court for the Western District of Michigan of violating 18 U.S.C. 371 by knowingly and willfully conspiring to export, from the U.S. to Lebanon, guns and gun parts designated as defense articles on the U.S. Munitions List (USML, 22 CFR Sec. 121.1) without having obtained the required licenses from the Department of State. In the court case, Saidi was sentenced to 3 months in prison with credit for time served, two years of supervised release, a $5,000 fine, and a $100 special assessment.

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Nov. 5, 2020 – 85 Fed. Reg. 70582: BIS denied the export privileges of Oswaldo Sanchez of Laredo, TX, for 10 years based on his conviction in U.S. District Court for the Western District of Texas of violating 18 U.S.C. 554(a) by knowingly facilitating the transportation and concealment and aiding and abetting the facilitation and attempted facilitation of, the export of a .50 caliber rifle from the United States to Mexico. In the court case, Sanchez was sentenced to 4 years of probation and a $100 special assessment.

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Nov. 5, 2020 – 85 Fed. Reg. 70583: BIS denied the export privileges of Patrick Germain of Evanston, IL, for 10 years based on his conviction in U.S. District Court for the Northern District of Illinois of violating 18 U.S.C. 554(a) by knowingly and fraudulently attempting to export firearms and ammunition from the United States to Haiti. In the court case, Germain was sentenced to time served, two years of supervised release, and a $100 special assessment.

Fines and Penalties

Nov. 2, 2020: Ge Songtao, of Nanjing, China, the chairman of Shanghai Breeze Technology Do. Ltd., of Shanghai, China, pleaded guilty in U.S. District Court in Jacksonville, FL, to conspiring to submit false export information through the Automated Export System (AES), and, to fraudulently export maritime raiding craft and engines, to China, and attempting to fraudulently export the equipment. According to the plea agreement, Songtao sought to identify a source of supply of U.S.-manufactured combat rubber raiding craft equipped with engines that can operate using gasoline, diesel fuel, or jet fuel. These vessels and multi-fuel engines are used by the U.S. military and can be operated after being launched from a submerged submarine. To induce the manufacturer to sell this equipment, Yang Yang, an employee of Shanghai Breeze, falsely represented that the customer was in Hong Kong rather than mainland China. To facilitate the purchase, Songtao arranged for the wire transfers to a separate company in Hong Kong, Belt Consulting Company Limited, which in turn wired over $110,000 to the U.S. manufacturer. He also coordinated plans to send an employee to Hong Kong to receive the raiding craft and engines and transship them to mainland China. Yang pleaded guilty in September 2020 to the same two charges to which Ge Songtao has now pleaded guilty. (See report in September 2020 Regulatory Update.)

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Nov. 10, 2020: DES International Co., Ltd., a Taiwan business organization, Soltech Industry Co., Ltd., a Brunei business organization related to Soltech, and Chin Hua Huang of Taiwan, a sales agent for DES and Soltech, were charged in U.S. District Court for the District of Columbia with conspiracy to defraud the U.S. and to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707)

and the ITSR by buying goods from the U.S., concealing the origin of those goods, and sending them to Iran for use by the government and businesses. Huang, on behalf of DES and Soltech, allegedly helped an Iranian research center obtain U.S. goods including a power amplifier and cybersecurity software by concealing their U.S. origin, including by removing serial number stickers with the phrase “Made in the USA” from the packages, and by causing the cybersecurity software to be downloaded onto a computer outside of Iran.

Concurrent with this criminal action by the Justice Department, the Treasury Department sanctioned Huang, DES, Soltech, and 7 related individuals and entities and placed them on the Specially Designated National and Blocked Persons List (SDN List).

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Nov. 18, 2020: Wei Sun, a Chinese national and naturalized U.S. citizen, was sentenced in U.S. District Court for the District of Arizona to 38 months in prison based on his plea of guilty of one felony count of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by exporting ITAR-controlled technical information to China without the required export license. (See report of the guilty plea in February 2020 Regulatory Update.) Specifically, on a personal trip to China taken while Sun was employed as an electrical engineer with Raytheon Missiles and Defense, he carried a company-issued computer containing ITAR-controlled data associated with an advanced missile guidance system. Sun knowingly transported the controlled information to China without a license despite having been trained to handle these materials correctly.

NOVEMBER 2020 EXPORT CONTROL REGULATION UPDATES Read More »

OCTOBER 2020 UPDATES

October 2020

This newsletter is a listing of the latest changes in export control regulations through October 31, 2020. 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 Proposed Its Annual EU Dual-Use Export Control List Update

Oct. 7, 2020: The European Commission (EC) proposed its annual update to the European Union (EU) dual-use export control list (Annex 1 to Regulation (EC) No. 428/2009) to align it with changes adopted by three international non-proliferation export control regimes: the Wassenaar Arrangement (WA, covering conventional arms and sensitive dual-use civilian/military goods and technologies); the Australia Group (AG, covering dual-use chemical manufacturing facilities, equipment, and related technology, plant pathogens, animal pathogens, biological agents, and dual-use biological equipment); and the Missile Technology Control Regime (MTCR, covering proliferation of missiles, complete rocket systems, unmanned air vehicles, and related technology for those systems capable of carrying a 500-kilogram payload at least 300 kilometers, as well as systems intended for the delivery of weapons of mass destruction). The EC announcement of the update (https://trade.ec.europa.eu/doclib/docs/2020/october/tradoc_158973.pdf) includes a list of the main changes in the control list and a link to a Comprehensive Change Note Summary that details all the technical changes and compares them to the 2019 EU Dual-Use Control List across all 10 categories. The announcement also provides a link to the full text of the proposed Regulation.

The new list will be published in the Official Journal of the European Union on December 14, 2020, and enter into force December 15, 2020, unless there are prior objections from the European Council or the European Parliament.

Department of Commerce – Bureau of Industry and Security

BIS Notified The Public That Restrictions On TikTok, Inc. Will not Go Into Effect, Pending Legal Developments

Oct. 2, 2020 – 85 Fed. Reg. 62214: BIS notified the public that, in compliance with a preliminary injunction granted to TikTok, Inc., by the District of Columbia Federal District Court, prohibitions that the Secretary of Commerce had ordered Sep. 24, 2020 (85 Fed. Reg. 60061) on certain transactions will not go into effect, pending further legal developments. The transactions whose prohibition has been enjoined are “any provision of services to distribute or maintain the TikTok mobile application, constituent code, or application updates through an online mobile application store, or any online marketplace where mobile users within the land or maritime borders of the United States and its territories may download or update applications for use on their mobile devices.”

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BIS Adds Controls On Six (6) Emerging Technologies

Oct. 5, 2020 – 85 Fed. Reg. 62583: The Bureau of Industry and Security (BIS) amended the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) and additional provisions in the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to add controls on 6 emerging technologies that are essential to U.S. security, consistent with the requirements of the U.S. Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) and the actions taken by the Wassenaar Arrangement (WA) at its December 2019 Plenary Meeting. The 6 technologies are:

Hybrid additive manufacturing (AM)/computer numerically controlled (CNC) tools;
computational lithography software designed for the fabrication of extreme ultraviolet (EUV) masks;
technology for finishing wafers for 5nm production;
digital forensics tools that circumvent authentication or authorization controls on a computer (or communications device) and extract raw data;
software for monitoring and analysis of communications and metadata acquired from a telecommunications service provider via a handover interface; and
sub-orbital craft.

To implement these changes, BIS added Export Control Classification Number (ECCN) 3E004 to control technology required for the slicing, grinding and polishing of 300 mm diameter silicon wafers and revised ECCNs 2B001, 3D003, 5E001, 5A004, and 9A004 and related ECCNs 5D002, 5E002, 9A012, and 9A515. Also, a correction was made in ECCN 5D001 regarding License Exception (LE) STA (Strategic Trade Authorization), and a revision was made in LE ENC (Encryption Commodities, Software, and Technology, EAR Sec. 740.17). BIS stated that it will implement the remaining decisions made at the WA 2019 Plenary in a separate rule.

Please contact us for additional information if your company is involved with these technologies.

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BIS Published A Final Rule Intended To Promote Human Rights

Oct. 6, 2020 – 85 Fed. Reg. 63007: In a final rule designed expressly to promote respect for human rights throughout the world, BIS amended EAR Sec. 742.7 to provide 1) that applications for items controlled for reasons of crime control (CC) will generally be considered favorably unless there is a civil disorder in the country or region of destination or if BIS assesses that there is a risk that the items will be used to violate or abuse human rights, and further, 2) that except for items controlled for short supply reasons, applications for items that require a license for any reason other than CC will also be judged based on whether they could be used by the recipient specifically to violate or abuse human rights.

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BIS Amends The EAR To Impose A License Requirement For Exports And Reexports Of Water Cannon Systems And Parts And Components Thereof

Oct. 6, 2020 – 85 Fed. Reg. 63009: In another action expressly designed to address violations of human rights, with particular reference to exports to the Hong Kong Police Force, BIS amended the EAR to impose a license requirement on exports and reexports of water cannon systems including their parts and components (ECCNs 0A977, 0D977, and 0E977).

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BIS Added 26 Persons To the Unverified List

Oct. 9, 2020 – 85 Fed. Reg. 64014: BIS added 26 persons – three in Armenia, two in Finland, three in Germany, five in Hong Kong, three in Pakistan, two in Turkey, six in the United Arab Emirates (UAE), and one each in China and Mexico -- to the Unverified List (UVL, EAR Part 744, Supp. No. 6) because it was not possible to complete a satisfactory end-use check on them for reasons outside the U.S. Government’s control. In the same rule BIS removed 40 persons – 16 in China, 22 in Hong Kong, one in Indonesia, and one in the UAE – from the UVL because BIS was able to conduct a successful end-use check or because they are no longer registered to do business in the country of listing and are no longer involved in U.S. exports.

(Exports, reexports, and transfers (in-country) to a person listed on the UVL are ineligible for license exceptions (EAR §740.2(a)(17)), and exporters, reexporters, and transferors of an item that is not otherwise subject to a license requirement must obtain a special statement meeting requirements described in EAR §744.15(b) before sending the item to a listed person.)

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BIS Extends The Deadline For Public Comment On The Definition Of Foundational Technologies To November 9, 2020

Oct. 9, 2020 – 85 Fed. Reg. 64078: BIS amended an Advance Notice of Proposed Rulemaking (ANPRM) it had issued on Aug. 27, 2020 (85 Fed. Reg. 52934) requesting public comments on specific topics relating to the development of a definition of “foundational technologies.” (See August 2020 Regulatory Update for details of this request.) The amendment extends the deadline for comments to Nov. 9, 2020, and provides rules for submitting business confidential information.

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BIS Streamlined The Procedure For Exporters To Request 6-month Extensions Of The Validity Period For Export Licenses Due To Expire On Or Before December 31, 20207

Oct. 16, 2020: Recognizing the importance of exports during this time of economic transition and recovery, BIS announced a special procedure for streamlining requests by exporters for 6-month extensions of the validity period for export licenses due to expire on or before Dec. 31, 2020. BIS estimates that the majority of extension validity requests using a new central electronic mailbox at LicenseExtensionRequest@bis.doc.gov will be processed and approved within two to three business days. This BIS announcement is at https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/2645-extension-of-license-validity-announcement/file.

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BIS Amends EAR Sec. 742.4 To Revise The License Review Policy For Items Controlled For National Security Reasons Destined For The People’s Republic Of China (PRC), Venezuela, Or Russia

Oct. 29, 2020 – 85 Fed. Reg. 68448: BIS amended EAR Sec. 742.4 to revise the license review policy for items controlled for national security reasons destined for the People’s Republic of China (PRC), Venezuela, or Russia. BIS and reviewing agencies will now determine, based on specific factors, whether the export, reexport, or transfer (in-country) of items controlled for national security reasons will make a material contribution to the development, production, maintenance, repair, or operation of weapons systems in those countries. A general policy of approval will apply to applications for items determined to be for civil end-users and civil end-uses, and a presumption of denial will apply to applications for items that would make a material contribution to the development, production, maintenance, repair, or operation of weapons systems, subsystems, and assemblies in these countries.

