CBP Selects Four Customs Brokers to Participate in Self-Assessment Pilot Program

U.S. Customs and Border Protection (CBP) has selected four customs brokers to to participate in the Broker Self-Assessment Outreach Pilot program that was announced in April 2009. CBP plans to use the pilot program to assist the agency in determining whether to formally implement the BSA program and what changes might be needed to ensure its effectiveness.

Under the BSA program pilot, participating customs brokers will update and improve internal controls, perform periodic testing of these internal controls, and disclose to CBP deficiencies discovered through the testing. The primary goal of the pilot is to ensure a high level of broker compliance with CBP laws and regulations.

The BSA pilot is based on the Importer Self-Assessment Program announced in 2002.

The four customs brokers were selected from 26 customs brokers that applied. CBP did not announce the names of the customs brokers selected.

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Several Important Trade-Related Issues Discussed at First U.S.-China Strategic and Economic Dialogue

Today marked the conclusion of the first U.S.-China Strategic and Economic Dialogue held in Washington, DC. At the conclusion of the meetings, the U.S. and China issued a Joint Fact Sheet summarizing the issues and action items agreed to during the two days of discussions.

The fact sheet contained several items of note on U.S. trade-regulatory issues.

Regarding foreign direct investment in the U.S., the fact sheet indicates that the U.S. "confirms that the Committee on Foreign Investment in the United States (CFIUS) process ensures the consistent and fair treatment of all foreign investment without prejudice to the place of origin."

On antidumping issues, the United States recognized "the continued progress China has made in its market reforms and will earnestly consider China's concerns, and will consult through the JCCT [US-China Joint Commission on Commerce and Trade] in a cooperative manner to work toward China's Market Economy Status in an expeditious manner." This has been an important issue for China, since for antidumping purposes China is treated as a non-market economy, a designation that typically leads to higher antidumping duty margins.

With respect to export controls, the U.S. and China agreed "to accelerate the implementation of "Guidelines for China-U.S. High Technology and Strategic Trade Development" and expeditiously formulate the Action Plan on Expansion of China-U.S. High Technology and Strategic Trade Cooperation in Priority Sectors.

The Guidelines referred to in the fact sheet were signed in December 2007 by former Under Secretary of Commerce Mario Mancuso and MOFCOM Vice Minister Wei Jiangguo. Under the Guidelines, the Commerce Department and MOFCOM agreed to jointly identify and carry out steps to enhance secure high technology and strategic trade. For example, the Commerce Department and MOFCOM will continue to review U.S. dual-use policy to identity and implement appropriate processes to streamline the licensing process for legitimate civilian trade. The Guidelines also recognized the critical role of end-use visits conducted by BIS in ensuring the protection of U.S. national security interests in the enhancement of high technology trade.

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Importing and Exporting For Executives Program to be Held in Miami and Tampa on August 27 and 28, 2009

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BIS Annual Report Outlining 2008 Export Licensing and Enforcement Initiatives

The Bureau of Industry and Security has posted to its Web site a report summarizing its activities during fiscal year 2008. Highlights of this report include the following.

Licensing. BIS processed 21,293 export license applications worth approximately $72.1 billion, a 9% increase from FY 2007 and the highest number of applications reviewed in 15 years. Over the past decade, the number of export license applications has steadily increased, nearly doubling since 2000.

BIS approved 17,945 license applications (84%), returned 3,171 without action (15%) and denied 177 (less than 1%). The average license application processing time was lowered from 28 days to 27 days.

China was the destination for the largest number of approved license applications. BIS approved 1,990 license applications for exports to China valued at more than $2.7 billion; 25% of these were for deemed export licenses to release controlled technology or source code to Chinese nationals working in U.S. companies and universities. The average processing time for all approved licenses to China was 33 days, down 12% from FY 2007.

During calendar year 2007, U.S. companies exported $2.8 billion of licensed items (of which 11.8% were exported under a special comprehensive license) and $14.2 billion of items under a license exception, representing 0.2% and 1.2%, respectively, of overall U.S. trade.

