16-0928 Wednesday “The Daily Bugle”

16-0928 Wednesday “Daily Bugle”

Wednesday, 28 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. Treasury/OFAC Seeks Comments on Hizballah Financial Sanctions Regulations 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC Announces Industry IT System Modernization Webinar 
  4. Treasury/OFAC Posts Seventh Biennial Report of Licensing Activities Pursuant to the TSRA 
  5. European Commission Proposes to Modernise and Strengthen Controls on Exports of Dual-Use Items 
  1. NSSF: “Firearms Retailers and NSSF File Federal Suit against Attorney General Healey’s Overreaching ‘Enforcement Notice'” 
  2. Quartz: “Elon Musk Explains Why He Doesn’t Hire Much Foreign Talent at SpaceX” 
  3. Reuters: “Saudi Arabia Expects Solution for Stalled German Gun Exports” 
  4. ST&R Trade Report: “Best Practices, Recommendations for Defense Trade Entities Outlined in State Dept. Report” 
  1. C. Navarro, R.D. Kyle & J.R. Wessel: “Are Your Inputs Subject to Import Duties? The U.S. International Trade Commission Has a New Process for Temporary Duty Elimination and Reduction through a Miscellaneous Tariff Bill” 
  2. D.F. Stenger, A. Kuntamukkala, M.A. Sullivan: “Department of Energy Revises its Part 810 FAQ on Nuclear Export Controls” 
  3. S. Kohn Ross: “It’s All About Compliance: Part 1, Value” 
  4. V. Alexander’s Compendium of Useful Acronyms (CUA) 
  5. R.C. Burns: “If It Were Real, It Wouldn’t Be ‘Deemed'” 
  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 (20 Sep 2016), FACR/OFAC (18 May 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (8 Sep 2016) 


EXIM_a11. Treasury/OFAC Seeks Comments on Hizballah Financial Sanctions Regulations

81 FR 66751: Submission for OMB Review; Comment Request
* DATES: Comments should be received on or before October 28, 2016 to be assured of consideration.
* ADDRESSES: Send comments regarding the burden estimates, or any other aspect of the information collection, including suggestions for reducing the burden, to (1) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Treasury, New Executive Office Building, Room 10235, Washington, DC 20503, or email at OIRA_Submission@OMB.EOP.gov and (2) Treasury PRA Clearance Officer, 1750 Pennsylvania Ave. NW., Suite 8117, Washington, DC 20220, or email at PRA@treasury.gov.
* FOR FURTHER INFORMATION CONTACT: Copies of the submission may be obtained by emailing PRA@treasury.gov, calling (202) 622-1295, or viewing the entire information collection request at www.reginfo.gov.
  – OMB Control Number: 1505-0255.
  – Type of Review: Extension of a currently approved collection.
  – Title: Hizballah Financial Sanctions Regulations.
  – Abstract: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) added the Hizballah Financial Sanctions Regulations to 31 CFR chapter V, in order to implement the Hizballah International Financing Prevention Act of 2015, Public Law 114-102 (HIFPA). The Regulations require a U.S. financial institution that maintained a correspondent account or a payable-through account for a foreign financial institution for which the maintaining of such an account has been prohibited to file a report with OFAC that provides full details on the closing of each such account within 30 days of the closure of the account. The report must include complete information on all transactions processed or executed in winding down and closing the account. This collection of information is required by OFAC to monitor compliance with regulatory requirements regarding the closure of correspondent accounts and payable-through accounts maintained by a U.S. financial institution for a foreign financial institution when the maintaining of such accounts for a foreign financial institution has been prohibited pursuant to the Regulations. …
Brenda Simms, Treasury PRA Clearance Officer.
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OGS_a12. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* State; RULES; International Traffic in Arms: Tunisia, Eritrea, Somalia, the Democratic Republic of the Congo, Liberia, Cote d’Ivoire, Sri Lanka, Vietnam; Amendments and Other Changes [Publication Date: 29 September 2016.]

