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.
U.K. Updates Controls On Information Security Products Using Cryptography
Feb. 26, 2018: The Export Control Joint Unit of the U.K. Department for International Trade published Notice to Exporters 2018/03: Updates to Controls on 'Information Security' Products Using Cryptography on its website at https://www.gov.uk/government/publications/notice-to-exporters-201803-updates-to-controls-on-information-security-products-using-cryptography/notice-to-exporters-201803-updates-to-controls-on-information-security-products-using-cryptography.
Editor’s note: These changes are from an earlier Wassenaar Arrangement Plenary session. The U.S. implemented these changes in September 2016.
Export Control Reform Act of 2018 A Potential Replacement Of The Export Administration Act
Feb. 15, 2018: U.S. House of Representatives Foreign Affairs Committee Chairman Ed Royce (R-CA) introduced the Export Control Reform Act of 2018 (ECRA, H.R. 5040). The bill, co-sponsored by Ranking Member Eliot Engel (D-NY), would repeal and replace the lapsed Export Administration Act of 1979 (EAA), but it specifies that all administrative and judicial actions that were made under the EAA, the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707), and the Export Administration Regulations (EAR, 15 CFR Parts 730-774) will continue in effect unless they are changed under its authority.
Among significant ECRA provisions that differ from the EAA, U.S. subsidiaries of non-U.S. companies would not be regarded as U.S. persons, and the definition of EAR-controlled “technology” would be broadened to include “foundational information” and “know-how.” The bill also requires that lists of controlled items be published “in a form that facilitates compliance with it, particularly by small- and medium-sized businesses, and academic institutions.”
After its introduction, H.R. 5040 was referred to the House Committee on Foreign Affairs and the House Committee on Oversight and Government Reform. No hearings have been scheduled. The full text of the bill can be found on the U.S. Library of Congress website at https://www.congress.gov/bill/115th-congress/house-bill/5040/text?r=26. Updates about actions on the bill will appear at https://www.congress.gov/bill/115th-congress/house-bill/5040/all-actions?r=26&overview=closed#tabs.
Department of Commerce – Bureau of Industry and Security
BIS Seeks Public Comments On “600 Series ECCNs”
Feb. 12, 2018 – 83 Fed. Reg. 5968: The Bureau of Industry and Security (BIS) requested public comments on matters related to implementation of the “600 series” of the Commerce Control List (CCL, EAR Part 774, Supplement No. 1), which covers items transferred from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) as part of the Obama administration’s Export Control Reform Initiative (ECRI). Specifically, BIS desires comments on the clarity, usability, potential cost savings, and any other matters related to the following “600 series” Export Control Classification Numbers (ECCNs):
- Energetic Materials (ECCNs 1B608, 1C608, 1D608, and 1E608);
- Armored and Protective "Equipment" (ECCNs 1A613, 1B613, 1D613 and 1E613);
- Military Electronics (ECCNs 3A611, 3B611, 3D611 and 3E611); and
- Cryogenic and Superconducting Equipment (ECCNs 9A620, 9B620, 9D620 and 9E620).
This BIS review complements a review by the State Department of the corresponding categories in the USML. (See below, in State Department section.) Deadline for comments is April 13, 2018.
BIS Adds 21 Entities In 3 Countries To The Entity List
Feb. 16, 2018 – 83 Fed. Reg. 6949: BIS amended the EAR by adding 21 entities in 3 countries to the Entity List (EAR Part 744, Supp. No. 4) based on the determination that they had been involved in activities contrary to the national security or foreign policy interests of the U.S. by violating international law and fueling the conflict in eastern Ukraine. The added entities are:
(1) ZAO Vneshtorgservis, Tskhinval, South Ossetia.
(1) Doncoaltrade SP Z O O, Katowice.
