Archive for the ‘Chemical & Biological Weapons’ Category

EAR Expands License Application Support Document Requirements for Hong Kong

2017/03/02

By: John Black

Effective April 19, 2017, the Bureau of Industry and Security (BIS) will  require persons planning on exporting and reexporting to Hong Kong any items subject to the Export Administration Regulations (EAR) and controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons to obtain, prior to the export or reexport, a copy of a Hong Kong import license or a written statement from the Hong Kong Government that such a license is not required.   The purpose of this change is to require that the Hong Kong Government issue an import license as an acknowledgement that sensitive EAR-controlled items are entering Hong Kong and as an agreement to prevent unauthorized reexport or transfer of those items to prohibited destinations.  Interestingly, the prohibited destination that most concerns the US is the People’s Republic of China (PRC).  The EAR treats Hong Kong as a separate “country” from the PRC even though the PRC, the United Nations, and nearly everybody else in the world considers Hong Kong to be part of the PRC because Hong Kong is part of the PRC.

Leaving behind the interesting point that the EAR treats Hong Kong as if it is not part of the PRC, there are a lot of details in this new rule.  In addition what was described above, this rule will also require persons planning on reexporting from Hong Kong any item subject to the EAR and controlled for NS, MT, NP column 1, or CB reasons to obtain a Hong Kong export license or a statement from Hong Kong government that such a license is not required. This final rule will be effective April 19, 2017.

The following amendments have been made:

  • In § 740.2, add paragraphs (a)(19) and (20) to read as follows:

(a) *  *  *

(19) The exporter or reexporter to Hong Kong of any item subject to the EAR and controlled on the CCL for NS, MT, NP Column 1, or CB reasons has not received one of the following with respect to the item:

(i) A copy of an import license issued to the Hong Kong importer by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be exported or reexported pursuant to that license exception for which a Hong Kong import license is required and that is valid on the date of the export or reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no import license is required to import into Hong Kong the item(s) to be exported or reexported. The statement may have been issued directly to the Hong Kong importer or it may be a written statement available to the general public. The statement may be used for more than one export or reexport to Hong Kong so long as it remains an accurate statement of Hong Kong law.

(20) The reexporter from Hong Kong of any item subject to the EAR controlled on the CCL for NS, MT, NP column 1, or CB reasons has not received one of the following with respect to the item:

(i) An export license issued by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be reexported pursuant to that license exception for which a Hong Kong export license is required and that is valid on the date of the reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no Hong Kong export license is required for the item(s) to be rexported.

The statement may have been issued directly to the Hong Kong reexporter or it may be a written statement available to the general public. The statement may be used for more than one reexport from Hong Kong so long as it remains an accurate statement of Hong Kong law.

  • 748.9(b) is amended by revising the section heading, revising paragraph (b) and all notes to paragraph (b), and adding two sentences to the end paragraph of (e)(1), to read as follows:

§ 748.9    Support documents for evaluation of foreign parties in license applications and/or for promoting compliance with license requirements.

(b) Requirements to obtain support documents for license applications. Unless an exception in paragraph (c) of this section applies, a support document is required for certain license applications for:

(1) The People’s Republic of China (PRC) other than the Hong Kong Special Administrative Region (see §§ 748.10 and 748.11(a)(2));

(2) ‘‘600 Series Major Defense Equipment’’ (see § 748.11);

(3) Firearms and related commodities to member countries of the Organization of American States (see § 748.12); and

(4) The Hong Kong Special Administrative Region of the People’s Republic of China (see § 748.13).

Note 1 to Paragraph (b): On a case-by-case basis, BIS may require license applicants to obtain a support document for any license application.

Note 2 to Paragraph (b): For End-Use Certificate requirements under the Chemical Weapons Convention see § 745.2 of the EAR.

*       *       *       *       *

(e) *  *  *

(1) *  *  * The documents issued by the Government of the Hong Kong Special Administrative region that are required pursuant to § 748.13 are not used to evaluate license applications. They must be obtained before shipment and need not be obtained before submitting a license application.

  • Redesignate § 748.13 as § 748.14 and add new § 748.13 to read as follows:

§ 748.13    Hong Kong import and export licenses.

