Archive for the ‘2015’ Category

Crude Oil is Now EAR99: Export Control Holiday Party Pointers

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan (Holiday party tip by John Black)

While few of our readers are involved in exporting crude petroleum, here is a nice jewel to brandish at holiday parties when the conversation shifts to President Obama authorizing exports of crude petroleum.  A handy tip is once somebody mentions the topic, immediately chime in with “Yep, it used to be 1C981 but not it’s EAR99.  Problem is, you still gotta screen against the denial lists, and there is no free lunch when it comes to AES filing either.  And, the worst thing is your ERP system probably still identifies the embargoed Crimea region are part of Ukraine, and we know that is a poster child violation waiting to happen.”  (FYI, the likely result is that you will not be invited back to that party next year.)
As widely reported in the media, the Obama Administration has removed most restrictions on exports of crude petroleum.  On December 18, 2015, the Bureau of Industry and Security (BIS) announced that crude petroleum would no longer be classified under ECCN 1C981 and would now be classified as EAR99. This change comes after the H.R.2029 – Consolidated Appropriations Act, 2016 (section 101 of Division O) passage.
It is important to remember that any exports of crude oil to embargoed or sanctioned countries or persons on any US Government denial list, normally still will require export authorization from BIS even though the item is EAR99.

Companies who hold a current license for crude oil exports should view EAR 750.79(i) regarding terminating license conditions upon the termination of the requirement for the export license.

BIS has not yet amended the Export Administration Regulations to reflect this change.

Details: http://www.bis.doc.gov/index.php/crude-oil-export-licensing-policy

Company Fined $38,930 for Selling Internet Security Products to Iran, Sudan and Syria

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

Barracuda Networks, Inc. of California and its United Kingdom subsidiary, Barracuda Networks Ltd. voluntarily disclosed violations to the Office of Foreign Assets Controls (OFAC) related to the sale of various internet security products.

Between August 2009 and April 2012 Barracuda UK sold web filtering products that are used to block or censor Internet activity along with internet security products and the related software subscriptions to entities in Iran, Sudan and entities on the Specially Designated Nationals and Blocked Persons List (SDNs). During the same time period Barracuda US provided firmware and software updates to the illegal software subscriptions. The total transaction value for these sales was $123,586.

Both companies were charged with a total of 37 violations and fined a total of $38,930. OFAC released the following factors and considerations related to the fine:

  1. Barracuda acted with reckless disregard for sanctions requirements by (a) permitting distributors and resellers to sell its products and updates to SDNs and to customers in sanctioned countries when it knew or had reason to know that the products were located in sanctioned countries or with SDNs, in potential violation of U.S. sanctions requirements, and (b) distributing its products and technology to more than 17,000 resellers and distributors worldwide without implementing any written sanctions compliance policies or procedures, and failing to provide training to its employees regarding export controls and sanctions;
  2. Barracuda knew or had reason to know that it was exporting goods, technology, and services to Iran and Sudan because IP addresses associated with those countries were used to contact the company; further, Barracuda knew or had reason to know that it was exporting technology to Syrian SDNs because the SDNs were listed on sales invoices;
  3. The exportation of the Web filtering software and hardware to Iran, Sudan, and SDNs in Syria could potentially have caused significant harm to U.S. sanctions program objectives because the technology could have been used to block or censor Internet activity;
  4. Barracuda did not screen IP addresses used to contact Barracuda’s servers because it had no OFAC compliance program in place at the time of the transactions;
  5. Barracuda has no prior OFAC sanctions history, including no penalty notice or Finding of Violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations, making it eligible for up to 25 percent “first offense” mitigation;
  6. Barracuda took significant remedial steps including developing a method to disable products in sanctioned countries, prioritizing U.S. sanctions and export controls compliance by establishing an Office of Trade Compliance and hiring a general counsel with subject matter expertise in these areas, issuing company-wide a statement from the CEO about sanctions-related policy, implementing a trade compliance manual, and enhancing its sales software to include red flags for orders that may require a license; and
  7. Barracuda substantially cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for approximately 521 days.

