20-1006 Tuesday “Daily Bugle”

20-1006 Tuesday “Daily Bugle”

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Tuesday, 6 October 2020

  1. Commerce/BIS: “Amendment to Licensing Policy for Items Controlled for Crime Control Reasons”
  2. Commerce/BIS: “Controls on Exports and Reexports of Water Cannon Systems”
  3. Commerce/BIS: “Information Sharing for Purposes of Judicial Review”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: “ITAR / USML Updates FAQs”
  1. Al-monitor: “Canada Suspending Arms Exports to Turkey Amid Azerbaijan-Armenia Conflict”
  2. Ecns.cn: “US, Chinese Firms Hurt by Export Rules”
  1. Mayer Brown: “US Commerce Department Identifies Prohibited Transactions with WeChat But Implementation Delayed”
  2. Nicholas Turner: “Sanctions Top-5 for the Week Ending 2 Oct”
  3. R|D Report: “Changes to Commerce Licensing Policy For CC-Controlled Items”
  4. Sidley: “New Section 301 Investigation of Vietnam’s (Alleged) Undervaluation of its Currency”
  1. ECS Presents: 16-17 Nov; “ITAR/EAR Controls for Non-U.S. Companies”
  2. FCC Academy Presents: 7 Oct; “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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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 amendment of the ITAR that took effect on 28 September is 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 here to guarantee you have an up-to-date ITAR!


1. Commerce/BIS: “EAR Amendment to Licensing Policy for Items Controlled for Crime Control Reasons”

85 FR 63007: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) by revising, in part, the licensing policy for items controlled for crime control (CC) reasons, which is designed to promote respect for human rights throughout the world. BIS also is amending the EAR to provide that, except for items controlled for short supply reasons, it will consider human rights concerns when reviewing license applications for items controlled for reasons other than CC. This revision is necessary to clarify to the exporting community that licensing decisions are based in part upon U.S. Government assessments of whether items may be used to engage in, or enable violations or abuses of, human rights including those involving censorship, surveillance, detention, or excessive use of force.
* DATES: This rule is effective October 6, 2020.
* FOR FURTHER INFORMATION CONTACT: Sheila Quarterman, Regulatory Policy Division, Office of Exporter Services, at email RPD2@bis.doc.gov or by phone at (202) 482-2440; and refer to RIN-0694-AH70.
. . .
List of Subjects in 15 CFR Part 742 Exports, Terrorism. 
Accordingly, part 742 of the Export Administration Regulations (15 CFR parts 730-774) is amended as follows: 
 ■ 1. The authority citation for part 742 continues to read . . .
 ■ 2. Amend § 742.7 by revising paragraph (b) to read as follows:
 § 742.7 Crime control and detection. * * * * * 
(b) Licensing policy. 
     (1) Applications for items controlled under this section will generally be considered favorably on a case-by-case basis, unless there is civil disorder in the country or region or unless there is a risk that the items will be used to violate or abuse human rights. The judicious use of export controls is intended to deter human rights violations and abuses, distance the United States from such violations and abuses, and avoid contributing to civil disorder in a country or region. 
     (2) BIS will review license applications in accordance with the licensing policy in paragraph (b)(1) of this section for items that are not controlled under this section but that require a license pursuant to another section for any reason other than short supply and could be used by the recipient Government or other end user specifically to violate or abuse human rights. 
* * * * *

