LATEST EXPORT CONTROLS AND COMPLIANCE UPDATE
See also our “Latest Sanctions Fines & Penalties” section below for an update on companies and persons denied export privileges by the United States Government.
The President Directs Agencies To Modify Requirements Due To Effects Of COVID-19
May 19, 2020 – 85 Fed. Reg. 31353: President Trump issued Executive Order 13924, directing federal agencies to modify some of their requirements to recognize the efforts of businesses attempting to cope with federal regulatory requirements while taking action to recover from the effects of the COVID-19 pandemic. To accomplish this goal, EO 13924 directs agencies to modify some of the standards under which they operate by taking actions such as not requiring subjects of enforcement actions to bear the burden of proving compliance, providing guidance on what the law requires, granting extensions of time for compliance with agency requirements, accelerating procedures for receiving pre-enforcement rulings regarding proposed conduct, and temporarily or permanently waiving regulations and other requirements that may inhibit economic recovery.
Department of Commerce – Bureau of Industry and Security
BIS Extends Temporary General License Regarding Huawei
May 18, 2020 – 85 Fed. Reg. 29610: BIS extended through Aug. 13, 2020, the Temporary General License (TGL) authorizing certain exports, re-exports, and in-country transfers to Huawei Technologies Co. Ltd., and its 114 non-U.S. affiliates that are included on the Entity List (15 CFR Part 744, Supp. No. 4) . This 90-day extension provides an opportunity for users of Huawei devices and telecommunication providers – particularly those in rural U.S. communities – to continue operating such existing networks and devices while hastening the transition to alternative suppliers. However, in this new announcement, BIS cautioned that the activities authorized in this TGL may be revised and possibly eliminated after the end of this extension, in which case they may require license applications. BIS is in the process of reviewing the public comments it received on this topic in response to the requests for comments it issued March 12 and 27, 2020. (See March 2020 Regulatory Update.)
BIS Amends Foreign-Produced Direct Product Rule
May 19, 2020 – 85 Fed. Reg. 29849: BIS issued an interim final rule, effective May 15, 2020, amending the EAR (Export Administration Regulations, 15 CFR Parts 730-774) foreign-produced direct product rule (General Prohibition Three, EAR Sec. 736.2(b)(3)) to expand the universe of foreign-produced items that are subject to the EAR to include items such as semiconductor designs produced by Huawei and Huawei’s affiliates on the Entity List that are the direct product of certain Commerce Control List (CCL) software and technology and, in limited cases, items such as chipsets produced from design specifications of Huawei or its affiliates that are the direct product of certain CCL semiconductor manufacturing equipment located outside the U.S., when there is knowledge that such items are destined to a designated entity on the Entity List, and when certain other conditions are satisfied.
As described in a Commerce Department press release (https://www.commerce.gov/news/press-releases/2020/05/commerce-addresses-huaweis-efforts-undermine-entity-list-restricts, May 14, 2020):
- “Specifically, this targeted rule change will make the following foreign-produced items subject to the Export Administration Regulations (EAR): (i)Items, such as semiconductor designs, when produced by Huawei and its affiliates on the Entity List (e.g., HiSilicon), that are the direct product of certain U.S. Commerce Control List (CCL) software and technology; and
- “Items, such as chipsets, when produced from the design specifications of Huawei or an affiliate on the Entity List (e.g., HiSilicon), that are the direct product of certain CCL semiconductor manufacturing equipment located outside the United States. Such foreign-produced items will only require a license when there is knowledge that they are destined for reexport, export from abroad, or transfer (in-country) to Huawei or any of its affiliates on the Entity List.”
In order to prevent immediate adverse economic consequences to foreign foundries that utilize U.S. semiconductor manufacturing equipment, this rule will not apply to shipments of foreign-produced items based on Huawei design specifications whose production had started prior to May 15, 2020 that are reexported, exported from a foreign country, or transferred in-country before September 14, 2020. The deadline for comments on this rule is July 14, 2020.
Department of Commerce – Census Bureau
Census Bureau Updates “How to Find Your Schedule B Number Revisited”
May 19, 2020: The Census Bureau published an updated version of “How to Find Your Schedule B Number Revisited,” an updated description of the function of Schedule B numbers and step-by-step guide to finding the right number for the user’s export. This guide is on the Census Bureau website at https://www.census.gov/newsroom/blogs/global-reach/2020/05/how_to_find_yoursch.html.
