Updates Archives - Page 12 of 12 - FD Associates, Inc.

JUNE 2015 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through June 30, 2015. The newsletter is provided as a complimentary service to assist clients with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Department of Commerce

BIS Proposes Rule to Harmonize Definitions of Key Terms Under the ITAR and the EAR

June 3, 2015 – 80 Fed. Reg. 31505: As part of the Export Control Reform effort, the Bureau of Industry and Security (BIS) proposed amendments to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to harmonize the definitions of the terms “technology,” “required,” “peculiarly responsible,” “proscribed person,” “published,” results of “fundamental research,” “export,” “reexport,” “release,” “transfer,” and “transfer (in-country)” with comparable terms in the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). (See State Department section below for revisions of definitions in the ITAR.) BIS noted that these amendments were intended to clarify and harmonize the defined terms, but not to materially change their scope. BIS also proposed amendments to the Scope sections of the EAR to update and clarify the application of the EAR to electronically transmitted and stored technology and software. Deadline for comments on these important proposed amendments is August 3, 2015.

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June 4, 2015 -- 80 Fed. Reg. 31834: BIS amended the EAR by adding Corporacion Nacional de Telecommunicaciones (CNT), of Quito, Ecuador, the state-owned telecommunications utility in Ecuador, to the Entity List (EAR Part 744, Supplement No. 4). A license will be required for any transaction in which items classified under Export Control Classification Numbers (ECCNs) 5D002 or 5A002 are to be exported, reexported, or transferred to this entity, and no license exceptions will be available for such transactions.

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BIS Posts FAQs on Its Website Related to Proposed Rules Adopting Wassenaar Agreement Restrictions on the Export of Technology for the Development of Intrusion Software/Systems

June 9, 2015: BIS posted 32 Frequently Asked Questions (FAQs) providing guidance on the new controls it proposed on May 20, 2015 regarding systems, equipment or components specially designed for the generation, operation, or delivery of, or communication with, intrusion software. (See May 2015 Regulatory Update.) The FAQs are on the BIS website at http://www.bis.doc.gov/index.php/policy-guidance/faqs.

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BIS Publishes Rule Concerning the Amendment of the EAR to Reflect Australia Group Agreements Related to Exports of Items That Could Contribute to the Proliferation of Chemical And Biological Weapons

June 16, 2015 – 80 Fed. Reg. 34266: In a final rule, BIS implemented decisions adopted in 2014 by the Australia Group (the multilateral export control organization concerned with exports that might contribute to the development of chemical or biological weapons) by amending ECCN 1C351 and deleting ECCN 1C352 to reflect the merger of the Australia Group’s List of Animal Pathogens and List of Biological Agents; amending ECCN 2B350; adding a technical note to ECCN 1C350; and making conforming changes in other EAR provisions.

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BIS Publishes Proposed ECR Rules to Amend the EAR related to Commodities Proposed for Transfer from USML Category XIV and XVIII

June 17, 2015 – 80 Fed. Reg. 34562: Continuing the Export Control Reform effort, BIS proposed to amend the EAR to incorporate into the Commerce Control List (CCL, 15 CFR Part 774, Supplement No. 1) articles that had been determined not to require continued control under Category XIV (Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment) or Category XVIII (Directed Energy Weapons) of the U.S. Munitions List (USML, 22 CFR Part 121). (See State Department section below for proposed concurrent amendments of the USML.) The Category XIV items – primarily dissemination, detection, and protection “equipment” and related articles – would be controlled under new ECCNs 1A607, 1B607, 1C607, 1D607, and 1E607. The Category XVIII items – primarily tooling, production “equipment,” test and evaluation “equipment,” test models, and related articles for Directed Energy Weapons – would be controlled under new ECCNs 6B619, 6D619, and 6E619. Deadline for comments on these proposed amendments is August 17, 2015.

Department of State

DDTC Name Changes

June 1 and 17, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following name and address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Boeing Singapore Pte Ltd Address Change; and
Alliant Techsystems, Inc. Name Change to Orbital ATK, Inc. and Address Change (due to merger)

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

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DDTC Proposes Rule to Harmonize Definitions of Key Terms Under the ITAR and the EAR, Including Controversial Changes in the Definition of Technical Data Under the ITAR

June 3, 2015 – 80 Fed. Reg. 31525: As part of the Export Control Reform effort, DDTC proposed amendments to the ITAR to revise the definitions of “defense article, “defense services,” “technical data,” “public domain,” “export,” and “reexport or retransfer” and create new definitions of “required,” “technical data that arises during, or results from, fundamental research,” “release,” “retransfer,” and “activities that are not exports, reexports, or retransfers” to clarify the scope of covered activities and information and to harmonize the definitions with the definitions of comparable terms in the EAR. (See Commerce Department section above for revisions of definitions in the EAR.) The proposal would also –

Detail the scope of licenses, unauthorized releases of information, and the “release” of secured information;
Revise the sections on “exports” of “technical data” to U.S. persons abroad;
Provide that the electronic transmission of unclassified “technical data” abroad is not an “export” if it is sufficiently secured to prevent access by foreign persons; and Allow for the electronic storage of unclassified “technical data” abroad if the data is secured to prevent access by unauthorized parties.

Importantly, DDTC also released the following documents to assist understanding of these proposals:

A 25-page chart comparing the DDTC and BIS proposals at http://www.pmddtc.state.gov/FR/2015/Definitions%20Rule%20Harmonization%20Chart.pdf, and
A fact sheet on the proposed definition revisions at http://www.pmddtc.state.gov/FR/2015/Defintions_Rule_Fact_sheet_2015_03_06.pdf.

Deadline for comments on these proposed amendments is Aug. 3, 2015.

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DDTC Publishes Proposed ECR Rules to Amend the ITAR related to USML Category XIV and XVIII Items

June 17, 2015 – 80 Fed. Reg. 34572: Also in furtherance of the Export Control Reform effort, DDTC proposed amendments to USML Category XIV (Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment) and Category XVIII (Directed Energy Weapons) to more precisely describe the articles in these categories that require continued control under the USML. (See Commerce Department section above for proposed concurrent amendments that would control under the CCL the items determined not to require control under these categories of the USML.) In this notice DDTC specifically identified several topics on which it particularly invites comment from the public, including information about items remaining on the USML that may be in normal commercial use and information about the consistency of these proposed amendments with the control lists of the Wassenaar Arrangement. Deadline for comments on these proposed amendments is August 17, 2015.

LATEST SANCTIONS FINES & PENALTIES

This section of our newsletter provides information on the latest sanctions, fines and penalties for export violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement

agencies. It is provided as a service to clients and associates of FD Associates to remind them of the importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your company! Call us with questions or concerns at 703-847-5801 or email info@fdassociates.net.

Sanctions

Department of Commerce

June 10, 2015 – 80 Fed. Reg. 32936: BIS denied the export privileges of Luis Armando Collins-Avila of Big Spring Correctional Institution in Big Spring, TX for 10 years based on his conviction in the U.S. District Court for Arizona of exporting 6,000 rounds of ITAR-controlled ammunition to Mexico without the required State Department authorization. In the criminal case Collins-Avila was sentenced to 46 months of imprisonment, 3 years of supervised release, and a $200 assessment.

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June 24, 2015 – 80 Fed. Reg. 36317: BIS denied the export privileges of Armin Shir Mohammadi of Lake Forest, CA for 10 years based on his conviction in U.S. District Court for the Southern District of California of conspiring to export and causing the export of satellite communication equipment, navigation equipment, and related goods from the U.S. to persons in third countries with knowledge that such goods were intended to be re-exported to Iran without the required authorization from the Treasury Department, Office of Foreign Assets Control (OFAC). In the criminal case Mohammadi was sentenced to one year and one day of imprisonment.

Department of State

June 5, 2015 – 80 Fed. Reg. 32193: The State Department posted a notice describing the temporary and limited sanctions relief that has been in effect since November 24, 2013, in order to continue negotiations between the U.S., France, the United Kingdom, Russia, China, and Germany (the P5+1) and Iran to achieve a long-term comprehensive solution ensuring that Iran’s nuclear program will be exclusively peaceful. Among other things, the notice specified that this sanctions relief did not apply to actions by U.S. persons and foreign entities owned or controlled by U.S. persons, and that all the suspended sanctions would resume on July 1, 2015, unless further action is taken by the P5+1 and Iran.

Department of the Treasury

June 30, 2015: The State Department and Treasury Department announced that the P5+1 had agreed with Iran to extend negotiations on Iran’s nuclear program for another 7 days, and that limited sanctions relief would continue in effect for that period. Guidance on this extension is on the OFAC website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/guidance_ext_20150630.pdf.

Fines and Penalties

June 11, 2015: Alexander Brazhnikov Jr. of Mountainside, NJ, a Russian-born U.S. citizen, pleaded guilty in U.S. District Court for the District of New Jersey to conspiracy to commit money laundering, conspiracy to smuggle electronics from the U.S., and conspiracy to violate the International Emergency Economic Powers Act (IEEPA) in an alleged wide-reaching operation that was responsible for nearly 2,000 illegal shipments of export-controlled sensitive electronics components, many of which wound up in the hands of Russian military and security forces. As part of the plot, Brazhnikov routinely falsified the true identity of the end-user of the components and the true value of the components in order to avoid completing required export control forms. Sentencing is scheduled for September 15. Brazhnikov has already agreed to the entry of a forfeiture money judgment of $65 million.

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June 16, 2015: Teledyne LeCroy, Inc., of Chestnut Ridge, NY agreed to pay a civil penalty of $75,000 to settle charges by BIS that it violated the EAR by exporting two oscilloscopes controlled under ECCN 3A292.d and valued at $13,008 and $2,594 to a university in China that was listed on the Entity List without the required authorization from BIS and by failing to file accurate Shippers Export Declarations/AES Filings in connection with these transactions by listing an intermediary party as the “ultimate consignee.”

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June 25, 2015: Kunlin Hsieh, a sales manager for Junbon Enterprises Co., Ltd in Taiwan, pleaded guilty in Federal District Court in San Antonio, TX to conspiracy to violate IEEPA and the Iranian Transaction and Sanctions Regulations (ITSR, 31 CFR Part 560) by conspiring with others to obtain circuit boards with U.S.-made laminates from U.S. companies without disclosing that the parts were destined for Iran. The circuit boards were usable in systems such as missile guidance systems, secure tactical radio communications, and military radar networks. An alleged co-conspirator, Agris Indricevs, a citizen of Latvia, did not plead guilty and it is scheduled for trial on August 10, 2015. Hsieh and Indricevs have been in federal custody since being arrested by federal authorities in Albuquerque, New Mexico, on August 13, 2014.

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June 30, 2015: Teoman Tosun of Kesan/Edirne, Turkey, agreed to pay a civil penalty of $75,000 (of which $50,000 will be suspended for two years and then waived if Tosun has not committed any further violations) and have his export privileges denied for two years to settle charges by BIS that he had violated a BIS Temporary Denial Order against Mahan Airways by facilitating the acquisition of a U.S.-origin MD-82 aircraft by Mahan and that he had caused, aided, or abetted a violation of the EAR by facilitating the reexport of the MD-82 aircraft from Turkey to Mahan in Iran.

JUNE 2015 EXPORT CONTROL REGULATION UPDATES Read More »

MAY 2015 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through May 31, 2015. The newsletter is provided as a complimentary service to assist clients with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Department of Commerce

ECR Update: BIS Publishes Proposed Rules to Adopt Changes to USML Category XII… Unlike prior ECR Changes, Not a Significant Amount is Being Down-Regulated

May 5, 2015 – 80 Fed. Reg. 25797: As part of the Export Control Reform effort, the Bureau of Industry and Security (BIS) proposed revisions to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) describing how articles that no longer require control under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) would be controlled under the CCL. To accomplish this, the proposal would create new “600 series” Export Control Classification Numbers (ECCNs) 6X615 to control military fire control, range finder, and optical equipment; amend the existing “600 series” ECCNs 7X611 to include military guidance and control equipment; and amend the following existing ECCNs to cover items that are considered dual use by the Wassenaar Arrangement: 0A987, 2A984, 6A004, 6A005, 6A007, 6A008, 6A107, 7A001, 7A002, 7A003, 7A005, 7A101, and 7A102.

In addition, the proposed rule would strengthen controls over night vision items by amending certain existing ECCNs to expand their scope of control,eliminate the use of some license exceptions, and create new ECCNs for certain software and technology related to night vision items. Among these new and expanded controls, ECCNs 6A002 and 6A990 will be subjected to regional stability (RS) controls; license exception Strategic Trade Authorization (STA) will be restricted for some items in ECCNs 0E987, 6A002, 6A004, 6A990, 6D002, 6D003, 6E001, 6E002, 6E990, and new 6E994; and the number of ECCNs covered by limitations imposed on exports and reexports of certain cameras, systems or equipment by Sec. 744.9 of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) will be expanded.

The deadline for comments on these proposals is July 6, 2015. (See related item in State Department section below.)

