OCTOBER 2019 EXPORT CONTROL REGULATION UPDATES

October 2019

This newsletter is a listing of the latest changes in export control regulations through October 31, 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

European Union 

EU Amends Council Common Position

Sep. 16, 2019: The Council of the European Union (EU) adopted a decision amending the Council Common Position of 8 Dec. 2008 on the control of arms exports to take into account new developments including the entry into force on 24 Dec. 2014 of the Arms Trade Treaty (ATT), which regulates international trade in conventional arms. All EU member states are States Parties to the ATT. The Council Decision amending Common Position 2008/944/CFSP defining common rules governing control of exports of military technology and equipment is on the Council website at https://www.consilium.europa.eu/media/40658/st10707-en19.pdf; a User’s Guide to the Council Common Position is at https://www.consilium.europa.eu/media/40659/st12189-en19.pdf.

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EU Updates The EU Dual-Use Export Control List

Oct. 17, 2019: The European Commission adopted its annual Delegated Regulation updating the EU dual-use export control list to bring it in line with decisions taken by the international non-proliferation regimes and export control arrangements in 2018. The 2019 Commission Delegated Regulation is at https://ec.europa.eu/transparency/regdoc/?fuseaction=list&coteId=3&year=2019&number=7313&version=ALL&language=en; a Comprehensive Change Note Summary 2019 providing a detailed overview of all the changes compared to the 2018 EU dual-use list is at https://trade.ec.europa.eu/doclib/docs/2019/october/tradoc_158392.pdf.

Missile Technology Control Regime (MTCR)

MTCR Technical Experts Meeting Revises The MTCR

Oct. 18, 2019: The MTCR Technical Experts Meeting conducted a regular revision of the MTCR Equipment, Software, and Technology Annex during the 32^nd MTCR plenary week, resulting in changes to the description of thrust vector control subsystems and to the accuracy parameters used for missile guidance and navigation systems. A new edition of the MTCR Annex, updated Oct. 11, 2019 and including tracked changes, is on the MTCR website at http://mtcr.info/wordpress/wp-content/uploads/2019/10/MTCR-TEM-Technical_Annex_2019-10-11-1.pdf.

U.S. Courts

The U.S. Court of Appeals for the D.C. Circuit Issues Decision In U.S. v. Burden

Oct. 11, 2019: The U.S. Court of Appeals for the D.C. Circuit held that a defendant can be convicted of willfully violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) if he or she had knowledge that the action was unlawful; conviction does not require that the defendant had knowledge of the specific provisions of the law that he or she violated. The case, U.S. v. Burden (2019 WL 3917651), involved a conviction of violating the AECA by exporting gun parts to Thailand without a license.

The President

President Issued Executive Order 13894 Imposing Sanctions On Turkey

Oct. 17, 2019 – 84 Fed. Reg. 55851: President Trump issued Executive Order 13894, Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria, imposing broad sanctions against the Turkish Ministry of National Defense, the Turkish Ministry of Energy and Natural Resources, and 3 Turkish Ministers in connection with Turkey’s military offensive in Syria. The sanctions also apply to any entity in which these parties (or other parties subject to sanctions) own a 50% or greater stake. While the Executive order is still available for the President to reimpose sanctions, the Treasury Department has removed the sanctions mandated by the EO due to the de-escalation of the military offensive by Turkey in Syria. (See Treasury Department section below for General Licenses (GLs) related to these sanctions and subsequent action removing the sanctions.)

Department of Commerce – Bureau of Industry and Security

BIS Adds 28 Chinese Entities To The Entity List

Oct. 9, 2019 – 84 Fed. Reg. 54002: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 28 entities in China 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 will apply to exports, reexports, or in-country transfers to these entities of all items subject to the EAR, and no available license exceptions will apply. A license review policy of case-by-case review will apply for Export Control Classification Numbers (ECCNs) 1A004.c, 1A004.d, 1A995, 1A999.a, 1D003, 2A983, 2D983, and 2E983 and items designated as EAR99 that are described in the Note to ECCN 1A995. A license review policy of presumption of denial will apply to all other items subject to the EAR.