Classification. In order to ascertain whether an export license is required from BIS, an exporter needs to classify the item to be exported by determining the Export Control Classification Number and may request an official classification. BIS processed 6,629 classification request applications in an average of 33 days.

Commodity Jurisdiction. A commodity jurisdiction request is used to determine whether an item or service is subject to the export licensing authority of the Department of Commerce or the Department of State. BIS processed 539 CJ requests in an average of 37 days.

Encryption. BIS processed 3,396 technical review requests for encryption items, including 627 requests for reviews of "mass market" encryption items. Most items submitted for review became eligible for export as "ENC Unrestricted" or "mass market" encryption commodities and software eligible for export and re-export without a license to both government and non-government end-users in most countries.

BIS also approved approximately 2,320 license applications for the export or re-export of restricted encryption products (such as high-end routers and other network infrastructure equipment) and technology outside the U.S. and Canada to non-sanctioned end-users outside Country Group E:1.

Enforcement. BIS investigations resulted in the criminal conviction of 40 individuals and businesses for export violations with penalties totaling more than $2.7 million in criminal fines, over $800,000 in forfeitures and over 218 months of imprisonment. This compares to 16 convictions and over $25.3 million in criminal fines in FY 2007.

BIS investigations also resulted in the completion of 56 administrative cases against individuals and businesses and over $3.6 million in administrative penalties, as compared to 75 cases and over $6 million in penalties in FY 2007. Of these, six cases involved antiboycott violations that resulted in penalties of $162,450, down from 10 cases and $194,500 in penalties the previous year.

End-use checks play a preventive enforcement role in confirming the bona fides of end-users, ensuring that items will be or have been properly used as authorized and that license conditions are adhered to. BIS completed 490 end-use checks in over 50 different countries, including 151 pre-license checks and 339 post-shipment verifications. BIS completed a significant number of other preventive enforcement actions as well, including 181 warning letters, 104 detentions, 20 seizures, temporary denial orders against nine individuals and 19 companies; the renewal of TDOs against 11 individuals and 19 companies, related-persons orders against four individuals, and five denials under Section 11(h) of the Export Administration Act (which authorizes denial of export privileges of parties convicted under certain federal statutes).

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U.S. Tells Syria That it Will Process Eligible Export License Applications as Quickly as Possible

There were various news reports today, including some from Syria, indicating that the U.S. Government had advised Syria that it was lifting sanctions or issuing waivers on the export of U.S.-origin parts and components for civil aircraft "as well as the embargo on exporting communications and information systems equipment and technology to Syria, including software, hardware and internet-related equipment."

This information is not entirely correct. According to a White House spokesman, in a meeting in Damascus on Saturday with Syrian President Bashar al-Assad, George Mitchell, the Obama Administration's Special Envoy for Middle East Peace, said that the Obama Administration "would process all eligible applications for export licenses to Syria as quickly as possible."

As a result of the Syria Accountability and Lebanese Sovereignty Act of 2003 (SAA), the U.S. currently prohibits the export to Syria of any items that appear on the United States Munitions List or Commerce Control List, the export to Syria of U.S.-origin products (other than food and medicine) and aircraft owned or controlled by the Syrian government from taking off from or landing in the United States.

Despite these prohibitions, General Order No. 2, issued by the Bureau of Industry and Security (BIS) in May 2004 to implement the SAA, states that BIS may consider license applications to export six types of items to Syria on a case-by-case basis, including: medicine (listed on the CCL) and medical devices; parts and components intended to ensure the safety of civil aviation and the safe operation of commercial passenger aircraft; and telecommunications equipment and associated computers, software and technology.

BIS and the other U.S. government reviewing agencies involved in the export licensing process have consistently approved licenses to export controlled medicines and medical devices to Syria on a regular basis and in a fairly timely manner since the SAA went into effect. (According to BIS data for 2008 the agency approved 247 licenses, returned without action 91 license applications and rejected 3 applications. The average license processing time in 2008 was 25 days.)

However, the same is not always true of other types of eligible products, such as aircraft components and telecommunication products. U.S. export data issued by the Census Bureau indicates that during 2004 to 2008 BIS approved on a case-by-case export license applications to Syria for other types of eligible products in very limited numbers.

