Key Trade Compliance Topics

Treasury Imposes Sanctions on Supporters of North Korea’s Weapons of Mass Destruction Proliferation

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Action Targets a Company and Four Individuals Facilitating Transactions for Designated North Korean Entity
 
WASHINGTON – Today the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated one company and four individuals tied to the Government of North Korea’s proliferation of weapons of mass destruction (WMD).  Specifically, OFAC imposed sanctions on Dandong Hongxiang Industrial Development Company Ltd (DHID) for acting for or on behalf of Korea Kwangson Banking Corporation (KKBC), which was previously designated by the United States and the United Nations for providing financial services in support of WMD proliferators.  OFAC also designated Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu for acting for or on behalf of DHID.
These designations were made pursuant to Executive Order (E.O.) 13382, which targets WMD proliferators and their supporters.  As a result of today’s action, any property or interests in property of DHID, Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu in the possession or control of U.S. persons or within the United States are blocked.  Additionally, U.S. persons are generally prohibited from engaging in transactions involving these designated persons.
In a related action, today the U.S. Department of Justice unsealed criminal charges against DHID, Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu for conspiring to evade U.S. economic sanctions and violating OFAC’s Weapons of Mass Destruction Proliferators Sanctions Regulations as well as conspiracy to launder money instruments. Additionally, the U.S. Department of Justice announced the filing of a civil forfeiture action for all funds contained in 25 bank accounts belonging to DHID and its front companies and a request for a restraining order to be sent to China for all of the funds based upon the allegation of the United States that the funds represent property involved in money laundering.
“Today’s action exposes a key illicit network supporting North Korea’s weapons proliferation,” said Adam J. Szubin, acting Under Secretary for Terrorism and Financial Intelligence at the U.S. Department of the Treasury. “DHID and its employees sought to evade U.S. and UN sanctions, facilitating access to the U.S. financial system by a designated entity.  Treasury will take forceful action to pressure North Korea’s proliferation network and to protect the U.S. financial system from abuse.”
OFAC designated China-based DHID for acting for or on behalf of North Korean-based KKBC. Specifically, DHID used an illicit network of front companies, financial facilitators, and trade representatives to facilitate transactions on behalf of KKBC. Ma Xiaohong, Zhou Jianshu, Hong Jinhua, and Luo Chuanxu were designated for acting for or on behalf of DHID.
KKBC was designated by OFAC under E.O. 13382 and the UN pursuant to UN Security Council Resolution (UNSCR) 2270 for providing financial services in support of the previously designated entities Tanchon Commercial Bank and the Korea Hyoksin Trading Corporation.  Both of those entities were designated pursuant to E.O. 13382 and UNSCR 1718 for their roles in North Korea’s WMD and missile programs.
This update was provided by the U.S. Department of the Treasury. Click here for more: https://www.treasury.gov/press-center/press-releases/Pages/jl5059.aspx

Addison-Clifton carves niche in China’s growing industries

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This article appeared in the USA-Midwest Report in the South China Morning Post on February 26, 2016 (prepared by Discovery Reports).

Ulice Payne has an uncanny ability to understand the market and foresee its demands. In the same year that he founded Addison-Clifton in Chicago, Illinois, the company president set up a Shanghai representative office to help companies in China comply with global trade regulations. That was over one decade ago. The mainland had just joined the WTO, and Payne foresaw that many companies would need its expertise in meeting trade regulations on products related to aerospace, defence, vehicles and power generation.
“We have designed our business to serve society,” Payne says. “We blend our understanding of the global regulatory framework with the scientific and engineering know-how of products to meet market demands.”
The company anticipates big opportunities in the aviation maintenance, repair and overhaul (MRO) space. Addison-Clifton would likely capture the market for aspiring China MRO companies that are working on airworthiness certificates for jet engines and avionics manufactured by existing Addison-Clifton clients. The company is also cooperating with the Shanghai Foreign Investment Development Board to encourage foreign capital into the industrial zones with a special emphasis promoting aviation.
Furthermore, Addison-Clifton expects to play a significant role in the mainland’s burgeoning electric vehicles industry. For example, the firm was the official business consultant for the Ningbo Foreign Trade and Economic Cooperation Bureau in connection with securing the participation of foreign electric car manufacturers for its clean energy vehicle summit. The firm continues to implement its plans to facilitate further support in this area due to China’s need for greener technologies.

Ultimately, Payne was right. He later expanded Addison-Clifton’s presence in China by opening a wholly foreign-owned enterprise subsidiary in Ningbo, thereby supporting two major port cities on the mainland. With his associations in the East, including India, Payne further increased Addison-Clifton’s capabilities in the region with its Asia Market Services practice. In addition to trade compliance services, Addison-Clifton provides multinational companies with quality assurance guidance along with supply chain support that includes actual product inspections and identifying and qualifying China suppliers.

