21-0105 Tuesday ” Daily Bugle “

21-0105 Tuesday “Daily Bugle”

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Tuesday, 5 January 2021

(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 Key Actors in Iran’s Steel Sector”
  5. Treasury/OFAC: “Issuance of Venezuela-related General License 31A and Amended FAQ”
  6. Treasury/OFAC: “Publication of Communist Chinese Military Companies Frequently Asked Question”
  7. Treasury/OFAC: “Banques Arabes et Françaises to Pay $8.5M to Settle OFAC Charges”
  1. EUS: “UK Publishes Libya Sanctions Regs & Guidance on 11 Sanctions Regimes”
  1. Sidley Austin: “TCA: Nothing Free About Free Trade”
  2. Steptoe: “OFAC FAQs Address Forthcoming Ban on US Investments in Chinese Military Companies”
  3. Vinson & Elkins: “FEMA Extends and Modifies Export Restrictions on Medical Supplies and Personal Protective Equipment”
  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 
  4. Submit Your Job Opening and View All Job Openings 
  5. Submit Your Event and View All Approaching Events 


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* Commerce/BIS; Rules; Export Administration Regulations:
Export Control Classification Supplement; Extension of Software Specially Designed to Automate the Analysis of Geospatial Imagery Classification; [Pub. Date: 6 Jan 2021] (PDF)
* State/DDTC; Notices; Department of State Sanctions Actions; Reimposing Certain Sanctions With Respect to Iran; [Pub. Date: 6 Jan 2021] (PDF)

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OGS_a22. Commerce/BIS: (No new postings)

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(Source: Treasury/OFAC, 5 Jan 2021)
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated a China-based supplier of graphite electrodes, a key element in steel production, as well as twelve Iranian producers of steel and other metals products, and three foreign-based sales agents of a major Iranian metals and mining holding company. The Iranian metals sector is 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.
“The Trump Administration remains committed to denying revenue flowing to the Iranian regime as it continues to sponsor terrorist groups, support oppressive regimes, and seek weapons of mass destruction,” said Secretary Steven T. Mnuchin.
Today’s action was taken pursuant to Executive Order (E.O.) 13871, which imposes sanctions on several sectors of the Iranian economy, including Iran’s steel sector, that continue to generate significant revenue for the Iranian regime.
Chinese Supplier of Materials Critical to Iranian Steel Production
Chinese company Kaifeng Pingmei New Carbon Materials Technology Co., Ltd. (KFCC) specializes in the manufacture of carbon materials, key elements in steel production. Between December 2019 and June 2020, KFCC fulfilled orders totaling thousands of metric tons of materials for several Iranian steel companies. In mid-2020, KFCC, working with an Iranian trading firm, sold 300 metric tons of graphite electrodes and miscellaneous equipment to Pasargad Steel Complex in Iran.
KFCC is being designated pursuant to E.O. 13871 for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, Iranian steelmaker Pasargad Steel Complex, an entity designated pursuant to E.O. 13871 for operating in the steel sector of Iran.
Iranian Steel Companies and Foreign-based Sales Agents 
OFAC is designating 12 Iranian steel manufacturers or holding companies, whose combined annual output capacity reaches millions of metric tons of steel product.
The Pasargad Steel Complex is an Iranian steel manufacturer, operating a complex capable of producing 1.5 million tons of steel billets per year. The Gilan Steel Complex Company maintains a hot rolling mill with a 2.5-million-ton capacity and a cold rolling mill with an annual capacity of 500,000 tons. Both entities are being designated pursuant to E.O. 13871 for operating in the steel sector of Iran.
Iran-based Middle East Mines and Mineral Industries Development Holding Company (MIDHCO), a metals and mining holding company that includes steelmakers Sirjan Iranian Steel and Zarand Iranian Steel Company, has a collective production capacity of over 19 million tons of steel, iron, and copper products. MIDHCO encompasses seventeen subsidiaries, including fully owned companies in Germany, China, and the United Kingdom. MIDHCO’s Germany-based subsidiary GMI Projects Hamburg GmbH paid foreign companies for procurement of parts and machinery on behalf of Sirjan Iranian Steel and Zarand Iranian Steel Company. MIDHCO’s China-based subsidiary World Mining Industry Co., Ltd. seeks to develop business relationships with Chinese suppliers in the industry.
MIDHCO is being designated for owning, controlling, or operating Sirjan Iranian Steel and Zarand Iranian Steel Company, entities that are part of the steel sector of Iran.
GMI Projects Hamburg GmbH, World Mining Industry Co., Ltd., and U.K.-based GMI Projects Ltd. are being designated for being owned or controlled by MIDHCO.
OFAC is also designating Iranian steelmakers Khazar Steel Co., Vian Steel Complex, South Rouhina Steel Complex, Yazd Industrial Constructional Steel Rolling Mill, West Alborz Steel Complex, Esfarayen Industrial Complex, Bonab Steel Industry Complex, Sirjan Iranian Steel, and Zarand Iranian Steel Company pursuant to E.O. 13871 for operating in the steel sector of Iran.
Concurrent with this action, the State Department is sanctioning KFCC and the Islamic Republic of Iran Shipping Lines (IRISL) subsidiary Hafez Darya Arya Shipping Company pursuant to Section 1245(a)(1)(C)(II) of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) for having knowingly sold, supplied, or transferred, directly or indirectly, graphite to or from Iran, and such graphite was sold, supplied, or transferred to or from an Iranian person on the SDN List. The State Department is also sanctioning Majid Sajdeh, a principal executive officer of Hafez Darya Arya Shipping Company, pursuant to IFCA Section 1245(a)(1)(C)(II).  
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, persons that engage in certain transactions with the persons designated today by OFAC may themselves be exposed to sanctions. Furthermore, any foreign financial institution that knowingly conducts or facilitates a significant transaction for or on behalf of the persons designated by OFAC today could be subject to U.S. correspondent or payable-through account sanctions.

