NCITD to Present Program Featuring Head of the U.K.'s Export Control Organisation on May 23, 2012 in Washington, DC

The National Council on International Trade Development (NCITD) will be hosting a program in Washington on May 23, 2012 featuring Tom Smith, head of the United Kingdom's Export Control Organisation (ECO).

The ECO, part of the United Kingdom's Department of Business Innovation and Skills (BIS) is responsible for legislating, assessing and issuing export, trade transshipment and trade control licenses for military and dual-use goods.

Mr. Smith, who has served as the head of the ECO since 2009, has a great deal of experience working with trade-related issues in the U.K. Government and in the private sector. Mr. Smith will discuss the latest export control and sanctions developments in the U.K. and European Union, including information on export enforcement and penalty matters.

The program, which will include lunch, will be held from 12 pm to 1:30 pm at GE's Washington, DC office, located at 1299 Pennsylvania Ave., NW.

The program is free for NCITD members and $45 for non-members.

Registration will close Tuesday May 22, 2012. RSVP at www.ncitd.org.

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U.S. to "Suspend" Sanctions on Burma

This afternoon Secretary of State Clinton announced that the U.S. is “suspending” the existing financial and investment sanctions on Burma (Myanmar).

However, the details on how the existing sanctions will be suspended are still being worked out and the existing Burmese Sanctions Regulations (31 CFR. Part 537) (BSRs) administered by the Treasury Department's Office of Foreign Assets Control (OFAC) will remain in effect until further notice.

It appears likely that OFAC will issue a general license that will amend the BSRs to enable U.S. companies to enter into contracts relating to the "economic development of resources in Burma" and other investment activities. In addition, the general license will also authorize financial institutions and other parties to provide financial services to Burma.

In today's announcement, Secretary Clinton indicated that U.S. companies doing business in Burma will be expected to implement certain Corporate Social Responsibility measures and U.S. companies will be expected, but not required to "to conduct due diligence to avoid any problems, including human rights abuses . . . create a grievance process that will be accessible to local communities; to demonstrate appropriate treatment of employees, respect for the environment; to be a good corporate citizen; and to promote equitable, sustainable development that will benefit the people."

Senior Administration officials today also reminded U.S. companies of the extensive corruption in Burma. Given the Burmese Government's extensive role in the company's business sector, particularly in the oil and gas sector, U.S. companies will have to take additional steps to ensure compliance with the U.S. Foreign Corrupt Practices Act. 


Existing U.S. Sanctions on Burma

The current U.S. sanctions on Burma are unique and are far less restrictive than the broad sanctions imposed by the U.S. Government on Cuba, Iran, North Sudan, Syria and North Korea. Unlike the other broad-based U.S. sanctions programs, the BSRs generally do not prohibit U.S. companies or U.S. citizens from exporting goods classified as EAR99 to Burma and receiving payment for such goods.

The BSRs currently prohibit U.S. persons and companies from engaging in the following activities involving Burma:

1. Exportation of Financial Services to Burma - No U.S. company or U.S. citizen, wherever located, can make any payment, directly or indirectly, to Burma.

2. New Investment in Burma - No U.S. person or company can enter into any contracts with the Government of Burma or nongovernmental entities in Burma for the "economic development of resources in Burma". The phrase "economic development of resources located in Burma" is defined to mean, among other things, activities pursuant to a contract that involves the development or exploitation of natural resources in Burma, such as contracts conferring rights to explore for, develop, extract or refine petroleum or natural gas in Burma. A "nongovernmental entity in Burma" include most types of business organizations that exist for engaging in economic development of resources in Burma.

3. Facilitation of Prohibited Transactions in Burma - U.S. companies and U.S. citizens are prohibited from approving, aiding or supporting a foreign person’s investment in Burma, if the foreign person’s activity would constitute prohibited new investment if engaged in by a U.S. person. This prohibition does not apply to contracts involving the sale of goods, services or technology to Burma or for use in Burma.

4. Prohibited Importation of Burmese Origin Goods - Most goods of Burmese origin are prohibited from being imported into the U.S.

Existing Export Controls on Burma 

U.S. exports of commercial goods to Burma will remain subject to export control requirements administered by the Commerce Department's Bureau of Industry and Security (BIS). Currently, exports of goods, technology and software on the Commerce Control List (i.e., not classified as EAR99) typically require a BIS export license.

Burma has been subject to a U.S. arms embargo since 1993 and therefore no "defense articles" or "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations can be exported to Burma. Today's announcement will not have any impact on this aspect of U.S. law.

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ITAR Freight Forwarder Update: Schenker AG and BAX Global Removed from EPLS

As a follow-up to our February 26, 2012 post regarding the mandatory and proposed debarment of a number of freight forwarders and the resulting impact on ITAR-related transactions, today Schenker AG and BAX Global Inc. were removed from the Excluded Party List System (EPLS).

The removal from the EPLS took place after the the companies presented to the Department of the Air Force information to demonstrate the companies' present responsibility to conduct business as a federal contractor. After consideration of that information the Air Force today determined that suspension or debarment of the companies was no longer necessary.  As a result, the proposed and mandatory debarments have been terminated and both entities have been removed from the EPLS. As we previously noted, Schenker Inc. was never included on the EPLS and DDTC had continued to issue licenses including that entity. 

Because the Schenker AG 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 any of the freight forwarders that were 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 Welttransport (Holding) AG (removed from EPLS on March 16, 2012)
• Panalpina Inc. (removed from EPLS on March 16, 2012)
• Schenker AG (removed from EPLS on April 11, 2012)
• BAX Global Inc. (now part of DB Schenker) (removed from EPLS on April 11, 2012)

Since none of these freight forwarders are "ineligible" to participate in ITAR transactions, we urge DDTC to remove or update its February 27, 2012 Web Notice to reflect this new information.

The significant interest in this issue has heightened the awareness of the role that the EPLS and serves as an important reminder that exporters and other parties involved in ITAR-related transactions should screen all the parties involved in ITAR licenses and other authorizations, including freight forwarders, against the EPLS. 

This action taken by the Air Force against these freight forwarders also highlights the impact of the debarment provisions contained in the Consolidated Appropriations Act of 2012 (Pub. L. 112-74). Those little-noticed provisions require the debarment of companies receiving federal funds, including from the Department of Defense, that have been "convicted of a felony criminal violation under any Federal law within the preceding 24 months." (See Division A, Section 8125 for the Department of Defense language.)

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NCITD to Present Program Featuring Tom Smith, Head of the United Kingdom’s Export Control Organisation, on May 23, 2012 in Washington, DC

The National Council on International Trade Development (NCITD) is pleased to announce that it will be hosting a program in Washington on May 23, 2012 featuring Tom Smith, head of the United Kingdom’s Export Control Organisation (ECO).

The ECO, part of the United Kingdom’s Department of Business Innovation and Skills (BIS) is responsible for legislating, assessing and issuing export, trade transshipment and trade control licenses for military and dual-use goods.

Mr. Smith, who has served as the head of the ECO since 2009, has a great deal of experience working with trade-related issues in the U.K. Government and in the private sector. Mr. Smith will discuss the latest export control and sanctions developments in the U.K. and European Union, including information on export enforcement and penalty matters.

The May 23, 2012 program, which will include lunch, will be held from 12 pm to 1:30 pm at General Electric’s Washington, DC office, located at 1299 Pennsylvania Ave., NW, Ninth Floor, Washington, DC 20004. The building entrance is at the NW corner of 12th and E Streets NW.  The program is free for NCITD members and $45 for non-members. 

For more information and to register for this program visit NCITD's website at www.ncitd.org. 

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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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