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.
Crude Oil Exports Legalized in United States
Dec. 18, 2015: President Obama signed H.R. 2029, the Consolidated Appropriations Act, 2016 (CAA 2016). Among many other actions, CAA 2016 repealed a law (Sec. 103 of the Energy Policy Conservation Act of 1975) which, since 1975, had banned exports of crude petroleum oil, subject only to narrow exceptions that had been rarely invoked. Under CAA 2016, no federal official is permitted to impose or enforce any restriction on the export of crude oil. (See implementation of this law below, under Department of Commerce.)
Department of Commerce
BIS Proposes to Include “600 Series” Items in Offset Reporting Requirements for Foreign Military Sales
Dec. 2, 2015 – 80 Fed. Reg. 75438: The Bureau of Industry and Security (BIS) published a proposal to expand the requirement to report offsets agreements in connection with sales of items controlled under the U.S. Munitions List (USML, 22 CFR Part 121) to include offsets agreements in connection with sales of items controlled in “600 series” Export Control Classification Numbers (ECCNs) on the Commerce Control List (CCL, 15 CFR Part 774, Supplement No. 1). The new reporting requirement would exclude certain submersible and semi-submersible cargo transport vessels and related items controlled under ECCNs 8X620.b. The reporting requirement applies only to agreements to provide offsets with a value exceeding $5 million. Comments on this proposal are due by February 1, 2016.
Various Clean-up Revisions to the EAR Published by BIS
Dec. 3, 2015 – 80 Fed. Reg. 75633: BIS made the following corrections and other changes in the Export Administration Regulations (EAR, 15 CFR Parts 730-774):
- In the Commerce Country Chart (EAR Part 738, Supplement No. 1), removed Argentina from the RS:2 column and removed South Africa from the NS:2 and RS:2 columns, with the result that Commerce Country Chart Columns NS:2 and RS:2 are now harmonized with Country Group A:1 in the Country Group list (EAR Part 740, Supplement No. 1);
- In the Country Group list, removed Fiji from Country Group D, including Column D:5 (U.S. Arms Embargoed Countries);
- Amended EAR Sec. 743.3(b) to restore an exception for Canada that had been inadvertently removed from reporting requirements for exports of thermal imaging cameras;
- Amended ECCN 8A620.f to implement a 2014 Wassenaar Arrangement agreement pertaining to diving and underwater swimming apparatus specially designed and modified for military use;
- Amended ECCN 9A004.a to correct the range of reference in the License Requirement Note and revised Note 3 in the Related Controls for clarity; and
- Amended ECCN 9A010 by removing the reference to the ITAR in the heading and adding a Related Controls paragraph referencing ITAR Categories IV and XV, ECCNs 9A515 and 9A604, and the Order of Review provisions of EAR Part 774, Supplement No. 4.
BIS Publishes Correction to Country Chart Pertinent to Congo
Dec. 14, 2015 – 80 Fed. Reg. 76629: BIS amended the Commerce Country Chart by moving footnote 1 from Congo (Republic of the) to Congo (Democratic Republic of the) and corrected the List of Items Controlled in ECCN 2B008.a and the List of Items Controlled in ECCN 2B009.a.
BIS Revises EAR to Remove Certain Defined Terms and Correct Citation Error
Dec. 17, 2015 – 80 Fed. Reg. 78651: BIS amended EAR Sec. 762.1(b) (Persons subject to EAR Part 762, Recordkeeping) by replacing references to Sec. 762.7 and Sec. 762.6 with references to Sec. 762.2 and Sec. 762.7, respectively. BIS also corrected EAR Part 772 (Definition of Terms) by removing the definitions of “fault tolerance”, “laser duration”, and “positioning accuracy”.
BIS Implements Policy to Reflect Crude Oil Being an EAR99 Item on the CCL
Dec. 22, 2015: BIS implemented the provision of the CAA 2016 repealing the prior ban on exports of crude oil (see description above) by announcing that crude oil is now classified as EAR99 and may ordinarily be exported without an export license from the Department of Commerce. Exports to embargoed or sanctioned countries or persons continue to require authorization. BIS will soon amend the EAR to implement the new law. The announcement is on the BIS website at http://www.bis.doc.gov/index.php/crude-oil-export-licensing-policy.
