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20-1216 Wednesday ” Daily Bugle “

20-1216 Wednesday “Daily Bugle”

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Wednesday, 16 December 2020

(No items of interest posted) 

  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. UK ECJU: “Notice to Exporters 2020/20: List Of Dual-Use Controlled Items Updated”
  1. EUS: “EU Commission Adopts Updated Dual-Use Control List”
  2. Reuters: “SMIC Says Board Aware Co-CEO Liang Intends to Resign”
  1. Hogan Lovells: “Court Rulings Reinforce Limitations on Sweeping Executive Orders Based on IEEPA” (Part I of II)
  2. Morrison Foerster: “Defense Bill Aims Additional Sanctions at Turkey, Russia, and China” (Part II of II)
  3. Wiley: “Sudan No Longer Designated as State Sponsor of Terrorism, Impacting Export Restrictions”
  1. FCC Academy Presents: 2 Feb 2021; “U.S. Export Controls – The ABC of 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. 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

[No relevant items for today]

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OGS OTHER GOVERNMENT SOURCES

[No new relevant items for today]

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OGS_a22. Commerce/BIS: (No new postings)

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OGS_a44. UK ECJU: “Notice to Exporters 2020/20: List Of Dual-Use Controlled Items Updated”
(Source: UK ECJU, 15 Dec 2020)
 
Commission Delegated Regulation EU 2020/1749 was published on 14 December 2020 in the Official Journal of the European Union. This updates the control list (Annex I to Regulation (EC) No 428/2009) which reflects the changes previously agreed in the international export control regimes. It comes into force on the 15 December 2020.
* Consolidated list: The consolidated list of strategic military and dual-use items that require export authorisation has been amended and republished accordingly.
* Open general export licences (OGELs): OGELs affected will be updated and republished shortly.
* Contact ECJU: HelplineExport Control Joint Unit, 2nd floor3 Whitehall Place London, SW1A 2AW
Email: exportcontrol.help@trade.gov.uk; Telephone 020-7215-4594
Contact for general queries about strategic export licensing.

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COM NEWS

 
The European Commission has adopted Delegated Regulation (EU) 2020/1749, which updates the EU dual-use export control list in Regulation (EC) 428/2009 to bring it into line with decisions made at the Wassenaar Arrangement and the Missile Technology Control Regime in 2019, and the Australia Group in February 2020. See Commission press release. The UK has also updated its dual-use export control list, see Notice.
The main changes include:
1)   A new entry for 24 chemicals, including the Novichok nerve agent precursors;
2)   New controls on certain software specially designed for monitoring or analysis by law enforcement;
3)   New controls on systems, equipment and components for defeating, weakening or bypassing information security systems;
4)   New controls on sub-orbital craft; and
5)   Amendments to controls on certain planar absorbers, metal alloys, simulation software, some lasers, certain valves and components, and information security systems.

(Source: Reuters, 16 Dec 2020) [Excerpts]
 
China’s biggest chipmaker SMIC said on Wednesday its board is aware that Mong-song Liang intends to resign from his co-chief executive role.
 
The company is working actively to verify Liang’s plans to leave, Semiconductor Manufacturing International Corporation said in a filing to the Shanghai stock exchange. A letter of resignation purportedly from Liang began circulating online late on Tuesday in which he stated the reasons for his departure.
 
SMIC was expected to more than double its spending this year to make higher-end chips but said last month it would reduce its expenditure plan because of the U.S. export controls.

COM COMMENTARY

(Source: Hogan Lovells, 14 Dec 2020)  
 
[I Part of II; Part II of this advisory will be posted in tomorrow’s Daily Bugle.]
 
* Principal Author: Anthony VA Capobianco, Esq., 1-202-637-2568, Hogan Lovells
 
Recent court rulings enjoining enforcement of the Trump Administration’s Executive Order (“EO”) targeting TikTok show signs of curbing the sweeping powers of the International Emergency Economic Powers Act (“IEEPA”), which arguably sits at the center of the modern U.S. sanctions and export control regimes.  Separate statutory constraints with respect to restrictions on sales of agricultural commodities, food, medicine, and medical supplies could also potentially limit the impact of the designation of the Xinjiang Production and Construction Corps (“XPCC”).
 
