Seasons Greetings and Happy New Year From International Trade Law News and 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 2013. 

In the spirit of the holiday season, and back by popular demand, 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, Trade Compliance Manager of iDirect Inc. (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 gift-giving enterprise is suspended from its normal course of surreptitiously sliding up and down chimneys.

1.  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 sleighs. 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. Donder 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 two 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 Airwaybills 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.   The entered value you have reported on these toys and gifts is too low to have been manufactured in the North Pole. 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 (the Saint Nickel) is not listed by any of the world’s financial markets.  

7.   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.

8.   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.

9.   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 leagues of “Nice Polar Bears” in the North Pole don’t seem to mind too much but the league of “Naughty Penguins” in the South Pole is especially outraged.

10. 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.

11. 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 toys and gifts 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.

Respectfully, 

Scrooge McGrinch

Bah Humbug Division, office of BIS (Big Important Stuff)

Enclosure: My Christmas list
                                      

p.s. Should the Mayan end of the world date of December 21, 2012 be accurate, please ignore all of the above.

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Finding a Willing Buyer Is Only the First Step of the Export Process

U.S. Exporters Looking to Boost Business Overseas Need to Understand the Rules and Regulations That Apply to International Trade Transactions

By Douglas N. Jacobson, Esq.*

In 2010, President Obama announced the National Export Initiative (NEI), a U.S. government-wide effort to double U.S. exports by the end of 2014. As part of the NEI, the federal  government plans to increase its trade advocacy efforts, including educating U.S. companies about opportunities overseas, directly connecting them with new customers and advocating more forcefully for their interests. The NEI will also include a focus on improving access to export financing and helping to remove barriers that prevent U.S. companies from getting access to foreign markets. Only a very small percentage of U.S. companies currently export their products, and of those that do, the majority export to only one country.

While increasing the number of U.S. companies that export and increasing trade promotion assistance are laudable goals, U.S. exporters must be aware that finding a willing buyer is only the first step in the exporting process.

In addition to taking the necessary steps to ensure they are paid for their goods, U.S. exporters need to understand the wide range of U.S. regulatory and legal issues applicable to exports. The increasing exports is beneficial for U.S. companies, the penalties for violating export controls, sanctions, customs and other laws and regulations can be severe. Many U.S. exporters learn of their export and sanctions compliance obligations only after they receive an administrative subpoena from the Commerce Department’s Bureau of Industry and Security (BIS), the Treasury Department’s Office of Foreign Assets Control (OFAC) or another U.S. enforcement agency. Many of those violations could have been avoided if the exporters understood their export compliance obligations prior to making the sale and shipping their goods abroad.

Examples of the types of export compliance-related rules and regulations that U.S. exporters should be aware of when selling goods overseas include the following:

Jurisdiction and Classification of Goods – Proper jurisdiction and classification of goods and technology under the Export Administration Regulations (EAR) (for commercial and so-called “dual-use” goods) and International Traffic in Arms Regulations (ITAR) (for defense articles) is required to determine the appropriate export licensing requirements and end-use and end-user restrictions for all products, software and technology exported from the U.S. U.S. Customs and Border Protection (CBP) often seizes goods at U.S. ports, airports and border crossings that are being exported without the appropriate license or other export authorization.

Ultimate Destination – U.S. export controls and licensing requirements vary by the country of destination. Some countries are subject to comprehensive U.S. sanctions and embargoes, while others are subject to targeted sanctions directed at certain individuals and companies. In addition, defense articles and technical data subject to the ITAR cannot be shipped to a number of “proscribed” countries.

Electronic Export Information Filings – The Foreign Trade Regulations (FTR) administered by the Census Bureau require exporters or their agents, such as freight forwarders, to submit certain information before the export takes place in an Electronic Export Information (EEI) filing. The information that must be provided in connection with most exports includes the quantity and value of the goods, the Schedule B number and a description of the goods, as well as the name of the foreign buyer. Penalties can be imposed on U.S. exporters for inaccurate or late filings.

Export Screening – To avoid engaging in transactions with parties that have been denied export privileges or are subject to U.S. sanctions, exporters should screen all customers and parties involved in the export against the government’s various restricted part lists, including the Denied Persons List, Entity List and Specially Designated Nationals List.

Know Your Customer and Export Red Flags – It is important for U.S. companies to be aware of the various “know your customer” guidelines issued by the Bureau of Industry  to make sure that the goods will not be diverted to a prohibited country or person. In addition, exporters should be on the lookout for export “red flags” that could be a sign that a customer may be attempting to obtain the goods for a prohibited purpose or end-user.

Antiboycott Compliance – Boycott requests, which often contain the words “boycott” or “blacklist” or provisions prohibiting the importation of goods from certain countries, are often found in documents involving sales to the Middle East, including purchase orders, tenders, contracts, shipping requests and letters of credit. Providing prohibited information in furtherance of an unsanctioned boycott is prohibited by the Antiboycott provisions of the Export Administration Regulations. Certain boycott requests must be reported to the Bureau of Industry and Security’s Office of Antiboycott Compliance on a quarterly basis.

Foreign Corrupt Practices Act – The U.S. Foreign Corrupt Practices Act (FCPA) prohibits U.S. persons and their agents from paying bribes and making other prohibited payments to foreign government officials in order to obtain or retain business. Significant civil and criminal penalties can be imposed on individuals and companies that violate the FCPA.

Incoterms 2010© – International Commercial Terms (Incoterms), such as FCA, CIF, DAP and DDP, are a set of internationally recognized terms published by the International Chamber of Commerce. Incoterms establish the responsibilities, risks and costs associated with international shipments. It is important for U.S. exporters to have a clear understanding of the correct Incoterm to use for a particular transaction in order to determine which party will be responsible for various aspects of the export transaction, including transportation costs and import duties in the country of destination. Once the appropriate Incoterm has been established it should be clearly indicated on the sales documents, including the purchase order and commercial invoice.

