BIS Publishes Rule Based Upon a Systematic Review of the Commerce Control List
06/28/10 10:22 PM
On
June 28, 2010, the Bureau of Industry and Security
(BIS) published a final rule revising the
Export Administration Regulations (EAR) based
upon a systematic review of the Commerce Control
List (CCL).
The rule is the third phase of the regulatory implementation of the results of a review of the CCL that was conducted by BIS starting in 2007. The BIS review was aided by input received from BIS’s Technical Advisory Committees (TACs) and comments received from the interested public.
The revisions in this rule include clarifications to existing controls; eliminating redundant or outdated controls; and establishing more focused and rationalized controls. This rule also makes CCL related changes to other parts of the EAR, including CCL related definitions and license exceptions.
The rule is effective upon publication and while no formal comment period, BIS welcomes comments from the public on this rule on a continuing basis.
The rule is the third phase of the regulatory implementation of the results of a review of the CCL that was conducted by BIS starting in 2007. The BIS review was aided by input received from BIS’s Technical Advisory Committees (TACs) and comments received from the interested public.
The revisions in this rule include clarifications to existing controls; eliminating redundant or outdated controls; and establishing more focused and rationalized controls. This rule also makes CCL related changes to other parts of the EAR, including CCL related definitions and license exceptions.
The rule is effective upon publication and while no formal comment period, BIS welcomes comments from the public on this rule on a continuing basis.
Freight Forwarder Settles Allegation Of Antiboycott Violation
06/25/10 04:26 PM
On
June 25, 2010, the U.S. Department of Commerce’s
Bureau of Industry and Security (BIS)
announced that Plane
Cargo Inc. (PCI), a freight forwarder located in
Houston, TX, has agreed to pay a $5,200 civil
penalty to settle allegations that it violated
the antiboycott provisions of the Export
Administration Regulations (EAR).
The announcement provided that:
The announcement provided that:
BIS, through its Office of Antiboycott Compliance, alleged that on one occasion in 2003, PCI, in connection with a transaction involving the sale and transfer of goods from the United States to Syria, furnished an invoice to a company in Syria that certified that the goods were not of Israeli origin in violation of the antiboycott provisions of the EAR. PCI cooperated fully with the investigation.
BIS Seeks Comments on Revising Encryption Export Controls
06/25/10 12:27 PM
On
June 25, 2010, the Bureau of Industry and Security
(BIS) issued an interim final rule
that amends the
Export Administration Regulations (EAR) to
modify the requirements of License Exception
ENC, “Encryption Commodities, Software and
Technology,” and the requirements for qualifying
an encryption item as mass market. In addition,
the rule also amends specific license
requirements for encryption items. EAR sections
affected are 15 CFR Parts 730, 734, 738, 740,
742, 748, 772 and 774. BIS also posted on its
website a press
release, a
summary of the rule,
and additional information
to
assist exporters.
BIS believes that the rule will streamline procedures for (1) less sensitive encryption items eligible for export under License Exception ENC and (2) most mass market encryption products. The interim final rule also implements the Wassenaar Arrangement’s decontrol of items that perform “ancillary cryptography” in the Commerce Control List.
The rule includes several significant changes to encryption export controls by modifying the way information about encryption products is collected an analyzed. The rule, as amended:
Comments on the suggested changes are due by August 24, 2010.
BIS believes that the rule will streamline procedures for (1) less sensitive encryption items eligible for export under License Exception ENC and (2) most mass market encryption products. The interim final rule also implements the Wassenaar Arrangement’s decontrol of items that perform “ancillary cryptography” in the Commerce Control List.
The rule includes several significant changes to encryption export controls by modifying the way information about encryption products is collected an analyzed. The rule, as amended:
- Removes review requirements for less sensitive encryption items;
- Establishes a company registration requirement for encryption items under License Exception ENC or as mass market encryption items. Under the new rule, authorization for License Exception ENC and mass market treatment is based on company authorizations that operate like a bulk license for the company’s products rather than product-by-product authorizations;
- Creates an annual self-classification report requirement for such items pursuant to an encryption registration. Under the new rule, the self-classification report would be required to be submitted annually to BIS and the ENC Encryption Request Coordinator in February for items exported and reexported the previous calendar year;
- Makes encryption technology eligible for export and reexport under License Exception ENC, except to countries of highest concern;
- Lifts the semi-annual sales reporting for less sensitive encryption items under License Exception ENC. When sales reporting is not required under License Exception ENC, companies need only maintain records as required by the EAR that can be reviewed by appropriate agencies of the U.S. Government upon request;
- Removes the 30-day delay to export and reexport less sensitive encryption items under License Exception ENC; and
- Removes the
30-day delay to make most mass market encryption
items eligible for mass market treatment.
Comments on the suggested changes are due by August 24, 2010.
Census Foreign Trade Division Updates HTS Codes and Schedule B Database
06/23/10 12:08 PM
The
U.S. Census Bureau’s Foreign Trade Division (FTD)
has posted a warning to
the trade community that some freight forwarders
and Customs brokers may need to update their
current commodity number classifications as
updated/new Harmonized Tariff Schedule (HTS)
numbers go into effect on July 1, 2010.
HTS commodity classification codes are generally revised twice annually, in January and July by the U.S. International Trade Commission. The codes are usually revised because members in the trade community are looking for more detailed statistical data. Recommendations for revisions to existing classifications or for the establishment of new classifications should be submitted to the Chairman of the Committee for Statistical Annotation of Tariff Schedules.
In addition, the FTD posted a link to an improved Schedule B database of export commodity codes. According to FTD, “the new improved search tool will interpret common commercial product information and interact intelligently and intuitively with users to help alleviate the complex nature of finding the correct code in the Schedule B book.”
HTS commodity classification codes are generally revised twice annually, in January and July by the U.S. International Trade Commission. The codes are usually revised because members in the trade community are looking for more detailed statistical data. Recommendations for revisions to existing classifications or for the establishment of new classifications should be submitted to the Chairman of the Committee for Statistical Annotation of Tariff Schedules.
In addition, the FTD posted a link to an improved Schedule B database of export commodity codes. According to FTD, “the new improved search tool will interpret common commercial product information and interact intelligently and intuitively with users to help alleviate the complex nature of finding the correct code in the Schedule B book.”
Iranian National Convicted of Export Violations
06/17/10 11:49 AM
On
June 17, 2010, the U.S. Department of
Justice announced that Omid
Khalili, an Iranian national, pleaded guilty in
U.S. District Court for the Southern District of
Alabama to attempting to illegally export
fighter jet or military aircraft parts from the
U.S. to Iran.
Khalili and other defendant were charged in a nine-count indictment returned on January 28, 2010, with conspiracy, money laundering, smuggling, and violations of the Arms Export Control Act (AECA), and the International Emergency Economic Powers Act (IEEPA).
According to court documents, Khalili and his co-conspirator have been working with the Iranian government to procure military items for the Iranian government. In November 2009, Khalili contacted an undercover agent seeking parts for the military aircraft for export to Iran.
The parts requested by Khalili are designated as defense articles on the U.S. Munitions List and require a U.S. State Department export license. In addition, these items may not be exported to Iran without a license from the U.S. Treasury Department due to the U.S. trade embargo on Iran. Neither Khalili nor his co-conspirator obtained the required export licenses.
On November 20, 2009, Khalili send an e-mail to the undercover agent containing a list of aircraft parts for the military aircraft and inquiring about their prices. In December 2009, Khalili and his co-conspirator talked with the agent and informed him that the parts were to be sent to Iran and that, because of the U.S. embargo, they would need to be re-routed through an intermediate country. When the undercover agent agreed to send the requested parts to the defendants, Khalili and his other co-conspirators sent four separate cash deposits totaling in excess of $70,000 from a bank in U.A.E. to a bank in Alabama as down-payment for the aircraft parts.
Khalili faces a maximum penalty of ten years in prison and a $1 million fine.
Khalili and other defendant were charged in a nine-count indictment returned on January 28, 2010, with conspiracy, money laundering, smuggling, and violations of the Arms Export Control Act (AECA), and the International Emergency Economic Powers Act (IEEPA).
According to court documents, Khalili and his co-conspirator have been working with the Iranian government to procure military items for the Iranian government. In November 2009, Khalili contacted an undercover agent seeking parts for the military aircraft for export to Iran.
The parts requested by Khalili are designated as defense articles on the U.S. Munitions List and require a U.S. State Department export license. In addition, these items may not be exported to Iran without a license from the U.S. Treasury Department due to the U.S. trade embargo on Iran. Neither Khalili nor his co-conspirator obtained the required export licenses.
On November 20, 2009, Khalili send an e-mail to the undercover agent containing a list of aircraft parts for the military aircraft and inquiring about their prices. In December 2009, Khalili and his co-conspirator talked with the agent and informed him that the parts were to be sent to Iran and that, because of the U.S. embargo, they would need to be re-routed through an intermediate country. When the undercover agent agreed to send the requested parts to the defendants, Khalili and his other co-conspirators sent four separate cash deposits totaling in excess of $70,000 from a bank in U.A.E. to a bank in Alabama as down-payment for the aircraft parts.
Khalili faces a maximum penalty of ten years in prison and a $1 million fine.
BIS Publishes Update 2010 Dates & Instructions
06/15/10 10:45 PM
The
Bureau of Industry and Security’s (BIS)
announced that its annual
Update Conference on Export Controls and Policy
will be held on August 31- September 2, 2010 in
Washington, DC.
To attend this year’s conference, you must follow a two-step process: (1) you must submit the online “Interest Form” between June 15 and June 28. If there are more potential participants than there is space available, BIS will grant registration through a random selection from the entire list of respondents, regardless of when received during the period. Those selected will be notified and given registration instructions in early July. They must register and submit payment by a designated date indicated in the instructions or their spot will be forfeited and given to someone on the wait list. Those not selected will be notified that they have been placed on a wait list.
More detailed program information will be posted in the coming weeks.
Registration transfers within companies or organizations may be permitted with prior approval from BIS. Registration transfers will not be permitted between different organizations or companies. Registrations may not be resold.
BIS will make every effort to ensure broad company representation at this event. Due to the limited capacity of the Update Conference, BIS reserves the right to limit, restrict or decline registrations to this event. Registrations are not confirmed until accepted and verified by BIS and the registration fee has been paid.
To attend this year’s conference, you must follow a two-step process: (1) you must submit the online “Interest Form” between June 15 and June 28. If there are more potential participants than there is space available, BIS will grant registration through a random selection from the entire list of respondents, regardless of when received during the period. Those selected will be notified and given registration instructions in early July. They must register and submit payment by a designated date indicated in the instructions or their spot will be forfeited and given to someone on the wait list. Those not selected will be notified that they have been placed on a wait list.
More detailed program information will be posted in the coming weeks.
Registration transfers within companies or organizations may be permitted with prior approval from BIS. Registration transfers will not be permitted between different organizations or companies. Registrations may not be resold.
BIS will make every effort to ensure broad company representation at this event. Due to the limited capacity of the Update Conference, BIS reserves the right to limit, restrict or decline registrations to this event. Registrations are not confirmed until accepted and verified by BIS and the registration fee has been paid.
Texas Company Settles Allegations Of Antiboycott Violations
06/14/10 04:21 PM
On
June 14, 2010, the U.S. Department of Commerce’s
Bureau of Industry and Security (BIS)
announced that Messina,
Inc. (Messina) of Dallas, TX, has agreed to pay
a $10,800 civil penalty to settle allegations
that it violated the antiboycott provisions of
the Export Administration Regulations (EAR) on
two occasions.
The announcement provided that:
The announcement provided that:
BIS, through its Office of Antiboycott Compliance, alleged that in 2004, in connection with two letter of credit transactions involving the sale and transfer of goods destined for Iraq that were shipped through the UAE, Messina furnished to a U.S. bank two certificates signed by the agent for a vessel that attested to the vessel’s eligibility to call at the port of a boycotting country. In doing so, Messina furnished information concerning other persons known or believed to be restricted from having any business relationship with or in a boycotting country, in violation of the antiboycott provisions of the EAR.
BIS Clarifies De Minimis Content Requirements in the EAR
06/04/10 10:33 AM
On
June 4, 2010, Bureau of Industry and Security (BIS)
issued a final rule in Federal
Register that clarifies language concerning
the de
minimis provisions in
the Export Administration Regulations (EAR).
The EAR generally do not apply to items that were made and are located outside the U.S. and that contain only a “de minimis” level of U.S-origin content. The procedures for calculating whether an item exceeds the de minimis threshold note that the calculation is appropriate only for items that are made outside the U.S. and are not currently in the U.S.
Effective June 4, 2010, the rule removes EAR provision in §734.3(b)(4), which outlines a category of items not subject to the EAR (“foreign made items that have less than the de minimis percentage of controlled U.S. content&rdquo
, because the provision could be
erroneously read as applying the de minimis
exclusion to foreign made items that are
located in the U.S.
In addition, the final rule provides technical corrections to the EAR involving certain performance criteria of turning machines and the rule also removes obsolete cross references, removes and reserves two regulatory provisions,
corrects a typographical error, and removes an unnecessary reporting
requirement.
The EAR generally do not apply to items that were made and are located outside the U.S. and that contain only a “de minimis” level of U.S-origin content. The procedures for calculating whether an item exceeds the de minimis threshold note that the calculation is appropriate only for items that are made outside the U.S. and are not currently in the U.S.
Effective June 4, 2010, the rule removes EAR provision in §734.3(b)(4), which outlines a category of items not subject to the EAR (“foreign made items that have less than the de minimis percentage of controlled U.S. content&rdquo
, because the provision could be
erroneously read as applying the de minimis
exclusion to foreign made items that are
located in the U.S.
In addition, the final rule provides technical corrections to the EAR involving certain performance criteria of turning machines and the rule also removes obsolete cross references, removes and reserves two regulatory provisions,
corrects a typographical error, and removes an unnecessary reporting
requirement.
DDTC Updates Guidelines
05/26/10 09:20 AM
DDTC
has updated its website to state that:
In addition, DDTC updated its Guidelines Regarding Company Names on License Documentation on May 3, 2010 and its Guidelines for Preparing Electronic Agreements, addition concerning electronic agreements submitted as Re-Baselined agreements on May 26, 2010.
Effective September 1, 2010 DDTC-Licensing will no longer accept unclassified paper submissions of Technical Assistance Agreements, Manufacturing License Agreements, and Warehouse Distribution Agreements (to include major amendments). After this date all submissions must be made electronically via D-Trade 2 utilizing the DSP-5 form. For information on submitting agreements electronically please reference the "Guidelines for Preparing Electronic Agreements" located on this website.
In addition, DDTC updated its Guidelines Regarding Company Names on License Documentation on May 3, 2010 and its Guidelines for Preparing Electronic Agreements, addition concerning electronic agreements submitted as Re-Baselined agreements on May 26, 2010.
Chinese Nationals Convicted of Illegally Exporting ITAR-Controlled Items to China
05/17/10 12:28 PM
On May
17, 2010, Bureau of Industry and Security
(BIS) announced that a federal
jury in Massachusetts convicted Chinese
nationals Zhen Zhou Wu (Wu) and Yufeng Wei (Wei)
of conspiracy to violate U.S. export laws and
illegally exporting electronic equipment from
the U.S. to China on numerous occasions from
2004 to 2007.
Evidence presented at trial showed that between April 2004 and June 2006 Wu and Wei illegally exported military electronic components, designated on the U.S. Munitions List (USML), to mainland China via Hong Kong. The defense articles that defendants exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications.
Also indicted was Chitron Electronics, Inc. (Chitron), a company created by Wu. Using Chitron, Wu targeted Chinese military factories and research institutes as customers of Chitron, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development, and manufacture of electronics for the Chinese military.
Based on the correspondence, Wu, Wei and other Chitron employees knew that exports of restricted parts were being shipped to Chinese customers without required export licenses. Wu instructed Wei and Chitron employees to never tell U.S. companies that parts were being exported overseas. Instead, U.S. companies were told to ship all ordered products to the Chitron office located in Waltham, Massachusetts. Upon receiving the products, Chitron employees forwarded them to Chitron’s Shenzhen office using freight forwarders in Hong Kong. The shipments were done without the requisite Department of State and Department of Commerce export licenses.
Wu and Wei both face up to 20 years imprisonment to be followed by three years supervised release and a $1 million fine. After serving their sentence, both will face deportation to China.
Chitron faces up to a $1 million fine for each count in the indictment charging them with illegal export of U.S. Munitions List items and $500,000 for each count in the indictment charging them with illegal export of Commerce controlled electronics. Sentencing is scheduled for August 17, 2010.
Evidence presented at trial showed that between April 2004 and June 2006 Wu and Wei illegally exported military electronic components, designated on the U.S. Munitions List (USML), to mainland China via Hong Kong. The defense articles that defendants exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications.
Also indicted was Chitron Electronics, Inc. (Chitron), a company created by Wu. Using Chitron, Wu targeted Chinese military factories and research institutes as customers of Chitron, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development, and manufacture of electronics for the Chinese military.
Based on the correspondence, Wu, Wei and other Chitron employees knew that exports of restricted parts were being shipped to Chinese customers without required export licenses. Wu instructed Wei and Chitron employees to never tell U.S. companies that parts were being exported overseas. Instead, U.S. companies were told to ship all ordered products to the Chitron office located in Waltham, Massachusetts. Upon receiving the products, Chitron employees forwarded them to Chitron’s Shenzhen office using freight forwarders in Hong Kong. The shipments were done without the requisite Department of State and Department of Commerce export licenses.
Wu and Wei both face up to 20 years imprisonment to be followed by three years supervised release and a $1 million fine. After serving their sentence, both will face deportation to China.
Chitron faces up to a $1 million fine for each count in the indictment charging them with illegal export of U.S. Munitions List items and $500,000 for each count in the indictment charging them with illegal export of Commerce controlled electronics. Sentencing is scheduled for August 17, 2010.
BIS Adds AMD China, Inc. as an Authorized Validated End-User
05/14/10 12:01 PM
On May
10, 2010, the Bureau of Industry and Security
(BIS) amended the Export
Administration Regulations (EAR) to add Advanced
Micro Devices China, Inc., as an end-user to the
list of validated end-users in the People's
Republic of China. Exports, reexports and
transfers of certain items to this end-user are
now authorized under Authorization Validated
End-User (VEU).
BIS further revised the EAR with additional AMD China information on May 14, 2010.
BIS further revised the EAR with additional AMD China information on May 14, 2010.
UK Firm Fined $2M for Exporting Boeing 747 Aircraft to Iran
05/11/10 12:10 PM
On May
11, 2010, the Department of Justice (DOJ)
announced that Balli
Aviation Ltd., a subsidiary of the United
Kingdom-based Balli Group PLC, was sentenced
that day in the U.S. District Court for the
District of Columbia to pay a $2 million fine
and to serve a five-year corporate period of
probation after pleading guilty on Feb. 5, 2010,
to a two-count criminal information in
connection with its illegal export of commercial
Boeing 747 aircraft from the United States to
Iran.
DOJ stated that:
The court imposed the maximum $2 million fine and a corporate probation of five years. The $2 million fine combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), is one of the largest fines for an export violation in BIS history.
DOJ stated that:
According to count one of the criminal information filed with the court, beginning in at least October 2007, through July 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. Specifically, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.Count two of the criminal information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.
The court imposed the maximum $2 million fine and a corporate probation of five years. The $2 million fine combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), is one of the largest fines for an export violation in BIS history.
French Court Refuses U.S. Request to Extradite Iranian Engineer
05/05/10 09:44 AM
The
New York Times reported that on May 5,
2010, French court rejected a U.S. request to
extradite Majid Kakavand (Kakavand), an Iranian
engineer and businessman accused of buying
equipment for a front company in Malaysia and
then rerouting it to Iranian military firms, in
violation an American embargo on exports to
Iran.
Specifically, the indictment against Kakavand alleged that from January 2006 to December 2008 he purchased online dual-use equipment intended for military purposes and had it shipped to Iran via Malaysia. The equipment included capacitors, resistors, connectors, reflectometers and pressure sensors that have a military application.
Iran Electronics Industry, one of the Iranian companies Kakavand bought the equipment for, was put on the European Union blacklist in June 2008. The last transaction between him and the company took place in April 2008. The other company, Iran Communications Industry, manufactures military and civilian communication equipment and now too is on the European blacklist.
