Archive for the ‘BIS’ Category

Potential Poster Child for Violating US Export Controls on Russia?: Flider Electronics’ Put on the U.S. Denial List for Shipments to Russia

Monday, April 27th, 2015 by Brooke Driver

By: Brooke Driver

BIS recently issued a temporary denial order suspending Californian-based Flider Electronics, LLC’s export privileges for 180 days, due to two of its officers’ illegal activities, who are accused of smuggling and money laundering.

BIS claims that the company exported items subject to the EAR to Russia without a license by transshipment through third countries, listing in AES filings Estonian and Finnish end-users who, in reality, acted as freight forwarders. In addition, BIS discovered no licensing history from the company of controlled U.S.-origin electronics to Russia.

BIS chose to issue the temporary denial order due to its belief that a violation of the EAR was “imminent in both time and degree of likelihood.”  This temporary denial leaves the door open for BIS to impose further penalties.

Russia likely is joining China and Iran at the top of the list of countries that will get you in the most trouble for violating US export or reexport controls.  The US Government is certainly looking for a more well-known company to be the “Don’t Let This Happen to You” poster child for violations of US trade controls on Russia.

BIS Revises Support Document Requirements for License Applications

Monday, March 30th, 2015 by Brooke Driver

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.

BIS Corrects Amendments that Shifted USML Cat. XI to CCL

Wednesday, February 4th, 2015 by Brooke Driver

By: Brooke Driver

Effective December 29, 2014, BIS corrected certain provisions of the EAR that were amended in 13 past final rules taking place between November 5, 2007 and October 14, 2014. The changes enact corrections meant to improve clarity and consistency in the regulations. The rule also addresses typographical errors included in the 13 final rules.

BIS Expands Microprocessor Military End-Use and End-User Control

Wednesday, February 4th, 2015 by Brooke Driver

By: Brooke Driver

On December 17, 2014, in an effort to accommodate technological advances, BIS revised the Export Administration Regulations (EAR) to amend  the microprocessor military end-use and end-user control in 744.14 of the EAR. The rule altered the scope of microprocessors subject to restriction.  The rule now prohibits exports, reexports or transfers (in-country) of:

  • Microprocessors (“microprocessor microcircuits,” “microcomputer microcircuits,” and microcontroller microcircuits having a processing speed of 5 GFLOPS or more and an arithmetic logic unit with an access width of 32 bit or more, including those incorporating “information security” functionality), or
  • Associated “software” and “technology” for the “production” or “development” of such microprocessors s.

The rule only applies to items destined to a “military end-use” or “military end-use” (see 744.17(d) for definitions) in Country Group D:1.

BIS said it amended the regulations to incorporate recent advances to microprocessor chips and to include related technology and software involved in the development and production of these products.

BIS Revises Six 600 Series ECCNs

Wednesday, February 4th, 2015 by Brooke Driver

By: Brooke Driver

A final rule came into effect December 30 that revises six Export Control Classification Numbers to accommodate a new ECCN, created July 1, 2014. This final rule revised the pertinent six ECCNs by clarifying that certain basic parts, components, accessories and attachments are not controlled by those ECCNs, but caught by the new ECCN. Likewise, the rule also removes controls on certain monolithic microwave integrated circuit power amplifiers and discrete microwave transistors and related technology, because these controls are outdated since the release of two other July 1 rules that provide controls on those items. Finally, the rule states how “specially designed” applies to printed circuit boards, populated circuit card assemblies and multichip modules to eliminate confusion.

BIS Slightly Tightens Controls on Hong Kong

Wednesday, February 4th, 2015 by Brooke Driver

By: John Black

In the December 23, 2014 Federal Register the Commerce Department revised the Export Administration Regulations to add export and reexport licensing requirements for certain items controlled for national security (NS) reasons.  Specially, items controlled for NS2 reasons are no longer eligible for export or reexport as No License Required (NLR) to Hong Kong.  The rule does not otherwise change Hong Kong’s eligibility for license exceptions, or change other aspects of the EAR controls on Hong Kong.  Items that are not eligible for NLR for Hong Kong still may qualify for export or reexport to Hong Kong under a license exception.

