Home / News / The Export Control Update: April 2016

It Never Pays to Use Your Church to Cover Your Export Violations

By: Danielle McClellan

What does a system analysist for a defense contractor, a church volunteer and an owner of 3 US companies all have in common?  They all involve one woman, who will now spend 57 months in prison, encompassed each, and all at the same time. Hannah Robert, of North Burnswick, New Jersey recently plead guilty to conspiring to violate the Arms Export Act by exporting military technical drawings to India without government approval.

The story begins with Robert being an employee for a defense contractor where she worked as a system analyst and had access to thousands of export controlled drawings that were used for bids on US Department of Defense (DoD) contracts (Robert held this position until November 2012). In June 2010, she became the founder, owner and president of One Source USA LLC where she contracted with the DoD to supply defense hardware items and spare parts. In September 2012, Robert opened another defense company, Caldwell Components, Inc. as well as Once Source India (located in India), with a resident of India (identified on as R.P. in court documents) that manufactured defense hardware items and spare parts.

Between June 2010 and December 2012 Robert illegally exported defense technical drawings for parts used in the torpedo systems for nuclear submarines, military attack helicopters and F-15 fighter aircraft to R.P. in India. Robert and her India counterpart also sold defense hardware items to foreign customers including the United Arab Emirates Ministry of Defence. Hannah Robert volunteered at a church in Camden County, New Jersey, as a web administrator. This allowed her access to the church’s website where she uploaded the defense technical data. She provided her login and password to the church’s website to R.P. so that he/she could download the files. This process went on for two years and was the way in which Robert and R.P. were able to pass the technical information amongst themselves.

Hannah Robert was also faced with the issue of providing US DoD with faulty wing pins for the F-15 fighter aircraft. Robert provided false and misleading material certificates and inspection reports for the parts. The documents also failed to list that the actual manufacturer of the pins was located in India, not One Source USA’s New Jersey location which was listed on all of her DoD bids. The failed wing pins grounded approximately 47 F-15 fighter aircraft and cost DoD over $150,000 to inspect and repair the pins. Robert must pay $181,000 to the DoD to cover the repair costs as well as forfeiting more than $77,000 that she earned from the contracts.

The case was investigated by the special agents of the Defense Criminal Investigative Service’s Northeast Field Office and the special agents of the Department of Homeland Security’s Counter Proliferation Investigations.

More Information: https://www.justice.gov/usao-nj/pr/former-owner-defense-contracting-businesses-sentenced-57-months-prison-illegally

 

 

 

BIS Amends EAR and Updates Six ECCNs for MTCR Annex

By: Danielle McClellan

On April 4, 2016 The Bureau of Industry and Security published a final rule to reflect changes to the Missile Technology Control Regime (MTCR) Annex that were agreed on by MTCR member countries in October 2015. The following changes have been published:

  • In § 742.5 (Missile technology), this final rule adds a new paragraph (b)(3), and redesignates paragraphs (b)(3) and (b)(4), as paragraphs (b)(4) and (b)(5). This paragraph specifies that BIS licenses for MT controlled items also authorize the minimum ‘‘software’’ and ‘‘technology’’ for MT controlled items authorized under the same license, unless such minimum ‘‘software’’ and ‘‘technology’’ are specifically excluded by BIS on the license.

  • This final rule also amends § 750.7(c)(1), which identifies ‘‘non-material changes [to a license that] do not require submission of a ‘Replacement’ license or any other notification to BIS.’’ BIS has determined that a license applicant who does not seek a license for minimum ‘‘software’’ or ‘‘technology’’ for an MT controlled item need not seek a ‘‘Replacement’’ license if the applicant subsequently wishes to export such software or technology under the authority of the previously issued license.

  • Accordingly, in this rule BIS establishes a new paragraph (c)(1)(x) to § 750.7 that applies to all MT licenses, except when a condition is placed on the license that excludes such minimum ‘‘software’’ and ‘‘technology.’’ These changes are also consistent with the boilerplate text on BIS licenses, because the § 750.7(c)(1)(x) revision identifies the export, reexport or transfer (in-country) of minimum necessary MT controlled software and technology as a non-material change to a license.

  • BIS makes this change to MT licensing policy to be consistent with the MTCR Annex General Minimum Software Note and the MTCR Annex General Technology Note that specify that a license for MT controlled items should also authorize certain minimum ‘‘software’’ and ‘‘technology,’’ which is being implemented by adding paragraph (c)(1)(x) to § 750.7 (which allows licensees to make such exports, reexports and transfers (in-country) pursuant to licenses for MT items) and paragraph (b)(3) to § 742.5 (which specifies this MT licensing policy) of the EAR.