While the Obama Administration's decision to process eligible applications for export licenses to Syria "as quickly as possible" is a positive development for certain U.S. industries, it certainly does not rise to the level of the "lifting of sanctions" and will affect only a relatively small range of products. As a result, until U.S. sanctions are modified, U.S. exporters should be aware that significant restrictions still remain on doing business with Syria, including the need to obtain export licenses from BIS prior to exporting eligible products and ensuring that unlicensed products will not be reexported or diverted to Syria.

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BIS Announces Agenda and Other Details About Update 2009 Export Controls Conference

The Bureau of Industry and Security (BIS) has posted on its website the agenda and other details for the 22nd annual Update Conference on Export Controls and Policy that will be held in Washington, DC from September 30 through October 2, 2009.

In addition, BIS began sending registration information to persons that submitted their "interest form" and were randomly selected to attend. Since there was more interest than space available, those names that were not drawn will be placed on a waiting list and notified on how to register as space becomes available.

If you missed out on submitting the Update Interest Form and would like to be included on the waiting list, you can complete the wait list form.

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New Report Confirms Increased Use of Trade Remedy Cases and Spike in Safeguard Cases

Professor Chad P. Bown, publisher of the Global Antidumping Database, recently issued a report confirming that the number of trade remedy cases is increasing. The report, entitled "Protectionism Continues its Climb", states that the second quarter of 2009 saw a 12.1% increase in initiated antidumping, safeguard and countervailing duty cases.

Among other things, the report notes that India continued the trend of being the most active country seeking to initiate new import restrictions, having initiated 34% of all of the new trade remedy cases during the second quarter of 2009. The U.S. was the second most active country in the second quarter of 2009, initiating 17% of the total number of new cases.

Not surprisingly, the report confirms that China is the primary target of the new trade remedy cases. China was named in 82.6% of newly initiated trade remedy investigations by WTO members and targeted in 17 out of the 17 new cases in which trade remedies were imposed.

The report also confirms a "spike" in the number of new safeguards cases and predicts that this trend "will almost certainly continue to increase throughout the remainder of 2009 and into 2010."

The Global Antidumping Database is a project of Chad P. Bown, an Associate Professor in the Department of Economics and Business at Brandeis University and a Fellow in the Global Economy and Development Program at the Brookings Institution.

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Commerce Secretary Says Reviewing U.S. Export Controls is One of His Top Five Priorities

In a speech presented this evening to the Washington International Trade Association, Commerce Secretary Gary Locke said that "undertaking a review of export controls" is one of his top five priorities and that he has already instructed the Bureau of Industry and Security to initiate a review of the entire U.S. export control system.

Below is the export controls portion of Secretary Locke's speech. The full text of the speech, including the list of his other four priorities, can be found here.

Yet another area where red tape is challenging American businesses, and American security, is our export control regime.

Earlier this year, former National Security Adviser Brent Scowcroft, chaired a distinguish panel* to look into this issue, and he flatly declared:

“The national security controls on science and technology are broken.”

The panel concluded that our Cold War era export control system has constrained both U.S. commercial and military capabilities from expanding into new fields and from applying new scientific developments.

Our export control system must adapt to America's changing security needs without inhibiting the competitiveness of U.S. companies and institutions. That competitiveness is critical to our economic and national security.

Commerce has already begun to implement programs that will reduce the export licensing burden on U.S. companies. For example, earlier this year, I announced the first Validated End User in India. The VEU program was designed to facilitate high technology trade in India and China by enabling certain items to be transferred without an individual export licenses. But much more needs to be done.

I have instructed Commerce’s Bureau of Industry and Security to initiate a review of the entire export control system. The review will focus on improving the system by targeting our controls at those state and non-state actors who would seek to do us harm, while ensuring that the traditional control lists keep pace with technological developments.

*The panel referred to produced the National Academies' January 2009 report on export controls entitled Beyond 'Fortress America: National Security Controls on Science and Technology in a Globalized World.

