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
ECR Update: BIS Publishes Proposed Rules to Adopt Changes to USML Category XII… Unlike prior ECR Changes, Not a Significant Amount is Being Down-Regulated
May 5, 2015 – 80 Fed. Reg. 25797: As part of the Export Control Reform effort, the Bureau of Industry and Security (BIS) proposed revisions to the Commerce Control List (CCL, 15 CFR Part 774, Supp. No. 1) describing how articles that no longer require control under U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) would be controlled under the CCL. To accomplish this, the proposal would create new “600 series” Export Control Classification Numbers (ECCNs) 6X615 to control military fire control, range finder, and optical equipment; amend the existing “600 series” ECCNs 7X611 to include military guidance and control equipment; and amend the following existing ECCNs to cover items that are considered dual use by the Wassenaar Arrangement: 0A987, 2A984, 6A004, 6A005, 6A007, 6A008, 6A107, 7A001, 7A002, 7A003, 7A005, 7A101, and 7A102.
In addition, the proposed rule would strengthen controls over night vision items by amending certain existing ECCNs to expand their scope of control,eliminate the use of some license exceptions, and create new ECCNs for certain software and technology related to night vision items. Among these new and expanded controls, ECCNs 6A002 and 6A990 will be subjected to regional stability (RS) controls; license exception Strategic Trade Authorization (STA) will be restricted for some items in ECCNs 0E987, 6A002, 6A004, 6A990, 6D002, 6D003, 6E001, 6E002, 6E990, and new 6E994; and the number of ECCNs covered by limitations imposed on exports and reexports of certain cameras, systems or equipment by Sec. 744.9 of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) will be expanded.
The deadline for comments on these proposals is July 6, 2015. (See related item in State Department section below.)
BIS Publishes Guidance on Routed Transactions Involving Russia and the Need to Obtain Clear Statements of End Use For All Russia-Related Transactions
May 19, 2015: BIS posted guidance on due diligence to prevent unauthorized transshipment/reexport of controlled items to Russia. While BIS is especially concerned about possible unauthorized reexports to Russia of NS-controlled items and items subject to the military end use requirement in EAR Part 744, Supp. No. 2, this guidance describes screening and inquiry practices that are equally applicable to prevention of unauthorized diversion to any destination. The guidance is on the BIS website at http://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/russia-due-diligence-guidance.
BIS Publishes Proposed Rule for Cybersecurity, Adopting Part of Wassenaar 2013 Plenary Agreements
May 20, 2015 – 80 Fed. Reg. 28853: BIS proposed a rule imposing NS, RS, and AT controls on certain cybersecurity items that would require an export license to all countries except Canada. No license exceptions except GOV would be available for exports of these items. The new controls would pertain to items involving “intrusion software,” which will be a newly defined term, and communications surveillance systems. Some of the designated items are already controlled for their information security functionality, including encryption and cryptanalysis, but others would be newly controlled solely because of their cybersecurity functionality. These changes would implement an agreement on intrusion and surveillance items that was adopted by the 2013 plenary of the Wassenaar Arrangement. Comments are due July 20, 2015.
BIS Publishes Various CCL Revisions to Adopt 2014 Wassenaar Plenary Agreements
May 21, 2015 – 80 Fed. Reg. 29431: BIS made extensive changes in the CCL to implement decisions agreed at the December 2014 plenary of the Wassenaar Arrangement. The changes include revisions of 45 ECCNs plus the addition of one ECCN (9D005) and the removal of one ECCN (4D002); amendment of the General Technology Note; and addition of 7 definitions and revision of 6 definitions. Items significantly affected by the changes include spacecraft equipment (Cat. 9), technology for fly-by-wire/flight-by-light systems (Cat. 7), machine tools (Cat. 2), optical equipment for military use and fiber laser components (Cat. 6); and unmanned aerial vehicles (Cat. 9). In addition, Column 1 of the Country Group list (EAR Part 740, Supp. No. 1) was modified to replace the former CoCom member countries with the Wassenaar Arrangement Participating States, and the Commerce Country Chart (EAR Part 738, Supp. No. 1) was amended, including harmonization of Columns RS2 and NS2 and other changes based on diversion risks.
