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The Export Control Update Newsletter
June 2008

CONTENTS

  1. The "Soon" Is Now: Throw Away Your SEDs Because It's AES EEI Time!
  2. OFAC Creates General Licenses to Help Burma
  3. $32 Million Fine, But Not for Export Violations
  4. Our Seminar Gets Write-up in a Real Newspaper
  5. Forwarder Gets Slapped on Wrist for Involvement in Illegal Cuba Shipment
  6. Aerospace Company Penalized for Release of Technical Data to Foreign Employee
  7. US to Allow Some Defense Exports to Southern Sudan
  8. US Announces List of Countries Supporting Terrorism
  9. President Bush Wants to Relax Defense Export Controls on UK and Australia
  10. Intent to Violate Gets 10 Years on Denied Parties List
  11. DDTC Corrects ITAR
  12. DDTC Updates FAQs for Commodity Jurisdiction
  13. DDTC Announces Policy for Your Licenses Involving Debarred Electro-Glass Products
  14. Job Posting: Export Compliance Training Institute Recruiting Speakers
  15. Older stories are in the Export Control Update newsletter archive

1. The “Soon” Is Now: Throw Away Your SEDs Because It’s AES EEI Time!

The “soon” is now, to paraphrase the late, great football coach George Allen. For quite a while, the Census Bureau has been saying soon it will publish the rewritten rules for the submission of Shipper’s Export Declarations (SEDs) and the Automated Export System (AES). The new rules enter into force on July 2, 2008, and on that day the SED will no longer be valid. The SED will be replaced by Electronic Export Information (EEI) that must be submitted via the AES (or AESDirect) electronic reporting system.

Nearly six years ago on September 30, 2002 the President signed the Foreign Relations Act that authorized the Commerce Department to eliminate the paper SED for all exports and require that exporters submit export information electronically. (Commerce is the mother agency of the Census Bureau’s Foreign Trade Division, which is the organization that administers the AES EEI regulations, technically known as 15 CFRP Part 30—Foreign Trade Regulations.) In the June 2, 2008 The Federal Register, the Census Bureau published the new FTR, to entirely replace the former Foreign Trade Statistics Regulations (FTSR).

So, background information aside, let’s look at the key highlights of the new FTR. Generally speaking, the FTR is quite similar to its FTSR predecessor. Based on my first read of the new FTR, here are some key changes that enter into force on July 2, 2008:

Electronic Filing Required for EAR99 Items: Formerly you could use paper SEDs for items classified as EAR99 in the Export Administration Regulations (EAR). Now everything has to be submitted via the AES EEI mechanism now.

FTR Fire and Brimstone: You can go to jail for violations of the FTR! Well, it is unlikely that anybody reading this article will go to jail, but the fines and penalties have been increased. Criminal penalties include up to $10,000 and 5 years in jail per violation. Worth noting is that there are civil penalties of up to $1,100 per day for failure to file or late filing, and $10,000 per violation. The Office of Export Enforcement in the Bureau of Export Administration and US Customs (Immigration and Customs Enforcement and Customs and Border Protection) are responsible for enforcing these rules.

Routed Export Transaction Adjustments: Routed generally means the foreign customer (also known as the FPPI or Foreign Principal Party in Interest) chooses the freight forward to get stuff out of the United States. In such cases, the US exporter (also known as the US PPI or US Principal Party in Interest) is not responsible for filing the AES EEI.

  • In routed exports, the FPPI is responsible for filing and normally authorizes its agent (e.g., forwarder) to file on its behalf. The agent of the FPPI must show the USPPI a copy of the power attorney in which the FPPI authorizes the agent to file the AES EEI. The agent must also give the USPPI a copy of the data elements it filed through AES.
  • In a routed export, the FPPI may authorize the USPPI to file AES on its behalf—this must be authorized in writing.

When is AES filing required? For the most part, there are no changes to when AES EEI filing is required. Some adjustments/clarifications/updates were made, such as adjustments to country lists. For example, filing is not required for temporary exports unless the export is destined to Country Group E:2 in the EAR, a license is required, or an International Traffic in Arms Regulations exemption applies. Another example is that the $2,500 exemption was adjusted—formerly there was a longer list of countries (including Libya, for example) not eligible for the $2,500. Now the countries excluded from the $2,500 exemption are those in Country Group E:1 in the EAR.

