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20-1109 Monday “Daily Bugle”

20-1109 Monday “Daily Bugle”

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Monday, 9 November 2020

(No items of interest posted) 

  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. EU Council: “Decision (CFSP) 2020/1656 regarding the Implementation of The EU Strategy Against Proliferation of Weapons of Mass Destruction”
  5. EU Council: “Notice for the Attention of Persons subjects to the Restrictive Measures in Syria and against Belarus and Turkey”
  1. EUS: “UK Finance Review of UK Sanctions Statutory Instruments”
  2. Seeking Alpha: “3D Systems Received Federal Subpoenas Related to Export Violation Probes”
  1. Arent Fox: “US Proposes Export Control on Emerging Technology Software to Operate Automated Nucleic Acid Assemblers and Synthesizers”
  2. ST&R Trade Report: “China Moves to Tighten Export Restrictions”
  3. Steptoe: “The UK’s Post-Transition Period Sanctions Regime – Continuity or Change?”
  1. Monday List of Ex/Im Job Openings: 63 Jobs Available – 10 New Job Openings This Week
  1. FCC Academy Presents: 1 and 3 Dec; “U.S. Export Controls: ITAR/EAR” and “FMS”
  1. Bartlett’s Unfamiliar Quotations 
  2. New Version of the BAFTR is Available Today 
  3. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
  4. Weekly Highlights of the Daily Bugle Top Stories 
  5. Submit Your Job Opening and View All Job Openings 
  6. Submit Your Event and View All Approaching Events 

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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

 

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OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 

* Commerce/BIS; Notices; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
Additional Protocol to the United States-International Atomic Energy Agency Safeguards; [Pub. Date: 10 Nov 2020] (PDF)
 
* Commerce/BIS; Notices; Agency Information Collection Activities; Proposals, Submissions, and Approvals:Import, End-User, Delivery Verification Certificates and Firearms Entry Clearance Requirements; [Pub. Date: 10 Nov 2020] (PDF)

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OGS_a22. Commerce/BIS: (No new postings)

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OGS_a44. EU Council: “Decision (CFSP) 2020/1656 regarding the Implementation of The EU Strategy Against Proliferation of Weapons of Mass Destruction”

 
The EU Council Council Decision (CFSP) 2020/1656 of 6 November 2020 on Union support for the activities of the International Atomic Energy Agency (IAEA) in the areas of nuclear security and in the framework of the implementation of the EU Strategy against Proliferation of Weapons of Mass Destruction.
 
 

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OGS_a55. EU Council: “Notice for the Attention of Persons Subject to the Restrictive Measures in Syria and against Belarus and Turkey”

 
The following information is brought to the attention regarding the situation in Syria, and concerning restrictive measures against Belarus and Turkey.
 
 

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COM NEWS

 
UK Finance has published a review of the UK sanctions statutory instruments passed in application of the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) to help financial institutions and firms comply with UK sanctions legislation.
The review looks at areas where: (1) existing EU requirements are not carried through to the UK SI; (2) the SI brings in new or more restrictive requirements; (3) the spirit of the requirement remains, but the wording brings in a different obligation; and (4) a different interpretation or language causes inconsistencies in the SI framework. The review gives detailed assessments of the likely impact of the changes on financial institutions and firms. See the UK section of the site for regulations and more guidance.

(Source: Seeking Alpha News, 6 Nov 2020)
 
3D Systems Corporation, headquartered in Rock Hill, South Carolina, recently stated in its 10-Q filing, that it has pulled back from its post-earnings gains after disclosing that it received  two federal grand jury subpoenas in August that were connected to ongoing reviews by the U.S. government. In late 2017, 3D received an administrative subpoena from the Bureau of Industry and Security of the Department of Commerce, which requested records in connection with possible violations of U.S. export control laws. 3D’s resulting internal investigation identified further potential violations of the International Traffic in Arms regulations and Export Administration regulations. The company made a series of disclosures including one in May of this year to the U.S. Treasury’s Office of Foreign Assets about potential violations of economic sanctions on Iran. 3D says it responded to the two new subpoenas and plans to cooperate with the Department of Justice in the investigation.

