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20-0701 Wednesday “Daily Bugle”

20-0701 Wednesday “Daily Bugle”

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Wednesday, 1 July 2020

  1. DSCA: Notice of Prospective Arms Sales to Indonesia
  2. DHS/CBP: “Modification of the National Customs Automation Program Test Regarding Reconciliation for Filing USMCA Post-Importation Claims”
  3. Treasury Department: “Implementation of the USMCA Agreement Uniform Regulations Regarding Rules of Origin”
  4. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. EU Council: “Declaration on the Adoption by China’s National People’s Congress of a National Security Legislation on Hong Kong.”
  5. Schedule B and Harmonized Tariff Schedule (HTS) Updated in the Automated Export System (AES)
  1. The Epoch Times: “Seizure of 10,800 Gun Parts Highlights Surge in Intercepts of Chinese Contraband Weapon Parts”
  1. Ankura: ” ‘Red Scare’ Reload – Commerce Tightens Controls on Exports/Reexports to China, Russia, and Other Countries of Concern”
  2. Blakes: “Amendments Introduced to Canadian Sanctions Legislation”
  3. Kelley Drye: “New Export Control Restrictions on Military End Users and End Uses in China, Russia, and Venezuela”
  1. ECTI Presents: A Practical Guide to AES Filing Webinar; 9 Jul
  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 
  4. Submit Your Job Opening and View All Job Openings 
  5. Submit Your Event and View All Approaching Events 

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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

 
85 FR 39542: Notice
* AGENCY: Defense Security Cooperation Agency, Department of Defense.
* ACTION: Arms sales notice of prospective sales to Government of Indonesia 
* SUMMARY: The Department of Defense is publishing the unclassified text of an arms sales notification.

* FOR FURTHER INFORMATION CONTACT: Karma Job at karma.d.job.civ@mail.mil or (703) 697-8976.

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

 
85 FR 39576: Notice
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security.
* ACTION: General notice.
* SUMMARY: This document announces a modification to the Automated Commercial Environment (ACE) National Customs Automation Program (NCAP) reconciliation prototype test to include the flagging for filing of post-importation preferential treatment claims arising under the Agreement Between the United States of America, the United Mexican States, and Canada (the USMCA) as implemented pursuant to the United States-Mexico-Canada Agreement Implementation Act (the USMCA Act). Importers may file USMCA post-importation claims for refunds of certain duties assessed on merchandise that both qualifies for preferential tariff treatment under the USMCA and was entered for consumption, or withdrawn from warehouse for consumption, on or after July 1, 2020. Unless and until the USMCA Act is subsequently amended, refunds for merchandise processing fees (MPF) are excluded from USMCA post-importation claims. Except to the extent expressly announced or modified by this document, all aspects, rules, terms and conditions announced in previously published Federal Register notices regarding the test remain in effect.
* DATES: The test is modified to allow reconciliation of post-importation preferential tariff treatment claims to be filed on or after July 1, 2020, for refunds of certain duties assessed on merchandise that both qualifies for preferential tariff treatment under the USMCA and was entered for consumption, or withdrawn from warehouse for consumption, on or after July 1, 2020.
* ADDRESSES: Comments concerning the reconciliation prototype test may be submitted via email to Randy Mitchell, Director, Commercial Operations, Revenue & Entry (CORE) Division, Office of Trade, U.S. Customs and Border Protection at OT-Reconfolder@cbp.dhs.gov, with a subject line identifier reading, “Modification of Reconciliation Test-USMCA”.
* FOR FURTHER INFORMATION CONTACT: For policy-related questions, contact Randy Mitchell, Director, Commercial Operations, Revenue & Entry (CORE) Division, Office of Trade, U.S. Customs and Border Protection, at (202) 325-6532 or via email at OTReconFolder@cbp.dhs.gov, with a subject line identifier reading “Modification of Reconciliation Test-USMCA”. For technical questions related to ACE or Automated Broker Interface (ABI) transmissions, contact your assigned client representative. Interested parties without an assigned client representative should direct their questions to Tonya Perez, Director, Client Services Division, Office of Trade, U.S. Customs and Border Protection, at (571) 421-7477 or via email at gmb.clientrepoutreach@cbp.dhs.gov.

