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20-0916 Wednesday “Daily Bugle”

20-0916 Wednesday “Daily Bugle”

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Wednesday, 16 September 2020

  1. Commerce/BIS: “Information Collection Activities; Comment Request – Rated Orders Under the Defense Priories and Allocations System (DPAS)”
  2. State/DDTC: “Notifications to the Congress of Proposed Commercial Export Licenses”
  3. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  4. USTR: “Notice of Product Exclusion Extension Amendment -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. Hong Kong TID Publishes List of Officers Authorized under Import and Export Ordinance
  1. EU Sanctions: “US Court Dismisses Fedex Claim Against Commerce Department”
  2. HSF: “UK Signs Free Trade Deal with Japan”
  1. Torres Law: “CFIUS Final Rule: How Export Control Regulations Will Impact Mandatory Filings”
  2. Winston: “Treasury Issues Final Regulation Revising Mandatory CFIUS Declaration Requirement for Certain Critical Technology Transactions”
  1. ECS Presents: 21-22 Oct; “3rd Annual ITAR/EAR Symposium and Managing ITAR/EAR Complexities”
  2. ECTI Presents: 29 Sep; “A New World of Export Controls for China”
  3. 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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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!    
 

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!    
 

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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register, 16 Sep 2020) [Excerpts]
 
85 FR 57820: Notice
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Notice of Information Collection, request for comment.
* SUMMARY: The Department of Commerce, in accordance with the Paperwork Reduction Act of 1995 (PRA), invites the general public and other Federal agencies to comment on proposed, and continuing information collections, which helps us assess the impact of our information collection requirements and minimize the public’s reporting burden. The purpose of this notice is to allow for 60 days of public comment preceding submission of the collection to OMB.

* ABSTRACT: This information collection is necessary to support the execution of the President’s priorities and allocations authority under the Defense Production Act of 1950 (DPA), as amended (50 U.S.C. 4501,

et seq.), and the priorities authorities under the Selective Service Act of 1948 (50 U.S.C. 3801, et seq.), as implemented by the Defense Priorities and Allocations System (DPAS) regulation (15 CFR part 700). The purpose of this authority is to ensure preferential acceptance and performance of contracts and orders supporting national defense and emergency preparedness program requirements. 

* DATES: To ensure consideration, comments regarding this proposed information collection must be received on or before November 16, 2020.
* ADDRESSES: Interested persons are invited to submit comments by email to Mark Crace, IC Liaison, Bureau of Industry and Security, at mark.crace@bis.doc.gov or to PRAcomments@doc.gov. Please reference OMB Control Number 0694-0092 in the subject line of your comments. Do not submit Confidential Business Information or otherwise sensitive or protected information.

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

(Source: Federal Register, 16 Sep 2020) [Excerpts]
 
85 FR 57922: Notice
* AGENCY: Department of State.
* ACTION: Notice.
* SUMMARY: The Directorate of Defense Trade Controls and the Department of State give notice that the attached Notifications of Proposed Export Licenses were submitted to the Congress on the dates indicated. … 
* DATES: As shown on each of the 19 letters. [See letters at Source URL.] 
* FOR FURTHER INFORMATION CONTACT: Ms. Paula C. Harrison, Directorate of Defense Trade Controls, Department of State, telephone (202) 663-3310; email DDTCResponseTeam@state.gov. ATTN: Congressional Notification of Licenses.

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

(Source: Federal Register, 16 Sep 2020) [Excerpts]
 
85 FR 57934: Notice
* 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 individuals that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List). OFAC has determined that one or more applicable legal criteria were satisfied to place the individuals on the SDN List. All property and interests in property subject to U.S. jurisdiction of these individuals are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. … [See list of names at Source URL.]
* 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; or Assistant Director for Regulatory Affairs, tel.: 202-622-4855.