Department of State

DDTC Name And Address Changes Posted To Website

Oct. 14 and 20, 2020: 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 Coritel S.A. to Tecnilógica Ecosistemas, S.A. due to corporate rebranding; and
Change in name from Flybe Aviation Services Limited to Atlantic Aviation Group Defence Services Limited due to Flybe’s acquisition by Atlantic Aviation (Virgin Atlantic Airways Ltd.).

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 Updates Frequently Asked Questions Regarding The U.S. Patent And Trademark Office And The “See Through Rule”

Sep. 30 and Oct. 5, 2020: DDTC published updated responses to two Frequently Asked Questions (FAQs):

Q: Does DDTC restrict the United States Patent and Trademark Office (USPTO) from including ITAR-controlled technical data when publishing a patent application? (See response at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_detail&sys_id=beb9e9061be79490d1f1ea02f54bcb78.)
Q: Where can I find the "see-through rule" in the ITAR and how does it work? (See response at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_detail&sys_id=e79535e31be7dc90d1f1ea02f54bcbf4.)

Department of the Treasury

OFAC Issued General License 8A For Certain Humanitarian Transactions With The Central Bank Of Iran Or The National Iranian Oil Company

Oct. 26, 2020: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License 8A, “Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran or the National Iranian Oil Company,” on its website at https://home.treasury.gov/system/files/126/iran_gl8a.pdf. OFAC also posted amended related Frequently Asked Questions (821, 822, 823, 825, 828, and 844), accessible through links at https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20201026_33.

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OFAC Published Updated FAQs Regarding The Cuban Assets Control Regulations

Oct. 26, 2020: OFAC published updated FAQs 72, 717, 728, 732, 733, 734, 756, 759, 796, and 797 relating to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515).

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OFAC Amended The Cuban Assets Control Regulations To Deny The Cuban Government’s Access To Funds In Connection With Remittances To Cuba

Oct. 27, 2020 – 85 Fed. Reg. 67988: OFAC amended the CACR to further implement portions of the President’s policy to deny the Cuban government access to funds in connection with remittances to Cuba. A description of the provisions of this amendment is in New FAQ 852 at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/852. The effective date of this rule is Nov. 26, 2020.

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OFAC Amended The Yemen Sanctions Regulations

Oct. 29, 2020 – 85 Fed. Reg. 68461: OFAC amended the Yemen Sanctions Regulations (31 CFR Part 552) that were published in abbreviated form on November 9, 2012 and reissued them in their entirety due to the number of regulatory sections being updated or added. This final rule is a more comprehensive set of regulations that includes additional interpretive and definitional guidance, general licenses, statements of licensing policy, and other regulatory provisions that will provide further guidance to the public.

* DATES: This rule was effective October 29, 2020.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

Oct. 29, 2020 – 85 Fed. Reg. 68557: BIS denied the export privileges of Junior Joel Joseph for 7 years based on his April 12, 2019 conviction in U.S. District Court for the Southern District of Florida of violating 18 USC 371, Section 38 of the Arms Export Control Act (AECA, 22 U.S.C.A. 2778 (2012), the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701, et seq. (2012)) and 18 U.S.C. 554(a) by conspiring to illegally export and send firearms and ammunition from the U.S. to Haiti without having obtained the required authorization, license, or approval. In the court case, Junior Joseph was sentenced to 16 months in prison, 3 years of supervised release, and a $500 assessment.

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Oct. 29, 2020 -- 85 Fed. Reg. 68558: BIS denied the export privileges of Jimy Joseph for 7 years based on his May 22, 2019 conviction of violating 18 U.S.C. 371 and 18 U.S.C. 554(a) by conspiring to illegally export and send firearms and ammunition from the U.S. to Haiti without having obtained the required authorization, license, or approval in violation of 18 U.S.C. 371 and for fraudulently and knowingly exporting, sending, and attempting to export AR-15 type rifles, Glock semi-automatic pistols, and ammunition from the U.S. to Haiti in violation of 18 U.S.C. 554. In the court case, Jimy Joseph was sentenced to 16 months in prison, 3 years of supervised release, and a $200 assessment.

Fines and Penalties

Oct. 6, 2020: Joyce Eliabachus of Morris County, NJ, was sentenced in federal court in Newark, NJ to 18 months’ imprisonment followed by one year of supervised release based on her plea of guilty of one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707). As the principal officer and operator of an aviation parts trading company, Edsun Equipments LLC, Eliabachus participated in an international procurement network that acquired 23,554 export-controlled aircraft components valued at over $2 million from U.S. distributors and shipped them to companies in the UAE and Turkey, where co-conspirators redirected them to locations in Iran. Eliabachus routinely falsified the true destination and end-users of the aircraft components and falsified the true value of the components being exported in order to avoid filing export control forms.

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Oct. 15, 2020: Seyed Sajjad Shahidian, a citizen of Iran, the founder and former Chief Executive Officer of PAYMENT24, an internet-based financial services company with offices in Tehran, Shiraz, and Isfahan, Iran, was sentenced in U.S. District Court in Minneapolis, MN to 23 months in prison for his role in conducting financial transactions in violation of US. sanctions against Iran. The primary business of PAYMENT24 was helping Iranian citizens conduct prohibited financial transactions with businesses based in the United States, including the unlawful purchase and exportation of computer software, software licenses, and computer servers from United States companies. According to his guilty plea and documents filed in court, Shahidian made material misrepresentations and omissions to United States-based businesses regarding the Iranian destination of United States-origin goods. In order to accomplish the transactions with U.S. sellers, Shahidian obtained payment processing accounts from United States-based companies like PayPal using fraudulent passports and other false residency documentation to falsely represent that his customers resided outside of Iran. Among these, he admitted to opening hundreds of PayPal accounts on behalf of his PAYMENT24 customers who resided in Iran and to unlawfully bringing millions of U.S. dollars into the economy of Iran. Unauthorized exports of goods, technology or services to Iran, directly or indirectly from the United States or by a United States person are prohibited by the International Emergency Economic Powers Act (IEEPA).

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Oct. 20, 2020: The Treasury Department Office of Foreign Assets Control announced that Berkshire Hathaway, Inc., a multinational conglomerate holding company based in Omaha, NE, on behalf of itself and its Turkish subsidiary, Iscar Kesici Takim Ticareti ve Imalati Limited Sirket, agreed to pay $4,144,651 to settle its potential civil liability for 144 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Specifically, Iscar apparently violated ITSR Sec. 560.215 when it exported 144 shipments of cutting tools and related inserts with a total value of $383,443 to two third-party Turkish distributors with knowledge that these items would be shipped to Iran for resale to Iranian end-users including several entities later identified as meeting the definition of the Government of Iran. Berkshire voluntarily self-disclosed the apparent violations on behalf of Iscar. However, OFAC stated that Iscar’s apparent violations were particularly serious and called for strong enforcement because they occurred under the direction of senior managers despite repeated communications from Berkshire regarding U.S. sanctions against Iran, and Iscar took steps to conceal these activities from Berkshire.

OCTOBER 2020 UPDATES Read More »

SEPTEMBER 2020 UPDATES

SEPTEMBER 2020

This newsletter is a listing of the latest changes in export control regulations through September 30, 2020. The newsletter is providedas a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to exportcontrol regulations or other regulatory matters of interest that may impact your company’s internationaltrade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net withquestions 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

Miscellaneous

The Department of State, OFAC and BIS Issued an Advisory on North Korea’s Ballistic Missile Procurement Activities

Sep. 1, 2020: The U.S. Department of State’s Bureau of International Security and Nonproliferation, the Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the Department of Commerce’s Bureau of Industry and Security (BIS) jointly issued an advisory onNorth Korea’s ballistic missile procurement activities. The Advisory provides extensive information including key North Korean entities and deceptive techniques, key materials and equipment used in the missile program, and an overview of U.S. sanctions authorities and North Korea-related sanctions enforcement resources. This advisory was issued because industry is on the front line of detecting and thwarting North Korea’s procurement attempts. It is critical that private sector companies and individuals be aware of key items sought by the North Korean weapons programs, North Korean procurement tactics and techniques, the risks of involvement in North Korea’s ballistic missilerelated procurements, and the potential consequences they face if determined to be engaging in conduct that is subject to UN and/or U.S. sanctions authorities.This Advisory is on the Treasury Department website at

https://home.treasury.gov/system/files/126/20200901_nk_ballistic_missile_advisory.pdf (19 pp.).

Department of Commerce – Bureau of Industry and Security

BIS Amended the CCL and EAR Per The Wassenaar Plenary

Sep. 11, 2020 – 85 Fed. Reg. 56294: BIS amended the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) and corresponding parts of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to implement changes to the Wassenaar Arrangement List of Dual-Use Goods and Technologies and Munitions List (WA Lists) made at the December 2018 plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (WA). (New controls involving five emerging technologies essential to U.S. national security that were also agreed to at the December 2018 WA plenarywere implemented in changes in the CCL on May 23, 2019. See May 2019 Regulatory Update.) The new rule implements the following changes:• Revisions to Export Control Classification Numbers (ECCNs)0A617, 1C001, 2A001, 2B003, 2B006, 3A001, 3A002, 3B001, 3E003, 5E001, 5A002, 5D002, 5E002, 5E992, 6A003, 6A005, 7A002, 7A003, 7A005, 7D003, 7D005, 8A001, 8A002, 8B001, 9A010, 9A610, 9B001, and 9E003;• License exception revisions to ECCNs 1C004 (GBS); 8A001 (LVS, STA); 8D001 (TSR, STA); and 8E001 (TSR, STA); • New ECCN 6B002 (masks and reticles for optical sensors specified in 6A002.a.1.b or 6A002.a.1.d); • Conforming changes to ECCNs 0A606, 1A008, 3A991, 6A002, 6E001, 6E002, 8D001, and 8E001; and• Revisions in some reporting requirements.

Please contact us for additional details if your commodities are regulated by one of the referenced ECCNs to learn the specific nature of the change.

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BIS Added 47 Entities in Canada, China, Hong Kong, Iran (15 entries including 5 individuals), Malaysia, Oman, Pakistan, Thailand, Turkey, the United Arab Emirates (UAE), and the United Kingdom to the Entity List

Sep. 24, 2020 – 85 Fed. Reg. 59419: BIS amended the EAR by adding 47 entities in Canada, China, Hong Kong, Iran (15 entries including 5 individuals), Malaysia, Oman, Pakistan, Thailand, Turkey, the United Arab Emirates (UAE), and the United Kingdom 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 license review policy of presumption of denial will apply to 39 of the 47 entities, and no license exceptions will now apply to exports, reexports, or in-country transfers of all items subject to the EAR to 39 of these persons. The remaining 8 entities will be subject to the licensing policy described under EAR Sec. 744.2 (Restrictions on Certain Nuclear End-Uses). No license exceptions will be available for exports, reexports, or transfers (in-country) to any of these entities.

(The Entity List (Supplement No. 4 to part 744) identifies persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. Editors’ Note: Use of the consolidated screening tool will ensure your company screening includes these added entities.)

Department of Commerce – Census Bureau

Census Seeks Comments Regarding The Impact on Removal of EEI Requirements for Exports to Puerto Rico and the U.S. Virgin Islands

Sep. 17, 2020—85 Fed. Reg. 58016: The Census Bureau Economic Management Division invited public comments on the possible impact on statistics, data users, businesses, and any others of removing the Electronic Export Information (EEI) filing requirement for shipments between the U.S. and Puerto Rico and the U.S. Virgin Islands, and to identify any other possible impacts. Removal of this requirement has been requested by the Government of Puerto Rico and members of the international trade community because it seems to treat Puerto Rico like a foreign country when in fact it is a U.S. territory and part of the U.S. customs area and because the filing requirement imposes a burden on interstate commerce and impedes economic development in Puerto Rico. However, removal of the requirement could impact the quality and availability of key federal statistics. Deadline for comments is Nov. 16, 2020.

