Archive for the ‘Entity List’ Category


Sep

13

Entity List Screening Headaches Can Be Costly: The Abbreviated Version


Posted by at 6:51 pm on September 13, 2018
Category: BISCivil PenaltiesEntity List

VNIEFF via http://www.vniief.ru/en/resources/2d252b804af3374599869d5b6de8bab2/12.jpg [Fair Use]BIS recently announced a settlement with Mohawk Global Logistics Corporation for $155,000 ($20,000 of which was suspended if Mohawk behaved itself during a probationary period).   The penalty arose out of Mohawk’s export of items to institutions on the Entity List without the required license.  In both instances, Mohawk screened against the list, but things went wrong.

One of the exports went to the University of Electronic Science and Technology of China (“UESTC”).  Rather than screen against the full name of the university, Mohawk just screened the university’s commonly-used acronym — UESTC.   As a result, it failed to flag the transaction.  BIS, in the charging documents, noted that the address it had for UESTC was a “near-match” (whatever that means) to the address shown for UESTC on the Entity List.  The take-away here, of course, is that exporters should screen entire names and addresses.

One of the other exports was to the All-Russian Scientific Research Institute of Experimental Physics otherwise known as VNIIEF (because the name in Russian – Всероссийский Научно-Исследовательский Институт Експериментальной Физики [Vserossiyskiy Nauchno-Issledovatelckiy Eksperimentalnoy Fiziki] — is abbreviated as ВНИИЕФ or VNIIEF when transliterated to the Roman alphabet — got that?).  Now for this export the transliterated Roman abbreviation resulted in a hit, which, for some unexplained reason, the Mohawk export supervisor simply ignored.

A footnote dropped by BIS on VNIIEF reveals the perils of foreign language names and the Entity List.   The initial listing was for the “All-Union” Scientific Research Institute of Experimental Physics.  When this was updated to the correct “All-Russian” Scientific Research Institute of Experimental Physics in 2011, the common acronym VNIIEF (but not ARSIEP, which is, clearly, a better acronym) was added.  But searches of VNIIEF, the common name of that entity, prior to 2011 would not have turned up anything.   The moral of this story:  don’t search abbreviations or acronyms.

The fine here seems high.   The goods involved were EAR99 items and worth, in total, about $200,000.  A license probably would have been granted if requested so there’s no palpable harm to national security here.  And Mohawk tried to screen but just did not do a very good job of it.  However, it’s not like they, like many exporters, did not even try to screen the recipients.   Granted the inexplicable activity of the Mohawk supervisor in overriding the hit for VNIIEF would permit some aggravation of the penalty.  And perhaps the failure to screen addresses when they had a “near match” of the correct address further annoyed BIS.  But it seems to me here that BIS is fining incompetence rather than malice.

 

 

 

https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2018/1193-e2561/file

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Copyright © 2018 Clif Burns. All Rights Reserved.
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Dec

7

BIS, For One, Does Not Welcome Our New Robot Overlords


Posted by at 6:28 pm on December 7, 2017
Category: BISCivil PenaltiesEntity List

Pilot Truck via http://www.pilotdelivers.com/images/photo-library/PFS011-web.jpg [Fair Use]The Bureau of Industry and Security (“BIS”) recently announced that Pilot Air Freight had agreed to a $175,000 fine ($75,000 of which was suspended) to settle charges that it had aided and abetted an attempted unlicensed export by one of its customers (against whom there is no record of any enforcement action) to IKAN Engineering Services, a company on the BIS Entity List. This seems rather high for what was essentially a software glitch.

According to the charging documents, Pilot had multiple interfaces for entering shipping data.  Its main interface, called “Navigator,” was linked to proprietary screening software that would screen shipment recipients against the Entity List and other relevant screening lists.   A second interface, called “Co-Pilot,” allowed customers to enter shipment data.   Apparently, entries made in “Co-Pilot” weren’t linked back to the Navigator screening software, so when a customer entered a shipment to IKAN, the shipment was not flagged.   It was apparently intercepted by Customs when it reached the Port of Long Beach.

There is nothing in the charging documents to suggest that Pilot knew of this glitch in its automated screening system.  It apparently thought that shipments were being screened.  This is unlike those cases where the exporter did not know of its obligation to screen shipments or knew of its obligation but decided not to screen certain shipments.   Certainly BIS has every right to penalize Pilot here, but the penalty should have taken into account what appear to have been the innocent and unintentional origins of the problem.   Almost everyone uses automated screening and would now appear to be at the mercy of the robots they employ to do the screening and the techies they hire to program the robots.

There’s another interesting wrinkle in the charging documents that BIS more or less glosses over.

Pilot failed to flag this transaction even though the name and address in its possession closely matched the Entity List listing for IKAN.   As Pilot has acknowledged to BIS during this matter, properly configured screening software would have identified the attempted export as involving a listed entity and flagged it for review.

