Archive for the ‘Export License’ Category

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

Company Fined $301K for Exporting Thermal Imaging Cameras to Hong Kong, Colombia, Ecuador, El Salvador and Mexico

Thursday, March 2nd, 2017 by Danielle McClellan

By: Danielle McClellan

Milwaukee Electric Tool Corporation (Milwaukee Electric) of Brookfield, WI has settled with the Bureau of Industry and Security (BIS) on 25 charges of Engaging in Prohibited Conduct (764.2(a)). The company has agreed to pay a fine of $301,000 and will not be debarred.

Between April 2012 and May 2014 Milwaukee Electric exported thermal imaging cameras classified as 6A003.b.4 (controlled for NS and RS) to Hong Kong, Colombia, Ecuador, El Salvador and Mexico without obtaining the required Department of Commerce export licenses. The total value of all shipments was approximately $129,284…nearly half of the fine that the company will pay.

Settlement Agreement: https://efoia.bis.doc.gov/index.php/documents/export-violations/1099-e2489/file

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

BIS Announces Favorable Export License Approval Policy for India

Thursday, March 2nd, 2017 by Danielle McClellan

By: John Black

Effective January 19, 2017, the Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to put in place a favorable export license approval policy for military items destined for India.  BIS stated that it generally will approve license applications subject to national security controls or regional stability controls to implement state that the US commitments related to the US and India becoming Major Defense Partners (according to the India-US Joint Statement of June 7, 2016).

More specifically, the following amendments have been made:

  • PART 742
    • 742.4 is amended by adding paragraph (b)(8) to read as follows:

§ 742.4 National security.

(b) * * *

(8) For India, there is a general policy of approval for license applications to export, reexport, or transfer items, including ‘‘600 series’’ items, for civil or military end uses in India, for ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as such items are not for use in nuclear, ‘‘missile,’’ or chemical or biological weapons activities.

*       *       *       *       *

  • 742.6 is amended by adding paragraph (b)(7) to read as follows: § 742.6    Regional Stability.

(b) *  *  *

(7) For India, there is a general policy of approval for license applications to export, reexport, or transfer items, including ‘‘600 series’’ items, for civil or military end uses in India, for ultimate end use by the Government of India, for reexport to countries in Country Group A:5, or for return to the United States, so long as such items are not for use in nuclear, ‘‘missile,’’ or chemical or biological weapons activities.

  • PART 748
    • 748.15 is amended by revising paragraphs (a)(2) and (d) introductory text to read as follows:

§ 748.15    Authorization Validated End-User (VEU).

(a) *  *  *

(2) In evaluating an end user for eligibility under authorization VEU, the ERC will consider a range of information, including such factors as: The entity’s record of exclusive engagement in appropriate end-use activities; the entity’s compliance with U.S. export controls; the need for an on- site review prior to approval; the entity’s capability of complying with the requirements of authorization VEU; the entity’s agreement to on-site reviews by representatives of the U.S. Government to ensure adherence to the conditions of the VEU authorization; and the entity’s relationships with U.S. and foreign companies. In addition, when evaluating the eligibility of an end user, the ERC will consider the status of export controls and the support and adherence to multilateral export control regimes of the government of the eligible destination.

(d) End-use restrictions. Items obtained under authorization VEU in China may be used only for civil end uses and may not be used for any activities described in part 744 of the EAR. Items obtained under authorization VEU in India may be used for either civil or military end uses and may not be used for any activities described in part 744 of the EAR. Exports, reexports, or transfers made under authorization VEU may be made to an end user listed in Supplement No. 7 to this part only if the items will be consigned to and for use by the validated end user. Eligible end-users who obtain items under VEU may only:

*       *       *       *       *

Paragraph (7)(ii) of the section titled Required Information for Validated End-User Authorization Requests in Supplement No. 8 to part 748 is revised to read as follows:

Supplement No. 8 to Part 748— Information Required in Requests for Validated End-User (VEU) Authorization

* * * * *

Required Information for Validated End-User Authorization Requests

* * * * *

(7) * * *

(ii) Understands and will abide by all authorization VEU end-use restrictions, including the requirement that items received under authorization VEU will only be used for authorized end-uses and may not be used for any activities described in part 744 of the EAR;

* * * * *

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-19/pdf/2017-00439.pdf

Understanding Routed Export Transactions

Tuesday, January 31st, 2017 by Danielle McClellan

(Source: Global Reach Blog)

Routed export transactions are a much discussed topic.  Therefore, we are revisiting this blog topic to give some helpful tips on remaining compliant if you’re involved in a routed export transaction. We’ll also take a look at an example.  For those not familiar with routed export transactions, it is when the Foreign Principal Party in Interest (FPPI) directs the movement of the goods out of the U.S. and authorizes a U.S. agent to file the Electronic Export Information (EEI) on their behalf.

