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.
UN Expands Sanctions on North Korea as a Result of Nuclear Test and Rocket Launch
March 2, 2016: The United Nations Security Council expanded U.N. sanctions against North Korea in response to a nuclear test and banned rocket launch by North Korea. The new sanctions require inspection of all cargo going to and from North Korea (expanded from requiring inspection only if there were reasonable grounds to believe a shipment contained prohibited goods), broaden the ban on weapons imports and exports to include formerly excluded small arms and light weapons, ban exports to North Korea of all items that could directly contribute to the operational capabilities of the country’s armed forces, ban the supply of all types of aviation fuel to North Korea, and expand the list of banned exports of luxury items to North Korea. (See below for U.S. implementation of the expanded U.N. sanctions by actions of the President and the Treasury Department.)
President Obama Signs Executive Order Pertaining to US Sanctions Against North Korea
March 18, 2016 – 81 Fed. Reg. 14943: The President issued Executive Order 13722 regarding sanctions against North Korea. Included in EO 13722 is a prohibition on the exportation from the U.S. or by a U.S. person of any goods, services, or technology to North Korea.
Department of Commerce
BIS Publishes Final Rule Requiring Reporting of Offset Agreements related to the Sale of “600 Series” Items
March 1, 2016 – 81 Fed. Reg. 10472: The Bureau of Industry and Security (BIS) announced a final rule amending 15 CFR Part 701 to require the reporting of offsets agreements in connection with sales of 600 series Export Control Classification Numbers (ECCNs) other than certain submersible and semi-submersible cargo transport vessels and related items. This final rule is unchanged from the proposed rule published on December 2, 2015 (80 Fed. Reg. 75438; see December 2015 Regulatory Update). BIS did not receive any comments on the proposed rule.
BIS Adds ZTE and Affiliated Companies to Entity List
March 8, 2016 – 81 Fed. Reg. 12004: BIS added the following persons to the Entity List (15 CFR Part 744, Supplement No. 4):
(1) Beijing 8-Star International Co., Beijing;
(2) Zhongxing Telecommunications Equipment Corporation, Shenzen (ZTE); and
(3) ZTE Kangxun Telecommunications Ltd., Shenzhen, China (ZTE Kangzun).
(1) ZTE Parsian, Tehran, Iran.
For these persons, BIS specified a license requirement for all items subject to the EAR and a license review policy of presumption of denial and determined that no license exceptions will be available. This action was based on a finding, documented in the announcement, that ZTE Corporation and the listed affiliates had reexported controlled items to sanctioned countries without the required authorization and had also developed a scheme to reexport controlled U.S. items without the required authorizations by using a series of “detached” corporations that would actually be controlled by ZTE.
BIS Issues Temporary General License for Exports to ZTE and ZTE Kangzun
On March 24, 2016, as a result of cooperation by ZTE with the US Government related to exports to Iran, BIS created a Temporary General License, effective until June 30, 2016, permitting exports (essentially returning exporting to the status quo) to tZTE and ZTE Kangxun.
In effect, the general license restores the export control situation that existed prior to March 8, 2016, when ZTE and ZTE Kangxun were added to the Entity List. (See above entry for March 8, 2016.) This temporary general license, which does not apply to the other two ZTE-affiliated companies, , may be renewed by BIS at its discretion. The temporary general license takes the form of a new Supplement No 7 to EAR Part 744.
BIS Publishes Videos and Transcripts on BIS Website of Webinars Related to (1) Encryption Export Controls and (2) Cuba, Iran, and Russian Sanctions
March 9, 2016: BIS posted links to video recordings, transcripts, and handout materials from two recent webinars: one pertaining to the February 17. 2016 webinar on the export controls on encryption items and the other related to the March 30, 2016 webinar on EAR sanctions on Cuba, Iran, and Russia. See, http://www.bis.doc.gov/index.php/2012-03-30-17-54-11/2013-02-15-13-50-20.