While Presidents have often turned to IEEPA to impose economic sanctions in furtherance of U.S. foreign policy and national security objectives, the Trump administration’s reliance on IEEPA authority for its TikTok EO appears to be having a rough time getting past the courts.  Similarly, the impact of the Trump Administration’s designation of XPCC as a Specially Designated National (“SDN”) might be mitigated by the requirements of the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), which generally prohibits the President from using his IEEPA authority to unilaterally restrict commercial sales of agricultural commodities, food, medicine, and medical devices.
 
Background of IEEPA
Passed in 1977, IEEPA provides the President broad authority to regulate a variety of economic transactions following the declaration of a national emergency pursuant to the National Emergencies Act (“NEA”).  Since its enactment, IEEPA has become an important means to impose economic sanctions, and has been used with growing frequency in recent years.  As of July 2020, Presidents had declared 59 national emergencies, 33 of which were still ongoing. Despite such broad powers, Congress has never attempted to terminate a national emergency invoking IEEPA. 

 

The IEEPA contains several important exceptions.  These include:
1)   “any postal, telegraphic, telephonic or other personal communication, which does not involve a transfer of anything of value;”
2)   certain donations, “by persons subject to the jurisdiction of the United States, of articles, such as food, clothing, and medicine, intended to be used to relieve human suffering”
3)   the importation or exportation, “regardless of format or medium of transmission,” of information or informational materials “including but not limited to, publications, films, posters, phonograph records, photographs, microfilms, microfiche, tapes, compact disks, CD ROMs, artworks, and news wire feeds.”
4)   “any transactions ordinarily incident to travel to or from any country, including importation of accompanied baggage for personal use, maintenance within any country including payment of living expenses and acquisition of goods or services for personal use, and arrangement or facilitation of such travel including non-scheduled air, sea, or land voyages.”
 
TikTok EO
In August 2020, President Trump issued an EO imposing restrictions on U.S. persons’ activities involving TikTok, which relied on the earlier authority of the 2019 Executive Order on Securing the Information and Communications Technology and Services Supply Chain.  The EO did not specify the precise scope of the restrictions – that was later promulgated in prohibitions published by the Department of Commerce (“Commerce”) in September 2020.  The rules were originally scheduled to go into effect on September 20, but were subsequently delayed until September 27 by Commerce in light of the ongoing negotiations by ByteDance to sell its US TikTok assets pursuant to a separate August EO requiring their divestment
 
In general terms, the restrictions would prohibit US persons from doing the following with respect to the app:
 
1)   Hosting the app on app stores (like the Google Play or Apple App stores);
2)   Providing internet hosting services;
3)   Providing content delivery network services;
4)   Providing internet transit or peering services; and
5)   Utilizing the app’s constituent code, functions, or services in the functioning of other software or services.
 
While the restrictions contained exceptions for personal and business users of the app, and Commerce described the restrictions as being aimed at service providers rather than individual users, the effect of these restrictions would have been to degrade TikTok’s functionality and eventually make it unusable in the US.
This understanding was largely embraced by the courts, which considered the restriction in several different cases across the country, which we describe below.  In general terms, the courts have taken the position that the restrictions unduly infringe upon personal communications, and run afoul of certain exceptions in IEEPA, which is one of the sources of statutory authority for these various EOs.
 
The Berman Amendment
In 1988 and 1994, IEEPA amendments introduced by Rep. Howard Berman (D-CA), collectively referred to as the “Berman Amendment,” expanded the list of protected rights under IEEPA to include the importation and exportation of informational materials in a variety of formats, including electronic media.  Under the Berman Amendment, transactions involving “information and informational materials” are generally exempt “regardless of format or medium of transmission” from the purview of Presidential regulation.

