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.
EU Published Description of Member States’ Conformity To EU Dual-Use Export Control Regulation
Jan. 17, 2020: The European Commission published an up-to-date, country-by-country description of all measures imposed by individual Member States to conform with the European Union (EU) dual-use export control regulation, Council Regulation (EC) No 428/2009. This document is on the EU website at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020XC0117(02)&from=EN.
UK Export Control Joint Unit Updates Export Control List
Jan. 8, 2020: The United Kingdom (UK) Export Control Joint Unit (ECJU) published an updated export control list to reflect changes made by the EU in the dual-use export control list it released in October 2019. (See October 2019 Regulatory Update.) The updated UK Consolidated List of Strategic Military and Dual-Use Items That Require Export Authorization is at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/856510/UK_strategic_export_control_lists_20191231.pdf.
UK Published A Notice Regarding Applicability Of Export Controls During Brexit Transition Period
Jan. 29, 2020: The ECJU published a notice describing the applicability of export controls to trade with EU countries during the transition period through Dec. 31, 2020, when the UK’s departure from the EU will become complete. Current export licensing arrangements will continue to apply during the entire transition period. A link to “Notice to Exporters 2020/03: Exporting and Trading Items Subject to Strategic Controls During the Transition Period,” is at https://www.gov.uk/government/organisations/export-control-organisation.
The President Imposes Additional Sanctions On Iran
Jan. 14, 2020 – 85 Fed. Reg. 2014: President Trump issued Executive Order 13902, “Imposing Sanctions With Respect to Additional Sectors of Iran,” targeting additional sources of revenue used by Iran to fund and support its nuclear and other programs. The EO authorizes sanctions against persons involved in additional sectors of the Iranian economy, including construction, mining, manufacturing, and textiles, and on foreign financial institutions that knowingly conduct or facilitate significant transactions involving those sectors of Iran’s economy or persons sanctioned under the order. (See Treasury Department section below for an FAQ about this EO.)
Department of Commerce
The Department Of Commerce Adjusts Civil Monetary Penalties For Inflation
Jan. 3, 2020 – 85 Fed. Reg. 207: The Commerce Department issued its annual rule adjusting maximum civil monetary penalties (CMPs) for inflation. Adjusted maximum CMPs for violations involving dual-use export controls include the following:
- violations of the International Emergency Economic Powers Act (IEEPA, 50 USC Sec. 1705(b)) – maximum increased from $302,584 to $307,922
- violations of Export Control Reform Act of 2018 (ECRA, 50 USC Sec. 4819) – maximum increased from $300,000 to $305,292
- violations of 13 USC Sec. 304 (Census, Collection of Foreign Trade Statistics -- failure to file export information, delayed filings) – maximum per day increased from $1,394 to $1,419; maximum per violation increased from $13,948 to $14,194
- violations of 13 USC Sec. 305 (Census, Collection of Foreign Trade Statistics – other unlawful export information activities) – maximum increased from $13,948 to $14,194.
The new maximum CMPs will apply to violations assessed after Jan. 15, 2020, including violations that occurred prior to that date.
BIS Amends EAR On Interim Basis Assigning ECCN 0D521 To Software That Automates The Analysis Of Geospatial Imagery
Jan. 6, 2020 – 85 Fed. Reg. 459: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by classifying under Export Control Classification Number (ECCN) 0D521 software that is specially designed to automate the analysis of geospatial imagery and meets specified additional criteria. A license will be required for regional stability reasons for the export and reexport of these items to all destinations except Canada, and the only available License Exception (LE) will be LE GOV (EAR Sec. 740.11), covering exports, reexports, and in-country transfers made by or consigned to a USG department or agency. This control under ECCN 0D521 will apply for a maximum of one year; after that time it will expire unless it is extended while the USG submits a proposal to the Wassenaar Arrangement or it is reclassified under another ECCN. This interim final regulation became effective Jan. 6, 2020; comments will be accepted until March 6, 2020.
