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20-1215 Tuesday “Daily Bugle”

20-1215 Tuesday “Daily Bugle”

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Tuesday, 15 December 2020

  1. State Department: “Reimposing Certain Sanctions with Respect to Iran”
  2. Treasury/OFAC: “Notice of Sanctions Actions”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS Implements Export Licensing Policy on a Turkish Government Entity
  3. State/DDTC Announces Turkey CAATSA Sanctions
  4. Commerce/Census: “Shipment Suppressed Email Confirmations–Suppression Request Defined”
  5. Treasury/OFAC: “Treasury Sanctions Senior Iranian Intelligence Officers Involved in the Abduction and Detention of Robert Levinson”
  6. Treasury/OFAC: “Introduction of the Non-SDN Menu-Based Sanctions (NS-MBS) List; CAATSA – Russia-related Designations”
  7. EU Council: “Alignment of Certain Countries Concerning Restrictive Measures against Syria”
  1. Clearancejobs: “U.S. Naval Officer Awaits Trial for Export Control Violations”
  2. Defense News: “US Sanctions Nato Ally Turkey over Purchase of Russian Missile Defense System”
  3. Export Compliance Daily: “EU Bracing for Challenging Implementation of New Export Control Regime”
  1. Frost Brown Todd: “China’s New Export Control Law: An Overview”
  2. Morrison Foerster: “Defense Bill Aims Additional Sanctions at Turkey, Russia, and China”
  3. Steptoe: “EU Adopts Magnitsky-Style Sanctions Framework Against Human Rights Violations”
  1. ECTI Presents 17 Dec; ITAR Compliance for US Persons Working Outside the United States: What You Need to Know Webinar
  1. Bartlett’s Unfamiliar Quotations 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source: Federal Register) [Excerpts]
 
85 FR 81261: Notice
 
* AGENCY: Department of State
* SUMMARY:The Secretary of State imposed sanctions on six entities and five individuals pursuant to E.O. 13846, Reimposing Certain Sanctions with Respect to Iran; the Secretary of State subsequently terminated those sanctions imposed on one of the entities and one of the individuals.
* DATES:The Secretary of State’s determination and selection of certain sanctions to be imposed upon the six entities and five individuals identified in the SUPPLEMENTARY INFORMATION section was effective as of September 25, 2019. The Secretary of State’s subsequent termination of sanctions with respect to one of the entities and one of the individuals, further identified in the SUPPLEMENTARY INFORMATION section, was effective January 31, 2020.
* FOR FURTHER INFORMATION CONTACT: Taylor Ruggles, Director, Office of Economic Sanctions Policy and Implementation, Bureau of Economic and Business Affairs, Department of State, Washington, DC 20520, tel.: (202) 647-7677, email: RugglesTV@state.gov.

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(Source: Federal Register) [Excerpts]
 
85 FR 81279: Notice
* AGENCY:Office of Foreign Assets Control, Treasury.
* ACTION:Notice.
* SUMMARY:The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing the names of one or more persons that have been placed on OFAC’s Specially Designated Nationals and Blocked Persons List based on OFAC’s determination that one or more applicable legal criteria were satisfied. All property and interests in property subject to U.S. jurisdiction of these persons are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
* DATES:

See Supplementary Information section for applicable date(s).  … 

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OGS OTHER GOVERNMENT SOURCES

[No new relevant items for today]

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Commerce Imposes License Restrictions after Turkey’s Acquisition of Russian Missiles
Statement from a BIS spokesperson: The Bureau of Industry and Security (BIS) in the Department of Commerce implemented a policy of denial for export license applications to the Turkish Presidency of Defense Industries (SSB) as a result of its acquisition of the S-400 long-range surface-to-air missile system from Russia. BIS coordinated this action with the Department of State, which imposed sanctions on the SSB pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) as a result of the missile deal.

