Archive for the ‘Export License’ Category

Miltech, Inc. of Northampton, MA Receives 18 Charges of Alleged Export Violations

Wednesday, November 15th, 2017 by Danielle McClellan

By: Ashleigh Foor

On September 25, 2017, Miltech, Inc. of Northampton, MA was charged a civil penalty of $230,000 due to engaging in conduct prohibited by the EAR when it exported items subject to the EAR from the United States to China and Russia without the required BIS Licenses. On eighteen separate occasions between, on, or around October 14, 2011 and July 14, 2014, Miltech exported active multiplier chains, items classified under Export Control Classification Number (“ECCN”) 3A001.b.4 and valued in total at approximately $364,947, without seeking or obtaining the licenses required for these exports pursuant to section 742.4 of the EAR. These items are controlled on national security and anti-terrorism grounds.

Miltech received 18 charges of 15 C.F.R. § 764.2(a) for engaging in prohibited conduct. $180,000 of the $230,000 penalty must be paid within 30 days, and the remaining $50,000 will be suspended and waived after two years if Miltech fulfills the terms of its settlement agreement and this order.  The company will not be debarred if penalty is paid as agreed and Miltech complies with other terms of this settlement.

Automated Commercial Environment Export Reports… What’s New?

Monday, October 16th, 2017 by Danielle McClellan

(Source: Global Reach Blog)

With more than 128,000 Automated Commercial Environment (ACE) export reports run since deployment mid-2015 and more than 6,762 reports run during the month of June 2017 alone, it’s evident that the trade community is using the export reports feature in ACE, and its popularity is ever increasing.

We received a lot of positive feedback and information on ACE Export Reports by EIN that helped us improve the utility of the feature, as well as enhance our training resources library.

Customer feedback continues to shape the way we do business. The following examples help illustrate the updates prompted and informed by such customer feedback:

  • The available data elements have been updated to include the Country of Ultimate Destination.
  • U.S. Customs and Border Protection (CBP) created 11 short topic-based export reports training videos available in the ACE Portal and on the CBP website.
  • A webinar and Q&A on ACE Export Reports was conducted in mid-December 2016 and subsequently an updated version of that webinar that was conducted in July 2017 and may be viewed online now for on-demand viewing and training needs.
  • The Notice of Proposed Rulemaking effective in July 2017 added additional data elements (the Internal Transaction Number, filer name and date of export) to the AES 203 (Agent-Filed Routed) Report to make this report useful. This data is now also searchable by filing date and export date.

These are just a few of the ways that you’ve helped us more effectively help you. We realize that users are exploring the export reports feature in ACE. We want to empower our users to utilize all of the available functionality.

And, here are just a few reminders:

  • The three available reports include: AES 201 (Filer), AES 202 U.S. Principal Party in Interest (USPPI) and AES 203 (Agent-Filed Routed).
  • The AES 201 and AES 202 will initially return a smaller universe of data elements (25). Learn how to add or remove data elements by watching the “Modifying Report Queries” video available on the CBP Export Reports resource page and in the Training Resources area in the ACE Portal.
  • The AES 203 report will only return the handful of data elements that are authorized by the Foreign Trade Regulations. ACE Importer accounts automatically have access to export reports for Employer Identification Numbers (EINs) already vetted by CBP on the import side. ACE Exporter accounts must be vetted by the U.S. Census Bureau.

Exporters are able to run comprehensive reports based on their EIN and review the Electronic Export Information that has been filed internally and externally. Authorized agents are able to run reports across the universe of filings they have transmitted, as well as run individual reports at the client level. The benefits of having this type of on-demand access is revolutionary to the export compliance landscape and gives the trade community a powerful auditing capability. We highly recommend that you obtain authorization to access reports if you have not done so already, and if you have access, to explore the functionality that is available to you.

Until the next update, happy reporting!

P.S. There is even a “Late Filing Indicator” data element that can be added to customized reports … how beneficial is that to your compliance pursuit?

US Citizen CEO Sentenced to 57 Months in Prison for Conspiring to Export Specialty Metals to Iran

Monday, October 16th, 2017 by Danielle McClellan

By: Ashleigh Foor

On Friday, September 8, 2017, Erdal Kuyumcu, a US citizen and the chief executive officer of Global Metallurgy, LLC, based in Woodside, New York, was sentenced to 57 months in prison for conspiring to export specialty metals to Iran. The sentencing took place at the federal courthouse in Brooklyn, New York and proceedings held before Chief United States District Judge Dora L. Irizarry. In June 14, 2016, Kuyumcu plead guilty to conspiracy to violate the International Emergency Economic Powers Act by exporting specialty metals from the United States to Iran.

