Archive for the ‘BIS’ Category

BIS Amends Country Chart and Various Missing Wassenaar Changes

Tuesday, January 19th, 2016 by Danielle McClellan

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

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

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

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

Friday, December 4th, 2015 by Danielle McClellan

By: Danielle McClellan

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

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

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

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

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

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

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

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

FOR FURTHER INFORMATION CONTACT:

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

BIS Posts Update 2015 Speeches and Presentations

Friday, December 4th, 2015 by Danielle McClellan

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

BIS Follows Suit with OFAC Changes and Adjusts EAR for the Cuba People

Thursday, October 1st, 2015 by Danielle McClellan

By: Danielle McClellan

Effective September 21, 2015 BIS amended the Export Administration Regulations (EAR) to expand the scope of License Exception Support for the Cuban People (SCP) and many other changes as noted below.  Although BIS made a wide range of changes, the changes did little to open up opportunities for most companies to do business in Cuba. See the full Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-09-21/pdf/2015-23495.pdf.

Expansion of License Exception Support for the Cuban People (SCP)

  • BIS revised EAR § 740.21(b) and (d)(1) to remove a requirement that items must be sold or donated when exported or reexported to authorized end-users in Cuba under License Exception Support for the Cuban People (SCP). Paragraph (b) authorizes certain exports and reexports to improve living conditions and support independent economic activity in Cuba. Paragraph (d)(1) authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban people. When License Exception SCP was created in January 2015, BIS included text regarding sales or donations in paragraphs (b) and (d)(1) to clarify that the provisions were not limited to exports and reexports of donated items. However, the construction of the sentences addressing sales or donations inadvertently precluded other types of exports and reexports intended to be covered under the license exception, such as those involving leased or loaned items. Consequently, BIS is removing the portions of paragraphs (b) and (d)(1) of License Exception SCP that refer to sales or donations of items to eliminate those unintended restrictions.
  • BIS revised paragraph (c)(2) of License Exception SCP to authorize certain temporary reexports to Cuba. Paragraph (c)(2) previously authorized certain temporary exports of items to Cuba from the United States for use in scientific, archeological, cultural, ecological, educational, historic preservation, or sporting activities, or in the traveler’s professional research. This change authorizes travelers departing the United States or a foreign country to temporarily export or reexport authorized items to Cuba for eligible end-uses. Additionally, this rule adds professional meetings to the list of eligible end-uses in paragraph (c)(2). This rule also introduces a requirement that the items remain under the traveler’s ‘‘effective control.’’ The existing EAR definition of effective control in § 772.1 applies to this use of the term. Eligible items continue to be limited to items subject to the EAR but not specified in any Export Control Classification Number (ECCN), i.e., EAR99) or controlled on the Commerce Control List (CCL) only for anti- terrorism reasons.
  • BIS added a new paragraph (d)(4) to  SCP to authorize exports and reexports of commodities and software to individuals and private sector entities in Cuba that will be used to develop software that will improve the free flow of information or that will support the private sector activities described in paragraph (b) of License Exception SCP.  The Cuban Government and Communist Party and certain officials thereof are designated as ineligible end users for commodities and software exported under paragraph (d)(4). Existing text in paragraph (d) limits the commodities and software authorized for export or reexport under this new paragraph (d)(4) to those that are either EAR99 or controlled on the CCL for anti- terrorism reasons only. For example, to qualify for export or reexport under new paragraph (d)(4), a general purpose software development kit must be either EAR99 or controlled in an ECCN where the only reason for control that applies to that kit is anti-terrorism and the kit’s use in Cuba must be to develop software that will improve the free flow of communication and/or that will support the private sector activities described in paragraph (b) of License Exception SCP.
