|
|
Greetings!
We hope you are all enjoying your summer! We have been extremely busy with business travel and hope you'll excuse the lateness of this month's Global Trader Newsletter. Highlights of August's import/export news are: video remarks of President Obama at BIS' Update Conference posted as well as comments by Commerce Secretary Locke and Under Secretary Hirschhorn which detail the Administration's export control reform initiative; Barclays has agreed to settle OFAC allegations for $176 Million; Blackwater has agreed to pay $42 Million to settle export allegations; BIS clarifies the impact of commodity classification determinations and advisory opinions; BIS issues a report on the impact of U.S. export controls on green technologies; and recent OFAC enforcement actions. Thank you for reading! Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
info@globaltradeexpertise.com
|
|
Video Remarks by President Obama for BIS' Update Conference Posted on BIS Website
President Outlines Export Control Reform Initiative
 On August 30, 2010, the White House published the video remarks by President Obama that will be presented at the U.S. Department of Commerce's Bureau of Industry and Security's (BIS) Export Controls Update Conference on August 31, 2010. The full remarks are as follows:
Hello everyone. I'm sorry I'm not able to be with you in person today, but I'm pleased to have the chance to join you by video to talk about our export control reform initiative.
About a year ago, we launched a comprehensive review of our export controls and determined that we need fundamental reform in all four areas of our current system - in what we control, how we control it, how we enforce those controls, and how we manage our controls. I want to thank Secretary Locke, Secretary Gates, Secretary Clinton and many others for their work on this initiative. And today I want to highlight the key elements of our new approach and the first steps toward its implementation.
For too long, we've had two very different control lists, with agencies fighting over who has jurisdiction. Decisions were delayed, sometimes for years, and industries lost their edge or moved abroad. Going forward, we will have a single, tiered, positive list - one which will allow us to build higher walls around the export of our most sensitive items while allowing the export of less critical ones under less restrictive conditions.
In the past, there was a lot of confusion about when a license was required. It depended on which agency you asked. Now, we will have a single set of licensing policies that will apply to each tier of control, bringing clarity and consistency across our system.
In addition, I plan to sign an Executive Order that creates an Export Enforcement Coordination Center to coordinate and strengthen our enforcement efforts - and eliminate gaps and duplication - across all relevant departments and agencies.
Finally, right now, export control licenses are managed by multiple, different IT systems or, in some cases, even on paper. Going forward, all agencies will transition to a single IT system, making it easier for exporters to seek licenses and ensuring that the government has the full information needed to make informed decisions.
While there is still more work to be done, taken together, these reforms will focus our resources on the threats that matter most, and help us work more effectively with our allies in the field. They'll bring transparency and coherence to a field of regulation which has long been lacking both. And by enhancing the competitiveness of our manufacturing and technology sectors, they'll help us not just increase exports and create jobs, but strengthen our national security as well.
All of this represents significant progress. And as we implement these reforms and take further steps - including working to create a single licensing agency - I look forward to working with both Congress and the export control community to ensure their success. Thank you.
[Emphasis added.]
|
Commerce Secretary Locke's Remarks at BIS' Update Conference Published
 On August 30, 2010, the Commerce Department published the prepared remarks of Commerce Secretary Gary Locke for the Bureau of Industry and Security's (BIS) 23rd Annual BIS Update Conference to be delivered on August 31, 2010.
In his remarks, Secretary Locke stated that, "We are taking important steps towards streamlining and simplifying our export control system to make it more transparent, and to enable exporters to quickly know exactly what can and cannot be exported, and where products can and cannot go. The first step to make this happen is to ensure that the Commerce and State Department control lists clearly lay out which products are controlled, and by which agency."
"To do this, we are working to make both the Commerce Control List and the Munitions List 'positive lists.' What this means is that we'll have two lists that classify and control items based upon specific characteristics, such as by size or by wavelength, or by the ability to operate under extreme atmospheric conditions."
"And, when this process is done - creating a 'bright line' between the two lists - exporters will be able to know which agency has jurisdiction over their products."
