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The Daily Bugle Weekly Highlights: Week 14 (31 March-3 April 2020)

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 8,000 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, Salvatore Di Misa, 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:

    1. DoD/DSCA Adds Section C.9.17. Foreign Military Sales (FMS) Trust Fund Transportation Cost Clearing Account; The Daily Bugle; Tuesday, 31 March 2020; Item #5.
    2. EU Commission Issues Guidance from the European Commission on Using the Public Procurement Framework in the Emergency Situation Related to The COVID-19 Crisis; The Daily Bugle; Wednesday, 1 April 2020; Item #8.
    3. Commerce/BIS Publishes Notification of Court Order Regarding 3-D Printed USML Controlled Items; The Daily Bugle; Thursday, 2 April 2020; Item #1.
    4. State/DDTC Issues Preliminary Injunction Regarding USML List Categories; The Daily Bugle; 2 April 2020; Item #2.
    5. State/DDTC: “Categories I, II and III Updates in DECCS; The Daily Bugle; Friday, 3 April 2020; Item #3.

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    DoD/DSCA Adds Section C.9.17. Foreign Military Sales (FMS) Trust Fund Transportation Cost Clearing Account

    (Source: DoD/DSCA)

    This memorandum adds Section C.9.17. Foreign Military Sales (FMS) Trust Fund Transportation Cost Clearing Account. This language defines account upper and lower controls and provides for daily, monthly and annual reviews of this account

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    EU Commission Issues Guidance from the European Commission on Using the Public Procurement Framework in the Emergency Situation Related to The COVID-19 Crisis

    (Source: Official Journal of the European Union, 1 Apr 2020) [Excerpts]

    (1) Introduction – Options and flexibilities under the public procurement framework

    COVID-19 is a health crisis that requires swift and smart solutions and agility in dealing with an immense increase of demand for similar goods and services while certain supply chains are disrupted. Public buyers in the Member States are at the forefront for most of these goods and services. They have to ensure the availability of personal protective equipment such as face masks and protective gloves, medical devices, notably ventilators, other medical supplies, but also hospital and IT infrastructure, to name only a few.

    At European level, the Commission together with the Member States has already stepped up efforts by launching joint procurement actions for various medical supplies.

    To further tailor its assistance to this emergency situation the Commission explains in this guidance [FN/1], which options and flexibilities are available under the EU public procurement framework for the purchase of the supplies, services, and works needed to address the crisis.

    Public buyers have several options they can consider:

    Firstly, in cases of urgency they can avail themselves of possibilities to substantially reduce the deadlines to accelerate open or restricted procedures.

    Should those flexibilities not be sufficient, a negotiated procedure without publication can be envisaged. Eventually, even a direct award to a preselected economic operator could be allowed, provided the latter is the only one able to deliver the required supplies within the technical and time constraints imposed by the extreme urgency.

    In addition, public buyers should also consider looking at alternative solutions and engaging with the market.

    This guidance focusses especially on procurements in cases of extreme urgency, which enable public buyers to buy within a matter of days, even hours, if necessary. Precisely for a situation such as the current COVID-19 crisis which presents an extreme and unforeseeable urgency, the EU directives do not contain procedural constraints.

    Concretely, the negotiated procedure without publication allows public buyers to acquire supplies and services within the shortest possible timeframe. Under this procedure, as set out in Art. 32 of Directive 2014/24/EU (the ‘Directive’) [FN/2], public buyers may negotiate directly with potential contractor(s) and there are no publication requirements, no time limits, no minimum number of candidates to be consulted, or other procedural requirements. No procedural steps are regulated at EU level. In practice, this means that authorities can act as quickly as is technically/physically feasible – and the procedure may constitute a de facto direct award only subject to physical/technical constraints related to the actual availability and speed of delivery.

    The European public procurement framework provides all necessary flexibility to public buyers to purchase goods and services directly linked to the COVID-19 crisis as quickly as possible. In order to speed up their procurements public buyers may also consider to:

    contact potential contractors in and outside the EU by phone, e-mail or in person,

    hire agents that have better contacts in the markets,

    send representatives directly to the countries that have the necessary stocks and can ensure immediate delivery,

    contact potential suppliers to agree to an increase in production or the start or renewal of production.