Appendices Galore: This stuff is export control nerd heaven. I mean, take these home and read them in your spare time.

  • Appendix A To Part 30 — Sample for Power of Attorney and Written Authorization
  • Appendix B To Part 30 — ES Filing Codes
  • Appendix C To Part 30 — Summary of Exemptions and Exclusions from EEI filing
  • Appendix D To Part 30 — AES Filing Citation, Exemption and Exclusion Legends
  • Appendix E To Part 30 — FTSR to FTR Concordance
  • Appendix F To Part 30 — FTR to FTSR Concordance

The FTR Learning Experience: OK, so for me the highlight of the new FTR is I learned a new word. My vocabulary is expanded to include the word “drayage.” Never heard of it before. I am not saying this is a new term in the regs, but it is new to me and I thought I would share it. I bet you don’t know what it means!

AES EEI Filing Lead Times: You have to read the ITAR to find out how far in advance of ITAR exports you have to submit AES EEI information. (Sarcastic comment omitted.) For all other exports, you must submit with these lead times

  • Air: 2 hours prior to scheduled departure time
  • Vessel: 24 hours prior to loading
  • Truck: 1 hour prior to arrival at the border
  • Rail: 2 hours prior to arrival at the border
  • Mail and other methods: 2 hours prior to export

Please May I Be Penalized? There is a new section 30.74 dedicated solely to voluntary disclosures. You will be surprised to learn that the Census Bureau “strongly encourages” voluntary disclosures of “any violation or suspected violation.” (Hmm, ‘suspected violation’s…Dear Census: We suspect we might have violated the FTR but we don’t know….” I don’t recommend that approach. Before you turn yourself, first figure out if you violated the rules, and, if you didn’t, well, don’t report yourself. They do not want you to voluntarily disclose that you are complying with the rules.

The FTR says voluntary disclosure is a mitigating factor, but it does not tell you how much it will help. In fact the FTR warns that “it is a factor that is considered together with all other factors in a case,” and then goes on to explain that the government will try to penalize you however it sees fit. I thought I should point that out for those of you who thought maybe the government would write regulations that would limit its ability to attempt to impose whatever penalty it feels like imposing for whatever reason.

But, the upside here is that if you do decide to do a voluntary disclosure, the FTR now includes specific description of the steps you should take, the internal investigation you should conduct over the past five years (ouch, ouch and ouch!!!!), and the information you should provide.

Conclusion: Well, that’s my first read of the new rules. I gotta stop now so I can go off on a long vacation—export controls can do that to a person. And no, I am not skipping town because I am afraid of 30 years in the slammer for failing to submit a few AES EEI records!

If you notice some interesting new things in the FTR, I would love to hear from you with your thoughts and comments.

Ok, one last important thing: “Drayage. The charge made for hauling freight, carts, drays, or trucks.”

SED: R.I.P.

— John Black

2. OFAC Creates General Licenses to Help Burma

The Treasury Department’s Office of Foreign Assets Control has posted amendments to General License Number 14 and posted a new general license, General License number 15 under the Burmese Sanctions regulations.

The Burma Sanctions are available at:
http://www.treas.gov/offices/enforcement/ofac/programs/burma/burma.pdf (PDF)

General License Number 14 previously only authorized the transfer of funds in support of not-for- profit humanitarian or religious activities in Burma only if they involved US or third-country NGO’s. The amendment will expand the authorization for a period of 120 days to allow funding to any organization or individual engaged in not-for-profit humanitarian or religious activities in Burma. This amendment is a result of the devastation left by Cyclone Nargis, in .Myanmar, Burma

General License Number 15 allows US financial institutions to process transfers of funds, unlimited in amount, for noncommercial, personal remittances to or from Burma, or for or on behalf of an individual ordinarily resident in Burma. Before the issuance of this license noncommercial, personal remittances to Burma were permitted only insofar as total remittances did not exceed $300 per Burmese household in any consecutive three month period. This new license has no such limitations.