[Editor’s note:  A new edition of
Bartlett’s Annotated ITAR (BITAR) will be published tomorrow and distributed to BITAR subscribers, to include the above ITAR amendments.  See BITAR subscription information at
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The webinar will provide a demonstration of the new Commodity Jurisdiction (CJ) (DS-4076) interface and is scheduled for Friday, October 14, 2016 from 2:00 p.m. (EST) to 3:00 p.m. (EST). Click here to view invitation
To join the webinar go here, enter your Name and click Enter Room.
Note: The webinar will allow for 100 participants. If you are unable to join the webinar session but would like to join via the conference line call 877-336-1829; Access Code: 730 766

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OFAC has released a Biennial Report of Licensing Activities pursuant to Section 906(c) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), covering activities undertaken by the Treasury Department’s Office of Foreign Assets Control (“OFAC”) under Section 906(a)(1) of the TSRA from October 2012 through September 2014.  Under the procedures established in its TSRA-related regulations, OFAC processes license applications requesting authorization to export agricultural commodities, medicine, and medical devices to Iran and Sudan under the one-year specific licensing regime set forth in Section 906 of the TSRA.

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Today, the European Commission proposes to strengthen controls on exports of certain goods and technologies that – in addition to legitimate civilian applications – may also be misused for severe human rights violations, terrorist acts or the development of weapons of mass destruction. A main element of today’s proposal is a new “human security” dimension in export controls, to prevent human rights violations associated with certain cyber-surveillance technologies. Furthermore, the proposal simplifies and harmonises the existing export control rules, in order to save time and money for EU exporters and national authorities. These export controls reflect the EU’s commitment to international peace and security.

   “We are living in turbulent times. Preserving peace and protecting human rights are core objectives of the EU and our trade policy is essential to that aim. That’s why we are proposing a set of modern rules to make sure that exports are not misused to threaten international security or undermine human rights”, said Commissioner for Trade Cecilia Malmström.

The purpose of the proposal is to strike a balance between ensuring a high level of security and adequate transparency, and maintaining the competitiveness of European companies and legitimate trade in dual-use items. With the emergence of, for instance, specifically designed surveillance technology such as monitoring centres and data retention systems, it is essential to ensure that regulations allow EU authorities to stop exports in cases where they could be misused for human rights violations, for repression or armed conflict.

Specifically, the Commission proposes to make these export controls:

  – more efficient: simplifying the administration of controls by optimising licensing processes, introducing EU General Export Authorisations, and simplifying the controls on technology transfers, while ensuring a high level of security and adequate transparency to prevent illicit use of the exported items;
  – more consistent: avoid divergent levels of controls throughout the EU by e.g. harmonising the controls on brokering, technical assistance and transit of dual-use items;
  – more effective: by introducing specific provisions preventing the misuse of dual-use items in relation to terrorism. 


The initiative builds on a political understanding reached in 2014 by the European Parliament, the Council and the Commission that “recognised the importance of continuously enhancing the effectiveness and coherence of the EU’s strategic export controls regime” and “considered that modernisation of the system is needed in order to keep up with new threats and rapid technological changes”.

The EU is a major producer and exporter of dual-use items and a significant actor in the fight against proliferation of weapons of mass distruction. The EU export control regime emerged in the late 1990s and was gradually strengthened over the last decade, in particular in response to the EU strategy against the proliferation of weapons of mass destruction of December 2003. The existing Regulation (EC) No 428/2009 implements the EU’s international commitments, enables the free circulation of dual-use items – with some exceptions – inside the EU. A common EU list of controlled dual-use items is included in an annex to the Regulation, and contains goods and technologies such as nuclear reactors, cryogenic refrigeration units, explosives, surveillance systems and equipment, and chemicals that can be used as precursors for toxic chemical agents. The regulation lays down basic principles and common rules for the control of the export, brokering, transit and transfer of dual-use items. These rules now need to be upgraded.

The Commission’s proposal will now be decided upon by the Council and the European Parliament in an ordinary legislative procedure.
More information

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NWS_a17. NSSF: “Firearms Retailers and NSSF File Federal Suit against Attorney General Healey’s Overreaching ‘Enforcement Notice'”