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

(Source: Federal Register, 6 Oct 2020) [Excerpts]
85 FR 63009: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations to impose a license requirement on exports and reexports of water cannon systems for riot or crowd control and parts and components specially designed therefor. This action furthers U.S. foreign policy interests for crime control (CC) reasons and is intended to address the spread of violations of human rights globally by enabling the government to review covered exports and reexports worldwide, except to NATO member countries and certain other military allies. This change will also enable the Government to more effectively control exports of water cannons to the Hong Kong Police Force, consistent with a 2019 Congressional mandate to prohibit the licensing of such transactions. This rule also makes conforming amendments.
* DATES: This rule is effective October 6, 2020.
* FOR FURTHER INFORMATION CONTACT: Steven Schrader, Foreign Policy Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, U.S. Department of Commerce, by email at Foreign.Policy@bis.doc.gov, or by phone at 202-482-4252.
* List of Subjects 15 CFR Part 742 Exports, Terrorism. 
15 CFR Part 774 Exports, Reporting and recordkeeping requirements. Accordingly, parts 742 and 774 of the Export Administration Regulations (15 CFR parts 730 through 774) are amended as follows:
(See Source for full text of amendment.)

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

(Source: Federal Register, 6 Oct 2020) [Excerpts]
85 FR 63011: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security (BIS) has the authority under the Export Control Reform Act of 2018 (ECRA) to enforce the Export Administration Regulations (EAR). This rule sets forth the procedure for classified national security information to be submitted ex parte and in camera to a court reviewing any agency action under the EAR. BIS is taking this action to safeguard national security information by ensuring that access to such information is controlled.
* DATES: This rule is effective October 6, 2020.
* FOR FURTHER INFORMATION CONTACT: Anthony Saler, Email: asaler@doc.gov, Office of Chief Counsel for Industry and Security; Phone: 202-482-5301.

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


(Source: Federal Register)
* Defense Department: NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Buy American, Trade Agreements, and Duty-Free Entry [Pub Date: 7 Oct 2020] (PDF)
* USTR: NOTICES; Product Exclusion Amendment: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation [Pub Date: 7 Oct 2020] (PDF) and (PDF)
* USTR: NOTICES; Product Exclusion Extension Amendment: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation [Pub Date: 7 Oct 2020] (PDF) and (PDF)

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

OGS_a25. Commerce/BIS: (No new postings)

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

(Source: State/DDTC, 5 Oct 2020)
Q:Where can I find the “see-through rule” in the ITAR and how does it work?
A:The phrase “see-through rule” is a colloquial phrase popularly used to refer to the impact of certain ITAR controls.  Specifically, it refers to the fact that pursuant to ITAR §120.6, any item described on the USML is a defense article.  ITAR § 123.1(a) further provides that any person who intends to export or temporarily import a defense article must obtain the approval of DDTC prior to the export or temporary import, and ITAR § 123.9(a) requires the written approval of DDTC before reselling, transferring, reexporting, retransferring, transshipping, or disposing of a defense article to any end-user, end-use, or destination other than as stated on the export license, except in accordance with the provisions of an applicable exemption.  These controls do not disappear simply because the defense article is integrated into another item.  If an ITAR-controlled defense article is integrated into a larger system or end-item, the defense article does not lose its identity.  Except as articulated specifically in the USML (see e.g., USML Category XV, Note 2 to paragraph (e)) the ITAR “sees through” the larger system or end-item and continues to regulate that defense article.

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


(Source: Al-monitor, 5 Oct 2020) [Excerpts]

  Canada has halted arms exports to Turkey while it investigates whether the drone technology was improperly used by Azerbaijan’s forces during ongoing clashes with Armenia, the Canadian foreign minister said Monday.
  “In line with Canada’s robust export control regime and due to the ongoing hostilities, I have suspended the relevant export permits to Turkey so as to allow time to further assess the situation,” Foreign Minister Francois-Philippe Champagne said in a statement.
  Azerbaijan and Armenia are locked in the worst outbreak of violence the South Caucasus region has witnessed in years. Hundreds have died during clashes this past week in the contested Nagorno-Karabakh enclave, which is officially part of Azerbaijan but run by ethnic Armenians backed by Yerevan. Turkey is backing Azerbaijan in the conflict.
  The Ploughshares report alleged that “Canada’s export of WESCAM sensors to Turkey poses a substantial risk of facilitating human suffering, including violations of human rights and international humanitarian law.”

