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19-0521 Tuesday “Daily Bugle'”

19-0521 Tuesday “Daily Bugle”

Tuesday, 21 May 2019

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The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here. Contact us for advertising 

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  1. President Adjusts Imports of Automobiles and Automobile Parts into the U.S. 
  2. President Adjusts Imports of Steel into the U.S. 
  3. President Continues National Emergency with Respect to the Stabilization of Iraq 
  4. Commerce/BIS Amends EAR, Adds Huawei and 68 of its Non-U.S. Affiliates to Entity List 
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Releases Harmonized System Update (HSU) 1908
  4. DHS/CBP Terminates Section 232 Duty for Steel and Aluminum Products of Canada and Mexico
  5. State/DDTC: (No new postings.)
  6. EU Amends Restrictive Measures Concerning Iraq
  7. UK OFSI Publishes Updated Guidance Concerning UK Sanctions on Syria
  1. Deutsche Welle: “U.S. Issues Huawei a Temporary Reprieve”
  2. Enterprise AI: “Tech Sector Frets Over U.S. Export Controls”
  3. The Guardian: “Citizens Committee Puts Saudi Arms Sales Under Scrutiny”
  4. ST&R Trade Report: “Legislative Update: China, Cuba, Freight Transport, Trade Promotion, Etc.”
  5. Stratfor: “Will Rare Earths Be the Next Front in the U.S.-China Tech War?”
  6. The Wall Street Journal: “U.S. Slows Hiring of Chinese Nationals by Chip Makers”
  1. G. Kelley: “Broad New Trade Restrictions on Huawei”
  2. J. Reeves and K. Heubert: “Yes, BIS License Applications Are Subject to Interagency Review”
  3. P. DiVecchio: “Why This Export Compliance Consultant is ‘Mad as Hell’!”
  4. S. Gearity: “Huawei, ZTE, and the Certainty of Trade Disruption”
  1. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (5 Apr 2019), DOC/EAR (14 May 2019), DOC/FTR (24 Apr 2018), DOD/NISPOM (18 May 2016), DOE/AFAEC (23 Feb 2015), DOE/EINEM (20 Nov 2018), DOJ/ATF (14 Mar 2018), DOS/ITAR (19 Apr 2018), DOT/FACR/OFAC (29 Apr 2018), HTSUS (13 May 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11.
President Adjusts Imports of Automobiles and Automobile Parts into the U.S.
(Source: 
Federal Register, 21 May 2019.)
 
84 FR 23433: Adjusting Imports of Automobiles and Automobile Parts into the U.S.
 
A Proclamation
 
(1) On February 17, 2019, the Secretary of Commerce (Secretary) transmitted to me a report on his investigation into the effects of imports of passenger vehicles (sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans) and light trucks (collectively “automobiles”) and certain automobile parts (engines and engine parts, transmissions and powertrain parts, and electrical components) on the national security of the United States under section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862).
 
(2) The report found that automotive research and development (R&D) is critical to national security. The rapid application of commercial breakthroughs in automobile technology is necessary for the United States to retain competitive military advantage and meet new defense requirements. Important innovations are occurring in the areas of engine and powertrain technology, electrification, lightweighting, advanced connectivity, and autonomous driving. The United States defense industrial base depends on the American-owned automotive sector for the development of technologies that are essential to maintaining our military superiority.
 
(3) Thus, the Secretary found that American-owned automotive R&D and manufacturing are vital to national security. Yet, increases in imports of automobiles and automobile parts, combined with other circumstances, have over the past three decades given foreign-owned producers a competitive advantage over American-owned producers.
 
(4) American-owned producers’ share of the domestic automobile market has contracted sharply, declining from 67 percent (10.5 million units produced and sold in the United States) in 1985 to 22 percent (3.7 million units produced and sold in the United States) in 2017. During the same time period, the volume of imports nearly doubled, from 4.6 million units to 8.3 million units. In 2017, the United States imported over 191 billion dollars’ worth of automobiles.
 
(5) Furthermore, one circumstance exacerbating the effects of such imports is that protected foreign markets, like those in the European Union and Japan, impose significant barriers to automotive imports from the United States, severely disadvantaging American-owned producers and preventing them from developing alternative sources of revenue for R&D in the face of declining domestic sales. American-owned producers’ share of the global automobile market fell from 36 percent in 1995 to just 12 percent in 2017, reducing American-owned producers’ ability to fund necessary R&D.
 
(6) Because “[d]efense purchases alone are not sufficient to support . . . R&D in key automotive technologies,” the Secretary found that “American-owned automobile and automobile parts manufacturers must have a robust presence in the U.S. commercial market” and that American innovation capacity “is now at serious risk as imports continue to displace American-owned production.” Sales revenue enables R&D expenditures that are necessary for long-term automotive technological superiority, and automotive technological superiority is essential for the national defense. The lag in R&D expenditures by American-owned producers is weakening innovation and, accordingly, threatening to impair our national security.
 
(7) In light of all of these factors, domestic conditions of competition must be improved by reducing imports. American-owned producers must be able to increase R&D expenditures to ensure technological leadership that can meet national defense requirements.
 
(8) The Secretary found and advised me of his opinion that automobiles and certain automobile parts are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States. The Secretary found that these imports are “weakening our internal economy” and that “[t]he contraction of the American owned automotive industry, if continued, will significantly impede the United States’ ability to develop technologically advanced products that are essential to our ability to maintain technological superiority to meet defense requirements and cost effective global power projection.”
 
(9) The Secretary therefore concluded that the present quantities and circumstances of automobile and certain automobile parts imports threaten to impair the national security as defined in section 232 of the Trade Expansion Act of 1962, as amended.
 
(10) In reaching this conclusion, the Secretary considered the extent to which import penetration has displaced American-owned production, the close relationship between economic welfare and national security, see 19 U.S.C. 1862(d), the expected effect of the recently negotiated United States-Mexico-Canada Agreement (USMCA), and what would happen should the United States experience another economic downturn comparable to the 2009 recession.
 
(11) In light of the report’s findings, the Secretary recommended actions to adjust automotive imports so that they will not threaten to impair the national security. One recommendation was to pursue negotiations to obtain agreements that address the threatened impairment of national security. In the Secretary’s judgment, successful negotiations could allow American-owned automobile producers to achieve long-term economic viability and increase R&D spending to develop cutting-edge technologies that are critical to the defense industry.
 
(12) I concur in the Secretary’s finding that automobiles and certain automobile parts are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States, and I have considered his recommendations.
 
(13) I have also considered the renegotiated United States-Korea Agreement and the recently signed USMCA, which, when implemented, could help to address the threatened impairment of national security found by the Secretary.
 
(14) Section 232 of the Trade Expansion Act of 1962, as amended, authorizes the President to take action to adjust the imports of an article and its derivatives that are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security. If that action is the negotiation of an agreement contemplated in 19 U.S.C. 1862(c)(3)(A)(i), and such an agreement is not entered into within 180 days of the proclamation or is not being carried out or is ineffective, then the statute authorizes the President to take other actions he deems necessary to adjust imports and eliminate the threat that the imported article poses to national security. See 19 U.S.C. 1862(c)(3)(A).
 
(15) I have decided to direct the United States Trade Representative (Trade Representative) to pursue negotiation of agreements contemplated in 19 U.S.C. 1862(c)(3)(A)(i) to address the threatened impairment of the national security with respect to imported automobiles and certain automobile parts from the European Union, Japan, and any other country the Trade Representative deems appropriate, and to update me on the progress of such negotiations within 180 days. Under current circumstances, this action is necessary and appropriate to remove the threatened impairment of the national security.
 
