17-0412 Wednesday “Daily Bugle”

17-0412 Wednesday “Daily Bugle”

Wednesday, 12 April 2017

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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[No items of interest noted today.] 

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. DoD/DSS Deploys the Annual NISP Cost Collection Survey April 13-27 
  4. State/DDTC Posts Name and Address Change for Meta Archiefbewaarneming B.V. 
  5. EU Amends Restrictive Measures Concerning Iran 
  1. Al Jazeera: “How We Revealed the Surveillance World’s Illegal Trades” 
  2. Straits Times: “Japan Extends its Own Sanctions Against North Korea” 
  3. ST&R Trade Report: “Legislative Update: Trade Agreements, Trade Remedies, Offshoring, Sanctions” 
  4. ST&R Trade Report: “White House Clarifies Effort to Reduce Federal Regulations” 
  1. M. Lester: “House of Commons Report on Russia Sanctions and Brexit” 
  2. M. Volkov: “Can Wells Fargo Fix its Defective Culture? (Part I of III)” 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (27 Jan 2017), DOD/NISPOM (18 May 2016), EAR (6 Apr 2017), FACR/OFAC (10 Feb 2017), FTR (15 May 2015), HTSUS (7 Mar 2017), ITAR (11 Jan 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 



[No items of interest noted today.]

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OGS_a11. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

[No items of interest noted today.]

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As the Executive Agency for the National Industrial Security Program (NISP) under Executive Order 12829, the DoD is required to provide the Information Security Oversight Office (ISOO) with an estimated annual cost to Industry of complying with NISP security requirements. We determine the costs by surveying contractors who possess classified information at their cleared facility. Results are forwarded to ISOO and incorporated in an annual report to the President.
To meet this requirement, DSS conducts a stratified random sample survey of contractor facilities using a web-based survey and Office of Management and Budget (OMB)-approved survey methodology. Since the sample of cleared facility participants is randomly selected, not all facilities will receive the survey. The survey will be fielded on April 13, 2017 and remain open through COB April 27, 2017. Participation is anonymous. The survey invitation will contain a survey.foreseeresults.com survey link. Verification of the legitimacy of the Survey URL can be obtained through your Cognizant Security Office. If you have any questions, please direct them to our mailbox: dss.ncr.dss.mbx.psiprogram@mail.mil.

We appreciate your cooperation and submission of the cost information by April 27, 2017. 

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. State/DDTC Posts Name and Address Change for Meta Archiefbewaarneming B.V.

(Source: State/DDTC) [Excerpts.]

Effective immediately, Meta Archiefbewaarneming B.V., Industrieweg 42B, 5731 HR, Mierlo, The Netherlands will change as follows: OASIS Data & Document Management Netherlands B.V., Koningsbeltweg 21, 1329 AB, Almere (and all other locations in) The Netherlands. Due to the volume of authorizations requiring amendments to reflect this change, the Deputy Assistant Secretary for Defense Trade Controls is exercising the authority under 22 CFR 126.3 to waive the requirement for amendments to change currently approved license authorizations. The amendment waiver does not apply to approved or pending agreements. …

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. EU Amends Restrictive Measures Concerning Iran

  – Council Implementing Regulation (EU) 2017/685 of 11 April 2017 implementing Regulation (EU) No 359/2011 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Iran
  – Council Decision (CFSP) 2017/689 of 11 April 2017 amending Decision 2011/235/CFSP concerning restrictive measures directed against certain persons and entities in view of the situation in Iran

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Al Jazeera: “How We Revealed the Surveillance World’s Illegal Trades”

Al Jazeera) [Excerpts.]
[Simon Boazman, Al Jazeera’s Investigative Reporter behind “Spy Merchants”:] 
My challenge was simple enough: establish whether major
manufacturers were willing to bypass global sanctions and export restrictions to obtain a sale.
My findings were astonishing. Not only did major European and Chinese spyware companies appear prepared to brush aside laws restricting sales to countries notorious for human rights abuse, but some even volunteered ways to cover up the proposed transactions.
  “We wipe everything,” the Chinese firm Semptian told our undercover reporter.
“We don’t know who is the end user. And we don’t care,” the company’s cofounder Frank Feng said. 
Another company, the Italian-based IPS, offered other methods to hide the true nature of the deal proposed by our undercover reporter. …
[Editor’s note: this article is related to item #5 of the Daily Bugle of Monday, 10 April, and item #10 of the Daily Bugle of Tuesday, 11 April 2017. The documentary film “Spy Merchants” (duration: 47 minutes) is available here and via the source link above.]

