LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
This newsletter is a listing of the latest changes in export control regulations through October 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 firstname.lastname@example.org 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.
EU Proposed Its Annual EU Dual-Use Export Control List Update
Oct. 7, 2020: The European Commission (EC) proposed its annual update to the European Union (EU) dual-use export control list (Annex 1 to Regulation (EC) No. 428/2009) to align it with changes adopted by three international non-proliferation export control regimes: the Wassenaar Arrangement (WA, covering conventional arms and sensitive dual-use civilian/military goods and technologies); the Australia Group (AG, covering dual-use chemical manufacturing facilities, equipment, and related technology, plant pathogens, animal pathogens, biological agents, and dual-use biological equipment); and the Missile Technology Control Regime (MTCR, covering proliferation of missiles, complete rocket systems, unmanned air vehicles, and related technology for those systems capable of carrying a 500-kilogram payload at least 300 kilometers, as well as systems intended for the delivery of weapons of mass destruction). The EC announcement of the update (https://trade.ec.europa.eu/doclib/docs/2020/october/tradoc_158973.pdf) includes a list of the main changes in the control list and a link to a Comprehensive Change Note Summary that details all the technical changes and compares them to the 2019 EU Dual-Use Control List across all 10 categories. The announcement also provides a link to the full text of the proposed Regulation.
The new list will be published in the Official Journal of the European Union on December 14, 2020, and enter into force December 15, 2020, unless there are prior objections from the European Council or the European Parliament.
Department of Commerce – Bureau of Industry and Security
BIS Notified The Public That Restrictions On TikTok, Inc. Will not Go Into Effect, Pending Legal Developments
Oct. 2, 2020 – 85 Fed. Reg. 62214: BIS notified the public that, in compliance with a preliminary injunction granted to TikTok, Inc., by the District of Columbia Federal District Court, prohibitions that the Secretary of Commerce had ordered Sep. 24, 2020 (85 Fed. Reg. 60061) on certain transactions will not go into effect, pending further legal developments. The transactions whose prohibition has been enjoined are “any provision of services to distribute or maintain the TikTok mobile application, constituent code, or application updates through an online mobile application store, or any online marketplace where mobile users within the land or maritime borders of the United States and its territories may download or update applications for use on their mobile devices.”
BIS Adds Controls On Six (6) Emerging Technologies
Oct. 5, 2020 – 85 Fed. Reg. 62583: The Bureau of Industry and Security (BIS) amended the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) and additional provisions in the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to add controls on 6 emerging technologies that are essential to U.S. security, consistent with the requirements of the U.S. Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.) and the actions taken by the Wassenaar Arrangement (WA) at its December 2019 Plenary Meeting. The 6 technologies are:
- Hybrid additive manufacturing (AM)/computer numerically controlled (CNC) tools;
- computational lithography software designed for the fabrication of extreme ultraviolet (EUV) masks;
- technology for finishing wafers for 5nm production;
- digital forensics tools that circumvent authentication or authorization controls on a computer (or communications device) and extract raw data;
- software for monitoring and analysis of communications and metadata acquired from a telecommunications service provider via a handover interface; and
- sub-orbital craft.
To implement these changes, BIS added Export Control Classification Number (ECCN) 3E004 to control technology required for the slicing, grinding and polishing of 300 mm diameter silicon wafers and revised ECCNs 2B001, 3D003, 5E001, 5A004, and 9A004 and related ECCNs 5D002, 5E002, 9A012, and 9A515. Also, a correction was made in ECCN 5D001 regarding License Exception (LE) STA (Strategic Trade Authorization), and a revision was made in LE ENC (Encryption Commodities, Software, and Technology, EAR Sec. 740.17). BIS stated that it will implement the remaining decisions made at the WA 2019 Plenary in a separate rule.
Please contact us for additional information if your company is involved with these technologies.
BIS Published A Final Rule Intended To Promote Human Rights
Oct. 6, 2020 – 85 Fed. Reg. 63007: In a final rule designed expressly to promote respect for human rights throughout the world, BIS amended EAR Sec. 742.7 to provide 1) that applications for items controlled for reasons of crime control (CC) will generally be considered favorably unless there is a civil disorder in the country or region of destination or if BIS assesses that there is a risk that the items will be used to violate or abuse human rights, and further, 2) that except for items controlled for short supply reasons, applications for items that require a license for any reason other than CC will also be judged based on whether they could be used by the recipient specifically to violate or abuse human rights.
BIS Amends The EAR To Impose A License Requirement For Exports And Reexports Of Water Cannon Systems And Parts And Components Thereof
Oct. 6, 2020 – 85 Fed. Reg. 63009: In another action expressly designed to address violations of human rights, with particular reference to exports to the Hong Kong Police Force, BIS amended the EAR to impose a license requirement on exports and reexports of water cannon systems including their parts and components (ECCNs 0A977, 0D977, and 0E977).
