Seasons Greetings and Happy New Year From International Trade Law News + Letter to Santa Regarding Possible Compliance Violations

Season's Greetings and Happy New Year to all of our loyal readers and clients around the world. See you in 2012. 

In the spirit of the holiday season we have reprinted below a letter to Santa regarding a number of alleged violations of import, export and other laws and regulations. 

—Doug Jacobson 

Letter to Mr. Claus from Scrooge McGrinch

 

By Dennis Salvey, Manager of Trade Compliance, VT iDirect Inc., Herndon VA. (reprinted with permission) 

Dear Mr. Claus:

We regret to inform you that your annual distribution of toys and gifts will not be permitted to proceed this year due to multiple Trade Compliance violations. Each of the below listed “alleged” violations are under review and until each is resolved, your enterprise is suspended from its normal course of business.

1.To begin with: the Office of Export Enforcement (OEE) has opened an investigation regarding the potentially illegal exports of toys and  gifts from the U.S. without the proper export licenses, customs declarations or documentation. The Export Administration Regulations (EAR) clearly defines an export as being the movement of goods, services, toys, gifts or technology from the U.S. to any other country by any means including reindeer powered sleds. There is no exception for Magic as your voluntary disclosure alludes to.

2.OEE is also considering placing 2 of your cohorts on the Denied Parties List. Donner and Blitzen are suspected of diverting toys and gifts into embargoed countries for the nefarious purpose of bringing joy to the world. Vixen may also be named as an accomplice. Dancer, Prancer and Comet’s alibi of being contestants on Dancing with the Stars during the time of the alleged incident is holding up for now. Incidentally, Interpol has some questions for you concerning 2 of your known alias’ Father Christmas and Kris Kringle.

3.   Incorrect application of Incoterm DDP (Delivery Duty Paid) has resulted in millions of gifts held by Customs agencies around the world as you are not a registered importer in any country in which you do business.  Although all of your customers (recipients) wanted to receive those gifts, not one of them was willing to act as the Importer of Record. The exception was little Billy Johnson of Des Moines Iowa who attempted bribing a customs official with a box of candy canes and now faces 5 years hard labor in Santa’s workshop on an FCPA charge. The total fines for storage by the respective Customs agencies are in the gazillions of dollars and must be paid before the gifts can be returned to the North Pole at your expense. Be advised that when paying fines in the currency of board games, only Monopoly and the Christmas Game currencies are acceptable.

4.   The Air Waybill’s used on your last 400 delivery episodes issued by “Fairy Land Airlines” is very questionable. It turns out that the dimensional weight versus the actual weight is impossible to calculate. In addition, the North Pole is not recognized as a valid Country of Origin.

5.   Speaking of Country of Origin, you claim that all of the material used in the making of every gift as well as all of the labor is a direct product of the North Pole. The World Customs Organization cannot verify that the materials needed to make all of these gifts could conceivably come from the North Pole. The criteria of “Grown, Produced or Manufactured in a specific country” used to determine origin is an absolute, international law does not recognize “Magic” as part of these criteria. They are also looking into unfair labor practices brought before the world court, by a group known as the International Little Brotherhood of Elves.

6.   There have been multiple complaints from parents around the world reporting high levels of lead and mercury in some toys and baby furniture prompting this panel to believe that these items are indeed made in China, not in the North Pole as you attest.

7.   The Cost of Goods value you have reported on these items is too low to have been manufactured in any other country but China. Your financial records will be subpoenaed unless you can otherwise validate the low value claim before your next distribution season. If North Pole currency, The Saint Nickel, was used in your valuation methodology, be prepared to show its value against the U.S. dollar, the Euro and the Yen at the time the determination was made as North Pole currency is not listed by any of the world’s financial markets. Example; 1 St Nickel = $1.19 USD

8.   The TSA has declared you as an “unknown shipper.”

9.    We are astonished at the number of paternity suits filing in from all over the world. These suits all start the same way; “I saw Mommy kissing Santa Clause underneath the mistletoe last night.” World courts will act with discretion in determining the validity of these claims; BUT we cannot guarantee that Mrs. Clause will not become aware of them at some point. The makers of Viagra seek your advice.

10. Immigration in all countries will deny you access because your passport expired December 24, 1611. The U.S. will require an I-129 for your brief employment within U.S. borders each year certifying that you do not require an export license for “Deemed Exports.”

11. The EPA and equivalent agencies around the world are investigating complaints of excessive reindeer emissions (droppings). The fact that some farmers welcome this will not be considered a mitigating factor when and if the case goes to court.

12. Your “naughty / nice” list has raised more than a few eyebrows. Servicing those on the nice list while refusing to do business with those on the naughty list is a direct violation of the U.S. Antiboycott rules as well as violating the discrimination laws in countries in which you do business. The Justice Department’s of the U.S., Argentina, Brazil, Hungary, Ethiopia, the entire European Union and the North and South Pole are looking into this.

13. Investigations into privacy laws have also been opened concerning the allegation that; “you see them when their sleeping and know when their awake”. However, all of these investigations will be dropped if you surrender the Intellectual Property rights to these methods to the CIA, FBI, Mussed, M5, and the KGB.

14. Finally; the red blinking light on Rudolf’s nose interferes with air traffic control and UFO sightings. The FCC, the FAA and the History Channel are investigating. You and Rudolf will be summoned to Roswell for a hearing on this issue. My advice; do not arrive at these hearings in the company sled.

Until each of the above issues is resolved you are hereby ordered to cease and desist your annual distribution or holiday cheer-spreading as you refer to it.

As an aside (not a Trade Compliance issue) the World Health Organization will be rescinding your status as a role model due to your weight and poor diet of milk and cookies at every house. This is not the type of example they expect from a person that children look up to. You will also receive a nasty note from Michelle Obama on the subject.

Respectfully,

Scrooge McGrinch

Bah Humbug Division BIS (Big Important Stuff)

Enclosure:

My Christmas list

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Wassenaar Arrangement Issues Best Practice Guidelines on Internal Compliance Programs for Dual-Use Goods and Technologies

During the recent Plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (WA) held in Vienna, Austria, the Participating States of the WA adopted a document encouraging exporters, including companies and academic institutions, located in WA Participating States to develop and implement export-related Internal Compliance Programs (ICPs).

The document, entitled "Best Practices Guidelines on Internal Compliance Programmes for Dual-Use Goods and Technologies" (a copy of which is provided below) states that WA Participating states should consider:

• providing exporters with opportunities to consult on the form and content of their export ICPs;
• encouraging exporters to to submit their draft ICPs for examination and comment;
• implementing measures and stimuli that would encourage exporters to introduce ICPs (e.g., taking the development and implementation of an ICP into account when considering applications for licenses and revoking existing licenses, or making an ICP a condition for the granting of a general license for an exporter.);
• taking steps to assess an exporter’s compliance with domestic export control laws and regulations, as appropriate, which may involve face-to-face consultations and/or inspection visits. 

