International Trade Law News

AAEI Issues "The Innovation Economy for America" Policy Paper

2010-03-15T08:00:00.073-04:00

The American Association of Exporters and Importers (AAEI) has isssued a policy paper entitled “The Innovation Economy for America.” The paper, which was sent to all members of Congress last week, contains a series of ideas that, if adopted, would according to AAEI "greatly increase the likelihood that the next great company with innovative technology and products will be created in the United States and thrive in the global marketplace."

"Our leaders need to better understand what innovation really is," said AAEI President and CEO Marianne Rowden, who authored the document. "Innovation can take many forms now, from new products to new processes. If Congress can improve the business environment for our cutting-edge innovators, then it will have tilled the soil from which new ideas can propel the future of our economy."

The document describes the following four policy areas that will foster innovative thinking and invention:

1. Creating an Environment that is Conducive to and Protects Innovation

2. Implementing These Small and Medium Size Business Enterprises Initiatives and Priorities

Completing Free Trade Agreements with Colombia, Panama and Korea
Help Small and Medium Size Business Navigate U.S. Export Controls by providing assistance through the U.S. Small Business Administration and the U.S. Department of Commerce
Expand Export Financing Opportunities for SMEs

3. Promoting Exports by

Enacting Duty Drawback Simplification
Streamlining Export Controls

4. Lower Transaction Costs for Business by

Passing the Miscellaneous Trade Bill (H.R. 4380)
Finishing the Automated Commercial Environment (ACE) and International Trade Data System (ITDS)
Economizing Homeland Security Costs (including C-TPAT, CCSP)
Harmonizing and Recognizing Authorized Economic Operator Programs
Promoting International Standards Setting Bodies
Enacting an Exclusive Forum for Trade-Related Disputes by passing a bill to expand the jurisdiction of hte U.S. Court of International Trade
Eliminating and Reducing User Fees

U.S. India High Technology Cooperation Group Meetings to Take Place this Week in DC

2010-03-14T20:06:00.000-04:00

The seventh U.S.-India High Technology Cooperation Group (HTCG) will take place this Monday and Tuesday (March 15 and 16) in Washington, DC.

The HCTG was formed in 2002 to provide a forum for discussing U.S.-India high-technology trade issues. The HCTG is co-chaired by the U.S. Department of Commerce's Bureau of Industry and Security (BIS) and the Government of India's Ministry of External Affairs

Neena Shenai, an adjunct scholar at the American Enterprise Institute, and formerly a senior advisor at BIS, has published an article entitled "India, the United States, and High-Tech Trade" that notes that this is the first HCTG under the Obama Administration and describes the three primary issues that will be discussed at the HCTG: export controls, defense trade, and civil nuclear cooperation.

Import and Export News Briefs

2010-03-12T00:36:00.011-05:00

Washington Times reports today on issues holding up confirmation of Undersecretary of Commerce for Industry and Security (BIS).

Compliance with import/export regulations and FCPA among top five corporate compliance challenges in 2010 for technology companies.

Politico reports that the Senate conferees for the pending Iran sanctions legislation have been selected. No word on House conferees yet.

India to press to push for liberalization of U.S. export controls at next week's U.S.-India High Technology Cooperation Group Meeting in Washington, DC.

President Obama issues annual notice advising Congress that the national emergency with respect to Iran will be continued and that comprehensive sanctions against Iran will remain.

Two reports on U.S. citizen Alan Gross who was arrested in Cuba in December 2009 here and here.

In case you missed it, 60 Minutes recently aired a report entitled "Made In The USA" In Iran discussing how U.S. parts and components end up in Iran via third countries.

Washington Post: Obama's ambitious export plan may rekindle free-trade battle.

Compliance Week announces agenda for 5th Annual Conference that will be held in Washington, DC from May 24-26, 2010.

Coalition for Security and Competiveness issues statement welcoming President’s continuing commitment to export control reform.

Census Blog: Make sure your AESDirect company account information is up to date!

Justice Department: Former Haitian Government Official Pleads Guilty to Conspiracy to Commit Money Laundering in Foreign Bribery Scheme

Secretary Locke Participates in White House Web Chat to Discuss National Export Initiative

2010-03-11T17:08:00.000-05:00

Here is the video from today's White House chat session that Commerce Secretary Gary Locke held following the President's speech on the National Export Initiative. Questions were submitted via Twitter (@seclocke), Facebook and email.

Text of Executive Order on President's National Export Initiative

2010-03-11T12:20:00.000-05:00

NEI Executive Order

President Announces Details of National Export Initiative at Ex-Im Bank's Annual Conference

2010-03-11T12:06:00.004-05:00

In a speech today at the Export-Import Bank of the United States' annual conference in Washington, DC, President Obama provided more details on the National Export Initiative (NEI) and his goal of doubling U.S. exports in the next five years that was announced in his State of the Union Speech in January.

The following is a summary the important points made in today's speech:

Four aims of NEI are (1) increasing export financing; (2) increasing export advocacy; (3) providing assistance for American businesses to locate, set up shop, and win in new markets; and (4) focusing on making sure American companies have free and fair access to those markets, including enforcing existing trade agreements.

