Addition of Certain Persons to the Entity List; Removal of Person From the Entity List Based on Removal Request; Implementation of Entity List Annual Review Changes

AGENCY:

Bureau of Industry and Security, Commerce.

ACTION:

Final rule.

SUMMARY:

This rule amends the Export Administration Regulations (EAR) by adding eighteen persons to the Entity List (Supplement No. 4 to Part 744) under nineteen entries. These persons have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States on the basis of § 744.11 of the EAR. These persons will be listed on the Entity List under China, Germany, Hong Kong, Ukraine, and United Arab Emirates. This rule also revises one entry under Germany to clarify the scope of the entry by providing two additional alternate addresses for the listed person. This rule further removes one entry under Canada as the result of a successful removal request. Finally, this rule notifies the public that the End-User Review Committee (ERC) has completed Annual Reviews of Afghanistan, Greece, India, Russia, and Ukraine and that no changes are being made to the Entity List as a result of these reviews. The Entity List provides notice to the public that certain exports, reexports, and transfers (in-country) to entities identified on the Entity List require a license from the Bureau of Industry and Security (BIS) and that availability of license exceptions in such transactions is limited.

DATES:

Effective Date: This rule is effective March 28, 2013.

FOR FURTHER INFORMATION CONTACT:

Karen Nies-Vogel, Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Fax: (202) 482-3911, Email: ERC@bis.doc.gov.

SUPPLEMENTARY INFORMATION:

Background

The Entity List (Supplement No. 4 to Part 744) notifies the public about entities that have engaged in activities that could result in an increased risk of the diversion of exported, reexported, or transferred (in-country) items to weapons of mass destruction (WMD) programs. Since its initial publication, grounds for inclusion on the Entity List have expanded to include activities sanctioned by the State Department and activities deemed contrary to the United States' national security or foreign policy interests, including terrorism-related activities and export control-related violations involving abuse of human rights. Certain exports, reexports, and transfers (in-country) to entities identified on the Entity List require licenses from BIS and are usually subject to a policy of denial. The availability of license exceptions in such transactions is very limited. The license review policy for each entity is identified in the License Review Policy column on the Entity List and the availability of license exceptions is published in the Federal Register notices adding persons to the Entity List. BIS places entities on the Entity List based on certain sections of part 744 (Control Policy: End-User and End-Use Based) of the EAR.

The ERC, composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote and all decisions to remove or modify an entry by unanimous vote.

ERC Entity List Decisions

Additions to the Entity List

This rule implements the decision of the ERC to add eighteen persons under nineteen entries to the Entity List on the basis of § 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The eighteen persons under nineteen entries consist of two entities in China, one entity in Germany, four entities in Hong Kong, one entity in Ukraine and eleven entities in the United Arab Emirates (U.A.E.). The ERC reviewed § 744.11(b) (Criteria for revising the Entity List) in making the determination to add these eighteen persons under nineteen entries to the Entity List. Under that paragraph, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that the persons have been involved, are involved, or pose a significant risk of being or becoming involved in, activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons may be added to the Entity List. Paragraphs (b)(1)-(b)(5) of § 744.11 include an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States.

The eighteen persons under nineteen entries being added to the Entity List under this rule have been determined by the ERC to be involved in activities that are contrary to the national security or foreign policy interests of the United States. One of the persons being added to the Entity List under this rule, Ukrspetexport, is located in Ukraine. Ukrspetexport, Ukraine's state-owned arms trader, exported military equipment to a country on the State Department's State Sponsors of Terrorism List. Therefore, pursuant to § 744.11(b) of the EAR, the ERC determined that Ukrspetexport knowingly and willfully engaged in activities contrary to US national security and foreign policy interests.

The ERC has reasonable cause to believe that the one person being listed under Germany, Manufacturers Equipment Organization (MEO), a company headquartered in Germany, assisted other persons already listed on the Entity List, specifically Christof Schneider and Schneider GMBH, in transactions involving items subject to the EAR. Mr. Schneider and his company were listed on the Entity List in a Federal Register Notice published July 21, 2009 (74 FR 35797) as a result of a February 5, 2009 indictment stemming from unlawful attempted shipments to Iran of petrochemical equipment. The consignee on the recent transaction, in which MEO assisted Schneider, also had links to the Iranian petrochemical industry. Based on Schneider's notorious activities, MEO's participation with Schneider in the export of items subject to the EAR to Iranian interests has led the ERC to determine that MEO engaged in activities contrary to U.S. national security and foreign policy interests and poses a high risk of involvement in violations of the EAR.

