OFAC Posts Recent Civil Penalties Cases

The Department of the Treasury's Office of Foreign Assets Controls (OFAC) published recent civil penalty information: 

On September 26, 2013, OFAC assessed a penalty of $750,000 against Finans Kiymetli Madenler Turizm Otomotiv Gida Tekstil San. Ve Tic (FINANS), a Turkey-based trading company, for violating the Iranian Transactions and Sanctions Regulations (ITSR).  Specifically, OFAC determined that in 2012, FINANS violated the prohibition against the exportation of services to Iran when it made at least three funds transfers via banks in the U.S., totaling $257,808, to the Iranian government and/or persons.

FINANS did not voluntarily disclose the violations to OFAC and the violations constituted an egregious case. The base penalty amount for the violations was $750,000.  In assessing the penalty amount, OFAC considered, among other factors, that FINANS' senior management had reason to know of the conduct that lead to the violations, and FINANS did not have a compliance program in place. 

On October 21, 2013, OFAC assessed a penalty of $1,500,000 against Alma Investment LLC (Alma), a UAE-based investment and advising company that also appears to serve as a general trading company, for violating the Iranian Transactions and Sanctions Regulations (ITSR). Specifically, on at least six occasions in 2009 and 2010, Alma originated electronic funds transfers, totaling $103,283, that were processed through financial institutions in the U.S. for the benefit of persons in Iran.  OFAC determined that Alma violated the prohibition against the exportation of services from the U.S. to Iran.

The violations constituted an egregious case and Alma did not voluntarily self-disclose the violations to OFAC.   

BIS Amends EAR Parts 734, 738, 740, 742, 748, 750, 772, and 774, to Make the CCL Clearer

Changes effective October 15, 2013

On October 4, 2013, Bureau of Industry and Security (BIS) posted a final rule in the Federal Register amending the Export Administration Regulations (EAR) Parts 734, 738, 740, 742, 748, 750, 772, and 774.The rule implements changes outlined in the November 29, 2012 proposed rule entitled Revisions to the Export Administration Regulations (EAR) To Make the Commerce Control List (CCL) Clearer.In addition, the rule also makes conforming changes and minor clarifications based on two final rules implementing the Export Control Reform Initiative: the April 16, 2013 final rule entitled Revisions to the EAR: Initial Implementation of Export Control Reform; and the July 8, 2013 final rule entitled Revisions to the EAR: Military Vehicles; Vessels of War; Submersible Vessels, Oceanographic Equipment; Related Items; and Auxiliary and Miscellaneous Items that the President Determines No Longer Warrant Control under the United States Munitions List.

The final rule, which went into effect October 15, 2013, provides detailed descriptions of the amendments. 

First Changes to the U.S. Export Control System Go

Into Effect

On October 15, 2013, the Obama Administration announced the first set of 

revised export control lists going into effect.

The changes to the International Traffic in Arms (ITAR) U.S. Munitions List (USML) affect categories VIII (Aircraft and Related Articles), XVII (Classified Articles, Technical Data and Defense Services Not Otherwise Enumerated), XIX (a new USML category that covers Gas Turbine Engines and Associated Equipment), and XXI (Articles, Technical Data and Defense Services Not Otherwise Enumerated).  

The changes to the Export Administration Regulations (EAR) Commerce Control List (CCL) create ten new 600-series Export Control Classification Numbers (ECCNs) to provide for items transferred from the USML, which include aircraft, gas turbine engines, related parts, components, accessories, attachments, software and technology.rwise Enumerated), XIX (a new USML category that covers Gas Turbine Engines and Associated Equipment), and XXI (Articles, Technical Data and Defense Services Not Otherwise Enumerated).

Taken together, the reformed USML and CCL categories account for the largest volume of U.S. export licenses and represent the highest percentage of licensed exports from 43 states, with licensed shipments amounting to almost $21 billion annually. These two categories also account for 75% of the USML export licenses approved solely for parts and components. 

To follow developments in the Export Control Reform Initiative, visit www.export.gov/ecr/. 

