Archive for the ‘Chemical & Biological Weapons’ Category

EAR Expands License Application Support Document Requirements for Hong Kong

Thursday, March 2nd, 2017 by Danielle McClellan

By: John Black

Effective April 19, 2017, the Bureau of Industry and Security (BIS) will  require persons planning on exporting and reexporting to Hong Kong any items subject to the Export Administration Regulations (EAR) and controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons to obtain, prior to the export or reexport, a copy of a Hong Kong import license or a written statement from the Hong Kong Government that such a license is not required.   The purpose of this change is to require that the Hong Kong Government issue an import license as an acknowledgement that sensitive EAR-controlled items are entering Hong Kong and as an agreement to prevent unauthorized reexport or transfer of those items to prohibited destinations.  Interestingly, the prohibited destination that most concerns the US is the People’s Republic of China (PRC).  The EAR treats Hong Kong as a separate “country” from the PRC even though the PRC, the United Nations, and nearly everybody else in the world considers Hong Kong to be part of the PRC because Hong Kong is part of the PRC.

Leaving behind the interesting point that the EAR treats Hong Kong as if it is not part of the PRC, there are a lot of details in this new rule.  In addition what was described above, this rule will also require persons planning on reexporting from Hong Kong any item subject to the EAR and controlled for NS, MT, NP column 1, or CB reasons to obtain a Hong Kong export license or a statement from Hong Kong government that such a license is not required. This final rule will be effective April 19, 2017.

The following amendments have been made:

  • In § 740.2, add paragraphs (a)(19) and (20) to read as follows:

(a) *  *  *

(19) The exporter or reexporter to Hong Kong of any item subject to the EAR and controlled on the CCL for NS, MT, NP Column 1, or CB reasons has not received one of the following with respect to the item:

(i) A copy of an import license issued to the Hong Kong importer by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be exported or reexported pursuant to that license exception for which a Hong Kong import license is required and that is valid on the date of the export or reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no import license is required to import into Hong Kong the item(s) to be exported or reexported. The statement may have been issued directly to the Hong Kong importer or it may be a written statement available to the general public. The statement may be used for more than one export or reexport to Hong Kong so long as it remains an accurate statement of Hong Kong law.

(20) The reexporter from Hong Kong of any item subject to the EAR controlled on the CCL for NS, MT, NP column 1, or CB reasons has not received one of the following with respect to the item:

(i) An export license issued by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be reexported pursuant to that license exception for which a Hong Kong export license is required and that is valid on the date of the reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no Hong Kong export license is required for the item(s) to be rexported.

The statement may have been issued directly to the Hong Kong reexporter or it may be a written statement available to the general public. The statement may be used for more than one reexport from Hong Kong so long as it remains an accurate statement of Hong Kong law.

  • 748.9(b) is amended by revising the section heading, revising paragraph (b) and all notes to paragraph (b), and adding two sentences to the end paragraph of (e)(1), to read as follows:

§ 748.9    Support documents for evaluation of foreign parties in license applications and/or for promoting compliance with license requirements.

(b) Requirements to obtain support documents for license applications. Unless an exception in paragraph (c) of this section applies, a support document is required for certain license applications for:

(1) The People’s Republic of China (PRC) other than the Hong Kong Special Administrative Region (see §§ 748.10 and 748.11(a)(2));

(2) ‘‘600 Series Major Defense Equipment’’ (see § 748.11);

(3) Firearms and related commodities to member countries of the Organization of American States (see § 748.12); and

(4) The Hong Kong Special Administrative Region of the People’s Republic of China (see § 748.13).

Note 1 to Paragraph (b): On a case-by-case basis, BIS may require license applicants to obtain a support document for any license application.

Note 2 to Paragraph (b): For End-Use Certificate requirements under the Chemical Weapons Convention see § 745.2 of the EAR.

*       *       *       *       *

(e) *  *  *

(1) *  *  * The documents issued by the Government of the Hong Kong Special Administrative region that are required pursuant to § 748.13 are not used to evaluate license applications. They must be obtained before shipment and need not be obtained before submitting a license application.

