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Voluntary Self Disclosure Changes Codified

The Commerce Department’s Bureau of Industry and Security (BIS) issued a final rule making changes to the Export Administration Regulations (EAR) related to BIS’s policies and practices regarding voluntary self-disclosures (VSDs) and to the BIS Penalty Guidelines. The rule revises the BIS Penalty Guidelines to change how the Office of Export Enforcement (OEE) calculates the base penalty in administrative cases and how OEE applies various factors to the base penalty to determine the final penalty.

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Wan Chai district of Hong Kong.
Hong Kong Business Advisory
On September 6, the U.S. Departments of State, Agriculture, Commerce, Homeland Security, and Treasury jointly released an updated warning for U.S. businesses about risks to their operations and activities in Hong Kong. Risk factors that were formerly limited to mainland China are now also a concern in Hong Kong and could affect commerce, trade, and seemingly routine individual commercial activities in Hong Kong. Many of these risks stem from the 2020 Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong SAR (National Security Law, or NSL), as well as the Safeguarding National Security Ordinance (SNS Ordinance), which was enacted in March 2024 under Article 23 of Hong Kong’s Basic Law.
The rule implements the
BIS Aligning Tech Controls with Allies
Bureau of Industry and Security (BIS) is implementing export controls on several semiconductor, quantum, and additive manufacturing items with an interim final rule published September 6th.   The rule adds and revises Export Control Classification Numbers (ECCNs) in the Commerce Control List, adds a new license exception for countries that have implemented equivalent technical controls, and adds two new worldwide license requirements to the national security and regional stability controls in the Export Administration Regulations (EAR). The new controls include a limited number of deemed export requirements in the sectors of quantum computers, materials, and related electronic assemblies; aerospace technology; and integrated circuit “development” or “production.”
A single AIM 120 AMRAAM Missile sells for around $1.37 million
RTX: Endemic ITAR Compliance Failures
RTX Corporation, the defense contracting roll-up formerly known as Raytheon, has entered into a settlement agreement with the U.S. Department of State following a comprehensive investigation into violations of the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). By paying $100 million in fines and promising to spend another $100 million on compliance programs, the firm avoids debarment and further criminal or civil action.
Washington Trade & Tariff Letter
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September, 2024 Export Practitioner

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OFAC Roundup 

Treasury’s Office of Foreign Assets Control (OFAC) announced several new outreach initiatives to complement their recent  website  upgrades and  video  series.     …

Wells Fargo Settles Money Laundering Probe

Compliance-challenged banking behemoth Wells Fargo & Co reached a settlement with the Office of the Comptroller of the Currency (OCC) related to the bank’s anti-money laundering (AML) and sanctions risk management failures. The Formal Agreement identifies deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas including suspicious activity and currency transaction reporting, customer due diligence, and the bank’s customer identification and beneficial ownership programs. The agreement requires the bank to take comprehensive corrective actions to enhance its Bank Secrecy Act/anti-money laundering and U.S. sanctions compliance programs.

GAO Report on China's Belt & Road Initiative

The U.S. Government Accountability Office (GAO) report highlights the substantial investments China is making through the world’s largest infrastructure finance program, the Belt and Road Initiative (BRI). Contributors to the report identified challenges to US competitiveness includeing the "lack of a public national strategy to guide and prioritize" U.S. efforts and the "fragmentation of foreign assistance efforts" across several federal agencies.

White House to Gut De Mimimis Exemption

The Biden-Harris Administration has announced a series of new actions aimed at addressing the growing abuse of the de minimis exemption, particularly by e-commerce platforms like Amazon, Shein and Temu. The administration’s efforts come in response to a significant rise in de minimis shipments, which have increased from 140 million annually to over one billion in the last decade, complicating efforts to regulate imports and block illegal goods.

Syria Shipping Update

Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued an update to the March 2019 OFAC Advisory to the Maritime Petroleum Shipping Community to highlight risks associated with shipments to Syria. Amendments to this advisory include updates to certain deceptive shipping practices and risk mitigation measures, along with an updated annex of vessels currently identified as blocked property on OFAC’s SDN List, that have been involved in fuel shipments to Syria.

