As part of the plea agreement, Cadence will pay criminal penalties of nearly $118 million. 

In addition to the charges, the Department of Commerce’s Bureau of Industry and Security (BIS) also announced the resolution of a civil enforcement action against the company in which Cadence agreed to pay over $95 million in civil penalties. 

The DoJ and BIS have coordinated the resolution of the parallel investigation, and each agreed to a partial credit against their fine for payments made to satisfy the other agency’s fine. Under the coordinated agreement, Cadence will pay criminal and civil penalties of more than $140 million.

Cadence committed criminal violations of the export control laws by selling hardware, software, and semiconductor design intellectual property to the National University of Defense Technology (NUDT) in China. NUDT was added to the Department of Commerce’s Entity List in February 2015. The university was involved in the development of supercomputers with applications for military and nuclear explosive simulations. 

Cadence and its Chinese subsidiary engaged in a conspiracy to commit export control violations by exporting this technology to NUDT without obtaining the requisite licenses from BIS. 

Court documents reveal that Cadence continued exporting software even after acknowledging via email that NUDT had been added to the Entity List.

In negotiating the plea agreement, the DoJ considered that Cadence was cooperative when the investigation commenced, but also noted the company’s failure to voluntarily disclose the misconduct to NSD. Accordingly, the amount of the monetary penalty reflects a 20% reduction of the statutory maximum fine.

​​This case demonstrates the government’s priority in enforcing export controls and the importance of prioritizing compliance programs.

Diaz Trade Law can help create a new export compliance plan for your business or review and update an existing one. To learn more about how we can help, contact us at info@diaztradelaw.com or call us at 305-456-3830.

Read more:

• The Importance of Regular Export Compliance Training for Your Business
• Building a Strong Export Compliance Plan
• Building & Maintaining an Effective Export Compliance Plan
• Introduction to Export Controls
• ICYMI: State Department Reaches $200M Settlement with RTX Corporation for Export Violations

EAR Violation

In 2016, USRA was granted a contract with NASA to license and distribute aeronautics-related and U.S. Army-owned flight control software. Jonathan Soong was employed by USRA and was responsible for performing due diligence on prospective purchasers. Soong willfully exported software subject to the Export Administration Regulations (EAR) to Beijing University, knowing that an export control license was required for the export because it was on the Entity List.

Soong used an intermediary to avoid detection, and embezzled tens of thousands of dollars in software license sales. He ultimately plead guilty to willfully violating the EAR. He was sentenced to 20 months in prison.

Company Disclosure & Remediation

Within days of learning of Soong’s actions, USRA self-disclosed the violation to the Department’s National Security Division (NSD). The company fully cooperated with the ensuing criminal investigation, which eventually established that Soong had acted alone.

USRA’s cooperation included proactively collecting and disclosing evidence and providing detailed and timely responses to the government’s requests for information. USRA remediated the root cause of the misconduct by disciplining an employee who failed to appropriately supervise Soong, and by improving its internal controls and compliance program.

USRA also compensated the government both for the funds Soong embezzled, and for the time Soong had spent embezzling funds instead of performing his duties under the contract with NASA.

The DoJ cited the timely disclosure, cooperation, and remediation as factors in their decision to not prosecute.

When You Should Self-Disclose an EAR Violation

The decision by the DoJ to prosecute an employee of the company but not the company itself highlights the importance and significance of self-disclosing a violation. If you discover an EAR violation in your company, it is critical to work with an attorney to navigate a potential disclosure. How and when you disclose the violation can make all the difference in the ultimate outcome. Diaz Trade Law has significant experience filing voluntary self-disclosures and mitigating penalties and can help you identify the best course of action.

Read more:

• Webinar: Intro to Export Controls
• Webinar: Building and Maintaining an Effective Export Compliance Plan
• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Bloomberg Law: Building & Maintaining an Export Compliance Plan
• Bloomberg Law: Export Licensing Under EAR

What Are the U.S. Antiboycott Laws?

“Anti-boycott” refers to U.S. laws and regulations that discourage and, in certain cases, prohibit U.S. persons from participating in unsanctioned foreign boycotts, particularly those targeting countries friendly to the United States.