(Source: Treasury/OFAC, 4 Jan 2021)

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing General License 31A, “Certain Transactions Involving the IV Venezuelan National Assembly, the Interim President of Venezuela, and Certain Other Persons Authorized.”  In addition, OFAC is amending a related Frequently Asked Question.

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(Source: Treasury/OFAC, 4 Jan 2021)
OFAC has published a new frequently asked question related to Executive Order (E.O.) 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.”

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(Source: Treasury/OFAC, 4 Jan 2021)
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a settlement with Union de Banques Arabes et Françaises (“UBAF”), a bank based in France that facilitates trade finance between Europe and the Middle East, North Africa, sub-Saharan Africa, and Asia.  UBAF agreed to remit $8,572,500 to settle its potential civil liability for 127 apparent violations of Syria-related sanctions. UBAF processed the payments on behalf of sanctioned Syrian financial institutions with the majority of the apparent violations involving UBAF’s processing of internal transfers on behalf of Syrian entities that were followed by corresponding funds transfers through the U.S. financial system. For more information, please visit the following web notice.

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(Source: EU Sanctions Law Practice and Guidance, 4 Jan 2021) [Excerpts]
The UK government has published The Libya (Sanctions) (EU Exit) Regulations 2020 (SI 2020/1665), which replace the EU sanctions regime relating to Libya. The UK has also issued guidance on the regulations, which includes information on asset freezes, partial asset freezes, interest, oil aboard UN-designated ships, and ownership and control. See explanatory memorandum, and reports under section 2(4) of the Sanctions and Anti-Money Laundering Act 2018 on the purpose of the regulations, and under section 18 of the Act on criminal offences.
In addition, the UK has published guidance on the regulations relating to the following sanctions regimes: Afghanistan, Somalia, Yemen, Sudan, Iraq, the DPRK, and Central African Republic, trade in cultural property in Syria, the misappropriation of state funds, and unauthorised drilling activities in the Eastern Mediterranean.
The guidance sets out the prohibitions and requirements imposed by the regulations, how they are enforced, licensing, penalties for breach and circumstances where the regulations do not apply. All regulations and guidance listed above, and on our UK Regulations & Guidance page on the site, are now in force because the Brexit transition period has come to an end.


