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20-1223 Wednesday “Daily Bugle”

20-1223 Wednesday “Daily Bugle”

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Wednesday, 23 December 2020

  1. Commerce/BIS Amends EAR by Adding Names to Military End User List
  2. Commerce/BIS Amends EAR by Removing Hong Kong as a Separate Destination
  3. State Department: “Sudan; Determination Under Presidential Proclamation”
  4. Treasury/OFAC: “Notice of OFAC Sanctions Actions”
  5. DOD: “National Industrial Security Program Operating Manual (NISPOM)”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. DoD/DCSA: NISPOM to be Codified
  4. State/DDTC: (No new postings)
  1. Financial Times: “European Tech Accuses US of Using Sanctions to Shut It Out of China”
  1. Holland & Knight: “DoD Codifies NISPOM, Formalizes Certain Personnel Reporting Requirements and Eases FOCI Burden”
  2. Pillsbury: “New U.S. Sanctions Target Turkey’s Defense Sector”
  3. Wiley: “Commerce Creates Military End User List, Restricting U.S. Exports to China, Hong Kong, Russia, and Venezuela”
  4. Williams Mullen: “Understanding the OFAC Sanctions Laws – Requirements For U.S. Companies”
  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

 
85 FR 83793: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) by adding a new `Military End User’ (MEU) List that includes the first tranche of entities.  
     The U.S. Government has determined that these entities are `military end users’ for purposes of the `military end user’ control in the EAR that applies to specified items for exports, reexports, or transfers (in-country) to the People’s Republic of China (China), Russia, and Venezuela when such items are destined for a `military end user.’  
     The existing `military end-use’ and `military end user’ controls under the EAR, including BIS’s authority to inform the public of a license requirement for an item due to an unacceptable risk of diversion to a `military end user’ via amendment to the EAR, are essential for protecting U.S. national security interests.  
     The addition of the new MEU List via amendment to the EAR and this first tranche of entities is also responsive to requests received from the public. This final rule will add 102 military end users to the MEU List consisting of 57 under China and 45 under Russia. However, the establishment of the MEU List does not imply that other parties, not included on the list, are not subject to the military end-use and military end user controls under the EAR.
* DATES: This rule is effective December 23, 2020.

 * * * * * * * * * * * * * * * * * * * *  

(Source: Federal Register, 23 Dec 2020) [Excerpts]
 
85 FR 83765: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this rule the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to remove the People’s Republic of China (PRC or China) Special Administrative Region of Hong Kong from the list of destinations in the EAR. The amendments implement Sections 2 and 3 of Executive Order 13936 of July 14, 2020, in response to new security measures imposed on Hong Kong by the government of China. These new measures fundamentally undermine Hong Kong’s autonomy increasing the risk sensitive U.S. technology and items will be diverted to unauthorized end uses and end users in China.
* DATES: This rule is effective December 23, 2020.

 * * * * * * * * * * * * * * * * * * * *  

 
85 FR 84092: Notice
I hereby determine, in accordance with section 5 of Presidential Proclamation No. 6958, of November 22, 1996, that the suspension of entry into the United States of members or officials of the Government of Sudan (GOS) and members of the Sudanese armed forces is no longer necessary and should be terminated given the termination of the restrictive measures in UN Security Council Resolution 1054 and its successor resolution UNSCR 1070, and the significant shift in U.S. foreign policy toward Sudan following the installation of the new Sudanese Civilian-Led Transitional Government. Restrictions imposed in said proclamation, pursuant to Section 212(f) and 215 of the Immigration and Nationality Act of 1952 as amended (8 U.S.C. 1182 (f) and section 301 of title 3, United States Code shall therefore lapse, and said proclamation shall terminate effective immediately.
 
This determination will be reported to Congress and published in the Federal Register. Dated: December 15, 2020.
 
Michael R. Pompeo, Secretary of State

 * * * * * * * * * * * * * * * * * * * *  

(Source: Federal Register, 23 Dec 2020) [Excerpts]
 
85 FR 84113: 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 (SDN List) based on OFAC’s action to impose sanctions on persons identified by the Secretary of State pursuant to the Countering America’s Adversaries Through Sanctions Act. 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).

 * * * * * * * * * * * * * * * * * * * *  

(Source: Federal Register, 21 Dec 2020) [Excerpts]
 
85 FR 83300: Notice

32 CFR Part 117  

* AGENCY: Office of the Under Secretary of Defense for Intelligence & Security, Department of Defense (DoD).

