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20-0501 Friday “Daily Bugle “

20-0501 Friday “Daily Bugle”

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Friday, 1 May 2020

  1. (From 30 Apr 2020): USTR Requests Comments on Extension of Particular Exclusions Granted Under the July 2019 Product Exclusion Notice From the $16 Billion Action Pursuant to Section 301
  2. (From 30 Apr 2020): USTR Requests Comments on Extension of Particular Exclusions Granted Under the July 2019 Product Exclusion Notice From the $34 Billion Action Pursuant to Section 301
  3. State/DDTC Suspends Duration of Several ITAR Requirements
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. EU Commission: “EU and Mexico Conclude Negotiations for New Trade Agreement”
  5. Hong Kong TDC: “VIETNAM: Businesses Exporting to EU Obliged to Self-Issue COO”
  1. ST&R Trade Report: “China Tightens Export Requirements for Medical and Non-Medical Items”
  2. WORLDecr: “US Calls for EU Sanctions on Iran’s Missile Programme After Tehran Launches First Military Satellite” 
  1. Baker McKenzie: “Commerce Tightens Restrictions on Technology Exports to Countries of Concern”
  2. Husch Blackwell: “DDTC Announces New COVID-Related Measures Covering Registration and Licensing”
  3. Lowenstein Sandler: “Devil in the Details for COVID-19 Duty Deferral”
  4. Mayer Brown: “Commerce Announces Rules to Restrict Exports to China and Other Countries of Concern”
  5. Steptoe: “OFAC Asserts Jurisdiction Under North Korea Sanctions Regulations Over Non-U.S. Entities Owned or Controlled by U.S. Financial Institutions”
  6. Thompson Hine: “CFIUS Filing Fees Go into Effect 1 May”
  1. ECS Presents “ITAR/EAR Boot Camp: Achieving Compliance” on 15-17 Sep
  2. FCC Academy Presents June Webinars: U.S. Export Controls: ITAR, EAR, and FMS
  3. Friday List of Approaching Events: 149 Events Posted This Week, Including 10 New Events
  1. Bartlett’s Unfamiliar Quotations
  2. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here.
  3. Weekly Highlights of the Daily Bugle Top Stories
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  5. Submit Your Event and View All Approaching Events

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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11. USTR Requests Comments on Extensions, Granted Under the July 2019 Product Exclusion Notice From
the $16 Billion Action Pursuant to Section 301

(Source: Federal Register, 30 Apr 2020)
 
85 FR 24076: Notice and request for comments.
 
*
AGENCY: Office of the United States Trade Representative.
*
ACTION: Notice and request for comments.
*
SUMMARY: Effective August 23, 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $16 billion as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The U.S. Trade Representative initiated the exclusion process in September 2018and granted multiple sets of exclusions. He granted the first set of exclusions in July 2019, which are scheduled to expire on July
31, 2020. The U.S. Trade Representative has decided to consider a possible extension for up to 12 months of particular exclusions granted in July 2019. The Office of the U.S. Trade Representative (USTR) invites public
comment on whether to extend particular exclusions.
*
DATES: May 1, 2020 at 12:01 a.m. ET: The public docket on the web portal at https://comments.USTR.gov will open for parties to submit comments on the possible extension of particular exclusions. June 1, 2020 at 11:59 p.m. ET: To be assured of consideration, submit written comments on the public docket by this deadline.
*
ADDRESSES: You must submit all comments through the online portal: https://comments.USTR.gov

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

EXIM_a22. USTR Requests Comments on Exclusions Extension, Granted Under the July 2019 Product Exclusion Notice From the $34 Billion Action Pursuant to Section 301
 
85 FR 24081: Notice and request for comments.
 
*
AGENCY: Office of the United States Trade Representative.
*
ACTION: Notice and request for comments.
*
SUMMARY: Effective July 6, 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $34 billion as part of the action in the Section 301
i
nvestigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The U.S. Trade Representative initiated the exclusion process in July 2018 and granted multiple sets of exclusions. He granted the sixth set of exclusions in July 2019, which are scheduled to expire on July 9, 2020. The U.S. Trade Representative has decided to consider a possible extension for up to 12 months of particular exclusions granted in July 2019. The Office of the U.S. Trade Representative (USTR) invites public
comment on whether to extend particular exclusions.
*
DATES:
   May 1, 2020 at 12:01 a.m. ET: The public docket on the web portal at https://comments.USTR.gov will open for parties to submit comments on the possible extension of particular exclusions.
   June 1, 2020 at 11:59 p.m. ET: To be assured of consideration, submit written comments on the public docket by this deadline.
*
ADDRESSES: You must submit all comments through the online portal: https://comments.USTR.gov.

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

EXIM_a33. State/DDTC Suspends Duration of Several ITAR Requirements
 
85 FR ___; 22 CFR Parts 120, 122, 123, 124, and 129, International Traffic in Arms Regulations: Notification of Temporary Suspension, Modification, or Exception to Regulations
 
AGENCY: Dep’t of State/DDTC
ACTION: Temporary suspensions, modifications, and exceptions. SUMMARY: The Department of State is issuing this document to inform the public of certain temporary suspensions, modifications, and exceptions for the durations described herein to several provisions of the International Traffic in Arms Regulations (ITAR). These actions are taken in order to ensure continuity of operations within the Directorate of Defense Trade Controls (DDTC) and among entities registered with DDTC pursuant to the ITAR during the current SARS-COV2 public health emergency.
DATES: This document is issued [INSERT DATE OF PUBLICATION IN THE FEDERAL REGISTER].
FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade Controls Policy, U.S. Department of State, telephone (202) 663-1282, or e-mail DDTCResponseTeam@state.gov., ATTN: Notice of Suspension, Modification, or Exception.
 