Below are some helpful tips to keep in mind: 

  • Communication is key!  Having conversations with all parties involved before the transaction occurs will make a difference in understanding roles and responsibilities to prevent filing errors in the Automated Export System (AES);
  • Refer to Sections 30.3(e), (e)(1) and (e)(2) of the Foreign Trade Regulations (FTR) for the definition and more information on the responsibilities of the parties involved in a routed transaction;
  • Utilize the Census Bureau resources; and
  • View sample templates for the power of attorney and written authorization on our website here or here.

Routed Export Transaction Example:

A U.S. Principal Party in Interest (USPPI) sells two paintings to a FPPI located in Italy.  Keep in mind, the USPPI is defined as the person or legal entity in the U.S. that receives the primary benefit, monetary or otherwise, from the transaction. The FPPI instructs the USPPI to send the paintings to an agent located in Florida.  The FPPI authorizes the agent to file the EEI in the AES on their behalf and ship the goods to Italy.  In this example, each party has important responsibilities that are outlined below.

FPPI

  • Provides the agent, who is authorized to file the EEI, with a power of attorney or written authorization, the authorization comes after the FPPI provides the POA or written authorization.

USPPI

  • Provides the agent with the data elements, such as Schedule B number, value, quantity, etc., specified in Section 30.3(e)(1) of the FTR.
  • Retains documentation to support the information provided to the authorized agent for five years from the date of export.
  • Requests a copy of the data elements that were filed in the AES and the power of attorney or written authorization.

Authorized Agent

  • Ensures that a power of attorney or written authorization is received from the FPPI.
  • Files the EEI in the AES.
  • Provides the Internal Transaction Number or exemption code if filing is not required to the carrier.
  • Retains documentation pertaining to the shipment for 5 years.
  • If requested, provides the USPPI with a copy of the USPPI data elements that were filed in the AES and the power of attorney or written authorization from the FPPI. For further questions, please contact the Trade Regulations Branch (TRB) at 1-800-549-0595, option 3 or email us at itmd.askregs@census.gov

Annotating an Export Shipment: Filing Citations, Exemption and Exclusion Legends

Tuesday, November 15th, 2016 by Danielle McClellan

(Source: Global Reach Blog)

The U.S. Census Bureau often receives questions on how to annotate commercial documents for export shipments to minimize potential delays at the port of export. In a previous blog on Filing Citations and Exemption Legends, we provided an overview of filing citations and exemption legends. In this blog, I would like to expand upon the information previously provided. We will discuss the use of exclusion legends and give a snap shot of the different types of citations and legends that must be clearly stated on the commercial loading documents.

Exclusion legends are used for shipments that fall outside the scope of the Foreign Trade Regulations (FTR). The types of shipments that are excluded from filing requirements are identified in Section 30.2(d) of the FTR.  It is important to remember that whether you are required to file the Electronic Export Information (EEI) or not, the correct annotation must be displayed on the commercial loading document or in a prominent location on the shipment package. Below is a snapshot describing the citations and legends that must be provided prior to exportation.

