Archive for 2004

Mandatory AES Requirement Approaching

Sunday, May 30th, 2004 by John Black

The Census Bureau unofficially announced that it will publish the proposed rule requiring the mandatory use of the Automated Export System (and the elimination of paper Shipper’s Export Declarations) in the Federal Register in June 2004. There will be a 60 day public comment period for the proposed rule. Census hopes to publish the final rule in early Fall 2004, with a January 2005 effective date.

Aren’t you glad you have already started using AES (or PC Link)?

Don’t Plan to Do ITAR Electronic Licensing on the Weekend

Sunday, May 30th, 2004 by John Black

The Directorate of Defense Trade Controls (DTC) announced that it plans to shut down its websites on the weekends for the foreseeable future. The DDTC and DDTC/D-Trade websites will be down for maintenance as follows:

Fridays 8:30 PM EST – Saturday 8:00 AM EST
Saturdays 7:00 PM EST – Sunday 8:00 AM EST
Sundays 7:00 PM EST – Monday 6:00 AM EST

Prohibited Parties Lists Changes May 2004

Sunday, May 30th, 2004 by John Black

1. ITAR Debarment

The State Department announced that it has imposed administrative debarment on

  • Mart Haller Incorporated, September 10, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:03Cr170(EBB).
  • Alan Haller, September 10, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:03Cr169(EBB).
  • –Tariq Ahmed a/k/a “Tariq Amin”, “Tariq Ahmad Amin”, September 30, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:02CR247(DJS).
  • Yasmin Ahmed a/k/a “Yasmin Tariq”, “Fatimah Mohammad”, September 4, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:02CR247(DJS).
  • Jami Siraj Choudhury, November 10, 2003, U.S. District Court, Eastern District of Wisconsin, Case :02-Cr-261.

The debarment theoretically is for a minimum of three years, but, as we have discussed in the past, these debarments typically last forever. (Federal Register 17468)

2. Office of Foreign Assets Control Lists

OFAC announced changes to its prohibited parties lists related to Iraq and terrorists. To see these changes go to www.treas.gov/offices/eotffc/ofac/actions/index.html

3. Nonproliferation Sanctions

The State Department removed these entities from its nonproliferation sanctions list:

  • Europalace 2000 (Federal Register 17262)
  • Grafit (aka State Scientific Research Institute of Graphite or NIIGRAFIT) (Federal Register 17262)
  • MOSO Company (Federal Register 17262)
  • The Scientific Research and Design Institute of Power Technology (aka NIKIET, Research and Development Institute of Power Engineering (RDIPE), and ENTEK). (Federal Register 17262)
  • Anatoliy Kuntsevich (Federal Register 17259)
  • TZNII Central Scientific Research Institute of Precision Machine Building (aka Tzniitochmash) (Federal Register 17263)
  • Volsk Mechanical Plant (Federal Register 17263)

4. Terrorist List

The State Department identified these terrorist organizations:

  • Babbar Khalsa International (Federal Register 23555)
  • Communist Party of Nepal (Maoist) Federal Register 23555)

US Relaxes Controls on Libya and Tightens Controls on Syria

Sunday, May 30th, 2004 by John Black

Within a matter of weeks the Bush Administration made significant changes to the US export/reexport controls on Libya and Syria. The United States relaxed its controls on Libya and tightened its controls on Syria. The new controls on these countries are relatively straight-forward, despite the fact that these changes are based on a relatively large number of official document (two executive orders from the White House, a new law, several Treasury Department general licenses, and at least two Federal Register notices).

Here are the new licensing requirements and restrictions in a nutshell.