Department of State

DDTC Name And Address Changes Posted To Website

Sep. 11, 14, and 30, 2020: 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 Meggitt Training Systems Pty Ltd. to InVeris Training Solutions Pty Ltd. due to corporate rebranding;• Change in Name from Meggitt Training Systems Ltd. to InVeris Training Solutions Limited. Due to corporate rebranding;• Change in Name from Meggitt Training Systems, Inc. changed name to InVeris Training Solutions, Inc. due to corporate rebranding;• Change in Name from Rheinmetall Military Vehicles GmbH to Rheinmetall Landsysteme GmbH due to an intracompany merger;• Change in Name from Meggitt Training Systems Pte Ltd. to InVeris Training Solutions Pte. Ltd.due to corporate rebranding;• Change in Name from Meggitt Training System Europe B.V. changed name to InVeris Training Solutions Europe B.V. due to corporate rebranding;• Change in Name from Sonovision ITEP-Spain, S.A.U. to Sonovision Ingenieros España S.A.U. due to corporate rebranding and Change in Address;• Change in Address for Ascent Vision Technologies, LLC;• Change in Name from TELEFUNKEN Radio Communication Systems GmbH & Co. KG to Elbit Systems Deutschland GmbH & Co. KG due to corporate rebranding and consolidation by Elbit of its wholly owned subsidiary, TELEFUNKEN Radio Communication Systems; and• Change in Name from Meggitt Training Systems (Quebec), Inc. to InVeris Training Solutions Canada Inc. 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 Invited Public Comments on the Revision of Form DS-6004, Request to Change End-User, End-Use and/or Destination of Hardware

Sep. 2, 2020 – 85 Fed. Reg. 54613: DDTC invited public comments on the revision of Form DS-6004, Request to Change End-User, End-Use and/or Destination of Hardware. Comments will aid DDTC in evaluating its accuracy in estimating the time and cost burden for this collection, including the validity of the methodology and assumptions used; enhance the quality, utility, and clarity of the information to be collected; and minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Deadline for comments is Nov. 2, 2020.

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DDTC Temporarily Removed Restrictions on Exports, Reexports, Retransfers, and Temporary Imports of Non-lethal Defense Articles and Defense Services Destined for or Originating in Cyprus

Sep. 28, 2020 – 85 Fed. Reg. 60698: The Department of State amended International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 126.1(r) to temporarily remove prohibitions on exports, reexports, retransfers, and temporary imports of non-lethal defense articles and defense services destined for or originating in Cyprus. Under the new rule, the U.S. Department of State will deny applications for licenses or other approvals for exports or imports of defense articles and defense services destined for or originating in Cyprus, except that a license or other approval may be issued, on a case-by-case basis, for the United Nations Forces in Cyprus (UNFICYP) or for civilian end-users. However, the policy of denial will not apply to exports, reexports, retransfers, and temporary imports of non-lethal defense articles and defense services destined for or originating in Cyprus if: (1) the request is made by or on behalf of the Government of the Republic of Cyprus; (2) the end-user of such defense articles or defense services is the Government of the Republic of Cyprus; and (3) there are no credible human rights concerns. This temporary rule is effective Oct. 1, 2020 through Sep. 30, 2021. An announcement and 5 FAQs about this rule are on the DDTC home page at https://www.pmddtc.state.gov/ddtc_public .

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The Department Of State Published the Cuba Prohibited Accommodations List

Sep. 28, 2020 – 85 Fed. Reg. 60855: The State Department published the Cuba Prohibited Accommodations List (CPA List) identifying properties owned or controlled by the Cuban government, prohibited officials of the Cuban government, and other prohibited parties. TheCuban Assets Control Regulations (CACR, 31 CFR Part 515), as amended by the Treasury Department Office of Foreign Assets Control (OFAC) on Sep. 28, 2020 (see Treasury Department section below), prohibit persons subject to U.S. jurisdiction from lodging, paying for lodging, or making any reservation for a third party to lodge at any listed property when the terms of the general or specific license expressly exclude such a transaction. The CPA List is accessible on the State Department website at

https://www.state.gov/cuba-sanctions/cuba-prohibited-accommodations-list/cuba-prohibited-accommodations-list-initial-publication/.

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The Department of State Published an Updated List of Entities and Subentities Associated With Cuba

Sep. 29, 2020 – 85 Fed. Reg. 61079: The State Department published an updated List of Entities and Subentities Associated With Cuba (Cuba Restricted List)with which direct financial transactions are generally prohibited under the CACR. The announcement noted that the Department of Commerce’s BISalso will generally deny applications to export or reexport items for use by entities or subentities on the Cuba Restricted List. The Cuba Restricted List and additional information concerning it are on the Department of State website at https://www.state.gov/cuba-sanctions/cuba-restricted-list/.

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DDTC Posted New FAQ Regarding the ITAR and the U.S. Patent and Trademark Office

Sep. 30, 2020: DDTC posted a new FAQ describing the circumstances under which the U.S. Patent and Trademark Office (USPTO) is, and is not, restricted from including ITAR-controlled technical data that is submitted by a patent applicant.The FAQ advises that information published by the USPTO as part of a patent application and available at any patent office is public domain information (see ITAR section 120.11(a)(5)). By definition, it is not technical data (see ITAR section 120.10(b)). Technical data submitted as part of a patent application and not published and available at any patent office is not information in the public domain and remains ITAR-controlled.Access this FAQ on the DDTC public portal at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events .

Department of the Treasury

OFAC Issued an Interim Final Rule Regarding Amounts of Civil Monetary Penalties

Sep. 3, 2020 – 85 Fed. Reg. 54911: OFAC issued an interim final rule adjusting the amounts of civil monetary penalties (CMPs) for failure to comply with certain recordkeeping and reporting requirements that are included in the Trading with the Enemy Act (50 U.S.C. 4315) (TWEA) and the International Emergency Economic Powers Act (50 U.S.C. 1705) (IEEPA), among others. The new amounts account for a catch-up adjustment that would have become effective for these CMPs August 1, 2016, plus annual adjustments for 2017 through 2020. The new CMPs, which vary depending upon the offense, range from $1,189 to $59,522, up from $1,000 to $50,000.The new amounts are applicable only to CMPs assessed after October 5, 2020, whose associated violations occurred after November 2, 2015.Deadline for comments was Oct. 5, 2020.*******

The U.S. Treasury Department, Office of Investment Security Published a Final Rule RegardingCFIUS Prior Notification If The U.S. Business Produces, Designs, Tests, Manufactures, Fabricates Or Develops Critical Technologies That Require “U.S. Regulatory Authorization”

Sep. 15, 2020 – 85 Fed. Reg. 57124: The U.S. Treasury Department Office of Investment Securitypublished a final rule that gave U.S. export control requirements an entirely new role. As background, the 2018 Foreign Investment Risk Review Modernization Act (FIRRMA)created a requirement that required parties to submit to the Committee on Foreign Investment in the United States (CFIUS) a prior notification of investments by non-U.S. persons in any U.S. business that produces, designs, tests, manufactures, fabricates, or develops any critical technologies, with a description of the types of industries that constituted a critical technology. Under the new rule, however, the prior notificationrequirement depends upon the more concrete issue of whether the export, re-export, transfer (in-country) of the technology in question requires “U.S. regulatory authorization,” with “U.S. regulatory authorization” defined to mean a license issued by the State Department under the ITAR, a license from the Commerce Department under the EAR, or a license issued by the Department of Energy or the Nuclear Regulatory Commission under specified regulations. Extensive additional rules about the nature and extent of the proposed foreign ownership also apply to the determination of whether a particular transaction will trigger a mandatory prior declaration. Effective date of the new rule is Oct. 15, 2020.

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OFAC Amended the Cuban Assets Control Regulations

Sep. 24, 2020 – 85 Fed. Reg. 60068: OFAC made extensive amendments to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) to implement the President’s policy to deny the Cuban regime sources of revenue. The changes:• add a new prohibition at CACR Sec. 515.210 for persons subject to U.S. jurisdiction regarding lodging and related transactions at certain properties in Cuba identified on a new list maintained by the State Department (see State Department section above) and amend an interpretive provision and several general licenses to incorporate this new prohibition;• amend four general licenses to restrict the importation into the United States of Cuban-origin alcohol and tobacco products;• amend a general license to remove the authorization for persons subject to U.S. jurisdiction to attend or organize professional meetings or conferences in Cuba;• remove a general license that authorizes persons subject to U.S. jurisdiction to participate in or organize certain public performances, clinics, workshops, other athletic or non-athletic competitions, and exhibitions and replace it with a specific licensing policy; and• make numerous technical and conforming changes.

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OFAC Posted 37 New and Updated Cuba Sanctions FAQs

Sep. 24, 2020: OFAC posted 37 new and updated Cuba Sanctions FAQs on its website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/topic/1541.

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OFAC Published a New FAQ On Issues Involved in Dealing With an Official of the Government of the Hong Kong Special Administrative Region

Sep. 25, 2020: OFAC published a new FAQ on issues involved in dealing with an official of the Government of the Hong Kong Special Administrative Region (HKSAR) who is designated as a Specially Designated National (SDN). The designation of an official of the Government of the HKSAR does not itself block the HKSAR government or any government agency where the SDN is an official or otherwise exercises control. FAQ 840 is on the OFAC website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/840.

President / U.S. Department of Commerce

The President’s August 6, 2020, Executive Orders And U.S. Department of Commerce’s Restrictions Related to Stopping Transactions With WeChat and TikTok

On August 6, 2020, the President issued two Executive Orders related to stopping transactions with Chinese apps WeChat and TikTok. The Executive Orders gave the U.S. Department of Commerce the authority to implement restrictions on transactions with WeChat and TikTok. The Executive Orders gave the Department of Commerce 45 days to implement the restrictions, which was September 20, 2020. On September 18, 2020, the U.S. Department of Commerce issued rules for public inspection regarding its proposed restrictions on WeChat and TikTok. The restrictions on TikTok are on-hold pending its corporate parent’s, ByteDance, spin off of TikTok in the U.S. to a new company-owned 20% by Oracle and 20% by Walmart. The restrictions on WeChat are on hold due to a preliminary injunction issued on Saturday, September 19, 2020, that prevents implementation of the WeChat restrictions announced by the U.S. Department of Commerce on September 18, 2020.

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.

Sep. 24, 2020 – 85 Fed. Reg. 60131:BIS denied the export privileges of Walid Chehade of Westlake, OH,for 7 yearsbased on his May 8, 2019 conviction in U.S. District Court for the Western District of Michigan of violating 18 US.C. 371 by knowingly and willfully conspiring to export from the U.S. to Lebanon guns and gun parts designated as defense articles on the U.S. Munitions List (USML, 22 CFR Sec. 121.1) without first obtaining the required licenses from the U.S. Department of State. In the court case,Chehade was sentenced to time served, one year of supervised release, a $5,000 fine, and a $100 special assessment.

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Sep. 1, 2020: Colin Fisher, a citizen of the United Kingdom, pleaded guilty in Federal Court for the Northern District of Florida to violating IEEPA and attempted smuggling in an effort to export a Solar Mars 90 S turbine core engine and parts that could be used to provide needed energy to the oil fields of Iran from the U.S. to a conspirator in Iran who was linked to an Iranian energy company. Fisher was arrested when he arrived in Pensacola, FL, from the United Arab Emirates (UAE) to consummate the illegal transaction. The turbine was seized by U.S. federal authorities before its transatlantic journey.

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Sep. 1, 2020: Carl Zeiss SBE LLC of Thornwood, NY, agreed to pay $55,000 to settle allegations by BISof 10 violations of the EAR involving exports of rifle scopeswith an estimated value of $889,170 that were controlled for Firearms Convention reasons under ECCN 0A987 to Canada without the required authorization from BIS.Carl Zeiss SBE LLC knew or had reason to know that a license was required for these exports because it had previously applied for and been granted a license from BIS for the same or similar exports that were also controlled under ECCN 0A987.

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Sep. 16, 2020: Yang Yang of Jacksonville, FL, an employee of Shanghai Breeze Technology Co., Ltd., of Shanghai, China, pleaded guilty to conspiring to submit false export information through the Automated Export System (AES) and to fraudulently export maritime raiding craft and engines to China, and attempting to fraudulently export that equipment in violation of U.S. law. According to the plea agreement, at the direction of co-conspirators in China she attempted to order seven military-model combat rubber raiding craft equipped with multi-fuel enginesfrom a U.S. manufacturer, falselyidentifying the purchaser as an entity in Hong Kong. By misrepresenting the purchaser, Yang caused the entry of false information in the AES. On Aug. 13, 2020,Yang’s co-defendant, Zheng Yan, pleaded guiltyto conspiring to submit false export information and to fraudulently export the raiding craft and engines. Co-defendants Fan Yang and Ge Songtao are scheduled to go on trial Feb. 1, 2021.

