The Daily Bugle Weekly Highlights: Week 20 (13 – 17 May 2019)

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 6,500 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, Alexander P. Bosch, Vincent J.A. Goossen, and Alex Witt.

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. Commerce/BIS Amends EAR, Revises Entity List; The Daily Bugle; Tuesday, 14 May 2019, Item #1;
  2. State/DDTC Releases End-Use Monitoring Report for FY 2018; The Daily Bugle; Tuesday, 14 May 2019, Item #8;
  3. USTR Implements Modification to Section 301, Increased tariff of List 3 Goods from 10 Percent to 25 Percent; The Daily Bugle; Wednesday, 15 May 2019, Item #4;
  4. State/DDTC Imposes Waiver of Sanctions Concerning Visas to PLO and Palestinian Authority Officials; The Daily Bugle; Thursday, 16 May 2019, Item #2;
  5. Commerce Announces Addition of Huawei Technologies Co. Ltd. to EAR Entity List; The Daily Bugle; Thursday, 16 May 2019, Item #4;
  6. EU Council Establishes Framework to Impose Sanctions Against Cyber Attackers; The Daily Bugle; Friday, 17 May 2019, Item #6;

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1. Commerce/BIS Amends EAR, Revises Entity List

(Source:Federal Register, 14 May 2019.) [Excerpts.]

84 FR 21233-21238: Addition of Certain Entities to the Entity List, Revision of an Entry on the Entity List, and Removal of an Entity From the Entity List

* AGENCY: Bureau of Industry and Security, Commerce.

* ACTION: Final rule.

* SUMMARY: This final rule amends the Export Administration Regulations (EAR) by adding twelve entities, under a total of sixteen entries, to the Entity List. These twelve entities have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the destinations of China, Hong Kong, Pakistan and the United Arab Emirates. This rule also modifies one existing entry on the Entity List under the destination of the United Arab Emirates. Finally, this rule removes one entity under the destination of the United Arab Emirates. The removal is made in connection with a request for removal that BIS received pursuant to sections of the EAR used for requesting removal or modification of an Entity List entry and a review of information provided in that request.

* DATES: This rule is effective May 14, 2019.

* FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Email: ERC@bis.doc.gov.

* SUPPLEMENTARY INFORMATION: … The Entity List (15 CFR, Subchapter C, part 744, Supplement No. 4)

identifies entities reasonably believed to be involved, or to pose asignificant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States. The Export Administration Regulations (EAR) (15 CFR, Subchapter C, parts 730-774) impose additional license requirements on, and limits the availability of most license exceptions for, exports, reexports, and transfers (in-country) to listed entities. The license review policy for each listed entity is identified in the “License review policy” column on the Entity List, and the impact on the availability of license exceptions is described in the relevant Federal Register notice adding entities to the Entity List. BIS places entities on the Entity List pursuant to part 744 (Control Policy: End-User and End-Use Based) and part 746 (Embargoes and Other Special Controls) of the EAR.

  The End-User Review Committee (ERC), composed of representatives of the Departments of Commerce (Chair), State, Defense, Energy and, where appropriate, the Treasury, makes all decisions regarding additions to, removals from, or other modifications to the Entity List. The ERC makes all decisions to add an entry to the Entity List by majority vote, and makes all decisions to remove or modify an entry by unanimous vote.

ERC Entity List Decisions

Additions to the Entity List

This rule implements the decision of the ERC to add twelve entities, under a total of sixteen entries, to the Entity List; four of the entities being added are located in two destinations. The twelve entities are being added based on Sec.  744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The sixteen entries consist of six entries located in China, four entries located in Hong Kong, one entry located Pakistan and five entries in the United Arab Emirates (U.A.E.).

  The ERC reviewed Sec.  744.11(b) (Criteria for revising the Entity List) in making the determination to add these twelve entities to the Entity List. Under that paragraph, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that they have been involved, are involved, or pose a significant risk of being or becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, along with those acting on behalf of such persons, may be added to the Entity List. Paragraphs (b)(1) through (5) of Sec.  744.11 provide an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States. For each of the twelve entities described below, the ERC made the requisite determination under the standard set forth in Sec.  744.11(b).