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BIS Publishes Guidance on Routed Transactions Involving Russia and the Need to Obtain Clear Statements of End Use For All Russia-Related Transactions

May 19, 2015: BIS posted guidance on due diligence to prevent unauthorized transshipment/reexport of controlled items to Russia. While BIS is especially concerned about possible unauthorized reexports to Russia of NS-controlled items and items subject to the military end use requirement in EAR Part 744, Supp. No. 2, this guidance describes screening and inquiry practices that are equally applicable to prevention of unauthorized diversion to any destination. The guidance is on the BIS website at http://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/russia-due-diligence-guidance.

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BIS Publishes Proposed Rule for Cybersecurity, Adopting Part of Wassenaar 2013 Plenary Agreements

May 20, 2015 – 80 Fed. Reg. 28853: BIS proposed a rule imposing NS, RS, and AT controls on certain cybersecurity items that would require an export license to all countries except Canada. No license exceptions except GOV would be available for exports of these items. The new controls would pertain to items involving “intrusion software,” which will be a newly defined term, and communications surveillance systems. Some of the designated items are already controlled for their information security functionality, including encryption and cryptanalysis, but others would be newly controlled solely because of their cybersecurity functionality. These changes would implement an agreement on intrusion and surveillance items that was adopted by the 2013 plenary of the Wassenaar Arrangement. Comments are due July 20, 2015.

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BIS Publishes Various CCL Revisions to Adopt 2014 Wassenaar Plenary Agreements

May 21, 2015 – 80 Fed. Reg. 29431: BIS made extensive changes in the CCL to implement decisions agreed at the December 2014 plenary of the Wassenaar Arrangement. The changes include revisions of 45 ECCNs plus the addition of one ECCN (9D005) and the removal of one ECCN (4D002); amendment of the General Technology Note; and addition of 7 definitions and revision of 6 definitions. Items significantly affected by the changes include spacecraft equipment (Cat. 9), technology for fly-by-wire/flight-by-light systems (Cat. 7), machine tools (Cat. 2), optical equipment for military use and fiber laser components (Cat. 6); and unmanned aerial vehicles (Cat. 9). In addition, Column 1 of the Country Group list (EAR Part 740, Supp. No. 1) was modified to replace the former CoCom member countries with the Wassenaar Arrangement Participating States, and the Commerce Country Chart (EAR Part 738, Supp. No. 1) was amended, including harmonization of Columns RS2 and NS2 and other changes based on diversion risks.

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BIS Permits Certain Exports to Crimea without a License

May 22, 2015 – 80 Fed. Reg. 29530: BIS amended EAR Sec. 746.6 to allow exports to Crimea without a license of mass market and EAR99 software necessary to enable the exchange of personal communications over the Internet. The rule also clarified that for purposes of the country group designations under the EAR, Crimea is regarded as part of Ukraine, and that for deemed export purposes the nationality of a foreign national located in or from Crimea is determined by the nationality on the person’s passport. (See related item in Treasury Department section below.)

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BIS Publishes Proposed Rule to Harmonize the EAR and ITAR Destination Control Statements

May 22, 2015 – 80 Fed. Reg. 29551: BIS proposed a rule that would revise the destination control statement (DCS) described in EAR Sec. 758.6 to harmonize it with the DCS required by Sec. 123.9(b)(1) of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). Comments are due July 6, 2015. (See related item in State Department section below.)

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BIS Publishes Advanced Notice of Proposed Rulemaking Requesting Comments on Improvements to Export Clearance Requirements Under the EAR

May 22, 2015 – 80 Fed. Reg. 29554: In an advanced notice of proposed rulemaking, BIS requested comments about how the export clearance requirements under the EAR can be improved, including how they can better be harmonized with the comparable requirements under the ITAR. This notice specifies several questions of particular concern to BIS, but BIS will accept suggestions for other improvements as well. Deadline for comments is July 6, 2015.

Department of Justice

ATF Publishes Rule to Adopt Changes to USMIL to Make it Consistent with USML Changes Arising from ECR

May 29, 2015 – 80 Fed. Reg. 30615: The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) finalized without change an interim rule (March 27, 2014, 79 Fed. Reg. 17024) that had amended the U.S. Munitions Import List (USMIL, 27 CFR Sec. 447.21) to remove certain defense articles currently on the United States Munitions Import List that ATF had determined no longer warrant import control under the Arms Export Control Act. Several biological agents and nuclear-related items were also removed from the list because they were already controlled under other regulations. (See fuller description of deleted items in March 2014 Regulatory Update.)

Department of State

Various Address Changes for Registrants and Foreign Parties to Licenses Published by DDTC

May 1, 15, 21, and 28, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Rockwell Collins Australia Pty Limited Address Change
Quality Precision Technology Limited Address Change
Logikor Inc. Address Change
Black Tree Group, LLC Address Change

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

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ECR Update: DDTC Publishes Proposed Rules to Adopt Changes to USML Category XII… Unlike prior ECR Changes, Not a Significant Amount is Being Down-Regulated

May 5, 2015 – 80 Fed. Reg. 25821: As part of the Export Control Reform effort, DDTC proposed to amend USML Category XII (fire control, range finder, optical and guidance and control equipment) to describe in greater detail the articles that should remain on the USML in order to establish a “bright line” between the items to be controlled on the USML and the items to be controlled on the CCL. As a result of this process, many items formerly controlled under the broader categories of the USML migrated to control under the CCL. (See related item in Commerce Department section above.) Among the many changes to achieve greater precision in the coverage of Category XII, definitions of “charge multiplication,” “focal plane array,” “image intensifier tube,” “microbolometer,” and “multispectral” are added to Category XII. The deadline for comments is July 6, 2015.

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DDTC Publishes Updated FAQs Related to Category XI ECR Changes and PCB Jurisdiction

May 7, 2015: DDTC updated its FAQs on Commodity Jurisdiction and Export Control Reform with responses to questions about Category XI(c)(2) PCBs and determinations about items that have transitioned from the USML to the CCL. A link to these FAQs is at http://www.pmddtc.state.gov/faqs/index.html.

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DDTC Proposes Amendment to the ITAR to Harmonize the EAR and ITAR Destination Control Statements, to Clarify the Manner to Get an Export License for EAR Items on ITAR Licenses, and to Expound on the 126.4 Exemption and Applicability for EAR-controlled Items

May 22, 2015 – 80 Fed. Reg. 29565: DDTC proposed amendments to the ITAR that would –

Clarify DDTC’s requirements pertaining to the export of items subject to the EAR that are made in conjunction with exports of items subject to the ITAR;
Clarify the exemption in ITAR Sec. 126.4 on exports made to or on behalf of an agency of the U.S. Government without a license and expand the scope of the exemption to include permanent exports;
Revise the Destination Control Statement required under ITAR Sec. 123.9 to harmonize it with comparable EAR requirements (see related item in Commerce Department section above);
Revise procedures for obtaining authorization from the State Department to export or retransfer items subject to the EAR; and
Make numerous edits to address erroneous or outdated reporting requirements.

The deadline for comments is July 6, 2015.

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DDTC Publishes Major New Proposed Rule Addressing the Definition of Defense Services and the Conditions Under Which U.S. Persons Who Perform Defense Services for Foreign Employers Need to Become Registered as ITAR Exporters

May 26, 2015 – 80 Fed. Reg. 30001: DDTC proposed to amend ITAR Parts 120, 122, 124, 125, and 126 to clarify the registration and licensing requirements for U.S. persons performing defense services as employees of foreign employers in the U.S. or abroad or in a foreign branch or (under some circumstances) subsidiary of a U.S. company and to U.S. persons engaged as independent contractors outside the U.S. The deadline for comments is July 27, 2015.

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May 29, 2015 – 80 Fed. Reg. 30614: DDTC amended ITAR Sec. 126.1 to rescind the previous policy of denying the export of ITAR-controlled items to Fiji.

Department of the Treasury

OFAC Posts Guidelines on Travel to Cuba

May 5, 2015: The Office of Foreign Assets Control (OFAC) posted guidance on travel between the U.S. and Cuba with reference to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) on its website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faq_ferry_05042015.pdf.

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OFAC Posts Guidelines on Ukraine-related Sanctions

May 7, 2015: OFAC posted two revised FAQs and one new FAQ regarding Ukraine-related sanctions. A link to FAQs 395, 419, and 453 is at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150507.aspx.

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OFAC Issues General License for Export of Certain CCL Items to Support the Access to Free Communication of the Ukrainian People

May 22, 2015: OFAC published Ukraine-related General License No. 9, “Exportation of Certain Services and Software Incident to Internet-Based Communications Authorized” on its website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl_9.pdf. (See related item in Commerce Department section above.) An FAQ at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#454 describes categories of sanctioned persons that are, and are not, eligible to receive these defense services and software.

LATEST SANCTIONS FINES & PENALTIES

agencies. It is provided as a service to clients and associates of FD Associates to remind them of the

importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your

company! Call us with questions or concerns at 703-847-5801 or email info@fdassociates.net.

Sanctions

Department of Commerce

BIS Denies Export Privileges to Joseph DeBose for Conviction for Illegally Exporting Firearms and Firearms Barrels to China

May 20, 2015 – 80 Fed. Reg. 28953: BIS denied the export privileges of Joseph DeBose of Ortonville, MI for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully exporting ITAR-controlled firearms and firearms barrels, including a Beretta 9mm semi-automatic handgun, to China without the required authorization from the State Department. In the criminal case DeBose was sentenced to 24 months of imprisonment, 3 years of supervised release, and a $100 assessment.

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BIS Denies Export Privileges to Jim Chu, for Conviction for Illegally Exporting ITAR Radiation Hardened Positive Voltage Regulators to Taiwan

May 20, 2015 – 80 Fed. Reg. 28954: BIS denied the export privileges of Wei Jiun Chu, a/k/a Jim Chu, of Diamond Bar, CA for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting 40 radiation-hardened adjustable positive voltage regulators controlled under USML Category XV(e) to Taiwan without the required State Department authorization. In the criminal case Chu was sentenced to 36 months of probation and a $100 assessment.

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BIS Amends TDO for Mahan Airways of Iran to Add Other Affiliated Entities

May 28, 2015 – 80 Fed. Reg. 30435: BIS amended the temporary denial order (TDO) against Mahan Airways of Tehran, Iran, and others by adding the following additional denied parties:

Al Naser Airlines, a/k/a al-Naser Airlines, a/ k/a Alnaser Airlines and Air Freight Ltd of Baghdad, Iraq, Dubai, United Arab Emirates (UAE), and Amman, Jordan;
Ali Abdullah Alhay, a/k/a Ali Alhay, a/k/a Ali Abdullah Ahmed Alhay of Baghdad, Iraq and Qatif, Saudi Arabia; and
Bahar Safwa General Trading of Dubai, UAE.

The TDO will remain in effect until 14 July 2015.

Fines and Penalties

May 1, 2015: Sam Rafic Ghanem of Springfield, VA, a Lebanese-born U.S. citizen who owned a freight forwarding business in District Heights, MD, was convicted by a jury in federal court in Greenbelt, MD of attempting to export firearms parts and accessories to Lebanon without the required authorization from the State Department. The weapons that Ghanem sought to export were provided to him by an FBI source. Ghanem concealed the weapons within the doors and cut-up parts of salvaged vehicles that were transported to the Port of Baltimore for shipment to Lebanon.

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May 4, 2015: Abelardo Delmundo of Toms River, NJ pleaded guilty to conspiracy to violate the AECA by agreeing to ship firearms and firearms parts from the U.S. to the Philippines without the required authorization from the State Department. Over a period of 5 years, Delmundo’s co-conspirator, Kirby Santos of the Philippines, who was indicted April 27, 2015 (see April 2015 Regulatory Update), purchased more than $200,000 worth of defense articles in the U.S. and had them shipped to Delmundo in New Jersey to make them appear as domestic sales. Delmundo then shipped them to the Philippines, labeled as food or other home goods.

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May 7, 2015: The U.S. District Court of the District of Columbia entered a formal judgment confirming a plea agreement by Schlumberger Oilfield Holdings Ltd. (SOHL), a wholly owned subsidiary of Schlumberger Ltd., requiring SOHL to pay $232,708,356 and submit to other penalties for conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan. Among other penalties, SOHL will submit to 3 years of corporate probation and SOHL’s parent, Schlumberger Ltd., will cease all operations in Iran and Sudan, report on its compliance with sanctions, and hire an independent consultant to review its internal sanctions policies and audits of sanctions compliance. The violations were committed by Drilling and Measurements, a U.S.-based Schlumberger business segment, and included approving and disguising the company's capital expenditure requests from Iran and Sudan for the manufacture of new oilfield drilling tools and for the spending of money for certain company purchases; making and implementing business decisions specifically concerning Iran and Sudan; and providing certain technical services and expertise in order to troubleshoot mechanical failures and to sustain expensive drilling tools and related equipment in Iran and Sudan.

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May 14, 2015: Bilal Ahmed of Bolingbrook, IL was sentenced to 24 months in federal prison followed by 24 months of supervision based on his plea of guilty to willfully violating IEEPA by exporting goods including a FLIR HRC-U thermal imaging camera, carbon fiber to make bullet-proof vests, and microwave laminate to Pakistan without the required authorization from the Department of Commerce. (See additional details about Ahmed’s violations in October 2014 Regulatory Update.)

