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20-0903 Thursday “Daily Bugle”

20-0903 Thursday “Daily Bugle”

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Thursday, 3 September 2020

  1. Commerce/BIS: “Effectiveness of Licensing Procedures for Agricultural Commodities to Cuba”
  2. Treasury/OFAC: “Inflation Adjustment of Civil Monetary Penalties Related to Reporting and Recordkeeping”
  3. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  1. Asia Pacific News: “China Puts Drones, Laser Tech on Restricted Export List”
  2. EU Sanctions: “UK National Pleads Guilty to Violating US Iran Sanctions”
  3. Courthouse News: “Four Charged in Theft and Sale of Navy-Owned Schematics”
  1. Sidley: “UAE Ends Participation in Arab League’s Boycott of Israel; How to Understand Continuing U.S. Antiboycott Obligations”
  2. Steptoe: “US Department of Defense Publishes Update to List of ‘Communist Chinese Military Companies'”
  1. ECTI Presents: 24 Sep; “Riding the Wave of Current and New Tariffs – Update on US Trade Remedies Webinar”
  2. FCC Academy Presents 4 Webinars: U.S. Export Controls: ITAR & EAR | FMS | Designing and Implementing an ICP
  1. FCC Presents its Risk Assessment Tool (“RAT©”) 
  2. Bartlett’s Unfamiliar Quotations 
  3. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
  4. Weekly Highlights of the Daily Bugle Top Stories 
  5. Submit Your Job Opening and View All Job Openings 
  6. Submit Your Event and View All Approaching Events 

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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register, 3 Sep 2020) [Excerpts]
 
85 FR 54982: Notice
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Request for comments.
* SUMMARY: The Bureau of Industry and Security (BIS) is requesting public comments on the effectiveness of its licensing procedures as defined in the Export Administration Regulations for the export of agricultural commodities to Cuba. BIS will include a description of these comments in its biennial report to the Congress, as required by the Trade Sanctions Reform and Export Enhancement Act of 2000, as amended (TSRA).
* DATES: Comments must be received by October 5, 2020.
* ADDRESSES: Federal rulemaking portal: http://www.regulations.gov- you can find this notice by searching on its regulations.gov docket number, which is BIS-2020-0028. All comments (including any personally identifying information) will be made available for public inspection and copying.
By mail or delivery to Regulatory Policy Division, Bureau of Industry and Security, U.S. Department of Commerce, Room 2099B, 14th Street and Pennsylvania Avenue NW, Washington, DC 20230. Refer to RIN 0694-XC064.
*FOR FURTHER INFORMATION CONTACT: Mark Salinas, Office of Nonproliferation and Treaty Compliance, Telephone: (202) 482-4252. Additional information on BIS procedures and previous biennial reports under TSRA is available at http://www.bis.doc.gov/index.php/policy-guidance/country-guidance/sanctioned-destinations/13-policy-guidance/country-guidance/426-reports-to-congress. Copies of these Start Printed Page 54983materials may also be requested by contacting the Office of Nonproliferation and Treaty Compliance.

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

(Source: Federal Register, 3 Sep 2020) [Excerpts]
 
85 FR 54911: Rule
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Interim final rule with request for comments.
* SUMMARY: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing this interim final rule to further implement the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, by adjusting for inflation its civil monetary penalties for failure to comply with certain recordkeeping and reporting requirements, which are contained in OFAC’s Economic Sanctions Enforcement Guidelines in OFAC’s Reporting, Procedures and Penalties Regulations.
* DATES: This rule is effective October 5, 2020. Comments must be received on or before October 5, 2020.
* ADDRESSES: You may submit comments by either of the following methods:
  • Federal eRulemaking Portal: www.regulations.gov. Follow the instructions on the website for submitting comments. Refer to Docket Number OFAC-2020-0001.
  • Mail: Attn: Request for Comments (Inflation Adjustment of Civil Monetary Penalties Related to Reporting and Recordkeeping), Office of Foreign Assets Control, Department of the Treasury, 1500 Pennsylvania Avenue NW, Freedman’s Bank Building, Washington, DC 20220. Refer to Docket Number OFAC-2020-0001.
  • Instructions: All submissions received must include the agency name and the docket number that appears at the end of this document. All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Sensitive personal information, such as account numbers or Social Security numbers, should not be included. Comments generally will not be edited to remove any identifying or contact information.
* FOR FURTHER INFORMATION CONTACT: OFAC: Assistant Director for Licensing, 202-622-2480; Assistant Director for Regulatory Affairs, 202-622-4855; or Assistant Director for Sanctions Compliance & Evaluation, 202-622-2490.

