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 ITEMS FROM TODAY’S FEDERAL REGISTER |
(Source: Federal Register, 31 Jul 2020) [Excerpts] 85 FR 45998: Rule * AGENCY: Bureau of Industry and Security, Commerce. * ACTION: Final rule. * SUMMARY: The Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to suspend the availability of all License Exceptions for Hong Kong that provide differential treatment as compared to those available to the People’s Republic of China (PRC). As announced on BIS’s website on June 30, 2020, these License Exceptions are no longer available for exports and reexports to Hong Kong, and transfers within Hong Kong, of all items subject to the EAR. BIS is taking this action as part of revised U.S. policy toward Hong Kong in response to the newly imposed security measures on Hong Kong by the Chinese Communist Party. These new security measures undermine Hong Kong’s autonomy and thereby increase the risk that sensitive U.S. technology and items will be illegally diverted to unauthorized end uses and end users in the PRC or to unauthorized destinations such as Iran or North Korea. This rule includes saving clauses for items, including for deemed exports. * DATES: This rule is effective July 31, 2020. * FOR FURTHER INFORMATION CONTACT: Patricia Muldonian, Office of National Security and Technology Transfer Controls, patricia.muldonian@bis.doc.gov.
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OTHER GOVERNMENT SOURCES |
| (Source: Federal Register) * USTR: NOTICES; Request for Comments: Extension of Particular Exclusions Expiring in October 2020 Granted under the $34 Billion Action Pursuant to Section 301; China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation [Pub. Date: 3 Aug 2020] (PDF)
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3. Commerce/BIS: (No new postings)
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5. Treasur y/OFAC Sanctions Chinese Entity and Officials Pursuant to Global Magnitsky Human Rights Executive Order Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned one Chinese government entity and two current or former government officials in connection with serious rights abuses against ethnic minorities in the Xinjiang Uyghur Autonomous Region (XUAR). These designations include the Xinjiang Production and Construction Corps (XPCC), Sun Jinlong, a former Political Commissar of the XPCC, and Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC. The entity and officials are being designated for their connection to serious human rights abuse against ethnic minorities in Xinjiang, which reportedly include mass arbitrary detention and severe physical abuse, among other serious abuses targeting Uyghurs, a Turkic Muslim population indigenous to Xinjiang, and other ethnic minorities in the region. This action is being taken pursuant to Executive Order (E.O.) 13818, “Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption,” which builds upon and implements the Global Magnitsky Human Rights Accountability Act. These designations are the latest U.S. government actions in an ongoing effort to deter human rights abuses in the Xinjiang region. On July 1, 2020, the U.S. Department of State, along with the U.S. Department of the Treasury, the U.S. Department of Commerce, and the U.S. Department of Homeland Security, issued the Xinjiang Supply Chain Business Advisory, advising businesses with potential supply chain exposure to Xinjiang to consider the reputational, economic, and legal risks of involvement with entities that engage in human rights abuses in Xinjiang, such as forced labor. On May 22, 2020, the U.S. Department of Commerce added nine PRC entities related to human rights abuses in the Xinjiang region to the Commerce Entity List; this action complemented the October 2019 addition to the Commerce Entity List of 28 entities engaged in the PRC repression campaign in the Xinjiang region. Also, in October 2019, the U.S. Department of State announced a visa restriction policy under section 212 (a)(3)(C) of the Immigration and Nationality Act for PRC and Chinese Communist Party (CCP) officials responsible for, or complicit in, human rights abuses in Xinjiang. The following individuals are also designated today for having acted or purported to act for or on behalf of, directly or indirectly, the XPCC: - Peng Jiarui, the Deputy Party Secretary and Commander of the XPCC.
- Sun Jinlong, a former Political Commissar of the XPCC.