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OGS_a35. State/DDTC Announces Turkey CAATSA Sanctions
(Source: State/DDTC, 14 Dec 2020) [Excerpts]
 
On December 14, 2020 the Secretary of State, pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act of 2017 (“CAATSA 231”) and in consultation with the Secretary of the Treasury, imposed sanctions on the Turkish Presidency of Defense Industries (Savunma Sanayii Baskanligi, or SSB), a Turkish government entity; its president, Dr. Ismail Demir; SSB Vice President Faruk Yigit; SSB Head of Air Defense and Space Department Serhat Genecoglu; and SSB Program Manager for Air Defense Systems Mustafa Alper Deniz.
 
CAATSA 231 requires the United States to impose at least five of the 12 sanctions listed in CAATSA Section 235 on any person determined to have knowingly engaged, on or after August 2, 2017, in a significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation. On July 12, 2019, Turkey took initial delivery of the S-400 surface-to-air missile system under a late 2017 contract reportedly worth approximately $2.5 billion. Significant transactions with Russia’s defense or intelligence sectors, like those which resulted in today’s sanctions, build Moscow’s relationships and generate revenue used to fund its malign activities.
 
The CAATSA 231 sanctions imposed are as follows: 
  • a prohibition on granting specific U.S. export licenses and authorizations for any goods or technology transferred to SSB (Section 235(a)(2)); the text of Section 235(a)(2) reads, “(2) EXPORT SANCTION.-The President may order the United States Government not to issue any specific license and not to grant any other specific permission or authority to export any goods or technology to the sanctioned person under-
    1. the Export Reform Control Act of 2018 (50 U.S.C. 4601 et seq.) (as continued in effect pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.));
    2. the Arms Export Control Act (22 U.S.C. 2751 et seq.);
    3. the Atomic Energy Act of 1954 (42 U.S.C. 2011 et seq.); or
    4. any other statute that requires the prior review and approval of the United States Government as a condition for the export or reexport of goods or services.
  •  a prohibition on loans or credits by U.S. financial institutions to SSB totaling more than $10 million in any 12-month period (Section 235(a)(3));
  • a ban on U.S. Export-Import Bank assistance for exports to SSB (Section 235(a)(1));
  • a requirement for the United States to oppose loans benefitting SSB by international financial institutions (Section 235(a)(4));
  • imposition of full financial blocking sanctions and a visa denial (Section 235(a)(7), (8), (9), and (11)) on SSB President Ismail Demir, SSB Vice President Faruk Yigit, SSB Head of Air Defense and Space Department Serhat Genecoglu, and SSB Program Manager for Air Defense Systems Mustafa Alper Deniz (Section 235 (a)(12)).
 
Therefore, effective immediately DDTC will not approve any specific license or authorization to export or re-export any defense articles, including technical data, or defense services where SSB is a party to the transaction. This prohibition does not apply to temporary import authorizations or to current, valid, non-exhausted export and re-export authorizations. However, the prohibition does apply to new export and re-export authorizations – including amendments to previously approved licenses or agreements and licenses in furtherance of previously approved agreements. This sanction does not apply to subsidiaries of SSB; however, licenses submitted to DDTC which name subsidiaries of SSB are still subject to a standard case-by-case review, including a foreign policy and national security review. We are not imposing a prohibition on U.S. Government procurement from SSB as part of this action.

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OGS_a46. Commerce/Census: “Shipment Suppressed Email Confirmations — Suppression Request Defined”
(Source: Global Reach Blog, 15 Dec 2020) [Excerpts]
 
How many of you have filed Electronic Export Information (EEI) in the Automated Export System (AES) and you get a fatal error that you cannot resolve, or you resolve it in a way that technically does not fix the problem? In a previous blog, we went over best practices to decrease unresolved fatal errors. Now, let us talk about another option known as a “suppression request.” We will discuss what it is, how you initiate one, and how the outcome will affect your order after a suppression has been processed.
 