The ERC also has reasonable cause to believe that eight of the persons being added under this rule, all listed under the U.A.E., Afsari General Trading LLC, Ghasem Afsari, Mohamad Javad, Moh Khoman, aBensa FZ LLC, Alex Ardalan, Next Gulf Trading LLC and Dr. Artush Parsi, actively engaged with Iran in the trade of items subject to the EAR and actively misled U.S. exporters and the U.S. Government in an attempt to disguise their illicit activities. Specifically, the above-referenced persons took the following actions: they portrayed themselves as the ultimate consignees for items subject to the EAR that, during subsequent end-use checks (EUCs) conducted by BIS Special Agents, could not be located, claimed to have purchased the items on behalf of customers who in fact did not exist, and claimed to have purchased the items on behalf of customers who denied any relationship with any of the eight persons. Based on their actions and their known connections to Iran, the ERC has determined that these persons are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

The ERC further has reasonable cause to believe that three of the persons being listed under this rule, also located in the U.A.E., Liberty House Trading LLC, Hamid Rashed, and David Khayam, attempted to procure items subject to the EAR on behalf of entities in Iran that support the Iranian government's nuclear and missile programs. Additionally, these three persons actively misled U.S. exporters and the U.S. Government as to the true destination of those items. After refusing to allow BIS to conduct a post-shipment verification check (PSV), Liberty House Trading LLC began doing business under the name Baet Alhoreya Electronics Trading (Baet Alhoreya). BIS was eventually able to conduct a PSV at the offices of Baet Alhoreya, which was negative. Based on their actions, the ERC has determined that Liberty House, Baet Alhoreya and certain individuals employed by the company (i.e., Hamid Rashed and David Khayam) are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

Additionally, the ERC has reasonable cause to believe that the five persons being listed in six entries under China and Hong Kong, Giant Base Asia Limited, Jadeshine, Jadeshine Engineering HK Co, Jadeshine Engineering (HK) Co., and Jason Shuai, obtained a U.S.-origin laser system and provided it to the Chinese Academy of Launch Vehicle Technology (CALT), which is involved in the design, development or production of rocket systems for China. Pursuant to § 744.3(a)(3) of the EAR, a license is required for the shipment of any item subject to the EAR that will be used in the design, development or production of rocket systems by a Country Group D:4 country (including China). Therefore, based on their actions, the ERC has determined that these five persons are engaged in activities contrary to U.S. national security and foreign policy interests and pose a high risk of involvement in violations of the EAR.

Pursuant to § 744.11(b)(3) and (b)(5) of the EAR, the ERC determined that the above conduct raises sufficient concern that prior review of exports, reexports, or transfers (in-country) of items subject to the EAR involving these eighteen persons under nineteen entries being listed on the Entity List, and the possible imposition of license conditions or license denials, will enhance BIS's ability to prevent violations of the EAR. For the eighteen persons under nineteen entries being added to the Entity List, the ERC specified a license requirement for all items subject to the EAR and established a license application review policy of a presumption of denial. The license requirement applies to any transaction in which items are to be exported, reexported, or transferred (in-country) to such persons or in which such persons acts as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the eighteen persons under nineteen entries being added to the Entity List.

This final rule adds the following eighteen persons under nineteen entries to the Entity List:

China

(1) Jadeshine,

R1102 B Tainyuangang Center, Dong San Bei Lu Bing 2, Chaoyang District, Beijing, China;

(2) Jadeshine Engineering HK Co.,

Shanghai, China; and Langfang, China.

Germany

(1) Manufacturers Equipment Organization (MEO), a.k.a. the following one alias:

—MEO GMBH

P.O Box 501168, D-42904, Wermelskirchen, Germany; and

Neuenhaus 96, 42929, Wermelskirchen, Germany.

