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.
Department of Commerce – Bureau of Industry and Security
BIS Clarifies License Exceptions GOV and STA
Nov. 1, 2017 – 82 Fed. Reg. 50511: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to clarify the intended use of License Exception GOV (Governments, International Organizations, International Inspections under the Chemical Weapons Convention, and the International Space Station, EAR Sec. 740.11) and License Exception STA (Strategic Trade Authorization, EAR Sec. 740.20). BIS emphasized that the clarifications are based on existing agency interpretations, including Frequently Asked Questions (FAQs), and do not change the applicability or any other requirements for the use of these License Exceptions.
BIS Implements The National Security Presidential Memorandum on Strengthening The U.S. Policy On Cuba
Nov. 9, 2017 – 82 Fed. Reg. 51983: BIS took action to implement the June 2017 National Security Presidential Memorandum on Strengthening the U.S. Policy on Cuba (Cuba NSPM – see description of this policy in June 2017 Regulatory Update) by establishing a general policy of denial of applications for licenses to export or reexport items for use by entities on a new list established by the State Department (see item in State Department section below) unless the transaction is otherwise consistent with the NSPM. In the same action BIS supported the NSPM’s policy to foster free enterprise in Cuba by simplifying and expanding License Exceptions Support for the Cuban People (SCP, EAR Sec. 740.21), Gift Parcels and Humanitarian Donations (GFT, EAR Sec. 740.12), and Consumer Communications Devices (CCD, EAR Sec. 740.19). These actions were coordinated with actions by the State Department and the Treasury Department (see items below). A joint Fact Sheet describing the actions taken by all three agencies is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_11082017.pdf. A Fact Sheet detailing the new BIS rules and policies on exports and reexports to Cuba is on the BIS website at https://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/cuba, and BIS FAQs are at https://www.bis.doc.gov/index.php/forms-documents/pdfs/1568-bis-cuba-consolidated-faqs-3/file. Refer to the article published on FD Associates’ website for additional details.
Department of Commerce – Census Bureau
Census Posts Blog On Routed Export Transactions
Nov. 8, 2017: The Census Bureau published a blog post aimed at combating the fear of routed export transactions (RETs). Titled “A Guide for the U.S. Authorized Agent and U.S. Principal Party in Interest,” it includes sections on Advice for All Parties in a RET, Advice for the U.S. Principal Party in Interest, and Advice for the U.S. Authorized Agent. The post is available on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2017/10/combating_the_fearo.html.
Department of Commerce – Office of Space Commerce
Second Edition Of The U.S. Export Controls for the Commercial Space Industry Has Been Published
November 2017: The Office of Space Commerce (OSC) of the Department of Commerce and the Office of Commercial Space Transportation (OCST) of the Department of Transportation Federal Aviation Administration (FAA) jointly published a second edition of their U.S. Export Controls for the Commercial Space Industry. This 76-page manual is a practical guide covering the entire military and dual-use export control process including classification (incorporating Export Control Reform changes), the use of License Exceptions, the licensing process, and compliance after license authorization. The manual can be accessed at http://www.space.commerce.gov/wp-content/uploads/2017-export-controls-guidebook.pdf.
Department of State
DDTC Name and Address Changes Posted To Website
Nov. 1, 13, and 21, 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 Name from Icon Polymer to Iocn Aerospace Technology Ltd. due to corporate reorganization;
- Change in Names for each of the following, from NEC Engineering, Ltd. (NECE), NEC Network Products, Ltd. (NECNP), NEC Yamanashi, Ltd. (NECY), and NEC Communication Systems, Ltd. (NECCS), respectively, to NEC Platforms, Ltd., due to corporate reorganization;
- Change in Name from HS Wroclaw Sp. Z.o.o. to UTC Aerospace Systems Wroclaw Sp. Z.o.o. due to corporate merger;
- Change in Name from KMWE Precise Eindhoven B.V. to KMWE Precision B.V. due to corporate rebranding;
- Change in Address for Thales Alenia Space UK Ltd.;
- Change in Names for each of the following, from Thales Training & Simulation SAS, Thales Avionics LCD SAS, Thales Electron Devices SAS, Thales Underwater Systems SAS, Thales Microelectronics SAS, Thales Angenieux SAS, TDA Armements SAS, Thales Air Operations SAS, Thales Cryogenie SAS, and Thales Optronique SAS, respectively, to Thales LAS France SAS due to corporate reorganization; and
- Change in Address for Thales LAS France SAS.
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 Posts New Interpretation Of Category XIV(f)(7)
Nov. 1, 2017: DDTC posted a notice stating that defense articles classified under U.S. Munitions List (USML, 22 USC Part 121) Category XIV(f)(7), including Chemical Agent Resistant Coatings, are designated as Significant Military Equipment (SME), and therefore require a DSP-83 non-transfer and use certificate. The notice is on the DDTC home page, http://www.pmddtc.state.gov/. This notice revises previous published guidance provided by DDTC that CARC was not SME and did not require a DSP-83.