The French government prosecutor opposed the request to extradite Kakavand on the grounds that he had not violated French law and that equipment at issue was not necessarily military in nature. In addition, he emphasized that, in contrast to the U.S., neither France nor the European Union has a general trade embargo on Iran.
The court ordered Kakavand set free, and his passport and bail returned. The U.S. Justice Department spokesman said efforts to apprehend Kakavand would continue, and that he would stand trial for his alleged crimes if he came into U.S. custody.
Specifically, the indictment against Kakavand alleged that from January 2006 to December 2008 he purchased online dual-use equipment intended for military purposes and had it shipped to Iran via Malaysia. The equipment included capacitors, resistors, connectors, reflectometers and pressure sensors that have a military application.
Iran Electronics Industry, one of the Iranian companies Kakavand bought the equipment for, was put on the European Union blacklist in June 2008. The last transaction between him and the company took place in April 2008. The other company, Iran Communications Industry, manufactures military and civilian communication equipment and now too is on the European blacklist.
The French government prosecutor opposed the request to extradite Kakavand on the grounds that he had not violated French law and that equipment at issue was not necessarily military in nature. In addition, he emphasized that, in contrast to the U.S., neither France nor the European Union has a general trade embargo on Iran.
The court ordered Kakavand set free, and his passport and bail returned. The U.S. Justice Department spokesman said efforts to apprehend Kakavand would continue, and that he would stand trial for his alleged crimes if he came into U.S. custody.
Former Probation Officer Convicted For Illegally Exporting Guns and Ammunition To Nigeria
04/28/10 12:24 AM
On
April 28, 2010, the Department of Justice (DOJ)
announced that Emenike Charles Nwankwoala, age 49,
of Laurel, Maryland, pleaded guilty today to
exporting arms without a license, exporting
controlled goods without a license and willful
delivery of a firearm to a common carrier without
written notice, in connection with a scheme to
export firearms and ammunition to Nigeria.
DOJ states that:
DOJ states that:
Nwankwoala faces a maximum sentence of 10 years in prison for exporting arms without a license; 20 years in prison for exporting controlled goods without a license; and five years in prison for willful delivery of a firearm to a common carrier without written notice. U.S. District Judge Peter J. Messitte has scheduled sentencing for July 21, 2010 at 9:30 a.m.According to Nwankwoala’s plea agreement, he was employed by the State of Maryland as a Probation Officer. Investigation showed that during a six-month period beginning in December 2008, Nwankwoala purchased at least 37 Maverick Model 88 shotguns from a Federal Firearms Licensee located in Kensington, Maryland. On April 21, 2009, Nwankwoala ordered an additional 25 shotguns over the internet from Impact Guns in Ogden, Utah, a Federal Firearms Licensee. Nwankwoala stated that he was purchasing these shotguns for hunting in Nigeria. The licensee asked Nwankwoala if he had an export license, and Nwankwoala falsely indicated that he did. Nwankwoala never obtained guns through this gun store.
DDTC Revises Guidelines for Preparing Electronic Agreements
04/26/10 12:15 AM
On
April 26, 2010, the Directorate of Defense Trade
Controls (DDTC) posted revised Guidelines for Preparing
Electronic Agreements.
White House Issues Fact Sheet on the Export Control Reform Initiative
04/20/10 11:32 PM
On
April 20, 2010, the White House issued a fact sheet
on President Obama’s Export Control Reform
initiative. The initiative started in August 2009
with a comprehensive assessment of the U.S. export
control system to identify possible reforms.
The assessment, created at the direction of the President, was conducted by an interagency task force that included all departments and agencies with roles in export controls. The assessment found that the current U.S. export control system does not sufficiently reduce national security risk based on the fact that its structure is “overly complicated, contains too many redundancies, and tries to protect too much.”
Based on the review, the Administration has determined that fundamental reform of the U.S. export control system is needed in each of its four component areas, with transformation to a:
For the implementation of the proposed reforms, the Administration has prepared a comprehensive, three-phase approach and is currently moving forward to make specific reforms which can be initiated immediately and implemented without legislation:
Phase I makes significant and immediate improvements to the existing system and establishes the framework necessary to create the new system, including making preparations for any legislative proposals. This phase includes implementing specific reform actions already in process and initiating review of new ones.
Phase II results in a fundamentally new U.S. export control system based on the current structure later this year. This phase completes deployment of specific Phase I reforms and initiates new actions contingent upon completion of Phase I items. Congressional notification will be required to remove munitions list controls or transfer items from the munitions list to the dual-use list, and additional funding will be required both for enhanced enforcement and the IT infrastructure.
Phase III completes the transition to the new U.S. export control system. Legislation would be required for this phase:
The assessment, created at the direction of the President, was conducted by an interagency task force that included all departments and agencies with roles in export controls. The assessment found that the current U.S. export control system does not sufficiently reduce national security risk based on the fact that its structure is “overly complicated, contains too many redundancies, and tries to protect too much.”
Based on the review, the Administration has determined that fundamental reform of the U.S. export control system is needed in each of its four component areas, with transformation to a:
- Single Control
List,
• Single Primary Enforcement Coordination Agency,
• Single IT System, and
• Single Licensing Agency.
For the implementation of the proposed reforms, the Administration has prepared a comprehensive, three-phase approach and is currently moving forward to make specific reforms which can be initiated immediately and implemented without legislation:
Phase I makes significant and immediate improvements to the existing system and establishes the framework necessary to create the new system, including making preparations for any legislative proposals. This phase includes implementing specific reform actions already in process and initiating review of new ones.
-
Control List – refine,
understand, and harmonize definitions to end
jurisdiction confusion between the two lists;
establish new independent control criteria to be
used to screen items for control into new tiered
control list structure.
• Licensing – implement regulatory-based improvements to streamline licensing processes and standardize policy and processes to increase efficiencies.
• Enforcement – synchronize and de-conflict enforcement by creation of an Enforcement Fusion Center.
• IT – determine enterprise-wide needs and begin the process to reduce confusion by creating a single U.S. Government (USG) point of entry for exporters.
Phase II results in a fundamentally new U.S. export control system based on the current structure later this year. This phase completes deployment of specific Phase I reforms and initiates new actions contingent upon completion of Phase I items. Congressional notification will be required to remove munitions list controls or transfer items from the munitions list to the dual-use list, and additional funding will be required both for enhanced enforcement and the IT infrastructure.
-
Control List – restructure
the two lists into identical tiered structures,
apply criteria, remove unilateral controls as
appropriate, and submit proposals multilaterally
to add or remove controls.
• Licensing – complete transition to mirrored control list system and fully implement licensing harmonization to allow export authorizations within each control tier to achieve a significant license requirement reduction which is compatible with national security equities.
• Enforcement – expand outreach and compliance.
• IT – transition toward a single electronic licensing system.
Phase III completes the transition to the new U.S. export control system. Legislation would be required for this phase:
-
Control List – merge the two
lists into a single list, and implement
systematic process to keep current.
• Licensing – implement single licensing agency.
• Enforcement – consolidate certain enforcement activities into a Primary Enforcement Coordination Agency.
• IT – implement a single, enterprise-wide IT system (both licensing and enforcement).
Secretary of Defense Discusses Reform of the U.S. Export Controls
04/19/10 11:10 PM
On
April 19, 2010, the U.S. Secretary of Defense
Robert Gates discussed the
administration’s interagency review of the U.S.
export control system. Gates stated that the
consensus among the Secretaries of State,
Commerce, Defense, Energy, and Homeland Security
is that the current export control system poses
a potential threat to national security. Gates
identified as part of the problem export control
processes that were designed 50 years ago that
he claims are unfit for solving modern issues.
The fundamental reform of the export control system, according to Gates, needs to take place in four dimensions, also referred as the “four singles”:
Gates also mentioned that among the changes to the export controls system are treaties between the U.S. and each of the key allies that contain special arrangements under which an export license would not be required for export of goods that are not on a list of very sensitive items, to pre-determined communities of companies that have been vetted by the foreign government. This legislation is currently pending ratification in the Senate.
The fundamental reform of the export control system, according to Gates, needs to take place in four dimensions, also referred as the “four singles”:
- A single export
control list. The United States Munitions List
(USML) and Commerce Control List (CCL) would be
replaced by a single list, which would prevent
forum shopping where exporters may try
classification under one list versus another,
duplication, where an item is covered by both
USML and CCL, and also aid companies in
understanding applicable restrictions.
2 A single licensing agency. Currently, two different authorities – the State Department’s Director of Defense Trade Controls (DDTC) and the Commerce Department’s Bureau of Industry and Security (BIS) – often make independent, unilateral decisions, which sometimes cause for confusion and delay in decision making.
3 A single agency to coordinate enforcement, which would strengthen the ability to identify, investigate and prosecute violations. Currently, multiple enforcement agencies exist, including Immigration and Customs Enforcement (ICE), State enforcement, Commerce Export Enforcement Office, FBI, and many others. It is expected that in the future there will still be multiple enforcement institutions, but their efforts will be coordinated to avoid overlapping jurisdiction and, in some cases, confused authorities.
4 A single unified IT system. Gates stressed that a single IT system instead of the current three would review license application process across the U.S. government and also make this process more efficient.
Gates also mentioned that among the changes to the export controls system are treaties between the U.S. and each of the key allies that contain special arrangements under which an export license would not be required for export of goods that are not on a list of very sensitive items, to pre-determined communities of companies that have been vetted by the foreign government. This legislation is currently pending ratification in the Senate.
BIS Eliminates Paper Versions of Most Export Submissions
04/05/10 12:33 AM
On
April 5, 2010, Bureau of Industry and Security
(BIS) issued a final rule in Federal
Register that eliminates the paper version of
most of export submissions to BIS. The rule also
changes certain recordkeeping requirements
associated with the elimination of paper
documents.
Specifically, the rule revises the EAR to state that BIS may issue export and reexport licenses either electronically or on paper and that each license will bear a license number. This language enables BIS to exercise discretion in deciding whether to issue a license electronically in SNAP-R or on paper. However, BIS expects that it will issue nearly all licenses electronically. Unless some exceptional circumstances exist, only licenses for which the applicant was authorized to file the application on paper and licenses that BIS cannot issue electronically (currently, only reopened licenses) will be issued on paper. BIS made the change to reduce the costs of generating and mailing paper copies of licenses.
Currently, BIS issues license related documents in two ways: electronically in BIS’s Simplified Network Application Processing Redesign system (SNAP-R) and on paper. Most license related documents are issued in both electronic and paper form. Only a few such documents are issued only on paper.
The EAR require that export license applications, reexport license application, License Exception AGR notification, encryption review requests, and classification requests be submitted to BIS electronically using SNAP-R, except in individual instances where BIS authorizes a paper submission. The license related documents associated with a SNAP-R submissions are issued on line in SNAP-R where the submitter may view, save, or print a copy. In addition, a paper version of each of those documents is mailed to the submitter.
In two situations, BIS issues only a paper version of a license related document: when BIS authorizes a paper submission, and when BIS must reissue the license related document because it reopened a matter previously considered to be completed. BIS does not intend to stop issuing paper license related documents in those two situations. It also does not intend to change its practices regarding issuance of Special Comprehensive Licenses or Special Iraq Reconstruction Licenses, both of which are paper-based.
BIS intends to discontinue issuing paper documents in the situations where it currently issues both paper and electronic versions of license related documents.
Recordkeeping Requirements
The final rule also made changes to recordkeeping requirements associated with the elimination of paper documents:
The new rule also provides that parties who receive documents issued by BIS in SNAP-R may store the documents in two ways, either of which meet the requirements that original documents be retained: electronically in a format readable by software possessed by the recipient party, or storage of a complete printed paper copy of the document.
The new rule is effective May 5, 2010.
Specifically, the rule revises the EAR to state that BIS may issue export and reexport licenses either electronically or on paper and that each license will bear a license number. This language enables BIS to exercise discretion in deciding whether to issue a license electronically in SNAP-R or on paper. However, BIS expects that it will issue nearly all licenses electronically. Unless some exceptional circumstances exist, only licenses for which the applicant was authorized to file the application on paper and licenses that BIS cannot issue electronically (currently, only reopened licenses) will be issued on paper. BIS made the change to reduce the costs of generating and mailing paper copies of licenses.
Currently, BIS issues license related documents in two ways: electronically in BIS’s Simplified Network Application Processing Redesign system (SNAP-R) and on paper. Most license related documents are issued in both electronic and paper form. Only a few such documents are issued only on paper.
The EAR require that export license applications, reexport license application, License Exception AGR notification, encryption review requests, and classification requests be submitted to BIS electronically using SNAP-R, except in individual instances where BIS authorizes a paper submission. The license related documents associated with a SNAP-R submissions are issued on line in SNAP-R where the submitter may view, save, or print a copy. In addition, a paper version of each of those documents is mailed to the submitter.
In two situations, BIS issues only a paper version of a license related document: when BIS authorizes a paper submission, and when BIS must reissue the license related document because it reopened a matter previously considered to be completed. BIS does not intend to stop issuing paper license related documents in those two situations. It also does not intend to change its practices regarding issuance of Special Comprehensive Licenses or Special Iraq Reconstruction Licenses, both of which are paper-based.
BIS intends to discontinue issuing paper documents in the situations where it currently issues both paper and electronic versions of license related documents.
Recordkeeping Requirements
The final rule also made changes to recordkeeping requirements associated with the elimination of paper documents:
- The rule removes
a requirement that the license holder attach a
replacement license issued by BIS to the original
license that it replaces. However, the rule
retains the requirement that the license holder
keep both the original and the replacement
licenses.
• The rule exempts parties who submit documents to BIS via SNAP-R from requirements to retain copies of documents so submitted even thought those documents are “export control documents” under the EAR.
• The new rule requires that the following documents are kept: (1) notification from BIS that an application is being returned without action; (2) notification from BIS that an application is being denied; and (3) notification from BIS of the results of a commodity classification or encryption review request conducted by BIS.
The new rule also provides that parties who receive documents issued by BIS in SNAP-R may store the documents in two ways, either of which meet the requirements that original documents be retained: electronically in a format readable by software possessed by the recipient party, or storage of a complete printed paper copy of the document.
The new rule is effective May 5, 2010.
Exporter Assessed $100,000 Penalty for Unauthorized Exports to Iran
04/02/10 11:18 PM
On
April 2, 2010, Aqua-Loop Cooling Towers Co.
(Aqua-Loop) of Folsom, CA, settled with Bureau of
Industry and Security (BIS) charges of violating
the Export Administrations Regulations (EAR).
According to the settlement agreement, from June 2004 to April 2005, Aqua-Loop exported items subject to the EAR from the U.S. to Iran, via the United Arab Emirates, without the required authorization from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Specifically, Aqua-Loop searched for and obtained items from U.S. distributors and then exported them to an Iranian customer and co-conspirator, Parto Abgardan Cooling Towers Co. (Parto). On one occasion, Parto asked Aqua-Loop to purchase a filament winding machine in the U.S. on its behalf and forward it on to Dubai and then to Iran.
According to the settlement agreement, Aqua-Loop was assessed a civil penalty of $100, 000 that was suspended for 10 years. The company is also prohibited from dealing in any transaction that is subject to the EAR for ten years
According to the settlement agreement, from June 2004 to April 2005, Aqua-Loop exported items subject to the EAR from the U.S. to Iran, via the United Arab Emirates, without the required authorization from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC).
Specifically, Aqua-Loop searched for and obtained items from U.S. distributors and then exported them to an Iranian customer and co-conspirator, Parto Abgardan Cooling Towers Co. (Parto). On one occasion, Parto asked Aqua-Loop to purchase a filament winding machine in the U.S. on its behalf and forward it on to Dubai and then to Iran.
According to the settlement agreement, Aqua-Loop was assessed a civil penalty of $100, 000 that was suspended for 10 years. The company is also prohibited from dealing in any transaction that is subject to the EAR for ten years
BIS Amends the EAR to Enhance U.S. Homeland Security
03/25/10 11:14 PM
On
March 25, 2010, the Bureau of Industry and Security
(BIS) issued a final rule amending the
Export Administration Regulations (EAR) by
revising controls to advance U.S. homeland
security and foreign policy interests. The
revisions include language that should
facilitate public understanding of how concealed
object detection equipment is treated for
purposes of U.S. Government export controls, in
particular by detailing the technical parameters
of concealed object detection equipment that is
subject to the Export Administration
Regulations.
These amendments reflect issues identified by an interagency working group that is reviewing export control issues related to homeland security. The interagency working group is made up of representatives from the Departments of Commerce, Defense, Homeland Security and State. The purpose of the interagency working group is to ensure that appropriate export controls are in place to protect U.S. export control interests for homeland security related items, while at the same time facilitating the development, production and use of items that will enhance U.S. homeland security and the homeland security of key U.S. allies.
To help accomplish these objectives, this rule adds three new entries to the Commerce Control List (CCL) to control certain concealed object detection equipment operating in the frequency range from 30 GHz to 3000 GHz and related software and technology. In addition, to facilitate the export and reexport of these items to certain trusted destinations and end-users, this rule adds new license review criteria to the EAR to create a presumption of approval for certain cooperating countries provided the items are being made to a government end-user or to a person designated by the government end-user pursuant to contract.
These amendments reflect issues identified by an interagency working group that is reviewing export control issues related to homeland security. The interagency working group is made up of representatives from the Departments of Commerce, Defense, Homeland Security and State. The purpose of the interagency working group is to ensure that appropriate export controls are in place to protect U.S. export control interests for homeland security related items, while at the same time facilitating the development, production and use of items that will enhance U.S. homeland security and the homeland security of key U.S. allies.
To help accomplish these objectives, this rule adds three new entries to the Commerce Control List (CCL) to control certain concealed object detection equipment operating in the frequency range from 30 GHz to 3000 GHz and related software and technology. In addition, to facilitate the export and reexport of these items to certain trusted destinations and end-users, this rule adds new license review criteria to the EAR to create a presumption of approval for certain cooperating countries provided the items are being made to a government end-user or to a person designated by the government end-user pursuant to contract.
Virginia Man Convicted of Theft of DuPont Trade Secrets
03/18/10 10:33 PM
On
March 18, 2010, the Department of Justice (DOJ)
issued a press release
regarding the
sentencing of Michael David Mitchell, a Virginia
man, to 18 months imprisonment for theft of
trade secrets and obstruction of justice.
Mitchell was employed as an engineer and
salesperson for DuPont for over 25 years. During
his last two years of employment, Mitchell
worked in the sales and marketing of Kevlar,®
DuPont's registered trademark for a very light,
very strong synthetic fiber that is spun into
ropes or fabric sheets that can be used as such,
or as an ingredient in composite material
components.
After DuPont terminated his employment, Mitchell began work as a consultant for Kolon Industries, Inc. (Kolon), a DuPont competitor. In 2007, DuPont officials became aware that Mitchell had been contacting current and former employees of DuPont seeking technical information on behalf of Kolon. DuPont officials raised their concerns with FBI and Department of Commerce (DoC) investigators, who launched a joint investigation. On March 12, 2008, FBI and DoC special agents executed a federal search warrant on Mitchell's house, seizing documents and multiple computers. Forensic analysis of the defendant's computers revealed hundreds of pages of DuPont proprietary documents, along with the evidence of the above-referenced Denier Economics email.
Following the execution of the search warrant, Mitchell agreed to become a cooperator for the government during its ongoing investigation relating to possible attempted theft of trade secrets and violations of export control laws. Under the direction and supervision of federal investigators, Mitchell made numerous recorded telephone conversations and exchanged emails with Kolon employees.
After DuPont terminated his employment, Mitchell began work as a consultant for Kolon Industries, Inc. (Kolon), a DuPont competitor. In 2007, DuPont officials became aware that Mitchell had been contacting current and former employees of DuPont seeking technical information on behalf of Kolon. DuPont officials raised their concerns with FBI and Department of Commerce (DoC) investigators, who launched a joint investigation. On March 12, 2008, FBI and DoC special agents executed a federal search warrant on Mitchell's house, seizing documents and multiple computers. Forensic analysis of the defendant's computers revealed hundreds of pages of DuPont proprietary documents, along with the evidence of the above-referenced Denier Economics email.
Following the execution of the search warrant, Mitchell agreed to become a cooperator for the government during its ongoing investigation relating to possible attempted theft of trade secrets and violations of export control laws. Under the direction and supervision of federal investigators, Mitchell made numerous recorded telephone conversations and exchanged emails with Kolon employees.