Hong Kong

(1) Giant Base Asia Limited,

Room 2205, 22/F, Kowloon Building, 555 Nathan Road, Hong Kong;

(2) Jadeshine Engineering (HK) Co.,

Room 702, Boss Commercial Centre, Ferry Street 38, Kowloon, Hong Kong;

(3) Jadeshine Engineering HK Co.,

G/F Blk C, 255 Tau Wai, DD 123 Lot, Yuen Long, Hong Kong;

(4) Jason Shuai, a.k.a. the following one alias:

—Jason Shine

Hong Kong.

Ukraine

(1) Ukrspetexport,

36 Degtiarivska Blvd., Ukraine 04119 Kyiv.

United Arab Emirates

(1) aBensa FZ LLC, a.k.a. the following one alias:

—BiotaGroup Company

Al Thuraya Tower 1, 9th Floor, Office 907, P.O. Box: 500097, Dubai, U.A.E.; and

Al Thuraya Tower 1, Media City, Dubai, U.A.E.;

(2) Afsari General Trading LLC,

Mezzanine Fl, No. M-7, Al Bakhit Centre, Abu-Bakr Rd, Deira, Dubai, U.A.E.; and

No. 405, Albakhit Centre, Abu-Bakr, AE-Dubai, U.A.E.; and

P.O. Box 40150, Al Bakhit Centre, Messanine Floor, M-7, Deira, Dubai, U.A.E.;

(3) Alex Ardalan,

Al Thuraya Tower 1, 9th Floor, Office 907, P.O. Box: 500097, Dubai, U.A.E.;

(4) David Khayam,

Apt #1811 Manchester Tower, Dubai Marina, Dubai, U.A.E.; and

PO Box 111831, Al Daghaya, Dubai, U.A.E.; and

Dubai Shopping Center, Office 13, Dubai, U.A.E.;

(5) Dr. Artush Parsi,

No. 75 Noor Mohammed Taleb Building, Opposite to Ascot Hotel, Khaleed-bin-Valid Rd, Bur Dubai, Dubai, U.A.E.; and

No. 7 Noor Mohammad Taleb Bldg. Opp. Ascot Hotel Khalid Bin Rd, Dubai, U.A.E.; and

No. 705, Noor Mohammad Taleb Bldg, Bin Valid Road, Dubai, U.A.E.; and

P.O. Box 122114, Dubai, U.A.E.; and

P.O. 111837, Dubai, U.A.E.;

(6) Ghasem Afsari,

No. 405, Albakhit Centre, Abu-Bakr, AE-Dubai, U.A.E.; and

P.O. Box 40150, Al Bakhit Centre, Messanine Floor, M-7, Deira, Dubai, U.A.E.; and

Mezzanine Fl, No. M-7, Al Bakhit Centre, Abu-Bakr Rd, Deira, Dubai, U.A.E.; and

No. 75 Noor Mohammed Taleb Building, Opposite to Ascot Hotel, Khaleed-bin-Valid Rd, Bur Dubai, Dubai, U.A.E.; and

No. 7 Noor Mohammad Taleb Bldg. Opp. Ascot Hotel Khalid Bin Rd, Dubai, U.A.E.; and

No. 705, Noor Mohammad Taleb Bldg, Bin Valid Road, Dubai, U.A.E.; and

P.O. Box 122114, Dubai, U.A.E.; and

P.O. 111837, Dubai, U.A.E.;

(7) Hamid Rashed,

Apt #1811 Manchester Tower, Dubai Marina, Dubai, U.A.E.; and

PO Box 111831, Al Daghaya, Dubai, U.A.E.; and

Dubai Shopping Center, Office 13, Dubai, U.A.E.;

(8) Liberty House Trading LLC, a.k.a. the following two aliases:

—Baet Alhoreya Electronics Trading; and

—Baet Alhoreya,

Apt #1811 Manchester Tower, Dubai Marina, Dubai, U.A.E.; and

PO Box 111831, Al Daghaya, Dubai, U.A.E.; and

Dubai Shopping Center, Office 13, Dubai, U.A.E. ;

(9) Moh Khoman,

No. 405, Albakhit Centre, Abu-Bakr, AE-Dubai, U.A.E.; and

P.O. Box 40150, Al Bakhit Centre, Messanine Floor, M-7, Deira, Dubai, U.A.E.; and

Mezzanine Fl, No. M-7, Al Bakhit Centre, Abu-Bakr Rd, Deira, Dubai, U.A.E.;

