Every Monday we post the highlights out of last week’s FCC Export/Import Daily Update (“The Daily Bugle”). Send out every business day to approximately 7,500 readers of changes to defense and high-tech trade laws and regulations, The Daily Bugle is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III, and Alexander Witt.
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Last week’s highlights of The Daily Bugle included in this edition are:
- Commerce/BIS Amends EAR and Tightens Additional Exports and Reexports to Cuba; The Daily Bugle; Monday, 21 October 2019, Item #1;
- DHS/ICE: “Chinese National Sentenced to 40 Months in Prison for Conspiring to Illegally Export Military and Space-Grade Technology from the US to China”; The Daily Bugle; Monday, 21 October 2019, Item #4;
- Treasury/OFAC Issues Amended Venezuela-related General License 8D; The Daily Bugle; Monday, 21 October 2019, Item #6;
- EU Updates Control List of Dual-Use Items; The Daily Bugle; Monday, 21 October 2019, Item #7;
- Treasury/OFAC Removes Sanctions Imposed on Turkey; The Daily Bugle; Wednesday, 23 October 2019, Item #6
- Treasury/OFAC Issues Iran General License K; The Daily Bugle; Thursday, 24 October 2019, Item #4
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1. Commerce/BIS Amends EAR and Tightens Additional Exports and Reexports to Cuba
(Source: Federal Register, 21 Oct 2019.) [Excerpts.]
FR 56117-56121: Restricting Additional Exports and Reexports to Cuba
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to further restrict exports and reexports of items to Cuba. Specifically, this rule amends the Cuba licensing policy in the EAR to establish a general policy of denial for leases of aircraft to Cuban state-owned airlines. This rule also amends License Exception Aircraft, Vessels and Spacecraft (AVS) to clarify that aircraft and vessels are not eligible for the license exception if they are leased to or chartered by a national of Cuba or a State Sponsor of Terrorism. Additionally, this rule amends the EAR to establish a general 10-percent de minimis level for Cuba. Finally, this rule revises License Exception Support for the Cuban People (SCP) to make the Cuban government and communist party ineligible for certain donations, removes an authorization for promotional items that generally benefits the Cuban government, and clarifies the scope of telecommunications items that the Cuban government may receive without a license. BIS is making these amendments to further restrict the Cuban government’s access to items subject to the EAR, thereby supporting the Administration’s national security and foreign policy decision to hold the Cuban regime accountable for its repression of the Cuban people and its support for the Maduro regime in Venezuela; the Cuban regime denies its people fundamental freedoms while keeping Maduro in power using Cuban military intelligence and state security services. These amendments are consistent with the National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, signed by the President on June 16, 2017.
* DATES: This rule is effective October 21, 2019.
* FOR FURTHER INFORMATION CONTACT:…
* SUPPLEMENTARY INFORMATION: …
Specific Amendments in This Rule
Cuba Licensing Policy
Consistent with the embargo of Cuba, BIS authorization in the form of a license or license exception is required for the export or reexport to Cuba of all items subject to the EAR. Section 746.2(b) of the EAR explains that license applications for the export or reexport to Cuba of items requiring a license are subject to a general policy of denial unless otherwise specified in that paragraph. This rule amends paragraph (b)(2)(v) to remove the general policy of approval for applications to export or reexport aircraft leased to Cuban state-owned airlines. Consequently, license applications to lease aircraft to Cuban state-owned airlines are now subject to the general policy of denial in Sec. 746.2(b) of the EAR. BIS will also revoke licenses within seven days, through individual notifications to licensees pursuant to Sec. 750.8 of the EAR, for aircraft leased to Cuban state-owned airlines under the former policy. BIS is making these changes because the Cuban government generates revenue from tourists that it transports on leased aircraft.
License Exception Aircraft, Vessels and Spacecraft (AVS)
Section 746.2(a)(1) of the EAR identifies the license exceptions, or portions thereof, that are available for exports and reexports to Cuba, including paragraphs (a) and (d) of License Exception AVS in Sec. 740.15 for, respectively, certain aircraft and vessels on temporary sojourn.
