BIS final rule expands end use/user and licensing in Russia, China, Venezuela

On April 28, 2020 the Department of Commerce, Bureau of Industry and Security (BIS)(1) published a final rule (the “Rule”)(2) that amends the Export Administration Regulations (EAR) to expand license requirements on exports, reexports, and transfers (in-country) of items intended for military end use or military end users in the People’s Republic of China (China), Russia, or Venezuela.

Summary

The Rule:

• Expands the licensing requirements for China to include “military end users,” in addition to “military end use”;

• Broadens the list of items for which the licensing requirements and review policy apply;

• Expands the definition of “military end use"(4);

• Creates a new reason for control and the associated review policy for regional stability for certain items exported to China, Russia, or Venezuela; and

• Adds Electronic Export Information (EEI)(5) filing requirements in the Automated Export System (AES)(6) for exports to China, Russia, and Venezuela.

Details

The Rule expands license requirements for exports, reexports, and transfers (in-country) of items intended for military end use or military end users in China, Russia, or Venezuela by expanding the requirement in 744.21(7) of the EAR to include military end users in China. “This expansion will require increased diligence with respect to the evaluation of end users in China, particularly in view of China’s widespread civil-military integration.(2)”

In addition, the Rule adds items to the list of those subject to license requirements in 744.21 subject to the military end-use and end-user license requirements in Supplement No. 2 to part 744.(8) The Rule adds the following ECCNs in the categories of materials processing, electronics, telecommunications, information security, sensors and lasers, and propulsion: 2A290, 2A291, 2B999, 2D290, 3A991, 3A992, 3A999, 3B991, 3B992, 3C992, 3D991, 5B991, 5A992, 5D992, 6A991, 6A996, and 9B990. Additionally, the Rule expands the range of items under ECCNs 3A992, 8A992, and 9A991 included in Supplement No. 2 to part 744.

The Rule adopts a license review policy of presumption of denial in 744.21(e).(7) The Rule broadens the definition of “military end use”(4) by identifying each element of the definition of “use” so that any one of the six elements standing alone, is sufficient.

In addition, the Rule relocates the existing license requirements for items described in a.y paragraph of a 9x515 or “600 series” ECCN to China, Russia, or Venezuela from 744.21 to the license requirements sections of the relevant ECCNs on the Commerce Control List (CCL)(9).

Finally, the Rule expands EEI filing requirements for exports to China, Russia, or Venezuela. The Rule revises 758.1(10) of the EAR to require filing for items destined to China, Russia, or Venezuela regardless of the value of the shipment, unless the shipment is eligible for License Exception GOV. Even if no license is required to ship an item to those destinations, the EEI filing must include the correct ECCN regardless of reason for control. Some exceptions from filing found in 758.1(c) are retained.

Background

• On June 19, 2007, BIS published license requirements of certain items intended for military end use in China.(11)

• On September 17, 2014, BIS expanded the license requirements to include military end uses and end users in Russia.(12)

• On November 7, 2014, BIS expanded these license requirements to include military end uses and end users in Venezuela.(13)

The Rule is effective June 29, 2020.

Contact the professionals at GCSG for more information on this development.

References

1. Bureau of Industry and Security: “Home Page”

2. Federal Register: “85 FR 23459-23470” - 4/28/2020. Corrections published 6/3/2020 to include each revised ECCN in full (whereas the 4/28/20 publication only published the revised portions of each ECCN.(3)

3. Federal Register: “85 FR 34306-34323” - 6/3/2020

4. Military end use: “The EAR’s current definition of military end use refers both to direct use (for parts, components or subsystems of weapons and other defense articles) and indirect use (weapon design and development, testing, repair and maintenance). This rule broadens the definition of military end use beyond any item for the ‘‘use,’’ ‘‘development,’’ or ‘‘production’’ to include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, ‘‘development,’’ or ‘‘production,’’ of military items.”(2) See 744.21(f) for the definition of “military end use”.(7)

5. U.S. Customs and Border Protection (CBP) Basic Import Export: “EEI” - 1/15/2014

6. U.S. Census Bureau: “AES” - 2020

7. eCFR: “15 CFR 744.21”

8. eCFR: “Supplement No. 2 to part 744”

9. BIS: “CCL”

10. eCFR: “15 CFR 758.1”

11. Federal Register: “72 FR 33646-33662” - 6/19/2007

12. Federal Register: “79 FR 55608-55615” - 9/17/2014

13. Federal Register: “79 FR 66288-66290” - 11/7/2014

BIS amends EAR to implement Australia Group decisions

On June 17, 2020 the Department of Commerce, Bureau of Industry and Security (BIS)(1) published a final rule(2) that updates the Export Administration Regulations (EAR) to implement decisions made at the February 2020 Australia Group(3) meeting. The rule amends Export Control Classification Numbers (ECCNs) 1C350, 1C351 and 2B352 on the Commerce Control List (CCL) by:

• Adding twenty-four (24) precursor chemicals, as well as mixtures in which at least one of these chemicals constitutes 30% or more of the weight of the mixture to ECCN 1C350.d;

• Amending ECCN 1C351 by adding Middle East respiratory syndrome-related coronavirus (MERS-related coronavirus); and

• Amending ECCN 2B352 by adding a technical note to indicate that cultivation chamber holding devices controlled in 2B352.b.2.b include single-use cultivation chambers with rigid walls.