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Straits Times) [Excerpts.]
With no end in sight to North Korea’s nuclear and ballistic missile ambitions or a return of Japanese citizens abducted by the rogue state, Tokyo yesterday [Friday] said it would extend its own sanctions against Pyongyang for two more years.
The unilateral penalties, which were first imposed in 2006, were due to expire next Thursday, and complement six sets of United Nations Security Council sanctions.
Japan’s sanctions include a trade embargo and a ban on North Korean-registered ships calling at its ports except for humanitarian purposes, and on chartered flights between the two nations. …
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8. ST&R Trade Report: “Legislative Update: Trade Agreements, Trade Remedies, Offshoring, Sanctions”

North Korea
. The House Foreign Affairs Committee approved March 29 the Korean Interdiction and Modernization of Sanctions Act (H.R. 1644), which includes the following provisions.
  – Authorizes enhanced screening of inbound cargo that has transited any of the foreign seaports or airports found to have failed to inspect or seize the cargo of North Korean ships or aircraft as required by United Nations Security Council resolutions
  – Prohibits goods produced in whole or part by North Korean forced labor from entering the U.S.
  – Expands the ability to sanction those who import North Korean coal, iron, or iron ore above the limits imposed by UNSC resolutions, buy textiles or fishing rights from North Korea, facilitate the online business activities of the North Korean regime, or fail to comply with UNSC resolutions targeting North Korea
  – Prohibits any ships owned by the government of North Korea or owned or operated on behalf of any country not complying with UNSC resolutions from operating in U.S. waters or landing at any U.S. port
  – Mandates sanctions against any foreign person who buys certain metals or minerals from North Korea or provides certain types of military-use fuel or insurance or reinsurance to vessels sanctioned under a UNSC resolution for engaging in illicit trade with North Korea
. H.Res.236 (introduced March 30 by Rep. Yoho, R-Fla.) calls on the president to consult with Congress on opportunities to promote further economic and commercial activity between the U.S. and Japan and to commence negotiations toward a trade agreement with Japan as soon as appropriate.
H.Res.271 (introduced April 7 by Rep. Ed Royce, R-Calif.) encourages the Office of the U.S. Trade Representative to commence negotiations on a bilateral trade agreement with Taiwan.
. The Corporate Expatriates and Inverters Tax Fairness Act (H.R. 1931, introduced April 5 by Rep. Doggett, D-Texas) would (a) apply an exit tax to any U.S. firm changing to foreign control and (b) tighten restrictions on corporate inversions, including increasing the threshold of foreign ownership required to accomplish the inversion for tax purposes.
The Stop Tax Haven Abuse Act (H.R. 1932, introduced April 5 by Rep. Doggett) would eliminate tax incentives for U.S. companies to move jobs and operations offshore and close loopholes that allow large multinationals to avoid taxes by shifting profits to offshore tax havens.
The Offshoring Prevention Act (H.R. 2005, introduced April 6 by Rep. Cicilline, D-R.I.) would prohibit companies from deferring income tax on profits earned from the manufacture of goods abroad for sale in the U.S.
Trade Remedies
. The Currency Reform for Fair Trade Act (H.R. 2039, introduced April 6 by Rep. Levin, D-Mich.) would allow the Department of Commerce to impose countervailing duties to offset the impact of currency manipulation on a U.S. industry.
. The African Growth and Opportunity Act and Millennium Challenge Act Modernization Act (S. 832, introduced April 5 by Sen. Cardin, D-Md.) would give the Millennium Challenge Corporation the authority to develop concurrent compacts with one country if one or both of the compacts are for purposes of regional economic integration, increased regional trade, or cross-border collaborations and if the country has been able to demonstrate progress toward meeting objectives of the original compact and sufficient capacity to successfully handle additional compacts. This bill would also require the State Department to better promote AGOA with sub-Saharan African governments and businesses and direct the president to implement policies that facilitate regional trade among SSA countries and provide capacity building for companies and governments to improve AGOA utilization.

