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 Plenary Meeting December 5-7
Dec. 11, 2018: The Wassenaar Arrangement (WA) released the following documents upon the conclusion of its Plenary Meeting Dec. 5-7:
- List of Dual-Use Goods and Technologies & Munitions List (Dec. 2018)
- Summary of Changes to Lists (Dec. 2018)
- List of Advisory Questions for Industry (Dec. 2018)
Links to all three documents are on the WA home page, https://www.wassenaar.org.
European Union Amends Its Dual-Use Export Control List
Dec. 15, 2018: A Regulation amending the European Union (EU) dual-use export control list to bring it into line with the decisions taken by the international non-proliferation regimes and export control arrangements in 2017 went into effect. Changes resulting from amendments agreed at the 2017 Plenary of the Wassenaar Arrangement (WA) included amendments to Export Control Numbers 2B006, 2B007a, 2E003b, 2E003d, 3A001i, 3B001j, 4D004, 4E001, 6A002f, 6A003a, 9A002, 9A004, and 9D004b. Also, changes were made resulting from decisions by the Missile Technology Control Regime (1B117, 2B109, 7A105, and 9A101), the Nuclear Suppliers Group (1B235 and 1B229), and the Australia Group (1C350). Important EU documents regarding the new dual-use list include:
- Full text of Regulation 2018/1922: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2018.319.01.0001.01.ENG&toc=OJ:L:2018:319:TOC
- Announcement of 2018 Update of the EU Control List of Dual-Use Items: http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157454.pdf
- Comprehensive Change Note Summary 2018 providing a detailed overview of all technical changes compared to the 2017 list: http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157452.pdf
- EU Dual-Use Control List across all 10 categories: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018R1922&from=EN
Canada Amends Its Export And Import Permits Act
Dec. 13, 2018: Legislation amending the Export and Import Permits Act (EIPA) with the primary purpose of achieving full compliance with the United Nations Arms Trade Treaty was finalized by royal assent. The amendments include, among others, a new control on brokering in military goods between two countries outside of Canada, specification of certain assessment criteria before authorizing export permits, and an increase from $25,000 to $250,000 in the maximum fine under the EIPA for summary conviction offenses. The full text of the law is at http://www.parl.ca/DocumentViewer/en/42-1/bill/C-47/royal-assent.
Department of Commerce – Bureau of Industry and Security
BIS Requests Public Comments On The Impact Of The Implementation Of The Chemical Weapons Convention
Dec. 11, 2018 – 83 Fed. Reg. 63613: The Bureau of Industry and Security (BIS) invited public comments on the impact of the implementation of the Chemical Weapons Convention (CWC) on commercial activities involving “Schedule 1” chemicals during calendar year 2018. BIS will use the information for a required annual report to Congress. Deadline for comments is January 10, 2019.
BIS Extends Period For Public Comments Regarding Emerging Technologies
Dec. 14, 2018 – 83 Fed. Reg. 64299: BIS extended until Jan. 10, 2019 the period for comments responding to its request for advice on the criteria to be used to identify emerging technologies that might ultimately be made subject to controls. (See additional information in November 2018 Regulatory Update.)
BIS Corrects ECCNs 7A005 And 7A105
Dec. 20, 2018 – 83 Fed. Reg. 65292: BIS corrected two entries on the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) to implement controls on items that had been determined to no longer warrant control under the U.S. Munitions List (USML, 22 CFR Sec. 121.1) in 2016 (Oct. 12, 2016 – 81 Fed. Reg. 70340), but mistakenly had not been added to the CCL in the counterpart BIS rule (Oct. 12, 2016 – 81 Fed. Reg. 70320). The affected items are Global Navigation Satellite Systems (GNSS) receiving equipment employing “adaptive antenna systems.” The affected Export Control Classification Numbers (ECCNs) are 7A005 and 7A105.
Department of State
DDTC Name and Address Changes Posted To Website
Dec. 3, 10, and 18, 2018: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:
- Change in Name from Vinghog AS to Rheinmetall Norway AS due to corporate restructure;
- Change in Address for Safran Electronics & Defense Australasia Pty Ltd;
- Change in Name and Address from Embraer Aircraft Holding, Inc. to Embraer Executive Aircraft, Inc., a U.S. entity wholly owned and controlled by Embraer Aircraft Holding, Inc., due to corporate restructuring;
- Change in Address for Mitsubishi Heavy Industries, Ltd.;
- Change in Name from KLX Aerospace Solutions sp z.o.o. to Boeing Distribution Services sp. z.o.o. due to acquisition of KLX Aerospace by Boeing Distribution;
- Change in Name from BMT Hi-Q Sigma Limited to BMT Defence and Security UK Limited due to corporate reorganization;
- Change in Address for Tekla Research, Inc.;
- Change in Name from Airbus Group Korea Limited to Airbus Korea Limited due to corporate reorganization; and
- Change in Address for Vista Outdoor Inc.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
DDTC Publishes FAQ Regarding ITAR Compliance Of Box And Government Cloud
Dec. 13, 2018: DDTC published a Frequently Asked Question concerning ITAR compliance of Box and Gov Cloud. This FAQ is on the DDTC website at https://www.pmddtc.state.gov/?id=ddtc_public_portal_faq_detail&sys_id=78c8ad22db9a2700529d368d7c9619ff.