  • BIS added a new paragraph (e) to License Exception SCP. Paragraph (e)(1) authorizes the export and reexport to Cuba of certain items for use by United States Persons (as defined in § 772.1 of the EAR) to establish, maintain, or operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the OFAC Cuban Assets Control Regulations (31 CFR 515.573). To be eligible for the exception under paragraph (e)(1), the end-users must be (1) entities organizing or conducting educational activities in Cuba authorized by OFAC pursuant to 31 CFR 515.565(a); (2) entities providing mail or parcel transmission services authorized by OFAC pursuant to 31 CFR 515.542(a) or providing cargo transportation services in connection with trade involving Cuba authorized by OFAC or exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (3) religious organizations engaging in religious activities in Cuba authorized by OFAC pursuant to 31 CFR 515.566; (4) persons engaged in transactions authorized by OFAC pursuant to 31 CFR 515.559(b); (5) persons that export or reexport items to Cuba that are exempt from the prohibitions of 31 CFR part 515 as specified in 31 CFR 515.206; (6) providers of travel services or carrier services authorized by OFAC pursuant to 31 CFR 515.572; or (7) persons that export or reexport to Cuba pursuant to a license issued by BIS or a license exception authorized by § 746.2(a)(1) of the EAR.
  • Items eligible for export and reexport to Cuba pursuant to paragraph (e)(1) of License Exception SCP are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.
  • Paragraph (e)(2) of License Exception SCP authorizes the export and reexport to Cuba of certain items for use by certain additional eligible end-users to establish, maintain, and operate a physical presence in Cuba. Any resulting payments associated with such a physical presence, such as lease payments, are permitted only to the extent authorized by § 515.573 of the Cuban Assets Control Regulations.  To be eligible for paragraph (e)(2), the end-users must be authorized by OFAC to provide telecommunications services and establish telecommunications facilities pursuant to 31 CFR 515.542(b)–(e) or to provide internet-based services pursuant to 31 CFR 515.578, including subsidiaries, branches, offices, joint ventures, franchises, and agency or other business relationships with any entity or individual who is a national of Cuba. The items authorized pursuant to paragraph (e)(2) are limited to those designated as EAR99 (i.e., items subject to the EAR but not specified in any ECCN) or controlled on the CCL only for anti-terrorism reasons.
  • Paragraph (e)(3) of SCP authorizes the export and reexport to Cuba of certain items to be given away for free as gifts for promotional purposes, such as pens, notepads, hats, and t-shirts. Items eligible for export or reexport to Cuba pursuant to paragraph (e)(3) are limited to those items of a type normally given away for free as gifts for promotional purposes that are designated as EAR99.
  • BIS is creating paragraph (e) of SCP to facilitate engagement between the U.S. and Cuban people; the free flow of information to, from, and among the Cuban people; and independent economic activity in Cuba generated by Cuba’s private sector.
  • This rule also creates new paragraph (f) to SCP to authorize certain temporary (not to exceed one year) exports and reexports to Cuba of EAR99 items and items controlled on the CCL only for anti- terrorism reasons. Paragraph (f) authorizes exports and reexports of the following:
  • Commodities and software as tools of trade for use by the exporters or employees of the exporters to install, service or repair items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign-origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Technology as tools of trade for use by certain persons for the installation, servicing or repair of items that are subject to the EAR and that have been exported or reexported to Cuba under a license or license exception, or foreign- origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Kits of replacement parts or components for items that have been exported or reexported to Cuba under a license or license exception, or foreign- origin items that are not subject to the EAR but are owned and used exclusively by individuals or private sector entities but not the Cuban Government, the Cuban Communist Party or certain officials thereof in Cuba;
  • Commodities and software for exhibition or demonstration at trade shows or to parties eligible to receive items under License Exception SCP; and
  • Containers that are necessary for shipment of commodities being exported or reexported to Cuba under a license or license exception; BIS is creating paragraph (f) of License Exception SCP to help support authorized travel and commerce.

Expansion of License Exception Consumer Communications Devices (CCD)

  • BIS revised EAR § 740.19(a) to remove references to sales or donations of eligible items authorized under License Exception CCD. License Exception CCD authorizes certain exports and reexports to improve the free flow of information to, from, and among the Cuban and Sudanese people. When BIS created CCD in September 2009 to authorize certain exports and reexports to Cuba, the license exception included a donation requirement. BIS revised License Exception CCD in January 2015 to authorize sales, in addition to donations, and to update the list of eligible items. (Sudan was added as an authorized destination in February 2015.) Instead of merely removing the word ‘‘donated’’ from paragraph (a) of License Exception CCD, the January 2015 revision added the phrase ‘‘either sold or’’ to that paragraph. That phrasing inadvertently precluded other types of exports and reexports intended to be authorized by the license exception, such as those involving leased or loaned items. Consequently, this rule removes phrase ‘‘either sold or donated’’ from paragraph (a) to eliminate that unintended restriction.

