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 8,500 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, Salvatore Di Misa, 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 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 week’s highlights of The Daily Bugle included in this edition are:
- Commerce/BIS Request Comments on Import, End-User, Delivery Verification Certificates and Firearms Entry Clearance Requirements; Tuesday, 10 Nov 2020; Item #2
- EU Commission Welcomes Agreement on the Modernization of EU Export Controls; Tuesday, 10 Nov 2020; Item #6
- EU Council: “New Rules on Trade of Dual-Use Items Agreed”; Tuesday, 10 Nov 2020; Item #7
- Treasury/OFAC: “Treasury Sanctions a Procurement Network for Supplying Iranian Military Firm”; Thursday, 12 Nov 2020; Item #4
- EU Commission: “Boeing WTO Case — EU Puts in Place Countermeasures Against U.S. Exports”; Friday, 13 Nov 2020; Item #6
Commerce/BIS Request Comments on Import, End-User, Delivery Verification Certificates and Firearms Entry Clearance Requirements
(Source: Federal Register, 10 Nov 2020) [Excerpts]
85 FR 71605: Notice
The Department of Commerce will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, on or after the date of publication of this notice. We invite the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public’s reporting burden. Public comments were previously requested via the Federal Register on 8/27/2020 (85 FR 52949) during a 60-day comment period. This notice allows for an additional 30 days for public comments.
* Agency: Bureau of Industry and Security, Commerce.
* Title: Import, End-User, Delivery Verification Certificates and Firearms Entry Clearance Requirements.
* OMB Control Number: 0694-0093.
* Form Number(s): BIS-645P, BIS-647P.
* Type of Request: Regular submission, extension of a current information collection.
* Number of Respondents: 11,776.
* Average Hours per Response: 1 to 30 minutes.
* Burden Hours: 1,630.
* Needs and Uses: This collection of information addresses three activities: (1) Import Certificates/End Use Certificates, (2) Delivery Verification, and (3) Firearms Entry Clearance Requirements.
* Import Certificates or End-User Certificates (IC/EUC)-The IC/EUC, BIS-645P, is obtained by the foreign importer and transmitted to the U.S. exporter. They are issued by the government of the country of ultimate destination to exercise legal control over the disposition of the items covered by the IC/EUC. The control exercised by the government issuing the IC/EUC is in addition to the conditions and restrictions placed on the transaction by BIS.
* Delivery Verification-The Delivery Verification Certificate (DV) is required by BIS as part of its export control program. The license holder is responsible for having the ultimate consignee complete the BIS-647P, Delivery Verification Certificate Form when the goods are delivered. BIS uses the DV procedure on an “as needed” basis. The DV is usually required when there is suspicion of violation of the EAR. Therefore, if the exporter cannot supply the DV, BIS must be notified to determine if an exception is legitimate. Otherwise, the exporter would be in violation of the EAR.
* Firearms Entry Clearance Requirements-On January 23, 2020, The Department of Commerce issued a final rule that described how articles the President determines no longer warrant control under the United States Munitions List (USML) Category I-Firearms, Close Assault Weapons and Combat Shotguns; Category II-Guns and Armament; and Category III-Ammunition/Ordnance would be controlled under the Commerce Control List (CCL). This final rule, which became effective on March 9, 2020, was published in conjunction with a final rule on Categories I, II, and III from the Department of State, Directorate of Defense Trade Controls (DDTC).
This entry clearance requirement is necessary due to the changes by the President in determining that certain items no longer warrant control under United States Munitions List (USML) Category I-Firearms, Close Assault Weapons and Combat Shotguns; Category II-Guns and Armament; and Category III-Ammunition/Ordnance would be controlled under the Commerce Control List (CCL). As the State Department previously collected this same type of information, the Department of Commerce controls the CCL and must now take over this collection of information. Section 758.10 Entry clearance requirements for temporary imports will specify the EAR procedures for temporary imports and subsequent exports.
* Affected Public: Business or other for-profit organizations.
* Frequency: On Occasion.
* Respondent’s Obligation: Mandatory.
* Legal Authority: §§748.9, 748.10, 748.12, 748.14, Part 748 Supplement No. 5, 758.10, 762.5(d), 762.6, 764.2(g)(2), and of the Export Administration Regulations (EAR).
EU Commission Welcomes Agreement on the Modernization of EU Export Controls
(Source: European Commission, 9 Nov 2020)
The European Commission welcomes the agreement reached today by the European Parliament and the Council on its proposal for a modernisation of EU export controls on sensitive dual-use goods and technologies.
The changes agreed today will upgrade and strengthen the EU’s export control toolbox to respond effectively to evolving security risks and emerging technologies. Thanks to the new Regulation, the EU can now effectively protect its interests and values and, in particular, address the risk of violations of human rights associated with trade in cyber-surveillance technologies without prior agreement at multilateral level. It also enhances the EU’s capacity to control trade flows in sensitive new and emerging technologies.