Department of the Treasury
OFAC Extends Duration Of Certain Ukraine Related General Licenses
Dec. 7, 2018: The Office of Foreign Assets Control (OFAC) issued Ukraine-related General Licenses (GLs) 13H, 14D, 15C, and 16D, extending the Jan. 7, 2019 expiration date of previous GLs authorizing certain transactions involving En+ Group plc (En+), United Company RUSAL plc (RUSAL), JSC EuroSibEnergo (ESE), and GAZ Group (GAZ). (See November 2018 Regulatory Update about previous GLs and see following two items regarding subsequent GLs and intended termination of sanctions against these entities.)
OFAC Notified Congress Of Intent To Terminate Sanctions Imposed On EN+, RUSAL and ESE
Dec. 19, 2018: OFAC notified Congress of its intention to terminate sanctions imposed on EN+, RUSAL, and ESE in 30 days, explaining that these companies, which had been designated because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, had now restructured and taken other actions to minimize Deripaska’s role. The notification further noted that Deripaska will remain on the Specially Designated Nationals (SDN) List and persons involved in transactions involving him or his property will continue to be fully subject to primary and secondary sanctions. The full notification to Congress is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/20181219_notification_removal.pdf.
OFAC Replaces Ukraine Related General Licenses Affecting GAZ
Dec. 20, 2018: OFAC replaced Ukraine-related GLs 13H and 15C with GLs 13I and 15D, which extended the expiration date affecting GAZ or entities in which it owns, directly or indirectly, a 50 percent or greater interest, to March 7, and extended the expiration date affecting EN+ or RUSAL or entities in which those persons own, directly or indirectly, a 50 percent or greater interest, to January 21.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Dec. 17, 2018 – 83 Fed. Reg. 64518: BIS renewed the Temporary Denial Order (TDO) for an additional 6 months against Mahan Airways of Tehran, Iran and Pejman Mahmood Kosarayanifard, a/k/a Kosarian Fard; Mahmoud Amini; Kerman Aviation, a/k/a GIE Kerman Aviation; Sirjanco Trading LLC; Maan Air General Trading LLC; Mehdi Bahrami; Al Naser Airlines, a/k/a al-Naser Airlines, a/k/a Al Naser Wings Airline, a/k/a Alnaser Airlines and Air Freight Ltd.; Ali Abdullah Alhay, a/k/a Ali Alhay, a/k/a Ali Abdullah Ahmed Alhay; Bahar Safwa General Trading; Sky Blue Bird Group, a/k/a Sky Blue Bird Aviation, a/k/a Sky Blue Bird Ltd., a/k/a Sky Blue Bird FZC; and Issam Shammout, a/k/a Muhammad Isam Muhammad, Anwar Nur Shammout, a/k/a Issam Anwar.
Dec. 20, 2018 – 83 Fed. Reg. 65340: As part of a global settlement with Eric Baird of Sarasota, FL (see description below, in Fines and Penalties section), BIS denied Baird’s export privileges for 5 years, of which the final year will be suspended and thereafter waived, provided that Baird has made full and timely settlement of the financial penalty, complied with the other terms of the settlement agreement, and has not committed any further violations,
Fines and Penalties
Dec. 6, 2018: Kassim Tajideen of Beirut, Lebanon pleaded guilty in Federal District Court in Washington, DC, to conspiracy to launder monetary instruments in furtherance of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707). Tajideen, who had been designated as a Specially Designated Global Terrorist (SDGT) in May 2009 as a result of his provision of significant financial support to Hezbollah, a foreign terrorist organization, admitted to conspiring to conduct over $50 million in transactions with U.S. businesses and engaging in transactions outside the U.S. involving transmissions of as much as $1 billion through the U.S. financial system from places outside the U.S. The plea agreement called for a sentence of 60 months in prison and payment in advance of sentencing of $50 million as a criminal forfeiture. (See additional information on this case in March 2017 Regulatory Update.)
Dec. 11, 2018: Shai Gear LLC, d/b/a Spider Camera Holster, d/b/a Spider Camera of Lansing, NY, agreed to pay a civil penalty of $8,500 to settle charges, by BIS, of violating the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by exporting camera accessories designated EAR99 and valued at $6,058 to Iran without the authorization required under the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560).