More information:

— Danielle McClellan

3. $32 Million Fine, But Not for Export Violations

Willbros Group Inc. and Willbros International Inc., a wholly owned subsidiary, have agreed to pay over $32 million in penalties, disgorgement and interested in criminal case with the Department of Justice and with the Securities and Exchange Commission. The companies are both publicly traded and provide construction, engineering and other services in the oil and gas industry.

Between late 2003 into March 2005, Willbros’ employees agreed to make corrupt payments in excess of $6.3 million to Nigerian government officials to obtain and retain a $387 million contract for work on major construction on a gas pipeline project known as the Eastern Gas Gathering System. Other employees based in South America also agreed to pay $300,000 in corrupt payments to Ecuadorian government officials of the state owned PetroEcuador and its subsidiary, Petrochemical, to obtain the Santo Domingo project. The project involved rehabilitation of several kilometers of a gas pipeline in Ecuador.

Willbros’ and its international subsidiary are charged with six criminal counts:

  • One count of conspiring to make bribe payments to Nigerian and Ecuadorian officials;
  • Two counts of violating the Foreign Corrupt Practices Act in connection with the authorization of corrupt payments;
  • Three counts of violating the FCPA by falsifying books and records relating to corrupt payments and a tax fraud scheme.

The Department of Justice has agreed to defer prosecution of all counts of criminal charges of the companies for three years; if the companies abide by all terms of their agreement the Department will dismiss the criminal information when the term of the agreement ends. This decision was made based on the Willbros’ exemplary cooperation, implementation of enhanced compliance policies and procedures, and their engagement of an independent corporate monitor.

More information:

— Danielle McClellan

4. Our Seminar Gets Write-up in Real Newspaper

The Export Compliance Training Institute’s Economic Sanctions and Export Controls Conference at Canary Wharf, London included a keynote address from Secretary of Commerce Mario Mancuso on May 13, 2008. Mancuso discussed US policy efforts to meet US national security challenges targeting financial measures and trade controls.

Mancuso explained, “Globalization is having profound implications for financial markets, technology trade, and national security.”

After attending the Export Compliance Training Institute’s seminar, Mancuso held meetings with the UK government, industry and academic leaders. He hopes that this visit will mark a BIS effort to elevate international engagement and diplomacy with key partners and markets on national security, high technology and strategic trade issues.

More information:

—Danielle McClellan

5. Forwarder Gets Slapped on Wrist for Involvement in Illegal Cuba Shipment

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:

—Danielle McClellan

6. Aerospace Company Penalized for Release of Technical Data to Foreign Employee

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:

— Danielle McClellan

7. US to Allow Some Defense Exports to Southern Sudan

The United States Government has decided to take another small step to aid the peoples of Southern Sudan by agreeing to approve certain exports of defense articles to Southern Sudan to support the peace arrangement between Southern Sudan and the murderous Government of Sudan which, along with its Janjaweed henchmen, is known to support or be involved in the murdering and burning of babies, women and children as part of its genocide against certain groups in Sudan.

The Department of State alongside with Foreign Operations has authorized the US to provide non-lethal defense services to the Government of Southern Sudan. This will include military assistance, military education and training, and defense services controlled under the International Traffic in Arms Regulations. It has been determined by State that this is in the best interest of the United States and Southern Sudan and that the assistance may be provided pursuant to section 666(e) of the ITAR.

More information:

— Danielle McClellan

8. US Announces List of Countries Supporting Terrorism

The Department of State has issued to Congress that Cuba, Eritrea, Iran, North Korea, Syria, and Venezuela are not fully cooperating with the United States antiterrorism efforts. John D. Negroponte, Deputy Secretary of State has issued the decision to retain the certification of North Korea pursuant to Section 40A of the Arms Export Control Act.

There will be an ongoing review of the designation of North Korea and the outcome of the review may warrant a new assessment and possible change in certification. (Update from John Black June 26: No changes were made in relationship to North Korea).

More information:

— Danielle McClellan

9. President Bush Wants to Relax Defense Export Controls on UK and Australia

Last year President Bush signed defense trade cooperation treaties with Britain and Australia to make trade in military items easier. The treaties are intended to eliminate the many export licenses companies must obtain before they can sell their products. These treaties will create “approved communities” consisting of companies whom can freely buy and sell MOST military items under circumstances. This should eliminate about two-thirds of the export licenses that the US Department will have to issue for military goods going to Britain and Australia.

