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Greetings!
April's import/export highlights include: the President's Initiative to Increase Trade & Exports; Johnson & Johnson to Pay $70M to Settle FCPA Allegatons; Census seeks comments on new AES data elements; ITA seeks comments on proposed information collection for U.S.-E.U. Safe Harbor Privacy Framework; State seeks comments on proposed ITAR changes re: defense services; Executive Order prohibits imports from N. Korea; individuals indicted for conspiracy to export computer-related equipment to Iran; BIS revokes certain Syria licenses; and CBP publishes IPR enforcement guide. As always, thank you for reading! Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
info@globaltradeexpertise.com
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President Obama Initiates Reform for More Effective Government
Initiative focuses on increasing trade and exports
 President Obama issued a Memorandum for the Heads of Executive Departments and Agencies regarding government reform (the Memorandum) on March 11, 2011.
In the Memorandum, President Obama stated that the Federal Government has not kept pace with the development of the information age, with government agencies growing without overall strategic planning and duplicative programs springing up. "My current budget proposes more than 200 terminations, reductions, and savings in agency programs totaling approximately $30 billion in fiscal year 2012. But we must go further. Winning the future will take a government that judiciously allocates scarce government resources to maximize its efficiency and effectiveness so that it can best support American competitiveness and innovation. Now is the time to act to consolidate and reorganize the executive branch of the Federal Government in a way that best serves this goal."
The President assigned the U.S. Chief Performance Officer (CPO) who also serves as the Deputy Director for Management of the Office of Management and Budget to lead the effort to create a plan for the restructuring and streamlining of the executive branch of the Federal Government. The first focus of this effort will be increasing trade, exports, and overall competitiveness of the U.S.
The President directed that the CPO establish a Government Reform for Competitiveness and Innovation Initiative led by an Executive Director to conduct a comprehensive review of the Federal agencies and programs involved in trade and competitiveness, including analyzing their scope and effectiveness, areas of overlap and duplication, unmet needs, and possible cost savings. As part of the review, the CPO and Executive Director will confer with the heads and staff of executive departments and agencies, including the offices and agencies within the Office of the President.
Recommendations on how to restructure and streamline Federal Government programs focused on trade and competitiveness are due to the President within 90 days from March 11, 2011.
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Recent OFAC Enforcement Actions
On April 7, 2011, Office of Foreign Assets Control (OFAC) posted on its web site information on recent OFAC enforcement actions:
- Aegis Electronic Group, Inc. (Aegis) has agreed to pay $20,000 to settle allegations of violations of the Iranian Transactions Regulations (ITR). OFAC alleged that Aegis, a U.S. distributor of industrial imaging products, including cameras, monitors, and related control units, violated the ITR by its unlicensed sale and export of camera control units to Austria with knowledge that the items were intended for re-export to Iran.
Specifically, OFAC alleged that, during the period August 2008 - January 2009, Aegis violated the ITR when it exported two camera control units from the United States to Austria for re-export to Iran. Aegis did not voluntarily disclose this matter to OFAC. The total transaction value of the camera control units exported to Austria for re-export to Iran was $2,685. The base penalty amount for Aegis' apparent violation was $10,000, but the settlement amount reflects OFAC's consideration of multiple factors including: the criminal charges set forth in the Deferred Prosecution Agreement reflect knowing and willful conduct by an employee that is attributable to the company; there is no indication that Aegis' senior management participated in the apparent violations; and Aegis lacked a sanctions compliance program at the time of the apparent violations, but it has since implemented a compliance program that requires sanctions and export compliance training of all employees.
- McGriff, Seibels & Williams of Texas, Inc., Houston, TX (McGriff), has paid $122,408 to settle allegations of violations of the Iranian Transactions Regulations (ITR). OFAC alleged that McGriff, a U.S. insurance brokerage firm specializing in insurance coverage for the energy sector, violated the ITR by its unlicensed design, revision, and placement, with foreign insurers, of six commercial multiple peril (CMP) insurance policies that insured the risks of a submersible oil rig in Iranian waters. The policy periods were between May 1, 2004, and April 31, 2005.
The combined premiums received by the foreign insurers for the six CMP insurance placements totaled $453,364. McGriff voluntarily disclosed this matter to OFAC and the alleged violations constituted a non-egregious case. The settlement amount reflects OFAC's consideration of the following: the insurance services provided by McGriff, which were highly specialized and involved the Iranian petroleum industry, were particularly harmful to the objectives of the sanctions program; the apparent violations resulted from the actions of a senior employee outside the knowledge of McGriff's senior management; McGriff strengthened its OFAC compliance program in response to the apparent violations; McGriff has not been the subject of prior OFAC penalties or other OFAC administrative actions; and McGriff cooperated with OFAC in the investigation, including entering into two tolling agreements.
