;

19-0523 Thursday “Daily Bugle”

19-0523 Thursday “Daily Bugle”

Thursday, 23 May 2019

TOP
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 

inquiries and rates
. 

  1. President Adjusts Aluminum Imports into the U.S.
  2. President Adjusts Steel Imports into the U.S.
  3. Commerce/BIS Amends EAR, Implements Changes Made to WA Dual-Use List
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. Commerce/Census: “Filing in AESDirect: How Do You Find Your Internal Transaction Number?”
  4. DoD/DSCA Policy Memos of Interest: End-Use Monitoring FVC and Potential End-Use Violations
  5. Justice: “Middlesex County Man Admits Participation in Conspiracy to Illegally Export Firearms and Other Items to Ukraine”
  6. State/DDTC: (No new postings.)
  1. Reuters: “French Court Approves Extradition of Iranian Engineer to U.S.”
  2. ST&R Trade Report: “Defense Export End-Use Checks Continue to Find Problems”
  3. The Straits Times: “U.S. Blacklisting of Huawei Prompts Global Firms, Including Panasonic and ARM, to Follow Suit”
  1. A. Doussin & I. Brooks: “UK Clamps Down on the Trading of Goods Outside the Country Without A License”
  2. D. Smith: “The Long Arm of OFAC – How U.S. Sanctions Impact Pretty Much Everyone”
  3. R. Whitten, J.S. Maberry & E. Agada: “Hua-Wait a Minute: Entity Designation Affects Non-U.S. Manufacturers’ Exports to China Tech Giant”
  1. ECS Presents “ITAR/EAR Bootcamp: Achieving Compliance” on 8-9 Jul in Seattle, WA
  2. 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 (23 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 (21 May 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11.
President Adjusts Aluminum Imports into the U.S.
(Source:
Federal Register, 23 May 2019.)
 
84 FR 23983-23985: Adjusting Imports of Aluminum into the United States
 
A Proclamation
 
1. On January 19, 2018, the Secretary of Commerce (Secretary) transmitted to me a report on his investigation into the effect of imports of aluminum 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 aluminum articles were 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 9704 of March 8, 2018 (Adjusting Imports of Aluminum Into the United States), I concurred in the Secretary’s finding that aluminum articles were 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 aluminum articles, as defined in clause 1 of Proclamation 9704, by imposing a 10 percent ad valorem tariff on such articles imported from most countries.
 
3. In Proclamation 9704, I further stated that any country with which we have a security relationship is welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports from that country, and noted that, should the United States and any such country arrive at a satisfactory alternative means to address the threat to the national security such that I determine that imports from that country no longer threaten to impair the national security, I may remove or modify the restriction on aluminum articles imports from that country and, if necessary, adjust the tariff as it applies to other countries, as the national security interests of the United States require.
 
4. The United States has successfully concluded discussions with Canada and Mexico on satisfactory alternative means to address the threatened impairment of the national security posed by aluminum imports from Canada and Mexico. The United States has agreed on a range of measures with Canada and Mexico to prevent the importation of aluminum that is unfairly subsidized or sold at dumped prices, to prevent the transshipment of aluminum, and to monitor for and avoid import surges. These measures are expected to allow imports of aluminum from Canada and Mexico to remain stable at historical levels without meaningful increases, thus permitting the domestic capacity utilization to remain reasonably commensurate with the target level recommended in the Secretary’s report. In my judgment, these measures will provide effective, long-term alternative means to address the contribution of these countries’ imports to the threatened impairment of the national security.
 
5. In light of these agreements, I have determined that, under the framework in the agreements, imports of aluminum from Canada and Mexico will no longer threaten to impair the national security, and thus I have decided to exclude Canada and Mexico from the tariff proclaimed in Proclamation 9704, as amended. The United States will monitor the implementation and effectiveness of these measures in addressing our national security needs, and I may revisit this determination as appropriate.
 
6. In light of my determination to exclude, on a long-term basis, these countries from the tariff proclaimed in Proclamation 9704, as amended, I have considered whether it is necessary and appropriate in light of our national security interests to make any corresponding adjustments to such tariff as it applies to other countries. I have determined that, in light of the agreed-upon measures with Canada and Mexico, it is necessary and appropriate, at this time, to maintain the current tariff level as it applies to other countries.
 
7. 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.
 
8. 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 9704, as amended, is further amended in the second sentence by deleting the “and” before “(c)” and inserting before the period at the end: “, and (d) on or after 12:01 a.m. eastern daylight time on May 20, 2019, from all countries except Argentina, Australia, Canada, and Mexico”.
 
(2) The “Article description” for heading 9903.85.01, in subchapter III of chapter 99 of the HTSUS, is amended by replacing “of Australia” with “of Australia, of Canada, of Mexico”.
 
(3) The modifications made by clauses 1 and 2 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 20, 2019, and shall continue in effect, unless such actions are expressly reduced, modified, or terminated.
 
(4) Any imports of aluminum articles from Canada and Mexico that were admitted into a U.S. 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 20, 2019, shall not be subject upon entry for consumption made after 12:01 a.m. eastern daylight time on May 20, 2019, to the additional 10 percent ad valorem rate of duty imposed by Proclamation 9704, as amended.
 
(5) 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 nineteenth 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 Signature.]

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

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

(Source:
Federal Register, 23 May 2019.)
 
84 FR 23987-23989: 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 were 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), were 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. As stated in the Proclamation dated May 16, 2019 (Adjusting Imports of Steel Into the United States), the Secretary has now advised me that the domestic industry’s capacity utilization has improved 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.
 