Signed an Executive Order instructing the federal government to use every available federal resource in support of that mission. That order created an Export Promotion Cabinet, made up of the Secretaries of State, Treasury, Agriculture, Commerce and Labor, along with our U.S. Trade Representative, Small Business Administrator, the Export-Import Bank President, and other senior U.S. officials whose work impacts exports. That cabinet will convene its first meeting in April.

Re-launched the President’s Export Council, the principal national advisory committee on international trade. Named Jim McNerney, the President and CEO of Boeing, as its chair; and Ursula Burns, the CEO of Xerox, as vice chair (White House announcement on these appointments here).

Export promotion efforts will extend throughout the Administration. Secretary Locke is issuing guidance to all senior government officials who have foreign counterparts on how they can best promote our exporters. Secretary Clinton is mobilizing a commercial diplomacy strategy, directing every one of our embassies to create a Senior Visitor Business Liaison who will manage our export advocacy efforts locally.

Will unleash a battery of comprehensive and coordinated efforts to promote new markets and new opportunities for American exporters. Will bring together the Ex-Im Bank, the SBA, the Departments of Commerce and Agriculture, and the Trade Development Agency to set up one-stop-shops across the country and in the 250 embassies and consulates abroad, to help American businesses gain a foothold in the fastest-growing markets with the most demand. And we’ll provide a comprehensive toolkit of services – from financing to counseling to promotion – to help potential exporters grow and expand.

Will increase funding for existing promotion efforts, including International Trade Administration at the Department of Commerce, and strengthen the USDA’s ability to connect farmers with new customers overseas.

Working to reform the U.S. Export Control System for strategic, high-tech industries, which will strengthen our national security. Will concentrate our efforts on enforcing controls on the export of our most critical technologies, making America safer while enhancing the competitiveness of key American industries. Have conducted a broad review of the Export Control System, and Secretary Gates will outline our reform proposal within the next couple weeks.

Regarding exports, the President announced two specific changes in export control laws that the Administration will work to implement:

A new one-time online review process for products containing encryption that is intended to reduce the current 30 to 60 day review process to "30 minutes".
Will eliminate unnecessary obstacles for exporting products to companies with dual-national and third-country-national employees by harmonizing the EAR and ITAR standards, making it easier for American and foreign companies to comply with U.S. export control requirements without diminishing national security.

The video of the speech is below:

President Announces Two Export Control Reform Initiatives Today (Encryption and Dual-Nationals)

2010-03-11T12:04:00.003-05:00

In a speech today on the National Export Initiative made today at the Export-Import Bank of the United States' annual conference in Washington, DC, President Obama announced two specific changes in U.S. export control laws that the Administration plans to implement:

A new one-time online review and notification process for products containing encryption algorithms. This new process is intended to reduce the current 30 to 60 day review process to "30 minutes."
Will eliminate unnecessary obstacles for exporting products to companies with dual-national and third-country-national employees by harmonizing the EAR and ITAR standards, making it easier for American and foreign companies to comply with U.S. export control requirements without diminishing national security.

Further details on these reforms will be announced by BIS and DDTC in the near future.

More information on the other aspects of the President's speech today are found in the subsequent post.

Remarks at Today's State Department Briefing Fail to Clear Up Confusion Over Dealing With BAE Systems

2010-03-09T23:15:00.002-05:00

As has been reported there is a great deal of confusion in the U.S. defense trade community about dealing with BAE Systems plc and their U.S. affiliates in light of the company's guilty plea last week to a conspiracy charge in connection with certain statements made to the U.S. Government. The fundamental legal question for U.S. companies is whether they are permitted by section 127.1(c) of the ITAR to continue to engage in defense-related transactions with BAE Systems given that the company appears to be "ineligible" as a result of the guilty plea.

At today's press briefing State Department spokesman P.J. Crowley was asked by a reporter about the BAE Systems licensing issue and, not surprisingly, his answer did not go very far in resolving this issue. As noted below, Mr. Crowley noted that the State Department is "assessing the implications that the plea will have on the statutory debarment and resulting policy of denial" and that "it would be inappropriate for [State] to make decisions on pending export applications at this time." He noted that this meant that "applications for export will be delayed if those applications involve BAE Systems PLC or any of its subsidiaries." The complete text of the exchange is below:

QUESTION: A question on export licenses. In reference to a specific company, I got a query from someone from another bureau about an export license being put on hold for a defense contract. Does the State Department have a particular hold on all export licenses at the moment? I know you guys are reviewing – you have an interagency review on export controls. Is that affecting the application for export licenses?
MR. CROWLEY: Export licenses writ [sic] large?
QUESTION: Yeah, that’s what I’m wondering. I mean, this was in reference to a specific defense contractor, a British defense contractor.
MR. CROWLEY: Well, so, is your question about that specific contractor?
QUESTION: Yes. Can I ask about the (inaudible)?
MR. CROWLEY: (Laughter.) No, you’ll say – I got the impression that we were holding --
QUESTION: Well, I’d like to ask about BAE’s application for --
MR. CROWLEY: Sure.
QUESTION: -- an export license being put on hold, and then specifically, is this something that is affecting everybody or just them?
MR. CROWLEY: Let me talk more specifically. I’m not aware of any blanket hold on all export licenses. On March 1^st, BAE Systems plc pled guilty in U.S. District Court for the District of Columbia to conspiracy involving violations of several U.S. laws, including the Arms Export Control Act. The State Department is studying the judgment and the plea agreement between the Department of Justice and BAE Systems plc, which BAE entered into to settle issues related to violations of the export – Arms Export Control Act. We are assessing the implications that the plea will have on the statutory debarment and resulting policy of denial. Though no final determinations have been reached, our analysis indicates it would be inappropriate for us to make decisions on pending export applications at this time. But for further information on the plea agreement, I refer you to the Department of Justice.
QUESTION: Can you explain what that means? You said we’re assessing implications the plea will have on the statutory something-something. What was that?
MR. CROWLEY: What this means is only that their applications for export will be delayed if those applications involve BAE Systems plc or any of its subsidiaries.
QUESTION: Thank you.