(Source: Editor, 4 Jan 2021)
* Author: Ted Murphy, Esq., 12027368016, Sidley Austin
I wanted to send a short note about the EU-UK trade and cooperation agreement (formally called, the “Trade and Cooperation Agreement Between the European Union and the European Atomic Energy Community, of the One Part, and the United Kingdom of Great Britain and Northern Ireland, of the Other Part” (or “TCA”)) that was reached on December 24, 2020 and became effective on January 1, 2021.  While there are a many good summaries of the 1,200+-page agreement out there, I wanted to highlight what this means from a trade-in-goods perspective – i.e., moving from a customs union to a free trade agreement.
In short, pre-Brexit, the UK was part of a customs union with the EU.  This meant that goods could move freely between the UK and other EU-member countries – no customs clearance requirements, no customs duties, etc.  So, a good produced in the UK could be shipped to customers in France, Germany, Slovenia or any of the other 27-member countries (or vice versa – from those countries to the UK) without the goods having to clear customs, or being subject to customs duties.  As for January 1, 2021, the UK is outside of the EU customs union, which means that goods imported into an EU member country from the UK (or vice versa – from an EU member country to the UK) will need to be imported (i.e., clear customs) and may be subject to customs duty.  
The costs and delays associated with these shipments having to now clear customs are real (although participating in the Authorised Economic Operator program may help). 
In terms of customs duties, this is where the TCA comes in.  The TCA is a free trade agreement which, among other things, provides preferential tariff treatment (i.e., a 0% customs duty rate) to qualifying goods when traded from one member (i.e., the UK) to another (i.e., the EU).  The rub, however, is that the preferential tariff treatment is only provided to goods that meet certain specified rules of origin – i.e., goods that are “originating”.  A free trade agreement, like the TCA, does not afford all goods traded between members preferential tariff treatment, but, instead, only rewards those goods that have undergone ‘enough production’ in the territory of one or more of the parties.  ‘Enough production’ is defined by the rules of origin set forth in the agreement.  In the TCA, the rules of origin are included in Part Two, Heading One; and Annex Orig-1-Annex-Orig-6.  So, if a given good meets a rule of origin set forth in the TCA, it will be eligible to be imported free of customs duties.  Of course, determining whether a given article meets the applicable TCA rule of origin is not cost free.  It involves applying the law (the applicable TCA rule of origin) to the facts (the bill of materials, production operations, etc.) to determine whether the good qualifies as an “originating good”.  In such a case, there are recordkeeping and other requirements involved.  For example, the TCA provides that claims for preferential tariff treatment can be made by the importer based on a “statement on origin” provided by the exporter, or the importer’s knowledge that the product is originating; an exporter that provides a statement on origin, much keep “records demonstrating that the product satisfies the requirements to obtain originating status” for a minimum of 4 years; etc. 
It is important to remember that free trade agreements, like the TCA, are voluntary (not mandatory or otherwise required to be used).  As a result, before pursuing TCA qualification, one needs to make sure that the benefit is worth the added costs/audit risk.  The general, non-preferential tariff rates in the UK and in the EU are reasonable low and many provisions are already subject to a MFN rate of free.  In such a case, there would be little-to-no benefit in pursuing TCA-qualification.  So, the first step should be to confirm the non-preferential rate of duty applicable to the goods being traded between the UK and the EU (and vice versa).  If the potential TCA savings are meaningful enough, it would then be worth determining whether the goods involved satisfy the applicable TCA rule of origin, memorializing the analysis for the file, preparing the statement of origin (if you are the exporter), or requiring your suppliers to perform the analysis and provide statements on origin for the goods that qualify (if you are the importer).

(Source: Steptoe, 4 Jan 2021)
* Principal Author: Nicholas Turner, Esq., 852-5998-7559, Steptoe & Johnson HK
On December 28, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) published five Frequently Asked Questions (FAQs) addressing the scope of the forthcoming prohibition on US persons investing in securities of so-called “Communist Chinese military companies” (CCMCs) under Executive Order (EO) 13959.
The FAQs, which respond to questions and concerns raised by members of the securities industry since the EO’s issuance on November 12, 2020, were accompanied by a “Non-SDN Communist Chinese Military Companies List providing additional identifying information about 35 CCMCs previously named by the Department of Defense. (For more information on Executive Order 13959, see our blog post of November 13, 2020, Executive Order Prohibits US Persons from Buying Securities of Chinese Military Companies as of January 11, 2021.”)
Key Points from OFAC’s FAQs
  • FAQ 857 clarifies that OFAC intends to identify subsidiaries of CCMCs using its authority under Section 4(a)(iii) of EO 13959. Such entities will be issuers of publicly traded securities that are (i) 50 percent or more owned by one or more CCMCs, or (ii) determined to be controlled by one or more CCMCs. The restrictions under EO 13959 would take effect 60 days after their identification.
  • FAQ 858 notes that some names of CCMCs previously identified by the Department of Defense (DoD) do not match the names of issuers of publicly traded securities. The FAQ states that the EO applies to securities of CCMCs “with a name that exactly or closely matches the name of an entity” identified in the Annex to EO 13959 or subsequently identified by the DoD or Treasury Department. The newly issued Non-SDN Communist Chinese Military Companies List provides additional identifying information.
  • FAQ 859 states that the term “publicly traded securities” includes both exchange-listed and over-the-counter securities in any jurisdiction, for the purposes of EO 13959.
  • FAQ 860 provides examples of financial instruments that are “securities that are derivative of, or are designed to provide investment exposure to” publicly traded securities of CCMCs. Examples given include “derivatives (e.g., futures, options, swaps), warrants, American depositary receipts (ADRs), global depositary receipts (GDRs), exchange-traded funds (ETFs), index funds, and mutual funds, to the extent such instruments also meet the definition of ‘security’ as defined” in EO 13959 (which refers to the definition of “security” at Section 3(a)(10) of the Securities Exchange Act of 1934).
  • FAQ 861 clarifies the EO’s application to both US and foreign funds, including ETFs or mutual funds, that hold publicly traded securities of CCMCs. According to the FAQ, the EO’s restrictions apply “regardless of such securities’ share of the underlying index fund, ETF, or derivative thereof.”
More to Come?  
As noted in our earlier blog post, the EO’s plain language appears to exclude many activities and does not appear to require US persons to divest holdings of CCMC securities, although Section 1(b) of the EO may be interpreted to prohibit sales of CCMC securities by US persons after 11 November 2021.
Additionally, OFAC has not provided specific guidance on topics such as derivatives products that are excluded from US securities regulations or the liability of non-US persons providing investment services to US persons. Financial institutions outside the United States may also need to consider the “suitability” of investment products that may have exposure to CCMC securities, if offered to investors who are US persons.
As some industry concerns remain outstanding, it is possible that OFAC could issue additional guidance on EO 13959 following the presidential transition on January 20, 2021. In the interim, investors and financial institutions should evaluate whether divestment of securities or additional compliance controls are warranted prior to the EO’s effective date of January 11, 2021 (and February 1, 2021 for four CCMCs identified by the DoD after the issuance of the EO).

