A New Look at US Sanctions and Practical Guidelines for Compliance (Encore presentation on the West Coast) – September 29, 2022

Join us in person at the Embassy Suites Santa Clara – Silicon Valley on September 29 to hear from this select panel of high-level government and industry policy leaders who will explore emerging sanctions and embargoes compliance trends in 2022 and beyond to include:

  • BIS/OFAC Panel on Advancing U.S. Foreign Policy and National Security through Economic Sanctions and Export Controls. BIS and OFAC have each played key roles implementing U.S. policy on China and Russia. This panel discussion will explore how each agency has employed its authority, lessons learned, and the challenges ahead.
  • Trade Compliance and Sanctions Training in Rapidly Changing Environments
  • Update on Russian Program – Export Controls and Sanctions

In-Person Event

2:30 – 5 p.m.

September 29, 2022
Embassy Suites
Santa Clara – Silicon Valley
2885 Lakeside Drive
Santa Clara, CA 95054

Presentation from Featured Speakers*

Matt Borman | Deputy Assistant Secretary for Export Enforcement – BIS | U.S. Department of Commerce

Lisa Palluconi | Associate Director, Sanctions Policy & Implementation – OFAC

*The program on Sept. 29 will include recorded remarks from Matt Borman and Lisa Palluconi made during the Sept. 26 program.

Live Event Panelists
George Grammas | Partner – Squire Patton Boggs
Jeremy Paner | Senior Associate – Squire Patton Boggs
Lauren Brown | Associate – Squire Patton Boggs
Brad Kabanuk | President – Content Enablers

POST-EVENT NETWORKING RECEPTION
A networking reception with cocktails and hors d’oeuvres will be held following the event.

Complimentary to the trade community. To register for this in-person event please sign up here: https://www.eventbrite.com/e/a-new-look-at-us-sanctions-and-practical-guidelines-for-compliance-tickets-400277931067

Space is limited, so register soon to save your seat!

A New Look at US Sanctions and Practical Guidelines for Compliance – September 26, 2022

Join us in person at the Schar School of Policy and Government at the George Mason University Arlington Campus on September 26 to hear from this select panel of high-level government and industry policy leaders who will explore emerging sanctions and embargoes compliance trends in 2022 and beyond to include:

  • BIS/OFAC Panel on Advancing U.S. Foreign Policy and National Security Through Economic Sanctions and Export Controls. BIS and OFAC have each played key roles implementing U.S. policy on China and Russia. This panel discussion will explore how each agency has employed its authority, lessons learned, and the challenges ahead.
  • Trade Compliance and Sanctions Training in Rapidly Changing Environments
  • Update on Russian Program – Export Controls and Sanctions

September 26, 2022
2:30 – 5 p.m.
Schar School of Policy and Government
George Mason University Arlington Campus
Van Metre Hall, 5th Floor, 3351 Fairfax Drive
Arlington, Virginia 22201

FEATURED SPEAKERS
Matt Borman | Deputy Assistant Secretary for Export Enforcement
U.S. Department of Commerce – Bureau of Industry & Security

Lisa Palluconi | Associate Director, Sanctions Policy & Implementation
Office of Foreign Assets Control

EVENT PANELISTS
George Grammas | Partner – Squire Patton Boggs
Jeremy Paner | Senior Associate – Squire Patton Boggs
Lauren Brown | Associate – Squire Patton Boggs
Brad Kabanuk | President – Content Enablers

POST-EVENT NETWORKING RECEPTION
A networking reception with cocktails and hors d’oeuvres will be held following the event.

To register for this in-person event please sign up here: https://www.eventbrite.com/e/a-new-look-at-us-sanctions-and-practical-guidelines-for-compliance-tickets-400258282297

Space is limited, so register soon to save your seat!

US Export Controls Workshops in the UK – June 27-29, 2022

Draped United States flag next to British flagFor the past 14 years, we have jointly hosted a successful annual workshop series on US export controls regulations with EGADD. In celebration of its 15th anniversary, this June’s workshop will also be organized in close partnership with BAE Systems, a major, multinational company that has considerable practical experience in dealing with the challenges arising from ITAR and EAR compliance.

