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
Department of Commerce Seeks Public Comments On Possible Controls On Electronic Waste
Oct. 23, 2018 – 83 Fed. Reg. 53411: The Bureau of Industry and Security (BIS) invited public comments on the costs and effects of a possible amendment to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) that would introduce export authorization requirements on electronic waste. The inquiry results from concern that the unregulated recycling of discarded electronic equipment overseas may result in the entry of counterfeit goods into the U.S. military and civilian electronics supply chain. Specific topics on which comments are invited include –
- the definition of “electronic waste;”
- criteria for the exemption of certain electronic waste items;
- reporting requirements for exempt electronic waste (possibly through a license exception or a new data requirement in the Automated Export System (AES));
- new recordkeeping requirements;
- the estimated cost to industry to implement these potential changes; and
- the prevalence of counterfeit commodities in electronic supply chains and whether the contemplated changes would alleviate the problem.
Deadline for comments is Dec. 24, 2018.
BIS Amends 50 Export Control Classification Numbers (ECCNs)
Oct. 24, 2018 – 83 Fed. Reg. 53742: BIS amended the EAR by revising 50 Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) and making associated changes in the EAR to implement changes made at the December 2017 Wassenaar Arrangement (WA) Plenary to the WA List of Dual-Use Goods and Technologies. The following ECCNs were revised: 0A617, 0A919, 1A002, 1C001, 1C002, 1C007, 1C010, 1C608, 2A001, 2B001, 2B006, 2B007, 2B008, 2E003, 3A001, 3A002, 3B001, 3B002, 3C002, 3C005, 3C006, 3C992, 3E001, 4A003, 4A004, 4D001, 4E001, 5A001, 5A002, 5D002, 5E002, 6A002, 6A003, 6A004, 6A005, 6A008, 6A203, 6D003, 6D991, 6E001, 6E002, 6E201, 7A006, 7E004, 9A002, 9A004, 9D001, 9D002, 9D004, and 9E003.Among additional changes, 37 definitions of terms that are used in only a single ECCN were moved from EAR Sec. 772.1 (definitions) to the specific ECCN in which they are used, and additional definitions were modified. Also, modifications were made in the Sensitive List (Supp. No. 6 to Part 774) and the Very Sensitive List (Supp. No. 7 to Part 774); a reference to ECCN 5D002 in License Exception ENC (Encryption Commodities, Software and Technology, EAR Sec. 740.17) was corrected; ECCN 3A001.i was made eligible for License Exception GBS (Shipments to Country Group B Countries, EAR Sec. 740.4); ECCN 3A991 was modified; ECCN 2B206 was revised to maintain NP (nuclear proliferation) controls; and additional technical changes were made.
BIS Adds Chinese Company To The Entity List
Oct. 30, 2018 – 83 Fed. Reg. 54519: BIS amended the Entity List (EAR Part 744, Supp. No. 4) by adding the following entity under the People’s Republic of China:
- Fujian Jinhua Integrated Circuit Company, Ltd., a.k.a., the following one alias: JHICC, Jinjiang City, Fujian Province.
JHICC was determined to pose a significant risk of becoming involved in activities contrary to the national security or foreign policy interests of the United States because it is nearing completion of substantial production capacity for dynamic random access memory (DRAM) integrated circuits which, in light of the likely U.S.-origin technology, threatens the long term economic viability of U.S. suppliers of these essential components of U.S. military systems. As a consequence of this designation, BIS imposed a license requirement with a review policy of presumption of denial for all exports, re-exports, and transfers to JHICC of all items subject to the EAR.
Department of State
DDTC Name and Address Changes Posted To Website
Oct. 2, 5, 12, and 23, 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 Name from Raufoss Offshore, AS to Thune Produkter Raufoss AS due to Raufoss Offshore’s acquisition by Thune Produkter;
- Change in corporate structure by Morgan Advanced Materials Canada, Inc. resulting in a split into two entities: Morgan Advanced Materials Canada, Inc. and NP Aerospace (Canada) Limited;
- Change in Name from AlliedSignal Aerospace Service Corporation to AlliedSignal Aerospace Service Corporation LLC due to change in corporate structure;
- Change in Address for Raytheon Canada Limited;
- Change in Address for Nammo Energetics Indian Head, Inc.;
- Change in Address for NovAtel Inc.; and
- Change in Address for SD Engineering Co., 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.