President Obama Signs Executive Order on National Export Initiative
03/11/10 05:38 PM
On
March 11, 2010, President Obama signed an
executive order
launching a
single, comprehensive strategy to promote
American exports called National Export
Initiative (NEI). That same day, President
Obama spoke about NEI at
the Export-Import Bank’s (Ex-Im) Annual
Conference in Washington, DC.
In the executive order, Obama states that the NEI will help meet his Administration’s goal of doubling exports over the next 5 years by working to remove trade barriers abroad, by helping firms to overcome obstacles to enter new export markets, by increasing trade financing, and by pursuing a general, Government-wide approach to promote U.S. exports abroad.
Particular focus of NEI will fall on the following areas:
a) Exports by small and medium-sized corporations (SMEs). EPC members will develop programs designed to enhance export assistance to SMEs, including developing programs to improve technical assistance to first-time exporters and assisting current exporters in identifying new export opportunities in international markets;
b) Federal Export Assistance. Members of the EPC will promote Federal resources currently available to assist U.S. exports;
c) Trade Missions and Commercial Advocacy. U.S. Government-led trade missions will effectively promote exports by U.S. companies;
d) Increasing Trade Financing. The President of Ex-Im will work on increasing the availability of credits to SMEs. In his speech, the President noted that in 2009, Ex-Im authorized $21 billion in loans in support of U.S. exports, almost a 50% increase from the previous year. Under the NEI, the amount of trade financing available to SMEs is expected to increase further;
e) Macroeconomic Rebalancing. A balanced and strong growth in the global economy will be promoted through the G20 or other appropriate mechanisms;
f) Reducing Barriers to Trade. The U.S. Trade Representative together with members of EPC will take steps to improve market access overseas for U.S. manufacturers, farmers, and service providers. To ensure that that U.S. companies have free and fair access to the overseas markets, in his speech at Ex-Im President Obama called for enforcement of trade agreements that U.S. already has on books; and
g) Export Promotion of Services. Pursuant to NEI, a framework for promoting services trade, including the necessary policy and export promotion tools, will be developed.
President Obama also stated that one of the major goals of NEI is aggressive protection of intellectual property in the U.S., achieved by negotiating proper protections with foreign countries and enforcing existing U.S. agreements overseas.
With regard to export controls, President Obama stated:
Finally, we’re working to reform our Export Control System for our strategic, high-tech industries, which will strengthen our national security. What we want to do is concentrate our efforts on enforcing controls on the export of our most critical technologies, making America safer while enhancing the competitiveness of key American industries. We’ve conducted a broad review of the Export Control System, and Secretary Gates will outline our reform proposal within the next couple of weeks. But today, I’d like to announce two steps that we’re prepared to take.
First, we’re going to streamline the process certain companies need to go through to get their products to market -– products with encryption capabilities like cell phone and network storage devices. Right now, they endure a technical review that can take between 30 and 60 days, and that puts that company at a distinct disadvantage to foreign competitors who don’t face those same delays. So a new one-time online process will shorten that review time from 30 days to 30 minutes, and that makes it quicker and easier for our businesses to compete while meeting our national security requirements.
And second, we’re going to eliminate unnecessary obstacles for exporting products to companies with dual-national and third-country-national employees. Currently, our exporters and foreign consumers of these goods have to comply with two different, conflicting set of standards. They’re running on two tracks, when they could be running just on one. So we’re moving towards harmonizing those standards and making it easier for American and foreign companies to comply with our requirements without diminishing our security. And I look forward to consulting with Congress on these reforms, as well as broader export control reform efforts.
In the executive order, Obama states that the NEI will help meet his Administration’s goal of doubling exports over the next 5 years by working to remove trade barriers abroad, by helping firms to overcome obstacles to enter new export markets, by increasing trade financing, and by pursuing a general, Government-wide approach to promote U.S. exports abroad.
Particular focus of NEI will fall on the following areas:
a) Exports by small and medium-sized corporations (SMEs). EPC members will develop programs designed to enhance export assistance to SMEs, including developing programs to improve technical assistance to first-time exporters and assisting current exporters in identifying new export opportunities in international markets;
b) Federal Export Assistance. Members of the EPC will promote Federal resources currently available to assist U.S. exports;
c) Trade Missions and Commercial Advocacy. U.S. Government-led trade missions will effectively promote exports by U.S. companies;
d) Increasing Trade Financing. The President of Ex-Im will work on increasing the availability of credits to SMEs. In his speech, the President noted that in 2009, Ex-Im authorized $21 billion in loans in support of U.S. exports, almost a 50% increase from the previous year. Under the NEI, the amount of trade financing available to SMEs is expected to increase further;
e) Macroeconomic Rebalancing. A balanced and strong growth in the global economy will be promoted through the G20 or other appropriate mechanisms;
f) Reducing Barriers to Trade. The U.S. Trade Representative together with members of EPC will take steps to improve market access overseas for U.S. manufacturers, farmers, and service providers. To ensure that that U.S. companies have free and fair access to the overseas markets, in his speech at Ex-Im President Obama called for enforcement of trade agreements that U.S. already has on books; and
g) Export Promotion of Services. Pursuant to NEI, a framework for promoting services trade, including the necessary policy and export promotion tools, will be developed.
President Obama also stated that one of the major goals of NEI is aggressive protection of intellectual property in the U.S., achieved by negotiating proper protections with foreign countries and enforcing existing U.S. agreements overseas.
With regard to export controls, President Obama stated:
Finally, we’re working to reform our Export Control System for our strategic, high-tech industries, which will strengthen our national security. What we want to do is concentrate our efforts on enforcing controls on the export of our most critical technologies, making America safer while enhancing the competitiveness of key American industries. We’ve conducted a broad review of the Export Control System, and Secretary Gates will outline our reform proposal within the next couple of weeks. But today, I’d like to announce two steps that we’re prepared to take.
First, we’re going to streamline the process certain companies need to go through to get their products to market -– products with encryption capabilities like cell phone and network storage devices. Right now, they endure a technical review that can take between 30 and 60 days, and that puts that company at a distinct disadvantage to foreign competitors who don’t face those same delays. So a new one-time online process will shorten that review time from 30 days to 30 minutes, and that makes it quicker and easier for our businesses to compete while meeting our national security requirements.
And second, we’re going to eliminate unnecessary obstacles for exporting products to companies with dual-national and third-country-national employees. Currently, our exporters and foreign consumers of these goods have to comply with two different, conflicting set of standards. They’re running on two tracks, when they could be running just on one. So we’re moving towards harmonizing those standards and making it easier for American and foreign companies to comply with our requirements without diminishing our security. And I look forward to consulting with Congress on these reforms, as well as broader export control reform efforts.
U.K. Co. Pleads Guilty to Conspiracy to Defraud U.S. Government Agencies
03/02/10 05:32 PM
On
March 1, 2010, Department of Justice (DOJ)
issued a press release
announcing that
BAE Systems plc (BAES) pleaded guilty in U.S.
District Court in the District of Columbia to
conspiracy to defraud the U.S. by impairing and
impeding its lawful functions, to make false
statements about its Foreign Corrupt Practices
Act (FCPA) compliance program, and to violate
the Arms Export Control Act (AECA) and
International Traffic in Arms Regulations
(ITAR). BAES was sentenced to pay $400 million
criminal fine.
Headquartered in the U.K., BAES is a multinational defense contractor. The company also has a U.S. subsidiary, BAE Systems, Inc., headquartered in Rockville, Maryland. None of the criminal conduct described in the case is attributable to the American company.
According to court documents, from approximately 2000 to 2002, despite its promises to create mechanisms to ensure compliance with the legal prohibitions on foreign bribery stemming from FCPA, as well as foreign laws implementing the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention, BAES knowingly and willfully failed to do so.
Instead, BAES made a series of substantial payments to shell companies and third party intermediaries that were not subject to the degree of scrutiny and review to which BAES told the U.S. government the payments would be subjected. BAES admitted it regularly retained what it referred to as “marketing advisors” to assist in securing sales of defense items without scrutinizing those relationships.
BAES also encouraged the advisors to establish their own offshore shell companies to receive payments from BAES while disguising the origins and recipients of these payments. BAES set up a company in the British Virgin Islands (BVI) to conceal its marketing advisor relationships and to circumvent laws in countries that did not allow such relationships, to create obstacles for investigators to penetrate the arrangements, and to assist advisors in avoiding tax liability for payment from BAES.
BAES used this BVI entity to make payments totaling more than £135 million in addition to $14 million, although being aware, in some cases, that there was a high probability that part of the payment would be used to ensure that BAES was favored in foreign government contracts regarding purchase of defense articles.
BAES also served as the prime contractor to the U.K. government in the mid-1980s, after the U.K. and the Kingdom of Saudi Arabia (KSA) entered into a formal understanding. There, BAES provided “support services” resulting in substantial benefits to a foreign public official of KSA, who was in position to influence sales of fighter jets, and other defense materials and related support services. BAES did not review or verify benefits provided to the KSA official, including it did not perform adequate review of more than $5 million in invoices submitted by a BAES employees from May 2001 to early 2002 to establish whether the listed expenses were in compliance with previous statements made by BAES to the U.S. government regarding its anti-corruption compliance measures.
As part of its guilty plea, BAES has agreed to maintain a compliance program designed to detect and deter violations of the FCPA, other foreign laws implementing the OECD Anti-bribery Convention, and any other applicable anti-corruption laws, and that is designed to detect and deter violations of the AECA and ITAR, as well as similar export control laws.
Headquartered in the U.K., BAES is a multinational defense contractor. The company also has a U.S. subsidiary, BAE Systems, Inc., headquartered in Rockville, Maryland. None of the criminal conduct described in the case is attributable to the American company.
According to court documents, from approximately 2000 to 2002, despite its promises to create mechanisms to ensure compliance with the legal prohibitions on foreign bribery stemming from FCPA, as well as foreign laws implementing the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention, BAES knowingly and willfully failed to do so.
Instead, BAES made a series of substantial payments to shell companies and third party intermediaries that were not subject to the degree of scrutiny and review to which BAES told the U.S. government the payments would be subjected. BAES admitted it regularly retained what it referred to as “marketing advisors” to assist in securing sales of defense items without scrutinizing those relationships.
BAES also encouraged the advisors to establish their own offshore shell companies to receive payments from BAES while disguising the origins and recipients of these payments. BAES set up a company in the British Virgin Islands (BVI) to conceal its marketing advisor relationships and to circumvent laws in countries that did not allow such relationships, to create obstacles for investigators to penetrate the arrangements, and to assist advisors in avoiding tax liability for payment from BAES.
BAES used this BVI entity to make payments totaling more than £135 million in addition to $14 million, although being aware, in some cases, that there was a high probability that part of the payment would be used to ensure that BAES was favored in foreign government contracts regarding purchase of defense articles.
BAES also served as the prime contractor to the U.K. government in the mid-1980s, after the U.K. and the Kingdom of Saudi Arabia (KSA) entered into a formal understanding. There, BAES provided “support services” resulting in substantial benefits to a foreign public official of KSA, who was in position to influence sales of fighter jets, and other defense materials and related support services. BAES did not review or verify benefits provided to the KSA official, including it did not perform adequate review of more than $5 million in invoices submitted by a BAES employees from May 2001 to early 2002 to establish whether the listed expenses were in compliance with previous statements made by BAES to the U.S. government regarding its anti-corruption compliance measures.
As part of its guilty plea, BAES has agreed to maintain a compliance program designed to detect and deter violations of the FCPA, other foreign laws implementing the OECD Anti-bribery Convention, and any other applicable anti-corruption laws, and that is designed to detect and deter violations of the AECA and ITAR, as well as similar export control laws.
BIS Posts Updated EMCP Compliance Guidelines
02/22/10 03:13 PM
On
February 22, 2010, the U.S. Bureau of Industry and
Security (BIS) posted online updated
“Compliance Guidelines: How to Develop
an Effective Export Management and Compliance
Program and Manual.”
U.S. Seeks Extradition of Iranian Engineer Who Purchased Sensitive Items Online
02/17/10 10:12 PM
The
Associated Press reported that on
February 17, 2010, a French court postponed a
decision on whether to extradite an Iranian
Engineer to the U.S., where he is accused of
exporting goods to an embargoed country, money
laundering, smuggling goods, and other charges.
Majid Kakavand (Kakavand) was arrested in Paris
on March 20, 2009 and held in prison until
August 26, 2009, until his release on condition
that he stays in Paris.
U.S. government claims that Kakavand went online to purchase U.S. electronics, including capacitors, inductors, resistors, sensors and connectors, and had them shipped to Malaysia, from where they were forwarded to two Iranian military entities.
The French court must decide whether Kakavand is to be extradited based on whether his actions were illegal in France as well as the United States. U.S. government claims that Kakavand needed export licenses to send the items to Iran. Kakavand’s attorneys argue that he did not violate French or European Union laws which have no general trade embargo on Iran like the U.S, and that documents in all sales transactions were stamped NLR, for “No License Required.”
The main argument in this case is whether items that Kakavand purchased have sensitive defense uses. The accused firefengineer contends that the electronics that he bought online are ordinary and commonplace; however, the U.S. in its extradition request argue that many items at issue meet military standards.
In February’s hearing, the judge handling the case asked for additional information on the matter, including France’s military armament body studies, before making the extradition decision. The new hearing has been set for March 31, 2010.
U.S. government claims that Kakavand went online to purchase U.S. electronics, including capacitors, inductors, resistors, sensors and connectors, and had them shipped to Malaysia, from where they were forwarded to two Iranian military entities.
The French court must decide whether Kakavand is to be extradited based on whether his actions were illegal in France as well as the United States. U.S. government claims that Kakavand needed export licenses to send the items to Iran. Kakavand’s attorneys argue that he did not violate French or European Union laws which have no general trade embargo on Iran like the U.S, and that documents in all sales transactions were stamped NLR, for “No License Required.”
The main argument in this case is whether items that Kakavand purchased have sensitive defense uses. The accused firefengineer contends that the electronics that he bought online are ordinary and commonplace; however, the U.S. in its extradition request argue that many items at issue meet military standards.
In February’s hearing, the judge handling the case asked for additional information on the matter, including France’s military armament body studies, before making the extradition decision. The new hearing has been set for March 31, 2010.
DDTC Makes Announcement re: Commodity Jurisdiction Requests
02/17/10 03:22 PM
On
February 17, 2010, the Directorate of Defense Trade
Controls (DDTC) announced that until further notice
and effective immediately: “All CJ requests must be
mailed (FedEx, DRL, UPS, USPS, etc.) to DDTC.
Requests must include eight complete copies of a
fully executed DS-4076 CJ Form and all supporting
documentation. This statement is to temporarily
update the CJ Guidelines included
below.”
Proposed Form I-129 Revision Requires Employers to Obtain BIS Deemed Export License before Filing for H-1B
02/08/10 11:33 PM
On
February 8, 2010, the Department of Homeland
Security, U.S. Citizenship and Immigration Services
(USCIS) issued a notice requesting
comments on the proposed changes of Form
I-129, Petition for
a Nonimmigrant Worker. If revised, Form I-129,
used to apply for H-1B visas for skilled
technical workers, will require employers to
obtaine a deemed export license from the Bureau
of Industry and Security (BIS) before applying
for the H-1B visa itself. Before, an employer
could file for H-1B visa and the deemed export
licensed simultaneously.
As provided by the instructions to Form I-129 on p. 4, if a deemed export license is required, “the petitioner must submit evidence that a review of the deemed export license requirements has been completed, as set forth by Title 15, Code of Federal Regulations (CFR), Export Administration Regulations (EAR) Part 734.2 the Deemed Export Rule as regulated by the U.S. Department of Commerce.”
Comments on the proposed changes are due by April 9, 2010.
As provided by the instructions to Form I-129 on p. 4, if a deemed export license is required, “the petitioner must submit evidence that a review of the deemed export license requirements has been completed, as set forth by Title 15, Code of Federal Regulations (CFR), Export Administration Regulations (EAR) Part 734.2 the Deemed Export Rule as regulated by the U.S. Department of Commerce.”
Comments on the proposed changes are due by April 9, 2010.
Ex-Boeing Engineer Sentenced for Stealing Aerospace Secrets for China
02/08/10 11:22 PM
The
Wall Street Journal reported that on
February 8, 2010, Dongfan “Greg” Chung, a
Chinese-born former Boeing engineer was
sentenced to 15 years and 8 months in prison for
acquiring sensitive U.S. space shuttle
information and other documents for China.
The case against Chung was the first U.S. trial on economic espionage charges. The government charged that Chung began spying for the Chinese in the late 1970s, after he became a naturalized U.S. citizen and was hired by Rockwell International, where he worked until it was acquired by Boeing in 1996. Chung stayed with Boeing until he was laid off in 2002, but a year later he was brought back as a consultant. Boeing fired Chung when FBI began its investigation in 2006.
The government accused Chung, a stress analyst with high-level clearance, of stealing documents related to aerospace technology development while working for Rockwell and Boeing. When FBI agents searched Chung’s house in 2006, they found more than 300,000 pages of documents on Boeing-developed aerospace and defense technologies. Specifically, the technologies involved an antenna developed for radar and communications on the U.S. shuttle and a fueling mechanism for a booster rocket used to launch manned space vehicles.
During trial, Chung claimed that he had brought the documents home to write a book. Chung’s lawyers argued that he may have violated Boeing policy by bringing the papers home, but he did not break any laws by doing so, and U.S. government could not prove that he had given away any sensitive information to China.
Assistant U.S. Attorney noted in sentencing papers that Chung acquired a personal wealth of more than $3 million during his cooperation with China.
Chung’s activities were discovered while investigating Chi Mak, another suspected Chinese spy living in Southern California. In 2007, Mak was convicted of conspiracy to export U.S. defense technology to China and sentenced to 24 years in prison.
The case against Chung was the first U.S. trial on economic espionage charges. The government charged that Chung began spying for the Chinese in the late 1970s, after he became a naturalized U.S. citizen and was hired by Rockwell International, where he worked until it was acquired by Boeing in 1996. Chung stayed with Boeing until he was laid off in 2002, but a year later he was brought back as a consultant. Boeing fired Chung when FBI began its investigation in 2006.
The government accused Chung, a stress analyst with high-level clearance, of stealing documents related to aerospace technology development while working for Rockwell and Boeing. When FBI agents searched Chung’s house in 2006, they found more than 300,000 pages of documents on Boeing-developed aerospace and defense technologies. Specifically, the technologies involved an antenna developed for radar and communications on the U.S. shuttle and a fueling mechanism for a booster rocket used to launch manned space vehicles.
During trial, Chung claimed that he had brought the documents home to write a book. Chung’s lawyers argued that he may have violated Boeing policy by bringing the papers home, but he did not break any laws by doing so, and U.S. government could not prove that he had given away any sensitive information to China.
Assistant U.S. Attorney noted in sentencing papers that Chung acquired a personal wealth of more than $3 million during his cooperation with China.
Chung’s activities were discovered while investigating Chi Mak, another suspected Chinese spy living in Southern California. In 2007, Mak was convicted of conspiracy to export U.S. defense technology to China and sentenced to 24 years in prison.
UK Firm Pleads Guilty to Exporting Boeing 747 Aircraft to Iran; Pays $15 Million in Fines
02/06/10 02:58 PM
On
February 5, 2010, the Department of Justice
(DOJ) announced that Balli
Aviation Ltd., a subsidiary of United
Kingdom-based Balli Group PLC, pleaded guilty in
the U.S. District Court for the District of
Columbia to a two-count criminal information in
connection with its illegal export of commercial
Boeing 747 aircraft from the United States to
Iran. (BIS’ press release can be found
here.)
The DOJ announced:
Under the plea agreement, Balli Aviation Ltd. agreed to pay a $2 million criminal fine and be placed on corporate probation for five years. The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce's Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), that was also announced today, represents one of the largest fines for an export violation in BIS history.
Under the terms of the related civil settlement, Balli Group PLC and Balli Aviation Ltd. have agreed to pay a civil penalty of $15 million of which $2 million will be suspended if there are no further export control violations. In addition, Balli Aviation Ltd. and Balli Group PLC are denied export privileges for five years, although this penalty will be suspended provided that neither Balli Aviation nor Balli Group commits any export violations and pays the civil penalty. Under the terms of the settlement, Balli Group PLC and Balli Aviation, Ltd. will also have to submit the results of an independent audit of its export compliance program to BIS and OFAC for each of the next five years.
