Industry insights

Global Trade Brief – April 2017

April 18th, 2017, Posted in Global Trade Brief

Click on each item to read the update.

Imports & Exports

Environmental Protection Agency Supplemental Guideline Updates and Reminders
  • The EPA has updated and published version (9.1) of their Implementation Guide and PGA (Partner Government Agency) Message Set samples
  • These coding changes are scheduled to go into PROD on 4/27/2017
  • on that date (4/27) the Harmonized Tariff Schedule (HTS) flagging for all EPA programs for all filers will be enforced
  • The EPA Supplemental CATAIR version 9.1 updates the ACE PGA Message Set guidance to align with recent rulemaking, updated business rule validations, and EPA HTS code flagging in ACE. These changes include:
    • Clarification that a PGA Message Set filer is not required to provide a TSCA negative certification when filing for pesticide imports regulated under FIFRA.
    • Revisions to Vehicles and Engines (V&E) guidance, indicating that additional information provided via DIS is now optional, not required or conditionally required under certain conditions.
    • Reduction in V&E Appendix A additional information requirements provided via DIS.
    • Updates to V&E guidance, removing requirement for Test Group/Engine Family name for Import Codes A, C, J, Z (3520-1) and 3, 4, 16, 24a (3520-21).
    • Updates to V&E guidance, removing requirement for Exemption Number for Import Codes 2, 5, 6, 7, 12 (3520-21).
    • Clarification for Type 06 FTZ Entry declarations, allowing filers to provide V&E data with entry summary following a weekly estimate.
  • General Reminders
    •  V&E declarations are required to be filed with the entry information, effective March 21, 2017.
    • Original Equipment Manufacturers (OEMs) who are importing on road and/or nonroad vehicles and engines with certificates of conformity, are not required to file V&E Declarations, but must file the disclaim reason code “B – Data Not Required per Agency Guidance.” The V&E webpage has been updated and can be found at here.
    • TSCA: The blanket TSCA Certification option was removed in from ACE in January 2017 and the EPA Supplemental CATAIR in November 2015. There are no significant changes for TSCA in this version of the guidance, however, the Pesticides filings no longer require an accompanying TSCA Negative Certification.
  • Paper filings and disclaims: Submission of paper documents is allowed for filers not using the complete PGA Message Set. However, for a filer proceeding without the PGA Message Set, instead filing via DIS or Paper, the EPA expects a disclaim reason code of C (DIS) or D (Paper).

https://www.cbp.gov/sites/default/files/assets/documents/2017-Mar/ACE%20CATAIR%20EPA%20Supplemental%20-%20March%202017.pdf

President signs Executive Order on establishing enhanced collection and enforcement of ADD/CVD

Highlights of the Executive Order are as follows:

  • Within 90 days of the date of this order, the Secretary of Homeland Security shall, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the United States Trade Representative, develop a plan that would require covered importers that, based on a risk assessment conducted by CBP, pose a risk to the revenue of the United States, to provide security for antidumping and countervailing duty liability through bonds and other legal measures, and also would identify other appropriate enforcement measures.
  • Within 90 days of the date of this order, the Secretary of Homeland Security, through the Commissioner of CBP, shall develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation, to the extent authorized by law.
  • The Attorney General, in consultation with the Secretary of Homeland Security, shall develop recommended prosecution practices and allocate appropriate resources to ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of trade laws

https://www.whitehouse.gov/the-press-office/2017/03/31/presidential-executive-order-establishing-enhanced-collection-and

CBP Update on Type 23 Temporary Import Bond Entries

Implementation of the ACE Cargo Release Functionality for all entry types and the decision to no longer require paper CBP Forms 3461 and 7501, there is also a need for a paperless process for TIB Entries. Apparently, this functionality is being planned. Meanwhile all using TIB entry type 23 need to present the same in the following manner:

  1. All entries are deemed to be “Export Examination Not Required” at the time of release unless designated otherwise.
  2. CBP will review submitted TIBs on a regular basis to determine the need for export examination.
  3. To maintain paperless process, fully electronic entries will be designated for examination using the text message “Export Examination Required” via the SO20 message set. This will most likely be sent to the filer post release.
  4. If paper entries are presented, they should continue to be stamped if an export examination is required.
  5. At the time of export, a completed CBP Form 3495 should be presented at the port of export identifying the shipment to be examined and to record examination completion as per current procedures. In lieu of a stamped CBP Form 3461/7501, the original entry number, date of entry and port of entry information should be provided as well as invoices etc. from original importation.
  6. CBP will attempt to utilize system information wherever possible but the full automation of this information has not been completed and filers will still need to provide documentation as required.
  7. Trade partners may request an export examination for any shipment where the examination was not required via the same process.

