November 2019
This newsletter is a listing of the latest changes in export control regulations through Nov. 30, 2019. The newsletter is provided as a complimentary service to assist exporters with their ITAR and EAR export compliance responsibilities. It provides a summary of recent changes to export control regulations or other regulatory matters of interest that may impact your company’s international trade and export compliance functions. Call us at 703-847-5801 or email info@fdassociates.net with questions or comments.
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
REGULATORY UPDATES
Department of Commerce – Bureau of Industry and Security
BIS Adds 22 Entities To The Entity List
Nov. 13, 2019 – 84 Fed. Reg. 61538: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 22 entities under 32 entries in 13 countries 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 available license exceptions will now apply to exports, reexports, or in-country transfers to these entities of all items subject to the EAR. The rule also modified one existing entry on the Entity List and removed 3 existing entries. (List of added, modified, and removed entities is at the end of this report.)
Editor’s Note: Use of denied party screening tools for each export transaction will ensure each export transaction is properly screened for these added entities.
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BIS Extends Temporary General License Related To Huawei
Nov. 20, 2019 – 84 Fed. Reg. 64018: BIS extended through Feb. 16, 2020, the validity of the Temporary General License (TGL) – codified as Supplement No. 7 to EAR Part 744 – authorizing certain exports to Huawei Technologies Co. Ltd., and 114 of its non-U.S. affiliates (collectively “Huawei”). Specifically, this TGL authorizes “certain activities, including those necessary for the continued operations of existing networks and equipment as well as the support of existing mobile services, including cybersecurity research critical to maintaining the integrity and reliability of existing and fully operational networks and equipment.” Exports, reexports, or in-country transfers of items subject to the EAR to any of the listed Huawei entities as of the effective date they were added to the Entity List continue to require a license, with the exception of transactions explicitly authorized by the TGL and eligible for export, reexport, or in-country transfer prior to May 16, 2019, without a license or under a license exception. Applications for such licenses will continue to be reviewed under a presumption of denial, as stated in the Entity List entries for the listed Huawei entities. Exporters, reexporters, and transferors utilizing this TGL are required to maintain certifications and other records, to be made available when requested by BIS, regarding their use of the temporary general license. (See information about the original issuance of this TGL and its extension and modification in May 2019 and August 2019 Regulatory Updates.)
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BIS Issued A Proposed Rule For Procedures Involving The Information and Communications Technology and Services (ICTS) Supply Chain
Nov. 27, 2019 – 84 Fed. Reg. 65316: The Commerce Department issued a proposed rule setting out procedures the Secretary of Commerce plans to use to identify, assess, and address transactions involving the Information and Communications Technology and Services (ICTS) Supply Chain that pose an undue risk to ICTS in the United States, or, to the critical infrastructure or the digital economy in the United States, or, an unacceptable risk to national security, or to the security and safety of U.S. persons. The rule would implement Executive Order (EO) 13873 of May 15, 2019, “Securing the Information and Communications Technology and Services Supply Chain” (see May 2019 Regulatory Update). Under this rule, the Secretary of Commerce, in consultation with other agencies, will use a case-by-case, fact-specific approach to identify transactions that must be prohibited or mitigated. The parties engaged in the transaction will then be notified and will have an opportunity to submit a position, which may include proposed mitigation measures. The Secretary will provide a written final determination to the parties. A summary of the final determination will be made publicly available, as appropriate. Deviations from these procedures may occur if required by the risk of public harm or by national security interests. The rule will apply to transactions initiated, pending, or completed after May 15, 2019. Deadline for public comments is Dec. 27, 2019.
Department of Commerce – Census Bureau
Census Announced Additions To The Harmonized Tariff Schedule (HTS)
Nov. 7, 2019: The Census Bureau announced that all recent additions to the Harmonized Tariff Schedule (HTS) are now available for use in the Automated Export System (AES), and that the ACE/AESDirect program has been updated with the new HTS Codes. There have been no additions to the Schedule B table. The 2019 Schedule B and HTS tables are available for downloading at http://www.census.gov/foreign-trade/aes/documentlibrary/#concordance; the current list of HTS codes that are not valid for AES is available at https://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.txt.
Department of State
DDTC Name and Address Changes Posted To Website
Nov. 1 and 4, 2019: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- · Change in name from Airbus Defense and Space Inc. to Airbus U.S. Space & Defense Inc. due to corporate rebranding;
- · Change in name from Harris Corporation’s (Night Vision Business) to Elbit Systems of America, LLC due to acquisition of Harris Corporation’s (Night Vision Business) by Elbit Systems of America; and
- · Change in address for The Tsurumi-Seiki Co. Ltd.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
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The State Department Published An Updated List Of Restricted Entities And Subentities Associated With Cuba (CRL)
Nov. 19, 2019 – 84 Fed. Reg. 63953: The State Department published an updated List of Restricted Entities and Subentities Associated with Cuba (CRL) with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515). 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 another entity or subentity on the CRL are not treated as restricted unless also specified by name on the list.