(Source: Morrison Foerster, 14 Dec 2020)  
 
[II Part of II; See part I in yesterday’s Daily Bugle] 
 
* Principal Author: John E. Smith, Esq., 1-202-887-1514, Morrison Foerster
 
Measures Addressing China
Reporting on Chinese Military Companies
Section 1260H is among the numerous provisions included in the NDAA that are intended to deter China’s behavior, position the United States to compete strategically, and protect U.S. assets against infiltration. This NDAA provision will supplement the November 12, 2020 Executive Order that gave teeth to the so-called “Pentagon List,” a list of Chinese military-owned companies operating in the United States produced by the U.S. Department of Defense; that recent Executive Order prohibited U.S. persons from transacting in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to, such securities, with companies on or added to the Pentagon List by the Defense or Treasury Departments.
 
Section 1260H further builds on the Pentagon List, the Executive Order, and the previous requirements under the NDAA for Fiscal Year 1999 to publicly identify Chinese military companies. Namely, section 1260H clarifies and expands the definition of “Chinese military company” to include “military-civil fusion contributors,” i.e., entities that have any of several enumerated government linkages such as receiving “assistance, operational direction or policy guidance” from the Chinese government or military, and are engaged in providing commercial services, manufacturing, producing, or exporting. Annual reports must also be submitted by the Defense Department to the Committees on Armed Services of the House and Senate listing each such Chinese military company no later than April 15, 2021, and annually thereafter through December 31, 2030.
 
Export Controls for Hong Kong
In an effort to shore up the United States’ strategic position in the East Asia region and simultaneously deter China’s approach to Hong Kong, Section 1252 of the NDAA, among other provisions, extends and modifies the existing prohibition on the commercial export of covered defense articles and services and covered munitions items to the Hong Kong Police Force.  Notably, Congress amended the title of the referenced legislation (Public Law 116-77; 133 Stat. 1173) to prohibit the commercial export not only of covered munitions but also of crime control items to the Hong Kong Police Force. This amendment did not alter the substantive definition of “covered munitions and crime control items,” which includes tear gas, pepper spray, rubber bullets, pepper balls, handcuffs, stun guns, shackles, tasers, and water cannons, among other items.
The change has limited practical impact, as Executive Order 13936 on Hong Kong Normalization this past July effectively ended the export of defense articles and services to Hong Kong as distinct from China. However, the section reflects continuing bipartisan focus on Hong Kong, and the re-titling of the section heading seems to draw attention to Chinese efforts to control crowds using such items and to implicitly criticize such behavior in the context of protests in Hong Kong.
 
Protecting the Innovation Base
The NDAA includes several provisions that attempt to protect federal investments in defense-sensitive intellectual property, technology, and data from being acquired by China through multiple mechanisms, and to protect national security researchers from foreign influence and security threats.
Section 1299C requires the Secretary of Defense, in consultation with other U.S. government officials and academia, to develop an initiative to protect intellectual property, key personnel, and critical technologies relevant to national security at academic institutions. This section builds on legislation in the Fiscal Year 2019 NDAA, creates a U.S. government liaison to academic institutions on these matters, and among other things requires:
 
  • Engagement with senior academic officials on espionage risks to academic institutions;
  • Development of a list of foreign programs of national security concern that seek to recruit talent from U.S. academic institutions; and
  • Development of a list of Chinese and Russian academic institutions that are of concern because of their connections to military and intelligence services, or their history of inappropriate technology transfer and theft of intellectual property, or efforts to recruit foreign academics in the United States.
 
