Export Control Regulatory Change Summary, July – September 2021

This final rule added four companies to the Entity List.

• King Royal Technologies Co., Ltd. –  a telecommunication company
• Myanmar Wanbao Mining Copper, Ltd.
• Myanmar Yang Tse Copper, Ltd.
• Wanbao Mining, Ltd.

This rule added thirty-four entities to the Entity List located in Canada; China; Iran; Lebanon; the Netherlands; Pakistan; Russia; Singapore; South Korea; Taiwan; Turkey; the UAE; and the United Kingdom.

Generally speaking, entities are added to this list based on involvement in activities contrary to the national security or foreign policy interests of the United States. The federal register notice provides specific details on the reasons the End-user Review Committee (ERC) made the decision to add these entries.

Some of the reasons provided in federal register notice include:

• reasonable cause to believe entities facilitated the export of U.S. items to Iran in violation of the EAR
• entities have been implicated in human rights violations
• procurement of U.S.-origin electronic components likely in furtherance of Russian military programs
• entities acquiring and attempting to acquire U.S.-origin items in support of military modernization for the People’s Liberation Army

On July 16, the U.S. Departments of State, Commerce, Homeland Security and the Treasury issued an advisory to businesses, individuals, academic institutions, and research service providers to highlight growing risks associated of operating in Hong Kong noting changes in Hong Kong’s laws and regulations. Changes include the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (National Security Law).

The advisory notes growing data privacy risks and risks related to lack of transparency and access to information that would be used for business purposes. And increased risk for violations of U.S. sanctions put in place in response to these changes. The advisory further notes that businesses operating in Hong Kong may face heightened risks and uncertainty related to PRC retaliation against companies that comply with sanctions imposed by the United States and other countries, including through enforcement of the Countering Foreign Sanctions Law put in place by China’s Ministry of Commerce (MOFCOM).

This final rule added six entities to the Entity List on the basis of activities that are described in Executive  Order (E.O.) 14024 (86 FR 20249, April  19, 2021), Blocking Property With  Respect To Specified Harmful Foreign  Activities of the Government of the Russian Federation, issued on April 15,  2021.

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated six entities as being within the scope of E.O. 14024. BIS took concurrent action by listing these entities on the Entity List, to ensure that U.S. sanctions on the entities will apply to all items subject to the EAR regardless of whether a U.S. person is involved in the transaction or whether the transaction involves the U.S. financial system.

The White House issued Executive Order 14038 “Blocking Property of Additional Persons Contributing to the Situation in Belarus“.

The EO authorizes the designation of persons determined “to operate or have operated in” certain enumerated sectors of the Belarus economy, including:

• the defense and related materiel sector;
• security sector;
• energy sector;
• potassium chloride (“potash”) sector;
• tobacco products sector;
• construction sector;
• transportation sector; or
• any other sector of the Belarus economy as may be determined by the Secretary of the Treasury

OFAC added 23 individuals and 21 entities to the Specially Designated Nationals list, as noted by OFAC were involved in the continuing violent crackdown on peaceful protests; are connected to the May 23, 2021, Ryanair incident; or, profit from or sustain the Belarusian regime at the expense of the Belarusian people.

Office of Foreign Assets Control (OFAC) and Department of Commerce’s Bureau of Industry and Security (BIS) issued a Fact Sheet to emphasize the U.S. government’s commitment to promoting the ability of the Cuban people to seek, receive, and impart information, by highlighting the most relevant exemptions and authorizations pertinent to supporting the Cuban people through the provision of certain internet and related telecommunications services.

The Fact Sheet includes an overview of OFAC GLs for:

• Software and services for Cuban internet users
• Telecommunications services and establishment of telecommunications facilities
• Internet based distance learning and education
• Information and informational materials

The Office of Foreign Assets Control (OFAC) is issued Iran General License M-1, “Authorizing the Exportation of Certain Graduate Level Educational Services and Software.” 

GL M-1 extends previously published GL-M by one year.

In addition, OFAC updated related Frequently Asked Question 853.

The White House issued Executive Order 14046 “Imposing Sanctions on Certain Persons with Respect to the Humanitarian and Human Rights Crisis in Ethiopia.”

The EO authorizes the Secretary of the Treasury in consultation with the Secretary of State to impose targeted sanctions on persons within the Ethiopian government, the Eritrean government, the Tigray People’s Liberation Front, and the local government of Ethiopia’s Amhara region responsible for or complicit in, or who have directly or indirectly engaged in, activity contributing to the crisis in northern Ethiopia.

