Archive for 2003

Chip Fixation Creates CJ Chaos

Friday, December 26th, 2003 by Maarten Sengers

Did you ever think that a $400 postage stamp sized chip would cause upwards of a thousand commercial jets to become subject to State Department defense trade licensing requirements?  Well, a closely watched case is doing precisely that, and in the process is sowing utter confusion among the hapless export compliance administrators already struggling to understand the commodity jurisdiction decision making process between the dual use Export Administration Regulations (EAR) and the defense use International Traffic in Arms Regulations (ITAR).

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State Publishes New Agreements Guidelines

Friday, December 26th, 2003 by Maarten Sengers

The Directorate of Defense Trade Controls (DDTC) issued new Guidelines for drafting Technical Assistance Agreements (TAA’s), Manufacturing License Agreements (MLA’s) and the like on its website.   You should immediately use the new guidelines and templates therein when preparing and submitting your TAA or MLA applications.

The new Guidelines are substantially more detailed than the old, though the actual MLA and TAA templates look virtually the same.  What’s different is the degree of explanations and clarifications contained in the new Guidelines that were not found in the old. They also contain new sample letters and templates.   A full accounting of all the changes is difficult, but notable changes include:

  1. Warehousing and Distribution Agreements dropped from the new Guidelines – The new Guidelines drop templates for Warehousing and Distribution Agreements.  These Agreements were typically used for establishing distribution centers for defense articles outside the United States.  But their actual use has been discouraged for years.  Apparently, DDTC is discouraging their use even more by dropping them altogether from the Guidelines.
  2. New Template for Proviso Reconsideration – How many of you have had conflicting provisos on your Agreement?  My personal favorite was an Agreement which had two provisos to the effect of 1) Shipment of hardware by separate license (e.g. DSP-5) is authorized and 2) Shipment of hardware by separate license (e.g. DSP-5) is not authorized.  The new Guidelines offer a suggested format for Proviso reconsideration to deal with those conflicting or impossible Provisos such as these.
  3. Dual Nationals Disclosure – The new Guidelines advise that you list the nationalities of all third country nationals and dual nationals that may be employed by your overseas licensee – see section 10.2 of the Guidelines.   This is now an explicit written instruction on what has been provided as informal, and often ignored, verbal guidance in the past.
  4. Foreign National Employees in the US – The Guidelines clarify that “most” foreign national employees should be licensed through a DSP-5, not a TAA.   A TAA must be used only when the employee must receive “technical training.”

Prohibited Parties Lists Changes December 2003

Tuesday, December 23rd, 2003 by John Black

DENIED PERSONS LIST:

Commerce Department added the following parties to the Denied Persons List:

  1. ABO (USA) INC., 2563 NW 20th St, Miami, FL 33142 (12/22/03): Commerce took this action in response to charges that ABO committed two violations of the Export Administration Regulations by illegally export commercial night vision scopes to Japan without an export license.
  2. Omega Engineering, Inc., One Omega Drive, Stamford, Connecticut 06907 (11/18/03): Commerce listed Omega for 17 violations related to illegal exports of laboratory equipment via Newport Electronics GmbH in Germany to Pakistan. Omega’s illegal exports came two to three months after Commerce denied Omega’s license application to export the items to Pakistan. Everybody knows that the government watches companies who get their licenses denied – I guess everybody but Omega knows that. Obviously, Omega is a good example of the law enforcement belief that if a company gets an export license denied, it will export anyway. Omega’s denied status is focused on transactions involving Pakistan. Commerce also fined Omega $187,000. In April of 2003 Omega pled guilty to criminal violations and received a $313,000 fine.
  3. Ralph Michel, Vice President, Omega Engineering, Inc., One Omega Drive, Stamford, Connecticut 06907 (11/18/03): Commerce put Michel, the CFO of Omega, on the list for his involvement in the Omega violations. Michel’s denied status is focused on transactions involving Pakistan. In April of 2003 Michel pled guilty to criminal violations and received 10 months of confinement and a $50,000 fine.
    So, now you have an example that demonstrates that the government may go after senior company officials in addition to the company.
  4. Ahwaz Steel Commercial & Technical Service Gmbh (ASOTEC), Tersteegenstr. 10, 40474 Dusseldorf, Germany AND Metal & Mineral Trade Sarl (MMT), Rue Pierre D’Aspelt, 1142 Luxembourg, Luxembourg. Commerce announced settlement agreement with these two parties in relation to charges that they caused illegal exports from the United States to Iran.

TERRORIST LIST:

In the December 23 Federal Register the State Department published notices adding aliases to the terrorist designation of various terrorist organizations. See www.access.gpo.gov/su_docs/fedreg/a031223c.html.

MISSILE PROLIFERATION SANCTIONS

In the December 24 Federal Register the State Department imposed missile proliferation sanctions against:

  1. Blagoja Samakoski (Macedonian national)
  2. Mikrosam (Macedonia)

These sanctions prohibit the approval of license for transfers to these parties of military and commercial items controlled by the Missile Technology Control Regime Annex. The sanctions also prohibit US Government contracts with these entities.

As a practical matter, exporters should read a bit more into these sanctions: First, if you ever deal with these entities, you must assume there are significant “red flags” indicating possible illegal missile activities and treat the transaction accordingly. Second, it is likely that the US Government will deny most, if not all, license applications for these parties.

December DTAG Meeting Notes

Wednesday, December 17th, 2003 by Maarten Sengers

On December 17, 2003, the Defense Trade Advisory Group (DTAG) held their plenary meeting at the State Department.  DTAG acts as an advisory group to the Directorate of Defense Trade Controls, and all of the DDTC bigwigs attended and spoke to the assembled group, including Assistant Secretary Lincoln Bloomfied, Deputy Assistant Secretary Gregory Suchan and the Managing Director for Defense Trade Controls Robert (“Turk”) Maggi.

