LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
Wassenaar 23rd Plenary Meeting
Dec. 6-7, 2017: The Wassenaar Arrangement held its 23rd Plenary meeting. Major actions taken during the meeting included the admission of India as the 42nd participating state and the adoption of changes in the List of Dual-Use Goods and Technologies and Munitions List. The changes included adoption of new export controls on military explosives and specific electronic components; clarification of existing controls regarding ground stations for spacecraft, submarine diesel engines, technology related to intrusion software, software for testing gas turbine engines, analog-to-digital converters, non-volatile memories, and information security; and relaxation of controls on some mechanical high-speed cameras and digital computers. A summary of the changes to the lists is on the Wassenaar website at http://www.wassenaar.org/wp-content/uploads/2017/12/Summary-of-Changes-to-2017-Lists-Website.pdf, and the complete 2017 lists are at http://www.wassenaar.org/wp-content/uploads/2017/12/2017_List_of_DU_Goods_and_Technologies_and_Munitions_List-1.pdf.
Annual Update Of The European Union Export Control List
Dec. 16, 2017: The annual update of the European Union export control list (Annex I to Regulation No. 428/2009) came into force. Most of the revisions result from amendments in the export control lists of the Wassenaar Arrangement, the Australia Group, the Nuclear Suppliers Group, and the Missile Technology Control Regime. A Comprehensive Change Note Summary is on the European Commission (EC) website at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156133.pdf. The full list, including an Explanatory Memorandum, is at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156132.pdf.
Department of Commerce – Bureau of Industry and Security
BIS Adds Two Russian Entities To The Entity List
Dec. 20, 2017 – 82 Fed. Reg. 60304: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding two Russian entities to the Entity List (EAR Part 744, Supp. No. 4) based on the finding that they produced for the Russian Federation Ministry of Defense a ground-launched cruise missile system and associated transporter-erector-launcher with a range prohibited by the Intermediate-Range Nuclear Forces Treaty. The two entities are:
- Joint Stock Company Experimental Design Bureau Novator, a.k.a. Novator Design Bureau and JSC OKB Novator, Yekaterinburg; and
- Joint Stock Company Federal Scientific and Production Center Titan-Barrikady, a.k.a. Federal Research and Production Center Titan Barrikady JSC, Titan Design Bureau, and JSC FNPTS Titan-Barrikady, Volgograd.
For both companies there is an export license requirement for all items subject to the EAR, a license review policy with a presumption of denial, and no license exceptions are available.
BIS Revises, Clarifies And Makes Technical Corrections To The EAR
Dec. 27, 2017 – 82 Fed. Reg. 61153: BIS made revisions, clarifications, and technical corrections in EAR Parts 732, 734, 738, 740, and 746 and six Export Control Classification Numbers (ECCNs) in the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). BIS stated that all the changes were editorial in nature and did not affect license requirements. Significant among these, several decision “blocks” in the Export Control Decision Tree diagram (EAR Part 732, Supp. No. 1) were amended to replace references to the general prohibitions with citations of specific EAR sections and to correct improper citations. Also in Part 732, Sec. 732.4(b)(7)(ii) was amended to correct the list of aircraft ECCNs that may be eligible for subsequent export or reexport under License Exception STA. In the CCL, misspellings were corrected and conforming changes were made in ECCNs 0A606, 8A609, 9A610, 2B352, 0D606, and 0E606.
Department of Commerce – Census Bureau
Census Bureau Publishes Advice On How To Find A Schedule B Number
Dec. 12, 2017: In its Global Reach Blog, the Census Bureau published advice for exporters on how to find a Schedule B number. A step-by-step demonstration on finding a Schedule B number is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2017/12/finding-your-schedule-b-number.html. The Global Reach Blog is available at https://www.census.gov/newsroom/blogs/global-reach.html.
Census Bureau Advises Which Schedule B #s, Harmonized Tariff Schedule #s Are Not Valid For AES
Dec. 28, 2017: The Census Bureau advised that Schedule B, the Harmonized Tariff Schedule (HTS), and the table of HTS Codes that are not valid for the Automated Export System (AES) have been updated to reflect the changes to the 2018 codes effective Jan. 1, 2018. The updated list of HTS codes that are not valid for AES is available at http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?eml=gd&utm_medium=email&utm_source=govdelivery">http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html.
Department of Justice
DOJ Publishes Enhanced Security Plan Guidance Regarding Use of Cloud Services And Network Infrastructure
Dec. 11, 2017: The U.S. Department of Justice National Security Division published an Enhanced Security Plan that it stated provides a helpful set of benchmarks and best practices for companies that may be considering the use of cloud services and network infrastructure to house and transmit their most sensitive data. The Plan was developed to satisfy a non-prosecution agreement reached with Netcracker Technology Corp. of Waltham, MA, a wholly-owned subsidiary of NEC Corp in 2015. In releasing the Enhanced Security Plan, the Justice Department recommended that companies doing business with the U.S. government or handling or using export-controlled technology, software, technical data, and cloud and network services should review the policies and procedures therein and consider whether to include them in their own compliance programs. The Enhanced Security Plan for U.S.-Based Customers’ Domestic Communications Infrastructure is on the Justice Department website at https://www.justice.gov/file/1017066/download.
