Archive for the ‘Licensing’ Category

Slackers Rejoice! DDTC Extends ITAR Authorizations Expiration Dates for ECR Shifted Items

Thursday, November 5th, 2015 by Danielle McClellan

2015/11/05

By: Danielle McClellan

Maybe you are not an ECR slacker.  Most likely, despite your great plan and diligent efforts, you are one of the many exporters who haven’t quite figured out yet which of your hardware, materials, software and technical data shifted from the USML to the CCL as a result of Export Control Reform (ECR).  On paper, the task of reclassifying everything sounds easy.  In practice, it requires a lot of resources and time.  No one ever said ECR would make your life easier in the short term.

Enter DDTC to make things easier for some exporters for a bit longer—not something DDTC is well known for doing.  DDTC certainly knows from its experience processing license applications that sometimes it takes longer to get something done than outsiders would first expect.  Regardless of it’s motives, DDTC has extended the transition period for ITAR authorizations involving items that shifted from USML to CCL jurisdiction.

When ECR went into full force in 2013, DDTC published a final rule that provided a “Transition Plan” for exporter’s to follow regarding ITAR licenses, authorizations, and agreements. At that time, DDTC stated that all ITAR licenses, authorizations, and agreements would remain valid for a period of two years from the effective date of the rule (October 15, 2013) for  items that shifted from the USML to the CCL—there was no change to the validity period authorizations for items that did not shift.   Authorizations that covered both USML and CCL items remained valid until the expiration as long as simple amendments were made to agreements to add the USML x paragraph designation for non-USML items.

DDTC recently decided to give more flexibility for authorizations covering only items that shifted to the CCL.   On its website, DDTC recently added revisions to the various expiration dates  by adding an Updated Guidance paragraph after the previously issued guidance:

“A license or authorization issued by the Department will be effective for up to two years from the effective date of the revised USML category if all the items on the license or authorization have transferred to the export jurisdiction of the Department of Commerce.” (78 Fed. Reg. 67,752)

Updated guidance: Licenses or authorizations that would otherwise expire at the conclusion of the referenced two-year period will remain valid for 48 months from the date of issuance, or as otherwise indicated on the license or authorization.

“Approvals issued for agreements submitted prior to the effective date of the relevant revised USML category that contain transitioning and non-transitioning items will remain valid until expired, unless they require an amendment, or for a period of two years from the effective date of the relevant final rule, whichever occurs first, unless otherwise revoked, suspended, or terminated.” (78 Fed. Reg. 67,752)

Updated guidance: For agreements that would otherwise expire at the conclusion of the referenced two-year period, DDTC is extending the period of validity by one year.

“Approvals issued for agreements submitted prior to the effective date of the relevant revised USML category that contain solely transitioning items will remain valid for a period of two years from the effective date of the relevant USML category, unless revoked, suspended, or terminated.” (78 Fed. Reg. 67,752)

Updated guidance: For agreements that would otherwise expire at the conclusion of the referenced two-year period, DDTC is extending the period of validity by one year.

Justice is Blind…Unless You’re a Native of China—In That Case, Assume the Position!

Thursday, October 1st, 2015 by Danielle McClellan

2015/10/01

By: Danielle McClellan

Earlier this year (May 2015) a Chinese-American Physics Professor at Temple University was dragged from his home in handcuffs accused of emailing design schematics for a pocket heater to a colleague in China.  This pocket heater is not the device you put in your coat pocket at chilly November football games but is a sensitive piece of equipment used in superconductor research.  Dr. Xiaoxing Xi, Chairman of the Physics Department, was arrested in front of his daughters, stripped of his professional position, and restricted from having any communications with anyone at Temple University. DOJ Press Release: http://www.justice.gov/usao-edpa/pr/university-professor-charged-wire-fraud-scheme.

Fast forward to last week…the government has dropped all charges against Dr. Xiaoxing Xi after finding out that the design schematics that they thought were for a pocket heater were actually for something else. Apparently, the prosecutors and FBI agents did not understand the design and jumped the gun when they saw the email with the blueprints. The US government is aggressively combating against outside and inside employees trying to steal government and corporate secrets…but that doesn’t excuse this.

