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
2019 Annual Increases in Civil Monetary Penalties
Feb. 7, 2019 – 84 Fed. Reg. 2445: The Commerce Department announced the 2019 annual increases in the civil monetary penalty (CMP) amounts that may be assessed for violations of laws including:
- Violations of the Chemical Weapons Convention Implementation Act:
- 22 USC 6761(a)(1)(A), from $37,601 to $38,549, and
- 22 USC 6761(a)(1)(B), from $7,520 to $7,710;
- Violations of the International Emergency Economic Powers Act, 50 USC 1705(b), from $295,141 to $302,584;
- Violations of the United States Additional Protocol Implementation Act, 22 USC 8142(a), from $30,557 to $31,328;
- Violations of the Export Control Reform Act of 2018, 50 USC 4819 (new penalty), maximum $300,000; and
- Violations involving Collection of Foreign Trade Statistics
- 13 USC 304, daily delinquency (total not to exceed maximum violation) from $1,360 to $1,394, and maximum per violation from $13,605 to $13,948, and
- 13 USC 305(b), from $13,605 to $13,948.
The new CMPs will apply to penalties assessed after March 1, 2019, including penalties for violations that occurred before that date.
Department of Commerce – Census Bureau
Census Posts New Videos On How To File EEI
Feb. 7, 2019: The Census Bureau announced the availability of new videos containing current information on how to file Electronic Export Information (EEI) via AES. A playlist of all the videos is on the Internet at .
New 2019 Schedule B and Harmonized Tariff Schedule
Feb. 12, 2019: The Census Bureau announced the availability of the new 2019 Schedule B and Harmonized Tariff Schedule (HTS) on its website at http://www.census.gov/foreign-trade/aes/documentlibrary/?utm_campaign=&utm_medium=email&utm_source=govdelivery#concordance"> and a current list of HTS codes that are not valid for AES at
http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?utm_campaign=&utm_medium=email&utm_source=govdelivery">. AES will not accept shipments reporting an outdated 2018 code.
Department of State
DDTC Name and Address Changes Posted To Website
- Change in Address for Scopex SARL;
- Change in Address for Dassault Systèmes BV;
- Change in Name from IMI, Ltd. Propulsion Systems Business to Tomer, Ltd., a government owned company, due to IMI acquisition by Elbit Systems in connection with deal between the parties and Israeli Government;
- Change in Name from BAE Systems Projects (Canada) Limited to BAE Systems (Canada) Inc., a wholly owned subsidiary due to corporate reorganization;
- Change in Name and Address from Systems Consultants Services Limited (SCS Ltd) to Systems Engineering & Assessment Ltd (SEA) zation;
- Change in Address for Phoenix Logistics, Inc.;
- Change in Name from General Dynamics European Land Systems – Germany GmbH to General Dynamics European Land Systems – Bridge Systems GmbH due to corporate reorganization;
- Change in Name from Commercial Marine Business of Rolls-Royce plc, including the Commercial Marine Business of Rolls-Royce Marine AS (Norway), Rolls-Royce AB (Sweden) and Rolls-Royce OY AB Finland to Kongsberg Maritime AS due to the acquisition of the Commercial Marine Business of Rolls-Royce plc, by KONGSBERG Gruppen ASA, parent company of Kongsberg Maritime AS; and
- Change in Name from KLX Inc. to Boeing Distribution Services Inc due to acquisition of KLX by Boeing.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
New Advisory Opinion Form Posted To DECCS
Feb. 4, 2019: DDTC announced the availability of a new Advisory Opinions application whose use will be limited to inquiries related to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Secs. 126.9(a), 126.9(c), and 129.9. This new application is located in DDTC’s Defense Export Control and Compliance System (DECCS). A DECCS Industry Service Portal providing information and enrollment instructions for DECCS is on the DDTC website at . Advisory opinion requests relating to ITAR sections other than 126.9(a), 126.9(c), and 129.9 should continue to be submitted in paper by mail.
DDTC Posts Request For Public Comments On Current, New And Revised Forms
Feb. 6, 12, 13, and 22, 2019: DDTC submitted the following requests for public comments on current, new, and revised forms:
- Feb. 6, 2019 -- 84 Fed. Reg. 2295 (deadline for comments April 8, 2019):
- Form DS-4076, Request for Commodity Jurisdiction Determination;
- Feb. 12, 2019 – 84 Fed. Reg. 3528, corrected by Feb. 22, 2019 – 84 Fed. Reg. 5802 (deadline for comments March 14, 2019):
- Form DSP-61, Application for Temporary Import of Defense Articles;
- Form DSP-73, Application/License for Temporary Export of Unclassified Defense Articles; and
- Form DSP-85, Application/License for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data;
- Feb. 12, 2019 – 84 Fed. Reg. 3529 (deadline for comments March 14, 2019):
- Form DS-4294, Brokering Prior Approval;
- Feb. 12, 2019 – 84 Fed. Reg. 3530 (deadline for comments March 14, 2019):
- Annual Brokering Report (no form); and
- Feb. 13, 2019 – 84 Fed. Reg. 3846 (deadline for comments March 15, 2019):
- Form DS-2032, Statement of Registration.