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6. EU Commission: “EU and China Discuss Trade and Economic Relations”
The European Union and China held today their 8th High-Level Trade and Economic Dialogue (HED). Executive Vice-President Valdis Dombrovskis, accompanied by Commissioner for Trade Phil Hogan, held the meeting via videoconference with Chinese Vice-Premier Liu He accompanied by several Vice-Ministers. The HED focused on the joint response to coronavirus and global economic governance issues, bilateral trade and investment concerns, and cooperation in the area of financial services and taxation, as a follow up to discussions in the EU-China Summit on 22 June. … With regards to market access, the EU recalled its request to China to authorise Member States’ exports of agricultural products currently awaiting export authorisation, as it is the case in the beef and poultry sector. The EU also outlined its concerns about new restrictions introduced on food exports, on the ground of controlling the coronavirus pandemic, leading to an increased number of unjustified inspections, controls and requests for certificates on EU exports of agricultural products. …
The EU and China agreed on the need to ensure the continued relevance of the World Trade Organization in addressing global trade challenges. In line with the 2019 EU-China Summit Joint Statement, the EU reiterated the urgent need for China to engage in future negotiations on industrial subsidies.
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* Council implements decision (cfsp) 2020/1137 of 30 Jul concerning restrictive measures in view of the situation in Libya. Read more here * Council implements regulation (eu) 2020/1129 of 30 Jul concerning restrictive measures against the Democratic People’s Republic of Korea. Read more here * Council’s decision (cfsp) 2020/1134 of 30 Jul extending decision (cfsp) 2017/915 on union outreach activities in support of the implementation of the Arms Trade Treaty. Read more here
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NEWS |
(Source: EU Sanctions, 30 Jul 2020) [Excerpts] The UAE Committee for Goods and Materials Subject to Import and Export Control has updated its list of goods and equipment subject to controls. See Cabinet Resolution 50 of 2020, which amends the Annex to Federal Law no. 13 for 2007. Export controls have been placed on a number of dual-use goods, equipment and technologies relating to nuclear materials, sensors, avionics, navigation systems, and telecommunication systems, as agreed under the multilateral regimes developed by the Australia Group, the Wassenaar Arrangement, the Missile Technology Control Scheme, the Nuclear Suppliers Group, and the Organisation for the Prohibition of Chemical Weapons. “National controlled commodities” (Category 11) include military and riot control vehicles, unmanned conversion kits, and marine systems. |
The U.S. should impose stricter export controls on advanced semiconductor manufacturing equipment to prevent China from indigenizing semiconductor technologies, technology policy experts said. If the U.S. and allies successfully block China from importing and developing specialized software and advanced chips, they should then impose end-use and end-user controls to allow shipments only for civilian uses in China, the experts said. … |
COMMENTARY |
* Principal Author: Johanna Reeves , Esq., 1-202-715-9941, Reeves & Dola LLP On July 28, the House Committee on Oversight and Reform announced that Rep. Stephen F. Lynch (D-MA) sent a letter to the Director of the Office of Management and Budget requesting documents related to the State Department’s decision to overturn its policy to restrict exports of firearm suppressors (also referred to as silencers) to official government end-users . For more information on this policy change, please refer to our July 15, 2020 Export Compliance News Alert . Considering the political taint that has attached to all things related to firearms, this development is not surprising. Noteworthy, although admittedly predictable, is the fact that neither the letter request (reprinted below) nor the web announcement acknowledge the legality, popularity and widespread availability of firearm suppressors throughout the world. On this important point the letter and the announcement are both completely silent. * * * * * * * * * * * * * * * * * * * * |