Until this issue is resolved once and for all by the State Department's Directorate of Defense Trade Controls, U.S. companies should consult section 127.1(c) of the ITAR and their export controls counsel for guidance on how to proceed.

Secretary of State Clinton Addresses Export Control Reform During House Foreign Affairs Committee Hearing

2010-03-04T18:32:00.001-05:00

The following is an excerpt of a brief exchange between Representative Don Manzullo (R-IL) and Secretary of State Hillary Rodham Clinton on export controls at last week's House Foreign Affairs Committee on the FY 2011 international affairs budget.

Rep. Manzullo is co-chair of the Congressional Export Control Working Group and has played an active role on export controls reform issues.

Export Controls Excerpt from Lauren Airey on Vimeo.

GSP Import Benefits at Stake for Certain Countries and Products

2010-03-04T16:26:00.002-05:00

Sandler, Travis & Rosenberg Client Advisory:

DUTY-FREE IMPORT BENEFITS AT STAKE FOR CERTAIN COUNTRIES AND PRODUCTS

March 25 Deadline for Comments on GSP Eligibility

U.S. importers, trade associations and foreign governments have until 5:00 p.m. on March 25 to submit comments to the Office of the U.S. Trade Representative concerning the eligibility of certain goods for duty-free treatment under the Generalized System of Preferences. These comments may seek to preserve, reinstate or revoke this treatment.

The U.S. GSP program includes provisions, known as competitive need limitations, that trigger the removal of duty-free treatment if imports of a covered product from a beneficiary developing country exceed certain limits. For calendar year 2009, these limits are (a) 50% of the value of total U.S. imports of the product from all countries or (b) $140 million. Once the president determines that a CNL has been exceeded, GSP duty-free treatment for the subject article must be terminated no later than July 1 of the next calendar year.

However, CNL waivers are permitted for products that are imported in de minimis quantities. In addition, duty-free treatment may be reinstated for products that no longer exceed the CNL.

USTR is therefore accepting comments from interested parties on the following potential modifications to GSP eligibility, based on import data for calendar year 2009.

De Minimis Waiver - The president may waive the 50% CNL with respect to an eligible article imported from a BDC if the value of total imports of that article from all countries did not exceed $19.5 million.

Redesignation Request - If imports of an eligible article from a BDC ceased to receive duty-free treatment due to exceeding a CNL in a prior year, the president may redesignate that article for duty-free treatment if imports in the 2009 did not exceed the CNL.

Potential Revocation of a Current CNL Waiver - A CNL waiver remains in effect until the president determines that it is no longer warranted due to changed circumstances. However, the president should revoke any CNL waiver that has been in effect with respect to an article for five years or more if the BDC's exports of that article to the U.S. exceeded (a) $210 million (1.5 times the applicable CNL value limit) or (b) 75% of the value of total U.S. imports of that article.

A list of products that may qualify for one of these actions can be found on USTR's Web site.

ST&R has extensive experience helping companies navigate all aspects of the GSP program, including the issues outlined above. For more information, including on how ST&R can assist you in the preparation and submission of comments to USTR, please contact Nicole Bivens Collinson, Jennifer Mulveny or Doug Jacobson.

Deadline for NCITD International Trade Scholarship is Approaching

2010-03-04T13:47:00.008-05:00

Update: Application deadline extended to April 15, 2010.

The National Council on International Trade Development (NCITD) has established a scholarship for students of international trade.

Scholarships awarded (minimum $1,000) will be paid directly to the institution, in the name of the awardee(s).

Awardee(s) will also receive a one-year NCITD membership and will be welcome to attend monthly meetings

Criteria for Eligibility:

Applicants must have at least "junior" status for 2010-2011 in an accredited U.S. college or university with at least a 3.0 Grade Point Average or equivalent "B" average.

Applicants must be currently enrolled and pursuing either an undergraduate or graduate degree in International Trade studies, such as political science, international relations, economics, international business, international law, international finance, etc. (including study abroad programs affiliated with a U.S. university).

Application Process:

Applicants must complete and submit:

* The NCITD Scholarship application form;

* A copy of the most current transcript from the college or university;

* A letter of recommendation from a sponsoring NCITD member; or from a work colleague or professor;

* A brief (2500 words or less) narrative from the applicant explaining his/her interest in international trade and why the applicant should be awarded this scholarship, including merit and financial need.

Criteria for Selection, in Order of Importance:

* Proven interest or experience in international trade, e.g., education, work or volunteering;

* Current academic standing and performance, including honors and extracurricular activities;

* Strength of the narrative submission and recommendations by NCITD member, professor or work colleague;

* Preference will be given to candidates sponsored by employees of NCITD member firms.

