Company Pays $1,220,400 for 37 Violations of the Iranian Transactions and Sanctions Regulations

2018/02/08

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced in December 2017, a $1,220,400 settlement with DENTSPLY SIRONA INC. (DSI), a US company with the successor in interest to DENTSPLY International Inc. (“DII” and, together with DSI, “DENTSPLY”) to settle a potential civil liability for 37 apparent violations of § 560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR).

Around November 26, 2009 and July 5, 2012, DII subsidiaries UK International (“UKI”) and DS Healthcare Inc. (d.b.a. Sultan Healthcare), (“Sultan”), exported 37 shipments of dental equipment and supplies from the US, directly or indirectly to Iran, to distributors in third-countries, with knowledge or reason to know that the goods were ultimately destined for Iran.  OFAC determined that DII did not voluntarily disclose the apparent violations and that the apparent violations constitute a non-egregious case.

Full Details: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20171206.aspx


BIS Publishes Clarifications to the Export Administration Regulations for the Use of License Exceptions

2018/02/08

Source: Federal Register

The goal of this final rule is to provide guidance based on existing agency understanding and practice on the use of License Exception GOV and STA. Specifically, this final rule makes three clarifications to License Exception Governments, International Organizations, International Inspections under the Chemical Weapons Convention, and the International Space Station (GOV) and adds five notes, along with making other minor clarifications, to License Exception Strategic Trade Authorization (STA).

Changes are as follows:

PART 740

Section 740.11 is amended:

  1. By revising paragraph (b)(2)(ii);
  2. By revising the introductory text of paragraph (b)(2)(iii)(C);
  3. By adding Note 1 to paragraph (b)(2)(iii)(C); and
  4. By adding Note 1 to paragraph (c)(1) to read as follows:
  • 740.11 Governments, International Organizations, International Inspections under the Chemical Weapons Convention, and the International Space Station (GOV).

* * * * *

(b) * * *

(2) * * *

(ii) Exports, reexports, and transfers (in-country) made by or consigned to a department or agency of the U.S. Government. This paragraph authorizes exports, reexports, and transfers of items when made by or consigned to a department or agency of the U.S. Government solely for its official use or for carrying out any U.S. Government program with foreign governments or international organizations that is authorized by law and subject to control by the President by other means. This paragraph does not authorize a department or agency of the U.S. Government to make any export, reexport, or transfer that is otherwise prohibited by other administrative provisions or by statute. Contractor support personnel of a department or agency of the U.S. Government are eligible for this authorization when in the performance of their duties pursuant to the applicable contract or other official duties. ‘Contractor support personnel’ for the purpose of this provision means those persons who provide administrative, managerial, scientific or technical support under contract to a U.S. Government department or agency (e.g., contractor employees of Federally Funded Research Facilities or Systems Engineering and Technical Assistance contractors). The term ‘contractor support personnel’ for purposes of this paragraph (b)(2)(ii) is limited to those individuals who are providing such support within a U.S. Government owned or operated facility or under the direct supervision of a U.S. government employee (i.e., an individual directly employed by the U.S. Government). Private security contractors are not ‘contractor support personnel’ for purposes of this paragraph (b)(2)(ii) because although they may work within a U.S. Government owned or operated facility, such contractors do not provide administrative, managerial, scientific or technical support under contract to the U.S. Government. This authorization is not available when a department or agency of the U.S. Government acts as a transmittal agent on behalf of a non- U.S. Government person, either as a convenience or in satisfaction of security requirements.

(iii) * * *

(C) This paragraph authorizes the ‘temporary’ export, reexport, or transfer (in-country) of an item in support of any foreign assistance or sales program authorized by law and subject to the control of the President by other means, when:

* * * * *

Note 1 to paragraph (b)(2)(iii)(C): ‘Temporary,’ for purposes of paragraph (b)(2)(iii)(C) of this section, means that four years from the date of an item’s initial export, reexport, or transfer (in-country), it must be returned to the exporter, reexporter, or transferor or its disposition otherwise authorized (e.g., pursuant to a license or another license exception) in accordance with the EAR.

* * * * *

(c) * * *

(1) * * *

Note 1 to paragraph (c)(1):

Civil intergovernmental organizations (such as the European Space Agency (ESA)) where the membership is limited to national governments that are ‘cooperating governments’ are also considered ‘cooperating governments’ for purposes of paragraph (c)(1) of this section. If the membership of the civil intergovernmental organization includes any national governments or other organizations that are not ‘cooperating governments,’ such civil intergovernmental organizations are not considered ‘cooperating governments’ for purposes of paragraph (c)(1) of this section. For example, civil intergovernmental organizations such as the European Aviation Safety Agency (EASA), the United Nations, and the World Bank do not fall within paragraph (c)(1) of this section because their membership includes governments that are not ‘cooperating governments.’

* * * * *

Section 740.20 is amended:

  1. By adding Note 1 to paragraph (a);
  2. By adding Note 1 to paragraphs (b)(2) and (b)(3) at the end of paragraph (b)(3);
  3. By revising paragraphs (d)(1)(i) and (d)(1)(ii);
  4. By revising paragraph (d)(2); and
  5. By adding Note 1 to paragraph (d)(3) to read as follows:
  • 740.20 License Exception Strategic Trade Authorization (STA).

