LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
The President Re-Imposes Iran Sanctions
Nov. 2, 2018: The White House released a fact sheet on the re-imposition, effective Nov. 5, 2018, of the remaining sanctions against Iran that had been lifted in January 2016, under the Joint Comprehensive Plan of Action (JCPOA). The fact sheet is on the White House website at
https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-reimposing-sanctions-lifted-unacceptable-iran-deal/. See Treasury Department section below for information on actions taken to re-implement the sanctions.
Department of Commerce – Bureau of Industry and Security
BIS Authorizes The Use Of License Exception CIV For ECCN 3A001.a.3, a.7, and a.11
Oct. 2, 2018 – 83 Fed. Reg. 55099: The Bureau of Industry and Security (BIS) corrected its Oct. 24, 2018 (83 Fed. Reg. 53742), notice of implementation of the Wassenaar Arrangement 2017 Plenary Agreements to add eligibility for License Exception CIV (Civil End-Users) to Export Control Classification Number (ECCN) 3A001.a.3, a.7, and a.11.
BIS Issued Advance Notice Of Proposed Rulemaking (ANPRM) Seeking Public Advice On The Criteria To Identify Emerging Technologies
Nov. 19, 2018 – 83 Fed. Reg. 58201: BIS issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking public advice on the criteria to be used to identify emerging technologies that are essential to U.S. national security that are currently subject to the Export Administration Regulations (EAR, 15 CFR Parts 730-754) but are controlled only to embargoed countries, countries designated as supporters of international terrorism, and restricted end uses or end users. The ultimate goal of the inquiry is to establish broader controls on the export, reexport, or in-country transfer of technologies that are important to national security without negatively impacting U.S. leadership in the science, technology, engineering, and manufacturing sectors, as provided in the Export Control Reform Act of 2018 (ECRA).
BIS specifically desires comments on specified aspects of the following technology categories:
(2) Artificial intelligence (AI) and machine learning technology;
(3) Position, navigation, and timing (PNT) technology;
(4) Microprocessor technology;
(5) Advanced computing technology;
(6) Data analytics technology;
(7) Quantum information and sensing technology;
(8) Logistics technology;
(9) Additive manufacturing (e.g., 3D printing);
(11) Brain-computer interfaces;
(13) Advanced materials; and
(14) Advanced surveillance technologies.
Specific topics on which BIS will welcome comments are:
(1) How to define emerging technology to assist identification of such technology in the future;
(2) Criteria to apply to determine whether there are specific technologies within these general categories that are important to U.S. national security;
(3) Sources to identify such technologies;
(4) Other general technology categories that warrant review to identify emerging technology that are important to U.S. national security;
(5) The status of development of these technologies in the U.S. and other countries;
(6) The impact specific emerging technology controls would have on U.S. technological leadership; and
(7) Any other approaches to the issue of identifying emerging technologies important to U.S. national security, including the stage of development or maturity level of an emerging technology that would warrant consideration for export control.
Deadline for comments is December 19, 2018.
Department of Commerce – Census Bureau
Census Published Guidance On Submitting Voluntary Self-Disclosures
Nov. 11, 2018: The Census Bureau published a guide to submitting a voluntary disclosure in a blog post titled “Submitting a Voluntary Self-Disclosure: Let’s Work Together!” The post is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2018/09/submitting_a_volunta.html?eml=gd&utm_medium=email&utm_source=govdelivery.
Department of State
DDTC Name and Address Changes Posted To Website
Nov. 2, 5, 6, 20, 23, 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:
- Change in Name from BMT Defence Services Limited and BMT Asset Performance Limited to BMT Defence and Security UK Limited due to corporate restructuring;
- Change in Name from ADAS, CONVERGY, and NEXEYA Systems to NEXEYA France due to merger of business lines/corporate reorganization;
- Change in Name from North Sylva Company division of Parklands Manor Inc., to North Sylva Sports division of 480492 Ontario Inc. due to corporate rebranding;
- Change in Name from PZL Warszawa-Okecie S.A. to Airbus Poland S.A. due to corporate rebranding;
- Change in Name from Selex GS GmbH to Leonardo Germany GmbH due to corporate rebranding;
- Change in Name from KLX Aerospace Solutions II Limited to Boeing Distribution Services III Limited due to Boeing’s acquisition of KLX; and
- Change in Name from GKN Sinter Metals Private Limited to GKN Aerospace Engine Systems India Private Limited due to corporate reorganization and changed address.
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 Secretary of State released a Conventional Arms Transfer (CAT) Policy Implementation Plan Update
Nov. 8, 2018: The Secretary of State released a Conventional Arms Transfer (CAT) Policy Implementation Plan Update, part of a strategy intended to better align U.S. conventional arms transfers with national security and economic interests. The tasks included in the plan include, among others,
- Streamline the International Traffic in Arms Regulations (ITAR), with the goal of reducing regulatory burdens for U.S. industry and barriers to the commercial defense trade;
- Revise the United States Munitions List (USML, 22 CFR Sec. 121.1) to ensure that it clearly describes and adequately controls only those items that merit USML control;
- Update the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) to account for technological developments, practical application issues identified by exporters and re-exporters, and changes in the military and commercial non-military applications of controlled items; and
- Modernize the Missile Technology Control Regime (MTCR) to reflect advances in technology while continuing to constrain the proliferation of systems that can deliver weapons of mass destruction.
