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20-1123 Monday “Daily Bugle”

20-1123 Monday “Daily Bugle”

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Monday, 23 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. U.S. District Court Awards $56.4 Million From Sale of Airbus SE Deferred Prosecution Agreement Bond for Violation of Arms Export Control Act
  5. EU Council: “Concerning Restrictive Measures in Respect of Actions Undermining or Threatening the Territorial Integrity, Sovereignty And Independence of Ukraine”
  6. EU Council: “Decision 2011/72/CFSP and Council Regulation (EU) No 101/2011 Concerning Restrictive Measures Directed Against Certain Persons, Entities and Bodies in View of The Situation in Tunisia”
  1. EUS: “UK Sanctions Unit Advice on Preparing For The End Of The Transition Period”
  2. Reuters: “In Latest China Jab, U.S. Drafts List of 89 Firms with Military Ties”
  1. Covington: “President Trump Issues Executive Order Prohibiting Transactions Involving Publicly Traded Securities of Communist Chinese Military Companies”
  2. Kirkland & Ellis: “Executive Order Prohibits Transactions in Securities Issued by Companies Associated with the Chinese Military”
  3. ST&R Trade Report: “Export Enforcement Regulations Updated”
  4. Steptoe: “OFAC Issues Updated General License 8G Extending Authorization of Transactions with PdVSA for Five Petroleum Companies”
  1. Monday List of Ex/Im Job Openings: 64 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 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

[No relevant federal items for today]

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OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 

* Commerce/BIS; Notices; Agency Information Collection Activities; Proposals, Submissions, and Approvals:Rated Orders Under the Defense Priories and Allocations System; [Pub. Date: 24 Nov 2020] (PDF)
 
* State; Notices; Designation as a Specially Designated Global Terrorist:Abdullahi Osman Mohamed and Maalim Ayman; [Pub. Date: 24 Nov 2020] (PDF) (PDF)

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OGS_a22. Commerce/BIS: (No new postings)

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OGS_a44. U.S. District Court Awards $56.4 Million From Sale of AIRBUS SE Deferred Prosecution Agreement Bond for Violation of Arms Export Control Act

(Source: 466 F.Supp.3d 63, 2020 WL 2896661) [Excerpts]
 
* Case: UNITED STATES of America, Plaintiff, v. $56,471,329.88 IN PROCEEDS FROM THE SALE OF A BOND BELONGING TO AIRBUS SE, Defendants.
* Citation: 466 F.Supp.3d 63, 2020 WL 2896661; Civil Action No. 20-cv-408
* Dates:  Filed 06/03/2020; Decided 
* Counsel: Zia Mustafa Faruqui, U.S. Attorney’s Office for the District of Columbia, Washington, DC, for Plaintiff.  Defendant’s counsel did not appear.
* Judge: Thomas F. Hogan, Senior District Judge
 
Background: Government brought civil forfeiture action in rem against defendant property consisting of $56,471,329.88 in proceeds from sale of a bond traceable to violation of Arms Export Control Act. Government moved for entry of default judgment and order of forfeiture.
* Holdings: The District Court, Thomas F. Hogan, Senior District Judge, held that:
(1) government satisfied its notice obligations, and
(2) proceeds were subject to civil forfeiture.
 