Let’s first define it. A suppression request is the manual removal of an unresolved fatal error for a specific Shipment Reference Number (SRN) that appears in an AES Fatal or Compliance Report. Filers may submit a request for fatal errors to be suppressed via email to ftd.aes.fatal.report@census.gov or contact the International Trade Call Center at 1-800-549-0595 (option 1).
 
Suppression requests can only be made for shipments that cannot be corrected. For example, you submitted an EEI record and you received a fatal error for an invalid port of export. Let’s call this shipment #123. However, instead of fixing shipment #123 you created another shipment and corrected the port of export, but the correction is now under shipment #456. You fixed the problem, but the fatal error for shipment #123 still exists. The only way to resolve this is for you to request a suppression for shipment #123. As a result, this shipment will no longer show up on future AES Fatal or Compliance Reports.
 
We have discussed the definition of a suppression request and walked through a hypothetical situation that would necessitate initiating one. Let us look below at an example of the type of email confirmation you will receive when a suppression request has been processed.
 
For more information on this and other economic data available to you from the Census Bureau, visit the National Economic Census data website available at data.census.gov. For more information about U.S. imports or exports, you can browse international trade data available at USA Trade Online, or contact the Macro Analysis Branch at 1-800-549-0595 (option 4).

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OGS_a57. Treasury/OFAC: “Treasury Sanctions Senior Iranian Intelligence Officers Involved in the Abduction and Detention of Robert Levinson”
(Source: Treasury/OFAC, 14 Dec 2020)
 
Today, the U.S. Department of the Treasury designated two senior officials of Iran’s Ministry of Intelligence and Security (MOIS), who were involved in the abduction of Robert A. “Bob” Levinson on Iran’s Kish Island on or about March 9, 2007. For 13 years, the Iranian government, which continues to take foreigners and dual-nationals hostage as political leverage, has denied knowledge of Mr. Levinson’s whereabouts or condition. However, senior Iranian officials authorized Levinson’s abduction and detention and launched a disinformation campaign to deflect blame from the Iranian regime. The individuals designated today, Mohammad Baseri and Ahmad Khazai, acted in their capacity as MOIS officers in the abduction, detention, and probable death of Mr. Levinson.
 
The MOIS has been designated pursuant to Executive Order (E.O.) 13553 for being complicit in the commission of serious human rights abuses against the Iranian people since June 12, 2009, as well as previously designated as a Specially Designated Global Terrorist pursuant to E.O. 13224.
 
Mohammad Baseri and Ahmad Khazai
Mohammad Baseri is a high-ranking MOIS officer involved in counterespionage activities in and outside of Iran, who has been involved in sensitive investigations related to Iranian national security issues. Baseri has worked directly with intelligence officials from other countries in order to harm U.S. interests. Ahmad Khazai is a high-ranking member of the MOIS who, in his role as a senior official of the MOIS, has led MOIS delegations to other countries to assess the security situation.
Mohammad Baseri and Ahmad Khazai, acting in their capacity as MOIS officers, were involved in the abduction, detention, and probable death of Mr. Levinson.
OFAC is designating Baseri and Khazai pursuant to E.O. 13553 for acting for or on behalf of, directly or indirectly, Iran’s MOIS.
 
Sanctions Implications
All property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC’s regulations generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons.
In addition, non-U.S. persons that engage in certain transactions with the persons designated today may themselves be exposed to designation. Furthermore, any foreign financial institution that knowingly conducts or facilitates a significant transaction for or on behalf of the persons designated today could be subject to U.S. correspondent or payable-through account sanctions.

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OGS_a68. Treasury/OFAC: “Introduction of the Non-SDN Menu-Based Sanctions (NS-MBS) List; CAATSA – Russia-related Designations”
(Source: Treasury/OFAC, 14 Dec 2020)
 
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing its new Non-SDN Menu Based Sanctions (NS-MBS) List.  This publication by the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designed as a reference tool  that identifies persons subject to certain non-blocking menu-based sanctions that have been imposed under statutory or other authorities, including certain sanctions described in Section 235 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), as implemented by Executive Order 13849, and the Ukraine Freedom Support Act of 2014, as amended by CAATSA.  When blocking is chosen as a menu-based sanction and imposed on a person, that person is identified solely on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List).  Any other menu-based sanctions imposed on that person are also identified on the SDN List.