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

(Source: Federal Register, 3 Sep 2020) [Excerpts]
 
85 FR 55073
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Notice.
* SUMMARY: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

* 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.

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

OGS OTHER GOVERNMENT SOURCES

[No items of interest posted]

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

OGS_a25. Commerce/BIS: (No new postings)

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

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

COM NEWS

(Source: Asia Pacific News, 30 Aug 2020) [Excerpts]
 
  Amid rising tension with the United States, China has included drones and lasers among the nearly two dozen technologies added to its restricted export list.
  On Friday, the ministry had said that 23 areas of innovation – ranging from space materials to 3D printing, encryption and large-scale high-speed wind tunnel design – had been added to the restricted export list.
  The South China Morning Post reported the China’s Ministry of Commerce as saying, “The main purpose is to regulate technology exports, promote scientific and technological progress and economic and technological cooperation, and maintain national economic security.”Iris Pang, chief economist for Greater China from ING Wholesale Banking was quoted in the SCMP as saying that the revision of list was response for “the US ban on Chinese tech companies”.
  “These new restrictions reflect that China owns some hi-tech patents that could disrupt other economies’ manufacturing,” Pang said.
  According to the Chinese Ministry, “With the rapid development of science and technology and the continuous improvement of China’s scientific and technological strength and industrial competitiveness, it is imperative to adjust the list in a timely manner in line with international practices.”On Friday, the ministry had said that 23 areas of innovation – ranging from space materials to 3D printing, encryption and large-scale high-speed wind tunnel design – had been added to the restricted export list.
  Additionally, Beijing has also revised details for 21 technologies that are already either restricted or banned, including chemical raw material production, crop breeding and biological pesticide production.

(Source: EU Sanctions, 2 Sep 2020) [Excerpts]
 
   The US Attorney’s Office for the Northern District of Florida and the Commerce Department’s Bureau of Industry and Security have announced that Colin Fisher, a UK national, has pleaded guilty to attempting unlawfully to export power generating equipment to Iran in violation of the International Emergency Economic Powers Act (IEEPA). Mr Fisher was arrested in Pensacola, Florida upon arrival from the UAE in August 2020.
   Between 1 October 2017 to 7 August 2020, Fisher attempted to export a Solar Mars 90 S turbine core engine and parts from the US to Iran, and in doing so participated in fraudulent invoicing, and used coded language to communicate with conspirators about the exports. The delivery of the turbine, valued at approximately $500,000, was intercepted by US authorities.
   His co-conspirator, James Meharg, CEO of Florida-based Turbine Resources International, pleaded guilty to the same offence, and is currently serving a 40-month sentence of imprisonment. Mr Fisher is due to be sentenced on 10 November 2020.

NWS_a39.

Courthouse News: “Four Charged in Theft and Sale of Navy-Owned Schematics”

(Source: Courthouse News Service, 2 Sep 20) [Excerpts]

Over 5,000 technical manuals and drawings, including military weapon systems, stolen from the U.S. Navy were sold to a California-based private company that then sold the information to customers across the globe, according to a criminal complaint filed Wednesday.  Four people have been arrested in the scheme, including civilian Navy engineer Mark Fitting who works out of a government facility in Philadelphia according to the U.S. Attorney’s Office.
 
Prosecutors say Fitting exchanged two dozen emails with Melony Erice who helped sell the documents to the private company. The emails contained government-controlled technical drawings or manuals related to military weapons systems.  Fitting had access to such documents because he signed a request form with the federal government that said he would “safeguard the data” from release.
 
