Archive for the ‘Telecommunication’ Category

BIS EAR Licensing Requirements for EAR-Controlled Items Destined to ISIL-Controlled Facilities or Territory

Wednesday, April 6th, 2016 by Danielle McClellan

(Source: Commerce/BIS)

BIS prohibits the shipment of items subject to the Export Administration Regulations (EAR) to the Islamic State of Iraq and the Levant (ISIL) absent a license in conjunction with regulations administered by the Department of the Treasury’s Office of Foreign Assets Control (OFAC). OFAC has designated ISIL as a Specially Designated Global Terrorist (SDGT) and the Department of State has designated ISIL as a Foreign Terrorist Organization (FTO).

As part of its efforts against ISIL, the U.S. Government is targeting not only ISIL’s abilities to raise revenue but also its purchase and use of U.S.-origin items.  BIS is committed to preventing ISIL from procuring U.S.-origin items, like oilfield equipment, that generate wealth as well as components useful for improvised explosive devices to support terrorist activities.  Our goal is to provide industry with information on potential diversion risks to safeguard the export, reexport, and transfer (in-country) of U.S.-origin items and protect national security.

ISIL controls facilities located in the areas which it controls and uses the facilities to generate revenue; some of these facilities require U.S.-origin parts and accessories to operate.  A list of ISIL-controlled facilities in Iraq and the addresses thereof is incorporated into Attachment A of this notice (see below).  BIS advises persons exporting or reexporting U.S.-origin items to Iraq to review Attachment A on a regular basis; it will be updated as necessary.  BIS also reminds persons exporting or reexporting U.S.-origin items to Syria of the existing license requirements for all items subject to the EAR, other than food or medicine classified as EAR99.  The full text of BIS’s licensing requirements and policy specific to Syria is found here.

Exporters/reexporters are advised that sanctions administered by other agencies, including those administered by OFAC, may also impact transactions in the region.  Exporters/reexporters should note that U.S. entities/persons are generally prohibited from engaging in activities with any entities/persons who are on the OFAC administered Specially Designated Nationals and Blocked Persons List.

Pursuant to Section 744.12  of the EAR, BIS requires a license for the export or reexport to an SDGT of any item subject to the EAR.  However, to avoid duplication, U.S. persons are not required to seek authorization for an export or reexport to an SDGT of an item that is subject to both the EAR and OFAC’s regulatory authority from both OFAC and BIS.  Rather, if OFAC authorizes an export from the United States or an export or reexport by a U.S. person to an SDGT, no separate authorization from BIS is necessary.  However, U.S. persons must seek authorization from BIS for the export or reexport to an SDGT of any item subject to the EAR that is not subject to OFAC’s jurisdiction and non-U.S. persons must seek authorization from BIS for any export from abroad or reexport of any item subject to the EAR to an SDGT.  BIS will generally review license applications for exports or reexports to SDGTs under a policy of denial.  No license exceptions or other BIS authorizations are available for the export or reexport to an SDGT of an item subject to the EAR.   Additionally, the EAR does not make contract sanctity available for export or reexport license applications to SDGTs.

BIS’s license requirements for shipments of items subject to the EAR to FTOs are found in Section 744.14 of the EAR.  Note especially the guidance in Section 744.14(e), which is specific to FTOs that are also designated as Specially Designated Terrorists (SDTs) or SDGTs, and directs that the guidance specific to SDTs or SDGTs, as applicable, will apply instead.

BIS also notes that an export, reexport, or transfer (in-country) to geographic areas controlled by ISIL carries a “red flag” and suggests that you exercise caution and strong oversight if you opt to engage in an EAR transaction within these areas. A list of geographic areas known to be under ISIL control is contained in Attachment B (see below).

For additional information on this FAQ or attachments, please contact the Office of Enforcement Analysis at the following: EEinquiry@BIS.DOC.GOV or 202-482-1881.

DDTC Agrees that the Public Domain Prior Approval Requirement is Unreasonable

Thursday, November 5th, 2015 by Danielle McClellan

Source: Author. Reprinted by permission.)

By: Christopher B. Stagg, Esq., chris@staggpc.com, 202-765-2278; Stagg P.C..

