China Issues the First Implementing Regulations in Draft from Under it's Export Control Law - Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP
On Thursday 21 April, the Ministry of Commerce of the People’s Republic of China (MOFCOM) issued a draft for public review and comment of its first set of implementing regulations1 under the 2020 Export Control Law of China. These draft regulations contain many significant elements of which all companies operating in China should take note. You will notice throughout this summary there are many references to China’s national security, national interests and foreign policy. These are the overarching themes of China’s Export Control Law (ECL). As such, we anticipate the items subject to control, the country-specific controls, and individual entity controls will all have a heavy political element as do other export control regimes around the world. We will continue to monitor further developments that may impact what items may be considered of China-origin under the ECL as well as broader trade controls such as sanctions. In the meantime, we have summarized below the key elements of the draft export control regulations issued by MOFCOM:
1. No Re-Export Controls
The Export Control Law under which these draft implementing regulations have been issued, provide for extraterritorial effect for investigating violations of the ECL that occur outside of China and imposing penalties or criminal punishment for violations. However, there are no re-export controls provided for under these draft regulations. A re-export is the transfer to a foreign country from another foreign country of technology or products that are subject to the ECL of China. Accordingly, there is no provision for a “de minimus2” test under the draft regulations as was contemplated in earlier drafts of the ECL and which remained possible under the final ECL enacted in late 2020. It appears this may have been dropped due to an inability to properly enforce controls on re-exports.
2. Dual-Use Control List
The list of dual-use goods, technology and services that are subject to the ECL of China has not yet been issued. Legacy export controls in China have utilized the harmonized system code to identify items subject to those legacy controls. These draft regulations make reference to a list that will be formulated by MOFCOM and updated frequently . In addition, these draft regulations provide that the dual-use items on the control list will be assigned control codes. This seems to indicate that HS codes will no longer be used to identify dual-use items. It should also be noted that the draft regulations state that the export control of dual-use items shall adhere to the overall concept of national security. This could mean that the items ultimately included on the control list could vary significantly from the typical dual-use lists in more mature export control jurisdictions.
3. Deemed-Export Controls?
These draft regulations define “export controls” to include the transfer of controlled items from within the territory of China to abroad as well as the provision of controlled items by Chinese citizens and legal persons (companies) to foreign organizations or individuals. There is no qualifier that this provision be made outside of China. We interpret this to be a deemed-export provision. A deemed export under the U.S. EAR is the defined as a release to a foreign national in the United States of “technology” or “source code” “required” for the “development,” “production,” or “use” of a controlled item. The export controls will apply to dual-use goods and technology that These draft regulations from MOFCOM.
4. General Licenses and Shipment-Specific Licenses
The draft regulations provide for the issuance of shipment-specific licenses that apply to a shipment of controlled dual-use items to a particular end user for a particular end use. These licenses will be valid for a one-year period. In addition, the draft regulations provide for a general license whereby an exporter from China can send multiple shipments of controlled dual-use items to multiple end-users under a general license that is valid for a two-year period. The documents that are required when applying for a license include:
• A copy of the contract or agreement for the export of dual-use items;
• Technical descriptions or lab reports of dual-use items as relevant;
• Documents establishing the end-user and end-use;
• Identification and description of the importers and end-users;
• Proof of the identity of the applicant’s legal representative, main business manager, and manager; and
• Other documents as required
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Federal Register Notices:
• Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Certain Vertical Shaft Engines Between 99cc and Up To 225cc, and Parts Thereof, From the People's Republic of China: Initiation of Circumvention Inquiry of the Antidumping and Countervailing Duty Orders-Dual-Piston Engines
• Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Stilbenic Optical Brightening Agents From Taiwan: Preliminary Results of Antidumping Duty Administrative Review; 2020-2021
• White Grape Juice Concentrate From the Republic of Argentina: Initiation of Countervailing Duty Investigation
• Sales at Less Than Fair Value; Determinations, Investigations, etc.: White Grape Juice Concentrate From Argentina: Initiation of Less-Than-Fair-Value Investigation
• Certain Preserved Mushrooms From France, the Netherlands, Poland, and Spain: Initiation of Less-Than-Fair-Value Investigations
• Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Glycine From the People's Republic of China: Final Results of the Expedited Sunset Review of the Antidumping Duty Order
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Area Port of Cleveland Sees Record Number of Drugs & Counterfeits 16,000 Pounds of Narcotics and $252 Million of Counterfeits Seized by CBP - U.S. Customs & Border Protection
CLEVELAND –The Area Port of Cleveland oversees major express consignment operations (ECO) in Indianapolis, Cincinnati, and Louisville. U.S. Customs and Border Protection (CBP) officers that work in these facilities seize illegal shipments nightly that are heading to every community in the U.S. and could harm our economy, our agricultural industry or cause death. CBP officers continue to be the first line of defense in stopping these dangerous shipments.