Canada last froze new export permits to Ankara in October 2019 following the Turkish military campaign against Syrian Kurdish forces, but the suspension was lifted in May.
  “Canada continues to be concerned by the ongoing conflict in Nagorno-Karabakh resulting in shelling of communities and civilian casualties,” Champagne said. “We call for measures to be taken immediately to stabilize the situation on the ground and reiterate that there is no alternative to a peaceful, negotiated solution to this conflict.”

(Source: Ecns.cn, 6 Oct 2020) [Excerpts]

  Export controls imposed by the United States on suppliers to China’s leading contract chipmaker Semiconductor Manufacturing International Corp are expected to have an adverse impact on the company’s long-term operations as well as on US suppliers and chipmakers, industry analysts said.

  SMIC said in a filing to the Hong Kong Stock Exchange on Sunday that its US suppliers had been issued letters by the US Department of Commerce outlining further export restrictions.

  SMIC said on Sunday that it is evaluating the US Bureau of Industry and Security’s restrictions, which could have “material adverse effects” on its production and operations.

  The chipmaker has had “preliminary exchanges” with the bureau and will continue to communicate with US government departments. SMIC also said it has been operating in compliance with the laws and regulations of all jurisdictions where it does business. …


* Principal Author: Margaret-Rose Sales, Esq., 1-202-263-3414, Mayer Brown
  On September 18, 2020, the United States Department of Commerce announced prohibitions on certain transactions relating to the mobile application (“app”) WeChat that were slated to take effect on September 20, 2020.[FN/1]These prohibitions would ban new downloads of the app by consumers in the United States and effectively disable the functionality of the app for existing US users, including by preventing updates to the app and limiting the ability to send or receive money through WeChat. However, just a day after the Commerce Department’s announcement, a federal district court issued a preliminary injunction halting the implementation of the WeChat prohibitions. In this Legal Update, we provide important background to the Commerce Department’s announcement, assess the scope of the prohibited transactions identified in the September 18 announcement and the potential impact on the business community, and address the uncertainty surrounding the implementation of Commerce’s action. 
I. Background
  WeChat is an app owned and developed by the Chinese company Tencent Holdings Ltd. that counts over 1.2 billion users worldwide. The multipurpose app is used for messaging, audio and video calls, payments, news, gaming, food delivery and ride-sharing. US companies use WeChat to facilitate transactions and engage consumers in China. It is estimated that there are 19 million daily active users of WeChat in the United States.[FN/2]Many in the Chinese-American and Chinese-speaking communities in the United States use WeChat to “communicate, socialize, and engage in business, charitable, religious, medical-related, and political activities with family, friends, and colleagues” both within the United States and around the world.[FN/3]Because most social media apps popular in the United States are blocked in China, WeChat is a key platform for these users to reach their networks in China.[FN/4]
On August 6, 2020, President Trump issued Executive Order 13943, titled “Addressing the Threat Posed by WeChat, and Taking Additional Steps to Address the National Emergency With Respect to the Information and Communications Technology and Services Supply Chain.”[FN5]The WeChat executive order, along with an executive order targeting TikTok issued on the same day, are the latest in a series of Trump administration efforts aimed at Chinese companies operating in the information and communications technology and services sectors. They are part of a more comprehensive effort by the current administration to address various national security concerns related to China. Specifically, the executive orders targeting WeChat and TikTok were issued as “additional steps” to deal with the national emergency declared in Executive Order 13873 of May 15, 2019, which addresses securing the United States’ information and communications technology and services (ICTS) supply chain by essentially establishing a new framework for conducting national security reviews and unwinding transactions involving ICTS with ties to foreign adversaries (including China). (For more information on Executive Order 13873 please see our Legal Update.) Although the Commerce Department has sought public comment on a proposed rule to implement regulations pursuant to Executive Order 13873, to date no regulations have been implemented. That said, the proposed rule does not have to go into effect for the Commerce Department to take action against any transaction covered by the proposed rule. 
  In the WeChat executive order (the “Executive Order”), President Trump expressed concern that “WeChat automatically captures vast swaths of information from its users,” which “threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information.”[FN/6]Section 1(a) prohibits people and property subject to US jurisdiction from carrying out “transactions” with Tencent or its subsidiaries that are “related to WeChat” after 45 days of the Executive Order’s issuance (i.e., September 20, 2020). The Executive Order directs the Secretary of Commerce to identify the transactions that will be prohibited. The limiting of the Executive Order to transactions with Tencent related to WeChat is purposeful and reflects the broader range of Tencent’s US dealings that the administration is not currently targeting.[FN/7]Section 2(a) prohibits any transaction “by a United States person or within the United States” that evades, avoids, or violates the uncertain prohibition in Section 1(a). The definition in the Executive Order of “United States person” appears to be borrowed from US sanctions regulations and means “any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.” 