DDTC Updates DS-2032 Statement of Registration Form

Effective October 25, 2013, a new version of the DS-2032 Statement of Registration form goes into effect. The U.S. Department of State Directorate of Defense Trade Controls (DDTC) will not accept older versions of the form if submitted after the effective date. DDTC provides on its website that DS-2032  may be submitted either electronically (via EFS), by registered mail, or express mail until December 31, 2013; effective January 1, 2014 only electronic submissions will be permitted.

The new version of the form includes several modifications, such as the ability for U.S. persons to consolidate manufacturer/exporter/broker registrations; updates to the International Traffic in Arms Regulations (ITAR) U.S. Munitions List (USML) categories; disclosure of intermediate through ultimate parents; a certification regarding debarred or subsequently reinstated parties; a certification on violations involving any U.S. criminal statutes; as well as clarification on foreign ownership.

CBP Amends Regulations to Implement the U.S.-Columbia TPA

On October 1, 2013, the U.S. Customs and Border Protection (CBP) posted a final rule in the Federal Register amending Customs regulations to implement the preferential tariff treatment and other customs-related provisions of the U.S.-Columbia Trade Promotion Agreement (CTPA).

Specifically, the following substantive provisions were adopted:

• An importer claiming preferential tariff treatment for a good imported into the U.S. must maintain supporting records for a minimum five years;

• A post-importation claim may be filed by paper or by method specified for equivalent reporting via an authorized electronic data interchange system;

• A clarification of rules for determining the value of a material for purposes of calculating the regional value content of a good and for applying the de minimis rules; and

• The term "repairs or alterations" does not include an operation or process that transforms an unfinished good into a finished good.

The rule goes into effect October 31, 2013. 

Proposed Rule Amends CBP Regulations to Implement U.S.-Panama TPA

On October 23, 2013, U.S. Customs and Border Protection (CBP) posted an interim rule in the Federal Register seeking comments on the implementation of the preferential tariff treatment and other customs-related provisions of the U.S.-Panama Trade Promotion Agreement (USPTPA)

Comments are due to CBP on December 22, 2013.

ITA's "Import Administration" Changes Name to "Enforcement and Compliance"

Change Effective October 21, 2013

On October 22, 2013, the Department of Commerce International Trade Administration (ITA) posted a final rule in the Federal Register that, through internal department organizational orders, changed the name of "Import Administration" to "Enforcement and Compliance" effective October 21, 2013. Consistent with this action, the rule made appropriate conforming changes in the Code of Federal Regulations.   

 On Tuesday, October 22, 2013, the Department of Justice (DOJ) announced that Diebold Inc. (Diebold), a provider of integrated self-service delivery and security systems, has agreed to pay $25.2 million to settle criminal charges that it violated the Foreign Corrupt Practices Act (FCPA) by bribing Chinese and Indonesian officials and by falsifying records in Russia in order to obtain contracts to provide ATMs to banks in those countries.

DOJ alleges that Diebold disguised the bribery payments and gifts through various means, such as routing the payments through third parties designated by the banks and recording leisure trips for bank employees as "training." In Russia, Diebold entered into false contracts with a distributor for services that the distributor was not performing. The distributor then used money received from Diebold to pay bribes to employees of Diebold's privately-owned bank customers in Russia in order to obtain and retain ATM-related contracts.

In addition to the criminal penalty, Diebold agreement to implement internal controls, cooperate fully with the DOJ, and retain a compliance monitor for a minimum of 18 months. DOJ agreed to defer prosecution for three years, and if Diebold abides by the terms of the deferred prosecution agreement, the DOJ will dismiss the criminal information when the agreement's term expires.

In a related matter, Diebold reached a settlement with the Securities and Exchange Commission (SEC) to pay almost $23 million in disgorgement and prejudgment interest.

WTO Releases International Trade Statistics 2013 

 On October 24, 2013, the World Trade Organization (WTO) released its annual compilation of trade and tariff data, including, for the first time, a publication dedicated to trade in services. The publication, International Trade Statistics 2013, provides a comprehensive overview of trade development in 2012, and also includes the 2013 editions of Trade Profiles, World Tariff Profiles and International Trade Statistics, which has been expanded to include data measured in value-added terms.