This newsletter is a listing of the latest changes in export control regulations through June 30, 2020. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email email@example.com 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.
Department of Commerce – Bureau of Industry and Security
BIS Published A Restatement On Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End-Use or Military End Users in the People’s Republic of China, Russia, and Venezuela
June 3, 2020 – 85 Fed. Reg. 34306: The Bureau of Industry and Security (BIS) published a restatement of the final rule it published April 28, 2020 (85 Fed. Reg. 23459 – see April l 2020 Regulatory Update) on Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End-Use or Military End Users in the People’s Republic of China, Russia, or Venezuela. The restatement did not make any substantive changes in the original rule but published each revised Export Control Classification Number (ECCN) in full, replacing the April 28 version which published only the revised portion of each ECCN.
Editors note: Refer to our recent constant contact article on this subject or our website at Consultant Corner for an expansive explanation of this important rule change that is now in effect.
BIS Added 24 Entities In China, Hong Kong And The UK To The Entity List
June 5, 2020 – 85 Fed. Reg. 34495: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 24 entities in the People’s Republic of China (China), Hong Kong and the United Kingdom (U.K.) to the Entity List (EAR Part 744, Supp. No. 4) based on a determination that each of these entities had acted contrary to the national security or foreign policy interests of the U.S. A license requirement with license review policy of presumption of denial and no license exceptions will now apply to exports, reexports, or in-country transfers to these persons of all items subject to the EAR. The 24 entities (under 25 entries) are:
- Beijing Cloudmind Technology Co., Ltd.;
- Beijing Computational Science Research Center;
- Beijing Jincheng Huanyu Electronics Co., Ltd.;
- Center for High Pressure Science and Technology Advanced Research;
- Chengdu Fine Optical Engineering Research Center;
- China Jiuyuan Trading Corporation;
- Harbin Chuangyue Technology Co. Ltd.;
- Harbin Engineering University;
Harbin Institute of Technology;
- Harbin Yun Li Da Technology and Development Co., Ltd.;
- JCN (HK) Technology Co., Ltd.;
- Kunhai (Yanjiao) Innovation Research Institute;
- Peac Institute of Multiscale Science;
- Qihoo 360 Technology Company;
- Shanghai Nova Instruments Co., Ltd.;
- Sichuan Dingcheng Material Trade Co., Ltd.;
- Sichuan Haitian New Technology Group Co., Ltd.;
- Sichuan Zhonghe Import and Export Trade Co., Ltd.;
- Skyeye Laser Technology Limited; and
- Zhu Jiejin.
- Cloudminds (Hong Kong) Limited;
- JCN (HK) Technology Co., Ltd.; and
- K Logistics (China) Limited.
- Cloudminds Inc.; and
- Qihoo 360 Technology Co. Ltd.
In the same announcement, BIS also modified the following three existing entries under the destination of China:
- China Electronics Technology Group Corporation 38th Research Institute (CETC 38);
- China Electronics Technology Group Corporation 55th Research Institute (CETC55); and
- Chinese Academy of Engineering Physics.
BIS Added 9 Entities In China To The Entity List Based On A Determination That Each Of These Entities Acted Contrary To The National Security Or Foreign Policy Interests Of The U.S.
June 5, 2020 – 85 Fed. Reg. 34503: BIS amended the EAR by adding 9 entities in China to the Entity List based on a determination that each of these entities had acted contrary to the national security or foreign policy interests of the U.S. For these entities a license requirement will now apply for all items subject to the EAR with a case-by-case review for ECCNs 1A004.c, 1A004.d, 1A995, 1A999.a, 1D003, 2A983, 2D983, and 2E983 and for items designated as EAR99 that are described in the Note to ECCN 1A995 and a presumption of denial for all other items, and no license exceptions will apply to exports, reexports, or in-country transfers to these persons of all other items subject to the EAR. The 9 entities are:
- Aksu Huafu Textiles Co.;
- CloudWalk Technology;
- FiberHome Technologies Group;
- Ministry of Public Security’s Institute of Forensic Science of China;
- Nanjing FiberHome Starrysky Communication Development Co.;
- NetPosa; and
In the same announcement, BIS also modified the following three existing entries under the destination of China:
- Hangzhou Hikvision Digital Technology Co., Ltd (originally identified as Hikvision);
- Beijing Sensetime Technology Development Co., Ltd (originally identified as Sensetime); and
- Kezilesu Kyrgyz Autonomous Prefecture Public Security Bureau.