According to count one of the information filed with the court, beginning in at least October 2005, through October 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. More particularly, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.
Count two of the information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.
"Today's case should serve as further warning of Iran's continued efforts to circumvent sanctions and obtain U.S. technology. Together with our colleagues from the Justice and Commerce departments, OFAC will continue to aggressively pursue both domestic and foreign entities that seek to violate U.S. sanctions programs by exporting goods to Iran from the United States." said Adam J. Szubin, Director, Office of Foreign Assets Control.
The DOJ announced:
Under the plea agreement, Balli Aviation Ltd. agreed to pay a $2 million criminal fine and be placed on corporate probation for five years. The $2 million fine, combined with a related $15 million civil settlement among Balli Group PLC, Balli Aviation Ltd., the U.S. Department of Commerce's Bureau of Industry and Security (BIS), and the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), that was also announced today, represents one of the largest fines for an export violation in BIS history.
Under the terms of the related civil settlement, Balli Group PLC and Balli Aviation Ltd. have agreed to pay a civil penalty of $15 million of which $2 million will be suspended if there are no further export control violations. In addition, Balli Aviation Ltd. and Balli Group PLC are denied export privileges for five years, although this penalty will be suspended provided that neither Balli Aviation nor Balli Group commits any export violations and pays the civil penalty. Under the terms of the settlement, Balli Group PLC and Balli Aviation, Ltd. will also have to submit the results of an independent audit of its export compliance program to BIS and OFAC for each of the next five years.
According to count one of the information filed with the court, beginning in at least October 2005, through October 2008, Balli Aviation Ltd. conspired to export three Boeing 747 aircraft from the United States to Iran without first having obtained the required export license from BIS or authorization from OFAC, in violation of the Export Administration Regulations (EAR) and the Iranian Transactions Regulations. More particularly, the information states that Balli Aviation Ltd., through its subsidiaries, the Blue Sky Companies, purchased U.S.-origin aircraft with financing obtained from an Iranian airline and caused these aircraft to be exported to Iran without obtaining the required U.S. government licenses. Further, Balli Aviation Ltd. entered into lease arrangements that permitted the Iranian airline to use the U.S.-origin aircraft for flights in and out of Iran.
Count two of the information states that Balli Aviation Ltd. violated a Temporary Denial Order (TDO) issued by BIS on March 17, 2008, that prohibited the company from conducting any transaction involving any item subject to the EAR. Starting in or about March 2008 and continuing through about August 2008, Balli Aviation Ltd. willfully violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft which went to the Export Administration Regulations.
"Today's case should serve as further warning of Iran's continued efforts to circumvent sanctions and obtain U.S. technology. Together with our colleagues from the Justice and Commerce departments, OFAC will continue to aggressively pursue both domestic and foreign entities that seek to violate U.S. sanctions programs by exporting goods to Iran from the United States." said Adam J. Szubin, Director, Office of Foreign Assets Control.
White House Launches National Export Initiative
02/04/10 10:44 PM
On
February 4, 2010, U.S. Commerce Secretary Gary
Locke (Locke) announced the details of
President Obama’s National Export Initiative
(NEI) that seeks to double U.S. exports to $3
trillion within then next 5 years. The new
export levels are expected to support 2 million
U.S. jobs.
According to Locke’s entry on the White House blog, NEI seeks primarily to expand U.S. government’s export promotion efforts, increase government’s focus on eliminating obstacles that prevent U.S. exporters from getting open and fair access to foreign access, and improve access to credit, especially for small- and medium-sized businesses that would like to become exporters.
To increase exports, the Commerce Department and several other federal agencies will collaborate in combining trade advocacy with export control reform. According to Locke, the White House is asking Congress to increase trade promotion funding by apportioning an additional $70 million for the International Trade Administration (ITA) and $50 million for the Department of Agriculture in the 2011 budget.
ITA plans to hire an additional 300 trade exports to promote U.S. companies overseas and assist a client base of more that 23,000 to begin or increase their exports in 2011.
As part of the initiative, the Export-Import Bank will increase financing available to small businesses by $2 billion to $6 billion over the next year. Over the past three months, the bank authorized $1 billion in small business loans to increase exports.
NEI will also focus on existing trade laws, including enforcement of intellectual property rights.
According to Locke’s entry on the White House blog, NEI seeks primarily to expand U.S. government’s export promotion efforts, increase government’s focus on eliminating obstacles that prevent U.S. exporters from getting open and fair access to foreign access, and improve access to credit, especially for small- and medium-sized businesses that would like to become exporters.
To increase exports, the Commerce Department and several other federal agencies will collaborate in combining trade advocacy with export control reform. According to Locke, the White House is asking Congress to increase trade promotion funding by apportioning an additional $70 million for the International Trade Administration (ITA) and $50 million for the Department of Agriculture in the 2011 budget.
ITA plans to hire an additional 300 trade exports to promote U.S. companies overseas and assist a client base of more that 23,000 to begin or increase their exports in 2011.
As part of the initiative, the Export-Import Bank will increase financing available to small businesses by $2 billion to $6 billion over the next year. Over the past three months, the bank authorized $1 billion in small business loans to increase exports.
NEI will also focus on existing trade laws, including enforcement of intellectual property rights.
BIS Publishes Final Rule Adding a Validated End-User for the PRC
01/15/10 01:09 AM
On
January 15, 2010, the Bureau of Industry and
Security (BIS) published a final rule to
add an entity to the list of validated end-users
for the Peoples' Republic of China (PRC)
approved to receive exports, reexports, and
transfers of certain items under Authorization
Validated End-User (VEU). Specifically, this
rule amends the EAR to add one additional
validated end-user and identifies eligible items
for export and reexport and transfer
(in-country) to one facility in the PRC.
BIS Launches Online Export Tracking System
01/12/10 09:40 PM
On
January 11, 2010, the Bureau of Industry and
Security (BIS) launched an online version of its
System for Tracking Export License Applications
(STELA). STELA allows users to
check the status of their export and re-export
license applications, classification requests
and agricultural license exception (AGR)
notifications. To access export data, STELA
users must input their application control
number (ACN) assigned by BIS.
With the launch of an online system, BIS plans to eventually phase out the phone-based STELA.
With the launch of an online system, BIS plans to eventually phase out the phone-based STELA.
BIS Updates Freight Forwarder Guidance
01/08/10 01:14 AM
On
January 7, 2010, the Bureau of Industry and
Security (BIS) updated its online guidance for freight
forwarders.
President Obama Advances Reform of the U.S. Export Controls
01/01/10 04:27 PM
Space
News reported that in a
presidential directive signed on December 21,
2009, President Barack Obama has directed his
administration to provide a comprehensive set of
recommendations to create a new U.S. export
control regime.
The recommendations, which are due on January 29, 2010, must be based on the findings of interagency review of U.S. regulations that govern exports of unclassified military and dual use technologies and that was announced by the White House on August 13, 2009. In his directive, the President requires that the recommendations include statutory and regulatory steps necessary for implementation.
The review is being conducted by a joint task force established by National Security Adviser and National Economic Council Director, and includes staff members of the National Security Council. The establishment of the review on August 13, 2009, was the first official indication that Obama would develop export control reform.
Some U.S. industries may benefit from a complete transformation of the current export controls system. The U.S. space industry’s market share declined since increased restrictions on U.S. commercial communications satellite exports in 1999, when Congress made all commercial satellites subject to International Traffic in Arms Regulations (ITAR) following allegations that China’s military was benefiting from launches of U.S. spacecraft. Prior to this legislation, the Commerce Department had export licensing authority over all commercial communications satellites, with the exception of the most sophisticated ones.
Defense News reported that 19 industry lobbying groups, representing hundreds of U.S. companies from warplane manufacturers to software encoders, have relaunched a campaign for export controls reform.
Specifically, the groups seek to de-emphasize current reliance on munitions and dual use technology lists, and instead want to base export decisions on factors such as whether an item can be bought from a foreign country, whether it is widely used outside of defense industry and whether the buyer is a trusted partner.
A key factor in the reform would be consideration of “foreign availability” in deciding whether an item can be exported. According to the lobbyists, if weapons technology can be bought from other countries, there may be little gain in terms of security by restricting U.S. export of those items or technology.
Furthermore, the groups seek that export rules be more specific: e.g., unarmed unmanned aerial vehicles (UAVs) and blimps should not be controlled in the same way that missiles are. Similarly, commercial satellites should not be treated as munitions.
The lobbyists argue that the U.S. Munitions List should be edited to remove items no longer controlled, and a more concrete process should be established for qualifying goods as defense items. One of the lobbying groups seeks that the Commerce Department’s dual-use technology list would be completely erased, after which the Commerce Department would provide reasons for why any one item should be placed on the list.
The groups also recommend that export controls should be switched from a transaction-based approach to a trusted partner process. Accordingly, licenses would not be required for each sale if items were sold to companies and countries that are designated trusted partners.
Current push for reform is likened to a group effort in 2007 to convince Bush administration to reform U.S. export control regime. As a result of the 2007 process, licensing procedures were improved and waiting periods for export licenses were greatly decreased.
The recommendations, which are due on January 29, 2010, must be based on the findings of interagency review of U.S. regulations that govern exports of unclassified military and dual use technologies and that was announced by the White House on August 13, 2009. In his directive, the President requires that the recommendations include statutory and regulatory steps necessary for implementation.
The review is being conducted by a joint task force established by National Security Adviser and National Economic Council Director, and includes staff members of the National Security Council. The establishment of the review on August 13, 2009, was the first official indication that Obama would develop export control reform.
Some U.S. industries may benefit from a complete transformation of the current export controls system. The U.S. space industry’s market share declined since increased restrictions on U.S. commercial communications satellite exports in 1999, when Congress made all commercial satellites subject to International Traffic in Arms Regulations (ITAR) following allegations that China’s military was benefiting from launches of U.S. spacecraft. Prior to this legislation, the Commerce Department had export licensing authority over all commercial communications satellites, with the exception of the most sophisticated ones.
Defense News reported that 19 industry lobbying groups, representing hundreds of U.S. companies from warplane manufacturers to software encoders, have relaunched a campaign for export controls reform.
Specifically, the groups seek to de-emphasize current reliance on munitions and dual use technology lists, and instead want to base export decisions on factors such as whether an item can be bought from a foreign country, whether it is widely used outside of defense industry and whether the buyer is a trusted partner.
A key factor in the reform would be consideration of “foreign availability” in deciding whether an item can be exported. According to the lobbyists, if weapons technology can be bought from other countries, there may be little gain in terms of security by restricting U.S. export of those items or technology.
Furthermore, the groups seek that export rules be more specific: e.g., unarmed unmanned aerial vehicles (UAVs) and blimps should not be controlled in the same way that missiles are. Similarly, commercial satellites should not be treated as munitions.
The lobbyists argue that the U.S. Munitions List should be edited to remove items no longer controlled, and a more concrete process should be established for qualifying goods as defense items. One of the lobbying groups seeks that the Commerce Department’s dual-use technology list would be completely erased, after which the Commerce Department would provide reasons for why any one item should be placed on the list.
The groups also recommend that export controls should be switched from a transaction-based approach to a trusted partner process. Accordingly, licenses would not be required for each sale if items were sold to companies and countries that are designated trusted partners.
Current push for reform is likened to a group effort in 2007 to convince Bush administration to reform U.S. export control regime. As a result of the 2007 process, licensing procedures were improved and waiting periods for export licenses were greatly decreased.
DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Establishes New Guidance Regarding Temporary Import Violations DDTC Issues New Guidance on Temporary Import Violations
12/15/09 05:22 PM
The
Directorate of Defense Trade Controls (DDTC) has
published a notice on its website
regarding temporary imports of defense articles.
The notice provides that such imports require
the recipient to obtain a DSP-61 (a Temporary
Import License), or to claim the exemption under
22 CFR §123.4.
According to DDTC, the number of instances where a foreign person temporarily returns a defense article for repair or replacement without authorization to a U.S. person without their prior knowledge has increased. In this type of situation, the U.S. person is unable to coordinate the return and obtain the requisite DSP-61 license or claim the regulatory exemptions under the International Traffic in Arms Regulations (ITAR).
DDTC has established new guidance regarding unauthorized temporary imports and the subsequent exports to return the items to the foreign person. In such case, the U.S. person should investigate the nature and cause of violation and determine if the U.S. person had any responsibility for the violation.
If the U.S. person determines he was not responsible for a licensing violation, then in lieu of submitting a separate Voluntary Disclosure in accordance with ITAR §127.12, the U.S. person can submit a DSP-5 license application to return the defense article to the foreign person. The DSP-5 application must be accompanied by a transmittal letter which explains why the applicant believes they do not share any responsibility for the violation and the steps taken to make this determination; the identities and addresses of all persons known or suspected to be involved in the activities giving rise to the unauthorized temporary import; and any measures taken to prevent such reoccurrence.
According to DDTC, the number of instances where a foreign person temporarily returns a defense article for repair or replacement without authorization to a U.S. person without their prior knowledge has increased. In this type of situation, the U.S. person is unable to coordinate the return and obtain the requisite DSP-61 license or claim the regulatory exemptions under the International Traffic in Arms Regulations (ITAR).
DDTC has established new guidance regarding unauthorized temporary imports and the subsequent exports to return the items to the foreign person. In such case, the U.S. person should investigate the nature and cause of violation and determine if the U.S. person had any responsibility for the violation.
If the U.S. person determines he was not responsible for a licensing violation, then in lieu of submitting a separate Voluntary Disclosure in accordance with ITAR §127.12, the U.S. person can submit a DSP-5 license application to return the defense article to the foreign person. The DSP-5 application must be accompanied by a transmittal letter which explains why the applicant believes they do not share any responsibility for the violation and the steps taken to make this determination; the identities and addresses of all persons known or suspected to be involved in the activities giving rise to the unauthorized temporary import; and any measures taken to prevent such reoccurrence.
BIS Amends EAR per Wassenaur Revisions
12/11/09 10:38 PM
The
Bureau of Industry and Security (BIS) issued
a final rule in the Federal
Register stating that, effective December 11,
2009, revises the Export Administration
Regulations (EAR) to implement changes to the
Wassenaar Arrangement’s List of Dual-Use Goods
and Technologies. The changes were agreed upon
by participating countries during Wassenaur
Arrangement’s plenary session in December 2010.
The U.S., as a participating member of the
Wassenaur Arrangement, must modify the Commerce
Control List (CCL) in order to incorporate these
changes.
The final rule amends CCL categories 1, 2, 3, 4, 5 (Parts 1 and 2), 6, 7, 8 and 9, as well as Definitions and Reports sections.
Detailed changes to CCL can be accessed here.
The final rule amends CCL categories 1, 2, 3, 4, 5 (Parts 1 and 2), 6, 7, 8 and 9, as well as Definitions and Reports sections.
Detailed changes to CCL can be accessed here.
DDTC Amends Policy on Review Time for ITAR License Applications
12/03/09 04:39 PM
On
December 3, 2009, the Department of State's
Directorate of Defense Trade Controls (DDTC) issued
a notice in the Federal
Register adding a sixth national security
exception to the general 60 day license
adjudication deadline.
National Security Presidential Directive-56 signed on January 22, 2008, instructs the Department of State to complete the review and adjudication of license applications within 60 days of receipt, except in cases where national security exceptions apply. In addition to the five national security exceptions published in April 2008, Department of State’s experience has shown that an additional exception to the license review time is required.
Specifically, it has been noted that certain circumstances may require the Department of State to initiate a review of an established export policy relevant to license applications, which might result in cases that have been approvable before the review being returned without action to the applicant while the review is ongoing. In such situations, enforcing the 60-day deadline without ability to account for these types of situations might result in another applicant’s license, submitted after the first license but that had not reached the 60-day headline, being approved once the review is complete, thus creating an unlevel playing field. Therefore, the Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding the sixth exception to account for this issue, and now the following national security exceptions are applicable:
(1) When a Congressional Notification is required (notification thresholds differ based on the dollar value, countries involved in the transaction and defense articles and services);
(2) When required Government Assurances have not been received;
(3) When end-use checks have not been completed;
(4) When the Department of Defense has not yet completed its review;
(5) When a Waiver of restrictions is required; and
(6) When a related export policy is under active review and pending final determination by the State Department.
National Security Presidential Directive-56 signed on January 22, 2008, instructs the Department of State to complete the review and adjudication of license applications within 60 days of receipt, except in cases where national security exceptions apply. In addition to the five national security exceptions published in April 2008, Department of State’s experience has shown that an additional exception to the license review time is required.
Specifically, it has been noted that certain circumstances may require the Department of State to initiate a review of an established export policy relevant to license applications, which might result in cases that have been approvable before the review being returned without action to the applicant while the review is ongoing. In such situations, enforcing the 60-day deadline without ability to account for these types of situations might result in another applicant’s license, submitted after the first license but that had not reached the 60-day headline, being approved once the review is complete, thus creating an unlevel playing field. Therefore, the Directorate of Defense Trade Controls (DDTC) issued a notice in the Federal Register adding the sixth exception to account for this issue, and now the following national security exceptions are applicable:
(1) When a Congressional Notification is required (notification thresholds differ based on the dollar value, countries involved in the transaction and defense articles and services);
(2) When required Government Assurances have not been received;
(3) When end-use checks have not been completed;
(4) When the Department of Defense has not yet completed its review;
(5) When a Waiver of restrictions is required; and
(6) When a related export policy is under active review and pending final determination by the State Department.
DDTC Publishes Proposed Rules for Comment
11/25/09 03:11 PM
On
November 25, 2009, the Department of State's
Directorate of Defense Trade Controls (DDTC)
published a proposed rule
to
amend Section 126.6 of the International Traffic
in Arms Regulations (ITAR) pertaining to U.S.
Government transfer programs and foreign-owned
military aircraft and naval vessels. Section
126.6 is being amended to clarify the particular
circumstances when a license is not required by
DDTC. DDTC will accept comments on this proposed
rule until January 25, 2010.
On November 25, 2009, the DDTC also published a proposed rule to amend Section 125.9 of the ITAR regarding an exemption for technical data, to clarify that the exemption covers technical data, including classified information, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the United States. DDTC will accept comments on this proposed rule until January 25, 2010.
On November 25, 2009, the DDTC also published a proposed rule to amend Section 125.9 of the ITAR regarding an exemption for technical data, to clarify that the exemption covers technical data, including classified information, regardless of media or format, sent or taken by a U.S. person who is an employee of a U.S. corporation or a U.S. Government agency to a U.S. person employed by that U.S. corporation or to a U.S. Government agency outside the United States. DDTC will accept comments on this proposed rule until January 25, 2010.
Director of Singapore Company Sentenced for Iran Embargo Violations
11/06/09 04:15 PM
On
November 5, 2009, a federal court in Brooklyn,
NY sentenced Laura
Wang-Woodford, a U.S. citizen and a director of
Singapore-based Monarch Aviation Pte, Ltd.
(Monarch), to 46 months’ incarceration for
conspiracy to violate the U.S. trade embargo by
exporting controlled aircraft components to
Iran.
Monarch has been engaged in imports and exports of military and commercial aircraft components for over 20 years.
Wang-Woodford was arrested at San Francisco International Airport in December 2007 after arriving on a flight from Hong Kong and has remained incarcerated ever since. Originally, Wang-Woodford was charged along with her husband Brian D. Woodford in a 20-count indictment returned in the Eastern District of New York on January 15, 2003. A superceding indictment charging Wang-Woodford with operating Jungda International Pte. Ltd (Jungda), a Singapore-based successor to Monarch, was returned on May 22, 2008. Brian Woodford, a U.K. citizen who served as chairman and managing director of Monarch, remains a fugitive.
The 2008 indictment alleged that between January 1998 and December 2007, the defendants exported controlled U.S. aircraft parts from the U.S. to Monarch and Jungda in Singapore and Malaysia and then re-exported those items to buyers in Iran without the required U.S. government licenses. The parts exported included aircraft shields, shears, “o” rings, and switch assemblies. On the export documents filed with the U.S. government, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts.
At the time of her arrest, Wang-Woodford had in her possession catalogues from China National Precision Machinery Import and Export Corporation (CPMIEC) containing advertisements for military technology and weaponry, including surface-to-air missile systems and rocket launchers. CPMIEC, a Chinese company, has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) based on the company’s history of selling military hardware to Iran. Under those sanctions, all U.S. persons and entities are prohibited from engaging in business with CPMIEC.
