In the Netherlands, Dutch Minister of Foreign Affairs Knapen debated with the parliamentary committee for foreign affairs about the Dutch arms trade policy and about the ministerial meeting of the EU’s Foreign Affairs Council. At a European level, The EU’s trade ministers discussed how to maintain and strengthen the current positive momentum in EU-US bilateral trade relations. Moreover, the EU has agreed to impose a fifth round of sanctions on Belarus. In the US, the Commerce Department’s Bureau of Industry and Security (“BIS”) added four foreign companies, located in Israel, Russia, and Singapore, to the Entity List for engaging in activities that were contrary to the national security or foreign policy interests of the US. Also in the US, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) stated that Mashreqbank PSC had violated the now repealed Sudanese Sanctions Regulations (‘’SSR’’). This, and more, in our newsletter.
1. The Netherlands
- Netherlands (Revision of the Strategic Services Act) – On 27 October 2021, Dutch Minister of Foreign Affairs (“MFA”) Knapen sent a letter to parliament about the revision of the Dutch Strategic Services Act (Wet strategische diensten). In his letter, the minister elaborated on the implications of the recast of the EU Dual-Use Regulation that entered into force on 9 September 2021. According to the minister, this new regulation provides that only cybersurveillance products intended, in whole or in part, for use in connection with internal repression or the commission of human rights violations and international humanitarian law can be subject to cyber surveillance and that the most significant implication of this regulation is that EU Member States may now introduce ad hoc license requirements for cybersurveillance products. As touched upon in our most recent newsletter, the Ministry considers that the assessment of whether to impose a licence requirement for the export of cybersurveillance products that are not on the control list will be made on a case-by-case basis and is currently identifying cybersurveillance items that will require an ad hoc export authorisation. In this regard, the Minister considers it a key challenge to draft new guidelines intended to assist exporters in complying with the new cyber-surveillance regulatory framework. Therefore, the Ministry is currently cooperating closely with other EU Member States and the European Commission to produce the guidelines for exporters. A first version of the guidelines is expected to be published in the first quarter of 2022.
- Netherlands (Parliamentary debate on arms trade policy) – On 3 November 2021, the parliamentary committee for foreign affairs debated about Dutch arms trade policy with minister Knapen. During the debate, Member of Parliament Klink called on the minister to update handbooks for industry as the guidance is allegedly outdated. Klink furthermore warned that the Dutch strategic goods industry is suffering from a strict and unpredictable interpretation of the European Common Position on Arms Exports. The Minister answered that approving an export authorization is based on a subjective trade-off between interests that depend on the circumstances of the case. Whereas the Minister stated understanding companies’ need for more certainty, he stated that this was difficult to provide, given that some of the countries of destination and some of the circumstances are “moving targets”. Minister Knapen did, on the other hand, assure that the ministry would remain in close contact with the sector to provide adequate and complementary information – without however explicitly affirming that it would update the handbook on the export of strategic goods.
- Netherlands (Parliamentary debate about sanctions policy) – On 8 November 2021, the parliamentary committee on foreign affairs debated with minister Knapen about the upcoming ministerial meeting of the EU’s Foreign Affairs Council. A wide majority of members of parliament voiced their support for imposing additional sanctions on Belarus in response to the migration crisis at the border between Belarus and Poland (see last item of this week’s newsletter). Besides discussing the situation in Belarus, the parliamentary committee also debated about sanctions policy in general. Member of Parliament Van der Lee, for example, called for beefing up the national ‘sanctions-unit’ with more funding to enhance its capacity. According to Van der Lee, this would enable the government to better prepare new (European) sanctions measures and implement current sanctions more effectively. The Minister acknowledged that enhancing the capacity could have beneficial effects and made a commitment to send a letter to parliament about possibly reinforcing the sanctions-unit before the debate about the ministerial budget for 2022 which will take place on 17 November.
- Netherlands (Academic factsheet discusses effectiveness of sanctions) – On 8 November 2021, the parliamentary committee on foreign affairs furthermore received an academic factsheet about several facets of the concept of ‘open strategic autonomy’. Amongst other things, the factsheet contains a dedicated chapter on the effectiveness of sanctions. The factsheet states that scientists dispute the effectiveness of sanctions as restrictive measures may have several unintended consequences. For example, sanctions can have a ‘rally around the flag’ effect in the targeted country, meaning that public support for the government is increasing sharply because differences of opinion seem less important in a period of threat. Another possible unintended consequence is reputational damage for companies incorporated in the country imposing sanctions. On the other hand, the factsheet describes that targeted financial measures are currently the most effective sanctions, in particular when the measures restrict access to specific goods or financial and economic resources. As targeted sanctions have increased, the factsheet highlights that the role of the private sector in enforcing sanctions has also grown. For example, banks, insurance companies and the transport sector have gradually become more important in the implementation of sanctions, as these private sector actors know their customers better than the authorities. At the same time, liability for breaching sanctions has also increased for the private sector.