BIS Publishes FAQ Related to the Prohibition on Exports to ISIL-controlled Facilities and Territories
March 9, 2016: BIS posted a Frequently Asked Question regarding BIS’ prohibition on the shipment of items subject to the EAR to ISIL-controlled facilities or territory.. This FAQ is on the BIS website at http://www.bis.doc.gov/index.php/policy-guidance/faqs?view=category&id=166.
BIS Amends Sections of the EAR to Facilitate Temporary Sojourns to Cuba By Vessels Carrying Cargo to Other Destinations
March 16, 2016 – 81 Fed. Reg. 13972: BIS amended several sections of the Export Administration Regulations (EAR, 15 CFR Parts 730-774) to ease some restrictions affecting exports to Cuba, including authorizing temporary sojourns in Cuba for ships carrying cargo to other destinations, authorizing exports of certain items to persons authorized by the Treasury Department to establish or maintain a physical or business presence in Cuba, and adopting a case-by-case license review policy for exports of items that would facilitate the export of items produced by the Cuban private sector. The revisions appear in EAR Sections 736.2(b)(8), 740.15(d)(6), 740.21(e), and 746.2(b)(3)(i). BIS noted that these modifications do not alter the U.S. comprehensive embargo that continues to require a license from BIS for all items subject to the EAR, unless authorized by a license exception or other specific regulatory provision. These changes were coordinated with other changes made by the Treasury Department Office of Foreign Assets Control (OFAC – see item about OFAC changes below). A joint BIS-OFAC announcement about these changes is on the BIS website at https://www.commerce.gov/news/press-releases/2016/03/commerce-and-treasury-announce-significant-amendments-cuba-sanctions. A link to updated BIS FAQs on the Cuba sanctions is at http://www.bis.doc.gov/index.php/forms-documents/doc_download/1446-bis-cuba-consolidated-faqs.
BIS Issues FAQ Regarding Authorization Period for Exports to Cuba Under the EAR’s AGR License Exception
March 17, 2016: BIS posted a notice describing the time frames that apply to exports of agricultural commodities to Cuba under the Agricultural Commodities (AGR) license exception. The notice is on the BIS website at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations//1018.
Various Parties Added to BIS Entity List
March 21, 2016 – 81 Fed. Reg. 14953: BIS added 44 persons from China, Germany, Hong Kong, India, Iran, Malaysia, The Netherlands, Singapore, Switzerland, and the United Arab Emirates (U.A.E.) to the Entity List. For each person, BIS imposed a license requirement for all items subject to the EAR and a license review policy of presumption of denial. Also, no license exceptions will be available for exports to these persons.
In the same announcement, BIS removed the following 5 persons from the Entity List:
(1) Ukrspetsexport, Kyiv.
(1) Girish Purushothama, Dubai and Abu Dhabi;
(2) Ivan Desouza, a.k.a., the following one alias: Ivan D’Souza, Dubai;
(3) Zener Marine, Dubai; and
(4) Zener One Net, Dubai.
BIS Publishes Comments Received on Proposed EAR Amendments Affecting ECCNs 9X610 and 9X619
March 29, 2016: BIS posted the responses it received to its request of Feb. 9, 2016 (81 Fed. Reg. 6791) for public comments on its proposed amendments affecting ECCNs 9A610, 9A619, 9C610, 9C619, and 9E619. (See background in February 2016 Regulatory Update.) A link to the public comments is on the BIS website at http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents.