SUPPLEMENTARY INFORMATION: In order to ensure continuity of operations within the Directorate of Defense Trade Controls (DDTC) and among entities registered with DDTC pursuant to part 122 of the International Traffic in Arms Regulations (ITAR), DDTC provides notice of the temporary suspension, modification, or exception to several ITAR provisions. These actions are being taken pursuant to ITAR § 126.2, which allows for the temporary This document is scheduled to be published in the Federal Register on 05/01/2020 and available online at federalregister.gov/d/2020-08839, and on govinfo.gov suspension or modification of provisions of the ITAR, and ITAR § 126.3, which allows for exceptions to provisions of the ITAR. These actions are in the interest of the security and foreign policy of the United States. Further, they are warranted as a result of the exceptional and undue hardships and risks to safety caused by the public health emergency related to the SARSCOV2 pandemic. The President declared a national emergency on March 13, 2020, as a result of this public health crisis. [Footnote: Proclamation 9994 of March 13, 2020, 85 FR 15337 (Mar. 18, 2020).]
 
   (1) As of February 29, 2020, a temporary suspension, modification, and exception to the requirement in ITAR parts 122 and 129 to renew registration as a manufacturer, exporter, and/or broker and pay a fee on an annual basis by extending ITAR registrations with an expiration date of February 29, March 31, April 30, May 31, or June 30, 2020 – for two (2) months from the original date of expiration.
 
   (2) As of March 13, 2020, a temporary suspension, modification, and exception to the limitations on the duration of ITAR licenses and agreements contained in ITAR parts 120 through 130, including but not necessarily limited to ITAR §§ 123.5(a), 123.21(a), and 129.6(e), to extend any license or agreement that expires between March 13, 2020 and May 31, 2020 – for six (6) months from the original date of expiration so long as there is no change to the scope or value of the authorization and no Name/Address changes are required. This six (6) month extension is warranted in light of the unique challenges applicants face in the current environment when attempting to coordinate with U.S. and foreign business partners regarding the scope of applications.
 
   (3) As of March 13, 2020, a temporary suspension, modification, and exception to the requirement that a regular employee, for purposes of ITAR § 120.39(a)(2), work at the 1 Proclamation 9994 of March 13, 2020, 85 FR 15337 (Mar. 18, 2020). company’s facilities, to allow the individual to work at a remote work location, so long as the individual is not located in Russia or a country listed in ITAR § 126.1. This suspension, modification, and exception shall terminate on July 31, 2020, unless otherwise extended in writing.
 
   (4) As of March 13, 2020, a temporary suspension, modification, and exception to authorize regular employees of licensed entities who are working remotely in a country not currently authorized by a technical assistance agreement, manufacturing license agreement, or exemption to send, receive, or access any technical data authorized for export, reexport, or retransfer to their employer via a technical assistance agreement, manufacturing license agreement, or exemption so long as the regular employee is not located in Russia or a country listed in ITAR § 126.1. This suspension, modification, and exception shall terminate on July 31, 2020, unless otherwise extended in writing. (Authority: 22 CFR 126.2 and 126.3)
 
Zachary A. Parker, Director, Office of Directives Management, U.S. Department of State.
 
Billing Code: 4710-25 [FR Doc. 2020-08839 Filed: 4/30/2020 8:45 am; Publication Date: 5/1/2020]

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

OGS OTHER GOVERNMENT SOURCES

OGS_a14. Items Scheduled for Future Federal Register Editions

(Source:Federal Register)

* Federal Trade Commission: NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals [Pub. Date: 4 May 2020] [
PDF]
* U.S. Customs and Border Protection: NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application and Approval to Manipulate, Examine, Sample or Transfer Goods notice of seizure [Pub. Date: 4 May 2020] [
PDF]

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

OGS_a25. Commerce/BIS: (No new postings)
(Source: Commerce/BIS)

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

OGS_a36. State/DDTC: (No new postings)

(Source:
State/DDTC)  

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

OGS_a47. EU Commission: “EU and Mexico Conclude Negotiations for New Trade Agreement”
 
  The European Union and Mexico concluded today the last outstanding element of the negotiation of their new trade agreement. Trade Commissioner Phil Hogan and Mexican Minister of Economy Graciela Márquez Colín – in a phone call today – agreed on the exact scope of the reciprocal opening of public procurement markets and a high level of predictability and transparency in public procurement processes. With this, the EU and Mexico can advance to the signature and ratification of this agreement in line with their respective rules and procedures.
 
  Commissioner for Trade Phil Hogan said: “While most of our efforts have been focused lately on tackling the coronavirus crisis, we have also been working to advance our open and fair trade agenda, which continues to be very important. Openness, partnerships and cooperation will be even more essential as we rebuild our economies after this pandemic. I am very pleased, therefore, that together with our Mexican partners, we share similar views and that our continued work could now come to fruition. Today’s agreement is clear evidence of our shared commitment to advance our agenda of partnership and cooperation. This agreement – once in force – will help both the EU and Mexico to support our respective economies and boost employment.”
 
