This newsletter is provided as a service to exporters and is not intended to replace the ITAR or EAR as a reference source. If you have questions concerning the correct interpretation of the regulations please call us at (703) 847-5801 or email us at firstname.lastname@example.org.
This newsletter is a listing of the latest changes in export control regulations through July 31, 2020. 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 email@example.com 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.
UK Departments Published Guidance On Licenses, Certificates And Special Rules For Taking Goods Out Of The UK
July 10, 2020: Several United Kingdom government departments, including the Department for International Trade and the Export Control Joint Unit, published Guidance on Licenses, certificates, and special rules for taking goods out of the UK from 1 January 2021 at https://www.gov.uk/guidance/export-licences-and-certificates-from-1-january-2021?utm_source=ff1300f0-6364-48d0-907f- bd4316d7851b&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate.
Guidance specific to controlled goods is at https://www.gov.uk/guidance/exporting-controlled-goods-after-eu-exit.
The UK’s Export Control Joint Unit Announced That The U.K. Will Extend An Arms Embargo To Hong Kong
July 22, 2020: The Export Control Joint Unit announced that the U.K. will extend to Hong Kong the arms embargo that has applied to mainland China since 1989. The announcement is at https://www.gov.uk/government/publications/notice-to-exporters-202012-the-extension-of-the-china-arms-embargo-to-hong-kong/notice-to-exporters-202012-the-extension-of-the-china-arms-embargo-to- hong-kong.
Canada Announced Export Control List Items To Hong Kong Will Be Treated The Same As China
July 7, 2020: The Canadian Minister of Foreign Affairs announced that effective July 3, 2020, Canada will treat exports to Hong Kong of items listed on the Export Control List in the same way as those destined for China, and, will not permit the export of sensitive military items to Hong Kong. This announcement is at https://www.international.gc.ca/trade-commerce/controls-controles/notices-avis/1003.aspx?lang=eng.
The Hong Kong Autonomy Act Passed By U.S. Congress And Signed By The President
July 14, 2020: The U.S. Congress passed and President Trump signed into law the Hong Kong Autonomy Act (HKAA, H.R. 7440, Public Law 116-149), which retaliates against China’s passage of the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Administrative Region (the “National Security Law”), which effectively ended the “One Country, Two Systems” arrangement which had guaranteed certain civil liberties to Hong Kong. The HKAA requires the imposition of specified sanctions on (1) foreign persons who contribute to China’s failure to observe its international obligations regarding Hong Kong, and (2) foreign financial institutions that knowingly conduct “significant” transactions with such persons. See items below about actions by the President and the Commerce Department on this topic.
The President Issued Executive Order (EO) 18936, Directing U.S. Agencies To Eliminate Or Suspend Rules Or Practices That Provide Different Treatment For Hong Kong Than For China
July 14, 2020 (85 Fed. Reg. 43413, July 17, 2020): President Trump issued Executive Order (EO) 18936, which directs U.S. agencies to eliminate or suspend rules or practices that provide different treatment for Hong Kong than for China, including revoking license exceptions that provide different treatment for exports to Hong Kong than for exports to China. Other preferential treatments to be eliminated, including immigration, export controls, national security, foreign investment and customs; license exceptions that differ between Hong Kong and China; license suspensions applying to exports of defense articles to Hong Kong persons physically located outside of Hong Kong and China; and others. EO 18936 also calls for the imposition of sanctions including blocking interests in property of persons who have been involved in developing or implementing the new Chinese National Security Law or have otherwise undermined democratic processes in Hong Kong, and persons who have aided persons in the first group.
The President Changes Export Treatment Of Certain “Category I” Unmanned Aerial Systems
July 24, 2020: The White House Press Secretary announced that President Trump will invoke national discretion to change the treatment of certain Unmanned Aerial Systems (UAS) which cannot travel faster than 800 km per hour being treated as a Missile Technology Control Regime (MTCR) Category I item to MTCR Category II, which will overcome the MTCR’s strong presumption of denial (for Category I items). The change will improve the capabilities of our partners and expand the UAS market to U.S. industry. The announcement stated that the U.S. is taking this action unilaterally because the current standards are outdated, but the MTCR has failed to act after more than two years of discussion. The announcement is at https://www.whitehouse.gov/briefings-statements/statement-press-secretary-unmanned-aerial-systems- exports/.