(Source: NSSF)
NEWTOWN, Conn. – Four federally-licensed Massachusetts firearms retailers and the National Shooting Sports Foundation (NSSF), the trade association for the firearms and ammunition industry, today filed action in United States District Court for the District of Massachusetts to challenge on Constitutional grounds the “Enforcement Notice” issued by state Attorney General Maura Healey. The lawsuit states that her office overstepped its legal authority and deprived the retailers of their due process protections guaranteed under the U.S. Constitution. The action seeks declaratory relief and a permanent injunction enjoining enforcement.
The retailers are Pullman Arms Inc. of Worcester; Guns and Gear, LLC of Agawam; Paper City Firearms of Holyoke; and Grrr Gear of Orange. “Attorney General Maura Healey’s actions were unconstitutional. Firearms retailers in Massachusetts cannot determine the meaning or scope of the Attorney General’s Enforcement Notice and subsequent explanations,” said Lawrence G. Keane, NSSF Senior Vice President and General Counsel. “Because criminal penalties can result due to Attorney General Healey’s unilateral reinterpretation of a state statute done without administrative process or input from affected parties, her office exceeded its lawful authority and retailers were deprived of their due process protections under the 5th and 14th Amendments.”
  “In addition, if the Attorney General’s Enforcement Notice is understood as applying to all semi-automatic firearms, it violates the Second and Fourteenth Amendments to keep and bear arms because it bans the manufacture, sale and possession of a broad range of firearms in common use by the citizens of Massachusetts,” Keane said. “Unfortunately, Attorney General Healy’s unconstitutional action has left us no other option than to seek relief from the courts.”
Representing NSSF and the retailers are the Boston-based law firm of Kenney and Sams, P.C., and Michael Sullivan of the Ashcroft Law Firm, who is a former United States Attorney for the District of Massachusetts and former Acting Director, U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives.

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NWS_a28. Quartz: “Elon Musk Explains Why He Doesn’t Hire Much Foreign Talent at SpaceX”
(Source: Quartz)
After arriving in Mexico for an international conference on space and unveiling the schematics for a low-cost transit system to Mars, SpaceX’s Elon Musk faced a tough question from the audience.
  “You’re going interplanetary, but you’re not going international,” said a woman named Anastasia, who identified herself as Russian. “When are you going to hire people from other countries than the US?” The question was met with applause from the crowded hall.
Musk, a South African who came to the United States by way of Canada and is a backer of increased immigration to the US, doesn’t have a vendetta against the global workforce. But the US government, which already makes it difficult for foreign workers to arrive, considers space technology a national security issue and generally prohibits foreigners from working on it, under rules known as International Traffic in Arms Regulations (ITAR).
The ITAR regulations are something of a sore point in the global space community, which tries to emphasize its distance, literal and figurative, from political concerns. How over-broad are the US government’s prohibitions? Even a company that designs space clothing in a Brooklyn studio must obey them and carefully track the nationality of any visitors.
So SpaceX, which aims to do business launching satellites for clients like the US Air Force, must obey these rules as well. And that means it can only have permanent residents in its workforce.
  “This is not out of some desire of SpaceX to just hire people with green cards,” Musk said. “It’s because we’re not allowed to do anything else. This is not a wise policy for the US, because there are so many talented people all around the world that we would love to have work at our company. But unless they can somehow get a green card, we’re legally prevented from hiring” them.
He noted that at Tesla, his electric car company, about a third of the engineering team was born outside the US.
As with Tesla, SpaceX’s pioneering work has made it a company that many young engineers around the world aspire to work for. A recent Reddit AMA with SpaceX’s head of human resources drew multiple questions about whether and when SpaceX could hire non-US employees.
  “Over time, as we make progress towards becoming a multi-planetary species, we expect that people from many nations will have the chance to participate in space exploration,” the HR executive, Brian Bjelde, wrote in response.
  “I really wish we could do more,” Musk said at his Mars presentation. “It’s just, our hands are tied.”
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NWS_a39. Reuters: “Saudi Arabia Expects Solution for Stalled German Gun Exports”
(Source: Reuters)
Saudi Arabia will work with Germany to resolve a dispute over stalled exports of gun parts by arms maker Heckler & Koch, and the issue will not damage relations, a senior Saudi military official said on Wednesday.
A German court in June ordered the government to decide whether to allow Heckler & Koch to export parts to Saudi Arabia, after the company sued the government for dragging its feet for over two years in licensing the exports of parts needed to manufacture its G36 assault rifle in Saudi Arabia.
Germany had approved a lucrative licensing deal in 2008 allowing Saudi Arabia to produce the G36, but changed its approach in 2013 following media criticism of Saudi Arabia’s use of the death penalty.
Exports have yet to resume, and Germany’s Economy Ministry had no immediate comment on Wednesday on when a decision could be expected.
Saudi Brigadier General Ahmed al-Asseri told reporters during a visit to Germany that it was “not very acceptable” to change course after signing a contract, but he played down the seriousness of the issue.
  “We will not make a case of this because the relationship with Germany is more valuable than a small contract regarding machine guns,” al-Asseri said. “We will find a solution which satisfies both sides.”
Saudi Arabia has defended its human rights record by saying its legal system is based on Islam, its judiciary is independent and it does not use torture.
Al-Asseri said Saudi Arabia buys few weapons from Germany, focusing mainly on rifles and machine guns. He said arms purchases were a way to strengthen alliances because they facilitated training and closer personal relationships.
The contract in question was “very minor,” he said.
German Economy Ministry Sigmar Gabriel has said he remains critical of exports to Saudi Arabia and in February spoke out against approval of the license.
Heckler & Koch’s G36 is standard issue for many armies around the globe and its HK416 assault rifle is said to have been used in the U.S. special forces operation to kill Osama bin Laden in 2011.
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NWS_a410. ST&R Trade Report: “Best Practices, Recommendations for Defense Trade Entities Outlined in State Dept. Report”
The State Department’s Office of Defense Trade Controls Compliance recently issued a report on the 15 visits it conducted between May 2015 and April 2016 under its company visit program. The CVP is designed to allow DTCC to better understand defense trade control and compliance programs and assess and disseminate industry best practices, and it includes onsite visits to industry as an extension of outreach initiatives (CVP-O) and engagement in existing compliance cases (CVP-C). This report shares some company best practices and provides recommendations for improving compliance programs but does not include observations or recommendations identified through disclosures or other enforcement activities.
Best Practices
. According to the report, DTCC noted the following best practices during its visits.
  – requiring suppliers to complete a standardized form identifying the jurisdiction or classification of their products and related technical data (use of such a form may drive more companies to take an active role in identifying and documenting the export control jurisdiction of their products and also serves as a standardized tool for clear and consistent recordkeeping)
  – integrating export control processes into company quality systems and reviews
  – physically segregating research controlled under the International Traffic in  Arms Regulations (including research using ITAR-controlled articles or technical data) at universities
  – incorporating export compliance reviews into information technology systems that manage project lifecycles so that the workflow requires approval from the export compliance function prior to the bid/no-bid business decision
  – requiring self-classifications to be reviewed and signed by engineering and technology managers of the cognizant business and a senior technology manager from a separate business unit serving as an independent peer reviewer
  – using incentive programs, such as internal recognition and/or awards, to recognize employees for compliance activities
. DTCC also made the following observations and/or recommendations for improvement.

