OFAC to Hold Financial Sector Symposium in New York City

The Treasury Department's Office of Foreign Assets Control (OFAC) announced today that it will be holding its first-ever Financial Sector Symposium in New York City on Tuesday, December 1, 2009.

According to OFAC, the Financial Sector Symposium is designed to provide the financial sector with insight and perspective from top OFAC officials on banking, securities and OFAC's enforcement guidelines and will feature speakers from OFAC and state and federal regulators.

For more information and to register for OFAC's Financial Sector Symposium, see the following link (PDF file).

OFAC held a very successful International Trade Symposium in Washington, DC earlier this year.

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BIS Issues Third Version of Commodity Classification Information Table

The Bureau of Industry and Security (BIS) recently released the third version of its Commodity Classification Information Table that contains information submitted by companies regarding where to locate commodity classification and export controls information on company websites.

The latest version of the table now contains information from nearly 40 companies, an increase from the 17 companies included in the first version of the table.

This table is the result of an initiative launched in September 2008 by BIS to establish a page on its website where manufacturers could voluntarily provide information on the export classification of their products to customers and other persons that intend to export their products. BIS explained that they commenced this initiative in an effort to aid exporters in the licensing process and to assist exporters in complying with U.S. export and reexport control laws.

Information on including your company's export control information on BIS's Commodity Classification Information Table can be found here.

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DDTC Requesting Comments on New Commodity Jurisdiction Form

The Directorate of Defense Trade Controls (DDTC) published a Federal Register notice announcing that the 30 day comment period has begun for the revised DS-4076 Commodity Jurisdiction Determination Form. This form is in a fillable PDF format.

DDTC is encouraging manufacturers to review the form and to consider using it in connection with Commodity Jurisdiction requests.

Note that the estimate for completing this form is 10 hours per response, which includes time required for searching existing data sources, gathering the necessary data, providing the information required, and reviewing the final information to be submitted.

Comments on this form must be submitted to the Office of Management and Budget by October 28, 2009.

The purpose of a Commodity Jurisdiction request is to determine whether an item or service is covered by the U.S. Munitions List (USML) and therefore subject to the International Traffic in Arms Regulations (ITAR) or if the item or service is subject to the jurisdiction of the Commerce Department's Export Administration Regulations (EAR).

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AEI to Present Export Control Reform Program on October 5th in Washington, DC

While there have been a large number of export control events scheduled lately, here is another good one to add to your calendar.

The American Enterprise Institute is holding a program during the afternoon of Monday, October 5, 2009 in Washington, DC entitled "Export Control Reform 2009: Enhancing National Security and Economic Competitiveness."

Here is a summary of the program's two panels on dual-use and defense export control reforms, which will feature many of the major players in the current export control reform process:

Panel I: Dual-Use Controls: Walking the Tight Rope

Panelists: Matthew Borman, Department of Commerce
Bill Reinsch, National Foreign Trade Council
Ed Rice, U.S. House of Representatives
Moderator: Neena Shenai, AEI

Panel II: Defense Trade Controls: Protecting U.S. National Security, Enhancing Business Opportunities Abroad

Panelists: Richard Aboulafia, Teal Group Corporation
Marion Blakey, Aerospace Industries Association
Thomas Donnelly, AEI
Moderator: Dan Blumenthal, AEI

Click here for more information and to register for this free program.

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Update on Revisions to Incoterms 2000

Frank Reynolds, the U.S. Delegate to the International Chamber of Commerce's (ICC) Incoterms drafting committee, has provided the editor of International Trade Law News with an update on the status of the revisions currently underway to Incoterms 2000, the standardized trade terms commonly used in international sales contracts.

After receiving a large number of comments from the ICC National Committees, the Incoterms Drafting Committee recently completed a second draft of the revised version of Incoterms. After comments on the second draft are submitted by the National Committees, the Drafting Committee will hold a series of meetings to complete a final draft.

Once the final draft is ready it will be circulated for review and approval (likely in in mid-2010), the final version will be subject to the approval of the ICC, with a goal of a January 1, 2011 (1/1/11) effective date (that date is the ICC's current goal and is subject to change).

Mr. Reynolds indicated that because the drafting process is ongoing, there is "little specific information" presently available. However, he added there are a "few reasonably safe predictions," including the following:

• There are likely to be fewer than the current 13 Incoterms 2000.
• Contrary to some predictions, Incoterm FAS will likely remain in the revised version since that Incoterm is important in bulk and break-bulk trade.
• A number of National Committees objected to the proposed Incoterms 3000 title, so the likely replacement will be "Incoterms 2011." This title will reflect the effective year and removes the expectation of a ten-year revision cycle.
• Incoterms 2011 will be more user friendly for both international and domestic business.

In order to prepare for 2011 implementation of the revised Incoterms, the United States Council for International Business will provide a number of Incoterms 2011 training programs starting in the fall of 2010.

The ICC introduced the first version of Incoterms, short for "International Commercial Terms," in 1936. There are currently 13 Incoterms. Incoterms have been revised six times in order to reflect international trade developments.

Frank Reynolds is the author of Incoterms for Americans, a very useful publication for U.S. exporters and importers.

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Dutch Company and Two Dutch Citizens Plead Guilty to Conspiring to Export Aircraft Components and Other Goods to Iran

A series of guilty pleas in a criminal export enforcement case announced today by the Justice Department is a good reminder of the need for U.S. exporters to be extra vigilant when trying to comply with U.S. export control laws, particularly when buyers are determined to circumvent U.S. law by using false end-user certifications and third countries as transshipment points.

