Every month we post the highlights of FCC’s Export/Import Daily Update (“The Daily Bugle”). The Daily Bugle is sent out every business day to approximately 10,000 readers, who keep up to date with changes in defense and high-tech trade laws and regulations. It is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III and Elina Tsapouri.
We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of European Union, Australia, Canada, U.K., and other countries and international organizations. Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items. To subscribe, click here.
Last month’s highlights of The Daily Bugle included in this edition are:
- State/DDTC Publishes ITAR Reorganization I – ITAR Redline Revision 2; Thursday, 1 Dec 2022; Item #5
- DHS/CBP: “CSMS #54197079 – Guidance: Extension of Section 301 China Product Exclusions”; Friday, 2 Dec 2022; Item #4
- DHS/CBP: “CSMS #54194146 – Requirement for Powers of Attorney (POAs) Executed Prior to 19 Dec 2022 to be Satisfied by 17 Feb 2023”; Tuesday, 8 Dec 2022; Item #4
- State Dept Updates ITAR Compliance Program Guidelines; Tuesday, 6 Dec 2022; Item #6
- State Dept: “ITAR: Notification of Temporary Suspension of a Regulatory Provision Related to Certain Capacitors Described on the USML”; Wednesday, 7 Dec 2022; Item #3
- European Union: “P2P Export Control Program”; Tuesday, 13 Dec 2022; Item #6
- Commerce/BIS Cuts Off Russian Procurement Network Evading Export Controls; Wednesday, 3 Dec 2022; Item #3
- UK ECJU Publishes Compliance Code of Practice for Export Licensing; Thursday, 15 Dec 2022; Item #5
- State/DDTC: Proposed Rule Amending ITAR § 120.54, Definitions of Activities that Are Not Exports, Reexports, Retransfers, or Temporary Imports; Friday, 16 Dec 2022; Item #5
- UK DIT Updates; Friday, 30 Dec 2022
State/DDTC Publishes ITAR Reorganization I – ITAR Redline Revision 2
(Source: State/DDTC 30 Nov 2022)
The Directorate of Defense Trade Controls (DDTC) has updated the ITAR Redline made available as a supporting document to 87 FR 16396, Mar. 23, 2022. This Revision 2, dated Nov. 28, 2022, adopts changes made by 87 FR 71250, Nov. 22, 2022, and limits redlines to only those changes made by the March 23 reorganization rule (i.e., changes to plain text those corrections to the original document made by Revision 1 to the ITAR Redline, dated Sept. 16, 2022).
In addition to making Revision 2 available here, DDTC has updated the link to the ITAR Redline in the original announcement entitled “International Traffic in Arms Regulations: Consolidation and Restructuring of Purposes and Definitions” and dated March 22, 2022.
Download Here: 87 FR 16396 – ITAR Reorg I – ITAR Redline
DHS/CBP: “CSMS #54197079 – Guidance: Extension of Section 301 China Product Exclusions”
The purpose of this memorandum is to provide guidance on extending the 81 COVID-19 related Section 301 product exclusions which are currently scheduled to expire on November 30, 2022.
On November 29, 2022, United States Trade Representative (USTR) published 87 FR 73383, extending the COVID-19 related Section 301 product exclusions for three months, through February 28, 2023.
The exclusions listed are available for any product that meets the description as set out in Annex B to 86 FR 63438, regardless of whether the importer filed an exclusion request. Further, the scope of each exclusion is governed by the scope of the 10-digit HTSUS classification and product descriptions provided in the Annexes to 86 FR 63438, not by the product descriptions set out in any particular request for exclusion.
The functionality for the acceptance of the extended product exclusions will be available in the Automated Commercial Environment (ACE) as of 7 am eastern standard time, December 1st, 2022.
Instructions for importers, brokers, and filers on submitting entries to CBP containing granted exclusions by the USTR from the Section 301 measures are set out below:
- Per 87 FR 73383and Annex B of Federal Register notice 86 FR 63438, in addition to reporting the regular Chapters 28, 34, 38, 39, 40, 48, 52, 55, 56, 61, 62, 63, 65, 84, 85, and 90 classifications of the HTSUS for the imported merchandise, importers shall report the HTSUS classification 9903.88.66 (Articles, the product of China as provided for in U.S. notes 20(sss)(i), 20(sss)(ii), 20(sss)(iii), and 20(sss)(iv) to this subchapter, each covered by an exclusion granted by the USTR for imported merchandise subject to the exclusion).
- Importers shall not submit the corresponding Chapter 99 HTSUS classification for the Section 301 duties when HTSUS 9903.88.66 is submitted.