BIS Revises Controversial Controls on MMICs and Discrete Microwave Transistors

Wednesday, February 4th, 2015 by Brooke Driver

By: John Black

In the December 23, 2014, Federal Register the Bureau of Industry and Security (BIS) amended the EAR controls in 3A001 and 3A611 to address the controversial controls on microwave monolithic integrated circuits (MMIC) and discrete microwave transistors, and other items.  This rule change addresses a classic export control dilemma:  How should the US Government control items that have both sensitive military applications and non-sensitive commercial applications.  How should the US control radar used in both military and civil applications?  Where should the government draw the lines of control?

In the July 2014 USML and CCL military electronics changes, which entered into force on December 30, 2014, certain mimics and discrete microwave transistors (we will focus our conversation on these items to illustrate the issues) became subject to must stricter export controls because of US Government concerns about the sensitive military radar and other military applications for these items.  This change did not upset a lot of US companies because not many companies make these things, however, several US companies who manufacture these devices were quite unhappy with the change.  For starters, the items that they had long been selling under less stringent export controls were going to be subject to strict export controls under 3A611 which controls “military electronics.”  And nobody likes to have to get export licenses, especially for things that did not previously require licenses.

But there is much more to this story—More even than I will talk about here.  The MMICs and discrete microwave transistors are used in a wide range of non-sensitive applications such as cellular telephone communications, commercial satellite communications (e.g., direct individual access to internet via satellite, passenger aircraft access to satellite internet connections),  telecommunications test equipment and civilian maritime, air traffic and weather radar.  Unfortunately for manufacturers and exporters, the same devices also have very sensitive military applications in radar and other items.  You might say a classic dual-use item in the Wassenaar sense of the word.  (OK, you probably wouldn’t say that, but I am sure some people would.)

By putting the MMICs and discrete microwave transistors into 3A611, the Commerce Department made the export and reexport of the items to China require a license that would be subject to a presumption of denial.  This would prevent US manufacturers from selling these items for use in non-sensitive commercial communications equipment manufactured in China.  To make matters worse, some of the devices in question are available from non-US sources, for example, Singapore and Japan, who do not have the same extensive and restrictive export controls on these devices.  And adding icing on the matters worse cake, the European Union member countries are far behind schedule in implementing even the current Wassenaar agreed controls on electronics which are much less stringent than the new US 3A611 controls, so it is unlikely that the EU would implement controls following the US approach on these devices anytime soon, if ever.

Add up all those things that make matters worse, and we end of the sum of all worse matters, which equals China telecomm manufacturers buying the devices from non-US suppliers, increasing the prospect that US manufacturers end up sending their manufacturing know-how to other countries to have the formerly US items made abroad where the foreign made duplicates of the US devices would be subject to less stringent US controls, including no US controls on the foreign devices that are duplicates of US devices once they would be incorporated into foreign telecomm equipment.

Enter the Great US MIMIC Depression of 2015.

OK, well, the depression was narrowly avoided as the US Government  decided to modify its July 1 military electronics changes that would have entered into force December 30, by publishing in the December 23 Federal Register a change to the July 1 change.  Without getting into the important and complex details of the change to the change, what we more or less ended up with is a middle ground approach to control for these devices.  The devices largely will be classified as 3A001 and have the standard, flexible 3A001 licensing requirements when destined for civil telecommunications use.  For all other uses, the items will be subject to an export/reexport license requirement when destined for any country other than Canada.

And that is just the quick summary of the complicated and interesting situation.  This situation is a classic example of balancing national security concerns and economic concerns, a balancing act made more complex by the fact that national security concerns and economic concerns sometimes agree with each other and sometimes do not.  On the one hand, there are the national security concerns because of the highly sensitive military applications of the devices and the concerns that China and other countries could use these devices to strengthen their military capability and, thus, harm US national security.

