Source: http://www.williamsmullen.com/news/update-international-business-compliance-1
Timestamp: 2018-06-18 09:42:58
Document Index: 322733245

Matched Legal Cases: ['in fine', '§126', '§124', '§120', '§120', 'art 6', 'art 6']

Update on International Business Compliance | Williams Mullen
05.20.2011 Update on International Business Compliance
1. EXPORT CONTROLS
Employee of Government Contracts Firm Charged Personally For Criminal ITAR Violations
A former employee of Rocky Mountain Instrument Co. was charged personally for criminal ITAR violations in connection with the transfer of technical drawings to offshore components manufacturers. Rocky Mountain Instrument, a government contracts firm in Denver, Colorado, had previously been prosecuted in 2007 for export violations for transferring to foreign manufacturers technical drawings for optical components without obtaining an export license. In June 2010, Rocky Mountain pled guilty to criminal ITAR charges and, in October 2010, also settled a separate civil investigation involving the same violations. It appears that prosecutors are continuing the investigation and now are turning their attention to individual employees involved in the case. The employee was arraigned in U.S. District Court in Colorado on April 21, 2011, although the events giving rise to the prosecution occurred in 2007. If convicted, the employee faces penalties of up to ten years imprisonment and $1,000,000 in fines, plus criminal forfeitures. The case currently is being investigated by Immigration and Customs Enforcement (ICE), Homeland Security Investigation (HSI) and the Defense Criminal Investigative Service (DCIS). Links to reports on the investigation can be found at http://www.justice.gov/usao/co/press_releases/2011/April2011/4_21_11.html and http://www.ice.gov/news/releases/1104/110421denver.htm?f=m.
DDTC issued a final rule amending ITAR related to transfers by foreign parties of ITAR-controlled items to dual national and third-country national employees. Prior to the issuance of the rule, if a U.S. party exported an ITAR-controlled item to a foreign end-user, significant restrictions applied if the end-user sought to transfer the ITAR item to its dual national and third-country national employees. Under the current amendment, DDTC sought to address this issue. The amendment provides a new ITAR §126.18 which provides that, subject to certain conditions, the transfer of unclassified defense articles, including technical data, will be permitted to or within a foreign business entity, foreign governmental entity, or international organization that is an authorized end-user or consignee for defense articles, including the transfer to dual nationals or third-country nationals who are bona fide regular employees directly employed by the foreign consignee or end-user. The transfer of defense articles pursuant to this provision must take place completely within the physical territory of the country where the end-user is located, where the governmental entity or international organization conducts official business, or where the consignee operates, and be within the scope of an approved export license, other export authorization, or license exemption.
As a condition of transferring a defense article to foreign employees as described above, any foreign organization that receives a defense article must have effective compliance procedures in place to prevent diversion to destinations or entities, or for purposes, other than those authorized by the applicable export license or other authorization. The elements of such compliance procedures are set forth in the amendment.
The amendment also adds §124.16 to ITAR, which provides, subject to certain conditions set forth in the amendment, special retransfer authorizations for unclassified technical data and defense services to member states of NATO and the European Union, Australia, Japan, New Zealand and Switzerland. A copy of the final amendment is available at: http://www.pmddtc.state.gov/FR/2011/76FR28174.pdf.
DDTC Issues Proposed Rule To Amend Definition of Defense Services
DDTC has issued a proposed rule to amend the definition of the term “Defense Services” contained in ITAR §120.9. In light of the importance of the regulation of services related to US Munitions List (USML) items, the rule could a have far-reaching effect on ITAR. Under the current definition in §120.9, “Defense Services” is defined to include three components. The new rule would define Defense Services to contain four components, as follows: (1) the furnishing of assistance (including training) using other than public domain data to foreign persons, whether in the United States or abroad, in the design, development, engineering, manufacture, production, assembly, testing, intermediate or depot level repair or maintenance, modification, demilitarization, destruction, or processing of defense articles; (2) the furnishing of assistance to foreign persons, whether in the United States or abroad, for the integration of any item controlled on the USML or the Commerce Control List into an end item or component that is controlled as a defense article on the USML, regardless of the origin; (3) training or providing advice to foreign units and forces, regular and irregular, regardless of whether technical data is transferred to a foreign person, including formal or informal instruction of foreign persons in the United States or abroad by any means, including classroom or correspondence instruction, conduct or evaluation of training and training exercises, in the employment of defense articles; or (4) conducting direct combat operations for or providing intelligence services to a foreign person directly related to a defense article.
In addition, the proposed rule would add a new section which provides that the following activities do not constitute Defense Services: (1) training in the basic operation (functional level) or basic maintenance of a defense article; (2) mere employment of a U.S. citizen by a foreign person; (3) testing, repair, or maintenance of an item “subject to the Export Administration Regulations” administered by the Bureau of Industry and Security, that has been incorporated or installed into a defense article; (4) providing law enforcement, physical security or personal protective training, advice, or services to or for a foreign person using only public domain data; or (5) providing assistance (including training) in medical, logistical (other than maintenance), or other administrative support services to or for a foreign person.
