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This Month in International Trade - August 2014

September 8, 2014


1) OFAC Changes Its Mind on Aggregate SDN Ownership

On August 13th, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) updated its 2008 guidance regarding how to treat entities potentially owned or controlled by Specially Designated Nationals (SDNs). While the new guidance confirms long-standing OFAC positions, it also reverses OFAC's recent guidance with respect to how to address the aggregation of SDN ownership interests in an entity.

OFAC's new guidance reaffirms that all entities owned 50 percent or more by an SDN, directly or indirectly, are considered designated by operation of law and must be treated as SDNs subject to the same restrictions as the person by which they are owned.

Importantly, however, the new guidance goes further. Reversing earlier guidance issued in the form of Frequently Asked Questions on the Russia/Ukraine sanctions, OFAC has now extended this guidance to aggregate ownership, indicating that if an entity is 50 percent or more owned "in the aggregate, directly or indirectly … by one or more blocked persons" it is considered to be an SDN.

In a revised set of Frequently Asked Questions issued contemporaneously, OFAC made this point more explicitly: "On August 13, 2014, OFAC indicated in its revised 50 Percent Rule guidance that OFAC's 50 Percent Rule applies to entities owned 50 percent or more in the aggregate by one or more blocked persons. Accordingly, if Blocked Person X owns 25 percent of Entity A, and Blocked Person Y owns another 25 percent of Entity A, Entity A is considered to be blocked." Aggregation applies across sanctions programs.

In its FAQs, OFAC issued several additional clarifications. First, "indirect" ownership for purposes of the 50 Percent Rule means entities that are owned through another entity or entities that are 50 percent or more owned in the aggregate by the blocked persons. OFAC provided five examples to illustrate how this indirect ownership rule works in practice.

Second, OFAC clarified that if SDNs divest their ownership interest in another entity in a transaction entirely outside U.S. jurisdiction such that the SDN ownership is now less than 50 percent, the now-divested entity is no longer considered to be an SDN by operation of law. If the property comes within the United States (or within the control of a U.S. person) before divestment however, it would remain blocked because OFAC does not recognize subsequent unlicensed transfers of blocked property.

Finally, OFAC clarified that its 50 Percent Rule applies only to certain sanctions programs. OFAC expressly identified Cuba and Sudan as having broader definitions of what entities were considered to be blocked by operation of law.

OFAC provided no transition period, general authorization to unwind involvement in now potentially prohibited transactions, or any guidance regarding how to treat interactions with newly designated entities. As such, clients should contact Crowell with any questions they might have on this modification to SDN ownership policy.

For more information, contact: Alan Gourley, Cari Stinebower, Salomé Cisnal de Ugarte, Chris Monahan, Dj Wolff

2) CBP Changes Policy on Post-importation Refund Claims for Preferential Tariff Treatment

In a dramatic change for importers, CBP has limited the methods importers may use to claim post-importation refunds under preferential tariff programs. Previously, importers have used a variety of mechanisms to make post-entry refund claims including Post-Entry Amendments (PEAs), Post Summary Corrections (PSCs), post-importation claims pursuant to 19 U.S.C. § 1520(d), and protests filed pursuant to 19 U.S.C. § 1514. Now, CBP will no longer allow importers to use protests as a mechanism for making refund claims under preference programs. 

Citing Xerox Corp. v. U.S., F. 3d 1356 (2005) and Corrpro Companies, Inc. v. U.S., 433 F.3d 1360 (2006), CBP stated that the failure to claim preference timely does not give rise to a right to protest. As such, refund claims filed after liquidation will not be treated as protests under 19 U.S.C. § 1514, nor treated as evidence warranting reliquidation under 19 U.S.C. § 1501. 

CBP's new policy for seeking duty refunds under preference claims if such claims are not made at the time of importation is as follows:

1. For preference programs that contain a post-importation provision by law, a 1520(d) post-importation claim is the only mechanism to seek preference.

2. For preference programs that do not have a post-importation provision, importers may only amend unliquidated entries by utilizing PEA or PSC procedures.

The below table was provided by CBP's Trade Agreements Branch to show which preference programs have 19 USC 1520(d) available and which do not.

19 USC 1520(d)


CAFTA-DR; Chile FTA; Colombia TPA; Korea FTA; NAFTA; Oman FTA; Panama TPA; Peru TPA

AGOA; Australia FTA; Bahrain FTA; CBERA; CBTPA; Civil Aircraft Agreement; GSP; Insular Possessions; Israel FTA; Uruguay Round Concession on Intermediate Chemicals for Dyes; Jordan FTA; Morocco FTA; Pharmaceutical Products Agreement; Singapore FTA

Clients should contact Crowell with any questions they might have on this change.