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9. ST&R Trade Report: “White House Clarifies Effort to Reduce Federal Regulations”

The White House has provided additional information on implementing a Jan. 30 executive order directing federal agencies to reduce regulation and control regulatory costs. This effort is likely to affect import, export, and other trade-related regulations issued by agencies such as U.S. Customs and Border Protection and the Department of Commerce, although the extent of this impact remains unclear.
EO 13771 requires executive departments or agencies publicly proposing or otherwise promulgating new regulations to identify at least two existing regulations to be repealed. In addition, any new incremental costs associated with new regulations must be offset by the elimination of existing costs associated with at least two prior regulations.
This order does not apply to regulations associated with national security or foreign affairs functions; regulations related to agency organization, management, or personnel; or any other category of regulations exempted by the Office of Management and Budget. Some trade agency officials have said they are still trying to determine which of their regulatory actions might qualify for these exemptions.
An April 5 memo from the Office of Information and Regulatory Affairs provides the following guidance to help agencies comply with EO 13771.
. A cabinet department is considered a single agency for purposes of EO 13771 compliance. The order does not apply to independent regulatory agencies.
Regulatory Actions
. EO 13771 applies to (a) significant regulatory actions that have been finalized and impose total costs greater than zero and (b) significant guidance documents (e.g., significant interpretive guidance) reviewed by OIRA that have been finalized and impose total costs greater than zero. It covers regulations issued after noon on Jan. 20 even if they are finalizing a proposed rule issued before then.
Deregulatory Actions
. Acceptable deregulatory actions include informal, formal, and negotiated rulemakings; guidance and interpretive documents; some actions related to international regulatory cooperation; and information collection requests that repeal or streamline recordkeeping, reporting, or disclosure requirements.
Both deregulatory actions and the associated cost savings may be “banked” for use in the same or a subsequent fiscal year, may be transferred within individual agencies, and could (upon OMB approval) be transferred between agencies.
. The following categories of regulatory actions may qualify for a full or partial exemption (other categories may be approved as well).
  – Expressly exempt actions (see above; full exemption)
  – Regulations addressing emergencies such as critical health, safety, financial, or non-exempt national security matters (offsets will still be required but after the emergency regulation has been issued)
  – Statutorily or judicially required actions (offsets must be done as soon as practicable after the issuance of the regulation)
  – Actions with de minimis costs (full or partial exemption)

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. M. Lester: “House of Commons Report on Russia Sanctions and Brexit”

* Author: Maya Lester, Esq., Brick Court Chambers, maya.lester@brickcourt.co.uk, +44 20 7379 3550.
The House of Commons Foreign Affairs Committee has published a report on the UK’s relations with Russia (link to the report here) which addresses sanctions on Russia.
The report notes that the UK is one of the strongest western supporters of sanctions on Russia, that “recent developments in both the EU and US have put the future of the sanctions regime in doubt”, and that “its withdrawal from the EU might add weight to the voices of those inside the bloc who would like to see the sanctions eased or lifted”.  It states therefore that:
“if the UK is determined to maintain a principled stance in relation to the sanctions on Russia, this may require uncomfortable conversations with close allies. The withdrawal of the existing sanctions should be linked to Russia’s compliance with its obligations towards Ukraine, and should not be offered in exchange for Russian cooperation in other areas… The challenge in this approach is that the practical effect of economic sanctions on Russian decision-making is doubtful. It looks as though it will be increasingly difficult to sustain a united western position on sanctions, not least if they becoming a bargaining point during Brexit negotiations”.
The committee calls on the international community to remain unified and that the FCO should continue to work closely with the EU to maintain support for Ukraine, whether through sanctions or otherwise. It notes that it is difficult to measure the impact of the sanctions on Russia’s economy, and heard from a number of witnesses who suggested that the sanctions may be cementing support for President Putin. It supported the introduction of “Magnitsky-style” sanctions against those responsible for gross human rights abuses in Russia, noting that “Russia’s actions demonstrating compliance with the rule of international law in Ukraine could be linked to the gradual removal of sanctions”.  The report states that people associated with the Putin regime and responsible for human rights violations use British financial and legal services and have other links with the UK, and suggests introducing sanctions along the lines set out in the Criminal Finances Bill (which would allow the UK to seize the UK-held property of targeted people).
The Committee called on the FCO to clarify by March 2018 “how the UK will impose sanctions post-Brexit, explain whether Brexit would entail changes from the current sanctions regime and analyse the costs and benefits of the possible models for future UK-administered sanctions”.  As noted in our previous blog, the UK government is to introduce a Bill on post-Brexit sanctions policy soon, and there is a House of Lords inquiry (blog here) on post-Brexit UK sanctions policy.

