;

16-0908 Thursday “The Daily Bugle”

16-0908 Thursday “Daily Bugle”

Thursday, 8 September 2016

TOPThe 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 
here
for free subscription.
Contact us
 for advertising inquiries and rates.

  1. State/DDTC Amends ITAR Parts 120, 125, 126, and 130 
  2. Commerce/BIS Seeks Comments on Effectiveness of Licensing Procedures for Agricultural Commodities to Cuba 
  3. Commerce/BIS Seeks Comments on Effects of Extending Foreign Policy-Based Export Controls Through 2017 
  4. DHS/CBP Posts Correction Concerning Investigation of Claims of Evasion of Antidumping and Countervailing Duties 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/Census: “ACE AESDirect Scheduled Outage, 10-11 Sep” 
  3. Commerce/BIS: (No new postings.) 
  4. DoD/DSS Posts Reminder About Upcoming Electronic Fingerprint Deadline 
  5. State/DDTC Systems Unavailable on 9 Sep 
  6. UK/BIS ECO: “EU Extends Russia Sanctions to 31 January 2017” 
  1. ST&R Trade Report: “ACE Transition for Liquidation, Drawback, Other Functionality Postponed to Oct. 29”
  2. WorldECR News Alert 8 September 2016 
  1. D.M. Edelman: “ITAR and EAR Changes Take Effect in September and November” 
  2. J.E. Bartlett III: “ITAR Amended Again Today. Is Your Copy of the ITAR Up to Date?” 
  3. M. Lester: “UN Calls for Stricter Enforcement of Sanctions on N Korea”
  4. S.L. Bell: “US Prohibits Imports Made with Forced Labor: New Law is a Force to be Reckoned With” 
  5. R.C. Burns: “Brace Yourself: OFAC Fines Orthodontic Device Company” 
  1. ICPA 2016 ICPA Export/Import Fall Conference, 9-11 Oct 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (26 Aug 2016), DOD/NISPOM (18 May 2016), EAR (7 Sep 2016), FACR/OFAC (18 May 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (8 Sep 2016) 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. State/DDTC Amends ITAR Parts 120, 125, 126, and 130
(Source: Federal Register) [Excerpts.]
 
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
* AGENCY: Department of State.
* ACTION: Final rule.
* SUMMARY: On June 3, 2016, the Department of State published an interim final rule amending and adding definitions to the International Traffic in Arms Regulations (ITAR) as part of the President’s Export Control Reform (ECR) initiative. After review of the public comments to the interim final rule, the Department further amends the ITAR by revising the definition of “retransfer” and making other clarifying revisions.
* DATES: The rule is effective September 8, 2016.
* FOR FURTHER INFORMATION CONTACT: Mr. C. Edward Peartree, Director, Office of Defense Trade Controls Policy, Department of State, (202) 663-1282; e-mail DDTCResponseTeam@state.gov. ATTN: ITAR Amendment – Revisions to Definitions.
* SUPPLEMENTARY INFORMATION: The Directorate of Defense Trade Controls (DDTC), U.S. Department of State, administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120 through 130). On June 3, 2015, the Department of State published a rule (80 FR 31525) proposing to amend the International Traffic in Arms Regulations (ITAR) by revising key definitions, creating several new definitions, and revising related provisions, as part of the President’s Export Control Reform (ECR) initiative. After review of the public comments on the proposed rule, the Department published an interim final rule (81 FR 35611, June 3, 2016) implementing several of the proposed revisions and additions, with an additional comment period until July 5, 2016. After reviewing the public comments to the interim final rule, the Department further amends the ITAR by revising the definition of “retransfer” in §120.51, adding a new paragraph (f) to §125.1, revising §126.16(a)(1)(iii) and §126.17(a)(1)(iii), revising §126.18(d)(1), and revising §130.2.
 
* Changes in This Rule
The following changes are made to the ITAR with this final rule: (i) revisions to the definition of “retransfer” in §120.51 to clarify that temporary  transfers to third parties and releases to same-country foreign persons are within the scope of the definitions; (ii) addition of a new paragraph (f) in §125.1 to mirror the new sections of the ITAR in §§ 123.28 and 124.1(e) detailing the scope of licenses; (iii) revising §126.16(a)(1)(iii) and §126.17(a)(1)(iii) to reflect the definitions of reexport and retransfer in the Defense Trade Cooperation Treaties with Australia and the United Kingdom, respectively, and to make appropriate revisions to the definitions of reexport in §120.19 and retransfer in §120.51 to reflect that these definitions do not apply in the treaty context; (iv) revisions to §126.18(d)(1) to clarify that the provisions include all foreign persons who meet the definition of regular employee in §120.39; and (v) revisions to §130.2 to ensure that the scope of the Part 130 requirements does not change due to the revised and new definitions. The remaining definitions published in the June 3, 2015 proposed rule (80 FR 31525) and not addressed in the June 3, 2016 interim final rule or this final rule, will be the subject of separate rulemakings and the public comments on those definitions will be addressed therein.  …
 
