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The Daily Bugle Weekly Highlights: Week 9 (24-28 February 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 7,500 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 Witt, 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. Commerce/BIS Amends Country Groups for Russia and Yemen Under the EAR, The Daily Bugle; Monday, 24 February 2020; Item #1.
    2. USTR Grants Product Exclusions Concerning China; The Daily Bugle; Tuesday, 25 February 2020; Item #4.
    3. Treasury/OFAC Issues Iran-related General License 8 and Frequently Asked Questions; The Daily Bugle, Thursday, 27 February 2020; Item #5
    4. Treasury/OFAC Settles for $7,829,640 with Swiss Telecommunications Company for Global Terrorism Sanctions Violations; The Daily Bugle, Thursday, 27 February 2020; Item #6.
    5. Justice: “Chinese National Sentenced for Stealing Trade Secrets Worth $1 Billion; The Daily Bugle; Friday, 28 February 2020; Item #4.

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1. Commerce/BIS Amends Country Groups for Russia and Yemen Under the EAR

(Source: Federal Register, 24 Feb 2020) [Excerpts]

85 FR 10274-10278: Amendments to Country Groups for Russia and Yemen Under the Export Administration Regulations

* AGENCY: Bureau of Industry and Security, Commerce.

* ACTION: Final rule.

* SUMMARY: In this final rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to revise the Country Group designations for the Russian Federation (Russia) and Yemen based on national security and foreign policy concerns, including proliferation-related concerns. This action is intended to facilitate and support accountability in connection with exports and reexports of items to these destinations under the EAR, and is part of a larger effort to restructure and re-align the Country Groups based on the aforementioned interests.

* DATES: This rule is effective February 24, 2020.

* FOR FURTHER INFORMATION CONTACT: Jodi.Kouts, Director, Chemical and Biological Controls Division, at email Jodi.Kouts@bis.doc.gov or by phone at (202) 482-6109.

* SUPPLEMENTARY INFORMATION:

Specific Amendments

Russia: Country Groups A and D

In this rule, BIS removes Russia from Country Groups A:2 (Missile Technology Control Regime) and A:4 (Nuclear Suppliers Group) to address U.S. concerns about diversion of U.S.-origin items to or from Russia for prohibited end uses and end users. This rule removes the “X” from Column “[A:2]” and the “X” from Column “[A:4]” in Supplement No. 1 to Part 740 for “Russia.” In relation to the changes to Country Groups A:2 and A:4 for Russia, this rule also adds Russia to Country

Groups of concern D:2 (Nuclear) and D:4 (Missile Technology). This rule adds an “X” in Column “[D:2]” and an “X” in Column “[D:4]” in Supplement No. 1 to Part 740 for “Russia.” Consistent with adding “Russia” to Country Group “[D:2],” this rule adds an “X” in Column “NP 1” for “Russia” in Supplement No. 1 to Part 738–Commerce Country Chart. Finally, BIS revises the licensing policy for items to Russia to a policy of presumption of denial when the items are controlled for reasons described under Sec.  742.2 (Proliferation of chemical and biological weapons), Sec.  742.3 (Nuclear nonproliferation), or Sec.  742.5 (Missile technology) of the EAR. However, with regard to NP and MT controls, applications for exports and reexports of items, which include commodities, software and technology, to Russia in support of U.S.-Russia civil space cooperation activities or commercial space launches will be reviewed on a case-by-case basis.

These amendments are consistent with the purpose of this rule to address U.S. concerns about Russia’s lack of cooperation and accountability for U.S.-origin items and diversion to unauthorized or

prohibited proliferation activities, end uses, and end users. Specifically, Russia has not been cooperative in allowing BIS to perform pre-license checks or post-shipment verifications related to U.S.-origin goods. The presumption of denial under Sec.  742.2 further accentuates the seriousness with which the United States takes Russia’s use of a “novichok” nerve agent in the attack against Sergei Skripal and his daughter Yulia Skripal in the United Kingdom on March 4, 2018.

Yemen: Country Groups B and D:1

In this rule, BIS removes Yemen from Country Group B and places Yemen in the country group of concern for national security reasons,

Country Group D:1 (National Security). Specifically, this rule removes “Yemen” from Country Group B in Supplement No. 1 to part 740, and adds an “X” in Column “[D:1]” of that Supplement for “Yemen.”

These changes are being made to address concerns about diversion of U.S.-origin items in Yemen for unauthorized purposes, including prohibited proliferation activities, end uses, and end users. In addition, there are concerns about the diversion to unauthorized and prohibited end uses and users of U.S.-origin items controlled for national security reasons. The ongoing conflict in Yemen has fostered international terrorism and instability in the Arabian Peninsula, including the proliferation of small arms, unmanned aerial systems, and missiles. …

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2. USTR Grants Product Exclusions Concerning China

(Source: Federal Register, 25 Feb 2020) [Excerpts]

85 FR 10808-10809: Notice of Product Exclusion: 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 Product Exclusion and Amendment.

