Denied & Restricted Parties

The Bureau of Industry and Security, US Department of Commerce has denied export privileges to Winter Aircraft Products SA of Madrid for a period of 10 years. The company was denied privileges because the BIS found that the company had taken actions with intent to transship aircraft part subject to the Regulations without a license.

Although the company did not actually follow through with the transshipment, their intent was enough to deny them exporting privileges from the US. It is now an export violation to directly or indirectly export, reexport or even “think” of doing business with this company beginning on May 19, 2008.

More information:

• efoia.bis.doc.gov/exportcontrolviolations/e2047.pdf (PDF)

On February 28, 2008 the Department of the Commerce, Bureau of Industry and Security issued a final rule amending the Export Administration Regulations. The rule will expand authorization for temporary exports and reexports to Sudan under EAR License Exception TMP (”Temporary Imports, Exports, and Reexports”), 15 C.F.R. Part 740.9.

The revision will now allow for an expanded list of “tools or trade” usually characterized by “usual and reasonable kinds of quantities of commodities, software, and technology for lawful use”. Software must be solely used for servicing or in-king replacement of software legally exported, which must remain loaded on exempted equipment while in Sudan. Before the final rule, all software was required to be loaded on to the hardware prior to sending the hardware to Sudan.

The new regulation will now permit reexports, they must however, be shipped to Sudan to and by eligible users for eligible uses. A permissible “eligible” user includes any non-governmental organizations or an individual staff member, employee, or contractor of such an organization.

All revisions are said to be effective immediately, but many are cautioned that there are still several restrictions involving TMP. For a complete list of restrictions and newly authorized component please see the final rule.

More information:

• Federal Registers
• BIS - Sudan Web Guidance (PDF)

The Department of Treasury’s Office of Foreign Assets Control has issued a guidance document to give much need direction banks, importers, and exporters regarding blocked property and interests in blocked property. The main issue the OFAC is attempting to answer in this document is, what if a company is not on the SDN list, but one of its partners/ shareholders/ members is? Can we do business with the company? The answer is not so clear however, it actually is that it depends. If the SDN lists any partners/ shareholders/ members who have 50% or more interest in the company than the answer is no, but if they only have 49% or less interest in the company than you can in fact do business with the company but you should act with strong caution.

This all may sound a bit clear until the fact arises of how to actually find out if the SDN has 50% or greater interest therein the company. The OFAC does not give any opinions or options to generate an answer for this problem. If in fact a company fails to detect a SDN interest in 50% or more in one of their customers and ends up engaging in business the company will be treated by the OFAC as if they dealt with an SDN directly.

OFAC warns and reminds companies, “In certain OFAC sanctions programs (e.g., Cuba and Sudan), there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership or control.”

More information:
OFAC Guidance Document (PDF)

The US Department of Commerce’s Bureau of Industry and Security (BIS) has issued denial orders for two New York medical device distributor companies. AR-AM Medical Services LLC and DMA Med-Chem Corporation, both located at 49 Watermill Lane, Great Neck, New York. The charging papers explain that the companies supplied commercial invoices to the New York branch of the Bank of Egypt containing the following language that violations the antiboycott rules in the Export Administration Regulations:

The goods are neither of Israeli materials nor [sic] they contain any Israeli materials nor are they exported from Israel.

We declare that no raw material of Israeli origin has been used for production or preparation of the goods mentioned in this invoice.

Because the language was found on invoices that both companies generated, this is not a case where either company missed the boycott language in terms and conditions and/or other documents supplied by the purchaser. AR-AM included the language in three invoices, whereas DMA has allegedly only included it in one of their invoices.

Both companies are prohibited from participating in transactions in Bahrain, Iraq, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates, and the Republic of Yemen. Beginning January 14, 2008 the companies will be prohibited from any transactions for two years and AR-AM was fined $7,200 while DMA agreed to a fine of $2,400.

While it is unusual for a violation of the antiboycott rules to result in a company getting its export privileges denied, it is not unprecedented. In the landmark Baxter Healthcare antiboycott case, Baxter was partially denied its export privileges for Saudi Arabia and Syria, in addition to getting hit with a $6 million dollar fine and having its general counsel also personally fined.