BIS is charged with administering and enforcing this policy under the Anti-Boycott Act of 2018, the Export Control Reform Act of 2018, and the Export Administration Regulations.

The antiboycott laws aim to prevent U.S. persons from advancing foreign policies of other nations that run counter to U.S. policy.

Prohibited Antiboycott Activities Under the EAR

Part 760 of the EAR specifies prohibited antiboycott activities including:

• Refusals or agreements to refuse to do business with or in a boycotted country or with blacklisted companies.
• Discrimination or agreements to discriminate against a U.S. person based on race, religion, sex, or national origin.
• Furnishing information or agreements to furnish information about business relationships with or in a boycotted country or with blacklisted companies.
• Furnishing information or agreements to furnish information about the race, religion, sex, or national origin of a U.S. person.
• Implementation of letters of credit containing prohibited boycott terms or conditions.
• Taking actions with the intent to evade Part 760 of the EAR.

Required Reporting        

Section 760.5 of the EAR requires U.S. persons to report receipts of boycott requests and requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott. Reports may be filed electronically or by mail, but they must be postmarked or electronically date-stamped by the last day of the month following the calendar quarter in which the underlying request was received.

Boycott Requestor List

BIS regularly updates and publishes a Boycott Requester List to assist U.S. persons in fulfilling the reporting requirements of the antiboycott regulations. The list also aims to raise awareness regarding certain sources of boycott-related requests. Entities on the list have been reported to BIS on a boycott request report form as having made a boycott-related request in connection with a transaction in the interstate or foreign commerce of the United States. The list is updated quarterly.

A party’s inclusion on the Requester List does not mean that U.S. persons are restricted from dealing with the listed party. Rather, U.S. persons are on notice that the listed party is more likely to make reportable boycott-related requests.

Getting Removed from the Boycott Requestor List

Exporters and other businesses rely on the Boycott Requestor list to inform their compliance efforts. Thus, any company that ends up on the list is likely to have its operations severely impacted. Since BIS relies on reports to maintain the list, inadvertent inclusion can and does happen.

To date, BIS has not established a formal process for list removal and routinely removes entities from the list. BIS directs entities who believe they have been included in error to contact the Office of Antiboycott Compliance (OAC) directly. While entities should conduct an internal investigation to determine what conduct may have resulted in a report, in some cases, entities may need to file a Freedom of Information Request to uncover the reason for the report.

Penalties

The Export Control Reform Act specifies both criminal and administrative penalties for violations of the Anti-Boycott Act of 2018.

BIS may impose the following administrative penalties:

• A monetary penalty in the amount of the greater of approximately $300,000 per violation or twice the value of the underlying transaction;
• Denial of export privileges; and/or
• Revocation of any BIS export licenses.

For violations that occurred prior to August 13, 2018, penalties may be imposed under the International Emergency Economic Powers Act (IEEPA). The maximum monetary penalty under IEEPA for each violation is the greater of $307,922 per violation or twice the value of the transaction that forms the basis of the violation.

The U.S. Government may impose the following criminal penalties:

• Up to $1 million on individuals or companies for a criminal antiboycott violation.
• Individuals may additionally (or alternatively) face up to 20 years of imprisonment.

Voluntary Self-Disclosures

BIS encourages U.S. persons to file a voluntary self-disclosure (VSD) if they believe they may have violated the antiboycott laws. Section 764.8 of the EAR sets out procedures for filing a disclosure including the timing of filing, the contents of the initial notification of a VSD, the subsequent narrative account of the violation(s), and certification of any representations made in connection with the VSD. The provision also describes supporting documentation that should accompany a VSD filing.

After receipt and review of the disclosure, OAC will inform the filing party of any action it intends to take. Before filing a VSD it is critical to seek legal counsel to ensure filing is the best course of action and that your disclosure properly captures the nature of the violation(s).

Looking Ahead: BIS Enforcement

laIn late 2022 the agency announced a renewed focus on enforcement that includes higher penalties. Since then, BIS has issued several updates to its antiboycott enforcement policies and procedures including the establishment of the Boycott Requestor List and a July 2023 memo strengthening antiboycott reporting measures.