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Sep. 17, 2020: Comtech Telecommunications Corp. of Melville, NY, and its wholly-owned subsidiary, Comtech EF Data Corp, of Tempe, AZ, which sell advanced communications systems, software, and services, agreed to pay $894,111 to settle potential civil liability for four apparent violations of the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538). The apparent violations involved indirect exports of warrantied satellite equipment and facilitation of services and training to a government-owned Sudanese entity. As part of the settlement, Comtech also committed to add three senior export compliance positions to its staff. In reporting this case, OFAC noted that companies engaging in high-risk international transactions should understand their obligations under OFAC regulations and recognize that they cannot shift those obligations onto their foreign customers or counterparties.

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Sep. 24, 2020: Keysight Technologies, Inc. of Santa Rosa, CA, on behalf of its former Finnish subsidiary, Anite Finland Oy, a designer and seller of test and measurement instruments and related software products to the wireless industry, agreed to pay $473,157 to settle its potential civil liability for Anite’sviolation of Sec. 560.205 of theIranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560)by re-exportinggoods that incorporated 10 percent or more of U.S.-export controlled content with the knowledge that such goods were destined for end-users in Iran. The illegally exported goods were valued at $331,089. After Keysight acquired Anite and implemented its policy to restrict sales to Iran, Anite employees continued sales to Iran, obfuscating the sales from Keysight. Keysight and Anite subsequently implemented remedial measures to prevent future unauthorized sales.

SEPTEMBER 2020 UPDATES Read More »

AUGUST 2020 EXPORT CONTROL REGULATION UPDATES

August 2020

This newsletter is a listing of the latest changes in export control regulations through August 31, 2020. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It summarizes 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 Issues Executive Order To Extend The Export Administration Act Of 1979

Aug. 14, 2020 -- 85 Fed. Reg. 49939: President Trump issued Executive Order (EO) 13222 pursuant to the International Emergency Economic Powers Act (IEEPA, 50 USC 1701 et seq.), continuing for an additional year the national emergency regarding the unusual and extraordinary threat to the national security, foreign policy and economy of the U.S. that has existed since the Export Administration Act of 1979, as amended (EAA, 50 USC 4601 et seq.), expired in 2001. This action is needed to provide authority for carrying out certain sanctions under the IEEPA that are not authorized by other legislation.

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Department of Commerce – Bureau of Industry and Security

BIS Adds 38 Non-U.S. Huawei Affiliates In 21 Countries To The Entity List And Updates General Prohibition # 3 “The Foreign Direct Product” Rule

Aug. 20, 2020 -- 85 Fed. Reg. 51596: BIS further restricts access by Huawei Technologies (“Huawei”) and its non-U.S. affiliates to U.S. products subject to the Export Administration Regulations (“EAR”) by adding 38 non-U.S. Huawei affiliates in 21 countries to the Entity List (EAR Part 744, Supp. No. 4). Specifically, BIS advised that the 38 listed Huawei affiliates needed to be added to the Entity List – and prohibited from receiving the benefit of U.S. exports because the entities “present a significant risk of acting on Huawei’s behalf contrary to the national security or foreign policy interests of the United States.”

The entities added are:

Huawei Cloud Computing Technology;
Huawei Cloud Beijing;
Huawei Cloud Dalian;
Huawei Cloud Guangzhou;
Huawei Cloud Guiyang;
Huawei Cloud Hong Kong;
Huawei Cloud Shanghai;
Huawei Cloud Shenzhen;
Huawei OpenLab Suzhou;
Wulanchabu Huawei Cloud Computing Technology;
Huawei Cloud Argentina;
Huawei Cloud Brazil;
Huawei Cloud Chile;
Huawei OpenLab Cairo;
Huawei Cloud France;
Huawei OpenLab Paris;
Huawei Cloud Berlin;
Huawei OpenLab Munich;
Huawei Technologies Dusseldorf GmbH;
Huawei OpenLab Delhi;
Toga Networks;
Huawei Cloud Mexico;
Huawei OpenLab Mexico City;
Huawei Technologies Morocco;
Huawei Cloud Netherlands;
Huawei Cloud Peru;
Huawei Cloud Russia;
Huawei OpenLab Moscow;
Huawei Cloud Singapore;
Huawei OpenLab Singapore;
Huawei Cloud South Africa;
Huawei OpenLab Johannesburg;
Huawei Cloud Switzerland;
Huawei Cloud Thailand;
Huawei OpenLab Bangkok;
Huawei OpenLab Istanbul;
Huawei OpenLab Dubai; and
Huawei Technologies R&D UK.

For these entities, there is a license requirement for all items subject to the EAR, except certain items under specified circumstances relating to “standards organizations,” with a presumption of denial and no available license exceptions. The rule also revised the following four existing Entity List entries: Huawei Device Co., Ltd. (Dongguan); Huawei Device (Shenzhen) Co., Ltd.; Huawei do Brasil Telecomunicacões Ltda; and Huawei Technologies Co., Ltd. (Huawei).

In the same rule, BIS removed the temporary general license (TGL) that it had renewed most recently on May 18, 2020 (85 Fed. Reg. 29610; see May 2020 Regulatory Review). The TGL partially restored the licensing requirements and policies under the EAR for exports, reexports, and transfers (in-country) to Huawei Technologies Co., Ltd. and its listed non-U.S. affiliates (collectively “Huawei”) for a narrow subsection of transactions necessary to permit, for example, U.S. telecommunications carriers with Huawei equipment to maintain their systems (e.g., cybersecurity updates). The purpose of the TGL was to ensure the continued secure operation of portions of telecommunications systems using Huawei products while allowing time for affected companies and persons to identify and shift to other sources of equipment, software, and technology. While most of the TGL was removed, this rule still permits limited disclosures of information to listed Huawei entities for the sole purpose of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently “fully operational networks” and equipment using Huawei products.

Finally, this rule provides an additional expansion on the EAR’s General Prohibition Three, the Foreign Direct Product Rule (“FDP Rule”), which was previously amended in May 2020 to target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology. (See May 2020 Regulatory Update.) Under the revised FDP Rule, there is a requirement for a license for the export, re-export, or transfer of any foreign produced item that is a direct product of U.S.-origin software or technology falling under ECCNs 3D001, 3D991, 3E001, 3E002, 3E003, 3E991, 4D001, 4D993, 4D994, 4E001, 4E992, 4E993, 5D001, 5D991, 5E001, or 5E991 or a direct product of a foreign plant or major component of a plant that has been developed with U.S. origin software or technology under the preceding ECCNs:

(1) where U.S. software or technology is the basis for the foreign-produced item that 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 Huawei entity on the Entity List; or

(2) when any Huawei entity on the Entity List is a party to such transaction, such as a “purchaser,” “intermediate consignee,” “ultimate consignee,” or “end-user”.

This expansion of the FDP Rule means that any party exporting software or technology to China under the above ECCNs – whether to a business partner, supplier, customer, or affiliate -- needs to obtain clear written assurances from the party to whom they are exporting software and technology that the party will not be supplying any product to Huawei using the U.S.-origin software or technology under the referenced ECCNs.

See EAR Section 736.2(b)(3) for the full details of the FDP Rule. The effective date of this rulemaking was August 17, 2020.

If you are considering any transaction involving the export of software or technology falling under the above-listed ECCNs and China, please contact FD Associates for support with performing the appropriate due diligence to ensure compliance with the EAR. Likewise, if you have knowledge that a customer in China is providing products to a Huawei-related company, please contact us to discuss the best way to structure your transactions to ensure compliance with the EAR.

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BIS Amends EAR Secs. 744.11 And 744.16

Aug. 20, 2020 -- 85 Fed. Reg. 51335: BIS amended EAR Secs. 744.11 (License requirements that apply to entities acting contrary to the National Security or Foreign Policy interests of the United States) and 744.16 (The Entity List (Supplement No. 4 to part 744), which identifies persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States) to clarify that the Entity List’s supplementary license requirements apply to every export, reexport, and transfer (in-country) in which a party listed on the Entity List acts as a purchaser, intermediate consignee, ultimate consignee, or end-user.

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BIS Adds 60 Entities (Under 61 Entries) To The Entity List

Aug. 27, 2020 – 85 Fed. Reg. 52898: BIS added 60 entities (under 61 entries) to the Entity List – 24 entities in the People’s Republic of China (China), and the remaining 36 shared among France, Hong Kong, Indonesia, Malaysia, Oman, Pakistan, Russia, Switzerland, and the United Arab Emirates (UAE). In the same rule, BIS also revised one existing Entity List entry each under the destinations of Canada, Germany, Hong Kong, Iran, and the UAE.

A license requirement for exports of all items subject to the EAR and a prohibition on license exceptions for exports, reexports, or transfers (in-country) will apply to all the added entities. License review policies as a presumption of denial for 51 entities, case-by-case review for one entity, and, for license applications involving certain nuclear end uses for eight entities, policies dictated by considerations detailed in EAR Sec. 744.2(d).

The reasons for adding an entity in this group to the Entity List include involvement in the attempted diversion of controlled U.S.-origin aircraft parts to Iran; contributions to unsafeguarded nuclear activities and missile proliferation activities; involvement in a scheme to falsify information submitted in support of BIS license applications in order to divert U.S.-origin items to Iran; risks that U.S.-origin items exported, reexported, or transferred (in-country) to these entities will be used in military end-use activities in China; involvement with Russian military and biological weapons programs; actual and attempted acquisition of U.S.-origin items for a person on the Entity List and in support of programs for China’s People’s Liberation Army; affiliation with a company already on the Entity List; enabling China to reclaim and militarize disputed outposts in the South China Sea; and involvement in China’s land reclamation efforts in the South China Sea. Contact us for the names of the 60 entities and details of the terms applicable to each entity.

Editors Note: Feeling overwhelmed with the constant updates to the EAR Entity List? Concerned you might not be taking the correct actions with your international transactions. BIS expects your company to complete a Denied Party Screening for each transaction to ensure the parties in your transaction are not on the Entity List. BIS offers the Consolidated Screening Tool on their website for use in conducting Denied Party Screening. FD Associates also provides screening services. Contact us for assistance.

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BIS Requests Comments On The Definition Of “Foundational Technologies”

Aug. 27, 2020 – 85 Fed. Reg. 52934: BIS issued an Advance Notice of Proposed Rulemaking (ANPRM) requesting comments from the public on the definition of, and the criteria for identifying, “foundational technologies” that are “essential to the national security,” i.e., technologies “that may warrant stricter controls if a present or potential application or capability of that technology poses a national security threat to the United States,” including items that currently are classified as either EAR99 or those that are controlled only for anti-terrorism (AT) reasons. The BIS announcement includes several additional requirements about the scope of the desired definition, e.g., the technology must be within the scope of the EAR. It also specifies eight topics: (1) How to further define foundational technology to assist in identification of such items; (2) sources to identify such items; (3) criteria to determine whether controlled items identified in AT level Export Control Classification Numbers (ECCNs), in whole or in part, or covered by EAR99 categories, for which a license is not required to countries subject to a U.S. arms embargo, are essential to U.S. national security; (4) the status of development of foundational technologies in the United States and other countries; (5) the impact specific foundational technology controls may have on the development of such technologies in the U.S.; (6) examples of implementing controls based on end-use and/or end-user rather than, or in addition to, technology based controls; (7) any enabling technologies, including tooling, testing, and certification equipment, that should be included within the scope of a foundational technology; and (8) any other approaches to the issue of identifying foundational technologies important to U.S. national security, including the stage of development or maturity level of an foundational technology that would warrant consideration for export control) about which comments are desired and notes that the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) requires the establishment of appropriate controls on the export, reexport, or transfer (in country) of emerging and foundational technologies. The deadline for comments is Oct. 26, 2020.

Department of Commerce – Census Bureau

Census Posts Guidance On Exports Between The U.S. And Puerto Rico

Aug. 17, 2020: The Census Bureau’s Global Reach Blog posted “Exports Between the United States and Puerto Rico – When to File Electronic Export Information,” the third and final installment of its series on this topic, on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2020/08/exports_between_the.html. This installment discusses routed export transactions. (See the June and July 2020 Regulatory Updates for earlier installments of this series.)