 

https://apps.cbp.gov/csms/viewmssg.asp?Recid=22538&page=&srch_argv=17-000135&srchtype=all&btype=&sortby=&sby=

Denied Parties & Sanctions

Updates

EASE Update: Clients need not worry about the newly added individuals and entities as these are updated daily in EASE and clients may download these lists automatically

 

Individual and Entity Names, Sources
The Office of Foreign Assets Control (OFAC) – Specially Designated Global Terrorist (SDGT) pursuant to Executive Order 13224, which targets terrorists and those providing support to terrorists or acts of terrorism

https://www.treasury.gov/press-center/press-releases/Pages/sm0027.aspx

https://www.treasury.gov/press-center/press-releases/Pages/sm0037.aspx

Muhammad Hadi al-`Anizi

Kassam Tajideen

Muhammad Bahrun Naim Anggih Tamtomo and Muhammad Wanndy Bin Mohamed Jedi

Department of State designates persons as global terrorists

https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/html/2017-06213.htm

https://www.gpo.gov/fdsys/pkg/FR-2017-04-05/html/2017-06653.htm

Alsayed Murtadha Majeed Ramadhan Alawi

Ahmad Hasan Yusuf

Sami Bashur Bouras

El Shafee Elsheikh

Anjem Choudary

The Bureau of Industry and Security BIS denies export privileges

https://efoia.bis.doc.gov/index.php/documents/export-violations/export-violations-2015/1101-e2491/file

Eyad Farah

BIS Adds the following entity on the Entity List

China:

Shi Lirong

BIS removes these persons from the Entity List

https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/html/2017-06227.htm

https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/html/2017-06228.htm

https://www.gpo.gov/fdsys/pkg/FR-2016-03-08/html/2016-05104.htm

https://www.gpo.gov/fdsys/pkg/FR-2016-03-24/html/2016-06689.htm

China:

Zhongxing Telecommunications Equipment (ZTE) Corporation

ZTE Kangxun Telecommunications Ltd.

Germany:

Industrio GmbH, Dreichlinger

Martin Hess

Peter Duenker

Wilhelm “Bill” Holler

Hong Kong:

Frank Genin,

India

Beaumont Trading AG

Singapore:

Amanda Sng

Switzerland:

Beaumont Trading AG

United Arab Emirates

Beaumont Trading AG

Frank Genin

The U.S. Department of Homeland Security’s Immigration and Customs Enforcement (ICE) has announced that Rivero has been sentenced to 92 months in prison for attempting to export illegally ammunition to Mexico

https://www.ice.gov/news/releases/nogales-man-sentenced-more-7-years-attempting-export-ammunition-mexico

Gabriel Rivero

 

DOJ has announced that Kassam Tajideen, a prominent financial supporter of the Hizballah terror organization, has been arrested and charged with evading U.S. sanctions imposed on him because of his financial support of Hizballah.

https://www.justice.gov/opa/pr/lebanese-businessman-tied-hizballah-arrested-violating-ieepa-and-defrauding-us-government

Kassam Tajideen
The U.S. Department of State (DOS) has announced that the United States imposed sanctions on 30 foreign entities and individuals in 10 countries pursuant to the Iran, North Korea, and Syria Nonproliferation Act (INKSNA)

https://www.state.gov/r/pa/prs/ps/2017/03/269084.htm

Beijing Zhong Ke Electric Co. Ltd. (ZKEC) (China)

Dalian Zenghua Maoyi Youxian Gongsi (China)

Jack Qin (Chinese individual)

Jack Wang (Chinese individual)

Karl Lee [aka Li Fangwei] (Chinese individual)

Ningbo New Century Import and Export Company Limited (China)

Shenzhen Yataida High-Tech Company Ltd (China)

Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) (China)

Sky Rise Technology [aka Reekay Technology Limited] (China)

Saeng Pil Trading Corporation (SPTC) (North Korea)

Mabrooka Trading (United Arab Emirates)

