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.
Stockholm International Peace Research Institute Good Practice Guides
Aug. 15, 2017: The Stockholm International Peace Research Institute (SIPRI), an international organization based in Stockholm, Sweden, devoted to arms control and related issues, released a concept paper and a Good Practice Guides for establishing and implementing internal compliance programs in the European Union. Separate guides pertain to nuclear, defense and aerospace, information and communication technology, academic and research, and transport and distribution service sectors. The project was funded by the Export Control and Related Border Security (EXBS) Program of the U.S. Department of State. The concept paper, Challenges And Good Practices In The Implementation of the EU’s Arms And Dual-Use Export Controls, is on the SIPRI website at https://www.sipri.org/sites/default/files/2017-07/1707_sipri_eu_duat_good_practices.pdf. Links to the sector-specific guides are at https://www.sipri.org/news/2017/sipri-study-examines-challenges-associated-implementing-effective-internal-compliance-programmes .
U.K. Financial Sanctions FAQs
Aug. 27, 2017: HM Treasury and Office of Financial Sanctions Implementation published updated guidance, FAQs, and penalty information on U.K. financial sanctions. Links to the publications “Financial Sanctions: General Guidance” and “Monetary Penalties for Breaches of Financial Sanctions” are on the OFSI website at https://www.gov.uk/government/publications/financial-sanctions-faqs.
President Trump Continues EAR Via IEEPA
Aug. 16, 2017 – 82 Fed. Reg. 39005: President Trump signed Executive Order 13222 continuing the national emergency regarding the unusual and extraordinary threat to the national security, foreign policy and economy of the U.S. that has existed since the expiration of the Export Administration Act of 1979, as amended (50 USC 4601 et seq.) This declaration permits the continued implementation of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) under the authority of the International Emergency Economic Powers Act (IEEPA, 50 USC 1701 et seq.).
President Trump Expands Russia and North Korea Sanctions
Aug. 2, 2017: President Trump signed into law the “Countering America’s Adversaries Through Sanctions Act,” which significantly expands U.S. sanctions against Russia, adds provisions to the sanctions against North Korea and Iran, and codifies existing sanctions on Russia, subjecting efforts by the President to reduce, waive, or eliminate U.S. sanctions against Russia to congressional review. The new provisions primarily affect economic transactions. A significant export-specific provision expands the prohibition on U.S. persons providing goods, services (except financial services), or technology in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil to any such project wherever located, and to any specified entity or any entity that has a controlling interest or a non-controlling ownership interest of at least 33% in such an entity. Also, denial of U.S. export licensing is one of 12 “secondary” sanctions that can be imposed on parties that are not subject to U.S. jurisdiction.
Mira Ricardel Confirmed As Under Secretary of Commerce (Export Administration)
Department of Commerce, Bureau of Industry and Security
Aug. 3, 2017: The U.S. Senate confirmed Mira Ricardel as Under Secretary of Commerce (Export Administration) and Richard Ashooh as Assistant Secretary of Commerce (Export Administration). Ms. Ricardel previously served as a Deputy Assistant Secretary in the Department of Defense, as a legislative assistant to Sen. Bob Dole (R., Kansas), and as a senior executive at Boeing Defense Space and Security. Mr. Ashooh previously served as a senior executive in the aerospace industry.
Updated SNAP-R Manual Now Available
Aug. 4, 2017: The Bureau of Industry and Security (BIS) posted a revised and updated manual for the SNAP-R (Single Network Application Process – Redesign) system. In addition to clarifying existing processes, the new manual includes updates aimed at making the system more user-friendly and efficient. The updates include the introduction of security questions which will enable users to more readily reset forgotten passwords and request and receive forgotten login IDs and CINs. There is also more flexibility in the format for Work Item reference numbers and the calculation of line item values. BIS stated that additional updates will be added in the future. The new manual is on the BIS website at https://snapr.bis.doc.gov/snapr/docs/fieldHelp.html.
ECCN Changes Due To Wassenaar Arrangement Plenary In December 2016
Aug. 15, 2017 – 82 Fed. Reg. 38764: BIS amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to implement changes agreed at the Wassenaar Arrangement plenary in December 2016 to reflect recent changes in technologies and conditions. Changes were made in the following 50 Export Control Classification Numbers (ECCNs):
1A004, 1A007, 1B001, 1C007, 1C608, 1E001, 1E002,
2A001, 2B001, 2B005, 2B991, 2D992, 2E003,
3A001, 3A002, 3A991, 3B001, 3C001, 3E001, 3E002, 3E003,
4A003, 4D001, 4D993,
5A001, 5B001, 5E001, 5A002, 5A003, 5D002, 5E002,
6A001, 6A003, 6A005, 6A008, 6D003, 6E003,
7D003, 7D004, 7E001, 7E003, 7E004,
9A001, 9A004, 9A515, 9B002, 9B009, and 9E003.