NOW, THEREFORE, I, DONALD J. TRUMP, President of the United States of America, by the authority vested in me by the Constitution and the laws of the United States of America, including section 301 of title 3, United States Code, and section 232 of the Trade Expansion Act of 1962, as amended, do hereby proclaim as follows:
 
(1) The Trade Representative, in consultation with the Secretary, the Secretary of the Treasury, and any other senior executive branch officials the Trade Representative deems appropriate, shall pursue negotiation of agreements contemplated in 19 U.S.C. 1862(c)(3)(A)(i) to address the threatened impairment of the national security with respect to imported automobiles and certain automobile parts from the European Union, Japan, and any other country the Trade Representative deems appropriate.
(2) Within 180 days of the date of this proclamation, the Trade Representative shall update me on the outcome of the negotiations directed under clause (1) of this proclamation.
(3) The Secretary shall continue to monitor imports of automobiles and certain automobile parts and shall, from time to time, in consultation with any senior executive branch officials the Secretary deems appropriate, review the status of such imports with respect to the national security. The Secretary shall inform the President of any circumstances that in the Secretary’s opinion might indicate the need for further action by the President under section 232 of the Trade Expansion Act of 1962, as amended.
(4) Any provision of previous proclamations and Executive Orders that is inconsistent with the actions taken in this proclamation is superseded to the extent of such inconsistency.
 
IN WITNESS WHEREOF, I have hereunto set my hand this seventeenth day of May, in the year of our Lord two thousand nineteen, and of the Independence of the United States of America the two hundred and forty-third.
 
(Presidential Sig.)

* * * * * * * * * * * * * * * * * * * *

EXIM_a22.
President Adjusts
Imports of Steel into the U.S.

(Source:
Federal Register
 
, 21 May 2019.)
 
84 FR 23421: Adjusting Imports of Steel into the United States
 
A Proclamation
 
(1) On January 11, 2018, the Secretary of Commerce (Secretary) transmitted to me a report on his investigation into the effect of imports of steel articles on the national security of the United States under section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. 1862). The Secretary found and advised me of his opinion that steel articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States.
 
(2) In Proclamation 9705 of March 8, 2018 (Adjusting Imports of Steel Into the United States), I concurred in the Secretary’s finding that steel articles, as defined in clause 1 of Proclamation 9705, as amended by clause 8 of Proclamation 9711 of March 22, 2018 (Adjusting Imports of Steel Into the United States), are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States, and decided to adjust the imports of these steel articles by imposing a 25 percent ad valorem tariff on such articles imported from most countries.
 
(3) In Proclamation 9705, I also directed the Secretary to monitor imports of steel articles and inform me of any circumstances that in the Secretary’s opinion might indicate the need for further action under section 232 of the Trade Expansion Act of 1962, as amended, with respect to such imports.
 
(4) In August 2018, the Secretary informed me that while capacity utilization in the domestic steel industry had improved, it was still below the target capacity utilization level recommended by the Secretary in his report. Although imports of steel articles had declined since the imposition of the tariff, I was advised that they were still several percentage points greater than the level of imports that would allow domestic capacity utilization to reach the target level. Given that imports had not declined as much as anticipated and capacity utilization had not increased to that target level, I concluded that it was necessary and appropriate in light of our national security interests to adjust the tariff imposed by previous proclamations.
 
(5) In the Secretary’s January 2018 report, the Secretary recommended that I consider applying a higher tariff to a list of specific countries should I determine that all countries should not be subject to the same tariff. One of the countries on that list was the Republic of Turkey (Turkey). As the Secretary explained in that report, Turkey was among the major exporters of steel to the United States for domestic consumption. To further reduce imports of steel articles and increase domestic capacity utilization, I determined in Proclamation 9772 of August 10, 2018 (Adjusting Imports of Steel Into the United States), that it was necessary and appropriate to impose a 50 percent ad valorem tariff on steel articles imported from Turkey, beginning on August 13, 2018. The Secretary advised me that this adjustment would be a significant step toward ensuring the viability of the domestic steel industry.
 
(6) The Secretary has now advised me that, since the implementation of the higher tariff under Proclamation 9772, imports of steel articles have declined by 12 percent in 2018 compared to 2017 and imports of steel articles from Turkey have declined by 48 percent in 2018, with the result that the domestic industry’s capacity utilization has improved at this point to approximately the target level recommended in the Secretary’s report. This target level, if maintained for an appropriate period, will improve the financial viability of the domestic steel industry over the long term.
 
(7) Given these improvements, I have determined that it is necessary and appropriate to remove the higher tariff on steel imports from Turkey imposed by Proclamation 9772, and to instead impose a 25 percent ad valorem tariff on steel imports from Turkey, commensurate with the tariff imposed on such articles imported from most countries. Maintaining the existing 25 percent ad valorem tariff on most countries is necessary and appropriate at this time to address the threatened impairment of the national security that the Secretary found in the January 2018 report.
 
(8) Section 232 of the Trade Expansion Act of 1962, as amended, authorizes the President to adjust the imports of an article and its derivatives that are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.
 
(9) Section 604 of the Trade Act of 1974, as amended (19 U.S.C. 2483), authorizes the President to embody in the Harmonized Tariff Schedule of the United States (HTSUS) the substance of statutes affecting import treatment, and actions thereunder, including the removal, modification, continuance, or imposition of any rate of duty or other import restriction.
 
NOW, THEREFORE, I, DONALD J. TRUMP, President of the United States of America, by the authority vested in me by the Constitution and the laws of the United States of America, including section 232 of the Trade Expansion Act of 1962, as amended, section 301 of title 3, United States Code, and section 604 of the Trade Act of 1974, as amended, do hereby proclaim as follows:
 
(1) Clause 2 of Proclamation 9705, as amended, is revised to read as follows:
 
“(2)(a) In order to establish certain modifications to the duty rate on imports of steel articles, subchapter III of chapter 99 of the HTSUS is modified as provided in the Annex to this proclamation and any subsequent proclamations regarding such steel articles.
 
(b) Except as otherwise provided in this proclamation, or in notices published pursuant to clause 3 of this proclamation, all steel articles imports covered by heading 9903.80.01, in subchapter III of chapter 99 of the HTSUS, shall be subject to an additional 25 percent ad valorem rate of duty with respect to goods entered for consumption, or withdrawn from warehouse for consumption, as follows: (i) on or after 12:01 a.m. eastern daylight time on March 23, 2018, from all countries except Argentina, Australia, Brazil, Canada, Mexico, South Korea, and the member countries of the European Union; (ii) on or after 12:01 a.m. eastern daylight time on June 1, 2018, from all countries except Argentina, Australia, Brazil, and South Korea; (iii) on or after 12:01 a.m. eastern daylight time on August 13, 2018, from all countries except Argentina, Australia, Brazil, South Korea, and Turkey; and (iv) on or after 12:01 a.m. eastern daylight time on May 21, 2019, from all countries except Argentina, Australia, Brazil, and South Korea. Further, except as otherwise provided in notices published pursuant to clause 3 of this proclamation, all steel articles imports from Turkey covered by heading 9903.80.02, in subchapter III of chapter 99 of the HTSUS, shall be subject to a 50 percent ad valorem rate of duty with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on August 13, 2018 and prior to 12:01 a.m. eastern daylight time on May 21, 2019. All steel articles imports covered by heading 9903.80.61, in subchapter III of chapter 99 of the HTSUS, shall be subject to the additional 25 percent ad valorem rate of duty established herein with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on the date specified in a determination by the Secretary granting relief. These rates of duty, which are in addition to any other duties, fees, exactions, and charges applicable to such imported steel articles, shall apply to imports of steel articles from each country as specified in the preceding three sentences”.
 
(2) The text of U.S. note 16(a)(i) to subchapter III of chapter 99 of the HTSUS is amended by deleting “Except as provided in U.S. note 16(a)(ii), which applies to products of Turkey that are provided for in heading 9903.80.02, heading 9903.80.01 provides” and inserting the following in lieu thereof: “Heading 9903.80.01 provides”.
 
(3) Heading 9903.80.02, in subchapter III of chapter 99 of the HTSUS, and its accompanying material, and U.S. note 16(a)(ii) to subchapter III of chapter 99 of the HTSUS, are deleted.
 