According to court documents, Kuyumcu conspired to export from the United States to Iran a metallic powder primarily composed of cobalt and nickel, without having obtained the required license from the US Treasury Department’s Office of Foreign Assets Control (OFAC). It was determined after a two-day presentencing evidentiary hearing that the metallic powder has potential military and nuclear uses. In order to prevent nuclear proliferation and terrorism, the US Department of Commerce requires a license to export and exporting without the required license is illegal.

In addition, Kuyumcu and others planned to obtain more than 1,000 pounds of the metallic powder from a US-based supplier, and hid the true destination of the goods by having it shipped first to Turkey and then to Iran. Coded language was used to keep this all secret, for instance, referring to Iran as the “neighbor.”  Once a shipment was sent from Turkey to Iran, a steel company in Iran would send a letter-sized package to Kuyumcu’s Turkey-based co-conspirator.

The Iranian steel company had the same address as an OFAC-designated Iranian entity under the Weapons of Mass Destruction proliferators’ sanctions program that was associated with Iran’s nuclear and ballistic missile programs.

BIS Implements Updates to Improve SNAP-R for License Application Submissions

Monday, October 16th, 2017 by Danielle McClellan

By: Ashleigh Foor

Per the request of the export controls industry, BIS has designed new updates for the Single Network Application Process-Redesign (SNAP-R), BIS’s electronic system for the submission of license applications, commodity classification requests, License Exception AGR notifications, and License Exception STA eligibility requests. This will be the first in a series of updates meant to make SNAP­-­R more user-friendly and efficient. Additional updates will be implemented in the future.

Included in the new updates is the introduction of security questions. Before this update, SNAP-R users would have to request assistance from SNAP-R account administrators or BIS to reset login IDs and passwords and to receive a reminder of their company identification number (CIN). Starting now, all new SNAP-R registrants will be required to provide answers to four of ten security questions as part of the registration process. Moving forward, the security questions put into place will identify and help users retrieve information on their own. Existing users will be prompted to choose security questions and answers at their next login.

Other changes include:

  • Work Item Reference Numbers: SNAP-R account holders are no longer limited to the previously required format (i.e., AAA####) for Work Item reference numbers.
  • Line Item Value Calculation: When listing the information for an export item on a license application, SNAP-R account holders can now choose to calculate the value of the item by multiplying the unit value by the quantity of items or to enter the total price of the item independent of the item’s quantity and unit value.

Other SNAP-R Features: Did you know that SNAP-R:

  • Can be used on browsers other than Internet Explorer®?
  • Has a spell check function?
  • Allows a previously created Work Item (e.g., a license application) to be used again when preparing a new Work Item for submission?

The SNAP-R manual has been revised and updated to incorporate the changes above as well as to clarify the tools available to SNAP-R system users. (https://www.bis.doc.gov/snap-r-updates)

CSE Global Limited and CSE TransTel Pte. Ltd. Pay Settlement for Apparent Violations Involving Iranian Companies

Monday, October 16th, 2017 by Danielle McClellan

By: Ashleigh Foor

A solely-owned subsidiary of CSE Global Limited (an international technology group), CSE TransTel Pte. Ltd., appears to have violated § 1705 (a) of IEEPA and § 560.203 of the ITSR and has agreed to pay a $12,027,066 settlement for the apparent 104 violations of the International Emergency Economic Powers Act 1 (IEEPA) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). The apparent violations occurred on or around June 4, 2012 through March 27, 2013 when TransTel appears to have involved at least six different financial institutions in the unauthorized exportation or re-exportation of services from the United States to Iran, a prohibition of § 560.204 of the ITSR.

OFAC concluded that TransTel did not voluntarily make known these apparent violations, which OFAC found to be grounds for a serious case. The maximum and base civil monetary penalty for the apparent violations was $38,181,161.

TransTel first signed contracts with and received purchase orders from Iranian companies starting August 25, 2010 through November 5, 2011. The purchase orders were for multiple energy projects taking place in Iran and/or Iranian territory. In order to carry out the orders to deliver and install telecommunications equipment, TransTel hired several Iranian companies to deliver these goods and services on its behalf.

Preceding these interactions with Iranian companies, CSE Global and TransTel opened separate Singapore bank accounts (the “Bank”). Then-Managing Director and CSE Global’s then-Group Chief Executive Officer signed and sent a letter titled “Sanctions – Letter of Undertaking” to the Bank with the following statement: “In consideration of [the Bank] agreeing to continue providing banking services in Singapore to our company, we, CSE TransTel Pte. Ltd … hereby undertake not to route any transactions related to Iran through [the Bank], whether in Singapore or elsewhere.”  The Bank continued to provide financial services to the company after receiving the Letter of Undertaking and around June 2012, less than two months after the Letter of Undertaking was delivered, TransTel began transferring USD funds related to its Iranian business.