(10) Mohamad Javad,

No. 405, Albakhit Centre, Abu-Bakr, AE-Dubai, U.A.E.; and

P.O. Box 40150, Al Bakhit Centre, Messanine Floor, M-7, Deira, Dubai, U.A.E.; and

Mezzanine Fl, No. M-7, Al Bakhit Centre, Abu-Bakr Rd, Deira, Dubai, U.A.E.;

(11) Next Gulf Trading LLC,

No. 75 Noor Mohammed Taleb Building, Opposite to Ascot Hotel, Khaleed-bin-Valid Rd, Bur Dubai, Dubai, U.A.E.; and

No. 7 Noor Mohammad Taleb Bldg. Opp. Ascot Hotel Khalid Bin Rd, Dubai, U.A.E.; and

No. 705, Noor Mohammad Taleb Bldg, Bin Valid Road, Dubai, U.A.E.; and

P.O. Box 122114, Dubai, U.A.E.; and

P.O. 111837, Dubai, U.A.E.

Modification to the Entity List

On the basis of a decision made by the ERC, in addition to the eighteen persons under nineteen entries described above, this rule amends one entry currently on the Entity List under Germany. The amendment provides two alternate addresses for this listed person, as follows:

Germany

(1) Christof Schneider,

Margaretenweg #10, 42929 Wermelskirchen, Germany; and

P.O Box 501168, D-42904, Wermelskirchen, Germany; and

Neuenhaus 96, 42929, Wermelskirchen, Germany.

Removal From the Entity List

This rule implements an ERC decision to remove one person, Atlas Electronic Systems, located in Canada, from the Entity List as a result of the person's successful request for removal. Based upon the review of the information provided in the removal request in accordance with § 744.16 (Procedure for requesting removal or modification of an Entity List entity), and after review by the ERC's member agencies, the ERC determined that Atlas Electronic Systems should be removed from the Entity List.

The ERC's decision to remove Atlas Electronic Systems took into account its cooperation with the U.S. Government, as well as its assurances of future compliance with the EAR. In accordance with § 744.16(c), the Deputy Assistant Secretary for Export Administration has sent written notification to Atlas Electronic Systems, informing it of the ERC's decision to remove them from the Entity List. This final rule implements the decision to remove the following person from the Entity List:

Canada

(1) Atlas Electronic Systems (AES),

7320 St. Jacques St., W. Montreal, QC, H4B1W1, Canada.

The removal of the above-referenced entity on the basis of a § 744.16 removal request that was approved by the ERC, eliminates the existing license requirements in Supplement No. 4 to part 744 for exports, reexports, and transfers (in-country) to this entity. However, the removal of this entity from the Entity List does not relieve persons of other obligations under part 744 of the EAR or under other parts of the EAR. Neither the removal of an entity from the Entity List nor the removal of Entity List-based license requirements relieves persons of their obligations under General Prohibition 5 in § 736.2(b)(5) of the EAR which provides that, “you may not, without a license, knowingly export or reexport any item subject to the EAR to an end-user or end-use that is prohibited by part 744 of the EAR.” Additionally, this removal does not relieve persons of their obligation to apply for export, reexport, or in-country transfer licenses required by other provisions of the EAR. BIS strongly urges the use of Supplement No. 3 to part 732 of the EAR, “BIS's `Know Your Customer' Guidance and Red Flags,” when persons are involved in transactions that are subject to the EAR.

Annual Review of the Entity List

This rule also provides notice that the ERC has concluded annual reviews of the Entity List for entities located in five countries, in accordance with the procedures outlined in Supplement No. 5 to part 744 (Procedures for End-User Review Committee Entity List Decisions). The ERC has concluded its annual review for entities located in Afghanistan, Greece, India, Russia, and Ukraine. No changes are made to the Entity List as a result of these reviews. The changes from the annual review of the Entity List that are approved by the ERC are implemented in stages as the ERC completes its review of entities listed under different destinations on the Entity List.

Savings Clause

Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on March 28, 2013, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR).