Companies of all sizes should ensure they have compliance processes in place to detect boycott requests and avoid any activity that furthers a boycott.

Questions about antiboycott compliance? Diaz Trade Law can help. Call 305-456-3830 or email info@diaztradelaw.com

Learn more:

• Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• ICYMI: BIS Updates Boycott Requester List
• BIS Releases New Edition of “Don’t Let This Happen to You”
• BIS Issues Final Rule on VSD Policies and Penalty Guidelines

Case highlights:

The publication highlights over 100 cases covering various violations of export control laws.

Military Controls

The owner of BQ Tree Consulting in Jacksonville, Florida, along with the President and Manager of the company were indicted for conspiring to illegally export military-grade combat rubber raiding craft (CCRC) to China.

The scheme involved providing a U.S. company with false end-use and end-user information for a front company in Hong Kong, which was used to complete the transaction ultimately destined for China. The intention was to reverse engineer the CRRC and engines to mass produce them for the Chinese People’s Liberation Army (PLA) Navy.

The company owner was sentenced to 16 months in prison, two years of supervised release, mandatory mental health screening, and a $200 special assessment. The company President was sentenced to 42 months confinement, three years of probation, a $50,000 criminal fine, and a $200 special assessment. The company manager was sentenced to 17 months in prison, one year of supervised release pending deportation, a prohibition on employment with any company that deals with the military, and a $100 special assessment.

National Security Controls

GlobalFoundries U.S. Inc., a semiconductor wafer manufacturing company headquartered in Malta New York violated the Export Administration Regulations (EAR) by sending 74 shipments of semiconductor wafers, valued at approximately $17.1 million, to SJ Semiconductor (SJS), a company on the BIS Entity List, without a license from BIS.

GlobalFoundries voluntarily disclosed the violations and cooperated fully with the investigation, which resulted in a reduction in the penalty.

On November 1, 2024, GlobalFoundries agreed to a $500,000 civil penalty.

WMD Controls

Chinese national Zaosong Zheng conducted cancer-cell research at Beth Israel Deaconess Medical Center in Boston. Zheng stole vials of biological research and attempted to take them out of the United States aboard a flight to China.

Zheng was arrested at Logan International Airport in Boston. Zheng pled guilty to making false, fictitious or fraudulent statements in connection with his theft of 19 vials and was sentenced to time served in prison, three years of supervised release, a $100 special assessment, and removal from the United States.

Unlicensed Exports

USGoBuy, LLC of Portland, Oregon entered into a settlement agreement with BIS to resolve two alleged violations of the EAR involving unlicensed exports of riflescopes to China and the UAE. As part of the settlement agreement, USGoBuy, LLC agreed to a three-year suspended denial order, which BIS could activate if the company failed to meet the terms of the settlement agreement or committed additional violations.

A subsequent audit identified significant continued deficiencies in USGoBuy, LLC’s export compliance program and revealed new violations of the EAR including 176 failures to make Electronic Export Information (EEI) filings and failures to maintain adequate records.

BIS activated the previously agreed upon suspended penalty – a three-year denial order.

Takeaways

In the publication, BIS noted that export controls have never been more important to the U.S.’s security interests and that Export Enforcement has taken decisive action to prioritize its enforcement efforts.

BIS also urged companies to invest in compliance upfront to avoid becoming one of the highlighted case studies.

Exporters should have a robust compliance program in place not only to prevent violations of the EAR but to detect them if and when they do occur.

Diaz Trade Law can provide assistance with a number of EAR-related matters including developing a compliance plan, export compliance training, transaction vetting, voluntary self-disclosures, and more.

Learn more:

• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Bloomberg Law: Building & Maintaining an Export Compliance Plan
• Bloomberg Law: Export Licensing Under EAR
• Bloomberg Law: Bloomberg Law – Introduction to U.S. Export Controls
• Webinar: Building and Maintaining an Effective Export Compliance Plan
• Webinar: Introduction to Export Controls

The rule codifies previously announced policy changes through several Policy Memoranda including an April 2023 memorandum on voluntary-self disclosures, and a June 2022 memorandum on strengthening administrative enforcement.