* * * * *

(a) * * *

Note 1 to paragraph (a): License Exception STA authorizes transfers (in-country) but is only needed to authorize a transfer (in- country) when an EAR authorization is required. If a transfer (in-country) is not being made under STA, the requirements specified in this section do not apply (see Note 1 to paragraphs (b)(2) and (b)(3) of this section for requirements specific to staying within the scope of the original License Exception STA authorization and the concept of ‘completing the chain’ for purposes of ‘‘600 series’’ items originally authorized under License Exception STA).

(b) * * *

(3) * * *

Note 1 to paragraphs (b)(2) and (b)(3): Any export, reexport, or transfer (in-country) originally authorized under License Exception STA must stay within the scope of the original authorization. For example, for ‘‘600 series’’ items authorized under License Exception STA, such items must be provided to an eligible ultimate end user, such as a Country Group A:5 military, to stay in compliance with the original authorization. This requirement for the ‘‘600 series’’ is referred to as ‘completing the chain,’ meaning regardless of how many times the ‘‘600 series’’ item is transferred (in-country) or whether the ‘‘600 series’’ item is incorporated into higher level assemblies or other items, the ‘‘600 series’’ item must ultimately be provided to an eligible ultimate end user, or be otherwise authorized under the EAR. This applies regardless of whether the ‘‘600 series’’ item has been incorporated into a foreign-made item that may no longer be ‘‘subject to the EAR.’’ Because the other items eligible for authorization under License Exception STA (9×515 and other non-600 series ECCNs) do not include the ‘‘600 series’’ requirements specific to ultimate end user, this ‘completing the chain’ concept does not apply to 9×515 and other non-600 series ECCNs authorized under License Exception STA. However, the original export, reexport, or transfer (in-country) made under License Exception STA for 9×515 and other non-600 series ECCNs still must comply with the original authorization—meaning the terms and conditions of License Exception STA.

* * * * *

(d) Conditions—(1) Requirement to furnish Export Control Classification Number.

(i) The exporter must furnish to the consignee the ECCN of each item to be exported pursuant to this section. Once furnished to a particular consignee, the ECCN that applies to any item need not be refurnished to that consignee at the time the same exporter makes an additional export of the same item, if the information remains accurate at the time of the additional export.

(ii) A reexporter or transferor must furnish to subsequent consignees the ECCN, provided by the exporter or a prior reexporter or transferor, of each item to be reexported or transferred (in- country) pursuant to this section. Once furnished to a particular consignee, the ECCN that applies to any item need not be refurnished to that consignee at the time the same reexporter or transferor makes an additional reexport or transfer (in-country) of the same item, if the information remains accurate at the time of the additional reexport or transfer (in- country).

* * * * *

(2) Prior Consignee Statement. The requirements in this paragraph (d)(2) apply to each party using License Exception STA to export, reexport, or transfer (in-country), including reexporters and transferors of items previously received under License Exception STA. The exporter, reexporter, or transferor must obtain the following statement in writing from its consignee(s) prior to exporting, reexporting, or transferring (in-country) the item and must retain the statement in accordance with part 762 of the EAR. One statement may be used for multiple exports, reexports, or transfers (in- country) of the same items between the same parties so long as the party names, the description(s) of the item(s) and the ECCNs are correct. The exporter, reexporter, or transferor must maintain a log or other record (such as documents created in the ordinary course of business) that identifies each shipment made pursuant to this section and the specific consignee statement that is associated with each shipment. For purposes of this paragraph (d)(2), a log or other record is not required for intangible (i.e., electronic or in an otherwise intangible form) exports, reexports, or transfers (in-country) made under License Exception STA, but an exporter, reexporter, or transferor is required, prior to making any export, reexport, or transfer (in-country), to ensure that a prior consignee statement has been obtained pursuant to the requirements of this paragraph (d)(2). (See Note 1 to paragraph (d)(3) of this section for additional guidance on intangible exports, reexports, and transfers (in-country), including best practices). Paragraphs (d)(2)(i) through (vi) of this section are required for all transactions. In addition, paragraph (d)(2)(vii) is required for all transactions in ‘‘600 series’’ items and paragraph (viii) of this section is required for transactions in ‘‘600 series’’ items if the consignee is not the government of a country listed in Country Group A:5 (See supplement no. 1 to part 740 of the EAR). Paragraph (d)(2)(viii) is also required for transactions including 9×515 items.

[INSERT NAME(S) OF CONSIGNEE(S)]:

(i) Is aware that [INSERT GENERAL DESCRIPTION AND APPLICABLE ECCN(S) OF ITEMS TO BE SHIPPED (e.g., aircraft parts and components classified under ECCN 9A610)] will be shipped pursuant to License Exception Strategic Trade Authorization (STA) in § 740.20 of the United States Export Administration Regulations (15 CFR 740.20);

(ii) Has been informed of the ECCN(s) noted above by [INSERT NAME OF EXPORTER, REEXPORTER OR TRANSFEROR];

(iii) Understands that items shipped pursuant to License Exception STA may not subsequently be reexported pursuant to paragraphs (a) or (b) of License Exception APR (15 CFR 740.16(a) or (b)); (iv) Agrees to obtain a prior consignee statement when using License Exception STA for any reexport or transfer (in-country) of items previously received under License Exception STA; (v) Agrees not to export, reexport, or transfer these items to any destination, use or user prohibited by the United States’ Export Administration Regulations;