More information:

www.exportlawblog.com/archives/288

www.bis.doc.gov/dpl/recentchanges.asp

Who would have thought that a company right here in my peaceful Shenandoah Valley of Virginia would set the export fine record with a $100 million penalty? (And, no, ITT is not and was not a client of mine). ITT agreed to plead guilty to criminal charges of illegally exporting controlled night vision technology and omitting material facts in statements to the government. The penalties stemmed from ITT’s outsourcing of components for their leading edge night-vision goggles. According to government and published reports, ITT exported technical data without the required licenses to the UK and Singapore. ITT was aware of violations in the mid 1990’s and voluntarily disclosed some limited infractions but omitted large amounts of material information and provided false information to hide the full scope of the problem. It seems like in the course of looking into UK violations it was discovered that there were even more significant violations involving Singapore.

There are many lessons that export compliance professionals can learn, from this story.

Read More

The Directorate for Defense Trade Controls at the State Department has debarred Security Assistance International, Inc. (SAI) and its president, Henry L. Lavery III from participating directly or indirectly in any activity regulated under the ITAR until December 12, 2007. DDTC also fined SAI $75,000. These penalties are based on a settlement agreement between DDTC and SAI. Because a significant part of the company’s business activities involve providing export compliance consulting services, this is a particularly stiff penalty as it may prohibit SAI from assisting companies with ITAR related compliance issues, not to mention the fact that this second settlement does nothing to help SAI’s reputation.
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On April 26 BIS notified the exporting community that it was adding Parrlab Technical Solutions, LTD of 1204, 12F Shanghai Industrial Building, 48-62 Hennesey Road, Wan Chai, Hong Kong SAR to the Unverified List, indicating an automatic red flag. By all means ensure that this company is added to your screening lists, but we doubt that this will impact many of you since even the omniscient Google has never heard of this company outside the context of the BIS notice.

As part of the same regulation implementing changes to the MTCR, BIS added four organizations in Syria to the Entity List. This marks the first time Syrian entities have been placed on the list, joining others from China, India, Israel, Pakistan, and Russia.

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1. ITAR Debarment

The State Department announced that it has imposed administrative debarment on

• Mart Haller Incorporated, September 10, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:03Cr170(EBB).
• Alan Haller, September 10, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:03Cr169(EBB).
• –Tariq Ahmed a/k/a “Tariq Amin”, “Tariq Ahmad Amin”, September 30, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:02CR247(DJS).
• Yasmin Ahmed a/k/a “Yasmin Tariq”, “Fatimah Mohammad”, September 4, 2003, U.S. District Court, District of Connecticut (New Haven), Case :3:02CR247(DJS).
• Jami Siraj Choudhury, November 10, 2003, U.S. District Court, Eastern District of Wisconsin, Case :02-Cr-261.

The debarment theoretically is for a minimum of three years, but, as we have discussed in the past, these debarments typically last forever. (Federal Register 17468)

2. Office of Foreign Assets Control Lists

OFAC announced changes to its prohibited parties lists related to Iraq and terrorists. To see these changes go to www.treas.gov/offices/eotffc/ofac/actions/index.html

3. Nonproliferation Sanctions

The State Department removed these entities from its nonproliferation sanctions list:

• Europalace 2000 (Federal Register 17262)
• Grafit (aka State Scientific Research Institute of Graphite or NIIGRAFIT) (Federal Register 17262)
• MOSO Company (Federal Register 17262)
• The Scientific Research and Design Institute of Power Technology (aka NIKIET, Research and Development Institute of Power Engineering (RDIPE), and ENTEK). (Federal Register 17262)
• Anatoliy Kuntsevich (Federal Register 17259)
• TZNII Central Scientific Research Institute of Precision Machine Building (aka Tzniitochmash) (Federal Register 17263)
• Volsk Mechanical Plant (Federal Register 17263)

4. Terrorist List

The State Department identified these terrorist organizations:

• Babbar Khalsa International (Federal Register 23555)
• Communist Party of Nepal (Maoist) Federal Register 23555)

1. ITAR Debarment

The State Department announced that it has imposed administrative debarment on

• Kam-Tech Systems, Ltd., Tel Aviv, Israel
• David Menashe, owner and manage of Kam-Tech

These two parties pled guilty to making false statements related to an export of AIM-9 Missile Seeker Section that was going to be transshipped to the PRC.

