Archive for the ‘Uncategorized’ Category

Dutch Freight Forwarder Manager Gets 6 Months for Iran Violations

2012/07/05

Ulrich Davis, 50, a Dutch citizen of Pumerend, The Netherlands, and former manager of the Netherlands Freight Forwarding Company, was sentenced to six months in prison last month for conspiring to defraud the United States by facilitating the illegal export of acrylic adhesives and spray-paint coatings to Iran.

The object of the conspiracy was for the Ulrich and the freight forwarding company to obtain money and property by exporting and causing the exporting of U.S. origin items in violation of United States law. Davis and company arranged for export and transshipment of

U.S.-origin goods after the issuance of a TDO (Temporary Denial Order).

See full BIS Press Release here: http://www.bis.doc.gov/index.htm


Delfin Group’s Former President Faces Charges for Illegal Exports to Iran

2012/07/05

Markos Baghdasarian, the president of Delfin Group USA, was arrested on Saturday, May 19, 2012, at the Hartsfield International Airport in Atlanta, just prior to boarding an international flight to the United Arab Emirates.

Baghdasarian served as president of Delfin Group USA, which is a Russian-owned producer of synthetic motor oils, located in North Charleston, S.C. From as early as June 13, 2010, until Oct. 12, 2011, Baghdasarian is alleged to have engaged in prohibited transactions with customers in Iran, including Pars Oil, which is an oil company owned by the government of Iran. U.S. persons and companies are prohibited from engaging in commercial transactions involving Iran unless authorized by the U.S. Department of Treasury.

Baghdasarian was charged with exporting aviation engine oils and polymer valued at $850,000 from the United States to the UAE via Iran without the required U.S. Department of the Treasury licenses and with making false statements on official government documents. If convicted of these charges, Baghdasarian could face a maximum of 20 years in federal prison. Baghdasarian made his first appearance before a magistrate judge in the Northern District of Georgia on May 22, 2012.

Commerce/BIS issued in February a Temporary Denial Order to Delfin suspending the company from making export transactions for 180 days.

See full BIS press release here: http://www.bis.doc.gov/index.htm

See BIS’ Temporary Denial Order here: http://efoia.bis.doc.gov/exportcontrolviolations/e2252.pdf


Sandhill Scientific, Inc. pays $126,000 to Settle Iran Violations

2012/07/05

Sandhill Scientific, Inc. (“Sandhill”), Highlands Ranch, CO, a U.S. manufacturer of medical equipment, has agreed to remit $126,000 to settle allegations that it violated the Iranian Transactions Regulations, 31 C.F.R. part 560 (the “ITR”) in May 2007, and OFAC’s Reporting, Procedures and Penalties Regulations, 31 C.F.R. part 501 (the “RPPR”), on separate occasions in May and July 2008. Specifically, OFAC alleged that, on or about May 4, 2007, Sandhill exported medical equipment valued at approximately $6,700 to Dubai, United Arab Emirates, with knowledge or reason to know that the goods were intended for transshipment or supply to a company in Iran with which Sandhill had an exclusive distributor agreement. OFAC also alleged that Sandhill failed to provide documents responsive to two administrative subpoenas issued by OFAC during its investigation.

Sandhill did not voluntarily disclose the matter to OFAC and did not fully cooperate with the investigation. These determinations resulted in a base penalty amount of $250,000 for the alleged ITR violation.

http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/04245012_sandhill.pdf


International Gun Trafficking Ring Halted with Three Arrests

2012/07/05

Joseph Debose, a resident of North Carolina and Staff Sergeant in a U.S. Special Forces National Guard Unit, has been charged by BIS with illegal gun dealing and aiding others, including Chinese nationals Zhifu Lin and Lilan Li, in the illegal export of firearms to China between December 2010 and April 2012.

Debose provided multiple shipments of firearms to associates who then secreted the weapons in packages and transported them to shipping companies to be sent to customers in China. The smuggling scheme came to light after authorities in China seized a package containing firearms with defaced serial numbers that had been shipped from Queens, New York.