On or around the dates of June 4, 2012 to March 27, 2013 Transtel appears to have violated § 1705 (a) of IEEPA and/or § 560.203 of the ITSR when it initiated 104 USD wire transfers totaling more than $11,111,000 involving Iran. Transfers from the Bank went to several different third-party contacts including Iranian vendors. There was never any mention of Iran, the Iranian projects, or any Iranian parties on documentations involved in these transactions.

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors:

(1) TransTel willfully and recklessly caused apparent violations of U.S. economic sanctions by engaging in, and systematically obfuscating, conduct it knew to be prohibited, including by materially misrepresenting to its bank that it would not route Iran-related business through the bank’s branch in Singapore or elsewhere, and by engaging in a pattern or practice that lasted for 10 months;

(2) TransTel’s then-senior management had actual knowledge of – and played an active role in – the conduct underlying the apparent violations;

(3) TransTel’s actions conveyed significant economic benefit to Iran and/or persons on OFAC’s List of Specially Designated Nationals and Blocked Persons by processing dozens of transactions through the U.S. financial system that totaled $11,111,812 and benefited Iran’s oil, gas, and power industries; and

(4) TransTel is a commercially sophisticated company that engages in business in multiple countries.

 

OFAC considered the following to be mitigating factors:

(1) TransTel has not received a penalty notice, Finding of Violation, or cautionary letter from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations;

(2) TransTel and CSE Global have undertaken remedial steps to ensure compliance with U.S. sanctions programs; and

(3) TransTel and CSE Global provided substantial cooperation during the course of OFAC’s investigation, including by submitting detailed information to OFAC in an organized manner, and responding to several inquiries in a complete and timely fashion.

This enforcement action reflects compliance obligations for all companies that conduct business in OFAC-sanctioned jurisdictions or process transactions through or related in any way to the United States. Prior to signing agreement letters, representatives should be certain they and their company are willing and able to abide by rules set forth.

Cryomech Charged for Illegal Export to Russian Company on Entity List

Wednesday, July 19th, 2017 by Danielle McClellan

By: Ashleigh Foor

Cryomech, Inc. of Syracuse, NY has received a charge involving its exports of  an LNP-20 Liquid Nitrogen Plant, an item classified as EAR99 in the EAR, from the United States to the All-Russian Scientific Research Institute of Experimental Physics (VNIIEF) a.k.a Russian Federal Nuclear Center-VNIIEF (RFNC-VNIIEF) in Sarov, Russia. Cryomech shipped this item, valued at $33,587, without the required BIS License on or around August 16, 2012. On June 9, 2017 the company received a civil penalty of $28,000 as well as an order to hire an unaffiliated third-party consultant with expertise in U.S. export control laws to complete an external audit of its entire export controls compliance program. Cryomech will not be debarred if penalty is paid and audit is completed with results submitted.

Settlement Documents: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1114-e2501/file

Export and Recordkeeping Violations Nets $700,000 Fine for Axis Communications

Wednesday, July 19th, 2017 by Danielle McClellan

By: Ashleigh Foor

On June 9, 2017 a total of 15 charges were brought against Chelmsford, MA company, Axis Communications, Inc, resulting in a $700,000 fine and a thorough audit of its entire export controls compliance program.

Thirteen of the charges were from exporting thermal imaging cameras without the required licenses on, around, or between the dates of March 16, 2011 and July 15, 2013. Axis exported thermal imaging cameras controlled by the Export Administration Regulations (EAR) from the United States to Mexico. Valued at $391,819, these exports required export license. Thermal imaging cameras, classified under Export Control Classification Number 6A003.b.4, are controlled for national security and regional stability reasons.

Axis also received two charges for failing to comply with EAR recordkeeping requirements. In mid-June of 2013, when these thermal imaging cameras were being shipped from the United States to Mexico, Axis allegedly did not keep the required documents and invoices connected to these exports. The EAR requires companies to retain these transaction documents. Axis’ failure to do so, in addition to its thirteen charges of exporting without a required license, resulted in a civil penalty of $700,000 and an order to undergo an external audit of the company’s export controls compliance program. Axis was required to hire an unaffiliated third-party consultant with an expertise in U.S. export control laws to conduct the audit. The order, given June 9, 2017, stated the company would be put on an export denial list unless fine is paid as arranged and audit is completed with results submitted.