  • The MTCR General Minimum Software Note, MTCR Annex General Technology Note, and the provisions this final rule adds to § 742.5 are consistent with the General Software Note and General Technology Note in Supplement No. 2 to part 774 and License Exception TSU under § 740.13, paragraphs (a) and (c). Note, however, that the implementation of these provisions is being done through the MT licensing policy, and the addition of paragraph (c)(1)(x) to § 750.7 described below, instead of through the use of a license exception.

  • This final rule also specifies in § 742.5, paragraph (b)(3) that a license for MT controlled items authorizes pursuant to § 750.7(c)(1)(x) the later export (or reexport, or transfer (in- country) as applicable) of ‘‘software’’ controlled for MT reasons intended to correct defects (bug fixes) in a previously legally exported item under a BIS license to the same ultimate consignee(s) and end user(s) specified on the license, provided that the capability and/or performance of the item are not otherwise enhanced and such ‘‘software’’ is not excluded from the license by a BIS condition on the license.

  • Lastly, for the changes to § 742.5, this final rule adds a Note to paragraph (b)(3) to clarify that for the limited number of ECCNs that are identified in § 740.2, paragraph (a)(5), License Exception TSU is available, and therefore exporters do not need to apply for a license from BIS for such minimum ‘‘software’’ or ‘‘technology.’’

  • In § 750.7(c) (Changes to the license), this rule adds a new paragraph (c)(1)(x), as referenced above in the description of the changes this final rule makes to § 742.5. This paragraph (c)(1)(x) specifies that the export, reexport or transfer (in-country) of missile technology (MT) controlled minimum ‘‘software’’ and/or ‘‘technology’’ permitted pursuant to the missile technology licensing policy in § 742.5(b)(3) does not require a new license.

  • This final rule also includes a parenthetical phrase in § 750.7(c)(1)(x) to cross reference § 742.5(b)(3)(i) to define the scope of eligible minimum ‘‘software’’ and ‘‘technology’’ and other limitations for licenses for MT controlled items.

  • Also in § 750.7, this final rule adds two notes to paragraph (c)(1)(x). The new Note 1 provides context for why BIS is implementing the MT licensing policy pursuant to § 750.7(c)(1)(x). Note 1 explains that the MT licensing policy is being implemented pursuant to paragraph (c)(1)(x) because it applies to all MT licenses. This new Note 1 also explains that this MT licensing policy does not apply when BIS places a condition on the specific license(s) which excludes the use of paragraph (c)(1)(x).

  • This final rule also adds a Note 2 to paragraph (c)(1)(x) to provide guidance on the relationship between License Exception TSU and § 750.7(c)(1)(x), as well as § 742.5(b)(3). Note 2 is the same as the Note to paragraph (b)(3) to § 742.5, described above in this final rule, except for minor changes to reflect that the note is in § 750.7.

  • This final rule amends ECCN 1B101 by revising paragraph a and the introductory text of paragraph b in the List of Items Controlled section. (MTCR Annex Change, Category II: Item 6.B.1.a. and b., Bern 2015 TEM). Specifically, this final rule amends paragraph a to revise the term ‘fiber- placement machines’ to add the term ‘‘/tow’’ after the term ‘‘fiber’’ to clarify that the scope of the control parameter extends to placement machines regardless of whether they are named fiber-placement machines or tow- placement machines.

    • This final rule revises the term ‘‘fiber-placement machines’’ to ‘‘fiber/tow-placement machines’’ in order to clarify that both these similar machines (two types of placement machines) are classified under this control parameter, regardless of the naming convention.

    • This final rule revises paragraph b to add single quotation marks around the term ‘tape- laying machines’ to indicate that this term is defined for purposes of ECCN 1B101.

    • This final rule also revises paragraph b to remove the phrase ‘‘and sheets,’’ because it is no longer needed as part of the control parameter because the definition of tape now encompasses sheets. Lastly, this final rule adds four new Technical Notes to paragraphs a and b. The addition of these four Technical Notes provides a cleartechnical definition for ‘fiber/tow- placement machines’ and ‘tape-laying machines’ under new Technical Note 1, which is based on the minimum width of material that these machines are capable of laying (as specified further in the new Technical Notes 3 and 4 this final rule adds to ECCN 1B101).

    • This final rule also adds a Technical Note 2 to provide an ECCN-specific definition of ‘filament band,’ which is also used as part of the definition of ‘fiber/tow- placement machines’ and ‘tape-laying machines.’ The purpose of this change to ECCN 1B101 is to more clearly define and differentiate between fiber/tow- placement machines and tape-laying machines.

  • This final rule amends ECCN 1C111 by revising paragraphs b.4, b.9, d.9, and d.12 in the List of Items Controlled section to add CAS (Chemical Abstract Service) Numbers. CAS Numbers are numerical identifiers assigned by the Chemical Abstracts Service (CAS) to every chemical substance described in open scientific literature, including organic and inorganic compounds, minerals, isotopes and alloys. The inclusion of CAS Numbers will make it easier to identify the materials controlled under these ‘‘items’’ paragraphs of 1C111.

