20-0807 Friday ” Daily Bugle “

20-0807 Friday “Daily Bugle”

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Friday, 7 August 2020

[No items of interest posted] 

  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: “Company President and Employee Arrested In Alleged Scheme To Violate The Export Control Reform Act”
  3. DHS/CBP: “ACE Production Extended Scheduled Maintenance this Weekend – Saturday @2100 to 0400 ET Sunday”
  4. State/DDTC: “Outage Notice”
  1. EU Sanctions: “OFAC Requests Information on Harmonic’s French Subsidiary Iran Transactions”
  2. Natlawreview: “Changing Global Trade Environment – Entity-Based Export Controls”
  3. VOA: “US Presses for Extension of UN Arms Embargo on Iran”
  1. Freshfields: “Are Export Controls on China the New Sanctions?”
  2. Pillsbury: “U.S. Authorizes Sanctions and Restricts Trade with Hong Kong in Response to China’s New National Security Law”
  3. Pledge Times: “Defense Trade: Europe Desires to Emancipate Itself from the United States”
  4. Sidley: “USTR List 3 Product Exclusion Approval Extensions”
  5. Thomsen and Burke: “Changes to Export Controls in July 2020” – Part II of II
  1. FCC Academy Presents September Webinars: U.S. Export Controls: ITAR & EAR, and FMS
  2. Friday List of Approaching Events: 206 Events Posted This Week, Including 11 New Events
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
  3. Weekly Highlights of the Daily Bugle Top Stories 
  4. Submit Your Job Opening and View All Job Openings 
  5. Submit Your Event and View All Approaching Events 

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load to your laptop to keep you updated on the latest amendments, and contain over 800 footnotes of section history, key cases, practice tips & tricks, and extensive Tables of Contents. The ITAR amendments to the ITAR that took effect on 9 March and 25 March are included in the current edition of the BITAR.  Subscribers receive updated editions every time the regulations are amended (usually within 24 hours) so you will always have the current versions of the regulations. Subscribe to the BITAR now to guarantee you have an up-to-date ITAR!    

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[No items of interest posted]

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OGS_a22. Commerce/BIS: “Company President and Employee Arrested In Alleged Scheme To Violate The Export Control Reform Act”
(Source: Commerce/BIS, 6 Aug 2020) [Excerpts] 
… CHONG SIK YU, a/k/a “Chris Yu,” and YUNSEO LEE of America Techma Inc., were charged on 6 Aug 2020 with conspiring to unlawfully export dual-use electronics components, in violation of the Export Control Reform Act, and to commit wire fraud, bank fraud, and money laundering. YU and LEE were arrested this morning and are expected to be presented later today before U.S. Magistrate Judge Kevin Nathaniel Fox in Manhattan federal court.
  Acting U.S. Attorney Audrey Strauss said: “Chong Sik Yu and Yunseo Lee are accused of violating U.S. export laws by sending electronics components with military applications to Hong Kong and China. … 
  Since at least 2019, a U.S. company named America Techma Inc. (“ATI”) has illegally exported electronic components from the United States to Hong Kong for apparent re-export to other countries, including China, in violation of the Export Control Reform Act of 2018 (“ECRA”). …  YU is ATI’s president, and LEE is an ATI sales representative. YU and LEE worked together and with others to ship what they knew to be export-controlled items to Hong Kong and China. …

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   Please be aware that there will be an Extended ACE PRODUCTION Maintenance window this Saturday evening, August 8, 2020, for CBP ACE Infrastructure maintenance that will start ONE hour Earlier than normal — Saturday 2100 ET to Sunday 0400 ET.

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(Source: State/DDTC, 6 Aug 2020)
  The Defense Export Control and Compliance (DECCS) Registration and Licensing applications will be unavailable to industry from 6:00 AM through 8:00 AM (EDT) Monday, August 10 for scheduled system maintenance.
  In addition, the Advisory Opinion, Commodity Jurisdiction, and User Management applications will be unavailable from 11:00 PM through 1:00 AM(EDT) Friday, August 7 to Saturday, August 8. Please ensure work in progress is saved before the scheduled downtime.

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(Source: EU Sanctions, 6 Aug 2020) [Excerpts]

   Harmonic, a San Jose-headquartered video technology manufacturer, has disclosed in a Securities and Exchange Commission filing that it has received an administrative subpoena from OFAC to produce information about transactions involving Iran. The transactions in question were conducted by a French company, Thomson Video Networks, which Harmonic acquired in early 2016. Harmonic have confirmed that they are cooperating fully with the investigation.

(Source: The National Law Review, 6 Aug 2020) [Excerpts]

  The U.S. Government’s approach to export controls and sanctions increasingly targets individuals, companies, and economy sectors, as opposed to countries, to achieve specific national security and foreign policy goals. Many of the restrictions have extraterritorial reach and require proactive and additional due diligence by companies to segregate legitimate exports to a country, and to guard against in-country diversion from legitimate end users to prohibited entities.