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

EXIM_a33. Treasury Department: “Implementation of the USMCA Agreement Uniform Regulations Regarding Rules of Origin”

(Source: Federal Register, 1 Jul 2020)
 
85 FR 39690: Rule
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury.
* ACTION: Interim final rule; request for comments.
* SUMMARY: This interim final rule amends the U.S. Customs and Border Protection (CBP) regulations to implement the rules of origin provisions for preferential tariff treatment of the Agreement Between the United States of America, the United Mexican States, and Canada (USMCA). This document sets forth the framework for our regulations that provides further guidance regarding the rules of origin for those seeking USMCA preferential tariff treatment and includes the text of the Uniform Regulations regarding rules of origin, as trilaterally agreed upon by the United States, the United Mexican States (Mexico), and Canada. Because the USMCA supersedes the North American Free Trade Agreement (NAFTA) when the USMCA enters into force on July 1, 2020, this document also amends the NAFTA regulations to reflect that the NAFTA provisions do not apply to goods entered for consumption, or withdrawn from warehouse for consumption, on or after July 1, 2020.
* DATES: This interim final rule is effective on July 1, 2020; comments must be received by August 31, 2020.
* ADDRESSES: You may submit comments, identified by docket number [USCBP-2020-0036], by one of the following methods:
Federal eRulemaking Portal at http://www.regulations.gov. Follow the instructions for submitting comments.
Mail: Due to COVID-19-related restrictions, CBP has temporarily suspended its ability to receive public comments by mail.
Instructions: All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to http://www.regulations.gov, including any personal information provided. For detailed instructions on submitting comments and additional information on the rulemaking process, see the “Public Participation” heading of the SUPPLEMENTARY INFORMATION section of this document.
Docket: For access to the docket to read background documents or comments received, go to http://www.regulations.gov. Due to the relevant COVID-19-related restrictions, CBP has temporarily suspended on-site public inspection of the public comments. Please note that any submitted comments that CBP receives by mail will be posted on the above-referenced docket for the public’s convenience.

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

EXIM_a44.
Treasury/OFAC: “Notice of OFAC Sanctions Actions”
 
85 FR 39683: Notice; Office of Foreign Assets Control, Treasury.
* ACTION: Notice.
* SUMMARY: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
* DATES: See SUPPLEMENTARY INFORMATION section for effective date(s).
* FOR FURTHER INFORMATION CONTACT: OFAC: Associate Director for Global Targeting, 202-622-2420; Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490; Assistant Director for Licensing, 202-622-2480; or Assistant Director for Regulatory Affairs, 202-622-4855.

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

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 
* Justice Department: NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Firearm Inquiry Statistics Program [Pub. Date: 2 Jul 2020] (PDF)
 
* State Department: NOTICES; Statutory Debarment under the Arms Export Control Act and the International Traffic in Arms Regulations; Correction [Pub. Date: 2 Jul 2020] (PDF)

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

OGS_a26. Commerce/BIS: (No new postings)

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

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

 
The Standing Committee of China’s National People’s Congress adopted the National Security Law in Hong Kong on 30 June and subsequently promulgated it in Hong Kong the same day. The European Union reiterates its grave concerns about this law which was adopted without any meaningful prior consultation of Hong Kong’s Legislative Council and civil society.

The European Union has a strong stake in the continued stability and prosperity of Hong Kong under the “One Country, Two Systems” principle. It attaches great importance to the preservation of Hong Kong’s high degree of autonomy, in line with the Basic Law and with international commitments, as well as to the respect for this principle.