On July 31, The Commerce Department’s Bureau of Industry and Security (BIS) will publish a notification in the Federal Register amending the Export Administration Regulations (EAR) to suspend the availability of all License Exceptions for Hong Kong that provide differential treatment as compared to those available to China. This EAR change implements the announcement made on BIS’s website on June 30, 2020 that these License Exceptions are no longer available for exports and reexports to Hong Kong, and transfers within Hong Kong, of all items subject to the EAR. To implement the change, BIS is adding a new, Hong Kong-specific paragraph to EAR Section 740.2 (“Restrictions on all License Exceptions”), as well as making some other conforming changes to Section 740.2. BIS is taking this action as part of revised U.S. policy toward Hong Kong in response to the newly imposed security measures on Hong Kong by China. Although the Federal Register notice does not make other changes to the EAR regarding Hong Kong or China, the notice indicates that BIS, in consultation with other executive branch agencies, continues to review the EAR to assess whether additional amendments are warranted. * * * * * * * * * * * * * * * * * * * * |
* Contact: messages@strtrade.com, 1-305-894-1035 Additional U.S. tariffs on billions of dollars’ worth of imports from the European Union appear set to remain in effect after the U.S. rejected an EU claim that it is now in compliance with a World Trade Organization ruling against subsidies provided to aircraft manufacturer Airbus. Those tariffs could be modified within the next few weeks, such as by extending them to more products or increasing the tariff rate, although a number of U.S. lawmakers are seeking specific exclusions. The EU announced recently an agreement to modify the terms of the repayable launch aid granted to Airbus for development of the A350 aircraft and said this action brought the EU into “full compliance” with the WTO ruling. As a result, EU Trade Commissioner Phil Hogan insisted that the U.S. lift its “unjustified tariffs” immediately. However, in a July 29 statement to the WTO Dispute Settlement Body, the U.S. rejected the EU’s claim. “The EU has not provided any details of these supposed amendments to the WTO or directly to the United States … nor does the EU even address the remaining six WTO-inconsistent launch aid measures,” the statement said. As a result, “no one can take seriously that these changes actually address the full scope of massive, WTO-inconsistent subsidies and bring a resolution to this longstanding dispute.” The statement indicates that the U.S. will not be removing its tariffs as the EU demanded and suggests that they will remain in place for the foreseeable future. While both sides have called for a negotiated solution at various points in the dispute, the Trump administration has shown little interest in that option and in fact has employed rhetoric that would seem to decrease its chances. For example, the July 29 statement asserted that Brussels has never “made a serious attempt to withdraw these subsidies or remove their pernicious effects” and that no WTO member “making a genuine effort to comply could get it so wrong, so frequently, and for so long.” In the meantime, the Office of the U.S. Trade Representative is considering whether to modify the list of EU goods subject to additional tariffs by removing or adding items or increasing the tariff level to as much as 100 percent. A decision could come in the next few weeks. On July 29 dozens of members of Congress wrote to USTR Robert Lighthizer asking that such modifications include removing all tariffs on food and drink products (HTSUS subheadings 0203 through 2208) given that industry’s ongoing economic struggles due to the COVID-19 pandemic. “Additional duties on imported wine, spirits, and food products like fruit, pork, and olive oil cut into their already tight profit margins,” the letter said, “further threatening the survival of these industries and the many jobs they support.” * * * * * * * * * * * * * * * * * * * * |
* Author: Oscar Gonzalez, Attorney; Gonzalez, Rolon, Valdespino, & Rodriguez, LLC; (469) 774-4793; oscarg@internationaltrade.law Summary
I make four objections to CBP’s proposed changes to the customs broker regulations, each objection explained in greater detail below. First, CBP provided insufficient notice regarding the newest and most important proposed changes to the customs brokers regulations. Second, making customs brokers “force multipliers” is unwise and illegal. Third, making customs brokers responsible for proper classification and valuation changes and heightens their standard of care. Fourth, forcing customs brokers to provide corrective advice to importers is the unlawful practice of law and imposes irreconcilable conflicts of interest/duties. 