  The targeted controls imposed by the government are exemplified by recent regulatory actions involving a major Chinese technology company and its worldwide affiliates. In a series of regulatory measures taken under the Export Administration Regulations (EAR), the U.S. Department of Commerce has expanded the imposed license requirements on exports, reexports, and in-country transfers involving items manufactured by or for these entities, if they involved certain U.S.-origin software or technology, wherever located.

  In 2019, the Commerce Department added the Chinese company and over 100 of its foreign affiliates to the Entity List maintained in the EAR. In 2020, the Commerce Department redefined its foreign-produced direct product rule. The agency expanded the jurisdictional scope of the EAR to add to its controls foreign-made items that are a product of U.S.-origin software or technology. Such items now require a license if they are known to be destined for these entities. As a result, exporters and other companies have to be more alert in carrying out their screening and due diligence responsibilities. This is especially complicated because of the large number of affected entities globally.
  The Commerce Department Entity List, first published in the late 1990s, was initially targeted in scope and focused on identifying entities involved in the proliferation of foreign weapons of mass destruction programs. Since that time, the grounds for inclusion on the Entity List have expanded to include activities contrary to U.S. national security and/or foreign policy interests.
  Companies need to be particularly vigilant in vetting parties against the Entity List because exports, reexports, and in-country transfers involving listed entities are subject to broader licensing requirements and usually a license denial policy. The failure to comply with the licensing requirements is a violation of the EAR and could result in criminal and/or civil penalties.

  The Commerce Department strongly recommends that exporters and overseas reexporters screen the parties to transactions against the Entity List to ensure compliance with the EAR. In addition, companies should be aware that the Commerce Department advises it considers that transactions of any nature with listed entities carry a “red flag,” and the agency recommends that companies proceed with caution with respect to such transactions.

(Source: Voice of America, 6 Aug 2020) [Excerpts]
   The United States is pressing ahead with plans to push for the extension of a U.N. arms embargo against Iran that is due to expire in two months under the 2015 nuclear deal, but it is likely to face stiff opposition from other nations, including Russia and China.
   “We have an objective to extend the arms embargo,” U.S. Special Envoy for Iran Brian Hook told reporters in a phone briefing Thursday. “That can be done the easy way, or it can be done the hard way, but it’s going to be extended.”
Council diplomats said the U.S. might push for a vote on its draft resolution seeking the extension early next week, but it may not have the necessary nine votes to pass it or to force Russia and China to veto.
   Washington’s case for extending the ban on conventional weapons is one of national security, arguing that Iran is a bad actor that perpetuates conflict and spreads terrorism, often through its proxies in the Middle East and beyond.
   “It [the arms embargo] has been in place for 13 years. Iran has still been able to move a lot of weapons around the Middle East to its proxies in the gray zone,” Hook said. “If this is what Iran has been able to accomplish in the dark, imagine what they will be able to accomplish in broad daylight.” …


* Principal Author: Nabeel Yousef, Esq., 1-202-777-4563; Freshfields Bruckhaus Deringer LLP
  The US Commerce Department’s Bureau of Industry and Security (BIS) added 11 Chinese companies to BIS Entity List on July 22, 2020, as part of the continued US response to China and in connection with China’s human rights abuses against Uyghurs, Kazakhs, and other members of Muslim minority groups in the Xinjiang Uyghur Autonomous Region (XUAR).  These 11 companies are not the only entities that have been added to the Entity List in recent weeks.  For example, 24 more Chinese organizations were added to the Entity List on June 5, 2020 for similar reasons.  In this blog post, we explain what these recent export controls on China mean, where sanctions still fit in, and how it relates to the broader US-China conflict.
What are these export controls, and how are they different than sanctions?
  Companies on the Entity List are targeted by export control restrictions.  These export control restrictions generally mean that US-origin goods, materials, software, and technology (collectively, items) – including non-US items with a greater than de minimis amount of US content – require a BIS license to export, re-export, or transfer to Entity Listed persons.  Export controls are different than sanctions:  export controls do not impose a blanket prohibition on US-related dealings with listed persons, however, US export controls follow US-origin items and components around the world whether or not a US person or US territory is involved.
  In recent months, the US government has increasingly used export controls, and Entity List restrictions in particular, in the same way as (or perhaps as an alternative to) sanctions.  Sanctions have traditionally been the primary trade tool used to apply pressure to foreign regimes in order to achieve political goals, whereas export controls have typically been less political and more focused on technical or national security concerns.  It has not been uncommon, however, for export control restrictions to follow the imposition of sanctions. …

Are sanctions still a concern for these and other Chinese companies?

  It is possible that sanctions may follow these export control restrictions because a number of sanctions programs target companies for essentially the same conduct that led to these Entity Listings – e.g., contributing to human rights abuses in the XUAR.  Chinese companies on the Entity List that are less well-known internationally, smaller, or less critical to global supply chains could be at a greater risk of becoming sanctioned.