4. In Proclamation 9705, I further stated that any country with which we have a security relationship is welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports from that country, and noted that, should the United States and any such country arrive at a satisfactory alternative means to address the threat to the national security such that I determine that imports from that country no longer threaten to impair the national security, I may remove or modify the restriction on steel articles imports from that country and, if necessary, adjust the tariff as it applies to other countries, as the national security interests of the United States require.
 
5. The United States has successfully concluded discussions with Canada and Mexico on satisfactory alternative means to address the threatened impairment of the national security posed by steel articles imports from Canada and Mexico. The United States has agreed on a range of measures with Canada and Mexico to prevent the importation of steel articles that are unfairly subsidized or sold at dumped prices, to prevent the transshipment of steel articles, and to monitor for and avoid import surges. These measures are expected to allow imports of steel articles from Canada and Mexico to remain stable at historical levels without meaningful increases, thus permitting the domestic industry’s capacity utilization to continue at approximately the target level recommended in the Secretary’s report. In my judgment, these measures will provide effective, long-term alternative means to address the contribution of these countries’ imports to the threatened impairment of the national security.
 
6. In light of these agreements, I have determined that, under the framework in the agreements, imports of steel articles from Canada and Mexico will no longer threaten to impair the national security, and thus I have decided to exclude Canada and Mexico from the tariff proclaimed in Proclamation 9705, as amended. The United States will monitor the implementation and effectiveness of these measures in addressing our national security needs, and I may revisit this determination as appropriate.
 
7. In light of my determination to exclude, on a long-term basis, Canada and Mexico from the tariff proclaimed in Proclamation 9705, as amended, I have considered whether it is necessary and appropriate in light of our national security interests to make any corresponding adjustments to such tariff as it applies to other countries. I have determined that, in light of the agreed-upon measures with Canada and Mexico, it is necessary and appropriate, at this time, to maintain the current tariff level as it applies to other countries.
 
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) Proclamation 9705, as amended, is further amended by revising clause 2 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; (iv) on or after 12:01 a.m. eastern daylight time on May 20, 2019, from all countries except Argentina, Australia, Brazil, Canada, Mexico, South Korea, and Turkey; and (v) on or after 12:01 a.m. eastern daylight time on May 21, 2019, from all countries except Argentina, Australia, Brazil, Canada, Mexico, 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 “Article description” for heading 9903.80.01, in subchapter III of chapter 99 of the HTSUS, is amended by deleting “of South Korea, of Brazil, of Turkey” and inserting “of Brazil, of Canada, of Mexico, of South Korea, of Turkey”.
 
(3) The modifications made by clauses 1 and 2 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 20, 2019, and shall continue in effect, unless such actions are expressly reduced, modified, or terminated.
 
(4) The Proclamation dated May 16, 2019 (Adjusting Imports of Steel Into the United States), is amended by revising clause 5 to read as follows: “The `Article description’ for heading 9903.80.01 in subchapter III of chapter 99 of the HTSUS is amended by replacing `of South Korea, of Turkey’ with `of South Korea’.”.
 
(5) Any imports of steel articles from Canada and Mexico that were admitted into a U.S. 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 20, 2019, shall not be subject upon entry for consumption made after 12:01 a.m. eastern daylight time on May 20, 2019, to the additional 25 percent ad valorem rate of duty as imposed by Proclamation 9705, as amended.
 
(6) 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 nineteenth 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 Signature.]

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

EXIM_a33.
Commerce/BIS Amends EAR, Implements Changes Made to WA Dual-Use List

(Source:
Federal Register, 23 May 2019.) [Excerpts.]
 
84 FR 23886-23899: Implementation of Certain New Controls on Emerging Technologies Agreed at Wassenaar Arrangement 2018 Plenary
 
* AGENCY: Bureau of Industry and Security, Commerce.
ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security maintains, as part of its Export Administration Regulations, the Commerce Control List (CCL), which identifies certain items subject to Department of Commerce’s jurisdiction. This final rule revises the CCL to implement certain changes made to the Wassenaar Arrangement List of Dual-Use Goods and Technologies maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement, or WA) at the December 2018 WA Plenary meeting. The Wassenaar Arrangement advocates implementation of effective export controls on strategic items with the objective of improving regional and international security and stability. This rule harmonizes the CCL with only the agreements on recently developed or developing technologies not previously controlled that are essential to the national security of the United States and warrant early implementation. The remaining agreements will be implemented in a separate rule.
* DATES:
This rule is effective May 23, 2019.
* FOR FURTHER INFORMATION CONTACT: For general questions, contact Sharron Cook, Office of Exporter Services, Bureau of Industry and Security, U.S. Department of Commerce at 202-482-2440 or by email:
Sharron.Cook@bis.doc.gov.
For technical questions contact:
– Category 3 (Electronics): Brian Baker at 202-482-5534.
– Category 5 (Information Security): Aaron Amundson or Anita Zinzuvadia 202-482-0707.
– Category 6 (Acoustic projector/transducer): Michael Tu 202-482-6462.
– Category 9×515 (Satellites): Michael Tu 202-482-6462.
* SUPPLEMENTARY INFORMATION: … The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar or WA) is a group of 42 like-minded states committed to promoting responsibility and transparency in the global arms trade, and preventing destabilizing accumulations of arms. As a Participating State, the United States has committed to controlling for export all items on the WA control lists. The control lists, which include the Wassenaar Arrangement Munitions List and the Wassenaar Arrangement List of Dual-Use Goods and Technologies, were first established in 1996 and have been revised annually thereafter. Proposals for changes to the WA control lists are reviewed by Participating States at expert group and annual plenary meetings. Participating States are charged with implementing the agreed list changes as soon as possible after approval. The United States’ implementation of WA list changes ensures U.S. companies have a level playing field with their competitors in other WA Participating States.
This rule adds to the EAR’s Commerce Control List (CCL) five recently developed or developing technologies that are essential to the national security of the United States: discrete microwave transistors (a major component of wideband semiconductors), continuity of operation software, post-quantum cryptography, underwater transducers designed to operate as hydrophones, and air-launch platforms.
 