COM COMMENTARY

(Source: Arent Fox, 6 Nov 2020)
 
* Principal Author: Kay C. Georgi, Esq., 1-202-857-6293, Arent Fox
 
The US Department of Commerce, Bureau of Industry and Security (BIS) has proposed a new Export Control Classification Number (ECCN), 2D352, to control “software” that is capable of being used to operate nucleic acid assemblers and synthesizers due to concerns the software could be used to create pathogens and toxins as biological weapons.
BIS is concerned that the software is “capable of being utilized in the production of pathogens and toxins and, consequently, the absence of export controls on such “software” could be exploited for biological weapons purposes.” The nucleic acid assemblers and synthesizers that are referred to in ECCN2B352.j. are nucleic acid assemblers and synthesizers that are both: j.1 Partly or entirely automated; and j.2. Designed to generate continuous nucleic acids greater than 1.5 kilobases in length with error rates less than 5% in a single run.
Since this ECCN is not yet on the Australia Group list, the new ECCN 2D352 would be unilateral – unless the US can convince the Australia Group to adopt the ECCN. And because the technology ECCN 2E001 controls “technology” for the “development” of “software” listed under Category 2D, the creation of this ECCN would also create a new technology control in 2E001 on the technology to develop ECCN 2D352 software.
The new ECCN 2D352 would require a license for CB2 column reasons meaning that exports of the software to any country with an X in the CB2 column of the Commerce Country Chart would require a license from BIS. The control would also require a deemed export license to allow software engineers from such countries in the United States on visas to gain access to the development technology.
Comments must be filed by December 21, 2020.
If adopted this will be the fifth set of Emerging Technology controls BIS has published and the second set of unilateral Emerging Technology controls. And software companies beware! It is the second unilateral Emerging Technology control on software.

 
* Contact: messages@strtrade.com, 1-305-894-1035
 
A new law set to take effect in China Dec. 1 appears aimed at creating a Chinese policy counterweight to the U.S. government’s use of export control authorities to restrict the transfer of U.S. dual-use technology to China, including provisions for retaliatory action and extraterritorial jurisdiction, according to a recent report from the Congressional Research Service. China has also taken other actions in recent months that could further restrict exports.
 
Export Control Law
The report states that over the past two years the U.S. and other countries have tightened China’s access to sensitive technology through strengthened export control authorities and licensing practices. Relatedly, there has been a marked increase over the past year in the number of countries that have sought to ban or impose conditions on the participation of China’s telecommunications firm Huawei in their 5G networks, particularly in Europe.
In an apparent response, the export control law gives the Chinese government new policy tools and justifications to deny and impose terms on foreign commercial transactions, both inside and outside of China, on the grounds of China’s national security and national interest. Specifically, the report states, the law authorizes the Chinese government to exercise export controls in retaliation against other countries’ actions, to impose temporary (up to two years) export controls on items not on a control list, and to broadly justify actions with several open-ended clauses.

The law also (1) includes an entity’s “social credit” rating in the factors to be considered for export licenses, “highlighting how the government may seek to leverage and enhance the emerging role of China’s social credit system as a policy tool to influence corporate activity,” and (2) provides for China’s participation in international discussions and regimes and global rulemaking on export controls, “a sign that China could become more active in trying to set rules and norms that advantage China.”
 
Export Catalogue
The report states that in August China’s Ministry of Commerce and Ministry of Science and Technology amended the Catalogue of Technologies Prohibited or Restricted from Export to impose new controls in various technological areas, including the following.
– biotechnology, pharmaceuticals, and medical equipment
– 3-D printing
– construction, petroleum, and power equipment
– machine tools
– high-speed wind tunnel design
– aerospace bearings
– unmanned aerial vehicles
– space-related remote sensing image acquisition, measurement instruments, and data transmission
– vacuum technology
– mapping
– information processing technologies (e.g., personal interactive data algorithms, speech synthesis, artificial intelligence-based interactive interface, voice evaluation, and intelligent scoring)
– cryptographic and cyber-related technologies
According to the report, China’s national industrial plans prioritize these technology areas, and the Chinese government prohibits or restricts foreign investment in these areas while seeking technology transfer through foreign partnerships and acquisitions.
 
Unreliable Entity List
In September China’s Ministry of Commerce issued an order calling for the establishment of an Unreliable Entity List to identify and respond to entities that endanger China’s sovereignty, security, or development; violate “normal” market transaction principles; and cause serious damage to the legitimate rights and interests of Chinese companies, organizations, or individuals. The report states that while this list triggers export control action similar to the U.S. Department of Commerce’s Entity List, China’s justifications for including an entity on the list appear to be much broader. Entities placed on this list may be subject to fines as well as restrictions or prohibitions on participation in China-related trade and investment.

(Source: Steptoe, 6 Nov 2020)
 
* Principal Author: Alexandra Melia, Esq., 44-20-7367-8092, Steptoe
 
On October 21, 2020, the UK Foreign, Commonwealth and Development Office’s Sanctions Unit hosted a webinar to explain how UK sanctions policy and compliance will operate when the Brexit transition period ends. 
EU sanctions will no longer apply in the United Kingdom after 11pm GMT on December 31, 2020. The UK’s new sanctions regime will come into force under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) from that time. Existing sanctions regimes will either be addressed under SAMLA or, in the case of some EU sanctions, continue as retained EU law under the EU (Withdrawal) Act 2018. UN sanctions also will be implemented in UK domestic law.
Whilst the new UK sanctions regime will broadly replicate existing EU sanctions measures, there will be divergence in certain areas.
 
