LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
This newsletter is a listing of the latest changes in export control regulations through April 30, 2021. 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.
The U.S. Court Of Appeals For The Ninth Circuit Overturned A Preliminary Nationwide Injunction Regarding Technical Data And Software Related To 3D Printed Guns
April 27, 2021: The U.S. Court of Appeals for the Ninth Circuit overturned a preliminary nationwide injunction issued by the U.S. District Court for the Western District of Washington in Seattle, WA on March 6, 2020 (see March 2020 Regulatory Update) that prohibited the transfer of jurisdiction over “technical data and software directly related to the production of firearms or firearm parts using a 3D-printer or similar equipment” from the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). (This transfer would otherwise have occurred as part of the implementation of the rules adopted Jan. 23, 2020, by the Commerce Department (85 Fed. Reg. 4136) and the State Department (85 Fed. Reg. 3819), effective March 9, 2020, that transferred jurisdiction over many firearms and related technologies controlled under USML Categories I, II, and III from the State Department to the Commerce Department.) The Ninth Circuit based its decision on a holding that the District Court did not have jurisdiction to review agency determinations of whether any item is, or is not, a “defense article” because the International Security Assistance and Arms Export Control Act of 1976 (22 U.S.C. § 2778(a)(1)) “precluded judicial review of both the designation and undesignation of items as defense articles.”
See the State Department section below for an announcement that the State Department will continue to enforce implementation of the District Court’s injunction, maintaining the technical data as export controlled ITAR data.
President Biden Issued Additional Russia Sanctions Via Executive Order 14024
April 18, 2021 – 86 Fed. Reg. 20249: President Biden issued Executive Order 14024 of April 15, 2021, “Blocking Property With Respect To Specified Harmful Foreign Activities Of The Government Of The Russian Federation.” The harmful foreign activities of the Government of the Russian Federation that underlay E.O. 14024 included, among others, undermining the conduct of free and fair democratic elections in the U.S. and its allies, engaging in and facilitating “malicious cyber-enabled activities,” and fostering and using transnational corruption to influence foreign governments. E.O. 14024 authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to block property and impose other sanctions on Russian persons found to be involved in any of a wide range of malign activities. The sanctions do not involve the Export Administration Regulations (EAR, 15 CFR Parts 730-774) or the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). A White House Fact Sheet about E.O. 14024 and its implementation is on the White House website at https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/15/fact-sheet-imposing-costs-for-harmful-foreign-activities-by-the-russian-government/. See information about the implementation of E.O. 14024 in the Treasury Department Sanctions section below.
Department of Commerce – Bureau of Industry and Security
BIS Applied Military Intelligence-Related Controls To Burma (Myanmar)
April 9, 2021 – 86 Fed. Reg. 18433: The Bureau of Industry and Security (BIS) amended the EAR to apply military intelligence-related controls to Burma (Myanmar) and to restrict U.S. persons’ activities in connection with military-intelligence end uses and end-users in Burma. Specifically, EAR Sec. 744.22 was amended to impose a license requirement on the export, reexport, or transfer (in-country) of any item subject to the EAR if an exporter, reexporter, or transferor has knowledge, or is informed by BIS, that the item is destined for a military-intelligence end use or end-user in Burma, expressly including Burma’s Office of Chief of Military Security Affairs (OCMSA) and the Directorate of Signal, a branch of the Burmese Army responsible for the military telecommunications network. Also, EAR Sec. 736.2(b)(7)(i)(A)(5) (General Prohibition Seven, on U.S. Person controls) and Sec. 744.6(b)(5) (Restrictions on specific activities of ‘‘U.S. Persons’’) are revised by adding Burma to the list of countries in which U.S. persons are prohibited from supporting military intelligence end uses or end users, even when such support does not involve an item subject to the EAR.
In the same rule, BIS also made further technical corrections and conforming changes to the Jan. 15, 2021 (86 Fed. Reg. 4865) rule that amended the EAR to implement, among other things, controls on exports, reexports, and transfers (in-country), as well as specific activities of U.S. persons, in connection with military-intelligence end uses and end-users in China, Cuba, Iran, North Korea, Russia, Syria, and Venezuela. (See January 2021 and March 2021 Regulatory Updates for information on original Jan. 15 rule and technical corrections made March 17, 2021 (86 Fed. Reg. 14534).)