Also, ECCN 3A001.b.12 was made eligible for License Exception LVS; ECCN 2A001.b.14 was made eligible for License Exception GBS; ECCNs 4D001 and 4E001 were made eligible for License Exceptions TSR and STA; and Burma was moved from computer tier 3 to computer tier 1 for purposes of License Exception APP. In addition, the following definitions were added or modified in Part 772: ‘‘authentication,’’ ‘‘MMIC,’’ ‘‘Monolithic Microwave Integrated Circuit,’’ ‘‘fly-by-light system,’’ ‘‘fly-by-wire system,’’ ‘‘stability,’’ ‘‘three dimensional integrated circuit,’’ ‘‘interposer,’’ “active pixel,” “aircraft,” “fibrous or filamentary materials,” ‘‘frequency hopping,” and “spacecraft,” and modifications were made in the Sensitive List (Supplement No. 6 to EAR Part 774).
Recent Additions To HTS Now Available In AES
Department of Commerce, Census Bureau
Aug. 3, 2017: The Census Bureau announced that all recent additions to the Harmonized Tariff Schedule (HTS) are now available for use in the Automated Export System (AES) and have been updated in the AESDirect program. No additions were made to Schedule B. The current list of HTS codes is at https://www.census.gov/foreign-trade/aes/documentlibrary/concordance/expaes.txt. The current list of HTS codes that are not valid for AES is at http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html?eml=gd&utm_medium=email&utm_source=govdelivery">http://www.census.gov/foreign-trade/aes/documentlibrary/concordance/hts-not-for-aes.html.
DDTC Name and Address Changes Posted To Website
Department of State
August 8, 16, 22, and 28, 2017: 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 from Diehl Raytheon Missile Systeme GmbH to Diehl Retrofit Missile Systeme GmbH due to joint venture between Raytheon Missile Systems and Diehl Stiftung & Co.;
- Change in name from Thales Electronic Systems GmbH to Thales Deutschland GmbH due to corporate reorganization;
- Thales UK Limited address change;
- Change in name from Safe Air Limited to Airbus New Zealand Limited due to corporate rebranding;
- Change in name from Assystem GmbH to Assystem Germany GmbH and address change due to merger between Assystem GmbH and Berner & Mattner;
- Change in name from MHI Information Systems Co., Ltd. to NTT Data MHI Systems Corporation and address change due to share transfer agreement and shareholders agreement between NTT Data Corporation and Mitsubishi Heavy Industries, Ltd.;
- Change in name from MHVC Acquisition Corp. to Peraton Corp. due to acquisition by Veritas Capital;
- Change in name from Harris IT Services Corporation to Peraton Inc. due to acquisition by Veritas Capital;
- Change in name from CapRock Government Solutions, Inc. to Peraton Government Communications Inc. due to acquisition by Veritas Capital;
- Change in name from MHVC Canada Acquisition Corp. to Peraton Canada Corp. due to acquisition by Veritas Capital;
- BAE Systems Australia Limited address change; and
- BAE Systems Marine Limited Weymouth Site 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.
DDTC Extended Temporary Modification to USML Category XI
Aug. 30, 2017 – 82 Fed. Reg. 41172: DDTC extended until Aug. 30, 2018, a temporary modification of U.S. Munitions List (USML, 22 CFR Sec. 121.1) Category XI (Military Electronics) that added software to the description of items controlled under Category XI(b) and added “or analyze and produce information from” to the purposes for which the controlled electronic systems, equipment, and software were specially designed. This temporary modification, originally made July 2, 2015 (80 Fed. Reg. 37974 -- see July 2015 Regulatory Update) and most recently extended on December 16, 2015 (80 Fed. Reg. 78130, see December 2015 Regulatory Update) would otherwise have expired on Aug. 30, 2017. On Aug. 30, 2018 this provision will revert to the language that existed prior to July 2, 2015, unless a different long-term solution has been adopted. International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 126.2 provides the authority for these temporary modifications in the interest of the security and foreign policy of the United States.
David Malpass Confirmed As Under Secretary Of The Treasury (International Affairs)
Department of the Treasury
Aug. 3, 2017: The U.S. Senate confirmed David Malpass as Under Secretary of the Treasury (International Affairs). Mr. Malpass previously served as chief economist at Bear Stearns.