1. CBP provided insufficient notice regarding the newest and most important proposed changes to the customs brokers regulations. In its Federal Register Notice, CBP provides a history of the buildup to its proposed revisions of customs regulations. CBP highlights its outreach to the trade community about ACE, national permits, and the customs broker exam and licensing. To be sure, all these are vital issues to customs brokers and CBP takes great pains to feature and expand upon them throughout its Federal Register Notice. However, for the most part, it is the regulations catching up to the practice. ACE and national permits, the main thrust of the Federal Register, are already and mostly in place. They are old news. The major departure from current practice and law is what I dedicate the remainder of my comments. Whether CBP ever reached out to the trade community about the specific issues that I now raise is nowhere mentioned in CBP’s Federal Register Notice. These profound amendments are also not mentioned on the CBP website, where CBP “announces the publication of the Notice of Proposed Rulemaking (NPRM) for the long awaited update to 19 CFR 111.” See https://www.cbp.gov/trade/programs-administration/customs-brokers. Given the sea change that CBP is proposing, CBP should provide a fuller explanation of these proposed amendments and provide further opportunities for the public to comment before finalizing and adopting its proposed regulations. If CBP’s proposed amendments are not a sea change, then CBP should clarify. 2. Making customs brokers “force multipliers” is unwise and illegal. Making customs brokers “force multipliers” is a euphemism for conscripting and deputizing customs brokers. Here is the wording from CBP’s Federal Register
Notice:
CBP proposes to add a new sentence requiring a broker to document and report to CBP when the broker separates or terminates the broker’s representation of a client as a result of the broker determining that the client is intentionally attempting to defraud or otherwise commit any criminal act against the U.S. Government. Under the current CBP regulations, when brokers discover that a client has not complied with the law or made errors or omissions in documents, affidavits, or other paper required by law, the broker must advise the client promptly of the noncompliance, error, or omission. See 19 CFR 111.39(b). The proposed new requirement puts an affirmative duty on the broker to document and report to CBP when the broker terminates representation of a client as a result of determining that the client is attempting to defraud or otherwise commit any criminal act against the U.S. Government. This requirement covers situations where a broker advises the client of a noncompliance, error, or omission, the client directs the broker to continue such noncompliance, error, or omission, and in response the broker terminates its relationship with the client. The proposed changes will allow brokers to act as “force multipliers” in combating fraud and other schemes against the government. Not only will CBP’s proposal distort the importer-broker relationship, but CBP is not empowered to legally make that change. Only Congress, and not CBP, may seek to change the nature of the customs broker-import client relationship. There is no statute that allows CBP to deputize customs brokers. CBP’s proposed regulations reveal either a profound misunderstanding or a troubling disdain of the customs broker-client relationship. CBP licenses and regulates customs brokers, but it does not employ or contract with them. Customs brokers are not federal officers, employees, or agents. Customs brokers are undoubtedly responsible for a number of things, including accurately reporting information to CBP, but it is the CBP,
not customs brokers, that shoulders the primary duty to protect the revenue under 19 USC 1641, although many “experts” claim otherwise. Customs brokers are primarily responsible to their importer clients. That is why a customs broker must operate under a power of attorney from its importer client. The importer client is the principal and the customs broker is its agent. As seen in 19 CFR 141, Subpart C (the regulations pertaining to powers of attorney), CBP is not a party to this relationship. The customs broker is a fiduciary, with its primary duty of loyalty to its client, as set out by the terms of the power of attorney and within the law. The customs broker’s duty cannot be diluted or split because a diluted or split loyalty is no loyalty at all. None of these principles are debatable and all are uniformly recognized and enforced by our courts, including the US Court of International Trade. See, for example: - Boynton v US, 517 F Supp 2d 1349, 1355 (CIT 2007) (“Customs brokers, as fiduciaries, are held to a higher standard of care than are ordinary businessmen“);
- US v Pan Pacific Textile Group, 395 F Supp 2d 1244, 1251 (CIT 2005) (by virtue of a power of attorney, a customs broker owes a fiduciary duty as agent to principal importer);
- Command Communications v Fritz, 36 P 3d 182 (CO Court of Appeals, 2nd Div 2001) (“Customs brokers act as agents for importers and therefore act in a fiduciary capacity“).