(Source: Vinson & Elkins, 4 Jan 2021)
* Author: Adrianne L. Goins, Esq., +1-202-639-6533, Vinson & Elkins
On December 31, 2020, the Federal Emergency Management Agency (“FEMA”) published a temporary final rule again extending and modifying export restrictions on scarce and critical health and medical supplies. The new rule clarifies existing restricted categories and adds certain syringes and hypodermic needles to the list of supplies that cannot be exported from the United States without explicit FEMA approval. The new rule extends the restrictions until June 30, 2021.
Under the original rule issued in April 2020, FEMA restricted exports of certain “covered materials,” including Personal Protective Equipment (“PPE”), to reserve these supplies for domestic use in fighting the COVID-19 pandemic. Please see our alert on FEMA’s original export restrictions here, our alert on exemptions here, and our alert on a previous modification here.
In addition to extending the time period for the restrictions, FEMA also modified the list of scarce and critical materials to reflect current domestic needs. The export restrictions now apply to the following items:
  • Syringes and Needles – FEMA is adding certain piston syringes and hypodermic needles to the list of covered materials so that these materials can be reserved for COVID-19 vaccinations. A dramatic increase in influenza vaccinations is also tightening supply of these syringes and needles.
  • Respirators – FEMA will continue to limit exports of surgical N95 filtering facepiece respirators. These respirators remain subject to high demand within the United States, and given the forecasts of increased COVID-19 cases and hospitalizations, supply is not expected to catch up with demand.
  • Masks – FEMA will continue to limit exports of PPE surgical masks, and the new rule provides specific standards designating the restricted masks.
  • Gloves – FEMA will continue to limit exports of certain PPE nitrile gloves used in surgery and medical exams, with a modification to clarify the types of gloves subject to the restrictions.
  • Gowns – FEMA will continue to limit exports of certain surgical gowns and surgical isolation gowns. These special surgical gowns meet certain technical standards including liquid barrier performance.
FEMA will continue to work with manufacturers, brokers, distributors, exporters, and shippers to ensure compliance with the restrictions. U.S. Customs and Border Protection will continue to detain shipments of the covered materials temporarily, to allow FEMA to determine whether to return the items for domestic use, to issue a rated Government order for the items under the Defense Production Act, or to allow the export of part or all of the shipments. FEMA has pledged to work to make those determinations quickly in order to minimize disruptions to the supply chain domestically and abroad.


TE_a112. FD Associates Presents: “ITAR FUNdamentals”; 19 – 22 Jan

(Source: FD Associates)
* What:  Live Stream Webinar “ITAR FUNdamentals” — Agenda
* When:  Tue-Fri 19-22 Jan 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_a113. Bartlett’s Unfamiliar Quotations

(Source: Editor)

Today, January 5th, is the “Twelfth Night,” the eve of Epiphany, and the traditional day Christians take down Christmas decorations or risk bad luck for the coming year.
* Robert Herrick (1591 – 1674; was a 17th-century English lyric poet and cleric. He is best known for Hesperides, a book of poems. This includes the well-known carpe diem poem “To the Virgins, to Make Much of Time”, with the first line “Gather ye rosebuds while ye may.”)
  – “Down with the rosemary, and so; Down with the bays and mistletoe; Down with the holly, ivy, all; Wherewith ye dress’d the Christmas Hall.” 
  –  “The season of failure is the best time for sowing the seeds of success.”
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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.
Latest Update 


5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
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 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. 

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.


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.

1 Jan 2019: 19 USC 1202 Annex.
HTS System Update #2009 of 29 Dec 2020.  
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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