This newsletter is a listing of the latest changes in export control regulations through October 31, 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
International Organizations
Missile Technology Control Regime (MTCR) Holds A Plenary Meeting In Sochi, Russia
Oct. 4-8, 2021: The Missile Technology Control Regime (MTCR) held a plenary meeting in Sochi, Russia. At the meeting the members adopted an updated Equipment, Software, and Technology Annex. During the meeting, the member nations emphasized that the MTCR Guidelines are not designed to impede technological development, including space programs, as long as such activities cannot contribute to the proliferation of Weapons of Mass Destruction (WMD) delivery systems. The new Equipment, Software, and Technology Annex is on the Internet at http://mtcr.info/wordpress/wp-content/uploads/2021/10/MTCR-TEM-Technical_Annex_2021-10-08.pdf, and a version showing the changes from the previous Annex is at https://mtcr.info/wordpress/wp-content/uploads/2021/10/MTCR-TEM-Technical_Annex_2021-10-08-Track-Changes.pdf.
Department of Commerce – Bureau of Industry and Security
BIS Makes Minor Edits To Multiple Parts Of The EAR
Oct. 5, 2021 – 86 Fed. Reg. 54807: The Bureau of Industry and Security (BIS) made minor editorial revisions in Parts 732, 734, 736, 738, 740, 744, 748, 750, 770, 772, and 774 of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct inadvertent inconsistencies in the language of these parts. The revisions did not change the substance of the EAR.
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BIS Adds ECCN 2D352 To Control "Software" Designed For Nucleic Acid Assemblers And Synthesizers Controlled By ECCN 2B352.j
October 5, 2021 – 86 Fed. Reg. 54814: BIS amended EAR Parts 742 and 774 to add new Export Control Classification Number (ECCN) 2D352 to reflect a decision made by the Australia Group (AG) in May 2021 to modify the AG biological equipment list. Specifically, new ECCN 2D352 controls "software" designed for nucleic acid assemblers and synthesizers controlled by ECCN 2B352.j that is capable of designing and building functional genetic elements from digital sequence data. This "software," which BIS had previously identified as an emerging technology when controlled under new ECCN 2D352, now requires a license for chemical and biological weapons (CB) reasons and anti-terrorism (AT) reasons to the destinations indicated under CB Column 2 and AT Column 1, respectively, on the Commerce Country Chart (Supplement No. 1 to EAR Part 738). BIS also amended ECCN 2E001 to extend controls to the "technology" for the development of this "software."
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BIS Takes Control Over Deuterium From The Nuclear Regulatory Commission Placing Control In ECCN 1C298
Oct. 6, 2021 – 86 Fed. Reg. 55492: BIS published a final rule completing the transfer from the Nuclear Regulatory Commission (NRC) to the Commerce Department for control of exports of deuterium that is intended for use other than in a nuclear reactor. The rule is effective December 6, 2021. (See NRC paragraph below for the NRC's release of control of exports of these items.) Deuterium intended for use other than in a nuclear reactor will now be classified for Nuclear Proliferation (NP) reasons in ECCN 1C298, which currently controls only certain graphite. For purposes of ECCN 1C298, "deuterium" is defined as "deuterium and any deuterium compound, including heavy water, in which the ratio of deuterium atoms to hydrogen atoms exceeds 1:5000."
