Understanding the Latest Export and Reexport Regulatory...
Transcript of Understanding the Latest Export and Reexport Regulatory...
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Understanding the Latest Export and Reexport Regulatory Requirements
Presented By:
Erin Clark, STTAS Senior Manager,
Export Compliance
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved. 2
• Current Regulatory Environment and Notable U.S. Changes
– Export Control Reform
– Sanctions
• Keeping Up With and Implementing Regulatory Changes
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Content
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
Current Regulatory Environment
3
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Continually Changing Global Environment
– Jurisdiction, Classification and Licensing Requirements
– Sanctions and Embargoes
• Change Combined with Existing Challenges
4
Current Regulatory Environment
Multilateral Export Control
Regimes
National Export
Control Laws & Regulations
Corporate Policies &
Procedures
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
Regulatory Changes Application
Export Control Reform • Revisions to control lists -
Reclassification of parts due to
items shifting from the ITAR’s
USML to the EAR’s CCL (or within
control lists)
• New jurisdiction and authorizations
• New definitions
Sanctions - Cuba • Some restrictions eased
• New license exceptions and
General License
Sanctions - Russia/Ukraine
• New entities/persons sanctioned
with onerous screening implications
• New activities/items restricted
5
Examples of Notable U.S. Changes
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• April 2010 - Obama Administration determined reform was warranted
– Outlined proposal for a three-phased U.S. Export Control Reform (ECR) initiative
• ECR is geared towards –
– “Building higher walls around fewer, more critical items”
– Focus enforcement on most significant threats
– Ease burdens on trade with allies/strategic partners
– Prevent “designing out” of US-origin items by foreign companies
• Means for achieving goals –
– ‘Four Singularities’
• Single Control List
• Single Enforcement Coordination Agency
• Single IT System
• Single Licensing Agency
6
Export Control Reform
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• In the near-term, instead of a Single Control List, objective has been to:
– Transform USML into a positive control list;
– Move less sensitive items, such as parts and components, from the USML to the CCL; and
– Revise both lists
• Items stay on the USML if they:
– Have an inherent military utility or capability; or
– Possess technical parameters or characteristics that provide a unique military or intelligence advantage to the U.S. and are almost exclusively sourced from the U.S.
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Reform of Control Lists
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• Went into Effect on October 15, 2013
– 600 series ECCNs
– “Specially Designed”
– Transition plan for existing DDTC licenses/authorizations
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First ECR Final Rule
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• Within the EAR, each applicable CCL Category will have a 600 Series ECCN for:
– Transferred USML items;
– Wassenaar Arrangement Munitions List (WAML) items (former XX018 items); and
– Specially desgined parts, components, accessories, and attachments (P/C/A/A) not listed on the revised USML (i.e., do not provide a unique and significant military function)
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Revisions to Commerce Control List
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Sample 600 Series ECCN
XA6XX CCL
Category 0-9
Product Group
A-E
Gives “600 series” its name
Last two characters track the
WAML
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ECCN Subparagraph
License Requirements
License Exceptions
Item classified in .a - .x (Specifically enumerated and specially designed (.x))
License required to all
destinations, except Canada
LVS TMP RPL TSU GOV STA
Items classified in .y (Specifically enumerated – less restricted)
Licensed required only to Country Group E:1 or T5 countries (Cuba, Iran, N. Korea, Sudan and Syria)
and China
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600-Series License Requirements
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• ITAR-Controlled?
– Specifically enumerated on the USML?
– Catch-all controls apply (specially designed)?
– If ‘No’, go to EAR . . .
• EAR-Controlled?
– Identify Commerce Control List (CCL) Category and Product Group
– Do 600-Series ECCNs apply (specifically enumerated or specially designed)?
– Do non-600 series ECCNs apply?
– If ‘No’, EAR99 (but still subject to EAR)
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Order of Review – Supp. 4 to Part 774
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• Definition included in both the ITAR (Part 120) and EAR (Part 772)
• ITAR and EAR definitions are similar, but differ slightly
• Catch & release structure
• Used to determine both jurisdiction and classification
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Specially Designed
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• Paragraph (a) of definition is the ‘Catch’
(1) Item developed with properties peculiarly responsible for achieving for exceeding the performance levels, functions or characteristics described in the applicable CCL or USML entry
(2) Is a part, component, accessory, attachment, associated equipment or software (P/C/A/A/E/S) for use in or with a defense article
• Paragraph (b) of definition is the ‘Release’ – Only one exclusion condition needs to apply to an item to release it from the “specially designed” control
– Some release exclusions –
• Regardless of form or fit, is a fastener, screw, bolt, etc. ((b)(2) exclusion)
• In production and has a commercial equivalent ((b)(3) exclusion)
• Was or is being developed with knowledge that it would be for a dual-use item ((b)(4) exclusion)
• Was or is being developed as a general purpose commodity or software ((b)(5) exclusion)
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Specially Designed
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Sanctions Target
• Entire country of Cuba
• All Cuban nationals
• SDNs
Prohibitions
• Most imports, exports and reexports, and other transactions prohibited
• Property blocked
• Travel restrictions
• 2015 Amendments
Cuba
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• SDNs
• SDN ownership issues
• September 2014 Update to OFAC and BIS Sanctions
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Russia
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The following are prohibited (by US Persons) without prior OFAC authorization— 1. Dealing with individuals and firms in Ukraine and Russia on the Specially Designated
Nationals Lists;
2. Financing or dealing in new debt or equity with certain Russian financial lenders, defense and energy firms;
3. Providing, exporting, or reexporting to firms on the Sectoral Sanctions Identification List goods, services, or technology for exploration/production of oil and gas (i.e., deepwater, Arctic offshore, or shale projects) in Russia;
4. Engaging in the above with firms that are 50% or more owned/controlled by one or more SDN/SSIL firms in the aggregate.
