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Greetings!
We hope you are enjoying the summer!
This month's import/export news highlights include: the sentencing of a retired university professor to 4 years in jail for export violations; the update to DTRADE2 that allows selected parties to submit agreements to DDTC electronically; a Circuit Court's overturning of an ITAR conviction based on the vagueness of the regulations; CBP's issuance of correcting amendments to the 10+2 rule; and CBP's publication of liquidated damages guidelines for Importer Security Filings. As always, we would appreciate any comments or suggestions you may have to improve this newsletter either by email to info@globaltradeexpertise or via our feedback survey link in our left column.Thank you for reading! Jennifer Kessinger & Tammie Goldstein Krauskopf
globaltradeexpertise
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Retired University Professor Sentenced for Export Violations
Sentence of Imprisonment of Four Years Imposed
 On July 1, 2009, the Department of Justice issued a press release announcing the sentencing of a retired university professor convicted of the Arms Export Control Act (AECA) violations. The AECA prohibits the exports of defense-related materials, including the technical information or data, to a foreign national or foreign nation.
In a U.S. District Court in Knoxville, Tennessee, Dr. John Reece Roth, a retired University of Tennessee professor, was sentenced to four years in prison.
In a highly publicized trial that ended in September 2008, Dr. Roth was convicted of more than a dozen AECA violations for illegally exporting to China technical information relating to a U.S. Air Force research and development contract. The illegal exports of military technical information for use in an unmanned aerial vehicle involved specific information about advanced plasma technology that had been designed and was being tested for use on the wings of UAVs operating as weapons or surveillance systems.
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DDTC Permits Selected U.S. Applicants to Submit Agreements Via DTrade2
Electronic Submission of Agreements Expected to Open to All by October 1, 2009
 Beginning July 6, 2009, the Directorate of Defense Trade Controls (DDTC) has allowed selected U.S. applicants to submit agreements and their amendments electronically via the D-Trade2 system. (See the press release here.) This system uses the D-Trade2 Production application to submit, review, and approve agreement proposals, and incorporates the DSP-5 as the primary tool for transitioning agreements and their amendments from one phase of the adjudication process to the next. Due to this process, DDTC will no longer have to issue a separate authorization letter upon approval of a case.
DDTC will follow the success of these pilot electronic agreement submissions, and expects to make this application available to all U.S. applicants on October 1, 2009. Electronic submission of the agreements will become mandatory in Spring 2010. During the initial phase of electronic submission, DDTC will continue to accept paper submissions until further notice.
In addition to the new DTrade2 component that supports the electronic submission function, DDTC has compiled a list of issues that users encounter with DTrade2 system, and published it with solutions and workarounds. Technical support for DTrade2 can be reached at (202) 663-2838, or via dtradehelpdesk@state.gov.
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OFAC Issues Report of Alleged OFAC Violations
Civil Penalties Outlined
 On July 1, 2009, the Treasury Department's Office of Foreign Assets and Controls (OFAC) issued its June 2009 report of civil penalties imposed for alleged violations of OFAC sanctioned regimes. The report lists the following four settlements of alleged violations:
· Oxbow Carbon and Minerals LLC of West Palm Beach, FL agreed to remit $276,250 to settle allegations that the company violated the Iranian Transactions Regulations occurring from November 2006 through October 2007. OFAC alleged that Oxbow engaged in transactions involving services originating in Iran and facilitated trade-related transactions by non-U.S. persons which involved the use of vessels owned and/or managed by the Islamic Republic of Iran Shipping Lines in Tehran, Iran, without an OFAC license. Oxbow did not voluntarily disclose the alleged violations to OFAC, but OFAC noted that the company "demonstrated cooperation" during OFAC's review of the alleged violations and has made revisions to its compliance program as a remedial measure.
· National Marine Consultants, Inc. has remitted $42,075 to settle allegations of violations of the Iranian Transactions Regulations. OFAC alleged that between March 2005 and May 2007 NMCI outsourced to an Iranian entity inspection services it was contractually bound to perform for a third-party, without an OFAC license. NMCI did not voluntarily disclose the matter to OFAC, but later cooperated with OFAC's investigation.
· Philips Electronics of North America Corporation, a New York, NY company, has remitted $128,750 to settle allegations of violations of the Cuban Assets Control Regulations occurring between June 2004 and March 2006. OFAC alleged that PENAC acted without an OFAC license through an employee's travel to Cuba in connection with the sale of medical equipment by a foreign affiliate of PENAC. PENAC voluntarily disclosed this matter to OFAC.