* ACTION: Final rule with request for comment.

* SUMMARY: The Department of Defense (DoD) is codifying the National Industrial Security Program Operating Manual (NISPOM) in regulation. The NISPOM establishes requirements for the protection of classified information disclosed to or developed by contractors, licensees, grantees, or certificate holders (hereinafter referred to as contractors) to prevent unauthorized disclosure.
   In addition to adding the NISPOM to the Code of Federal Regulations (CFR), this rule incorporates the requirements of Security Executive Agent Directive (SEAD) 3, ”Reporting Requirements for Personnel with Access to Classified Information or Who Hold a Sensitive Position.” SEAD 3 requires reporting by all contractor cleared personnel who have been granted eligibility for access to classified information. This NISPOM rule provides for a single nation-wide implementation plan which will, with this rule, include SEAD 3 reporting by all contractor cleared personnel to report specific activities that may adversely impact their continued national security eligibility, such as reporting of foreign travel and foreign contacts. NISP Cognizant Security Agencies (CSAs) shall conduct an analysis of such reported activities to determine whether they pose a potential threat to national security and take appropriate action.
   Finally, the rule also implements the provisions of Section 842 of Public Law 115-232, which removes the requirement for a covered National Technology and Industrial Base (NTIB) entity operating under a special security agreement pursuant to the NISP to obtain a national interest determination as a condition for access to proscribed information.

* DATES: Effective date: This rule is effective February 24, 2021. Comments must be received by February 19, 2021.  . . . .

 * * * * * * * * * * * * * * * * * * * *  

OGS OTHER GOVERNMENT SOURCES

(Source: Federal Register)
 
* Commerce/BIS: RULES; Amendment to Country Groups for Ukraine, Mexico and Cyprus Under the Export Administration Regulations [Pub. Date: 28 Dec 2020] (PDF)
 
* Treasury/OFAC: NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 28 Dec 2020] (PDF) and (PDF)

 * * * * * * * * * * * * * * * * * * * *  

(Source: Commerce/BIS, 23 Dec 2020)
 
Today, the U.S. Department of Commerce announced the creation of the Aluminum Import Monitoring and Analysis (AIM) system, which will enable Commerce to collect and publish data on aluminum imports. AIM is modeled on Commerce’s successful Steel Import Monitoring and Analysis (SIMA) system.
“AIM represents yet another step forward for the Administration’s America First trade agenda,” said Secretary of Commerce Wilbur Ross. “The new program will enable Commerce and the public to better detect potential transshipment and circumvention involving aluminum products – helping to ensure that domestic producers can compete on a level playing field.”
Under AIM, importers will be required to obtain a free, automatic import license before they import aluminum products.  To obtain the import license, companies must report the volume, value, country of origin, country of most recent cast, and certain other information, as detailed in a Federal Register notice published today https://www.federalregister.gov/documents/2020/12/23/2020-28166/aluminum-import-monitoring-and-analysis-system. The licensing requirement becomes effective on January 23, 2021. In addition, following a one-year grace period, Commerce will require importers to report the country where imported aluminum products were smelted.  Commerce will offer an additional opportunity to comment on this and other aspects of the licensing requirements in the coming months.
Once license data is collected, Commerce will release the data on an aggregate basis through the public AIM monitor. The monitor will track aggregate trends in U.S. imports of certain aluminum products in almost real-time, providing an early indication of trends.  The AIM monitor will also identify surges of specific aluminum products suggesting potential transshipment and circumvention relating to these products. The monitor will be available here, starting on January 23, 2021.
Commerce will hold a series of training webinars to educate the trading community about the new import licensing requirements. These webinars will be offered on a first-come, first-served basis.  To access these reference materials, find upcoming webinar dates and times, and to participate, please visit https:/www.trade.gov/updates-steel-import-licensing.
Today’s establishment of the AIM system follows Commerce’s recent expansion and modernization of the SIMA system, announced in September 2020.  The new online platform created for SIMA will also be used for AIM.
AIM and SIMA are administered by Commerce’s Enforcement and Compliance unit within the International Trade Administration, which is responsible for vigorously enforcing U.S. trade laws.

 * * * * * * * * * * * * * * * * * * * *  

(Source: DoD/DCSA, 22 Dec 2020)
 
The Federal Register published the final rule titled “National Industrial Security Program Operating Manual (NISPOM)” (32 CFR part 117) on Dec. 21, 2020. The rule can be found here. Click the title for more information.
 
