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20-0811 Tuesday “Daily Bugle”

20-0811 Tuesday “Daily Bugle”

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Tuesday, 11 August 2020

  1. Presidential Document Addressing the Threat Posed by TikTok, and Taking Additional Steps to Address the National Emergency with Respect to the Information and Communications Technology and Services Supply Chain”
  2. Presidential Document Addressing the Threat Posed by WeChat, and Taking Additional Steps to Address the National Emergency with Respect to the Information and Communications Technology and Services Supply Chain”
  3. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  4. USTR: “Notice of Extension of Particular Exclusions Granted Under the $300 Billion Action Pursuant to Section 301”
  5. USTR: “Notice of Product Exclusion Extensions”
  6. USTR: “Product Exclusions and Amendments”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  1. Expeditors News: “FEMA Extends and Revises PPE Export Restrictions”
  2. Japantimes: “All National Universities in Japan Now Control Exports of Sensitive Technology”
  1. Husch Blackwell: “Canada Announces Retaliatory Tariffs on U.S. Imports”
  2. Kelley Drye: “China and Hong Kong Developments: Sanctions, Export Controls, and Supply Chain Risks”
  3. Vinson & Elkins: “Update on FEMA’s Export Restrictions on Personal Protective Equipment”
  4. WilmerHale: “New Executive Orders Target Chinese Apps”
  1. FCC Academy Presents 4 Webinars: U.S. Export Controls: ITAR & EAR | FMS | Designing and Implementing an ICP
  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

(Source: Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48637: Executive Order
   I, DONALD J. TRUMP, President of the United States of America, find that additional steps must be taken to deal with the national emergency with respect to the information and communications technology and services supply chain declared in Executive Order 13873 of May 15, 2019 (Securing the Information and Communications Technology and Services Supply Chain). Specifically, the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States. At this time, action must be taken to address the threat posed by one mobile application in particular, TikTok.
   TikTok, a video-sharing mobile application owned by the Chinese company ByteDance Ltd., has reportedly been downloaded over 175 million times in the United States and over one billion times globally. TikTok automatically captures vast swaths of information from its users, including internet and other network activity information such as location data and browsing and search histories. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information-potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.
TikTok also reportedly censors content that the Chinese Communist Party deems politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities. This mobile application may also be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.
   These risks are real. The Department of Homeland Security, Transportation Security Administration, and the United States Armed Forces have already banned the use of TikTok on Federal Government phones. The Government of India recently banned the use of TikTok and other Chinese mobile applications throughout the country; in a statement, India’s Ministry of Electronics and Information Technology asserted that they were “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.” American companies and organizations have begun banning TikTok on their devices. The United States must take aggressive action against the owners of TikTok to protect our national security.
Accordingly, I hereby order:
 
Section 1. (a) The following actions shall be prohibited beginning 45 days after the date of this order, to the extent permitted under applicable law: Start Printed Page 48638any transaction by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd. (a.k.a. Zìjié Tiàodòng), Beijing, China, or its subsidiaries, in which any such company has any interest, as identified by the Secretary of Commerce (Secretary) under section 1(c) of this order.
 
(b) The prohibition in subsection (a) of this section applies except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted before the date of this order.
 
(c) 45 days after the date of this order, the Secretary shall identify the transactions subject to subsection (a) of this section.
 
Sec. 2. (a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate the prohibition set forth in this order is prohibited.
 
(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.
 
Sec. 3. For the purposes of this order:
 
(a) the term “person” means an individual or entity;
 
(b) the term “entity” means a government or instrumentality of such government, partnership, association, trust, joint venture, corporation, group, subgroup, or other organization, including an international organization; and
 
(c) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.
 
Sec. 4. The Secretary is hereby authorized to take such actions, including adopting rules and regulations, and to employ all powers granted to me by IEEPA as may be necessary to implement this order. The Secretary may, consistent with applicable law, redelegate any of these functions within the Department of Commerce. All departments and agencies of the United States shall take all appropriate measures within their authority to implement this order.
 
Sec. 5. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:
 
(i) the authority granted by law to an executive department, agency, or the head thereof; or
 
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
 
(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
 
Start Printed Page 48639
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

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

(Source: Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48641: Executive Order
   I, DONALD J. TRUMP, President of the United States of America, find that additional steps must be taken to deal with the national emergency with respect to the information and communications technology and services supply chain declared in Executive Order 13873 of May 15, 2019 (Securing the Information and Communications Technology and Services Supply Chain). As I explained in an Executive Order of August 6, 2020 (Addressing the Threat Posed by Tiktok, and Taking Additional Steps to Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain), the spread in the United States of mobile applications developed and owned by companies in the People’s Republic of China (China) continues to threaten the national security, foreign policy, and economy of the United States. To protect our Nation, I took action to address the threat posed by one mobile application, TikTok. Further action is needed to address a similar threat posed by another mobile application, WeChat.