  We are already seeing other, non-China-specific sanctions programs in use against Chinese companies for similar alleged activities.  The most decisive sanctions action against China in this area to date come from the US Treasury Department’s Office of Foreign Assets Control (OFAC), which on July 9, 2020, added four Chinese officials and one Chinese government entity to the List of Specially Designated Nationals and Blocked Persons (SDN list) in connection with human rights abuses against ethnic minorities in the XUAR under the Global Magnitsky Human Rights Accountability Act.  … 

  The Hong Kong Autonomy Act (HKAA), signed into law on July 14, 2020, could have the greatest sanctions impact on China over time.  The HKAA establishes a new sanctions program that involves a stepped process and broad executive discretion to target certain foreign persons and foreign financial institutions who have materially contributed to “the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law,” which sets forth the constitutional principle of “one country, two systems.”  A key provision of the HKAA – which could potentially result in a broad chilling effect – authorizes sanctions on any foreign financial institution that “knowingly” conducts a “significant” transaction with any foreign person identified under the HKAA.  Such financial institutions could ultimately be subject to “menu-based” secondary sanctions, up to and including broad restrictions on transacting in US property, access to the US financial system, and access to US dollars.
Link to Timeline: Hong Kong Autonomy Act
  Additional sanctions may also be forthcoming under the Uyghur Human Rights Policy Act (UHRPA), signed into law on June 17, 2020, which requires the President to provide a list of senior Chinese government officials responsible for serious human rights abuses against Turkic Muslims in China’s XUAR.  … 
How does this fit into the wider US response to China?
  These export controls coincide with a number of other recent actions, including the HKAA and the termination of Hong Kong’s special status in July 2020.  Please see below our timeline of recent US action against China, as well as our lengthier client briefing on the full range of recent US responses.
As covered in our briefing, the US response to China, which has garnered broad support across the political spectrum, has thus far included:
  • the expansion of Chinese telecom and technology export restrictions, as well as the targeting of additional companies (Export Administration Regulations; DOD List; FCC);
  • sanctions designations and warnings related to Hong Kong, Xinjiang, and Tibet (Global Magnitsky; UHRPA; Reciprocal Access to Tibet Act of 2018);
  • a new sanctions program targeting foreign financial institutions (HKAA);
  • Hong Kong increasingly being treated the same as mainland China through the removal of the so-called “special status” (United States-Hong Kong Policy Act of 1992; Executive Order on Hong Kong Normalization);
  • a Hong Kong arms embargo (International Traffic in Arms Regulations);
  • the termination of Hong Kong export control preferences (Export Administration Regulations);
  • threatened delisting of Chinese companies (Holding Foreign Companies Accountable Act);
  • the introduction of COVID-19 and Hong Kong retaliation bills (COVID-19 Accountability Act); and
  • potential US dollar restrictions.
Link to Timeline: US Response to China

  As the US-China trade war and conflict continues, further US action against China should be expected, including the increasing use of export controls and sanctions as foreign policy tools.

President Trump signs law authorizing sanctions on individuals and financial institutions and ends U.S. preferential treatment for Hong Kong.
  • The Hong Kong Autonomy Act authorizes sanctions on foreign financial institutions that conduct significant transactions with foreign persons involved in undermining Hong Kong’s autonomy.
  • An executive order ending preferential treatment for Hong Kong requires Hong Kong to be treated in the same way as China for the purposes of U.S. trade and export control policy.
  • The Department of Commerce and the Department of State have already begun implementing changes to export controls with respect to Hong Kong.

  Following passage by unanimous consent in both the Senate and House, the President signed the Hong Kong Autonomy Act (HKAA) on July 14, 2020, authorizing the imposition of sanctions on (1) foreign persons who have materially assisted China’s failure to meet its obligations under the Basic Law and Joint Declaration with respect to Hong Kong and (2) foreign financial institutions that knowingly engage in significant transactions with such individuals.
The Hong Kong Autonomy Act

  The HKAA requires the State Department to issue a report within 90 days after enactment (by October 12, 2020) with an identification of individuals, an explanation why the person was identified, and a description of the activity that resulted in the identification.

  A foreign person “materially contributes” to the failure of the government of China to meet its obligations if the person (1) took action that resulted in the inability of the people of Hong Kong to enjoy freedom of assembly, speech, press, or independent rule of law, or to participate in democratic outcomes; or (2) otherwise took action that reduces the high degree of autonomy of Hong Kong.

  Following issuance of the State Department report, the Treasury Department is then required to issue a report within 30 – 60 days (between November 11 and December 11, 2020) identifying foreign financial institutions that “knowingly conduct a significant transaction” with an identified foreign person. The HKAA defines the term “knowingly” based on an actual knowledge standard. The term “significant transaction” is not defined.

  At any time after issuance of the State Department report, the President may impose (discretionary) sanctions consisting of blocking assets/prohibiting transactions and visa restrictions on an identified foreign person. These sanctions must be imposed (mandatory) not later than one year after the report is issued.