  The Executive Order does not define “transaction” but rather directs the Secretary of Commerce to identify the transactions that are subject to the Executive Order’s broad prohibitions. The secretary has significant discretion in defining the term “transaction” for purposes of the Executive Order. The underlying statutory authority cited in the Executive Order-the International Emergency Economic Powers Act (“IEEPA”)-provides extremely broad authority to investigate, regulate, or prohibit activities with a particular target based on national security grounds. We note that the courts have generally been highly deferential to the Executive Branch in its adoption of extremely expansive interpretations of IEEPA to impose virtually comprehensive restrictions on trade to address a declared threat to US national security (including in contexts involving free speech and due process-related challenges). However, as illustrated by the preliminary injunction to halt the implementation of the WeChat ban described further below, this deference is not unlimited.
II. Identified Prohibited Transactions
  On September 18, 2020, the Commerce Department issued a press release announcing its identification of transactions prohibited under the Executive Order and posted an advance copy of the implementing Federal Register Notice (the “Notice”) for public inspection.[FN/8]The Notice identified the following six specific transactions as prohibited:
  1. Any provision of services to distribute or maintain the WeChat mobile app, constituent code, or mobile app updates through an online mobile app store or any online marketplace where mobile users within the land or maritime borders of the United States and its territories may download or update apps for use on their mobile devices
  2. Any provision of internet hosting services enabling the functioning or optimization of the WeChat app within the land and maritime borders of the United States and its territories 
  3. Any provision of content delivery services enabling the functioning or optimization of the WeChat mobile app within the land and maritime borders of the United States and its territories 
  4. Any provision of directly contracted or arranged internet transit or peering services enabling the functioning or optimization of the WeChat mobile app within the land and maritime borders of the United States and its territories 
  5. Any provision of services through the WeChat mobile app for the purpose of transferring funds or processing payments to or from parties within the land or maritime borders of the United States and its territories 
  1. Any utilization of the WeChat mobile app’s constituent code, functions, or services in the functioning of software or services developed and/or accessible within the land and maritime borders of the United States and its territories 
  The Notice included important limitations on the scope of prohibited transactions. First, the Commerce Department has drawn a bright line between transactions within the United States and those outside of the United States. The list of prohibited transactions apply only to activities “within the land or maritime borders of the United States and its territories.” Furthermore, the identified prohibitions do not apply to:
Activities related to mobile applications intended for distribution, installation or use outside of the United States by any person, including but not limited to any person subject to U.S. jurisdiction, and all ancillary activities, including activities performed by any U.S. person, which are ordinarily incident to, and necessary for, the distribution, installation, and use of mobile applications outside of the United States (emphasis added).
  This makes clear that the use of WeChat and other transactions related to WeChat that occur outside of the United States, even where such uses are by US persons, are not prohibited. This is an important limitation for the many US businesses that use WeChat in China to communicate with customers, employees, and other business partners as well as to market to customers and make and receive payments. Moreover, even certain “ordinarily incident and necessary” support of such uses that may occur within the United States would qualify for exclusion from the prohibitions. The term “ordinarily incident to, and necessary for” has long been used in the US sanctions context and allows for activity by US persons or with some connection or nexus to the United States that are in support of or facilitate activities that have been authorized by a license but would otherwise be prohibited. This carve out is particularly helpful for US companies with subsidiaries in China that use WeChat as it would allow their US person employees in China to engage in the companies’ transactions related to WeChat outside of the United States. This language also indicates that US person employees, wherever located, who have roles in a company’s WeChat uses and related transactions occurring outside of the United States would not be subject to the prohibitions provided that their involvement qualifies as “ancillary activities … ordinarily incident to, and necessary for[,]” the distribution, installation, and use of WeChat’s app. 