DOS applied the measures authorized in Section 3 of the Iran, North Korea, and Syria Nonproliferation Act (Pub. L. 109-353) against the following foreign person identified in the report submitted pursuant to Section 2(a) of the Act

 https://www.gpo.gov/fdsys/pkg/FR-2017-03-29/html/2017-06224.htm Rosoboronexport (ROE) (Russia) and any successor, sub-unit, or subsidiary thereof
State Dept. Imposes Nonproliferation Measures against Multiple Foreign Persons and Entities

https://www.gpo.gov/fdsys/pkg/FR-2017-03-30/html/2017-06225.htm

Ministry of Defense Directorate of Defense Industries (DDI) (Burma) and any successor, sub-unit, or subsidiary thereof;

Beijing Zhong Ke Electric Co., LTD. (ZKEC) (China), and any successor, sub-unit, or subsidiary thereof;

Dalian Zhenghua Maoyi Youxian Gongsi (China) and any successor, sub-unit, or subsidiary thereof;

Jack Qin (Chinese individual); Jack Wang (Chinese individual);

Ningbo New Company Import and Export Company Limited (China) and any successor, sub-unit, or subsidiary thereof;

Karl Lee [aka Li Fangwei] (Chinese individual);

Shanghai Horse Construction [aka Forrisio International Group] (China) and any successor, sub-unit, or subsidiary thereof;

Shenzhen Yataida High-Tech Company Ltd. (China) and any successor, sub-unit, or subsidiary thereof;

Sinotech (Dalian) Carbon and Graphite Corporation (SCGC) (China) and any successor, sub-unit, or subsidiary thereof;

Sky Rise Technology [aka Reekay Technology Limited] (China) and any successor, sub-unit, or subsidiary thereof;

Sun Creative (Zhejiang) Technologies, Inc. (China) and any successor, sub-unit, or subsidiary thereof;

T-Rubber Co. Ltd (China) and any successor, sub-unit, or subsidiary thereof;

Special Defense Research Center (SDRC) (Egypt) and any successor, sub-unit, or subsidiary thereof;

Eritrean Navy (Eritrea) and any successor, sub-unit, or subsidiary thereof;

Aerospace Industries Organization (AIO) (Iran) and any successor, sub-unit, or subsidiary thereof;

Saeng Pil Trading Corporation (SPTC) (North Korea) and any successor, sub-unit, or subsidiary thereof;

150th Aircraft Repair Plant (Russia) and any successor, sub-unit, or subsidiary thereof; Aviaexport (Russia) and any successor, sub-unit, or subsidiary thereof;

Bazalt (Russia) and any successor, sub-unit, or subsidiary thereof;

Kolomna Design Bureau of Machine-Building (KBM) (Russia) and any successor, sub-unit, or subsidiary thereof;

Ulyanovsk Higher Aviation Academy of Civil Aviation (UVAUGA) (Russia) and any successor, sub-unit, or subsidiary thereof;

Ural Training Center for Civil Aviation (UUTsGA) (Russia) and any successor, sub-unit, or subsidiary thereof;

Zhukovskiy and Gagarin Academy (Z&G Academy) (Russia) and any successor, sub-unit, or subsidiary thereof;

Madar Yara Medical Company (Saudi Arabia) and any successor, sub- unit, or subsidiary thereof;

Giad Heavy Industries (GHI) (Sudan) and any successor, sub-unit, or subsidiary thereof;

Military Industries Corporation (MIC) (Sudan) and any successor, sub-unit, or subsidiary thereof;

Muhammad al-Husayn Yusuf (Sudanese individual); and

Mabrooka Trading (United Arab Emirates) and any successor, sub- unit, or subsidiary thereof.

Case Studies

Final Determination Concerning Country of Origin of the KC-390 Military Cargo Airplane Converted to a Fire-Fighting Aircraft

Facts

Embraer is large Brazilian aerospace company that manufactures aircrafts. Embraer intended to offer the KC-390 aircraft in response to a United States Forest Service (USFS) solicitation for air tankers that can be used in civil fire-fighting operations. The KC-390 was being produced in Brazil. Embraer planned to modify the KC-390 from a medium military cargo aircraft to a fire suppression aircraft to meet the requirements of the USFS solicitation. The work on the aircraft was to occur in the United States at a Boeing facility in San Antonio, Texas. The conversion of the KC-390 from a military transport aircraft to a civil fire-fighting aircraft would require modification of multiple systems and structures in order to meet the USFS requirements for aerial fire-fighting.

