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20-1027 Tuesday “Daily Bugle”

20-1027 Tuesday “Daily Bugle”

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Tuesday, 27 October 2020

  1. Treasury/OFAC: “Cuban Assets Control Regulations”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC Publishes DTAG 22 Oct Plenary Consolidated Slides
  4. EU Commission: “Boeing WTO Case – EU Gets Formal Green Light to Impose Duties on U.S. Imports”
  5. EU External Action: “Arms Exports Control – Launch of Online Database Increasing Transparency on EU Arms Exports”
  1. SCMP: “US Moves Closer to Expanding Tech Export Controls List as Competition with China for Future Technology Builds”
  2. Washington Times: “China to Sanction U.S. Weapons Companies Over $1.8 Billion Proposed Arms Sale to Taiwan”
  1. Kelley Drye: “How New CFIUS Rules on Critical Technology Affect CFIUS Filing Strategy”
  2. Nicholas Turner: “Sanctions Top-5 for the Week Ending 23 Oct”
  3. SPB: “US,EU,UK – Export Controls and Sanctions Update”
  1. ECS Presents: “ECS ITAR/EAR Webinar Series”
  2. FCC Academy Presents: 1 and 3 Dec; “U.S. Export Controls: ITAR/EAR” and “FMS”
  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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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register, 27 Oct 2020) [Excerpts]
 
85 FR 67988: 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 government access to funds in connection with remittances to Cuba.
* DATES: This rule is effective November 26, 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.

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OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 
* DHS/CBP: NOTICES; Customs Broker Permit User Fee Payment for 2021 [Pub. Date: 28 Oct 2020] (PDF)
 
* DHS/CBP: PROPOSED RULES; Continuing Education for Licensed Customs Brokers [Pub. Date: 28 Oct 2020] (PDF)
 
* Commerce/BIS: NOTICES; Meetings: Emerging Technology Technical Advisory Committee [Pub. Date: 28 Oct 2020] (PDF)
 
* Treasury/OFAC: NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 28 Oct 2020] (PDF)

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OGS_a23. Commerce/BIS: (No new postings)

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* Tasking: Help DDTC develop a comprehensive compliance risk matrix that could be used by business involved in ITAR-regulated activities to 

* Tasking: DDTC published revisions to ITAR §126.4 licensing exemption on April 19, 2019. Now that U.S. industry has some experience with the revised exemption, DDTC asked DTAG to advise on its utility (positive and challenging experiences) and provide recommendations for improvement. Identify the “Top Three” Issues related to §126.4 that should be addressed.
Download the slides by clicking on this link:

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

 
  Today, the Dispute Settlement Body of World Trade Organization (WTO) formally authorised the EU to take countermeasures against the United States. The EU can now increase its duties on U.S. exports worth up to $4 billion. Today’s decision follows the WTO panel announcement confirming EU retaliation rights in reaction to illegal subsidies granted to the U.S. aircraft maker, Boeing.
  Executive Vice-President for an Economy that Works for People and Commissioner for Trade, Valdis Dombrovskis, said: “Today’s formal approval by the Dispute Settlement Body of the WTO confirms the EU’s right to impose countermeasures for illegal subsidies to the American aircraft maker, Boeing. The European Commission is preparing the countermeasures, in close consultation with our Member States. As I have made clear all along, our preferred outcome is a negotiated settlement with the U.S. To that end, we continue to engage intensively with our American counterparts, and I am in regular contact with U.S. Trade Representative Robert E. Lighthizer. In the absence of a negotiated outcome, the EU will be ready to take action in line with the WTO ruling.”
  The European Commission is currently finalising the process, involving EU Member States, to be ready to use its retaliation rights in case there is no prospect of bringing the dispute to a mutually beneficial solution in a near future.

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  Today the European External Action Service launched an online database on its website that will allow everyone to consult and analyse the data on Member States’ arms exports in a user-friendly manner.
  The database contains information on the value, destination and type of arms export licenses and actual exports from Member States, covering the years 2013-2019. The database will be updated on an annual basis.
All data in the annual reports and in the database is provided by Member States. Annual reports are shared publicly through publication in the Official Journal. On 23 October, the Council adopted the Twenty-Second Annual Report on arms exports covering the data for the year 2019.
  To improve transparency, the new database offers various graphic representations to all those interested in the value, military equipment and destination of European arms exports.
 
