First Export Under BIS License Exception STA Takes Place

The Commerce Department's Bureau of Industry and Security has indicated that the first export from the U.S. under new License Exception STA (Strategic Trade Authorization) recently took place.

The U.S. export made under License Exception STA included products controlled under Category 6, which covers sensors and lasers, to a destination in Europe. This transaction would previously required an individual validated license from BIS if License Exception STA would not have been available.

U.S. exporters and freight forwarders are reminded that in order to export items under License Exception STA and other license exceptions that the appropriate license exception code should be reported in the Electronic Export Information (EEI) filing reported in the Automated Export System (AES).

The Census Bureau has recently updated the AES system to add a new License Exception code of C59 in the AES License Type Field for STA shipments. The Census Bureau has also indicated that following new reporting requirements should be followed when using C59 to prevent the return of fatal errors from AES:

• In addition to reporting C59 in the AES License Type field, also report STA in the license number field.
• The Export Control Classification Number (ECCN) field is required. Refer to §740.20 of the Export Administration Regulations for those items that are ineligible for BIS license exception STA.
• Only destinations identified in §740.20 of the Export Administration Regulations are eligible.
• Report Export Information Codes OS, OI, CH or CI.
• Report any mode of transportation, except pipeline.

A complete list of all of the AES License Type codes and reporting instructions can be found here, which has been updated to include the code for License Exception STA.

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Commerce Department's Press Release on New License Exception STA

Below is the press release issued today by the U.S. Department of Commerce announcing the issuance of the final rule on License Exception Strategic Trade Authorization (STA) that is the subject of the previous post. I will leave it to readers to determine whether License Exception STA is actually a "major" or "significant" step forward in the export control reform process.

Commerce Department Implements New Export Control Rule to Enhance National Security, Facilitate Trade

Major step forward in President's reform initiative to modernize export control system

Washington, DC (MMD Newswire) June 16, 2011 - - U.S. Commerce Secretary Gary Locke today announced the next step in President Obama's export control reform (ECR) initiative aimed at strengthening U.S. national security and ensuring the competitiveness of American companies abroad. The Department will implement today a new license exception, Strategic Trade Authorization (STA), that will facilitate exports between the United States and partner countries while enhancing the competitiveness of key industrial base sectors.

The Export Control Reform Initiative aims to build higher fences around a core set of items whose misuse can pose a national security threat to the United States. By facilitating trade to close partners and allies, the Commerce Department can better focus its resources ensuring the most sensitive items do no end up where they should not.

"This is an important first step towards creating a system that addresses the serious threats we face in today's changing economic and technological landscape. This new license exception will eliminate the need for U.S. exporters to seek licenses in nearly 3,000 types of transactions annually, affecting an estimated $1.4 billion in goods and technology," Commerce Secretary Gary Locke said. "The new license exception will allow us to focus our resources on items that pose a significant national security risk and help facilitate U.S. exports."

"This is a significant step in President Obama's Export Control Reform Initiative which enhances our national security and makes U.S. exporters more competitive by easing their licensing burden for exports to partners and allies," said Under Secretary of Commerce for Industry and Security Eric L. Hirschhorn.

Items such as electronic components for use on the International Space Station, cameras for search and rescue efforts for fire departments, components for civil aviation navigation systems for commercial aircraft, airport scanners, and toxins for vaccine research will be eligible for the new license exception.

At the same time, the license exception establishes new safeguards designed to ensure Department of Commerce approval is obtained before controlled items exported under the exception are re-exported outside of authorized destinations.

To see a copy of the regulation published in the Federal Register Notice, go to http://www.gpo.gov/fdsys/pkg/FR-2011-06-16/pdf/2011-14705.pdf.

Background

The President has directed a broad-based interagency reform of the U.S. export control system with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats and adapting to the changing economic and technological landscape.