Revisions to Voluntary Self-Disclosures

The rule makes both substantive and procedural changes to the VSD policies:

1. Addition of non-disclosure as an aggravating factor – the new rule makes clear that BIS will consider a deliberate decision to not disclose a violation as an aggravated factor when determining what administrative sanctions will be imposed.
2. New dual track for processing VSDs – one track for minor or technical violations, the other for significant violations.
3. Authorizes any person (not just the party submitting a VSD) to notify the Director of BIS’s Office of Export Enforcement (OEE) that a violation has occurred and to request permission to engage in corrective activities.

Revisions to Penalty Guidelines

This rule makes several changes to the BIS Penalty Guidelines, including:

1. Changes the base penalty caps:
   1. Non-egregious VSD cases: was $125,000, now one-half of the transaction value.
   2. Non-egregious cases that are not initiated by a VSD: was $250,000, now the full transaction value.
2. Permits BIS to use  non-monetary penalties to resolve cases that are not egregious and have not resulted in national security harm, but rise above the level of cases warranting a warning letter.
3. Removes from the BIS Penalty Guidelines all specific percentage ranges for potential penalty reduction.
4. Amends aggravating factors to include the enabling of human rights abuses as a specific consideration when BIS assesses the potential impact of an apparent violation on U.S. foreign policy objectives.
5. Adds a new aggravating factor for failure to disclose a significant apparent violation.
6. Expands the scope of past criminal convictions that OEE may consider in an enforcement response.
7. Clarifies that disclosure of conduct by others that leads to an enforcement action counts as “exceptional cooperation.”

Takeaways for Exporters

The changes in this revised rule reflect BIS’s continued commitment to enforcing compliance with export controls and the agency’s willingness to impose more significant penalties for non-compliance.

Exporters should familiarize themselves with the changes in this rule and adjust compliance programs as necessary. Need assistance developing or revising your export compliance program? Diaz Trade Law can help.

Learn more:

• Bloomberg Law: BIS Regulatory Updates: 2023 Significant Changes
• Bloomberg Law: Significant Updates to BIS Enforcement Policies in 2022
• Bloomberg Law: Voluntary Self-Disclosures: Recent Guidance From BIS, OFAC & DOJ
• Bloomberg Law: Submitting Voluntary Self-Disclosures to Bureau of Industry & Security
• Webinar: Building and Maintaining an Effective Export Compliance Plan
• Webinar: ACE: Auditing Your Export History
• Webinar: Introduction to Export Controls

Background on Boycott Requests

BIS is charged with enforcing anti-boycott laws under the Export Administration Regulations (EAR). The laws prohibit U.S. companies from taking actions in furtherance of a boycott maintained by a foreign country against a country friendly to the United States. Common boycott requests include:

• Requesting a certification that goods are not from a specific country
• Requesting that goods are not shipped to a certain country
• Requesting that a business does not engage with a particular country

U.S. persons must report boycott-related requests to BIS’s Office of Anti-boycott Compliance (OAC).

Boycott Requester List

OAC maintains a boycott-requester list to raise awareness and assist U.S. persons in identifying sources of boycott-related requests.

Entities on the list have been reported by a U.S. person to BIS via a request report form. The list is updated quarterly but is not an exhaustive list of entities that may make these requests.

The most recent update to the list includes 57 additions and the removal of 127 entities.

Requesting countries added in the most recent update include:

• Afghanistan
• Algeria
• Bangladesh
• Germany
• India
• Iraq
• Japan
• Kuwait
• Malaysia
• Norway
• Oman
• Pakistan
• Saudi Arabia
• Singapore
• Switzerland
• United Arab Emirates
• Qatar
• Vietnam

Exporters have a duty to remain vigilant in spotting boycott-related requests and reporting them to BIS. Diaz Trade Law can help ensure your compliance program meets all EAR requirements.