The following twenty-four (24) precursor chemicals are now controlled under ECCN 1C350:

• (C.A.S. #589–57–1) Diethyl chlorophosphite;

• (C.A.S. #762–77–6) Ethyl chlorofluorophosphate;

• (C.A.S. #1498–51–7) Ethyl dichlorophosphate;

• (C.A.S. #460–52–6) Ethyl difluorophosphate;

• (C.A.S. #754–01–8) Methyl chlorofluorophosphate;

• (C.A.S. #677–24–7) Methyl dichlorophosphate;

• (C.A.S. #22382–13–4) Methyl difluorophosphate;

• (C.A.S. #14277–06–6) N,NDiethylacetamidine;

• (C.A.S. #53510–30–8) N,NDiethylbutanamidine;

• (C.A.S. #90324–67–7) N,NDiethylformamidine;

• (C.A.S. #1342789–47–2) N,NDiethylisobutanamidine;

• (C.A.S. #84764–73–8) N,NDiethylpropanamidine;

• (C.A.S. #1315467–17–4) N,NDiisopropylbutanamidine;

• (C.A.S. #857522–08–8) N,NDiisopropylformamidine;

• (C.A.S. #2909–14–0) N,NDimethylacetamidine;

• (C.A.S. #1340437–35–5) N,NDimethylbutanamidine;

• (C.A.S. #44205–42–7) N,NDimethylformamidine;

• (C.A.S. #321881–25–8) N,NDimethylisobutanamidine;

• (C.A.S. #56776–14–8) N,NDimethylpropanamidine;

• (C.A.S. #1339586–99–0) N,NDipropylacetamidine;

• (C.A.S. #1342422–35–8) N,NDipropylbutanamidine;

• (C.A.S. #48044–20–8) N,NDipropylformamidine;

• (C.A.S. #1342700–45–1) N,NDipropylisobutanamidine; and

• (C.A.S. #1341496–89–6) N,NDipropylpropanamidine.

Note: Mixtures in which at least one of the chemicals listed in ECCN 1C350.d constitutes 30% or more of the weight of the mixture are also controlled under this ECCN.

Contact the professionals at GCSG for more information on this development.

References

1. Bureau of Industry and Security: “Home Page”

2. Federal Register: “85 FR 36483-36492” - June 17, 2020

3. Australia Group: “Home Page”

BIS amending EAR to expand license requirements for military end users and uses

The Department of Commerce, Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR)(1). The rule will:

• Expand the licensing requirements for China to now include “military end users”, in addition to those intended for “military end use”.

• Broaden the items for which the licensing requirements and review policy apply.

• Expand the definition of “military end use”.

• Create a new reason for control and associated review policy for regional stability for certain items to China, Russia, or Venezuela; and

• Add Electronic Export Information filing requirements in the Automated Export System (AES) for exports to China, Russia, and Venezuela.

Contact us to learn more.

E   info@globalcompliancesg.com

W www.globalcompliancesg.com/contact

Reference(s)

1. Reginfo.gov - “Expansion of Export, Reexport, and Transfer (In-Country) Controls for Military End Use or Military End Users in the People's Republic of China (China), Russia, or Venezuela”

BIS Export Controls Update: May 14-15, 2018 in D.C.

The U.S. Department of Commerce, Bureau of Industry and Security (BIS) announced it will hold its annual export controls update conference on May 14-15, 2018 in Washington, D.C.  The conference will be hosted at the Marriott Marquis Hotel.  For additional information contact BIS at: UpdateConference@bis.doc.gov or +1 (202) 482-6031.

Key Link(s):

• BIS - Home
• BIS - "Update Conference 2018" News Release

BIS publishes FAQs on HK export/re-export documentation requirements

In an update to our February 20, 2017 article which detailed upcoming export/re-export documentation requirements for certain Hong Kong shipments, the U.S. Bureau of Industry and Security (BIS) has recently published a FAQs page with more details. 

The rule is effective April 19, 2017.  Click here for the original article. 

Key Link(s):

• BIS - FAQs
• Commerce Control List
• Federal Register Notice: Support Document Requirements With Respect to Hong Kong
• Hong Kong's Trade and Industry Department (HKTID)
• HKTID - Strategic Commodities Control System
• HKTID - Control Status of Common Dual-Use Products
• The Australia Group
• The Missile Technology Control Regime
• The Nuclear Suppliers Group
• The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies
• 15 CFR 734.13 - 734.14 (Export and Re-Export) 
• 15 CFR 740 (License Exceptions)
• 15 CFR 748 (Application Classification Advisory and License)
• 15 CFR 762 (Recordkeeping)   

BIS adds Hong Kong documentation requirements for exports/re-exports

On January, 19, 2017 the Department of Commerce, Bureau of Industry and Security (BIS) published a final rule (82 FR 6216-6218) which will require, in certain cases, that documents be obtained prior to exporting to Hong Kong or re-exporting from Hong Kong (HK).  BIS issued this rule to provide more assurance that items subject to multilateral control regimes, that pass through HK, are appropriately authorized to their final destination. 

