;

20-0824 Monday “Daily Bugle”

20-0824 Monday “Daily Bugle”

 this copy of the Daily Bugle to others or share this subscription link
Monday, 24 August 2020

  1. Treasury/OFAC: “Blocking or Unblocking of Persons and Properties”
  2. USTR: “Product Exclusions: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. DHS/CBP: “Additional 45-day Compliance Period for Executive Order 13936 – Hong Kong Normalization”
  1. Forbes: “Emirati F-35s Couldn’t Seriously Challenge the Israeli Military’s Technological Superiority Over The Middle East”
  1. Husch Blackwell: “U.S. Adds 38 New Huawei Affiliates to Entity List While Again Expanding Foreign-Produced Direct Product Rule”
  2. King & Wood Mallesons: “Major U.S. Sanctions and Trade Restrictions Lists”
  3. Mayer Brown: “Tightening the Screws: US Further Restricts Huawei’s Access to US Technologies”
  1. Mike Laychak Advances to Acting Director of DTSA
  2. Monday List of Ex/Im Job Openings: 67 Jobs Available – 7 New Job Openings This Week
  1. ECTI Presents: A New World of Export Controls for China: September 29, 2020
  2. 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 

Are You Keeping Up to Date with the Latest Regulations?
 

Bartlett’s Annotated ITAR and Bartlett’s Annotated FTR are Word documents to down-

load to your laptop to keep you updated on the latest amendments, and contain over 800 footnotes of section history, key cases, practice tips & tricks, and extensive Tables of Contents. The ITAR amendments to the ITAR that took effect on 9 March and 25 March are included in the current edition of the BITAR.  Subscribers receive updated editions every time the regulations are amended (usually within 24 hours) so you will always have the current versions of the regulations. Subscribe to the BITAR now to guarantee you have an up-to-date ITAR!    
 

Combo
BITAR + BAFTR
Price: $300
Offer: $275

  Buy Here

BITAR

Price: $200
BAFTR

  Price: $100

EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register) [Excerpts]
 
85 FR 52049: Notice
 
* AGENCY:Office of Administrative Services (OAS), General Services Administration (GSA).
* ACTION:Final rule.
* SUMMARY:GSA is amending the General Services Administration’s regulations implementing the Freedom of Information Act (FOIA). The previous published final rule inadvertently excluded a subpart.
* DATES:Effective: August 24, 2020.
FOR FURTHER INFORMATION CONTACT:
Mr. Travis S. Lewis, Director of GSA, OAS, Freedom of Information Act Requester Service Center, at 202-219-3078 or via email at travis.lewis@gsa.gov for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755. Please cite GSPMR Case 2016-105-1.

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

(Source: Federal Register) [Excerpts]
 
85 FR 52188: Notice
 
* AGENCY:Office of the United States Trade Representative.
* ACTION:Notice of product exclusions and amendments.
* SUMMARY:In September 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 a product exclusion process in June 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 exclusions and make technical amendments to previously announced exclusions.
* DATES:As stated in the September 20, 2019 notice, product exclusions will apply from September 24, 2018 to August 7, 2020. The amendments announced in this notice are retroactive to the date the original exclusions were published and do not extend the period for the original exclusions. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

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

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 
* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties; [Pub. Date: 25 Aug 2020] (PDF)
 
* Commerce/BIS; NOTICES;Export Privileges; Denials:
PT MS Aero Support, et al.; [Pub. Date: 25 Aug 2020] (PDF)

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

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

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

(Source: DHS/CBP, 21 Aug 2020)
 
This notice is to inform the trade that the 45-day transition period for compliance with the President’s Executive Order (EO) on Hong Kong Normalization has been extended for an additional 45 days through November 9, 2020.   Additionally, this notice updates the guidance provided in CSMS# 43633412, issued August 11, 2020.
 
BACKGROUND
On July 14, 2020, the President issued Executive Order 13936 dealing with Hong Kong Normalization, and suspended, among other things, the application of section 201(a) of the United States-Hong Kong Policy Act of 1992 to certain statutes, including 19 U.S.C. 1304.  On August 11, 2020, CBP issued a notice in the Federal Register (85 FR 48551) notifying the public that, unless excepted from marking, goods produced in Hong Kong must be marked to indicate that their origin is “China” for purposes of 19 U.S.C. 1304.  The position set forth in the notice became applicable as of July 29, 2020; however, CBP granted a transition period until September 25, 2020 for importers to implement marking consistent with the notice.