Today, Aviation Services International, B.V., a Dutch aviation services company, its director and sales manager, both Dutch citizens, pleaded guilty to to a one-count criminal information related to a conspiracy to illegally export aircraft components and other items from the U.S. to entities in Iran via the Netherlands, the United Arab Emirates and Cyprus.

The criminal information charged each with conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions Regulations by exporting aircraft components and other goods to Iran without obtaining licenses from the Treasury Department’s Office of Foreign Assets Control (OFAC).

Among other things, the defendants were alleged to have engaged in the following activities:

• The defendants received orders from customers in Iran for U.S.-origin goods that were restricted from being transshipped into Iran. The defendants then contacted companies in the U.S. and negotiated purchases of materials on behalf of Iranian customers. The defendants provided false end-user certificates to certain U.S. companies to conceal that customers in Iran would be the true recipients of the goods.

• In order to conceal these activities from the U.S. government, the defendants caused certain companies in the U.S. to ship the materials to ASI in the Netherlands or to addresses in other countries, including the UAE and Cyprus. Upon arrival in the Netherlands or these other countries, the ordered materials were repackaged and transshipped to Iran.

• The defendants falsely certified that certain equipment, which had potential applications in Unmanned Aerial Vehicles, was being sent to the Polish Border Control Agency, when, in reality, the equipment was being sent to Iran.
  

• The defendants purchased aluminum sheets and rods from a Florida company and instructed the U.S. company and a freight forwarder to list the Netherlands as the ultimate destination in the shipping documents. ASI attempted to have these goods shipped from the Netherlands to Iran, but Dutch Customs officials detained them.

The two individual defendants each face a potential sentence of five years in prison and a maximum fine of $250,000 or twice the pecuniary gain or loss. ASI has agreed to pay a $100,000 fine and corporate probation for five years.

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Council on Foreign Relations: The Lengthening List of Iran Sanctions

The Council on Foreign Relations published an article today entitled "The Lengthening List of Iran Sanctions" that discusses the various efforts by the U.S. and the international community to impose sanctions on Iran.

The article contains a list of the various sanctions imposed by the U.S. on Iran over the years and discusses the sanctions proposals pending in Washington and elsewhere.

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Alan Bersin Nominated to Serve as Commissioner of U.S. Customs and Border Protection

Today President Obama nominated Alan Bersin to serve as U.S. Customs and Border Protection (CBP) Commissioner. Mr. Berson is currently serving as Assistant Secretary for International Affairs and Special Representative for Border Affairs at the Department of Homeland Security.

Prior to joining the Obama Administration, Bersin served as the Board Chairman of the San Diego County Regional Airport Authority. He served from 2005-2006 as California’s Secretary of Education and previously served as superintendent of public education in San Diego.

Bersin served as the U.S. Attorney for the Southern District of California from 1993 to 1998. He was appointed as Special Representative for the Southwest Border in 1995 by former Attorney General Janet Reno where he oversaw the coordination of border law enforcement along the U.S.-Mexico border for three years.

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Members of Congress Displeased by Report of Saudi Arabia's Increased Boycotting Activity

As a follow-up to the recent Jerusalem Post story regarding the increase in boycott requests from Saudi Arabia, a follow-up story in that newspaper described the Congressional reaction to the report.

The story, entitled "'Post' report sparks congressional anger" notes that "leading Democratic and Republican congressmen expressed outrage following a report . . . that Saudi Arabia has been violating its promise to Washington to stop enforcing the Arab League boycott of Israel."

The article notes that several influential members of Congress intend to express their concerns on this issue with the Obama Administration.

Data contained in the Bureau of Industry and Security's (BIS) 2008 Annual Report (pdf) (see below) indicates that Saudi Arabia actually ranked fifth in the total number of boycott requests reported to BIS in Fiscal Year 2008. The total number of boycott-related requests received from Saudi Arabia (74) was far below the number of requests received from the United Arab Emirates (542), Libya (157) and trailed request received from Qatar (94) and Lebanon (77). Nearly half of the boycott-related requests received from Saudi Arabia related to request specifying that Israeli goods were prohibited.

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Secretaries of Commerce and Defense Meet to Discuss Export Control and Business Visa Reform

Secretary of Commerce Gary Locke met yesterday with Secretary of Defense Robert Gates at the Pentagon to discuss export controls and business visa reform. (Photo courtesy of Department of Commerce).

Locke and Gates met for approximately one hour and agreed to continue to work together with their counterparts at other cabinet agencies toward these reforms.

They plan to meet again in the next few weeks with fellow administration officials to address their progress.

On July 22nd 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. The White House subsequently announced that the Obama Administration would conduct a review of the U.S. export control system.

Secretary Locke will be the keynote speaker at next week's Update Conference on Export Controls and Policy presented by the Commerce Department's Bureau of Industry and Security.

We hope to see many of our readers at Update.

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Registration Now Open for U.S.-China High Technology Working Group Meeting in Washington, DC

Registration is now open for the U.S.-China High Technology Working Group public-private sector dialogue that will be held in the Reagan Building in Washington, DC on September 29, 2009.

The one-day event will feature a number of speakers on U.S.-China high technology trade-related issues, including export controls.

The agenda for the program can be found here. Registration is $145.

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Iran Gains U.S. Military Technology Through Malaysia Middlemen

Bloomberg.com reported today that "Iran increasingly is obtaining U.S. military equipment and technology through shipments to Malaysian middlemen that illegally circumvent trade restrictions, according to American officials and analysts."

