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The Daily Bugle Monthly Highlights: November
Every month we post the highlights of FCC’s Export/Import Daily Update (“The Daily Bugle”). The Daily Bugle is sent out every business day to approximately 10,000 readers, who keep up to date with changes in defense and high-tech trade laws and regulations. It is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III and Elina Tsapouri.
We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of European Union, Australia, Canada, U.K., and other countries and international organizations. Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items. To subscribe, click here.
Last month’s highlights of The Daily Bugle included in this edition are:
- DHS/CBP: “Updates to the ACE and Automated Systems Coming Soon!”; Wednesday, 2 Nov 2022; Item #4
- DoD/DCSA: “Understanding the Threat to U.S. Technologies”; Friday, 4 Nov 2022; Item #4
- Congress: “Prioritizing National Security in Export Controls Act of 2022” Bill Would Transfer Export Control Authorities from Commerce to DOD; Tuesday, 8 Nov 2022; Item #4
- President Continues National Emergency with Respect to Proliferation of Weapons of Mass Destruction; Thursday, 10 Nov 2022; Item #2
- State/DDTC: “DTAG Presentations from 9 Nov DTAG Plenary”; Thursday, 10 Nov 2022; Item #7
- UK ECJU Publishes New Russia Notice; Monday, 14 Nov 2022; Item #7
- State/DDTC: “ITAR; Prohibited Exports, Imports, and Sales to or From Certain Countries-Cyprus”; Tuesday, 22 Nov 2022; Item #1
- State/DDTC: Notification of Temporary Suspension of ITAR § 120.11(c) with respect to Certain Capacitors Described on the U.S. Munitions List; Wednesday, 23 Nov 2022; Item #4
- EU Council Adds the Violation of Restrictive Measures to the List of EU Crimes; Tuesday, 29 Nov 2022; Item #7
- State/DDTC Publishes ITAR Reorganization I – ITAR Redline Revision 2; Wednesday, 30 Nov 2022
DHS/CBP: “Updates to the ACE and Automated Systems Coming Soon!”
(Source: DHS/CBP/CSMS #53843701, 2 Nov 2022)
U.S. Customs and Border Protection (CBP) is pleased to announce the coming launch of updates to the ACE and Automated Systems homepage. While users will continue to have access to all the latest information about the Automated Commercial Environment (ACE), the updated website will offer a streamlined organization of ACE resources and fewer clicks for users to access the information they need. In particular, the coming update will include a new “How to Use ACE” page, providing an overview of the ACE Portal and ACE electronic data interchange (EDI) processing and giving users a single location to access all related resources. Any links or bookmarks to URLs that are no longer in service will be redirected to the upgraded resource page.
DoD/DCSA: “Understanding the Threat to U.S. Technologies”
(Source: Defense Counterintelligence and Security Agency, 4 Nov 2022)
The foreign intelligence threat to the nation’s defense industrial base has never been more capable, sophisticated, or complex. Adversaries use illicit methods to acquire classified and sensitive information and technologies, which can determine the outcome of future conflicts. Mitigating these threats starts with understanding them. Read the latest edition of “The Targeting U.S. Technologies: A Report of Threats to Cleared Industry” to learn more about the threats facing the cleared defense industrial base. You’ll find the 2022 edition HERE.
Congress: “Prioritizing National Security in Export Controls Act of 2022” Bill Would Transfer Export Control Authorities from Commerce to DOD
(Source: Congress.gov, 28 Oct 2022)
H.R.9241 — 117th Congress (2021-2022) Prioritizing National Security in Export Controls Act of 2022
* Sponsor: Banks, Jim [Rep.-R-IN-3] (Introduced 10/28/2022)
* Committees: House – Foreign Affairs; Armed Services; Appropriations
* Latest Action: House – 10/28/2022 Referred to the Committee on Foreign Affairs, and in addition to the Committees on Armed Services, and Appropriations.
