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.S. Congress – Congressional Research Service
Export Control Reform Initiative Description Released
March 5, 2019: The Congressional Research Service released “The U.S. Export Control System and the Export Control Reform Initiative,” a basic but comprehensive description of the systems regulating exports of dual-use, military, and nuclear items and the content and status of the Export Control Reform Initiative. This 31-page report is on the congressional website at https://crsreports.congress.gov/product/pdf/R/R41916.
Government Accountability Office
GAO Released A Report On Export Control Reform And Changes To Controls On Firearms, Artillery And Ammunition
March 1, 2019: In a review of proposed changes to export controls on firearms, artillery, and ammunition, the Government Accountability Office (GAO) analyzed the numbers of export license applications that would move from the State Department to the Commerce Department, the resource implications of the change for both departments, and the differences in rules and implementation between the two systems. The report’s primary recommendation was that the State Department and Commerce Department should develop a process for sharing State’s internal watch list. The full report can be accessed at https://www.gao.gov/products/GAO-19-307?utm_campaign=usgao_email&utm_content=daybook&utm_medium=email&utm_source=govdelivery (52 pages).
Department of Commerce – Bureau of Industry and Security
The Bureau of Industry and Security Requested Public Comment
March 7 and 13, 2019: The Bureau of Industry and Security (BIS) requested public comments on the following topics:
- March 7, 2019 – 84 Fed. Reg. 8302: License Exceptions and Exclusions, including reporting and recordkeeping burdens (deadline for comments May 6, 2019);
- March 13, 2019 – 84 Fed. Reg. 9084: Offsets in Military Exports. including ways to minimize the burden of information collection (deadline for comments May 13, 2019); and
- March 13, 2019 – 84 Fed. Reg. 9085: License Exemptions and Exclusions, including reporting and recordkeeping burdens (deadline for comments May 13, 2019).
The Bureau of Industry and Security Requested Public Comment
March 8, 2019 – 84 Fed. Reg. 8485: BIS requested public comments on items that have been added to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) as a result of recent revisions of Categories IV and XV of the U.S. Munitions List (USML, 22 CFR Sec. 121.1). Specific requests for comments relate to –
- Technologies controlled under Export Control Classification Number (ECCN) 9A515;
- Controls on specific space-related technologies;
- Possible future controls on items associated with the Lunar Gateway;
- Additional technologies controlled in Categories IV and XV that should be controlled under the Export Administration Regulations (EAR, 15 CFR Parts 730-774);
- Specific defense articles that have entered into normal commercial use;
- Defense articles for which commercial use is proposed, intended, or anticipated in the next 5 years;
- Other technical issues for these items which BIS should address; and
- Cost savings to private entities that would result from shifting control of additional specific commercial items from the USML to the CCL.
Deadline for comments is April 22, 2019. (See parallel comment request in State Department section below.)
Department of State
DDTC Name and Address Changes Posted To Website
March 4, 5, 8, 18, and 21, 2019: 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 MEITEC Corporation;
- Change in name from Vasini, Diana, Gualandi Srl (abbreviated Vasini Srl) and Sacil srl to RB SRL due to acquisition of Vasini and Sacil by RB SRL;
- Change in address for the following General Dynamics subsidiaries:
- General Dynamics Information Technology, Inc.,
- Buccaneer Computer Systems & Services, Inc.,
- Computer Service Solutions, LLC,
- ForeSight Technology Services, LLC,
- General Dynamics Global Force, LLC,
- Signal Solutions, LLC, and
- General Dynamics Overseas Systems and Services Corporation;
- Change in name from Qioptiq Singapore PTE LTD to Excelitas Technologies Singapore PTE LTD due to internal reorganization via an amalgamation;
- Change in name from Acorn Surface Technology AIMT UK Ltd. (Acorn Surface Technology) to Aalberts Surface Treatment Ltd. (Aalberts Surface Treatment) due to corporate reorganization;
- Change in address for “K” Line Logistics (U.S.A.) Inc.;
- Change in name from Renault Trucks Defense to ARQUUS due to corporate rebranding;
- Change in name from Abacus Innovations Israel, Ltd. to Leidos Innovations Israel A.B. Ltd, due to merger between Lockheed Martin and Abacus Innovations;
- Change in address for Rohde & Schwarz Benelux B.V.;
- Change in address for Thales Alenia Space UK Ltd; and
- Change in address for CAE Australia Pty 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 Department Requested Public Comments Revisions To USML Categories IV And XV
March 8, 2019 – 84 Fed. Reg. 8486: The State Department requested public comments to inform its review of the controls implemented in the most recent revisions of USML Categories IV and XV, particularly on the following topics pertaining to these categories:
- Emerging or new technologies that warrant control in these categories, but are not currently clearly described;
- Specific items described in these categories that have entered into normal commercial use;
- Items in these categories for which commercial use is proposed, intended, or anticipated in the next 5 years;
- Other technical issues for these categories that the Department should address;
- A way to provide technical differentiation within U.S. export control regulations between space-based optical telescopes for astrophysics missions and those used for Earth observation;
- Suggested revisions to clarify the scope of Categories XV(a)(7) and XV(e)(2);
- Revisions to clarify the scope of Category XV(a)(12) regarding the scope of “servicing” space stations;
- The potential control status of the future Lunar Gateway; and
- Cost savings to private entities from shifting control of a suggested specific item from the USML to the CCL.