Availability of License Exception Aircraft, Vessels and Spacecraft (AVS)

  • BIS revised EAR § 746.2(a)(1)(x) to make paragraphs (b) and (d) of License Exception AVS available for Cuba.  BIS also amended EAR § 740.15(b) and (d) to add to License Exception AVS paragraphs (b)(4) and (d)(6) described below that apply only to Cuba.
  • Paragraph (b) of AVS authorizes certain exports and reexports of equipment and spare parts for permanent use on vessels and aircraft departing the United States. The paragraph also authorizes certain exports of ship and plane stores for use on board vessels and aircraft departing the United States. Paragraph (d) of AVS authorizes certain exports and reexports of vessels on temporary sojourn. Paragraph (a) of AVS, which authorizes certain exports and reexports of aircraft on temporary sojourn, was, prior to publication of this rule, available for Cuba.
  • BIS added a note to paragraph (a) prohibiting an aircraft exported or reexported to a country pursuant to that paragraph from remaining in that country for more than seven consecutive days before it departs for a country to which it may be exported without a license or the United States.
  • BIS added new paragraph (b)(4) to AVS to specify that the commodities eligible for export and reexport to Cuba pursuant to paragraph (b) are limited to those designated as EAR99 or controlled on the CCL only for anti-terrorism reasons.
  • Additionally, this rule adds new paragraph (d)(6) to License Exception AVS. Paragraph (d)(6) provides that only certain categories of vessels, when engaged in specified activities are eligible for the license exception when destined for Cuba. The types of vessels and activities eligible for temporary sojourn to Cuba are as follows.
  1. Cargo vessels for hire for use in the transportation of items.
  2. Passenger vessels for hire for use in the transportation of passengers and/ or items. Vessels used to transport both passengers and items to Cuba may transport automobiles only if the export or reexport of the automobiles has been authorized by a separate license issued by BIS (i.e., not authorized by license exception). The export or reexport to Cuba of personally owned vehicles is not normally necessary to support authorized travel. However, if the need arises, the exporter or reexporter may submit a license application to BIS for review pursuant to the licensing policy in § 746.2 of the EAR.
  3. Recreational vessels destined for Cuba that that are used in connection with travel authorized by the Department of the Treasury, Office of Foreign Assets Control (OFAC).
  • Finally, BIS added a note to paragraph (d) prohibiting a vessel exported or reexported to a country pursuant to that paragraph from remaining in that country for more than 14 consecutive days before it departs for a country to which it may be exported without a license or the United States.
  • BIS is making paragraphs (b) and (d) of AVS available for Cuba to help facilitate authorized travel and commerce. For clarity, BIS is adding notes to paragraphs (a) and (d) specifying the amount of time an aircraft or vessel exported or reexported to a country pursuant to the paragraphs may remain in that country. Previously, BIS interpreted paragraph (a) to authorize temporary sojourns consisting of only one overnight stay while in-country (see 57 FR 30899, July 13, 1992). BIS selected the time periods of seven days for aircraft and 14 days for vessels based on its experience in licensing aircraft and vessels for temporary sojourn to Cuba. The vast majority of such licenses were for stays of seven days or less for aircraft and 14 days or less for vessels.

New Licensing Policy for Civil Aviation Safety

  • BIS amended the licensing policy for Cuba in EAR § 746.2 to add a policy of case-by-case review of license applications for exports and reexports of items to ensure safety in civil aviation and safe operation of commercial passenger aircraft. Items that will be reviewed pursuant to this policy include aircraft parts and components related to safety of flight, weather observation stations, airport safety equipment, and commodities used for security screening of passengers. BIS is adding this licensing policy to support international aviation and passenger safety.

Scope of License Requirements for Deemed Exports and Reexports

  • This rule amends the license requirements for Cuba in § 746.2 of the EAR to specify that a license is required for the release of technology or source code on the CCL to Cuban nationals in the United States or a third country, but not for the deemed export or deemed reexport of technology or source code designated as EAR99.