BIS Amended Three ECCNs Per Decisions Made By The Australia Group In 2020
June 17, 2020 – 85 Fed. Reg. 36483: BIS implemented decisions made by the Australia Group in 2020 by amending three ECCNs: ECCN 1C350 by adding 24 precursor chemicals as well as mixtures in which at least one of these chemicals constitutes 30 percent or more of the weight of the mixture; ECCN 1C351.a.30 by adding Middle East respiratory syndrome-related coronavirus (MERS-related coronavirus); and ECCN 2B352 by adding a Technical Note to indicate that single-use cultivation chambers with rigid walls are controlled under ECCN 2B352.b.2.b. BIS also clarified that “software” or “technology” related to the added items is controlled under one or more of these ECCNs if it falls within the parameters of the controls described therein. BIS noted that the inclusion of precursor chemicals and single-use cultivation chambers on the control list is consistent with the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) because they are emerging technologies that are essential to U.S. national security.
BIS Amended The EAR To Authorize Releases To Huawei For The Purpose Of Contributing To The Revision Or Development Of A “Standard” In An International “Standards Organization”
June 18, 2020 – 85 Fed. Reg. 36719: BIS amended the EAR to authorize the release without a license of technology designated EAR99 or controlled only for anti-terrorism (AT) reasons to Huawei and 114 of its foreign affiliates on the Entity List if the release is made for the purpose of contributing to the revision or development of a “standard” in an international “standards organization.” This authorization does not apply to releases of technology for commercial purposes, and the rule adds definitions of ‘‘standard’’ and ‘‘standards organization’’ to EAR Sec. 772.1 (Definitions). BIS requested comments on the impact of these revisions. This interim final rule became effective June 18, 2020. Deadline for comments is Aug. 17, 2020.
BIS Published 32 FAQs Regarding The Expansion of Export, Reexport, And Transfer (in-Country) Controls For Military End Use Or Military End Users In The People’s Republic Of China, Russia, And Venezuela
June 26, 2020: BIS published 32 FAQs about the final rule on Expansion of Export, Reexport, and Transfer (in-Country) Controls for Military End Use or Military End Users in the People’s Republic of China, Russia, or Venezuela issued on April 28, 2020 (85 FR 23459—See April 2020 Regulatory Update). The FAQs appear under 5 headings: Changes to Section 744.21; Military End User; Military End Use; License Review Policy; and Electronic Export Information (EEI) Filing Requirement in the Automated Export System (AES). These FAQs are on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2566-2020-meu-faq/file.
BIS Clarified The Effective Dates Of New EEI Filing Requirements
June 26, 2020: BIS posted an announcement clarifying the effective dates of new Electronic Export Information (EEI) filing requirements that had been established in the April 28, 2020 rule on “Revisions to EEI Filing Requirements Pursuant to Revisions to Section 744.21 (China/Russia/Venezuela military end use/end user rule).” (See preceding item.) The effective date for filing EEI for items subject to Supplement No. 2 to Part 744 destined for China, Russia, and Venezuela is June 29, 2020, and the effective date of the EEI filing requirement for exports to China, Russia or Venezuela of items controlled by ECCNs not listed in Supplement No. 2 to Part 744 is September 27, 2020. This announcement is on the BIS website at https://www.bis.doc.gov/index.php/all-articles/2-uncategorized/1686-revisions-to-eei-filing-requirements-pursuant-to-revisions-to-section-744-21-china-russia-venezuela-military-end-use-end-user-rule.
U.S. Commerce Secretary Wilbur Ross Announced The Impending Suspension Of Commerce Department Regulations That Afford Preferential Treatment To Hong Kong Over China
June 29, 2020: U.S. Commerce Secretary Wilbur Ross announced the impending suspension of Commerce Department regulations that afford preferential treatment to Hong Kong over China, specifically including the availability of export license exceptions (see the following item), but stating that additional actions to eliminate differential treatment between Hong Kong and China are also being evaluated. These measures result from the imposition by the Chinese Communist Party of new security measures on Hong Kong, with the resulting risk that sensitive U.S. technology will be diverted to the China’s People’s Liberation Army or the Ministry of State Security. Secretary Ross’ statement is on the Commerce Department website at https://www.commerce.gov/news/press-releases/2020/06/statement-us-secretary-commerce-wilbur-ross-revocation-hong-kong. (See below for counterpart statement by Secretary of State Pompeo.)