Export Administration Regulation (EAR) regulated items, controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear non-proliferation (NP column 1), or chemical and biological weapons (CB) will now be required to obtain, prior to export or re-export, a copy of a Hong Kong import license.  If a license is not required the exporter or re-exporter will be required to obtain a statement from the Hong Kong government that a license is not required.

This rule will be effective on April 19, 2017.

Key Link(s):

• Commerce Control List
• Federal Register Notice: Support Document Requirements With Respect to Hong Kong
• Hong Kong's Trade and Industry Department
• The Australia Group
• The Missile Technology Control Regime
• The Nuclear Suppliers Group
• The Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies
• 15 CFR 734.13 - 734.14 (Export and Re-Export) 
• 15 CFR 740 (License Exceptions)
• 15 CFR 748 (Application Classification Advisory and License)
• 15 CFR 762 (Recordkeeping)   

US Treasury, State, and Commerce - Monetary Penalty Increases Last Two Years

The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the "Act") required federal agencies to adjust their maximum allowable civil monetary penalties ("CMPs") annually.  The initial "catch-up" adjustments occurred in 2016; and now the first annual adjustments have been finalized by the US Department of Commerce's Bureau of Industry and Security ("BIS"), the US Treasury Department's Office of Foreign Assets Control ("OFAC"), and the US Department of State's Directorate of Defense Trade Control ("DDTC").  The chart below provides a reference for the original, 2016 "catch-up", and 2017 annual adjustment penalty amounts. 

Key Terms:

• IEEPA - International Emergency Economic Powers Act
• TWEA - Trading with the Enemy Act
• FNKDA - Foreign Narcotics Kingpin Designation Act
• AEDPA - Antiterrorism and Effective Death Penalty Act
• CDTA - Clean Diamond Trade Act
• AECA - Arms Export Control Act

Key Links:

• (81 FR 95432 - 95435) Department of Commerce Civil Monetary Penalty Adjustments for Inflation - Wednesday, December 28, 2016
• (81 FR 36454 - 36458) Department of Commerce Civil Monetary Penalty Adjustments for Inflation - Tuesday, June 7, 2016
• (81 FR 10434 - 10440) Department of the Treasury Inflation Adjustment of Civil Monetary Penalties - Friday, February 10, 2017
• (81 FR 43070 - 43077) Department of the Treasury Implementation of the Federal Civil Penalties Inflation Adjustment Act - Friday, July 1, 2016
• (81 FR 3168 - 3170) Department of State 2017 Civil Monetary Penalties Inflationary Adjustment - Wednesday, January 11, 2017
• DDTC Civil Penalty Inflation Adjustments

BIS Harmonization of Destination Control Statements

On August 17, 2016 the Department of Commerce, Bureau of Industry and Security (BIS) published a final rule (81 FR 54721-54732) that implements changes recommended in a May 22, 2015 proposed rule (80 FR 29551-29554).  The rule revises the destination control statement in Sect 758.6 of the Export Administration Regulations (EAR).  The rule harmonizes the EAR statement with the destination control statement required for the export of items subject to the International Traffic in Arms Regulations (ITAR). 

The revised destination control statement reads as follows:

"These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end user(s) herein identified.  They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations"

The rule is effective November 15, 2016.

Key Link(s):

• May 22, 2015, 15 CFR 758, EAR: Harmonization of the Destination Control Statements - Proposed Rule
• August 17, 2016, 15 CFR 758, EAR: Harmonization of the Destination Control Statements - Final Rule
• U.S. Department of Commerce, Bureau of Industry and Security

BIS Revises Guidance Regarding EAR Enforcement Cases

On Wednesday, June 22 the Department of Commerce, Bureau of Industry and Security (BIS) published (81 FR 40499-40511) updated guidance (found in Supplement No. 1 to part 766) regarding violations of the Export Administration Regulations (EAR). 

The guidance amends the EAR to make civil penalty decisions more transparent and aligns them with the Treasury Department's Office of Foreign Assets Control (OFAC). 

OFAC criminal penalties can reach 20 years imprisonment and $1 million per violation.  OFAC civil penalties use the transaction value as the starting point and can reach $250,000 or twice the value of the transaction, whichever is greater (Economic Sanctions Enforcement Guidelines). 

The updated guidance does not apply to alleged violations under part 760 of the EAR - Restrictive Trade Practices and Boycotts or to cases that are pending prior to July 22, 2016. 

The effective date of the final rule change is July 22, 2016. 

Key Link(s):

• Guidance on OFAC Enforcement Policy
• OFAC Enforcement Guidelines
• 15 CFR 766 - Guidance on Charging and Penalty Determinations in Settlement of Administrative Enforcement Cases