The document also contains a number of basic and additional elements that may be included in an export ECP, depending on the organizations' structure, size and other circumstances.  The WA's Best Practices Guidelines state that the basic elements of an export internal compliance program for dual-use items include:

1. Commitment to Compliance
2. Structure and Responsibility
3. Export Screening Procedures
4. Shipment Control
5. Performance Review
6. Training
7. Record Keeping
8. Reporting and Corrective Action

Many countries encourage exporters to adopt export-related internal compliance programs. For example, the U.S. Department of Commerce's Bureau of Industry and Security has recommended that U.S. exporters implement an Export Management and Compliance Program and has issued detailed guidelines.  Japan's Ministry of Economy, Trade and Industry (METI) has been encouraging companies to establish export ICPs since 1987 and since 2003 has published on its website the names of companies that have voluntarily established ICPs, conducted self-audits, and registered with METI.

However, the WA's adoption of the Best Practices Guidelines on export internal compliance programs is significant given the number of countries that participate in the WA and the range of countries that are currently seeking membership (e.g., Mexico and India). The issuance of the WA Best Practices Guidelines will likely lead to the increased issuance and use of ICPs by exporters, particularly if governments provide meaningful benefits to exporters that voluntarily adopt and implement such programs.

While the WA's "Elements of Internal Compliance Programmes For Dual-Use Items" is a useful framework for export compliance programs, the elements do not contain a great amount of detail. Exporters should supplement the WA guidelines by reviewing export and other compliance-related materials issued by governments and non-government organizations when creating their ICPs. For example, the Nunn-Wolfowitz's Task Force Report on Export Compliance Programs (pdf), while more than 10 years old, still serves as a useful resource with respect to best practices in export compliance programs. In addition, the detailed export compliance best practices that were recently issued by the Coalition for Excellence in Export Compliance (CEEC) provide specific and practical information with respect to the various elements of export internal compliance programs.

WA 2011- Internal Compliance Programmes

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U.S. Export Control Reform News and Upcoming Deadlines for Public Comments

Resumption of Weekly Wednesday Export Control Reform Update Conference Calls and Addition of Conference Call on Monday, December 19th

BIS Assistant Secretary Kevin Wolf will resume his weekly teleconferences on Wednesdays at 2:00 pm EST to answer questions about the Department of Commerce’s proposed rules regarding the Administration’s Export Control Reform (ECR) Initiative. These calls are intended to foster public understanding of ECR and to assist the public in submitting informed comments to the proposed regulations that are pending (see below). The dial-in number for the conference calls is 1-877-389-6079, Participant Code: 905168. Advance written questions are encouraged and should be sent to oesdseminar@bis.doc.gov with a subject line of “Teleconference questions.”

Because of the overwhelming response to last Wednesday's call, a number of people were not able to join the call. BIS has now added the ability to allow more participants to join the calls.

In addition, an additional call with Assistant Secretary Wolf has been scheduled for Monday, December 19 from 3:30 to 4:30 pm EST (using same number as above).

Deadline for Comments on Moving Aircraft and Related Items from USML Category VIIII to CCL is December 22, 2011

The Directorate of Defense Trade Controls' (DDTC) proposed rule issued on November 7, 2011 would amend the International Traffic in Arms Regulations (ITAR) to revise U.S. Munitions List (USML) Category VIII (aircraft and related parts) to describe more precisely the military aircraft and related defense articles warranting control on the USML and under the ITAR.

The BIS proposed rule also published on November 7, 2011 describes how aircraft and parts determined no longer to be subject to USML Category VIII would be controlled under the Commerce Control List (CCL) in new Export Control Classification Numbers (ECCNs) 9A610, 9B610, 9C610, 9D610, and 9E610. This proposed rule also would control military aircraft and related items now controlled under ECCNs 9A018, 9D018 and 9E018 under new ECCNs 9A610, 9D610 and 9E610. This proposed rule also addresses license exception STA availability for items controlled by the five new ECCNs that would be created.

Comments on these proposed rules are due on December 22, 2011 and should be submitted by email or via www.regulations.gov. See the text of each proposed rule for the applicable reference number (RIN).

Deadline for Comments on Proposed Changes to Export Administration Regulations is February 1, 2012

In addition to considering how to modify the CCL to control items moved from the USML, on August 5, 211, BIS issued a Notice of Inquiry in the Federal Register requesting public comments on how the EAR, Chemical Weapons Convention Regulations, Additional Protocol Regulations, and National Defense Industrial Base Regulations can be clarified or streamlined to be more effective or less burdensome. This is being done as part of President Obama's January 2011 Executive Order directing government agencies to review and improve regulations. BIS regulation review will focus on issues outside the context of Export Control Reform and extends to the entire EAR, including license exceptions and documentation requirements. Any changes from this review that do away with unnecessary complexity will reduce exporters' licensing and compliance burdens and go beyond the significant reductions expected from the Export Control Reform Initiative.

BIS is seeking comments on the following topics:

• Identifying unnecessary compliance burden caused by regulations that are unduly complex, outmoded, inconsistent, or overlapping;
• Specific comments on ways to improve the existing regulations or eliminating outmoded ones;
• Aspects of the regulations the public considers effective or well designed;
• Information on foreign countries’ implementation of export controls.

Comments can submitted until February 1, 2012 to BIS by email or via www.regulations.gov. The regulations.gov ID for this Notice of Inquiry is: BIS–2011–0027.

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BIS Adds Two Parties in UAE to Entity List For Diverting Internet Proxy Devices to Syria

The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule in the Federal Register on Friday, December 16, 2011, adding the following individual and company in United Arab Emirates to the BIS Entity List. 

• Infotec, a.k.a., Info Tech, Ras Al Khaimah Free Trade Zone, U.A.E.
• Waseem Jawad, Ras Al Khaimah Free Zone, U.A.E.; P.O. Box: 25123, Dubai U.A.E.

The BIS Entity List includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and licensing requirements. The entries on the Entity List specify the license requirements and license review policy that are applicable to shipments to each listed entity and in many cases the listed entities are prohibited from receiving items subject to U.S. jurisdiction.

In this case, the entries on the Entity List for Infotec and Mr. Jawad specify a license requirement for "all items subject to the EAR" and the license review policy is "presumption of denial."

BIS stated that the two parties in the U.A.E. are being added to the Entity List based on evidence that they purchased U.S.-origin internet filtering devices and transshipped the devices to Syria. Specifically, BIS’s Office of Export Enforcement allegedly obtained evidence that Mr. Jawad, using the company name Infotec, ordered multiple Blue Coat SG9000-20 Proxy devices in December 2010 from a Blue Coat authorized distributor in the U.A.E. That authorized distributor in turn placed an order for the devices with Blue Coat in the U.S. A December 2010 email notification identified the end-user of the Blue Coat products for this order as the Ministry of Communication in Baghdad, Iraq. In February 2011, the devices were shipped from the U.s. to the United Arab Emirates, and ownership was transferred to Mr. Jawad in the Ras Al Khaimah Free Trade Zone in the U.A.E. Approximately three days later, the devices departed the U.A.E. for delivery to Syria. According to BIS, several of the proxy devices were identified by serial number as devices being used by the Syrian Telecommunications Establishment in Damascus, Syria.

