16-0907 Wednesday “The Daily Bugle”

16-0907 Wednesday “Daily Bugle”

Wednesday, 7 September 2016

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. Commerce/BIS Amends EAR, Adding 81 Entities to the Entity List 
  2. DoD/DARS Seeks Comments on Rights in Technical Data and Validation of Proprietary Data Restrictions 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC: (No new postings.) 
  4. Treasury/OFAC: “World Class Technology Corporation Settles Potential Civil Liability for Alleged Violations of the Iranian Transactions and Sanctions Regulations” 
  1. ST&R Trade Report: “CBP Guidance on Imported Cargo Shipped on Bankrupt Carrier” 
  1. CTP: “‘Surge’ or ‘Flow’ – Optimize Your Classification Strategy 
  2. Gary Stanley’s ECR Tip of the Day 
  1. ECS Presents ITAR/EAR Boot Camp in Annapolis MD, Sep 14-15 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (26 Aug 2016), DOD/NISPOM (18 May 2016), EAR (7 Sep 2016), FACR/OFAC (18 May 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (17 Aug 2016) 


EXIM_a11. Commerce/BIS Amends EAR, Adding 81 Entities to the Entity List

Commerce/BIS) [Excerpts.]
81 FR 61595-61612: Russian Sanctions: Addition of Certain Entities to the Entity List
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) by adding eighty-one entities under eighty-six entries to the Entity List. The eighty-one entities who are added to the Entity List have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States. BIS is taking this action to ensure the efficacy of existing sanctions on the Russian Federation (Russia) for violating international law and fueling the conflict in eastern Ukraine. These entities will be listed on the Entity List under the destinations of the Crimea region of Ukraine, Hong Kong, India, and Russia.
* DATES: This rule is effective September 7, 2016.
* FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Email: ERC@bis.doc.gov.
   This rule implements the decision of the ERC to add eighty-one entities under eighty-six entries to the Entity List. These eighty-one entities are being added on the basis of Sec. 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The eighty-six entries being added to the Entity List consist of seven entries in the Crimea region of Ukraine, two entries in Hong Kong, two entries in India, and seventy-five entries in Russia. There are eighty-six entries for the eighty-one entities because five entities are listed in multiple locations, resulting in five additional entries. …
   Dated: September 1, 2016.
Eric L. Hirschhorn, Under Secretary of Commerce for Industry and Security.
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EXIM_a22. DoD/DARS Seeks Comments on Rights in Technical Data and Validation of Proprietary Data Restrictions

(Source: Federal Register) [Excerpts.]
81 FR 61646-61647: Defense Federal Acquisition Regulation Supplement: Rights in Technical Data and Validation of Proprietary Data Restrictions (DFARS Case 2012-D022)
* AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD).
* ACTION: Proposed rule; extension of comment period.
* SUMMARY: DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement a section of the National Defense Authorization Act for Fiscal Year 2012 that revises the sections of title 10 of the United States Code (U.S.C.) that address technical data rights and validation of proprietary data restrictions. The comment period on the proposed rule is extended 16 days.
* DATES: For the proposed rule published on June 16, 2016 (81 FR 39481), submit comments by September 30, 2016. …
* FOR FURTHER INFORMATION CONTACT: Ms. Amy G. Williams, telephone 571-372-6106.
   On June 16, 2016, DoD published a proposed rule in the Federal Register at 81 FR 39481 to implement section 815 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2012, which …
  Jennifer L. Hawes, Editor, Defense Acquisition Regulations System.


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OGS_a13. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce; Industry and Security Bureau; NOTICES; Effectiveness of Licensing Procedures for Agricultural Commodities: Cuba [Publication Date: 8 September 2016.]

* Commerce; Industry and Security Bureau; NOTICES; Effects of Extending Foreign Policy-Based Export Controls [Publication Date: 8 September 2016.]

* State; RULES; International Traffic in Arms: Revisions to Definition of Export and Related Definitions [Publication Date: 8 September 2016.]

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 8 September 2016.]

* U.S. Customs and Border Protection; RULES; Investigations of Claims of Evasions of Antidumping and Countervailing Duties; Correction [Publication Date: 8 September 2016.]  