* Decision:  DEFAULT JUDGMENT AND ORDER OF FORFEITURE
 This matter comes before the Court upon the Plaintiff’s Motion for Entry of Default Judgment and Order of Forfeiture, as well as the Memorandum of Points and Authorities submitted in support of it. The Court has carefully reviewed the history of this case, which is a civil forfeiture action in rem against defendant property consisting of $56,471,329.88 in proceeds from the sale of a bond belonging to Airbus SE (“Defendant Property”).
The Defendant Property is subject to forfeiture pursuant to 18 U.S.C.§ 981(a)(1)(C), of all right, title, and interest in the Defendant Property, as property, real or personal, constituting or derived from proceeds traceable to a violation of the Arms Export Control Act (“AECA”), 22 U.S.C. § 2778, et seq., and the AECA’s implementing regulations, the International Traffic in Arms Regulations (“ITAR”), 22 C.F.R. § 130.9.  . . .
On February 12, 2020, the plaintiff commenced this forfeiture action against the Defendant Property by filing a Verified Complaint for Forfeiture In Rem. See Complaint, ECF 1. Plaintiff identified Airbus SE as the only potential claimant with standing as to the Defendant Property; however, Airbus SE waived the direct notice requirement in its Deferred Prosecution Agreement (“DPA”) and acknowledged that the Defendant Property was subject to forfeiture. SeeDPA, United States v. Airbus SE, No. 1:20-cr-00021 (TFH), 2020 WL 1226425 (D.D.C. Jan. 31, 2020). Such waivers extinguish any ownership interest held in the Defendant Property and any direct notice obligations on the government. See United States v. Assorted Artifacts, 2017 WL 1205086 (E.D. Va. Feb. 21, 2017),report and recommendation adopted2017 WL 1199735, (E.D. Va. Mar. 29, 2017) (government not required to send direct notice where it obtained a waiver from the only known interested party); see also United States v. Two AN/PVS-14 Monocular Night Vision Devices, 2018 U.S. Dist. LEXIS 55546 at 3-4 (D.C. Apr. 2, 2018) (“Company 1 provided to the Government a signed Consent and Agreement to Forfeiture, in which Company 1 waived any interest it had in the NVDs.”).
The plaintiff provided notification of this civil forfeiture action by publication pursuant to Rule G(4)(a)(iv) of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. On February 14, 2020, the government commenced notification of this forfeiture action on an internet site,http://www.forfeiture.gov, for 30 consecutive days pursuant to the Verified Complaint for Forfeiture In Rem. Thus, any verified claim in response to notice by publication had to be filed not later than April 14, 2020.
No person filed a verified claim, thus, the Clerk of Court determined that the notice requirements were satisfied when it entered default in this matter on May 22, 2020. See Clerk’s Entry of Default, ECF 6.  . . .
 
Government satisfied its notice obligations in civil forfeiture action in rem against defendant property consisting of proceeds from sale of a bond traceable to violation of Arms Export Control Act, where only potential claimant waived direct notice requirement in its deferred prosecution agreement and acknowledged that property was subject to forfeiture, government commenced notification on government forfeiture website for 30 consecutive days, no person filed verified claim, and time for filing claim had expired. 22 U.S.C.A. § 2778 et seq.; Supplemental Admiralty and Maritime Claims Rules G(4)(a)(iv), G(5)(a)(ii).  . . .
 
Based on the Government’s well-pleaded allegations of the Complaint and Airbus’s admissions in the DPA, which established prima facie forfeitability of the Defendant Property, the Court finds that the Defendant Property is property that constituted or was derived from proceeds traceable to a violation of AECA, 22 U.S.C. § 2778, et seq., and the AECA’s implementing regulations, ITAR, 22 C.F.R. 130.9. As such, the Defendant Property is subject to forfeiture to the United States, pursuant to 18 U.S.C. § 981(a)(1)(C). The Court finds that the Verified Amended Complaint for Forfeiture In Rem states a factual and legal basis for forfeiture. In addition, the Court also finds that process was fully issued in this action with respect to the Defendant Property and returned according to law. In consequence, no response, answer, or defenses remain interposed and no opposition has been made to the Plaintiff’s Motion for Entry of a Default Judgment and for Order of Forfeiture.
*4 Based upon the foregoing and the entire record in this action, it is by the Court, on this 3rd day of June, 2020, hereby
ORDERED, that Plaintiff’s Motion for Entry of a Default Judgment and Order of Forfeiture is GRANTED; and it is further ORDERED, ADJUDGED, AND DECREED, that the Defendant Property is HEREBY DECLARED FORFEITED TO THE UNITED STATES OF AMERICA, and that title to the Defendant Property is vested in the United States of America; and that no right, title, or interest in the defendant property shall exist in any other person; and it is further ORDERED, that the Clerk of the Court shall forward a certified copy of this Order to USADC.AFMLS2@usdoj.gov.
ORDERED, that the Clerk of the Court may close this matter as fully resolved.