MAY 2015 EXPORT CONTROL REGULATION UPDATES Read More »

APRIL 2015 EXPORT CONTROL REGULATION UPDATES

This newsletter is a listing of the latest changes in export control regulations through APRIL 2015. The newsletter is provided as a complimentary service to assist clients with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

Australia Amends Defense Control Act to Bring it in Line with Wassenaar Arrangement

April 2, 2015: An amendment to the Defence Trade Controls Act 2012 affecting the supply and publication of controlled technology and the brokering of controlled goods and technology received Royal Assent. Before passing the amendment, there was a gap under Australian export control law where the transfer of technical information and technology did not require licensing in the same or similar manner as the export of hardware. The changes are described in a Guide to the DTC Bill on the Australian Defence Ministry’s website at http://www.defence.gov.au/deco/_Master/docs/Consultation-Docs/Guide-to-DTC-Bill.pdf. Royal Assent is the process in United Kingdom Commonwealth countries where the Governor General, or other state leader who is a representative of the United Kingdom monarchy, grants or withholds approval for laws enacted by the legislature.

United Kingdom Amends Its Export Control Lists to Provide Clearer Controls on the Export of Firearms

April 17, 2015: The U.K. Export Control Organisation (ECO) announced the amendment of its control lists (Export Control Order 2008, Schedules 1, 2, and 3) to control and rationalize its controls on firearms. Notice to Exporters 2015/16, describing the changes, is on the ECO website at https://www.gov.uk/.

Department of Commerce Issues EAR Amendment to Address Changes in the EAR Necessitated by Agreements Made by Wassenaar Member Nations in 2014

April 7, 2015 – 80 Fed. Reg. 18522: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to reflect changes to the Missile Technology Control Regime (MTCR) that had been adopted by the MTCR member countries in 2014. The changes affect the following Export Commodity Control Numbers (ECCNs): 1C111, 3A101, 9A106, 9A110, 9A604, and 9A610.

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BIS Issues Minor Amendment to the ECCN 6C992 to Clarify Its Controls

April 17, 2015 -- 80 Fed. Reg. 21159: BIS amended ECCN 6C992 to read: “Items: The list of items controlled is contained in the ECCN heading.”

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BIS Posts Updated FAQs on Its Website In Line with Obama Administration Decisions to Lift Terrorist Designation of Cuba and to Permit a Broader Range of Exports to Cuba.

April 20, 2015: BIS posted updated Frequently Asked Questions (FAQs) about controls relating to Cuba on its website at http://www.bis.doc.gov/index.php/policy-guidance/faqs.

Various Persons Added to the BIS Restricted Party Lists

April 23, 2015 – 80 Fed. Reg. 22638: BIS added 8 persons under 9 entries to the Entity List (15 CFR Part 744, Supp. No. 4) following the indictment of 5 companies and 5 individuals in connection with illegal exports to Iran. All these persons will be subject to a license requirement for exports of all items subject to the EAR, with a license review policy of denial. The persons added to the Entity List are:

China

Shandong Sheenrun Optics & Electronics Co., Ltd., a.k.a. China Sheenrun Optics and Electronics Co. Ltd. and Jinan Sheenrun Electronics Company Ltd., Jinan, China

Iran

(1) Abbas Goldoozan, Tehran, Iran (also listed under Turkey);

(2) Arash Servatian, Tehran, Iran;

(3) Elaheh Siahpoush, Tehran, Iran; and

(4) Faratel Company, Tehran, Iran.

Taiwan

(1) Arthur Shyu, Taipei, Taiwan; and

(2) Hosoda Taiwan Limited, Taipei, Taiwan.

Turkey

(1) Abbas Goldoozan, Istanbul, Turkey 34134 (also listed under Iran); and

(2) Golsad Istanbul Trading, a.k.a. Golsad Import-Export, Istanbul, Turkey.

Department of State Publishes Name & Address Changes for Registrants for April 2015

April 10, 14, 16, 17, 23, 24, 27, and 28, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

B/E Aerospace Consumables Management Sp. z o.o. Changing to KLX Aerospace Solutions Sp. z o.o. due to corporate restructure;
T.D. Williamson Algerie EURL Address Change;
Astrotech Corporation and Astrotech Space Operations, Inc. Changing to Astrotech Space Operations, LLC due to corporate reorganization;
Academi, LLC and Constellis Group Changing to Constellis Holding LLC due to corporate rebranding;
Bibby Distribution Limited Address Change;
Cockerill Maintenance et Ingenierie S.A. Changing to CMI Defence S.A. due to corporate restructure;
HYDROID EUROPE Address Change;
NEC Toshiba Space Systems, Ltd. Changing to NEC Space Technologies, Ltd. due to corporate restructure;
AECOM/GSS, LTD Changing to Global Sourcing Solutions;
FIFE GROUP (Scotland) Ltd Changing to FIFE GROUP LTD due to corporate restructure;
Lockheed Martin Canada, Inc. Address Change;
Selex ES S.p.A, (Italy) Address Change;
L3 Communications Corporation International Licensing Group (ILG) Address Change; and
Infoterra GmbH Changing to Airbus DS Geo GmbH due to corporate rebranding.

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

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State Department Extends Limited Relief for Iran-Related Sanctions Through June 30, 2015

April 16, 2015 – 80 Fed. Reg. 20552: The Department of State extended through June 30, 2015 the limited relief of Iran-related sanctions that has been in effect since November 2013 while the U.S. and its international partners negotiate with Iran on a plan whereby Iran will halt and/or roll back progress on its nuclear program. Transactions with Iran by U.S. persons and foreign entities owned or controlled by U.S. persons generally remain sanctioned, and are not affected by this temporary relief.

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State Department Renews Temporary Waivers of Sanctions to Permit the Provision of Satellite Connectivity to Iran

April 23, 2015 – 80 Fed. Reg. 22762: The Department of State renewed temporary waivers of certain sanctions against Iran to permit a specific range of transactions related to the provision of satellite connectivity services to the Islamic Republic of Iran Broadcasting (IRIB).

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State Department Publishes List Identifying Items that Can Be Imported from Cuba Under Certain Limitations

April 23, 2015 – 80 Fed. Reg. 22763: The Department of State published a list of goods and services that are eligible for importation from Cuba into the U.S. pursuant to 31 CFR Sec. 515.582, which was added to the Treasury Department Cuban Assets Control Regulations (CACR, 31 CFR Part 515) in January 2015 to implement the President’s liberalized policy on trade with Cuba. The “Section 515.582 List” permits commercial imports of certain goods and services produced by independent Cuban entrepreneurs, as demonstrated by documentary evidence. Goods from certain sections/chapters of the Harmonized Tariff Schedule of the U.S. (HTS) are excluded from eligibility under this rule.

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DDTC Publishes Notice Regarding Elimination of Ellie Net and Tracking of Paper Submissions

April 24, 2015: The Directorate of Defense Trade Controls (DDTC) posted a notice describing how industry users will be able to find and track their paper applications, such as General Correspondence Letters and DSP-85 Applications after the “ELLIE Net” system is decommissioned. Filers will be required to provide email addresses as part of the submissions. The notice is on the DDTC website at http://www.pmddtc.state.gov/documents/WebNotice_PaperApplications.pdf.

Department of the Treasury

OFAC Publishes Guidance on Iran Sanctions in Light of Discussions with Iran on Its Nuclear Program

April 3, 2015: The Office of Foreign Assets Control (OFAC) published guidance regarding the sanctions-related consequences of the announcement on April 2, 2015 of parameters for a Joint Comprehensive Plan of Action regarding the Islamic Republic of Iran’s Nuclear Program. A link to this guidance is on the Treasury Department website at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150403_33.aspx.

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OFAC Releases New Format for Consolidated Sanctions List Data Files

April 6, 2015: OFAC released a new format for its Consolidated Sanctions List Data Files on its website at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/consolidated.aspx#data. In addition to the Specially Designated Nationals List, which had already been released in the new advanced format, the new Consolidated Sanctions List Data Files include the Foreign Sanctions Evaders (FSE) List, Sectoral Sanctions Identifications (SSI) List, Palestinian Legislative Council (NS-PLC) List, the List of Foreign Financial Institutions Subject to Part 561 (the Part 561 List), and the Non-SDN Iranian Sanctions Act (NS-ISA) List. FAQs regarding the new format are at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/advanced_faq.aspx.

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OFAC Amends Syrian Sanctions Regulations to Permit Certain Publishing Transactions

April 13, 2015 – 80 Fed. Reg. 19532: OFAC amended the Syrian Sanctions Regulations (31 CFR Part 542) by adding a new general license to authorize certain transactions relating to publishing that are not already exempt from regulation. This general license will not apply if the parties to such transactions include the government of Syria (except academic institutions) or any other person whose property and interests in property are blocked. This general license is at 31 CFR Sec. 542.532.

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OFAC Publishes Updated FAQs Related to the Cuba Embargo

April 16, 2015: OFAC published new and updated FAQs about the Cuban Assets Control Regulations on its website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf.

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

Department of Commerce

BIS Denies Export Privileges to Precision Image Corp for Illegal Exports Under AECA

April 2, 2015 – 80 Fed. Reg. 17716: BIS denied the export privileges of Precision Image Corp. of Woodinville, WA for 10 years based on its conviction in federal district court in Seattle on Oct. 28, 2013 of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by exporting technical data controlled under Category XII(f) of the U.S. Munitions List (USML, 22 CFR Sec. 121.1) without the required authorization. In the criminal case, Precision was sentenced to 3 years of probation and ordered to pay a criminal fine of $300,000 and an assessment of $400.

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BIS Denies Export Privileges to Ivon Castaneda for Violating the AECA By Illegally Exporting Firearm Barrels to Honduras

April 2, 2015 – 80 Fed. Reg. 17718: BIS denied the export privileges of Ivon Castaneda, currently an inmate in federal prison in Coleman, FL for 10 years based on his conviction in federal district court in the Southern District of Florida on Dec. 18, 2012 of violating the AECA by conspiring and attempting to export firearm barrels and other items controlled under the AECA to Honduras without the required authorization. In the criminal case, Castaneda was sentenced to 37 months of imprisonment and 2 years of supervised release and ordered to pay an assessment of $200.

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BIS Denies Export Privileges to Erik Antonio Perez-Bazan for Violating the AECA by Illegally Exporting Grenade Launcher Barrels to Mexico

April 2, 2015 – 80 Fed. Reg. 17722: BIS denied the export privileges of Erik Antonio Perez-Bazan, currently an inmate in federal prison in Bastrop, TX, for 10 years based on his conviction in federal court in the Southern District of Texas on Sep. 15, 2014 of violating the AECA by conspiring, attempting, and causing the export of grenade launcher barrels and other defense articles to Mexico without the required authorization. In the criminal case, Perez-Bazan was sentenced to 75 months of imprisonment and 3 years of supervised release and ordered to pay a $100 assessment.

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BIS Denies Export Privileges to Ronald Alexander Dobek for Violating the AECA by Illegally Exporting F-16 Canopy Seals to Venezuela

April 2, 2015 – 80 Fed. Reg. 17724: BIS denied the export privileges of Ronald Alexander Dobek, currently an inmate in federal prison in Duluth, MN, for 10 years based on his conviction in federal court in the Eastern District of Wisconsin on Sep. 10, 2014 of violating the AECA by conspiring and attempting to export, exporting, and causing to be exported F-16 canopy seals controlled on the USML to Venezuela without the required authorization. In the criminal case, Dobek was sentenced to 84 months of imprisonment and 3 years of supervised release and ordered to pay a $300 assessment.

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BIS Denies Export Privileges to Brian Keith Bishop for Violating the AECA by Illegally Exporting Ammunition to Jordan

April 2, 2015 – 80 Fed. Reg. 17725: BIS denied the export privileges of Brian Keith Bishop of Dulles, VA for 5 years based on his conviction in federal court in the Eastern District of Virginia on May 7, 2013 of violating the AECA by attempting to export approximately 7,496 rounds of 9mm and 7.62 x 39mm ammunition to Jordan without the required authorization. In the criminal case, Bishop was sentenced to 2 years of probation with 6 months home confinement and ordered to pay a criminal fine of $25,000 and a $100 assessment.

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BIS Renews Temporary Denial Order Against X-TREME Motors LLC and EXTREME Outdoor Store and Their Owners for Repeated Unauthorized Exports Under the EAR

April 2, 2015 – 80 Fed. Reg. 17726: BIS renewed a Temporary Denial Order (TDO) against X-TREME Motors LLC and EXTREME Outdoor Store, both of West Haven, Utah, and Tyson Preece, Corey Justin Preece, and Toby Green, all of Morgan, Utah, based on their repeated exportation of items controlled under the EAR for Crime Control reasons.

