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.
EXECUTIVE ORDER (PRESIDENT OBAMA)
President Obama Issues EO Terminating Most Sanctions Against Sudan
Jan. 18, 2017 – 82 Fed. Reg. 5331: President Obama issued Executive Order 13761 which terminates, effective July 12, 2017, most aspects of most sanctions against Sudan that had been ordered under two EOs issued in 1997 and 2006. The termination will become effective only if the Secretary of State has provided a report to the President and, in consultation with the Secretary of the Treasury, the Director of National Intelligence, and the Administrator of the U.S. Agency for International Development, has published a notice stating that the Government of Sudan had sustained the positive actions that gave rise to this EO. (See below for implementation of this order by the Bureau of Industry and Security and the Office of Foreign Assets Control.)
DEPARTMENT OF COMMERCE
Five Russian Entities Added to the Entity List
Jan. 4, 2017 – 82 Fed. Reg. 722: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding the following 5 Russian entities to the Entity List (EAR Part 744, Supp. No. 4):
- Autonomous Noncommercial Organization Professional Association of Designers of Data Processing Systems, a.k.a., ANO PO KSI, Andreyevka, Moscow Region;
- Federal Security Service (FSB), a.k.a., Federalnaya Sluzhba Bezopasnosti, Moscow;
- Main Intelligence Directorate, a.k.a., Glavnoe Razvedyvatel’noe Upravlenie, GRU, and Main Intelligence Department, Moscow;
- Special Technology Center, a.k.a., STC, Ltd., St. Petersburg; and
- Zorsecurity Center (f.k.a., Esage Lab), a.k.a., TSOR Security, Moscow.
These entities were designated for tampering, altering, or causing a misappropriation of information with the purpose or effect of interfering with the 2016 U.S. election process. A license will be required for all items subject to the EAR to these entities. The licensing policy will be presumption of denial, and no license exceptions will be available.
BIS Issues Third Final Rule for Spacecraft, With Modifications and Clarifications of USML Category XV and ECCN 9X515
Five Turkish Entities added to the Entity List, One Indian Entity Removed and One Russian Entity Modified
Jan. 10, 2017 – 82 Fed. Reg. 2883: BIS added the following 5 persons in Turkey to the Entity List based on a determination that they were acting contrary to U.S. national security or foreign policy interests:
- AR Kompozit Kimya, a.k.a., AR Composites Company Ltd and AR Kompozit Kimya Muhendislik Taah Dis Tic Ltd., Istanbul;
- Fulya Kalafatoglu Oguzturk, a.k.a., Macide Fulya Kalafatoglu, Istanbul;
- Murat Taskiran, Istanbul;
- Ramor Group, a.k.a., Ramor Construction Food and Furniture Incorporation, Ramor Ins, Ramor Company, and Ramor Ltd. Co., Istanbul; and
- Resit Tavan, Istanbul.
BIS also removed Veteran Avia LLC, a.k.a., Veteran Airline, from the entries for India, Armenia, Greece, Pakistan and the United Kingdom. BIS also revised the listing for FAU ‘Glavgosekspertiza Rossii’ under the destination Russia to conform with a new General License No. 11 issued by the Treasury Department Office of Foreign Assets Control (OFAC).
BIS Requests Comments on Technical Parameters for Control Under USML Category XII and Sensor/Laser ECCNs Under the EAR
Jan. 17, 2017 – 82 Fed. Reg. 4287: BIS requested comments from the public on the impact of further increasing controls on fire control, laser imaging, and guidance equipment that had been determined no longer to warrant control under Category XII (Fire Control, Laser, Imaging, and Guidance Equipment) of the USML, particularly with regard to the ECR rules for USML Category XII that went into effect on December 31, 2016. (See October 2016 Regulatory Update.) The proposed changes affect EAR Sections 734.4 and 740.20 and ECCNs 3E001, 6A993, 6E001, 6E002, and 6E990. Comments are due by March 14, 2017. (See related proposal in State Department section below.)