Department of State

DDTC Name And Address Changes Posted To Website

Aug. 17 and 25, 2020: 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 Showa Optronics Co., Ltd. to KYOCERA SOC Corporation and Change of Address due to acquisition of Showa by KYOCERA CORPORATION, effective Oct. 1, 2020;
Change in Name from Force Protection Europe Limited (FPE) to General Dynamics United Kingdom Limited (GDUK) due to acquisition of FPE by GDUK;
Change in Address for Proact Netherlands B.V.;
Change in Name of the Northrop Grumman Corporation entities listed below due to Northrop Grumman Corporation Internal Legal Entity Restructuring as follows:
- Change in Name from Northrop Grumman Innovation Systems Inc. to Northrop Grumman Innovation Systems LLC;
- Change in Name from Orbital Sciences Corporation to Orbital Sciences LLC;
- Change in Name from ATK Space Systems Inc. to ATK Space Systems LLC; and
- Change in Name from ATK Launch Systems Inc. to ATK Launch Systems LLC; and
Change in Address for Thales Alenia Space UK Ltd.

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 Changes The Definition Of “Applicable Schedule Amount”

Aug. 11, 2020 – 85 Fed. Reg. 48474: The Office of Foreign Assets Control (OFAC) amended its regulations (31 CFR part 501, Appendix A, Sec. 1.B.6 and Sec. 1.B.7) to change the definition of “applicable schedule amount” (“ASA”), such that in the case of transactions valued at $100,000 or more, but less than $200,000, the ASA is now $200,000, and in the case of transactions valued at $200,000 or more, the ASA is now $307,922. The new ASAs correspond with the current civil monetary penalties (CMPs) for violations of the IEEPA.

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OFAC Posts New Sudan Program and Darfur Sanctions Guidance

Aug. 11, 2020: OFAC posted a new Sudan Program and Darfur Sanctions Guidance and updated, amended, and removed several FAQs to reflect that Sudan has not been a comprehensively sanctioned country since Oct. 12, 2017. The Sudan Program and Darfur Sanctions Guidance is on the Treasury Department website at https://home.treasury.gov/system/files/126/sudan_guidance_20200811.pdf. Additional information is at https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20200811 and in TSRA Question 5 at https://home.treasury.gov/policy-issues/financial-sanctions/ofac-license-application-page/trade-sanctions-reform-and-export-enhancement-act-of-2000-tsra-program/trade-sanctions-reform-and-export-enhancement-act-of-2000-tsra-program-information.

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of Commerce

Aug. 25, 2020 – 85 Fed. Reg. 52321: BIS issued a 180-day Temporary Denial Order (TDO) against the following persons and when acting for or on their behalf, any successors or assigns, agents, or employees:

Sunarko Kuntjoro, Jakarta, Indonesia;
Satrio Wihargo Sasmito, Jakarta, Indonesia;
Triadi Senna Kuntjoro, Jakarta, Indonesia;
PT MS Aero Support, Jakarta, Indonesia;
PT Antasena Kreasi, Jakarta, Indonesia; and
PT Kandiyasa Energi Utama, Jakarta, Indonesia.

The TDO was based on these parties’ operation of an international procurement network of aircraft parts suppliers and repair facilities to acquire and repair U.S.-origin aircraft parts on behalf of Mahan Air, a BIS Denied Person since 2008. (See December 2019 Regulatory Update for the indictment of Sunarko Kuntjoro, PT MS Aero Support, PT Antasena Kreasi, and PT Kandiyasa Energi Utama for conspiracy to evade several U.S. laws in connection with this enterprise. )

Fines and Penalties

July 23, 2020: Independent Freight International LLC of Elk Grove Village, IL, agreed to pay $7,500 to settle charges by BIS of three charges of failure to report boycott requests in connection with the sale and/or transfer of goods or services (including information) to Qatar and the UAE.

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Aug. 4, 2020: Vladimir Volgaev of Sarasota, FL, was sentenced in Federal District Court in Tampa, FL to two years and nine months in federal prison and ordered to forfeit $6,835 based on his guilty plea and conviction of theft of government property and smuggling goods from the U.S. in violation of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). Volgaev allegedly shipped more than 1,600 firearm components, including barrels, slides, receivers, and frames from the U.S. to Ukraine, where they were used to construct fully functional firearms, including handguns and rifles.

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Aug. 6, 2020: Chong Sik Yu, a/k/a Chris Yu, of Oradell, NJ, the president America Techma Inc. (ATI), a U.S. company, and Yunseo Lee of Fort Lee, NJ, a sales representative of ATI, were arrested on charges of conspiracy to unlawfully export dual-use electronics components in violation of the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) and conspiracy to commit wire fraud, bank fraud, and money laundering. ATI allegedly exported electronic components controlled under the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) to Hong Kong for apparent re-export to other countries, including China, without the required export licenses. After U.S. law enforcement detained such a shipment, Yu and Lee allegedly sought to evade future law enforcement scrutiny by transshipping packages through South Korea and by using a separate New Jersey shipper to send shipments to Hong Kong; however, the required export licenses allegedly were not obtained for any of these shipments.

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Aug. 10, 2020: Alex Yun Cheong Yue of South El Monte, CA pleaded guilty in federal court in Boston, MA, to conspiracy to violate the EAR, unlawful exports and attempted exports to Hong Kong and smuggling of U.S.-origin cesium atomic clocks controlled under the CCL without the required export licenses. A co-defendant, Victor Zee, remains at large in Hong Kong. Yue purchased the clocks using a fictitious company, “Ecycle Tech International Ltd.,” by falsely representing to the seller that they would be used solely in the U.S. for cordless phone research and development, and then reshipped them to Zee in Hong Kong without obtaining an export license. Later, when Yue attempted to purchase an additional cesium atomic clock, he provided an end-user certificate stating that the clocks would be used in a calibration lab in California. However, when the U.S. seller insisted on a site visit to the California location, Yue abruptly canceled the order.

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Aug. 19, 2020: Amin Mahdavi, an Iranian national resident in the UAE, and Parthia Cargo LLC, a freight forwarding company located in the UAE, were charged in U.S. District Court in Washington, D.C. with conspiracy to defraud the U.S. and to violate the IEEPA and the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Mahdavi, the Managing Director of Parthia, allegedly agreed to use Parthia’s services to help ship a U.S.-origin commercial aircraft part to an Iranian transport company without the required export license, and then Mahdavi and Parthia conspired with individuals and business organizations outside the U.S. to carry out the illegal shipment, including falsely stating to a U.S.-based aircraft parts supplier that the goods would not be shipped to Iran unless authorized by the U.S. Government.

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Aug. 25, 2020 – 85 Fed. Reg. 52312: Acting Under Secretary of Commerce for Industry and Security Cordell Hull upheld the $31,425,760 civil monetary penalty that had been imposed in March 2020 on Nordic Maritime Pte. Ltd. (Nordic) and its Chairman and Majority Shareholder, Morten N. Minnhaug, both of Singapore, and determined that no suspension of this penalty was warranted. (See earlier action in March 2020 Regulatory Update.) The actions that resulted in this penalty involved the unauthorized re-export of controlled equipment to perform a 3D offshore seismic survey in a natural gas field in Iranian territorial waters and the provision of false information to BIS.

AUGUST 2020 EXPORT CONTROL REGULATION UPDATES Read More »

JULY 2020 EXPORT CONTROL REGULATION UPDATES

July 2020

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

This newsletter is a listing of the latest changes in export control regulations through July 31, 2020. 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 Departments Published Guidance On Licenses, Certificates And Special Rules For Taking Goods Out Of The UK

July 10, 2020: Several United Kingdom government departments, including the Department for International Trade and the Export Control Joint Unit, published Guidance on Licenses, certificates, and special rules for taking goods out of the UK from 1 January 2021 at https://www.gov.uk/guidance/export-licences-and-certificates-from-1-january-2021?utm_source=ff1300f0-6364-48d0-907f- bd4316d7851b&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate.

Guidance specific to controlled goods is at https://www.gov.uk/guidance/exporting-controlled-goods-after-eu-exit.

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The UK’s Export Control Joint Unit Announced That The U.K. Will Extend An Arms Embargo To Hong Kong

July 22, 2020: The Export Control Joint Unit announced that the U.K. will extend to Hong Kong the arms embargo that has applied to mainland China since 1989. The announcement is at https://www.gov.uk/government/publications/notice-to-exporters-202012-the-extension-of-the-china-arms-embargo-to-hong-kong/notice-to-exporters-202012-the-extension-of-the-china-arms-embargo-to- hong-kong.

Canada

Canada Announced Export Control List Items To Hong Kong Will Be Treated The Same As China

July 7, 2020: The Canadian Minister of Foreign Affairs announced that effective July 3, 2020, Canada will treat exports to Hong Kong of items listed on the Export Control List in the same way as those destined for China, and, will not permit the export of sensitive military items to Hong Kong. This announcement is at https://www.international.gc.ca/trade-commerce/controls-controles/notices-avis/1003.aspx?lang=eng.

U.S. Congress

The Hong Kong Autonomy Act Passed By U.S. Congress And Signed By The President

July 14, 2020: The U.S. Congress passed and President Trump signed into law the Hong Kong Autonomy Act (HKAA, H.R. 7440, Public Law 116-149), which retaliates against China’s passage of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Administrative Region (the “National Security Law”), which effectively ended the “One Country, Two Systems” arrangement which had guaranteed certain civil liberties to Hong Kong. The HKAA requires the imposition of specified sanctions on (1) foreign persons who contribute to China’s failure to observe its international obligations regarding Hong Kong, and (2) foreign financial institutions that knowingly conduct “significant” transactions with such persons. See items below about actions by the President and the Commerce Department on this topic.

The President

The President Issued Executive Order (EO) 18936, Directing U.S. Agencies To Eliminate Or Suspend Rules Or Practices That Provide Different Treatment For Hong Kong Than For China

July 14, 2020 (85 Fed. Reg. 43413, July 17, 2020): President Trump issued Executive Order (EO) 18936, which directs U.S. agencies to eliminate or suspend rules or practices that provide different treatment for Hong Kong than for China, including revoking license exceptions that provide different treatment for exports to Hong Kong than for exports to China. Other preferential treatments to be eliminated, including immigration, export controls, national security, foreign investment and customs; license exceptions that differ between Hong Kong and China; license suspensions applying to exports of defense articles to Hong Kong persons physically located outside of Hong Kong and China; and others. EO 18936 also calls for the imposition of sanctions including blocking interests in property of persons who have been involved in developing or implementing the new Chinese National Security Law or have otherwise undermined democratic processes in Hong Kong, and persons who have aided persons in the first group.

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The President Changes Export Treatment Of Certain “Category I” Unmanned Aerial Systems

July 24, 2020: The White House Press Secretary announced that President Trump will invoke national discretion to change the treatment of certain Unmanned Aerial Systems (UAS) which cannot travel faster than 800 km per hour being treated as a Missile Technology Control Regime (MTCR) Category I item to MTCR Category II, which will overcome the MTCR’s strong presumption of denial (for Category I items). The change will improve the capabilities of our partners and expand the UAS market to U.S. industry. The announcement stated that the U.S. is taking this action unilaterally because the current standards are outdated, but the MTCR has failed to act after more than two years of discussion. The announcement is at https://www.whitehouse.gov/briefings-statements/statement-press-secretary-unmanned-aerial-systems- exports/.

U.S. Department of Commerce – Bureau of Industry and Security

The Departments Of Commerce, State, Treasury, and Homeland Security Issued A Business Advisory For Businesses With Supply Chain Exposure To Entities Engaged In Forced Labor And Other Human Rights Abuses In The Xinjiang Uyghur Autonomous Region (XUAR) Of China

July 1, 2020: The Departments of Commerce, State Treasury, and Homeland Security issued a business advisory to highlight the reputational, economic, and legal risks and considerations for businesses with supply chain exposure to entities engaged in forced labor and other human rights abuses in the Xinjiang Uyghur Autonomous Region (XUAR) of China. The guide does not have the force of law but provides extensive concrete information including, names of enterprises involved, locations, indicators of abuse, and descriptions of industries. Read it at https://www.bis.doc.gov/index.php/documents/pdfs/2569-xinjiang- supply-chain-business-advisory-final-for-508/file.

