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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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The Department of Commerce&rsquo;s Bureau of Industry and Security (BIS) has issued two final rules and one proposed rule intended to prevent efforts by entities in China, Russia and Venezuela to acquire U.S. technology that could be used in development of weapons, military aircraft or surveillance technology through civilian supply chains or under civilian-use pretenses. In a press release, Secretary of Commerce Wilbur Ross stated, &ldquo;Certain entities in China, Russia, and Venezuela have sought to circumvent America&rsquo;s export controls, and undermine American interests in general, and so we will remain vigilant to ensure U.S. technology does not get into the wrong hands.&rdquo;
The actions taken by BIS are:
<ul>
<li>Elimination of License Exception Civil End Users (CIV) &ndash; This <a href="https://www.govinfo.gov/content/pkg/FR-2020-04-28/pdf/2020-07240.pdf" target="_blank" rel="noopener noreferrer">final rule</a> removes, effective June 29, 2020, the longstanding license exception CIV. This license exception authorizes exports, reexports, or transfers (in-country) of certain items controlled for national security purposes to civilian end users for civil end uses in certain countries otherwise restricted on the Commerce Control List (CCL) country chart for national security reasons. BIS noted that many countries are seeking to &ldquo;align civil and defense technology development for many reasons &ndash; to achieve greater efficiency, innovation, and growth.&rdquo; However, according to BIS, such integration makes it harder for U.S. exporters to know or determine whether the end use and end users of an item will or will not be intended for military uses or military end users. BIS determined that certain countries have employed a strategy of obscuring U.S. exporters from being able to readily determine the intended end use. Accordingly, BIS determined that transactions involving the national security-controlled items that have been permitted under CIV license exception should henceforth be reviewed prior to export.</li>
<li>Expansion of Military End Use/User Controls in China, Russia or Venezuela &ndash; This <a href="https://www.govinfo.gov/content/pkg/FR-2020-04-28/pdf/2020-07241.pdf" target="_blank" rel="noopener noreferrer">final rule</a>, effective June 29, 2020, expands licensing requirement controls on China, Russia and Venezuela to cover &ldquo;military end users&rdquo; in all three countries, in addition to &ldquo;military end uses.&rdquo; It also broadens the list of items controlled and potentially requiring an export license, including items such as semiconductor equipment, sensors, and other technologies sought for military end use or by military end users in these countries. Importantly, this rule broadens the definition of military end use beyond any item for the &lsquo;&lsquo;use,&rsquo;&rsquo; &lsquo;&lsquo;development,&rsquo;&rsquo; or &lsquo;&lsquo;production&rsquo;&rsquo; to now include any item that supports or contributes to the operation, installation, maintenance, repair, overhaul, refurbishing, &lsquo;&lsquo;development,&rsquo;&rsquo; or &lsquo;&lsquo;production,&rsquo;&rsquo; of military items. BIS clearly notes that these expansions &ldquo;will require increased diligence with respect to the evaluation of end users in China, particularly in view of China&rsquo;s widespread civil-military integration.&rdquo; Finally, the rule expands Electronic Export Information (EEI) filing requirements by removing two exemptions when the destination is China, Russia or Venezuela: (i) from filing EEI for any shipments valued under $2,500 and (ii) from reporting the Export Control Classification Number (ECCN) when the only reason for control is anti-terrorism (AT).</li>
<li>Proposal to Amend License Exception Additional Permissive Reexports (APR) &ndash; This <a href="https://www.govinfo.gov/content/pkg/FR-2020-04-28/pdf/2020-07239.pdf" target="_blank" rel="noopener noreferrer">proposed rule</a>&nbsp;seeks to eliminate certain provisions of the APR license exception which authorizes certain reexports between and among certain identified countries if the requirements of the country authorizing the reexport are met. BIS proposes to remove the provision in this license exception that authorizes the reexport of certain national security controlled items from Country Group A:1 country or Hong Kong to Country Group D:1. According to BIS, this proposed change is due to evidence that partner countries have different standards and have approved licenses for the reexport of a U.S.-origin items that would have been denied if exported directly from the United States. BIS is requesting comment on how the proposed change would impact persons who currently use or plan to use the APR license exception. Comments on this proposed ruled must be received by BIS no later than June 29, 2020, and must be submitted to the federal rulemaking portal (<a href="http://www.regulations.gov/" target="_blank" rel="noopener noreferrer">www.regulations.gov</a>) under Docket No. BIS&ndash;2020&ndash;0010.</li>
</ul>

core/freeform

SmarTrade

Senior Legislative and Regulatory Policy Advisor

Scott E. Diamond

BIS Tightens Export Controls on National Security-Controlled Items: Focus on Diversion for Military End Use in China, Russia and Venezuela