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July 24, 2015 

Questions and Answers on the Iran Nuclear Agreement (JCPOA) and Impact on Iran Sanctions

By Doug Jacobson, Jacobson Burton PLLC

Here are answers to some of the frequently asked questions we have been receiving from US and non-US companies following the July 14, 2015 announcement of the Joint Comprehensive Plan of Action (JCPOA) between the P5+1 countries and Iran on Iran's nuclear program.

What would you advise companies now wanting to trade with Iran? 

Answer: The key piece of advice I have been providing to clients following the July 14, 2015 JCPOA announcement is to have realistic expectations, to understand the limited scope of the US sanctions relief contained in the JCPOA, the major hurdles in the way of its implementation, and to avoid media reports that contain general information only. We should not expect to see any sanctions relief for several months, and most likely not until early 2016. Sales and marketing staff should work very closely with their in-house and outside compliance resources to determine what is permissible and what is not. In the meantime, and for the next few months, the activity with Iran that was prohibited on July 13, 2015, the day before the announcement, remains prohibited today. 

What misconceptions are out there that need to be corrected regarding sanctions on Iran? 

Answer: For most US-based companies, even if the JCPOA is approved by Congress and after several months is implemented in full, there will be little impact on US companies. The US agreed to lift only selected sanctions on Iran, such as secondary (extraterritorial) nuclear sanctions that restrict the activities of non-US persons with Iran. This means there will be relief only from sanctions on transactions outside the United States, not involving US persons or products sourced from the US. The US primary sanctions that prohibit most US goods from being exported to Iran and generally prohibit US persons from engaging in transactions with Iran will remain in effect until modified by the US Congress. In other words, once this agreement is implemented, which will not be until early 2016, US policy will be very similar to what it was in 2010, which is before the US secondary sanctions on Iran were first imposed. 

What mistakes do companies need to avoid in connection with potential business with Iran? 

Answer: Companies must avoid relying on rumors and unofficial information. They must make decisions based on specific guidance provided by the US Office of Foreign Assets Control, the Bureau of Industry and Security and other US regulatory agencies. Just because a competitor may be undertaking an activity in Iran or involving Iranian entities does not mean that it is compliant with US laws or the laws of other countries. The broad sanctions imposed on Iran by the EU and many other countries will also remain unchanged for the next several months and some countries, such as Canada, have indicated that they may choose to maintain the existing sanctions. 

On what sectors of the Iranian economy will the sanctions be lifted first and what sectors will take longer? 

Answer: For US based companies, the only significant changes to the current primary sanctions on Iran, once implemented in 2016, will be to allow for the sale and lease of commercial passenger aircraft and related parts to Iran for civilian end-use, upon receipt of a license from OFAC. In addition, OFAC will license non-US entities that are owned or controlled by a US person, such as a non-US subsidiary of a US company, to engage in activities with Iran that are consistent with the JCPOA. It is not yet clear whether OFAC will issue a general license authorizing such transactions or if each company will need to obtain its own specific license. In addition, the US will again allow the importation into the US of Iranian-origin carpets and food, which were permitted from 2000 through 2010. The US secondary (extraterritorial) sanctions relief will affect the activities of non-US companies in many other sectors in Iran, including energy, metals, automotive and shipping, insurance and banking. 

Will the JCPOA impact the current US policy on exports of permitted medical and agricultural products to Iran?

Answer: No. As noted, there will be limited changes on the US primary sanctions on Iran. OFAC's licensing policy for food, medicine, medical devices and agricultural commodities will not change under the JCPOA. As a result, the exports of these items still require a general or specific license to be exported to Iran. It is possible, although not certain, that payments for authorized items through European or Asian banks may be easier as a result of the JCPOA but direct Iran-US banking transactions will remain prohibited. In addition, there are many ports in Iran that will remain off limits due to the port operators being on the SDN List. The sanctions relief in the JCPOA is not expected to change the current policy since those sanctions were imposed for non-nuclear reasons.

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July 21, 2015 

U.S. GSP Renewal and Refund Update

By Doug Jacobson, Jacobson Burton PLLC

As a result of the recent renewal by Congress of the expired Generalized System of Preferences (GSP) program, US Customs and Border Protection (CBP) has announced that the normal GSP process will resume on July 29, 2015. On that date, U.S. importers will be able to have their customs brokers file entry summaries on imports of GSP eligible products without the payment of estimated duties.

In addition, because GSP was renewed retroactively to July 31, 2013, US importers are now eligible to receive retroactive benefits on GSP eligible imports that entered the U.S. between July 31, 2013 and July 29, 2015. 


