An Update from BIS Update 2008
10/02/08 10:24 PM
The Department of Commerce's
Bureau of Industry and Security (BIS) held its annual update
conference in Washington, DC from September 29 - October 1, 2008.
Global Trade Expertise were there and here is a short summary of
key highlights from the event:
- BIS videotaped all of the sessions and plans to post the videos on their website in about 4 weeks.
- BIS announced five regulatory initiatives: (1) Expanding the Entity List; (2) Comprehensive Review of the Commerce Control List; (3) Revisions to the Encryption Regulations; (4) Revised De Minimis Regulations; and (5) a proposed rule will be published next week outlining the Intra-Company Transfer License Exception (ICT), for which a 45-day comment period will follow.
- BIS has expanded the foreign availability criteria beyond national security controls.
- Based on the representations by BIS, the Intra-Company Transfer License Exception (ICT) will require prior approval, which will be similar to the license application process; periodic reporting will be required; and only certain technology for deemed exports will be covered by the ICT license exception.
BIS Announces Five Regulatory Changes
10/02/08 10:14 PM
On October 1, 2008, the Department
of Commerce's Bureau of Industry and Security (BIS) announced five
regulatory updates:
- Proposed rule to amend the Export Administration Regulations (EAR) to establish a new license exception entitled "Intra-Company Transfer (ICT)." (To be published in the Federal Register)
- Interim final rule to amend the EAR to make the treatment of encryption items more consistent with the treatment of other items subject to the EAR. (To be published in the Federal Register)
- Final rule to revise the EAR to implement changes agreed upon in the December 2007 Wassenaar Arrangement Plenary Meeting and the provisions regarding solar cells agreed upon in the December 2006 Plenary Meeting. (To be published in the Federal Register)
- Final rule to amend the EAR as a result of a systematic review of the Commerce Control List. (To be published in the Federal Register)
- Interim rule to amend the EAR to change the de minimis calculation for foreign produced hardware that is bundled with U.S.-origin software. (Published in today’s Federal Register)
BIS Publishes Update 2008 Plenary Remarks
09/30/08 08:55 PM
On September 30, 2008, the
Department of Commerce's Bureau of Industry and Security (BIS)
published the Plenary Remarks of Assistant Secretary Christopher R.
Wall at the 2008 BIS Update Conference in Washington, D.C.
here.
DDTC Increases Registration Fees and Changes Registration Renewal Period
09/26/08 08:37 PM
On September 25, 2008, the U.S.
Department of State's Directorate of Defense Trade Controls (DDTC)
published a final rule
amending the
International Traffic in Arms (ITAR) to increase registration fees,
change the registration renewal period, and make other minor
administrative changes. The DDTC states that to align the
registration fees with the cost of licensing, compliance, and other
related activities, the DDTC is adopting a three-tier registration
fee schedule.
The first tier fee structure is set at $2,250 per year for registrants who are renewing a registration, required to register by law, and for whom the DDTC has not yet reviewed, adjudicated or issued a response to any application during the twelve-month period ending 90 days prior to the expiration of their current registration.
The second tier is for registrants for whom DDTC has reviewed, adjudicated or issued a response to between one and ten applications during the twelve-month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a set fee of $2,750 per year.
The third tier is for registrants for whom DDTC has reviewed, adjudicated or issued a response more than ten applications during the twelve-month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a set fee of $2,750 per year plus an additional fee that is based on multiplying $250 by the number of applications for which DDTC has reviewed, adjudicated or issued a response during the twelve months ending 90 days prior to the expiration of the current registration.
The first tier fee structure is set at $2,250 per year for registrants who are renewing a registration, required to register by law, and for whom the DDTC has not yet reviewed, adjudicated or issued a response to any application during the twelve-month period ending 90 days prior to the expiration of their current registration.
The second tier is for registrants for whom DDTC has reviewed, adjudicated or issued a response to between one and ten applications during the twelve-month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a set fee of $2,750 per year.
The third tier is for registrants for whom DDTC has reviewed, adjudicated or issued a response more than ten applications during the twelve-month period ending 90 days prior to the expiration of their current registration. For this tier, registrants will pay a set fee of $2,750 per year plus an additional fee that is based on multiplying $250 by the number of applications for which DDTC has reviewed, adjudicated or issued a response during the twelve months ending 90 days prior to the expiration of the current registration.
State Amends ITAR to Terminate Arms Sanctions Against Rwanda
09/26/08 08:24 PM
On September 25, 2008, the U.S.
Department of State published a final rule
amending the
International Traffic in Arms Regulations (ITAR) with respect to
Rwanda. Through the final rule, the State Department is removing
Rwanda from its regulations on prohibited exports and sales to
certain countries as a result of United Nations Security Council
(UNSC) Resolution 1823, which terminated remaining arms sanctions
against Rwanda.
BIS to Post Commodity Classificaton Information Based on Exporters' Request
09/26/08 08:17 AM
On September 25, 2008,
the U.S. Department of
Commerce’s Bureau of Industry and Security (BIS)
announced that it will provide companies the
opportunity to have their Commodity Classification
information made
accessible via
the BIS website.
If a company has, or plans to have, Commodity Classification information or an export control point of contact available on their website, and would like this information to be accessible via the BIS website, they are asked to contact CommodityClassification@bis.doc.gov. In the e-mail, the company must provide the following information, which then will be posted on the BIS website:
1) Company name, 2) General description of the products/services, 3) Commodity classification information website address, and 4) Export control point of contact.
If a company has, or plans to have, Commodity Classification information or an export control point of contact available on their website, and would like this information to be accessible via the BIS website, they are asked to contact CommodityClassification@bis.doc.gov. In the e-mail, the company must provide the following information, which then will be posted on the BIS website:
1) Company name, 2) General description of the products/services, 3) Commodity classification information website address, and 4) Export control point of contact.
Physicist Charged with Arms Export and Foreign Corrupt Practices Act Violations
09/25/08 07:21 PM
On September 24, 2008, Shu
Quan-Sheng, a PhD physicist, was arrested in Newport News, VA on charges of
illegally exporting space launch technical data and services to
China and offering bribes to Chinese government officials. Dr. Shu,
born in China and a naturalized U.S. citizen, is the President,
Secretary and Treasurer of AMAC International (AMAC), a Newport
News high-tech company that also has an office in Beijing,
China.
Dr. Shu is charged with unlawfully exporting a defense service to foreign persons without obtaining permission, in violation of the Arms Export Control Act (AECA), and bribing, offering a bribe, and attempting to bribe a foreign government official, in violation of the Foreign Corrupt Practices Act (FCPA).
The criminal complaint states that in January 2003, Dr. Shu provided technical assistance and foreign technology acquisition expertise to several Chinese government entities involved in the building of a space launch facility in Hainan, China. The facility is designated to house liquid-propelled heavy payload launch vehicles designed to send space stations and satellites into orbit, as well as provide support for manned space flight and future lunar missions.
Specifically, the complaint charges that Dr. Shu has participated in China’s systematic effort to upgrade their space exploitation and satellite technology capabilities by providing technical expertise and foreign technology acquisition in the fields of cryogenic pumps, valves, transfer lines and refrigeration equipment, elements necessary for the use of liquefied hydrogen in the Hainan facility. Dr. Shu is also said to have been instrumental in arranging for various Chinese officials to visit various European space launch facilities and hydrogen / storage facilities.
There were several Chinese government entities involved in building of the space launch facility, including the People’s Liberation Army’s General Armaments Department and the 101st Research Institute, which is overseen by the Commission of Science Technology and Industry for the National Defense as one of the research institutions that makes up the China Academy of Launch Vehicle Technology. Another entity involved is the Beijing Special Engineering Design Research Institute, which is responsible for the procurement of cryogenic liquid storage tanks for the Hainan launch facility.
The complaint also charges Dr. Shu with violations of the FCPA. Dr. Shu is said to have offered bribes to the 101st Research Institute government officials to induce the award of the hydrogen liquefier contract to a French company Dr. Shu represented. The value of the contract is believed to be around $4 million. According to the complaint, in December 2003, Dr. Shu and his company entered into an agreement with the French company establishing AMAC and positioning Dr. Shu as the French company’s representative in China. The agreement provided that AMAC was entitled to a success fee of ten to fifteen percent.
The maximum penalty for each AECA violation is 10 years imprisonment. Violation of FCPA carries a 5-year sentence.
Dr. Shu is charged with unlawfully exporting a defense service to foreign persons without obtaining permission, in violation of the Arms Export Control Act (AECA), and bribing, offering a bribe, and attempting to bribe a foreign government official, in violation of the Foreign Corrupt Practices Act (FCPA).
The criminal complaint states that in January 2003, Dr. Shu provided technical assistance and foreign technology acquisition expertise to several Chinese government entities involved in the building of a space launch facility in Hainan, China. The facility is designated to house liquid-propelled heavy payload launch vehicles designed to send space stations and satellites into orbit, as well as provide support for manned space flight and future lunar missions.