(1) Evro Polis Ltd., a.k.a., the following two aliases: Evro Polis, OOO and Obshchestvo S Ogranichennoi Otvetstvennostyu Evro Polis, Krasnogorsk;
(2) Instar Lodzhistiks, OOO, a.k.a., the following one alias: Instar Logistics, Moscow;
(3) Kaliningradnefteprodukt OOO, a.k.a., the following three aliases: Kaliningradnefteprodukt LLC, Limited Liability Company Kaliningradnefteproduct, and LLC Kaliningradnefteproduct, Kaliningrad;
(4) Kinef OOO, a.k.a., the following three aliases: Kinef, LLC, Limited Liability Company Production Association Kirishinefteorgsintez, and LLC Kinef, Kirishi, Leningradskaya Oblast;
(5) Kirishiavtoservis OOO, a.k.a., the following two aliases: Limited Liability Company Kirishiavtoservis and LLC Kirishiavtoservis, St. Petersburg;
(6) Kompaniya Gaz-Alyans, OOO, a.k.a., the following three aliases: Company Gaz-Alliance LLC, Kompaniya Gaz-Alyans, OOO, and Obshchestvo S Ogranichennoi Otvetstvennostyu Kompaniya Gaz-Alyans, Nizhni Novgorod;
(7) Lengiproneftekhim OOO, a.k.a., the following three aliases: Institut Po Proektirovaniyu Predpriyaty Neftepererabatyvayuschey I Neftekhimicheskoy Promyshlennosti, Limited Liability Company, Limited Liability Company Oil Refining and Petrochemical Facilities Design Institute, and LLC Lengiproneftekhim, St. Petersburg;
(8) Limited Liability Company Foreign Economic Association Technopromexport, a.k.a., the following three aliases: Obschestvo S Ogranichennoi Otvestvennostyu Vneshneekonomicheskoe Obedinenie Tekhnopromeksport, OOO VO Technopromexport, and OOO VO TPE, Moscow;
(9) Media-Invest OOO, a.k.a., the following two aliases: Limited Liability Company Media-Invest and LLC Media-Invest, Moscow;
(10) Novgorodnefteprodukt OOO, a.k.a., the following three aliases: Limited Liability Company Novgorodnefteproduct, LLC Novgorodnefteproduct, and Novgorodnefteprodukt LLC, Novgorod;
(11) PJSC Power Machines, a.k.a., the following three aliases: Open Joint Stock Company Power Machines-ZTL, LMZ, Electrosila, Energomachexport; Publichnoe Aktsionernoe Obshchestvo Silovye Mashiny-ZTL, LMZ, Elektrosila, Energomasheksport; and -Silovye Mashiny, PAO, St. Petersburg;
(12) Pskovnefteprodukt OOO, a.k.a., the following two aliases: Limited Liability Company Marketing Association Pskovnefteproduct and LLC Pskovnefteproduct, Pskov;
(13) SNGB AO, a.k.a., the following three aliases: Closed Joint Stock Company Surgutneftegasbank (ZAO SNGB), Joint Stock Company Surgutneftegasbank, and JSC BANK SNGB, Surgut;
(14) SO Tvernefteprodukt OOO, a.k.a., the following two aliases: Limited Liability Company Marketing Association Tvernefteproduct and LLC MA Tvernefteproduct, Tver;
(15) Sovkhoz Chervishevski PAO, a.k.a., the following three aliases: OJSC Sovkhoz Chervishevsky, Open Joint Stock Company Sovkhoz Chervishevsky, and Sovkhoz Chervishevsky, JSC, Chervichevsky, Tyumensky Rayon, Tyumensky Oblast;
(16) Strakhovove Obshchestvo Surgutneftegaz OOO, a.k.a., the following three aliases: Insurance Company Surgutneftegas, LLC,Limited Liability Company Insurance Company Surgutneftegas, and LLC Insurance Company Surgutneftegas, Surgut;
(17) Surgutmebel OOO, a.k.a., the following four aliases: Limited Liability Company Syrgutmebel, LLC Surgutmebel, LLC Syrgutmebel, and -Surgutmebel, LLC, Poselok Barsovo, Surgutsky District, Yugra, Khanty-Mansiysky Autonomos Okrug;
(18) Ugolnye Tekhnologii, OOO, a.k.a., the following two aliases: Coal Technologies and Obshchestvo S Ogranichennoi Otvetstvennostyu "Ugolnye Tekhnologii", Rostov-on-Don; and
(19) VAD, AO, a.k.a, the following seven aliases: Aktsionernoe Obshchestvo VAD, -AO, VAD, CJSC VAD-Joint Stock Company VAD, JSC VAD, ZAO VAD, and High-Quality Highways, Vologda and St. Petersburg.