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OGS_a79. EU Council: “Alignment of Certain Countries Concerning Restrictive Measures against Syria”
(Source: Council of the European Union, 14 Dec 2020)
 
On 6 November 2020, the Council adopted Decision (CFSP) 2020/1651 implementing Council Decision 2013/255/CFSP. The Council added eight persons to the list of natural and legal persons, entities or bodies subject to restrictive measures in Annex I to Decision 2013/255/CFSP.
 
The Candidate Countries, the Republic of North Macedonia, Montenegro, Serbia and Albania and the EFTA countries Iceland, Liechtenstein and Norway, members of the European Economic Area, as well as Ukraine, the Republic of Moldova, and Georgia align themselves with this Council DecisionThey 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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COM NEWS

(Source: Clearancejobs, 14 Dec 2020) [Excerpts]
 
LT Fan Yang, USN, an active-duty U.S. Navy Lieutenant, has not joined his three co-conspirators in pleading guilty to the charges of violating U.S. export laws as part of a conspiracy to purchase and export U.S. manufactured vessels, with dual-use applications (both civilian and military) to the Peoples Republic of China (China). This may be because he is also charged with providing false information as part of his background investigation and lying to his command, and thus he has not been offered the “deal” which his co-defendants enjoyed.
 
Lieutenant Fan Yang is a naturalized U.S. citizen (born in China in 1985, emigrated to the U.S. in 1999, and became U.S. citizen in 2006). Yang served in the U.S. Navy from 2005-2007 and after attending college and acquiring a bachelor’s degree in electrical engineering, re-enlisted in the Navy in 2012 to attend Officer Candidate School, followed by flight school. Yang holds a Top Secret national security clearance and is assigned to the Maritime Patrol Reconnaissance Weapons School at Naval Air Station Jacksonville (Florida).

(Source: Defense News, 15 Dec 2020) [Excerpts]
 
The Trump administration on Monday imposed sanctions on its NATO ally Turkey over its purchase of a Russian air defense system, in a striking move against a longtime partner that sets the stage for further confrontation between the two nations as President-elect Joe Biden prepares to take office.
The extraordinary step against a treaty ally comes at a delicate time in relations between Washington and Ankara, which have been at odds for years over Turkey’s acquisition from Russia of the S-400 missile defense system, along with Turkish actions in Syria, the conflict between Armenia and Azerbaijan and in the eastern Mediterranean.
 
The sanctions, which were required under U.S. law dating to 2017 if the administration deemed there to be violations, add another element of uncertainty to the relationship as Trump winds down his term. The move is the first time that law, known as CAATSA, has been used to penalize a U.S. ally.

(Source: Export Compliance Daily, 14 Dec 2020) [Excerpts]
 

The European Union is bracing for a large workload and host of new “responsibilities” as it prepares to implement its new dual-use export control regime, said Denis Redonnet, the European Commission’s chief trade enforcement officer. Redonnet said the regime will “test” EU agencies and governments and will only succeed with cooperation from industry experts.

COM COMMENTARY

(Source: Frost Brown Todd, 14 Dec 2020)
 
* Principal Author: Joseph J. Dehner, Esq., 1-513-651-6949, Frost Brown Todd
 
On October 17, 2020, the Standing Committee of the 13th National People’s Congress promulgated the Export Control Law of People’s Republic of China (ECL), the first comprehensive set of export control laws in China. The ECL becomes effective on December 1, 2020. It creates a framework for control of exports that China considers a matter of national security that restricts or prevents export of such goods and services.
The ECL applies to the export of items for military and nuclear applications as well as for dual-use (i.e., used for both civilian and military purposes). It will apply to other exports of goods, technologies, and services as China decides are needed to safeguard national security and to implement international obligations such as non-proliferation. Under the ECL, China will adopt prohibitive measures and restrictive measures in the export context involving either the transfer of the controlled items out of China or the provision (a concept that appears to be similar to “deemed export”) of the controlled items by Chinese nationals and entities to their foreign counterparts. China’s State Council and Central Military Commission are the “State Export Control Administrative Agency” (the “Agency”) that will be jointly in charge of the implementation and enforcement of the ECL.
 