House China Hawks Continue Crane Refrain

Majority staff from the Homeland Security and Select China Committees released a report recapping their efforts to draw attention to the role of Chinese suppliers in U.S. Port Security.    China's Shanghai Zhenhua Heavy Industry Co., Ltd. (ZPMC), the world’s largest STS crane manufacturer is an entity of particular focus of the report.   Producing nearly 80% of the STS cranes used at U.S. ports ZPMC commands 70% of the global market share.  

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Enforcement
An India- and New Jersey-based man who operated jewelry companies in New York City’s Diamond District admitted today to spearheading a scheme to illegally evade customs duties for more than $13.5 million of jewelry imports into the United States and with illegally processing more than $10.3 million through an unlicensed money transmitting business, U.S. Attorney Philip R. Sellinger announced.
“After acquiring Wirtgen Thailand in 2017, Deere failed to timely integrate it into its existing compliance and controls environment, resulting in these bribery schemes going unchecked for several years,” said Charles E. Cain, Chief of the SEC Enforcement Division’s FCPA Unit.
The Securities and Exchange Commission announced that Deere & Company, which does business as John Deere, agreed to pay nearly $10 million to resolve SEC charges that it violated the Foreign Corrupt Practices Act (FCPA) arising out of bribes paid by its wholly owned subsidiary, Wirtgen Thailand. Thailand employees bribed Thai government officials with the Royal Thai Air Force, the Department of Highways, and the Department of Rural Roads to win multiple government contracts and also bribed employees of a private company to win sales to that company.
Siberian Airlines' fleet includes 63 European Airbus A320/321, 19 American Boeing 737, and 17 Brazilian Embraer aircraft.
An Israeli freight forwarder pleaded guilty to conspiracy to commit export control and smuggling violations for his role in a scheme to illegally ship aircraft parts and avionics from U.S. manufactures and suppliers to Russia, including for the benefit of sanctioned Russian airline companies. As part of his plea agreement, Gal Haimovich, 49, admitted that his scheme involved deceiving U.S. companies about the true destination of the goods at issue, and that the defendant and others attempted to conceal the scheme by submitting false information in export documents filed with the U.S. government. A sentencing hearing has been set for Nov. 22.

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Sanctions

Georgia Tech Retreats from China

The Georgia Institute of Technology announced it is shuttering its Shenzhen campus and closing a chapter of educational cooperation in the “China’s Silicon Valley” dating back to 1984. To date, Tianjin University remains on the Entity List, making Georgia Tech’s participation with Tianjin University, and subsequently GTSI, no longer tenable" the Iniversity said in a statement.

U.S. Allies Target Iran Missile Sales

The US and allies announced a coordinated response to punish the government of Iran for supplying missiles to Moscow for use in Ukraine.  In a significant step, the allies promised sanctions against Iran Air, further crippling the Airbus-dependant state carrier. Existing sanctions have grounded much of the carrier's fleet of Airbus and ATR aircraft, with reports from last summer saying more than two-thirds were out of service.    The average age of the fleet exceeds 25 years.
Since May 2023, the Dassault Falcon, tail number T7-ESPRT, has been used for the benefit of Maduro and his representatives, including to transport Maduro on visits to other countries. (900LX shown)

Justice Snags Maduro's Falcon Jet

The Justice Department today announced the seizure of a Dassault Falcon 900EX aircraft owned and operated for the benefit of Nicolás Maduro Moros and persons affiliated with him in Venezuela. The aircraft was seized in the Dominican Republic and transferred to the Southern District of Florida at the request of the United States based on violations of U.S. export control and sanctions laws.