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BIS Issues Denial of Export Privileges Order in Yayuz Cizmeci for Illegal Export of Boeing 747 to Iran via Turkey

April 3, 2015 – 80 Fed. Reg. 18194: BIS imposed a 20-year denial order on Yavuz Cizmeci, President and Chief Executive Officer of Ankair, a Turkish charter airline, for facilitating the re-export of a Boeing 747 aircraft from Turkey to Iran shortly after Ankair had been notified that a TDO had been imposed on it to prevent this transfer. Cizmeci submitted false documents to Turkish authorities claiming that the plane was bound for Pakistan, when in fact it was destined for Tehran, Iran. Cizmeci also agreed to pay a civil fine of $50,000 in partial settlement of these charges.

Fines and Penalties

Hanna Robert Pleaded Guilty to Violating the AECA by Exporting F-15 Technical Data Illegally to India

April 1, 2015: Hanna Robert of North Brunswick, NJ pleaded guilty in federal court in New Jersey to conspiracy to violate the AECA by exporting ITAR-controlled military technical drawings without the required authorization from the State Department. Robert owned a company, One Source USA, LLC, that contracted with the U.S. Department of Defense to supply defense hardware items and spare parts in 2010. Subsequently, through companies she established in New Jersey and India, she conspired to export, and did export, the drawings for military parts including parts used in the torpedo systems for nuclear submarines and F-15 fighter aircraft to India so that the Indian company could submit bids to supply foreign customers with defense hardware items. Robert allegedly transmitted the drawings to India by posting them on the website of a church at which she was a volunteer web administrator. In other counts in the same indictment, Robert was also accused of submitting fraudulent bids to the U.S. Department of Defense. Sentencing is scheduled for June 26, 2015.

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AMA United Group, Malak Neseem Swares Boulos, and Amged Kalel Yonan Tawdraus Pleaded Guilty to Violating the AECA by Exporting ITAR-Controlled Parts for Aerial Warheads to Egypt

April 2, 2015: AMA United Group, Malak Neseem Swares Boulos, and Amged Kalel Yonan Tawdraus pleaded guilty in Brooklyn, NY federal court of failing to file required export information in connection with the attempted shipment to Egypt of ITAR-controlled components integral to the manufacture of housings for explosives in an aerial warhead. Boulos and Tawdraus are Egyptian citizens and partners in AMA United Group. When sentenced, Boulos and Tawdraus face up to 5 years in prison, plus criminal forfeiture and fines. All 3 defendants also face possible denials of export privileges by the U.S. Departments of Commerce, State, and Treasury.

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Bahram Mechanic, Tooraj Faridi, and Khosrow Aghahi Indicted for Exporting Microelectronics Usable in Missiles to Iran

April 17, 2015: Bahram Mechanic, a naturalized U.S. citizen resident in Houston, TX, Tooraj Faridi, also of Houston, and Khosrow Afghahi of Los Angeles, CA, along with two other individuals and 4 companies were indicted on charges of facilitating the illegal export to Iran of microelectronics usable in cruise missiles, uninterruptible power supplies, and other commodities in violation of the International Emergency Economic Powers Act (IEEPA, 50 USC 1701-1707). The indictment alleges an Iranian procurement network that operated over a period of 5 years and exported items valued at over $24 million to Iran via Taiwan and Turkey. Mechanic allegedly was investigated for illegal trading activities at least 3 times since 1985 and was convicted in the 1980s of attempting to export a microwave calibration device without a validated export license. Mechanic, Faridi, and Afghahi are in U.S. custody. The remaining defendants are identified as Arthur Shyu of Taiwan; Matin Sadeghi of Turkey; Faratel Corporation of Iran, co-owned by Mechanic and Afghahi; Smart Power Systems, Inc. of Houston; Hosoda Taiwan Co. Ltd. of Taiwan; and Golsad Istanbul Trading Ltd. of Turkey.

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Morex, Inc. Pays Civil Penalty for Violating Anti-boycott Provisions of the EAR

April 22, 2015: Morex, Inc., of Charlotte, NC agreed to pay a civil penalty of $25,200 to settle charges by BIS that it violated the antiboycott provisions of the EAR (15 CFR Part 760) by furnishing information about another person’s business relationships with a boycotted country in connection with transactions with Qatar and the United Arab Emirates (UAE) and by failing to report the receipt of a boycott request against a country friendly to the U.S. in connection with transactions with Pakistan.

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Arash Ghahreman Convicted of Violating U.S. Export and Money Laundering Laws for Transactions Involving the Illegal Export of Marine Navigation Equipment and Military Electronics to Iran

April 23, 2015: Arash Ghahreman of Staten Island, NY, a U.S. citizen and former national of Iran, was convicted by a jury in federal court in the Southern District of California of 7 charges of violations of U.S. export control and money laundering laws arising from his involvement in a scheme to purchase marine navigation equipment and military electronic equipment for illegal export to Iran. Ghahreman and two co-defendants carried out the scheme through a front company in Dubai. Co-defendant Ergun Yildiz, a German national resident in the UAE pleaded guilty to conspiracy in the scheme on Oct. 9, 2014. Co-defendant Koorush Taherkhani, an Iranian national and resident, remains a fugitive. TIG Marine Engineering Services of Dubai, the front company for the operation, is also named as a co-defendant in the case.

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Bo Cai and Wentong Cai Convicted and Sentenced to Prison for Violating the AECA by Exporting Military Sensors to China

April 23, 2015: Bo Cai, of Nanjing, China was sentenced in federal court in New Mexico to 24 months in federal prison and his cousin Wentong Cai of Chifeng, China was sentenced to 18 months in federal prison based on their conviction of violating the AECA and the ITAR by scheming to export sensors manufactured primarily for sale to the U.S. Department of Defense for use in high-level applications such as line-of-sight stabilization and precision motion control systems. The men were caught in a sting operation after undercover U.S. Immigration and Customs Enforcement agents responded to overtures from Wentong Cai. After negotiations, the defendants obtained a sensor from the agents and developed a plan to smuggle it out of the U.S. Bo Cai was arrested at an airport in Los Angeles as he prepared to board a flight to China after the sensor was discovered concealed in a computer speaker in his luggage. Wentong Cai was subsequently arrested in Ames, Iowa.

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Kirby Santos Charged with Conspiracy to Violate the AECA by Selling Firearms Parts to the Philippines without Export Approval

April 27, 2015: Kirby Santos of the Republic of the Philippines was charged in federal court in New Jersey with conspiracy to violate the AECA by selling firearms parts to the Philippines without the required authorization. According to the criminal complaint, Santos arranged for suppliers to ship the parts to an unnamed co-conspirator’s address in Toms River, NJ, to make the sales appear domestic. The co-conspirator then shipped them to Philippines in packages whose contents were not properly identified. In this manner Santos purchased and directed the illegal export of more than $200,000 worth of defense articles over a period of almost 5 years.

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Russell Henderson Convicted and Sentenced to Prison for Violating the IEEPA and the Terms of a Denial Order Related to Illegal Exports of F-16 Parts to Thailand and J-69 Engine Parts to Pakistan

April 27, 2015: Russell Henderson Marshall of Palm Beach County, FL was sentenced in federal court in the Southern District of Florida to serve 41 months in federal prison for violating IEEPA and violating the terms of a denial order issued by the U.S. Department of Commerce. Marshall will be removed from the U.S. upon completion of his sentence. Marshall’s company, Universal Industries Limited Inc., which became inactive as a result of Marshall’s arrest, was sentenced to a term of one year probation and a special assessment of $400. The convictions resulted from a complaint on the hotline of the U.S. Department of Defense Inspector General. The subsequent investigation revealed that Marshall and Universal had attempted to send parts for F-16 fighter jets to Thailand and parts for the J-69 engine used on 737 military trainer aircraft to Pakistan, thereby violating a denial order that had been issued against them following their convictions for violating the AECA in an earlier case in 2011.

APRIL 2015 EXPORT CONTROL REGULATION UPDATES Read More »

MARCH 2015 EXPORT CONTROL REGULATION UPDATES

March 2015

This newsletter is a listing of the latest changes in export control regulations through March 31, 2015. The newsletter is provided as a complimentary service to assist clients with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

United Kingdom

March 26, 2015: The U.K. Department for Business Innovation & Skills Export Control Organisation (ECO) published updated versions of its export control lists, effective March 24, 2015. The updated U.K. Military List is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417729/militarylist20150324.pdf. The updated combined list of strategic military and dual-use items that require export authorization is at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/417722/controllist20150324.pdf.

Department of Commerce

March 2, 2015 – 80 Fed. Reg. 11315: The Bureau of Industry and Security (BIS) invited public comments about the Export Control Reform Initiative (ECRI) transfer of certain military aircraft, military gas turbine engines, and related items from the U.S. Munitions List (USML, 22 CFR Part 121) to the Commerce Control List (CCL, 15 CFR Part 774) that took place October 15, 2013. Specifically, BIS desires comments on the clarity, usability and any other matters related to new CCL Export Control Classification Numbers (ECCNs) 9A610, 9B610, 9C610, 9D610 and 9E610 (controlling military aircraft and related items) and 9A619, 9B619, 9C619, 9D619 and 9E619 (controlling military gas turbine engines and related items). Deadline for comments is May 1, 2015. (See below for related State Department request for comments.)

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March 5, 2015 – 80 Fed. Reg. 11863: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774, Supplement No. 7 to Part 748) to add two items to the list of items that may be exported, reexported, or transferred without an export license to eligible facilities of Validated End User Samsung China Semiconductor Co. Ltd. in the People’s Republic of China (PRC).

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March 13, 2015 – 80 Fed. Reg. 13210: BIS amended Parts 742, 748, and 762 of the EAR to remove certain support document requirements for license applications. An International Import Certificate or Delivery Verification will no longer be required in connection with license applications, and the requirement to obtain a Statement by Ultimate Consignee and Purchaser will be required only for applications for exports, reexports, and in-country transfers of 600 Series Major Defense Equipment.

Department of State

March 12, 16, 20, 26, and 30, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

http://www.pmddtc.state.gov/licensing/name_change.html:

ITGlobe Incorporated address change;
Jena Optronik GmbH address change;
Calgon Carbon Corporation address change;
Babcock Canada Incorporation address change;
Energy Resources Conservation Board (ERCB) change in name to Alberta Energy Regulator (AER) along with an address change due to its acquisition by AER; and
Pacific Scientific Energetic Materials Company (Arizona) LLC changing to Pacific Scientific Energetic Materials Company (California) LLC due to corporate reorganization.

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

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March 2, 2015 – 80 Fed. Reg. 11313: DDTC invited public comments on USML Categories VIII (Aircraft and Related Articles) and XIX (Gas Turbine Engines and Related Equipment) in effect since Export Control Reform took effect October 15, 2013. Specific topics for comment are emerging technologies that are not well described; items remaining in these categories that have entered into normal commercial use; defense articles for which commercial use is anticipated within 5 years; and drafting or other technical issues in the text of either category. Deadline for comments is May 1, 2015. (See related item in Commerce Department section above.)

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March 25, 2015: DDTC announced that in support of the U.S. policy on the export of U.S.-origin military unmanned aerial systems (UAS), certain assurances of proper use from the foreign end users, signed by the foreign end user and the U.S. applicant, will now be required to be submitted with the standard DSP-83 Non Transfer and Use Certificate at the time of an initial application for a permanent export license. The notice on the DDTC website at http://www.pmddtc.state.gov/documents/UAS_NoticeRevised.pdf provides the specific form that the new addendum must take.

Department of the Treasury

March 31, 2015 -- 80 Fed. Reg. 17152: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.

LATEST SANCTIONS FINES & PENALTIES

company! Call us with questions or concerns at 703-847-5801 or email info@fdassociates.net.

Sanctions

Department of Commerce

March 26, 2015 – 80 Fed. Reg. 15979 (amended March 30, 2015 – 80 Fed. Reg. 16632): BIS issued a 6-month Temporary Denial Order (TDO) against the following persons:

Flider Electronics, LLC, a/k/a Flider Electronics, d/b/a Trident International Corporation, d/b/a Trident International, d/b/a Trident International Corporation, LLC (Trident), San Francisco, CA;
Pavel Semenovich Flider, a/k/a Pavel Flider, a Russian national and naturalized U.S. citizen, of San Rafael, CA; and
Gennadiy Semenovich Flider, a/k/a Gennadiy Flider, San Francisco, CA.

The TDO was based on allegations that Trident had engaged in known violations of the EAR and that it structured its transactions and shipment routes in a manner designed to camouflage the actual destinations, end uses, and/or end users of export-controlled goods.

Prior to the issuance of the TDO, Flider was indicted and arrested based on charges that he and co-defendant Trident illegally transshipped export-controlled programmable computer chips capable of operating in austere environments to Russia through Estonia and Finland and knowingly submitted false and misleading information on Shipper’s Export Declarations. In connection with these illegal exports, Flider allegedly received more than $60 million in bank transfers from many countries including the Czech Republic, Estonia, Latvia, Cyprus, and Hong Kong. The charges against Flider and Trident include smuggling of goods, conspiracy to commit international money laundering, and substantive money laundering.

