Insights

On May 1, 2024, the Department of State’s Directorate of Defense Trade Controls (DDTC) published a proposed rule that, if implemented, would streamline defense trade between and among Australia, the United Kingdom (UK), and the United States in furtherance of the trilateral security partnership (the “AUKUS” partnership). DDTC issued the proposed rule pursuant to new authorities and requirements contained in Section 1343 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2024 which, in part, directs the Department of State to immediately implement an International Traffic in Arms Regulations (ITAR) exemption, subject to certain statutory limitations, for the UK and Australia if State determines and certifies that each has implemented (1) a system of export controls comparable to those of the United States and (2) a comparable exemption from its export controls for the United States. According to DDTC, the proposed rule “prepare[s] for a future exemption” and solicits public feedback “to shape a final rule following any positive certification.”

On April 11, 2024, the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) announced proposed amendments to its enforcement and mitigation regulations, marking the first substantive update to CFIUS’s mitigation and enforcement provisions since the enactment of the Foreign Investment Risk Review Modernization Act of 2018.  The Committee issued a notice of proposed rulemaking ("NPRM”) that would modify the regulations that apply to certain investments and acquisitions, as well as real estate transactions, by foreign persons as follows:

Following a meeting of the G7 Summit Leaders, on May 19, 2023, the United States and the United Kingdom announced a new round of sanctions and export controls against the Government of the Russian Federation (“Russia”) to continue their efforts against key sectors of Russia’s military-industrial base. These actions target procurement and evasion networks to curtail the flow of necessary resources Russia needs to maintain and fund its campaign against Ukraine. In this alert, Crowell & Moring attorneys based in our U.S. and UK offices provide a comprehensive overview of the recent multi-jurisdictional actions taken by the respective countries’ government agencies.

On March 22, 2023, the Department of Defense (DoD) issued a proposed rule that would amend the Defense Federal Acquisition Regulation Supplement (DFARS) to require certain contractors to provide export authorizations to the Defense Authorization Management Agency (DCMA).

Two new rules announced by the U.S. Department of Commerce, Bureau of Industry and Security (BIS) strive to severely inhibit China’s progress in indigenously producing advanced semiconductors. Although advanced semiconductors are widely used for commercial applications, BIS cited serious concerns regarding China’s use of the technology for WMD and military applications, and enabling human rights violations or abuses. BIS' announcement follows remarks in September by the U.S. National Security Advisor signaling a shift in the U.S. export control strategy from one of maintaining a “relative” advantage over competitors in certain key technologies, to maintaining “as large a lead as possible.” It remains to be seen if U.S. allies key to the semiconductor supply chain will impose similar export restrictions on transfers to China. Following the announcement of the rules, BIS officials have underscored the importance of multilateral adoption of the new currently unilateral controls, describing engagement with allies as a “priority” for BIS.

On June 28, 2022, the Financial Crimes Enforcement Network (“FinCEN”) and the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) issued a joint alert (the “Alert”), urging financial institutions regulated under the Bank Secrecy Act (“BSA”) to remain vigilant of efforts by third parties to evade the extensive U.S. export controls imposed on Russia and Belarus relating to Russia’s invasion of Ukraine. The Alert provides BSA-regulated financial institutions (“Covered Institutions”) with guidance on how to identify customers and transactions that may pose elevated export controls evasion risks. The Alert reflects the Biden Administration’s “whole of government” approach to prevent Russian circumvention of U.S. export controls. 

On January 12, 2022 the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a federal register notice delaying the effective date of new controls on cybersecurity items and an accompanying new license exception. The rules are now set to take effect on March 7, 2022.

Today, December 6th, is the deadline to file comments on the Department of Commerce’s Bureau of Industry and Security’s (BIS) interim final rule introducing export controls over cybersecurity items. The rule was issued on October 21st and broadly speaking covers intrusion software and internet protocol (IP) network communication surveillance that software is “subject to the Export Administration Regulations (EAR),” i.e., is either exported from the United States or is developed and exported from abroad with more than a minimal percentage of U.S.-origin content.[i]

BIS remains busy during the closing days of the year. On December 18 and 21 the Department of Commerce issued several press releases announcing the addition of 77 entities to the Entity List, and for the first time, a Military End User List. The December 18 press releases (here and here) announced the addition of 77 entities to the Entity List, including several high-profile Chinese companies. And while the new additions were not published in the Federal Register until December 22, the additions became effective on the date of the press release, December 18. Continuing a “rulemaking by press release,” exporters who rely on the Federal Register may have missed the additions. The December 21 press release (here) publicized the creation of a new list, the Military End User List (“MEU List”), related to the MEU rule BIS issued earlier this year (see our prior alert here). The MEU List was published in the Federal Register and went into effect on December 23.

On October 8, 2020, the Treasury Department’s Office of Foreign Assets Control (OFAC) took a long-rumored final step in curtailing virtually all non-humanitarian financial flows with Iran, identifying the Iranian “financial sector” as a target for potential “secondary” sanctions designation, and simultaneously designating eighteen Iranian financial institutions, many of which had been the only remaining conduits by which funds flowed to or from Iran. OFAC designated sixteen banks for operating in the Iranian financial sector under the authority of Executive Order (EO) 13902, one bank for being owned or controlled by a bank designated under EO 13902, and one bank that serves Iran’s armed forces under the non-proliferation authorities of EO 13382 (EO 13382). Following a 45-day wind-down period, the sanctions become effective on November 22, 2020.

The long-awaited sequel to the still-pending advanced notice of proposed rulemaking (ANPR) for Emerging Technologies from November 19, 2018, is finally here (see our prior alert). On August 27, 2020, BIS published an ANPR seeking comment on the definition of, and criteria for, identifying “foundational technologies,” as required by Section 1758 of the Export Control Reform Act of 2018 (ECRA). Not only may this rulemaking result in additional controls for items that were either uncontrolled or only subject to limited controls, but it could expand the range of companies where even minimal foreign investment can trigger review by the Committee on Foreign Investment in the United States (CFIUS).

On May 29, 2020, President Trump announced his intention to direct his administration to begin the review and removal of Hong Kong’s special treatment for dual-use export controls.  Over the last week, we have seen the U.S. State and Commerce Departments begin to implement these changes through a coordinated series of announcements that, collectively, represent the largest change in Hong Kong’s status under export control laws since the 1997 handover ending British sovereignty.

We are excited to announce our Export Controls Classroom webinar series. This monthly series open to all will cover a range of topics from the nuts and bolts of export compliance, to in-depth analysis of emerging issues, and will be designed for those new to export controls and as well as more experienced compliance and industry professionals. Our attorneys from the International Trade practice group will team up with practitioners from other complementary practices such as Privacy & Cyber, Government Contracts, Corporate, and Labor & Employment to provide full coverage of the issues.

Asserting that Huawei has taken advantage of a “loophole,” Secretary of Commerce Ross on Friday, March 15, 2020, announced an amendment of the direct product rule that for now applies only to Huawei and its affiliates on the Entity List. The amendment expands the scope of the rule to capture certain foreign manufactured items, making them “subject to the EAR.” Items captured under the amended rule require a BIS license prior to export, reexport, or transfer to Huawei or its listed affiliates.