The Bureau of Industry and Security publish on its website Lists to Check that include sanctions by various government agencies and that should be consulted by persons involved in export or re-export transactions.
Monarch has been engaged in imports and exports of military and commercial aircraft components for over 20 years.
Wang-Woodford was arrested at San Francisco International Airport in December 2007 after arriving on a flight from Hong Kong and has remained incarcerated ever since. Originally, Wang-Woodford was charged along with her husband Brian D. Woodford in a 20-count indictment returned in the Eastern District of New York on January 15, 2003. A superceding indictment charging Wang-Woodford with operating Jungda International Pte. Ltd (Jungda), a Singapore-based successor to Monarch, was returned on May 22, 2008. Brian Woodford, a U.K. citizen who served as chairman and managing director of Monarch, remains a fugitive.
The 2008 indictment alleged that between January 1998 and December 2007, the defendants exported controlled U.S. aircraft parts from the U.S. to Monarch and Jungda in Singapore and Malaysia and then re-exported those items to buyers in Iran without the required U.S. government licenses. The parts exported included aircraft shields, shears, “o” rings, and switch assemblies. On the export documents filed with the U.S. government, the defendants falsely listed Monarch and Jungda as the ultimate recipients of the parts.
At the time of her arrest, Wang-Woodford had in her possession catalogues from China National Precision Machinery Import and Export Corporation (CPMIEC) containing advertisements for military technology and weaponry, including surface-to-air missile systems and rocket launchers. CPMIEC, a Chinese company, has been sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) based on the company’s history of selling military hardware to Iran. Under those sanctions, all U.S. persons and entities are prohibited from engaging in business with CPMIEC.
The Bureau of Industry and Security publish on its website Lists to Check that include sanctions by various government agencies and that should be consulted by persons involved in export or re-export transactions.
BIS Finalizes Encryption Simplification Rule
10/15/09 01:47 PM
On
October 15, 2009, the Bureau of Industry and
Security (BIS) published the Final Encryption Simplification
Rule in the Federal
Register. BIS had published the interim final
rule entitled "Encryption Simplification" on
October 3, 2008 (73 Fed. Reg. 57,495). This rule
finalizes that rule, corrects errors published
in the October 3, 2008 interim final rule, and
resolves inconsistencies in that rule identified
by the public.
Among other things, the October 3, 2008 interim final rule removed section 744.9 of the EAR, which set forth requirements for authorization from BIS for U.S. persons to provide technical assistance to foreign persons with the intent to aid a foreign perosn in the development or manufacture outside the U.S. of encryption commodities or software that, if of U.S.-origin, would be "EI" controlled under ECCNs 5A002 or 5D002. Although the interim final rule removed section 744.9, other parts of the EAR that referred to that section were inadvertently not removed. The final rule removes those sections and makes other corrections to harmonize with revisions made in the October 3, 2008 interim final rule. Finally, some revisions in the final rule are the results of requests for clarification from the public on the October 3, 2008 encryption simplification rule.
Among other things, the October 3, 2008 interim final rule removed section 744.9 of the EAR, which set forth requirements for authorization from BIS for U.S. persons to provide technical assistance to foreign persons with the intent to aid a foreign perosn in the development or manufacture outside the U.S. of encryption commodities or software that, if of U.S.-origin, would be "EI" controlled under ECCNs 5A002 or 5D002. Although the interim final rule removed section 744.9, other parts of the EAR that referred to that section were inadvertently not removed. The final rule removes those sections and makes other corrections to harmonize with revisions made in the October 3, 2008 interim final rule. Finally, some revisions in the final rule are the results of requests for clarification from the public on the October 3, 2008 encryption simplification rule.
DDTC Allows Electronic Submission of Agreements for All U.S. Applicants
10/07/09 02:39 PM
On
October 7, 2009, the Directorate of Defense Trade
Controls (DDTC) announced that beginning
October 19, 2009, DDTC will alllow all U.S.
applicants to submit agreements electronically
via the D-Trade 2 application. DDTC states that
this electronic system will employ the D-Trade 2
Production application as the means for
submitting, reviewing, and approving agreement
proposals. It will incorporate the DSP-5 tool as
the primary instrument for transitioning
agreements and their respective amendments from
one phase of the adjudication process to the
next and will negate the need for DDTC to issue
a separate authorization letter upon approval of
a case.
DDTC states that only new agreements and re-baselined agreements may be submitted initially using the D-Trade 2 production systems. Applicants are not authorized to submit an electronic amendment proposal to an approved paper agreement. Once an electronic agreement is approved, electronic amendments to that approval may be submitted.
DDTC encourages all applicants to thoroughly review the Guidelines for Preparing Electronic Agreements (as of October 7, 2009). Additionally, DDTC is requesting that any U.S. applicant not previously approved to submit electronic agreements as part of the Test Phase submit only one initial electronic agreement proposal. Once that application has cleared DDTC and has been forwarded for staffing to additional agencies, the applicant can openly submit applications as required. DDTC states that this initial submission "pause" will aloow DDTC analysts to confirm submissions are complete and accurate and minimize the number of potential applications being returned without action.
Both paper and electronic submission of agreement proposals will continue to be accepted. However, DDTC anticipates making the sumbission of electronic agreement applications mandatory for all applicants in Fall 2010.
DDTC states that only new agreements and re-baselined agreements may be submitted initially using the D-Trade 2 production systems. Applicants are not authorized to submit an electronic amendment proposal to an approved paper agreement. Once an electronic agreement is approved, electronic amendments to that approval may be submitted.
DDTC encourages all applicants to thoroughly review the Guidelines for Preparing Electronic Agreements (as of October 7, 2009). Additionally, DDTC is requesting that any U.S. applicant not previously approved to submit electronic agreements as part of the Test Phase submit only one initial electronic agreement proposal. Once that application has cleared DDTC and has been forwarded for staffing to additional agencies, the applicant can openly submit applications as required. DDTC states that this initial submission "pause" will aloow DDTC analysts to confirm submissions are complete and accurate and minimize the number of potential applications being returned without action.
Both paper and electronic submission of agreement proposals will continue to be accepted. However, DDTC anticipates making the sumbission of electronic agreement applications mandatory for all applicants in Fall 2010.
DDTC Publishes Web Updates
09/30/09 05:54 PM
The
State Department's Directorate of Defense Trade
Controls (DDTC) published several updates to its
website in September:
- Updated Guidance for Licensing of Foreign Persons Employed by a U.S. Person (9.30.09)
- DDTC announcement that it will no longer process DSP Amendments for Value or Quantity Changes (9.30.09)
- Announcement of a New Commodity Jurisdiction (CJ) Form, DS-4076, is available for use, which will be processed as a paper document, but in the future, will be required to be submitted electronically (9.30.09)
- DSP119 forms may now only be used to amend DSP85 licenses. To amend a DSP-5, DSP-61 or DSP-73 license, the applicant must submit the companion amendment form via DTRADE-2 (9.25.09)
- DSP-83 Requirements for Licensing of Chemical Agent Resistant Coatings (CARC) Paint - Category XIV(f)(5) (9.14.09)
- The List of Statutorily Debarred Parties has been updated (9.14.09)
- Use of USML Category XXI now requires a copy of a DDTC Commodity Jurisdiction identifying USML Cat XXI or an official letter from the Director of the Office of Defense Trade Controls Policy granting permission to use Cat XXI (9.08.09)
Exporters Settle Allegations of Unlawful Exports
09/15/09 04:09 PM
On
September 15, 2009, the Commerce Department’s
Bureau of Industry and Security (BIS) issued press
releases announcing companies settling allegations
of unlawful exports:
• Five foreign subsidiaries of Thermon Manufacturing Company (Thermon US), a Texas-based firm, have agreed to pay a $176,000 in combined civil penalties to settle allegations that they exported and reexported EAR99 heat tracing equipment to Iran, Syrian, Libya, and listed entities in India without the required BIS or the Treasury Department’s Office of Foreign Assets Controls (OFAC) licenses. The foreign subsidiaries were told by the parent company that products manufactured by Thermon US may not be sold to countries on the U.S. trade sanctions list; however, the subsidiaries exported the equipment to prohibited end users without informing the parent company of the ultimate destination for the items. Thermon US voluntarily disclosed the violations to BIS.
• Foxsemicon Integrated Technologies, Inc. (FITI) of Taiwan has agreed to pay $250,000 to settle allegations that between August 2005 and May 2006, the company made unlicensed exports of pressure transducers to China, in violation of the EAR. The transducers are used as spare components of manufacturing systems controlled for nuclear non-proliferation reasons. BIS alleged that FITI knew that licenses were required for the parts but made no attempt to apply for the shipment authorization. FITI was also alleged to have made false statements on export documentation stating that no license was required for the exports. In addition to FITI, FITI’s wholly-owned affiliate, Foxsemicon LLC of San Jose, CA, settled allegations that it aided and abetted FITI’s violations. Foxsemicon’s $160,000 civil penalty was suspended provided no additional violations occur in the next year.
• Five foreign subsidiaries of Thermon Manufacturing Company (Thermon US), a Texas-based firm, have agreed to pay a $176,000 in combined civil penalties to settle allegations that they exported and reexported EAR99 heat tracing equipment to Iran, Syrian, Libya, and listed entities in India without the required BIS or the Treasury Department’s Office of Foreign Assets Controls (OFAC) licenses. The foreign subsidiaries were told by the parent company that products manufactured by Thermon US may not be sold to countries on the U.S. trade sanctions list; however, the subsidiaries exported the equipment to prohibited end users without informing the parent company of the ultimate destination for the items. Thermon US voluntarily disclosed the violations to BIS.
• Foxsemicon Integrated Technologies, Inc. (FITI) of Taiwan has agreed to pay $250,000 to settle allegations that between August 2005 and May 2006, the company made unlicensed exports of pressure transducers to China, in violation of the EAR. The transducers are used as spare components of manufacturing systems controlled for nuclear non-proliferation reasons. BIS alleged that FITI knew that licenses were required for the parts but made no attempt to apply for the shipment authorization. FITI was also alleged to have made false statements on export documentation stating that no license was required for the exports. In addition to FITI, FITI’s wholly-owned affiliate, Foxsemicon LLC of San Jose, CA, settled allegations that it aided and abetted FITI’s violations. Foxsemicon’s $160,000 civil penalty was suspended provided no additional violations occur in the next year.
Free Downloads of Mass Market Software by Anonymous Persons Do Not Violate EAR
09/12/09 04:12 PM
The
U.S. Department of Commerce’s Bureau of Industry
and Security (BIS) released an advisory
opinion, dated
September 11, 2009, on whether a company would
be in violation of the Export Administration
Regulations (EAR) if it allowed encrypted
software, classified by BIS as “mass market,” to
be downloaded free of charge from the company’s
website without restriction.
In the advisory opinion, BIS stated:
On the issue of whether the same would apply if the user was required by the company to provide a name and email address before download occurs, BIS stated that in such a case the download of the software would not be considered anonymous; thus, allowing the download by a person in a country embargoed under the EAR (15 C.F.R. Part 746) without the necessary licenses would constitute a violation of the EAR.
However, in circumstances where the IP address of the user downloading the software is collected by the software provider at the time of the download and is stored as a “footprint” in the machine code of the software provider’s data base but is not tracked or used for any purpose by the software provider, then a violation would not occur.
The advisory opinion was limited to the interpretation of the EAR; the sanctions regulations implemented by the Office of Foreign Assets Control of the U.S. Department of Treasury (OFAC) were not addressed.
In the advisory opinion, BIS stated:
Publishing “mass market” encryption software to the Internet where it may be downloaded by anyone neither establishes “knowledge” of a prohibited export or reexport nor triggers any “red flags” necessitating the affirmative duty to inquire under the “Know Your Customer” guidance provided in the EAR. Therefore a person or company would not be in violation of the EAR if it posts “mass market” encryption software on the Internet for free and anonymous download and then at a later time the software is downloaded by an anonymous person in Iran, Cuba, Syria, Sudan or North Korea.
On the issue of whether the same would apply if the user was required by the company to provide a name and email address before download occurs, BIS stated that in such a case the download of the software would not be considered anonymous; thus, allowing the download by a person in a country embargoed under the EAR (15 C.F.R. Part 746) without the necessary licenses would constitute a violation of the EAR.
However, in circumstances where the IP address of the user downloading the software is collected by the software provider at the time of the download and is stored as a “footprint” in the machine code of the software provider’s data base but is not tracked or used for any purpose by the software provider, then a violation would not occur.
The advisory opinion was limited to the interpretation of the EAR; the sanctions regulations implemented by the Office of Foreign Assets Control of the U.S. Department of Treasury (OFAC) were not addressed.
In-Country Transfers of Items Subject to EAR Require Licenses
09/08/09 04:00 PM
On
September 8, 2009, the Department of Commerce’s
Bureau of Industry and Security (BIS) published
a final rule in the Federal
Register amending three sections of 15 C.F.R.
Part 744 of the Export Administration
Regulations (EAR) used by the U.S. Government as
the regulatory basis for placing persons on the
Entity List.
Effective immediately, the new rule specifies that licenses are required for in-country transfers of any items subject to the EAR as they pertain to Certain Entities in Russia (§744.10), Entities Acting Contrary to the National Security or Foreign Policy Interests of the U.S. (§744.11), and Certain Sanctioned Entities (§744.20).
Prior to this amendment, the three sections specified that licenses are required for exports and re-exports to persons listed on the Entity List however, they were silent regarding licenses pertaining to in-country transfers of items subject to the EAR.
As a result of this amendment, all end-use and end-user controls that are used as a regulatory basis for placing persons on the Entity List (15 C.F.R. §§ 744.2-744.4, 744.10-744.11, and 744.20) now include in-country transfers in addition to exports and re-exports.
Effective immediately, the new rule specifies that licenses are required for in-country transfers of any items subject to the EAR as they pertain to Certain Entities in Russia (§744.10), Entities Acting Contrary to the National Security or Foreign Policy Interests of the U.S. (§744.11), and Certain Sanctioned Entities (§744.20).
Prior to this amendment, the three sections specified that licenses are required for exports and re-exports to persons listed on the Entity List however, they were silent regarding licenses pertaining to in-country transfers of items subject to the EAR.
As a result of this amendment, all end-use and end-user controls that are used as a regulatory basis for placing persons on the Entity List (15 C.F.R. §§ 744.2-744.4, 744.10-744.11, and 744.20) now include in-country transfers in addition to exports and re-exports.
BIS Amends Regulations to Ease Restrictions on Gift Parcels and Humanitarian Donations to Cuba
09/03/09 05:40 PM
On
September 3, 2009, the U.S. Department of
Commerce’s Bureau of Industry and Security
(BIS) announced amendments to the Export
Administration Regulations (EAR) making it
easier for Americans to visit and send gifts to
their family members in Cuba. The amendment
concerns primarily 15 C.F.R. §740.12, which
authorizes, among other things, certain exports
of gift parcels to Cuba pursuant to a License
Exception GFT (Gift Parcels and Humanitarian
Donations). BIS published Questions and Answers
regarding these amendments here.
The new measures remove the requirement that gift parcels be sent only to donor’s immediate family members. Instead, an individual in the U.S. may now send a gift parcel to an individual or an independent religious, educational, or charitable organization in Cuba. The same donor can send only one gift parcel to the same donee in any calendar month; however, there is no frequency limit on gift parcels of food to Cuba. The new regulations also require that parcel contents be used by donee or his immediate family; resale of gifts is prohibited. With some exceptions, any items normally exchanged between individuals as gifts may be included in such gift parcels, with the combined total domestic retail value not exceeding $800 (this limit does not apply to food items).
In circumstances outside the scope of the license exception, such as when parties seek to ship gift parcels to Cuba more frequently, or want to consolidate several parcels into one shipment, individuals should file for a license application with BIS.
In addition to the GFT Exception, the licensing policy was also revised to facilitate exports needed to establish telecommunications links between the U.S. and Cuba, including relations established through third countries and provision of satellite radio and television services to Cuba. A new License Exception CCD (Consumer Communications Devices) found in §740.19 of the EAR authorizes exports and re-exports to Cuba of donated personal communication devices such as mobile phones, computers and software, satellite receivers and digital cameras.
With respect to the License Exception BAG (Baggage) found in §740.14, the EAR was amended to remove the 44-pound limit that used to apply to personal baggage of travelers to Cuba.
To accommodate the new License Exception CCD, the U.S. Census Bureau has modified the Automated Export System (AES) by adding the new License Type Code “C58.” The AES filers who report “C58” are required to report CCD, regardless of value, in the license number field and the Export Control Classification Numbers 4A994, 4D994, 5A991, 5D991, 5A992, 5D992, or EAR99 corresponding to the License Exception. AES filers must report the country of destination and ultimate consignee as CU. Furthermore, Export Information Codes OS, OI, CH, and CI, and all modes of transportation, except pipeline, are acceptable.
The new measures remove the requirement that gift parcels be sent only to donor’s immediate family members. Instead, an individual in the U.S. may now send a gift parcel to an individual or an independent religious, educational, or charitable organization in Cuba. The same donor can send only one gift parcel to the same donee in any calendar month; however, there is no frequency limit on gift parcels of food to Cuba. The new regulations also require that parcel contents be used by donee or his immediate family; resale of gifts is prohibited. With some exceptions, any items normally exchanged between individuals as gifts may be included in such gift parcels, with the combined total domestic retail value not exceeding $800 (this limit does not apply to food items).
In circumstances outside the scope of the license exception, such as when parties seek to ship gift parcels to Cuba more frequently, or want to consolidate several parcels into one shipment, individuals should file for a license application with BIS.
In addition to the GFT Exception, the licensing policy was also revised to facilitate exports needed to establish telecommunications links between the U.S. and Cuba, including relations established through third countries and provision of satellite radio and television services to Cuba. A new License Exception CCD (Consumer Communications Devices) found in §740.19 of the EAR authorizes exports and re-exports to Cuba of donated personal communication devices such as mobile phones, computers and software, satellite receivers and digital cameras.
With respect to the License Exception BAG (Baggage) found in §740.14, the EAR was amended to remove the 44-pound limit that used to apply to personal baggage of travelers to Cuba.
To accommodate the new License Exception CCD, the U.S. Census Bureau has modified the Automated Export System (AES) by adding the new License Type Code “C58.” The AES filers who report “C58” are required to report CCD, regardless of value, in the license number field and the Export Control Classification Numbers 4A994, 4D994, 5A991, 5D991, 5A992, 5D992, or EAR99 corresponding to the License Exception. AES filers must report the country of destination and ultimate consignee as CU. Furthermore, Export Information Codes OS, OI, CH, and CI, and all modes of transportation, except pipeline, are acceptable.
Exporter Settles Allegations of EAR Violations & Agrees to $190,000 Penalty
08/15/09 08:40 PM
On
August 14, 2009, the Commerce Department’s Bureau
of Industry and Security (BIS) announced that RF Micro
Devices, Inc. (RFMD) of Greensboro, N.C. has
agreed to pay a $190,000 civil penalty to settle
allegations that it exported spread-spectrum
modems in violation of the Export Administration
Regulations (EAR) to China. In addition, Carol
Wilkins, RFMD manager whose responsibilities, at
the time of the violations, included export
control compliance, has agreed to pay a civil
penalty in the amount of $15,000 for making
false and misleading statements to BIS Special
Agents during the investigation.
The allegations involved fourteen unlicensed exports of spread-spectrum modems, classified under Export Control Classification Number 5A001 and controlled for national security reasons, to China with knowledge that a violation of the Regulations was occurring, was about to occur or was intended to occur in connection with the spread-spectrum modems. Additionally, BIS alleged that on thirteen occasions RFMD made false or misleading statements about the submission of Shipper’s Export Declarations (SEDs).
RFMD voluntarily disclosed the violations that occurred in 2002 and 2003.
The allegations involved fourteen unlicensed exports of spread-spectrum modems, classified under Export Control Classification Number 5A001 and controlled for national security reasons, to China with knowledge that a violation of the Regulations was occurring, was about to occur or was intended to occur in connection with the spread-spectrum modems. Additionally, BIS alleged that on thirteen occasions RFMD made false or misleading statements about the submission of Shipper’s Export Declarations (SEDs).
RFMD voluntarily disclosed the violations that occurred in 2002 and 2003.
Exporter Agrees to $610,000 Penalty for EAR Violations
08/13/09 08:12 AM
On
August 13, 2009, the Commerce Department’s Bureau
of Industry and Security (BIS) announced that FMC
Technologies, Inc. has agreed to pay a $610,000
civil penalty to settle allegations that between
2003 and 2007 it exported oil and gas industry
service parts in violation of the Export
Administration Regulations (EAR).