Paragraph (a) of License Exception AVS authorizes the export or reexport to Cuba of certain aircraft on temporary sojourn, provided all of the associated terms and conditions are met. Paragraph (a)(3) identifies the criteria that must be met if a flight is to qualify as a temporary sojourn. This rule adds paragraph (a)(3)(x) to clarify that aircraft leased to or chartered by a Cuban national are not eligible for License Exception AVS. New paragraph (a)(3)(x) also clarifies that aircraft are not eligible for License Exception AVS if leased to or chartered by a national of a destination in Country Group E:1 (Terrorist supporting countries). Additionally, this rule adds Cuba to restrictions in paragraphs (a)(1)(i) and (ii) of License Exception AVS regarding the sale or transfer of operational control of foreign registered aircraft and to restrictions in paragraphs (a)(3)(iv) through (ix) of License Exception AVS regarding the operational control of foreign and U.S. registered aircraft. Instead of identifying Cuba by name, this rule adds references to Country Group E:2 (Unilateral embargo), which currently only includes Cuba. For consistency, this rule changes a reference to Cuba in paragraph (a)(2)(ii) of License Exception AVS to Country Group E:2. This rule also clarifies the existing list of aircraft eligible for paragraph (a)(2)(i) of License Exception AVS.
Paragraph (d) of License Exception AVS authorizes the export or reexport to Cuba of cargo vessels for hire on temporary sojourn, provided all of the associated terms and conditions are met. Paragraph (d)(3) identifies the criteria that must be met if a voyage is to qualify as a temporary sojourn. This rule adds paragraph (d)(3)(v) to clarify that vessels leased to or chartered by a Cuban national are not eligible for License Exception AVS. New paragraph (d)(3)(v) also clarifies that vessels are not eligible for License Exception AVS if leased to or chartered by a national of a destination in Country Group E:1. Additionally, this rule adds Cuba to the restriction in paragraphs (d)(1)(i) and (ii) of License Exception AVS regarding the sale or transfer of operational control of foreign flagged vessels and to restrictions in paragraphs (d)(2)(v) through (vii), (d)(3)(iv), and (d)(4)(v) through (vii) of License Exception AVS regarding the operational control of and related activities involving foreign and U.S. flagged vessels. As is done in paragraph (a), the changes to paragraph (d) reference Country Group E:2 instead of referencing Cuba by name.
License applications for the export or reexport of aircraft or vessels leased to or chartered by, or on the behalf of, the Cuban government, including state-owned airlines or other enterprises, will generally be denied pursuant to the licensing policy in Sec. 746.2(b) of the EAR. License applications for aircraft or vessels leased to or chartered by other nationals of Cuba will be reviewed pursuant to the applicable licensing policy described in Sec. 746.2(b) of the EAR. BIS is making these changes to License Exception AVS because the Cuban government has generated revenue or otherwise benefited from the lease or charter of aircraft and vessels.
De Minimis Rule
Pursuant to part 734 of the EAR, foreign-made items located abroad are subject to the EAR under specified circumstances, including when they incorporate, or are bundled or commingled with, specified levels of controlled U.S.-origin commodities, software, or technology. Paragraph (a) of Sec. 734.4 identifies items for which there is no de minimis level, and thus are subject to the EAR if they contain any controlled U.S.-origin content, and paragraph (b) identifies special requirements for certain encryption items. When paragraphs (a) and (b) of Sec. 734.4 are not applicable, either the 10-percent de minimis rule described in paragraph (c) or the 25-percent de minimis rule described in paragraph (d) applies, depending upon the destination of the items.
This rule amends Sec. 734.4(d) of the EAR to make Cuba subject to the general 10-percent de minimis rule in Sec. 734.4(c). Now, a BIS license or an applicable license exception specified in Sec. 746.2(a)(1) of the EAR is required for the reexport to Cuba of foreign-made items that contain greater than 10 percent of U.S.-origin content or, when Sec. 734.4(a) applies, contain any U.S.-origin content. License applications for such items are subject to a general policy of denial, unless eligible for another licensing policy described in Sec. 746.2(b) of the EAR. Instead of referencing Cuba by name in Sec. 734.4, this rule makes Cuba subject to the general 10-percent de minimis rule by referencing Country Group E:2. BIS is making this change to de minimis because the Cuban government could generate revenue or otherwise benefit from the receipt of items containing greater than 10 percent of U.S.-origin content.
License Exception Support for the Cuban People
License Exception Support for the Cuban People (SCP) in Sec. 740.21 of the EAR was created to authorize certain exports and reexports to Cuba that are intended to support the Cuban people by improving their living conditions and supporting independent economic activity; strengthening civil society in Cuba; and improving the free flow of information to, from, and among the Cuban people. Items exported or reexported pursuant to certain provisions of License Exception SCP may be consigned to or, in some instances, used by the Cuban government provided the items would be used to benefit the Cuban people.