Revisions to the Commerce Control List Related to WA 2018 Plenary Agreements
 
– Revises (4) ECCNs: 3A001, 5A002, 6A001 and 9A004.
– Added ECCNS: 3D005.  
 
3A001 Electronic Items 
 
ECCN 3A001 is amended by adding paragraph b.3.f to control discrete microwave transistors “rated for operation with a peak saturated power output greater than 5 W (37.0 dBm) at all frequencies exceeding 8.5 GHz up to and including 31.8 GHz”. While older devices specified limited frequency ranges, new microwave transistors cover wider frequency bands at higher power levels, opening up new possibilities for radar and other transmitting applications.
 
Note 1 that appears after paragraph b.3.f is revised, so that it does not apply to new paragraph b.3.f, meaning that the control status of a transistor in b.3.f is not determined by the lowest peak saturated power output control threshold.
 
Discrete microwave transistors are used in microwave semiconductors and are applicable for both civilian use, such as mobile phone base stations and weather radars, and military use, such as fire control radars, decoys and jammers. Discrete microwave transistors are also increasingly used in wideband semiconductors, which have less power output and are more energy-efficient than the narrowband semiconductors. These features permit wideband semiconductors to operate at much higher voltages, frequencies and temperatures than conventional semiconductors. The wideband semiconductor is mainly used for military applications, such as electronic counter-measures for decoys, jammers and military radars, because it has a fractional bandwidth greater than 100%, and can enable a wide range of military radars, seekers, decoys and jammers. However, there are also instances of wideband semiconductors being used in civilian applications, such as to make green and blue light emitting diodes (LEDs) and lasers, which are used in DVD players (the Blu-ray and HD DVD formats). Wideband semiconductors will likely be a technology used in new electrical grid and alternative energy devices, in which such semiconductors will reduce energy loss and enable longer performance life in solar and wind energy power converters and eliminate bulky grid substation transformers. In addition, these robust and efficient power components are expected to be used in high energy vehicles, including electric trains and plug-in electric vehicles. It has been predicted that wideband semiconductors will facilitate simpler and higher efficiency charging for hybrid and all-electric vehicles.
 
These discrete microwave transistors are subject to National Security (NS Column 1), Regional Stability (RS Column 1) and Anti-terrorism (AT Column 1) license requirements, except those being exported or reexported for use in civil telecommunications applications, as indicated on the Commerce Country Chart in Supplement No. 1 to part 738 of the EAR. List-based license exceptions (Limited Value Shipment (LVS) and Group B Shipments (GBS) and Strategic Trade Authorization (STA), see part 740 of the EAR), are available for those discrete microwave transistors that are being exported or reexported for use in civil telecommunications applications that meet the criteria of the license exception and where none of the license exception restrictions of §740.2 apply. Transaction-based license exceptions may be available depending on the transaction meeting the license exception criteria; see part 740 of the EAR.

 

3D005 Continuity of Operation Software
 
ECCN 3D005 is added to the CCL in order to control software that ensures continuity of operation when electronics are exposed to Electromagnetic Pulse (EMP) or Electrostatic Discharge (ESD). The software is controlled for national security and anti-terrorism reasons and a license is required worldwide, except for Canada, under national security (NS Column 1) and Anti-terrorism (AT Column 1) license requirements as indicated on the Commerce Country Chart, Supplement no. 1 to part 738 of the EAR. No list-based license exceptions are applicable; however, License Exception Strategic Trade Authorization (STA) is available for countries listed in Country Group A:5, see Supplement No. 1 to part 740 of the EAR.
 
Research and development activities related to integrated circuit software that provides electromagnetic pulse (EMP) protective function to electronic devices is currently underway, and it is predicted that these products will be in the commercial marketplace in a few years. Because continuity of operation software would also be beneficial to military applications, it is being added to the CCL in this final rule.
 
3D005 Continuity of Operation Software
 
ECCN 3D005 is added to the CCL in order to control software that ensures continuity of operation when electronics are exposed to Electromagnetic Pulse (EMP) or Electrostatic Discharge (ESD). The software is controlled for national security and anti-terrorism reasons and a license is required worldwide, except for Canada, under national security (NS Column 1) and Anti-terrorism (AT Column 1) license requirements as indicated on the Commerce Country Chart, Supplement no. 1 to part 738 of the EAR. No list-based license exceptions are applicable; however, License Exception Strategic Trade Authorization (STA) is available for countries listed in Country Group A:5, see Supplement No. 1 to part 740 of the EAR.
 
Research and development activities related to integrated circuit software that provides electromagnetic pulse (EMP) protective function to electronic devices is currently underway, and it is predicted that these products will be in the commercial marketplace in a few years. Because continuity of operation software would also be beneficial to military applications, it is being added to the CCL in this final rule.
 
Category 5 – Part 2 – “Information Security”
 
ECCN 5A002 is amended in order to add a control on certain types of post-quantum cryptographic algorithms. This rule adds paragraph 2.c of the Technical Notes that follow paragraph 5A002.a.4 to include a new paragraph addressing certain post-quantum asymmetric algorithms. This rule also revises paragraphs 5A002.a, a.4, paragraph 2 of the Technical Notes that follow paragraph 5A002.a.4, paragraph a.1.a.1.b in Note 2 to 5A002.a, and paragraph (4)(a) of Related Controls to 5A002, to replace the term `in excess of 56 bits of symmetric key length, or equivalent’ with `described security algorithm’. These changes are being made for technical accuracy since methods for establishing equivalence between modern classical and post-quantum cryptography (PQC) are not settled. In addition, this rule revises the Nota Bene to Note 3 (the Cryptography Note) to specify that items that include post-quantum asymmetric algorithms described by paragraph 2.c of the Technical Notes are subject to the classification or self-classification reporting requirements for mass market items.
 