The allegations against the Houston, Texas provider of specialty oil and gas products and services involved 78 unlicensed exports of butterfly and check valves classified under the ECCN 2B350 and controlled for reasons of chemical and biological weapons proliferation.
The company voluntarily disclosed the violations and cooperated with the investigation.
The allegations against the Houston, Texas provider of specialty oil and gas products and services involved 78 unlicensed exports of butterfly and check valves classified under the ECCN 2B350 and controlled for reasons of chemical and biological weapons proliferation.
The company voluntarily disclosed the violations and cooperated with the investigation.
BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Announce a Multi-Million Dollar Settlement with DHL BIS and OFAC Annouce Multi-Million Dollar Settlement with DHL
08/10/09 03:04 PM
On
August 6, 2009, the Commerce Department’s Bureau of
Industry and Security (BIS) and the Treasury
Department’s Office of Foreign Assets Control
(OFAC) announced they have
jointly entered into a settlement agreement with
DPWN Holdings (USA), Inc. and DHL Express (USA),
Inc. (collectively DHL) The settlement agreement
has been reached following allegations that DHL
unlawfully aided and abetted illegal exports of
goods to Syria, Iran and Sudan and failed to
comply with record keeping requirements of the
Export Administration Regulations (EAR) and OFAC
regulations.
Specifically, BIS charged that between June 2004 and September 2004, DHL transported articles subject to the EAR from the U.S. to Syria, and failed to retain air waybills and other export control documents, as required by the EAR. OFAC charged that between 2002 and 2006 DHL violated various OFAC regulations when it made thousands of shipments to Iran and Sudan, mainly failing to comply with applicable recordkeeping requirements.
Pursuant to the settlement agreement, DHL must pay a civil penalty of nearly $9.5 million and conduct external audits of exports to Iran, Syria and Sudan from March 2007 to December 2009, as well as conduct annual calendar year audits in 2010 and 2011.
Specifically, BIS charged that between June 2004 and September 2004, DHL transported articles subject to the EAR from the U.S. to Syria, and failed to retain air waybills and other export control documents, as required by the EAR. OFAC charged that between 2002 and 2006 DHL violated various OFAC regulations when it made thousands of shipments to Iran and Sudan, mainly failing to comply with applicable recordkeeping requirements.
Pursuant to the settlement agreement, DHL must pay a civil penalty of nearly $9.5 million and conduct external audits of exports to Iran, Syria and Sudan from March 2007 to December 2009, as well as conduct annual calendar year audits in 2010 and 2011.
ITAR License Exemption for Temporary Export of Body Armor for Personal Use Added
08/06/09 08:06 AM
On
August 6, 2009, the Department of State,
Directorate of Defense Trade Controls (DDTC) issued
a final rule in the Federal
Register amending the International Traffic in
Arms Regulations (ITAR). The new rule, effective
immediately, adds an exemption for the temporary
export of body armor covered by 22 CFR 121.1,
Category X(a)(1). The new rule exempts U.S.
individuals who wear body armor for personal
safety when traveling to hazardous areas from
obtaining a license.
To qualify for the exemption, the body armor must be used exclusively by the individual and must be returned to the U.S. The individual may not re-export the protective equipment to a foreign person or otherwise transfer the ownership. Upon departure, such exports must be declared by filing CBP Form 4457 and require inspection by a U.S. Customs and Border Protection (CBP) officer.
Such body armor may be exported to countries not subject to restrictions under ITAR §126.1 and also specifically to Iraq and Afghanistan. For temporary exports to Afghanistan, the rule requires that the general conditions of the rule be met. For temporary exports to Iraq, the U.S. person utilizing the license exemption must either be affiliated with the U.S. Government or, not affiliated with the U.S. Government but traveling to Iraq under direct authorization by the Government of Iraq and engaging in humanitarian activities on behalf of Government of Iraq.
To qualify for the exemption, the body armor must be used exclusively by the individual and must be returned to the U.S. The individual may not re-export the protective equipment to a foreign person or otherwise transfer the ownership. Upon departure, such exports must be declared by filing CBP Form 4457 and require inspection by a U.S. Customs and Border Protection (CBP) officer.
Such body armor may be exported to countries not subject to restrictions under ITAR §126.1 and also specifically to Iraq and Afghanistan. For temporary exports to Afghanistan, the rule requires that the general conditions of the rule be met. For temporary exports to Iraq, the U.S. person utilizing the license exemption must either be affiliated with the U.S. Government or, not affiliated with the U.S. Government but traveling to Iraq under direct authorization by the Government of Iraq and engaging in humanitarian activities on behalf of Government of Iraq.
DDTC Permits Selected U.S. Applicants to Submit Agreements Via DTrade2
07/07/09 10:55 PM
Beginning July 6,
2009, the Directorate of Defense Trade Controls
(DDTC) has allowed selected U.S. applicants to
submit agreements and their amendments
electronically via the D-Trade2 system. (See the
press release here.) This system
uses the D-Trade2 Production application to
submit, review, and approve agreement proposals,
and incorporates the DSP-5 as the primary tool
for transitioning agreements and their
amendments from one phase of the adjudication
process to the next. Due to this process, DDTC
will no longer have to issue a separate
authorization letter upon approval of a case.
DDTC will follow the success of these pilot electronic agreement submissions, and expects to make this application available to all U.S. applicants on October 1, 2009. Electronic submission of the agreements will become mandatory in Spring 2010. During the initial phase of electronic submission, DDTC will continue to accept paper submissions until further notice.
In addition to the new DTrade2 component that supports the electronic submission function, DDTC has compiled a list of issues that users encounter with DTrade2 system, and published it with solutions and workarounds. Technical support for DTrade2 can be reached at (202) 663-2838, or via dtradehelpdesk@state.gov.
DDTC will follow the success of these pilot electronic agreement submissions, and expects to make this application available to all U.S. applicants on October 1, 2009. Electronic submission of the agreements will become mandatory in Spring 2010. During the initial phase of electronic submission, DDTC will continue to accept paper submissions until further notice.
In addition to the new DTrade2 component that supports the electronic submission function, DDTC has compiled a list of issues that users encounter with DTrade2 system, and published it with solutions and workarounds. Technical support for DTrade2 can be reached at (202) 663-2838, or via dtradehelpdesk@state.gov.
Retired University Professor Sentenced to 4 Years Imprisonment for Export Violations
07/02/09 10:34 PM
On
July 1, 2009, the Department of Justice issued
a press release announcing the
sentencing of a retired university professor
convicted of the Arms Export Control Act (AECA)
violations. The AECA prohibits the exports of
defense-related materials, including the
technical information or data, to a foreign
national or foreign nation.
In a U.S. District Court in Knoxville, Tennessee, Dr. John Reece Roth, a retired University of Tennessee professor, was sentenced to four years in prison.
In a highly publicized trial that ended in September 2008, Dr. Roth was convicted of more than a dozen AECA violations for illegally exporting to China technical information relating to a U.S. Air Force research and development contract. The illegal exports of military technical information for use in an unmanned aerial vehicle involved specific information about advanced plasma technology that had been designed and was being tested for use on the wings of UAVs operating as weapons or surveillance systems.
In a U.S. District Court in Knoxville, Tennessee, Dr. John Reece Roth, a retired University of Tennessee professor, was sentenced to four years in prison.
In a highly publicized trial that ended in September 2008, Dr. Roth was convicted of more than a dozen AECA violations for illegally exporting to China technical information relating to a U.S. Air Force research and development contract. The illegal exports of military technical information for use in an unmanned aerial vehicle involved specific information about advanced plasma technology that had been designed and was being tested for use on the wings of UAVs operating as weapons or surveillance systems.
Court Overturns ITAR Conviction Based on the Vagueness of the Regulations
07/01/09 11:00 PM
On
June 15, 2009, the U.S. Court of Appeals for the
7th Circuit issued its decision in
U.S. v.
Doli Syarief Pulungan, (No. 08-3000),
overturning the conviction of the defendant that
was found guilty of exporting rifle scopes in
violation of the International Traffic in Arms
Regulations (ITAR).
In support of its decision, the court stated that the government failed to properly identify which specific items were subject to export control regulations, or to justify the criteria for controlling them. According to the court, because the regulations were so vague, the defendant could not be held responsible for violating such vague regulations.
The court stated that the State Department’s claim of “authority to classify any item as a “defense article,” without revealing the basis of the decision and without allowing any inquiry by the jury, would create serious constitutional problems.” The court went on to state that in regular circumstances, a regulation is published for all to see, giving people an opportunity “to adjust their conduct to avoid liability.” But, “a designation by an unnamed official, using unspecified criteria, put in a desk of a drawer, and taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian regimes.” “Government must operate through public laws and regulations” and not through “secret laws,” the court declared.
Some commentators suggest this ruling could have a great effect on the export controls, as it discusses the ambiguity of the ITAR, which provide the State Department with great latitude in determining what articles are covered under the ITAR.
In support of its decision, the court stated that the government failed to properly identify which specific items were subject to export control regulations, or to justify the criteria for controlling them. According to the court, because the regulations were so vague, the defendant could not be held responsible for violating such vague regulations.
The court stated that the State Department’s claim of “authority to classify any item as a “defense article,” without revealing the basis of the decision and without allowing any inquiry by the jury, would create serious constitutional problems.” The court went on to state that in regular circumstances, a regulation is published for all to see, giving people an opportunity “to adjust their conduct to avoid liability.” But, “a designation by an unnamed official, using unspecified criteria, put in a desk of a drawer, and taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian regimes.” “Government must operate through public laws and regulations” and not through “secret laws,” the court declared.
Some commentators suggest this ruling could have a great effect on the export controls, as it discusses the ambiguity of the ITAR, which provide the State Department with great latitude in determining what articles are covered under the ITAR.
BIS Posts Interest Form for BIS Update 2009 Conference
06/30/09 03:33 PM
On June 29, 2009, the Bureau of Industry and
Security (BIS) posted
details
on its Update 2009 Conference to be held from
September 30 - October 2, 2009 in Washington, D.C.
Interested parties must follow a two-step process to attend this year’s conference. First, you must submit the online “Interest Form” between June 25 and July 17, 2009. If there are more potential participants than there is space available, BIS will grant registration through a random selection from the entire list of respondents, regardless of when received during the period. Those selected will be notified and given registration instructions in late July. They must register and submit payment by a designated date indicated in the instructions or their spot will be forfeited and given to someone on the wait list.
Those not selected will be notified that they have been placed on a wait list. More detailed program information will be posted in the coming weeks.
Registration transfers within companies or organizations may be permitted with prior approval from BIS. Registration transfers will not be permitted between different organizations or companies. Registrations may not be resold.
Interested parties must follow a two-step process to attend this year’s conference. First, you must submit the online “Interest Form” between June 25 and July 17, 2009. If there are more potential participants than there is space available, BIS will grant registration through a random selection from the entire list of respondents, regardless of when received during the period. Those selected will be notified and given registration instructions in late July. They must register and submit payment by a designated date indicated in the instructions or their spot will be forfeited and given to someone on the wait list.
Those not selected will be notified that they have been placed on a wait list. More detailed program information will be posted in the coming weeks.
Registration transfers within companies or organizations may be permitted with prior approval from BIS. Registration transfers will not be permitted between different organizations or companies. Registrations may not be resold.
Illinois Company Has Export Privileges Suspended
06/19/09 02:41 PM
On June 18, 2009, the Bureau of Industry and
Security (BIS) issued a
notice
in Federal Register detailing the sentencing of TAK
Components, Inc. (TAK), an Illinois firm that was
convicted of 16 counts of the International
Emergency Economic Powers Act (IEEPA) violations in
October, 2007.
TAK exported from the U.S. to Iran, via the United Arab Emirates, replacement and service parts and equipment for agricultural machinery without the requisite authorization from the Department of Treasury’s Office of Foreign Assets Control (OFAC).
TAK was sentenced to one year probation for each count, to run concurrently, was ordered to pay a special assessment of $6,400, and forfeited $181,000 obtained from the illegal transactions. TAK’s export privileges will be suspended until October 11, 2012.
TAK exported from the U.S. to Iran, via the United Arab Emirates, replacement and service parts and equipment for agricultural machinery without the requisite authorization from the Department of Treasury’s Office of Foreign Assets Control (OFAC).
TAK was sentenced to one year probation for each count, to run concurrently, was ordered to pay a special assessment of $6,400, and forfeited $181,000 obtained from the illegal transactions. TAK’s export privileges will be suspended until October 11, 2012.
GAO Issues Report Critical of U.S. Export Controls
06/05/09 09:29 PM
On June 4, 2009, the Government Accounting Office
(GAO) issued two reports following Testimony before
the Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce of the U.S. House
of Representatives.
In a report entitled, “Export Controls: Fundamental Reexamination of System Is Needed to Help Protect Critical Technologies,” Anne-Marie Lasowski, the Director Acquisition and Sourcing Management, explained the work GAO has conducted on export controls in past years and stated that over the years, the GAO has identified interagency coordination challenges, inefficiencies in the export control system, and a lack of systematic assessments conducted by State and Commerce Departments. In conclusion, the GAO calls for the executive and legislative branches to conduct a fundamental reexamination of the current export control programs and processes.
In a report entitled, “Military and Dual-Use Technology: Covert Testing Shows Continuing Vulnerabilities of Domestic Sales for Illegal Export,” Gregory D. Kutz, the GAO’s Managing Director Forensic Audits and Special Investigations, testified regarding undercover tests conducted by the GAO to attempt to (1) purchase sensitive dual-use and military items from manufacturers and distributors in the United States and illegally export such items from the U.S. In its covert testing, the GAO purchased items such as gyro chips, night vision monoculars, accelerometers, electrical components used in IEDs, and secure military-grade radios used by U.S. Special Operations personnel. The covert testing was conducted between May 2008 and June 2009 and in at least two instances, the GAO was able to illegally export two items without detection.
In this report, the GAO concluded:
In a report entitled, “Export Controls: Fundamental Reexamination of System Is Needed to Help Protect Critical Technologies,” Anne-Marie Lasowski, the Director Acquisition and Sourcing Management, explained the work GAO has conducted on export controls in past years and stated that over the years, the GAO has identified interagency coordination challenges, inefficiencies in the export control system, and a lack of systematic assessments conducted by State and Commerce Departments. In conclusion, the GAO calls for the executive and legislative branches to conduct a fundamental reexamination of the current export control programs and processes.
In a report entitled, “Military and Dual-Use Technology: Covert Testing Shows Continuing Vulnerabilities of Domestic Sales for Illegal Export,” Gregory D. Kutz, the GAO’s Managing Director Forensic Audits and Special Investigations, testified regarding undercover tests conducted by the GAO to attempt to (1) purchase sensitive dual-use and military items from manufacturers and distributors in the United States and illegally export such items from the U.S. In its covert testing, the GAO purchased items such as gyro chips, night vision monoculars, accelerometers, electrical components used in IEDs, and secure military-grade radios used by U.S. Special Operations personnel. The covert testing was conducted between May 2008 and June 2009 and in at least two instances, the GAO was able to illegally export two items without detection.
In this report, the GAO concluded:
A comprehensive network of controls and enforcement is necessary to ensure sensitive technology does not make it into the hands of unauthorized individuals. However, the lack of legal restrictions over domestic sales of these items, combined with the difficulties associated with inspecting packages and individuals leaving the United States, results in a weak control environment that does not effectively prevent terrorists and agents of foreign governments from obtaining these sensitive items. The key to preventing the illegal export of these sensitive items used in nuclear, IED, and military applications is to stop the attempts to obtain the items at the source, because once sensitive items make it into the hands of terrorists or foreign government agents, the shipment and transport out of the United States is unlikely to be detected.
BIS Issues Final Rule on Certain Thermal Imaging Cameras
05/22/09 10:08 PM
On May
22, 2009, the Bureau of Industry and Security (BIS)
published a final rule in the Federal
Register revising the license requirements and
license exception eligibility for certain
thermal imaging cameras and foreign made
military commodities incorporating such cameras.
The rule imposes a license requirement for certain exports and reexports of military commodities manufactured outside the United States that are not subject to the International Traffic in Arms Regulations (ITAR), regardless of the level of U.S.-origin content, if those military commodities incorporate certain thermal imaging cameras that are subject to the Export Administration Regulations (EAR).
The rule also removes Commerce Control List (CCL) based export and reexport license requirements with respect to 36 destinations for certain thermal imaging cameras when they are not incorporated into military commodities and if they are not being exported or reexported to be embedded in a civil product. It imposes a semi-annual reporting requirement on the transactions from which it removes the CCL based license requirements.
The rule also imposes a license requirement for software used to increase the frame rate of certain cameras.
BIS states that it is making these changes in recognition of the emerging availability of these cameras around the world, the export licensing practices of other governments and the potential use of these cameras in military applications.
The rule imposes a license requirement for certain exports and reexports of military commodities manufactured outside the United States that are not subject to the International Traffic in Arms Regulations (ITAR), regardless of the level of U.S.-origin content, if those military commodities incorporate certain thermal imaging cameras that are subject to the Export Administration Regulations (EAR).
The rule also removes Commerce Control List (CCL) based export and reexport license requirements with respect to 36 destinations for certain thermal imaging cameras when they are not incorporated into military commodities and if they are not being exported or reexported to be embedded in a civil product. It imposes a semi-annual reporting requirement on the transactions from which it removes the CCL based license requirements.
The rule also imposes a license requirement for software used to increase the frame rate of certain cameras.
BIS states that it is making these changes in recognition of the emerging availability of these cameras around the world, the export licensing practices of other governments and the potential use of these cameras in military applications.
Exporter Sentenced in Arms Export Conspiracy
05/18/09 01:06 AM
On May
18, 2009, CBS News reported that Joseph
Piquet, a 55-year old Port St. Lucie, Florida
man, was sentenced to 5 years in prison followed
by two years of supervised release for his
participation in conspiracy to export arms.
Piquet was charged with seven counts of arms export violations arising from conspiracy to purchase military use electronic components from Northrop Grumman Corporation, and then ship those items to China and Hong Kong without obtaining the required export licenses under the Arms Export Control Act (AECA) and the International Emergency Economic Powers Act (IEEPA). A federal jury in Fort Pierce convicted Piquet on all counts on March 5th.
Among the items involved in the conspiracy were high power amplifiers designed for U.S. military use and low noise amplifiers that have a dual – commercial and military – use. The testimony showed that on several occasions in 2004 and 2005, Piquet purchased restricted electronic parts and submitted false End Use Certificates to the manufacturer to conceal the intended final destination for those exports.
Piquet was charged with seven counts of arms export violations arising from conspiracy to purchase military use electronic components from Northrop Grumman Corporation, and then ship those items to China and Hong Kong without obtaining the required export licenses under the Arms Export Control Act (AECA) and the International Emergency Economic Powers Act (IEEPA). A federal jury in Fort Pierce convicted Piquet on all counts on March 5th.
Among the items involved in the conspiracy were high power amplifiers designed for U.S. military use and low noise amplifiers that have a dual – commercial and military – use. The testimony showed that on several occasions in 2004 and 2005, Piquet purchased restricted electronic parts and submitted false End Use Certificates to the manufacturer to conceal the intended final destination for those exports.
DTrade 2 is Now Operational
05/16/09 01:00 AM
The
U.S. Department of State announced that, starting
May 16, 2009, exporters must use the DTrade 2
application to submit all new license
submissions. The State Department announced that
licensing submissions will no longer be accepted
via DTrade 1, and will be returned without
action, directing the applicant to the DTrade2
application.
Exporters can still use DTrade 1 to track status and to attach data to pre-existing cases. Cases submitted to the Directorate of Defense Trade Controls (DDTC) via the DTrade 1 prior to May 16, 2009, will be processed until the review of the submission is complete.
The information about the new licensing application, new forms, and guidelines are available on the DTrade Information Center website.
Exporters can still use DTrade 1 to track status and to attach data to pre-existing cases. Cases submitted to the Directorate of Defense Trade Controls (DDTC) via the DTrade 1 prior to May 16, 2009, will be processed until the review of the submission is complete.
The information about the new licensing application, new forms, and guidelines are available on the DTrade Information Center website.