“[S]ome of those drawings and manuals were specifically labeled with International Traffic in Arms Regulations (ITAR) distribution warnings related to export control and destruction, as well as DOD contractor proprietary markings,” according to an affidavit dated Aug. 28, 2020.  Erice’s Gmail account contained documents and drawings which prosecutors say Fitting used to sell the information to Newport Aeronautical Sales Corporation (NASC), a private company based in Orange County, California. …  

The affidavit says the scheme started in 2012 but may go back as far as 2008.  The four people arrested are scheduled to make their first appearances in federal courtrooms across the country. …

COM COMMENTARY

 
* Principal Author: Dr. Daniel Z. Altman, 1-212-839-6797, Sidley Austin LLP
 
  On August 29, 2020, the United Arab Emirates (UAE) reportedly formally ended its participation in the Arab League’s economic boycott of Israel when UAE President Khalifa bin Zayed Al Nahyan issued a decree to dissolve its domestic boycott law.[FN/1] Diplomatic relations between Israel and the UAE will be officially normalized when the two states sign the Abraham Accord in early September.[FN/2]    
  For persons subject to U.S. antiboycott regulations, this development appears likely to generate a more liberal reporting and compliance environment. Although there are other Arab League member states that do not enforce or have never applied the Arab League’s boycott of Israel, only two other Arab League countries – Egypt and Jordan – have entered formal diplomatic treaties with Israel terminating their participation in the boycott.[FN/3] Both countries were subsequently explicitly excluded from the scope of the U.S. antiboycott regulations.
  Nevertheless, U.S. companies should be cautious not to revise their antiboycott compliance processes too quickly in response to this announcement. Companies instead should continue to watch for the anticipated changes described below.    
 
Overview of U.S. Antiboycott Regulations
  The United States responded to the Arab League boycott of Israel in the 1970s by implementing its antiboycott regulations, which permit U.S. companies to participate in the primary boycott of Israel (e.g., refusals to ship goods to the UAE from Israel or to ship goods from the UAE to Israel) but prohibit and penalize their participation in secondary boycotts (e.g., refusals to do business with U.S. persons that do business with Israel, usually in accordance with a blacklist) and tertiary boycotts (e.g., refusals to do business with U.S. persons that themselves do business with U.S. persons on a blacklist). The U.S. antiboycott regulations also require U.S. companies to report certain types of boycott requests. Although the UAE and other Gulf Cooperation Council member states announced in 1996 that they would enforce only the primary boycott, in practice U.S. companies have continued to receive, and been required to report, secondary and tertiary boycott requests from the UAE.
  The U.S. antiboycott regulations, found in 26 U.S.C. Part 999, and in 15 C.F.R. Part 760, are administered by the U.S. Department of the Treasury (Treasury Department) and the U.S. Department of Commerce, respectively (Commerce Department).
 
Anticipated Changes in Treasury Department Requirements
  The Treasury Department requires U.S. taxpayers to report (a) operations in or related to a designated list of boycotting countries (known as the Treasury List) or in any other country if the taxpayer knows or has reason to know that participation in an international boycott is required as a condition of doing business within such country, (b) the taxpayer’s participation in or cooperation with an international boycott, and (c) any requests to participate in or cooperate with an international boycott (whether from a Treasury List country or elsewhere) as well as the taxpayer’s response to those requests. A taxpayer’s participation or cooperation in an international boycott results in certain tax detriments, and a willful failure to report may result in a fine of not more than $25,000 or imprisonment of not more than a year or both. 
  The Treasury List does not include all Arab League member states. Countries that do not enforce the boycott, such as Algeria, Morocco, and Tunisia, are not listed, nor is Mauritania, which never applied the boycott. The Treasury Department has also removed certain countries from the Treasury List based on their commitment to end participation in the Arab League’s boycott. For example, the Treasury Department removed both Jordan and Egypt from the Treasury List after each country formally ended its respective participation in the boycott. Egypt signed a peace treaty with Israel on March 26, 1979, and was removed from the Treasury List effective April 1, 1980 – after lifting its domestic boycott laws. Jordan signed a peace treaty with Israel in October 26, 1994, and was removed from the Treasury List on November 6, 1995, again following changes to its domestic law. The Treasury Department has also rewarded less formal commitments to end the boycott with removal from the Treasury List: Bahrain and Oman, during negotiations of their respective free trade agreements with the United States, each agreed to no longer comply with the Arab League boycott and were subsequently removed from the Treasury List.  The UAE is currently on the Treasury List. [FN/4]
  However, based on this precedent, we anticipate that the Treasury Department will ultimately remove the UAE from the Treasury List, which is released quarterly. Given that the UAE has reportedly already terminated its domestic boycott law, Treasury may remove the UAE from the Treasury List as early as next quarter, in October 2020. Until the UAE is removed from the Treasury List, however, U.S. taxpayers remain subject to the same reporting obligations and penalty structure that now applies to their operations in the UAE. The recipient’s knowledge of the requester’s boycott intent is not a requirement for penalties to adhere under Treasury’s antiboycott regulations, and the UAE’s termination of the boycott does not guarantee that companies will stop receiving boycott requests: In fact, the Treasury Department continued to report requests from Jordan and Egypt decades after formally removing those countries from its list. Nonetheless, it is notable that many of the Treasury Guidelines refer to situations in which the “laws, regulations, requirements or administrative practices” of a country require participation in the boycott – such as agreements to comply with the laws of the UAE. To the extent that this is no longer the case in the UAE, antiboycott tax detriments and reporting may no longer adhere to such agreements.