The WA cryptography controls reflect the development and application of modern cryptography. Currently, the WA includes controls over the most commonly-used forms of cryptography in the contemporary world: symmetric algorithms based on key length; and asymmetric algorithms based on factorization of integers or on the computation of discrete logarithms (over various groups). These controls are defined in the Technical Note 2 to 5A002.a of the CCL.
 
The WA introduced specific parameters for the export control of cryptography in 1998, along with a general Category 5-Part 2 exclusion for `mass market’ encryption products (Cryptography Note, Note 3), in recognition of the increasing use of cryptography in the public domain. While the structure of Category 5-Part 2 of the WA has evolved significantly since 1998, the algorithms addressed have remained unchanged.
 
These algorithms continue to provide adequate protection for encrypted data, based on the threat posed by attack by a non-quantum computer. However, if and when large scale quantum computers are built, they will likely undermine the security of current cryptographic systems.
 
One goal of PQC is to develop and deploy quantum-resistant algorithms well in advance of a potential attack from a quantum computer. As the threat of quantum computers grows nearer, cryptography researchers are developing algorithms and working towards standardizing algorithms that resist attack from existing known quantum algorithms (such as Shor’s Algorithm). PQC is currently in use in commercial products, but those algorithms are not covered by any WA controls. Because such algorithms are becoming increasingly common, this control is being added to ensure that there is consistent treatment and a level playing field between modern classical and post-quantum cryptography.
 
5A002.a is subject to national security (NS Column 1), anti-terrorism (AT Column 1) and encryption items (EI) license requirements, as indicated on the Commerce Country Chart in Supplement no. 1 to part 738 of the EAR. Because this new control is added to 5A002.a with corresponding applicability to EI-controlled ECCNs 5D002.a.1, 5D002.c.1 and 5E002.a, BIS has determined that no changes to License Exception ENC are required to accommodate this change. Items with post-quantum algorithms described by the technical note are treated the same under License Exception ENC as products using classical algorithms.
 
6A001 Acoustic Systems, Equipment, and “Components”
 
ECCN 6A001 is amended by moving the Note previously located below Item paragraph a.2.g.4 to below the introductory Item paragraph a.2 for better readability. This Note informs the public that Item paragraph a.2 “applies to receiving equipment, whether or not related in normal application to separate active equipment, and “specially designed” components therefor”. This rule also adds a Technical Note 2 after paragraph a.2.a to alert the public that underwater acoustic transducers designed to operate as passive receivers are hydrophones. This rule revises paragraph a.2.a.6 to add the parameter “and having a `hydrophone sensitivity’ better than −230 dB below 4 kHz”, to remove any transducers or hydrophones that are not of strategic concern.
 
An underwater transducer that is designed to operate as a hydrophone, designed for operation below 1000 m and having a useful sensitivity below 4 kHz, must be controlled because of its utility in Anti-Submarine Warfare (ASW). These amendments will bridge the control gap that previously treated underwater acoustic transducers and receivers separately. Newer underwater acoustic devices can more readily operate in both transmit and receive mode. The new control structure resulting from these amendments allows each aspect of these multifunction devices to be evaluated.
 
This rule also corrects a License Exception LVS paragraph for 6A001.a.1.b.1 by reversing the frequency band range for the equipment from “30 kHz to 2 kHz” to read “2 kHz to 30 kHz”. All items in ECCN 6A001 are subject to national security (NS Column 2) and anti-terrorism (AT Column 1) license requirements as indicated in the Commerce Country Chart in Supplement no. 1 to part 738 of the EAR. License Exception Low Value Shipment (LVS) may be available depending on the operating frequency. License Exception Strategic Trade Authorization (STA) and transaction-based license exceptions may also be available depending on the circumstances of the transaction and the destination; see part 740 of the EAR.
 
9A004 Space Launch Vehicles and “Spacecraft”, “Spacecraft Buses”, “Spacecraft Payloads”, “Spacecraft” On-Board Systems or Equipment, and Terrestrial Equipment
 
ECCN 9A004 is amended by revising the Heading to add air-launch platforms. This rule adds new Item paragraph 9A004.g, which controls “aircraft” “specially designed” or modified to be air-launch platforms for space launch vehicles (SLV). The license requirements table is revised to add 9A004.g to the NS and AT license requirements paragraphs.
 
Several commercial entities are building space-bound craft that will utilize an air-launch rather than traditional ground launch. This new Item paragraph expands existing space-launch controls to include this developing technology. Originally, military aircraft were used for air-launched rockets to carry satellites specifically for military applications. Now, air-launch platforms allow the use of specialized commercial aircraft instead of rockets or military aircraft to facilitate the transport and launch of commercial satellites. The increase in commercial space activities has commercial satellite owners and space tourism companies moving toward air-launch platforms to support their endeavours.
 
Items specified in 9A004.g require a license for national security (NS Column 1) and anti-terrorism reasons (AT Column 1) as indicated on the Commerce Country Chart in Supplement no. 1 to part 738 of the EAR. There are no list-based license exceptions, but transaction-based license exceptions may be available; see part 740 of the EAR. …
 
Saving Clause
 
Shipments of items removed from license exception eligibility or eligibility for export, reexport or transfer (in-country) without a license as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on May 23, 2019, pursuant to actual orders for exports, reexports and transfers (in-country) to a foreign destination, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported, reexported or transferred (in-country) before July 22, 2019. Any such items not actually exported, reexported or transferred (in-country) before midnight, on July 22, 2019, require a license in accordance with this final rule. …
 
Nazak Nikakhtar, Assistant Secretary for Industry & Analysis, Performing the Non-exclusive Duties of the Under Secretary for Industry and Security.

