Archive for the ‘Information Technology’ Category

DDTC Posts IT Modernization Webinar: Commodity Jurisdiction

Tuesday, November 15th, 2016 by Danielle McClellan

2016/11/15

(Source: State/DDTC)

The webinar presented October 14, 2016 regarding the upcoming deployment of Defense Export Control and Compliance System (DECCS) Release 1 is available for review. The webinar provided a brief overview of the status of the IT Modernization effort and a demonstration of the new Commodity Jurisdiction (CJ) (DS-4076) interface.

Click here to read
Recorded webinar
Presentation slides

Electronics Retailer Pays $275,000 for Illegal Exports of Optical Sighting Devices

Wednesday, February 4th, 2015 by Brooke Driver

2015/02/04

By: John Black

Well-known electronics retailer, B&H Electronics Corp. of New York, most likely lost money on 50 exports of 0A987 optical sighting devices after it agreed to pay $275,000 for 50 illegal export between 2009 and 2012.  In fact, if B&H paid the standard hefty legal fees normally involved in reaching settlement agreements and paid to implement corrective, remedial actions to prevent future illegal exports, its losses could easily exceed double the $275k settlement payment.

Ever the auditor, I couldn’t stop myself from making a quick check-up on the B&H website to see what happens if I pretended to be outside the United States and order some optical sites.  When I indicated I was in Australia, the B&H website would not accept my order and cited US export controls as the reason.  I tried again using the UK, Pitcairn Island, and Canada and B&H refused each one, even for Canada.  I then ordered an Audio Technica turntable pretending to be in the same countries and the system did not refuse my order.

I pulled my audit’s cap tighter onto my head and I entered a fake order from Canada using the name of a person on an export prohibited parties list.  Unfortunately, in order to see if it would accept my order, I would have had to enter a credit card number, and, well I stopped my spot check at that point.  Not only did I not want my credit card charged, I did not want to participate in an export involving a prohibited party.

BIS Issues Advisory Opinion Confirming that the EAR’s General Technology Note Applies to All ECCNs Controlling ‘Technology’

Friday, May 23rd, 2014 by Brooke Driver

2014/05/23

By: D. Jacobson and M. Burton (Source: International Trade Law News, http://www.tradelawnews.com/)

On March 25, 2014 the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued an Advisory Opinion (reprinted below) clarifying that the General Technology Note (GTN) in Supplement No. 2 to Part 774, <http://www.bis.doc.gov/index.php/forms-documents/doc_download/750-774>, of the U.S. Export Administration Regulations (EAR) applies to all Export Control Classification Numbers (ECCNs) on the Commerce on Commerce Control List “regardless of whether the ECCN specifically refers to the GTN or uses the term ‘required.’”

The reason for this inquiry is that there has been some uncertainty regarding the scope of the GTN in the EAR. This is because the GTN is based on the Wassenaar Arrangement’s (WA) GTN, which applies to the WA’s Dual-Use List. The U.S. Commerce Control List (CCL), however, includes many more items than covered by the WA Dual-Use List, such as items controlled for missile technology reasons, chemical and biological reasons, as well as many U.S. unilateral controls. As a result of Export Control Reform the CCL also contains certain military-related parts and components under the new “600 series” and will soon control commercial space and satellite-related items under the “500 series”.

The related “technology” for an item included on the CCL is controlled under the corresponding “E” Group of the ECCN. In many cases involving items controlled by the WA, the corresponding “E” Group specifically mentions the GTN, such as ECCN 3E001 which covers “‘Technology’ according to the General Technology Note for the ‘development’ or ‘production’ of equipment or materials controlled by 3A . . . 3B . . . or 3C.” Many other “E” Group ECCNs do not refer to the GTN.

The BIS Advisory Opinion makes clear that, while the GTN is based on the WA List, the “EAR does not limit its definition of technology or the GTN to only those technologies controlled in the EAR pursuant to the WA” and “[t]herefore, the GTN and the EAR’s definition of “required” apply to all references to ”technology” in all the ECCNs on the CCL.”