Among other things, the article notes:

Middlemen also have operated out of the United Arab Emirates city of Dubai. Shipments through Malaysia increased after the U.A.E. cracked down on exports more than a year ago, said Steven Pelak, the principal deputy chief of the Justice Department’s counterespionage section in Washington.

“We’ve seen a lot more being now diverted through Malaysia in particular,” Pelak said in an interview. “We have seen Iranian front companies there and we’ve seen an increase there since there’s been a tightening in Dubai.”

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Saudi Arabia Steps Up Boycott of Israel

Today's Jerusalem Post reports that "despite efforts by Washington in recent years to bring about a normalization of relations between Israel and the Arab world, Saudi Arabia has been steadily intensifying its enforcement of the Arab League boycott of Israel."

The article, which examines recent data issued by the Bureau of Industry and Security's (BIS), Office of Antiboycott Compliance, indicates that the number of boycott-related requests submitted to BIS has increased in the past two years, rising from 42 in 2006 to 65 in 2007 to 74 in 2008, an increase of 76 percent.

The article notes that the "bulk of these requests were related to the companies' or products' relationship to Israel. Typically, Saudi officials ask foreign suppliers to affirm that any goods exported to the desert kingdom are not manufactured in Israel and do not contain any Israeli-made components."

The antiboycott provisions of the U.S. Export Administration Regulations (EAR) (15 CFR Part 760) prohibit U.S. persons from engaging in certain activity relating to restrictive trade practices and unsanctioned foreign boycotts, including implementing letters of credit containing prohibited boycott terms or conditions and entering into agreements containing prohibited boycott language.

The U.S. antiboycott regulations also require U.S. persons to report to BIS certain requests they have received to take certain actions to comply with, further or support an unsanctioned foreign boycott.

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LA Film Executives Found Guilty of Violating FCPA in Connection With Contracts in Thailand

The Justice Department issued a press release today regarding Friday's conviction of two Los Angeles-area film executives in a closely watched criminal case involving the U.S. Foreign Corrupt Practices Act (FCPA).

After a two and a half week jury trial in the Central District of California Courthouse in Los Angeles, Gerald Green and Patricia Green were found guilty of conspiracy and substantive violations of the FCPA and U.S. money laundering laws in relation to an alleged bribery scheme that enabled the defendants to obtain a series of Thai government contracts, including contracts to manage and operate the annual Bangkok International Film Festival.

Patricia Green was also found guilty of falsely subscribing U.S. income tax returns in connection with this scheme.

Mr. and Mrs. Green, who were charged and arrested in December 2007, owned and operated Film Festival Management, a Los Angeles-based business that was created to bid for the management contract for the annual Bangkok International Film Festival. In January 2008 they were indicted by a federal grand jury in Los Angeles on one count of conspiracy to bribe a foreign public official in violation of the FCPA and six substantive counts of violating the FCPA.

Earlier this year, the Greens were charged in a second superseding indictment with 21 counts, including conspiracy to violate the FCPA, conspiracy to violate U.S. anti-money laundering laws, eight substantive counts of violating the FCPA, seven counts of violating anti-money laundering laws, one count of obstruction of justice and two counts of making a false statement on a U.S. Income Tax Return.

According to the superseding indictment, the Greens paid approximately $1.8 million in bribes to the former TAT governor through numerous bank accounts in Singapore, the United Kingdom and the Isle of Jersey in the name of the former governor’s daughter and a friend of the former governor. The contracts received by the Greens resulted in more than $13.5 million in revenue to businesses they owned. Evidence introduced at trial showed that beginning in 2002 and continuing into 2007, the Greens conspired with others to bribe the former governor of the TAT in order to get the film festival contracts as well as other TAT contracts. As a result of the then governor’s position at the TAT, the former governor was able to influence the awarding of these contracts.

Trial evidence also showed that the Greens used different business entities, some with fake business addresses and telephone numbers, in their dealings with the TAT in order to hide the money the Greens were being paid under the contracts. Trial evidence also showed that the Greens disguised the payments as "sales commission" payments and made the payments for the benefit of the former governor through the foreign bank accounts of intermediaries, including bank accounts in the name of the former governor’s daughter and friend.

The conspiracy and FCPA charges each carry a maximum penalty of five years in prison, and each of the money laundering counts carries a maximum penalty of up to 20 years in prison. The false subscription of a U.S. income tax return carries a maximum penalty of three years in prison and a fine of not more than $100,000.

Sentencing has been set for Dec. 17, 2009.

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President Nominates Eric Hirschorn as Nominee for Under Secretary of Commerce for Export Administration and Head of BIS

Today, President Obama announced his intent to nominate Washington, DC attorney Eric Hirschorn as Nominee for Under Secretary of Commerce for Export Administration and head of the Bureau of Industry and Security.

As indicated by his biography from the formal announcement below, Mr. Hirschorn has extensive experience in export control-related issues, having served as Deputy Assistant Secretary for Export Administration in the early 1980s and while in private law practice.

Following the nomination Secretary of Commerce Gary Locke issued a statement indicating that:

"Eric Hirschhorn has a wealth of experience working with export controls and I look forward to having him onboard as we implement President Obama's vision to reform the export control system and increase competitiveness of U.S. companies by facilitating the sale of our goods while protecting national security."

There are still two vacant political positions at BIS: Assistant Secretary for Export Administration and Assistant Secretary for Export Enforcement.