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Iran Refined Petroleum Sanctions May Move Forward if U.S. Engagement With Iran Fails

The House Foreign Affairs Committee held a hearing today on recent developments in Iran and their implications for U.S. Policy. In his opening statement, Committee Chairman Howard Berman (D-CA) said that if engagement with Iran does not work he is prepared to move forward with the Iran Refined Petroleum Sanctions Act (H.R. 2192) as early as this fall.

Specifically, Representative Berman said:

I agree with the President’s timetable. If by autumn the Iranians are not responsive to US efforts to engage them, it likely will be time to move on, hopefully in close coordination with our allies and other key countries.

That is also my approach regarding H.R. 2194, the Iran Refined Petroleum Sanctions Act, which I introduced with the Ranking Member in April, and which is now co-sponsored by well over half the Members of the House.

My bill would impose sanctions on companies that are involved in exporting refined petroleum products to Iran or in helping Iran to increase or maintain its existing domestic refining capacity.

This legislation would force companies in the energy sector to choose between doing business with Iran, or doing business with the United States.

The Iranian economy is heavily dependent on imports of refined petroleum, so this legislation -- if it becomes law -- would significantly increase economic pressure on Iran, and hopefully persuade the regime to change its current course.

When I introduced H.R. 2194, I said that I did not intend to immediately move it through the legislative process. I wanted – and still want – to give the Administration’s efforts to engage Iran every possible chance to succeed, within a reasonable time frame.

I view the bill as a “sword of Damocles” over the Iranians – a clear hint of what will happen if they do not engage seriously and move rapidly to suspend their uranium enrichment program, as required by numerous UN Security Council resolutions.

If engagement doesn’t work, then I am prepared to mark up the bill in Committee early this fall.

If enacted, the Iran Refined Petroleum Sanctions Act, which currently has 260 co-sponsors, requires any foreign entity that exports refined petroleum to Iran, or otherwise enhances Iran’s ability to import refined petroleum (such as financing, brokering, underwriting or providing ships for such activity), to be subject to a number of financial and other sanctions that would effectively bar the foreign entity from doing business in the United States.

The bill also would impose sanctions on any entity that provides goods or services that enhance Iran’s ability to maintain or expand its domestic production of refined petroleum, including any assistance in refinery constructions, modernization or repair.

The full text of Representative Berman's opening remarks at the hearing can be found here.

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DDTC Issues Policy Guidance Regarding Exports of ITAR Components Destined for Satellites Launched From India

Following yesterday's joint announcement that the U.S. and India signed a Technology Safeguards Agreement to permit civil or non-commercial satellites containing U.S. ITAR-controlled components on Indian space launch vehicles, the Directorate of Defense Trade Controls today issued the following clarification and guidance:

For the purposes of this policy, “civil or non-commercial satellites” does not include commercial satellites (communications or otherwise). Commercial satellites will continue to be subject to a presumption of denial; hybrid commercial satellites containing non-commercial payloads will be reviewed on a case-by-case basis.

Effective immediately as a result of this change in USG policy, the Directorate of Defense Trade Controls is implementing the following additional documentation requirements on requests for the export or retransfer of USML Category XV satellites or components for incorporation into satellites destined for launch from India. The following information must be contained in the purpose block of the application or in the Supplementary Letter of Explanation document attached as supporting material:

• Description of the satellite, to include satellite purpose, orbital inclination, and coverage area
• Purchaser of the satellite
• Manufacturer of the satellite
• Anticipated launch vehicle and schedule

Applicants are advised export licenses for satellite components destined for launch from India may be subject to monitoring in accordance with Section 1516 of Public Law 105-261. (See 22 CFR 123.27 for additional information.)

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BIS Issues Final Rule Adding and Removing Parties on Entity List

The Bureau of Industry and Security (BIS) published a final rule in today's Federal Register amending the Entity List to add and remove certain entities. The modifications to the Entity List contained in today's rule were as follows:

• Thirteen entities in Germany, Hong Kong and Ireland were added to the Entity List on grounds that that they were acting contrary to the national security or foreign policy interests of the United States. There will be a policy of denial of an export license to any products destined for these thirteen entities.
  