BIS's December 16, 2011 final rule also removed the following four entities from Entity List based on the results of the annual review of the Entity List:

Singapore:

(1) Strive Components, Block 10 Toa Payoh Industrial Park Lor 8 #01–1221, Singapore, 319062; and

(2) Synoptics Imaging Systems Pte Ltd., 12 Lor Bakar Batu #06–09, Singapore, 348745.

Taiwan:

(1) Christine Sun, 7th Floor, Number 17, Zhonghua Rd., Sec 2, Xinzhuang City, Taipei, Taiwan; and

(2) In-Tech Company, a.k.a., In-Tech Telecom, Number 15, Lane 347, Jhongjheng Road, Sinjihuang City, Taipei, Taiwan, and 7th Floor, Number 17, Zhonghua Rd., Sec 2, Xinzhuang City, Taipei, Taiwan.

The removal of the four entities from the Entity List eliminates the existing BIS license requirements for exports, reexports and in-country transfers to the four entities. However, the removal of these four entities from the Entity List does not relieve persons of other obligations under part 744 of the EAR or under other parts of the EAR.

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OFAC Issues General License Unblocking Most Remaining Blocked Libyan Government Property

Following Friday's decision by the United Nations Security Council to lift the sanctions on Libya's Central Bank, the Treasury Department's Office of Foreign Assets Control (OFAC) on Friday evening issued Libya GeneralLicense No. 11 (GL 11) unblocking all remaining blocked property and interests in property of the Government of Libya (including agencies, instrumentalities, and controlled entities) and the Central Bank of Libya, including the Libyan Arab Foreign Bank.

The only exception to OFAC's GL 11 is that all funds (including cash, securities, bank accounts, and investment accounts, and precious metals) of the Libyan Investment Authority (“LIA”) and entities owned or controlled by the LIA (including the Libyan Africa Investment Portfolio) remain blocked. 


While OFAC removed the LIA and Libyan Africa Investment Portfolio from the SDN List on November 18, 2011, OFAC did not unblock their assets because those entities still remain subject to United Nations sanctions. 

According to OFAC, GL 11 should lead to the unblocking of more than $30 billion in assets of the Government of Libya.  

Most Libyan Government funds and assets have now been unblocked by OFAC and few restrictions remain from the sanctions imposed by the U.S. on February 25, 2011. However, the assets of certain members of the previous Libyan regime and other persons added by OFAC to the SDN List under OFAC's Libya 2 sanctions program remain blocked. An updated list of the remaining Libya parties and entities that remain subject to the United Nations travel ban and assets freeze is provided below. 

Exports and reexports to Libya of U.S. origin products, software and technology are subject to the export controls administered by the Bureau of Industry and Security.

UN LIST OF LIBYA INDIVIDUALS AND ENTITIES (Dec. 16, 2011)

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Coalition for Excellence in Compliance Releases Restricted Party Screening and Other Export Compliance Best Practices

The Coalition for Excellence in Export Compliance (CEEC) (pronounced “seek”), a voluntary group of experienced export compliance professionals from leading companies, law firms, research organizations and consulting firms, recently released a series of detailed and practical standards containing best practices on a wide range of important topics for export and sanctions compliance programs. 

CEEC's mission is to provide a uniform set of best practices that companies and trade compliance professionals could use to provide clarity over the existing patchwork of official and unofficial guidance regarding export and sanctions compliance requirements and programs. The best practices are not tied to any particular country’s laws or requirements and are intended to be applicable worldwide. 

To date, CEEC has issued best practices covering a wide range of topics, including: screening, training, classification, personnel, management commitment, license determinations and use, and intangible exports. Additional compliance-related best practices topics will be issued by CEEC in the near future.

CEEC’s best practices on Restricted Party Screening (pdf) contains valuable guidance on restricted party screening programs and ways to implement screening programs. For example, CEEC’s restricted party screening best practices provides recommendations on the types of parties to be screened, how and when screening should be conducted, the structure of restricted party screening programs, the lists to check and how matches and potential matches to restricted party lists should be handled.

With respect to the types of parties to be screened, CEEC’s screening best practices note that both domestic and international transactions should be screened, since certain restrictions may apply to domestic transactions, domestic transactions may be part of an international transaction, and reputational concerns may exist. The screening best practices provide a detailed list of the types of parties that should be screened (to the extent applicable), including customers, suppliers, freight forwarders, banks, agents, ship to parties, etc.

CEEC’s screening best practices indicate that a “software tool should be used for screening” and that it should “employ a “fuzzy logic” algorithm to identify close as well as identical matches.” Of course, because restricted party list changes are often effective immediately, the “the automated screening tool must promptly update all applicable watch lists as these lists are changed and updated by issuing authorities.”

As for the structure of a restricted party screening program, CEEC’s screening best practices recommend that the screening process should be documented, and it could be “advantageous to centralize the screening program” in order to “minimize duplicative work and promote uniformity.”

Regarding the lists to check, CEEC advises that a “risk analysis should be done to determine which lists (by country, type, etc.) are needed for the organization to use for screening.” For example, it “may be appropriate to use different lists for different businesses, different categories of transactions, or different geographic locations.”

CEEC’s screening best practices provides specific information and guidance on the frequency of screening and at what point in the screening process screening should be done. For example, the best practices recommend that new business partners should be screened prior to the first transaction or other business dealing and that organizations “should consider implementing procedures to screen at the time the business partner is entered into the organization’s database, when background or credit checks are run, when quotes or proposals are requested, or at some other time, as appropriate.” The best practices indicate that “the intervals in between database screenings should be measured and limited in order to mitigate the risk of doing business with a restricted/prohibited/denied party.”

Finally, with respect to screening matches and potential matches, CEEC’s best practices state that an organizations’ restricted party screening process “must allow for a transaction to be halted unless and until any screening matches are cleared. To minimize business disruption, potential matches should be cleared as promptly as possible and the determination “should be documented.” When an actual match to a restricted party list occurs, the CEEC best practices advise that “depending upon the nature of the list, the legal applicability in the jurisdiction, and an evaluation of reputational concerns, the process must allow for determination by an authorized person whether the transaction may proceed . . . and this decision should be documented.”

CEEC members encourage comments and suggestions for improving the best practices and CEEC’s website contains a contact page for the submission of comments on their efforts to date.

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OFAC Makes Significant Changes to Remaining U.S. Sanctions on South Sudan

Today OFAC issued a final rule (PDF) that made significant changes to the Sudanese Sanctions Regulations as they relate to transactions with the newly independent country of the Republic of South Sudan (“South Sudan”), including South Sudan’s oil and gas sector.

The changes made in the final rule are effective immediately. 