Sixteen Persons Added to the Entity List by BIS
Dec. 28, 2015 – 80 Fed. Reg. 80643: BIS added the following 16 persons to the Entity List (EAR Part 744, Supplement No. 4) to support existing sanctions on Russia for fueling the conflict in eastern Ukraine. A license will be required for any transaction in which the export, reexport, or transfer of items subject to the EAR involves any of these entities. There will be a license review policy of presumption of denial, and no license exceptions will be available.
Crimea Region of Ukraine
- Aktsionernoe Obschestvo ‘Yaltinskaya Kinodstudiya,’ and 8 aliases, Yalta;
- Crimean Enterprise Azov Distillery and 5 aliases, Azov;
- Resort Nizhnyaya Oreanda (formerly known as Federalnoe Gosudarstvennoe Byudzhetnoe Uchrezhdenie Sanatori Nizhnyaya Oreanda Upravleniya), and 3 aliases, Yalta;
- State Concern National Production and Agricultural Association Massandra, and 4 aliases, Massandra;
- State Enterprise Factory of Sparkling Wine Novy Svet, and 6 aliases, Sudak;
- State Enterprise Magarach of the National Institute of Wine, and 5 aliases, Vilino; and
- State Enterprise Universal-Avia, and 6 aliases, Simferopol.
- White Seal Holdings Limited, Limasol.
- Maples SA, Luxembourg.
- Lerma Trading S.A., Este.
- Avia Group Terminal Limited Liability Company, and 3 aliases, Khimki;
- OAO Volgogradneftemash (formerly known as Dochernee Aktsionernoe Obshchestvo Otkrytogo Tipa Volgogradneftemash Rossiiskogo Aktsionernogo Obshchestva Gazprom), and 2 aliases, Volgograd;
- Otkrytoe Aktsionernoe Obshchestvo Vneshneekonomicheskoe Obedinenie Tekhnopromeksport, and 7 aliases, Moscow; and
- Transservice LLC, and 3 aliases, Omsk.
- LTS Holding Limited, Geneva (See alternate address under United Kingdom).
- Fentex Properties LTD., Tortola, British Virgin Islands; and
- LTS Holding Limited, Tortola, British Virgin Islands. (See alternate address under Switzerland).
The rule includes a clarification about the interpretation of references on the Entity List to EAR Sec. 746.5 (Russian Industry Sector Sanctions).
BIS Proposes Minor Revision to the EAR to Standardize its Policies Pertaining to Charging and Penalty Determinations for Violations of the EAR
Dec. 28, 2015 – 80 Fed. Reg. 80710: BIS proposed to revise the current Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases (EAR Part 766, Supplement No. 1) involving violations of the EAR. The new guidelines aim to make civil penalty determinations more predictable and transparent to the public. They would be aligned with the well-established guidelines used by the Treasury Department’s Office of Foreign Assets Control (OFAC) in administering sanctions programs under the International Emergency Economic Powers Act (IEEPA, 50 USC 1701-1707), the same statute that authorizes the implementation of the EAR by BIS. The revised guidance would establish a base penalty depending on whether the violation is egregious or non-egregious and whether or not the case arose from a voluntary self-disclosure (VSD). Identified aggravating, general, and mitigating factors would then be used to adjust the penalty amount up or down. BIS does not expect the revised guidelines to increase the number of cases that result in administrative action rather than being closed with a warning letter. The proposed guidance takes the form of a rewrite of the current guidance. Comments will be accepted until February 26, 2016.
BIS Publishes EAR Revision for ECCN 9E003 Along with Revision to Entity List
Dec. 31, 2015 – 80 Fed. Reg. 81744: BIS corrected the CCL entry for ECCN 9E003 to remove the second introductory text of paragraph f.1. BIS also corrected the Entity List (EAR Part 744, Supplement No. 4) to move the entry for “Sergey Grinenko” from Greece to Germany.