LIBYA

  • Items classified as EAR99 under the Export Administration Regulations (EAR) are eligible for export/reexport as No License Required (NLR) to Libya. Items under all specific ECCNs continue to require a license.
  • Libya is eligible to receive items under license exceptions TMP, GOV, GFT, TSU, RPL and AVS in limited circumstances.
  • There is a somewhat favorable license review policy for exports of low-level computers, civil aircraft and parts, and certain other items t o non-military/police end-users.
  • Jurisdiction for exports to Libya is transferred from the Office of Foreign Assets Control to the Bureau of Industry and Security (BIS). (BIS already had jurisdiction over reexports to Libya.
  • OFAC dropped its rules that prohibit US persons from being involved in transactions involving Libya. US persons may now enter into new transactions with Libya without OFAC restrictions. OFAC continues to prohibit:
    • US persons involvement in Libyan property and property blocked by US person prior to April 23, 2004; and
    • Certain travel-related activities including carriers of the United States and Libya flying to Libya and the United States, respectively.
  • The 10% de minimis level for foreign-made items with US content remains unchanged.
  • If you have an OFAC license for Libya, you may continue to use it through its expiration date (May 1, 2005 if the license has no expiration date).

SYRIA

  • Everything except food and medicine require a license for Syria-that is, items classified as EAR99 now require a license for export or reexport to Syria. All items that formerly required a license for Syria still require a license.
  • BIS revoked all licenses that BIS issued for Syria prior to May 14, 2004.
  • The new restrictions (above) do not apply to any items en route to Syria on May 14, 2004 as long as the items are exported or reexported by May 28, 2004.
  • You may not use license exceptions for Syria except as follows:
    • TMP only for news media
    • GOV only for US Government
    • TUS only for operation tech data/software, sales tech data, and software updates
    • BAG only in limited cases for personally owned baggage
    • AVS only for temporary sojourn of aircraft reexported to Syria
  • BIS policy is to deny all license applications for Syria. Exceptions might be made for deemed exports/reexports, items to support US Government or United Nations activities; medicines and medical devices on the Commerce Control List; aircraft parts to ensure safety of civil aviation; telecomm equipment and associated computers, software and tech data.
  • The 10% de minimis level for foreign-made items with US content remains unchanged.
  • OFAC did not impose any restrictions on US persons dealing with Syria.

When Did These Changes Happen?

The primary Libya change was announced in a BIS Federal Register notice on April 29 and a general license OFAC announced on its web site on April 23. The Syria change was announced in a May 14, 2004 Federal Register notice.

Why Did the United States Change Its Policies?

Several factors led the United States to significantly relax its controls on Libya: 1) Libya exposed the widespread illicit international nuclear weapons proliferation network and thereby did as much to thwart the future spread of nuclear weapons as any export control regime could ever hope to accomplish; 2) Libya promised that it has ended its weapons of mass destruction program; and 3) Libya accepted a certain responsibility for the bombing of the commercial aircraft over Lockerbie, Scotland and agreed to pay $10 million to the families of the victims.

(Interestingly, a couple of weeks after the United States ended its trade embargo on Libya, Libyan President Gadhafi announced that Libya will halt its military trade with North Korea, Syria and Iran. The White House said that Libya’s actions “have made our country and the world safer.” We have calculated that if the current rate of increasing cooperation and trade policy coordination continues at this pace, by June 17, 2006 Libya will share the same status as Canada under US trade controls!)

As for Syria, the Bush Administration was pressured to impose more trade restrictions on Syria when Congress passed the Syria Accountability and Lebanese Sovereignty Act of 2003. Congress passed the law to punish Syria for its support of international terrorism.

Enforcement Roundup

Thursday, February 26th, 2004 by John Black

Morton International and Its Foreign Affiliates Agree to Pay $647,000

What does the illegal export and reexport of some chemicals, including thiodiclycol, cost? Well, Morton International, Inc. of Chicago and its affiliates Morton International SAS in France and Rohm and Hass Japan agreed to pay a $647,000 civil penalty in response to Commerce Department charges of 3 illegal exports and 146 illegal reexports of chemicals to friendly countries. Morton International, Inc. voluntarily disclosed the violations and cooperated with the BIS investigation. For more information, go to www.bxa.doc.gov/News/2004/MortonIntl2_24.htm.

Emcore Agrees to Pay $400,000 for 71 Violations

The Commerce Department announced that Emcore Corporation agreed to pay a $400,000 civil penalty to settle charges that committed 71 violations of the Export Administration Regulations between 1998 and 2003. According to Commerce, Emcore exported Metal Organic Vapor Disposition (MOCVD) tools to Taiwan and the PRC with the required licenses, illegally serviced the tools after they were illegally exported, failed to file Shipper’s Export Declarations and failed to keep required records. Emcore voluntarily disclosed the violations and cooperated with the Commerce Department investigation. For more information go to www.bxa.doc.gov/News/2004/Emcore1_26.htm.