In addition, the proposed rule also proposes definitions of the terms “Organizational-level maintenance”, “Intermediate-level maintenance” and “Depot-level maintenance” and makes other conforming changes to ITAR. Comments are due by June 13, 2011. Here is a link to the proposed rule: http://www.pmddtc.state.gov/FR/2011/76FR20590.pdf.
DDTC Proposed Rule for Exemption for Temporary Export of Chemical Agent Protective Gear
DDTC has proposed an amendment to the ITAR which would add an exemption for temporary exports of chemical agent protective gear for exclusive personal use to non-restricted destinations and Afghanistan and Iraq under certain conditions. The rationale for the exemption is that U.S. citizens are going to areas where this type of protective gear is essential for their safety. Comments on the proposed rule are due by May 23. The Federal Register notice can be found at: http://www.pmddtc.state.gov/FR/2011/76FR16353.pdf.
In preparation for Southern Sudan’s plan to secede from the Republic of Sudan in July of this year, OFAC has released guidance on how the Sudanese Sanctions Regulations would apply to an independent Southern Sudan. OFAC states in the guidance that the Sudan Sanctions Regulations will not apply to an independent Southern Sudan. There are still certain activities that will be prohibited without authorization due to the continued interdependence of some sectors of the economy and infrastructure of Southern Sudan with the Republic of Sudan. Those include: dealing in “property and interests in property of the Government of Sudan,” performing services that “benefit Sudan or the Government of Sudan,” engaging in transactions “relating to the petroleum or petrochemical industry in Sudan,” and participating in exports to or imports from the new state “that transit through the Republic of Sudan.” The guidance can be found here: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110412.aspx.
BIS – Syria Licenses Revoked
BIS has revoked certain licenses for the export and reexport to Syria of items relating to VIP aircraft used for transporting senior officials of the Syrian government. This action is effective as of April 29, 2011. Recent human rights problems in Syria led to the revocation. All persons holding relevant licenses have been notified of this action.
BIS - Entity List Clarification
BIS has noted a formatting error in the Entity List rule published on December 17, 2010 (75 FR 78883). The University of Electronic Science and Technology of China (UESTC) and the 901 Institute should have been separate aliases for the China Academy of Engineering and Physics, rather than the 901 Institute being listed as part of the UESTC entry. BIS will publish a correction in the Federal Register as soon as possible.
BIS - Japan Emergency Support and Humanitarian Relief Efforts
In an effort to support relief efforts in Japan, BIS will consider requests for expedited processing for items requiring a license that are exported to Japan for emergency support and humanitarian relief. The Exporter Counseling Staff can provide further information (202-482-4811 or https://www.bis.doc.gov/forms/askacounselor.html.
Comments Available on Strategic Trade Authorization License Exception
Comments from interested parties are now available on the proposed Strategic Trade Authorization License Exception to the EAR. As we reported in December, the rule would add a new license exception to the EAR which would permit exports, reexports and in-country transfers of certain controlled items to NATO countries and other countries that pose low risk of unauthorized use or transshipment. To prevent abuse of this exception, parties using it would be subject to notification, destination control statement and consignee statement requirements. This proposed rule was part of the President’s Export Control Reform Initiative. The comments are available at: http://efoia.bis.doc.gov/pubcomm/records-of-comments/record_of_comments_sta.pdf.
Three individuals and two companies have been indicted for illegally exporting computer-related equipment from the U.S. to Iran via the United Arab Emirates. Jeng “Jay” Shih, Massoud Habibion, Mohsen Motamedian, Online Micro LLC, and Sunrise Technologies and Trading Company were charged under 27 counts in the two cases. To convict the parties, the government will need to prove that they knew that their shipments to the UAE were illegal. This is particularly significant in the case involving Sunrise Technologies and its president, Mr. Shih, because the government likely will rely on a 2006 “outreach visit” in which BIS’s Office of Export Enforcement visited the company and told Shih that exporting to Iran was illegal (but did not appear to mention transshipments). A link to the summary of the case can be found at: http://www.bis.doc.gov/news/2011/doj04212011.htm
Other Export Control Developments
• Editorial Corrections to the Export Administration Regulations: http://www.bis.doc.gov/news/2011/fr_04292011.pdf.
• Michigan Company Fined for Illegal Exports to China, Others: http://www.bis.doc.gov/news/2011/bis_press03222011.htm.
• Final Rule on dual-nationals and third country nationals employed by foreign end users has been published: http://www.pmddtc.state.gov/FR/2011/76FR28174.pdf.
• Publication of Terrorist Asset Report: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110509.aspx.
• Syria Executive Order; Syria Designations: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110429.aspx.
• Kingpin Act Designations; Kingpin Act Designation Updates; Anti-narcotics Designation Removals; Sudan Designation Removals: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110428.aspx.
• Libya Oil/Gas General License and Statement of Licensing Policy: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110426_33.aspx.