This week President Bush has made it clear that he wants senate to put a rush on the ratifications of both treaties. Unfortunately, for both Bush and exporters the Senate has made it very clear that they will not be rushed. On May 21, 2008 members of the Senate Foreign Relations Committee explained that they need to see all the treaties details and the implementing regulations before anything will be ratified. Currently these details are being drafted, but will not be ready until the end of the summer.

The major issues the Senate wants to see resolved is who will be prosecuted when illegal diversion of military goods occurs, the US? Britain? Australia? At this time it is unclear who has jurisdiction. Another question being raised whether or not defense companies will be inspected for compliance with export restrictions since no licenses will be required? The Senate wants to know how stringent Britain and Australia will be when protecting their sensitive military technology, and whether or not Congress will be notified of major arms sales.

When The Senate Foreign Relations Committee can comfortably answer these questions and many more we may see the signed treaties, but don’t hold your breath.

More information:

— Danielle McClellan

10. Intent to Violate Gets 10 Years on Denied Parties List

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:

— Danielle McClellan

11.  DDTC Corrects ITAR

The State Department’s DDTC issued a correction for 22CFR Part 121.1(b) of the United States Munitions List. On page 19780 of the list, in the first column, in Sec. 121.1(b), in the first line, “(b)” will now read “*(b)”.

More information:

— Danielle McClellan

12.  DDTC Updates FAQs for Commodity Jurisdiction

The DDTC has updated the frequently asked questions on commodity jurisdiction on their website. The FAQ’s listed were chosen based on numerous questions that the DDTC Response Team has been answering frequently.

— Danielle McClellan

13. DDTC Announces Policy for Your Licenses Involving Debarred Electro-Glass Products

Electro-Glass Products was found guilty of violating the Arms Export Control Act in July 2007; in September 2007 the conviction caused the company to be debarred. The DDTC has recently posted the policy regarding new approvals for companies requesting Electro-Glass Products.

Transaction Exceptions will be granted to companies requesting Electro-Glass Products with respect to the following:

  • Overriding US foreign policy or national security interests;
  • Law enforcement interests that are consistent with foreign policy or national interests of the United States; or
  • Other compelling interests that are consistent with the foreign policy or national security interests of the United States.

The Department has also determined that transaction exceptions will generally be granted to third parties where Electro-Glass Products is a source or manufacturer listed on the license application until September 11, 2008 concerning the following categories:

  • Existing, pending and future authorizations in support of US government contracts or end-use;
  • Existing, pending and future authorizations for end-use by NATO Allies & Major Non-Nato Allies;
  • Existing, pending and future authorizations in support of foreign law enforcement activities when the export is part of a US Government contract or is for foreign government end-use;
  • Existing, pending and future authorizations for end-use by the following close allies: Austria, Chile, Finland, Oman, Qatar, United Arab Emirates, Brunei, and Sweden.

When applying for any transaction exceptions regarding Electro-Glass Products exporters need to clearly state how the general requirements for the exception have been met and how it falls within at least one of the five categories listed above.

More information:

— Danielle McClellan

14. Job Posting: Export Compliance Training Institute Recruiting Speakers

The Export Compliance Training Institute is actively seeking speakers for our Export Compliance Seminars.

We are looking for professionals with in-depth knowledge of United States trade laws and regulations and demonstrated public speaking ability. Successful applicants will be both dynamic speakers and knowledgeable about the practical implications of the rules and how they impact companies’ compliance practices and procedures.

Interested persons should send cover letter, resume and anything else which could help to demonstrate your qualifications (video, references, etc.) to:

The Export Compliance Training Institute
Attn: Jill Kincaid, Manager
243-L Neff Avenue
Harrisonburg, VA 22801 USA

 

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Our stories have links to pages and documents on other Web sites. We’ve been publishing export control updates for a very long time (since 1999). Web sites change all the time; sometimes they remove files from their sites. We apologize if you encounter links in our news stories that do not work anymore.