However, because Bangladesh and Russia have lost their GSP eligibility, retroactive and future GSP benefits on imports from Bangladesh and Russia are not eligible for refunds or future GSP claims.


CBP has also posted a list of GSP-related frequently asked questions, which can be found here.


CBP’s instructions for obtaining GSP refunds are set forth below.


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US GSP Refund Process


A. Automation


Recognizing the impact that retroactive renewal and consequent numerous re-liquidations will have on both importers and CBP, CBP developed a mechanism to facilitate refunds for entries submitted during the lapse period  using the Special Program Indicator (SPI) for GSP (with the letter "A," "A+," or "A*") as a prefix to the tariff number. We expect to begin automated processing of these shortly after the effective date.


B. Formal/Informal Entries


CBP will liquidate or reliquidate all affected entry summaries and refund any duties deposited (without interest) for items qualifying for GSP and for which requests for liquidation or reliquidation are timely filed. Field locations will not issue GSP refunds except as instructed to do so by CBP Headquarters.


If as stated above, an ABI entry summary was filed with payment of estimated duties using the Special Program Indicator (SPI) for GSP (with the letter "A," "A+," or "A*") as a prefix to the tariff number, no further action by the filer is required; filings with the SPI "A," "A+," or "A*" will be treated as confirming requests for refunds.


If an ABI entry summary was filed with payment of estimated duties without the use of the SPI "A," "A+," or "A*" as a prefix to the tariff number, a refund of duties deposited must be requested in writing as described below for non-ABI entry summaries.


Non-ABI filers must request a refund in writing from the Port Director at the port of entry by December 28, 2015, regardless if they previously designated a refund on the Customs Form 7501 by using the SPI "A," "A+," or "A*" code. The request may cover either single entry summaries or all entry summaries filed by an individual filer at a single port. To expedite refunds, CBP recommends the following information be included in each letter:


A statement requesting a refund, as provided by section 201 of Title II of the Trade Preferences Extension Act of 2015;


An enumeration of the entry numbers and line items for which refunds are requested; and

The amount requested to be refunded for each line item and the total amount owed (not including interest) for all entry summaries.

C. Mail Entries


The addressees on mail entries must request a refund of GSP duties (not including interest) and return it, along with a copy of the CF 3419A, to the appropriate International Mail Branch (address listed on bottom right hand corner of CF 3419A). It is essential that a copy of the CF 3419A be included, as this will be the only means of identifying whether GSP products have been entered and estimated duties and fees have been paid.


D. Baggage Declarations and Non-ABI Informals


If travelers/importers wrote a statement directly on their Customs declarations (CF 6059B) or informal entries (CF 363 or CF 7501) requesting a refund (not including interest), no further action by the traveler/importer will be required; the statement will be treated as a conforming request for a refund. Failure to request a refund in this manner does not preclude a traveler/importer from otherwise making a timely request in writing, as described above for non-ABI filers.


Goods Eligible for Retroactive Benefits


The GSP reauthorization provides retroactive benefits only to goods from a country that is a beneficiary of the GSP program as of July 29, 2015. As such, this would exclude countries such as Bangladesh and Russia that lost eligibility between July 31, 2013 and July 29, 2015.

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July 01, 2015 

BIS Export Controls Update Conference to be Held in Washington, DC from November 2-4, 2015


The US Department of Commerce’s Bureau of Industry and Security (BIS) finally announced that the annual BIS Update Conference on export controls, which has been held in July for the past few years, will be held in Washington, DC from November 2-4, 2015.  

BIS Update has taken on more importance in the export controls community since many defense articles that were once subject to the ITAR are now subject to the jurisdiction of the Export Administration Regulations administered by BIS. 

In addition, because BIS has played a key role in the new sanctions imposed on Russia and Crimea, as well as in the changes to the US embargo on Cuba, those topics will likely be on the agenda.

As in the past, there will likely be speakers from OFAC on sanctions-related matters. 

Use the search box on the right side of this page to see summaries of prior BIS Update conferences. 

Further details on registration will soon be posted on the BIS website: http://tinyurl.com/o6ehphn.

May 18, 2015 

BIS Issues Guidance on Due Diligence to Prevent Unauthorized Transshipment and Reexport of Export Controlled Items to Russia.

By Doug Jacobson and Michael Burton, Jacobson Burton PLLC
 
Today the Bureau of Industry and Security (BIS) published guidance to exporters on the type of due diligence that should be undertaken by companies to prevent the unauthorized transshipment and reexport of export controlled items to Russia that are subject to the Export Administration Regulations (EAR).  

