overview of control list developments and sanctions update

Attorney Advertising. Prior results do not guarantee a similar outcome.

Overview of Control List Developments and Sanctions Update

Ronald Meltzer

Waltham, MA

May 31, 2012

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Attorney Advertising. Prior results do not guarantee a similar outcome.

Principal U.S. export control authorities

Treasury Dept.

Office of Foreign Assets

Control

State Dept. Directorate of

Defense Trade

Controls

Commerce Dept. Bureau of Industry and

Security

Foreign assets control regulations

International Traffic in Arms Regulations, United States Munitions List

Export Administration Regulations, Commerce Control List

Transactions with sanctioned countries, entities and persons

Transfers of defense articles and provision of defense services

Exports and re-exports of dual-use commodities, software, equipment, and technology

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Attorney Advertising. Prior results do not guarantee a similar outcome.Attorney Advertising. Prior results do not guarantee a similar outcome.

2012 Update: General Developments Continued implementation of Administration’s export control

reform initiative (ECRI) and four “singularities”– Single list: list revision continues; few final rules

– Single licensing agency and revisions to policy: pace is slower

– Single IT system: DDTC completing migration to the DoD licensing database, USXports. Commerce to migrate in 2012.

– Enforcement: Export Enforcement Coordination Center, E2C2 (March 2012)

BIS/State – Leading list revision OFAC - New Executive Orders and revisions to several

regimes

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Control List Reform“Control Lists Tracker” provided at http://export.gov provides a snapshot

of progress

source: http://export.gov/static/2012-5-7%20ECR%20Control%20List%20Tracker_1_142193_eg_main_048264.pdf

http://export.gov/

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BIS: Key changes affecting export control list

New holding ECCN 0Y521 (April 2012) – For “Items Not Elsewhere Listed on the Commerce Control

List (CCL)”– Equivalent to United States Munitions List (USML)

Category XXI (Miscellaneous Articles), but items remain only up to 1 year, after which time the 0Y521 entry expires

– Items will be added to the 0Y521 ECCNs by the Department of Commerce, with the concurrence of the Departments of Defense and State

– Nearly worldwide license requirement, with case-by-case review for licensing

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BIS: Key proposals affecting export control

• New controls for items formerly on USML and related articles Category VI - Vessels of War

Category VII - Military Vehicles

Category VIII - Aircraft

Category XIX - Gas Turbine Engines

Category XX - Submersible Vessels, Oceanographic Equipment

• Possible changes to Categories I, II, III (firearms, guns, ammunition)

– “White House Efforts to Relax Gun Exports Face Resistance,” Wall Street Journal, May 1, 2012

– “Obama plan would ease weapons export rules,” Washington Post, May 2, 2012

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BIS: Key enforcement actions September 2011, Flowserve Corporation of Texas

– Settled ($2.5 million to BIS and $502,408 to OFAC) allegations of making unlicensed exports of pumps and related parts indirectly to Iran and Sudan and engaging in transactions with Cuba or a Cuban national

October 2011, Sunrise Technologies and Trading Corporation and its principal owner

– Fined $1,250,000 and prohibited from exporting any goods from the U.S. for ten years after making unlicensed exports to Iran of computer-related goods. Sunrise and its principal owner also agreed to a $1,661,672 settlement with OFAC.

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BIS: Key enforcement actions January 2012, Nadeem Akhtar of Maryland

– Sentenced to 37 months in prison for conspiring to sell export nuclear-related materials to Pakistan.

February 2012, Online Micro, LLC and one of its principal owners

– Fined $1,899,964 and prohibited from exporting any goods from the U.S. for ten years after exporting computer-related goods to Iran. Company and the owner also agreed to a $1,054,388 settlement with OFAC.

May 2012, Ulrich Davis of The Netherlands

– Sentenced to six months in prison for facilitating the illegal export of acrylic adhesives and spray paint coatings to Iran.

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OFAC: Key changes New SDN Search Tool: "SDN Search."

– Provides an online interface to search the SDN list across several criteria

– http://sdnsearch.ofac.treas.gov/

http://sdnsearch.ofac.treas.gov/

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OFAC: Key changes

Executive Orders– Yemen: EO Blocking Property of Persons Threatening the

Peace, Security, or Stability of Yemen (May 16, 2012) – Evasion: EO on Foreign Sanctions Evaders (Iran and

Syria) (May 1, 2012)– Human Rights and Surveillance Technology: EO on

Human Rights Information Technology (“GHRAVITY”) Order (April 23, 2012)

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OFAC: Key changes Burma

– Various general licenses issued 4/17/12, including for financial services supporting : (1) projects to meet basic human needs; (2) democracy building and good governance projects; (3) educational activities; (4) sporting activities; (5) non-commercial development projects directly benefiting the

Burmese people; and (6) religious activities.

