Archive for the ‘BIS’ Category

UAE Freight Forwarder Pays $125,000 Penalty for Exports and Reexports of Monitoring Devices to Syria

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

In May, BIS announced that Aramex Emirates, LLC, based in Dubai, has settled for $125,000 to resolve the charges against it. BIS claims that in December of 2010 and February of 2011, Aramex facilitated the export or reexport of unlicensed network devices and software to Syria via the U.A.E. Under Secretary of Commerce, Eric L. Hirschhorn explained the importance of controlling the related items in announcing the settlement:

“Today’s settlement shows the importance of compliance with U.S. law by foreign freight forwarders handling items subject to U.S. export controls…The items in question could be used by the Syrian government to monitor internet activity and block pro-democracy websites as part of its brutal crackdown against the Syrian people.”

The case against Aramex strengthened significantly when it was discovered that the company’s cargo system team, including employees directly involved in carrying out the illegal transactions had been specifically informed of U.S. sanctions against Syria and advised to avoid U.S. shipments to Syria in the 2009 company-wide circular “Exporting U.S.-made Products to Countries Under the U.S.A. Trade Ban.”

Although BIS pursued action against Aramex, due to its seemingly purposeful violations of U.S. customs law, BIS reduced the demanded penalty to reflect the complete cooperation it received during its investigation.

Commerce/Census: “Tips on How to Resolve AES Fatal Errors”

Wednesday, July 16th, 2014 by Brooke Driver

Source: AES Broadcast #2014044, May 19, 2014

When a shipment is filed to the AES, a system response message is generated and indicates whether the shipment has been accepted or rejected. If the shipment is accepted, the AES filer receives an Internal Transaction Number (ITN) as confirmation. However, if the shipment is rejected, a Fatal Error notification is received.

To help you resolve AES Fatal Errors, here are some tips on how to correct the most frequent errors that were generated in AES this month.

Fatal Error Response Code: 515

Narrative: ECCN Must Be Formatted NANNN
Reason: The Export Control Classification Number is not reported in the correct format.
Resolution: The Export Control Classification Number must be formatted as NANNN where N is a numeric character and A is an alpha character, except when EAR99 is reported.
Verify the Export Control Classification Number, correct the shipment and resubmit.

Fatal Error Response Code: 643

Narrative: Quantity 2 Must Be Greater Than Zero
Reason: The Schedule B/HTS number reported requires a Quantity 2 to be reported and the Quantity (2) is missing or reported as zero.
Resolution: When the Schedule B/HTS number reported requires a Quantity 2, Quantity 2 must be greater than zero.
Verify the Quantity 2, correct and resubmit. Quantity (2) must be greater than zero.

For a complete list of Fatal Error Response Codes, their reasons, and resolutions, see Appendix A – Commodity Filing Response Messages.

It is important that AES filers correct Fatal Errors as soon as they are received in order to comply with the Foreign Trade Regulations. These errors must be corrected prior to export for shipments filed predeparture and as soon as possible for shipments filed postdeparture, but not later than ten calendar days after departure.

For further information or questions, contact the U.S. Census Bureau’s AES Branch.
Telephone: (800) 549-0595, select option 1 for AES
Email: askaes@census.gov
Online: www.census.gov/trade
Blog: blogs.census.gov/globalreach

Commerce Amends Missile Technology Control Sections of EAR

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

On May 21, BIS announced a final rule that went into effect May 27, 2014. This rule adjusts aspects of the EAR, 15 CFR Parts 772 and 774 based on changes to the Missile Technology Control Regime (MTCR) Annex signed off by MTCR member countries at the October 2013 Plenary meeting in Rome and at the 2013 Technical Experts Meeting in Bonn, Germany. The rule revises eight ECCNs: 1B102, 1B117, 1D001, 1D018, 1D101, 6A107, 9A101, and 9B106. BIS also added new ECCN 9A102 to control turboprop engine systems (plus parts and related items) specially designed for items controlled in 9A012 for MT reasons and having a maximum power great than 10kW. BIS also revised the definitions of “payload” and “repeatability.” For more information, click here.

Fokker Forks Over $10.5 Million for Illegal Shipments to Iran and Sudan

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

The US Bureau of Industry and Security (BIS) again showed its resolve to impose significant penalties when it took down Netherlands-based aerospace services provider Fokker Services B.V. BIS charged the company with a whopping 253 separate violations of the EAR, and the egregious nature of the charges drew special attention from other branches of the U.S. government. Fokker Services, a subsidiary of Fokker Technologies Holding B.V., repeatedly participated in the export and reexport of aircraft parts, technology and related services to Iran and Sudan, activities that are controlled under the EAR for national security and antiterrorism purposes. Even worse, Fokker Services seems to have dealt knowingly with Iranian military end users and systematically avoid U.S. customs law by concealing the final destination of the transactions.

