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.
Department of Commerce
BIS Entity List Changes
Nov. 12, 2015 – 80 Fed. Reg. 69852: The Bureau of Industry and Security (BIS) updated the Entity List (EAR Part 744, Supp. No. 4) by adding 7 persons, removing 2 persons, and adding or modifying the addresses and/or aliases of 10 persons. The following persons were added to the Entity List with a license requirement with presumption of denial for all items subject to the EAR:
- Sky Rise Technology Ltd., a.k.a. Sky Rise Tech., Beijing, China and Sheung Wan and Kowloon, Hong Kong;
- TiMi Technologies Co., Ltd., a.k.a. TiMi Technology Co. Ltd., a.k.a. TiMi Tech., Beijing and Shenzhen, China and Sheung Wan and Kowloon, Hong Kong;
- Wang Wei, a.k.a. Jack Wang, Beijing, China and Sheung Wan and Kowloon, Hong Kong;
- 32 Group China Ltd., Kowloon, Hong Kong;
- Caprice Group Ltd., Kowloon, Hong Kong;
- Kitronix Display, Kowloon, Hong Kong; and
- Reekay Technology Ltd., a.k.a. Reekay Technology, Sheung Wan, Hong Kong.
The following persons were deleted from the Entity List:
- Weihai New Era Chemical Industrial Company Limited, China; and
- Able City Development Limited, Hong Kong.
BIS Publishes De Minimis and Direct Product Rule Decision Tool on Website
Nov. 13, 2015: BIS posted a De Minimis and Direct Product Rules Decision Tool that can help users determine whether a foreign-made item that has some U.S. content and is located outside the United States is subject to the Export Administration Regulations (EAR, 15 CFR Parts 730-774) under the de minimis rules (EAR Sec. 734.4 and Supplement No. 2 to Part 734) or the direct product rule (EAR Sec. 736.2(b)(3)). The tool is on the BIS website at http://www.bis.doc.gov/index.php/de-minimis-direct-product-rules-decision-tool.
BIS Adds XBS Epoxy to the Catch-All ECCN for Products with Military Significance not Enumerated on the USML Where Controls Not Clearly Defined in the EAR
Nov. 18, 2015 – 80 Fed. Reg. 70676: BIS amended the EAR to classify the XBS Epoxy system designed to obfuscate critical technology components against x-ray and terahertz microscopy imaging attempts under Export Control Classification Number (ECCN) 0C521, controlled for Regional Stability (RS) Column 1 reasons. This item requires a license to all destinations except Canada, and License Exception GOV will be the only exception available. Like all 0Y521 controls, this is a unilateral classification that will be valid for only one year unless it is extended by the U.S. Government or adopted by a multilateral export control regime. The amendment was effective immediately, but comments will be accepted until January 15, 2016. In the same amendment, BIS also removed ECCNs 0D521 and 0E521 from the Commerce Control List (CCL, EAR Part 774), as the aircraft wing fold system software and technology covered by those items are now classified under ECCNs 9D001 and 9E003, respectively.
Department of State
Name and Address Changes of companies involved with ITAR regulated materials
Nov. 3, 12, 13, 16, 18, 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 TRaC Global Ltd. to Element Materials Technology Warwick Ltd. due to acquisition;
- Change in Name from BAE Systems Operations Limited (Advanced Technology Centre) to BAE Systems Applied Intelligence Limited due to corporate reorganization;
- Change in Name from Bombardier MAT Inc. and/or Bombardier Inc. (solely as it pertains to the Military Aviation Training Business Unit) to CAE MAT Inc. due to acquisition;
- Change in Name from Hesco Armor, LLC to Hesco Armor, Inc. due to legal restructuring;
- AeroVironment, Inc. Address Change;
- Rockwell Collins UK Limited Address Change; and
- Change in Name from BAE Systems Integrated System Technologies Limited to BAE Systems Surface Ship Limited and BAE Systems (Operations) 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.
Contingent Waiver of Certain IRAN Sanctions Issued by State Department; Contingency Tied to Passing IAEA Requirements for Elimination of Nuclear Development Activities
Nov. 2, 2015 – 80 Fed. Reg. 67470: The Secretary of State issued a contingent waiver of sanctions against certain transactions by non-U.S. persons that involve Iran. This waiver will not become effective until Implementation Day, after the International Atomic Energy Agency has certified that Iran has implemented the nuclear-related measures specified in the Joint Comprehensive Plan of Action. The waiver covers certain transactions involving Iran’s financial and banking sectors; underwriting services, insurance, or reinsurance; Iran’s energy and petrochemical sectors; Iran’s shipping sector; trade with Iran in precious metals and other metals and software; and Iran’s automotive sector.
DDTC Publishes Slightly Revised Guidelines for GCs for Re-transfer of Licenses Affected by Registration Name Changes
Nov. 12, 2015: DDTC issued detailed updated instructions for the submission of General Correspondence (GC) requests seeking amendment of prior ITAR (International Traffic in Arms Regulations, 22 CFR Parts 120-130) authorizations due to changes in the name/address and/or registration code of U.S. entities. Changes from the original guidance include simplifying the authorization matrix/spreadsheets, adding a time restriction for amending the GC, and clarifying who may submit the GC. The new guidance is at http://www.pmddtc.state.gov/licensing/documents/gl_GCsMandA.pdf. DDTC will entertain comments after the update is implemented.