For all these entities BIS imposed a license requirement for all items subject to the EAR with a license review policy of presumption of denial, and no license exceptions will be available for exports, reexports, or in-country transfers to them. The license requirements apply to any transaction in which items subject to the EAR are to be exported, reexported, or transferred (in-country) to any of the listed entities or in which such an entity acts as purchaser, intermediate consignee, ultimate consignee, or end-user.
Department of Commerce – Census Bureau
Census Publishes 2018 Updated 10-digit Schedule B Commodity Classification Codes
Feb. 5, 2018: The Census Bureau noted that updated 10-digit Schedule B commodity classification codes for 2018 have been published. The full list of 2018 codes, including a full list of codes added and deleted since January 2017 and a list of obsolete codes, is on the Census Bureau website at https://www.census.gov/foreign-trade/schedules/b/2018/index.html. Also, the Schedule B Search Engine at https://uscensus.prod.3ceonline.com/ can be used to determine whether any Schedule B number is still valid.
Department of State
DDTC Name and Address Changes Posted To Website
Feb. 1 and 12, 2018: 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:
- Angst + Pfister changed address; and
- Change in name and address from GSI Group Europe GmbH to Novanta Europe GmbH due to corporate rebranding.
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 Requests Public Comments On USML Categories V, X, and XI
Feb. 12, 2018 – 83 Fed. Reg. 5970: DDTC requested public comments on the controls implemented in recent revisions to USML Categories V (Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents), X (Personal Protective Equipment), and XI (Military Electronics). Topics of specific interest to DDTC include emerging and new technologies that would appropriately be controlled in these categories; articles described in the categories that have entered into commercial use or are likely to do so within the next 5 years; drafting or other technical issues in the text of the categories; and potential cost savings to private entities from shifting jurisdiction from the ITAR to the EAR.
This DDTC review complements a review by the Commerce Department of the corresponding items in the CCL. (See above, in Commerce Department section.) Deadline for comments is April 13, 2018.
DDTC Adds South Sudan To Section 126.1(d)(2) Of The ITAR
Feb. 14, 2018 – 83 Fed. Reg. 6457: DDTC amended the International Traffic Arms Regulations (ITAR, 22 CFR Parts 120-130) by adding South Sudan to the list of countries in Sec. 126.1(d)(2) to which a policy of denial applies and adding a new paragraph 126.1(w) to specify the exceptions to the policy of denial to which applications may be approved on a case-by-case basis. In the announcement DDTC also noted that pursuant to ITAR Sec. 129.7, brokering or proposing to engage in brokering activities subject to the ITAR that involve South Sudan will henceforth require the prior approval of DDTC. The policy of denial was initially announced on Feb. 2, 2018, in a notice with immediate effect on the DDTC home page at http://www.pmddtc.state.gov.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Feb. 2, 2018 – 83 Fed. Reg. 4897: BIS issued a 180-day Temporary Restraining Order (TRO) against the following persons, all of Istanbul, Turkey:
- Gulnihal Yegane;
- Trigron Lojistik Kargo Limited Sirketi;
- Ufuk Avia Lojistik Limited Sirketi; and
- RA Havacilik Lojistik Ve Tasimacilik Ticaret Limited Sirketi.