Dr. Xi said this to the New York Times: I don’t expect them to understand everything I do. … But the fact that they don’t consult with experts and then charge me? Put my family through all this? Damage my reputation? They shouldn’t do this. This is not a joke. This is not a game.

Dr. Xi’s lawyer, according to the Times, went further and suggested that the prosecution targeted Dr. Xi because he was Chinese. If he was Canadian-American or French-American, or he was from the U.K., would this have ever even got on the government’s radar? I don’t think so.

It should also be noted that a similar case was dismissed a few months ago…seems that following the rules may not keep you out of trouble anymore if you are an American citizen of Chinses ancestry.

More Information: http://www.nytimes.com/2015/09/12/us/politics/us-drops-charges-that-professor-shared-technology-with-china.html?_r=4

Changes to DDTC Paper Applications

Tuesday, June 2nd, 2015 by Danielle McClellan

2015/06/02

By: Danielle McClellan

DDTC is in the process of modernizing its infrastructure; the newest change will directly impact paper applications. At this time, the ELLIE Net system allows users to track paper applications such as General Correspondence (GC) Letters and Applications for Permanent/Temporary Export or Temporary Import of Classified Defense Articles and Related Classified Technical Data (DSP-85). Going forward ELLIE Net will be retired and users will no longer have the ability to access the system to track their paper applications.

DDTC is urging users to include a valid email address on all paper applications so that DDTC can send an email with the application number to users. DDTC will use this transition period to work out any problems with the interim process.

Information:  http://www.pmddtc.state.gov/documents/WebNotice_PaperApplications.pdf

DDTC Migrates All External Systems to a New Platform

Monday, March 30th, 2015 by Brooke Driver

2015/03/30

By: Brooke Driver

Source: http://pmddtc.state.gov/

DDTC is modernizing its technology infrastructure, and migrating all external systems to a new platform. The migration will occur on Friday, April 17, 2015.

New versions of the DTrade DSP forms will be available from the DDTC web site on April 3, 2015. DS-2032 and DS-4076 form versions will remain unchanged. If you have any questions, please contact the DDTC Helpdesk at 202-663-2838 or dtradehelpdesk@state.gov

Following the migration, Users will be required to submit a DSP-85 for any amendment applications to License for Export/Import of Defense Articles that were previously submitted using a DSP-119. The Ellie system will be decommissioned as of Friday, April 17, 2015.

Industry users will see no functional changes to the remaining online applications. However, effective April 18, 2015, users will access DTrade, Electronic Forms Submission, and MARY using the following new URLs:

– DTrade Application: https://dtrade.pmddtc.state.gov
– Electronic Forms Submission for DS-2032 and DS-4076: https://efs.pmddtc.state.gov
– MARY status application: https://mary.pmddtc.state.gov/mary

BIS Revises Support Document Requirements for License Applications

Monday, March 30th, 2015 by Brooke Driver

2015/03/30

By: Brooke Driver

Effective March 13, 2015, the BIS has amended the EAR to streamline the support document requirements for license applications in part 748. Under the new rule, it is no longer necessary to obtain an International Import Certificate or Delivery Verification during the licensing process. The changes also limit the requirement to obtain a Statement by Ultimate Consignee and Purchaser to exports, reexports and transfers (in-country) of 600 Series Major Defense Equipment.

Commerce Department Tells Specific Exporters Not to Use STA for Arabsat

Monday, November 24th, 2014 by Brooke Driver

2014/11/24

By: John Black

Over the past month or so, the Bureau of Industry and Security in the US Department of Commerce has been sending letters to individual exporters informing them that they may not use License Exception STA to export for 9X515 items for use in the Arab Satellite Communications Organization (Arabsat) 6th Generation satellite project.  BIS sent the letters to individual addresses of specific exporters, and not necessarily to their corporate headquarters.  If a single location of your corporation received this notice, it should be passing the warning on to all other locations who could be involved in similar activities.

If your location received this letter, you would be well advised to share it with any other location of your corporation that may be dealing with Arabsat 6th Generation satellite.  Nothing in the letter says, after all, that it is applicable only to the location at the address at the top of the letter.