There are concerns about the conformity of the new law with Hong Kong’s Basic Law and with China’s international commitments. In line with assurances that China gave in the past, the European Union considers it essential that the existing rights and freedoms of Hong Kong residents are fully protected, including freedom of speech, of the press and of publication, as well as freedom of association, of assembly, of procession and of demonstration. The provisions of the International Covenant on Civil and Political rights (ICCPR) as enshrined in Hong Kong legislation must continue to be fully applied.

The European Union is concerned that the law risks seriously undermining the high degree of autonomy of Hong Kong, and having a detrimental effect on the independence of the judiciary and the rule of law. Both of these principles remain essential for the continued stability and prosperity of Hong Kong, and are therefore of vital interest to the European Union and the international community.

The European Union urges China to avoid any act which undermines Hong Kong’s autonomy in the legal field, including in terms of human rights.

The European Union is assessing the implications of such a law and will continue to raise its concerns in its dialogue with China. It will continue to follow developments closely, including in the context of the upcoming Legislative Council elections on 6 September, which need to proceed as planned and in an environment conducive to the exercise of democratic rights and freedoms as enshrined in the Basic Law.

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

(Source:
U.S. Census, 1 Jul 2020)

Effective immediately, the Schedule B, Harmonized Tariff Schedule (HTS), and HTS Codes That Are Not Valid for AES tables have been updated to accept the changes to the July 1, 2020 codes.

AES will accept shipments with outdated codes during a grace period for 30 days beyond the expiration date of June 30, 2020. Reporting an outdated code after the 30-day grace period will result in a fatal error.

The ACE AESDirect program has been updated with the 2020 codes and will accept shipments with outdated codes during the grace period.

The 2020 Schedule B and HTS tables are available for downloading at:
http://www.census.gov/foreign-trade/aes/documentlibrary/#concordance

The current list of HTS codes that are not valid for AES is available at:


For further information or questions, contact the U.S. Census Bureau’s International Trade Indicator Micro Analysis Branch: 

Telephone: (800) 549-0595, select option 2 for International Trade Indicator Micro Analysis Branch

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

COM NEWS

(Source:
The Epoch Times, 30 Jun 2020) [Excerpts]
 

The recent seizure of 10,800 assault weapons parts from
 
China
 
is part of a surge in the intercepts of illicit gun parts shipments from China, according to data from U.S. Customs and Border Protection (CBP).


Customs officers have seized a total of nearly 5,300 illicit gun part shipments in fiscal year 2020, dwarfing the 78 shipments seized in 2019 and 31 shipments in 2018, according to CBP statistics obtained by The Epoch Times.

The weapons
 
components from Shenzhen, China, account for more than half of all the Chinese weapon parts seized this fiscal year, according to the CBP. Customs officers have seized more than 20,700 weapon parts in fiscal year 2020, which ends Sept. 30.

Compared to the prior fiscal year, the CBP is seizing a smaller number of Chinese weapon parts per shipment this year. The agency seized an average of 254 gun parts per shipment in fiscal 2019. This fiscal year to date, the average number of weapon parts per shipment has dropped to fewer than four per seizure, suggesting that smugglers are breaking up larger shipments to avoid detection. …

Since January, CBP officers in Louisville, Kentucky, have seized a variety of small gun suppressor shipments from China at a local consignment hub. The shipments contained silencers of varying designs destined for different cities. The packages came in labeled as soft toys and fuel filters. …

Only licensed importers, dealers, or manufacturers can import firearms into the United States. The Bureau of Alcohol, Tobacco, Firearms, and Explosives, which regulates weapons shipments, didn’t respond to a request by The Epoch Times for comment.

CBP seized the 10,800 assault weapons parts from Shenzhen on May 22 and reported the haul on June 26. The shipment manifest described the contents as “100 Steel Pin Samples.” Similar to the silencers, the shipment was seized at a consignment hub in Louisville.

The Shenzhen shipment was valued at $129,600, according to the machinery team at the CBP’s Center of Excellence and Expertise, Machinery. In 2019, CBP seized more than 52,000 illegal weapons parts in a single shipment from China with a domestic value of more than $378,000, according to the CPB.
While the number of intercepted shipments of gun parts from China has surged this year, the CBP has so far seized far fewer guns in fiscal year 2020 than last fiscal year. According to the CBP, customs officers seized 3,622 guns in 1,081 incidents in 2019. To date this fiscal year, the agency has seized 1,456 guns in 450 incidents.

