Every Monday we post the highlights out of last week’s FCC Export/Import Daily Update (“The Daily Bugle”). Send out every business day to approximately 6,500 readers of changes to defense and high-tech trade laws and regulations, The Daily Bugle is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III, Alexander P. Bosch, Vincent J.A. Goossen, and Alex Witt.
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 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 week’s highlights of The Daily Bugle included in this edition are:
- EU Prolongs Belarus Arms Embargo and Sanctions Against 4 Individuals; The Daily Bugle; Monday, 25 Feb 2019, Item #7;
- Dutch Government Publishes “Anti-Torture” Factsheet; The Daily Bugle; Monday, 25 Feb 2019, Item #9;
- UK OFSI Imposes Monetary Penalty for Financial Sanctions Breach; The Daily Bugle; Tuesday, 26 Feb 2019, Item #9;
- DHS/CBP Releases Harmonized System Update 1902; The Daily Bugle; Thursday, 27 Wednesday 2019, Item #5;
- State/DDTC: “Darling Industries, Inc. Fined $400,000 to Settle Alleged AECA and ITAR Violations, Including Appointing Unqualified Empowered Official”; The Daily Bugle; Thursday, 28 February 2019, Item #5;
- Justice: “Snohomish County Resident Convicted of Violating the Arms Export Control Act and Three Federal Firearms Laws”; The Daily Bugle; Thursday, 01 March 2019, Item #8.
EU Prolongs Belarus Arms Embargo and Sanctions Against 4 Individuals
(Source:Council of the European Union, 25 Feb 2019.)
Today the Council decided to prolong the restrictive measures against Belarus for one year, until 28 February 2020. These measures include an embargo on arms and on equipment that could be used for internal repression as well as an asset freeze and travel ban against four people designated in connection with the unresolved disappearances of two opposition politicians, one businessman and one journalist in 1999 and in 2000.
The Council also prolonged the derogation to the restrictive measures to allow the export of biathlon equipment and limited number of specific-use sporting rifles and sporting pistols to Belarus, which remain subject to prior authorization by national competent authorities on a case by case basis.
The restrictive measures against Belarus were initially introduced in 2004 in response to the disappearance of the four persons referred to above. Additional restrictive measures were later adopted against those involved in the violation of international electoral standards and international human rights law, as well as in the crackdown on civil society and democratic opposition.
The arms embargo was introduced in 2011. On 15 February 2016, the Council decided to lift the restrictive measures against 170 individuals and four companies, while maintaining the arms embargo and the sanctions against the four persons.
The legal acts were adopted by the Council by written procedure. They will be published in the Official Journal of 26 February 2019.
Dutch Government Publishes “Anti-Torture” Factsheet
(Source:Rijksoverheid, 22 Feb 2019.
The Dutch Ministry of Foreign Affairs has published on its website a factsheet concerning anti-torture goods (in Dutch).
The factsheet explains what torture goods are and what is regulated, specifically pursuant to Regulation (EU) 2019/125, the EU regulation concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment.
The factsheet is available in PDF here.
UK OFSI Imposes Monetary Penalty for Financial Sanctions Breach
(Source:UK OFSI, 21 Feb 2019.)
The UK Office of Financial Sanctions Implementation (OFSI) has published the below reportof penalty for breach of financial sanctions on its website:
Imposition of Monetary Penalty – Raphaels Bank
Penalty imposed on: R. Raphael & Sons plc trading as Raphaels Bank (Raphaels Bank)
On Monday, 21 January 2019 the Office of Financial Sanctions Implementation (OFSI), part of HM Treasury, issued a monetary penalty of £5,000.00 in accordance with s146 of the Policing and Crime Act 2017 against Raphaels Bank for a contravention of regulation 3 of the Egypt (Asset-Freezing) Regulations 2011 (S.I. 2011/887).
The value of the transaction was £200.00. Raphaels Bank dealt with funds belonging to a person designated under the above regime.
Raphaels Bank made a disclosure to OFSI when they became aware that a breach of financial sanctions had taken place.
OFSI reduced the penalty by 50% from £10,000.00 following our published guidance on case assessment, in consideration of Raphaels Banks’ disclosure and cooperation.
OFSI imposed the monetary penalty because it was satisfied, on the balance of probabilities, that Raphaels Bank breached a prohibition that is imposed by or under financial sanctions legislation, and knew, or had reasonable cause to suspect, that they were in breach of the prohibition.
Enquiries remain ongoing into other aspects of this breach which do not concern Raphaels Bank. A fuller summary of this breach may be published following the conclusion of these enquiries.
DHS/CBP Releases Harmonized System Update 1902
(Source:CSMS# 19-000088, 27 Feb 2019.)
Harmonized System Update (HSU) 1902 was created on February 26, 2019 and contains 40 ABI records and 11 harmonized tariff records.
This update contains adjustments related to Section 301. Changes were made to extend the 10 percent duty rate on HTS 99038803. This will allow for pre filing of entries at the 10 percent duty rate. Further updates are possible after the forthcoming Federal Register notice is published.
Modifications required by the verification of the 2019 Harmonized Tariff Schedule (HTS) are included as well.
The modified records are currently available to all ABI participants and can be retrieved electronically via the procedures indicated in the CATAIR. For further information about this process, please contact your client representative. For all other questions regarding this message, please contact Jennifer Keeling via email at Jennifer.L.Keeling@cbp.dhs.gov.
State/DDTC: “Darling Industries, Inc. Fined $400,000 to Settle Alleged AECA and ITAR Violations, Including Appointing Unqualified Empowered Official”
(Source: State/DDTC, 28 Feb 2019.)