Imports which have been granted a product exclusion from the Section 301 measures and which are not subject to the Section 301 duties, are not covered by the Foreign Trade Zone (FTZ) provisions of the Section 301 Federal Register notices, but instead are subject to the FTZ provisions in 19 CFR part 146.
To request a refund of Section 301 duties paid on previous imports of products granted duty exclusions by the USTR, importers may file a Post Summary Correction (PSC) if within the PSC filing timeframe. If the entry is beyond the PSC filing timeframe, importers may protest the liquidation if within the protest filing timeframe. The latest guidance on the process for submitting retroactive claims for product exclusions to CBP is found in CSMS 42566154.
Specifically, if importers enter Chinese goods subject to the extended exclusions under HTSUS classification 9903.88.66 on or after December 1, 2022, and pay Section 301 duties, importers should file Post Summary Corrections on or after December 2, 2022, to obtain a refund of duties paid.
In situations where an importer has requested a product exclusion and the request is pending with the USTR, importers or their licensed representative may submit a request to extend the liquidation of impacted unliquidated entry summaries to CBP.
Reminder: importers, brokers, and/or filers should refer to CSMS 39587858 (Entry Summary Order of Reporting for Multiple HTS when 98 or 99 HTS are required) for guidance when filing an entry summary in which a heading or subheading in Chapter 99 is claimed on imported merchandise.
For ease of reference, a summary of Section 301 duties and product exclusion notifications is attached.
Questions from the importing community concerning ACE entry rejections involving product exclusions should be referred to their CBP Client Representative. Questions related to Section 301 entry-filing requirements, please refer to CSMS message #CSMS #52417905 (Information on Trade Remedy Questions and Resources) CSMS #52417905 – UPDATE: Information on Trade Remedy Questions and Resources (govdelivery.com).
DHS/CBP: “CSMS #54194146 – Requirement for Powers of Attorney (POAs) Executed Prior to 19 Dec 2022 to be Satisfied by 17 Feb 2023”
In the Modernization of the Customs Broker Regulations Final Rule (87 FR 63267) under 19 CFR 111.36(c)(3), which becomes effective on December 19, 2022, a broker must execute a power of attorney (POA) directly with an importer of record (IOR) or drawback claimant (client) and not through a freight forwarder or other third party in order to transact customs business on behalf of the client.
For brokers with POAs executed prior to December 19, 2022, CBP will permit the requirement identified in the Modernization of the Customs Broker Regulations Final Rule (87 FR 63267) under 19 CFR 111.36(c)(3) to be satisfied by February 17, 2023. Brokers may take steps to ensure that a POA has been directly executed with an importer or drawback claimant by affirming the POA via direct communication with the importer or drawback claimant.
On or after December 19, 2022, Broker POAs must be executed pursuant to the requirements in 19 CFR 111.36(c)(3) established by the Final Rule.
How must a broker obtain a power of attorney with a client?
A broker must execute a power of attorney (POA) directly with the importer of record (IOR) or drawback claimant, and not through a freight forwarder or other (unlicensed) third party, in order to transact customs business for that importer of record or drawback claimant. The term “directly” means the IOR or claimant must execute and sign the POA by directly communicating with the broker, and cannot have an agent or third party sign or negotiate the POA in their stead. However, the IOR or claimant may have an agent or third party assist in executing the POA, for example, by: providing translation services; providing counsel in reviewing the terms of a POA; or, providing courier services to relay a written POA.
For more information on the regulations, visit CBP’s Customs Broker Modernization Regulation dedicated webpage. The Office of Trade’s Broker Management Branch will continue to engage with the public and the trade community to maintain transparency during the implementation of the new regulations. Read the full text of the Modernization of the Customs Broker Regulations Final Rule here and the Elimination of Customs Broker District Permit Fee Final Rule here.
Questions regarding this message should be sent to: Broker Management Branch, Office of Trade at firstname.lastname@example.org.
State Dept Updates ITAR Compliance Program Guidelines
(Source: State/DDTC, 5 Dec 2022)
The guidelines contained in this document are intended to provide an overview of an effective compliance program and an introduction to defense trade controls, including information on the laws and regulations the U.S. Department of State, Bureau of Political-Military Affairs, Directorate of Defense Trade Controls (DDTC), administers. These defense trade controls are contained in the Arms Export Control Act (AECA) (22 U.S.C. § 2751 et seq.) as amended, and the International Traffic in Arms Regulations (ITAR), Title 22 of the Code of Federal Regulations in parts 120- 130, both of which are authoritative on defense trade controls. The guidelines contained in this document are not intended to serve as a basis for any registration or licensing decisions on the part of the public or DDTC. To the extent there is any discrepancy between these guidelines and either the AECA or the ITAR, the AECA and ITAR will prevail.