 
 

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OGS_a55. EU Council: “Concerning Restrictive Measures in Respect of Actions Undermining or Threatening the Territorial Integrity, Sovereignty And Independence of Ukraine”

(Source: Council of the European Union, 20 Nov 2020) [Excerpts]
 
On 10 September 2020, the Council adopted Decision (CFSP) 2020/1269 amending Decision 2014/145/CFSP. The Council Decision renewed the existing restrictive measures for a further 6 months, until 15 March 2021, and amended the list of individual designations subject to restrictive measures as set out in the Annex to Decision 2014/145/CFSP, concerning 41 individuals and 28 entities.

The Candidate Countries Montenegro and Albania, and the EFTA countries Liechtenstein and Norway, members of the European Economic Area, align themselves with this Council Decision. They will ensure that their national policies conform to this Council Decision. The European Union takes note of this commitment and welcomes it.
 
 

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OGS_a66. EU Council: “Decision 2011/72/CFSP and Council Regulation (EU) No 101/2011 Concerning Restrictive Measures Directed Against Certain Persons, Entities and Bodies in View of The Situation in Tunisia”

(Source: Official Journal of the European Union, 23 Nov 2020) [Excerpts]
 
The following information is brought to the attention of the persons that appear in the Annex to Council Decision 2011/72/CFSP, and in Annex I to Council Regulation (EU) No 101/2011, concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Tunisia.
The Council has received information from the Tunisian authorities that will be considered within the framework of the annual review of the restrictive measures concerning all persons listed in the Annex to Decision 2011/72/CFSP and in Annex I to Regulation (EU) No 101/2011.
 
 

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COM NEWS

 
The Sanctions Unit of the UK Foreign Commonwealth and Development Office has advised that, after the transition period (11pm on 31 December 2020):
  • The new UK regulations and guidance will come into effect, which should be read and understood to ensure compliance;
  • Only licences granted by the UK will be valid under UK sanctions legislation, and licences granted by the UK will not be recognised by the EU in respect of EU sanctions legislation;
  • The UK Sanctions List covers all sanctions made under SAMLA 2018, and the OFSI Consolidated List of Financial Sanctions Targets covers all financial sanctions designations. Organisations should ensure they are checking the correct list, and some may need to check both; and
  • Substantial changes will be made to the data in both lists given that UK designations will be made under a new legal framework.
The UK’s licensing authorities are:
  • HMT Office of Financial Sanctions Implementation (OFSI) for asset freezes and other financial measures (OFSI@hmtreasury.gov.uk);
  • DIT Import Licensing Branch for import measures (ilb@trade.gov.uk)
  • DIT Export Control Joint Unit for export and all other trade measures (help@trade.gov.uk)

DfT Transport Sanctions team for transport measures (transportsanctions@dft.gov.uk)

(Source: Reuters, 23 Nov 2020) [Excerpts]
 
The Trump administration is close to declaring that 89 Chinese aerospace and other companies have military ties, restricting them from buying a range of U.S. goods and technology, according to a draft copy of the list seen by Reuters.
 
The list, if published, could further escalate trade tensions with Beijing and hurt U.S. companies that sell civil aviation parts and components to China, among other industries.
 
Speaking in Beijing, Chinese Foreign Ministry spokesman Zhao Lijian said China “firmly opposes the unprovoked suppression of Chinese companies by the United States.”  “What the United States is doing severely violates the principle of market competition and international norms for trade and investment that the U.S. claims to uphold,” he added. “Chinese companies have always operated in accordance with the law and strictly follow local laws and regulations when operating overseas, including in the United States,” Zhao said.