  Second, the Notice expressly stated that the identified prohibitions only apply to “the parties to business-to-business transactions.” Reflecting this targeting of business-to-business activities, the identified prohibitions do not apply to users of the app within the United States. The Notice provided that the following falls outside the scope of identified prohibitions: “The exchange between or among WeChat mobile application users of personal or business information using the WeChat mobile application, to include the transferring and receiving of funds.” This is in line with a September 16 Department of Justice filing in federal court stating that the Commerce Department “does not intend to take actions that would target persons or groups whose only connection with WeChat is their use or downloading of the app to convey personal or business information between users.” The Department of Justice added that such users would not be exposed to “criminal or civil liability.”[FN/9]An unnamed senior Commerce Department official noted that some users will find ways to continue using the app, and it does not intend to prosecute anyone for doing so. According to the official, the Commerce Department’s aim is to decrease the use of the app over time.[FN/10]
IIILooking Ahead
  On August 21, 2020, a complaint was filed in the Northern District of California by the nonprofit U.S. WeChat Users Alliance and several WeChat users in a bid to block the Executive Order.[FN/11]The WeChat Users Alliance is a nonprofit organization made up of WeChat users in the United States who want to continue to using WeChat in the United States. The six individual plaintiffs consist of WeChat users residing throughout the United States who use WeChat for personal and business purposes, as well as an online retailor that uses WeChat to deliver its targeted marketing and advertising services. The plaintiffs filed an amended complaint on September 18, 2020, after the Commerce Department posted the Notice. The plaintiffs claim the Executive Order is unconstitutional and that the Trump administration did not provide sufficient evidence to support its claims that WeChat raises a national security threat. Specifically, the plaintiffs allege that the ban (1) violates the First Amendment to the US Constitution; (2) violates the Fifth Amendment; (3) violates the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb(1)(a); (4) was not a lawful exercise of the president’s and the secretary’s authority under IEEPA-which, as noted above, allows the president to prohibit “transactions” in the interest of national security-because IEEPA, 50 U.S.C. § 1702(b)(1), does not allow them to regulate personal communications; and (5) violates the Administrative Procedures Act because the secretary exceeded his authority under IEEPA and should have promulgated the rule through the notice-and-comment rulemaking procedures in 5 U.S.C. § 553(b). The plaintiffs seek declaratory and injunctive relief.
  The plaintiffs filed a motion for a preliminary injunction on August 28, 2020, against the implementation of the Executive Order, and they filed a supplemental motion for preliminary injunction on September 18, 2020, following the Commerce Department’s posting of the Notice on that day. On September 19, 2020, the court granted the plaintiffs’ motion for a nationwide injunction-limited to the secretary of commerce’s identification of prohibited transactions published on September 18, 2020-“on the ground that the plaintiffs have shown serious questions going to the merits of the First Amendment claim, the balance of hardships tips in the plaintiffs’ favor, and the plaintiffs establish sufficiently the other elements for preliminary-injunctive relief.”[FN/12]The court found that the plaintiffs established “that there are no viable substitute platforms or apps for the Chinese-speaking and Chinese-American community” and that the Secretary of Commerce’s identification of prohibited transactions does not survive intermediate scrutiny for content-neutral restriction of speech because “the prohibited transactions burden substantially more speech than is necessary to serve the government’s significant interest in national security, especially given the lack of substitute channels for communication.” [FN/13] The court reasoned:
  Certainly the government’s overarching national-security interest is significant. But on this record-while the government has established that China’s activities raise significant national-security concerns-it has put in scant little evidence that its effective ban of WeChat for all U.S. users address those concerns. And, as the plaintiffs point out, there are obvious alternatives to a complete ban, such as barring WeChat from government devices, as Australia has done, or taking other steps to address data security.[FN/14]
  On September 24, 2020, the Department of Justice filed a motion to stay the preliminary injunction pending any appeal to the Ninth Circuit and, if necessary, any further review by the Supreme Court.[FN/15]If the court does not revise or stay the entire injunction order, the Department of Justice requests in the alternative that the court stay at least Paragraph 1 of the Commerce Department’s identification of prohibited transactions, which prohibits “[a]ny provision of services to distribute or maintain the WeChat mobile application … through an online mobile application store, or any online marketplace where mobile users within … the United States … may download or update applications for use on their mobile devices.”[FN/16]On October 2, 2020, the Department of Justice appealed the district court’s preliminary injunction order to the US Court of Appeals for the Ninth Circuit. A hearing on the government’s motion to stay the preliminary injunction order pending appeal is scheduled for October 15, 2020.
  The implementation of the Executive Order remains uncertain. For the time being, it remains on hold due to the preliminary injunction, though the Department of Justice has filed a motion to stay preliminary injunction pending any appeal of the district court ruling. The Commerce Department has withdrawn the Notice from public inspection on the Federal Register.[FN/17] While it remains to be seen how the ongoing litigation will affect the Executive Order’s implementation, US businesses should use the current pause to conduct a global assessment of the potential business and operational impacts in the event the list of identified prohibited transactions and exceptions in the Notice are implemented.