While OFAC lifted most sanctions on South Sudan after the country became independent in July of this year, OFAC still prohibited transactions that involved Northern Sudan’s oil and gas sector and the transshipment of items to or from South Sudan via North Sudan (since South Sudan is land-locked, South Sudan relies on Port Sudan, which is located in the North).

The change issued today with the broadest impact is a new general license contained in new section 538.536 of the Sudanese Sanctions Regulations that authorizes "all activities and transactions relating to the petroleum and petrochemical industries in" South Sudan that would otherwise be prohibited under the Sudan sanctions because they involve Sudan or Sudanese persons. As a result of this general license, the following activities are now authorized:

• The sale and export of equipment to South Sudan for use in South Sudan’s oil and gas sector;
• the transshipment of goods, technology and services to or from South Sudan through North Sudan;
• a broad range of activities in South Sudan’s oil and gas exploration and production sector, including exploration, development, production and oilfield services;
• downstream activities such as ... sale, and transport of petroleum from South Sudan; and
• financial transactions ordinarily incident to any such activities.

OFAC also issued a general license (section 538.537) that authorizes the “transit or transshipment" of any "goods, technology, and services through Sudan to or from" South Sudan, along with related financial transactions, regardless of whether these transactions involve South Sudan’s petroleum sector.

While the exportation of equipment and other items subject to U.S. jurisdiction may be exported to South Sudan, such items remain subject to the jurisdiction of the dual-use export controls administered by BIS.

All activities and transactions relating to the petroleum and petrochemical industries in Northern Sudan continue to be prohibited, unless otherwise authorized by a specific license.

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Lessons Learned from Flowserve's BIS and OFAC Voluntary Disclosures: December 6, 2011 in Dallas, TX

On December 6, 2011, a unique event in the Dallas, Texas area will be held on the lessons learned from Flowserve Corporation's export controls and sanctions voluntary-self disclosure (VSD) that led to a $3 million civil settlement with OFAC and BIS.

The event, which will take place from 9 am to 4:30 pm at the Center for American International Law's (CAIL) campus in Plano, Texas, will feature the "inside scoop" on Flowserve’s VSD from company and government speakers. The topics will include:

• What Went Wrong?
• How Did the Company Respond?
• Effectively Planning and Executing a Global
• Disclosure
• Implementing Remedial Measures
• Negotiating Settlements Across Multiple Agencies
• The Government’s Perspective
• Lessons Learned

The fee to attend is only $25, although attendance is limited. For further information see blow. To register for this event click here.
Flowserve VSD Event Flyer - December 6, 2011

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DHL Express Hosting Export Compliance Program in Cincinnati Area on November 17, 2011

DHL Express is hosting a full day export compliance conference in the Cincinnati area on November 17, 2011.

The program, which is sponsored by DHL Express, AAEI, NAM and the Northern Kentucky International Trade Association, will feature a number of government, industry representatives and practitioners speaking on the following topics:

• U.S. export controls and export control reform efforts
• Overview of export enforcement by Bureau of Industry and Security (BIS), Office of Export Enforcement
• Discussion of recent changes to U.S. sanctions and embargo programs (OFAC)
• Automated Export System compliance
• BIS export compliance best practices

The program will also include an exporter's roundtable lunch.

The program will be held at the Hilton Cincinnati Airport located in Florence, Kentucky and is only $50.

For more information see the brochure below. The registration link can be found here.
DHL AAEI Export Conference Nov 17, 2011

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Today's Sanctions, Export Controls and FCPA News and Notes

• OFAC today added to the SDN List six IRISL front companies in Panama that took ownership of IRISL vessels. The six Panamanian companies are: Galliot Maritime, Mount Everest Maritime, Melodious Maritime, Indus Maritime, Rishi Maritime, and Kaveri Maritime. OFAC Director Szubin says: "IRISL will undoubtedly continue trying to find other jurisdictions willing to host its companies and flag its ships. But IRISL’s days may be numbered. Governments and shipping companies are learning that IRISL’s deception, fraud and dangerous activities on behalf of the Government of Iran pose a risk to all of those exposed to IRISL and are proving to be very costly in the long term." 

• The State Departments Defense Trade Advisory Group (DTAG) will meet on November 9, 2011 in Washington, DC from 1 p.m. until 4 p.m. ET. Details and registration information can be found here.

•  The President's Export Council Subcommittee on Export Administration (PECSEA) will meet on November 14, 2011 in Washington, DC at 10 a.m. The meeting agenda and other information on the meeting can be found here.

• Want to go to Afghanistan? The U.S. Department of Commerce's International Trade Administration is organizing a business development trade mission to Kabul, Afghanistan in February 2012. The targeted sectors include: Construction (including engineering, architecture, transportation and logistics, and infrastructure); mining (including equipment, technology, and services); agribusiness; and information and communications technology. More information on this trade mission can be found here.

• The former president of Terra Telecommunications Corp. was sentenced to 15 years in prison for his alleged role in a scheme to bribe officials at Haiti Teleco. This is the longest prison sentence imposed under the FCPA. The company's former executive vice president was sentenced to seven years in prison for his alleged involvement. Both are required to forfeit more than $3 million. In a press release Assistant Attorney General Lanny Breuer said: 

 “This sentence – the longest sentence ever imposed in an FCPA case – is a stark reminder to executives that bribing government officials to secure business advantages is a serious crime with serious consequences . . . . A company’s profits should be driven by the quality of its goods and services, and not by its ability and willingness to pay bribes to corrupt officials to get business.  As today’s sentence shows, we will continue to hold accountable individuals and companies who engage in such corruption.”

• A Georgia man was sentenced yesterday to 46 months in prison, a $10,000 fine and was ordered to forfeit $160,362 in connection with his efforts to allegedly export military components for fighter jets and attack helicopters from the United States to Iran. 

• OFAC announced today that it had settled an enforcement case with a Florida-based trading company for $7,000 involving an attempted export to Iran of goods valued at $7,168. The transaction was not voluntarily disclosed to OFAC. Further details on the case, including the mitigating factors that OFAC used to determine the penalty amount, can be found here.

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International Trade Law News Marks Eighth Anniversary

This week is the eighth anniversary of International Trade Law News.

I appreciate the kind words, favorable comments and tips received from clients, colleagues, government officials, law students and members of the international trade community over the last eight years.

I am also pleased that this blog has inspired several colleagues to start blogs of their own.

The number of readers of International Trade Law News has increased significantly over the past eight years and the site has thousands of readers per month and thousands of readers that subscribe to our e-mail notification service, RSS feed and Twitter (@tradelawnews) site.

The readers of this blog are truly international in scope. In 2011, International Trade Law News has had readers from 175 countries and territories (including all of the Country Group E countries, except North Korea).

--Doug Jacobson

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BIS Adds 15 Parties to Entity List; Justice Department Indicts Five Individuals for Export Control Violations

Today the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) today announced that it will add fifteen parties to the Entity List. The parties, which are located in China, Hong Kong, Iran and Singapore, were added to the Entity List for their alleged roles in a procurement network involving products subject to the jurisdiction of the Export Administration Regulations and International Traffic in Arms Regulations.