For more information, contact: John Brew, Jini Koh, Julia Rieper, Edward Goetz

3) USTR Seeks Industry Feedback on Global Trade Barriers and China's WTO Compliance

In two Federal Register Notices published on August 15th, the Office of the U.S. Trade Representative(USTR) called for industry feedback on global trade barriers and China's WTO compliance. Information collected will be integrated into two key reports published by USTR: the National Trade Estimate (NTE) Report on Foreign Trade Barriers, and USTR's annual report on whether or not China is complying with its World Trade Organization (WTO) commitments.

Both reports are important to U.S. firms and workers seeking to compete in the global economy. The NTE is used to support the efforts of U.S. government officials to enforce U.S. trade laws and strengthen the rules-based trading system. In order to focus on the most significant foreign trade barriers, active private sector involvement is necessary to determine which trade restrictions to include in the report.

Each year the USTR conducts a review on whether or not China is compliant with the concessions and other commitments it made when it entered the WTO in December 2001.  USTR has frequently criticized Beijing for not following through on its obligations and seeks information from U.S. businesses that are trading with and/or investing in China to aid them in holding the Chinese accountable. The information received will be reviewed by USTR's China Enforcement Task Force and will be used to highlight areas of greatest concern for USTR enforcement efforts.

Comments and concerns regarding both subjects may cover the entire international trade spectrum: barriers stemming from subsidies, standards and technical regulations, government procurement, trade-related investment measures, and general rule of law issues, as well as anything else that will be helpful. 

The deadline for NTE comments is October 29th, while feedback on the China report is needed by September 17th

In addition to comments, there is a hearing scheduled on Chinese WTO compliance on October 1st in Washington, D.C. Persons wishing to testify at the hearing must provide written notification of their intention, as well as a summary of their testimony, by September 17th. Notifications of intent to testify and written comments should be submitted electronically at

Companies should contact Crowell with any questions they might have or to seek assistance with submitting comments. Crowell's experienced attorneys can help make your voice heard on these important issues.

For more information, contact:  Jonathan (Josh) Kallmer, Edward Goetz

4) Treasury Proposes New Transparency Rule to Identify "Beneficial Owners" of Accounts – Comments Due by October 3rd

The Financial Crimes Enforcement Network (FinCEN), published a Notice of Proposed Rulemaking (NPR) to amend the Bank Secrecy Act (BSA) with a new Customer Due Diligence (CDD) requirement for certain Financial Institutions (FI) to identify and verify the identity of beneficial owners of legal entity customers. 

This long-awaited NPR is the result of the Announced Notice of Proposed Rule Making, published on February 29, 2012, and subsequent industry sector round tables, and is designed to strike a balance between law enforcement's desire for additional beneficial ownership information and a reasonable burden on financial institutions to collect and maintain additional beneficial ownership information. Treasury Secretary Jack Lew acknowledged the NPR sounds very technical, but that it is necessary because "banks and brokerages often do not know the identity of the people behind the businesses that open accounts." He added, "This makes it easier for financial criminals, terrorist financiers, and sanctions busters to move and launder their dirty money through anonymous shell companies, front companies, and other types of legal entities." This NPR is intended to establish a single set of requirements rather than leaving the CDD process up to individual industry sectors to develop and define. 

A beneficial owner is "the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement." Although the NPR requires an FI to verify the identity of the beneficial owner, it does not require the verification of their status as beneficial owners. This requirement is designed to provide law enforcement with additional information needed for investigation purposes while limiting additional burdens on covered financial institutions. 

Invoking FinCEN's incremental rule making authority, the proposed rule will be limited to FIs with Customer Identification Programs (CIP). These include banks; brokers or dealers in securities; mutual funds; and futures commission merchants and introducing brokers in commodities.

An additional aspect of this change is Treasury's desire to harmonize what it considers the four "pillars" of Customer Due Diligence within existing Anti-Money Laundering (AML) programs. The beneficial ownership proposal is one of these. The others are:

  1. identifying and verifying the identity of customers;
  2. understanding the nature and purpose of customer relationships; and
  3. conducting ongoing monitoring to maintain and update customer information and to identify and report suspicious transactions. 

