Home / News / The Export Control Update: November 2016

New Changes to EAR and ITAR Related to Military Aircraft and Gas Turbine Engines

On November 21, 2016, DDTC published a final rule revising USML paragraphs VII(h)(29) and XIX (f) (12). This rule mainly affects a narrow range of articles related to next-generation platforms that were previously subject to the Export Administration Regulations (EAR) and will soon become subject to the International Traffic in Arms Regulations (ITAR) as of December 31, 2016.

It’s important to remember the following related to this rule beginning December 31, 2016:

  • Articles subject previously to the EAR but now subject to the ITAR under this rule, any unshipped balance under a Department of Commerce authorization will be null and void

  • The ITAR will regulate the reexport or retransfer of articles subject previously to the EAR but now subject to the ITAR under this rule

ITAR regulation Changes:

  • VIII(h)(29) Any of the following equipment if specially designed for a defense article described in paragraph (h)(1): (i) Scale test models; (ii) Full scale iron bird ground rigs used to test major aircraft systems; or (iii) Jigs, locating fixtures, templates, gauges, molds, dies, or caul plates.
    (i) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (h) of this category and classified technical data directly related to items controlled in ECCNs 9A610, 9B610, 9C610, and 9D610 and defense services using classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)

  • XIX (f)(12) Any of the following equipment if specially designed for a defense article described in paragraph (f)(1): Jigs, locating fixtures, templates, gauges, molds, dies, caul plates, or bellmouths.
    (g) Technical data (see § 120.10 of this subchapter) and defense services (see § 120.9 of this subchapter) directly related to the defense articles described in paragraphs (a) through (f) of this category and classified technical data directly related to items controlled in ECCNs 9A619, 9B619, 9C619, and 9D619 and defense services using the classified technical data. (See § 125.4 of this subchapter for exemptions.) (MT for technical data and defense services related to articles designated as such.)

The Bureau of Industry and Security (BIS) simultaneously published a rule related to this rule that adds clarifying text to the descriptions of the types of military aircraft controlled by the CCL (items subject only to the anti-terrorism reason for control). T

BIS Changes:

  • This rule updates the text of ECCN 9A610.w to reflect amendments made to that paragraph since the February 9 rule was published by adding references to ‘‘pneumatic’’ and ‘‘fly-by-light’’ flight control systems (see 81 FR 19026, April 4, 2016). These additions were made to align the descriptions in ECCN 9A610.w with the description of such systems in the current Equipment, Software And Technology Annex Technology Annex of the MTCR.

  • Section 770.2 is amended by adding paragraph (n)

  • ECCN 0A604—[Amended] 4. In in Supplement No. 1 to part 774, ECCN 0A604, remove Note 1 to 0A604.x and redesignate Note 2 to 0A604.x as Note to 0A604.x.

  • ECCN 0A614—[Amended]

  •  In ECCN 0A614, remove Note 3 to 0A614.

  • In ECCN 3A611, in the ‘‘List of Items Controlled’’ section, ‘‘Items’’ paragraph, revise paragraph .x and revise paragraph .y, introductory text

  • In ECCN 8A992, revised the related controls paragraph

  • Revise ECCN 9A115

  • In ECCN 9A604, remove Note 1 to 9A604.x and redesignate Note 2 to 9A604.x as Note to 9A604.x.

  • In ECCN 9A610, revise the ‘‘Control(s)’’ table in the ‘‘License Requirements’’ section and the ‘‘List of Items Controlled”

  • In ECCN 9A619, the List of Items Controlled section is amended by:

    • Revising the ‘‘Related Controls’’ paragraph;

    •  Revising the ‘‘Related Definitions’’ paragraph;

    • Removing the note that immediately follows paragraph .e in the ‘‘Items’’ paragraph;

    • Revising paragraph .x in the ‘‘Items’’ paragraph; and

    • Revising paragraph .y in the ‘‘Items’’ paragraph.

  • In ECCN 9A620, remove the note to 9A620.b that immediately follows paragraph .x.