ADDITIONAL 45 DAYS FOR INFORMED COMPLIANCE
In an effort to allow importers ample time to comply with EO requirements for goods produced in Hong Kong to be appropriately marked with the origin of “China”, CBP is extending the transition period for an additional 45 days, through November 9, 2020.  During this period, CBP personnel from the Ports of Entry and Centers of Excellence and Expertise (Centers) should not take any enforcement actions (i.e., marking notices, marking penalties, etc.) on goods produced in Hong Kong for purposes of 19 U.S.C. 1304.  Centers and Ports of Entry should take measures to inform accounts and importers of these new marking rules for Hong Kong set forth in the EO.

This change in marking requirements does not affect country of origin determinations for purposes of assessing ordinary duties under Chapters 1-97 of the HTSUS or temporary or additional duties under Chapter 99 of the HTSUS.  Entry summary procedures also have not changed.  Given that this new rule only applies to marking requirements under 19 U.S.C. 1304, filers should continue to file their entry summaries and submit payments for applicable duties, taxes and fees in accordance with current regulations and policies.

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

COM NEWS

(Source: Forbes, 22 Aug 2020) [Excerpts]
 
The Trump administration is reportedly eager to sell the United Arab Emirates stealthy fifth-generation F-35 Lightning II jet fighters, raising concerns among some in Israel that its qualitative military edge over Middle East states could face a significant challenge.

Israel, which has just began establishing official relations with Abu Dhabi, denies that it has given its blessing to this supposed secret offer made by the Trump administration, reportedly pushed by the president’s son-in-law Jared Kushner, to sell F-35s and drones to the UAE. Under U.S. law, Israel’s qualitative military edge must be taken into consideration for proposed Middle East arms sales.
 
Much presently remains unclear about any potential sale of F-35s to the UAE. Nevertheless, even if the administration moves ahead with such a deal, it would, as the New York Times correctly noted, still “take six to eight years and could be undone by a future administration.”

COM COMMENTARY

(Source: Husch Blackwell, 21 Aug 2020)
 
* Principal Author: Grant D. Leach, Esq., 1-402-964-5143, Husch Blackwell
 
The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) has announced that it is further restricting access by Huawei Technologies Co. Ltd. and its designated non-U.S. affiliates (“Huawei”) to U.S.-produced technology and software.  As we have previously discussed, BIS first added Huawei to its Entity List on May 15, 2019 and has continued to impose additional export restrictions on Huawei under the U.S. Export Administration Regulations (“EAR”).  Most recently, BIS published a Federal Register notice to implement the following enhancements.  Although BIS published this Federal Register notice on August 20, 2020, the following rule changes took effect retroactively as of August 17, 2020:

  • Addition of Thirty-Eight New Huawei Affiliates to the Entity List. In its announcement, BIS added thirty-eight (38) additional Huawei affiliates to the Entity List.  This action now brings the total number of Entity List-designated Huawei affiliates to one hundred and fifty-two (152).  The EAR generally prohibits anyone, anywhere in the world from supplying products, software or technology that is “subject to the EAR” to these Huawei affiliates without a BIS license.
 
  • Expiration of Huawei Temporary General License. BIS had previously issued (and then, on multiple occasions, extended) a Temporary General License which permitted certain transactions with Huawei Entity List affiliates in order to support existing networks, equipment and handsets that were in existence prior to Huawei’s initial Entity List designation on May 16, 2019.  In its Federal Register notice, BIS announced that it would be allowing the Temporary General License to expire.  As a result, pursuant to the expiration date set in its most recent renewal notice, the Huawei Temporary General License expired effective August 13, 2020.  Anyone who previously utilized the Temporary General License was required to obtain certain compliance certifications in connection with transactions conducted pursuant to the Temporary General License and the EAR will require those persons to retain those certifications in accordance with the EAR’s recordkeeping requirements.
 