Yegane, who is on BIS’ Entity List, owns, controls, or is otherwise affiliated with the remaining three persons. The TRO is based on findings that all of these persons have been involved in illegally procuring U.S.-origin aircraft engines and parts for the Iranian airline Mahan Airways and other Iranian airlines. Mahan Airways is on BIS’ Denied Persons List and has been designated by the Treasury Department Office of Foreign Assets Control (OFAC) as a Specially Designated Global Terrorist.
Feb. 14, 2018 – 83 Fed. Reg. 6510: BIS denied the export privileges of Justin Gage Jangraw of Key West, FL, until Nov. 21, 2019, based on his conviction in 2014 of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by knowingly and willingly exporting 3 ITAR-controlled Magpul angled fore grips and Magpul battery-assisted device levers to Austria without the required license from the Department of State. In the criminal case, Jangraw was sentenced to 8 months in prison, one year of supervised release, and a $125 assessment.
Feb. 20, 2018 – 83 Fed. Reg. 7144: BIS denied the export privileges of Irina Cvetkovic of Marianna, FL, until April 26, 2027, based on her conviction, in 2017, of violating the AECA by knowingly and willfully exporting two ITAR-controlled Ruger model SR22 semi-automatic pistols, two silencers, and 1,000 rounds of ammunition to Hong Kong without the required license from the Department of State. In the criminal case, Cvetkovic was sentenced to 10 months in prison with credit for time served, one year of supervised release, and a $100 special assessment.
Fines and Penalties
Feb. 9, 2018: Mitsui Plastics, Inc., of White Plains, NY, agreed to pay a civil penalty of $28,600 to settle charges by BIS that it had violated the Antiboycott Regulations (EAR Part 760) by furnishing information about business relationships with boycotted countries or blacklisted persons (2 violations) and failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. (7 violations). The alleged violations all involved transactions between the U.S. and Bahrain.
Feb. 16, 2018: The Department of Justice announced the indictment of Usama Darwich Hamade, Samir Ahmed Berro, and Issam Darwich Hamade on charges of violating the IEEPA, the EAR, and the ITAR by conspiring to illegally export goods and technology to Lebanon, specifically to Hizballah, without obtaining the required licenses from the U.S. Departments of Commerce and State. The illegally exported items included inertial measurement units suitable for use in unmanned aerial vehicles, a jet engine, piston engines, and recording binoculars. Usama Hamade and Issam Hamade are currently in custody in South Africa, and the U.S. is seeking their extradition. Berro remains at large.
Feb. 16, 2018: Scott Douglas Browning, of Fayetteville, NC, was indicted in federal court in Raleigh, NC, for violating the ITAR and other laws by selling unidentified military property stolen from Fort Bragg to the Netherlands without the required authorization from the State Department, as well as selling more than $1.5 million of stolen military equipment in the U.S. Browning allegedly utilized eBay accounts to sell and export the stolen equipment after he had been formally notified that such transactions were in violation of federal export law.
Feb. 27, 2018: Tengiz Sydykov and Eldar Rezvanov, Kyrgyzstan citizens resident in Alexandria, VA, were arrested and charged with violating the AECA and other laws by attempting to ship over 100 disassembled firearms to Chechnya without the required authorization. Sydykov, who is the son of a former Kyrgyz ambassador to the U.S., and Rezvanov allegedly used false shipping inventories and disguised the disassembled firearms as kitchen utensils.
Feb. 27, 2018: Frederik Barbieri, of Port St. Lucie, FL, was indicted on several charges relating to the illegal exportation to Brazil of firearms, firearm accessories, and ammunition, including exporting firearms without the required license from the State Department. In an alleged four-year conspiracy, Barbieri and his co-conspirators allegedly purchased firearms, firearm accessories, and ammunition, and then obliterated the serial numbers from the firearms. They then concealed the firearms, firearm accessories, and ammunition in different packages and shipped the packages to Brazil, where Barbieri and his co-conspirators would sell them at a profit. Barbieri was reportedly considered Brazil’s biggest firearms dealer, and the Brazilian government has reportedly requested that he be extradited to Brazil.