Archive for the ‘Denied & Restricted Parties’ Category

Repeal of Pratt & Whitney Canada Corporation’s Statutory Debarment

Monday, October 16th, 2017 by Danielle McClellan

By: Ashleigh Foor

As of July 12, 2017, the statutory debarment of Pratt & Whitney Canada Corporation has been lifted and the company reinstated, according to the Department’s authorities under the Arms Export Control Act and the International Traffic in Arms Regulations.

In June 2012, Pratt & Whitney Canada Corporation plead guilty to violating the AECA (US District Court, District of Connecticut, 12-CR-146-WWE), making the company statutorily debarred in accordance with section 120.1 of the ITAR with certain exceptions, pursuant to section 127.7(b). Section 38(g)(4) of the AECA, 22 U.S.C. 2778(g)(4) prohibits any party that has violated the AECA from issuing export licenses or other approvals for the export of defense articles or services. The notice debarring Pratt & Whitney Canada Corporation in all its locations was published in the Federal Register July 6, 2012.

According to section 127.7 of the ITAR, a statutory debarment may be repealed once appropriate US agencies concur that the violating company has taken appropriate steps to alleviate any law enforcement concerns. The Department of State consulted with other US agencies and concluded that Pratt & Whitney Canada Corporation has appropriately addressed the causes of violations and mitigated any law enforcement concerns.

Effective July 12, 2017, the statutory debarment is removed and Pratt & Whitney Canada Corporation may now participate in any activities subject to the ITAR , in accordance with section 38(g)(4) of the AECA and sections 127.7(b) and 127.11(b) of the ITAR.

OFAC: Specially Designated Nationals List Update

Thursday, August 3rd, 2017 by Danielle McClellan

The following individuals have been added to OFAC’s SDN List (Venezuela-related Designations):

ALBISINNI SERRANO, Rocco, Miranda, Guarico, Venezuela; DOB 06 Mar 1982; Gender Male; Cedula No. 15481927 (Venezuela); President of Venezuela’s National Center for Foreign Commerce (CENCOEX); Former Vice Minister of the State and Socialist Economy of Venezuela’s Ministry of Economy and Finance; Current or Former Principal Director of Venezuela’s National Development Fund (FONDEN) (individual) [VENEZUELA].

FLEMING CABRERA, Alejandro Antonio, Caracas, Capital District, Venezuela; DOB 03 Oct 1973; Gender Male; Cedula No. 11953485 (Venezuela); Vice Minister for Europe of Venezuela’s Ministry of Foreign Affairs; Former Vice Minister for North America of Venezuela’s Ministry of Foreign Affairs; Former President of Venezuela’s National Center for Foreign Commerce (CENCOEX); Former President for Suministros Venezolanos Industriales, C.A. (SUVINCA) of Venezuela’s Ministry of Commerce; Former Ambassador of Venezuela to Luxembourg and Chief Ambassador of the Venezuelan Mission to the European Union (individual) [VENEZUELA].

GARCIA DUQUE, Franklin Horacio (Latin: GARCÍA DUQUE, Franklin Horacio), Miranda, Venezuela; DOB 19 Aug 1963; citizen Venezuela; Gender Male; Cedula No. 9125430 (Venezuela); Former National Director of Venezuela’s Bolivarian National Police; Former Commander of the West Integral Strategic Defense Region of Venezuela’s National Armed Forces (individual) [VENEZUELA].

JAUA MILANO, Elias Jose (Latin: JAUA MILANO, Elías José), Miranda, Venezuela; DOB 16 Dec 1969; POB Caucagua, Miranda, Venezuela; citizen Venezuela; Gender Male; Cedula No. 10096662 (Venezuela); Head of Venezuela’s Presidential Commission for the Constituent Assembly; Venezuela’s Minister of Education; Venezuela’s Sectoral Vice President of Social Development and the Revolution of Missions; Former Executive Vice President of Venezuela (individual) [VENEZUELA].