Number (1) is already part of every CIP requirement, so AML program requirements would be amended to include numbers (2) and (3). FinCEN believes these two requirements are substantively the same as those included within regulations or rules issued by federal functional regulatory agencies and self-regulatory organizations, and that formalizing these in AML programs will not add or change the covered FIs obligations.

Comments on this interim final rule may be submitted here (green tab on the top right of the page) on or before October 21st, 2014. 

Crowell's attorneys can advise and assist FIs in how to best advocate their positions.

For more information, contact: Cari Stinebower, Edward Goetz

5) White House Eases Policy on Registered Lobbyists Serving on Some Federal Advisory Boards

In an about face driven by a court ruling, the Obama Administration is allowing registered lobbyists to once again serve on some federal advisory boards so long as they are representing a client. Lobbyists not representing a specific interest are still banned from serving.

The U.S. Court of Appeals for the D.C. Circuit reversed and remanded a lower court ruling that dismissed the complaint of several lobbyists who claimed that the Administration's ban on lobbyists serving on Federal Advisory Boards violated the First Amendment. The appeals court held that because trade panels "exist for the very purpose of reflecting viewpoints of private industry," the lower court should reexamine the lobbyists' First Amendment claims.

The new policy changes the 2010 policy enacted by the Executive Branch to limit the influence of lobbyists in government decision-making. The First Amendment lawsuit driving the change was tied to industry Trade Advisory Committees at the U.S. Trade Representative (USTR) and the Commerce Department, but could also apply to other agencies.

For more information, contact: John Brew, Brian Gatta, Edward Goetz


Agency Enforcement Actions

Bureau of Industry and Security (BIS)

On August 1st, BIS added one entity to the U.S. Entity List.  This same entity was also sanctioned by OFAC in July.

Gatewick LLC agreed to pay a civil penalty of $40,000 for allegedly aiding the shipment of 2,300 computer motherboards to Iran in February 2009. It was charged with conspiracy to violate export regulations; causing, aiding, or abetting an unlicensed export; and acting contrary to the terms of a denial order. Gatewick allegedly plotted the export with Mahan Airways, an Iranian entity that has been under a denial order since March 2008. Gatewick is also barred from participating in any transactions covered by the Export Administration Regulations for up to seven years.

Office of Foreign Assets Control (OFAC)

Branch Banking & Trust Co. (BB&T), a U.S. bank, settled potential civil liability for one apparent violation of the Sudanese Sanctions Regulations by agreeing to remit $19,125 to a customer in Sudan. On June 1, 2011, BB&T received instructions to process a $20,000 funds transfer on behalf of its customer, destined for a third-country company's account at a foreign financial institution. BB&T's interdiction software stopped the payment for review due to a name in the payment details that appeared to match an entry on OFAC's List of Specially Designated Nationals and Blocked Persons (the SDN List). During the course of BB&T's investigation of the potential name match, the bank determined that the individual was a Sudanese national but failed to request additional information, such as a physical address. After determining that the name was not an SDN List match, a BB&T compliance specialist added a reference in the payment details that included, inter alia, "NATIONALITY: SUDANESE" and then approved the wire. When BB&T's interdiction software rescreened the transaction it failed to generate an alert because the software did not contain the word "Sudanese." After BB&T processed the transaction, the bank's customer notified it that the individual referenced in the payment details was located in Omdurman, Sudan, and that the payment was for merchandise being shipped to Sudan.

Customs and Border Protection (CBP)

Five defendants pleaded guilty in Federal District court to conspiracy to smuggle aluminum extrusions from China into the United States in order to avoid paying antidumping and countervailing duties. The defendants, one of which included PRP Trading Corporation, were indicted by a grand jury after an investigation by Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HSI) and CBP's Import Specialist Branch. The indictment stated that the defendants attempted to smuggle the aluminum extrusions by passing false and fraudulent invoices and documents through the San Juan CBP customhouse.

United States District Court – Northern District of Illinois

On August 21st, one of two men charged with engaging in "public relations, political consulting and lobbying" U.S. officials to lift sanctions against Zimbabwean President Robert Mugabe and other top government officials was sentenced to 7.5 months in prison. The other individual has pleaded "not guilty" and is awaiting trial. OFAC does not consider lobbying activities as included in the General License for legal services under the Zimbabwe Sanctions Regulations.