(vi) Agrees to provide copies of this document and all other export, reexport, or transfer records (i.e., the documents described in 15 CFR part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7;

(vii) Understands that License Exception STA may be used to export, reexport, and transfer (in-country) ‘‘600 series’’ items to persons, whether non- governmental or governmental, only if they are in and, for natural persons, nationals of a country listed in Country Group A:5 (See supplement no. 1 to part 740 of the EAR) or the United States and if:

(A) The ultimate end user for such items is the armed forces, police, paramilitary, law enforcement, customs, correctional, fire, or a search and rescue agency of a government of one of the countries listed in Country Group A:5 or the United States Government;

(B) For the ‘‘development,’’ ‘‘production,’’ operation, installation, maintenance, repair, overhaul, or refurbishing of an item in one of the countries listed in Country Group A:5 or the United States that will be for one, or more, of the following purposes:

(1) Ultimately to be used by any such government agencies in one of the countries listed in Country Group A:5 or the United States Government; or

(2) Sent to a person in the United States and not for subsequent export under § 740.9(b)(1) (License Exception TMP for items moving in transit through the United States); or

(C) The United States Government has otherwise authorized the ultimate end use, the license or other authorization is in effect, and the consignee verifies in writing that such authorization exists and has provided the license or other approval identifier to the exporter, reexporter or transferor (as applicable).

(viii) Agrees to permit a U.S. Government end-use check with respect to the items.

[INSERT NAME(S) AND TITLE(S) OF PERSON(S) SIGNING THIS DOCUMENT, AND DATE(S) DOCUMENT IS SIGNED].

Note 1 to paragraph (d)(2): When multiple consignees who form a network engaged in a production process (or other type of collaborative activity, such as joint development) will be receiving items under License Exception STA, a single prior consignee statement for multiple consignees may be used for any item eligible for export, reexport, or transfer (in-country) under License Exception STA, provided all of the applicable requirements of License Exception STA are met, including those specified in paragraph (d)(2).

Note 2 to paragraph (d)(2): Country Group A:5 and A:6 government consignees are not required to sign or provide a prior consignee statement.

(3) * * *

Note 1 to paragraph (d)(3): While the exporter, reexporter, and transferor must furnish the applicable ECCN and obtain a consignee statement prior to export, reexport or transfer (in-country) made under License Exception STA in accordance with the requirements of paragraphs (d)(1) and (d)(2) of this section, intangible (i.e., electronic or in an otherwise intangible form) exports, reexports, and transfers (in-country) made under License Exception STA are not subject to the notification requirements of paragraph (d)(3) of this section. However, any export, reexport, or transfer (in-country) made under STA must stay within the scope of the original authorization.

* * * * *

Federal Register: https://www.bis.doc.gov/index.php/documents/regulations-docs/federal-register-notices/federal-register-2017/2163-82-fr-50511/file


Amendments to Implement United States Policy Toward Cuba

2018/02/08

Source: Federal Register

Effective November 9, 2017, The Bureau of Industry and Security (BIS) has amends the licensing policy for Cuba and portions of three license exceptions available for exports and reexports to Cuba: License Exceptions Gift Parcels and Humanitarian Donations (“GFT”), Consumer Communications Devices (“CCD”), and Support for the Cuban People (“SCP”).

Changes are as follows:

PART 740

Section 740.12 is amended by revising paragraph (a)(2)(v)(A) to read as follows:

Gift parcels and humanitarian donations (GFT).

(a) * * *

(2) * * *

(v) * * * (A) No gift parcel may be sent to any of the following officials of the Cuban government: Ministers and Vice-Ministers; members of the Council of State; members of the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; Director Generals and sub-Director Generals and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; or members and employees of the Supreme Court (Tribuno Supremo Nacional).

* * * * *

Section 740.19 is amended by revising paragraph (c)(2)(i) to read as follows:

Consumer  Communications  Devices (CCD).

* * * * *

(c) * * *

(2) * * *

(i) Ineligible Cuban Government Officials. Ministers and Vice-Ministers; members of the Council of State; members of the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; Director Generals and sub-Director Generals and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; or members and employees of the Supreme Court (Tribuno Supremo Nacional).

* * * * *

Section 740.21 is amended by:

  1. Revising paragraph (b)(1);
  2. Removing paragraphs (b)(2) and (3);
  3. Redesignating paragraph (b)(4) as new paragraph (b)(2); and
  4. Revising paragraph (d)(4)(ii) to read as follows:

Support for the Cuban People (SCP).

* * * * *

Start Printed Page 51986

(b) * * *

(1) Items for use by the Cuban private sector for private sector economic activities, except for items that would be used to:

(i) Primarily generate revenue for the state; or

(ii) Contribute to the operation of the state, including through the construction or renovation of state-owned buildings.

(2) Items sold directly to individuals in Cuba for their personal use or their immediate family’s personal use, other than officials identified in paragraphs (d)(4)(ii) or (iii) of this section.

