17-0817 Thursday “Daily Bugle”

17-0817 Thursday “Daily Bugle”

Thursday, 17 August 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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  1. President Signs Administrative Order Addressing China’s Laws, Policies, Practices, and Actions Related to IP, Innovation, and Technology 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC Publishes Name and Address Change Announcement
  4. EU Publishes Implementing Regulations Concerning the Classification of Certain Goods in the Combined Nomenclature
  1. Asia Times: “Could Pyongyang’s Nuke Missile Program Get 3D Printers?”
  1. J. DiMauro: “Evaluating and Enhancing Sanctions Screening as U.S. Raises Pressure”
  2. M. Volkov: “Retaining a ‘Risky’ Third-Party”
  3. Gary Stanley’s ECR Tip of the Day
  1. NAITA Presents 2017 Export Control Update (ITAR/EAR/OFAC) on 18-19 Sept in Huntsville, AL 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (28 Jul 2017), DOD/NISPOM (18 May 2016), EAR (15 Aug 2017), FACR/OFAC (16 Jun 2017), FTR (19 Apr 2017), HTSUS (25 Jul 2017), ITAR (11 Jan 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 


1President Signs Administrative Order Addressing China’s Laws, Policies, Practices, and Actions Related to IP, Innovation, and Technology

(Source: Federal Register)
82 FR 39007-39008: Memorandum of August 14, 2017 Addressing China’s Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation, and Technology
Memorandum for the United States Trade Representative
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby directed as follows:
Section 1. Policy
. It is the policy of the United States for our trade relations to enhance our economic growth, contribute favorably to our balance of trade, promote reciprocal treatment of American goods and investment, and strengthen the American manufacturing base.
The United States is a world leader in research-and-development-intensive, high-technology goods. Violations of intellectual property rights and other unfair technology transfers potentially threaten United States firms by undermining their ability to compete fairly in the global market. China has implemented laws, policies, and practices and has taken actions related to intellectual property, innovation, and technology that may encourage or require the transfer of American technology and intellectual property to enterprises in China or that may otherwise negatively affect American economic interests. These laws, policies, practices, and actions may inhibit United States exports, deprive United States citizens of fair remuneration for their innovations, divert American jobs to workers in China, contribute to our trade deficit with China, and otherwise undermine American manufacturing, services, and innovation.

Sec. 2. Determination of Whether to Conduct Investigation
. The United States Trade Representative shall determine, consistent with section 302(b) of the Trade Act of 1974 (19 U.S.C. 2412(b)), whether to investigate any of China’s laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development.
Sec. 3. General Provisions
  (a) Nothing in this memorandum shall be construed to impair or otherwise affect:
    (i) the authority granted by law to an executive department or agency, or the head thereof; or
    (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
  (b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.
  (c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
  (d) You are hereby authorized and directed to publish this memorandum in the Federal Register.
  (Presidential Sig.)
Washington, August 14, 2017.

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OGS_a12. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register

[No items of interest noted today.] 

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OGS_a34. State/DDTC Publishes Name and Address Change Announcement

(Source: State/DDTC)
DDTC has published the following name and address change announcement.
Effective immediately, Assystem GmbH, Hamburg at Hein-Sass-Weg 36, 21129 Hamburg, Germany will change as follows: Assystem Germany GmbH, Munich at Erwin-von-Kreibig-Strabe 3, 80807 Munich. 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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OGS_a45. EU Publishes Implementing Regulations Concerning the Classification of Certain Goods in the Combined Nomenclature


* Commission Implementing Regulation (EU) 2017/1476 of 11 August 2017 concerning the classification of certain goods in the Combined Nomenclature
* Commission Implementing Regulation (EU) 2017/1477 of 11 August 2017 amending Regulation (EC) No 1051/2009 concerning the classification of certain goods in the Combined Nomenclature

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Asia Times: “Could Pyongyang’s Nuke Missile Program Get 3D Printers?”