Department of the Treasury
OFAC Modifies List of Medical Supplies Exportable to IRAN
Nov. 2, 2015: The Office of Foreign Assets Control (OFAC) updated and expanded the list of medical supplies that can be exported or reexported to Iran under the general license set forth in Sec. 560.530(a)(3)(i) of the Iranian Transactions and Sanctions Regulations (ITSR, 31 CFR Part 560). The updated list is on the OFAC website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_gl_med_supplies.pdf. OFAC’s notice of this amendment also references additional relevant resources on the OFAC website: the FAQs on this general license at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#lic_agmed and guidance on the sale of food, agricultural commodities, medicine, and medical devices by non-U.S. persons to Iran at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_guidance_med.pdf.
OFAC Publishes FAQ Related to Requirements Pertaining to Travel by U.S. Persons to Cuba
Nov. 25, 2015: OFAC published a new FAQ regarding the processing by financial institutions subject to U.S. jurisdiction of Cuba travel-related transactions. The FAQ notes, among other things, that parties providing travel related services (e.g., airlines, vessel operators, and travel agents) to U.S. persons traveling to Cuba must maintain records for five years with details regarding the legal basis of the U.S. persons’ travel to Cuba under the Cuba Asset Control Regulations. This legal basis for travel to Cuba is to be certified by the traveler and does not require independent verification by the travel service provider. FAQ Nos. 34 and 52 are on the Treasury Department website at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf.
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
Department of State
Nov. 25, 2015 – 80 Fed. Reg. 73865: The Department of State announced a modification of a sanction announced on Sep. 2, 2015, that prohibited U.S. Government procurements from the Russian entity Rosoboronexport (ROE). (See September 2015 Regulatory Update.) As modified, the sanction does not apply to U.S. Government subcontracts at any tier with ROE and any ROE sub-unit or subsidiary for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally, including the purchase of spare parts, supplies, and related services for these purposes.
Fines and Penalties
Nov. 4, 2015: The U.S. Attorney for the Central Division of the District of Utah filed a criminal complaint against Kolar Rahman Anees Ur Rahman, a citizen of India, alleging that he had violated the Arms Export Control Act (AECA, 22 USC Sec. 2778) and the ITAR by unlawfully and willfully attempting to export ten .308 caliber sniper rifles and ammunition to Belarus without the required authorization from the Department of State. The action resulted from a sting in which Rahman attempted to purchase the rifles and ammunition from an undercover Special Agent of the U.S. Department of Homeland Security. The complaint was filed after Rahman sent a down payment to the undercover agent and informed the agent that he was aware that an export license would not be available to Belarus and there would be a need to make misrepresentations on the export paperwork. (Exports of ITAR-controlled items to Belarus are prohibited by ITAR Sec. 126.1.)
Nov. 16, 2015: Ahmad Feras Diri of London, England, was arraigned in federal court for the Middle District of Pennsylvania and pleaded not guilty to an indictment alleging that he had conspired with two other men to export items from the U.S. to customers in Syria via third countries without the required authorization from the U.S. Department of Commerce. Diri was arrested in London on March 14, 2013, but was not extradited to the U.S. until Nov. 12, 2015. The goods involved in the indictment related to the detection of chemical warfare agents and to oil and gas field operations. One alleged co-conspirator, Harold Rinko, pleaded guilty to the conspiracy charge in September 2014. The third co-conspirator, Mowea Diri, a brother of Ahmad Diri, is a citizen of Syria. (See additional information in April 2014 and September 2014 Regulatory Updates).
Nov. 23, 2015: EGYPTAIR Airlines Company of Cairo, Egypt agreed to pay $140,000 to settle charges by BIS that it had exported two Boeing 737-566 aircraft to Sudan without the required authorization. The planes were allegedly flown under Sudan Airways flight numbers from August 2010 to February 2011.
Nov. 23, 2015: Barracuda Networks, Inc. of Campbell, CA (Barracuda U.S.) and its wholly-owned subsidiary, Barracuda Networks, Ltd. of Basingstoke, U.K. (Barracuda U.K.) agreed to pay $1,500,000 to settle charges by BIS of 26 violations of the EAR by Barracuda U.S. and 11 violations of the EAR by Barracuda U.K. All the charges involved acting with knowledge of a violation by selling and/or servicing items controlled under the EAR for encryption and/or antiterrorism reasons to Syria, Iran, and/or Sudan. The exports occurred from April 2009 through May 2012, and the exported commodities included web filters, firewall products, link balancers, server backup software, and subscriptions to software updates. Barracuda U.S. voluntarily disclosed the violation.
Nov. 24, 2015: OFAC announced that Barracuda U.S. had agreed to pay a civil fine of $38,930 to settle charges by OFAC that it and Barracuda U.K. violated the ITSR, the Sudanese Sanctions Regulations (31 CFR Part 538), and the Syrian Sanctions Regulations (31 CFR Part 542). The OFAC charges alleged that Barracuda U.K. sold web filtering products, internet security products, and related software subscriptions to persons in Iran and Sudan and to persons who were Specially Designated Nationals and Blocked Persons under the Syrian Sanctions Regulations from August 2009 to April 2012, and that Barracuda U.S. provided the firmware and software updates for these and other software subscriptions from August 2009 to May 2012. Barracuda voluntarily self-disclosed the alleged violations to OFAC.