Due to the gravity of the case, the OEE was joined by the Department of Justice, the Department of the Treasury’s Office of Foreign Assets Control, the Federal Bureau of Investigation, the Defense Criminal Investigative Service and Homeland Security in investigating Fokker Service’s activities and arriving at a corresponding punishment. The Under Secretary of Commerce Eric L. Hirschhorn explained in a press release the importance of the case:

“The scope of today’s global settlement with Fokker Services highlights the egregious nature of the violations and points to the commitment of OEE to pursue and prosecute those responsible no matter where they are located…OEE and our partner law enforcement colleagues will continue to use all means available to ensure that U.S. technology does not fall into the wrong hands.”

Bass Pro Fined for Illegal Rifle Scope Exports

Wednesday, July 16th, 2014 by Brooke Driver

By: John Black

What? Bass Pro Shops, the favorite store for all my redneck buddies and family members got busted for sending scopes to the Chinese Communists? What in the world can be next?

BIS announced on the 10th of June that it has settled with the outdoors retail giant Bass Pro over its nine alleged violations of the Export Administration Regulations. According to BIS, during the period between June 2, 2010 and June 29, 2011, Bass Pro exported controlled optical sighting devices with a total value of $3,513 to end users in Canada, China and Cyprus without first attaining the necessary licensure. These items are controlled for Firearms Conventions reasons when exporting to Canada and Crime Control reasons when exporting to the two other countries.

Although the total amount of the shipments was fairly low, BIS has decided to enforce a $25,000 penalty, likely due to the number of countries involved in the illegal transactions.

Western Advanced Engineering Company Settles for Illegal Export of Prepreg Machine Worth $825,215

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

BIS announced its settlement agreement with Western Advanced Engineering Company this June 12th. Western Advanced seems to have gotten off fairly easily considering the high value of the illegal shipment in question. According to BIS, the company exported a 24” Hot Melt Prepreg Machine for Uni-directional Tape—an item with an $825,215 value—to Spain, in violation of the EAR Section 742.5 (Missile Technology). Surprisingly, at this point, BIS has not required a monetary penalty—or enforced any penalty, really.

The only consequence for Western Advanced, in fact, is a three year probationary period. If another violation occurs during that time, however, the company will be included on the denied parties list for a period of three years.

Oil Services & Trading, Inc. Fined $250,000 for Violating Iranian Transactions Regulations

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

On April 7, BIS announced its decision to settle with Texas-based Oil Services & Trading, Inc. (OSAT) over its violations of the EAR and Iranian Transactions Regulations. The charge is specifically listed as “acting with knowledge of a violation.” BIS states that between the dates of January 14, 2006 and February 23, 2008, OSAT sold or transferred various controlled oil and gas equipment parts to Iran via the United Arab Emirates.

BIS felt that the severe consequences of a probationary debarment and $250,000 fine were appropriate considering that OSAT knowingly violated the regulations; U.S. law enforcement agents made multiple outreach visits and contacts regarding the licensing process for embargoed countries (including Iran) between the years of 2000 and 2007. The oil company also purposefully concealed from the U.S. government the ultimate destination of the products, listing instead the United Arab Emirates as the end point.

BIS, however, is not without mercy. Assuming OSAT pays its fine in a timely manner and does not violate any more embargo controls in the next five years, BIS will waive the five-year debarment period.

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

Friday, May 23rd, 2014 by Brooke Driver

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

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

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

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

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

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

 

 

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

Tuesday, May 6th, 2014 by Brooke Driver

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.

BIS Settles with Ansell and Comasec for Attempted Transshipment of Industrial-Strength Gloves to Iran through UAE

Thursday, March 13th, 2014 by Brooke Driver

By: Brooke Driver

Well, folks, here’s yet another case of the consequences of defying U.S. embargoes. BIS has announced that it has reached a settlement agreement with Ansell Protective Products Inc. of New Jersey and Comasec of Gennevilliers, France. Specifically, Ansell was charged with two counts of engaging in prohibited conduct by exporting items to Iran without the required license and two counts of evasion, while Comasec was charged with two counts of causing, aiding or abetting and two counts of evasion. Between June 27, 2008 and September 19, 2008, Ansell entered into business with French company Comasec SAS and agreed to export 35,000 pairs of Nitrotough N115 and Blue Nitrile industrial-strength gloves with a total value of $43,500 to Comasec’s client Zhabeh Safety Co. of Tehran, Iran. To avoid the U.S. embargo, Ansell and Comasec chose to first ship the items to the UAE, where they would then be transferred to their final destination in Iran. The scheme was thwarted in March of 2009, when the violation was discovered and the items seized by CBP.

The two companies were certainly smart to settle, rather than go to court over these charges, as the investigation had uncovered a significant amount of evidence of both companies’ conscious efforts to continue with the transaction despite the U.S. sanction. The evidence ranged from invoices that explicitly stated the end user’s location in Iran to emails between Ansell and Comasec expressing their knowledge of the U.S. embargo against Iran and detailing their plan for avoiding the restrictive U.S. law. Considering the amount and gravity of the evidence, in fact, BIS’ settlement of a $190,000 fine for each company is surprisingly lenient.

Of course, the relatively low value of the items involved certainly played a role in determining the appropriate payment, but Ansell’s and Comasec’s blatant disregard for U.S. regulations seems to merit a more severe consequence. All the same, the case certainly proves the point yet again that it is never worth the cost to engage in business with an embargoed country and that BIS is cracking down on those that do.