  After the UAE is removed from the Treasury List, companies will no longer be required to report their operations in the UAE with their annual boycott reporting in future taxable years – unless they receive requests that they have reason to know require participation in or cooperation with the boycott as a condition of doing business with the country’s government or one of its companies or nationals – or that any other person has received such a request.

 
Anticipated Changes in Commerce Department Regulations
  The Commerce Department requires U.S. persons, including U.S. companies, to report any boycott requests they receive and prohibits them from agreeing to a boycott request or taking boycott action. Violations of the antiboycott provisions in the Commerce Department’s Export Administration Regulations (EAR) can result in criminal penalties of up to 20 years of imprisonment and up to $1 million in fines per violation or both. Administrative monetary penalties can reach up to $300,000 per violation or twice the value of the transaction, whichever is greater.  
  Though Commerce does not maintain a list of boycotting countries, it has specifically excluded two countries – Jordan [FN/5] and Egypt [FN/6] – from any boycott-related presumptions after each entered into a diplomatic treaty with Israel and removed its domestic boycott laws or policies. Notably, these exclusions do not apply when the request is facially boycott-related (for example, when the request explicitly mentions the boycott, the boycotted country, or the blacklist).
We anticipate that the Commerce Department will ultimately amend the EAR to specifically exclude the UAE from its boycott presumption, although the department has not yet begun the rulemaking process to do so. The UAE exclusion will likely include the same caveats for explicit boycott requests that are present in the EAR exceptions for Egypt and Jordan.  
  U.S. persons may continue to receive potentially reportable, prohibited boycott requests from the UAE, despite its reported termination of the boycott. With regard to requests received before Commerce amends the regulations, U.S. persons should note that the EAR’s quarterly antiboycott reporting provisions apply only to those requests that are sent with boycott intent, such that the recipient party knows or has reason to know that the purpose of the request is to enforce or otherwise further, support, or secure compliance with the boycott. Likewise, its prohibitions apply only where a U.S. person takes or knowingly agrees to take a boycott action “with intent to comply with, further, or support” a boycott. Consequently, in the context of requests received after the UAE repealed its boycott law, such intent may be absent – at least where the requests do not explicitly invoke the boycott, the blacklist, or boycott-related discrimination.  
  Antiboycott reporting requirements and prohibitions are detailed and complex. 
 
Footnotes:
[FN/1] UAE Federal Decree Law No. 04 of 2020, dissolving Federal Law No. 15 of 1972.
[FN/2] Joint Statement of the United States, the State of Israel, and the United Arab Emirates, Aug. 13, 2020, https://www.whitehouse.gov/briefings-statements/joint-statement-united-states-state-israel-united-arab-emirates.
[FN/3] Egypt-Israel Peace Treaty, Mar. 26, 1979, art. III.3 (“The Parties agree that the normal relationship established between them will include full recognition, diplomatic, economic and cultural relations, termination of economic boycotts and discriminatory barriers to the free movement of people and goods, and will guarantee the mutual enjoyment by citizens of the due process of law”); Jordan-Israel Peace Treaty, Oct. 26, 1994, art. 7 (“[T]he parties agree to the following: (A) To remove all discriminatory barriers to normal economic relations, to terminate economic boycotts directed at the other Party, and to co-operate in terminating boycotts against either Party by third parties …”).
[FN/4] List of Countries Requiring Cooperation With an International Boycott, 85 Fed. Reg. 20,028 (Apr. 9, 2020).
[FN/5] 15 C.F.R. 760, Supplement 16.
[FN/6] 15 C.F.R. 760, Supplement 3.