• One entity in Pakistan and two entities in the UAE were removed from the Entity List.
• The final rule also made a correction to the address of one party in the UAE listed on the Entity List.
  

The Entity List, established in 1997 and modified periodically, is found in Supplement No. 4 to Part 744 of the Export Administration Regulations. The Entity List includes non-U.S. businesses, research institutions, government and private organizations, individuals, and other types of entities whose activities are contrary to U.S. national security and/or foreign policy interests.

The inclusion of a party on the Entity List notifies exporters that certain exports and reexports to parties identified on the Entity List require an export license from BIS and that the availability of License Exceptions in such transactions is limited. The Entity List also includes the license review policy for each part listed. In some cases, there is a presumption that an export license will not be granted.

U.S. exporters should screen all of the customers and end-users in an export transaction against the Entity List prior to the products being exported from the U.S.

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BIS publishes Critical Technology Assessment of Five Axis Simultaneous Control Machine Tools

The Bureau of Industry and Security's (BIS) Office of Technology Evaluation today published a critical technology assessment of five axis machine tools that examined the health and competitiveness of the U.S. machine tool industry and identified issues relevant to domestic and foreign machine tool procurements by the Department of Defense and its contractors necessary to produce and support critical defense systems, including the impact of U.S. export controls.

Five axis grinding machines are controlled by the Export Administration Regulations (EAR) under ECCNs 2B001.b.2 (mills) and 2B001.c.2 (grinders). Exports of five axis machine tools from the U.S. are controlled for NS, NP, and AT reasons and there are no license exceptions.

The following is a summary of the key findings of the critical technology assessment:

• Foreign availability of certain five axis simultaneous control mills, mill/turns, and machining centers controlled by ECCN 2B001.b.2 exists in China and Taiwan, both having an indigenous capability to produce five axis simultaneous control machine tools with parameters comparable to those produced in the U.S.;

• U.S. export license processing times, especially to China, are longer than those of other Wassenaar Arrangement members, placing U.S. exporters at a competitive disadvantage;

• The U.S. is losing market share to its European and Asian competitors, particularly South Korea;

• U.S. producers of five axis simultaneous control machine tools, while currently profitable, face an uncertain future for their five axis machine tool product lines with imports outpacing domestic sales and increasing customer demand for foreign machine tools;

• A potential vulnerability exists with regard to sensitive data stored in the computerized numerical controllers of machine tools connected to the Internet.

As a result of the assessment, the following recommendations were made:

• The EAR should be amended to facilitate the export of five axis simultaneous control mills, mill/turns, and machining centers of certain precision accuracies controlled by ECCN 2B001.b.2 with foreign availability to controlled countries under license exception or similar-type authorization, and work with international partners to modify the existing multilateral export control of five axis simultaneous control machine tools;

• Producers and distributors of these machine tools are encouraged to identify or develop anti-tampering and anti-diversion features that can be utilized to mitigate concerns of machine tool misuse or diversion after export to facilitate interagency review of license applications to sensitive destinations;

• Improve communication between U.S. companies and U.S. export licensing officials to decrease processing times of license applications for exports destined to China;

The complete report can be found here (pdf).

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U.S. Senators Introduce Bill to Sanction Non-U.S. Companies Selling Certain Monitoring or Blocking Technologies to Iran

Yesterday, Senator Charles Schumer (D-NY) and Senator Lindsey Graham (R-SC) introduced S. 1475, a bill that would impose sanctions on non-U.S. companies that sell technology to Iran that could assist the Iranian regime in monitoring or blocking the Internet connections or cell phone conversations of protesters.

Under S. 1475, the Administration would be required to identify non-U.S. companies that export sensitive technology to Iran. Those companies would not be allowed to apply for procurement contracts with the U.S. government, or renew expiring ones, unless they first terminated those exports to Iran. The President could waive this requirement if he determines that such a waiver would be in the national interest of the United States, but he would have to report to Congress on the reasons for the waiver.

Update: The short title of the bill is the "Reduce Iranian Cyber-Suppression Act" and the full text of the bill can be found here.

