Source: http://docplayer.net/17685670-Summary-table-of-contents.html
Timestamp: 2019-01-20 00:29:29
Document Index: 183424933

Matched Legal Cases: ['art 732', 'arts\n10', 'art 766', 'art 764', 'art 744', 'art 766', 'art 732', 'art 732', 'art 744', 'art 732']

3 Summary Table of Contents Introduction Mission and Organization... Page 3 Office of Export Enforcement... Page 4 Office of Enforcement Analysis... Page 6 Office of Antiboycott Compliance... Page 7 Authorities and Remedies... Page 7 Criminal and Civil Penalties... Page 7 Voluntary Self-Disclosures... Page 9 Denial of Export Privileges... Page 9 BIS-Administered Lists... Page 9 Asset Forfeiture... Page 10 False Statements... Page 11 Export Control Reform... Page 11 Information Triage Unit... Page 12 Export Enforcement Coordination Center... Page 12 Strategic Trade Authorization License Exception... Page 13 Definition of Specially Designed... Page 14 Export Compliance... Page 14 Responsible Parties... Page 14 Nine Principles for an Effective Compliance Program... Page 14 Transshipment & Re-Exports... Page 16 Catch-All... Page 16 Successor Liability... Page 17 Educational Outreach... Page 17 Cyber-Intrusions and Data Exfiltration... Page 17 Case Presentations... Page 18 Chapter 1 Terrorism and State Sponsors of Terrorism Introduction: Criminal and Administrative Case Examples... Page 21 Schlumberger Oilfield Holdings Ltd... Page 22 Ya Qian Jonathan Chen... Page 23 Weatherford International... Page 23 Hetran, Inc./Helmut Oertmann/FIMCO FZE... Page 24 Corezing International PTE, LTD... Page 24 Mayrow General Trading Network... Page 25 Robbins & Myers Belgium SA... Page 26 Balli Group... Page 26 Computerlinks FZCO/Infotec/Waseem Jawad/Aramex Emirates LLC... Page 27 Borna Brad Faizy/Touraj Ghavidel/Techonweb... Page 27 Dani Tarraf/Moussa Hamdan/Douri Tarraf/Hassan Komeiha... Page 28 Transamerica Express of Miami Corp... Page 28 Saeed Talebi... Page 29 i
4 Ericsson de Panama S.A.... Page 29 Matthew Kallgren/PC Industries... Page 29 Mohammad Reza Hajian/R.H. International LLC/Nexiant LLC/ P & P Computers LLC/Randy Barber/Michael Dragoni/Fortis Data Systems LLC/Greencloud LLC/John Talley/Tallyho Peripherals Inc... Page 30 Aviation Services International/Delta Logistics/Neils Kraaipoel/ Robert Kraaipoel... Page 30 Mohammad Tabibi/Michael Edward Todd/Hamid Seifi/ Parts Guys, LLC/Galaxy Aviation Services... Page 31 Hossein Ali Khoshnevisrad/MAC Aviation Group... Page 31 Engineering Dynamics, Inc./James Angehr/John Fowler/Nelson Galgoul... Page 32 Massoud Habibion/Mohsen Motamedian/Online Micro LLC... Page 32 Farhad Jenabfar... Page 33 Mark Alexander... Page 33 Mostafa Saberi Tehrani... Page 34 AAG Makina... Page 34 Trans Merits Co., Ltd... Page 35 Hasan Ibrahim... Page 35 Sunrise Technologies and Trading Corporation/Jeng Shih... Page 35 Chapter 2 Commerce Control List Introduction: Criminal and Administrative Case Examples... Page 36 Nuclear Nonproliferation Controls... Page 37 Qiang (Johnson) Hu... Page 37 Nicholas Kaiga... Page 37 Lisong Ma... Page 37 Ming Suan Zhang... Page 38 Nadeem Akhtar/Computer Communication USA... Page 38 XunWang/PPG Paints Trading (Shanghai) Co., Ltd/Huaxing Construction.. Page 39 Mattson Technology Inc.... Page 39 Jirair Avanessian/Farhad Masoumian Amirhossein Sairafi/XVAC... Page 40 Peter Gromacki/Hamid Reza Hashemi/Amir Abbas Tamimi/ Murat Taskiran... Page 40 Chemical/Biological Weapons Controls... Page 41 Flowserve Corporation... Page 41 Buehler Limited... Page 41 Dr. Thomas Butler... Page 41 Missile Technology Controls... Page 42 C.A. Litzler Co., Inc.... Page 42 GrafTech International Holdings... Page 42 Interpoint Corporation... Page 42 Parthasarathy Sudarshan/Mythili Gopal/Cirrus Electronics, LLC... Page 43 National Security Controls... Page 43 Area S.p.A.... Page 43 Russell Marshall/Universal Industries Limited, Inc..... Page 43 Wind River Systems... Page 44 ii
5 Arc Electronics/Alexander Fishenko/Alexander Posobilov... Page 44 Susan Yip/Mehrdad Foomanie/Merdad Ansari... Page 44 Zhen Zhou Wu/Yunfeng Wei/Bo Li/Chitron Electronics, Inc.... Page 45 ARC International/Yaming Nina Qi Hanson/Harold DeWitt Hanson... Page 45 Timothy Gormley/Amplified Research Corporation... Page 46 Fu-Tain Lu/Fushine Technology... Page 46 Joseph Piquet/Alphatronx, Inc.... Page 46 Jason Liang/Sanwave Electronics... Page 47 William Tsu/Cheerway Corporation... Page 47 B&H Foto & Electronics Corp... Page 47 Crime Controls... Page 47 Vitali Tsishuk/Volha Dubouskaya/Aliaksandr Stashynski/Yahor Osin/ Aliaksandr Belski/Ernest Chornoletskyy... Page 48 John Carrington/Sirchie... Page 48 Boniface Ibe... Page 49 Mark Komoroski/Sergey Korznikov/D&R Sports Center... Page 49 Donald Wayne Hatch/Rigel Optics, Inc.... Page 49 Aaron Henderson/Valhalla Tactical Supply... Page 50 Chapter 3 Freight Forwarders Introduction: Criminal and Administrative Case Examples... Page 51 Kintetsu World Express.... Page 51 General Logistics International.... Page 51 Federal Express.... Page 51 DPWN Holdings (USA), Inc. (formerly known as DHL Holdings (USA), Inc.) and DHL Express (USA).... Page 52 Chapter 4 Deemed Exports Introduction: Criminal and Administrative Case Examples... Page 53 Atmospheric Glow Technologies/J. Reece Roth... Page 53 Intevac Inc.... Page 53 Maxim Integrated Products Inc.... Page 54 Ingersoll Machine Tools... Page 54 TFC Manufacturing, Inc.... Page 54 Chapter 5 Antiboycott Controls Introduction: Criminal and Administrative Case Examples... Page 55 Baker Eastern, SA (Libya).... Page 57 TMX Shipping Company, Inc.... Page 57 Laptop Plaza, Inc. (aka IWEBMASTER NET, Inc.).... Page 57 Leprino Foods Company... Page 58 AIX Global, LLC... Page 58 Digi-Key Corporation... Page 58 iii