As with the Pentagon List, these lists may be predicates for further action.
Another NDAA provision, Section 1062, limits funding for U.S. universities with Confucius Institutes, which are Chinese government-sponsored educational partnerships between Chinese colleges and universities and higher education institutes around the world. These institutes are quite ubiquitous; there are more than 300 Confucius Institutes in more than 140 countries, and they are widespread throughout the American higher education system (according to the U.S. Department of State, there are 75 active Confucius Institutes at U.S. colleges and universities). Confucius Institutes have been the subject of Congressional concerns for several years as vehicles for Chinese government influence on academic institutions, academics, and students.
Section 1062 prohibits post-secondary educational institutions with Confucius Institutes from being eligible to receive federal funds from the Department of Defense other than those provided directly to students, without a waiver from the Secretary of Defense, in consultation with the National Academies of Sciences, Engineering, and Medicine. The NDAA conferees note their expectation that the waiver process will require that the institution taken steps to safeguard academic freedom at the institution, prohibit the application of foreign laws at the institution, and grant managerial authority of the Confucius Institute to the institution.
 
These measures seem designed to safeguard the integrity of academic institutions generally, and defense-funded research activities specifically, from undue influence and intrusion by the Chinese government through Confucius Institutes.
 
Additionally, Section 223 of the NDAA requires the disclosure by recipients of federal research and development awards of all current and pending foreign and domestic external funding sources. This section responds to concerns about and cases of academics conducting federally funded research receiving undisclosed funding from foreign sources, such as China’s 1000 Talents program.
 
Recipients must also agree to update their disclosure at the request of the distributing agency prior to the award being issued, as well as at any subsequent time during the award term. Failure to comply with Section 223 can result in rejection of the application, suspension or termination of an award already made by the agency to an individual or entity, or a number of other actions, including further investigation to determine if any criminal or civil laws were violated. Notice to the relevant individual or entity is required by any federal research agency that plans to take any such action, and the individual or entity must be provided with an opportunity and process to contest the proposed agency action.  In-kind contributions are included in the definition of “current and pending research support” that would need to be disclosed in the context of the federal research agency awards supporting research and development activities referenced in this section.
Such efforts to shine a light onto external funding sources seem intended to reveal and curb potential sources of foreign influence that could pose a threat to U.S. investments in defense-sensitive research and development efforts, either by China or other actors.
 
Looking Forward
While the final version of the NDAA for Fiscal Year 2021 passed the House and Senate with veto-proof majorities, President Trump has dangled the possibility that he may nonetheless veto the critical bill. The main areas of disagreement between the President and Congress are a provision within the NDAA to rename military bases named after Confederate generals and the non-inclusion of a provision to repeal a liability shield for social media companies. Despite the looming veto threat, both the House and Senate passed the NDAA with veto-proof majorities. Therefore, it looks like it is only a matter of time until the sanctions discussed in this alert come into effect.

(Source: Wiley, 14 Dec 2020)
 
* Principal Author: Lori E. Scheetz, Esq., 1-202-719-7419, Wiley
 
On December 14, 2020, the State Department officially rescinded Sudan’s State Sponsors of Terrorism (SST) designation, because Congress did not issue a joint resolution of disapproval. Originally on October 26, 2020, President Trump certified that the Government of Sudan no longer supports terrorism, triggering a 45-day period for Congress to review the Government of Sudan’s designation on the SST list. With the change in designation, certain export controls and other restrictions on Sudan should now be lifted. The rescission was part of a larger agreement in which Sudan agreed to normalize relations with Israel and to pay U.S. victims of terrorist attacks in which the prior Sudanese regime played a role.  
 
Sudan has been listed on the SST list since 1993. Although the Department of the Treasury’s Office of Foreign Assets Control (OFAC) lifted the comprehensive sanctions targeting Sudan in early 2017, due to its SST designation, Sudan remained subject to stringent export controls. U.S. commodities, software, and technology on the Commerce Control List-i.e., everything classified above the EAR99 level for export purposes-still required a license or license exception from the Department of Commerce, Bureau of Industry and Security (BIS) to be exported to Sudan.
 