As a preamble to its guidance, BIS noted that it:

remains concerned about efforts by front companies and other intermediaries, who are not the true final end users, to transship or reexport U.S.-origin items to the Russian Federation in violation of these measures and other export controls. Even prior to the imposition of restrictions based on the situation in Crimea, front companies and other intermediaries obtained U.S.-origin items that may require a license to Russia through intermediate countries subject to a more favorable licensing policy under the Export Administration Regulations (EAR). A salient example is Wassenaar Arrangement dual-use items controlled under the EAR for National Security (NS) reasons. 
The following is an annotated summary of the BIS Russia guidance. Note that much of the guidance is not Russia specific, but is applicable to exports and reexport transactions involving sanctioned or restricted countries:
  • As described in Supplement No. 3 to Part 732 of the EAR [which includes BIS's "know your customer" and red flags guidance], whenever a person who is clearly not going to be using the item for its intended end use (e.g., a freight forwarder) is listed as an export item’s final destination, the exporter has an affirmative duty to inquire about the end use, end user, and ultimate destination of the item to ensure the transaction complies with the EAR.
  • Exporters should pay attention to any information that may indicate an unlawful diversion is planned. This may include discrepancies in the destination country and the country from which an order is placed or payment is made. 
  • When inquiring into the ultimate destination of the item, an exporter should consider e-mail address and telephone number country codes and languages used in communications from customers or on a customer’s website. The exporter should also research the intermediate and ultimate consignees and purchaser, as well as their addresses, using business registers, company profiles, websites, and other resources. 
  • Exporters should pay attention to the countries a freight forwarder serves, as well as the industry sectors a distributor or other non-end user customer supplies. The exporter should then determine whether a license is required based on the likely country of ultimate destination and end use and end user. 
  • Exporters should consider not only the list-based license requirements specified in Supplement No. 1 to Part 738 of the EAR (the Commerce Country Chart) in conjunction with item’s classification specified in Supplement No. 1 to Part 774 of the EAR (the Commerce Control List), but also the end use and end user controls in Part 744 and the embargoes and special controls in Part 746. 
  • If the exporter continues to have any doubts or concerns surrounding the end use, end user, or country of ultimate destination after exercising due diligence, the exporter should present all relevant information to BIS in the form of a license application or refrain from the transaction.
While not included in the BIS guidance, we recommend to our clients that they obtain end-use certificates in connection with all export transactions. Such end-use certificates should specifically mention the current Russia end-use restrictions contained in in the EAR. Such end-use certificates are also useful since they can be provided to freight forwarders and US Customs and Border Protection in order to facilitate authorized transactions intended for Russia.

May 12, 2015 

US Trade Security Steering Group Conducting Online Deemed Export Survey

The Washington, DC-based Trade Security Steering Group (TSSG), which supports a range of public-private initiatives to more effectively mitigate international security risks while enhancing the export competitiveness of high-performing companies, is conducting an online survey on deemed export licensing issues.

Feedback from companies, universities, and other organizations across the exporting community is requested to assist the TSSG in formulating a proposal to reform the deemed export licensing system.

The anonymous survey can be found here: http://j.mp/TSSGSurvey and will only take a few minutes to complete. 

The deadline for completing the survey is May 15, 2015. 

December 08, 2014 

New Clarifying Language to be Included on BIS Export and Reexport Licenses

In an effort to make export and reexport licenses more clear, the Bureau of Industry and Security (BIS) announced today that the following notice will appear on all new licenses authorizing the export, reexport and in-country transfer of goods, technology and software subject to the Export Administration Regulations (EAR):

Unless limited by a condition set forth below, the export, reexport or transfer (in-country) authorized by this license is for the item(s), end-use(s), and parties described in the license application and any letters of explanation. The applicant is responsible for informing the other parties identified on the license, such as ultimate consignees and end-users, of the license’s scope and of the specific conditions applicable to them. BIS has granted this license in reliance on representations the applicant made in the license application, letters of explanation, and other documents submitted.
BIS stated that this change is intended to "rationalize and make more consistent the use of conditions on BIS licenses" and to "eliminate, to the greatest extent possible, the inclusion of requirements and prohibitions included in the Export Administration Regulations (EAR) as conditions on validated licenses."

BIS is eliminating such conditions because they are already applicable to all exports, reexports and in-country transfer of items subject to the EAR by operation of law. Express reference to such conditions, therefore is redundant. 

This is illustrated by the following conditions included on a BIS export license that was recently issued for "600 series" parts and components:
  1. Applicant must inform consignee of all license conditions.
  2. For stated end-use only
  3. No resale, transfer, or reexport of the items listed on this license is authorized without prior authorization by the U.S. Government.
As a result of this change, these types of general statements will not be included as license conditions. License conditions will be reserved only for requirements applicable to a particular license, such as licenses requiring national security (NS) controlled items to be repaired by a citizen of Country Group A:1.

