Earlier this month, BIS’ Office of Boycott Compliance announced a Settlement Agreement with Mitsui Plastics, Inc., a domestic concern doing business in New York, to settle its potential civil liability for nine alleged violations of the Export Administration Regulations (EAR).

Charges Details Summary Enforcement Action
§ 760.2(d) Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons In connection with the sale and/or transfer of goods from the U.S. to Bahrain, Mitsui, on two occasions “furnished information concerning another person’s business relationships with another person who is known or believed to be restricted from having any business relationship with or in a boycotting country.” Civil Monetary Penalty of $28,600
§ 760.5 Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States Also in connection with the sale and/or transfer of goods from the U.S. to Bahrain, Mitsui, on seven occasions “received a request to take an action which would have the effect of furthering or supporting a restrictive trade practice or unsanctioned foreign boycott. Mitsui failed to report its receipt of these requests to the Department…”

On February 12, the State Department’s Directorate of Defense Trade Controls (DDTC) published a Federal Register Notice seeking comments to inform its review of controls implemented in recent revisions to the following United States Munitions List (USML) Categories:

V – Explosives and Energetic Materials, Propellants, Incendiary Agents, and Their Constituents;

X – Personal Protective Equipment; and

XI – Military Electronics

Commerce’s Bureau of Industry and Security (BIS) also published a notice on February 12. The agency is seeking public comments to perform a complementary review of items on the Commerce Control List (CCL) concurrent with DDTC’s review to ensure that the descriptions of these items on the CCL are clear, items for normal commercial use are not inadvertently controlled as military items on the USML, technological developments are accounted for on the control lists, and controls properly implement the national security and foreign policy objectives of the United States.

This is part of DDTC and BIS’ periodic post-Export Control Review (ECR) of the USML/CCL.

Comments for both notices are due on April 13.

BIS published a Final Rule in the January 26 Federal Register adding 21 persons to the Entity List, Supplement No. 4 to part 744 of the Export Administration Regulations (EAR).

The Entity List identifies entities and other persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. The EAR imposes additional license requirements on, and limits the availability of most license exceptions for, exports, re-exports, and transfers (in-country) to those listed.

These twenty-one persons will be listed on the Entity List under the destinations of Bulgaria, China, Kazakhstan, Russia, Syria, and the United Arab Emirates (U.A.E.).

Among the 21 are a number of entities from China, Kazakhstan, Russia, and the U.A.E. They are:

Country Name
China Chengdu Spaceon Technology Co., Ltd., along with the alias “Tianao Electronics Co. Ltd.”
Kazakhstan/Russia Abtronics
UAE Advanced Aerospace Industries
UAE Deira General Marketing
UAE DGL Clearing and Forwarding LLC
UAE Emitech Middle East FZC
UAE Eurotech DMCC
UAE Foremost International FZE
UAE Jazirah Aviation Club
UAE Modest Marketing LLC
UAE Pearltrainer FZE
UAE Sky Gulf Consultancy and Researches LLC
UAE Stealth Telecom FZC

In addition, this rule amends the EAR by removing three entities from the Entity List. This rule removes one entity listed under the destination of Taiwan and two entities listed under the destination of the U.A.E. from the Entity List. All three of the removals are the results of requests for removal received by BIS pursuant to the section of the EAR used for requesting removal or modification of an Entity List entry and a review of information provided in the removal requests.

Finally, this final rule modifies two existing entries on the Entity List. This rule modifies one entry under China and one entry under Pakistan to provide additional or modified addresses and/or names for these persons

 

 

 

On January 11, BIS announced a Settlement Agreement with MHz Electronics, Inc. of Phoenix, AZ, to settle its potential civil liability for two alleged violations of the Export Administration Regulations (EAR).

Charges Details Summary Enforcement Action
§ 764.2(a) Engaging in Prohibited Conduct On two occasions in 2013, the company exported pressure transducers subject to the EAR under Export Control Classification Number (ECCN) 2B230 without a license to China and Taiwan Civil Monetary Penalty of $10,000

Complete an external audit of its export controls compliance program

BIS found the company did not seek to determine the ECCN of the items, intended end use, end users, or otherwise determine if an export license was required. MHz Electronics, at the time, did not have any program in place to ensure U.S. export control compliance.

On December 20, 2017, the Bureau of Industry and Security (BIS) added two Russian companies to  its Entity List because they provided technology which aided the development of a new Russian cruise missile—the nuclear-capable Novator 9M729 missile (designated by NATO as the SSC-8)—which the U.S. alleges is a violation of the 1987 Intermediate Nuclear Forces Treaty (INF).