President Obama announced his intent to nominate the following individuals today:


Eric L. Hirschhorn, Nominee for Under Secretary of Commerce for Export Administration and head of the Bureau of Industry and Security, Department of Commerce

Eric Hirschhorn, a partner in the Washington, D.C. office of Winston & Strawn LLP, long has been active in the areas of international law, litigation, and professional responsibility. As Deputy Assistant Secretary for Export Administration at the U.S. Department of Commerce (1980-81), Mr. Hirschhorn oversaw U.S. export controls for items having commercial as well as military applications, antiboycott compliance, restraints on imports for national security reasons, and the Department’s participation in the Committee on Foreign Investment in the United States (CFIUS). Earlier, while a member of President Jimmy Carter’s reorganization project staff (1977-80), he worked on reorganizing the government’s international trade, public diplomacy, and foreign assistance mechanisms. Before working in the Executive branch, Mr. Hirschhorn held several congressional staff positions, was in private law practice in New York City, and was a legal services lawyer. Mr. Hirschhorn has represented clients on a wide range of commercial and regulatory matters since returning to private law practice in 1981. Mr. Hirschhorn is Executive Secretary of the Industry Coalition on Technology Transfer (ICOTT), a group whose industry participants are affected by U.S. export control and embargo rules. He is the author of The Export Control and Embargo Handbook, Second Edition, published in 2004, and numerous articles on export controls, embargoes, and related topics. He chairs the D.C. Bar Rules of Professional Conduct Review Committee and is a member (and former chair) of the D.C. Bar Legal Ethics Committee. He also is a member of the New York City Bar Association and the Thurgood Marshall American Inn of Court. Mr. Hirschhorn received his B.A. degree from the University of Chicago and a J.D. degree from Columbia University, where he was a Harlan Fiske Stone Scholar.

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OFAC Issues General License Authorizing Sales of Medicine, Medical Devices and Agricultural Commodities to Certain Areas in Sudan

Today the Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule in the Federal Register amending the Sudanese Sanctions Regulations (31 CFR Part 538) by adding a general license authorizing the export and reexport of medical devices, medicine and agricultural commodities to the so-called “Specified Areas of Sudan” (the permissible areas in Sudan described below).

OFAC's general license is effective immediately.

As a result of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) all exports and reexports of medical devices, medicine and agricultural commodities of U.S. or non-U.S.medical devices to Sudan currently require a one-year specific license to be issued by OFAC. U.S. companies have experienced significant delays in obtaining one-year licenses from OFAC. The issuance of the general license resolves the conflict between TSRA and the Darfur Peace and Accountability Act of 2006.

As a result of today’s amendments to the Sudanese Sanctions Regulations, U.S. companies and their affiliates may export and reexport medical devices, medicine and agricultural commodities to the following Specified Areas in Sudan:

Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur, and marginalized areas in and around Khartoum. The term “marginalized areas in and around Khartoum” means the following official camps for internally displaced persons: Mayo, El Salaam, Wad El Bashir and Soba.

It will still be necessary to obtain a one-year specific license from OFAC prior to making any sales of medical devices, medicine and agricultural commodities to the Government of Sudan, to any individual or entity in an area of Sudan other than the Specified Areas of Sudan, or to persons in third countries purchasing specifically for resale to the Specified Areas of Sudan.

There is a unique feature of this the new general license that must be taken into account with respect to future sales to Sudan under this general license. Because the TSRA only authorizes one-year licenses, this general license will cover exports shipped within the twelve-month period beginning on the date of the signing of the sales contract. Each year by the anniversary of the September 9, 2009 effective date, OFAC will determine whether to revoke the general license or not. Unless revoked, the general license will remain in effect.

In addition, note the following other compliance-related aspects associated with the use of OFAC’s Sudan general license:

• The general license authorizes the making of shipping and cargo inspection arrangements, the obtaining of insurance, the arrangement of financing and payment, the entry into executory contracts, and the provision of brokerage services for such sales and exports or reexports.
• The general license cannot be used for any transaction with any party on OFAC’s List of Specially Designated Nationals and Blocked Persons, including persons.
• The general license cannot be used to ship products to any parties associated with the petroleum or petrochemical industries in Sudan.
• The use of the general license is subject to OFAC’s standard recordkeeping requirements and all records relating to the transaction must be maintained for a period of not less than five years from the date of delivery.
• The transshipment or transit of permissible exports through areas of Sudan other than the Specified Areas of Sudan is still prohibited.

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DDTC Issues Announcement Regarding Use of USML Category XXI

The State Department's Directorate of Defense Trade Controls (DDTC) issued an announcement (doc) today that could impact many exporters of products and technical data subject to the International Traffic in Arms Regulations (ITAR).

As noted below, DDTC will all require all license submissions for exports of items identified as USML Category XXI, the category that covers "miscellaneous articles" (and related technical data), to include either a copy of a DDTC Commodity Jurisdiction (CJ) determination letter identifying the commodity as controlled under Category XXI or a letter from the Director of the Office of Defense Trade Controls Policy granting permission to use Category XXI.

DDTC made this change since there has been an "increase" in the improper use of Category XXI to describe defense articles that should be properly categorized under another USML category.

Exporters that are not sure about which USML Category covers their product, or whether their product is subject to the jurisdiction of the ITAR or Exprot Administration Regulations, should seek a CJ from DDTC.

