The Department of Commerce and the Bureau of Industry and Security recently revised an arcane export control rule that imposes US export controls on foreign-origin products that are a direct product of certain US technologies. Although the two new categories of foreign direct product are far broader than the old one, new foreign direct products require a licence only when they are exported or re-exported to entities on a new special subset of the Entity List, which includes Huawei, HiSilicon and other Huawei affiliates.
Recognising that COVID-19 is further straining humanitarian needs in sanctioned countries and complicating compliance with economic sanctions, the Department of the Treasury Office of Foreign Assets Control recently issued web-based guidance to remind the public of the many ways in which medical exports and other humanitarian services, supplies and donations can legally flow to sanctioned countries, offer reporting and compliance flexibility and provide some Iran secondary sanctions relief.
The Commerce Department recently took significant steps to revise the Export Administration Regulations to address military-civil fusion. Specifically, the Bureau of Industry and Security issued two final rules regarding licence exception civil end users and military end-use and end-user controls, as well as a proposed rule which would eliminate a provision of the licence exception additional permissive re-exports that currently authorises certain re-exports to China and other countries.
Like many other US government agencies, the State Department, Directorate of Defence Trade Controls (DDTC) has announced certain measures, effective immediately, to alleviate burdens caused by COVID-19 in relation to compliance with the International Traffic in Arms Regulations. The changes affect registration, compliance, licensing and outreach to the DDTC.
In a notification of exemptions action recently published for public inspection, the Federal Emergency Management Agency (FEMA) set out a list of exemptions to its requirement for prior approval to export previously identified scarce medical personal protective equipment. However, despite its attempt to clarify previous rules and guidance, FEMA's notice has raised nearly as many questions as it answers.
The Federal Emergency Management Agency has exercised its delegated authority under the Defence Production Act to issue a temporary final rule (Prioritisation and Allocation of Certain Scarce or Threatened Health and Medical Resources for Domestic Use) to prohibit the export of five types of medical personal protective equipment that the government previously identified as scarce and threatened materials during the COVID-19 pandemic.
The Defence Production Act (DPA) allows the president to shape the domestic industrial base for national defence preparedness, which includes emergency preparedness activities. This article addresses a number of DPA-related questions that have arisen in light of the COVID-19 pandemic, including how the administration has used the DPA in response to the crisis, what the impact of the administration's DPA-related orders and memoranda will be and what this means for exporters.
The State Department has finally brought the International Traffic in Arms Regulations (ITAR) into the 21st century by releasing an interim final rule adopting the cloud computing encryption standards that the Commerce Department adopted in 2015. The good news is that, for the most part, the State Department resisted the temptation to do something different in the ITAR, so the joint Commerce-State solution works.
Providers of telecoms, internet and digital services, as well as IT vendors and equipment manufacturers, will soon find doing deals with foreign entities a little more risky and complicated. A new review process soon to be underway at the Department of Commerce is designed to ferret out transactions that pose a threat to US national security, but provides parties whose deals are being evaluated little time to comment.
The Bureau of Industry and Security (BIS) announced another major policy change towards Cuba by further restricting the Cuban government's access to items subject to BIS's Export Administration Regulations. This new rule will have a significant impact on exporters and re-exporters currently using certain licence exceptions to export to Cuba that export non-US origin products with US-origin content to Cuba and lease commercial aircraft to Cuban state-owned airlines.
The US State Department recently solicited feedback on its draft US Government Guidance for the Export of Hardware, Software and Technology with Surveillance Capabilities and/or Parts/Know-How. The draft guidance aims to provide insight to exporters on the considerations to weigh prior to exporting items with intended and unintended surveillance capabilities and could foreshadow new export controls and a US State Department review.
President Trump recently signed an executive order, freezing all assets in which the Venezuelan government has an interest that are in US hands and prohibiting US persons from conducting transactions with the Venezuelan government, unless specifically exempted or authorised. Although this is not an embargo on all trade with Venezuela, the executive order goes substantially further than the previous sanctions.
The US State Department recently announced the issuance of another round of sanctions on the Russian government in relation to the Chemical and Biological Weapons Control and Warfare Elimination Act 1991, which will come into effect on 19 August 2019. While this second round of sanctions is unlikely to affect most US companies, it may affect US banks, but only with respect to transactions involving non-ruble bonds and funds from the Russian sovereign issued after 26 August 2019.