Export Control Item List
The ECL authorizes the Agency to promulgate an “export control item list” for controlled items. The Agency may also publish a separate “interim list” that may include those items that are not on the “export control item list” but nevertheless are subject to a temporary control period of up to two years for national security and international obligation fulfillment reasons. Under the ECL, the Agency may ban export of specific items to any destination, or may ban the export of specific items to designated countries, regions, organizations, and individuals.
 
Export License
Exporters will need to apply for an export license for items subject to both the “export control item list” and the “interim list.” With respect to goods, technologies, and services beyond the “export control item list” and the “interim list,” an exporter will be required to apply for a license if the exporter knows should know, or has received notification from the Agency, that the items to be exported have the risk of being used (i) to compromise national security and interest, (ii) to design, develop, manufacture and apply mass destruction weapons and their transportation tools, or (iii) for terrorism purposes. As a part of the export license application, exporters must submit documents regarding end-users and their contemplated uses of the controlled items. The end-users will need to certify that they will not change the declared uses of the controlled items or transfer the controlled items to third parties.
 
Blacklist
The ECL requires the Agency to promulgate an export control blacklist that includes the importers and end-users that (i) have violated the ECL, (ii) may compromise China’s national security and interest, or (iii) may use the controlled items for terrorism purposes. The Agency may prohibit or restrict transactions involving the blacklisted entities and individuals. Exporters will be generally prohibited from engaging in any transactions with the importers and end-users on the blacklist, though they may apply with the Agency for an export license under special circumstances. Importers and end-users on the blacklist may apply for removal from the list if they can show the basis for being included on the blacklist no longer exists.
 
Penalties
Exporters that violate the ECL will be subject to warnings and penalties that include an order to cease illegal activities, confiscation of illegal gains, fines, suspension of business license, revocation of export license, and ineligibility to apply for future export licenses. Individuals who are directly responsible for an exporter’s violation may face criminal liability and may be banned from engaging in export activities.
 
Enforcement of the ECL is designed to have an extraterritorial effect for items on the control lists. Under the ECL, organizations and individuals outside of the territory of China are subject to liability if they violate the export control laws (e.g., by changing the declared uses of the controlled items or transferring the controlled items to third parties), and threaten China’s national security and interests, or hinder the implementation of China’s international obligations such as non-proliferation.
 
Much remains to be implemented before the ECL becomes developed and enforced. Multinational companies with Chinese subsidiaries or other sources should monitor how China rolls out its control lists, the documentation it will require for export licenses and end-user certifications. Businesses that rely on goods, technologies, or services from China should evaluate supply chain risks in light of the ECL and its implementation. Businesses doing trade with China should develop compliance programs to comply with the new law and minimize risk.

(Source: Morrison Foerster, 14 Dec 2020)  
 
[I Part of II; Part II of this advisory will be posted in tomorrow’s Daily Bugle.] 
 