On the other hand is the interest in keeping the US manufacturers of these advanced technology devices strong and thriving by not imposing controls that could cause them to lose market share vis-à-vis their non-US competitors while the availability of non-US sources means US controls would not prevent China and others from getting the devices anyway.  The classic analysis comes down to the fact that it is sometimes better to have US companies selling sensitive devices under a flexible level of US controls than having strict, unilateral US controls that foster the development of foreign sources of the sensitive items.  Foreign sources will sell free from any level of US controls and take money out of the hands of US suppliers.  Nobody in the US wins when that happens.

It supports US national security to have US companies excel in making devices such as these and having US companies profit from doing so will allow them to continue to develop new and better technologies to develop new and better devices for US military applications and commercial applications too.  That strengthens US national security.  And all of this is good for the US economy.

So, in a way, it all comes full circle:  Sometimes we can serve both national security interests and economic interests by having US companies who make sensitive and valuable technologies thrive while targeting our controls at those specific exports that could obviously and directly give the adversaries of the United States a military advantage.  Sometimes flexible controls are a win-win for national security and economic interests.

Kum-ba-ya my friend.    Kum-ba-ya.

Don’t miss Felice Laird’s Export Controls on Electronic Components, Telecom & Infosec: 2015 Update Webinar which will cover this topic.

Commerce Predicts the Future: Possible 2015 Changes to EAR

Wednesday, February 4th, 2015 by Brooke Driver

By: Brooke Driver

Recently, the Department of Commerce released its semiannual regulatory agenda, which lists a number of possible changes to the regulations that would affect international trade in the next year, including a final rule (possibly releasing this month) amending the Foreign Trade Regulations to reflect changes related to the implementation of the International Trade Data System, a final rule reinstating export filing exemptions for temporary exports and a final rule amending the microprocessor military end use and end user controls by expanding the scope of microprocessor chips and include related software and technology for the development and production of these chips. For the full list of possible 2015 changes to the regulations, see the semiannual regulatory agenda.

US Relaxes Export Controls on India: Bayonets, Shields and Pepper Spray No Longer Require a License

Wednesday, February 4th, 2015 by Brooke Driver

By: John Black

In the January 23, 2015 Federal Register the Commerce Department revised the Export Administration Regulations (EAR) to reduce US export controls on exports and reexports to India of certain items on the Commerce Control List controlled for regional stability and crime control reasons.  Despite the hoopla and the pageantry of the “US-India Bilateral Understanding,” the impact of this relaxation is focused on a relatively small group of products.

Specifically, the regional stability RS 2 and crime control CC 1 and CC 3 license requirements no longer apply to exports and reexports to India.  Here are some examples of items now eligible for export and reexport to India as no license required:

  • 0A918 Bayonets
  • 0A979 Police helmets and shields
  • 1A984 Tear gas, pepper spray, smoke bombs
  • 0A984 Shotguns with barrels over 18 inches and related items
  • 0A987 Optical sighting devices
  • 3A980 Voice print analysis equipment
  • 3A981 Polygraphs
  • 6A002 police infrared viewers
  • 0A606.b Unarmed military vehicles derived from commercial vehicles
  • 1A004.d Explosive detection equipment
  • 2A293 Explosive or detonator detection equipment
  • 2A294 Concealed object detection equipment
  • 6A002.c police infrared viewers
  • 6A003 certain cameras

New Export Clearance Requirements:  Before you have the party for your license-free million dollar export of bayonets, shields, pepper spray and smoke bombs to India, make sure you note that the EAR has new special rules related AES filing and destination control statements.

Specifically, 758.1(b)(9) requires that you always  file your Electronic Export Information through the Automated Export System for all RS2, CC1 and CC2 exports to India even though such exports no longer require an export license.

BIS Announces Significant Amendments to Cuba Sanctions

Wednesday, February 4th, 2015 by Brooke Driver


On December 17, 2014 the President announced a set of diplomatic and economic changes to chart a new course in U.S. relations with Cuba and to further engage and empower the Cuban people. The U.S. Department of the Treasury and the U.S. Department of Commerce today are announcing the forthcoming publication of the revised Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), which implement the changes announced on December 17 to the sanctions administered by Treasury’s Office of Foreign Assets Control (OFAC) and Commerce’s Bureau of Industry and Security (BIS). The changes take effect tomorrow, when the regulations are published in the Federal Register.

