Global Trade Brief – August 2022

EU: Waiver of customs duties and VAT on import of “life-saving goods” to Ukraine

 

OFAC took action against companies used by Iran’s Persian Gulf Petrochemical Industry Commercial Co. (PGPICC), to facilitate the sale of tens of millions of dollars worth of Iranian petroleum and petrochemical products from Iran to East Asia. PGPICC is a subsidiary of Iran’s petrochemical conglomerate Persian Gulf Petrochemical Industry Co. (PGPIC), which accounts for half of all of Iran’s total petrochemical exports.

 

The action is being taken pursuant to Executive Order (E.O.) 13846 and follows OFAC’s July 6, 2022 designation of an Iranian oil and petrochemical network selling Iranian petroleum and petrochemicals to purchasers in East Asia, and the June 16, 2022 designation of an international sanctions evasion network supporting Iranian petrochemical sales.

 

IRANIAN PETROCHEMICAL AND PETROLEUM SALES TO EAST ASIA

 

PGPICC has used UAE-based Blue Cactus Heavy Equipment and Machinery Spare Parts Trading L.L.C. to facilitate the sale of millions of dollars worth of Iranian-origin petroleum products to Triliance Petrochemical Co. Ltd. (Triliance) for onward shipment to East Asia.

 

PGPICC, in cooperation with Treasury-sanctioned Iranian petrochemical broker Petrochemical Commercial Company (PCC), has similarly used Farwell Canyon HK Limited (Farwell Canyon) and Shekufei International Trading Co., Limited (Shekufei) to facilitate the sale of tens of millions of dollars worth of Iranian-origin petrochemical and petroleum products for onward shipment to buyers in East Asia.
PGPICC has used Farwell Canyon and Shekufei’s bank accounts, as well as those of Hong Kong- and Malaysia-based PZNFR Trading Limited, to collect millions of dollars worth of proceeds from these sales.

 

SANCTIONS IMPLICATIONS

 

All property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. OFAC’s regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in the property of blocked or designated persons.

 

In addition, persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to enforcement action. Furthermore, unless an exception applies, any foreign financial institution that knowingly facilitates a significant transaction for any of the individuals or entities designated today could be subject to U.S. sanctions.

 

Source: https://home.treasury.gov/news/press-releases/jy0901

 

Reminder on Filing Entries of Steel and Aluminum Imports Subject to General Approved Exclusions

 

For imports from countries subject to Section 232 duties on steel and aluminum imports, when filing an entry of a steel or aluminum import under a Harmonized Tariff Schedule (HTS) classification subject to Section 232 General Approved Exclusions (GAEs), report the applicable Chapter 72, 73, or 76 HTS classification. Do not file the Section 232 Chapter 99 HTS classification for the Section 232 duties.

 

Source: https://content.govdelivery.com/accounts/USDHSCBP/bulletins/32630b7?reqfrom=share

 

Commerce Department Identifies First Foreign-Produced Commercial Aircraft Exported to Russia in Apparent Violation Of U.S. Export Controls

 

BIS is updating its list of aircraft that have flown into Russia or Belarus in apparent violation of EAR by adding the first 25 foreign-produced aircraft that BIS has identified as apparently violating the EAR’s de minimis threshold for U.S. components. There are now a total of 183 aircraft identified on the list for apparent violations of U.S. export controls.

 

Based on publicly available information, BIS has identified aircraft subject to the EAR flying from third countries to Russia since March 2 or Belarus since April 8 all of which are owned or controlled by, or under charter or lease to, Belarus, Russia, or Russian or Belarusian nationals. In addition to U.S.-origin aircraft, foreign-produced aircraft that exceed a de minimis amount greater than 25 percent – of controlled U.S.-origin content by value are also subject to the EAR. As a result, BIS identified 25 foreign-produced aircraft that are subject to the EAR due to meeting this de minimis threshold that has apparently violated BIS’s stringent export controls on Russia.

 

Accordingly, any subsequent actions taken with regard to any of the listed aircraft, including, but not limited to, refueling, maintenance, repair, or the provision of spare parts or services, are subject to the prohibitions outlined in General Prohibition Ten of the EAR (Section 736.2(b)(10)), which provides: (10) General Prohibition Ten – Proceeding with transactions with the knowledge that a violation has occurred or is about to occur (Knowledge Violation to Occur). You may not sell, transfer, export, re-export, finance, order, buy, remove, conceal, store, use, loan, dispose of, transport, forward, or otherwise service, in whole or in part, any item subject to the EAR and exported or to be exported with the knowledge that a violation of the Export Administration Regulations, the Export Administration Act or any order, license, License Exception, or other authorization issued thereunder has occurred, is about to occur, or is
intended to occur in connection with the item. Nor may you rely upon any license or License Exception after notice to you of the suspension or revocation of that license or
exception.