BIS Amends EAR In Final Rule To Regulate Certain Firearms And Ammunition (Previously ITAR) For Export Effective March 9, 2020
Jan. 23, 2020 – 85 Fed. Reg. 4136: BIS amended the EAR to add 17 new ECCNs to the Commerce Control List (CCL, EAR Part 774, Supp. No. 1) to include certain commercially available firearms and ammunition items that have been determined no longer to require control under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Categories I, II, and III, based on a thorough interagency review that concluded that they do not provide a critical military or intelligence advantage to the U.S. and, in the case of firearms, do not have an inherently military function. (See State Department section below for additional information about the changes in the USML. Also, see May 2018 Regulatory Update for information about a proposed rule on this topic.) Certain software and technology capable of producing firearms when posted on the Internet under specified circumstances is also controlled under this rule. The items removed from the USML will be classified under new 500 and 600 series controls in CCL Category 0. An authorization from BIS will be required to export or reexport any of these items to any country, including releases of related technology and software to foreign persons in the U.S. A 3-page BIS list of Myths and Facts about this transition is on the BIS website at https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2020/2516-cats-i-iii-myths-and-facts/file. Effective date of this final rule is March 9, 2020. Contact us for additional information about this rule and about its effect on specific CCL and USML items.
Attend FD Associates’ workshops February 11 and 25 or March 10 and 24 to learn about these changes.
Department of State
DDTC Name and Address Changes Posted To Website
Jan. 6, 9, 17, 28, and 30, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_kb_article_page&sys_id=bd72ca0adbf8d30044f9ff621f961981:
- Change in name from P3 engineering GmbH to Umlaut engineering GmbH due to corporate rebranding;
- Change in name from Sogeti UK Limited to CapGemini UK due to corporate rebranding;
- Change in address for Itter B.V.;
- Change in name from General Dynamics European Land Systems – Santa Barbara Sistemas to Fabrica De Municiones De Granada due to acquisition of GDELS – Santa Barbara Sistemas by Fabrica De Municiones De Granada;
- Change in name from Lord Corporation to Parker Hannifin Corporation due to the acquisition of Lord Corporation by Parker Hannifin;
- Change in name from FERCHAU Engineering to FERCHAU France SAS due to corporate reorganization;
- Change in name from Bond Offshore Helicopters Limited to Babcock Mission Critical Services Offshore Ltd. due to corporate reorganization;
- Change in address for Sikorsky Aircraft Australia Limited (SAAL);
- Change in address for Keysight Technologies UK Ltd; and
- Change in name from Triumph Aviation Services International Ltd. to STS Aviation Services International Ltd. due to acquisition of Triumph Aviation by STS Aviation.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
DDTC Posts FAQs Related To U.S. Persons Working Abroad
Jan. 6, 2020: DDTC posted one general FAQ and 14 specific FAQs providing guidance regarding provision of defense services by U.S. persons for foreign entities located outside the U.S. Among other things, the FAQs provide that the U.S. person employee of a foreign employer, as exporter of the services, is responsible for obtaining authorization from DDTC, usually by a General Correspondence authorization; confirmed that the foreign employer is not required to register with DDTC nor is the individual U.S. person; and discussed issues such as whether a foreign-origin defense article becomes subject to the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by virtue of the involvement of the U.S. employee. The general FAQ is on the DDTC website at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_detail&sys_id=6831a4fbdbca80d05564ff1e0f961996; the 14 specific FAQs are at https://www.pmddtc.state.gov/ddtc_public?id=ddtc_public_portal_faq_cat&topic=6acdbfe8db3bc30044f9ff621f96197e&subtopic=6d00203bdbca80d05564ff1e0f9619e3#6d00203bdbca80d05564ff1e0f9619e3.