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Commerce Revises Commerce Control List

Wednesday, December 10th, 2003 by John Black

In the December 10, 2003 Federal Register the Commerce Department published a wide range of changes to the Commerce Control List.  The majority of these changes implement the December 2002 agreement by the members of the Wassenaar Arrangement.

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ITAR Drops Embargo on UNITA and Adds Iraq Policy

Friday, November 21st, 2003 by John Black

In the November 21 Federal Register the State Department revised the ITAR to drop its policy of denying all applications destined for UNITA, the terrorist/freedom fighter organization in Angola.  At the same time the State Department revised the ITAR to reflect its new policy for approving applications for items Iraq if the items are “nonlethal military equipment or lethal military equipment for use in support of a reconstituted (or interim) Iraqi military or police force required by the Coalition Provisional Authority.”

Prohibited Parties List Changes October 2003

Friday, October 31st, 2003 by John Black

1. Commerce Denied Persons List

The Commerce Department added the following to its DPL during October 2003:

  • Reza Moghadam Pirasteh, 23087 Arroyo Court, Plano, Texas to the DPL for seven years based on a settlement agreement for Pirasteh’s alleged illegal exports to Iran. (October 7, 2003)
  • Abdulamir Mahdi (aka Amir Mahdi and Jasin Khafaf), 20 Huntingwood Drive, Scarborough, Ontario, Canada and OTS Refining Equipment Corporation, 7030 Woodbine Avenue, NE, Suite 500, Markham, Ontario, Canada. See story in section 2.1 below.

2. Terrorists Lists

  • Communist Party of Nepal (Maoist), aka the United Revolutionary Council, aka People’s Liberation Army of Nepal, aka CPN(M). (October 31, 2003 Federal Register)
  • Dhamat Houmet Daawa Salafia [also known as Group Protectors of Salafist Preaching; aka Houmat Ed Daawa Es Salifiya; aka Katibat El Ahoual; aka Protectors of the Salafist Predication; aka El-Ahoual Battalion; aka Katibat El Ahouel; aka Houmate Ed-Daawa Es-Salafia; aka the Horror Squadron; aka Djamaat Houmat Eddawa Essalafia; aka Djamaatt Houmat Ed Daawa Es Salafiya; aka Salafist Call Protectors; aka Djamaat Houmat Ed Daawa Es Salafiya; aka Houmate el Da’awaa es-Salafiyya; aka Protectors of the Salafist Call; aka Houmat ed-Daaoua es-Salafia; aka Group of Supporters of the Salafiste Trend; aka Group of Supporters of the Salafist Trend] (October 20, 2003 Federal Register)

3. State Department Debarred Parties Clarification

Last month we reported that the State Department (finally) announced that it has imposed statutory debarment on a long list of parties who committed export/reexport violations. The State Department Federal Register notice said that each party was debarred for three years. In fact, one of our readers pointed out that under the ITAR, each party is debarred forever unless the State Department takes an action to lift the debarment. So, leave these parties on the denial list you use for export compliance screening.

DTC Policy Initiatives: UK and Australia to Get Canada Status under ITAR?

Thursday, October 30th, 2003 by John Black

During several speeches this summer, copies of which are posted on the Directorate of Defense Trade Controls (DTC) website, Deputy Assistant Secretary of State Lincoln Bloomfield expanded on recent policy and reorganization initiatives at DTC. Perhaps we could see some concrete progress in what virtually every knowledgeable insider agrees can be a bureaucratic nightmare. It’s at least encourage to hear someone at State acknowledge, as Lincoln Bloomfield has, “for a number of years there has been palpable discontent, among US defense exporters and allied governments alike, about the process of obtaining licenses from the State Department.” Slightly understated but encouraging.

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State Implements New Electronic Export Reporting Rules for ITAR Export

Monday, October 27th, 2003 by John Black

Last month Directorate for Defense Trade Controls (DTC) published a notice on its web site requiring electronic filing of Shipper’s Export Declarations (SEDs) using the electronic AES system for all items controlled by the International Traffic in Arms Regulations (ITAR). On October 27, 2003, DTC amended the ITAR to officially require the same. The new ITAR requires that you electronically report all ITAR exports to the US Government, except for exports of technical data under exemptions (not including the exemption for agreement). Generally speaking, for hardware exports you report electronically using AES and for technical data exports you report directly to DTC.

Note to Companies outside of the United States: If you are transferring items between non-US locations, no AES or ITAR reporting is required but you may want to share the information below with the US-based business who export to you to help them get their exports to you cleared properly.

The primary ITAR revisions come in the new ITAR section 123.22 – Filing, retention, and return of export licenses and filing of export information. ITAR 123.22 requires electronic export reporting for all ITAR exports, either via AES for hardware or via a new system for direct reporting to DTC (the latter system currently is a paper reporting system). These are the new ITAR 123.22 procedures for exports.

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US Moving towards Syria Embargo

Saturday, October 25th, 2003 by John Black

As we reported earlier, the US Government seems to be inching closer to placing an embargo on Syria. At this time, Syria remains highly controlled under the Export Administration Regulations, with all items in a classification other than EAR99 requiring an export or reexport license. According to press reports, the House International Relations Committee recently approved the Syria Accountability and Lebanese Sovereignty Restoration Act, mostly due to concerns surrounding Syria’s support of terrorists groups, which Syria of course denies. The bill authorizes the President to impose a ban on all US exports to and US investments in Syria. Current Washington speculation appears to point towards Congress likely passing the Syria sanctions bill before it takes its Fall break.