This interim final rule became effective April 9, 2021.
BIS Added Seven Chinese Supercomputing Entities To The Entity List
April 9, 2021 – 86 Fed. Reg. 18437: BIS added seven Chinese supercomputing entities to the Entity List (15 CFR Part 744, Supp. No. 4) based on their procurement of U.S.-origin items for activities that support China’s military actors, its destabilizing military modernization efforts, and/or its weapons of mass destruction (WMD) programs. The 7 entities are:
- National Supercomputing Center Jinan;
- National Supercomputing Center Shenzhen;
- National Supercomputing Center Wuxi;
- National Supercomputer Center Zhengzhou;
- Shanghai High-Performance Integrated Circuit Design Center;
- Sunway Microelectronics; and
- Tianjin Phytium Information Technology.
For these entities, BIS imposes a license requirement with a license review policy of a presumption of denial for all items subject to the EAR. In addition, no license exceptions will be available for exports, reexports, or transfers (in-country) to these entities.
Department of State
DDTC Name And Address Changes Posted To Website
April 5, 7, 12, 14, 21, and 30, 2021: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- Change in Name from Pratt & Miller Engineering & Fabrication Inc. to Pratt & Miller Engineering & Fabrication LLC due to corporate restructure;
- Change in Name and Address from Leonardo MW Ltd to Leonardo UK Ltd due to corporate reorganization;
- Change in Name of Babcock Spain entities due to corporate rebranding as follows:
Helisureste Centro de Mantenimiento Aeronautico SA; Babcock Mission Critical Services Espana
Helicopteros del Sureste SAU; SA
Helicsa Helicopteros, SAU;
Inaer Helicopteros Off Shore SAU;
Transportes Aereos del Sur SA;
Transportes Aereos del Sur SLU;
Helisureste Centro de Mantenimiento Aeronautico SA;
Inaer Maintenance SA Heliasset SL; Babcock Mission Critical Services Asset
Inaer Asset Management SAU Management SAU
Inesair Fleet Spain SLU; Babcock Mission Critical Services Fleet
Inaer Fleet Management SAU Management SAU
Prioris Aviation Spain SAU; Babcock Mission Critical Services Group
Avincis Mission Critical Services Group SAU SAU
Inaer Inversionres Aereas SL; Babcock Mission Critical Services SAU
Inaer Aviation Spain SAU;
Avincis Mission Critical Services SAU Idomeneo SLU;
Inaer Aviation International SLU; Babcock Mission Critical Services
Inaer Aviation International SAU International SAU
Heli-Europa SA; Babcock Mission Critical Services
Heli-Europa SL; Galicia SL
Inaer Galicia SL
- Change in Name from SAVIS Tecnologia e Sistemas S/A to Embraer S.A. due to merger of Savis with Embraer;
- Change in Name of FLIR Radars Inc. and 360 Surveillance Inc. to FLIR Unmanned Aerial Systems ULC due to corporate restructure;
- Change in Name from Milrem LCM to Milworks OU due to corporate rebranding;
- Panta Aerospace B.V. Acquires GKN Aerospace Netherlands B.V. Subsidiaries Fokker Services B.V. and Fokker Techniek B.V. (Names/Addresses Unchanged); and
- Due to Corporate Reorganizaiton HENSOLDT AG is now a party to DSP authorizations and agreements to which HENSOLDT Holding Germany GmbH, its German subsidiary, is a party.