2. European Union & United Kingdom
A. European Union
- EU (Foreign Affairs Council meeting) – On 11 November 2021, the ministerial meeting of the EU Foreign Affairs Council (Trade) took place in Brussels. The EU’s trade ministers namely discussed how to maintain and strengthen the current positive momentum in EU-US bilateral trade relations, focusing on the announcement made on 31 October 2021 on steel and aluminium trade. Under the Trump administration, the US had imposed a 25% tariff on steel and a 10% tariff on aluminium imports from the EU. Following the US announcement to replace the tariffs on steel and aluminium for tariff rate quotas based on historic levels of imports, the EU decided to suspend its retaliatory tariffs that were imposed on US goods such as Harley Davidson motorcycles, bourbon whiskey and Levi’s jeans. The Ministers expressed their commitment to advancing a positive, forward-looking trans-Atlantic agenda, and encouraged the Commission to continue its intensive engagement with the Biden administration, for example through the Trade and Technology Council (see our previous newsletter). The suspended application of harmful tariffs for a period of five years in disputes concerning Boeing-Airbus announced in June 2021 is another example of the EU and the US’ attempt to bridge long-standing differences in transatlantic trade relations. The Foreign Affairs Council (Trade) will meet again from 29 November to 3 December in Geneva in the margins of the 12th WTO ministerial conference.
B. United Kingdom
- UK (Updated Measures for Charity to Afghanistan) On 1 November 2021, the UK Office of Financial Sanctions Implementation (“OFSI”) updated several policies and guidelines in the wake of the Taliban´s takeover of Afghanistan in August this year. This includes an update to OFSI’s guidance for the charity sector. The latest update to the guidance includes information on due diligence when using Informal Value Transfer Systems (‘’IVTS’’) (i.e. mechanisms that can be used to transfer funds without necessarily leaving a paper trail or using regulated financial institutions) including the Hawala system that operates in Afghanistan, a reminder of the UK’s ownership and control policy, and highlights of the relevant parts of OFSI’s enforcement approach. The complete guidance document can be found here.
3. United States of America
- US (4 new foreign companies added to Entity List) – On 3 November 2021, the Commerce Department’s Bureau of Industry and Security added four foreign companies, located in Israel, Russia, and Singapore, to the Entity List for engaging in activities that were contrary to the national security or foreign policy interests of the US. One of the companies in question is NSO Group, an Israeli technology firm primarily known for its spyware Pegasus, which is alleged to have been maliciously deployed by foreign governments to target, inter alia, journalists, diplomats, businesspeople, and government officials. The spyware allows these foreign governments to read their messages, access their data and even remotely turn on the microphone without the owner’s knowledge.
The Entity List, on which these four companies are placed, features individuals, organisations and companies believed to be involved in activities contrary to US national security or foreign policy interests to which it is restricted to export, reexport and in-country transfer of items subject to the Export Administration Regulations. Adding the four entities in question to the Entity List is part of the Biden-Harris Administration’s efforts to put human rights at the centre of US foreign policy, aimed at, inter alia, improving digital security and reducing unlawful surveillance. This effort follows a recent interim final rule released by the Commerce Department establishing controls on the export, reexport, or in-country transfer of certain items that can be used for malicious cyber activities.
- US (US responds to calls for easing of North Korea sanctions) – On 3 November 2021, China and Russia published a draft UN Security Council resolution calling for a partial reduction of UN sanctions against the Democratic People’s Republic of North Korea (“DRPK”). The draft proposes the removal of specific trade restrictions with the purpose of improving the standard of living for North Korean citizens. According to China and Russia, North Korea faces food shortages, which could have a severe impact on North Korean citizens. The US Department of State did express its concern over the humanitarian situation in the DRPK, indicating that it was determining how to support the humanitarian needs of the North Korean citizens. On the other hand, the Department of State also stressed the US remains committed to the sanctions regime and called on all UN members to fulfil their sanctions obligations under existing UN Security Council resolutions.
- US (OFAC issues a ‘Finding of Violation’ to Mashreqbank PSC) – On 9 November 2021, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) stated that Mashreqbank PSC had violated the now repealed Sudanese Sanctions Regulations (‘’SSR’’). The violations related to Mashreqbank’s processing of payments through US financial institutions that related to US dollar transfers from accounts of Sudanese banks held outside the US. Instead of a civil monetary penalty, OFAC decided to issue a Finding of Violation (‘’FOV’’) because Mashreqbank had voluntarily entered into a retroactive statute of limitations waiver agreement. This enforcement action highlights the importance of financial institutions maintaining appropriate internal controls, policies, and procedures to ensure the processing of transactions in a transparent manner, including the disclosure of the involvement of underlying OFAC-sanctioned parties to US intermediary parties.