(4) Paragraphs (b), (c), and (d) of U.S. note 16 to subchapter III of chapter 99 of the HTSUS are each amended by replacing “headings 9903.80.01 and 9903.80.02” with “heading 9903.80.01”.
 
(5) The “Article description” for heading 9903.80.01 in subchapter III of chapter 99 of the HTSUS is amended by replacing “of Brazil, of Turkey” with “of Brazil”.
 
(6) The modifications to the HTSUS made by clauses 1 through 5 of this proclamation shall be effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 21, 2019 and shall continue in effect, unless such actions are expressly reduced, modified, or terminated.
 
(7) Any steel articles imports from Turkey that were admitted into a United States foreign trade zone under “privileged foreign status” as defined in 19 CFR 146.41, prior to 12:01 a.m. eastern daylight time on May 21, 2019, shall be subject upon entry for consumption on or after such time and date to the ad valorem rate of duty in heading 9903.80.01 in subchapter III of chapter 99 of the HTSUS.
 
(8) Any provision of previous proclamations and Executive Orders that is inconsistent with the actions taken in this proclamation is superseded to the extent of such inconsistency.
 
IN WITNESS WHEREOF, I have hereunto set my hand this sixteenth day of May, in the year of our Lord two thousand nineteen, and of the Independence of the United States of America the two hundred and forty-third.
 

(Presidential Sig.) 

* * * * * * * * * * * * * * * * * * * *

EXIM_a33.
President Continues National Emergency with Respect to the Stabilization of Iraq

(Source: Federal Register, 21 May 2019.)
 
84 FR 23437: Continuation of the National Emergency with Respect to the Stabilization of Iraq
 
On May 22, 2003, by Executive Order 13303, the President declared a national emergency pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States posed by obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in the country, and the development of political, administrative, and economic institutions in Iraq.
 
The obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in the country, and the development of political, administrative, and economic institutions in Iraq continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States. For this reason, the national emergency declared in Executive Order 13303, as modified in scope and relied upon for additional steps taken in Executive Order 13315 of August 28, 2003, Executive Order 13350 of July 29, 2004, Executive Order 13364 of November 29, 2004, Executive Order 13438 of July 17, 2007, and Executive Order 13668 of May 27, 2014, must continue in effect beyond May 22, 2019. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to the stabilization of Iraq declared in Executive Order 13303.
 
This notice shall be published in the Federal Register and transmitted to the Congress.
 
(Presidential Sig.)
THE WHITE HOUSE,

May 20, 2019. 

* * * * * * * * * * * * * * * * * * * *

EXIM_a44.
Commerce/BIS Amends EAR, Adds Huawei and 68 of its Non-U.S. Affiliates to Entity List

(Source:
Federal Register
 
, 21 May 2019.) [Excerpts.]
 
FR 22961-22968: Addition of Entities to the Entity List
 
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) by adding Huawei Technologies Co., Ltd. (Huawei) to the Entity List. The U.S. Government has determined that there is reasonable cause to believe that Huawei has been involved in activities contrary to the national security or foreign policy interests of the United States. BIS is also adding non-U.S. affiliates of Huawei to the Entity List because those affiliates pose a significant risk of involvement in activities contrary to the national security or foreign policy interests of the United States. Huawei will be listed on the Entity List under the destination of China. This final rule also adds to the Entity List sixty-eight non-U.S. affiliates of Huawei located in twenty-six destinations: Belgium, Bolivia, Brazil, Burma, Canada, Chile, China, Egypt, Germany, Hong Kong, Jamaica, Japan, Jordan, Lebanon, Madagascar, Netherlands, Oman, Pakistan, Paraguay, Qatar, Singapore, Sri Lanka, Switzerland, Taiwan, United Kingdom, and Vietnam.
* DATES: Effective Date: This rule is effective May 16, 2019.
* FOR FURTHER INFORMATION CONTACT: Director, Office of Exporter Services, Bureau of Industry and Security, Department of Commerce, Phone: (949) 660-0144 or (408) 998-8806 or email your inquiry to: ECDOEXS@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
 
ERC Entity List Decision
 
Additions to the Entity List
 
Under Sec. 744.11(b) (Criteria for revising the Entity List) of the EAR, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that the person has been involved, is involved, or poses a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States and those acting on behalf of such persons may be added to the Entity List. Pursuant to Sec. 744.11(b) of the EAR, the ERC has determined that there is reasonable cause to believe that Huawei Technologies Co., Ltd. (Huawei) has been involved in activities determined to be contrary to the national security or foreign policy interests of the United States. To illustrate, Huawei has been indicted in the U.S. District Court for the Eastern District of New York on 13 counts of violating U.S. law (Superseding Indictment), including violations of the International Emergency Economic Powers Act (IEEPA), by knowingly and willfully causing the export, reexport, sale and supply, directly and indirectly, of goods, technology and services (banking and other financial services) from the United States to Iran and the government of Iran without obtaining a license from the Department of Treasury’s Office of Foreign Assets Control (OFAC), as required by OFAC’s Iranian Transactions and Sanctions Regulations (31 CFR part 560), and conspiracy to violate IEEPA by knowingly and willfully conspiring to cause the export, reexport, sale and supply, directly and indirectly, of goods, technology and services (banking and other financial services) from the United States to Iran and the government of Iran without obtaining a license from OFAC as required by OFAC’s Iranian Transactions and Sanctions Regulations (31 CFR part 560). The Superseding Indictment also alleges that Huawei and an Iranian-based affiliate, working with others, knowingly and willfully conspired to impair, impede, obstruct, and defeat, through deceitful and dishonest means, the lawful government operations of OFAC.
 
Further, Huawei’s affiliates present a significant risk of acting on Huawei’s behalf to engage in such activities. Because the ERC has determined that there is reasonable cause to believe that the affiliates pose a significant risk of becoming involved in activities contrary to the national security or foreign policy interests of the United States due to their relationship with Huawei, this final rule also adds to the Entity List sixty-eight non-U.S. affiliates of Huawei located in twenty-six destinations: Belgium, Bolivia, Brazil, Burma, Canada, Chile, China, Egypt, Germany, Hong Kong, Jamaica, Japan, Jordan, Lebanon, Madagascar, Netherlands, Oman, Pakistan, Paraguay, Qatar, Singapore, Sri Lanka, Switzerland, Taiwan, United Kingdom, and Vietnam. Without the imposition of a license requirement as to these affiliated companies, there is reasonable cause to believe that Huawei would seek to use these entities to evade the restrictions imposed by its addition to the Entity List. As set forth in the Superseding Indictment filed in the Eastern District of New York, Huawei participated along with certain affiliates in the alleged criminal violations of U.S. law, including one or more non-U.S. affiliates. The Superseding Indictment also alleges that Huawei and affiliates acting on Huawei’s behalf engaged in a series of deceptive and obstructive acts designed to evade U.S. law and to avoid detection by U.S. law enforcement.
 
In light of the foregoing, Huawei and sixty-eight non-U.S. affiliates of Huawei raise sufficient concern that prior review of exports, reexports, or transfers (in-country) of items subject to the EAR involving these entities, and the possible imposition of license conditions or license denials on shipments to these entities, will enhance BIS’s ability to prevent activities contrary to the national security or foreign policy interests of the United States.
For all of the entities added to the Entity List in this final rule, unless authorized by the Savings Clause in this final rule, BIS imposes a license requirement for all items subject to the EAR and a license review policy of presumption of denial. Similarly, no license exceptions are available for exports, reexports, or transfers (in-country) to the persons being added to the Entity List in this rule except as allowed in the Savings Clause in this final rule.
 
This final rule adds the following entity to the Entity List:
 
China
 
(1) Huawei Technologies Co., Ltd. (Huawei), Bantian Huawei Base, Longgang District, Shenzhen, 518129, China.
 
This final rule also adds the following sixty-eight non-U.S. affiliates of the entry above to the Entity List:
 
Belgium
 
(1) Huawei Technologies Research & Development Belgium NV, Belgium.
 
Bolivia
 
(1) Huawei Technologies (Bolivia) S.R.L., La Paz, Bolivia.
 