The Department Of State Amends The ITAR To Clarify Various Sections Of The USML And The Return Of Technical Data Licenses
Oct. 4, 2018 – 83 Fed. Reg. 50003: The State Department made an amendment in the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) as follows:
- amended Sec. 123.22(b)(3)(i) and (c)(2) to remove the requirement to return licenses after the initial export of approved technical data;
- added a note to U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category IV(d) clarifying that it does not control thrusters for satellites and spacecraft and recommending that exporters of such items review USML Category XV(e)(12) and ECCN 9A515;
- revised USML Category XV(f) to resolve an inconsistency with Category IV(i) regarding mission integration and launch failure analysis without changing the scope of the controls;
- added a new Note 3 to USML Category V to clarify the most materials in this category whose export, reexport occurs when incorporated into an item that is subject to the EAR and classified under ECCN 1C608 is licensed by the Department of Commerce for export;
- updated USML Category VIII(h)(12) to make controls over swarming more precise;
- added a note to USML Category XI(a)(3)(i) and revised a note to Category XI(a)(3)(xii) to state what it does not control (certain radars used in commercial drones); and
- revised USML Category XI(c)(4) to implement power thresholds that will exclude those components necessary for 5G wireless technology but maintain control on those items that provide the U.S. a critical military or intelligence advantage.
This interim rule was effective Oct. 4, 2018; comments will be accepted until Nov. 19, 2018.
Department of State Invites Industry To Test New Registration And Advisory Opinion Applications
Department of State Invites Feedback On Test Versions Of New Registration And Advisory Opinion Applications
Oct. 30, 2018: DDTC invited industry to provide feedback of test versions of its most recent DECCS Advisory Opinions and Registration Applications. Further information is available in the DDTC announcement at https://www.pmddtc.state.gov/?id=ddtc_public_portal_news_and_events.
Department of the Treasury
OFAC Extends Ukraine Related General Licenses
Oct. 12, 2018: The Office of Foreign Assets Control (OFAC) extended until Dec. 12, 2018, the expiration dates of Ukraine-related General Licenses (GLs) 13E, 14B, and 16B, for activities relating to EN+ Group plc, United Company RUSAL PLC, JSC EuroSibEnergo, and entities in which those entities own, directly or indirectly, a 50 percent or greater interest. (See item below for subsequent action on GL 13E.)
OFAC Extends Certain Ukraine Related General Licenses
Oct. 19, 2018: OFAC extended until Dec. 12, 2018, the expiration date of certain Ukraine-related general licenses and issued new GL 13F relating to EN+ Group PLC, GAZ Group, United Company RUSAL PLC, Irkutskenergo, GAZ Auto Plant, Rusal Capital Designated Activity Company, and entities in which those entities own, directly or indirectly, a 50 percent or greater interest, and GL 15A relating to GAZ Group or any other entity in which GAZ Group owns, directly or indirectly, a 50 percent or greater interest. GL 13F replaced and superseded GL 13E, dated Oct. 12, 2018, and GL 15A replaced and superseded GL 15, dated May 22, 2018.
OFAC Issues Belarus General License 2F
Oct. 24, 2018: OFAC issued Belarus General License 2F extending until October 25, 2019, the expiration date of Belarus General License 2E relating to 9 named Belarusan entities and any entities that are owned, individually or in the aggregate, directly or indirectly, 50 percent or more by one or more of those entities.
Department of Commerce
Oct. 2, 2018 – 83 Fed. Reg. 49540: BIS issued a 180-day Temporary Denial Order (TDO) against the following persons:
- Eastline Technologies OU, Tallinn, Estonia;
- Adimir OU, Tallinn, Estonia;
- Valery Kosmachov, a/k/a Valeri Kosmachov, a/k/a Valery Kosmatsov, a/k/a Valery Kosmatshov, a/k/a Valery Kosmachev, Tallinn, Estonia;
- Sergey Vetrov, a/k/a Sergei Vetrov, Moscow, Russia; and
- Real Components Ltd., Moscow, Russia.
