India’s Export Control in Line with Wassenaar Arrangement: Government

June 8th, 2017 by Danielle McClellan

(Source: Financial Express)

India’s export controls are in line with the Wassenaar Arrangement, one of the four non- proliferation regimes that prohibit the export of items of dual- use technology, a senior external ministry official said. The government came out with a Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list on April 24, said Pankaj Sharma, joint secretary (Disarmament and International Security Affairs) of the Ministry of External Affairs.

The notification has come into effect on May 1. Export of dual-use (which can also be used for proliferation purpose) items and technologies is either prohibited or is permitted under a license. In foreign trade policy, dual-use items have been given the nomenclature of SCOMET.

“Broadly speaking the Scomet list has been consolidated,” Sharma said, adding that category six of the Scomet list now recommends the Wassenaar Arrangements munitions list and the Wassenaar Arrangement dual-use list items. Sharma was speaking at a seminar on ‘Scomet update: Implications for the dual-use and defence industry’ organised by the FICCI.

With an aim to gain entry into four non-proliferation regimes, India has been aligning its export controls as per these groups. These groups are the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Australia Group and the Wassenaar Arrangement. In 2016, India officially applied for membership of the NSG and gained entry to the MTCR.

Learn more by attending our Ready, Aim, Fire: India Adopts the Wassenaar Arrangement Control Lists Webinar on June 28, 2017. Details at http://www.learnexportcompliance.com/Webinars/Ready,-Aim,-Fire-India-Adopts-the-Wassenaar-Arrang.aspx.

Tips on How to Resolve AES Fatal Errors

June 8th, 2017 by Danielle McClellan

(Source: census@subscriptions.census.gov, 18 May 2017.)

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: 136

  • Narrative: PR to US Requires PR Port of Export
  • Reason: The Country of Destination is reported as the Unites States and the Port of Export Code is not a Puerto Rican port.
  • Resolution: A Port of Export Code must be reported on shipments from Puerto Rico to the United States and it must be a Puerto Rican port. See Appendix D, Export Port Codes for a list of acceptable Port of Export Codes. Verify the Country of Ultimate Destination and Port of Export Code, correct the shipment and resubmit.

Fatal Error Response Code: 538

  • Narrative: Shipping Weight Must Be Greater Than Zero For MOT
  • Reason: The Mode of Transportation Code reported was one that identifies a Vessel, Rail, Truck, or Air shipment and the Shipping Weight was not reported.
  • Resolution: When the Mode of Transportation is Vessel, Rail, Truck or Air, the Shipping Weight must be reported. Verify the Mode of Transportation and Shipping Weight, correct the shipment and resubmit.

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 five calendar days after departure.

For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.

The Automated Export System (AES) has a New Data Element

June 8th, 2017 by Danielle McClellan

(Source: Global Reach Blog)

The U.S. Census Bureau published the Final Rule entitled, “Foreign Trade Regulations (FTR): Clarification on Filing Requirements,” April 19.

This rule addresses new export reporting requirements related to the International Trade Data System and includes the addition of a new data element, the original Internal Transaction Number (ITN) that can be reported in the Automated Export System (AES). The original ITN field is an optional data element that can be used when a previously filed shipment is replaced, divided or cancelled.

The Census Bureau decided to add the original ITN data element to address situations when a party involved in an export transaction received penalties for shipments that were originally filed on time, but whose shipments were divided while in transit to the ultimate consignee. This data element makes it possible for U.S. Customs and Border Protection (CBP) to identify AES filings that are associated with previously filed shipments. Prior to the original ITN field, CBP was unable to determine if a shipment, identified as late, was associated with a shipment originally filed in accordance with the FTR. The inclusion of the original ITN field will enable parties in an export transaction to proactively provide CBP with additional information and will allow CBP to conduct a more thorough review of these types of shipments prior to assessing any penalties.