BIS Removes T 37 Jet Trainer and Aircraft Parts from CCL
05/06/09 04:57 PM
On May
6, 2009, the Bureau of Industry and Security (BIS)
published a final rule in the Federal
Register, which removes the T 37 jet trainer
aircraft and specially designed parts from under
the Department of Commerce’s licensing
jurisdiction on the Commerce Control List (CCL).
In the final rule, BIS states that although the T 37 jet trainer aircraft appear on the CCL, the Department of State, Directorate of Defense Trade Controls (DDTC) reviews license applications for these aircraft and parts. Accordingly, BIS is removing the T 37 jet trainer aircraft from the CCL to “avoid potentially overlapping coverage and reduce the possibility of confusion by the public.”
In the final rule, BIS states that although the T 37 jet trainer aircraft appear on the CCL, the Department of State, Directorate of Defense Trade Controls (DDTC) reviews license applications for these aircraft and parts. Accordingly, BIS is removing the T 37 jet trainer aircraft from the CCL to “avoid potentially overlapping coverage and reduce the possibility of confusion by the public.”
Exporter Settles Allegations of U.S. Export Regulations with a Civil Penalty
05/01/09 01:05 AM
On May
1, 2009, the Bureau of Industry and Security
(BIS) announced that B.J.
Services Company agreed to settle allegations
that it exported certain butterfly and check
valves in violation of the Export Administration
Regulations (EAR) with an $800,000 civil fine.
The allegations against the company involved 63 cases of unlicensed exports to several countries during 2003 and 2007. The exports were controlled under Export Commodity Classification No. 2B350 for reasons of chemical and biological weapons proliferation.
The company voluntarily disclosed its EAR violations and fully cooperated in the investigation.
The allegations against the company involved 63 cases of unlicensed exports to several countries during 2003 and 2007. The exports were controlled under Export Commodity Classification No. 2B350 for reasons of chemical and biological weapons proliferation.
The company voluntarily disclosed its EAR violations and fully cooperated in the investigation.
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 Validated End User authorization. In October 2007, BIS announced the first five companies approved for VEU authorization.
The report claims that two of the first nonmilitary Chinese companies designated as VEUs are in fact high risk because of their links to the Chinese government, the People's Liberation Army, and other Chinese entities accused in the past of ties to Syria and Iran. One of these Chinese companies, the BHA Aero Composites Company, is partly owned by two American companies - 40 percent by Boeing and 40 percent by the aerospace materials maker Hexcel, with the remaining 20 percent owned by a Chinese government-owned company, AVIC I, or the China Aviation Industry Corporation I.
Gary Milollin, director of the Wisconsin Project, claims that his staff has uncovered several links with the Chinese military establishment involving both BHA and another of the first five VEUs, the Shanghai Hua Hong NEC Electronics Company. The report claims that AVIC I produces fighters, nuclear-capable bombers and aviation weapons systems for the People's Liberation Army and the U.S. State Department has cited another AVIC subsidiary, the China National Aero-Technology Import & Export Corporation, for links to arms sales to Iran and Syria.
The Wisconsin Project report also states that Shanghai Hua Hong NEC Electronics is majority owned "through a corporate chain" by the China Electronics Corporation, which the report says is a government conglomerate that produces military equipment along with consumer electronics. The report claims it has a unit that produces arms for the 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 Validated End User authorization. In October 2007, BIS announced the first five companies approved for VEU authorization.
The report claims that two of the first nonmilitary Chinese companies designated as VEUs are in fact high risk because of their links to the Chinese government, the People's Liberation Army, and other Chinese entities accused in the past of ties to Syria and Iran. One of these Chinese companies, the BHA Aero Composites Company, is partly owned by two American companies - 40 percent by Boeing and 40 percent by the aerospace materials maker Hexcel, with the remaining 20 percent owned by a Chinese government-owned company, AVIC I, or the China Aviation Industry Corporation I.
Gary Milollin, director of the Wisconsin Project, claims that his staff has uncovered several links with the Chinese military establishment involving both BHA and another of the first five VEUs, the Shanghai Hua Hong NEC Electronics Company. The report claims that AVIC I produces fighters, nuclear-capable bombers and aviation weapons systems for the People's Liberation Army and the U.S. State Department has cited another AVIC subsidiary, the China National Aero-Technology Import & Export Corporation, for links to arms sales to Iran and Syria.
The Wisconsin Project report also states that Shanghai Hua Hong NEC Electronics is majority owned "through a corporate chain" by the China Electronics Corporation, which the report says is a government conglomerate that produces military equipment along with consumer electronics. The report claims it has a unit that produces arms for the military.
ATF Annouces Final Rule to Conform with Revised ITAR
12/27/07 10:38 AM
The
Bureau of Alcohol, Tobacco,
Firearms, and Explosives (ATF)
announced
on December 26, 2007 a final rule
conforming
the regulations in 27 C.F.R. Part 447
to
the revised International Traffic in Arms
Regulations (ITAR) by
amending the list of countries from which the
importation of defense articles into the United
States is proscribed by adding Afghanistan and
removing South Africa and some of the sates
composing the former Soviet Union (Armenia,
Azerbaijan and Tajikistan. The rule also removes
the arms embargo against the countries of Serbia
and Montenegro. It also clarifies an outdated
reference to Zaire, currently known as the
"Democratic Republic of the Congo," and makes a
miscellaneous technical amendment to the
regulations.
As background, the Arms Export Control Act of 1976 (AECA), 22 U.S.C. § 2778, gives the President of the United States the authority to control the import and export of defense articles and defense services. The ATF is responsible for administering the import provisions of the AECA. (The Department of State's Directorate of Defense Trade Controls is responsible for administering the export provisions of the AECA with the ITAR). Import regulations issued under this law are in 27 CFR Part 447.
As background, the Arms Export Control Act of 1976 (AECA), 22 U.S.C. § 2778, gives the President of the United States the authority to control the import and export of defense articles and defense services. The ATF is responsible for administering the import provisions of the AECA. (The Department of State's Directorate of Defense Trade Controls is responsible for administering the export provisions of the AECA with the ITAR). Import regulations issued under this law are in 27 CFR Part 447.
Commerce Secretary Receives Report and Recommendations from Deemed Export Advisory Committee
12/20/07 05:13 PM
The Advisory Committee Chairman, Norman Augustine, a retired Chairman and CEO of Lockheed Martin Corporation, delivered the report, entitled, The Deemed Export Rule in the Era of Globalization. The report can be found here.
BIS' SNAP-R Webinar Now Available
12/19/07 05:08 PM
DDTC Amends Voluntary Disclosure Rules
12/14/07 09:07 PM
On
December 13, 2007, the Department of State's
Directorate of Defense Trade Controls (DDTC)
published a final
rule amending
the Voluntary Disclosure provisions of the
International Traffic in Arms Regulations
(ITAR). Section
127.12 of
the ITAR governs Voluntary Disclosure. The new
rule amends section 127.12 in 4 major respects:
- The new rule imposes a 60-calendar day deadline after the initial notification to submit a full disclosure. Previously, there was no set time limit for a party to submit a full disclosure after an initial notification to DDTC. Under the new rule, a party may request an extension to the 60-calendar day extension, and, in certain cases, DDTC may require the requester to certify in writing that the full disclosure will be submitted within a specified time period. Failure to do any of the preceding may result in the DDTC deciding not to consider the initial notification as a mitigating factor in determining the appropriate disposition of the violation.
- The new rule requires the party making the disclosure to provide specific information including, but not limited to, names and addresses of individuals involved in the violation, and a precise description of the nature and extent of the violation.
- The new rules also require that the disclosing party describe corrective actions already undertaken that clearly identifies the new compliance initiatives implemented to address the causes of the violations set forth in the voluntary disclosure and any internal disciplinary action taken; and how these corrective actions are designed to deter those particular violations from occurring again.
- Finally, the new rules provide that, in cases of "a major violation, a systematic pattern of violations, or the absence of an effective compliance program," DDTC may require that the disclosure be signed by a "senior officer."
BIS Expands License Exceptions TMP & BAG
12/12/07 09:53 PM
The new rule expands the availability of TMP and BAG to allow for certain temporary exports and reexports of technology by U.S persons to U.S. persons or their employees traveling or temporarily assigned abroad. However, there are several significant limitations to the license exceptions for technology:
- The license exceptions are only available to U.S. persons or non-U.S. persons otherwise authorized to receive the technology (e.g., under a license or license exception) or, alternatively do not require such authorization due to the technology's NLR status. In addition, the employer must demonstrate and document for recordkeeping purposes the reason that the technology authorized under the tools of trade provisions is needed by the non-U.S. employees.
- The technology exported under these license exceptions may not be thereafter be disclosed to anyone who is also not a U.S. person or otherwise authorized to receive the data.
- If the technology authorized under License Exception TMP is shipped or transmitted in a format that could facilitate a subsequent release of the technology must be returned to the U.S. or disposed of within 12 months from the export pursuant to the License Exception.
- The new rule also requires that the exporting or reexporting party and the recipient take adequate security protections to protect against unauthorized access to the technology while the technology is being transmitted and used overseas, such as secure connections (such as VPN) and the use of password systems and/or personal firewalls on electronic devices.
- The technology authorized under these provisions may not be used for foreign production purposes or for technical assistance unless authorized by BIS.
- Encryption technology under ECCN 5E002 is not authorized for export or reexport under the amended "tools of trade" provisions of License Exception TMP or under BAG § 740.14 to any destination listed in Country Group E:1 of Supplement No. 1 to part 740. for export or reexport of 5E002 technology by companies, their subsidiaries and employees, BIS states that License Exception Encryption Commodities and Software (ENC) in § 740.17 should be used.
Pennsylvania Company Fined $470,000 for Export Violations
12/10/07 03:22 PM
On
December 7, 2007, the Bureau of Industry and
Security (BIS) announced that
Mine Safety Appliances Company (MSA) of
Pittsburgh, PA agreed to pay a $470,000 civil
penalty. The settlement arose from allegations
that MSA, through its branch office in Abu
Dhabi, MSA Middle East, violated the Export
Administration Regulations (EAR) on 107
occasions. The allegations relate to the
reexport of safety equipment from the UAE to
Iran and Syria without the required export
licenses.
"Preventing the diversion of U.S.- origin goods so that they do not support the economies of countries that sponsor terrorism, such as Syria and Iran, is extremely important," said Darryl Jackson, assistant secretary of commerce for export enforcement. "This case demonstrates that companies must take extra care when implementing compliance programs with foreign subsidiaries.”
BIS alleged that between May 2001 and December 2005, MSA Middle East made 107 reexports of EAR99 and controlled items, including helmets, gas masks, detection equipment, filters, and other safety equipment to Iran and Syria from the UAE without required export licenses.
BIS stated that MSA voluntarily disclosed these violations to BIS and cooperated fully in the investigation, which was a mitigation factor in calculating the penalty. In addition, MSA received mitigation credit for its compliance efforts.
BIS stated:
"Preventing the diversion of U.S.- origin goods so that they do not support the economies of countries that sponsor terrorism, such as Syria and Iran, is extremely important," said Darryl Jackson, assistant secretary of commerce for export enforcement. "This case demonstrates that companies must take extra care when implementing compliance programs with foreign subsidiaries.”
BIS alleged that between May 2001 and December 2005, MSA Middle East made 107 reexports of EAR99 and controlled items, including helmets, gas masks, detection equipment, filters, and other safety equipment to Iran and Syria from the UAE without required export licenses.
BIS stated that MSA voluntarily disclosed these violations to BIS and cooperated fully in the investigation, which was a mitigation factor in calculating the penalty. In addition, MSA received mitigation credit for its compliance efforts.
BIS stated:
Parties who may have been involved in violations of the EAR are encouraged to submit a Voluntary Self Disclosure (VSD) to BIS’s Office of Export Enforcement, as provided in Part 764.5 of the EAR. VSDs are an important indicator of parties’ intent to bring themselves into compliance with the EAR, and may provide BIS important information on illicit proliferation networks. A VSD is considered a “great weight” mitigating factor in the settlement of BIS administrative cases.
Silicon Valley Export Broker Sentenced to 2 Years in Prison for Illegal Exports to China
12/04/07 01:08 PM
On
December 4, 2007, the San Jose Mercury
News reported
that
a Cupertino, CA man was sentenced to two years
in prison and ordered to pay a fine of $50,000
for exporting controlled night vision equipment
to China.
Philip Cheng, an export broker, was indicted in 2004 on export control and arms trafficking violations for his role in brokering the sale of night vision gear to Chinese governement authorities. Cheng, 60, pleaded guilty after a mistrial in which a jury voted 11-1 for conviction. He was sentenced by United States District Court Judge Ronald M. Whyte in San Jose today.
The Mecury News reports:
Philip Cheng, an export broker, was indicted in 2004 on export control and arms trafficking violations for his role in brokering the sale of night vision gear to Chinese governement authorities. Cheng, 60, pleaded guilty after a mistrial in which a jury voted 11-1 for conviction. He was sentenced by United States District Court Judge Ronald M. Whyte in San Jose today.
The Mecury News reports:
Federal authorities accused Cheng and Martin Shih, founder of Night Vision Technology, of selling a Panther series infrared camera to the North China Research Institute of Electro-Optics and the China National Electronics Import & Export Corporation. Authorities said the equipment could be used by China's military. Shih has since died of cancer. Cheng will begin serving his sentence on Feb. 18.
Export Penalties Increase to $250,000 or More Per Violation
12/01/07 10:04 PM
The new
law
increases civil penalties from
$50,000 to the greater of
either $250,000 or twice the amount of the
transaction that is
the basis for the violation. Fines for willful and
knowing violations (criminal
penalties) were
increased from $50,000 to
$1,000,000 with the
maximum term of imprisonment remaining at 20 years.
Prior to changes brought by the USA PATRIOT ACT
Improvement and Reauthorization Act of 2005, which
went into effect in March 2006, civil penalties for
such violations were limited to only $11,000 per
violation and the maximum term of imprisonment was
only 10 years.
Thus, the new penalties are 250 times the amount of
just 2 years ago!
Under the new law, it appears that even low dollar
amount transactions could be subject to the maximum
civil penalty of up to $250,000. For example, if a
violative export transaction of $5,000 occurred,
the Department of Commerce’s Bureau of Industry and
Security (BIS) could impose a penalty of up to
$250,000 (the greater) versus a penalty of up to
twice the amount of the transaction, or $10,000
(the lesser).
Moreover, BIS or OFAC could impose a much higher
penalty in the case of a large dollar amount
transaction. For example, in the case of a
violative export transaction or wire transfer of
$1.5 million, BIS or OFAC would have the authority
to impose a maximum penalty of twice the amount of
the transaction or $3 million.
It remains to be seen how BIS or OFAC will actually
assess maximum penalties in practice.
However, in a November 1, 2007 BIS Fact Sheet, BIS
states that it will continue to grant up to a 25%
reduction of the amount of penalties to be assessed
for the existence of an effective export compliance
program in place before the violation and later
upgraded. Furthermore, for all valid Voluntary
Self-Disclosures, BIS will generally reduce any
calculated penalty by at least 50% - and does so
after considering the aggravating and mitigating
factors in the case.
Keep in mind that
penalties may increase even more in the near
future.
Senator Christopher Dodd introduced bill S. 2000 on
August 3, 2007, that is intended to increase the
enforcement authority and extend the Export
Administration Act of 1979. If that bill is passed,
the Export Administration Act of 2007 will increase
the
maximum civil penalty to
$500,000 per violation. It
will also increase the
maximum criminal penalties to the greater of $5
million or 10 times the value of the
transactions involved
for corporations and $1,000,000 and 10 years
imprisonment for individuals.
Legislation Introduced to Reduce DDTC Processing Times
11/29/07 04:37 PM
Clif
Burns on his exportlawblog.com
reports
that
Representative Brad Sherman (D-CA) with one
other Democrat and two Republicans introduced
a bill to
"improve the performance of the defense trade
controls functions of the Department of State."
He states:
The centerpiece of the proposed legislation is the imposition of mandatory average processing times. For transactions not subject to Congressional notification requirements, for example, licenses to NATO members, Australia, Japan, New Zealand, and Israel must be processed, on average, within 20 days; 30 days for exports to major non-NATO allies; and 60 days to everyone else. Commodity jurisdiction requests would be required to be acted upon by DDCTwithin 60 days on average.
DDTC's average processing times for Technical Assistance Agreements (TAAs) would need to be 120 days. It’s not clear why the proposed legislation would permit a significant delay in processing TAAs when license requests are put on such a short string. Further, the time limit doesn’t cover approving amendments to TAAs, even though the most significant delays currently being experienced are with respect to such amendments.
The proposed legislation would also significantly change the current provisions of the International Traffic in Arms Regulations (ITAR) relating to exports of spare parts. Under the proposed changes, a DDTC license would not be required for exports of spare and replacement parts to NATO members, Australia, New Zealand and Japan in specified circumstances, including that the parts and components are one-for-one replacements for parts and components for an item previously exported pursuant to a DDTC license. Under section 123.16(b)(2) of the ITAR, components or spare parts can be exported without a license in support of a defense article previously authorized for export as long as the value is under $500, the parts are going to the end user and not a distributor, and no more than 24 shipments are made per year to the end user. If this proposal is adopted, spare parts can be exported even if their value exceeds $500 and more than 24 shipments are made per year.
White House Battle with Congress May Be Brewing for Arms Sale to Saudi Arabia
11/19/07 04:42 PM
World Tribune reports that while the Administration believes they have the support needed in Congress to approve this sale, others believe opposition is growing both publicly and privately. If a battle ensues over the proposed sale, it would mark the first fight between Congress and the White House over an arms sale to Saudi Arabia since 1990 when the House persuaded the administration of then President George H. W. Bush to reduce the $20 billion defense package to $7.3 billion and remove the airborne early warning and control aircraft and the KE-3 tanker aircraft.
Officials of the Bush Administration say that the proposed sale would be formally relayed to Congress soon while prenotification of the sale was given to House Speaker Nancy Pelosi on November 13, 2007. The article states:
"People of all political stripes have come out against this deal," Rep. Anthony Weiner, a New York Democrat said. "It's mind-bogglingly bad policy because the Saudi's at every turn have been uncooperative. The idea that we are going to reward the Saudi's with precision weaponry is a stunningly bad idea, and clearly deserves the full review of Congress."
U.S. Exports Surge Despite Financial Woes
11/10/07 11:56 AM
The sliding value of the dollar has driven US export sales to record highs with the US trade deficit plunging to its lowest level in more than two years, even as worries grow over a surge of mortgage losses, credit write-downs, and fluctuating stock values.
US Commerce Department (DOC) figures released yesterday show that the trade deficit for September dipped by 0.6% to $57 billion from the previous month.
That was the narrowest trade imbalance since May 2005 and took many economists, who had forecasted that the deficit would rise would rise, by surprise.
The improvement in the deficit, the DOC said, came from a full 1% jump in US exports, which climbed to a record $140 billion. The dollars' decline against many major currencies has made US goods cheaper and more competitive in foreign markets.
Miss the BIS Update Conference?
11/08/07 09:35 PM
Did you
miss this year's BIS Update Conference like I did?
If so, you can read an informative blow-by-blow
account of the Update Conference by Douglas
Jacobson on his blog.
BIS Publishes Final Rule to Implement December 2006 Wassenaar Arrangement Plenary Agreement
11/06/07 04:45 PM
On
November 5, 2007, the Bureau of Industry and
Security (BIS) published a final rule to implement
the December 2006 Wassenaar Arrangement Plenary
Agreement. It can be found here. The
rule is effective on November 5, 2007.
In publishing the rule, BIS states that:
In publishing the rule, BIS states that:
This final rule revises the Export Administration Regulations (EAR) to implement changes made to the Wassenaar Arrangement’s List of Dual Use Goods and Technologies (Wassenaar List), and Statements of Understanding maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies (Wassenaar Arrangement, or WA). The Wassenaar Arrangement advocates implementation of effective export controls on strategic items with the objective of improving regional and international security and stability. To harmonize with the changes to the Wassenaar List, this rule revises the EAR by amending certain entries that are controlled for national security reasons in Categories 1, 2, 3, 5 Part I (telecommunications), 6, 7, 8, and 9; and adding new entries to the Commerce Control List (CCL), amending EAR Definitions, as well as adding new definitions to the EAR, and adding a new Statement of Understanding on source code.
The purpose of this final rule is to make the necessary changes to the CCL, definitions of terms used in the EAR, and Wassenaar reporting requirements to implement Wassenaar List revisions that were agreed upon in the December 2006 Wassenaar Arrangement Plenary Meeting.