Deadline for comments is April 22, 2019. (See parallel comment request in Commerce Department section above.)
State Department Requested Public Comment On Its Voluntary Disclosure Form
March 8, 2019 – 84 Fed. Reg. 8558: The State Department requested public comments about the new electronic form and instructions it is developing for use in submitting voluntary disclosures of violations. Proposed Form DS-7787 is on the DDTC website at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=afa0dfb5db88f3c05564ff1e0f9619fd; its instructions are at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=dfa09f35db88f3c05564ff1e0f96195c. Deadline for comments is May 7, 2019.
State Department Listed Commodity Jurisdiction Determinations it issued during the period Oct. 14, 2010 - Dec. 27, 2018.
March 11, 2019: DDTC posted a list of 4,562 Commodity Jurisdiction Determinations it issued during the period Oct. 14, 2010 - Dec. 27, 2018. The list, including a keyword search function, is on the DDTC website at https://www.pmddtc.state.gov/?id=ddtc_kb_article_page&sys_id=6ea6afdcdbc36300529d368d7c96194b.
State Department Announced New 2019 Civil Monetary Penalties
March 19, 2019 – 84 Fed. Reg. 9957: The State Department announced the new 2019 Civil Monetary Penalties (CMPs), applying the 2019 multiplier of 1.02522 to the 2018 amounts. The new amounts include:
- Violations of the Chemical Weapons Convention Implementation Act (22 USC 6761):
- 22 CFR 103.6, Prohibited Acts, from $37,601 to $38,549, and
- 22 CFR 103.6, Recordkeeping Violations, from $7,520 to $7,710;
- Violations of the Arms Export Control Act (22 USC 2778, 2779(a), and 2780):
- 22 CFR 127.10(a)(1)(i), from $1,134,602 to $1,163,217,
- 22 CFR 127.10(a)(1)(ii), from $824,959 or 5 times the amount of the prohibited payment, whichever is greater to $845,764 or 5 times the amount of the prohibited payment, whichever is greater, and
- 22 CFR 127.10(a)(1)(iii), from $981,935 to $1,006,699.
The new CMPs will apply to penalties assessed on or after March 19, 2019, regardless of the date on which the violations occurred.
Department of the Treasury
OFAC Replaced Ukraine-related General Licenses (GLs) 13J and 15D with GLs 13K and 15E
March 6, 2019: The Office of Foreign Assets Control (OFAC) replaced Ukraine-related General Licenses (GLs) 13J and 15D with GLs 13K and 15E, which extended to July 6, 2019 the expiration date affecting certain transactions involving GAZ Group or entities in which it owns, directly or indirectly, a 50 percent or greater interest.
OFAC Issued Venezuela-related GL 7A
March 14, 2019: OFAC issued Venezuela-related GL 7A authorizing certain transactions related to PDV Holding, Inc. (PDVH) and CITGO Holding, Inc. (CITGO) for 18 months, renewing automatically on a monthly basis. GL 7A also authorizes until April 28, 2019 certain transactions and activities relating to Petroleos de Venezuela, S.A. (PdVSA) and any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest.