Citations / Legends Description Annotation
Proof of Filing Citation Parties to the transaction file the EEI and receive their Internal Transaction Number (ITN) before the exportation of the shipment. Automated Export System (AES) ITN. Example: AES X20160523777777
Postdeparture Citation Postdeparture approved U.S. Principal Party in Interest (USPPI) have the privilege of filing  EEI within five days after exportation rather than obtaining the ITN in advance. USPPI Filed: AESPOST followed by the USPPI ID and followed by the DATE OF EXPORT. Example: AESPOST   123456789 05/23/2016 Agent Filed:   AESPOST followed by the USPPI ID FILER ID and followed by the DATE OF EXPORT. Example:   AESPOST  123456789  – 987654321   05/23/2016
AES Downtime Filing Citation When the AES experiences a major failure, the AES Downtime Filing Citation is used in place of a proof of filing citation.  The downtime filing citation is not to be used when the filer’s system is down, experiencing delays or for shipments subject to the International Traffic in Arms Regulations. AESDOWN followed by the FILER ID and followed by DATE OF EXPORT. Example:   AESDOWN 123456789 05/23/2016
Exemption Legends These transactions are within the scope of the FTR, but certain details make them exempt from filing EEI in the AES. The exemptions are located in 30.36 – 30.40. Below are two of the most commonly used exemptions: Ø 30.36 Exemption for shipments destined to Canada. Ø 30.37(a) Exemption for shipments that are valued $2,500 or less per Schedule B. NO EEI followed by the corresponding   FTR Exemption. Example: NO EEI 30.37(a)
Exclusion Legends These transactions are outside the scope of the FTR and shall be excluded from filing EEI in the AES. Exclusions: Ø 30.2(d)(1) Good transiting the U.S. under U.S. Customs and Border Protection bond from one foreign country to another. NO EEI followed by the corresponding FTR Exclusion. Example: NO EEI 30.2(d)(1)
  Ø 30.2(d)(2) – Except Puerto Rico and the U.S. Virgin Islands, goods shipped from the U.S. territories and goods shipped between the U.S. and these territories do not require EEI filing. Ø 30.2(d)(3) Electronic transmissions and intangible transfers. Ø 30.2(d)(4) – Goods shipped to Guantanamo Bay Naval Base from the U.S., Puerto Rico, or the U.S. Virgin Islands and from Guantanamo Bay Naval Base to the U.S., Puerto Rico, or the U.S. Virgin Islands. Ø 30.2(d)(5) – Goods licensed by a federal agency where the country of ultimate destination is the U.S. or goods destined to international waters where the entity assuming control of the goods is a U.S. entity.  

Lebanon Company Fined $450,000 for Reexporting Items to Syria

Tuesday, November 15th, 2016 by Danielle McClellan

By: Danielle McClellan

Tecnoline SAL (Tecnoline )of Sin El Fil, Beirut, Lebanon pled guilty to 7 charges of Causing, Aiding, or Abetting a Violation of the Regulations and will pay a civil penalty of $450,000. Tecnoline reexported US-origin mass spectrometers, gas chromatographs and consumables, liquid chromatograph-mass spectrometer systems, and liquid chromatograph modules (ECCN 3A999), controlled for anti-terrorism reasons, to Syria. There is a long standing US Embargo against Syria which makes a BIS license required for all exports/reexports subject to the EAR with the only exception being food and certain medicines).

The items were manufactured by Agilent Technologies (Agilent), a US company, and Technoline was an authorized distributor and reseller of Agilent’s products. In 2004, Technoline signed an agreement with Agilent that acknowledged their awareness of US export control laws and regulations and agreed to comply with them as a reseller and distributor of controlled products. Between August 2009 and October 2010, Technoline negotiated price discounts on the items with Agilent and eventually ordered the items for the Syrian Government ministries or entities. Technoline falsely identified the ultimate destination of the items as being Iraq or Lebanon (BIS license not required) and on one or more occasions they failed to disclose the ultimate destination of the items. Agilent shipped the items to TEchnoline in Beirut, Lebanon via Agilent’s German subsidiary. Once Technoline received the items they transferred them to Syria, there they were installed at Syrian Government ministries within a month or so. There were never any authorizations from BIS to export the items from the US to Syria, or to reexport them from Germany to Syria.

View Order: https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1080-e2474/file

State/DDTC No Longer Accepts CJ Submission through EFS

Tuesday, November 15th, 2016 by Danielle McClellan

(Source: State/DDTC)

Effective Wednesday, November 16th at 5PM EST, The Department of State will no longer use the Electronic Form Submission (EFS) application to accept Commodity Jurisdiction (CJ) (DS-4076) applications. Beginning Monday, November 21st at 8AM EST users will submit CJ applications via the Defense Export Control and Compliance (DECCS) CJ application.