The NISPOM establishes requirements for the protection of classified information disclosed to or developed by contractors, licensees, grantees, or certificate holders to prevent unauthorized disclosure.
 
In addition to adding the NISPOM to the Code of Federal Regulations (CFR), this rule incorporates the requirements of Security Executive Agent Directive (SEAD) 3, “Reporting Requirements for Personnel with Access to Classified Information or Who Hold a Sensitive Position.” SEAD 3 requires reporting by all contractor cleared personnel who have been granted eligibility for access to classified information.
 
Comments must be received by February 21. The rule will become effective February 24, 2021, and authorizes the contractor no more than 6 months to comply with changes from the effective date of the rule.

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COM NEWS

(Source: Financial Times, 23 Dec 2020) [Excerpts]   

European tech executives and diplomats are accusing the US of using its sanctions regime to shut them out of the Chinese market while offering exemptions for American companies. Over the past two years, the US has imposed aggressive sanctions on Chinese companies such as Huawei and, as of Friday, the chipmaker SMIC, which have prevented them from buying most US-made technologies.  

 

But one senior European executive said the sanctions had created an “America First” trade policy, involving exemptions for US companies while groups from other countries are cut out of the Chinese market. “So far, US companies have been given licences to supply Huawei, while European suppliers cannot,” said the executive, who asked not to be named.  
 
Many European businesses that produce chips and chipmaking equipment are affected by American sanctions because they rely on US intellectual property. A second European tech executive said their company had once been stopped from supplying components to Chinese buyers because of suspicions that they could be used for military purposes. But the market for the components was quickly filled by US vendors selling through middlemen, the executive claimed.
The impact on EU companies has been significant. Earlier this month, one of Europe’s biggest semiconductor companies, Swiss-based STMicroelectronics, postponed its annual revenue target for a year, citing US sanctions on an “important customer” – Huawei. ST’s shares dropped almost 12 per cent the same day.
 
Chief executive Jean-Marc Chery told investors that its market “did not grow substantially during the past two years,” citing the US-China trade war as one reason. In September, the head of the German chipmaker Infineon told CNBC that US-China tensions were “a big concern”. Infineon told the FT: “Europe must be careful not to be crushed in the competition for technological leadership between the USA and China.”  
 
Dutch company ASML, the world’s biggest chipmaking equipment group, has been blocked from selling its newest-generation machines to SMIC, China’s biggest chipmaker. The company expects China to make up one-quarter of its sales this year. The list of companies granted licences to sell to blacklisted Chinese corporations is not public. …

COM COMMENTARY

 
* Principal Author: Antonia I. Tzinova, 1-202-419-2661, Holland & Knight LLP
 
In a final rule effective Feb. 24, 2021, the U.S. Department of Defense (DoD) codified the National Industrial Security Program Operating Manual (NISPOM) in Title 32, Part 117 of the Code of Federal Regulations.[FN/1] Of primary concern to government contractors, licensees, grantees, or certificate holders, NISPOM is a manual that sets baseline procedures and imposes requirements for protecting classified information of the U.S. government.
Key takeaways for companies holding a U.S. facility security clearance or interested in operating in the government contracts space accessing classified information are as follows.
  • In addition to codifying the NISPOM, DoD is also incorporating therein the Security Executive Agent Directive (SEAD) 3, ”Reporting Requirements for Personnel with Access to Classified Information or Who Hold a Sensitive Position.” The SEAD 3 reporting requirements will apply to contractor personnel 1) granted access to classified information through the National Industrial Security Program (NISP) and 2) engaging in specific activities that may adversely impact their continued national security eligibility (e.g., foreign travel, foreign contracts).
  • The NISP Cognizant Security Agencies (CSAs) will be responsible for evaluating the reportable activities. The CSAs’ objective is to determine whether a reported activity poses a potential national security threat and to take appropriate action.
  • U.S. cleared entities have until Aug. 24, 2021 (i.e., six months from the final rule’s effective date) to evaluate each existing classified contract and ensure compliance with the final rule.
  • Importantly, the DoD’s final rule also implements the provisions of Section 842 of the National Defense Authorization Act of 2019 (Pub. L. 115-232) affecting U.S. cleared entities under Foreign Ownership, Control or Influence (FOCI). The NDAA provision eliminated the requirement that covered National Technology and Industrial Base (NTIB) entities operating under a Special Security Agreement pursuant to the NISP attain a National Interest Determination as a condition for accessing Top Secret or other proscribed classified information. This rule implements the NDAA provision to alleviate some of the burden on cleared entities that operate under an SSA as the FOCI mitigation approved by the Defense Counterintelligence and Security Agency.
The final rule is open to comment by the public until Feb. 19, 2021. For assistance in submitting comments or for more information on the final rule and how it would impact your company, contact the authors or another member of Holland & Knight’s CFIUS and Industrial Security Team.