LUCENA RAMIREZ, Tibisay (Latin: LUCENA RAMÍREZ, Tibisay), El Recreo, Libertador, Capital District, Venezuela; DOB 26 Apr 1959; POB Barquisimeto, Lara, Venezuela; citizen Venezuela; Gender Female; Cedula No. 5224732 (Venezuela); Passport 3802006 (Venezuela); President of Venezuela’s National Electoral Council; President of Venezuela’s National Board of Elections (individual) [VENEZUELA].

MALPICA FLORES, Carlos Erik, Naguanagua, Carabobo, Venezuela; DOB 17 Sep 1972; Gender Male; Cedula No. 11810943; Former National Treasurer of Venezuela; Former Vice President of Finance for Petroleos de Venezuela, S.A. (PDVSA); Former Presidential Commissioner for Economic and Financial Affairs (individual) [VENEZUELA].

PEREZ AMPUEDA, Carlos Alfredo (Latin: PÉREZ AMPUEDA, Carlos Alfredo), Caracas, Capital District, Venezuela; DOB 13 Dec 1966; citizen Venezuela; Gender Male; Cedula No. 9871452 (Venezuela); National Director of Venezuela’s Bolivarian National Police; Former Commander of Carabobo Zone for Venezuela’s Bolivarian National Guard (individual) [VENEZUELA].

REVEROL TORRES, Nestor Luis (Latin: REVEROL TORRES, Néstor Luis), Zulia, Venezuela; El Valle, Libertador, Caracas, Capital District, Venezuela; DOB 28 Oct 1964; citizen Venezuela; Gender Male; Cedula No. 7844507 (Venezuela); Passport A0186449 (Venezuela); Venezuela’s Minister of Interior, Justice, and Peace; Former Commander General of Venezuela’s Bolivarian National Guard; Former Director of Venezuela’s Anti-Narcotics Agency (individual) [VENEZUELA].

RIVERO MARCANO, Sergio Jose (Latin: RIVERO MARCANO, Sergio José), Caracas, Captial District, Venezuela; DOB 08 Nov 1964; citizen Venezuela; Gender Male; Cedula No. 6893454 (Venezuela); Commander General of Venezuela’s Bolivarian National Guard; Former Commander of the East Integral Strategic Defense Region of Venezuela’s National Armed Forces (individual) [VENEZUELA].

SAAB HALABI, Tarek William, Anzoategui, Venezuela; DOB 10 Sep 1962; citizen Venezuela; Gender Male; Cedula No. 8459301 (Venezuela); Passport 5532000 (Venezuela); Venezuela’s Ombudsman; President of Venezuela’s Republican Moral Council (individual) [VENEZUELA].

SUAREZ CHOURIO, Jesus Rafael (Latin: SUÁREZ CHOURIO, Jesús Rafael), Aragua, Venezuela; Caracas, Venezuela; DOB 19 Jul 1962; citizen Venezuela; Gender Male; Cedula No. 9195336 (Venezuela); General Commander of Venezuela’s Bolivarian Army; Former Commander of Venezuela’s Central Integral Strategic Defense Region of Venezuela’s National Armed Forces; Former Commander of Venezuela’s Aragua Integrated Defense Zone of Venezuela’s National Armed Forces; Former Leader of the Venezuelan President’s Protection and Security Unit (individual) [VENEZUELA].

VARELA RANGEL, Maria Iris (Latin: VARELA RANGEL, María Iris), Caracas, Capital District, Venezuela; DOB 09 Mar 1967; POB San Cristobal, Tachira, Venezuela; citizen Venezuela; Gender Female; Cedula No. 9242760 (Venezuela); Passport 8882000 (Venezuela); Member of Venezuela’s Presidential Commission for the Constituent Assembly; Venezuela’s Former Minister of the Penitentiary Service (individual) [VENEZUELA].