The complete text of DDTC's announcement is as follows:

Use of USML Category XXI

Effective immediately, all license submissions which identify USML Category XXI – Miscellaneous Articles must include an attached copy of one of the following two documents authorizing use of Cat XXI or the application will be subject to Return Without Action:

• A copy of a DDTC Commodity Jurisdiction determination letter identifying the commodity as controlled under the USML at Cat XXI;
• Or an official letter from the Director, Office of Defense Trade Controls Policy granting permission to use Cat XXI.

This policy is necessary to enforce the requirement of 22 CFR Part 121.1 Category XXI(a). DDTC has observed a recent increase in the use of Cat XXI for items which should be properly categorized under a well defined USML category. The incorrect use of Cat XXI results in the license application being directed to the incorrect licensing team at DDTC and DTSA, which significantly slows down the adjudication of the request. Additionally, if a properly categorized commodity is designated as SME, the incorrect use of Cat XXI also incorrectly identifies the commodity as non-SME.

If you are unsure if your commodity is controlled by the USML, you should seek a Commodity Jurisdiction determination (see 22 CFR 120.4). Please follow the guidelines at http://www.pmddtc.state.gov/commodity_jurisdiction/index.html. If you have determined your commodity is USML but are unsure of the correct category, contact the DDTC Response Team at 202-663-1282 or PM-DDTC-Response-Team-DL@state.gov.

Any other questions or concerns regarding the use of Category XXI should be directed to the DDTC Response Team at 202-663-1282 or PM-DDTC-Response-Team-DL@state.gov.

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U.S. State Department Designates North Korean Nuclear and Missile Entities

The U.S. Department of State today designated two entities in North Korea under Executive Order 13382, which authorizes the blocking of property of persons engaged in proliferation activities and their support networks.

The following is a brief a summary of these entities:

• General Bureau of Atomic Energy (GBAE) -- located in Pyongyang, oversees the North Korean government's nuclear program and manages operations at the Yongbyon Nuclear Research Center.

• Korea Tangun Trading Corporation -- also located in Pyongyang, is subordinate to North Korea’s Second Academy of Natural Sciences and is primarily responsible for the procurement of commodities and technologies to support North Korea’s defense research and development programs and procurement, including materials that are controlled under the Missile Technology Control Regime or the Australia Group.

The two entities designated were also designated by the United Nations in July 2009 for their involvement in North Korea’s WMD and missile programs.

As a result of today's designations, these two entities have been added to OFAC's SDN List, assets of these entities that are within U.S. jurisdiction must be blocked and U.S. persons are prohibited from conducting any transactions with these entities.

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BIS Publishes Final Rule Regarding In-Country Transfers to Parties on Entity List

The Bureau of Industry (BIS) published a final rule (PDF) in today's Federal Register amending several sections of Part 744 of the Export Administration Regulations (EAR) to specify that in-country transfers of items subject to the EAR to parties on the Entity List are now subject to the Entity's List's licensing requirements.

BIS stated that the rationale for making these changes was as follows:

Regardless of the form of the transaction (export, reexport, or transfer (incountry)), the United States Government believes it is important to review all transactions involving persons listed on the Entity List prior to the initiation of a transaction with a listed person and/or receipt by the listed person of an item in a transaction.

The Entity List (PDF), set forth in Supplement No. 4 to Part 744 of the EAR, provides notice to the public that certain exports, reexports, and transfers (in-country) to parties identified on the Entity List require a license from the Bureau of Industry and Security (BIS) and that availability of License Exceptions in such transactions is limited.

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Changes to Cuba Embargo Published in Today's Federal Register

Today's edition of the Federal Register contains the final rules making the changes to the U.S. embargo on Cuba announced last week by the Departments of Treasury and Commerce.

• The PDF version of the changes made to OFAC's Cuban Assets Control Regulations can be found here.

• The PDF version of the Changes to the Commerce Department's Export Administration Regulations modifying the rules on certain exports to Cuba can be found here.

Summaries of the various changes made to the U.S. embargo on Cuba can be found here (OFAC) and here (BIS).

Despite these changes, there are still significant restrictions on exports, reexports and travel to Cuba. For example, all sales of U.S. telecommunications, agricultural or medical products exported or re-exported to Cuba pursuant to the recent changes must be authorized or licensed by BIS. In addition, nearly all travel to Cuba, including for educational and humanitarian purposes, still requires a specific license to be issued by OFAC before such travel occurs. In addition, all authorized travel to Cuba must be arranged and provided by OFAC authorized providers of air and travel services.

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Census Modifies AES to Implement Cuba License Exception Consumer Communication Devices

In order to implement yesterday's changes in certain aspects of the U.S. embargo on Cuba, the Census Bureau's Foreign Trade Division has issued Foreign Trade Letter No. 5 explaining the requirements for filing electronic export information (EEI) through the Automated Export System (AES) for shipments under new License Exception Consumer Communication Devices (CCD).

License Exception CCD authorizes exports and re-exports to Cuba of certain donated consumer communications devices, computers, and software to individuals in Cuba and to independent non-governmental organizations in Cuba. Exports or re-exports under the License Exception CCD may not be made to organizations administered or controlled by the Cuban Government or the Communist Party or to designated officials of the Cuban Government or Communist Party.

FTR Letter No. 5 also states that Census has modified the AES by adding the new License Type Code “C58” for the License Exception CCD. The AES filers who report “C58” are required to report CCD, regardless of value, in the license number field and the Export Control Classification Numbers 4A994, 4D994, 5A991, 5D991, 5A992, 5D992, or EAR99 corresponding to the License Exception. The country of destination and ultimate consignee reported in the AES must be CU.