• Update of Comprehensive Guidelines for License Applications to Engage in Travel-Related Transactions Involving Cuba: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110421.aspx.
• Kingpin Act Designations: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110420.aspx.
• Executive Order Prohibiting Certain Transactions with respect to North Korea: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110419_33.aspx.
• North Korea Designation: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110419.aspx.
• Release of updated list of authorized providers of air, travel, and remittance forwarding services to Cuba: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110418.aspx.
• Change to SDN Data File Format Released: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110414.aspx.
• Libya Sanctions – General License No. 4: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110408_44.aspx.
• Release of OFAC Civil Penalties Information: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110408_33.aspx, http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110426.aspx.
• Libyan Sanctions Designations: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110408.aspx.
• Libyan Sanctions Designation Removal: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110404.aspx.
• Nonproliferation and Weapons of Mass Destruction Advisory: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110331_33.aspx.
• Kingpin Act Designations Removals: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110330.aspx.
• Anti-terrorism designations; non-proliferation designations: http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110324.aspx, http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110331.aspx; http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20110511.aspx.
2. CUSTOMS AND TRADE LAW
Employers Filing H, L and O Petitions Must Heed New Export Control Certification: A new Part appearing in the updated Form I-129 Petition for Nonimmigrant Worker issued by U.S. Citizenship and Immigration Services (USCIS) requires employers to complete an export control certification. Part 6 of the updated Form I-129 contains a certification regarding the release of or provision of access to controlled technology or technical data to certain foreign persons employed in the United States. The certification essentially requires employers of workers entering the United States under certain nonimmigrant visa classifications (H-1B, H-1B1, L-1, and O-1A) to attest to the employer's compliance with U.S. “deemed export” laws, which treat releases of controlled technology and technical data to certain foreign nationals as exports, even if a release takes place in the United States. Each employer/petitioner must certify that, with respect to the technology or technical data involved, the employer has reviewed the Export Administration Regulations (EAR) and the International Traffic in Arms Regulations (ITAR) and has determined that either: (i) export does not require a license; or (ii) a license is required, but the petitioner will prevent the beneficiary from getting access without such a license. Importantly, the form requires all employers, not just those in defense or highly technical industries, to make the certification. Although USCIS anticipates that this certification will affect a relatively small percentage of employers, all employers must be cognizant that, under both the EAR and the ITAR, the release of controlled technology or technical data to foreign persons in the United States, even by an employer, is deemed to be an export to that person’s country or countries of nationality. As such, to be on the safe side, employers of H, L and O employees should conduct the necessary review and ensure that the Part 6 certification can be made and that such employers do not risk making deemed exports.
WTO Prohibits U.S. Methodology Imposing Both AD and CVD Duties Against China: U.S. antidumping duties (AD) and countervailing duties (CVD) aim to level the playing field when imported merchandise sold at unfairly low or subsidized prices injures or threatens to injure the domestic industry. The application of U.S. CVD law to subsidized imports from nonmarket economies has triggered considerable controversy over the years. The World Trade Organization (WTO) Dispute Settlement Body (DSB) has now adopted an Appellate Body ruling against the United States’ imposition of AD and CVD on certain Chinese steel pipes, off-road tyres and woven sacks. The United States had won at the panel level. The Appellate Body, however, determined that the United States acted inconsistently with its WTO obligations when its methodology imposed both AD and CVD in the case of imports of specific products from China. The WTO ruling requires the United States to bring its practices into compliance with the Appellate Body report. It is as yet unclear whether or how the United States will comply with the ruling.
Ag Department Seeks More Comments on Implementation of Revised Lacey Act Provisions: The Animal and Plant Health Inspection Service (APHIS) is accepting comments on its implementation of declaration requirements under the Lacey Act. The Food, Conservation, and Energy Act of 2008 (FCEA) expanded the Lacey Act’s protections to a broader range of plants and plant products. It also made unlawful the importation of certain plants and plant products without an import declaration. Generally, that declaration must identify, among other things, the scientific name of the plant, the value of the importation, the quantity of the plant and the name of the country from which the plant was harvested. Under the FCEA, APHIS must review the implementation of these declaration requirements and submit a report to Congress, which must: (1) evaluate the effectiveness of declaration requirements, in terms of the usefulness (or not) of each type of data collected; (2) highlight whether the requirements could be harmonized with other regulations applied to imports; (3) recommend any needed legislation; (4) analyze the requirements’ effects on legal plant costs; and (5) analyze the requirements’ effects on illegal logging. The public notice and comment period is part of the review process. The deadline for submitting comments to APHIS was April 14, 2011.
If you have any questions concerning the subject matter addressed above, please feel free to contact Thomas B. McVey, 202.293.8118 or tmcvey@williamsmullen.com, or any member of Williams Mullen’s International Practice.
Williams Mullen Update on International Business Compliance is prepared for information purposes only and does not constitute legal advice. Persons seeking legal advice concerning the issues addressed in this issue are encouraged to contact competent legal counsel.