ZERPA DELGADO, Simon Alejandro (Latin: ZERPA DELGADO, Simón Alejandro), Sucre, Miranda, Venezuela; DOB 28 Aug 1983; Gender Male; Cedula No. 16544324 (Venezuela); Vice President of Finance for Petroleos de Venezuela, S.A. (PDVSA) ; President of Venezuela’s Economic and Social Development Bank (BANDES); President of Venezuela’s National Development Fund (FONDEN); Vice Minister of Investment for Development  of Venezuela’s Ministry of Economy and Finance; Principal Director of Venezuela’s Foreign Trade Bank (BANCOEX); Principal Director of Venezuela’s National Telephone Company (CANTV); Current or Former Presidential Commissioner to the Joint Chinese Venezuelan Fund; Current or Former Principal Board Member of Venezuela’s National Electric Corporation (CORPOELEC); Former Executive Secretary of Venezuela’s National Development Fund (FONDEN) (individual) [VENEZUELA].

Details: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170726.aspx

Beware of Contracts Signed by Specially Designated Nationals

Thursday, August 3rd, 2017 by Danielle McClellan

(Source: Commonwealth Trading Partners)

By: Chalinee Tinaves, Esq., Commonwealth Trading Partners, ctinaves@ctp-inc.com.

On July 20, 2017, the Office of the Foreign Assets Control (OFAC) announced a $2 million penalty against ExxonMobil Corporation and two of its subsidiaries for violating the Ukraine-Related Sanctions Regulations. According to OFAC, ExxonMobil violated the sanctions when its execs dealt in services with Igor Sechin, President of Rosneft OAO, when they signed eight legal documents relating to oil and gas projects in Russia between May 14, 2014, and May 23, 2014.

If you’ll travel back in time to March 2014, as tensions were heating up regarding Russian deployment of military forces in the Crimea region of Ukraine, President Obama issued Executive Order 13661, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” in response to actions deemed to constitute an unusual and extraordinary threat to the national security and foreign policy of the U.S. Section 1(a)(ii) authorized the Secretary of the Treasury to designate officials of the Government of the Russian Federation, block any property or interests in property, and prohibit dealing in any property and interests in property of a person listed on the Specially Designated Nationals and Blocked Persons List (SDN List). Section 4 of E.O. 13661 prohibited US persons from making “any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order” as well as receiving “any contribution or provision of funds, goods, or services” from a designated person.

On April 28, 2014, OFAC designated Igor Sechin as an official of the Russian government, thereby generally prohibiting US persons from conducting transactions with him. Although Rosneft OAO is:

  • designated on the Sectoral Sanctions Identifications List (SSI List) pursuant to Executive Order 13662 “Blocking Property of Additional Persons Contributing to the Situation in Ukraine;”
  • subject to Directive 2 (prohibiting transacting in, providing financing for, or otherwise dealing in new debt of greater than 90 days maturity if that debt is issued on or after the sanctions effective date by, on behalf of, or for the benefit of the persons operating in Russia’s energy sector); and
  • subject to Directive 4 (prohibition against the direct or indirect provision of, exportation, or reexportation of goods, services, or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil in the Russian Federation or in maritime area claimed by Russian Federation and extending from its Territory); nonetheless, Rosneft OAO is not designated on the SDN List and is therefore not subject to blocking sanctions.

As you can see, the conflict lies in how to conduct business transactions with an organization that is not blocked with an executive who is. According to the release, OFAC rejected ExxonMobil’s position that Sechin was acting in his professional capacity as President of Rosneft OAO when they signed the legal documents. Specifically, ExxonMobil referenced comments by a Treasury Department spokesman in April 2014 allowing BP Plc Chief Executive, Bob Dudley, to remain on the board of directors of Rosneft OAO so long as he did not discuss personal business with Sechin. In rejecting this argument, OFAC indicated that statement did not address ExxonMobil’s conduct nor did the plain language of Ukraine-Related Sanctions Regulations include a distinction between “personal” or “professional.” Further, OFAC has not interpreted the Regulations to create a carve-out for designated parties acting in their professional capacity.