BIS Added 26 Persons To the Unverified List
Oct. 9, 2020 – 85 Fed. Reg. 64014: BIS added 26 persons – three in Armenia, two in Finland, three in Germany, five in Hong Kong, three in Pakistan, two in Turkey, six in the United Arab Emirates (UAE), and one each in China and Mexico -- to the Unverified List (UVL, EAR Part 744, Supp. No. 6) because it was not possible to complete a satisfactory end-use check on them for reasons outside the U.S. Government’s control. In the same rule BIS removed 40 persons – 16 in China, 22 in Hong Kong, one in Indonesia, and one in the UAE – from the UVL because BIS was able to conduct a successful end-use check or because they are no longer registered to do business in the country of listing and are no longer involved in U.S. exports.
(Exports, reexports, and transfers (in-country) to a person listed on the UVL are ineligible for license exceptions (EAR §740.2(a)(17)), and exporters, reexporters, and transferors of an item that is not otherwise subject to a license requirement must obtain a special statement meeting requirements described in EAR §744.15(b) before sending the item to a listed person.)
BIS Extends The Deadline For Public Comment On The Definition Of Foundational Technologies To November 9, 2020
Oct. 9, 2020 – 85 Fed. Reg. 64078: BIS amended an Advance Notice of Proposed Rulemaking (ANPRM) it had issued on Aug. 27, 2020 (85 Fed. Reg. 52934) requesting public comments on specific topics relating to the development of a definition of “foundational technologies.” (See August 2020 Regulatory Update for details of this request.) The amendment extends the deadline for comments to Nov. 9, 2020, and provides rules for submitting business confidential information.
BIS Streamlined The Procedure For Exporters To Request 6-month Extensions Of The Validity Period For Export Licenses Due To Expire On Or Before December 31, 2020
Oct. 16, 2020: Recognizing the importance of exports during this time of economic transition and recovery, BIS announced a special procedure for streamlining requests by exporters for 6-month extensions of the validity period for export licenses due to expire on or before Dec. 31, 2020. BIS estimates that the majority of extension validity requests using a new central electronic mailbox at LicenseExtensionRequest@bis.doc.gov will be processed and approved within two to three business days. This BIS announcement is at https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/2645-extension-of-license-validity-announcement/file.
BIS Amends EAR Sec. 742.4 To Revise The License Review Policy For Items Controlled For National Security Reasons Destined For The People’s Republic Of China (PRC), Venezuela, Or Russia
Oct. 29, 2020 – 85 Fed. Reg. 68448: BIS amended EAR Sec. 742.4 to revise the license review policy for items controlled for national security reasons destined for the People’s Republic of China (PRC), Venezuela, or Russia. BIS and reviewing agencies will now determine, based on specific factors, whether the export, reexport, or transfer (in-country) of items controlled for national security reasons will make a material contribution to the development, production, maintenance, repair, or operation of weapons systems in those countries. A general policy of approval will apply to applications for items determined to be for civil end-users and civil end-uses, and a presumption of denial will apply to applications for items that would make a material contribution to the development, production, maintenance, repair, or operation of weapons systems, subsystems, and assemblies in these countries.
Department of State
DDTC Name And Address Changes Posted To Website
Oct. 14 and 20, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- Change in name from Coritel S.A. to Tecnilógica Ecosistemas, S.A. due to corporate rebranding; and
- Change in name from Flybe Aviation Services Limited to Atlantic Aviation Group Defence Services Limited due to Flybe’s acquisition by Atlantic Aviation (Virgin Atlantic Airways 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.
DDTC Updates Frequently Asked Questions Regarding The U.S. Patent And Trademark Office And The “See Through Rule”
Sep. 30 and Oct. 5, 2020: DDTC published updated responses to two Frequently Asked Questions (FAQs):
Department of the Treasury
OFAC Issued General License 8A For Certain Humanitarian Transactions With The Central Bank Of Iran Or The National Iranian Oil Company
Oct. 26, 2020: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License 8A, “Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran or the National Iranian Oil Company,” on its website at https://home.treasury.gov/system/files/126/iran_gl8a.pdf. OFAC also posted amended related Frequently Asked Questions (821, 822, 823, 825, 828, and 844), accessible through links at https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20201026_33.
OFAC Published Updated FAQs Regarding The Cuban Assets Control Regulations
Oct. 26, 2020: OFAC published updated FAQs 72, 717, 728, 732, 733, 734, 756, 759, 796, and 797 relating to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515).
OFAC Amended The Cuban Assets Control Regulations To Deny The Cuban Government’s Access To Funds In Connection With Remittances To Cuba
Oct. 27, 2020 – 85 Fed. Reg. 67988: OFAC amended the CACR to further implement portions of the President’s policy to deny the Cuban government access to funds in connection with remittances to Cuba. A description of the provisions of this amendment is in New FAQ 852 at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/852. The effective date of this rule is Nov. 26, 2020.
