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20-1217 Thursday ” Daily Bugle “

20-1217 Thursday “Daily Bugle”

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Thursday, 17 December 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. Treasury/OFAC: “Treasury Sanctions Companies for Supporting the Sale of Iranian Petrochemicals”
  5. UK ECJU: “Sanctions relating to Unauthorised Drilling Activities”
  1. Defense News: “Erdogan Says US Sanctions Aim to Stymie Growing Turkish Defense Industry”
  2. EUS: “US State Dept Lists Saraya Al-Mukhtar as an SDGT”
  1. Hogan Lovells: “Court Rulings Reinforce Limitations on Sweeping Executive Orders Based on IEEPA” (Part II of II)
  2. Kelley Drye: “Turkey’s SSB Subject to Secondary Sanctions & OFAC Publishes New Sanctions List”
  3. Pillsbury: “The EU’s Global Human Rights Sanctions Regime Comes into Force”
  1. FD Associates Presents “ITAR FUNdamentals” 19 – 22 Jan
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
  3. Weekly Highlights of the Daily Bugle Top Stories 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

[No relevant items for today]

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OGS OTHER GOVERNMENT SOURCES

 
* Justice/ATF; Notices; Objective Factors for Classifying Weapons with Stabilizing Braces; [Pub. Date: 18 Dec 2020] (PDF)
 
* State Department; Notice; Designation as a Global Terrorist:
Ashraf al-Qizani and Saraya al-Mukhtar; [Pub. Date: 18 Dec 2020] (PDF) (PDF)
 
* State Department; Notice; Rescission of Determination Regarding Sudan; [Pub. Date: 18 Dec 2020] (PDF)
 
* Commerce/BIS; Notices; Termination for National Security Investigation of Imports of Mobile Cranes; [Pub. Date: 18 Dec 2020] (PDF)

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OGS_a22. Commerce/BIS: (No new postings)

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OGS_a44. Treasury/OFAC: “Treasury Sanctions Companies for Supporting the Sale of Iranian Petrochemicals”
(Source: Treasury/OFAC, 16 Dec 2020) [Excerpts]
 
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated four entities for facilitating the export of Iranian petrochemical products by Triliance Petrochemical Co. Ltd. (Triliance), an entity designated by Treasury in January 2020. These China- and United Arab Emirates-based companies have provided Triliance with critical shipping services or conducted financial transactions on behalf of the company, enabling Triliance to continue brokering and moving Iranian petrochemical exports. Iranian petrochemical sales are an important revenue source for the Iranian regime, generating wealth for its corrupt leaders and financing a range of nefarious activities, including the proliferation of weapons of mass destruction and their means of delivery, support for foreign terrorist groups, and a variety of human rights abuses, at home and abroad.  . . . 
These entities are being designated pursuant to section 1(a)(iii)(B) of Executive Order (E.O.) 13846.
 
SANCTIONS EVASION
In early 2020, China-based Donghai International Ship Management Limited (Donghai) was responsible for operating a vessel that freighted tens of thousands of metric tons of petrochemicals worth millions of dollars from Iran to China for a deal brokered by Triliance. 
 
China-based Petrochem South East Limited (Petrochem) was used to channel payments to companies involved in deals with Triliance. In early 2020, Petrochem was used to make payment to Donghai in return for Donghai’s management of a vessel used to transport petrochemicals in a deal brokered by Triliance. Likewise, in late 2019, Petrochem was used to facilitate a payment related to a deal for Iranian petrochemicals facilitated by Triliance.
 
UAE-based Alpha Tech Trading FZE has been used as a front company for Triliance’s and Trio Energy DMCC’s brokerage of thousands of tons of petrochemical sales. OFAC designated Trio Energy DMCC in September 2020 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Triliance. Likewise, UAE-based Petroliance Trading FZE has been used as a front company for Triliance’s brokerage of petrochemical sales.
 
Donghai International Ship Management Limited, Petrochem South East Limited, Alpha Tech Trading FZE, and Petroliance Trading FZE are being designated, pursuant to section 1(a)(iii)(B) of E.O. 13846, for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Triliance. 
 