General Accounting Office
GAO Released Report - “Export Controls: State And Commerce Should Improve Guidance And Outreach To Address University-Specific Compliance Issues”
May 12, 2020: The General Accounting Office (GAO) released a report titled “Export Controls: State and Commerce Should Improve Guidance and Outreach to Address University-Specific Compliance Issues,” focused on the risk of deemed exports to foreign students and scholars. Key findings of the report include that current guidance from the Departments of State and Commerce does not adequately address issues that are more common to universities, such as fundamental research; that the Department of Defense has not consistently interpreted the export control regulations; and that while most universities in the study had robust export compliance practices in place, there were gaps in practices involving risk assessments, training, internal audits, and export compliance manuals. The full 94-page report is on the GAO website at https://www.gao.gov/assets/710/706829.pdf.
Department of State
DDTC Name And Address Changes Posted To Website
May 4 and 18, 2020: The Directorate of Defense Trade Controls (DDTC) posted the following name and/or address changes on its website at
- Change in Name from Arconic Inc. to Howmet Aerospace Inc. due to corporate restructuring and spin-off;
- RUAG Switzerland Ltd changed names as follows due to reorganization:
o RUAG Switzerland Ltd (also known as RUAG Schweiz AG) changed to RUAG Ltd (also known as RUAG AG), and
o RUAG Switzerland Ltd. (also known as RUAG Schweiz AG) - Space and Aerostructures division is unaffected; and
- Change in Name for Elbit Systems’ Israeli wholly owned direct subsidiary, Elbit Systems Land and C4I Ltd. (ESLC), to Elbit Systems C4I and Cyber Ltd., due to corporate restructure.
Each announcement includes a link to a notice detailing the change and its effects on pending and currently approved authorizations involving the listed entity.
DDTC Announced The Temporary Suspension Of Rules And/Or Deadlines During The SARS-COV2 (aka COVID-19) Public Health Emergency
May 1, 2020 – 85 Fed. Reg. 25287: DDTC announced the temporary suspension of several rules and/or deadlines during the SARS-COV2 public health emergency, as authorized by International Traffic in Arms Regulations (ITAR, 22 CFR Parts 120-130) Secs. 126.2 and 126.3. The suspensions include:
- Effective Feb. 29, 2020, annual registrations under ITAR parts 122 and 129 as a manufacturer, exporter, and/or broker with expiration dates of Feb. 29, March 31 April 30, May 31, or June 30, 2020 are extended for two months from the original date of expiration;
- Effective March 13, 2020, limitations on the duration of ITAR licenses and agreements contained in ITAR parts 120 through 130 that expire between March 13 and May 31, 2020 are suspended for six months after the original date of expiration, as long as there is no change in the scope or value of the authorization and no name /address changes are required;
- Effective March 13, 2020, a contract employee who meets the requirements of ITAR Sec. 120.39(a)(2) may work at a remote work location excluding Russia or a country listed in ITAR Sec. 126.1 until July 31, 2020, unless that date is otherwise extended in writing; and
- Effective March 13, 2020, a regular employee of a licensed entity who is working remotely in a country not currently authorized by a Technical Assistance Agreement (TAA), Manufacturing License Agreement (MLA), or exemption is authorized to send, receive, or access any technical data authorized for export, reexport, or retransfer to their employer via a TAA, MLA, or exemption so long as the regular employee is not located in Russia or an ITAR Sec.126.1 country until July 31, 2020, unless that date is otherwise extended in writing.
DDTC Temporarily Reduced Registrations Fees Due To COVID-19 Public Health Emergency
May 6, 2020 – 85 Fed. Reg. 26847: In an action intended to help mitigate the economic impact of the COVID–19 public health emergency on the U.S. Defense Industrial Base and also warranted by the economic hardship caused by the pandemic, DDTC temporarily reduced registration fees referenced in ITAR Sec. 122.3 as follows:
- Tier I (initial registration and those that file no licenses) and Tier II (those that file less than 10 licenses per year) registrants whose original expiration date is between May 30, 2020 and April 30, 2021: registration fee reduced to $500.
- New applicants who submit their application between May 1, 2020 and April 30, 2021: registration fee reduced to $500.
- All new registrants are in Tier I in their first year.
- Tier I and Tier II entities after April 30, 2021: Fees revert to April 1, 2020 amounts.
- Tier III registrants: No change from current fee structure.