Fines and Penalties

March 18, 2015: Hsien Tai Tsai, a former resident of Taiwan who was arrested in May 2013 in Tallinn, Estonia and later extradited to the U.S., was sentenced in Federal District Court in Chicago to serve 24 months in federal prison based on his guilty plea to conspiracy to interfere with and obstruct U.S. regulations that seek to disrupt the proliferation of weapons of mass destruction. Documents in the case indicate that Tsai was associated with companies in Taiwan that purchased machinery used to fabricate metals and other materials with a high degree of precision from U.S. and other sources and then exported the items to countries including North Korea. The judge who sentenced Tsai noted that the sentence reflected the “substantial assistance” that Tsai had provided and would continue to provide to the Government’s investigation of weapons of mass destruction proliferators. (See additional details of this case in May 2013 and October 2014 issues of the Regulatory Update.)

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March 25, 2015: Schlumberger Oilfield Holdings Ltd. (Schlumberger OHL), a wholly owned subsidiary of Schlumberger Ltd., agreed to plead guilty to conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan and to pay a penalty of $232,708,356. In addition to the monetary penalty, Schlumberger OHL agreed to submit to a 3-year term of probation, to continue to cooperate with the government, and not to commit any further felonies. In addition, Schlumberger Ltd. agreed that during the 3-year probation it will –

Maintain its cessation of all operations in Iran and Sudan;
Report on its compliance with sanctions;
Respond to requests by U.S. authorities for information related to its compliance with U.S. sanctions; and
Hire an independent consultant to review its internal sanctions policies and procedures and its internal audits focused on sanctions compliance.

The offenses covered by this case were committed by Drilling & Measurements (D&M), a U.S.-based Schlumberger unit, which provided oilfield services to customers in Iran and Sudan through non-U.S. subsidiaries of Schlumberger OHL from 2004 through June 2010. Schlumberger OHL had policies and procedures to prevent D&M from violating U.S. sanctions, but failed to train D&M’s U.S. person employees adequately about these policies and procedures. As a result, D&M violated U.S. sanctions through its operations related to Iran and Sudan. Details of the conduct covered by the guilty plea are in a U.S. Department of Justice press release at http://www.justice.gov/opa/pr/schlumberger-oilfield-holdings-ltd-agrees-plead-guilty-and-pay-over-2327-million-violating-us.

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March 27, 2015: A federal court in the Eastern District of New York sentenced brothers Rex Maralit, a former New York City Police Officer, and Wilfredo Maralit, a former U.S. Customs and Border Protection Officer assigned to Los Angeles International Airport, to 3 years in federal prison followed by 3 years of supervised release based on their pleas of guilty of violating the Arms Export Control Act (AECA, 22 USC 2778). From 2009 through 2013 the brothers exported various military-style firearms, including high-capacity magazines and other accessories, to the Philippines where they were sold to overseas customers. The brothers used their official status to obtain and ship the weapons without the required authorization from the U.S. Department of State.

MARCH 2015 EXPORT CONTROL REGULATION UPDATES Read More »

JULY 2016 EXPORT CONTROL REGULATION UPDATES

July 2016

This newsletter is a listing of the latest changes in export control regulations through July 31, 2016. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

DEPARTMENT OF COMMERCE

EEI Entries are Required for Shipments to Cuba Under License Exceptions, Including EAR99 Items, NLR May Not Be Used

July 7, 2016: The Bureau of Industry and Security (BIS) posted a notice reminding exporters and forwarding agents that ship to Cuba about the proper filing of electronic export information (EEI) in the Automated Export System (AES). In particular, BIS noted that the code for “No License Required” (NLR, Code C32/C33) may not be used for items shipped under a license exception. Rather, the AES entries for such items must identify the specific license exception (e.g., Code C62 for items eligible for License Exception SCP, Support for the Cuban People). The notice is on the BIS website at http://www.bis.doc.gov/index.php/regulations/1090.

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BIS Posts Guidelines to Exporters to Take Precautions Not to Export to Areas Under ISIL/ISIS Control

July 25, 2016: BIS posted guidance on license requirements for shipment of items subject to the Export Administration Regulations (EAR, 15 CFR Part 730-774) to areas under the control of the Islamic State of Iraq and the Levant (ISIL). The guidance notes that ISIL is designated as a Specially Designated Global Terrorist (SDGT) by the Treasury Department Office of Foreign Assets Control (OFAC) and as a Foreign Terrorist Organization (FTO) by the State Department, and that exports to areas controlled by ISIL carry a “red flag” under the EAR. Among other information, the guidance details the licensing jurisdiction of BIS and OFAC and describes BIS licensing policies. Find this guidance in an FAQ on the BIS website at http://www.bis.doc.gov/index.php/forms-documents/doc_view/1500-facilities-faq.

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BIS Publishes Final ECR Rule Related to Toxicological Agents Formerly Controlled Under USML Category XIV and Directed Energy Weapons Under USML Category XVIII

July 28, 2016 – 81 Fed. Reg. 49517: As part of the President’s Export Control Reform effort, BIS amended the EAR to include in the Commerce Control List (CCL, 15 CFR Part 774, Supplement No. 1) articles that have been determined to no longer to warrant control under Category XIV (Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment) or Category XVIII (Directed Energy Weapons) of the U.S. Munitions List (USML, 22 CFR Part 121). (See State Department section below for concurrent amendments to the USML.) The affected Category XIV articles consist primarily of dissemination, detection, and protection ‘‘equipment’’ and related articles, such as production and test ‘‘equipment,’’ that will now be controlled on the CCL under new Export Control Classification Numbers (ECCNs) 1A607, 1B607, 1C607, 1D607, and 1E607. The affected Category XVIII articles consist primarily of tooling, production ‘‘equipment,’’ test and evaluation ‘‘equipment,’’ test models, and related articles that will now be controlled under new ECCNs 6B619, 6D619 and 6E619. BIS believes that moving these items to control under the CCL will provide greater flexibility particularly for exports and reexports to NATO member countries and other multiple-regime member countries. These amendments, which were initially proposed on June 17, 2015 (80 Fed. Reg. 34562), will be effective December 31, 2016.

DEPARTMENT OF STATE

DDTC Posts Name/Address Changes to Its Website

July 7, 8, 11, 20, and 27, 2016: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Address of SELEX Galileo Inc.;
Change in Freight Forwarder, Logistics and Warehouse Service Provider of Wincanton Group Limited (Wincanton) from AgustaWestland Limited (AWL) to Kuehne + Nagel Ltd (K+N);
Change in Name from Fokker Aerostructures B.V., Fokker Elmo B.V., Fokker Landing Gear B.V., and Fokker Services B.V to Fokker Technologies Holding B.V. due to internal corporate reorganization;
Change in Name from Finmeccanica S.p.A. to Leonardo-Finmeccanica S.p.A., “dba” Leonardo S.p.A. due to internal corporate rebranding; and
Change in Name from ESL Defence (Holdings) Limited and ESL Defence Limited to Textron Systems Electronic Systems UK (Holdings) Limited & Textron Systems UK Limited due to corporate rebranding.

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

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DDTC Announces Reinstatement of Company Visit Program; Visits Can Be Requested by Exporters Wanting Verification of Processes by DDTC

July 15, 2016: DDTC announced that it had relaunched its Company Visit Program, in which DDTC officials visit U.S. entities registered with DDTC as manufacturers, exporters, or brokers of defense articles and defense services and also foreign companies and governments. Visits can be made either for compliance purposes or for purposes of outreach, which DDTC identifies as understanding how companies implement ITAR compliance requirements, not evaluating compliance failures or violations. The announcement, including FAQs and information about how to request a company visit, is on the DDTC website at http://www.pmddtc.state.gov/compliance/cvp.html. An informative overview of the Company Visit Program is at http://www.pmddtc.state.gov/compliance/documents/CVP_Overview.pdf.

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DDTC Publishes Public Comments Received on New Definitions to Streamline with EAR

July 21, 2016: DDTC posted the public comments it received on its interim final rule that revised the definitions of “export,” reexport," "release," and "retransfer" and expanded the exemption for the export of technical data to or for U.S. persons abroad (June 3, 2016 – 81 Fed. Reg. 35611 – see additional information in June 2016 Regulatory Update). The public comments are on the DDTC website at http://pmddtc.state.gov/regulations_laws/documents/proposed_rules/Definitions_Comments.pdf .

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DDTC Posts Guidance on What it Means to Be a Manufacturer of an ITAR Firearm, Part, or Component

July 23, 2016: DDTC posted policy guidance to aid firearms manufacturers and gunsmiths in determining whether their activities constitute “manufacturing” for ITAR purposes, and therefore, whether they are required to register with DDTC as a manufacturer of defense articles. The guidance is on the DDTC website at http://www.pmddtc.state.gov/compliance/Applicability of the ITAR Registration Requirement to Firearms Manufacturers (Publish).pdf.

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DDTC Publishes Final ECR Rule Related to Which Toxicological Agents and Related Items Will Remain Controlled Under USML Category XIV and Which Directed Energy Weapons and Related Items Will Remain Controlled Under USML Category XVIII

July 28, 2016 – 81 Fed. Reg. 49531: As part of the President’s Export Control Reform effort, the Department of State amended the ITAR to revise USML Categories XIV (Toxicological Agents, Including Chemical Agents, Biological Agents, and Associated Equipment) and XVIII (Directed Energy Weapons) to describe more precisely the articles warranting control under the ITAR, while moving other items currently covered under the USML to the CCL. (See Commerce Department section above for concurrent amendments to the CCL.) The amendments are slightly revised from the proposed amendments published June 17, 2015 (80 Fed. Reg. 31525 – see June 2015 Regulatory Update.) Effective date of these amendments is December 31, 2016.

DEPARTMENT OF THE TREASURY

OFAC Increases Maximum Civil Penalties for Violations of IEEPA and the Trading With the Enemy Act

July 1, 2016 – 81 Fed. Reg. 43070: Consistent with recent federal legislation, the Office of Foreign Assets Control (OFAC) increased the maximum civil monetary penalty (CMP) for a violation of the International Emergency Economic Powers Act (IEEPA, 50 USC 1705) from the greater of $250,000 or twice the amount of the underlying transaction to the greater of $284,582 or twice the amount of the underlying transaction. Also, OFAC increased the maximum CMP for a violation of the Trading With the Enemy Act (TWEA, 50 USC 4315) from the current $65,000 to $83,864 and the maximum CMP for a violation of the Kingpin Act (21 USC 1901-1908) from $1,075,000 to $1,414,020. The new penalties are effective Aug. 1, 2016, for violations that occurred after Nov. 2, 2015.

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OFAC Issued Additional General Licenses to Permit Certain Export Transactions With 3 Named Companies in Kingpin Sanctions Regulations

July 1 and 21, 2016: OFAC issued General Licenses authorizing certain activities, including some exports, involving 3 Panamanian entities that would otherwise be prohibited by the Foreign Narcotics Kingpin Sanctions Regulations (31 CFR Part 598). General License 4C authorizes “Certain Transactions Involving Individuals or Entities Located in the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama);” https://www.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl5b.pdf">General License 5B authorizes “Certain Transactions and Activities Related to the Panamanian Government Seizure of Balboa Bank & Trust;” and https://www.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl6b.pdf">General License 6B authorizes “Certain Transactions and Activities Related to the Intervention by the Superintendency of Securities Markets of Panama in Balboa Securities, Corp.” Links to the licenses and related FAQs are on the OFAC website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/OFAC-Recent-Actions.aspx .

LATEST SANCTIONS FINES & PENALTIES

agencies. It is provided as a service to exporters 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 7, 2016 – 81 Fed. Reg. 45276: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) against the following parties, based on evidence that they continued to be involved in unlawful re-exports of aircraft to Iran:

Mahan Airways,
Pejman Mahmood Kosarayanifard,
Mahmoud Amini,
Kerman Aviation,
Sirjanco Trading LLC,
Ali Eslamian,
Mahan Air General Trading LLC,
Skyco (UK) Ltd.,
Equipco (UK) Ltd.,
Mehdi Bahrami,
Al Naser Airlines,
Ali Abdullah Alhay,
Bahar Safwa General Trading,
Sky Blue Bird Group, and
Issam Shammout.

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July 19, 2016 – 81 Fed. Reg. 46898: BIS denied the export privileges of Fang Liwu of Beijing, China for 10 years based on his conviction in federal court in Philadelphia in 2015 of violating the IEEPA by engaging in transactions to export, attempting to export, and aiding and abetting the export of three CC-10 vacuum gauges from the U.S. to Iran without the required authorization. In the criminal case, Fang was sentenced to 24 months in prison, 3 years of supervised release, and a special assessment of $400.

DEPARTMENT OF STATE

July 5, 2016 – 81 Fed. Reg. 43694: The Bureau of International Security and Nonproliferation (ISN) determined that 38 persons had engaged in activities that warrant the imposition of sanctions pursuant to the Iran, North Korea, and Syria Nonproliferation Act, which provides for penalties on persons that transfer certain types of sensitive items to, or acquire such items from, these countries after certain dates. Accordingly, it imposed sanctions on these persons prohibiting U.S. Government (USG) sales to them of any items on the U.S. Munitions List (USML, 22 CFR Part 121), terminating sales to them of any item controlled under the Arms Export Control Act (AECA, 22 USC Sec. 2778), prohibiting individual licenses for transfer to them of any item controlled under the EAR, and suspending any existing such licenses. The 38 persons are located in Belarus, China, Iran, Iraq, Malaysia, North Korea, Russia, Sudan, Syria, and Uganda.