- Metropolitan Life Insurance Company (MetLife) has remitted $22,500 to settle allegations of a violation of the Cuban Assets Control Regulations. OFAC alleged that, in June 2006, MetLife mailed a check representing a $30,162 lump sum death benefit payment directly to the beneficiary in Cuba. This matter was not voluntarily disclosed by MetLife. The alleged violation was reported to OFAC and to MetLife by the attorney who administered the estate of the U.S. decedent. Upon the receipt of the notice, MetLife stopped payment and deposited the death benefit payment into a blocked account. The funds were subsequently transferred to a bank for distribution to the beneficiary. The alleged violations constituted a non-egregious case.
The base penalty amount for MetLife's apparent violation was $50,000. The settlement amount reflects OFAC's consideration of the following: MetLife provides specialized insurance services; MetLife has not been the subject of prior OFAC penalties; MetLife cooperated with OFAC by making an authorized transfer of the blocked payment to a blocked account opened in the name of the beneficiary for the purpose of making authorized distributions to the beneficiary; and MetLife has taken several steps to strengthen its OFAC compliance program, including requiring sanctions compliance training of all employees.
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Johnson & Johnson to Pay $70 Million to Settle FCPA Allegations
On April 8, 2011, U.S. Department of Justice (DOJ) reported that Johnson & Johnson (J&J) has agreed to pay a $21.4 million criminal penalty as part of a deferred prosecution agreement with the DOJ to resolve improper payments by J&J subsidiaries to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act (FCPA).
According to the deferred prosecution agreement, J&J has acknowledged responsibility for the actions of its subsidiaries, employees and agents who made various improper payments to public health care providers in Greece, Poland and Romania in order to induce the purchase of medical devices and pharmaceuticals manufactured by J&J subsidiaries. J&J also acknowledged that kickbacks were paid on behalf of J&J subsidiary companies to the former government of Iraq under the United Nations Oil for Food Program in order to secure contracts to provide humanitarian supplies. A criminal information filed in connection with the deferred prosecution agreement charges J&J subsidiary DePuy Inc. with conspiracy and violations of the FCPA in connection with the payments to public physicians in Greece.
The agreement recognizes J&J's timely voluntary disclosure, and thorough self-investigation of the underlying conduct; the extraordinary cooperation provided by the company to the department, the SEC and multiple foreign enforcement authorities, including significant assistance in the industry-wide investigation; and the extensive remedial efforts and compliance improvements undertaken by the company. Due to J&J's pre-existing compliance and ethics programs, extensive remediation, and improvement of its compliance systems and internal controls, J&J was not required to retain a corporate monitor, but it must report to the Department of Commerce on implementation of its remediation and enhanced compliance efforts every six months for the duration of the agreement.
In a related matter, J&J reached a settlement with the Securities and Exchange Commission (SEC) under which it agreed to pay more than $48.6 million in disgorgement of profits, including pre-judgment interest.
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Census Seeks Comments on Proposed New Data Elements in AES Reports
 On April 11, 2011, the U.S. Census Bureau posted a notice in the Federal Register seeking comments on proposal to collect additional data elements in the Automated Export System (AES) as well as modifications to current data elements.
The fields that will be added or modified are conditional data elements required only if that element applies to the specific shipment being exported. In addition, AES filings will be mandatory for shipments of all used self-propelled vehicles and household goods regardless of value or country of destination.
The additional data elements include name and address of the end user, and ultimate consignee type. The addition of these new fields is expected to help detect and prevent export of items by unauthorized parties or to unauthorized destinations or end users. Entering information for the end user and consignee type will be based on the knowledge the exporter has at the time of export. If that information is not known at the time of export, the filer will not be required to report it.
Additional data elements will also include license applicant address, license value, and country of origin. The equipment number field will be revised to require the container number for all containerized cargo. For shipments where a license is required (currently, only 6% of records filed require a license), the address of the license applicant will be required to be reported. The license value per commodity classification will be required to be reported in addition to the value that is currently captured in the AES.
For shipments where the origin of the commodity is foreign (currently, 17% of records filed contain goods of foreign origin), the country of origin will be required to be reported. For shipments where the method of transportation (MOT) is containerized vessel cargo (currently, 19% of records filed are reported as containerized), the container number will be required to be reported in the equipment number field.
