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.
Canada Updates Its Guide To The Canadian Export Control List
July 12, 2017: The Trade Controls Bureau of Global Affairs Canada announced publication of an updated version of its guide to the Canadian export control list. The guide, a comprehensive, 332-page manual titled “A Guide to Canada’s Export Control List – December 2015” [sic], is at . It will become effective on August 11, 2017.
The U.K. Updates Its Consolidated List of Strategic Military And Dual Use Items
July 13, 2017: The U.K. Department of International Trade Export Control Organisation (DIT ECO) published a revised and updated version of the Consolidated List of Strategic Military and Dual-Use Items that Require Export Authorization. Most of the changes reflect amendments to the European Union Common Military List, which in turn comply with changes agreed earlier by the Wassenaar Arrangement. The new Consolidated List is at . An ECO Notice to Exporters describing the changes is at . An additional ECO Notice describing changes made in four Open General Export Licenses (OGELs) to comply with the changes in the control lists is at .
The U.K. Publishes Its Export Controls Annual Report 2016
Singapore Announces A New Strategic Goods Control Order
July 7, 2017: Singapore Customs announced a new Strategic Goods (Control) Order 2017 (“SGCO 2017”) that amends Singapore’s strategic goods control list to make it consistent with the 2016 Wassenaar Arrangement Munitions List and the 2016 European Union List of Dual-Use Items. SGCO 2017 also makes other changes in the control list and the Strategic Goods (Control) Regulations (SGCR), including a modification of the scope of the transshipment controls. The Singapore Customs announcement is at . A 7-page list of “Highlights of Key Changes” made by SGCO 2017 in the control list is at . Effective date of SGO 2017 will be September 1, 2017.
The President Extended Time Regarding Termination Of Sudan Sanctions Until October 12, 2017
July 14, 2017 – 82 Fed. Reg. 32611: In an Executive Order, President Trump extended the period for determining whether to terminate the comprehensive sanctions regime against Sudan until October 12, 2017. Meanwhile, all transactions prohibited by the Sudanese Sanctions Regulations (SSR, 31 CFR Part 538) and Executive Orders 13067 and 13412 remain authorized by a General License at 31 CFR Sec. 538.540, which was issued by the Office of Foreign Assets Control (OFAC) pursuant to an Executive Order by President Obama (Jan. 18, 2017 – 82 Fed. Reg. 5331). (See details about the Obama Executive Order in January 2017 Regulatory Update, and see Treasury Department section below for an FAQ about this action.)
BIS Removed Indira Mirchandani From The Entity List
Department of Commerce
June 30, 2017 – 82 Fed. Reg. 29714: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by removing the entry “Indira Mirchandani” from the United Arab Emirates section of the Entity List (EAR Part 744, Supp. No. 4).
BIS Amended EAR Parts 742, 744, 772, And 744 To Reflect Changes To The MTCR Annex
July 7, 2017 – 82 Fed. Reg. 31442: BIS amended EAR Parts 742, 744, 772, and 744 to reflect changes to the Missile Technology Control Regime (MTCR) Annex that were agreed at MTCR meetings during 2016. This final rule revises Export Control Classification Numbers (ECCNs) 1C107, 1C111, 2B018, 2B109, 5A101, 7A103, 9A101, 9E101, 9E102, 9D101, 9D104, 9E001, and 9E002; adds ECCN 9B104 to control aerothermodynamic test facilities; revises the definitions of “missiles” and “unmanned aerial vehicles”; and makes conforming changes in other EAR provisions.
The Congressional Research Services Publishes A Report On The U.S. Export Control System And The Export Control Reform Initiative
Congressional Research Service
July 24, 2017: The Congressional Research Service (CRS) issued a 26-page report, “The U.S. Export Control System and the Export Control Reform Initiative.” The report provides detailed descriptions of the current U.S. export control system and President Obama’s Export Control Reform Initiative. This CRS report is available at .