The State Department Adjusts Civil Monetary Penalties For Inflation
Jan. 14, 2020 – 85 Fed. Reg. 2020: The State Department issued its annual rule adjusting maximum CMPs for inflation. Adjusted maximum CMPs for violations involving the ITAR are:
- violations of Arms Export Control Act (AECA, 22 USC 2778 et seq.) Sec. 38(e) (ITAR Sec. 127.10(a)(1)(i)): $1,183,736
- violations of AECA Sec. 39A(c) (ITAR Sec. 127.10(a)(1)(ii)): $860,683 or 5 times the amount of the prohibited payment, whichever is greater
- violations of AECA Sec. 40(k) (ITAR Sec. 127.10(a)(1)(iii)): $1,024,457.
DDTC Amends The ITAR In Final Rule Revising USML Categories I, II and III Effective March 9, 2020
Jan. 23, 2020 – 85 Fed. Reg. 3819: DDTC amended USML Categories I (Firearms, Close Assault Weapons and Combat Shotguns, to be renamed “Firearms and Related Articles’’), II (Guns and Armament), and III (Ammunition and Ordnance) to limit their scope to those articles that provide the U.S. with a critical military or intelligence advantage or, in the case of weapons, perform an inherently military function. Control over items that do not meet that standard, e.g., articles that are widely available in retail outlets in the U.S. and abroad, will be transferred to the CCL; however, all the transferred items will remain subject to export authorization requirements. and License Exception STA will not be available for them. Effective date of this final rule is March 9, 2020. (See Commerce Department section above for additional information about the changes in the CCL. Also, see May 2018 Regulatory Update for information about a proposed rule on this topic.) A DDTC Fact Sheet on these changes, including Myths and Facts, is on the DDTC website at https://www.state.gov/proposed-rules-for-oversight-of-firearms-exports-published-for-public-comment/, and DDTC transition guidance is at https://www.pmddtc.state.gov/sys_attachment.do?sysparm_referring_url=tear_off&view=true&sys_id=11608c55db664c107ede365e7c96196e [5 pp.]. Contact us for additional information on this rule, and about its effect on the specific defense articles and defense services that affect you.
Department of the Treasury
OFAC Issues Amended Venezuela-Related General Licenses
Jan. 7, 17, and 21, 2020: The Office of Foreign Assets Control (OFAC) issued the following amended Venezuela-related General Licenses (GLs):
- GL 6A, “Authorizing Certain Activities Necessary to the Wind Down of Operations or Existing Contracts with Globovision Tele C.A. or Globovision Tele CA, Corp." (effective through Jan. 21, 2020) (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl6a.pdf);
- GL 8E, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for Maintenance of Operations for Certain Entities in Venezuela” (effective through April 22, 2020) (https://home.treasury.gov/system/files/126/venezuela_gl8e.pdf); and
- GL 20B, "Authorizing Official Activities of Certain International Organizations Involving the Government of Venezuela" (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/venezuela_gl20b.pdf).
OFAC Posts New Iran-Related FAQ
Jan. 16, 2020: OFAC posted a new Iran-related FAQ addressing whether there is a wind-down period for EO 13902 of Jan. 14, 2020, “Imposing Sanctions With Respect to Additional Sectors of Iran,” (see The President section above) at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#816.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Jan. 8, 2020 – 85 Fed. Reg. 873: BIS denied the export privileges of Edgar Sanchez-Muro until June 19, 2024, based on his conviction of violating the AECA by knowingly attempting to export and exporting approximately 980 rounds of ammunition from the U.S. to Mexico without the required authorization. In the criminal case, Sanchez-Muro was sentenced to 12 months and one day in prison and a $100 special assessment.
Jan. 8, 2020 – 85 Fed. Reg. 874: BIS denied the export privileges of Resit Tavan until Aug. 29, 2029, based on his conviction of conspiracy to violate U.S. sanctions by exporting specialized marine equipment from the U.S. to Iran without the required authorization. (See additional details in September 2019 Regulatory Update.) In the criminal case, Tavan was sentenced to 28 months in prison with credit for time served and a $100 special assessment.