  – U.S. companies may consider additional outreach and training on ITAR compliance for foreign partners and customers.
  – Processes for identifying dual and third-country nationals should include a requirement to review the bona fide regular employee status.
  – A U.S. applicant should consider including in contracts with foreign parties terms and conditions that ensure it has direct physical access to its U.S. person employees providing defense services so as to allow direct oversight of their compliance.
  – To maintain objectivity, universities should ensure that internal, independent reviews are used to determine the ITAR-controlled status of current programs and future opportunities.
  – Compliance personnel should identify and document all IT systems that store, or have the potential to store, ITAR-controlled technical data and a current record of who has access to these applications should be maintained.
DTCC Lessons Learned
. According to the report, DTCC’s visits highlighted that with growing frequency U.S. persons are employed abroad to assist with maintenance, operation, and training related to U.S. defense articles acquired by foreign military forces. These activities by U.S. persons may constitute defense services that require registration and authorization. DTCC also found that former U.S. military personnel who will be working for foreign government-owned entities while carrying out such activities may not be aware, and that their would-be employers may also not be aware, of separate Defense Department employment authorization requirements applicable to these arrangements. The report therefore states that DTCC should consider increasing its outreach and training initiatives for foreign parties to ITAR authorizations.
Further, the report recommends that the State Department consider providing guidance specifying when a company would be expected to maintain access logs that can verify potential versus actual access to technical data.
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COMM_a111. C. Navarro, R.D. Kyle & J.R. Wessel: “Are Your Inputs Subject to Import Duties? The U.S. International Trade Commission Has a New Process for Temporary Duty Elimination and Reduction through a Miscellaneous Tariff Bill”