COM COMMENTARY

(Source: Covington, 19 Nov 2020) [Excerpts]
 
* Principal Author: Trisha B. Anderson, Esq., 1-202-662-5048, Covington
 
On Thursday, November 12, 2020, President Trump signed an Executive Order (the “Order”) that, beginning on January 11, 2021, will prohibit U.S. persons from transacting in the publicly traded securities of 31 companies that the Department of Defense has identified as “Communist Chinese military companies.” The requirement for the Department of Defense to create a list of companies was directed by Congress pursuant to Section 1237 of the National Defense Authorization Act (“NDAA”) for Fiscal Year 1999. The Order, entitled “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies,” follows months of U.S. government scrutiny and regulatory action with respect to the activity of Chinese companies. It may also represent one in a series of last-minute actions taken on China by the Trump Administration as it nears the end of its term.

Finding that China “is increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses, which continues to allow the PRC to directly threaten the United States homeland and United States forces overseas, including by developing and deploying weapons of mass destruction, advanced conventional weapons, and malicious cyber-enabled actions against the United States and its people,” the Order declares a national emergency with respect to the threat posed by China’s “military-industrial complex” under the authorities granted in the International Emergency Economic Powers Act (“IEEPA”), the National Emergencies Act, and Section 301 of Title 3 of the United States Code.
Under the Order, U.S. persons will have through November 11, 2021, to divest securities in these companies. Furthermore, the Order authorizes the Secretaries of Defense and/or Treasury to designate additional parties as Communist Chinese military companies subject to the same prohibitions (also accompanied by a one-year divestment period), and delegates authority to the Secretary of the Treasury, in consultation with other agencies, to enforce the Order, including by promulgating implementing rules and regulations.
 
Principal Elements of the Executive Order
Prohibited Conduct
Pursuant to the Order, beginning at 9:30 AM Eastern Standard Time on January 11, 2021, U.S. persons are prohibited from engaging in “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities,” of the “Communist Chinese military companies” on two existing lists of Chinese companies incorporated by reference in the Order. Moreover, the same restriction applies beginning 60 days after the designation of any additional Communist Chinese military companies pursuant to the Order.

The Order defines “United States person” as “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 Order defines “security” by reference to Section 3(a)(10) of the Securities Exchange Act of 1934, but then adds to this definition “currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding 9 months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.” The latter portion of the definition appears to refer to debt instruments collectively known as commercial paper.

Importantly, the prohibitions in Section 1(a) of the Order do not apply unless the security also is “publicly traded,” and the Order includes no definition for this concept. The Order also includes no obvious geographic limitation for where covered securities are publicly traded, so absent contrary guidance from the U.S. Department of the Treasury, even transactions by U.S. persons involving affected securities traded on non-U.S. exchanges would appear to be prohibited. Nevertheless, by focusing on “publicly traded” securities, the Order appears to make clear that certain securities transactions involving the affected companies-such as joint venture investments-are not prohibited.
 
Affected Securities
For the initial round of prohibitions slated to go into effect on January 11, 2021, the Order relies on a list of “Communist Chinese military companies” promulgated by the Department of Defense pursuant to a mandate in Section 1237 of the Fiscal Year 1999 NDAA (as amended). The Act required the Department of Defense to create a list of “those persons operating directly or indirectly in the United States or any of its territories and possessions that are Communist Chinese military companies,” with such persons defined to include parties listed in one of two Defense Intelligence Agency reports from the 1990s, and any other person that “is owned or controlled by, or affiliated with, the People’s Liberation Army,” and “is engaged in providing commercial services, manufacturing, producing, or exporting.”