U.S. Department of Commerce – Bureau of Industry and Security
The Departments Of Commerce, State, Treasury, and Homeland Security Issued A Business Advisory For Businesses With Supply Chain Exposure To Entities Engaged In Forced Labor And Other Human Rights Abuses In The Xinjiang Uyghur Autonomous Region (XUAR) Of China
July 1, 2020: The Departments of Commerce, State Treasury, and Homeland Security issued a business advisory to highlight the reputational, economic, and legal risks and considerations for businesses with supply chain exposure to entities engaged in forced labor and other human rights abuses in the Xinjiang Uyghur Autonomous Region (XUAR) of China. The guide does not have the force of law but provides extensive concrete information including, names of enterprises involved, locations, indicators of abuse, and descriptions of industries. Read it at https://www.bis.doc.gov/index.php/documents/pdfs/2569-xinjiang- supply-chain-business-advisory-final-for-508/file.
BIS Issued 107 FAQs Regarding The Transfer Of Former USML Category I, II and III Items To The EAR
July 7, 2020: BIS published guidance in the form of 107 FAQs and several definitions relating to the Jan. 23, 2020, rules that transferred export controls on certain firearms, armament, and ammunition from Categories I, II, and III of the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) (85 Fed. Reg. 3819 and 85 Fed. Reg. 4136, respectively – see detailsinJanuary2020RegulatoryUpdate). Topic areas covered include specific Export Control Classification Numbers (ECCNs), specific license exceptions, brokering controls, 3D printing of firearms, licensing process, conventional arms reporting, export clearance requirements, entry clearance requirements for temporary imports, recordkeeping, and enforcement, as well as definitions of 14 key terms. This 62-page document is on the BIS website 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/file.
BIS Seeks Comments on Items Controlled For Crime Control And Detection
July 17, 2020 – 85 Fed. Reg. 43532: BIS requested public comments on the list of items controlled on the CCL for crime control and detection (CC) reasons. The comments will inform BIS’ decisions on making additions and removals to this list and related licensing requirements. Issues of particular interest are noted in the announcement. The deadline for comments is Sep. 15, 2020.
BIS Added 11 Entities In China To The Entity List
July 22, 2020 – 85 Fed. Reg. 44159: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 11 entities in China to the Entity List (EAR Part 744, Supp. No. 4) because they had been implicated in human rights violations and abuses targeting Uyghurs, Kazakhs, and other members
of Muslim minority groups from the XUAR. For these entities, a license requirement will now apply for all items subject to the EAR. In view of the current pandemic, there will be a license review policy of case-by-case review for specific ECCNs and for certain EAR99 items that protect against chemical or biological agents that are consumer goods, packaged for retail sale or personal use, or medical products, and for items subject to the EAR that are necessary to detect, identify and treat infectious disease. A license review policy of presumption of denial will apply to all other items subject to the EAR. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the entities being added to the Entity List. The 11 entities are:
- Changji Esquel Textile Co. Ltd.;
- Hefei Bitland Information Technology Co. Ltd.;
- Hefei Meiling Co. Ltd.;
- Hetian Haolin Hair Accessories Co. Ltd.;
- Hetian Taida Apparel Co., Ltd.;
- KTK Group;
- Nanjing Synergy Textiles Co. Ltd.;
- Nanchang O-Film Tech;
- Tanyuan Technology Co. Ltd.;
- Xinjiang Silk Road BGI; and
- Beijing Liuhe BGI.
Also, in view of the current pandemic, BIS modified the license review policy for the 37 entities added to the Entity List on June 5, 2020, (85 Fed. Reg. 34503 – see June 2020 Regulatory Update) to provide case-by-case license review for items subject to the EAR that are necessary to detect, identify and treat infectious disease. This modification will be accomplished by a new Hong Kong-specific paragraph in EAR Sec. 740.2.
BIS Amended The EAR To Suspend The Availability Of All License Exceptions For Items Subject To The EAR That Provides Differential Treatment For Hong Kong Than For China
July 31, 2020 – 85 Fed. Reg. 45998: In response to the security measures newly imposed by China on Hong Kong, BIS amended the EAR to suspend the availability of all License Exceptions for items subject to the EAR that provide differential treatment for Hong Kong than from China. The changes, including a limited savings clause, appear in amended EAR Sec. 740.2(a)(12) and (13) and new Sec. 740.2(a)(23).