Interestingly, in support of its position, OFAC pointed to its Frequently Asked Question #285 published on March 18, 2013, regarding the Burma Sanctions Program. Although conveniently now removed from OFAC’s FAQs and website following the termination of the Burma Sanctions Regulations, an archived link detailing FAQ #285 captured the full text of OFAC’s response to ministry dealings with a designated Burmese Government minister. According to OFAC:

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN.

However, in Treasury’s restatement of FAQ #285 in the ExxonMobil announcement, OFAC indicated that US parties should “be cautious in dealings with [a non-designated] entity to ensure that they are not providing funds, goods, or services to the SDN, for example, by entering into any contracts that are signed by the SDN.”

Rejecting ExxonMobil’s rebuttal that OFAC regulations state that different interpretations may exist among and between the sanctions programs that it administers, FAQ #285 “clearly signaled” that OFAC views the signing of a contract with an SDN as prohibited, even if the entity on whose behalf the SDN signed was not sanctioned in situations where sanctions programs also involve SDNs. These reasons, in addition to the definitions of “property” and “property interest” in the Ukraine-Related Sanctions Regulations, E.O. 13661, and statements issued by the White House and the Department of Treasury, served to provide ExxonMobil with notice that signing the legal documents with Sechin would violate the prohibitions in the Ukraine-Related Sanctions Regulations.

In assessing the penalty based on OFAC’s Economic Sanctions Enforcement Guidelines, among other aggravating factors, OFAC viewed ExxonMobil’s transaction to be a show of “reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of an SDN” and contributed “significant harm” to the objectives of the Ukraine-Related Sanctions Program. Following the announcement, ExxonMobil stood by its position that it acted in full compliance with the sanctions guidelines in 2014 and argued that the Treasury Department is “trying to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before the relevant conduct and still publicly available today.”

What does all this mean for U.S. companies? While FAQ #285 was initially crafted to address contracts with a designated government official (which Sechin satisfied based on his designation as a Russian official), it is unclear whether this interpretation would also be applicable in situations involving non-government SDNs and their corporate dealings. Further, the prohibited conduct of entering into a contract signed by an SDN in FAQ #285 was listed as an example. It is entirely possible that a range of other contract activities are prohibited by SDNs like negotiating a contract. Companies must be aware of the risks associated with projects that would require authorization by an SDN. Further, companies can mitigate their risk by screening all the parties involved in a transaction to avoid potentially violating a sanctions program.

Rosoboronexport Added to Nonproliferation Act by State

Thursday, May 11th, 2017 by Danielle McClellan

On March 21, 2017, the Department of State applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act against Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof. The measures below will remain in place for two years from the effective date unless the Secretary of State determines otherwise.

Rosoboronexport accounts for more than 90% of Russia’s annual arms sales and India is their major client, other leading clients include China, Algeria, Syria, Vietnam, Venezuela and recently Iraq.

Section 3 of the Act, imposes the following measures against Rosoboronexport:

  1. 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 this foreign person, except to the extent that the Secretary of State otherwise may determine. This measure 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. Moreover, the ban on U.S. government procurement from the Russian entity Rosoboronexport (ROE) and any successor, sub-unit, or subsidiary thereof shall not apply to United States Government procurement of goods, technology, and services for the purchase, maintenance, or sustainment of the Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia’s Open Skies Treaty compliance. Such subcontracts include the purchase of spare parts, supplies, and related services for these purposes;
  2. 2. No department or agency of the United States Government may provide any assistance to this foreign person, and this person shall not be eligible to participate in any assistance program of the United States Government, except to the extent that the Secretary of State otherwise may determine;
  3. No United States Government sales to this foreign person of any item on the United States Munitions List are permitted, and all sales to this person of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and;
  4. No new individual licenses shall be granted for the transfer to this foreign person of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/pdf/2017-06224.pdf