 
  WeChat, a messaging, social media, and electronic payment application owned by the Chinese company Tencent Holdings Ltd., reportedly has over one billion users worldwide, including users in the United States. Like TikTok, WeChat automatically captures vast swaths of information from its users. This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information. In addition, the application captures the personal and proprietary information of Chinese nationals visiting the United States, thereby allowing the Chinese Communist Party a mechanism for keeping tabs on Chinese citizens who may be enjoying the benefits of a free society for the first time in their lives. For example, in March 2019, a researcher reportedly discovered a Chinese database containing billions of WeChat messages sent from users in not only China but also the United States, Taiwan, South Korea, and Australia. WeChat, like TikTok, also reportedly censors content that the Chinese Communist Party deems politically sensitive and may also be used for disinformation campaigns that benefit the Chinese Communist Party. These risks have led other countries, including Australia and India, to begin restricting or banning the use of WeChat. The United States must take aggressive action against the owner of WeChat to protect our national security.
  Accordingly, I hereby order:
 
 Section 1. (a) The following actions shall be prohibited beginning 45 days after the date of this order, to the extent permitted under applicable law: any transaction that is related to WeChat by any person, or with respect to any property, subject to the jurisdiction of the United States, with Tencent Holdings Ltd. (a.k.a. Tengxun Konggu Youxian Gongsi),  Shenzhen, China, Start Printed Page 48642or any subsidiary of that entity, as identified by the Secretary of Commerce (Secretary) under section 1(c) of this order.
 
(b) The prohibition in subsection (a) of this section applies except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted before the date of this order.
 
(c) 45 days after the date of this order, the Secretary shall identify the transactions subject to subsection (a) of this section.
 
Sec. 2. (a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate the prohibition set forth in this order is prohibited.
 
(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.
 
Sec. 3. For those persons who might have a constitutional presence in the United States, I find that because of the ability to transfer funds or other assets instantaneously, prior notice to such persons of measures to be taken pursuant to section 1 of this order would render those measures ineffectual. I therefore determine that for these measures to be effective in addressing the national emergency declared in Executive Order 13873, there need be no prior notice of an identification made pursuant to section 1(c) of this order.
 
Sec. 4. For the purposes of this order:
 
(a) the term “person” means an individual or entity;
 
(b) the term “entity” means a government or instrumentality of such government, partnership, association, trust, joint venture, corporation, group, subgroup, or other organization, including an international organization; and
 
(c) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.
 
Sec. 5. The Secretary is hereby authorized to take such actions, including adopting rules and regulations, and to employ all powers granted to me by IEEPA as may be necessary to implement this order. The Secretary may, consistent with applicable law, redelegate any of these functions within the Department of Commerce. All departments and agencies of the United States shall take all appropriate measures within their authority to implement this order.
 
Sec. 6. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:
 
(i) the authority granted by law to an executive department, agency, or the head thereof; or
 
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
 
(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
 
Start Printed Page 48643
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

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

(Source: Federal Register & Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48632: Notice
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Notice.
* SUMMARY: The 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 (the SDN 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. Additionally, OFAC is publishing the names of one or more persons that have been removed from the SDN List. Their property and interests in property are no longer blocked, and U.S. persons are no longer generally prohibited from engaging in transactions with them.
* FOR FURTHER INFORMATION CONTACT: OFAC: Associate Director for Global Targeting, tel.: 202-622-2420; Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490; Assistant Director for Licensing, tel.: 202-622-2480.

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

(Source: Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48595: Notice
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice and request for comments.
* SUMMARY: On August 20, 2019, at the direction of the President, the U.S. Trade Representative determined to modify the action being taken in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation by imposing additional ad valorem duties on goods of China with an annual trade value of approximately $300 billion. The additional duties on products in List 1, which is set out in Annex A of that action, became effective on September 1, 2019. The U.S. Trade Representative initiated a product exclusion process in October 2019, and has issued seven product exclusion notices under this action and is issuing an eighth notice concurrent with this notice. The product exclusions granted under these notices are scheduled to expire on September 1, 2020. The U.S. Trade Representative decided to consider a possible extension of particular exclusions granted under the first seven product exclusion notices. This notice announces the U.S. Trade Representative’s decision to consider a possible extension of particular exclusions granted under the eighth notice of product exclusions.
* DATES: August 5, 2020: The public docket on the web portal at https://comments.USTR.gov opened for parties to submit comments on the possible extension of particular exclusions.
August 20, 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.
* FOR FURTHER INFORMATION CONTACT: Associate General Counsel Philip Butler or Assistant General Counsel Benjamin Allen at (202) 395-5725.