In these past six months officers have been stopping a record number of shipments before they reach their finals destination. One of the main reasons for these increases is the rapid growth of e-commerce. Consumers can search for and easily purchase millions of products through online vendors, but this easy access gives illicit goods more ways to enter the U.S. economy.
Since October 1, CBP officers in Indianapolis have seen an increase across the board in drug seizures, counterfeit interceptions, and agricultural inspections. Officers at this ECO saw an increase of 117% in total seizures that were made in Indianapolis, inspecting, and seizing 738 shipments that contained popular drugs like marijuana, Ketamine, and prescription drugs.
Officers also intercepted 714 parcels of counterfeit items that if real their Manufacturer’s Retail Price (MSRP) would have been over $41.6 million. Last year at this time officers seized counterfeit items with a MSRP more than $13.1, a 216% increase. CBP officers in Indianapolis also were stopping pests and disease from entering the U.S. by issuing 497 Emergency Action Notifications (EAN). EAN can alert trade entities of non-compliance with Animal and Plant Health Inspection Services regulations. This year EAN issuance is 148% higher than it was this time last year.
Indianapolis was just one ECO. The other two ECO hubs in Cincinnati and Louisville have had similar increases. In Cincinnati, officers have seized 4,059 packages, a 70% increase from this time last year. Of those seizures 506 contained narcotics. The drugs of choice were marijuana, cocaine, and methamphetamine. In all officers seized 5,044 pounds of narcotics. Officers in a partnership with the Food and Drug Administration also seized 1,039 packages containing FDA unapproved items, a 79% increase from last year’s total.
Cincinnati CBP intercepted 771 parcels containing Intellectual Property Rights violations with a MSRP, if they were genuine, of $60.8 million. CBP Agriculture Specialists (CBPAS) in Cincinnati inspected 13,687 shipments resulting in 5,072 EAN, a 41% increase from this timeframe last year. CBPAS notable seizures so far are 132 pounds of smuggled pork, Bird’s Nest hidden in chip canisters and a parcel containing a dried duck carcass.
Louisville CBP takes home the title of most narcotic seizures and total pounds. CBP officers in Louisville have made an astonishing 1,472 seizures of narcotics at their facility. The most popular drugs seized were marijuana, methamphetamine, and steroids. In all, officers seized a whopping 10,436 pounds of narcotics. Of that, 235 pounds was fentanyl, enough to kill 50 million people. That is enough to kill the entire population of New York (8.8 million) six times. Louisville also made a splash seizing 1,311 IPR violations that would have been worth over $149.5 million (more than Indianapolis and Cincinnati combined) and issuing 5,824 EANs.
“These numbers represent the amount of illicit material that comes through these ECO hubs,” LaFonda D. Sutton-Burke, Director, Field Operations-Chicago Field Office, pointed out. “These environments that our officers work in and every day they are stopping shipments that are dangerous, harmful to our citizens.”
An ECO is a facility operating in any mode or intermodally moving cargo by special express commercial service under closely integrated administrative control. Under Title 19 of the Code of Federal Regulations, CBP officers are stationed at ECOs and other smaller hubs across the nation and work in collaboration with these carriers to stop illegal shipments. The partnership with the ECOs is critical in CBP accomplishing its mission.
“Our officers are highly skilled at identifying packages that represent a higher level of risk through visual examination, based on their knowledge and awareness of ever-changing trends employed by the individuals and organizations seeking to illegally import contraband,” said Diann Rodriguez, Area Port Director-Cleveland.
CBP’s border security mission is led at 328 ports of entry by CBP officers from the Office of Field Operations. Please visit CBP Ports of Entry to learn more about how CBP’s Office of Field Operations secures our nation’s borders. Learn more about CBP at www.CBP.gov.
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In Two Weeks Chicago CBP Seizes 743 Counterfeit IDs - U.S. Customs & Border Protection
CHICAGO –- U.S. Customs and Border Protection (CBP) officers discovered counterfeit driver’s licenses inside inbound packages moving through the International Mail Facility at O’Hare International Airport. During a routine examination of packages, officers focused enforcement efforts on counterfeit documents produced outside the United States that were potentially going to be used to fake an identity of young adults that have not yet reached the age of 21.
