Archive for the ‘BIS’ Category

The Export Compliance Manual: One Size Does Not Fit All

Thursday, August 28th, 2014 by Brooke Driver

By: Stephen Wagner

You are so confused.

BIS Agents were in your office conducting an “industry outreach.”  They spoke with your export managers and scanned through your export records and training program materials.  However, when they reviewed your export compliance manual, they said that it was inadequate and that your company could face higher penalties because of it, if violations are found.

When your company created the manual three years ago, they precisely followed and used the outline and sample forms for export compliance manuals that were given by BIS on its own website.  Since you followed their forms to the letter, how can you be non-compliant?

Simply put: when it comes to export compliance manuals, one size does not fit all.

The Bureau of Industry and Security (BIS) (the Department of Commerce’s export control office) has developed and published “Compliance Guidelines: How to Develop an Effective Export Management and Compliance Program and Manual.”  Within the contents of this 145-page document, BIS delineates the “Key Elements” necessary for export compliance programs in general and, more specifically, the manuals that are supposed to capture the policies and procedures that underlie those programs.

Yet, as informative and helpful as these Compliance Guidelines can be, they are just that – guidelines.  BIS stresses the importance of customizing the contents of your compliance manual (and program) to reflect your company’s operational realities and meet your company’s specific needs.

For example, if your company sends its technicians (and their equipment) out to overseas clients and customers to perform training, maintenance, repairs and warranty replacements, your compliance manual should specifically address the controls you have put in place to safeguard – and license, when necessary – the equipment, software, technical drawings and knowledge that goes out with them.  While the BIS-provided manual outline addresses “Nuclear explosive activities” and end-use checks for “Certain Rocket Systems and Unmanned Air Vehicles,” those sections are probably irrelevant for most companies and can be omitted from the export compliance manual.

Your company needs to reevaluate your compliance manual to see if the manual does such things as:

  • capture the company’s current operations and work-flows,
  • provide standard operating procedures (SOPs) for compliance activities and safeguards during each step of the export process,
  • allocate specific compliance tasks to specific responsible personnel, and
  • involve all levels of the company from the senior executives responsible for operations all the way down to the people working the loading dock.

In addition, your compliance manual should contain features that are not even included in the BIS Guidelines.  For example, your manual could contain, if applicable, SOPs to identify and prevent foreign corrupt practices, such as improper payments to foreign government officials.  Also, every manual should have procedures on how to respond to enforcement activities such as investigations, subpoenas and an announced or unannounced “industry outreach,” which is just an enforcement action in disguise.

You can also think outside the box when it comes to an export compliance manual.  The “manual” does not have to be a three-ring binder on a bookshelf.  An effective manual can also be well-documented checks and balances that are integrated into your automated processes.  For example, when entering the “ship to” name on a packing list, a pop-up window can ask whether the employee has checked the consignee’s name against screening lists promulgated by the various export control agencies.  Many enterprise accounting, logistics, and inventory control solutions can incorporate such control features into company operations.

Most critically, your export compliance manual needs to be a living, breathing document.  A manual created three years ago that has sat on a shelf almost invariably is outdated.  The company must have procedures in place for reviewing and updating the compliance manual no less than annually.  Employees need to be trained on how to use the manual (and report needed corrections to SOPs).  Finally, the manual needs to be in harmony with – and accurately reflect – the overall export compliance program for the company.

The importance of having an up-to-date, dynamic export compliance manual cannot be underestimated.  As special agents from the BIS Office of Export Enforcement will tell you, having a current manual (as part of the overall compliance program) is accorded “great weight” by BIS as a mitigating factor in possible export penalties and sanctions.  In contrast, an out-of-date manual speaks of an export compliance program that probably is not being adequately implemented by a company.

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

Thursday, August 28th, 2014 by Brooke Driver

Source: AES Broadcast #2014060

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 for this month.


Fatal Error Response Code: 561

Narrative: DDTC License Number Unknown

Reason: The License Code/ License Exemption Code reported requires a Department of State/ Directorate of Defense Trade Controls (DDTC) license number, but the DDTC license number reported is unknown in AES.

Resolution: The DDTC license number reported must be valid in AES.

Verify the DDTC license number, correct and resubmit.


Fatal Error Response Code: 590

Narrative: Shipment Value Exceeds Available Value for License

Reason: The License Code/ License Exemption Code reported was DDTC S05 for a DSP-05 license, but the Value reported exceeds the value remaining on the license.

Resolution: The DSP-05 license has not been decremented because the Value reported exceeds the value amount remaining for that license.

Verify the Value, correct and resubmit.

For further assistance, contact the licensing agency. The Department of State/ Directorate of Defense Trade Controls / DDTC Help Desk can be reached on 202-663-2838.

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.