Brazil
 
(1) Huawei do Brasil Telecomunicacões Ltda, Sao Paulo, Brazil.
 
Burma
 
(1) Huawei Technologies (Yangon) Co., Ltd., Yangon, Burma.
 
Canada
 
(1) Huawei Technologies Canada Co., Ltd., Markham, ON, Canada.
 
Chile
 
(1) Huawei Chile S.A., Santiago, Chile.
 
China
 
(1) Beijing Huawei Digital Technologies Co., Ltd., Beijing, China;
(2) Chengdu Huawei High-Tech Investment Co., Ltd., Chengdu, Sichuan, China;
(3) Chengdu Huawei Technologies Co., Ltd., Chengdu, Sichuan, China;
(4) Dongguan Huawei Service Co., Ltd., Dongguan, Guangdong, China;
(5) Dongguan Lvyuan Industry Investment Co., Ltd., Dongguan, Guangdong, China;
(6) Gui’an New District Huawei Investment Co., Ltd., Guiyang, Guizhou, China;
(7) Hangzhou Huawei Digital Technology Co., Ltd., Hangzhou, Zhejiang, China;
(8) HiSilicon Optoelectronics Co., Ltd., Wuhan, Hubei, China;
(9) HiSilicon Technologies Co., Ltd (HiSilicon), Bantian Longgang District, Shenzhen, 518129, China.
(10) HiSilicon Tech (Suzhou) Co., Ltd., Suzhou, Jiangsu, China;
(11) Huawei Device Co., Ltd., Dongguan, Guangdong, China;
(12) Huawei Device (Dongguan) Co., Ltd., Dongguan, Guangdong, China;
(13) Huawei Device (Shenzhen) Co., Ltd., Shenzhen, Guangdong, China;
(14) Huawei Digital Technologies (Suzhou) Co., Ltd., Suzhou, Jiangsu, China;
(15) Huawei Machine Co., Ltd., Dongguan, Guangdong, China;
(16) Huawei Software Technologies Co., Ltd., Nanjing, Jiangsu, China;
(17) Huawei Technical Service Co., Ltd., China;
(18) Huawei Technologies Service Co., Ltd., Langfang, Hebei, China;
(19) Huawei Training (Dongguan) Co., Ltd., Dongguan, Guangdong, China;
(20) Huayi Internet Information Service Co., Ltd., Shenzhen, Guangdong, China;
(21) North Huawei Communication Technology Co., Ltd., Beijing, China;
(22) Shanghai Haisi Technology Co., Ltd., Shanghai, China;
(23) Shanghai Huawei Technologies Co. Ltd., Shanghai, China;
(24) Shanghai Mossel Trade Co., Ltd., Shanghai, China;
(25) Shenzhen Huawei Technical Services Co., Ltd., Shenzhen, Guangdong, China;
(26) Shenzhen Huawei Terminal Commercial Co., Ltd., Shenzhen, Guangdong, China;
(27) Shenzhen Huawei Training School Co., Ltd., Shenzhen, Guangdong, China;
(28) Shenzhen Huayi Loan Small Loan Co., Ltd., Shenzhen, Guangdong, China;
(29) Shenzhen Legrit Technology Co., Ltd., Shenzhen, Guangdong, China;
(30) Shenzhen Smartcom Business Co., Ltd., Shenzhen, Guangdong, China;
(31) Suzhou Huawei Investment Co., Ltd., Suzhou, Jiangsu, China;
(32) Wuhan Huawei Investment Co., Ltd., Wuhan, Hubei, China;
(33) Xi’an Huawei Technologies Co., Ltd., Xi’an, Shaanxi, China;
(34) Xi’an Ruixin Investment Co., Ltd., Xi’an, Shaanxi, China; and
(35) Zhejiang Huawei Communications Technology Co., Ltd., Hangzhou, Zhejiang, China.
 
Egypt
 
(1) Huawei Technology, Cairo, Egypt.
 
Germany
 
(1) Huawei Technologies Deutschland GmbH, Germany.
 
Hong Kong
 
(1) Huawei Device (Hong Kong) Co., Limited, Tsim Sha Tsui, Kowloon, Hong Kong;
(2) Huawei International Co., Limited, Hong Kong;
(3) Huawei Tech. Investment Co., Limited, Hong Kong;
(4) Huawei Technologies Co. Ltd., Tsim Sha Tsui, Kowloon, Hong Kong;
(5) Hua Ying Management Co. Limited, Tsim Sha Tsui, Kowloon, Hong Kong; and
(6) Smartcom (Hong Kong) Co., Limited, Sheung Wan, Hong Kong;
 
Jamaica
 
(1) Huawei Technologies Jamaica Company Limited, Kingston, Jamaica.
 
Japan
 
(1) Huawei Technologies Japan K.K., Japan.
 
Jordan
 
(1) Huawei Technologies Investment Co. Ltd., Amman, Jordan.
 
Lebanon
 
(1) Huawei Technologies Lebanon, Beirut, Lebanon.
 
Madagascar
 
(1) Huawei Technologies Madagascar Sarl, Antananarivo, Madagascar.
 
Netherlands
 
(1) Huawei Technologies Coöperatief U.A., Netherlands.Start Printed Page 22963
 
Oman
 
(1) Huawei Tech Investment Oman LLC, Muscat, Oman.
 
Pakistan
 
(1) Huawei Technologies Pakistan (Private) Limited, Islamabad, Pakistan.
 
Paraguay
 
(1) Huawei Technologies Paraguay S.A., Asuncion, Paraguay.
 
Qatar
 
(1) Huawei Tech Investment Limited, Doha, Qatar.
 
Singapore
 
(1) Huawei International Pte. Ltd., Singapore.
 
Sri Lanka
 
(1) Huawei Technologies Lanka Company (Private) Limited, Colombo, Sri Lanka.
 
Switzerland
 
(1) Huawei Technologies Switzerland AG, Liebefeld, Bern, Switzerland.
 
Taiwan
 
(1) Xunwei Technologies Co., Ltd., Taipei, Taiwan.
 
United Kingdom
 
(1) Huawei Global Finance (UK) Limited, Great Britain;
(2) Proven Glory, British Virgin Islands; and
(3) Proven Honour, British Virgin Islands.
 
Vietnam
 
(1) Huawei Technologies (Vietnam) Company Limited, Hanoi, Vietnam; and
(2) Huawei Technology Co. Ltd., Hanoi, Vietnam.
 
Savings Clause
 
Shipments of items removed from eligibility for a License Exception or export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on May 16, 2019, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or reexport without a license (NLR). …
 
Dated: May 16, 2019.

Wilbur Ross, Secretary of Commerce. 

* * * * * * * * * * * * * * * * * * * *

OGSOTHER GOVERNMENT SOURCES

OGS_a15. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

 

* Commerce/BIS; NOTICES; Meetings: Regulations and Procedures Technical Advisory Committee [Pub. Date: 22 May 2019.]
 
* Commerce/BIS; RULES; Temporary General License [Pub. Date: 22 May 2019.]
 
* State; NOTICES; Imposition of Nonproliferation Measures Against Foreign Persons, Including a Ban on U.S. Government Procurement [Pub. Date: 22 May 2019.]
 
* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 22 May 2019.]

 

* * * * * * * * * * * * * * * * * * * * 

* * * * * * * * * * * * * * * * * * * *

OGS_a37.
DHS/CBP Releases Harmonized System Update (HSU) 1908
 

(Source: CSMS# 19-000258, 21 May 2019.
 
Harmonized System Update (HSU) 1908 was created on May 20, 2019 and contains 212 ABI records and 43 harmonized tariff records.
 
Modifications include those made as a result of Presidential Proclamation 9886, Adjusting Imports of Steel into the United States. This proclamation was published in the Federal Register on May 21, 2019, Vol. 84 No. 98, page 23421, and can be found using this link.
 
Additional changes were made to support the PGA Message Set functionality as well.
 
Adjustments required by the verification of the 2019 Harmonized Tariff Schedule (HTS) are also included.
 