6 Dear Members of the Exporting Community: T O he U.S. Department of Commerce plays an integral role at the intersection of economic growth and national security. The Bureau of Industry and Security (BIS) at the Department of Commerce is the principal agency involved in the development, implementation and enforcement of export controls for commercial technologies and for many military technologies as a result of the President s Export Control Reform initiative. Export Enforcement at BIS detects, prevents, investigates, and assists in the prosecution of illegal exports of such items, with criminal investigators supported by enforcement analysts investigating overseas procurement networks that seek to undermine this Nation s security. In addition, our Office of Antiboycott Compliance works with boycotting countries to remove prohibited language and enable U.S. businesses to compete on an equal footing. Our most important touchstone is you, the exporting community. You are our eyes and ears; you are the ones receiving the suspicious inquiries; you are the ones whose reputation is damaged when your items get diverted; you are the ones that are spending hard-earned profits on compliance programs while some of your competitors may not be. We ask you to be ever-vigilant, as all unsolicited inquiries or unauthorized intrusions, such as cyberthefts, should trip your compliance systems into motion, and we encourage you to contact one of our field offices for advice. Our commitment to responsible exporters is to help you identify suspicious transactions through a robust outreach program and aggressive use of proscribed parties lists; to give you great weight mitigation if you have an export management and compliance system in place that results in voluntary self-disclosures (VSDs); and to take enforcement action against parties that divert or steal your items without your knowledge. With regard to VSDs, the number of overall disclosures has increased fifty percent from FY2013 to FY2014. Nonetheless, the outcome of those VSDs has remained fair and consistent. VSDs are a compelling indicator of a party's intent to comply with U.S. export control requirements in the present and the future. BIS s longstanding policy of encouraging the submission of VSDs involving apparent violations is reflected by the fact that, over the past several years, on average only three percent of VSDs submitted have resulted in the imposition of a civil penalty. The vast majority of cases brought to our attention through VSDs result in the issuance of warning letters, containing a finding that a violation may have taken place. Warning letters will generally be issued in cases involving inadvertent violations and cases involving minor or isolated compliance deficiencies, absent the presence of aggravating factors. As we finalize the last categories of the USML to CCL transition under Export Control Reform and reflect on recent expansions of controls on unauthorized military end-uses and end-users, it presents an opportunity to reexamine the fundamentals of an effective export compliance program. Knowing your customer continues to be at the core of this effort for responsible U.S. companies. Export Enforcement is committed to working with industry to help identify threats, facilitate licensing decisions and party screening, and mitigate penalties where companies have taken the appropriate actions to manage export compliance. As Under Secretary Hirschhorn has stated, a vigorous enforcement posture on the part of BIS and the larger law enforcement community is only problematic for the individual or company that is purposely trying to flout the law. For those that seek to comply with our export control rules, enforcement is meant to level the playing field, domestically and internationally. I wish you another prosperous year of secure trade! Sincerely, David W. Mills Assistant Secretary of Commerce for Export Enforcement 1
8 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Introduction to Enforcement of U.S. Export Controls Mission and Organization T he U.S. Department of Commerce s Bureau of Industry and Security (BIS) administers and enforces export controls on dual-use and certain munitions items for the Department of Commerce through the Export Administration Regulations (EAR) under the authority of the International Emergency Economic Powers Act (IEEPA). 1 Other federal agencies with a role in administering U.S. export controls include the Department of State, which controls the export of defense articles and defense services subject to the International Traffic in Arms Regulations (ITAR), the Department of Energy, which controls exports and reexports of technology related to the production of special nuclear materials, the Nuclear Regulatory Commission, which controls the export of certain nuclear materials and equipment, and the Department of the Treasury, which administers economic sanctions programs. The Export Enforcement arm of BIS protects and promotes U.S. national security, foreign policy and economic interests by educating parties to export Under Secretary for Industry and Security transactions on how to improve export compliance Eric L. Hirschhorn at the Update practices and identify suspicious inquiries, supporting Conference in Washington, D.C., July the licensing process by evaluating the bona fides of transaction parties, conducting end-use checks, interdicting illegal exports, investigating violations, and referring violators of export control laws for administrative penalties or criminal prosecution. Export Enforcement at BIS has evolved over the past 30 plus years into a sophisticated law enforcement agency, with criminal investigators and enforcement analysts who are singularly focused on export enforcement and work closely together with licensing officers within a single bureau of the government. Using its subject matter expertise in the area of export controls, coupled with its unique administrative enforcement tools, Export Enforcement leverages its relationships with partner law enforcement agencies and industry to maximize its impact. As part of the President s Export Control Reform (ECR) initiative, BIS s jurisdiction is being expanded to cover tens of thousands of munitions items transferring from the ITAR to the EAR (see below for additional information on the ECR initiative). These transfers will enhance U.S. Government oversight on such munitions exports because the specialized resources and authorities of Export Enforcement will augment the existing enforcement resources of other federal agencies dedicated to protecting U.S. national security. ECR has also created interagency information sharing and coordination mechanisms to leverage U.S. Government export enforcement and compliance resources more effectively. 1 Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order of March 8, 2013, 78 FR (March 13, 2013) and as extended by successive Presidential Notices, the most recent being that of August 7, 2014, 79 FR (August 11, 2014), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act (50 U.S.C et seq. (2006 & Supp. IV 2010)). BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order as amended by Executive Order
