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.
EU Lifts Various Nuclear-related Economic and Financial Sanctions Against Iran, Sort of…
October 18, 2015: The Council of the European Union adopted the following legal acts lifting nuclear-related economic and financial EU sanctions against Iran, to be effective on “Implementation Day,” the day when the International Atomic Energy Agency (IAEA) verifies that Iran has implemented the nuclear-related measures specified in the Joint Comprehensive Plan of Action (JCPOA):
- Council Regulation (EU) 2015/1861 of 18 October 2015 amending Regulation (EU) No 267/2012 concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0001.01.ENG
- Council Implementing Regulation (EU) 2015/1862 of 18 October 2015 implementing Regulation (EU) No 267/2012 concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0161.01.ENG
- Council Decision (CFSP) 2015/1863 of 18 October 2015 amending Decision 2010/413/CFSP concerning restrictive measures against Iran: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.274.01.0174.01.ENG
Note: As “Implementation Day” will only occur once the IAEA has verified that Iran has implemented sufficient measures to reduce its proliferation of nuclear weapons, it is possible that “Implementation Day” will not occur in the near term, if at all.
DEPARTMENT OF COMMERCE
BIS Amends the Unverified List
October 7, 2015 – 80 Fed. Reg. 60529: The Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR, 15 CFR Parts 730-774) by adding 12 persons to the Unverified List (UVL, Supplement No. 6 to EAR Part 744); adding additional addresses for 4 parties already listed on the UVL; and removing 2 persons from the UVL list.
Added to the UVL:
Rizma, Inc., Toronto
Bonitopto S.R.O., Ostrov
Spars Ltd., a.k.a. Spars Trading Ltd., Tbilisi
Foot Electronics Co. Ltd., Kowloon and Wan Chai
GA Industry Co. Ltd., Kowloon
Hua Fu Technology Co. Ltd., Kowloon
Yogone Electronics Co., Kowloon
United Arab Emirates (UAE):
Gulf Modern Solutions Engineering Company, Dubai
Masomi General Trading, Dubai
Recaz Star General Trading LLC, Dubai
Renat International General Trading, Ajman
Trade Star FZC, Dubai and Sharjah
AST Technology Group (HK) Ltd.
Ling Ao Electronic Technology Co. Ltd., a.k.a. Voyage Technology (HK) Co. Ltd.
Narpel Technology Co., Limited
Removed from the UVL:
Ditis Hong Kong Ltd., Kowloon and New Territories
Fauji Fertilizer Company Ltd., Rawalpindi
BIS Seeks Comments on ECR Changes involving USML Categories VI, VII, XIII, and XX
Oct. 9, 2015 – 80 Fed. Reg. 61137: BIS requested public input into their review of the items that were moved from U.S. Munitions List (USML, 22 CFR Sec. 121.1) Categories VI (surface vessels of war and special naval equipment), VII (ground vehicles), XIII (materials and miscellaneous articles), and XX (submersible vessels and related articles) to the Commerce Control List (CCL, EAR Part 774) effective January 6, 2014, as part of the Export Control Reform Program (ECRP). BIS specifically invited comments on the clarity, usability, and other matters related to the following Export Control Classification Numbers (ECCNs): military vehicles (ECCNs 0A606, 0B606, 0C606, 0D606, and 0E606); vessels of war (ECCNs 8A609, 8B609, 8C609, 8D609, and 8E609); submersible vessels and oceanographic equipment (ECCNs 8A620, 8B620, 8D620, and 8E620); and auxiliary and miscellaneous military equipment (ECCNs 0A617, 0B617, 0C617, 0D617, and 0E617). Deadline for comments is Dec. 8, 2015. (See below for coordinated State Department announcement.)
BIS Amends List of Validated End Users in China
Oct. 28, 2015 – 80 Fed. Reg. 65931: BIS amended the entries on the List of Validated End Users (EAR Part 748, Supp. No. 7) for Advanced Micro-Fabrication Equipment, Inc., China (AMEC) and Applied Materials (China), Inc. (AMC). ECCN 3B001.a.2 was added to the list of items that may be provided to AMEC’s facility under Authorization VEU, and ECCN 3E001 (limited to technology for the development or production of items controlled by ECCN 3B001) was added to the VEU list for AMC. A new eligible facility in Shanghai was also added for AMC.
