This newsletter is a listing of the latest changes in export control regulations through November 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
President
Biden Administration Proposal to Revise The Conventional Arms Transfer Policy
Nov. 29, 2021, The Biden administration is currently revising its conventional arms transfer policy. This policy provides guidance on how the United States approaches weapons sales. The administration is reportedly considering placing a greater emphasis on human rights in the policy’s text and joining and ratifying the Arms Trade Treaty. A key component of the revision to U.S. industry and exporters is the proposal to shift the regulation of firearms and munition sales back to the State Department and the International Traffic in Arms Regulations (ITAR). These revisions, if implemented, would give greater emphasis to human rights considerations when making arms sales, reduce sales of small weapons to governments that may use them on domestic populations, and affirm U.S. support for the Arms Trade Treaty. https://warontherocks.com/2021/11/bidens-conventional-arms-transfer-policy-review-could-be-a-turning-point/
(* Author: Jordan Cohen))
Department of Commerce – Bureau of Industry and Security
BIS Adds Four Entities In Israel, Russia And Singapore To The Entity List
Nov. 4, 2021 – 86 Fed. Reg. 60759: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 4 entities in Israel, Russia, and Singapore to the Entity List (EAR Part 744, Supp. No. 4). The entities are:
Israel
- Candiru and
- NSO Group;
Russia
- Positive Technologies; and
Singapore
- Computer Security Initiative Consultancy PTE. LTD.
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 Israeli entities were added to the Entity List based on evidence that they had developed and supplied spyware to foreign governments that used it to maliciously target government officials, journalists, business people, activists, academics, and embassy workers; the Russian and Singaporean entities were added based on a determination that they trafficked in cyber tools used to gain unauthorized access to information systems, threatening the privacy and security of individuals and organizations worldwide. BIS noted that this effort to combat cyber threats and mitigate unlawful surveillance followed the rule released in October (86 Fed. Reg. 58205, Oct. 21, 2021) establishing controls on exports, reexports, or in-country transfers of certain items that can be used for malicious cyber activities. (See October 2021 Regulatory Update.)
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BIS Publishes FAQs On The Export Of Cybersecurity Items
Nov. 12, 2021: BIS published 29 very detailed FAQs on the export of cybersecurity items, listed under three categories titled (1) “’Cybersecurity Items’ and the Export Administration Regulations (EAR)” (13 questions); (2) “’Vulnerability Disclosure’ and ‘Cyber Incident Response’” (7 questions); and (3) “Penetration testing tools and other ‘cybersecurity items’ overlap with Category 5 - Part 2 ‘encryption items’” (9 questions). These “EAR ‘cyber rule’ FAQs” are in a 16-page document on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2872-cyber-tools-le-ace-faqs-final-version-nov-2021/file.
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BIS Adds Twenty-Seven Entities In The People’s Republic of China, Japan, Pakistan And Singapore To The Entity List
Nov. 26, 2021 – 86 Fed. Reg. 67317: BIS added 27 entities in the People’s Republic of China (PRC), Japan, Pakistan, and Singapore to the Entity List (Supplement No. 4 to EAR Part 744) because they had acted contrary to the national security or foreign policy interests of the U.S. In the same rule, BIS also added one entity in Russia to the Military End-User list (MEU list, Supplement No. 7 to EAR Part 744). The entities added to the Entity List are:
China
- Corad Technology (Shenzhen) Ltd.
- Hangzhou Zhongke Microelectronics Co., Ltd.
- Hefei National Laboratory for Physical Sciences at Microscale
- Hunan Goke Microelectronics
- New H3C Semiconductor Technologies Co., Ltd.
- Peaktek Company Ltd.
- Poly Asia Pacific Ltd., (PAPL)
- QuantumCTek Co., Ltd.
- Shaanxi Zhi En Electromechanical Technology Co., Ltd.
- Shanghai QuantumCTek Co., Ltd.
- Xi’an Aerospace Huaxun Technology
- Yunchip Microelectronics
Japan
- Corad Technology Japan K.K.
Pakistan
- Al-Qertas
- Asay Trade & Supplies
- Broad Engineering (Pakistan)
- Global Tech Engineers
- Jade Machinery Pvt. Ltd.
- Jiuding Refrigeration & Air-conditioning Equipment Co (Pvt) Ltd.