Specifically, the complaint charges that Dr. Shu has participated in China’s systematic effort to upgrade their space exploitation and satellite technology capabilities by providing technical expertise and foreign technology acquisition in the fields of cryogenic pumps, valves, transfer lines and refrigeration equipment, elements necessary for the use of liquefied hydrogen in the Hainan facility. Dr. Shu is also said to have been instrumental in arranging for various Chinese officials to visit various European space launch facilities and hydrogen / storage facilities.
There were several Chinese government entities involved in building of the space launch facility, including the People’s Liberation Army’s General Armaments Department and the 101st Research Institute, which is overseen by the Commission of Science Technology and Industry for the National Defense as one of the research institutions that makes up the China Academy of Launch Vehicle Technology. Another entity involved is the Beijing Special Engineering Design Research Institute, which is responsible for the procurement of cryogenic liquid storage tanks for the Hainan launch facility.
The complaint also charges Dr. Shu with violations of the FCPA. Dr. Shu is said to have offered bribes to the 101st Research Institute government officials to induce the award of the hydrogen liquefier contract to a French company Dr. Shu represented. The value of the contract is believed to be around $4 million. According to the complaint, in December 2003, Dr. Shu and his company entered into an agreement with the French company establishing AMAC and positioning Dr. Shu as the French company’s representative in China. The agreement provided that AMAC was entitled to a success fee of ten to fifteen percent.
The maximum penalty for each AECA violation is 10 years imprisonment. Violation of FCPA carries a 5-year sentence.
BIS Issues Guidance on Illicit Diversion of Goods to Iran
09/25/08 06:34 AM
Following the disbanding of an
illicit Iranian global procurement scheme, on September 24, 2008,
the U.S. Department of Commerce’s Bureau of Industry and security
(BIS) issued guidance on actions exporters can take to
prevent illegal diversion of items to support Iran’s nuclear
weapons or ballistic missile programs.
Iran is currently trying to procure items for its uranium enrichment centrifuge program. Iran has admitted to evading international sanctions to procure sensitive items that can contribute to its weapons of mass destruction (WMD) programs. Specifically, Iranian entities form front companies in other countries for the sole purpose of exporting items to Iran that can be used in the nuclear and missile programs.
BIS recommends that the U.S. exporters take the following steps to prevent illicit export to Iran (more detail on the BIS Iranian Guidance website):
All exports to Iran are subject to the Export Administration Regulations (EAR) and the Department of the Treasury’s Iranian Transaction Regulations (ITR). Exports must be authorized by the Treasury’s Office of Foreign Assets Control (OFAC) prior to exporting to Iran. If ORAC authorizes such an export or reexport, no separate authorization from BIS is necessary.
Iran is currently trying to procure items for its uranium enrichment centrifuge program. Iran has admitted to evading international sanctions to procure sensitive items that can contribute to its weapons of mass destruction (WMD) programs. Specifically, Iranian entities form front companies in other countries for the sole purpose of exporting items to Iran that can be used in the nuclear and missile programs.
BIS recommends that the U.S. exporters take the following steps to prevent illicit export to Iran (more detail on the BIS Iranian Guidance website):
- Know your consumer;
- Understand “Red Flag” indicators;
- Be cautious of customers operating in transshipment countries or free trade zones;
- Screen parties to a transaction using the U.S. Government “Lists to Check” on BIS website;
- Contact BIS if something does not seem right about the transaction or if you suspect a shipment may have been diverted to Iran;
- Subscribe to the BIS listserv and to the Department of the Treasury, Office of Foreign Assets Control’s (OFAC) service to receive notifications about changes to the Entity List and List of Specially Designation Nationals and Blocked Persons.
All exports to Iran are subject to the Export Administration Regulations (EAR) and the Department of the Treasury’s Iranian Transaction Regulations (ITR). Exports must be authorized by the Treasury’s Office of Foreign Assets Control (OFAC) prior to exporting to Iran. If ORAC authorizes such an export or reexport, no separate authorization from BIS is necessary.
BIS Announces ETRAC Members
09/24/08 09:03 PM
On September 23, 2008, the
Department of Commerce's Bureau of Industry and Security (BIS)
announced the membership of the Emerging Technology and Research
Advisory Committee (ETRAC) here.
ETRAC Members:
ETRAC Members:
| Pamela Abshire, University of
Maryland |
Maja Mataric, University of
Southern California |
| Jeffrey Ashe, General Electric
Global Research |
Richard McCullough, Carnegie
Mellon University |
| Robert Breault, Breault Research
Organization, Inc. |
Steven Patterson, Lawrence
Livermore National Lab. |
| Claude Canizares, Massachusetts
Institute of Technology |
Carl A. Picconatto, MITRE
Experimental Laboratory |
| A. Stephen Dahms, Alfred E. Mann
Foundation |
Jeffrey Puschell, Raytheon Space
& Airborne Systems |
| Charbel Farhat, Stanford
University |
Jeffrey Reed, Virginia
Tech |
| Bob Gleichauf, Cisco
Systems |
Michael Reiter, University of
North Carolina |
| Harry Kington, Honeywell
Aerospace |
Samuel Stanley, Jr, Washington
University |
| Gerald Kulcinski, University of
Wisconsin |
Marlin Thomas, Air Force Institute
of Technology |
| Brooks Keel, Louisiana State
University |
Thomas E. Tierney IV, Los Alamos
National Laboratory |
| Nikolai Leung, Qualcomm,
Inc. |
James Tour, Rice
University |
| Seth R. Marder, Georgia Institute of Technology |
| |
DDTC Publishes Updated Guidance on Licensing of Foreign Persons
09/22/08 07:45 PM
Iranian Ring Charged with Procuring IED Components Iranian Ring Charged with Procuring IED Components Iranian Ring Charged with Procuring IED Components Iranian Ring Charged with Procuring IED Components
09/18/08 08:23 AM
On September 17, 2008, the
Department of Justice (DOJ) announced that a federal grand jury in
Miami, Florida, has returned a Superseding
Indictment charging sixteen foreign nationals
and corporations in connection with their participation in
conspiracy to export U.S.-manufactured commodities to prohibited
entities and to Iran.
The Indictment includes charges of conspiracy, violations of the International Emergency Economic Powers Act (IEEPA) and the United States Iran Embargo, and making false statements to federal agencies in connection with the export of thousands of U.S. goods to Iran. Specifically, the Indictment alleges that the defendants purchased, and then caused the export of U.S. dual-use goods to ultimate buyers in Iran through middle countries, including the United Arab Emirates, Malaysia, England, Germany, and Singapore. Dual-use commodities are those that have commercial application, but could potentially be used to further the military or nuclear programs of other nations and thus could be detrimental to the foreign policy or national security of the United States.
The goods at issue are controlled by the Export Administration Regulations (EAR) for missile technology, national security and antiterrorism reasons as well as under the International Traffic in Arms Regulations (ITAR). In this case, the Indictment alleges that the defendants exported 120 field-programmable gate arrays, over 5,000 integrated circuits of varying types, around 345 Global Positioning Systems (GPS), 12,000 Microchip brand micro-controllers, and a Field Communication. These commodities have potential military applications, including as components in construction of improvised explosive devises (IEDs).
The charges announced are the result of a criminal investigation that was initiated in July 2006. Led by the Commerce Department, the investigation also included the efforts of the Departments of Homeland Security, Defense, State and Treasury.
As a result of investigation, the Commerce Department’s Bureau of Industry and Security (BIS) issued a Final Rule in the Federal Register announcing 75 additions to its Entity List because of their involvement in this illegal global procurement network for the benefit of the Iranian Government, and for their relationship to the Mayrow General Trading, one of the procurement front companies.
The Indictment includes charges of conspiracy, violations of the International Emergency Economic Powers Act (IEEPA) and the United States Iran Embargo, and making false statements to federal agencies in connection with the export of thousands of U.S. goods to Iran. Specifically, the Indictment alleges that the defendants purchased, and then caused the export of U.S. dual-use goods to ultimate buyers in Iran through middle countries, including the United Arab Emirates, Malaysia, England, Germany, and Singapore. Dual-use commodities are those that have commercial application, but could potentially be used to further the military or nuclear programs of other nations and thus could be detrimental to the foreign policy or national security of the United States.
The goods at issue are controlled by the Export Administration Regulations (EAR) for missile technology, national security and antiterrorism reasons as well as under the International Traffic in Arms Regulations (ITAR). In this case, the Indictment alleges that the defendants exported 120 field-programmable gate arrays, over 5,000 integrated circuits of varying types, around 345 Global Positioning Systems (GPS), 12,000 Microchip brand micro-controllers, and a Field Communication. These commodities have potential military applications, including as components in construction of improvised explosive devises (IEDs).