Department of the Treasury
OFAC Issued Two Ukraine-related General Licenses (GLs)
Nov. 1, 2019: OFAC issued two Ukraine-related General Licenses (GLs) related to GAZ Group: GL 13M, Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group, and GL 15G, Authorizing Certain Activities Necessary to Maintenance or Wind Down of Operations or Existing Contracts with GAZ Group, and Certain Automotive Safety and Environmental Activities. GL 13M and GL 15G both extended the validity date of existing GLs to March 31, 2020. GL 15G also expanded the authorization for certain safety-related activity and added a new authorization for certain activities to comply with environmental regulatory requirements. GL 13M is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13m.pdf; GL 15G is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl15g.pdf.
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OFAC Amended Venezuela-related General License (GL) 34A
Nov. 5, 2019: The Office of Foreign Assets Control (OFAC) issued amended Venezuela-related General License (GL) 34A “Authorizing Transactions Involving Certain Government of Venezuela Persons” (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl34a.pdf) and related amended Frequently Asked Question (FAQ) 680 (https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#680) and new Venezuela-related GL 35 “Authorizing Certain Administrative Transactions with the Government of Venezuela” (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl35.pdf) and related FAQ 803 (https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#803)
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OFAC Revoked Syria-related GLs 2 And 3
Nov. 5, 2019: In view of the Oct. 24, 2019, removal of Syria-related sanctions that had been imposed on two Turkish ministries and three Turkish individuals (see October 2019 Regulatory Update), OFAC revoked Syria-related GLs 2 and 3, which had been issued in relation to the no-longer-effective sanctions.
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OFAC Released Its Reports Of Licensing Activities Pursuant To The Trade Sanctions Reform And Export Enhancement Act Of 2000
Nov. 5, 2019: OFAC released its Reports of Licensing Activities Pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) for the 2nd, 3rd and 4th quarters of FY 2018, covering exports of agricultural commodities, medicine, and medical devices to Iran and Sudan. A link to these reports is at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/lic-agmed-index.aspx#quarterly.
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OFAC Updates Venezuela Sanctions Regulations (VSR, 31 CFR Part 591)
Nov. 22, 2019 – 84 Fed. Reg. 64415: OFAC issued a final rule making major updates to the Venezuela Sanctions Regulations (VSR, 31 CFR Part 591) to incorporate the provisions of 6 Executive Orders issued since the VSR were issued on July 10, 2015, and to take actions including, among others, adding a general license authorizing official U.S. Government activities regarding Venezuela (new Sec. 591.509); adding an interpretive provision regarding settlement agreements and the enforcement of liens, judgments, and other orders to Sec. 591.407; and expanding the scope of prohibited transactions in existing Sec. 591.201. OFAC notes in the announcement that it intends to supplement Part 591 with a more comprehensive set of regulations.
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OFAC Updated Existing Iran-Related Frequently Asked Questions
Nov. 27, 2019: OFAC updated existing Iran-Related Frequently Asked Questions (FAQs) 303 and 804 and issued three new Iran-related FAQs: FAQ 805 concerning transactions involving non-U.S. persons outside U.S. jurisdictions and FAQs 806 and 807 concerning General License K.
| 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
Nov. 14, 2019 – 84 Fed. Reg. 61869: BIS denied the export privileges of Mojtaba Biria of Stuhr, Germany, for 10 years based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by conspiring to export gas turbine parts and causing them to be exported from the U.S. to Germany with knowledge that they were intended for reexportation to Iran without the required export license. In the criminal case, Biria was sentenced to time served, a fine of $5,000, and an assessment of $100. He had been in U.S. custody since Nov. 23, 2017, when he was arrested at Boston’s Logan International Airport. (See additional information about this case in August 2019 Regulatory Update.)
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Nov. 14, 2019 – 84 Fed Reg. 61870 and 61872: BIS denied the export privileges of Ali Caby, a/k/a Alex Caby, of Sofia, Bulgaria and Arash Caby, a/k/a Axel Caby, of Miami, FL, respectively, for 6 years (with two years suspended and thereafter waived, provided that the Denied Person commits no further violations) based on separate agreements settling civil charges by BIS of conspiracy to violate the EAR. Both men were officers of Arrowtronic, LLC and AW-Tronics LLC. (See next item.) The purpose and object of the conspiracy was to unlawfully export goods from the United States through transshipment points to Syria, including to Syrian Arab Airlines (‘‘Syrian Air’’), the flag carrier airline of Syria and a Specially Designated Global Terrorist (‘‘SDGT’’), and in doing so evade the prohibitions and licensing requirements of the Regulations and avoid detection by U.S. law enforcement. In December 2017, in federal court in Miami, both men were found guilty of criminal charges based on the same conspiracy. Arash Caby was sentenced to 24 months in prison, 2 years of supervised release, and a $10,000 fine. Ali Caby was sentenced to 24 months in prison and 2 years of supervised release. (See December 2017 Regulatory Update.)