Department of State
DDTC Name and Address Changes Posted To Website
Dec. 5, 7, 21, and 22, 2017: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:
- Change in Address for SKY Perfect JSAT Corporation;
- Change in Addresss for BAE Systems (International) Limited;
- Change in Address for NorthStar Aviation USA LLC;
- Change in Name for Thales subsidiary from Thales Avionics SAS (TAV) to Thales AVS France SAS due to corporate rebranding;
- Change in Name for Thales subsidiary from Thales Systemes Aeroportes SAS to Thales DMS France SAS due to corporate rebranding;
- Change in Name for Thales subsidiary from Thales Air Systems SAS (TR6) to Thales LAS France SAS due to corporate rebranding;
- Change in Name from Airbus Military France SAS to Airbus Defence and Space SAS due to corporate rebranding;
- Change in Name from Celestica International Inc. to Celestica International L.P. due to corporate reorganization; and
- HENSOLDT Holding Germany GmbH became a party to current DSP authorizations (including agreements) to which HENSOLDT Sensors GmbH and/or HENSOLDT Optronics GmbH, its German operating subsidiaries, are a party to, due to an internal corporate reorganization.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
OFAC Announces Issuance Of The Magnitsky Act Sanctions Regulations, 31 CFR Part 584
Dec. 21, 2017, 82 Fed. Reg. 60507: The Office of Foreign Assets Control (OFAC) announced the issuance of the Magnitsky Act Sanctions Regulations, 31 CFR Part 584, pursuant to the Sergei Magnitsky Rule of Law Accountability Act of 2012. The Magnitsky Act sanctions block the assets of persons determined by the Secretary of the Treasury to be involved in certain Russia-related human rights violations; they do not generally prohibit trade or the provision of banking or other financial services to the Russian Federation. The regulations lay out the requirements for blocking the property of those designated and freezing their American assets. Pursuant to these regulations, OFAC also added 5 persons to the List of Specially Designated Nationals (SDN List, https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx). New OFAC FAQs about the Magnitsky sanctions are at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/12212017_glomag_faqs.pdf.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Dec. 4, 2017 – 82 Fed. Reg. 57203: BIS modified the Temporary Denial Order (TDO) against Mahan Airways and others by removing the following persons from the TDO: Ali Eslamian, Equipco (UK) Ltd., and Skyco (UK) Ltd. The modification was made at the request of the BIS Office of Export Enforcement (OEE).
Dec. 11, 2017 – 82 Fed. Reg. 58169: BIS amended its denial order against Shantia Hassanshahi a/k/a Shahi a/k/a Shantia Haas a/k/a Sean Haas (see October 2017 Regulatory Update) by updating his address to reflect his release from federal prison.
Dec. 28, 2017 – 82 Fed. Reg. 61536: BIS denied for 10 years the export privileges of Joseph Esequiel-Gonzalez of Bastrop Federal Correction Institution (FCI), Bastrop, TX, based on his conviction of exporting, attempting to export, and causing to be exported, to Mexico, a .380 caliber pistol designated as a defense article on the U.S. Munitions List (USML) without the required authorization. In the criminal case, Esequiel-Gonzalez was sentenced to 55 months in prison, 3 years of supervised release, and a special assessment of $100.
Dec. 28, 2017 – 82 Fed. Reg. 61537: BIS denied the export privileges of Hunter Perry of Vine Grove, KY, for 5 years, based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by exporting or causing to be exported, to the United Kingdom, defense articles on the USML including a night vision scope, a thermal scope, a mini-thermal scope, and a night vision binocular without the required authorization. In the criminal case, Perry was sentenced to one day in prison, one year of supervised release and a special assessment of $500.
Dec. 28, 2017 – 82 Fed. Reg. 61538: BIS denied the export privileges of Gerardo Trevino-Moncivais of the D. Ray James FCI, Folkston, GA, for 10 years based on his conviction of violating the AECA by aiding and abetting the export, attempting to export, and causing to be exported, to Mexico, rifles, pistols, and ammunition on the USML without the required authorization. In the criminal case, Trevino-Moncivais was sentenced to 36 months in prison and a special assessment of $100.
Dec. 28, 2017 – 82 Fed. Reg. 61539: BIS denied the export privileges of Papa Faal of Brooklyn Park, MN, for 10 years, based on his conviction of violating the AECA by conspiring to export to Gambia semi-automatic rifles listed on the USML without the required authorization. In the criminal case, Faal was sentenced to time served, 3 years of supervised release, and an assessment of $200.
