On May 24, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued a final rule amending the Export Administration Regulations (“EAR”) to (i) remove Venezuela from Country Group B, which affords favorable treatment for certain exports of national security-controlled items, and (ii) add Venezuela to Country Group D:1, which includes countries of national security concern, and to Country Groups D:2, D:3, and D:4, which include countries of nuclear, chemical and biological weapons, and missile technology concern, respectively. BIS also made other conforming changes to the EAR, including adding (i) nonproliferation column 2 (NP 2) and (ii) chemical and biological weapons column 3 (CB 3) reasons for control for Venezuela. Venezuela had previously been part of Country Group D:5 as a US arms embargoed country, meaning that exports and reexports to Venezuela for items classified under 9×515 and “600 series” ECCNs were already subject to a policy of denial, and Venezuela has been included in the military end-use and end-user control in Section 744.21 of the EAR. BIS noted that the final rule better protects US national security and better aligns the Country Group designations for Venezuela with other EAR national security-related provisions that already apply to Venezuela.
Effective May 20, 2019, the US Commerce Department’s Bureau of Industry and Security (“BIS”) issued a final rule creating a 90-day Temporary General License (“TGL”) authorizing certain transactions involving the export, reexport, and transfer of items subject to the Export Administration Regulations (“EAR”) to Chinese-headquartered Huawei Technologies Co. Ltd. (“Huawei”) and its sixty-eight non-US affiliates, which were added to the BIS Entity List effective May 16, 2019 (the “Entity List designation”). The TGL will be effective through August 19, 2019. Please see our prior blog post here for more information on the Entity List designation.
The US Government has taken coordinated actions this week that target Huawei Technologies Co. Ltd (“Huawei”), effectively cutting it off from sourcing US products and technology and likely barring its products from being used in US communications infrastructure and networks. The US export/reexport restrictions targeting Huawei took effect immediately on May 16, 2019. The expected prohibition on the use of Huawei products in US communications infrastructure is likely to take several months to implement.
Alexandre Lamy published an article, “Supply Chain Risks Related to US Sanctions and Export Control Issues,” in the February 2019 issue of Baker McKenzie’s “Aerospace & Defense Compliance Bulletin.” The text of that article is provided below.
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Supply Chain Risks Related to US Sanctions and Export Control Issues
When companies and compliance departments think about US sanctions and export control risks, they often focus on sales to customers and exports/reexports from one country to another. In that context, the compliance focus is typically on confirming that a customer and other parties involved in a sale and shipment are not restricted parties and that the transfer of a product is authorized under applicable export-control regulations. This is only half the story. Companies can have similar risks in their supply chain, which can be disruptive to a company’s operations beyond one transaction or customer relationship if not property managed.