    • This final rule revises paragraph b.4 to add the CAS Number (CAS 25265– 19–4/CAS 68891–50–9) after the material ‘‘polybutadiene acrylic acid acrylonitrile (PBAN).’’ (MTCR Annex Change, Category II: Item 4.C.5.e., otterdam 2015 Plenary).

    • This final rule revises paragraph d.9 to add the CAS Number (CAS 6068– 98–0) after the material ‘‘ethylene dihydrazine.’’ (MTCR Annex Change, Category II: Item 4.C.2.b.8., Rotterdam 2015 Plenary).

    • This final rule revises paragraph d.12 to add the material ‘‘1,1- Dimethylhydrazinium azide (CAS 227955–52–4),’’ which is an alternative structure of the same chemical (Dimethylhydrazinium azide) classified under d.12. This final rule also revises paragraph d.12 to add ‘‘1,2-’’ before the material ‘‘Dimethylhydrazinium azide’’ and adds the CAS Number (CAS 299177–50–7) after the material ‘‘1,2- Dimethylhydrazinium azide.’

    • Lastly, for the changes to ECCN 1C111, this final rule revises paragraph d.19, to add the material ‘‘1,1- Diethylhydrazine nitrate (DEHN),’’ which is an alternative structure of the same chemical (Diethylhydrazine nitrate (DEHN)) classified under d.19.

    • This final rule also revises paragraph d.19 to add ‘‘1,2-’’ before the material ‘‘Diethylhydrazine nitrate (DEHN)’’ and adds the CAS Number (CAS 363453– 17–2) after the material ‘‘1,2- Dimethylhydrazinium nitrate.’’

  • This final rule amends ECCN 7A116 to revise the heading to add the term ‘‘pneumatic’’ to the beginning of the control parameter to specify that pneumatic flight control systems are also controlled under ECCN 7A116. In addition, this final rule adds the phrase ‘‘and fly-by-light’’ to the parenthetical phrase ‘‘(including fly-by- wire systems)’’ to specify that the flight control systems classified under this ECCN include fly-by-wire and fly-by- light systems. (MTCR Annex Change, Category II: Item 10.A.1., Rotterdam 2015 Plenary).

  • This final rule amends ECCN 9A012 by adding paragraph b.5 in the List of Items Controlled section to control pneumatic, hydraulic, mechanical, electro-optical, or electromechanical flight control systems (including fly-by-wire and fly-by-light systems) and attitude control equipment designed or modified for UAVs or drones controlled by ECCN 9A012, and capable of delivering at least 500 kilograms payload to a range of at least 300 km. (MTCR Annex Change, Category II: Item 10.A.1., Rotterdam 2015 Plenary). New paragraph b.5 is not intended to control UAVs or drones controlled by either USML paragraph VIII(a) or ECCN 9A610.a.

  • This final rule also makes two conforming changes to ECCN 9A012 for the addition of paragraph 9A012.b.5. Specifically, this final rule is revising the ‘‘MT’’ paragraph in the License Requirements section to add an MT control for the new paragraph 9A012.b.5.

  • This final rule is revising the Related Control Paragraph to include a reference to also see ECCN 9A610, because as noted above, similar types of systems and equipment are controlled under ECCN 9A610.w

  • This final rule amends ECCN 9A610 by revising paragraph w in the List of Items Controlled section to add the term ‘‘pneumatic’’ to the beginning of the control parameter to specify that pneumatic flight control systems are also classified under this paragraph w.

    • In addition, this final rule adds the phrase ‘‘and fly-by-light’’ to the parenthetical phrase ‘‘(including fly-by- wire systems)’’ to specify that the flight control systems classified under this paragraph w include fly-by-wire and fly- by-light systems. (MTCR Annex Change, Category II: Item 10.A.1., Rotterdam 2015 Plenary).

  • This final rule amends ECCN 9B106 by revising paragraphs a.1 and the introductory text of paragraph a.2 in the List of Items Controlled section. The introductory text of paragraph previously referred to both paragraphs a.1 and a.2 as flight conditions, which was not entirely accurate.

    • Therefore, this final rule revises the introductory text of paragraph a by removing the phrase ‘‘simulating all of the following flight conditions’’ and adding in its place the phrase ‘‘having all of the following characteristics.’’ (MTCR Annex Change, Category II: Item 15.B.4.a., Bern 2015 TEM). The altitude and temperature requirements specified in paragraphs a.1.a and a.2.a are flight conditions, but the incorporation or ability to incorporate a shaker unit or other vibration test equipment specified in paragraph a.2 is not strictly a flight condition, but a means of simulating a flight condition, so the introductory text of paragraph a needed to be updated for clarity. This clarification to the introductory text of paragraph a reflects the way this control has previously been interpreted by BIS.

