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. Ministry of Economy, Trade and Industry (METI) Updates Its End User List
May 2, 2018: The U.K. Ministry of Economy, Trade and Industry (METI) issued an updated End User List (EUL) of 529 foreign entities for which concern cannot be eliminated regarding involvement in activities such as the development of weapons of mass destruction (WMDs). Exporters must apply for a license to export items to listed entities unless it is evident that the exported items will not be used for activities such as the development of WMDs and other items. The updated EUL is on the METI website at http://www.meti.go.jp/press/2018/05/20180502001/20180502001-1.pdf.
U.S. Ends Participation In The Joint Comprehensive Plan of Action (JCPOA) for Iran
May 8, 2018: President Trump issued a Presidential Memorandum (PM) ending U.S. participation in the Joint Comprehensive Plan of Action (JCPOA, the nuclear agreement reached with Iran in 2015) and instructing the Secretary of State and Secretary of the Treasury to take within 180 days the steps necessary to re-impose all sanctions that were waived under the JCPOA, e.g., preparing necessary executive actions, re-listing persons removed from any relevant sanctions lists, issuing limited waivers during the wind-down period, and preparing guidance needed by the business community. The PM further directs that these steps be implemented in a manner that to the extent practicable, shifts the financial burden of re-imposing the sanctions to Iran or the Iranian counterparty. This PM is on the White House website at https://www.whitehouse.gov/presidential-actions/ceasing-u-s-participation-jcpoa-taking-additional-action-counter-irans-malign-influence-deny-iran-paths-nuclear-weapon/. (See below for information about this PM posted by the Treasury Department.)
Department of Commerce – Bureau of Industry and Security
BIS Announces Improvements To Its SNAP-R System
May 11, 2018: The Bureau of Industry and Security (BIS) announced improvements in the Simplified Network Application Process – Redesign (SNAP-R) system designed to make the system more user-friendly. The changes include a new “Login Help” option on the login screen, new “contact person” field on the “List Work Items” page, new format for entering international telephone numbers and telephone extension numbers, and increased character limits in some data fields. The full announcement is on the BIS website at https://www.bis.doc.gov/index.php/all-articles/1420-snap-r-updates-2018.
BIS Posts Presentations From 2018 Update Conference on Its Website
May 15, 2018: BIS posted 11 presentations from the 2018 Annual Conference on Export Controls and Policy, which was held in Washington, DC May 14-15, 2018. The presentations are on the BIS website at https://www.bis.doc.gov/index.php/all-articles/226-bis-annual-conference-2018/1423-bis-annual-conference-2018-presentations. BIS also posted the prepared remarks of Secretary of Commerce Wilbur Ross and Assistant Secretary for Export Administration Richard Ashooh at https://www.commerce.gov/sites/commerce.gov/files/bis2018_secross_remarks_0511.pdf and https://www.bis.doc.gov/index.php/forms-documents/bis-annual-conference-2018/2217-remarks-of-assistant-secretary-for-export-administration-richard-ashooh-may-15-2018-as-prepared-for-delivery/file, respectively.