Commission Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “I warmly welcome this agreement to upgrade our controls on dual-use technologies. These can have a far-reaching impact and pose a risk to national and international security, while cyber-technologies can lead to human rights violations. We will now have robust export controls to mitigate against abuses of dual-use tech and exporters will have to follow due diligence obligations. The Commission will work now closely with Member States and the European Parliament to implement the new Regulation effectively. We will also interact closely with industry, which is the ‘first line of defence’ to guard against proliferators and other malevolent actors.”
This new Regulation provides a new basis for the coordination of controls on a wider range of emerging dual-use technologies between the Commission and Member States in support of the effective enforcement of controls throughout the EU. Due diligence obligations and compliance requirements for exporters have also been introduced, recognising the role of the private sector in addressing the risks posed by trade in dual-use items to international security. Transparency will also be enhanced through the obligation to publish reports on the licenses granted.
Finally, the new Regulation provides a strong basis for the EU to engage with third countries in order to support a global level-playing field and enhance international security through more convergent approaches to export controls at global level.
Background and further details
The Commission adopted its legislative proposal to modernise EU controls on exports of sensitive dual-use goods and technology in September 2016. Such items have many civilian uses but can also be used for defence, intelligence and law enforcement purposes (nuclear and special materials, telecommunication, electronics and computers, space and aerospace, marine equipment etc.).
The new Regulation includes many of the Commission proposals for a comprehensive “system upgrade”, and will make the existing EU Export control system more effective by:
- introducing a novel ‘human security’ dimension so the EU can respond to the challenges posed by emerging dual-use technologies – especially cyber-surveillance technologies – that pose a risk to national and international security, including protecting human rights;
- updating key notions and definitions (e.g. definition of an “exporter” to apply to natural persons and researchers involved in dual-use technology transfers);
- simplifying and harmonising licensing procedures and allowing the Commission to amend – by ‘simplified’ procedure, i.e. delegated act – the list of items or destinations subject to specific forms of control, thereby making the export control system more agile and able to evolve and adjust to circumstances;
- enhancing information-exchange between licensing authorities and the Commission with a view to increasing transparency of licensing decisions;
- coordination of, and support for, robust enforcement of controls, including enhancing secure electronic information-exchange between licensing and enforcement agencies;
- developing an EU capacity-building and training programme for Member States’ licensing and enforcement authorities;
- outreach to industry and transparency with stakeholders, developing a structured relationship with the private sector through specific consultations of stakeholders by the relevant Commission group of Member-State experts, and;
- setting up a dialogue with third countries and seeking a level playing field at global level.
EU Council: “New Rules on Trade of Dual-Use Items Agreed”
(Source: Council of the European Union, 9 Nov 2020)
The EU will soon be equipped with a set of new rules allowing for more accountable, competitive and transparent trade of dual-use items. These are a vast group of goods, materials, software and technology which can be used for both civil and military purposes.
The German presidency of the Council and European Parliament representatives today reached a provisional political agreement on a revised regulation setting out the EU regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items.
Today’s agreement on trade of dual-use items is an important contribution in making the European Union fit for modern trade challenges. The new rules strike the right balance between strengthening the competitiveness of the EU, ensuring our security interests and promoting human rights. Thanks to the new rules, we will in the future be better equipped to allow legitimate trade to be carried out smoothly, but also to put an emphasis on control of certain technologies, especially cyber-surveillance items, which can be misused in connection with human rights violations. Furthermore, we strengthen our common EU approach by providing for more ways in which the member states can cooperate in the field of export controls.
The agreement now needs to be endorsed by member states’ ambassadors sitting on the Permanent Representatives Committee (Coreper). Parliament and Council will then be called on to adopt the proposed regulation at first reading.
The EU’s current export control system for dual-use items has been in place since 2009. This system needed, however, to be adapted to the changing technological, economic and political circumstances.
More generally, the new rules aim to further strengthen EU action on the non-proliferation of weapons of mass destruction and their means of delivery, to contribute to regional peace, security and stability, and to help ensure respect for human rights and international humanitarian law by controlling the export of dual-use items from the European Union.
The main features of the agreed regulation are as follows:
– in order to prevent human rights violations and security threats linked to the potential misuse of cyber-surveillance technology, the new rules include provisions making this technology subject to stricter export controls in certain circumstances
– moreover, the regulation now includes an EU-level coordination mechanism which allows for greater exchange between the member states concerning the export of cyber-surveillance items
– the regulation introduces two new, general EU export authorisations for the export of dual-use items – one for cryptographic items and one for intra-group technology transfers under certain circumstances – thereby significantly reducing the administrative burden for both companies and licensing authorities
– the regulation also strengthens the enforcement of controls through improved cooperation between licensing and customs authorities, and introduces mechanisms allowing member states to strengthen their cooperation in this area
– the regulation introduces a new provision on transmissible controls, allowing, in certain cases, a member state to introduce export controls on the basis of the legislation established by another member state, thereby allowing for a cross-border effect of member states’ export controls
– the regulation harmonises at EU-level the rules applicable to certain services with regard to dual-use items currently regulated at national level (technical assistance)
– new reporting rules will allow for more transparency on trade in dual-use items while at the same time respecting the confidentiality of business secrets and of national security interests.