Financial Crimes Enforcement Network (FinCEN) – Department of the Treasury

FinCEN reached an agreement with Mr. George Que, a former VIP Services Manager at the Tinian Dynasty Hotel & Casino in the Northern Mariana Islands, to permanently bar him from working in financial institutions as a result of his willful violations of the Bank Secrecy Act (BSA). For at least a year, Mr. Que helped high-end gamblers avoid detection of large cash transactions by agreeing not to file either Currency Transaction Reports (CTRs) or Suspicious Activity Reports (SARs) that were required under the BSA. Mr. Que will also pay a $5,000 civil money penalty.

FinCEN imposed a civil money penalty against BPI, Inc., a New Jersey money services business (MSB), for willful and repeated violations of the Bank Secrecy Act (BSA). BPI has admitted that its conduct violated the BSA and has consented to a civil money penalty in the amount of $125,000.  Despite being repeatedly cited in 2005 and 2006 for serious concerns with its anti-money laundering (AML) program by examiners, BPI failed to address these and other noted deficiencies. A 2011 exam again discovered these same deficiencies more than 5 years after federal and state authorities had first issued warnings and corrective actions to BPI. In addition to deficiencies with its internal controls, independent testing, and training, examiners found that, prior to the 2011 examination; BPI had never filed a single Suspicious Activity Report (SAR). Additionally, BPI employees also allowed customers to conduct transactions without verifying and retaining required identification information and also allowed customers to conduct money transfers by using expired identification documents.

For more information, contact: Michael Appel, Edward Goetz

Russia-Ukraine Update: Canada, Switzerland, and Australia Expand Sanctions List; Russia Bans Western Food Imports; No New U.S. or EU Sanctions (Yet)

On August 5th, Switzerland announced that 26 entities and 18 individuals had been added to its watch list, which is designed to prevent individuals and companies subject to sanctions by the EU from using financial intermediaries in Switzerland to circumvent restrictions. All 44 had been previously sanctioned.  

On August 6th, Canada amended its Special Economic Measures Regulations for both Ukraine and Russia, adding 5 individuals and 16 entities  to the former and 14 individuals and 6 entities to the latter. 

  • Three of the Russian entities were banks added to Canada's sectoral sanctions list (preventing new debt financing and/or raising new equity from Canada);
  • Two new individuals, both Russian, were added that had not been sanctioned before. They were Vladimir Georgyevich Kulishov, First Deputy Director of the Russian Federal Security Service, Chief of the Border Guards, and Yuriovych Travkin, an officer in the Main Intelligence Directorate of the General Staff of the Armed Forces of the Russian Federation.

On August 7th, in response to Western sanctions on Russia over the crisis in Ukraine, Moscow announced a ban on certain food imports for a period of 12 months.

On August 27th, Switzerland, having focused its previous efforts on ensuring that it was not used to circumvent EU sanctions, announced a variation on sectoral sanctions with a similar motivation. 

  • Five banks subject to EU sectoral sanctions (Sberbank, VTB Bank, Gazprombank, Vnesheconombank and Rosselkhozbank) are now required to seek authorization for any new financial instruments and authorizations will only be provided if the instrument is in line with the averages for the last three years. The Swiss-based subsidiaries of the five banks are exempt from this requirement as long as they are not acting on behalf of, or on the instructions of their parent companies. Finally, secondary trading in financial instruments newly issued outside Switzerland and the EU will be subject to a duty to notify.
  • On the same date, Switzerland also added 11 individuals or entities to its sanctions list (all had been previously sanctioned).

On August 30th, Australia added 63 individuals and 21 entities to its sanctions list effective the following day. Only one of the individuals was new (not previously sanctioned). This was Alexander Karaman, the New Foreign Minister of the 'People's Republic of Donetsk.' He replaced Ekaterina Gubareva around August 16th and is a Transnistria native who previously served as Deputy Prime Minister on Social Policy.

Australian Prime Minister Abbott also announced his intention on September 1st to push for legislative authority to expand sanctions. These would parallel U.S., EU and Canadian efforts and would include:

  • restrictions on arms exports;
  • restrictions on the access of Russian state-owned banks to Australian capital markets;
  • preventing the export of goods and services for use in Russia's oil exploration or production; and
  • restrictions on Australian trade and investment in Crimea.

Although no new U.S. or EU sanctions were levied against Russia, EU leaders ended the month with new threats of expanding its sanctions program due to increased Russian involvement in the conflict in eastern Ukraine.