H. R. 9241
To provide for the transfer of export control authorities from the Department of Commerce to the Department of Defense, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
October 28, 2022
Mr. Banks (for himself, Mr. Wittman, and Mr. Steube) introduced the following bill, which was referred to the Committee on Foreign Affairs, and in addition to the Committees on Armed Services, and Appropriations, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned
To provide for the transfer of export control authorities from the Department of Commerce to the Department of Defense, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. Short title: This Act may be cited as the “Prioritizing National Security in Export Controls Act of 2022”.
SEC. 2. Findings: Congress makes the following findings:
(1) In 2018 Congress on an overwhelming bipartisan basis passed the Export Control Reform Act of 2018 requiring the Department of Commerce to tighten restrictions on transfers of emerging and foundational technologies to high risk countries, especially China, but there has been little progress ever since.
(2) The Department of Commerce has shown itself inept to reconcile its mission to protect United States national security with its objective of promoting United States exports to high-risk countries, especially China.
(3) By August 2022, a Department of Commerce-led process that reviews United States technology exports to China has approved almost all requests and has overseen an increase in sales of some particularly important technologies.
(4) There are only 70 Chinese entities on the Department of Commerce’s current entity list, despite that tens of thousands of Chinese entities may meet the United States criteria for military end-user export restrictions.
(5) The Bureau of Industry and Security, responsible for enforcing export control under the Department of Commerce, has not taken a single action since the passing of the Export Control Reform Act of 2018 to restrict foundational technology from being transferred to China.
(6) In May 2022, the Bureau of Industry and Security dropped foundational technology as a criterion, culminating its defiance of Congress.
SEC. 3. Sense of Congress: It is the sense of Congress that export control authority should be taken away from the Bureau of Industry and Security of the Department of Commerce since the Bureau has manifestly been unable to resolve the conflict of interest between promoting trade and protecting United States national security through enforcing restrictions on technology transfer to high-risk countries, especially China.
SEC. 4. Transfer of export control authorities from the Department of Commerce to the Department of Defense.
(a) Transfer of export control authorities —
(1) IN GENERAL — Notwithstanding any provision of the Export Control Reform Act of 2018 or any other provision of law, all authorities provided to the Department of Commerce, including the Bureau of Industry and Security, regarding implementation and enforcement of matters relating to export control shall be transferred to and carried out by the Defense Technology and Security Administration of the Department of Defense.
(2) IMPLEMENTATION — The Secretary of Commerce and the Secretary of Defense shall take such actions, including the promulgation of regulations, as may be necessary to implement or otherwise carry out this subsection.
(c) Prohibition on transfer of certain Senior Executive Service positions —
(1) IN GENERAL—Notwithstanding any other provision of law, beginning on the date of the enactment of this Act, no individual employed in a Senior Executive Service position related to export control in Department of Commerce, including the Bureau of Industry and Security, may be permitted to transfer from such position to a position in the Defense Technology and Security Administration of the Department of Defense. . . .
President Continues National Emergency with Respect to Proliferation of Weapons of Mass Destruction
(Source: 87 FR 68015, 10 Nov 2022)
* AGENCY: Executive Office of the President
* ACTION: Notice
On November 14, 1994, by Executive Order 12938, the President declared a national emergency with respect to the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States posed by the proliferation of nuclear, biological, and chemical weapons (weapons of mass destruction) and the means of delivering such weapons. . . .
The proliferation of weapons of mass destruction and the means of delivering them continues to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. For this reason, the national emergency declared in Executive Order 12938 of November 14, 1994, with respect to the proliferation of weapons of mass destruction and the means of delivering same. . . .
Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency declared in Executive Order 12938, as amended. . . .
State/DDTC: “DTAG Presentations from 9 Nov DTAG Plenary”
(Source: State/DDTC, 10 Nov 2022)
The Defense Directorate of Trade Compliance (DDTC) held a public meeting of the Defense Trade Advisory Group (DTAG) yesterday. The following three working groups presented recommendations on proposed taskings from DDTC. The full PowerPoint presentations are available HERE.