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Policy Briefs
Additionally, OFAC put on public inspection Interim Final Rule to Extend Recordkeeping Requirements from Five to 10 Years, consistent with the extension of the statute of limitations for violations of certain sanctions administered by OFAC. OFAC also put on public inspection a Comment Request for Reporting, Procedures and Penalties Regulations and Other Information Collections Maintained by OFAC for comments concerning OFAC's information requirements.
BIS released a Notice of Proposed Rulemaking outlining a new mandatory reporting requirement for the world’s leading AI developers and cloud providers. The proposed rule requires developers of the most powerful AI models and computing clusters to provide detailed reporting to the federal government. This includes reporting about developmental activities, cybersecurity measures, and outcomes from red-teaming efforts, which involve testing for dangerous capabilities like the ability to assist in cyberattacks or lower the barriers to entry for non-experts to develop chemical, biological, radiological, or nuclear weapons.
Ottawa Parliament Hill
Evidently the "strong concerns with Canada’s unilateral digital service tax" the USTR cited in the readout of last weeks meeting between Ambassador Katherine Tai and Minister of Export Promotion, International Trade, and Economic Development, Mary Ng. Involved a preview of a USMCA dispute settlement complaint. Friday Tai announced that the United States has requested dispute settlement consultations with Canada under the United States-Mexico-Canada Agreement (USMCA) regarding Canada’s recently enacted digital service tax (DST).

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Supply Chain
The Commerce Department has announced a new tool for analyzing supply chain resiliance.   Introduced at the inaugural Supply Chain Summit in Washington, the SCALE tool represents an effort to build the U.S. Government’s analytical capacity to understand and address supply chain risk. Officails also used the event to announce a redoubled effort to direct federal funds to favored industries via the Chips and Science Act and the Bipartisan Infrastructure Law.
A new air cargo screening directive issued Aug. 21 by the TSA has some carriers looking for clarification from the U.S. government, and at least one carrier has issued an embargo on U.S. routes via Europe.   The emergency amendment – with restricted access –requires carriers to submit additional details of shippers and consignees to the US Customs and Border Protection agency.
1 in 3 EVs Worldwide has a CATL battery
Congressional China hawks have called for U.S. Department of Defense to immediately place Contemporary Amperex Technology Limited (CATL) on the Section 1260H List, which provides transparency on Chinese military companies operating in the United States. Chairman John Moolenaar (R-MI) of the House Select Committee on the Chinese Communist Party and Sen. Marco Rubio (R-FL) sent a letter to Defense Secretary Lloyd Austin urging the move, stating "By including CATL on the Section 1260H List, the DoD would not only safeguard America’s military infrastructure from exposure to the PLA, it would also send a powerful signal to U.S. companies who are currently weighing partnerships with CATL.”

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Licensing
India-U.S. Defense Acceleration Ecosystem (INDUS-X) Summit is sponsored by the DoD's Defense Innovation Unit (DIU) and the Indian MoD's Defense Innovation Organization (DIO)
The U.S. Department of Defense and Indian Ministry of Defence (MoD) participated in the third India-U.S. Defense Acceleration Ecosystem (INDUS-X) Summit in Silicon Valley, California on Monday, …
BIS has recently updated its Guidelines for Preparing Export License Applications Involving Foreign Persons (Deemed Exports/Reexports). Deemed exports are most often encountered in the employment context however, this guidance also addresses license submission requirements related to releases of controlled “technology” and “source code” to foreign persons in other contexts, such as foreign students participating in collaborative research when there are restrictions on publication or foreign students participating in curricular practical training (CPT) or optional practical training (OPT).
Rubio is calling for a blanket “presumption of denial” on tech exports to China
The Commerce Department should adopt a blanket “presumption of denial” posture for export license applications that would send critical technology to any entity based in China, according to Sen. Marco Rubio (R-Fla). Commerce should impose the strict controls because of the demonstrably high risk that such applications are intended to circumvent export controls, the senator said.
Department of State, Directorate of Defense Trade Controls (DDTC) is requesting comments on the administration of Form DS-2032 Statement of Registration;
The U.K. governemnt has published a Licence allowing the export of dual-use items or military goods software or technology and trade of military goods, to, between and among Australia, the USA and the UK, in furtherance of the AUKUS Treaty. This open general licence (OGL) permits, subject to certain conditions, the export of dual-use items or military goods software or technology and trade of military goods, to, between and among Australia, the US and the UK. This includes re-exporting goods, software or technology to and from permitted destinations, even if they have been incorporated into other products.

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