Background & next steps
Under international commitments, EU member states need to have measures in place at national level to prevent the proliferation of nuclear, chemical or biological weapons and their means of delivery. This includes controls over dual-use items, that is related materials, equipment and technology for export which can be used for both civilian and military purposes, including the purposes mentioned above.
To this end, in 2009 the EU adopted a regulation setting up a regime for the control of exports, brokering, technical assistance, transit and transfer of dual-use items.
To adapt to the rapidly changing technological, economic and political circumstances, in September 2016 the Commission presented a proposal for a revised regulation which would update and extend the existing rules.
In June 2019 the Council agreed on its negotiating mandate, and since then trilogues have been held in October 2019, November 2019, February 2020 and September 2020.
The agreement will be submitted for endorsement by Coreper. Parliament and Council will then be called on to adopt the proposed regulation at first reading.
Treasury/OFAC: “Treasury Sanctions a Procurement Network for Supplying Iranian Military Firm”
(Source: Treasury/OFAC, 10 Nov 2020) [Excerpts]
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated a network of six companies and four individuals that facilitated the procurement of sensitive goods, including U.S.-origin electronic components, for Iran Communication Industries (ICI), an Iranian military firm designated by the United States in 2008 and by the European Union in 2010 for being owned or controlled by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), the overall manager and coordinator of Iran’s ballistic missile program. ICI, a subsidiary of Iran Electronics Industries, which falls under MODAFL, produces various items including military communication systems, avionics, information technology, electronic warfare, and missile launchers. “The Iranian regime utilizes a global network of companies to advance its destabilizing military capabilities,” said Secretary Steven T. Mnuchin. “The United States will continue to take action against those who help to support the regime’s militarization and proliferation efforts.”
Treasury’s action is being taken pursuant to Executive Order (E.O.) 13382, an authority aimed at freezing the assets of proliferators of weapons of mass destruction (WMD) and their supporters. Concurrent with Treasury’s designations, the U.S. Attorney’s Office for the District of Columbia is filing charges by criminal complaint against two entities and one individual that have also been designated today. ….
Click here to see specially designated nationals list update
EU Commission: “Boeing WTO Case — EU Puts in Place Countermeasures Against U.S. Exports”
(Source: European Commission, 9 Nov 2020)
The European Commission’s regulation increasing tariffs on U.S. exports into the EU worth $4 billion will be published in the Official Journal of the EU.
The countermeasures have been agreed by EU Member States since the U.S. has not yet provided the basis for a negotiated settlement, which would include an immediate removal of U.S. tariffs on EU exports in the Airbus WTO case. The World Trade Organization (WTO) formally authorised the EU on 26 October to take such countermeasures against illegal U.S. subsidies to aircraft maker Boeing. The measures will take effect as from tomorrow. The European Commission stands ready to work with the U.S. to settle this dispute and also to agree on long-term disciplines on aircraft subsidies.
Executive Vice-President for an Economy that Works for People and Commissioner for Trade Valdis Dombrovskis said: “We have made clear all along that we want to settle this long-running issue. Regrettably, due to lack of progress with the U.S., we had no other choice but to impose these countermeasures. The EU is consequently exercising its legal rights under the WTO’s recent decision. We call on the U.S. to agree to both sides dropping existing countermeasures with immediate effect, so we can quickly put this behind us. Removing these tariffs is a win-win for both sides, especially with the pandemic wreaking havoc on our economies. We now have an opportunity to reboot our transatlantic cooperation and work together towards our shared goals.“
The countermeasures bring the EU equal footing with the U.S., with sizeable tariffs on each side based on two WTO decisions related to aircraft subsidies. They include additional tariffs of 15% on aircraft as well as additional tariffs of 25% on a range of agricultural and industrial products imported from the U.S., thereby strictly mirroring the countermeasures imposed by the United States in the context of the WTO case on subsidies to Airbus.
In March 2019, the Appellate Body, the highest WTO instance, confirmed that the U.S. had not taken appropriate action to comply with WTO rules on subsidies, despite the previous rulings. Instead, it continued its illegal support of its aircraft manufacturer Boeing to the detriment of Airbus, the European aerospace industry and its many workers. In its ruling, the Appellate Body:
- confirmed the Washington State tax programme continues to be a central part of the U.S. unlawful subsidisation of Boeing;
- found that a number of ongoing instruments, including certain NASA and U.S. Department of Defence procurement contracts constitute subsidies that may cause economic harm to Airbus, and;
- confirmed that Boeing continues to benefit from an illegal U.S. tax concession that supports exports (the Foreign Sales Corporation and Extraterritorial Income Exclusion).
Today’s decision confirming the EU right to retaliate stems directly from that previous decision. In a parallel case on Airbus, the WTO allowed the United States in October 2019 to take countermeasures against European exports worth up to $7.5 billion. This award was based on an Appellate Body decision of 2018 that had found that the EU and its Member States had not fully complied with the previous WTO rulings with regard to Repayable Launch Investment for the A350 and A380 programmes. The U.S. imposed these additional tariffs on 18 October 2019. The EU Member States concerned have taken in the meantime all necessary steps to ensure full compliance.