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Bureau of Industry and Security Unveils New License Exception Strategic Trade Authorization (STA)

As part of the ongoing export control reform process, the Bureau of Industry and Security today published in the Federal Register (PDF version of notice) the anticipated new license exception Strategic Trade Authorization (STA).

Under the U.S. Export Administration Regulations, a license exception authorizes the export or reexport of eligible products, software and technology without having to submit a license application and obtain a license from BIS as long as the specific conditions of the license exception are followed.

While License Exception STA will take effect immediately for eligible products, software and technology, as discussed below, it will take some time before the Automated Export System (AES) is modified by the Census Bureau to add the appropriate code in AES.

The scope of the final version of License Exception STA was significantly changed from the version included in the proposed rule published in December 2010. For example, the list of countries eligible to export controlled items that are considered to be less sensitive items was narrowed from 125 countries to eight. Although the final rule does not mention the reason, Ukraine was removed from the list of STA eligible countries.

In addition, based on input received during the public comment period BIS has clearly indicated that License Exception STA can be used for "deemed exports."

According to the final rule, License Exception STA can only be used to export products, software and technology in specific Export Control Classification Numbers (ECCNs) on the Commerce Control List without a license to the following 36 countries (known as 740.20(c)(1) destinations):

Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Turkey, and the United Kingdom.

ECCNs eligible to be exported to these 36 countries are indicated by the designation "STA" in the License Exception section of the particular ECCN.

For certain ECCNs involving less sensitive items, software and technology, the following eight additional countries (known as 740.20(c)(2) destinations) are eligible for license exception STA shipments:

Albania, Hong Kong, India, Israel, Malta, Singapore, South Africa, and Taiwan.

However, items controlled for national security reasons are not eligible to be exported under STA to these eight countries and are indicated by "exclusion paragraphs" in the specific ECCN text. 

In addition, items on the Commerce Control List that are subject to control for encryption (EI), short supply (SS), surreptitious listening (SL), missile technology (MT), chemical weapons (CW), and human rights reasons are not eligible for License Exception STA because of various requirements imposed by statutes, treaties or U.S. implementation of international commitments.

The final rule made some favorable changes to the notification requirement contained in the proposed rule. However, the following three conditions will apply to exports, reexports and transfers made under STA:

Condition 1. The consignee must be furnished with the ECCN that applies to each item transferred under License Exception STA. The ECCN notification needs to be made only once for each item to be shipped. As long as the ECCN remains accurate, it does not need to be refurnished for subsequent shipments.

Condition 2. Consignees must provide, prior to the shipment, the following written statement identifying the items to be shipped and restating the ECCN(s) to be shipped.

[CONSIGNEE NAME]:
(i) Is aware that [INSERT DESCRIPTION AND APPLICABLE ECCNS OF ITEMS TO BE SHIPPED] will be shipped pursuant to License Exception Strategic Trade Authorization (STA) in § 740.20 of the United States Export Administration Regulations (15 CFR 740.20); (ii) Has been informed of the ECCNs noted above by [INSERT NAME OF EXPORTER, REEXPORTER OR TRANSFEROR];
(iii) Understands that items shipped pursuant to License Exception STA may not subsequently be reexported pursuant to paragraphs (a) or (b) of License Exception APR (15 CFR 740.16(a) or (b));
(iv) Agrees not to export, reexport or transfer these items to any destination, use or user prohibited by the United States Export Administration Regulations; and
(v) Agrees to provide copies of this document and all other export, reexport or transfer records (i.e., the documents described in 15 CFR part 762) relevant to the items referenced in this statement to the U.S. Government as set forth in 15 CFR 762.7.

The consignee’s written statement must be maintained as well as a log or other written record that identifies each shipment associated with a particular statement.

Condition 3. The consignee must be notified in writing that the shipment is made pursuant to License Exception STA. The notice must either specify which items are subject to License Exception STA or state that the entire shipment is made pursuant to License Exception STA. The notice must clearly identify the shipment to which it refers. The written notice may be conveyed by paper documents or by electronic methods such as facsimile or email.