Technical Corrections to License Exception Agricultural Commodities (AGR)

On July 22, 2015, BIS published a rule implementing the rescission of Cuba’s State Sponsor of Terrorism designation (80 FR 43314). Among other amendments, that rule removed Cuba from Country Group E:1, which changed the general de minimis level for Cuba from 10 to 25 percent. Although the rule made certain technical and conforming changes to the EAR, BIS overlooked references to the former 10 percent de minimis level in paragraph (b)(3) of License Exception Agricultural Commodities (AGR) in § 740.18 of the EAR. Consequently, this rule corrects the de minimis percentages referenced in paragraph (b)(3) of License

$500,000 Penalty for Illegal Pump Exports

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

Lewis Pumps Division d/b/a Weir Minerals Lewis Pumps (Envirotech) has been fined $500,000 for exporting globe, gate, and butterfly valves (ECCN 2B350) to China, Russia, and other illegal destinations without licenses. The charging letter indicates that between December 2007 and July 2011 the company exported these items on 32 occasions at an approximate value of $1.4 million.

The $500,000 fine isn’t as bad as it may seem. Envirotech must pay $150,000 up front and the remaining $350,000 will be suspended and waived after two years as long as the company doesn’t commit any violations during those two years. What may be much more painful than the $150,000 fine, the company has agreed to two audits of their export compliance program. The results of the audit must be submitted to the Department of Commerce. The first audit will cover the 12 month period prior to the Order (July 2015) and must be received by BIS no later than 3 months from the Order. That’s a quick turnaround for a comprehensive audit not to mention that the Order states that the audit will be, “substantial with the Export Management and Compliance Program (ECMP) sample audits module, and shall include an assessment of Envirotech’s compliance with the regulations.”

Order and Charging Letter: http://efoia.bis.doc.gov/index.php/component/docman/cat_view/18-export-violations/34-export-violations-2015?Itemid=

No More Oil from Yuzhno-Kirinskoye Field

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

The Bureau of Industry and Security (BIS) has added the Russian oil and gas field, the Yuzhno-Kirinskoye Field to the Entity List. This field is located in the Sea of Okhotsk and has been reported to contain substantial reserves of gas and oil. Due to this information the US Government has decided that exports, reexports, and transfers (in-country) of items subject to the EAR to Yuzhno-Kirinskoye will require a BIS license.

This field will be listed on the Entity List under the destination of Russia effective August 7, 2015. The rule will also change the following:

Clarify the introductory text of the Entity List to specify that the embargoes and other special controls part of the EAR is also used to add entities to the Entity List

  • The first sentence of the introductory text of the Entity List to add a reference to part 746. This clarification to the introductory text will make it clear that this Supplement lists certain entities subject to license requirements for specified items under this part 744 and part 746 of the EAR.

Change the Russian industry sector sanctions by clarifying the additional prohibition on those informed by BIS also includes end-uses that are within the scope of the Russian Industry sector sanctions.

  • In § 746.5 (Russian industry sector sanctions), this final rule revises the second sentence of paragraph (a)(2) for the additional prohibition on those informed by BIS to add the term ‘‘end- use’’ after the term ‘‘end-user.’’ This change clarifies that the additional prohibition described in this paragraph (a)(2), as part of the BIS ‘‘is informed’’ process, may be based on an end-user or end-use when BIS determines there is an unacceptable risk of use in, or diversion to, the activities specified in paragraph (a)(1) of this section in Russia. This clarification does not change the scope of § 746.5, but rather clarifies the cases in which BIS will use the ‘‘is informed’’ process to assist exporters, reexporters, and transferors to ‘‘know’’ when an export, reexport, or transfer (in-country) is subject to the license requirements specified in § 746.5.

Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-08-07/pdf/2015-19274.pdf

Commerce Implements Various Relaxations on Cuba—25% de Minimis Is the Biggest

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

The Bureau of Industry and Security has released a final rule effective July 22, 2015 that removes Cuba from Country Group E:1 (Supplement No. 1 to Part 740—Country Groups) and the anti-terrorism (AT) license requirements from Cuba which now makes Cuba eligible for a general 25% de minimis level and portions of four license exceptions (RPL, GOV, BAG, AVS). Finally…something is actually changing with the Regulations and Cuba! Don’t jump for joy just yet, there’s a big catch, Cuba is still subject to a comprehensive embargo and, as stated in Sec. 746.2(a) of the EAR, a license is still required to export or reexport to Cuba ANY ITEM subject to the EAR unless authorized by a license exception…including EAR99 items.