The following eight parties will be added to the Entity List since it was determined that they have engaged in actions that could enhance Iran's military capability and because their conduct and deceptive practices pose a risk of ongoing violations of the Export Administration Regulations: 

• Corezing International
• Hia Soo Gan Benson
• Hossein Ahmad Larijani
• Lim Kow Seng
• Lim Yong Nam
• NEL Electronics Pte. Ltd.
• Paya Electronic Complex
• Wong Yuh Lan.

According to BIS these parties participated in a network that engaged in schemes to divert U.S.-origin items to Iran and/or to China by using shifting/circuitous routes and false or omitted information on shipping documentation in an attempt to conceal their activities. These parties are also alleged to have obtained ITAR-controlled antennas designed for use in military radars and aircraft, and exported them to Singapore and Hong Kong. The individuals named above were indicted today by the Justice Department for their alleged roles in conspiring to export U.S.-origin components to Iran that were later found in IEDs in Iraq.

The following seven parties will be added to the Entity List based on evidence that they aided and/or facilitated the activities of the procurement network.

• Action Global, Amaze International and OEM Hub Co., Ltd., all Hong Kong entities, allegedly served as front companies and are otherwise related to the other entities named today.

• Ms. Luo Jie, director of Corezing International, Action Global and Amaze International, is being added on the basis of information indicating that she was involved in the procurement and attempted procurement of U.S. power amplifiers intended for end-users in China, as well as in the diversion of various U.S.-origin goods through Hong Kong to Iran.

• Parto Systems Tehran, an Iranian freight forwarder, is being added based on information indicating that it was involved in the diversion of U.S.-origin items to Iran and is closely associated with Hossein Ahmad Larijani.

• Surftech Electronics, a Singapore corporation established by Hia Soo Gan Benson, is co-located with Corezing International and allegedly sought to purchase certain U.S.-origin items for shipment to Iran.

• Mr. Zhou Zhenyong, director of Corezing International, is being added based on information that he was specifically involved in the procurement and attempted procurement of U.S.-origin items, including U.S.-origin munitions items destined for end-users in China and/or Iran.

While a BIS license is required to export, reexport or transfer any item subject to the EAR to any of the persons listed above, BIS has established a policy of a presumption of denial for all license applications.

The BIS Entity List, found in Supplement Number 4 to Part 744 of the Export Administration Regulations, includes the names of businesses, research institutions, government organizations and individuals that have been identified as being involved in activities that merit additional scrutiny and licensing requirements.

The entries on the Entity List specify the license requirements and license review policy that are applicable to shipments to each listed entity. In some cases, a license will be required to ship items classified as EAR99 to the customer, even when a license would not normally be required. In other cases, all items subject to the Export Administration Regulations will require a license. The export license review policy also varies from entity to entity. In some cases, there is a presumption of approval or denial and, in other cases, the license will be reviewed by BIS on a case-by-case basis. Significant penalties can be imposed against parties that engage in transactions with parties on the Entity List without the appropriate license.

Update: The final rule associated with this announcement was published in the Federal Register on October 31, 2011 and is effective on that date.

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Details of U.S. Antidumping and Countervailing Duty Cases Filed on Solar Cells and Modules from China

Yesterday, the Coalition for American Solar Manufacturing (CASM) filed antidumping (AD) and countervailing (CVD) duty petitions with the U.S. Department of Commerce and the International Trade Commission alleging that Chinese manufacturers of crystalline silicon photovoltaic cells and panels are selling in the U.S. market at less than fair value and are receiving illegal subsidies from the Chinese government.

CASM is a coalition of seven solar companies that manufacture solar cells and panels in the United States. The coalition is led by SolarWorld, the largest U.S. solar manufacturer. The six other companies have chosen to be anonymous, which is unusual in U.S. AD/CVD cases.

The scope of merchandise alleged by CASM to be subject to these AD/CVD petitions is as follows:

Crystalline silicon photovoltaic (PV) cells, whether or not individually or partially or fully assembled into other products, including, but not limited to, modules, laminates, panels and building integrated materials.

The scope covers crystalline silicon PV cells of thickness equal to or greater than 20 micrometers, having a heterogeneous, homogeneous or patterned p/n junction, heterojunction, metal-insulator-semiconductor junction or charge-induced junction. The junction may be formed by any means, including but not limited to dopant diffusion, ion implantation, epitaxial growth, any other deposition or growth of semiconductors, insulators or metals, or bonding of dissimilar materials. The merchandise subject to these petitions may be either partially or fully processed.

Merchandise covered by this investigation is currently classified in the Harmonized Tariff System of the United States (HTSUS) under subheadings 8541.40.60.20, 8451.40.60.30, 8501.61.00.00 and 8507.20.80. 

The petitions do not include thin-film photovoltaic products produced from amorphous silicon, cadmium telluride, copper indium gallium selenide, or dye-sensitized solar cells.

The AD petition alleges that Chinese solar cell and panel producers are dumping their products in the United States in amounts greater than 100% of their value.

The CVD petition claims that Chinese solar cell and panel producers benefit from a range of subsidies from the Chinese government, including cash grants; significantly discounted raw material inputs, such as polysilicon and aluminum; discounted or free land, power and water; preferential loans and directed credit; tax exemptions, incentives and rebates; export assistance credits; and export insurance at preferential rates. 

The statutory timeline for the AD and CVD cases indicates that preliminary antidumping duties could be imposed on these products by January 12, 2012, although such duties could be imposed 90 earlier since the petitioners have alleged “critical circumstances” and are seeking to have duties applied retroactively.

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OFAC Issues General Licenses to Export Food Products to Iran and Northern Sudan

The Treasury Department's Office of Foreign Assets Control (OFAC) recently made changes to the Iran and Sudan sanctions regulations that will have a favorable impact on U.S. exporters of food and nutritional products.

Specifically, OFAC issued a final rule amending the Iranian and Sudanese Transactions Regulations by adding a general license authorizing the exportation or reexportation of “food” products to the Governments of Iran or Northern Sudan, individuals or entities in Iran or Northern Sudan, or persons in third countries purchasing specifically for resale to any of the foregoing parties in Iran and Northern Sudan, and the conduct of related transactions. No military or law enforcement purchasers or importers are authorized.

A general license is preexisting legal authority to conduct a transaction and does not require the submission of any license application to OFAC in order to utilize the authority. As a result, U.S. exporters no longer need to obtain a specific license from OFAC to sell food products to authorized customers in Iran or Northern Sudan.

The term “food” is broadly defined in OFAC's regulations as “items that are intended to be consumed by and provide nutrition to humans or animals in Iran, including vitamins and minerals, food additives and supplements, and bottled drinking water, and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals in Iran.” The term “food” does not include alcoholic beverages, cigarettes, gum, or fertilizer. In addition, there are several types of food products that are specifically excluded from eligibility for this general license.

