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Greetings!
The import/export news highlights from the last few months include: enforcement actions against individuals from China, Iran, and a former U.S. soldier resulting in criminal penalties; BIS and DDTC publishing public comments they have received on proposed changes; CBP requesting comments on the Declaration for Free Entry of Returned American Products; challenges made by the U.S. against China at the WTO with regard to export subsidies paid to Chinese auto manufacturers; DOD's implementation of the U.S.-Korea Free Trade Agreement; and BIS posts Update 2012 conference materials online. As always, thank you for reading! Jennifer Kessinger, Tammie Krauskopf
& Ruta Riley
globaltradeexpertise
info@globaltradeexpertise.com
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Chinese National Arrested After Attempting to Illegally Export Regulated Material to China 
On September 26, 2012, Bureau of Industry and Security (BIS) announced that Ming Suan Zhang was charged in Brooklyn federal court with attempting to illegally export thousands of pounds of aerospace-grade carbon fiber from the United States to China.
According to the complaint, Zhang was arrested after trying to negotiate a deal to acquire the specialized carbon fiber, a high-tech material used frequently in the military, defense and aerospace industries, and is therefore closely regulated by the United States Department of Commerce to combat nuclear proliferation and terrorism.
The complaint alleges that Zhang and two of his Taiwanese accomplices attempted to locate large quantities of the specialized carbon fiber via remote Internet contacts. Zhang told his accomplice that his usual order would be one to two tons, however, this time he was looking to purchase 100 kilograms of the carbon fiber. Shortly thereafter, Zhang contacted an undercover law enforcement agent in an effort to finalize the deal to export the carbon fiber from New York to China. In one conversation, Zhang stated that he had an urgent need for the carbon fiber in connection with the scheduled test flight of a Chinese fighter plane. Zhang then arranged a meeting with an undercover agent to take possession of a carbon fiber sample, which was to be shipped to China and analyzed to verify its authenticity. Zhang was subsequently placed under arrest.
If convicted, Zhang faces up to 20 years in prison.
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Iranian Pleads Guilty to Conspiring to Procure Supplies for Iranian Petrochemical Companies
On September 26, 2012, Department of Justice announced that Seed Talebi, an Iranian national, pled guilty in Manhattan federal court to conspiring to illegally export from the U.S. to Iran parts and goods designed for use in industrial operations.
Court documents allege that on numerous occasions in 2010 and 2011, Talebi conspired with others to ship industrial parts from the U.S. to various petrochemical companies located in Iran, via an intermediary in Dubai, without the required Office of Foreign Assets Control (OFAC) license.
Talebi pleaded guilty to one count of conspiring to violate the International Emergency Economic Powers Act (IEEPA), relevant Executive Orders, and United States Treasury regulations. He faces a maximum sentence of five years in prison.
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State Posts Comments to Proposed Revisions of USML Categories IX and XIII
 The U.S. Department of State Directorate of Defense Trade Controls (DDTC) posted public comments it received in response to proposed revisions of the International Traffic in Arms Regulations (ITAR) U.S. Munitions List Category IX and XIII.
Category IX comments can be found here.
Category XIII comments can be found here.
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Former Soldier Pleads Guilty to Participation in International Arms Smuggling Ring
 On September 6, 2012, the Department of Justice (DOJ) reported that Joseph Debose, a resident of North Carolina and a former Staff Sergeant in a U.S. Special Forces National Guard Unit, pleaded guilty in the U.S. District Court for the Eastern District of New York to violating the Arms Export Control Act (AECA). According to court documents, Debose provided multiple shipments of firearms to co-conspirators who then concealed the weapons in packages and transported them to shipping companies to be sent to customers in China. The weapons included numerous semiautomatic handguns, rifles and shotguns.
Authorities initially learned of the arms smuggling scheme after police in China seized a package containing firearms with defaced serial numbers, which had been shipped from Queens, New York. Upon learning of the seizure of the weapons, U.S. law enforcement officials traveled to China to examine the evidence. The types of weapons seized by the Chinese authorities have been designated on the United States Munitions List (USML), and may not be exported without a license from the U.S. State Department. With the aid of forensic techniques, agents determined that one of the weapons seized in China had originally been purchased in North Carolina. Agents then traced that gun, and others, to Debose. Agents arrested Debose in a sting operation when he arrived at a meeting location with a truckload of guns for the next shipment. Debose was carrying a loaded .45 caliber pistol at the time of his arrest. To date, four individuals have been charged with weapons trafficking and export offenses as a result of this investigation.