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BIS Establishes Controls On Certain Items That Can Be Used For Malicious Cyber Activities
Oct. 21, 2021 – 86 Fed. Reg. 58205: BIS issued an interim final rule establishing controls on the export, reexport, or transfer of certain items that can be used for malicious cyber activities by creating new ECCNs. This interim final rule added ECCNs: 4A005; 4D004; 4E001.a; 4E001.c; and 5A001.j. This interim final rule also overlaps with Category 5 – Part 2 when a cybersecurity item also incorporates particular "information security" functionality specified in ECCNs 5A002.a, 5A004.a, 5A004.b, 5D002.c.1, or 5D002.c.3 Category 5 - Part 2 of the CCL in Supplement No. 1 to part 774 of the EAR, these Category 5—Part 2 ECCNs prevail. Additionally, all items subject to the EAR that are controlled for Surreptitious Listening (SL) reasons under another ECCN not added by this rule will continue to be classified under the SL ECCN. This interim final rule also establishes License Exception (LE), LE Authorized Cybersecurity Exports ("ACE"). The announcement requests public comments on the potential cost to the U.S. industry and the cybersecurity community of compliance with the proposed controls. The new rule, in conjunction with LE ACE, will allow the export of "cybersecurity items" to most destinations, while requiring a license for exports to countries of national security or weapons of mass destruction (WMD) concern or countries subject to a U.S. arms embargo, as well as for circumstances where the exporter knows or has reason to know at the time of the export that the "cybersecurity item" will be used to affect the confidentiality, integrity, or availability of information or information systems without authorization by the owner, operator or administrator of the information system. A major goal of this rule is to ensure that U.S. companies are not fueling authoritarian practices. (Contact us for further information about the specific requirements of this rule if you have concerns about any proposed export, reexport, or in-country transfer.) This rule will be effective January 19, 2022; the deadline for comments is December 6, 2021.
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BIS Proposes The Amendment Of License Exception STA For Certain ECCNs And Corrected Inconsistencies Between License Exceptions STA and TSR
Oct. 22, 2021 – 86 Fed. Reg. 58615: BIS issued a proposed rule amending the EAR to clarify restrictions on the availability of LE STA (Strategic Trade Authorization) for ECCNs 9D001, 9D002, 9D004, 9E001, 9E002, and 9E003 and to further restrict the availability of LE STA for certain technology controlled under ECCNs 2E003.f and 1E001. The proposed rules also corrects inconsistencies between LEs STA and Technology Software Restricted (TSR), including the exclusion of the same technologies from eligibility for License Exception TSR; and to make conforming amendments throughout LE STA (Requirements and Limitations, EAR Sec. 740.20(b)) and in affected ECCNs. The deadline for comments is December 6, 2021.
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BIS Issues An Advance Notice Of Proposed Rulemaking Requesting Feedback From The Public And U.S. Industry About The Potential Uses Of Brain-Computer Interface Technology
Oct. 26, 2021 – 86 Fed. Reg. 59070: BIS issued an Advance Notice of Proposed Rulemaking (ANPRM) requesting feedback from the public and U.S. industry about the potential uses of Brain-Computer Interface (BCI) technology, particularly regarding whether BCI technology could provide the U.S. or any of its adversaries with a military or intelligence advantage and whether it would be possible to subject BCI to effective export controls. BCI technology, which includes, inter alia, neural-controlled interfaces, mind-machine interfaces, direct neural interfaces, and brain-machine interfaces, has until now been regarded as an emerging technology. The deadline for comments is December 10, 2021.
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BIS Posts FAQs About the Foreign Direct Product Rule
Oct. 28, 2021: BIS posted an extensive and very useful series of FAQs about the Foreign Direct Product (FDP) Rule titled "Foreign-Produced Direct Product (FDP) Rule as it Relates to the Entity List Sec. 736.2(b)(3)(vi) and footnote 1 to Supplement No. 4 to Part 744" on its website at https://www.bis.doc.gov/index.php/documents/about-bis/2681-2020-fpdp2-faq-120820-ea/file. The FAQs in this 9-page compendium are shown under the following topics:
- General Topics
- Types of Items
- Prior Exports
- Plant/Major Component
- De Minimis
- Supply Chain
- Prior Licenses
- Licensing Policy
- Item-Specific Questions
- Savings Clauses
Footnote 1 to Supplement No. 4 to Part 744 identifies entities on the Entity List that exporters may not reexport, export from abroad, or transfer (in-country) without a license or license exception any foreign-produced item specified when there is "knowledge" that the foreign-produced item will be incorporated into, or will be used in the "production" or "development" of any "part," "component," or "equipment" produced, purchased, or ordered by any entity with a footnote 1 designation or any entity with a footnote 1 designation that is a party to any transaction involving the foreign-produced item, e.g., as a "purchaser," "intermediate consignee," "ultimate consignee," or "end-user."