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

(Source: Federal Register, 16 Sep 2020) [Excerpts]
 
85 FR 57925: Notice
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of product exclusion extension and amendment.
* 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 expired on August 7, 2020. On May 6 and June 3, 2020, the U.S. Trade Representative invited the public to comment on whether to extend particular granted exclusions. On August 11, 2020, the U.S. Trade Representative announced a determination to extend certain previously granted exclusions. This notice makes one technical amendment to a previously extended exclusion.
* DATES: The product exclusion extension amendment announced in this notice applies as of August 7, 2020, and continues through December 31, 2020. This notice does not further extend the period for product exclusion extensions. 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.

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

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register
 

* Commerce/Census: Proposed Rules; Foreign Trade Regulations: Overall Impact of the Removal of Electronic Export Information Filing Requirements for Shipments between the United States and Puerto Rico and the Virgin Islands [Pub. Date: 17 Sep 2020] (PDF)

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

OGS_a26. Commerce/BIS: (No new postings)

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

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

 
  Hong Kong TID Publishes Officers Authorized to Sign on Strategic Commodities Licences and Delivery Verification Certificates under Import and Export Ordinance, Cap 60 Import and Export (Strategic Commodities) Regulations. See the full list here.

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

COM NEWS

NWS_a19. EUS: “US Court Dismisses Fedex Claim Against Commerce Department”

(Source: EU Sanctions, 15 Sep 2020) [Excerpts]
 
  A federal court in the District of Columbia has granted the US Commerce Department’s motion to dismiss FedEx’s claim, which challenged the Bureau of Industry and Security’s strict liability standard for civil violations of the Export Administration Regulations (EAR) for common carriers. Fedex argued that the standard violates due process obligations under the Fifth Amendment, and exceeds BIS’ delegated authority under the Export Control Reform Act (ECRA). See Memorandum Opinion.
  FedEx’s case was that it is irrational to impose strict liability on common carriers, but to hold customers liable if they “knowingly” engage in a prohibited shipment. FedEx contended that the EAR requires more screening than possible, particularly given the volume of shipments it carries out, and that BIS’ interpretation of the EAR places such onerous restrictions on its enterprise that it must either cease certain operations or risk imminent enforcement action.
  The court held that, unlike “potentially one-off consumers”, common carriers have the “institutional knowledge and scale to navigate the EAR; thus, it is reasonable that common carriers might be held to a higher standard.”

(Source: Herbert Smith Freehills, 14 Sep 2020) [Excerpts]
 
  On 11 September 2020, the UK signed its first major free trade agreement as an independent nation after its exit from the EU with Japan.

  The UK-Japan Comprehensive Economic Partnership Agreement largely replicates the EU’s trade agreement with Japan and secures tariff-free trade on 99% of exports to Japan and is estimated to increase trade with Japan by £15.2 billion. The deal includes arrangements, amongst others, on digital and data provisions, improved market access for UK financial services, new and more liberal Rules of Origin, expanding the list of geographical indications for UK goods and reduced tariffs on some goods coming from Japan for the UK car and rail manufacturing.

 
Please click here for further details.

COM COMMENTARY

(Source: Torres Law Briefings, , 15 Sep 2020) [Excerpts]
 
* Principal Author: Olga Torres, Esq., Torres Law, PLLC 
 
  The U.S. Department of the Treasury Office of Investment Security (“Treasury”) published a final rule on September 15, 2020, significantly changing the mandatory filings administered by the Committee on Foreign Investment in the United States (“CFIUS”). The Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”) expanded CFIUS’s jurisdiction to review and take action to address national security concerns arising from certain investments and real estate transactions involving foreign persons. As a result, mandatory filings apply to certain controlling and non-controlling foreign investments in U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. Please see our previous article for a detailed analysis of Treasury’s proposed rule issued on May 21, 2020.
  This final rule is very similar to the provisions included in the proposed rule. Notably, the mandatory filing analysis will move away from the current industry test [FN/1] and instead focuses on export control licensing requirements. In other words, the analysis will now be premised on whether the products and technology manufactured/produced by the U.S. business would require a license/regulatory authorization to export to certain persons in the ownership chain. Additionally, the final rule also clarifies the definition of the term “substantial interest” and a related provision and makes one technical revision to example 2 included in the definition of “covered transaction” found at § 800.213(e).[FN/2] Below is a summary of the key takeaways from the final rule, which will go into effect 30 days after the final rule is published, or on around October 15, 2020.
 