  • No direct transposition of existing EU sanctions regimes into the new UK sanctions regulations: The drafting of the new UK sanctions regulations is more detailed and clearer cut on its face than the comparable EU legislation.  Individuals who or businesses that undertake activity relating to a sanctioned country or entity should read and understand the new UK regulations and related guidance to ensure that they remain compliant.
 
  • Changes to the geographical validity of licenses: Whilst financial sanctions licenses only apply to actions subject to UK jurisdiction, some trade licenses currently granted by the United Kingdom are valid for activity in EU Member States (e.g., trade licenses allowing export from another EU Member State). Under the post-transition period UK sanctions regime only licenses granted by the United Kingdom will be valid in the United Kingdom and UK-granted licenses will not be valid for activity within the jurisdiction of EU Member States. In certain circumstances licenses will be required from the United Kingdom and either an EU Member State or another country to complete a contemplated activity, for example, if a UK person exported controlled goods from another country to a sanctioned destination.
 
  • Differing thresholds for designations: The new threshold for the imposition of sanctions under SAMLA is lower than the “necessity test” under European law. SAMLA allows the “appropriate minister” to make UK designations when he/she has “reasonable grounds to suspect” that a person is or has been involved in a specified activity, is owned, controlled, acting on behalf of, acting at the direction of such person, or is a member of or associated with such person and the appropriate minister considers the designation “appropriate” given the purpose of the particular sanctions regime and having regard to the “likely significant effects” of the designation on the designated person. This difference in threshold may result in the United Kingdom making designations that may not meet the threshold under European law, leading to a divergence in designations.
 
  • Introduction of designation by description: Under SAMLA persons or entities can be designated by description, which is not a feature of the current EU sanctions regime. The description must be “such that a reasonable person would know whether that person fell within it” and can only be made when “it is not practicable for the Minister to identify and designate by name all the persons falling within that description at that time.” No such designations have yet been made and it is unclear whether financial sanctions will extend to persons owned or controlled by individuals who or entities that have been designated by description. Integrating the concept of designation by description into compliance and sanctions screening programmes for UK persons likely will pose teething problems, including determining whether a person falls within a designation by description and accessing information that is reliable and sufficient to allow such assessments to be made. 
 
  • Changes to the process for challenging designations: Persons designated under EU sanctions currently can challenge their designation through the European courts whether the original designation was made under a United Nations sanctions regime or an EU sanctions regime. After the transition period ends, a distinction will be drawn between designations made under the new UK sanctions regime, which will be subject to judicial review by the UK courts, and those made under UN sanctions regimes. The ability of persons designated under UN sanctions regimes to challenge their designation will be limited under SAMLA to requesting that the Secretary of State uses his/her “best endeavours” to secure the removal of their name from the relevant UN list.
 
  • Introduction of “general licenses”: A general license permits a person to undertake an otherwise prohibited activity without the need to apply for a specific license, provided that the person meets certain conditions. Whilst general licenses have been available for some time under various US sanctions programmes, current EU and UK sanctions regimes do not include a comparable concept. Under SAMLA, the Office of Financial Sanctions Implementation (OFSI) can issue general licenses when other licensing derogations or exceptions are not available.  For persons subject to both UK and EU jurisdiction, however, a UK general license will not provide an exemption from the need to apply for a specific license in the relevant EU Member State(s), which will add an additional layer of complexity to sanctions compliance.
 
  • Emerging divergence in EU and UK Russian sectoral sanctions programs: In addition to list-based sanctions, the European Union also maintains categories of prohibited activities in specific countries or with specific persons. After the transition period ends, the United Kingdom will replace existing EU Russia-related sectoral sanctions with a single Russian sanctions regulation that is designed to deliver “substantially the same effect” as existing EU sanctions. The UK’s new Russian sanctions regime incorporates several notable points of divergence from the current EU regime that will add new complexity to sanctions compliance, including:
 
    • Persons exempt from sectoral sanctions – Under the EU’s Russian sectoral sanctions, EU subsidiaries of listed entities are exempt from the prohibition on providing “investment services” for, issuing credit for, or dealing with new bonds, equity and similar instruments issued by certain Russian banks, defence and energy companies. The UK’s new Russian sanctions regime exempts only UK-based subsidiaries. The UK’s new Russian sanctions regime also exempts loans making funds available for a non-restricted trade only when the trade in question has a UK nexus whereas an EU nexus is required under the comparable EU regime. Companies operating in the United Kingdom and European Union will need to carefully consider the exemptions on which they can rely and whether authorisation is required from both the United Kingdom and the European Union.
 