(a) Requirement to obtain the document—(1) Exports and reexports to Hong Kong. An exporter or reexporter must obtain the documents described in paragraph (a)(1)(i) or (a)(1)(ii) of this section before using a license issued by BIS to export or reexport to Hong Kong any item subject to the EAR and controlled on the CCL for NS, MT, NP column 1, or CB reasons. Collectively, the documents issued by Hong Kong must cover all of the items to be exported or reexported pursuant to a license.

(i) A copy of an import license issued to the Hong Kong importer by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers the items to be exported or reexported pursuant to that BIS license for which a Hong Kong import license is required and that is valid on the date of the export or reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no import license is required to import into Hong Kong the item(s) to be exported or reexported to Hong Kong. The statement may have been issued directly to the Hong Kong importer or it may be a written statement available to the general public. The statement may be used for more than one export or reexport to Hong Kong so long as it remains an accurate statement of Hong Kong law.

(2) Reexports from Hong Kong. No license issued by BIS may be used to reexport from Hong Kong any item subject to the EAR controlled on the CCL for NS, MT, NP column 1, and/or CB reasons unless the reexporter has received either:

(i) An export license issued by the Government of the Hong Kong Special Administrative Region, pursuant to the Hong Kong Import and Export (Strategic Commodities) Regulations, that covers all items to be rexported pursuant to that BIS license for which a Hong Kong export license is required and that is valid on the date of the reexport that is subject to the EAR; or

(ii) A copy of a written statement issued by the Government of the Hong Kong Special Administrative Region that no export license is required from Hong Kong for the item(s) to be reexported. The statement may have been issued directly to the Hong Kong reexporter or it may be a written statement available to the general public. The statement may be used for more than one reexport from Hong Kong so long as it remains an accurate statement of Hong Kong law.

(b) Recordkeeping. The documents required to be obtained by paragraph (a) of this section must be retained and made available to the U.S. Government upon request in accordance with part 762 of the EAR.

  • In § 762.2 remove the word ‘‘and’’ from the end of paragraph (b)(52); remove the period from the end of paragraph (b)(53) and add in its place a semicolon followed by the word ‘‘and’’; add paragraph (b)(54) to read as follows:

§ 762.2    Records to be retained.

*       *       *       *       *

(b) *  *  * (54) § 748.13, Certain Hong Kong import and export licenses.

 

Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2017-01-19/pdf/2017-00446.pdf


Our License Expired Last Month and We Shipped Today: Our Penalty is Double the Value of the Export

2012/11/02

By: John Black

Times are tough.  Sometimes even an export valued at $14,000 may seem to be worth the risk of a violation.  (I personally prefer the math of committing violations on the $2. billion dollar order.)  Unfortunately, the US Government has at its disposal plenty of potential penalties and a willingness to impose them that can make that shipment after the license expired less than worthwhile.

Consider PhibroChem, who had a license to export sodium fluoride (classified as 1C350)  to a customer in Mexico.  The PhibroChem export license expired in December 2007.  In January, 2008, PhibroChem made a $14,000 export of sodium fluoride to the same customer in Mexico but it did not have a valid export license.  PhibroChem agreed to pay a $31,000 in a settlement agreement with the Commerce Department.  While $31,000 pales in comparison to the huge penalties we often talk about, it is notable that even though the chemicals went to a trusted recipient in a trusted country, the company’s penalty amount was more than twice the value of the export.  And the penalty amount does not include the likely significant amount PhibroChem paid in legal fees and administrative costs to enhance its compliance program.

(Sodium fluoride:  Is that the stuff in toothpaste?   I cannot imagine a toothpaste additive is a chemical weapons precursor, but it doesn’t surprise because I know the germs that cause cavities are nasty things because I have seen pictures of them in TV commercials.  I wonder if the government is on the lookout for a shipment of a million tubes of toothpaste to a terrorist cell that might try to extract the sodium fluoride to make a chemical weapon.)    


US Government Mistakenly Sends Nuke Nose Cones to Taiwan

2008/05/16

2008/05/16

By: John Black

Early in 2007 Taiwanese officials reported that four packages they received from the US military did not contain the helicopter batteries that they were expecting. US officials told the Taiwanese officials to simply dispose of the incorrect items. Last week however posed a serious issue for the US Defense Department; apparently the Taiwanese officials opened the packages before disposing of them and alerted the US that they contained “warheads”.