Venezuela Joins Russia and China in the EAR Military End Use (User) Controls Club

Monday, November 24th, 2014 by Brooke Driver

2014/11/24

By: John Black

The US Bureau of Industry and Security has added Venezuela to the list of countries subject to special military end-use (user) controls.  EAR 744.21 imposes controls on exports/reexports of certain ECCNs to “military end-uses” in the PRC.  744.21 imposes control on exports/reexports of certain ECCNs to “military end-uses” and “military end-users” in Russia.  Venezuela is now subject to the same rules that were already applicable to Russia, and which are broader than the rules applicable to the PRC, because the PRC rule does not prohibit delivery to “military end-users.”

An often overlooked critical aspect of the PRC, Russia and Venezuela rules are that they apply only uses that fall within the EAR definition of “military end-use” and only to users (for Russia and Venezuela only) military end-users” as defined in the EAR.  Many exporters make the mistake of assuming the rules use a common sense definition of military end-use and military end-user, but that is not the case.  For example, military end-use rules may apply in cases where you deliver to a manufacturer in China and the military end-user rule may apply in cases where you deliver items to the national police in Russia.  The other common mistake is that some people assume the rules are applicable to all EAR items, when, in fact, the rules apply only to those items identified in Supp. 2 to 744 of the EAR, which, for example, does not include EAR99 items.

“Military end use,” as defined in 744.21, includes delivery to activities involving the production of military items (on the USML, the Wassenaar Munitions List or in xx018 of 600 series ECCNs in the CCL), but does not include a complete ban on delivery to military entities, as it focuses on the nature of the end use, not on the end user.

The military end user rule for Russia and Venezuela is a complete ban on delivery of the items in Supp. 4 to “military end users,” which is defined to include national armed services (army, navy, marine, air force or coast guard), as well as the national guard and national police, government intelligence or reconnaissance organizations or any person or entity whose actions or functions are intended to support “military end uses” as defined in 744.21.

If you already have procedures in place to comply the long standing rules for China and the new rules for Russia, just update your procedures to apply to Venezuela the same procedures you use for Russia.  If you don’t have procedures for China or Russia, this Venezuela rule will spurn you to get something in place ASAP.

For more information go to: http://www.bis.doc.gov/index.php/regulations/federal-register-notices#79fr66288

Reexporting No License Required: The reexporter’s guide to determining US export license requirements in a reformed world

Wednesday, August 27th, 2014 by Brooke Driver

2014/08/27

By: Scott Gearity

— originally published in the World ECR…the journal of export controls and sanctions

This article is the third in a series of articles examining how U.S. export control reform impacts non-US firms. In this and future articles, we will introduce case studies in export control reform and identify answers to common questions.

The Case: Reexporting No License Required

There are many unpleasant aspects to applying the International Traffic in Arms Regulations (ITAR), but determining license requirements is not one of them. If an item is a defense article described by the U.S. Munitions List (USML), exporting it from the U.S. requires a Department of State license perhaps 99 percent of the time (with the remaining one percent permitted by exemption). Outside the U.S., where most ITAR exemptions are unavailable, the proportion of retransfers requiring specific authorization is probably even higher. The basic rule is simple – if the item is ITAR-controlled, expect to need a license. Simple, yes, but also quite burdensome.

Now, enter the Export Control Reform Initiative (ECR). How do the recent U.S. regulatory adjustments affect the license requirements applicable to reexports of items now subject to the Export Administration Regulations (EAR)?

To better understand the answer to this question, imagine a fictional Belgian aerospace and defense firm known as EuroAero. EuroAero has been working diligently with its suppliers to reclassify various U.S.-origin components in its inventory to reflect ECR changes. Among the recently reclassified items are the following:

Part No. Description ECCN
34507 fuel tank 9A610.x
43900 check valve 9A610.y.4
84366 armored truck 0A606.b.1

 

The business team is pursuing opportunities to sell these products in Canada, Poland and Qatar. The team needs to set customer expectations for lead times, and U.S. reexport license requirements are an important factor. Your assignment is to advise them as to which of these items may be shipped No License Required (NLR) to each of the three prospective destinations.

The response:

In contrast to ITAR-controlled defense articles, reexporters may ship many EAR-controlled items NLR. This is true even for items classified in some of the new 600 series Export Control Classification Numbers (ECCNs). The determination mainly depends on the item’s ECCN and the country of destination. NLR is not merely a statement that no specific, advance approval of the Bureau of Industry and Security (BIS) is necessary; it is a reexport authorization in and of itself on par with a BIS license or regulatory license exception.