  Further, not later than one year after issuance of the Treasury Department report, the President is required to impose 5 of 10 listed sanctions on an identified foreign financial institution. Within two years after issuance of the Treasury Department report the President must impose all 10 of the listed sanctions.
HKAA Sanctions Menu
   (1) prohibit any U.S. financial institution from making loans or providing credit to the foreign financial institution;
   (2) prohibit the foreign financial institution from being designated as a primary dealer in U.S. Government debt instruments;
   (3) prohibit the foreign financial institution from serving as agent of the U.S. Government or serving as a repository for U.S. Government funds;
   (4) prohibit any transactions in foreign exchange that are subject to U.S. jurisdiction and in which the foreign financial institution has any interest;
   (5) prohibit any transfers of credit or payments between financial institutions or by, through or to any financial institution, to the extent that such transfers or payments are subject to U.S. jurisdiction and involve any interest of the foreign financial institution;
   (6) prohibit any person from (a) acquiring, holding, withholding, using, transferring, withdrawing, transporting, importing, or exporting any property that is subject to U.S. jurisdiction and with respect to which the foreign financial interest has any interest; (b) dealing in or exercising any right, power, or privilege with respect to such property; or (c) conducting any transaction involving such property;
   (7) restrict or prohibit exports, reexports, and transfers (in-country) of commodities, software, and technology, directly or indirectly, subject to the jurisdiction of the U.S. to the foreign financial institution;
   (8) prohibit any U.S. person from investing in or purchasing significant amounts of equity or debt instruments of the foreign financial institution;
   (9) deny a visa to or exclude from the U.S. any alien who is a corporate officer or principal or, or a shareholder with a controlling interest in, the foreign financial institution; or
   (10) impose sanctions 1-8 above that are applicable on the principal executive officer or officers of the foreign financial institution, or on individuals performing similar functions and with similar authorities as such officer or officer.
  The President may exclude or remove a foreign financial institution from the report prior to the imposition of sanctions, upon notification to Congress, if the significant transaction at issue:
   (A) does not have a significant and lasting negative effect that contravenes the obligations of China under the Joint Declaration and the Basic Law;
   (B) is not likely to be repeated in the future; and 
   (C) has been reversed or otherwise mitigated through positive countermeasures taken by that foreign financial institution.
Lifting or waiving the sanctions is subject to congressional disapproval.
  Executive Order on Hong Kong Normalization.  On the same day, the President also issued an Executive Order on Hong Kong Normalization suspending or eliminating different and preferential treatment for Hong Kong to the extent permitted by law. The Executive Order extends and makes more specific the Secretary of State’s March 27, 2020 determination under the Hong Kong Human Rights and Democracy Act of 2019 and the President’s statement on March 29, 2020 concerning Hong Kong’s autonomy. However, agency action is still required to implement a number of actions.

  Specifically, the U.S. will suspend or eliminate different and preferential treatment for Hong Kong under the following U.S. statutes:

  a) Section 103 of Immigration Act of 1990 (quotas on the number of immigrant visas made available to natives of Hong Kong);
   b) Sections 203(c), 212(l) and 221(c) of the Immigration and Nationality Act of 1952, as amended (allocation of visas, inadmissible aliens, and the issuance of visas);
   c) Arms Export Control Act (licenses for exports of defense articles);
   d) Section 721(m) of the Defense Production Act of 1950, as amended (annual reports to Congress relating to certain mergers, acquisitions, and takeovers);
   e) Export Control Reform Act of 2018 (licenses for exports of dual-use technology); and
   f) Section 1304 of title 19, United States Code (country of origin markings for items imported into the U.S.).
  The executive order directs the heads of relevant agencies to commence taking action within 15 days to:
   a) amend any regulations implementing the statutes identified above and the International Emergency Economic Powers Act (IEEPA), which provide different treatment for Hong Kong as compared to China;
   b) eliminate the preference for Hong Kong passport holders as compared to PRC passport holders;
   c) revoke license exceptions for exports to Hong Kong, reexports to Hong Kong, and transfers (in-country) within Hong Kong of items subject to the Export Administration Regulations that provide differential treatment compared to those license exceptions applicable to exports to China, reexports to China, and transfers (in-country) within China;
   d) terminate the export licensing suspensions under section 902(a)(3) of the Foreign Relations Authorization Act insofar as such suspensions apply to exports of defense articles to Hong Kong persons who are physically located outside of Hong Kong and the PRC and who were authorized to receive defense articles prior to the date of this order.
  Some of these actions, such as suspending Commerce Department license exceptions and State Department licenses for exports of defense articles, have already been taken.  Other actions include:
  – the suspension of agreements for the surrender of fugitive persons and the transfer of sentenced persons,
  – training the Hong Kong police force, 
  – scientific and technical cooperation, 
  – the Fulbright exchange program, 
  – taxes on income of the international operation of ships, and
  – the admission of refugees. 
The Executive Order allows agencies to propose any other further actions to end special conditions and preferential treatment for Hong Kong.
  Finally, the Executive Order authorizes the imposition of sanctions based on broad and open ended criteria related to the suppression of democracy in Hong Kong. These sanctions go far beyond the July 9, 2020 Global Magnitsky designations on foreign individuals and entities involved in Uighur human rights violations. Specifically, full blocking sanctions may be imposed on any foreign individuals or entities that have been determined by the Secretary of State and the Secretary of Treasury-
   (i) to be or have been involved, directly or indirectly, in developing, adopting, or implementing, the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Administrative Region;
   (ii) to be responsible for or complicit in, or to have engaged in, directly or indirectly, undermining democratic processes in Hong Kong; threatening the peace, security, stability, or autonomy of Hong Kong; censorship or other activities that limit the exercise of freedom of expression or assembly of citizens of Hong Kong or that limit access to free and independent media sources; or serious human rights abuse in Hong Kong;
   (iii) to be or have been a leader or official of an entity, including any government entity, that has engaged in, or whose members have engaged in, the implementation of China’s national security law or in actions that relate to undermining democratic processes in Hong Kong, threatening the peace or autonomy of Hong Kong, and censorship or other similar activities, or an entity whose property and interests in property are blocked pursuant to the executive order;
   (iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked;
   (v) to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked; or
   (vi) to be a member of the board of directors or a senior executive officer of any person whose property and interests in property are blocked.
  Based on the timing of the State Department’s report under the HKAA and the broad criteria for the imposition of sanctions under the Executive Order, the last two weeks of October before the election could see significant sanctions designations that could sharply exacerbate tensions between the United States and China. Based on the timing of the Treasury Department’s report in the November – December timeframe, sanctions could be threatened or imposed on foreign financial institutions.