When sentenced, Debose faces up to 20 years in prison.
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BIS Posts Public Comments on the EAR Transition Rule and Definition of "Specially Designed"
 On August 6, 2012, the Bureau of Industry and Security (BIS) posted on its website public comments received for the June 21, 2012 Proposed Revisions to the Export Administration Regulations (EAR): Implementation of Export Control Reform; Revisions to License Exceptions After Retrospective Regulatory Review; proposed rule.
Also, BIS posted public comments received for the June 19, 2012 "Specially Designed" Definition Proposed rule.
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Legislation Broadens U.S. Sanctions Against Iran
 On August 10, 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012 (the Act) (P.L. 112-158). The Act broadens the sanctions provided under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) and the Iran Sanctions Act of 1996 (ISA). Most significantly, the Act imposes liability on U.S. firms for their foreign subsidiaries' involvement in sanctioned activities as well as provides for U.S. sanctions on non-U.S. firms and their corporate officers.
The Iranian sanctions under the Act will become similar to those currently in place with respect to Cuba in that the foreign affiliates of U.S. companies will be included under the U.S. jurisdiction. Thus, under the Act, foreign entities owned or controlled by a U.S. person must comply with U.S. sanctions against Iran. Sec. 218 of the Act provides that violation of the Iranian sanctions by a foreign affiliate requires the imposition of civil penalties under the International Emergency Economic Powers Act (IEEPA) of up to twice the amount of the relevant transaction, on U.S. parent companies for the activities of their foreign subsidiaries that would violate the Act.
Other significant sections include:
* Sec. 201, which expands sanctions with respect to transactions in Iran's energy sector.
* Sec. 202 imposes sanctions for transportation of crude oil from Iran and evasions of sanctions by shipping companies.
* Sec. 203 expands sanctions with respect to development of weapons of mass destruction (WMD).
* Sec. 204 expands sanctions available under the ISA, including prohibiting any U.S. person from investing in or purchasing significant amounts of equity or debt instruments of a sanctioned person.
* Sec. 219 requires companies whose stock is traded on U.S. stock exchanges to disclose whether they or their affiliates have knowingly engaged in sanctionable activities.
Act summary by section: http://banking.senate.gov/public/_files/IranSanctionSectionbySectionRevised.pdf
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BIS Posts Update 2012 Conference Materials
The Bureau of Industry and Security (BIS) posted on its website Update 2012 conference materials. The materials cover the following areas:
- Automated Export System
- ECR - Commerce & State Compliance and Enforcement
- Encryption Controls
- End-Use Monitoring & Best Practices - Diversion
- End-Use Monitoring & Best Practices - Transshipment
- Use of the Entity List: IED Counter-Proliferation Efforts
- Export Controls & Services for Small & Medium Enterprises
- Export Enforcement Panel
- Industry Advisory Committee Perspectives
- ECR - License Exception STA
- Meeting the Deemed Export Challenge
- ECR - New Information Technology
- Nuclear Technology Policy, Licensing Issues & Trends
- Regulatory Review
- ECR - Reshaping Control Lists
- Role of Freight Forwarders
- Sanctions
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U.S. Challenges China's Export Subsidies to Auto Manufacturers in China
On September 17, 2012, the U.S. requested dispute settlement consultations with the Government of China at the World Trade Organization (WTO) concerning China's auto and auto parts "export base" subsidies. China provides extensive subsidies to auto and auto parts producers located in designated regions, known as "export bases," that meet export performance requirements. China's program appears to provide export subsidies that are prohibited under WTO rules because they severely distort trade by providing an unfair advantage to auto and auto parts manufacturers located in China, which are in competition with producers located in the United States and other countries. China expressly agreed to eliminate all export subsidies when it joined the WTO in 2001, however, documentation shows that "export bases" made at least $1 billion in subsidies available to auto and auto-parts exporters in China during the years 2009 through 2011.
This challenge is the latest in a series of enforcement actions that U.S. has taken to ensure that China complies with its WTO commitments, including challenging China's local-content subsidies to its wind power equipment manufacturers; unfairly imposed duties China places on U.S. automobiles, U.S. steel products, and U.S. poultry products; China's export restraints on key industrial raw materials; and market access restrictions on U.S. providers of electronic payment (e.g., credit and debit card) services.