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 Issued A Factsheet, “Summary Of Changes To International Traffic in Arms Regulations Sec. 126.1 – Russia” And Updated FAQs
April 12, 2021: DDTC issued a Factsheet, “Summary of Changes to International Traffic in Arms Regulations Sec. 126.1 – Russia,” and updated Frequently Asked Questions (FAQs) related to the March 18, 2021 amendment (86 Fed. Reg. 14802 – see March 2021 Regulatory Update) that subjected Russia to the coverage of ITAR Sec. 126.1(d)(2), which applies a policy of denial for exports, subject to an exception in Sec. 126.1(l) providing that a license or other approval may be issued on a case-by-case basis (1) for government space cooperation, and (2) prior to September 1, 2021, for commercial space launches; and also amends ITAR Sec. 126.1(a) to allow exporters to use the exemptions provided in
ITAR § 126.4(a)(2) and (b)(2) for exports to Russia when in support of government space cooperation. The Factsheet and related FAQs are on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=a6baec641baf2c14d1f1ea02f54bcbfc ; many more new FAQs are at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_cat&topic=840e3f6cdb3bc30044f9ff621f9619c0&subtopic=e4d3fc6c1b236c14d1f1ea02f54bcbb3#e4d3fc6c1b236c14d1f1ea02f54bcbb3 .
DDTC Issued A Notice That It Is Still Enforcing The Court Injunction Treating Technical Data And Software Related To 3D Printed Firearms As ITAR Controlled
April 30, 2021: DDTC issued a notice ( https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_news_and_events ) stating that it is continuing to enforce the March 6, 2020 injunction calling for the treatment of “technical data and software directly related to the production of firearms or firearm parts using a 3D-printer or similar equipment” as subject to control on the U.S. Munitions List (USML, 22 CFR Sec. 121.1), because the opinion issued by the Ninth Circuit Court of Appeals (see Courts section above) that mandates vacating that injunction will not go into force until certain further court procedures have been completed.
Department of the Treasury
OFAC Published New Syria FAQs
April 5, 2021: The Office of Foreign Assets Control (OFAC) published new Syria FAQs 884 and 885. FAQ 884 states that non-U.S. persons who engage in or facilitate activities that would be authorized for a U.S. person under a general license issued pursuant to the Syrian Sanctions Regulations (SySR) do not risk exposure to U.S. secondary sanctions pursuant to the Caesar Syria Civilian Protection Act of 2019 (Caesar Act). FAQ 885 states the general rule that U.S. and non-U.S. persons, including nongovernmental organizations (NGOs) and foreign financial institutions, may provide or facilitate certain humanitarian assistance to Syria without the risk of sanctions; recommends contacting the BIS Foreign Policy Division for questions specific to transactions involving items subject to the EAR destined to Syria; and for additional information cites OFAC’s April 16, 2020 Fact Sheet on Provision of Humanitarian Assistance and Trade to Combat COVID-19 (https://home.treasury.gov/system/files/126/covid19_factsheet_20200416.pdf; see April 2020 Regulatory Update). FAQ 885 also states as a general principle applicable to transactions by non-governmental organizations that may implicate sanctioned persons or countries that “OFAC remains committed to ensuring that humanitarian assistance can flow to the people of Syria and maintains a favorable policy supporting the provision of humanitarian assistance.” FAQs 884 and 885 are on the Treasury Department website at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/884 and https://home.treasury.gov/policy-issues/financial-sanctions/faqs/885 .
The Treasury Department Published Its Quarterly List Of Countries That Require Or May Require Participation In, Or Cooperation With, An International Boycott And Removes The UAE From The List
April 8, 2021 – 86 Fed. Reg. 18374: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The countries named are Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, and Yemen. The Treasury Department states that the United Arab Emirates (UAE) has been removed from the list due to the repeal of its law mandating a boycott of Israel and subsequent UAE government actions to implement this new policy. Exporters and others should note, however, that this action by the Treasury Department does not change the scope or the substantive rules and reporting requirements of the Anti-Boycott Regulations (ABR, EAR Part 760) administered by the Department of Commerce Office of Anti-Boycott Compliance (OABC).
OFAC Published FAQs Regarding Format Options For OFAC License Applications
April 12, 2021: OFAC published amended FAQ 97 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/97) and FAQ 98 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/98), which address presentation and format options for license applications pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA).