Even though BIS acknowledges that this was not an exact match, we have no idea how inexact the match was.  Even though Pilot agreed that it was not so inexact that it would have been missed by its screening software , it is hard to tell whether they really believed that or felt compelled to say it to keep BIS happy.  The failure of BIS to reveal the name used by the shipper suggests that the match might not have been as close as BIS would now have us believe.

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May

3

Maybe BIS Should Read This Blog More Often


Posted by at 6:21 pm on May 3, 2017
Category: BISEntity ListOFACRussia Sanctions

Vladimir Putin via http://en.kremlin.ru/events/president/news/27394 [Fair Use]Way back in January of this year, I pointed out a problem that the Bureau of Industry and Security (“BIS”) and the Office of Foreign Assets Control  (“OFAC”) may have unwittingly created for U.S. manufacturers of encryption-enabled products, i.e., virtually anything that touches the Internet or a private network.  Both agencies had imposed sanctions on the FSB, the Kremlin spy agency formerly known as the KGB.  The problem with this otherwise laudable move is that the FSB regulates import of encryption products into Putinstan, er, Russia, and these restrictions could effectively prevent exports of U.S. encryption items into Russia.  This would happen because U.S. exporters were forbidden from filing the necessary paperwork with the FSB by virtue of its addition to OFAC’s SDN List and BIS’s Entity List.

Well, OFAC heard the howls of industry and in just after a little more than a week after the issue had come to light issued General License 1 to permit the filing with the FSB of the necessary paperwork for imports of these products.  BIS, however, slept through those howls and did nothing.   The original post on this problem had noted the difficulties posed by BIS having put FSB on the Entity List.   It was at least possible that the FSB notification and application forms could contain unpublished EAR99 technology regarding the device to be exported to Russia, in which case a BIS license would be necessary before the notification or application could be sent to the FSB.   That would be the case even after the OFAC General License authorized the notification and application forms to be sent

Rip van BIS-winkle has finally roused itself from its slumber on this issue.  On April 17, 2017, BIS amended the Entity List designation for FSB to remove the license requirement for transactions for “items subject to the EAR” that are “related to transactions that are authorized by the Department of the Treasury’s Office of Foreign Assets Control pursuant to General License No. 1 of February 2, 2017.” What do you want to bet that a number of FSB applications were filed with technology “subject to the EAR” without the required license before this amendment to the Entity List? Technology, even technology relating to an EAR99 item, is subject to the EAR unless it has already been published or has arisen during “fundamental research.” Few people would think that unpublished information about a commercial EAR99 item would require a license. Most people probably felt that the OFAC General License got them to the finish line when dealing with the FSB. It now does, but it did not before April 17.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

28

ZTE Gets Last Minute Reprieve (Sort Of)


Posted by at 10:33 pm on June 28, 2016
Category: BISChinaEntity ListIran Sanctions

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]The Bureau of Industry and Security today announced that it was extending the Temporary General License which permitted exports to ZTE from June 30 all the way to August 30. ZTE, as this blog reported here, was placed on the Entity List because of elaborate shenanigans by the company by which it bought U.S. goods and resold them to Iran.

Two weeks after bringing the ban hammer down on ZTE, BIS issued a temporary general license which covered March 24 to June 30, more than three months. The new temporary license expires on August 30, one day short of two months from June 30. Why this temporary license is shorter than the previous one was not disclosed but one can only suspect that ZTE may not be minding its manners in the way that BIS would like to see.

The problem for U.S. exporters is that such a short license, with the real possibility, given its shortened length, that it may not be renewed beyond August 30, opens up the possibility that the exporter will sell items to ZTE that it may not later be able to service even though the warranty on those items is still in force. If the temporary general license is not renewed and ZTE stays on the list, the ability of the U.S. exporter to send replacement parts to ZTE or, alternatively, to repair the item in the United States and return it to ZTE will be in question. It would not surprise me if the temporary general license does not get much use.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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Mar

22

Easy Come, Easy Go, Easy Return: ZTE Temporary General License Issued


Posted by at 11:28 am on March 22, 2016
Category: BISEntity List

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]According to the Federal Register public inspection files, BIS will publish on March 24, a temporary general license authorizing exports to ZTE Corporation and ZTE Kangxun under the same terms and conditions as were in place prior to the order placing those two companies on the Entity List. This means that, effective March 24, licenses won’t be required for exports to these two entities unless licenses are otherwise required based on the exported item or the proposed end use. The temporary general license, which expires on June 30, 2016, does not include Beijing 8-Star or ZTE Parsian, which were included in the initial designation of ZTE entities.

The problem with the temporary general license is that there is no assurance that BIS will extend the license beyond that date. If an exporter relying on this license, exports an item to ZTE before June 26 but the license is then revoked, the exporter will be effectively excluded from warranty service on that item. Exporters shipping to ZTE during this regulatory limbo would be well advised to make sure that their contracts with ZTE are modified to prevent warranty claims by ZTE if the general license should, at any time, be revoked.

Photo Credit: ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)