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20-0407 Tuesday “Daily Bugle”

20-0407 Tuesday “Daily Bugle”

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Tuesday, 07 April 2020

[No items of interest today.] 

  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP: “Entry Summary, Payment and Post-Release Processing of Trade Activities Due to COVID-19”
  4. State/DDTC: (No new postings.)
  5. UK DIT Offers Support to Exporters and Investors
  6. UN Rights Expert Urges Governments to Save Lives By Lifting All Economic Sanctions Amid COVID-19 Pandemic
  1. Export Compliance Daily: “Lack of Coordination Between FAA, OFAC Leading to Sanctions Issues, GAO Says”
  2. KPMG: “EU: Customs duties and VAT waived, imported medical equipment (COVID-19)”
  3. WORLDecr: “Swiss Ban Exports of Face Masks and Slap Entry Restrictions on All Schengen States”
  1. Arent Fox: “Defense Production Act: Takeaways for Companies That Make or Sell Medical Personal Protective Equipment”
  2. Baker McKenzie: “United States Invokes Defense Production Act to Limit Exports of Critical US Medical Supplies”
  3. N. Turner: “Sanctions Top-5 for the Week Ending 3 April 2020”
  1. ECTI Presents: COVID-19 Outbreak: Anticipating the Unpredictable and What This Means for the Export World Webinar: April 16, 2020
  2. FCC Academy: U.S Export Controls: ITAR, EAR, and FMS
  1. Bartlett’s Unfamiliar Quotations
  2. New 2 Apr 2020 Edition of the BITAR
  3. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here.
  4. Weekly Highlights of the Daily Bugle Top Stories
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  6. Submit Your Event and View All Approaching Events

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EXIMITEMS FROM TODAY’S FEDERAL REGISTER

[No items of interest today.] 

Back to top.


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OGSOTHER GOVERNMENT SOURCES

OGS_a11.
Items Scheduled for Future Federal Register Editions 
 (No items of interest today.) 

 
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OGS_a22. 
Commerce/BIS: (No new postings.)

 
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OGS_a3
3
.
DHS/CBP: “Entry Summary, Payment and Post-Release Processing of Trade Activities Due to COVID-19”
 

(Source: DHS/CBP, 6 Apr 2020)
 
U.S. Customs and Border Protection (CBP) continues to maintain operations at the Ports of Entry and within the Centers of Excellence and Expertise while taking measures to ensure the safety of the public and CBP staff. Due to the circumstances surrounding the COVID-19 pandemic, CBP highly recommends that CBP’s automated systems be used to their fullest extent possible in order to minimize exposure and sustain trade activities. 
CBP recommends the application of the following measures; although this list is not exhaustive:
  • Transmit entry and entry summaries to the Automated Commercial Environment (ACE);
  • Update current account and point of contact information in the ACE portal, to include email, to provide a means for electronic communication;
  • Submit supporting documentation or responses to CBP Requests for Information (CBPF28) through the ACE portal or the Document Image System (DIS);
  • Transmit post-summary activities, such as Protests and Post-Importation Claims through ACE; and
  • Filers submitting Post Summary Corrections (PSCs) that require a payment of duties may opt to receive a bill, or may still mail payment to the Port of Entry.

CBP encourages importers and filers to take advantage of the Automated Clearinghouse (ACH) for electronic payment to the greatest extent possible. In the event that the use of electronic submissions cannot be utilized, documentation may be mailed to the Port of Entry for processing, to include checks for payment of duties, taxes and fees, liquidated damages, prior disclosures, etc.   
The trade community is encouraged to monitor CSMS and maintain contact with local Ports of Entry as trade facility operations at each location may change due to COVID-19.  Additionally, the Centers of Excellence and Expertise can be used as a resource for trade related matters. 
A directory of Center managers is available by Center team number using this link.