Paragraph (c)(1) of License Exception SCP authorizes the export or reexport to Cuba of certain donated items for use in scientific, archeological, cultural, ecological, educational, historic preservation, or sporting activities provided specified conditions are met. This rule amends paragraph (c)(1) to exclude donations to organizations administered or controlled by the Cuban government or communist party. Consequently, an exporter or reexporter wanting to donate items to organizations administered or controlled by the Cuban government or communist party must submit a license application to BIS, which will be reviewed pursuant to the licensing policy in Sec. 746.2(b) of the EAR. This change will give the U.S. Government the opportunity to determine whether donations to those entities would benefit the Cuban people. Paragraph (c)(1) of License Exception SCP is still available for eligible donations to the Cuban people and civil society organizations provided the items would be used to support activities independent of the Cuban government and communist party.
Paragraph (d)(1) of License Exception SCP authorizes the export or reexport to Cuba of certain items for telecommunications infrastructure creation and upgrades. This rule amends paragraph (d)(1) to clarify that it is limited to eligible items for the creation and upgrades of telecommunications infrastructure to improve the free flow of information to, from, and among the Cuban people. For infrastructure items that would be used to connect specific end users (i.e., non-backbone items), those items may be used to connect individual Cubans or the Cuban private sector only. A license is required for the export or reexport to Cuba of items for telecommunications infrastructure that would be used to connect other specific end users (e.g., Cuban government ministries and state-owned hotels), which will be reviewed pursuant to the licensing policy in Sec. 746.2(b) of the EAR. Separately, License Exception Consumer Communications Devices (CCD) in Sec. 740.19 of the EAR authorizes the export or reexport to Cuba of certain consumer communications devices for use by eligible individuals and independent non-governmental organizations.
This rule also revises paragraph (e)(2) of License Exception SCP to eliminate an authorization for items to be given away for free for promotional purposes. This provision regarding such promotional items has been primarily beneficial to the Cuban government since it has a virtual monopoly on importing items into the country. However, items for use by the Cuban private sector for private sector economic activities remain eligible for paragraph (b)(1) of License Exception SCP, provided the associated terms and conditions are met. License applications for the export or reexport of promotional items to the Cuban government will be reviewed pursuant to the general policy of denial in Sec. 746.2(b) of the EAR.
BIS is making these changes to License Exception SCP to ensure that the Cuban people, not the Cuban government or communist party, benefit from items exported or reexported pursuant to the license exception. …
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2. DHS/ICE: “Chinese National Sentenced to 40 Months in Prison for Conspiring to Illegally Export Military and Space-Grade Technology from the US to China”
(Source: DHS/ICE, 18 Oct 2019.) [Excerpts.]
On Oct. 16, United States District Judge Diane J. Humetewa sentenced Tao Li, a 39-year-old Chinese national, to 40 months in prison, followed by three years of supervised release. Li had previously pleaded guilty to conspiring to export military- and space-grade technology to the People’s Republic of China without a license in violation of the International Emergency Economic Powers Act discovered in an investigation led by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) assisted by the Defense Criminal Investigative Service (DCIS).
Between December 2016 and January 2018, Li worked with other individuals in China to purchase radiation-hardened power amplifiers and supervisory circuits and illegally export them from the United States to China. The electronic components sought by Li are capable of withstanding significant levels of radiation and extreme heat, and as a result, are primarily used for military and space applications. Due to the technological capabilities of the electronic components sought by Li and the significant contribution that the components could make to a foreign country’s military and space programs, both parts required an export license from the U.S. Department of Commerce, Bureau of Industry and Security, prior to being sent out of the United States. Notwithstanding the licensing requirement, the Department of Commerce has a policy of denial to export these types of electronic components to the People’s Republic of China.
Between December 2016 and January 2018, Li, who resided in China, used multiple aliases to contact individuals in the United States, including representatives of United States-based private companies, to try to obtain the electronic components. Additionally, Li and his coconspirators agreed to pay a “risk fee” to illegally export the electronic components to China. In furtherance of his request, Li wired money from a bank account in China to a bank account in Arizona. Li was arrested in September 2018 at Los Angeles International Airport, as Li attempted to travel from China to Arizona to meet with one of the undercover agents.
“This case is one of many involving illegal attempts to take U.S. technology to China. Li attempted to procure highly sensitive U.S. military technology in violation of our export control laws. Such laws are in place to protect our national security, and the Department of Justice will continue to vigorously enforce them,” said Assistant Attorney General John C. Demers. “We don’t take these crimes lightly and we will continue to pursue them.”
“If you steal our military and space technology, you should expect to go to prison,” said Michael Bailey, United States Attorney for the District of Arizona. “But for the diligent work of HSI and the Defense Criminal Investigative Service, our nation’s security would’ve been damaged by Mr. Li.”