BIS Suspended All License Exceptions (LEs) For Exports And Reexports To Hong Kong And Transfers (in-country) Within Hong Kong
June 30, 2020: BIS issued a notice suspending all License Exceptions (LEs) for exports and reexports to Hong Kong and transfers (in-country) within Hong Kong of items subject to the EAR that provide differential treatment than those available to China. This rule is effective June 30, 2020, but a savings clause permits completion of shipments and deemed export/reexport transactions already in process on June 30 under a previous LE eligibility until Aug. 28, 2020, subject to specified documentation requirements. BIS states that this action is in response to new security measures imposed on Hong Kong by the Chinese Communist Party that undermine its autonomy and thereby increase the risk that sensitive U.S. items will be illegally diverted to the Chinese People’s Liberation Army or Ministry of State Security, Iran, or North Korea. This rule is on the BIS website at https://bis.doc.gov/index.php/documents/pdfs/2568-suspension-of-license-exceptions-for-exports-and-reexports-to-hong-kong/file.
Department of Commerce – Census Bureau
Census Issued The First In A Three-part Series Designed To Explain Export Regulations Between The U.S. And Puerto Rico
June 23, 2020: The Census Bureau’s Global Reach Blog issued the first in a three-part series designed to explain export regulations between the U.S. and Puerto Rico. This first installment includes a general overview of filing requirements for shipments between the U.S. and all the U.S. territories, as well as a more detailed description of the requirements and exemptions that apply to filing Electronic Export Information (EEI) in the Automated Export System (AES) for shipments between the U.S. and Puerto Rico. This post is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach.html.
Department of Homeland Security – Customs and Border Protection
DHS/CBP Announced That It Will Host A Series Of Technical Support Calls On New Requirements For Processing Entries Subject To The U.S. Mexico Canada Agreement
June 10, 2020: In view of the scheduled deployment on July 1, 2020, of the U.S. Mexico Canada Agreement (USMCA) enhancement of the Automated Commercial Environment (ACE), Customs and Border Protection (DHS/CBP) announced that it will host a series of technical support calls on new requirements for processing entries subject to the USMCA. These include calls July 6, 7, and 8 at 2:00 p.m. This bulletin, including WebEx meeting links and passwords for each call, is on the DHS/CBP website at https://content.govdelivery.com/bulletins/gd/USDHSCBP-2901903?wgt_ref=USDHSCBP_WIDGET_2.
Department of Justice
The U.S. Department Of Justice Criminal Division Released An Updated Version Of Its Memorandum On “Evaluation of Corporate Compliance Programs”
June 1, 2020: The U.S. Department of Justice Criminal Division released an updated version of its memorandum on “Evaluation of Corporate Compliance Programs,” a 20-page manual that provides prosecutors with concrete guidance for determining the effectiveness of a corporation’s compliance program by answering three basic questions: whether the program is well designed; whether it is being applied earnestly and in good faith; and whether it actually works in practice. The updated manual is on the Justice Department website at https://www.justice.gov/criminal-fraud/page/file/937501/download.
Department of State
DDTC Name and Address Changes Posted To Website
June 8, 15, 16, and 30, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and address changes on its website at
- Change in Address for Meggitt PLC and its UK subsidiaries, Meggitt PLC, Meggitt Aerospace Ltd, Meggitt UK Ltd., and Meggitt Training Systems Ltd.;
- Change in Address for Aerotech Helicopters;
- Change in Name from BFFT aeromotive GmbH to EDAG aeromotive GmbH due to corporate rebranding to complete prior acquisition of BFFT by EDAG Group;
- Change in Name from Chemring Ordnance, Inc. to Nammo Perry Inc. due to acquisition of Chemring Group PLC by Nammo Defense Systems Inc.;
- Change in Name from KPN Consulting B.V. to Cegeka Consulting B.V. due to acquisition of KPN by Cegeka;
- Change in Name from MHI Plant Engineering & Construction, Ltd. (MHIPEC) to Mitsubishi Heavy Transportation and Construction Engineering, Ltd. (MHITC) due to corporate restructure;
- Change in Address for Babcock Corporate Services Limited entities BCDA Vodafone, Internet Solutions Center and BCDB Vodaphone Data Centre;
- Change in Name from Pennant Training Systems Limited to Pennant International Limited due to corporate restructure; and
- Changes in Name for American Outdoor Brands Corporation entities due to corporate restructure as follows:
o Change in Name from American Outdoor Brands Corporation to Smith & Wesson Brands, Inc.,
o Change in Name from American Outdoor Brands Sales Company to Smith & Wesson Sales Company; and
o Change in Name from Battenfield Technologies, Inc., to AOB Products Company.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
DDTC Requested Public Comment On Changes Made Due To COVID-19
June 10, 2020 – 85 Fed. Reg. 35376: DDTC requested comments from the public on the temporary suspensions, modifications, and exceptions to several provisions of the ITAR that it announced May 1, 2020 (85 Fed. Reg. 25287 -- see May 2020 Regulatory Update). Deadline for comments was June 25, 2020.