“We have spent years in China building genuine relationships with customers and local governments,” Payne says. “By understanding the market and the role of the government, we can serve as a bridge between the private and public sectors.”

http://www.scmp.com/presented/business/topics/usa-report-midwest-edition/article/1918577/addison-clifton-carves-niche

 

 

Statement Relating to the Joint Comprehensive Plan of Action “Implementation Day” of January 16, 2016

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Implementation Day Statement:

On July 14, 2015, the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States), the European Union, and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program will be exclusively peaceful. October 18, 2015 marked Adoption Day of the JCPOA, the date on which the JCPOA came into effect and participants began taking steps necessary to implement their JCPOA commitments.  Today, January 16, 2016, marks Implementation Day of the JCPOA.  On this historic day, the International Atomic Energy Agency (IAEA) has verified that Iran has implemented its key nuclear-related measures described in the JCPOA, and the Secretary State has confirmed the IAEA’s verification.  As a result of Iran verifiably meeting its nuclear commitments, the United States is today lifting nuclear-related sanctions on Iran, as described in the JCPOA.
In connection with reaching Implementation Day, today the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued several documents.  Specifically, OFAC posted to its website: Guidance Relating to the Lifting of Certain Sanctions Pursuant to the Joint Comprehensive Plan of Action on Implementation Day; Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day; General License H: Authorizing Certain Transactions relating to Foreign Entities Owned or Controlled by a United States Person; and a Statement of Licensing Policy for Activities Related to the Export or Re-Export to Iran of Commercial Passenger Aircraft and Related Parts and Services. The aforementioned documents are effective today, January 16, 2016.
OFAC has also published to its website additional information regarding actions to give effect to other JCPOA commitments, including removals from the Specially Designated Nationals and Blocked Persons List, the Foreign Sanctions Evaders List, and/or the Non-SDN Iran Sanctions Act List, as appropriate.  In addition, OFAC has made available on its website a list of persons identified as blocked solely pursuant to Executive Order 13599 (“E.O. 13599 List”), which consists of persons that OFAC previously identified as meeting the definition of the Government of Iran or an Iranian financial institution.  Information regarding these changes to OFAC’s sanctions lists is available on OFAC’s Recent Actions website. This information will be published subsequently in the Federal Register.
Implementation Day also marks the close of the Joint Plan of Action of November 24, 2013, as extended (JPOA), including the provision of sanctions relief pursuant to the JPOA.
Effective Implementation Day, all specific licenses that: (1) were issued pursuant to OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry, and (2) have an expiration date on or before July 14, 2015, are hereby authorized to remain in effect according to their terms until May 31, 2016.
For more information, visit the site below:
https://www.treasury.gov/resource-center/sanctions/Programs/Pages/iran.aspx

How does Secretary of State’s May 29, 2015 rescission of Cuba’s designation as a state sponsor of terrorism affect the Bureau of Industry and Security?

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The Secretary of State’s action does not change the Export Administration Regulations.   It does not suspend or terminate any of the license requirements or other controls in those regulations pertaining to Cuba.  Cuba remains subject to a comprehensive embargo and the export or reexport of all items subject to the EAR still requires authorization from BIS.

http://bis.doc.gov/index.php/licensing/embassy-faq#subcat198

 

EAR99 and 5D992 Software Exceptions with Respect to the Crimea Region of Ukraine

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OFFICE OF FOREIGN ASSETS CONTROL Executive Order 13685 of December 19, 2014 Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to the Crimea Region of Ukraine GENERAL LICENSE NO. 9 Exportation of Certain Services and Software Incident to Internet-Based Communications Authorized (a) Except as provided m paragraph (d) of this general license, the exportation or reexportation, directly or indirectly, from the United States or by U.S. persons, wherever located, to persons in the Crimea region of Ukraine of services incident to the exchange of personal communications over the Internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging, is authorized, provided that such services are widely available to the public at no cost to the user. (b) Except as provided in paragraph (d) of this general license, the exportation or reexportation, directly or indirectly, from the United States or by U.S. persons, wherever located, to persons in the Crimea region of Ukfaine of software necessary to enable the services described in paragraph (a) of this general license is authorized, provided that such software is designated EAR99 under the Export Administration Regulations, 15 CFR parts 730 through 774 (the “EAR”), or is classified by the U.S. Department of Commerce (Commerce) as mass market software under export control classification number (ECCN) 5D992 of the EAR, and provided further that such software is widely available to the public at no cost to the user. (c) Except as provided in paragraph (d) of this general license, the exportation or reexportation, directly or indirectly, from the United States or by U.S. persons, wherever located, to persons in the Crimea region of Ukraine of software that is not subject to the EAR because it is of foreign origin and is located outside the United States that is necessary to enable the services described in paragraph (a) of this general license is authorized, provided that such software would be designated EAR99 if it were located in the United States or would meet the criteria for classification under ECCN 5D992 of the EAR if it were subject to the EAR, and provided further that such software is widely available to the public at no cost to the user. (d) This general license does not authorize: (1) The exportation or reexportation, directly or indirectly, of services or software with knowledge or reason to know that such services or software are intended for any person whose property and interests in property are blocked pursuant to Executive Order 13660 of March 6, 2014, Executive Order 13661 of March 17, 2014, Executive Order 13662 of March 20, 2014, or Executive Order 13685 of December 19, 2014; (2) The exportation or reexportation, directly or indirectly, of any goods or technology listed on the Commerce Control List in the EAR, 15 CFR part 774, supplement No. 1 (CCL), except for software necessary to enable the services described in paragraph (a) of this general license that is classified by Commerce as mass market software under ECCN 5D992 of the EAR; (3) The exportation or reexportation, directly or indirectly, of commercial-grade Internet comiectivity services or telecommunications transmission facilities (such as dedicated satellite links or dedicated lines that include quality of service guarantees); or (4) The exportation or reexportation, directly or indirectly, of web-hosting services that are for commercial endeavors or of domain name registration services. (e) Specific licenses may be issued on a case-by-case basis for the exportation or reexportation of services or software incident to the exchange of personal communications over the Internet not specified in paragraphs (a), (b), or (c) of this general license, and for the exportation or reexportation of hardware incident to the exchange of personal communications over the Internet. Note to General License 9: Nothing in this general license or in any license issued pursuant to paragraph (e) of this general license relieves the exporter from compliance with the export license application requirements of another Federal agency. John E. Smith Acting Director Office of Foreign Assets Control Dated: May 22, 2015