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World Class Technology Corporation (“WCT”), Portland, Oregon, has agreed to pay $43,200 to settle potential civil liability for alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560. The alleged violations involve WCT’s exportation of seven shipments of orthodontic devices, collectively valued at $59,886, from the United States to Germany, United Arab Emirates, and/or Lebanon, with knowledge or reason to know that the shipments were intended specifically for supply, transshipment, or reexportation to Iran, in apparent violation of §§ 560.204 and 560.206 of the ITSR between April 2008 and July 2010. OFAC determined that WCT did not voluntarily self-disclose the alleged violations, and that the alleged violations constitute a non-egregious case. The maximum statutory civil penalty amount for the alleged violations was $1,750,000, and the base penalty amount was $80,000.
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors:
  (1) WCT willfully violated U.S. sanctions laws;
  (2) WCT’s management had actual knowledge or reason to know that WCT’s products were being exported to Iran; and
  (3) WCT had no OFAC compliance program in place until June 2008.
OFAC considered the following to be mitigating factors:
  (1) the alleged violations did not result in great economic or other benefit conferred on Iran, as the transactions likely would have been licensed by OFAC had WCT applied for a license;
  (2) WCT has no sanctions history with OFAC for the five years preceding the date of the first transaction giving rise to the alleged violations;
  (3) WCT cooperated with OFAC by agreeing to toll the statute of limitations;
  (4) WCT developed an economic sanctions compliance procedure in June 2008 and subsequently drafted a written compliance policy; and
  (5) WCT lacked commercial sophistication in conducting international sales at the time of the alleged violations.  
For more information regarding OFAC regulations, please go to:
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NWS_a17. ST&R Trade Report: “CBP Guidance on Imported Cargo Shipped on Bankrupt Carrier”
(Source: ST&R Trade Report)
U.S. Customs and Border Protection has set forth the actions to be taken in the following scenarios involving imported cargo being transported by Hanjin Shipping, a major ocean carrier that recently filed for bankruptcy. See separate article this issue regarding the Federal Maritime Commission’s actions concerning Hanjin.
Vessel Diverted to Foreign Port and Discharged. If a Hanjin vessel does not arrive in the intended U.S. port and diverts to a foreign port to discharge freight:
  – the manifest and importer security filing must be deleted;
  – all bills of lading need to be deleted (not cancelled);
  – entries and entry summaries need to be cancelled;
  – for cargo subsequently entering the U.S. via the land border or other means, a new entry should be filed at the appropriate port of entry; and
  – for shipments subject to Food and Drug Administration requirements, filers must request deletion and a new Bio-Terrorism Act prior notice submission should be transmitted along with the new entry if the cargo subsequently enters the U.S.
Vessel Diverted to Foreign Port but Not Discharged. If a Hanjin vessel diverted to a foreign port of entry is not discharged but cargo is transferred to an alternative conveyance (e.g., barge) for arrival and discharge at the original intended U.S. port of entry (which should only be done in limited situations):
  – no change is needed to the manifest, bill of lading, ISF, or pre-filed entries;
  – a new FDA prior notice is not required; and
  – the arrival date will reflect the date the conveyance arrives at the intended U.S. port to be offloaded.
Vessel Diverted to Another U.S. Port and Discharged. In any scenario in which shipments manifested for one U.S. port are discharged in a port other than the manifested port:
  – manifest and bill information should be updated to reflect the port code where the freight will actually be discharged;
  – no change is needed to the ISF but filers should monitor the ISF disposition codes to ensure that any changes to the manifest and bill information did not cause the original bill match to drop;
  – pre-filed entries should be changed to reflect the actual port code of discharge (filers may opt to (1) use ACE cargo release corrections capability, which should be fully automated with minimal CBP intervention as long as the shipment is not held or arrived/released, or (2) initiate an electronic in-bond movement or use a 7512 to allow for intermodal transport of the goods to the original intended U.S. port for processing by CBP);
  – entries may be cancelled and refiled for the new port of entry; and
  – a new FDA prior notice is not required (filers can retransmit a corrected/updated prior notice).
In all cases under this scenario manifest and bill information should be updated but no change is needed to the ISF. CBP advises that without updating the bills of lading the shipments cannot be arrived at the first port of arrival, which will prevent entries from releasing. Changes in entry process with ACE cargo release have linked the entry release to the manifest arrival to increase the number of fully paperless transactions. Without this, paper entries and other documents will be needed for shipments not requiring examination or further processing with ACE. In addition, since shipments being held for examination or document review will need to be amended in any scenario, this process provides a standard process with most compliant transactions requiring minimal CBP intervention.
Vessel Diverted to Another U.S. Port but Not Discharged. No change is needed to the bill of lading or entries and the arrival date for the vessel will reflect the date the ship returns to the intended U.S. port to be offloaded.
Vessel Rests at Anchor and Not Diverted. When a vessel arrives in port but due to work stoppage rests at anchor until freight can be discharged:
  – the carrier must continue to provide advance notification to local CBP ports of the pending arrival (CBP Form 3171);
  – when a vessel arrives at a U.S. port (within CBP territory) and comes to rest, whether at anchor, dock, or harbor, carriers must notify local CBP vessel processing personnel;
  – after initial arrival, a change to the vessel’s arrival status should be considered (vessel unarrived) to avoid automated cargo release and general order issues;
  – the carrier and vessel agents should maintain close communication with the local CBP port vessel processing office to share information, updates, instructions, and port-specific guidance;
  – CBP will work with the carrier on a case-by-case basis so the actual arrival date and time at the first U.S. port closely reflect the actual date/time the vessel begins to unlade the cargo; and
  – CBP will take into consideration situations where cargo has been unladen but due to work stoppage cannot be moved from the dock.
In-bond (IT and T&E) cargo already in the U.S. moving under Hanjin’s bond to U.S. port for entry or export. This cargo must be arrived to process the entry and allow release. Customs brokers and others using ABI functions QP/WP can arrive and/or export any in-bond at destination. As an alternative, the in-bond document (or information as appropriate) can be delivered to CBP and in-bond destination to be manually arrived/exported.
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COMM_a18. CTP: “‘Surge’ or ‘Flow’ – Optimize Your Classification Strategy
Commodity classification is critical. In fact, we call it Job #1 since most of your compliance requirements are based on these determinations. But classification projects are not all the same. Most companies use the “surge” approach, tackling the entire inventory all at once, be it dozens, hundreds or thousands of items. Other companies, for various reasons, can’t process everything at once and must rely instead on the “flow” method of classifying items only when they enter the Order Processing system. Both are valid and effective methods, giving companies the licensing requirements they need, but to help you pick your strategy, we’ll walk you through the pros and cons of wholesale “surge” classification versus the “flow-through” basis.
The entire-inventory “surge” approach has many advantages, particularly if your product, parts and technologies don’t change regularly. Most importantly, it’s all done at once, not piecemeal. All your items and technologies are classified and the results are stored in your data system so that licensing requirements are immediately apparent in every new order or situation. It is also valuable, particularly in the current environment of ongoing Export Control Reform, that the classifications are all up to date and accurate. The final advantage is that the maintenance of your classification database is far easier if you need only focus on new additions and occasional categorical updates.
There are important factors when considering the entire-inventory approach. The first is time, which of course equates to money. Do you train existing employees to do your classifications? That diverts them from their regular duties and their speed at classification may not be efficient, that is, cost-effective. The second factor is quality, which is even more important. Erroneous classifications could lead to export violations and result in fines, bad publicity and significant legal issues. None of this is good. Commodity classification is best done by trained experts who are fast, accurate, and cost efficient. 
The other approach is the “flow-through” methodology: classifying items in batches on an as-needed basis, usually when they are included in a sales transaction or a large scale project procurement. This approach is especially beneficial for distributors and resellers that access multiple inventories and vendors whose inventories are particularly dynamic.  …
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COMM_a29. Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update; available by subscription from
) [Excerpts.]
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
The jurisdiction of a particular application-specific PCB is determined by the jurisdiction of the next higher-level functional assembly for which the PCB was specially designed (i.e., the jurisdiction of the item that drove the design requirements for the PCB in question). Thus, an application specific PCB whose layout is specially designed for a defense article controlled on the USML is controlled under ITAR Category XI(c)(2). Conversely, an application specific PCB whose layout is not specially designed for an article controlled on the USML would not be ITAR-controlled. …