The charges announced are the result of a criminal investigation that was initiated in July 2006. Led by the Commerce Department, the investigation also included the efforts of the Departments of Homeland Security, Defense, State and Treasury.
As a result of investigation, the Commerce Department’s Bureau of Industry and Security (BIS) issued a Final Rule in the Federal Register announcing 75 additions to its Entity List because of their involvement in this illegal global procurement network for the benefit of the Iranian Government, and for their relationship to the Mayrow General Trading, one of the procurement front companies.
Defense Trade Advisory Group to Meet October 21, 2008
09/10/08 07:35 PM
On September 9, 2008, the
Department of State published a Notice of Meeting for the Defense Trade Advisory
Group (DTAG). The DTAG will meet on October 21, 2008 from 9:30 a.m.
- 1 p.m. at the U.S. Department of State, Harry S. Truman Building,
Washington, D.C. Entry and registration will begin at 8:45
a.m.
As access to the Department of State facilities is restricted, persons wishing to attend the meeting must notify the DTAG Executive Secretariat by COB, Thursday, October 14, 2008.
As access to the Department of State facilities is restricted, persons wishing to attend the meeting must notify the DTAG Executive Secretariat by COB, Thursday, October 14, 2008.
BIS Requests Comments on Foreign-Based Policy Export Controls
09/09/08 09:07 PM
On September 8, 2008, the
Department of Commerce's Bureau of Industry and Security (BIS)
published a notice in the Federal Register requesting
comments on foreign-based policy export controls. BIS is reviewing
the foreign policy-based export controls in the Export
Administration Regulations (EAR) to determine whether they should
be modified, rescinded, or extended. BIS would like to receive
comments on how existing foreign policy-based export controls have
affected exporters and the general public.
In addition, BIS is particularly interested in comments regarding the Entity List (Supplement No. 4 to Part 744 of the EAR), including comments on its usefulness and format, as well as the specific entities listed and the licensing policies and requirements for each.
Comments must be received by October 8, 2008.
In addition, BIS is particularly interested in comments regarding the Entity List (Supplement No. 4 to Part 744 of the EAR), including comments on its usefulness and format, as well as the specific entities listed and the licensing policies and requirements for each.
Comments must be received by October 8, 2008.
Retired Professor Convicted of Arms Export Violations
09/05/08 09:44 PM
On September 3, 2008, Dr. J. Reece
Roth, a retired University of Tennessee (UT) professor, was
found guilty of conspiracy to violate the Arms
Export Control Act (AECA) and fifteen separate violations of
illegally exporting sensitive information relating to a U.S. Air
Force research and development contract. The information concerned
plasma technology to be used in the construction of drones under
the U.S. Air Force contract.
The AECA prohibits transfer of defense-related materials, including technical data, to a foreign national without permission. Dr. Roth was convicted of conspiring with Atmospheric Glow Technology, Inc. (AGT), a Knoxville, Tennessee, technology company, with unlawfully transferring fifteen different "defense articles" to a graduate student, a national of China, in violation of the AECA. As part of a plea agreement, AGT recently pleaded guilty to 10 counts of exporting defense-related materials. Sentencing in that case in still pending.
Roth testified last week that he didn’t break the law because the prosecution had not proved that the research was successful, reports the Associated Press. "My understanding was that it only applied to things that worked, and we had not shown that. We had a lot of work to do," Roth testified.
Roth was also accused of taking reports and related studies in his laptop to China during a lecture tour in 2006, and having one report e-mailed to him there through a Chinese professor's Internet connection.
The government seized materials from Roth's office and took his laptop from him at the airport when he returned from the trip. Prosecutors claimed he violated the export control act simply by taking the laptop with sensitive materials outside the country even if, as forensic evidence showed, he didn't open all of those files while he was in China.
"Today's guilty verdict should serve as a warning to anyone who knowingly discloses restricted U.S. military data to foreign nationals," said Patrick Rowan, Acting Assistant Attorney General for National Security. United States Attorney Russ Dedrick said, "Our scientific and educational communities must take precautions to insure that technology and research are protected, when required, from disclosure to foreign governments."
The maximum punishment for the conspiracy to violate AECA is five years imprisonment and a fine of $250,000. The maximum penalty for each of the AECA offenses is 10 years imprisonment, a criminal fine of $1,000,000, and a mandatory special assessment of $100 for each offense. Dr. Roth's sentencing has been set for January 7, 2009, in United States District Court in Knoxville.
The AECA prohibits transfer of defense-related materials, including technical data, to a foreign national without permission. Dr. Roth was convicted of conspiring with Atmospheric Glow Technology, Inc. (AGT), a Knoxville, Tennessee, technology company, with unlawfully transferring fifteen different "defense articles" to a graduate student, a national of China, in violation of the AECA. As part of a plea agreement, AGT recently pleaded guilty to 10 counts of exporting defense-related materials. Sentencing in that case in still pending.
Roth testified last week that he didn’t break the law because the prosecution had not proved that the research was successful, reports the Associated Press. "My understanding was that it only applied to things that worked, and we had not shown that. We had a lot of work to do," Roth testified.
Roth was also accused of taking reports and related studies in his laptop to China during a lecture tour in 2006, and having one report e-mailed to him there through a Chinese professor's Internet connection.
The government seized materials from Roth's office and took his laptop from him at the airport when he returned from the trip. Prosecutors claimed he violated the export control act simply by taking the laptop with sensitive materials outside the country even if, as forensic evidence showed, he didn't open all of those files while he was in China.
"Today's guilty verdict should serve as a warning to anyone who knowingly discloses restricted U.S. military data to foreign nationals," said Patrick Rowan, Acting Assistant Attorney General for National Security. United States Attorney Russ Dedrick said, "Our scientific and educational communities must take precautions to insure that technology and research are protected, when required, from disclosure to foreign governments."
The maximum punishment for the conspiracy to violate AECA is five years imprisonment and a fine of $250,000. The maximum penalty for each of the AECA offenses is 10 years imprisonment, a criminal fine of $1,000,000, and a mandatory special assessment of $100 for each offense. Dr. Roth's sentencing has been set for January 7, 2009, in United States District Court in Knoxville.
BIS Initiates Foreign Availability Assessment Process for Certain Thermal Imaging Cameras in China
09/04/08 06:29 PM
On September 2, 2008, the U.S.
Department of Commerce’s Bureau of Industry and Security
(BIS) announced a 90-day study to assess the
foreign availability of uncooled thermal imaging cameras
incorporating microbolometer focal plane arrays in China.
BIS was required to initiate such assessment after the Sensors and Instrumentation Technical Advisory Committee (SITAC) certified a petition asserting that uncooled thermal imaging cameras were widely availably in China, thus rendering U.S. export controls ineffective. In connection with the petition, SITAC has issued a report detailing the foreign availability of the uncooled thermal imaging cameras in controlled countries.
Part 768 of the Export Administration Regulations (EAR) sets out the procedure associated foreign availability assessment. The Secretary of Commerce has 90 days from the date of initiation to determine whether the thermal imaging cameras are available in China in sufficient quantity, and whether they are of comparable quality to render current U.S. export controls ineffective.
To develop its own recommendation for the Secretary of Commerce consideration, BIS is also seeking information from the public and other U.S. Government agencies on the availability of these cameras in China. Comments from the public must be received by September 17, 2008. Once the Secretary completes the review process, both SITAC and Congress will be notified of the final assessment determination.
If foreign availability is determined, the Department of Commerce may remove the license requirements, unless the President determines that this would be detrimental to national security. The Secretary may also recommend to the President that negotiations be undertaken to eliminate the foreign availability.
The Federal Register notice details methods by which public may submit comments on the matter.
BIS was required to initiate such assessment after the Sensors and Instrumentation Technical Advisory Committee (SITAC) certified a petition asserting that uncooled thermal imaging cameras were widely availably in China, thus rendering U.S. export controls ineffective. In connection with the petition, SITAC has issued a report detailing the foreign availability of the uncooled thermal imaging cameras in controlled countries.
Part 768 of the Export Administration Regulations (EAR) sets out the procedure associated foreign availability assessment. The Secretary of Commerce has 90 days from the date of initiation to determine whether the thermal imaging cameras are available in China in sufficient quantity, and whether they are of comparable quality to render current U.S. export controls ineffective.
To develop its own recommendation for the Secretary of Commerce consideration, BIS is also seeking information from the public and other U.S. Government agencies on the availability of these cameras in China. Comments from the public must be received by September 17, 2008. Once the Secretary completes the review process, both SITAC and Congress will be notified of the final assessment determination.
If foreign availability is determined, the Department of Commerce may remove the license requirements, unless the President determines that this would be detrimental to national security. The Secretary may also recommend to the President that negotiations be undertaken to eliminate the foreign availability.
The Federal Register notice details methods by which public may submit comments on the matter.