Let’s take a look at an example of how the original ITN field can be used. A foreign buyer in Italy purchases $20,000 worth of jewelry from a U.S. seller. The U.S. seller ships the jewelry to the buyer, but while in transit the seller is contacted by the buyer who now only wants $8,000 worth of jewelry. The seller then finds a new buyer in Sweden for the remaining $12,000 worth of jewelry. The originally filed AES record needs to be updated to reflect the value of $8,000 for the buyer in Italy. Additionally, a new AES record is created for the new buyer in Sweden. This new filing would generate a late filing compliance alert.  However, to ensure CBP is aware that the new shipment was filed prior to exportation in accordance with the FTR, the filer can include the previously filed ITN in the original ITN field.

For more information, contact the International Trade Management Division Call Center at 1-800-549-0595. Select option 3 for the Trade Regulations Branch.

Illegal Exporting of IED Components Lands Singapore Native in Prison

June 8th, 2017 by Danielle McClellan

By: Ashleigh Foor

Illegal exporting of goods lands Singapore native, Lim Yong Nam (aka Steven Lim), 43, in a lot of trouble. Forty months in prison kind of trouble to be exact. On December 15, 2016 Lim plead guilty to charges of conspiracy to defraud the US.

The conspiracy involved Lim’s and others’ involvement in the shipment of thousands of radio frequency modules from a Minnesota-based company to Iran.  The frequency transmitting technology used in these modules is related to that which connects office computers and printers wirelessly. The same technology is also used for remote detonation systems. Connected with the right antenna, the wireless capabilities can stretch 40 miles. But this technology was not shipped with the intention of setting up networks in an office building. Of the 6,000 modules shipped from Minnesota to Iran, 14 were later found in Iraq in unexploded improvised explosive devices (IEDs). According to case files, IEDs were the main source of American casualties in Iraq from 2001-2007.

Charges were first filed against Lim in June 2010, when he plead guilty to falsifying documents and breaking US law in order for 6,000 modules to ship from Minnesota to Singapore and finally to Iran through 5 shipments.  Lim admitted that he and his co-conspirators were aware of US restrictions on shipments to Iran and made false statements to indicate Singapore as the final destination.

After reaching Singapore, these shipments were combined with other electronic devices and stored with a freight forwarding company before being re-exported to Iran. There is no evidence of Lim having any physical contact with the modules.

From 2008 to 2009 several of these modules originating from Minnesota were found in Iraq being used for the remote detonation system for IEDs. With US request for extradition, Indonesia detained Lim in 2014. After being extradited to the US in 2016, Lim plead guilty to charges of conspiracy against the US and will be deported after his sentence.

Interestingly, the Minnesota supplier has not been charged for any violations related to the exports in question.

OFAC Investigating Smartphone Company…Were They Working with ZTE?

May 11th, 2017 by Danielle McClellan

By: Danielle McClellan

Huawei, one of the world’s biggest sellers of smartphones and the back-end equipment that makes cellular networks work has received an administrative subpoena from the United States Treasury Department’s Office of Foreign Assets Control (OFAC).  This subpoena was sent out in December 2016, following the Department of Commerce’s subpoena which was sent out in the summer of 2016 asking for the company to describe technology and services provided to Cuba, Iran, Sudan, and Syria over the past 5 years. North Korea was named in the Commerce Department subpoena, but not the OFAC subpoena. At this point Huawei has not been accused of any wrong doing and the subpoenas do not indicate that the company is part of any criminal investigations.

Not long ago the Chinese company, ZTE agreed to pay $1.2 billion after pleading guilty to shipping US-origin items to Iran (http://www.learnexportcompliance.com/News/The-Export-Control-Update-March-2017.aspx#ZTE). That investigation released documents that showed ZTE executives mapping out plans to work around, or break, US export control regulations. Further investigation found that ZTE learned about the plan from a company labeled as, F7, which closely mimics Huawei. Last month, ten members of Congress sent a letter demanding that F7 be publically identified and fully investigated, “We strongly support holding F7 accountable should the government conclude that unlawful behavior occurred,” read part of the letter.

It’s uncertain if the government believes that Huawei is F7 and that’s why the subpoenas were sent out or if they are just probing for other violations. Only time will tell.