PART 120

PURPOSE AND DEFINITIONS 
§ 120.19 Reexport.
(a) Reexport, except as set forth in § 126.16 or § 126.17, means:
* * * * *
§ 120.51 Retransfer.
(a) Retransfer, except as set forth in § 126.16 or § 126.17, means:
   (1) A change in end use or end user, or a temporary transfer to a third party, of a defense article within the same foreign country; or
   (2) A release of technical data to a foreign person who is a citizen or permanent resident of the country where the release or transfer takes place.
(b) [Reserved]
 
PART 125

LICENSES FOR THE EXPORT OF TECHNICAL DATA AND CLASSIFIED DEFENSE ARTICLES
§ 125.1 Exports subject to this part.
* * * * *
(f) Unless limited by a condition set out in an agreement, the export, reexport, retransfer, or temporary import authorized by a license is for the item(s), end-use(s), and parties described in the agreement, license, and any letters of explanation. DDTC approves agreements and grants licenses in reliance on representations the applicant made in or submitted in connection with the agreement, letters of explanation, and other documents submitted.
 
PART 126

GENERAL POLICIES AND PROVISIONS
§ 126.16 Exemption pursuant to the Defense Trade Cooperation Treaty between the United States and Australia.
(a) * * *
   (1) * * *
      (iii) Reexport and retransfer.
(A) Reexport means, for purposes of this section only, the movement of previously Exported Defense Articles by a member of the Australian Community from the Approved Community to a location outside the Territory of Australia.
(B) Retransfer means, for purposes of this section only, the movement of previously Exported Defense Articles by a member of the Australian Community from the Approved Community to a location within the Territory of Australia;
* * * * *
§ 126.17 Exemption pursuant to the Defense Trade Cooperation Treaty between the United States and United Kingdom.
(a) * * *
   (1) * * *
      (iii) Reexport and retransfer.
(A) Reexport means, for purposes of this section only, movement of previously Exported Defense Articles by a member of the United Kingdom Community from the Approved Community to a location outside the Territory of the United Kingdom.
(B) Retransfer means, for purposes of this section only, the movement of previously Exported Defense Articles by a member of the United Kingdom Community from the Approved Community to a location within the Territory of the United Kingdom.
* * * * *
§ 126.18 Exemptions regarding intra-company, intra-organization, and intra-governmental transfers to employees who are dual nationals or third-country nationals.
* * * * *
(d) * * *
   (1) Regular employees of the foreign business entity, foreign governmental entity, or international organization;
* * * * *
 
PART 130

POLITICAL CONTRIBUTIONS, FEES AND COMMISSIONS
§ 130.2 Applicant.
Applicant
means any person who applies to the Directorate of Defense Trade Controls for any license or approval required under this subchapter for the export, reexport, or retransfer of defense articles or defense services valued in an amount of $500,000 or more which are being sold commercially to or for the use of the armed forces of a foreign country or international organization. This term also includes a person to whom the required license or approval has been given.
 
   Rose E. Gottemoeller, Under Secretary, Arms Control and International Security, Department of State.

* * * * * * * * * * * * * * * * * * * * 

EXIM_a2

2. Commerce/BIS Seeks Comments on Effectiveness of Licensing Procedures for Agricultural Commodities to Cuba
(Source: Federal Register) [Excerpts.]
 