Trial Begins for Retired Professor Charged with ITAR Violations
08/25/08 10:26 PM
On August 25, 2008, J. Reece Roth,
a retired University of Tennessee (UT) physics professor went on
trial charged with violating the Arms Export Control Act (AECA). As
reported by USA Today, prosecutors allege Roth violated
AECA by allowing two UT students, one from China and another from
Iran, unrestricted access to information about the technology used
in an U.S. Air Force project. The professor is also said to have
taken documents relating to that project on his trip to China in
2006.
The Air Force contract involved developing lightweight flight control system technology for use in unmanned air vehicles, otherwise known as drones. According to USA Today, Atmospheric Glow Technologies (AGT), with Roth as a consultant and subcontractor, promised a control system that would use plasma, rather than mechanical flaps, to lift the aircraft. Roth, an expert in plasma technology, was one of the founders of AGT, but later the company went public. The company specialized in use of plasma technology that was developed by UT.
AECA bars the transfer of sensitive information to foreign nationals without permission. Roth came under investigation in 2006 when UT export-control officials discovered his use of foreign nationals in his UT lab on the military contract. Government agents searched his office and seized his laptop computer when he returned from a lecture trip to China in May of 2006.
On August 20, 2008, AGT pleaded guilty to 10 counts of AECA violations from late 2004 to May 2006, reports the Knoxville News Sentinel. AGT, which is in bankruptcy, still faces probation and a maximum fine of $1 million for each AECA violation. Knoxville News Sentinel reports that, as part of the plea agreement, AGT’s board of directors now admits company officials knew Roth had allowed the China national access to information on the Air Force project without notifying the Department of Defense.
Daily updates on the trial can be found at www.knoxnews.com.
The Air Force contract involved developing lightweight flight control system technology for use in unmanned air vehicles, otherwise known as drones. According to USA Today, Atmospheric Glow Technologies (AGT), with Roth as a consultant and subcontractor, promised a control system that would use plasma, rather than mechanical flaps, to lift the aircraft. Roth, an expert in plasma technology, was one of the founders of AGT, but later the company went public. The company specialized in use of plasma technology that was developed by UT.
AECA bars the transfer of sensitive information to foreign nationals without permission. Roth came under investigation in 2006 when UT export-control officials discovered his use of foreign nationals in his UT lab on the military contract. Government agents searched his office and seized his laptop computer when he returned from a lecture trip to China in May of 2006.
On August 20, 2008, AGT pleaded guilty to 10 counts of AECA violations from late 2004 to May 2006, reports the Knoxville News Sentinel. AGT, which is in bankruptcy, still faces probation and a maximum fine of $1 million for each AECA violation. Knoxville News Sentinel reports that, as part of the plea agreement, AGT’s board of directors now admits company officials knew Roth had allowed the China national access to information on the Air Force project without notifying the Department of Defense.
Daily updates on the trial can be found at www.knoxnews.com.
BIS Issues Rule for Expanding Entity List
08/23/08 12:59 PM
On August 21, 2008, Bureau of
Industry and Security (BIS) issued a final rule
that expands the
criteria for adding parties to the Entity List. The BIS Entity List
lists parties whose involvement in a transaction can require a
license under the Export Administration Regulations (EAR). The list
specifies the license requirements that apply to each listed
entity.
Effective immediately, the new rule authorizes imposition of foreign policy export and reexport license requirements, limiting the availability of license exceptions, and setting license application review policy for exports and reexports. BIS may take such actions “if there is reasonable cause to believe, based on specific and articulable facts, that the entity has been involved, is involved, or poses a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States.”
Under the rule, the activities at issue do not have to be subject to EAR in order for a party to be placed on the Entity List. BIS lists five examples of conduct that could be found detrimental to the identified U.S. interests:
Supporting persons engaged in acts of terror;
Actions that could strengthen military or terrorism capabilities of governments that have been designated by the Secretary of State as repeatedly providing support for acts of international terrorism;
Dealing or assisting dealing in conventional weapons in a way contrary to the U.S. national security or foreign policy interest;
Preventing accomplishment of an end use check conducted by BIS or the Directorate of Defense Trade Controls; and
Engaging in conduct that poses a risk of violating the EAR when such conduct raises sufficient concern that prior review of exports or reexports enhances BIS’s ability to prevent EAR violations.
The rule applies to foreign parties only, and will not be used to add U.S. persons on the Entity List. Thus, a foreign party could be added to the Entity List if specific and articulable facts provide that it has been engaged in the type of conduct identified.
The new rule also amends the EAR to include a procedure for addressing requests of a listed parties to be removed from the list or have their listing modified.
Effective immediately, the new rule authorizes imposition of foreign policy export and reexport license requirements, limiting the availability of license exceptions, and setting license application review policy for exports and reexports. BIS may take such actions “if there is reasonable cause to believe, based on specific and articulable facts, that the entity has been involved, is involved, or poses a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States.”
Under the rule, the activities at issue do not have to be subject to EAR in order for a party to be placed on the Entity List. BIS lists five examples of conduct that could be found detrimental to the identified U.S. interests:
Supporting persons engaged in acts of terror;
Actions that could strengthen military or terrorism capabilities of governments that have been designated by the Secretary of State as repeatedly providing support for acts of international terrorism;
Dealing or assisting dealing in conventional weapons in a way contrary to the U.S. national security or foreign policy interest;
Preventing accomplishment of an end use check conducted by BIS or the Directorate of Defense Trade Controls; and
Engaging in conduct that poses a risk of violating the EAR when such conduct raises sufficient concern that prior review of exports or reexports enhances BIS’s ability to prevent EAR violations.
The rule applies to foreign parties only, and will not be used to add U.S. persons on the Entity List. Thus, a foreign party could be added to the Entity List if specific and articulable facts provide that it has been engaged in the type of conduct identified.
The new rule also amends the EAR to include a procedure for addressing requests of a listed parties to be removed from the list or have their listing modified.
DDTC Publishes Notice & FAQs on License Support Documentation
08/13/08 01:22 PM
On August 7, 2008, the State
Department's Directorate of Defense Trade Controls (DDTC) published
an updated notice on license support documentation.
In the notice, DDTC states:
The FAQ questions can be found here.The purpose of this requirement is to confirm the legitimacy of the transaction, including the roles and responsibilities of all the parties. DTCL has received with increasing frequency supporting documentation that calls into question whether the applicants are in a position to fulfill their responsibilities as registered exporters and, in fact, whether anyone at the companies could meet the obligations as empowered officials under Section 120.25. In these instances, the applications have been Returned Without Action advising the applicants of the ITAR requirements. At this time, DTCL finds it prudent to iterate to exporters of defense articles the fundamental ITAR requirement for supporting documentation.
BIS Agenda for Next Six Months Outlined
08/07/08 10:18 PM
On July 30, 2008, Under Secretary
of Commerce Mario Mancuso delivered a keynote address to the
Washington International Trade Association entitled,
"Sprinting to the Finish - The BIS Agenda for
the Final Six Months."
Highlights of the agenda are:
Highlights of the agenda are:
- BIS will continue to focus on the areas of highest enforcement concern to the agency: nations of illicit trans-shipment concern, proliferators, and terrorists - with Iran being of particular concern. Reauthorization of the EAA is a priority for the agency.
- BIS will work to implement the dual-use directive signed by the President this past January and BIS hopes to make meaningful progress on the following regulatory issues: the intra-company transfer license exception, deemed exports, encryption, thermal imaging, foreign availability, and 17C.
- BIS will continue to support its current work and make a smooth transition to the new administration. BIS is committed to doing its best to attract the best and brightest to public service, better integrate its enforcement and policy functions, improving interagency engagement, upgrading its technology infrastructure and business processes over time, and better aligning its workforce to address BIS's highest priorities.
USPTO Publishes Notice Reminding Patent Filers of Export Controls
07/29/08 07:18 PM
On July 23, 2008, the United
States Patent and Trademark Office (USPTO) published
a notice in the Federal
Register regarding the scope of its foreign
filing licenses. Through the notice, USPTO reminds applicants and
registered patent practitioners that the export of subject matter
abroad pursuant to a license from the USPTO, such as a foreign
filing license, is limited to the purposes related to the filing of
foreign patent applications. The USPTO reminds applicants who are
considering exporting subject matter abroad for the preparation of
patent applications to be filed in the United States to contact the
Bureau of Industry and Security (BIS) of the Department of Commerce
for appropriate clearances.
In the notice, the USPTO states that it has become aware that a number of law firms or service provider companies located in foreign countries that are sending solicitations to U.S. registered patent practitioners offering their services in connection with the preparation of patent applications to be filed in the United States. The USPTO states that, "if an invention was made in the United States, technical data in the form of a patent application, or in any form, can only be exported for purposes related to the preparation, filing or possible filing and prosecution of a foreign patent application, after compliance with the EAR or following the appropriate USPTO foreign filing license procedure. See 37 CFR 5.11(c). A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States."