It is important to note that OFAC only authorizes the following payment options for exports made under these general licenses:

1. Payment of cash in advance (i.e., wire transfer);
2. Sales on open account, provided that the account receivable may not be transferred by the person extending the credit; or
3. Financing by third-country financial institutions that are neither U.S. persons nor Government of Iran entities. Such financing may be confirmed or advised by U.S. financial institutions.

Payments by letter of credit (L/C) issued by a bank in Iran or Northern Sudan still requires a specific license to be issued by OFAC. Therefore, if the only way to obtain payment for the products is a L/C issued by an Iranian bank the exporter/beneficiary will still have to apply to OFAC for a specific license.

As with all licensed transactions involving Iran or Northern Sudan, banks included on OFAC’s Specially Designated Nationals List (SDN List) may not be involved in the payment transaction, even if cash in advance or one of the three payment mechanisms listed above is used.

While these new general license will be a useful tool for U.S exporters, exports to Iran and Northern Sudan present a number of logistical and compliance issues. As a result, exporters must closely coordinate these transactions with their freight forwarders, banks and export compliance counsel in order to prevent delays.

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U.S. Senate Passes Bill Extending GSP Program and Raising MPF on Imports

The U.S. Senate last night passed H.R. 2832, legislation that will renew the expired Generalized System of Preference (GSP) program and extend the program until July 31, 2013. Because the Senate version included an amendment to extend the Trade Adjustment Assistance program, the House will have to vote on the Senate version of the bill before it is sent to President Obama for signature. Nevertheless, the bill should be enacted into law soon.

Importantly, the legislation provides that the GSP program will be renewed retroactively for all GSP eligible entries made after December 31, 2010. Once the bill has been signed into law CBP will issue instructions on how to obtain refunds for all GSP eligible imports entered during the past year.

When the GSP program expired in the past U.S. Customs and Border Protection (CBP) automatically liquidated or reliquidated items flagged in the ABI system with the GSP Special Program Indicator (SPI) "A" as duty-free and issued refunds to importers without the need to submit individual claims.

Nevertheless, U.S. importers should ensure that their customs brokers continue to use the GSP Special Program Indicator for eligible entries and to monitor their post December 31, 2010 GSP entries to ensure that the correct refunds are received. The bill provides that any unflagged GSP eligible entries must be submitted to CBP within 180 days after the enactment of this bill.

U.S. importers should also aware that the GSP renewal bill contains an increase in the Merchandise Processing Fee (MPF) on ALL applicable U.S. imports starting on October 1, 2011. The MPF will increase from 0.21% ad valorem to 0.3464% ad valorem. However, the MPF paid on a single entry will still be capped at $485.

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Registration for U.S.-China High Technology Working Group Program on September 26th Ends Tomorrow

Tomorrow is the last day to register for the third annual U.S.-China High Technology Working Group  (HTWG) Public-Private Sector Dialogue that will be held in Washington, DC on Monday, September 26, 2011.

The HTWG was established for the U.S. and China to provide an update on their export control policies and practices, to offer an opportunity for U.S. and Chinese companies to interact directly on these issues, and to learn from individual U.S. and Chinese exporters about the ways in which the two governments can support high technology trade for civilian end-uses.

The program, which is being presented in partnership with the National Association of Manufacturers (NAM), includes an excellent line-up of speakers, including high-level U.S. and Chinese officials from the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and China's Ministry of Commerce (MOFCOM), as well as industry panels addressing the semiconductor industry, aerospace/aviation issues and export compliance practices.

The current agenda and registration information can be found here.

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Guest Post on Census Blog Serves as Important Reminder on Certificate of Origin Accuracy

There was an important guest post for exporters published today on Global Reach, the blog of the U.S. Census Bureau's Foreign Trade Division.

The post by Chris Mead, Senior Vice President of the American Chamber of Commerce Executives, dealt with the accuracy of certificates of origin provided by U.S. companies to overseas customers.

The post notes that:

Certificates of origin are used to determine where products were made and thus can affect how much duty is levied on imports, whether imports are exceeding quotas or not, and whether the imports comply with local health and product safety regulations. The simple documents, usually just a page in length, can also affect the price of imports: many people overseas will pay more for items they think are made in the United States.

So the stakes are high on these seemingly innocuous documents. Around the world, they are treated with care. In the United States, people frequently handle outgoing certificates of origin with little attention and varying standards, even though U.S. Customs monitors incoming certificates of origin with vigilance.

Customers in foreign countries often request certificates of origin, which are intended to provide the "country of origin" of goods, be completed by local chambers of commerce in the U.S. Like all international trade-related documents, certificates of origin, which are typically based on a rule of origin involving the "substantial transformation" standard and are different than certificates of origin associated with Free Trade Agreements such as NAFTA, must be completed accurately.

As this post points out though, many persons and companies in the U.S. do not take the issuance of such documents seriously which casts doubt on the credibility of the documents and the underlying transaction.

This post serves as a useful reminder that U.S. exporters and their agents should take steps to ensure that all international trade-related documents presented to overseas customers and customs authorities are correct and accurate. This includes Certificates of Origin prepared for "origin's sake"; Certificates of Origin prepared for Free Trade Agreement purposes, such as NAFTA Certificates of Origin; Commercial Invoices (values and descriptions) and other related documents.

As this post correctly states, "the world’s importers should have confidence in the certificates issued in the United States. Let’s not let them down."

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U.S. Lifts Most Financial Sanctions on Libyan Government

Yesterday, the United States Government lifted most of the financial sanctions on Libya that were imposed on February 25, 2011 by Executive Order 13566. These actions were taken after the United Nations Security Council last Friday approved Resolution S/Res/2009 (2011) which lifted most multilateral sanctions on the Libyan Government.

The Office of Foreign Assets Control (OFAC) implemented the U.N. resolution via two additional General Licenses, General Licenses 7A and 8.

General License 7A allows all new transactions with Libya’s National Oil Company (NOC) and the affiliated companies named in the amended General License. In addition, General License 7A unblocks all previously blocked property owned or controlled by NOC and the named affiliates. General License 7A requires financial institutions to file an email report with OFAC within 10 business days of the release of any blocked funds, including cash and securities, to the email address included in the general license.

General License 8 authorizes new transactions with the Government of Libya, its agencies, instrumentalities, and controlled entities, as long as they are not included on the list of 19 persons named on the GL (and are included on OFAC’s SDN List with the [LIBYA2] designation. However, General License 8 does not allow payment of previously blocked transactions and thus any prior transactions that were blocked cannot be paid until OFAC issues a specific or general license authorizing prior transactions.

While business activities involving Libya are not likely to normalize for some time, these new general licenses will make it easier for U.S. companies and financial institutions to resume their business activities in Libya as long as they are aware of the constraints that still exist, including that a large number of transactions and funds remain blocked. Blocked transactions may not be paid or finalized until a specific license is issued by OFAC.

Libya still remains subject to export controls administered by the Department of Commerce's Bureau of Industry and Security (BIS) and all export licenses remain suspended until further notice .

