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.
February 2, 2018 **Pursuant to section 38(a) of the Arms Export Control Act and the delegated authority of the Secretary of State thereunder, the Secretary has determined that it is the policy of the Department of State to deny, with limited exceptions, export licenses or other approvals for defense articles and defense services subject to the International Traffic in Arms Regulations (ITAR) and destined for South Sudan. This policy is effective immediately. DDTC will publish a rule in the Federal Register to implement a conforming change to ITAR §126.1.
EU Updates Its Dual-Use Control List
Jan. 17, 2018: The European Commission issued a Corrigendum to the updated dual-use control list it adopted in September 2017 (see October 2017 Regulatory Update). The Corrigendum, which corrects 5 references to item 0B001, is on the EC website at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32017R2268R(01)&from=EN. The full EC control list is at http://trade.ec.europa.eu/doclib/docs/2017/october/tradoc_156132.pdf .
U.S. Congressional Research Service
The Congressional Research Service Released Its “The U.S. Export Control System and the Export Control Reform Initiative” Report
Jan. 8, 2018: The Congressional Research Service released “The U.S. Export Control System and the Export Control Reform Initiative,” a 28-page report that will provide background if Congress considers reauthorizing the expired Export Administration Act or enacting replacement legislation. The report describes the legislative authority and operation of current dual-use, military, and nuclear export controls; provides information on each of the four singularities of President Obama’s Export Control Reform Initiative (single licensing agency; unified single control list; unified enforcement structure; and information technology system); and also contains a section on encryption. The report is available at https://fas.org/sgp/crs/natsec/R41916.pdf.
Department of Commerce – Bureau of Industry and Security
BIS Updates Adjusts Civil Monetary Penalties For IEEPA and EAR Violations
Jan. 8, 2018 – 83 Fed. Reg. 706: The Commerce Department adjusted the Civil Monetary Penalties (CMPs) applicable to each law under its jurisdiction to implement the annual inflation adjustment required by federal law. Among these, the maximum penalty for violations of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701 -1707), including violations of the EAR, was increased from $289,238 to $295,141. The new CMPs will apply to all penalties assessed after Jan. 15, 2018, including penalties for offenses committed prior to the effective date.
BIS Corrects Errors In ECCNs
Jan. 8, 2018 – 83 Fed. Reg. 709: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to correct errors in revisions of the EAR that were published Dec. 27, 2017 (82 Fed. Reg. 61153 – see December 2017 Regulatory Update). The revisions occur in Export Control Classification Numbers (ECCNs) 0D606, 0E606, and 8A609.
BIS Adds 21 Persons in 6 Countries (Bulgaria, China, Kazakhstan, Russia, Syria, and the United Arab Emirates) to the Entity List
Jan. 26, 2018 – 83 Fed. Reg. 3577: BIS added 21 persons in 6 countries (Bulgaria, China, Kazakhstan, Russia, Syria, and the United Arab Emirates) to the Entity List (EAR Part 744, Supp. No. 4). The reasons for listing these entities included transshipping items to a person on the Entity List in China for an unauthorized military end-use; procuring or transferring items for an entity on the Entity List; procuring U.S.-origin items and transferring them to entities of the Russian military and parties on the Entity List; and conspiring to procure and divert controlled aircraft parts to the Syrian Arab Airlines, a party on the Specially Designated Nationals (SDN) List. For all these entities there will be a license requirement with a presumption of denial for all items subject to the EAR, and no license exceptions will be available to them.
Iskren Georgiev, Sofia;
Lyubka Hristova, Sofia;
Mihaela Nenova, a.k.a., Mihaela Nenova-Muhy, Sofia; and
Zhelyaz Andreev, Sofia
Chengdu Spaceon Technology Co., Ltd., a.k.a., Tianao Electronics Co., Ltd., Chengdu
Abtronics, Almaty (see Russia); and
Timofey Telegin (see Russia), Almaty
Abtronics, Yekaterinburg; and
Timofey Telegin, Yekaterinburg
Adib Zeno, Damascus, Syria;
Rizk Ali, Damascus, Syria.
United Arab Emirates:
Advanced Aerospace Industries, Abu Dhabi;
Ammar Almounajed, a.k.a., Ammar al-Mounjad. Dubai;
Deira General Marketing, Abu Dhabi;
DGL Clearing and Forwarding LLC, Abu Dhabi;
Emitech Middle East FZC, Sharjah;
Eurotech DMCC, Dubai;
Foremost International FZE, Sharjah;
Jazirah Aviation Club, Ras al Khaimah;
Modest Marketing LLC, Dubai;
Pearltrainer FZE, Sharjah;
Sky Gulf Consultancy and Researches LLC, Abu Dhabi; and
Stealth Telecom Sharjah
In the same action, BIS removed the following 3 persons from the Entity List, based on information provided by them in requests for removal and further review conducted by the End-User Review Committee:
Hosoda Taiwan Limited, Taipei
United Arab Emirates:
Euro Vision Technology, Dubai
Noun Nasreddine, a.k.a. N.A. Nasreddine, Dubai
Department of State
DDTC Name and Address Changes Posted To Website
Jan. 2 and 17, 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:
- · Change in Name for Thirty-one Computer Sciences Corporation entities as a result of the merger of Computer Sciences Corporation and the Enterprise Services Division of Hewlett Packard Enterprise HPE. These entities include:
- o Entities with names beginning with “CSC” in Korea, Singapore, India, Thailand, Hong Kong, Taiwan, Japan, Vietnam, Malaysia, South Africa, Australia, New Zealand, France, Italy, Luxembourg, and Portugal;
- o Entities with names beginning with “UXC” in Australia and New Zealand;
- o PT. CSC Indonesia;
- o CSC New Asia Holdings Pte. Ltd.;
- o CSC Computer Sciences VOF/SNC; and
- o Computer Sciences Espana, SA.