Counterfeit documents are fake documents that have the appearance of legal documentation but are not issued by a legitimate organization or government agency and are not recognized in the United States as official travel or identification instruments. Counterfeit documents, such as these driver’s licenses, can be used as a means for college students who have not yet turned the age of 21, to enter a bar or business that sells and serves alcohol. Unfortunately, these students put themselves at great risk when purchasing these fake documents.
“Counterfeit driver’s licenses are used by young adults who have not yet reached the legal drinking age,” said Shane Campbell, Area Port Director-Chicago. “Not to mention the criminal consequences, CBP's interception of these IDs significantly reduces the chances for alcohol to be purchased by underage individuals and hopefully reduces the consequences of their actions, including deadly accidents.”
From April 1 to April 15, Chicago CBP officers seized 122 shipments containing 743 counterfeit United States driver’s licenses from all over the U.S. to include: Ohio, Florida, New Jersey, Pennsylvania, California, Mississippi, Texas, Connecticut, Utah, Minnesota, South Dakota, Washington, and Illinois. All the driver’s licenses were hidden within handbags, jewelry boxes, and various toys. Most of the licenses originated in China enroute to residences throughout the U.S. Only two companies have authorization by the U.S. Department of State to print international driver’s licenses in the United States: The American Automobile Association (AAA) or American Automobile Touring Alliance (AATA). The IDs are considered counterfeit based upon the lack of fine line detail, and exhibit features that are not consistent with the document type.
While CBP will often see these dark web transactions, according to LaFonda D. Sutton-Burke, Director, Field Operations-Chicago Field Office, the reasoning for buying fake IDs has evolved from teenagers trying to get into bars to more nefarious activity. “Some of the major concerns as they relate to fraudulent identity documents include identity theft, worksite enforcement, critical infrastructure protection, fraud linked to immigration-related crimes such as human smuggling and human trafficking, and these documents can be used by those individuals associated with terrorism to minimize their scrutiny undergoing travel screening measures.”
CBP officers coordinate identification findings with CBP’s Fraudulent Document Analysis Unit, Homeland Security Investigations, and other federal partners to combat any illicit activity. Visit CBP’s YouTube channel to learn more about how CBP’s Office of Field Operations secures our nation’s borders.
CBP routinely conducts inspection operations on arriving and departing international flights and intercepts narcotics, weapons, currency, prohibited agriculture products, counterfeit goods, and other illicit items at our nation’s 328 international ports of entry.
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Justice Department and FTC File Complaint to Stop Deceptive Marketing Practices Involving the Sale of Funeral Goods and Services - Federal Trade Commission / Department of Justice
The Department of Justice, together with the Federal Trade Commission (FTC), today announced a civil enforcement action against defendants Legacy Cremation Services LLC, Funeral & Cremation Group of North America LLC and Anthony Joseph Damiano for alleged violations of the Federal Trade Commission Act (FTC Act) and the FTC’s Trade Regulation Rule Concerning Funeral Industry Practices (Funeral Rule).
According to a complaint filed in the U.S. District Court for the Southern District of Florida, the defendants, who arrange third-party cremation services, made deceptive statements to consumers about pricing for funeral and cremation services, misrepresented the location where services were to be provided and wrongfully withheld loved one’s remains. The FTC Act prohibits unfair and deceptive conduct and false advertising. The Funeral Rule prohibits providing consumers with inaccurate price information and requires certain disclosures to consumers regarding pricing for funeral-related goods.
The complaint seeks monetary relief, civil penalties and injunctive relief to stop defendants from continuing to violate the FTC Act and the Funeral Rule.
“Consumers are particularly vulnerable when a loved one passes,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The Department of Justice is committed to stopping companies and individuals from profiting off of consumers’ grief by engaging in unlawful and deceptive marketing practices when offering funeral arrangements. The department will continue to partner with the FTC to prevent unlawful and deceptive practices that take advantage of vulnerable consumers.”
“The financial and emotional exploitation of people when they are at their most vulnerable will not be tolerated in this district,” said U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida. “Together with our federal partners, we will continue to protect South Florida residents through vigorous enforcement of consumer protection laws.”
“Preying on consumers when they are dealing with the loss of a loved one is outrageous, and it’s illegal,” said Director Samuel Levine of the FTC’s Bureau of Consumer Protection. “The FTC is committed to enforcing the Funeral Rule to protect both grieving consumers and honest funeral homes.”
This matter is being handled by Trial Attorneys Cody Matthew Herche and Wandaly Fernández García and Assistant Director Lisa K. Hsiao of the Civil Division’s Consumer Protection Branch, and Assistant U.S. Attorney James A. Weinkle for the Southern District of Florida. Rebecca Plett and Thomas Harris represent the FTC.