Finally, the USPTO states:
In the notice, the USPTO states that it has become aware that a number of law firms or service provider companies located in foreign countries that are sending solicitations to U.S. registered patent practitioners offering their services in connection with the preparation of patent applications to be filed in the United States. The USPTO states that, "if an invention was made in the United States, technical data in the form of a patent application, or in any form, can only be exported for purposes related to the preparation, filing or possible filing and prosecution of a foreign patent application, after compliance with the EAR or following the appropriate USPTO foreign filing license procedure. See 37 CFR 5.11(c). A foreign filing license from the USPTO does not authorize the exporting of subject matter abroad for the preparation of patent applications to be filed in the United States."
Finally, the USPTO states:
This notice does not change existing laws or regulations. Thus, while the notice is effective on July 23, 2008, this notice does not excuse or otherwise affect the legal consequence of a failure to comply with existing law or regulations that occurred prior to July 23, 2008.
BIS Announces Dates for Update 2008 Conference
07/24/08 05:24 PM
On July 24, 2008, the Bureau of
Industry and Security (BIS) announced the dates for its Update 2008
conference. Update 2008 will be held from September 29, 2008 -
October 1, 2008. Further information can be found
here and the agenda can be found
here.
BIS states:
BIS had posted information on how to express your interest in attending Update 2008 and will e-mail instructions on how to register on July 25, 2008. BIS states, "Since there was more interest than space available at the conference, those whose names are not drawn will be placed on a waiting list and notified of how to register as space becomes available." For those who receive the registration email, they must register by August 18th, or their spot will be given to those on the wait list.
BIS states:
Update activities will begin on Monday, September 29 featuring mini training sessions for those new to Update as well as an Exhibit Hall with industry and government exhibitors. The main conference will begin on Tuesday, September 30 and end on Wednesday, October 1. Please see the Agenda for conference details. A Program Description will be posted in the coming weeks.
BIS had posted information on how to express your interest in attending Update 2008 and will e-mail instructions on how to register on July 25, 2008. BIS states, "Since there was more interest than space available at the conference, those whose names are not drawn will be placed on a waiting list and notified of how to register as space becomes available." For those who receive the registration email, they must register by August 18th, or their spot will be given to those on the wait list.
Census Issues Mandatory AES Final Rule
06/04/08 01:21 PM
On June 2, 2008, the U.S. Census
Bureau (Census) issued a final rule requiring mandatory filing of
export information through the Automated Export System (AES) or
through AESDirect
for all shipments
where a Shipper's Export Declaration (SED) is required (an
announcement of the rule can be found here). The new rule substantially
revises Census' export regulations, significantly increases
penalties, and allows for greater enforcement by Bureau of Industry
and Security (BIS) and U.S. Immigration and Customs Enforcement
(ICE). Although the effective date for this rule is July 2, 2008,
the rule will not be implemented until September 30, 2008.
Census has posted mandatory AES frequently asked questions (FAQs) here and "A Quick Guide to Title 15, Part 30 Foreign Trade Regulations" here.
The final rule was issued following a three year dispute between Census and the Department of Homeland Security (DHS) involving the sharing of confidential export information with foreign governments and the Option 4 program, which allows export data to be filed up to 10 days following vessel departure. DHS had pushed for the sharing of certain export data with foreign governments for antiterrorism purposes and Census strongly opposed this. In addition, DHS sought to end the Option 4 program because it believed it created an avenue for illegal exports, while Census disagreed. In the end, Census maintained the confidentiality of export data that existed in its previous regulations and continued the moratorium on new users for the Option 4 program with the program only allowed for current users.
Key changes made by the new regulations are as follows:
Census has posted mandatory AES frequently asked questions (FAQs) here and "A Quick Guide to Title 15, Part 30 Foreign Trade Regulations" here.
The final rule was issued following a three year dispute between Census and the Department of Homeland Security (DHS) involving the sharing of confidential export information with foreign governments and the Option 4 program, which allows export data to be filed up to 10 days following vessel departure. DHS had pushed for the sharing of certain export data with foreign governments for antiterrorism purposes and Census strongly opposed this. In addition, DHS sought to end the Option 4 program because it believed it created an avenue for illegal exports, while Census disagreed. In the end, Census maintained the confidentiality of export data that existed in its previous regulations and continued the moratorium on new users for the Option 4 program with the program only allowed for current users.
Key changes made by the new regulations are as follows:
- The Foreign Trade Statistics Regulations are renamed, "Foreign Trade Regulations" (FTR);
- All export data must be filed electronically through AES -- no paper SEDs will be accepted after September 30, 2008;
- Electronic Export Information (EEI) is the term for data filed through AES and is the equivalent to the data in the SEDs;
- Increased civil penalties of a maximum of $1,100 per day of delinquency (but, not more than $10,000 per violation) for failures to file or delinquent filings; a maximum of $10,000 per violation for false filings or misleading information in AES, in addition to other penalties; and civil forfeiture of any property involved in a violation of the FTR;
- Criminal penalties of a maximum of $10,000 per violation or five years' imprisonment or both for a knowing failure to file or a knowing filing, directly or indirectly, of false or misleading information;
- New voluntary self-disclosure are "strongly encouraged" by Census of any violation or suspected violation of the FTR. Voluntary disclosures are to be directed to Census, which will notify Customs and Border Protection (CBP), BIS' Office of Export Enforcement (OEE) and ICE.
- Specific rules on what constitutes proper proof of AES filing citations or exemptions are provided as well as how they are to be annotated on other shipping documents. For example, only the Internal Transaction Number (ITN), which confirms that the shipment information has been accepted in AES, is acceptable as proof of filing citation. The External Transaction Number (XTN) will no longer be accepted as proof of filing.
- Time frames for filing AES are provided based on the mode of transportation.
BIS Deemed Export Webinar - April 15
04/03/08 12:14 PM
BIS announced a Deemed Export
Webinar which will take place on April 15, 2008 from 1pm - 2pm
Eastern. The webinar costs $35 and one can sign up
here. BIS states that participants
will learn about the recently issued Deemed Export Advisory Committee's (DEAC)
report and
will learn about deemed exports rules and regulations. Alex Lopes,
Director of the Deemed Exports and Electronics Division of BIS,
will be the main speaker and will respond to questions. All that is
needed to participate is a telephone for the audio portion and a
computer with high speed internet access for the visual portion of
the webinar.
New York Times Reports on Reexport from UAE to Iran
04/02/08 02:26 PM
On April 2, 2008, the New York
Times reported that the Bush Administration has
been concerned about American-made items such as computer circuits,
aircraft parts, specialized metals, and gas detectors that are
controlled for export purposes and have been found in Iran and
Iraq. In general, the controlled items were exported to the United
Arab Emirates and then illegally reexported to Iran or Iraq.
The article states that last year, U.S. military investigators discovered American-made computer circuits in bomb detonators used in Iraq against U.S. forces. By reading the serial number of the chip and studying shipping records, investigators determined that the chip had been manufactured by AMD in Sunnyvale, CA and sold to Mayrow General Trading in Dubai. A spokesperson for AMD told the New York Times that the company had cooperated with the investigation and added that its customers are bound by agreements not to re-export its products to Iran. The U.S. did not have jurisdiction over Mayrow, a foreign company, but were angered that UAE counterparts had not immediately moved to close Mayrow.
The report states that the discovery of the computer circuits in the bomb detonators set off a clash when the Bush Administration cited the diversion of computer circuits to Iran and then to Iraq, as proof that the UAE were failing to prevent American technology from falling into the wrong hands. American officials stated that other controlled items have moved through Dubai, one of the emirates, to Iran, Syria, and Pakistan.
The article states:
Despite the new UAE export control laws, Iranian traders have found little evidence that the law has been broadly enforced. The article states that the U.S. has been concerned about the diversion of exports to the UAE since 2002 when the Commerce Department sent Mary O'Brien, an inspector, to the UAE for end use checks. From her spot checks of factories, freight forwarders, and other companies that had ordered U.S. export controlled products, Commerce officials stated that it was clear that the products were being diverted on a grander scale than imagined.
The NYT reports that the Commerce Department had proposed new export controls for "governments unwilling or unable to cooperate with the U.S. in its interdiction efforts," which would require special reviews before certain dual-use items could be exported to such nations. Last year, nearly $12 billion worth of American goods were exported to the UAE. Diplomats and lobbyists from the UAE appealed to the State Department and White House and promised the Commerce Department that the UAE would adopt its own export control law, staving off the new reforms. The export control law was adopted in the UAE last August. In fact, the UAE claims to have shut down 12 companies late last year suspected of illegal exports or money laundering and recently arrested a Jordanian businessman who tried to import a metal used in nuclear reactors with the intention of selling to other countries.
Commerce and State officials say that they are encouraged by the steps taken by the UAE, but said that an export licensing system must still be introduced and other enforcement steps taken. Mario Mancuso, the Commerce Under Secretary for export administration stated, "The UAE has made progress, but more needs to be done."