 
* Principal Author: Christopher R. Wall, Esq., 1-202-663-9250, Pillsbury Winthrop Shaw Pittman LLP
 
On December 14, 2020, the U.S. Department of State initiated a series of sanctions pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA) that target the Turkish Presidency of Defense Industries (SSB). The sanctions deny new U.S. export licenses to SSB and limit the SSB’s access to credit from U.S. and international financial institutions. In addition, the Office of Foreign Assets Control (OFAC) designated several principal executive officers of SSB as Specially Designated Nationals (SDNs). However, the U.S. action is calibrated, and does not designate SSB or its affiliates as SDNs, nor does it apply broader sanctions on Turkey or the Turkish defense industry.
 
The action comes in response to Turkey’s purchase of the S-400 surface-to-air missile defense system from Russia, and after bipartisan pressure from the U.S. Congress to push back against the purchase of sensitive military hardware from Russia by a NATO member country. These sanctions under CAATSA are not the first actions taken by the U.S. in response to the S-400 purchase, as Turkey was ousted from the F-35 advanced fighter program in 2019.
 
Menu-Based Sanctions Under CAATSA
Section 231 of CAATSA prohibits any person from knowingly engaging in a significant transaction with a person that is a part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation. Where Section 231 is invoked, the President is required to impose at least five of the 12 sanctions listed in CAATSA Section 235.
The Trump Administration has opted for a “scalpel” response, imposing the following sanctions under Section 235.
  • Export Controls – New licenses for export of dual-use items under the Export Administration Regulations (EAR) and defense items under the International Traffic in Arms Regulations (ITAR) are now subject to a policy of denial where SSB is a party to the transaction. However, existing licenses remain valid and license exceptions remain available. The State Department indicated that it has not banned procurement on purchases from SSB.
  • Sanctions on Principal Executive Officers – OFAC added to the SDN List multiple executive officers of SSB, including SSB’s president Ismail Demir. The full list of individuals added to the SDN List is available here.
  • Loans from U.S. Financial Institutions – U.S. financial institutions are prohibited from making loans or providing credits to SSB totaling more than $10,000,000 in any 12-month period unless SSB is engaged in activities to relieve human suffering and the loans or credits are provided for such activities.
  • Loans from International Financial Institutions – The U.S. government will oppose loans from international financial institutions (e.g., development banks) that would benefit SSB.
  • Export-Import Bank Assistance for Exports to Sanctioned Persons – The Export-Import Bank of the US will not give approval to the issuance of any guarantee, insurance, extension of credit, or participation in the extension of credit in connection with the export of any goods or services to SSB.
In conjunction with the actions under Section 231 of CAATSA, OFAC published a new “Non-SDN Menu-Based Sanctions List”. This list identifies sanctions responses other than SDN designation where imposed under statutory authorities that offer the President a menu of alternate penalty options. This tool is available here.
 
The sanctions have potential implications for a number of U.S., European and Asian companies and financial institutions. SSB is at the center of defense-related procurement for Turkey, a top-20 economy and NATO ally with a large military and intelligence sector.
 
This marks only the second implementation of CAATSA Section 231. The first invocation occurred in September 2018 against the Chinese entity Equipment Development Department (EDD) and its director in connection with EDD’s purchase of Su-35 combat aircraft and S-400 equipment, also from Rosoboronexport.
 
The relationship between the United States, NATO, Turkey and Russia remains complicated. The U.S. announcement comes shortly after the European Union announced sanctions related to Turkish energy exploration in the eastern Mediterranean Sea. The U.S. government added and then quickly removed sanctions on Turkey in 2019 related to its activities in Syria. (See here.) We expect further changes as the Biden Administration reviews U.S. policy with respect to Turkey after January 2021.

