Changes to DDTC Paper Applications

June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

DDTC is in the process of modernizing its infrastructure; the newest change will directly impact paper applications. At this time, the ELLIE Net system allows users to track paper applications such as General Correspondence (GC) Letters and Applications for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data (DSP-85). Going forward ELLIE Net will be retired and users will no longer have the ability to access the system to track their paper applications.

DDTC is urging users to include a valid email address on all paper applications so that DDTC can send an email with the application number to users. DDTC will use this transition period to work out any problems with the interim process.

Information:  http://www.pmddtc.state.gov/documents/WebNotice_PaperApplications.pdf

Free, Updated Searchable ITAR and CCL Available Now!

June 2nd, 2015 by Danielle McClellan

By: Jill Kincaid

ECTI strives to provide useful tools and resources for trade compliance professionals in addition to our live training seminars, webinars and e-Seminars.   For that reason, ECTI has created a searchable ITAR and a searchable CCL.  You might think DDTC and BIS already offer these—in which case you would be wrong.

ECTI’s newest tool is a FREE Searchable ITAR document.  The ITAR document includes all of Parts 120-130 in one single pdf file which is updated and current with all ITAR  changes on a monthly basis.  The document is downloadable in searchable PDF format with bookmarks so it is easy to find what you are looking for—in one convenient file!

Similarly, for some time now ECTI has been offering a CCL tool that includes all of CCL categories 0 – 9 in a single pdf file which is updated and current with all CCL changes on a monthly basis.    Both of these tools are FREE and available for download at any time on our website!

Searchable ITAR

Searchable CCL

Commerce and State Publish PROPOSED Changes for Night Vision, Optics, and Guidance Items

June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

Export Control Reform has returned with a proposed rule change to Category XII (Fire Control, Range Finder, Optical and Guidance and Control Equipment) of the USML.  New, proposed changes to the ITAR and EAR, if implemented, would eventually shift certain less sensitive items out of Category XII to the CCL, where they normally would end up in proposed:

  • New “600 series” ECCNs  6A615, 6B615, and 6D615 for military fire control, range finder, and optical items, and
  • Revised ECCN 7A611 and new ECCNs 7B611, 7C611, and 7E611 for military optical and guidance items.

The proposed rule would also expand in a new way the scope of end-use restrictions on certain exports and reexports of certain cameras, systems or equipment and expand the scope of military commodities described in ECCN 0A919.

The proposed rule is focused on identifying the types of articles that are currently controlled by USML Category XII that are either: inherently military and otherwise warrant control on the USML or if it is a type of common to non-military equipment, possess parameters or characteristics that provide a critical military or intelligence advantage to the US, and that are almost exclusively available from the US. If an article met one or both of these criteria, the article will remain on the USML. If it did not satisfy either requirement because of differences in form or fit, “specially designed” for military applications, it was identified in current or new ECCNs proposed above.

BIS and DDTC are seeking public comments on their respective proposed changes.   DDTC and BIS will accept comments until July 6, 2015.

Once the US Government analyzes the public comments on the proposed changed, the departments of Commerce, State and Defense will determine what, if any changes to make to the proposed rules and then DDTC and BIS will publish final rules to make actual changes to their regulations.  It seems optimistic to think the new final rules could be published by early 2016 (or late 2015) and the final rules will have a six-month delay after publication before they enter into force.  That would mean that actual changes to the controls on these items would enter into force in the summer of 2016.

To review the ITAR proposal go to:  http://www.pmddtc.state.gov/FR/2015/2015-09673.pdf

To review the EAR proposed rule go to:  http://www.bis.doc.gov/index.php/regulations/federal-register-notices#FR25798

Learn more by viewing ECTI’s On Demand, Export Control Reform for Category XII webinar today!

$232 Million Penalty? Soit Cacahuètes! French Bank Agrees to Pay $8.9 Billion for Violating US Sanctions

June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

BNP Paribas SA, a French bank, has been fined $8.9 billion and sentenced to five years of probation for violating sanctions against Sudan, Cuba and Iran. This case marks the first time a global bank has plead guilty to violations of US economic sanctions, BNP’s general counsel explained that the bank accepted “full responsibility for its conduct” and is currently improving its policies as we speak.

Records indicated that BNP was a central bank for the government of Sudan and concealed its tracks and initially failed to cooperate with law enforcement. The bank also evaded sanctions against Iran and Cuba by stripping information from wire transfers so that they could pass through US systems without raising red flags.

The US Justice Department announced that some of the $8.9 billion could go to a new program to assist people who have been harmed by the regimes of the three sanctioned countries.

