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.
Sep. 28, 2016 – The European Commission (EC) released a proposed new dual-use export control regulation that would replace the current Community dual-use regime (Council Regulation (EC) No 428/2009, as amended.
The proposal is a major overhaul with changes in many provisions of the current regulation. Prior to adoption it will go through extensive review as part of the standard EU legislative procedure. The full text of the proposal is on the EU website at http://trade.ec.europa.eu/doclib/docs/2016/september/tradoc_154976.pdf.
The purpose of the proposal is to strike a balance between ensuring a high level of security and adequate transparency, and maintaining the competitiveness of European companies and legitimate trade in dual-use items. With the emergence of, for instance, specifically designed surveillance technology such as monitoring centres and data retention systems, it is essential to ensure that regulations allow EU authorities to stop exports in cases where they could be misused for human rights violations, for repression or armed conflict.
Specifically, the Commission proposes to make these export controls:
- more efficient – simplifying the administration of controls by optimising licensing processes, introducing EU General Export Authorisations, and simplifying the controls on technology transfers, while ensuring a high level of security and adequate transparency to prevent illicit use of the exported items;
- more consistent – avoid divergent levels of controls throughout the EU by e.g. harmonising the controls on brokering, technical assistance and transit of dual-use items;
- more effective – by introducing specific provisions preventing the misuse of dual-use items in relation to terrorism.
Department of Commerce
BIS Validated End User Modification for VEU Boeing Tianjin Composites Co. Ltd.
Sep. 7, 2016 – 81 Fed. Reg. 61104: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by modifying the Validated End-User (VEU) list (EAR Part 748, Supplement No 7) for China to reflect a change in the written address (but not the physical location) of VEU Boeing Tianjin Composites Co. Ltd.
BIS Amends Entity List
Sep. 7, 2016 – 81 Fed. Reg. 61595: BIS amended the EAR by adding 81 persons in the Crimea region of Ukraine, Hong Kong, India, and Russia to the Entity List (EAR Part 744, Supplement No. 4) to ensure the efficacy of existing sanctions imposed on Russia because of its involvement in the conflict in eastern Ukraine. Thirty of these persons will be subject to a license requirement for all items subject to the EAR with a license review policy of presumption of denial. For 51 persons – all subsidiaries of Gazprom OAO – the new license requirement with presumption of denial will be limited to items involved directly or indirectly in a specified sector of the Russian oil and gas industry. The large number of new entries, and the details of their requirements, illustrate the importance to exporters and others in the export chain of exercising continual due diligence in screening the parties in every export transaction.
If you do not utilize a Denied Party Screening tool or software, we recommend you use the Consolidated Screening List at: https://build.export.gov/main/ecr/eg_main_023148.
Sep. 20, 2016 – 81 Fed. Reg. 64693: BIS amended the Entity List to change the license requirements for the following 12 Chinese entities currently listed on the Entity List. The license requirement for these entities, which formerly excluded EAR99 items, will now include all items subject to the EAR:
- 33 Institute;
- 35 Institute;
- 54th Research Institute of China;
- Baotou Guanghua Chemical Industrial Corporation;
- Beijing Aerospace Automatic Control Institute (BICD);
- Beijing Institute of Structure and Environmental Engineering (BISE);
- China Aerodynamics Research and Development Center (CARDC);
- Northwestern Polytechnical University;
- Shanghai Academy of Spaceflight Technology (SAST);
- Shanghai Institute of Space Power Sources;
- Southwest Research Institute of Electronics Technology; and
- Xi’an Research Institute of Navigation Technology.
This amendment also consolidated (but did not change) Entity List license requirements, policies, and procedures by moving several provisions that were previously in EAR Sec. 741.1 into Sec. 744.16.
BIS Requests Comments on Rules Pertaining to Export of Agricultural Commodities to Cuba
Sep. 8, 2016 – 81 Fed. Reg. 62079: BIS requested public comments on the effectiveness of its licensing procedures for the export of agricultural commodities to Cuba. Information on the economic impact of these controls is of particular interest; other topics of interest are also specified in the announcement. The comments will be included in a periodic report to Congress. Deadline for comments is Oct. 11, 2016.
BIS Amends EAR to Harmonize CCL with Wassenaar Related to Computer Controls
Sep. 20, 2016 – 81 Fed. Reg. 64655: BIS amended the EAR to implement changes in 4 separate areas:
- Harmonized the Commerce Control List (CCL, EAR Part 774, Supplement No. 1) with changes made at the December 2015 plenary meeting of the Wassenaar Arrangement, including raising the Adjusted Peak Performance (APP) for high performance computers;
- Changed APP parameters in areas not agreed to at the Wassenaar Plenary, e.g., the de minimis rules, License Exception APP, and related reporting requirements;
- Updated license requirements and licensing policies associated with Category 5–Part 2, including revising Export Control Classification Numbers (ECCNs) 5A992, 5D992, and 5E992; and
- Removed the Foreign National Review requirement associated with deemed exports under License Exceptions APP and CIV.