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Nov. 14, 2019 – 84 Fed. Reg. 61873 – and Nov. 15, 2019 – 84 Fed. Reg. 62502: BIS denied for 6 years the export privileges of Arrowtronic, LLC and AW-Tronics LLC, respectively, both of Miami, FL, and when acting for or on behalf of either company, its successors, assigns, director, officers, representatives, agents, or employees, based on separate settlement agreements whereby each company agreed to the 6-year denial order to settle a civil charge by BIS of conspiracy to violate the EAR. The charges in both actions involved an alleged conspiracy to export goods from the U.S. to Syria, including to Syrian Arab Airlines, the flag carrier airline of Syria and a Specially Designated Global Terrorist (''SDGT''), without the required U.S. Government authorization. The exports were conducted through transshipment points, including an AW-Tronics/Arrowtronic office in Sofia, Bulgaria, which were falsely identified as final destinations.
Fines and Penalties
Nov. 7, 2019: Apollo Aviation Group, LLC (now d/b/a Carlyle Aviation Partners, Ltd.), agreed to pay a civil penalty of $210,600 to settle charges by OFAC that it violated the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) during the period 2013-2015 by leasing three aircraft engines to an entity incorporated in the United Arab Emirates (UAE), which then subleased the engines to a Ukrainian airline, which then installed the engines on an aircraft “wet leased” to Sudan Airways (“Sudan Air”), which at the time was identified on the Specially Designated National and Blocked Persons List (SDN List, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx) as meeting the definition of “Government of Sudan.” [N.B.: The GL at SSR Sec. 538.540 that authorized all transactions prohibited under the SSR did not exist at the time of these offenses. Also, Sudan Air was subsequently removed from the SDN List on October 12, 2017.] OFAC noted that this action highlighted the importance of companies operating in high-risk industries to implement effective, thorough and on-going, risk-based compliance measures, especially when engaging in transactions concerning the aviation industry.
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Nov. 13, 2019: Cotran Corporation of Portsmouth, RI, agreed to pay a civil penalty of $136,000 ($50,000 payable in quarterly installments, with the remaining $86,000 suspended and then waived after 4 years if Cotran has committed no further violations) to settle charges by BIS that it violated the EAR by exporting electric cattle prods controlled for Crime Control reasons under Export Control Classification Number (ECCN) 0A985 and valued in total at $81,010 to various countries including Venezuela, Mexico, South Africa, and the Czech Republic without the required BIS export licenses; failing to properly monitor the expiration dates of export licenses it had been granted; and failing to observe document retention requirements. The BIS announcement noted that Cotran had previously applied for and received a number of export licenses for electric cattle prods, including some destined for the end-users at issue in this action.
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Nov. 15, 2019: Behzad Pourghannad, a citizen and resident of Iran, was sentenced to 46 months in prison for his participation in a conspiracy to export carbon fiber from the U.S. to Iran without the required export authorization. Over several years, Pourghannad and two codefendants exported and attempted to export large quantities of carbon fiber to Iran via Europe and other sites including Dubai, United Arab Emirates (UAE) and Tbilisi, Georgia, identifying it on shipping labels as “acrylic” or “polyester” on shipping labels. Pourghannad was arrested in Germany and extradited to the U.S. by the German government. His codefendants remain at large. (See additional details in report on Pourghannad’s guilty plea in September 2019 Regulatory Update.)
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Nov. 19, 2019: Aerovironment , Inc. of Simi Valley, CA, agreed to accept a $1 million civil fine ($500,000 suspended if spent on corrective actions) and undertake specified corrective actions to settle charges by DDTC of 10 violations of the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) involving unauthorized exports of defense articles including technical data; failure to maintain required records; and violations of terms of export authorizations. The unauthorized exports included unmanned aircraft systems (UAS) to Canada; UAS user manuals to Australia, France, Canada, and Thailand; and Shrike UAS to the United Kingdom. Other violations involved failure to obtain end-use certificates for the UAS and parts, components, and accessories exported to Canada; violations of provisos, terms, and conditions of licenses and other approvals; and failure to maintain ITAR–required records. Corrective actions (CAs) required under the consent agreement include, among others, retention of a Special Compliance Officer (SCO) reporting directly to DDTC; review of compliance resources and assurance of sufficient compliance resources; a comprehensive jurisdiction/classification review of the company’s ITAR-regulated hardware and related defense services, technical data, and software; and an outside audit assessing the effectiveness of the company’s implementation of the CA.
