Articles Posted in Exports

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On August 15, 2022, the Department of Commerce’s Bureau of Industry and Security (BIS) published an interim final rule introducing new controls on four “emerging and foundational technologies” that were identified during the December 2021 plenary meeting of the multilateral Wassenaar Arrangement. These items are two substrates of ultra-wide bandgap semiconductors (gallium oxide and diamond), electronic computer aided design (ECAD) software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (GAAFET) structure, and pressure gain combustion (PGC) engine technology for the production and development of gas turbine engines.

The new controls were implemented effective on August 15, 2022, with the exception of the controls for ECAD software, which will be effective on October 14, 2022. BIS has requested public comments only on the new ECAD controls, which are due by September 14, 2022.

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On July 13, 2022, as part of a new pilot program, the Department of State’s Directorate of Defense Trade Controls (DDTC) issued two open general licenses (OGLs) permitting certain reexports and retransfers of unclassified defense articles subject to the International Traffic in Arms Regulations (ITAR) within or between Australia, Canada, and the United Kingdom. The OGLs were published in the Federal Register on July 20, 2022, and will be effective August 1, 2022. The OGLs could significantly reduce licensing burdens for many entities in these close ally countries of the United States.

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On June 12, 2022, a bipartisan group of Senate and House lawmakers announced agreement on a new draft of the National Critical Capabilities Defense Act of 2022 (NCCDA), which would establish an expansive outbound review mechanism for investments and other transactions in specified countries of concern, including China. The draft is based on a bill introduced in the Senate last year that ultimately was not included in the US Innovation and Competition Act (USICA), which passed, while the House included a similar measure in its America COMPETES Act, which also passed, and the two bills are now in conference.

If enacted, the NCCDA would establish a new interagency panel to review and potentially prohibit outbound transactions on national security grounds. The Committee on National Critical Capabilities (CNCC) would function in a manner similar to the Committee on Foreign Investment in the US (CFIUS), which reviews inbound foreign investment. Both US persons and foreign entities that engage in or plan to engage in a “covered activity” would be required to submit a mandatory written notification 45 days before engaging in the activity.  It is not clear how the requirement would apply to a foreign entity that does not have a connection with the United States.

“Covered activities” include an extraordinarily wide range of transactions including any activity by a US person or a foreign entity or their affiliates that:

  • Builds, develops, produces, manufactures, fabricates, refurbishes, expands, shifts, services, manages, operates, utilizes, sells, or relocates a national critical capability to or in a country of concern;
  • Shares, discloses, contributes, transfers, or licenses to an entity of concern any design, technology, intellectual property, or knowhow, including through open-source technology platforms or research and development, that supports, contributes to, or enables a national critical capability by an entity of concern or in a country of concern; or
  • Invests in, provides capital to, or consults for, or gives any guidance, related to enhancing the capabilities or facilitating access to financial resources for a national critical capability for an entity of concern or a country of concern.”

Covered activities would also include transactions by certain entities that receive financial assistance pursuant to the Bipartisan Innovation Act (the presumed name of the legislation that emerges from conference), as well as activities by entities that benefit from government contracts over a certain amount (to-be-determined) with a US national security agency with respect to an entity of concern or a country of concern.

In addition to China, “countries of concern’ include Russia, Iran, North Korea, Cuba, and Venezuela. The term “entity of concern” is broadly and vaguely defined to include entities “affiliated with” or “influenced by” a country of concern. Covered activities would not include de minimis value transactions, as well as “ordinary business transactions,” which generally include transactions involving the sale or license of a finished product.

“National critical capabilities” are defined as those identified necessary for supply chains identified pursuant to the supply chain review mandated by Executive Order 14017, including:

  • semiconductor manufacturing materials,
  • large capacity batteries,
  • critical minerals and materials,
  • pharmaceuticals and active pharmaceutical ingredients, and
  • “critical and emerging technologies,” such as artificial intelligence, bioeconomy, and quantum information science and technology.