This rule also adds and expands unilateral U.S. export controls and national security export controls on certain items to make them consistent with the amendments made to implement the Wassenaar Arrangement’s decisions. In addition, this rule removes the remaining references to ‘‘Composite Theoretical Performance (CTP)’’ and ‘‘Millions of Theoretical Operations Per Second (MTOPS)’’ in the EAR, which is consistent with agreements made by the Wassenaar Arrangement with regard to microprocessors.
BIS Issues Press Release and Fact Sheet on Implementation of Enhanced IEEPA Penalty Provisions
11/02/07 11:24 PM
On
November 1, 2007, BIS issued a press
release and
fact sheet
regarding
welcoming the enhanced penalties of the
International Emergency Economic Powers
Enhancement Act (IEEPA) signed into law by
President Bush on October 16, 2007.
In its press release, BIS states:
The significant changes provided under the Act include:
In its press release, BIS states:
The significant changes provided under the Act include:
- Additional Unlawful Acts: Section 206(a) of IEEPA is amended to clarify that civil penalties may be assessed against those who conspire to violate, or cause a violation of any license, order, regulation, or prohibition of title 50 of the United States Code.
- Administrative Penalties: A civil penalty amounting to the greater of $250,000, or twice the value of the transaction that is the basis of the violation (Enhanced Penalties), may be imposed for each violation of IEEPA.
- Effective Date/Retroactivity: The new civil penalties apply to enforcement action that are pending, which BIS interprets an action to be if a Final Order has not been signed, or commenced on or after October 16, 2007.
- Criminal Penalties: Violators can be fined up to $1,000,000 and/or up to 20 years in prison. Additionally, criminal liability is provided for anyone who “willfully conspires to commit, or aids or abets in the commission of” an unlawful act described in the statute.
- Effective Date: The new criminal penalties apply to criminal enforcement actions commenced on or after October 16, 2007.
Commerce Secretary Guiterrez's BIS Update Comments Published
11/02/07 10:00 PM
Commerce
Secretary Carlos Gutierrez addressed the Bureau of
Industry and Security (BIS) Update 2007 Conference
on Export Controls and Policy in Washington, D.C.
on November 1, 2007. His comments can be
found here.
BIS Publishes Final Rule on Burma
11/01/07 08:49 PM
This rule creates a new section 744.22 to set forth the new license requirements. Further, in part 740 of the EAR (License Exceptions), this rule moves Burma from Computer Tier 1 to Computer Tier 3, restricting access to high-performance computers and related technology and software under License Exception APP (Section 740.7).
In Supplement No. 1 to part 740 (Country Groups), this rule moves Burma from Country Group B (countries raising few national security concerns) to Country Group D:1 (countries raising national security concerns), which further limits the number of license exceptions available for exports to Burma. Burma will remain in Country Group D:3 (countries raising proliferation concerns related to chemical and biological weapons).
On October 30, 2007, BIS published Questions and Answers regarding the final rule on Burma.
BIS Publishes Q&As for Regulation on Burma
10/30/07 05:08 PM
Today,
BIS published a Question and Answer document
regarding the new regulation on Burma sanctions
issued on October 24, 2007. The document can be
found here.
Could UK Export Control Investigations Have Halted Iran's Nuclear Program?
10/30/07 01:37 PM
In an
interesting article on MSNBC today,
a U.K. Customs agent claims that his export
control investigation of a Pakistani scientist,
Abdul Qadeer Khan, uncovered a nuclear black
market which supplied Iran with centrifuges. The
agent, Atif Amin, claims that he was prevented
from fully investigating the matter by U.K. and
U.S. intelligence agencies in 2000. It's a
fascinating read if you like spy-type stories
that link back to our bread and butter -
international trade regulation.
BIS Publishes Q&As for New China Rule & VEUs in India
10/29/07 05:05 PM
Today,
BIS published a Question and Answer publication
regarding the new China rule and extending the
Validated End User (VEU) authorization to India.
The document can be found here.
DDTC Key Personnel Listing
10/25/07 01:26 PM
Pratt & Whitney Canada Engines Found in Chinese Military Attack Helicopter
10/24/07 02:33 PM
The New
York Times reported
yesterday that
the U.S. State Department is investigating how
engines made by a Pratt & Whitney Canadian
subsidiary made it into a Chinese attack
helicopter. Pratt & Whitney Canada stated
last week that 10 engines were sent to China in
2001 and 2002 under a Canadian government export
license for civilian use. But, the company said
that the engines ended up in prototypes of the
Z-10, China's first domestically developed
attack copter, designed to carry guided antitank
missiles.
The Times reports that while the Canadian government has no plans to take action against Pratt & Whitney for the military diversion, a State Department spokesman, Karl E. Duckworth, said that the U.S. government is continuing an investigation into the company's actions.
In an e-mailed statement, a Pratt & Whitney spokesman, Jean-Daniel Hamelin, stated that the company was selected by a Chinese aircraft maker in 2000 to provide engines for the civilian variation of a helicopter that was simultaneously being developed for the military. He wrote that when Pratt & Whitney applied for the Canadian export license, the company understood that the Chinese would develop their own engine for the military model. The two helicopters were being developed, he said, on a "common platform" that shared rotors and transmissions. Mr. Hamelin stated, "the Chinese engine encountered delays, and our engines were used during the development of the common platform," adding, "The program has undergone changes by the Chinese. The Canadian government is currently re-evaluating the program."
The New York Times states that, "Several aviation publications have reported that the Chinese military has still been unable to create its own copter engine and that it continues to rely on engines made by Pratt & Whitney."
The Canadian Department of Foreign Affairs and International Trade, which issued the export license, said on Friday that it had no concerns about the way the engine sale was handled or the effectiveness of its export control program for technologies with potential military applications. François Jubinville, a spokesman for the international trade minister stated, "Pratt & Whitney lived up to the condition of the licenses. We're pretty confident that our control system was used properly."
When asked whether the system was working properly given that the engines had ultimately been put to military use, Mr. Jubinville replied, "The question should be asked to the Chinese."
The Times reports that while the Canadian government has no plans to take action against Pratt & Whitney for the military diversion, a State Department spokesman, Karl E. Duckworth, said that the U.S. government is continuing an investigation into the company's actions.
In an e-mailed statement, a Pratt & Whitney spokesman, Jean-Daniel Hamelin, stated that the company was selected by a Chinese aircraft maker in 2000 to provide engines for the civilian variation of a helicopter that was simultaneously being developed for the military. He wrote that when Pratt & Whitney applied for the Canadian export license, the company understood that the Chinese would develop their own engine for the military model. The two helicopters were being developed, he said, on a "common platform" that shared rotors and transmissions. Mr. Hamelin stated, "the Chinese engine encountered delays, and our engines were used during the development of the common platform," adding, "The program has undergone changes by the Chinese. The Canadian government is currently re-evaluating the program."
The New York Times states that, "Several aviation publications have reported that the Chinese military has still been unable to create its own copter engine and that it continues to rely on engines made by Pratt & Whitney."
The Canadian Department of Foreign Affairs and International Trade, which issued the export license, said on Friday that it had no concerns about the way the engine sale was handled or the effectiveness of its export control program for technologies with potential military applications. François Jubinville, a spokesman for the international trade minister stated, "Pratt & Whitney lived up to the condition of the licenses. We're pretty confident that our control system was used properly."
When asked whether the system was working properly given that the engines had ultimately been put to military use, Mr. Jubinville replied, "The question should be asked to the Chinese."
Woman Indicted for Attempting to Export Accelerometers to China
10/19/07 02:10 PM
On
October 18, 2007, the Department of Justice
(DOJ)
announced
the
indictment by a federal grand jury sitting in
San Diego, CA of Qing Li, 39 of Stamford,
Connecticut, with conspiracy to procure the
illegal export of military-grade accelerometers
from the U.S. to China based on an undercover
operation by agents from the U.S. Immigration
and Customs Enforcement (ICE) and Defense
Criminal Investigative Service (DCIS).
According to court papers, Li conspired with an individual in China to locate and procure Endevco 7270A-200K accelerometers for what her co-conspirator described as a "special" scientific agency in China. DOJ states that the Endevco 7270A-200K accelerometer measures massive shocks up to and beyond 200,000 g, and has many military applications, including use in "smart" bombs and missile development. Julie Myers, Department of Homeland Security Assistant Secretary for Immigration and Customs Enforcement stated,
The government claims that from April 2007 to October 2007, Li and her co-conspirator used e-mail messages and telephone calls to negotiate the illegal export transaction with an undercover ICE agent in San Diego. The government alleges that Li and her co-conspirator urged the undercover agent to deliver the accelerometers directly to China, advising the undercover agent that if the accelerometers tested properly, large orders would follow.
Rick Gwin, Special Agent in Charge for the DCIS, Western Field Office, stated,
If you are interested in reading more details regarding this case, you can find it here.
According to court papers, Li conspired with an individual in China to locate and procure Endevco 7270A-200K accelerometers for what her co-conspirator described as a "special" scientific agency in China. DOJ states that the Endevco 7270A-200K accelerometer measures massive shocks up to and beyond 200,000 g, and has many military applications, including use in "smart" bombs and missile development. Julie Myers, Department of Homeland Security Assistant Secretary for Immigration and Customs Enforcement stated,
These devices are simply not for export to China or anywhere else without explicit permission from the U.S. Government. Stopping the illicit export of weapons technology is paramount to the national security of our country and the public safety of all.
The government claims that from April 2007 to October 2007, Li and her co-conspirator used e-mail messages and telephone calls to negotiate the illegal export transaction with an undercover ICE agent in San Diego. The government alleges that Li and her co-conspirator urged the undercover agent to deliver the accelerometers directly to China, advising the undercover agent that if the accelerometers tested properly, large orders would follow.
Rick Gwin, Special Agent in Charge for the DCIS, Western Field Office, stated,
This investigation signifies the aggressive pursuit by the DCIS, in cooperation with our other federal law enforcement partners, to identify and pursue prosecution of those that illegally export or steal our sensitive military technology.
If you are interested in reading more details regarding this case, you can find it here.
BIS Publishes Final Rule re: VEUs
10/19/07 10:24 AM
The
U.S. Bureau of Industry and Security (BIS)
published a final rule amending the Export
Administration Regulations (EAR) which would allow
BIS to list the names of end users in the Peoples'
Republic of China (PRC) who have been approved to
receive exports, reexports, and transfers of
certain items under the Validated End User (VEU)
authorization. Additional information and the
publication can be found here.
BIS Publishes Proposed Rule on SNAP-R
10/19/07 10:17 AM
The
U.S. Bureau of Industry and Security (BIS) has
published a proposed rule to amend the Export
Administration Regulations (EAR) that would make
SNAP-R mandatory. The proposed rule would require
that most submissions to BIS be made via SNAP-R.
Any comments on the proposed rule must be received
by December 18, 2007. Additional information is
available here.
Five Approved as Validated End Users
10/18/07 04:21 PM
BIS
announced
the
approval for the first five companies in China
for Validated End-User authorization. The VEU
authorization will remove individual license
requirements on exports of certain controlled
items to the approved companies. BIS stated
that, "The VEU program for China will make
transactions easier, faster and more reliable
with customers that meet rigorous security
requirements established by an interagency
review process, and will help U.S. exporters
remain competitive in one of the fastest-growing
markets for American companies. The VEU program
is an innovative way to facilitate exports to
civilian end-users in China."
The first companies approved for VEU authorization are:
• Applied Materials China
• Boeing Hexcel AVIC I Joint Venture
• National Semiconductor Corporation
• Semiconductor Manufacturing International Corporation (SMIC)
• Shanghai Hua Hong NEC Corporation (HHNEC)
BIS also stated that, "These companies, which accounted for 150 licenses between 2002 and 2006, were approved for VEU status after a thorough review of such factors as the entity’s record of exclusive engagement in civil end-use activities; the entity’s compliance with U.S. export controls; the need for an on-site review prior to approval; the entity’s capability of complying with the requirements of authorization VEU; the entity’s agreement to on-site reviews to ensure adherence to the conditions of the VEU authorization by representatives of the U. S. Government; and the entity’s relationships with U.S. and foreign companies."
The first companies approved for VEU authorization are:
• Applied Materials China
• Boeing Hexcel AVIC I Joint Venture
• National Semiconductor Corporation
• Semiconductor Manufacturing International Corporation (SMIC)
• Shanghai Hua Hong NEC Corporation (HHNEC)
BIS also stated that, "These companies, which accounted for 150 licenses between 2002 and 2006, were approved for VEU status after a thorough review of such factors as the entity’s record of exclusive engagement in civil end-use activities; the entity’s compliance with U.S. export controls; the need for an on-site review prior to approval; the entity’s capability of complying with the requirements of authorization VEU; the entity’s agreement to on-site reviews to ensure adherence to the conditions of the VEU authorization by representatives of the U. S. Government; and the entity’s relationships with U.S. and foreign companies."
DOJ Targets Illegal Tech Exports
10/11/07 04:44 PM
The U.S.
Department of Justice (DOJ) announced
today
the launch of a national counter-proliferation
initiative. The DOJ states that the initiative
will be undertaken in conjunction with the State
Department's Directorate of Defense Trade
Controls (DDTC) and the Commerce Department's
Bureau of Industry and Security (BIS). As part
of the initiative, the DOJ's National Security
Division has begun monthly meeting with the
leadership of these offices to ensure that
investigations, prosecutions, and enforcement
issues are fully coordinated.
Counter-Proliferation Task Forces have been
formed in U.S. Attorney offices around the
country in regions with large concentrations of
high-tech businesses and research facilities.
DOJ states that the threat posed by illegal acquisition of restricted U.S. technology is "substantial and growing." It states that a 2006 U.S. Defense Department report found a 43 percent increase in the number of suspicious foreign contact with U.S. defense firms and an Intelligence Committee report issued last year found that entities from a record 108 nations were engaged in efforts to obtain controlled U.S. technology.
DOJ reports that China and Iran pose particular concerns for U.S. export control with the majority of criminal prosecutions in recent years involving restricted U.S. technology bound for these nations. Recent prosecutions have involved illegal exports of stealth missile technology, military aircraft components, Naval warship data, night vision equipment, and other restricted technology destined for China or Iran.
The DOJ has appointed its first National Export Control Coordinator to implement this initiative and foster coordination among the different agencies involved in export control. Based in the Counterespionage Section of the National Security Division, the National Export Control Coordinator is responsible for managing the nationwide training of prosecutors and monitoring the progress on export control prosecutions around the country.
In addressing these export control threats, DOJ states that law enforcement agencies and federal prosecutors have stepped up their enforcement activity in recent years. U.S. Immigration and Customs Enforcement (ICE) has recently doubled the number of agents assigned to export control cases and reports making 149 export-related arrest last fiscal year. The FBI reports that it is investigating approximately 125 economic espionage cases and has increased counterintelligence instructions for new agents by 240 percent.
The Commerce Department reports that more than 80 percent of its export convictions in fiscal year 2207 were related to WMD proliferation, terrorist support, or diversion to military end-use. In fiscal year 2007, the DOJ states there was more than a 50 percent increase in defendants charged with violating export control statutes compared to the prior year.
The Associated Press has reported this story as well, see here.
DOJ states that the threat posed by illegal acquisition of restricted U.S. technology is "substantial and growing." It states that a 2006 U.S. Defense Department report found a 43 percent increase in the number of suspicious foreign contact with U.S. defense firms and an Intelligence Committee report issued last year found that entities from a record 108 nations were engaged in efforts to obtain controlled U.S. technology.
DOJ reports that China and Iran pose particular concerns for U.S. export control with the majority of criminal prosecutions in recent years involving restricted U.S. technology bound for these nations. Recent prosecutions have involved illegal exports of stealth missile technology, military aircraft components, Naval warship data, night vision equipment, and other restricted technology destined for China or Iran.
The DOJ has appointed its first National Export Control Coordinator to implement this initiative and foster coordination among the different agencies involved in export control. Based in the Counterespionage Section of the National Security Division, the National Export Control Coordinator is responsible for managing the nationwide training of prosecutors and monitoring the progress on export control prosecutions around the country.
In addressing these export control threats, DOJ states that law enforcement agencies and federal prosecutors have stepped up their enforcement activity in recent years. U.S. Immigration and Customs Enforcement (ICE) has recently doubled the number of agents assigned to export control cases and reports making 149 export-related arrest last fiscal year. The FBI reports that it is investigating approximately 125 economic espionage cases and has increased counterintelligence instructions for new agents by 240 percent.
The Commerce Department reports that more than 80 percent of its export convictions in fiscal year 2207 were related to WMD proliferation, terrorist support, or diversion to military end-use. In fiscal year 2007, the DOJ states there was more than a 50 percent increase in defendants charged with violating export control statutes compared to the prior year.
The Associated Press has reported this story as well, see here.
DOJ Report of Export Prosecutions
10/11/07 04:06 PM
The
Department of Justice (DOJ) today issued a
report
of
major U.S. export enforcement actions in the
past year. Here a list of the cases:
- Illegal Exports of F-4 and F-14 Fighter Jet Components to Canada - 10/5/07
- Products with Nuclear & Missile Applications to Pakistan - 10/4/07
- Military Night Vision Goggles and Aviation Helmets - 9/8/07
- Economic Espionage and Theft of Trade Secrets to China - 9/26/07
- Sensitive Aircraft Components to Iran - 9/18/07
- 100,000 Uzi Submachine Guns to Iran - 8/27/07
- U.S. Military Source Code to China - 8/1/07
- Restricted Technology (controlled microwave integrated circuits) to China - 8/1/07
- Controlled Vibration Amplifiers, Cable Assemblies and Vibration Processor Units to India - 7/30/07
- Illegal Exports of F-5 and F-14 Fighter Jet Components to Malaysia - 7/19/07
- Telecommunications Equipment to Iraq - 7/19/07
- Missiles, Arms to Terrorists in Colombia and Various Armed Factions - 6/7/07
- U.S. Naval Warship Data to China - 6/5/07
- F-14 Fighter Jet Components to Iran - 5/8/07
- Telecommunications Equipment from China to Iraq - 4/10/07
- Software to Iran - 4/8/07
- Surface-to-Air Missiles, Arms to Terrorists in Sri Lanka and to Indonesian Military - 4/5/07
- Ballistic Missile Technology to Government Facilities in India - 4/3/07
- Outsourcing Manufacture of Armaments to China - 3/28/07
- Ballistic Helmets to Suriname - 3/28/07
- ITT Corp. Agrees to Pay $100 Million Penalty for Illegal Exports of Military Night Vision Technology to China, Singapore & UK - 3/27/07
- Machine Guns, Arms to Indonesia - 6/18/07
- Trade Secrets Stolen from 2 Silicon Valley tech companies to Chinese Nationals - 12/14/06
- "Guided Wave" Scanning Device to Iranian National - 12/5/06
- Technology with Nuclear Applications to Iran - 11/30/06
- Rifle Scopes, Weapons to Iran - 11/22/06
- U.S. Stealth Missile Data & Military Secrets to China - 11/8/06
- Military Weapon Scopes to China - 10/26/06
- U.S. Military Vehicles to the Middle East - 10/26/06
- Terrorist Transactions, Computer Exports to Libya and Syria - 10/13/06
- Machinery to Iran - 10/13/06
- Aircraft Parts to Iran - 10/13/06
- Industrial Furnace to Missile Institute in China - 10/4/06
BIS Seeks Israel Industry Input
10/05/07 10:43 AM
BIS is
seeking industry input in
advance of the recently announced
High
Tech Forum with Israel designed to facilitate
secure bilateral high technology trade and
investment between the U.S. and Israel. The
inaugural meeting of the HTF is expected to be
held in early 2008. Under Secretary of Commerce
for Industry and Security, Mario Mancuso, will
co-chair the HTF with his Israeli counterparts.
BIS states,
In order to maximize the impact of the dialogue, we are seeking private sector input about barriers or challenges to bilateral high technology trade and investment, including but not limited to the impact of dual-use export controls. We will work closely with our interagency partners and the Government of Israel to address these challenges through the HTF.We welcome and encourage your input. Please provide your comments to: US_IsraelHTF@bis.doc.gov. If you have questions in reference to the HTF, please contact Sarah Heidema, at 202-482-2906.
BIS Extends VEU Authorization to India
10/03/07 11:56 AM
BIS had created the new VEU authorization in a final rule