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Nov. 25, 2019: OFAC announced that Apple, Inc., of Cupertino, CA, had agreed to pay $466,912 to settle its potential civil liability for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR, 31 CFR Part 598). The apparent violations involved SIS, a software company in Trzin, Slovenia, which became an app development client of Apple’s in 2008. On Feb. 24, 2015, OFAC designated SIS and Savo Stjepanovic, a director and majority owner of SIS, pursuant to the FNKSR and added them to the SDN List. Apple used its usual screening tool to screen the newly designated significant foreign narcotics traffickers (SDNTKs) against its app developer account holder names; however, this screening failed to identify that SIS had been added to the SDN List, apparently because of a failure to match the upper case name “SIS DOO” in Apple’s system with the lower case name “SIS d.o.o.” as written on the SDN List. A separate discrepancy apparently caused the screening tool to miss the designation of Stjepanovic as a SDNTK. Apple identified SIS as a potential SDNTK after it enhanced its sanctions screening tool and related processes in 2017, and ultimately voluntarily disclosed the apparent violations.
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Nov. 28, 2019: Virgil Griffith, a U.S. citizen and resident of Singapore, was arrested at Los Angeles International Airport on charges of conspiracy to violate the IEEPA by traveling to the Democratic People’s Republic of Korea (DPRK), attending the “Pyongyang Blockchain and Cryptocurrency Conference,” and delivering a presentation and technical advice on using cryptocurrency and blockchain technology to evade sanctions although the State Department had denied him permission to travel to the DPRK and he lacked the OFAC authorization required to provide goods, services, or technology to the DPRK. During the presentation, Griffith allegedly responded to specific questions from conference attendees who appeared to work for the DPRK government who asked specific questions about blockchain and cryptocurrency and prompted discussion on technical aspects of these technologies. After the DPRK Cryptocurrency Conference, Griffith allegedly began formulating plans to facilitate the exchange of cryptocurrency between the DPRK and South Korea, despite knowing that assisting with such an exchange would violate sanctions against the DPRK.
Additions, etc. to Entity List, per 84 Fed. Reg. 61538 (Nov. 13, 2019)
Added to the Entity List:
Bahrain
- Marzoghi, Ltd.
- Mohammed Marzoghi.
France
- Dart Aviation, including four aliases (Dart Aviation Technics, Dart Aviation Marlbrine S.A.R.L., MBP Trading Ltd., and Sari IEAS).
Iran
- Dart Aviation, including four aliases (Dart Aviation Technics, Dart Aviation Marlbrine S.A.R.L., MBP Trading Ltd., and Sari IEAS).
Jordan
- The Jordanian Lebanese Company for Laboratory Instruments S.A.L.
Lebanon
- EDO–ELEMED, including two aliases (EDO ELEMED and EDO/ELEMED)
- Elemed Liban;
- Rahal Corporation for Technology and Medical Supplies
- Rahal Establishment.
Oman
- Safe Technical Supply Co., LLC, including three aliases (Safe Technical Equipment Services LLC; Safe Technical; and SafeTech)
Pakistan
- Engineering Equipment (Private) Limited
- Fabcon International
- Muhandis Corporation
- Paktech Engineers
- Rohtas Enterprises
- Techlink Communications
- Techlinks
Saudi Arabia
- Safe Technical Supply Co., LLC, including three aliases (Safe Technical Equipment Services LLC; Safe Technical; and SafeTech).
Senegal
- Dart Aviation, including four aliases (Dart Aviation Technics, Dart Aviation Marlbrine S.A.R.L., MBP Trading Ltd., and SARL IEAS).
Syria
- EDO–ELEMED, including two aliases (EDO ELEMED and EDO/ELEMED)
- Elemed Liban
- Rahal Corporation for Technology and Medical Supplies
- Rahal Establishment
Turkey
- Eslem Global Pazarlama Sanayi ve Ticaret
- Mehmet Yari
United Arab Emirates (UAE)
- Abdullah Poor Nagar
- Al Ras Gate General Trading
- Bestway Line FZCO
- Khaled Al Taher
- Mohammed Marzoghi
- Safe Technical Supply Co., LLC, including three aliases (Safe Technical Equipment Services LLC; Safe Technical; and SafeTech)
United Kingdom
- Dart Aviation, including four aliases (Dart Aviation Technics, Dart Aviation Marlbrine S.A.R.L., MBP Trading Ltd., and Sari IEAS).
Modified:
Pakistan
- Mushko Electronics Pvt. Ltd: License Requirement changed to “Items on the Commerce Control List (CCL) only, and in address, spelling of “Boulevad” changed to “Boulevard.”
Removed from Entity List:
Pakistan
- Technology Links Pvt. Ltd.
Singapore
- All Industrial Manufacturing (AIM) Pte Ltd.
UAE
- Eurotech DMCC