Debose was arrested May 20, 2012, in a sting operation by federal agents in Smithfield, North Carolina, when he arrived to provide another shipment of firearms for export. At the time of his arrest, Debose was carrying a loaded .45 caliber pistol. In addition, agents seized twelve other firearms from Debose, which were intended for export.

Link and Li were arraigned May and charged with illegally exporting firearms.

The defendants each face up to 20 years’ imprisonment if convicted.

See full BIS press release here: http://www.bis.doc.gov/index.htm


Census Bureau AES Advice: “Tips on How to Resolve AES Fatal Errors”

2012/07/05

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 the month of May.

Narrative: Shipment Cannot Be Cancelled

Reason: The shipment cannot be cancelled if the shipment has been seized or detained by the U.S. Customs and Border Protection (CBP). When a shipment is held by CBP, an indicator is entered into the Automated Export System. This indicator will not allow the shipment to be cancelled.

Resolution: A CBP officer must manually remove the enforcement activity in the Automated Export System to allow for cancellation. The filer must contact the CBP Officer at the port of export; otherwise subsequent errors will be generated. Contact your AES client representative for further information.

Narrative: Line on File, Action Not Allowed

Reason: The reported Line Number for the shipment already exists on file, therefore the Add action was not allowed for the line item.

Resolution: When the Shipment Filing Action Request Indicator is a Change and the Line Item Filing Action Request Indicator is an Add, an export shipment commodity cannot exist on the file that matches the reported Line Number for the shipment.

Verify, correct the shipment and resubmit. Contact your AES representative for further information


Another Employee Charged with ITAR Violations

2012/05/11

By: Tom McVey, Williams Mullen, (202) 293-8118, tmcvey@williamsmullen.com

Editor’s Note:  Do you remember the employee who didn’t care too much about compliance because he (or she) knew that only the company gets in trouble for export violations and that employees don’t have anything to worry about?  Apparently they need to talk to Tom McVey….

A resident of Massachusetts pleaded guilty on January 20, 2012 to violations of ITAR in connection with the export of 55 antennae from the United States. The case is illustrative for export professionals on a number of levels as described further below.

According to the Department of Justice release, Rudolf Cheung (“Defendant”) was the head of research and development at a private company that manufactures antennae. In this capacity, he designed a library of antennae over recent years, some of which are used in the US space program and others for military applications.

According to the release, during 2006 his company received a request for the export of certain antennae to Singapore and Hong Kong. The company’s export compliance officer advised the customer that, to make the export, the company would be required to comply with ITAR licensing requirements. The customer refused to comply, and the compliance officer cancelled the order. After learning that the company had blocked the order, Defendant entered into discussions with a person outside the company (“Co-Conspirator C” according to the Justice Department release) to export the antenna without the knowledge of the company. Under the plan, Co-Conspirator C approached the company to purchase the antennae in a domestic transaction, and then exported the antennae and sold them to the purchaser in Singapore and Hong Kong without the requisite export licenses. During this period, Defendant was aware that the antennae were being exported to Singapore and Hong Kong without the license in violation of ITAR.

The Defendant was arrested and charged with criminal ITAR violations in the U.S. District Court For the District of Columbia. He pleaded guilty and is currently awaiting sentencing. He faces a potential sentence of up to five years in prison, a $250,000 fine and a three-year term of supervised release. The purchaser in Singapore/Hong Kong is being charged separately and extradited to the United States for prosecution.

Since the US company had an export compliance officer and compliance program, and previously stopped the original attempted export, the US company was not prosecuted in the case.

The case is instructive for two reasons. First, this reconfirms what we already know – that federal officials will prosecute individuals (as well as companies) for criminal export violations. Second, a sound export compliance program can protect a company and its owners from export liability, even when one of its own employees is engaged in illegal activity. Even when an export violation occurs, a compliance program demonstrates the good faith efforts of the company to comply with the law and can save the company from liability. A link to the Department of Justice press release is at http://www.bis.doc.gov/news/2012/doj01202012.htm.


