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Over the course of the Obama and Trump administrations, U.S. officials have found new ways to incorporate human rights concerns into sanctions and export control policies.  Recent announcements by the Commerce and State Departments address how, by the U.S. government in its licensing approvals, and private companies in their foreign-sales decisions, can take into account human rights impacts.

Export Licensing for Dual-Use and Commercial Products

On October 6, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule revising the Export Administration Regulations (EAR) to allow the agency to consider human rights concerns when granting export licenses.  Specifically, BIS amended its licensing policy for items controlled for crime control (CC) reasons under 15 CFR §742.7.

The final rule also expands the existing EAR human rights licensing policy.  The prior licensing policy provided for case by case review for CC-controlled items “unless there is evidence that the government of the importing country may have violated internationally recognized human rights.” The final rule now would allow BIS to consider the risk that items will be used in violation or abuse of human rights by individuals or entities in addition to the government or the importing country.  Further, licensing officers will now review how an item may be used to engage in, or enable, violations or abuses of human rights (not just “internationally recognized” human rights), including through censorship, surveillance, detention, or excessive use of force.  Importantly, the new provision also allows the agency to consider such risk for items controlled for reasons beyond CC, covering most items listed on the Commerce Control List (with the exception of items controlled for short supply).  The final rule specifically notes the need to examine items controlled for reasons related to certain telecommunications and information security and sensors.

State Department Guidance for Surveillance Tools

Separately, on September 30, 2020, the Department of State released guidance designed to assist U.S. businesses in assessing the risk that surveillance tools exported to foreign government end-users could be used to commit human rights abuses.

The guidance entitled, “U.S. Department of State Guidance on Implementing the UN Guiding Principles for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities,” provides a roadmap for businesses to assess the risk of human rights abuse prior to engaging in a transaction with a foreign government end-user and provides recommended contractual and procedural safeguards should the business proceed with the transaction.  The guidelines are non-binding and, according to a statement by a State Department official, they will not be used as a basis for sanctions against foreign governments.

The State Department encourages U.S. businesses to integrate human rights due diligence into compliance programs, including export compliance programs.  The following eight recommendations are provided to assist companies seeking to conduct human rights due diligence, screening, and risk mitigation—

  1. Review the capabilities of the product or service in question to determine potential for misuse to commit human rights violations or abuses by foreign government end-users or private end-users that have close relationships with a foreign government.
  2. Review the human rights record of the foreign government agency end-user of the country intended to receive the product or service.
  3. Review, including through in-house or outside counsel, whether the foreign government end-user’s laws, regulations, and policies that implicate products and services with surveillance capabilities are consistent with the Universal Declaration of Human Rights.
  4. Review stakeholders involved in the transaction (including end-user and intermediaries such as distributors and resellers). Refer to BIS’s Know Your Customer Guidance.
  5. To the extent possible and as appropriate, tailor the product or service distributed to countries that do not demonstrate respect for human rights and the rule of law to minimize the likelihood that it will be misused to commit  or facilitate  human rights violations or abuses.
  6. Prior to sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
  7. After sale, strive to mitigate human rights risks through contractual and procedural safeguards and strong grievance mechanisms.
  8. Publicly report on sales practices (e.g., in annual reports or on websites).

The guidance is designed for U.S. companies that engage in transactions involving sensors, biometric identification, data analytics, internet surveillance tools, non-cooperative location tracking, and recording devices, among other products and services.  While the guidance is not designed to address export control licensing, the State Department has suggested that the guidance may be used as a resource during export license reviews in cases that raise a human rights concern.

These two announcements form part of a slow-but-steady growth among U.S. officials looking for ways to use existing trade regulatory tools to recognize human rights considerations.  Other examples include recent U.S. Customs withhold release orders (WROs) for certain goods produced from forced or indentured labor in Xinjian, China here; Hong Kong trade treatment in the wake of human rights abuses in that territory here; and Global Magnitsky sanctions designations here.

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Continuing its “maximum pressure” campaign against Iran, the United States has (a) ratcheted up sanctions under Executive Orders that provide for the imposition of secondary sanctions on non-U.S. companies that engage in transactions with Iranian financial institutions, and (b) authorized the imposition of secondary sanctions on non-U.S. companies that engage in arms-related transactions with Iran pursuant to a new Executive Order, notwithstanding the expiration of the United Nations arms embargo under Security Council Resolution 2231 implementing the Joint Comprehensive Plan of Action (JCPOA).