“Li’s sentencing was the result of a highly successful joint investigative effort with our law enforcement partners and the U.S. Attorney’s Office that prevented U.S. military technology from falling into the wrong hands,” said Bryan D. Denny, special agent in charge of the Defense Criminal Investigative Service, Western Field Office. “It also reaffirms our commitment to protecting America from this type of activity and, equally so, serves as a warning to those intent on illegally exporting our technologies that the DCIS and its partners will pursue these crimes relentlessly.” …
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3. Treasury/OFAC Issues Amended Venezuela-related General License 8D
(Source: Treasury/OFAC, 21 Oct 2019.)
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing amended General License 8D, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for Maintenance of Operations for Certain Entities in Venezuela.”
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4. EU Updates Control List of Dual-Use Items
(Source: European Commission, 17 Oct 2019.)
On 17 October 2019, the European Commission adopted the annual Delegated Regulation that updates the EU dual-use export control list in Annex I to Regulation (EC) No 428/2009 and brings it in line with the decisions taken within the framework of the international non-proliferation regimes and export control arrangements in 2018.
The majority of the changes result from amendments agreed at the Wassenaar Arrangement, including:
– New decontrol note for ‘open-cell foam’ electromagnetic wave absorbing materials
(1C001)
– Amendment to control entry for gear machine tool including a cascaded structure for
the control criteria (2B003)
– New local definition of ‘measuring range’ for linear displacement measuring
instrument (2B006b1)
– Amendment to control entry for Digital-to-Analogue Converter to avoid overlapping of
the controls (3A001a5b)
– New entry for ‘other’ discrete microwave transistors (3A001b3f)
– New entry for signal generators with specified ‘Radio Frequency modulation
bandwidths’ (3A002d5)
– Amendment to control entry for multi-layer mask control (3B001h)
– New entry for software designed to restore operation of microcomputers/
microprocessors after Electromagnetic Pulse (EMP) or Electrostatic Discharge (ESD)
disruption (3D005)
– New decontrol note for “Information security” items specially designed for a
‘connected civil industry application’ (5A002)
– Amendment to control entry for cryptographic activation token, including a Technical
Note for the local definition of ‘cryptographic activation token’ (5A002)
– Amendment to control entry for hydrophones operating over 1000m (6A001a2a6)
– New Note 6 for lasers defining ‘Single transverse mode’ and ‘Multiple transverse
mode’ (6A005)
– New entry for masks and reticles designed for optical sensors (6B002)
– Amendment to control entry for underwater submersible vehicles (8A001c)
– New entry for air-launch platforms for space launch vehicles (9A004g)
– Deletion of entry for technology for diffusion bonding for gas turbine engine components (9E003a7)
Some changes result from amendments agreed at the Missile Technology Control Regime, including:
– Amendment to the acronym for “CEP” (“Circular Error Probable”) (7A103.c)
– Amendment to control entry for include detonation engines (9A111).
Other changes were substantially editorial changes made to bring Annex I controls in line with Regime controls and changes for the correction of minor errors.
The Commission Delegated Regulation will enter into force upon its publication approximately 2 months after its adoption, provided that the Council and the European Parliament raise no
objections within this period.
The 2019 Commission Delegated Regulation.
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5. Treasury/OFAC Removes Sanctions Imposed on Turkey
(Source: Treasury/OFAC, 23 Oct 2019.)
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed sanctions imposed on the Government of Turkey’s Ministry of National Defence and the Ministry of Energy and Natural Resources, as well as the Minister of National Defence, Minister of Energy and Natural Resources, and the Minister of the Interior, following Turkey’s pause in military operations in Syria as agreed to with the United States on October 17, 2019 (the October Ceasefire).
“As a result of the ceasefire, and at the direction of President Donald J. Trump, Treasury is delisting two Turkish ministries and three of the country’s senior officials,” said Secretary Steven T. Mnuchin.
On October 14, 2019, OFAC designated Turkey’s Ministry of National Defence and Ministry of Energy and Natural Resources for being a subdivision, agency, or instrumentality of the Government of Turkey. OFAC simultaneously designated Hulisi Akar, Minister of National Defence, Suleyman Soylu, the Minister of Interior, and Fatih Donmez, the Minister of Energy pursuant to E.O. 13894 of October 14, 2019, for being a current or former official of the Government of Turkey. Today’s action, taken in consultation with the U.S. Department of State, is a direct result of Turkey’s adherence to the terms of the October Ceasefire.
As a result of today’s action, all property and interests in property, which had been blocked solely as a result of these designations, are unblocked and all otherwise lawful transactions involving U.S. persons and these entities and individuals are no longer prohibited.
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6. Treasury/OFAC Issues Iran General License K
(Source: Treasury/OFAC, 24 Oct. 2019)
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing Iran General License K “Authorizing Maintenance or Wind Down of Transactions Involving Cosco Shipping Tanker (Dalian) Co., Ltd.”
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