Man Pleads Guilty to Stealing Sensitive Military Documents from United Technologies and Exporting Them to China

Tuesday, January 31st, 2017 by Danielle McClellan

By: Danielle McClellan

Yu Long, 38, a citizen of China and permanent resident of the US, plead guilty on December 19, 2016 to one count of conspiracy to engage in the theft of trade secrets as well as one count of unlawful export and attempted export of defense articles from the US. Long worked as a Senior Engineer/Scientist at United Technologies Research Center (UTRC) from May 2008 to May 2014 where he worked on F119 and F135 engines. During this time Long always intended to return to China to work on research projects at state-run universities in China using the knowledge and materials he was acquiring at UTRC. During 2013 and 2014, Long was recruited by Shenyang Institute of automation (SIA), of China, where he substantiated claims that he could provide documents from his work at UTRC and examples of projects on which he worked.

On May 30, 2014, Long left URTC and began travelling back and forth between the US and China with a UTRC external hard drive that he unlawfully retained after his employment ended. On November 7, 2014, Long was arrested, two days after he attempted to board a plane to China with sensitive, proprietary and export controlled documents from Rolls Royce, not URTC. His checked baggage was inspected by CBP officer in Newark, NJ, where the hard drive was found with all of the proprietary, export controlled information.

After his digital media was seized it was found that he had voluminous files protected by the ITAR and EAR, as well as files proprietary to UTRC, Pratt, and Rolls Royce. UTRC confirmed that the hard drive that he stole and accessed in China contained not only documents and data from projects long worked on, but also from projects that he did not work on. It was found that he obtained Pratt and Rolls Royce proprietary information from a project that the US Air Force had convened a consortium of major defense contractors to work together to see if they could collectively lower the costs of specific metals used.

A sentencing date has not been set but Long faces a maximum term of imprisonment for 15 years for the theft of trade secrets charge and 20 years of imprisonment for violated the Arms Export Act.

More Information: https://www.justice.gov/opa/pr/chinese-national-admits-stealing-sensitive-military-program-documents-united-technologies

Lebanon Company Fined $450,000 for Reexporting Items to Syria

Tuesday, November 15th, 2016 by Danielle McClellan

By: Danielle McClellan

Tecnoline SAL (Tecnoline )of Sin El Fil, Beirut, Lebanon pled guilty to 7 charges of Causing, Aiding, or Abetting a Violation of the Regulations and will pay a civil penalty of $450,000. Tecnoline reexported US-origin mass spectrometers, gas chromatographs and consumables, liquid chromatograph-mass spectrometer systems, and liquid chromatograph modules (ECCN 3A999), controlled for anti-terrorism reasons, to Syria. There is a long standing US Embargo against Syria which makes a BIS license required for all exports/reexports subject to the EAR with the only exception being food and certain medicines).

The items were manufactured by Agilent Technologies (Agilent), a US company, and Technoline was an authorized distributor and reseller of Agilent’s products. In 2004, Technoline signed an agreement with Agilent that acknowledged their awareness of US export control laws and regulations and agreed to comply with them as a reseller and distributor of controlled products. Between August 2009 and October 2010, Technoline negotiated price discounts on the items with Agilent and eventually ordered the items for the Syrian Government ministries or entities. Technoline falsely identified the ultimate destination of the items as being Iraq or Lebanon (BIS license not required) and on one or more occasions they failed to disclose the ultimate destination of the items. Agilent shipped the items to TEchnoline in Beirut, Lebanon via Agilent’s German subsidiary. Once Technoline received the items they transferred them to Syria, there they were installed at Syrian Government ministries within a month or so. There were never any authorizations from BIS to export the items from the US to Syria, or to reexport them from Germany to Syria.