  • In ECCN 9B610, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section

  • In ECCN 9B619, revise the ‘‘Related Controls’’ paragraph in the List of Items Controlled section

  • In ECCN 9C610, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section

  • In ECCN 9C619, revise the heading, and the ‘‘Items’’ paragraph of the ‘‘List of Items Controlled’’ section

  • In ECCN 9E610, in the ‘‘List of Items Controlled’’ section, the ‘‘Items’’ paragraph is amended by:

    • Removing the word ‘‘or’’ from the end of paragraph .b.13;

    • Removing the period from the end of paragraph .b.14 and adding in its place a semicolon followed by the word ‘‘or’’; and

    • Adding paragraph .b.15.

  • In ECCN 9E619, the ‘‘List of Items Controlled’’ section is amended by revising the ‘‘Related Controls’’ paragraph, and in the ‘‘Items’’ paragraph:

    • Revising the Note that immediately follows paragraph .a;

    • Removing the word ‘‘or’’ from the end of paragraph .b.8;

    • Removing the period from the end of paragraph .b.9 and adding in its place a semicolon followed by the word ‘‘or’’;  and

    • Adding paragraph b.10.

State Federal Register Notice: http://pmddtc.state.gov/documents/1400_AD89.pdf

BIS Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-11-21/pdf/2016-27777.pdf

 

 

 

Tips on Setting up an Account in the Automated Commercial Environment

(Source: Global Reach Blog)      

This blog provides a few tips to address some common questions and issues for those who set-up exporter accounts in ACE on behalf of a client, authorized agents and freight forwarder roles, as well as with existing ACE importer accounts. Exporter accounts and the AESDirect filing system now reside in the Automated Commercial Environment (ACE).

Exporter Roles

  "Exporter" is an account type within the ACE account structure used for all export related roles including:

  • Authorized agent

  • Freight forwarder

  • Exporting company (U.S. Principal Party in Interest)

 When you register in the ACE, you will also be registering for an ACE Exporter Account, regardless of your role in the export transaction.

 

Filing on Behalf of a Client

When filing on behalf of another company, the U.S. Principal Party in Interest (USPPI) section in ACE should be completed the same way it was for the legacy AESDirect system. An additional USPPI Employee Identification Number (EIN) should only be added to a top account for company subsidiaries. Authorized agents and freight forwarders should not add an USPPI EIN to their account.

 

Account Structure for Authorized Agents and Freight Forwarders

A USPPI will not be able to register in ACE if a forwarder or agent added the USPPI's EIN to their ACE Top Account. The USPPI will not be able to get access to AESDirect or their ACE Export Reports.  If you notice this issue, the forwarder or agent must call the ACE Account Service Desk at 1-866-530-4172, option 1, then option 2 to submit a service ticket to solve this issue.

 

Existing ACE Importer Accounts

Any company with an existing ACE Importer Account needs to add the exporter role to their account to get instant access to their export reports. No vetting would be required in this case.

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

  • Telephone: (800) 549-0595; select option 1 for AES.

  • Email: askaes@census.gov

  • International Trade Management Division Website

 

 

 

Update on Cote d’Ivoire, Liberia, Sri Lanka and Vietnam Embargoes

Effective November 4, 2016 the Bureau of Industry and Security (BIS) has amended the Export Administration Regulations (EAR) to implement changes in controls on the arms and related material to Cote d’Ivoire, Liberia, Sri Lanka, and Vietnam.  Cote d’Ivoire, Liberia, Sri Lanka, and Vietnam will be removed from Country Group D, this change means that the countries will no longer be subject to additional restrictions including de minimis US content, license exception availability, and licensing policies for specific items.

This final ruling has also added the addition of India as a member of the Missile Technology Control Regime (MTCR) which occurred on June 27, 2016.