Concurrently with Treasury’s designations, the Department of State imposed sanctions on Vietnam Gas and Chemicals Transportation Corporation pursuant to E.O. 13846 in connection with significant transactions for the transport of petroleum products from Iran, on or after November 5, 2018. The Department of State also imposed sanctions pursuant to E.O. 13846 on the company’s Managing Director, Vo Ngoc Phung, for serving as a principal executive officer of the company.  
 
SANCTIONS IMPLICATIONS
All property and interests in property of these persons designated today subject to U.S. jurisdiction are blocked, and U.S persons are generally prohibited from engaging in transactions with them. Any entities that are owned, directly or indirectly, 50 percent or more by such persons are also blocked. In addition, foreign financial institutions that knowingly facilitate significant transactions for, or persons that provide material or certain other support to, the persons designated by OFAC today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.

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OGS_a55. UK ECJU: “Sanctions relating to Unauthorised Drilling Activities”
(Source: UK ECJU, 16 Dec 2020)
 
The Unauthorised Drilling Activities in the Eastern Mediterranean (Sanctions) (EU Exit) Regulations 2020 put in place sanctions measures to discourage any hydrocarbon exploration, production or extraction activities which:
  • have not been authorised by the Republic of Cyprus in its territorial sea, or are
  • in its exclusive economic zone
  • on its continental shelf
 
This includes, in cases where the exclusive economic zone or continental shelf has not been delimited in accordance with international law with a State having an opposite coast, activities which may jeopardise or hamper the reaching of a delimitation agreement. This instrument is one element of a broader strategy to achieve the UK’s foreign policy goals around supporting efforts to reach delimitation agreements and stability.When these regulations come into force they will replace, with substantially the same effect, relevant existing EU legislation and related UK regulations.

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COM NEWS

(Source: Defense News) [Excerpts]
 
Turkish President Recep Tayyip Erdogan on Wednesday portrayed U.S. sanctions imposed on Turkey over its purchase of a Russian air defense system as an attempt to obstruct his country’s rising defense industry.
In a speech delivered during the inauguration of a highway in central Turkey, Erdogan also said the sanctions would increase his government’s determination to make the Turkish defense industry stronger and more independent.
The U.S. sanctions, imposed on Monday over Turkey’s procurement of Russia’s advanced S-400 system, are part of a U.S. law known as CAATSA, which are aimed at pushing back on Russian influence.
The move is the first time that the law has been used to penalize a U.S. ally. …
 
Turkey had insisted that the Russian technology is no risk to NATO systems because they wouldn’t be integrated into defense strategies involving the S-400s. …

 
The US State Department has designated the Bahrain-based Saraya al-Mukhtar group as a Specially Designated Global Terrorist pursuant to Executive Order 13224 (asset freeze) on the basis that it poses a “significant risk of committing acts of terrorism that threaten the national security and foreign policy of the United States”.
The press release says that Saraya al-Mukhtar receives financial and logistical support from Iran’s Islamic Revolutionary Guard Corps, and that its goal is to “depose the Bahraini government” so that Iran can exert its influence in Bahrain. Reportedly, the group “has plotted attacks against US personnel in Bahrain and has offered cash rewards for the assassination of Bahraini officials”.

COM COMMENTARY

(Source: Hogan Lovells, 14 Dec 2020)
 
[II Part of II; See part I in yesterday’s Daily Bugle] 
 
* Principal Author: Anthony V. Capobianco, Esq., 1-202-637-2568, Hogan Lovells
 
TikTok v. US (D.D.C.)
On September 27, 2020, the U.S. District Court for the District of Columbia (D.D.C.) granted TikTok a preliminary injunction with respect to the app store prohibitions scheduled to go into effect on September 27, but not the other restrictions scheduled to go into effect on November 12.  The injunction was granted on the basis that IEEPA explicitly excludes the authority to regulate the importation or exportation of information or informational materials, or personal communications, which do not involve a transfer of anything of value.  
 