"An additional step will be to divide each control list into a three-tiered structure. Think of the tiers as shelves in a cabinet:
· The top tier - or the highest shelf - will be reserved for our most sensitive items, ones made in the U.S. which have high value military or intelligence capabilities;
· The middle tier - or a more accessible shelf - will hold somewhat less sensitive items, and will be products that are available almost exclusively from our multilateral partners and allies;
· The lowest tier will be reserved for items that are less sensitive, and which are more broadly available."
"Once all of the items are placed into a tier, a corresponding licensing policy will be assigned to ensure appropriate agency review.
· For the top tier, a license will generally be required for all destinations;
· Many of the items in the middle tier will be eligible to be exported to allies and most multilateral partners under a license exception or general authorization;
· And for items placed in the lowest tier, licenses will typically not be required."
"O[f] course we will continue to maintain robust and comprehensive sanctions against countries like Iran, North Korea and Cuba."
"In the final stage of export reform, we plan to merge the two lists into one - and we will continue to work with our colleagues on Capitol Hill to try to make this happen."
|
Remarks of Under Secretary Eric Hirschhorn at BIS Update Conference Published Export Control Reform Initiative Discussed At Length
On August 30, 2010, the Bureau of Industry and Security (BIS) published the remarks of Under Secretary Eric Hirschhorn to be made at BIS' Update Conference on August 31, 2010.
In his remarks, Under Secretary Hirschhorn states that President's Obama's export control reform initiative has been overseen by the White House on a daily basis and its champions include the three key cabinet secretaries principally responsible for reviewing export license applications -- Secretary Locke, Secretary Clinton, and Secretary Gates.
Once the government has implemented "a reformed export control mechanism," Under Secretary Hirschhorn states that he expects to see a system based on 3 overarching principles -- three "E"s, i.e., efficiency, education, and enforcement.
With regard to Efficiency, Hirschhorn stated that the government's approach rests on two fundamental principles: (1) the rules should be transparent and predictable, and (2) we must have streamlined processes and higher fences to control sensitive items appropriately while facilitating exports of less sensitive items to destinations and end users that don't pose substantial national security, proliferation, or similar concerns.
Hirschhorn states that the Commerce Control List (CCL) generally controls items based on technical parameters. Items not meeting a specified threshold are not subject to control. Hirschhorn states that, "There typically is no corresponding technical basis, though, for determining when an item is subject to the U.S. Munitions List. Instead, the USML relies heavily on the concept of 'design intent,' even where the function of an item may not be uniquely military."
Hirschhorn continues to state, "Our system should make clear when an item, regardless of the intent of its designers, is subject to control. As SecretaryLocke has indicated, we are restructuring the USML and, where necessary, the CCL, to create 'positive lists' of controlled items." Hirschhorn states that they are beginning by turning Category VII of the USML into a positive list of tanks, military vehicles, and elements of such goods that warrant control as defense articles. Additionally, the government will divide each control list into a three-tiered structure with licensing policies corresponding to specific tiers.
Hirschhorn stated that other initiatives that will lead to a more streamlined system will be implemented, including: (1) harmonizing definitions across all the export control regulations; (2) rationalization (e.g., the new encryption regulations); and (3) merging export control IT systems. With regard to merging export control IT systems, Hirschhorn stated that EAR license applications are reviewed by the Departments of State, Energy, Defense, and Commerce. Currently these 4 departments each use different IT systems, have access to different data, and can't directly communicate with one another. Commerce and the other agencies are developing a single IT system that will allow free and immediate data sharing. Hirschhorn stated that Defense is currently using this system, State will begin doing so early next year, Commerce should be on board later in 2011, and other agencies will follow.
For now, export license applications will continue to be processed through either D-Trade for USML items or SNAP-R for CCL items. When the control lists are merged in Phase III of the export control reform initiative, Hirschhorn stated that he expects to have a single application form that is linked to the common IT system.