* * * * *

(d) * * *

(4) * * *

(ii) Ministers and Vice-Ministers; members of the Council of State; members of the Council of Ministers; members and employees of the National Assembly of People’s Power; members of any provincial assembly; local sector chiefs of the Committees for the Defense of the Revolution; Director Generals and sub-Director Generals and higher of all Cuban ministries and state agencies; employees of the Ministry of the Interior (MININT); employees of the Ministry of Defense (MINFAR); secretaries and first secretaries of the Confederation of Labor of Cuba (CTC) and its component unions; chief editors, editors and deputy editors of Cuban state-run media organizations and programs, including newspapers, television, and radio; or members and employees of the Supreme Court (Tribuno Supremo Nacional); and

* * * * *

PART 746

Section 746.2 is amended by revising Note 2 to Paragraph (b)(3)(i) to read as follows:

Cuba.

* * * * *

(b) * * *

(3) * * *

(i) * * *

Note 2 to paragraph (b)(3)(i):

The policy of case-by-case review in this paragraph is intended to facilitate exports and reexports to meet the needs of the Cuban people. Accordingly, BIS generally will deny applications to export or reexport items for use by state-owned enterprises, agencies, and other organizations that primarily generate revenue for the state, including those engaged in tourism and those engaged in the extraction or production of minerals or other raw materials. Applications for export or reexport of items destined to the Cuban military, police, intelligence or security services also generally will be denied. Additionally, pursuant to section 3(a) of the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (NSPM), dated June 16, 2017, BIS generally will deny applications to export or reexport items for use by entities or subentities identified by the Department of State in the Federal Register or at https://www.state.gov/​e/​eb/​tfs/​spi/​cuba/​cubarestrictedlist/​index.htm, unless such transactions are determined to be consistent with sections 2 and 3(a)(iii) of the NSPM.

Federal Register: https://www.federalregister.gov/documents/2017/11/09/2017-24448/amendments-to-implement-united-states-policy-toward-cuba


Treasury Publishes List of Countries Requiring Cooperation with an International Boycott

2018/02/08

Source: Federal Register

The Department of the Treasury has named the following countries as requiring or may requiring participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-01-08/pdf/2018-00123.pdf


Tips on How to Resolve AES Fatal Errors

2018/02/08

Source: census@subscriptions.census.gov

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:  107

  • Narrative: Country of Ultimate Destination Unknown
  • Reason: The Country of Ultimate Destination reported is not valid in AES.
  • Resolution: The Country of Ultimate Destination Code must be a valid ISO country code listed in the ‘Appendix C, ISO Country Codes’.  Verify the Country of Ultimate Destination, correct the shipment and resubmit.

Fatal Error Response Code:  628

  • Narrative: 1st Unit of Measure Code / Schedule B/HTS Mismatch
  • Reason: The Unit of Measure (1) reported does not match the Unit of Measure (1) required for the Schedule B/ HTS Number reported.
  • Resolution: The Unit of Measure (1) must match exactly the Unit of Measure (1) prescribed by the Schedule B/HTS Number reported.  See Appendix K – Units of Measure Codes Verify the Unit of Measure (1) required for the reported Schedule B/HTS Number, 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 post departure but not later than five calendar days after departure.

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


BIS Corrects ECCNs 0D606, 0E606, and 8A609

2018/02/08

Source: Federal Register

On December 27, 2017 BIS published a final rule (82 FR 61153) which made corrections to certain provisions of the EAR, including the CCL. The corrections were editorial in nature and did not affect any license requirements. In a nutshell, the original text in 0D606 and 0E606 was erroneously replaced with the text for 0D614 and 0E614. This rule fixes the issue and reinstates paragraph (2) of the Special Conditions for STA in 8A609.

ECCNs 0D606 and 0E606: The December 27 rule amended ECCN subparagraphs 0D606.a and 0E606.a to include references to ECCNs 0B606 and 0C606. During drafting, the License Requirements section and the text following the revised subparagraphs for both ECCNs was exchanged with the text for ECCNs 0D614 and 0E614, respectively. In order to follow the guidelines of the original preamble, this correction to the December 27 rule restores the original License Requirements section and the text of ECCNs 0D606 and 0E606 following subparagraph a in both ECCNs. In addition, this rule replaces the incorrect reference to 0D606 with 0E606 in the Special Conditions for STA of ECCN 0E606.

ECCN 8A609: The December 27 rule amended ECCN 8A609 by revising the title reference in these ECCNs to match the current title of § 740.20(g) and in doing so inadvertently removed paragraph (2) of the Special Conditions for STA. This rule restores paragraph (2) of the Special Conditions for STA in ECCN 8A609.

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-01-08/pdf/2018-00059.pdf


Employer Identification Numbers: Guidance for Exporting Goods From the United States

2018/02/08

Written by: Kristi Sellers, Trade Regulations Branch, International Trade Management Division

Exporting goods from the United States to a foreign country may require having Electronic Export Information (EEI) in the Automated Commercial Environment (ACE). If filing is required for your shipment, an Employer Identification Number (EIN) issued by the U.S. Department of Treasury, Internal Revenue Service (IRS) is needed prior to exporting.

What is an EIN?