For "deemed exports," the ECCN notification, consignee statement, and destination control statement requirements are replaced with a requirement that the releaser of the technology or source code notify the recipient in writing of the restrictions on further release and other requirements.

As with all BIS license exceptions, the applicable license exception symbol and code will have to be reported in Electronic Export Information (EEI) filings, regardless of the value of the shipment. The U.S. Census Bureau will soon modify the Automated Export System (AES) by adding a new License Type Code for License Exception STA.

BIS has previously indicated that License Exception STA has the potential to eliminate approximately 3,000 individual licenses that BIS issued last year. Given the narrowed scope of the final version of STA, this number is likely to be reduced. Nevertheless, even if a smaller number of individual licenses do not have to be obtained by U.S. exporters, License Exception STA is a positive development.

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Guest Post: 15 (FCPA) Blogs Sites to Check Out

Today's guest post is by Tom Fox, a Houston, Texas-based attorney with a great deal of experience in international transactions and global anti-corruption policy and issues, including the Foreign Corrupt Practices Act (FCPA). Tom writes the "FCPA Compliance and Ethics Blog", a great resource on the FCPA and other corporate ethics and compliance-related issues.

Tom published the following post last month and I thought readers of this blog would find it useful. Thanks to Tom for including International Trade Law News on his top 15 list. Tom's very active and informative Twitter feed is @tomfoxlaw.
 

15 (FCPA) Blogs Sites to Check Out 

For some time now I have wanted to write about whom I read and why, so I thought it might be a good idea to list my 15 favorite blog sites. Below is a list of my favorites and as this blog provides my spin on all things related to the Foreign Corrupt Practices Act (FCPA) arena here we go…

The First Blog I Read Each Day

FCPA Blog/FCPA Professor - I know I said “the” first but it is always one of these two, depending on how early in the morning it is and where the mouse pointer ends up when I make the first click. But regardless of which I read first, here is why they are the first.

FCPA Blog - Richard Cassin, the ‘Dean’ of FCPA bloggers. If you want to know what is going on in the FCPA, or wider compliance, world on a once, twice or thrice times daily basis, this is the blog for you. In addition to Dick’s own posts, he gets the crème-de-la-crème of the world’s anti-bribery and anti-corruption writers to send in posts. If the FCPA Blog didn’t exist, someone would have to create it and fortunately for us Dick has done so.

FCPA Professor - Professor Mike Koehler on all things ‘legal’ in the FCPA world. If you want to know the latest Department of Justice (DOJ), Securities and Exchange Commission (SEC), federal court or anything else FCPA-thinking, from the law perspective, this is the blog for you. Always insightful, and provocative, if you want to hone your Socratic method, parry and thrust via email with the Professor. I guarantee you will learn quite a bit, I know I have.

After I get through these I tweet about them so everyone else can enjoy their collective wit and wisdom then it’s off to the following sites…

Corporate Compliance Insights - A collection of all things compliance, with a starting rotation and bullpen of great authors and contributors. But more than simply blogs, it has job postings, career advice and a broad list of resources for the compliance practitioner. And here’s the best part-it’s all free. Maurice Gilbert and his team have put together an outstanding compliance resource.

Open Air Blog - How can one best describe Howard Sklar’s blogging; withering, skewering, contrarian; he describes himself as “a crusty, irascible curmudgeon.” Here’s how I would describe Howard – one of the best compliance practitioners and commentators around. His insights are great and he uses the right touch of humor and real-world examples to get his point across. His blog is great and a ton of fun to read so saddle up and enjoy the (compliance) ride.

Corruptions Currents - From the Wall Street Journal, Sam Rubenfeld and Joe Palazzollo blog all-day on all things related to the anti-corruption world; FCPA, AML, Whistleblowers, Sanctions and General Anti-Corruption are all covered in this blog. Both journalists were jointly named by Ethisphere as one of the 100 most influential folks in the anti-corruption world. Great coverage, great insight AND it’s from the Wall Street Journal.

