Federal District Court Judge Denies Deferred Prosecution Agreement for Fokker Services BV Regarding Export Violations
Feb. 5, 2015: A judge in Federal District Court for the District of Columbia refused to approve a deferred prosecution agreement in which the U.S. Department of Justice, the Treasury Department Office of Foreign Assets Control (OFAC), and the Commerce Department Bureau of Industry and Security (BIS) had proposed to accept a $21 million penalty to settle sanctions violations by Fokker Services B.V., a Netherlands company, involving 1,153 illegal exports of aircraft parts, technology, and services, valued at a total of $21 million, to Iran, Sudan, and Burma. (See description of this case in June 2014 Regulatory Update.) In rejecting the agreement, the judge found the penalty to be “grossly disproportionate” to the gravity of the offenses, which had been committed with the apparent knowledge of the company’s management. The judge stated specifically: “Surely one would expect, at a minimum, a fine that exceeded the amount of revenue generated, a probationary period longer than 18 months, and a monitor trusted by the Court to verify for it and the Government both that this rogue company truly is on the path to complete compliance.” Despite the judge’s strong words, the judge clarified in his closing statements that he remained open to approving a modified plea agreement.
Department of Commerce
BIS Requests that State Department Submit Proposal for Amendment of Wassenaar Arrangement to Remove Anistropic Plasma Dry Etching Equipment
Feb. 9, 2015 – 80 Fed. Reg. 6948: BIS determined that foreign availability exists for anisotropic plasma dry etching equipment controlled for national security reasons under Export Control Classification Number (ECCN) 3B001.c on the Commerce Control List (CCL, 15 CFR Part 774). As a result, BIS has requested the Department of State to submit a proposal to the Wassenaar Arrangement to remove this item from the Wassenaar Arrangement Dual-Use Control List.
Various Chinese Entities Added to the BIS Entity List Due to Use of EAR Parts in Nuclear Explosive-Related Activities
Feb. 18, 2015 – 80 Fed. Reg. 8524: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 11 entities to the Entity List (Supp. No. 4 to EAR Part 744). The following Chinese entities, added to the list for using U.S.-origin items to produce supercomputers believed to be used in nuclear explosive activities, will now be subject to a license requirement for all items subject to the EAR with a case-by-case licensing policy:
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
- National Supercomputing Center Changsha (NSCC-CS), Changsha City, Hunan Province;
- National Supercomputing Center Guangzhou (NSCC-GZ), Guangzhou;
- National Supercomputing Center Tianjin (NSCC-TJ), Tianjin; and
- National University of Defense Technology (NUDT), Changsha City, Kaifu District, Hunan Province.
Various Pakistani and UAE Entities Added to BIS Entity List for Supporting Terrorist Organizations
The following Pakistani and United Arab Emirates entities, added to the list for engaging in activities in support of terrorist and extremist organizations, will now be subject to a license requirement for all items subject to the EAR with a license review policy of denial and no license exceptions available:
- Azad Motors Property Choice, a.k.a Peshawar Master Azad Motors; Peshawar Motors Complex; Karakoram Azad Motors; and Azad Cars, Peshawar, Pakistan;
- Hakim Noor, a.k.a. Hakim Nur, Sarafa Miram Shaw and Sikandar Pura, Pakistan;
- Hakim Nur Sarafa, a.k.a. Noor Muhammad Market and Haji Hakim Noor Saraf, Miram Shaw, Pakistan;
- Sher Qadir, Mirim Shaw, Pakistan;
- Ajab Noor, a.k.a. Ajab Nur. Dubai, UAE;
- Ajab Trading Co. LLC, Dubai, UAE; and
- Perfect Tyre Trading Co LLC, Dubai and Abu Dhabi, UAE.