Quarterly List Of Countries That Require Or May Require Participation In, Or Cooperation With, An International Boycott
Aug. 2, 2017 – 82 Fed. Reg. 36076: 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.
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
Aug. 17, 2017 – 82 Fed. Reg. 39103: BIS issued a 5-year denial order against David L. Maricola, currently an inmate in Federal Correctional Institution (FCI) Fort Dix, NJ, based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778 et seq.) by attempting to export firearm parts controlled under the U.S. Munitions List (USML, 22 CFR Sec. 121.1) to 22 countries including France, Finland, Indonesia, New Zealand, Thailand, Spain, Australia, and Germany without the required authorizations from the State Department. In the criminal case Maricola was sentenced to 33 months in prison, 3 years of supervised release, and a $3,200 assessment.
Aug. 17, 2017 – 82 Fed. Reg. 39104: BIS issued a 5-year denial order against Alexandre Dos Anjos Oliveira, currently an inmate at McRae FCI, Helena, GA, based on his conviction of violating the AECA by attempting to export firearm barrels, cylinders, receivers, and components, parts, and accessories controlled under the USML to Brazil without the required authorization from the State Department. In the criminal case Oliveira was sentenced to 38 months in prison, one year of supervised release, and a $100 assessment.
Aug. 17, 2017 – 82 Fed. Reg. 39105: BIS issued a 10-year denial order against Mansour Moghtaderi Zadeh, a/k/a Mansour Zadeh, a/k/a Mita Zarek, a/k/a Mita Zadeh, an inmate at Rivers FCI, Winton, NC, based on his conviction of violating the IEEPA by conspiring to export and causing the export of goods including aviation course indicators, aerospace metal sheets and rods, specialty paints and adhesives, and a fiber optic video transmitter and receiver to Iran without the required authorization. These exports also violated an underlying temporary denial order (TDO) that BIS had issued against Zadeh and a Cyprus company that he controlled. In the criminal case Zadeh was sentenced to 18 months in prison, 12 months of supervised release, a special assessment of $100, and forfeiture of $69,159.
Aug. 17, 2017 – 82 Fed. Reg. 39106: BIS issued a 10-year denial order against Wenxia Man, a/k/a Wency Man, currently an inmate of FCI Camp Parks, Dublin, CA, based on her conviction of violating the AECA by conspiring to export and cause the export to the People’s Republic of China (PRC) of fighter jet engines and an unmanned aerial vehicle that were controlled under the USML without the required authorization from the State Department. In the criminal case Man was sentenced to 50 months in prison, two years of supervised release, and a $100 assessment.
Aug. 17, 2017 – 82 Fed. Reg. 39107: BIS issued a 10-year denial order against Yasser Ahmad Obeid, currently an inmate of FCI Yazoo, Yazoo City, MS 39194, based on his conviction of violating the AECA by attempting to export and attempting to cause to be exported firearms controlled under the USML without the required authorization from the State Department. In the criminal case Obeid was sentenced to 51 months in prison, three years of supervised release, and a $300 assessment.
Aug. 17, 2017 – 82 Fed. Reg. 39109: BIS issued a 5-year denial order against Ricardo Humberto Varela, currently an inmate of Bastrop FCI in Bastrop, TX, based on his conviction of violating the AECA by conspiring and agreeing to export and cause to be exported 5.56 caliber rifles that were controlled under the USML to Mexico without the required authorization from the State Department. In the criminal case
Varela was sentenced to 46 months in prison, three years of supervised release, and a $200 assessment.
Aug. 17, 2017 – 82 Fed. Reg. 3910: BIS issued a 5-year denial order against Jose Luis Benavides-Cira, currently an inmate at Great Plains FCI, Hinton, OK, based on his conviction of violating the AECA by conspiring and agreeing to export and to cause to be exported 5.56 caliber rifles that were controlled under the USML to Mexico without the required authorization from the State Department. In the criminal case Benavides-Cira was sentenced to 46 months in prison and a $100 assessment.
Department of State
Aug. 2, 2017 – 82 Fed. Reg. 36068: The State Department Bureau of Political-Military Affairs rescinded the statutory debarment of Pratt & Whitney Canada Corporation (PWCC) and reinstated its authority to participate in activities controlled under the AECA. PWCC had been statutorily debarred (with certain exceptions) in June 2012 (77 Fed. Reg. 40140, July 6, 2012), after it pleaded guilty to violating the AECA. The rescission was approved after the State Department consulted with other U.S. agencies and determined that PWCC had taken appropriate steps to address the causes of the violation and to mitigate any law enforcement concerns.