  • Permanent Authorization for Cybersecurity Research and Vulnerability Disclosures to Huawei Entity List Companies. The Temporary General License also contained a provision which authorized the disclosure of certain information to Huawei Entity List companies in order to assist with maintaining the integrity and reliability of existing data networks.  After allowing the remainder of the Temporary General License to expire, BIS permanently codified this narrow exception into the EAR in order to promote cybersecurity.
 
  • Expansion of the Huawei Foreign-Produced Direct Product Rule. In May 2020, BIS amended the EAR’s foreign-produced direct product (FPDP) rules to designate the following items as “subject to the EAR”: (i) foreign-produced items produced or developed by a Huawei Entity List affiliate through the use of technology or software controlled under certain Export Control Classification Numbers (ECCNs), and (ii) foreign-produced items that are produced using equipment which is the direct product of U.S. origin software or technology controlled under certain ECCNs and also produced according to software or technology specifications produced or developed by a Huawei Entity List affiliate.  BIS has now significantly expanded this rule.  As amended, the new Huawei FPDP rule now completely disregards whether foreign-produced items produced by a 3rd party are produced according to Huawei specifications and instead extends the Huawei FPDP rule’s coverage to all foreign-produced items resulting from the specified software, technology or production equipment which are intended for incorporation into or for use in the “production” or “development” of any “part”, “component”, or “equipment” to be produced, purchased or ordered by a Huawei Entity List company or otherwise included in any transaction featuring a Huawei Entity List company as a “purchaser”, “intermediate consignee”, “ultimate consignee” or “end-user” (terms in quotation marks in the previous sentence are defined terms under the EAR).   As a result of these amendments, a much broader range of foreign-produced items are now “subject to the EAR” and therefore prohibited for export, reexport or in-country transfer to any Huawei Entity List company without an appropriate BIS license.  Although BIS will normally review such license applications on a “presumption of denial” standard, these amendments did create an exception which states that BIS will evaluate license applications involving Huawei Entity List companies on a “case-by-case” basis when they involve foreign-produced telecommunications systems, equipment and devices below the 5G level.
 
The amendment did feature a savings clause which allowed the continuance of certain qualifying transactions which were initiated prior to August 17, 2020.

(Source: King & Wood Mallesons, 21 Aug 2020)
 
* Principal Author: Aaron Wolfson, Esq., 1-212-319-4755, King & Wood Mallesons 
 
Introduction
There are several designation lists created by U.S. government agencies to prohibit or restrict certain economic or trade activities the U.S. deems to be adverse to U.S national security and foreign policy goals. These lists are created, maintained, and regulated by different U.S. government agencies and impose different requirements on those subject to them. They also impose different levels of enforcement mechanisms, with violations potentially being subject to both criminal and civil liability.

The designations can be either comprehensive-barring U.S. persons from all transactions with those designated-or selective-barring U.S. persons from certain transactions with those designated. The consequences of being designated can range from having assets blocked in the United States to being prohibited to deal in U.S. goods and technology. For example, the SDN List and the CAPTA List target the transactions of U.S. persons with certain countries, regimes, organizations, entities, and individuals to counter a variety of threats, such as terrorism, narcotics trafficking, proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States. These, and a number of other U.S. designation lists, are described in greater detail below.
 
U.S. Department of the Treasury – Office of Foreign Assets Control
Specially Designated Nationals and Blocked Persons List (“SDN List”)
The SDN List, published and maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), includes individuals, entities, and vessels sanctioned under a series of U.S. economic and trade sanctions. U.S. persons are prohibited from dealing with parties on the SDN List and must block any assets of SDN-listed parties that come into their possession or control anywhere in the world. Blocked assets are essentially frozen assets. Where such assets come into the possession or control of a U.S. person, the U.S. person is prohibited from exercising any rights or privileges over them without express authorization from OFAC. Any person seeking to have dealings with a blocked party must request a specific license from OFAC, unless the dealings are otherwise permitted by a general OFAC exemption.
If a party is placed on the SDN List, it is effectively cut off from any U.S.-related business or financial transactions. A U.S.-related transaction covers a broad range of transactions. For example, any non-U.S. individual or entity that is a party to a transaction that is cleared through the U.S. financial system can fall within U.S. jurisdiction if it causes a transaction that is in violation of OFAC sanctions to occur. Thus, OFAC can exercise jurisdiction over a transaction which takes place anywhere in the world if the transaction involves the U.S. financial system at any point.

