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20-0924 Thursday “Daily Bugle”

20-0924 Thursday “Daily Bugle”

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Thursday, 24 September 2020

  1. Commerce/BIS: “Order Denying Export Privileges”
  2. Commerce/Office of the Secretary: “Identification of Prohibited Transactions to Implement EO 13942 and Address the Threat Posed by TikTok and the National Emergency”
  3. Treasury/OFAC: “Cuban Assets Control Regulations”
  4. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: “Bucks County Man Indicted for Trafficking Firearms to St. Lucia”
  3. State/DDTC: (No new postings)
  4. EU Commission Publishes Notice on Dual-use Exports After Brexit Transition Period
  1. EU Sanctions: “US Business Owner Charged Violating Pakistan Export Controls”
  2. Reuters: “Intel Gets U.S. Licences to Supply Some Products to Huawei”
  1. Husch Blackwell: “U.S. Scheduled Bans on TikTok and WeChat Apps Delayed”
  2. Nicholas Turner: “Sanctions Top-5 for the Week Ending 18 Sep”
  3. Thompson Hine: “U.S. Government Issues Significant New Sanctions on Iran, Unilaterally Triggering ‘Snapback’ UN Sanctions on Iran”
  1. ECS Presents: “ECS ITAR/EAR Webinar Series”
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register, 24 Sep 2020) [Excerpts]
 
85 FR 60131: Notice.  In the Matter of: Walid Chehade, 4855 Hawthorn Lane, Unit 20, Westlake, OH 44145. 
  On May 8, 2019, in the U.S. District Court for the Western District of Michigan, Walid Chehade (“Chehade”), was convicted of violating 18 U.S.C. 371. Specifically, Chehade was convicted of knowingly and willfully conspiring to export from the United States to Lebanon guns and gun parts designated as defense articles on the United States Munitions List, without first obtaining the required licenses from the U.S. Department of State. Chehade was sentenced to time served, one year of supervised release, a $5,000 fine, and a $100 special assessment. …  
  Based upon my review of the record, including Chehade’s written submission from Counsel, and consultations with BIS’s Office of Export Enforcement, including its Director, and the facts available to BIS, I have decided to deny Chehade’s export privileges under the Regulations for a period of seven years from the date of Chehade’s conviction. I have also decided to revoke any BIS-issued licenses in which Chehade had an interest at the time of his conviction. …

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

(Source: Federal Register, 24 Sep 2020) [Excerpts]
 
85 FR 60061: Rule
* AGENCY: Office of the Secretary, U.S. Department of Commerce.
* ACTION: Identification of prohibited transactions.
* SUMMARY: Pursuant to Executive Order 13942, the Secretary of Commerce is publishing the list of prohibited transactions by any person, or with respect to any property, subject to the jurisdiction of the United States, with ByteDance Ltd. (a.k.a. Zìjié Tiàodòng), Beijing, China, or its subsidiaries, including TikTok Inc., in which any such company has any interest, to address the national emergency with respect to the information and communications technology and services supply chain declared in Executive Order 13873, May 15, 2019 (Securing the Information and Communications Technology and Services Supply Chain), and particularly to address the threat identified in Executive Order 13942 posed by mobile application TikTok.
* DATES: Transactions identified in paragraph 1 below will be prohibited at 11:59 p.m. eastern standard time on September 27, 2020; transactions identified in paragraphs 2, 3, 4, and 5 below will be prohibited at 11:59 p.m. eastern standard time on November 12, 2020.
* FOR FURTHER INFORMATION CONTACT: Kathy Smith, U.S. Department of Commerce, 1401 Constitution Avenue NW, Washington, DC 20230; telephone: (202) 482-1859.