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BIS Issued 107 FAQs Regarding The Transfer Of Former USML Category I, II and III Items To The EAR

July 7, 2020: BIS published guidance in the form of 107 FAQs and several definitions relating to the Jan. 23, 2020, rules that transferred export controls on certain firearms, armament, and ammunition from Categories I, II, and III of the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) (85 Fed. Reg. 3819 and 85 Fed. Reg. 4136, respectively – see detailsinJanuary2020RegulatoryUpdate). Topic areas covered include specific Export Control Classification Numbers (ECCNs), specific license exceptions, brokering controls, 3D printing of firearms, licensing process, conventional arms reporting, export clearance requirements, entry clearance requirements for temporary imports, recordkeeping, and enforcement, as well as definitions of 14 key terms. This 62-page document 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 Seeks Comments on Items Controlled For Crime Control And Detection

July 17, 2020 – 85 Fed. Reg. 43532: BIS requested public comments on the list of items controlled on the CCL for crime control and detection (CC) reasons. The comments will inform BIS’ decisions on making additions and removals to this list and related licensing requirements. Issues of particular interest are noted in the announcement. The deadline for comments is Sep. 15, 2020.

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BIS Added 11 Entities In China To The Entity List

July 22, 2020 – 85 Fed. Reg. 44159: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 11 entities in China to the Entity List (EAR Part 744, Supp. No. 4) because they had been implicated in human rights violations and abuses targeting Uyghurs, Kazakhs, and other members

of Muslim minority groups from the XUAR. For these entities, a license requirement will now apply for all items subject to the EAR. In view of the current pandemic, there will be a license review policy of case-by-case review for specific ECCNs and for certain EAR99 items that protect against chemical or biological agents that are consumer goods, packaged for retail sale or personal use, or medical products, and for items subject to the EAR that are necessary to detect, identify and treat infectious disease. A license review policy of presumption of denial will apply to all other items subject to the EAR. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the entities being added to the Entity List. The 11 entities are:

Changji Esquel Textile Co. Ltd.;
Hefei Bitland Information Technology Co. Ltd.;
Hefei Meiling Co. Ltd.;
Hetian Haolin Hair Accessories Co. Ltd.;
Hetian Taida Apparel Co., Ltd.;
KTK Group;
Nanjing Synergy Textiles Co. Ltd.;
Nanchang O-Film Tech;
Tanyuan Technology Co. Ltd.;
Xinjiang Silk Road BGI; and
Beijing Liuhe BGI.

Also, in view of the current pandemic, BIS modified the license review policy for the 37 entities added to the Entity List on June 5, 2020, (85 Fed. Reg. 34503 – see June 2020 Regulatory Update) to provide case-by-case license review for items subject to the EAR that are necessary to detect, identify and treat infectious disease. This modification will be accomplished by a new Hong Kong-specific paragraph in EAR Sec. 740.2.

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BIS Amended The EAR To Suspend The Availability Of All License Exceptions For Items Subject To The EAR That Provides Differential Treatment For Hong Kong Than For China

July 31, 2020 – 85 Fed. Reg. 45998: In response to the security measures newly imposed by China on Hong Kong, BIS amended the EAR to suspend the availability of all License Exceptions for items subject to the EAR that provide differential treatment for Hong Kong than from China. The changes, including a limited savings clause, appear in amended EAR Sec. 740.2(a)(12) and (13) and new Sec. 740.2(a)(23).

Department of Commerce – Census Bureau

Census Reported The 2020 Schedule B, Harmonized Tariff Schedule (HTS), And HTS Codes Are Updated For Codes Not Valid For AES

July 1, 2020: The Census Bureau reported that the Schedule B, Harmonized Tariff Schedule (HTS), and HTS Codes that are not valid for AES tables had been updated to accept the changes to the July 1, 2020 codes. The 2020 Schedule B and HTS tables are available for downloading at https://www.census.gov/foreign-trade/aes/documentlibrary/index.html#concordance.

The current list of HTS Codes that are not valid for AES is available at https://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.txt.

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Census Posted Guidance On Exports Between The U.S. and Puerto Rico

July 21, 2020: The Census Bureau posted “Exports Between the United States and Puerto Rico: When to File Electronic Export Information,” the second installment of its series on U.S.-Puerto Rico shipping regulations, on its website at https://www.census.gov/newsroom/blogs/global-reach/2020/07/exports_between_the.html. (See information on the first installment in June 2020 Regulatory Update.)

Department of State

DDTC Name and Address Changes Posted To Website

July 14, 15, 27, and 28, 2020: 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 FABRICA DE MUNICIONES DE GRANADA, S.R.L. (FMG) to MSM Group S.R.O. of Slovakia due to the acquisition of FMG by MSM Group;
Change in the address for Rossell Techsys (Division of Rossell India Limited);
Change in the address for B.E. Meyers & Co. Inc.; and
Changes in the name for Elbit Systems entities due to corporate reorganization::
- Change in name from Elbit Systems Land and C4I Ltd. to Elbit Systems C4I and Cyber Ltd.; and
- Change in name of Elbit Systems’ “Land Division” business from Elbit Systems Land and C4I Ltd. to Elbit Systems Land Ltd. and change in address for this entity.

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 Changed Its Policy On Exports Of Firearms Sound Suppressors

July 10, 2020: DDTC announced that effective immediately, it has changed its policy on exports of firearms sound suppressors and will now handle them in a manner consistent with other USML-controlled technologies. Details are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public.

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DDTC Posted Three FAQs Regarding Hong Kong

July 15, 2020: DDTC posted an announcement and three FAQs about EO 13936. The FAQs clarified the effect of EO 13936 on the issuance of licenses for exports of defense services to certain Hong Kong persons; the validity of previously approved authorizations naming Hong Kong as a transfer territory; and the breadth of applicability of the presumption of denial of license requests. The announcement and FAQs are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events.

DDTC Announced The Addition Of A New “Other” Category To Block 4 Of The DS-6004 Reexport/Retransfer Application

July 16, 2020: DDTC announced the addition of a new “Other” category to Block 4 of the DS-6004 Reexport/Retransfer Application – ITAR Part 123.9 and specified the circumstances for which it should be selected when submitting General Correspondence (GC) requests. This announcement is on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events.

The “Other” category to Block 4 of the DS-6004 Reexport/Retransfer Application is used for submitting General Correspondence (GC) requests related to Mergers and Acquisitions (for license transfers), U.S. and Foreign Entity Name/Address Changes or Registration Code Changes, and U.S. Persons providing defense services abroad.

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DDTC Amends Prohibited Destination Central African Republic Adding Additional Exemptions From The Embargo

July 22, 2020 – 85 Fed. Reg. 44188: DDTC amended the International Traffic in Arms (ITAR, 22 CFR Parts 120-130) Sec. 126.1(u) to implement reductions in the arms embargo on the Central African Republic (CAR). The reduction was made in accordance with a resolution of the United Nations Security Council (UNSC) that provided additional exemptions from the embargo in support of the CAR government’s work to implement a peace agreement with 14 armed groups in the country and to extend state control over the entire territory of the country.

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The Department Of State, Bureau Of Energy Resources Published Updated Guidance On Its Implementation Of Section 232 Of The Countering America's Adversaries Through Sanctions Act Of 2017

July 23, 2020 – 85 Fed. Reg. 44561: The Department of State, Bureau of Energy Resources published updated guidance on its implementation of Section 232 of the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA, 22 USC 9201 et seq.), notably including information on the expansion of its focus, which will no longer exclude projects for which contracts or investments were signed before August 2, 2017, and will now include Russian energy export pipelines such as Nord Stream 2 and the second line of TurkStream. This guidance includes 8 FAQs. It is also on the State Department website at https://www.state.gov/caatsa-crieea-section-232-public-guidance/ and https://www.state.gov/wp-content/uploads/2020/07/Updated-CAATSA-Section-232-Guidance-July-15-2020.pdf.

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July 23, 2020: DDTC posted new FAQs to aid registrants in the submission of registration-related notifications. The new FAQs on Mergers, Acquisitions, and Divestitures can be accessed from https://www.pmddtc.state.gov/ddtc_public. Also, DDTC announced the establishment of a new, all-electronic mechanism for submitting 60-day advance notifications of foreign acquisitions of ITAR registrants pursuant to ITAR Sec. 122.4(b). The new instructions are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public.

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DDTC Announced Updates To The Extension Of Temporary Suspensions, Modifications And Exceptions To The ITAR Due To COVID-19

July 29, 2020 – 85 Fed. Reg. 45513: DDTC announced that it had made the following decisions regarding the possible extension of the four temporary suspensions, modifications, and exceptions to the ITAR it had announced on May 1, 2020, in response to the SARS-COV2 public health emergency May 1, 2020 (85 Fed. Reg. 25287 – see description in May 2020 Regulatory Update):

The two-month extension of annual registration renewals expiring July forward will not be issued;
The 6-monthextension on the duration of ITAR licenses and agreements will not be further extended;
The suspension of the requirement that a regular employee work at the company’s facilities, that allows the employee to work at a remote location (except Russia or a country listed in ITAR Sec. 126.1) is extended until Dec. 31, 2020; and
The suspension authorizing a regular employee of a licensed entity who is working remotely in a country not currently authorized by a technical assistance agreement, manufacturing license agreement, or exemption to send, receive, or access any technical data authorized for export, reexport, or retransfer to their employer via a technical assistance agreement, manufacturing license agreement, or exemption (so long as the regular employee is not located in Russia or a country listed in ITAR § 126.1) is extended until Dec. 31, 2020.

Department of the Treasury

OFAC Issued Two Ukraine-Related General Licenses

July 16, 2020: The Office of Foreign Assets Control (OFAC) issued two Ukraine-Related General Licenses (GLs) related to GAZ Group. GL 15I authorizes specified transactions and activities that are ordinarily incident and necessary to the manufacture and sale of specified vehicles and components produced by GAZ Group until Jan. 22, 2021, and GL 13O supersedes GL 13N and authorizes certain transactions necessary to divest or transfer debt, equity, or other holdings in GAZ group, also until Jan. 22, 2021. (See July 22 item below for FAQs about these GLs.)

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OFAC Amended The Nicaragua Sanctions Regulations

July 17, 2020 – 85 Fed. Reg. 43436: OFAC amended the Nicaragua Sanctions Regulations (NSR, 31 CFR Part 582) to make technical edits and expand and clarify the provisions on prohibited transactions in Sec.

582.201. OFAC also added as new Sec. 582.509 a general license authorizing all transactions that are for the conduct of the official business of the United States Government by USG employees, grantees, or contractors.

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OFAC Published 9 Amended FAQs To Reflect The Issuance Of Ukraine-Related General Licenses

July 22, 2020: OFAC published 9 amended FAQs to reflect the issuance of Ukraine-Related GLs 13O and 15I. FAQs 570, 571, 586, 588, 589, 590, 591, 592, and 625 are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#571,

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of Commerce

July 8, 2020 – 85 Fed. Reg. 40966: BIS denied the export privileges of Mahin Mojtahedzadeh, a.k.a. Mahin Toussi Mojtahedzadeh, a.k.a. Mahin Mojtahedzadeh Toussi, for 10 years based on her conviction on January 30, 2020, of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by conspiring to export gas turbine parts from the U.S. to Iran without the required U.S. authorization. (See details of this case in January 2020 Regulatory Update.) In the criminal case, Mojtahedzadeh was sentenced to time served, a $100 special assessment, and a fine of $5,000, and was placed in immigration custody for removal from the U.S.

Department of State

July 2, 2020 – 85 Fed. Reg. 39967: The Department of State published a correction and restatement of its notice of May 20, 2020 (85 Fed. Reg. 30783) imposing statutory debarment on 23 persons. (See May 2020 Regulatory Update.) The statutory debarments remain effective and unchanged. However, the July 2 notice restates and clarifies the description of the Department’s policies on statutory debarment that was included in the Supplementary Information portion of the May notice.