81 FR 62079: Effectiveness of Licensing Procedures for Agricultural Commodities to Cuba
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Request for comments.
* SUMMARY: The Bureau of Industry and Security (BIS) is requesting public comments on the effectiveness of its licensing procedures as defined in the Export Administration Regulations for the export of agricultural commodities to Cuba. BIS will include a description of these comments in its biennial report to the Congress, as required by the Trade Sanctions Reform and Export Enhancement Act of 2000, as amended (TSRA).
* DATES: Comments must be received by October 11, 2016. …
* FOR FURTHER INFORMATION CONTACT: Tracy L. Patts, Office of Nonproliferation and Treaty Compliance, Telephone: (202) 482-4252. Additional information on BIS procedures and previous biennial reports under TSRA is available here. Copies of these materials may also be requested by contacting the Office of Nonproliferation and Treaty Compliance.
* SUPPLEMENTARY INFORMATION: …
   By this notice, BIS requests public comments on the effectiveness of the licensing procedures for the export of agricultural commodities to Cuba set forth under section 740.18 of the EAR. Parties submitting comments are asked to be as specific as possible. All comments received by the close of the comment period will be considered by BIS in developing the report to Congress. …
 
   Dated: September 2, 2016.
Kevin J. Wolf, Assistant Secretary for Export Administration.

* * * * * * * * * * * * * * * * * * * * 

EXIM_a3

3. Commerce/BIS Seeks Comments on Effects of Extending Foreign Policy-Based Export Controls Through 2017
(Source: Federal Register) [Excerpts.]
 
81 FR 62080-62081: Effects of Extending Foreign Policy-Based Export Controls Through 2017
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Request for comments.
* SUMMARY: The Bureau of Industry and Security (BIS) is seeking public comments on the effect of existing foreign policy-based export controls in the Export Administration Regulations. Section 6 of the Export Administration Act requires BIS to consult with industry on the effect of such controls and to report the results of the consultations to Congress. BIS is conducting the consultations through this request for public comments. Comments from all interested persons are welcome. All comments will be made available for public inspection and copying and included in a report to be submitted to Congress.
* DATES: Comments must be received by October 11, 2016. …
* FOR FURTHER INFORMATION CONTACT: Mark Salinas, Foreign Policy Division, Office of Nonproliferation and Treaty Compliance, Bureau of Industry and Security, telephone 202-482-2164. Copies of the current Annual Foreign Policy Report to the Congress are available here, and copies may also be requested by calling the Office of Nonproliferation and Treaty Compliance at the number listed above.
* SUPPLEMENTARY INFORMATION: …
     BIS is particularly interested in receiving comments on the economic impact of proliferation controls. BIS is also interested in industry information relating to the following:
  (1) Information on the effect of foreign policy-based export controls on sales of U.S. products to third countries (i.e., those countries not targeted by sanctions), including the views of foreign purchasers or prospective customers regarding U.S. foreign policy-based export controls.
  (2) Information on controls maintained by U.S. trade partners. For example, to what extent do U.S. trade partners have similar controls on goods and technology on a worldwide basis or to specific destinations?
  (3) Information on licensing policies or practices by our foreign trade partners that are similar to U.S. foreign policy based export controls, including license review criteria, use of conditions, and requirements for pre- and post-shipment verifications (preferably supported by examples of approvals, denials and foreign regulations).
  (4) Suggestions for bringing foreign policy-based export controls more into line with multilateral practice.
  (5) Comments or suggestions to make multilateral controls more effective.
  (6) Information that illustrates the effect of foreign policy-based export controls on trade or acquisitions by intended targets of the controls.
  (7) Data or other information on the effect of foreign policy-based export controls on overall trade at the level of individual industrial sectors.
  (8) Suggestions for measuring the effect of foreign policy-based export controls on trade.
  (9) Information on the use of foreign policy-based export controls on targeted countries, entities, or individuals. BIS is also interested in comments relating generally to the extension or revision of existing foreign policy-based export controls. …
 
   Dated: September 1, 2016.
Kevin J. Wolf, Assistant Secretary for Export Administration.

* * * * * * * * * * * * * * * * * * * * 

EXIM_a4

4. DHS/CBP Posts Correction Concerning Investigation of Claims of Evasion of Antidumping and Countervailing Duties
(Source: Federal Register) [Excerpts.]
 
81 FR 62004: Investigation of Claims of Evasion of Antidumping and Countervailing Duties; Correction
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury.
* ACTION: Interim final rule; correction.
* SUMMARY: U.S. Customs and Border Protection (CBP) published an interim final rule on August 22, 2016, in the Federal Register, concerning investigation of claims of evasion of antidumping and countervailing duties. In accordance with section 421 of the Trade Facilitation and Trade Enforcement Act of 2015, the rule amended the U.S. Customs and Border Protection regulations to set forth procedures for CBP to investigate claims of evasion of antidumping and countervailing duty orders. That document inadvertently omitted a comma in the definition of “evade or evasion.” This document corrects the text in that definition.
* DATES: This correction is effective September 8, 2016.
* FOR FURTHER INFORMATION CONTACT: Robert Altneu, Chief, Trade and Commercial Regulations Branch, Regulations and Rulings, Office of Trade, at robert.f.altneu@cbp.dhs.gov.
* SUPPLEMENTARY INFORMATION: On August 22, 2016, U.S. Customs and Border Protection (CBP) published in the Federal Register (81 FR 56477) an Interim Final Rule (CBP Dec. 16-11) document, entitled “Investigation of Claims of Evasion of Antidumping and Countervailing Duties.” As published, the interim final regulation contains an error in the text of the definition of “evade or evasion” in Sec. 165.1. The definition should be the same as the statutory definition found in section 421 of the Trade Facilitation and Trade Enforcement Act of 2015 (19 U.S.C. 1517(a)(5)), but a comma was inadvertently omitted. …
 