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

EXIM_a33. Treasury/OFAC: “Cuban Assets Control Regulations”
(Source: Federal Register, 24 Sep 2020) [Excerpts]
 
85 FR 60068: Rule
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Final rule.
* SUMMARY: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is amending the Cuban Assets Control Regulations to further implement portions of the President’s foreign policy toward Cuba to deny the Cuban regime sources of revenue. Specifically, this rule: Adds a new prohibition for persons subject to U.S. jurisdiction regarding lodging and related transactions at certain properties in Cuba identified on a new list maintained by the State Department, and amends an interpretive provision and several general licenses to incorporate this new prohibition; amends four general licenses to restrict the importation into the United States of Cuban-origin alcohol and tobacco products; amends a general license to remove the authorization for persons subject to U.S. jurisdiction to attend or organize professional meetings or conferences in Cuba; and removes a general license that authorizes persons subject to U.S. jurisdiction to participate in or organize certain public performances, clinics, workshops, other athletic or non-athletic competitions, and exhibitions, and replaces it with a specific licensing policy. OFAC is also making a number of technical and conforming changes.
* DATES: This rule is effective September 24, 2020.
* 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, 24 Sep 2020) [Excerpts]
 
85 FR 60282: 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 persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) based on the determination by the Secretary of State, in consultation with the heads of relevant agencies, 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; or the Assistant Director for Licensing, tel.: 202-622-2480.

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

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register, 24 Sep 2020)
 
* DHS/CBP: NOTICES; Modification of Test Program Regarding Electronic Foreign Trade Zone Admission Applications [Pub. Date: 25 Sep 2020] (PDF)
 
* Treasury/OFAC: NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 25 Sep 2020] (PDF) (PDF) (PDF) (PDF)

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(Source: Commerce/BIS, 23 Sep 2020)
 
  First Assistant United States Attorney Jennifer Arbittier Williams announced that Thomas Harris Jr., 27, of Croydon, PA was arrested and charged by Indictment with multiple firearms trafficking offenses stemming from his scheme to sell almost 40 guns to a buyer on the island of St. Lucia. Specifically, the defendant was charged with making false statements to a federal firearm licensee, dealing in firearms without a license, delivery of firearms to a common carrier without written notice, and smuggling goods from the United States.
The Indictment alleges that Harris purchased approximately 38 firearms in 12 transactions at two Bucks County, PA, gun shops between April 20, 2019, and February 15, 2020, and provided a false address as his place of residence on the required federal forms that he completed during each transaction. It is further alleged that the defendant then illegally trafficked, and attempted to traffic, the guns to St. Lucia, a sovereign island nation in the West Indies, despite his not having a license to deal in firearms nor a license to export them as required by law. He also allegedly failed to notify the shipping company he used that his shipments contained firearms, as required by law.
  If convicted, the defendant faces a maximum possible sentence of 80 years in prison, three years of supervised release, a $3,750,000 fine, and a $1,500 special assessment.

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COM NEWS

NWS_a19. EU Sanctions: “US Business Owner Charged Violating Pakistan Export Controls”

(Source: EU Sanctions, 22 Sep 2020) [Excerpts]
 

  A federal court in Chicago has returned an indictment charging Obaidullah Syed, a Chicago resident, and his company Business System International with 1 count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and foreign trade regulations, and 1 count of violating the IEEPA. From 2006 to 2015, Mr Syed is alleged to have exported computer equipment from the US to the Pakistan Atomic Energy Association without the required licences. Mr Syed is said to have falsely represented to US computer manufacturers that the shipments were intended for Pakistani universities, Syed’s Pakistan-based business, or Syed himself, thereby causing manufacturers to declare false end users for the US-origin goods.
  The maximum penalty for conspiracy to violate the IEEPA is 5 years’ imprisonment, and the maximum penalty for a violation of the IEEPA carries a maximum sentence of 20 years’ imprisonment. See press release.