The article states that last year, U.S. military investigators discovered American-made computer circuits in bomb detonators used in Iraq against U.S. forces. By reading the serial number of the chip and studying shipping records, investigators determined that the chip had been manufactured by AMD in Sunnyvale, CA and sold to Mayrow General Trading in Dubai. A spokesperson for AMD told the New York Times that the company had cooperated with the investigation and added that its customers are bound by agreements not to re-export its products to Iran. The U.S. did not have jurisdiction over Mayrow, a foreign company, but were angered that UAE counterparts had not immediately moved to close Mayrow.
The report states that the discovery of the computer circuits in the bomb detonators set off a clash when the Bush Administration cited the diversion of computer circuits to Iran and then to Iraq, as proof that the UAE were failing to prevent American technology from falling into the wrong hands. American officials stated that other controlled items have moved through Dubai, one of the emirates, to Iran, Syria, and Pakistan.
The article states:
The diplomatic face-off, which drew little public attention, prompted the United States to threaten tough new controls on exports to the United Arab Emirates, an ally. The nation had invested billions to become a global trading hub and had begun a campaign to burnish its image in the United States after the uproar in 2006 over a proposal to allow a Dubai company manage some American port terminals.The administration backed down only after the emirates promised to pass their own export control law. But it is unclear that much has changed nearly a year after the confrontation.
Despite the new UAE export control laws, Iranian traders have found little evidence that the law has been broadly enforced. The article states that the U.S. has been concerned about the diversion of exports to the UAE since 2002 when the Commerce Department sent Mary O'Brien, an inspector, to the UAE for end use checks. From her spot checks of factories, freight forwarders, and other companies that had ordered U.S. export controlled products, Commerce officials stated that it was clear that the products were being diverted on a grander scale than imagined.
In Ms. O'Brien's 4 years of end user checks, nearly 40% were unfavorable in that the regulated items were found to be missing or the recipient would not cooperate. These end user checks helped jump start many criminal investigations into the diversion of controlled U.S. commodities diverted to Iran. As of last year, 58 inquiries (about half of the total) involved the United Arab Emirates.An entity said to be a woodworking shop, for example, had ordered a sophisticated American machine for making metal parts. The device, Ms. O’Brien knew, could also shape components for a missile system. The supposed factory contained almost no sawdust, and the few employees could not explain how they intended to use the machine.“This is not right,” Ms. O’Brien said she had said to herself, convinced that she had turned up her first “briefcase business”— open for inspection, but closed for good as soon as she walked out.
The NYT reports that the Commerce Department had proposed new export controls for "governments unwilling or unable to cooperate with the U.S. in its interdiction efforts," which would require special reviews before certain dual-use items could be exported to such nations. Last year, nearly $12 billion worth of American goods were exported to the UAE. Diplomats and lobbyists from the UAE appealed to the State Department and White House and promised the Commerce Department that the UAE would adopt its own export control law, staving off the new reforms. The export control law was adopted in the UAE last August. In fact, the UAE claims to have shut down 12 companies late last year suspected of illegal exports or money laundering and recently arrested a Jordanian businessman who tried to import a metal used in nuclear reactors with the intention of selling to other countries.
Commerce and State officials say that they are encouraged by the steps taken by the UAE, but said that an export licensing system must still be introduced and other enforcement steps taken. Mario Mancuso, the Commerce Under Secretary for export administration stated, "The UAE has made progress, but more needs to be done."
California Engineer Sentenced to 24 Years in Prison
03/27/08 05:45 PM
The Los Angeles Times
reported on March 25, 2008 that a
Chinese-born, naturalized U.S. citizen was sentenced to 24 years
and five months in federal prison and fined $50,000 for conspiring
to export ITAR-controlled technology to China. Chi Mak, 67, was a
former electrical engineer at Power Paragon, Inc. of Anaheim, CA,
which handled Navy contracts. Mak was convicted of conspiracy to
violate export control laws, attempting to violate export control
laws, acting as an unregistered agent of China, and lying to the
FBI.
Mak's conviction was the culmination of an 18-month long investigation of Mak's family that ended in October 2005 when he and four other family members were arrested by the FBI and charged with a scheme to illegally send military information to China. Mak's wife, brother, sister-in-law, and nephew have all pleaded guilty and agreed to jail terms or probation.
The government's case centered around three encrypted computer disks that the family had tried to take with them on a flight to China. Two of the disks contained information about an electrically powered propulsion system for warships and a solid-state power switch for ships. The third disk contained a Powerpoint presentation on the future of power electronics. Witnesses during the trial testified that some of these materials were available for purchase on the website of the American Society of Naval Engineers until the government put a stop to it. In addition, Mak's attorney stated that information contained on one of the disks was discussed at an international conference attended by Chinese engineers and the FBI.
Mak's attorney stated that Mak was "sentenced as a trophy rather than a human being" and the case against Mak was unwarranted. Mak will serve his sentence in a low security federal prison.
Mak's conviction was the culmination of an 18-month long investigation of Mak's family that ended in October 2005 when he and four other family members were arrested by the FBI and charged with a scheme to illegally send military information to China. Mak's wife, brother, sister-in-law, and nephew have all pleaded guilty and agreed to jail terms or probation.
The government's case centered around three encrypted computer disks that the family had tried to take with them on a flight to China. Two of the disks contained information about an electrically powered propulsion system for warships and a solid-state power switch for ships. The third disk contained a Powerpoint presentation on the future of power electronics. Witnesses during the trial testified that some of these materials were available for purchase on the website of the American Society of Naval Engineers until the government put a stop to it. In addition, Mak's attorney stated that information contained on one of the disks was discussed at an international conference attended by Chinese engineers and the FBI.
Mak's attorney stated that Mak was "sentenced as a trophy rather than a human being" and the case against Mak was unwarranted. Mak will serve his sentence in a low security federal prison.
Highlights from BIS's 2008 Export Control Forum in Newport Beach
03/24/08 09:37 PM
The Bureau of Industry and
Security (BIS) held its 3rd Annual Export Control Forum in Newport
Beach, CA on March 17, 2008. BIS, Census and Office of Foreign
Assets Control (OFAC) provided updates to the trade. Global Trade
Expertise attended and in case you missed it, we'll recap the
highlights here.
- In a presentation by Gerry Horner, Senior Trade and Industry Analyst, Office of Technology Evaluation, Mr. Horner stated that BIS has been measuring EAR compliance by comparing data elements in AES and license approvals. For example, BIS is comparing approved licenses to licensed exports, comparing license values to licensed export values, and comparing countries on license with licensed exports. BIS is also scrutinizing license exception uses and EAR99 classifications.
- Alex Lopes, Director of BIS' Deemed Exports and Electronics Division, gave a presentation and a half-day seminar on Deemed Exports. Mr. Lopes set forth two general findings of the Deemed Export Advisory Committee (DEAC) Report as: (1) strengthening and streamlining deemed export policy and process; and (2) expanding BIS' outreach. With regard to the second recommendation, BIS will be updating its website, providing more frequent webinars, and tailoring outreach. In fact, BIS will be having a webinar on Deemed Exports on April 15, 2008.
- With regard to implementing the first recommendation: strengthening and streamlining deemed export policy and process, Mr. Lopes set fort the following steps:
- BIS announced in February the establishment of the Emerging Technologies and Research Advisory Committee (ETRAC), which will work on creating a list of technologies that should be regulated for deemed export purposes;
- BIS is creating a license exception for intra-company transfers (ICT) of both commodities and technology that is currently being reviewed by other government agencies;
- BIS is seeking to establish objective licensing criteria when reviewing dual nationals;
- BIS is in the process of redesigning its website to simply and clarify regulatory language and online guidance; and
- BIS is undertaking a comprehensive review of the CCL.
- Darryl Jackson, Assistant Secretary of Commerce for Export Enforcement, stated that the fourth export enforcement priority is now Antiboycott Compliance (after Weapons of Mass Destruction Proliferation, Terrorism and State Sponsorship of Terror, and Diversions to Unauthorized Military End-Use).
- Mr. Jackson also revealed for the first time the 9 Factors to an Effective Compliance Program that would be entitled to great weight mitigation, which will be posted on the BIS website: (1) whether a company has performed a meaningful risk analysis; (2) the existence of formal written compliance program; (3) whether appropriate senior company officials are responsible for overseeing the export compliance program; (4) whether adequate training is provided to employees; (5) whether the company adequately screens its customers and transactions; (6) whether company meets recordkeeping requirements; (7) the existence and operation of an internal system for reporting export violations; (8) the existence and results of internal or external reviews or audits (with associated updates of the EMCP); and (9) whether remedial activity has been taken in response to export violations.
- Todd Willis, Assistant Director, Office of Enforcement Analysis gave an update on BIS' end-use checks. In 2008, BIS will begin conducting end-use checks (EUC) on software and technology. Mr. Willis provided information that BIS will look for during end use checks, which elicited questions from the audience regarding how much control BIS expects exporters to exert over foreign customers and what the effects of an unfavorable EUC will have on future license applications.