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

OGSOTHER GOVERNMENT SOURCES

OGS_a14. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

 
* Commerce/BIS; RULES;
   – Addition of Certain Entities to the Entity List, Revision of an Entry on the Entity List, and Removal of an Entity from the Entity List; and
   – Revisions to Country Group Designations for Venezuela and Conforming Changes for License Requirements [Pub. Dates: 24 May 2019.]

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

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

OGS_a36. Commerce/Census: “Filing in AESDirect: How Do You Find Your Internal Transaction Number?”

(Source:
Global Reach Blog, 22 May 2019.) [Excerpts.]
 
Have you wondered how to find your Internal Transaction Number (ITN) after submitting an export filing in AESDirect? Let’s look at the different ways to find your ITN.
 
The ITN
 
The ITN is the Automated Export System’s (AES) proof of filing citation. The
Foreign Trade Regulations (FTR) 30.3 states the U.S. Principal Party in Interest (USPPI) or Authorized Agent must provide a proof of filing citation, post-departure filing citation, AES downtime citation, and an exemption or exclusion legend to the carrier. The ITN serves as the AES proof of filing citation in this requirement.
 
The AES generates the ITN, which is assigned to a shipment confirming that the Electronic Export Information (EEI) was accepted by the AES. The ITN starts with the letter “X,” followed by the year, month and day of acceptance in the AES, and six randomly assigned digits from the system. An example of an ITN for a shipment that was accepted on March 8, 2019, would be X20190308366903. …

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

OGS_a47.
DoD/DSCA Policy Memos of Interest: End-Use Monitoring FVC and Potential End-Use Violations

(Source:
DoD/DSCA, 23 May 2019.)
 
* DSCA Policy Memo 19-04
End Use Monitoring (EUM) Focused Verification Checks (FVC) and Reporting Potential End Use Violations has been posted. Focused Verification Checks (FVC) are ad hoc inspections of U.S.-origin defense articles that may be directed when concerns arise regarding their use, transfer, and physical security. They are a mechanism to proactively address issues that could lead to end-use violations. The implementation of FVCs will address a gap in EUM practice identified during the recent deep dive on EUM policy and procedure. This revision also provides more detailed guidance on the requirements and process for reporting potential end-use violations to the DSCA EUM Team and to the Department of State.  
 
* DSCA Policy Memo 19-28
Assignment of Program Code “7E” to track Fiscal Year (FY) Funds Provided for FY 2019/2020 Peacekeeping Operations (PKO), Overseas Contingency Operations (OCO)

has been posted. Effective immediately, Program Code “7E” is assigned to track and execute FY 2019/2020 funds provided for PKO-OCO under Division F of the Department of State, Foreign Operation and Related Program Appropriations Act, 2019 (P.L. 116-06). These funds are available for obligation until September 30, 2020 and for reprogramming until September 30, 2024.  

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

OGS_a58.
Justice: “Middlesex County Man Admits Participation in Conspiracy to Illegally Export Firearms and Other Items to Ukraine”

(Source:
Justice, 22 May 2019.) [Excerpts.]
 
An Edison, New Jersey, man today admitted that he conspired to export, without a license, firearms and other items subject to the export control list, U.S. Attorney Craig Carpenito announced.
 
Gene Shilman, 62, a native of the Soviet Union, pleaded guilty before U.S. District Court Judge Katharine S. Hayden in Newark federal court to an information charging him with one count of conspiracy to violate the Arms Export Control Act, the International Emergency Economic Powers Act, and the Export Control Reform Act.
 
According to documents filed in this case and statements made in court:
 
From May 2014 through October 2018, Shilman entered into a conspiracy that included a conspirator living in Ukraine. Shilman exported defense articles regulated by the Arms Export Control Act. He exported to Ukraine items that are on the commerce control list as well as items with both defense and civilian uses that are subject to the Export Control Reform Act. Shilman never obtained the required export license from the U.S. Department of Commerce.
 
Shilman ordered and received firearm components and parts, ammunition, night-vision goggles and bulletproof vests from various vendors and firearms dealers in the United States. He received numerous wire transfers from overseas locations to pay for the purchase of these items. Shilman repackaged and shipped these munitions to overseas locations without the required export licenses.
 
In September 2018, Shilman completed a Customs Declaration form at a U.S. Post Office in Middlesex County, New Jersey, on which he falsely represented that the contents of the parcel destined for Ukraine contained tools and cartridges. An inspection of the parcel revealed that it actually contained multiple upper receivers, ammunition magazines and threaded barrels for handguns and a set of front and rear sights for a handgun.
 
The conspiracy count with which Shilman is charged carries a maximum potential sentence of five years in prison. …

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

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

NWSNEWS

NWS_a110
.
Reuters: “French Court Approves Extradition of Iranian Engineer to U.S.”

(Source:
Reuters, 23 May 2019.)
 
A French court approved the extradition of an Iranian engineer to the United States to face charges of attempting to illegally import U.S. technology for military purposes on behalf of an Iranian company, a judicial source said on Thursday.
 
The court in Aix-en-Provence, southern France, also rejected a bail request by the Iranian engineer, Jalal Rohollahnejad, 41, who has been detained since Feb. 2 after being arrested at Nice airport as he got off a plane coming from Tehran via Moscow.
 
U.S. judicial investigators suspect Rohollahnejad of trying to import into Iran high-power industrial microwave systems from the United States that could be used for military purposes.
 
After withdrawing last May from a 2015 international deal to curb Iran’s nuclear program, the United States reimposed a raft of sanctions targeting a range of Iranian sectors.
 