4. Around the Globe
- Belarus (Recently adopted restrictive measures) – The international community is looking to further calibrate its response to the ongoing migrant crisis between Belarus and the EU, which is leading thousands of migrants to be stuck at the EU border in appalling conditions and in freezing temperatures. The UK, the Netherlands and the European Council have already taken the following sanctions measures:
- On 1 November 2021, the UK Parliament debated on Belarus sanctions. It clarified that the prohibition from the Regulations on the Republic of Belarus (Sanctions) (EU Exit) (Amendment) (No. 2) on dealing with certain bonds issued by Belarus includes a prohibition on assisting in the issue of such bonds. Also, it stated that the UK has not imposed a blanket ban on potash imports, so as to minimise unintended consequences on Belarus society and the UK economy and that travel bans under the Sanctions Act allow the government to exclude individuals from the UK for the purposes of the Immigration Act.
- On 8 November 2021, the members of the Dutch Parliament debated introducing economic sanctions that would tackle the illegal migration problem in Belarus. The aim is to introduce sanctions on state-owned companies, so as not to punish all innocent citizens.
- On 9 November 2021, the European Council announced that it had adopted a decision partially suspending the application of the EU-Belarus visa facilitation agreement. The suspension covers the provisions that waive requirements for documentary evidence, regulate the issuing of multiple entry visas and reduce visa application fees as they apply to officials of the Belarus regime. This decision does not affect ordinary citizens of Belarus.
- On 15 November 2021, the European Council amended the EU sanctions regime against Belarus. The criteria for placing individuals and entities on the EU sanctions list has been expanded to now include those who “organise or contribute to activities which facilitate illegal crossing of the EU external border”. Through this addition, the EU aims to counter the flow of migrants which have been attempting to enter the EU from Belarus. The EU accuses Belarus of pushing migrants over the EU border as reprisal over the existing EU sanctions regime. The Belarusian government denies these accusations.
- WCO (Renewal of HS nomenclature) – On 1 January 2022, the Harmonized System (‘’HS’’) 2022 will enter into force and these rules can already be consulted here. The World Customs Organization (“WCO”) is the only independent intergovernmental body with competence in customs that aims to increase efficiency of customs administrations by facilitating the standardization of trade documentation and the transmission of data. Since the 1970s, the Harmonized System (“HS”) nomenclature has been a universal classification tool and is currently used by over 200 countries to complete customs formalities, establish international tariffs and collect international trade statistics. The need to update the current HS 2017 in response to social and environmental issues and fast-changing product streams in global trade has long-since been acknowledged.
What are the implications of the HS 2022? Major reforms include more visibility for several high-profile product streams. For instance, the HS 2022 introduces special provisions for classification of the product class ‘electrical and electronic waste’ and ‘unmanned aerial vehicles’ and simplified provisions for the classification of products as ‘multi-purpose intermediate assemblies’, such as flat panel display modules. In an attempt to curb terrorist acts and human rights violations, many new subheadings for dual-use goods have been established in the HS 2022, e.g. those dual-use items that can be misused for unauthorized purposes (e.g., radioactive material, biological safety cabinets) and those necessary for the manufacture of improvised explosive devices (e.g., detonators).
Consider this a reminder that proper classification of goods, by making use of the HS 2022 as of 1 January 2022, if necessary, is pivotal. Using the wrong HS codes may cause exposure to legal repercussions, including fines, seizure of goods and damage to your company’s reputation.
- China/Taiwan (Repercussions against Taiwan officials) – On 5 November 2021, the Taiwan Affairs Office of the State Council, an administrative agency under the State Council of the People’s Republic of China (“PRC”), imposed restrictive measures on three Taiwanese officials – Taiwan Premier Su Tseng-Chang, Foreign Minister Joseph Wu and Legislative Yuan President You Si-kun – for apparent support of Taiwan independence. The repercussions include travels bans to mainland China, Hong Kong and Macau and the prohibition to cooperate with organizations and individuals based on China´s mainland. Also, individuals and companies affiliated with the three individuals are targeted.
These restrictive measures come against the backdrop of long-standing tension between the PRC and Taiwan over the disputed sovereignty of Taiwan. It remains to be seen whether restrictive measures will – for example – be imposed against Europe as well, which has recently displayed closer ties with Taiwan, such as the unprecedented trip of Taiwan’s Foreign Affairs Minister to Brussels last month. This would not be the first time for China to take countermeasures against the EU: European politicians and academics have previously faced countersanctions from China, after the EU imposed sanctions on Chinese officials linked to human rights abuses in Xinjian.
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