The parties are:

Belvneshpromservice (BVPS) (Belarus) and any successor, sub-unit, or subsidiary thereof;
Composite International (China) and any successor, sub-unit, or subsidiary thereof;
Cosailing Business Trading Company (China) and any successor, sub-unit, or subsidiary thereof;
Do Best Industry Co., Ltd (China) and any successor, sub-unit, or subsidiary thereof;
Global Holding Group Company (China) and any successor, sub-unit, or subsidiary thereof;
Jack Qin (China);
Li Fangwei (aka Karl Lee) (China);
Ningbo Jiahe Trading Co., Ltd (China) and any successor, sub-unit, or subsidiary thereof;
Ningbo New Century (China) and any successor, sub-unit, or subsidiary thereof;
Richard Yue (China);
Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) (China) and any successor, sub-unit, or subsidiary thereof;
Shanghai Electric International Economic & Trading Company (SEIC) (China) and any successor, sub-unit, or subsidiary thereof:
Xi'an Jiate Titanium Industry Company (China) and any successor, sub-unit, or subsidiary thereof;
Asaib ahl Haq (AAH) (Iraq) and any successor, sub-unit, or subsidiary thereof;
Khata'ib Hezbollah (KH) (Iraq) and any successor, sub-unit, or subsidiary thereof;
Islamic Revolutionary Guard Corps Qods Force (IRGC QF) (Iran) and any successor, sub-unit, or subsidiary thereof;
Shahid Moghadam-Yazd Marine Industries (SMYM) (Iran) and any successor, sub-unit, or subsidiary thereof;
Shiraz Electronic Industries (SEI) Company (Iran) and any successor, sub-unit, or subsidiary thereof;
Budaya Kita Sdn Bhd (BK) (Malaysia) and any successor, sub-unit, or subsidiary thereof;
Mohammad Rafie Ab Malek (Malaysia);
Kay Marine Sdn. Bhd. (Malaysia) and any successor, sub-unit, or subsidiary thereof;
Kang Mun-kil (North Korea);
Korea Namhung Trading Corporation (North Korean entity operating in China) and any successor, sub-unit, or subsidiary thereof;
Saeng Pil Trading Corporation (STC) (North Korea) and any successor, sub-unit, or subsidiary thereof;
General Department of Military Cooperation (North Korea) and any successor, sub-unit, or subsidiary thereof;
150th Aircraft Repair Plant (ARZ) (Kaliningrad) (Russia) and any successor, sub-unit, or subsidiary thereof;
Instrument Building Design Bureau (KBP) Tula (Russia) and any successor, sub-unit, or subsidiary thereof;
Kolomna Design Bureau of Machine-Building (KBM) (Russia) and any successor, sub-unit, or subsidiary thereof;
Kuntsevo Design Bureau (Russia) and any successor, sub-unit, or subsidiary thereof;
NPO Mashinostroyeniya (NPOM) (Russia) and any successor, sub-unit, or subsidiary thereof;
Military Industrial Corporation (MIC) (Sudan) and any successor, sub-unit, or subsidiary thereof;
Khartoum Industrial Complex (Giad) (Sudan) and any successor, sub-unit, or subsidiary thereof;
Khartoum Military Industrial Complex (Yarmouk) (Sudan) and any successor, sub-unit, or subsidiary thereof;
Vega Aeronautics and Engineering Company Ltd (Sudan) and any successor, sub-unit, or subsidiary thereof;
Scientific Studies and Research Center (SSRC) (Syria) and any successor, sub-unit, or subsidiary thereof;
Lebanese Hizballah (Syria) and any successor, sub-unit, or subsidiary thereof; and
Luwero Industries Ltd (Uganda) and any successor, sub-unit, or subsidiary thereof.

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July 5, 2016 – 81 Fed. Reg. 43696: ISN imposed sanctions similar to those in the item above on Rosoboronexport (ROE) (Russia); however, it excluded from the sanctions contracts and subcontracts with ROE – including subcontracts for the purchase of spare parts, supplies, and related services -- made on behalf of the USG for goods, technology, and services for the maintenance, repair, overhaul or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan or for combating terrorism and violent extremism globally.

Fines and Penalties

June 30, 2016: Alcon Pharmaceuticals Ltd of Fribourg, Switzerland (Alcon Ltd.) and Alcon Laboratories, Inc. of Fort Worth, TX (Alcon Labs) agreed jointly to pay $8,100,000 to settle 188 charges by BIS of violations of the EAR involving unauthorized exports and reexports of U.S.-origin medical devices and equipment to Syria and Iran. The charging documents alleged unauthorized transshipments by Alcon Labs to Iran valued at approximately $3,652,378 and unauthorized transshipments by Alcon Ltd. to Iran valued at approximately $8,106,260 and to Syria valued at approximately $72,927. A link to the charging letter, settlement agreement, and order is on the BIS website at https://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations .

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July 5, 2016: In a settlement with OFAC related to the settlement with BIS described above, Alcon Ltd., Alcon Labs, and Alcon Management, SA of Geneva, Switzerland agreed to settle potential civil liability to OFAC of $7,617,150 for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) and the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) involving 513 occasions when they allegedly made unauthorized sales and exports of medical end-use surgical and pharmaceutical products from the U.S. to distributors in Iran and Sudan. The obligation to OFAC will be satisfied by the payment of $1,317,150 to the U.S. Treasury Department, the full payment of the BIS settlement amount, and compliance with the other terms of the settlement agreement with BIS. Additional information is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160705_alcon.pdf .

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July 8, 2016: Gregory Allen Justice of Culver City, CA, an engineer who worked on military and commercial satellites for a cleared defense contractor, was jailed in Los Angeles, CA, without bail, on charges of economic espionage and violating the AECA. Justice allegedly provided proprietary and ITAR-controlled satellite information to a person who he believed was a representative of a foreign intelligence service, but was actually an FBI undercover agent. Justice allegedly sought and received cash payments in exchange for the information.

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July 8, 2016: Daofu Zhang of Shenzen, China was sentenced in federal court in Hartford, CT to a prison term of 15 months and forfeiture of $63,000 based on his plea of guilty to conspiracy to traffic in counterfeit goods. Zhang and two co-conspirators, Xianfeng Zuo and Jiang Yan, operated businesses in China that sold electronic components. When they sought to purchase several advanced Xilinx integrated circuits (ICs) that had military applications including radiation tolerance for uses in space, their U.S. contact informed them that the export would require a license, and also that the ICs would need to be stolen from U.S. military inventory. A co-conspirator shipped 8 counterfeit Xilinx ICs to the U.S. contact to replace the ones that would be stolen. All 3 conspirators flew to the U.S. in December, 2015, to complete the purchase and were arrested when they arrived at the agreed meeting location. Zuo and Yan have entered guilty pleas and are awaiting sentencing.

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July 13, 2016: Su Bin (a/k/a Stephen Su and Stephen Subin), a citizen and resident of China, was sentenced in federal court in Los Angeles, CA, to 46 months in federal prison based on his plea of guilty of conspiracy to violate the AECA by exporting ITAR-controlled defense articles and to gain unauthorized access to a protected computer. Su admitted that he identified data relating to the C-17 strategic transport aircraft and U.S. military fighter jets and other military technical data on computer networks of U.S. targets (including Boeing Company) to be hacked by co-conspirators in China. He then translated the stolen data into Chinese and sent reports to the Chinese People’s Liberation Army. (See additional information on this case in March 2016 Regulatory Update.)

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July 21, 2016: Alexander Fishenko, a dual U.S. and Russian citizen, was sentenced in federal court in Brooklyn, NY to 10 years in prison and forfeiture of more than $500,000 based on his plea of guilty of conspiring to export and actually exporting microelectronics to Russia without the required authorization, conspiring to launder money, and other charges. Fishenko headed a conspiracy involving two corporations and 10 additional individuals that shipped approximately $50 million worth of microelectronics and other technologies to Russia without the required authorizations. The illegally shipped goods included cutting-edge microelectronics that are used in military systems including radar and surveillance systems, missile guidance systems, and detonation triggers, many of which are not produced in Russia, and the largest Russian purchasers were certified suppliers of military equipment to the Russian Ministry of Defense. Methods used by the conspiracy to evade applicable export controls included providing false end-user information and falsely classifying the goods. (See additional information on this conspiracy in October 2012, September 2015, and October 2015 Regulatory Updates.)

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July 22, 2016: R&A International Trading Inc., doing business as R&A International Logistics, of Jamaica, NY, and Rukhsana Kadri, also known as Roxanne Kadri, of Davie, FL, the owner & president of R&A, agreed jointly and severally to pay a civil penalty of $500,000 to settle charges by BIS that they had violated the EAR by misrepresenting the identity of an exporter on export control documents in hundreds of export transactions valued at about $22 million and making false statements to BIS investigators. By concealing the true name of the exporter, Kadri and R&A made the exports possible, as the exporter was not authorized by the manufacturer to export the product. The settlement provides that $350,000 of the penalty will be suspended for 5 years and then waived if Kadri and R&A pay $150,000 on an agreed schedule, commit no further violations, and comply with any sentences imposed pursuant to a guilty plea they have entered in a related criminal case in federal court in Brooklyn, NY. A 5-year denial of export privileges will be suspended under the same conditions.

JULY 2016 EXPORT CONTROL REGULATION UPDATES Read More »

AUGUST 2016 EXPORT CONTROL REGULATION UPDATES

LATEST EXPORT CONTROLS AND COMPLIANCE UPDATEAugust 2016

This newsletter is a listing of the latest changes in export control regulations through August 31, 2016. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

DEPARTMENT OF COMMERCE

Two New Items Added to the EAR Catch-All ECCN 0Y521

Aug. 8, 2016 – 81 Fed. Reg. 52326: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding two entries to the Commerce Control List (EAR Part 774, Supplement No. 1): “targets made of or containing lithium “specially designed” for the production of tritium by insertion in the core of a nuclear reactor” under Export Control Classification Number (ECCN) 0A521, and “technology” required for the “development” or “production” of these items under ECCN 0E521. These items are controlled for Regional Stability (RS) Column 1 reasons and require a license to all destinations except Canada. License Exception GOV will be the only exception available. Like all 0X521 controls, this is a unilateral classification that will be valid for only one year unless it is extended by the U.S. Government or adopted by a multilateral export control regime. This interim final rule was effective Aug. 8, 2016, but comments will be accepted until Oct. 7, 2016.

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BIS Amends EAR Destination Control Statement, Harmonizing with ITAR

Aug. 17, 2016 – 81 Fed. Reg. 54721: As part of the President’s Export Control Reform (ECR) Initiative, BIS revised the language and some of the regulatory requirements of the Destination Control Statement (DCS) mandated by EAR Sec. 758.6 for exports of commodities regulated by the EAR. The changes are intended to harmonize the DCS requirements of the EAR with the DCS requirements for exports of military items under the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). The same DCS will now be used for exports of both EAR and ITAR regulated items, and it will be required only on the commercial invoice. The DCS will be required for all exports of tangible items subject to the EAR except exports of EAR99 items and items exported under License Exception BAG or GFT. Also, the ECCN for 9x515 or ‘‘600 series’’ items exported in tangible form must be provided as an integral part of the commercial invoice. Effective date for these changes will be Nov. 15, 2016. (See State Department section below for concurrent action on DCS requirements for exports of military items.)

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Ten Persons Added to BIS Entity List

Aug. 23, 2016 – 81 Fed. Reg. 57451: BIS added 10 persons to the Entity List (EAR Part 744, Supplement No. 4) based on determinations that 9 of them had provided logistical and material support to the Islamic State of Iraq and the Levant (ISIL) and one had been indicted for illegal sales of military and dual-use items to the Philippines. For exports involving any of these entities, there will be a license requirement for all items subject to the EAR with a presumption of denial, and no license exceptions will be available. The 10 entities (under 14 entries) are:

Iraq

(1) Abd Al Hakim Luqman Jasim Muhammad, Mosul;

(2) Ag Yildiz Insaat Gayrimenkul Tasimacilik Pazarlama lthalat Ihracat ve Ticaret Ltd. Sirketi, a.k.a., the following four aliases:

—Ag Yildiz Cargo;

—Ag Yildiz Gayrimenkul;

—Yildiz Company; and

—Yildiz Shipping Company,

Irbil and Mosul (See alternate addresses under Syria and Turkey); and

(3) Sekirin Tekstil Ithalat Ihracat le ve Dis Ticaret Limited Sirketi, a.k.a., the following seven aliases:

—Sekirin Textiles Export Import Limited Company;

—Al Shakirin International Transport Company;

—Shakirin Company;

—Shakrin Company;

—Sekirin Ticaret;

—Al Shakirin Company; and

—Sekirin Company,

Mosul (See alternate addresses under Syria and Turkey).