Learn more:

• The Importance of Regular Export Compliance Training for your Business
• Building and Maintaining an Effective Export Compliance Plan
• Introduction to Export Controls

The note:

1. Highlights the applicability of U.S. sanctions and export control laws to persons and entities located abroad;
2. Outlines the enforcement mechanisms that are available for the U.S. government to hold non-U.S. persons accountable for violations of such laws; and
3. Provides an overview of compliance considerations for non-U.S. companies and compliance measures to help mitigate their risk

Applicability of U.S. Sanctions and Export Control Laws to Foreign-Based Persons

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers and enforces economic and trade sanctions, primarily against foreign jurisdictions but also against individuals and entities such as traffickers and terrorists.

The following persons/entities must comply with OFAC regulations:

• U.S. citizens and permanent resident aliens
• All persons within the United States
• All U.S.-incorporated entities and their foreign branches

In certain sanctions programs, foreign entities owned or controlled by U.S. persons also must comply with applicable restrictions – such as engaging in a transaction with the government of Iran. Certain sanctions programs also require foreign persons in possession of U.S.-origin goods to comply.

Non-U.S. persons are also subject to certain OFAC prohibitions. For example, non-U.S. persons are prohibited from causing or conspiring to cause U.S. persons to wittingly or unwittingly violate U.S. sanctions, as well as engaging in conduct that evades U.S. sanctions.

Applicability of U.S. Export Control Laws

The compliance note highlights that the Export Administration Regulations (EAR) follow the goods – meaning U.S. export control laws may extend to items subject to the EAR anywhere in the world and to foreign persons who deal with them. Anyone involved in the movement of items subject to the EAR must adhere to U.S. export control laws.

Transshipment

The reach of U.S. export control laws means that parties to an export transaction cannot bypass the EAR by shipping items through a third country. Similarly, foreign parties to an export transaction cannot bypass EAR requirements because the item is located outside the United States.

U.S.-Origin Components

The EAR may also apply to foreign companies that manufacture items containing U.S.-origin components. The factor that determines EAR applicability is the value of the components. Most of the time, a non U.S.-made item is subject to the EAR if the value of the U.S.-origin controlled content exceeds 25% of the value of the finished product. For certain countries, the threshold is lower (Cuba, Iran, North Korea, and Syria – 10%).

Foreign Produced Products that contain U.S.-Controlled Technology

Under the EAR, certain foreign-produced items located outside of the United States that are produced using certain U.S.-controlled technology, software, or production equipment are subject to the EAR when exported from abroad, reexported, or transferred in-country to certain countries or parties on the Entity List.

This means that even if the items never enter the U.S., they may still be subject to U.S. export control jurisdiction under certain conditions.

Examples include:

• License requirement for Huawei and its subsidiaries on the Entity List on items that are the direct product of certain U.S.-origin software or technology.
• Certain Chinese entities associated with advanced semiconductors.
• Controls on certain defense-related entities and items in Russia, Belarus, and Iran.

Enforcement Against Foreign Persons and Entities

The note illustrates the authority of the Bureau of Industry and Security (BIS), OFAC, and the Department of Justice by providing past examples of enforcement actions.

BIS

• June 9, 2023 – BIS issued a Temporary Denial Order (TDO) suspending the export privileges of companies in the Netherlands and Greece for acting as a procurement network for Russian intelligence services.
• April 20, 2023 – BIS announced a $300 million penalty against a Singapore company for shipping millions of hard disk drives to Huawei without a license.

OFAC

• In April 2022, an international freight forwarding and logistics company paid over $6M to settle civil liability for received payments through the U.S. financial system in connection with shipments to Korea, Iran, and Syria.
• July 2021 – a UAE-based company settled with OFAC for $415,000 for exporting storage tank cleaning units from the U.S. to Iran by falsely listing a Dubai-based company as the end-user.

Department of Justice

• October 2022 – DOJ indicted three Latvian nationals, one Ukrainian national, one Latvian company, and one Estonian company with violating U.S. export laws by trying to smuggle from the United States to Russia a dual-use, high-precision computer-controlled grinding machine.
• December 2023 – DOJ indicted one Iran-based person and one China-based person for conspiring to illegally purchase and export from the United States to Iran dual-use microelectronics commonly used in UAV production.