More information: https://www.nytimes.com/2017/04/26/business/huawei-investigation-sanctions-subpoena.html?_r=0

Changes for the Implementation of the International Trade Data System

May 11th, 2017 by Danielle McClellan

After consideration of the comments received, the Census Bureau revised and added certain provisions to address the concerns of commenters and to clarify the requirements related to the implementation of the International Trade Data System (ITDS). These changes will be effective July 18, 2017. The changes made in this Final Rule are as follows:

  • Amend the proposed rule to remove the definition and filing requirement for the used electronics indicator.
  • Section 30.1(c) is amended to revise the definition of ‘‘Carrier’’ to include a Non Vessel Operating Common Carrier (NVOCC) as an example of a carrier because the Automated Export System Trade Interface Requirements allows the Standard Carrier Alpha Code of a NVOCC to be reported.
  • Section 30.1(c), is amended to add the definition of ‘‘U.S. Postal Service customs declaration form’’ to identify the shipment document used for exports by mail.
  • Section 30.1(c), is amended to revise the definition of ‘‘Commercial loading document’’ to include the U.S. Postal Service customs declaration form as an example of a commercial loading document.
  • The note to § 30.2(a)(1)(iv) is amended to add Country Group E:2 to ensure consistency with the Export Administration Regulations (EAR).
  • Section 30.2(c) is amended to clarify the application and certification process by dividing the section based on the filing method, AESDirect or methods other than AESDirect. As a result, the title was amended to read as ‘‘Application and Certification Process’’ as opposed to ‘‘Certification and Filing Requirements.’’
  • Section 30.3(e)(2) is amended to add language requiring the authorized agent to provide the filer name in addition to the Internal Transaction Number (ITN) and date of export as proposed in the NPRM, when requested by the U.S. Principal Party in Interest in a routed transaction.
  • Section 30.4(b)(2)(v) is amended to read ‘‘mail’’ rather than ‘‘mail cargo’’ and the phrase ‘‘filing citation or exemption legend’’ will be revised to read ‘‘proof of filing citation, postdeparture filing citation, AES downtime filing citation, exemption or exclusion legend.’’
  • Section 30.8(a) is amended to more accurately reflect U.S. Postal Service operations.
  • Section 30.16(d) is amended to add Country Group E:2 to ensure consistency with the EAR.
  • Section 30.28 is amended to add language removed from 30.28(c) to the opening paragraph.
  • Section 30.29(a)(2) is amended by clarifying that a license value is only required to be reported for shipments licensed by a U.S. Government agency.
  • Section 30.29(b)(2) is amended to replace the term ‘‘commercial document’’ with the defined term ‘‘commercial loading documents’’.
  • Section 30.37(y) is amended to add Country Group E:2 to ensure consistency with the EAR.
  • Delete Appendices B, C, E and F because the Appendices were initially created to assist the trade in transitioning from the Foreign Trade Statistics Regulations (FTSR) to the FTR and are no longer necessary. As a result of deleting Appendices B, C, E, and F, Appendix D is redesignated as Appendix B. Program Requirements In addition to the above changes the Census Bureau is amending relevant sections of the FTR in order to comply with the requirements of the Foreign Relations Act, Public Law 107–228. The following sections of the FTR are amended to revise or clarify export reporting requirements and are unchanged from the Notice of Proposed Rulemaking of March 9, 2016, titled Foreign Trade Regulations: Clarification on Filing Requirements (RIN 0607– AA55):
  • In § 30.1(c), revise the definition of ‘‘AES applicant’’ to remove the text ‘‘applies to the Census Bureau for authorization to’’ and ‘‘or its related applications’’ because the registration will no longer go through the Census Bureau. Rather, the registration will be submitted to CBP through its Web site or through ACE and will be processed by CBP. In addition, related applications will be eliminated.
  • In § 30.1(c), revise the definition of ‘‘AESDirect’’ to clarify the appropriate parties that can transmit Electronic Export Information (EEI) through the AES, clarify that all regulatory requirements pertaining to the AES also apply to AESDirect, and eliminate the reference to the URL.
