Every Monday we post the highlights out of last week’s FCC Export/Import Daily Update (“The Daily Bugle”). Send out every business day to approximately 9,500 readers of changes to defense and high-tech trade laws and regulations, The Daily Bugle 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 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 week’s highlights of The Daily Bugle included in this edition are:
- Commerce/BIS Amends EAR by Implementing Wassenaar Decisions and Eliminating Reporting Requirements for Certain Encryption Items”; Monday, 29 Mar 2021; Item #1
- EU Parliament Agrees to New EU Export Rules on Dual-use Items; Monday, 29 Mar 2021; Item #6
- EU Makes Specific Arrangements to the Mechanism Making the Exportation of Certain Products Subject to the Production of an Export Authorisation; Monday, 29 Mar 2021; Item #8
- UK ECJU: “Notice to Exporters 2021/02 – Exporting Military or Dual-use Technology”; Wednesday, 31 Mar 2021; Item #7
- UK/Office of Financial Sanctions Implementation; Thursday, 1 Apr 2021; Item #6
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Commerce/BIS Amends EAR by Implementing Wassenaar Decisions and Eliminating Reporting Requirements for Certain Encryption Items”
(Source: Federal Register) [Excerpts]
86 FR 16482: Rule
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security (BIS) maintains, as part of its Export Administration Regulations (EAR), the Commerce Control List (CCL), which identifies certain items subject to Department of Commerce jurisdiction. This final rule amends the EAR by revising the CCL, as well as corresponding parts of the EAR, to implement changes to the Wassenaar Arrangement List of Dual-Use Goods and Technologies (WA List) that were decided upon by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement, or WA) at the December 2019 WA Plenary meeting.
The Wassenaar Arrangement advocates implementing effective export controls on strategic items with the objective of improving regional and international security and stability. This rule harmonizes the CCL with the decisions reached at the 2019 Plenary meeting by revising Export Control Classification Numbers (ECCNs) controlled for national security reasons in each category of the CCL.
This rule also makes associated changes to the EAR as well as corrections. This rule also makes changes to various provisions related to Category 5-Part 2 of the CCL in the EAR, including provisions on License Exception Encryption commodities, software, and technology (ENC). These changes, which include the elimination of reporting requirements for certain encryption items, are designed to reduce the regulatory burden for exporters while still fulfilling U.S. national security and foreign policy objectives. . . . .
* DATES: This rule is effective March 29, 2021.
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EU Parliament Agrees to New EU Export Rules on Dual-use Items
(Source: European Parliament News, 25 Mar 2021)
- New EU criteria for granting export licences for dual use products
- Checks on the export of dual use products contribute to preventing human rights violations
- The export of cyber-surveillance tools will also be controlled
Parliament backed the new set of rules for exporting dual use products and technologies, including cyber-surveillance tools.
The reviewed rules govern the export of so-called dual use goods, software and technology – for example, high-performance computers, drones and certain chemicals – that can have legitimate civilian applications, but can also be used for the development of weapons of mass-destruction, terrorist acts and human rights violations. The update was adopted by 642 votes for, 37 against and 9 abstentions.
The current update, made necessary by technological developments and growing security risks, includes new criteria to grant or reject export licenses for certain items.
Human rights and cyber-surveillance
Thanks to Parliament’s negotiators, the updated regulation will also have substantially stronger human rights considerations among those new criteria to avoid that certain surveillance and intrusion technologies exported from the EU contribute to human rights abuses.
It will lead to the establishment of an EU list of technologies that are subject to export restrictions. The list, which goes beyond international lists, also includes stricter export controls on certain cyber-surveillance tools in the interest of protecting human rights and political freedoms. The regulation sets up an EU-level coordination mechanism for the exports of cyber-surveillance items, new transparency and reporting obligations for member states, and will swiftly incorporate emerging technologies.
Quotes
“With the reform of the dual use regulation, the Parliament has put human rights and human security at the forefront of European export policy. The new rules for cyber-surveillance exports paired with companies’ new due diligence requirements and meaningful transparency will make sure that our facial recognition technology and other European high-end surveillance do not end up in the hands of the Chinese Communist Party or other authoritarian regimes to violate human rights. EU countries now must implement the rules and apply the new tools we created to make this a reality”- said rapporteur Marketa Gregorova (Greens/EFA, CZ).
“This is an update long overdue. Parliament’s perseverance and assertiveness against a blockade by some member states has paid off: respect for human rights will become an export standard. This new regulation, in addition to the one on conflict minerals and a future supply chain law, shows that we can shape globalisation according to a clear set of values and binding rules to protect human and labour rights and the environment. This must be the blueprint for future rule-based trade policy,” chair of the trade committee Bernd Lange(S&D, DE) added.
Next steps
After the formal endorsement of the Parliament, Council has to officially agree to the updated regulation before it can enter into effect.
Background
Under international commitments, EU member states have to prevent the proliferation of nuclear, chemical or biological weapons. This obligation extends to the control of the export of dual use products the Commission proposed to update in 2016. Parliament adopted its negotiating mandate in January 2018, and was waiting for the Council’s position to start talks until October 2019.
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EU Makes Specific Arrangements to the Mechanism Making the Exportation of Certain Products Subject to the Production of an Export Authorisation
(Source: Official Journal of the European Union, 24 Mar 2021) [Excerpts]
….
HAS ADOPTED THIS REGULATION:
Article 1
The application of point (a) of Article 1(9) of Implementing Regulation (EU) 2021/442 is suspended.