- K-SOFT Enterprises
- Muhammad Ashraf
- Muhammad Farrukh
- Prime Tech
- Q&N Traders
- Seljuk Traders (SMC-Private) Limited
- U.H.L. Company
Singapore
- Corad Technology Pte Ltd.
Russia
Moscow Institute of Physics and Technology (added to MEU List only)
The Federal Register announcement provides the specific reasons for which each of the 27 entities was added to the Entity List (or the MEU List). A license requirement with license review policy of presumption of denial will now apply to all exports, reexports, or in-country transfers of all items subject to the EAR to all the entities added to the Entity List, and no license exceptions will be available.
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BIS Proposes Amendments To The Interim Final Rule On Securing The Information And Communications Technology And Services (ICTS) Supply Chain (Supply Chain Rule)
Nov. 26, 2021 – 86 Fed. Reg. 67379: The Commerce Department proposed to amend the interim final rule on Securing the Information and Communications Technology and Services (ICTS) Supply Chain (Supply Chain Rule) that it published on January 19, 2021 (86 Fed. Reg. 4909 – see January and March 2021 Regulatory Updates). The proposal would revise the definition of ICTS to expressly include “connected software applications” and would provide for additional criteria that the Secretary of Commerce could consider when determining whether ICTS transactions (as defined in the Supply Chain Rule) that involve connected software applications present an undue or unacceptable risk. The notice solicits the public’s
views on specific questions about the additional criteria for connected software applications. The deadline for comments is December 27, 2021.
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BIS Requests Public Comments Regarding Areas And Priorities For U.S. And European Union (EU) Export Control Cooperation
Nov. 30, 2021 – 86 Fed. Reg. 67904: BIS requested public comments regarding areas and priorities for U.S. and European Union (EU) export control cooperation to help inform the work of the U.S–EU Trade and Technology Council (TTC) Export Control Working Group. Comments should address ways in which existing U.S. and/or EU dual-use export control policies and practices may be made more transparent, more efficient, and effective, more convergent, and fit for today’s challenges, in particular with regard to the control of emerging technologies. The deadline for comments is January 14, 2022.
Department of State
DDTC Name And Address Changes Posted To Website
Nov. 16 and 26, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- Change in Address for ATI Engineering Services, LLC; and
- Change in Address for Parsons Government Services, Inc.
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 Adds Ethiopia To 22 CFR § 126.1(n) Of The ITAR And Updates The Entry For Eritrea In § 126.1(h)
Nov. 1, 2021 – 86 Fed. Reg. 60165: DDTC amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) to add Ethiopia to Sec. 126.1(n) and to update the entry for Eritrea in Sec. 126.1(h) to codify the U.S. policy of denial that applies to licenses or other approvals for exports of defense articles or defense services destined to or for the armed forces, police, intelligence, or other internal security forces of either Ethiopia or Eritrea. This final rule became effective on November 1, 2021.
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DDTC Publishes Six FAQS Relating To Debarments, Rescissions, And Reinstatement And Eleven FAQs Relating To Violations And Disclosures
Nov. 19 and 22, 2021: DDTC published six FAQs relating to Debarments, Rescissions, and Reinstatement and eleven FAQs relating to Violations and Disclosures. The FAQs regarding Debarments, Rescissions, and Reinstatement focus on U.S. person status of DACA residents, how to determine if the party you are dealing with is a debarred party, is there an exception so that a statutorily or administratively debarred party can participate in an ITAR-controlled activity, what does DDTC’s debarred parties list mean, is the rescission of statutory debarment under ITAR § 127.7(b) the same as the reinstatement of export privileges and duration administrative debarment or statutory debarment. The FAQs regarding Violations and Disclosures focus on how to respond to DDTC questions regarding a violation, are you required to voluntarily disclose a violation, how does DDTC assign voluntary disclosure case #s, how much time do you have to submit a voluntary disclosure, when should you submit a voluntary disclosure, extension request, how to obtain the status of the review of a voluntary disclosure, who can submit a voluntary disclosure, and do you need to wait for the disclosure to close before you submit a new export license.
All these FAQs are accessible from https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_landing.
Department of the Treasury
OFAC Publishes New Syria FAQ 934 Regarding Stabilization And Early Recovery-Related Activities And Transactions Involving Syria
Nov. 8, 2021: The Treasury Department Office of Foreign Assets Control (OFAC) published new Syria FAQ 934, discussing the scope of the authority granted by the Syrian Sanctions Regulations (SySR, 31 CFR Part 542) to the United Nations and the U.S. Government and their contractors and grantees, to conduct stabilization and early recovery-related activities and transactions involving Syria. FAQ 934 further references Syria FAQ 884 regarding the exposure to U.S. secondary sanctions of non-U.S. persons, including NGOs, private sector entities, and foreign financial institutions facilitating or assisting in the same activities. Syria FAQ 934 is on the OFAC website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/934; FAQ 884 is at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/884.