February 27, 2012 Update: CEVA Logistics LLC and EGL Inc. have successfully challenged their debarment

2012/03/05

Reprinted with permission from International Trade Law News

By: Douglas Jacobson

Read related article

February 27, 2012 Update: CEVA Logistics LLC and EGL Inc. have successfully challenged their debarment and have been removed from the EPLS and can resume participation in ITAR Transactions. This is reflected in the guidance issued today by DDTC.

Because this is a fluid situation, applicants for ITAR authorizations are encouraged to monitor the EPLS for any changes to the status of the remaining entities.

What is the Impact of the Debarment on ITAR-Related Exports and Imports?

Because the forwarders listed are deemed by DDTC to be “ineligible” written authorization from DDTC would normally be required before a company or person applies for, obtains or uses an export control document involving one of the forwarders named above.  However, DDTC has issued the following guidance on how to manage existing, pending, and future authorizations involving these seven entities as follows:

  • Existing authorizations — Existing DSP-5s and other authorizations approved by DDTC prior to February 24, 2012 are not impacted. Authorizations that include any individual entity, or combination of entities, listed above as intermediate consignee, consignor, or freight forwarder may continue to be utilized by the applicant without need to amend or obtain other written authorization from DDTC.
  •  Pending Authorization Requests — License applications and other authorization requests received by DDTC prior to February 18, 2012, will be reviewed by DDTC in the normal course of business, without the submission of a transaction exception request for approval in accordance with § 127.1(c) of the ITAR to include an ineligible party. Authorization holders may utilize the named entity(ies) in their approved roles.  Authorization requests received by DDTC February 18, 2012, and after, and which are pending with the Department as of February 24, 2012, involving any one or more of the parties above, but that do not include a transaction exception request
    will be Returned Without Action, unless a transaction exception request is submitted via DTrade2 within 72 hours from the date of this notice (i.e., by 5 pm on February 27, 2012). Requests that include a TE request will be reviewed.
  • Future Authorization Requests — License applications and other authorization requests received by DDTC after February 24, 2012 involving any one or more of the parties above, must include a TE request or they will be Returned Without Action. Those that do include such a request will be reviewed.

TEs will be made by DDTC on a case-by-case basis. Under standard DDTC policy, policy exception will be granted only after a full review of all circumstances and the following factors:

  • Whether an exception is warranted by overriding United States foreign policy or national security interests; or
  • Whether an exception would further law enforcement concerns that are consistent with the foreign policy or national security interests of the United States; or
  • Whether other compelling circumstances exist that are consistent with the foreign policy or national security interests of the United States and that do not conflict with law enforcement concerns.

In this case, TE requests should include, at a minimum, an explanation of why the request should be considered, why the generally ineligible entity should be part of the transaction (i.e., why the applicant is unable to utilize a different freight forwarder), and how the inclusion of the ineligible entity is in the interests of U.S. foreign policy or national security. This will likely be a difficult hurdle to overcome, although a number of specific-business scenarios could meet these requirements.
Why Companies Involved in ITAR Transactions Should Include the EPLS in Their Restricted Party Screening Process

This case demonstrates why exporters and other parties involved in ITAR-related transactions must screen their transactions against the EPLS. It should be noted that the new Consolidated Restricted Party List maintained by the Bureau of Industry and Security does not include parties on the EPLS. In addition, not all commercial restricted party screening software systems screen against the EPLS or include immediate updates to parties added to or removed from the EPLS. Parties involved in ITAR-related transactions that utilize commercial screening software should therefore ask their software companies whether the EPLS is one of the lists used in the screening process and should perform tests to see whether these forwarders are included as a “hit”. While inclusion of a party on the EPLS does not mean the party will be prohibited from all export transactions, an EPLS “hit” is a “red flag” that needs to be resolved prior to the export from taking place.