The modified records are currently available to all ABI participants and can be retrieved electronically via the procedures indicated in the CATAIR. For further information about the retrieval process, please contact your client representative.
 
All other questions regarding this message, please contact Jennifer Keeling via email at Jennifer.L.Keeling@cbp.dhs.gov.  

* * * * * * * * * * * * * * * * * * * * 

OGS_a48.
DHS/CBP Terminates Section 232 Duty for Steel and Aluminum Products of Canada and Mexico

(Source: CSMS# 19-000252, 19 May 2019.)
 
* UPDATE: Effective for goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 20, 2019, the Section 232 duty on imports of steel and aluminum articles with a country of origin of Canada or Mexico will no longer be in effect.
* COMMODITY:
Steel mill and aluminum articles with a country of origin of Canada or Mexico.
* FILING INSTRUCTIONS:
Imports of steel mill and aluminum articles with a country of origin of Canada or Mexico:
Do not report Harmonized Tariff Schedule (HTS) classification 9903.80.01 or 9903.85.01.
– Steel Products
Report the regular Chapter 72 or 73 HTS classification for the imported merchandise.
– Aluminum Products
Report the regular Chapter 76 HTS classification for the imported merchandise.
* FOR FURTHER INFORMATION:
See the May 2019 Proclamations on Adjusting Imports of Steel and Aluminum into the United States.
Questions related to Section 232 entry filing requirements should be emailed to traderemedyunit@cbp.dhs.gov.
Questions from the importing community concerning ACE rejections should be referred to their Client Representative.


 

* * * * * * * * * * * * * * * * * * * * 

* * * * * * * * * * * * * * * * * * * * 

OGS_a610.
EU Amends Restrictive Measures Concerning Iraq

(Source: Official Journal of the European Union, 21 May 2019.)
 
Regulations
* Commission Implementing Regulation (EU) 2019/808 of 20 May 2019 amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions on economic and financial relations with Iraq.

 

* * * * * * * * * * * * * * * * * * * * 

OGS_a711.
UK OFSI Publishes Updated Guidance Concerning UK Sanctions on Syria
(Source: UK OFSI, 21 May 2019.)
 
The UK Office of Financial Sanctions Implementation (OFSI) has updated the guidance on the UK’s sanctions regime on Syria, if the UK leaves the EU without a deal.
 
The Guidance can be read here.

* * * * * * * * * * * * * * * * * * * * 

NWSNEWS

NWS_a112
.
Deutsche Welle: “U.S. Issues Huawei a Temporary Reprieve”

(Source:
Deutsche Welle
, 21 May 2019.) [Excerpts.]
 
The Trump administration has eased some trade restrictions on Huawei, allowing the Chinese tech giant to continue doing business with US firms for another 90 days. Huawei’s founder has warned conflict is “inevitable.”
 
US officials on Monday granted a temporary license that will allow Huawei to continue doing business with American firms for the next 90 days. 
 
The new authorization is intended to give telecommunications operators that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement.
 
“In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks,” Ross added.
 
However, a Commerce Department filing says the delay does not change the ban imposed by President Donald Trump on national security grounds, an action with major implications for US and Chinese technology firms.
 
The company is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied.
 
The reprieve comes after Google said on Sunday that it was pulling Huawei’s license to use its mobile phone operating system Android. …

* * * * * * * * * * * * * * * * * * * * 

NWS_a213
.
Enterprise AI: “Tech Sector Frets Over U.S. Export Controls”

(Source: Enterprise AI, 20 May 2019.) [Excerpts.]
 
As regulators prepare to tighten U.S. export controls with an eye toward restricting technology transfers to China, industry groups are pushing back, arguing that overly restrictive rules would cost U.S. industry hundreds of billions in export sales.
 
Trade groups are meanwhile seeking to ensure that export control issues are not swept up in the current trade tensions between the U.S. and China.
 
Congress moved last year to expand export rules to cover so-called “emerging and foundational technologies” deemed vital to U.S. national security but not currently covered by existing regulations. Among the technology categories raising the most concern among industry groups are AI and machine learning, data analytics, emerging computing approaches such as “memory-centric logic” and quantum computing, encryption and sensing. …
 
Industry groups are especially concerned that lawmakers left undefined precisely what constitutes either emerging or foundational technologies. Those hotly-debated definitions were left to the Commerce Department’s Bureau of Industry and Security (BIS), which enforces U.S. export controls. …

* * * * * * * * * * * * * * * * * * * * 

NWS_a314
.
The Guardian: “Citizens Committee Puts Saudi Arms Sales Under Scrutiny”

(Source: The Guardian, 21 May 2019.) [Excerpts.]
 
The failure of Britain’s “broken select committee system” to mount a new inquiry into UK arms sales to Saudi Arabia has prompted a group of MPs, arms sales analysts and former army officers to form its own citizens committee to argue against the multibillion-pound weapons contracts.
 
Nearly half of UK arms sales go to Saudi Arabia, which is involved in an intractable five-year civil war in Yemen where international law has been violated by both sides.
 
The new citizens committee on arms sales (CCAS), meeting in Westminster on Wednesday, is due to take evidence from Yemeni human rights campaigners speaking from the capital Sana’a as well as a former UK brigadier to the Saudi capital, Riyadh, who has previously claimed the UK is breaking its own rules by selling arms for use in Yemen. …
 
The backdrop to the assembly on Wednesday includes a long-awaited court of appeal verdict into whether UK government is abiding by its own commitment not to supply weapons where there is a clear risk that they might be used in serious violations of international humanitarian law. The judges’ ruling is expected by the summer.

* * * * * * * * * * * * * * * * * * * * 

NWS_a415
.
ST&R Trade Report: “Legislative Update: China, Cuba, Freight Transport, Trade Promotion, Etc.”

(Source: Sandler, Travis & Rosenberg Trade Report, 21 May 2019.) [Excerpts.]
 
China
. The China Technology Transfer Control Act (S. 1459, introduced May 14 by Sen. Hawley, R-Mo.) would place all “core technologies” from China’s “Made in 2025” strategy (e.g., artificial intelligence, robotics, semiconductors, advanced construction equipment) on the Department of Commerce’s export control list, which would require companies to obtain licenses to export such technologies to China and impose sanctions on foreign entities and individuals that violate these restrictions. This bill would also formally admonish China for intellectual property theft and manipulation of the lawful transfer and uses of technology in ways that directly support its military objectives and threaten the U.S.
 
The U.S.-China Economic and Security Review Act (H.R. 2565, introduced May 7 by Reps. Sherman, D-Calif., and Gallagher, R-Wis.) seeks to reduce the U.S. government’s reliance on supply chains in China and push back on Beijing’s unfair trading practices by implementing many of the U.S.-China Economic and Security Review Commission’s recommendations. Among other things, this bill would require the Office of the U.S. Trade Representative to assess whether it is in the national interest to bring a complaint against China at the World Trade Organization in coordination with U.S. allies and partners; require the director of national intelligence to report on the effect of China’s existing and potential facilities along the Silk Road Economic Belt and the New Maritime Silk Road on freedom of navigation, sea control, and U.S. interests;; and require USTR to report on China’s trade-distorting practices and what it is doing to counteract their anticompetitive impact. …

 

* * * * * * * * * * * * * * * * * * * * 

NWS_a516
.
Stratfor: “Will Rare Earths Be the Next Front in the U.S.-China Tech War?”

(Source: Stratfor, 21 May 2019.) [Excerpts.]
 
The rise of the Chinese tech sector has helped power Beijing’s rivalry with the United States. The recent efforts of the White House to counter China’s tech champions, including its most profitable foreign venture, Huawei Technologies, have already taken effect, leading to a move by Google parent Alphabet Inc. to halt some business with the telecommunications giant.
 