 
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OGS_a55.
UK DIT Offers Support to Exporters and Investors  

(Source: UK ECJU, 6 Apr 2020) [Excerpts]
 

The Department for International Trade outlines support available to 160,000 exporters and international investors.
  • 160,000 exporters and investors trading internationally reached by government with outline of support on offer.
  • UK businesses now eligible to secure export insurance cover to major international markets.
Guidance on how to help secure export finance to keep trading during the coronavirus outbreak has been set out by government in direct communication to 160,000 exporters and investors Today (Monday 6 April).
As well as advice on what financial support is available for companies to manage the impacts of coronavirus, DIT stands ready to provide assistance with customs authorities to ensure smooth clearance of businesses’ products, and to offer advice on intellectual property and other issues with business continuity.
The message follows the news that UK businesses will now be eligible to secure export insurance cover to markets including the EU, US, Japan, Australia, New Zealand, Canada, Iceland, Norway and Switzerland with immediate effect, following UK Export Finance expanding the scope of its Export Insurance Policy (EXIP). Exports from the UK to these markets totalled £499 billion last year, accounting for 74% of all international sales from the UK. …
Businesses are being encouraged to
:

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

(Source: OHCHR, 3 Apr 2020) [Excerpts]
 
A UN human rights expert today called for the lifting of all unilateral sanctions that obstruct the humanitarian responses of sanctioned States, in order to enable their health care systems to fight the COVID-19 pandemic and save lives.
 
“I urge the international community to take immediate measures to lift, or at least suspend, all sanctions until our common threat is eliminated,” said Ms. Alena Douhan, the newly appointed UN Special Rapporteur on the negative impact of the unilateral coercive measures on the enjoyment of human rights. This aligns with the recent appeal of the UN Secretary-General to wave sanctions that undermine countries’ capacity to respond to the pandemic.
 
“The defeat of this enemy can only be achieved through joint efforts of all States and international organisations in a spirit of multilateralism, cooperation and solidarity,” she said. “In the face of the global challenge, no one shall be denied vital medical care.
 
“I call on all Governments that use sanctions as foreign-relation tools to immediately withdraw measures aimed at establishing trade barriers, and ban tariffs, quotas, non-tariff measures, including those which prevent financing the purchase of medicine, medical equipment, food, other essential goods,” said the UN expert.
 
The Special Rapporteur stressed that the current pandemic is challenging the whole system of human rights, including such fundamental rights as the right to life and right to health. “A sensitive human-rights approach is needed to confront the COVID-19 crisis, and that includes the lifting of any coercive measures among States,” she said. …

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

COMNEWS

(Source: Export Compliance Daily, 7 Apr 2020) [Excerpts]
 
The Federal Aviation Administration does not independently vet civil aircraft registrations, which could lead to a host of sanctions related risks, according to a March report from the Government Accountability Office. In at least one case, the FAA allowed a sanctioned Venezuelan drug trafficker to obtain a dealer certificate, which gave his front company access to blocked planes for more than a year, the GAO said. FAA officials said they do not have the required authorities to address sanctions issues, but the GAO pointed to a lack of coordination between FAA and the Treasury’s Office of Foreign Assets Control and a flawed FAA registration system. …
 
Because the FAA and OFAC do not coordinate on flagged registrations and because the FAA does not “proactively” check OFAC sanctions data, the two agencies may be unable to manage sanctions risks, the GAO said. “In addition, FAA misses opportunities to address abuse of the registry for illicit purposes, as well as to provide information to OFAC in support of U.S. efforts to curb drug trafficking, corruption, and other illicit activity.” …
 
Among several recommendations, the GAO said the FAA needs a “comprehensive registry risk assessment,” which could help “manage risks of fraud.” The FAA should also develop an approach to routinely check OFAC sanctions data and flag sanctioned people and entities across its aircraft registration and dealer systems.

NWS_a28. KPMG: “EU: Customs duties and VAT waived, imported medical equipment (COVID-19)”

(Source: KPMG, 6 Apr 2020) [Excerpts]
 
The European Commission issued guidance to assist EU Member States affected by the coronavirus (COVID-19) pandemic, by allowing for the temporary suspension of customs duties and value added tax (VAT) on protective equipment, testing kits or medical devices such as ventilators.
 
As noted in the EC release, this measure applies for six months, with a possible extension, from 30 January 2020 until 31 July 2020.

NWS_a39. WORLDecr: “Swiss Ban Exports of Face Masks and Slap Entry Restrictions on All Schengen States”

(Source: 
WORLDecr, 3 Apr 2020) [Excerpts]
 
Switzerland has restricted exports of face masks and protective equipment and entry controls on all Schengen states, as it battles the coronavirus pandemic that has already claimed more than 400 lives in the country.
 
Meanwhile, France reversed an export ban on face masks going to Switzerland, where the government says more than two million are needed every day.
 