* Principal Author: John E. Smith, Esq., 1-202-887-1514, Morrison Foerster
 
One of the widest-ranging bills of the U.S. Congress’s legislative year, the National Defense Authorization Act for Fiscal Year 2021 (NDAA), is nearing the finish line as both the House and Senate overwhelmingly approved the bill last week. Now the NDAA is on its way to President Trump’s desk for his signature (or potential veto-more on that below). As with most NDAAs in recent years, Congress has included a host of sanctions and similar measures, with this year’s bill targeting Turkey’s purchase of a Russian air defense missile system, Russian energy export pipelines, and Chinese Military Companies and other activities in the United States.
Because its focus is to fund the U.S. military, the NDAA is considered a must-pass bill each year, allowing Congress to incorporate a number of priority national security-related measures that otherwise failed to become law. Therefore, while the NDAA is quite long (over 4,500 pages!), we’ve analyzed the bill’s sanctions provisions and summarized our key takeaways below, so that you don’t have to dig into it yourself; it is the holidays after all! (Our MoFo colleagues are also summarizing the bill’s beneficial ownership, procurement, and cybersecurity-related provisions, among others, so stay tuned for additional NDAA alerts).
 
Key Takeaways
  • Turkey targeted – The NDAA requires sanctions on Turkey in response to its purchase of the Russian S-400 air defense missile system, a particularly noteworthy development given Turkey’s membership in NATO. Apparently in response to this provision’s inclusion in the NDAA, the Trump Administration announced sanctions against Turkey under CAATSA on December 14.
  • Russian pipelines, again – In a recurring theme, the NDAA contains yet another provision expanding sanctions on two key Russia-led natural gas pipelines, Nord Stream 2 and TurkStream, beyond the sanctions imposed by last year’s NDAA.
  • Several provisions confronting national security challenges posed by China – The NDAA’s focus on Chinese activity within the United States-as well as Chinese activity in the Indo-Pacific region and globally-highlights longstanding concerns within Congress on modern security threats posed by China and how best to confront them.
  • Potential presidential veto – President Trump has threatened to veto the NDAA, but lawmakers from both chambers of Congress are confident they have the required votes to override a veto, should the president decide to use one.
 
Sanctions on Turkey
NDAA Section 1241 would compel the President, whether President Trump or President-elect Biden, to impose sanctions on Turkey within 30 days in response to its purchase of the Russian S-400 air defense missile system. These sanctions are not a big surprise; tensions regarding this issue have been brewing since 2017, when Turkey signed a deal with Russia to acquire the S-400 missile defense system, which the United States argues is designed to shoot down F-35 jets commonly used by NATO allies.
Even without the NDAA, President Trump possessed the authority to sanction Turkey for its purchase of the defense system under the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA). Specifically, Section 231 of CAATSA authorizes the President to impose sanctions against entities that engage in “a significant transaction” with the defense or intelligence sectors of the Russian Federation. Turkey’s S-400 acquisition plainly satisfies that definition, and congressional leaders have reiterated the position that CAATSA applies to the purchase.
 
Now, after seeing the Trump administration fail for years to respond to Turkey’s purchase of the S-400 system, the NDAA would require that at least five of twelve sanctions provided under CAATSA Section 235 be imposed on each person that knowingly engaged in the acquisition of the S-400 air defense system. The available sanctions under CAATSA Section 235 are varied, but include blocking sanctions, export restrictions, and restrictions blocking the sanctioned person’s access to U.S. financial institutions.
 
Apparently in response to Section 1241’s inclusion in the NDAA, the Trump administration announced on December 14 that it is imposing sanctions on Turkey’s Presidency of Defense Industries (SSB)-Turkey’s primary defense procurement institution-pursuant to Section 231 of CAATSA for knowingly engaging in a significant transaction with Russia by procuring the S-400 missile system. The specific sanctions include a ban on all U.S. export licenses and authorizations and a prohibition on certain loans or credits to SSB and full blocking sanctions and visa restrictions on Dr. Ismail Demir, its president, and three other SSB officers.
 
Sanctions on the Nord Stream 2 and TurkStream Pipeline Projects
In addition to sanctioning Turkey for its purchase of the S-400 system, the NDAA also takes aim at Russia by expanding existing sanctions on the Nord Stream 2 and TurkStream pipeline projects, which we detailed in our previous alerts herehere, and here. These pipelines originate in Russia and are intended to circumvent an existing pipeline through Ukraine to reach the rest of Europe, raising U.S. fears that Russia will increasingly dominate European energy security and continue to undermine Ukraine.
 