BIS Adds 33 Persons To The Unverified List
May 17, 2018 – 83 Fed. Reg. 22842: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 33 persons in Canada, China, Estonia, Finland, Pakistan, Russia, and the United Arab Emirates (UAE) to the Unverified List (UVL, EAR Part 744, Supp. No. 6) on the basis that BIS could not verify their bona fides through an end-use check. License exceptions may not be used for exports to a party on the UVL, and persons exporting items that do not require an export license to a party on the UVL must first obtain a UVL statement from the listed party. The new persons on the UVL are:
- Laval Electronics, Laval;
- Services GP Tek, a.k.a. Nouvelle Option, Brossard and Montreal;
- Changhe Aircraft Industries Group, Jingdezhen City, Jiangxi Province;
- Dandong Center for Food Control, Dandong;
- Institute of Geology, Chinese Academy of Geological Sciences, Beijing;
- Jiangxi Hongdu Aviation Ind. Group, The Nanchang National High & New Technology Development Zone, Jiangxi Province, Yaohu Nanchang;
- Jiujiang Jinxin Nonferrous Metals Co, Ltd., Jiujiang City;
- Liupanshui Normal University, Liupanshui, Guizhou;
- Nanchang University, Nanchang;
- Shanxi Hemu Industrial Co., Ltd., Shanxi;
- Sino Superconductor Technology Company, a.k.a. Zongyi Superconductor Technologies Co. Ltd., a.k.a. SinoHTS, Beijing;
- Xinjiang East Hope New Energy Company Ltd, XinJiang;
- Yantai Salvage Bureau, Yantai, Shandong;
- Simms Marine Group OU, Tallinn;
- Net Logistics JVM OY, a.k.a. Net Logistic JVM OY Helsinki and Kotka;
- Ling Ao Electronic Technology Co. Ltd, a.k.a. Voyage Technology (HK) Co., Ltd. a.k.a. Xuan Qi Technology Co., Ltd., Kowloon Bay, Kwun Tong, Wanchai, Kowloon, and Wanchi;
- Andleeb Associates, Rawalpindi;
- Alliance EG Ltd., St. Petersburg;
- Eltech Ltd., Saint Petersburg;
- EFO Ltd., Saint Petersburg;
- MT Systems, Saint Petersburg;
- Radiofizika OAO, Moscow;
- Romona Inc., Yuzhno-Sakhalinsk;
- FSUE Rosmorport Far Eastern Basin Branch, Vladivostok;
- Sakhalin Energy Investment Company Ltd., Yuzhno-Sakhalinsk;
- SIC Dipaul, Saint Petersburg;
- Tavrida Microelectronics, Moscow;
- VIP Technology Ltd., Saint Petersburg;
United Arab Emirates:
- Alsaroud General Trading, a.k.a. Alsaroud Ground Trading Company, a.k.a. Alsarroud General Trading LLC, Sharjah;
- Chepstow FZE, Sharjah;
- GenX Middle East FZE, a.k.a. GenX Systems LLC, Dubai;
- Roudah Al Hayat General Trading FZE, a.k.a. Rudha Al Hayat General Trading, a.k.a. Rouda Al Hayat General Trading, a.k.a. JSB Logistics, Dubai; and
- TEM International FZC, Dubai.
BIS Publishes Proposed Rule Regarding Transition of USML Category I, II and III Items To EAR
May 24, 2018 – 83 Fed. Reg. 24166: BIS published a proposed rule describing how firearms, guns, ammunition, and related articles that are currently controlled under Categories I, II, and III of the U.S. Munitions List (USML, 22 CFR Sec. 121.1) but neither provide the U.S. with a critical military or intelligence advantage nor, in the case of weapons, are inherently for military end use would be controlled under the Commerce Control List (CCL, EAR Part 774, Supp. No. 1). Under the new rule, transferred items currently controlled under USML Category II would be controlled under the CCL in four new “600 series” Export Control Classification Numbers (ECCNs), as these items are of a military nature. Items currently controlled under USML Categories I and III, which for the most part have civil, recreational, law enforcement, or other non-military applications would be covered by new “500 series” ECCNs. Small arms that are currently controlled under USML Category I will be subject to brokering requirements under Arms Export Control Act, even though the items are transferring to control under the EAR which does not presently have any brokering related provisions. The proposed rule also clarifies and renumbers some existing ECCNs. Deadline for comments is July 9, 2018. (See information below about coordinated proposal by Department of State.)