9 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Export Enforcement has three program offices: the Office of Export Enforcement, the Office of Enforcement Analysis, and the Office of Antiboycott Compliance. Export Enforcement blends the unique talents of its program offices to channel enforcement efforts against current and emerging threats to national security. Those unique talents are described in the following paragraphs. Office of Export Enforcement The Office of Export Enforcement (OEE) maintains Special Agents at offices across the United States, including its headquarters in Washington, D.C., eight field offices located in Boston, Chicago, Dallas, Los Angeles, Miami, New York, San Jose, and Washington, D.C., and a resident office in Houston. In addition, OEE agents have been deployed to Federal Bureau of Investigation (FBI) field offices in Cincinnati, Ohio; Minneapolis, Minnesota; Phoenix, Arizona; Portland, Oregon; Atlanta, Georgia; and St. Louis, Missouri; as well as to the Defense Criminal Investigative Service (DCIS) office in San Antonio, Texas, to provide enhanced coverage for investigating export violations. OEE Special Agents executing a search warrant. OEE Special Agents are sworn federal law enforcement officers with authority to bear firearms, make arrests, execute search warrants, serve subpoenas, detain and seize items about to be illegally exported, and order the redelivery to the United States of the items exported in violation of U.S. law. OEE is the only federal law enforcement agency exclusively dedicated to the enforcement of export control laws, and that singular focus allows for the development of the requisite subject matter expertise to be able to effectively enforce a complex regulatory regime. Some cases may require years of investigation to bring to fruition. OEE investigations are initiated on information and intelligence obtained from a variety of sources, including routine review of export documentation, overseas end-use monitoring, and industry information. OEE investigates both export violations by U.S. persons and the unauthorized reexport or transfer by foreign persons of items subject to the EAR to prohibited end-uses, end-users, or destinations. OEE works closely with other federal law enforcement agencies to identify and act on export violations and with industry to raise awareness of compliance best practices and red flag indicators of potential illicit activities. 2 For example, OEE works with U.S. Customs and Border Protection to train outbound officers on EAR requirements and identify suspicious cargoes for detention. Based on information gathered during the course of an investigation, OEE works closely with attorneys from the Department of Justice to prosecute violators criminally, as well as with the Office of Chief Counsel for Bureau and Security to bring administrative charges. Export Enforcement also takes actions where appropriate to place parties on the BIS Entity List and Unverified List. Export Enforcement is co-located in the same Department of Commerce bureau as Export Administration, allowing for close cooperation in the administration and enforcement of export controls. Export Enforcement provides advice and comments on the 2 An illustrative list of indicators of possible unlawful diversion is found in Supplement No. 3 to Part 732 of the Export Administration Regulations (EAR), 15 C.F.R. Parts
10 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION enforceability of new policies and regulations, and works closely with Export Administration at BIS to routinely review export transactions to ensure compliance with the EAR. Such review includes: Confirming whether exported items were properly classified; Verifying required export authorizations, if applicable (i.e., the required export license was obtained prior to the shipment and the transaction complies with the license conditions, a license exception was available and properly used, or the item did not require a license for export to the end- user and destination); and Determining whether the transaction involved any apparent violations of the EAR (e.g., related to the general prohibitions, end-use or end-user-based controls, proscribed parties). Director Hassebrock and Deputy Assistant Secretary Richard Majauskas, at the 33 rd Annual National Peace Officer s Memorial Service. Export Enforcement also has Special Agents co-located with the FBI in Cincinnati, Ohio; Minneapolis, Minnesota; Phoenix, Arizona; Portland, Oregon; Atlanta, Georgia; and St. Louis, Missouri, as well as with DCIS in San Antonio, Texas. Export Enforcement also has Export Control Officers (ECOs) in Beijing, China; Hong Kong, China; New Delhi, India; Moscow, Russia; Dubai, UAE; and Singapore. 5
11 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION In fiscal year 2014, BIS investigations led to the criminal convictions of 39 individuals and businesses for export violations with penalties of over $137 million in criminal fines, more than $1 million in forfeitures, and 568 months of imprisonment. In addition, OEE and BIS s Office of Chief Counsel completed 44 administrative export cases, resulting in over $60 million in civil penalties. Export Enforcement also initiated the addition of 155 new parties onto the BIS Entity List. Office of Enforcement Analysis The Office of Enforcement Analysis (OEA) supports the identification, prevention, investigation and prosecution of the illegal exports, reexports and transfers of items subject to the EAR by: 1) analyzing the bona fides of foreign transaction parties to license applications (i.e., their reliability as recipients of U.S.- origin items); 2) monitoring end-uses and end-users of U.S.-origin exports; 3) identifying suspicious inquiries to alert U.S. companies; 4) developing investigative leads; 5) providing analytical case support; and 6) engagement with key trading partners. OEA accomplishes this mission through its Strategic Intelligence Division, Internal Operations Division, Export Control Officer Program, and Investigative Analysis Division. OEA s Strategic Intelligence Division vets the bona fides of foreign parties to license applications and serves as the executive agent for the interagency Information Triage Unit, or ITU. A part of the President s Export Control Reform initiative, discussed in more detail below, the ITU is responsible for assembling and disseminating relevant information, including intelligence, from which to base informed decisions on proposed exports requiring a U.S. Government license. OEA s International Operations Division screen BIS license applications and reviews export documentation to select candidates for pre-license checks (PLCs) and post-shipment verifications (PSVs), collectively referred to as end-use checks (EUCs). PLCs validate information on BIS export license applications, including end-user reliability. PSVs strengthen assurances that exporters, shippers, consignees, and end-users comply with the terms of export licenses and the EAR. This end-use monitoring program supports the export licensing process and generates information about possible export violations for further investigation by OEE. This division, working with Export Control Officers stationed abroad, supports Export Enforcement s role in the bilateral negotiations with Hong Kong, Singapore and the United Arab Emirates on export control cooperation and coordination to increase capacity to prevent the diversion of U.S.