Department of the Treasury
Department of Treasury Posts List Of Potential Countries Cooperating In International Boycotts
Feb. 6, 2019 – 84 Fed. Reg. 2337: 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 Publishes Updated Version Of Its “Data Delivery Standards Guidance: Preferred Practices for Productions to OFAC” Manual
Feb. 26, 2019: The OFAC Office of Compliance and Enforcement (OCE) issued an updated edition of its manual “Data Delivery Standards Guidance: Preferred Practices for Productions to OFAC,” which provides guidance on the preferred format, organization, and technical standards for electronic and hard-copy submissions to OCE including administrative subpoena responses, self-disclosures, and other documents or reports. This OCE Data Delivery Standards Guidance is on the Treasury Department website at .
LATEST SANCTIONS FINES & PENALTIES
Feb. 4, 2019 – 84 Fed. Reg. 1422: BIS denied the export privileges of Eduard Roel Vazquez of the Federal Correctional Institution (FCI), Beaumont, TX for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by aiding and abetting the export and attempted export of two ITAR-controlled rifles, to Mexico, without the required licenses from the U.S. Department of State. In the criminal case, Vazquez was sentenced to 38 months in prison, 3 years of supervised release, and a $100 assessment.
Feb. 4, 2019 – 84 Fed. Reg. 1423: BIS denied the export privileges of Veronica Trujillo of FCI, Phoenix, AZ for 7 years based on her conviction of violating the AECA by exporting, and causing the export of, 2000 rounds of Wolf 7.62x39mm ammunition and 1,000 rounds of Wolf 9MM luger ammunition, to Mexico, without the required licenses from the U.S. Department of State. In the criminal case, Trujillo was sentenced to 46 months in prison with credit for time served, 3 years of supervised release, and a $100 assessment. She was also placed on the U.S. Department of State Debarred List.
Feb. 4, 2019 – 84 Fed. Reg. 1424: BIS denied the export privileges of Alexander Fishenko of FCI, Three Rivers, TX for 10 years based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701 et seq.) and the AECA by exporting microelectronics controlled under the Export Administration Regulations (EAR, 15 CFR Parts 730-774) and power amplifiers controlled under the ITAR, to Russia, without the required licenses from the U.S. Departments of Commerce and State. In the criminal case, Fishenko was sentenced to 120 months in prison, 3 years of supervised release, and a $1,900 assessment and forfeited over $500,000 in criminal proceeds. He was also placed on the U.S. Department of State Debarred List. (See additional information about this case in July 2016 Regulatory Update.)
Feb. 4, 2019 – 84 Fed. Reg. 1426: BIS denied the export privileges of Joel Prado, Jr., of the U.S. Penitentiary, Beaumont, TX for 10 years based on Prado’s conviction of violating the AECA by conspiring to export, and causing to export, ITAR-controlled .223 caliber rifles without the required license from the U.S. Department of State. In the criminal case, Prado was sentenced to 96 months in prison, 3 years of supervised release, and an assessment of $200.
Feb. 4, 2019 – 84 Fed. Reg. 1427: BIS denied the export privileges of Jose Jesus Campos-Flores of FCI Bastrop, TX, for 7 years based on his conviction of violating the AECA by exporting and attempting to export ITAR-controlled firearms, to Mexico, without the required licenses from the U.S. Department of State. In the criminal case, Campos-Flores was sentenced to 36 months in prison, 3 years of supervised release, and a $100 assessment.
Feb. 5, 2019 – 84 Fed. Reg. 1703: BIS denied the export privileges of Shavkat Abdullaev of FCI Moshannon Valley, PA for 5 years based on his conviction of violating the IEEPA by exporting EAR-controlled microelectronics, to Russia, without the required licenses from the U.S. Department of Commerce. In the criminal case, Abdullaev was sentenced to 36 months in prison, two years of supervised release, and a $400 assessment.