A detailed list of the changes made in Category 5—Part 2 and the license exceptions that apply to it are on the BIS website at http://www.bis.doc.gov/InformationSecurity2016-updates
Department of State
DDTC Publishes Name and Address Changes on Its Website
Sep. 1, 7, 15, 20, 22, 26, and 30 2016: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at http://www.pmddtc.state.gov/licensing/name_change.html:
- Change in Name of Kayaba Industry Co., Ltd. to KYB Corporation due to corporate rebranding;
- Change in Name of Selex ES to Leonardo MW Ltd. due to corporate restructure;
- Change in Name of Doosan Defense Systems & Technology Co., Ltd. (DDST) to Hanwha Defense Systems Corp. (HDS) due to acquisition of Doosan Defense Systems by Hanwha Defense Systems;
- Change in Name of Thales-Raytheon Systems-Malaysia Sdn. Bhd. to Raytheon CCS-Malaysia Sdn. Bhd. due to restructure under joint venture;
- Indo-MIM Inc. became a party to DSP authorizations to which its affiliates Indo-US MIM Tec Pvt. Ltd. LLC and Indo-US MIM Tech Pvt Ltd are already a party due to corporate reorganization;
- Change in Name of EADS CASA Espacio S.L. of Spain to Airbus Defence and Space, S.A. of Spain due to corporate rebranding;
- UTi Worldwide Name Change due to its acquisition by DSV:
- Country UTi Organizations DSV Organizations
- Austria UTi Logistik GmbH DSV Osterreich Spedition GmbH
- Australia UTi (Aust) Pty Ltd. DSV Air & Sea Pty Ltd.
- Belgium UTi Belgium NV DSV Air & Sea NV
- Brazil UTi do Brasil Ltda DSV Air & Sea Logistica Ltda.
- Canada UTi Canada Inc. DSV Air & Sea Inc.
- Chile UTi Chile S.A. DSV Air & Sea S.A.
- France UTi France S.A.S. DSV Air & Sea
- India UT World (India) (Pvt) Limited DSV Air & Sea Pvt. Ltd
- Israel UTi Logistics Israel Ltd. DSV Air & Sea Israel Ltd.
- Japan UTi (Japan) KK DSV Air & Sea Co. Ltd.
- Poland Uti (Poland) Sp. z.o.o. DSV Air & Sea Sp. z.o.o.
- Portugal UTi Portugal – Freight & Logistics Services, Lda DSV Transitarios, Lda
- Spain UTi Spain DSV Air & Sea S.A.U.
- Sweden UTi Logistics AB DSV Air & Sea AB
- Taiwan UTi Air (Taiwan) Co. Ltd. or UTi (Taiwan) Ltd. DSV Air & Sea Ltd.
- Thailand UTi Worldwide Co. Ltd. DSV Air & Sea Ltd.
- United Kingdom UTi Worldwide (UK) Ltd. DSV Air & Sea Ltd
- United States UTi United States, Inc. DSV Air & Sea Inc. (DSV)
- Change in Address of Wincanton Group Limited;
- Change in Address of Raytheon Systems Limited; and
- Change in Name of RYMSA ESPACIO S.A. to TRYO AEROSPACE FLIGHT SEGMENT, S.A.U. as a result of merger between RYMSA Espacio and the space business division of MIER Communications.
Each announcement includes a link to a notice specifying the effects of the change on pending and currently approved authorizations involving the listed entity.
DDTC Publishes Revision to Agreement Guidelines
Sep. 1, 2016: DDTC published Revision 4.4a of the Agreement Guidelines, replacing Revision 4.4 that was published August 11, 2016. Revision 4.4a corrects an inadvertent omission in Revision 4.4. Revision 4.4a is on the DDTC website at http://pmddtc.state.gov/licensing/documents/agreement_guidelinesv4.4a.pdf.
DDTC Publishes Amendment to ITAR to Clarify Meaning of the Term Retransfer Under the ITAR, As Harmonized with the EAR
Sep. 8, 2016 – 81 Fed. Reg. 62004: DDTC amended the International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) by revising the definition of “retransfer” (Sec. 120.51) to clarify that temporary transfers to third parties and releases to same-country foreign persons are within the scope of the definition and made additional revisions to Sections 126.16(a)(1)(iii), 126.17(a)(1)(iii), 126.18(d)(1), and 130.2. The new definition of “retransfer” further revised the definition contained in an interim final rule issued on June 3, 2016 (81 Fed. Reg. 35611; see June 2016 Regulatory Review). Further, in a response to a comment on that rule, DDTC stated that “theoretical or potential access to technical data is not a release.” DDTC also noted that additional definitions included in a proposed rule on June 3, 2015 (80 Fed. Reg. 31525; see June 2015 Regulatory Review) that have not yet been issued in final form will be the subject of separate rulemakings.