‘Licenses will now be needed to export masks, gloves, goggles and swabs as of March 26,’ swissinfo.ch, the international service of Switzerland’s public broadcaster, quoted the government as saying. ‘Exceptions to the licensing requirement will apply to the EU as well as Norway, Iceland and Liechtenstein ‘as long as they treat Switzerland the same way.’
 
Economics Minister Guy Parmelin said the decision was in line with EU regulations. …
 
Meanwhile, Swiss media said France had lifted restrictions on exports of face masks to Switzerland, following the lead of Germany, which sparked a diplomatic uproar last month when it stopped a truckload of face masks from crossing into Switzerland.
 
Last week, the Swiss government also imposed entry restrictions on all other 25 Schengen states, according to official Swiss media reports.  
 
Citizens of Switzerland and Liechtenstein, people with a Swiss residence permit, and people who have to travel to Switzerland for work-related reasons or because of an emergency will continue to be allowed to enter the country. Travelers may continue to transit through Switzerland and movements of goods is still permitted.

COMCOMMENTARY

COM_a110. Arent Fox: “Defense Production Act: Takeaways for Companies That Make or Sell Medical Personal Protective Equipment”

(Source: Arent Fox, 6 Apr 2020)
 
* Principal Author: Marwa M. Hassoun, Esq., 1-213-443-7645, Arent Fox LLP
 
What is the DPA? How has the administration used it in response to the COVID-19 crisis? What is the impact of the Administration’s DPA-related orders and memoranda? What about enforcement? What does it all mean for exporters?
 
What is the DPA?
The Defense Production Act (DPA), enacted in 1950 as a response to the Korean War, allows for the President to shape the domestic industrial base for national defense preparedness, which includes emergency preparedness activities. The three key powers under the DPA are prioritization, allocation, and incentives.
 
– First, the DPA authorizes the President to require businesses to accept and prioritize contracts (either with the US government directly or with a higher tier contractor supporting the US government) for materials and services necessary for national preparedness. This is typically accomplished by issuing “rated orders” under the Defense Priorities and Allocations System.
– Second, the DPA allows the President to allocate materials, services, and facilities as deemed necessary and appropriate by, for example, ordering the domestic industrial base to increase production and supply of specifically designated scarce or critical materials. Further, the President can use the authorities in the DPA to prohibit hoarding and price gouging of scarce or critical materials.
– Third, to support these efforts, the DPA authorizes the President to provide incentives, such as loans, loan guarantees, and purchase commitments.
 
Critically, many conditions of the DPA are waived in national emergencies, and President Trump declared COVID-19 a national emergency on March 18, 2020. This gives the President even broader authority to use the DPA.
 
Most authorities under the DPA can be delegated, and in the case the COVID-19 national emergency the President has delegated certain authorities to the Secretary of the Department of Health and Human Services (DHHS) as well as the Secretary of the Department of Homeland Security (DHS) through the course of several Executive Orders (EO) and statements.
 
How has the administration used the DPA in response to the COVID-19 crisis?
With regards to the DPA and COVID-19, the President has issued the following EOs, memoranda, and statements:
 
– March 18, 2020. President Trump issued EO 13909 (Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of COVID-19). The EO states that “health and medical resources,” including personal protective equipment (PPE) and ventilators meet the criteria of “critical and strategic materials” under the DPA.
– March 23, 2020. President Trump issued EO 13910 (Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19). The EO authorizes DHHS to take action to prevent hoarding of personal protective equipment and sanitizing and disinfecting products. Specifically, DHHS can limit the accumulation of these commodities, and designate any material as a scarce material to prevent hoarding and price gouging.
Under the authority of the EO, DHHS issued a notice on March 30, 2020 (but effective March 25, 2020), designating 15 categories of health and medical commodities as “scarce materials.”
– March 27, 2020. The President issued EO 13911 (Delegating Additional Authority under the Defense Production Act with respect to health and medical resources to respond to the spread of COVID-19), which delegates authority to DHHS and DHS to make and guarantee loans and other financial incentives to expand the domestic industrial base to supply medical resources. Additionally, DHS is delegated with prioritizing the allocation of medical resources, including “controlling the distribution of such materials in the civilian market.”
– March 27, 2020. The President issued an order under the DPA directing DHS “to require [company] to accept, perform, and prioritize contracts or orders for the number of ventilators that the Secretary determines to be appropriate.”
– April 2, 2020. President Trump issued an order under the DPA directing DHS through FEMA to use the authority of the DPA to obtain the number of N-95 respirators that FEMA deems necessary from a specific company.
– April 2, 2020. President Trump issued an order under the DPA directing DHHS in consultation with DHS to use the DPA “to facilitate the supply of materials to the appropriate subsidiary or affiliate of the following entities for the production of ventilators: [specified companies].”
– April 3, 2020. President Trump issued a memorandum (Allocating Certain Scarce or Threatened Health and Medical Resources to Domestic Use), which authorizes DHS through the Federal Emergency Management Agency (FEMA) to use the authority of DPA §101 to “allocate to domestic use as appropriate” five of the scarce materials identified by DHHS in its March 25th notice.
 