-origin items. OEA s Export Control Officer Program consists of Special Agents on detail to the Department of Commerce s Foreign Commercial Service in six strategic overseas locations critical to BIS s mission: Beijing, China; Hong Kong, China; Dubai, United Arab Emirates; New Delhi, India; Moscow, Russia; and Singapore. All of these positions have regional responsibilities that extend their reach to an additional 43 countries. End-use checks are also conducted by OEE Sentinel Trips and U.S. Embassy personnel. In 2013, Export Enforcement completed 1,044 end-use checks in 51 countries. Finally, OEA s Investigative Analysis Division is responsible for producing investigative leads relating to potential export violations for outreach and investigation by OEE Special Agents. Investigative leads are developed from unfavorable end-use checks, review of export and license data, and classified and open sources of information. In addition, OEA s Investigative Analysis Division provides research and analytical case support to OEE investigations. The case of Arc Electronics (see page 44) demonstrates how collaboration between OEE and OEA helps bring violators to justice. The initial stage of the investigation found a single potentially controlled export of an integrated circuit to Russia. As the investigation developed over a two-year period it was determined that Arc was involved in a complex Russian procurement network supplying microcircuits and other electronic components to military weapons and development programs. OEA Analysts provided significant assistance in a variety of ways, including but not limited to: gathering and analyzing SED data; compiling specification data for the components involved; providing preliminary 6
12 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION analysis of the specifications to triage components for license determinations; contributing to intelligence information reports produced by the FBI; and finally, assisting in execution of arrest warrants and collecting evidence. Export Enforcement Panel at the BIS Update Conference on Export Controls and Policy, July 2014 Office of Antiboycott Compliance The Office of Antiboycott Compliance (OAC) administers and enforces the antiboycott provisions of the EAR. OAC carries out its mandate through a threefold approach: monitoring boycott requests received by U.S. businesses; bringing enforcement actions when necessary; and guiding U.S. businesses on the application of the EAR to particular transactions. In addition to these traditional compliance tools, OAC liaises with foreign governments to eliminate boycott requests at their origin. By working with U.S. Government partners in the Office of the U.S. Trade Representative and at the Department of State, OAC has met with officials of boycotting countries issuing boycott-related requests. By meeting with these governments and pointing out the barrier to trade that boycott requests impose, OAC often is able to remove prohibited language, enabling U.S. businesses to compete on an equal footing in these markets. Authorities and Remedies Criminal and Civil Penalties In cases where there has been a willful violation of the EAR, violators may be subject to both criminal fines and administrative penalties. Administrative penalties may also be imposed when there is no willful intent, which means that administrative cases can be brought in a much wider variety of circumstances than criminal cases. BIS has a range of unique administrative enforcement authorities including the imposition of civil penalties, denial of export privileges, and placement of individuals and entities on lists that restrict or prohibit their involvement in export and reexport transactions. Under IEEPA, criminal penalties can reach 20 years imprisonment and $1 million per violation. Administrative monetary penalties can reach $250,000 per violation or twice the value of the transaction, whichever is greater. 7
13 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION The EAR provide that in appropriate cases the payment of a civil penalty may be suspended or deferred in whole or in part during a probationary period imposed by BIS. The suspended or deferred penalty is subject to activation and collection if the probationary conditions are not fulfilled. Penalty suspensions may occur, for example, when the respondent has demonstrated, typically through the submission of financial statements and tax returns, that it is unable to pay some or all of the penalty that would be appropriate for the violations at issue. Penalties may also be suspended in whole or in part as a result of substantial cooperation with the investigation but where the agency nonetheless decides that a suspended penalty should be imposed for its deterrent effect. (See: Amplifier Research Corp., p. 45) BIS also may impose the requirement that the respondent hire an unaffiliated third-party consultant to conduct one or more external audits of the company s compliance with U.S. export control laws and regulations and provide a copy of the audit to Export Enforcement. INCREASING TRANSPARENCY THROUGH PENALTY GUIDANCE BIS provides guidance (found in Supplement No. 1 to Part 766 of the EAR) to provide the public with a comprehensive description of how BIS determines appropriate penalties in the settlement of administrative export control enforcement cases. It explains that BIS carefully considers each settlement offer in light of the facts and circumstances of the case, relevant precedent, and BIS s objective to achieve an appropriate level of penalty and deterrent effect. The penalty guidance can be found online at: Several factors are taken into account when determining the appropriate administrative penalty. The penalty guidance encourages parties to provide information to BIS that would be helpful in the application of the guidance to their cases. Some factors are given great weight and are treated as considerable more significant than factors that are not so designated. General factors for consideration include: Destination of the export Degree of willfulness involved in violations Number of violations Criminal charges Mitigating factors include: Voluntary Self-Disclosure of violations ( great weight ) Effective export compliance program ( great weight ) Cooperation with BIS investigation Assistance to other BIS investigations No previous record of violations Aggravating factors include: Deliberate effort to hide or conceal violations ( great weight ) Serious disregard for export compliance responsibilities ( great weight ) Item is significant due to its sensitivity or reason for control ( great weight ) History of violations High quantity of value of exports 8