Compliance Considerations for Foreign-Based Persons

The note ends by advising foreign-based companies and individuals to take seriously the impacts of U.S. sanctions and export control laws on their business and operations. The note provides a list of compliance considerations including screening protocols, integrating know-your-customer practices, and ensuring that affiliates are trained on U.S. export control requirements.

Diaz Trade Law Can Assist with EAR Compliance

While having an export compliance plan is not a guarantee that an export violation will not occur, a robust export compliance program can minimize the risk of non-compliance. Diaz Trade Law can help you develop an effective export compliance plan, export compliance training, transaction vetting, and more.

Reach out to us at info@diaztradelaw.com or call us at 305-456-3830.

Want more information on EAR compliance? Check out our relevant blog posts and on-demand webinars:

• Introduction to Export Controls
• The Importance of Regular Export Compliance Training for your Business
• Expanded Export Control Obligations when Exporting to China

U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)

• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
• OFAC is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
• OFAC is adding regulations to implement Executive Order 14059 of December 15, 2021, “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade”. These regulations are currently available for public inspection with the Federal Register and will take effect upon publication in the Federal Register on Tuesday, December 20, 2022.
  • OFAC intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.
• OFAC is publishing the names of persons whose property and interests in property have been unblocked and who have been removed from the list of Specially Designated Nationals and Blocked Persons.

U.S. Customs and Border Protection (CBP)

• The U.S. Customs and Border Protection (CBP) announces the  DR-CAFTA contains quantitative restraints associated with a reduced duty rate for agricultural products that meet the requirements for a “qualifying good.” A qualifying good is one that meets the product specific rule of origin; however, U.S. materials or inputs are considered to be of a non-Party, i.e., U.S. materials are considered non-originating. The tariff rate quotas (TRQs) cover products such as sugar, sugar-containing products, beef, cheese, milk powder, butter, other dairy products, ice cream, milk, cream, and sour cream.
• CBP announced from September 16, 2022, through December 1, 2022, the document attachment functionality of the Automated Commercial Environment (ACE) Protest Module was inoperative. As announced in Cargo Systems Messaging Service (CSMS) message #54197466 the issue has been resolved and document attachment functionality is restored.
  • • Protest filers impacted by the error should upload any documents supporting a Section 514 protest or a Section 520(d) post-importation claim as soon as possible but no later than Monday, January 30, 2023. Documents must only be uploaded to the protest record; no documents will be accepted through email or any other means.
      • During this lapse in functionality, protests or 520(d) claims, submitted between September 16th and December 1st should not have been denied solely because supporting documents were not attached. In the event that CBP did deny a protest during this time period based on documents not being attached, protestants may submit a 19 U.S.C. 1515(d) void denial request, in accordance with the ACE Business Rules. For 520(d) claims that were denied for the reasons described above, the filer will need to submit a Section 514 protest.
• CBP announced the annual Customs Broker permit user fee due date for the 2023 calendar year is February 24, 2023. The annual permit user fee reflects changes made by two final rules (87 FR 63267 and 87 FR 63262) published in the Federal Register on October 18, 2022, and effective December 19, 2022, that eliminate broker districts and district permits, and transition all customs brokers to a single national permit.
  • The fee for the 2023 calendar year is $163.71 and is due to the processing Center no later than February 24, 2023. The annual permit user fee will only be collected for active national permits.

U.S. International Trade Commission (USITC)

• The U.S. International Trade Commission (USITC) has given notice of the scheduling of expedited reviews pursuant to the Tariff Act of 1930 to determine whether revocation of the countervailing duty order on steel concrete reinforcing bar from Turkey and the antidumping duty orders on steel concrete reinforcing bar from Japan, Taiwan and Turkey would be likely to lead to continuation or recurrence of material injury within a reasonably foreseeable time.
• The USITC on the basis of the record developed in five-year reviews, has determined pursuant to the Tariff Act of 1930 that revocation of the antidumping duty orders on certain stainless steel pipe from South Korea and Taiwan would be likely to lead to continuation or recurrence of material injury to an industry in the United States within a reasonably foreseeable time.