(Source: Hogan Lovells)
* Authors: Chandri Navarro, Esq., chandri.navarro@hoganlovells.com, 202-637-5640; Robert D. Kyle, Esq., robert.kyle@hoganlovells.com, 202-637-5494; and Jared R. Wessel, Esq. jared.wessel@hoganlovells.com, 202-637-6472. All of Hogan Lovells.
The American Manufacturing Competitiveness Act of 2016 created a new process for companies to petition for temporary elimination and reduction of import duties through the Miscellaneous Tariff Bill (MTB). Under the new system, companies no longer ask Members of Congress to introduce the suspension or reduction. Rather, the U.S. International Trade Commission (ITC) will be responsible for analyzing companies’ requests and recommending certain products for Congressional consideration.
In order for a product to be eligible under the MTB process, the petition will have to comply with certain requirements: (1) no opposition from a domestic producer, (2) easily administrable scope (items covered), and (3) availability of the suspension or reduction to all importers. In addition, the estimated loss in revenue from the suspension or reduction must not exceed US$500,000 per year.
The ITC will publish a Federal Register notice beginning the process no later than October 15, 2016. That will start the 60-day period for interested companies to submit their petitions.
The submitted petitions will be published by the ITC and comments will then be accepted for the next 45 days. The ITC will issue a preliminary report up to 150 days after the initial publication of the petitions and a final report to Congress within the next 60 days, recommending or not the requested duty suspension or reduction. Congress must then vote to approve the ITC’s recommendation.

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COMM_a212. D.F. Stenger, A. Kuntamukkala, M.A. Sullivan: “Department of Energy Revises its Part 810 FAQ on Nuclear Export Controls”
(Source: Hogan Lovells)
* Authors: Daniel F. Stenger, Esq., daniel.stenger@hoganlovells.com, 202-637-5691; Ajay Kuntamukkala, Esq., ajay.kuntamukkala@hoganlovells.com, 202-637-5552; and Mary Anne Sullivan, Esq., maryanne.sullivan@hoganlovells.com, 202-637-3695. All of Hogan Lovells.
The Department of Energy (DOE) recently published its amended Part 810 Frequently-Asked-Questions (FAQs) on compliance with the amended Part 810 Regulations on nuclear export controls (10 C.F.R. Part 810). The 2015 amendments to the Part 810 regulations were the first comprehensive updating of DOE nuclear export control policy since 1986. For more information on the Part 810 refresh, please see our prior Client Alerts on the issuance of the amended regulations, as well as the amended guidance to the regulations. The amended Part 810 FAQ is useful to those interested in providing nuclear technology or assistance abroad, as well as to those who work with foreign nationals in the United States that require access to nuclear technology.
In amending the Part 810 FAQ, DOE primarily added to the content of the FAQs. The amended FAQ addresses 60 questions, while the prior version addressed less than 20-but the prior questions remain largely unaltered. Of the many new additions to the Part 810 FAQ, some of the most notable new questions concern the following:
Back-end processes.
  Questions 4 and 7 explain that certain back-end processes, such as examination, storage, transportation, and disposal of spent nuclear fuel, are not covered by Part 810.      

* “Publicly available information.”

  Questions 8 through 11 concern what is “public information” exempt from Part 810. The amended FAQ posits that if a non-disclosure agreement is required for the sharing of technical information, this is indicia that the information could fall under the scope of Part 810, but not determinative. The amended FAQ reaffirms the amended guidance in stating that financial information related to a nuclear technology, separated from technical information, does not fall under the scope of Part 810.    

* General authorization for individuals with “unescorted access.”

Question 17 clarifies the § 810.6(b) general authorization applicable to contractors granted unescorted access to NRC-licensed power plants. It states that the individuals must have a “direct contractual relationship” with the owner or operator of the plant, or be employed with companies that have such a relationship, in order for the general authorization to apply.     

* Radiological emergency and operational safety.

  – Questions 18 and 57 explain that companies acting to prevent or correct a radiological emergency, or offering operational safety information, to generally authorized countries need not rely on the § 810.6(c) general authorization (which requires prior notice or approval), and can instead use the general authorization available under § 810.6(a), which requires a 30-day post transfer notification. 
  – Question 23 explains that although DOE is supposed to review and approve efforts to share operational safety information pursuant to the § 810.6(c)(2), (3) for countries not listed in Appendix A within 45 days, if DOE misses the deadline the activities still cannot go forward until DOE responds. 
  – Questions 22 and 59 discuss what counts as “operational safety” information for purposes of the § 810.6(c)(2) general authorization. DOE notes that consulting services on “best operating practices” are not covered by the general authorization, as the information shared would likely extend beyond operational safety. On the other hand, Probabilistic Risk Assessment (PRA) services or instruction are considered eligible for the “operational safety” general authorization.      