Department of State
DDTC Name/Address Changes Published to DDTC Website
December 4, 8, 22, 29, and 30, 2015: 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 Appendix Publishing Inc. and Appendix Sonovision-Itep to Sonovision Canada Inc. due to corporate rebranding;
- Change in Name from Chromalloy Israel to Turbochrome Ltd. due to acquisition by TAT Technologies Ltd.;
- Change in Name from Farsound Engineering Limited to Xcel Aerospace due to acquisition and corporate restructure;
- CoorsTek, Inc. Address Change;
- Change in Name from FGP Precision Engineering Limited to FGP Systems Limited due to corporate merger;
- Change in Name from BAE Systems Electronics Limited and BAE Systems Surface Ships Limited to BAE Systems Surface Ships Limited due to corporate rebranding;
- United Technologies Corporation Address Change; and
- Airbus Group Reorganization: Airbus DS Electronics and Border Security GmbH, Germany and Airbus DS Electronics and Border Security SAS, France authorized as part of Airbus Defence and Space, GmbH, Germany and Airbus DS SAS, France.
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 Updates Debarment List
Dec. 7, 2015: DDTC updated the statutory debarment list. The updated complete list is on the DDTC website at http://www.pmddtc.state.gov/compliance/debar.html.
DDTC Further Extends Temporary Modification of USML Category XI(b) Language Pertaining to Military Information Security Devices, as Review of Applicable Controls are Still In Progress
Dec. 16, 2015 – 80 Fed. Reg. 78130: DDTC extended until August 30, 2017, a temporary modification of USML Category XI 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), would otherwise have expired on Dec. 29, 2015. DDTC noted that the new extension will allow the U.S. government to continue to review the controls in Category XI(b).
DDTC Published Comments Received on Implementation of ECR for USML Cats. VI, VII, XIII, & XX
Dec. 16, 2015: DDTC posted the public comments received on the review of USML Categories VI, VII, XIII, and XX on its website at
Export Licenses No Longer Need to Be Formally Lodged with CBP, as License Information is Automatically Transmitted to CBP through AES/ACE
Dec. 21, 2015: DDTC posted a notice, effective immediately, waiving the requirement for exporters to deposit permanent export licenses with U.S. Customs and Border Patrol (CBP) prior to filing in the Automated Export System (AES) or the Automated Commercial Environment (ACE). CBP no longer needs to receive this information from exporters because DDTC is electronically sending registration and licensing data to CBP on a daily basis. The notice is on the DDTC home page, http://www.pmddtc.state.gov.
DSP-85s will still need to be lodged with CBP as DSP-85s are not transmitted electronically by DDTC to CBP
Department of the Treasury
OFAC Issues 6 Month General License to Permit Certain Trade-Related Transactions Involving Burma
Dec. 7, 2015: The Office of Foreign Assets Control (OFAC) issued a six-month general license (General License No. 20) to authorize most transactions otherwise prohibited by the Burmese Sanctions Regulations (BSR, 31 CFR Part 537) that are ordinarily incident to the export of goods, technology or non-financial services to or from Burma, including trade finance transactions and payment of port fees and shipping and handling charges associated with sending goods to or from Burma. The license does not authorize transactions that directly involve a Specially Designated National (SDN) or an entity in which an SDN has a 50% or greater interest and does not modify any other prohibitions relating to trade with Burma. The general license is intended to foster trade with Burma by permitting U.S. persons to be involved in transactions that go through Burmese ports and facilities that are owned or controlled by SDNs.
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 exporters 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
Fines and Penalties
Dec. 3, 2015: Amin al-Baroudi, a Syrian-born U.S. citizen and former resident of Irvine, CA, was arrested at Washington Dulles International Airport and detained pending further court proceedings based on an indictment charging him with exporting rifle scopes, night-vision goggles, bullet-proof vests, and other items controlled under the EAR from the U.S. to Syria without the required authorization. The goods allegedly went to the insurgent group Ahrar el-Sham, which fights alongside Al-Qaida’s Syrian branch. Among other exports, al-Baroudi allegedly shipped the unlicensed gear in 14 pieces of baggage weighing more than 600 pounds total as accompanied baggage on a February 2013 trip from Los Angeles to Turkey and then transported it to Syria.