The second efficiency principle is to establish streamlined processes and higher control fences. Hirschhorn stated that, "As the new control lists are created, we will tailor our licensing policies to focus on the most sensitive items and on destinations and end-users of concern. We are preparing a regulatory proposal that would provide more flexible licensing authorizations as we move down the tiers." Hirschhorn also stated that, "BIS will closely scrutinize Automated Export System transactions to ensure that exporters are complying with the EAR. We may require foreign consignees to provide end-use assurances against diversion and similar undertakings from, or at least notification to, subsequent purchasers. We will be stepping up outreach, domestically and abroad." Hirschhorn continued to state, "Finally, the Administration is preparing legislation that would combine the administrative enforcement and licensing activities of BIS, the State Department's Directorate of Defense Trade Controls, and the Treasury Department's Office of Foreign Assets Control into an independent licensing agency. We will seek action on this legislation in the near future."
With regard to Education, Hirschhorn stated that, "In addition to outreach publications, seminars, and one-on-one counseling, the Bureau in recent years has expanded its effort to include such cutting edge strategies as on-line training and webinars. Yet we need to spread the word even further-particularly to those who may not even realize they're subject to controls."
Hirschhorn stated, "Every exporter must classify its exports and should screen its customers against such lists as the Denied Persons List and the Entity List. BIS has a responsibility to assist exporters, particularly small and medium-sized businesses, to do this. To that end, we are mining Automated Export System data to identify exporters of interest. We are working with other bureaus and agencies, and with such private sector entities as freight forwarders, to educate exporters. We are employing such outreach techniques as foreign language seminars and CommerceConnect. Moreover, we continue to work with the Census Bureau and Customs and Border Protection on new electronic tools to help exporters make timely and accurate submissions to AES. This will expedite the clearance of exports and facilitate our compliance reviews." [Emphasis added.]
With regard to Enforcement, Hirschhorn stated that concurrently with efficiencies and education efforts, enforcement will become an even higher priority. Hirschhorn stated that, "The new Comprehensive Iran Sanctions, Accountability, and Divestment Act confers permanent law enforcement authorities on our export enforcement agents for the first time. This enhances our ability to deter and prosecute violators of the EAR."
Hirschhorn stated that BIS will ensure coordination with other enforcement agencies, BIS will participate in the National Export Enforcement Coordination Network. BIS will share information and leverage resources by working with colleagues from the Federal Bureau of Investigation (FBI), military security agencies, Immigration and Customs Enforcement (ICE), and the intelligence community. President Obama will soon sign an Executive Order making this coordination center permanent. The order will mandate participation by all relevant law enforcement agencies and the intelligence community.
Hirschhorn stated, "I ask that you carry a message back to your senior management and those who market your products: We are working to create a more efficient export control system and to ensure that those subject to it are aware of that fact. Also, where appropriate, we will seek to minimize penalties for companies that have good internal compliance programs and make demonstrably unintentional errors. But-and this is an important but-we are planning increased efforts against individuals who flout the rules and against companies whose inadequate internal compliance programs tell us that they are indifferent to whether they follow the rules." [Emphasis added.]
Finally, Hirschhorn stated that the proposed single licensing agency would include the administrative enforcement functions of BIS, State, and Treasury. The Administration also plans to seek legislation to transfer BIS's criminal enforcement functions to Immigration and Customs Enforcement, which would have a separate unit dedicated to enforcement of the export control and embargo laws.
|
Barclays Bank Settles Allegations of Multiple Sanctions Programs for $176 Million
Barclays voluntarily disclosed the violations to OFAC
On August 18, 2010, Office of Foreign Assets Control (OFAC) announced that Barclays Bank PLC (Barclays) has agreed to settle allegations of violating the Sudanese Sanctions Regulations, the Iranian Transactions Regulations, the Burmese Sanctions Regulations, and the Cuban Assets Control Regulations, promulgated under either the International Emergency Economic Powers Act (IEEPA) or the Trading With the Enemy Act (TWEA). The settlement with OFAC is part of a global settlement among Barclays, OFAC, the U.S. Department of Justice, and the New York Country District Attorney's Office.
Barclays agreed to settle with OFAC the alleged violations for $176 million. The obligation was deemed satisfied by Barclay's payment of $298 million to the Department of Justice (DOJ) and the New York County District Attorney's Office.