For more information, contact: Alan Gourley, Cari Stinebower, Salomé Cisnal de Ugarte, Chris Monahan, Dj Wolff, Edward Goetz

Iran Update: Nuclear Negotiations Resume in September; Iran Misses Important 'Nuclear Transparency' Deadline; U.S. Designates Multiple Entities for Violating Iranian Sanctions

The next round of nuclear negotiations is expected to coincide with the U.N. General Assembly that begins September 16th. The talks will be conducted by senior foreign ministry officials and could possible extend into the annual assembly of world leaders, which starts September 24th, at the ministerial level. In an attempt to narrow the differences between the two sides, several bilateral talks were held between the major powers and Iran this past month. No details were released on any of the meetings.
On August 27th, diplomatic sources said Iran appeared to have missed the deadline it adopted in a Joint Statement made with the International Atomic Energy Agency (IAEA) in May, for implementing five 'practical measures' for nuclear transparency. The measures were to be completed by August 25th. The IAEA is investigating possible military dimensions of Iran's nuclear program and completion of the five measures was designed to jumpstart the process. These activities are pursuant to the Framework for Cooperation signed in November of last year and are separate from the Joint Plan of Action (JPOA).

On August 29th, the U.S. demonstrated it would continue to rigorously enforce Iranian sanctions during this extended JPOA period, as the Treasury's Office of Foreign Assets Control (OFAC) announced the designation of multiple individuals, entities, and vessels under different Iran-related authorities, targeting Iran's missile and nuclear programs, sanctions evasion efforts, and terrorism support. At the same time, the U.S. Department of State listed four Iranian entities for supporting the proliferation of Weapons of Mass Destruction (WMD) or their means of delivery and two entities for engaging with the energy or petrochemical sectors of Iran.  

For more information, contact: Cari Stinebower, Dj Wolff, Edward Goetz

CIT Decision Reversed on Canadian Screw Duties; Lower Tariff Rate to be Re-evaluated

On August 4th, in a 2-1 opinion, the U.S. Court of Appeals for the Federal Circuit vacated and remanded a Court of International Trade (CIT) decision on the proper tariff classification of imports of Canadian screws. The majority said the CIT failed to examine the commercial use of the screws when examining the proper tariff classification, thereby erasing the decision that allowed GRK Canada to import the screws at a 6.2 percent tariff rate.

The importer brought suit in 2009, after U.S. Customs and Border Protection applied a 12.5 percent duty to the screws, deeming the product to be classified under the HTS as "other wood screws." GRK argued to the CIT that the goods should be classified under the HTS as "self-tapping screws" with a duty of only 6.2 percent. The CIT said that either classification could be appropriate, then proceeded to apply a rarely used provision of HTS interpretation (HTS General Rule of Interpretation 3(c)), which states that goods classifiable under two provisions shall be classified under the HTS provision that occurs later in numerical order. In this case, the CIT result was the lower of the two duties.

The Federal Circuit's majority opinion examined the relationship between two different methods of tariff classification:  i.e., whether the competing tariff provisions should be considered "eo nomine," provisions, which focus only on the name of the goods at issue, or "principal use" provisions, which consider how the good is used. Although eo nomine provisions generally do not call for a use analysis, the Court said an exception exists when the use is included within the name of the product.

In his dissent, Judge Jimmie V. Reyna said, "The majority's articulation of when use should be considered in an eo nomine analysis effectively converts eo nomine provisions into use provisions. The majority stated that eo nomine provisions may 'require an analysis of the intended use of products' but does not explain when such an analysis is required or even how 'intended use' differs from principal use."

The case will now be reconsidered by the CIT based on the Federal Circuit's opinion.

Clients should contact Crowell with any questions they might have on this case.

For more information, contact: John Brew, Jini Koh, Julia Rieper, Edward Goetz

BIS Eases Export Licensing Requirements to Mexico

The Commerce Country Chart was recently updated to remove the X (i.e., requirement for an export license) for Mexico for reasons of National Security (Column 2) and Regional Stability (Column 2). 

This easement in licensing requirements is possible because of Mexico's recently granted membership in three multi-lateral arms control regimes: the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, the Australia Group (control of chemical and biological weapons and technologies), and the Nuclear Suppliers Group.

This move signifies Mexico's commitment to the arms control policies of these groups, enabling the U.S. to remove the need for an export license under many conditions.

For more information, contact: Chris Monahan, Edward Goetz

Bonded Carriers Need Proof of Delivery; Company Liable for Missing Goods

Although bonded carriers have always been responsible for ensuring "transportation and exportation"(T&E) entries are delivered to their exporting location, a Court of Appeals for the Federal Circuit (CAFC) three-judge panel ruled on July 28th that carriers are also liable for duties and taxes if they cannot provide documents proving the items were actually exported.