 

There are no License Exceptions to this General Prohibition Ten in part 740 of the EAR. BIS has led the Department of Commerce’s efforts in response to Russia’s invasion of Ukraine by taking a number of powerful regulatory and enforcement actions, including issuing public notice of potential violations of the EAR in the aerospace sector and issuing Temporary Denial Orders (TDOs) on major Russian airlines Aeroflot, Aviastar, Azur Air, Nordwind Airlines, Pobeda, Rossiya, S7 Airlines, and Utair, as well as Belarus’s flag carrier Belavia. These TDOs terminate the rights of these airlines to participate in transactions subject to the EAR, including exports from the United States and reexports from third countries.

 

On February 24, 2022, BIS imposed expansive controls on aviation-related items to Russia, including a license requirement for the export, reexport or transfer (in-country) to Russia of any aircraft or aircraft parts on the Commerce Control List. Belarus was made subject to these restrictions on March 2, 2022. On March 2, 2022, BIS tightened its restrictions further by excluding any aircraft registered in, owned, controlled by, or under charter or lease by Russia or a national of Russia from being eligible for license exception Aircraft, Vessels, and Spacecraft (AVS). BIS similarly removed AVS’s eligibility in connection with Belarus and/or Belarus nationals on April 8, 2022. Accordingly, any aircraft manufactured in the United States, or that is manufactured in a foreign country and includes more than 25 percent by value of U.S.-origin controlled content, is subject to a license requirement if such aircraft is destined for Belarus or Russia.

 

Source: https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3108-2022-08-02-bis-press-release-gp10-list-foreign-produced-de-minimis-additions/file

 

BIS Issues Charging Letter Against Chinese Company Far East Cable for Violating U.S. Export Controls Related to Shipments to Iran

 

Bureau of Industry and Security (BIS) Office of Export Enforcement (OEE) Director John Sonderman issued an administrative Charging Letter against Far East Cable on July 29, 2022, alleging violations of the Export Administration Regulations (EAR) for causing, aiding, and/or abetting violations of the EAR. From September 2014 to January 2016, Far East Cable served as a cutout between the Zhongxing Telecommunications Equipment Corporation (“ZTE”), which was under investigation by the U.S. Government for EAR violations at the time, and Iranian telecommunications companies. The Charging Letter is publicly available here. The Charging Letter alleges that Far East Cable signed contracts with ZTE and Iranian telecommunications companies to deliver U.S.-origin equipment to Iran as part of an effort to conceal and obfuscate ZTE’s Iranian business from U.S. investigators. BIS is charging Far East Cable with 18 violations of the EAR.

 

Source: https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3111-08-08-2022-bis-press-release-far-east-cable-charging-letter/file

 

Implementation of Certain 2021 Wassenaar Arrangement Decisions on Four Section 1758 Technologies

 

Commerce is revising the CCL, as well as corresponding parts of the EAR, to implement controls on four technologies. These changes reflect certain controls decided by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (WA) at the December 2021 WA Plenary meeting. These four technologies meet the criteria of Section 1758 of the Export Control Reform Act (ECRA) pertaining to emerging and foundational technologies. These technologies are two substrates of ultra-wide bandgap semiconductors (Gallium Oxide (Ga2O3) and diamond), Electronic Computer-Aided Design (ECAD) software specially designed for the development of integrated circuits with any Gate-AllAround Field-Effect Transistor (GAAFET) structure, and pressure gain combustion (PGC) technology for the production and development of gas turbine engine components or systems.

 

This interim final rule revises the CCL as well as corresponding parts of the EAR to implement controls on these four technologies by revising five ECCNs and adding one new ECCN, as follows:

 

• Revises ECCNs: 3C001.d–.f, 3C005.a and .b, 3C006, and 3E003 for two substrates (Ga2O3 and diamond) of ultrawide bandgap semiconductors; and 9E003.a.2.e for PGC technology.
• New ECCN: 3D006 for Software for ECAD for the development of Integrated Circuits (ICs) with GAAFET.

Effective dates: This rule is effective August 15, 2022, except for instruction 5, concerning the addition of Export Control Classification Number (ECCN) 3D006.

 

Source: https://www.govinfo.gov/content/pkg/FR-2022-08-15/pdf/2022-17125.pdf

 

The Department of Commerce is amending the Export Administration Regulations (EAR) by adding seven entities under seven entries to the Entity List. These entities have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the destination of the People’s Republic of China (China). This final rule also corrects typographical errors in two existing entries on the Entity List.

The ERC determined to add China Aerospace Science and Technology Corporation (CASC) 9th Academy 771 Research Institute, China Aerospace Science and Technology Corporation (CASC) 9th Academy 772 Research Institute, China Academy of Space Technology 502 Research Institute, China Academy of Space Technology 513 Research Institute, China Electronics Technology Group Corporation 43 Research Institute, China Electronics Technology Group Corporation 58 Research Institute, and Zhuhai Orbita Control Systems to the Entity List for acquiring and attempting to acquire U.S.-origin items in support of China’s military modernization efforts. This activity is contrary to national security and foreign policy interests under § 744.11(b) of the EAR. For these seven entities added to the Entity List, BIS imposes a license requirement for all items subject to the EAR. For these seven entities, BIS will review license applications under a presumption of denial.

 

Source: https://public-inspection.federalregister.gov/2022-18268.pdf

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