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DDTC Issues Notice Regarding License Applications for Unmanned Aerial Vehicles and Inertial Measurement Units

To assist in the proper routing of license applications, the Directorate of Defense Trade Controls today issued the following notice regarding license applications submitted for USML Category VIII Unmanned Aerial Vehicles and Inertial Measurement Units:

Effective immediately, the Directorate of Defense Trade Controls is seeking assistance from the export community regarding the content of submissions for the export of USML Category VIII Unmanned Aerial Vehicles (UAVs) and Inertial Measurement Units (IMUs). For all such electronic license applications (DSP 5, 61, 73), please include the following statement as the first part of the purpose block:

· All Cat VIII(a, b, d, f, h) for Unmanned Vehicles - “UAV Related License”

· All Cat VIII(e) - “IMU Related License”

This change is necessary to ensure your license application is routed to the proper licensing division. Because the D-Trade 2 electronic application system makes the initial division assignment based on USML Category, these Cat VIII licenses are automatically assigned to the Aircraft Division. Due to Missile Technology Export Committee (MTEC) interest in reviewing all UAV and IMU licenses, the Director of Licensing assigned responsibility for these commodities to the Space and Missile Technology Division, which has a representative on the MTEC. The Directorate intends to institute an automated process for this assignment change on a future version of D-Trade 2. Until that time, industry assistance and cooperation is requested.

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"Houston, Tranquility Base here. The Eagle has landed"

Eagle, the Apollo Mission's Lunar Module, landed on the moon exactly 40 years today (4:18 ET). You can listen to the audio clip of Eagle's descent to the moon here (150 seconds).

Eagle, and the subsequent lunar modules, were built in Bethpage, New York by Grumman Corporation.

At 10:56 p.m. ET, Neil Armstrong climbed down the ladder and proclaimed: "That's one small step for man, one giant leap for mankind."


Buzz Aldrin joined Armstrong shortly thereafter. The two astronauts explored the lunar surface for two and a half hours, collecting samples and taking photographs.

They left behind an American flag, a patch honoring the fallen Apollo 1 crew, several scientific instruments and a plaque on one of Eagle's legs that read, "Here men from the planet Earth first set foot upon the moon. July 1969 A.D. We came in peace for all mankind."

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U.S. and India Reach Agreement on Defense End-Use Monitoring Arrangements and Space Technology Safeguards

Following meetings between U.S. Secretary of State Hillary Rodham Clinton and India's External Affairs Minister, S.M. Krishna, the two governments today issued a joint statement indicating that the two countries had reached an End-Use Monitoring Agreement on U.S. defense articles that are exported to India.

Section 40A of the Arms Export Control Act (22 U.S.C. 2785) requires the U.S. to implement a program whereby recipients of defense articles and services to agree to end-use monitoring arrangements. The Department of Defense's Defense Security Cooperation Agency (DSCA) is responsible for conducting end-use checks on government-to-government transfers of defense articles. The Government of India has long resisted the end-use monitoring requirements on purchases of U.S. defense articles on grounds that such restrictions violated its sovereignty and such resistance has held up approval of some very large transactions.

In addition, the government of the U.S. and India announced that they have signed a Technology Safeguards Agreement and associated side letters pertaining to the use of U.S.-licensed components on spacecraft launched from Indian facilities. The agreement will facilitate the launch of U.S.-licensed spacecraft components and safeguard protected technologies and data of both countries. The side letters commit the U.S. and India to enter into consultations regarding the market for commercial space launch and satellite services.

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Today Marks 40th Anniverary of Apollo 11 Mission to the Moon

Forty years ago today, at 9:32 am EST, Apollo 11 lifted off from Florida, en route to the moon. The video of the launch is below.



To mark the 40th anniversary of the Apollo 11 mission, the John F. Kennedy Library is hosting a great website, called We Choose The Moon (www.wechoosethemoon.org). The website recreates the mission to the moon in real time and includes the actual audio transmission between mission control in Houston and the astronauts aboard Columbia (the command module) and Eagle (the Lunar Excursion Module) in the precise times that they did 40 years ago.

The transcripts of those recordings are also being sent via Twitter at @ap11_capcom; @AP11_EAGLE; and @AP11_SPACECRAFT.