This confirms BIS’s longstanding but heretofore unwritten policy that, regardless of CCL category, the term “required” “refers to only that portion of ‘technology’ or ‘software’ which is peculiarly responsible for achieving or exceeding the controlled performance levels, characteristics or functions.” What this means from a practical perspective is that while the GTN applies to all ECCNs, not all technology related to a controlled item is necessarily “required” for its development, production, or use. Thus, careful analysis must be performed when classifying technology under the EAR.

 

 

Under the Wikileaks Radar: Blue Lantern End-Use Checks in Europe

Monday, March 31st, 2014 by Brooke Driver

2014/03/31

By: Scott Gearity

When the Export Compliance Training Institute returns to London next month for its seminars on US Export Controls on Non-US Transactions, it seems likely that Julian Assange will still be holed up at Ecuador’s embassy to the UK, the WikiLeaks founder’s home since June 2012. ECTI can neither confirm nor deny that Mr. Assange will make an appearance at the Hilton London Kensington Hotel as a special guest speaker.

Whatever you may think of Mr. Assange’s work, or the allegations that have caused him to seek asylum, it is simply a reality that the leak of a quarter million U.S. Department of State cables beginning in 2010 put an enormous amount of information of interest into the public domain. Some of the contents of the leaked cables are well known – spying by U.S. diplomats to the United Nations, untactful criticism of foreign leaders, the ugly wheeling and dealing involved in attempting to get countries to resettle Guantanamo Bay detainees. But many of the cables relating to more obscure topics have escaped broad public notice.

It is fair to say that among these lesser-known communiqués are those detailing end-use checks conducted by U.S. embassy personnel as part of the Directorate of Defense Trade Controls’ Blue Lantern program. That is not to say that these checks are not a frequent subject to the leaked cables, fully 1,865 of which reference the program. Blue Lantern focuses on Direct Commercial Sales, and is one of two broad U.S. Government end-use monitoring programs. The other is the Department of Defense’s Golden Sentry program, which examines compliance with Foreign Military Sales agreements. (By the way, who names these things? Stan Lee?)

In fiscal year 2012, there were 820 Blue Lantern checks in 103 countries (a large increase from a few years earlier, when the number of checks consistently hovered around 500). The checks are not equally distributed around the world; 195 of the 820 checks initiated in FY2012 were in Europe. While 36 percent of license applications are for exports to Europe, only 24 percent of Blue Lantern cases occur there, reflecting a higher level of trust by the U.S. Government in the many European countries, which are either NATO members or otherwise allies with the U.S. In other words, Europe is the site of a disproportionately low number of end-use checks. But even this relatively small number means the U.S. conducts a Blue Lantern check in Europe almost every working day.

Here are a few of the more interesting selections from cables:

  • The investigations do not necessarily involve an on-site visit. For a check into Aviation Trading Co., Embassy London contacted the U.K. firm and inquired with multiple U.K. Government agencies to establish the firm’s bona fides, but no published cable indicates that an actual visit ever took place.
  • Unfavorable checks in Europe are uncommon but not unheard of. There are several cables to and from Embassy Madrid discussing unfavorable checks involving night vision goggles at Elint, S.A., including a description of an “egregious alteration of a U.S. Non-Transfer and Use Certificate (DSP-83).”
  • The Germans are skeptical of “ITAR-free” products, but want to be kept in the loop. At a 2009 meeting in Bonn, a Ministry of Defense official “expressed strong sentiments against European companies that market allegedly ‘ITAR-free’ defense articles, such as satellites, asserting that such efforts contribute to the deterioration of transatlantic ties and falsely deny the interdependency of European and American defense companies.” Only a year later, the Ministry of Foreign Affairs expressed concern to Embassy Berlin at the array of U.S. Government departments (Commerce, Defense and State) conducting end-use monitoring without notifying the German government.
  • Broker registrations get the Blue Lantern treatment, too. There are numerous cables recounting inquiries made by U.S. diplomats into foreign firms attempting to register with DDTC as brokers. In these cases, embassy personnel often describe their attempts to reach out to contacts in foreign trade and law enforcement to establish if there is any derogatory information about the prospective registrant. In one example from Embassy Copenhagen, ironically marked as “not for internet distribution,” the embassy political officer actually visited the home office of a Danish consultant.