Department of State
DDTC Name and Address Changes Posted To Its Website
May 7 and 21, 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 Address for Goodrich Actuation Systems SAS;
- Change in Name from Airbus DS Electronics and Border Security SAS (EBS France) to HENSOLDT France SAS due to its acquisition by HENSOLDT;
- Change in Address for Fokker Engineering Romania SRL;
- Change in Address for Quyntess BV; and
- Change in Name from Oculus Info Inc. to Uncharted Software Inc. 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 Publishes Proposed Rule Regarding Transition of USML Category I, II and III Items To EAR
May 24, 2018 – 83 Fed. Reg. 24198: DDTC published a proposed rule amending the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by revising USML Categories I (firearms, close assault weapons and combat shotguns), II (guns and armament) and III (ammunition and ordnance) to describe more precisely the articles warranting control on the USML because they provide the U.S. with a critical military or intelligence advantage or, in the case of weapons, are inherently for military end use. Articles removed from the USML would all become subject to the EAR. A link to a list of the key points of these proposed transfers is on the DDTC website at https://www.pmddtc.state.gov, under “Announcements.” As with prior ECR revisions of the ITAR, all 3 categories will include a new paragraph allowing ITAR licensing for items subject to the EAR if they are to be used in or with defense articles and are described in the purchase documentation submitted with the license application. Deadline for comments is July 9, 2018. (See information above about coordinated proposal by Department of Commerce.)
Department of the Treasury
OFAC Issues Ukraine/Russia General Licenses 12B and 13A
May 1, 2018: The Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General Licenses (GLs) 12B and 13A, both expiring June 6, 2018. GL 12B, on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl12b.pdf, replaces GL 12A (see April 2018 Regulatory Update) in its entirety and authorizes certain financial transactions relating to processing funds held by a blocked U.S. person at a U.S. financial institution. GL13A, published at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13a.pdf, replaces GL 13 (see April 2018 Regulatory Update) in its entirety and relates specifically to holdings in EN+ Group, GAZ Group, United Company RUSAL PLC, Irkutskenergo, GAZ Auto Plant, and Rusal Capital Designated Activity Company. OFAC also published 3 new FAQs related to its April 6, 2018, 50 percent rule on its website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#583 and revisions to FAQs as a result of OFAC’s April 6. 2018, 50 percent rule at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#570.
OFAC Issues 90-180 Wind Down Periods For Transactions With Iran
May 8, 2018: Following up on the President’s Memorandum ending U.S. participation in the JCPOA (see information about the PM above), OFAC announced that Departments and Agencies will begin a process to implement 90-day and 180-day wind-down periods for activities involving Iran that were consistent with the U.S. sanctions relief specified in the JCPOA; that OFAC expects to revoke or amend general and specific licenses issued in connection with the JCPOA “as soon as administratively feasible;” and that these actions will include new authorizations to allow the wind-down of transactions and activities that were authorized by the revoked or amended licenses. At the same time, OFAC also published 16 FAQs covering General Questions, Wind-down, Sanctions Listings, Licensing, and Other. The OFAC statement is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/iran.aspx; the FAQs are at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf.
Treasury Lists Countries That May Be Involved In An International Boycott
May 16, 2018 – 83 Fed. Reg. 22751: 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.
OFAC Issues Ukraine/Russia General Licenses 12C and 15
May 22, 2018: OFAC issued Ukraine-/Russia-related GL 12C and GL 15. GL 12C, authorizing certain actions by U.S. financial institutions, replaces and supersedes GL 12B (see May 1, 2018, above) in its entirety. GL 15 authorizes U.S. persons to engage in specified transactions related to winding down or maintaining business with GAZ Group and its subsidiaries until Oct. 23, 2018. GL 12C is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl12c.pdf; GL 15 is at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl15.pdf; and 6 new FAQs and revisions to existing FAQs about these general licenses are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#586 and https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#576, respectively.
May 31, 2018: OFAC issued Ukraine-/Russia-related GL 13B, replacing and superseding GL 13A (see May 1, 2018, above) in its entirety and providing a new expiration date of Aug. 5, 2018. GL 13B is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl13b.pdf.