US secondary sanctions are sanctions that the United States can apply to wholly non-US actors in wholly non-US transactions of which the US administration disapproves. A sanctioned individual or entity can be put on the Specially Designated Nationals list, but there is no well-defined numerical threshold for imposing sanctions. This article identifies some of the problems with the application of secondary sanctions and offers some potential solutions.
A company recently entered into a $400,000, 18-month consent agreement with the Department of State, Directorate of Defence Trade Controls (DDTC) to settle six alleged violations of the International Traffic in Arms Regulations (ITAR). The key issue was the company's ITAR empowered official, who was neither empowered nor an expert. Through this consent agreement, the DDTC is sending a message to the industry: an empowered official must have (among other things) sufficient authority to stop a transaction.
Between the addition of Huawei Technologies Co Ltd – the world's largest telecoms equipment maker – to the Entity List and a new executive order declaring a national emergency relating to information and communications technology and services, May 2019 has proved to be a period of non-stop excitement for the export control world. This article discusses what these changes mean for US companies.
President Donald Trump recently issued an executive order authorising broad new sanctions with respect to the steel, aluminium, iron and copper sectors of Iran. The announcement came hours after Iran announced that it would no longer fully comply with elements of the Joint Comprehensive Plan of Action. The executive order is a major expansion of existing statutory secondary sanctions which relate to steel and aluminium and also addresses two new sectors – copper and iron.
After years of waiting, the new 22 CFR 126.4 International Traffic in Arms Regulations licence exemption for transfers of defence articles and services by or for the US government has come into effect. While the introduction of the revised exemption is largely positive for exporters, there are a few new boxes to check.
In a strike against Nicolás Maduro and his supporters, the Trump administration recently announced a new executive order. Pursuant to Executive Order 13850, US persons are now broadly prohibited from engaging in transactions with Petróleos de Venezuela, SA (PDVSA), including its majority-owned subsidiaries. However, the Office of Foreign Assets Control has rolled out a slew of general licences authorising US persons to engage in certain transactions involving PDVSA and its majority-owned subsidiaries.
President Trump recently announced the United States' intention to withdraw from the Joint Comprehensive Plan of Action and re-impose secondary sanctions on Iran. The announcement was accompanied by wind-down periods during which non-US persons could wrap up transactions entered into prior to 8 May 2018. The final wind-down period recently expired and secondary sanctions were re-imposed on a broad swathe of Iranian persons and sectors of Iran's economy.
The US administration recently announced that it will be imposing sanctions on the Russian government under the Chemical and Biological Weapons Control and Warfare Elimination Act 1991 over the use of a novichok nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal. Of the five sanctions to be imposed, the fifth – the prohibition on the export of national security-controlled items to the Russian government – is likely the most significant.
Most US and multinational corporations are quick to say "we don't do business with North Korea". However, some companies will recognise the risk of sourcing products from businesses located outside North Korea that may use North Korean overseas workers or subcontract to North Korean companies. As such, the Office of Foreign Assets Control recently issued a useful guidance document that provides businesses a helping hand.
Before former President Obama left office in late 2016, the Department of the Treasury's Office of Foreign Assets Control (OFAC) published a list of FAQs to address the possibility of revoking the relaxed sanctions on Iran. Following President Trump's recent announcement that the United States is withdrawing from the Joint Comprehensive Plan of Action, OFAC has published new FAQs explaining how the re-imposition of sanctions will go into effect.
In its first year, the Trump administration has tackled sanctions issues involving Cuba, Iran, North Korea, Russia, Sudan and Venezuela, as well as individuals involved in human rights abuses and corruption. In some cases, the result has been forced by Congress; in others, the president has 'made good' on campaign promises. Most have involved the heightened rhetoric and threats characteristic of Trump's presidency, but the rhetoric has often outpaced the actual action.
At the end of January 2018, the Trump administration took two actions relating to the Russia and Ukraine sanctions programme under the Countering America's Adversaries Through Sanctions Act 2017, the law that President Trump signed on August 2 2017. While these acts did not result in the imposition of any actual sanctions, they do provide additional hints to businesses of where the Trump administration is heading in the months ahead, identifying risk areas that businesses can review and assess.
The Trump administration recently took significant steps towards using economic sanctions to tackle international human rights abuses and corruption. The administration's actions underline the ever-growing importance of know-your-customer and anti-corruption due diligence and compliance procedures for international business.