In making this change, BIS hopes to eliminate the confusion caused from having expressly referenced in the license some requirements and/or prohibitions of the EAR but not others. BIS was concerned that exporters might infer erroneously that those provisions not expressly identified were not applicable to the licensed transaction.

BIS also hopes this change clarifies the scope of issued licenses given that the new language specifies that the license authorizes only the transaction requested by the license applicant. 

License applicants interested in receiving authorization to ship items other than those listed on their license applications must either request that their license applications be returned for correction or submit an additional license application. Exporters may, in limited circumstances, continue to avail themselves of the EAR's provisions on non-material changes to a license, which remain unchanged.

September 12, 2014 

BIS Adds Major Russian Energy and Defense Companies to Entity List

By Doug Jacobson and Michael Burton, Jacobson Burton PLLC

As part of the next phase of U.S. sanctions on Russia, today the U.S. Department of Commerce's Bureau of Industry and Security (BIS) expanded the controls on export and reexports to companies in Russia by adding ten companies in the Russian oil and gas and defense sectors to the BIS Entity List.


BIS's actions are in addition to the the new sanctions on Russia's financial services, energy and defense sectors announced today by the Treasury Department that will be implemented by OFAC.

Today's move by BIS dramatically expands the previously imposed restrictions on the export or reexport of U.S. origin good, software and technology intended for Russia's energy sector, since any product or software that is "subject to the Export Administration Regulations" (EAR) will require a BIS license (with a presumption of denial) if:


1. it will be used by the five energy companies listed below; and 
2. in the exploration of, or production from, deepwater, Arctic offshore, or shale projects in Russia.

These restrictions are much broader than the sanctions imposed by the EU and other countries to date.

Here is a summary of the parties added to the BIS Entity List today:

Russian Energy Sector

  • Gazprom, OAO major business lines are geological exploration, production, transportation, storage, processing and sales of gas, gas condensate and oil, sales of gas as a vehicle fuel as well as generation and marketing of heat and electric power.
  • Gazpromneft  is a Russian oil company engaged primarily in oil & gas exploration and production, the sale and distribution of crude oil, and the production and sale of petroleum products.
  • Lukoil, OAO is a leader of Russia’s petroleum industry.
  • Rosneft a leader of Russia’s petroleum industry. Rosneft activities include hydrocarbon exploration and production, upstream offshore projects, hydrocarbon refining, and crude oil, gas and product marketing in Russia and abroad.
  • Surgutneftegas is a Russian oil and gas company that was created in 1993 by merging several previously state-owned companies owning large oil and gas reserves in Western Siberia.
BIS will impose a license requirement for the export, reexport or foreign transfer of items subject to the Export Administration Regulations (EAR) to these companies when the exporter, reexporter or transferor knows those items will be used directly or indirectly in exploration for, or production from, deepwater, Arctic offshore, or shale projects in Russia.  License applications for such transactions will be reviewed with a presumption of denial when for use directly or indirectly for exploration or production from deepwater, Arctic offshore, or shale projects in Russia that have the potential to produce oil. As before, natural gas projects appear to be subject to a case-by-case review.

These Entity List restrictions on the five designated Russian energy sector companies are in addition to the previously issued BIS export restrictions on a specified list of items to any end-user in Russia. Thus, which items are subject to control depends on the end-user.  Both sets of prohibitions only target the three types of covered activities, deepwater, Arctic offshore and shale. 

Russian Defense Sector

  • Almaz-Antey Air Defense Concern Main System Design Bureau, JSC is one of the world’s largest defense industry complexes, specializing in development of anti-air, anti-missile and space defense systems.
  • Tikhomirov Scientific Research Institute of Instrument Design specializes in the development of weaponry control systems for fighter planes and mobile medium range anti-aircraft surface to air missile (SAM) defense vehicles.
  • Mytishchinski Mashinostroitelny Zavod, OAO manufactures and supplies ordnance and accessories, including naval, aircraft, anti-aircraft and field artillery products.
  • Kalinin Machine Plant, JSC designs and manufactures machines for military and civil applications.
  • Dolgoprudny Research Production Enterprise develops and manufactures high-technology defense products.
BIS will impose a license requirement for the export, reexport or foreign transfer of items subject to the to the EAR to the designated entities, with a presumption of denial.  BIS will also require licenses for an additional group of items destined to military end uses or end users in Russia.


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