  • In § 30.1(c), revise the definition of ‘‘AES downtime filing citation’’ to remove filing requirements from the definition.
  • In § 30.1(c), remove the definition of ‘‘AES participant application (APA)’’ because the APA is no longer used for filers to obtain access to the AES.
  • In § 30.1(c), revise the definition of ‘‘Annotation’’ to remove the word ‘‘placed’’ to eliminate the implication of a manual process and add ‘‘or electronic equivalent’’ to allow for an electronic process.
  • In § 30.1(c), add the definition of ‘‘Automated Commercial Environment (ACE)’’ to identify the system through which the trade community reports data.
  • In § 30.1(c), revise the definition of ‘‘Automated Export System (AES)’’ to clarify that AES is accessed through the Automated Commercial Environment.
  • In § 30.1(c), revise the definition of ‘‘Bill of lading (BL)’’ to distinguish between the responsibilities of the carrier and the authorized agent.
  • In § 30.1(c), revise the definition of ‘‘Container’’ to make the language consistent with Article 1 of the Customs Convention on Containers.
  • In §30.1(c), remove the definition of ‘‘Domestic exports’’ because this term is not used in the FTR and add the definition of ‘‘Domestic goods.’’
  • In § 30.1(c), revise the definition of ‘‘Electronic Export Information (EEI)’’ to reference the Shipper’s Export Declaration itself as opposed to the information collected on the SED.
  • In § 30.1(c), revise the definition ‘‘Fatal error message’’ by removing the following sentence to remove the regulatory requirements from the definition: ‘‘The filer is required to immediately correct the problem, correct the data, and retransmit the EEI.’’
  • In § 30.1(c), revise the term ‘‘Filers’’ to ‘‘Filer’’ and revise the definition to reduce redundancy.
  • In § 30.1(c), remove the definition of ‘‘Foreign exports’’ because this term is not used in the FTR and add the definition of ‘‘Foreign goods.’’
  • In § 30.1(c), remove the definition for ‘‘Non Vessel Operating Common Carrier (NVOCC)’’ because the term is not referenced in the FTR.
  • In § 30.1(c), revise the definition of ‘‘Proof of filing citation’’ by removing the word ‘‘placed’’ to eliminate the implication of a manual process and allow for an electronic process.
  • In § 30.1(c), remove the definition of ‘‘Reexport’’ because the term is not used for statistical purposes in the FTR.
  • In § 30.1(c), revise the definition of ‘‘Service center’’ to clarify the role of a service center as it pertains to the FTR.
  • In § 30.1(c), revise the term ‘‘Shipment reference number’’ to read as ‘‘Shipment Reference Number (SRN).’’
  • In § 30.1(c), revise the definition of ‘‘Split shipment’’ to incorporate the revised timeframes addressed in FTR Letter #6, Notice of Regulatory Change for Split Shipments.
  • In § 30.1(c), revise the term ‘‘Transportation reference number’’ to read as ‘‘Transportation Reference Number (TRN).’’
  • Revise § 30.2(a)(1)(iv)(A) to ensure consistency with the Department of Commerce, Bureau of Industry and Security regulations.
  • Revise § 30.2(a)(1)(iv)(C) to add language which notes that the filer must reference the Department of State regulations for exceptions to the filing requirements for goods subject to the ITAR.
  • Revise § 30.2(b)(3) to remove the reference to ‘‘30.4(b)(3)’’ and add ‘‘30.4(b)(4)’’ in its place.
  • Revise § 30.3(e)(2) to add paragraph (xv) ‘‘Ultimate consignee type’’ to clarify that the authorized agent is responsible for reporting the ultimate consignee type in a routed export transaction.
  • Revise § 30.4(b)(2)(v) to reference only mail shipments by removing the words ‘‘and cargo shipped by other modes, except pipelines’’ because all other modes are covered in paragraph (vi). In addition, revise language to replace ‘‘exporting carrier’’ with ‘‘U.S. Postal Service’’ and remove the reference to § 30.46 because pipeline language has been added to § 30.4(c)(2).
  • Revise § 30.4(b)(3) to indicate that the USPPI or authorized agent must provide the proof of filing citation, post departure filing citation, AES downtime citation, exemption or exclusion legend to the carrier.
  • Revise § 30.4(c) by removing the introductory text.
  • Revise § 30.4 by adding paragraphs (c)(1) to address current post departure filing procedures and (c)(2) to address pipeline filing procedures.
  • Revise the title of § 30.5 to be ‘‘Electronic Export Information filing processes and standards’’ to accurately reflect the information that remains in this section because the AES application and certification process are removed.