The debarment theoretically is for a minimum of three years, but, as we have discussed in the past, these debarments typically last forever.

2. Office of Foreign Assets Control Lists

OFAC announced changes to its prohibited parties lists impacting nearly 100 entities with several hundred alias and also known as names.

To see these changes go to www.treas.gov/offices/eotffc/ofac/actions/20040128.html

DENIED PERSONS LIST:

Commerce Department added the following parties to the Denied Persons List:

1. ABO (USA) INC., 2563 NW 20th St, Miami, FL 33142 (12/22/03): Commerce took this action in response to charges that ABO committed two violations of the Export Administration Regulations by illegally export commercial night vision scopes to Japan without an export license.
2. Omega Engineering, Inc., One Omega Drive, Stamford, Connecticut 06907 (11/18/03): Commerce listed Omega for 17 violations related to illegal exports of laboratory equipment via Newport Electronics GmbH in Germany to Pakistan. Omega’s illegal exports came two to three months after Commerce denied Omega’s license application to export the items to Pakistan. Everybody knows that the government watches companies who get their licenses denied - I guess everybody but Omega knows that. Obviously, Omega is a good example of the law enforcement belief that if a company gets an export license denied, it will export anyway. Omega’s denied status is focused on transactions involving Pakistan. Commerce also fined Omega $187,000. In April of 2003 Omega pled guilty to criminal violations and received a $313,000 fine.
3. Ralph Michel, Vice President, Omega Engineering, Inc., One Omega Drive, Stamford, Connecticut 06907 (11/18/03): Commerce put Michel, the CFO of Omega, on the list for his involvement in the Omega violations. Michel’s denied status is focused on transactions involving Pakistan. In April of 2003 Michel pled guilty to criminal violations and received 10 months of confinement and a $50,000 fine.
   So, now you have an example that demonstrates that the government may go after senior company officials in addition to the company.
4. Ahwaz Steel Commercial & Technical Service Gmbh (ASOTEC), Tersteegenstr. 10, 40474 Dusseldorf, Germany AND Metal & Mineral Trade Sarl (MMT), Rue Pierre D’Aspelt, 1142 Luxembourg, Luxembourg. Commerce announced settlement agreement with these two parties in relation to charges that they caused illegal exports from the United States to Iran.

TERRORIST LIST:

In the December 23 Federal Register the State Department published notices adding aliases to the terrorist designation of various terrorist organizations. See www.access.gpo.gov/su_docs/fedreg/a031223c.html.

MISSILE PROLIFERATION SANCTIONS

In the December 24 Federal Register the State Department imposed missile proliferation sanctions against:

1. Blagoja Samakoski (Macedonian national)
2. Mikrosam (Macedonia)

These sanctions prohibit the approval of license for transfers to these parties of military and commercial items controlled by the Missile Technology Control Regime Annex. The sanctions also prohibit US Government contracts with these entities.

As a practical matter, exporters should read a bit more into these sanctions: First, if you ever deal with these entities, you must assume there are significant “red flags” indicating possible illegal missile activities and treat the transaction accordingly. Second, it is likely that the US Government will deny most, if not all, license applications for these parties.

1. Commerce Denied Persons List

The Commerce Department added the following to its DPL during October 2003:

• Reza Moghadam Pirasteh, 23087 Arroyo Court, Plano, Texas to the DPL for seven years based on a settlement agreement for Pirasteh’s alleged illegal exports to Iran. (October 7, 2003)
• Abdulamir Mahdi (aka Amir Mahdi and Jasin Khafaf), 20 Huntingwood Drive, Scarborough, Ontario, Canada and OTS Refining Equipment Corporation, 7030 Woodbine Avenue, NE, Suite 500, Markham, Ontario, Canada. See story in section 2.1 below.