IMPORTANT LESSON: Once an item is illegally exported, it is a violation to service that item (without a license), even if the servicing activities themselves do not otherwise involve items or technical data that require a license.

OFAC Announces Civil Penalties

On February 6, the Office of Foreign Assets Controls has updated the list of civil penalties it has imposed for violations of its embargoes on Cuba, Iran, Iraq, Libya, Yugoslavia, and Sudan, its sanctions against narcotics kingpins. The penalties range from a fine of $750 for the Salvation Army’s illegal travel expenditures in Cuba to $61,526 fine against Hakan Agro Trading for attempted illegal exports to Iraq. These fines fall short of the higher fines announced by the Commerce Department.

While you might find it disturbing that the US Government penalized the Salvation Army, you would have to admit that the $750 fine is, well, charitable.

For more information go to www.treas.gov/offices/eotffc/ofac/civpen/penalties/index.html

Have You Seen the “New” DSP-5 Instructions?

Thursday, February 26th, 2004 by John Black

The guidelines for filling out the DSP-5 application are not all that new and they are not dramatically different. The most important new elements of the DSP-5 instructions are the special guidelines for DSP-5 applications for transfer of technical data to your foreign national employees in the United States. The new instructions also include a sample non-disclosure agreement for foreign national employees in the United States.

Colin Powell Rolls Out State’s D-Trade Electronic Application System

Thursday, February 26th, 2004 by John Black

According to Assistant Secretary of State Lincoln Bloomfield, not even the people who have been in DTC for a long time “can remember when the Secretary of State has graced the presence of the licensing office.” Well, Secretary of State Colin Powell appeared at the Directorate of Defense Trade Controls (DTC) to inaugurate D-Trade, the State Department’s new system for electronically submitting license applications and supporting documents for items subject to the International Traffic in Arms Regulations (ITAR).

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Prohibited Parties Lists Changes February 2004

Thursday, February 26th, 2004 by John Black

1. ITAR Debarment

The State Department announced that it has imposed administrative debarment on

  • Kam-Tech Systems, Ltd., Tel Aviv, Israel
  • David Menashe, owner and manage of Kam-Tech

These two parties pled guilty to making false statements related to an export of AIM-9 Missile Seeker Section that was going to be transshipped to the PRC.

The debarment theoretically is for a minimum of three years, but, as we have discussed in the past, these debarments typically last forever.

2. Office of Foreign Assets Control Lists

OFAC announced changes to its prohibited parties lists impacting nearly 100 entities with several hundred alias and also known as names.

To see these changes go to www.treas.gov/offices/eotffc/ofac/actions/20040128.html

Chips Up for Boeing, Chips Down For Most Others

Thursday, February 26th, 2004 by John Black

Here is a follow up to our Chip Fixation article: State and Commerce issued Federal Register Notices in which they attempted to resolve the Commodity Jurisdiction (CJ) debacle surrounding an apparently dual use avionics chip that was originally designed for defense use.

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Syria and Libya Update

Wednesday, February 25th, 2004 by John Black

Syria and Libya export controls are under active review at the senior levels of the Bush Administration. As usual, OFAC representatives would not comment on any potential Libya sanctions development other than to say that they are waiting for a White House decision. Based on past experience, the Libya sanctions are likely to be lifted in measured steps over a significant period of time. The first step taken was a lifting of the Libya travel ban on February 25 (for more information see: www.treas.gov/offices/eotffc/ofac/sanctions/libya_gl1.pdf), and an announcement by President Bush encouraging US companies to travel to Libya and prepare themselves for doing business. But the statement seemed more window dressing than sustentative. At least for now, no deals can be closed, as the myriad of sanctions remain, including a total export and reexport ban as well as financial and other transaction restrictions. These sanctions are likely to be rolled back in steps in the coming months, with ECCN: EAR99 license free exports likely to be a first decontrol step.

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