All the new names begin with “DXC.” The full names are in the announcement at http://www.pmddtc.state.gov/licensing/documents/nc/nc_ComputerSciencesCorporation.pdf.
- · Change in Name for Signalis SAS, a subsidiary of Airbus, to Airbus Defence and Space SAS due to 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.
DDTC Adjusts Civil Monetary Penalties For ITAR Violations
Jan. 3, 2018 – 83 Fed. Reg. 234: The State Department adjusted the Civil Monetary Penalties (CMPs) applicable to each law under its jurisdiction to implement the annual inflation adjustment required by federal law. The revisions for violations of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) are:
ITAR Sec. 127.10(a)(1)(i) $1,111,908 $1,134,602
ITAR Sec. 127.10(a)(1)(ii) $ 808,458 $ 824,959
ITAR Sec. 127.10(a)(1)(iii) $ 962,295 $ 982,935
The new CMPs apply to all penalties assessed on or after Jan. 3, 2018, including penalties for offenses committed prior to the effective date.
Department of the Treasury
Treasury Department Publishes Quarterly List Of Countries Related To International Boycotts
Jan. 8, 2018 (83 Fed. Reg. 966): The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates (UAE), and Yemen.
LATEST SANCTIONS FINES & PENALTIES
Fines and Penalties
Dec. 21, 2017: Great Lakes Dredge & Dock Company LLC of Oak Brook, IL, agreed to pay a $37,000 civil penalty to settle charges by BIS of violating the Antiboycott Regulations (EAR Part 760) by knowingly agreeing to refuse to do business with a boycotted country (3 violations involving shipments to Bahrain) and failing to report the receipt of a request to engage in a boycott against a country friendly to the U.S. (7 violations involving shipments to Bangladesh, Bahrain, Kuwait, and Lebanon). If the company does not pay the penalty in a timely manner, BIS may deny its export privileges for one year.
Jan. 8, 2018: Four additional defendants were sentenced in federal court in Nashville, TN, for their participation in a scheme in which military equipment stolen by soldiers from Fort Campbell, KY, was sold over eBay, and by other means, to customers in Russia, China, Thailand, Japan, The Netherlands, Australia, India, Germany and Mexico. (See additional information about this case in December 2017 Regulatory Update.) Charges for which the additional defendants were sentenced included violation of the Arms Export Control Act (AECA, 22 USC 2778 et seq.). Cory Wilson of Clarksville, TN, was sentenced to 44 months in prison and required to pay $500,000 in restitution to the Army; Michael Barlow, a former soldier, was sentenced to 5 years’ probation and required to pay $5,000 in restitution; Kyle Heade, a former soldier, was sentenced to 30 months in prison and required to pay $10,000 in restitution; and Jonathan Wolford of Clarksville was sentenced to 3 years’ probation and required to pay $2,000 in restitution.
Jan. 11, 2018: MHz Electronics, Inc., of Phoenix, AZ, agreed to be assessed a civil penalty of $10,000 (suspended for 2 years and thereafter waived if MHz commits no further violations) and complete an external audit of its export controls compliance by an unaffiliated third party to settle charges by BIS that it exported pressure transducers controlled for nonproliferation reasons under ECCN 2B230 to China and Taiwan without the required export licenses. If MHz does not submit the audit results to BIS in a timely manner, BIS may deny its export privileges for up to one year. BIS alleged that MHz sold the transducers over eBay without attempting to determine their export control classification and without determining their intended end use and end user, notwithstanding an earlier expression of concern by FBI agents about the sale of another controlled product over eBay. Also, MHz failed to begin implementing a compliance program until after it received an outreach visit and subsequent administrative summons from BIS.
Jan. 19, 2018: Yi-Chi Shih, an electrical engineer and part-time resident of Los Angeles, CA, and Kiet Ahn Mai, of Pasadena, CA were arrested on charges including violating IEEPA for an alleged scheme to fraudulently obtain export controlled custom designed monolithic microwave integrated circuits (MMICs) and their design technology from a defense contractor in the U.S. and export them without the required export license to a MMIC manufacturer in China that was listed on the Entity List. Shih was president of the company that owned the Chinese manufacturer. Mai allegedly obtained the MMICs and technology from their U.S. producer by posing as a legitimate domestic customer intending to use them solely in the U.S.
Jan. 24, 2018: Peter Zuccarelli, of Plano, TX, was sentenced in federal court for the Eastern District of Texas to 46 months in prison, 3 years of supervised release, and a $50,000 fine based on his plea of guilty of violating IEEPA by conspiring to smuggle and export radiation hardened integrated circuits (RHICs) for use in the space programs of China and Russia without the required authorization. Zuccarelli allegedly ordered the RHICs from U.S. suppliers, falsely stating that a domestic company was the end user, and then repackaged and exported them, falsely declaring them as “touch screen parts.” (See additional information about this case in August 2017 Regulatory Update.)
Jan. 25, 2018: Paul Stuart Brunt, of Bellevue, WA, and Rawnd Khaleel Aldalawi, of Seattle, WA, were arrested on charges of conspiring to violate the AECA by exporting ITAR-controlled handguns to Turkey without the required authorization with the intention that they be transferred to Iraq for use by Kurdish forces. The alleged conspiracy was discovered when Turkish officials found the handguns hidden in vehicles. After their arrest, Brunt was released on bond while Aldalawi was remanded to custody as a possible flight risk pending a preliminary hearing.