Information: http://www.reuters.com/article/2015/05/01/us-bnp-paribas-settlement-sentencing-idUSKBN0NM41K20150501

$232+ Million Fine for Lack of US Sanctions Training

June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan

The highest fine in the history of US Sanctions violations has been handed to Schlumberger Oilfield Holdings Ltd. (Schlumberger). The company entered into a plea agreement forcing them to pay a $232,708,356 penalty for willfully facilitating transactions with Iran and Sudan.

Court documents explain that in early 2004, through June 2010, Drilling & Measurements (a US-based Schlumberger business) provided oilfield services to customers in Iran and Sudan through non-US subsidiaries of Schlumberger.  These documents also indicate that the company failed to properly train employees located in the US (US persons and non-US citizens residing in the US) on how to comply with Schlumberger’s sanction and compliance procedures. Schlumberger employees residing in the US violated the US sanctions against Iran and Sudan by:

  • Approving and disguising the company’s capital expenditure requests from Iran and Sudan for drilling tools etc.;
  • Making and implementing business decisions concerning Iran and Sudan;
  • Providing technical services and expertise in order to troubleshoot mechanical failures and to sustain tools and equipment in Iran and Sudan.

Schlumberger is now the poster child for US sanctions violations. In addition to the massive monetary penalty they have submitted to a three-year period of corporate probation and must continue to cooperate with the government and NOT commit any additional felony violations of US federal law. Schlumberger must also hire an outside consultant to review their parent company’s internal sanctions policies and procedures as well as their internal audits focusing on sanctions compliance. This is a great example on the importance of training…the cost of the initial training probably will never be near the cost of not training, and breaking the law.

Information: http://www.justice.gov/opa/pr/federal-court-issues-written-judgment-accepting-guilty-plea-schlumberger-oilfield-holdings

Russia/Crimea Restrictions…You Are Responsible—You Can’t Say BIS Didn’t Officially Warn You

June 2nd, 2015 by Danielle McClellan

By: Danielle McClellan and John Black

Without reading the details of this guidance, you should get this message:  You better be careful so you do not end up being the first one caught with a significant violation of the new, complicated US sanctions and export controls put in place in response to Russia’s actions in Ukraine and the situation in Crimea.

If you have not studied the complicated array of various new BIS and OFAC rules, you should do so immediately

If you do not understand that these BIS and OFAC rules can have a dramatic impact in your business activities in Russia, Ukraine, Crimea and nearly every other country in the world, you need to study the rules again and study the guidance from the departments of Commerce and Treasury regarding the scope of their respective rules.

The new rules have a remarkably broad potential scope when compared to other US sanctions and export controls.  The broad scope is at least partially due to the new, prohibited parties lists that target important and large Russian entities and the multitude of the unlisted affiliates of the listed parties that often are subject to the same restrictions as the listed parties.

Now, you add to that the BIS guidance that says if you are dealing with a company in Panama and that company’s website says or hints that it is related to a certain listed party, you may have a problem.

And don’t fail to notice that for purposes of these sanctions BIS says “Exporters.”

Finally, one purpose of the guidance may be to give exporters and reexporters friendly advice.  Another purpose may be to put exporters and reexports officially on notice regarding how to comply with the complex rules so as to remove the “we didn’t know BIS wanted us to do that” argument from the list of possible arguments to use to negotiate smaller penalties if you end up doing something BIS doesn’t like.

Anyway, enough of the warnings.  Here is the news:

BIS recently released guidance related to the current export restrictions imposed on Russia due to the “ongoing situation in Crimea.” In August 2014, BIS placed restrictions on exports of certain items to Russia and expanded some licensing requirements later in December 2014.

BIS is now providing additional guidance to US exporters in order to prevent unauthorized reexports to Russia, mainly those involving NS-controlled items or items listed in Supplement No. 2 to Part 744 of the EAR.  BIS advised that exporters should remember that when a party who is not going to use the item is listed as the final destination (e.g., a freight forwarder), exporters have an affirmative duty to inquire about the end use, end user, and ultimate destination of the item(s) to ensure their transaction fully complies with the EAR.  BIS is reminding exporters to do the following:

  • When inquiring into the ultimate destination of the item consider e-mail addresses, telephone number country codes and languages used in communications as well as the customers website
  • Research the intermediate and ultimate consignees and purchaser (addresses, business registers, company profiles, websites etc.)
  • Screen all customers using an export screening tool
  • Pay attention to the countries that freight forwarders serve
  • Look into industry sectors and distributors or non-end user customer supplies

If you have any concerns about suspicious inquires that come to your company, BIS encourages you to contact local BIS Export Enforcement Office or use BIS’s online tip form.  Of course, before you contact the BIS law enforcement agents, it would be prudent to discuss the situation you are considering and the related history with your management and legal counsel.