One possible response for China would be to restrict or ban exports of the rare earth elements critical to high-tech products. China’s preeminence in the rare earths supply chain would make that a potent option; China has about a third of the world’s reserves of the elements but controls a much larger portion of mining and refining operations. Rare earths are crucial for components across a variety of technologies. …
 
In the current trade climate, a ban on rare earths exports, especially heavy rare earths, would be a risky move that could pull other countries into a more active role in the U.S.-China trade war. Additionally, China lacks sufficient export control personnel and monitoring systems to effectively enforce a targeted export ban aimed at the United States. In an effort to balance its own domestic supply – and because of concerns about illegal mining operations – China recently enacted a ban on imports of rare earths from Myanmar. That action will likely have some near-term effects, apparently limited for now to a speculative reaction, on the global market.

  

* * * * * * * * * * * * * * * * * * * * 

NWS_a617
.
The Wall Street Journal: “U.S. Slows Hiring of Chinese Nationals by Chip Makers”
(Source: The Wall Street Journal, 21 May 2019.) [Excerpts. Subscription required.]
 
The U.S. has sharply slowed approvals for the nation’s semiconductor companies to hire Chinese nationals for advanced engineering jobs, according to industry insiders, who say the delays are limiting access to vital talent.
 
The disruption, which started last year, has affected hundreds of jobs across the industry at companies including Intel Corp., Qualcomm Inc. and Globalfoundries Inc., impeding their ability to hire Chinese employees or move existing employees to key projects in the U.S., these people said. …
  

* * * * * * * * * * * * * * * * * * * * 

COMMCOMMENTARY

COM_a118.
G. Kelley: “Broad New Trade Restrictions on Huawei”

(Source: Author, 21 May 2019.)
 
* Author: Glen Kelley, Esq., 
gkelley@jacobsonburton.com. Of Jacobson Burton Kelley PLLC.
 
As a follow-up to our Huawei update last Thursday (May 16):

–  We put out an alert on Sunday (May 19) noting that the US Bureau of Industry and Security (BIS), which administers the Entity List, is taking the position that the addition of Huawei and 68 of its affiliates to the Entity List took effect at 4:15pm ET on Thursday May 16, 2019.

–  As we predicted in that alert, BIS has issued a “Temporary General License” (TGL), authorizing some transactions with Huawei that would otherwise be prohibited by the Entity List action. We discuss the TGL below.

Effective date of Entity List restrictions 

In our initial alert on May 16, we noted that the Final Rule adding the 69 Huawei companies to the Entity List (the Huawei Rule) should not be effective until it is published in the Federal Register on Tuesday May 21, 2019.  However, late on Friday (May 17) BIS posted
guidance on its website regarding the Huawei Rule. That guidance links to a one paragraph PDF document stating that the Huawei Rule was effective at 4:15pm on Thursday May 16 when the
advance copy of the Rule was released for public inspection.


Unlike changes to the Denied Persons List or the OFAC SDN List, a formal amendment of regulations is required to modify the Entity List, specifically Part 744 of the Export Administration Regulations (EAR). 

BIS has suggested that a provision of the Export Control Reform Act of 2018 gave BIS new authority to amend the EAR without prior notice or formal publication. Nonetheless, the position of BIS seems to run counter to decades of regulatory practice and US administrative law. If BIS brings enforcement actions for pre-May 21, 2019 transactions with Huawei, BIS may face challenges in the US courts. 

Recommended approach 

Out of an abundance of caution, companies should move as quickly as possible to comply with the Huawei Rule as if it is went into effect on May 16. We summarized in our alert below the relevant restrictions on exports, reexports and transfers of items to the 69 Huawei companies.  In our alert we noted that there is a “savings clause” in the Huawei Rule that generally exempts items that had already been shipped to Huawei and were en route when the Rule became effective, so long as they did not previously require a BIS export license.

Companies should also document actions they take to comply with the Huawei Rule, and the timing of those actions. To document the uncertainty over the effective date, we note that:

–  As of 9pm ET on Monday May 20, the
Electronic Code of Federal Regulations, updated daily and stated to be current through May 17 did not reflect the addition of any of the 69 Huawei entities to the Entity List.

–  The
Entity List provided on the BIS website had not been updated to include the Huawei entities as of May 19 and was difficult to download on May 20. This is part of a copy of the EAR set out in PDF files which BIS normally updates promptly to reflect amendments.

–  The
Consolidated Screening List made available by Commerce was updated to include the Huawei entities during the afternoon of Monday, May 20.

We also note that as of May 20 most third party software screening providers had not added the 69 Huawei entities to their lists since they are based on electronic data provided by the US government.

Temporary General License 

Effective 4:15pm ET on Monday, May 20), BIS issued a
TGL authorizing the following four categories of transactions for a 90 day period through August 19, 2019:

–  Transactions necessary to maintain and support networks and equipment that “currently fully operational”, pursuant to agreements in place with any of the 69 Huawei entities on or before May 16, 2019.

–  Transactions necessary for service or support, including software updates and patches, to “existing Huawei handsets”, which appears to mean existing models of Huawei devices that were already being manufactured and sold to the public as of May 16.

–  Disclosure of information regarding security vulnerabilities in items owned or controlled by any of the 69 Huawei entities, as part of “ongoing security research critical to maintaining the integrity and reliability of” fully operational networks and equipment, as well as handsets.

–  Engagement with the 69 Huawei entities “necessary for the development of 5G standards as part of duly recognized international standards bodies” such as the IEEE, ISO, ITU and GSMA.

The authorization provided by the TGL only covers the restrictions imposed by the Entity List action. It does not lift any other restriction on a transaction imposed by other provisions of the regulations, including general BIS export licensing requirements applicable to the Huawei entities before they were added to the Entity List. 

Companies relying upon the TGL should review it closely and take appropriate care to ensure that any products, software or technology they provide to Huawei going forward either (i) fall outside the scope of the Entity List restrictions completely, or (ii) fall squarely within the terms of the TGL.

Being confident regarding the analysis of transactions covered by the TGL is particularly important because the TGL requires that a company complete and maintain in its own files a written “certification statement” before engaging in a transaction with Huawei in reliance on the TGL. The statement must “specify” how the relevant export, reexport or transfer to Huawei “meets the scope of” the TGL.

Companies should be alert for changes in the TGL. It is likely that before the end of its 90 day period on August 19 the TGL will be modified (either broadened or cut back), and it could be extended or even terminated early.

Like the Final Rule adding the Huawei entities to the Entity List, BIS has taken the position that the TGL was effective immediately upon its release on Monday May 20, in the Public Inspection section of the Federal Register website. The TGL is not due to be formally published in the Federal Register until Wednesday, May 22.

* * * * * * * * * * * * * * * * * * * * 

COM_a2
19
.
J.
Reeves and K. Heubert: “Yes, BIS License Applications Are Subject to Interagency Review”

(Source: Reeves & Dola, 17 May, 2019.)
[Available by subscription via 
info@reevesdola.com
.] 

 

In preparation for the finalization of the proposed transition of U.S. Munition List (“USML”) certain Categories I, II, and III items, we take a look at the licensing process under the Department of Commerce, Bureau of Industry and Security’s (“BIS”) Export Administration Regulations (“EAR”) in hopes of dispelling some myths and misconceptions. Unless the final rules vary widely from the proposed rules, which is unlikely but always a possibility, non-automatic and semi-automatic firearms up to and including .50 caliber currently controlled under USML Category I(a), as well as all parts, components, accessories and attachments specially designed for those firearms will move off of the USML. These items will be subject to the EAR under newly created “500 series” Export Control Classification Numbers (“ECCNs”) in the Commodity Control List (“CCL”).
 
As we have covered in previous alerts, a license still will be required under the EAR for exports of firearms and ammunition to any country in the world, including Canada. The license submission process for BIS is not so different from Department of State’s DTrade system, except one critical difference is it’s free of charge, as are individual license applications. Companies will need to get set up on the Simplified Network Application Process – Redesign (“SNAP-R”)  electronic licensing system in order to submit a license application, but this is not the same as the registration requirement on the State Department side and there is no annual fee requirement. SNAP-R allows users to submit export license applications, commodity classification requests, reexport license applications using the same form. Each different type of request has specific information that may be required. Like the DTrade system, supporting documents can be uploaded as attachments in SNAP-R.  Part 748 of the EAR provides instructions for completing a license application.
 