(Source: Wiley Alert, 22 Dec 2020)

 
* Principal Author: John R. Shane, Esq., 1-202-719-7222, Wiley Rein LLP
 
On December 21, 2020, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) announced a final rule amending the Export Administration Regulations (EAR) by creating a new Military End User List. The rule provides the “first tranche” of entities, which includes 103 total military end users-58 from China and 45 from Russia-subject to special export licensing requirements. Importantly, the list is not exhaustive. Accordingly, exporters still are required to conduct military end use/end user due diligence in accordance with 15 C.F.R. § 744.21 for exports of covered commercial and dual-use commodities, software, and technology to entities not included on the initial positive list.
 
The new list builds on a rule published in April 2020 that expanded the universe of U.S. exports subject to controls if such items are intended for a “military end use” or “military end user” in China, Russia, or Venezuela. Practically, BIS’s “MEU rule” subjects even low-level electronics, mass market encryption hardware and software (such as laptops and smartphones), and parts and components for commercial aircraft to a license requirement if destined for a military end use or end user in China, Russia, or Venezuela. The full list of Export Control Classification Number (ECCNs) impacted by the MEU rule are in Supplement No. 2 to Part 744 of the EAR.
 
The MEU rule published in April broadened BIS’s definition of “military end uses” beyond items for the use, development, or production of military items (as those terms are defined in the EAR) to include any U.S. commodity, software, or technology that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, development, or production of military items. The combination of the military end use definition and the military end user definition-which, per BIS guidance, includes any entity that develops, produces, uses, or maintains military items-generally captures transactions with commercial entities in China, Russia, and Venezuela that engage in even relatively small volumes of business with the military.
Since the MEU rule went into effect on June 29, BIS has relied on companies to conduct their own due diligence to determine whether their potential customers were caught by the rule. This has resulted in significant uncertainty in the export community, particularly with respect to how to treat commercial companies as well as companies listed on the U.S. Department of Defense’s lists of companies determined to be owned or controlled by China’s People’s Liberation Army, published pursuant to Section 1237 of the National Defense Authorization Act (NDAA) for Fiscal Year 1999, as amended. In Commerce’s announcement, it noted that it is taking the action “to respond to requests received from the public to identify specific ‘military end users’ by name and address in the regulations.”
 
The new BIS list, which includes several aerospace and shipping companies, including Aviation Industry Corporation of China (AVIC) and its related entities, eliminates some ambiguity for exporters, as it is now clear that any exports  (or reexports/transfers) where a listed entity is a party to the transaction (e.g., as a purchaser, intermediate consignee, ultimate consignee, or end user) require an export license, and most such licenses likely will be denied. The list does not include Commercial Aircraft Corporation of China (COMAC), despite initial press reports. However, it includes Shanghai Aircraft Design and Research Institute, which designs COMAC planes, and Shanghai Aircraft Manufacturing Co, which manufactures COMAC planes. The list also includes Russia’s Foreign Intelligence Service (SVR), which carried out this month’s massive cyber attack on the U.S. government.
 
Keep in mind that the list is not comprehensive. In other words, industry must continue to conduct due diligence and grapple with the military end user and military end use definitions for any transactions with Chinese, Russian, or Venezuelan companies that are not included in BIS’s initial list. Additionally, while the list is a helpful tool for U.S. companies, publication of the list and the U.S. government’s broader efforts to combat the “military-civil fusion” strategy in China may well result in retaliation by China against U.S. companies. For example, in response to a separate Commerce Department action banning exports to dozens of Chinese companies, this week the Chinese Ministry of Commerce said (link in Chinese) that it would take necessary measures to safeguard the rights and interests of Chinese companies.
 
Apart from its new MEU list, BIS is issuing a separate rule formally removing Hong Kong as a separate destination under the EAR, following U.S. Secretary of State Michael Pompeo’s announcement in May that Hong Kong no longer warrants treatment under U.S. law as autonomous from China. As such, Hong Kong now will fall in Country Group D and be subject to arms embargo restrictions in the EAR; exports to Hong Kong also must comply with the MEU rule.
 
Wiley continues to closely monitor the U.S. government’s efforts to address the growing political, economic, and military competition from China, Russia, and other countries and the impact of such efforts on U.S. and non-U.S. companies. Should you have any questions on the MEU rule or other EAR restrictions, please do not hesitate to contact one of the attorneys listed on this alert.

(Source: Williams Mullen News, December 18, 2020) [Excerpt of long article.]

