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.
European Union Activates Updated Blocking Statue Regarding European Companies Who May Experience U.S. Sanctions For Engaging In Legal Business Activities In Iran
European Union (EU)
Aug. 7, 2018: In response to the withdrawal of the U.S. from the Joint Comprehensive Plan of Action (JCPOA) and the resulting re-imposition of U.S. sanctions against Iran (see item under U.S. President below), the EU activated an Updated Blocking Statute (UBS) to support the EU’s continued implementation of the JCPOA and to mitigate the impact of the re-imposed U.S. sanctions on the interests of EU companies doing legitimate business in Iran. The UBS allows EU residents and companies to recover damages arising from U.S. extraterritorial sanctions against Iran from the persons causing them; nullifies the effect in the EU of any foreign court rulings based on the U.S. sanctions; and prohibits EU persons from complying with those sanctions unless specifically authorized to do so by the European Commission (EC). An EC Fact Sheet on the UBS is on the EU website at http://europa.eu/rapid/press-release_MEMO-18-4786_en.htm; detailed Q&As about its implementation are at https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52018XC0807(01)&from=EN.
Trump Issues E.O. Re-imposing Sanctions Against Iran
Aug. 7, 2018 -- 83 Fed. Reg. 38939: President Trump issued Executive Order 13846 re-imposing the sanctions against Iran that had been lifted under the JCPOA as a result of his May 8, 2018 decision to withdraw the U.S. from the JCPOA. (See May 2018 Regulatory Update.) The re-imposed sanctions primarily target non-U.S. persons, including non-U.S. entities owned or controlled by U.S. persons. This order directs and authorizes the Secretary of Treasury, Secretary of State, and heads of other appropriate agencies to take action to resume implementation of the sanctions at the close of wind-down periods ending August 7, 2018 for some sanctions and November 5, 2018 for other sanctions. See U.S. Treasury Sanctions section below for resources on implementation of this order.
Trump Continues Use Of IEEPA For Implementation of Expired Export Administration Regulations
Aug. 8, 2018 – 83 Fed. Reg. 39871: President Trump continued for an additional year the national emergency regarding the unusual and extraordinary threat to the national security, foreign policy and economy of the U.S. that has existed since the Export Administration Act of 1979, as amended (EAA, 50 USC 4601 et seq.) expired in 2001. This declaration permits the continued implementation of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) under the authority of the International Emergency Economic Powers Act (IEEPA, 50 USC 1701 et seq.).
The Export Control Reform Act of 2018 Signed Into Law
Aug. 13, 2018: The Export Control Reform Act of 2018 (ECRA) was signed into law as part of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA 2019). Among other provisions, the ECRA --
- ·expressly provides permanent statutory authority for the Export Administration Regulations (EAR, 15 CFR Parts 730-774) and all other administrative actions that had been in effect under the expired EAA as continued in effect pursuant to the IEEPA;
- ·requires the President, in coordination with the Secretaries of Commerce, Defense, Energy, and State, and the heads of other federal agencies as appropriate, to lead an ongoing interagency process to identify emerging and foundational technologies that are essential to the national security of the U.S. and are not already subject to export controls;
- ·directs that “appropriate controls” be developed for the export, reexport, or in-country transfer of emerging and foundational technologies, including a license requirement for the export of any such technology to countries subject to a U.S.-imposed embargo;
- ·directs that considerations regarding license applications include an assessment of whether the denial of an application would have a significant negative impact on the defense industrial base; and
- ·increases the maximum civil fine to the greater of $300,000 or twice the value of the underlying transaction.
The NDAA 2019 is on the congressional website at https://www.congress.gov/bill/115th-congress/house-bill/5515/text; the ECRA is comprised of Sections 1741-1781.