Selection Process:

For consideration for the 2010-2011 academic terms, all applications must be submitted by April 15, 2010.

The Application, transcript, recommendation and narrative essay should be mailed in a single package OR emailed to:

ATTN: Scholarship Applications
c/o Christina Filipovic
NCITD
1707 L Street N.W.
Suite 570
Washington, DC 20036
Email: christina@ncitd.org

The NCITD Scholarship Committee will select the winner(s) and determine the award no later than April 15, 2010.

The winner(s) will be notified by e-mail and letter.

The scholarship(s) will be presented at the June 9, 2010 Compliance Meeting in Washington, DC.

The scholarship application form is available here.

For information contact Christina Filipovic at the NCITD Secretariat at 202-872-9280.

Three Persons Indicted in Los Angeles for Conspiring to Export Assault Rifle Parts and Gun Sights to Phillippines

2010-02-26T10:27:00.002-05:00

U.S. Immigration and Customs Enforcement (ICE) announced yesterday that a federal grand jury in Los Angeles indicted the former owner of a Los Angeles-area gun store and two employees of a freight forwarding company for violating international arms trafficking and export control laws for allegedly exporting gun sights and equipment used to manufacture assault rifles to the Philippines without the required export licenses.

The three men are accused of conspiring to illegally ship defense articles and other controlled items to the Philippines in violation of the Arms Export Control Act and the International Emergency Economic Powers Act.

According to the indictment, the defendants conspired to purchase and export to the Philippines, in three separate shipments, a total of 250 forging for AR-15 assault rifles and 11 holographic rifle sights. Two of the shipments were intercepted by Philippine customs officials. It is alleged that the forgings are subject to the jurisdiction of the International Traffic in Arms Regulations and the rifle sights are subject to the jurisdiction of the Export Administration Regulations.

Two of the defendants were arrested yesterday and the third defendant apparently fled to the Philippines several years ago.

Photos From BIS 2010 Export Control Forum

2010-02-25T11:08:00.003-05:00

Below are some photos from the Bureau of Industry and Security's 2010 Export Control Forum that was held earlier this week in Irvine, California. The event's Keynote Speaker was Kevin Wolf, who was recently sworn in as Assistant Secretary of Commerce for Export Administration. In addition to speakers from BIS, the program also featured speakers from OFAC, Census, DDTC and DTSA.

Photos courtesy of John Priecko, Chief Executive Officer and President of Trade Compliance Solutions (photos 1-4), and Melissa Miller Proctor, Sandler, Travis & Rosenberg, P.A.

Registration

Kevin Wolf, Keynote Speaker

Kevin Wolf and other BIS officials

Erin Clark, STTAS & Melissa Miller Proctor, STR

Next NCITD Meeting to Feature Speakers from OFAC, DDTC and FinCEN

2010-02-23T15:54:00.000-05:00

The next meeting of the National Council on International Trade Development (NCITD) will take place on Wednesday, March 10, 2010 in Washington, DC and will feature the following speakers:

Adam Szubin, Director, Office of Foreign Assets Control, Department of the Treasury. Topic: OFAC News and Update;

Charles Shotwell, Director, Office of Defense Trade Controls Policy, Directorate of Defense Trade Controls, US Department of State. Topic: Commodity Jurisdiction: Trends, Statistics and Automation Update;

Jamal El-Hindi, Associate Director, Regulatory Policy and Programs Division, Financial Crimes Enforcement Network, Department of the Treasury. Topic: FinCEN Enforcement Efforts and Updates.

For information on how to join NCITD or to attend the meeting, see www.ncitd.org or contact the NCITD Secretariat at 202-872-9280.

U.S. Customs Broker Sentenced to 24 Months in Prison for Defrauding Importer

2010-02-19T17:29:00.000-05:00

An unusual criminal case involving a customs broker illustrates the need for U.S. importers to be vigilant in exercising oversight over the activity of their customs brokers.

Earlier this week a New York-based customs broker was sentenced to 24 months in prison, three years of supervised release and ordered to pay nearly $1.2 million in restitution for defrauding an importer of medical equipment by submitting false customs documents that indicated that the importer owed customs duties on goods that were actually duty free.

According to the Justice Department, the customs broker, who had served as the importer's broker since 1980, continued to invoice the importer for customs duties over a seven year period even though the U.S. duty rate had decreased on imported medical equipment from 5.5% to duty free.

To show that the invoices were legitimate, the customs broker sent the importer falsified customs forms that indicated the amount of duty owed on the medical equipment. As a result, the importer reimbursed the customs broker for duties that the broker never paid, in amounts ranging from $1,000 to $9,000 per customs entry. By the time the importer discovered the problem seven years later the broker had defrauded the importer out of almost $1.2 million.

Under U.S. law, a conviction of a customs broker of a crime involving the importation of merchandise or arising out of the conduct of customs business is grounds for revocation of a customs broker license. As a result, assuming that this case is not overturned on appeal, the defendant's customs broker's license will be revoked by U.S. Customs and Border Protection.

While this type of activity by a customs broker is extremely rare (customs brokers must undergo an extensive background check before they receive their broker's license), this situation could have been easily avoided had the importer audited the customs entries to verify that the amount of duties and fees shown on the invoices and documents provided by the broker was consistent with the applicable duty rate shown on the Harmonized Tariff Schedule of the United States.