14 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Voluntary Self-Disclosures Export Enforcement at BIS encourages the submission of Voluntary Self-Disclosures (VSDs) by parties who believe they may have violated the EAR. VSDs are a compelling indicator of a party s intent to comply with U.S. export control requirements. Parties can submit an initial disclosure when the violations are first uncovered and follow-up with a complete narrative within 180 days. 3 BIS carefully reviews VSDs received from disclosing parties to determine if violations of the EAR have occurred and to determine the appropriate corrective action when violations have taken place. Most VSDs are resolved with the issuance of a warning letter. Should Export Enforcement determine the issuance of an administrative penalty is appropriate for the resolution of a VSD, great weight is accorded the VSD in assessing and mitigating the penalty. In appropriate cases, fines, and other administrative penalties may be significantly reduced and/or suspended for a probationary period. During fiscal year 2014, OEE opened a total of 312 VSD cases and closed a total of 213 VSD cases. Over half of these VSD cases were closed with the issuance of a warning letter, while nearly a third were closed with no action or no violation. Only a very few, around three percent, were closed with the issuance of administrative sanctions. In addition, during fiscal year 2014, approximately 90 VSDs involving the CCL s new 600-series commodities were submitted. Denial of Export Privileges BIS has the authority and discretion to deny all export privileges under the EAR of a domestic or foreign individual or company. Consider the potentially catastrophic impact upon a person or organization of not being able to export, reexport, or receive any item including an EAR99 item that is subject to the EAR. BIS may impose a denial of export privileges as a sanction in an administrative case, or as a result of a person s criminal conviction under certain statutes. A denial of export privileges prohibits a person from participating in any transactions subject to the EAR. Furthermore, it is unlawful for other businesses and individuals to participate in an export transaction subject to the EAR with a denied person. Denial of export privileges may be imposed as part of an administrative penalty. Under Section 11(h) of the EAA, a denial of export privileges may be imposed for up to ten years from the date of a person s conviction under the EAR, IEEPA, or Section 38 of the Arms Export Control Act (or any regulation, license, or order issued thereunder), or one of the several espionage-related statutes. The standard terms of a BIS denial order are published in Supplement No. 1 to Part 764 of the EAR. In addition, the Assistant Secretary for Export Enforcement may issue a Temporary Denial Order (TDO) denying any, or (typically) all, of the export privileges of a company or individual to prevent an imminent or ongoing export control violation. These orders are issued ex parte for a renewable 180-day period and deny not only the right to export form the United States, but also the right to receive or participate in exports from the United States. TDOs are also described in Section of the EAR. BIS-Administered Lists The Department of Commerce maintains three screening lists, which advise the exporting public that listed persons are subject to specific end-user restrictions. In the event an entity, company, or individual on one of the following lists appears to match a potential party in an export transaction, additional due diligence is required before proceeding to ensure the transaction does not violate the EAR. These lists are available on the BIS Website at and are also included in the U.S. Government Consolidated Screening List available at 3 See Section764.5 of the EAR for details on how to submit a VSD. 9
15 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Denied Persons List The Denied Persons List contains the names and addresses of persons subject to a denial of export privileges. Any dealings with a person on this list that would violate the terms of the denial order are prohibited. Entity List The Entity List has evolved into a formidable administrative enforcement tool that prohibits listed foreign persons from receiving some or all items subject to the EAR unless the exporter secures a license. Those on the Entity List were placed there because of the risk they pose of diversion of U.S.-origin items to weapons of mass destruction (WMD) programs, destabilizing accumulations of conventional weapons, terrorism, or other activities contrary to U.S. national security or foreign policy interests. These license requirements are in addition to any license requirements imposed on the transaction by other provisions of the EAR. As a general rule, BIS applies a policy of denial for license applications involving listed persons. 340 persons were added to the Entity List during FY2013 and FY2014 alone. The Entity List is also a marketing incentive for foreign parties to implement effective internal compliance programs to stop the diversion of U.S.