Articles Posted in Reexports

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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 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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On April 28, 2020, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) published two final rules that will eliminate the license exception for civil end users (CIV) in the People’s Republic of China, Russia, and Venezuela and expand military end use and end user restrictions on these countries. These rules confront the national security risks presented by the increasing integration of civilian and military technology development, particularly in China, by requiring U.S. Government review of a broader range of exports including electronics and telecommunications items only controlled for antiterrorism (AT) reasons (with licenses subject to a presumption of denial) when shipped for military end uses or to military end users. These final rules will go into effect on June 29, 2020.

BIS also published a proposed rule that would modify License Exception Additional Permissive Reexports (APR) by restricting the destinations that will be eligible for the license exception. Comments on the proposed rule are also due June 29, 2020. Continue reading →

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As trade relations with China continue to evolve, Huawei Technologies Co., Ltd. (“Huawei”) and its foreign affiliates remain subject to broad U.S. export license requirements. However, President Trump’s statements at the G20 Summit on the relaxation of restrictions on Huawei were followed by recent senior administration officials’ announcements, including Commerce Secretary Wilbur Ross, that export licenses may be possible where the proposed transaction does not implicate U.S. national security.

The U.S. Commerce Department’s Bureau of Industry and Security (“BIS”) maintains the Entity List, which is comprised of individuals and entities subject to U.S. export licensing requirements for exports, re-exports and in-country transfers of items subject to the Commerce Department’s export control jurisdiction. On May 16, 2019, BIS added Huawei and 68 affiliates to the Entity List, creating a license requirement for all items subject to the Export Administration Regulations (“EAR”). This designation means that licenses are required for all exports and re-exports to Huawei of U.S.-origin goods, including “EAR99” items that are not identified on the Commerce Department’s dual-use Commerce Control List (“CCL”). “Items subject to the EAR” can also include non-U.S. made items in certain circumstances, such as where they contain more than a de minimis amount of controlled U.S.-origin content, or are a “direct product” of certain controlled U.S.-origin technology. The official licensing policy for exports to Huawei is a “presumption of denial.”

BIS subsequently issued a Temporary General License authorizing a narrow subset of transactions through August 19, 2019. Temporarily authorized transactions include those relating to:

  • Continued operation of existing networks and equipment: Transactions necessary to maintain and support existing and currently fully operational networks and equipment, including software updates and patches, subject to legally binding contracts and agreements executed between Huawei on or before May 16, 2019.
  • Support to existing handsets: Transactions necessary to provide service and support, including software updates or patches, to existing models of Huawei handsets that were available to the public on or before May 16, 2019.
  • Cybersecurity research and vulnerability disclosure: The disclosure to Huawei of information regarding security vulnerabilities in items owned, possessed, or controlled by Huawei when related to the process of providing ongoing security research critical to maintaining the integrity and reliability of existing and currently fully operational networks and equipment, as well as handsets.
  • Engagement as necessary for development of 5G standards by a duly recognized standards body: Transactions necessary for the development of 5G standards as part of a duly recognized international standards body. U.S. and non-U.S. companies dealing in items subject to the EAR should be aware that Huawei is still on the Entity List and remains subject to broad export licensing requirements. The Temporary General License authorizes certain limited exports to Huawei until August 19, 2019, and could signal the types of activities that would be viewed favorably in a license request. For activities outside the scope of the Temporary General License, exporters may consider submitting license applications for exports to Huawei or its supply chain where they believe the U.S. government would not have national security concerns.

Since its designation, interested U.S. and non-U.S. parties have questioned whether Huawei’s Entity List designation will remain permanent. President Trump made statements that the U.S. would lift some of the restrictions on Huawei following a meeting with Chinese President Xi Jinping to reengage the stalled China-U.S. trade talks. On July 9, 2019, Commerce Secretary Wilbur Ross indicated that Huawei will remain on the Entity List with the same export licensing requirements. In other words, exports to Huawei of any items subject to the EAR (including EAR99 items) will continue to require a license subject to an official policy of a “presumption of denial.” However, Secretary Ross left open the possibility that BIS may grant licenses where the proposed exports do not threaten national security. He further stated: “Within those confines we will try to make sure that we don’t just transfer revenue from the U.S. to foreign firms.” BIS has not released any official guidance announcing any specific criteria that would need to be met in order to obtain a license.

U.S. and non-U.S. companies dealing in items subject to the EAR should be aware that Huawei is still on the Entity List and remains subject to broad export licensing requirements. The Temporary General License authorizes certain limited exports to Huawei until August 19, 2019, and could signal the types of activities that would be viewed favorably in a license request. For activities outside the scope of the Temporary General License, exporters may consider submitting license applications for exports to Huawei or its supply chain where they believe the U.S. government would not have national security concerns.

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On June 5, 2019, the Department of Commerce Bureau of Industry and Security (BIS) amended an important license exception which generally permitted the temporary sojourn of civil aircraft and vessels to Cuba. Specifically, BIS eliminated the license exception for use by non-commercial aircraft and passenger and recreational vessels sailing to Cuba. BIS also amended its licensing policy for such aircraft and vessels establishing a general policy of denial. On the same day, the Department of the Treasury eliminated its authorization for group people-to-people educational travel to Cuba.

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On May 16, 2019, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce added Huawei Technologies Co., Ltd. (Huawei) and sixty-eight of its non-U.S. affiliates to the Entity List, thereby prohibiting the export or transfer of U.S. commercial and dual-use goods, software and technology to those companies without a license. Non-U.S. goods or software with more than “de minimis” U.S. content are also subject to the restrictions.

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Today, OFAC issued new General License J (“GL J”) authorizing non-U.S. persons to reexport certain “Eligible Aircraft” to Iran. Importantly, GL J only applies to temporary sojourns, meaning that any sales or leases (including wet leases) of aircraft to Iran would still require a specific license. Please click here to view OFAC’s new General License J.

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