An EIN is a nine-digit numerical code typically used by the IRS to identify a business entity. EINs are also used by individuals exporting goods from the United States when applying for an ACE exporter account. Individuals exporting from the United States must have an EIN even if they do not own a business. Whether you are exporting on behalf of a U.S. company or simply shipping a personal vehicle or gift to a family member, the requirement to obtain an EIN remains the same.

Why do you need an EIN?

The Office of Management and Budget mandated the U.S. Census Bureau eliminate the collection of the Social Security Number (SSN) for EEI filing purposes. This rule was implemented to ensure that a U. S. citizen’s or resident’s SSN is protected in accordance with the Privacy Act of 1974, Title 5, United States Code, Section 552a. The Census Bureau complied with this federal law by eliminating the use of the SSN as of December 3, 2009.

How do you obtain an EIN?

An individual can apply for an EIN by phone, fax, mail and online. The approximate timeframes for receiving an EIN are as follows:

  • Online or by telephone: Approximately 15 minutes.
  • Fax: Four business days.
  • Mail: Four weeks.

To access step-by-step instructions to apply for an EIN, go to www.census.gov/foreign-trade/regulations/trb_obtaining_an_ein.pdf.

To apply for an EIN online, go to www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online.

For additional information on applying for an EIN, go to <www.irs.gov/businesses/small-businesses-self-employed/online-ein-frequently-asked-questions.

For questions about obtaining an EIN, please contact the EIN Help Line at 1-800-829-4933.


Tips on How to Resolve AES Fatal Errors

2018/02/08

Source: census@subscriptions.census.gov

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:  107

  • Narrative: Country of Ultimate Destination Unknown
  • Reason: The Country of Ultimate Destination reported is not valid in AES.
  • Resolution: The Country of Ultimate Destination Code must be a valid ISO country code listed in the ‘Appendix C, ISO Country Codes’.  Verify the Country of Ultimate Destination, correct the shipment and resubmit.

Fatal Error Response Code:  628

  • Narrative: 1st Unit of Measure Code / Schedule B/HTS Mismatch
  • Reason: The Unit of Measure (1) reported does not match the Unit of Measure (1) required for the Schedule B/ HTS Number reported.
  • Resolution: The Unit of Measure (1) must match exactly the Unit of Measure (1) prescribed by the Schedule B/HTS Number reported.  See Appendix K – Units of Measure Codes  Verify the Unit of Measure (1) required for the reported Schedule B/HTS Number, 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 post departure but not later than five calendar days after departure.

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


New Schedule B Numbers Have Arrived

2018/02/08

Source: Global Reach Blog

The Schedule B commodity classification codes for export have been updated for 2018. Codes are updated every January and July at the 10-digit level. In this blog, we will explore three resources available on our website to help you navigate these updates. All resources can be found online.

Schedule B Book

From our web site the new 2018 Schedule B book is available in the red box labeled “Browse” in HTML and PDF formats. Simply click on the link “Look through HTML or PDF versions of Schedule B book content” next to 2018 to browse section and chapter notes and Schedule B numbers by chapter.

All current and historic codes added or removed from the Schedule B going back to the last major revision, in January 2017, can be found in the “Add/Delete List” under “Browse chapters.”

 

Obsolete Codes List

Outdated Schedule B codes are available in the red box labeled “Obsolete Codes.” The “Obsolete to New” list is a quick way to see which codes are no longer valid, starting January 2018, and which new codes replaced them.

Notice that from 2016 forward, there were obsolete codes in both January and July. Before 2016, the Schedule B numbers were only updated annually.

 

Schedule B Search Engine

The third resource available is the Schedule B Search Engine.

Type a Schedule B number into the search engine, and if it appears, then the number is still valid. However, if the number is outdated, the search engine will show “No Results” for the code.

For more information on the new Schedule B numbers visit International Trade online; call the International Trade Help Line at 800-549-0595, Option 2 for Commodity Classification Assistance; or email eid.scheduleb@census.gov.


Key Developments in Canada’s Economic Sanctions and Export Controls During 2017 & What to Expect in 2018

2018/02/08

By: John W. Boscariol, Robert A. Glasgow, Martha Harrison, Claire Seaborn

Over the past year, there have been major changes to Canada’s export controls and economic sanctions regimes that will have a significant impact on companies doing business abroad during 2018 and beyond. Firms will need to familiarize themselves with these changes and, if they have not already, ensure they are incorporated into their compliance polices and controls. More than ever before, companies should carefully track and monitor the parties they have direct and indirect dealings with and where their products and technology end up.

This article begins with a summary of parliamentary recommendations to improve Canada’s sanctions regime, and then launches into reforms that have already taken shape, such as the creation of a publicly-accessible sanctions database and the adoption of a new Magnitsky Law. Second, it discusses recent updates to Canada’s export controls and economic sanctions laws. Third, we explore Canada’s preparations to join the Arms Trade Treaty with Bill C-47, including expected developments in 2018.

(1) Parliamentary Committee Proposes Sanction Regime Reforms

On April 6, 2017, the Standing Committee on Foreign Affairs and International Development (the “Committee”) issued a Report entitled “A Coherent and Effective Approach to Canada’s Sanctions Regimes: Sergei Magnitsky and Beyond” (the “Report”).[1] The Report is a result of a year-long comprehensive parliamentary review of Canada’s economic sanctions regime. Over the course of 13 meetings, the Committee heard 43 witnesses, including government officials, academics, practitioners, victims and their relatives, and scrutinized numerous written briefs and other documents.