U.S. judges say the engineer acted on behalf of a company linked to Iran’s elite Revolutionary Guards.
 
Rohollahnejad’s lawyer was quoted by French media as saying the U.S. arrest warrant was politically motivated and that he would continue to refuse extradition.
 

A decree by the French prime minister is still necessary for the extradition to go ahead.   

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

NWS_a211
.
ST&R Trade Report: “Defense Export End-Use Checks Continue to Find Problems”

 
More than a quarter of the defense export end-use cases closed in fiscal year 2018 found inconsistencies with or could not verify the information on license applications, according to a
report from State Department’s Directorate of Defense Trade Controls. This report on the annual performance of DDTC’s “Blue Lantern” end-use monitoring program highlights the importance for defense exporters to maintain effective compliance procedures.
 
The Blue Lantern program monitors the end-use of defense articles, technical data, services, and brokering activities exported through commercial channels and subject to licensing or other approvals under section 38 of the Arms Export Control Act and the International Traffic in Arms Regulations. Blue Lantern end-use monitoring includes pre-license, post-license, and post-shipment checks to verify the bona fides of foreign consignees and end-users, confirm the legitimacy of proposed transactions, and provide reasonable assurance that (a) the recipient is complying with U.S. government requirements with respect to use, transfers, and security of defense articles and defense services and (b) such articles and services are being used for the purposes for which they are provided.
 
According to the report, in FY 2018 the Blue Lantern program initiated 466 checks in more than 70 countries, up from 429 in 92 countries the year before. East Asia and the Pacific accounted for the largest share of these initiations at 43 percent (up from 23 percent), followed by Africa at 20 percent (up from 17 percent), Europe at 14 percent (down from 23 percent), the Americas at 7 percent (down from 20 percent), South/Central Asia at 3 percent (down from 10 percent), and the Near East at 2 percent (down from 7 percent).
 
Of the 585 Blue Lantern cases closed in FY 2018 (up from 539), 168 (29 percent, unchanged from FY 2017) were determined to be unfavorable. South/Central Asia had the highest rate of unfavorable checks at 81 percent (up from 47 percent), followed by the Near East at 46 percent (up from 22 percent), Africa at 41 percent (up from 38 percent), Europe at 32 percent (up from 20 percent), the Americas at 32 percent (up from 28 percent), and East Asia at 5 percent (down from 31 percent).
 
The report states that the leading cause of an unfavorable finding in FY 2018 (68 cases, up from 25) was the foreign party being uncooperative or failing to respond to an end-use check. Other reasons include the inability to confirm an order or receipt of goods (54 cases, down from 68), derogatory information/foreign party deemed unreliable recipient (52, up from 47), unlicensed party (12, down from 28), physical security concerns (7, up from 4), inability to confirm existence of foreign party (3, up from 1), unauthorized reexports/retransfers (3), indications of potential or actual diversion (1, down from 3), and evidence of stockpiling (1, no change). The report notes that less than one percent of closed cases revealed indications of willful diversion tactics.
 

Finally, the report notes that unfavorable cases resulted in DDTC recommending denial, removal of an entity, revocation, or return without action on 57 license applications (up from 50). Nine were referred to Defense Trade Controls Compliance (up from three), including three to that office’s Law Enforcement Liaison Division.  

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

NWS_a312
.
The Straits Times: “U.S. Blacklisting of Huawei Prompts Global Firms, Including Panasonic and ARM, to Follow Suit”

(Source:
The Straits Times, 23 May 2019.) [Excerpts.]
 
Japan’s Panasonic said on Thursday (May 23) that it is suspending business with Huawei after a United States ban on the Chinese firm over security fears.
 
And in a potentially more consequential blow, British chip designer ARM Holdings, an important supplier to Huawei, also said it has halted relations with it.
 
ARM Holdings said it was “complying with the latest restrictions set forth by the US government”.
 
The moves follow a decision by 
US President Donald Trump to effectively ban US companies from supplying Huawei and affiliates with critical components, citing security concerns. The US ban is now spurring effects for non-US companies.
 

An ARM spokesman said some of the company’s intellectual property is designed in the US and is therefore “subject to US export controls”. … 

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

COMMCOMMENTARY

COM_a113.
A. Doussin & I. Brooks: “UK Clamps Down on the Trading of Goods Outside the Country Without A License”
(Source: Hogan Lovells, 21 May 2019.)
 
* Authors: Aline Doussin, Esq., aline.doussin@hoganlovells.com; and Imogen Brooks, Esq., imogen.brooks@hoganlovells.com. Both of Hogan Lovells, London.
 
What has happened?
 
HM Revenue & Customs (HMRC) recently issued a compound penalty of more than £10,000 to a UK person who was “brokering” an unlicensed trading of body armor. Although the goods were not exported from the UK, the transaction involved a UK person. This activity requires a trade control license if UK nationals or companies are involved, even if the goods do not pass through the UK.
 
What does this mean?
 
It is a criminal offence to export goods without the relevant trade license, and this recent penalty demonstrates that HMRC is increasingly using its enforcement powers to prosecute UK persons involved in trading goods outside of the UK without a license.
 
By way of background, the UK’s export control regime is mostly governed by the Dual-Use Regulation, the Export Control Act 2002, and the Export Control Order 2008.
 
The UK Department for International Trade publishes a consolidated control list of strategic military and dual-use items that need an export license, and the 2008 Order sets out detailed rules for the export of items on the control list.
 
UK persons should be aware that a trade license is required for trafficking and brokering in listed items when this involves a company or person from within the UK (whether or not they are a UK person) or by any UK person operating overseas.
 
The term “UK person” means a UK national (including British nationals overseas and dual nationals) or a UK company.
 