BIS Changes Policy of Denial into Policy of Approval for Exports to Sudan Intended for Civil Aviation Safety and Railroad Operation Safety
Jan. 17, 2017 – 82 Fed. Reg. 4781: BIS changed its license application review policy from a general policy of denial to a general policy of approval for exports to Sudan of certain items controlled only for AT reasons that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft and certain items controlled only for AT reasons for use in specified operations relating to railroads. The liberalized review policy applies only to exports for civil uses and does not apply to exports to “sensitive end users,” including Sudan’s military, police, and/or intelligence services. No existing license requirements were removed, and exports of other items to Sudan remain under a general policy of denial. (See related articles in The President section above and Treasury Department section below.)
US Exporters of Certain Goods to Hong Kong Must Demonstrate that They Have a Hong Kong Import Permit or that the Hong Kong Government has Issued a Written Statement that an Import Permit is Not Required
Jan. 19, 2017 -- 82 Fed. Reg. 6216: BIS amended the EAR to require persons intending to export or reexport to Hong Kong any item controlled for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons to obtain, prior to such export or reexport, a copy of a Hong Kong import license or a written statement from the Hong Kong government that such a license is not required. The rule also requires persons intending to reexport any such item from Hong Kong to obtain a Hong Kong export license or a statement from the Hong Kong government that such a license is not required. This rule will go into effect April 19, 2017. FAQs describing its purpose and effect are on the BIS website at https://www.bis.doc.gov/index.php/forms-documents/pdfs/1637-2017-hong-kong-rule-faqs/file.
BIS Establishes Policy of Approval for Exports of EAR Items to India, Including “600 Series Items,” When the Items are for Ultimate End Use by the Government of India or Re-export to A:5 Countries or the US, Provided the Items are not for Nuclear, Missile, or Chemical/Biological Weapon End Uses
Jan. 19, 2017 – 82 Fed. Reg. 6218: BIS established a licensing policy of general approval for exports or reexports to, or transfers within, India of items subject to the EAR, including “600 series” items, for civil or military end uses in India, for ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as the items are not for use in nuclear, “missile” or chemical or biological weapons activity. BIS also amended the Validated End User (VEU) authorization (EAR Sec 748.15) to permit items obtained in India under this authorization to be used for both civil and military end uses, so long as the items are not controlled for MT reasons and are not for use in nuclear, “missile” or chemical or biological weapons activities. These amendments, which occur in EAR Sections 742.4, 742.6, and 748.15, reflect a recognition of India as a Major Defense Partner of the U.S.
BIS Pushes Implementation Date for Removal of Nuclear Proliferation Controls on Certain Equipment Usable in Nuclear Reactors Due to President Trump Postponement of Effective Date of Rules for 60 Days
Feb. 1, 2017 – 82 Fed. Reg. 8893: BIS delayed until March 21, 2017, the implementation of portions of an amendment of Nov. 25, 2016 (81 Fed. Reg. 85138 -- see November 2016 Regulatory Update), removing ECCNs 2A292, 2A293, 2B290, and 3A292 from the CCL and taking other actions that were scheduled to become effective Jan. 1, 2017. Specifically, “software" "specially designed" for the "development," "production," or "use" of items previously controlled under ECCN 3A292 will continue to be classified and licensed by BIS under the designation EAR99 through a delayed date of March 21, 2017. As of March 22, 2017, such "software" will be classified and licensed by BIS under ECCN 3D991. The postponement resulted from a Jan. 20, 2017, Presidential Memorandum requiring a 60-day postponement of rules that had been published in the Federal Register, but had not yet taken effect.