Although the Export Administration Act expired on August 20, 2001, the President, through Executive Order 13222 of August 17, 2001, 3 CFR, 2001 Comp., p. 783 (2002), as amended by Executive Order 13637 of March 8, 2013, 78 FR 16129 (March 13, 2013), and as extended by the Notice of August 15, 2012, 77 FR 49699 (August 16, 2012), has continued the Export Administration Regulations in effect under the International Emergency Economic Powers Act. BIS continues to carry out the provisions of the Export Administration Act, as appropriate and to the extent permitted by law, pursuant to Executive Order 13222.

Rulemaking Requirements

1. This rule has been determined to be not significant for purposes of Executive Order 12866.

2. Notwithstanding any other provision of law, no person is required to respond to nor be subject to a penalty for failure to comply with a collection of information, subject to the requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (PRA), unless that collection of information displays a currently valid Office of Management and Budget (OMB) Control Number. This regulation involves collections previously approved by the OMB under control numbers 0694-0088, “Multi-Purpose Application,” which carries a burden hour estimate of 43.8 minutes for a manual or electronic submission. This rule does not alter any information collection requirements; therefore, total burden hours associated with the PRA and OMB control number 0694-0088 are not expected to increase as a result of this rule. You may send comments regarding the collection of information associated with this rule, including suggestions for reducing the burden, to Jasmeet K. Seehra, Office of Management and Budget (OMB), by email to Jasmeet_K._Seehra@omb.eop.gov, or by fax to (202) 395-7285.

3. This rule does not contain policies with Federalism implications as that term is defined in Executive Order 13132.

4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public comment, and a 30-day delay in effective date are inapplicable because this regulation involves a military or foreign affairs function of the United States. (See 5 U.S.C. 553(a)(1)). BIS implements this rule to protect U.S. national security or foreign policy interests by preventing items from being exported, reexported, or transferred (in country) to the persons being added to the Entity List. If this rule were delayed to allow for notice and comment and a delay in effective date, then entities being added to the Entity List by this action would continue to be able to receive items without a license and to conduct activities contrary to the national security or foreign policy interests of the United States. In addition, because these parties may receive notice of the U.S. Government's intention to place these entities on the Entity List once a final rule was published it would create an incentive for these persons to either accelerate receiving items subject to the EAR to conduct activities that are contrary to the national security or foreign policy interests of the United States and/or to take steps to set up additional aliases, change addresses, and take other steps to try to limit the impact of the listing on the Entity List once a final rule was published. Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule by 5 U.S.C. 553, or by any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., are not applicable.

List of Subject in 15 CFR Part 744

• Exports
• Reporting and recordkeeping requirements
• Terrorism

Accordingly, part 744 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows:

PART 744—[AMENDED]

1. The authority citation for 15 CFR part 744 continues to read as follows:

Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 22 U.S.C. 3201 et seq.; 42 U.S.C. 2139a; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 12058, 43 FR 20947, 3 CFR, 1978 Comp., p. 179; E.O. 12851, 58 FR 33181, 3 CFR, 1993 Comp., p. 608; E.O. 12938, 59 FR 59099, 3 CFR, 1994 Comp., p. 950; E.O. 12947, 60 FR 5079, 3 CFR, 1995 Comp., p. 356; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13099, 63 FR 45167, 3 CFR, 1998 Comp., p. 208; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; E.O. 13224, 66 FR 49079, 3 CFR, 2001 Comp., p. 786; Notice of January 19, 2012, 77 FR 3067 (January 20, 2012); Notice of August 15, 2012, 77 FR 49699 (August 16, 2012); Notice of September 11, 2012, 77 FR 56519 (September, 12, 2012); Notice of November 1, 2012, 77 FR 66513 (November 5, 2012).

2. Supplement No. 4 to part 744 is amended:

a. By removing under Canada, one Canadian entity: “Atlas Electronic Systems (AES), 7320 St. Jacques St., W. Montreal, QC, H4B1W1, Canada.”;

b. By adding under China, in alphabetical order, two Chinese entities;

c. By revising under Germany, one German entity;

d. By adding under Germany, in alphabetical order, one German entity;

e. By adding under Hong Kong, in alphabetical order, four Hong Kong entities;

f. By adding under Ukraine, in alphabetical order, one Ukrainian entity; and

g. By adding under United Arab Emirates, in alphabetical order, eleven Emirati entities.

The revisions read as follows:

Supplement No. 4 to Part 744—Entity List