(Source: Pledge Times, 6 Aug 20) [Excerpts]

  Weight? Reliability? Price? These are the usual criteria when the Bundeswehr starts the tender for a device. In three years, the soldiers are said to have new assault rifles in their hands. There is another condition with a key role for the successor of the G36. The chief buyers of the German military are additionally demanding: The components of the new weapon “may not be subject to ITAR regulations”.

  The wording hides the instruction that no US components or armament technology may be in the product. The abbreviation ITAR stands for “International Traffic in Arms Regulations” – and for one of the most comprehensive export regulations in the USA.  The authorities secure the possibility of control and export restrictions via ITAR regulations. Even if the product and components are not manufactured in the USA, they want to have a say where the products are going, and even who can work on them. After all, it’s about their armament technology.

  But now there is resistance in Europe. Events such as the withdrawal of thousands of soldiers from Germany just announced by US President Donald Trump are prompting many local soldiers to demand that Europeans do more for their own security and become more independent.
  “ITAR free” is the goal.  For a long time now, it’s not just about assault rifles, drones or, as in a recent call for tenders, electronic ammunition detonators for howitzer tanks. The “ITAR free” goal is now considered a sign of self-confidence, self-determination and the search for sovereignty in Europe’s armaments industry and politics.

  Even one of the largest European armaments projects, the Future Combat Air System (FCAS) with a new fighter jet as the centerpiece, should manage with as little or as little US technology as possible. A few days ago, Michael Schreyögg, board member of the German engine manufacturer MTU Aero Engines, said that “ITAR free” was definitely the goal for the engine of the so-called superjet, which should be ready for use in 2040.  This is to ensure exportability. Airbus armaments chief Dirk Hoke also sees “ITAR free” efforts as an industrial policy aspect. “To be a real reliable partner for NATO and the Americans in transatlantic alliances, we have to develop and develop our own capabilities in Europe.”

  So it is no wonder that Europe’s arms managers are always happy to listen when President Emmanuel Macron talks about the “strategic autonomy” of France and the European Union.  … When the leading French engine manufacturer Safran recently presented a technical cooperation with the German transmission specialist ZF Friedrichshafen for a large propeller engine, the slogan “ITAR free” was emblazoned on a presentation slide. It was emphasized several times that it was a “100 percent European solution”. Everything stays in Europe, the patents, the supplies. The sure sovereignty, especially since the engine could be installed in the large military drone “Euro drone”.
  “One of the advantages of 100 percent European products is that the data from operations remains in Europe and does not end up in the hands of non-European countries,” says the sales manager of the saffron helicopter division Florent Chauvancy. Then it becomes clear: “With ‘ITAR free’ and without the requirements of other American regulatory systems, Europe gets more freedom to whom defense products are delivered.”  …

  Of course, there is also a business calculation behind the statements. The new saffron helicopter engine is in the Euro drone competition with a drive from the US company General Electric. It is not purely European. Saffron therefore relies on the “ITAR free” joker.

  However, Europe’s arms emancipation is still at the very beginning. So far, it has been impossible to do without US technology in some areas. The Bundeswehr is currently in the process of selecting a new heavy transport helicopter. There are only two US products to choose from here – either from Boeing or Lockheed Martin / Sikorsky. Europe has nothing to offer in the large helicopter class. The situation is similar with larger missiles for air defense systems.
  The rules even have an impact on the staff.  The Munich lawyer Matthias Creydt, who works as a consultant for the defense industry, also calls for a realistic assessment of the extent to which US defense technology can be dispensed with. In addition, the ITAR list, which had been blown up in the Cold War, had already been defused by the USA a few years ago with an export control reform.  There used to be tens of thousands more items on it, even the smallest parts of a few grams or about glue. If it was used in European products, the USA had a say in where these products could be delivered or taken.
  Industry specialist Creydt admits that the US arms export control regulations are still very complex. They go so far that even former citizenships of people can play a role in who can work on the products with US defense technology components or know-how at all.
  America’s ITAR regulations even influence the personnel policy of European defense and space groups. Even with later German citizenship, an Iranian has practically poor chances of working on an armaments project using US technology. Ironically, this also applies to the same extent to US citizens who work outside the United States. For their work in projects related to armaments or missiles, these require regular approval from the US authority.
  At the Federal Armed Forces Procurement Agency, the so far only isolated tenders with ITAR-free conditions are not officially declared politically. Here we talk more of practical considerations. Due to the regulations, there are reporting obligations to the US government and various approval requirements, it says. “This restricts the use of a product considerably and requires complex configuration management”, is communicated on request. “In this respect, the ITAR-free requirement is associated with both time and cost savings.”