The CAT Policy Implementation Plan Update is on the State Department website at https://www.state.gov/r/pa/prs/ps/2018/11/287213.htm.
Nov. 15, 2018 – 83 Fed. Reg. 57523: The State Department updated the List of Restricted Entities and Subentities Associated with Cuba (CRL, Cuba Restricted List). While the CRL was established to identify persons with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR, 31 CFR Part 515), it is also considered by BIS pursuant to EAR Sec. 746.6(b)(3)(i) in reviewing license applications for exports to Cuba. The CRL is on the State Department website at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/287349.htm.
Department of the Treasury
OFAC Amended The Iranian Transactions And Sanctions Regulations
Nov. 5, 2018 – 83 Fed. Reg. 55269: The Office of Foreign Assets Control (OFAC) amended the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) and took other actions to complete the reinstatement of the nuclear-related primary and secondary sanctions against Iran upon the end of the 180-day wind-down period following the May 8, 2018, announcement that the U.S. would cease participation in the JCPOA. Sanctions against more than 700 blocked and sanctioned parties were reinstated, and several sanctions lists were reorganized. Lists of individuals, entities, vessels, and aircraft added to OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List); changes made to OFAC’s SDN List; and deletions from OFAC’s Executive Order 13599 List are on the OFAC website at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20181105_names.aspx. Effective date for these changes was Nov. 5, 2018.
OFAC Published 15 New new Frequently Asked Questions (FAQs)
Nov. 5, 2018: OFAC published 15 new Frequently Asked Questions (FAQs) relating to the re-imposition of the sanctions lifted or waived under the JCPOA at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#630. OFAC also amended existing FAQs 256 and 417 and archived several outdated FAQs. Among notable FAQs, FAQ 630 states that the provision or delivery of goods or services to an Iranian counterparty after Nov. 4, 2018 – including activities pursuant to an agreement entered into prior to May 8, 2018 -- may result in sanctions unless such activities are exempt from regulation, authorized by OFAC, or otherwise not sanctionable. It further notes that authorizations and exceptions under U.S. sanctions do not apply to transactions involving persons on the SDN List for certain reasons. Also, FAQ 644 states that U.S.-owned or -controlled foreign entities are prohibited from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran that would be prohibited by the ITSR if engaged in by a U.S. person or in the United States.
OFAC issued Ukraine-related General Licenses (GLs) 13G, 14C, 15B, and 16C
Nov. 9, 2018: OFAC issued Ukraine-related General Licenses (GLs) 13G, 14C, 15B, and 16C, extending from Dec. 12, 2018, to Jan. 7, 2019, the expiration date of current GLs authorizing transactions involving EN+ Group PLC, United Company RUSAL PLC, and GAZ Group, and their subsidiaries. The extension is related to ongoing efforts to make substantial corporate governance changes that could result in significant changes in control of these sanctioned entities.
Nov. 15, 2018 – 83 Fed. Reg. 57308: OFAC amended and largely restated the Democratic Republic of the Congo Sanctions Regulations (CSR, 31 CFR Part 547) to implement provisions of E.O. 13671 of July 8, 2014 (“Taking Additional Steps to Address the National Emergency with Respect to the Conflict in the Democratic Republic of the Congo”), and to make other technical and conforming changes. The changes include revising and restating Subpart B (Prohibited Transactions), Subpart D (Interpretations, including the sanctions status of subsidiaries), and Subpart G (Penalties and Findings of Violation) in their entirety. Also, changes were made in Subpart C (Definitions), including updates and clarifications of some existing definitions and the addition of a new definition of “information or informational materials;” several general licenses were revised in Subpart E (Licenses, Authorizations, and Statements of Licensing Policy); and other changes were also made.
OFAC Published An Advisory On “Sanctions Risks Related to Shipping Petroleum to Syria”
Nov. 20, 2018: OFAC published an Advisory on “Sanctions Risks Related to Shipping Petroleum to Syria” on its website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria_shipping_advisory_11202018.pdf.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Nov. 26, 2018 – 83 Fed. Reg. 60395: BIS denied the export privileges of Gregory Allen Justice of the Federal Correctional Institution in Safford, AZ, for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by attempting to export, cause others to export, and aid and abet the export of USML-controlled technical data relating to U.S. military satellite programs to a person he believed to be a Russian intelligence agent. Justice was a Boeing engineer; the purported Russian agent was in fact an undercover employee of the U.S. Federal Bureau of Investigation. In the criminal case, Justice was sentenced to 5 years in prison, 3 years of supervised release, and a $200 special assessment. (See additional information on this case in May 2017 Regulatory Update.)