The court agreed that TikTok had shown it was likely to succeed with its claim that the order violated IEEPA’s informational materials exception and the personal communications exception because the ban would have prevented any U.S. user from sharing or receiving any TikTok content, and the court was not convinced of the government’s argument that TikTok communications held economic value.  The court found TikTok to be a “medium of transmission,” and primarily a “conduit of informational materials” that fell under the Berman Amendment carveout.  The DOJ appealed this injunction to the U.S. Court of Appeals for the D.C. Circuit (D.C. Cir.).
 
On December 7, 2020, D.D.C. granted TikTok’s motion for a preliminary injunction regarding all the other prohibitions in the EO.  The court looked to the President’s TikTok EO and the Commerce Department’s related decision memorandum to discern the regulatory objects of the Secretary’s prohibitions on TikTok, and found that they constituted efforts to control the flow of informational materials, or pictures, art, and film as included in the statutory definition itself.  The court also rejected the  argument that there was a cyber-espionage exception to the informational materials provisions.
Marland v. Trump (E.D.Pa.)
 
Separate from TikTok’s own challenge, a group of TikTok content creators have also challenged the prohibitions of the TikTok EO in the U.S. District Court for the Eastern District of Pennsylvania (E.D.Pa.). On October 30, 2020, the judge there granted a nationwide injunction against the prohibitions in their entirety.  The judge similarly found the ban violated the informational materials exception of IEEPA, finding that the prohibition’s effect of stopping the exchange of informational materials is “in no way tangential.”  The DOJ also appealed this ruling to the U.S. Court of Appeals for the 3rd Circuit.
Approach to Medical Supplies for XPCC. XPCC was designated as an SDN on July 31, 2020 pursuant to the Executive Order Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption (EO 13818).  As previous EOs have done, EO 13818 finds that the “making of donations” to any person blocked pursuant to that EO would seriously impair the President’s ability to deal with the national emergency declared in that order, and that such donations are prohibited per section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)).
 
However, under section 7202(a) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), 22 U.S.C. 7202, a complete prohibition on all sales of food, agricultural commodities, medicine, and medical devices would constitute a “unilateral medical sanction,” which is prohibited by TSRA.  Similar activities involving SDNs or sanctioned countries have been previously authorized by OFAC, either through a general license or on a case-by-case basis through the issuance of specific licenses.  However, certain differences in agency action has taken place in the context of China, and what the future holds in this case is uncertain.
 
Next steps
It remains to be seen whether the various U.S. Courts of Appeal will uphold the District Courts in enjoining enforcement of the TikTok EO.  If they do so, this would represent a significant reining in of the President’s ability to use IEEPA, with potentially broad implications for internet and communication services more generally.
 
With time running out for the Trump Administration, it is also possible that the Courts of Appeal will not issue any rulings prior to January 20.  After his inauguration, it will be up to President Biden to determine whether or not to continue this EO, or to terminate it.  If he were to terminate it, that would potentially render these disputes moot, and leave the scope of the President’s IEEPA authorities untouched, for now.

(Source: Kelley Drye, 15 Dec 2020)
 
* Principal Author: Jennifer Liu, Esq., 1-202-342-8522, Kelley Drye
 
Yesterday, the United States imposed secondary sanctions on Turkey’s Presidency of Defense Industries (SSB), the country’s main defense procurement entity, for purchasing the Russian S-400 missile system.  The sanctions were imposed pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), which authorize secondary sanctions against non-U.S. parties that conduct a “significant transaction” with the Russian defense or intelligence sectors.  The action marks the first time such sanctions have been imposed on a NATO country.
 
The U.S. State Department imposed the following five sanctions on SSB, out of a menu of 12 possible options:
  • Prohibiting issuance of specific U.S. export licenses/authorizations for any goods or technology transferred to SSB;
  • Prohibiting loans or credits by U.S. financial institutions to SSB totaling more than $10 million in any 12-month period;
  • Banning U.S. Export-Import Bank assistance for exports to SSB;
  • Requiring the U.S. to oppose loans benefitting SSB by international financial institutions; and
  • Imposing full blocking sanctions and visa restrictions on SSB’s Chairman and three other employees.
 