The NDAA, through Section 1242, expands existing sanctions on the two projects.  Namely, it expands sanctions under the Protecting Europe’s Energy Security Act (PEESA)-passed as part of last year’s NDAA-to now include penalties on parties involved in a wider range of pipe-laying activities than previously authorized. Section 1242 now defines “pipe-laying activities” as “activities that facilitate pipe-laying, including site preparation, trenching, surveying, placing rocks, backfilling, stringing, bending, welding, coating, and lowering of pipe.” Section 1242 further expands sanctions on the two projects by targeting foreign persons that support the expanded definition of pipe-laying activities, for example, by providing underwriting services, insurance, or reinsurance for vessels engaged in pipe-laying activities for the two pipelines; services or facilities for technology upgrades or installation of welding equipment for, or retrofitting or tethering of, those vessels for the two pipelines; or services for the testing, inspection, or certification necessary for, or associated with the operation of, the Nord Stream 2 pipeline.
 
The NDAA’s expansion of sanctions against the Nord Stream 2 and TurkStream projects comes in the wake of other recent sanctions efforts to curtail the progress of the two pipelines.
 
  • In October 2020, the U.S. Department of State (“State”) moved to enhance the scope of sanctions applicable to the pipeline projects.  Specifically, State published new guidance that expanded existing sanctions imposed by PEESA (which originally targeted the underwater vessels used for construction of Russian energy export pipelines such as the Nord Stream 2 and TurkStream pipeline projects) to also sanction companies providing services, facilities, or funding for “upgrades or installation of equipment” for vessels working on the projects.
     
  • Just a few months earlier, in July 2020, State issued updated guidance regarding the applicability of secondary sanctions under Section 232 of CAATSA to foreign persons involved in the Nord Stream 2 or TurkStream projects.  As detailed in a prior alert, Section 232 of CAATSA targets parties that (i) make investments that directly and significantly contribute to the enhancement of the ability of Russia to construct energy export pipelines; or (ii) sell, lease, or provide goods, services, technology, information, or support to the Russian Federation for the construction of Russian energy export pipelines.  Earlier guidance from State had indicated that sanctions under Section 232 of CAATSA would be on projects initiated after August 2, 2017, thereby excluding Nord Stream 2 and TurkStream. With its July guidance, however, State removed the August 2, 2017 limitation, paving the way for additional sanctions on the two projects.
 
The previous sanctions against Nord Stream 2, including those imposed under the 2020 NDAA, have delayed the project considerably, although construction reportedly resumed on the project last week. The new set of sanctions seems likely to have a similar chilling impact on the project. As a result, stakeholders in Germany, including government representatives and parliamentarians, have raised concerns about the sanctions as threatening the sovereignty of Germany and Europe, and have discussed options for counter-measures. For example, the government of the German Federal State of Mecklenburg-Western Pomerania disclosed its plans to help businesses with the completion of the project by setting up a foundation designed to shield pipe-laying activities and related services. Similar to the creation of INSTEX (the EU payment channel for transactions with Iran that uses a barter scheme), the concept of a government-backed foundation shows that governments and businesses continue to be creative in their attempts to counter the broad effects of U.S. sanctions threats against the pipeline projects. EU businesses, however, have and should continue to thoroughly assess the risks that remain, even when using government-backed schemes apparently designed to protect them.
 
[Part II of this advisory will be posted in tomorrow’s Daily Bugle.]

(Source: Steptoe, 14 Dec 2020)
 
* Principal Author: Stefan Tsakanakis, Esq., 32-2-626-0517, Steptoe
 
On December 7, 2020 the Council of the EU adopted a Decision and a Regulation establishing a EU Global Human Rights Sanctions Regime. Similar to the US Magnitsky Act, the framework will enable the EU to target individuals, entities and bodies responsible for, involved in or associated with serious human rights violations and abuses worldwide, regardless of where they occurred.
 