What is the impact of the Administration’s DPA-related orders and memoranda?
As we are reporting on an ongoing basis, countries worldwide are restricting the export of medical personal protective equipment under local laws and regulations. The goods subject to these restrictions are generally the same items DHHS has now designated as “scarce materials.” To date, the United States has not implemented similar regulatory measures.
 
However, as noted above, the US Administration is now taking actions through the DPA in relation to “scarce materials” that ultimately may mirror other countries’ export restrictions.
 
Hoarding and Price Gouging
: The President’s issuance of EO 13902 and the actions of DHHS means that DPA §102 is in effect. That provision provides that “no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation.” In other words, hoarding or price gouging in resale (domestic or export) for the PPE that has been designated scarce by DHHS is illegal.
 
Use of DPA to Restrict Exports
: The Administration has not officially used the DPA to restrict exports in any published order or EO. However, the possibility looms and other countries have expressed concerns. On April 4, 2020, Canada’s prime minister Justin Trudeau stated that “it would be a mistake to create blockages or reduce the amount of back-and-forth trade of essential goods and services, including medical goods, across our border.” Trudeau’s concern stems from the fact that Canada does not manufacture any of its own N-95 masks.
 
FEMA Can “Allocate” PPE to “Domestic Use” as “Appropriate”
: While the DPA does not directly address exports of domestic production, DPA §101 does allow the President “to allocate materials, services, and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to promote the national defense” (emphasis added). Further, under the Act the President can control the distribution of specified materials in the civilian market if essential to national defense and if the requirements for national defense cannot otherwise be met. The President delegated this authority to DHS and DHHS in his March 27 EO.
 
The President’s April 3 EO authorized DHS through FEMA to use its delegated authority under DPA §101 to “allocate to domestic use as appropriate” five of the scarce materials. [FN/1] On April 3, 2020, DHHS Secretary Alex Azar issued a statement regarding this use of the DPA, stating “President Trump’s latest orders under the [DPA] support HHS and FEMA’s efforts to ramp up ventilator production and ensure supplies of PPE that have been the target of hoarders-especially N95 respirators-go to America’s heroic healthcare workers rather than being exported.”
 
Thus, it is clear that DHS through FEMA now has the authority to “allocate to domestic use” the five scarce resources, imposing an effective US export control on those items, though it is still unclear how this control will be implemented. At the time of this writing, DHS has not issued a broad order of this nature, and it is not clear whether DHS may decide to use its authority in a more narrow fashion.
 
What about enforcement?
We are all familiar with penalties possible under the Export Control Reform Act (ECRA), however, if exports of PPE are restricted under the DPA, the Export Administration Regulations and ECRA do not apply. Violations of the DPA are actually financially less harsh than ECRA, but all penalties are criminal – willful violations of the DPA may result in a fine of $10,000 or imprisonment for one year.
 
In a memorandum dated March 24, 2020, the Office of the Attorney General indicated that DOJ is responsible for enforcing the DPA as it applies to hoarding or price gouging items identified as scarce or threatened materials by DHHS. In the same memorandum, the DOJ created a task force to address enforcement issues – the COVID-19 Hoarding and Price Gouging Task Force, and enforcement actions are already underway. For example, on April 2, 2020, DHHS and DOJ announced a bust of PPE and other medical supplies hoarding in New Jersey by the DOJ COVID-19 Hoarding and Price Gouging Task Force. As part of that operation, DHHS redistributed the medical supplies to the New Jersey Department of Health, the New York State Department of Health, and the New York City Department of Health and Mental Hygiene. In its announcement, DHHS indicated it will pay fair market value to the owner of the medical supplies.
 