This precedential case involved a 2001 shipment of three apparel entries from China transported from Los Angeles to the Port of Laredo in Texas. A customs broker stamped the T&E entry forms, but did not transport the merchandise to the export lot and his log book did not contain the date of exportation for each entry. Further, U.S. Customs and Border Protection (CBP) never inspected, nor took possession of the merchandise. CBP subsequently conducted a post-audit in 2002 and required the carrier to provide proof of exportation, but found the Mexican import forms provided by the carrier to be fakes. CBP then issued notices for liquidated damages against the carrier and demanded payment for duties, taxes, and fees owed on the subject merchandise.

The government filed an action in the Court of International Trade (CIT) for the duties, taxes, and fees, and the CIT ruled in 2012 that the carrier was liable because it had a duty to ensure the items were either exported or "lawfully entered" into a warehouse or commerce within the U.S. The carrier appealed, arguing that it was only responsible for delivering the merchandise to the port of exportation, and was not liable for any losses occurring after that. In its opinion, CAFC stated that once the government has met its initial burden to prove that the subject merchandise was missing, the carrier's inability to provide satisfactory proof of exportation or any other evidence regarding the disposition of the merchandise exposed it to liability. Accordingly, CAFC affirmed the CIT decision.

It is important to note that while customs forms should be acceptable proof of delivery, they are not "conclusive." CBP may request other documentation such as delivery receipts or bills of lading.  The panel said export documents are acceptable proof because not having them could support a determination that the goods were never delivered.

Clients should contact Crowell with any questions they might have on this ruling.

For more information, contact: John Brew, Jini Koh, Julia Rieper, Edward Goetz

New Interim Final Rule Clarifies Use of Electronic Export Information Data – Comments Due by October 21st

The U.S. Census Bureau published an interim final rule on Friday, August 22nd amending the Foreign Trade Regulations (FTR) to clarify access and use of Electronic Export Information (EEI) data filed in the Automated Export System (AES).

Census revised section 30.60 of the FTR (Confidentiality of Electronic Export Information) as part of the implementation of the International Trade Data System (ITDS). The ITDS is intended to eliminate redundant information requirements and efficiently share information through a single portal system among the various agencies charged with enforcing U.S. international trade laws and regulations. 

The new rule does not impose any additional information requirements on exporters already required to provide information such as the exporter’s identification and detailed descriptions of the goods to be exported in their EEI filing. Instead, the new rule identifies data already collected under the authority of other federal agencies that will now be made available to authorized federal agencies via AES. This data is already traditionally shared among the relevant agencies to identify and prevent unauthorized exports, but is generally exempt from public disclosure. 

Revised section 30.60 now allows agencies to access and analyze the data directly in AES to evaluate national security threats and to evaluate trade statistics.  Census states that this rule will help ensure that authorized agencies have efficient and timely access to AES export data in order to protect U.S. interests and effectively enforce U.S. export controls.

Comments on this interim final rule may be submitted here (green tab on the top right of the page) on or before October 21, 2014. 

Clients should contact Crowell with any questions they might have on this rule or for assistance with submitting comments. 

For more information, contact: Lindsay Denault

FinCEN Updates List of Jurisdictions with Anti-Money Laundering and Counter-Terrorist Financing Deficiencies

The Financial Crimes Enforcement Network (FinCEN), on August 5th, 2014, updated its list of jurisdictions with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) deficiencies. 

This FinCEN Advisory is in response to decisions made on June 27th, 2014 by the Financial Action Task Force (FATF), a 36-member intergovernmental policy making body that establishes international standards to combat money laundering and counter the financing of terrorism and proliferation of weapons of mass destruction. The United States is a member.

The FATF advised its members to apply countermeasures when dealing with Iran and North Korea and to apply Enhanced Due Diligence (EDD) for transactions involving Algeria, Ecuador, Indonesia, and Myanmar due to lack of progress in addressing AML/CFT deficiencies. As a reminder for FIs, EDD measures are described in 31 CFR §1010.610(b) and (c). 

Additionally, the FATF has recognized Ethiopia, Pakistan, Syria, Turkey, and Yemen for their progress in substantially or largely addressing their FATF action plans and are now included in its "Improving Global AML/CFT Compliance: On-going Process" document.

FIs should also be aware of a number of jurisdictions that have developed action plans with the FATF because of deficiencies in their AML/CFT regimes. These are Afghanistan, Albania, Angola, Argentina, Cambodia, Cuba, Ethiopia, Iraq, Kuwait, Lao PDR, Namibia, Nicaragua, Pakistan, Panama, Papua New Guinea, Sudan, Syria, Tajikistan, Turkey, Uganda, Yemen, and Zimbabwe.