Court Extends Preliminary Injunction Of Defense Distributed’s Publication On The Internet Of CAD Files For The 3-D Printing Of Weapons
Aug. 27, 2018: The U.S. District Court in Seattle, WA issued a preliminary injunction extending the ban on publishing computer aided design (“CAD”) files for the automated production of 3-D printed weapons and certain other technical data on the Internet that was imposed by a temporary restraining order issued by the same court on July 31. These actions arose in response to a continuing effort initiated in 2014 by Defense Distributed, a Texas-based 3D-gun manufacturer, to post such files on the Internet. (See July 2018 Regulatory Update for additional information about this matter.) The Aug. 27 preliminary injunction will remain valid until further order of the Court.
Commerce Adds 44 Entities To The Entity List
Department of Commerce – Bureau of Industry and Security
Aug. 1, 2018 – 83 Fed. Reg. 37423: The Bureau of Industry and Security (BIS) amended the EAR by adding 44 entities in China to the Entity List (EAR Part 744, Supp. No. 4). Seventeen of the entities were added based on reasonable cause to believe that they are involved in the illicit procurement of commodities and technologies for unauthorized military end-use in China, and 27 entities were added because they present an unacceptable risk of use in (or diversion of U.S.-origin items to) military end use. For all transactions in which these entities are a party, there is a license requirement for all items subject to the EAR and a license review policy of presumption of denial, and no license exceptions will be available for exports, reexports, or transfers to them. The 44 entities are listed in the Federal Register announcement at https://www.gpo.gov/fdsys/pkg/FR-2018-08-01/pdf/2018-16474.pdf#page=1.
The regular use of screening tools as part of your company due diligence will ensure compliance regarding all restricted parties that are added to the list.
Commerce Recognizes India’s Entry To The Wassenaar Arrangement, License Exceptions For Exports To India Now Available For NS Controlled Items
Aug. 3, 2018 – 83 Fed. Reg. 38018: BIS made several amendments to the EAR to reflect India’s role as a Major Defense Partner of the U.S. and to implement India’s membership in the Wassenaar Arrangement (WA). Supplement No. 1 to EAR Part 740 (Country Groups) was amended to add India to Country Groups A:1 (Wassenaar Participating States) and A:5. Inclusion in Country Group A:5 provides greater availability of License Exception Strategic Trade Authorization (STA) for exports and reexports to, and transfers within India under the EAR. The Commerce Country Chart (EAR Part 738, Supplement No. 1) was amended to remove India from license requirements for National Security Column 2 (NS2) reasons. Several conforming changes, including changes in filing requirements, were also made.
Commerce Changes Status Of South Sudan To Conform With ITAR 126.1 Embargoed List
Aug. 3, 2018 – 83 Fed. Reg. 38021: BISamended Supplement No. 1 to EAR Part 740 (Country Groups) to transfer South Sudan from Country Group B to Country Group D:5 (U.S. Arms Embargoed Countries) to conform with a final State Department rule that amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) to add South Sudan to ITAR Sec. 126.1 (Prohibited exports, imports, and sales to or from certain countries). (See February 2018 Regulatory Update.) Exports to countries in Country Group D:5 are subject to special restrictions on de minimis U.S. content, license exception availability, and licensing policy for certain items, and license applications for “600 series” or 9x515 Export Control Classification Numbers (ECCNs) are reviewed consistent with the policies of ITAR Sec. 126.1.
Commerce Seeks Comments On ECCN 2B352.i Items
Aug. 13, 2018 – 83 Fed. Reg. 39921: BIS invited comments on the effectiveness of controls on spraying or fogging systems, and “parts” and “components” therefor, that are described in ECCN 2B352.i. In addition to comments on the current controls, BIS also requests comments on specific possible alternatives described in the notice. Deadline for comments is Oct. 12, 2018.
Commerce Amends 17 ECCNS To Reflect MTCR Changes
Aug. 30, 2018 – 83 Fed. Reg. 44216: BIS amended the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) by revising 17 ECCNs to implement changes that were agreed to by the members of the Missile Technology Control Regime (MTCR) at the May 2017 Technical Experts Meeting and the October 2017 MTCR Plenary and to align the MT controls on the CCL with the MTCR Annex. The amended ECCNs are 1B117, 1B118, 1C111, 1C118, 2B109, 2B120, 2B121, 2B122, 6A107, 7A105, 7A107, 7A116, 9A012, 9A101, 9A115, 9A515, and 9A610.