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

(Source: Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48600: Notice
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of product exclusion extensions.
* SUMMARY: Effective September 24, 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $200 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 on June 24, 2019, and has granted 15 sets of exclusions under the $200 billion action. These exclusions will expire on August 7, 2020. On May 6, 2020 and June 3, 2020, the U.S. Trade Representative established a processes for the public to comment on whether to extend particular exclusions granted under the $200 billion action for up to 12 months. This notice announces the U.S. Trade Representative’s determination to extend certain exclusions through December 31, 2020.
* DATES: The product exclusion extensions announced in this notice will apply as of August 7, 2020, and extend through December 31, 2020. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.
* FOR FURTHER INFORMATION CONTACT: For general questions about this notice, contact Associate General Counsel Philip Butler or Assistant General Counsel Benjamin Allen, or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For specific questions on customs classification or implementation of the product exclusions identified in the Annex to this notice, contact traderemedy@cbp.dhs.gov.

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

(Source: Federal Register, 11 Aug 2020) [Excerpts]
 
85 FR 48627: Notice
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of product exclusions.
* SUMMARY: On August 20, 2019, at the direction of the President, the U.S. Trade Representative determined to modify the action being taken in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation by imposing additional duties of 10 percent ad valorem on goods of China with an annual trade value of approximately $300 billion. The additional duties on products in List 1, which is set out in Annex A of that action, became effective on September 1, 2019. The U.S. Trade Representative initiated a product exclusion process in October 2019, and interested persons have submitted requests for the exclusion of specific products. This notice announces the U.S. Trade Representative’s determination to grant certain exclusion requests, as specified in the Annex to this notice, and make certain amendments to previously announced exclusions.
* DATES: The product exclusions announced in this notice apply as of September 1, 2019, the effective date of List 1 of the $300 billion action, and extend to September 1, 2020.

* FOR FURTHER INFORMATION CONTACT: For general questions about this notice, contact Associate General Counsels Philip Butler or Megan Grimball, or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For specific questions on customs classification or implementation of the product exclusions identified in the Annex to this notice, contact traderemedy@cbp.dhs.gov.

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

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)

* Treasury/OFAC: NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 12 Aug 2020] (PDF) and (PDF)

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

OGS_a28. Commerce/BIS: (No new postings)

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

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

COM NEWS

(Source: Expeditors News, 10 Aug 2020) [Excerpts]

 
On August 10, 2020, the U.S. Federal Emergency Management Agency (FEMA) published a Temporary Final Rule in the Federal Register extending the regulation and modifying restrictions of exports of certain Personal Protective Equipment (PPE) through December 31, 2020, initially published in April.
The new Temporary Final Rule also modifies the list of covered PPE products to reflect the current domestic demand. Per the Rule:
  • “Other filtering facepiece respirators” and “elastomeric, air-purifying respirators” have been removed;
  • The scope for PPE gloves or surgical gloves has been narrowed to include nitrile gloves; and
  • Certain surgical gowns have been added.
The rule is effective from August 10, 2020, through December 31, 2020.

(Source: The Japan Times, 11 Aug 2020) [Excerpts]
 
   By this spring, all national universities in the nation had created export control sections to prevent nuclear, radar and other high-level technologies with the potential for military use from being transferred abroad, and had set relevant rules, according to the education ministry.
   Last year, five of the 86 state-run universities did not have such units and 17 had lacked rules on export controls. But as of April, all of the institutions had introduced both, a tally by the Education, Culture, Sports, Science and Technology Ministry showed.
   Universities in Japan have faced growing calls to tighten their export controls and the United States, which has raised questions about China stealing technology, has called on its allies to take such steps.
   There have been fears that any delay in boosting export control measures could result in Japanese universities being excluded from joint research opportunities with peers from the United States and other countries.