Removed from the FATF-listing and monitoring process are Kenya, Kyrgyzstan, Mongolia, Nepal, and Tanzania. This is due to the significant progress these countries have made in addressing all or nearly all of their strategic AML/CFT deficiencies. 

When dealing with countries with action plans or those that have seen improvement, FIs are reminded to maintain their vigilance in accordance with 31 CFR §1010.610(a).

Clients should contact Crowell with any questions they might have on ensuring their compliance programs meet the requirements of the Bank Secrecy Act(BSA) for dealing with jurisdictions that have AML/CTF deficiencies.

For more information, contact: Cari Stinebower, Edward Goetz

FCPA Case Asking "Who is a Foreign Official" Loses 11th Circuit Appeal; Defendants File Supreme Court Petition

Attorneys for two ex-executives of Terra Telecommunications Corp, who were found guilty of violating the Foreign Corrupt Practices Act(FCPA)(and related charges) for bribing officials at Haiti's state-owned telecom company, filed a petition with the U.S. Supreme Court after losing an appeal in the U.S. Court of Appeals for the Eleventh Circuit in May. In becoming the first federal appeals court to define "instrumentality" as it is used in the FCPA's definition of "foreign official," the Eleventh Circuit endorsed a broad definition, rejecting the defendants' arguments that only entities that perform "traditional, core government functions" can quality as instrumentalities.

In a case of first impression, the Eleventh Circuit held that any entity can qualify as an "instrumentality," even an entity performing commercial services, so long as the entity is (1) "controlled by the government of a foreign country" and (2) "performs a function the controlling government treats as its own."

The court then offered a number of non-exclusive factors that courts and juries should consider to "decide if the government 'controls' an entity" including:

  • the foreign government's formal designation of that entity;
  • whether the government has a majority interest in the entity;
  • the government's ability to hire and fire the entity's principals;
  • the extent to which the entity's profits, if any, go directly to the government, and, by the same token, the extent to which the government funds the entity if it fails to break even;
  • and the length of time these indicia have existed.

The defendants' attorneys argue that the Eleventh Circuit's ruling creates confusion over the reach of the FCPA, and hope for clarity from the Supreme Court. However,the chances of being selected as one of the 75-80 cases the Court will hear during its nine-month term are slim.

Clients should contact Crowell with any questions they might have regarding the FCPA, including how to establish an effective FCPA compliance program.

For more information, contact: Cari Stinebower, Adelicia (Addie) Cliffe, Edward Goetz

August OFAC Regulatory Action

On August 11th, OFAC issued an amended Sudan General License No. 1A (GL 1A). General License 1, issued in April of 2013, authorized certain academic and professional exchange activities between the United States and Sudan, which are otherwise prohibited by the Sudanese Sanctions Regulations (31 C.F.R. Part 538).

GL 1A expands the definition of "U.S. academic institutions" to include their third-country branch campuses, and the authorizations for U.S. academic institutions as defined now include their contractors. 

GL 1A authorizes U.S. academic institutions to engage in activities involving Sudanese nationals that are necessary for such nationals to apply to U.S. academic institutions and for authorized professional training seminars. Such activities may include accepting payments for tuition, admission application fees, and document certification or warehousing fees. U.S. academic institutions located in the United States may engage in transactions with Sudanese nationals authorized by this general license before a non-immigrant student visa is issued to such nationals. 

Finally, GL 1A also authorizes U.S. financial institutions to process transfers of funds by Sudanese nationals to pay fees and expenses (including tuition, living expenses, and enrollment fees) to enable Sudanese nationals to participate in authorized academic exchange programs (in the United States or at a third-country branch campus) or authorized professional training seminars.

For more information, contact: Cari Stinebower, Chris Monahan, Dj Wolff, Edward Goetz

Upcoming Government – Industry Meetings

Department of Commerce

The next meeting of the Advisory Committee on Supply Chain Competitiveness is scheduled for September 10th (1 – 3 pm) and 11th (9 am – 4 pm) in Washington, D.C. The purpose of the Committee is to advise the Secretary of Commerce on the necessary elements of a supply chain that supports U.S. export growth and national economic competitiveness.

Both meetings are open to the public on a first-come, first-served basis. 