DEPARTMENT OF STATE
DDTC Name and Address Changes Posted to Website
Jan. 17 and 27, 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 Forges De Zeebrugge SA to Thales Belgium SA due to corporate rebranding, and
- Change in Name from Bluefin Robotics Corporation to General Dynamics Mission Systems Inc., due to acquisition of Bluefin Robotics by GD Mission Systems
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 Final Rule Implementing ITAR Revisions to Reflect the Current Systems Used to Report Export Information to CBP
Jan. 3, 2017 – 82 Fed. Reg. 15: DDTC amended International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Parts 120, 123, and 126 to implement the International Trade Data System (ITDS), a new government-wide system that allows businesses to electronically submit the data required to import or export cargo. Traders will only need to create and submit a single set of data for each import or export. Information for users is on the Customs and Border Protection (CBP) website at https://www.cbp.gov/trade/automated. (For reference, the implementation of the ITDS in the Automated Commercial Environment ("ACE") will not affect the process by which exporters prepare and submit Electronic Export Information ("EEI") to the Census bureau for qualifying exports. For most ACE users, the revised ITDS interface will be invisible.)
DDTC Issues Companion to BIS’s Third Final Rule for Spacecraft, With Modifications and Clarifications of USML Category XV and ECCN 9X515
Jan. 10, 2017 -- 82 Fed. Reg. 2889: In an update to an interim rule revising USML Category XV (Spacecraft and Related Articles) (May 13, 2014 -- 79 FR 27180), DDTC amended Category XV to better reflect the intended scope of control with regard to autonomous tracking systems, logistics, propulsion systems, cryocoolers, and vibration suppression systems; to clarify controls on specific electro-optical remote sensing capabilities and space qualified optics; and to limit the controls to items that genuinely warrant controls on the USML. See Commerce Department section above for description of a related rule.
DDTC Increases Maximum Civil Penalty for ITAR Violations Due to Inflation
Jan. 11, 2017 – 82 Fed. Reg. 3168: The State Department increased the maximum Civil Monetary Penalty (CMP) for violations of the ITAR from $1,094,010 to $1,111,908 based on an inflation adjustment formula mandated by law. The new CMP will apply to penalties assessed on or after Jan. 11, 2017, regardless of the date on which the underlying facts or violations occurred.
DDTC Requests Comments on Technical Parameters in ECR Revisions to USML Category XII
Jan. 17, 2017 – 82 Fed. Reg. 4226: Following implementation on Dec. 31, 2016, of amendments to USML Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) (see October 2016 Regulatory Update), DDTC requested comments from the public relating to issues regarding controls on items “specially designed for a military end user,” the scope of controls on certain laser target designators or coded target markers (Cat. XII(b)(1)), and parameters to replace “specially designed” controls. Comments are due by March 14, 2017.
DEPARTMENT OF THE TREASURY
OFAC Issues General Licenses Related to La Estrella and El Siglo Newspapers and the Panamanian Mall and Associated Complex
Jan. 5, 2017: OFAC issued two general licenses affecting exports to Panama. General License 3B authorizes “Certain Transactions and Activities to Wind Down Operations Involving La Estrella and El Siglo Newspapers," and General License 4E authorizes “Certain Transactions involving the Panamanian Mall and Associated Complex, Soho Panama, S.A. (a.k.a. Soho Mall Panama).” FAQs about these general licenses are at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#panama (FAQs 471 and 472).
OFAC Issues New FAQs Related to Transactions Involving Goods on Vessels that Have Entered into Cuban Sovereign Territory
Jan. 6, 2017: OFAC issued five new FAQs about restrictions on transactions involving goods on vessels that have entered a port or place in Cuba. The FAQs are on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf (FAQs 86-90).
OFAC Advises that US Persons Cannot Provide Legal Advice or Consulting Services to Persons Who Are Specially Designated Nationals (“SDNs”) or Who Have Been Otherwise Restricted from Receiving US Export Services by OFAC
Jan. 17, 2017: OFAC issued Guidance and related FAQs on the provision of legal and other services relating to the requirements of U.S. sanctions laws. The Guidance is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/compliance_services_guidance.pdf; the FAQs are at www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#csg (FAQs 495-499 – titled “Cross-Programmatic Compliance Services Guidance”).
OFAC Issues General License Authorizing Many Transactions Formerly Prohibited under Sudanese Sanctions Regulations
Jan. 17, 2017 – 82 Fed. Reg. 4793: OFAC published a General License authorizing all transactions prohibited by the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538). This General License, which implements Executive Order 13761 (see description above) takes the form of a new Section 538.540. However, many transactions with Sudan remain subject to statutory restrictions such as time limits on exports to Sudan of agricultural commodities, medicine, or medical devices. Details are described in a Fact Sheet at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#sudan_whole and FAQs 490-494 at the same link above. (See related information in Commerce Department section above.)