* SUMMARY: Effective August 23, 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $16 billion as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The U.S. Trade Representative’s determination included a decision to establish a product exclusion process. The U.S. Trade Representative initiated the exclusion process in September 2018, and stakeholders have submitted requests for the exclusion of specific products. The U.S. Trade Representative is issuing determinations to grant exclusion requests on a rolling basis. This notice announces the U.S. Trade Representative’s determination to grant the additional exclusion specified in the Annex to this notice, and to make a technical amendment to a previously granted exclusion.

* DATES: The product exclusion will apply as of the August 23, 2018 effective date of the $16 billion action, and will extend through October 1, 2020. The technical amendment announced in this notice applies to the time period established for the original exclusion, that is, retroactive to the original date of October 2, 2019, and ending on October 1, 2020 at 11:59 p.m. EDT. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.

* FOR FURTHER INFORMATION CONTACT: For general questions about this notice, contact Assistant General Counsel Philip Butler or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For specific questions on customs classification or implementation of the product exclusions identified in the Annex to this notice, contact traderemedy@cbp.dhs.gov.

* SUPPLEMENTARY INFORMATION: …

  1. Determination To Grant Exclusion

Based on the evaluation of the factors set out in the September 18 notice, which are summarized above, pursuant to sections 301(b), 301(c), and 307(a) of the Trade Act of 1974, as amended, and in accordance with the advice of the interagency Section 301 Committee, the U.S. Trade Representative has determined to grant the product exclusion set out in the Annex to this notice. The U.S. Trade Representative’s determination also takes into account advice from advisory committees and any public comments on the pertinent exclusion request.

As set out in the Annex, the exclusion is reflected in a specially prepared product description, found in Paragraph A.

In accordance with the September 18 notice, an exclusion is available for any product that meets the description in the Annex, regardless of whether the importer filed an exclusion request. Further, the scope of the exclusion is governed by the scope of the 10-digit HTSUS subheading and product description in the Annex to this notice, and not by the product description set out in any particular request for exclusion.

  1. Technical Amendment to an Exclusion

Subparagraph B of the Annex makes a technical amendment to U.S. note 20(y)(2) to subchapter III of chapter 99 of the HTSUS, as set out in the annex of the notice published at 84 FR 52553 (October 2, 2019). In particular, the amendment in Subparagraph B converts an exclusion of a specially prepared product description to an exclusion of a 10-digit HTSUS subheading.

The U.S. Trade Representative will continue to issue determinations on a periodic basis as needed. …

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3. Treasury/OFAC Issues Iran-related General License 8 and Frequently Asked Questions

(Source: Treasury/OFAC, 27 Feb 2020)

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing General License 8“Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran” and related FAQs ​in conjunction with the formalization of the Swiss Humanitarian Trade Arrangement (SHTA), which became fully operational today

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4. Treasury/OFAC Settles for $7,829,640 with Swiss IT Company for Global Terrorism Sanctions Violations

(Source: Treasury/OFAC, 27 Feb 2020)

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that Société Internationale de Télécommunications Aéronautiques SCRL (“SITA”), a service provider for the civilian air transportation industry headquartered in Geneva, Switzerland, has agreed to pay $7,829,640 to settle its potential civil liability for 9,256 apparent violations of the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594 (GTSR) (the “Apparent Violations”). Specifically, SITA appears to have violated §§ 594.201 and 594.204 of the GTSR between April 2013 and February 2018 when it provided commercial services and software that were subject to U.S. jurisdiction, and benefitted certain SITA member airlines after OFAC designated those airlines as specially designated global terrorists pursuant to Executive Order 13224. The total transaction value of the Apparent Violations was $2,428,200. OFAC determined that SITA did not voluntarily self-disclose the Apparent Violations, and that the Apparent Violations constitute a non-egregious case.

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5. Justice: “Chinese National Sentenced for Stealing Trade Secrets Worth $1 Billion” 

(Source: Justice , 27 Feb 2020)

Hongjin Tan, 36, a Chinese National and U.S. legal permanent resident, was sentenced to 24 months in federal prison in federal court today for stealing proprietary information worth more than $1 billion from his employer, a U.S. petroleum company.

In November 2019, Tan pleaded guilty to theft of a trade secret, unauthorized transmission of a trade secret, and unauthorized possession of a trade secret. From June 2017 until December 2018, Tan was employed as an associate scientist at the petroleum company and was assigned to work in a group with the goal of developing next generation battery technologies for stationary energy storage, specifically flow batteries. In his plea agreement, Tan admitted to intentionally copying and downloading the technologies’ research and development materials without authorization from his employer.  . . . 

According to the plea agreement, Tan used a thumb drive to copy hundreds of files containing the proprietary information on Dec. 11, 2018. He subsequently turned in his resignation and was escorted from the premises on Dec. 12, 2018. Later that day, he returned the thumb drive, claiming that he had forgotten to do so before leaving his employer’s property. Upon examination, it was discovered that there was unallocated space on the thumb drive, indicating five documents had previously been deleted. Investigators with the FBI searched Tan’s premises and found an external hard drive. They discovered that the same five missing files from the thumb drive had been downloaded to the hard drive. Tan maintained the files on a hard drive so he could access the data at a later date. Further accessing the material would have been financially advantageous for Tan but caused significant financial damage to his Oklahoma employer.  . . . 

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