Although the mandate to promulgate a list of Communist Chinese military companies is more than 20 years old, the Department of Defense issued the first names, in response to Congressional interest, in June and August 2020. A total of 31 companies have now been formally identified by the Department of Defense as “Communist Chinese military companies.” These companies include, for example, China Mobile Communications Group and China Telecommunications Corp., both of whose shares are traded on U.S. exchanges.[FN/1]

The Order also contemplates future additional designations by the Secretaries of Defense and/or Treasury. Sections 4(a)(ii) and (iii) of the Order define “Communist Chinese military company” to include:
  • any person that the Secretary of Defense, in consultation with the Secretary of the Treasury, designates in the future pursuant to the authority” of the Order; or
  • any person that the Secretary of the Treasury separately determines “is owned or controlled by the People’s Liberation Army” and “is engaged in providing commercial services, manufacturing, producing, or exporting” or is a “subsidiary of a person already determined to be a Communist Chinese military company.”
 
Certain Divestitures Authorized
Notwithstanding these prohibitions on the specified transactions, Section 1(b) of the Order authorizes on or before November 11, 2021, “purchases for value or sales . . . solely to divest, in whole or in part” securities in companies designated under Section 4(a)(i) of the Order. With respect to future designations that may be made under Section 4(a)(ii) or (iii) of the Order, Section 1(c) of the Order authorizes, for one year from the date on which a person is determined to be a Communist Chinese military company, “purchases for value or sales . . . solely to divest, in whole or in part, from securities that any United States person held” on the date that the applicable prohibition takes effect.
 
[FN/1] See Chinese Companies Listed on Major U.S. Stock Exchanges, U.S.-China Economic and Security Review Commission, Oct. 2, 2020, https://www.uscc.gov/sites/default/files/2020-10/Chinese_Companies_on_US_Stock_Exchanges_10-2020.pdf.

(Source: Kirkland & Ellis, 20 Nov 2020)
 
* Principal Author: Cori A. Lable, Esq., 852-3761-3592, Kirkland & Ellis
 
On November 12, 2020, President Trump issued an Executive Order entitled “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies” to prohibit U.S. persons[FN/1] from engaging in transactions[FN/2] involving publicly traded securities[FN/3] tied to certain companies designated in June and August by the U.S. Department of Defense (“Defense”) as associated with the Chinese military. See also 85 Fed. Reg. 73185 (Nov. 17, 2020). In a novel manner, the prohibitions exercise the extraordinary discretion granted to the President under the International Emergency Economic Powers Act (“IEEPA”), which is the authorizing legislation for a number of U.S. embargoes and sanctions programs and traditionally is invoked to block the assets of persons, such as terrorists, weapons proliferators and narcotics traffickers. They take effect on January 11, 2021, which also is the trigger date for a 10-month wind-down period for divestments, ending on November 11, 2021.
 
The View From Washington
The Executive Order is the first international trade-related action taken by the President since the election and raises the question of whether this is only the first of several actions to be taken with respect to China prior to the January 20, 2021, inauguration. While the Trump administration has adopted a number of conventional measures targeting China, such as the imposition of tariffs on Chinese imports and the implementation of more stringent export controls, the investment-related prohibitions are emblematic of the willingness of the administration to use its IEEPA authorities more unconventionally. Another prominent recent example of such usage of IEEPA is the imposition of restrictions targeted at the operation of TikTok and WeChat mobile applications in the U.S., though the implementation of the relevant Executive Orders remains enjoined.

It remains to be seen whether the restrictions in their current form will survive the presidential transition, i.e., whether the incoming Biden administration will maintain the Executive Order altogether or further modify its prohibitions. It should be noted, however, that proposed legislation, which has passed the Senate and is pending before the House, would grant the U.S. government greater authority to delist Chinese companies on U.S. exchanges. Thus, beyond the Executive Order, there are calls in Congress to more closely scrutinize publicly traded Chinese companies. Furthermore, the U.S. Securities and Exchange Commission reportedly also intends to propose a regulation by the end of this year that could lead to the delisting of Chinese companies for not complying with U.S. auditing rules.
 