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On October 5, 2020, the Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule that imposes new multilateral controls on six “emerging technologies,” agreed during the December 2019 plenary meeting of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement).  These recently developed or developing technologies “essential for the national security of the United States” include forensic hacking tools, surveillance software, sub-orbital craft, and manufacturing tools and technology used to make integrated circuits and semiconductors.

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On September 15, 2020, a World Trade Organization (“WTO”) panel found that the Trump Administration’s unilateral tariffs imposed on Chinese products violated WTO rules regarding nondiscrimination and import tariff rates agreed to by the United States.  The dispute concerned China’s challenge to the Trump Administration’s tariffs imposed pursuant to the Trump Administration’s investigation under Section 301 of China’s intellectual property and technology transfer practices.  Specifically, China challenged USTR List 1 (discussed here) and List 3 (discussed here).

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On September 14, 2020, U.S. Customs and Border Protection (CBP) issued five Withhold Release Orders (WROs) for a range of goods produced in the Xinjiang region of China. Under 19 U.S.C. § 1307, CBP can initiate enforcement actions for products made wholly or “in part” by forced or indentured labor—defined as “work or service which is exacted from any person under the menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily,” as well as forced or indentured child labor. CBP issues WROs following an investigation if it finds that information “reasonably but not conclusively” indicates that the goods have been made in whole or in part by such forced labor. A WRO prevents the products from being released by CBP into the United States.

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On September 18, 2020, the U.S. Commerce Department published two rules defining the scope of prohibited transactions related to the mobile applications, WeChat and TikTok. The scope of prohibited transactions clarified the two parallel executive orders (EOs) issued by the Trump administration on August 6, 2020, which required the Commerce Department to impose restrictions on both platforms.

The scope of prohibited transactions are the same for both WeChat and TikTok. Prohibited transactions do not include individual use of these mobile platforms to exchange personal or business information. However, the rule would effectively shut down WeChat and TikTok within the United States via mobile application storefronts (e.g., Apple Store and Google Play), and additional restrictions would further impair the apps’ functionality and user experience.

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GettyImages-478409256-Treasury-300x261On September 15, 2020, the U.S. Department of Treasury published a final rule that removes the mandatory declaration requirement for filings to the Committee on Foreign Investment in the United States (CFIUS) based on North American Industry Classification System (NAICS) code and replaces it with a determination based on U.S. export control criteria. The final rule largely adopts the changes outlined in the proposed rule that was published on May 21, 2020, and which we discussed previously, with some added clarifications. The final rule will be effective on October 15, 2020.

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On August 11, 2020, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new guidance document, the Sudan Program and Darfur Sanctions Guidance (“Sudan Guidance”), which clarifies the current status of sanctions and export controls that apply to Sudan and the Government of Sudan. The Sudan Guidance confirms the removal of comprehensive sanctions on Sudan, permitting U.S. persons to engage in most economic activity. However, individual sanctions listings in Sudan and South Sudan continue and a U.S. embargo policy remains in place for exports to Sudan.

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The Department of Commerce (the Department) has proposed to modify its regulations under Part 351 of Title 19 to improve administration and enforcement of the antidumping duty (AD) and countervailing duty (CVD) laws.[1] The proposed modifications have been undertaken with a view to address circumvention and evasion of duties and will make significant changes to existing procedures for new shipper reviews, scope inquiries, circumvention proceedings among others. The Department has sought comments to the proposed changes by September 14, 2020.

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On August 17, 2020, the U.S. Department of Commerce Bureau of Industry and Security (BIS) made available for public inspection a final rule expanding restrictions on Huawei Technologies Co., Ltd. and its non-U.S. affiliates on the BIS Entity List (collectively “Huawei”).

In the final rule, BIS announced a further expansion of the direct product rule asserting U.S. jurisdiction over foreign-manufactured items with respect to Huawei, ended the Huawei Temporary General License (TGL), added 38 non-U.S. Huawei affiliates to the BIS Entity List, and clarified that Entity List license requirements apply to transactions where Huawei acts in a variety of roles as a “party to the transaction.”

In a concurrent final rule, BIS clarified that license requirements under the Entity List apply where the listed party is a “party to the transaction,” whether acting as a purchaser, intermediate or ultimate consignee, or end-user as defined in the Export Administration Regulations (EAR).

These actions, while not officially published in the Federal Register until August 20, 2020, are effective as of August 17, 2020.

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