As evidence that a violation of the EAR is imminent, BIS cited a history of unauthorized exports of EAR-controlled items to Russia by these persons via transshipment through Estonia and Finland and provision of false destination information to U.S. suppliers and the U.S. Government.
Oct. 4, 2018 – 83 Fed. Reg. 50070, 50071, 50072, 50073, 50074, 50075, and 50076: BIS denied the export privileges of 7 individuals, all currently resident in Federal Correctional Institutions (FCIs) in Texas, based on their convictions of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778 et seq.) by knowingly exporting and attempting to export firearms listed on the USML to Mexico without the required licenses from the State Department. The denied individuals are:
- Convicted March 28, 2017:
- Edgar Garza-Sanchez, 5-year denial;
- Convicted Nov. 16, 2017:
- Erik Villasana, 10-year denial;
- Juan Diego Madrid, 10-year denial;
- Rolando Armando Madrid, 10-year denial;
- Ruben Arnoldo Madrid, 10-year denial; and
- Francisco Xavier Martinez, 7-year denial; and
- Convicted Dec. 14, 2017:
- Rolando Armando Madrid, 10-year denial.
Oct. 19, 2018 – 83 Fed. Reg. 53029: BIS denied the export privileges of Luis Antonio Urdaneta Pozo, currently resident in FCI Edgefield, SC, until June 27, 2027, based on his conviction of violating the AECA by knowingly and willfully exporting handguns and ammunition of various calibers listed on the USML, to Venezuela, without the required licenses from the State Department.
Department of State
Oct. 5, 2018 – 83 Fed. Reg. 50433: The State Department imposed sanctions under the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA) on the Chinese entity Equipment Development Department of the Central Military Commission (EDD), formerly known as the General Armaments Department (GAD), and its director, Li Shangfu, based on a finding that EDD had knowingly engaged in a significant transaction with a person that was part of, or operated for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation. The sanctions include prohibiting U.S. Government agencies from issuing to EDD any specific license or other authority to export or re-export goods or technology.
Fines and Penalties
Sep. 27, 2018: Bryan Evan Singer of Bryan, TX, was sentenced to 78 months in federal prison following his conviction of attempting to illegally smuggle goods out of the U.S. and making false statements to federal law enforcement. The charges were based on Mr. Singer’s unauthorized export to Cuba of nanostation network devices designed to provide highly encrypted connections between computer networks over long distances. In a pre-departure inspection, U.S. law enforcement discovered the smuggled devices in a hidden compartment under a bolted-down bed in the cabin of Mr. Singer’s boat.
Oct. 1, 2018: Si Chen, a/k/a Cathy Chen and other aliases, a Chinese national resident in Pomona, CA, was sentenced to 46 months in federal prison based on Ms. Chen’s plea of guilty of conspiracy to violate the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by smuggling components commonly used in military communications “jammers” and communications devices commonly used in space communications applications to China. Ms. Chen allegedly took delivery of the export-controlled items at an office in Pomona, CA and used falsified information to ship them to Hong Kong for transshipment to China. She also pleaded guilty to money laundering and using a forged passport.
Oct. 5, 2018: OFAC announced a $5,263,171 settlement with JPMorgan Chase Bank, N.A. (JPMC) to settle potential civil liability for 87 apparent violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515); the Iranian Transactions and Sanctions Regulations, (ITSR, 31 CFR Part 560); and the Weapons of Mass Destruction Proliferators Sanctions Regulations (WMDSPR, 31 CFR Part 544). JPMC voluntarily self-disclosed the apparent violations, which involved net settlement payments totaling approximately $1,500,000 to the interests of airlines that were on OFAC's List of Specially Designated Nationals and Blocked Persons (the SDN List), blocked pursuant to OFAC sanctions, or located in countries subject to sanctions programs administered by OFAC.
Separately, OFAC also issued a Finding of Violation against JPMC for violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR, 31 CFR Part 598) and the Syrian Sanctions Regulations (SSR, 31 CFR Part 542) involving 85 transactions totaling $42,127 on behalf of 6 customers who were identified on the SDN List.