  Pursuant to Sec.  744.11(b) of the EAR, the ERC determined to add Longkui Qu and Taizhou CBM-Future New Material Science and Technology Co., Ltd., both located in China, to the Entity List for engaging in activities contrary to the national security interests of the United States. Specifically, these entities participated in the prohibited export of controlled technology concerning the manufacture of syntactic foam and supplying syntactic foam to PRC state-owned enterprises, PRC defense industrial corporations, and PRC military-related academic institutions.

  The ERC also determined to add four companies–Avin Electronics Technology Co., Ltd. (AETC); Multi-Mart Electronics Technology Co, Ltd.; Tenco Technology Company Ltd.; and Yutron Technology Co. Ltd.–to the Entity List under the destinations of China and Hong Kong for actions contrary to the national security or foreign policy interests of the United States. Specifically, these entities have been attempting to procure U.S.-origin commodities that would ultimately provide material support to Iran’s weapons of mass destruction and military programs, in violation of U.S. export controls.

  In addition, the ERC determined to add Impex Trade & Services, located in the destination of Pakistan, to the Entity List for actions contrary to the national security or foreign policy interests of the United States. Specifically, Impex Trade & Services has been involved in proliferation to unsafeguarded nuclear activities.

  Under the destination of the United Arab Emirates (U.A.E.), the ERC determined that German Sky International Trading Company LLC has been involved in activities that

are contrary to the national security and foreign policy interests of the United States. Specifically, in accordance with Sec. 744.11(b)(4), German Sky International Trading Company LLC is being added to the Entity List because it has prevented the accomplishment of end-user checks conducted by the Department of Commerce. Also under the destination of the U.A.E., the ERC has determined to add to the Entity List Emirates Hermes General Trading; Presto Freight International, LLC; Basha Asmath Shaikh; and Manohar Nair. These four entities have been involved in activities that are contrary to the national security and foreign policy interests of the United States as set forth in Sec.  744.11(b). Emirates Hermes General Trading and Presto Freight International, LLC, operated by Basha Asmath Shaikh and Manohar Nair, procured U.S.-origin items for Complete Freight Solutions, a listed entity on the Entity List, and for Mahan Air, an Iranian airline that is subject to a BIS temporary denial order and has been designated a Specially Designated Global Terrorist by the U.S. Department of Treasury’s Office of Foreign Assets Control.

  Pursuant to Sec.  744.11(b) of the EAR, the ERC determined that the conduct of these twelve entities raises sufficient concern that prior review of exports, reexports, or transfers (in-country) of all items subject to the EAR involving these entities, and the possible imposition of license conditions or license denials on shipments to the persons, will enhance BIS’s ability to prevent violations of the EAR.

  For the twelve entities, under a total of sixteen entries, being added to the Entity List, BIS imposes a license requirement for all items subject to the EAR and a license review policy of presumption of denial. The license requirements apply to any transaction in which items are to be exported, reexported, or transferred (in-country) to any of the entities or in which such entities act as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the entities being added to the Entity List in this rule. The acronym “a.k.a.” (also known as) is used in entries on the Entity List to identify aliases, thereby assisting exporters, reexporters, and transferors in identifying entities on the Entity List. …

Removal From the Entity List

  This rule implements a decision of the ERC to remove DGL Clearing and Forwarding LLC, an entity located in the U.A.E., from the Entity List on the basis of a removal request. The entry for DGL Clearing and Forwarding LLC was added to the Entity List on January 26, 2018 (83 FR 3580). The ERC decided to remove this entry based on information BIS received pursuant to Sec.  744.16 of the EAR and the review the ERC conducted in accordance with procedures described in Supplement No. 5 to part 744. …

Savings Clause

  Shipments of items removed from eligibility for a License Exception or for export or reexport without a license (NLR) as a result of this regulatory action that were en route aboard a carrier to a port of export or reexport, on May 14, 2019, pursuant to actual orders for export or reexport to a foreign destination, may proceed to that destination under the previous eligibility for a License Exception or export or NLR. …

  Dated: May 9, 2019.