BIS’s action is part of the new Trump Administration INF Treaty Integrated Strategy. It states, “While the United States will continue to pursue a diplomatic solution, we are now pursuing economic and military measures intended to induce the Russian Federation to return to compliance.” In addition to the first BIS designations related to alleged INF treaty violations, the U.S. is beginning research and development on its own new nuclear cruise missile, an action that Russia is alleging represents a separate violation of the INF Treaty.

The two designated parties are: (1) Joint Stock Company Experimental Design Bureau Novator; and (2) Joint Stock Company Federal Scientific and Production Center Titan-Barrikady.

On January 8, the Treasury Department published its quarterly ‘List of Countries Requiring Cooperation with International Boycott’ in the Federal Register.

On the basis of the best information currently available to the Department of the Treasury, the following countries require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986:

  • Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

This list is unchanged from Treasury’s last Federal Register Notice regarding boycott, published on August 2, 2017.

Office of Foreign Assets Control (OFAC)

  • On November 17, American Express Company (AMEX) agreed to pay $204,277 to settle its potential civil liability for 1,818 alleged violations of the Cuban Assets Control Regulations (CACR). The violations occurred between 2009 and 2014, at which time a wholly-owned subsidiary of AMEX, Alpha Card Group, owned 50 percent of BCC Corporate SA (BCCC), a Belgium-based credit card issuer and corporate service company. Alpha Card and BCCC failed to implement controls to prevent its credit cards from being used in Cuba. AMEX and BCCC voluntarily self-disclosed the violations. OFAC determined this was a non-egregious case.
    • Aggravating factors included:
      • Personnel within both Alpha Card and BCCC had reason to know of the conduct that led to the apparent violations.
      • Despite Alpha Card’s business model prior to its acquisition of BCCC in March 2009, in which it dealt exclusively with AMEX-related products (and therefore had insight into all the parties involved in any transactions throughout the network), none of the companies involved appear to have appreciated the possibility or risk that BCCC-issued credit cards could be used in Cuba, and the company should have taken steps to assess the level of sanctions risk, and related controls, for BCCC-issued credit cards.
      • The apparent violations resulted in harm to U.S. sanctions program objectives at the time they occurred.
      • AMEX is a large and commercially sophisticated financial institution.
      • During OFAC’s investigation, AMEX and BCCC provided certain information on multiple occasions that was verifiably inaccurate or incomplete, including material omissions.
    • Mitigating factors included:
      • BCCC has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations.
      • Upon discovering the apparent violations, AMEX took swift and appropriate remedial action.
      • AMEX and BCCC voluntarily self-disclosed the apparent violations to OFAC.
      • BCCC signed a statute of limitations tolling agreement and tolling agreement extensions.
  • On November 28, OFAC issued a Finding of Violation to Dominica Maritime Registry, Inc. (DMRI) of Fairhaven, Massachusetts, for a violation of the Iranian Transactions and Sanctions Regulations (ITSR). On July 4, 2015, the company executed a binding Memorandum of Understanding, which OFAC determined to be a contingent contract, with the National Iranian Tanker Company (NITC), an entity of the Government of Iran. The company did not voluntarily disclose the violation. OFAC ruled it a non-egregious case.
    • Aggravating Factors:
      •  DMRI failed to exercise a minimal degree of caution or care by executing a contingent contract with an entity it knew was listed on the SDN List at the time of the violation.
      • DMRI executives had actual knowledge of, and actively participated in, the conduct the led to the violation, and were aware of NITC’s status when DMRI executed the contingent contract.
      • DMRI undermined the policy objectives of the ITSR by dealing in the blocked property of a Government of Iran entity identified on the SDN List.
    • Mitigating factors included:
      • DMRI had not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transaction giving rise to the violation.
      • DMRI is a small company.
      • DMRI took remedial actions, including engaging trade counsel to assist it in understanding its obligations under U.S. sanctions laws, updating its OFAC compliance procedures, and undertaking a process to establish an OFAC compliance training program for all employees.
    • OFAC determined a Finding of Violation was the appropriate enforcement response because DRMI is a small company, the scope of the contract at issue was limited, and there was no performance on the contract.