Under the new EU-Mexico agreement, practically all trade in goods between the EU and Mexico will be duty-free. The agreement also now includes progressive rules on sustainable development, such as a commitment to effectively implementing the Paris Climate Agreement. It is also the first time that the EU agrees with a Latin American country on issues concerning investment protection. Simpler customs procedures will further help boost exports.
 
The broader Global Agreement, of which the trade agreement is an integral part, also covers the protection of human rights, as well as chapters on political and development cooperation. It will also be the very first EU trade agreement to include provisions to fight corruption, with measures to act against bribery and money laundering.
 
Mexico is the EU’s number one trade partner in Latin America with bilateral trade in goods worth €66 billion and trade in services worth another €19 billion (respectively 2019 and 2018 data). EU goods exports exceed €39 billion a year. EU-Mexico trade in goods has more than tripled since the entry into force of the original agreement in 2001. The modernised trade agreement will help boost this strong historical growth.
 
Next Steps
  The legal revision of the agreement is now being finalised. Once the process is concluded, the agreement will be translated into all EU languages. Following the translations, the Commission proposal will be transmitted for signature and conclusion to the Council and European Parliament.
 
Background
  The trade agreement is part of a broader Global Agreement, which sets the framework for the EU’s relationship with Mexico and covers issues of broader shared interest that go beyond trade, including political issues, climate change and human rights. Mexico was the first country in Latin America to sign a Global Agreement with the EU in 1997. The EU and Mexico started the negotiations for this new, modernised agreement in May 2016. They reached an agreement in principle two years later, in April 2018, leaving for further discussion some outstanding technical issues. Those are now fully agreed.

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

 
  Local companies exporting to the EU, Norway or Switzerland under the Generalised System of Preferences (GSP) programme will be obliged to self

issue Certificates of Origin (COO) as of 1 July this year. Accordingly, businesses have until 30 June to obtain the required EU Registered Exporter (REX) number from the Vietnam Chamber of Commerce and Industry. Business exporting goods valued at US$6,500 or less, however, will be entitled to self

issue COOs without the prior need to secure a REX number.
  Although the system of self

issuance of COOs for EU GSP exports was originally introduced in January last year, a one

year transition period (subsequently extended by a further six months) was on offer to affected traders. With that period now drawing to a close, the previous COO Form A

based system is to be officially withdrawn from use.

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

COM NEWS

NWS_a19. ST&R Trade Report: “China Tightens Export Requirements for Medical and Non-Medical Items”

(Source: Sandler, Travis & Rosenberg Trade Report, 1 May 2020) [Excerpts]
 
China’s Ministry of Commerce has announced the following changes regarding exports of medical and non-medical supplies.
 
Non-Medical Face Masks
Effective April 26, all exports of non-medical face masks must meet the qualification standards of either China or the importing nation. When declaring such an export, the manufacturer must submit an electronic or written announcement, jointly signed by the exporter and the foreign importer, attesting that the product meets this requirement. In addition, the foreign importer must attest that they accept the qualification standard and are aware that the face masks should not be used for medical use.
 
MOFCOM will be responsible for confirming and updating a list of non-medical face mask manufacturers certified or registered in foreign countries. The State Administration for Market Regulation will be responsible for updating a list of manufacturers with disqualified products. China Customs will clear export shipments for manufacturers that are on the MOFCOM list or are not on the SAMR list.
 
Medical Supplies
Also, effective April 26, exporters of COVID-19 inspection reagents, medical face masks, medical protective clothing, respirators, and infrared thermometers must submit a certification attesting that the product meets the qualification and safety standards in the importing country (area). China Customs will clear such shipments based on MOFCOM’s list.

NWS_a210. WORLDecr: “US Calls for EU Sanctions on Iran’s Missile Programme After Tehran Launches First Military Satellite”
(Source: WORLDecr, 30 Apr 2020) [Excerpts]
 
The United States has called on the European Union to place sanctions on anyone involved in developing Iran’s missile programmes, saying the UN’s conventional arms embargo on Iran must be extended, after Tehran announced last month it had successfully launched its first military satellite.
 
US Secretary of State Mike Pompeo said that Washington was calling ‘on the European Union to sanction those individuals and entities working on Iran’s missile programs.’ In the 25 April statement, he added, ‘As a start, nations should support extending the UN conventional arms embargo on Iran, which is set to expire this October.’
 
On 22 April, Iran’s Islamic Revolution Guards Corps (‘IRGC’) announced it had placed its Nour-1 satellite into orbit. Last September, the US claimed Iran was using its civilian space agencies to advance the country’s ballistic missile programme.
 
Germany, France and the UK have expressed concern about the launch, while Russia has said the deployment did not violate any UN resolutions.

COM COMMENTARY

COM_a111. Baker McKenzie: “Commerce Tightens Restrictions on Technology Exports to Countries of Concern”

 
* Principal Author: Sylwia A. Lis, Baker McKenzie
 

  On April 28, 2020, the Department of Commerce’s Bureau of Industry and Security (“BIS”) published two new final rules and a proposed rule in the Federal Register amending the Export Administration Regulations (“EAR”) to tighten restrictions on exports of technology to China, Russia, and Venezuela. According to Commerce Secretary Wilbur Ross, these actions are intended to combat efforts by entities in China, Russia, and Venezuela to use certain US technologies obtained through civilian supply chains or under civilian-use pretenses to develop weapons, military aircraft, and surveillance technology contrary to US national security interests.