    However, confronted with situations of an exceptional increase in the demand of similar goods, products and services coupled with a significant disruption of the supply chain, it may be physically/technically impossible to procure using even the fastest available procedures. To satisfy their needs, public buyers may have to look for alternative and possibly innovative solutions, which might already be available on the market or could be capable of being deployed at (very) short notice. Public buyers will have to identify solutions and interact with potential suppliers in order to assess whether these alternatives meet their needs [FN/3]. Interaction with the market may offer good opportunities to take into account also strategic public procurement aspects, where environmental, innovative and social requirements, including accessibility to any services procured, are integrated in the procurement process.

    Public buyers are fully empowered under the EU framework to engage with the market and in matchmaking activities. There are various ways to interact with the market to stimulate the supply and for the medium term needs, the application of urgent procedures could prove a more reliable means of getting better value for money and wider access to available supplies. In addition:

    Public buyers may use innovative digital tools [FN/4] to trigger a wide interest among economic actors able to propose alternative solutions. For example, they could launch hackathons for new concepts that enable reusing protective masks after cleaning, for ideas on how to protect medical staff effectively, for ways to detect the virus in the environment, etc.

    Public buyers may also work more closely with innovation ecosystems or entrepreneurs’ networks, which could propose solutions.

    Public buyers can rely on the EU public procurement framework, which provides ways and means to accommodate severe emergencies such as the COVID-19 pandemic.

    It allows and encourages public buyers to pursue a multi-stage strategy. First, for their immediate and projected short-term needs, they should fully exploit the flexibilities of the framework. As a complementary tool, they are encouraged to procure jointly and to take advantage of the Commission’s joint procurement initiatives. Procedures with reduced deadlines serve their needs in the medium term, as they are in principle more reliable means of getting better value for money and ensureing wider access of companies to the business opportunities and a wider range of available supplies.

    The Commission will mobilise all its resources to provide further advice and assistance [FN/5] to Member States and public buyers. …

    [FN/1] This guidance builds on the ‘Commission Communication on Public Procurement rules in connection with the current asylum crisis of 9 September 2015 COM(2015) 454 final’; This guidance reflects the Commission’s understanding of the Treaties, the public procurement directives and the case-law of the Court of Justice of the European Union (the Court). It should be noted that, in any event, the binding interpretation of Union law is ultimately the role of the Court of Justice of the European Union. The guidance does not change the legal framework.

    [FN/2] Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ L 94 of 28.3.2014, p. 65).

    [FN/3] Guidance and good practice on buying innovative products and services.

    [FN/4] Digital procurement encourages innovative approaches.

    [FN/5] There are more than 250 000 contracting authorities in the EU, hence the Commission already communicates with designated national contact points from Member States through a dedicated WIKI online tool.

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    Commerce/BIS Publishes Notification of Court Order Regarding 3-D Printed USML Controlled Items

    (Source: Federal Register, 2 Apr 2020)

    85 FR 18438: Notification of court order.

    * AGENCY: Bureau of Industry and Security, Department of Commerce.

    * ACTION: Notification of court order.

    * SUMMARY: The Bureau of Industry and Security (BIS) is publishing this notification to alert the public of the Bureau’s interim measures with respect to a court order issued on March 6, 2020.

    * DATES: The court order was effective March 6, 2020.

    On January 23, 2020, the Department published a final rule in the Federal Register at 85 FR 3819 that amends the International Traffic in Arms Regulations (ITAR) to revise Categories I, II, and III of the U.S. Munitions List (USML) and removes certain items that no longer warrant control. On the same date, the Department of Commerce published a companion final rule in the Federal Register at 85 FR 4136 that makes conforming changes to the Export Administration Regulations (EAR) to control the items removed from the USML. The final rules were to be effective March 9, 2020.