Asia Times, 17 Aug 2017.) [Excerpts.]
Ukrainian-made rocket engines and illicit components from Chinese makers are being credited for a recent spate of successful North Korean missile launches. Such flouting of non-proliferation rules frustrates efforts to find solutions to the crisis.
However, there’s another, potentially worse development looming: What if Pyongyang reverse-engineers such equipment and uses advanced 3D printing technology to mass-produce rocket and nuclear-bomb parts?
The cutting-edge technology of 3D printing, which rapidly creates physical objects from three-dimensional digital models, is a game changer for North Koreans and others who want to reverse-engineer and make weapons of mass destruction (WMD) in quantity. Analysts say signs are that North Korea is trying to acquire 3D printers for this purpose, or may have already. …
Robert Shaw, a US arms-control expert, says there’s no hard evidence yet that Pyongyang has acquired advanced 3D printing technology. But he told Asia Times: “I would be surprised if there were not already efforts to procure high-end 3D printers. Ideally, they would want to procure such machines in quantity.” …
Shaw says the spread of such technology could be held in check by strengthening existing export controls and requiring 3D printer manufacturers to monitor sales to foreign buyers carefully.
But it may be a losing battle. Shaw notes that the export-control rules governing Cold War-era bodies such as the Missile Technology Control Regime currently have few controls in place that focus on 3D printers. … 

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. J.

DiMauro: “Evaluating and Enhancing Sanctions Screening as U.S. Raises Pressure”

* Author: Julie DiMauro, regulatory intelligence expert in the Enterprise Risk Management division of Thomson Reuters Regulatory Intelligence, julie.dimauro@thomsonreuters.com.
A surge of U.S. foreign-policy sanctions has added new challenges to financial services firms in ways that will test their ability to adapt and remain competitive.
Regulators and enforcement authorities have made it clear that organizations are obligated to screen employees, contractors, vendors, business associates, and customers against an ever-growing list of excluded individuals and entities.
The alternative is significant financial penalties and reputational damage.
All of this has greatly increased the burden on compliance officers, especially as regulators are demanding the use of high-quality technology for screening purposes.
A Surge of Sanctions
The Trump administration slapped financial sanctions on Venezuelan President Nicolas Maduro last week(here) after a disputed weekend election that gave the South American country’s ruling party virtually unlimited powers.
The sanctions freeze any assets Maduro may have in U.S. jurisdictions and bar Americans from doing business with him. They were outlined by the Treasury Department’s Office of Foreign Assets Control.
The monetary impact of the sanctions was not immediately clear — Maduro’s U.S. holdings were not publicized. Imposing sanctions on a head of state is rare, though, but can be symbolically powerful, leading other countries to similarly shun the leader.
The United States has had sanctions against Syria’s President Bashar Assad since 2011. Other heads of state currently subject to U.S. sanctions include Zimbabwe’s Robert Mugabe and North Korea’s Kim Jong Un.
Trump also last week signed legislation overwhelmingly passed by Congress that expands U.S. sanctions against Russia, Iran and North Korea. Russia was targeted for its suspected meddling in last year’s U.S. presidential election and its annexation of Ukraine’s Crimea, while Iran and North Korea were targeted for weapons activities. Russia denies any interference in the election.
The new Countering America’s Adversaries Through Sanctions Act, among other actions, establishes a congressional review process to authorize any changes to existing sanctions against Russia, expands the sectoral sanctions program launched in 2014, and authorizes secondary sanctions against non-U.S. persons for engaging in certain Russia-related activities.
The law directs the U.S. Office of Foreign Assets Control (OFAC) to expand sanctions imposed by the United States and the European Union on many of the largest Russian sectors, such as banks, oil and gas companies, and dozens of their subsidiaries. The expansion prohibits U.S. persons from involvement in new financing for these Russian banks and oil and gas companies, and new share offerings by such banks.
The act also establishes new secondary sanctions, allowing the Trump administration to penalize non-U.S. companies engaged in certain sensitive activities relating to Russia, even if the penalized company has no ties or contact with the United States. It is unclear how this can and will be enforced.
The act limits the president’s ability to dismantle the current sanctions targeting Russia and Russian companies without Congress’ authority. Trump criticized this language even as he signed the bill.
Also in late July(here), the U.S. Treasury imposed sanctions on six Iranian firms for their role in the development of a ballistic missile program, after Tehran launched a rocket capable of putting a satellite into orbit.
Iran calls the new sanctions a breach of the nuclear deal it agreed in 2015, and it has complained to the international body that oversees the pact’s implementation, the Joint Comprehensive Plan of Action (JCPOA) Commission.