OFAC Amended Venezuela-related GL 4 And Issued Four New GLs
March 22, 2019: OFAC amended Venezuela-related GL 4, “Authorizing New Debt Transactions and Transactions involving Certain Banks Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, or Replacement Parts and Components,” and issued the following four new Venezuela-related GLs: GL 15, “Authorizing Transactions Involving Certain Banks Prohibited by Executive Order 13850 for Certain Entities;” GL 16, “Authorizing Maintenance of U.S. Person Accounts and Noncommercial, Personal Remittances involving Certain Banks;” GL 17, “Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Certain Banks;” and GL 18, “Authorizing Certain Transactions Involving Integracion Administradora de Fondos de Ahorro Previsional, S.A.” Two related FAQs are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#663.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
March 13, 2019 – 84 Fed. Reg. 9752: BIS denied the export privileges of Shavkat Abdullaev of Moshannon Valley Correctional Institution, Philipsburg, PA, for 5 years based on his conviction of violating the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1701-1707) by knowingly and intentionally exporting microelectronics, to Russia, without the required licenses from the Department of Commerce. In the criminal case, Abdullaev was sentenced to 36 months in prison, 2 years of supervised release, and a $400 assessment.
Department of State
March 4, 2019 – 84 Fed. Reg. 7411: The State Department Bureau of Political-Military Affairs rescinded the statutory debarment of Rocky Mountain Instrument Company (RMI) under the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). The debarment was imposed on September 8, 2010 (75 84 Fed. Reg. 54692), based on RMI’s earlier conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and modified to allow specific exceptions on May 9, 2016 (81 Fed. Reg. 28113). (See additional details in September 2010 and May 2016 Regulatory Updates.) The rescission was granted based on the determination that RMI had taken appropriate steps to address the causes of the violations. Pursuant to the requirements of ITAR Sec. 127.11, certain conditions will continue to apply to the issuance of licenses directly to RMI, but all otherwise eligible persons may engage in exports of RMI-manufactured defense articles, incorporate RMI-manufactured items into defense articles for export, or otherwise engage in transactions subject to the ITAR without providing the prior written notification of RMI's involvement that would otherwise be required.
Fines and Penalties
March 20, 2019: The U.S. Department of Justice unsealed an indictment charging Valery Kosmachov, of Tallinn, Estonia, a Russian national and naturalized citizen of Estonia, and Sergey Vetrov, a Russian national, with violations of the IEEPA, international money laundering, and smuggling. The indictment was in connection with a scheme to illegally procure U.S.-origin controlled dual-use electronic components, including programmable computer chips capable of operating in austere environments, and smuggling them into Russia. Kosmachov and Vetrov allegedly used two Estonia-based companies owned by Kosmachov as procurement “fronts,” claiming that the components were intended for end users in Estonia, and, then trans-shipping them into Russia, in part using laundered funds. Kosmachov was arrested, in Tallinn, on September 12, 2018, and was extradited to the U.S. on March 14, 2019. Vetrov remains at large.
March 21, 2019: David Russell Levick, of Cherrybrook NSW, Australia, was sentenced in Washington, DC Federal District Court to 24 months in prison and a forfeiture of $199,227 based on his plea of guilty of 4 violations of the IEEPA involving procuring or attempting to procure precision pressure transducers, emergency flotation system kits, and shock mounted light assemblies for transshipment, to Iran, without the required licenses from the Treasury Department. Levick, as general manager of a company in Thornleigh, Australia, sold these items to a customer in Iran that also controlled intermediaries in Malaysia. He allegedly concealed the ultimate end use and end users of these items from U.S. and other suppliers and structured payments to avoid trade restrictions on Iranian financial institutions. The forfeiture amount represented the total value of the goods involved in the illegal transactions. Levick was indicted in February 2012 (see February 2012 Regulatory Update) and was extradited from Australia to the U.S. in December 2018.
March 27, 2019: OFAC announced that Stanley Black & Decker, Inc. (“SB&D”) of New Britain, CT, on behalf of itself and its Chinese subsidiary, Jiangsu Guoqiang Tools Co., Ltd. (“GQ”), had agreed to pay a civil fine of $1,869,144 to settle charges, by OFAC, of 23 apparent violations of Sec. 560.215 of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). These transactions involved 23 shipments, by GQ, of power tools and spare parts with a total value of $3,201,648, directly to Iran, or to a third country with knowledge that the goods were specifically intended for end use in Iran. SB&D voluntarily self-disclosed the apparent violations, which occurred in 2013 and 2014.