From across the pond…

thebriberyact.com - If you only have one resource for all things UK Bribery Act related, you could not find a better site. Barry Vitou and Richard Kovalevsky have put together that rarest of all blog sites, one that covers an entire subject in-depth, with both practical insight and analysis. Their interviews of the relevant players allow all compliance practitioners to develop insight into what the top UK regulatory officials are thinking about on the Bribery Act.

From North of the Border…

i-sight investigation blog - Lindsey Khan provides excellent insight on a wide variety of compliance topics. As with most advice we Americans receive from our Canadian cousins, her blogging is direct with practical guidance on how to navigate compliance challenges. She often provides Templates with her blogging to give you specific guidance on the ‘how to’ of compliance. So get thee to the Great White
North and check out i-sight.com

The Business Ethics Blog - Chris MacDonald teaches Philosophy, including business ethics, at Saint Mary's University and fortunately for the rest of us, he blogs. If you believe either “a) that corporations have a god-given right to accumulate as much capital as possible without regard for who gets hurt along the way; or b) that all corporations, and all people who work for them, are inherently evil, you will probably be irritated by [his] blog.” However, the rest of us can learn quite a bit from this thought provoking blog.

For Export Control…

International Trade Law News - My favorite site for all things trade compliance. Fellow UT Longhorn Doug Jacobson has put together a great site for export controls, sanctions, customs law, FCPA, antidumping and other international trade issues. He touches on the FCPA from time-to-time but he is “The Man” for me to catch up with all issues relating to export control.

Subscription Required - Sorry but you have to pay to read these great blogs…

Compliance Week Blogs - Matt Kelly has put together a plethora of all-star bloggers for his publication Compliance Week. Bruce Carton on the SEC; Melissa Aguilar on Regulatory Developments; Tammy Whitehouse on Accounting and Auditing; Neil Baker with his Global Perspectives; Jaclyn Jaeger with the Scuttlebutt and the Man, Matt Kelly himself. Any of these bloggers would be worth a solo listing but to have them on one site is fantastic.

Just Anti-Corruption - Editor Mary Jacoby and Reporter Chris Matthews blog throughout the day on anti-corruption and anti-bribery issues from a DC perspective. Both are great journalists and both have first-class sources. It puts information to us out in the provinces (as in ‘Outside the Beltway’) on what the DOJ is doing and thinking on all things FCPA.

Aggregators-they put it all together for you.

MyCorporateResource-Nick Montgomery is the hardest working man I know of in the blogosphere world. He manages to post literally hundreds of blogs each day, all focused for the in-house corporate lawyer. He has a specific FCPA site, which is found in the Client Memos, International Trade Sub Menu, Foreign Corrupt Practices Act. He posts blogs from Blue Chip law firms so the information is well, blue chip. It is a fabulous resource for all things an in-house counsel would need to know and a wonderful FCPA resource.

Law Agents-this site announces that “With over 1,400 subscriptions by users, lawgents.com is the internet's largest free law related news and blog aggregator.” How is that for an opening line. Best of all, its free and you can join, post or just use as a resource.

New Kids on the Block - Note I didn’t say young but these two guys have recently started blogging and from what I know of them, their stuff will be high quality.

Internal Investigations Blog - Cleveland attorney Jim McGrath focuses on all aspects of investigations relating to anti-corruption, anti-bribery, corporate fraud and employee-related theft. His blog is broader than simply the FCPA but just imagine the results of L’Affaire Renault if that company had read Jim’s blog before firing the soon to be multi-millionaire ex-employees.

White Collar Defense and Compliance – and finally… Mike Volkov has started up his own blog. For anyone who has heard Mike speak or read any of his Client Alerts you know this guy knows his stuff. I often wonder how he puts out so much material and manages to practice law, but he does and we, and the greater compliance world, are better for it. So check him out, as in now.