  • Redesignate § 748.13 as § 748.14 and add new § 748.13 to read as follows:

§ 748.13    Hong Kong import and export licenses.

(a) Requirement to obtain the document—(1) Exports and reexports to Hong Kong. An exporter or reexporter must obtain the documents described in paragraph (a)(1)(i) or (a)(1)(ii) of this section before using a license issued by BIS to export or reexport to Hong Kong any item subject to the EAR and controlled on the CCL for NS, MT, NP column 1, or CB reasons. Collectively, the documents issued by Hong Kong must cover all of the items to be exported or reexported pursuant to a license.

(i) A copy of an import license issued to the Hong Kong importer by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers the items to be exported or reexported pursuant to that BIS license for which a Hong Kong import license is required and that is valid on the date of the export or reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no import license is required to import into Hong Kong the item(s) to be exported or reexported to Hong Kong. The statement may have been issued directly to the Hong Kong importer or it may be a written statement available to the general public. The statement may be used for more than one export or reexport to Hong Kong so long as it remains an accurate statement of Hong Kong law.

(2) Reexports from Hong Kong. No license issued by BIS may be used to reexport from Hong Kong any item subject to the EAR controlled on the CCL for NS, MT, NP column 1, and/or CB reasons unless the reexporter has received either:

(i) An export license issued by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be rexported pursuant to that BIS license for which a Hong Kong export license is required and that is valid on the date of the reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no export license is required from Hong Kong for the item(s) to be reexported. The statement may have been issued directly to the Hong Kong reexporter or it may be a written statement available to the general public. The statement may be used for more than one reexport from Hong Kong so long as it remains an accurate statement of Hong Kong law.

(b) Recordkeeping. The documents required to be obtained by paragraph (a) of this section must be retained and made available to the U.S. Government upon request in accordance with part 762 of the EAR.

  • In § 762.2 remove the word ‘‘and’’ from the end of paragraph (b)(52); remove the period from the end of paragraph (b)(53) and add in its place a semicolon followed by the word ‘‘and’’; add paragraph (b)(54) to read as follows:

§ 762.2    Records to be retained.

*       *       *       *       *

(b) *  *  * (54) § 748.13, Certain Hong Kong import and export licenses.

 

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-19/pdf/2017-00446.pdf

Our License Expired Last Month and We Shipped Today: Our Penalty is Double the Value of the Export

Friday, November 2nd, 2012 by Danielle McClellan

By John Black

Times are tough.  Sometimes even an export valued at $14,000 may seem to be worth the risk of a violation.  (I personally prefer the math of committing violations on the $2. billion dollar order.)  Unfortunately, the US Government has at its disposal plenty of potential penalties and a willingness to impose them that can make that shipment after the license expired less than worthwhile.

Consider PhibroChem, who had a license to export sodium fluoride (classified as 1C350)  to a customer in Mexico.  The PhibroChem export license expired in December 2007.  In January, 2008, PhibroChem made a $14,000 export of sodium fluoride to the same customer in Mexico but it did not have a valid export license.  PhibroChem agreed to pay a $31,000 in a settlement agreement with the Commerce Department.  While $31,000 pales in comparison to the huge penalties we often talk about, it is notable that even though the chemicals went to a trusted recipient in a trusted country, the company’s penalty amount was more than twice the value of the export.  And the penalty amount does not include the likely significant amount PhibroChem paid in legal fees and administrative costs to enhance its compliance program.

(Sodium fluoride:  Is that the stuff in toothpaste?   I cannot imagine a toothpaste additive is a chemical weapons precursor, but it doesn’t surprise because I know the germs that cause cavities are nasty things because I have seen pictures of them in TV commercials.  I wonder if the government is on the lookout for a shipment of a million tubes of toothpaste to a terrorist cell that might try to extract the sodium fluoride to make a chemical weapon.)