  As a result of these rules, a universe of transactions involving widely commercially available US technologies that require BIS licenses could dramatically increase, particularly for China – with the licensing policy of the presumption of denial making such licenses difficult to obtain. These rules are part of a broader wave of recent regulatory measures aimed to strengthen the US Government’s restrictions on, as well as visibility into, technology transfers to China and other countries of concern to protect US national security and foreign policy interests.   
 
As described further below, the rules:
  (1) amend the EAR to expand license requirements on exports, reexports, and transfers (in-country) of items intended for military end-use or military end-users in China, Russia, or Venezuela;
  (2) propose to modify License Exception Additional Permissive Reexports (“APR”) to remove provisions authorizing certain reexports of national security-controlled items; and 
  (3)
remove License Exception Civil End Users (“CIV”) for national security-controlled items on the Commerce Control List (“CCL”) to countries of national security concern.
 
Expansion of Military End Use/User Controls for China, Russia, and Venezuela
  The Commerce Department is broadening the US Government’s visibility into and ability to deny or condition exports, reexports, and transfers (in-country) involving certain items on the CCL destined to military end users or military end uses in China, Russia, or Venezuela. The final rule, which becomes effective on June 29, 2020, provides for the following changes to the EAR:

 

Military end user-based licensing requirements for China

  The licensing requirements for China are strengthened to include exports/reexports of designated items to military end users in China unless License Exception GOV applies. The existing licensing requirements for military end users only apply to Russia and Venezuela. The EAR’s definition of “military end user” is not changing and continues to apply broadly to “national armed services (army, navy, marine, air force, or coast guard), as well as the national guard and national police, government intelligence or reconnaissance organizations, or any person or entity whose actions or functions are intended to support ‘military end uses’.” (Emphasis added.) The expansion of the license requirements to exports/reexports destined to “military end users” in China will, however, significantly increase compliance burdens on companies supplying designated items to China. In particular, given China’s integration of its civilian industries with the military sector, vetting Chinese entities for purposes of ensuring compliance with the end user-based license requirements is likely to pose considerable challenges.
  Further, given the breath of the definition of “military end user,” along with the just expanded definition of “military end-use” (see below), a universe of transactions triggering license requirements could significantly increase. Supplying designated items to Chinese companies that engage in any (even de minimis) degree of business in support of military end-uses, could trigger licensing requirements. For example, Chinese semiconductor foundries could constitute “military end users” if even a small volume of semiconductor wafers they produce is used for integrated circuits for incorporation into defense articles. The consequence would be that US semiconductor tool manufacturers would have to obtain licenses to sell and supply semiconductor tools classified under ECCN 3B991 to such foundries. Similarly, Chinese aircraft maintenance organizations that furnish maintenance services for both commercial and military aircraft could constitute “military end users, ” resulting in a license requirement for US suppliers of aircraft parts classified under ECCN 9A991, even if those parts could only be used for a commercial aircraft.
  In sum, should the US Government adopt a broad interpretation of these terms, US companies supplying non-sensitive, broadly available items to Chinese companies for civilian applications (e.g., items classified under ECCNs 3A991, 3B991, 5A992, or 9A991) may need BIS licenses, which would be difficult to obtain given the licensing policy of denial (see below). This could have a detrimental impact on a broad swath of US industry, in particular in the semiconductor, telecommunications, and aircraft sectors. BIS has indicated that it will be issuing guidance to industry to help clarify the expanded licensing requirements for China.

 

Expanded definition of “military end use” 

  The definition of “military end use” has been changed from covering items for the “use,” “development,” or “production” of military items (as those terms are defined in the EAR) to also include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, “development,” or “production” of military items. By expanding the definition to include items that support or contribute and by making a single element of the definition of “use” trigger the license requirement, the reach of the military end use-based restrictions could be extremely broad, possibly covering any peripheral item that could in any way be linked to a military item.  

 

Broader list of items covered by military end use/user licensing requirements 

  The list of items subject to the military end use and military end user license requirements in Supplement No. 2 to part 744 is being expanded to include the following Export Control Classification Numbers (“ECCNs”) in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers, and propulsion: 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996, and 9B990. Notably, these changes roll out military end use/end user controls to items that are commercially widely available and are not inherently sensitive but rather could be important building blocks or components for products and technologies that China, Russia, and Venezuela may be developing to strengthen their military capabilities. As such, the expansion is significant and will require the suppliers of the designated items to go through a rigorous vetting process to determine whether the items destined to China, Russia, of Venezuela are being sourced for a military end user or a military end use.

 

Electronic Export Information (“EEI”) filing requirements for exports to China, Russia, or Venezuela 

  Filings of EEI relating to exports of items to China, Russia, or Venezuela will be required regardless of the value of the shipment unless the shipment is eligible for license exception GOV. Further, such filings must identify the ECCN of the items to be exported regardless of the reason for control. Currently, some shipments under $2,500 are exempt from AES filing requirements, and an ECCN does not need to be indicated when the only reason for control is Anti-Terrorism (AT).
  These changes will trigger the need for the filing of EEI for a larger universe of exports and will give the US Government a broad window into exports of items to China, Russia, and Venezuela, including increased visibility into the categories of technologies being supplied to China. The EEI records are available to a number of US Government agencies and have historically been an effective tool in the enforcement of US export controls. 

 

Presumption of denial licensing policy for military end-use/end user exports to China, Russia, or Venezuela

  License applications for the export, reexport, and (in-country) transfers of items, which are subject to the military end-use and end-user controls, to military end users or for military end uses in China, Russia, or Venezuela will be subject to a presumption of denial. Accordingly, while no export ban is in place per se for such transactions, obtaining a license will become difficult. 