First, consider the fuel tank classified in ECCN 9A610.x, a common classification for parts specially designed for a military aircraft, but which are not controlled on the USML. The “License Requirements” section of the ECCN tells us that items classified 9A610.x are controlled for four reasons – National Security (NS1), Regional Stability (RS1), Anti-terrorism (AT1) and United Nations (UN) Embargo. By cross-referencing the reasons for control against the EAR’s Commerce Country Chart, we learn that none of these reasons for control apply to Canada, but NS and RS are each applicable to Poland and Qatar. This fuel tank is eligible for NLR reexport to Canada, but not to Poland or Qatar. Parts described by ECCN 9A610.x are highly controlled. In fact, Canada is the only NLR-eligible destination.

The next part in EuroAero’s classification matrix is a check valve with an ECCN of 9A610.y.4. Despite sharing the same base ECCN as the fuel tank classified 9A610.x, the only applicable reason for control for the .y paragraph of ECCN 9A610 is AT1. Referring again to the Country Chart, we note that AT1 controls are inapplicable to all three of the countries of interest. Therefore, the check valve is NLR-eligible for shipment to Canada, Poland and Qatar.

Finally, there is the matter of the armored truck classified in ECCN 0A606.b.1. NS, RS, AT and UN reasons for control all apply to this truck. But, importantly, the NS and RS controls are each of the Column 2 variety, which do not apply to a much larger group of countries than the corresponding Column 1 controls. So the armored truck is eligible for NLR reexport to both Canada and Poland, but not to Qatar.

Three different items – all controlled by new 600 series ECCNs – and in each case subject to a different set of determinations for reexporting without a license.

It is important to remember that NLR eligibility does not necessarily mean that EuroAero can actually make the reexport NLR. Other factors, such as a problematic end-use or an ineligible end-user might intervene. Also beware other EAR restrictions which are not handled by the Country Chart, such as the blanket prohibition on the reexport of 600 series items (including those classified in a .y paragraph) to China.

US and EU Impose Economic Sanctions in Response to the Crisis in Ukraine

Tuesday, May 6th, 2014 by Brooke Driver

2014/05/06

By: A. Esslinger, L. Grove & L. Van Buren
(Source: Anita Esslinger, anita.esslinger@bryancave.com)

As part of the broad and ongoing international response to the crisis in Ukraine, the United States, the European Union and other countries have imposed or announced economic sanctions against persons involved in the crisis. While not explicit, the US sanctions include measures that will allow the United States to impose sanctions on persons that threaten peace and security in Ukraine, including those who are asserting governmental authority in the Crimean region. As yet, however, no person has been identified as a target of the sanctions. In contrast, the European Union’s sanctions specifically target former Ukrainian President Viktor Yanukovych and seventeen other members of his former regime, but at this time avoid targeting the Russian Federation.

Persons and entities that are engaging in business involving Ukraine and Russia should keep a close eye on these sanctions and future developments in order to comply with the law.

United States:

On March 6, President Obama signed an Executive Order imposing sanctions against and prohibiting entry into the United States by persons determined to be involved in the Ukrainian crisis. Persons targeted by these sanctions include those who (a) are involved in the breakdown of or threats to democratic processes or institutions, peace, security, stability, sovereignty, territorial integrity, or the proper disposition of assets in Ukraine; (b) have been determined “to have asserted governmental authority over any part or region of Ukraine without the authorization of the Government of Ukraine;” or (c) are either leaders of entities involved in such activities, have provided assistance or support for such activities or for a person sanctioned for such activities, or are owned or controlled by or acting on behalf of a person sanctioned for such activities.

Among other things, the Executive Order freezes sanctioned persons’ property and interests in property in, or that come into, the United States or that are in the control or possession of US persons (including persons in the United States, US citizens and permanent resident aliens, and US entities and their foreign branches). The Executive Order also prohibits the contribution or provision of funds, goods, or services by, to, or for the benefit of any sanctioned person-including donations of humanitarian articles-and the receipt of any funds, goods, or services from any sanctioned person.