Related-agency activities.
  Questions 24 through 27 offer guidance on related agency activities. They state that “[a]ctivities approved by the NRC, such as NRC-sponsored visits by foreign delegations” fall outside of Part 810, but warn that Department of State exchange programs are typically not generally authorized. The amended FAQ also clarifies that IAEA inspections and delegations sponsored by the Department of State or DOE fall under § 810.6(e) general authorizations.    


Evaluating whether an individual is a “foreign national.”
  Question 30 expands upon the discussion of who is a “foreign national” for purposes of Part 810. Specifically, the question clarifies that permanent residency is a part of the DOE’s case-by-case evaluation of foreign persons with multiple nationalities. For example, a citizen of Iran who is a permanent resident of France would be evaluated on a case-by-case basis for all foreign allegiances, including all countries of citizenship and permanent residence. Companies should seek guidance from DOE in these scenarios. 

Question 31 explains that a citizenship that is renounced generally is not included in the DOE’s analysis of foreign country citizenship. For example, a citizen of Canada and India who then renounced her Indian citizenship generally would be evaluated by DOE as a citizen of Canada only.

Ukraine-specific FAQs.
Question 55 offers specific guidance when working with Ukraine and Ukrainian nationals. Specifically, the amended FAQ makes clear that transfers to Ukrainian foreign nationals located in the United States do not require pre-notification under § 810.14(a), but that transfers to entities organized in Ukraine, such as Ukrainian-chartered corporations, when located in the United States would require pre-notification.