BIS Establishes Online Export Control Training Room
03/19/08 10:40 PM
On March 19, 2008, the Department
of Commerce's Bureau of Industry and Security (BIS)
announced the creation of an
BIS Online Training
Room.
In its announcement, BIS stated:
The Online Training Room currently provides 3 training modules:
1. Export Control Basics
2. Classifying Your Item and Determining If You Need a License
3. General Prohibitions including Prohibited End-Users and End-Uses & Activities
Also included in the Online Training Room are BIS' previously conducted webinars:
1. Reexport Controls (March 12, 2008)
2. An Introduction to Commercial Export Licensing Requirements (Spanish) (October 18, 2007)
3. Intermediate Deemed Exports (August 29, 2007)
4. Update to China Export Control Policy (June 20, 2007)
5. An Introduct to Commercial Export Licensing Requirements (May 15, 2007)
BIS states, "We wll continue to create and update content for the online training room, and would welcome your suggestions for how to further improve our outreach efforts."
As part of its ongoing efforts to improve outreach, BIS will continue to create and supplement the materials regularly. The initial launch includes the first half of the Essentials of Export Controls seminar that BIS currently offers around the country, as well as five pre-recorded webinars covering a variety of topics. The training modules are presented in a video streaming format. The pre-recorded BIS webinars were conducted over the past year and focus on specific export control issues.
The Online Training Room currently provides 3 training modules:
1. Export Control Basics
2. Classifying Your Item and Determining If You Need a License
3. General Prohibitions including Prohibited End-Users and End-Uses & Activities
Also included in the Online Training Room are BIS' previously conducted webinars:
1. Reexport Controls (March 12, 2008)
2. An Introduction to Commercial Export Licensing Requirements (Spanish) (October 18, 2007)
3. Intermediate Deemed Exports (August 29, 2007)
4. Update to China Export Control Policy (June 20, 2007)
5. An Introduct to Commercial Export Licensing Requirements (May 15, 2007)
BIS states, "We wll continue to create and update content for the online training room, and would welcome your suggestions for how to further improve our outreach efforts."
BIS Requests Comments on EAR Crime Control License Requirements
03/19/08 10:29 PM
On March
19, 2008, the Department of Commerce's Bureau of Industry and
Security (BIS) published a notice of inquiry in the
Federal Register
requesting public comments on the
crime control export and reexport license requirements in the
Export Administration Regulations (EAR). BIS is seeking comments on
whether the scope of items currently subject to crime control
license requirements should be revised to add or remove items and
is also seeking comments on whether the destinations to which crime
control license requirements apply should be revised.
The Notice of Inquiry can be found here. Comments must be received no later than June 17, 2008.
The Notice of Inquiry can be found here. Comments must be received no later than June 17, 2008.
Minnesota Company Fined $400,000 for Export Violations
03/13/08 03:07 PM
MTS Systems Corp. of Eden Prairie,
MN, pleaded guilty and was sentenced on March 12, 2008 in
connection with submitting false export license applications to the
U.S. Department of Commerce for proposed shipments to India. (The
DOJ news release can be found here.) MTS Systems Corp. was sentenced
to two years probation and a $400,000 fine. Pursuant to the plea
agreement, the court also ordered MTS to implement and maintain a
model export compliance program and to sponsor an export compliance
conference to be held at a future date.
The government alleged that MTS submitted a false export license application when it omitted any corporate knowledge of a possible nuclear end-use for seismic testing equipment to be shipped to India. Assistant Secretary of Commerce for Export Enforcement Darryl W. Jackson stated, "Omitting material information to a licensing official about the intended end-use of a controlled technology item is a serious offense. In this case, the omission clearly was an attempt to disguise the end-use of testing structural components of nuclear-power plants."
The case was the result of an investigation by BIS and ICE.
The government alleged that MTS submitted a false export license application when it omitted any corporate knowledge of a possible nuclear end-use for seismic testing equipment to be shipped to India. Assistant Secretary of Commerce for Export Enforcement Darryl W. Jackson stated, "Omitting material information to a licensing official about the intended end-use of a controlled technology item is a serious offense. In this case, the omission clearly was an attempt to disguise the end-use of testing structural components of nuclear-power plants."
The case was the result of an investigation by BIS and ICE.
New AES Reporting Requirements for BIS License Exceptions
02/27/08 10:51 AM
BIS has
issued new AES reporting requirements for BIS license exceptions.
The notice can be found here.
The notice states that as of April 28, 2008, the following reporting change will be implemented:
The notice states that as of April 28, 2008, the following reporting change will be implemented:
The Export Control Classification Number (ECCN) will be required for License Exceptions reportable under the following License Exception codes: C38-TSR, C41-RPL, C42-GOV, C43-GFT, C44-TSU, C45-BAG, C46-AVS, C47-APR, C48-KMI, C49-TAPS, C50-ENC
Industry & University Groups Oppose DEAC Recommendations
02/26/08 10:28 AM
On
February 15, 2008, twelve industry groups (listed below) issued a
letter to the Secretary of Commerce offering their "preliminary
reaction" to the report by the Deemed Export Advisory Committee
(DEAC) issued on December 20, 2007. The signatories to the letter
were: the American Electronics Association (AeA), American Council
on International Personnel, Association for Manufacturing
Technology (AMT), Coaltion for Employment Through Exports, Computer
and Communications Industry Association, Emergency Committee for
American Trade, Information Technology Industry Council,
International Safety Equipment Association, National Council on
International Trade Development, National Foreign Trade Council,
and U.S.-China Business Council.
In the letter, the groups note a "marked disparity between the DEAC's analysis of the difficulties of regulating the transfer of technological knowledge in a globally interconnected world," an analysis they largely endorse, and the specific recommendations for a new approach to controlling the transfer of controlled information to foreign nationals while in the U.S. -- which they believe would be "difficult to translate into regulations, burdensome for U.S. companies' compliance programs and ultimately counterproductive to the U.S. national interest."
Specifically, the groups claimed that:
1. Controlled technologies would not be refined
2. More foreign nationals would be subject to controls
3. Recommendations would harm U.S. technological leadership
In conclusion, the groups stated, "We urge the Department to go back to the drawing board and work closely with industry in developing an approach that will produce a more balanced result."
Similarly, on February 20, 2008, the Association of American Universities (AAU) and the Council on Governmental Relations (COGR) submitted a letter to the Secretary of Commerce expressing their views on the findings and recommendations of the DEAC report. The groups stated that they strongly agree with the DEAC's principal conclusion that ". . . the existing Deemed Export Regulatory Regime no longer effectively serves its intended purpose and should be replaced with an approach that better reflects the realities of today's national security needs and global economy."
In the letter, the groups endorsed and specifically highlighted the following points:
1. Too many technologies are subject to deemed export controls and the list of covered technologies should be drastically reduced;
2. Each technolgoy on the CCL should "sunset" automatically after a period of one year, unless there is explicit action to retain it on the list following a review process; and
3. They agree wtih the DEAC recommendation to eliminate any distinction between research products and knowledge regarding equipment needed to conduct the research.
The letter then goes on to state the groups' serious concerns over the following DEAC recommendations:
1. They urge Commerce to regject the deemed export decision process construct proposed in the report -- specifically, as with the industry groups, they disapprove of the proposed "loyalty" assessments, which they claim would raise very serious policy, practical, and legal issues for universities;
2. They are concerned about the impact of loyalty assessments and broad-based background checks will have on reviews of deemed export license applications; and
3. They reject the DEAC's proposal to change the definition of fundamental research.
In conclusion, they state that they find the report to be well-considered and contains many helpful findings, but they urge Commerce to seriously consider the concerns outlined.
In the letter, the groups note a "marked disparity between the DEAC's analysis of the difficulties of regulating the transfer of technological knowledge in a globally interconnected world," an analysis they largely endorse, and the specific recommendations for a new approach to controlling the transfer of controlled information to foreign nationals while in the U.S. -- which they believe would be "difficult to translate into regulations, burdensome for U.S. companies' compliance programs and ultimately counterproductive to the U.S. national interest."
Specifically, the groups claimed that:
1. Controlled technologies would not be refined
2. More foreign nationals would be subject to controls
3. Recommendations would harm U.S. technological leadership
In conclusion, the groups stated, "We urge the Department to go back to the drawing board and work closely with industry in developing an approach that will produce a more balanced result."
Similarly, on February 20, 2008, the Association of American Universities (AAU) and the Council on Governmental Relations (COGR) submitted a letter to the Secretary of Commerce expressing their views on the findings and recommendations of the DEAC report. The groups stated that they strongly agree with the DEAC's principal conclusion that ". . . the existing Deemed Export Regulatory Regime no longer effectively serves its intended purpose and should be replaced with an approach that better reflects the realities of today's national security needs and global economy."