Department of State
May 9, 2018 – 83 Fed. Reg. 21333: The State Department, Bureau of International Security and Nonproliferation (ISN) imposed on Rosoboronexport (ROE) (Russia) and any successor, sub-unit or subsidiary thereof nonproliferation measures including a ban on U.S. Government (USG) procurement, a ban on USG sales of any item on the USML and termination of all sales of defense articles, defense services, or design and construction services under the Arms Export Control Act (AECA, 22 USC 2778 et seq.), and a prohibition against the issuance of individual licenses for exports of items whose export is controlled under the EAR. These nonproliferation measures will remain in place for two years unless the Secretary of State determines otherwise.
May 10, 2018 – 83 Fed. Reg. 21812: ISN imposed nonproliferation measures including a ban on USG procurement, a ban on USG sales of any item on the USML and termination of all sales of defense articles, defense services, or design and construction services under the AECA, and a prohibition against the issuance of individual licenses for exports of items whose export is controlled under the EAR on the following persons:
- Abascience Tech Co., Ltd. and any successor, sub-unit, or subsidiary thereof;
- Easy Fashion Metal Products Trade Company [aka Easyfashion Industries] and any successor, sub-unit, or subsidiary thereof;
- Emily Liu (Chinese individual);
- Karl Lee [aka Li Fangwei] (Chinese individual);
- Raybeam Optronics Co., Ltd and any successor, sub-unit, or subsidiary thereof;
- Shanghai Rotech Pharmaceutical Engineering Company and any successor, sub-unit, or subsidiary thereof;
- Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) and any successor, sub-unit, or subsidiary thereof;
- Sunway Tech Co., Ltd and any successor, sub-unit, or subsidiary thereof;
- T-Rubber Co. Ltd and any successor, sub-unit, or subsidiary thereof;
- Sakr Factory for Developmental Industries and any successor, sub-unit, or subsidiary thereof;
- Mojtaba Ghasemi (Iranian individual);
- Islamic Revolutionary Guard Corps Qods Force (IRGC QF) and any successor, sub-unit, or subsidiary thereof;
- Pars Aviation Service Company (PASC) and any successor, sub-unit, or subsidiary thereof;
- Defense Industries Organization (DIO) and any successor, sub-unit, or subsidiary thereof;
- Saeng Pil Trading Corporation (SPTC) and any successor, sub-unit, or subsidiary thereof;
- Second Economic Committee (SEC) Korea Ryonbong General Corporation and any successor, sub-unit, or subsidiary thereof;
- 183rd Guard Air Defense Missile Regiment and any successor, sub-unit, or subsidiary thereof;
- Instrument Design Bureau (KBP) Tula and any successor, sub-unit, or subsidiary thereof;
- Gatchina Surface-to-Air Missile Training Center and any successor, sub-unit, or subsidiary thereof;
- Russian General Staff Main Intelligence Directorate (GRU) and any successor, sub-unit, or subsidiary thereof;
- 18th Central Scientific Research Institute (18th TsNII) Scientific Research Center (NITs) (Kursk) and any successor, sub-unit, or subsidiary thereof;
- Russian Research and Production Concern (BARL) and any successor, sub-unit, or subsidiary thereof;
- Scientific Studies and Research Center (SSRC) and any successor, sub-unit, or subsidiary thereof;
- Lebanese Hizballah and any successor, sub-unit, or subsidiary thereof;
- Megatrade and any successor, sub-unit, or subsidiary thereof;
- Syrian Air Force and any successor, sub-unit, or subsidiary thereof;
- Seden Denizcilik Hizmeleri Sanayi de Ticaret Limited and any successor, sub-unit, or subsidiary thereof; and
United Arab Emirates:
- Yona Star International and any successor, sub-unit, or subsidiary thereof.
These nonproliferation measures will remain in place for two years unless the Secretary of State determines otherwise.