Government guidance defines ‘brokering services’ as the selling or buying of dual-use items or the deal, negotiation or transaction for purchasing or supplying dual-use items from a third country to any other third country.
 
In practice, brokering could include the following activities:
 
  • arranging supply from overseas factories/warehouses;
  • arranging intra-company transfers;
  • drop shipping;
  • acting as a ‘project manager’ for a project in one third country who sources supplies for that project in other third countries.
 
This requirement applies even if the items are not exported from the UK or do not pass through the UK
 
Therefore, when UK persons are involved in arrangements pertaining to certain listed items, their activities are still controlled by the UK export control regime, even if the goods are exported from a third country to another.
 
What are the penalties?
 
In the UK, HMRC monitors export control compliance and can bring prosecutions for non-compliance.
 
It is a criminal offence to ship unlicensed goods. A strict liability offence covers inadvertent breaches, and a more serious offence covers deliberate evasion of export controls (which can attract a fine or up to 10 years’ imprisonment).
 
However, HMRC can also offer an offender the opportunity to avoid prosecution in return for the payment of a compound penalty.
 
Compound penalties avoid criminal prosecution and so may incentivize UK persons to make a voluntary disclosure.
 
Therefore, where a company or person suspects that export control rules may have been breached, self-reporting may reduce any potential penalty.
 
It should be noted, however, that there is no maximum compound penalty limit; HMRC recently issued a compound penalty of over £109,000 to a UK person in relation to unlicensed exports of military goods.

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

COM_a2
14
. D. Smith: “The Long Arm of OFAC – How U.S. Sanctions Impact Pretty Much Everyone”

(Source:
Global Trade Talk
, 21 May 2019.) [Excerpts.]
 
* Author: Daniel Smith, Product Marketing Leader, +1 201 935-8588,
Solutions@AmberRoad.com
, Amber Road.
 
When you think sanctions, there are a few things that probably come to mind: Iran, North Korea, possibly Russia. You may envision munitions being smuggled in Cold War-era trucks by rogue factions of defunct military groups. You may think only bad actors such as known terrorists are direct targets of US sanctions, and only companies that operate within the US are subject to sanctions rules. If you think this, you’d be wrong.
 
The agency responsible for US sanctions is the
Office of Foreign Assets Control (OFAC),
a division of the US Treasury Department. OFAC’s sole function is to enforce the economic and foreign policy goals of the executive branch of the US government, and the primary way it does this is through economic and trade sanctions. OFAC puts in place sanctions on specific nations or entities to prevent groups that are deemed a threat from getting access to resources such as technology, funds, and even aid and shelter. It also has the power to enforce those sanctions by placing crippling fines and penalties, criminal liability, and loss of trade privileges on individuals or companies that violate the sanctions.
 
Of course, any company based in the US is subject to OFAC’s jurisdiction. So are companies that operate within the US or import to the US. But OFAC’s reach is much, much broader than this. In fact, in light of recent enforcement actions OFAC has taken, it seems unlikely that any company or individual anywhere in the world can safely assume they aren’t subject to OFAC’s sanctions authority.
 
How can that be? How is it that a small US agency can extend its long arm of enforcement over a person or company that isn’t based in the US, doesn’t operate in the US, doesn’t export from the US, and doesn’t trade in US goods? The answer to that question lies mainly in recent legal interpretations and the sheer reach of the US economic system across the globe. Due to legislation such as the 2017 “Countering America’s Adversaries Through Sanctions Act” (CAATSA), OFAC can now exercise rulings over foreign companies or individuals for a variety of reasons, such as conducting a wire transfer using US dollar currency or having filed for past bankruptcy in a US court.
 
OFAC administers a variety of sanctions programs. Some target specific geographies (such as Iran), some target specific activities (terrorism or narcotics trafficking), and some restrictions are placed on specific persons or entities. The list of restricted persons, the Specially Designated Persons (SDN) list, changes continuously and has over 6,000 names. As part of the due diligence companies are required to conduct, you must ensure, among other things, that none of your trade activities involve any entity on the SDN list.
 
Compliance with OFAC’s sanctions rules presents several significant challenges.
 
   – First, ensuring full compliance would be difficult enough on its own, especially when trying to manually keep track of changes to hundreds of restricted party lists, update your internal databases, and maintain adequate records all without some form of automation. But OFAC sanctions also apply to entities that are at least 50% owned by a person or persons on the SDN list. It is no easy task to determine the ultimate ownership structure of companies you transact with.
   – Secondly, OFAC’s expectations for due diligence require you to have in-depth knowledge of all your trading partners, the end destination of the goods, and the end user-even for seemingly harmless products.
   – Thirdly, companies must screen even for alternate spellings and for shipments and transactions that might ultimately benefit a sanctioned person. This makes the already difficult task of screening against the large SDN list next to impossible without a highly accurate, flexible, automated solution.
 
What’s really at stake here, though, is how your organization is impacted by violating OFAC’s sanctions rules. Violations can lead to jail time and fines of up to $1 million per incident, even for unintentional breaches. The total financial penalty can easily exceed this amount. For example:
 
   – French financial institution BNP Paribas S.A. was penalized nearly $9 billion in 2014 “for processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions.”
   – In early 2019, UniCredit Bank AG, headquartered in Munich, agreed to remunerate over $600 million for illegally processing financial transactions on behalf of Iran.
 
OFAC recently consolidated its list of blocked foreign financial institutions with a new list, the “Correspondent Account or Payable-Through Account Sanctions” list (CAPTA). It specifically names foreign financial institutions that are subject to US sanctions, and can potentially require US firms to make special disclosures to OFAC.
 