Two BIS Nominees Confirmed by Senate

2010-02-12T10:14:00.004-05:00

Yesterday the U.S. Senate confirmed Kevin Wolf to serve as Assistant Secretary of Commerce for Export Administration and David Mills to be Assistant Secretary of Commerce for Export Enforcement.

These two confirmations, along with 25 positions at other agencies, occurred after Senate Republicans earlier this week released a hold on a number of pending nominees following President Obama's threat to fill open positions by way of a recess appointment while the Senate is in recess next week.

However, the Senate confirmations did not include the nomination of Eric Hirschhorn to serve as Under Secretary of Commerce for Export Administration, the most senior position at the Bureau of Industry and Security. Mr. Hirschhorn's nomination was reported to the full Senate and has been included on the Senate calendar since December 17, 2009. Mr. Hirschhorn and 35 other nominees still await Senate confirmation. It is expected that the Senate will act on Mr. Hirschhorn's nominations in the coming weeks.

In a statement issued by President Obama after yesterdays' confirmations, he said that the Senate's action "is a good first step, there are still dozens of nominees on hold who deserve a similar vote, and I will be looking for action from the Senate when it returns from recess. If they do not act, I reserve the right to use my recess appointment authority in the future."

Virginia Resident Pleads Guilty in Connection With Role in Conspiracy to Pay Bribes to Obtain Business in Panama

2010-02-10T20:16:00.000-05:00

Despite the snow in the Washington, DC area, the blizzard of FCPA prosectutions continues.

Today, John W. Warwick pleaded guilty before U.S. District Court Judge Henry E. Hudson in Richmond, Virginia., to a one-count indictment charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for Ports Engineering Consultants Corporation (PECC) in violation of the Foreign Corrupt Practices Act

According to the indictment issued on December 15, 2009, PECC, a company incorporated under the laws of Panama, was affiliated with an engineering firm based in Virginia Beach. According to the indictment, PECC was created so that Warwick, co-conspirator Charles Jumet, an the engineering firm could obtain certain maritime contracts from the Panamanian government.

According to the Justice Department, Warwick and Jumet participated in a conspiracy to pay money secretly to Panamanian government officials for awarding contracts to PECC to maintain lighthouses and buoy in Panama. In December 1997, the Panamanian government awarded PECC a no-bid, 20-year concession to perform these duties. Upon receipt of the concession, Warwick, Jumet, and others authorized payments to be made to the Panamanian government officials.

In connection with his guilty plea, Warwick admitted that at least from 1997 through approximately July 2003, he, Jumet and others conspired to make corrupt payments totaling more than $200,000 to the former administrator and deputy administrator of the Panama Maritime Authority and to a former, high-ranking elected executive official of the Republic of Panama.

As part of his plea agreement, Warwick agreed to forfeit $331,000,the proceeds of the contract. At sentencing, scheduled for May 14, 2010, Warwick faces a maximum of five years in prison and a fine of the greater of $250,000 or twice the gain.

Jumet pleaded guilty on Nov. 13, 2009, to a two-count criminal information charging him with conspiring to make corrupt payments to foreign government officials for the purpose of securing business for PECC, in violation of the FCPA, and making a false statement. Jumet is scheduled to be sentenced on March 26, 2010.

U.S. Treasury Department Adds Affiliates of Iran's Islamic Revolutionary Guard Corps to SDN List

2010-02-10T12:10:00.000-05:00

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) today took further action to implement existing U.S. sanctions against Iran's Islamic Revolutionary Guard Corps by adding to the Specially Designated Nationals List an individual and four companies affiliated with the Revolutionary Guard pursuant to Executive Order 13382, which freezes the assets of designated proliferators of weapons of mass destruction and their supporters.

Today's action targets Khatam al-Anbiya Construction Headquarters, an arm of the Revolutionary Guard, previously designated in 2007 pursuant to E.O. 13382.

Today's designations include Revolutionary Guard Corps General Rostam Qasemi, the commander of Khatam al-Anbiya Construction Headquarters, the engineering arm of the Revolutionary Guard that serves to help the Revolutionary Guard generate income and fund its operations. According to the Treasury Department, Khatam al-Anbiya is owned or controlled by the Revolutionary Guard and is involved in the construction of streets, highways, tunnels, water conveyance projects, agricultural restoration projects, and pipelines.

OFAC also designated the following four companies companies that are owned or controlled by Khatam al-Anbiya, or that act on its behalf, and directly support various mining and engineering projects:

Fater Engineering Institute
Imensazen Consultant Engineers Institute (ICEI)
Makin Institute
Rahab Institute

U.S. persons (i.e., U.S. companies, citizens, permanent residents) are prohibited from engaging in any transaction or dealing with any party designated under E.O. 13382.

U.S. Customs Issues Memorandum on Paperless Entry of ITAR-Controlled Goods

2010-02-10T11:46:00.000-05:00

The following story was published in Sandler, Travis & Rosenberg's World Trade\INTERACTIVE daily newsletter and is reprinted by permission:

Procedures on Paperless Entry of ITAR-Controlled Goods. U.S. Customs and Border Protection issued to its field offices Feb. 5 a memo establishing the following uniform national procedures for paperless entries of commodities controlled under International Traffic in Arms Regulations licenses or license exemptions. CBP states that because its Automated Commercial System does not have a mechanism to collect information on ITAR licenses and license exemptions, entries of ITAR-controlled commodities are often released paperless without the proper presentation of the temporary import or temporary export licenses or the ITAR exemption statement. The result is a lack of proof of legal importation of ITAR-controlled goods, leading to the possibility of seizure of the commodities.