2. Terrorists Lists

• Communist Party of Nepal (Maoist), aka the United Revolutionary Council, aka People’s Liberation Army of Nepal, aka CPN(M). (October 31, 2003 Federal Register)
• Dhamat Houmet Daawa Salafia [also known as Group Protectors of Salafist Preaching; aka Houmat Ed Daawa Es Salifiya; aka Katibat El Ahoual; aka Protectors of the Salafist Predication; aka El-Ahoual Battalion; aka Katibat El Ahouel; aka Houmate Ed-Daawa Es-Salafia; aka the Horror Squadron; aka Djamaat Houmat Eddawa Essalafia; aka Djamaatt Houmat Ed Daawa Es Salafiya; aka Salafist Call Protectors; aka Djamaat Houmat Ed Daawa Es Salafiya; aka Houmate el Da’awaa es-Salafiyya; aka Protectors of the Salafist Call; aka Houmat ed-Daaoua es-Salafia; aka Group of Supporters of the Salafiste Trend; aka Group of Supporters of the Salafist Trend] (October 20, 2003 Federal Register)

3. State Department Debarred Parties Clarification

Last month we reported that the State Department (finally) announced that it has imposed statutory debarment on a long list of parties who committed export/reexport violations. The State Department Federal Register notice said that each party was debarred for three years. In fact, one of our readers pointed out that under the ITAR, each party is debarred forever unless the State Department takes an action to lift the debarment. So, leave these parties on the denial list you use for export compliance screening.

Last November Abdulamir Mahdi got out of US federal prison after spending 51 months in jail for his schemes to illegally divert US oil field equipment from the United States via Canada to Iran. In the October 3, 2003 Federal Register the Commerce Department added Mahdi to its Denied Persons List for 20 years for the same schemes. In hindsight, I bet Mahdi thinks the orders for $232,834 worth of oil field equipment were not worth the price he paid.

The 17-page Federal Register notice describes Mahdi’s schemes and the basis of the government case against him. The notice includes seven interesting lessons for exporters and reexporters.

Read More

(1) Saeed Homayouni, June 11, 2001 (entry date of June 14, 2001), U.S. District Court, Southern District of California (San Diego), Docket 00-CR-3843-ALL.
(2) Quality Aviation & Power Support, Inc., August 21, 2001 (entry date of August 27, 2001), U.S. District Court for the Central District of California (Western Division), Docket 2:00-CR-787.

(3) Earlene L. Christensen aka Earlene Larson Christenson aka Earlene Larson, August 21, 2002 (entry date August 27, 2002), Central District of California, (Western Division), Docket 2:00-CR-787.

(4) Richard Kelly Smyth, December 28, 2001 (entry date of January 8, 2002), U.S. District Court, Central District of California (Western Division), Docket 85-CR-483-ALL.

(5) Diaa Mohsen, November 16, 2001 (entry date November 20, 2001), U.S. District Court, Southern District of Florida (West Palm Beach), Docket 01-CR-8087-ALL.

(6) Jonathan Reynolds, September 28, 2000 (entry date October 2, 2000), U.S. District Court, District of Massachusetts (Boston), Docket 00-CR-10267-ALL.

(7) Fadi Boutros, aka Fadi E. Sitto, aka Fadi Jirjis, aka Fred Boutros, February 11, 1999 (entry date February 17, 1999), U.S. District Court, District of Connecticut (New Haven), Docket 3:99-CR-19.

(8) Paul Siroky, October 5, 2000 (entry date October 6, 2000), U.S. District Court, Central District of California (Western Division), Docket 2:00-CR-884.

(9) Steven Picatti, October 19, 1998 (entry date November 18, 1998), U.S. District Court, Central
District of California (Western Division), Docket 2:98-CR-860.

(10) Peter Appelbaum, August 18, 1999 (entry date August 24, 1999), U.S. District Court, Southern District of Florida (Miami), Docket 99-CR-530-ALL.

(11) Bing Sun, August 1, 2000 (entry date August 2, 2000), U.S. District Court, Eastern District of Virginia (Norfolk), Docket 2:00-CR-28.]

(12) Patte Sun, August 1, 2000 (entry date August 2, 2000), U.S. District Court, Eastern District of Virginia (Norfolk), Docket 2:00-CR-28.

(13) All Ports Inc., August 1, 2000 (entry date August 2, 2000), U.S. District Court, Eastern District of Virginia (Norfolk), Docket 2:00-CR-28.

(14) Beta Trading Company, August 28, 1998 (entry date September 1, 1998), U.S. District Court, District of South Carolina (Charleston), Docket 98-CR-332-ALL.