Read the new guidelines here.
State Dept: “ITAR: Notification of Temporary Suspension of a Regulatory Provision Related to Certain Capacitors Described on the USML”
(Source: Today’s Federal Register, 87 FR 74967, 7 Dec 2022) [Excerpts]
* ACTION: Temporary suspension.
* SUMMARY: The Department of State (the Department) is informing the public that on November 21, 2022, the Deputy Assistant Secretary of State for Defense Trade Controls temporarily suspended for a period of six (6) months the applicability of regulations for certain capacitors described in the U.S. Munitions List (USML) Category XI that have a voltage rating of one hundred twenty-five volts (125 V) or less.
* DATES: This temporary suspension went into effect on November 21, 2022 and will expire on May 22, 2023 or when terminated by the Department, whichever occurs first.
* FOR FURTHER INFORMATION CONTACT: Mr. Chris Weil, Office of Defense Trade Controls Policy, Department of State, telephone (202) 571-7051; email DDTCPublicComments@state.gov ATTN: Temporary Suspension Related to Certain Capacitors.
European Union: “P2P Export Control Program”
The European Union is a long-standing provider of capacity-building activities aimed at the overall strengthening of export controls for dual-use and arms trade worldwide.
The EU P2P export control programme (formerly “EU Outreach in Export Control programme”) is the cornerstone of the EU efforts in this area.
The EU P2P export control programme includes projects in two main areas of export controls:
- Dual-Use Trade Control(Search for available translations of the preceding link) EN••
- Arms Trade Control(Search for available translations of the preceding link) EN••
This website provides basic information and updates on the EU’s Cooperation and capacity building activities under the EU P2P Programme.
Access to the private document repository (CIRCABC platform) is restricted to approved and registered experts from the EU countries and partner countries, and other international bodies.
Commerce/BIS Cuts Off Russian Procurement Network Evading Export Controls
Today, Matthew S. Axelrod, Assistant Secretary of Commerce for Export Enforcement, issued a Temporary Denial Order (TDO) immediately suspending the export privileges of three persons: Boris Livshits, Svetlana Skvortsova, and Aleksey Ippolitov; and two companies: Advanced Web Services, and Strandway, LLC, for 180 days for the unauthorized export of sensitive items subject to the Export Administration Regulations (EAR) to Russia. The TDO is available online here.
TDOs are some of the most significant civil sanctions BIS can issue, cutting-off not only the right to export items subject to the EAR from the United States, but also to receive or participate in exports from the United States or reexports of items subject to the EAR. Today’s action prevents imminent violations of the EAR by denying Boris Livshits, Svetlana Skvortsova, Aleksey Ippolitov, Advanced Web Services, and Strandway, LLC the ability to apply for, obtain, or use any license, license exception, or export control document, or engaging in or benefitting from such transactions. The order was issued for a renewable 180-day period.
As described in the TDO and the indictment, as alleged, the respondents and defendants were affiliated with Serniya Engineering and Sertal LLC, Moscow-based companies that operate under the direction of Russian intelligence services to procure advanced electronics and sophisticated testing equipment for Russia’s military industrial complex and research and development sector. Serniya and Sertal operated a vast network of shell companies and bank accounts throughout the world, including the United States, that were allegedly used in furtherance of the scheme to conceal the involvement of the Russian government and the true Russian end users of U.S.-origin equipment. This network began operations prior to Russia’s invasion of Ukraine and sought to obtain and divert items that had previously been subject to stringent U.S. export controls.
According to the TDO, the respondents unlawfully purchased and exported sensitive components, some of which can be used in military applications. Specifically, as alleged in the TDO, Livshits, a Russian national, attempted to evade export controls by creating shell companies, like Advanced Web Services and Strandway LLC, and associated bank accounts in the United States, to route shipments and layer financial transactions in order to obscure the true Russian end users. The respondents are alleged to have used this network to purchase and export highly sensitive and heavily regulated electronic components, including advanced semiconductors, for the Russian military, defense sector, and research institutions. This investigation was conducted by the BIS Office of Export Enforcement’s New York Field Office jointly with the Federal Bureau of Investigation.
Following Russia’s invasion of Ukraine in February 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry and Security (BIS) levied sanctions and/or imposed licensing requirements against Serniya, Sertal, Yevgeniy Grinin and several companies used in the scheme, calling them “instrumental to the Russian Federation’s war machine.”