According to the memo, customs brokers must present a paper CBP Form 3461 for all entries that involve a temporary import license (DSP-61) or a temporary export license (DSP-73) issued by the State Department’s Directorate of Defense Trade Controls prior to release. Brokers must also present the temporary license for decrementation, along with all other documents necessary for entry at the time entry is made.

However, inbound shipments controlled under ITAR license exemptions will continue to be entered via the Automated Broker Interface. Filers must notate the import entry documents with the proper statements required for the exemption. At the time of export of these shipments, the exporter or agent must file the Electronic Export Information in the Automated Export System and provide on the invoice the import entry document number on which the exemption was first declared.

A CBP officer may request a copy of the import entry document to verify that the exemption was declared. If the document does not cite the appropriate exemption, the shipment will be detained and referred through the EXODUS Command Center for failing to meet the conditions of the exemption. This type of violation will require a permanent export license for the export of the controlled commodities. The exporter or agent is required to disclose the violation to DDTC and obtain a permanent export license (DSP-5) prior to the Fines, Penalties & Forfeitures procedures and release of the merchandise.

The memo states that first-time violators of these requirements will be issued a warning and allowed to make the necessary corrections and that this information will be recorded in the Treasury Enforcement Communication System. However, subsequent violations will not be considered technical violations and will not be treated as such by the ports.

CBP notes that if a continuous entry bond is available, a single-entry bond will not be required for ITAR shipments requiring a paper CBP form 3461 or for paperless entry.

Aerospace Engineer Sentenced to More than 15 Years in Prison After Being Convicted of Economic Espionage and Acting as Chinese Foreign Agent

2010-02-10T09:38:00.003-05:00

An aerospace engineer formerly employed by Rockwell International and Boeing was sentenced on February 8, 2009 to 15 years and eight months in federal prison after being convicted on charges of economic espionage and acting as an agent of the People's Republic of China (PRC).

Dongfan "Greg" Chung, 73, of Orange, California, was convicted in July 2009 after a 10 day bench trial held in U.S. Federal Court in Santa Ana, California on one count of acting as a foreign agent, one count of conspiring to violate the Economic Espionage Act of 1996, six counts of violating the EEA and one count of making a false statement to the Federal Bureau of Investigation. In his written decision after the trial, United States District Judge Cormac J. Carney found that Mr. Chung had been an agent of the PRC for over thirty years.

At the sentencing hearing, Judge Carney said that he could not "put a price tag" on national security, and that with the long sentence for Mr. Chung he wanted to send a signal to China to "stop sending your spies here."

The case against Mr. Chung resulted from an investigation into Mr. Chi Mak who was convicted of providing defense articles to China. Mr. Mak was sentenced in March 2008 to more than 24 years in prison. Four of Mr. Mak's family members later pleaded guilty to similar charges.

According to the evidence presented during Mr. Chung’s trial, individuals in the Chinese aviation industry began sending Mr. Chung "tasking" letters as early as 1979. Over the years, the letters directed Mr. Chung to collect specific technological information, including data related to the Space Shuttle and various military and civilian aircraft. Mr. Chung responded in one undated letter that "I would like to make an effort to contribute to the Four Modernizations of China." In various letters to his handlers in the PRC, Mr. Chung referenced engineering manuals he had collected and sent to the PRC, including 24 manuals relating to the B-1 Bomber.

Between 1985 and 2003, Mr. Chung made multiple trips to the PRC to deliver lectures on technology involving the Space Shuttle and other programs During those trips he met with PRC government officials, including agents affiliated with the People’s Liberation Army. Mr. Chung and PRC officials exchanged letters that discussed Mr. Chung’s travel to China and recommended methods for passing information, including suggestions that Mr. Chung use Chi Mak and his wife Rebecca to transmit information.

In September 2006, FBI and NASA agents searched Mr. Chung’s house and found more than 300,000 pages of documents from Boeing, Rockwell and other defense contractors inside the house and in a crawl space underneath the house. Among the documents found in the crawl space were scores of binders containing decades' worth of stress analysis reports, test results and design information for the Space Shuttle, Delta IV Rocket, F-15 fighter, B-52 bomber, CH-46/47 Chinook helicopter, and other proprietary aerospace and military technologies.

According to reports, Mr. Chung told the judge during the sentencing hearing that he had taken the information to write a book.

Mr. Chung's attorney plans to appeal.

BIS Publishes Final Rule Amending EAR for Certain Exports Used on International Space Station

2010-02-09T09:03:00.000-05:00

While the federal government in Washington, DC remains closed today for the second day in a row, the Government Printing Office remains open and publishing the Federal Register.

Today's edition of the Federal Register contains one export control-related notice, a final rule published by the Bureau of Industry and Security amending the Export Administration Regulations (EAR) to modify License Exception GOV to provide authorization for exports and reexports for use on the International Space Station (ISS).

In order to prepare for the end of the Space Shuttle program (there are only four more shuttle missions scheduled), today's final rule amends section 740.11 of the EAR by providing a new authorization for the export or reexport of commodities subject to the EAR that are classified under ECCN 9A004 (which covers space launch vehicles and spacecraft not controlled by the ITAR) for use on the ISS.