Fines and Penalties

June 26, 2020: Angelica O. Preti, of Ontario, Canada, the export operations manager at a Canadian forwarding and customs brokerage service provider, was sentenced in Federal District Court in Columbus, OH to 18 months in prison for conspiring to violate the IEEPA by illegally exporting gas turbine engine parts from the U.S. to Iran. Preti facilitated the shipment of the gas turbine engine parts and related items, to Iran, by directing the filing of false electronic export information (EEI), attesting that the final destination of the goods was not Iran and employing additional methods to obscure the fact that Iran was the end-user for the shipments.

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July 8, 2020: OFAC announced that Amazon.com, Inc., of Seattle, WA, agreed to pay $134,523 to settle its potential civil liability for apparent violations of multiple OFAC sanctions programs. The violations included the provision of goods and services to persons located in Crimea, Iran, and Syria; to individuals located in or employed by the foreign missions of Cuba, Iran, North Korea, Sudan, and Syria; and persons named on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”) pursuant to eight separate sanctions programs. Amazon also failed to timely report hundreds of transactions it conducted under a GL that included a mandatory reporting requirement. The primary cause of the apparent violations was the failure of Amazon’s automated screening processes to analyze all transaction and customer data relevant to compliance with OFAC’s sanctions regulations. Factors in determining the settlement amount included OFAC’s determination that the apparent violations – whose total transaction value was approximately $269,000 – were non-egregious and voluntarily self-disclosed, and that Amazon had implemented significant remedial measures upon discovery of the apparent violations. The OFAC announcement of this case, which includes an extensive discussion of Amazon’s remedial measures and a broader description of OFAC’s compliance considerations and resources, is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20200708_amazon.pdf.

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July 16, 2020: Aiden Davidson, a/k/a Hamed Aliabadi, of Brighton, MA, a citizen of the U.S. and Iran, was sentenced in Federal District Court in Concord, NH, to serve 46 months in prison for exporting ten or more containers of industrial goods including motors, pumps, and other items, to Iran, without the required authorization. Davidson, as the registered agent of a New Hampshire company, arranged the exportations, falsely naming a company in Turkey as the Ultimate Consignee.

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July 20, 2020: OFAC announced that Essentra FZE Company Limited, a cigarette filter and tear tape manufacturer in the United Arab Emirates, agreed to pay $665,112 to settle its potential civil liability for three apparent violations of the North Korea Sanctions Regulations (NKSR, 31 CFR part 510). Essentra allegedly exported cigarette filters with an alleged commercial value of $333,272 to North Korea through a network of front companies in China and other countries using deceptive practices and received payment into its bank accounts at the foreign branch of a U.S. bank.

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July 20, 2020: Usama Darwich Hamade, a national of Lebanon, was sentenced in U.S. District Court in Minneapolis, MN to 42 months in prison for conspiring to export goods and technology in violation of the IEEPA, the Export Administration Regulations (EAR, 15 CFR Parts 730-774), the Arms Export Control Act (AECA, 22 USC 2778 et seq.), and the ITAR. According to his guilty plea and documents filed in court, Hamade conspired to export U.S.-origin goods and technology including inertial measurement units suitable for use in un-crewed aerial vehicles (UAVs), digital compasses suitable for UAV use, a jet engine, piston engines, and recording binoculars for ultimate use by Hizballah without the required export authorizations. Hamade’s indictment was announced by the U.S. Justice Department in February 2019, when Hamade was in custody in South Africa and the U.S. was seeking his extradition.

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July 28, 2020: OFAC announced that Whitford Worldwide Company, LLC, a cookware coating manufacturer based in Elverson, PA, agreed to pay $824,314 to settle its potential civil liability for 74 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Whitford’s subsidiaries in Italy and Turkey facilitated in some cases by U.S. persons employed by

Whitford allegedly sold coatings intended for customers in Iran and conducted other trade-related transactions with Iran. Whitford voluntarily disclosed the apparent violations. The Treasury Department’s Enforcement Release noted that according to Whitford when Whitford became aware of Iran General License H, it realized that its foreign subsidiaries had likely violated U.S. sanctions and hired outside counsel to conduct an investigation, submitted a disclosure to OFAC, cooperated with OFAC’s the investigation, and took significant corrective actions.

JULY 2020 EXPORT CONTROL REGULATION UPDATES Read More »

JUNE 2020 EXPORT CONTROL REGULATION UPDATES

June 2020

This newsletter is a listing of the latest changes in export control regulations through June 30, 2020. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Department of Commerce – Bureau of Industry and Security

BIS Published A Restatement On Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End-Use or Military End Users in the People’s Republic of China, Russia, and Venezuela

June 3, 2020 – 85 Fed. Reg. 34306: The Bureau of Industry and Security (BIS) published a restatement of the final rule it published April 28, 2020 (85 Fed. Reg. 23459 – see April l 2020 Regulatory Update) on Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End-Use or Military End Users in the People’s Republic of China, Russia, or Venezuela. The restatement did not make any substantive changes in the original rule but published each revised Export Control Classification Number (ECCN) in full, replacing the April 28 version which published only the revised portion of each ECCN.

Editors note: Refer to our recent constant contact article on this subject or our website at Consultant Corner for an expansive explanation of this important rule change that is now in effect.

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BIS Added 24 Entities In China, Hong Kong And The UK To The Entity List

June 5, 2020 – 85 Fed. Reg. 34495: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 24 entities in the People’s Republic of China (China), Hong Kong and the United Kingdom (U.K.) 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 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 24 entities (under 25 entries) are:

China

Beijing Cloudmind Technology Co., Ltd.;
Beijing Computational Science Research Center;
Beijing Jincheng Huanyu Electronics Co., Ltd.;
Center for High Pressure Science and Technology Advanced Research;
Chengdu Fine Optical Engineering Research Center;
China Jiuyuan Trading Corporation;
Harbin Chuangyue Technology Co. Ltd.;
Harbin Engineering University;

Harbin Institute of Technology;

Harbin Yun Li Da Technology and Development Co., Ltd.;
JCN (HK) Technology Co., Ltd.;
Kunhai (Yanjiao) Innovation Research Institute;
Peac Institute of Multiscale Science;
Qihoo 360 Technology Company;
Shanghai Nova Instruments Co., Ltd.;
Sichuan Dingcheng Material Trade Co., Ltd.;
Sichuan Haitian New Technology Group Co., Ltd.;
Sichuan Zhonghe Import and Export Trade Co., Ltd.;
Skyeye Laser Technology Limited; and
Zhu Jiejin.

Hong Kong

Cloudminds (Hong Kong) Limited;
JCN (HK) Technology Co., Ltd.; and
K Logistics (China) Limited.

United Kingdom

Cloudminds Inc.; and
Qihoo 360 Technology Co. Ltd.

In the same announcement, BIS also modified the following three existing entries under the destination of China:

China Electronics Technology Group Corporation 38th Research Institute (CETC 38);
China Electronics Technology Group Corporation 55th Research Institute (CETC55); and
Chinese Academy of Engineering Physics.

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BIS Added 9 Entities In China To The Entity List Based On A Determination That Each Of These Entities Acted Contrary To The National Security Or Foreign Policy Interests Of The U.S.

June 5, 2020 – 85 Fed. Reg. 34503: BIS amended the EAR by adding 9 entities in China to the Entity List based on a determination that each of these entities had acted contrary to the national security or foreign policy interests of the U.S. For these entities a license requirement will now apply for all items subject to the EAR with a case-by-case review for ECCNs 1A004.c, 1A004.d, 1A995, 1A999.a, 1D003, 2A983, 2D983, and 2E983 and for items designated as EAR99 that are described in the Note to ECCN 1A995 and a presumption of denial for all other items, and no license exceptions will apply to exports, reexports, or in-country transfers to these persons of all other items subject to the EAR. The 9 entities are:

Aksu Huafu Textiles Co.;
CloudWalk Technology;
FiberHome Technologies Group;
Intellifusion;
IS’Vision;
Ministry of Public Security’s Institute of Forensic Science of China;
Nanjing FiberHome Starrysky Communication Development Co.;
NetPosa; and
SenseNets.

In the same announcement, BIS also modified the following three existing entries under the destination of China:

Hangzhou Hikvision Digital Technology Co., Ltd (originally identified as Hikvision);
Beijing Sensetime Technology Development Co., Ltd (originally identified as Sensetime); and
Kezilesu Kyrgyz Autonomous Prefecture Public Security Bureau.

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BIS Amended Three ECCNs Per Decisions Made By The Australia Group In 2020

June 17, 2020 – 85 Fed. Reg. 36483: BIS implemented decisions made by the Australia Group in 2020 by amending three ECCNs: ECCN 1C350 by adding 24 precursor chemicals as well as mixtures in which at least one of these chemicals constitutes 30 percent or more of the weight of the mixture; ECCN 1C351.a.30 by adding Middle East respiratory syndrome-related coronavirus (MERS-related coronavirus); and ECCN 2B352 by adding a Technical Note to indicate that single-use cultivation chambers with rigid walls are controlled under ECCN 2B352.b.2.b. BIS also clarified that “software” or “technology” related to the added items is controlled under one or more of these ECCNs if it falls within the parameters of the controls described therein. BIS noted that the inclusion of precursor chemicals and single-use cultivation chambers on the control list is consistent with the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) because they are emerging technologies that are essential to U.S. national security.

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BIS Amended The EAR To Authorize Releases To Huawei For The Purpose Of Contributing To The Revision Or Development Of A “Standard” In An International “Standards Organization”

June 18, 2020 – 85 Fed. Reg. 36719: BIS amended the EAR to authorize the release without a license of technology designated EAR99 or controlled only for anti-terrorism (AT) reasons to Huawei and 114 of its foreign affiliates on the Entity List if the release is made for the purpose of contributing to the revision or development of a “standard” in an international “standards organization.” This authorization does not apply to releases of technology for commercial purposes, and the rule adds definitions of ‘‘standard’’ and ‘‘standards organization’’ to EAR Sec. 772.1 (Definitions). BIS requested comments on the impact of these revisions. This interim final rule became effective June 18, 2020. Deadline for comments is Aug. 17, 2020.

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BIS Published 32 FAQs Regarding The Expansion of Export, Reexport, And Transfer (in-Country) Controls For Military End Use Or Military End Users In The People’s Republic Of China, Russia, And Venezuela

June 26, 2020: BIS published 32 FAQs about the final rule on Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People’s Republic of China, Russia, or Venezuela issued on April 28, 2020 (85 FR 23459—See April 2020 Regulatory Update). The FAQs appear under 5 headings: Changes to Section 744.21; Military End User; Military End Use; License Review Policy; and Electronic Export Information (EEI) Filing Requirement in the Automated Export System (AES). These FAQs are on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2566-2020-meu-faq/file.

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BIS Clarified The Effective Dates Of New EEI Filing Requirements

June 26, 2020: BIS posted an announcement clarifying the effective dates of new Electronic Export Information (EEI) filing requirements that had been established in the April 28, 2020 rule on “Revisions to EEI Filing Requirements Pursuant to Revisions to Section 744.21 (China/Russia/Venezuela military end use/end user rule).” (See preceding item.) The effective date for filing EEI for items subject to Supplement No. 2 to Part 744 destined for China, Russia, and Venezuela is June 29, 2020, and the effective date of the EEI filing requirement for exports to China, Russia or Venezuela of items controlled by ECCNs not listed in Supplement No. 2 to Part 744 is September 27, 2020. This announcement is on the BIS website at https://www.bis.doc.gov/index.php/all-articles/2-uncategorized/1686-revisions-to-eei-filing-requirements-pursuant-to-revisions-to-section-744-21-china-russia-venezuela-military-end-use-end-user-rule.

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U.S. Commerce Secretary Wilbur Ross Announced The Impending Suspension Of Commerce Department Regulations That Afford Preferential Treatment To Hong Kong Over China

June 29, 2020: U.S. Commerce Secretary Wilbur Ross announced the impending suspension of Commerce Department regulations that afford preferential treatment to Hong Kong over China, specifically including the availability of export license exceptions (see the following item), but stating that additional actions to eliminate differential treatment between Hong Kong and China are also being evaluated. These measures result from the imposition by the Chinese Communist Party of new security measures on Hong Kong, with the resulting risk that sensitive U.S. technology will be diverted to the China’s People’s Liberation Army or the Ministry of State Security. Secretary Ross’ statement is on the Commerce Department website at https://www.commerce.gov/news/press-releases/2020/06/statement-us-secretary-commerce-wilbur-ross-revocation-hong-kong. (See below for counterpart statement by Secretary of State Pompeo.)