  • Revise § 30.5 to remove the introductory text and remove and reserve paragraphs (a) and (b) because the certification process is now addressed in § 30.2(c).
  • Remove § 30.5(d)(3) to remove outdated requirements.
  • Revise § 30.5(f) to amend outdated information.
  • In § 30.6, revise the introductory text to add language indicating that additional elements collected in ITDS are mandated by the regulations of other federal government agencies.
  • Revise § 30.6(a)(1) to include the definition of the USPPI for consistency with the format for other data elements.
  • Revise § 30.6(a)(1)(iii) to clarify the use of an Employer Identification Number (EIN) and include the Data Universal Numbering System (DUNS) number as an acceptable USPPI ID number.
  • Revise § 30.6(a)(1)(iv) to clarify whose contact information should be provided in the AES for the USPPI.
  • Revise § 30.6(a)(5)(i) to clarify the country of ultimate destination to be reported with respect to shipments under BIS and State Department export licenses.
  • Revise § 30.6(a)(5)(ii) and add paragraphs (A) through (C) to clarify the country of ultimate destination to be reported with respect to shipments not moving under an export license.
  • Revise § 30.6(a)(11) by removing paragraphs (i) and (ii) because domestic goods and foreign goods are now included in § 30.1(c) as definitions.
  • Revise § 30.6(a)(19) to conform with the revised term ‘‘Shipment Reference Number (SRN).’’
  • Revise the title of § 30.6(b)(14) to conform with the revised term ‘‘Transportation Reference Number (TRN).’’
  • Revise § 30.6(c) to add paragraph (3) to include the original ITN field. Adding the original ITN field will assist the export trade community and enforcement agencies in identifying that a filer completed the mandatory filing requirements for the original shipment and any additional shipment(s).
  • Remove § 30.10(a)(1) and (2) because the electronic certification notice is no longer provided.
  • In § 30.28, revise the introductory text to incorporate the revised timeframes addressed in FTR Letter #6, Notice of Regulatory Change for Split Shipments.
  • Revise § 30.28(a) to allow for an electronic process and incorporate the revised timeframes.
  • Revise § 30.28 by removing paragraph (c) because this information is included in the introductory text.
  • Revise § 30.29(a)(1) to remove the phrase ‘‘non-USML goods’’ and add the phrase ‘‘goods not licensed by a U.S. Government agency and not subject to the ITAR’’ in its place.
  • Revise § 30.29(a)(2) to remove the phrase ‘‘USML goods’’ and add the phrase ‘‘goods licensed by a U.S. Government agency or subject to the ITAR’’ in its place.
  • Revise § 30.29(b)(2) to remove the phrase ‘‘non-USML’’ and add the phrase ‘‘goods not licensed by a U.S. Government agency in its place.
  • Revise §30.29(b)(2) to remove the phase ‘‘USML shipments’’ and add the phrase ‘‘goods licensed by a U.S. Government agency in its place.
  • Revise § 30.36(b)(4) to ensure consistency with the Export Administration Regulations.
  • Revise the titles to Subpart E and § 30.45, revise paragraphs 30.45(a), (a)(1) and (b), remove and reserve paragraph 30.45(a)(2) and (a)(3), and remove 30.45(c) through 30.45(f) to ensure consistency with the CBP regulations.
  • Revise § 30.46 through 30.49 by removing and reserving these sections.
  • Revise the introductory text in § 30.50 to replace ‘‘Automated Broker Interface (ABI)’’ with ‘‘Automated Commercial Environment (ACE)’’.
  • Revise the introductory text in § 30.53 to provide more detail for classifying goods temporarily imported for repair and remove paragraphs 30.53(a) and 30.53(b).
  • Revise § 30.74 paragraph (c)(5) to indicate the new division name and revise the address.
  • Redesignate Appendix D as Appendix B. Revise the title to read ‘‘Appendix B to Part 30—AES Filing Citation, Exemption and Exclusion Legends’’ and remove ‘‘I. USML Proof of Filing Citation’’, ‘‘XII. Proof of filing citations by pipeline’’, and renumber remaining entries.
  • Revise new Appendix B numbers III and IV to clarify the dates listed in the examples are the dates of export.
  • Remove Appendices C through F because they are no longer needed to help transition the trade community from the Foreign Trade Statistics Regulations to the Foreign Trade Regulations.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-04-19/pdf/2017-07646.pdf