Bureau of Industry and Security (BIS)

  • On November 20, BIS announced a Settlement Agreement with Pilot Air Freight, LLC (a.k.a. Pilot Air Freight Corp.) of Lima, Pennsylvania, to settle potential civil liability for one alleged violation of the Export Administration Regulations (EAR). In February 2015, Pilot allegedly aided or abetted an attempted unlicensed exported to IKAN Engineering Services in Pakistan, an entity on BIS’ Entity List. The item was an ultrasonic mill cutting machine controlled for Anti-Terrorism reasons, and valued at more than $250,000.
    • Pilot was assessed a civil penalty of $175,000.
    • The company agreed to complete two external audits of its export controls compliance program.

For more information, contact: Jeff Snyder, Edward Goetz

Bureau of Industry and Security

  • On August 31, BIS announced a Settlement Agreement with Narender Sharma and his company Hydel Engineering Products (Hydel/Sharma), both of Rumpur Bushahr, India. Hydel/Sharma was charged with one count of Conspiracy to Export Items from the U.S. to an Iranian Government Entity without Authorization. The purpose of the conspiracy was to sell and export U.S.-origin waterway barrier debris systems and related components to Iran via third countries. The company was assessed a penalty of $100,000 and agreed to a five-year denial of export privileges, suspended for a five-year probationary period.
  • On September 25, BIS announced a Settlement Agreement with Millitech, Inc., of Northampton, Massachusetts to settle 18 alleged violations of the Export Administration Regulations (EAR). Millitech is alleged to have engaged in prohibited conduct when it exported multiplier chains, controlled under Export Control Classification Number (ECCN) 3A001.b.4, to China and Russia without a license. The company was assessed a civil penalty of $230,000.

Department of Justice and Securities and Exchange Commission

  • Telia Company AB, a Stockholm-based international telecommunications company, entered into a deferred prosecution agreement in connection with a criminal information filed on September 21 in the Southern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). Its Uzbek subsidiary, Coscom LLC, pled guilty to the same charge. Telia agreed to pay a total criminal penalty of $274,603,972 to the U.S., including a $500,000 criminal fine and $40 million forfeiture on behalf of Coscom. Separate settlements were made with the Securities and Exchange Commission and the Public Prosecution Service of the Netherlands in related proceedings. The total amount of criminal and regulatory penalties paid to U.S., Dutch, and Swedish authorities will be $965,773,949.
    • In its press release, the DOJ stated, “According to the companies’ admissions, Telia and Coscom, through various managers and employees within Telia, Coscom and affiliated entities, paid approximately $331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry. The companies structured and concealed the bribes through various payments including to a shell company that certain Telia and Coscom management knew was beneficially owned by the foreign official. The bribes were paid on multiple occasions between approximately 2007 and 2010, so that Telia could enter the Uzbek market and Coscom could gain valuable telecom assets and continue operating in Uzbekistan. Certain Telia and Coscom management also contemplated structuring an additional bribe payment in late 2012, after Swedish media began reporting about Telia’s corrupt payments in Uzbekistan, Swedish authorities began a criminal investigation and Telia opened an internal investigation.”

Directorate of Defense Trade Controls

  • On September 11, DDTC announced Bright Lights USA, Inc. settled 11 allegations that it violated the International Traffic in Arms Regulations (ITAR) with unauthorized exports of defense articles, including the export of technical data to a proscribed destination. Bright Lights voluntarily disclosed the alleged violations and agreed to pay a civil penalty of $400,000. DDTC did not seek disbarment because the company cooperated with the Department’s review, expressed regret, and took steps to improve its compliance program.
    • Among other things, between 2010 and 2012, the company exported ITAR-controlled technical data under Categories II, IV, and VII without authorization. Four of these were to China. The company also misclassified items under the Export Administration Regulations and exported them without a license to non-prohibited destinations.

Office of Foreign Assets Control

  • On September 26, OFAC announced Richemont North America, Inc., doing business as Cartier, agreed to pay $334,800 to settle its potential civil liability for four alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR). Between 2010 and 2011, Cartier exported four shipments of jewelry to an entity on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List).

For more information, contact: Jeff Snyder, Edward Goetz

Bureau of Industry and Security (BIS)