OFAC Published Two Amended FAQs On Sudan-related Sanctions
April 12, 2021: OFAC published two amended FAQs on Sudan-related sanctions issues. FAQ 500 (https://home.treasury.gov/policy-issues/financial-sanctions/faqs/500 ) states that no license from OFAC is required to export or reexport agricultural commodities, medicines, or medical devices to Sudan, and FAQ 836 ( https://home.treasury.gov/policy-issues/financial-sanctions/faqs/836 ) summarizes the few Sudan-related sanctions that remain in effect since the Sudanese Sanctions Regulations (SSR, 31 C.F.R. Part 538) were revoked on June 28, 2018.
OFAC Amended The Somalia Sanctions Regulations
April 28, 2021 – 86 Fed. Reg. 22346: OFAC amended the Somalia Sanctions Regulations (31 CFR Part 551) by reissuing them in their entirety, replacing regulations that were published in abbreviated form on May 5, 2010. Effective April 28, 2021, this new final rule includes additional interpretive and definitional guidance, general licenses, statements of licensing policy, and other regulatory provisions to provide further guidance to the public.
OFAC Moved Its its Non-SDN Communist Chinese Military Companies (NS-CCMC) List To Its Standard List Format
April 30, 2021: OFAC announced that it will migrate its Non-SDN Communist Chinese Military Companies (NS-CCMC) List from its current temporary PDF and CSV format to the standard OFAC list format and that this data will now be included in OFAC's Non-SDN Consolidated Data Files for machine processing. Human-readable versions of the NS-CCMC list will now be available on a dedicated NS-CCMC landing page.
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 the Treasury
April 15, 2021: OFAC took numerous actions to implement Executive Order 14024, “Blocking Property With Respect To Specified Harmful Foreign Activities Of The Government Of The Russian Federation,” signed by President Biden on April 15, 2021. (See The President section above.) In accordance with E.O. 14024, these actions involve sanctions such as blocking property, prohibiting U.S. financial institutions from participating in the primary market for Russia’s sovereign debt, and adding persons to the Specially Designated Nationals (SDNs) List; they do not involve the EAR or the ITAR. A Treasury Department release at https://home.treasury.gov/news/press-releases/jy0127 summarizes the sanctions and identifies the sanctioned Russian persons that are designated as Russian Companies in the Technology Sector Supporting Russian Intelligence Services and Russian Malicious Cyber Actors; another Treasury Department release at https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20210415 includes links to new FAQs 886, 887, 888, 889, 890, and 891 and updated FAQs 673, 674, 675, and 676.
Fines and Penalties
April 15, 2021: Harsimran Singh and Panther Trading Company, Inc. (PTC), both of Landsdowne, MD, have agreed to pay a civil penalty of $42,000, for which they are jointly and severally liable, to settle charges by BIS that they committed three violations of EAR Sec. 764.2(a) (two violations by engaging in prohibited conduct by exporting items controlled for crime control reasons to Mexico without BIS authorization and one violation by exporting items controlled for crime control reasons to the Dominican Republic without BIS authorization) and one violation of EAR Sec. 764.2(b) (causing, aiding, or abetting exports of crime control items to Nigeria without BIS authorization). A payment of $12,500 will be paid within 30 days, and the remaining $29,500 will be suspended for one year and then waived, provided that Singh and PTC have made full and timely payment of the $12,500 and have committed no further violations of the Export Control Reform Act (ECRA, 50 U.S.C. § 4801 et seq.), the EAR, or any order, license or authorization issued thereunder.
April 19, 2021: OFAC announced that Alliance Steel, Inc. of Oklahoma City, OK, a designer and manufacturer of prefabricated steel structures, agreed to pay $435,003 to settle its potential civil liability for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) when on at least 61 occasions it knowingly imported engineering services from a third-party engineering company located in Tehran, Iran. Alliance sells its products exclusively to domestic consumers, does not export goods or services, and does not market itself outside the United States. However, when demand for engineering services exceeded its available resources, it outsourced the work to third-party contractors, including an Iranian engineering company. Numerous senior managers were aware that the subcontractor was an Iranian company, and several were involved in the process of approving and paying for each transaction with the Iranian company. However, Alliance asserted that because the company otherwise operates entirely within the United States, these management officials were “not attuned to the laws and regulations administered by OFAC.”
