BIS

Johnson Trading & Engineering Company, Ltd. of Taiwan has agreed to pay BIS $90,000 to settle charges that it knowingly caused the unlicensed export of computer chips to the People’s Republic of China, and for evading the EAR. The computer chips are subject to the EAR and controlled for national security and anti-terrorism reasons.

Between February 2003 and December 2003, on seven different occasions, Johnson Trading ordered computer chips from a US exporter and provided the exporter with false documentation that the country of ultimate destination was Taiwan. When the chips reached Taiwan, Johnson Trading arranged for them to be shipped to the PRC via Hong Kong.

Johnson Trading has agreed to the fine and will be suspended for a five-year period encompassing the denial of export privileges and an audit of the company’s export compliance program. If Johnson Trading fully complies with all terms of the agreement (which has yet to be published), $30,000 of the $90,000 penalty will be suspended.

“BIS is taking a hard-line with license exceptions being used to evade licensing requirements,” explained Kevin Delli-Colli, Deputy Assistant Secretary for Export Enforcement at BIS.

More information:

• BIS News Release

BIS announced that effective October 20, 2008, it will require the following applications or notifications to be submitted through SNAP-R:

• Export and reexport license applications
• Classification requests
• Encryption review requests
• License exception AGR notifications
• Any related documents to be submitted with the above mentioned; PDF files can be submitted as “attachments”

The requirement does not apply to applications for Special Comprehensive Licenses or in certain situations in which BIS authorizes paper submissions.

Section 748.1 “General provisions,” Section 748.3 “Classification requests, advisory opinions, and encryption review requests,” and Section 748.6 “General instructions for license applications,” have been amended to comply with the new ruling.

More information:

Federal Register Notice - August 21, 2008

BIS has published a final rule in the Federal Register amending the EAR export and reexport requirements for persons and entities designated on the Entity List. 15 CFR Parts 730, 744 and 756 have been changed effective immediately The rule expands on the idea that certain exports and reexports to parties on the Entity List require a license from BIS and availability of License Exceptions in those transactions is limited.

A summary of the changes are as follows:

• An End-User Review Committee will be formed consisting of representatives from the Department of Commerce, State, Defense, Energy, and Treasury. The committee will have the discretion to add, remove or modify a party on the Entity List.
• The Entity List will be changed when there is reasonable cause to believe, based on specific facts, that an entity has been involved in, or poses a risk of being involved in activities that are contrary to the national security or foreign policy interests of the US. BIS stated that a guidance will be published in the near future regarding the ability of US persons to deal with parties related to those on the Entity List; BIS also stated that “US persons” will not be placed on the Entity List. Read More

BIS amended the EAR to clarify that crew protection kits are on the Wassenaar Arrangement Munitions List (WAML) and are correctly classified on the CCL under the entry regarding “construction equipment built to military specifications.” Crew protection kits are items used as protective cabs on construction equipment to help protect crews operating in a military or otherwise hostile environment.

The phrase “crew protection kits” will be added to ECCN 0A018.a, this ECCN is used to control items listed on the WAML. BIS believes that this will further clarify that the all items listed are considered to be “construction equipment built to military specifications” and that all are controlled by that ECCN.

This amendment will not create any new export controls for crew protection kits.

More information:

Federal Register - September 5, 2008

Effective September 2, 2008, BIS amended the EAR to establish export licensing requirements for Kosovo. The US recognized Kosovo as a sovereign state on February 18, 2008 and this rule will update the EAR as follows:

• Supplement No. 1 to part 738 (Country Chart) will have “Kosovo” added
• Supplement No. 1 to part 740 (Country Groups), will be amended by adding Kosovo to Country Group B
• 740.7(d) (1) (Computer Tier 3 destinations) will add “Kosovo” for License Exception APP purposes

This rule will not amend Supplement No. 2 to part 745 (States Parties to the Convention on the Prohibition…) to include Kosovo because the country is not currently a State Party to the Convention at this time.

More information:

Federal Register - September 2, 2008

BIS is amending the Export Administration Regulations to reflect changes made the Missile Technology Control Regime (MTCR). MTCR is an export control arrangement of 34 nations that share the goal of stemming the flow of missile systems capable of delivering weapons of mass destruction. The regime was originally created to prevent the spread of missiles capable of nuclear warheads, but as times and technology have changed, they have expanded their mission. Members voluntarily pledge to adopt the regime’s export Guidelines and restrict export of items contained in the regime’s Annex. The MTCR controls both military and dual-use items.

MTCR met and made changes to the Annex in November 2007. BIS is now amending the EAR to coincide with those modifications. Here are the changes: Read More

BIS has issued a denial order suspending export privileges of Galaxy Aviation Trade Company, and three of its shareholders. The London Based company planned to purchase the 747 from Ankair, a Turkish company who would then re-export the US-origin Boeing 747 to Iran. Iran Air, who was to acquire the aircraft, has been issued a denial order and Ankair has been issued a non-standard denial. Read More

TFC Manufacturing Inc., a California-based aerospace fabrication facility has been charged with violating the “deemed export” rule. The Commerce Department’s Bureau of Industry and Security has required the company pay a $31,500 penalty.

From March to April 2006, TFC Manufacturing Inc. released unlicensed US technology for the production of aircraft parts classified under ECCN 9E991. The company gave the information to an employee who was a national of Iran, under the Export Administration Regulations; this release of technology to a national of Iran is deemed to be an export and is prohibited without a license.