It is uncertain how long the Taiwanese officials actually knew that the packages contained warhead-related material, but the drums had been in their possession for over 18 months and the US never noticed that the sensitive materials were missing. The items inside the barrels were labeled “secret” and they included Mark 12 nose cones, which are used in intercontinental ballistic missiles.

President Bush has ordered an immediate investigation to focus on whether the Air Force properly labeled the packages for shipment to the DLA, how it was stored, tracked and shipped overseas. Authorities claim that the packages were inappropriately stored in an unclassified warehouse and the outer packages might have been mislabeled. “The investigation will determine the integrity of the shipping containers and their contents during the foreign military sales process,” explained Air Force Secretary Michael Wynne in announcing the erroneous shipment.

So we should be concerned for various reasons here. First, the US Government didn’t notice that these nuclear bomb widgets were missing. Should we worry that there is other unknown missing nuclear bomb stuff? Second, should we assume this is the first time this has happened? Are there other boxes in some foreign government warehouse that contain nuclear weapons parts? And third, despite the fact that several mistakes were made in this case, the US Air Force should thank its lucky stars that it is not a regular exporter. If an exporter were to make the same mistake and ship the wrong military equipment to Taiwan, it would have an ITAR violation, which could result in significant penalties in some cases, and even if you don’t end up paying an ITAR fine, you could end up paying your lawyers a lot of money if you report the violation. And I am thinking that a company that would mis-label and illegally export nuclear bomb components would get both a fine and a large legal bill.

More information:

 


Commerce Adjusts CBW Export Controls

2007/09/12

2007/09/12

By: Danielle McClellan

Effective September 12, 2007, the Bureau of Industry and Security (BIS) will amend the Export Administration Regulations (EAR) to reflect changes to the “Control List of Biological Agents”. This rule will amend the EAR to reflect the admission of Croatia into the Australia Group and revises the CCL entry which controls equipment that is can be used in handling any type of biological materials. Lastly, the new rule will amend the list of countries that are States Parties to the Chemical Weapons Convention, Barbados will now be joining the party.

More information:

Federal Register Notice


New US Sanctions Against Iran

2006/09/30

2006/09/30

By: Jill Kincaid

On Saturday, September 30, 2006, President Bush signed into law the Iranian Freedom Support Act. In addition to codifying existing sanctions against Iran, this act added significant new ones, targeting Iran’s efforts at nuclear proliferation, as well as the companies that assist them.

The act requires the President to impose these sanctions on any company or individual who knowingly provides goods, services or technologies to Iran which would aid them in acquiring, or developing, nuclear, chemical or biological weapons.

It is mandatory that the President impose sanctions on violating companies, but he does have the flexibility to choose among six separate sanctions. They are:

  1. Withholding Ex-Im Bank financing and credit
  2. Denial of export licenses
  3. Prohibiting loans in excess of 10 million dollars to the sanctioned party
  4. Prohibiting the sanctioned person form acting as a repository of government funds or from serving as a primary dealer of US debt instruments
  5. Prohibiting the US government from procuring goods and services from the sanctioned person
  6. Imposing any other sanctions under the International Emergency Economic Powers Act

Offending companies must be published in the Federal Register. No company has been listed yet, but it is likely that Russian and Chinese companies who have assisted Iran with nuclear facilities and missile technology will be among the first.


BIS Celebrates Australia Group Milestone with New Regulation

2005/09/30

2005/09/30

By: Scott Gearity

While most college-age Australians have nothing more to remember their birthdays than hangovers and bad sunburns, a rather more sober Australian twenty-year-old recently celebrated its first twenty years stemming the spread of chemical and biological weapons. I am speaking of course of the Australia Group, the informal multilateral export control regime which returned to its place of birth earlier this year for its twentieth annual plenary session. Speaking at the plenary, Australian Foreign Minister Alexander Downer recounted a bit of the organization’s history:

It is 20 years since Australia convened the first meeting of 15 like-minded countries in 1985 in Brussels.

That meeting was a response to the findings of a UN investigation, led by an Australian – Dr Peter Dunn, that Iraq had used chemical weapons in the Iran-Iraq war. It posed the question of how to prevent Iraq from acquiring materials for the production of chemical weapons through otherwise legitimate commercial trade.