The Bureau of Political-Military Affairs Rescinded Its Policy Of Denial Concerning BAE Systems Saudi Arabia Limited
May 20, 2020 – 85 Fed. Reg. 30783: The Bureau of Political-Military Affairs gave notice that it has rescinded its policy of denial concerning BAE Systems Saudi Arabia Limited (BAES SAL), a subsidiary of BAE Systems plc, including BAES SAL’s divisions and business units and successor entities, based on a determination that the rescission is in the national security and foreign policy interests of the U.S. The policy of denial was announced on May 23, 2011 (76 Fed. Reg. 29814).
Department of the Treasury
OFAC Revoked Venezuela-Related General License (GL) 13E
May 12, 2020: The Office of Foreign Assets Control (OFAC) revoked and archived on its website Venezuela-related General License (GL) 13E, “Authorizing Certain Activities Involving Nynas AB,” as changes in Nynas’s ownership and control had ended the need to maintain Nynas as a blocked party under the Venezuela Sanctions Regulations (VSR, 31 CFR Part 591). Consistent with this action, OFAC also issued GL 3H ("Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds") and GL 9G ("Authorizing Transactions Related to Dealings in Certain Securities") to remove Nynas from the prior versions of both licenses. FAQs 661 and 662, further describing GLs 3H and 9G, are on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#661.
OFAC Published An FAQ About the Wind-Down Period Regarding The Sanctions Waiver Covering All Remaining Nuclear Projects In Iran That Originated With The Joint Comprehensive Plan of Action
May 27, 2020: Following an announcement by the Secretary of State that the sanctions waiver covering all remaining nuclear projects in Iran that originated with the Joint Comprehensive Plan of Action (JCPOA) would end following a final 60-day wind-down period, OFAC published an FAQ about a wind-down period ending July 27, 2020 for activities associated with the waivers. Secretary Pompeo’s announcement is on the State Department website at https://www.state.gov/keeping-the-world-safe-from-irans-nuclear-program/; the OFAC FAQ is on the Treasury Department website at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#829.
LATEST SANCTIONS FINES & PENALTIES
Department of State
May 20, 2020 – 85 Fed. Reg. 30783: DDTC imposed statutory debarment on the following persons based on their convictions for violating, or conspiracy to violate, the Arms Export Control Act (AECA, 22 USC 2778 et seq.):
(1) Asad-Ghanem, Rami Najm (aka Ghanem, Rami Najm);
(2) Boyko, Gennadiy;
(3) Browning, Scott Douglas;
(4) Brunt, Paul Stuart;
(5) Chehade, Walid;
(6) Dequarto, Dominick;
(7) Diab, Hicham;
(8) El Mir, Nafez;
(9) Heubschmann, Andy Lloyd;
(10) Joseph, Junior Joel;
(11) Peterson, John James;
(12) Prezas, Julian;
(13) Rodriguez, Chris;
(14) Ruchtein, Sergio;
(15) Saiag, Allexander (aka Saiag, Alexandre);
(16) Saidi, Abdul Majid;
(17) Shapovalov, Michael (aka Mikhail Shapovalov);
(18) Sheng, Zimo;
(19) Srivaranon, Apichart;
(20) Taylor, Maurice;
(21) Tishchenko, Oleg Mikhaylovich;
(22) Zamarron-Luna, Carlos Antonio; and
(23) Zuppone, Brunella.
These persons are prohibited from participating directly or indirectly in any activities that are regulated by the ITAR for 3 years following their conviction, and, beyond that date, until they request and receive reinstatement from the State Department. During debarment, the Department may grant transaction exceptions on a case-by-case basis. The Federal Register announcement includes a description of the rules applicable to statutory debarment.
Fines and Penalties
May 6, 2020: Biomin America, Inc. of Overland Park, KS, an animal nutrition company, paid $257,862 to settle charges by OFAC that Biomin and its owned or controlled foreign entities had violated Sec. 515.201 of the Cuban Assets Control Regulations (CACR, 31 CFR Part 515) by making 30 sales of agricultural commodities produced outside the U.S. to Alfarma S.A. in Cuba without authorization from OFAC. OFAC noted that Biomin could potentially have avoided these violations by making these exports under an existing general license under CACR Sec. 515.533(a) or applying for a specific license from OFAC; however, it apparently failed to seek appropriate advice and did not have an OFAC compliance program. The sales in question had a transactional value of $17,391,950.