Customs Requirements, Import Duties and Taxes – Many countries impose customs duties, value added tax and other charges on imported goods. It important for U.S. exporters to understand who will be responsible for paying for the customs duties and other taxes imposed on the goods. It is also important for the U.S. exporter to know the proper customs classification of the product under the Harmonized System (known as the Harmonized Tariff Schedule number) they are exporting so they can advise their customer.

Free Trade Agreements– The growing number of U.S. Free Trade Agreements (FTAs), including NAFTA (Mexico and Canada), KORUS (U.S.-South Korea) have leveled the playing field for U.S. exporters by greatly reducing or eliminating the customs duties on U.S. goods exported to many countries. However, for U.S. goods to qualify for preferential duty treatment under the FTAs when imported into the customer’s country the goods must “originate” in the U.S. Each of the FTAs has specific “rules of origin” that specify whether a product qualifies for duty free treatment or not. In some FTAS, such as NAFTA, the exporter must prepare a specific Certificate of Origin certifying that the goods qualify for the FTA. It is important for U.S. companies to understand the rules of origin of the applicable FTA to make sure that the goods being exported qualify for the FTA and that the Certificate of Origin is properly completed.  

There are a number of other regulatory requirements that may be applicable to goods exported from the U.S. For example, certain countries require labels, user manuals and instructions to be printed in a particular language. Other countries impose registration and licensing requirements. Some countries require certificates of origin. Working with reputable customers, experienced counsel and other international trade resources will greatly enhance the chances that an export transaction will be problem free.

*Doug Jacobson is a Washington, DC-based international trade attorney. He can be reached at (202) 431-2407 or at info@djacobsonlaw.com.

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U.S. Securities and Exchange Commission Issues Answers to FAQs on Iran Reporting Requirements

The U.S. Securities and Exchange Commission (SEC) yesterday issued some answers to frequently asked questions on the new reporting requirement contained in section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (TRA) (H.R. 1905, enacted as Public Law 112-158) that was signed into law on August 10, 2012 and requires ''issuers" to disclose certain activities in Iran starting on February 6, 2013.

As expected, the guidance is broad in nature and does not shed too much light on important terms, such as the definition of “affiliate.” As noted below, the SEC has stated that they will use the definition of that term that is currently contained in section 12b-2of the SEC’s regulations, which states:

Affiliate. An “affiliate” of, or a person “affiliated” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.

The FAQs can be found on the SEC's website here and include questions 147.01 through 147.07. 

The text of each of the FAQs are reprinted below:

Question 147.01

Question: Section 219(b) of the Iran Threat Reduction and Syria Human Rights Act of 2012, signed into law on August 10, 2012, specifies that new Section 13(r) of the Exchange Act “shall take effect with respect to reports required to be filed with the Securities and Exchange Commission after the date that is 180 days after the date of the enactment of this Act,” which would be February 6, 2013. If an issuer’s periodic report is required to be filed on a date after February 6, 2013 — such as, for example, the 2012 Form 10-K for calendar year filers — is the issuer required to disclose Iran-related business activities pursuant to Section 13(r) if it files the periodic report on or before February 6, 2013?

Answer: Yes. We interpret “reports required to be filed” to include any periodic report with a due date after February 6, 2013, regardless of when the report is actually filed. [Dec. 4, 2012]

Question 147.02

Question: If an issuer’s annual report is required to be filed after February 6, 2013, must it include disclosure of activities specified in Section 13(r)(1) that occurred during the fiscal year but prior to enactment of the Iran Threat Reduction and Syria Human Rights Act of 2012 on August 10, 2012?
Answer: Yes. An issuer is required to disclose activities specified in Section 13(r)(1) that occurred during the period covered by the report, which, for a Form 10-K, is the entire fiscal year. For example, an issuer that files an annual report for the fiscal year ending December 31, 2012 is required to disclose any activities specified in Section 13(r)(1) that took place between January 1, 2012 and December 31, 2012. [Dec. 4, 2012]

Question 147.03

Question: Section 13(r) covers activities by an issuer “or any affiliate of the issuer.” How is the term “affiliate” defined for purposes of Section 13(r)?
Answer: The term “affiliate” in Section 13(r) is as defined in Exchange Act Rule 12b-2. [Dec. 4, 2012]

Question 147.04

Question: If an issuer and its affiliates have not engaged in any of the activities specified in Section 13(r)(1) during the period covered by the report, must the issuer include a statement to that effect in its periodic report?
Answer: No. Disclosure is required only if the issuer or any of its affiliates engaged in any of the activities specified in Section 13(r)(1) during the period covered by the report. [Dec. 4, 2012]

Question 147.05

Question: Section 13(r)(1)(D)(iii) requires disclosure if an issuer or any of its affiliates knowingly conducts any transaction or dealing with “any person or entity identified under section 560.304 of title 31, Code of Federal Regulations (relating to the definition of the Government of Iran) without the specific authorization of a Federal department or agency.” Would this provision allow issuers to omit disclosure of transactions or dealings that have been specifically authorized by foreign governmental authorities, but not any U.S. federal department or agency?
Answer: No. A transaction or dealing with any person or entity identified under 31 CFR § 560.304 must be disclosed unless it was specifically authorized by a U.S. federal department or agency. If a disclosable transaction was specifically authorized by a foreign governmental authority, an issuer could disclose that fact in addition to the other information required by Section 13(r)(2) to provide the appropriate context for the disclosure. [Dec. 4, 2012]