DDTC Publishes Summary Report of First Activity Under the Relaunched Company Visit Program – Identifies Best Practices, Recommendations for Exporters
Sep. 23, 2016: DDTC posted a summary report on its recently relaunched company visit program (CVP), which involves visits to industry for outreach initiatives and also as part of compliance cases (see July 2016 Regulatory Update). In addition to a list of visits (not identifying the entities visited), the report includes lists of Best Practices Noted During Visits, Recommendations/Observations for Improvement, and Office of Defense Trade Controls Compliance (DTCC) Takeaways. The report is on the DDTC website at https://www.pmddtc.state.gov/compliance/documents/CVP_REPORT_2015-2016.pdf.
DDTC Publishes a Series of Modifications of ITAR Section 126.1
Sep. 29, 2016 – 81 Fed. Reg. 66804: DDTC amended several paragraphs of ITAR Sec. 126.1 to update, clarify, and reorganize them (but not to change their fundamental content) and amended ITAR Parts 120 and 126 to change the export control status of Tunisia, Somalia, Eritrea, the Democratic Republic of the Congo, Liberia, Cote d’Ivoire, Sri Lanka, and Vietnam. The changes in the status of the individual countries are:
- Tunisia: Designated a major non-NATO ally (ITAR Sec. 120.32);
- Somalia: Exemptions from arms embargo modified per United Nations Security Council Resolutions (UNSCRs) 2244, 2111, and 2142 (ITAR Sec. 126.1(m));
- Eritrea: Exemptions from arms embargo modified per UNSCRs 2244 and 2111 (ITAR Sec. 126.1(h);
- DR Congo: Exemptions from arms embargo expanded per UNSCR 2293 (ITAR Sec. 126.1(i);
- Liberia: Sanctions terminated per UNSCR 2288 (ITAR Sec. 126,1(o) reserved);
- Cote d’Ivoire: Sanctions terminated per UNSCR 2283 (ITAR Sec. 126.1(q) reserved);
- Sri Lanka: Licensing restrictions removed per their omission from the U.S Consolidated Appropriations Act of 2016 (ITAR Sec. 126.1(n) reserved); and
- Vietnam: Ban on lethal weapons sales lifted by U.S. Department of State (ITAR Sec. 121.1(l) and associated note reserved).
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Sep. 21, 2016 – 81 Fed. Reg. 64871: BIS denied the export privileges of Francisco Javier Mendoza-Esquivel for 10 years based on his conviction in U.S. District Court for the Southern District of Texas of intentionally and knowingly conspiring and agreeing to knowingly and willfully export, attempt to export, and cause to be exported to Mexico 5,860 rounds of 7.62 x 39 mm caliber ammunition without the required authorization from the State Department. In the criminal case Mendoza-Esquivel was sentenced to a 51-month prison term and a $100 assessment.
Fines and Penalties
Sep. 1, 2016: Syed Vaqar Ashraf of Lahore, Pakistan was sentenced to 33 months in prison in Federal District Court of Arizona based on his plea of guilty of conspiracy to export gyroscopes to Pakistan without the required authorization from the Commerce Department. The gyroscopes, which were initially exported to Belgium, were allegedly intended to be transshipped to Pakistan for use by the Pakistani military. Ashraf was arrested by the Belgian Federal Police at the request of U.S. Immigration and Customs Enforcement after he traveled to Belgium to inspect the gyroscopes and arrange for their onward shipment to Pakistan.
Sep. 7, 2016: World Class Technology Corporation of Portland, OR agreed to pay a civil penalty of $43,200 to settle charges by OFAC that it violated the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by exporting 7 shipments of orthodontic devices valued at $59,886 to Germany, United Arab Emirates, and/or Lebanon with knowledge or reason to know that the devices were intended for transshipment to Iran.
Sep. 13, 2016: PanAmerican Seed Company of West Chicago, IL, a division of Ball Horticultural Company, agreed to pay $4,320,000 to settle charges by OFAC that it violated the ITSR on 48 occasions when it indirectly exported seeds – primarily flower seeds – to two distributors in Iran. The shipments were made to consignees in two unnamed third countries in Europe or the Middle East, and PanAmerican’s customers arranged their re-exportation to Iran.
Sep. 27, 2016: Amin Yu of Orlando, FL, a U.S. permanent resident originally from China, was sentenced in federal court in Orlando to 21 months in federal prison for acting as an illegal agent of a foreign government without prior notification to the Attorney General and conspiring to commit international money laundering. Although Yu was not convicted of export control violations, her illegal acts involved illegally exporting systems and components for marine submersible vehicles from the U.S. to China, where they were used in the development of marine submersible vessels. In the course of these exports, Yu allegedly failed to file required Electronic Export Information (EEI) and also filed export related documents in which she significantly undervalued the exported items and provided false end user information.
Sep. 29, 2016: Technoline SAL of Sin El Fil, Beirut, Lebanon agreed to pay a civil fine of $450,000 to settle charges by BIS that it caused, aided, and/or abetted unauthorized exports or reexports to Syria of U.S.-origin mass spectrometers, gas chromatographs and consumables, liquid chromatograph-mass spectrometer systems, and liquid chromatograph modules classified under ECCN 3A999. The illegal exports occurred in 2009 and 2010 and were valued at $583,110.