(Source: Medium, 6 Oct 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. After several weeks of politicking, the European Union adopted asset freezes and travel bans against 40 individuals in connection with the disputed presidential election in Belarus in August 2020 and repression of opposition protests. The US Office of Foreign Assets Control (OFAC) followed suit by naming eight individuals as Specially Designated Nationals (SDNs) under Executive Order 13405 of 16 June 2006. Meanwhile, the UK and Canada announced sanctions against Belarussian President Aleksandr Lukashenko and seven others. (The EU did not sanction Lukashenko.)
  2. The Open Society Justice Initiative (OSJI) filed suit against US sanctions targeting the International Criminal Court (ICC) under Executive Order 13928. A copy of the OSJI’s complaint is available here. (The arguments are not unlike those made recently against the Trump administration’s WeChat- and TikTok-related Executive Orders, which were also adopted under the International Emergency Economic Powers Act (IEEPA)). Meanwhile, OFAC published the International Criminal Court-Related Sanctions Regulations at 31 CFR Part 520.
  3. OFAC announced a USD 5,864,860 settlement with a New York-based travel insurance company for 2,593 apparent violations of the Cuban Assets Control Regulations (CACR). According to the OFAC settlement notice, the company knowingly made payments via a Canadian affiliate to cover claims made by Canadians traveling to Cuba between 2010 and 2015 (and had a procedure for it, to boot). The total penalty is about 20 times the value of the underlying payments which totaled USD 285,760.
  4. OFAC named three individuals and 13 entities as SDNs under Executive Orders 13582 and 13573, including a Syrian businessman and his telecommunications company, the head of Syria’s General Intelligence Directorate, and the governor of Syria’s Central Bank. Meanwhile, the US State Department announced sanctions on a division of the Syrian Arab Army and two individuals who have provided financial support to Syrian President Bashar al-Assad and his wife.
  5. OFAC issued a warning about sanctions risks when making payments to hackers to unlock computer systems frozen by ransomware attacks. The advisory recommends that parties who facilitate such payments, including banks and cyber-insurance providers, should adopt risk-based controls for identifying potential nexuses to sanctioned persons or territories. The Financial Crimes Enforcement Network (FinCEN) issued its own advisory discussing money laundering risks and reporting obligations associated with ransomware payments.