These measures will facilitate travel to Cuba for authorized purposes, facilitate the provision by travel agents and airlines of authorized travel services and the forwarding by certain entities of authorized remittances, raise the limits on and generally authorize certain categories of remittances to Cuba, allow U.S. financial institutions to open correspondent accounts at Cuban financial institutions to facilitate the processing of authorized transactions, authorize certain transactions with Cuban nationals located outside of Cuba, and allow a number of other activities related to, among other areas, telecommunications, financial services, trade, and shipping. Persons must comply with all provisions of the revised regulations; violations of the terms and conditions could result in penalties under U.S. law.

To see the Treasury regulations, which can be found at 31 Code of Federal Regulations (CFR), part 515, please see here. To see the Commerce regulations, which can be found at 15 CFR parts 730-774, please see here. The regulations will be effective as of Friday, January 16. Major elements of the changes in the revised regulations include:

Travel –

  • In all 12 existing categories of authorized travel, travel previously authorized by specific license will be authorized by general license, subject to appropriate conditions.  This means that individuals who meet the conditions laid out in the regulations will not need to apply for a license to travel to Cuba.
  • These categories are: family visits; official business of the U.S. government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain authorized export transactions.
  • The per diem rate previously imposed on authorized travelers will no longer apply, and there is no specific dollar limit on authorized expenses. Authorized travelers will be allowed to engage in transactions ordinarily incident to travel within Cuba, including payment of living expenses and the acquisition in Cuba of goods for personal consumption there.
  • Additionally, travelers will now be allowed to use U.S. credit and debit cards in Cuba.

Travel and Carrier Services

  • Travel agents and airlines will be authorized to provide authorized travel and air carrier services without the need for a specific license from OFAC.

Insurance –

  • U.S. insurers will be authorized to provide coverage for global health, life, or travel insurance policies for individuals ordinarily resident in a third country who travel to or within Cuba. Health, life, and travel insurance-related services will continue to be permitted for authorized U.S. travelers to Cuba.

Importation of Goods

  • Authorized U.S. travelers to Cuba will be allowed to import up to $400 worth of goods acquired in Cuba for personal use. This includes no more than $100 of alcohol or tobacco products.

Telecommunications –

  • In order to better provide efficient and adequate telecommunications services between the United States and Cuba, a new OFAC general license will facilitate the establishment of commercial telecommunications facilities linking third countries and Cuba and in Cuba.
  • The commercial export of certain items that will contribute to the ability of the Cuban people to communicate with people within Cuba, in the United States, and the rest of the world will be authorized under a new Commerce license exception (Support for the Cuban People (SCP)) without requiring a license. This will include the commercial sale of certain consumer communications devices, related software, applications, hardware, and services, and items for the establishment and update of communications-related systems.
  • Additional services incident to internet-based communications and related to certain exportations and reexportations of communications items will also be authorized by OFAC general license.

Consumer Communications Devices –

  • Commercial sales, as well as donations, of the export and reexport of consumer communications devices that enable the flow of information to from and among the Cuban peoplesuch as personal computers, mobile phones, televisions, memory devices, recording devices, and consumer software – will be authorized under Commerce’s Consumer Communication Devices (CCD) license exception instead of requiring licenses.

Financial Services

  • Depository institutions will be permitted to open and maintain correspondent accounts at a financial institution that is a national of Cuba to facilitate the processing of authorized transactions.
  • U.S. financial institutions will be authorized to enroll merchants and process credit and debit card transactions for travel-related and other transactions consistent with section 515.560 of the CACR. These measures will improve the speed and efficiency of authorized payments between the United States and Cuba.