  Guidelines drawn up by the Ministry of Economy, Trade and Industry, which oversees issues related to export controls, urge domestic universities to assign personnel to be responsible for determining whether each technology should be subject to export restrictions based on the nation’s foreign exchange and foreign trade law. …

 
   At the University of Tokyo, Chinese accounted for about 60 percent of some 4,000 foreign students on its undergraduate and graduate courses as of May, according to the university.
   A trade ministry report said a foreign student was caught attempting to transfer a technology that is subject to export controls without permission, while another student was found to have belonged to an organization suspected of having engaged in developing weapons of mass destruction back home. …

COM COMMENTARY

 
* Principal Author: Stephen Brophy, Esq., 1-202-378-2408, Husch Blackwell LLP
 
   On August 7, 2020, Canada’s Deputy Prime Minister Chrystia Freeland announced that Canada will be imposing retaliatory tariffs on $2.7 billion worth of U.S. imports in response to President Trump’s decision to re-implement a 10% ad valorem tariff on non-alloyed unwrought aluminum from Canada (HTS subheading 7601.10). During a news conference Freeland stated, “We will impose dollar-for-dollar countermeasures in a balanced and perfectly reciprocal retaliation.” These decisions come after the two countries, along with Mexico, recently implemented the USMCA to further facilitate trade.
   Following the announcement, the Canadian Department of Finance issued a notice containing a list of over sixty aluminum goods subject to a 10% rate that will take effect on September 16, 2020. According to the notice, interested parties (Canadian companies or Canadian industry associations) should provide written comments by September 6, 2020 to fin.tariff-tarif.fin@canada.ca.

 
 
   Over the last month, the United States has taken a variety of steps to increase pressure on China in response to the imposition of China’s National Security Law in Hong Kong and alleged human rights abuses in Xinjiang.  These measures include new sanctions programs targeting Hong Kong, export and trade control restrictions, and sanctions targeting actors in the Xinjiang region.  The U.S. government also issued a lengthy Advisory warning U.S. and global companies of supply chain risks related to forced labor and other human rights issues in Xinjiang.
   In this post, we highlight some key risks that companies should consider when doing business in the region against the backdrop of rising U.S.-China tensions.
 
Hong Kong
   On July 14 , 2020, the President signed the Hong Kong Autonomy Act of 2020 (HKAA) into law and issued Executive Order 13936 in response to the imposition of China’s National Security Law in Hong Kong.  The new U.S. rules authorize sanctions on parties in Hong Kong and China and eliminate the differential treatment between China and Hong Kong under U.S. export control and international trade rules.  Companies with significant operations or investments in Hong Kong need to carefully monitor this evolving situation and assess their exposure to government officials and financial institutions that may be named as sanctions targets under the HKAA or become subject to sanctions under E.O. 13936.  As we’ve previously noted, exporters also need to ensure that exports to Hong Kong comply with the new export control restrictions.
 
a. The HKAA: Reports, Blocking Sanctions, and Foreign Financial Institution Secondary Sanctions
   The HKAA requires the Administration to issue two reports to Congress, which must be followed by sanctions on identified parties.
   The first report must identify foreign persons who have materially contributed to the “failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law” within 90 days.*  Once identified in the first report, the President may impose sanctions on the listed parties.  Within a year, however, the President must impose sanctions on the listed parties, which may include blocking sanctions and visa restrictions.  Blocking sanctions essentially prohibit a sanctioned party from conducting business dealings or financial transactions that involve the United States, cutting the sanctioned party off from the United States and much of the global financial system.
The first HKAA report must be followed up within 60 days with a second report identifying foreign financial institutions that knowingly conduct a “significant transaction” with a person identified in the first report.  The HKAA then requires the president to impose at least five “secondary sanctions” on the offending financial institution within a year of the report and impose the full menu of ten secondary sanctions within two years of the report.**
   Sanctions under the HKAA can be waived if the actions of the listed parties or foreign financial institutions did not have a significant and lasting effect on Hong Kong, the actions are not likely to be repeated in the future, and the party or foreign financial institution has reversed or otherwise mitigated its sanctionable conduct.
 
b. E.O. 13936 Blocking Sanctions
   In addition to the sanctions authorized by the HKAA, Section 4 of E.O. 13936 authorizes the imposition of blocking sanctions against parties that engage in a variety of practices that undermine democratic processes or institutions of Hong Kong.  While the E.O. appears primarily aimed at government officials and entities, it could also be used to target companies and other private sector actors engaged in the activities described in Section 4.  Unlike the HKAA, the E.O. does not require the issuance of a report prior to the imposition of sanctions, so sanctions under the E.O. may be issued without warning.
 