In a related action, the U.S. Department of Justice unsealed a 16 count indictment filed in the Eastern District of New York charging Boris Livshits, Svetlana Skvortsova, Aleksey Ippolitov, Yevgeniy Grinin, Vadim Konoshchenok, Alexey Brayman, and Vadim Yermolenko, for export violations and other criminal violations to include conspiracy and other charges related to a global procurement and money laundering network on behalf of the Russian government.
UK ECJU Publishes Compliance Code of Practice for Export Licensing
(Source: UK Export Control Joint Unit, 13 Dec 2022) [Excerpts]
Who the code applies to: …
Legal status of the code: …
Meeting the code of practice: …
(1) Committing to compliance
You must show your business commits to following:
- UK export control law and regulations
- other national controls where applicable
How to show your commitment to your staff: . . .
Showing your company’s commitment to ECJU compliance inspectors
You can supply a copy of your compliance statement to ECJU’s compliance inspectors when they visit.
(2) Nominating responsible personnel: . . .
Showing your commitment to compliance inspectors: …
(3) Informing and training staff
You must demonstrate that you have adequate procedures in place to:
- inform staff about changes to export control guidance and regulation
- train personnel about export controls
These procedures apply to staff who:
- export goods
- can export technology via electronic means
- are involved in arranging the movement of goods between foreign countries
How to show your commitment to your staff. Regulations and guidance.
The person with responsibility for export controls makes available to staff:
- a reference list of sources of information, guidance and regulations
- a list of contacts for advice
- Export Control Act 2002
- Export of Radioactive Sources (Control) Order 2006
- Export Control Order 2008
- Export Control (Amendment) (EU Exit) Regulations 2020(England, Wales and Scotland only)
- Council Regulation (EC) No 428/2009(Northern Ireland only)
- ECJU guidance pages on GOV.UK
- notices to exporters
- contact details for ECJU
The export controls lead establishes a process to:
- update this information when changes occur
- make staff aware when there are changes
Training: . . .
Showing your commitment to compliance inspectors
You can show ECJU’s compliance inspectors documented procedures on how your staff are:
- aware of where to access information on export controls
- kept up-to-date about new regulations and guidance
- trained on export controls
(4) Company compliance procedures: . . .
You should draw up and operate compliance procedures that are effective for your business. These procedures for processing enquiries or orders should meet export control requirements.
- reflect the best practices illustrated in this code
- show that everything possible is done to prevent the export of licensable items without a valid licence
How to show your commitment to your staff: . . .
Showing your commitment to compliance inspectors:
You can show ECJU’s compliance inspectors:
- a considered plan of what is needed for compliance
- clear and simple procedures, appropriate to the business’ structure and integrated with business functions
- effective and appropriate procedures for processing enquiries or orders
- comprehensive coverage, detailing requirements of all relevant functions from sales, through order administration, to credit and finance and despatch, and including where necessary maintenance and repair
- adequate documentation
(5) Handling suspicious enquiries or orders: . . .
Indicators of suspicious activity
You should be suspicious if the customer:
- is reluctant to offer information about the end-use of the items
- is reluctant to provide clear answers to commercial or technical questions which are routine in normal negotiations
- gives an unconvincing explanation about why they need the items, given their normal business, or the technical sophistication of the items
- declines routine installation, training or maintenance services
- offers unusually favourable terms, such as higher price or lump-sum cash payment
- requests unusual shipping, packaging or labelling arrangements
- is new to you and your knowledge about them is incomplete or inconsistent
- is using an installation site that is:
- in an area under strict security control or has severely restricted access
- unusual in view of the type of equipment being installed
- has unusual requirements for excessive confidentiality about final destinations, or customers, or specifications of items
- requests excessive spare parts or has a lack of interest in any spare parts
You should make sure that all activity around controlled goods:
- is traceable
- is easily checked
- has an adequate audit trail
(7) Provision for audits
You should establish a programme of regular internal audit of the system for export control compliance.
How to show your commitment to your staff
The person with responsibility for export controls establishes a programme of regular internal audit of the system for export control compliance.
The audit is one of the following:
- a self-audit carried out according to a simple checklistof questions
- is delegated to a central auditing function within the company
(8) Integrating with quality management practices: . . .
Annex A: Illustrative Examples of Management Commitment
State/DDTC: Proposed Rule Amending ITAR § 120.54, Definitions of Activities that Are Not Exports, Reexports, Retransfers, or Temporary Imports
(Source: Today’s Federal Register, 87 FR 77046, 16 Dec 2022)
* AGENCY: Department of State.
* ACTION: Proposed rule.