Where the U.S. government has jurisdiction, it may apply primary sanctions, including fines or imprisonment, directly against violators of U.S. sanctions. Primary sanctions apply to U.S. persons anywhere in the world or to non-U.S. persons in situations where there is a nexus with the United States. U.S. persons-which include not only U.S. citizens but also persons physically located in the United States, even temporarily-may not deal with SDNs or transactions involving sanctioned countries. U.S. persons are also prohibited from facilitating any dealings by non-U.S. persons that would be prohibited if it involved a U.S. person.

Under certain sanctions programs, the U.S. government applies secondary sanctions in order to deter sanctions-violative transactions by non-U.S. persons where the transaction has no U.S. nexus. Secondary sanctions apply to non-U.S. persons and relate to conduct that takes place outside the U.S. and does not involve U.S. dollars, the U.S. financial system, or U.S. persons. As the U.S. government does not have jurisdiction over this conduct, it is unable to impose direct penalties such as fines or imprisonment. Accordingly, secondary sanctions pressure non-U.S. persons to cease business activities with the sanctioned target by threatening a variety of potential penalties, including to designate them to the SDN List.

Correspondent Account or Payable-Through Account Sanctions List (“CAPTA List”).  OFAC administers and enforces several non-SDN sanctions lists. One is the CAPTA List, which identifies non-U.S. financial institutions that are prohibited or severely restricted from opening or maintaining U.S. correspondent or payable-through accounts. The list was created in March 2019, and the only non-U.S. financial institutions on the list so far are Bank of Kunlun and its related entities, all of which were found to have provided financial services to Iranian banks in violation of U.S. sanctions. U.S. financial institutions are also prohibited from opening or maintaining U.S. correspondent or payable-through accounts on behalf of any non-U.S. institution identified on the CAPTA List.

Sectoral Sanctions Identifications List (“SSI List”)
The SSI List identifies persons operating in sectors of the Russian economy identified by the U.S. Secretary of the Treasury pursuant to Executive Order 13662. Persons on the SSI List, unlike those on the SDN list, do not face an asset freeze, and U.S. persons are not as strictly prohibited from dealing with them. Rather, persons on the SSI List are subject to a more calibrated set of sanctions that are intended to cut off access to certain types of financing, and, in the case of designated energy companies, to also restrict access to U.S. exports.

Four directives under Executive Order 13662 describe the prohibitions on dealings with the persons identified on the SSI List and include: (1) restrictions on new equity investment and financing for identified entities in Russia’s financial sector; (2) prohibitions on new financing for identified entities in Russia’s energy sector; (3) prohibitions on new financing for identified entities in Russia’s defense sector; and (4) prohibitions on U.S. trade with identified entities related to the development of Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil and such projects worldwide in which those entities have an ownership interest of at least 33% or a majority of voting interests.

Foreign Sanctions Evaders List (“FSE List”)
The FSE List is a list of persons OFAC has determined have engaged in conduct related to the evasion of U.S. sanctions on Iran and Syria. It also lists non-U.S. persons who have facilitated deceptive transactions for or on behalf of persons subject to U.S. sanctions.

Although the FSE List is not a part of the SDN List, individuals and companies on the FSE List may also appear on the SDN List. Being on the FSE List carries similar prohibitions to being on the SDN List, such as a general prohibition on U.S. persons engaging in any transactions with the persons identified. However, unlike the SDN List, there is no obligation to block or freeze the property of a person listed on the FSE List (unless the person is also on the SDN List).
 
U.S. Department of Commerce – Bureau of Industry and Security-Entity List
The Entity List, administered and enforced by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), identifies persons who the U.S. government believes are involved, or who pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. The End-User Review Committee-composed of representatives of the U.S. Departments of Commerce, State, Defense, Energy and, where appropriate, the Treasury-is responsible for deciding whether to place someone on the Entity List. Each entity on the Entity List is assigned a specific licensing requirement and a license review policy based on national security or foreign policy considerations. The End-User Review Committee usually imposes a license requirement for all items subject to the Export Administrative Regulations (“EAR”) and a license review policy of “presumption of denial,” effectively banning shipments of all items subject to the EAR-a very broad spectrum of physical goods, software, and technology (information)-to the listed entity.