(Source: Reuters, 22 Sep 2020) [Excerpts]
 

  Intel Corp INTC.CO has received licences from U.S. authorities to continue supplying certain products to Huawei Technologies [HWT.UL], an Intel spokesman said on Tuesday.
  With U.S.-China ties at their worst in decades, Washington has been pushing governments around to world to squeeze out Huawei, arguing that the telecoms giant would hand data to the Chinese government for espionage.
From September 15, new curbs have barred U.S. companies from supplying or servicing Huawei.
  This week the state-backed China Securities Journal said Intel had received permission to supply Huawei.
  Last week China’s Semiconductor Manufacturing International Corporation 0981.HK confirmed it had also sought permission to continue servicing Huawei. SMIC uses U.S.-origin equipment to make chips for Huawei and other companies. 
  South Korean chipmaker SK Hynix 000660.KS also applied for U.S. licence for Huawei sales, but it has not gained approval, a person familiar with the matter said. 
  The person, declining to be identified as they were not authorised to speak to media, said non-U.S. firms may not have a high chance of getting U.S. approval, and chipmakers are drafting contingency plans to increase supplies to other customers. …
  In August, Taiwanese chip designer MediaTek Inc 2454.TW disclosed it had applied to the U.S. government for permission to continue supplying China’s Huawei. …
  In what some observers have compared to the Cold War arms race, the United States worries that 5G dominance would give China an advantage Washington is not ready to accept.

COM COMMENTARY

 
* Principal Author: Cortney O’Toole Morgan, Esq., 1-202-378-2389, Husch Blackwell LLP 
 
  China-based smartphone apps, TikTok and WeChat, have each received a reprieve from the respective bans, which were originally ordered by President Trump on August 6, 2020 against both parties and were scheduled to take effect on September 21, 2020.  Please see our previous post covering the Executive Orders.  Pursuant to the Executive Orders banning the apps on national security grounds, the U.S. Department of Commerce (“Commerce”) published final rules for implementing the bans on September 19, 2020, which were subsequently withdrawn.  Commerce then delayed the order to withdraw TikTok from U.S. app stores until September 27, 2020 at 11:59pm. Meanwhile, Commerce’s order to withdraw WeChat has been suspended temporarily due to an injunction granted by the U.S. District Court for the Northern District of California.
  In an effort to come into compliance with the Executive Order and avoid the ban, TikTok’s parent, ByteDance Ltd. (“ByteDance”), negotiated a deal with Oracle and Walmart to keep TikTok operating in the United States.  Under the terms of the agreement, based on media reports, TikTok will be spun off into a U.S.-based company majority-owned by its Chinese parent ByteDance, while Oracle and Walmart will take up to a twenty (20) percent stake of the new U.S. company.  ByteDance will maintain control over the app’s algorithm, while user data will be stored in the U.S.  It is possible that the ban on TikTok may be formally lifted once the deal is finalized, since President Trump has given his personal approval of the agreement, though that is unclear at this time.
  A judge from the U.S. District Court for the Northern District of California granted a nationwide injunction on September 19, 2020, temporarily suspending Commerce’s order for Apple and Google to remove WeChat from their app stores.  Plaintiffs U.S. WeChat Users Alliance, et al. allege that the ban violates First Amendment rights, especially for Chinese Americans. Judge Beeler stated that the plaintiffs “have shown serious questions going to the merits of the First Amendment claim” and that “the balance of hardships tips in the plaintiffs’ favor”.

(Source: Medium, 22 Sep 2020)