 

License requirements for items described in a y. paragraph of a 9×515 or “600 series” ECCN to China, Russia, or Venezuela relocated to the relevant ECCNs

  Currently, the licensing requirements for such items are described as part of the military end use/end user controls in § 744.21 but will be relocated to the relevant ECCNs and assigned a reason for control of Regional Stability (RS). This is not a substantive change but rather one intended to help companies comply with these requirements.
 
Modification of License Exception APR 
  BIS proposes to eliminate the application of License Exception APR to reexports of national security-controlled items to countries in Country Group D:1, which covers countries of national security concern, including China, Russia, and Venezuela. Under the proposed rule, such reexports would become subject to licensing requirements under the EAR, in addition to local licensing requirements, to ensure consistent review of reexports of national security-controlled items. The public comment period for this proposed rule ends on June 29, 2020.
 
Removal of License Exception CIV
  BIS is removing License Exception CIV, which authorizes exports, reexports, and transfers (in-country) of certain national security-controlled items to most civil end users for civil end uses in Country Group D:1. The final rule will become effective on June 29, 2020, and will result in exports of national security-controlled items to Country Group D:1 countries becoming subject to BIS license requirements, thus giving the US Government more visibility into transactions of national security interest. License Exception CIV is one of the more commonly used exceptions to export licensing requirements and BIS has acknowledged that its outright removal may have a disproportionate effect on deemed exports, i.e., releases of national security-controlled technology to foreign nationals in the United States. In this regard, BIS has indicated that it would welcome industry feedback to help frame this issue going forward, notwithstanding that the removal of License Exception CIV was published as a final rule.

COM_a212. Husch Blackwell: “DDTC Announces New COVID-Related Measures Covering Registration and Licensing”
(Source: Husch Blackwell, 29 Apr 2020)
 
* Principal Author: Coutney O’Toole Morgan, Esq., 1-202-378-2389, Husch Blackwell LLP
 
  The U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) recently announced on its 
website
immediate measures intended to mitigate the impact of the SARS-COV2 pandemic on U.S. businesses and supply chains. These measures include the following temporary changes to the registration and licensing requirements:
  • Temporary suspension of the requirements set forth in the International Traffic in Arms Regulations (ITAR) Parts 122 and 129 to renew registration as a manufacturer, exporter and/or broker and pay an annual fee by extending current ITAR registrations expiring on February 29, March 31, April 30, May 31, and June 30, 2020 by two (2) months from the original expiration date.  DDTC is also contemplating a one-time temporary reduction in registration fees for certain categories of DDTC registrants, but no decision has been made to date.  More information on any change will be communicated through DDTC’s website.
  • An additional thirty (30) days for responses to its request-for-information letters related to voluntary and directed disclosures. The notice further indicates that DDTC Compliance is considering extensions of time for the submission of full voluntary disclosures on a case-by-case basis.  Interested parties should submit such requests via email on company letterhead in PDF format to DTCC-CaseStatus@state.gov.
  • A six-month extension from the original date of expiration for any license that expires between March 13, 2020 and May 31, 2020 by temporarily suspending ITAR Parts 120-130.
  • To encourage remote work by temporarily suspending the ITAR § 120.39(a)(2) requirement that a regular employee must work at the company’s facilities until July 31, 2020. Note, the temporary suspension, modification and exception to ITAR § 120.39(a)(2) does not apply if the individual is located in Russia or any other country listed in ITAR § 126.1.
  While the web notice was posted on April 23, 2020, all of the measures are retroactive to March 13, 2020, when the President declared a national emergency.

COM_a213. Lowenstein Sandler: “Devil in the Details for COVID-19 Duty Deferral”

(Source: 
JOC.com
, 24 Apr 2020) [Excerpts] 

 
* Principal Author: 
Doreen M. Edelman
, Esq.,
Lowenstein Sandler LLP
 
  Importers wanting to take advantage of US Customs and Border Protection’s (CBP) recently announced COVID-19-related duty deferral option should be cognizant of the makeup of their entry summaries.
  Importantly, if an entry summary includes any products that are subject to the list of special duties – including those related to tariffs on imports from China and steel and aluminum – the entire entry is excluded from the deferral program and the importer cannot defer any of the duties owed on that entry. Since so many products are currently subject to Trump administration tariffs, this limitation prevents a huge portion of entries from China from benefiting from the duty deferral program.
  CBP on Monday announced that importers of certain goods could defer for 90 days duties owed on products brought into the United States between March 13 and April 30. The deferral is meant to help importers cope with the economic effects of the COVID-19 pandemic.  … 
 
(Go
 HERE
 
for full article.)

(Source:
Mayer Brown, 29 Apr 2020)
 
* Principal Author: Tamer A. Soliman, Esq., 1-202-263-3292, Mayer Brown
 
  On April 28, 2020, the US Department of Commerce Bureau of Industry and Security (“BIS”) published two final rules and a proposed rule designed to impose further restrictions on exports and technology transfers to China, Russia, Venezuela and other countries of national security concern.  In announcing these changes, US Secretary of Commerce Wilbur Ross cited efforts by China, Russia and Venezuela to use “civilian supply chains” to acquire US goods and technology for diversion to military and intelligence applications that harm US interests. As a practical matter, all three actions have broad and significant implications for US and non-US entities dealing goods, software and technology in a broad range of applications (notably including items relating to semiconductor, civil aviation, telecommunications, optics and other technologies), and will create new due diligence obligations and licensing requirements for exports, reexports and transfers involving countries of national security concern.   
 