Military End Uses and Military End Users
Although not a list in the sense of the Entity List, the EAR also set forth certain restrictions on military end uses and end users. “Military end users” include the national armed services, national guard and national police, government intelligence or reconnaissance organizations, or any person or entity whose actions or functions are intended to support military end uses. On June 29, 2020, BIS implemented new rules in relation to military end uses and end users. The rules expanded the existing provisions under the EAR and further restrict exports to military end users and for military end uses in China, Russia, and Venezuela. Specifically, exports, reexports, and (in-country) transfers of certain designated items to military end users or for military end use deemed to be contrary to U.S. national security interests previously permitted under the Civil End Users (“CIV”) License Exception will no longer be permitted. Simultaneously, the list of designated items subject to these restrictions has been expanded to include new items such as electronics, telecommunications, sensors, and lasers, and BIS has adopted a “presumption of denial” licensing policy in reviewing military end use/user exports to those targeted countries.
Denied Persons List (“DPL”)

The DPL lists individuals and entities who have been denied export and reexport privileges, such as persons who have previously been charged with violating U.S. export controls. Denied persons are prohibited from participating in any way in any transaction involving any commodity, software, or technology exported, or to be exported, from the United States that is subject to the EAR. Moreover, any person who facilitates a denied person to circumvent these prohibitions is also in violation of the EAR.
Unverified List (“UVL”)

The UVL designates end users whom BIS has been unable to verify despite investigating past transactions. If a transaction involves a party on this list, it is considered a “red flag” that others involved in the transaction should investigate and resolve before moving forward with the transaction. It also requires that details of the transaction be reported to BIS. UVL parties are not eligible to receive items subject to the EAR by means of an exception to a license requirement.
 
U.S. Department of Defense– Section 1237 List
The Section 1237 List was released by the U.S. Department of Defense (“DOD”) on June 12, 2020 and includes 20 Chinese companies operating in the U.S. that the U.S. government believes are owned or controlled by the Chinese military. The list was compiled pursuant to section 1237 of the National Defense Authorization Act for Fiscal Year 1999, as amended by the National Defense Authorization Act for Fiscal Year 2001, which requires the DOD to annually report a list of companies operating directly or indirectly in the United States that are owned or controlled by the Chinese People’s Liberation Army.
About half of the companies included in the Section 1237 List have already been added to the Entity List, and those that have not been may be considered military end users subject to tighter export restrictions under the EAR given their classification by the DOD as “Communist Chinese military companies.” 

Though severe, the restrictions on Entity Listed entities and Chinese military end users are not as far-reaching as being placed on the SDN List.
Although inclusion on the Section 1237 List does not amount to being sanctioned, it does mean that the President has the authority to impose sanctions on the companies listed. The President has not yet exercised that authority; but, if exercised, it could result in U.S. persons being prohibited from dealing with the entities on the Section 1237 List, and many of their subsidiaries, which would essentially cut the listed companies off from the U.S. financial system and U.S. market.
 
U.S. Department of State – Directorate of Defense Trade Controls
Arms Export Control Act Debarred List (“AECA Debarred List”)
The Directorate of Defense Trade Controls (“DDTC”) maintains the AECA Debarred List. Parties designated to this list are prohibited from participating in the export of defense articles (including technical data) and defense services. A “statutory debarment” occurs where a party has been convicted of violating or conspiring to violate the AECA. DDTC may also impose an “administrative debarment” for violations of the AECA or the International Traffic in Arms Regulations (“ITAR”), which control the export and reexport of defense articles and services. Under either type of debarment, the debarred party must seek and be granted reinstatement before engaging in any activities subject to the ITAR.
 
U.S. Department of State – Bureau of International Security and Nonproliferation– Nonproliferation Sanctions List
The Nonproliferation Sanctions List is compiled by the Bureau of International Security and Nonproliferation (“ISN”) from a variety of laws directed against non-U.S. individuals, private entities, and governments that engage in proliferation activities related to, amongst others, nuclear, chemical, and biological weapons. The specific sanctions imposed on listed parties vary depending on the law under which the party was added to the Nonproliferation Sanctions List.