The response – a proposal to harmonize national export controls – was endorsed by all present at that meeting, and the Australia Group was born.

But the plenary wasn’t all talk with the AG participants agreeing on three control list changes to refine limits on illegitimate trade in items with chemical or biological weapons end uses:

  1. Simplification of the types of pumps subject to controls due to their usefulness in manufacturing chemical weapons (the US controls such equipment under ECCN 2B350.i).
  2. New controls on spraying or fogging systems designed for use with aircraft or unmanned aerial vehicles (UAVs) and capable of delivering droplets of less than 50 m in diameter at a rate of greater than 2 liters per minute (ECCN 2B352).
  3. A revision to the technical note clarifying that the controls applicable to genetic elements and genetically-modified organisms also cover nucleic acid sequences that represent a significant hazard to human, animal or plant health or enhance the ability of AG-controlled or other microorganisms to cause harm. (This change in particular has potentially significant implications for firms and universities involved in biotechnology research. The revised technical note can be found under ECCN 1C353).

It may have taken nearly four months, but the US Bureau of Industry and Security did finally turn up with a gift in honor of the AG’s first twenty years on August 5 – a regulation implementing the group’s new rules. In addition to the control list and technical note revisions explained above, the BIS rule updates the Export Administration Regulations to reflect a new AG participant (Ukraine), the fact that the tiny Pacific island nation of Niue has acceded to the Chemical Weapons Convention, and a new name for the largest part of the former Yugoslavia (Serbia and Montenegro).


Substantial Tightening of Chemical/Biological Controls

2005/04/01

2005/04/01

By: Scott Gearity

Without formally requesting comments, BIS on April 14 published a rule substantially increasing export restrictions on several items subject to controls for chemical or biological weapons reasons (CB). This regulation comes only two weeks after a March 30 rule expanding the scope of CB catch-all controls to include members of the Australia Group (AG), the multilateral group which seeks to limit the proliferation of chemical and biological weapons. Steven Goldman, director of the Office of Nonproliferation and Treaty Compliance, first alerted the exporting community to the prospect of the new rule in a January 27 meeting of the Materials Technical Advisory Committee (MTAC). (This is as good a time as any to remind folks to be sure to read the meeting minutes of the TACs related to your business for all sorts of interesting nuggets, at least from those committees which deign to hold their discussions in open session and bother to publish minutes at all.)

(more…)


More Countries Subjected to Chemical and Biological Weapon Catch-All Rules

2005/03/31

2005/03/31

By: Scott Gearity

The last in a Herculean series of March rulemaking efforts by BIS came on the second to last day of the month – an expansion of the scope of chemical and biological weapons (CBW) end-user and end-use controls to cover every country in the world.

These CBW prohibitions are one flavor of the catch-all controls encompassed within the EAR.  Even when an item would not ordinarily require an export license to be shipped to a particular destination, the exporter is obliged to seek a license from BIS if he knows that the item will be used in the design, development, production, stockpiling, or use of CBW.

Similar end-use and end-user restrictions are in place on nuclear, rocket, UAV, and maritime nuclear propulsion activities (see EAR Part 744).

The March 30 regulation widens the scope of these controls by eliminating the exemption to them for members of the Australia Group (AG), the informal international arrangement that seeks to limit the proliferation of CBW-related materials and technology.  Now US exporters will need to scrutinize orders from AG countries such as the Belgium, South Korea, and Sweden for CBW end-users and end-use with the same due diligence they have long been required to exercise when it came to the rest of the world.


US Imposes Proliferation Sanctions on Chinese Entity

2001/06/26

2001/06/26

By: John Black

In the June 26, 2001 Federal Register the Office of Chemical, Biological and Missiles Proliferation in the State Department imposed sanctions on a PRC entity pursuant to the Iran Non-Proliferation Act of 2000. The PRC entity is Jiangsu Yongli Chemicals and Technology Import and Export Corporation (China) (“JYCTIEC”), including any of its successors, sub-units or subsidiaries. The Federal Register notice did not describe specifically what the Chinese entity did. Apparently, the sanctions are in response to JYCTIEC transferring dual-use chemicals and chemical processing equipment to Iran.

(more…)