Question 147.06

Question: The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury issues both general and specific licenses. A general license authorizes a particular type of transaction for a class of persons without the need to apply for a specific license. A specific license is a document issued by OFAC to a particular person or entity, authorizing a particular transaction in response to a written license application. See OFAC’s Frequently Asked Questions and Answers #74, available at http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx#60(explaining the difference between a general license and a specific license). Does a general license issued by OFAC count as a “specific authorization of a Federal department or agency” for purposes of Section 13(r)(1)(D)(iii)?
Answer: Yes. Both general and specific licenses constitute specific authorization by OFAC to engage in a transaction, provided all conditions of the applicable license are strictly observed. [Dec. 4, 2012]

Question 147.07

Question: If an issuer includes disclosure responsive to Section 13(r) in a periodic report filed with the Commission, will the disclosure become public?
Answer: Yes. All periodic reports filed with the Commission are made public automatically upon filing through the Commission’s EDGAR system. [Dec. 4, 2012]

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Non-U.S. Subsidiaries of U.S. Companies Now Prohibited From Engaging in Unlicensed Transactions With Iran

Today President Obama issued an Executive Order that contains the framework for implementing various provisions of the Iran Threat Reduction and Syria Human Rights Act of 2012. HR 1905 which has variously been referred to as ITRSHRA, ITRA or TRA, was passed by Congress on August 1, 2012 and signed into law by the President on August 10, 2012 (Public Law 112-158). 

[October 12, 2012 Update: The full text of Executive Order 13628 published in the Federal Register on October 12, 2012 is below. OFAC has indicated that it is referring to the Iran Threat Reduction and Syria Human Rights Act of 2012 as the "TRA".] 

 The provision of ITRA that has generated the most interest and will have the most significant impact on U.S. companies is section 218, which prohibits entities owned or controlled by a U.S. person and established or maintained outside the U.S. (i.e., non-U.S. subsidiaries) from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if the transaction is prohibited by any U.S. laws or regulations. In other words, ITRA prohibits non-U.S. subsidiaries from engaging in unlicensed transactions with Iran, even if no U.S. persons are involved in the transaction.

Section 4 of today's Executive Order implements the foreign subsidiary provision of ITRA and authorizes the imposition of penalties on U.S. parent companies that own or control the non-U.S. entity that engaged in the prohibited transaction. 

The Treasury Department has been delegated by the President to implement this provision and the Office of Foreign Assets Control (OFAC) will be responsible for implementing and enforcing this new aspect of the long-standing U.S. sanctions on Iran.

As a result of today's action, Iran now joins Cuba as the only U.S. sanctions programs that apply to non-U.S. subsidiaries of U.S. companies. 

In accordance with ITRA, the Executive Order states that penalties for violations of the subsidiary prohibition in will not apply if the U.S. person that owns or controls the entity divests or terminates its business with the entity not later than February 6, 2013.

In connection with the issuance of the Executive Order OFAC today issued three Frequently Asked Questions (FAQ) on its website (reprinted below) that provide additional guidance on OFAC's policy regarding the new prohibitions applicable to foreign subsidiaries of U.S. companies. 

Importantly, the Executive Order and FAQ 239 state that the U.S. parent liability prohibitions will not apply in cases where general or specific licenses have been issued by OFAC authorizing the foreign subsidiary to engage in the transaction. As a result, U.S. companies that export medicine and medical devices to Iran under licenses issued under the Trade Sanctions Reform Act should review their licenses to ensure that the licenses cover the activities by their foreign subsidiaries. 

______________________________________________________________________________

[OFAC Answers to] Questions Related to Section 4 of Executive Order Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Syria Human Rights Act of 2012 and Additional Sanctions with Respect to Iran

238. What is the new prohibition on foreign subsidiaries of U.S. persons, and how does it work?

Section 4 of the Order prohibits an entity owned or controlled by a U.S. person and established or maintained outside the United States (a “foreign subsidiary”) from knowingly engaging in any transaction, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran, if that transaction would be prohibited by certain Executive orders prohibiting trade and other dealings with, and investment in, Iran and blocking the Government of Iran and Iranian financial institutions, or any regulation issued pursuant to the foregoing, if the transaction were engaged in by a United States person or in the United States. Civil penalties for the foreign subsidiary’s violation shall be applied to the U.S. parent company to the same extent that they would apply to a U.S. person for the same conduct.

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239. Are foreign subsidiaries of U.S. companies covered under OFAC general licenses and/or permitted to apply for specific licenses from OFAC?

To the extent a transaction is exempt from the prohibitions of the Iranian Transactions Regulations, E.O. 13599, section 5 of E.O. 13622, or Section 12 of the Order, or is authorized by a general license issued pursuant to these authorities if engaged in by a U.S. person, it would not be prohibited for a foreign subsidiary (as defined above) to engage in the transaction, provided that it satisfies all the conditions and requirements of the exemption or general license. Similarly, if the transaction is one for which a U.S. person might apply for a specific license — for example, the exportation of medical devices to Iran — a foreign subsidiary or its U.S. parent may apply for a specific license for the foreign subsidiary to engage in the transaction. Note: Whether a U.S. parent company’s specific license covers transactions by its foreign subsidiary that are otherwise prohibited by section 4 of the Order will depend on the terms of that license and the scope of the authorized activities.

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240. Is there a wind-down or safe harbor provision in Section 4 of the Order? 

Consistent with Section 218(d) of the TRA, Subsection 4(c) of the Order provides that civil penalties shall not apply if the U.S. person divests or terminates its business with the foreign subsidiary (as defined above) not later than February 6, 2013.


Executive Order 13628 (10.9.12)

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Free Antiboycott, Export Controls, Sanctions and FCPA Compliance Training Programs Now Available From Lawline

Lawline, a leading provider of continuing legal education (CLE) programs, has opened up their entire library of online training courses so that anyone can view the courses for free. 