DEPARTMENT OF STATE
DDTC Name Changes Posted to Website
October 5, 9, 13, 15, 19, 20, and 23, 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 International Rectifier Denmark ApS to International Rectifier HiRel Denmark ApS due to corporate reorganization;
- ESG Elektroniksystem-und Logistik-GmbH merged with E-Sicherheitsbeteiligungen GmbH and changed name to ESG Elektroniksystem-und Logistik-GmbH
- HCL Logistics Inc. address change;
- Change in name from Raytheon Microelectronics Espana S.A. to Malaga Aerospace, Defense and Electronics Systems, S.A. due to Raytheon Company’s (US) Spanish subsidiary being acquired by Malaga Aerospace, Defense and Electronics Systems S.A.;
- Change in name of OTO Melara S.p.A., and Whitehead Sistemi Subacquei to Finmeccanica S.p.A., and decision for AgustaWestland S.pA., Alenia Aermacchi S.p.A., Selex ES S.p.A.to continue to operate as subsidiaries of Finmeccanica S.p.A. due to corporate reorganization;
- Airbus DS Electronics and Border Security GmbH of Germany and Airbus DS Electronics and Border Security SAS, France established as subsidiaries of Airbus Defence and Space, GmbH, Germany and Airbus DS SAS, France, respectively, due to corporate reorganization; and
- Change in name from GE Aviation Hydraulic Actuation to Triumph Actuation Systems-UK, Ltd. due to acquisition.
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 Grants Extension on Validity Period of Export Licenses Involving Commodities That Transitioned from ITAR Control to EAR Control Due to ECR
Oct. 9, 2015: DDTC extended the validity period of export licenses, authorizations, and agreements covering items transitioning from the USML to the CCL pursuant to the ECRP as follows:
- Licenses or authorizations that would otherwise expire 2 years after the effective date of the revision of the relevant USML category will remain valid for 48 months from the date of issuance, or as otherwise indicated on the license or authorization, and
- Agreements containing transitioning items only, or both transitioning and non-transitioning items, that under the prior guidance would expire 2 years after the effective date of the revision will now remain valid for an additional year, until amendment, if required.
The updated guidance is on the DDTC website at http://www.pmddtc.state.gov/documents/IndustryNotice_ECRTransitionPlan.pdf.
DDTC Also Seeks Comments on ECR Changes involving USML Categories VI, VII, XIII, and XX
Oct. 9, 2015 – 80 Fed. Reg. 61138: In a notice coordinated with the Commerce Department, DDTC requested comments from the public for its review of the items transferred from USML Categories VI, VII, XIII, and XX to the CCL pursuant to the ECRP. (See coordinated announcement in Commerce Department section above.) DDTC especially requested comments about controlled emerging and new technologies that are not sufficiently described in existing categories; defense articles that have entered into normal commercial use since the prior revision, or for which commercial use is anticipated within the next 5 years; and drafting or other technical issues in the text of the control list. Deadline for comments is Dec. 8, 2015.
DEPARTMENT OF THE TREASURY
Quarterly List of Israel Boycott-Supporting Countries Published by Treasury
Oct. 29, 2015 – 80 Fed. Reg. 66621: The Treasury Department published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. The list remains unchanged since it was last published. It includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, UAE, and Yemen.
OFAC Announces that October 18, 2015 is “Adoption Day” for the JCPOA, As Participating Countries Prepare to Implement the Reduction in Sanctions Against Iran in Exchange for a Reduction in Iran’s Nuclear Program
Oct. 18, 2015: The Office of Foreign Assets Control (OFAC) issued a statement noting that October 18, 2015 marked “Adoption Day,” the day on which the JCPOA became effective and participants began to prepare for implementation of their JCPOA commitments. U.S. sanctions remain unchanged from their status before Adoption Day. Actual implementation of the JCPOA will occur only on “Implementation Day,” which will occur, assuming it ever does, only once the IAEA certifies that Iran has taken sufficient steps to implement its commitments under the JCPOA to cease nuclear proliferation activities. New FAQs relating to “Adoption Day” are on the OFAC website at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_adoption_faqs_20151018.pdf.