In the Report, the Committee noted the extreme complexity of Canada’s sanctions regime and the very significant challenges facing Canadian banks, exporters and others seeking to do business abroad, acknowledging that multiple legislative acts, regulations and actors often cause confusion for compliance and enforcement. The Committee found that more government guidance was necessary to fight over-compliance – companies often take a conservative and cautious approach, leading to increased costs and a negative impact on export business. Ultimately, the Report makes 13 recommendations for reform that are detailed below, some of which have already been adopted.

(a) Committee makes 13 recommendations for reform

As a result of this extensive study, the Committee came up with 13 recommendations to improve the effectiveness of Canada’s sanctions regime. The recommendations are that the Government of Canada should:

  1. ensure that sanctions imposed using more than one of the United Nations Act (“UNA”)[2], the Special Economic Measures Act (“SEMA”)[3] or the Export and Import Permits Act (“EIPA”)[4] are imposed in a complementary and coherent manner, and amended concurrently when necessary;
  2. implement the decisions of the United Nations Security Council regarding its mandated sanctions regimes through the timely enactment, amendment, and repeal of regulations under the UNA;
  3. properly resource and reform the structures responsible for its sanctions regimes, in order to effectively impose sanctions on targeted states and persons;
  4. provide comprehensive, publically available, written guidance to the public and private sectors regarding the interpretation of sanctions regulations in order to maximize compliance;
  5. produce and maintain a comprehensive, public and easily accessible list of all individuals and entities targeted by Canadian sanctions containing all information necessary to assist with the proper identification of those listed;
  6. transfer responsibility for the issuance of permits under the SEMA and the UNA to the section of Global Affairs Canada that already issues similar permits under the EIPA, i.e., the Export Controls Division;
  7. ensure that law enforcement agencies highly prioritize the enforcement of sanctions measures and are given the necessary resources to fulfil their duties;
  8. amend SEMA and the Freezing Assets of Corrupt Foreign Officials Act (“FACFOA”)[5] to allow for an independent administrative process by which individuals and entities listed under these Acts can challenge such listings in a transparent and fair manner;
  9. provide a clear rationale for the listing and delisting of persons under SEMA and ensure that the information is easily accessible to the public through the Global Affairs Canada sanctions website;
  10. amend SEMA to require the production of an annual report by the Minister of Foreign Affairs, to be tabled in each House of Parliament within six months of the fiscal year end, which would detail the objectives of all orders and regulations made pursuant to SEMA and actions taken for their implementation;
  11. amend SEMA and FACFOA to require a mandatory legislative review of this legislation by a parliamentary committee within five years of the amendments becoming law;
  12. in honour of Sergei Magnitsky, amend SEMA to expand the scope under which sanctions measures can be enacted, including in cases of gross human rights violations; and
  13. amend the Immigration and Refugee Protection Act (“IRPA”)[6] to designate all individuals listed by regulations under SEMA as inadmissible to Canada.[7]

In the Report, the Committee emphasised that Canada’s sanctions laws should be consistent, easily-accessible, and sufficiently clear so as to avoid over-compliance. Additionally, the Committee wanted to ensure that a clear rationale was provided for listing and delisting of persons, and that targeted persons may defend themselves on procedural fairness grounds. While this client alert does not propose to review each of the 13 recommendations listed above in detail, below we elaborate on key recommendations that have already been adopted.

(b) Minister Freeland’s response to the Report

Canada’s Minister of Foreign Affairs, Chrystia Freeland, responded to the Report in a public letter dated July 17, 2017.[8] In her response, Minister Freeland emphasizes to importance of economic sanctions as a strategic foreign policy tool and focused primarily on the recommendation to expand the use of sanctions measures in the context of gross human rights violations through the Magnitsky Law, described below. She also recognized potential improvements to the processes and structures for administering and operating economic sanctions, including through the use of a consolidated list, also described below.

(c) Canada publishes Consolidated SEMA Sanctions List

On October 13, 2017, Global Affairs Canada published an online tool, known as the “Consolidated SEMA Sanctions List”, that can be used by members of the public to search for individuals and entities named in the schedules of sanctions regulations made under SEMA. The Committee proposed the creation of a “consolidated list of persons targeted by sanctions” as “Recommendation 5” in the Report. Although the Committee’s objective was to create consolidated lists similar to those in Australia, the EU and the US, the Committee did not specify whether that consolidated list should include SEMA sanctions only or sanctions under other legislation, such as FACFOA or the Magnitsky Law.

The Consolidated SEMA Sanctions List was primarily driven by the Committee’s desire to make Canada’s sanctions regime more streamlined and accessible. The Committee found that vagueness as to the scope of the restrictions and their exemptions has led to over-compliance, which not only increases the cost of regulatory compliance, but also can have the effect of a quasi-blanket embargo for certain regions and entities. The Committee suggested that a consolidated list would lessen compliance costs and reduce over-compliance.