View Order: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1080-e2474/file

Pakistani National Extradited and Sentenced to 33 Months in Prison for Conspiracy to Export Gyroscopes to Pakistan

Wednesday, October 12th, 2016 by Danielle McClellan

By: Danielle McClellan

Syed Vaqar Ashraf (71) of Lahore, Pakistan (also known as Vaqar A. Jaffrey) was sentenced to 33 months in prison after being extradited from Belgium on July 31, 2015. According to court documents, in June 2012 Ashraf began asking a Tucson-based company, who shall remain nameless, for price quotes for unmanned aerial vehicles (drones). The company specializes in the design, development, and manufacturing of drones for the US military. The company immediately tipped off Homeland Security Investigations (HIS) agents about Ashraf’s requests.  HSI quickly assigned special agents to work undercover as employees of the Tucson-based company and they began dialoging with Ashraf directly.

From June 2012 to August 2014, Ashraf negotiated with special agents. He represented himself as the head of I&E International, based in Lahore, Pakistan.  Most of the correspondence was done via email where he agreed to purchase 18 gyroscopes that were intended to help medium-sized drones fly longer distances as well as 10 optical receiver modules and laser diodes intended to be installed in the aircraft for approximately $440,000.

In September 2013, HSI agents met with Ashraf in Vienna, Austria to work out details regarding the sale. Ashraf explained during the meeting that Pakistan’s nuclear program had been developed using technology exported from the west without a license. This led the agents to believe that Ashraf was working for Pakistan’s Advanced Engineering Research Organization and the intended use for the electronics was for the Pakistani military UAV program.

From January to March 2014 Ashraf asked agents for suggestions to get around the US export controls after agents requested a license from the Commerce Department and were told that the items would require a special license because the optical receive modules could be used in “activities related to nuclear, chemical, or biological weapons or missile delivery systems.” Ashraf asked if there were any alternative descriptions that would appear to cover the items on documents, but would clear arms control hurdles from State and Commerce departments.  Secret agents offered Ashraf with a few different descriptions and asked him if the customer was aware that transaction was “being done without a license.” Ashraf told the agents that they (customer) were “absolutely aware of everything.” Later in an email, Ashraf wrote, “He (customer) is well aware that he cannot get these gyros in a normal way; he’s well aware of that.” The ultimate plan was to transship all of the items; they would be shipped to Pakistan through Belgium.

HIS agents met with Ashraf three more times in face-to-face meetings, including one in the US where they agreed on a series of wire transfers, including one for $67,000. On August 26, 2014 agents set up a final meeting with Ashraf in Belgium to deliver some of the technology. Before the meeting began Belgian police showed up and arrested Ashraf. A little less than a year later Ashraf was extradited to the US to face trial on charges of conspiracy to export defense controlled items without a license which he later pled guilty to.

Read more: https://www.justice.gov/opa/pr/pakistani-national-extradited-and-sentenced-attempting-export-sensitive-technology-pakistani

BIS Extends Temporary General License for ZTE Entities

Tuesday, September 6th, 2016 by Danielle McClellan

On March 24, 2016, a final rule was published that created a temporary general license that allowed, for a short time period, two entities (ZTE Corporation and ZTE Kangxun) that had been added to the Entity List on March 8, 2016, to be able to take part in exports, reexports, and transfers (in- country).

BIS has decided to extend the temporary general license until November 28, 2016. Due to this extension, the final rule will remove the date of August 30, 2016 and substitute the newest expiration date of November 28, 2016. No other changes have been made to the license.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-08-19/pdf/2016-19828.pdf

Screen Your Parties’ Addresses & Screen Before Shipments: Experienced and Sophisticated Company Fined $90,000 for One Export of EAR99 Item

Tuesday, September 6th, 2016 by Danielle McClellan

By: Danielle McClellan

Spectrolab is an experienced and sophisticated exporter, according to BIS’s Order related to the illegal export of a Large Area Pulsed Solar Simulator (EAR99).  You may be thinking, EAR99 items don’t need a license so how is there an illegal export, but as the title states…screening is important and will find violations that otherwise are not obvious to the naked eye.