Included in Lawline's course catalog are four one-hour international trade compliance programs presented by international trade attorney Doug Jacobson on the following topics:

• An Introduction to U.S. Antiboycott Laws and Compliance 

• An Introduction to U.S. Export Controls and Sanctions 

• International Traffic in Arms Regulations (ITAR): What You Need to Know 

• The U.S. Foreign Corrupt Practices Act: Compliance and Enforcement

These four programs, which are highly rated by those that have seen them, can be accessed here. The entire Lawline catalog of courses can be accessed here. 

Only attorneys wanting to obtain CLE credit will have to pay a fee to Lawline. CLE credit is available to attorneys that are members of the bars of numerous states, including Texas, California and New York. 

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AAEI to Present Export Control Reform Webinar With BIS Undersecretary Hirschhorn on October 11, 2012

The American Association of Exporters and Importers (AAEI) will be hosting a webinar on the pending Export Control Reform effort on October 11, 2012 at 2 pm Eastern time. 

The speakers will include  Under Secretary for Industry and Security Eric L. Hirschhorn and Director of the Bureau of Industry and Security's Office of Exporter Services, Bernie Kritzer. 

The webinar, which is open to the public, will provide details and other important information on the current status of the export control reform initiatvie. Questions will also be taken from participants.  

The webinar fee is $25 for AAEI members and $35 for non-AAEI members. The webinar registration link can be found here. 

More information on the President's Export Control Reform can be found at Export.gov/ecr.

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Final Rule Adding 164 Parties to BIS Entity List Will Take Effect on October 9, 2012

The final rule mentioned in our previous post adding 164 parties to the Bureau of Industry and Security's Entity List will be published in the Federal Register on Tuesday, October 9, 2012 and will become effective on that date. The Federal Register notice is available below. 


The parties being added to Entity List are the 164 foreign persons and companies who were identified during a U.S. Government investigation as assisting a network of companies and individuals (namely Arc Electronics in Houston) involved in the procurement and delivery of electronic products subject to the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR) to Russia in violation of the EAR and ITAR (a list of the part numbers of the products allegedly shipped to Russia can be found on pages 20-23 of the indictment. It is interesting to note that the indictment only mentions one part number subject to the ITAR).  


The practical impact of the publication of this final rule is that effective October 9, 2012 nothing "subject to the EAR" can be exported, reexported or transferred to any of the named parties starting on October 9, 2012 unless the items were already "en route aboard a carrier to a port of export or reexport." This is because the Entity List imposes a licensing policy of “presumption of denial” on all 164 parties. 

While the U.S. Government's Consolidated Restricted Party List was updated late last week to add all 164 names some commercial restricted party screening providers will not update their lists until this notice is published on Tuesday.

BIS Entity List Additions (10.8.2012)

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U.S. Indicts U.S. and Russian Companies and Individuals Involved in Russian Military Procurement Network and Adds 164 Parties to BIS Entity List

As a result of an investigation involving an alleged Russian military procurement network, the U.S. Department of Justice announced today that it had unsealed an indictment against two companies and 11 individuals located in the U.S. and Russia and executed a number of search warrants at various residences, businesses and banks in the U.S. 

In a coordinated action, the Commerce Department's Bureau of Industry and Security (BIS) also issued a final rule (PDF) amending the Export Administration Regulations (EAR) to add 164 foreign persons and companies to the Entity List who allegedly received, transshipped or facilitated the exports of the items to Russia.

The Indictment

According to the indictment, the defendants were allegedly involved in: 

a surreptitious and systematic conspiracy to obtain advanced, technologically cutting-edge microelectronics from manufacturers and suppliers located within the United States and to export those high-tech goods to Russia, while carefully evading the government licensing system set up to control such exports. The microelectronics shipped to Russia included analog-to-digital converters, static random access memory chips, microcontrollers, and microprocessors” that were subject to the jurisdiction of the Export Administration Regulations (EAR) or International Traffic in Arms Regulations (ITAR).

The Justice Department also stated that the defendants:

allegedly exported many of these high-tech goods, frequently through intermediary procurement firms, to Russian end users, including Russian military and intelligence agencies. To induce manufacturers and suppliers to sell them these high-tech goods, and to evade applicable export controls, the defendants often provided false end user information in connection with the purchase of the goods, concealed the fact that they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce. For example, in order to obtain microelectronics containing controlled, sensitive technologies, Arc claimed to American suppliers that, rather than exporting goods to Russia, it merely manufactured benign products such as traffic lights. Arc also falsely claimed to be a traffic light manufacturer on its website. In fact, Arc manufactured no goods and operated exclusively as an exporter.

In addition to the 11 individuals named in the announcement, the two companies that were indicted are:

• Arc Electronics, Inc., Houston, Texas
• Apex System, L.L.C., Moscow, Russia

Addition of 164 Parties to BIS Entity List

The 164 parties that will be added to the Entity List are located in Belize, Canada, Cyprus, Estonia, Finland, Germany, Greece, Hong Kong, Kazakhstan, Russia (119 of the 164), Sweden, United Kingdom and British Virgin Islands. (There are actually 165 entries added, one of which is an alternate address for one party). 

The Entity List, found at Supplement No. 4 to Part 744 of the EAR, includes the names of non-U.S. 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. Exporters, freight forwarders and other parties that are involved in shipping items to parties on the Entity List without the required export license are subject to civil penalties of up to $250,000 per violation or twice the value of the underlying transaction.

In this case, the Entity List license requirement for 164 parties is “presumption of denial” and applies to “all items subject to the EAR.” As a result, an export license issued by BIS is required before any item subject to the EAR can be exported, reexported or transferred to these persons or companies, and establishes a presumption that no such license will be granted. In addition, no License Exceptions contained in the EAR can be used for exports, reexports or transfers to any of the 164 named parties.

The export license requirement will go into effect upon publication of the Entity List changes in the Federal Register, which should take place early next week. 