Background
  While decisions on issuing export licenses for military equipment are a clear national competence, the assessment criteria on which national authorities base their decisions are European. They are enshrined in the Common Position 2008/944 CFSP as the EU framework on arms export. The EEAS works together with Member States towards increased transparency and convergence in the implementation of that Common Position. It is essential to uphold European values when exporting arms: strict implementation by Member States of the Common Position on arms export is necessary.
  Military weapons have an indispensable role in the preservation of security, freedom and peace, provided they are used in accordance with International Law, including Human Rights Law and International Humanitarian Law. At the same time, weapons of war are by definition capable of inflicting death and destruction. This means that governments that control such weapons must ensure that they are traded and used in a responsible and accountable way, and prevent their diversion to terrorists, criminals and other unauthorised users. Accountability for arms export decisions can only take place when authorities are transparent. The EU does all it can to ensure that utmost transparency is being upheld and calls upon all other States to do the same.
You can find more information about the EU’s arms export control policy here.

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COM NEWS

(Source: South China Morning Post, 27 Oct 2020) [Excerpts] 

 
   Commerce Department wraps up comment period seeking industry input to identify, define and set criteria for technology that will be subject to export controls.
   The list is part of the Trump administration’s ramped-up efforts to control tech exports as competition with China over next-generation tech heats up.
The US has completed a public comment period on finalising a list of technologies critical to American national security that will be subject to stringent export control rules.
  The list is part of the Trump administration’s ramped-up efforts to control tech exports as competition with China over next-generation tech heats up.
The initial proposals for emerging tech and foundational tech were announced in 2018, at the time when the US started cracking down on Chinese smartphone and 5G tech giants Huawei Technologies and ZTE.
  But the process to redefine the list has been slow to strike a delicate balance of safeguarding national security while avoiding depressing foreign investment and domestic innovation in the industry.
   In another step toward implementing the long delayed provisions, the Commerce Department wrapped up the 57-day comment period on Monday seeking industry input on how to identify, define and set criteria for “foundational technologies” that historically have not been subject to such rules.
   These technologies, once finalised, will be added to the Commerce Control List and be restricted from being exported to certain countries.
Industry comments on the proposed rules of foundational technologies were mixed with aggression and caution.
  “Even [if] no outside supplier is allowed to ship certain product to a company, countries like China would try to develop the technology by itself under state controlled national plan,” wrote one commenter identified as James Michael.
   “China government is already doing so” to develop sensitive technology “using US equipment, US IP, US software and with US engineers (Chinese-Americans)” wrote Michael. And “it is important those Chinese companies developing sensitive technology with US technology are also restricted”. …

(Source: Washington Times, 26 Oct 2020) [Excerpts]

 
  China is gearing up to slap sanctions on several U.S. weapons manufacturers for their role in a new weapons sale to Taiwan.
  The companies that will be sanctioned include Lockheed Martin, Boeing and Raythron, among others, a spokesperson for China’s foreign ministry said Monday.
  “To safeguard our national interests, China decided to take necessary measures and levy sanctions on U.S. companies such as Lockheed Martin, Boeing Defence and Raytheon, and those individuals and companies who behaved badly in the process of the arms sales,” spokesperson Zhao Lijian told reporters, as quoted by Reuters.
  The Trump administration last week formally notified Congress of an intended $1.8 billion weapons sale to Taiwan.
  Although the U.S. does not share formal, diplomatic ties with Taiwan, the sale is the latest step in a sharp escalation of tensions between the U.S. and China, which has included the shuttering of diplomatic consulates, trade tariffs, the expulsion of journalists and U.S. sanctions over Chinese policies in Hong Kong and Xinjiang province.
  The notice, announced Wednesday, detailed the weapons package approved by the State Department and includes 135 Boeing-made air-to-ground missiles, also known as Standoff Land Attack Missile Expanded Response (SLAM-ER) missiles, and related maintenance products valued at more than $1 billion; 11 High Mobility Artillery Rocket Systems (HIMARS) M142 Launchers worth roughly $436 million; and six MS-110 Recce Pods valued at $367.2 million.
The decision to sell advanced weapons to Taiwan marks a particularly provocative advance in the eyes of China, which views Taiwan as its own territory.