State Name And Address Changes
Department of State
Aug. 13, 20, and 27, 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:
- ·Delphi to Aptiv Corporation Changes in Name due to Corporate Rebranding:
- oFrom Delphi Corporation to Aptiv Corporation;
- oFrom Delphi Corporation Systems, LLC to Aptiv Services 3 (US), LLC;
- oFrom Delphi Automative Systems, LLC to Aptiv Services US, LLC; and
- oFrom Delphi Connect Systems – Tijuana, SA de CV to Aptiv Contract Services Tijuana, S.A. de C.V.;
- ·Change in name from Quantel SA to Lumibird due to merger between the Keopsys and Quantel groups;
- ·Change in address for Asahi Kasei Corporation; and
- ·Change in address for EDS Engineering Ltd due to acquisition by HBS Electronic (Holdings) Ltd.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
State Extends Temporary Modification Of USML XI(b) & Notifies Public Of Review of Public Comments Of Proposed Further Modification of USML V, X, & XI
Aug. 30, 2018 – 83 Fed. Reg. 44228: DDTC extended through Aug. 30, 2019 a temporary modification of ITAR Category XI(b) as adopted Aug. 30, 2017 (82 Fed. Reg. 41172), which otherwise would have expired Aug. 30, 2018. (See August 2017 Regulatory Update.) This extension will allow this provision to be revised as part of the ongoing wholesale revision of USML Category XI. The State Department and the interagency are currently reviewing public comments on the revision of USML Categories V, X, and XI that were received in response to a request published Feb. 12, 2018 (83 Fed. Reg. 5970).
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Aug. 3, 2018 – 83 Fed. Reg. 38123: BIS activated a $70,000 civil penalty and 5-year denial order against Narender Sharma and Huydel Engineering Products of Middle Bazzar, Rampur Bushahr, India that had been suspended pursuant to an August 31, 2017, settlement agreement resolving an enforcement action against them for conspiring to export U.S.-origin waterway barrier debris systems and related components from the U.S. to Iran without the required authorization. (See details in September 2017 Regulatory Update.) The $70,000 fine and 5-year denial order were suspended provided that Hydel and Sharma complied with the terms of the Settlement Agreement, including making full and timely payment of $30,000 by Dec. 15, 2017. BIS activated the suspended penalties because the $30,000 was not paid as promised.
Aug. 20, 2018 – 83 Fed. Reg. 42109: BIS denied for 10 years the export privileges of Alex Bryukhov of Morrisville, PA, based on his April 6, 2016, conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by knowingly and willfully exporting a FLIR T-60 Thermal Camera, gun parts, and an OASYS Night Vision Sight, to Russia, without the required license from the State Department.
Department of State
Aug. 27, 2018 – 83 Fed. Reg. 43723: The State Department imposed sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991, as amended (22 U.S.C. Section 5604(a) and Section 5605(a)), based on a determination that Russia had used chemical weapons in violation of international law or lethal chemical weapons against its own nationals. The sanctions include:
- ·Termination of sales to Russia under the AECA and licenses for exports to Russia of any item on the U.S. Munitions List (USML, 22 CFR Sec. 121.1), with a partial waiver for issuance of licenses in support of government space cooperation and commercial space launches on a case-by-case basis consistent with export licensing policy for Russia prior to the enactment of these sanctions;
- ·Termination of all foreign military financing for Russia under the AECA;
- ·Denial of U.S.G. credit or other financial assistance, including from the U.S. Export-Import Bank;
- ·Prohibition of exports of national security-sensitive goods and technology to Russia, subject to waivers permitting the following:
- oExports and reexports of goods or technology eligible under License Exceptions GOV, ENC, RPL, BAG, TMP, TSU, APR, CIV, and AVS;
- oExports and reexports of the following items pursuant to new licenses, provided that such licenses shall be issued on a case-by-case basis, consistent with export licensing policy for Russia prior to these sanctions:
- §Exports and reexports necessary for the safety of flight of civil fixed-wing passenger aviation;
- §Deemed exports and reexports of goods or technology to Russian nationals;
- §Exports and reexports of goods or technology to wholly-owned U.S. subsidiaries in Russia;
- §Exports and reexports of goods or technology in support of government space cooperation and commercial space launches; and
- §Exports and reexports of goods or technology for civil end-uses by commercial end-users in Russia; and
- oExports and reexports of goods or technology pursuant to new licenses for Russian state-owned or state-funded enterprises, to be reviewed on a case-by-case basis, subject to a policy of presumption of denial.