(Source: Author) [Excerpts]

  The U.S. Trade Representative (USTR) has just acted on the product exclusion extension requests for articles included on List 3.  As you know, the product exclusion approvals for List 3 articles expire today, August 7, 2020.  Yesterday, USTR released a list of the approvals that it has decided to extend.  (A copy of that notice is available from the author.)  

  For the approvals being extended, the extensions only run through December 31, 2020 (while USTR considered extending approvals by up to 12 months, it ultimately determined that a shorter extension was appropriate – i.e., through December 31, 2020).  It is also important to note that the Chapter 99 HTS classification associated with the extension is different from the Chapter 99 HTS classification associated with the original approval.  So, if you are using an approval that has been extended, you need to use a new 10-digit Chapter 99 classification as of today.

(Source: Thomsen and Burk Newsletter) [Part I was published yesterday]
* Principal Author: Roszel C. Thomsen II, Esq., 1-410-539-2596, Thomsen and Burke LLP


Enforcement Actions
  On July 31, 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned one Chinese government entity and two current or former government officials in connection with serious rights abuses against ethnic minorities in the Xinjiang Uyghur Autonomous Region (XUAR). These designations include the Xinjiang Production and Construction Corps (XPCC), Sun Jinlong, a former Political Commissar of the XPCC, and Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC. The entity and officials are being designated for their connection to serious human rights abuse against ethnic minorities in Xinjiang, which reportedly include mass arbitrary detention and severe physical abuse, among other serious abuses targeting Uyghurs, a Turkic Muslim population indigenous to Xinjiang, and other ethnic minorities in the region.”As previously stated, the United States is committed to using the full breadth of its financial powers to hold human rights abusers accountable in Xinjiang and across the world,” said Secretary Steven T. Mnuchin.
  This action is being taken pursuant to Executive Order (E.O.) 13818, “Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption,” which builds upon and implements the Global Magnitsky Human Rights Accountability Act.
  The XPCC is a paramilitary organization in the XUAR that is subordinate to the Chinese Communist Party (CCP). The XPCC enhances internal control over the region by advancing China’s vision of economic development in XUAR that emphasizes subordination to central planning and resource extraction. The XPCC’s structure reflects a military organization, with 14 divisions made up of dozens of regiments. Chen Quanguo (Chen), who was designated on July 9, 2020 for his connection to serious human rights abuse, is the current First Political Commissar of the XPCC, a role in which he has exercised control over the entity. Chen is also the current Communist Party Secretary of XUAR, and has a notorious history of intensifying security operations in the Tibetan Autonomous Region, where he was deployed before arriving in Xinjiang to tighten control over members of Tibetan ethnic minority groups. Following his arrival in Xinjiang, Chen began implementing a comprehensive surveillance, detention, and indoctrination program targeting Uyghurs and members of other ethnic minority groups. The XPCC has helped implement Chen’s CCP policy in the region.
  The XPCC was designated today for being owned or controlled by, or for having acted or purported to act for or on behalf of, directly or indirectly, Chen.
  The following individuals are also designated today for having acted or purported to act for or on behalf of, directly or indirectly, the XPCC:
  • Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC.
  • Sun Jinlong, a former Political Commissar of the XPCC.
  The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $824,314 settlement with Whitford Worldwide Company, LLC (“Whitford”). Whitford, a cookware coating manufacturer headquartered in Elverson, Pennsylvania, has agreed to settle its potential civil liability for 74 apparent violations of the Iranian Transactions and Sanctions Regulations by Whitford and its subsidiaries in Italy and Turkey. Specifically, between about November 2012 and December 2015, these subsidiaries sold coatings intended for customers in Iran and engaged in other trade-related transactions with Iran. Additionally, U.S. persons employed by Whitford facilitated some of these transactions with Iran. OFAC determined that Whitford voluntarily disclosed the apparent violations and that the apparent violations constitute a non-egregious case.
  The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $665,112 settlement with Essentra FZE Company Limited (“Essentra FZE”). Essentra FZE, a cigarette filter and tear tape manufacturer located in the United Arab Emirates, has agreed to settle its potential civil liability for three apparent violations of the North Korea Sanctions Regulations, 31 C.F.R. part 510. Specifically, Essentra FZE exported cigarette filters to the DPRK through a network of front companies in China and other countries using deceptive practices, and received payment for the shipment of these goods into its bank accounts at the foreign branch of a U.S. bank between September 2018 and December 2018. OFAC determined that Essentra FZE did not
voluntarily self-disclose these apparent violations, and that these apparent
violations constitute an egregious case.
  Assistant Attorney General for National Security John C. Demers and U.S. Attorney Erica H. MacDonald for the District of Minnesota today announced the sentencing of Usama Darwich Hamade, 55, to 42 months in prison, for conspiring to illegally export goods and technology in violation of the International Emergency Economic Powers Act (IEEPA), the Export Administration Regulations, the Arms Export Control Act, and the International Traffic in Arms Regulations. The sentence was handed down by Chief Judge John R. Tunheim in U.S. District Court in Minneapolis, Minn.
  According to the defendant’s guilty plea and documents filed in court, from 2009 through 2011, Hamade conspired with others to export U.S. origin goods and technology including inertial measurement units suitable for use in uncrewed aerial vehicles, or “UAVs,” digital compasses suitable for UAV use, a jet engine, piston engines, and recording binoculars, without obtaining the required export licenses from the U.S. Department of Commerce and the U.S. Department of State, in violation of IEEPA, the Export Administration Regulations, the Arms Export Control Act, and the International Traffic in Arms Regulations. According to evidence presented by the government, the ultimate beneficiary of Hamade’s actions was the designated foreign terrorist organization Hizballah.