-origin items to unauthorized destinations, uses, or users, thereby providing a basis for removal. For example, T-Platforms, a Russian supercomputer manufacturer, noted that its Entity List designation caused significant economic and image impact [because] the decision was interpreted by many manufacturers as a complete ban on the sale of various products to T-Platforms, often not subject to the EAR. BIS removed T-Platforms from the Entity List on December 31, 2013 after cooperating with the U.S. Government and receiving assurances that the company would comply with the EAR. For guidance concerning the prohibitions and license application review policy applicable to a particular person, please review that person s entry on the list. Listed persons may require removal from the Entity List by submitting a request pursuant to Supplement 5 to Part 744 of the EAR. Unverified List The Unverified List (UVL) contains the names and addresses of foreign persons that have been parties to transactions subject to the EAR whose bona fides could not be confirmed as a result of an end-use check, including the U.S. Government s inability to conduct such an end-use check. The presence of a person listed on the Unverified List in a proposed export transaction creates three requirements: all export transactions must be reported in the Automated Export System (AES); license exception-eligibility is suspended; and for all other EAR transactions not subject to a license requirement, the exporter must obtain a statement from the UVL party agreeing to abide by the EAR, including to permit an end-use check prior to export. Once BIS confirms the bona fides of the foreign party, including through completion of an end-use check, a party may be removed from the UVL. Similar to the Entity List, the UVL provides a market incentive for foreign companies to comply with the EAR, including its end-use check requirements. Asset Forfeiture Asset forfeitures target the financial motivation underlying many illicit export activities. The forfeiture of assets obtained in the conduct of unlawful activity may be imposed on connection with a criminal conviction for export violations, in addition to other penalties. Asset forfeitures prevent export violators from benefiting from the fruits of their crimes, and with no statutory maximum, the value of forfeited assets can greatly exceed criminal fines or civil penalties. 10
16 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION False Statements OEE Special Agents conducting an inspection. A party to an export transaction may be subject to criminal and/or administrative sanctions for making false statements to the U.S. Government in connection with an activity subject to the EAR. Most frequently, the false statements are made on an export document or to a federal law enforcement officer. Common types of false statements seen by BIS are statements on a Shipper s Export Declaration or AES Electronic Export Information filing that an export is destined for one country when it is really destined for a sanctioned destination, the export does not require a license (i.e., that is NLR ) when in fact a license is required for the shipment, false item valuations and statements that an export was shipped under a particular license number when in fact that license was for a different item. False statements that are made to the U.S. Government indirectly through another person, such as a freight forwarder, constitute violations of the EAR. Export Control Reform Secretary Pritzker at BIS s 2013 Update Conference describing how Export Control Reform simplifies controls on less significant military items that have the same utility as their commercial variant, as demonstrated by certain military and commercial aircraft switches. In August 2009, President Obama directed a broad-based interagency review of the U.S. export control system with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on current threats, as well as adapting to the changing economic and technological landscape. As a result of this review, tens of thousands of items are now being transferred from the United States Munitions List (USML), administered by the Department of State, to the more flexible licensing regime of the Commerce Control List (CCL). The ECR initiative will facilitate interoperability with U.S. allies and partners, strengthen the U.S. defense industrial base by reducing incentives for foreign manufacturers to avoid using U.S. parts and components, and allow the U.S. Government to concentrate its resources on the threats that matter most. The ECR initiative already is reducing dramatically the number of timeconsuming license applications required for exports to our closest friends and allies, decreasing licensing burdens on U.S. exporters. Although the majority of the focus has been on the transfer of items from the USML to the CCL, the effort to erect higher fences around those items has been every bit as important. A key piece of this effort involves 11
17 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION education. Export Enforcement has conducted hundreds of outreach meetings with companies impacted by the transition of items from the ITAR to EAR. Export Enforcement has also provided training to the Customs and Border Protection (CBP) on the regulatory changes to facilitate legitimate exports, particularly those eligible for more flexible licensing authorizations. In addition to the newly revamped Unverified List referenced above, ECR has also established new resources to support U.S. Government evaluation of proposed export transactions and increase interagency coordination in taking enforcement action. Information Triage Unit The first of these new resources is the interagency Information Triage Unit (ITU), 4 which helps ensure the overall integrity of our export control system. The ITU, housed within OEA, is responsible for assembling and disseminating relevant information, including intelligence, from which to base informed decisions on proposed exports requiring a U.S. Government license. This multi-agency screening coordinates the reviews of separate processes across the government to ensure that all departments and agencies have a full set of data, consistent with national security, from which to make decisions on license applications. Such screening contributes to more timely, predictable, and consistent processes that U.S. exporters engaged in global trade have confirmed are critical to their competitiveness. Export Enforcement Coordination Center As part of the ECR, the President established the Export Enforcement Coordination Center (E2C2) by Executive Order 5 in order to enhance information-sharing and coordination among law enforcement and intelligence officials regarding possible violations of U.S. export control laws. The E2C2 is housed in the Department of Homeland Security (DHS) with the participation of over fifteen federal agency partners, and enables these agencies to better employ their resources in a coordinated effort. The Director of the Center is from DHS; BIS and the FBI provide the two Deputy Directors. The participating agencies include the following: U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement U.S. Department of Defense, Air Force Office of Special Investigations U.S. Department of Defense, Defense Criminal Investigative Service U.S. Department of Defense, Defense Intelligence Agency U.S. Department of Defense, Defense Security Service U.S. Department of Defense, Naval Criminal Investigative Service U.S. Department of Energy, National Nuclear Security Administration U.S. Department of Homeland Security, Customs and Border Protection U.S. Department of Homeland Security, Homeland Security Investigations U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives U.S. Department of Justice, Federal Bureau of Investigation U.S. Department of Justice, National Security Division 4 ITU participants include BIS, the Departments of Defense, Homeland Security, Energy, State, and the Treasury, as well as the Intelligence Community. 5 Executive Order of November 9, 2010, 75 FR (November 15, 2010). 12