On June 3, 2015, the Directorate of Defense Trade Controls issued a proposed rule to amend the public domain exclusion within ITAR § 120.11 to include a prior government approval requirement. In proposing this revision, DDTC made a curious statement in the preamble that prior government approval is not a new requirement and that the proposed revision is merely “a more explicit statement of the ITAR’s requirement that one must seek and receive a license or other authorization [to put information into the public domain].”  The federal court case where DDTC made these statements is Bernstein v. Department of State in DDTC’s opposition to the plaintiff’s motion for summary judgment at 25, 945 F. Supp. 1279 (N.D. Cal. 1996).  A copy of DDTC’s statements to the federal court is provided here.

This is a curious statement because DDTC has previously stated to the federal courts that reading ITAR § 120.11 to impose a prior approval requirement is “by far the most un-reasonable interpretation of the provision” and also “one that people of ordinary intelligence are least likely to assume is the case.” Accordingly, DDTC confirmed to the federal courts in 1996 that there is no prior approval requirement to put information into the public domain.

The federal court case where DDTC made these statements is Bernstein v. Department of State. A copy of DDTC’s statements to the federal court is provided here (click on image for a high-resolution version):

These are highly damaging statements by DDTC. Not only does DDTC’s statement unequivocally maintain that there is no prior approval requirement, but it also establishes that the position DDTC now takes is admittedly “by far the most un-reasonable interpretation of the provision” and “that people of ordinary intelligence are least likely to assume is the case.”

Since DDTC concedes that “people of ordinary intelligence” would not read the public domain exclusion to impose a prior approval requirement, this raises a due process claim under the Fifth Amendment that DDTC’s new interpretation is unconstitutionally vague. The legal standard for a due process vagueness claim is whether the law would give fair notice to persons of ordinary intelligence of the legal requirements. Also, in laws that concern speech covered by the First Amendment, the federal courts impose an even higher standard by requiring that the law has even greater clarity. Here, DDTC concedes that such persons would not have notice.

DDTC’s statements in the court case also confirms that it has a long-standing practice of not requiring prior government approval to put information into the public domain. In changing its practice, it is well-established law that a regulatory agency must (1) acknowledge it is departing from prior practice and (2) explain the reason for the departure. The failure by a regulatory agency to follow these requirements raises due process issues. For instance, without an agency following these procedural requirements in changing its position, courts could not know whether a regulatory agency acted erroneously.

Here, DDTC fails both requirements. Instead of recognizing it is departing from prior practice, DDTC simply asserts that this is not a new requirement. Yet, the regulatory history of the public domain exclusion and DDTC’s own admissions to the federal courts clearly evidences this is incorrect. Since DDTC failed to acknowledge it is departing from prior practice, it also failed to fulfill the second well-established requirement of explaining the reason for its departure.

To read the rest of this article (including exhibits), please click here.

State Department Clarifies Recent Press Release Regarding Tokenization and Cloud Computing

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

The Department of State’s Directorate of Defense Trade Controls recently issued minor clarifications to the postings on the Perspecsys, Inc. website relating to an advisory opinion on the secure transfer of technical data via the internet. The advisory opinion is stated below:

“In accordance with [ITAR] § 125.4(b)(9), tokenization may be used to process controlled technical data using cloud computing applications without a license even if the cloud computing provider moved tokenized data to servers located outside the U.S., provided sufficient means are taken to ensure the technical data may only be received and used by U.S. persons who are employees of the U.S. government or are directly employed by a U.S. corporation and not by a foreign subsidiary throughout all phases of the transfer, including but not limited to transmission, storage, and receipt. Inclusions of transfers to foreign persons would require the appropriate authorization from the Directorate of Defense Trade Controls.”

“Additionally, in all cases the technical data must be sent by a U.S. person who is an employee of a U.S. corporation or a U.S. government agency. Transmission of classified information through this means if sent or taken outside of the United States must be accomplished in accordance with the requirements of the Department of Defense National Industrial Security Program Operating Manual.”

The DDTC claims that the advisory opinion is not intended to imply that “sufficient means” to accomplish the requisite assurance levels exist today technologically, nor that tokenization by itself could achieve that end. In addition, the DDTC insists that the advisory opinion states that the use of cloud computing applications (even through tokenization) is limited to receipt and use of unclassified technical data by U.S. entities; transfer to a foreign entity would require separate authorization.
Finally, the DDTC asks readers to remember that advisory opinions are released in response to individual submissions and particular to individual situations, and therefore should not be considered reliable guidance or precedence for the general audience.