Richard E. Ashooh, Assistant Secretary for Export Administration.

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2. State/DDTC Releases End-Use Monitoring Report for FY 2018

(Source:State/DDTC, 14 May 2019.)

This report summarizes the Department of State’s administration of the Blue Lantern end-use monitoring program for fiscal year (FY) 2018. The Blue Lantern program fulfills requirements stipulated in section 40A of the Arms Export Control Act (AECA) (22 U.S.C. 2785) and delegated to the Department of State in Executive Order 13637 (March 8, 2013). The program monitors the end-use of defense articles, technical data, services, and brokering activities exported through commercial channels and subject to Department of State licenses or other approvals under section 38 of the AECA and the International Traffic in Arms Regulations (ITAR) (22 CFR Parts 120-130), which implement section 38 of the AECA. The Blue Lantern program is managed by the Country and End-Use Analysis Division (CEA), Office of Defense Trade Controls Policy, Directorate of Defense Trade Controls (DDTC), Bureau of Political-Military Affairs.

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3. USTR Implements Modification to Section 301, Increased tariff of List 3 Goods from 10 Percent to 25 Percent

(Source: Federal Register, 15 May 2019.)

84 FR 21892: Notice of implementing modification of Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

* AGENCY:Office of the United States Trade Representative.

* ACTION: Notice of implementing modification.

* SUMMARY:In a notice published on May 9, 2019 (May 9 Notice), the U.S. Trade Representative (Trade Representative) increased the rate of additional duty from 10 percent to 25 percent for the products of China covered by the September 2018 action that are (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (ii) exported to the United States on or after May 10, 2019. This notice provides that products of China that are covered by the September 2018 action and that were exported to the United States prior to May 10, 2019, are not subject to the additional duty of 25 percent, as long as such products are entered into the United States prior to June 1, 2019. Such products remain subject to the additional duty of 10 percent for this interim period.

* DATES: HTSUS heading 9903.88.09, which is set out in the Annex to this notice, applies to products of China covered by the September 2018 action that were exported before May 10, 2019, and entered into the United States on or after May 10, 2019, and before June 1, 2019.

* FOR FURTHER INFORMATION CONTACT: For questions about this notice, contact Associate General Counsel Arthur Tsao or Assistant General Counsel Juli Schwartz, or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For questions on customs classification or implementation of additional duties on products covered in the supplemental action, contact traderemedy@cbp.dhs.gov.

* SUPPLEMENT INFORMATION:

In the May 9 Notice, the Trade Representative modified the action being taken in the Section 301 investigation by increasing the rate of additional duty from 10 percent to 25 percent for the products of China covered by the September 2018 action in this investigation. The “September 2018 action” refers to the additional duties on products of China with an annual trade value of approximately $200 billion, published at 83 FR 47974 (Sep. 21, 2018), as subsequently modified by the notice published at 83 FR 49153 (September 28, 2018). The increase in the rate of additional duty became effective on May 10, 2019.

Under this implementing modification, and as specified in the Annex to this notice, products of China that are covered by the September 2018 action that were exported prior to May 10, 2019, are not subject to the additional duty of 25 percent as long as such products are entered into the United States prior to June 1, 2019. Such products remain subject to the additional duty of 10 percent for a transitional period of time before June 1, 2019. The covered products of China that are entered into the United States on or after June 1, 2019, are subject to the 25 percent rate of additional duty.

To distinguish between covered products of China subject to the 10 percent rate of additional duty from those subject to the 25 percent rate, the Annex to this notice creates a new heading in Chapter 99 of the HTSUS (9903.88.09) for products of China covered by the September 2018 action that were exported before May 10, 2019, and entered into the United States on or after May 10, 2019 and before June 1, 2019. HTSUS heading 9903.88.09 is limited to covered products of China entered into the United States during this period of time to account for customs enforcement factors and the average transit time between China and the United States by sea.