Fines and Penalties
Feb. 1, 2019: The Department of Justice (DOJ) announced that it had reached a settlement with Honda Aircraft Company, LLC, of Greensboro, NC, resolving a DOJ claim that Honda had violated an Immigration and Nationality Act anti-discrimination provision (8 USC 1324b) by unlawfully restricting job vacancies to U.S. citizens and lawful permanent residents based on a misunderstanding of the requirements of the ITAR and the EAR. In the settlement, Honda agreed to pay a civil penalty of $44,626 and implement extensive correctional actions. A DOJ press release describing the intersection of export control and antidiscrimination requirements is on the DOJ website at , and the settlement agreement describing the agreed-upon correctional actions is at .
Feb. 7, 2019: Kollmorgen Corporation of Radford, VA, agreed to pay a civil penalty of $13,381 to settle charges, by OFAC, of six violations by Kollmorgen’s Turkish affiliate Elsim Elektroteknik Sistemler Sanayi ve Ticaret Anonim Sirketi of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). Elsim allegedly violated ITSR Sec. 560.215 when, on six occasions, Elsim serviced machines containing Elsim products located in Iran and provided products, parts, or services valued at $14,867 with knowledge that they were destined for Iranian end-users. In addition to the monetary penalty, Evren Kayakiran, the Elsim manager who was primarily responsible for the conduct that led to the alleged violations, was designated on the Foreign Sanctions Evaders List. When Kollmorgen acquired Elsim, it was aware that Elsim had customers in Iran. Therefore, it established an extensive compliance program to prevent violations of the ITSR. The ensuing violations occurred when Elsim violated the compliance program, while not disclosing the violations to Kollmorgen. Kollmorgen voluntarily disclosed the violations. OFAC’s report on this case, on the Treasury Department website at , details the compliance program and the steps that Kollmorgen took when it discovered the violations.
Feb. 14, 2019: OFAC assessed a civil penalty of $5,512,564 against AppliChem GmbH of Darmstadt, Germany, for 304 violations of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) involving the unauthorized sale, to Cuba, of chemical reagents with a total value of $3,433,495. The illegal sales occurred after AppliChem was acquired by Illinois Tool Works, Inc., of Glenview, IL, and after ITW sent AppliChem a memorandum explaining ITW’s guidelines for complying with U.S. sanctions, including a requirement to cease all Cuban transactions. After ITW sent additional instructions to cease all transactions with Cuba in the face of apparent violations by AppliChem, AppliChem management created a scheme to conceal its Cuban business from ITW after specifically representing to ITW that it had ceased. ITW voluntarily self-disclosed the violations on behalf of AppliChem. In its announcement of the settlement, OFAC emphasized the importance of (i) implementing risk-based controls, such as regular audits, to ensure sanctions compliance by subsidiaries, (ii) performing follow-up due diligence on acquisitions of foreign persons that have a history of transactions with sanctioned persons and jurisdictions, and (iii) appropriately
responding to derogatory information regarding the sanctions compliance efforts of foreign persons subject to U.S. jurisdiction.
Feb. 21, 2019: ZAG IP, LLC (formerly known as ZAG International, LLC), of Newtown, CT, agreed to pay a civil penalty of $506,250 to settle charges, by OFAC, of 5 violations of Sec. 560.206 of the ITSR involving the purchase of a total of 263,563 metric tons of Iranian-origin cement clinker with a total value of $14,495,961 from a company based in the UAE for ultimate sale to a customer in Tanzania. ZAG was aware that the clinker was sourced from Iran but relied on the supplier’s misrepresentation that it was not subject to U.S. economic sanctions on Iran. ZAG voluntarily self-disclosed the violations to OFAC. Mitigating factors noted by OFAC included that ZAG undertook significant remedial measures by conducting a thorough internal investigation to determine the causes of the compliance failures and enhancing its sanctions compliance policy and procedures, including developing and implementing a U.S. Export Controls and Economic Compliance Manual and appointing a sanctions compliance officer.
Feb. 26, 2019: Lionel Chan, a resident of Brighton, MA, and Muhammad Mohd Radzi, a resident of Brooklyn, NY, both nationals of Malaysia, were indicted for conspiring to violate the AECA by exporting firearm parts, including ITAR-controlled parts used in AR-15 assault rifles and 9MM semi-automatic handguns, to a buyer in Hong Kong without the required export license. The parts were allegedly shipped in at least 33 packages via Federal Express after Chan and Radzi provided false information about their contents to Federal Express. In October 2018, Hong Kong authorities interdicted two of the packages and found that they contained numerous firearms parts, including a firing pin and gun sight, that were controlled under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category I. Chan and Radzi were arrested Jan. 31, 2019. In addition to the conspiracy charge, Chan was also indicted for obstruction of justice after he allegedly deleted text messages regarding the illegal exports between himself and the buyer in Hong Kong during a flight from Dublin, Ireland to Boston.