Archive for 2015

US Exporters, Don’t Try This: German Gun Maker Sues Government for Export Approval

Friday, December 4th, 2015 by Danielle McClellan

By: Danielle McClellan

Heckler & Koch is suing the German Government for failing to approve the export of parts needed to produce its G36 gun in Saudi Arabia. In 2008, Chancellor Angela Merkel’s government approved the controversial (and lucrative) deal for Heckler & Koch to allow Saudi Arabia to produce the G36 itself.

The German government stopped authorizing the export of five key components that are required to make the gun in the middle of last year. Economy Minister Sigmar Gabriel made the decision to stop approving the export after vowing to be more cautious when licensing exports.

Last month, Germany was forced to defend a decision to allow the export of tanks and artillery to Qatar, which was reported to have sent troops to fight in Yemen.

More Information: http://www.reuters.com/article/2015/10/29/germany-hecklerkoch-idUSL8N12T65920151029

Alstom S.A. Pays $772 Million Fine for Violating FCPA…5 Executives Being Charged Too

Friday, December 4th, 2015 by Danielle McClellan

By: Danielle McClellan

Alstom S.A., a French power and transportation company, was sentenced today to pay a $772,290,000 fine to resolve criminal charges related to a corruption scheme that involved over $75 million in hidden bribes paid to governments worldwide. The company’s subsidiaries were also charged as follows:

  • Alstom Netwrok Schweiz AG formerly known as Alstom Prom AG (Alstom Prom), the company’s Swiss subsidiary pled guilty to conspiring to violate the anti-bribery provisions of the FCPA.
  • Alstom Power Inc. and Alstom Grid Inc., formerly T&D Inc., the two US subsidiaries have entered into deferred prosecution agreements after admitting they both conspired to violate the anti-bribery provisions of the FCPA.

All of the Alstom companies, through various executives and employees paid bribes to government officials in Indonesia, Egypt, Saudi Arabia, the Bahamas and Taiwan. The companies worked together to falsify books and records in connection with power, grid and transportation projects for state-owned entities around the world. Alstom paid more than $75 million to secure more than $4 billion in projects around the world, with a company profit of around $300 million.

Alstom attempted to conceal the bribery scheme by retaining consultants who provided consulting services on behalf of the companies, but who actually served as conduits for corrupt payments to the government officials. This sentence is the largest criminal fine ever imposed in FCPA history and reflects the following:

  • Failure to voluntarily disclose the misconduct
  • Previous corruption problems
  • Refusal to fully cooperate with the department’s investigation for several years
  • Breadth of misconduct
  • Lack of an effective compliance and ethics program at the time of the conduct

To date, five Alstom corporate executives have been charged for alleged corrupt conduct.

More details: http://www.justice.gov/opa/pr/alstom-sentenced-pay-772-million-criminal-fine-resolve-foreign-bribery-charges

Oy, 521! X-Ray Stealth Now EAR Controlled and More Changes on Wing Folding Systems

Friday, December 4th, 2015 by Danielle McClellan

By: Danielle McClellan

Oy, another 521!  On November 16, 2015 BIS added XBS Epoxy System to the List of 0Y521 Series. The Epoxy system is designed to obfuscate critical technology components against X-ray and terahertz microscopy imaging attempts.  This seems to be the stuff that you could spray on that oversized jug of body cream or your Swiss army knife so they would not be detected by airport x-ray machines.  Oy, TSA!

The 0Y521 Series was established in April 2012 for items for which there is no ECCN but that should be controlled for export because they provided at least a significant military or intelligence advantage to the US, or because foreign policy reasons justify its control.  0Y521 controls are temporary controls that allow BIS to impose controls on a temporary basis while it sorts things out—including making sure the controls are justified and attempting to get other countries to impose similar export controls.

This rule classifies XBS Epoxy System (ECCN 0C521) to be controlled for regional stability (RS) Column 1 reasons. The only license exception available for these items is for exports, reexports, and transfers (in-country) made by or consigned to a department or agency of the US Government. The license requirements and policies for ECCN 0Y521 series appear in § 742.6(a)(7) of the EAR.