List of the 28 newly added Chinese entities:

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BIS Increased Restrictions On Exports/Reexports Of Items To Cuba

Oct. 21, 2019 – 84 Fed. Reg. 56117: BIS increased restrictions on exports and reexports of items to Cuba by amending Parts 734, 740, and 746 of the EAR. The changes include establishing a general licensing policy of denial for leases of aircraft to Cuban state-owned airlines; narrowing the applicability of License Exceptions Aircraft, Vessels and Spacecraft (AVS) and Support for the Cuban People (SCP); establishing a general 10% de minimis level for Cuba; removing an authorization for promotional items that generally benefits the Cuban government; and clarifying the scope of telecommunications items that the Cuban government may receive without a license.

A compendium of 64 Cuba Frequently Asked Questions (FAQs), updated Oct. 21, 2019, is on the BIS website at https://www.bis.doc.gov/index.php/documents/pdfs/2484-bis-cuba-consolidated-faqs-1/file.

Department of State

DDTC Name and Address Changes Posted To Website

Oct. 4, 11, 18, and 31, 2019: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at

• Change in name from Silver Atena Electronic Systems Engineering GmbH to Silver Atena GmbH due to corporate restructure;
• Change in name from RUAG Switzerland Ltd. Product Unit Slip Rings to RUAG Slip Rings Ltd. due to corporate restructure;
• Change in name from Bellinger Instruments Pty Ltd to Bellinger Systems Pty Ltd due to corporate restructure;
• Change in name from Flight Refueling Limited to Cobham Mission Systems Wimborne Limited due to corporate restructure;
• Change in name and address from GKN America Corp to GKN Aerospace US Holdings due to corporate restructure as a result of GKN’s acquisition by Melrose Industries;
• Change in name from FERCHAU Engineering GmbH to FERCHAU GmbH due to corporate restructure;
• Change in address for Ultra Electronics Limited;
• Change in name from Paul Fabrications Ltd to Dynamic Aerospace Fabrications Ltd. due to acquisition of Paul Fabrications by The Dynamic Group;
• Change in names from Park Electrochemial Corp. (PEC) and Park Aerospace Technologies Corp. (PATC) to Park Aerospace Corp. (PAC) due to corporate rebranding and merger of subsidiary into parent company; and
• Change in name from Saab Microwave Canada Ltd. to Saab Canada, Inc. due to corporate restructure.

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 Notifies Congress Of Licensed Permanent Exports

Oct. 7, 2019: DDTC published its Report to Congress documenting the defense articles and defense services licensed for permanent export under section 38 of the AECA to each foreign country government and international organization during FY 2018, with data on dollar values and quantities of items licensed and items actually shipped, listed by U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category and by country. Various other units (e.g., for authorizations applicable to multiple countries, or licenses executed over multi-year periods) are also used. A link to the report is on the DDTC home page, https://www.pmddtc.state.gov/ddtc_public, under Announcements, 2018 Section 655 Report.

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DDTC Requests Public Comments On DECCS Voluntary Disclosure Form DS-7787

Oct. 28, 2019 – 84 Fed. Reg. 57801: DDTC requested public comments on a proposed new electronic Form DS-7787, Disclosure of Violations of the AECA, to replace the current practice of reporting violations in writing via hard copy documentation. Deadline for comments is Nov. 27, 2019.

Department of the Treasury

OFAC Issues General Licenses Related To Turkey Sanctions

Oct. 14, 2019: The Office of Foreign Assets Control (OFAC) issued three General Licenses under the Executive Order sanctioning Turkey’s activities regarding the situation in Syria (EO 138894 -- see The President section above). GL1 authorizes official business of the United States, including by its employees, grantees, and contractors; GL2 creates a 30-day wind-down period (to Nov. 13, 2019) for existing activities with the Turkish Ministry of National Defense and the Ministry of Energy and Natural Resources; and GL3 authorizes official business of the United Nations and related organizations with the Turkish Ministry of National Defense and the Ministry of Energy and Natural Resources. While the Executive order is still available for the President to reimpose sanctions, the Treasury Department has removed the sanctions mandated by the EO due to the de-escalation of the military offensive by Turkey in Syria. (See below for subsequent action removing these sanctions on Oct. 23, 2019.)