Furthermore, Trump in June announced that the United states would strengthen economic and diplomatic sanctions on Cuba(here), reversing an Obama policy of more open relations with the Castro regime that Trump called “terrible and misguided.”
An executive order signed by Trump reinstated broad sanctions against the Cuban government, including a tourism ban. Under the new policy, the United States is prohibited from trading with or purchasing from establishments owned by the Castro military and government, including state-run restaurants and hotels. U.S. dollars will still be able to go to small businesses owned by private citizens, however, which Cuba made legal in 2016.
Even before Trump took office, then-President Barack Obama issued an executive order in December(here) targeting Russian intelligence services and their top officers, as well as three companies seen as supporting Russia’s cyber-enabled activities including election interference.
Record Penalty
This year has delivered the largest OFAC penalty ever against a non-financial institution.
OFAC in March joined the Commerce and Justice Departments in reaching a $1.2 billion settlement agreement with ZTE Corp.(here) for civil and criminal violations of export and sanctions laws, which included a guilty pleas for conspiring to violate the International Emergency Economic Powers Act (IEEPA).
The settlement agreement followed an investigation into ZTE Corp.’s “multi-year and systematic practice of utilizing third-party companies to surreptitiously supply ran with a substantial volume of U.S.-origin goods, including those on the Commerce Control List.”
ZTE’s misconduct included serious charges of obstructing justice and taking affirmative steps to mislead the U.S. government, a likely factor behind the record fine.
In February, OFAC issued regulations to implement the Federal Civil Penalties Adjustment Act of 1990 and raise the maximum amount of civil fines that may be assessed in civil sanctions cases.
Violations of IEEPA, the statute under which most OFAC sanctions regulations have been promulgated, may now be subject to a penalty of the greater of $289,238 per violation, or twice the amount of the underlying transaction.
Evaluating Sanctions Screening Practises 
The sanctions noted above are but a fragment of the ones that exist today, but they demonstrate the rapid evolution of the sanctions environment.
The burden on compliance departments is significant. Regulators expect firms to provide the resources, especially technology(here), to implement sanctions and fight related illicit financial transactions.
Each sanctions program supports different foreign policy and national security goals, and thus, has an importance beyond business conduct.
U.S. persons and entities are expected to exercise diligence against transacting any business with a sanctioned country, group, entity, or individual. This can only be carried out if the sanctions are understood, policies and procedures are updated swiftly, and the appropriate people are trained and resources are sufficient.
First, the compliance team must identify the staff members with oversight of the entire process.
Employees roles should be clearly identified, covering tasks such as screening, noting results, verification and testing, report writing and implementing actions.
If other teams assist or some tasks are outsourced — those teams and persons must be known and their training documented. Their work should be subject to periodic and surprise vetting.
Although OFAC has the authority to audit businesses on site, the agency frequently rely on other federal regulators to enforce compliance. Businesses need to be prepared for on-site examinations in which regulators review institutions’ policies and procedures, inspect documentation of past and pending transactions, and interview personnel.
Institutions should conduct a risk analysis to determine the likelihood that they will encounter sanctions-infringing issues.
Certain types of business operations, such as international wire transfers or international trade, particularly foreign trade finance, are at a higher risk than others.
Sanctions-related risk depends in large part on who the customers are and what kind of business the firm does.
A well-crafted sanctions compliance program should address the particular risks associated with the firm’s lines of business, transactions, products, customer base and geographies.
Third, companies must be mindful that many enforcement lapses have a cultural root.
A company that has a well-articulated and strong risk culture generally showcase certain qualities, such as timely information sharing; a rapid elevation of emerging risks to persons independent of the transactional side of the business; and a leadership that encourages the prompt reporting of suspected wrongdoing.
A strong risk culture might also feature coordination among compliance and risk functions and business lines regarding procedures in areas, such as anti-money laundering and economic sanctions procedures, that are both subject to increased law enforcement pressure and directly affect the business’ ability to compete internationally.
Fourth, companies must institute an incident response system that immediately responds to and remediates incidents, and an evidence-based method of showcasing operational effectiveness after remediation.
Look-back exercises in these scenarios are excellent training tools for internal employees and business partners.
Finally, individual compliance and risk professionals should be mindful of the evidence they collect on their own behalf to demonstrate that they have assembled the right resources and effectively managed the firm’s sanctions policies and procedures.