  • Under consideration are major-competitiveness related topics, including trade and competitiveness; freight movement and policy; information technology and data requirements; regulatory issues; and finance and infrastructure.
  • The final agenda will be posted here at least one week prior to the meeting.

The next meeting of the Transportation and Related Equipment Technical Advisory Committee will begin at 9:30 am, September 10th, 2014, in Washington, D.C. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to transportation and related equipment or technology.

A limited number of seats will be available during the public session of the meeting. Reservations are not accepted.  To the extent time permits, members of the public may present oral statements to the Committee. Written statements may be submitted at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the materials should be forwarded prior to the meeting to Ms. Yvette Springer at

  • This is a partially closed meeting.
  • Public Session:
    • Welcome and Introductions.
    • Status reports by working group chairs.
    • Public comments and Proposals.
  • Closed Session

The next meeting of the Materials Technical Advisory Committee will begin at 10:00 am on September 11th, 2014, in Washington, D.C. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to materials and related technology.

A limited number of seats will be available during the public session of the meeting. Reservations are not accepted.  To the extent time permits, members of the public may present oral statements to the Committee.  Written statements may be submitted at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the materials should be forwarded prior to the meeting to Ms. Yvette Springer at

  • This is a partially closed meeting.
  • Public Session:
    • Opening Remarks and Introductions.
    • Remarks from Bureau of Industry and Security senior management.
    • Presentation on recycling composites.
    • Presentation on Department of Homeland Security outreach to industry.
    • Report from working groups: Public Domain Issues; Composite Working Group; Biological Working Group; and the Pump/Valves Working Group
    • Report on regime-based activities.
    • Public Comments and New Business.
  • Closed Session

The next Regulations and Procedures Technical Advisory Committee (RPTAC) will begin at 9:00 am on September 16th, 2014, in Washington, D.C. The Committee advises the Office of the Assistant Secretary for Export Administration on implementation of the Export Administration Regulations (EAR) and provides for continuing review to update the EAR as needed.

  • This is a partially closed meeting.
  • Public Session
    • Opening remarks by the Chairman.
    • Opening remarks by Bureau of Industry and Security.
    • Presentation of papers or comments by the Public.
    • Export Enforcement update.
    • Regulations update.
    • Working group reports.
    • Automated Export System update.
  • Closed Session

The open session will be accessible via teleconference to 25 participants on a first come, first serve basis.  To join the conference, submit inquiries to Ms. Yvette Springer at no later than September 9th, 2014.

A limited number of seats will be available for the public session. Reservations are not accepted. To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate the distribution of public presentation materials to the Committee members, the Committee suggests that presenters forward the public presentation materials prior to the meeting to Ms. Springer via email.

U.S. Customs and Border Protection (CBP)

The 2014 Automated Commercial Environment (ACE) Software Developer (Technical) Meeting will be held in Washington, D.C. on October 9th, 2014, from 8:15 am – 4:00 pm (Registration opens at 7:30 am).

  • Topics: operational and technical changes related to Entry Summary Accounts and Revenue (ESAR), Cargo Release (including the PGA Message Set), Export Manifest Processing, and E-Bond.

Registration is required for this event.

  • All CBP, PGA and Trade participants must pre-register to gain access to the USDA building. Participants may register here.
  • Registration for this event is free.
  • Registration will close on Friday, October 3, 2014 at 5:00 PM EDT.
  • Per USDA regulations, on-site registration will not be available.

Office of Foreign Assets Control (OFAC)

OFAC’s 2014 Financial Symposium will be held in the Walter E. Washington Convention Center in Washington, DC on October 7th, 2014, from 8 am – 5 pm.

Registration is required for this event.

  • Participants may register here.
  • The registration link also contains additional information.  

Please note that online registration does not automatically confirm your attendance. A separate email will be sent containing your registration status.

  • Travel arrangements should not be made until you have received a second email confirming your status.
  • OFAC is asking that attendance be limited to two(2) persons per institution due to space limitations.

Companies should contact Crowell with questions regarding any of these meetings or with assistance in submitting comments. 

For more information, contact: Brian Gatta, Edward Goetz

*      *      *

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

John B. Brew
Partner – Washington, D.C.
Phone: +1.202.624.2720
Edward Goetz
Manager, International Trade Services – Washington, D.C.
Phone: +1.202.508.8968
Alan W. H. Gourley
Partner – Washington, D.C.
Phone: +1.202.624.2561
David (Dj) Wolff
Partner; Attorney at Law – London, Washington, D.C.
Phone: +44.20.7413.1368, +1.202.624.2548