China leads the list of foreign nations in which illicit gun shipments originated over the past three years, according to CBP statistics. 

COM COMMENTARY

(Source:
Ankura, 18 Jun 2020)
 
* Principal Author: Randal H. Hook, 1-212-818-1555, Ankura Consulting Group, LLC
 
Key Takeaways
  • On April 28, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS), published two final rules and one proposed rule intended to keep certain technologies out of the hands of countries (and their nationals) deemed to be of national security concern to the U.S.
  • The two final rules take effect on June 29, 2020 and include:
  • Expansion of Military End Use/User Controls for China, Russia, and Venezuela (the targeted countries”)
  • Removal of License Exception Civil End Users (CIV)
  • The proposed rule would narrow the scope of License Exception Additional Permissive Reexports (APR) to enable U.S. government review of reexports of certain items to, among others, the targeted countries. Comments must be submitted by June 29, 2020.
  • Any entity that transfers items subject to the EAR to the targeted countries or their nationals, or that regularly relies on License Exceptions CIV and/or APR, should consider whether the rules may impact operations.
  • The changing regulations reflect continuing dynamic tension in the U.S. trade and strategic relationship with the targeted countries, which interested companies and parties will need to watch closely.
Overview

On April 28, 2020, the BIS published two final rules and one proposed rule with amendments to the Export Administration Regulations (EAR) intended to further curtail exports, reexports, and in-country transfers of certain technologies to countries the U.S. feels are blurring the lines between civil and military technology development. Forefront in the minds of the regulators are countries such as China, Russia, and Venezuela, with histories of using civilian entities as a cover to obtain sensitive products and technologies destined for use by their militaries.

This heightened concern around civil-military integration and BIS’s actions to address it will mean: increased due diligence on the part of exporters, reexporters, and in-country transferors of EAR-controlled items in more sensitive dual-use technology areas such as materials processing, electronics, telecommunications, information security, sensors and lasers, and aerospace and propulsion when the targeted countries and other countries of national security concern are involved; as well as more stringent licensing requirements, and in some cases a presumption of license denial. The two final rules take effect on June 29, 2020, and public comments on the proposed rule are due to BIS by the same day.
 
What is at Stake for U.S. Exporters?
China was the third-most popular destination for U.S. exports in 2018 and 2019. [FN/1]
 
According to the most recent data available from BIS (for 2018), the vast majority of those exports did not require a BIS license, and for those that did, License Exception CIV was the second-most-utilized exception. [FN/2] Additionally, of the “no license required” (NLR) exports, seven of the top 10  Export Control Classification Numbers (ECCNs) by value are ECCNs that will be subject to the expansion of the Military End Use/User Controls. Data available for exports to Russia and Venezuela in 2017 indicate a similar trend, where the majority of exports (over 95% for Russia and over 99% for Venezuela) did not require a license. [FN/3]
 
For both NLR exports to Russia and Venezuela, five of the top 10 ECCNs by value will soon be subject to the revised Military End Use/User Controls rule as well. As described further below, the two final rules will broaden the scope of items, end uses, and end users triggering a license requirement for export or reexport to the Targeted Countries. In some cases, such license requests will be denied.