Once an application is submitted, you can track the U.S. Government review progress using the BIS System for Tracking Export License Applications (“STELA”). This internal government review process can sometimes be a mystery and seems to be where a lot of misinformation and confusion is coming from, at least as far as future BIS license applications for firearms and ammunition moving over from the USML. We have heard rumors that run the gamut about the level of scrutiny that will be given to such license applications, ranging from “there will be no interagency review outside of BIS” to “BIS will be able to overrule other agencies.”  This is not accurate. 
 
On August 13, 2018, the Export Control Reform Act of 2018 (“ECRA”) became law as part of the John S. McCain National Defense Authorization Act for Fiscal Year 2019. ECRA provides permanent statutory authority for the EAR. Part I, the “Export Controls Act of 2018” (“ECA”), authorizes BIS to administer the export controls under its purview. Section 1758 of the ECA requires BIS to control the export of “emerging and foundational technologies” that are “essential to the national security of the United States.”  Interestingly, Congress did not provide a definition for “emerging” or “foundational” technologies in ECRA – this is left up to BIS to define. 
 
To assist BIS in determining what should be considered an “emerging” or “foundational” technology, BIS published an Advance Notice of Proposed Rulemaking (ANPRM) back in November 2018. In the ANPRM, BIS provided a listing of representative technologies that may be considered “emerging technology” and asked for public comment (public comment period has now closed).  However, BIS notes in the ANPRM that it will be publishing a separate Federal Register notice regarding “identification of foundational technologies that may be important to U.S. national security.”  This ANPRM has yet to publish. Are they waiting for the transition rules?  We don’t know for sure, but we do note it is possible certain firearms and ammunition may be added to a “foundational technology” list as part of the finalization of the transition process.  
 
If firearms and ammunition are identified as “foundational technology that is essential to the national security of the United States,” the license review process outlined in § 1758(b)(3) of the ECA will apply to any application submitted to export firearms or ammunition. That license review process requires BIS to follow the procedures set forth in Executive Order (EO) 12981, which makes it clear that “the Departments of State, Defense, and Energy, and the Arms Control and Disarmament Agency each shall have the authority to review any export license application submitted to [BIS].”  
 
It is important to note that this interagency review process is not new; it has been in existence since 1995 (the issuance date of EO 12981) and is already outlined in the existing text of § 750.4 of the EAR. The ECA simply reiterates the process and formally attaches it to “emerging” or “foundational” technologies. This interagency review establishes a process by which any one of the reviewing agencies can issue a recommendation to deny a license application. If there is disagreement on the issuance of a license, it is then raised to the Operating Committee (“OC”), which includes members from the aforementioned agencies, as well as non-voting representatives of the Joint Chiefs of Staff and the Nonproliferation Center of the Central Intelligence Agency. There is an appeal process by which a reviewing agency can appeal the decision of the OC. This appeal is made to the Advisory Committee on Export Policy (”ACEP”), who’s majority vote is final. 
 
In addition to invoking the license review process of EO 12981, § 1758(b)(3)(B) of the ECA requires BIS “take into account information provided by the Director of National Intelligence regarding any threat to the national security of the United States posed by the proposed export, reexport, or transfer.”  Finally, the existing language in § 750.4 of the EAR allows for pre-license checks of the proposed end-user, requests for government-to-government assurances, consultations with other governments, multilateral reviews, as well as Congressional Notifications for items that require it under the EAR.
 
As you can see, there is already established a robust license review process in the EAR, and the ECRA provides permanent statuary authority for it and requires it to be applied to “emerging” or “foundational” technologies. All of this together clearly debunks the myth that there are no reviews of export license applications outside of BIS or that BIS’ decision is final, and underscores the potential for firearms to be placed in a subset of items that will require just as much scrutiny as they do now as USML items.

* * * * * * * * * * * * * * * * * * * * 

COM_a3
20
.
P. DiVecchio: “Why This Export Compliance Consultant is ‘Mad as Hell’!”


(Source: Author, 21 May 2019.)

 
* Author: Paul DiVecchio, Principla, DiVecchio & Associates,
pauldivec@earthlink.net.

I’m mad as hell!  Let me tell you why.  In my nearly 40 years of interpreting and advising my myriad of clients on export control regulations, I have never seen such a terrible mishandling of rulemaking rollout that I have just witnessed with this latest placement of Huawei and 68 of its overseas affiliates on the Commerce Department’s Entity List.

Specifically, there has been mass confusion within the export industry, as well as among the legal community, when the effective date for the Entity List restrictions are to commence.  The Trump administration declared the enforcement clock for these Entity List additions turned on last Thursday at 4:15 p.m. EST, or in other words, the date and time that the Federal Register notice was released in prepublication form. In that same prepublication notice, the Commerce Department’s Bureau of Industry and Security stated that the final Federal Register notice will be published at midnight, starting Tuesday, thus traditionally could be assumed as setting the start of enforcement by the agency.

So which date is it?  Let’s face it, most exporters do not refer to the public inspection postings of Federal Register notices – or for that matter even know these exist.  Even if the exporter’s compliance manager had reviewed the public inspection notice of the Entity List additions, he or she could have read the statement on the second page, “Effective Date: This rule is effective [INSERT DATE OF DISPLAY ON THE PUBLIC INSPECTION LIST].” That would signal to the exporter that enforcement of the rule actually would actually start at midnight on Tuesday and that his or her exports en route to Huawei through that actual publication date in the Federal Register are still in compliance.

BIS did not highlight on its website that the effective date of the restriction, May 16, for the addition of Huawei and its 68 overseas affiliates until Friday, in essence 24 hours later than the public inspection notice’s release. At the same time, the agency’s website posting incorrectly referenced the Federal Register notice (which will be officially published Tuesday) and did not correctly identify the Federal Register “public inspection.”

As of midnight EST Monday, the BIS Entity List posted on the Export Administration Regulations (EAR), under Supplement No. 4, part 744, had not been updated with Huawei and its 68 affiliates.  The Consolidated List on the BIS website, which is used by many export compliance staff to conduct their restricted party screening, also had not been updated by the agency as of midnight Monday.  During the scramble to figure out exactly when enforcement of the Huawei additions to the Entity List, the various third-party restricted parties screening vendors did not update their databases until various times on Friday, almost one day after the date of restriction.  On top of that, media outlets, through no fault of their own, showed a lack of consistency and understanding to the effective date for the Huawei-related additions to the Entity List.

The bottom line is that the business community relies on predictability and transparency of federal regulations in order to eliminate the risks of noncompliance and enhance opportunities to be competitive in the marketplace.

If you knew there was such a thing as a “public inspection” to the Federal Register and if you knew where to find it, then you would at least have been able to read the ambiguous language identified on page two, which alludes to the posting date on page 28.  Add to that, in case you missed it, the “saving clause” found on page 13 of the “public inspection” document, which reads: “Shipments of items removed from eligibility for a license exception or export or re-export without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or re-export on [INSERT DATE OF DISPLAY ON THE PUBLIC INSPECTION LIST], pursuant to actual orders for export or re-export to a foreign destination may proceed to that destination under the previous eligibility for a license or export or re-export without a license (NLR).”

In essence, you had to know that you could not release from your shipping dock exports to Huawei or any of the company’s 68 affiliates on the Entity List no later than 11:59 pm. EST on May 16. Otherwise, you would be in violation. (You would have had to know that the posting to the Federal Register public inspection was made at 4:15 pm EST on May 16.  In essence, you would have had seven hours and 44 minutes to know about the posting – 45 minutes prior to the end of the workday – in order to get the shipment off of your dock or you would be in violation of the EAR.)

BIS has done a great job in posting real-world FAQs and detailed answers on the BIS website. On the homepage, go to Policy Guidance – Entity List FAQs. Several of the FAQs address: “Can a U.S. company have any dealings with a listed entity?” and “Do the license requirements and policies of the Entity List apply to separately incorporated subsidiaries, partially owned subsidiaries or sister companies of a listed entity?”