OFAC stated that, "Barclay's violations arose out of practices designed to circumvent filters at U.S. banks installed to detect transactions in violation of OFAC regulations. This was done using cover payments to avoid referencing parties targeted by U.S. sanctions and omitting or removing information in payment messages in order to conceal the identities of U.S. sanctions targets - most notably Sudan - in electronic funds transfer instructions executed through the United States. In addition, Barclays sometimes processed payments involving sanctioned persons through a Barclays sundry account, making it appear as though Barclays was the remitting bank."
Based on OFAC's analysis of information provided by Barclays, from August 2002 through September 2006 Barclays routed at least 1,285 electronic funds transfers, with an aggregate value of approximately $112.7 million, through Barclays New York and third-party banks located in the United States.
Barclays has terminated the practices leading to violations of OFAC regulations and has put in place policies and procedures that are designed to minimize the risk of the recurrence of similar conduct in the future. The bank voluntarily self-disclosed the apparent violations and has cooperated fully with OFAC.
|
Blackwater to Pay $42 Million to Settle Allegations of Violating U.S. Export Controls Regulations
Consent Agreement, Proposed Charging Letter & Order Published
On August 23, 2010, the U.S. State Department's Directorate of Defense Trade Controls (DDTC) announced that Blackwater Worldwide, a private security company now called Xe Services (Blackwater), has entered into a consent agreement to settle 288 violations of the Arms Export Control Act (AECA) and International Traffic in Arms Regulations (ITAR) in connection with unauthorized export of defense articles, including technical data, unauthorized provision of defense services, violating the terms of license authorizations, unauthorized sales activity involving a proscribed country, failure to maintain records involving ITAR-controlled transactions and false statements, misrepresentations, and omissions of material facts.
According to the State Department, Blackwater sought training contracts from foreign governments and other foreign organizations without adhering closely to U.S. export regulations. Blackwater also shipped automatic weapons and other military equipment for use by its personnel in Iraq and Afghanistan in violation of export controls and in some cases sought to hide its actions. In one incident, Blackwater shipped weapons to Iraq hidden inside containers of dog food.
To settle the alleged violations, Blackwater must pay a civil penalty of $42 million, a portion of which will be suspended on the condition that Blackwater spends the funds on self-initiated or consent agreement-authorized remedial compliance measures.
|
|
BIS Clarifies Reach of Commodity Classification Determinations and Advisory Opinions
Comments are due October 2, 2010
On August 2, 2010, Bureau of Industry and Security (BIS) issued an interim final rule in the Federal Register amending the Export Administration Regulations (EAR) to clarify that commodity classification determinations and advisory opinions BIS issues or has issued under the EAR are not and may not be relied upon as U.S. Government determinations that the items described therein are subject to the EAR, as opposed to the jurisdiction of another U.S. Government agency.
Section 748.3(a) the EAR, as amended, requires that exporters, before requesting commodity classifications and advisory opinions, determine that the items at issue are not subject to the exclusive export control jurisdiction of one of the other U.S. Government agencies listed in §734.3(b) of the EAR, such as Directorate of Defense Trade Controls (DDTC), Office of Foreign Assets Controls (OFAC), or the Patent and Trademark Office (PTO).
Only DDTC has authority to issue commodity jurisdiction determinations since they are the agency responsible for administering the U.S. Munitions List (USML) and the International Traffic in Arms Regulations (ITAR). Unlike the ITAR, the EAR does not provide authority to make commodity jurisdiction determinations. Thus, because BIS does not have the authority to issue commodity jurisdiction determinations, a BIS commodity classification only reflects whether an item identified in the commodity classification request is described in the Commerce Control List (CCL).
With respect to advisory opinions, the rule states that they are limited in scope to BIS's interpretation of EAR provisions, and may not be relied upon or cited as evidence of U.S. Government's determination that the items described in the advisory opinion are not subject to the export control jurisdiction of another agency of the U.S. Government.
Comments on the interim final rule are due October 2, 2010.
|
BIS Issues Report on Impact of U.S. Export Controls on Green Technology Items
BIS Conclusions and Recommendations Summarized
On August 16, 2010, the Bureau of Industry and Security issued its latest Office of Technology Evaluation Report: Technology Assessment on Impact of U.S. Export Controls on Green Technology Items.