Remittances –

  • The limits on generally licensed remittances to Cuban nationals other than certain prohibited Cuban Government and Cuban Communist Party officials will be increased from $500 to $2,000 per quarter.
  • Certain remittances to Cuban nationals for humanitarian projects, support for the Cuban people, or development of private businesses will be generally authorized without limitation. These general licenses will allow remittances for humanitarian projects in or related to Cuba that are designed to directly benefit the Cuban people; to support the Cuban people through activities of recognized human rights organizations, independent organizations designed to promote a rapid, peaceful transition to democracy, and activities of individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba; and to support the development of private businesses, including small farms.
  • Authorized travelers will be allowed to carry with them to Cuba $10,000 in total family remittances, periodic remittances, remittances to religious organizations in Cuba, and remittances to students in Cuba pursuant to an educational license.
  • Under an expanded general license, banking institutions, including U.S.-registered brokers or dealers in securities and U.S.-registered money transmitters, will be permitted to process authorized remittances to Cuba without having to apply for a specific license.

Third-Country Effects

  • U.S.-owned or -controlled entities in third countries, including banks, will be authorized to provide goods and services to an individual Cuban national located outside of Cuba, provided the transaction does not involve a commercial exportation of goods or services to or from Cuba.
  • OFAC will generally authorize the unblocking of accounts of Cuban nationals who have permanently relocated outside of Cuba.
  • OFAC is issuing a general license that will authorize transactions related to third-country conferences attended by Cuban nationals.
  • In addition, a general license will authorize foreign vessels to enter the United States after engaging in certain trade with Cuba.

Small Business Growth –

  • Certain micro-financing projects and entrepreneurial and business training, such as for private business and agricultural operations, will be authorized.
  • Also, commercial imports of certain independent Cuban entrepreneur-produced goods and services, as determined by the State Department on a list to be published on its website, will be authorized.

“Cash in Advance” –

  • The regulatory interpretation of “cash in advance” is being redefined from “cash before shipment” to “cash before transfer of title to, and control of,” the exported items to allow expanded financing of authorized trade with Cuba.

Supporting Diplomatic Relations and USG Official Business –

  • The President announced the reestablishment of diplomatic relations with Cuba. To facilitate that process, OFAC is adding a general license authorizing transactions with Cuban official missions and their employees in the United States.
  • In addition, in an effort to support important U.S. government interests, an expanded general license will authorize Cuba-related transactions by employees, grantees, and contractors of the U.S. government, foreign governments, and certain international organizations in their official capacities.

Support for the Cuban People –

  • Exports and reexports to provide support for the Cuban people in three areas:  improving living conditions and supporting independent economic activity; strengthening civil society; and improving communications – will be eligible under Commerce’s SCP license exception.
  • To improve living conditions and support independent economic activity, SCP will authorize: (1) building materials, equipment, and tools for use by the private sector to construct or renovate privately-owned buildings, including privately-owned residences, businesses, places of worship, and building for private sector social or recreational use; (2) tools and equipment for private agricultural activity; and (3) tools, equipment, supplies, and instruments for use by private sector entrepreneurs.
  • To strengthen civil society, SCP will authorize export and reexport of donated items and temporary export and reexport by travelers to Cuba of items for use in scientific, archaeological, cultural, ecological, educational, historic preservation, or sporting activities. SCP will also authorize exports and reexports to human rights organizations, individuals, or non-governmental organizations that promote independent activity intended to strengthen civil society.
  • Travelers will also be able to export temporarily items for use in professional research in the traveler’s profession or full time field of study under SCP. The activities or research must not be related to items on the United States Munitions List or items controlled for sensitive reasons on the Commerce Control List.
  • To improve communications, SCP will authorize exports and reexports of items for use by news media personnel and U.S. news bureaus.
  • SCP will not authorize the export of items on the Commerce Control List for sensitive reasons such as national security, nuclear proliferation, regional stability, missile technology, and other reasons of similar sensitivity.

Gift Parcels –

  • Consolidated shipments of gift parcels will be eligible for the same Commerce license exception that authorizes individual gift parcels.

Liberalizing License Application Review Policy –

  • Commerce will set forth a general policy of approval for applications to export or reexport items necessary for the environmental protection or enhancement of U.S. and international air and water quality or coastlines (including items that enhance environmental quality through energy efficiency).