  • Export Violations
    • On August 18, BIS announced a Settlement Agreement with Cryofab, Inc. of New Jersey. On two different occasions in 2012, the company engaged in conduct prohibited by the Export Administration Regulations (EAR). Cryofab exported gas storage containers and related tools and accessories from the U.S. to an Indian entity, the Bhabha Atomic Research Center (BARC), listed on the Entity List. The company was assessed a penalty of $35,000 and agreed to an external audit of its export controls compliance program covering the 12-month period beginning on the date of the order.
  • Alleged Antiboycott Violations
    • On August 22, BIS announced a Settlement Agreement with Carrier Saudi Services Company Ltd. (CSSC), a controlled-in-fact affiliate of Carrier Corporation, a U.S. firm for four alleged violations of Part 760 of the EAR, Restrictive Trade Practices or Boycotts. The company was charged with two violations of “Refusal to Do Business” and two violations of “Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States”. All four violations came as a result contracts from 2012. CSSC agreed to pay a $12,000 civil penalty.
    • On August 22, BIS announced a Settlement Agreement with CH Robinson Freight Services, Ltd. (CHR) for 17 alleged violations of Part 760 of the EAR. The company was charged with ten violations of “Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons” and seven “Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States”. All 17 violations occurred between 2012 and 2015 and were transactions involving the sale and/or transfer of goods or services (including information) from the U.S. to the UAE. CHR agreed to pay a $12,000 civil penalty.

Office of Foreign Assets Control (OFAC)

    • On August 10, OFAC announced IPSA International Services, Inc. agreed to pay $259,000 to settle its potential civil liability for 72 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • IPSA, on 44 occasions, imported Iranian-origin services into the U.S. and on 28 occasions, IPSA engaged in transactions or dealings related to Iranian-origin services by approving and facilitating its foreign subsidiaries’ payments to providers of Iranian-origin services.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. OFAC found at least one of IPSA’s senior management knew, or had reason to know, it was dealing in transactions related to Iran; however, the fine was mitigated by, among other things, the company undertaking remedial measures and submitting an investigation report to OFAC without an administrative subpoena. It answered additional questions promptly, and entered into a statute of limitations tolling agreement.
    • On August 17, OFAC announced Blue Sky Blue Sea, Inc., doing business as American Export Lines and International Shipping Company (USA), agreed to pay $518,063 to settle potential civil liability for 140 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • Between 2010 and 2012, the company appears to have transshipped used and junked cars and parts from the U.S. via Iran to Afghanistan on 140 occasions.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. OFAC found the company’s President and co-owner knew and approved of the transshipments via Iran; however, the fine was mitigated by, among other things, taking remedial steps before OFAC’s investigation began. It also cooperated, to include agreeing to toll the statute of limitations for 804 days.
    • On August 24, OFAC announced COSL Singapore Ltd., an oilfield services company located in Singapore and a subsidiary of China Oilfield Service Limited, agreed to pay $415,350 to settle its potential civil liability for 55 apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR).
      • Between 2011 and 2013, the company, through two subsidiaries, exported or attempted to export 55 orders of oil rig supplies from the U.S. to Singapore and the UAE, then re-exported or attempted to re-export these supplies to four oil rigs in Iranian territorial waters.
      • The company did not voluntarily disclose the apparent violations and OFAC determined it to be a non-egregious case. COSL Singapore’s fine was mitigated by, among other things, the institution of an OFAC sanctions compliance program and its display of substantial cooperation, to include entering a tolling agreement with OFAC.

For more information, contact: Jeff Snyder, Edward Goetz

Bureau of Industry and Security (BIS)

  • On July 25, BIS entered into a Settlement Agreement with Harold Rinko, doing business as Global Parts Supply of Hallstead, Pennsylvania (also known as Rinko/Global Parts Supply) to settle a charge of one alleged violation of the Export Administration Regulations (EAR). The company was assessed a $100,000 civil penalty and a denial of export privileges for ten years. Both are suspended so long as the company makes quarterly reports to BIS.
    • Between 2007 and 2011, Rinko/Global Parts conspired and/or acted in concert with others to procure U.S.-origin goods, subject to the EAR, from suppliers in the U.S. to Syria without a license. These included items specifically identified on the Commerce Control List (CCL) or designated as EAR99. For example, in 2008, the company prepared false sales invoices for a multi-gas scanner, used in the detection of chemical warfare agents, and accessories, knowing the items would be transshipped to Syria.

Financial Crimes Enforcement Network (FinCEN)

  • On July 26, Treasury took its first action against a foreign-located money service business, assessing a $110 million civil monetary penalty against BTC-e, a/k/a Canton Business Corporation for willfully violating U.S. anti-money laundering (AML) laws. One of BTC-e’s operators, Russian national Alexander Vinnik, was arrested in Greece, as well. FinCEN assessed a $12 million penalty against him for his role in the violations.
    • BTC-e exchanges fiat currency as well as different convertible virtual currencies, such as Bitcoin. It is one of the largest virtual currency exchanges by volume in the world. BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

For more information, contact: Jeff Snyder, Edward Goetz