 
* Author: Nicholas Turner, Esq., 852-5998-7559, Steptoe & Johnson HK 
 
  Here are five things that happened this week in the world of economic sanctions that I think you should know about.
  (1) The US Commerce Department announced two rules restricting transactions with ByteDance and Tencent (in relation to WeChat) (rules available here and here). The rules, which were called for under Executive Orders 13942 and 13943 of 6 August 2020, more or less prohibit certain business-to-business transactions enabling WeChat and TikTok to be downloaded or updated by users “within the land and maritime borders of the United States and its territories” and certain services for the functioning and optimization of the apps. (Read more about it in my colleague’s blog post on the Steptoe International Compliance Blog.)
  (2) After failing to convince the UN Security Council to trigger the snapback provision of the Joint Comprehensive Plan of Action (JCPOA), the US State Department issued a statement threatening “consequences” against states that do not re-impose sanctions against Iran, including an arms embargo set to expire next month. (A little while ago, the US State Department announced sanctions against numerous individuals and entities involved in nuclear- and missile-related activities in Iran and a new Executive Order targeting persons involved in Iran’s trade in conventional weapons (including Venezuela’s Nicolás Maduro).)
  (3) The US Office of Foreign Assets Control (OFAC) named Union Development Group Co., Ltd., a Chinese state-owned entity, as a Specially Designated National (SDN) under the Global Magnitsky Sanctions program for collaborating with a Cambodian general sanctioned in December 2019 on a controversial development project in Cambodia’s Koh Kong province.
  (4) China’s Ministry of Commerce (MOFCOM) issued provisions for the long-talked-about Unreliable Entity List (UEL) which could be used to restrict foreign companies from transacting or investing in China, among other things. So far, no names have been added to the list. (Read more about it in this alert by Qing Ren and team at Global Law Office.)
  (5) OFAC announced a USD 894,111 settlement with a US-based telecommunications manufacturer for violations of the (now terminated) Sudan Sanctions Regulations (SSR). According to the OFAC settlement notice and settlement agreement, the company exported satellite equipment and services to the Sudan Civil Aviation Authority via a Canadian company despite knowing the shipments were likely prohibited under the SSR.
 
Comments
Not so fast. On Saturday, the Commerce Department postponed the TikTok rule for seven days, until 27 September 2020, in anticipation of a deal involving Oracle and Walmart (which is apparently on the rocks as of this morning). Meanwhile, a US federal judge issued a preliminary injunction blocking the WeChat rule pending litigation brought by the US WeChat Users Alliance. (Read the judge’s decision here.) In any event, US persons will not prohibited under these rules from using the apps inside or outside the United States. Phew!

(Source: Smartrade, 21 Sep 2020)
 