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Cybersecurity Compliance on U.S. Government Contracts and Subcontracts

Digital Gavel

The U.S. Department of Justice announced late last year that it would utilize the False Claims Act, the U.S. government’s primary civil tool to redress false claims for federal funds and property, to bring actions against U.S. government contractors and subcontractors who do not meet the cybersecurity requirements of a particular contract or grant.  DOJ certainly was not bluffing.  In the past few months, DOJ has announced the settlement of two False Claims Act cases related to cybersecurity deficiencies or misrepresentations, and more are expected.  As such, it is now imperative that companies executing U.S. government contracts and subcontracts proactively assess their compliance with federal cybersecurity requirements.

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BIS Proposes Designating Automated Peptide Synthesizers as a Section 1758 Technology 

On September 13, 2022, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) published in the Federal Register (87 FR 55930) an Advance Notice of Proposed Rulemaking (ANPRM) and request for comments regarding certain instruments for the automated synthesis of peptides (automated peptide synthesizers). This proposed rule seeks to identify such automated peptide synthesizers as emerging and foundational technologies pursuant to section 1758 of the Export Control Reform Act of 2018 (ECRA) (“Section 1758 Technologies”).  

Section 1758 Technologies

Under the proposed rule, BIS identified automated peptide synthesizers for evaluation as Section 1758 Technologies. Section 1758 of ECRA requires BIS to establish appropriate export, reexport, or transfer (in-country) controls on “emerging and foundational technologies” essential to national security.

Automated Peptide Synthesizers

BIS seeks to designate automated peptide synthesizers as a Section 1758 Technology because they pose an increased risk to the proliferation of biological weapons. Peptides and polypeptides are polymeric chains of amino acids, linked together by peptide bonds.  Proteins are three-dimensional (3D) macromolecules composed of one or more folded large chains of polypeptides. Advances in peptide synthesis technology and instruments enable more efficient production of peptides and proteins with a length of more than 100 amino acids. Most protein toxins that are controlled under Export Control Classification Number (ECCN) 1C351 on the Commerce Control List (CCL) are over 100 amino acids in length and have an average length of 300 amino acids (with the exception of conotoxins, which range between 10-100 amino acids).  The technology and instrumentation for certain peptide synthesis could be used to produce controlled toxins for biological weapons purposes.

Public Comment Period

  1. BIS is seeking comments from the public on this proposed rule. Specifically, BIS is interested in comments on the following questions: What is the current state of development of automated peptide synthesizers in the United States, including those having primarily academic or commercial applications, and how does this compare with that of other countries? If possible, identify supporting, publicly available studies.
  2. What is the current availability and predominate application(s) of automated peptide synthesizers in the United States and how does this compare with that of other countries?
  3. To what extent are custom peptide synthesis services available in the United States and other countries, and would the availability of such services (particularly for academic or commercial applications) likely impact domestic or foreign demand for automated peptide synthesizers?
  4. To what extent are current or near-term developments in peptide synthesis technology expected to address the challenges of peptide length, sequence fidelity, and protein folding (e.g., are efforts currently underway to integrate protein folding into the automation process)?
  5. To what extent would the establishment of Section 1758 technology export controls on automated peptide synthesizer instruments, and related “software” and “technology,” impact U.S. technological leadership in this field (e.g., within the academic or commercial spheres) and would this impact be distinctly different if controls were placed primarily on “software” as opposed to hardware, or vice versa?
  6. To what extent would the imposition of Section 1758 technology export controls on automated peptide synthesizer instruments, and related “software” and “technology,” likely be effective in terms of limiting the proliferation of these items abroad (including the potential use of such items to produce controlled toxins for biological weapons purposes)?
  7. To what extent has the increased availability of lower cost coupling reagents, together with recent advances in automated peptide synthesizers and related technology, overcome economic or technological factors that previously might have limited the availability and use of this technology, abroad?
  8. To what extent should Section 1758 technology export controls on peptide synthesizer technology be implemented multilaterally (rather than unilaterally), in the interest of increasing their effectiveness and minimizing their impact on U.S. industry?

Parties wishing to submit a comment may do so either through the Federal eRulemaking Portal at http://www.regulations.gov, or by submitting an email to PublicComments@bis.doc.gov. The docket number for this proposed rule is BIS-2022-0023 or RIN 0694-AI84.  Comments are due no later than October 28, 2022. 