Working Group 1: – Part 130 Reporting
Background: DTAG recommended changes to the ITAR Part 130 reporting process on May 20, 2021, October 22, 2020, and May 14, 2020.
DTAG recommended that DDTC consolidate the annual Part 130 reporting at the time of a registrant’s renewal of registration and explored the feasibility of offering an annual Part 130 reporting schedule. To assess how such an approach would work, DDTC would like to better understand industry practices related to reporting supplier and vendor contributions, gifts, commissions, or fees paid, offered, or agreed to be paid to solicit, promote, or otherwise in connection with Foreign Military Sales (FMS).
Tasking: DDTC asked DTAG complete the following two sub-tasks:
Identify instances, whether required or discretionary, where industry provides information required under AECA Section 36(b)(1) to the Departments of State or Defense by any means; and Provide recommendations to DDTC ensuring that if DDTC moves to an annual Part 130 reporting requirement, the Departments of State and Defense would receive information required under AECA Section 36(b)(1) before the required notifications to Congress.
Working Group 2: “Development” vs. “Production”
Background: ITAR § 121.1 contains fifteen entries that control developmental items based on DOD funding and each has a “Note” that releases items once they are in “production.” The ITAR consolidation / restructuring interim final rule (effective 9/6/2022) adds definitions for “development” and “production” phases (§ 120.43(a) and (b)(1), respectively).
Tasking: DDTC requests that the DTAG review the interaction between § 120.43(a) and (b)(1), and § 121.1 “developmental” entries and recommend clarifications if necessary, to better illustrate the two phases and when a transition from one stage to the other occurs.
Working Group 3: Joint Ventures
Background: DDTC has identified concerns with “joint ventures,” given they are business entities created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Because of potential ITAR compliance challenges with Joint Ventures, DDTC seeks to become better informed on how JV agreements comply with the ITAR.
Tasking: DDTC requests the DTAG address this question: What factors should parent companies take into consideration to ensure that joint ventures comply with the various requirements of the ITAR?
The full presentations including discussions and recommendations of the Working Groups are available HERE.
UK ECJU Publishes New Russia Notice
(Source: EU Sanctions, 11 Nov 2022) [Excerpts]
On 09 November ECJU published:
(1) General Trade Licence Russia Sanctions – Financial Services and Funds related to Fertilisers which permits the provision of financial services and making funds available to a person connected with Russia for the supply or delivery of specified fertiliser goods either from Russia to a third country, or from Russia to a person in a third country, where they are intended for agricultural use only, and
(2) Notice to exporters 2022/28: New general trade licence Russia sanctions – fertilisers which advises of the new General trade licence Russia sanctions – financial services and funds related to fertilisers.
State/DDTC: “ITAR; Prohibited Exports, Imports, and Sales to or From Certain Countries-Cyprus”
(Source: Today’s Federal Register, 87 FR 71250, 22 Nov 2022) [Excerpts]
* AGENCY: Department of State.
* ACTION: Final rule.
* SUMMARY: The Department of State is amending the International Traffic in Arms Regulations (ITAR) to reflect current defense trade policy towards Cyprus.
* DATES: This rule is effective November 22, 2022.
* FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-1282, or email DDTCCustomerService@state.gov. ATTN: Regulatory Change, ITAR Section 126.1 Cyprus Country Policy Update.
State/DDTC: Notification of Temporary Suspension of ITAR § 120.11(c) with respect to Certain Capacitors Described on the U.S. Munitions List
(Source: State/DDTC, 22 Nov 2022)
On November 21, 2022 the Deputy Assistant Secretary of State for Defense Trade Controls temporarily suspended for a period of six (6) months the applicability of § 120.11(c) of the International Traffic in Arms Regulations (ITAR) for certain capacitors described in U.S. Munitions List (USML) Category XI(c)(5).