Department of Commerce – Census Bureau
Census Reported The 2020 Schedule B, Harmonized Tariff Schedule (HTS), And HTS Codes Are Updated For Codes Not Valid For AES
July 1, 2020: The Census Bureau reported that the Schedule B, Harmonized Tariff Schedule (HTS), and HTS Codes that are not valid for AES tables had been updated to accept the changes to the July 1, 2020 codes. The 2020 Schedule B and HTS tables are available for downloading at https://www.census.gov/foreign-trade/aes/documentlibrary/index.html#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.
Census Posted Guidance On Exports Between The U.S. and Puerto Rico
July 21, 2020: The Census Bureau posted “Exports Between the United States and Puerto Rico: When to File Electronic Export Information,” the second installment of its series on U.S.-Puerto Rico shipping regulations, on its website at https://www.census.gov/newsroom/blogs/global-reach/2020/07/exports_between_the.html. (See information on the first installment in June 2020 Regulatory Update.)
Department of State
DDTC Name and Address Changes Posted To Website
July 14, 15, 27, and 28, 2020: 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:
- Change in name from FABRICA DE MUNICIONES DE GRANADA, S.R.L. (FMG) to MSM Group S.R.O. of Slovakia due to the acquisition of FMG by MSM Group;
- Change in the address for Rossell Techsys (Division of Rossell India Limited);
- Change in the address for B.E. Meyers & Co. Inc.; and
- Changes in the name for Elbit Systems entities due to corporate reorganization::
- Change in name from Elbit Systems Land and C4I Ltd. to Elbit Systems C4I and Cyber Ltd.; and
- Change in name of Elbit Systems’ “Land Division” business from Elbit Systems Land and C4I Ltd. to Elbit Systems Land Ltd. and change in address for this entity.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
DDTC Changed Its Policy On Exports Of Firearms Sound Suppressors
July 10, 2020: DDTC announced that effective immediately, it has changed its policy on exports of firearms sound suppressors and will now handle them in a manner consistent with other USML-controlled technologies. Details are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public.
DDTC Posted Three FAQs Regarding Hong Kong
July 15, 2020: DDTC posted an announcement and three FAQs about EO 13936. The FAQs clarified the effect of EO 13936 on the issuance of licenses for exports of defense services to certain Hong Kong persons; the validity of previously approved authorizations naming Hong Kong as a transfer territory; and the breadth of applicability of the presumption of denial of license requests. The announcement and FAQs are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events.
DDTC Announced The Addition Of A New “Other” Category To Block 4 Of The DS-6004 Reexport/Retransfer Application
July 16, 2020: DDTC announced the addition of a new “Other” category to Block 4 of the DS-6004 Reexport/Retransfer Application – ITAR Part 123.9 and specified the circumstances for which it should be selected when submitting General Correspondence (GC) requests. This announcement is on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events.
The “Other” category to Block 4 of the DS-6004 Reexport/Retransfer Application is used for submitting General Correspondence (GC) requests related to Mergers and Acquisitions (for license transfers), U.S. and Foreign Entity Name/Address Changes or Registration Code Changes, and U.S. Persons providing defense services abroad.
DDTC Amends Prohibited Destination Central African Republic Adding Additional Exemptions From The Embargo
July 22, 2020 – 85 Fed. Reg. 44188: DDTC amended the International Traffic in Arms (ITAR, 22 CFR Parts 120-130) Sec. 126.1(u) to implement reductions in the arms embargo on the Central African Republic (CAR). The reduction was made in accordance with a resolution of the United Nations Security Council (UNSC) that provided additional exemptions from the embargo in support of the CAR government’s work to implement a peace agreement with 14 armed groups in the country and to extend state control over the entire territory of the country.
The Department Of State, Bureau Of Energy Resources Published Updated Guidance On Its Implementation Of Section 232 Of The Countering America’s Adversaries Through Sanctions Act Of 2017
July 23, 2020 – 85 Fed. Reg. 44561: The Department of State, Bureau of Energy Resources published updated guidance on its implementation of Section 232 of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA, 22 USC 9201 et seq.), notably including information on the expansion of its focus, which will no longer exclude projects for which contracts or investments were signed before August 2, 2017, and will now include Russian energy export pipelines such as Nord Stream 2 and the second line of TurkStream. This guidance includes 8 FAQs. It is also on the State Department website at https://www.state.gov/caatsa-crieea-section-232-public-guidance/ and https://www.state.gov/wp-content/uploads/2020/07/Updated-CAATSA-Section-232-Guidance-July-15-2020.pdf.