In the announcement of this case (https://home.treasury.gov/system/files/126/20210419_alliance.pdf), OFAC notes that this enforcement action demonstrates the importance of developing and maintaining effective, risk-based sanctions compliance controls, even for companies operating predominantly within the United States, and recommends several OFAC resources that can aid in this task.
April 28, 2021: Shuren Qin, a Chinese national residing in Wellesley, MA, pleaded guilty in Federal District Court in Boston, MA in connection with illegally procuring and causing the illegal export of $100,000 worth of U.S.-origin hydrophones to Northwestern Polytechnical University (NWPU), a Chinese military university that works closely with the People’s Liberation Army, to one count of conspiracy to unlawfully export items from the U.S. to NWPU without first obtaining the required export licenses as well as counts of visa fraud, making false statements to law enforcement agents, money laundering, and smuggling. Qin and his company, LinkOcean, concealed from the U.S. manufacturer of the hydrophones that NWPU was the true end-user, thereby causing false end-user information to be filed with the U.S. government.
April 29, 2021: FLIR Systems, Inc., of Wilsonville, OR agreed to pay an administrative fine of $307,922 to resolve allegations by BIS that it made inaccurate or incomplete representations in the course of seeking a commodity jurisdiction determination that a newly developed Uncooled Focal Plane Array (UFPA) was subject to the EAR rather than the ITAR. In response to concerns expressed by the U.S. Government about possible diversion of the UFPA to end-users of concern, FLIR represented that the UFPA was designed specifically for insertion into commercial smartphones and that FLIR recognized the need to prevent diversion to other uses, while internally contemplating other markets and developing plans for military applications. Later, FLIR sold cameras incorporating the UFPA to a Norwegian customer in the defense industry. FLIR also represented to USG officials that its UFPAs incorporated novel anti-tamper encryption protection, but it never actually developed or added such protection to the UFPA.
April 29, 2021: SAP SE of Walldorf, Germany, entered into separate agreements with the U.S. Departments of Justice, Commerce, and Treasury as part of a global resolution of voluntary disclosures to all three agencies of violations of the EAR and the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). All three cases involved the export of SAP software products to Iran in two ways: releasing U.S.-origin software, including upgrades or software patches, more than 20,000 times to users in Iran without using geolocation filters to identify and block Iranian nationals, and allowing foreign subsidiaries to permit approximately 2,360 Iranian users to access U.S.-based cloud services from Iran.
The charges by DOJ resulted in a non-prosecution agreement that recognized the importance of SAP’s voluntary self-disclosures and cooperation with the government during and after the three-year investigation, spending more than $27 million on measures including remediating and implementing changes in its export compliance and sanctions program, deactivating thousands of users of SAP cloud-based services based in Iran, instituting automated sanctioned party screening of its affiliates, auditing and suspending partners that sold to Iran-affiliated customers, hiring experienced U.S.-based export controls staff, and conducting more robust due diligence regarding new acquisitions. SAP will also disgorge $5.14 million of ill-gotten gain. The Commerce Department case concluded with an administrative settlement of $3,290,000 and a requirement of three annual audits. The Treasury Department case concluded with an administrative settlement of $2,132,174, which will be satisfied by the penalties assessed by DOJ and DOC.
In its announcement, DOJ stated that this is the first case in which a voluntary self-disclosure of export violations led to a non-prosecution agreement between the violating company and the DOJ. Also, it encouraged companies to voluntarily self-disclose all potentially willful violations of the statutes implementing the U.S. government’s primary export control and sanctions regimes — the Arms Export Control Act (AECA), the Export Control Reform Act (ECRA), and the International Emergency Economic Powers Act (IEEPA), — directly to the National Security Division (NSD). DOJ also recommended a DOJ publication as a source of guidance for future cases: Export Control And Sanctions Enforcement Policy For Business Organizations, https://www.justice.gov/nsd/ces_vsd_policy_2019/download (Dec. 13, 2019).