 
*Author:  Thomas B. McVey, Esq., 1-202 293-8118, Williams Mullen LLP 
 
It seems almost every day there are reports of new developments under the U.S. sanctions laws.  Yet many U.S. companies do not understand the significance of these laws.  While they often appear to affect distant countries such as Iran and N. Korea, they actually impact U.S. companies on a day-to-day basis.  Due to the severe civil and criminal penalties involved (including recent penalties of over $1 billion), it is important for companies and their counsel to understand these laws.  The following is a summary of U.S. sanctions laws in day-to-day business transactions and important compliance issues for U.S. companies.  
 
The U.S. sanctions laws are a set of legal requirements designed to achieve U.S. foreign policy and national security goals.  They are administered by the Office of Foreign Assets Control (“OFAC”) within the U.S. Treasury Department, in conjunction with the State Department and other U.S. agencies.  Sanctions are typically initiated by the President issuing an Executive Order declaring a national emergency under the International Emergency Economic Powers Act (“IEEPA”), the National Emergencies Act or similar authority and designating the parties targeted for sanctions.  While originally adopted to freeze assets of enemies in times of war, they have evolved into a powerful tool for advancing U.S. foreign policy interests around the world.[FN/1]
 
Sanctions are typically imposed to force foreign adversaries to change bad behavior – such as developing nuclear weapons or terrorist activity.[FN/2]  They frequently take the form of prohibitions on U.S. parties entering business transactions with targeted countries or individual parties, and blocking assets of targeted parties.  They apply to U.S. and certain foreign companies including exporters, financial institutions, companies in effectively all industries and even non-profit organizations.  As a result, they have a direct impact on activities of many U.S. and foreign businesses.
 
One of the most controversial parts of the sanctions laws is that the U.S. can designate a foreign party (an individual or entity) for sanctions.  Targeted parties are placed on the OFAC List of Specially Designated Nationals and Blocked Persons (the “SDN List”) or other OFAC restricted party lists.  If a party is listed on the SDN List, parties subject to U.S. jurisdiction are prohibited from entering most types of business transactions with the targeted party anywhere in the world, and the targeted party is cut off from the dollar-denominated U.S. financial system.  In addition, U.S. persons are required to block the assets of the targeted party that come within the U.S. person’s possession and not deal in them.  OFAC typically adds  up to a thousand or more parties to the sanctions lists each year and more are being added every day – these requirements create huge compliance challenges for U.S. companies conducting international business transactions.    
 

A. Requirements Under the Sanctions Laws. 

. . . . 

B. Sanctions Requirements In Day-To-Day Business Transactions.
. . . . 
C. Compliance Procedures For U.S. Sanctions Laws.  
. . . . 
 
The Challenge Ahead.  The U.S. sanctions laws are complex and ever-expanding.  As such, they create an ongoing compliance challenge for U.S. companies.  Based on current political and enforcement trends, this challenge will likely continue for the foreseeable future.  U.S. companies should use care to understand these laws and adopt compliance strategies that are suitable for their business to address these issues.
 


[FN/1] OFAC, part of the Office of Terrorism and Financial Intelligence within the Treasury Department, was founded in 1950.  OFAC and its predecessor agencies the Office of Foreign Funds Control and the Division of Foreign Assets Control have a history of blocking assets and restricting trade and financial transactions with U.S. enemies dating back to the War of 1812.  These agencies operated under Presidential national emergency powers including under the Trading With the Enemy Act of 1917 and other statutory authority to impose asset freezes and trade embargoes involving U.S. adversaries, including administering the Proclaimed List of Certain Blocked Nationals, or the “Black List.”  

[FN/2] For example, the Ukraine/Russia sanctions were imposed in response to the Russian invasion of Ukraine, and the Venezuela sanctions were imposed due to human rights abuses.

EN EDITOR’S NOTES

EN_a114. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* Samuel Smiles (23 Dec 1812 – 16 Apr 1904; was a Scottish author and government reformer. His best known work, Self-Help, promoted thrift and claimed that poverty was caused largely by irresponsible habits.)
 “Idleness of the mind is much worse than that of the body: wit, without employment, is a disease — the rust of the soul, a plague, a hell itself.”
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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. 
23 Dec 2020: 85 FR 83765:

Removal of Hong Kong as a Separate Destination.
85 FR 83793: Addition of ‘Military End-user (MEU) List and addition of entities to the MEU. 

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 Bartlett’s Annotated FTR “BAFTR” is 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 Bartlett’s Annotated ITAR (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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