In the report, BIS found:
· Most green technology-related items do not require a BIS export license. Licensed green technology-related exports represented 0.05% of total U.S. exports and a mere 0.004% of all energy sector exports in 2008. Of the $1,300.5 billion in total U.S. exports in 2008, BIS identified 5.8% ($75.0 billion) as green technology-related exports, and only 0.9% ($697.4 million) of these required an export license.
· Some of the high-technology parts, materials, and equipment used to produce green technology items in the following areas would likely require an export license: wind power, solar power, alternative fuel vehicles, water purification, and energy efficiency.
· Exporters have expressed concern with the lengthy processing times and difficulty in obtaining export licenses for carbon fiber and machine tools, the material and equipment needed for the production of wind turbines and lighter weight (i.e., energy efficient) commercial composite aircraft structures and engine components. Two companies with production facilities in the United States that are industry leaders for tape laying and tow/fiber placement machines used to manufacture windmill turbine blades are considering moving production of these machines overseas, especially because of the increased demand for wind turbines.
· The export of Metal-Organic Chemical Vapor Deposition (MOCVD) equipment requires an export license in most cases, and is used to produce the solar cells used in solar panels and LED lighting products. One of the main MOCVD producers in Germany has sold this equipment to a customer that was denied an export license for the same equipment from a U.S. producer.
· There are several green technology items in the areas of water purification (e.g., chemicals, pumps, valves) and energy efficiency (i.e., industrial gas turbine components and thermal imaging cameras) that are subject to an export license requirement, but the licensing and export statistics do not show that this license requirement is having an adverse affect on the competitiveness of these industries.
· In most cases, BIS has determined that export licenses are not required for items in the following green technology areas: alternative fuel vehicles, commercial airlines noise reduction, biodegradable/bio-resins for composite materials, and green coating processes. However, research and emerging technologies in these fields could lead to the creation of new high-technology products that would be subject to export license requirements.
Accordingly, BIS states that it will:
· Issue guidance to exporters clarifying which tape laying and tow/fiber placement machines would be controlled under ECCNs 1B001 or 1B101 for MT or NS reasons.
· Monitor the volume of export license applications received for chemicals, chemical equipment, industrial gas turbines and components, and thermal imaging cameras and adjust export licensing policy and regulations where possible to ensure that export controls do not hinder trade in these items, especially when intended for civilian (i.e., non-military) green- related end-uses, consistent with national security interests.
· Develop a green technology working group comprised of existing TAC members to identify emerging technologies that can support green technology initiatives that may be subject to an export license requirement in the future.
· Work with the Department of Commerce's International Trade Administration on harmonization with export promotion efforts for the energy sector.
In addition, BIS will work with other U.S. Government (USG) agencies to develop a license exception, fast-track license review, and/or a one-time product/end-user review procedure for the export of items for civilian (i.e., non-military) green-related end-uses only.
|
Recent OFAC Enforcement Actions
On August 13, 2010, Office of Foreign Assets Control (OFAC) posted on its web site information on recent OFAC enforcement actions:
Compass Bank of Birmingham, AL, has remitted $607,500 to settle allegations of violating the Sudanese Sanctions Regulations in September 2006. OFAC alleged that Compass Bank acted without an OFAC license or outside the scope of its license by initiating three funds transfers on behalf of one of its clients related to the petroleum or petrochemical industries in Sudan. Compass Bank did not voluntarily disclose this matter to OFAC and the alleged violation constituted a non-egregious case.
Custom Polymers, Inc., a Charlotte, NC company, has agreed to remit $57,800 to settle an allegation of violating the Sudanese Sanctions Regulations on or about August 17, 2007. OFAC alleged that Custom Polymers attempted to make a payment involving Sudan, on behalf of its affiliate, without the required OFAC license. The $116,250 payment was allegedly for the purchase and export of bottle regrind from Sudan. OFAC determined that Customs Polymers did not voluntarily disclose this matter to OFAC and the alleged violation constituted a non-egregious case.
|
APHIS Proposes Definitions for Exempt and Regulations Articles
Comments due October 4, 2010
 On August 4, 2010, the Animal and Plant Inspection Service (APHIS), in response to amendments to the Lacey Act, issued a proposed rule in the Federal Register establishing definitions for the terms "common cultivar" and "common food crop." As amended, the Lacey Act now makes it unlawful to: (1) import, export, transport, sell, receive, acquire, or purchase in interstate or foreign commerce any plant, with limited exceptions, obtained in violation of any Federal, State, tribal, or foreign law that protects plants; (2) make or submit any false record, account, or label for, or any false identification of, any plant covered by the Act; and (3) to import certain plants and plant products without an import declaration. The declaration must contain the scientific name of the plant, value of the import, quantity of the plant, and name of the country from which the plant was harvested.