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OFAC Amends Venezuela General License GL 13D

Oct. 17, 2019: OFAC issued amended Venezuela-related GL13D authorizing all transactions and activities prohibited by EO 13850, as amended by EO 13857 of January 25, 2019, or EO 13884, where the only Government of Venezuela entities involved are Nynas AB or any of its subsidiaries, through 12:01 a.m. EDT, April 14, 2020.

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OFAC Amends Venezuela General License GL 8D

Oct. 21, 2019: OFAC issued Venezuela-related GL8D authorizing transactions involving Petróleos de Venezuela, S.A. (PdVSA) necessary for maintenance of operations for Chevron Corporation, Halliburton, Schlumberger Limited, Baker Hughes, a GE Company, and Weatherford International, Public Limited Company. This license authorizes transactions that were in effect prior to July 26, 2019, through 12:01 a.m. EST, January 22, 2020. It replaces and supersedes GL8C.

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OFAC Removes Turkey Sanctions

Oct. 23, 2019: OFAC removed the sanctions imposed on Oct. 14, 2019 on the Turkish Ministry of National Defense, the Turkish Ministry of Energy and Natural Resources, and the Minister of National Defense, the Minister of Energy and Natural Resources, and the Minister of the Interior. These sanctions were lifted due to Turkey’s pause in military operations in Syria as agreed to with the United States on October 17, 2019 (the October Ceasefire). As a result, all property and interests in property which had been blocked solely as a result of these designations are unblocked and all otherwise lawful transactions involving U.S. persons and these entities and individuals are no longer prohibited.

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OFAC Issues Iran General License K

Oct. 24, 2019: OFAC issued Iran-related General License K authorizing certain transactions ordinarily incident and necessary to the maintenance or wind down of transactions involving Cosco Shipping Tanker (Dalian) Co., Ltd., or any entity owned, directly or indirectly, 50 percent or more by Cosco Shipping Tanker (Dalian) Co., Ltd., through 12:01 a.m. EST Dec. 20, 2019.

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

Oct. 7, 2019 – 84 Fed. Reg.53402: BIS denied the export privileges of Benjamin James Cance of Plainwell, MI, for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting gun components designated as defense articles without the required licenses from the State Department.    In the criminal case, Cance was sentenced to 48 months in prison, two years of supervised release, a fine of $3,000, and an assessment of $200.

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Oct. 7, 2019 – 84 Fed. Reg. 53403: BIS denied the export privileges of Kenneth S. Chait of the Residential Reentry Office in Miami, FL, for 5 years based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by knowingly and willfully agreeing to attempt to export ceramic metal triggered spark gaps controlled on the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) without the required Commerce Department export license. In the criminal case, Chait was sentenced to 12 months and 1 day in prison, supervised release for 2 years, and a $100 assessment.

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Oct. 7, 2019 – 84 Fed. Reg. 53404: BIS denied the export privileges of Arash Sepehri, a/k/a William Anderson, a/k/a Aresh Sepheri Eshtairan of Tehran, Iran, for 7 years based on his conviction of violating 18 U.S.C. Sec. 371 by knowingly and willfully conspiring to export U.S.-origin items, including high-resolution sonar equipment, data input boards, acoustic transducers and rugged laptops, to Iran without the required export licenses.   In the criminal case, Sepehri was sentenced to 25 months in prison with credit for time served and a $100 special assessment.

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Oct. 7, 2019 – 84 Fed. Reg.53405: BIS denied the export privileges of Rasheed Al Jijakli of FCA Lompoc, CA, for 10 years based on his conviction of violating IEEPA by conspiring to export tactical gear including U.S.-origin laser boresighters and day- and night-vision rifle scopes, to Syria, without the required license.   In the criminal case, Al Jijakli was sentenced to 46 months in prison, a fine of $5,000, an assessment of $100, and 2 years of supervised release.

