Trade issues – December 2021 | Lowenstein Sandler LLP



1. US emerging tech companies cannot work with these Chinese entities

On November 26, the Commerce Department’s Bureau of Industry and Security added 27 foreign organizations and individuals, including eight China-based technology entities, to its list of entities. The purpose of the additions is to prevent emerging US technologies from being used in “Beijing’s quantum computing efforts that support military applications,” according to the Commerce press release. In response, a spokesperson for the Chinese Foreign Ministry claimed that the United States had “repeatedly extended the concept of national security and abused state power to hamper Chinese companies.”

2. New Chinese entities targeted via the list of entities

Investors have sued Standard Chartered PLC for misleading investors and publishing false information about its violations of US sanctions against Iran. Investors claim the bank withheld information between 2012, when it paid $ 670 million to settle Iranian sanctions allegations, and 2019, when it paid an additional $ 11 billion for other sanctions violations . Investors say the bank knowingly and willfully violated US sanctions laws, and its efforts to end money laundering and improve financial controls “were woefully inadequate.”

3. United States imposes first penalty on company for unauthorized exports to Huawei

On November 8, the Commerce Department announced the first sanction against a company for unauthorized exports to Huawei. SP Industries, a US company, agreed to an administrative settlement that included a penalty of $ 80,000 and internal audit requirements related to alleged violations of export administration regulations. SP exported items to Huawei and two of its subsidiaries after they entered the entity list. SP Industries voluntarily disclosed the violations and fully cooperated with the ensuing investigation, which was likely factored into the assessment of the low penalty. The company has also agreed to conduct audits of its compliance program over the next two years.

4. Economic sanctions: data mining and hot spots to watch out for

SAAS companies must review location data
Contracts obtained through a Freedom of Information Act request show that the Treasury Department acquired data feeds from Babel Street, a data company namely, for use by the Office of Foreign Assets Control (OFAC) and the IRS. The contracts say OFAC examines location data to “scan for malicious activity and identify malicious actors” and to “examine corporate structures and determine beneficial ownership.” SaaS companies need to be aware of this compliance risk and make sure they know where their customers are.

Cambodia in the crosshairs?
On November 10, the State Department, the Treasury Department and the Commerce Department jointly issued a business advisory focusing on the risks to investors and companies doing business with Cambodia. Corruption in Cambodia is widespread and on the increase, according to the opinion, and banks are often used to launder illicit funds. The advisory warns that corruption and limited regulation and supervision extend beyond the financial sector to all business activities, including casino, real estate, tourism, infrastructure, manufacturing and wood industries. Companies and investors who are considering or are already engaged in doing business in Cambodia should review their compliance processes to ensure that they are properly addressing the risks involved. The US government issued a similar notice before taking action on human rights violations in Xinjiang, China.

Burundi Program completed
On November 18, President Biden ended the decree underlying the Burundi sanctions program.

5. Next deadline for public comments on Brain-Computer Interface (BCI) technology

The December 10 deadline is approaching for public comments on proposed Commerce Department regulations identifying BCI technology as an emerging technology under the U.S. export control regime. The Commerce Department has identified the BCI as an emerging technology essential to the national security of the United States. In its October 26, 2021 advance notice regarding the development of proposed rules, the Commerce Department requested comments on the potential uses of BCI technology, its impact on United States national security, and how to use it effectively. and appropriately export controls on BCI technology to protect United States national security while minimizing the negative effects of export controls on commercial and scientific applications.

6. China issues new encryption import controls effective immediately

The Ministry of Commerce of China (MOFCOM) released the Revised Catalog of Technologies Subject to Import Bans and Restrictions, effective immediately, and included “Data Encryption Technology Using Key Length Greater than 256 bits As a technology requiring importation. allowed. Physical encryption devices are also licensed and controlled for import by a separate branch of MOFCOM with an entirely different regulatory framework and enforcement mechanism. These two parallel regulatory frameworks create additional complexity for multinational companies and can have a significant impact on supply chain operations that involve the cross-border transfer of encryption technology.

7. FCC will ban covered Chinese communication equipment

On November 11, President Biden enacted the bipartisan Secure Equipment Act of 2021, which requires the Federal Communications Commission to pass rules stating that it will no longer review or approve any equipment license applications from companies. companies appearing on the agency’s “covered list”. “The list covered includes companies such as Huawei and ZTE Corporation. This legislation fills a loophole that allowed equipment to be purchased with private or non-federal government dollars and fed into the US telecommunications network. that poses a risk to national security Communications equipment manufacturers and businesses should ensure that they know the origin of their equipment to ensure that it is not on the covered list.

8. CIT Ready to Hear Oral Arguments in Section 301 Tariff Litigation

The International Trade Tribunal (CIT) has scheduled oral argument in the ongoing litigation challenging the legality of item 301 tariffs on List 3 and List 4A imports from China for February 1, 2022. The plan follows months of procedural haggling over whether entry refunds would be available if plaintiffs ultimately win – a disagreement that was ultimately resolved in favor of plaintiffs – and would set the stage for a decision by the plaintiffs. CIT on the merits in 2022. In February, counsel for the plaintiffs will argue that the parameters of the relevant law only allow the President and the United States Trade Representative (USTR) to increase tariffs “when the burden on American commerce has increased. increased because of the investigated practices which were the subject of the action under section 301 ”and that the imposition of the tariffs of lists 3 and 4A is not the scope of this power and are therefore illegal. For importers who wish to join the thousands of plaintiffs already engaged in the litigation, it is not too late. However, given the approach of oral argument slated for February, importers should file their complaints as soon as possible to avoid missing out on potential refunds as the case draws to a close.

9. The State Department performs end-user verifications to ensure compliance

At the Defense Trade Advisory Group meeting on November 4, 2021, senior State Department officials shared ongoing policy reviews as well as licensing trends for 2021. In 2021 , while the overall volume of licenses has continued to decline, since certain items were removed from the ammunition list, the number of registrants in the defense trade remains close to an all-time high, at just under 14,000. In 2021, the agency also launched more than 280 end-use checks, a three-year record, on defense exports through its Blue Lantern program. Since the transfer of some weapons controls to the Commerce Department, the agency has been able to devote more resources to its Blue Lantern program.


Business tip of the month: The USTR office announced a six-month extension for 81 of the 99 specific product exclusions under Section 301. The exclusions relate to “certain medical care products required to combat the COVID-19 pandemic.” The exclusions were previously extended until November 14, 2021 and will now expire on May 31, 2022.


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