Under the proposed rule, "common cultivar" is defined as a plant (except a tree) that:
(a) Has been developed through selective breeding or other means for specific morphological or physiological characteristics; and
(b) Is a species or hybrid that is cultivated on a commercial scale; and
(c) Is not listed:
(1) In an appendix to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (27 UST 1087; TIAS 8249);
(2) As an endangered or threatened species under the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.); or
(3) Pursuant to any State law that provides for the conservation of species that are indigenous to the State and are threatened with extinction.
"Common food crop" is defined as a plant that:
(a) Has been raised, grown, or cultivated for human or animal consumption, and
(b) Is a species or hybrid that is cultivated on a commercial scale; and
(c) Is not listed:
(1) In an appendix to the Convention on International Trade in Endangered Species of Wild Fauna and Flora (27 UST 1087; TIAS 8249);
(2) As an endangered or threatened species under the Endangered Species Act of 1973 (16 U.S.C. 1531 et seq.); or
(3) Pursuant to any State law that provides for the conservation of species that are indigenous to the State and are threatened with extinction.
The rule also provides definition for "plant" as "any wild member of the plant kingdom, including roots, seeds, parts or products thereof, and including trees from either natural or planted forest stands."
In addition to the definitions, APHIS intends to provide guidance in the form of a list of examples of plant taxa or commodities that qualify for exemption from the provisions of the Act as common cultivars and common food crops. The U.S. Department of Agriculture (USDA) and the U.S. Department of the Interior (DOI) will develop and maintain this list on-line and will update as necessary. List updates will also be made available on APHIS' web site.
Comments on the proposed rule are due October 4, 2010.
|
CBP to Discontinue Use of Unknown Manufacturer IDs
 On August 2, 2010, U.S. Customs and Border Protection (CBP) issued a notice stating that CBP will discontinue the use of the unknown Manufacturer Identification Numbers (MIDs) as data to report the manufacturer (or supplier). After this date, entries reporting unknown MIDs will be rejected by the Automated Broker Interface (ABI) effective September 15, 2010.
Any questions regarding this notice should be directed to remote.filing@dhs.gov.
|
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. |
|
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 - Bureau of Industry and Security
September 14 - 15, 2010 - Hoover, AL - $375
Complying with the ITAR - DDTC
September 16, 2010 - Hoover, AL - $150
U.S. Export Controls Seminar - Export Compliance Training Institute
September
20-21, 2010 - Chicago, IL - $1050
Complying with U.S. Export Controls - Bureau of Industry and Security
September 22 - 23, 2010 - Salt Lake City, UT - $325
Complying with U.S. Export Controls - Bureau of Industry and Security
September 29 - 30, 2010 - Santa Clara, CA - $425
Export Control of Equipment, Technology and Services - Federal Publications Seminar
October 12 - 13, 2010 - Las Vegas, NV - $995
Basic ITAR Workshop - Federal Publications Seminar
October 20, 2010 - Washington, DC - $595
ITAR Compliance and Audits - Federal Publications Seminar
October 27 - 28, 2010 - Washington, DC - $995
|
|
|
|
|
|
Thanks again for your interest in our newsletter!
Sincerely,
|
Jennifer Kessinger, Tammie Krauskopf & Ruta Riley
Attorneys & Consultants
jk@globaltradeexpertise.com
Tel. 925.876.1381 (Jennifer Kessinger)
tk@globaltradeexpertise.com
Tel. 708.707.4087 (Tammie Krauskopf)
rr@globaltradexpertise.com
Tel. (630) 862-8123
www.globaltradeexpertise.com
|  |
|
|