Issue

What is the country of origin of the Embraer KC-390 aircraft after it has been converted from a military cargo aircraft to an aircraft that can be used by the USFS in combatting forest fires?

Holding

Based upon the specific facts of the case, the country of origin of the KC-390 aircraft converted from a military cargo aircraft to a fire suppression aircraft for purposes of U.S. Government procurement would remain Brazil, the country where it was originally manufactured.

An article is a product of a country or instrumentality only if (i) it is wholly the growth, product, or manufacture of that country or instrumentality, or (ii) in the case of an article which consists

in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.

The determining Factors included:

 

  • The work performed to the aircraft was not as significant as the work performed to the aircraft in HQ 546092, where the aircraft’s spar was replaced with a new and heavier spar, and a new engine and propeller were fitted as part of the modification of the aircraft.
  • The information presented indicated that the most important systems of the KC-390 would remain intact.

  • The modification of the KC-390 aircraft largely consisted of removing items from the aircraft that are associated with hauling military cargo and personnel and installing some new systems in order that the aircraft can carry and disperse fire retardant materials.

  • the basic structural integrity and the aerodynamics of the aircraft would not be changed For example, the size and shape including its length and wing-span will not be changed.

  • no information was presented showing that the engine powering the aircraft would be significantly reworked, meaning there will be no meaningful change to the aircraft’s power, speed and range.

  • The electronics and instruments, which are involved in flying the airplane, will not be significantly changed.

  • The fundamental identity of the product Would not be changed.

  • After the work is completed to give the KC-390 its forest fire- fighting capability, the product will still remain an airplane.

  • when the aircraft is imported into the United States, it is already a fully functioning airplane capable of flight, and ready for transporting personnel and equipment.

  • The changes made to the aircraft to convert it to a fire suppression airplane are not extensive enough to result in a substantial transformation of the aircraft.

https://www.gpo.gov/fdsys/pkg/FR-2017-03-10/html/2017-04741.htm

$ 27 Million paid to settle EAR Violations- Access USA Shipping

 

Access USA Shipping, LLC committed 150 violations of the EAR, highlights of the violations are as follows:

  1. They exported or attempted export items subject to the EAR from the United States to Transshpere Oy in Finland without the BIS license that EAR § 744.11 and Supplement No. 4 to EAR Part 744 required. The items were classified under ECCN 5A991 and controlled for anti-terrorism reasons, or were designated EAR99. Transsphere Oy is a Finnish entity listed on BIS’ Entity List
  2. They exported or attempted export items classified under ECCN 0A987 and controlled for Crime Control reasons without BIS Export licenses that EAR § 742.7 required. The destinations included Argentina, Australia, Hong Kong, Indonesia, Libya, South Africa, and Sweden
  3. They engaged in transactions or took actions that enabled foreign customers to purchase items subject to the EAR through Access without U.S. merchants knowing the items were intended for export and that were designed at least in part to avoid detection by U.S. Government and law enforcement. These actions included mis-describing and undervaluing the items in false export control documents; undervaluing the items improperly to avoid the filing of the required export control documents; allowing foreign customers to place orders through Access employees to avoid export scrutiny; destroying or altering export control documents; and failing to maintain records related to export transactions

https://www.bis.doc.gov/index.php/forms-documents/about-bis/newsroom/1661-access-usa-shipping-final-order/file

UNITED STATES OF AMERICA v. ZTE CORPORATION Combined PENALTY OF $1.19 BILLION

Facts

Between January 2010 and January 2016, ZTE, either directly or indirectly through a third company, shipped approximately $32,000,000 of U.S.-origin items to Iran without obtaining the proper export licenses from the U.S. government. In early 2010, ZTE began bidding on two different Iranian projects. The projects involved installing cellular and landline network infrastructure. Each contract was worth hundreds of millions of U.S. Dollars and required U.S. components for the final products.

In December 2010, ZTE finalized the contracts with Iranian customers. The contracts were signed by four parties: the Iranian customer, ZTE, Beijing 8 Star and ZTE Parsian. Court documents explain that ZTE identified Beijing 8 Star (8S) as a possible vehicle for hiding its illegal shipments of U.S. items to Iran. It intended to use 8S to export U.S.-origin items from China to ZTE customers in Iran. As part of this plan, ZTE supplied 8S with necessary capital and took over control of the company.