Fines and Penalties
Aug. 1, 2017: Rasheed Al Jijakli, a Syrian-born U.S. citizen, pleaded not guilty in U.S. District Court for the Central District of California of charges that he violated IEEPA by exporting day-and-night-vision rifle scopes, laser boresighters, a bulletproof vest, and other tactical equipment to Syria without the required authorization from BIS. Jijakli, the chief executive officer of a check cashing business in Orange County, CA, and three unnamed individuals allegedly hand-carried the items to Istanbul by air and then transferred them by land to Syria.
Aug. 2, 2017: Fadi Yassine, a citizen and resident of Lebanon, was sentenced in federal court in Cedar Rapids, IA, to serve 57 months in prison for violating the AECA by conspiring to broker firearms shipments to Lebanon without the required authorization from the Department of State. Four Cedar Rapids residents with ties to Lebanon were sentenced to prison last year for their role in the gun-smuggling scheme. (See additional information on this case in April 2017 Regulatory Update.)
Aug. 3, 2017: Peter Zuccarelli of Plano, TX, pleaded guilty in Federal District Court for the Eastern District of Texas of violating the IEEPA by conspiring to export radiation hardened integrated circuits (RHICs) for use in the space programs of the PRC and Russia without the required authorization. According to court fillings, Zuccarelli received orders and payments of approximately $1.5 million from a co-conspirator and then obtained the RHICs from U.S. suppliers, certifying that his U.S company was the end user. He then repackaged the RHICs, falsely declared them as “touch screen parts,” and shipped them out of the U.S. without the required licenses using false paperwork.
Aug. 18, 2017: Blue Sky Blue Sea, Inc. of Los Angeles, CA, d/b/a American Export Lines and International Shipping Company (USA) (“AEL”) agreed to pay a civil fine of $518,063 to settle charges by OFAC that it had violated the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) by transshipping used and junked cars and parts from the U.S. to Afghanistan via Iran on 140 occasions.
Aug. 22, 2017: Carrier Saudi Services Co. Ltd., a controlled-in-fact foreign affiliate of Carrier Corporation, a U.S. company, agreed to pay a civil penalty of $12,000 to settle charges by BIS that it violated the Antiboycott Regulations (EAR Part 760) by failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. (15 CFR 760.5) on two occasions and agreeing to refuse to do business with another person pursuant to an agreement with, a requirement of or a request from a boycotting country (15 CFR 760.2(a)) on two occasions. The charges involved commerce with Saudi Arabia. CSSC voluntarily disclosed the violations.
Aug. 24, 2017: COSL Singapore Ltd, a Singapore company, agreed to pay a civil fine of $415,350 to settle charges by OFAC that it had violated the ITSR when, through its subsidiary companies, it exported or attempted to export 55 orders of oil rig supplies from the U.S. to Singapore and the United Arab Emirates (UAE), and then re-exported or attempted to re-export these supplies to four separate oil rigs located in Iranian territorial waters. OFAC alleged that the purchase order quotations received from U.S. vendors of some of the supplies involved in these violations included specific warnings that the goods could not be shipped or re-exported to countries subject to U.S. sanctions, including Iran.
Aug. 24, 2017: Cryofab, Inc. of Kenilworth, NJ, agreed to pay a civil fine of $35,000 and undergo an external audit of its compliance with U.S. export control laws (including recordkeeping requirements) to settle charges by BIS that on two occasions it had exported items to the Bhabha Atomic Research Center (BARC), an Indian Department of Atomic Energy entity located in Mumbai, India, without the authorization from BIS that was required because BARC is a party listed on the Entity List (EAR Part 744, Supp. No. 4). The items shipped to BARC were storage containers for helium and nitrogen and related items, all designated EAR99, with a total value of $21,570. Cryofab failed to screen the Entity List in connection with both these shipments and erroneously listed them as eligible for shipment without a license (“NLR”) on the Shipper’s Letter of Instructions.
Aug. 24, 2017: C.H. Robinson Freight Services, Ltd. of Indianapolis, IN, agreed to pay a civil penalty of $37,000 to settle charges that it violated the Antiboycott Regulations by furnishing information about business relationships with boycotted countries or blacklisted persons on 7 occasions and failing to report the receipt of a request to engage in a restrictive trade practice or foreign boycott against a country friendly to the U.S. on 10 occasions. C.H. Robinson voluntarily disclosed the violations, which involved commerce with the UAE.