While DOJ is responsible for enforcing hoarding and price gouging, it is unclear if it will also be responsible for enforcing export “violations” under the DPA. However, assuming such violations are criminal, DOJ will be involved. DOJ regularly partners with US export and import agencies on criminal enforcement actions. In the event of export restrictions under the DPA, enforcement will likely fall, at least in part, to Customs and Border Protection (CBP). CBP has broad authority to seize merchandise that is being exported in violation of the law.
 
What does this all mean for exporters?
Manufacturers, resellers, distributors, and brokers of medical supplies identified as scarce by DHHS and subject to US jurisdiction should tread carefully in any export of any of these materials. We have four key takeaways.
 
(1) The DPA prohibition on the hoarding and price gouging of PPE is already in effect and violations can evidently lead to confiscation and redistribution of the PPE in question.
(2) While most companies are not currently legally prohibited from exporting the PPE, they should prepare for a possible prohibition on export in the near future. The Administration has set the stage for future export restrictions on PPE and other designated medical supplies.
(3) Going forward with exports of PPE and medical equipment may draw the attention of DHHS and DHS as well as the President, potentially spurring an entity direct order under the DPA or triggering broader restrictions on export.
(4) Finally, given the totality of the COVID-19 pandemic, companies may be risking adverse publicity from continuing exports of designated medical equipment.
 
Ultimately, we will need to wait and see what further transpires under the DPA in relation to export restrictions. We will be monitoring future actions and will send out updates, but do not hesitate to contact any member of the International Trade or Government Contracts team at Arent Fox with questions.
 
[FN/1] The five scarce resources are:
(a) N-95 Filtering Facepiece Respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates;
(b) Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR 84.181;
(c) Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;
(d) PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials; and
(e) PPE gloves or surgical gloves, including those defined at 21 CFR 880.6250 (exam gloves) and 878.4460 (surgical gloves) and such gloves intended {sic}.

COM_a211.
Baker McKenzie: “United States Invokes Defense Production Act to Limit Exports of Critical US Medical Supplies”

(Source: Baker McKenzie, 6 Apr 2020)
 
* Principal Author: Kerry B. Contini
, Baker McKenzie 
 
On April 3, 2020, President Trump issued an order via Presidential Memorandum (”
Order“) invoking an obscure authority under Section 101 of the Defense Production Act, 50 U.S.C. § 4501 
et seq.
 (”
DPA“), to potentially restrict exports from the United States of personal protective equipment (“PPE”) needed in the response to the COVID-19 crisis.  This is in the wake of numerous countries around the world implementing export bans on PPE and other medical supplies (see our previous blog posts on these non-US developments
 
here).  The White House also issued a statement (”
WH Statement“) in connection with the Order that explains that it is intended to “prevent hoarding, price gouging, and profiteering by preventing the harmful export” of critically needed materials.  The Order follows several days in which the Administration ordered specific US companies to accept and prioritize orders for ventilators and respirators and reportedly pressured at least one company not to export those materials.    
Which Materials are Covered by the Order?
The Order covers certain of the 15 categories of materials previously identified as “scarce or threatened materials” by the US Department of Health and Human Services (“HHS”) in a
 
notice issued on March 25, 2020.  The materials covered by the Order (“Targeted Materials”) all fall into the category of PPE, specifically:


(1) N-95 Filtering Facepiece Respirators, including devices that are disposable half-face-piece non-powered air-purifying particulate respirators intended for use to cover the nose and mouth of the wearer to help reduce wearer exposure to pathogenic biological airborne particulates;


(2) Other Filtering Facepiece Respirators (e.g., those designated as N99, N100, R95, R99, R100, or P95, P99, P100), including single-use, disposable half-mask respiratory protective devices that cover the user’s airway (nose and mouth) and offer protection from particulate materials at an N95 filtration efficiency level per 42 CFR § 84.181;|

(3) Elastomeric, air-purifying respirators and appropriate particulate filters/cartridges;

(4) PPE surgical masks, including masks that cover the user’s nose and mouth and provide a physical barrier to fluids and particulate materials; and

(5) PPE gloves or surgical gloves, including those defined at 21 CFR § 880.6250 (exam gloves) and § 878.4460 (surgical gloves)   

The Order does not cover the other materials identified as “scarce or threatened materials” in the HHS notice, which includes, among other things, drug products with the active ingredient chloroquine or hydroxychloroquine HC1; ventilators and related materials; certain sterilization services; certain sanitizing and disinfecting products; and medical gowns or apparel.  It is possible that these materials could be targeted in the future. 
 