All in all, it seems that as long as a European firm is abiding by the terms and any provisos of a State Department export license, it has little to fear from an end-use check.

Maryland Man Imprisoned for 8 Years for Participating in Conspiracy to Help Iran Launch First Satellite

Thursday, January 30th, 2014 by Brooke Driver

2014/01/30

By: Brooke Driver

Nader Modanlo, a born Iraqi and naturalized U.S. citizen living in Potomac, Maryland, was recently sentenced to eight years in prison, three years of probation and a whopping $10,000,000 fine for violating the International Emergency Economic Powers Act, money laundering and obstructing bankruptcy proceedings. A number of government agencies were involved in constructing the case against Modanlo, including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Internal Revenue Service’s Criminal Investigation and the Defense Criminal Investigative Service.

The 53-year-old took part in a complex conspiracy (that took place between the years of 2000 and 2007) to illegally provide satellite related services to Iran. According to the evidence presented at trial, Modanlo used his expertise as a mechanical engineer and his background in finance and strategic policy as they relate to space-based telecommunications to facilitate the creation and launch of Iran’s first satellite.

In 1994, as the principal owner and president of Final Analysis, Inc., Modanlo began a working relationship with POLYOT, an aerospace company owned by the Russian government. Between the years 1995 and 2000, Final Analysis provided POLYOT with telecommunication satellites. Modanlo filed for and received the required licenses for these transactions.

However, in 2001, after Final Analysis was forced into bankruptcy, Modanlo founded New York Satellites Industries, running the company out of his own home. While working for Final Analysis, Modanlo began his illegal contract with POLYOT to construct and launch a remote sensing and telecommunications satellite for Iran, an agreement he honored under the name of his new company. Knowing that direct financial transactions would be difficult due to the sanction against the country, Modanlo and a number of other interested parties, including a former Iranian ambassador, met in Switzerland to discuss the details of the launch and the money exchange. To solve the problem, they formed a fake company called Prospect Telecom and opened a Swiss bank account under that name. Investors transferred funds to this account for the project, including $10,000,000 that was almost immediately sent to Modanlo’s New York Satellite Industries bank account as payment for his help in the launch, which took place October 2005. In the two years following the launch, Modanlo made false statements and withheld information regarding the ownership and aim of Prospect Telecom in bankruptcy proceedings.

Wassenaar Arrangement Modifies Controls on Electronic Surveillance Tools

Thursday, January 30th, 2014 by Brooke Driver

2014/01/30

By: Brooke Driver

At its annual plenary meeting in Austria December 3-4, 2013, the Wassenaar Arrangement, a group of 41 countries including the U.S., Russia, the U.K. and most E.U. states, focused on export controls for conventional arms and dual-use goods and technology, agreed on new harsher export controls on cybersecurity technologies, recognizing their great potential for terrorism. Each participating country must now implement these changed policies, one major area of which is surveillance and intelligence gathering tools, including malware and rootkits, which governments can use to bypass security features on electronic devices in order to attain supposedly protected data. Internet protocol network surveillance systems or equipment are also now subject to revised export controls, which include technologies used to screen for malware, viruses and surveillance programs. These technologies are subject to new controls, because representatives of the 41 countries believed that they could be used to both block cyber attacks and grant foreign persons dangerous insight into Western screening systems, increasing the potential for hacks. The agreement also places stricter controls on intelligence gathering technologies that analyze individuals’ or groups’ relational networks and activities, although there will be exceptions for companies using such software for marketing or consumer-monitoring purposes.

