ITAR Freight Forwarder Update: Schenker AG and BAX Global Working on EPLS Removal

There has been a great deal of interest on the current situation involving the freight forwarders that received notices of suspension by the Department of the Air Force and the resulting impact on ITAR transactions.

Of the companies added to the Excluded Party List System (EPLS) on February 16, 2012, as of today only Schenker AG and BAX Global Inc. (now part of DB Schenker) remain on the EPLS (it was incorrectly reported earlier this week that these parties had been removed from the EPLS).

Schenker AG and BAX Global Inc. are working closely with the Department of the Air Force to demonstrate that they are "presently responsible contractors," the applicable legal standard. The companies hope that this matter will be resolved very soon and that they will be removed from the EPLS. 

It is important to note that Schenker AG's U.S. affiliated, Schenker Inc., is not on the EPLS. I have clients that have received recent authorizations and licenses from DDTC that include Schenker Inc. as the freight forwarder.

Here is the current status of the freight forwarders added to the EPLS on February 16, 2012:

• CEVA Logistics LLC   (removed from EPLS on February 24, 2012)
• EGL Inc. (now owned by CEVA Logistics) (removed from EPLS on February 24, 2012)
• Kuehne and Nagel International AG (removed from EPLS in March 2012)
  
• Panalpina World Transport (Holding) AG (removed from EPLS on March 16, 2012)
• Panalpina Inc. (removed from EPLS on March 16, 2012)

 The remaining list of ITAR-ineligible freight forwarders is as follows:

• Schenker AG
• BAX Global Inc. (now part of DB Schenker)

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Office of Defense Trade Controls Compliance Closed Due to Building Fire

The State Department's Directorate of Defense Trade (DDTC) controls announced today that a fire occurred early Tuesday morning, March 20, in a portion of the Washington, DC office complex that includes the Office of Defense Trade Controls Compliance (DTCC).

The fire occurred before normal duty hours and there were no reports of injury. The fire did not impact DTCC, but the office experienced fairly significant water damage. Other offices within the DDTC were not impacted. As a result, DTCC was closed yesterday and remains closed while damage assessment teams survey conditions. While temporary space is being prepared for the compliance staff, this effort is expected to take 2 to 3 days to complete.

DTCC expects to return to a normal level of operation within one week. In the meantime, industry will experience delays in contacting members of the compliance staff and in the issuance of new and renewing registrations.

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ITAR Freight Forwarder Update: Panalpina Removed from EPLS

As a follow-up to our February 26, 2012 post on the proposed debarment of a number of freight forwarders and the impact on ITAR-related transactions, Panalpina Inc. and its parent company Panalpina World Transport (Holding) AG were recently removed from the Excluded Party List System (EPLS).

This action took place after Panalpina presented to the Department of the Air Force information to demonstrate that the companies' present responsibility to conduct business as a federal contractor. On March 16,  after consideration of that information, including an oral presentation, the Air Force notified both companies that the Air Force has determined that suspension or debarment of the companies was no longer necessary.  The proposed debarments have been terminated and both entities have since been removed from the Excluded Parties List.

Because the Panalpina entities are no longer considered to be "ineligible" parties under section 120.1(c) of the ITAR, there should be no further need for exporters to submit a "transaction exception" request to DDTC for pending or future ITAR authorizations involving the following freight forwarders:

• CEVA Logistics LLC   (removed from EPLS on February 24, 2012)
• EGL Inc. (now owned by CEVA Logistics) (removed from EPLS on February 24, 2012)
• Kuehne and Nagel International AG (removed from EPLS in March 2012)
  
• Panalpina Welttransport (Holding) AG (removed from EPLS on March 16, 2012)
• Panalpina Inc. (removed from EPLS on March 16, 2012)

 The remaining list of ITAR-ineligible freight forwarders is as follows:

• Schenker AG
• BAX Global Inc. (now part of DB Schenker)

DDTC's February 27, 2012 Web Notice has not yet been updated to reflect this change and hopefully they will issue an updated notice on their website soon. While DDTC does not normally issue notices on whether parties included on the EPLS are "ineligible" to participate in ITAR transactions DDTC issued detailed guidance in this case due to the major impact on defense trade and the large number of questions that DDTC received on this issue.

The recent addition of the freight forwarders to the EPLS serves as an important reminder that exporters and other parties involved in ITAR-related transactions should screen their transactions against the EPLS. Companies that use third party screening software should therefore ask their screening providers whether the EPLS is one of the lists used in the screening process and should perform tests to see whether these forwarders are included as a "hit". While inclusion of a party on the EPLS does not mean the party will be prohibited from all export transactions, particularly those "subject to the jurisdiction of the EAR", an EPLS "hit" is a "red flag" that should be resolved prior to the export from taking place.

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ITAR Freight Forwarder Update: Kuehne + Nagel International AG Removed from EPLS

As a follow-up to our previous post on the proposed debarment of a number of freight forwarders and the impact on ITAR-related transactions, Kuehne + Nagel International AG was recently removed from the Excluded Party List System (EPLS).

While DDTC's February 27, 2012 Web Notice has not yet been update to reflect this change, it appears that Kuehne + Nagel International AG is now again eligible to participate in ITAR-related transactions and there should be no further need for exporters to submit a "transaction exception" request for pending or future authorizations involving Kuehne + Nagel International AG.

The remaining list of ITAR-ineligible freight forwarders is as follows:

• Panalpina Welttransport (Holding) AG
• Panalpina Inc.
• Schenker AG (note that Schenker Inc. is not on the EPLS)
• BAX Global Inc. (now part of DB Schenker)

Panalpina met with the Air Force last week in an effort to have the proposed debarment to be rescinded and to be removed from the EPLS.

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U.S. Announces Opening of Export Enforcement Coordination Center and Information Triage Unit

As part of the Obama Administration's export control reform efforts, two new national multi-agency centers were officially opened today in order to improve how the U.S. Government administers its export control system.  

• Export Enforcement Coordination Center (E2C2): Established by the President under Executive Order 13558, the E2C2 is responsible for enhanced information sharing and coordination between law enforcement and intelligence officials regarding possible violations of U.S. export controls laws.  The E2C2 is administered by the Department of Homeland Security (DHS) with a leadership team comprised of officials from DHS, the Federal Bureau of Investigation, and the Department of Commerce.  The opening of the E2C2 builds on the increased criminal penalties for export control violations and the provision of Commerce’s permanent law enforcement authorities implemented in partnership with Congress in the Comprehensive Iran Sanctions, Accountability, and Divestment Act, to further strengthen the enforcement of U.S. export controls.

• Information Triage Unit (ITU): The ITU, which is located in the Commerce Department's Bureau of Industry and Security, is responsible for assembling and disseminating relevant information, including intelligence, from which to base informed decisions on proposed exports requiring a U.S. Government license.  This multi-agency screening will coordinate the reviews of separate processes across the government in an effort to ensure that all departments and agencies have complete information in order to make decisions on license applications.  This is intended to contribute to more timely, predictable, and consistent processes for U.S. exporters. 

In addition to the opening of these multi-agency centers, James Clapper, the Director of National Intelligence, has designated the Office of the National Counterintelligence Executive as the entity responsible for coordinating export control issues involving the Intelligence Community.

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