  1.  On January 23, 2020, several U.S. States filed a lawsuit in the United States District Court for the Western District of Washington (Civil Action No. 2:20-cv-00111) seeking a court order to prohibit the Departments of State and Commerce from implementing or enforcing the final rules described above. Plaintiff States subsequently filed a motion for a preliminary injunction.

    On March 6, 2020, the Honorable Richard A. Jones, District Judge of the U.S. District Court for the Western District of Washington issued an order enjoining the U.S. Department of State from implementing or enforcing the regulation entitled International Traffic In Arms Regulations: U.S. Munitions List Categories I, II, and III, 85 FR 3819 (Jan. 23, 2020) “insofar as it alters the status quo restrictions on technical data and software directly related to the production of firearms or firearm parts using a 3D-printer or similar equipment.” (Case No. 2:20-cv-00111-RAJ).

     As a result, any request for licenses of items that would otherwise fall under the U.S. Department of Commerce regulation, 15 CFR 732.2(b) and 734.7(c) (added by the final rule, entitled, Control of Firearms, Guns, Ammunition and Related Articles the President Determines No Longer Warrant Control Under the United States Munitions List (USML);

    85 FR 4136, Jan. 23, 2020), should instead be directed to the U.S. Department of State.

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    State/DDTC Issues Preliminary Injunction Regarding USML List Categories

    (Source: Federal Register, 2 Apr 2020)

    85 FR 18445: International Traffic in Arms Regulations: U.S. Munitions List Categories; Preliminary Injunction Ordered by a Federal District Court.

    * AGENCY: Department of State.

    * ACTION: Notification of preliminary injunction.

    * SUMMARY: The U.S. Department of State (the Department) is issuing this document to inform the public of a preliminary injunction ordered by a Federal district court on March 6, 2020, affecting the Department.

    * DATES: The court order was effective March 6, 2020.

  2. On January 23, 2020, the Department published a final rule in the Federal Register at 85 FR 3819 that amends the International Traffic in Arms Regulations (ITAR) to revise

    Categories I, II, and III of the U.S. Munitions List (USML) and removes certain items that no longer warrant control. On the same date, the Department of Commerce published a companion final rule in the Federal Register at 85 FR 4136 that makes conforming changes to the Export Administration Regulations (EAR) to control the items removed from the USML. The final rules were to be effective March 9, 2020.

        On January 23, 2020, several U.S. States filed a lawsuit in the

    United States District Court for the Western District of Washington Civil Action No. 2:20-cv-00111) seeking a court order to prohibit the Departments of State and Commerce from implementing or enforcing the final rules described above. Plaintiff States subsequently filed a motion for a preliminary injunction.

    On March 6, 2020, the District Court issued an “Order Granting in Part Plaintiff States’ Motion for Preliminary Injunction.” This order states that the Department of State is enjoined “from implementing or enforcing the regulation entitled International Traffic in Arms Regulations: U.S. Munitions List Categories I, II, and III, 85 FR 3819 (Jan. 23, 2020) insofar as it alters the status quo restrictions on technical data and software directly related to the production of firearms or firearm parts using a 3D-printer or similar equipment.”

    The Department of State is complying with the terms of this order. All persons engaged in manufacturing, exporting, temporarily importing, brokering, or furnishing defense services related to “technical data and software directly related to the production of firearms or firearm parts using a 3D-printer or similar equipment” must continue to treat such technical data and software as subject to control on the USML. All other items addressed in the final rules were transferred from the jurisdiction of the Department and the USML to the Department of Commerce and the Commerce Control List (CCL) on March 9, 2020.

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    State/DDTC: “Categories I, II and III updates in DECCS”

    (Source: State/DDTC)

    The Defense Export Control and Compliance (DECCS) Licensing application has been updated to reflect the changes outlined in the regulation entitled International Traffic In Arms Regulations: U.S. Munitions List Categories I, II, and III, 85 Fed. Reg. 3819 (Jan. 23, 2020). Industry users will be able to select from the new category and subcategory values detailed in the regulation. This change only applies to new license submissions. It does not apply to previously submitted license applications.

    The changes were applied to the system the morning of Friday, April 3, 2020.

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