LATEST SANCTIONS FINES & PENALTIES
DEPARTMENT OF COMMERCE
Jan. 6, 2017 – 82 Fed. Reg. 1689: BIS denied the export privileges of Dane Francisco Delgado, Eden Correctional Institution, Eden, TX, for 10 years based on his conviction of violating the Arms Export Control Act (AECA, 22 USC 2778) in connection with a conspiracy to export defense articles to Mexico without the required authorization. In the criminal case, Delgado was sentenced to 70 months in prison, 3 years of supervised release, and a $100 assessment.
Jan. 6, 2017 – 82 Fed. Reg. 1690: BIS denied the export privileges of Robert Luba, U.S. Penitentiary Satellite Camp, Waymart, PA, for 10 years based on his conviction of violating the AECA by knowingly and willfully exporting a technical drawing for a part of the torpedo tube of the NSSN Class Submarine to India without the required authorization. In the criminal case, Luba was sentenced to 6 months in prison, 3 years of unsupervised release, $173,737 in restitution, and a $200 assessment.
Jan. 6, 2017 – 82 Fed. Reg. 1691: BIS denied the export privileges of Kamran Ashfaq Malik, Federal Correctional Institution, Fort Dix, MD, for 5 years based on his conviction of violating the AECA by knowingly and willfully exporting firearms controlled under the USML to Pakistan without the required authorization. In the criminal case, Malik was sentenced to 24 months in prison, 3 years of supervised release, and a $100 assessment.
Jan. 9, 2017 – 82 Fed. Reg.2312: BIS renewed the Temporary Denial Order (TDO) against Mahan Airways, Pejman Mahmood Kosarayanifard, Mahmoud Amini, Kerman Aviation, Sirjanco Trading LLC, Ali Eslamian, Mahan Air General Trading LLC, Skyco (UK) Ltd., Equipco (UK) Ltd., Mehdi Bahrami, Al Naser Airlines, Ali Abdullah Alhay, Bahar Safwa General Trading, Sky Blue Bird Group, and Issarn Shammout for an additional 6 months.
Jan. 11, 2017 – 82 Fed. Reg. 4842: Berty Tyloo of Morges, Switzerland agreed to a denial of his export privileges for 3 years to settle charges by BIS that he had made false or misleading statements to BIS in the course of an investigation. The investigation involved unlicensed exports of controlled items to Syria.
Fines and Penalties
Jan. 12, 2017: Aban Offshore Limited of Chennai, India, agreed to pay $17,500 to settle potential liability for violating the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). OFAC claimed that Aban violated the ITSR when its Singapore subsidiary placed an order for oil rig supplies from a vendor in the U.S. with the intended purpose of re-exporting these supplies from the United Arab Emirates (UAE) to a drilling rig in Iranian territorial waters.
Jan. 27, 2017: Milwaukee Electric Tool Corporation agreed to pay $301,000 (of which $31,000 was suspended) to settle charges by BIS that it violated the EAR on 25 occasions by exporting thermal imaging cameras controlled under ECCN 6A003.b.4 to various countries including Hong Kong, Colombia, Ecuador, El Salvador, and Mexico without the required authorization. The total value of the unauthorized exports was $129,284.
Jan. 30, 2017: Michael Andrew Ryan, aka Brad Jones and GunRunner, of Manhattan, KS, was sentenced in U.S. District Court for the District of Kansas to 52 months in prison for his role in the illegal export of firearms including pistols, revolvers, UZIs, and Glocks as well as magazines and ammunition to Ireland, England, Scotland, and Australia. In his plea agreement Ryan admitted having sold these items using Black Market Reloaded, a hidden Internet marketplace. In addition to the prison sentence, Ryan was also ordered to forfeit all firearms and ammunition seized by law enforcement during the investigation.