More information:

• BIS Imposes $31,500 Penalty on California Company For Violating Deemed Export Rule (International Trade Law News)

Kabba & Amir Investments, Inc., d.b.a. International Freight Forwarders (IFF) of Canada have been fined $6,000 for export violations. The company is a freight forwarding company. In June 2000, IFF took possession of shipment of X-Ray Film Processors, items subject to the Regulations, and exported them to Cuba without a license.

The company worked with known and unknown co- conspirators to export the processors to Cuba via Canada without obtaining a BIS export license. IFF violated the regulations when they took possession of the items in the United States and took them to Canada.

After several reviews, and IFF claiming that they were unaware that a license was necessary, BIS found that they do not have to prove that the company knew or did know that they needed a license. As long as IFF pays their fine within 30 days of their final charging letter they will not be denied export privileges, if they do not, their export privileges will be denied for three years.

More information:

• efoia.bis.doc.gov/exportcontrolviolations/e2045.pdf (PDF)

The Bureau of Industry and Security has proposed to amend the Export Administration Regulations by making changes to ensure consistency within the language and terminology of Part 744. Because this is only a proposed rule, none of the changes are in force at this time.

Part 744 of the EAR deals with the end-user and end- use based control policy. Sections 744.3 (missile catch-all control), 744.4 (chemical/biological weapons catch-all control), and 744.6 (US persons involvement in weapons of mass destruction proliferation activities) all prohibit exports, reexports and transfers (in-country) of items subject to the EAR. 744.2 (nuclear catch-all control) presently only states it prohibits exports and reexports of items subject to the EAR. The proposed amendment would change the nuclear catch-all control language to prohibit export, reexport, and transfers (in-country) to conform to the other sections.

The rule also proposes to amend the “is informed” paragraph (B) of the sections of part 744 to ensure that the same terminology is used throughout all sections. Read More

The Bureau of Industry and Security (BIS) has issued a rule to amend the Export Administration Regulations to make technical corrections and clarifications after a review of the Commerce Control List. The rule will be effective April 18, 2008 and the BIS plans to publish another rule later this year to employ the second phase of corrections.

The rule revises “Related Controls” paragraphs found in the following Export Control Classification Numbers (“ECCNs”) by adding related controls references. BIS has even included related controls references in CCL entries to assist exporters in classifying items on the CCL and in some cases provide cross references for CCL items. Read More

Engineering Dynamics of Kenner LA has been fined $132,791.39 for export violations. (Editor’s note: I would love somebody to tell me how they came up with the 39 cents. — John Black) The company has been exporting an engineering software program from the US to Iran via Brazil without authorization from the Office of Foreign Assets Control (OFAC) from March 1995 into February 2007 to export the software until the US Department of Treasury discovered the illegal exports.

Over the years the company and its co-conspirators would market, sell, and service the engineering software program to their Iranian clients through another conspirator in Brazil. Engineering Dynamics will not be suspended from export transactions as long as their entire penalty is paid as agreed upon.

More information available at:
BIS - e2044.pdf (PDF)

French corporation, Cryostar France pleads guilty to conspiracy, illegal export, and attempted illegal export of Cryogenic Submersible Pumps to Iran. Cryostar has several businesses worldwide where they specialize in the design and manufacturing of cryogenic equipment. They were sentenced in the US to a criminal fine of $500,000 and corporate probation of two years.

Cyrostar was a middleman between Ebara International Corp., Inc. and “TN” a French company with a US subsidiary. Cryostar was to purchase the pumps from Ebara and then resell them to “TN” who would then forward the pumps to Iran. Cryostar falsely indicated that the final purchaser was the French company “TN” who would install the pumps in France, when all parties were in agreement that the pumps would go to Iran. The three companies created false purchase orders, and purchased as many component parts from non-US suppliers as possible to avoid any and all questions from US suppliers and to conceal their conduct. No export licenses were ever obtained for any of the items.

In 2004 penalties were imposed on Ebara and its former CEO Everett Hylton. At that time Ebara pled guilty to criminal violations and agreed to an administrative settlement, with combined fines of over $6.4 million dollars while Hylton agreed to personally pay $109,000. Ebara and Hylton’s schemed together to violate the embargo on Iran after some people in Ebara initially stopped an Ebara sale to Iran. Ebara falsified some documents and removed “made by Ebara” markings from certain items to evade US restrictions on Iran.

More information:

• DOJ Announces $500,000 Fine for Illegal Exports to Iran (WorldTrade Interactive)
• For the 2004 penalties: BIS News Release

On March 21, 2008, the BIS made clarifications involving the ECCN 1C210 and ECCN3A233.

The ECCN 1C210, thermoset resin is defined as those resins that, when cured by the action of a catalyst or heat and pressure, become an infusible and insoluble material. Once the thermoset is cured it can no longer be returned to the uncured state.

The ECCN 3A233, materials resistant to UF6 are limited to aluminum, aluminum alloys, nickel, and nickel alloys containing more than 60% nickel.

More information:

• BIS advisory opinion on ECCN 1C210 (PDF)
• BIS advisory opinion on ECCN 3A233 (PDF)

Secretary Mancuso delivered the keynote address on March 17, 2008 at the Export Control Forum in Newport Beach California. Mancuso emphasized the need to strengthen the US dual-use export control enforcement architecture and pushed for Congress to pass “a reauthorized Export Administration Act as quickly as possible.”

He also restated that his three highest policy priorities are still:

• Refining BIS’s enforcement efforts; focusing on terrorists, proliferators, and nations with transshipment concern;
• Reforming and updating dual-use export controls to enhance US national security and competitiveness;
• Accelerating and elevating international engagement with the most dynamic high technology markets in the world.

More information:

• BIS News Release