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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