Dec. 11, 2018: Patrick Germain of Evanston, IL, pleaded guilty to knowingly and fraudulently attempting to export 16 handguns, 5 shotguns, a rifle, and ammunition, to Haiti, without the required authorization. Germain admitted that he had hidden the guns and ammunition in a plywood container inside a cargo van and delivered the van to a shipping company, in Miami, for export. Law enforcement seized the van before it could be transported to Haiti.
Dec. 12, 2018: In a global settlement with the U.S. Department of Justice and BIS, Eric Baird of Sarasota, FL pleaded guilty to one count of felony smuggling, admitted to 166 administrative violations, and agreed to pay civil penalties of $17 million with $7 million suspended, and to accept a 5-year denial order, with the final year suspended. The $17 million penalty is the largest civil penalty paid by an individual in BIS history. The violations occurred during Baird’s tenure as Chief Executive Officer of Access USA Shipping, LLC d/b/a MyUS.com (Access) from 2011 through 2013, when Access provided foreign customers with access to a U.S. address and other mechanisms to enable them to obtain U.S.-origin items without revealing to the seller that the items were intended for export. Access also facilitated the export of these items using falsified export documentation to conceal the export-controlled status of some of the items and falsely reducing their values. (See March 2017 Regulatory Update for report of settlement between Access and BIS in which Access agreed to pay a civil penalty of $27 million, of which $17 million was suspended.)
Dec. 12, 2018: Yantai Jereh Oilfield Services Group Co. Ltd. of Yantai, China, and its worldwide affiliated companies and subsidiaries (Jereh Group) agreed to pay $2,774,972 to settle charges by OFAC of 11 apparent violations of the ITSR involving the actual and attempted exportation and re-exportation of U.S.-origin items intended for end users in Iran via China. The items in question included oilfield equipment such as spare parts, coiled tubing strings, and pump sets. Some of the items were intended for further processing in China before being sent to Iran. Two of the 11 shipments were seized by U.S. Customs and Border Protection prior to exiting the U.S. In its announcement of this enforcement action, OFAC noted the importance of implementing audits, reviews, and other control measures to ensure compliance with U.S. export control and sanctions regulations. (See next item about concurrent action by BIS.)
Dec. 14, 2018: In a settlement with BIS related to the settlement with OFAC described above, the Jereh Group agreed to pay a civil penalty of $600,000 and accept a 5-year denial of its export privileges to settle charges, by BIS, that it violated the EAR by acting with knowledge of a violation and making false statements to BIS in the course of an investigation. The Jereh Group allegedly bought and/or sold coiled tubing subject to the EAR on 3 occasions with the intention to export the tubing to Iran via third countries including the United Arab Emirates and China. The 5-year denial order will be suspended for 5 years and thereafter waived if the Jereh Group pays the penalty on schedule and commits no further violations.
Dec. 20, 2018: Zoltek Companies, Inc. (Zoltek), a holding company of Bridgeton, MO, its U.S. subsidiary Zoltek Corporation (Zoltek U.S.), and its Hungarian subsidiary, Zoltek Vegyipari ZRT (Zoltek Hungary) agreed to pay a civil penalty of $7,772,102 to settle charges by OFAC of violating the Belarus Sanctions Regulations (BSR, 31 CFR Part 548) on 26 occasions when Zoltek U.S. approved purchases by Zoltek Hungary of acrylonitrile, a chemical used in the production of carbon fiber, from a subsidiary of J.S.C. Naftan (Naftan), a Belarusian entity on the SDN List. These purchases were discussed, reviewed, and approved by senior Zoltek U.S. managers even after Zoltek Hungary informed the Chief Operating Officer of Zoltek U.S. of the designation of Naftan as an SDN, and after they had confirmed that Zoltek Hungary’s trading partner was a subsidiary of Naftan and that Naftan was subject to U.S. trade sanctions. OFAC noted that this enforcement action highlighted the risks for companies with overseas operations of failing to implement compliance programs covering the OFAC sanctions regulations.
Dec. 20, 2018: Rasheed Al Jijakli of Walnut, CA was sentenced to 46 months in federal prison based on his plea of guilty of violating IEEPA and the Syrian Sanctions Regulations (SSR, 31 CFR Part 542) by conspiring with others to export tactical gear including U.S.-origin laser boresighters and day- and night-vision rifle scopes to Syria for use by Ahrar Al-Sham and other Syrian rebels in Syria, or with knowledge that the tactical gear was going to Syria. (See information about Al Jijakli’s not-guilty plea and his later guilty plea in September 2017 and August 2018 Regulatory Updates.)