Dec. 28, 2017 – 82 Fed. Reg. 61540: BIS denied the export privileges of Saeid Yahya Charkhian and Caspian Machinery Supply LLC, both of Dubai, United Emirates (UAE), for 12 years, based on their settlement of criminal charges of violating the EAR by acting with knowledge of a violation (both defendants) and making a false or misleading statement (Charkhian only) in connection with unauthorized exports to Iran of U.S.-origin items including masking wax, lithium batteries, and zirconia crucibles, all designated EAR99 and valued in total at nearly $190,000.
Dec. 29, 2017 – 82 Fed. Reg. 61745: BIS renewed for an additional 180 days the TDO against Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Mahan Air General Trading LLC, Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issarn Shammout.
Fines and Penalties
Nov. 30, 2017: Seiler Instrument & Manufacturing Company, Inc., of Kirkwood, MO, agreed to forfeit $1,500,000 to settle criminal charges that it improperly certified optical materials imported from China as compliant with the Buy American Act. The imported optical materials were used in weapons sights that Seiler manufactured under a series of contracts with the Department of Defense (DoD). Seiler also agreed to a compliance program to be monitored by DoD. Seiler made these commitments in a pretrial diversion agreement in which the company also agreed to enter a plea of guilty to a false statement charge if it does not meet the full terms of the agreement.
Dec. 5, 2017: John Roberts of Clarksville, TN, and three U.S. Army soldiers at Fort Campbell, KY, were sentenced in Nashville, TN, federal court for their roles in a scheme in which Army weapons accessories and equipment were stolen from Fort Campbell and sold worldwide over eBay and through other means. (See description in October 2017 Regulatory Update.) Roberts, who purchased the stolen items from the soldiers for cash and then exported them, was sentenced to 15 years in prison for conspiracy, wire fraud, and violating the AECA and ordered to pay $4.2 million in restitution for the stolen equipment. The three soldiers, Alexander Hollibaugh, Dustin Nelson, and Aaron Warner, were sentenced to time served and probation for conspiracy to steal and sell Army property.
Dec. 6, 2017: Dentsply Sirona Inc. of York, PA, the successor in interest to Dentsply International Inc. (together DSI) agreed to pay $1,220,400 to settle civil charges by OFAC of violating the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) on 37 occasions when two of its subsidiaries exported dental equipment and supplies to distributors in third countries with knowledge or reason to know that the goods were ultimately destined for Iran. Supervisory personnel within the subsidiaries participated in the conduct that led to the claimed violations and appeared to have deliberately concealed their awareness from DSI.
Dec. 11, 2017: Eric Daniel Doyle of Kalispell, MT, pleaded not guilty to 44 counts of illegal gun exports and related crimes in federal court in Missoula, MT. Doyle was indicted on the charges in 2015 but fled and was a fugitive until his capture in Mexico Nov. 8, 2017. Doyle allegedly set up sales to customers in Australia, Norway, Denmark, and Sweden through the Internet and then shipped them through the U.S. Postal Service.
Dec. 18, 2017: Ali Soofi, a Canadian-Iranian dual citizen, was sentenced in federal court in New York, NY, to 32 years in prison and one year of supervised release for conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707) by participating as a broker in the unauthorized export to Iran of military items including helicopters, high-tech machine gun parts, tank parts, and military vehicle technology. In the conspiracy, Soofi worked to fill specific orders from Iranian clients including a high-ranking official in the Iranian Revolutionary Guard Corps.
Dec. 20, 2017: Three residents of Miami, FL were sentenced in federal court in Miami for their roles in a conspiracy to violate IEEPA by shipping various aircraft parts and equipment to Syrian Arab Airlines without the required authorization. Arash Caby, a/k/a Axel Caby, who managed AW-Tronics, the Miami export company through which the exports were made, was sentenced by 24 months in prison, 2 years of supervised release, and a $10,000 fine. Ali Caby, a/k/a Alex Caby, who ran the Bulgaria office of AW-Tronics and also had a management role in the Miami headquarters office, was sentenced to 24 months in prison and 2 years of supervised release, and Marjan Caby, who as AW-Tronics export compliance officer and auditor facilitated the exports by submitting false and misleading electronic export information to federal agencies, was sentenced to 12 months and one day in prison and 2 years of supervised release.
Dec. 21, 2017: Giovanni Zannoni of Gavorrano, Italy pleaded guilty in federal court in Brooklyn, NY to violating the AECA by exporting and attempting to export night vision equipment and assault rifle components controlled under the USML to Italy without the required authorization. As part of his plea, Zannoni agreed to forfeit $436,674 and dozens of gun parts and night vision and thermal imaging devices recovered by the U.S. Government in connection with his prosecution. Zannoni was arrested on May 14, 2017, after entering the U.S. at Miami International Airport.