COM COMMENTARY

 
* Principal Author: Eric McClafferty, Esq., 1-202-342-8841, Kelley Drye & Warren LLP
 
  The Department of Treasury’s office that administers reviews of foreign investments in U.S. companies is changing how it identifies critical technology businesses and related technologies that require mandatory review during a foreign investment process.  The Committee on Foreign Investment in the United States (CFIUS or the Committee) issued a final rule effective October 15, 2020 that updates its approach to identifying export controlled items and know-how (“technology”) of concern to the Committee when reviewing potential national security issues with respect to foreign investments in the U.S.   The Committee had earlier issued its own new approach to identifying those critical technology national security areas of concern, but appears to have recognized that the U.S. government already has a well-established system for determining whether U.S. military, nuclear, and dual-use items/know-how are critical technologies that are sensitive from a national security perspective.  The new CFIUS approach falls back on identifications of sensitive know-how in the existing export controls in the U.S. Department of State’s International Traffic in Arms Regulations (ITAR) governing military item/know-how exports, Nuclear Regulatory Commission and Department of Energy export controls on nuclear products/know-how, and the Commerce Department’s, Bureau of Industry and Security (BIS) controls on dual use items/know-how.
  The new approach implements the requirements of the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA, which amended the prior CFIUS statute) to clarify whether a review will be required of foreign investments by CFIUS for “critical technology businesses.” In short, mandatory review requirements now turn on whether an export license would be required to release export controlled “critical technology” (the know-how required to develop, produce and in some cases to use export controlled items) to the foreign investor country/personnel.  There are a few wrinkles related to export license exceptions, but those can be evaluated on a case-by-case basis for proposed acquisitions and investments.
  This new approach provides more certainty for both U.S. and non-U.S. companies evaluating proposed investments in the U.S. as it relies on a long-established approach to the identification of export controlled know-how. That said, many U.S. companies make products that are subject to export controls and this new approach makes it clearer than ever that more foreign investment in the U.S. will be subject to mandatory CFIUS filings.  The ruling also puts some additional pressure on BIS to continue its progress toward identifying emerging and foundational technologies that should be added to existing traditional export control lists, which are primarily based on multilateral agreements, with some important additional unilateral U.S. controls.  As part of that effort, Commerce re-started its moribund Emerging Technologies and Research Technical Advisory Committee as one part of its effort to identify new technologies for export control.
  The recent expansion by BIS of controls on a series of relatively low level technologies for military end use and end users (and those who provide “support” for those users) in China, Russia and Venezuela is likely to trigger even more mandatory filings, particularly for proposed Chinese investment.  The newly expanded scope of controls for military end users includes a broad swath of relatively basic products, including such common items as stainless steel plate, most industrial pumps and a variety of commonly used valves, items that are commonly traded and not typically thought of as sensitive from a national security standpoint. That said, not all of the newly-listed control categories have associated technology export controls.  Sorting out what is controlled for export and what is not for a particular proposed investment will be critical to determining CFIUS filing strategy.

(Source: Medium, 27 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. The White House formally notified Congress that Sudan would be removed from the State Department’s list of State Sponsors of Terrorism. As mentioned last week, the US Office of Foreign Assets Control (OFAC) lifted its comprehensive sanctions on Sudan in October 2017. (More on this below.)
  2. The US State Department announced that six entities and two individuals in China and Hong Kong were designated as Specially Designated Nationals (SDNs) under Section 1244 of the Iran Freedom and Counter-Proliferation Act. According to a State Department news release, the targets arranged for the sale of container ships to a subsidiary of the Islamic Republic of Iran Shipping Line (IRISL) and arranged for IRISL vessels to berth at ports in China.
  3. OFAC named five Iranian entities as SDNs under Executive Order 13848 for their “brazen attempts to sow discord among the voting populace by spreading disinformation online and executing malign influence operations aimed at misleading US voters.” OFAC also sanctioned Iran’s ambassador to Iraq under Executive Order 13224 for acting for or on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF).
  4. The European Union sanctioned two Russian nationals and the 85th Main Centre for Special Services (GTsSS) of the Main Directorate of the General Staff of the Armed Forces of the Russian Federation (a.k.a. “Fancy Bear“) for their roles in a cyber attack on the German Federal Parliament in 2015.
  5. OFAC announced a USD 4,144,651 settlement with a US-based company for violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to the OFAC settlement notice, the company’s indirectly held Turkish subsidiary sold products to distributors with knowledge they would be sold to Iran in breach of the parent’s sanctions policy. (Again: Non-US companies owned or controlled by US persons are subject to the ITSR.)