While the Entity List announcement contains a "saving clause" authorizing shipments of items to these parties that were en route aboard a carrier to a port of export or reexport, on the date of publication of the notice in the Federal Register, U.S. exporters and non-U.S. exporters of U.S. origin items should review the names to be added to the Entity List to ensure that there are no pending transactions with any of these parties that may be ready to be shipped. 

While restricted party screening software vendors will update their restricted party screening list databases to include these 164 new names, some software vendors will not update their databases until the notice is published in the Federal Register next week.

Finally, while Arc Electronics in Houston, Texas is not included on the Entity List since it is located in the U.S., it is recommended that Arc Electronics and the other named U.S. defendants not included on the Entity List be considered as restricted parties for export compliance purposes pending the outcome of the court proceedings (although it is my understanding that Arc Electronics was shut down today and could be added to the Denied Persons List in the future).  

Request by Law Enforcement for Assistance

In an unusual development, the press release includes the following request by the law enforcement agencies involved in this matter:

As a result of this case, there may be victims and witnesses who need to contact the agencies involved in the investigation. If your business has been approached by one of the defendants, or by someone trying to obtain export-protected, sensitive technology who appeared not to be legitimate, please report that information to businessoutreach@leo.gov. The information will remain confidential and will be handled by the appropriate authorities.

The leo.gov website is the FBI's Law Enforcement Online (LEO) system that is used to support investigations and other law enforcement communication-related activities. 

Exporters should consider consulting with qualified export controls counsel before submitting information via the LEO website.

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Date of U.S. Customs and Border Protection's 2012 Trade Symposium in Washington, DC Changed to October 29-30, 2012

U.S. Customs and Border Protection (CBP) recently announced that the 2012 East Coast Trade Symposium to be held in Washington, DC has been moved from September 27-29 to October 29–30, 2012.

Further information regarding the Symposium's agenda and online registration will be available on this page on CBP's website and registration is expected to open during mid-August.

A subscription to the live Webcast of the event will also be offered this year for those that cannot attend in person.

Because of the venue's size, CBP will limit attendance to three representatives from the same company.

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Global Customs Forum to be held in in Sao Paulo, Brazil on September 18-19,2012

The Trusted Trade Alliance (TTA) and Brazil’s International Trade Institute (ICI) are presenting the 2012 Global Customs Forum in Sao Paulo, Brazil on September 18-19, 2012.

This year’s conference, entitled “Leveraging Trade Facilitation for Latin America's Economic Growth”, will bring together key players from the public and private sectors in Brazil, countries in the broader region and from other parts of the world.

The focus of the 2012 Global Customs Forum will be on international standards for trade facilitation, on customs and border solutions directly relevant to the region’s trade growth potential and solutions to alleviate the increasing trade barriers and compliance burdens on business.

The program will be of special interest to government and multilateral policymakers, corporate executives responsible for international procurement and sales, trade compliance and customs administration, import and export, and logistics and supply chain professionals. It will also be of interest to corporate counsel, customs and trade lawyers, and service providers in the international trade field.

More information about the conference can be found on the conference website at  www.globalcustomsforum.com. The current version of the program agenda can be found here.

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BIS Posts Public Comments on Definitions of Specially Designed and Export Control Reform Transition Rule

BIS has posted on its website the public comments submitted on the proposed rules published in mid-June on the definitions of “specially designed” and the Export Control Reform Initiative transition rule. These two proposed rules are important pieces of the overall Export Control Reform puzzle and are intended to lay the groundwork for the next step in the process.

The consolidated PDF file for each of the comments can be found at the following links (note that the file sizes are quite large): 

Proposed Rule on Definition of "Specially Designed" in the Export Administration Regulations - There were 31 separate public comments submitted by individuals, companies, and trade associations on the June 19, 2012 "Specially Designed" definition proposed rule. The PDF file containing the containing the text of the proposed rule and the consolidated comments can be found here.

Export Control Reform Transition Rule - There were 26 separate public comments submitted by individuals, companies, universities and trade associations on the proposed rule issued by BIS on June 21, 2012 entitled "Proposed Revisions to the Export Administration Regulations: Implementation of Export Control Reform; Revisions to License Exceptions After Retrospective Regulatory Review." The PDF file containing the text of the proposed rule and the consolidated comments can be found here.

The State Department's Directorate of Defense Trade Controls, which also published their own separate rule on these topics, has not yet posted the public comments on its website. However, several of the documents submitted to BIS also included the comments submitted to DDTC on the ITAR-related aspects of the proposed rules. 

BIS and DDTC are expected to soon publish in the Federal Register the proposed changes to the remaining USML categories that have not yet been issued. The proposed changes to USML Category XI (Military Electronics) and the corresponding 600 Series in the Commerce Control List is expected to be the next set of proposed rules to be published.

The latest version of the Export Control List Tracker which shows the status of the USML and 600 Series categories published to date can be found here:
ECR Control List Tracker June 2012


The current version of the Export Control Dashboard, which shows the current progress of various aspects of the Export Control Reform Initiative can be found here:
Export Control Reform Dashboard (June 2012)

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BIS Update Conference 2012 - Summary of Day 3

Here is a summary of our live tweets (Hashtag #BISUpdate) from the third and final day of the Bureau of Industry's 25th annual Update Conference on Export Controls and Policy:

• Third and final day of BIS update now underway. Roundtable discussions with BIS, OEE, DDTC, OFAC and CBP staff very well attended. The roundtables are a great opportunity for exporters and one of the most useful aspects of BIS Update. 

• Open forum on export control reform and move of certain items from USML to CCL now underway. BIS Assistant Secretary Wolf now answering numerous questions on pending rules, including "specially designed" and transition rules. Public comments on those rules are greatly encourage. 

• Export control reform will greatly minimize number of commodity jurisdiction requests submitted. Idea is to make USML and CCL objective lists with bright lines on jurisdiction. 