The new sanctions regime makes it possible to act against human rights violations through the freezing of funds and economic resources of sanctioned persons, entities and organizations. Additionally, it will be prohibited to make funds and economic resources available to those listed. Sanctioned individuals will also be prohibited from traveling to the EU.
 
The EU Global Human Rights Sanctions Regime covers a wide range of human rights violations including, genocide; crimes against humanity; torture and other cruel, inhuman or degrading treatment or punishment; slavery; extrajudicial, summary or arbitrary executions and killings; enforced disappearance of persons; as well as arbitrary arrests or detentions. It also covers other violations or abuses, if they are widespread, systematic or otherwise of serious concern when measured against the objectives of the EU common foreign and security policy. Such other violations or abuses include, trafficking in human beings, as well as abuses of human rights by migrant smugglers; sexual and gender-based violence; violations or abuses of freedom of peaceful assembly and of association; and violations or abuses of freedom of opinion and expression or religion or belief.
 
The adoption of the new sanctions framework emphasizes the EU’s determination to promote and protect human rights and to address serious human rights violations and abuses. The Council, acting upon a proposal from an EU Member State or from the High Representative of the EU for Foreign Affairs and Security Policy, is responsible for establishing, reviewing and amending the sanctions list. Unanimity among the EU Member States will be required to approve each proposal to sanction specific persons, entities or organizations. So far, no names have been added to the sanctions list. The application and enforcement of the sanctions is entrusted to the competent authorities of the EU Member States, which may grant authorizations in the cases foreseen by the EU framework and may sanction infringements by imposing penalties under national law. Those listed may challenge their listings before the EU courts using the same remedies as against listings under other EU sanctions frameworks.
 
According to EU representatives, the new Global Human Rights Sanctions Regime has the benefit of offering greater flexibility to target those involved in serious human rights violations or abuses worldwide, regardless of their nationality, place of residence or place of establishment. The framework could become particularly relevant in cases where the EU is not able to impose sanctions against one specific country for lack of unanimity among the Member States. European Commission President Ursula von der Leyen previously explained that there is a need for this framework in view of the EU’s recent difficulties to impose sanctions on Belarus, Turkey or Russia. Since the framework does not target a specific country but only those persons, entities or organizations listed, the political implications of listings will typically be less severe and therefore, it might be easier to reach consensus for the adoption of measures.
 
The introduction of the EU Global Human Rights Sanctions Regime is a positive development in favor of the enforcement of human rights world-wide. Companies with international operations would be well-advised to adapt their internal compliance systems accordingly and give due regard to human rights considerations when making strategic choices with regard to the design of their supply chains.

TE EX/IM TRAINING EVENTS & CONFERENCES

(Source: Ashleigh Foor)
 
* What: ITAR Compliance for US Persons Working Outside the United States: What You Need to Know
* When: 17 Dec; 1:00 p.m. (EST)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Susan Kovarovics and Megan Barnhill
* Register: here or Ashleigh Foor, 1-540-433-3977, ashleigh@learnexportcompliance.com.
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EN EDITOR’S NOTES

EN_a117. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* J. Paul Getty (15 Dec 1892 – 6 Jun 1976; was an American-born British petrol-industrialist, and the patriarch of the Getty family. He founded the Getty Oil Company, and in 1957 Fortune magazine named him the richest living American, while the 1966 Guinness Book of Records named him as the world’s richest private citizen.)
  – “You cannot further the Brotherhood of Man by encouraging class hatred.”
  – “I would gladly give all my millions for just one lasting marital success.”
* * * * * * * * * * * * * * * * * * * *

 

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): Kimberley Process Certificates.  The latest edition of the BAFTR is 
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. 

11 Dec 2020: 85 FR 79836: Extension of temporary suspensions, modifications and exceptions. The latest edition of the BITAR is 11 Dec 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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