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OFAC Issues General Licenses And FAQs To Ensure That Humanitarian Assistance Could Flow To The People Of Ethiopia, Eritrea, And The Greater Horn Of Africa Region
Nov. 12, 2021: OFAC took several actions to continue its effort to ensure that humanitarian assistance could flow to the people of Ethiopia, Eritrea, and the greater Horn of Africa region. (See earlier measures in Treasury Department section of September 2021 Regulatory Update.) These actions included the issuance of General License (GL) 4 ( https://home.treasury.gov/system/files/126/ethiopia_gl4.pdf), updated FAQ 927, and new FAQs 935, and 936 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/927, https://home.treasury.gov/policy-issues/financial-sanctions/faqs/935, and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/936, respectively).
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OFAC Updates SDN List Regarding Burundi, Adds Others for Interference With The U.S. Elections and Updates Yemen Designations
Nov. 18, 2021: In response to Presidential Executive Order issued 11/18/21 with respect to “Termination of the Emergency With Respect to the Situation in Burundi” OFAC has updated the Specially Designated Nationals (SDN) list removing parties named in the SDN having property blocked as they were deemed to be contributing to the situation in Burundi.
OFAC also updated the SDN list, adding and removing parties designated for interference with the U.S. elections and situation in Yemen.
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OFAC Issues GL 8I Regarding Petróleos de Venezuela, S.A.
Nov. 24, 2021: OFAC issued GL 8I, “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 specified activities until June 1, 2022. GL 8I replaces and supersedes GL 8H, which expired Dec. 1, 2021. GL 8I is on the OFAC website at https://home.treasury.gov/system/files/126/venezuela_gl8i.pdf.
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OFAC Amends The Nongovernmental Organization (NGO) GL In SySR Sec. 542.516 To Expand Existing Authorizations For NGOs To Engage In Humanitarian Assistance That Benefit The Syrian People
Nov. 26, 2021 – 86 Fed. Reg. 67324: OFAC amended the nongovernmental organization (NGO) GL in SySR Sec. 542.516 to expand existing authorizations for NGOs to engage in humanitarian assistance that benefits the Syrian people, including certain early-recovery activities. The newly authorized transactions and activities by NGOs include new investment, the purchase of refined Syrian-origin petroleum products, and certain transactions with elements of the Government of Syria, all limited to support of the not-for-profit activities already authorized under the existing GL. This NGO GL also authorizes U.S. financial institutions to process transfers of funds in support of the transactions and activities authorized by the amendment.
New FAQs 937 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/937 ) and 938 (,https://home.treasury.gov/policy-issues/financial-sanctions/faqs/938 ), issued Nov. 24, 2021, provide additional information and guidance about what is authorized by the amended GL in SySR Sec. 542.516.
| 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. 15, 2021 – 86 Fed. Reg. 62986: BIS denied the export privileges of Christopher Daniel Stines of Big Spring Correctional Institution, Big Spring, TX, until March 2, 2030, based on his conviction in the U.S. District Court for the Southern District of Florida of violating 18 USC Sec. 554(a) by knowingly and fraudulently attempting to export firearm parts to Haiti. In the criminal case, Stines was sentenced to 46 months in prison, two years of supervised release, and a $100 assessment.
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Nov. 15, 2021 – 86 Fed. Reg. 62987: BIS denied the export privileges of Hersel Lincoln McKenzie, Jr. of Los Angeles, CA, until January 8, 2025, based on his conviction in the U.S. District Court for the Southern District of Texas of violating 18 USC Sec. 554(a) by knowingly and fraudulently attempting to export and exporting certain merchandise, articles, and objects, namely 7.62 x 39 mm ammunition, from the U.S. to Mexico. In the criminal case, McKenzie was sentenced to 12 months and one day in prison and a $100 assessment.