BIS Permits Certain Exports to Crimea without a License
May 22, 2015 – 80 Fed. Reg. 29530: BIS amended EAR Sec. 746.6 to allow exports to Crimea without a license of mass market and EAR99 software necessary to enable the exchange of personal communications over the Internet. The rule also clarified that for purposes of the country group designations under the EAR, Crimea is regarded as part of Ukraine, and that for deemed export purposes the nationality of a foreign national located in or from Crimea is determined by the nationality on the person’s passport. (See related item in Treasury Department section below.)
BIS Publishes Proposed Rule to Harmonize the EAR and ITAR Destination Control Statements
May 22, 2015 – 80 Fed. Reg. 29551: BIS proposed a rule that would revise the destination control statement (DCS) described in EAR Sec. 758.6 to harmonize it with the DCS required by Sec. 123.9(b)(1) of the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130). Comments are due July 6, 2015. (See related item in State Department section below.)
BIS Publishes Advanced Notice of Proposed Rulemaking Requesting Comments on Improvements to Export Clearance Requirements Under the EAR
May 22, 2015 – 80 Fed. Reg. 29554: In an advanced notice of proposed rulemaking, BIS requested comments about how the export clearance requirements under the EAR can be improved, including how they can better be harmonized with the comparable requirements under the ITAR. This notice specifies several questions of particular concern to BIS, but BIS will accept suggestions for other improvements as well. Deadline for comments is July 6, 2015.
Department of Justice
ATF Publishes Rule to Adopt Changes to USMIL to Make it Consistent with USML Changes Arising from ECR
May 29, 2015 – 80 Fed. Reg. 30615: The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) finalized without change an interim rule (March 27, 2014, 79 Fed. Reg. 17024) that had amended the U.S. Munitions Import List (USMIL, 27 CFR Sec. 447.21) to remove certain defense articles currently on the United States Munitions Import List that ATF had determined no longer warrant import control under the Arms Export Control Act. Several biological agents and nuclear-related items were also removed from the list because they were already controlled under other regulations. (See fuller description of deleted items in March 2014 Regulatory Update.)
Department of State
Various Address Changes for Registrants and Foreign Parties to Licenses Published by DDTC
May 1, 15, 21, and 28, 2015: The Directorate of Defense Trade Controls (DDTC) posted the following address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:
- Rockwell Collins Australia Pty Limited Address Change
- Quality Precision Technology Limited Address Change
- Logikor Inc. Address Change
- Black Tree Group, LLC Address Change
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
ECR Update: DDTC Publishes Proposed Rules to Adopt Changes to USML Category XII… Unlike prior ECR Changes, Not a Significant Amount is Being Down-Regulated
May 5, 2015 – 80 Fed. Reg. 25821: As part of the Export Control Reform effort, DDTC proposed to amend USML Category XII (fire control, range finder, optical and guidance and control equipment) to describe in greater detail the articles that should remain on the USML in order to establish a “bright line” between the items to be controlled on the USML and the items to be controlled on the CCL. As a result of this process, many items formerly controlled under the broader categories of the USML migrated to control under the CCL. (See related item in Commerce Department section above.) Among the many changes to achieve greater precision in the coverage of Category XII, definitions of “charge multiplication,” “focal plane array,” “image intensifier tube,” “microbolometer,” and “multispectral” are added to Category XII. The deadline for comments is July 6, 2015.
DDTC Publishes Updated FAQs Related to Category XI ECR Changes and PCB Jurisdiction
May 7, 2015: DDTC updated its FAQs on Commodity Jurisdiction and Export Control Reform with responses to questions about Category XI(c)(2) PCBs and determinations about items that have transitioned from the USML to the CCL. A link to these FAQs is at http://www.pmddtc.state.gov/faqs/index.html.