Department of State
Name Changes Published to DDTC Website
March 8, 17, 21, and 24, 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:
• Alion Science and Technology (Canada) Corporation (Alion) Address Change;
• Triumph Actuation Systems - UK, Ltd. Address Change;
• Change in Name from Bruckner Polska Spolka Z Organiczona Odpowiedzialnoscia to WESCO Integrated Supply Polska Spolka Z Organiczona Odpowiedzialnoscia due to acquisition of Bruckner Polska Spolka by WESCO Integrated;
• Change in Name from GE Intelligent Platforms Holdings Limited to Abaco Systems Limited due to corporate divesture;
• Change in Name from GE Intelligent Platforms Technology Corp. to Abaco Systems Technology Corp. due to corporate divesture;
• Change in Name from BAE Systems plc-Turkey to BAE Systems (International) Limited-Turkey due to corporate reorganization;
• Change in Name from BAE Systems Land Systems South Africa (Pty) Ltd to Denel Vehicle Systems (Pty) Ltd due to acquisition of BAE Systems Land Systems by Denel Vehicle Systems;
• Change in Name from GE Intelligent Platforms Embedded Systems, Inc. Name Change to Abaco Systems, Inc. due to corporate divesture;
• Change in Name from Heat Treatment Australia to HTA Aerospace and Defense Pty Ltd due to corporate reorganization; and
• Change in Name from Crane Process Flow Technologies (India) Limited Name Change to Crane Process Flow Technologies (India) Private Limited due to corporate reorganization.
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 Comments Received in Relation to New Agreement Guidelines
March 16, 2016: DDTC posted a response to the industry comments it received following publication of Draft 4.3 of the Agreement Guidelines on January 6, 2016 (see January 2016 Regulatory Update). The DDTC response is on its website at http://pmddtc.state.gov/licensing/documents/IndustryComments%20_Agreement%20Guidelines%204.3.pdf.
DDTC Publishes New Agreement Guidelines
March 28, 2016: DDTC posted new Revision 4.3 of its Guidelines for Preparing Agreements on its website at http://pmddtc.state.gov/licensing/documents/AG_Rev%204.3.pdf.
DDTC Publishes Comments on Proposed Further Revisions to USML Categories VIII and XIX
March 28, 2016: DDTC published the comments it received in response to its request of Feb. 9, 2016 (81 Fed. Reg. 6797), for public comments on its proposed amendments to USML Categories VIII (aircraft and related articles) and XIX (gas turbine engines and associated equipment). (See background in February 2016 Regulatory Update.) The comments are on the DDTC website at http://www.pmddtc.state.gov/regulations_laws/documents/proposed_rules/CategoryVIIIandXIX_Comments.pdf.
Department of the Treasury
OFAC Amends the Cuban Asset Control Regulations In Parallel with BIS to Permit Certain Travel-Related Activities
March 16, 2016 – 81 Fed. Reg. 13989: In an action coordinated with BIS (see item about BIS actions above), OFAC amended the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) to further facilitate travel to Cuba for authorized purposes, expand the range of authorized financial transactions, and authorize additional business and personal presence in Cuba. At the same time, OFAC published new and updated FAQs (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf) and a fact sheet summarizing the changes (https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_03152016.pdf).
OFAC Publishes General License 1 for Certain Limited Activities Involving Exports to Iran of Commercial Passenger Aircraft
March 24, 2016: OFAC issued General License 1 under the Iranian Transactions and Sanctions Regulations (31 CFR Part 560) authorizing some activities in connection with implementation of the Statement of Licensing Policy that OFAC had issued in January 2016 regarding activities relating to exports to Iran of commercial passenger aircraft. General License 1 is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_gli.pdf. OFAC also published 4 FAQs (J.9 – J.12) about General License 1 at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf.
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
Department of Commerce
March 9, 2016 – 81 Fed. Reg. 12459: BIS amended the Temporary Denial Order (TDO) against Ribway Airlines Company et al. (January 26, 2016 -- 81 Fed. Reg. 4251) to add the following parties:
• moreJet Ltd., Bournemouth and Hampshire, United Kingdom;
• Stefan Piotr Kondak, a/k/a Stefan Peter Kondak, Bournemouth and Hampshire, United Kingdom; and
• AC AVIATIE UK Limited, f/k/a Bin Vali Aviation Limited, East Sussex, United Kingdom.
In the same action, BIS removed the following parties from this TDO:
• AF-Aviation Limited, Wolverhampton, United Kingdom and
• Andy Farmer, Wolverhampton, United Kingdom.