Recent Regulatory Developments: Expanding Control Exemption for Standard-Setting to All on Entity List—Analysis 

Under an interim rule published in the Federal Register on Friday, September 9, 2022, the Commerce Department’s Bureau of Industry & Security (BIS) is loosening restrictions on the sharing of specific technology with blacklisted firms, to maintain the United States’ lead in setting international standards. Under that rule, no license will be required to export certain items subject to the Export Administrative Regulations (EAR), including certain encryption software and technology, to entities listed on BIS’s Entity List (EL), for standard-setting purposes. 

The rule arose from the need to let US companies participate in standard-setting discussions with certain companies on the EL on information-security standards. During the Trump Administration, Commerce officials identified certain Chinese technology companies and their non-American affiliates as national security threats and added them to the EL, which curtails their access to critical US and non-US suppliers with items subject to the EAR. The policy led US and non-US companies to limit their participation in standards-related activities at a time when Chinese companies appear to be ramping-up theirs. Throughout congressional consideration of the recently-enacted China competition bill, Members of Congress raised major concerns that China’s government and its largest companies have been taking a larger role in such organizations, which determine how technology is designed and applied globally, theoretically giving them a competitive edge in the international marketplace. 

Coupled with the recent agreement between US and Chinese securities regulators on a framework that would ensure that Chinese companies listed in US exchanges comply with US audit-reporting requirements, this development could be viewed as favorable for international businesses invested in the responsible management of the bilateral relationship. Indeed, in light of upcoming meeting between President Biden and President Xi expected later this year, the timing of the rule’s roll-out might not have been a coincidence despite that industry has been expecting this rule for a while.

Finally, the interim rule may support the narrow proposition that, in a case (or in cases) where prohibiting exports to a Chinese technology company is wholly unrelated to the underlying reason why Commerce originally decided to put a given company on the EL, Commerce may be open to granting limited and targeted relief. Such cases may be strongest where given relief would in fact benefit US suppliers and their ability to compete globally, or further broader US geopolitical objectives—as in this case, maintaining US leadership in standards-setting bodies by ensuring US entities are not hamstrung by EL restrictions. 

However, given the overwhelming concern that Members of Congress expressed in connection with the recently enacted China bill about China’s manipulation of international standard-setting organizations, certain lawmakers could rail against the Administration and this rule, holding it out as benefiting blacklisted Chinese technology companies and try to push responsive legislation, including provisions that each chamber passed in their versions of the China bill that were not adopted in the final. Nonetheless, considering the long list of competing year-ending legislative priorities for both the House and Senate, their ability to do so may be limited.

BIS Issues Rule on Export Controls for Semiconductor and Gas Turbine Technologies


On August 12, 2022, the US Department of Commerce’s Bureau of Industry and Security issued an interim final rule establishing new export controls on four technologies that support the production of advanced semiconductors and gas turbines. The agency has determined Gallium Oxide and diamond, Electronic Computer-Aided Design (ECAD) software specially designed for the development of integrated circuits with Gate-All-Around Field-Effect Transistor (GAAFET) structure, and Pressure Gain Combustion (PGC) technology meet the criteria for emerging and foundational technologies under Section 1758 of the Export Control Reform Act (ECRA) and are essential to US national security. The rule implements the controls agreed upon by Participating States at the December 2021 Wassenaar Arrangement Plenary. The US implementation of the rule includes controls on a wider range of technologies than agreed upon in the Wassenaar Arrangement, including additional equipment, software, and technology used to produce semiconductors.

Section 1758 Technologies

As part of a May 23, 2022 rule, BIS confirmed the agency would no longer characterize new controls as either “emerging” or “foundational” technologies under Section 1758 of ECRA. Instead, the agency now refers to such technologies as “Section 1758 technologies.” BIS explained this change in approach reflected the difficulties in drawing useful distinctions between emerging and foundational technologies for the purposes of fulfilling BIS’s statutory obligations under Section 1758 of ECRA. The agency contends the more general nomenclature allows for a focus on issuing controls, resulting in a more streamlines rulemaking process.