    • This final rule revises the control parameter in paragraph a.1.b to clarify the temperature range goes from below ¥50° C to above 125° C.

    • The revision to paragraph a.1.b does not change the scope of control of 9B610 and this revision will better reflect the control text of the MTCR Annex. (MTCR Annex Change, Category II: Item 15.B.4.a.1.b., Conforming Change to MTCR Annex).

 

Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting or reexporting carrier, or enroute aboard a carrier to a port of export or reexport, on April 4, 2016, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR) so long as they are exported or reexported before May 4, 2016. Any such items not actually exported or reexported before midnight, on May 4, 2016, require a license in accordance with this rule.

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-04-04/pdf/2016-07601.pdf

 

 

 

Singaporean Extradited for Illegal Exports Later Found in IEDs  

By: Danielle McClellan

Lim Yong Nam (known as Steven Lim), a citizen of Singapore, has been extradited from Indonesia to stand trial in Washington, DC on charges of conspiracy.  He allegedly caused 6,000 radio frequency modules to be illegally exported from the US to Iran. Over the course of May 2008 and July 2010, sixteen of the modules were found in unexploded IEDs recovered in Iraq by coalition forces.

Between 2007 and February 2008 Lim and others in Singapore purchased 5 shipments of radio frequency modules from a Minnesota-based company by falsifying documents that stated the modules would stay in Singapore. When the modules were purchased they were always destined for Iran, however, Lim and his Singapore counterparts knew this would not be approved by the US government so they concealed the ultimate origin from the US manufacturer. 

In 2009, when Lim was questioned by US authorities he was adamant that he never participated in any illicit exports to Iran. Communications were later found between Lim and several others regarding the US export rules and the issues with sending the modules to Iran.

Lim is currently facing the following charges:

  • One count of conspiracy to defraud the US

  • One count of smuggling

  • One count of Illegal export of goods from the US to Iran

  • One count of making false statements to the US Government

  • One count of making false statements to law enforcement

More details: https://www.justice.gov/opa/pr/singapore-man-extradited-united-states-connection-plot-involving-exports-iran-us-components

 

 

 

DDTC Agreements Guidelines Updates

Revision 4.3 of the Guidelines for Preparing Agreements has been posted on the DDTC website. Download the document at http://pmddtc.state.gov/licensing/documents/AG_Rev%204.3.pdf.

 

 

 

AESDirect Accounts with Prefixes  “60-79 and "80-99" Are Now Deactivated

(Source: census@subscriptions.census.gov, 21 Apr 2016)

This message is not intended for filers using AESWebLink and AESDirect EDI Upload. It is strictly for the attention of filers using the legacy AESDirect portal at aesdirect.census.gov and the AESPcLink application.

On Monday April 11th at 12:01 AM ET Legacy AESDirect Accounts with prefixes "60-79" were deactivated.

On Monday April 25th at 12:01 AM ET Legacy AESDirect Accounts with prefixes "80-99" were deactivated.

The Refactored AESDirect system in the Automated Commercial Environment was launched on November 30, 2015. Since that time, filers have submitted over 950,000 accepted shipments using the new system.

As part of the transition of AESDirect to the ACE Portal, the ability to file Electronic Export Information via legacy AESDirect at aesdirect.census.gov and the AESPcLink application will be terminated in stages over the next month. All legacy AESDirect filers have been notified of their mandatory transition date to the Refactored AESDirect system upon login and have been provided a specific date their account will be closed off based upon their Filer ID.

As a reminder, your filing in the Refactored AESDirect system does not require vetting or Reports Authorization. Vetting is only required for those companies looking to obtain export reports access outside of the AESDirect Shipment Manager. For more information regarding the transition, please see our AESDirect Transition to ACE - Refactored AESDirect page.

Please make sure you have secured ACE Exporter access and have taken the necessary steps to begin filing in the Refactored AESDirect system in ACE prior to your mandatory transition date. For questions regarding your ACE Account access, please contact the CBP Accounts Service Desk at 1-866-530-4172 option 1, then option 2 or ACE.Support@cbp.dhs.gov.
Please expect 15 to 30 minute waiting times during this transition period.


Complete Transition Schedule:

  • Prefixes 00-19 on 02/29/2016

  • Prefixes 20-39 on 03/14/2016

  • Prefixes 40-59 on 03/28/2016

  • Prefixes 60-79 on 04/11/2016

  • Prefixes 80-99 on 04/25/2016

Once your account is deactivated, there will be no further access to legacy AESDirect to file or amend Electronic Export Information. You will only have access to the Shipment Manager application to view previously submitted shipments. The access to the Shipment Manager Application (for viewing submitted shipments) will be available for all users until May 20, 2016.

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

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