Department of State Posts Cuba Restricted List
Nov. 9, 2017 – 82 Fed. Reg. 52089: Implementing the Cuba NSPM announced in June 2017 (see Commerce Department section above), the Department of State published a List of Entities and Sub-Entities Associated with Cuba (the Cuba Restricted List) identifying entities and sub-entities that are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel. Direct financial transactions with listed entities will generally be prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515 – see item below in Treasury Department section), and the list will also be considered by BIS when it reviews license applications. The Cuba Restricted List and FAQs about it are on the State Department website at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/index.htm.
DDTC Will No Longer Accept DSP-119s To Amend DSP-85s
Nov. 14, 2017: DDTC announced that effective Dec. 1, 2017, it will no longer accept form DSP-119 to amend form DSP-85. Amendments to the DSP-85 will now require a completely new DSP-85 with a transmittal letter signed by the Empowered Official explaining the change.
Department of the Treasury
Treasury Implements The National Security Presidential Memorandum on Strengthening The U.S. Policy On Cuba
Nov. 9, 2017 – 82 Fed. Reg. 51998: To implement the Cuba NSPM, the Office of Foreign Assets Control (OFAC) amended the Cuban Assets Control Regulations (CACR, 31 CFR part 515) to restrict direct financial transactions with entities and sub-entities listed on the Cuba Restricted List, tighten the rules on educational travel to Cuba, and broaden the coverage of the term “prohibited officials of the government of Cuba.” The new provisions are aimed at channeling economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba. To assist exporters in complying with the new rules, OFAC published new and updated FAQs at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf (35, and the Treasury Department published the above-mentioned joint Fact Sheet at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_11082017.pdf.
OFAC Publishes Guidance On How To Provide Humanitarian Assistance To Iranian People Due To Earthquake
Nov. 17, 2017: In light of the recent earthquake in Iran, OFAC published a new FAQ to highlight the ways in which Americans can provide humanitarian assistance to the Iranian people, consistent with the Iran-related sanctions administered by OFAC. The FAQ describes General License E, issued in 2013 pursuant to the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560), which authorizes nongovernmental organizations to export services to Iran in support of activities related to humanitarian projects to meet basic human needs in Iran. FAQ 549 is on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#549.
LATEST SANCTIONS FINES & PENALTIES
Fines and Penalties
Sep. 29, 2017: BIS posted a warning letter issued to Phillips Specialty Products Inc. of Bartlesville, OK. Phillips allegedly violated Sec. 760.2(d) of the Antiboycott Regulations (EAR Part 760) when, in connection with the sale and/or transfer of goods or services from the U.S. to Libya, it furnished to the letter of credit advising bank a shipping certificate including the following certification: “We hereby state that the carrying vessel is allowed to enter Libyan ports.”
Nov. 2, 2017: Julian Prezas of San Antonio, TX, a former U.S. Army sergeant, was sentenced in federal court in San Antonio to 200 months in federal prison, 3 years of supervised release, and a $600 special assessment fee based on his guilty plea and conviction of making a false statement during the purchase of firearms and attempting to export defense articles listed on the USML to Mexico without the required authorization. In his guilty plea, Prezas admitted to conspiring to illegally purchase more than 40 assault rifles, actually purchasing the rifles, and delivering them to multiple individuals, one of whom delivered them to members of the Gulf Cartel in Mexico. Prezas made some of the deliveries while in uniform and in a government vehicle.
Nov. 13, 2017: Bank of America, NA agreed to pay a civil penalty of $44,625 to settle charges by BIS of 15 violations of the Antiboycott Regulations involving refusal to do business, furnishing information about business relationships with boycotted countries or blacklisted persons, 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. Bank of America voluntarily disclosed the violations, which involved transactions with the United Arab Emirates (UAE) and Kuwait.
Nov. 21, 2017: Pilot Air Freight, LLC, a/k/a Pilot Air Freight Corp., of Lima, PA, agreed to pay a civil penalty of $175,000 (of which $75,000 will be suspended through March 31, 2020 and thereafter waived if Pilot has committed no further violations) and to complete two external audits of its export control compliance program to settle charges by BIS that it violated EAR Sec. 764.2(b) by aiding or abetting an attempted unlicensed export to an entity listed on the Entity List (EAR Part 744, Supp. No. 4). Pilot, which arranged transportation to the port of export and prepared and submitted shipping documentation including Electronic Export Information (EEI) for the export of items classified under 2B991 and EAR99 to IKAN Engineering Services, a Pakistani entity listed on the Entity List, erroneously stated on the EEI that the export did not require an export license. The error occurred because Pilot had failed to connect its proprietary screening software to the system on which its customers entered and scheduled their shipments.