Specifically, this rule provides a new authorization for commodities classified under ECCN 9A004 that are subject to the EAR that are needed at launch destinations outside of the U.S. (France, Japan, Kazakhstan and Russia) on short notice. The rule defines "short notice" as a requirement to have a commodity manifested and at the scheduled launch site for hatch-closure no more than 45 days from the time the exporter or reexporter received complete documentation.

While most exports of items for use on the RSS to launch countries are handled by NASA, this amended license exception permits other exporters to use this license exception if necessary.

Export Control Reform 2010: Transforming the Legal Architecture of Dual-Use and Defense Trade Controls

2010-02-09T07:30:00.136-05:00

While there have been many export control reform proposals issued in the past few months, very few of them have focused on the legal aspects of the U.S. export control regime.

Neena Shenai, an adjunct scholar at the American Enterprise Institute for Public Policy Research, has added an interesting perspective to the export control reform debate in her working paper entitled Export Control Reform 2010: Transforming the Legal Architecture of Dual-Use and Defense Trade Controls (available here in PDF format). Ms. Shenai, an attorney, is well-suited to provide this perspective given her experience in the private sector and in government, which includes serving as a law clerk to a judge at the U.S. Court of International Trade, practicing international trade law at a leading law firm and serving as an advisor to the Assistant Secretary for Export Administration at the Commerce Department's Bureau of Industry and Security.

The paper offers the thesis that improvements in the export control system’s legal architecture, including administrative procedural safeguards and limited judicial review while also protecting classified information and national security determinations, will improve the workings of the system in general.

Ms. Shenai reaches that conclusion by discussing the existing legal framework of dual-use and defense-related export controls, examining the various shortcomings of the existing export controls legal regime and discussing what can be learned from other U.S. international-related legal regimes that could serve as useful models for reform of the U.S. export control system. The regimes examined include the licensing of nuclear products by the Nuclear Regulatory Commission, the administration of trade remedy laws, the administration of U.S. customs laws and the treatment of national security information protected from disclosure under the Freedom of Information Act.

The paper then provides a number of general and specific recommendations to improve the legal framework of the export control system, including improvements to the commodity jurisdiction (CJ), commodity classification and licensing processes. For example, the paper advocates having agency decisions provide applicants with detailed information on why licenses were granted or denied, the grounds on how CJ determinations are made and allowing applicants the ability to appeal such decisions to a federal court, preferably the Court of International Trade, given its longstanding history of hearing cases under the U.S. trade laws.

Ms. Shenai concludes by noting that "the recommendations made in this paper, if implemented, would serve to ensure that the U.S. export control laws are administered in a fair, transparent, predictable, and accountable fashion, while simultaneously maintaining national security protections."

It should be noted that this working paper has not yet been finalized and Ms. Shenai welcomes comments and corrections. Information on how to contact Ms. Shenai can be found in the document.

Sandler, Travis & Rosenberg Advisory: Finding a Willing Buyer Only One Part of the Export Process

2010-02-08T08:33:00.003-05:00

Finding a Willing Buyer Only One Part of the Export Process

Exporters Looking to Boost Business Need to Mind Rules and Regulations Too

The Obama administration is launching a government-wide effort to double U.S. exports over the next five years as part of a plan to increase domestic employment and boost the U.S. economy. However, companies looking to take advantage of the new National Export Initiative to break into new markets should be aware that shipping goods overseas comes with potential perils as well as opportunities.

As part of the NEI, the federal government plans to increase its trade advocacy efforts, including educating U.S. companies about opportunities overseas, directly connecting them with new customers and advocating more forcefully for their interests. The NEI will also include a focus on improving access to export financing and helping to remove barriers that prevent U.S. companies from getting access to foreign markets. Only a very small percentage of U.S. companies currently export their products, and of those that do, 58% export to only one country. The Obama administration is looking to increase these figures in the expectation that doing so will also increase employment.

However, warns Doug Jacobson, head of Sandler, Travis & Rosenberg’s export controls practice group, while increasing the number of U.S. companies that export and increasing trade promotion assistance are laudable goals, U.S. exporters must be aware that finding a willing buyer is only the first step in the exporting process.

“In addition to taking the necessary steps to ensure they are paid for their goods, U.S. exporters must be aware of the wide range of U.S. regulatory and legal issues applicable to exports,” Jacobson said. “The benefits of exporting can be great for U.S. companies, but the penalties for violating export laws and regulations can be severe. ST&R often represents exporters in enforcement actions that learn of their export compliance obligations only after they receive an administrative subpoena from the Bureau of Industry and Security or the Office of Foreign Assets Control. Many of those violations could have been avoided if the exporters understood their export compliance obligations in advance.”

Examples of the important compliance-related issues that U.S. exporters should be aware of when selling goods overseas include the following.

Ultimate Destination. U.S. export restrictions and licensing requirements vary by the country of destination. Some countries are subject to comprehensive embargoes, while others are subject to targeted sanctions directed at certain individuals and companies.

Jurisdiction and Classification of Goods. Proper jurisdiction and classification of goods under the Export Administration Regulations or the International Traffic in Arms Regulations is required to determine export licensing requirements and end-use and end-user restrictions for all products being exported from the U.S. In addition, the proper export classification is required to be declared in the Electronic Export Information filing that must be transmitted via the Automated Export System.