However, the suspension shall not apply to the following countries and territories: (eight entities) . . .
Article 2
1) The competent authority of a Member State shall grant an export authorisation requested pursuant to Implementing Regulation (EU) 2021/442 provided that:
(a) the export authorisation fulfils the condition of Article 1(7) of Implementing Regulation (EU) 2021/442;
(b) the authorisation does not otherwise pose a threat to the security of supply within the Union of the goods covered by Implementing Regulation (EU) 2021/442.
2) To determine whether the condition in point (b) of paragraph 1 is fulfilled, the competent authority of the Member State shall assess the following factors:
(a) whether the country of destination of the export restricts its own exports to the Union of goods covered by Implementing Regulation (EU) 2021/442, or of the raw materials from which they are made, either by law or by any other means, including through the conclusion of contractual arrangements with the manufacturers of those goods;
(b) the relevant conditions prevailing in the country of destination of the export, including the epidemiological situation, the vaccination rate and the existing availability of goods covered by Implementing Regulation (EU) 2021/442.
3) When the Commission assesses the draft decision notified by the competent authority of the Member State pursuant to Article 2(4) of Implementing Regulation (EU) 2021/442, it shall also evaluate whether the condition in point (b) of paragraph 1 of this Article is fulfilled, having regard to the factors listed in its paragraph 2.
Article 3
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union. It shall apply until six weeks from its entry into force.This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 24 March 2021.
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UK ECJU: “Export Controls Applying to Academic Research”
(Source: UK ECJU, 31 Mar 2021) [Excerpts]
This guidance is for academics or those doing postgraduate research in fields where there is a high risk it could be used for military purposes. This includes the development, production, use or delivery of weapons of mass destruction (WMD).
It explains:
- how to assess if the UK’s export controls apply
- when your research might be exempt
- how to check whether you need an export licence
UK strategic export controls focus on high risk activities, such as applied research and could affect your activities if you:
- work with colleagues overseas on research projects
- take your research overseas
- export your technology
It is a criminal offence to export controlled items without the correct licence. Penalties vary depending on the nature of the offence.
High risk research
Applied research in certain fields is high risk and could potentially be misused for military purposes. These areas are usually in the science, technology, engineering and mathematics (STEM) subjects.
They include:
- aeronautical and space technology
- applied chemistry, biochemistry and chemical engineering
- applied physics
- biotechnology
- electrical and mechanical engineering
- instrumentation and sensors
- materials technology
- nuclear technologies
- production and process technology
- telecommunications and information technology
Technology and software
Academic and university researchers must check:
- definitions of the term ‘technology’ and ‘software’ as used in export controls
- what constitutes an export of technology
See guidance on exporting military or dual-use technology: definitions.
Working in the cloud
Computer-based services and activities that take place online, in the cloud or through distributed computing, include:
- virtual learning environments (VLEs)
- e-Research
- e-Science
Export controls can still apply to these types of activities and need to be considered.
Collaborating internationally
Before agreeing to any international research collaboration, researchers and institutions must first undertake a due diligence process.
The development and production of complex military systems, such as WMDand the means of their delivery, require expertise in a wide range of technical areas.
A particular collaboration may not on first appearance be directly relevant to such activities. However, a transfer of technical information or data for one purpose could unwittingly be used for another purpose, including assisting in the development or production of WMD.
This is particularly important with organisations in countries subject to sanctions relating to WMD, or countries that have WMD or ballistic missile programmes.
You should note certain countries have an active state policy concerning the diversion of advanced and emerging technologies. This is to support the development of their military including in WMD.
You should:
- Check if there will be any transfer of controlled items, including ‘technology’.
- Check if there is a risk that the activities of a party to the collaboration could divert items, including non-controlled items, to a WMD programme.
- Get an export licence for any transfers. …
When UK strategic export controls apply
Export controls apply:
- to goods, software and technology appearing on control lists
- when there are concerns about end-use or end-user
- when destinations are subject to sanction or other restrictions
Check guidance on UK’s strategic export controls.
Transnational education (TNE)
Both export control restrictions and exemptions apply when a UK institution offers STEM-based courses:
- through an overseas campus
- to overseas-based students by electronic means
When providing these STEM-based courses you must ensure any training, advanced study, continued professional development, or individual research projects:
- comply with export controls
- are not undertaken in support of a WMD programme
Care must also be taken if research is:
- undertaken as part of an applied or work based programme, such as an engineering doctorate
- through a split-site programme of study involving a non-UK based component
How nationality affects export controls
The nationality of any intended recipient is not a factor as to whether or not export controls apply. Therefore the UK does not have what is termed ‘deemed exports’. The transfer of controlled ‘technology’ to a non-UK national, that takes place solely in the UK, and does not involve any transfer from the UK, is not deemed to be an export.
The nationality of a person is a factor with other government approvals, such as the Academic Technology Approval Scheme (ATAS) certificate. This is a requirement for certain non-UK persons to be able to study specific subjects in the UK.
Case studies
Read our case studies showing scenarios when export controls apply to academic research.
Penalties and fines
Breaching export controls is a criminal offence. Penalties can vary depending on the nature of the offence.
They include:
- revocation of licences
- seizure of items
- issuing of a compound penalty fine
- imprisonment for up to 10 years
See how to voluntarily report any licensing irregularities to HMRC.
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UK/Office of Financial Sanctions Implementation
(Source: UK Gov, 1 Apr 2021)
OFSI – UK Financial Sanctions guidance updated today. See Source for new guidance.