Every month we post the highlights of FCC’s Export/Import Daily Update (“The Daily Bugle”). The Daily Bugle is sent out every business day to approximately 10,000 readers, who keep up to date with changes of defense and high-tech trade laws and regulations. It is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III and Elina Tsapouri.
We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of European Union, Australia, Canada, U.K., and other countries and international organizations. Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items. To subscribe, click here.
Last month’s highlights of The Daily Bugle included in this edition are:
- Treasury/OFAC: “Settlement Agreement with Airbnb Payments, Inc.”; Monday, 3 Jan 2022; Item #5
- Commerce/Census: “New BIS License Type C64 – (ACE) Authorized Cybersecurity Exports”; Friday, 7 Jan 2022; Item #4
- State Department Adjusts 2022 Civil Monetary Penalties Inflationary; Monday, 10 Jan 2022; Item #1
- UK ECJU: “UK Exporters Fined for Unlicensed Strategic Exports”; Tuesday, 11 Jan 2022; Item #5
- Commerce/BIS Delays Effective Date of New Rules on Information Security Controls-Cybersecurity Items; Wednesday, 12 Jan 2022; Item #1
- DHS/CBP: “Coming Changes to Trade User Responses to CBP Forms 28, 29 and 4647”; Friday, 21 Jan 2022; Item #5
- State Dept Imposes Sanctions on Chinese Missile Proliferators; Friday, 21 Jan 2022; Item #1
- DHS/CBP: “Modifications to the Harmonized Tariff Schedule of the United States – Section 301 China Remedy”; Thursday, 27 Jan 2022; Item #4
- Treasury/OFAC: “Business Advisory on Heightened Risks Associated with doing Business in Burma”; Thursday, 27 Jan 2022; Item #8
- State/DDTC: Leonid Boris Volfson and Torrey Pines Logic, Inc. to pay $840,000for ITAR Violations; Monday, 31 Jan 2022; Item #4
Treasury/OFAC: “Settlement Agreement with Airbnb Payments, Inc.”
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a settlement with Airbnb Payments, Inc. (“Airbnb Payments”), a registered money services business incorporated in 2013 under the laws of the State of Delaware and headquartered in San Francisco, California, and a wholly owned subsidiary of Airbnb, Inc.
Airbnb Payments agreed to remit $91,172.29 to settle its potential civil liability for apparent violations of sanctions against Cuba. Airbnb Payments processed payments related to guests traveling for reasons outside of OFAC’s authorized categories and failed to keep certain required records associated with Cuba-related transactions. For more information, please visit the following web notice.
Commerce/Census: “New BIS License Type C64 – (ACE) Authorized Cybersecurity Exports”
(Source: U.S. Census Bureau, firstname.lastname@example.org, 7 Jan 2022)
On Thursday, October 21, 2021, the Department of Commerce, Bureau of Industry and Security (BIS) published an interim final rule that becomes effective January 19, 2022. This interim final rule establishes a new control on cyber security items and a new License Exception “Authorized Cybersecurity Exports” (ACE) that authorizes exports of these items to most destinations except in the circumstances described in the rule. As a result of this rule, the following changes will be made to the Automated Export System (AES) in order for exporters and authorized agents to successfully report electronic export information in the AES.
The Addition of Two Export Control Classification Numbers (ECCN)
ECCNs 4A005 and 4D004 will be added to the AES ECCN reference table.
Note: By using any of the License Exceptions or “No License Required” (NLR), you are certifying that the terms, provisions, and conditions described in the Export Administration Regulations (EAR) have been met.
A New License Code has been added to the AES
An update has been made to AES to create a new License Code C64 Authorized Cybersecurity Exports (ACE) that authorizes exports, reexports and transfers (in-country) of cybersecurity items and certain IP network surveillance products, which are not also controlled in Category 5—Part 2 of the Commerce Control List (CCL) or for Surreptitious Listening (SL) reasons. License Exception ACE allows the export, reexport and transfer (in- country) of ‘cybersecurity items’ to most destinations, except to destinations listed in Country Groups E:1 and E:2 of Supplement No. 1 to Part 740 of the EAR.
AES filers must adhere to the following new reporting when using C64 (ACE) to prevent the return of fatal errors from AES.