Jan. 8, 2020 – 85 Fed. Reg. 875: BIS denied the export privileges of Ruben Beltran-Ramos, a/k/a Ruben Ramos-Beltran, until Nov. 20, 2028, based on his conviction of violating the AECA by knowingly attempting to export and exporting 5,000 cartridges of ammunition from the U.S. to Mexico without the required authorization. In the criminal case, Beltran-Ramos was sentenced to 26 months in prison and a $100 special assessment.
Jan. 24, 2020 – 85 Fed. Reg. 4271: BIS entered a 180-day Temporary Denial Order (TDO) against the following persons and businesses:
- Muhammad Kamran Wali, Rawalpindi, Pakistan;
- Muhammad Ahsan Wali, Mississauga, Ontario, Canada;
- Haji Wali Muhammad Sheikh, Mississauga, Ontario, Canada;
- Ahmed Waheed, Essex, United Kingdom;
- Ashraf Khan Muhammad, Kowloon, Hong Kong;
- Business World, Rawalpindi, Pakistan;
- Buziness World, Mississauga, Ontario, Canada;
- Business World, Kowloon, Hong Kong;
- Industria Hong Kong Ltd, d/b/a Transcool Auto Air Conditioning Products, d/b/a Electro-Power Solutions, Kowloon, Hong Kong; and
- Product Engineering, Rawalpindi, Punjab, Pakistan.
(See Fines and Penalties section below for indictment of 5 of these persons.)
Jan. 24, 2020 – 85 Fed. Reg. 4276: BIS denied the export privileges of Marjan Caby of Miami, FL for 4 years based on a settlement agreement between Caby and the U.S. Attorney’s Office for the Southern District of Florida involving a charge of conspiracy to violate IEEPA by shipping various aircraft parts and equipment to Syrian Arab Airlines without the required authorization. (See related denial orders in November 2019 Regulatory Update.)
Department of State
Jan. 16, 2020 – 85 Fed. Reg. 2802: The State Department rescinded the statutory debarments of the following individuals and entities, all of whom had been debarred because they had pled guilty to violations of the AECA:
- Jami Siraj Choudhury;
- David Michael Janowski II;
- Netria Corporation;
- Jonathan Robert Reynolds; and
- State Metal Industries, Inc.
As a result of this rescission, all otherwise eligible persons may engage in exports of any of the Parties’ manufactured defense articles, incorporate any of the Parties’ manufactured items into defense articles for export, or otherwise engage in transactions subject to the ITAR without providing prior written notification of the Parties’ involvement as would otherwise be required. However, the Parties’ direct export privileges have not been reinstated.
Fines and Penalties
Jan. 15, 2020: The Department of Justice announced the unsealing of an indictment returned on Oct. 16, 2019, against Muhammad Kamran Wali of Pakistan; Muhammad Ahsan Wali and Haji Wali Muhammad Sheikh, both of Mississauga, Ontario, Canada; Ashraf Khan Muhammad of Hong Kong; and Ahmed Waheed of Ilford, Essex, United Kingdom, for conspiracy to violate the IEEPA and the ECRA by exporting U.S.-origin goods without the required USG authorizations to two Pakistani entities that were included on the Commerce Department’s Entity List (15 CFR Part 744, Supp. No. 4) because they were involved in Pakistan’s cruise missile and strategic UAV programs. All 5 defendants were associated with a front company, “Business World” in Rawalpindi, Pakistan, that operated as an international procurement network for these programs.
According to the indictment, the defendants concealed the actual destination of the goods from their U.S. suppliers by using a network of front companies as the claimed purchasers, end-users, and sources of payments, allegedly causing 29 different U.S. exporters to unintentionally falsely identify the ultimate consignees of the shipments on export documents. Arrest warrants are pending for all 5 defendants; none has thus far been apprehended. (See related Temporary Denial Order in Sanctions section above.)