 
* Principal Author: Wendy Wysong, Esq., 852-3729-1804, Steptoe & Johnson LLP
 
  On August 27, 2020, the US Department of Defense (“DoD”) published a second tranche to its list of “Communist Chinese military companies,” pursuant to Section 1237 of the of the National Defense Authorization Act for Fiscal Year 1999 (the “DoD List”).
  The announcement follows the DoD’s June 24, 2020, publication of a letter to Senator Tom Cotton enclosing a list of twenty companies headquartered in the People’s Republic of China (“PRC”) which DoD determined are operating directly or indirectly in the United States and are “Communist Chinese military companies.”
 
Background 
  Titled “Qualifying Entities Prepared in Response to Section 1237 of the National Defense Authorization Act for Fiscal Year 1999 (PUBLIC LAW 105-261),” the DoD List includes some Chinese companies frequently associated with the Chinese military, and others that may not have been previously associated with the Chinese military.
 
Section 1237 of the Act
  In relevant part, Section 1237(a) authorizes, but does not require, the President to impose sanctions, with the exception of import-related restrictions, under the International Emergency Economic Powers Act (“IEEPA”) “in the case of any commercial activity in the United States by a person that is on the list” published under Section 1237(b).  It appears that the President is not required to declare a national emergency in order to impose such sanctions, as is typically the case under IEEPA.

  According to the original Section 1237(b), the Secretary of Defense, within 90 days after enactment of the Act (i.e., within 90 days after October 17, 1998), “shall make a determination of those persons operating directly or indirectly in the United States or any of its territories and possessions that are Communist Chinese military companies and shall publish a list of those persons in the Federal Register.”  An amendment to the Act in 2000 required the initial determinations to be made “not later than March 1, 2001,” suggesting that DoD had failed to make any determination prior to that date.

  The Act as amended requires the Secretary of Defense to produce classified and unclassified versions of the list, update the list on an annual basis, and share the list with the US Congress and with relevant US government agencies.   Changes to the list are to be made in consultation with the Attorney General, the Director of National Intelligence, and the Director of the Federal Bureau of Investigation.

The Act defines the term “Communist Chinese military company” as:
(A) any person identified in the Defense Intelligence Agency publication numbered VP-1920-271-90, dated September 1990, or PC-1921-57-95, dated October 1995, and any update of those publications for the purposes of this section; and
(B) any other person that: (i) is owned or controlled by the People’s Liberation Army; and (ii) is engaged in providing commercial services, manufacturing, producing, or exporting.
  The term “People’s Liberation Army” means the land, naval, and air military services, the police, and the intelligence services of the People’s Republic of China, and any member of any such service or of such police.
 
Impacts on US Government Contractors and Subcontractors
  The publication of this list by DoD has immediate ramifications for US government contractors and other companies participating in the supply chain for the US government.  Based on existing rules addressing the supply chain for the US government, companies should assess whether the publication of this list triggers any existing prohibitions on doing business with companies owned or controlled by the Chinese military or a foreign government.

  Under the Federal Acquisition Regulation (“FAR”), federal agencies are prohibited from “procuring or obtaining” “any equipment, system, or service” that uses “covered telecommunications equipment or services” for certain critical technology or a “substantial or essential component of any system.”  FAR 4.2101.  When this prohibition was initially introduced by Congress in 2018, it made headlines because it expressly identified five major China-based technology companies.  But the statute and the implementing regulations broadly define this prohibition as including other unnamed companies if telecommunications or video surveillance equipment or services are “produced or provided by an entity that the Secretary of Defense . . . reasonably believes to be an entity owned or controlled by, or otherwise connected to, the government of a covered foreign country.”  FAR 4.2101(4).

  Section 514 of the Consolidated Appropriations Act for FY 2018 provides that, for a “high-impact or moderate-impact information system” (as defined by NIST’s Standards for Security Categorization of Federal Information Systems), agencies must review the “supply chain risk for the information systems against criteria developed by NIST and the Federal Bureau of Investigation (FBI) to inform acquisition decisions.”  This includes consideration of risk related to sabotage presented by involvement of “one or more entities identified by the United States Government as posing a cyber threat, including … those that may be owned, directed, or subsidized by the People’s Republic of China.”