Know Your Customer. To avoid engaging in transactions with parties that have been denied export privileges or are subject to U.S. sanctions, exporters should screen all customers and parties involved in the export against the government’s various restricted party lists.

Anti-boycott Compliance. Boycott requests, which often contain the words “boycott” or “blacklist” or provisions prohibiting the importation of goods from certain countries, are often found in documents involving sales to the Middle East, including purchase orders, tenders, contracts, shipping requests and letters of credit. Certain boycott requests must be reported to the Bureau of Industry and Security.

Foreign Corrupt Practices Act. The FCPA prohibits U.S. persons and their agents from making prohibited payments to foreign government officials to obtain and keep business.

For more information on these issues, or how ST&R can help you increase your exports while remaining compliant with applicable laws and regulations, please contact Doug Jacobson at (202) 216-9307.

You can also stay up-to-date on the latest developments on this issue by subscribing to ST&R’s WorldTrade\INTERACTIVE daily e-newsletter.

Sandler, Travis & Rosenberg, P.A., is a customs and international trade law firm concentrating in assisting clients with the global movement of goods, ideas and personnel and the setting of global trade policy. Our affiliated consulting company, Sandler & Travis Trade Advisory Services Inc., is a leading provider of trade-related management and consulting services to government and industry. For more information about ST&R and STTAS, please visit our Web site.

Reprinted with permission of Sandler, Travis & Rosenberg, P.A.

U.K. Company Fined $17 Million for Exporting Boeing 747s to Iran

2010-02-05T15:10:00.004-05:00

Balli Aviation Ltd., a subsidiary of the United Kingdom-based Balli Group PLC (collectively "Balli"), pleaded guilty today in the U.S. District Court for the District of Columbia to a two-count criminal information in connection with its illegal export of commercial Boeing 747 aircraft from the United States to Iran.

In a related civil enforcement case, Balli entered into a joint settlement agreement with the Treasury Department's Office of Foreign Assets Control (OFAC) and the Commerce Department's Bureau of Industry and Security (BIS) to settle alleged violations of U.S. export controls and sanctions laws..

Under the criminal plea agreement, Balli agreed to pay a $2 million criminal fine and be placed on corporate probation for five years. In the civil settlement with BIS and OFAC, Balli agreed to pay a $15 million civil penalty (payable in five installments over two years) to settle alleged violations of the Iranian Transactions Regulations and Export Adminstration Regulations. The terms of the civil settlement agreement provide that $2 million of Balli's civil penalty will be suspended and waived if Balli remains in compliance with U.S. export control laws.

According to count one of the criminal information, from 2005 through 2008, Balli conspired to export three Boeing 747 aircraft from the United States to Iran via a subsidiary without first having obtained the required export license from BIS or authorization from OFAC, in violation of the EAR and Iranian Transactions Regulations. The criminal information also states that the Boeing 747 was purchased with financing obtained from Mahan Airlines, the first private airline in Iran. (Mahan Airlines prominently features the Boeing 747 on its home page).

Count two of the information states that Balli violated a Temporary Denial Order (TDO) issued by BIS in March 2008 that prohibited the company from conducting any transaction involving any item subject to the EAR. The Justice Department alleged Balli subsequently violated the TDO by carrying on negotiations with others concerning buying, receiving, using, selling and delivering U.S.-origin aircraft.

In the civil case, Balli was charged with conspiracy to violate the EAR by working with the Iranian airline to export the U.S.-origin aircraft to Iran. BIS also charged Balli with one count of acting contrary to the terms of a TDO by attempting to sell and export three additional 747s to Iran.

In addition to the civil monetary penalties, BIS suspended Balli's export privileges for five years (as noted, Balli was previously subject to a BIS TDO that was later lifted), although BIS agreed to suspend the denial order as long as the penalty is timely paid and the company remains compliant with the EAR. Mahan Airways remains on BIS's Denied Persons List.

In addition, the civil settlement agreement requires Balli to hire an unrelated third-party consultant with expertise in U.S. export control laws and sanctions regulations to conduct audits of Balli's U.S. export control and sanctions compliance on an annual basis during the next five years and to submit the audit results to BIS and OFAC.

The OFAC and BIS joint settlement agreement, which contain additional details on Balli's alleged activities, can be found here (pdf).

SIDEBAR: On a somewhat related note, last month marked the 40th anniversary of the first commercial flight of the Boeing 747 from New York to London by its launch customer Pan American World Airways. The Flightglobal website has put together a special section marking the 40th anniversary of the Boeing 747 here.

Next NCITD Meeting to Feature Speakers Discussing Export Control Reform and ITAR Issues

2010-02-05T10:46:00.001-05:00

The next meeting of the National Council on International Trade Development (NCITD) will take place on Wednesday, February 10, 2010 in Washington, DC and will feature the following speakers:

Bill Reinsch, President, National Foreign Trade Council
Topic: Export Control Reform Update

Charles B. Shotwell, Director, Office of Defense Trade Controls Policy, Directorate of Defense Trade Controls, U.S. Department of State Topic: Commodity Jurisdiction: Trends and Statistics; Automation Update

For information on how to join NCITD or to attend the meeting, see www.ncitd.org or contact the NCITD Secretariat at 202-872-9280.