“Steam turbine generators” versus “steam generators.”
  Question 56 offers specific guidance differentiating the Part 810 coverage of “steam turbine generators” versus “steam generators.” The amended FAQ posits that steam turbine generators in boiling water reactors, although using coolant from the primary loop to create power, are part of the balance of plant and fall outside the scope of Part 810. The amended FAQ contrasts this with steam generators in pressurized water reactors, which are fundamentally part of the nuclear island and therefore covered by Part 810.
The revised Part 810 FAQ, despite addressing a number of questions, still leaves open certain issues that companies seeking to export nuclear technologies may need to grapple with. Examples are discussed in our prior Client Alert on the Part 810 amended guidance, and include the “Americanization” of foreign technologies imported into the United States, practical issues with using the general authorization for foreign nationals having unescorted access at NRC facilities, and the interaction of Part 810 with other agency export control reviews.
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COMM_a313. S. Kohn Ross: “It’s All About Compliance: Part 1, Value”
* Author: Susan Kohn Ross, Esq.,
Mitchell Silberberg & Knupp LLP,
, 310-312-3206.
This Alert is one in an occasional series of articles providing tips about various topics, which arise routinely with import and export transactions. These tips are published with the intention to aid international traders in their ongoing efforts to get their declarations right the first time, and are based on situations we commonly see occurring. Whether it is reasonable care on the import side or not self-blinding on the export side, compliance is a key for many different reasons, including protecting your bottom line.
Given the ever increasing attention being paid by the U.S. government to compliance by companies of all sizes, and especially in light of the recent informed compliance letter sent out by CBP’s Regulatory Audit in Houston, TX, now is the time to review how to value goods correctly.
The same basic value code is used throughout the world, at least among all the World Customs Organization member countries, although most assess duty on the C.I.F. value of the imported goods, whereas the U.S. assesses duty on the F.O.B. cost of goods. While admittedly each country has its own interpretation and they vary a tad, the basics are:
  (1) transaction value;
  (2) transaction value of identical or similar merchandise;
  (3) deductive value;
  (4) computed value; and
  (5) other values.
These are applied in order. For ease of calculation and documentation alone, everybody prefers transaction value. Transaction value simply means the price paid or payable for the merchandise when sold for export to the U.S., plus packing costs, the selling commission, the value of any assist, any royalty or license fee, and the proceeds of any subsequent resale, disposal or use of the merchandise that accrues, directly or indirectly, to the seller, if not already included.
The bottom line is all of the value elements must apply to reach an F.O.B. cost of goods. If the F.O.B. price cannot be established, you go through each other option in order until one is satisfied.
What is the price paid or payable for the goods?
Typically, it is exactly what the definition implies – the F.O.B. cost of the shipment. The amount must be revised if the importer is given a credit on the current shipment to offset a shortage or quality problem on an earlier shipment, whereas the reasonable cost for constructing, erecting, assembling, maintaining, or providing technical assistance after importation, transport of goods post-importation and the duties, user fees and other federal taxes paid by the importer may be deducted, if previously added to the invoice price. Just don’t jump the gun and start deducting any of these costs unless you have actual invoices. Similarly, where there are restrictions on the use of the goods; the value cannot be determined, proceeds accrue to the seller, an adjustment cannot be made or the relationship between the parties influences the price, there are challenges to establishing a proper transaction value.
Assists are a topic unto themselves, but basically cover anything provided to the seller to make the goods which was provided free of charge or at a reduced cost. The one broad exclusion is for engineering, development, artwork, design work, and plans and sketches that are undertaken in the United States. Additional challenges arise when you must apportion the cost as the design work is created in the U.S. and at least one other country or all the units produced are not exported to the U.S. Also worth keeping in mind is the impact if that design work is subject to an export license under the deemed export rules.
Royalties and license fees can be another serious challenge. Any company that owns a trademark, copyright or other form of intellectual property wants to protect it, but trying to determine whether the amount paid is or is not dutiable can be a major headache and often turns on exactly what is provided in the royalty agreement and the actual relationship between the parties – arms’ length or related.
Transaction value of identical or similar merchandise can be a challenge to an importer because you typically do not have access to the acquisition cost of your competitors, assuming your products are identical or similar, and how is that similarity to be defined? Computed value is typically used for related party transactions and deductive value generally applies to consigned goods such as produce. Since this article is intended as a refresher, we will avoid the complexity of these categories of value!
Value Tips For Compliance:
  (1) Verify the INCOterm of sale of the deal match your invoices and periodically verify how your value is structured;
  (2) Conduct knowledgeable reviews of your import and export transactions.
  (3) Provide regular reminders to employees to double-check value issues apparent on documents, such as a term of sale which conflicts with how freight is charged (e.g., an F.O.B. invoice with prepaid freight or C.I.F. invoice with collect freight);
  (4) Provide training to refresh knowledge and address any issues spotted during previous document reviews;
  (5) Always vet business partners carefully; Establish the right to make entry or routed transaction is properly documented.
  (6) Periodically verify that value determinations are correct and current, and reflect actual terms and conditions, and, if any errors are discovered, take immediate corrective action; decide if the error must be disclosed to the government and, in so doing, seek legal advice before making a final decision.
  (7) Purely on the export side –
    – the value reported is the selling price by the U.S. Principal Party in Interest to the foreign buyer or cost if not sold;
    – plus the cost of inland freight, insurance, and other charges incurred in moving the goods from their U.S. point of origin to the U.S. port of exportation;
    – but the import price is whatever else the buyer’s country requires to be added to reach transaction value.
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COMM_a414. V. Alexander’s Compendium of Useful Acronyms (CUA)
(Source: Larry Riesberg, Director, Trade Compliance, V. Alexander,
, 615-885-6401 ext. 2427) [Reprinted by permission.]
V. Alexander has made their 58-page Compendium of Useful Acronyms (CUA) containing hundreds of trade-related acronyms (can be pronounced as a word) and initialisms (just the letters) available to be downloaded
.  Below are the first 20 of hundreds of items in their 58-page CUA:
A-A             Average-to-Average (DoC)
AAA            American Arbitration Association
A&A            Assessment and Authorization (DSS/DoD)
AAD            Conveyance Arrival Notification (ACE/AMS)
AAEI           American Association of Exporters & Importers
AAFA           American Apparel and Footwear Association
AALA           American Automobile Labeling Act (NHTSA)
AAPA          American Association of Port Authorities     
AAR            Association of American Railroads
AB              Accreditation Body (ISO/IAF)
ABA            American Bar Association
ABC            Activity Based Costing (CBP calculation of direct and
indirect costs for activities and services)
ABG            Automated and Biometrics-Supported Border Controls
(Germany Trusted Traveler program)
ABI             Automated Broker Interface (CBP/ACE)
ABO            ACE Business Office (ACE/CBP)
AC              Access Control (NIST/DoD)
ACA            Affordable Care Act (a.k.a. Obamacare)
ACAS          Air Cargo Advanced Screening (DHS/CBP/TAS)
ACBPS        Australian Customs and Border Protection Service
(Australian equivalent of CBP)
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COMM_a515. R.C. Burns: “If It Were Real, It Wouldn’t Be ‘Deemed'”
Export Law Blog
. Reprinted by permission.)
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, 202-624-3949,
The Fifth Circuit last week released its opinion in which it upheld the District Court in its decision not to grant a preliminary injunction to Defense Distributed, which sought to prevent the Directorate of Defense Trade Controls (“DDTC”) from prohibiting Defense Distributed from putting on the Internet plans for printing guns with 3-D printers. The majority opinion was one that did not really reach the merits of the case or whether DDTC had the right to prohibit U.S. citizens from uploading gun plans to the Internet. Rather it turned on a procedural issue: whether Defense Distributed or DDTC would be hurt more by an injunction. The majority opinion weighed that balance in favor of DDTC, arguing that a preliminary injunction would result in untold millions of foreigners printing crappy plastic guns whereas not granting the injunction would just mean that Defense Distributed had to sit on its hands until trial.
The dissenting opinion of Judge Jones, however, dove straight into the merits, arguing that DDTC’s theory of the case was fatally flawed because uploading things to the Internet is not an “export” within the meaning of the Arms Export Control Act. To summarize Judge Jones, “export” means sending stuff across a border for money. As a result, Defense Distributed could not be held to have engaged in an export as a result of “the domestic publication on the Internet, without charge and therefore without any ‘trade,’ of lawful, nonclassified, nonrestricted information.”