Pay the Government on Time…or Pay Even Sooner

Thursday, May 11th, 2017 by Danielle McClellan

By: Danielle McClellan

In September 2015, Streit USA Armoring, LLC entered into a Settlement Agreement with the Bureau of Industry and Security (BIS) that imposed a civil penalty of $1.6 million ($850 million in installment payments and $750,000 suspended). The company violated the regulations after it reexported armored vehicles to Iraq, Nigeria, and the Philippines. Full article available at http://learnexportcompliance.bluekeyblogs.com/2015/10/01/bis-nails-mid-and-high-level-company-officials-but-not-export-administrator-in-addition-to-company/.

During settlement negotiations Streit USA specifically sought for the ability to pay the $850,000 in installment payment of $170,000. Under this plan, the company was required to make all payments on time; it was found that their November 2016 payment was not made in a timely fashion so the Final Order has been amended to move the due date forward for the final two remaining payments. Streit USA will now owe its final payment son May 2017 and September 2017 compared to the original June 2017 and January 2018.

Amended Order: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1111-e2498/file

Chinese National Pleads Guilty to Attempting to Export “Bananas”

Thursday, May 11th, 2017 by Danielle McClellan

By: Danielle McClellan

For the past 6 years, 53 year old Fuyi Sun has attempted to purchase carbon fiber for the Chinese military (according to court records). A few years ago Sun contacted what he thought was a US company that distributed carbon fiber, but was, in fact, an undercover entity created by Homeland Security Investigations (HSI) and staffed by undercover agents. The company, “UC Company,” was asked by Sun to supply M60 Carbon Fiber which is a high-grade carbon fiber that is used in sophisticated aerospace and defense applications, specifically for drones and other government defense applications. M60 Carbon Fiber requires a license for export to China for nuclear non-proliferation and anti-terrorism reasons.

During the course of the relationship between UC Company and Sun, he often suggested various security measures they should take to make sure they would both remain protected from the “U.S. Intelligence.” He instructed the undercover agents to use the word “banana” instead of “carbon fiber” in all communications…he inquired about purchasing 450 kilograms of banana in one email. He also instructed agents to remove identifying barcodes for the carbon fiber, prior to transshipment,  and instructed them to identify it as “acrylic fiber” in customs documentation.

On April 11, 2016, Sun traveled from China to New York to purchase the M60 Carbon Fiber from UC Company. On April 11th and 12th Sun met with undercover agents and suggested to them that the Chinese military was the ultimate end-user for the carbon fiber, he also explained that he personally worked in the Chinese missile program. He further asserted that he had a close relationship with the Chinese military, and would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. He agreed to purchase two cases of the carbon fiber on the 12th from UC Company and provided them with $23,000 in cash for the carbon fiber and then provided an additional $2,000 as compensation for the risk that he believed they were taking to illegally export the carbon fiber to China without a license. Sun was arrested the next day.

Sun pled guilty to attempting to violate the International Emergency Economic Powers Act (IEEPA), which carries a maximum sentence of 20 years in prison. The maximum sentence in this case will be prescribed by Congress. Sun will be sentenced on July 26, 2017.

Details: https://www.justice.gov/opa/pr/chinese-national-pleads-guilty-attempting-illegally-export-high-grade-carbon-fiber-china

Florida Company Fined $27 Million for 150 Intentional EAR Violations

Thursday, March 30th, 2017 by Danielle McClellan

By: Danielle McClellan

Access USA Shipping, LLC (Access) of Sarasota, Florida was charged with 150 violations beginning in April 2011 and spanning to February 2013. The company went out of its way to conceal the fact that foreign customers were purchasing products through them without their US merchants knowing who the end users of their items were. Access mis-described, undervalued, and destroyed and/or altered export control documents to conceal the illegal exports. They also made sure that their foreign customers had a direct employee to order through to avoid any export scrutiny. They went as far as allowing foreign customers to send “wish lists” to Access employees who would then purchase the products from their US merchants with US credit cards and PayPal accounts in the name of Eric Baird, Access’s founder and then-owner and CEO or cards opened in the name of the employee making the order. The foreign customer would then reimburse Access or the employee; there were even situations when the shipments were delivered to the homes of Access employees to ensure that the US merchants would not become suspicious of the order and the end user.

Access also exported (or attempted to) items classified as ECCN 0A987 which are controlled for Crime Control reasons to Argentina, Austria, Hong Kong, Indonesia, Libya, South Africa, and Sweden without a BIS export license. It was also found that the company exported (or attempted to) items classified as ECCN 5A990 and controlled for anti-terrorism reasons as well as EAR99 items to Transsphere Oy, a company on the Entity List.

The company is ordered to pay $10 million right away and the other $17 million will be suspended for two years and waived if the company does not commit any violations during the two year probationary period.

Charging Letter: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1102-e2490/file