18 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION U.S. Department of State, Directorate of Defense Trade Controls U.S. Department of the Treasury, Office of Foreign Assets Control U.S. Export-Import Bank, Office of the Inspector General U.S. Postal Service, Postal Inspection Service Office of the Director of National Intelligence, Office of the National Counterintelligence Executive Assistant Secretary for Export Enforcement David W. Mills speaking at BIS s 2013 Update Conference. Regulatory Changes In addition to these new compliance and enforcement resources, two regulatory changes to the EAR, driven by the ECR initiative, are of particular benefit to our enforcement efforts and to the exporting community. Strategic Trade Authorization License Exception License Exception Strategic Trade Authorization (STA) authorizes the export of dual-use and munitions items (including those transferred from the USML to the CCL) to allied and partner nationals subject to certain safeguards. This License Exception requires that not only the exporter, but also any subsequent reexporter or transferor, must notify any subsequent consignee of each item shipped under the authority of STA and furnish the Export Control Classification Number (ECCN) of the item. Each consignee must then provide a written statement citing STA, the ECCN, and its agreement to abide by the EAR, including end-use and end-user restrictions, as well as maintain records (for provision to BIS on request). The STA consignee certification requirement thus remains with the item even after reexport or subsequent transfer. For munitions items transferred to the CCL s new 600 series, additional safeguards apply, including limiting applicability for ultimate end-use by the governments of 36 STA-eligible destinations, requiring foreign parties to the 13
19 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION transaction to have been previously approved on an export license issued by the Department of State or Commerce, and informing consignees about BIS end-use check requirements. In this way, STA creates a chain of custody and paperwork trail that increases BIS s ability to monitor and enforce EAR compliance. From the perspective of the exporting community, STA will speed up the processing of export transactions previously conducted under license. Definition of Specially Designed Another regulatory change under ECR is the new definition of the term specially designed, which makes compliance efforts more straightforward for the exporting community. The Departments of Commerce and State have established complementary definitions of this term in the ITAR and EAR to specifically articulate objective criteria for determining whether an item is considered specially designed. This new definition addresses ambiguities resulting from the previous requirement to ascertain design intent. From an enforcement perspective, this framework clarifies when an item is subject to control as a specially designed item. Export Compliance Responsible Parties All parties that participate in transactions subject to the EAR must comply with the EAR. These persons may include exporters, freight forwarders, carriers, consignees, and other participants in an export transaction. They EAR apply not only to parties in the United States, but also to persons in foreign countries who are involved in transactions subject to the EAR. Due Diligence: Nine Principles for an Effective Compliance Program Many exports of controlled items, including software and technology, require a license from BIS. It is the responsibility of the exporter to obtain a license when one is required under the EAR. License requirements for a particular transaction, as described in the EAR, are based on a number of factors, including technical characteristics of the item to be exported, and the item s destination, end-user, and end-use. When determining whether a license is required for your transaction, you should be able to answer the following questions: What is being exported? Where is the item being exported? Who will receive the item? How will the item be used? CAN Check exporters and customers Check end users and end uses Automated Export Declarations Educate relevant personnel BIS weighs a variety of aggravating and mitigating factors in deciding the level of penalties to assess in administrative cases. As set forth in Supplements 1 and 2 to Part 766 of the EAR, an effective compliance program is entitled to great weight mitigation. BIS s Export Management Compliance Program (EMCP) guidelines can be accessed through BIS s website at under the Compliance and Training tab. BIS employs the following nine guiding principles when assessing the effectiveness of a company's export compliance program: 14