Who is Targeted by the Order?
The Order focuses on non-manufacturers and seeks “to prevent domestic brokers, distributors, and other intermediaries from diverting such material overseas.”
  The WH Statement issued in connection with the Order highlights “wartime profiteering” by these parties in secondary markets that “purchase domestic supplies of scarce and critical materials, hoard them while they engage in profiteering and speculation, and then export them.”  The WH Statement explains that this may include “a large army of speculators and warehouse operators operating in the dark corners of our markets” and also “some well-established PPE distributors with the ability to unscrupulously divert PPE inventories from domestic customers, such as hospitals and State governments, to foreign purchasers willing to pay significant premiums.”
  The WH Statement provides the Order will not interfere with the ability of PPE manufacturers to export “when doing so is consistent with United States policy and in the national interest of the United States.”  
 
Is the Export of these PPE Materials from the United States now Prohibited?
Based on its language, it appears that the Order will need to be implemented by the US Department of Homeland Security (“DHS”). Specifically, the Order directs DHS, through the Federal Emergency Management Agency and in consultation with HHS, to use its DPA Section 101 authority to “allocate to domestic use, as appropriate” the Targeted Materials.  The Order uses the “allocation” authority in DPA Section 101 (which does not specifically mention exports) as the mechanism to implement the stated policy objective of preventing exports.  The Order does not establish a broad-based prohibition on exports from the United States of the Targeted Materials, which could have been implemented through the
 
Export Administration Regulations, 15 C.F.R. Part 730
 
et seq., which are administered by the US Department of Commerce’s Bureau of Industry and Security.  In any event, this language indicates that further action by DHS is needed to implement the Order. We expect further clarity on in the coming days and will update this blog with any noteworthy developments.
Considering that no President has used the allocation authority under the DPA since the Cold War (according to this Congressional Research Service
 
report), it is not immediately clear how DHS will allocate these materials for domestic use and prevent their export from the United States.  (DPA Section 101 provides a separate priority authority that allows the President to require US companies to accept and prioritize government contracts.  That DPA priority authority has been used regularly by various US Administrations, including in recent days.) 
 
In a
 
2015 interim final rule, HHS had already established a framework called the “Health Resources Priority and Allocations System” to allocate health and medical materials to promote the national defense pursuant to the authority under the DPA as delegated to HHS.  If DHS follows this framework established by HHS, one possible way to implement the Order would be to issue an “allocation directive” to specific brokers, distributors, intermediaries, and possibly other parties (e.g., manufacturers) determined to be profiteering by exporting the covered PPE products at a premium.  Such an allocation directive could order a party to allocate all of Targeted Materials to domestic use (i.e., not to export any of the products).    The US Government may issue further guidance about these DPA developments in the coming days.  Baker McKenzie is actively monitoring any further guidance or development on these issues.

COM_a312.
N. Turner: “Sanctions Top-5 for the Week Ending 3 April 2020”

(Source: LinkedIn, 7 Apr 2020)
 
* Author:
 
Nicholas Turner, Esq., 852-5998-7559, Steptoe & Johnson HK LLP
 
Here are five things that happened this week in the world of economic sanctions that I think you should know about.
 
(1) The UK Office of Financial Sanctions Implementation (OFSI) announced two monetary penalties totaling GBP 20.47 million against Standard Chartered Bank (SCB) for violations of the UK’s Ukraine-related sectoral sanctions. According to the penalty notice, between 2015 and 2018, SCB issued numerous loans to Turkey-based Denizbank, a majority-owned subsidiary of Russia’s Sberbank, some of which violated the regulations.

 

 
 
(3) A few days after the indictments, the US State Department released a thirteen-point Democratic Transition Framework for Venezuela calling for a transitional government to administer presidential elections in the country. According to a US State Department news release, US “sanctions will remain in effect, and increase, until the Maduro regime accepts a genuine political transition.”
 
(4) Rosneft announced that it has terminated its operations in Venezuela and sold related assets to an entity owned by the Russian government. Following the announcement, US Special Representative for Venezuela Elliott Abrams and an unnamed official said the US could lift sanctions against two Rosneft subsidiaries sanctioned under Executive Order 13850 for operating in the Venezuelan oil sector.
 