Comments and recommendations for the proposed information collection are due to Office of Management and Budget within 30 days of this notice. |
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ITA Seeks Comments on Proposal to Collect Information for U.S. - EU Safe Harbor Privacy Framework
On April 11, 2011, the International Trade Administration (ITA) posted a notice in the Federal Register seeking comments on proposal to collect information for the U.S.-EU Safe Harbor Privacy Framework.
In response to the European Union Directive on Data Protection that restricts transfers of personal information from Europe to countries whose privacy practices are not deemed "adequate," the U.S. Department of Commerce has developed a "Safe Harbor" framework that will allow U.S. organizations to satisfy the EU Directive's requirements and ensure that personal data flows to the U.S. occur without interruption. The framework bridges the differences between the EU and U.S. approaches to privacy protection.
As of December 10, 2010, 2,415 U.S. organizations have been placed on the Safe Harbor List. Organizations that have signed up to this list are deemed "adequate" under the Directive and do not have to provide further documentation to European officials.
The Safe Harbor List is necessary to make the Safe Harbor agreement operational, and will be used by EU organizations to determine whether further information and contracts will be needed for a U.S. organization to receive personally identifiable information.
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State Seeks Comments on Proposed Changes to ITAR re: Defense Services
Comments must be received by June 13, 2011
On April 13, 2011, the Department of State (DOS) proposed to amend parts 120 and 124 of the International Traffic in Arms Regulations (ITAR) to update the policy regarding defense services, to clarify the scope of activities that are considered a defense service, and to provide definitions of "Organizational-Level Maintenance," "Intermediate-Level Maintenance," and "Depot-level Maintenance," and to make other conforming changes.
After review of the ITAR, DOS determined that the current definition of defense services in §120.9 is overly broad, capturing certain forms of assistance or services that do not warrant ITAR control. The proposed change in subpart (a) of the definition of "defense services" narrows the focus of services to furnishing of assistance (including training) using "other than public domain data", integrating of items into defense articles, or training of foreign forces in the employment of defense articles. The proposed definition also includes a new provision that would control the "integration" of items, whether controlled by the U.S. Munitions List (USML) or the Commerce Control List (CCL), into USML controlled defense articles even if ITAR-controlled "technical data" is not provided to a foreign person during the provision of such services.
Under the new rule, training for foreign "units or forces" of §120.9(a)(3) will be considered a defense service only if the training involves the employment of a defense article, regardless of whether technical data is involved. In §120.9(b), the proposed rule specifies examples of activities that do not constitute defense services.
A new §120.38 proposes to provide definitions for "Organizational-Level Maintenance" (or basic level maintenance), "Intermediate-Level Maintenance," and "Depot-Level Maintenance," terms used in the proposed revision of §120.9.
DOS proposed to make several other conforming changes to the ITAR. The proposed rule modifies §124.1(a) which describes the approval requirements of manufacturing license agreements and technical assistance agreements. The proposed change removes the requirement in §124.1(a) to seek the Directorate of Defense Trade Controls' (DDTC) approval if the defense service that is being rendered uses public domain data or data otherwise exempt from ITAR licensing requirements.
Comments to the DOS are due by June 13, 2011.
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Executive Order Prohibits Imports from North Korea
Order effective April 19, 2011
On April 18, 2011, President Obama issued an Executive Order that, effective April 19, 2011, prohibits all direct or indirect importation of goods, services, and technology form North Korea. Unless exempt, all imports into the U.S. from North Korea must be authorized.
The Order leaves in place all existing sanctions imposed under Executive Orders 13466 and 13551.
Executive Order 13466 of 2008 declared a national emergency pursuant to International Emergency Economic Powers Act (IEEPA) to deal with the unusual and extraordinary threat to the U.S. posed by the proliferation of weapons-usable fissile material on the Korean Peninsula.
Executive Order 13551 of 2010 expanded the national emergency declared in Executive Order 13466 and blocked the property and interests in property of three North Korean entities and one individual.
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Individuals Indicted for Conspiracy to Export Computer-related Equipment to Iran
On April 21, 2011, U.S. Department of Justice (DOJ) reported that Jeng "Jay" Shih, a U.S. citizen, and his Queens, N.Y. company, Sunrise Technologies and Trading Company, were indicted in the District of Columbia on 27 counts relating to the illegal export of computer-related equipment to Iran without first having obtained the required Department of Treasury license.
According to the indictment, Commerce Department agents visited Shih's business in New York in 2006 where they informed Shih about U.S. laws governing the export of goods from the U.S. to other countries, particularly embargoed countries like Iran. In April 2010, ICE-Homeland Security Investigations (HSI) agents seized hundreds of laptop computers that originated from Sunrise and were destined for Dubai, UAE. Communications related to these shipments indicated that the purchasers were located in Iran.