Philippines

(1) Warren Sumaylo, Butuan City

Syria

(1) Ag Yildiz Insaat Gayrimenkul Tasimacilik Pazarlama lthalat Ihracat ve Ticaret Ltd. Sirketi, a.k.a. the following four aliases:

—Ag Yildiz Cargo;

—Ag Yildiz Gayrimenkul;

—Yildiz Company; and

—Yildiz Shipping Company,

Al Bab (See alternate addresses under Iraq and Turkey);

(2) Jamal Jum’ah al-Shawi, Al Bab;

(3) Muhammad ‘ulwan Al-Shawi, Al Bab; and

(4) Sekirin Tekstil Ithalat Ihracat le ve Dis Ticaret Limited Sirketi, a.k.a., the following seven aliases:

—Sekirin Textiles Export Import Limited Company;

—Al Shakirin International Transport Company;

—Shakirin Company;

—Shakrin Company;

—Sekirin Ticaret;

—Al Shakirin Company; and

—Sekirin Company,

Al Bab (See alternate addresses under Iraq and Turkey).

Turkey

(1) Ag Yildiz Insaat Gayrimenkul Tasimacilik Pazarlama lthalat Ihracat ve Ticaret Ltd. Sirketi, a.k.a., the following four aliases:

—Ag Yildiz Cargo;

—Ag Yildiz Gayrimenkul;

—Yildiz Company; and

—Yildiz Shipping Company,

Gaziantep (See alternate addresses under Iraq and Syria);

(2) Ala al-Shawi, a.k.a., the following one alias:

—Abu Cemal,

Gaziantep;

(3) Ali Guzel, Gaziantep;

(4) Luqman Yasin Yunus Shgragi, a.k.a., the following two aliases:

—Lkemanasel Yosef; and

—Luqman Sehreci,

Gaziantep;

(5) Sekirin Tekstil Ithalat Ihracat le ve Dis Ticaret Limited Sirketi, a.k.a., the following seven aliases:

—Sekirin Textiles Export Import Limited Company;

—Al Shakirin International Transport Company;

—Shakirin Company;

—Shakrin Company;

—Sekirin Ticaret;

—Al Shakirin Company; and

—Sekirin Company,

Gaziantep (See alternate addresses under Iraq and Syria); and

(6) Yunus Luqman Yasin Shgragi, a.k.a., the following one alias:

—Yunus Sehreci,

Gaziantep.

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BIS Proposes to Amend License Exception TMP To Increase Time Allowed for Temporary Exports to Mexico

Aug 23, 2016 – 81 Fed. Reg. 57505: BIS proposed to amend License Exception TMP (Temporary Imports, Exports, Reexports, and Transfers (In-country), EAR Sec. 740.9) to extend the time limit for temporary exports to Mexico for use in Mexico’s IMMEX (Decree for the Promotion of Manufacturing, Maquiladora and Export Services) program from one year to 4 years. This would match Mexico’s time limit of 4 years for imports under the IMMEX program. Comments are due by Oct. 24, 2016.

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BIS Extends General License for ZTE and ZTE Kangxun

Aug. 19, 2016 – 81 Fed. Reg. 55372: BIS extended until Nov. 28, 2016, the temporary general license for exports, reexports, and transfers to Zhongxing Telecommunications Equipment (ZTE) Corporation and ZTE Kangxun Telecommunications Ltd. that was originally scheduled to end on June 30, 2016, and subsequently extended until Aug. 30, 2016. (See March 2016 and June 2016 Regulatory Updates for additional details.)

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DEPARTMENT OF STATE

DDTC Posts Name and Address Changes on DDTC Website

Aug. 10, 11, 18, 19, and 23, 2016: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html[OG1] :

Change in Address of AeroParts Engineering & Fabrication;
Change in Name of the following entities due to the acquisition of OHL (Ozburn-Hessy Logistics) by Geodis Wilson:
- OHL (S) Pte. Ltd. to Geodis Wilson Singapore Pte Ltd,
- OHL International Sdn. Bhd. to Geodis Wilson Freight Management Sdn Bhd,
- OHL (Hong Kong) Ltd. to Geodis Wilson Hong Kong Ltd,
- OHL (Xiamen) Co., Ltd to Geodis Wilson (China) Limited,
- OHL (Vietnam) Co., Ltd. to Geodis Wilson Vietnam Ltd,
- OHL (Taiwan) Limited to Geodis Wilson Taiwan Limited,
- Activair Australia Pty Ltd. to Geodis Wilson Australia Pty Ltd,
- Activair (UK) Ltd. to Geodis Wilson UK Ltd, and
- BarthcoDart Global Logistics (Europe) B.V. to Geodis Wilson Netherlands B.V.;
Change in Address of Tactical Products Group, LLC;
Change in Name of Thales-Raytheon Systems Company SAS to Thales Air Operations SAS due to acquisition;
Change in Address of Diamond Office Service Co., Ltd.;
Change in Name of Thales-Raytheon Systems Company LLC to Raytheon Command and Control Solutions LLC due to acquisition by Raytheon Company;
Change in Name of A.C.M Composites (1993) Inc. to ACM Composites Inc. due to corporate rebranding; and
Change in Name of Microturbo S.A.S. to Safran Power Units S.A.S. due to acquisition of Microturbo by Safran

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

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DDTC Revises Agreement Guidelines

Aug. 11, 2016: DDTC published Revision 4.4 of the Guidelines for Preparing Agreements. Significant changes from the current Guidelines include –

amendments to many sections to reflect ITAR amendments including new definitions of “export”, “reexport”, and “retransfer”;
removal of country of birth as a consideration when vetting dual nationals and third-country nationals;
updates in many required statements; and
updates of the templates in Appendix A.

A summary of the changes is on the DDTC website at http://www.pmddtc.state.gov/licensing/documents/agreement_guidelines_preamblev4.4.pdf[OG2] . The full text of the new Guidelines is at http://www.pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.4.pdf[OG3] . Effective date of the new guidelines is Sep. 1, 2016, coinciding with the effective dates of the relevant ITAR amendments.

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DDTC amends ITAR destination control statement

Aug. 17, 2016 – 81 Fed. Reg. 54732: Acting to implement the President’s ECR initiative, DDTC amended ITAR Sec. 123.9 to adopt new language harmonizing the DCS required for ITAR regulated items, with the DCS required for EAR regulated items. (See Commerce Department section above for concurrent action on DCS requirements for exports of dual-use items.) In addition to the DCS, which is now only required on the Commercial Invoice, the commercial invoice on shipments of ITAR-controlled items must include the country of ultimate destination, the name of the end user, and the license number or applicable exception. The rule also clarifies requirements applicable when EAR items are shipped with items subject to the ITAR. Effective date of this rule is Nov. 15, 2016.

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DEPARTMENT OF THE TREASURY

OFAC Issues General License for Iran Allowing Non-US Persons to Temporarily Re-export to Iran Fixed Wing Civil Aircraft with 10% or Greater US Content, Classified Under ECCN 9A991.b, and Registered in a Country Other than the US or Country Group E:1

July 29, 2016: The Office of Foreign Assets Control (OFAC) issued General License J under the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), permitting non-US persons to temporarily re-export to Iran US-origin fixed-wing civil aircraft or non-US-origin fixed-wing civil aircraft having 10% or more US content that are classified under ECCN 9A991.b and are registered in a country other than the US or Country Group E:1 of EAR Part 740, Supplement No. 1. The maximum time of each such temporary sojourn is 72 hours, and several other restrictions also apply. The full text of General License J is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_glj.pdf[OG4] .

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Treasury Issues Quarterly List of Israel Boycotting Nations

Aug. 5, 2016 – 81 Fed. Reg. 51967: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.

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OFAC Issues General License Authorizing Certain Transactions with Panamanian Mall and Associated Complex and Other Related Parties

Aug. 19, 2016: OFAC published General License 4D, “Authorizing Certain Transactions involving the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama),” replacing General License 4C in its entirety. OFAC also amended three https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#472">Frequently Asked Questions regarding General Licenses 4D, 5B, and 6B. General License 4D is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/kingpin_gl4d.pdf[OG5] . The revised FAQs are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#narco[OG6] .

LATEST SANCTIONS FINES & PENALTIES

agencies. It is provided as a service to exporters 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. 19, 2016 – 81 Fed. Reg. 55430: BIS denied the export privileges of Walter Anders and Terand, Inc., both of Huntersville, NC, based on a settlement of charges that they had caused, aided, and/or abetted the export of 6,577 kilograms of T300 carbon fiber controlled for nuclear proliferation reasons under ECCN 1C210 to Singapore without the required authorization. Terand/Anders agreed that Terand would falsely serve as exporter of record for these exports in return for a commission after an export license granted to another exporter for exports of this product to Singapore was revoked by BIS due to concerns regarding the recipients of the items.

Fines and Penalties

Aug. 11, 2016: RHDC International, LLC, of Houston, TX, agreed to pay a civil penalty of $9,000 to settle charges by BIS that it had violated the EAR by failing to report the receipt of requests to engage in a restrictive trade practice or foreign boycott against a country friendly to the United States. The violations occurred when RHDC failed to report 5 occasions involving sales and/or transfers to Kuwait, Lebanon, Qatar, and the UAE, when it received a request to take an action which would have the effect of furthering or supporting a restrictive trade practice or unsanctioned foreign boycott.

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Aug. 19, 2016: Wenxia Man, aka Wency Man, of San Diego, CA, was sentenced in U.S. District Court for the Southern District of Florida to 50 months in prison based on her conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by conspiring to export and causing the export of fighter jet engines, an unmanned aerial vehicle, and related technical data to China without the required authorization. (See additional information in June 2016 Regulatory Update.)

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Aug. 23, 2016: Charles Shearon, of Goodlettsville, TN, Elmer Hill, of Brentwood TN, Michael Curlett, of Wixom, MI, and Arnold See, Jr., of Murfreesboro, TN, all former executives of Sabre Defence Industries LLC, a defense contractor formerly based in Nashville, TN, were sentenced to prison terms ranging from 13 to 18 months for violating the AECA by conspiring to export and attempting to export firearms and firearm components without the required authorization. All four entered guilty pleas in 2011. In attempting to conceal Sabre’s illegal exports, they used falsified shipping documents and shipping crates with false bottoms. Sabre, which filed for bankruptcy in 2011, also maintained fictitious business records to conceal its unlawful shipments of firearm parts, lied about the value of items on shipping documents, and illegally imported firearm silencers.

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Aug. 22, 2016: Spectrolab, Inc., of Sylmar, CA, agreed to pay a civil penalty of $60,000 to settle charges by BIS that it violated the EAR by acting with knowledge of a violation when it sold and transferred a Large Area Pulsed Solar Simulator (LAPSS II) to Pakistan with knowledge or reason to know that the intended end user was Pakistan's Space and Upper Atmosphere Research Commission ("SUPARCO"), an entity that was included in the Entity List. The LAPSS II was classified as EAR99. Although the procurement agent had not identified SUPARCO as a participant in the transaction, Spectrolab was aware of SUPARCO’s involvement because the procurement agent provided its address in Karachi, and a SUPARCO engineer who visited Spectrolab’s facilities and participated in inspection and training at Spectrolab’s facilities wore a badge identifying himself as a SUPARCO employee.

AUGUST 2016 EXPORT CONTROL REGULATION UPDATES Read More »

SEPTEMBER 2016 EXPORT CONTROL REGULATION UPDATES

LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE

September 2016

This newsletter is a listing of the latest changes in export control regulations through September 30, 2016. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.

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

REGULATORY UPDATES

European Union

Sep. 28, 2016 – The European Commission (EC) released a proposed new dual-use export control regulation that would replace the current Community dual-use regime (Council Regulation (EC) No 428/2009, as amended.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:134:0001:0269:en:PDF).

The proposal is a major overhaul with changes in many provisions of the current regulation. Prior to adoption it will go through extensive review as part of the standard EU legislative procedure. The full text of the proposal is on the EU website at http://trade.ec.europa.eu/doclib/docs/2016/september/tradoc_154976.pdf.

The purpose of the proposal is to strike a balance between ensuring a high level of security and adequate transparency, and maintaining the competitiveness of European companies and legitimate trade in dual-use items. With the emergence of, for instance, specifically designed surveillance technology such as monitoring centres and data retention systems, it is essential to ensure that regulations allow EU authorities to stop exports in cases where they could be misused for human rights violations, for repression or armed conflict.

Specifically, the Commission proposes to make these export controls:

more efficient – simplifying the administration of controls by optimising licensing processes, introducing EU General Export Authorisations, and simplifying the controls on technology transfers, while ensuring a high level of security and adequate transparency to prevent illicit use of the exported items;
more consistent – avoid divergent levels of controls throughout the EU by e.g. harmonising the controls on brokering, technical assistance and transit of dual-use items;
more effective – by introducing specific provisions preventing the misuse of dual-use items in relation to terrorism.

Department of Commerce

BIS Validated End User Modification for VEU Boeing Tianjin Composites Co. Ltd.

Sep. 7, 2016 – 81 Fed. Reg. 61104: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by modifying the Validated End-User (VEU) list (EAR Part 748, Supplement No 7) for China to reflect a change in the written address (but not the physical location) of VEU Boeing Tianjin Composites Co. Ltd.