License applications for this item may be submitted through SNAP–R in accordance with § 748.6 of the EAR. Exporters are directed to include detailed descriptions and technical specifications with the license application, and identify the item as 0C521.

In this rule, BIS has also removed technology and software related to aircraft wing folding systems from the 0Y521 Series List. The following changes have been made:

  • Entries No. 3 0D521 and No. 2 0E521, respectively, in Supplement No. 5 to part 774 are obsolete because, in accordance with procedure established in the April 13, 2012, final rule, the U.S. Government adopted a control through the relevant multilateral regime(s), which determined an appropriate longer-term control over the item. The wing fold system ‘‘software’’ is now controlled by ECCN 9D001, and the ‘‘technology’’ is controlled by ECCN 9E003.j on the CCL

As always, BIS is encouraging you to submit your comments on these changes.  You may submit comments by any of the following methods:

  • Federal eRulemaking Portal: www.regulations.gov. The identification number for this rulemaking is BIS– 2015–0043.
  • By email directly to: publiccomments@bis.doc.gov. Include RIN 0694–AG70 in the subject line.
  • By mail or delivery to Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW., Washington, DC 20230. Refer to RIN 0694–AG70.

FOR FURTHER INFORMATION CONTACT:

Michael Rithmire, Electronics and Materials Division, Office of National Security and Technology Transfer Controls by phone at (202) 482–6105 or by email at Michael.Rithmire@bis.doc.gov.

BIS Posts Update 2015 Speeches and Presentations

Friday, December 4th, 2015 by Danielle McClellan

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has posted on its website speeches and presentations given at its Update 2015 conference that took place earlier this week in Washington, DC.

DDTC Updates GC’s for Amendments and Adds Time Restrictions

Friday, December 4th, 2015 by Danielle McClellan

By: Danielle McClellan

DDTC has posted an updated guidance that will simplify the authorization matrix and spreadsheets and add a new time restriction for amending the General Correspondence (GC) for Amendments of Existing ITAR Authorizations. They will also clarify who may submit the GC and will take comments from industry after they implement the update. Contact Pete Walker at walkerwp@state.gov, 202-663-2806 with questions and comments.

§122.4 states that a registrant must notify DDTC of all material changes to their registration file. These include:

  • Restructuring,
  • Merger/acquisitions and/or
  • Registration code consolidations and combinations thereof

Per §122.4(c)(3), the licenses affected by these changes must be identified to DDTC via a spreadsheet/matrix attached to a General Correspondence letter. Any license not identified will be considered invalid. Per §122.4(c)(4), affected agreements require an executed amendment for a US entity name change within 60 days of notification. Any agreements not so amended will be considered invalid.

GC requests are applicable regardless of the number of authorizations involved and will cover approval of both DSP licenses and agreements. NEW CHANGE:

  • The GC request must be submitted within 60 days after DDTC approval or acknowledgment of the change.
  • DDTC will entertain name/address changes or registration code change amendments up to 180 days after the date of the approved GC
  • DDTC general policy will be to RWA amendments to GCs that fall outside of the 180 day time frame (they will review these on a case-by-case basis)
    • If the GC amendment is RWA (Return without Action), the applicant will have to individually replace any remaining licenses, and amend any agreements pursuant to 124.1(c)

Name or Registration Change:

When requesting a name or registration code change the following documentation must be included in with the submitted GC for the US entity:

  1. A letter identifying the requested changes;
  2. A §126.13 certification letter;
  3. A copy of the DTCC’s letter acknowledging the requested change(s), if issued, and;
  4. A matrix/spreadsheet containing the authorizations to be transferred.

