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ILN Today Post

Five Lessons from DDTC’s Most Recent Consent Agreement

On January 21, 2022, the U.S. Directorate of Defense Trade Controls (“DDTC”) entered into a consent agreement with Torrey Pines Logic, Inc. (“TPL”) and its founder and president, Dr. Leonid Volfson, for alleged violations of the Arms Export Control Act (“AECA”) and the International Traffic in Arms Regulations (“ITAR”).1 TPL, an electro-optics and communications equipment company, allegedly committed violations that involved the attempted unauthorized export and unauthorized export of defense articles, including to proscribed destinations; involvement in ITAR-regulated activities while ineligible; and failure to maintain export transaction records. Read more…

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Russia Restrictions Could Be a Blueprint for U.S. Response if China Invades Taiwan

On May 23, 2022, President Joe Biden, when asked whether the United States would get involved militarily if China invaded Taiwan, answered firmly, “Yes. That’s the commitment we made.”  As the world watches the war in Ukraine, many wonder whether China will take similar actions with respect to Taiwan, and what the United States’ response would be, both military and otherwise. The United States has loosed a salvo of new sanctions and export controls in response to Russia’s February 24 invasion of Ukraine. This article, in turn, examines potential sanctions, export controls, and import restrictions the United States could place on Beijing in the event of an incursion against Taiwan.

To access the full article, click Here.

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De Minimis Dominates International Trade Commission Hearing on Foreign Trade Zones

On May 17, 2022, the U.S International Trade Commission (“USITC”) held a public hearing in connection with an investigation into the effect of Foreign Trade Zone (“FTZ”) policies and practices on U.S. firms operating in U.S. FTZs and under similar programs in Canada and Mexico. FTZs are secured areas located in or near U.S. Customs and Border Protection (“CBP” or “Customs”) ports of entry, but merchandise in an FTZ is generally considered to be outside of U.S. Customs territory. Within an FTZ, the operator may conduct certain (CBP supervised) domestic activity involving foreign items, including storage, exhibition, assembly, manufacturing, and processing, prior to formal Customs entry. The public hearing investigating FTZs featured testimony from eight representatives of various stakeholders, including trade and industry groups, consulting firms, logistics companies, and manufacturers.

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Trade Alert: Nuclear Regulatory Commission Suspends General License Authority to Export Radioactive Material to Russia

On May 17, 2022, the Nuclear Regulatory Commission (“NRC”) issued an order, effective immediately, suspending the general license authority under NRC regulations to export radioactive material and deuterium for nuclear end-use to Russia. Now, exporters of such material must apply to the NRC for a specific license to export to Russia.

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Trade Alert: Commerce Expands Export Controls on Shipments of EAR99 Items to or within Russia

On May 9, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced a new final rule, to be published on May 11, 2022, expanding export controls against Russia under the Export Administration Regulations (“EAR”). The final rule imposes a license requirement under 15 C.F.R § 746.5(a)(1)(ii) for exports, reexports, or transfers (in-country) to or within Russia for additional items subject to the EAR identified under specific Harmonized Tariff Schedule (“HTS”) descriptions. The final rule adds 205 HTS codes at the 6-digit level (and descriptions) and 478 corresponding 10-digit Schedule B numbers (and descriptions) to the chart in Supplement No. 4 to Part 746.

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Trade Alert: Treasury Specifies “Services” Prohibited for Export to Russia under Executive Order 14071

On May 8, 2022, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a determination pursuant to Executive Order (“EO”) 14071. The determination specifies that the provision of the following activities to any person in Russia are prohibited: accounting services, trust and corporate formation services, and management consulting services. The prohibition takes effect on June 7, 2022 and does not apply to services provided to entities located in Russia owned or controlled by U.S. persons, or any services in connection with the wind down or divestiture of any entity in Russia not owned or controlled by a Russian person. The determination expands EO 14024 to prohibit such services. Read more…

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What Was the Impact of Section 232 and Section 301 Duties on Your Company?

If your company has been negatively impacted by the Section 232 and Section 301 duties, you may now have another opportunity to voice your concerns in Washington. On May 5, 2022, the U.S. International Trade Commission (ITC) published information regarding a fact-finding investigation into the economic impact of the Section 232 and 301 duties on U.S. industries.

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U.S. Trade Representative Initiates Four-Year Review of Section 301 Tariffs

On May 3, 2022, the U.S. Trade Representative (“USTR”) announced a statutory two-phase review of the Section 301 tariffs on Chinese-origin goods. USTR also published a Federal Register Notice draft describing the process for filing requests for extension of the tariffs.

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Lost at Sea: Lack of BIS Guidance on New Russia/Belarus FDP Rule Creates Compliance Chaos

On March 2, 2022, as part of a string of sanctions and export controls, the Russia/Belarus Foreign Direct Product (“FDP”) Rule and Russia/Belarus-Military End User (“MEU”) FDP Rule took effect.1 These rules, generally, restrict the sale to Russia and Belarus of foreign-produced items produced with certain controlled U.S.-origin software or technology.

While the political aim of the Russia/Belarus FDP rules was to punish Russia for its invasion of Ukraine and punish Belarus for enabling Russia to do so, the practical outcomes and effects of the new FDP rules are unclear. Without guidance from the Bureau of Industry and Security (“BIS”), legal and compliance practitioners – as well as their clients operating in the global marketplace – are left to form their own interpretations of these already complex rules at the expense of their and their client’s reputations and businesses. Read more…

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ZTE’s Court-Appointed Monitorship Comes to a Close

The largest criminal monitorship in U.S. history has ended. On March 22, 2022 a U.S. judge ruled that Chinese telecommunications giant ZTE Corporation had completed the terms of its five-year probation, which began in 2017 following ZTE’s criminal plea agreement for its role in exporting controlled U.S. products to embargoed countries.

The resolution was up in the air as late as March 14, when ZTE returned to court for a hearing on whether alleged visa fraud by a former research director had violated the Chinese company’s probation. In this hearing, which came just one week before the stipulated end date of the original five-year corporate compliance monitorship, the judge found that the alleged conduct in the visa fraud case did not violate the terms of ZTE’s probation. Nevertheless, he “encouraged the government to pursue any reasonable charges and criminal or civil penalties against the company, especially for export compliance violations. Read more…

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