Fines and Penalties
Oct. 31, 2018: Abdul Majid Saidi and Walid Mounir Chehade, both of metro Cleveland, OH, plead guilty in U.S. District Court in Grand Rapids, MI, to one count each of conspiracy to violate the AECA by plotting with a third person to export 20 semiautomatic pistols, to Lebanon, without the required authorization from the State Department by concealing them inside automobile engine blocks and transmissions that were placed in a cargo shipping container addressed to a person in Beirut, Lebanon. The shipment was intercepted when the pistols were discovered by U.S. Customs and Border Patrol inspectors in Virginia.
Nov. 7, 2018: Aplerash Sepehri, a citizen of Iran, pleaded guilty in U.S. District Court in Washington, DC, to conspiracy to unlawfully export U.S. goods, to Iran, in violation of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) and the ITSR and conspiracy to defraud the U.S. Sepehri was allegedly an employee and a member of the Board of Directors of Tajhiz Sanat Shayan or Tajhiz Sanat Company (TSS), an Iranian company that had been listed by the European Union, in 2011, as an entity sanctioned for its involvement in procuring components for the Iranian nuclear program. Sepehri and others allegedly conspired to obtain high-resolution sonar equipment, acoustic transducers, and other controlled technology and export them to Iran without obtaining the required export licenses. They allegedly sought to avoid legal controls by using various means including a variety of aliases, front companies based in the United Arab Emirates (UAE), and an intermediary shipping company based in Hong Kong, and by arranging to have payments made through the UAE.
Nov. 8, 2018: Hicham Diab, of Tripoli, Lebanon, and Nafez El Mir, a Canadian citizen residing in Lebanon, were arrested in Seattle, WA, on charges of conspiracy to violate the AECA. The arrest occurred when they exited a warehouse in which they had been hiding firearms in door panels and bumper space inside a sport-utility vehicle that they planned to ship to Lebanon. The firearms had been secured by Homeland Security Investigations (HSI) agents in a sting operation after a person in the U.S. who Diab believed was willing to locate firearms to be smuggled to Lebanon alerted HSI about the contact. The hidden firearms included 20 Glock handguns, a Smith & Wesson .50 revolver, an FN Fiveseven pistol, an AR15 rifle kit, and an M203 grenade launcher.
Nov. 13, 2018: Naum Morgovsky, of Hillsborough, CA, was sentenced in federal court in San Francisco, CA, to 9 years in prison, 3 years of supervised release, a fine of $1 million, and an assessed forfeiture of $222,930 and three (3) InfraTec night vision devices based on his plea of guilty of violating the AECA by conspiring to illegally export components for the production of night-vision and thermal devices to Russia, and for laundering the proceeds of the scheme. Morgovsky’s wife, Irina Morgovsky, was sentenced on Oct. 31 to 18 months in prison for her role in the export conspiracy. The Morgovskys used their U.S. business to purchase night and thermal vision components, including image intensifier tubes and lenses, misrepresenting to sellers that they would not be exported, and then shipped the products to Russia without the required authorization using numerous front companies and shipment methods. (See additional information about these cases in April 2017 and June 2018 Regulatory Updates.)
Nov. 16, 2018: Rami Najm Asad-Ghanem, a/k/a Rami Ghanem, a naturalized U.S. citizen residing in Egypt at the time of the offenses, was convicted by a federal jury of illegally brokering and conspiring to export a wide array of different surface-to-air missile systems to customers in Libya, the UAE, Iraq, and other countries, as well as other crimes related to the same activities. Ghanem was arrested on Dec. 8, 2015, in Athens, Greece, as a result of an undercover operation by U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI). He was extradited to the U.S. in April 2016 and was then held in custody without bond.
Nov. 20, 2018: Cobham Holdings, Inc. of Arlington, VA, on behalf of its former subsidiary Aeroflex/Metelics, Inc., agreed to pay a civil fine of $87,507, to settle charges by OFAC regarding three (3) apparent violations of the Ukraine Related Sanctions Regulations (URSR, 31 CFR Part 589) involving the indirect export of components to be incorporated into commercial air traffic control radar to a person owned 50 percent or more, directly or indirectly, by a person identified on the SDN List in violation of URSR Sec. 589.201. In announcing the settlement of this non-egregious case, OFAC described the steps that Cobham had taken to minimize the risk of recurrence of similar conduct in the future and noted the importance to companies operating in the defense industry of implementing effective, risk-based compliance measures. The announcement is on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20181127_metelics.pdf.
Nov. 30, 2018: Fuyi Sun, a/k/a Frank Sun, a citizen of the People’s Republic of China (PRC), was removed from the U.S. by ICE Enforcement and Removal Operations (ERO) officers and turned over to Chinese authorities without incident. Sun was serving a 3-year prison term for violating the IEEPA by attempting to illegally export, to the PRC, high-grade carbon fiber which is used primarily in aerospace and military applications. (See additional information about this case in June 2018 Regulatory Update.)