DDTC Proposes Amendment to the ITAR to Harmonize the EAR and ITAR Destination Control Statements, to Clarify the Manner to Get an Export License for EAR Items on ITAR Licenses, and to Expound on the 126.4 Exemption and Applicability for EAR-controlled Items
May 22, 2015 – 80 Fed. Reg. 29565: DDTC proposed amendments to the ITAR that would –
- Clarify DDTC’s requirements pertaining to the export of items subject to the EAR that are made in conjunction with exports of items subject to the ITAR;
- Clarify the exemption in ITAR Sec. 126.4 on exports made to or on behalf of an agency of the U.S. Government without a license and expand the scope of the exemption to include permanent exports;
- Revise the Destination Control Statement required under ITAR Sec. 123.9 to harmonize it with comparable EAR requirements (see related item in Commerce Department section above);
- Revise procedures for obtaining authorization from the State Department to export or retransfer items subject to the EAR; and
- Make numerous edits to address erroneous or outdated reporting requirements.
The deadline for comments is July 6, 2015.
DDTC Publishes Major New Proposed Rule Addressing the Definition of Defense Services and the Conditions Under Which U.S. Persons Who Perform Defense Services for Foreign Employers Need to Become Registered as ITAR Exporters
May 26, 2015 – 80 Fed. Reg. 30001: DDTC proposed to amend ITAR Parts 120, 122, 124, 125, and 126 to clarify the registration and licensing requirements for U.S. persons performing defense services as employees of foreign employers in the U.S. or abroad or in a foreign branch or (under some circumstances) subsidiary of a U.S. company and to U.S. persons engaged as independent contractors outside the U.S. The deadline for comments is July 27, 2015.
May 29, 2015 – 80 Fed. Reg. 30614: DDTC amended ITAR Sec. 126.1 to rescind the previous policy of denying the export of ITAR-controlled items to Fiji.
Department of the Treasury
OFAC Posts Guidelines on Travel to Cuba
May 5, 2015: The Office of Foreign Assets Control (OFAC) posted guidance on travel between the U.S. and Cuba with reference to the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) on its website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faq_ferry_05042015.pdf.
OFAC Posts Guidelines on Ukraine-related Sanctions
May 7, 2015: OFAC posted two revised FAQs and one new FAQ regarding Ukraine-related sanctions. A link to FAQs 395, 419, and 453 is at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20150507.aspx.
OFAC Issues General License for Export of Certain CCL Items to Support the Access to Free Communication of the Ukrainian People
May 22, 2015: OFAC published Ukraine-related General License No. 9, “Exportation of Certain Services and Software Incident to Internet-Based Communications Authorized” on its website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl_9.pdf. (See related item in Commerce Department section above.) An FAQ at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#454 describes categories of sanctioned persons that are, and are not, eligible to receive these defense services and software.
LATEST SANCTIONS FINES & PENALTIES
This section of our newsletter provides information on the latest sanctions, fines and penalties for export
violations or matters of non-compliance with the ITAR or EAR issued by the US government enforcement
agencies. It is provided as a service to clients and associates of FD Associates to remind them of the
importance of extreme due diligence in all international trade and export compliance matters, particularly those involving exports subject to the ITAR or the EAR. Don’t let this happen to you or your
Department of Commerce
BIS Denies Export Privileges to Joseph DeBose for Conviction for Illegally Exporting Firearms and Firearms Barrels to China
May 20, 2015 – 80 Fed. Reg. 28953: BIS denied the export privileges of Joseph DeBose of Ortonville, MI for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully exporting ITAR-controlled firearms and firearms barrels, including a Beretta 9mm semi-automatic handgun, to China without the required authorization from the State Department. In the criminal case DeBose was sentenced to 24 months of imprisonment, 3 years of supervised release, and a $100 assessment.