DDTC Name and Address Changes Posted To Website
Department of State
- Change in Address for Northstar Aviation USA LLC;
- Change in Name from Aerolyusa to ALA-Advanced Logistics for Aerospace dba ALA North America due to corporate rebranding; and
- Change in Address for Defense Acquisition Program Administration (DAPA), South Korea.
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 Issues 2016 Annual Report On Blue Lantern Reviews
June 26, 2017: DDTC issued its 2016 annual report on the Blue Lantern program, which monitors the end-use of defense articles, technical data, services, and brokering activities that are subject to the Arms Export Control Act (AECA, 22 USC 2778 et seq.) and are exported through commercial channels. Among other findings in the report, cases in the Near East had the highest rate of unfavorable results (39%), while cases in Africa had the lowest rate of unfavorable results (9%). Actions on unfavorable Blue Lantern cases included returning or denying license applications, removing parties from licenses, revoking licenses, updating the Watch List, and referring cases to DDTC’s Office of Defense Trade Controls Compliance (DTCC) and/or U.S. law enforcement agencies for appropriate civil and/or criminal enforcement investigation and action. The report is on the DDTC website at .
DDTC Updates FAQs
- Q: Does saving ITAR controlled technical data on the cloud constitute an export per ITAR § 120.17?
- Q: Are public universities eligible to use the ITAR § 125.4(b)(9) exemption?
- Q: Which office (DDTC or RSAT) should a foreign end user contact if they are not certain of the original procurement method of a defense article (FMS or DCS) and is seeking a third party transfer or reexport/retransfer authorization?
- Q: Is the term "at the company's facilities" in ITAR § 120.39(a)(2) include only a company's headquarters, or also includes travel to other facilities?
- Q: What is meant by "commercial invoice" in ITAR § 123.9(b)(1)?
Also, the following FAQs were added under the new subheading “Blue Lantern Program”:
- Q: What is the Blue Lantern program?
- Q: Is end-use monitoring mandated by U.S. law?
- Q: What does the Blue Lantern program entail?
- Q: Who manages the Blue Lantern program?
Several references to International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Sec. 124.16 were also removed from FAQs and replaced by references to Sec. 126.18(d) or omitted entirely.
OFAC Posts FAQ Regarding Sudan Sanctions
Department of the Treasury
July 11, 2017: Following the President’s Executive Order regarding sanctions against Sudan (see above, under The President), OFAC posted an FAQ clarifying that existing sanctions, and the general license that broadly authorizes most prohibited transactions with respect to Sudan, remain in place pending further action on the possible termination of the sanctions. FAQ 506 is on the Treasury Department website at .
OFAC Posts FAQ Regarding Cuba
July 25, 2017: OFAC updated the FAQs it issued on June 16, 2017 in the wake of President Trump’s June 16, 2017 policy announcement regarding Cuba (see June 2017 Regulatory Update) and added two new FAQs about travel to Cuba. The current FAQs are on the Treasury Department website at .
LATEST SANCTIONS FINES & PENALTIES
Department of Commerce
July 3, 2017 – 82 Fed. Reg. 30823: BIS renewed for an additional 6 months the Temporary Denial Order (TDO) denying the export privileges of 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.
July 3, 2017 – 82 Fed. Reg. 30830: BIS denied the export privileges of Manuel Morales, currently in the Federal Correctional Institution in Phoenix, AZ, for 10 years based on his conviction of violating the AECA by conspiring to export and causing to be exported 540 rounds of 7.62 x 39 caliber ammunition and seven 7.62 x 39 caliber magazines to Mexico without the required authorization from the Department of State. In the criminal case, Morales was sentenced to 50 months in prison with credit for time served, 36 months of supervised release, and a $100 special assessment.
July 3, 2017 – 82 Fed. Reg. 30831: BIS denied the export privileges of Edwin Navarro Makasiar II, currently in the D. Ray James Correctional Institution in Folkston, GA, for 10 years based on his conviction of violating the AECA by attempting to export two Glock .40 caliber pistols and approximately 2,500 rounds of .223 caliber and 5.56 mm ammunition to the Philippines without the required authorization from the Department of State. In the criminal case, Makasiar was sentenced to 60 months in prison, a $2,000 criminal fine, and a $200 assessment.