Environmental Protection Agency (EPA)

• The United States Environmental Protection Agency (EPA) announced a regulation which establishes tolerances for residues of simazine in or on citrus fruits (crop group 10-10), pome fruits (crop group 11-10), stone fruits (crop group 12-12), and tree nuts (crop group 14-12) and amends the tolerance for residues in or on almond hulls. Syngenta Crop Protection, LLC requested these tolerances under the Federal Food, Drug, and Cosmetic Act (FFDCA).

National Institute of Standards of Technology

• The National Institute of Standards of Technology announced the 2023 Interim Meeting of the National Conference on Weights and Measures (NCWM) will be held in-person at the Hyatt Regency Savannah in Savannah, Georgia from Sunday, January 8 through Wednesday, January 11, 2023. This notice contains information about significant items on the NCWM Committee agendas but does not include all agenda items. As a result, the items are not consecutively numbered.

Department of Commerce (DOC)

• On December 9, 2022, the Department of Commerce (DOC)’s International Trade Administration announced the United States- Mexico-Canada Agreement (USMCA) Secretariat received a Consent Motion to Terminate Panel Review from Hogan Lovells US LLC on behalf of Evraz Inc. NA in the above-mentioned dispute. As a result, and pursuant to Rule 75(2) of the USMCA Rules of Procedure for Article 10.12 (Binational Panel Review), the USMCA dispute USA-CDA-2022-10.12-01 has been terminated effective December 9, 2022.
• DOC is amending the Export Administration Regulations (EAR) by adding thirty-six entities to the Entity List. These entities have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the destinations of the People’s Republic of China  and Japan.
• DOC continues to find that Huantai Dongyue International Trade Co., Ltd, Shandong Dongyue Chemical Co., Ltd., Zhejiang Yonghe Refrigerant Co., Ltd., and Zhejiang Sanmei Chemical Ind. Co., Ltd. made no shipments during the period of review (POR), August 1, 2020, through July 31, 2021.
• DOC determines that certain steel nails from the Sultanate of Oman were sold in the United States at less than normal value during the period of review (POR), July 1, 2020, through June 30, 2021.
• DOC preliminarily finds that Ningbo Dongxin High-Strength Nut Co., Ltd., is not eligible for a separate rate. The period of review is April 1, 2021, through March 31, 2022. Commerce is also rescinding the review with respect to Ningbo Zhongjiang High Strength Bolts Co., Ltd.. Interested parties are invited to comment on these preliminary results of review.
• DOC is amending its notice of final results for the 2020 administrative review of the countervailing duty (CVD) order on certain softwood lumber products from Canada.
• DOC determines that certain steel nails from the Sultanate of Oman were sold in the United States at less than normal value (NV) during the period of review (POR), July 1, 2020, through June 30, 2021.
• DOC preliminarily determines that countervailable subsidies are being provided to producers and exporters of multilayered wood flooring  from the People’s Republic of China. The period of review (POR) is January 1, 2020, through December 31, 2020. Interested parties are invited to comment on these preliminary results of review.

If you have questions about these updates, contact our Diaz Trade Law attorneys at info@diaztradelaw.com or call us at 305-456-3830.

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Licensing Exception for “Servicing and Replacement of Parts and Equipment” (RPL)

An export license under the EAR is not necessary if the License Exception for “Servicing and Replacement of Parts and Equipment” (“RPL”) applies. License Exception RPL is described under Part 740.10 of the EAR. RPL is known as a transaction-based exception because the availability/applicability of the exception is based on the terms of the transaction.

According to BIS guidance, the RPL License Exception may be used for the two following scenarios:

• Replacement Parts – This authorizes the export and reexport of replacement parts for the immediate repair of previously exported, reexported or foreign made equipment incorporating U.S. origin parts on a one-for-one replacement basis. It also authorizes the export and reexport of stock spare parts that were authorized to accompany the export of equipment.
• Servicing and Replacement – Replacements for defective or unacceptable U.S.-origin equipment. (a) The commodity or software to be replaced must have been previously exported or reexported in its present form under a license or authorization such as NLR. (b) No commodity or software may be exported or reexported to replace equipment that is worn out from normal use.