SATCO GmbH Removed from BIS Entity List
In the same action, BIS also removed the following entity from the Entity List:
- SATCO GmbH, a.k.a. Satco Inc., Bremen, Germany
BIS Amends the EAR to Facilitate Communication and the Free Flow of Information for the Citizens of the Republic of Sudan
Feb. 18, 2015 – 80 Fed. Reg. 8520: BIS amended regulations affecting the export of certain services, hardware, and software incident to personal communications to the Republic of Sudan (Sudan) with the
goal of facilitating communication and the free flow of information among the Sudanese people. Changes include removing the license requirement from software controlled under ECCN 5D992.b or .c, expansion
of License Exception Consumer Communications Devices (CCD, EAR Sec. 740.19) to include exports to Sudan, and revision of the antiterrorism licensing policy in EAR Sec. 742.10 from a general policy of denial to a case-by-case policy for exports and reexports to Sudan of telecommunications equipment and associated computers, software and technology for civil end use, including items useful for the development of civil telecommunications network infrastructure. . It should be noted that the EAR was amended to reflect the July 2011 formal recognition of the Republic of South Sudan (South Sudan) as a new country. Please note that the license requirements and licensing policies are different for South Sudan and Sudan. Sudan continues to be subject to stringent controls, notwithstanding this change with regard to consumer communications equipment, as a consequence of Sudan’s designation as a State Sponsor of Terrorism. BIS guidance on these issues is at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/13-policy-guidance/country-guidance/191-sudan (See below for related action by OFAC.)
Department of Energy
The National Nuclear Security Administration (NNSA) Updated Its Regulations Pertaining to Assistance for Foreign Atomic Energy Activities
Feb. 23, 2015 – 80 Fed. Reg. 9359: The National Nuclear Security Administration (NNSA) issued a comprehensive update of its regulation on Assistance to Foreign Atomic Energy Activities (10 CFR Part 810), which controls the export of unclassified nuclear technology and assistance. A 16-page publication providing details and guidance on the revised rule is on the NNSA website at http://nnsa.energy.gov/sites/default/files/nnsa/inlinefiles/810guidancedocument022015_0.pdfhttp://nnsa.energy.gov/sites/default/files/nnsa/inlinefiles/810guidancedocument022015_0.pdf.
Department of State
Various Name/Address Changes Posted to the DDTC Website
February 5, 6, 12, 13, and 23, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:
- Airbus Helicopters c/o Daher Address Change;
- Energy Resources Conservation Board (ERCB) Changing to Alberta Energy Regulator (AER) and Changing Address due to its acquisition by AER;
- Wojskowe Zaklady Mechaniczne S.A. Changing to ROSOMAK S.A. due to corporate rebranding;
- B/E Aerospace Consumables Management Changing to KLX Poland due to corporate reorganization;
- Northrop Electronic Systems Integration Ltd Changing to Northrop Grumman UK Ltd. due to corporate reorganization; and
- Sensor and Antenna Systems Lansdale, Inc. (SASL) acquired REMEC Defense & Space, Inc., which merged with Cobham Electronic Systems Inc.;
- SASL is now Changing to Cobham Advanced Electronic Solutions, Inc.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
Grace Period for Using ITAR Agreements Extended to Two Years After the LAST EFFECTIVE DATE a USML Category in the TAA was Changed by ECR
Feb. 4, 2015: DDTC modified the Agreement Guidelines to clarify how Export Control Reform (ECR) changes will affect agreements (TAAs, MLAs, WDAs, etc.) when the agreement covers multiple categories under the United States Munitions List (USML). DDTC changed the Guidelines to reflect that the USML Category with the latest effective date will govern the grace period for amending agreements to address ECR changes in product classifications. For example, if a TAA covers both USML Category VIII and Category XI technical data, the TAA will remain fully effective without amendment until December 30, 2016, due to the Category XI ECR changes going into effect last, on December 30, 2014. Without this clarification, the applicant for the TAA would have had to seek amendment for their TAA prior to October 13, 2015 for the Category VIII technical data and defense articles covered by their TAA, as the two year period for using existing agreements for Category VIII technical data and defense articles expires on October 13, 2015. Then, the applicant would have had to later seek amendment for USML categories later effected by ECR. Now, applicants can wait and keep existing approvals that cover multiple USML categories until two years after the last effective date that a covered USML Category was modified by ECR. See, http://www.pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.2.pdf.