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OECD Acknowledges Turkey's Progress in Combating Bribery

The Organization of Economic Cooperation and Development's (OECD) Working Group on Bribery recently issued a report (pdf) (the "Phase 2bis" report) addressing Turkey's progress in complying with the OECD Anti-Bribery Convention.

The report examined Turkey's progress in the following areas: (1) investigating and prosecuting allegations of bribing foreign public officials; (2) re-instating the liability of legal persons; and (3) awareness-raising by the Turkish Government.

The report noted that Turkey has taken "important steps" to address recommendations from the Working Group, including:

• Two foreign bribery cases are currently under investigation, and Turkish officials have recently increased their efforts to gather information about allegations against Turkish companies in the 2005 Final Report of the Independent Inquiry Committee in the UN Oil-for-Food Programme.
  
• A draft law re-introducing corporate liability for foreign bribery is currently under consideration by the Turkish Parliament.
  
• Turkey has implemented a wide range of awareness-raising efforts, which appear to have significantly raised awareness in the business community about the prohibition against bribing foreign public officials in the Turkish Penal Code.

Despite this progress the OECD Working Group's noted that it remains concerned that Turkey continues to be in non-compliance with Article 2 of the Anti-Bribery Convention as long as companies are not liable for foreign bribery and recommended that Turkey urgently adopt the draft law on corporate liability.

The Working Group also recommended a peer review analysis of the new law on corporate liability once it is enacted and a further assessment of progress on foreign bribery investigations and prosecutions in December 2009.

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BIS Issues Final Rule Implementing Australia Group Changes, Including Change to ECCN 2B350

The Bureau of Industry and Security (BIS) yesterday published a final rule in the Federal Register to amend the Export Administration Regulations (EAR) to implement the 2008 Australia Group (AG) intersessional decisions.

Among other things, this final rule makes an important change to Export Control Classification Number (ECCN) 2B350, the ECCN that covers many valves used in the chemical industry. ECCN 2B350 is one of the most common ECCNs subject to BIS enforcement actions.

The final rule amends ECCN 2B350 by revising the controls on valves included in ECCN 2B350.g to include any valves (including casings or preformed casing liners designed for such valves) that are made from any of the following ceramic materials:

(1) Silicon carbide with a purity of 80% or more by weight;

(2) aluminum oxide (alumina) with a purity of 99.9% or more by weight; or

(3) zirconium oxide (zirconia).

In addition, this final rule adds a new ECCN 2D351 to control dedicated software for toxic gas monitoring systems and their dedicated detecting components controlled under ECCN 2B351.

Finally, this rule amends the list of countries that are States Parties to the Convention on the Prohibition of the Development, Production, Stockpiling, and Use of Chemical Weapons and on Their Destruction (known as the Chemical Weapons Convention or CWC) by adding the Bahamas, Dominican Republic, Iraq and Lebanon, all of which recently became States Parties to that Convention.

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Export Administration Act Policy Hearing to be Held by House Subcommittee

The House Foreign Affairs Committee's Subcommittee on Terrorism, Nonproliferation and Trade will hold a hearing on various policy considerations associated with the lapsed Export Administration Act this Thursday at 10 a.m. on July 9th in room 2172 of the Rayburn House Office Building. This hearing was originally scheduled to be held on June 18th and was postponed due to pending House business.

The witnesses scheduled to appear at the hearing are:

• The Honorable John Engler, President and Chief Executive Officer of the National Association of Manufacturers
  

• Arthur Shulman, Esq., Senior Research Associate at the Wisconsin Project on Nuclear Arms Control

• Owen Herrnstadt, Esq., Director of Trade and Globalization Policy at the International Association of Machinists and Aerospace Workers

The Export Administration Act of 1979 lapsed in August 2001 and has not been renewed by Congress. The Export Administration Regulations have remained in effect pursuant to Executive Order 13222 issued on August 17, 2001 pursuant to the International Emergency Economic Powers Act and extended annually by the President.

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OFAC Issues June 2009 Monthly Civil Penalties Report

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its June 2009 (pdf) monthly report of civil penalties imposed for alleged violations of the sanctions regimes administered by OFAC.