Under the terms of the Iran contracts, ZTE agreed to supply the “self-developed equipment,” collect payments for the projects and manage the whole network. ZTE Parsian was to provide locally purchased materials and all services. 8S was responsible for “relevant third-party equipment,” which primarily meant parts that would be subject to U.S. export laws. ZTE intended for 8S to be an “isolation company,” that is, ZTE intended for 8S (rather than ZTE) to purchase the embargoed equipment from suppliers and provide that equipment under the contract in an effort to distance ZTE from U.S. export-controlled products and insulate ZTE from U.S. export violations. However, 8S had no purchasing or shipping history and no real business reputation.

Ultimately, although 8S was a party to the contracts, ZTE itself purchased and shipped the embargoed goods under the contract. In its shipping containers, it packaged the U.S. items with its own self-manufactured items to hide the U.S.-origin goods. ZTE did not include the U.S. items on the customs declaration forms, though it did include the U.S.-origin items on the packing lists included inside of the shipments.

In early 2011, when ZTE determined that the use of 8S was insufficient to hide ZTE’s connection to the illegal export of U.S.-origin goods to Iran, senior management of ZTE ordered that a company-level export control project team study, handle and respond to the company’s export control risks. In September 2011, four senior managers signed an Executive Memo, which proposed that the company identify and establish new “isolation companies” that would be responsible for supplying U.S. component parts necessary for projects in embargoed countries. The isolation companies would conceal ZTE’s role in the transshipment scheme and would insulate ZTE from export control risks.

In March 2012, Reuters published an article regarding ZTE’s sale of equipment to Iran. In response, ZTE made a decision to temporarily cease sending new U.S. equipment to Iran. By November 2013, however, ZTE had resumed its business with Iran. Beginning in July 2014, ZTE began shipping U.S.-origin equipment to Iran once again without the necessary licenses.

Instead of using 8S, however, ZTE identified a new isolation company. ZTE signed a contract with the new isolation company, which in turn signed contracts with the two Iranian customers. According to the new scheme, ZTE purchased and manufactured all relevant equipment – both U.S.-origin and ZTE-manufactured – and prepared them for pick-up at its warehouse by the new isolation company. The new isolation company then shipped all items to the Iranian customers. Shipments to Iran continued from January 2014 through January 2016.

Despite its knowledge of an ongoing grand jury investigation into its Iran exports, ZTE took several steps to conceal relevant information from the U.S. government. It further took affirmative steps to mislead the U.S. government. In the summer of 2012, ZTE asked each of the employees who were involved in the Iran sales to sign nondisclosure agreements in which the employees agreed to keep confidential all information related to the company’s U.S. exports to Iran.

During meetings throughout late 2014, late 2015 and early 2016, outside counsel for ZTE, unaware that the statements ZTE had given to counsel for communication to the government were false, represented to the DOJ and federal law enforcement agents that ZTE had stopped doing business with Iran and therefore was no longer violating U.S. export laws. Similarly, on July 8, 2015, in-house counsel for ZTE accompanied outside counsel in a meeting with the DOJ and federal law enforcement agents and reported that ZTE was abiding by U.S. laws. That statement was also false.

ZTE also hid data related to its resumed illegal sales to Iran from a forensic accounting firm hired by defense counsel to conduct an internal investigation into the company’s Iran sales. ZTE knew the forensic accounting firm was reviewing its systems and knew that the analysis was being reported to the DOJ and U.S. law enforcement. To avoid detection of its 2013-2016 resumed illegal sales to Iran, ZTE formed the “contract data induction team” (“CDIT”). The CDIT was comprised of approximately 13 people whose job it was to “sanitize the databases” of all information related to the 2013-2016 Iran business. The team identified and removed from the databases all data related to those sales. ZTE also established an auto-delete function for the email accounts of those 13 individuals on the CDIT, so their emails were deleted every night – a departure from its normal practices – to ensure there were no communications related to the hiding of the data.

Result

ZTE Corporation has agreed to enter a guilty plea and to pay a $430,488,798 PENALTY to the U.S. for conspiring to violate the International Emergency Economic Powers Act (IEEPA) by illegally shipping U.S.-origin items to Iran, obstructing justice and making a material false statement. ZTE simultaneously reached settlement agreements with the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). In total ZTE has agreed to pay the U.S. Government $892,360,064. The BIS has suspended an additional $300,000,000, which ZTE will pay if it violates its settlement agreement with the BIS.

https://www.justice.gov/opa/pr/zte-corporation-agrees-plead-guilty-and-pay-over-4304-million-violating-us-sanctions-sending