March 25, 2016 – 81 Fed. Reg. 16137: BIS denied for 10 years the export privileges of Nutveena Sirirojnananont of Portsmouth, NH, based on her conviction for violating the Arms Export Control Act (AECA, 22 USC Sec. 2778) by knowingly and willfully causing the export from the U.S. to Thailand of firearms controlled under the USML without the required authorization from the Department of State. Sirirojnanont was sentenced in federal court in New Hampshire to 10 months of imprisonment, one year of supervised release, and a $600 assessment.
Department of the Treasury
March 16, 2016: OFAC determined that North Korea sanctions under the President’s E.O. 13722 (see item above) would apply to persons operating in the transportation, mining, energy, and financial services industries in North Korea and issued 9 new general licenses authorizing certain activities involving North Korea. Links to the general licenses and updated FAQs are on Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Pages/nkorea.aspx#gl .
Fines and Penalties
March 2, 2016: Louis Brothers of Covington, KY was sentenced to 93 months in prison and fined $1.1 million in Federal District Court for the Eastern District of Kentucky based on his conviction of conspiracy and aiding and abetting the illegal export of defense articles and conspiracy to launder funds. In a guilty plea, Brothers admitted that he had exported microcircuits to the Peoples Republic of China without the required authorization by labeling the shipments as “computer parts.”
March 10 and 24, 2016: Ali Afif Al Herz, his sons Adam Ben Ali Al Herz and Bassem Al Herz, and his daughter-in-law Sara Zeaiter, all of Cedar Rapids, IA, pleaded guilty in federal court in Cedar Rapids to violating the AECA and other laws in a scheme to export firearms, parts, and ammunition to Lebanon without the required authorization from the State Department. The unlicensed items were shipped illegally in three shipments, concealed in clothing drive items, skid loaders, and Bobcat construction equipment. Federal agents intercepted two of the three shipments.
March 14, 2016: Chemical Partners Europe S.A. of Brussels, Belgium agreed to pay a civil fine of $350,000 to settle charges by BIS that it had acted with the intent to evade the EAR by exporting coatings, pigments, and paints, including goods suitable for use in nuclear facilities or in marine applications, from the U.S. to Iran via Belgium. CPE allegedly concealed the ultimate destination when it purchased the goods, did not obtain the required authorization from OFAC, and falsely listed CPE as the ultimate consignee and Belgium as the country of ultimate destination on the Shipper’s Export Declarations filed for the shipments.
March 15, 2016: Amir Abbas Tamimi, an Iranian citizen resident in Iran, was turned over to Iranian law enforcement authorities in Tehran, Iran, following his release from federal prison in Philipsburg, PA. In November, 2013 Tamimi pleaded guilty to violating the International Emergency Economic Powers Act (IEEPA, 50 USC Secs. 1701-1707) by participating in a scheme to export sensitive components of a helicopter that could be used for military purposes to Iran.
March 23, 2016: Su Bin, a/k/a Stephen Su and Stephen Subin, a citizen and resident of China, pleaded guilty in federal court in Los Angeles, CA to conspiracy to violate the AECA and other laws by hacking into the computer networks of major U.S. defense contractors, stealing sensitive military and export-controlled data, and exporting the stolen data to China. Su’s guilty plea identified the Boeing Company in Orange County, California as a target of the conspiracy. Su allegedly told his co-conspirators what persons, companies, and technologies to target; identified the files and folders that should be stolen after the co-conspirators had gained access to the target computers; and then translated the stolen data from English into Chinese. Su was initially arrested in Canada on a warrant related to this case in July 2014. He waived extradition and agreed to be moved to the U.S. in February 2016.
March 29, 2016: Gilbert Elian, a Lebanese national and naturalized U.S. citizen resident in Grand Rapids, MI, pleaded guilty in federal court in Grand Rapids of conspiracy to violate the AECA. U.S. Customs and Border Protection officers allegedly found 20 disassembled handguns inside an engine and transmission that were being shipped to Beirut, Lebanon by Elian. Elian purchased 93 handguns over a two-year period and told investigators he brought 65 of them to Lebanon. Elian claimed that he did not know the guns required an export license and stated that the guns had been properly checked in with airport security.