· Willbros USA, Inc. of Houston, Texas, paid $6,600 to settle an allegation of violation of the Sudanese Sanctions Regulations occurring between June 18, 2003 and December 29, 2004. OFAC alleged that Willbros willfully violated the Regulations when it entered into a contract to bid on an oil development project in Sudan, despite its knowledge that such activities violated the Regulations, by facilitating the export of goods, technology or services to Sudan and evading the prohibitions set forth in the Regulations. Willbros voluntarily disclosed this matter to OFAC. OFAC applied its 2003 Economic Sanctions Enforcement Guidelines to this violation because Willbros and OFAC agreed to settle the allegation of violation, and memorialized the tentative agreement, prior to the issuance of OFAC's Civil Penalties Interim Policy of November 27, 2007.
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Court Overturns ITAR Conviction Based on the Vagueness of the Regulations
U.S. Court of Appeals for the 7th Circuit Decision
 On June 15, 2009, the U.S. Court of Appeals for the 7th Circuit issued its decision in U.S. v. Doli Syarief Pulungan, (No. 08-3000), overturning the conviction of the defendant that was found guilty of exporting rifle scopes in violation of the International Traffic in Arms Regulations (ITAR).
In support of its decision, the court stated that the government failed to properly identify which specific items were subject to export control regulations, or to justify the criteria for controlling them. According to the court, because the regulations were so vague, the defendant could not be held responsible for violating such vague regulations.
The court stated that the State Department's claim of "authority to classify any item as a "defense article," without revealing the basis of the decision and without allowing any inquiry by the jury, would create serious constitutional problems." The court went on to state that in regular circumstances, a regulation is published for all to see, giving people an opportunity "to adjust their conduct to avoid liability." But, "a designation by an unnamed official, using unspecified criteria, put in a desk of a drawer, and taken out only for use at a criminal trial, and immune from any evaluation by the judiciary, is the sort of tactic usually associated with totalitarian regimes." "Government must operate through public laws and regulations" and not through "secret laws," the court declared.
Some commentators suggest this ruling could have a great effect on the export controls, as it discusses the ambiguity of the ITAR, which provide the State Department with great latitude in determining what articles are covered under the ITAR.
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CBP Issues Correcting Amendments to 10+2 Rule
Correction is Effective on July 14, 2009
 On July 14, 2009, the Bureau of Customs and Border Protection (CBP) issued correcting amendments to the interim final rule entitled "Importer Security Filing and Additional Carrier Requirements" originally published in the Federal Register on November 25, 2008.
Pursuant to the interim final rule, commonly known as the 10+2 rule, an Importer Security Filing (ISF) must be filed for cargo arriving into a U.S. port generally no later than 24 hours before the cargo is laden aboard a vessel at a foreign port.
The new correcting amendment added a new paragraph (b)(5) to 19 C.F.R. §149.2 to clarify that ISFs for shipments intended to be transported in-bond as immediate exportations (I&Es) or transportation and exportations (T&Es) must be transmitted no later than 24 hours before the cargo is laden aboard a vessel that is destined to the U.S.
With respect to the obligation to amend the ISF, CBP specified that the ISF must be updated if there is a change to any of the ISF data elements before the goods enter the boundaries of the first port of arrival in the U.S. Amendments to the ISF are accepted at any time after the goods arrive in a U.S. port.
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CBP Publishes Liquidated Damages Guidelines for Failure to Comply with Importer Security Filing Requirements
Mitigating and Aggravating Factors Outlined
On July 17, 2009, U.S. Customs and Border Protection ("CBP") published its Guidelines for the Assessment and Cancellation of Claims for Liquidated Damages for Failure to Comply with Importer Security Filing Requirements. (CBP Dec. 09-26).
In addition to liquidated damages, a carrier or ISF Importer may be issued a do not load (DNL) hold, the delay or denial of a vessel carrier's preliminary entry- permit/special license to unlade and/or the assessment of any applicable statutory penalty. CBP may also withhold the release or transfer of the cargo until CBP receives the required information and has had the opportunity to review the documentation. Liquidated damages may be assessed in the following circumstances:
Late Filing - If an ISF Importer submits a late ISF, CBP may assess a claim for liquidated damages in the amount of $5,000 per late ISF.
Inaccurate Filing - CBP may assess liquidated damages in the amount of $5000 per inaccurate ISF.