(Source: Mayer Brown, 21 Aug 2020)
 
* Principal Author: Tamer A. Soliman, Esq., 1-202-263-3292, Mayer Brown
 
On August 17, 2020, the US Department of Commerce, Bureau of Industry and Security (“BIS”), issued a final rule further restricting Huawei Technologies and its non-US affiliates (collectively, “Huawei”) from access to US technologies (“Rule”).[FN/1]The Rule (1) adds 38 Huawei entities to the BIS “Entity List” and removes the Temporary General License that had been in effect for certain transactions with Huawei (with an exception related to cybersecurity research and vulnerability disclosure) and (2) amends and clarifies the foreign-produced direct product rule related to the Huawei companies on the Entity List. The Rule is the latest in a series of recent actions intended to address national security concerns the US government has cited regarding Huawei. The Rule took effect immediately to “prevent Huawei’s attempts to circumvent U.S. export controls to obtain electronic components developed or produced using U.S. technology.” [FN/2] However, the Rule includes an important Savings Clause that will allow for certain limited transitional activities. This Legal Update provides background on BIS’ actions targeting Huawei and the effect of the Rule for businesses.
 
BACKGROUND
Entity List Designation of Huawei
On May 16, 2019, BIS added Huawei Technologies Co., Ltd. and dozens of its non-US affiliates to the Entity List. (See our Legal Update.) That action imposed a license requirement on exporting, re-exporting or transferring (in-country) items subject to the Export Administration Regulations (“EAR”) to Huawei. On August 19, 2019, an additional 46 non-US Huawei affiliates were placed on the Entity List. BIS issued a Temporary General License (“TGL”) authorizing certain limited categories of transactions for a 90-day period and issued successive extensions of that general license. Outside of these narrow exceptions, the Entity List designation effectively cut Huawei off from both US and non-US items, whether goods, technology or software, (collectively, “items”), when they are subject to the EAR. For example, items made outside of the United States may also be subject to the EAR if they incorporate greater than de minimis-controlled US-origin content (generally greater than 25 percent) or, in certain limited cases, are produced as the direct product of certain controlled US-origin technology subject to national security controls.
The Foreign Direct Product Rule
As described in our previous Legal Update, on May 15, 2020, BIS announced an amendment of the EAR’s long-standing foreign-produced direct product rule (“Foreign Direct Product Rule”) to effectively expand the reach of that rule to transactions involving Huawei and its affiliates on the Entity List. This amendment imposed licensing requirements on foreign-made items produced or developed by Huawei that are also (1) the product of certain specified technology or software subject to the EAR or (2) the product of a plant or major component of a plant located outside of the United States that is itself a direct product of certain specified technology or software subject to the EAR. BIS explained that the amendment “narrowly and strategically target[ed] Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.”[FN/3]
 
BIS FINAL RULE
The August 17 Rule expands and amends both the Entity List designations and the Foreign Direct Product Rule. BIS further restricted access by Huawei to US technologies by (1) adding 38 additional non-US affiliates of Huawei to the Entity List, (2) removing the TGL for Huawei and replacing it with a more limited authorization and (3) further amending the Foreign Direct Product Rule.
Inclusion of 38 Additional Non-US affiliates of Huawei in the Entity List
First, the Rule has designated 38 additional non-US affiliates of Huawei located across 21 countries [FN/4] to the Entity List, which have been determined to also pose a significant risk of involvement in activities contrary to the national security and foreign policy interests of the United States. BIS now imposes for each of the additional 38 entities a license requirement for all items subject to the EAR, and no license exceptions are available. Separately, the Rule revises the Entity List: It adds additional information, including aliases and addresses, with respect to Huawei and three of its listed affiliates.
Expiration of the TGL and New Limited Permanent Authorization
Second, the Rule allows the TGL to expire (the TGL’s validity period extended through August 13, 2020) and replaces those provisions with a more limited permanent authorization to exclude license requirements for exports, re-exports and transfers (in-country) to Huawei for cybersecurity research and vulnerability disclosure, subject to other provisions of the EAR. This limited authorization would allow for a disclosure of certain information to Huawei when the disclosure is limited to information regarding security vulnerabilities in items owned, possessed or controlled by Huawei. However, the disclosure must be related to the process of providing ongoing security research that is critical to maintaining the integrity and reliability of existing and currently fully operational network and equipment. The authorizations of the TGL related to the continued operation of existing networks and equipment and support to existing handsets are being allowed to expire. The authorization in the TGL related to the sharing of certain US technology with Huawei for the purpose of contributing to the revision or development of a “standard” by a recognized standards organization has been made part of the Entity List through an interim final rule published by BIS on June 18, 2020. [FN/5]
Expansion of the Foreign Direct Product Rule
Third, the Rule made amendments to the Foreign Direct Product Rule to expand and clarify which foreign-produced items are subject to the EAR and require a license for re-export, export from abroad or transfer (in-country). [FN/6]
In its August 17 Rule, BIS expands the scope of items that will be captured under the Foreign Direct Product Rule for Huawei and its affiliates on the Entity List to further restrict Huawei’s ability to procure items that are the direct product of specified US technology or software but not otherwise subject to the EAR. The Rule retains the license requirement on re-exports, exports from abroad or transfer (in-country) of certain foreign-produced items that are the direct product of (or that have been produced by a plant or major component of a plant located outside of the United States that are the product of) certain specified technologies or software subject to the EAR. Significantly, however, the Foreign Direct Product Rule is no longer limited to foreign-made items developed or produced by Huawei, a limitation that was part of the May 2020 amendment to the Foreign Direct Product Rule described above. Instead, foreign-made items will be subject to the EAR and require a license when there is knowledge (including reason to know) that:

 

(1) items will be incorporated into, or will be used in the “production” or “development” of, any “part,” “component” or “equipment” produced, purchased or ordered by Huawei; or

 

(2) Huawei is a party to any transaction involving the foreign-produced item, including as a “purchaser,” “intermediate consignee,” “ultimate consignee” or “end-user.”

 

The result is that the Foreign Direct Product Rule will now apply to a much broader set of items than under the May 2020 amendment, including commercial off-the-shelf items when there is knowledge that the items will be incorporated in or used in items that Huawei will ultimately buy or order or are part of a transaction to which Huawei is otherwise a party.
The controls imposed by this amendment have been incorporated in Footnote 1 to the Entity List. [FN/7]The Rule establishes a case-by-case license review policy (as opposed to a presumption of denial) specifically for items controlled under Footnote 1 that are capable of supporting the “development” or “production” of telecom systems, equipment and devices at below the 5G level. For those items, the sophistication and capabilities of the technology will be a factor to consider in the license application review.
Savings Clause
While the Rule is effective as of August 17, 2020, it carves out exceptions that allow some ongoing activities made in reliance upon the regulatory framework pre-dating the Rule, including shipments of (1) items subject to the EAR that were en route aboard a carrier to a port on August 17, 2020, made pursuant to actual orders; (2) foreign-produced items that will be incorporated into, or will be used in the “production” or “development” of, any “part,” “component” or “equipment” produced, purchased or ordered by Huawei and that on August 17, 2020, were on a dock for loading, laden aboard an exporting or transferring carrier, or en route aboard a carrier to a port of export or to the consignee/end-user pursuant to an actual order; and (3) foreign-produced items involved in transactions in which Huawei is a party and whose “production” started prior to August 17, 2020, so long as they have been exported, re-exported or transferred (in-country) before midnight (local time) on September 14, 2020.
 
CHINA’S RESPONSE
The Chinese government objected strongly to the US action as it has done with previous restrictions targeting Huawei. Because the changes effected by the new Rule are consistent with prior US actions severely restricting Huawei’s access to US goods and technology, and were in part a response to comments BIS received since May 2020 about loopholes in the Foreign Direct Product Rule, it is possible that the Chinese response to the US action may be limited in the short term, as China views it as a long-running issue with the United States. However, businesses operating in both countries should closely monitor developments in this area.
 
NEXT STEPS FOR BUSINESS
As a result of BIS’ Rule, companies who relied on the TGL authorizations that have expired and not been replaced must cease those activities immediately unless they fall within the scope of the Savings Clause. In addition, both US and non-US companies should evaluate their supply chains and sales distribution channels for transactions involving Huawei and the extent to which BIS’ action could impact them. Furthermore, businesses that supply products directly or indirectly to Huawei should promptly review the items they supply that are not otherwise subject to the EAR to determine whether they are the direct product of certain US technology or software that would be captured by the Foreign Direct Product Rule.
 