Gallium Oxide and Diamond

Gallium Oxide (Ga2 O3) and diamond are two substrates of ultra-wide bandgap semiconductors. The materials that enable semiconductors to work under more severe conditions, including higher voltages and higher temperatures. According to BIS, because of this expanded capability, the devices that use these materials have an increased potential for military use. Based on this military potential, BIS added Gallium Oxide and diamond as Section 1758 technologies to the Commerce Control List under the Export Control Classification Numbers (ECCNs) 3C001.d-.f, 3C005.a and .b, and 3C006. Additionally, BIS revised ECCN 3E003, adding paragraph 3E003.h to control “technology” for the “development” or “production” of substrates of Gallium Oxide for electronic components. The CCL already listed “technology” for the “development” or “production” of substrates of diamond under ECCN 3E003.d.

ECAD

ECAD is a category of software tools used for designing, analyzing, optimizing, and validating the performance of integrated circuits or printed circuit boards. ECAD software can be used in various applications by the military and aerospace defense industries to design complex integrated circuits. A prevalent use of ECAD software is to connect the stages involved in progressing smoothly from the Register Transfer Level (RTL) design stage to the logic design stage, then finally to the physical design stage, which results in Geometrical Database Standard II (GDSII) of integrated circuits. GAAFET technology enables faster and more radiation-tolerant integrated circuits and are critical to scaling to 3 nanometer and below technology nodes. GAAFET technologies have commercial as well as military applications, including defense and communication satellites.

To implement the control, BIS added a new ECCN 3D006 to the CCL to control ECAD “software” “specially designed” for the “development” of integrated circuits having any GAAFET structure and meeting the parameters set forth in ECCN 3D006. Such software must be either “specially designed” for implementing RTL to GDSII or an equivalent standard or “specially designed” for optimization of power or timing rules. The new ECCN 3D006 also includes a new technical note that defines ECAD, RTL, and GDSII.

BIS is seeking public comment to identify “what specific ECAD features are particularly suited to design GAAFET circuits”. Additionally, BIS’s Technical Advisory Committees has recommended industry has the chance to submit public comments on the implementation of ECCN 3D006 control. As such, there is a 60-day delayed effective date for the addition of 3D006 to the CCL and a 30-day comment period with respect to the implementation.

The comment period is open through September 14, 2022.

PGC

PGC technology can be used in both terrestrial and aerospace applications, including rockets and hypersonic systems. The technology has the potential to increase gas turbine engine efficiency by more than 10 percent. Although BIS has not identified any engine currently using PGC, there is substantial research in the area and the increased fuel efficiency and compact engine could provide military advantages. PGC-based propulsion systems for rockets, space launch vehicles, missiles, and military gas turbine engines, and technology directly related to such items, are already defense articles described on the U.S. Munitions List (USML). The BIS controls the development and production technology for combustors not described on the USML.

The rule revises 9E003.a.2.e to cover PGC technology. Specifically, it adds paragraph 9E003.a.2.e to control development and production technology for combustors utilizing “pressure gain combustion” not described on the USML and adds a technical note to define “pressure gain combustion”.

This rule is effective August 15, 2022, with the exception of ECCN 3D006, which is effective October 14, 2022.

BIS Proposes New US Export Controls on Marine Toxins

clean-export-and-import

On May 23, 2022, the US Commerce Department’s Bureau of Industry and Security (BIS) published in the Federal Register a proposed rule and request for comments. This proposed rule seeks to amend the Export Administration Regulations (EAR) (15 CFR parts 730-774) by adding four dual-use biological toxins to Export Control Classification Number (ECCN) 1C351 on the Commerce Control List (CCL). The proposed rule also would identify the synthesis and collection of these toxins for evaluation as “emerging and foundational technologies” according to the criteria in Section 1758 of the Export Control Reform Act of 2018 (ECRA).

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Now and Next Podcast Series: Russia/Ukraine Conflict

SanctionsIn our Now & Next podcast series, we spotlight the “Now” (the ongoing global responses to the conflict and crisis in Ukraine) and the “Next” (the immediate- and long-term rippling effects of those responses), as well as what businesses should do now and next to navigate the situation and mitigate their risk exposures.

Matthew Kirk, the host of Now & Next, focuses on the following topics in the first few episodes of the series: Continue Reading

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