Scope of Applicable Prohibitions
According to the Executive Order, the Chinese national strategy of “Military-Civil Fusion” compels Chinese companies to support Chinese military and intelligence activities, even while such companies “raise capital by selling securities to United States investors that trade on public exchanges both here and abroad, lobbying United States index providers and funds to include these securities in market offerings, and engaging in other acts to ensure access to United States capital.” As of the date of the Executive Order, these designated companies are those previously determined by Defense to be “Communist Chinese military companies” operating directly or indirectly in the U.S. in accordance with the statutory requirement of Section 1237 of the National Defense Authorization Act for Fiscal Year 1999, as amended. The initial designations were made at the behest of Senators Schumer (D-NY) and Cotton (R-AK), though a recent report indicates more designations are forthcoming.

Accordingly, effective as of 9:30 a.m. EST on January 11, 2021, U.S. persons will be prohibited from engaging in any “transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities,” of any of the companies. These same prohibitions also will take effect 60 calendar days after a company is similarly designated either by Defense or the U.S. Department of the Treasury (“Treasury”).[FN/4]

The Executive Order defines “transactions” narrowly as the “purchase for value of any publicly traded security.” By referencing the Securities Exchange Act of 1934, the term “securities” should be understood to include both stocks and bonds, and it appears likely that the new restrictions will cover purchases of debt securities.   

However, while the prohibitions regarding “transactions” in publicly traded securities seemingly are straightforward, the Executive Order does not define the terms “derivative of” or “designed to provide investment exposure,” which could create considerable uncertainly until Treasury, after consultation with the Secretary of State, the Secretary of Defense, the Director of National Intelligence and other federal agencies, as appropriate, promulgates implementing regulations or issues clarifying guidance. It seems, however, that beyond individual investments into these companies directly, these prohibitions are intended to capture investment vehicles such as mutual funds, as well as foreign investment funds, in which U.S. persons may be passively invested, such as through pension funds with diverse investments to track market indexes.

Furthermore, as noted above, U.S. persons are permitted to divest from affected securities until November 11, 2021, or for a period of 10 months after the effective date of the prohibitions for any companies designated at a later date (i.e., approximately one year from the date any such entity is listed). After the divestment period ends, presumably Treasury, likely through the Office of Foreign Assets Control (“OFAC”), will be empowered to issue licenses to U.S. persons to engage in “transactions” in such securities, but it remains to be seen whether licenses will be required to divest, in whole or in part, or to engage in ancillary transactions. For example, pending further guidance, the prohibitions in their current form do not appear to extend to publicly traded entities that are parents or subsidiaries of designated entities but are not themselves designated, which should be clarified.    

Note that a significant number of the listed entities already are subject to restrictions imposed by the U.S. government, including those administered by the Federal Communications Commission and the Department of Energy. Notably, many of these entities appear on the Entity List, which is maintained by the Bureau of Industry and Security, U.S. Department of Commerce in accordance with the U.S. Export Administration Regulations (“EAR”).[FN/5] Consequently, these firms are generally prohibited from obtaining items that are “subject to the EAR,” which is a narrower set of restrictions that ordinarily would not impact securities investments. While a number of these companies were placed on the Entity List several years ago, some (such as CCCC, Hikvision and Huawei) are more recent additions and serve to advance U.S. foreign policy interests or promote human rights. CCCC, for example, was listed to counter Chinese infrastructure projects in the South China Sea, whereas Hikvision was listed to thwart human rights abuses in the Xinjiang Uyghur Autonomous Region and Huawei was listed to inhibit Chinese technological leadership, particularly with respect to 5G.
 