While not a complete blocking of SSB, the sanctions will likely limit the ability of the SSB to purchase defense-related goods and services from the United States and limit the company’s ability to partner with U.S. companies in the defense sector.
 
New “NS-MBS” (Non-Sanctions – Menu Based Sanctions) List
Yesterday, OFAC and the State Department also announced a new non-SDN list to identify parties subject to menu-based sanctions authorities, such as CAATSA.  The new “NS-MBS List” appears on OFAC’s Consolidated Screening List and will be used to identify parties subject to non-blocking sanctions only.  Parties subject to blocking requirements will continue to be identified on the Specially Designated Nationals (SDN) List.

(Source: Pillsbury, 16 Dec 2020)
 
* Principal Author: Henrietta Worthington, Esq., 44-20-7847-9542, Pillsbury
 
The EU’s new global human rights sanctions regime came into force on December 8. Council Regulation (EU) 2020/1998 provides for the freezing of funds and economic resources and travel bans on those responsible for or involved in serious human rights violations and abuses worldwide. Individuals and entities who provide financial, technical or material support for, or are otherwise involved in or associated with, listed individuals or entities may also be targeted [FN/1].
 
Article 2 of the new regulations establishes that they apply to:
  • genocide;
  • crimes against humanity;
  • serious human rights violations or abuses including torture, slavery, extrajudicial killings, enforced disappearance of persons and arbitrary arrests or detentions; and
  • other human rights violations or abuses, including human trafficking, abuses by migrant smugglers, sexual and gender-based violence, and abuses of freedom of peaceful assembly, association, opinion, expression, religion or belief.
 
The new global framework is a divergence from the EU’s typical country-specific sanctions regimes and reflects “the EU’s determination to address serious human rights violations and abuses.” In a blog post, the EU’s Foreign Affairs Minister, Josep Borrell, highlighted that a global regime is required to “gain more flexibility to go after the perpetrators regardless of where they are and dispenses us from having to set up a specific legal framework each time for each specific case.”
 
No individuals or entities have currently been designated under the new regime. It therefore remains to be seen what approach the EU will take towards designations. However, Borrell confirmed that the EU regulations will be more limited in scope than the equivalent U.S. regime (the Magnitsky Act). Whilst the Magnitsky Act aims to tackle issues of human rights violations and corruption, the EU system will only apply to the former.
 
The announcement is in line with the new EU Action Plan on Human Rights and Democracy 2020 – 2024 which was unveiled in November. It is also recognizes the increasing global effort to tackle these issues. Canada has had its Magnitsky laws in place since 2017. The UK implemented its own human rights sanctions regime in July this year (see post), and Australia recently released a report recommending the introduction of similar measures.
 
The new regulations will apply to all individuals and entities within the EU and all EU nationals and EU businesses. Affected companies will need to ensure that their compliance policies and procedures are up-to-date pending designations.
 
[FN/1]Article 3(3)

TE EX/IM TRAINING EVENTS & CONFERENCES

(Source: FD Associates)
 
* What:  Live Stream Webinar “ITAR FUNdamentals” — Agenda
* When:  Tues- Friday 19-22 January 2021
* Where:  Your computer 
* Sponsor:  FD Associates
* Presenters: Jenny Hahn, President, FD Associates. 

 

* Register HERE, call 1-703-847-5801, or email info@fdassociates.net.

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EN EDITOR’S NOTES

EN_a112. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* Ethel Watts Mumford (17 Dec 1876 – 1940; was an American author from New York City.)
  – “Knowledge is power, if you know it about the right person.” 
 
* John Greenleaf Whittier (17 Dec 1807 – 7 Sep 1892; was an American Quaker poet and advocate of the abolition of slavery in the United States. Frequently listed as one of the Fireside Poets, he was influenced by the Scottish poet Robert Burns. Whittier is remembered particularly for his anti-slavery writings, as well as his 1866 book Snow-Bound.)
  – “For all sad words of tongue and pen, The saddest are these, ‘It might have been’.”
  – “You don’t always win your battles, but it’s good to know you fought.”
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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): 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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