– Obama Administration may be further lifting sanctions against Burma (May 17, 2012)

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OFAC: Key changes Iran

– Iranian Transactions Regulations Amendment and change in licensing policy on internet freedom (March 2012)

– Financial Sanctions Regulations: Implementing Sec. 1245(d) of the FY 2012 NDAA and related guidance (February 2012)

– Executive Order Blocking the Property and Interests in Property of the Government of Iran and Iranian Financial Institutions (February 2012)

– General licenses for food items (October 2011)

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OFAC: Key changes Syria

– General licenses (wind down transactions, humanitarian)

Libya– General licenses, i.e. permitting certain transactions with

Government of Libya and the Central Bank of Libya

Sudan– General licenses for food items, oil-related activities with respect

South Sudan

Weapons of Mass Destruction– General License 5 issued and amended

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OFAC: Key enforcement actions

In December 2011, a Georgia company paid $13,500 to settle allegations that it attempted to export a boat and boat parts to Sudan.

In February 2012, Teledyne Technologies, Inc., and a subsidiary paid $30,385 to settle allegations that, on two occasions, it indirectly exported Acoustic Doppler Current Profilers to Sudan.

In April 2012, a Colorado company agreed to a settlement of $126,000 for twice allegedly exporting medical equipment to the United Arab Emirates with reason to know that the goods were intended to be shipped to Iran.

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OFAC: Key enforcement actions

Also in April 2012, a New York cosmetics company agreed to pay $450,000 because of unlicensed exports of nail care products to Iran.

In May 2012, an asset management company agreed to a $112,500 settlement after purchasing $3 million in shares of a Cayman Islands company that invests exclusively in Iran.

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State/DDTC: Key proposals affecting export control

Some proposals still waiting for final disposition – Replacement Parts/Components and Incorporated Articles (proposed

March 2011)

Definition of of “defense services” (proposed April 2011)

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State/DDTC: More proposals affecting export control Additional proposed revisions to:

– Category VI, Vessels of War and Special Naval Equipment

– Category VII, Tanks and Military Vehicles (again)

– Category VIII, Aircraft and Associated Equipment

– Category XX, Submersible Vessels, Oceanographic and Associated Equipment

– Category V, Explosives and energetic materials, propellants, incendiary agents, and their constituents

– Category XIII, Auxiliary and miscellaneous items

Proposed New USML Category XIX, Gas Turbine Engines

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State/DDTC: Key enforcement actions

Enhanced enforcement through debarment— 85 total statutory debarments for AECA convictions were

published in the Federal Register between 2004-2008 103 in 2010 and 2011 alone: 56 in 2010, 47 in 2011.

– Source: http://www.pmddtc.state.gov/compliance/debar_intro.html

http://www.pmddtc.state.gov/compliance/debar_intro.html

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In September 2011, two owners of a Chinese company who purchased programmable read-only microchips for sale to a Chinese government-controlled entity were each sentenced to 24 months in prison.

In December 2011, EO System Company, Ltd, and three individuals were indicted for exporting infrared focal plan array detectors and infrared camera engines to South Korea.

In January 2012, the head of research and development at a Massachusetts company pleaded guilty to allegations of exporting military antennae to Hong Kong and Singapore.

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February 2012, ICM Components Inc. – Company and owner indicted for attempting to export helicopter parts to

Iran.

April 2012, Alpine Aerospace Corporation – Paid a $30,000 fine for six unlicensed exports of parts for Hawk missile

systems.

– Consent agreement required enhanced corporate export compliance procedures and an audit of the company

– Suspended the fine on the condition that the funds be used on compliance.

– TS Trade Tech Inc., with the same ownership, received the same terms but with a suspended civil penalty of only $20,000 for the unauthorized export of aircraft parts & equipment.

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Possible legislation in this arena Unlike last year, no wholesale reform legislation on the

horizon Satellite control reform: Safeguarding United States

Leadership and Security Act (S. 3211)– Responds to findings of the DOD “Section 1248” report

– Companion bill to measure passed by the House on May 1, 2012 as part of the NDAA for FY2013 (H.R. 4310)

– Gives the President the authority to move satellites and related components off the US Munitions List (USML), but prohibiting the export of such items to China, Iran, and several other nations

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Questions?

Ronald Meltzer

WilmerHale

[email protected]

+1 202 663 6389

mailto:[email protected]

overview of control list developments and sanctions update

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