CBP’s proposals may well disrupt the business of customs brokerage. Few would hire a CPA to prepare their tax returns if the CPA acted as a “force multiplier” for the IRS. Few would hire a landscaper if the landscaper was working as a “force multiplier” for city ordinance enforcement. Likewise, importers might be reluctant to engage or trust customs brokers who spy on the importers and report back to CBP when they suspect something is wrong. Not only is CBP prohibited by law from conscripting customs brokers as “force multipliers,” but the ambiguity in the customs broker’s duty to snitch is open to abuse. With the duty of loyalty in ruins, little prevents a customs broker from leveraging their new-found power to exaggerate or even concoct customs errors that can be reported to CBP if the customs broker does not get its way with its client importer. In its Federal Register Notice, CBP writes: In addition, CBP proposes to add a new sentence requiring a broker to document and report to CBP when the broker separates or terminates the broker’s representation of a client as a result of the broker determining that the client is intentionally attempting to defraud or otherwise commit any criminal act against the U.S. Government. Under the current CBP regulations, when brokers discover that a client has not complied with the law or made errors or omissions in documents, affidavits, or other paper required by law, the broker must advise the client promptly of the noncompliance, error, or omission. See 19 CFR 111.39(b). The proposed new requirement puts an affirmative duty on the broker to document and report to CBP when the broker terminates representation of a client as a result of determining that the client is attempting to defraud or otherwise commit any criminal act against the U.S. Government. This requirement covers situations where a broker advises the client of a noncompliance, error, or omission, the client directs the broker to continue such noncompliance, error, or omission, and in response the broker terminates its relationship with the client. The proposed changes will allow brokers to act as “force multipliers” in combating fraud and other schemes against the government. A customs broker’s duty to snitch is triggered when its importer client is “attempting to defraud or otherwise commit any criminal act against the U.S. Government” or has committed any “noncompliance, error, or omission.” In other words, any compliance errors or omission will do. This open-endedness is alarming and invites impermissible overreaching by enforcement authorities. CBP may respond that the customs broker’s duty to snitch is limited because it is activated only when an importer refuses to correct the errors or omissions, thereby forcing customs broker to terminate its representation of the importer. Such logic ignores CBP’s proposal to heighten the standard of care that customs brokers must observe when performing customs business on behalf of an importer (see arguments 3 and 4, below). Their heightened standard of care will pressure customs brokers, already emboldened and skittish from their new enforcement powers, to terminate importer representations prematurely and hastily, thus, paradoxically eroding the general level of compliance with customs law within the trade community. CBP’s proposal is also superfluous. Whistleblower laws exist and are found both in CBP’s own regulations (19 CFR §161.12 and 19 USC 1619) and in the False Claims Act (31 USC §§3729-3733). Both reward people, including customs brokers, for snitching on importers who violate customs laws. The difference is that whistleblower laws work through incentive, not through the coercion of a newly-fabricated affirmative duty… [Editor’s note: the second part of this article will run in the Bugle on Monday, August 3rd] * * * * * * * * * * * * * * * * * * * * |
EX/IM TRAINING EVENTS & CONFERENCES |
(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, so we are displaying here only the new events in the Daily Bugle, while maintaining a LINK HERE to the full list.] On-Line: #
* Date: (Location;) “Event Title”; <Weblink>” Event Sponsor; On-Line: * 16 Sep: “
Navigating EU military export controls
“; WorldECR * * * * * * * * * * * * * * * * * * * *
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| EDITOR’S NOTES |
15. Bartlett’s Unfamiliar Quotations
(Source: Editor) * Milton Friedman
(31 Jul 1912 – 16 Nov 2006; was an American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy.) – “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.” – “Concentrated power is not rendered harmless by the good intentions of those who create it.” – “Hell hath no fury like a bureaucrat scorned.” *
Aristotle (384-322 BC; was a Greek philosopher and polymath during the Classical period in Ancient Greece. Taught by Plato, he was the founder of the Lyceum, the Peripatetic school of philosophy, and the Aristotelian tradition. His writings cover many subjects including physics, biology, zoology, metaphysics, logic, ethics, aesthetics, poetry, theatre, music, rhetoric, psychology, linguistics, economics, politics, and government. His philosophy has exerted a unique influence on almost every form of knowledge in the West.) – “It is the mark of an educated mind to be able to entertain a thought without accepting it.” * * * * * * * * * * * * * * * * * * * *
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