July 23, 2020: DDTC posted new FAQs to aid registrants in the submission of registration-related notifications. The new FAQs on Mergers, Acquisitions, and Divestitures can be accessed from https://www.pmddtc.state.gov/ddtc_public. Also, DDTC announced the establishment of a new, all-electronic mechanism for submitting 60-day advance notifications of foreign acquisitions of ITAR registrants pursuant to ITAR Sec. 122.4(b). The new instructions are on the DDTC website at https://www.pmddtc.state.gov/ddtc_public.
DDTC Announced Updates To The Extension Of Temporary Suspensions, Modifications And Exceptions To The ITAR Due To COVID-19
July 29, 2020 – 85 Fed. Reg. 45513: DDTC announced that it had made the following decisions regarding the possible extension of the four temporary suspensions, modifications, and exceptions to the ITAR it had announced on May 1, 2020, in response to the SARS-COV2 public health emergency May 1, 2020 (85 Fed. Reg. 25287 – see description in May 2020 Regulatory Update):
- The two-month extension of annual registration renewals expiring July forward will not be issued;
- The 6-monthextension on the duration of ITAR licenses and agreements will not be further extended;
- The suspension of the requirement that a regular employee work at the company’s facilities, that allows the employee to work at a remote location (except Russia or a country listed in ITAR Sec. 126.1) is extended until Dec. 31, 2020; and
- The suspension authorizing a regular employee of a licensed entity who is working remotely in a country not currently authorized by a technical assistance agreement, manufacturing license agreement, or exemption to send, receive, or access any technical data authorized for export, reexport, or retransfer to their employer via a technical assistance agreement, manufacturing license agreement, or exemption (so long as the regular employee is not located in Russia or a country listed in ITAR § 126.1) is extended until Dec. 31, 2020.
Department of the Treasury
OFAC Issued Two Ukraine-Related General Licenses
July 16, 2020: The Office of Foreign Assets Control (OFAC) issued two Ukraine-Related General Licenses (GLs) related to GAZ Group. GL 15I authorizes specified transactions and activities that are ordinarily incident and necessary to the manufacture and sale of specified vehicles and components produced by GAZ Group until Jan. 22, 2021, and GL 13O supersedes GL 13N and authorizes certain transactions necessary to divest or transfer debt, equity, or other holdings in GAZ group, also until Jan. 22, 2021. (See July 22 item below for FAQs about these GLs.)
OFAC Amended The Nicaragua Sanctions Regulations
July 17, 2020 – 85 Fed. Reg. 43436: OFAC amended the Nicaragua Sanctions Regulations (NSR, 31 CFR Part 582) to make technical edits and expand and clarify the provisions on prohibited transactions in Sec.
582.201. OFAC also added as new Sec. 582.509 a general license authorizing all transactions that are for the conduct of the official business of the United States Government by USG employees, grantees, or contractors.
OFAC Published 9 Amended FAQs To Reflect The Issuance Of Ukraine-Related General Licenses
July 22, 2020: OFAC published 9 amended FAQs to reflect the issuance of Ukraine-Related GLs 13O and 15I. FAQs 570, 571, 586, 588, 589, 590, 591, 592, and 625 are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#571,
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 firstname.lastname@example.org.
Department of Commerce
July 8, 2020 – 85 Fed. Reg. 40966: BIS denied the export privileges of Mahin Mojtahedzadeh, a.k.a. Mahin Toussi Mojtahedzadeh, a.k.a. Mahin Mojtahedzadeh Toussi, for 10 years based on her conviction on January 30, 2020, of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by conspiring to export gas turbine parts from the U.S. to Iran without the required U.S. authorization. (See details of this case in January 2020 Regulatory Update.) In the criminal case, Mojtahedzadeh was sentenced to time served, a $100 special assessment, and a fine of $5,000, and was placed in immigration custody for removal from the U.S.
Department of State
July 2, 2020 – 85 Fed. Reg. 39967: The Department of State published a correction and restatement of its notice of May 20, 2020 (85 Fed. Reg. 30783) imposing statutory debarment on 23 persons. (See May 2020 Regulatory Update.) The statutory debarments remain effective and unchanged. However, the July 2 notice restates and clarifies the description of the Department’s policies on statutory debarment that was included in the Supplementary Information portion of the May notice.