• First 38(f) notification likely to be submitted by State to Congress later this fall. 

• Here is the export control reform "Iceberg" slide now on screen. http://t.co/gKZvPnf7. Here is export control reform "Iceberg" slide now on screen. Subtitled "a visual metaphor of relative and non-visible export control burdens, not sinking ships" 

• Final #BISUpdate sessions today on encryption controls, export control reform and export controls for small and medium sized companies. 

• Full text of remarks by Assistant Secretary for Export Enforcement David Mills at BIS Update can be found here: http://t.co/QB0m24nK 

• BIS and Census are considering making changes to Routed Export Transactions. 

• Census Bureau likely to publish final rule making changes to Foreign Trade Regulations and AES filings later this year. 

• During final session on encryption controls BIS officials discussed the various changes to encryption regulations over the past 2 years, including the inclusion of Note 4 to category 5 part 2 and other types of encryption software not subject to the EAR. 

• Lots of positive comments from BIS Update attendees about program, speakers and venue of this year's Update conference. 

• Assuming that export control reform continues to move forward as we expect the CCL and USML should look very different at next year's version of BIS Update.

It is important for industry and exporters to continue submitting comments on the various proposed export control reform regulations issued by BIS and DDTC rules, including the proposed rule regarding the definition of "specially designed" and the "transition" rule. The deadline for submitting comments on those rules are August 3 and August 6, respectively.

Presentations from BIS are now posted on the BIS web site, Update 2012 Presentations or on the BIS BETA web site Update 2012 Presentations.

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OFAC Issues "Global Advisory" to Shipping Industry Regarding Flagging of Iranian Vessels

Today OFAC issued the following global advisory statement to the maritime industry:

Global Advisory to the Maritime Industry Regarding the 

Islamic Republic of Iran Shipping Lines

Issued: July 19, 2012

Subject: Flagging of IRISL Vessels

The Office of Foreign Assets Control (“OFAC”) is issuing this Advisory to alert the maritime industry that IRISL has recently been operating vessels despite their flags having been revoked.  International sanctions, and IRISL’s efforts to evade them through deceptive practices, have led to increased vigilance by the maritime industry and prompted an increasing number of countries to revoke or refuse to issue a flag to vessels in which IRISL or its affiliates have an interest (“IRISL vessels”).  For example, Sierra Leone is the latest country to take such action.  On June 25, 2012, Sierra Leone took action to revoke its flag for the Irano-Hind  vessel AMIN.

As more jurisdictions refuse to flag IRISL vessels, it is increasingly likely that persons will encounter IRISL vessels that are not properly flagged.   Therefore, maritime authorities should be alert to the presentation by IRISL of potentially fabricated vessel registration and flag credentials at ports of call and canal entrances.  We urge state port control and canal authorities to thoroughly scrutinize the certificates of registry of IRISL vessels, to ensure that such documentation is not expired or fraudulent and, if they are found lacking, to take action appropriate and consistent with domestic and international law.

Maritime authorities and other persons in the maritime industry should be aware that assisting IRISL or its blocked affiliates to re-flag their vessels may constitute the provision of services to a person whose property is blocked and may be considered a basis for designation pursuant to Executive Order 13382.

If you have any questions regarding U.S. sanctions involving Iran, please contact OFAC’s Compliance Hotline at 1-800-540-6322 or 202-622-2490.

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BIS Update Conference 2012 - Summary of Day 2

Here is a summary of our live tweets (Hashtag #BISUpdate) from day 2 of the Bureau of Industry's 25th annual Update Conference on Export Controls and Policy:

• BIS Update day 2 starts with speech by Assistant Secretary for Export Enforcement David Mills. 

• Today's breakout sessions include: deemed exports; entity list; regulatory review; automated export system.

• Mills: This year marks 30th anniversary of Office of Export Enforcement. OEE is only agency of US government that specializes in export enforcement.

• Mills: export enforcement statistics 2011 - criminal conviction on 10 companies and 29 individuals and $20 million in fines. Administrative penalties included 39 settlements and $8.5 million in civil penalties. 

• Mills - OEE encourages voluntary disclosures. Only small number of VSDs led to imposition of penalties. In FY 2011 BIS issued 227 warning letters and in FY 2012 181 warning letters have been issued to date.

• Mills: discussed a number of successful export enforcement investigations and penalty cases resolved over the past year.

• Mills: regarding VSDs, BIS has made significant progress in closing out VSD backlog. Mentioned following statistics: closed 60% of VSDs submitted in 2011 and 30% of VSDs submitted in 2012. Reiterated that 97% of VSDs resulted in no penalties.

• Mills: mentioned importance of complying with Antiboycott regulations. Noted that 8 antiboycott penalty cases were settled in 2011. Also mentioned US Govt meetings with boycotting countries has led to one country agreeing to remove boycotting language from documents.

• Next session is an interagency panel on export controls, including officials from Departments of State and Defense. Noted that 15,652 licenses issued by BIS in FY2012. 212 were sent to Operating Committee and 26 were sent to next level for review. 788 CJs were issued in FY12.

• Some other news from Update: BIS has unveiled a new Strategic Trade Authorization (STA) Interactive Compliance Tool on its website at http://t.co/xGa49eyv.

• Other news from BIS Update: A new address verification feature will be soon be added to SNAP-R electronic licensing system.

• In other sanctions news, today OFAC added a number of high ranking Syrian officials to the SDN List: http://t.co/4y9ypaMb

• Full text of opening remarks by BIS Under Secretary of Commerce Eric Hirschhorn at Update 2012 found here: http://www.bis.doc.gov/news/2012/hirschhorn_update_2012.htm

• Full text of yesterday's remarks by BIS Assistant Secretary Kevin Wolf at Update 2012 found here: http://www.bis.doc.gov/news/2012/wolf_update_2012.htm

• Keynote speaker at Update day 2 is FBI director Robert Mueller. 