  On September 19, 2020, the United States announced that virtually all United Nations (UN) sanctions on Iran were being re-imposed. President Donald Trump and Secretary of State Mike Pompeo have taken the position that the United States can trigger the “snapback” provisions of UN sanctions under UN Security Council resolution 2231 pursuant to the Joint Comprehensive Plan of Action (JCPOA) that was implemented by Iran and the P5+1 countries (China, France, Germany, Russia, the United Kingdom and the United States) on July 14, 2015. The United States, however, withdrew from the JCPOA on May 8, 2018. Nevertheless, on August 20, 2020, the United States notified the President of the UN Security Council of Iran’s “significant non-performance of its JCPOA commitments,” thus claiming to have triggered the 30-day process leading to the snapback of previously terminated UN sanctions. On September 19, 2020, the United States unilaterally announced the snapback of the UN sanctions and Secretary Pompeo released a press statement stating that:
  The United States took this decisive action because, in addition to Iran’s failure to perform its JCPOA commitments, the Security Council failed to extend the UN arms embargo on Iran, which had been in place for 13 years. The Security Council’s inaction would have paved the way for Iran to buy all manner of conventional weapons on October 18. Fortunately for the world, the United States took responsible action to stop this from happening. In accordance with our rights under UNSCR 2231, we initiated the snapback process to restore virtually all previously terminated UN sanctions, including the arms embargo. The world will be safer as a result. The United States expects all UN Member States to fully comply with their obligations to implement these measures.
The remaining parties to the JCPOA have taken the position that the United States cannot trigger the snapback provision of UN sanctions under the JCPOA given that it withdrew from – and is no longer a party to – the agreement.
In addition, on September 21, 2020, the State Department announced a series of new sanctions against Iran. The sanctions include:
  • Issuance of a new Executive Order targeting Iran-related conventional arms transfers, claiming that the UN arms embargo on Iran “is re-imposed indefinitely” and that the United States “will ensure that it remains in place until Iran changes its behavior.”
  • Designation on the Department of the Treasury’s Office of Foreign Assets Control (OFAC) SDN List of Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), Iran’s Defense Industries Organization (DIO) and its Director, Mehrdad Akhlaghi-Ketabchi, pursuant to the new Iran Conventional Arms Executive Order noted above.
  • Designation on the SDN List of Nicolas Maduro, the leader/ruler of Venezuela, for conventional arms-related activities and assisting Iran in circumventing the UN arms embargo pursuant to the new Iran Conventional Arms Executive Order noted above.
  • Designation on the SDN List of six individuals and three entities associated with the Atomic Energy Organization of Iran (AEOI) pursuant to earlier implemented Executive Order 13382 pertaining to WMD proliferators. These entities and persons are involved in Iran’s nuclear research and development.
  • Addition of five individuals affiliated with the AEOI to the Department of Commerce’s Entity List, and imposing export control restrictions on these individuals. Each individual is associated with Iran’s JHL Laboratory, and AEOI, and have been involved in Iran’s nuclear weapons development program.
  • Designation on the SDN List of three individuals and four entities associated with Iran’s liquid propellant ballistic missile organization, the Shahid Hemmat Industrial Group (SHIG) pursuant to Executive Order 13382. These entities are responsible for the integration, final assembly, testing of liquid propellant ballistic missiles and space launch vehicles.
  The Department of State has issued a detailed Fact Sheet on these actions.
The Department of the Treasury’s Office of Foreign Assets Control (OFAC), as noted above, added certain persons and entities to its Specially Designated Nationals (SDN) List, available here. As a result, all property and interests in property of the identified persons and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC’s regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons. In addition, persons that engage in certain transactions with the Iranian individuals and entities designated may themselves be exposed to sanctions or subject to an enforcement action. Furthermore, OFAC has made clear that unless an exception applies, any foreign financial institution that knowingly facilitates a significant transaction for any of the individuals or entities designated today could be subject to U.S. sanctions.
  The Department of Commerce’s Bureau of Industry and Security (BIS), as noted above, added certain individuals to its Entity List, available here. As a result, BIS has now imposed a license requirement for all items subject to the Export Administration Regulations (EAR), with a license review policy of presumption of denial. No license exceptions are available for exports, reexports, or transfers (in-country) to the entities being added to the Entity List.
  Secretary Michael R. Pompeo, Treasury Secretary Steven Mnuchin, Defense Secretary Mark Esper, Commerce Secretary Wilbur Ross, U.S. Representative to the United Nations Kelly Craft, and National Security Advisor Robert O’Brien held a brief press conference to discuss these actions toward Iran. A transcript is available here.
  The Thompson Hine SmarTrade Blog will continue to closely monitor today’s actions and report on any official responses issued by Iran and the parties remaining in the JCPOA.

TE EX/IM TRAINING EVENTS & CONFERENCES

 
*What:  ECS ITAR/EAR Webinar Series
*When:  Webinars Each Week Through December 2020
*Where:  Your Computer
*Sponsor: Export Compliance Solutions & Consulting (ECS)
*ECS Speakers:  Suzanne Palmer
*Register: here for individual webinars, here for a 4-pack, here for an 8-pack, or write to liz@exportcompliancesolutions.com or call 1-866-238-4018
* * * * * * * * * * * * * * * * * * * *

The ABC of Foreign Military Sales (FMS)
Tuesday, 29 September 2020

More Info

Designing and Implementing
 an ICP
Tuesday, 6 October 2020 More Info
Wednesday, 7 October
* * * * * * * * * * * * * * * * * * * *

EN EDITOR’S NOTES

EN_a116. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
  – “Cut out all these exclamation points. An exclamation point is like laughing at your own joke.”  
* * * * * * * * * * * * * * * * * * * *

 

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. 
22 Sep 2020: 85 FR 59419 Additions of Entities to the Entity List and Corrections 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
Update of Cuban Assets Control 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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