Although the adoption of a Consolidated SEMA Sanctions List is a step forward, users must be aware of three primary limitations. First, despite being “consolidated”, the Consolidated SEMA Sanctions List does not cover sanctions issued under the JVCFOA, FACFOA, the Criminal Code, or the UNA. The Office of the Superintendent of Financial Institutions (“OSFI”) maintains unofficial separate consolidated lists for sanctions issued under each of the Criminal Code, terrorism-related regulations, and FACFOA. The Secretariat of the United Nations Security Council maintains a consolidated list for individuals and entities subject to sanctions measures imposed by the Security Council. Additional trade and travel restrictions are set out in the EIPA and IRPA.

Second, although the Consolidated SEMA Sanctions List is a helpful administrative tool, it does not have the force of law and should not be relied upon as a legal authority. Users reviewing this list should always make sure it is the current version, cross-check against the sanctions’ legal authority, and consider relationships with related legislation. Further, because the consolidated list does not provide any guidance on what companies may be owned or controlled by listed persons, companies are still responsible for undertaking significant due diligence on their counterparties in this regard.

Third, there have already been errors in creating this list from the existing SEMA regulations. For example, the Russian entity designated under Schedule II of the Special Economic Measures (Russia) Regulations, “Sberbank” is incorrectly named as “Sperbank” in the Consolidated SEMA Sanctions List. There may be other such typographical errors – especially where a person is named in a language which is transcribed into English imprecisely (such as with Arabic or Russian), which allows for different derivations of a common name.

(d) Canada adopts Magnitsky Law and amends SEMA

On October 18, 2017, Canada adopted the Justice for Victims of Corrupt Foreign Officials Act (“JVCFOA”)[9], which, along with amendments to SEMA expands the scope under which sanctions can be enacted against states, entities or individuals, including in cases of gross human rights violations and significant corruption. The JVCFOA is known as Canada’s “Magnitsky Law”, named after anti-corruption lawyer, Sergei Magnitsky, who discovered Russian officials’ embezzlement of state funds amounting to $230 million USD and soon after was arrested, tortured, and died in a Russian prison.

The Committee suggests at “Recommendation 12” of the Report that Canada amend SEMA to “allow for the expanded use of sanctions against human rights violators”.[10] In response, not only did the Government of Canada amend SEMA, but it also adopted the JVCFOA as entirely new legislation to demonstrate their commitment human rights protection as part of Canada’s foreign policy strategy.

The JVCFOA now allows Canadian officials to deny visas for and freeze assets of foreign nationals that are involved in gross violations of internationally recognized human rights or are public officials or associates who are responsible for or complicit in acts of significant corruption. The federal government has already adopted regulations under the JVCFOA to place asset freezes on 52 officials from Russia, Venezuela, and South Sudan, including Venezuelan President Nicolás Maduro Moros.

(2) Updates to Canadian export controls and sanctions

During 2017, Canada’s existing export control and economic sanctions regimes saw several amendments, the most significant of which are summarized below.

(a) Additions to SEMA regulations

On April 14, 2017, Minister Freeland announced amendments to the Special Economic Measures (Syria) Regulations, enacted under SEMA,to list 27 additional individuals who are now subject to an asset freeze and dealings prohibition.[11] The persons listed are high-ranking officials in the Assad regime.

On September 22, 2017, Minister Freeland, announced sanctions against 40 Venezuelan officials and individuals who have played a key role in undermining the security, stability and integrity of democratic institutions of Venezuela in the Special Economic Measures (Venezuela) Regulations, enacted under SEMA. [12] These regulations impose asset freezes and dealings prohibitions with or for the benefit of listed persons, although certain exemptions apply.

(b) New Version of the Export Controls Guide

On August 11, 2017, a new version of the Guide to Canada’s Export Control List (the “Guide”) came into effect.[13] The new version of the Guide, now referred to as the “December 2015 version”, bring Canada’s export control regime into compliance with its international obligations as of December 31, 2015.[14]

The Guide lists the goods and technology subject to export and technology transfer controls and reflects many new additions, deletions and clarifications. The transfer from Canada of any items listed in the Guide must be made under the authority of an export permit, including transfers via physical export, telephone discussions, email, server access, upload and download, technical assistance and services, and other forms of information transmission.

Companies doing business abroad, whether in connection with sales, sourcing or research and development, should be carefully reviewing the latest changes to the Guide to ensure full compliance with Canada’s export control regime.

(c) Addition to Automatic Firearms Country Control List

On December 13, 2017, Canada announced that Ukraine will be added to the Automatic Firearms Country Control List (“AFCCL”), enacted under the EIPA.[15] In October 2017, Canada also considered and began consultations for adding Mexico and Japan to the AFCCL; however, to date Ukraine is only new addition.[16]

The EIPA requires that a person, prior to a shipment, obtain an export permit from the Minister of Foreign Affairs to export from Canada an item that is found on the Export Control List. Since the EIPA contains strict controls on the export of firearms, weapons and devices defined as prohibited in the Criminal Code of Canada, the AFCCL is an additional export control measure that prohibits export of automatic firearms unless the country of end-use is listed on the AFCCL.[17]

Currently the AFCCL lists 40 countries, including Ukraine. Global Affairs Canada continues to evaluate export permit application on a case-by-case basis, and does not automatically grant export permits where the destination country is listed on the AFCCL.