So that is my 15 ‘faves’ list. If you are not on it, please don’t take it personally, I’m sure that I read your blog and tweet about you.

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Representative Berman Introduces Bill to Update U.S. Export Control System

Today, Representative Howard Berman (D-CA), the Ranking Member on the House Foreign Affairs Committee introduced what is expected to be the first of several bills to update the U.S. dual-use export control system. Such a bill is needed because the Export Administration Act of 1979 (EAA), the last major export control bill enacted by Congress, lapsed in August 2001 and the Export Administration Regulations have remained in effect as a result of successive presidents invoking the International Emergency Economic Powers Act (IEEPA).

Representative Berman's 68 page bill, entitled the Technology Security and Antiboycott Act (pdf) (no bill number assigned as of this writing), would repeal the EAA and replace the authority in that law with a new statutory scheme that reflects the numerous technological advances and global changes that have occurred since 1979.

The following are some of the key aspects of the Technology Security and Antiboycott Act:

• Provides the President with authority to deploy controls to counteract current and future national security threats, including rogue governments, terrorist organizations, and other non-state actors that seek to attack the U.S. and its allies.

• Modernizes the definition of "national security" to include sustaining U.S. leadership in science, manufacturing and our high-tech workforce, and requires the President to balance traditional security goals with maintaining U.S. academic and manufacturing leadership in applying controls.

• Updates the definition of "dual-use" to include capable of being used in terrorist or cyber attacks. 

•  Establishes a process for regular review of the Commerce Control List to ensure that new items are adequately controlled and that the level of control of items on the lists are adjusted as conditions change.

• Requires control lists to be published in a form that facilitates compliance by small and medium sized businesses and academic institutions.

• Retains IEEPA penalty structure of maximum criminal penalties of $1 million or 20 years in prison and maximum civil penalties of $250,000 or twice the amount that this the basis of the violation.

• Civil penalties for export violations would be based on seriousness of the violation, culpability of the violator and violator's record of cooperation with the government.

• Provides that penalties for export and antiboycott violations would be subject to judicial review.

• Requires the publication of "best practices" guidelines to assist persons in developing and implementing, on a voluntary basis, effective export control programs.

• Provides that implementation of an effective export compliance program should be mitigating factors in civil penalty cases.

• Requires civil aircraft parts certified by the Federal Aviation Administration to be subject to dual-use controls under the Technology Security Act and not the International Traffic in Arms Regulations (ITAR).

• Establishes the Transfer Policy Committee, a high-level interagency management group responsibility for overall administration, rule-making and oversight of export controls. 

• Reenacts provisions authorizing the antiboycott authority and non-proliferation (missile and chemical and biological) functions of the U.S. government.

The Technology Security and Antiboycott Act is expected to be referred to the House Foreign Affairs Committee, where Representative Berman is the senior Democrat. Representative Ileana Ros-Lehtinen (R-FL), the Chairman of the House Foreign Affairs Committee indicated in the May 12, 2011 export control hearing that she plans to introduce a bill to that would authorize a short-term extension of the lapsed Export Administration Act that would also include other provisions to "help enable Congress and the Administration to tackle together the critical changes necessary to strengthen our national security, while advancing commercial interests." The Obama Administration is also working on legislative language to implement those aspects of the export control reform reform process that requires legislation.

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EU Export Controls for North American Trade Compliance Professionals to be Held in DC on July 18, 2011

The Trusted Trade Institute is holding a one-day program on European Union (EU) export controls on July 18, in the Washington, DC area.

The program, entitled "EU Export Controls for North American Trade Compliance Professionals" is being held the Monday before the annual BIS Update Conference on Export Controls, in order to allow those who reside outside of the Washington, DC area to attend both programs in one trip.

This Special Master Class is designed to give participants an overview of the essentials of EU dual-use export controls, with an introduction into the complexity presented by the national administration
of those controls (and their own additional controls) by the individual EU Member States.