OFAC issued

• Ethiopia General License Number 1, “Official Activities of Certain International Organizations and Other International Entities,”
• Ethiopia General License Number 2, “Certain Transactions in Support of Nongovernmental Organizations’ Activities,”
• Ethiopia General License Number 3, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates.” 

The Office of Foreign Assets Control (OFAC) issued an updated advisory to highlight the sanctions risks associated with ransomware payments in connection with malicious cyber-enabled activities and the proactive steps companies can take to mitigate such risks, including actions that OFAC would consider to be “mitigating factors” in any related enforcement action.

The Office of Foreign Assets Control (OFAC) is issued General License 14, “Authorizing Humanitarian Activities in Afghanistan.”

General License 15, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components, or Software Updates in Afghanistan.”

This final rule added a new Export Control Classification Number (ECCN) 2D352 to the CCL to control nucleic acid assembler and synthesizer “software” capable of designing and building functional genetic elements from digital sequence data. In addition, this rule amended ECCN 2E001 to control, “technology” for the “development” of this “software.”

Certain nucleic acid assemblers and synthesizer equipment were already controlled, and BIS’ new rule now expands the export licensing requirements for nucleic acid assemblers and synthesizers to cover related software and associated technology.

The Department of Commerce published this final rule in conjunction with a U.S. Nuclear Regulatory Commission (NRC) final rule to remove the NRC’s licensing authority for exports of deuterium for non-nuclear end use.

The responsibility for the licensing of exports of deuterium for non-nuclear end use is being transferred to the Department of Commerce’s Bureau of Industry and Security (BIS).  Exports of deuterium for nuclear end use will remain under the NRC’s export licensing jurisdiction.

The NRC’s recent licensing experience has shown that deuterium has been exported almost exclusively for non-nuclear industrial and research end uses including for use as tracers in hydrological, biological, and medical studies.

Q1A: Are integrated circuits (IC) which are acquired, tested, or otherwise used by the United States Government (USG) or by persons or entities in a contractualrelationship with the USG, considered to be “rated as radiation hardened” under Export Control Classification Number (ECCN) 3A001.a.1 or meeting or exceeding the characteristics set forth in ECCN 9A515.d or e?

A1A: No. Unless designed, rated, certified, or otherwise specified or described as meeting by the manufacturer to meet control parameters described in ECCNs 3A001.a.1 or 9A515.d. or .e, integrated circuits, manufactured using existing commercial fabrication technologies, which are acquired, tested, or otherwise used by, for, or under contract with the United States Government are not considered to be “rated as radiation hardened” under ECCNs 3A001.a.1 or 9A515.e or .d. Thus, subsequent use of integrated circuits does not change the classification of the underlying standard process technology. For example, if a 3A991 integrated circuit is “tested” by the USG and meets the radiation-hardened parameters in 3A001.a.1, the classification of the IC does not change from 3A991 and the underlying standard process technology does not change its classification from 3E991.

Q1B: Further, what is the impact to the classification of those standard fabrication process technologies that do not meet the “required” standard (as defined in Part 772 of the Export Administration Regulations), used to manufacture ICs that are acquired, tested, or otherwise used by the United States Government or by persons or entities in a contractual relationship with the USG?

A1B: There is no impact to the classification of those standard fabrication process technologies. Under the EAR, only that portion of the technology that is “required” is controlled under 3E001 as it relates to 3A001.a.1. or 9E001 as it relates to 9A515.d or .e. However, if the foundry were to deviate from its standard fabrication process (e.g. the addition of special process steps that are intended (and needed) to produce an IC that meets or exceeds the parameters in 3A001.a.1 or 9A515.d. or .e), then those additional process steps (along with the IC design data) may be “required” technology and thus controlled under 3E001 or 9E515, respectively.

Q2: In developing Program Protection Plans to prevent the release of controlled technology during the lifecycle of an acquisition, can the United States Government rely on industry technology control plans for programs using onshore foundries for integrated circuit production?

A2: Yes. For Department of Defense acquisition programs relying on onshore foundries for integrated circuit production and which include approved Program Protection Plans, authorized program personnel may rely, as necessary, on existing industry technology control plans to assist in certifying that an export of technical data does not occur during the production of integrated circuits.