  Outside the area of information technology, there are existing prohibitions that might be triggered by this publication.  For example, DoD’s supplement to the FAR (DFARS Subpart 225.770) prohibits contractors from delivering any supplies or services covered by the United States Munitions List that are acquired, directly or indirectly, from a “Communist Chinese military company.”

  These are only a few examples.  In any procurement, particularly those involving information systems or information technology, the US government has broad discretion to undertake assessments of cybersecurity and supply chain risk, and those considerations could adversely impact a company’s eligibility for award.  As a result, companies should assess whether this publication has a potential impact on supply chain risk for their business.
 
IEEPA Sanctions
  Although the DoD List is not a sanctions list, Section 1237(a) of the Act does authorize the President to impose at least some IEEPA sanctions against persons included on the list.  Under IEEPA, the President has broad authority to investigate, regulate, block, or prohibit transactions that are “subject to the jurisdiction of the United States.”  Examples of such transactions include transactions that involve US persons, the US financial system, or US-origin goods or services. When IEEPA sanctions are applied to specific companies, it is usually done by adding them to OFAC’s List of Specially Designated Nationals (“SDNs”) and Blocked Persons.
Observations
Timing
  Although the Section 1237 reporting requirement has been in place for over 20 years, it is not clear whether DoD has created prior versions of the list.  We are not aware of any previous instances in which prior versions of the DoD List (if any) have been made public by the Executive Branch or Congress.  The controversy surrounding this law and DoD’s resistance to publishing such a list go back many years.

  DoD’s letter to Senator Cotton states that the DoD staff “developed a methodology and produced an initial list of companies that meet the congressionally-directed criteria in Section 1237” (emphasis added). DoD’s letter and its creation of the list follow a letter to the Secretary of Defense dated September 11, 2019 from Senators Cotton and Schumer and Representatives Gallagher and Gallego demanding that DoD update the list.  DoD previously had acknowledged that it had developed, but not disclosed, a list of software that failed to meet DoD’s national security standards.  This list reportedly includes Chinese software products.
 
Likelihood of IEEPA Sanctions
  At this time, there is no indication that the President intends to impose IEEPA sanctions on the entities on the DoD List, and the Act does not require any further action.  If the Administration does impose new sanctions on the listed entities, such sanctions could include a variety of potential measures with a range of severity, including possibly prohibiting transactions through the US financial system (e.g., most US dollar transactions) and, in the most extreme case, blocking sanctions (i.e., designation on the SDN list), which would require US persons to block (i.e., freeze) all property and property interests of blocked persons that come within the possession or control of the US person.
 
Nature of any Possible IEEPA Sanctions
  The authority to impose sanctions restrictions “in the case of any commercial activity in the United States by a person that is on the list” (other than those related to importation into the United States) could potentially be viewed as authorizing only narrower sanctions measures, rather than full SDN designations.  The effect of an SDN designation goes well beyond “commercial activity in the United States,” and impacts much activity outside the United States as well.  However, this statutory language may not be viewed as restricting the nature or extent of sanctions that can be imposed and may instead simply define the conduct trigger for when these sanctions can be imposed, i.e., when the covered companies conduct commercial activity in the United States.  Under that latter view, the statutory intent would appear to be to incentivize such PRC companies not to do business in the United States.
 
Impact on the EAR’s Military End-Use/End-User Rule
  The DoD List is not related or linked to recent amendments to US export controls targeting military end-uses and end-users in the PRC, set forth in section 744.21 of the Export Administration Regulations (“EAR”) controlling the transfer of certain dual use civilian/military items.  These amendments, effective June 29, 2020, imposed, inter alia, a licensing requirement for exports, reexports, or transfers (in-country) of certain products and technologies “subject to the EAR” to PRC “military end-users” that had not previously required a license.  (Even before this action, certain US-controlled exports already were restricted for “military end-uses” in China.)

  This rule defines military end-users to include any “person or entity whose actions or functions are intended to support ‘military end-uses.'”  Following the amendments, the regulatory agency responsible for the EAR, the Department of Commerce’s Bureau of Industry and Security (“BIS”), stated that it would provide guidance regarding the entities that would be considered to be supporting military end-uses.  This DoD List could be considered a “red flag” by exporters or reexporters subject to section 744.21.  At minimum, suppliers who send products or technologies subject to section 744.21 of the EAR to the listed companies should consider conducting enhanced due diligence to determine if the licensing requirement is triggered.