Led by a senior official of Germany’s export control agency, this program will outline parallels and contrasts between the EU and US regulatory systems. The program will feature practical presentations and information presented by leading export control attorneys and consultants from the perspective of both
in-house counsel and outside counsel/consultants. The program will also feature keynote remarks by Kevin Wolf, the U.S. Department of Commerce’s Assistant Secretary for Export Administration.

Further information on these programs, including the agenda, speaker bios and registration information, can be found below. The direct registration page can be found here.

EU Export_Controls_2011_Trusted Trade Institute July 18, 2011

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Flurry of New Iran-Related Sanctions Imposed by U.S. Government

There has been a flurry of sanctions activity under the Iran Sanctions Act, as amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA).

Yesterday President Obama issued an Executive Order that authorizes OFAC to implement ISA and CISADA related sanctions on parties and individuals that have been determined by the Secretary of State to have violated ISA/CISADA.

Today OFAC announced several sets of ISA/CISADA sanctions on a number of companies. Because ISA and CISADA authorize a wide variety of sanctions to be imposed, the sanctions that are imposed under ISA/CISADA can vary from entity to entity.

ISA/CISADA sanctioned parties are now designated on OFAC's SDN List as [ISA].

As for the specific sanctions, OFAC has added the following three shipping companies to the SDN List for providing shipping services in violation of CISADA:

• ASSOCIATED SHIPBROKING (a.k.a. ASSOCIATED SHIPBROKING S.A.M.; a.k.a. "SAM"), Gildo Pastor Center - Block C 4.20, 7 rue du Gabian, Fontvieille MC 98000, Monaco [ISA]

• ROYAL OYSTER GROUP, ROG Corporate Office, Royal Oyster General Trading LLC, P.O. Box 34299, Dubai, United Arab Emirates [ISA]

• SPEEDY SHIP FZC (a.k.a. SEPAHAN OIL COMPANY; a.k.a. "SPD"), Room 206, 2nd Floor, Building W5B, Dubai Airport Free Zone, P.O. Box 54916, Dubai, United Arab Emirates [ISA]

OFAC also added PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL (PCCI) to the SDN List for CISADA violations, but that company was already on the SDN List due to other Iran-related sanctions.

In the event that any U.S. accounts need to be blocked as a result of these designations, the procedures in the Iran Financial Sanctions Regulations (31 CFR Part 561) need to be followed.

In addition, for the first time OFAC is implementing targeted sanctions under CISADA on the following two companies located in Singapore and Israel:

• Ofer Brothers Group, Ramat Aviv Tower, 40 Einstein St., P.O.B #11, Tel Aviv, 69102 Israel; MATAM Haifa, 9, Andre Saharov St., P.O.B #5090, Haifa, 31905 Israel

• Tanker Pacific Ship Management (a.k.a Tanker Pacific), Headquarters (Singapore), Tanker Pacific Management (Singapore) Pte Ltd, 1 Temasek Avenue, #38-01,Millenia Tower, Singapore 039192

U.S. financial institutions are now prohibited from making loans or providing credits totaling more than $10,000,000 in any 12-month period to these two companies unless the activity is associated with the relief of human suffering and the loans or credits are provided for such activities. However, it is important to note that these companies are not being added to the SDN List and there is no need to block any property or funds in U.S. accounts.

Finally, today the U.S. imposed sanctions on the Venezuelan state-owned oil company PDVSA for shipping refined petroleum to Iran. However, the sanctions are limited in scope and prohibit PDVSA from competing for U.S. government procurement contracts, from getting financing from the Export-Import Bank of the U.S. and from obtaining U.S. export licenses. Crude oil exports by PDVSA to the U.S. are not affected.

This new “mix and match” sanctions approach under ISA/CISADA will make it difficult for banks and companies to monitor the type of activity that is permissible or not.

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