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BIS Amends Export Adminstration Regulations Governing Travel and Gifts to Cuba

In addition to the changes made in the U.S. embargo on Cuba made today by OFAC (see previous post) the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) today amended the Export Administration Regulations (EAR) to implement the President’s April 13, 2009 directive to make it easier for Americans with family members in Cuba to visit and send gifts to their relatives.

The amendments to the EAR will authorize items normally exchanged between individuals as gifts to be included in gift parcels going to Cuba and remove the requirement that gift parcels be sent only to members of the donor’s immediate family. Gift parcels may now be sent from an individual in the United States to an individual or an independent religious, educational, or charitable organization in Cuba.

The amendment also raises the value limit for gift parcels from $400 to $800 and increases the number of parcels that an individual donor may send each month.

The EAR update also removes the 44-pound limit on personal baggage that previously applied to travelers to Cuba and creates a new License Exception that authorizes exports and re-exports to Cuba of donated personal communications devices such as mobile phone systems, computers and software, satellite receivers and digital cameras.

The amendment also revises BIS licensing policy to facilitate exports needed to establish telecommunications links between the United States and Cuba, including links established through third countries, and including the provision of satellite radio or satellite television services to Cuba.

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OFAC Issues Regulations Making Changes to Cuban Embargo

Today the Treasury Department's Office of Foreign Assets Control (OFAC) issued the long-awaited final rule to amend the Cuban Assets Control Regulations to implement changes to the U.S. embargo on Cuba passed by Congress in March of this year.

The advance version of the final rule that will be published in the Federal Register on Tuesday, September 8, 2009 can be found here (pdf). These regulations are effective today. OFAC’s fact sheet providing an overview of these changes is reprinted below.

While these regulations expand the ability of Americans to visit “close relatives” in Cuba and send remittances to family members in Cuba, from the perspective of U.S. exporters the regulations make two important changes:

1. The amended regulations authorize a greatly expanded range of commercial telecommunications transactions with Cuba, such as cellular and satellite communications. In addition, the amended regulations contains a general license authorizing travel to Cuba related to the commercial export of telecommunications-related items that have been authorized by the Department of Commerce. Individuals traveling under this general license must be employed by a telecommunications services provider that is a person subject to U.S. jurisdiction or by an entity duly appointed to represent such a provider. In addition, the traveler’s schedule of activities cannot include free time, travel, or recreation in excess of that consistent with a full work schedule (i.e., no long weekends on the beach); and

2. The amended regulations also authorize a general license to authorize, with certain conditions, employees of producers or distributors of medical or agricultural products (including food) to travel to Cuba to engage in the marketing, sales negotiation, accompanied delivery, or servicing in Cuba of agricultural commodities, medicine, or medical devices eligible under the Department of Commerce's export or reexport licensing policy to Cuba. Note that persons traveling to Cuba under this general license must submit pre and post-departure reports to Cuba identifying
the traveler and the producer/distributor and describing the purpose and scope of such travel and describing the business activities conducted, the persons with whom the traveler met in the course of such activities, and the expenses incurred. The same limitations on free time describe above also apply. This is a major change for U.S. exporters of humanitarian products since all previous travel to Cuba had to take place pursuant to a specific license issued by OFAC.

Important Note: All travel to Cuba pursuant to these general licenses must be arranged and provided by OFAC authorized providers of air and travel services.

Fact Sheet: Treasury Amends Cuban Assets Control Regulations
To Implement the President’s Initiative on
Family Visits, Remittances, and Telecommunications

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) today issued a final rule amending the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR), to implement the President's initiative of April 13, 2009, to reach out to the Cuban people in support of their desire to freely determine their country's future, promote greater contact between separated family members in the United States and Cuba, and increase the flow of remittances and information to the Cuban people.

Today's amendments to the CACR change the rules in three major areas: (1) family visits; (2) family remittances; and (3) telecommunications. These amendments also make certain technical and conforming changes to the CACR.

Family visits. OFAC has eased restrictions on travel-related transactions for visits to "close relatives" who are nationals of Cuba by issuing a general license.

• Travelers may visit "close relatives" (including, for example, aunts, uncles, cousins, and second cousins) who are nationals of Cuba.
• There is no limit on the duration of a visit to these "close relatives."
• There is no limit on the frequency of visits to these "close relatives."
• Authorized expenditure limits for travel within Cuba have been increased to match the expenditures allowed for all other authorized categories of travel to Cuba -- specifically, the current State Department "per diem rate" for Havana (for use anywhere in Cuba) plus amounts for additional transactions directly incident to visiting close relatives in Cuba. The current "maximum per diem rate" is $179. For future updates to this rate, travelers may check the Department of State's Office of Allowances web site (http://aoprals.state.gov).
• Travelers may be accompanied by persons who share a common dwelling as a family with them.

Remittances. OFAC has also eased restrictions on remittances (including from inherited blocked accounts) to "close relatives" who are nationals of Cuba by issuing a general license.

• Persons subject to the jurisdiction of the United States may send remittances to "close relatives" (including, as noted above, aunts, uncles, cousins, and second cousins) who are nationals of Cuba. These amendments do not affect the prohibition on remittances to a "prohibited official of the Government of Cuba" or a "prohibited member of the Cuban Communist Party," as defined in the CACR.
• There is no limit on the amount of such a remittance.
• There is no limit on the frequency with which persons subject to the jurisdiction of the United States may send such remittances.
• Authorized family travelers may carry up to $3,000 of such remittances to Cuba.
• Remittances for emigration-related purposes continue to be subject to separate restrictions.
• Remittances may be made from depository institutions. To facilitate this, depository institutions are permitted to set up testing arrangements and exchange authenticator keys with Cuban financial institutions.