Although BIS has not yet published any official rule changes, one of the most significant upshots of the removal of Sudan from the SST list is that Sudan should no longer be subject to these restrictive, antiterrorism (AT) export controls in the Export Administration Regulations (EAR). While Sudan will still be subject to other export licensing requirements, the move should allow the export of many less sensitive items, including commercial electronics and software, to Sudan without a license. Additionally, lifting the SST designation allows for certain financial and humanitarian transactions with Sudan that had previously required OFAC authorization under the Terrorism List Governments Sanctions Regulations. Practically, the removal of most of these restrictions is more of an optics issue, as OFAC had broadly permitted the export of agricultural commodities, medicine, and medical devices to Sudan as well as nearly all financial transactions with the Government of Sudan. The change in designation also allows for U.S. support of debt relief at international financial institutions such as the World Bank and International Monetary Fund (IMF).
 
As part of the October agreement, Sudan agreed to pay $335 million to the victims of U.S. embassy bombings in Kenya and Tanzania and the attack on the USS Cole, in which the past Sudanese regime played a role. According to the White House, these funds will be held in escrow unless Congress can resolve Sudan’s liability for its role in past terrorist attacks, a so-called “legal peace” legislation. Earlier this year, the Supreme Court upheld approximately $10.2 billion in damages against Sudan for its role in the 1998 U.S. embassy bombings in Nairobi and Dar es Salaam. While the Fiscal Year (FY) 2021 National Defense Authorization Act (NDAA) conference agreement would update U.S. policy toward Sudan and provide support for development programs, debt relief, and other financial assistance, it does not resolve the liability/sovereign immunity issue. Without the immunity issue resolved, foreign investors may be reluctant to do business with Sudan out of fear that they could be left on the hook for providing compensation to terror victims.
 
On October 26, 2020, President Trump also certified that Sudan had “taken demonstrable steps” to meet certain criteria related to humanitarian concerns in the Darfur region, which could ultimately lead to the removal of remaining sanctions on Sudanese individuals and entities. The following week, however, the President notified Congress he was continuing the national emergency with respect to Sudan, which the United States relies on to implement UN sanctions obligations related to the Darfur conflict. Secretary Pompeo stated that the “United States is committed to working with the Sudanese government and our international partners to identify circumstances that could result in lifting sanctions related to the Darfur conflict at the earliest opportunity.”

TE EX/IM TRAINING EVENTS & CONFERENCES

Thur, 2 Feb; 15:00 pm – 17:00 pm (CET) /09:00 am – 11:00 am (EST) /06:00 am – 08:00 am (PST)
 

Presenters: Mike Farrell & Jim Bartlett
Register or find more information for the course here
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EN EDITOR’S NOTES

EN_a111. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* Jane Austen (16 Dec 1775 – 18 Jul 1817; was an English novelist known primarily for her six major novels, including Sense and SensibilityPride and Prejudice,Mansfield Park, and Emma, which interpret, critique and comment upon the British landed gentry at the end of the 18th century. )
  – “There are people, who the more you do for them, the less they will do for themselves.”
   – “Seldom, very seldom, does complete truth belong to any human disclosure; seldom can it happen that something is not a little disguised, or a little mistaken.”
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EN_a612. New Version of the BAFTR is Available Today

(Source: Editor)
 
We are pleased to release a new edition of Bartlett’s Annotated Foreign Trade Regulations (“The BAFTR”), containing changes to footnotes and Index entries updates regarding fatal errors and the definition of a Suppression Request.
 
The BAFTR contains the verbatim Foreign Trade Regulations from 15 C.F.R. Part 130, annotated with approximately 250 footnotes showing history, case notes, practice tips, and indications of errors in the official regulations, and an appendix showing FTR amendments since 2008, Executive Orders affecting the FTR, official FTR Letters and FTR Notices, and a glossary of FTR terms.  This Word version may be saved to your computer, or for users who prefer a hard copy of the regulations, the Word version may be printed on your computer to 152 double-sided pages on 8 ½ by 11 paper (76 sheets).  Subscribers to the BAFTR will be notified of a revised BAFTR usually within 24 hours of any amendment.  To subscribe to the BAFTR, go to http://www.fullcirclecompliance.eu/our-services/annotated-regulations/.
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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 ofBartlett’s Annotated FTR (BAFTR): 15 Dec 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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