(15) Genaro Lopez-Gonsales, October 5, 1999 (entry date October 19, 1999), U.S. District Court, Southern District of Texas (McAllen), Docket 99-CR-434-ALL.

(16) Octabio Merida Gonzalez, July 1, 1998 (entry date July 8, 1998), U.S. District Court, Southern District of Texas (Brownsville), Docket 98-CR-255-ALL.

(17) Collin Xu, aka Collin Shu, aka Zhihong Xu, November 9, 2000 (entry date November 15, 2000), U.S. District Court, District of Massachusetts (Boston), Docket 99-CR-10075-ALL.

(18) Yi Yao, aka Yao Yi, February 2, 2000 (entry date February 8, 2000), U.S. District Court of Massachusetts (Boston), Docket 99-CR-10075-ALL.

(19) Mariano Recinos-Rivera, June 5, 2000 (entry date June 20, 2000), U.S. District Court, Southern District of Texas (McAllen), Docket 00-CR-218-ALL.

(20) Gunther Kohlke, February 27, 2002 (entry date March 1, 2002), U.S. District Court, District of New York (Brooklyn), Docket 01-CR-738-ALL.

(21) Eugene Yon-Tsai Hsu, April 30, 2002 (entry date May 5, 2002), U.S. District Court, District of Maryland (Baltimore), Docket 01-CR-485-ALL.

(22) David Tzuwei Yang, April 30, 2002 (entry date May 5, 2002), U.S. District Court, District of Maryland (Baltimore), Docket 01-CR-485-ALL.

(23) Dennis Ritiche Jones, March 23, 1999 (entry date March 26, 1999), U.S. District Court, District of Arizona, Docket CR-99-346-01.

(24) Carlos Fernando Chirinos, September 13, 2002 (entry date September 17, 2002), U.S. District Court, District of Arizona, Docket 02-20605-CR.

(25) Daniel Jose Uribazo, August 29, 2002 (entry date August 30, 2002), U.S. District Court, District of Arizona, Docket 02-20605-CR.

(26) Maximo de los Santos, November 18, 1999 (entry date November 19, 1999), U.S. District Court, District of Hawaii, Docket 1:99CR00426-001.

(27) Jesse Radona Ponce, November 18, 1999 (entry date November 19, 1999), U.S. District Court, District of Hawaii, Docket 1:99CR00426-001.

(28) Jesus Pascual Domingo, April 6, 2000 (entry date April 6, 2000), U.S. District Court, District of Hawaii, Docket 1:99CR00426-001.

(29) Paul Guzman, November 22, 1999 (entry date November 24, 1999), U.S. District Court, District of Hawaii, Docket 1:99CR00426-001.

1. Proliferation Sanctions

In the September 19, 2003 Federal Register the State Department imposed proliferation sanctions on China North Industries Corporation because it was involved in the proliferation of missile technology.

The sanctions call for the US Government to deny all license applications for exports of missile related items (including dual use items) to this entity. The sanctions also prohibit US Government contracts with this entity and ban imports of items made by this entity into the United States from this entity. The import sanctions were waived.

2. Commerce Denied Persons List

In the September 11, 2003 Federal Register the Commerce Department added the following party to its DPL:

Gunter Kohlke, currently incarcerated at: Allenwood Federal Correctional Institution, Inmate No. 10080- 196, P.O. Box 1500, White Deer, Pennsylvania 17887, and with an address at: Im Dankholz 25, 79798 Jestetten, Germany

Quick, run cancel that shipment to the Allenwood prison!

3. State Terrorists Lists

In the September 10, 2003 Federal Register the State Department redesignated

“United Self-Defense Forces of Colombia”
Also Known as the “Autodefensas Unidas de Colombia”
Also Known as “AUC”

as a Foreign Terrorist Organization.

4. State Department Debarred Parties

In the September 3, 2003 Federal Register the State Department (finally) announced that it has imposed statutory debarment on the entities listed in Annex 1 to this newsletter. If you look at the Annex you will see the date each party was convicted of violating the Arms Export Control Act. State imposed a three-year debarment period on each party. Interestingly, however, some of he parties were convicted more than three years ago so their debarment period is already over.

My advice is to consider leaving these parties on your prohibited parties lists because you know they have been convicted of illegal arms exports.