However, the terrible mishandling by the Commerce Department of when the enforcement of Huawei additions to the Entity List actually takes place means that some large suppliers of semiconductors and other electronics technology to the Chinese telecom may already be in violation. 

On the positive side, the good news is that BIS has posted on the pre-publication to the Federal Register a “General Temporary License”(GTL) for those affected Hauwei and “the 68” affiliates which is effective as of 4:15 pm EST on 5/20/19 as a final rule.  There are 4 sets of “authorizations” that you must meet at least one in order to take advantage of the GTL.  If eligible for the GTL, you also must prepare a “Certification Statement” prior to the export/re-export/or in country transfer.  This is not the same type of “General License”  issued to the posting of ZTE to the Entity List.  There are a number of qualifying factors for usage of the TGL and you can expect a visit from Special Agents of BIS’s Office of Export Enforcement to ensure that you qualify for using the TGL.

* * * * * * * * * * * * * * * * * * * * 

COM_a4
21
.
S. Gearity: “Huawei, ZTE, and the Certainty of Trade Disruption”

 
* Author: Scott Gearity, Principal of BSG Consulting, and President of the Export Compliance Training Institute (ECTI), Inc.  Contact Scott at
scott@learnexportcompliance.com.
 
As I write these words, Huawei and 68 of its affiliates around the world are set to be added tomorrow (21 May) to the Bureau of Industry and Security’s Entity List, an action which will trigger the need for a license for the export, reexport, and transfer of all items subject to the EAR to these companies. 
 
The consequences are already piling up. In the past few days we have learned that 
Google will limit
 Huawei’s access to the Android software which runs its smartphones. Multiple semiconductor manufacturers have told their employees to stop business with Huawei.
 
We have known since at least 2016 that the US Government was investigating Huawei. Not coincidentally, 2016 was the year BIS first sanctioned a different Shenzhen-based telecommunications firm, ZTE. BIS took the unusual step of publishing evidence obtained during a search of a ZTE executive and his assistant at the Boston airport. The documents demonstrated ZTE’s intent to circumvent export controls on components it was buying from US suppliers and no doubt contributed to the decision by BIS to place ZTE on the Entity List. But the documents also identified a company called “F7” who ZTE seemed to regard as a sort of role model for US sanctions evasion. According to reporting, F7 is Huawei.
 
It’s been nearly five years since that border search at Logan International Airport. Nonetheless, we may be closer to the beginning of the Huawei export enforcement story than the end. It’s instructive to recall the sequence of events involving ZTE:
 
(1) Added to the Entity List
(2) Temporary general license issued
(3) Temporary general license extended (a total of four times)
(4) Removed from the Entity List as part of settlement agreement including payment of penalties
(5) Suspended denial order activated following false statements by ZTE to BIS

(6) Denial order lifted with new settlement agreement and additional penalties 

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a122. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands


 
This training course is designed for compliance officers, managers, and other professionals who aim to enhance their organization’s compliance efforts. The course will cover multiple topics and tackle various key questions, including but not limited to:
– Setting the Scene: ensuring compliance in the export control and sanctions arena
– What is expected from your organization? A closer look at the official frameworks and guidelines from U.S. and European government agencies
– Key elements of an ICP
– Best practice tips for enhancing your current compliance efforts  
– Internal controls samples (policies, procedures, instructions)
– Strategic benefits of having an ICP.
 
* What: Designing an Internal Compliance Program (ICP) for Export Controls & Sanctions
* Date: Tuesday, 1 Oct 2019
* Location: Full Circle Compliance, Landgoed Groenhoven, Dorpsstraat 6, Bruchem, The Netherlands
* Times:
  – Registration and welcome: 9.00 am – 9.30 am
  – Training course hours: 9.30 am – 4.30 pm
* Level: Intermediate
* Target Audience:  the course provides valuable insights for both compliance professionals, employees and (senior / middle) management working in any industry subject to U.S. and/or EU (member state) export control laws and sanctions regulations.
* Instructors: Drs. Ghislaine C.Y. Gillessen RA and Marco M. Crombach MSc.

* Information & Registration: click here or contact us at events@fullcirclecompliance.eu or 31 (0)23 – 844 – 9046. 

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ENEDITOR’S NOTES

* Alexander Pope (21 May 1688 – 30 May 1744; was an 18th-century English poet. He is best known for his satirical verse, including Essay on Criticism, The Rape of the Lock, and The Dunciad, and for his translation of Homer. He is the second-most frequently quoted writer in The Oxford Dictionary of Quotations after Shakespeare.)
  – “No one should be ashamed to admit he is wrong, which is but saying, in other words, that he is wiser today than he was yesterday.”
  – “Be not the first by whom the new are tried, Nor yet the last to lay the old aside.”

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EN_a324
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

 

*
DHS CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199.  Implemented by Dep’t of Homeland Security, U.S. Customs & Border Protection.

  – Last Amendment: 5 Apr 2019:
84 FR 13499-13513: Civil Monetary Penalty Adjustments for Inflation
 

DOC EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774. Implemented by Dep’t of Commerce, Bureau of Industry & Security.
  – Last Amendment: 21 May 2019: FR 22961-22968: Addition of Entities to the Entity List [Addition of Huawei and 68 of its Non-U.S. Affiliates to Entity List.]  
 
* DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.  Implemented by Dep’t of Commerce, U.S. Census Bureau.
  – Last Amendment: 24 Apr 2018: 83 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates
  – HTS codes that are not valid for AES are available here.
  – The latest edition (1 Jan 2019) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu.   

 

DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M. Implemented by Dep’t of Defense.
  – Last Amendment: 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; Implemented by Dep’t of Energy, National Nuclear Security Administration, under Atomic Energy Act of 1954.
  – Last Amendment: 23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. This rule also identifies destinations with respect to which most assistance would be generally authorized and destinations that would require a specific authorization by the Secretary of Energy.
 
DOE EXPORT AND IMPORT OF NUCLEAR EQUIPMENT AND MATERIAL; 10 CFR Part 110; Implemented by Dep’t of Energy, U.S. Nuclear Regulatory Commission, under Atomic Energy Act of 1954.
  – Last Amendment: 20 Nov 2018, 10 CFR 110.6, Re-transfers.
 

* DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.  Implemented by Dep’t of Justice, Bureau of Alcohol, Tobacco, Firearms & Explosives.
  – Last Amendment: 14 Mar 2019: 84 FR 9239-9240: Bump-Stock-Type Devices 

 

DOS INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130. Implemented by Dep’t of State, Directorate of Defense Trade Controls.
  – Last Amendment: 19 Apr 2019: 84 FR 16398-16402: International Traffic in Arms Regulations: Transfers Made by or for a Department or Agency of the U.S. Government   
  – The only available fully updated copy (latest edition: 19 Apr 2019) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment. The BITAR is available by annual subscription from the Full Circle Compliance website. BAFTR subscribers receive a $25 discount on subscriptions to the BITAR, please contact us to receive your discount code.
 
* DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders. 

Implemented by Dep’t of Treasury, Office of Foreign Assets Control.

  – Last Amendment: 29 Apr 2019: 84 FR 17950-17958: Foreign Interference in U.S. Elections Sanctions Regulations [amendment of 31 CFR Part 579 to implement EO 13848] 
  
* USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), 1 Jan 2019: 19 USC 1202 Annex. Implemented by U.S. International Trade Commission. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)

  –
Last Amendment: 21 May 2019: Harmonized System Update (HSU) 1908 

  – HTS codes for AES are available here.

  – HTS codes that are not valid for AES are available here.

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EN_a0325
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published  
here

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Vincent J.A. Goossen and Alexander Witt; and Events & Jobs Editor, Sven Goor. The Ex/Im Daily Update is emailed every business day to approximately 7,000 readers of changes to defense and high-tech trade laws and regulations.  
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

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.


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