DDTC Announces New Unmanned Aircraft System (UAS) Export Policies
Feb. 13, 2015: DDTC announced that in support of U.S. policy on the export of military unmanned aerial systems (UAS), it will now require certain assurances of proper use, signed by the foreign end user and the U.S. applicant, in addition to the required DSP-83 Non-Transfer and Use Certificate. The new assurances will be included in an additional form that will be required to be submitted to DDTC at the time of initial application for every license application for a permanent (not temporary) export of a UAS. The form, an addendum to DSP-83 Block 5, is on the DDTC website at http://www.pmddtc.state.gov/documents/Web%20Notice%20Addendum%20to%20DSP.pdf.
DDTC Announces New Unmanned Aircraft System (UAS) Export Policies
Feb. 17, 2015: The State Department announced a new policy permitting the export of U.S.-origin armed military UAS under stringent conditions, with applications to be considered on a case-by-case basis. Requirements for such exports include that the sales be made through the government-to-government Foreign Military Sales (FMS) program after review under the Department of Defense Technology Security and Foreign Disclosure process and that the recipient nation agree to end-use assurances including use of force only when lawful under international law, end-use monitoring, possible additional security conditions, adherence to international humanitarian and human rights law, non-use for unlawful surveillance or unlawful force against domestic populations, and appropriate training to reduce risk of unintended injury or damage. Sales of commercial UAS will continue to be governed by the EAR.
State Department Announces New, As Yet Unreleased Policy regarding the Sale of Armed UAS via the FMS Program
Feb. 26, 2015: DDTC posted an Industry Notice stating that pursuant to International Traffic in Arms Regulations (ITAR, 22 CFR Secs. 120-130) Sec. 126.6(c), the temporary import (and subsequent export) without a license of unclassified and classified defense items transferred under the Department of Defense FMS program and specifically identified in an executed DOD Letter of Offer and Acceptance pursuant to the FMS program is authorized. A Frequently Asked Question (FAQ) on this topic is on the DDTC website at http://www.pmddtc.state.gov/faqs/ECR.html.
Department of the Treasury
Treasury Department Amends the OFAC to Reflect Obama Administration Efforts to Open Communications and the Free Flow of Information to the Citizens of the Republic of Sudan
Feb. 18, 2015 – 80 Fed. Reg. 8531: OFAC amended the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) by issuing a general license expanding the scope of software, hardware, and services incident to
personal communications that may be exported to Sudan without specific authorization. (See above for related action by BIS.) FAQs about this general license are posted on the OFAC website at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/ques_index.aspx#sud_comm_gl.
LATEST SANCTIONS FINES & PENALTIES
This section of our newsletter provides information on the latest sanctions, fines and penalties for export violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement agencies. It is provided as a service to clients and associates of FD Associates to remind them of the importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your company! Call us with questions or concerns at 703-847-5801 or email firstname.lastname@example.org.
BIS Denies Export Privileges to Maple Pacific Corporation and Andrew Hsu for Unlawfully Exporting Equipment to Iran
Department of Commerce
Feb. 12, 2015 – 80 Fed. Reg. 7839: BIS denied the export privileges of Maple Pacific Corporation and related person Andrew Hsu, both of Mission Viejo, CA, for 10 years based on the 2012 conviction of Maple Pacific of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 et seq.) by willfully exporting and transshipping industrial parts used to maintain equipment in the steel manufacturing industry from the U.S. to Iran without the required authorization. In the criminal case Maple Pacific was sentenced to probation for 2 years, a $5,000 fine, and a $400 assessment.