c. Export Controls & Trade “Normalization” with Hong Kong
   In addition to new sanctions, E.O. 13936 requires U.S. government agencies to take a variety of steps to “normalize” trade with Hong Kong and eliminate any differential treatment between Hong Kong and mainland China.  From an export control perspective, “normalization” generally means treating exports and other transfers to Hong Kong as if they were being shipped directly to mainland China.  Among other measures, the E.O. requires U.S. government agencies to:  1) amend any regulations which provide preferential treatment to Hong Kong as compared to China; 2) revoke license exceptions for exports, reexports and transfers (in-country) to Hong Kong of items subject to the Export Administration Regulations (EAR) that don’t also apply to China (BIS had already suspended these exceptions); and 3) terminate export licensing suspensions for defense articles transferred to Hong Kong persons physically located outside of Hong Kong and China and who were authorized to receive defense articles prior to the date of the E.O.  The E.O. also mandates changes to a variety of other trade control rules, including origin marking, and may have implications for duties on goods imported from Hong Kong.
   Companies that export or import goods to or from Hong Kong need to review these changes and ensure their trade compliance programs account for the updated rules.  Companies relying on license exceptions in the past must ensure they have processes in place to obtain individual licenses from U.S. authorities before exporting, re-exporting, or transferring items subject to U.S. export control laws to Hong Kong.
 
Xinjiang Sanctions & Supply Chain Risks
   In addition to the new Hong Kong measures, the United States has also expanded sanctions on China in response to what the U.S. government calls “serious human rights abuse against ethnic minorities in Xinjiang” including “mass arbitrary detention and severe physical abuse, among other serious abuses targeting Uyghurs” in western China.  The U.S. government also issued comprehensive guidance warning companies of supply chain risks related to human rights abuses in the region.
   Taken together, these measures amount to significant new trade compliance risks for companies that operate in or deal with companies in Xinjiang.  To address these risks, companies should adopt robust due diligence procedures to screen for the involvement of sanctioned parties or supply chain risks that could result in financial or reputational damage to the company.
 
a. Blocking Sanctions
   Only July 9 and July 31, the Office of Foreign Assets Control (OFAC), the U.S. agency with primary responsibility for U.S. sanctions, announced new sanctions on current and former Chinese government officials for their role in human rights abuses Xinjiang and on the Xinjiang Production and Construction Corps (XPCC, also known as the “Bingtuan”), which OFAC identified as a paramilitary organization that is responsible for implementing Beijing’s repressive policies in the region.  OFAC added these parties to the List of Specially Designated Nationals (the SDN List) pursuant to E.O. 13818 and the Global Magnitsky Human Rights Act, which authorizes the imposition of sanctions against parties responsible for human rights abuses and corruption around the world.  As regular readers of this blog know, persons subject to U.S. jurisdiction are broadly prohibited from conducting transactions or business with parties on the SDN List or with entities owned 50 percent or more by SDNs under OFAC’s “50 percent rule.”  Pursuant to an OFAC general license, however, U.S. persons may engage in limited activities necessary to wind down transactions with or divest from entities that are owned 50 percent or more by the XPCC, subject to certain restrictions and reporting requirements, before September 30, 2020.

Even with the general license, the designation of the XPCC could have far-reaching effects for U.S. and global companies that do business in or related to Xinjiang.  According to media reports, the XPCC has broad reach in Xinjiang and elsewhere, employing a significant percentage of the population and controlling up to 20 percent of the economy of the region.  Companies doing business in the region must adopt rigorous due diligence procedures to identify business partners that may be ultimately owned by the XPCC to prevent violations of the new U.S. sanctions.
 
b. Entity List Restrictions
   In addition to the OFAC designations, the Bureau of Industry and Security (BIS), the U.S. dual-use export control regulator, added 11 companies to its Entity List on July 20 due to the parties’ alleged involvement in human rights abuses in Xinjiang.  U.S. and non-U.S. persons are prohibited from transferring any items “subject to the EAR” to the designated parties.  The restrictions broadly apply to any person dealing in goods, software, and technology (collectively, “items”) in the United States, U.S.-origin items, certain items manufactured outside the United States that contain sufficient U.S.-origin content, and certain items manufactured using U.S. technology.  The July 20 Entity List designations follow similar actions by BIS in June 2020 and October 2019.
   As with the designation of the XPCC, the only way to comply with the new Entity List restrictions is to screen transactions for the involvement of sanctioned parties.
 