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BIS Suspended All License Exceptions (LEs) For Exports And Reexports To Hong Kong And Transfers (in-country) Within Hong Kong

June 30, 2020: BIS issued a notice suspending all License Exceptions (LEs) for exports and reexports to Hong Kong and transfers (in-country) within Hong Kong of items subject to the EAR that provide differential treatment than those available to China. This rule is effective June 30, 2020, but a savings clause permits completion of shipments and deemed export/reexport transactions already in process on June 30 under a previous LE eligibility until Aug. 28, 2020, subject to specified documentation requirements. BIS states that this action is in response to new security measures imposed on Hong Kong by the Chinese Communist Party that undermine its autonomy and thereby increase the risk that sensitive U.S. items will be illegally diverted to the Chinese People’s Liberation Army or Ministry of State Security, Iran, or North Korea. This rule is on the BIS website at https://bis.doc.gov/index.php/documents/pdfs/2568-suspension-of-license-exceptions-for-exports-and-reexports-to-hong-kong/file.

Department of Commerce – Census Bureau

Census Issued The First In A Three-part Series Designed To Explain Export Regulations Between The U.S. And Puerto Rico

June 23, 2020: The Census Bureau’s Global Reach Blog issued the first in a three-part series designed to explain export regulations between the U.S. and Puerto Rico. This first installment includes a general overview of filing requirements for shipments between the U.S. and all the U.S. territories, as well as a more detailed description of the requirements and exemptions that apply to filing Electronic Export Information (EEI) in the Automated Export System (AES) for shipments between the U.S. and Puerto Rico. This post is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach.html.

Department of Homeland Security – Customs and Border Protection

DHS/CBP Announced That It Will Host A Series Of Technical Support Calls On New Requirements For Processing Entries Subject To The U.S. Mexico Canada Agreement

June 10, 2020: In view of the scheduled deployment on July 1, 2020, of the U.S. Mexico Canada Agreement (USMCA) enhancement of the Automated Commercial Environment (ACE), Customs and Border Protection (DHS/CBP) announced that it will host a series of technical support calls on new requirements for processing entries subject to the USMCA. These include calls July 6, 7, and 8 at 2:00 p.m. This bulletin, including WebEx meeting links and passwords for each call, is on the DHS/CBP website at https://content.govdelivery.com/bulletins/gd/USDHSCBP-2901903?wgt_ref=USDHSCBP_WIDGET_2.

Department of Justice

The U.S. Department Of Justice Criminal Division Released An Updated Version Of Its Memorandum On “Evaluation of Corporate Compliance Programs”

June 1, 2020: The U.S. Department of Justice Criminal Division released an updated version of its memorandum on “Evaluation of Corporate Compliance Programs,” a 20-page manual that provides prosecutors with concrete guidance for determining the effectiveness of a corporation’s compliance program by answering three basic questions: whether the program is well designed; whether it is being applied earnestly and in good faith; and whether it actually works in practice. The updated manual is on the Justice Department website at https://www.justice.gov/criminal-fraud/page/file/937501/download.

Department of State

DDTC Name and Address Changes Posted To Website

June 8, 15, 16, and 30, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and 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 Meggitt PLC and its UK subsidiaries, Meggitt PLC, Meggitt Aerospace Ltd, Meggitt UK Ltd., and Meggitt Training Systems Ltd.;
Change in Address for Aerotech Helicopters;
Change in Name from BFFT aeromotive GmbH to EDAG aeromotive GmbH due to corporate rebranding to complete prior acquisition of BFFT by EDAG Group;
Change in Name from Chemring Ordnance, Inc. to Nammo Perry Inc. due to acquisition of Chemring Group PLC by Nammo Defense Systems Inc.;
Change in Name from KPN Consulting B.V. to Cegeka Consulting B.V. due to acquisition of KPN by Cegeka;
Change in Name from MHI Plant Engineering & Construction, Ltd. (MHIPEC) to Mitsubishi Heavy Transportation and Construction Engineering, Ltd. (MHITC) due to corporate restructure;
Change in Address for Babcock Corporate Services Limited entities BCDA Vodafone, Internet Solutions Center and BCDB Vodaphone Data Centre;
Change in Name from Pennant Training Systems Limited to Pennant International Limited due to corporate restructure; and
Changes in Name for American Outdoor Brands Corporation entities due to corporate restructure as follows:

o Change in Name from American Outdoor Brands Corporation to Smith & Wesson Brands, Inc.,

o Change in Name from American Outdoor Brands Sales Company to Smith & Wesson Sales Company; and

o Change in Name from Battenfield Technologies, Inc., to AOB Products Company.

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 Comment On Changes Made Due To COVID-19

June 10, 2020 – 85 Fed. Reg. 35376: DDTC requested comments from the public on the temporary suspensions, modifications, and exceptions to several provisions of the ITAR that it announced May 1, 2020 (85 Fed. Reg. 25287 -- see May 2020 Regulatory Update). Deadline for comments was June 25, 2020.

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

June 12, 2020 – 85 Fed. Reg. 35972: DDTC published an updated List of Restricted Entities and Sub-entities Associated with Cuba (CRL, Cuba Restricted List) with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) because they are under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba. The CRL is also considered by BIS when it reviews applications for export licenses under the EAR. The State Department noted that entities or subentities owned or controlled by an entity or subentity on the CRL are not treated as restricted unless also specified by name on the list. The CRL is also available on the State Department website at https://www.state.gov/cuba-sanctions/cuba-restricted-list/.

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DDTC Released Its 2019 “Blue Lantern Report”

June 15, 2020: DDTC released its report on End-Use Monitoring of Defense Articles and Defense Services Commercial Exports FY 2019 (the 2019 “Blue Lantern Report”). The checks it reported included the first-ever joint checks between the Departments of State and Defense as well as the first tranche of “Blue Lantern” visits tailored to assess the risk of diversion of U.S. defense articles due to the acquisition of foreign companies by entities that pose a potential enhanced risk of diversion. Among other successes, the report noted that DDTC had enhanced its work with posts, resulting in the posts conducting the checks in a more timely and effective manner, with DDTC initiating 187 checks and posts closing 181 checks, and DDTC recommending non-approval of more than 130 license applications, compared to 57 during FY 2018 thanks to better execution of Blue Lantern checks and other improvements described in the report. The full 2019 Blue Lantern Report, which includes many detailed statistics of the Blue Lantern results, is on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=c13d692b1b9154102dc36311f54bcb2b.

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U.S. Secretary Of State William Pompeo Announced That The U.S. Will Take Steps Toward Imposing The Same Restrictions On U.S. Defense And Dual-Use Technology Exports To Hong Kong As It Does For China

June 29, 2020: U.S. Secretary of State William Pompeo announced that the U.S. “will today end exports of U.S.-origin defense equipment and will take steps toward imposing the same restrictions on U.S. defense and dual-use technologies to Hong Kong as it does for China” to protect U.S. national security in view of China’s actions to treat Hong Kong as “One Country, One System.” However, the statement did not announce any formal regulatory action. Secretary Pompeo’s statement is on the State Department website at https://www.state.gov/u-s-government-ending-controlled-defense-exports-to-hong-kong/. (See above for counterpart statement by Secretary of Commerce Ross.)

Department of the Treasury

OFAC Published A Final Rule Establishing The Syria-Related Sanctions Regulations

June 5, 2020 – 85 Fed. Reg. 34510: The Office of Foreign Assets Control (OFAC) published a final rule establishing the Syria-Related Sanctions Regulations (SRSR, 31 CFR Part 569) based on Executive Order (EO) 13894 of Oct. 14, 2019, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria” (Oct. 17, 2019 – 84 Fed. Reg. 55851; also reproduced as Appendix to the new SRSR. See October 2019 Regulatory Update for information about earlier actions under EO 13894.) The Syrian Sanctions Regulations (SSR, 31 CFR Part 542) remain in effect, separate from the SRSR.

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OFAC Released FAQs Regarding “Imposing Sanctions With Respect to Additional Sectors of Iran”

June 5, 2020: OFAC released four Frequently Asked Questions (FAQs) related to EO 13902, “Imposing Sanctions With Respect to Additional Sectors of Iran” (Jan. 14, 2020 – 85 Fed. Reg. 2003 – See January 2020 Regulatory Update). The FAQs address the scope of the sanctions, including issues such as the definitions of the “construction,” “mining,” “manufacturing”, and “textiles” sectors of the Iranian economy and the “goods” and “services” used in connection with those industry sectors, clarification of the status of medical-related activities, and the interpretation of the terms “knowingly” and “significantly.” .FAQs 830-833 are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#830.

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OFAC Posted An Important Technical Notice For Users Of The OFAC Website And Sanctions List Data Files Regarding The Annual Renewal Of The Public Certificate Securing The www.treasury.gov Website

June 22, 2020: OFAC posted an Important Technical Notice for Users of the OFAC Website and Sanctions List Data Files regarding the annual renewal of the public certificate securing the www.treasury.gov website. The existing certificate will expire July 10, 2020; the new one was made available on June 25, 2020. For full information see the Notice, on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/20200622.aspx.

LATEST SANCTIONS FINES & PENALTIES

Sanctions

Department of Commerce

June 4, 2020 – 85 Fed. Reg. 34405: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) against the following persons and, when acting for or on their behalf, any successors or assigns agents, or employees:

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

June 12, 2020: Qingshan Li, a Chinese national, was sentenced in U.S. District Court in San Diego, CA, to three years in federal custody based on his conviction of conspiracy to attempt to export defense articles without the required license from DDTC. Specifically, Li attempted to export a Harris Falcon III AN/PRC 152A radio that was controlled under the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). Li allegedly purchased the radio and other military radios, antennas, and additional military equipment while he was in the U.S. on a tourist visa for a scheduled a 9-day visit, informing the seller of the radio that he planned to take it to Tijuana, Mexico and ship it to China from there in light of the lack of export control rules in Mexico. After he was stopped by law enforcement agents with the radio and other military equipment in his bag, he allegedly told the agents that he knew the radio was export-controlled, that it was illegal to transport it to China, and that he had purchased it with the intent to ship it to China, knowing that this would violate U.S. law.

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June 16, 2020: Seyed Sajjad Shahidian, a citizen of Iran, pleaded guilty in U.S. District Court in Minneapolis, MN to conspiracy to commit offenses against and to defraud the U.S. for his role in conducting financial transactions in violation of U.S. sanctions against Iran. Shahidian was founder and CEO of Payment24, an internet-based Iranian financial services company whose primary business was helping Iranian citizens conduct prohibited financial transactions including the unlawful exportation of computer servers, software, and software licenses with U.S.-based businesses, utilizing devices including PayPal accounts opened with false documentation, a remote IP address from the United Arab Emirates (UAE), fraudulent passports and other false residency documentation, material misrepresentations to U.S.-based businesses regarding the destination of U.S.-origin goods, and advice on creating accounts with a foreign identity. The guilty plea occurred after Shahidian was arrested in London, England on Nov. 11, 2018, indicted in the U.S. on Dec. 18, 2018, and extradited to the U.S. on May 15, 2020.

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June 18, 2020: Gabriele Villone, an Italian national, was sentenced in U.S. District Court in Savannah, GA, to 28 months in prison for conspiring to violate the International Emergency Economic Powers Act (IEEPA,

50 USC Secs. 1701-1707) and the Export Control Reform Act of 2018 (ECRA, 50 USC Secs. 4801 et seq.). Villone allegedly conspired with two Russian nationals, an Italian national, a U.S. citizen, and various unnamed companies to attempt to purchase a power turbine valued at approximately $17.3 million from a U.S. manufacturer and export it without the required export license for use by a Russian company on a Russian Arctic deepwater drilling platform. The conspiracy included concealing the true end-user of the turbine from both the U.S. manufacturer and the U.S. government by submitting false documentation stating that the turbine would be used near Atlanta, Georgia by a U.S. company. The case against Russian and U.S. defendants remains under investigation.

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