Footnote 1 currently lists Huawei entities from around the world.
Nuclear Regulatory Commission
The Nuclear Regulatory Commission Completes Transfer Of Deuterium To The EAR When Its Intended Use Is Other Than In A Nuclear Reactor
Oct. 6, 2021 – 86 Fed. Reg. 55476: The U.S. Nuclear Regulatory Commission (NRC) issued a final regulation removing the NRC's licensing authority for exports of deuterium for non-nuclear end-use. (See item in BIS section above for regulatory action by BIS placing these items on the Commerce Control List (CCL, EAR Part 774, Supp. No. 1).) The change of jurisdiction over these exports recognizes that exports of deuterium for commercial use have become far more common than exports of deuterium for nuclear end uses. Accordingly, responsibility for the licensing of such exports is being transferred to the Department of Commerce's Bureau of Industry and Security and the Export Administration Regulations ("EAR"). However, exports of deuterium for nuclear end-use will remain under the NRC's export licensing jurisdiction.
Department of State
DDTC Name And Address Changes Posted To Website
Oct. 6, 15, 19, 20, 22, 25, 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 Airbus Helicopters' European Maintenance Repair and Overhaul Logistics Hub;
- Change in Name for Babcock UK-owned entities due to corporate rebranding as follows:
From: To:
Bond Air Services Limited Babcock Mission Critical Services Onshore Limited
International Aviation Leasing Limited Babcock Mission Critical Services Leasing Limited
Vastone Limited Babcock Mission Critical Services Leasing Limited;
- Change in Name from HENSOLDT Optronics (Pty.) Ltd. to HENSOLDT South Africa (Pty.) Ltd. due to consolidation of subsidiaries GEW Technologies (Pty.) Ltd. and HENSOLDT Optronics (Pty.) Ltd.;
- Change in Name from Hawker Pacific Pty. Ltd. to Jet Aviation Australia Pty. Ltd. due to acquisition of Hawker Pacific by Jet Aviation Australia;
- Change in Name from Selex ES Saudi Arabia Ltd. to Leonardo Saudi Ltd. due to corporate rebranding;
- Change in Name from Harris C4i Pty. Ltd. to C4i Pty. Ltd. due to acquisition by Frequentis Group as part of Frequentis acquisition of L3 Harris ATM voice communications and arrival management product business;
- Change in Address for Accenture S.L.; and
- Change in Name from ST Engineering Land Systems Ltd., KIS Division, a legal entity of Singapore Technologies Engineering Ltd. to ST Engineering Land MRO & Services Pte. Ltd. due to corporate reorganization.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
Department of the Treasury
OFAC Published Guidance On "Sanctions Compliance Guidance for the Virtual Currency Industry"
October 15, 2021: The Treasury Department, Office of Foreign Assets Control (OFAC) published "Sanctions Compliance Guidance for the Virtual Currency Industry," which provides an industry-specific overview of OFAC sanctions requirements and procedures, including licensing, enforcement, and sanctions compliance best practices. This 28-page brochure is on the Treasury Department website at https://home.treasury.gov/system/files/126/virtual_currency_guidance_brochure.pdf. At the same time, OFAC also published Frequently Asked Question (FAQ) 559, defining for OFAC sanctions purposes the terms "digital currency," "digital currency wallet," "digital currency address," and "virtual currency" (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/559) and FAQ 646 on how to block digital currency (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/646).
| 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 State
October 1, 2021 – 86 Fed. Reg. 54502: The Bureau of Political-Military Affairs (PM) rescinded the statutory debarment imposed on Dennis Haag on April 25, 2018 (83 Fed. Reg. 18112). The debarment was imposed based on Haag's plea of guilty of violating Sec. 38 of the Arms Export Control Act (AECA, 22 USC 2778 et seq.); the rescission was based on a review made in response to a request from Haag in accordance with International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 127.7(b). However, pursuant to ITAR Sec. 127.11, this notice does not reinstate his export privileges.