• FBI Director Mueller now speaking at Update on export controls and enforcement issues. Noted impact of globalization on technology and information flows. Noted efforts by procurement networks to obtain controlled technology. Also noted internal threats by employees having access to controlled technology.

• RT @dcsleeps: Extremely powerful and moving presentation by Master Sergeant Jarrett Jongema re IEDs and counter-proliferation efforts.

• FBI Director Mueller mentioned several past and ongoing export controls enforcement investigations and convictions against persons and procurement networks. Noted importance of FBI's partnership with private sector in export control cases. Stressed importance of recognizing red flags.

• The full text of FBI Director's remarks today at Update can be found here on FBI's website: http://t.co/FTqaWGca

• Export enforcement panel now underway at Update. Moderated by DAS Salo. Panelists include directors of Office of Export Enforcement, Office of Antiboycott Compliance, Office of Chief Counsel and Office of Export Analysis.

• Export enforcement panel using pre-submitted question and answer format as in the past. Several questions on antiboycott compliance and jurisdictional issues, including scope of "US Commerce."

• Director of Office of Antiboycott Compliance said that BIS and UAE are working together to remove prohibited boycott language from agreements, tenders and other documents issued by UAE companies.

• BIS Office of Antiboycott compliance mentioned growing number of boycott requests involving Malaysia. 

• BIS will soon be issuing modifications to the Unverified List to update the parties on that list. Inclusion of a party on the Unverified List is a red flag.

Reminder: On Thursday, July 19th, Assistant Secretary for Export Administration Kevin Wolf and other BIS regulatory and technical specialists will address issues related to the current export control reform effort in open forum telephone conference calls on July 19th from 10:00 am-12:00 pm EDT and from 1:00 pm-3:30 pm EDT. While live questions will not be taken, callers are encouraged to submit questions to BIS in advance by e-mail the following email address: OESDSeminar@bis.doc.gov. The dial-in number and passcode for the teleconferences is as follows: Call in Number: 888-455-8218; Passcode: 6514196.

Presentations from BIS are now posted on the BIS web site, Update 2012 Presentations or on the BIS BETA web site Update 2012 Presentations.

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BIS Update Conference 2012 - Summary of Day 1

Today is the first day of the Bureau of Industry's 25th annual Update Conference on Export Controls and Policy. Here is a summary of our live tweets (twitter.com/tradelawnews) from day 1:

• Annual BIS export controls Update starts today in DC. More than 1000 attendees. Will live tweet over next few day. Hashtag #BISUpdate 

• For those not able to attend Update, materials and webcasts are available on BIS's website. See http://t.co/UpJUEu0a for details.

• First speaker - BIS Undersecretary Hirschhorn stressed need for exporters to stay engaged on export control reform (ECR). As part of Export Control Reform (ECR), first 38(f) notifications on transfer of items from USML to CCL will take place later this year. Future issues to be reviewed by BIS include cloud computing, deemed exports, CCL review, recordkeeping, etc. 

• Next speaker- Asst Secy of State Andrew Shapiro. ECR intended to prioritize controls, not decontrol items. Will lead to better enforcement. 

• Asst Secy Shapiro - "speculation that ECR is stalled is false". Momentum not being lost. Results of hard work on ECR are in reach. 

• Next speaker- Asst Secretary Wolf who has played key role in ECR. While ECR appears to be slow, actually moving quickly when looking at big picture. ECR will make export controls understandable by "Muggles." 

• USML Cat XI (electronics) likely to be published in coming weeks. Here is some information from on the record press briefing by senior BIS and State Dept officials at Update. BIS would like to issue changes to encryption rule in future. Other future changes to regs include cloud computing. Regarding 38(f) process, working closely with Congress and have made changes as a result. Concerned about various amendments to pending legislation on satellites that could have adverse impact on ECR. Hope that satellite legislation can be taken up this year. E2C2 export enforcement coordination center up and running. 

• Update breakout sessions on sanctions, AES, control list changes and end use monitoring. Many of the presentations can be found on the BIS website at http://www.bis.doc.gov/seminarsandtraining/update2012/presentations.htm 

• OFAC participated with BIS on sanctions panel and clarified some points on new Burmese general licenses. Also answered questions on various sanctions programs and licensing issues. OFAC clarified that the new reporting requirement in Burma GL applies to investments greater than $500,000 only and not sales over that amount. OFAC also stated that average processing time for Iran TSRA Ag/Med licenses is 3 months. No real downturn in applications of TSRA applications due to Iran payment issues. also, BIS reiterated importance of reviewing both OFAC and BIS regs due to overlap of jurisdiction in some programs. 

• Regarding press reports re Apple products being denied for Iranians in US, OFAC said that OFAC regs are not discriminatory but that an OFAC license is required when controlled good are exported to Iran. 

• Keynote speaker today is Acting Secretary of Commerce Dr. Rebecca Blank. Acting Secretary of Commerce Blank discussing National Export Initiative and other economic issues relating to exports, including new free trade agreements. Mentioned importance of repealing Jackson-Vanik and permanent MFN for Russia. Promoted current export control reform efforts and reiterated that ECR is not decontrol. Noted herculean efforts made so far in ECR and that no other administration has got this far. Hopes to have some final changes from USML to CCL published by end of year. 

• Export enforcement panel VERY well attended. Discussing IED components concerns and continued focus on enforcement involving China and Iran. Pakistan still an illegal procurer and discussed joint OEE and FBI investigation efforts in procurement networks. Also discussed trends in voluntary self disclosures. Noted only 3% of VSDs led to penalties. Will be 20% increase in enforcement outreach efforts. 