Click here for details of these changes and others decided upon at this year’s Wassenaar plenary meeting: http://www.wassenaar.org/controllists/2013/Summary%20of%20Changes%20to%20Control%20Lists%202013.pdf

BIS Adapts Some ITAR-Like Policies for Deemed Reexports of Technical Data and Source Code

Wednesday, December 4th, 2013 by Brooke Driver

2013/12/04

By: Brooke Driver

BIS has released an updated guidance document regarding deemed reexports of technology, technical data and source code controlled under the EAR. BIS said that this revision addresses the unintentional consequence of the shift of many military items from the ITAR to the EAR. Commerce is making this change, because it discovered that the EAR requires a license in certain situations where the ITAR allows for deemed reexports under the exemptions in 124.16 or 126.18.

In order to make the EAR as generous as the ITAR is to reexporters, BIS has decided to give reexporters three options for deemed reexports:

1)     Follow the longstanding BIS “legacy” guidance regarding deemed reexports; OR

2)    Make license-free deemed reexports consistent with ITAR 124.16; OR

3)     Make license-free deemed reexports consistent with ITAR 126.18.

While ITAR reexporters may be familiar with the ITAR 124.16 and 126.18 exemptions, EAR reexporters likely are unfamiliar with those ITAR exemptions. ITAR and EAR reexporters alike should take a look at the detailed BIS guidance on deemed reexports at:

http://www.bis.doc.gov/index.php/policy-guidance/deemed-exports/deemed-reexport-guidance1

While, of course, three options are more complex than one, the increased options offer reexporters more flexibility. In fact, it is not hard to imagine a scenario where a reexporter may use all of the options, depending on the nationality and technology involved.

Computerlinks FZCO fined $2,800,000 for Violating Syria Trade Embargo

Tuesday, June 18th, 2013 by Brooke Driver

2013/06/18

By: Brooke Driver

Recently, United Arab Emirates’ Computerlinks FZCO, a Middle East distributer working with Blue Coat Systems, Inc. of Sunnyvale, California, was charged with shipping without permission—or the manufacturer’s knowledge—to the embargoed country Syria. Although Computerlinks FZCO had agreed in its distribution agreement with Blue Coat to abide by US Department of Commerce regulations, the company falsified end user and final destination information it gave to Blue Coat on three occasions.

On or about October 29, 2010, December 31, 2010 and May 15, 2011, Computerlinks FCZO ordered devices from Blue Coat used to monitor and control web traffic along with related equipment and software, informing the manufacturer that the items were bound for the Iraq Ministry of Telecom or Liwalnet (an Internet service provider in Afghanistan), when in fact Computerlinks sent them to the Syrian Telecommunications Establishment. The total value of the three shipments is approximately $1,400,000

Because the value of the shipments was so high and because Computerlink intentionally evaded trade regulations, the BIS chose to:

  • Fine the company a whopping $2,800,000
  • Require three consecutive external audits—the first to analyze the company’s activity during the year prior to the charges, the second to observe the company’s activity the year directly after the charges and the last to analyze its activity two years after the charges

State/DDTC Posts New Guidelines for Preparing Electronic Agreements

Tuesday, June 18th, 2013 by Brooke Driver

2013/06/18

By: Brooke Driver

Effective April 22, 2013, the “Guidelines for Preparing Electronic Agreements” section of the ITAR has undergone extensive revision. Look at the Table of Contents for the stuff highlighted in yellow to find the updates.  Be sure to download and review the new procedures here:

http://www.pmddtc.state.gov/licensing/documents/agreement-ElectronicGuidelinesv4.pdf