Companies who export, reexport, or transfer (in-country) the named EAR-controlled items and technologies to the targeted countries and other countries of national security concern to the U.S. should assess their exposure under the changed rules. Specifically, entities that export, reexport, or transfer (in-country) the following types of items may be significantly affected by these regulatory changes:
 
semiconductors
 
and semiconductor manufacturing equipment and materials,
 
mass market encryption
 
commodities and software,
 
telecommunications
 
equipment,
 
computers and other electronics
 
products,
 
aerospace-related
 
products, materials/chemicals and software for the production of
 
composites,
 
and synthetic fibers and filaments.
The following sections outline the most significant changes associated with each rule and how they might affect companies who do business with the targeted countries and other countries deemed to present a national security threat to the U.S. For a full account of the changes, please refer to the associated Federal Register Notices cited in each section.
Expansion of Military End Use/User Controls (MEU Rule;
 
06/03/2020 Correction [FN/4])

Since June 2007, BIS has imposed a licensing requirement on exports, reexports, and in-country transfers of certain items intended for military end use in China. In 2014, BIS expanded the licensing requirement to include military end uses and end users in Russia and Venezuela. The list of items subject to these requirements is set forth in Supplement No. 2 to Part 744 of the EAR and currently spans nine of the 10 Commerce Control List (CCL) categories, including items from certain equipment and machine tools to electronic devices, telecommunications equipment, cameras, lasers, navigation and avionics equipment, aircraft, gas turbine engines, as well as certain software and technology.

Effective June 29, 2020, the MEU Rule will implement the following significant changes to the controls set forth in EAR §744.21:
  • Broaden the definition of “military end use” to include operation, installation, maintenance, repair, overhaul, refurbishing, as well as “development” or “production” of the relevant CCL hardware, software or technology (items)
  • Add “military end users” to the licensing requirement for China, aligning with restrictions already in place for Russia and Venezuela
  • Add 18 ECCNs to the list of items subject to the licensing requirements, including materials processing, electronics, telecommunications, information security, sensors and lasers, aerospace and propulsion, and additional categories of information security and software
  • Expand the scope of existing ECCNs on the list of items subject to the licensing requirements in the categories of electronics, marine, and aerospace and propulsion
  • Implement a licensing policy presumption of denial for licenses submitted pursuant to the MEU requirements
Exporters, reexporters, and in-country transferors of EAR-controlled items to the targeted countries should closely review their business with those countries and determine (1) whether they include any items, end uses, or end users that will be covered by the military end use/user controls as of June 29, 2020, and (2) if so, what they must do to comply. Frequently, significant due diligence may be needed to reliably determine whether a military end use or end user is implicated.
 
Removal of License Exception Civil End Users (CIV; EAR §740.5)

License Exception CIV currently authorizes the export, reexport, and in-country transfer without a license of 28 ECCNs subject to national security controls to most civil end users for civil end uses in Country Group D:1 countries [FN/5]
 
(which include the Targeted Countries, along with 20 additional countries of national security concern). Effective June 29, 2020, the
 
CIV Rule
 
will remove License Exception CIV from the EAR, thus requiring licenses for export of those 28 types of national security-controlled items to any country (or national) in Country Group D:1.

Similar to the rationale behind the expansion of military end use/end user controls, the removal of License Exception CIV is a result of “the increasing integration of civilian and military technology development in these countries of concern.”  The removal of this license exception will give the U.S. government control and visibility into the transfer to these countries of the covered items, including certain semiconductor manufacturing equipment, telecommunications systems, lasers and optical devices, and gas turbine engine equipment. (A summary table of the affected ECCNs can be found at the end of this alert.) License applications submitted for such items and end users will be subject to a case-by-case review, with a general policy of approval when items are for civilian use.

Exporters, reexporters, and in-country transferors who use License Exception CIV on a regular basis should prepare to obtain the necessary information and documentation to support the preparation and submission of license applications to BIS as of June 29, 2020.
 
Proposed Changes to License Exception Additional Permissive Reexports (APR; EAR §740.16)

Paragraph (a)(3)(ii) of License Exception APR currently authorizes certain reexports of specified items from countries in Country Group A:1[6]
 
(i.e., Wassenaar Arrangement Participating States, except for Malta, Russia, and Ukraine) or Hong Kong to Country Group D:1 countries, provided that the reexport is consistent with an export authorization from the reexporting country. Due to BIS concerns regarding less stringent licensing review standards for national security-controlled items in Country Group A:1 countries and Hong Kong, the proposed rule (APR Proposed Rule) would remove Country Group D:1 (i.e., countries of national security concern) from the list of eligible destinations.