Telecommunications. Certain telecommunications services, contracts, related payments, and travel-related transactions are authorized by general licenses. The CACR amendments ease the telecommunications rules in three broad areas, as well as allow travel-related transactions for the specific purpose of conducting business in all three areas.

• Persons subject to U.S. jurisdiction may contract with and pay non-Cuban telecommunications services providers to provide services to particular individuals in Cuba (other than prohibited officials of the Government of Cuba or prohibited members of the Cuban Communist Party, as defined in the CACR). For example, an individual in the United States may contract with and pay a U.S. or third-country telecommunications company to provide cellular telephone service for a phone owned and used by that individual's friend in Cuba. Moreover, a U.S. telecommunications services provider may enter into a contract with a particular individual in Cuba to provide telecommunications services to that individual.
• Telecommunications services providers that are persons subject to U.S. jurisdiction are generally licensed (1) to make payments incident to the provision of telecommunications services between the United States and Cuba and the provision of satellite radio or satellite television services to Cuba and (2) to enter into and perform (including making payments) under roaming services agreements with telecommunications services providers in Cuba.
• Transactions incident to establishing facilities to provide telecommunications services linking the United States and Cuba, including fiber-optic cable and satellite facilities, are authorized by general license. The Bureau of Industry and Security of the U.S. Department of Commerce licenses the exportation and re-exportation of goods and technology for the establishment of telecommunications facilities linking the United States and Cuba.
• Two general licenses have been added authorizing, with certain conditions, travel-related transactions incident to authorized telecommunications transactions. One of these licenses authorizes, with certain conditions, travel transactions incident to the commercial export of telecommunications-related items that have been authorized by the Department of Commerce. The second license authorizes travel transactions incident to participation in telecommunications-related professional meetings.

New general license for TSRA travel-related transactions. The new amendments to the CACR also implement provisions of the Omnibus Appropriations Act, 2009. Pursuant to section 620 of the Omnibus Appropriations Act, 2009, which amended the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), there is a new general license for travel-related transactions incident to agricultural and medical sales under TSRA.

• This new general license authorizes, with certain conditions, travel-related transactions that are directly incident to the commercial marketing, sales negotiation, accompanied delivery, or servicing in Cuba of agricultural commodities, medicine, or medical devices that appear consistent with the Department of Commerce's export or reexport licensing policy.
• A traveler may rely on this general license if he or she is regularly employed by a producer or distributor of the agricultural or medical items or by an entity duly appointed to represent such a producer or distributor, and if that traveler's schedule of activities is consistent with a full work schedule.
• Under the new general license, written reports must be submitted to OFAC at least 14 days before departure for Cuba and within 14 days of return.

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U.S.-China High Technology Working Group to Hold Public-Private Sector Dialogue on September 29, 2009

The Bureau of Industry and Security (BIS) announced today that the next session of the U.S.-China High Technology Working Group (HTWG), which will be held in Washington, DC at the end of September 2009 will include a public-private dialogue on Tuesday, September 29, 2009 (the day before Update 2009 begins) in cooperation with the National Association of Manufacturers (NAM).

Participants in the public-private HTWG event will focus on identifying barriers to U.S.-China high technology trade, particularly in two of the largest categories of bilateral advanced technology trade: civil aviation-aerospace and information technology. The principal goals of this dialogue are to offer an opportunity for U.S. and Chinese companies to interact with each other and with government officials directly on these issues, and to learn from individual U.S. and Chinese companies about the ways in which the two governments can further support high technology trade for civilian end-uses in China.

The HTWG, which was established in 2005, meets twice a year to discuss ways to facilitate secure, civilian high technology trade between the U.S. and China.

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International Arms Dealer Arrested for Conspiracy to Supply U.S. Fighter Jet Engines to Iran

The Justice Department announced today that a Belgian national and resident of France suspected of international arms dealing for decades, has been arrested in New York on charges alleging that he conspired to illegally export F-5 fighter jet engines and parts from the United States to Iran.

According to the Justice Department, a six-count indictment was returned on August 27, 2009, in the Southern District of Alabama charging Jacques Monsieur, and co-defendant Dara Fotouhi, an Iranian national currently living in France, with conspiracy, money laundering, smuggling, as well as violations of the Arms Export Control Act (AECA) and the International Emergency Economic Powers Act (IEEPA).

According to the indictment and an affidavit filed in the case, defendants Monsieur and Fotouhi are experienced arms dealers who have been actively working with the Iranian government to procure military items for the Iranian government. More information on Mr. Monsier's "interesting" background as an arms deadler can be found in this 2002 story published by the Center for Public Integrity's International Consortium of Investigative Journalists.

The indictment alleges that in 2009, Mr. Monsieur contacted an undercover agent seeking engines for the F-5 fighter jet or the C-130 military transport aircraft for export to Iran. Monsieur began having regular e-mail contact with the undercover agent regarding requested F-5 engines and parts that ultimately led to a purchase order being issued from a front company in Kyrgyzstan. The purchase order requested that the parts be exported to the United Arab Emirates for transshipment to Iran. Subsequently, $110,000 was sent by wire transfer from Dubai to a bank account in Alabama as payment for the parts.