DDTC Published An Updated List Of Restricted Entities And Sub-entities Associated With Cuba
June 12, 2020 – 85 Fed. Reg. 35972: DDTC published an updated List of Restricted Entities and Sub-entities Associated with Cuba (CRL, Cuba Restricted List) with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) because they are under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba. The CRL is also considered by BIS when it reviews applications for export licenses under the EAR. The State Department noted that entities or subentities owned or controlled by an entity or subentity on the CRL are not treated as restricted unless also specified by name on the list. The CRL is also available on the State Department website at https://www.state.gov/cuba-sanctions/cuba-restricted-list/.
DDTC Released Its 2019 “Blue Lantern Report”
June 15, 2020: DDTC released its report on End-Use Monitoring of Defense Articles and Defense Services Commercial Exports FY 2019 (the 2019 “Blue Lantern Report”). The checks it reported included the first-ever joint checks between the Departments of State and Defense as well as the first tranche of “Blue Lantern” visits tailored to assess the risk of diversion of U.S. defense articles due to the acquisition of foreign companies by entities that pose a potential enhanced risk of diversion. Among other successes, the report noted that DDTC had enhanced its work with posts, resulting in the posts conducting the checks in a more timely and effective manner, with DDTC initiating 187 checks and posts closing 181 checks, and DDTC recommending non-approval of more than 130 license applications, compared to 57 during FY 2018 thanks to better execution of Blue Lantern checks and other improvements described in the report. The full 2019 Blue Lantern Report, which includes many detailed statistics of the Blue Lantern results, is on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=c13d692b1b9154102dc36311f54bcb2b.
U.S. Secretary Of State William Pompeo Announced That The U.S. Will Take Steps Toward Imposing The Same Restrictions On U.S. Defense And Dual-Use Technology Exports To Hong Kong As It Does For China
June 29, 2020: U.S. Secretary of State William Pompeo announced that the U.S. “will today end exports of U.S.-origin defense equipment and will take steps toward imposing the same restrictions on U.S. defense and dual-use technologies to Hong Kong as it does for China” to protect U.S. national security in view of China’s actions to treat Hong Kong as “One Country, One System.” However, the statement did not announce any formal regulatory action. Secretary Pompeo’s statement is on the State Department website at https://www.state.gov/u-s-government-ending-controlled-defense-exports-to-hong-kong/. (See above for counterpart statement by Secretary of Commerce Ross.)
Department of the Treasury
OFAC Published A Final Rule Establishing The Syria-Related Sanctions Regulations
June 5, 2020 – 85 Fed. Reg. 34510: The Office of Foreign Assets Control (OFAC) published a final rule establishing the Syria-Related Sanctions Regulations (SRSR, 31 CFR Part 569) based on Executive Order (EO) 13894 of Oct. 14, 2019, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria” (Oct. 17, 2019 – 84 Fed. Reg. 55851; also reproduced as Appendix to the new SRSR. See October 2019 Regulatory Update for information about earlier actions under EO 13894.) The Syrian Sanctions Regulations (SSR, 31 CFR Part 542) remain in effect, separate from the SRSR.
OFAC Released FAQs Regarding “Imposing Sanctions With Respect to Additional Sectors of Iran”
June 5, 2020: OFAC released four Frequently Asked Questions (FAQs) related to EO 13902, “Imposing Sanctions With Respect to Additional Sectors of Iran” (Jan. 14, 2020 – 85 Fed. Reg. 2003 – See January 2020 Regulatory Update). The FAQs address the scope of the sanctions, including issues such as the definitions of the “construction,” “mining,” “manufacturing”, and “textiles” sectors of the Iranian economy and the “goods” and “services” used in connection with those industry sectors, clarification of the status of medical-related activities, and the interpretation of the terms “knowingly” and “significantly.” .FAQs 830-833 are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#830.
OFAC Posted An Important Technical Notice For Users Of The OFAC Website And Sanctions List Data Files Regarding The Annual Renewal Of The Public Certificate Securing The www.treasury.gov Website
June 22, 2020: OFAC posted an Important Technical Notice for Users of the OFAC Website and Sanctions List Data Files regarding the annual renewal of the public certificate securing the www.treasury.gov website. The existing certificate will expire July 10, 2020; the new one was made available on June 25, 2020. For full information see the Notice, on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/20200622.aspx.
|LATEST SANCTIONS FINES & PENALTIES|
This section of our newsletter provides information on the latest sanctions, fines and penalties for export violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement agencies. It is provided as a service to exporters and associates of FD Associates to remind them of the importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don't let this happen to you or your company! Call us with questions or concerns at 703-847-5801 or email firstname.lastname@example.org.