In addition, exports to Libya remain subject to restrictions imposed by the Directorate of Defense Trade Controls, which includes the suspension of all export licenses for defense articles and technical data that have been issued under the ITAR. In addition, no ITAR exemptions may be utilized to export items subject to the ITAR to Libya.

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State Department Finally Publishes Notice Regarding Iran Sanctions Announced in May and Admits Sanctioning Wrong Entity

The State Department will finally publish in tomorrow’s Federal Register a formal notice regarding the sanctions imposed on seven non-U.S. companies announced on May 24, 2011 for engaging in activity that violated the Iran Sanctions Act of 1996 (ISA), as amended by the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISADA).

The sanctioned companies included in the May 24, 2011 announcement were: Associated Shipbroking, Petróleos de Venezuela S.A. (PDVSA); Petrochemical Commercial Company International (PCCI), Royal Oyster Group, Speedy Ship FZC, Tanker Pacific Management (Singapore) Pte. Ltd. and Ofer Brothers Group.

This Notice provides a list of the specific sanctions imposed on each of the named companies. In addition, the Notice specifies, in relation to each sanctioned entity, whether the penalties apply "with respect to [the named company] and not to any subsidiary, affiliate, or shareholder thereof unless separately identified", or alternatively specify that the penalties "also apply with respect to any person in which [the named company] has an interest of fifty percent or more." The two prior Federal Register notices announcing ISA sanctions did not contain this language. This new language is useful to clear up confusion among commercial counterparties, and especially among financial institutions, dealing with affiliates of designated persons.

An important aspect of the formal notice is that the State Department eliminated the sanctions on Israel’s Ofer Brothers Group and replaced them with Allvale Maritime Inc. (based in Liberia) and Société Anonyme Monégasque D’Administration Maritime Et Aérienne (SAMAMA) (based in Monaco), companies that are owned by the Ofer Brothers Group.

A State Department official today admitted that it sanctioned the wrong entity in its May 24th announcement, stating:

"In issuing this clarification, our intent was to sanction the specific entities in the Sammy Ofer shipping organization that were responsible for providing a tanker to Iran. The use of the name ‘Ofer Brothers Group,’ a commonly used trade name, caused confusion for some banks and companies that were trying to comply with U.S. sanctions. The complex nature of the conglomerate's business structure necessitated that we take the time to look closely at these companies in order to ensure that we were identifying the precise legal names of the entities directly responsible for the sanctionable transaction."

The sanctions imposed on PDVSA, Associated Shipbroking, PCCI, Royal Oyster Group, Speedy Ship FZC, and Tanker Pacific Management (Singapore) Pte. Ltd. remain unchanged from the original notice.

Depending on the sanctioned company, these sanctions include a prohibition on: U.S. financial institutions from making loans or providing credits totaling more than $10 million in any 12-month period, obtaining U.S. government contracts, from receiving financing from the Export-Import Bank of the U.S. and from being a part to U.S. export licenses. Crude oil exports from PDVSA to the U.S. are not affected by these sanctions.

To date, the Treasury Department's Office of Foreign Assets Control (OFAC) has not yet provided guidance to financial institutions on how to interpret and apply the prohibition on loans or credits over $10 million in any 12-month period, which has been imposed on five different sanctioned companies since October 2010.

In addition, the Commerce Department's Bureau of Industry and Security (BIS) has not made any public statement on how it intends to implement the export sanctions on PDVSA and other companies. Under ISA export sanctions, the U.S. Government may not issue any specific license and shall not grant any other specific permission or authority to export any goods or technology to the sanctioned companies.

In another interesting development, Tanker Pacific Management (Singapore) Pte. Ltd. (TPM) today issued a press release stating that the ISA sanctions were a result of PM’s role in managing the 2010 sale of the tanker Raffles Park to Coral Light Asset Corp (Panama), an company nominated by the buyers. The statement indicates that due diligence carried out by TPM at the time of the sale included checking OFAC’s SDN List and the buyers did not appear on the list and the company’s due diligence uncovered no evidence that the buyers had any links to Iran. TPM noted that it was later informed by the U.S. Government that the buyers acted as front companies for the Islamic Republic of Iran Shipping Lines (IRISL). The statement also indicates that had TPM been aware that “the buyers were acting on behalf of Iranian interests, this sale would never have gone ahead.”

To address this issue and improve the company’s internal compliance procedures, TPM announced that it has implemented the following enhanced due diligence measures:

• comprehensive risk assessment: we will continue our ongoing comprehensive risk assessment to identify and mitigate areas of potential risk;
• enhanced counterparty screening procedures: we have instituted new procedures including additional pre-transaction due diligence and independent third party screening to assess the profile of potential counterparties more effectively;
• compliance manager: we have recruited a dedicated compliance manager;
• mandatory training programs: we are putting in place robust training programs for all relevant personnel;
• regular compliance procedure reviews: we will conduct ongoing compliance reviews to update our procedures, reflecting changing business operations and evolving legal requirements.

These additional measures serve as a useful guide to other companies on the need to performing additional due diligence on prospective buyers and helping to ensure compliance with ISA/CISADA and other U.S. sanctions programs.

The last page of the Federal Register notice contains a complete list of companies that have been sanctioned under the Iran Sanctions Act. The complete list is as follows:

• Allvale Maritime Inc.
• Associated Shipbroking (a.k.a. SAM)
• Belarusneft (see 76 Fed. Reg. 18821, April 5, 2011);
• Naftiran Intertrade Company (see 75 Fed. Reg. 62916, Oct. 13, 2010).
• Petrochemical Commercial Company International (a.k.a. PCCI)
• Petróleos de Venezuela S.A.
• Royal Oyster Group
• Société Anonyme Monégasque D’Administration Maritime Et Aérienne (a.k.a. S.A.M.A.M.A., a.k.a. SAMAMA)
• Speedy Ship (a.k.a. SPD)
• Tanker Pacific Management (Singapore) Pte. Ltd.

 More information on the Iran Sanctions Act sanctions announced on  May 24, 2011 can be found here.

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OFAC Issues Additional Syria and Libya Sanctions General Licenses

On September 9, 2011, the Treasury Department's Office of Foreign Assets Control (OFAC) issued several general licenses relating to the U.S. sanctions programs on Syria and Libya. The following is an overview of these general licenses:

Libya General License

In the biggest change involving the current round of sanctions imposed by Executive Order 13566 on Libya on February 25, 2011, OFAC issued General License No. 7 which authorizes U.S. persons and companies to engage in transactions involving the following 16 subsidiaries of the Libyan National Oil Corporation located in Libya, Germany, Netherlands and other countries without having to obtain a specific license from OFAC:

• Arabian Gulf Oil Company
• Azzawiya Oil Refining Company
• Brega Petroleum Marketing Company
• Harouge Oil Operations
• Jamahiriya Oil Well Fluids and Equipment
• Libya Oil
• Mediterranean Oil Services Company
• Mediterranean Oil Services GmbH
• National Oil Fields and Terminals Catering Company
• North African Geophysical Exploration Company
• National Oil Wells Drilling and Workover Company
• Oilinvest Netherlands B.V.
• Ras Lanuf Oil and Gas Processing Company
• Sirte Oil Company for Production of Manufacturing of Oil and Gas
• Tamoil Group
• Waha Oil Company

It is important to note that General License No. 7 does not authorize transactions with the Libyan National Oil Corporation, Zueitina Oil Company or any other persons whose property and interests in property remain blocked pursuant to Executive Order 13566.