In the letter, the groups endorsed and specifically highlighted the following points:
1. Too many technologies are subject to deemed export controls and the list of covered technologies should be drastically reduced;
2. Each technolgoy on the CCL should "sunset" automatically after a period of one year, unless there is explicit action to retain it on the list following a review process; and
3. They agree wtih the DEAC recommendation to eliminate any distinction between research products and knowledge regarding equipment needed to conduct the research.
The letter then goes on to state the groups' serious concerns over the following DEAC recommendations:
1. They urge Commerce to regject the deemed export decision process construct proposed in the report -- specifically, as with the industry groups, they disapprove of the proposed "loyalty" assessments, which they claim would raise very serious policy, practical, and legal issues for universities;
2. They are concerned about the impact of loyalty assessments and broad-based background checks will have on reviews of deemed export license applications; and
3. They reject the DEAC's proposal to change the definition of fundamental research.
In conclusion, they state that they find the report to be well-considered and contains many helpful findings, but they urge Commerce to seriously consider the concerns outlined.
BIS Announces Steps to Implement Deemed Export Advisory Committee Recommendations
02/07/08 02:44 PM
On February 6, 2008, the
Department of Commerce's Bureau of Industry and Security
(BIS) announced that it had completed its review
of the Deemed Export Advisory Committee's (DEAC)
report. BIS states that the Department
has begun to work with its U.S. government partners, including the
Departments of Defense, State, and Energy, to "consider the
report's analysis and recommendations as a basis for reforming
current deemed export policy."
A "deemed export" is the transfer of controlled dual-use technology to a foreign national while in the United States. BIS stated that, "Given the significant role that foreign nationals play in the U.S. research system, deemed export policy has significant implications for U.S. national security and economic competitiveness."
Mario Mancuso, Under Secretary of Commerce for Industry and Security, stated, "U.S. deemed export policy must account for the variety of risks we face. While our rules should not permit the transfer of sensitive U.S. technology to a real or potential adversary, they must ensure the United States remains the most innovative and competitive economy in the world."
While certain proposals under active consideration will require interagency support, Under Secretary Mancuso has directed BIS to immediately:
A "deemed export" is the transfer of controlled dual-use technology to a foreign national while in the United States. BIS stated that, "Given the significant role that foreign nationals play in the U.S. research system, deemed export policy has significant implications for U.S. national security and economic competitiveness."
Mario Mancuso, Under Secretary of Commerce for Industry and Security, stated, "U.S. deemed export policy must account for the variety of risks we face. While our rules should not permit the transfer of sensitive U.S. technology to a real or potential adversary, they must ensure the United States remains the most innovative and competitive economy in the world."
While certain proposals under active consideration will require interagency support, Under Secretary Mancuso has directed BIS to immediately:
- Create an Emerging Technologies Advisory Committee, composed of representatives from leading research universities, government research labs, and industry to make recommendations to BIS regarding emerging technologies on a regular basis; and
- Improve outreach and engagement efforts to the academic and technology communities about the progress and scope of the deemed export policy efforts.
Political Backstory Behind Recent Presidential Export Control Directives
01/31/08 09:35 AM
On
January 31, 2008, Politico.com reported on the political lobbying
that took place prior to President Bush's issuance of directives
meant to modernize the State Department and Commerce Department's
export control activities. The report entitled, "High-Tech Lobby
Notches Victory," can be read here.
BIS Fines Northrup Grumman $400,000 for Illegal Exports of Navigational Equipment
01/26/08 12:04 AM
On
January 25, 2008, the Commerce Department's Bureau of Industry
& Security (BIS) announced that Northrop Grumman agreed to pay a $400,000
civil penalty to settle allegations that it committed 131
violations of the Export Administration Regulations (EAR), both in
its own capacity and as successor to Litton Industries, Inc., which
it acquired in April 2001.
BIS states, "The allegations primarily involved unlicensed exports of specially designed components for navigation equipment and module manufacturing data that were to destinations in the Philippines, Singapore, Malaysia, Italy, and the United Kingdom between January 1998 and September 2002." Northrop Grumman made a voluntary self disclosure of these violations and cooperated fully in the investigation per BIS.
BIS states, "The allegations primarily involved unlicensed exports of specially designed components for navigation equipment and module manufacturing data that were to destinations in the Philippines, Singapore, Malaysia, Italy, and the United Kingdom between January 1998 and September 2002." Northrop Grumman made a voluntary self disclosure of these violations and cooperated fully in the investigation per BIS.
President Bush Issues Export Control Directives
01/23/08 12:54 AM
On
January 22, 2008, President Bush announced presidential directives
aimed at modernizing export controls under both the ITAR and the
EAR. In a brief statement, the White House said the package of
directives would promote a "more efficient and transparent export
licensing process."
With regard to the State Department, President Bush directed:
More Effective U.S. Export Licensing
A More Efficient Dispute Resolution Mechanism
Enhanced Enforcement
With regard to the Commerce Department, the Presidential directive recommended:
• Maintaining a Validated End User program to ease exports to “reliable foreign companies,” while imposing additional scrutiny on exports to less favored foreign buyers.
• Conducting regular updates of the export controls on dual-use items.
• Revising rules on intra-company transfers of sensitive items.
• Revising rules restricting the export of encryption products.
• Reviewing re-export controls.
• Increasing transparency by publishing advisory opinions on the Internet and listing foreign parties that warrant higher scrutiny.
With regard to the State Department, President Bush directed:
More Effective U.S. Export Licensing
- Additional financial resources and intelligence support will be made available for the timely adjudication of defense trade licenses.
- Guidelines will be issued that require a decision by the U.S. Government on defense trade export license applications within 60 days, absent a strong reason for additional time, such as a requirement for Congressional notification. Initial efforts in this regard have resulted in a nearly 50 percent reduction since April 2007 in the number of export license applications pending with the Department of State.
- The electronic licensing system will be upgraded to permit the submission of all types of defense trade licenses and to enable all agencies to access the same electronic information.
- The Secretary of State will update U.S. controls on exports involving dual and third country nationals from NATO and other allied countries.
A More Efficient Dispute Resolution Mechanism
- A formal interagency dispute mechanism will be created to allow for timely resolution of licensing jurisdiction issues involving the Departments of State and Commerce under the Commodity Jurisdiction (CJ) process. The National Security Council will also undertake a review to make sure the CJ process is efficient and timely.
Enhanced Enforcement
- A multi-agency working group will be established to improve procedures for conducting export enforcement investigations.
With regard to the Commerce Department, the Presidential directive recommended:
• Maintaining a Validated End User program to ease exports to “reliable foreign companies,” while imposing additional scrutiny on exports to less favored foreign buyers.
• Conducting regular updates of the export controls on dual-use items.
• Revising rules on intra-company transfers of sensitive items.
• Revising rules restricting the export of encryption products.
• Reviewing re-export controls.
• Increasing transparency by publishing advisory opinions on the Internet and listing foreign parties that warrant higher scrutiny.
BIS Issues 2008 Report on Foreign Policy-Based Export Controls
01/18/08 12:17 AM
On
January 17, 2008, BIS issued its 2008 Report on Foreign Policy-Based Export
Controls. Export controls
maintained for foreign policy purposes require annual extension
according to the provisions of Section 6 of the Export
Administration Act of 1979, as amended (the Act). Section 6(f) of
the Act requires the President to submit a report to Congress to
extend the controls. The President has delegated this authority to
the Department of Commerce.
Former U.S. Defense Contractor Engineer Indicted For Spying
01/06/08 11:36 PM
The Washington Times
reported on December 12, 2007 that Noshir S. Gowadia, an
Indian-born engineer who former worked for Northop Grumman spent
more than two years working with China's military to design and
test a radar-evading component for a new Chinese cruise missile as
part of an espionage conspiracy, according to a federal indictment
submitted to the U.S. District Court in Hawaii in October 2997. The
indictment states that he worked closely with a Chinese government
agent and missile technicians during six visits to China between
2003 and 2005.
According to the indictment,
According to the indictment,
New York Times Publishes Article Questioning New China Export Rules
01/03/08 10:34 AM
On January 2, 2008, the
New York Times published a report entitled, "Eased Rules on
Tech Sales to China Questioned." The report states that
the Bush administration "quietly" eased some restrictions on the
export of "politically delicate technologies to China" six months
ago, but are now facing questions from weapons experts about
whether some equipment could instead end up helping China modernize
its military.
The report states that questions are being raised by a report entitled, In China We Trust, issued by this week by the Wisconsin Project on Nuclear Arms Control, an independent research foundation that opposes the spread of arms technologies. The Wisconsin Project specifically questions the wisdom of BIS' new
The report states that questions are being raised by a report entitled, In China We Trust, issued by this week by the Wisconsin Project on Nuclear Arms Control, an independent research foundation that opposes the spread of arms technologies. The Wisconsin Project specifically questions the wisdom of BIS' new