The products of China covered by the September 2018 action that are admitted into a foreign-trade zone (FTZ) in “Privileged Foreign” status shall retain that status consistent with 19 CFR 146.41(e) and will be subject, at the time of entry for consumption, to the additional duty rate that was in effect at the time of FTZ admission of said product.

U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

Annex…

Joseph Barloon, General Counsel, Office of the U.S. Trade Representative.

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4. State/DDTC Imposes Waiver of Sanctions Concerning Visas to PLO and Palestinian Authority Officials

(Source:Federal Register, 16 May 2019.)

84 FR 22222: Public Notice; Determination on Imposition and Waiver of Sanctions Under Sections 603 and 604 of the Foreign Relations Authorization Act, Fiscal Year 2003

Consistent with the authority contained in section 604 of the Foreign Relations Authorization Act, Fiscal Year 2003 (Pub. L. 107-228) (the “Act”), the Presidential Memorandum dated April 30, 2009, and Department of State Delegation of Authority 245-2, and with reference to the determinations set out in the Report to Congress transmitted pursuant to section 603 of the Act, regarding the extent of noncompliance by the Palestine Liberation Organization (PLO) or the Palestinian Authority with certain commitments, I hereby impose the sanction set out in section 604(a)(1), “Denial of Visas to PLO and Palestinian Authority Officials.” This sanction is imposed for a period of 180 days from the date that the report under section 603 of the Act is transmitted to Congress or until such time as the next report under section 603 is required to be transmitted to Congress, whichever is later.

Furthermore, I hereby determine that it is in the national security interest of the United States to waive this sanction, pursuant to section 604(c) of the Act. This waiver shall be effective for a period of 180 days from the date hereof or until such time as the next report under section 603 of the Act is required to be transmitted to Congress, whichever is later. This Determination shall be reported to Congress promptly and published in the Federal Register.

Dated: April 12, 2019.

John J. Sullivan, Deputy Secretary of State.

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5. Commerce Announces Addition of Huawei Technologies Co. Ltd. to EAR Entity List

(Source:Commerce, 16 May 2019.) [Excerpts.]

Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.

The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.

“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross. “President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.”

Additions to the Entity List are decided by the End-User Review Committee which is comprised of officials from the Department of Commerce, Department of Defense, State Department, and Department of Energy. Under § 744.11(b) of the Export Administration Regulations, persons or organizations for whom there is reasonable cause to believe that they are involved, were involved, or pose a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such persons, may be added to the Entity List. …

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6. EU Council Establishes Framework to Impose Sanctions Against Cyber Attackers

(Source:Council of the European Union, 17 May 2019.)

On 17 May 2019, the Council established a framework which allows the EU to impose targeted restrictive measures to deter and respond to cyber-attackswhich constitute an external threatto the EU or its member states, including cyber-attacks against third States or international organizationswhere restricted measures are considered necessary to achieve the objectives of the Common Foreign and Security Policy (CFSP).

Cyber-attacks falling within the scope of this new sanctions regime are those which have significant impactand which:

  • originate or are carried out from outside the EU or
  • use infrastructure outside the EU or
  • are carried out by persons or entities established or operating outside the EU or
  • are carried out with the support of person or entities operating outside the EU.

Attempted cyber-attacks with a potentially significant effect are also covered by this sanctions regime.

More specifically, this framework allows the EU for the first time to impose sanctions on persons or entities that are responsible for cyber-attacks or attempted cyber-attacks, who provide financial, technical or material support for such attacks or who are involved in other ways. Sanctions may also be imposed on persons or entities associated with them.  

Restrictive measures include a banon persons travelling to the EU, and an asset freezeon persons and entities. In addition, EU persons and entities are forbidden from making funds available to those listed. …