BIS Denies Export Privileges to Jim Chu, for Conviction for Illegally Exporting ITAR Radiation Hardened Positive Voltage Regulators to Taiwan
May 20, 2015 – 80 Fed. Reg. 28954: BIS denied the export privileges of Wei Jiun Chu, a/k/a Jim Chu, of Diamond Bar, CA for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting 40 radiation-hardened adjustable positive voltage regulators controlled under USML Category XV(e) to Taiwan without the required State Department authorization. In the criminal case Chu was sentenced to 36 months of probation and a $100 assessment.
BIS Amends TDO for Mahan Airways of Iran to Add Other Affiliated Entities
May 28, 2015 – 80 Fed. Reg. 30435: BIS amended the temporary denial order (TDO) against Mahan Airways of Tehran, Iran, and others by adding the following additional denied parties:
- Al Naser Airlines, a/k/a al-Naser Airlines, a/ k/a Alnaser Airlines and Air Freight Ltd of Baghdad, Iraq, Dubai, United Arab Emirates (UAE), and Amman, Jordan;
- Ali Abdullah Alhay, a/k/a Ali Alhay, a/k/a Ali Abdullah Ahmed Alhay of Baghdad, Iraq and Qatif, Saudi Arabia; and
- Bahar Safwa General Trading of Dubai, UAE.
The TDO will remain in effect until 14 July 2015.
Fines and Penalties
May 1, 2015: Sam Rafic Ghanem of Springfield, VA, a Lebanese-born U.S. citizen who owned a freight forwarding business in District Heights, MD, was convicted by a jury in federal court in Greenbelt, MD of attempting to export firearms parts and accessories to Lebanon without the required authorization from the State Department. The weapons that Ghanem sought to export were provided to him by an FBI source. Ghanem concealed the weapons within the doors and cut-up parts of salvaged vehicles that were transported to the Port of Baltimore for shipment to Lebanon.
May 4, 2015: Abelardo Delmundo of Toms River, NJ pleaded guilty to conspiracy to violate the AECA by agreeing to ship firearms and firearms parts from the U.S. to the Philippines without the required authorization from the State Department. Over a period of 5 years, Delmundo’s co-conspirator, Kirby Santos of the Philippines, who was indicted April 27, 2015 (see April 2015 Regulatory Update), purchased more than $200,000 worth of defense articles in the U.S. and had them shipped to Delmundo in New Jersey to make them appear as domestic sales. Delmundo then shipped them to the Philippines, labeled as food or other home goods.
May 7, 2015: The U.S. District Court of the District of Columbia entered a formal judgment confirming a plea agreement by Schlumberger Oilfield Holdings Ltd. (SOHL), a wholly owned subsidiary of Schlumberger Ltd., requiring SOHL to pay $232,708,356 and submit to other penalties for conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by willfully facilitating illegal transactions and engaging in trade with Iran and Sudan. Among other penalties, SOHL will submit to 3 years of corporate probation and SOHL’s parent, Schlumberger Ltd., will cease all operations in Iran and Sudan, report on its compliance with sanctions, and hire an independent consultant to review its internal sanctions policies and audits of sanctions compliance. The violations were committed by Drilling and Measurements, a U.S.-based Schlumberger business segment, and included approving and disguising the company's capital expenditure requests from Iran and Sudan for the manufacture of new oilfield drilling tools and for the spending of money for certain company purchases; making and implementing business decisions specifically concerning Iran and Sudan; and providing certain technical services and expertise in order to troubleshoot mechanical failures and to sustain expensive drilling tools and related equipment in Iran and Sudan.
May 14, 2015: Bilal Ahmed of Bolingbrook, IL was sentenced to 24 months in federal prison followed by 24 months of supervision based on his plea of guilty to willfully violating IEEPA by exporting goods including a FLIR HRC-U thermal imaging camera, carbon fiber to make bullet-proof vests, and microwave laminate to Pakistan without the required authorization from the Department of Commerce. (See additional details about Ahmed’s violations in October 2014 Regulatory Update.)