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Freight Forwarder Fined For Export Violation May be Forced to Shut Down

American Metal Market (www.amm.com) recently ran the following story containing additional details on our recent post describing the recent Bureau of Industry and Security (BIS) enforcement case involving Eastways Shipping Corporation, a New York City-based freight forwarder. As noted below, it appears that the penalty will force the freight forwarder to shut down their business (disclaimer: the editor of International Trade Law News is quoted in the article):

Export of Tinplate Brings Freight Firm $70,000 Fine

By: Paul Schaffer
Published: Aug. 26, 2009
(Reprinted with permission of American Metal Market)

New York -- A freight forwarder who arranged to deliver $95,335 worth of tinplate scrap to Pakistan in 2006 has been hit with a $70,000 penalty because the Karachi buyer was on a U.S. Commerce Department blacklist.

Although New York-based Eastways Shipping Corp. has been given six months to pay the penalty in installments, owner and president Nigel Storey told AMM that the business can't survive such a hit and that he will shut it once he settles with his landlord. The order issued by the Bureau of Industry and Security said Eastways failed to obtain a license for the shipment. The violation didn't pertain to the contents of the shipment, but rather that Allied Trading Co. is on the bureau's "entity list." The Commerce Department roster shows Allied as one of many buyers of technologically sensitive goods that ended up in Pakistan's nuclear weapons program.

Storey said that his client, Fairfield, Conn.-based Tinplex Corp., was listed as the exporter and was willing to explain Eastways' limited role to the Commerce Department. "They wanted no part of that," he said. The forwarder is held responsible for knowing export control subtleties if the commodity itself isn't on any restricted list. "I still felt that the actual exporter was really the responsible party," he said.

Douglas Jacobson, a Washington-based trade lawyer not involved with the forwarder or Allied, said that Eastways would have been cleared for the shipment if it had dealt with Commerce ahead of time. However, any transactions with Allied Trading require pre-clearance because of the Pakistani company's past activities, he said.

Note that the article's reference to "pre-clearance" refers to the Export Administration Regulation's requirement that exports and reexports to parties identified on the Entity List require a license to be obtained from BIS prior to shipment. In this case, the Entity List states that the license review policy for Allied Trading Company is "case-by-case for all items listed on the CCL" and that there is a "presumption of approval for EAR99 items." Because the scrap metal was classified as EAR99, it appears that BIS may have approved the export license application submitted by the exporter in this case.

It is not yet clear whether BIS has or will bring an enforcement case against the exporter of the scrap metal to Pakistan. While each case is evaluated by BIS independently, BIS will typically allege that both the freight forwarder and exporter engaged in prohibited activity in connection with the export to the party on the Entity List.

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OFAC Issues August 2009 Monthly Civil Penalties Report

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its August 2009 monthly civil penalty report.

Given the very large civil penalties announced by OFAC earlier in August on ANZ Bank and DHL this penalty report is very short.

According to the report, Thermon Manufacturing Company, a San Marcos, Texas-based manufacturer of heat tracing equipment for the petrochemical, oil and gas, engineering and power industries remitted $14,613.24 to settle allegations of violations of the Sudanese Sanctions Regulations occurring in 2004 and 2005.

OFAC alleged that Thermon engaged in and facilitated the export and/or re-export of heat tracing equipment, directly or indirectly, to Sudan in three separate transactions.

Thermon voluntarily disclosed this matter to OFAC. Thermon also reported to OFAC corrective measures and improvements to its OFAC compliance procedures it had taken in response to its discovery of the alleged violations.

This matter was resolved according to OFAC's 2003 enforcement guidelines that set the maximum penalty at $11,000 per violation. The current maximum penalty for violating OFAC's Sudanese Sanctions Regulations is $250,000 per violation.

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Sentencing of Atmospheric Glow Technologies, Inc. Set for October 28, 2009

The sentencing of Atmospheric Glow Technologies, Inc. (AGT), the company alleged to be Professor John Reece Roth's co-conspirator in the criminal case involving unlawful exports of ITAR controlled technology, has been moved to 10 a.m. on October 28, 2009 in Knoxville, Tennessee.

AGT plead 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.

AGT, which filed for bankruptcy in 2008, was a privately held plasma technology company located in Knoxville, Tennessee. Professor Roth, who was an original shareholder of AGT, was hired by AGT to work on the U.S. Air Force plasma technology contract that led to the violations of U.S. export control laws that resulted in criminal proceedings against AGT, Roth and Daniel Max Sherman, a physicist who formerly worked at AGT and was trained by Roth.

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OFAC Makes "Large Scale" Changes to SDN List

The Treasury Department's Office of Foreign Assets Control today announced that it released an updated version of its list of Specially Designated Nationals ("SDN List"). While OFAC's update did not include any substantive changes to the parties included on the SDN List, the new version of the SDN List makes a number of changes in the format of the list to consolidate duplicate records and to ensure that it conforms to established list standards and to remove duplicate records.

For example, OFAC merged duplicate names into single records with multiple addresses and standardized records to move aliases into a separate "alias field" (e.g., a.k.a.).

A complete list of all changes made to the SDN List can be found here.

OFAC’s various sanctions regulations generally prohibit transaction with parties named on the SDN List. In addition, part 744 of the Export Administration Regulations imposes export and reexport licensing requirements for items subject to the EAR to any party on the SDN List that contains any of the suffixes "SDGT", "SDT", "FTO", "IRAQ2" or "NPWMD".

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