BIS Guidance: http://www.bis.doc.gov/index.php/compliance-a-training/export-management-a-compliance/russia-due-diligence-guidance

The Office of Defense Trade Controls Licensing Reorganizes

April 27th, 2015 by Brooke Driver

By: Brooke Driver

As of April 20, the Office of Defense Trade Controls Licensing has been restructured to reflect the 36% drop in licensing volume and disparity in the volume of cases among the previous divisions resulting from changes made by Export Control Reform. The DTCL has streamlined its divisions to reflect the post-ECR environment and now includes four operational divisions: Space, Missile and Sensor Systems, Electronic and Training Systems, Sea, Land and Air Systems and Light Weapons and Personal Protective Equipment Systems.

Export compliance professionals will not need to adjust application procedures due to the changes; D-Trade will automatically route cases to the corresponding division based on the USML commodities listed in the application.

Click here for more information.

NYPD Police Officer and His Customs Officer Brother Jailed for Illegally Exporting Guns to the Philippines

April 27th, 2015 by Brooke Driver

By: Brooke Driver

Sometimes, brotherly love isn’t a good thing—particularly where power and means meets bad intentions and family connections. In a shocking case, an NYPD cop named Rex Maralit (46) and his brother, forty-nine-year-old Wilfredo Maralit, a California Customs and Border Protection officer, have been jailed for illegally exporting military-grade weapons for over four years (over a third of Rex’s career as an NYPD officer).

The Maralit brothers took advantage of their resources as law enforcement officers to purchase the weapons—assault rifles, AR-15s and semiautomatic weapons—and shipped the products for distribution to yet another criminal brother, Ariel Maralit, who lives in the Philippines and emailed Rex and Wilfredo customer orders.

Both Rex and Wilfredo pled guilty to violating the Arms Export Control Act and received three years in prison a piece. The presiding judge, Allyne R. Ross, said of her sentence, “the rule of law applies with equal force to law enforcement officials and non-law enforcement officials.”

Potential Poster Child for Violating US Export Controls on Russia?: Flider Electronics’ Put on the U.S. Denial List for Shipments to Russia

April 27th, 2015 by Brooke Driver

By: Brooke Driver

BIS recently issued a temporary denial order suspending Californian-based Flider Electronics, LLC’s export privileges for 180 days, due to two of its officers’ illegal activities, who are accused of smuggling and money laundering.

BIS claims that the company exported items subject to the EAR to Russia without a license by transshipment through third countries, listing in AES filings Estonian and Finnish end-users who, in reality, acted as freight forwarders. In addition, BIS discovered no licensing history from the company of controlled U.S.-origin electronics to Russia.

BIS chose to issue the temporary denial order due to its belief that a violation of the EAR was “imminent in both time and degree of likelihood.”  This temporary denial leaves the door open for BIS to impose further penalties.

Russia likely is joining China and Iran at the top of the list of countries that will get you in the most trouble for violating US export or reexport controls.  The US Government is certainly looking for a more well-known company to be the “Don’t Let This Happen to You” poster child for violations of US trade controls on Russia.

Schlumberger Oilfield Holdings to Pay Over $232.7 Million for Violating U.S. Iran and Sudan Sanctions

April 27th, 2015 by Brooke Driver

By: Brooke Driver

Schlumberger Oilfield Holdings, Inc., a subsidiary of Schlumberger Ltd., recently pleaded guilty to multiple violations of the International Emergency Economic Powers Act. According to Assistant Attorney General Carlin,

“Over a period of years, Schlumberger Oilfield Holdings, Inc. conducted business with Iran and Sudan from the United States and took steps to disguise those business dealings, thereby willfully violating the U.S. economic sanctions against those regimes…The International Emergency Economic Powers Act is an essential tool that the United States uses to address foreign threats to national security through the regulation of commerce. Knowingly circumventing sanctions undermines their efficacy and has the potential to harm both U.S. national security and foreign policy objective.”

U.S. Attorney Machen added,

“This is a landmark case that puts global corporations on notice that they must respect our trade laws when on American soil…Even if you don’t directly ship goods from the United States to sanctioned countries, you violate our laws when you facilitate trade with those countries from a U.S.-based office building.”

Along with a three year corporate probation, the company must pay a fine of $232,708,356, consisting of a $77,569,452 criminal forfeiture and a $155,138,904 criminal fine—the largest criminal fine ever assigned in connection with an IEEPA prosecution.