Fines and Penalties
October 5, 2021: Aydan Sin a/k/a/ Hon Chak Gordon Sin a/k/a Andy a/k/a Bullion of British Columbia, Canada, was sentenced in Federal District Court in Buffalo, NY, to serve 46 months in prison based on his May 17, 2017, a plea of guilty of violating the AECA by conspiring to export USML-listed firearms, suppressors, magazines, and ammunitions to Colombia and Dubai without the required authorization. Sin and co-conspirators Guy Deland and Charan Singh communicated with an undercover law enforcement agent (UCA) and asked him whether he could export firearms from the U.S. to the United Arab Emirates (UAE). In the course of their communications, the UCA advised them that a license from the State Department was required in order lawfully to export the firearms. In response, the conspirators acknowledged the illegality of the exports, provided the UCA with an encrypted Blackberry for the purpose of covert communications, and wired approximately $70,000 as a 50% down payment for the export of the goods. A similar process occurred subsequently with a requested export of firearms, magazines, suppressors, and ammunition to Colombia (via Panama). The invoices for both shipments stated that exporting these products without an export license was prohibited by law. Charges remain pending against Deland and Singh.
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Oct. 12, 2021: VTA Telecom Corporation (VTA) of Milpitas, CA, the U.S. subsidiary of a Vietnam state-owned telecommunications company in Hanoi, Vietnam, agreed to pay $1,869,372 (of which $200,000 will be suspended for two years and thereafter waived if VTA observes the terms of the agreement, including spending $25,000 on additional ongoing compliance efforts within 12 months of the Order and retaining a Director of Trade Compliance to oversee VTA's export activities for two years from the date of the Order, or if VTA has dissolved or ceased its business operations) to settle charges by BIS that it provided false end-use and end-user information to officials of BIS and other U.S. government agencies in connection with export license applications and other export activities to conceal the defense purposes of some of its exports. The alleged violations that were covered by the settlement agreement were:
- Charge 1: Evasion (EAR Sec. 764.2(e));
- Charges 2-4: False Statements to BIS and/or another U.S. Government Agency and on Export Control Documentation (EAR Sec. 764.2(g));
- Charge 5: Acting with Knowledge of a Violation: Unlicensed Export (EAR Sec. 764.2(e)); and
- Charge 6: Engaging in Prohibited Conduct: Unlicensed Export (EAR Sec. 764.2(a)).
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Oct. 21, 2021: Peter Sotis, of Delray Beach, FL, and Emilie Voissem, of Sunrise, FL, were convicted by a jury in federal court in Miami, FL, of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707), attempted violation of the IEEPA, and smuggling. Sotis and Voissem willfully attempted to export rebreather diving equipment to Libya after they received an instruction from a Department of Commerce special agent that such items were detained and not to be exported while a license determination was pending. (Rebreathers are specialized equipment that enable a diver to operate undetected for long periods of time underwater and therefore have both civilian and military applications.) Despite this instruction, Sotis and Voissem lied to and misled a shipping company about what the agent had told them and about whether the rebreathers had a military use. Sotis and Voissem will be sentenced on Jan. 6, 2022.
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Oct. 26, 2021: Obaidulllah Syed, of Northbrook, IL, the owner of Pakistan-based Business System International Pvt. Ltd. (BSIP) and Chicago-based BSI USA (BSIUS), both of which provide high-performance computing platforms, servers, and software application solutions, pleaded guilty to conspiracy to export goods from the U.S. without the required license from the Commerce Department and to submit false export information. In the plea agreement, Syed admitted that he conspired with BSIP employees to violate the IEEPA by exporting computer equipment from the U.S. to the Pakistan Atomic Energy Commission (PAEC) – a Pakistani government agency whose responsibilities include designing and testing explosives and nuclear weapons parts – without the required authorization from the U.S. Department of Commerce. Syed also admitted that he and other conspirators falsely represented to U.S.-based computer manufacturers that the illegal exports were intended for Pakistan-based universities or Syed's businesses while knowing that the true end-user of each shipment was either the PAEC or a research institute that trained PAEC engineers and scientists, thereby causing the U.S.-based computer manufacturers to submit shipping documents containing false information to the U.S. Government. BSIP was charged as a corporate defendant in the conspiracy. It has not responded to the charges.
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