On May 29, 2015 the Secretary of State rescinded the designation of Cuba as a State Sponsor of Terrorism which is why the following changes are occurring.

Removal of Anti-Terrorism Controls and Text Associating Cuba With Terrorism This rule removes:

•The reference to ‘‘counter- terrorism’’ from the licensing policy that applies to certain exports intended to provide support for the Cuban people that appears in § 746.2(b)(4)(i) (which will be redesignated as § 746.2(b)(3)(i));

•§ 746.2(c), which identifies Cuba as a country whose government has repeatedly provided support for acts of international terrorism;

•The references to ‘‘terrorism’’ and ‘‘state sponsors of terrorism’’ from § 746.2(e), which describes the license requirements regarding Cuba of the U.S. Department of the Treasury, Office of Foreign Assets Control and the U.S. Department of State; and

•The word ‘‘Cuba’’ from the statements of anti-terrorism license requirements in Export Control Classification Numbers 1C350, 1C355, 1C395, 2A994, 2D994 and 2E994.

This rule also removes Cuba from the following provisions, which list countries that have been designated as State Sponsors of Terrorism or that have repeatedly supported acts of international terrorism: § 742.1(d); Supplement No. 2 to part 742, paragraphs (a) and (b)(1); § 750.4(b)(6)(i); and § 772.1, definition of ‘‘countries supporting international terrorism.’’ Finally, this rule removes Cuba from Country Group E:1—Terrorist Supporting Countries—in Supplement No. 1 to Part 740—Country Groups. However, Cuba remains in Country Group E:2—Unilateral embargo. Cuba also remains in Country Groups D:2, D:3, and D:5. Because country groups are used to specify the countries that are subject to certain provisions of the EAR, particularly license exceptions, and to impose certain restrictions, removal of Cuba from Country Group E:1 can have effects elsewhere in the EAR as will be discussed below.

Jurisdiction—Items That Are Subject to the EAR

The removal of Cuba from Country Group E:1 raises the de minimis level to 25 percent for most items destined for Cuba. Additionally, since Cuba is no longer in Country Group E:1, the 25 percent de minimis level now applies to certain foreign-made encryption items destined for Cuba that meet the criteria specified in § 734.4(b)(1)(iii) of the EAR. With the general increase in the de minimis level to 25 percent, paragraph (b)(3) of § 746.2, which described the circumstances under which BIS would favorable consider license applications for foreign made items containing an insubstantial proportion of U.S. origin content (i.e., not exceeding 20 percent), is no longer needed, so this rule removes that paragraph.

Foreign-made items destined for Cuba that incorporate U.S.-origin 9×515 or ‘‘600 series’’ including 600 Series .y content continue to be subject to the EAR regardless of the percentage of U.S.-origin content, i.e., there is no de minimis for these items when destined for Cuba. To maintain this exclusion with respect to Cuba, this rule adds Country Group E:2 to the list of destinations (Country Group E:1 and the People’s Republic of China) subject to that exclusion.

Items That Are the Direct Product of U.S.-Origin National Security Technology and Software:   The EAR controls certain foreign-made national security items that are the direct product of U.S.-origin national security technology and software. Such items are subject to the EAR (and require a license) if destined to a country in Country Group D:1 or E:1. This rule retains Cuba as one of the destinations that is subject to this requirement by adding Country Group E:2 to § 736.2(b)(3).

Provisions Impacted by Cuba’s Removal From County Group E:1

The provisions of License Exception Servicing and Replacement of Parts and Equipment (RPL), License Exception Governments (GOV), License Exception Baggage (BAG), and  License Exception Aircraft, Vessels and Spacecraft (AVS) contain restrictions that apply to countries in Country Group E:1 or to nationals of those countries. There will be some changes related to the restrictions that will no longer apply to Cuba or Cuban nationals as a result of Cuba’s removal from Country Group E:1.