- Report License Code: C64 Authorized Cybersecurity Exports (ACE)
- Allowable ECCN’s: The following ECCNs are eligible 4A005, 4D001, 4D004, 4E001, 5A001, 5B001, 5D001, and 5E001 to the extent permitted under part 740 of the EAR and the respective ECCN entry.
- Allowable Export Information Codes: All except UG
- Allowable Modes of Transportation: All except ‘70’ (Fixed Transport)
Please refer to §740.22 Authorized Cybersecurity Exports (ACE) in the EAR for additional requirements for this license exception. There are two types of end-user restrictions for license exception ACE which include a ‘government end user,’ as defined in § 740.22, of any country listed in Country Group D:1, D:2, D:3, D:4 or D:5 in supplement no. 1 to part 740, or a non-government end user located in a country listed in Country Group D:1 or D:5.
A complete list of all of the AES License Codes and reporting instructions for these types can be found at https://www.cbp.gov/document/guidance/aestir-appendix-f-license-and-license-exemption-type-codes
For questions regarding these upcoming AES changes, please contact the Bureau of Industry and Security at one of the phone numbers below.
* Outreach and Educational Services Division (Wash DC) (202) 482-4811
* Office of Technology Evaluation (Wash DC): (202) 482-4933
* Western Regional Office (Irvine CA) (949) 660–0144
* Northern California branch (San Jose CA) (408) 998-8806
State Department Adjusts 2022 Civil Monetary Penalties Inflationary
(Source: Today’s Federal Register, 87 FR 1072, 10 Jan 2022) [Excerpts]
* AGENCY: Department of State.
* ACTION: Final rule.
* SUMMARY: This final rule is issued to adjust the civil monetary penalties (CMP) for regulatory provisions maintained and enforced by the Department of State. The revised CMP adjusts the amount of civil monetary penalties assessed by the Department of State based on the December 2021 guidance from the Office of Management and Budget. The new amounts will apply only to those penalties assessed on or after the effective date of this rule, regardless of the date on which the underlying facts or violations occurred.
* DATES: This final rule is effective on January 10, 2022.
UK ECJU: “UK Exporters Fined for Unlicensed Strategic Exports”
(Source: UK Export Control Joint Unit, 10 Jan 2022) [Excerpts]
Between March and November 2021, HM Revenue & Customs (HMRC) issued compound penalties between £1,000 and £54,000 to 10 UK exporters.
The 10 settlements were: . . . These related to unlicensed exports of dual use goods, military goods and related activity controlled by The Export Control Order 2008. HMRC has policy responsibility for enforcing export controls on strategic goods and sanctions and investigating breaches of those controls. Where appropriate, HMRC can use their powers to offer a compound penalty in lieu of a file being prepared and sent to the Crown Prosecution Service.
Commerce/BIS Delays Effective Date of New Rules on Information Security Controls-Cybersecurity Items
(Source: Today’s Federal Register, 87 FR 1670, 12 Jan 2022) [Excerpts]
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Interim final rule; delay of effective date.
* SUMMARY: On October 21, 2021, the Bureau of Industry and Security (BIS) published an interim final rule that establishes new controls on certain cybersecurity items for National Security (NS) and Anti-terrorism (AT) reasons, along with a new License Exception, Authorized Cybersecurity Exports (ACE), that authorizes exports of these items to most destinations except in the circumstances described in that rule. That rule was published with a 45-day comment period, which ended on December 12, 2021, and a 90-day delayed effective date (January 19, 2022). This rule delays the effective date of the interim final rule by 45 days.
* DATES: As of January 12, 2022, the effective date for the interim final rule published October 21, 2021, at 86 FR 58205, is delayed to March 7, 2022.
DHS/CBP: “Coming Changes to Trade User Responses to CBP Forms 28, 29 and 4647”
(Source: DHS/CBP/CSMS #50775619)
On January 29, 2022, CBP will implement changes to the electronic process for reviewing entry summaries. While the majority of these changes only affect CBP users, until the new ACE forms application is completed in April 2022, trade users will also see a change in how responses to CBP Forms 28, 29 and 4647 (issued by CBP through the ACE Portal) may be submitted. Beginning on January 29, trade users will no longer be able to submit responses directly through the ACE Portal, and electronic responses will only be available through DIS (via EDI or email submission). Once the new ACE forms application is deployed in April 2022 (to be accessed via the ACE Portal), trade users will have the option to directly respond to CBP Forms 28, 29 and 4647 through the new application. For questions about these changes, please contact ESAR@cbp.dhs.gov.