OFAC’s judgments and interpretations supersede even its previous public statements, meaning you might be compliant today but out of compliance tomorrow without advance public notice of changes. Furthermore, OFAC’s website directly states that companies should not use precedent alone to guide their compliance practices, but should be proactive in doing all they can do to remain compliant. OFAC’s scope, reach, and power set an extremely high bar for companies.
 
The good news is that OFAC considers all circumstances when it makes a judgment. Companies that proactively manage their compliance programs and voluntarily report violations are much more likely not to incur severe consequences. Using an accurate, reliable software solution is another key element. Amber Road provides the industry’s most comprehensive database of government regulations and international business rules. …

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

COM_a3
15
.
R. Whitten, J.S. Maberry & E. Agada: “Hua-Wait a Minute: Entity Designation Affects Non-U.S. Manufacturers’ Exports to China Tech Giant”

(Source: Sheppard Mullin LLP, 11 Dec 2018.)
 
* Authors: Reid Whitten, Esq., rwhitten@sheppardmullin.com; J. Scott Maberry, Esq., Sheppard, smaberry@sheppardmullin.com; and Enumale Agada, Esq., eagada@sheppardmullin.com. All of Sheppard Mullin LLP.
 
On May 16, 2019, a sweeping U.S. export control rule went into effect that will impact the U.S. tech industry, but may also create an outsized risk for non-U.S. manufacturers. The rule, issued by the U.S. Department of Commerce, Bureau of Industry and Security (BIS) adds Huawei Technologies Co., Ltd. (Huawei) and 68 of its affiliates to the Entity List. That designation effectively prohibits the export, reexport, and retransfer of all U.S.-origin “items subject to the Export Administration Regulations (EAR)” to those entities. The designation arises from a U.S. government finding that the restrictions are warranted on U.S. national security and foreign policy grounds.
 
The De Minimis Rule
 
For companies in the United States, the effect of the rule is straightforward: virtually all items manufactured in the United States are “subject to the EAR.” (The biggest exception is military items, which are already subject to a total export prohibition for China under the International Traffic in Arms Regulations.) But the seemingly straightforward Entity List prohibition becomes a little more complicated for manufacturers outside the United States. The source of that complication is the de minimis rule.
 
Effects on Non-U.S. Manufacturers
 
Under the de minimis rule, U.S. export controls are applied to certain foreign-made products. The de minimis rule provides that a foreign-made commodity is subject to the EAR if that foreign-made commodity contains more than 25% controlled U.S.-origin content by value. The rule does not count so-called EAR99 items or other items that do not require a license (NLR items) to the final destination. That means that some low-level U.S.-origin software, technology, or commodities do not count in the 25% de minimis threshold.
 
We won’t delve into the details here, but if you make a product outside the United States that incorporates U.S. parts, components, or technology, or bundles U.S.-origin software, U.S. export controls may apply to the export of your product from outside the United States to Huawei in China. If the relevant controls apply, the foreign manufacturer (and any other person wherever located) is prohibited from exporting the item to Huawei.
 
Turning the Screws
 
For now, the application of the de minimis rule is straightforward: foreign made product with 25% or less controlled U.S.-origin content – no EAR, no worry.
 
Currently, the 25% de minimis threshold does not count U.S.-origin content that does not require a license to the item’s final destination. Consider, however, what would happen if, for exports to Huawei, BIS took into account that all U.S.-origin content would require a license to Huawei. That would mean counting EAR99 and NLR items in the 25%. That would restrict an enormous number of foreign-made goods that use commercial, off-the-shelf U.S. parts and technology, from being sold to Huawei.
 
BIS has not published guidance or clarification on how the Entity List additions will intersect with the de minimis rule. However, we understand that, in the past, BIS and the Office of Export Enforcement have considered regulations interpretations that would prevent companies from exploiting the de minimis to “laundering” U.S.-origin input items in non-U.S. end-products.
 
The Takeaway
 
At this point, non-U.S. manufacturers that sell to Huawei or other designated entities would do well to assess the amount of U.S.-origin content they use in their products. If the value of that content, including U.S.-origin technology and software, approaches 25%, those companies would be well advised to carefully account and record the U.S.-origin value in that product. It is likely that BIS will be looking carefully for U.S. items and technology being reexported to the newly designated entities.
 

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


TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a016. ECS Presents “ITAR/EAR Bootcamp: Achieving Compliance” on 8-9 Jul in Seattle, WA

(Source: E. Dahlvang,
liz@exportcompliancesolutions.com
.) 
 
* What: “ITAR/EAR Bootcamp: Achieving Compliance” in Seattle, WA
* When: July 8-9, 2019
* Where:
Sheraton Grande 

* Sponsor:  Export Compliance Solutions & Consulting (ECS)

* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register 
here
 or by calling 866-238-4018 or email

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

TE_a117. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands


 
* 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. 

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

ENEDITOR’S NOTES


Thomas Hood (23 May 1799 – 3 May 1845; was an English poet, author and humorist, best known for poems such as “The Bridge of Sighs” and “The Song of the Shirt”. Hood wrote regularly for
The London Magazine, Athenaeum, and
Punch.)
  
– “Lives of great men oft remind us as we o’er their pages turn, That we too may leave behind us – Letters that we ought to burn.”
 
*
Alfred P. Sloan (Alfred Pritchard Sloan Jr. (23 May 23, 1875 – 17 Feb 1966; was an American business executive in the automotive industry. He was a long-time president, chairman and CEO of General Motors Corporation.)
  
– “If we are all in agreement on the decision — then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

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

EN_a319
. 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: 23 May 2019: 84 FR 23886-23899: Implementation of Certain New Controls on Emerging Technologies Agreed at Wassenaar Arrangement 2018 Plenary  
 
* 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.

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

EN_a0320
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

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

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.


* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website

* BACK ISSUES: An archive of Daily Bugle publications from 2005 to present is available HERE.

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

Scroll to Top