Once a notification is submitted, the CNCC would undertake a review to determine if the activity is likely to result in “an unacceptable risk to one or more national critical capabilities.” If it determines such a risk exists, it will make a recommendation to the President to address the risk, including imposing mitigation measures, potentially including disinvestment. The Committee would also have the authority to initiate investigation of a covered activity if a notification is not submitted.

Although the lawmakers announcing the agreement characterized the bill as a “refined proposal,” it is still extremely broad. Key terms and concepts are vague and ill-defined or left to regulators to fill in the blanks, and industry groups including the US China Business Council and the US Chamber are raising their voices in opposition.

 

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On February 24, 2022, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) issued a final rule effective immediately imposing sweeping export control restrictions against Russia in response to Russia’s invasion of Ukraine. On March 2, 2022, BIS issued another final rule effective immediately imposing the same export restrictions against Belarus in response to Belarus’s role enabling Russia’s invasion of Ukraine. These actions are part of a larger set of recent sanctions and export control restrictions imposed by the U.S., UK, EU, Japan and other allies. Please see our prior posts available here, here, here, here, here, and here discussing recent sanctions and export control developments against Russia.

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On February 24, 2022, the U.S. Government issued a number of sanctions measures in response to Russia’s attack on Ukraine. These measures include sweeping financial sanctions and stringent export controls, which will have broad impacts on companies and individuals doing business in Russia, Ukraine and Belarus. Today’s announcement came alongside additional measures coordinated with U.S. allies, including the United Kingdom, European Union, Canada and Japan.

A brief overview of today’s U.S. measures is provided below. In following blogs, we will provide more focused looks at (a) U.S. sanctions; and (b) sanctions and export controls issued by a number of other key economies around the world.

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In response to President Putin’s televised recognition of Donetsk and Luhansk People’s Republics (“DNR” and “LNR”) of Ukraine as “independent” nations, and reports of Russian troops being ordered into Ukrainian territory, the United States has imposed Crimea-style comprehensive sanctions on the DNR and LNR prohibiting new U.S. investment as well as imports and exports to and from the regions. The EU and the UK have sanctioned banks and oligarchs, and Germany has suspended certifications on the NordStream2 pipeline project.

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Bureau-of-Industry-and-Security-seal-300x300On October 21, 2021, the U.S. Department of Commerce, Bureau of Industry and Security (BIS) announced an interim final rule (Interim Rule), which will amend the Export Administration Regulations (EAR) to add controls for the export, reexport and transfer of certain cybersecurity exploitation, intrusion and monitoring tools. The Interim Rule also creates a new License Exception “Authorized Cybersecurity Exports (ACE)” that authorizes certain exports, reexports and transfers of cybersecurity items, as described in more detail below. The Interim Rule will be made effective 90 days after publication, on January 19, 2022.

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In response to the recent military coup in Myanmar (also known as Burma) against the democratically elected government, on February 11, 2021 the Biden Administration issued an Executive Order on Blocking Property with Respect to the Situation in Burma (E.O.), which launched a new targeted sanctions regime. That same day, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated former and current officials of Burma’s military or security forces and affiliated entities in the jade and gems sector as Specially Designated Nationals (SDNs). In addition, the Commerce Department’s Bureau of Industry and Security (BIS) announced a series of steps to tighten export controls on certain ministries, armed forces, and security services, and to limit availability of license exceptions. It has been indicated that these are initial steps, and that further sanctions and export control may follow.

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On January 13, 2021, U.S. Customs and Border Protection (CBP) issued a withhold-release order (WRO) on all cotton and tomato products from China’s Xinjiang Uyghur Autonomous Region (XUAR) based on information that reasonably indicated that such products used forced labor. This action comes after CBP’s December 2020 WRO on cotton and cotton products produced by Xinjiang Production and Construction Corporation (XPCC). Continue reading →

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On December 21, the Bureau of Industry and Security (BIS) published a Military End User (MEU) list to further implement the military end user/end use (MEU) rule defined in Section 744.21 of the Export Administration Regulations (EAR). An EAR license is required to export or reexport to the listed entities a broad range of items subject to U.S. jurisdiction.

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