While OFAC has issued several other Libya general licenses, including General License No. 6 on August 19, 2011 that authorizes transactions with the Transitional National Council of Libya (formally known as the National Transitional Council), a large number of companies and entities in Libya remain blocked.

A summary of Executive Order 13566 and the current sanctions on Libya can be found here.

Because of the fast moving events in Libya U.S. persons and companies should proceed with caution before engaging in any business or financial transactions with Libya.

Syria General Licenses

OFAC issued the following four narrowly tailored general licenses with respect to the U.S. sanctions imposed on Syria on August 17, 2011 under Executive Order 13582:

General License 7​ - Authorizes transactions until November 25, 2011 that are incident and necessary to wind down contracts involving the Government of Syria. Also authorizes the divestiture to foreign persons of a U.S. person's investments in Syria.

General License 8 ​ - Authorizes U.S. persons to engage in transactions and activities in Syria associated with the United Nations and related programs and funds, including the World Health Organization, IMF, UNICEF, etc. Note 1 to the General License contains a reminder on the need to comply with other U.S. legal requirements, such as the Export Administration Regulations.
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General License 9 - Authorizes U.S. persons residing in Syria ​to pay to the Government of Syria personal expenses, such as housing, utilities, goods and services, taxes and fees.

General License 10​ - Authorizes U.S. financial institutions to operate accounts for non-blocked individuals in Syria as long as the transactions are for non-commercial purposes and do not involve transfers to Syria or for the benefit of persons residing in Syria.

A summary of Executive Order 13582 and the current sanctions on Syria can be found here.

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BIS Publishes New Best Practices for Preventing Unlawful Diversion of Dual-Use Items Subject to the Export Administration Regulations

The U.S. Department of Commerce's Bureau of Industry and Security today published on its website a series of new "Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade."

These seven new best practices are being issued by BIS following last year's publication in the Federal Register of a notice of inquiry requesting public comments on a draft version of the first update to best practices on transit, transshipment and reexport of dual-use items since 2003.

In response to the notice of inquiry, BIS received written comments from industry and many additional comments through meetings with trade associations, exporters, freight forwarders, carriers, software vendors, advisory committees and other government agencies. As a result of this input, BIS substantially modified several of the proposed best practices in the final version, including combining two of the proposed best practices into one and adding a new best practice (No. 7) regarding the use of information technology.

In publishing these seven industry best practices BIS noted that, while this guidance  practices as it applies to items and transactions that are subject to the EAR, it has broader potential applications. BIS indicated that it envisions this guidance as a step toward a strengthened dialogue with all members of the export logistics supply chain industry, other agencies that administer export controls, and foreign governments in a manner that may make the guidance pertinent beyond its application to the EAR.

Best practice No. 4 is particularly noteworthy, and is likely to generate the most interest among exporters and freight forwarders, since it recommends that companies "avoid routed export transactions when exporting and facilitating the movement of dual-use items unless" there is a "long standing and trustworthy relationship" between the exporter, foreign buyer and the foreign buyer's freight forwarders. A "routed export transaction is defined in Census' Foreign Trade Regulations (15 CFR Part 30) is when a Foreign Principal Party in Interest (e.g., a non-U.S. buyer) authorizes a freight forwarder or other agent in the U.S. to facilitate export of items from the United States on its behalf and prepare and file the Electronic Export Information (EEI). Many exporters of controlled items, whether they are subject to the EAR or ITAR, already prohibit routed export transactions unless they are confident that the buyer of the goods will comply with any restrictions on the diversion or transfer of the exported products. On the other hand, many non-U.S. customers prefer to hire their own freight forwarder in the U.S., particularly when they want to consolidate shipments in the U.S. prior to being exported.

It is important to note that these best practices are recommendations only. While exporters and freight forwarders are recommended to implement these best practices, to the extent possible, there is no legal obligation to comply with these best practices, absent a legal requirement that is set forth elsewhere in the Export Administration Regulations (EAR). In addition, compliance with these best practices creates no defense to liability for the violation of export control laws. However, BIS has indicated that demonstrated compliance with these best practices by a company will be considered an "important mitigating factor in administrative prosecutions arising out of violations of provisions of the EAR that apply to transit, transshipment or reexport transactions."

While these best practices are issued by BIS and are intended for exports of dual-use items subject to the EAR, many of the same principles are applicable to exporters that export defense articles subject to the jurisdiction of the ITAR.

2011 Best Practices for Preventing Unlawful Diversion of U.S. Dual-Use Items Subject to the Export Administration Regulations, Particularly through Transshipment Trade

The following reflect new best practices that guard against diversion risk, particularly through transshipment trade.

Best Practice No. 1 – Companies should pay heightened attention to the Red Flag Indicators on the BIS Website and communicate any red flags to all divisions, branches, etc., particularly when an exporter denies a buyer’s order or a freight forwarder declines to provide export services for dual-use items.

Best Practice No. 2 - Exporters/Re-exporters should seek to utilize only those Trade Facilitators/Freight Forwarders that administer sound export management and compliance programs which include best practices for transshipment.

Best Practice No. 3 - Companies should “Know” their foreign customers by obtaining detailed information on the bona fides (credentials) of their customer to measure the risk of diversion. Specifically, companies should obtain information about their customers that enables them to protect dual-use items from diversion, especially when the foreign customer is a broker, trading company or distribution center.

Best Practice No. 4 - Companies should avoid routed export transactions when exporting and facilitating the movement of dual-use items unless a long standing and trustworthy relationship has been built among the exporter, the foreign principal party in interest (FPPI), and the FPPI’s U.S. agent.

Best Practice No. 5 - When the Destination Control Statement (DCS) is required, the Exporter should provide the appropriate Export Control Classification Number (ECCN) and the final destination where the item(s) are intended to be used, for each export to the end-user and, where relevant, to the ultimate consignee. For exports that do not require the DCS, other classification information (EAR99) and the final destination should be communicated on bills of lading, air waybills, buyer/seller contracts and other commercial documentation. For re-exports of controlled and uncontrolled items, the same classification and destination specific information should be communicated on export documentation as well.

Best Practice No. 6 - An Exporter/Re-exporter should provide the ECCN or the EAR99 classification to freight forwarders, and should report in AES the ECCN or the EAR99 classifications for all export transactions, including “No License Required” designation certifying that no license is required.

Best Practice No. 7 - Companies should use information technology to the maximum extent feasible to augment "know your customer" and other due-diligence measures in combating the threats of diversion and increase confidence that shipments will reach authorized end-users for authorized end-uses.

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