Department of Commerce
June 4, 2020 – 85 Fed. Reg. 34405: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) against the following persons and, when acting for or on their behalf, any successors or assigns agents, or employees:
- Mahan Airways, Tehran, Iran;
- Pejman Mahmood Kosarayanifard A/K/ A Kosarian Fard, Dubai, United Arab Emirates (UAE);
- Mahmoud Amini, Dubai, UAE;
- Kerman Aviation A/K/A Gie Kerman Aviation, Paris, France;
- Sirjanco Trading LLC, Dubai, UAE;
- Mahan Air General Trading LLC, Dubai, UAE;
- Mehdi Bahrami, Istanbul, Turkey;
- Al Naser Airlines A/K/A Al-Naser Airlines A/K/A Al Naser Wings Airline A/K/A Alnaser Airlines And Air Freight Ltd., Baghdad, Iraq, Dubai, UAE, and Amman, Jordan;
- Ali Abdullah Alhay A/K/A Ali Alhay A/K/A Ali Abdullah Ahmed Alhay, Baghdad, Iraq, and Qatif, Saudi Arabia;
- Bahar Safwa General Trading, Dubai, UAE;
- Sky Blue Bird Group A/K/A Sky Blue Bird Aviation A/K/A Sky Blue Bird Ltd A/K/A Sky Blue Bird FZC Ras Al Khaimah Trade Zone, UAE; and
- Issam Shammout A/K/A Muhammad Isam Muhammad Anwar Nur Shammout A/K/A Issam Anwar, Damascus, Syria, Beirut, Lebanon, London, United Kingdom, and Istanbul, Turkey.
Fines and Penalties
June 12, 2020: Qingshan Li, a Chinese national, was sentenced in U.S. District Court in San Diego, CA, to three years in federal custody based on his conviction of conspiracy to attempt to export defense articles without the required license from DDTC. Specifically, Li attempted to export a Harris Falcon III AN/PRC 152A radio that was controlled under the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). Li allegedly purchased the radio and other military radios, antennas, and additional military equipment while he was in the U.S. on a tourist visa for a scheduled a 9-day visit, informing the seller of the radio that he planned to take it to Tijuana, Mexico and ship it to China from there in light of the lack of export control rules in Mexico. After he was stopped by law enforcement agents with the radio and other military equipment in his bag, he allegedly told the agents that he knew the radio was export-controlled, that it was illegal to transport it to China, and that he had purchased it with the intent to ship it to China, knowing that this would violate U.S. law.
June 16, 2020: Seyed Sajjad Shahidian, a citizen of Iran, pleaded guilty in U.S. District Court in Minneapolis, MN to conspiracy to commit offenses against and to defraud the U.S. for his role in conducting financial transactions in violation of U.S. sanctions against Iran. Shahidian was founder and CEO of Payment24, an internet-based Iranian financial services company whose primary business was helping Iranian citizens conduct prohibited financial transactions including the unlawful exportation of computer servers, software, and software licenses with U.S.-based businesses, utilizing devices including PayPal accounts opened with false documentation, a remote IP address from the United Arab Emirates (UAE), fraudulent passports and other false residency documentation, material misrepresentations to U.S.-based businesses regarding the destination of U.S.-origin goods, and advice on creating accounts with a foreign identity. The guilty plea occurred after Shahidian was arrested in London, England on Nov. 11, 2018, indicted in the U.S. on Dec. 18, 2018, and extradited to the U.S. on May 15, 2020.
June 18, 2020: Gabriele Villone, an Italian national, was sentenced in U.S. District Court in Savannah, GA, to 28 months in prison for conspiring to violate the International Emergency Economic Powers Act (IEEPA,
50 USC Secs. 1701-1707) and the Export Control Reform Act of 2018 (ECRA, 50 USC Secs. 4801 et seq.). Villone allegedly conspired with two Russian nationals, an Italian national, a U.S. citizen, and various unnamed companies to attempt to purchase a power turbine valued at approximately $17.3 million from a U.S. manufacturer and export it without the required export license for use by a Russian company on a Russian Arctic deepwater drilling platform. The conspiracy included concealing the true end-user of the turbine from both the U.S. manufacturer and the U.S. government by submitting false documentation stating that the turbine would be used near Atlanta, Georgia by a U.S. company. The case against Russian and U.S. defendants remains under investigation.