Comments

  Sudan is one country that has benefited from some relative continuity in the approaches taken by the Obama and Trump administrations since 2017. Barack Obama issued Executive Order 13761 on 13 January 2017, a few days before Donald Trump’s inauguration. That order would have allowed OFAC’s Sudan-related sanctions to terminate automatically on 12 July 2017. The Trump administration extended the deadline under Executive Order 13804, and OFAC’s comprehensive sanctions expired accordingly on 12 October 2017. Since then, Sudan has been subject to heightened export controls under the Export Administration Regulations (EAR) owing to its inclusion on the State Department’s list of State Sponsors of Terrorism. Those will also be lifted in due course. (NB: Any breaches of the sanctions that took place before 12 October 2017 are still fair game for an OFAC enforcement action.)
The decision accompanied the announcement that Sudan and Israel would normalize their relations. According to a White House press statement, Sudan also agreed to transfer USD 335 million into an escrow account for US victims of terrorism and their families who have outstanding claims against the Sudanese government. What might other sanctioned countries learn from all this? Deal making plus regional politics equals sanctions relief.

 

* Principal Author: George N. Grammas, Esq., 1-202-626-6234, Squire Patton Boggs 
 
  This publication from our International Trade Practice looks at the shifting regulatory framework for international trade compliance on both sides of the Atlantic.
  In this issue, we cover:
 
US
  • BIS Amends EAR to Suspend License Exceptions for Hong Kong
  • BIS Designates Huawei Entities, Removes Temporary General License and Amends Foreign-produced Direct Product Rule
  • National Security Direct Product Rule
  • Designated Entity Direct Product Rule
  • BIS Publishes ANPRM Regarding Certain Foundational Technologies
  • DDTC Announces Upcoming Changes to the Policy of Denial for the Republic of Cyprus
  • OFAC Announces Settlement Agreement With an Individual
  • OFAC Announces Settlement Agreement With Deutsche Bank Trust Company Americas
  • OFAC Targets Hizballah Executive Council Companies and Official
  • OFAC Amends Cuba Assets Control Regulations
EU
  • EU Issues Notice to Stakeholders Regarding UK’s Withdrawal and Export Controls
  • EU Imposes Sanctions Against Cyberattacks
  • EU Announces Sanctions on Belarus
  • EU Extends Sanctions With Respect to the Situation in Ukraine
  • EU Imposes Sanctions Related to the Libyan Conflict
  • Commission Announces Actions to Make Europe’s Raw Materials Supply More Secure and Sustainable
UK
  • UK Prepares to Join US and Canada in Sanctioning Belarus for Human Rights Violations
  • EU Raises Possibility on Sanctioning the UK for Breach of Brexit Withdrawal Agreement
Read more here.

EN 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 phyllis@exportcompliancesolutions.com or call 1-866-238-4018
* * * * * * * * * * * * * * * * * * * *

U.S. Export Controls: ITAR & EAR from a non-U.S. Perspective (Tuesday, 1 Dec 2020) by Jim Bartlett and Marco Crombach
Register or find more information here

 
The ABC of Foreign Military Sales (FMS) (Thursday, 3 Dec 2020) by Mike Farrell and Jim Bartlett
Register or find more information here
* Register for both and take advantage of our discounted price!
 * * * * * * * * * * * * * * * * * * * *

EN EDITOR’S NOTES

EN_a114. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* James Cook (Captain James Cook FRS; 27 Oct 1728 – 14 Feb 1779; was a British explorer, navigator, cartographer, and captain in the British Royal Navy. He made detailed maps of Newfoundland before making three voyages to the Pacific Ocean, during which he achieved the first recorded European contact with the eastern coastline of Australia and the Hawaiian Islands, and the first recorded circumnavigation of New Zealand.
  – “Do just once what others say you can’t do, and you will never pay attention to their limitations again.”
 
* Niccolo Paganini (27 Oct 1782 – 27 May 1840; was an Italian violinist, violist, guitarist, and composer. He was the most celebrated violin virtuoso of his time, and left his mark as one of the pillars of modern violin technique. His 24 Caprices for Solo Violin Op. 1 are among his best known compositions, and have served as an inspiration for many prominent composers.)
 – “I am not handsome, but when women hear me play, they come crawling to my feet.”
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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. 

9 Oct 2020: 
85 FR 64014:  Revisions to the Unverified List (UVL)

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. 

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
Amendment 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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