Trade Update 1: Financial Institutions Get Guidance on Export Controls
The Bureau of Industry and Security (BIS) has issued new guidance for financial institutions (FIs) on best practices for complying with the Export Administration Regulations (EAR). This is important because every export transaction involves a financial element.
The document outlines steps FIs can take to avoid violating EAR, particularly General Prohibition 10 (GP 10), which forbids FIs from financing or servicing transactions they know are tied to EAR violations.
Key recommendations include:
- Conducting due diligence by screening customers using the U.S. Consolidated Screening List, encouraging customers to certify EAR compliance, and implementing risk-based procedures to detect red flags before or after transactions.
- The guidance also suggests reviewing customers and their trade activities against data on exports to high-risk countries, like Russia.
- Focus on General Prohibition 10 (GP 10). This rule prohibits financing or servicing exports if you know (or have a high reason to believe) the EAR is being breached.
- Implement best practices. Screening customers against restricted party lists, recommending EAR compliance certifications from some clients, and having procedures to identify and investigate potential violations after a transaction.
- Be aware of red flags. Checking customers (and potentially their customers) against specific lists, such as those who might be involved in supplying sanctioned countries.
This advisory is part of broader efforts by BIS and other government agencies to improve the security of international trade, prevent export evasion, and encourage compliance through various alerts and notices on topics ranging from Russian evasion tactics to voluntary self-disclosures.
Source Link: https://www.bis.gov/sites/default/files/press-release-uploads/2024-10/Final%20PR%20GP-10%20Guidance%2010.9.24.pdf
Trade Update 2: G7 Cracks Down on Russia with Industry Guidance on Sanctions Evasion
The G7, consisting of the U.S., Canada, France, Germany, Italy, Japan, the U.K., and the European Union, has released first-ever joint guidance to help industries prevent evasion of export controls and sanctions against Russia. These sanctions aim to block Russia from acquiring materials needed for its military operations, particularly in the ongoing conflict with Ukraine.
The guidance highlights three key areas:
- Identifying items at high risk of being diverted to Russia
- Recognizing red flags of potential sanctions evasion
- Implementing best practices for enhanced due diligence.
This is the first time the G7 has issued such guidance, emphasizing the importance of industry cooperation to combat Russia’s evolving tactics. The document provides a framework for industries to protect critical items, avoid reputational damage, and mitigate liability risks.
Why it matters:
- This guidance helps companies identify and stop Russia from acquiring critical materials for its military.
- It protects businesses from reputational harm and potential legal issues if they unknowingly participate in sanctions evasion.
Since February 2022, the G7, alongside other countries in the Global Export Control Coalition, has imposed strict export controls to limit Russia’s access to technology and resources needed for its military efforts.
The guidance comes as part of the G7’s broader enforcement efforts, facilitated through the Sub-Working Group on Export Control Enforcement, which focuses on sharing information and best practices for compliance and enforcement.
Trade Update 3: BIS Slaps a Texas-based Company with $439,992 Fine for Export Violations
The Department of Commerce’s Bureau of Industry and Security (BIS) has imposed a significant fine on a Texas-based company specializing in the export of military and commercial equipment, for violating export control regulations.
The company was found guilty of submitting a backdated a Prior Consignee Statement (PCS) to use a License Exception Strategic Trade Authorization (STA), which otherwise would have required a BIS license. Additionally, the company was accused of exporting military aircraft parts to Malaysia and South Korea without the necessary BIS authorization.
The $439,992 fine includes a $75,000 immediate payment and a $364,992 suspended portion. The suspended portion will be waived if the company remains compliant with the settlement agreement for a year.
As part of the settlement, the company is required to provide export compliance training to its employees and will be subject to a one-year probationary period.
BIS emphasized the importance of adherence to export control laws and warned that false or misleading information will not be tolerated. This enforcement action serves as a reminder for companies engaged in international trade to maintain robust export compliance programs.
Trade Update 4: U.S. Streamlines Space Export Controls, Boosting Innovation and Alliances
The U.S. Commerce Department’s Bureau of Industry and Security (BIS) announced three new rules to modernize space-related export controls. These measures aim to support U.S. leadership in space innovation, safeguard national security, and strengthen international partnerships. The updates stem from an extensive review led by the National Space Council.
The changes include:
- A Final Rule eliminating export licenses for certain space-related technologies when trading with close allies like Australia, Canada, and the UK.
- An Interim Final Rule reducing export license requirements for spacecraft components to over 40 allied nations and supporting NASA’s collaborative programs.
- A Proposed Rule that transfers jurisdiction of certain space-related defense articles from the U.S. Munitions List to the Commerce Control List, simplifying exports for commercial space items.
These rules reflect a strategic shift to facilitate innovation and collaboration in the space sector, while maintaining strict controls for sensitive technologies and adversarial nations. The public is invited to comment on the Proposed Rule within 30 days.
The updates result from a review that included feedback from industry players and recommendations from the Transportation and Related Equipment Technical Advisory Committee. Through this modernization, the U.S. aims to remain competitive in the evolving global space market.
Source Link: https://www.bis.gov/sites/default/files/press-release-uploads/2024-10/Space%20Action%20PR.pdf