  Happy Golden Week and a belated happy Mid-Autumn Festival. Fortunately, the weekend didn’t start with a major China-related sanctions development for once. Hopefully those of you in China and Hong Kong got some much needed rest and family time.
  OFAC’s latest advisory underscores the catch-22 faced by victims of ransomware since cryptocurrency addresses were first added to the SDN List beginning in November 2018. What is a US person to do if their servers fall prey to sanctioned hackers? The advisory doesn’t offer much of a way out. It says: “Ransomware payments benefit illicit actors and can undermine the national security and foreign policy objectives of the United States. For this reason, license applications involving ransomware payments demanded as a result of malicious cyber-enabled activities will be reviewed by OFAC on a case-by-case basis with a presumption of denial.” Keep that in mind the next time you are tempted to click on a suspicious email attachment. 

(Source: R|D Alert, 5 Oct 3030)
* Principal Author: Johanna Reeves, Esq., 1-202-715-9941, Reeves & Dola LLP
  On October 5, 2020, the Commerce Department’s Bureau of Industry and Security (BIS) published a Final Rule in the Federal Register to amend the Export Administration Regulations (EAR) by revising, in part, the licensing policy for items controlled for crime control (CC) reasons. BIS announced that it is making the changes to “clarify to the exporting community that licensing decisions are based in part upon U.S. Government assessments of whether items may be used to engage in, or enable violations or abuses of, human rights including those involving censorship, surveillance, detention, or excessive use of force.”
  The Final Rule revises paragraph (b) of 15 C.F.R. § 742.7 to expand its licensing policy as it applies to CC-controlled items, as well as expand its consideration of human rights beyond CC-controlled items. A new subparagraph (b)(1) has been created to instruct that BIS “generally will consider favorably, on a case-by-case basis, license applications for a CC-controlled item unless there is civil disorder in the country or region of destination or if BIS assesses that there is a risk that the items will be used in a violation or abuse of human rights.” Additionally, a new subparagraph (b)(2) has been added to make clear that BIS will consider the licensing policy set forth in new subparagraph (b)(1) when reviewing items controlled for reasons other than CC, with the exception of items controlled for short supply.


*What: ITAR/EAR Controls for Non-U.S. Companies
*When: 16-17 Nov
*Where: Your Computer
*Sponsor: Export Compliance Solutions & Consulting (ECS)
*ECS Speakers: Suzanne Palmer, Marc Binder
*Register: Here or write to phyllis@exportcompliancesolutions.com or call 1-866-238-4018
* * * * * * * * * * * * * * * * * * * *


EN_a115. Bartlett’s Unfamiliar Quotations

(Source: Editor)

* Caroline Gordon (Caroline Ferguson Gordon (6 Oct 1895 – 11 Apr 1981; was a notable American novelist and literary critic who, while still in her thirties, was the recipient of two prestigious literary awards, a 1932 Guggenheim Fellowship and a 1934 O. Henry Award.)
  – “A well-composed book is a magic carpet on which we are wafted to a world that we cannot enter in any other way.”
* Thor Heyerdahl (6 Oct 1914 – 18 Apr 2002; was a Norwegian adventurer and ethnographer with a background in zoology, botany, and geography. Heyerdahl is notable for his Kon-Tiki expedition in 1947, in which he sailed 5,000 miles across the Pacific Ocean in a hand-built raft from South America to the Tuamotu Islands to illustrate the possibility of South America as the source of Pacific island natives.)
  – “Circumstances cause us to act the way we do. We should always bear this in mind before judging the actions of others.”
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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.
Latest Update 


5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
6 Oct 2020: 85 FR 63011:  Information Sharing for Purposes of Judicial Review.

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 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. 

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.


28 Sep 2020: 85 FR 60874: Temporary Amendment for Republic of Cyprus. The latest edition of the BITAR is 28 Sep 2020. 

DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
International Criminal Court-Related Sanctions Regulations.

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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