Jan. 16, 2020: Majid Ghorbani, an Iranian citizen and resident of California, was sentenced in U.S. District Court in the District of Columbia to a prison term of 30 months followed by 36 months of supervised release based on his guilty plea to willfully violating the IEEPA and the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by providing surveillance of and collecting identifying information about the U.S. members and activities of the Mujahadeen-e-Khalq (MEK), an organization that opposes the current Government of Iran. Ghorbani provided the information and materials, including photographs of rally attendees, to a codefendant who tasked him on behalf of the Iranian regime and, among other things, paid him $2,000 provided by his Government of Iran handler.
Jan. 26, 2020: James P. Meharg of Pensacola, FL was sentenced in U.S. District Court for the Northern District of Florida to 40 months in prison followed by 3 years of federal supervised release, and, ordered to forfeit $250,000 based on his conviction of violating the ITSR by conspiring with citizens of the United Kingdom and Iran to export a Solar Mars 90 S turbine core engine and parts, from the U.S. to a recipient in Iran. Meharg also allegedly falsified documents used to export the items from the U.S. The turbine was seized by U.S. law enforcement authorities before its transatlantic journey.
Jan. 28, 2020: Honeywell Middle East FZE of Dubai, United Arab Emirates (UAE) agreed to pay a civil penalty of $26,250 to settle charges of violating the Antiboycott Regulations (EAR Part 760) by refusing to do business (EAR Sec. 760.2(a)) on 2 occasions and by failing to report the receipt of requests to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. (EAR Sec. 760.5) on one occasion. The violations involved transactions with Oman and the UAE.
Jan. 29, 2020: Airbus SE (Airbus) of Leiden, The Netherlands, agreed to pay a civil penalty of $10 million ($5 million in 3 installments and $5 million assessed for remedial compliance measures and suspended on condition of completion of remedial measures), assign a Special or Internal Compliance Officer, and take extensive remedial compliance measures to settle charges by DDTC of 75 violations of the AECA and ITAR including failure to report accurate ITAR Part 130 statements for fees or commissions paid to facilitate sales; failure to maintain required ITAR Part 130 records; unauthorized reexports of defense articles from Spain to Australia; and unauthorized retransfers of defense articles in Spain.
Separately, Airbus also entered into a deferred prosecution agreement (DPA) with the Department of Justice (DOJ) in connection with a criminal investigation charging it with conspiracy to violate the AECA and the ITAR and conspiracy to violate the anti-bribery provision of the Foreign Corrupt Practices Act (FCPA, 15 U.S.C. §§ 78dd-1, et seq.). The AECA charge involves Airbus’ willful failure to inform DDTC of commissions it paid to third-party brokers who were hired to generate sales of defense articles and defense services to foreign armed forces. Under this DPA, Airbus will pay penalties of $527 million (including $5 million to be credited by DOJ from the $10 million DDTC penalty), plus 50 million Euros (approximately $55 million) as part of the civil forfeiture agreement for the ITAR-related conduct. A DOJ press release with additional information is on the DOJ website at https://www.justice.gov/opa/pr/airbus-agrees-pay-over-39-billion-global-penalties-resolve-foreign-bribery-and-itar-case.
Jan. 30, 2020: Mahin Mojtahedzadeh, a citizen of Iran, was sentenced in federal district court in Albany, NY to time served (443 days in jail) and a $5,000 fine for violating the IEEPA and the ITSR by conspiring to export gas turbine parts valued at more than $3,000 from the U.S. to Iran without the required license from OFAC. Mojtahedzadeh was President and Managing Director of ETCO-FZC, a supplier of spare and replacement turbine parts for power generation companies in the Middle East with an office in Dubai, UAE. Working with companies in Canada and Germany, she arranged for U.S.-origin turbine parts to be illegally trans-shipped from those countries to Iran. Two co-conspirators in these violations, Olaf Tepper and Mojtaba Biria, both citizens of Germany, pleaded guilty to violating the IEEPA and were sentenced in August 2018 and August 2019, respectively. (See August 2019 Regulatory Update.) Mojtahedzadeh will now be placed in immigration custody for removal from the U.S.