State Dept Imposes Sanctions on Chinese Missile Proliferators
(Source: Federal Register, 86 FR 3376, 21 Jan 2022)
* AGENCY: State Department
* ACTION: Notice – Imposition of Missile Proliferation Sanctions: Three Entities in the People’s Republic of China, and Imposition of Missile Proliferation Sanctions: Three Entities in the People’s Republic of China
* SUMMARY: A determination has been made that the following PRC entities have engaged in activities that require the imposition of measures pursuant to the Arms Export Control Act, as amended, and the Export Administration Act of 1979, as amended:
– China Aerospace Science and Technology Corporation (CASC) First Academy, and its sub-units and successors;
– China Aerospace Science and Industry Corporation (CASIC) Fourth Academy, and its sub-units and successors; and
– Poly Technologies Incorporated (PTI), and its sub-units and successors.
DHS/CBP: “Modifications to the Harmonized Tariff Schedule of the United States – Section 301 China Remedy”
(Source: CBP/CSMS: 26 Jan 2022)
CSMS #50834787: The purpose of this message is to provide guidance on new Section 301 modifications made to certain Harmonized Tariff Schedule (HTS) classifications within the Harmonized Tariff Schedule of the United States (HTSUS).
On December 23, 2021, the President issued Presidential Proclamation 10326, making modifications to the HTSUS pursuant to 19 U.S.C. 3005(a). See 86 FR 73593. Proclamation 10326 incorporates by reference U.S. International Trade Commission (ITC) Publication 5240, entitled “Modifications to the Harmonized Tariff Schedule of the United States under Section 1206 of the Omnibus Trade and Competitiveness Act of 1988 and for Other Purposes” (Publication 5240).
To modify the HTSUS to maintain the duty treatment with respect to actions pursuant to section 301 of the Trade Act of 1974, the HTSUS is modified as set forth in Annex II of Publication 5240. The modifications laid out in Publication 5240 are effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after January 27, 2022.
The functionality for the acceptance of the imported merchandise covered by these modifications will be available in the Automated Commercial Environment (ACE) as of 7 a.m. eastern daylight time, January 25, 2022.
The new Section 301 modifications made to certain HTS classifications within the HTSUS are laid out in pages 185-195 of Publication 5240. The new HTS will maintain the duty treatment with respect to actions pursuant to section 301 of the Trade Act of 1974 under the appropriate U.S. Note provided below and will take effect on January 27, 2022.
- Per Annex II.A, certain HTS classifications under Chapters 28, 84, 85, 87, 88, and 90 of U.S. note 20(b) are modified.
- Per Annex II.A, certain HTS classifications under Chapters 39, 85, 87 of U.S. note 20(d) are modified.
- Per Annex II.A, certain HTS classifications under Chapters 3, 4, 7, 8, 12, 20, 22, 24, 25, 29, 32, 34, 38, 40, 44, 55, 57, 58, 59, 68, 70, 71, 74, 81, 84, 85, 87, 89, and 94 of U.S. note 20(f) are modified.
- Per Annex II.A, certain HTS classifications under Chapters 4, 8, 12, 15, 17, 20, 21, 29, 36, 38, 40, 44, 49, 62, 70, 85, 90, 91, 94, 95, and 97 of U.S. note 20(s) are modified.
- Importers shall submit the corresponding Chapter 99 HTSUS number for the Section 301 duties when the new 1-97 Chapter HTSUS numbers laid out in Publication 5240are submitted.
Reminder: importers, brokers, and/or filers should refer to CSMS 39587858 (Entry Summary Order of Reporting for Multiple HTS when 98 or 99 HTS are required) for guidance when filing an entry summary in which a heading or subheading in Chapter 99 is claimed on imported merchandise. . . .
Questions from the importing community concerning ACE entry rejections involving product exclusions should be referred to their CBP Client Representative. Questions related to Section 301 entry-filing requirements, please refer to CSMS message #42203908 (Information on Trade Remedy Questions and Resources).