Department of the Treasury
May 24, 2018: In a notice designating 9 individuals and entities procuring export-controlled, U.S.-origin goods for sanctioned Iranian airlines as Specially Designated Global Terrorists (SDGTs), OFAC also designated as SDGTs 31 individual aircraft in which Caspian Air, Meraj Air, Pouya Air, or Mahan Air, Iranian airlines previously designated as SDGTs, have a property interest. OFAC stated that these identifications serve to give notice to those who grant landing rights and provide general services to these aircraft that they could be exposed to U.S. sanctions. The list of newly designated SDGTs is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20180524.aspx; an explanatory press release is at https://home.treasury.gov/news/press-releases/sm0395.
Fines and Penalties
May 10, 2018: Giovanni Zannoni, an Italian national and member of the Italian military, was removed from the U.S. on a commercial flight and transferred to the custody of Italian law enforcement authorities following his conviction of violating the AECA by exporting night vision equipment and assault rifle components controlled on the USML without the required license from the State Department. As part of his guilty plea, Zannoni agreed to forfeit $436,673, gun parts, and night vision and thermal imaging devices.
May 15, 2018: Frederik Barbieri, of Port St. Lucie, FL, pleaded guilty in U.S. District Court for the Southern District of Florida of conspiracy and violation of the AECA by possessing firearms with obliterated serial numbers; delivering packages containing those firearms to contract carriers for international shipment without providing notice that the packages contained firearms; and exporting firearms, firearm accessories, and ammunition from the U.S. to Brazil without obtaining the required licenses from the State Department. The violations were discovered when Brazilian law enforcement intercepted a shipment by Barbieri that contained approximately 30 AR-15 and AK-45 rifles and firearm magazines, all concealed in 4 hollowed-out 38-gallon Rheem water heaters. Documentation held by the freight forwarder revealed earlier shipments of 120 water heaters, and U.S. enforcement agents executing a search warrant found an additional 52 rifles with obliterated serial numbers, over 2,000 rounds of ammunition, and packaging materials in a storage unit rented by Barbieri.
May 16, 2018: Mehmet Hakan Atilla, a resident and citizen of Turkey and Deputy General Manager of International Banking of Turkish Bank-1, was sentenced in federal court in New York City to serve 32 months in federal prison following his conviction in a 5-week jury trial of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by conspiring to use the U.S. financial system to conduct transactions on behalf of the government of Iran and other Iranian entities which were barred by U.S. sanctions and defrauding U.S. financial institutions by concealing these transactions’ true nature. The conspiracy included providing access to restricted oil revenues through international financial networks, including unwitting U.S. financial institutions, to the government of Iran, Iranian entities, and various entities that had been identified by OFAC as Specially Designated Nationals (SDNs). Among other things, Turkish Bank-1 was used in transactions involving billions of dollars of petroleum revenues held by the Central Bank of Iran and the National Iranian Oil Company. The conspirators also used fraudulent documents to disguise prohibited transactions for Iran by making them falsely appear to involve food, making them eligible for humanitarian exceptions to the sanctions regime.
May 25, 2018: Merit Aerospace, Inc. and its Chief Executive, Yanhong Zhou, a/k/a Joe Zhou, both of Pasadena, CA, agreed to pay a civil penalty of $221,000, complete two audits of Merit’s export controls compliance program, and have their export privileges suspended for 4 years to settle charges by BIS that they violated EAR Sec. 764.2(g) by misrepresenting and concealing facts from BIS. (The penalty will be paid in two installments of $20,000. The remaining $181,000 of the penalty and the suspension of Merit’s export privileges will both be suspended for 4 years and thereafter waived if Merit and Zhou have complied with the terms of the Settlement Agreement and committed no further violations.) After Merit was notified by the BIS Office of Export Enforcement (OEE) that a shipment of aircraft parts had been detained for further investigation, while Merit was in ongoing discussions with OEE about its export business with the customer, Merit arranged to ship replacement parts to the customer by exporting them to a different consignee and arranging for their ongoing shipment to the customer. Accordingly, Merit submitted electronic export information (EEI) for the replacement shipment that falsely identified the ultimate consignee. Merit then violated EAR Sec. 764.2(g) when it deliberately did not inform OEE of this new shipment when it met with OEE the following day.