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. M. Volkov: “Can Wells Fargo Fix its Defective Culture? (Part I of III)”

Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
The more you learn about Wells Fargo’s culture problems, the more difficult the problems become. But you have to start somewhere, and assuming that Wells Fargo really is committed to addressing the serious problems they face, this will take a long time and a lot of work.
Wells Fargo is really at the early stages of a massive remediation project. The board has essentially taken the matter over. Some would say that the board should have acted a long time ago, and was too trusting of senior management. That may very well be true and further investigation will reveal some answers to this important question.
As an initial step, like in life, Wells Fargo has to acknowledge the company had (and continues to have) a problem. Under the prior leadership- of CEO Stumpf, Wells Fargo tried to deny the problem and limit the extent of the problem.
Notwithstanding internal prior notices, line manager complaints, and complaints from whistleblowers, Wells Fargo denied the full extent of the problem. Just to refresh your recollection, under a Wells Fargo sales incentive program, local managers and bank officers were required to meet stringent sales targets built on the assumption of eight accounts (e.g. checking, credit card, cds) for each customer. As a result, Wells Fargo personnel created nearly 2 million (yes, two million) fake accounts to meet these ridiculous sales targets.
As a consequence, Wells Fargo is now facing major investigations from the Justice Department, the Department of Labor and the Securities and Exchange Commission. Previously, Wells Fargo settled with the CFPB, banking agencies and the City of Los Angeles for $185 million in penalties.
After much hand-wringing and delays, Wells Fargo’s board launched a major internal investigation of the incident, including serious issues raised about its handling of whistleblowers, several of whom were fired after raising concerns about the program. Whether Wells Fargo is able to conduct a serious internal investigation to uncover all of the facts and the reasons for the collapse of any corporate governance framework remains to be seen. As always, time will tell.
To be sure, Wells Fargo has some real difficult questions to answer, starting with the board itself for its wholesale lack of supervision over senior management. Former CEO Stumpf who has denied knowing about the problems with the sales program has to answer for internal documents which show he was notified about the problem but failed to act. It is not clear whether former CEO Stumpf read the internal documents but there are real issues surrounding his knowledge and failure to act.
Furthermore, former CEO Stumpf has to answer for something he definitely did do – he allowed Carrie Tolstedt, the senior executive responsible for overseeing the sales incentive program, to retire and collect a measly bonus of $124 million. Former CEO Stumpf has never answered for allowing this to occur after the scandal broke.
Recently, Wells Fargo fired four executives as it uncovered more information about the scandal and Wells Fargo’s failures. I am sure more heads will role but the question boils down to how Wells Fargo can ever recover and how long it will take.
Judging from comparable cases in the past, the question really is whether Wells Fargo will ever recover any positive reputation. The stain of this scandal is major and expected to continue for several years as it tries to put the matter behind it.
A major investigation is only one step. The question is whether Wells Fargo is ready to take the following steps that may require significant changes, including at the board level. Even with the commitment of a new senior leadership team, Wells Fargo’s cultural damage has occurred at every level of its operations – from branches to mid-level managers and to the C-Suite. Acknowledging a problem is one step, but committing to wholesale change is another.
Financial institutions are not known for being nimble. Wells Fargo needs to bring about structural and operational changes. To do so, Wells Fargo will have to make a major commitment to a separate and independent ethics function, as well as a wholesale expansion of its compliance office with resources.
Building a new culture can only be done with the commitment of the board and senior management. To implement such a new approach, the board and senior management have to empower and unleash independent ethics and compliance functions to follow through on their commitment. Such a process will take years of hard work, acceptance and commitment. Whether Wells Fargo can accomplish such a task remains to be seen.

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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: 27 Jan 2017: 82 FR 8589-8590: Delay of Effective Date for Importations of Certain Vehicles and Engines Subject to Federal Antipollution Emission Standards; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions.

  – 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: 6 Apr 2017: 82 FR 16730-16733: Revisions to the Unverified List (UVL)

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment:
10 Feb 2017: 82 FR 10434-10440: Inflation Adjustment of Civil Monetary Penalties. 
: 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 Jan 2017: 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: 7 Mar 2017: Harmonized System Update 1702, containing 1,754 ABI records and 360 harmonized tariff records. 
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
  – Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition 8 Mar 2017) of the ITAR is Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 750 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 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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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor)
Review last week’s top Ex/Im stories in the “Weekly Highlights of Daily Bugle Top Stories” posted 

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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 8,000 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.

* 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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