The indictment further alleges that agents subsequently identified a company in Dubai that was purchasing millions of dollars of computers from U.S. companies for export to Iran, through Dubai. ICE-HIS agents arrested one of company's agents, who pleaded guilty in December 2010 and began cooperating with the government. In interviews with agents, the agent indicated that he and his company in Dubai had purchased million worth of laptops from Shih in recent years for shipment to Iran. The agents determined that more than 1,000 computers had been shipped by Shih's company to Dubai and later to Iran, between April 2010, and May 2010, alone.
In February 2011, the cooperating agent met with Shih in New York. In recorded conversations, Shih allegedly told the agent he was aware of the U.S. embargo against Iran and U.S. export control laws. According to the indictment, Shih also told the cooperating individual how to avoid detection when shipping goods to Iran by using fake invoices and indicated that he treated the seizure of some of his shipments as a "loss" when reporting business income and loses on his U.S. taxes.
If Shih is convicted, he will face a maximum sentence of 20 years in prison and a $1 million fine for each of the IEEPA counts and five years for each false statement count, all related to this illegal exports case.
DOJ also reported that Massoud Habibion, 48, aka "Matt Habibion" or "Matt Habi, and Mohsen Motamedian, 43, aka "Max Motamedian" or "Max Ehsan," both U.S. citizens, and their Costa Mesa, California, company, Online Micro LLC, were indicted in the District of Columbia on 32 counts relating to the illegal export of computer-related equipment to Iran without the required Department of Treasury license.
The indictment against Habibion and Motamedian alleges that a company in Dubai, referenced above in Shih's case, purchased millions of dollars worth of laptop computers from Online Micro and that these computers were subsequently shipped to Iran. According to the affidavit, the cooperating agent for the Dubai company told federal agents that Habibion and Motamedian sold roughly $300,000 worth of computers to the Dubai company each month and that Habibion and Motamedian fully understood that the computers were destined for Iran.
In December 2010, the cooperating individual met with Habibion and Motamedian. Allegedly, they instructed the cooperating individual to make fake invoices to conceal that Iran was the destination of the shipments and to indicate that the end-users were in Dubai. In addition, the indictment alleges that in a Jan. 5, 2011, meeting, Habibion told the cooperating individual to lie to federal agents about conducting business in Iran, stating, "If they ask you, for instance, 'Do you do business in Tehran?' 'No, I don't have any business in Tehran. I go there to visit my family, but I have no business there.' They will ask such questions, it is part of their routine."
If Habibion or Motamedian are convicted, they will face a maximum sentence of 20 years in prison and a $1 million fine for each of the IEEPA counts and five years for each false statement count relating to this illegal exports case. In addition, they also face 20 years for each obstruction of justice count.
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Certain Syria Licenses Revoked
Effective April 29, 2011 the Department of Commerce's Bureau of Industry and Security (BIS) has revoked certain licenses for the export and reexport to Syria of items relating to VIP aircraft used to transport senior officials of the Syrian government. Due to the commission of human rights abuses related to political repression in Syria, export and reexport of these items is deemed contrary to the foreign policy interests of the United States. BIS took this action under the authority of Section 750.8 of the Export Administration Regulations and all persons holding relevant licenses have been notified of this action.
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CBP Publishes Intellectual Property Rights Enforcement Guide
 On March 31, 2011, U.S. Customs and Border Protection (CBP) published an Intellectual Property Rights Enforcement Guide. In it, CBP identifies three ways intellectual property (IP) owners can maximize protection of their IP rights:
· E-Recordation - establishing an e-Recordation record provides CBP with information necessary to determine when imported goods infringe on legitimate IP owner's rights;
· E-Allegations - business and rights owners are encouraged to submit allegations of infringing shipments or conduct to CBP. CBP uses this information to target these acts and may refer cases for criminal prosecution;
· Information Sharing - to proactively help CBP in making infringement determinations, rights owners should consider submitting product identification guides to CBP to be placed on CBP internal websites and linked to the E-Recordation system, and also providing product identification training to CBP personnel at ports of entry. |
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
May 4 - 5, 2011 - Newport Beach, CA - $325
Complying with U.S. Export Controls - Bureau of Industry and Security
May 10-11, 2011 - Louisville, KY - $475
Technology Controls - Bureau of Industry and Security
May 12, 2011 - Louisville, KY - $135
AAEI's 90th Annual Conference & Expo - American Association of Exporters and Importers
June 5-7, 2011 - New York, NY
Complying with U.S. Export Controls - Bureau of Industry and Security
June 16 - 17, 2011 - Seattle, WA - $445
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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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Thanks again for your interest in our newsletter!
Sincerely,
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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
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