The Export Control Update: May 2017


Chinese National Pleads Guilty to Attempting to Export “Bananas”

By: Danielle McClellan

For the past 6 years, 53 year old Fuyi Sun has attempted to purchase carbon fiber for the Chinese military (according to court records). A few years ago Sun contacted what he thought was a US company that distributed carbon fiber, but was, in fact, an undercover entity created by Homeland Security Investigations (HSI) and staffed by undercover agents. The company, “UC Company,” was asked by Sun to supply M60 Carbon Fiber which is a high-grade carbon fiber that is used in sophisticated aerospace and defense applications, specifically for drones and other government defense applications. M60 Carbon Fiber requires a license for export to China for nuclear non-proliferation and anti-terrorism reasons.

During the course of the relationship between UC Company and Sun, he often suggested various security measures they should take to make sure they would both remain protected from the “U.S. Intelligence.” He instructed the undercover agents to use the word “banana” instead of “carbon fiber” in all communications…he inquired about purchasing 450 kilograms of banana in one email. He also instructed agents to remove identifying barcodes for the carbon fiber, prior to transshipment,  and instructed them to identify it as “acrylic fiber” in customs documentation.

On April 11, 2016, Sun traveled from China to New York to purchase the M60 Carbon Fiber from UC Company. On April 11th and 12th Sun met with undercover agents and suggested to them that the Chinese military was the ultimate end-user for the carbon fiber, he also explained that he personally worked in the Chinses missile program. He further asserted that he had a close relationship with the Chinese military, and would be supplying the M60 Carbon Fiber to the Chinese military or to institutions closely associated with it. He agreed to purchase two cases of the carbon fiber on the 12th from UC Company and provided them with $23,000 in cash for the carbon fiber and then provided an additional $2,000 as compensation for the risk that he believed they were taking to illegally export the carbon fiber to China without a license. Sun was arrested the next day.

Sun pled guilty to attempting to violate the International Emergency Economic Powers Act (IEEPA), which carries a maximum sentence of 20 years in prison. The maximum sentence in this case will be prescribed by Congress. Sun will be sentenced on July 26, 2017.

Details: https://www.justice.gov/opa/pr/chinese-national-pleads-guilty-attempting-illegally-export-high-grade-carbon-fiber-china


India’s Export Control in Line with Wassenaar Arrangement: Government

(Source: Financial Express)

India’s export controls are in line with the Wassenaar Arrangement, one of the four non- proliferation regimes that prohibit the export of items of dual- use technology, a senior external ministry official said. The government came out with a Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list on April 24, said Pankaj Sharma, joint secretary (Disarmament and International Security Affairs) of the Ministry of External Affairs.

The notification has come into effect on May 1. Export of dual-use (which can also be used for proliferation purpose) items and technologies is either prohibited or is permitted under a license. In foreign trade policy, dual-use items have been given the nomenclature of SCOMET.

“Broadly speaking the Scomet list has been consolidated,” Sharma said, adding that category six of the Scomet list now recommends the Wassenaar Arrangements munitions list and the Wassenaar Arrangement dual-use list items. Sharma was speaking at a seminar on ‘Scomet update: Implications for the dual-use and defence industry’ organised by the FICCI.

With an aim to gain entry into four non-proliferation regimes, India has been aligning its export controls as per these groups. These groups are the Nuclear Suppliers Group (NSG), the Missile Technology Control Regime (MTCR), the Australia Group and the Wassenaar Arrangement. In 2016, India officially applied for membership of the NSG and gained entry to the MTCR.

Learn more by attending our Ready, Aim, Fire: India Adopts the Wassenaar Arrangement Control Lists Webinar on June 28, 2017. Details at http://www.learnexportcompliance.com/webinar/ready-aim-fire-india-adopts-the-wassenaar-arrangement-control-lists/


Tips on How to Resolve AES Fatal Errors

(Source: census@subscriptions.census.gov, 18 May 2017.)

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: 136

  • Narrative: PR to US Requires PR Port of Export
  • Reason: The Country of Destination is reported as the Unites States and the Port of Export Code is not a Puerto Rican port.
  • Resolution: A Port of Export Code must be reported on shipments from Puerto Rico to the United States and it must be a Puerto Rican port. See Appendix D, Export Port Codes for a list of acceptable Port of Export Codes. Verify the Country of Ultimate Destination and Port of Export Code, correct the shipment and resubmit.

Fatal Error Response Code: 538

  • Narrative: Shipping Weight Must Be Greater Than Zero For MOT
  • Reason: The Mode of Transportation Code reported was one that identifies a Vessel, Rail, Truck, or Air shipment and the Shipping Weight was not reported.
  • Resolution: When the Mode of Transportation is Vessel, Rail, Truck or Air, the Shipping Weight must be reported. Verify the Mode of Transportation and Shipping Weight, 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 postdeparture but not later than five calendar days after departure.

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


The Automated Export System (AES) has a New Data Element

(Source: Global Reach Blog)

The U.S. Census Bureau published the Final Rule entitled, “Foreign Trade Regulations (FTR): Clarification on Filing Requirements,” April 19.

This rule addresses new export reporting requirements related to the International Trade Data System and includes the addition of a new data element, the original Internal Transaction Number (ITN) that can be reported in the Automated Export System (AES). The original ITN field is an optional data element that can be used when a previously filed shipment is replaced, divided or cancelled.

The Census Bureau decided to add the original ITN data element to address situations when a party involved in an export transaction received penalties for shipments that were originally filed on time, but whose shipments were divided while in transit to the ultimate consignee. This data element makes it possible for U.S. Customs and Border Protection (CBP) to identify AES filings that are associated with previously filed shipments. Prior to the original ITN field, CBP was unable to determine if a shipment, identified as late, was associated with a shipment originally filed in accordance with the FTR. The inclusion of the original ITN field will enable parties in an export transaction to proactively provide CBP with additional information and will allow CBP to conduct a more thorough review of these types of shipments prior to assessing any penalties.

Let’s take a look at an example of how the original ITN field can be used. A foreign buyer in Italy purchases $20,000 worth of jewelry from a U.S. seller. The U.S. seller ships the jewelry to the buyer, but while in transit the seller is contacted by the buyer who now only wants $8,000 worth of jewelry. The seller then finds a new buyer in Sweden for the remaining $12,000 worth of jewelry. The originally filed AES record needs to be updated to reflect the value of $8,000 for the buyer in Italy. Additionally, a new AES record is created for the new buyer in Sweden. This new filing would generate a late filing compliance alert.  However, to ensure CBP is aware that the new shipment was filed prior to exportation in accordance with the FTR, the filer can include the previously filed ITN in the original ITN field.

For more information, contact the International Trade Management Division Call Center at 1-800-549-0595. Select option 3 for the Trade Regulations Branch.