20 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Management Commitment: Senior management must establish written export compliance standards for the organization, commit sufficient resources for the export compliance standards for the organization, commit sufficient resources for the export compliance program, and ensure appropriate senior organizational official(s) are designated with the overall responsibility for the export compliance program to ensure adherence to export control laws and regulations. Continuous Risk Assessment of the Export Program. Formal Written Export Management and Compliance Program: Effective implementation and adherence to written policies and operational procedures. Ongoing compliance Training and Awareness. Pre/Post Export Compliance Security and Screening: Screening of employees, contractors, customers, products, and transactions and implementation of compliance safeguards throughout the export life cycle including product development, jurisdiction, classification, sales, license decisions, supply chain, servicing channels, and post-shipment activity. Adherence to Recordkeeping Regulatory Requirements. Internal and External Compliance Monitoring and Periodic Audits. Maintaining a Program for Handling Compliance Problems, including Reporting Export Violations. Completing Appropriate Corrective Actions in Response to Export Violations. Developing an effective company compliance program is essential not only for preventing export violations, but also for enabling BIS to differentiate violations by individual employees from larger patterns of corporate noncompliance. Export Enforcement will afford great weight mitigation to companies with effective compliance programs and will emphasize individual responsibility when seeking penalties against willful violations by employees. The case of Timothy Gormley, a former employee of Amplifier Research, indicates this distinction between individual and corporate responsibility, and is discussed further on page 45. If you need assistance to determine whether the item you want to export requires a license you should: 1. Check the BIS Website or 2. Call one of our export counselors at (Washington, DC) or (California) for counseling assistance. Please note that, whether you are the exporter, freight forwarder, consignee, or other party to the transaction, you must address any red flags that arise. Taking part in an export transaction where a license is required but not obtained may subject you to criminal and/or administrative liability. The EAR discuss red flags in a section entitled Know Your Customer, Supplement No. 3 to Part 732, which is available on the BIS website. A key in determining whether an export license is required from the Department of Commerce involves knowing whether the item for export has a specific ECCN, an alpha-numeric code that describes a particular item or type of item, and shows the controls placed on that item. All ECCNs are listed on the CCL. Once an item has been classified, the next step is to determine whether an export license is required based on the reasons for control of the item and the country of ultimate destination. Reasons for control include chemical and biological weapons controls, nuclear nonproliferation, national security, missile technology, and crime control. Please visit for more information on how to classify items. 15
21 DON T LET THIS HAPPEN TO YOU EXPORT ENFORCEMENT INTRODUCTION Transshipment & Reexports Parties to an export transaction cannot bypass the EAR by shipping items through a third country. The transshipment or reexport of items in international commerce may be a violation of U.S. law. For example, an exporter cannot bypass the U.S. embargo against Iran by shipping an item to a distributor in the United Kingdom and asking that distributor to transship the item to a customer in Iran. Under U.S. law, this would be considered an export to Iran, even though it does not go directly to that country, and both the U.S. exporter and the United Kingdom distributor could be liable for violating U.S. law. Parties to exports or reexports of items subject to the EAR should be alert to the red flag indicators of possible unlawful diversion found in Supplement No. 3 to Part 732 of the EAR, and should consult BIS s guidance on reexports at: In addition, exporters should be knowledgeable about the export control requirements of their customers and are strongly encouraged to obtain copies of any relevant import licenses (permits) prior to export. For example, Hong Kong requires all importers to receive a license prior to receipt of multilaterally-controlled items from abroad. A U.S. company should inquire about such obligations and where they exist, obtain a copy of any required import license prior to export. Similarly, exporters are required to notify their customers of export license conditions (e.g., requirement for BIS authorization for subsequent transfer (in-country) or reexport) and should make their customers aware that a license (permit) may be required for subsequent reexport from their own government in addition to BIS. In December 2013, BIS published guidance on its website on Foreign Import/Export License Requirements (Hong Kong/Singapore) to assist exporters in this regard. Catch-All As mentioned in Chapter One, BIS controls exports of items not only based on their technical specifications, but also based on their intended end-use and end-user. The EAR impose license requirements on exports of items subject to the EAR if the exporter knows or has reason to know that any of the items will be used in an end-use of particular concern to the U.S. Government, such as a missile or nuclear weapons program, or in certain circumstances a military end-use or by a military end-user. These controls are often referred to as catch-all controls because they apply to a broad set of items, or in the case of WMD activities, to any item subject to the EAR, even if the item would not ordinarily require a license based on its technical specification. Export restrictions based on end-use and end-user are specified in Part 744 of the EAR and include restrictions on certain nuclear, rocket system, chemical and biological, and military end-uses, as well as restrictions on certain end-users. BIS maintains restrictions on end-users listed on the three lists described above: the Denied Persons List, the Entity List, and the Unverified List. BIS uses these lists to notify the public of end-users of concern, including entities engaged in illicit export activity or other activities contrary to U.S. national security or foreign policy, and entities that could not be confirmed as reliable recipients of U.S.-origin commodities, software, or technology. The EAR also incorporate by reference certain entities sanctioned by the Department of the Treasury, including Specially Designated Terrorists, Specially Designated Global Terrorists, and Foreign Terrorist Organizations. These lists are not comprehensive and do not relieve parties to an export transaction of their responsibility to determine the nature and activities of potential customers who may not be listed (see BIS s Know Your Customer Guidance in Supplement No. 3 to Part 732 of the EAR, available on the BIS website). 16
ly JULY 2014 l EXPORT ENFORCEMENT Summary Table of Contents Introduction Mission and Organization... Page 3 Office of Export Enforcement... Page 4 Office of Enforcement Analysis... Page 6 Office of Antiboycott