(3) Canada Prepares to Join Arms Trade Treaty

On April 13, 2017, the Canadian government announced its commitment to accede to the Arms Trade Treaty and introduced Bill C-47, An Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments (“Bill C-47”).[18] The Arms Trade Treaty is a multilateral treaty that regulates the international trade in conventional weapons that entered into force on December 24, 2014.

Most significantly, Bill C-47 proposes the creation of a Brokering Control List comprised of certain Export Control List goods and technology the brokering of which is prohibited unless authorized by a permit. Brokering is a new concept in Canadian export control law and refers to the arranging or negotiating of a transaction that relates to the movement of Brokering Control List goods or technology from one foreign country to another foreign country, including by way of acquisition, disposition or disclosure. Bill C-47 passed second reading in the Canadian House of Commons on October 3, 2017 and has been referred to the Committee. A revised version of the Bill C-47 with commentary from the Committee is expected in early 2018.

Conclusion

2017 was busy year for changes to Canada’s export controls and economic sanctions regimes, complete with a major parliamentary committee report, adoption of the Magnitsky Law, launch of a new Consolidated SEMA Sanctions List, additions to the SEMA regulations, a new version of the Export Controls Guide, additions to the Automatic Firearms Country Control List, and progress on Bill C-47 regarding the Arms Trade Treaty. Still, the Government of Canada has more work to do if it is to accomplish the balance of the Committee’s recommendations for a more transparent and efficient economic sanctions regime.

In 2018, we expect to see further efforts to implement recommendations in the Report, including improvements to the Consolidated SEMA Sanctions List. Further progress on Bill C-47 is expected in early 2018, particularly with the creation of a Brokering Control List and associated permitting process. Over the next year, companies should stay apprised of these fast-paced changes to Canada’s export controls and economic sanctions regimes and how they will impact their business abroad.

At the present time, in addition to its export and technology transfer controls, Canada imposes trade controls of varying degrees on activities involving the following countries (and over 2,000 listed entities and individuals associated with them): Burma (Myanmar), the Central African Republic, the Crimea Region of Ukraine, Cuba, the Democratic Republic of the Congo, Eritrea, Guinea, Iran, Iraq, Lebanon, Libya, North Korea, Pakistan, Russia, Somalia, South Sudan, Sudan, Syria, Tunisia, Ukraine, Venezuela, Yemen and Zimbabwe. Any involvement of these countries or any listed person (or entities they own or control) in proposed transactions or other activities should raise a red flag for further investigation to ensure compliance with export and technology transfer controls and economic sanctions.

[1] “A Coherent and Effective Approach to Canada’s Sanctions Regimes: Sergei Magnitsky and Beyond” Government of Canada Publications (April 2017), online: http://publications.gc.ca/collections/collection_2017/parl/xc11-1/XC11-1-1-421-7-eng.pdf (the “Report”).

[2] United Nations Act, R.S.C., 1985, c. U-2 (“UNA”).

[3] Special Economic Measures Act, S.C. 1992, c. 17(“ESMA”).

[4] Export and Import Permits Act, R.S.C., 1985, c. E-19 (“EIPA”).

[5] Freezing Assets of Corrupt Foreign Officials Act, S.C. 2011, c. 10 (“FACFOA”).

[6] Immigration and Refugee Protection Act, S.C. 2001, c. 27 (“IRPA”)

[7] The Report, supra note 1, at pages 11-12.

[8] Letter to the Standing Committee on Foreign Affairs and International Development from the Minister of Foreign Affairs, Global Affairs Canada (July 17, 2017), online: https://www.ourcommons.ca/content/Committee/421/FAAE/GovResponse/RP9072713/421_FAAE_Rpt07_GR/421_FAAE_Rpt07_GR-e.pdf.

[9] Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law), S.C. 2017, c. 21.

[10] The Report, supra note 1, at p. 40.

[11] Special Economic Measures (Syria) Regulations, S.C. 1992, c. 17.

[12] Special Economic Measures (Venezuela) Regulations, S.C. 1992, c. 17.

[13] A Guide to Canada’s Export Controls: December 2015 version (updated 2017-08-11) Global Affairs Canada, online: http://www.international.gc.ca/controls-controles/about-a_propos/expor/guide-2015_toc-tdm.aspx?lang=eng.

[14] John W. Boscariol et al., “Major Changes to Canada’s Export and Technology Transfer Controls Coming into Force Shortly”, August 4, 2017, available online: http://mccarthy.ca/article_detail.aspx?id=7370

[15] Automatic Firearms Country Control List, SOR/91-575.

[16] “Consulting Canadians on proposed addition of Japan and Mexico to the Automatic Firearms Country Control List (AFCCL), Global Affairs Canada (October 12, 2017), online: http://www.international.gc.ca/trade-commerce/consultations/other-autre/japan_mexico_AFCCL-japon_mexique_LPDAA.aspx?lang=eng.

[17] “Order Amending the Automatic Firearms Country Control List”, Global Affairs Canada (November 23, 2017), online: http://gazette.gc.ca/rp-pr/p2/2017/2017-12-13/html/sor-dors248-eng.html.

[18] Bill C-47, An Act to amend the Export and Import Permits Act and the Criminal Code (amendments permitting the accession to the Arms Trade Treaty and other amendments (First Reading, April 13, 2017), online: http://www.parl.ca/DocumentViewer/en/42-1/bill/C-47/first-reading.