More importantly, the net effect of these rules will be to provide the US government greater visibility and controls over exports, reexports and transfers to civilian end users in China and other affected countries and enhance the corresponding due diligence obligations and licenses for parties in the supply chain affected by these changes. 

 

The rules published yesterday are as follows:
   (1) A 
final rule
, to go into effect June 29, 2020, that significantly expands licensing requirements for export, reexport and transfer (in-country) of a broad range of goods (including materials and equipment), software and technology controls for military end use or military end users in the People’s Republic of China, Russia, or Venezuela (the “MEU Rule”). 
   (2) A 
final rule
, to go into effect June 29, 2020, to remove License Exception Civil End Users (“CIV”), an authorization that currently allows for unlicensed exports, reexports or transfers of a range of national security-controlled items to civilian end users in several countries, including China.  BIS review will now be required for activities involving purely civilian end uses and previously covered by this license exception.  
   (3)
A 
proposed rule
, with comments due by June 29, 2020, to modify License Exception Additional Permissive Reexports (“APR”) by removing provisions which authorize non-US companies to reexport from certain lower-risk countries certain national security-controlled items on the CCL to countries of national security concern, including China (the “APR Proposed Rule”).

 
Summary of Changes 

 

The MEU Rule (Military End Uses and End Users in China, Russia and Venezuela in the “Civil-Military Fusion” Context)
The MEU Rule implements, effective June 29, 2020, several changes related to military end use and military end user controls with respect to China, Russia and Venezuela (15 C.F.R. § 744.21).
 
The key changes are as follows:
   (1)
Expansion to “Military End Users” in China and “Increased Diligence” Obligation.
 
The rule expands the current licensing requirement on certain items for Chinese “military end use” to also include Chinese “military end users” (in addition to existing controls on military end users and end uses in Russia and Venezuela).  Notably, the agency highlights that this change “will require increased diligence with respect to the evaluation of end users in China, particularly in view of China’s widespread civil-military integration.”  BIS defines “military end user” broadly for these purposes to include not only military, law enforcement and intelligence functions but also “any person or entity whose actions or functions are intended to support” military end uses. 
   (2) Expansion of Restricted Items. 
 

The rule expands the items for which the military end use and end user restrictions on China, Russia and Venezuela apply. The revised Supplement No. 2 to Part 744 adds the following ECCNs in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers, and propulsion: 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996 and 9B990. The rule also expands the range of items under ECCNs 3A992, 8A992 and 9A991 already included in Supplement No.  

   (3) Expanded Definition of “Military End Use.”  The rule broadens the definition of “military end use” to include not only incorporation into any military item but also “any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, ‘development’ or ‘production'” of such items.  A military item for these purposes is any item described on the US Munitions List or under an A018 or 600 series classification of the EAR. 
   (4)
Presumption of Denial. 
 
The new rule adopts a presumption of denial for those applying for a license to export, reexport or transfer items to military end users or for military end use in China, Russia and Venezuela.
   (5)
Expanded Export Declaration Requirements. 
 
The rule expands Electronic Export Information (“EEI”) filing requirements in the Automated Export System (“AES”) to require filings for exports of any items on the CCL to China, Russia or Venezuela regardless of the value of the shipment (with the exception of certain shipments of the US government, certain cooperating governments and international bodies eligible for License Exception GOV). In addition, the EEI filing must include the correct ECCN regardless of the reason for control.
 
The CIV Rule (Civil End Users in Group D:1 Countries)
 
   (i)
Effective June 29, 2020, the CIV Rule removes License Exception CIV from the EAR. License Exception CIV previously authorized exports, reexports and transfers (in-country) of certain national security-controlled items on the CCL, without prior review by BIS, provided the exception’s criteria were met, to most civil end users for civil end uses in Country Group D:1 (countries of national security concern). BIS decided to remove this license exception due to the “increasing integration of civilian and military technology development in” the D:1 countries. 
  (ii) Now, a license is required to export, reexport or transfer (in-country) items controlled for national security to D:1 countries.   
 
APR Proposed Rule (Certain Reexports and Transfers Consistent with the Laws of Certain Friendly Jurisdictions)
   (a) The APR Proposed Rule proposes to modify the EAR to no longer allow reexports under License Exception APR to Country Group D:1 countries (including China), with the goal of gaining better visibility into transactions of national security or foreign policy interest to the United States.  License Exception APR currently allows for reexports of items controlled for national security reasons to be made from certain friendly jurisdictions (including Hong Kong) to certain destinations, provided that the reexport is consistent with an export authorization from the country of reexport.
The proposed rule would remove countries in Country Group D:1 as a category of eligible destinations for national security-controlled items under License Exception APR.  
   (b) The proposed change is “due to variations in how the United States and its partners . . . perceive the threat of civilian and military technology development in countries of concern.” Namely, certain countries have differing licensing review standards for national security-controlled items destined to Country Group D:1, resulting in the reexport of US-origin items from A:1 countries to D:1 countries that would have been denied if exported directly from the United States.
   (c) BIS is seeking public comment on the APR Proposed Rule, which must be received by June 29, 2020.