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Current OFAC Sanctions on Russia
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BIS licenses are required for exports, reexports or transfers of:
1. All items subject to the EAR (including EAR99 items) to individuals and firms in Russia on the Entity List, and to certain energy sector firms in Russia designated on the Entity List if the shipper knows that the items will be used directly or indirectly in exploration for/production of oil or gas in Russian deepwater (greater than 500 feet), Arctic offshore locations, or shale formations in Russia that have the potential to produce oil;
2. Items identified in Supplement No. 2 to Part 744 of the EAR to/for Russian military end‐users/end‐uses;
3. Items classified in ECCN 9X515 (satellites) or items classified in the 600‐Series ECCNs on the Commerce Control List;
4. Items classified in certain Harmonized System subheadings and ECCNs where the shipper knows that they will be used in the proscribed oil and gas exploration/production activities in Russia described above.
5. Items subject to the EAR triggering license requirements based on their classification.
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Current BIS Sanctions on Russia
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Keeping Up With &
Implementing Regulatory Changes
19
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
Minimizes risk, exposure and liability -
• Preventative measure
– Creates a proactive vs. reactive environment
– Controlled export/reexport/transfer of goods, services and technologies and diminishes risk of delay
• Potential mitigation of civil and criminal penalties
Effective Trade Compliance Program
20
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Effective program will focus on –
• People –
– Knowledgeable and provided resources necessary to support trade compliance roles.
– Environment of compliance from top-down.
– Awareness throughout the company of issues to raise and how to raise them.
• Processes –
– Comprehensive, well-documented, step-by-step and focused on all key functional areas and locations involved in export transactions.
– Ever-changing, not stagnant.
• Information Technology (IT) Resources –
– Efficiently control and facilitate export compliance
– Dynamically linked to business resources and processes.
– Minimize human error.
Robust Trade Compliance Program
21
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• Management Commitment to Compliance
• Effective Organization and Knowledgeable Personnel
• Well-documented and Followed Policies and Procedures Covering Key Areas of Compliance
• Regular Self-Assessments
• Well-established Issue Escalation Path
& Corrective Actions
• Regular Training
• Thorough Due Diligence
• Comprehensive Supporting Documentation/Recordkeeping
Core Elements of Trade Compliance Programs
22
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Management Commitment to Compliance
• Effective Organization and Knowledgeable Personnel (People)
• Documented & Followed Policies and Procedures Covering Key Areas of Compliance
• Regular Self-Assessments
• Well-established Issue Escalation Path & Corrective Actions
• Regular Training
• Thorough Due Diligence
• Comprehensive Supporting Documentation/Recordkeeping
Core Elements of Trade Compliance Programs
23
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Effective Organization and Knowledgeable Personnel
– Structure complements focus
– ‘Two heads are better than one’
• Redundancy for critical responsibilities
• Lapses in judgment
• Intentional misconduct
– Diverse backgrounds
– Well-trained and appropriate resources allocated
– Aware of and able to utilize tools/resources necessary
Core Elements of Trade Compliance Programs
24
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Management Commitment to Compliance
• Effective Organization and Knowledgeable Personnel
• Documented & Followed Policies and Procedures Covering Key Areas of Compliance
(Processes and IT Resources)
• Regular Self-Assessments
• Well-established Issue Escalation Path & Corrective Actions
• Regular Training
• Thorough Due Diligence
• Comprehensive Supporting Documentation/Recordkeeping
Core Elements of Trade Compliance Programs
25
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Documented & Followed Policies and Procedures Covering Key Areas of Compliance
– Key areas of compliance covered
– Thorough yet ‘user-friendly’
– One size does not fit all – cater to the business unit/model
– Global focus, country-specific
– Dynamic and malleable
– Rely on effective technology when possible . . . automation is key, but not when used exclusively
Core Elements of Trade Compliance Programs
26
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Management Commitment to Compliance
• Effective Organization and Knowledgeable Personnel
• Documented & Followed Policies and Procedures Covering Key Areas of Compliance
• Regular Self-Assessments
• Well-established Issue Escalation Path & Corrective Actions
• Regular Training
(People and IT Resources)
• Thorough Due Diligence
• Comprehensive Supporting Documentation/Recordkeeping
Core Elements of Trade Compliance Programs
27
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
• Regular Training
– New-hire orientation and semi-annual/annual internal training
– Reaches all levels of organization
– Catered
– Live and web-based/eLearning
– Attendance logs
– Desktop procedures
– External training
Core Elements of Trade Compliance Programs
28
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved.
Regulatory Change
Jurisdiction and
Classification
Licensing
Screening Training
Operations/
Logistics
Post-Transaction/
Internal Review
29
Keeping Up with & Implementing Change
© 2015 Sandler, Travis & Rosenberg, P.A., Sandler & Travis Trade Advisory Services, Inc. All rights reserved. 30
Erin Clark
Export Compliance Sr. Manager Sandler & Travis Trade Advisory Services, Inc.
San Diego, California Tel: 619.881.7273 [email protected]