The changes are:

  • Supplement No. 1 to part 738 ‘‘Commerce Country Chart’’ is amended by removing the footnote notation number 1 from ‘‘Cote d’Ivoire’’ and ‘‘Liberia’’

  • Supplement No. 1 to part 740, Country Group D, is amended by:

    • Removing the entries for ‘‘Cote d’Ivoire’’, ‘‘Liberia’’ and ‘‘Sri Lanka’’; and

    • Removing the ‘‘X’’ under column D:5 ‘‘U.S. Arms Embargoed Countries’’ for ‘‘Vietnam’’

  • Section 742.5 is amended by removing the clause ‘‘, and India as an MTCR adherent,’’ from the first sentence of paragraph (d)

  • Section 746.1 is amended by removing ‘‘Cote d’Ivoire (Ivory Coast),’’ and ‘‘Liberia,’’ from the list of countries in paragraph (b)(2)

Federal Register Notice: https://www.gpo.gov/fdsys/pkg/FR-2016-11-04/pdf/2016-26535.pdf

 

 

 

New CJ Request System Up and Running

Beginning November 21, 2016, a new online system for Commodity Jurisdiction (CJ) determination requests will take the place of the External Form Submission (EFS). This system is the first release of the Defense Export Control and Compliance System (DECCS) which is part of DDTC’s IT Modernization effort. ELISA will still be available for users to track the status of their requests.

Enhancements Coming Soon:

  • One Stop Shopping: a single location to complete and submit the DS-4076

  • Web Based: no more Adobe PDF forms

  • Digital Signature: no more pen and ink signatures


Important Dates:

  • November 16, 2016: Last day to submit a CJ request via the EFS application

  • November 17 to 20, 2016: DDTC prepares for deployment. No CJ requests will be accepted

  • November 21, 2016: DECCS CJ application is released

Important Links:

  • PM/DDTC: monitor for up to date announcements

  • DECCS CJ: to access the new CJ application

  • ELISA: to track your CJ request

Questions?

Send questions to the PM/DDTC Special Projects Team: PM_DDTCProjectTeam@state.gov (note the underscore _ after PM_ in the email address)

 

 

 

 

US Oil & Gas Company Fined $25 Million from BIS & OFAC

National Oilwell Varco, Inc., a Delaware corporation, and its Canadian subsidiaries, Dreco Energy Services, Ltd (Dreco) and NOV Elmar (NOV) have agreed to pay a combined $25 Million for violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations.

The charges are as follows:

  • Between 2002 and 2005, National Oilwell Varco approved four Dreco commission payments to a UK based entity related to the sale and exportation of goods from Dreco to Iran. The four commission payments had a combined value of $2,630,091.

  • Between 2006 and 2008 National Oilwell Varco was involved in two transactions involving the sale and exportation of goods to Iran that totaled $13,596,980.

  • Between 2003 and 2007, Dreco knowingly exported (indirectly) goods from the US to fill seven orders from Iranian customers. The transactions totaled $526,480.

  • During 2007 and 2009, Dreco engaged in 45 transactions involving the sale of goods to Cuba totaling $1,707,964.

  • NOV engaged in two transactions between 2007 and 2008 involving the sale of goods or services to Cuba that totaled $103,119.

  • Finally, between 2005 and 2006 NOV engaged is a $20,928 transaction involving the exportation of goods from the US to Sudan.

OFAC considered the violations to be egregious since senior-level executives approved the commission payments and the NOV “willfully blinded” itself of the regulation violations by continuing to approve payments and communications. NOV will pay OFAC a settlement of $5,976,028, this will be deemed satisfied with its payment of $25,000,000 in relation to its settlement agreement between OFAC, BIS, and a Non-Prosecution Agreement (NPA).

OFAC considered the following to be aggravating factors:

  1. NOV’s conduct that gave rise to the Apparent Violations demonstrated at least reckless disregard for U.S. sanctions requirements;

  2. Senior managers at National Oilwell Varco, Inc. and Dreco knew or had reason to know that their respective business transactions giving rise to the ITSR-related apparent violations involved Iran;

  3. NOV’s conduct caused harm to sanctions program objectives by providing a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan;

  4. NOV is a large and sophisticated company that is engaged in the business of providing oilfield services around the world, including regions with high sanctions risk; and

  5. NOV’s compliance program at the time of the Apparent Violations was wholly inadequate.  

OFAC considered the following to be mitigating factors:

  1. NOV had not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations;

  2. NOV cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and

  3. NOV has made efforts to remediate its compliance program and agreed to further compliance enhancements.

More Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20161114_varco.pdf

 

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