Mergers & Acquisitions Changes:

For these, the GC must come from the acquiring party and if the GC does not come from the acquirer the GC will likely be RWA’d. The GC must contain the following:

  • A subject line clearly indicating that the GC will amend export authorizations as a result of a corporate restructuring, merger/acquisition and/or registration code consolidation or any combination thereof.
  • Concise description of the proposed transaction, in particular the
    • Acquirer and acquiree’s registrant codes (i.e., the “before and after” registration codes.)
  • The request must reference the submitted documentation and, if applicable, provide an attached DTCC approval letter.
  • The following statement MUST be included: “Modifications to the existing agreements submitted as part of this letter are specifically limited to a change to the registration code and/or to the U.S. entity name as a result of an approved merger or acquisition, and are signed by the new U.S. entity, the former U.S. licensor and the foreign licensee(s). Any other modifications will be requested through a proposed amendment in accordance with §124.1(c) or (d).” If no executed amendment is required (such as registration code change only) then this statement is not necessary.
  • The spreadsheet/matrix of authorizations to be transferred must include all existing and pending authorizations. Only those authorizations identified in the list will be amended. Any authorization not included will be considered invalid and a new authorization must be obtained. The spreadsheet/matrix must include the following information for each authorization:
  1. License or agreement number; (Note: §122.4(c)(3) states that registrants shall advise DDTC of all approvals on which unshipped balances will be shipped under the surviving registration code. However, registrants should also consider referencing exhausted licenses in order to retain access to such licenses in DTrade;)
  2. Disposition of authorization (Approved or Pending Approval);
  3. Date of Authorization Expiration;
  4. New registration number and/or company name (if applicable), and;
  5. State Y or N if an executed amendment is required (for agreements only.)

For expeditious review, the applicant should filter the spreadsheet as follows: registration #/new name/existing authorizations/pending authorizations.
Agreements Changes

DDTC will annotate affected agreements in its database.

Changing the Registration Code for Agreements:

  • Submit a GC request

US Entity Name Change for Agreements issued thru DTrade:

  • Upload a cover letter
  • Upload executed “minor amendment” (defined by §124.1(d)) into DTrade case file

 

US Entity Name Change for Paper Agreements:

  • The following documents must be sent via separate cover letters
    • Upload a cover letter citing GC case number in the body
    • Upload executed “minor amendment” (defined by §124.1(d)) into DTrade case file

Third Parties Affected by Change

A third-party is a US entity other than the license holder who has submitted the GC request. Third party licenses affected by a US entity name change does not require a DSP amendment for he affect DSP license. The DDTC issues web notice of name change serves as approval for the change. This notice should be attached to all affected licenses.

Agreements affected by US entity name changes will require the agreement holder to amend the agreement. The executed amendment will serve as a minor amendment (§124.1(d)). The agreement holder must upload the re-executed agreement to the relevant DTrade Case. Any applicants with a pending agreement or amendment must notify the respective DDTC Agreement or Licensing Officer of the upload of a revised executed agreement.
For Company Address Changes Only:

If the US registrant changes address (i.e. address change only, no change in company name or registration code) the following must be submitted:

  1. A letter identifying the requested changes to the company address;
  2. A §126.13 certification letter, and;
  3. A copy of the DTCC’s letter acknowledging the requested change(s), if issued.

DDTC will issue an acknowledgement letter to the US registrant regarding the address change and issue a web notice to alert the US applicants of the address change and provide guidance.

View DDTC’s full notice here: http://pmddtc.state.gov/licensing/documents/gl_GCsMandA.pdf

Tips on How to Resolve AES Fatal Errors

Friday, December 4th, 2015 by Danielle McClellan

(Source: census@subscriptions.census.gov, 18 Nov 2015)

When a shipment is filed to the AES, a system response message is generated and indicates whether the shipment has been accepted or rejected. If the shipment is accepted, the AES filer receives an Internal Transaction Number (ITN) as confirmation. However, if the shipment is rejected, a Fatal Error notification is received.

To help you resolve AES Fatal Errors, here are some tips on how to correct the most frequent errors that were generated in the AES for this month.

Fatal Error Response Code: 132

  • Narrative: Port of Export Must Be A Road Port
  • Reason: The Port of Export reported is not allowed for road shipments
  • Resolution: The Port of Export Code reported must accommodate the Mode of Transportation indicated in your shipment. See Appendix D – Export Port Codes for a list of acceptable Port of Export Codes and their corresponding Modes of Transportation. Verify the Port of Export Code and Mode of Transportation Code combination, correct the shipment and resubmit.

Fatal Error Response Code: 623

  • Narrative: Schedule B/ HTS Number Unknown
  • Reason: The Schedule B/ HTS Number reported is not valid in AES
  • Resolution: A valid Schedule B/HTS Number must be reported when adding or replacing a commodity line item, unless Export Information Code HH for shipments of household goods is reported. Verify the Schedule B/ HTS Number, correct the shipment and resubmit.

For a complete list of Fatal Error Response Codes, their reasons, and resolutions, see Appendix A – Commodity Filing Response Messages.

It is important that AES filers correct Fatal Errors as soon as they are received in order to comply with the Foreign Trade Regulations. These errors must be corrected prior to export for shipments filed pre-departure and as soon as possible for shipments filed post-departure, but not later than five calendar days after departure.

For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.

– Blog: http://blogs.census.gov/globalreach

ACE One-Pager Available Online

Friday, December 4th, 2015 by Danielle McClellan

(Source: Commerce/Census)

Our ACE One-Pager is now available online for your convenience. This is a great “go-to” resource for an overview of the transition into ACE. When printed front and back, one side highlights ACE Accounts and Export Reports and the other side highlights helpful information on the new AESDirect in ACE.

Be sure to prepare for the transition by obtaining ACE export access as directed in the PDF and visit our transition page for updates!

How Do I Find out More about the New ACE Export Features

Friday, December 4th, 2015 by Danielle McClellan

(Source: Global Reach Blog)

As part of the International Trade Data System (ITDS), we are getting the word out that the Automated Commercial Environment (ACE) Secure Data Portal now features ACE Exporter Accounts and ACE Export Trade Reports, new features that the trade can register for and use. You can find more information about these new functionalities here. The ITDS is a collaborative effort with many agencies that will help streamline trade. As part of our role in the ITDS, the Census Bureau’s International Trade Management Division will continue to lead the efforts of keeping you educated will all of the resources available. In this blog we will discuss some new information that is available on the U.S. Customs and Border Protection’s (CBP) website.

If you follow the link provided above, it will take you to the ACE page for CBP and under the Exporter Account Type, you are able to apply for an ACE Exporter Account. Also under this section, there is a Frequently Asked Questions section for exporters that provides an introduction to the new ACE Exporter features and addresses some common questions for ACE Portal Account Users.

Another great resource is the Exporter Account Quick Reference User Guide that provides detailed instructions for the different scenarios that may apply to you when registering. The guide explains how to apply for an ACE Exporter Account and how to login for the first time for Non-ACE Account Users. It also provides details on how to create an Exporter Account for Current ACE Portal Users and how to request access to your filing history by using the Export Reports feature.

Finally, there are three videos that CBP has available explaining the new features. The first video demonstrates how to request a new Exporter Account though the portal. The second video goes into detail on how to request an ACE Portal Exporter Account for existing users. The last video indicates how to request access to EIN Data for ACE Portal Export Accounts.

These new ACE features provide access to all of your export information allowed per the Foreign Trade Regulations (FTR). If you have further questions regarding accessing these new features, please contact the CBP ACE Account Service Desk (1-866-530-4172 option 1, then option 2) for technical questions.

Companies Fined a Combined $61K for Antiboycott Violations

Thursday, November 5th, 2015 by Danielle McClellan

By: Danielle McClellan

Vinmar International, Ltd of Houston, TX will pay $19,800 to settle alleged antiboycott violations. Between January 2011 and February 2012, on two separate occasions, Vinmar provided information concerning another person’s business relationships with another person who is known or believed to be restricted from having any business relationship with or in a boycotting country (15 CFR 760.2(d)). In connection with these violations, Vinmar failed to report the receipt of a request to engage in a restrictive trade practice or Foreign Boycott against a country friendly to the US on five occasions (15 CFR 760.5). Below is a schedule of the violations.

An affiliate of Vinmar International, Ltd., Vinmar Overseas, Ltd. was charged with a total of 13 antiboycott violations with a total penalty of $41,400. On 5 separate occasions in 2009 the company violated 15 CFR 760.2(d) when they furnished information concerning another person’s business relationships with another person who is known or believed to be restricted from having any business relationship with or in a boycotting country. On 8 other instances the company violated 15 CFR 760.5 when they failed to report their receipts of requests to engage in a restrictive trade practice or boycott, as required by the Regulations. Below is a schedule of Vinmar Overseas, Ltd. violations.

Vinmar International, Ltd. Charging Letter

Vinmar Overseas, Ltd. Charging Letter

Need an Antiboycott refresher? Check out ECTI’s On Demand webinar, US Antiboycott Regulations: Clarified and Demystified!

DDTC Agrees that the Public Domain Prior Approval Requirement is Unreasonable

Thursday, November 5th, 2015 by Danielle McClellan

Source: Author. Reprinted by permission.)

By: Christopher B. Stagg, Esq., chris@staggpc.com, 202-765-2278; Stagg P.C..

On June 3, 2015, the Directorate of Defense Trade Controls issued a proposed rule to amend the public domain exclusion within ITAR § 120.11 to include a prior government approval requirement. In proposing this revision, DDTC made a curious statement in the preamble that prior government approval is not a new requirement and that the proposed revision is merely “a more explicit statement of the ITAR’s requirement that one must seek and receive a license or other authorization [to put information into the public domain].”  The federal court case where DDTC made these statements is Bernstein v. Department of State in DDTC’s opposition to the plaintiff’s motion for summary judgment at 25, 945 F. Supp. 1279 (N.D. Cal. 1996).  A copy of DDTC’s statements to the federal court is provided here.

This is a curious statement because DDTC has previously stated to the federal courts that reading ITAR § 120.11 to impose a prior approval requirement is “by far the most un-reasonable interpretation of the provision” and also “one that people of ordinary intelligence are least likely to assume is the case.” Accordingly, DDTC confirmed to the federal courts in 1996 that there is no prior approval requirement to put information into the public domain.

The federal court case where DDTC made these statements is Bernstein v. Department of State. A copy of DDTC’s statements to the federal court is provided here (click on image for a high-resolution version):

These are highly damaging statements by DDTC. Not only does DDTC’s statement unequivocally maintain that there is no prior approval requirement, but it also establishes that the position DDTC now takes is admittedly “by far the most un-reasonable interpretation of the provision” and “that people of ordinary intelligence are least likely to assume is the case.”

Since DDTC concedes that “people of ordinary intelligence” would not read the public domain exclusion to impose a prior approval requirement, this raises a due process claim under the Fifth Amendment that DDTC’s new interpretation is unconstitutionally vague. The legal standard for a due process vagueness claim is whether the law would give fair notice to persons of ordinary intelligence of the legal requirements. Also, in laws that concern speech covered by the First Amendment, the federal courts impose an even higher standard by requiring that the law has even greater clarity. Here, DDTC concedes that such persons would not have notice.

DDTC’s statements in the court case also confirms that it has a long-standing practice of not requiring prior government approval to put information into the public domain. In changing its practice, it is well-established law that a regulatory agency must (1) acknowledge it is departing from prior practice and (2) explain the reason for the departure. The failure by a regulatory agency to follow these requirements raises due process issues. For instance, without an agency following these procedural requirements in changing its position, courts could not know whether a regulatory agency acted erroneously.

Here, DDTC fails both requirements. Instead of recognizing it is departing from prior practice, DDTC simply asserts that this is not a new requirement. Yet, the regulatory history of the public domain exclusion and DDTC’s own admissions to the federal courts clearly evidences this is incorrect. Since DDTC failed to acknowledge it is departing from prior practice, it also failed to fulfill the second well-established requirement of explaining the reason for its departure.

To read the rest of this article (including exhibits), please click here.