In a separate case filed on the same day, the U.S. has requested that the WTO establish a dispute settlement panel to address China's imposition of antidumping and countervailing duties on more than $3 billion in exports of American-produced automobiles.
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Department of Defense Implements the U.S.-Korea Free Trade Agreement
Final rule amends Federal Acquisition Regulation
On September 13, 2012, Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA) posted a final rule in the Federal Register that amends the Federal Acquisition Regulation (FAR) to implement the U.S.-Korea Free Trade Agreement (FTA), which took effect on March 15, 2012. The Republic of Korea is already party to the World Trade Organization (WTO) Agreement on Government Procurement (GPA), but this trade agreement implements a lower procurement threshold.
The final rule adds the Republic of Korea to the definition of "Free Trade Agreement country" in multiple locations in the FAR. The Republic of Korea was already listed as a designated country because it is party to the WTO GPA. The excluded services for the Korea FTA are the same as for the WTO GPA. By implementation of this Korea FTA, eligible goods and services from Korea are now covered when valued at or above $100,000, rather than at or above the WTO GPA threshold of $202,000. The threshold for the Korea FTA for construction is the same as the threshold for the WTO GPA for construction.
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Gibson Guitar Corp. Settles Lacey Act Violations Charges
On August 6, 2012, the Department of Justice (DOJ) announced that Gibson Guitar Corp. (Gibson) entered into a criminal enforcement agreement with the U.S. resolving a criminal investigation into allegations that the company violated the Lacey Act by illegally purchasing and importing ebony wood from Madagascar and rosewood and ebony from India.
According to the facts of the criminal enforcement agreement, the harvest of ebony in and export of unfinished ebony from, Madagascar has been banned since 2006.
Gibson purchased "fingerboard blanks," consisting of sawn boards of Madagascar ebony, for use in manufacturing guitars. The Madagascar ebony fingerboard blanks were ordered from a supplier who obtained them from an exporter in Madagascar. Gibson's supplier continued to receive Madagascar ebony fingerboard blanks from its Madagascar exporter after the 2006 ban. The Madagascar exporter did not have authority to export ebony fingerboard blanks after the law issued in Madagascar in 2006.
In 2008, an employee of Gibson participated in a trip to Madagascar, where he was told that a law passed in 2006 in Madagascar banned the harvest of ebony and the export of any ebony products that were not in finished form. He was also told by trip organizers that instrument parts, such as fingerboard blanks, would be considered unfinished and therefore illegal to export under the 2006 law. Trip participants also visited the facility of the exporter in Madagascar, from which Gibson's supplier sourced its Madagascar ebony, and were informed that the wood at the facility was under seizure at that time and could not be moved.
After the Gibson employee returned from Madagascar with this information, he conveyed the information to superiors at Gibson. This information was not further investigated or acted upon prior to Gibson continuing to place orders with its supplier. Gibson received four shipments of Madagascar ebony fingerboard blanks from its supplier between October 2008 and September 2009.
The criminal enforcement agreement defers prosecution for criminal violations of the Lacey Act and requires Gibson to pay a penalty amount of $300,000 and provide a community service payment of $50,000 to the National Fish and Wildlife Foundation. In related civil forfeiture actions, Gibson will withdraw its claims to the wood seized in the course of the criminal investigation, including Madagascar ebony from shipments with a total invoice value of $261,844.
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CBP Requests Comments on the Declaration for Free Entry of Returned American Products
Comments are due to CBP on November 20, 2012
 On September 21, 2012, U.S. Customs and Border Protection (CBP) issued a notice in the Federal Register requesting comments on the Declaration for Free Entry of Returned American Products (CBP Form 3311).
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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:
2012 East Coast Trade Symposium - U.S. Customs and Border Protection
Oct. 29 - 30, 2012 - Washington, D.C. - POSTPONED due to Hurricane Sandy
2012 Fall Conference - Society for International Affairs
Nov. 8 - 9, 2012 - Arlington, VA - $550 - $800
Essentials of U.S. Export Controls - Bureau of Industry and Security
Nov. 28, 2012 - Austin, TX - $250
Technology and Encryption Export Controls - Bureau of Industry and Security
Nov. 29, 2012 - Austin, TX - $250
Complying with U.S. Export Controls - Bureau of Industry and Security
December 11-12, 2012 - Jacksonville, FL - Details not yet posted
How to Develop an Export Management and Compliance Program - Bureau of Industry and Security
December 13, 2012 - Jacksonville, FL - Details not yet posted
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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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