BIS Denies Export Privileges to Ernesto Salgado-Guzman for Unlawfully Exporting Firearms to Mexico
Feb. 23, 2015 – 80 Fed. Reg. 9434: BIS denied the export privileges of Ernesto Salgado-Guzman or Raymondville, TX for 10 years based on his conviction in 2014 of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully exporting, causing to be exported, and attempting to export rifles to Mexico without the required authorization. In the criminal case Salgado-Guzman was sentenced to 46 months imprisonment, 36 months of supervised release, and a $100 assessment.
Department of State
DDTC Removes Chemical and Biological Weapons Proliferation Sanctions on Two Chinese Companies
Feb. 24, 2015 – 80 Fed. Reg. 9846: DDTC waived chemical and biological weapons proliferation sanctions that have been in effect since May 1997 against the following two Chinese entities:
- Nanjing Chemical Industries Group (NCI) and
- Jiangsu Yongli Chemical Engineering and Technology Import/Export Company.
Fines and Penalties
Various Persons Convicted of Violating U.S. Export Laws and Regulations
Feb. 3, 2015: Ali Saboonchi of Parkville, MD, a dual citizen of the U.S. and Iran, was sentenced to two years in prison in federal court in Greenbelt, MD based on his conviction of conspiracy and 7 counts of violating IEEPA by exporting industrial parts and components to the UAE and China with knowledge that they would be transshipped to Iran. Working with two Iranian co-conspirators who remain at large in Iran, Saboonchi established a company in Maryland to respond to purchase orders from Iranian customers for items including, among others, various liquid pumps and valves and flow meters.
Feb. 9, 2015: David Kelley of Richmond, TX was sentenced to 18 months in prison followed by 3 years of supervised release based his plea of guilty to charges of violations of the AECA involving unlicensed
exports of ITAR-controlled night-vision equipment to customers in 24 countries including Argentina, Australia, Russia, the Philippines, the United Kingdom, and Japan. Kelley sold the items through a business that operated primarily over eBay. He was caught in a sting operation when an undercover agent of the U.S. Immigration and Customs Enforcement Homeland Security Investigations (ICE-HSI) asked him to export an ATN Generation 4 monocular night vision device. After acknowledging in an email that the export would violate the ITAR and demanding additional payment for risking prosecution, Kelley exported the device to New Zealand without the required authorization from DDTC.
Feb. 17, 2015: The Assistant Attorney General for National Security and U.S. Attorney for the Northern District of Illinois announced the indictment of Vibgyor Optical Systems Inc., of Arlington Heights, IL,
its president Bharat “Victor” Verma, also of Arlington Heights, and a former employee, Urvashi “Sonia” Verma, of Chicago, IL on charges including conspiracy to unlawfully export military articles including components used in night vision systems and in the M1A1 Abrams tank. The alleged unlawful imports and exports occurred as part of a larger conspiracy to defraud the U.S. by misrepresenting the location of manufacture of items it supplied on a subcontract to supply optical components and systems to Defense Department prime contractors. According to the allegations, after falsely representing that the items Vibgyor supplied were made in the U.S. Bharat Varma illegally exported technical data and attempted to export an example of one of the items to a manufacturer in China.
Feb. 25, 2015: Mozaffar Khazaee, formerly of Manchester, CT, pleaded guilty in Federal District Court in Hartford, CT to violating the AECA in connection with his efforts to export to Iran information relating to military jet engines for the F35 Joint Strike Fighter and F-22 Raptor programs. Khazaee had obtained the information during his previous employment by U.S. defense contractors Pratt & Whitney, General Electric, and Rolls Royce. In November 2013 Khazaee sent many boxes of documents and digital media, including thousands of sensitive technical manuals, drawings, and other proprietary material, some of which were labeled as ITAR-controlled, to a freight forwarder for shipment to Iran. Khazaee was arrested in January 2014 at Newark Liberty International Airport before boarding a flight with a final destination of Iran. Search warrants executed on his luggage revealed additional export controlled documents relating to military jet engines. He has been in federal custody since that time. Sentencing is scheduled for May 20, 2015.