c. Supply Chain Risks
   On July 1, the U.S. Departments of Commerce, State, Treasury, and Homeland Security issued the “Xinjiang Supply Chain Business Advisory” to highlight supply chain risks related to Xinjiang and suppliers outside of Xinjiang that may engage in human rights abuses, such as the use of forced labor.  The Advisory identifies three primary supply chain risks related to Xinjiang:
  • The provision of surveillance goods, services, or technology (e.g., cameras, tracking technology, biometric devices, among others) that may be deployed in Xinjiang;
  • Relying on labor or goods sourced in Xinjiang or from factories in China that may utilize forced labor from Xinjiang; and
  • Assisting with the construction of internment facilities used to detain Muslim minority groups, and/or manufacturing facilities that are located nearby these internment camps.
   The Advisory cautions that third-party audits alone may not be a reliable source of information on whether human rights abuses exist, and that businesses should consider collaborating with industry groups to share information on risks in the region.  The Advisory also encourages companies, to the extent they have a reason to know, to perform reasonable due diligence before supplying companies with goods and services to ensure they are not potentially supporting Chinese customers that may be involved in human rights abuses in Xinjiang.
   The Advisory also identifies the following industries as having a heightened risk of involving forced labor sourced from Xinjiang: Agriculture; Cell Phones; Cleaning Supplies; Construction; Cotton Yarn, Cotton Fabric, Ginning, Spinning Mills, and Cotton Products; Electronics Assembly; Extractives (including coal, copper, hydrocarbons, oil, uranium, and zinc); Fake Hair and Human Hair Wigs, Hair Accessories; Food Processing Factories; Hospitality Services; Noodles; Printing Products; Footwear; Stevia; Sugar; Textiles (including such products as apparel, bedding, carpets, wool); and Toys.
   Companies involved in these sectors in China, or that may otherwise have supply chain exposure to Xinjiang, should review the Advisory in detail and consider their exposure to Xinjiang-related risks with respect to existing relationships and future transactions.

COM_a314. Vinson & Elkins: “Update on FEMA’s Export Restrictions on Personal Protective Equipment”

 
* Principal Author: Damara Chambers, Esq., 1-202-639-6750
 
   On August 6, 2020, the Federal Emergency Management Agency (“FEMA”) issued a temporary final rule modifying the list of Personal Protective Equipment (“PPE”) subject to FEMA’s export restrictions and extending the restrictions until December 31, 2020. The restrictions were scheduled to expire on August 10, 2020; and the changes take effect on that date.
Under a temporary final rule issued in April, FEMA restricted exports of certain health and medical supplies designated as “covered materials.” By requiring explicit approval from FEMA to export these materials, FEMA sought to reserve them for domestic use. In addition to modifying the list of covered materials, the new temporary rule continues the eleven previously announced exemptions. Please see our alert on FEMA’s export restrictions here and our alert on the exemptions here.
   Through December 31, 2020, the export restrictions apply to the following covered materials:
  • Respirators – FEMA will continue to limit exports of surgical N95 filtering facepiece respirators. FEMA has clarified that industrial N95 respirators are not restricted. FEMA is removing other filtering facepiece respirators and elastomeric, air-purifying respirators and appropriate particulate filters/cartridges from the list of covered materials.
  • Masks – FEMA is continuing to limit exports of PPE surgical masks.
  • Gloves – FEMA is narrowing the category of PPE gloves to include only PPE nitrile gloves for use in surgery and medical exams.
  • Gowns – FEMA is adding certain surgical gowns and surgical isolation gowns to its list of covered materials. These special surgical gowns meet certain technical standards including liquid barrier performance.
   FEMA is continuing to control these items because the U.S. domestic demand continues to exceed supply. FEMA has been unable to fill outstanding requests from state and local governments for over 6 million surgical N95 respirators, 28 million surgical masks, 139 million nitrile gloves, and 11 million surgical gowns remaining on the list of covered materials.
   U.S. Customs and Border Protection will continue to detain shipments of the covered materials temporarily, to allow FEMA to determine whether to return the items for domestic use, to issue a rated Government order for the items under the Defense Production Act, or to allow the export of part or all of the shipments. FEMA is working to make determinations on shipments quickly in order to minimize disruptions to the supply chain both domestically and abroad.

COM_a415. WilmerHale: “New Executive Orders Target Chinese Apps”

 
* Principal Author: Charlene Barshefsky, Esq., 1-202-663-6130, Wilmer Cutler Pickering Hale and Dorr LLP
 