The sanctions will remain in effect for at least one year, until further notice. Consult us for further information, including details about waivers and licensing policies.
Department of the Treasury
Aug. 6, 2018: The Office of Foreign Assets Control (OFAC) released 27 new FAQs providing detailed information about implementation of the Iran sanctions re-imposed by E.O 13846. (See above in The President section.) These new FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#eo_reimposing. OFAC also released amendments to several existing FAQs relating to the Iran Freedom and Counter-Proliferation Act of 2012 at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#ifca. Further, a revised statement regarding the re-imposition of sanctions and provisions for a wind-down period following the decision to cease U.S. participation in the JCPOA is at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/iran.aspx, and updated related FAQs are at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf.
Fines and Penalties
Aug. 2, 2018: Citibank, NA agreed to pay a civil penalty of $60,000 to settle charges by BIS that on 20 occasions it violated the Antiboycott Regulations (EAR Part 760) by furnishing information about business relationships with boycotted countries or blacklisted persons. The boycotting countries involved were Kuwait, Lebanon, Oman, Pakistan, Qatar, and the United Arab Emirates.
Aug. 10, 2018: Mohawk Global Logistics Corp. (formerly known as Mohawk Customs and Shipping Corp.) of North Syracuse, NY agreed to pay a civil penalty of $155,000 to settle charges by BIS that it caused, aided, or abetted violations of the EAR by forwarding items subject to the EAR and designated as EAR99 on one occasion to an entity in Russia that was listed on the Entity List and on two occasions to an entity in China that was listed on the Entity List without the required authorization. In all three cases the exporters had clearly identified the ultimate consignees to Mohawk. Payment of $135,000 of the penalty will be made in three installments, with $20,000 to be suspended if all installments are paid on time. BIS may suspend Mohawk’s export privileges for one year if Mohawk fails to make a timely payment.
Aug. 14, 2018: Rasheed Al Jijakli of Walnut, CA pleaded guilty in U.S. District Court for the Central District of California to violating IEEPA and the Syrian Sanctions Regulations (SSR, 31 CFR Part 542) by conspiring to export U.S.-origin tactical gear to Syria. In the plea agreement, Al Jijakli admitted that he and co-conspirators knowingly provided at least 43 laser boresights, 85 day rifle scopes, 30 night vision rifle scopes, tactical flashlights, a digital monocular, 5 radios, and 1 bulletproof vest to Syrian rebels in Syria, or with knowledge that the tactical gear was going to Syria. (See information about Al Jijakli’s earlier not-guilty plea in September 2017 Regulatory Update.)
Aug. 30, 2018: Katharine O’Neal, a former member of the U.S. Army stationed at Fort Carson, Colorado, was sentenced in Federal District Court in Denver, CO to serve 3 years in federal prison followed by 3 years of supervised release for violating the AECA and other federal laws by exporting firearms to the Dominican Republic without the required authorization from the State Department. O’Neal allegedly made multiple trips to the Dominican Republic shortly after purchasing firearms in Denver and Colorado Springs. On one such trip she flew with 11 firearms in her luggage. She declared the firearms to the airline, but did not obtain an export license. Her bags were misdirected by the airline and were not on her fight. When they arrived later, the firearms were discovered by Dominican Republic officials while examining her baggage. O’Neal was arrested when she came to the airport to claim her luggage.