OFAC Amended The Yemen Sanctions Regulations
Oct. 29, 2020 – 85 Fed. Reg. 68461: OFAC amended the Yemen Sanctions Regulations (31 CFR Part 552) that were published in abbreviated form on November 9, 2012 and reissued them in their entirety due to the number of regulatory sections being updated or added. This final rule is a more comprehensive set of regulations that includes additional interpretive and definitional guidance, general licenses, statements of licensing policy, and other regulatory provisions that will provide further guidance to the public.
* DATES: This rule was effective October 29, 2020.
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 email@example.com.
Department of Commerce
Oct. 29, 2020 – 85 Fed. Reg. 68557: BIS denied the export privileges of Junior Joel Joseph for 7 years based on his April 12, 2019 conviction in U.S. District Court for the Southern District of Florida of violating 18 USC 371, Section 38 of the Arms Export Control Act (AECA, 22 U.S.C.A. 2778 (2012), the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701, et seq. (2012)) and 18 U.S.C. 554(a) by conspiring to illegally export and send firearms and ammunition from the U.S. to Haiti without having obtained the required authorization, license, or approval. In the court case, Junior Joseph was sentenced to 16 months in prison, 3 years of supervised release, and a $500 assessment.
Oct. 29, 2020 -- 85 Fed. Reg. 68558: BIS denied the export privileges of Jimy Joseph for 7 years based on his May 22, 2019 conviction of violating 18 U.S.C. 371 and 18 U.S.C. 554(a) by conspiring to illegally export and send firearms and ammunition from the U.S. to Haiti without having obtained the required authorization, license, or approval in violation of 18 U.S.C. 371 and for fraudulently and knowingly exporting, sending, and attempting to export AR-15 type rifles, Glock semi-automatic pistols, and ammunition from the U.S. to Haiti in violation of 18 U.S.C. 554. In the court case, Jimy Joseph was sentenced to 16 months in prison, 3 years of supervised release, and a $200 assessment.
Fines and Penalties
Oct. 6, 2020: Joyce Eliabachus of Morris County, NJ, was sentenced in federal court in Newark, NJ to 18 months’ imprisonment followed by one year of supervised release based on her plea of guilty of one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707). As the principal officer and operator of an aviation parts trading company, Edsun Equipments LLC, Eliabachus participated in an international procurement network that acquired 23,554 export-controlled aircraft components valued at over $2 million from U.S. distributors and shipped them to companies in the UAE and Turkey, where co-conspirators redirected them to locations in Iran. Eliabachus routinely falsified the true destination and end-users of the aircraft components and falsified the true value of the components being exported in order to avoid filing export control forms.
Oct. 15, 2020: Seyed Sajjad Shahidian, a citizen of Iran, the founder and former Chief Executive Officer of PAYMENT24, an internet-based financial services company with offices in Tehran, Shiraz, and Isfahan, Iran, was sentenced in U.S. District Court in Minneapolis, MN to 23 months in prison for his role in conducting financial transactions in violation of US. sanctions against Iran. The primary business of PAYMENT24 was helping Iranian citizens conduct prohibited financial transactions with businesses based in the United States, including the unlawful purchase and exportation of computer software, software licenses, and computer servers from United States companies. According to his guilty plea and documents filed in court, Shahidian made material misrepresentations and omissions to United States-based businesses regarding the Iranian destination of United States-origin goods. In order to accomplish the transactions with U.S. sellers, Shahidian obtained payment processing accounts from United States-based companies like PayPal using fraudulent passports and other false residency documentation to falsely represent that his customers resided outside of Iran. Among these, he admitted to opening hundreds of PayPal accounts on behalf of his PAYMENT24 customers who resided in Iran and to unlawfully bringing millions of U.S. dollars into the economy of Iran. Unauthorized exports of goods, technology or services to Iran, directly or indirectly from the United States or by a United States person are prohibited by the International Emergency Economic Powers Act (IEEPA).
Oct. 20, 2020: The Treasury Department Office of Foreign Assets Control announced that Berkshire Hathaway, Inc., a multinational conglomerate holding company based in Omaha, NE, on behalf of itself and its Turkish subsidiary, Iscar Kesici Takim Ticareti ve Imalati Limited Sirket, agreed to pay $4,144,651 to settle its potential civil liability for 144 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Specifically, Iscar apparently violated ITSR Sec. 560.215 when it exported 144 shipments of cutting tools and related inserts with a total value of $383,443 to two third-party Turkish distributors with knowledge that these items would be shipped to Iran for resale to Iranian end-users including several entities later identified as meeting the definition of the Government of Iran. Berkshire voluntarily self-disclosed the apparent violations on behalf of Iscar. However, OFAC stated that Iscar’s apparent violations were particularly serious and called for strong enforcement because they occurred under the direction of senior managers despite repeated communications from Berkshire regarding U.S. sanctions against Iran, and Iscar took steps to conceal these activities from Berkshire.