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8M. Volkov: “Retaining a ‘Risky’ Third-Party”

(Source: Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
Every company has done it. Chief Compliance Officers have had to hold their respective noses and push forward with due diligence to retain a risky third party.
Rather than reject the third party, a CCO convinces him or herself that the company can mitigate the risks by contract representations and warranties, annual certifications, and a plan to monitor and audit the third party in the next three years. The problem with this “rationalization” is that CCOs rarely get around to following up on the third parties they know need to be monitored and audited.
We all have experienced this scenario. Due diligence systems are not inflexible, and they can be massaged to make a risky deal look better or even passable.
Let’s face it, due diligence is an imprecise science. It is hard to predict based on a due diligence review whether a third party agent will break bad or stay in compliance. We all know that some third parties look low-risk on paper but in fact may be higher risk. Some traits and personal risk factors cannot be identified on paper, through a questionnaire or based on open source intelligence.
In some cases, a thorough due diligence reveals few risks but there might be a gut feeling that the third party is not all they are cracked up to be. A third party by definition is not an employee and a company has little control over the third party-s day-to-day activities. I am not suggesting that due diligence is worthless or that there is no way to assess the risk of a third party. To the contrary, I believe in due diligence as a discipline and a comparative technique that provides valuable insight and assessment of future risks. Some of the process involves intangibles relating to a business sponsor, the justification for hiring a third party, the nature of the interactions with the potential third party in the due diligence process, and an overall sense of the third party’s commitment to ethics and compliance. There is no reason to ignore your gut reactions to these factors and others when reviewing due diligence information.
With experience comes wisdom, and I have witnessed due diligence cases where an initial impression may quickly change based on a detailed investigation and uncovering of misconduct and other risk factors. On the other hand, I have conducted due diligence of third parties where there are few risks and further investigation has only confirmed the low risk nature of the proposed third party.
CCOs know there are a few “risky” third parties operating with the business. While it is easy to remind CCOs to monitor and audit these risky third parties, CCOs face a stark reality that they do not have the time or resources to monitor these third parties on an ongoing basis (other than maintaining a database service that notifies the CCO if a significant event involving the third party occurs). As always, the CCO has to prioritize his or her resources, attend to the riskier third parties, and enlist the support of internal auditing to help follow up with some of the risky third parties.
CCOs know how to use sampling and other transaction testing strategies to conduct monitoring and auditing of third parties in order to maximize use of available resources. The term “audit” is not limited to a formal, all-out financial and compliance audit with boots on the ground. There are less intensive type audits that can be conducted with sampling and transaction testing techniques. CCOs should rely on these strategies when needed to leverage limited resources.

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9Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update; available by subscription from
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
The definition of the word “item” in EAR Part 772 states that it means “commodities, software, and technology.” When the EAR intend to refer specifically to commodities, software, or technology, the text will use the specific reference.

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10NAITA Presents 2017 Export Control Update (ITAR/EAR/OFAC) on 18-19 Sept in Huntsville, AL

(Source: Amanda Berkey;
* What: NAITA 2017 Export Control Update (ITAR/EAR/OFAC).
* When: 18-19 Sept 2017.
* Where: The Westin Huntsville; 6800 Governors West, Huntsville, AL 35806.
* Sponsor: North Alabama International Trade Association (NAITA) and Maynard Cooper & Gale PC.
* Speakers Include:  Kevin Wolf, Candace Goforth, Michael Laychak, and Jim Bartlett.
* Credits: Approved by the Mandatory Continuing Legal Education Commission of the Alabama State Bar for 12.5 CLEs.
* Register: Click here for details & registration link or contact Amanda Berkey/NAITA at 256-532-3505,

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* Henry Drummond (Rev. Prof Henry Drummond; 17 Aug 1851 – 11 Mar 1897; was a Scottish evangelist, biologist, writer, and lecturer.)
  – “Unless a man undertakes more than he possibly can do, he will never do all he can do.”
* Davy Crocket (David Crockett; 17 Aug 1786 – 6 Mar 1836; was a 19th-century American folk hero, frontiersman, soldier, and politician. He is commonly referred to in popular culture by the epithet “King of the Wild Frontier”. In early 1836, Crockett took part in the Texas Revolution and was killed at the Battle of the Alamo in March.)
  – “We have the right as individuals to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money.”

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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: 28 Jul 2017: 82 FR 35064-35065: Technical Corrections to U.S. Customs and Border Protection Regulations
  – 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 cancelled Supp. 1 to the NISPOM (Summary here.)

: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last Amendment: 15 Aug 2017: 
82 FR 38764-38819: Wassenaar Arrangement 2016 Plenary Agreements Implementation 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 16 Jun 2017: 82 FR 27613-27614: Removal of Burmese Sanctions Regulations 
: 15 CFR Part 30
  – Last Amendment: 19 Apr 2017: 82 FR 18383-18393: Foreign Trade Regulations: Clarification on Filing Requirements 
  – HTS codes that are not valid for AES are available
  – The latest edition (18 July 2017) 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, Census/AES guidance, and to many errors contained in the official text. 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: 25 Jul 2017: Harmonized System Update 1706, containing 834 ABI records and 157 harmonized tariff records.
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
  – Last Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition: 10 Jun 2017) 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, over 800 footnotes containing amendment histories, 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 “Weekly Highlights of the Daily Bugle Top Stories” published 

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is 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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