* SUMMARY: On March 25, 2020, the Department added a new ITAR section (§ 120.54) to clarify and consolidate activities that do not require authorization from the Department (84 FR 70887). This proposed rule would add to ITAR § 120.54 two activities that are not controlled events (defined herein, and in the previous rule, to mean “an export, reexport, retransfer, or temporary import”) and therefore do not require authorization from the Department. While previously not specified in the ITAR, the Department’s long-standing policy is that these two proposed activities are not controlled events.
The first of the two new proposed additions to ITAR § 120.54 is a new paragraph (a)(6) making explicit that the taking of defense articles outside a previously approved country by the armed forces of a foreign government or United Nations personnel on a deployment or training exercise is not a controlled event, provided there is no change in end-use or end-user. The Department proposes this new provision to ensure interoperability between and among the United States and partner countries’ armed forces when deployed and to provide assurances to partner countries that have requested a clearer statement of the long- standing Department policy articulated in this proposed rule. This policy is noted in DDTC’s “Guidelines for Preparing Agreements” and this proposed provision would codify this long-standing understanding in the ITAR.
The second addition to ITAR § 120.54 would state in a new paragraph (a)(7) that the transfer of a foreign defense article originally imported into the United States that has since been exported out of the United States, is not a controlled event, unless certain enumerated circumstances have occurred.
The Department proposes this new provision to eliminate any misperception that foreign defense articles which originally entered the United States and have since been exported out of the United States always will require Department authorization for subsequent transfers. The Department assesses this proposed provision will address concerns raised by partners and allies and avoid the need for unnecessary requests for authorization on the part of domestic and foreign defense companies.
For the reasons set forth above, the Department of State proposes to amend title 22, chapter I, subchapter M, part 120 as follows:
PART 120 – PURPOSE AND DEFINITIONS . . .
- Amend § 120.54 by adding paragraphs (a)(6) and (7) to read as follows:
- 120.54 Activities that are not exports, reexports, retransfers, or temporary imports.
(a)* * *
(6) The taking of a defense article subject to the reexport or retransfer requirements of this subchapter on a deployment or training exercise outside a previously approved country, provided:
(i) the defense article is transported by and remains in the possession of the armed forces of a foreign government or United Nations personnel; and
(ii) there is no change in end-use or end-user with respect to the subject defense article.
(7) The transfer of a foreign defense article previously imported into the United States that has since been exported from the United States pursuant to a license or other approval under this subchapter, provided:
(i) the foreign defense article was not modified, enhanced, upgraded or otherwise altered or improved in a manner that changed the basic performance of the item prior to its return to the country from which it was imported or a third country; and
(ii) a U.S.-origin defense article was not incorporated into the foreign defense article.
* DATES: Send comments before February 14, 2023.
* * * * *
UK DIT Updates
(Source: UK Department for International Trade, 30 Dec 2022)
Licence for the export of military goods which have been imported into the UK for repair or replacement under warranty.
Licence allowing the export of a wide range of software and source codes for military goods.
Licence allowing the export of information security items.
Licence allowing the export or transfer of printed circuit boards (PCBs) and components for dual-use goods.
Licence allowing the export or transfer of printed circuit boards (PCBs) and components for military goods.
Licence allowing certain chemicals to be exported from the UK to permitted destinations.
Licence for the export of military goods and transfers if the export is in support of UK government defence contracts.
Licence allowing the export of specific goods that have relaxed controls.
Licence allowing the export of technology and the information needed for the development, and production of, military goods.
Licence for the export of surplus military vehicles.
Licence allowing certain historic military goods to be exported from the UK to permitted destinations.
- Open general export licence access overseas to software and technology for military goods: individual use only
Licence allowing people who are temporarily based abroad to access their business’ technology and information technology systems in the UK.
- Open general export licence military and dual-use goods: UK forces deployed in non-embargoed destinations
Licence allowing the export or transfer of military and dual-use goods to UK armed forces in countries not subject to an embargo.
Licence allowing the export of certain types of cryptographic development software and technology.
Licence for the transfer of small arms to and from specified countries.
Licence for the transfer of ‘category C’ military goods to and from specified countries.
Licence for the export of military goods for the production, development or maintenance of Typhoon aircraft.
Licence allowing the export of dual-use items imported into the UK for repair or replacement under warranty.
Licence allowing the export of dual-use items returned to the original country of import for repair or replacement under warranty.
Licence allowing the export of low value shipments of certain goods.
Licence allowing the export of a range of dual-use items in support of contracts within the oil and gas industry.
Licence allowing the export of technology for dual-use items.
Licence for the export of military goods for exhibition where the goods will be returned to the UK.
Licence for the export of military goods which have been imported into the UK to be returned to the original country for repair or replacement.
Licence for the export of military goods for demonstration.
Licence allowing the export or transfer of goods, software or technology for the A400M collaborative programme.