  Aiden Davidson, a/k/a Hamed Aliabadi, 32, of Brighton, Massachusetts, was sentenced to 46 months in federal prison for smuggling goods from the United States to Iran in violation of the U.S. embargo on trade with Iran, United States Attorney Scott W. Murray announced today. According to court documents and statements made in court, Davidson is a citizen of Iran and a naturalized citizen and resident of the United States. Davidson was the manager/member and registered agent of a New Hampshire limited liability company, Golden Gate International, LLC (“Golden Gate”). Babazedeh Trading Co., a/k/a “Babazadeh Hydraulic Trading Group” (“Babazadeh”) was an Iranian company that operated an online resale business based in Tehran, Iran. Stare Lojistik Enerji Sanayi Ticaret (“Stare”) was a Turkish freight forwarding company with a location in Igdir, Turkey.
  Between December 2016 and February 2017, Davidson and Golden Gate smuggled goods from Savannah, Georgia, to Babazadeh in Iran. The goods included motors, pumps, valves, and other items that were valued at more than $100,000. Documents related to the shipments falsely identified the Ultimate Consignee of the shipments as Stare in Turkey. In causing the unlicensed exportation of these goods, Davidson and Golden Gate willfully evaded national security controls related to transactions with Iran. 
  Between April 2017 and August 2017, Davidson and Golden Gate again knowingly smuggled goods from Savannah, Georgia, to Babazadeh in Iran.  The goods included displacement pumps that were valued at approximately $13,000. Documents related to these shipments falsely identified the Ultimate Consignee of the shipments as Ariyanis Group in Turkey. In causing the unlicensed exportation of these goods, Davidson and Golden Gate willfully evaded national security controls related to transactions with Iran. 
  All told, between 2014 and 2017, Davidson caused a total of at least ten exports of containers of industrial goods and equipment from the U.S. to Iran. During that period he received approximately $1 million in international wire transfers to Golden Gate’s bank account in New Hampshire. Davidson was arrested in September 2018 prior to boarding a flight from Atlanta to Turkey.
  The president of a California-based electronics distribution company, his company and an employee have been indicted by a federal grand jury in Providence, Rhode Island, on charges they participated in a conspiracy to conceal information from the U.S. Department of Commerce and U.S. Customs and Border Protection as part of a scheme to illegally export chemicals manufactured and/or distributed by a Rhode Island-based company to a technology company in China. The company is on a U.S. government list of businesses not permitted to receive products manufactured in the United States. According to an indictment unsealed today in U.S. District Court in Providence, there is reasonable cause to believe that the Chinese entity is involved in the illicit procurement of commodities and technologies for unauthorized military end-use. Export Administration Regulations restrict the export of items that could make a significant contribution to the military potential of other nations or that could be detrimental to the foreign policy or national security of the United States. 
  It is alleged in the indictment that Broad Tech System Inc., located in Ontario, California, the company’s CEO, CFO, and President Tao Jiang, aka “Jason Jiang” and Bohr Winn-Shih, an equipment engineer for Broad Tech Systems, conspired to order the chemicals HiPR 6517 Photoresist (Photoresist) and HPRD 441 Developer (Developer) from a Rhode Island-based manufacturer, then knowingly submitted false and misleading documentation to the U.S. Government and shipping companies in an effort to have the product illegally shipped to a company in China, in violation of the Export Control Reform Act. Photoresist and HPRD are essential in the chip manufacturing process.
  It is alleged the defendants knowingly provided false information in an attempt to ship the chemicals to China Electronics Technology Group Corporation 55th Research Institute, a/k/a Nanjing Electronic Devices Institute, CETC Research Institute 55, NEDI, and NEDTEK, located in Nanjing, China. The company is a state-owned Chinese entity that mainly engages in the manufacturing of electronic components and the research, development and production of core chips and key components in China’s military strategic early warning systems, air defense systems, airborne fire control systems, manned space systems, and other national large-scale projects.
  On October 25, 2018, The Customs and Border Protection National Targeting Center alerted an agent from the Department of Commerce (DOC) of an intended export of 58 gallons of Photoresist to NEDI. The shipment was halted and agents from DOC communicated with the RI-based manufacturer to inform them that NEDI was included on a U.S government list of Chinese companies that U.S companies are prohibited from exporting commodities to. The product was returned to the manufacturer.
  According to the indictment, in January 2019, Jiang, Shih, and Broad Tech provided false information to a California-based freight forwarder about the intended recipient of 58 gallons of Photoresist. In May 2019, Jiang, Shih, and Broad Tech provided false information to the freight forwarder about the intended recipient of an additional 36 gallons of Photoresist and 131 units of Developer. Relying on these false representations, the freight forwarder filed export documents with the DOC that allegedly falsely identified the recipient of the Photoresist and Developer as NTESY.
  According to the indictment, on January 29, 2019, Broad Tech received a wire transfer of $65,984 to its account at a bank within the United States purporting to be from NTESY Technology Co., China, representing payment for the 58 gallons of Photoresist. The wire transfer originated in Nanjing, China. Records show that the account where the funds originated from was an account controlled by NEDI.
  The indictment charges Broad Tech Systems, Inc., Tao Jiang, 50, of Riverside, CA, and Bohr Winn-Shih, 63, of Ontario, CA, with conspiracy, violation of the Export Control Reform Act, and money laundering conspiracy.