Dec. 9, 2015: Song Il Kim, a citizen of Cambodia who was born in North Korea and resides in the Peoples Republic of China (PRC), pleaded guilty in federal court in Salt Lake City, UT to violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by attempting to purchase military-grade night vision goggles and to illegally export them to the PRC. Kim allegedly agreed to pay an undercover agent $22,000 for 6 military-grade night vision goggles that he would send to his business in the PRC. He was arrested in Honolulu, HI in July 2015 after he met with an undercover agent, provided a $16,000 cash down payment, put 3 of the devices in a box, completed a customs form stating that the box contained used toys and towels, and went with the undercover agent to a post office and had the box shipped to the PRC.
Dec. 10, 2015: GLS Solutions Inc. of Aventura, FL agreed to pay a civil penalty of $50,000 ($17,500 to be paid within 30 days and the remaining $32,500 suspended for one year and thereafter waived if GLS has committed no further violations) to settle charges that it had violated the EAR by acting with knowledge of a violation of the EAR when it sold or transferred a FLIR high performance infrared camera controlled under ECCN 6A003.b.4 for export to Venezuela with knowledge that a violation of the EAR was occurring, was about to occur, or was intended to occur in connection with the item.
Dec. 10, 2015: Gregorio L. Salazar, President of GLS Solutions Inc. of Avantura, FL (see related case above), agreed to pay a civil penalty of $50,000 to settle charges that he had violated the EAR by making a false or misleading statement in a disclosure to BIS. In a disclosure letter to BIS describing the unauthorized export by GLS Solutions of a FLIR high performance infrared camera to Venezuela, Salazar allegedly claimed that at the time of the shipment he was unaware that the camera required an export license in order to be shipped to Venezuela. However, in a subsequent interview with BIS Special Agents, he admitted that he knew of the licensing requirement before the camera was exported.
Dec. 10, 2015: Daofu Zhang, Jiang Guanghou “Ben” Yan, and Xianfeng Zuo, all nationals of the PRC, were arrested in Milford, CT on charges that they had violated the IEEPA and other U.S. laws in a scheme that included obtaining and illegally exporting sophisticated semiconductors stolen from the U.S. military. The men were arrested after they traveled to the U.S. to take delivery of what they thought were 22 stolen Xilinx semiconductors from an undercover agent.
Dec. 16, 2015: Eyad Farah of Barrington, TX, was sentenced in U.S. District Court in Tampa, FL to 37 months in federal prison based on his plea of guilty of conspiring to export and actually exporting firearms without the required authorization. The court also ordered Farah to forfeit 7 firearms traceable to the offense. Farah allegedly was part of a network of individuals who smuggled firearms from the U.S. to Jordan by concealing them in vehicles that had been purchased at used car auctions.
Dec. 18, 2015: Sihai Cheng, a/k/a Chun Hai Cheng, a/k/a Alex Cheng, a citizen of the PRC, pleaded guilty in U.S. District Court in Boston, MA to conspiring to export and actually exporting U.S. manufactured pressure transducers via the PRC to Iran without the required authorization. Pressure transducers can be used to produce weapons-grade uranium. They cannot be shipped to the PRC without an export license, and they cannot be shipped to Iran at all. In his plea Cheng admitted that he had caused the unauthorized export of 185 pressure transducers from the U.S. to Iran in 2009. The transducers were exported to the PRC using fraudulently obtained U.S. export licenses. Cheng then removed their U.S. manufacturer’s serial numbers and caused them to be exported to Iran knowing that they were being supplied to the Government of Iran. Cheng was extradited from the United Kingdom to the U.S. in December 2014 and has remained in U.S. custody since then.