Updates - CBP may assess a claim for liquidated damages against the importer for the first inaccurate ISF update in the amount of $5000.
Withdrawals - CBP may assess a claim for liquidated damages in the amount of $5000 if an ISF importer fails to withdraw an ISF.
Additional penalties under 19 U.S.C. § 1595a(b) may be assessed for serious or repetitive violations.
The Guidelines also discuss the cancellation of liquidated damages and mitigating and aggravating factors to consider. In the case of a first time violation, the liquidated damages claim may be cancelled upon payment of an amount between $1000 and $2000 depending on the presence of mitigating and aggravating factors. Subsequent violations may be cancelled upon payment of an amount not less than $2,500 if CBP determines that law enforcement goals were not compromised.
Mitigating factors include evidence of progress in the implementation of the ISF requirement during the flexible enforcement period (January 26, 2009 to January 26, 2010); small number of violations compared to the number of shipments for which ISFs were required; an ISF Importer which is a certified Tier 2 or Tier 3 C-TPAT member; demonstrated remedial action; ISF information was filed late because of vessel diversion due to factors outside of the ISF Importer's control; the presenting party acquired the information from another party in accordance with ordinary commercial practices and can demonstrate that it reasonably believed the information to be true and it was not reasonably able to verify the information.
Aggravating factors include lack of cooperation with CBP; evidence of smuggling or attempt to introduce merchandise contrary to law; multiple errors on the ISF; and rising error rate which is indicative of deteriorating performance in the transmission of ISF information.
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Who's Hiring?
A Summary of Current Trade Job Opportunities
 As a service to the international trade community, Global Trade Expertise compiles links to trade job opportunities from many different sources. New trade job listings are posted frequently on our website.
To sort the job opportunities by region, fields, or levels, click on the appropriate category or tag in the right column on our Trade Jobs webpage. |
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Calendar of Events
Upcoming Trade Events & Seminars
 Our website has a comprehensive listing of import and export conferences held throughout the country, as well as Customs training, EAR training, ITAR training, and other training. Below is a small sampling of what's available in the coming months:
Complying with U.S. Export Controls - BIS & The Southern California Regional District Export Council
August 19 - 20, 2009 - Universal City, CA - $350
Update 2009 - U.S. Bureau of Industry and Security (BIS)
September 30 - October 2, 2009 - Washington, D.C.
Complying with U.S. Export Controls - BIS
September 10 - 11, 2009 - Del Mar, CA - $350
Complying with U.S. Export Controls - BIS & Oklahoma District Export Council
September 15 - 16, 2009 - Oklahoma City, OK - $350
Complying with ITAR - Defense Articles and Services - BIS & Oklahoma District Export Council
September 17, 2009 - Oklahoma City, OK - $195
Complying with U.S. Export Controls - BIS & Professional Association of Exporters and Importers (PAEI)
September 23 - 24, 2009 - Santa Clara, CA - $350
Complying with Export Controls on International Tech Transfers - American Conference Institute
September 23 - 24, 2009 - San Francisco, CA - $1995 - $2795
Complying with ITAR - Defense Articles and Services - BIS & Oklahoma District Export Council
September 17, 2009 - Oklahoma City, OK - $195
Advanced ITAR Workshop - Federal Publications Seminar
September 30 - October 1, 2009 - Seattle, WA - $995
Satellite and Space Export Controls - American Conference Institute
October 1 - 2, 2009 - Orlando, FL - $2695
Export Control of Equipment, Technology, and Services - Federal Publication Seminars
October 14-15, 2009 - Las Vegas, NV - $995
Export Control of Equipment, Technology and Services - Federal Publications Seminar
October 14 - 15, 2009 - Las Vegas, NV - $995
Basic ITAR Workshop - Federal Publications Seminar
October 16, 2009 - Chicago, IL - $595
ITAR Boot Camp - American Conference Institute
October 20 - 21, 2009 - Orlando, FL - $2195
ITAR Compliance and Audits - Federal Publications Seminar
October 21 - 22, 2009 - Washington, DC - $995
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Basic ITAR Workshop - Federal Publications Seminar
October 27, 2009 - Arlington, VA - $595
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Thanks again for your interest in our newsletter!
Sincerely,
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Jennifer Kessinger & Tammie Krauskopf
Attorneys & Consultants
jk@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
tk@globaltradeexpertise.com
Tel. 708.707.4087 (Tammie Krauskopf)
www.globaltradeexpertise.com
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