  Companies will need to evaluate these situations on a case-by-case basis, and it would be quite useful for BIS to publish the additional guidance that it has promised to industry which hopefully will shed additional light on these challenging regulatory questions.

TE EX/IM TRAINING EVENTS & CONFERENCES

 
* What: Riding the Wave of Current and New Tariffs – Update on US Trade Remedies
* When: 24 Sep; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Melissa Proctor
* Register: here / or Ashleigh Foor, 1-540-433-3977,ashleigh@learnexportcompliance.com. 

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

ITAR & EAR from a non-US perspective
Tuesday, 8 September 2020
More Info
Special Offer: $199
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

 
  Because of COVID, we have seen significant changes in the way we live and work. Working from home has become the new normal, and we are getting closer to the “virtual world”. But how do you keep your organization in control while complying with national and international export control laws and regulations?

What is it?
  Full Circle Compliance BV has developed the Risk Assessment Tool© (“RAT”©). The RAT© is an online tool for measuring your company’s performance on Export Control. The RAT© will become the new tool in the assessing export control performance inside your organization by allowing your company to determine its export control performance at any given time.
 
How does it work?
  Various employees from different departments will be given access to the online Risk Assessment Tool© environment. Your employees will determine the potential level of likelihood and impact for 65 risk-based export control scenarios.
   “Impact” is the effect that a particular export control scenario has on an organization and the “Likelihood” is the chance that this particular scenario may occur. The RAT’s assessment is plotted in a Risk Heat Matrix, reflecting an organization’s performance on export control compliance.
 
When?
  The RAT© is an online tool that requires no physical contact between your organization and Full Circle Compliance. Using an online tool will enable your companythe opportunity to keep measuring export control performance while eliminating physical contact during COVID. Your employees have full autonomy to participate at any time of the day, and the assessment will take an average less than an hour to generate. You will no longer need to synchronize employee agendas.
 
What will you gain?
  • Confidence in your export compliance at a low cost. Full Circle Compliance will summarize the results of the RAT© in a handy to-the-point report that focuses on the Key Risk Areas (“KRAs”) you need to improve. The KRAs are based on the likelihood of the risk and the possible adverse effects on your organization’s export control operations.
  • Performing regular assessments with the RAT© will monitor the progress you are making in mitigating any export control risk areas. Monitoring your progress gives the governmental regulator and your internal management peace of mind as proof of your continuous improvement for complying with relevant export control laws and regulations.
  • Export control risks are threats that can damage your organization’s reputation and export business if ignored. Many companies fail to identify their risks early on and focus solely on continuing their business. This can create vulnerability in an organization’s Internal Compliance Program (“ICP”), which will require much more work later to correct. In addition, identifying risks early can assist you to streamline your business processes to make them more effective and efficient.
  • Through an adequate and well-facilitated risk assessment your organization will be able to identify and analyze the export control risks it faces. Such a risk assessment identifies key export control risks, monitors their likelihood, and determines their potential impact on your organization’s international business operations. An export control risk assessment can also serve as a basis to determine how to manage export control risks, and for developing or improving an ICP. Performed during regular intervals, a risk assessment can also show the progress that you have made in mitigating the risks to which you are exposed.
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EN_a615. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* Ferdinand Porsche (3 Sep 1875 – 30 Jan 1951; was an Austrian-German automotive engineer and founder of the Porsche car company. He is best known for creating the first gasoline-electric hybrid vehicle (Lohner-Porsche), the Volkswagen Beetle, the Auto Union racing car, the Mercedes-Benz SS/SSK, several other important developments and Porsche automobiles.)
  – “If one does not fail at times, then one has not challenged himself.”
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The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments are listed below.
 
Agency 
Regulations 
Latest Update 
DHS CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199.

 

5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
DOC EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774. 
27 Aug 2020: 85 FR 52898Additions of Entities to the Entity List and Revisions of entries on the Entity List.

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

2 Sep 2020: 85 FR 54911:

 

Inflation Adjustment of Civil Monetary Penalties Related to Reporting and Recordkeeping. 

 
 
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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