Automated Export System Impacted by Export Control Reform Implementation

Tuesday, June 18th, 2013 by Brooke Driver

2013/06/18

By: Brooke Driver

Source: Global Reach Blog; http://globalreach.blogs.census.gov/

AES Broadcast #2013029.  On Tuesday, April 16, 2013, the Department of Commerce, Bureau of Industry and Security published a final rule (http://www.gpo.gov/fdsys/pkg/FR-2013-04-16/pdf/2013-08352.pdf) that will become effective October 15, 2013. As a result of this rule, the following changes will be made to the Automated Export System (AES) in order for exporters and authorized agents to successfully report electronic export information in the AES:
The Addition of “600 series” Export Control Classification Numbers (ECCN)
ECCNs 9A610, 9A619, 9B610, 9B619, 9C610, 9C619, 9D610, 9D619, 9E610 and 9E619 will be added to the AES ECCN reference table. See the following instructions to determine which “600 series” ECCNs are eligible for certain license types. By using any of the License Exceptions or a Special Comprehensive License, you are certifying that the terms, provisions, and conditions described in the EAR have been met.

  • C30 (BIS license), C31 (BIS Special Comprehensive License), C40 (TMP), C41 (RPL), C42 (GOV), and C59 (STA) –“600 series” ECCNs are eligible to the extent permitted under parts 740 and 752 of the EAR.
  • C32 (NLR with a reason for control other than or in addition to AT) – All “600 series” ECCNs created under this final rule are eligible if exported to Canada. Some of these “600 series” items were previously authorized under an International Traffic in Arms Regulations (ITAR) Canadian exemption (SCA).
  • C35 (LVS) – The following “600 series” ECCNs are eligible: 9A610, 9A619, 9B610, 9B619, 9C610, and 9C619.
  • C44 (TSU) – The following “600 series” ECCNs are eligible: 9D610, 9D619, 9E610, and 9E619.

If the “600 series” ECCNs are reported under any other license type, AES will generate a fatal error back to the filer. With the exception of “600 series” .y paragraph exports (described below), an AES filing is required for exports of items classified under “600 series” ECCNs, regardless of the value of the item or destination.
The Addition of a New License Type (C60) for the AES Collection of “600 series” .y Paragraph Exports
A new license type (C60) DY6 will be created in AES for the reporting of items that fall under “600 series” ECCNs with a paragraph “.y.” If an AES filer submits electronic export information containing a “600 series” ECCN with a paragraph “.y,” then the filer must do so under C60. Items under the .y paragraphs of the “600 series” ECCNs may be exempt from reporting in AES if their value is $2,500 or less or they are destined for Canada.

  • C60 (DY6) – Reporting an ECCN is not required, but when reported, only the following “600 series” ECCNs are eligible: 9A610, 9A619, 9B619, 9D610, 9D619, 9E610, and 9E619. When C60 is used, the filer must report DY6 in the License Number field.

Items subject to the EAR, including “600 series” ECCNs that are licensed by the State Department under the International Traffic in Arms Regulations (ITAR)
Under a delegation of authority, the State Department may license an item subject to the EAR on an ITAR license pursuant to new section 120.5(b) of the ITAR. If this occurs, the AES filer must report the ECCN (including “600 series” ECCNs) or the EAR99 designation in the ECCN field in AES, even if the license type is S05 (DSP-5). All other fields associated with license type S05 are required, such as registration number, significant military equipment indicator, DDTC eligible party certification indicator, USML category code, DDTC unit of measure and DDTC quantity.
A complete list of all of the AES License Type codes and reporting instructions for these types can be found at http://www.cbp.gov/xp/cgov/trade/automated/aes/tech_docs/aestir/june04_intro/appendices/
For questions regarding these upcoming AES changes, please contact the Bureau of Industry and Security by email at ECR_AES@bis.doc.gov or at one of the phone numbers below.

  • Office of Technology Evaluation (located in Washington, DC): (202) 482-2078
  • Outreach and Educational Services Division (located in Washington, DC) (202) 482-4811
  • Western Regional Office (located in Irvine, CA) (949) 660–0144
  • Northern California branch (located in San Jose, CA) (408) 998-8806