Key Takeaways
1. Applicability of Final Rule. The above-mentioned mandatory filing changes take effect 30 days after the final rule is published. For certain transactions between February 13, 2020 and until October 15, 2020, the previous industry test based on NAICS codes would continue to apply.
 
2. Substantial Interest (§ 800.244). The “substantial interest” definition revisions remain the same as in the proposed rule. A mandatory filing may be required for certain covered transactions where a foreign government has a substantial interest in a foreign person that will in turn acquire a substantial interest in certain types of U.S. businesses. Responding to comments, Treasury clarified that the substantial interest analysis is appropriately focused on the interest held in the general partner/managing member when such individual primarily directs, controls, or coordinates the entity’s activities. The involvement of a third party acting on behalf of the general partner does not remove the transaction from the substantial interest analysis.
 
3. Modified Criteria for Mandatory Filings (§ 800.401(c)). The new criteria stipulated in § 800.401(c)(1) is now based on whether certain “U.S. government authorization” would be required to export, re-export, transfer (in country), or retransfer one or more critical technologies produced, designed, tested, manufactured, fabricated, or developed by the U.S. business to certain persons in the ownership chain.
The final rule makes it clear that for purposes of the mandatory filing evaluation, both direct and indirect ownership interests (as set out in § 800.401(c)(1)(i)-(v)) should be reviewed. The final rule revisions also clarify that a “group of foreign persons,” who are related or have a formal or informal arrangement, [FN/3] would be reviewed as holding voting interests in the aggregate.
 
4. Timeframe to assess “critical technology” in a covered transaction.
Covered transaction under § 800.401(c) and “substantial interest” transaction under § 800.248(a).
In the final rule Treasury clarifies that a “critical technology” assessment should be conducted as of the earliest date of the transaction activities, including the execution of a binding agreement by the parties, or when changes to investors’ rights result in a covered transaction or covered investment.[FN/4]
 
5. Export Administration Regulations (“EAR”) License Exceptions. Importantly, when conducting a mandatory filing analysis if an EAR license exception enumerated at § 800.401(e)(6) is deemed applicable, a mandatory CFIUS filing would not be triggered. But the same “persons” that triggered the mandatory filing, must also be eligible to use the EAR license exceptions.
The revisions also clarify that “eligibility” for an EAR license exception refers to having satisfied any requirements imposed by the EAR that must be satisfied prior to export (even if no export is to occur). Notably, CFIUS provides the example of how the export classification requirements (including submission of commodity classification requests) and procedures in EAR license exception § 740.17(b)[5] must be met for the exception to apply, and consequently be able to use the CFIUS exception. Otherwise, the CFIUS exception to the mandatory filing requirement would not apply. CFIUS also explains that the following requirements under the relevant EAR license exceptions are not conditions of eligibility to avail parties of the CFIUS exception. These include the:
  • reporting requirements (e.g., semiannual reporting) enumerated in EAR license exception for encryption commodities, software, and technology;[FN/6]
  • recordkeeping requirements under EAR license exception for technology and software-unrestricted;[FN/7] and
  • requirements to furnish certain commodity classifications to third parties under EAR license exception for strategic trade authorization.[FN/8]
End-users and EAR licenses and exceptions. The final rule also clarifies that special attention should be paid to certain end-users, including entities listed in the Bureau of Industry and Security Entity List (Supplement No. 4 to Part 744), because these parties may not be eligible for license exceptions and they  have more stringent license application review policies.
***
In sum, the final revisions published by Treasury formally set forth the new test for mandatory filings involving critical technologies, which is now focused on export control licensing requirements. Additionally, Treasury also clarified the definition of “substantial interest” and provided insight on using EAR license exceptions to qualify for an exception to the mandatory CFIUS filing requirements. The new test will significantly impact companies and will shed some light on the importance of export control regimes. If a mandatory filing is triggered and not filed, a company can be subject to substantial penalties to include $250,000 or the value of the transaction, whichever is greater. Companies and foreign investors should improve their export compliance programs to ensure accurate product and technology export classifications are readily available to determine licensing or EAR exception applicability. … 