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Nov. 15, 2021 – 86 Fed. Reg.62988: BIS denied the export privileges of Robert Herman Fleischer of Phoenix, AZ, until August 4, 2024, based on his conviction in the U.S. District Court for the District of Arizona of violating Sec. 38 of the Arms Export Control Act (AECA, 22 USC Sec. 2778 (2012)) by intentionally attempting to knowingly and willfully export and cause to be exported from the U.S. to Mexico 2,999 rounds of 7.62x39 mm caliber ammunition without the required authorization from the Department of State. In the criminal case, Fleischer was sentenced to 21 months in prison with credit for time served, three years of supervised release, and a special assessment of $100. Fleischer was also placed on the U.S. Department of State Debarred List.
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Nov. 15, 2021 – 86 Fed. Reg. 62989: BIS denied the export privileges of Si Mong Park of Tucson, AZ, until September 14, 2027, based on his conviction in the U.S. District Court for the District of Columbia of violating Sec. 38 of the AECA by knowingly and willfully exporting and causing the export from the U.S. to South Korea of defense articles, i.e., technical data related to launch vehicles, guided missiles, ballistic missiles, rockets, torpedoes, bombs and mines, and technical data related to enumerated aircraft and aircraft-related articles without the required authorization from the Department of State. In the criminal case, Park was sentenced to 21 months in prison, 36 months of supervised release, and a $100 assessment.
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Nov. 16, 2021 – 86 Fed. Reg. 63333: BIS denied the export privileges of Manuel Valencia-Hermosillo until October 13, 2024, based on his conviction in the U.S. District Court for the District of Arizona of violating Sec. 38 of the AECA by knowingly and willfully attempting to export and cause to be exported from the U.S. to Mexico ammunition and rifle magazines, all of which were designated as defense articles on the U.S. Munitions List, without the required authorization from the Department of State. In the criminal case, Valencia-Hermosillo was sentenced to 15 months in prison with credit for time served, three years of supervised release, and an assessment of $100. Valencia-Hermosillo was also placed on the U.S. Department of State Debarred List.
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Nov. 22, 2021 – 86 Fed. Reg. 66276: BIS renewed for an additional 180 days the Temporary Denial Order (TDO) issued on May 27, 2021, against the following persons:
- 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
Nov. 8, 2021: SP Industries, Inc. (“SP,” doing business as SP Scientific) of Warminster, PA, agreed to pay a civil penalty of $80,000 and submit to audit requirements to settle allegations by BIS that it had committed four violations of the EAR by exporting items to Huawei Technologies Co., Ltd. and two subsidiaries, Huawei Device Co., Ltd. and HISilicon Technologies Co., Ltd., without the required licenses from BIS. The exports were made after these Huawei companies had been designated on the Entity List. SP voluntarily self-disclosed two of the four violations listed in the settlement. After learning of the apparent violations, SP instituted new screening and compliance procedures for all orders. Also, in the settlement, it agreed to conduct two audits of its compliance system over the next two years and submit the results to BIS’ Export Enforcement’s New York Field Office, and when actual or potential violations of the EAR occur, to provide BIS with documentation related to the compliance concerns and a detailed plan of corrective actions and documentation related to these concerns.
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Nov. 9, 2021: Andrew Scott Pierson of Jay, OK, pleaded guilty to conspiracy to violate the AECA for his role in a conspiracy to traffic firearms to Mexico. His role in the conspiracy, which he performed in Nuevo Laredo, Mexico, was to receive counterfeit Colt lower receivers and other parts that were transported to him by an organization in Laredo, TX, and assemble them into functioning automatic weapons for use by two Mexican cartels. According to the U.S. Department of Justice, law enforcement later confirmed that cartel firearm availability was impaired following Pierson’s arrest.
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Nov. 10, 2021: Dali Bagrou, of Alpharetta, GA, was sentenced in U.S. District Court for the Southern District of Georgia to 51 months in prison followed by three years of supervised release based on his plea of guilty to conspiracy, and Bagrou’s company, World Mining and Oil Supply (WMO), of Dacula, GA was sentenced to five years’ probation after pleading guilty to violating the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.). Also, as part of his plea agreement, Bagrou agreed to forfeit his $800,000 home. The sentences and guilty pleas involved a conspiracy to sell a U.S.-manufactured power turbine to a Russian energy company for use on a Russian Arctic deep-water drilling platform -- a use that is expressly prohibited without a license from the U.S. Department of Commerce -- while submitting false documentation to the U.S. Government stating that the turbine would be used by a U.S. company in and around Atlanta. (See August 2021 Regulatory Update and prior issues cited there for additional information about this conspiracy and its journey through the U.S. legal system.)