Wassenaar Arrangement Modifies Controls on Electronic Surveillance Tools

Thursday, January 30th, 2014 by Brooke Driver

By: Brooke Driver

At its annual plenary meeting in Austria December 3-4, 2013, the Wassenaar Arrangement, a group of 41 countries including the U.S., Russia, the U.K. and most E.U. states, focused on export controls for conventional arms and dual-use goods and technology, agreed on new harsher export controls on cybersecurity technologies, recognizing their great potential for terrorism. Each participating country must now implement these changed policies, one major area of which is surveillance and intelligence gathering tools, including malware and rootkits, which governments can use to bypass security features on electronic devices in order to attain supposedly protected data. Internet protocol network surveillance systems or equipment are also now subject to revised export controls, which include technologies used to screen for malware, viruses and surveillance programs. These technologies are subject to new controls, because representatives of the 41 countries believed that they could be used to both block cyber attacks and grant foreign persons dangerous insight into Western screening systems, increasing the potential for hacks. The agreement also places stricter controls on intelligence gathering technologies that analyze individuals’ or groups’ relational networks and activities, although there will be exceptions for companies using such software for marketing or consumer-monitoring purposes.

Click here for details of these changes and others decided upon at this year’s Wassenaar plenary meeting: http://www.wassenaar.org/controllists/2013/Summary%20of%20Changes%20to%20Control%20Lists%202013.pdf

Computerlinks FZCO fined $2,800,000 for Violating Syria Trade Embargo

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

Recently, United Arab Emirates’ Computerlinks FZCO, a Middle East distributer working with Blue Coat Systems, Inc. of Sunnyvale, California, was charged with shipping without permission—or the manufacturer’s knowledge—to the embargoed country Syria. Although Computerlinks FZCO had agreed in its distribution agreement with Blue Coat to abide by US Department of Commerce regulations, the company falsified end user and final destination information it gave to Blue Coat on three occasions.

On or about October 29, 2010, December 31, 2010 and May 15, 2011, Computerlinks FCZO ordered devices from Blue Coat used to monitor and control web traffic along with related equipment and software, informing the manufacturer that the items were bound for the Iraq Ministry of Telecom or Liwalnet (an Internet service provider in Afghanistan), when in fact Computerlinks sent them to the Syrian Telecommunications Establishment. The total value of the three shipments is approximately $1,400,000

Because the value of the shipments was so high and because Computerlink intentionally evaded trade regulations, the BIS chose to:

  • Fine the company a whopping $2,800,000
  • Require three consecutive external audits—the first to analyze the company’s activity during the year prior to the charges, the second to observe the company’s activity the year directly after the charges and the last to analyze its activity two years after the charges

Another Group Complains about the ITAR

Saturday, September 29th, 2007 by John Black

During the 58th International Astronautical Congress in Hyderabad, India, many speakers from emerging space nations all voiced a concern over the United States International Traffic and Arms Regulations (ITAR). The speakers charged that the United States ITAR is holding back growth in the industry. All of the speakers made a point to explain that both cooperation and competition were necessary to ensure growth of the space industry, and the ITAR is holding emerging space nations back.

China claimed that the U.S. policy was the largest hurdle to be faced by the growth of new actors in the industry, while India claimed that there is more risk to non-US players because of the ITAR rules

(Hmmmm, I guess the US Government is glad to hear that news, because that is exactly the intent of the ITAR. — John Black)

Hua Changzhi, vice president of China Great Wall Corp. pointed out those U.S. satellite manufacturers had lost market share in recent years, he remarked, “This is the price paid by U.S. policy”. Ray A. Williamson, research professor, Space Policy Institute at George Washington University in the United States said that change in ITAR would make it easier for the international space industry to operate, “unfortunately, given the current political situation in the United States, I don’t think ITAR regime will change for the next five to ten years”.

Executive director of Antrix Corp Ltd, the commercial arm of Indian Space Research Organization, K.R. Sridhara Murthy called for addressing certain issues at a political level especially regarding the export policies of advanced countries. Murthy also called for a unified licensing system for space services and complementary ground services and also underlined a need to change policy and regulations to facilitate easy access to remote sensing data used by many companies. Another one of his concerns was the merger of smaller companies with the “big players” in the industry, explaining that the dominant players in the industry hurt the market and consumers. The industry is also faced with the fact that the orbit and spectrum resources are in the hands of the governments.