Companies using subsidiaries or supply chain partners in the A:1 countries or Hong Kong as part of their export strategy for ultimate export to the D:1 countries should consider the loss of exception APR closely. Interested parties should submit comments to BIS by June 29, 2020. …

(Source:
Blakes, 30 Jun 2020)
 
* Principal Author: Greg Kanargelidis, 1-416-863-4306, Cassels & Graydon LLP
 
   Effective June 1, 2020, the Government of Canada introduced amendments to several regulations made under the
 
United Nations Act
 
(Canada) (UN Act). The UN Act enacts into Canadian law sanctions adopted by the United Nations Security Council (Security Council). The sanctions imposed under the UN Act regulations vary depending on the target jurisdiction or group and generally include arms embargoes, trade restrictions and prohibitions against providing financial services or technical assistance in respect of such covered activities. In addition, the UN Act regulations prohibit dealings with persons designated under the Security Council resolutions or their property.

The regulations that have been amended are listed below:
  • United Nations Al-Qaida and Taliban Regulations (Al-Qaida and Taliban Regulations)
  • Regulations Implementing the United Nations Resolutions on the Central African Republic (CAR Regulations)
  • United Nations Democratic Republic of the Congo Regulations
  • Regulations Implementing the United Nations Resolution on Eritrea (Eritrea Regulations)
  • Regulations Implementing the United Nations Resolutions on the Democratic Peoples Republic of Korea (DPRK) (North Korea Regulations)
  • Regulations Implementing the United Nations Resolutions on Somalia (Somalia Regulations)
  • Regulations Implementing the United Nations Resolution on South Sudan (South Sudan Regulations)
  • United Nations Sudan Regulations (Sudan Regulations)
The amendments implement recent resolutions of the Security Council and address certain miscellaneous comments raised by the Standing Joint Committee for the Scrutiny of Regulations. The bulk of the amendments relate to arms and related materials, military activities and transport restrictions. A number of changes are made to harmonize the language used across regulations. Other key changes are summarized below.
 
ISIL

The scope of the sanctions framework in the Al-Qaida and Taliban Regulations has been expanded to explicitly include reference to ISIL (Da

esh). To reflect this change, the Al-Qaida and Taliban Regulations have been renamed as the
 
Regulations Implementing the United Nations Resolutions on Taliban, ISIL (Da

esh) and Al-Qaida
.
 
ERITREA REGULATIONS REPEALED

The Eritrea Regulations have been repealed following the Security Council

s decision to lift the sanctions against Eritrea.
 
NORTH KOREA REGULATIONS

The North Korea Regulations have been amended to, among other things, include a prohibition on knowingly selling, leasing or otherwise making available real property to North Korea, a national or any person acting on behalf or at the direction of North Korea or a national. There is an exemption for property located in Canada that is used exclusively for diplomatic or consular activities. The purpose of this change was to prevent the use of such property by North Korea to generate income for its nuclear and ballistic missile programs.
The prohibition against opening a new branch in North Korea has also been expanded to include a new office, subsidiary or bank account in North Korea.
 
ACQUIRING FINANCIAL OR RELATED SERVICES

The amendments introduce a prohibition on
 
acquiring
 
any financial or related services from a designated person, a person acting on behalf of or at the direction of a designated person, or an entity that is owned, held or controlled by a designated person. This prohibition also applies to a dealing of any property in Canada that is owned, held or controlled by a designated person or by a person acting on behalf of, or at the direction of, a designated person. These prohibitions are worded slightly differently across regulations and are reflected as extensions to the existing prohibitions against providing financial or related services to a designated person.
 
DISCLOSURE INFORMATION

The amendments introduce and amend provisions that allow for the disclosure of personal information by officials and the Minister of Foreign Affairs to comply with requests from the Security Council.
 