Douglas N. Jacobson
Law Offices of Douglas N. Jacobson, PLLC
International Trade Law
1725 I Street, NW, Suite 300
Washington, DC 20006
Tel: 202.431.2407
Fax: 202.688.2782
dnj@djacobsonlaw.com
www.tradelawnews.com


Summary of Regulatory Changes and Proposals

2012/01/03

By: Holly Thorne

(THESE AND OTHER ISSUES WILL BE ANALYZED IN THE UPCOMING SPECIAL NEWSLETTER WITH REGULATORY ANALYSIS OF 2011 CHANGES AND PROPOSALS AND US EXPORT CONTROL REFORM)

Amendment to the International Traffic in Arms Regulations: Filing, Retention, and Return of Export Licenses and Filing of Export Information

The Department of State is amending the International Traffic in Arms Regulations (ITAR) to reflect changes in the requirements for the return of licenses. Applicants are no longer required to return certain expired DSP-5s. This change will reduce the administrative burden on applicants.

This rule is effective November 4, 2011.

Click here for full amendment and supplementary information.


Revisions to the Export Administration Regulations (EAR)

2012/01/03

By: Holly Thorne

Control of Aircraft and Related Items the President Determines No Longer Warrant Control Under the United States Munitions List (USML)

This proposed rule describes how articles the President determines no longer warrant control under Category VIII (aircraft and related items) of the United States Munitions List (USML) would be controlled under the Commerce Control List (CCL) in new Export Control Classification Numbers (ECCNs) 9A610, 9B610, 9C610, 9D610, and 9E610.  In addition, this proposed rule would control military aircraft and related items now controlled under ECCNs also addresses license exception availability for items controlled by the five new ECCNs that would be created.

This is the second in a planned series of proposed rules describing how various types of articles the President determines, as part of the Administration’s Export Control Reform Initiative, no longer warrant USML control, would be controlled on the CCL and by the EAR.  This proposed rule is being published in conjunction with a proposed rule of the Department of State, Directorate of Defense Trade Controls, which would amend the list of articles controlled by USML Category VIII.

In addition, this proposed rule would modify aspects of the Bureau of Industry Security’s (BIS) July 15, 2011 proposed rule by adding cross references to ECCNs 9A018, 9D018 and 9E018; by adding provisions relating to License Exception Strategic Trade Authorization (STA) eligibility to clarify that its scope extends to the United States Government, to any person in the United States, and to the “development” or “production” of items; and by including a general policy of denial for 600 series items for destinations that are subject to a United States arms embargo under the regional stability reasons for control.

Source: http://www.gpo.gov/fdsys/pkg/FR-2011-11-07/html/2011-28504.htm


New Platform, Servers for AESDirect

2011/10/05

By: Holly Thorne

In late August, the AESDirect database migrated to a new platform and new servers. AESDirect.gov and AESWeblink users will now notice a more manageable interface and a few minor changes within the application. Links on the Main Menu and within the application have been removed, added, or changed, as follows:

  • The “Retrieve an Existing Shipment”, “Delete Shipment from AES” and “AESDirect Archive Service” links have been removed from the Main Menu. The “Shipment Manager” provides you with access to all of your shipments and also allows you to retrieve, replace or delete them.
  • If you submit a shipment with a USPPI ID that is different from the EIN registered for that account, you will now see a pop-up message confirming that you are filing on the behalf of a party other than yourself.

User accounts were moved to the new database servers during the months of August and September. Users will notice the following changes:

  • Error messages have been revised to make it easier for you to determine where the errors in your shipment are.
  • You will no longer have to differentiate between archived and new shipments. The application will now combine these two in a single search.

EDI Vendors and Clients

If you use EDI to submit to AESDirect or you are an EDI vendor, you will notice changes to the text of the error messages. The EDI system will mirror the same error messages as www.aesdirect.gov in order to reduce the amount of Fatal Errors.

For additional information on the interface changes, please visit: http://www.aesdirect.gov/support/interface_changes.html.