 

Key Considerations for Business
These new rules should be understood in the context of the US government’s increased scrutiny on the use of “civilian supply chains” by companies in the commercial sector for acquisition and diversion of products to military application.  These rules may pose a number of new considerations and challenges for companies exporting, reexporting or transferring items subject to national security controls as well as companies whose supply chains depend on such items.   
   (1) Companies involved directly or indirectly in the trade or transfer of covered goods (including production equipment, materials and finished products), software or technology to China, Russia and Venezuela should carefully consider the risk that the US government may consider their commercial activities to involve “military end users” or “military end uses” and ensure they have appropriate due diligence and risk mitigation in place to address those risks given the current focus on “widespread civil military integration.”   
   (2) Companies that rely on, or whose suppliers may rely on, License Exception CIV should evaluate the potential impact of the elimination of that license exception on their current sales and supply chain (including possible license application requirements to BIS). 
   (3) Parties should immediately consider updating their AES filing protocol for exports of items to China, Russia or Venezuela to ensure that the new EEI filing requirements- which now apply to shipments of any value, among other requirements-can be met by June 29, 2020.
   (4) While changes under the APR Proposed Rule are not final, parties should identify whether any of their transactions would no longer be permitted if BIS removes D:1 countries as an eligible destination from License Exception APR. Potentially impacted businesses should also consider submitting comments to BIS. Specifically, BIS “does not have a way to readily account for how many items are being authorized for reexport or transfer (in-country) under the provisions of License Exception APR” and thus “is seeking information as to the volume of transactions affected by this proposed change, how the proposed change would affect the amount of time necessary to complete such transactions in the future, and how the proposed change would otherwise affect current business.” Comments are due by June 29, 2020.

COM_a5
15. Steptoe: “OFAC Asserts Jurisdiction Under North Korea Sanctions Regulations Over Non-U.S. Entities Owned or Controlled by U.S. Financial Institutions”
(Source:
Steptoe
, 29 Apr 2020)
 
* Principal Author:
Peter Jeydel, Esq., 1-202-429-6291, Steptoe & Johnson LLP
 

  In a 
Federal Register notice
 
published on April 10, 2020, the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”), amended its 
North Korea Sanctions Regulations
 
(“NKSR”) to extend their application to non-U.S. entities owned or controlled by U.S. financial institutions. The change was mandated by Congress in Section 7121 of the 
National Defense Authorization Act for Fiscal Year 2020
.
 


  This jurisdictional expansion involving U.S. sanctions on North Korea is noteworthy.  With the exception of the Cuba and Iran sanctions programs, U.S. sanctions prohibitions typically do not apply directly to non-U.S. entities owned or controlled by U.S. persons.  Historically, the extension of U.S. sanctions prohibitions to foreign subsidiaries of U.S. companies has been one of the most controversial “extraterritorial” aspects of U.S. sanctions programs.  (So-called “secondary sanctions” do generally apply to non-U.S. entities, but they do not impose “prohibitions” under U.S. law.)
 
  New 
Section 510.214
 
of the NKSR extends the broad prohibitions of the NKSR to “any person that is owned or controlled by a U.S. financial institution and established or maintained outside the United States.”  This appears to include non-financial companies that are owned or controlled by U.S. financial institutions.   In general, “control” can include minority ownership combined with other important rights, such as executive appointments or board representation.  Moreover, a “U.S. financial institution” includes branches or offices of non-U.S. financial institutions that are located in the United States – conceivably an exercise of “control” by such a U.S. branch or office over a non-U.S. entity could trigger OFAC jurisdiction.
  • The comprehensive prohibitions in the NKSR include prohibitions on exports, imports, and new investments, as well as “blocking” sanctions against the Government of North Korea and the Workers’ Party of Korea.  Practically speaking, this latter prohibition effectively restricts all activity in or relating to the formal economy of North Korea, where the North Korean government is ubiquitous and unavoidable.   The NKSR also prohibit dealings with the many non-North Korean parties that have been designated on OFAC’s Specially Designated Nationals (“SDN”) list under the NKSR.  This includes numerous trading and shipping companies and vessels domiciled in various jurisdictions, among others.
  • The term “U.S. financial institution” includes “any U.S. entity (including its foreign branches) that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or other extensions of credit, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent. It includes depository institutions, banks, savings banks, trust companies, securities brokers and dealers, commodity futures and options brokers and dealers, forward contract and foreign exchange merchants, securities and commodities exchanges, clearing corporations, investment companies, employee benefit plans, and U.S. holding companies, U.S. affiliates, or U.S. subsidiaries of any of the foregoing. This term includes those branches, offices, and agencies of foreign financial institutions that are located in the United States, but not such institutions’ foreign branches, offices, or agencies.”
  The new prohibitions only apply when such prohibited activity is conducted “knowingly.”  It some circumstances, a party may not know that it is dealing with North Korea or its instrumentalities or affiliates, which often operate internationally through shell entities and other deceptive structures that may not be readily apparent to their counterparties.  That said, OFAC generally expects parties to conduct risk-based due diligence to ascertain whether a party involved in a transaction may be subject to U.S. sanctions, and 
the term “knowingly”
 
includes circumstances in which a party “should have known” of the relevant facts.
 
  Given the relative isolation of North Korea from the global economy, this change may not have significant immediate practical impact.  But U.S.-based institutions (including U.S. branches or offices of non-U.S. institutions) that have not fully implemented U.S. sanctions compliance policies and procedures with respect to their foreign owned or controlled entities should carefully review their compliance program to be sure it adequately accounts for this new rule.  The parent institution is subject to fines and other penalties if any non-U.S entity that it owns or controls violates, attempts to violate, conspires to violate, or causes a violation of the NKSR.