Fines and Penalties
June 26, 2020: Angelica O. Preti, of Ontario, Canada, the export operations manager at a Canadian forwarding and customs brokerage service provider, was sentenced in Federal District Court in Columbus, OH to 18 months in prison for conspiring to violate the IEEPA by illegally exporting gas turbine engine parts from the U.S. to Iran. Preti facilitated the shipment of the gas turbine engine parts and related items, to Iran, by directing the filing of false electronic export information (EEI), attesting that the final destination of the goods was not Iran and employing additional methods to obscure the fact that Iran was the end-user for the shipments.
July 8, 2020: OFAC announced that Amazon.com, Inc., of Seattle, WA, agreed to pay $134,523 to settle its potential civil liability for apparent violations of multiple OFAC sanctions programs. The violations included the provision of goods and services to persons located in Crimea, Iran, and Syria; to individuals located in or employed by the foreign missions of Cuba, Iran, North Korea, Sudan, and Syria; and persons named on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”) pursuant to eight separate sanctions programs. Amazon also failed to timely report hundreds of transactions it conducted under a GL that included a mandatory reporting requirement. The primary cause of the apparent violations was the failure of Amazon’s automated screening processes to analyze all transaction and customer data relevant to compliance with OFAC’s sanctions regulations. Factors in determining the settlement amount included OFAC’s determination that the apparent violations – whose total transaction value was approximately $269,000 – were non-egregious and voluntarily self-disclosed, and that Amazon had implemented significant remedial measures upon discovery of the apparent violations. The OFAC announcement of this case, which includes an extensive discussion of Amazon’s remedial measures and a broader description of OFAC’s compliance considerations and resources, is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20200708_amazon.pdf.
July 16, 2020: Aiden Davidson, a/k/a Hamed Aliabadi, of Brighton, MA, a citizen of the U.S. and Iran, was sentenced in Federal District Court in Concord, NH, to serve 46 months in prison for exporting ten or more containers of industrial goods including motors, pumps, and other items, to Iran, without the required authorization. Davidson, as the registered agent of a New Hampshire company, arranged the exportations, falsely naming a company in Turkey as the Ultimate Consignee.
July 20, 2020: OFAC announced that Essentra FZE Company Limited, a cigarette filter and tear tape manufacturer in the United Arab Emirates, agreed to pay $665,112 to settle its potential civil liability for three apparent violations of the North Korea Sanctions Regulations (NKSR, 31 CFR part 510). Essentra allegedly exported cigarette filters with an alleged commercial value of $333,272 to North Korea through a network of front companies in China and other countries using deceptive practices and received payment into its bank accounts at the foreign branch of a U.S. bank.
July 20, 2020: Usama Darwich Hamade, a national of Lebanon, was sentenced in U.S. District Court in Minneapolis, MN to 42 months in prison for conspiring to export goods and technology in violation of the IEEPA, the Export Administration Regulations (EAR, 15 CFR Parts 730-774), the Arms Export Control Act (AECA, 22 USC 2778 et seq.), and the ITAR. According to his guilty plea and documents filed in court, Hamade conspired to export U.S.-origin goods and technology including inertial measurement units suitable for use in un-crewed aerial vehicles (UAVs), digital compasses suitable for UAV use, a jet engine, piston engines, and recording binoculars for ultimate use by Hizballah without the required export authorizations. Hamade’s indictment was announced by the U.S. Justice Department in February 2019, when Hamade was in custody in South Africa and the U.S. was seeking his extradition.
July 28, 2020: OFAC announced that Whitford Worldwide Company, LLC, a cookware coating manufacturer based in Elverson, PA, agreed to pay $824,314 to settle its potential civil liability for 74 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Whitford’s subsidiaries in Italy and Turkey facilitated in some cases by U.S. persons employed by
Whitford allegedly sold coatings intended for customers in Iran and conducted other trade-related transactions with Iran. Whitford voluntarily disclosed the apparent violations. The Treasury Department’s Enforcement Release noted that according to Whitford when Whitford became aware of Iran General License H, it realized that its foreign subsidiaries had likely violated U.S. sanctions and hired outside counsel to conduct an investigation, submitted a disclosure to OFAC, cooperated with OFAC’s the investigation, and took significant corrective actions.