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* What: ITAR & EAR Boot Camp Seminar Series
* When: September 14-15, 2016
* Where: Annapolis Chart House
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register 
or by calling 866-238-4018 or e-mail:

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Today’s notable birthdays: 

* Buddy Holly (Charles Hardin Holley; 7 Sep 1936 – 3 Feb 1959; was an American musician and singer-songwriter who, as a member of the rock & roll group, the Crickets, recorded many top-selling records, including “That’ll Be the Day” and “Peggy Sue”.  Holly died in a plane crash, also killing musicians, Ritchie Valens and the Big Bopper, later elegized by Don McLean as “The Day the Music Died”.
  – “Death is very often referred to as a good career move.”
* Grandma Moses (Anna Mary Robertson Moses; 7 Sep 1860 – 13 Dec 1961; was a renowned American folk artist. Having begun painting in earnest at the age of 78, she is often cited as an example of an individual successfully beginning a career in the arts at an advanced age.)
  – “Painting’s not important. The important thing is keeping busy.”

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. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 26 Aug 2016: 81 FR 58831-58834: Administrative Exemption on Value Increased for Certain Articles 

  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and canceled Supp. 1 to the NISPOM  (Summary here.)

  – Last Amendment: 7 Sep 2016: 81 FR 61595-61612: Russian Sanctions: Addition of Certain Entities to the Entity List 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 18 May 2016: 81 FR 31169-31171: Burmese Sanctions Regulations   
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
  – The latest edition (9 Mar 2016) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance.  Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
, 1 Jul 2016: 19 USC 1202 Annex.  (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 30 Aug 2016; Harmonized System Update (HSU) 1612, containing 4,692 ABI records and 935 harmonized tariff records.   
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130 (Caution — The ITAR as posted on GPO’s eCFR website and linked on the DDTC often takes several weeks to update the latest amendments.)
  – Latest Amendment:
17 Aug 2016: 81 FR 54732-54737: Amendment to the International Traffic in Arms Regulations: Procedures for Obtaining State Department Authorization To Export Items Subject to the Export Administration Regulations; Revision to the Destination Control Statement; and Other Changes
  – Latest effective change: 1 Sep 2016: 81 Fed. Reg. 35611-35617 (June 3, 2016, effective 1 Sep 2016): Sections from parts 120, 123, 124, 125, and 126.
  – The only available fully updated copy (latest edition 1 Sep 2016) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III.  The BITAR contains all ITAR amendments to date, plus a large Index and over 700 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is THE essential tool of the ITAR professional.  The BITAR is available by annual subscription from the Full Circle Compliance website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us to receive your discount code.

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 7,500 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* INTERNET ACCESS AND BACK ISSUES: The National Defense Industrial Association (“NDIA”) posts the Daily Update on line, and maintains back issues since August, 2009 here.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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