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BIS Amends Entity List

Sep. 7, 2016 – 81 Fed. Reg. 61595: BIS amended the EAR by adding 81 persons in the Crimea region of Ukraine, Hong Kong, India, and Russia to the Entity List (EAR Part 744, Supplement No. 4) to ensure the efficacy of existing sanctions imposed on Russia because of its involvement in the conflict in eastern Ukraine. Thirty of these persons will be subject to a license requirement for all items subject to the EAR with a license review policy of presumption of denial. For 51 persons – all subsidiaries of Gazprom OAO – the new license requirement with presumption of denial will be limited to items involved directly or indirectly in a specified sector of the Russian oil and gas industry. The large number of new entries, and the details of their requirements, illustrate the importance to exporters and others in the export chain of exercising continual due diligence in screening the parties in every export transaction.

If you do not utilize a Denied Party Screening tool or software, we recommend you use the Consolidated Screening List at: https://build.export.gov/main/ecr/eg_main_023148.

Sep. 20, 2016 – 81 Fed. Reg. 64693: BIS amended the Entity List to change the license requirements for the following 12 Chinese entities currently listed on the Entity List. The license requirement for these entities, which formerly excluded EAR99 items, will now include all items subject to the EAR:

33 Institute;
35 Institute;
54th Research Institute of China;
Baotou Guanghua Chemical Industrial Corporation;
Beijing Aerospace Automatic Control Institute (BICD);
Beijing Institute of Structure and Environmental Engineering (BISE);
China Aerodynamics Research and Development Center (CARDC);
Northwestern Polytechnical University;
Shanghai Academy of Spaceflight Technology (SAST);
Shanghai Institute of Space Power Sources;
Southwest Research Institute of Electronics Technology; and
Xi’an Research Institute of Navigation Technology.

This amendment also consolidated (but did not change) Entity List license requirements, policies, and procedures by moving several provisions that were previously in EAR Sec. 741.1 into Sec. 744.16.

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BIS Requests Comments on Rules Pertaining to Export of Agricultural Commodities to Cuba

Sep. 8, 2016 – 81 Fed. Reg. 62079: BIS requested public comments on the effectiveness of its licensing procedures for the export of agricultural commodities to Cuba. Information on the economic impact of these controls is of particular interest; other topics of interest are also specified in the announcement. The comments will be included in a periodic report to Congress. Deadline for comments is Oct. 11, 2016.

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BIS Amends EAR to Harmonize CCL with Wassenaar Related to Computer Controls

Sep. 20, 2016 – 81 Fed. Reg. 64655: BIS amended the EAR to implement changes in 4 separate areas:

Harmonized the Commerce Control List (CCL, EAR Part 774, Supplement No. 1) with changes made at the December 2015 plenary meeting of the Wassenaar Arrangement, including raising the Adjusted Peak Performance (APP) for high performance computers;
Changed APP parameters in areas not agreed to at the Wassenaar Plenary, e.g., the de minimis rules, License Exception APP, and related reporting requirements;
Updated license requirements and licensing policies associated with Category 5–Part 2, including revising Export Control Classification Numbers (ECCNs) 5A992, 5D992, and 5E992; and
Removed the Foreign National Review requirement associated with deemed exports under License Exceptions APP and CIV.

A detailed list of the changes made in Category 5—Part 2 and the license exceptions that apply to it are on the BIS website at http://www.bis.doc.gov/InformationSecurity2016-updates

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Department of State

DDTC Publishes Name and Address Changes on Its Website

Sep. 1, 7, 15, 20, 22, 26, and 30 2016: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:

Change in Name of Kayaba Industry Co., Ltd. to KYB Corporation due to corporate rebranding;
Change in Name of Selex ES to Leonardo MW Ltd. due to corporate restructure;
Change in Name of Doosan Defense Systems & Technology Co., Ltd. (DDST) to Hanwha Defense Systems Corp. (HDS) due to acquisition of Doosan Defense Systems by Hanwha Defense Systems;
Change in Name of Thales-Raytheon Systems-Malaysia Sdn. Bhd. to Raytheon CCS-Malaysia Sdn. Bhd. due to restructure under joint venture;
Indo-MIM Inc. became a party to DSP authorizations to which its affiliates Indo-US MIM Tec Pvt. Ltd. LLC and Indo-US MIM Tech Pvt Ltd are already a party due to corporate reorganization;
Change in Name of EADS CASA Espacio S.L. of Spain to Airbus Defence and Space, S.A. of Spain due to corporate rebranding;
UTi Worldwide Name Change due to its acquisition by DSV:
- Country UTi Organizations DSV Organizations
- Austria UTi Logistik GmbH DSV Osterreich Spedition GmbH
- Australia UTi (Aust) Pty Ltd. DSV Air & Sea Pty Ltd.
- Belgium UTi Belgium NV DSV Air & Sea NV
- Brazil UTi do Brasil Ltda DSV Air & Sea Logistica Ltda.
- Canada UTi Canada Inc. DSV Air & Sea Inc.
- Chile UTi Chile S.A. DSV Air & Sea S.A.
- France UTi France S.A.S. DSV Air & Sea
- India UT World (India) (Pvt) Limited DSV Air & Sea Pvt. Ltd
- Israel UTi Logistics Israel Ltd. DSV Air & Sea Israel Ltd.
- Japan UTi (Japan) KK DSV Air & Sea Co. Ltd.
- Poland Uti (Poland) Sp. z.o.o. DSV Air & Sea Sp. z.o.o.
- Portugal UTi Portugal – Freight & Logistics Services, Lda DSV Transitarios, Lda

Spain UTi Spain DSV Air & Sea S.A.U.
Sweden UTi Logistics AB DSV Air & Sea AB
Taiwan UTi Air (Taiwan) Co. Ltd. or UTi (Taiwan) Ltd. DSV Air & Sea Ltd.

Thailand UTi Worldwide Co. Ltd. DSV Air & Sea Ltd.
United Kingdom UTi Worldwide (UK) Ltd. DSV Air & Sea Ltd
United States UTi United States, Inc. DSV Air & Sea Inc. (DSV)
Change in Address of Wincanton Group Limited;
Change in Address of Raytheon Systems Limited; and
Change in Name of RYMSA ESPACIO S.A. to TRYO AEROSPACE FLIGHT SEGMENT, S.A.U. as a result of merger between RYMSA Espacio and the space business division of MIER Communications.

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

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DDTC Publishes Revision to Agreement Guidelines

Sep. 1, 2016: DDTC published Revision 4.4a of the Agreement Guidelines, replacing Revision 4.4 that was published August 11, 2016. Revision 4.4a corrects an inadvertent omission in Revision 4.4. Revision 4.4a is on the DDTC website at http://pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.4a.pdf.

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DDTC Publishes Amendment to ITAR to Clarify Meaning of the Term Retransfer Under the ITAR, As Harmonized with the EAR

Sep. 8, 2016 – 81 Fed. Reg. 62004: DDTC amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by revising the definition of “retransfer” (Sec. 120.51) to clarify that temporary transfers to third parties and releases to same-country foreign persons are within the scope of the definition and made additional revisions to Sections 126.16(a)(1)(iii), 126.17(a)(1)(iii), 126.18(d)(1), and 130.2. The new definition of “retransfer” further revised the definition contained in an interim final rule issued on June 3, 2016 (81 Fed. Reg. 35611; see June 2016 Regulatory Review). Further, in a response to a comment on that rule, DDTC stated that “theoretical or potential access to technical data is not a release.” DDTC also noted that additional definitions included in a proposed rule on June 3, 2015 (80 Fed. Reg. 31525; see June 2015 Regulatory Review) that have not yet been issued in final form will be the subject of separate rulemakings.

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DDTC Publishes Summary Report of First Activity Under the Relaunched Company Visit Program – Identifies Best Practices, Recommendations for Exporters

Sep. 23, 2016: DDTC posted a summary report on its recently relaunched company visit program (CVP), which involves visits to industry for outreach initiatives and also as part of compliance cases (see July 2016 Regulatory Update). In addition to a list of visits (not identifying the entities visited), the report includes lists of Best Practices Noted During Visits, Recommendations/Observations for Improvement, and Office of Defense Trade Controls Compliance (DTCC) Takeaways. The report is on the DDTC website at https://www.pmddtc.state.gov/compliance/documents/CVP_REPORT_2015-2016.pdf.

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DDTC Publishes a Series of Modifications of ITAR Section 126.1

Sep. 29, 2016 – 81 Fed. Reg. 66804: DDTC amended several paragraphs of ITAR Sec. 126.1 to update, clarify, and reorganize them (but not to change their fundamental content) and amended ITAR Parts 120 and 126 to change the export control status of Tunisia, Somalia, Eritrea, the Democratic Republic of the Congo, Liberia, Cote d’Ivoire, Sri Lanka, and Vietnam. The changes in the status of the individual countries are:

Tunisia: Designated a major non-NATO ally (ITAR Sec. 120.32);
Somalia: Exemptions from arms embargo modified per United Nations Security Council Resolutions (UNSCRs) 2244, 2111, and 2142 (ITAR Sec. 126.1(m));
Eritrea: Exemptions from arms embargo modified per UNSCRs 2244 and 2111 (ITAR Sec. 126.1(h);
DR Congo: Exemptions from arms embargo expanded per UNSCR 2293 (ITAR Sec. 126.1(i);
Liberia: Sanctions terminated per UNSCR 2288 (ITAR Sec. 126,1(o) reserved);
Cote d’Ivoire: Sanctions terminated per UNSCR 2283 (ITAR Sec. 126.1(q) reserved);
Sri Lanka: Licensing restrictions removed per their omission from the U.S Consolidated Appropriations Act of 2016 (ITAR Sec. 126.1(n) reserved); and
Vietnam: Ban on lethal weapons sales lifted by U.S. Department of State (ITAR Sec. 121.1(l) and associated note reserved).

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 clients of FD Associates to remind them of the importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don't let this happen to you or your company! Call us with questions or concerns at 703-847-5801 or email info@fdassociates.net.

Sanctions

Department of Commerce

Sep. 21, 2016 – 81 Fed. Reg. 64871: BIS denied the export privileges of Francisco Javier Mendoza-Esquivel for 10 years based on his conviction in U.S. District Court for the Southern District of Texas of intentionally and knowingly conspiring and agreeing to knowingly and willfully export, attempt to export, and cause to be exported to Mexico 5,860 rounds of 7.62 x 39 mm caliber ammunition without the required authorization from the State Department. In the criminal case Mendoza-Esquivel was sentenced to a 51-month prison term and a $100 assessment.

Fines and Penalties

Sep. 1, 2016: Syed Vaqar Ashraf of Lahore, Pakistan was sentenced to 33 months in prison in Federal District Court of Arizona based on his plea of guilty of conspiracy to export gyroscopes to Pakistan without the required authorization from the Commerce Department. The gyroscopes, which were initially exported to Belgium, were allegedly intended to be transshipped to Pakistan for use by the Pakistani military. Ashraf was arrested by the Belgian Federal Police at the request of U.S. Immigration and Customs Enforcement after he traveled to Belgium to inspect the gyroscopes and arrange for their onward shipment to Pakistan.

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Sep. 7, 2016: World Class Technology Corporation of Portland, OR agreed to pay a civil penalty of $43,200 to settle charges by OFAC that it violated the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by exporting 7 shipments of orthodontic devices valued at $59,886 to Germany, United Arab Emirates, and/or Lebanon with knowledge or reason to know that the devices were intended for transshipment to Iran.

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Sep. 13, 2016: PanAmerican Seed Company of West Chicago, IL, a division of Ball Horticultural Company, agreed to pay $4,320,000 to settle charges by OFAC that it violated the ITSR on 48 occasions when it indirectly exported seeds – primarily flower seeds – to two distributors in Iran. The shipments were made to consignees in two unnamed third countries in Europe or the Middle East, and PanAmerican’s customers arranged their re-exportation to Iran.

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Sep. 27, 2016: Amin Yu of Orlando, FL, a U.S. permanent resident originally from China, was sentenced in federal court in Orlando to 21 months in federal prison for acting as an illegal agent of a foreign government without prior notification to the Attorney General and conspiring to commit international money laundering. Although Yu was not convicted of export control violations, her illegal acts involved illegally exporting systems and components for marine submersible vehicles from the U.S. to China, where they were used in the development of marine submersible vessels. In the course of these exports, Yu allegedly failed to file required Electronic Export Information (EEI) and also filed export related documents in which she significantly undervalued the exported items and provided false end user information.

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Sep. 29, 2016: Technoline SAL of Sin El Fil, Beirut, Lebanon agreed to pay a civil fine of $450,000 to settle charges by BIS that it caused, aided, and/or abetted unauthorized exports or reexports to Syria of U.S.-origin mass spectrometers, gas chromatographs and consumables, liquid chromatograph-mass spectrometer systems, and liquid chromatograph modules classified under ECCN 3A999. The illegal exports occurred in 2009 and 2010 and were valued at $583,110.

SEPTEMBER 2016 EXPORT CONTROL REGULATION UPDATES Read More »