Pay the Government on Time…or Pay Even Sooner

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

Rosoboronexport Added to Nonproliferation Act by State

May 11th, 2017 by Danielle McClellan

On March 21, 2017, the Department of State applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act against Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof. The measures below will remain in place for two years from the effective date unless the Secretary of State determines otherwise.

Rosoboronexport accounts for more than 90% of Russia’s annual arms sales and India is their major client, other leading clients include China, Algeria, Syria, Vietnam, Venezuela and recently Iraq.

Section 3 of the Act, imposes the following measures against Rosoboronexport:

  1. No department or agency of the United States Government may procure or enter into any contract for the procurement of any goods, technology, or services from this foreign person, except to the extent that the Secretary of State otherwise may determine. This measure shall not apply to subcontracts at any tier with ROE and any successor, sub-unit, or subsidiary thereof made on behalf of the United States Government for goods, technology, and services for the maintenance, repair, overhaul, or sustainment of Mi-17 helicopters for the purpose of providing assistance to the security forces of Afghanistan, as well as for the purpose of combating terrorism and violent extremism globally. Moreover, the ban on U.S. government procurement from the Russian entity Rosoboronexport (ROE) and any successor, sub-unit, or subsidiary thereof shall not apply to United States Government procurement of goods, technology, and services for the purchase, maintenance, or sustainment of the Digital Electro Optical Sensor OSDCAM4060 to improve the U.S. ability to monitor and verify Russia’s Open Skies Treaty compliance. Such subcontracts include the purchase of spare parts, supplies, and related services for these purposes;
  2. 2. No department or agency of the United States Government may provide any assistance to this foreign person, and this person shall not be eligible to participate in any assistance program of the United States Government, except to the extent that the Secretary of State otherwise may determine;
  3. No United States Government sales to this foreign person of any item on the United States Munitions List are permitted, and all sales to this person of any defense articles, defense services, or design and construction services under the Arms Export Control Act are terminated; and;
  4. No new individual licenses shall be granted for the transfer to this foreign person of items the export of which is controlled under the Export Administration Act of 1979 or the Export Administration Regulations, and any existing such licenses are suspended.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/pdf/2017-06224.pdf

U.S. Administration Exempts DDTC from Limit on New Regulations

May 11th, 2017 by Danielle McClellan

Mr. Brian Nilsson, Deputy Assistant Secretary of State for Defense Trade Controls, stated at the public meeting of the Defense Trade Advisory Group (DTAG) today in Washington, DC, that DDTC is exempt from the Administration’s limit on new regulations, so plans are continuing to issue new or revised regulations this year for the following subjects:

  • Defense services
  • Public domain
  • Technical data
  • Fundamental research
  • ITAR 126.4 exemption
  • US persons abroad – registration and licensing requirements

DDTC welcomes public suggestions for amendments of the International Traffic in Arms Regulations, and for DDTC operations such as the website format, and agency training and outreach. Submit them to DDTCResponseTeam@state.gov.

Chinese National Pleads Guilty to Attempting to Export “Bananas”

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