OFAC Notice: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20151124_Barracuda.pdf

EGYPTAIR Leases Aircraft to Sudan Airways…Fined $140,000

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

Between August 2010 and February 2011 EGYPTAIR leased two Boeing 737-566 aircraft to Sudan Airways without obtaining the required BIS licenses. Both aircraft were flown under Sudan Airways flight numbers and are classified as 9A991.b and controlled for Anti-Terrorism reasons. EGYPTAIR has been assessed a penalty of $140,000 for two charges of reexporting an item without required licenses.

EGYPTAIR did not self-disclose the violations and will pay the $140,000 fine in installments.

Charging Letter

AESDirect Is Now Available in ACE!!!

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

(Source: census@subscriptions.census.gov)

Attention all export filers… the new AESDirect is available in ACE for export filing.

If you have ACE Exporter Account access, you can begin filing using the new system. If you have not yet obtained ACE Exporter Account access, please review the broadcast message covering ACE registration and exporter access.

Today marks the beginning of the transition from the legacy AESDirect application to the Refactored AESDirect in ACE. During this transition period, both the legacy and the ACE AESDirect application are available for export filing. Take advantage of this time and begin transitioning your users to the new system. Please ensure proper transition management to avoid duplicate filing.

For more information, including the new user guide, FAQs, archived broadcast messages, training materials, etc. please check out the ACE Transition page. The ACE One-Pager also has a wealth of contact information and resource links to assist you with this transition.

Note: If you have technical issues filing in the new system, please contact the AES Help Desk at askaes@census.gov or 800-549-0595, option 1.

If you have technical issues with your ACE Accounts Access, please contact the ACE Service Desk at ACE.Support@cbp.dhs.gov or 1-866-530-4172, option 1, then option 2.

Guidance on WebLink and EDI batch filing will be provided within the next 2 weeks. This deployment is for Portal and Bulk Upload filing through AESDirect only.

BIS Amends Country Chart and Various Missing Wassenaar Changes

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

BIS released the following amendments and revisions that were inadvertently omitted from the Wassenaar Arrangement 2014 Plenary Agreements Implementation and Country Policy Amendments. A rule was published on May 21, 2015 but the following revisions were absent in that notice and will be implemented now:

 

  • Supplement No. 1 to Part 738: Commerce Country Chart
    • This rule would remove the X, i.e., license requirement, in the NS:2 Column for South Africa, as well as remove the X in the RS:2 Column for Argentina and South Africa
  • Part 740: Country Groups
    • This rule removes Fiji from Country Group D:5 ‘‘U.S. Arms Embargoed Countries,’’ and from Country Group D in Supplement No. 1 to part 740 of the EAR (This correction is not the result of a Wassenaar Arrangement agreement, but rather of a final rule published by the Department of State on May 29, 2015)
  • Section 743.3: Thermal Imaging Camera Reporting
    • BIS inadvertently removed a thermal imaging camera reporting requirement exemption for Canada in the May 21 rule. The reporting requirements for thermal imaging cameras are corrected by exempting Canada from the reporting requirements, as was the policy prior to the publication of the May 21, 2015, Wassenaar rule. The exception is added to paragraph (b) of § 743.3 of the EAR.
  • Part 772: Definitions
    • This rule removes a reference for ‘‘signal analyzer (dynamic).  .  .’’ that was inadvertently not removed when the definition for ‘‘dynamic signal analyzer’’ was removed from this part.
  • Supplement No. 1 to Part 774: Commerce Control List ECCN 8A620 Submersible Vessels, Oceanographic and Associated Commodities
    • Replaces paragraph .f with a new paragraph containing two subparagraphs: Subparagraph f.1 for self-contained diving rebreathers, closed or semi-closed circuit; and subparagraph f.2 for underwater swimming apparatus ‘‘specially designed’’ for use with equipment specified in paragraph f.1. Paragraph f.1 narrows the scope by adding the ‘‘self- contained’’ parameter, while f.2 is an expansion of controls.
  • ECCN 9A004 Space Launch Vehicles and ‘‘Spacecraft’’
    • The range of reference in the License Requirement Note is corrected to read ‘‘9A004.b through .f.’’ Also, Note 3 in the Related Controls is revised for clarity.
  • 9A010  ‘‘Specially Designed’’ ‘‘Parts,’’ ‘‘Components,’’ Systems and Structures, for Launch Vehicles, Launch Vehicle Propulsion Systems or ‘‘Spacecraft’’
    • The Heading to ECCN 9A010 is corrected by removing the reference to the ITAR for jurisdiction over these items and instead referring to the newly added Related Controls paragraph.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2015-12-03/pdf/2015-30253.pdf