OFAC Issues Guidance Cautioning Parties on the Use of “False Hit Lists,” Advising that Such Lists Can Inadvertently Lead to Violations of OFAC Rules as Sanctions on Parties Change Over Time
Oct. 21, 2015: OFAC posted guidance regarding the use and maintenance of “false hit lists” that are maintained by some exporters to reduce the volume of sanction screening-related matches that they have determined do not apply to the persons of the same name who are involved in their transactions. The guidance is on the OFAC website at http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Documents/false_hit.pdf.
OFAC Advises that NON-U.S. PERSONS Can Provide Certain Goods and Services to Diplomatic Missions of the Government of Iran without Becoming Subject to U.S. Law, but U.S. Persons May Not Engage in Such Activities
Oct. 22, 2015: OFAC posted a new FAQ on the provision of goods and services by non-U.S. persons for the conduct of the official business of the diplomatic missions of the Government of Iran located outside the United States or for the personal use of the employees of the missions. A link to this FAQ is at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#diplomatic.
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 clients 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
Sep. 13, 2015 – 80 Fed. Reg. 61358 and 61359: BIS issued 10-year denial orders against Rex Gene Maralit and Wilfredo Maralit based on their convictions of violating the Arms Export Control Act (AECA, 22 USC 2778) by exporting numerous military-style firearms, including high-capacity magazines and other accessories, to the Philippines, where they were re-exported to other countries. The two brothers are currently in federal prison serving 3-year sentences. (See more information about these cases in March 2015 Regulatory Update.)
FINES AND PENALTIES
Sep. 25, 2015: Vinmar International, Ltd. (“International”) and Vinmar Overseas Ltd. (“Overseas”), both foreign concerns doing business in Texas, agreed to pay civil fines to settle charges by BIS that they had violated the Antiboycott Regulations (EAR Part 760) by furnishing information about business relationships with boycotted persons or blacklisted persons and failing to report the receipt of requests to engage in a restrictive trade practice or foreign boycott friendly to the U.S. International agreed to pay $19,800 to settle charges of 7 violations involving transactions with Lebanon, Libya, Oman, UAE, and Yemen. Overseas agreed to pay $41,400 for 13 violations involving transactions with Lebanon, Qatar, Syria, and UAE.
Oct. 9, 2015: Kirby Santos of the Republic of the Philippines pleaded guilty in U.S. District Court in New Jersey to a charge of conspiracy to violate the AECA and U.S. anti-smuggling laws. According to the criminal complaint, Santos arranged for suppliers to ship firearms parts to co-conspirators in the U.S. to make the sales appear domestic. The co-conspirators then shipped them to the Philippines in packages whose contents were falsely identified. In this manner Santos purchased and directed the illegal export of more than $200,000 worth of defense articles over a period of almost 5 years. One co-conspirator, Abelardo Delmundo, of Toms River, NJ pleaded guilty to his role in the conspiracy in April 2015.
Oct. 23, 2015: Mozaffar Khazaee, a dual citizen of the U.S. and Iran, formerly of Manchester, CT was sentenced in U.S. District Court in Connecticut to 97 months in prison and a $50,000 fine based on his plea of guilty to charges violating the AECA by attempting to send to Iran highly sensitive export controlled materials related to the Joint Strike Force Program, the F-22 Raptor, and numerous other U.S. military engine programs, including the V-22 Osprey, the C130J Hercules, and the Global Hawk. Khazaee, who had a Ph.D. in mechanical engineering, had stolen the information while he was employed at U.S. defense contractors Pratt & Whitney, General Electric, and Rolls Royce. (See additional details of this case in February 2015 Regulatory Update.)
Oct. 26, 2015: Alexander Posobilov, Shavkat Abdullaev, and Anastasia Diatlova were convicted in federal court in Brooklyn, NY of conspiring to export, and illegally exporting, controlled microprocessors and other technology to Russia. All were employees of Arc Electronics Inc., of Houston, TX. The illegally exported items allegedly have applications in military systems, including radar and surveillance systems, missile guidance systems, and detonation triggers, many of which are not produced in Russia. The president of Arc, Alexander Fishenko, pleaded guilty to related charges in September 2015. (See details in September 2015 Regulatory Update.)