EXCEPTIONS

The amendments introduce various exceptions, most of which relate to the embargoes on arms and related material, military activities and transport. The CAR Regulations, Somalia Regulations, South Sudan Regulations and Sudan Regulations have been amended to allow the payment of interest or other earnings to a designated person if the payment resulted from a dealing or transaction that occurred prior to the person

s status as a designated person and the amount paid is frozen in accordance with the regulations.


(Source:
Kelley Drye, 29 Jun 2020)

* Principal Author:
Scott Wise
,
Kelley Drye & Warren LLP
 
Bureau of Industry and Security Issues Guidance on Rule

The new
 
Bureau of Industry and Security (BIS) rule
 
prohibiting certain exports, reexports, and transfers of items to “military end-users” and “military end-uses” in China, Russia, and Venezuela is effective today.

The new rule creates additional due diligence burdens on manufacturers and exporters in the materials processing, technology, electronics, telecommunications, information security, sensors and lasers, and propulsion sectors.  Under the new rule, exporters are prohibited from knowingly exporting, reexporting, or transferring enumerated items to the armed forces, certain state-owned enterprises, defense contractors, and other companies that develop, produce, maintain, or use military items in China, Russia, or Venezuela.

Although the rule is effective today, it includes a savings clause that provides that any item on the dock for loading or already en route as of today may be shipped until July 27, 2020.  In addition, certain aspects of the newly expanded Electronic Export Information (“EEI”) filing requirements
 
are delayed until September 27, 2020.

Late Friday, BIS
 
published
 
a series of Frequently Asked Questions (FAQs) regarding the new restrictions.  Based on the FAQs, BIS expects exporters to perform robust due diligence to determine whether the rule applies.  Exports should consider developing and documenting internal processes and procedures to ensure compliance with this rule.  Given the administration’s focus on enforcing export controls rules with these countries, especially China, caution is warranted.  Below are key aspects of the BIS guidance:
  • The restrictions apply to several types of entities.  The rule not only applies to traditional foreign military and related organizations, but also to governmental organizations, state-owned enterprises (“SOEs”), and other private companies that support “military end-uses.”
  • The restrictions can apply to items that are not intended for a military end-use if those items are for export to a military end-user.  An end-use statement that a product will not be used for a military end-use is therefore a necessary, but not a sufficient, part of the due diligence required by this rule.
  • Subsidiary agencies or authorities of military end-users may be, but are not necessarily, also military end-users.  To determine whether such an agency or authority also qualifies, the exporter must analyze its nexus and relationship to the military end-user, what role the agency or authority serves to the public, and whether it develops or uses military items.  The FAQs specifically identify military hospitals as an example of an entity that must be analyzed on a case-by-case basis.
  • Affiliated companies are not necessarily subject to the same restrictions as their related entities. Exporters must perform due diligence to determine the relationship between the affiliates.  If the parent or subsidiary is directly involved in military end-uses, and the specific end-user’s activities are “relevant” to those end-uses, then it is a factor that the exporter must consider in making its determination.  If a direct nexus exists between the two entities, it is very likely that the end-user will be subject to the restrictions in the rule.
  • Sales to distributors that sometimes supply military end-users will be subject to the restrictions if the exporter has knowledge that the distributor intends to supply your items for a military end-use.  Therefore, sales to distributors that supply military end-users are not necessarily subject to the restrictions.  However, it is now necessary to educate your distributors on these restrictions and to gain assurance that your items will not be re-exported or transferred to such end-users.
This rule will have a significant effect on exporters in certain industries, given its application to less sensitive goods, including most industrial pumps controlled under ECCN 2B999 and mass market software controlled under ECCN 5D992, among other items.  Companies need to adopt procedures to determine whether the new rule applies to their products and to determine whether sales of those items involve prohibited military end users or end uses.


TE EX/IM TRAINING EVENTS & CONFERENCES

 
* What: A Practical Guide to AES Filing 
* When: 9 Jul, 2020; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Jonathan Young

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

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

EN EDITOR’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. 
DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   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. 
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. 

 
 
 
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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