ITAR & EAR from a non-US perspective
Tuesday, 8 September 2020
More Info
The ABC of Foreign Military Sales (FMS)
Tuesday, 29 September 2020
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(Sources: Event sponsors)  

Submit your event in the Submission section at the end of this newsletter.  
[Editor’s note:  This Daily Bugle Event List has grown so large that we have run out of space to display it, so we are displaying here only the new events in the Daily Bugle, while maintaining a LINK HERE to the full list.]


Published every Friday or last publication day of the week. Send events to events@fullcirclecompliance.eu, composed in the below format:
# * Date: (Location;) “Event Title”; <Weblink>” Event Sponsor;

* 11-13 Aug: “99th Annual AAEI Conference” (many topics and speakers); American Association of Exporters and Importers
* 12 Aug: “Webex Broker Exam Webinar“; Customs and Border Protection
* 18-20 Aug: “99th Annual AAEI Conference” (many topics and speakers – not a repeat of earlier sessions); American Association of Exporters and Importers
* 25-27 Aug: “99th Annual AAEI Conference” (many topics and speakers – not a repeat of earlier sessions); American Association of Exporters and Importers
* 1-3 Sep: “99th Annual AAEI Conference” (many topics and speakers – not a repeat of earlier sessions); American Association of Exporters and Importers
* 23 Sep: “Webex Broker Exam Webinar“; Customs and Border Protection
* 29 Sep: “The ABC of Foreign Military Sales (FMS) “; FCC Academy
* 15 Oct: “Export Documentation & Import Procedures Course“; Chamber International

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EN_a115. Bartlett’s Unfamiliar Quotations

(Source: Editor)

* Tryon Edwards (7 Aug 1809 – 4 Jan 1894; was an American theologian and Congregational minister.  He was best known for his collection of quotations, A Dictionary of Thoughts, a book of quotations.)
  – “Age does not depend upon years, but upon temperament and health. Some men are born old, and some never grow so.”
  – “To waken interest and kindle enthusiasm is the sure way to teach easily and successfully.”
  – “If you would know anything thoroughly, teach it to others.”
Friday funnies: “Only in America –“
  – do drugstores make the sick walk all the way to the back of the store to get their prescriptions while healthy people can buy cigarettes at the front.
  – do people order double cheeseburgers, large fries, and a diet Coke.
  – do we leave cars worth thousands of dollars in the driveway and put useless junk in the garage.
  – do they sell hot dogs in packages of ten and buns in packages of eight.
  – do they have drive-up ATM machines with Braille lettering.
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The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments are listed below.
Latest Update 


5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
31 Jul 2020: 85 FR 45998: Revision of the Export Administration Regulations and Suspension of License Exceptions for Hong Kong. 
DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   24 Apr 2018: 83 FR 17749: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates.  

: DoD 5220.22-M. Implemented by Dep’t of Defense. 

18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary here.)  
DOE ASSISTANCE TO FOREIGN ATOMIC ENERGY ACTIVITIES: 10 CFR Part 810.    23 Feb 2015: 80 FR 9359: comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. 

15 Nov 2017, 82 FR 52823: miscellaneous corrections include correcting references, an address and a misspelling.

DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War. 
14 Mar 2019: 84 FR 9239: Bump-Stock-Type Devices.


29 Jul 2020: 85 FR 45513 Extension to Certain Temporary Suspensions, Modifications, and Exceptions due to Corona Virus.  The latest edition of the BITAR is 29 July 2020.  

DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

17 Jul 2020: 85 FR 43436: Nicaragua Sanctions Regulations. 


1 Jan 2019: 19 USC 1202 Annex.
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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