Judge Jones does not stop at the notion of mere access as an export, but zeroes in on the “across borders” criterion to take dead aim against “deemed exports.”
Although the majority opinion adopts the State Department’s litigating position that “export” refers only to publication on the Internet, where the information will inevitably be accessible to foreign actors, the warning letter to Defense Distributed cited the exact, far broader regulatory definition: “export” means “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States of abroad.” There is embedded ambiguity, and disturbing breadth, in the State Department’s discretion to prevent the dissemination (without an “export” license) of lawful, non-classified technical data to foreign persons within the U.S. The regulation on its face, as applied to Defense Distributed, goes far beyond the proper statutory definition of “export.”
Or, more succinctly, if it was a real export they wouldn’t have to call it a “deemed” export.
Judge Jones’s opinion is certainly grounded in common sense, something often lacking in export control. In the early days of my practice, I tried to explain to a former military officer who was CEO of a client that disclosing information to a foreign employee in the United States was an export. He paused for a moment and then, with the veins in his neck bulging and his cheeks flushed, he said “That is the dumbest [bad word] thing I’ve ever heard come out of the mouth of a lawyer” and promptly invited me to leave his office immediately.  I still think his assessment of “deemed exports” was dead on.
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Notable birthdays:

Brigitte Bardot (Brigitte Anne-Marie Bardot; born 28 September 1934 (age 82), is a French actress, singer and fashion model, who later became an animal rights activist. She was one of the best known sex symbols of the 1950s and 1960s.)
  – “What could be more beautiful than a dear old lady growing wise with age? Every age can be enchanting, provided you live within it.” 

* Ed Sullivan (Edward Vincent Sullivan, 28 Sep 1901 – 13 Oct 1974, was an American television personality, sports and entertainment reporter, and longtime syndicated columnist for the New York Daily News. He is principally remembered as the creator and host of the television variety program The Ed Sullivan Show.)
  – “If you do a good job for others, you heal yourself at the same time, because a dose of joy is a spiritual cure. It transcends all barriers.”
* Georges Clemenceau (Georges Benjamin Clemenceau, 28 Sep 1841 – 24 Nov 1929, was a French politician, physician, and journalist who served as Prime Minister of France during the First World War.)
  – “All that I know I learned after I was thirty.”

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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: 20 Sep 2016: 81 FR 64693-64698: Revisions to the Entity List; and 81 FR 64655-64692: Wassenaar Arrangement 2015 Plenary Agreements Implementation, Removal of Foreign National Review Requirements, and Information Security Updates 

: 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: 8 Sep 2016; 81 FR 62004-62008: 22 CFR Parts 120, 125, 126, and 130; Public Notice: 9672; RIN: 1400-AD70; International Traffic in Arms: Revisions to Definition of Export and Related Definitions
  – The only available fully updated copy (latest edition 8 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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