More information:

US regulations restrict space industry growth (Earth Times)

US regulations restrict space industry growth (India PR Wire)

Thales Builds ITAR-Free Satellite for China: Avoiding ITAR Components Adds 6% to Sales Price

Monday, July 30th, 2007 by John Black

Peter Selding of SPACE.com reported China has successfully launched a Thales satellite that did not contain any US components controlled by the International Traffic in Arms Regulations (“ITAR”). Any non-US origin satellite with one or more ITAR-controlled part (regardless of value) would require approval by the US State Department for transfer to China — and the State Department would not approve transfers of any commercial communication satellite with ITAR content to China. The Thales ITAR-free satellite proves that it is possible for companies to build satellites and sell them without having to deal with the cumbersome and sometimes prohibitive ITAR controls.

According to the report, the Chinasat 6B telecommunications satellite is the fourth satellite built for the Chinese satellite-fleet operators by Thales Alenia Space. And it looks like it doesn’t cost all that much to avoid ITAR components. According to the report, avoiding ITAR restrictions added approximately six percent to the cost of the satellite due to lack of options in choosing more competitive parts suppliers and the currency used in payment. Thales Alenia Space has pointed out going to a fully ITAR-free product line is out of the question because of the risk of not being able to keep up with the market demand as ITAR-free satellites rely on a supply chain that would have difficulty increasing deliveries in the short term. This sale might be a scary prospect for US satellite makers and US satellite component suppliers. The State Department will not approve license for transfers of US satellites or foreign-origin satellites with US content to China. Now Thales seems to have a monopoly on sales of satellites to China, or, at least Thales is going to get sales that neither US satellite manufacturers nor any foreign manufacturers who use ITAR components will get. Clearly, in attempting to prevent satellite sales to China, the US has used the ITAR to dam up most of the river while leaving an opening wide enough to launch a Thales satellite through. So, the Chinese get communication satellites and US manufacturers get bumpkiss (i.e., nothing). Well, perhaps US policy makers still feel good about the symbolic nature of the US “no satellite sales to China” policy, and as US policy makers are perched high atop their self-designated moral high ground, they will have a clear view of the ITAR-free satellite sales to China.

I will not ask if anybody in the US Government has unofficially threatened Thales or attempted to convince Thales to not go down the ITAR-free path.

DDTC Publishes Guidance for Dealing with Alcatel Alenia Space Name Change

Wednesday, May 30th, 2007 by Jill Kincaid

Company Name Changed to Thales Alenia Space

In an effort to facilitate continued licensed defense trade between the United States and the recently renamed Thales Alenia Space, the DDTC has published guidance for dealings with the company and its subsidiaries.

Satellite designer and manufacturer Alcatel Alenia Space SAS (AAS), has its stock held by Alcatel-Lucent Participations SA (France) and Finmeccanica SpA (Italy). Subsidiaries of AAS are located in France, Italy, Belgium and Spain. As the result of a transaction reassigning its current stock, AAS has changed its name to Thales Alenia Space. Subsidiaries have also changed their names accordingly.

For the purposes of exporting against valid licenses after the transaction closing dates (April & May 2007), exporters should note the name change at the time of the AES filing. Submitting a DSP-119 is not necessary.

Example: “Thales Alenia Space France” formerly “Alcatel Alenia Space France”

For the purposes of current TAA and MLA agreements, an amendment must be submitted to each agreement to reflect the name change. Failure to submit the necessary amendment within 60 days of the transaction closing date for each entity will result in the termination of the agreement.

For the purposes of agreements currently in review, those pending approval will be processed under the submitted name. Once approvals are granted, exporters must change the name to the new entity before execution of the agreement or amendment and must note the change in the cover letter of the submission of the executed agreement.

For new licenses & agreements, exporters must supply the new legal name of the entity. New agreements submitted 60 days after specified closing dates with the incorrect name will be returned without action.