    • Expanded definition of “financial assistance” – EU sectoral sanctions also prohibit, amongst other things, financial assistance related to certain goods with military purposes or certain uses in oil exploration. The Court of Justice of the European Union recently held that financial assistance under the EU regime does not include payment processing, despite contrary guidance from the European Commission. The UK’s new Russian sanctions regime, by contrast, uses the broader term “financial services.” Guidance issued by OFSI in June 2020 confirms that financial services includes payment and money transmission services.
 
  • Changes to the structure of UK sanctions lists: At 11:00 p.m. GMT on December 31, 2020 the UK sanctions list will be updated to include all designations made under SAMLA and will include those designated under all types of sanctions. The OFSI Consolidated List will no longer include EU designations. Additionally, the Consolidated List will only include those designations on the UK sanctions list that are financial in nature. Companies that currently need to check customers/clients against sanctions lists should ensure that they are using the correct lists for their activities.
 
Viewed from Brussels, the fact that the United Kingdom will regain its legal autonomy in the enactment and enforcement of its own sanctions regime is not as such disconcerting. UK and EU officials will still have solid reasons to believe that, for now, their respective legal frameworks largely remain anchored to each other. A good example is the United Kingdom’s continued reliance on the Blocking Statute to protect UK persons and entities trading in countries affected by extraterritorial rules, which for now concerns Iran and Cuba. The sole changing element is the Secretary of State and the Department of Trade and Industry replacing the European Commission in the management and enforcement of the Blocking Statute. 

It is still premature to predict a shift in the sanctions policy objectives that the United Kingdom has helped to design and implement whilst being an EU Member State. In fact, whilst the BREXIT negotiations were underway, the European Union and the United Kingdom stated that they intend to coordinate as much as possible on sanctions policy after the end of the transition period. 
Some commentators have observed that the current EU sanctions process has often been both politically driven by the United Kingdom and dependent on UK intelligence information for its choice of targets. There have been suggestions that the departure of the United Kingdom from the EU sanctions system may either result in less use of sanctions (the value of which is often questioned by both politicians and economic operators) or the EU experiencing greater difficulty in compiling the data necessary to identify sanctions targets.

Sanctions policy aside, the degree of divergence of approach in the architecture of the UK’s new legal framework for sanctions brings with it the potential to create sanctions compliance difficulties for companies operating in both the United Kingdom and European Union that will be required to comply with both regimes. Affected businesses should carefully analyse the requirements of the UK and EU sanctions regimes to ensure that they remain compliant when the Brexit transition period ends.   

TE EX/IM MOVERS & SHAKERS:

MS_a111. Monday List of Ex/Im Job Openings: 63 Jobs Available – 10 New Job Openings This Week

* Cisco; San Jose, CA; Legal Global Export Trade; Job ID: 1308201
* Entegris; Chaska, MN; Trade Compliance Specialist
* Honda Aircraft Company; Greensboro, NC; Trade Compliance Specialist
* Kearfott Corporation; Black Mountain, NC; Export Compliance Adminisrator
* Leonardo; Philadelphia, PA; Import Export Manager; Job ID: 1822
* Sales Force; Georgia, AL; Atlanta, GE; Project Manager, Global Trade 
* Sensata; Thousand Oaks, CA; Export Compliance Supervisor
* Skechers USA; Santa Monica, CA; European customs compliance senior manager 
* Supermicro; San Jose, CA; Compliance Manager
* Thermo Fisher;Hillsboro, OR; Trade Analyst; Job ID: 132058BR

     

Click here for the full list.   

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TE EX/IM TRAINING EVENTS & CONFERENCES

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

 
The ABC of Foreign Military Sales (FMS) (Thursday, 3 Dec 2020)
Register or find more information here.
Presenters: Mike Farrell & Jim Bartlett

* Register for both and take advantage of our discounted price!

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EN EDITOR’S NOTES

EN_a113. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* Marie Dressler (born Leila Marie Koerber, 9 Nov 1868 – 28 Jul 1934; was a Canadian-American stage and screen actress, comedienne, and early silent film and Depression-era film star. In 1914, she was in the first full-length film comedy. She won the Academy Award for Best Actress in 1931.)
  – “To know that one has never really tried — that is the only death.”
 
Monday is pun day.

* What did one flag say to the other? Nothing, it just waved.  
* A bystander consoled the shocked owner of a car that had just been smashed flat by a dropped wrecking ball, and said, “May I say just one word?” “Sure,” the owner says. “Plethora” the bystander replies. “Thanks,” said the car owner. That means a lot.”  
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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 Kimberley Process. Latest update of Bartlett’s Annotated FTR (BAFTR): 9 Nov 2020. 
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
International Criminal Court-Related 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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