July 3, 2017 – 82 Fed. Reg. 30832: BIS denied the export privileges of Jose Abraham Benavides-Cira, currently in the Federal Correctional Institution in Big Spring, TX, for five years based on his conviction of violating the AECA by conspiring to export and causing to be exported 5.56 caliber rifles to Mexico without the required authorization from the Department of State. In the criminal case, Benavides-Cira was sentenced to 135 months in prison and a $200 assessment.
Fines and Penalties
July 17, 2017: Joao Pereira da Fonseca, a citizen of Portugal, pleaded guilty in Federal District Court in Washington, D.C. to conspiring to unlawfully export goods and technology to Iran and to defraud the United States. The charges involved a scheme in which Fonseca contracted with a Portuguese engineering company that served as a front company to purchase machinery used in producing sophisticated optical lenses from one unnamed U.S. manufacturer and machinery used to test components of inertial guidance systems from another unnamed U.S. manufacturer. The undisclosed end user was in Iran. Fonseca, a mechanical engineer, was arrested in March 2016 while he was in the U.S. to be trained on how to use the inertial guidance system equipment.
July 17, 2017: Two Iranian nationals, Mohammed Reza Rezakhah and Mohammed Saeed Ajily, were indicted in federal court in Burlington, VT on charges including violations of the AECA and the Iran Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560) for a criminal conspiracy in which they conducted unauthorized intrusions into victim networks to steal particular pieces of valuable software including PRODAS (Projectile Rocket Ordnance Design and Analysis System), a proprietary software product controlled under the AECA and used for, among other things, aerodynamics analysis and design for projectiles from bullets to GPS guided artillery shells. The hacked software was then marketed and sold to Iranian entities including universities and military and government entities without authorization from the State Department. The court issued arrest warrants for both defendants.
July 20, 2017: OFAC assessed a $2,000,000 civil penalty against ExxonMobil Corp. of Irving, TX (including two U.S. subsidiaries) for violating Sec. 589.201 of the Ukraine-Related Sanctions Regulations (31 CFR Part 589). In imposing the fine, OFAC claimed that the presidents of the U.S. subsidiaries dealt in services of a blocked person when they signed 8 legal documents related to oil and gas projects in Russia that were signed on the Russian side by Igor Sechin, the president of Rosneft. Sechin (but not Rosneft) is identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. A 3-page OFAC backgrounder on this case is on the Treasury Department website at . ExxonMobil is challenging the penalty. An ExxonMobil press release about the case is at .
July 26, 2017: Harold Rinko /Global Parts Supply of Halstead, PA agreed to accept a civil penalty of $100,000 (all of which will be suspended for 5 years and thereafter waived if Rinko has complied with specified quarterly reporting requirements and has not committed a further violation) and a 10-year denial of export privileges (suspended for 10 years and thereafter waived if he has completed the specified reporting requirements and has not committed a further violation) to settle a charge by BIS of conspiracy to procure goods subject to the EAR for export from the U.S. to Syria without the required authorization from BIS. As part of the conspiracy, Rinko/Global Parts Supply concealed the items’ ultimate destination from U.S. suppliers and prepared invoices that listed false purchasers and end users in third countries. This civil settlement took into consideration Rinko’s guilty plea in a related criminal case, including his payment of a forfeiture of $45,698. (See item about the criminal case in October 2016 Regulatory Update.)
July 27, 2017: William Ali, a Fiji citizen resident in New Zealand, was sentenced in federal court in Seattle, WA to two years in federal prison based on his conviction on Dec. 16, 2016, of conspiracy to violate the AECA by purchasing certain accelerometers that were designed for use in spacecraft and missile navigation in the U.S. and exporting them to China without the required license from the State Department. Ali was arrested April 16, 2016 in a Homeland Security sting operation.