OFAC announced the following four settlements with companies, none of which were resolved under OFAC's new enforcement guidelines implementing the enhanced maximum civil penalties of $250,000 for IEEPA-based violations:

• Oxbow Carbon and Minerals LLC of West Palm Beach, Florida agreed to remit $276,250.00 to settle allegations that if violated te Iranian Transactions Regulations in 2006 and 2007. OFAC alleged that Oxbow engaged in transactions in or related to services of Iranian origin and facilitated trade-related transactions by non-U.S. persons which involved the use of vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines in Tehran, Iran, without an OFAC license. While Oxbow did not voluntarily disclose the alleged violations, OFAC noted that the company demonstrated cooperation during OFAC’s review of the matter and as a remedial measure has made revisions to its compliance program.
  

• National Marine Consultants, Inc. remitted $42,075.00 to settle allegations of violations of the Iranian Transactions Regulations that occurred between March 2005 and May 2007. OFAC alleged that NMCI outsourced to an Iranian entity inspection services it was contractually bound to perform for a third-party, without an OFAC license. NMCI did not voluntarily disclose the matter to OFAC but cooperated with OFAC’s investigation.

• Philips Electronics of North America Corporation (PENAC) remitted $128,750.00 to settle allegations that it violated the Cuban Assets Control Regulations between 2004 and 2006. OFAC alleged that PENAC acted without an OFAC license through an employee’s travel to Cuba in connection with the sale of medical equipment by a foreign affiliate of PENAC. PENAC voluntarily disclosed this matter to OFAC.
  

• Houston, Texas-based Willbros USA, Inc. paid $6,600 to settle an allegation of violation of the Sudanese Sanctions Regulations occurring in 2003 and 2004. OFAC alleged that Willbros, through a former Senior Vice President, willfully violated the Sudanese Sanctions Regulations (SSR) when it entered into a contract to bid on an oil development project in Sudan, despite its knowledge that such activities violated the Regulations, by facilitating the export of goods, technology or services to Sudan and evading the prohibitions set forth in the SSR. Willbros voluntarily disclosed this matter to OFAC.

OFAC did not settle any cases involving individuals last month.

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Tennessee Professor Sentenced to 48 Months in Prison for Export Control Violations

Today U.S. District Judge Thomas sentenced former University of Tennessee Professor John Reece Roth to 48 months in prison for violating the Arms Export Control Act. Following his release from prison, Roth, who is 72 years old, must serve two years of supervised release. Although he faced potential fines of more than $15 million, Judge Varlan did not impose any monetary penalties on Dr. Roth. The sentence was 15 months below the minimum suggested 63 month sentence contained in the Federal Sentencing Guidelines.

The press release issued by the Justice Department announcing Dr. Roth's sentence can be found here.

Following the sentencing hearing, there was a bond hearing at 2 p.m. today to determine whether Dr. Roth should remain free on bond pending an appeal. The U.S. Attorney's office opposes Dr. Roth's defense counsel's request that he remain free on bond. At the bond hearing Judge Varlan indicated that he would consider Dr. Roth's motion for bond pending appeal and will render a decision in the coming weeks.

There are still two more sentences to be handed out in this case. Daniel Max Sherman, a University of Tennessee-trained physicist who was an employee, director and one of the original founders of Atmospheric Glow Technologies, Inc. , pleaded guilty to conspiracy to violate the Arms Export Control Act. Sherman, who has been free on bond, will be sentenced in on July 17th. Sherman was a graduate student under Dr. Roth's supervision at the University of Tennessee and served as the lead scientist in the Air Force projects contracts at issue in this case.

One of Dr. Roth's alleged co-conspirators, Atmospheric Glow Technologies, Inc. (AGT) will be sentenced on August 27th. AGT, which filed last year for bankruptcy, was a plasma technology company located in Knoxville, Tennessee. AGT pleaded guilty in August 2008 to 10 counts of unlawfully exporting defense articles to a citizen of the People’s Republic of China in violation of the Arms Export Control Act.

More details to follow as soon as they are available.

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