   On August 6, 2020, President Trump issued two nearly parallel executive orders (EOs) targeting the enormously popular apps TikTok and WeChat: Executive Order on Addressing the Threat Posed by TikTok (TikTok EO), and Executive Order on Addressing the Threat Posed by WeChat (WeChat EO). These EOs arrive in the wake of the review by the Committee on Foreign Investment in the United States of a past acquisition by TikTok’s parent, ByteDance Ltd., as well as President Trump’s repeated threats against TikTok as Microsoft considers acquiring the company. [F/N 1] Importantly, the EOs do not have immediate effect; rather, 45 days from the date the EOs were issued (on September 20, 2020), the Commerce Secretary is authorized to identify transactions that will be subject to prohibitions.
   But the extraordinary breadth and ambiguity of the EOs have left US companies and many others looking to the Trump Administration for additional clarity on how the EOs will be implemented, with much of the focus on whether the WeChat EO sweeps in transactions with WeChat’s parent, Tencent Holdings, and the types of transactions that will be subject to the prohibitions. Despite some uncertainty over how exactly the Commerce Secretary will implement these EOs, we can now highlight certain key aspects.
   TikTok, owned by ByteDance Ltd. (ByteDance), is a video-sharing mobile application that, according to the TikTok EO, has been downloaded over 175 million times in the United States and over one billion times globally. WeChat, owned by Tencent Holdings Ltd. (Tencent), is a messaging, social media and electronic payment application that the WeChat EO states has over one billion users in the United States and worldwide.
  In the preambles to the EOs, the President asserts that these apps present national security and foreign policy threats to the United States because they automatically capture-and may allow the Chinese government to access-vast swaths of personal and proprietary information of Americans and Chinese dissidents visiting the United States (the latter only in the case of WeChat). He also cites the perceived role that these applications play in the Chinese government’s censorship of content it deems undesirable and in Chinese disinformation campaigns. Although the EOs do not require that the Commerce Secretary only prohibit transactions that contribute to these risks, we would expect such transactions to be the focus of any new prohibitions issued on or after September 20, 2020.
   Both EOs derive authority from the International Emergency Economic Powers Act (IEEPA) [F/N 2] and expand on the national emergency declared in EO 13873 of May 15, 2019, Securing the Information and Communications Technology and Services Supply Chain, which creates a framework for regulating the acquisition, importation, transfer, installation, dealing in or use of any information and communications technology or service by any person, or with respect to any property, subject to the jurisdiction of the United States, where the transaction involves a “foreign adversary.” That executive order directed the Commerce Secretary to ban such transactions that pose an “undue” or “unacceptable” risk to the national security of the United States. In November 2019, the Commerce Department issued a proposed rule to implement EO 13873. 
   The TikTok and WeChat EOs have several noteworthy features.
  First, the EOs delegate the authority to identify prohibited “transactions” not to the Secretaries of the Treasury or State, who typically administer IEEPA-based financial and commercial sanctions against designated targets, but instead to the Commerce Secretary, who typically administers US export controls. In this way, the EOs extend the EO 13873 delegation of authority to an agency that does not currently maintain a regulatory framework to administer this kind of sanctions regime.
  How the Commerce Department will execute this newfound authority is unclear. One possibility is that the Commerce Department’s Bureau of Industry and Security, which administers the Export Administration Regulations (EAR), could use the EAR as the regulatory framework within which to administer these EOs. One relatively straightforward regulatory action that the Commerce Department could take would be to use its Entity List to limit exports of certain items “subject to the EAR” (US-origin goods, software and technology, and some foreign-produced items containing or derived from US technology) to ByteDance, Tencent and/or an enumerated list of their subsidiaries. This is the approach that the Commerce Department has taken with respect to Huawei Technologies Co. Ltd. (Huawei). But the US policy interests at issue with respect to Huawei-which has been accused of diverting US-origin technology to Iran, among other activities involving US-origin technology that are inconsistent with US national security and foreign policy objectives-were better advanced by the use of the EAR than would be the case here. Indeed, the EAR may be an awkward fit in this case given that it is limited to regulating items “subject to the EAR,” which generally does not include US users’ dealings with Chinese mobile apps nor the transfer of US user data to China.
   Second, these EOs do not appear to contemplate sanctions applicable to all dealings with designated individuals or entities but, rather, they contemplate sanctions applicable to specific transactions. In this way they may function similarly to so-called sectoral sanctions against Russia, where the Treasury Department’s Office of Foreign Assets Control issued four specific directives specifying the types of transactions that would be subject to US sanctions prohibitions. The Commerce Department here could issue similar directives or other measures specifying the particular types of transactions that are prohibited.
   Because the EOs are not a model of clarity, it is difficult to predict what transactions could become subject to future prohibitions. The TikTok EO appears to authorize the Commerce Department to impose prohibitions on any transaction subject to US jurisdiction (i.e., where a US person and/or US property are involved in the transaction) with ByteDance. In contrast, the WeChat EO appears to authorize the Commerce Department to impose prohibitions on any transaction subject to US jurisdiction with Tencent “that is related to WeChat,” though the EO is not sufficiently clear to rule out the possibility that it could be used to otherwise target transactions with Tencent.
The authorization to prohibit transactions involving property subject to US jurisdiction creates the possibility that the Commerce Department could be quite expansive, e.g., by prohibiting transactions by non-US companies that involve US-based services (see third point, below). The Commerce Department may decide to tailor the prohibitions narrowly or issue carveouts, safe havens or general licenses, e.g., for companies to wind down relevant operations, though the EOs themselves do not require it to do so. Indeed, the WeChat EO (but, for reasons that are not apparent, not the TikTok EO), contains a provision that is standard in IEEPA-based executive orders that permits action to be taken to prohibit transactions with “no prior notice.”
   Some limitation on the scope of prohibited transactions may be required, however, with respect to transactions involving “information or informational materials.” Because the President relied on the authority granted to him under IEEPA to issue the EOs, any restrictions impacting the free exchange of international communications through the apps could contravene the so-called Berman Amendment to IEEPA, which carves out from IEEPA’s broad grant of powers to the President the authority to restrict, “directly or indirectly,” the import or export, “whether commercial or otherwise, regardless of format or medium of transmission,” of “information or informational materials.” [F/N 3] The Commerce Department may face legal challenges if it seeks to restrict the use of these apps for communicative purposes. 
   Third, the Commerce Secretary may impose the contemplated prohibitions on any transaction “by any person, or with respect to any property, subject to the jurisdiction of the United States.” [F/N 4] Based on this plain language, the Commerce Secretary could prohibit transactions by foreign subsidiaries of US companies and other non-US firms where such transactions involve US-based computing, banking or other services-though the preambles to the EOs suggest that such transactions may not be the focus of implementation. In contrast, the EOs’ prohibitions against sanctions evasion extend only to transactions by “a United States person or within the United States,” which excludes activities of non-US firms outside the United States.
   These EOs authorize the Commerce Secretary to prohibit a broad range of commercial relationships and thus have the potential to be highly disruptive. Many stakeholders will likely engage with the Trump Administration prior to September 20 to seek clarity on the Commerce Department’s implementation of the EOs, or to influence the Commerce Department’s approach. Regardless of whether the scope and application of the EOs is clarified, there remains the prospect of Chinese retaliatory action. Already, China’s Foreign Ministry spokesman, Wang Wenbin, reacted to the EOs by stating, “The US is using national security as an excuse and using state power to oppress non-American businesses. That’s just a hegemonic practice.” A stronger response by China may be forthcoming.
 