Key Takeaways
 
  • The Executive Order targets publicly traded securities, including stocks and bonds, and will likely also cover transactions in debt securities, issued by a number of Chinese companies, many of which already are subject to restrictions under U.S. export control and other regulations.
  • The Executive Order’s lack of definitions for certain key terms will likely, in the absence of clarifying guidance, create uncertainty regarding a broad range of transactions that may be ancillary to the holding of affected securities.
  • The Executive Order applies IEEPA in a novel fashion that extends beyond its more conventional use as the statutory authority underpinning the embargoes, sanctions programs and asset blocking measures administered by OFAC.
  • It remains to be seen whether the incoming Biden administration will object to the scope of the Executive Order or retain its prohibitions, but if the latter, we would expect carefully considered rulemaking implementing the prohibitions.
  • Despite the inherent uncertainty regarding the ultimate implementation of the Executive Order, U.S. investors and their advisers are well advised to begin inventorying potentially affected securities and to consider divestment or other effective mitigation strategies.
 
 
[FN/1] For purposes of the Executive Order, the term “U.S. person” 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.”
 
[FN/2] The term “transaction” is defined as a “purchase for value” of any publicly traded security.
 
[FN/3] The term “security” includes the definition set forth in section 3(a)(10) of the Securities Exchange Act of 1934, Public Law 73-291, as codified as amended at 15 U.S.C. 78c(a)(10), except that currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited, shall be a security for purposes of this order.
 
[FN/4] Under the Executive Order, Treasury also is authorized to target for designation subsidiaries of those companies identified by the U.S. Department of Defense, or entities that are owned or controlled by the People’s Liberation Army or entities involve in China’s defense industrial base.
 
[FN/5] Certain other of these entities also presumptively should be treated as military end users for purposes of applying the specific restrictions set forth at Section 744.21 of the EAR, resulting in stricter export license requirements.

 
* Contact: messages@strtrade.com, 1-305-894-1035
 
The Bureau of Industry and Security has issued a final rule that, effective Nov. 18, makes a number of changes to the Export Administration Regulations to (1) implement the export enforcement portions of the Export Control Reform Act and (2) revise provisions concerning the issuance of licenses and denial orders and the payment of civil penalties.  
 
ECRA Changes. BIS states that this rule implements the following enforcement provisions, consistent with the expanded authorities provided by the ECRA.
– BIS has authority to conduct (1) pre-license checks and post-shipment verifications outside the U.S. and (2) export enforcement investigations both within and outside the U.S.
– The results of PLCs, when available, will be communicated to licensing officials within existing timeframes governing the conduct of PLCs and will be considered in determining the outcome of a license application.
– Persons located outside the U.S. must produce for inspection books and other information required to be kept pursuant to the EAR in addition to records as specified in the ECRA, and only U.S. officials designated by BIS may require such production.
– Requirements for clearing export shipments are described more accurately.
– Actions that the BIS Office of Export Enforcement may take to ensure that exports, reexports, and transfers (in-country) comply with all laws and regulations administered or enforced by BIS are updated and revised.
– The conduct of BIS enforcement activities may be governed by other legal and procedural principles.
– OEE may order the return and unloading of cargo to ensure export compliance, and the actions a carrier must take to return and unload cargo when ordered by OEE are specified.
 
Non-ECRA Changes. This rule also makes the following changes unrelated to the implementation of the ECRA.
– Any license obtained based on a false or misleading misrepresentation or the falsification or concealment of a material fact is void as of the date of issuance.
– The maximum time period for payment of civil penalties as a condition of receiving certain privileges under the EAR is extended from one year to two years.
– The circumstances under which the Directorate of Defense Trade Controls may not issue licenses, or may deny licenses, involving certain parties indicted for or convicted of certain export violations are reflected more accurately.
– The director of OEE is the designated BIS official for issuing orders denying the export privileges of persons convicted of certain criminal offenses, notifying affected persons of such orders, and determining the terms of such orders as well as their applicability to related persons.