The Executive Order does not yet list any person designated as a target of the sanctions. Administration officials have said that about a dozen persons are now subject to the travel ban although the list is being withheld for privacy reasons. Officials also have said that more people would be added to the travel ban over the coming days.

The United States had previously taken softer actions to protest Russia’s involvement with Ukraine, such as suspending trade, military, and multilateral engagement with Russia (including the G-8 summit). By including those asserting governmental authority over any part of Ukraine without the authority of the Ukrainian government the U.S. sanctions also target officials of Crimea who are cooperating with the Russian invasion. The Executive Order also provides the US Government sufficient latitude to designate officials of the Russian Federation who, in the US Government’s view, engage in such actions, threaten the peace or territorial integrity of Ukraine or provide material assistance for such activities.

US Secretary of State John Kerry has reportedly characterized the Executive Order as merely providing a tool. The US Congress is also considering legislation to deal with the crisis.

European Union:

On March 5, the Council of the European Union adopted a Regulation directly applicable in all the EU Member States, imposing sanctions against former Ukrainian president Viktor Yanukovych and seventeen other members of his former regime. Notably, these sanctions did not include any Russian nationals or entities. The former Ukrainian leaders are under investigation by the new Ukrainian government for embezzlement of state funds and the illegal transfer of those funds outside of Ukraine.

The Regulation applies with immediate effect. With limited exceptions, it requires funds and economic resources of the designated persons to be frozen and prohibits making available, directly or indirectly, funds or economic resources to or for the benefit of the designated persons. The term “economic resources” means all kinds of assets, including goods. Thus, supply of goods to designated persons is prohibited. The Regulation also requires certain reporting to competent authorities in the relevant EU Member States, such as with respect to information on accounts and amounts frozen in accordance with the Regulation.

The reach of the Regulation is broad, applying: 1) within the EU; 2) to individuals who are nationals of an EU member state, wherever located; 3) to all EU legal persons (companies and organizations incorporated or constituted under the laws of an EU member state), wherever they are in the world; and 4) to any legal person in respect of any business done in whole or in part within the EU.

Notably, while talk of travel and visa restrictions against the former regime was mentioned in previous European Council talks, no official announcement of such restrictions has yet been made, although they may be applied without public notice.

Meanwhile, the Council continued to meet in emergency session on March 6 and voted to suspend talks with Russia on a wide-ranging economic pact and a visa agreement. Further sanctions in line with the US asset freeze and travel ban aimed directly at Moscow will be held in reserve pending the outcome of diplomatic efforts.

Other Nations:

So far, the US remains the only nation to announce that it may impose sanctions against Russia. Several non-EU European nations, including Switzerland, Lichtenstein and Norway, have also announced asset freezes and travel bans on former Yanukovych regime members, but stopped short of sanctions on Russia. US neighbor Canada has also moved swiftly to follow the sanctions on the former Ukrainian president; but, although it has suspended participation in the Russian-Canadian Intergovernmental Economic Commission and recalled its ambassador to Russia, it too has taken no further steps against Russia.

Events in Ukraine continue to move quickly. Great vigilance is the order of the day.

Beware RWA: BIS Licenses Lack Flexibility of ITAR Agreements

Tuesday, December 31st, 2013 by Brooke Driver

2013/12/31

By: John Black

BIS is currently not allowing applications to exceed 70 end users (e.g., former ITAR agreement licensees and sublicensees) and items on its license applications. The SNAP-R application will not allow you to exceed that limit and if you try to go above 70 by naming additional parties or items in your letter of explanation, BIS will RWA your request with this notice:

“Regrettably, for the end users not identified on the actual license [applicant name omitted] will have to submit a second, completely separate license with the parties not identified in the initial license application. We apologize for the inconvenience; however, this is the guidance we are giving all applicants who encounter this same problem with multiple end users that will not ‘fit’ on the application.”

So, it looks like you will have to replace certain large TAAs and MLAs with multiple BIS licenses and keep track of multiple licenses and what you do under each with and for the different parties on each license. For example, instead of using an MLA for all 90 parties, you use license 1 to export data that is going to party A and license 2 to export data that is going to party B. With multiple licensees and sublicensees, keeping track will be a challenge.

We can all hope BIS changes this, so its approvals are at least as flexible as ITAR agreements.