COM_a616. Thompson Hine: “CFIUS Filing Fees Go into Effect 1 May”
(Source: Trump and Trade, 29 Apr 2020)
 
* Principal Author: Scott E. Diamond, Esq., 1-202-263-4197, Thompson Hine
 
  On April 29, 2020, the U.S. Department of the Treasury’s Office of Investment Security published an 
interim rule
 
in the Federal Register that establishes a range of fees for formal written voluntary notices filed on or after May 1, 2020 with the Committee on Foreign Investment in the United States (CFIUS). The interim rule largely tracks the 
proposed regulations
 
and adopts the sliding scale fee structure published on March 9, 2020. CFIUS has also issued a 
fact sheet
 
and guidance for paying the 
filing fees
. Public comments on the interim rule will be accepted until June 1, 2020.
  Under the interim rule, all formal written notifications submitted on or after May 1, 2020 for “covered transactions” under 31 C.F.R. Part 800 or “
covered real estate transactions
” under Part 802, will be subject to filing fees ranging from $750 to $300,000, depending on the value of the transaction. Generally, valuation will be calculated based on the total value of all consideration that has been or will be paid in the context of the transaction by or on behalf of the foreign person who is a party to the transaction.
  CFIUS explained that there is no fee to submit a short-form declaration with CFIUS. However, the fees will apply to notices filed by parties at the end of the declaration process and full notifications made to CFIUS of a transaction subject to a mandatory short-form declaration. Notably, CFIUS may waive portions of a fee or the entire payment if “extraordinary circumstances relating to national security warrant such a waiver.”
 
  The filing fee structure previously proposed remains unchanged:

Value of the Transaction Fee
Less than $500,000 No fee
Equal to or greater than $500,000
but less than $5,000,000
$750
Equal to or greater than $5,000,000
but less than $50,000,000
$7,500
Equal to or greater than $50,000,000
but less than $250,000,000
$75,000
Equal to or greater than $250,000,000
but less than $750,000,000
$150,000
Equal to or greater than $750,000,000 $300,000

TE EX/IM TRAINING EVENTS & CONFERENCES

(Source:
ECS
)
 
*What: 3rd Annual ITAR/EAR Symposium & Managing ITAR/EAR Complexities Seminar
*When: 15-17 Sep
*Where: 
Chart House
, Annapolis, MD
*Sponsor: Export Compliance Solutions & Consulting (ECS)
*Presenter: Suzanne Palmer, Lisa Bencivenga, Mal Zerden, guest speaker panel
*Register:  
Here
 or by calling 866-238-4018 or email 
liz@exportcompliancesolutions.com

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

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

(Sources: Event sponsors) 
 

Submit your event in the Submission section at the end of this newsletter.  
 
[Editor’s note:  This Daily Bugle Event List has grown so large that we have run out of space to display it!  This week we begin a new practice of displaying only the new events in the Daily Bugle, while maintaining a 
LINK HERE to the full list.] 
 
On-Line:
 
* 7 May:
Introduction to the EAR & Export Authorizations
; Export Compliance Solutions & Consulting (ECS)
* 14 May: 
Fundamentals of Jurisdiction & Classification
; Export Compliance Solutions & Consulting (ECS)
* 20 may:
Apparel Classification Series: Advanced Topics
; Sandler, Travis & Rosenberg
* 21 May:
How to Complete ITAR Export Authorizations
; Export Compliance Solutions & Consulting (ECS)
* 28 May:
Required Elements of a Compliance Program
; Export Compliance Solutions & Consulting (ECS)
* 4 Jun: 
Overview of the Most Commonly Used ITAR Exemptions
; Export Compliance Solutions & Consulting (ECS)
* 11 Jun:
Overview of the Most Commonly Used EAR Exceptions
; Export Compliance Solutions & Consulting (ECS)

* 18 Jun: 
Top 10 Violations & Tips to Prevent
; Export Compliance Solutions & Consulting (ECS)

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

EN EDITOR’S NOTES

EN_a120. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* Joseph Addison (1 May 1672 – 17 Jun 1719; was an English essayist, poet, playwright and politician. His name is usually remembered alongside that of his long-standing friend Richard Steele, with whom he founded The Spectator magazine. His simple prose style marked the end of the mannerisms and conventional classical images of the 17th century.)
  – “Cheerfulness is the best promoter of health and is as friendly to the mind as to the body.”
  – “Reading is to the mind what exercise is to the body.”
 
Novalis (The pseudonym and pen name of Georg Philipp Friedrich Freiherr von Hardenberg; 2 May 1772 – 25 Mar 1801; a poet, author, mystic, and philosopher of Early German Romanticism.)
  – “Poetry heals the wounds inflicted by reason.”
 
Friday funnies:
* I have a lot of good jokes about unemployed people…But none of them work.
* What do you call a bee that was born is the United States?  A USB.
* Where do animals go when their tails fall off?  The retail store.
* Why can’t you trust trees? Because they are shady.
* What is the slipperiest country in the world? Greece!
* The hardest thing about doing nothing is that you don’t know when you are finished! 

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

 

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.

28 Apr 2020:
85 FR 23470
: Elimination of License Exception Civil End Users (CIV).
 

 

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

10 Apr 2020:
85 FR 20158:

North Korea Sanctions Regulations. 

 
 
 
 
USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), Revision 8.

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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