http://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl_9.pdf

NEW BIS LICENSE EXCEPTION C62 – SUPPORT FOR THE CUBAN PEOPLE (SCP)

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January 16, 2015

NEW BIS LICENSE EXCEPTION C62 – SUPPORT FOR THE CUBAN PEOPLE (SCP) 

On Friday, January 16, 2015, the Department of Commerce, Bureau of Industry and Security published a final rule that will become effective immediately. 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 a New License Type (C62) for Support for the Cuban People (SCP) has been added to the Automated Export System.

A new license type (C62) SCP was created in AES for the reporting of certain items exported and re-exported to Cuba that are intended to improve the living conditions of the Cuban people; support independent economic activity and strengthen civil society in Cuba; and improve the free flow of information to, from, and among the Cuban people.

United States Principal Parties in Interest (USPPIs) and their authorized filing agents (AES filers) must follow the following new reporting requirements regardless of value when using C62 to prevent the return

of fatal errors from AES.

Report SCP in the license number field.

Report Export Control Classification Numbers (ECCNs) having a reason for control of Anti-Terrorism only or EAR99 (see appendix F (link provided below) of the AES Trade Interface Requirements (AESTIR) for acceptable ECCNs).

The country of destination and ultimate consignee country must show Cuba (CU).

Report Export Information Codes: All except UG, FS, FI.

Report any mode of transportation.

A complete list of all of the AES License Type codes and reporting instructions for these types can be found here.

For questions regarding these AES changes, please contact the Bureau of Industry and Security by email at ECR_AES@bis.doc.gov or at (202) 482-4933.

https://www.federalregister.gov/articles/2015/01/16/2015-00590/cuba-providing-support-for-the-cuban-people?eml=gd&utm_medium=email&utm_source=govdelivery

European Union: New Sanctions Regime Against Russia

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The European Union (“EU”) has recently agreed to an additional higher level of sanctions against Russia.  A big impact is to be expected from the new “sectoral sanctions” set out in EC Regulation No. 833/2014 which was published on July 31, 2014 and will go into effect immediately.

 

Effective as of August 1, 2014, this new regime:

 

  • restricts access to capital markets for Russia state banks as defined in Annex III of the Regulation (including their subsidiaries established outside of the EU and other entities acting on behalf or at the direction of such institutions) by setting out prohibitions on purchasing, selling, providing brokering or other assistance in the issuance of or otherwise dealing in debt or equity securities or money market instruments with a tenor exceeding 90 days, in each case if issued after August 1, 2014.

 

  • prohibits the importing from and exporting to Russia of military goods and related material (subject to the grandfathering of contracts concluded before August 1, 2014).

 

  • prohibits exporting dual-use goods and technology (these are goods and technology that can be used for both civil and military purposes) to Russia military end-users (subject to the grandfathering of contracts concluded before August 1, 2014); and

 

  • curtails Russian access to sensitive technologies (as listed in Annex II of the Regulation), particularly in the oil sector.

 

Further, the Regulation prohibits a number of ancillary services in relation to the aforementioned (including brokering and direct or indirect financial or technical assistance in relation to goods that are objects of the embargo).

 

These prohibitions apply not only within the territory of the EU, its vessels and aircrafts, but also to EU incorporated businesses and nationals of EU Member States, as well as with respect to any business done within the EU.

 

Learn more at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2014_229_R_0001.