JUNE 2021 UPDATES

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

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

REGULATORY UPDATES

European Union

EU Published New EU Dual-Use Regulation

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

Department of Commerce – Bureau of Industry and Security

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

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

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

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

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BIS Added 8 Pakistan and UAE Entities To The Entity List

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

Pakistan

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

UAE

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

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

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

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

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

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

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BIS Added Five Chinese Entities To The Entity List

 

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

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

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

Department of State

DDTC Name And Address Changes Posted To Website

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

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

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

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

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

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

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

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

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

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DDTC Posted Its 2020 “Section 655 Report”

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

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

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

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Department of the Treasury

OFAC Issues The Burma Sanctions Regulations, 31 CFR § 525

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

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

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

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

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

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

At the same time, OFAC issued six FAQs that provide further clarity on what the COVID-19-related GLs authorize, OFAC’s due diligence expectations for U.S. financial institutions facilitating activity authorized by the COVID-19-related GLs, and guidance for non-U.S. persons engaging in activities authorized for U.S. persons under the COVID-19-related GLs.  The six FAQs are on the Treasury Department website at 906907908909910, and 911.

LATEST SANCTIONS FINES & PENALTIES

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

Sanctions

 

Department of Commerce

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

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

Department of State

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

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

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

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

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

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

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

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

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

 

Fines and Penalties

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

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

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

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

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

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

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