Provisions Being Amended To Retain Existing Cuba-Related Requirements

Although Cuba is removed from Country Group E:1, Commerce added Cuba to Country Group E:2 so that Cuba is still subject to a comprehensive embargo and, as specified in § 746.2(a) of the EAR—this means a license is still required to export or reexport to Cuba any item subject to the EAR unless authorized by a license exception.

Written Assurance for License Exception Technology and Software Under Restriction (TSR)

The new rules add Country Group E:2 to D:1 and E:1 as the countries targeted by the TSR written assurance.

Supplement No. 2 to Part 748—Unique Application and Submission Requirements

Supplement No. 2 to Part 748 of the EAR describes information required to be included in license applications for certain specific situations. Paragraph (i)(2)(x) requires that technology intended to accompany any shipment to destinations in Country Group D:1 or E:1 be described in the application. Paragraph (o)(3)(i) requires applicants for licenses to export or reexport national security controlled technology to obtain a written assurance against transfer to destinations in Country Groups D:1 or E:1. This rule adds Country Group E:2 to both paragraphs to continue both requirements with respect to Cuba.

Export Clearance Requirements

Part 758 of the EAR describes certain export clearance requirements. Section 758.1(b)(1) makes the $2,500 threshold below which most exports need not be filed in the Automated Export System (AES) inapplicable for exports to Country Group E:1 by requiring such filing for exports to Country Group E:1 regardless of value. This rule retains that requirement for exports to Cuba by adding Country Group E:2 to § 758.1(b)(1). Section 758.2(b)(3) makes export to Country Group E:1 grounds for rejecting applications for post-departure filing in AES (i.e., authorization to file after the exporting carrier departs the port of export). This rule retains export to Cuba as a ground for rejection by adding Country Group E:2 to § 758.2(b)(3).

License Condition General Order for Conditions on Previously Approved Licenses

Commerce added General Order No. 3 to Supplement No. 1 to Part 736 of the EAR to continue all restrictions on transactions with Cuba or Cuban nationals, by reference to Country Group E:1, that are contained in licenses issued prior to July 22, 2015. Certain licenses issued by BIS contain conditions that restrict the export, reexport, or transfer (in-country) to State Sponsors of Terrorism and countries subject to unilateral embargo by reference to Country Group E:1. Many of those restrictions were intended to apply to Cuba, not only as a State Sponsor of Terrorism but also as a country subject to unilateral embargo. However, BIS did not always list both Country Groups E:1 and E:2 in license conditions because, at the time, doing so would have been redundant. This general order applies those conditions to Country Groups E:1 and E:2. Licensees who seek authorization for transactions that are affected by General Order No. 3, may submit license applications that refer to General Order No. 3 and explain the reason for the request in Block 24 of the application. All license applications involving Cuba are reviewed pursuant to the licensing policy in § 746.2(b) of the EAR.

ECCN 4A003

This rule adds a reference to Country Group E:2 to the note that immediately follows the control table in ECCN 4A003. That note states that except for destinations in Country Group E:1, no license is required for computers with an Adjusted Peak Performance not exceeding 8.0 weighted teraFLOPS. The addition of Country Group E:2 retains Cuba’s status as a destination for which a license is required.

Federal Register Notice: http://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17981.pdf

Company Fined $75,000 for Exports to End User of Entity List

Friday, September 11th, 2015 by Danielle McClellan

By: Danielle McClellan

Teledyne LeCroy, Inc. of Chestnut Ridge, NY has been charged with two violations of the Export Administration Regulations (EAR) and fined $75,000. On two separate occasions between January 27 and April 14, 2010 the company exported oscilloscopes (ECCN 3A292.d) to Beihang University of Aeronautics and Astronautics (BUAA) in Beijing without a license. BUAA was added to the Entity List on September 16, 2005 and Teledyne LeCroy was aware of this listing when they sold and exported the oscilloscopes.

Teledyne LeCroy not only failed to obtain a BIS license they also failed to file accurate Shipper’s Export Declarations which is no surprise, why would they indicate an ultimate consignee that is on the Entity List. The company was assessed a penalty of $75,000 for the two charges.

Charging Letter: http://efoia.bis.doc.gov/index.php/electronic-foia/index-of-documents/7-electronic-foia/227-export-violations