However, there are certain limitations which apply to the use of the RPL License Exception:

• Items that improve or change the basic design characteristics of the equipment upon which they are installed are not deemed to be replacement parts; and
• Obsolete parts that are being replaced must either be destroyed abroad or returned to the United States. (If the part was destroyed, it is a best practice to get a signed statement from the end-user confirming that the part was destroyed, ideally with proof of destruction from the scrap yard or recycling facility).

RPL is eligible for all legally exported, reexported, and foreign purchased items, even if the original item was not shipped under a license at the time of exportation. So, if an export license was not previously required for the entire equipment, but an export license is now required for that equipment, the RPL License Exception could result in exporters not needing an export license for the current part shipment. Furthermore, exporters should note that when using the RPL License Exception, stating on the underlying ECCN in EEI filings is mandatory.

What You Can Do

Exporters have significant responsibilities to ensure compliance, to avoid penalties and/or jail time (i.e., your compliance manager deserves a raise!). Proper adherence to EAR requirements ensures that your business contributes to safeguarding U.S. national security and avoiding costly penalties. Many U.S. businesses have paid hefty civil penalties for violating U.S. export control laws. L3Harris Technologies, for example, was fined $13 million for illicitly exporting defense technology and software. For more examples of costly civil and criminal penalties, check out BIS’ latest Don’t Let This Happen to You! Publication.

If you are exporting goods subject to EAR, we propose you should:

• Develop an effective export compliance plan.

A key foundation of proactive and effective export compliance requires the development of an export compliance plan. An export compliance plan establishes a set of procedures for your organization to ensure that everyone is on the same page about how standard processes work, who is responsible for what, how to identify violations, what to do when violations occur, etc. An export compliance plan helps build consciousness in your organization that compliance is critical – both to avoid costly penalties and also to protect national security. Diaz Trade Law helps exporters create export compliance manuals that help prove you have a process in place to classify your merchandise correctly, vet your customers and ensure you can prove you can take compliance seriously and implement all of the important great weight mitigating factors. Diaz Trade Law has significant experience in developing and enhancing export compliance plans for organizations. Additionally, Diaz Trade Law can assist your business in auditing and improving your current plan so that it is in its best shape.

• Engage in regular export compliance training.

A foundation of a strong export compliance program is export compliance training. Training is important because it (1) ensures that all employees understand the export regulations and reinforces internal policies and procedures, (2) demonstrates to federal government agencies that your business is proactive about export compliance, and (3) avoids your business from being subject to costly penalties and even criminal liability. Fortunately, export compliance training can be highly tailored to meet your company’s needs. All of your training events include assessments for comprehension, certificates for successful participation, and ample opportunities for Q&A. For your next export compliance training event, trust Diaz Trade Law to provide highly-effective, engaging training.

• Thoroughly vet your proposed export transactions

Unsure whether a proposed export transaction violates the EAR? Diaz Trade Law has significant experience vetting your potential transaction against U.S. export control laws. Through research and due diligence, Diaz Trade Law ensures that your transaction won’t get you in trouble later down the road.

• Request authorization when necessary

BIS export authorization is required for many export transactions of controlled goods. Diaz Trade Law has significant experience in vetting proposed transactions to determine whether BIS authorization is required. Furthermore, Diaz Trade Law assists clients by filing BIS export license applications on their behalf on BIS’ SNAP-R portal.

• Engage in mitigation and corrective actions.

If your business has violated U.S. export control laws, there is a lot you can do to mitigate penalties and prevent future violations. Diaz Trade Law has significant experience representing businesses in dealing with the U.S. Commerce Department’s Bureau of Industry & Security and the Census Bureau. Specifically, Diaz Trade Law has successfully assisted clients in (1) submitting voluntary self-disclosures to mitigate penalties, (2) negotiated agreements with BIS and Census, and (3) built corrective action systems to help ensure that your business does not make the same violation again.

Contact Us

Diaz Trade Law has significant experience in a broad range of export compliance matters. To learn more about the services we offer, contact us at info@diaztradelaw.com or call us at 305-456-3830.