(Source: Steptoe, 20 Nov 2020)
 
* Principal Author: A. Cherie Tremaine, Esq., 1-202-429-1308, Steptoe
 
On November 17, 2020, OFAC issued Venezuela General License 8G, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.”  General License 8G extends the pre-existing authorization for US persons to engage in certain transactions and activities involving the Venezuelan state-owned oil company PdVSA through June 3, 2021, for Chevron, Halliburton, Schlumberger, Baker Hughes, and Weatherford International.  These are some of the most significant petroleum companies with US connections operating in Venezuela.  Aside from extending the expiration date – which had been December 1, 2020 – General License 8G is substantively the same as general License 8F, which it replaces.
Specifically, General License 8G authorizes US persons to engage in transactions and activities “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements” for the above-mentioned companies and their subsidiaries that –
  • are for safety or the preservation of assets in Venezuela;
  • involve PdVSA or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest; and
  • were in effect prior to July 26, 2019.
General License 8G also authorizes US persons to wind down operations, contracts, or other agreements for these companies that involve PdVSA and were in effect prior to July 26, 2019.
As noted above, these authorizations are now set to expire on June 3, 2021.
General License 8G continues to list certain activities that are not covered by the authorization.  For example, General License 8G specifies that the drilling, lifting, processing, purchase or sale, or transport or shipping, of Venezuelan-origin petroleum are not considered activities for safety or the preservation of assets in Venezuela.

OFAC first issued General License 8 on January 28, 2019, as we discussed in a prior International Law Advisory.  Since then, OFAC has issued superseding licenses 8A-8G, refining the scope of permitted activities and extending the authorization timeline.

TE EX/IM MOVERS & SHAKERS:

MS_a113. Monday List of Ex/Im Job Openings: 64 Jobs Available – 10 New Job Openings This Week

* AeroVironment; Simi Valley, CA; Trade Compliance Specialist, Sr.; Job ID: 1695
* Aurora; Manassas, VA; Trade Compliance Senior Specialist; Job ID: 2920
* Booz Allen; Washington, DC; Foreign Military Sales Export Manager Lead; Job ID: R0089147
* CISCO; San Jose, CA; Legal Global Export Trade Manager; Job ID: 1308201
* Dupont;Wilmington, DE; Export Control Compliance Specialist; Job ID: 213343W-01
* KPMG; Miami, FL; Manager, Trade & Customs – Export; Job ID: 51598
* Marvin Engineering Company; Inglewood, CA; Trade Compliance Specialist I
* Schaeffler; Fort Mill, SC; Export Control Specialist
* XPO; Charlotte, NC; Senior Analyst, Trade Compliance

  

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_a115. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* Helen Rowland (Helen May Rowland (1875-1950; was an American journalist and humorist. For many years she wrote a column in the New York World. Many of her pithy insights from these columns were published in book form, including Reflections of a Bachelor GirlThe Rubáiyát of a Bachelor, and A Guide to Men.) (1922).
  – “The follies which a man regrets most in his life are those which he didn’t commit when he had the opportunity.” 
 
* Rodney Dangerfield (born Jacob Rodney Cohen, 22 Nov 1921 – 5 Oct 2004; was an American stand-up comedian, actor, producer, screenwriter, musician and author. He was known for his self-deprecating one-liner humor, his catchphrase “I don’t get no respect!” and his monologues on that theme.)
 – “My psychiatrist told me I was crazy, and I said I want a second opinion. He said okay, you’re ugly too.”
  – “I remember the time I was kidnapped, and they sent a piece of my finger to my father. He said he wanted more proof.”
 
Monday is pun day.
* What’s grey and not very heavy?  Light grey. 
* Young lady, if you can find a man with 10,000 bees, marry him.  You’ll know he’s a keeper!  
* In order to spell Panda, all you need is p and a
.
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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. 
 18 Nov 2020: 85 FR 73411:  Revisions to Export Enforcement Provisions. 

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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