The Department assessed that it is in the security and foreign policy interests of the United States to facilitate commercial uses of certain capacitors when integrated into any item not described on the USML (for example, certain items used in energy exploration and commercial aviation). Accordingly, pursuant to ITAR § 126.2, and the Department’s administration of the Arms Export Control Act (AECA), the Deputy Assistant Secretary of State for Defense Trade Controls ordered the temporary suspension of ITAR § 120.11(c) with respect to capacitors described in USML Category XI(c)(5) that have a voltage rating of one hundred twenty-five volts (125 V) or less and have been integrated into, and included as an integral part of, any item not described on the USML. Such articles are licensed by the Department of Commerce when integrated into, and included as an integral part of, items subject to the EAR.
This temporary suspension is valid for a period of six months, from November 21, 2022 to May 21, 2023, or when terminated by notice, whichever occurs first.
Capacitors described in USML Category XI(c)(5) remain subject to the controls of the ITAR in all other circumstances, including as stand-alone articles. The export, reexport, retransfer, or temporary import of technical data and defense services directly related to all defense articles described in USML Category XI(c)(5) remain subject to the ITAR.
Any violation of the ITAR, including any violation of the terms and conditions of any export license issued by the Department of State prior to the temporary suspension announced herein, remains a violation of the AECA. The Department of State strongly encourages industry to disclose unauthorized exports, reexports, retransfers, or temporary imports of defense articles, including the subject capacitors, that occurred prior to this temporary suspension.
EU Council Adds the Violation of Restrictive Measures to the List of EU Crimes
(Source: EU Council, 28 Nov 2022)
The Council today unanimously adopted a decision to add the violation of restrictive measures to the list of ‘EU crimes’ included in the Treaty on the Functioning of the EU.
The EU has adopted a number of restrictive measures in the context of Russia’s war of aggression against Ukraine and it is essential that these measures are fully implemented. Currently member states have different definitions of what constitutes a violation of restrictive measures and what penalties should be applied in the event of violation. This could lead to different degrees of enforcement of sanctions and a risk of these measures being circumvented, potentially allowing sanctioned persons to continue accessing their assets and supporting regimes targeted by EU measures.
The inclusion of the violation of restrictive measures in the list of ‘EU crimes’ is the first of two steps to ensure a similar degree of sanctions enforcement throughout the EU and to dissuade attempts to circumvent or violate EU measures.
Following the adoption of this decision, the European Commission will present a proposal for a directive containing minimum rules concerning the definition of criminal offences and penalties for the violation of EU restrictive measures. This draft directive will then need to be discussed and adopted by the Council and the European Parliament.
Under Article 83(1) of the Treaty on the Functioning of the EU, the Parliament and the Council may establish minimum rules concerning the definition of criminal offences and sanctions in areas of particularly serious crime with a cross-border dimension. The areas of crime currently listed in this article are terrorism, trafficking in human beings and sexual exploitation of women and children, illicit drug trafficking, illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime and organised crime.
On 25 May 2022, the European Commission presented a proposal for a decision to extend the list of these areas of crime to include the violation of restrictive measures adopted by the EU. . . .
State/DDTC Publishes ITAR Reorganization I – ITAR Redline Revision 2
(Source: State/DDTC 30 Nov 2022)
The Directorate of Defense Trade Controls (DDTC) has updated the ITAR Redline made available as a supporting document to 87 FR 16396, Mar. 23, 2022. This Revision 2, dated Nov. 28, 2022, adopts changes made by 87 FR 71250, Nov. 22, 2022, and limits redlines to only those changes made by the March 23 reorganization rule (i.e., changes to plain text those corrections to the original document made by Revision 1 to the ITAR Redline, dated Sept. 16, 2022).
In addition to making Revision 2 available here, DDTC has updated the link to the ITAR Redline in the original announcement entitled “International Traffic in Arms Regulations: Consolidation and Restructuring of Purposes and Definitions” and dated March 22, 2022.
Download Here: 87 FR 16396 – ITAR Reorg I – ITAR Redline