In this case, Spectrolab sold and transferred a Large Area Pulsed Solar Simulator to a party on the Entity List in Pakistan. SUPARCO (Pakistan’s Space and Upper Atmosphere Research Commission) was added to the list in 1999 after it was found that they were involved in nuclear or missile activities. SUPARCO used a procurement agent to obtain the simulator from Spectrolab in 2014. Initially the agent said the item was for Pakistan’s Institute of Space Technology (IST) but soon after Spectrolab was made aware that SUPARCO was involved in the transaction. The procurement agent provided Spectrolab with the names and every party involved in the transaction except SUPARCO. Spectrolab screened the names, but not the addresses that they received from the agent which would have alerted them that SUPARCO was on the Entity List as their address was listed as IST.

Spectrolab even hosted an inspection and training session on installation and operation with an engineer from SUPARCO. The engineer even attended the training wearing a SUPARCO badge. As a result, Spectrolab was fully aware that SUPARCO was the end user of the simulator before they ever exported it. Spectrolab failed to run or re-run its screening software to screen either the SUPARCO name or address in connection with the final shipment, a direct contradiction of their own export compliance plan.

There were a few things that went wrong in this case for Spectrolab:

  1. They didn’t screen the companies address; if this was initially done the entire process would have stopped before it even started. BIS noted in the Order that Spectrolab used an export control screening software.
  2. No one raised the question of why the engineer worked for SUPARCO instead of IST or why the end user was SUPARCO instead of IST. This is really where the break down occurred
  3. They didn’t re-run their screening software before shipping the item to Pakistan

The biggest take away from this case is to screen everything about your customers, and that the government expects you to catch on to oddities related to your shipments. In this case, the company name changing, it’s not surprising that no one knew that SUPARCO was on the Entity List, there’s thousands on that list. The issue is that there was a red flag with SUPARCO coming into the transaction but not being listed on the documents. Entities who are on the denial list will be sneaky, and BIS expects you to catch that…that just didn’t happen in this case.

Order:  https://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations

China Telecomm Giant ZTE Gets Another Temporary Reprieve from US Export Denial List

Tuesday, July 12th, 2016 by Danielle McClellan

By: John Black

The Commerce Department’s Bureau of Industry and Security (BIS) announced that it is extending the temporary general license for ZTE to effectively suspend ZTE’s denial list status until August 30, 2016.  BIS originally put ZTE on its Entity List on March 8, 2016, based on BIS’ allegations that ZTE, including its senior management, established a complex network as part of its efforts to illegally transfer US technology to Iran and other prohibited destinations.  The original denial prohibited all transfers from anywhere in the world of US origin items to ZTE as well as exports from outside the United States of non-US origin items with more than 25% US controlled content and certain foreign items produced directly from using US technology.  The original listing was clearly the biggest EAR penalty ever imposed in my 32 years in this field.

As previously reported in this newsletter, on March 24, 2016 BIS announced a general license that effectively temporarily suspended until June 30, 2016, the denial  against:

  • Zhongxing Telecommunications Equipment (ZTE) Corporation (also referred to as ZTEC)
  • ZTE Kangxun Telecommunications Ltd.

Now BIS has extended that general license for these two entities through August 31, 2016.  It is easy to infer from this that ZTE must have originally refused to cooperate with BIS regarding the diversions to prohibited destinations, but after being placed on the Entity List ZTE rounded up a hoard of Washingotn lawyers and came crawling on its knees to BIS promising to cooperate and take decisive remedial actions.  The extension indicates that ZTE is continuing to cooperate with BIS, at least as much as is necessary to get the suspension of its denial extended until the end of August.

These two ZTE entities remain on the EAR Entity List:

  • Beijing 8 Star International Co.
  • ZTE Parsian

For more information go to:  http://www.bis.doc.gov/index.php/regulations/federal-register-notices#fr41799