(5) The US Office of Foreign Assets Control (OFAC) named 20 entities and individuals in Iran and Iraq as Specially Designated Nationals (SDNs) pursuant to Executive Order 13224 for acting on behalf of the Islamic Revolutionary Guards Corps-Qods Force (IRGC-QF). The designations coincided with the US State Department’s announcement of the renewal of a secondary sanctions waiver for the import of electricity from Iran to Iraq.

Comments

Like OFAC, the UK’s OFSI is using enforcement actions as an opportunity to educate the world on sanctions compliance best practices. The SCB penalty is especially interesting because some, but not all, of the bank’s loans to Denizbank violated the UK regulations. (Side note: Denizbank was excused from US sectoral sanctions against Sberbank under General License 3 of 20 March 2014.) As explained in OFSI’s penalty notice, the regulations contain an exemption for loans relating to EU trade. As a result, loans made to Denizbank that fell under the exemption were permissible. The lesson: banks offering trade facilities involving EU sectoral-sanctions targets should review the underlying activity on a transaction-by-transaction basis if needed.  
 
The European Union signaled its support for the US Democratic Transition Framework for Venezuela in a statement last week. (Note that both the US and EU statements link the political situation in Caracas to the ongoing coronavirus pandemic.) How about Russia? Point 3 of the framework demands the immediate departure of “[a]ll foreign security forces” from Venezuela, which would include Russian forces. Meanwhile, the Kremlin has found additional leverage by taking over Rosneft’s operations in the country. Stay tuned for more.

TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a1
13. 
ECS Presents 8-Part Export Controls Webinar Series 8 Apr to 27 May  

(Source: 
ECS
)
 
*What: U.S. Export Controls – Separate subjects on separate days:
  • Wed. April 8: Introduction to Export Controls & the Elements of the ITAR
  • Wed. April 15: Introduction to the EAR & Export Authorizations
  • Thurs. April 23: Fundamentals of Jurisdiction & Classification
  • Wed. April 29: How to Complete ITAR Export Authorizations
  • Wed. May 6: Required Elements of a Compliance Program
  • Wed. May 13: Overview of the Most Commonly Used ITAR Exemptions
  • Wed. May 20: Overview of the Most Commonly Used EAR Exceptions
  • Wed. May 27: Top 10 Violations & Tips to Prevent
* When: 1-2:30 pm Eastern, on the above dates
* Where: Webinar on your computer
* Sponsor: Export Compliance Solutions & Consulting
* Presenter: Suzanne Palmer, Mal Zerden
* Register here:
* More information: 1-866-238-4018 or email 
liz@exportcompliancesolutions.com

* * * * * * * * * * * * * * * * * * * *
TE_a214. FCC Academy: U.S. Export Controls: ITAR, EAR, and FMS

U.S. Export Controls: EAR

Wednesday, 8 April 2020, Online
More Info

The ABC of Foreign Military Sales (FMS)

Tuesday, 9 April 2020, Online
More Info

ENEDITOR’S NOTES

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The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments are listed below.
 
Agency 
Regulations 
Latest Update 
DHS CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199.
 
 
 
5 Apr 2019:84 FR 13499: Civil Monetary Penalty Adjustments for Inflation.

DOC EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774.

24 Feb 2020:
85 FR 10274
: Amendments to Country Groups for Russia and Yemen Under the Export Administration Regulations.
 

 

DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   Last Amendment: 24 Apr 2018: 83 FR 17749: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates.

DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M. Implemented by Dep’t of Defense.

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. 

23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. 
DOE EXPORT AND IMPORT OF NUCLEAR EQUIPMENT AND MATERIAL; 10 CFR Part 110.

15 Nov 2017, 82 FR 52823: miscellaneous corrections include correcting references, an address and a misspelling.

 

DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.

14 Mar 2019: 84 FR 9239: Bump-Stock-Type Devices.

DOS INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.  26 Dec 2019: 84 FR 70887; 23 Jan 2020: 85 FR 3819: Encryption rule and USML Categories I, II, III, and related sections regarding guns & ammo. 
 
DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

13 Mar 2020:
85 FR 14572:
General Licenses Issued Pursuant to Venezuela-Related Executive Order 13835.

 
 
 
 
USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA),

1 Jan 2019: 19 USC 1202 Annex.
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.
 

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