• DDTC and BIS panel discussing details on implementing ECR. All 600 series items must be reported in AES, regardless of value. Post departure AES filing not eligible for 600 series. Special destination statement required for 600 series items. BIS expects 30K increase in licenses. BIS information triage unit is reviewing legitimacy of exports. Enhanced data sharing with DDTC and end use monitoring. DDTC and BIS panel discussing details on implementing ECR.

• RT @CommerceSec: just finished with my remarks at the Conference on Export Controls Policy, hosted by our Bureau of Industry and Security. 

• Head of DDTC export compliance now discussing enforcement issues related to defense articles. Discussing end use checks, export license due diligence, red flags. 

•  Information and updates on export control reform can be found at http://export.gov/ecr

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Alternative Options Will be Available to Participate in Next Week's BIS Update Conference

The Bureau of Industry and Security's Annual Update Conference on Export Controls and Policy will take place in Washington, DC from July 17 - 19, 2012.

While registration for Update is now closed BIS has announced that it will be offering a number of  opportunities for those not able to attend the conference in person to participate in the program. This is an excellent opportunity to learn more about the pending export control reform efforts underway in Washington, DC.

First, there will be a live Web cast of the morning Update sessions on July 17 and July 18 (click here for the Update agenda). Viewers can log on from the following links:

Tuesday, July 17 – 8:30am-10:00 am EDT:
http://mtitv.com/ConferenceOnExportControls1.html

Wednesday, July 18 – 8:30am-10:00 am EDT:
http://mtitv.com/ConferenceOnExportControls2.html

In addition, Assistant Secretary for Export Administration Kevin Wolf and other BIS regulatory and technical specialists will address issues related to the current export control reform effort in open forum telephone conference calls on July 19th from 10:00 am-12:00 pm EDT and from 1:00 pm-3:30 pm EDT. While live questions will not be taken, callers are encouraged to submit questions to BIS in advance by e-mail the following email address: OESDSeminar@bis.doc.gov. The dial-in number and passcode for the teleconferences is as follows: Call in Number: 888-455-8218; Passcode: 6514196.

Speaker presentations received as of July 11 are now posted on the BIS web site, Update 2012 Presentations or on the BIS BETA web site Update 2012 Presentations.

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U.S. Government Issues General Licenses Suspending Sanctions on Burma and Imposes Responsible Investment Reporting Requirements

Nearly eight weeks after the Obama Administration announced that it would “suspend” and “ease” sanctions on Myanmar (still referred to the U.S. as Burma), the U.S. Government today implemented the necessary changes to permit new investment in Burma for the first time in 15 years and to reauthorize the exportation of financial services to Burma. See our original May 17, 2012 post here.

The changes to the existing sanctions were made by OFAC via the issuance of two general licenses, OFAC Burmese Sanctions Regulations General Licenses 16 and 17 (see below) and are effective immediately.  

By issuing the general licenses OFAC was able to “suspend” the existing sanctions, but left open the possibility that they could be reimposed in the future by simply revoking the general licenses in the event that the Government of Myanmar fails to implement the promised reforms. 

For the first time ever the U.S. Government will require companies that engage in new investment in Burma exceeding $500,000 to submit an annual “Responsible Investment” report to the State Department. The report will include information on the company’s corporate social responsibility policies and procedures with respect to a number of issues, including human rights, workers’ rights, anti-corruption, environmental stewardship, land acquisitions, arrangements with security service providers and annual payments exceeding $10,000 to Burmese government entities. 

These reporting requirements, which will not take effect until the notice and comment period have been completed later this year, are included at pages four through six of the document below. The term “new investment”, as defined in OFAC's Burmese Sanctions Regulations, refers to the development of economic resources in Burma and not to other types of investment activities, such as entering into an agreement to buy a manufacturing facility in Burma that is unrelated to the development of natural resources. 

In addition to OFAC's general licenses, the President also issued a new Executive Order that provides new authority to include on the SDN List individuals or entities that have been determined to, among other things, threaten the peace, security, or stability of Burma or and those who conduct certain arms trade with North Korea. In addition, OFAC added two Burmese entities to the SDN List, including Burma's Directorate of Defense Industries and Innwa bank. 

Although OFAC's General Licenses 16 and 17 make significant changes to the existing U.S. sanctions on Burma, it is important to note the following:

1.No changes were made to the existing prohibition on the importation of goods of Burmese origin into the U.S. (this includes jewelry containing gems mined or extracted from Burma).  

2. No changes were made to the U.S. arms embargo on Burma that has been in place since 1993. As a result, "defense articles" and "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations are still prohibited from be exported to Burma, whether directly or indirectly. (See section 126.1 of the ITAR). 

3. The sale of goods to Burma and receipt of payment for such products was previously authorized under the Burmese Sanctions Regulations as long as no financial services were provided. General License 16 now authorizes U.S. companies to extend credit to customers and receive payment via letters of credit for sales to Burma.   

4. U.S. exports of commercial (i.e., "dual-use") goods to Burma remain subject to export control requirements administered by the Commerce Department's Bureau of Industry and Security (BIS). Exports of goods, technology and software on the Commerce Control List (i.e., not classified as EAR99) typically require a BIS export license. Therefore, exporters need to determine whether an export license from BIS may be required before goods are exported or reexported to Burma. 

5. A large number of banks, entities and individuals in Burma are on OFAC's SDN List. Therefore, banks, exporters and other companies engaged in transactions with Burma must check the SDN List and other U.S. Government restricted party lists to determine whether transactions with the parties are blocked or otherwise restricted. Section (d) of Burma General License 16 authorizes the transfer of funds to or from SDNs as long as the transaction does not involve a bank located in the U.S. This is one of the rare situations that allows a transaction to occur with a party on the SDN, albeit the transaction has to take place indirectly (i.e., funds transfers via a third country bank are okay). 

Burma Sanctions - OFAC GLs and Reporting Requirements (July 11, 2012)

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