 
* Principal Author: Christopher B. Monahan, Esq., 1-202-282-5778, Winston & Strawn LLP
 
  The Department of the Treasury has issued final regulations that revise the requirement for filing a mandatory declaration with the Committee on Foreign Investment in the United States (CFIUS) in connection with certain transactions involving U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The final regulation is expected to be published in the Federal Register on September 15, 2020, and it will become effective 30 days after publication.
  Under the new rule, parties will be required to file a declaration in connection with covered transactions where certain U.S. Government authorizations would be required to export, reexport, transfer (in country), or retransfer a U.S. business’s critical technology to certain transaction parties or others in the ownership chain. This is a shift from the current regulations, under which, parties are required to file a declaration with CFIUS for certain transactions involving U.S. businesses with a connection to one or more of 27 industries identified by reference to the North American Industry Classification System (NAICS) codes.
  Specifically, parties to a transaction will soon be required to evaluate whether a U.S. regulatory authorization would be required to export the U.S. business’s critical technology to the direct acquirer, or to a person with a voting interest of 25% or more in the acquirer. Additionally, in certain circumstances, this 25% threshold will apply up the ownership chain of the direct acquirer’s general partner (or equivalent). If U.S. regulatory authorization would be required to export the U.S. business’s critical technology to these individuals or entities, the parties will be required to file a short-form declaration with CFIUS at least 30 days prior to the transaction’s expected completion date. There is a carve-out to the declaration requirement if the export would be covered by certain license exceptions under the Export Administration Regulations. Parties should exercise caution when determining if their transaction is covered by the carve-out, however, as failure to file a declaration when one is required could result in a civil monetary penalty up to the value of the transaction. 

TE EX/IM TRAINING EVENTS & CONFERENCES

  
* What: 3rd Annual ITAR/EAR Symposium and Managing ITAR/EAR Complexities 2-Day Webinar
* When: 16-17 Sep moved to 21-22 October 2020 
* Where: Your Computer
* Sponsor: Export Compliance Solutions & Consulting (ECS)
* ECS and Guest Speakers: Phil Kuhn-Commerce/BIS Office of Export Enforcement; Debi Davis-TransDigm, Scott Jackson-Curtiss-Wright: Suzanne Palmer & Lisa Bencivenga-ECS
 
* Register: here (https://exportcompliancesolutions.com/cart/october-2020-managing-itar/ear-complexities.html), write to liz@exportcompliancesolutions.com or call 1-866-238-4018.
* * * * * * * * * * * * * * * * * * * *

 
* What: A New World of Export Controls for China
* When: 29 Sep; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Scott Gearity
* Register: here/ or Ashleigh Foor, 1-540-433-3977, ashleigh@learnexportcompliance.com.
* * * * * * * * * * * * * * * * * * * *

The ABC of Foreign

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_a116. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* J. C. Penney (James Cash Penney, Jr.; 16 Sep 1875 – 12 Feb 1971; was an American businessman and entrepreneur who founded the J. C. Penney stores in 1902.)
 – “There’s no better friend to any merchant than a fair competitor.
 
* Laurence Johnston Peter (16 Sep 1919 – 12 Jan 1990; was a Canadian educator. He became widely known in 1969 upon the publication of his book, The Peter Principle, in which he states: “In a hierarchy every employee tends to rise to his level of incompetence. In time every post tends to be occupied by an employee who is incompetent to carry out its duties. Work is accomplished by those employees who have not yet reached their level of incompetence.”
  – “The great question is not whether you have failed, but whether you are content with failure.”
* * * * * * * * * * * * * * * * * * * *

 

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

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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