F/N 1. Microsoft reportedly is in negotiations with ByteDance to purchase TikTok’s global operations. If the purchase occurs before September 20, 2020, it could potentially spare TikTok (and other ByteDance entities) from being subject to prohibitions under the TikTok EO. 
F/N 2. 50 U.S.C. § 1702(b)(3); 50 U.S.C. app. § 5(b)(4) (2006).
 
F/N 3. The Berman Amendment also provides a non-exhaustive list of items that qualify under the exemption, “including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds. 50 U.S.C. § 1702(b)(3); 50 U.S.C. app. § 5(b)(4) (2006). The exemption does not include exports that are controlled for export on national security grounds or on foreign policy grounds to the extent that such controls promote the nonproliferation or antiterrorism policies of the United States.
 
F/N 4. TikTok EO, Section 1(a) (emphasis added); WeChat EO, Section 1(a) (emphasis added).

TE EX/IM TRAINING EVENTS & CONFERENCES

ITAR & EAR from a non-US perspective
Tuesday, 8 September 2020
More Info
The ABC of Foreign Military Sales (FMS)
Tuesday, 29 September 2020
Designing and Implementing an ICP
Tuesday, 6 October 2020 More Info
Wednesday, 7 October
More Info
* * * * * * * * * * * * * * * * * * * *

EN EDITOR’S NOTES

EN_a117. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* Alex Haley (Alexander Murray Palmer Haley; 11 Aug 1921 – 10 Feb 1992; was an American writer and the author of Roots: The Saga of an American Family. ABC adapted the book as a television miniseries of the same name and aired it in 1977 to a record-breaking audience of 130 million viewers. )
  – “Nobody can do for little children what grandparents do. Grandparents sort of sprinkle stardust over the lives of little children.”
 
* Taki Theodoracopulos (Panagiotis “Taki” Theodoracopulos; born 11 August 1936; is a Greek journalist and writer. He lives in New York City, London, and Switzerland.)
  – “I don’t see democracy getting better. I see democracy diminishing. More rules, more legislation. Eventually governments will run everything.”
* * * * * * * * * * * * * * * * * * * *

 

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. 
31 Jul 2020: 85 FR 45998: Revision of the Export Administration Regulations and Suspension of License Exceptions for Hong Kong. 
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. 

29 Jul 2020: 85 FR 45513 Extension to Certain Temporary Suspensions, Modifications, and Exceptions due to Corona Virus.  The latest edition of the BITAR is 29 July 2020.  

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

17 Jul 2020: 85 FR 43436: Nicaragua 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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