The relevant closing dates for entities affected by this change are as follows:

  • Alcatel Alenia Space in France on April 6, 2007
  • Alcatel Alenia Space in Belgium on April 11, 2007
  • Alcatel Alenia Space in Spain on April 11, 2007
  • Alcatel Alenia Space in Italy on May 4, 2007

Affected Companies and their former and current names can be viewed, along with the complete guidelines, at:

Special Libya Update: US Relaxes Export Controls

Friday, September 1st, 2006 by John Black

What Happened & What You Need to Do

On August 31, 2006, the Commerce Department published regulations that move Libya off the small list of countries subject to severe US export and reexport controls. Generally speaking, the Export Administration Regulations (EAR) now treat Libya similar to countries such as the PRC, Russia, and Armenia. (more…)

US Relaxes Controls on Libya and Tightens Controls on Syria

Sunday, May 30th, 2004 by John Black

Within a matter of weeks the Bush Administration made significant changes to the US export/reexport controls on Libya and Syria. The United States relaxed its controls on Libya and tightened its controls on Syria. The new controls on these countries are relatively straight-forward, despite the fact that these changes are based on a relatively large number of official document (two executive orders from the White House, a new law, several Treasury Department general licenses, and at least two Federal Register notices).

Here are the new licensing requirements and restrictions in a nutshell.

LIBYA

  • Items classified as EAR99 under the Export Administration Regulations (EAR) are eligible for export/reexport as No License Required (NLR) to Libya. Items under all specific ECCNs continue to require a license.
  • Libya is eligible to receive items under license exceptions TMP, GOV, GFT, TSU, RPL and AVS in limited circumstances.
  • There is a somewhat favorable license review policy for exports of low-level computers, civil aircraft and parts, and certain other items t o non-military/police end-users.
  • Jurisdiction for exports to Libya is transferred from the Office of Foreign Assets Control to the Bureau of Industry and Security (BIS). (BIS already had jurisdiction over reexports to Libya.
  • OFAC dropped its rules that prohibit US persons from being involved in transactions involving Libya. US persons may now enter into new transactions with Libya without OFAC restrictions. OFAC continues to prohibit:
    • US persons involvement in Libyan property and property blocked by US person prior to April 23, 2004; and
    • Certain travel-related activities including carriers of the United States and Libya flying to Libya and the United States, respectively.
  • The 10% de minimis level for foreign-made items with US content remains unchanged.
  • If you have an OFAC license for Libya, you may continue to use it through its expiration date (May 1, 2005 if the license has no expiration date).

SYRIA

  • Everything except food and medicine require a license for Syria-that is, items classified as EAR99 now require a license for export or reexport to Syria. All items that formerly required a license for Syria still require a license.
  • BIS revoked all licenses that BIS issued for Syria prior to May 14, 2004.
  • The new restrictions (above) do not apply to any items en route to Syria on May 14, 2004 as long as the items are exported or reexported by May 28, 2004.
  • You may not use license exceptions for Syria except as follows:
    • TMP only for news media
    • GOV only for US Government
    • TUS only for operation tech data/software, sales tech data, and software updates
    • BAG only in limited cases for personally owned baggage
    • AVS only for temporary sojourn of aircraft reexported to Syria
  • BIS policy is to deny all license applications for Syria. Exceptions might be made for deemed exports/reexports, items to support US Government or United Nations activities; medicines and medical devices on the Commerce Control List; aircraft parts to ensure safety of civil aviation; telecomm equipment and associated computers, software and tech data.
  • The 10% de minimis level for foreign-made items with US content remains unchanged.
  • OFAC did not impose any restrictions on US persons dealing with Syria.

When Did These Changes Happen?

The primary Libya change was announced in a BIS Federal Register notice on April 29 and a general license OFAC announced on its web site on April 23. The Syria change was announced in a May 14, 2004 Federal Register notice.

Why Did the United States Change Its Policies?

Several factors led the United States to significantly relax its controls on Libya: 1) Libya exposed the widespread illicit international nuclear weapons proliferation network and thereby did as much to thwart the future spread of nuclear weapons as any export control regime could ever hope to accomplish; 2) Libya promised that it has ended its weapons of mass destruction program; and 3) Libya accepted a certain responsibility for the bombing of the commercial aircraft over Lockerbie, Scotland and agreed to pay $10 million to the families of the victims.

(Interestingly, a couple of weeks after the United States ended its trade embargo on Libya, Libyan President Gadhafi announced that Libya will halt its military trade with North Korea, Syria and Iran. The White House said that Libya’s actions “have made our country and the world safer.” We have calculated that if the current rate of increasing cooperation and trade policy coordination continues at this pace, by June 17, 2006 Libya will share the same status as Canada under US trade controls!)

As for Syria, the Bush Administration was pressured to impose more trade restrictions on Syria when Congress passed the Syria Accountability and Lebanese Sovereignty Act of 2003. Congress passed the law to punish Syria for its support of international terrorism.