Treasury/OFAC: “Business Advisory on Heightened Risks Associated with doing Business in Burma”
(Source: Treasury/OFAC, 26 Jan 2022)
Today (26 Jan 2022), the U.S. Departments of the Treasury, State, Commerce, Homeland Security, Labor, and the Office of the U.S. Trade Representative have issued a business advisory titled: Risks and Considerations for Businesses and Individuals with Exposure to Entities Responsible for Undermining Democratic Processes, Facilitating Corruption, and Committing Human Rights Abuses in Burma (Myanmar). For more information on this specific action, please visit this page.
State/DDTC: Leonid Boris Volfson and Torrey Pines Logic, Inc. to pay $840,000 for ITAR Violations
(Source: State/DDTC Penalties, Jan 2022)
* Respondent: Leonid Boris Volfson, and Torrey Pines Logic, Inc., 10505 Roselle St. #100 San Diego, CA 92121
(1) Attempted Unauthorized Export of Defense Articles Respondents violated 22 C.F.R. § 127.1(a)(1) one time when they, without authorization, attempted to export two thermal imaging systems (T25 and T20) controlled at the time of export under USML Category XII(c)(2)(i) and designated as SME to Singapore.
(2) Unauthorized Exports of Defense Articles Respondents violated 22 C.F.R. § 127.1(a)(1) one time when they, without authorization, exported 13 shipments of T10 thermal imaging units controlled – 11 – under USML Category XII(c) and designated as SME to Bulgaria, Germany, Switzerland, Lebanon (a proscribed destination under 22 C.F.R. § 126.1), Canada, the PRC (a proscribed destination under 22 C.F.R. § 126.1), Spain, Estonia, and Russia (a country subject to restrictive measures on defense exports pursuant to the Department of State public announcement on April 28, 2014).
(3) Unauthorized Exports of Defense Articles Respondents violated 22 C.F.R. § 127.1(a)(1) one time when they, without authorization, exported five shipments of S30 Sentinel optical detection units controlled under USML Category XII(b) and designated as SME to Japan.
(4) Involvement in ITAR-Regulated Activities While Generally Ineligible Respondents violated 22 C.F.R. § 127.1(d)(2) one time by performing manufacturing work on at least one defense article (S30 Sentinel, USML Category XII(b) and designated as SME) for export to a foreign customer while generally ineligible under 22 C.F.R. § 120.1(c)(2) and by participating in a transaction involving the export of two S30 Sentinels to Thailand. – Charge 5: Failure to Maintain and Produce Export Transaction Records Respondents violated 22 C.F.R. § 127.1(b)(1) one time when they failed to maintain and produce export transaction records as required under 22 C.F.R. § 122.5(a).
* Aggravating Factors:
(1) certain violations involved unauthorized exports to the People’s Republic of China (PRC) and Lebanon, proscribed destinations listed in ITAR § 126.1;
(2) certain violations involved unauthorized exports to Russia, a country subject to restrictive measures on defense exports per the Department of State public announcement on April 28, 2014;
(3) certain violations involved defense articles designated as Significant – 2 – Military Equipment (“SME”);
(4) Respondents’ repeated violations of the ITAR;
(5) Respondents did not voluntarily disclose certain violations; and
(6) Respondents did not obtain a license or other approval from the Department for the export of defense articles while a commodity jurisdiction (“CJ”) request was pending with the Department.
* Mitigating Factors: DDTC considered mitigating factors when determining whether to propose charges in this matter. Most notably, Respondents:
(1) submitted one voluntary disclosure, which included a third-party audit report that identified various export violations;
(2) cooperated with the Department’s investigation by responding to numerous requests for additional information;
(3) entered into successive agreements with the Department tolling the statute of limitations period for certain violations; and
(4) Respondent Dr. Volfson voluntarily waived his rights to assert a statute of limitations defense to certain claims.
* Agreed Penalties & Corrective Actions (including but not limited to):
- Appoint Special Compliance Monitor (SCO) for term of Consent Agreement.
- Pay civil settlement of $840,000 (allocated payments over 3 years)
- Refrain from ITAR controlled activities for 3 years.
- Term of consent agreement: 3 years
- Implement strengthened compliance policies, procedures, and training.
- Review and verify the export control jurisdiction of all items they manufacture and any defense services or technical data, including software, directly related to such hardware.
- Have audit conducted by an outside consultant with expertise in AECA/ITAR matters, approved by the Director, DTCC.
- Agree to 15 arrange and facilitate, with minimum advance notice, on-site reviews by DDTC while Consent Agreement remains in effect.
* Date of Order: 21 Jan 2021
* Available documents: