20-0617 Wednesday “Daily Bugle”

20-0617 Wednesday “Daily Bugle”

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Wednesday, 17 June 2020

  1. Commerce/BIS “Addition of Certain Rigid-Walled, Single-Use Cultivation Chambers and Precursor Chemicals to the Commerce Control List”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS:(No new postings)
  3. State/DDTC: (No new postings)
  4. Treasury/OFAC: “Founder and CEO of Iranian Financial Services Firm Pleads Guilty to Conspiracy to Violate U.S. Sanctions”
  5. Council Decision (CFSP) 2020/794 of 16 June 2020 Amending Decision (CFSP) 2018/101 on the Promotion of Effective Arms Export Controls
  1. Forbes: “U.S. Could Face Unintended Consequences If It ‘Reinterprets’ Arms Control Pact to Sell More Drones”
  2. Nextgov: “Commerce to Allow Sharing Certain Technology with Huawei”
  3. Nikkei: “US Blacklists ‘China’s MIT’ as Tech War Enters New Phase”
  1. Houthoff: “New Dutch FDI Screening to Protect Vital Sectors”
  2. ST&R Trade Report: “Civil Penalties for Import, Shipping Violations Increased”
  3. Thomsen and Burke: “Commerce to Publish New Huawei Rule in the Context of Standards Organizations”
  4. Thompson Hine: “Commerce Announces New Rule to Facilitate U.S. Companies’ Involvement in Standard-Setting Bodies Including Huawei”
  1. ECTI Presents: Foods, Supplements, Cosmetics, Devices…Oh My: How the FDA Regulates More Than You May Think! Webinar; 24 Jun
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
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85 FR 36483
: Rule
Bureau of Industry and Security, Commerce.
Final rule.

The Bureau of Industry and Security (BIS) publishes this final rule to amend the Export Administration Regulations (EAR) to implement the decisions made at the February 2020 Australia Group (AG) Intersessional Implementation Meeting, and those later adopted pursuant to the AG’s silence procedure. Specifically, this rule amends Export Control Classification Numbers (ECCNs) 1C350, 1C351 and 2B352 on the Commerce Control List (CCL) to reflect these AG changes. ECCN 1C350 is amended by adding twenty-four precursor chemicals, as well as mixtures in which at least one of these chemicals constitutes 30 percent or more of the weight of the mixture, to ECCN 1C350.d. ECCN 1C351 is amended to add Middle East respiratory syndrome-related coronavirus (MERS-related coronavirus). ECCN 2B352 is amended by adding a Technical Note to indicate that cultivation chamber holding devices controlled in 2B352.b.2.b include single-use cultivation chambers with rigid walls.  

The items addressed by this final rule were not previously listed on the CCL or controlled multilaterally. BIS, consistent with the interagency process described in the Export Control Reform Act of 2018 (ECRA), identified the precursor chemicals and single-use cultivation chambers addressed by this final rule as emerging technologies that are essential to U.S. national security and for which effective controls can be implemented. The inclusion of such items in this final rule is consistent with the requirements of ECRA and the decision of the AG to add such items to its common control lists, thereby making exports of such items subject to multilateral control (following the implementation of these changes by individual AG participating countries, including the United States).
This rule is effective June 17, 2020.

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Federal Register
* Commerce/BIS: RULES; Release of Technology to Certain Entities on the Entity List in the Context of Standards Organizations [Pub. Date: 18 Jun 2020] (PDF
* Treasury/OFAC;
Blocking or Unblocking of Persons and Properties
; [Pub. Date: 18 Jun 2020] (PDF)
* Treasury/OFAC;
Blocking or Unblocking of Persons and Properties
; [Pub. Date: 18 Jun 2020] (PDF)

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(Source: Treasury/OFAC
, 16 Jun 2020
Assistant Attorney General for National Security John C. Demers and U.S. Attorney Erica H. MacDonald today announced the guilty plea of Seyed Sajjad Shahidian, 33, for his role in conducting financial transactions in violation of U.S. sanctions against Iran.  Shahidian, who was indicted on Dec.18, 2018, entered his guilty plea today to one count of conspiracy to commit offenses against and to defraud the United States before Judge Patrick J. Schiltz in U.S. District Court in Minneapolis, Minnesota.
Shahidian, a citizen of Iran, was arrested in London, England on Nov. 11, 2018.  On May 15, 2020, Shahidian was extradited to the United States and had his initial appearance in the District of Minnesota on May 18, 2020.
According to the defendant’s guilty plea and documents filed in court, Payment24 was an internet-based financial services company with approximately 40 employees and offices in Tehran, Shiraz, and Isfahan, Iran.   
The primary business of Payment24 was helping Iranian citizens conduct prohibited financial transactions with businesses based in the United States, including the unlawful purchase and exportation of computer software, software licenses, and computer servers from United States companies.  According to Payment24’s website, the company charged a fee to circumvent “American sanctions,” and claimed to have brought in millions of dollars of foreign currency into Iran.  … 

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(Source: Official Journal of the European Union, 17 Jun 2020) [Excerpts] 
 On 22 January 2018, the Council adopted Decision (CFSP) 2018/101, which provides for a 30-month implementation period from the date of conclusion of the financing agreement referred to in that Decision, for the activities referred to in Article 1 thereof.
 On 30 April 2020, the Bundesamt für Wirtschaft und Ausfuhrkontrolle, in its capacity as the Implementing Agency, requested the authorisation of the Union to extend the implementation of Decision (CFSP) 2018/101 until 30 November 2020 due to challenges arising from the continuing COVID-19 pandemic.
 The continuation of the activities referred to in Article 1 of Decision (CFSP) 2018/101 can be performed without any financial resource implication until 30 November 2020.
 Decision (CFSP) 2018/101 should therefore be amended accordingly,
Article 1
Decision (CFSP) 2018/101 is hereby amended as follows:
Article 5 is replaced by the following:
‘Article 5
This Decision shall enter into force on the date of its adoption and shall expire on 30 November 2020.’.
In the Annex, section 10 is replaced by the following:
The project will end on 30 November 2020.’.
Article 2
This Decision shall enter into force on the date of its adoption.
Done at Brussels, 16 June 2020.

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(Source: Forbes, 16 Jun 2020) [Excerpts]
The Trump Administration plans to reinterpret a decades-old arms control agreement, an official speaking anonymously told Reuters. This would enable U.S. suppliers to export large drones like the MQ-9 Reaper. The move could give a huge boost to the American aerospace industry and open up a whole new market, but could also have serious unintended consequences. …
The Missile Technology Control Regime (MTCR) was formed in 1987. It is a multilateral agreement between 35 member states which seeks to limit the proliferation of missile technology. …
U.S. policymakers have been kicking around the idea of reinterpreting the MCTR to permit drone exports since at least 2017, when the idea was discussed at a plenary meeting of MCTR members.
The U.S., a leader in many other areas, currently sees many large armed drone sales go to other countries. …

(Source: Nextgov, 16 Jun 2020) [Excerpts]
U.S. companies will be allowed to disclose certain technology to Chinese telecommunications giant Huawei when such disclosure is for the purpose of revising or developing technical standards that allow technology around the world to work together, according to a new rule from the Commerce Department.
“The United States will not cede leadership in global innovation,” Commerce Secretary Wilbur Ross said in a press release announcing the rule Monday. “The Department is committed to protecting U.S. national security and foreign policy interests by encouraging U.S. industry to fully engage and advocate for U.S. technologies to become international standards.”
The rule, scheduled for publication in the Federal Register Thursday, received cautious praise from some in the industry.  …
Last May, citing alleged sanctions violations, the Commerce Department placed Huawei and its many international affiliates on a list of entities U.S. companies are banned from conducting business with unless they have a license from BIS.

(Source: Nikkei Asian Review, 17 Jun 2020) [Excerpts]
The U.S. war on Chinese technology has entered a new phase, with universities in the country added to Washington’s blacklist of tech entities.
While Chinese tech giants such as Huawei Technologies, Hikvision and SenseTime have long had restricted access to American technology, the extension of the so-called entity list to educational institutions means that the Chinese equivalent of the Massachusetts Institute of Technology will now take a hit. The entity list specifies companies or organizations that require U.S. government approval before American technology can be sold or transferred to them. …
The U.S. Department of Commerce said in a statement accompanying its latest entity list published in May that the two Chinese universities and 22 other entities were being punished for “engaging in activities contrary to the national security or foreign policy interests of the United States.” It did not say what those interests are, but Beijing sees the move as a fresh attack.
“The move reflects the U.S.’s ingrained cold-war thinking,” Chinese Foreign Ministry spokeswoman Hua Chunying told reporters at a briefing on Friday. Hua called the blocked access to American software “political repression” against China, and urged the U.S. to lift the ban. …


(Source: Houthoff, 15 Jun 2020)
* Principal Author:
Gerrit Oosterhuis
Esq., 32




, Houthoff
On 2 June 2020, the Dutch Minister of Economic Affairs gave an update on his intention to present a bill introducing a national security screening mechanism to protect vital sectors. This will include mandatory preclosing notification requirements for transactions that pose a threat to national security. The bill is expected to be submitted to the Dutch Parliament for consultation by the end of 2020.
The screening will involve a substantive review based on assessing the following risks:

(i) adverse effect on the continuity of vital processes;
(ii) adverse effect on the integrity and exclusivity of data and knowhow-related vital processes and highly sensitive technology; and
(iii) the creation of strategic dependency on other countries.

In this context, ‘vital processes’ are processes that are so essential that their failure or disturbance would lead to serious social disruption or to a threat to the national economy and security. These include oil and gas supply and distribution, water supply, internet and data supply, access to internet and data traffic, voice services, money transfer, citizen identification and authentication, traffic handling at seaports and airports, and nuclear waste disposal (as already listed by the National Coordinator for Terrorism Prevention and Security). The scope of ‘highly sensitive technology’ must still be defined, but this will be done in line with definitions used in existing multilateral export control regimes for dual-use goods and strategic goods. Finally, ‘strategic dependency’ is the dependency on countries with a different geopolitical orientation. As an example, the Minister mentioned acquisitions that result in the Netherlands being politically pressured to the extent that the democratic order could be undermined or that a vital process could be disrupted.     

The criteria for assessing whether there are objections to an investor will resemble those from the recent Act against Undesirable Influence in the Telecom Sector (Wet ongewenste zeggenschap telecommunicatie). A threat to the national interest may be considered to exist if the investor is a persona non grata or a state that can reasonably be expected to use its influence to the detriment of the public interest. Investors who do not cooperate with the assessment or whose identity cannot be established may also be considered a threat to the public interest.   
If the acquisition or investment is considered to pose a threat to national security, the Minister may impose mitigating measures, such as appointing a trustee to work within the company, requiring the company to grant a license on knowhow to keep the knowledge or technology available for the national vital infrastructure or, where absolutely necessary, unwinding the acquisition or investment.   
Even if the bill is only presented in the last quarter of 2020, part of the screening will be applied retroactively as from 2 June 2020. This means that any acquisition or investment conducted on or after 2 June 2020 will be subject to the screening. However, this retroactive screening will only happen if this is justified based on national security, and will only apply to acquisitions of and investments in (i) providers of vital processes and vital infrastructure and (ii) companies that are active in the field of highly sensitive technol-ogy. The Minister considers the retroactive application justified due to the coronavirus pandemic and the need to avoid circumvention by unwelcome buyers that would quickly wrap up acquisitions of strategic assets before the law enters into force.   
Certainly for EU investors, this bill will have limited consequences. For investments from countries with – what is euphemistically called – “a different geopolitical orientation” – the bill could pose at least time consuming red tape. However, we expect that the Dutch government will use this tool with moderation, as the Dutch economy is quite reliant on international commerce.   
Also on 2 June 2020, the European Commission leaked what seems to be the final draft of its White Paper on an Instrument on Foreign Subsidies to the Financial Times. The White Paper should be published in June 2020, to be followed by a bill in 2021. It will propose a) that when a non-EU owned company uses non-EU subsidies to distort the internal market, the relevant Member States can take measures and b) that when a non-EU owned company uses non-EU subsidies to finance an acquisition in the EU, the European Commission can take measures.

* Contact: 
messages@strtrade.com, 1-305-894-1035
The Department of Homeland Security has issued a final rule adjusting the civil monetary penalties assessed for violations related to the following. These changes will be effective for penalties assessed after June 17 whose associated violations occurred after Nov. 2, 2015.
– dealing in or using empty stamped imported liquor containers: $540 (up from $531)
– employing a vessel in a trade without a required certificate of documentation: $1,352 (up from $1,329)
– safe containers for international cargo: $6,376 (up from $6,265)
– port security: $35,486 (up from $34,871)
– port security; continuing violations: $63,761 (up from $62,656)

* Principal Author: Roszel C. Thomsen II, Esq., 1-410-539-2596, Thomsen and Burke
Effective with its publication in the Federal Register, which is scheduled for June 18, 2020, Commerce is amending the Export Administration Regulations (EAR) to authorize the release of certain technology to Huawei Technologies Co., Ltd. (Huawei) and 114 of its foreign affiliates on the Entity List without a license if such release is made for the purpose of contributing to the revision or development of a “standard” in a “standards organization.”
This interim final rule and request for comments is currently available on the Federal Register’s Public Inspection page.
Huawei and its affiliates were added to the Entity List administered by the Bureau of Industry and Security (BIS) in 2019 restricting these entities from receiving items subject to the EAR without a license from BIS. Since Huawei’s addition to the Entity List, organizations have consequently sought clarity about U.S. industry participation in standards development. BIS is implementing this rule to authorize the release of technology to Huawei and its affiliates in the context of standards organizations, as follows:
The release is made for the purpose of contributing to the revision or development of a “standard” in a “standards organization.” These terms are defined in Office of Management and Budget Circular A-119 (Rev. 2016) (81 FR 4673 (Jan. 27, 2016)), “Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities” Section 2.a.
This rule applies to technology subject to the EAR that is designated as EAR99, or controlled on the Commerce Control List for anti-terrorism reasons only. This means that technology controlled for national security (e.g. 5E002 encryption technology) and other reasons are not authorized under this rule.
The technology subject to this rule can only be released to members of a “standards organization.”
With the publication of this rule, BIS is rescinding its advisory opinion titled “General Advisory Opinion Concerning Prohibited Activities in the Standards Setting or Development Context When a Listed Entity Is Involved” and removing this advisory opinion from its website.
BIS is requesting comments on the impact of these revisions. You will have 60 days from the date of publication in the Federal Register to submit comments through the Federal eRulemaking Portal.


Ashleigh Foor

* What: 
Foods, Supplements, Cosmetics, Devices…Oh My: How the FDA Regulates More Than You May Think!
* When: 24 Jun; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Shelly Garg, Attorney

* Register:
or contact
Ashleigh Foor
, 1-540-433-3977

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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.
Latest Update 
: 19 CFR, Ch. 1, Pts. 0-199.
5 Apr 2019:84 FR 13499: Civil Monetary Penalty Adjustments for Inflation.


17 June 2020: 85 FR 3648 : Addition of Certain Rigid-Walled, Single-Use Cultivation Chambers and Precursor Chemicals to the Commerce Control List.  
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. 

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.)  

23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. 

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.

6 May 2020: 85 FR 26847, Notice (not an amendment) temporarily reducing the registration fee schedule in ITAR 122.3 until April 30, 2021. 


DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

5 Jun 2020:
85 FR 84510:

Syria Sanctions Regulations. 


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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