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Oct. 7, 2019 – 84 Fed. Reg. 53406: BIS denied the export privileges of Eldar Rezvanov of Moshannon Valley CI, Philipsburg, PA, for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting, causing the export of, and attempting to export items designated as defense articles on the USML from the United States to Russia without the required U.S. Department of State licenses. The items included assembled firearms, firearm stocks, fully assembled lower receivers, and many other firearm parts. In the criminal case, Rezvanov was sentenced to 46 months in prison, 3 years of supervised release, and an assessment of $100.

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Oct. 7, 2019 – 84 Fed. Reg. 53407: BIS denied the export privileges of Barbara Jo Luque of Tucson, AZ, for 7 years based on her conviction of violating the AECA by attempting to willfully and knowingly export and cause to be exported to Mexico items controlled under the USML, namely 5,000 rounds of FMJ Russian 7.62x39 mm ammunition and 125 AK-47 KCI thirty-round magazines.   In the criminal case, Luque was sentenced to 6 months in prison, with credit for time served, two years of supervised release, and a special assessment of $100.

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Oct. 30, 2019 – 84 Fed. Reg. 58127: BIS denied the export privileges of Alexis Vlachos of Montreal, Quebec, Canada, for 7 years based on his conviction of violating the AECA by knowingly and willfully exporting and causing to be exported to Canada firearms controlled on the USML without the required licenses.   In the criminal case Vlachos was sentenced to 51 months in prison and an assessment of $200.

Fines and Penalties

Sep. 19, 2019: L3Harris Technologies, Inc., agreed to take specified remedial compliance measures and pay a civil penalty of $13 million (of which $6.5 million will be suspended if it is spent on the specified compliance measures) to settle charges by DDTC that it had violated the AECA and the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) in connection with unauthorized exports of defense articles, including technical data in the form of software; the provision of a false Part 130 statement on a Technical Assistance Agreement; the violation of export license provisos; the violation of terms or conditions of multiple licenses and agreements; and various violations caused by systemic administrative issues. The Consent Agreement details specific compliance measures and requires the appointment of a Designated Official to oversee their implementation.

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Oct. 1, 2019: The General Electric Company of Boston, Mass., on behalf of three GE subsidiaries - Getsco Technical Services Inc., Bentley Nevada, and GE Betz - agreed to pay a civil penalty of $2,718,581 to settle charges by OFAC of 289 alleged violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) involving acceptance of payments from the Cobalt Refinery Company, a Cuban Specially Designated National, for goods and services provided to a Canadian customer of GE. OFAC found that GE had provided goods and services to a customer that provided a direct and indirect benefit to a facility owned and operated by Cobalt.

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Oct. 9, 2019: Jaguar Imports, LLC of Orlando, FL agreed to pay a civil penalty of $98,000 (of which $65,000 will be suspended for 5 years and then waived if Jaguar has committed no further violations) to settle charges by BIS that it violated the EAR on 12 occasions by exporting stun guns, handcuffs, police batons, and pepper spray – all of which were controlled under the EAR for Crime Control reasons -- to Colombia, Mexico, and Panama without the required licenses from BIS.

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Oct. 16, 2019: Tao Li, a national and resident of the People’s Republic of China, was sentenced to 40 months in prison followed by 3 years of supervised release based on his plea of guilty of violating the IEEPA by conspiring to export to China without the required license radiation-hardened power amplifiers and supervisory circuits whose technological capabilities can make a significant contribution to a foreign country’s military and space programs. Li used multiple aliases to contact potential U.S. suppliers of these products and agreed to pay a “risk fee” to illegally export them to China. Li was arrested in September 2018 at Los Angeles International Airport as he attempted to travel from China to Arizona to meet with an undercover agent.

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Oct. 24, 2019: Behrooz Behroozian, an Iranian-born U.S. citizen of Columbus, OH, was sentenced in federal court in Columbus to serve 20 months in prison based on his conviction of violating IEEPA by supplying manifolds, valves, and connectors used for industrial pipelines in the gas and oil refinement industry to Iran without the required export authorizations. Behroozian made the exports over a period of 10 years through an intermediary company, Sumar Industrial Equipment, in the United Arab Emirates.