[FN/1] Addition of Huawei Non-U.S. Affiliates to the Entity List, the Removal of Temporary General License, and Amendments to General Prohibition Three (Foreign-Produced Direct Product Rule), 85 FR 51596 (Aug. 20, 2020).
[FN/4] The Huawei entities are located in the following countries: China (including Hong Kong), Argentina, Brazil, Chile, Egypt, France, Germany, India, Israel, Mexico, Morocco, the Netherlands, Peru, Russia, Singapore, South Africa, Switzerland, Thailand, Turkey, the United Arab Emirates, and the United Kingdom.
[FN/6] 15 C.F.R. § 736.2(b)(3)(iv).
[FN/7] Supplement No. 4 to Part 744 – Entity List, Footnote 1.

TE EX/IM MOVERS & SHAKERS

MS_a111. Mike Laychak Advances to Acting Director of DTSA

(Source: Editor)
 
Michael Laychak, a member of the Senior Executive Service, has been appointed to serve as the Acting Director for the Defense Technology Security Administration (DTSA). He replaces Ms. Heidi Grant, who moved to be Director, Defense Security Cooperation Agency. Mike Laychak was previously DTSA’s Deputy Director, and before that he was DTSA’s Director for Licensing. Contact Mike at 1-571-372-2303 or Michael.R.Laychak.civ@mail.mil.

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

MS_a212. Monday List of Ex/Im Job Openings: 67 Jobs Available –  7 New Job Openings This Week 

* Bayer; Manchester; PL; Senior Analyst Export; Job ID:

226802

 
* Boeing; Huntsville, AL; Procurement Agent; Job ID: 00000198388
 
* Celestica; Portland, OR; Shipping Import/Export Lead; Job ID: 62136
 
* SBIR; Santa Barbara, CA; Contracts Manager
 
* Schneider Electric; Boston, MA; Senior Manager Export Control; Job ID: 006892
 
* Treasury/OFAC; Washington DC; Attorney-Advisor; Job ID : 576538700
 
* University of Central Florida; Orlando, FL; Export Control Manager; Job ID: 499305

Click here to see the full list.

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

TE EX/IM TRAINING EVENTS & CONFERENCES

TE_a113. ECS Presents: 16-17 Sep; “3rd Annual ITAR/EAR Symposium and Managing ITAR/EAR Complexities”

(Source: ECS)
  
* What: 3rd Annual ITAR/EAR Symposium and Managing ITAR/EAR Complexities 2-Day Webinar
* When: 16-17 Sep
* Where: Your Computer
* Sponsor: Export Compliance Solutions & Consulting (ECS)
* ECS and Guest Speakers: Suzanne Palmer, Mal Zerden, Lisa Bencivenga, Debi Davis, Scott Jackson
* Register: here or write to liz@exportcompliancesolutions.com or call 1-866-238-4018

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

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_a115. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* Robert Herrick (24 Aug 1591- 15 Oct 1674; was a 17th-century English lyric poet and cleric. He is best known for Hesperides, a book of poems. This includes the carpe diem poem “To the Virgins, to Make Much of Time”, with the first line “Gather ye rosebuds while ye may”.)
  – “Who covets more is evermore a slave.”
  – “It takes great wit and interest and energy to be happy. The pursuit of happiness is a great activity. One must be open and alive. It is the greatest feat man has to accomplish.”
 
Monday is pun day.
* What did the bald man say to the friend who have him a comb for his birthday?  “Thanks! I’ll never part with this!”
What did the left eye say to the right eye?  Between you and me, something smells.
* What do you call a fake noodle?  An impasta.
* What do you call a magic dog?  A labracadabrador.
* What do you call a pony with a bad cough?  A little horse..
* * * * * * * * * * * * * * * * * * * *

 

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.

* * * * * * * * * * * * * * * * * * * *
The Daily Bugle Archive

Are you searching for updates from the past editions of the Daily Bugle? 

We publish a list of over 100 trade compliance job openings every day.

Submit your job for free.
PermanentJobListView All Job Openings

Are you looking for a new job in trade compliance? Click here to see the current job openings.

We publish a list of over 100 trade compliance events every day. Submit your event for free.

PermanentJobListView All Events

Are you looking for an upcoming event?   Click here to see upcoming events.

Scroll to Top