Darling Industries, Inc., of 3749 N. Romero Road, Tucson, AZ, settled allegations that it violated the International Traffic in Arms Regulations (ITAR) in connection with unauthorized exports of defense articles; provision of defense services; and failure to appoint a qualified Empowered Official.
* Respondent: Darling Industries Inc., 3749 N. Romero Rd., Tucson, AZ 85705
* Charges: Six violations of the Arms Export Control Act (AECA), and the International Traffic in Arms Regulations (ITAR), for unauthorized exports; unauthorized defense services; and failure to appoint a qualified Empowered Official (EO), between 9 Feb 2012 and 3 Mar 2014. A self-initiated compliance review described decades of systematic, reoccurring violations involving R.E. Darling’s manufacture and sale of ethylene propylene diene monomer compound (EPDM), a Kevlar-filled, raw material used as a missile case insulator and missile motor insulator, controlled under USML IV(h) and breathing hoses, controlled under USML VIII(h). EPDM is also designated on MTCR Annex, Category II- Item 3. Specifically:
– Violation of ITAR § 127.1(a)(1) by unauthorized exports of defense articles and furnishing of defense services to Canada for the production of Black Brant rocket motors.
– Violation of ITAR § 127.1(a)(1) by unauthorized exports of Cat VIII(h) breathing hoses to the UK and Italy.
– Violation of ITAR § 127.1(b)(1) by appointing an unqualified EO who did not meet § 120.25 requirements. “R.E. Darling’s Empowered Official was not in a position of having authority for policy or management within R.E. Darling’s organization, as required by 22 CFR 120.25(a)(1). Also, the Empowered Official did not understand the provisions and requirements of the various export statutes and regulations, as described in 22 CFR 120.25(a)(3).” Charging Letter, pp. 3-4.
* Civil Settlement: $400,000 ($200,000 will be suspended if penalty is paid and corrective actions are undertaken as agreed).
* Result of Voluntary Disclosure: Yes.
* Date of Order: 26 Feb 2019.
* Available documents: Proposed Charging Letter; Consent Agreement; Order.
* Mitigating Factors:
– Respondent submitted a Voluntary Disclosure.
– Respondent entered into an agreement with DDTC.
– Respondent instituted a number of self-initiated compliance program improvements.
* Aggravating Factors:
– Delayed disclosure (22 months after discovery of the violation).
* Corrective Actions (CAs) include:
– Incorporate CAs into any of future business acquisitions that are involved in AECA and ITAR-regulated activities.
– Notify DDTC 60 days before sale of any entity engaged in ITAR-regulated activities and inform purchaser of CA requirements.
– Ensure adequate resources are dedicated to ITAR compliance, including lines of authority, staffing increases, performance evaluations, and career paths.
– Appoint Internal Special Compliance Officer (ISCO) who will:
(1) Report directly to DDTC and to VP/GM;
(2) Conduct ITAR compliance review throughout ITAR-regulated business units;
(3) Oversee implementation of all compliance measures;
(4) Have authority to hire staff and outside consultants to assist.
(5) Review and verify export control jurisdictions and classifications.
(6) Perform, under supervision of ISCO, one audit by an outside consultant during the term of the Consent Agreement.
[Editor’s Note: read the related State Media Note here.]
Justice: “Snohomish County Resident Convicted of Violating the Arms Export Control Act and Three Federal Firearms Laws”
(Source:Justice, 28 Feb 2019.) [Excerpts.]
A 35-year-old resident of Tulalip, Washington was convicted late yesterday in U.S. District Court in Seattle on four federal felonies related to illegal gun possession and trafficking, announced U.S. Attorney Brian T. Moran. HANY VELETANLIC, a citizen of Bosnia legally residing in the United States, was found guilty of violating the Arms Export Control Act, illegally possessing two unregistered silencers, and possessing a firearm with an obliterated serial number. The jury deliberated nearly three hours following two days of testimony. U.S. District Judge James L. Robart scheduled sentencing for May 20, 2019.
According to records filed in the case and testimony at trial, in February 2017, Swedish law enforcement seized a part of a Glock firearm from a residence in Fagersta, Sweden. The serial number on the Glock firearm had been filed off, but Glock Inc. was able to trace the sale of the firearm using a specialized company code imprinted on the part. The gun had been purchased by a resident of the Seattle area. When contacted by law enforcement, the resident said he had privately sold the gun to VELETANLIC. In May 2017, VELETANLIC contacted Homeland Security agents when he learned they had been asking about the firearm. VELETANLIC told agents about his activity selling firearms on eBay and in direct sales. After being advised of his Miranda rights, VELETANLIC ultimately admitted shipping packages of firearms overseas – as many as 20 different shipments to two different customer groups in Sweden. He also shipped gun parts to a person in France.
In the course of a July 2017 interview with law enforcement, VELETANLIC admitted that the customer in France had shipped him two silencers in exchange for the firearms parts. VELETANLIC claimed the silencers had been destroyed. However, when agents received permission to look in VELETANLIC’s gun safe, they found one of the silencers. The second silencer was turned over by VELETANLIC to agents in August 2017.
In May 2018, VELETANLIC was arrested on federal charges. At the time of his arrest he was carrying a Ruger pistol with an obliterated serial number. VELETANLIC admitted the weapon had an obliterated serial number because it had been stolen.
Violating the Arms Export Control Act is punishable by up to 20 years in prison. Possession of as unregistered firearm is punishable by up to ten years in prison. Possession of a firearm with an obliterated serial number is punishable by up to five years in prison. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. The sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors. …