BIS Releases Data Portal

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

Last month BIS launched its Data Portal which will provide access to data related licensing, controlled trade with select countries, ECR and a few more topics (see links below). This is the first time that BIS has made this type of information public, after looking at it, it is basic statistical information. For example, you can see that the percentage of AES Records in Compliance with the EAR has remained at 99% since 2010 or you can see the Statistical Analysis of US Trade with China in 2014. Happy data mining!

The Portal features statistical papers and datasets on:
Exporter Compliance
Controlled Trade with Select Countries
Export Control Reform (ECR)
BIS Licensing
U.S. Defense Industrial Base Analysis

Who creates this information?

The Office of Technology Evaluation (OTE) analyzes U.S. export data from the Census Automated Export System (AES) and BIS license application data to inform export policy decisions.

Our analysis primarily covers dual-use Commerce Control List (CCL) items which have both a civilian and military or proliferation-related end-use. Included are licensed, license exception, and unlicensed export transactions subject to the Export Administration Regulations (EAR). In addition, OTE assesses BIS license applications, including approved, denied and returned determinations.

OTE uses the findings from its analysis to educate industry at AES seminars on proper reporting of items subject to the EAR in the AES.

Have questions or comments?  Send us an email: data@bis.doc.gov.

It Never Pays to Lie…Actually it Could Cost You $50K

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

On September 14, 2012 GLS Solutions, Inc. of Aventura, Florida exported a $28,335 FLIR 440 High Performance Infrared Camera to Venezuela. The camera is classified under ECCN 6A003.b.4 and is controlled for National Security and Regional Stability reasons. GLS knew that a license was required to export the camera but continued to export it without obtaining a license. GLS has been assessed a penalty of $50,000 for one violation of “Acting with Knowledge of a Violation.” $32,500 of the penalty will be suspended for one year and eventually waived if GLS does not commit and further violations within the one year probationary period.

Gregorio L. Salazar, owner and president of GLS Solutions, was aware of the violation; however, in his initial disclosure letter to BIS regarding the illegal export of the camera he stated he was, “not aware that this camera required approval from United States Government in order to be shipped to Venezuela.” Nearly 6 months later, during a follow-up interview with a BIS Special Agent, Salazar admitted that he knew the licensing requirement for the FLIR camera prior to exporting it to Venezuela and explained that a FLIR Systems, Inc. representative informed him prior to the export that a license was required.  In addition to the penalty on the company, Salazar will pay $50,000 for one charge of providing, “False or Misleading Statement(s) in a Disclosure to BIS.” BIS did not suspend any of Salazar’s fine.

GLS Solutions Charging Letter
Gregorio L. Salazar Charging Letter

Tips on How to Resolve AES Fatal Errors

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

(Source: census@subscriptions.census.gov, 21 Dec 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 AES for this month.

* Fatal Error Response Code: 256

  • Narrative: USPPI Postal Code Not Valid for State
  • Reason: The Postal Code and State Code reported in the USPPI Address do not match.
  • Resolution: The reported USPPI State Code must match the state associated to the Postal Code.

Verify the USPPI State Code and Postal Code combination, correct the shipment and resubmit.

* Fatal Error Response Code: 649

  • Narrative: Quantity 1 Cannot Exceed Shipping Weight
  • Reason: Shipping Weight is reported in kilograms. When the Unit of Measure 1 requires kilograms, the first net quantity (Quantity 1) cannot exceed the Shipping Weight. Ensure the Shipping Weight includes the weight of the packaging materials.
  • Resolution: The first net quantity (Quantity 1) in kilograms cannot exceed the Shipping Weight in kilograms. Verify the Quantity 1 and Shipping Weight, 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.

Military Importers and Exporters Beware: State Department Modifies Sanctions against Rosoboronexport

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

It is the significance of the target, Rosoboronexport, that makes this a noteworthy development.   According to its own website:

The Joint Stock Company Rosoboronexport, part of the Russian Technologies State Corporation, is the sole Russian state intermediary agency responsible for import/export of the full range of defense and dual-use end products, technologies and services.

Rosoboronexport was set up by RF President’s Decree 1834 of 4 November 2000 as a federal state unitary enterprise tasked to implement the national policy in the area of military-technical cooperation between Russia and foreign countries. Since 1 July 2011 Rosoboronexport has been operating as an open joint stock company.
Rosoboronexport operates under the strict supervision of the Russian President, the Russian Government, and in full conformity with the UN arms control treaties and the relevant international agreements.
Only Rosoboronexport has the right to supply the world market with a full range of arms and military equipment manufactured by Russia’s defense industrial complex and approved to be exported. Rosoboronexport accounts for more than 85% of Russia’s arms exports.
Rosoboronexport is among the major operators in the world market for arms and military equipment. Rosoboronexport cooperates with more than 70 countries.

The official status of the exclusive state intermediary agency gives Rosoboronexport unique opportunities to expand long-term mutually beneficial cooperation with foreign partners, provide guaranteed state support of all export-import operations, and strengthen Russia’s leadership in the world arms market.

On September 2, 2015 the US Government  released the following notice: ‘No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from [Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof], except to the extent that the Secretary of State otherwise may determine .  .  .  .’’

The Department of State has now released (November 19, 2015) the following modification to the September notice: “The United States Government has decided to modify the measure described above against ROE and any successor, sub-unit, or subsidiary thereof as follows. The measure described above shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally.”

This modification includes subcontracts for the purchase of spare parts, supplies, and related services for these purposes and can be applied retroactively as of the effective dates of the sanctions (they will remain in place for 2 years unless otherwise determined by the US Government).

This change does not apply to any other measures imposed pursuant to INKSNA.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2015-11-25/pdf/2015-30058.pdf

Intelligence Analytics Software is on the USML…In Case You Read it Wrong

Tuesday, January 19th, 2016 by Danielle McClellan

2016/01/19

By: Danielle McClellan

This notice, while it impacts few exporters, should be clear reminder that as DDTC starts the results of the wide ranging changing changes to the US Munitions List over the past few years, we are bound to see adjustments.   DDTC tends to call these changes to the USML something like clarifications of current policy, instead of changes to the USML.  Regardless of what they are called, exporters should be constantly on the lookout for clarifications or changes to various aspects of the USML and CCL changes made during Export Control Reform.

In this case, the State Department revised paragraph (b) of Category XI after determining that the current language may lead exporters to determine that certain intelligence analytics software is no longer controlled on the USML, when in fact it still is.

On July 1, 2014 DDTC published a final rule amending Category XI of the USML (effective December 30, 2014). This temporary revision clarifies that the scope of control is in existence prior to December 30, 2014 for USML paragraph (b) and directly related software in paragraph (d) remains in effect. This rule inserts the words, “analyze and produce information from” and by adding software description of items controlled.

On July 2, 2015 a final rule was published that temporarily modified Category XI(b) until December 29, 2015. This rule extends the July 2, 2015 modification to August 30, 2017 to allow DDTC more time to consider the controls in Category XI(b).

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2015-12-16/pdf/2015-31528.pdf