   Harold M. Singer,Director, Regulations and Disclosure Law Division, Regulations and Rulings, Office of Trade, U.S. Customs and Border Protection.
   Approved: September 2, 2016.
Timothy E. Skud, Deputy Assistant Secretary of the Treasury.

* * * * * * * * * * * * * * * * * * * * 

OGS
OTHER GOVERNMENT SOURCES

OGS_a15. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals [Publication Date: 9 September 2016.]:
  – Application and Approval to Manipulate, Examine, Sample or Transfer Goods
  – Foreign Assembler’s Declaration
  – Lien Notice
  – Vessel Entrance or Clearance Statement

* U.S. Customs and Border Protection; NOTICES; National Customs Automation Program Tests: Submission of Data Required by the Food Safety and Inspection Service in the Automated Commercial Environment [Publication Date: 9 September 2016.]

* * * * * * * * * * * * * * * * * * * *

OGS_a26. Commerce/Census: “ACE AESDirect Scheduled Outage, 10-11 Sep”

(Source: census@subscriptions.census.gov, 8 Sep 2016)
 
This message is intended for ACE AESDirect filers ONLY. If you are not an ACE AESDirect filer, you are not affected by this outage.
 
The outage is effective 10:00pm EST Saturday, September 10 – 4:00am EST Sunday, September 11.
 
ACE AESDirect filers may submit shipments under the AES Downtime Policy. State Department licensable shipments cannot be exported under the AES Downtime Policy and must be held until the connection is restored and an Internal Transaction Number (ITN) is received. Once connection is brought back on-line after the outage, all shipments that were exported under the AES Downtime Policy must be filed along with any new AES transactions.
 
If you use the AES Downtime Policy for export, please contact the port from which you will be exporting. In lieu of the AES Proof of Filing citation, please use the AES Downtime citation, which consists of the phrase AESDOWN, your individual company’s Filer ID, followed by the date.
 
For example: AESDOWN 123456789 09/10/2016
 
Please see the CBP web site for further information on the AES Downtime Policy.
 
For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.
 
  – Telephone: (800) 549-0595, select option 1 for AES
  – Email: askaes@census.gov
* * * * * * * * * * * * * * * * * * * *

OGS_a37. Commerce/BIS: (No new postings.)

(Source: Commerce/BIS)
* * * * * * * * * * * * * * * * * * * *

OGS_a48. DoD/DSS Posts Reminder About Upcoming Electronic Fingerprint Deadline

(Source: DoD/DSS)
 
Effective October 1, 2016, all fingerprints associated with SON 346W must be submitted electronically to the Office of Personnel Management, or the fingerprint will be rejected. This will also result in the rejection of any investigation requests if an electronic fingerprint is not received within 14 days of the investigation request being received by OPM. Click here to view the electronic fingerprint capture options for Industry.
* * * * * * * * * * * * * * * * * * * *

OGS_a59. State/DDTC Systems Unavailable on 9 Sep

(Source: State/DDTC)
 
REMINDER: All DDTC systems, including DTrade and EFS, will be unavailable to industry from 5:30PM (EST) Friday September 9 through 9:30PM (EST) Friday September 9 due to scheduled system maintenance.
* * * * * * * * * * * * * * * * * * * *

OGS_a610. UK/BIS ECO: “EU Extends Russia Sanctions to 31 January 2017”

(Source: UK/BIS)

ECO Notice to Exporters 2014/22 outlined the EU economic sanctions introduced in response to Russia’s destabilising role in Eastern Ukraine. The measures were contained in Council Decision 2014/512/CFSP, and the 22 June 2015 amendment to the Council Decision linked the restrictive measures to the complete implementation of the Minsk agreements.
 
On 21 December 2015, the EU Council extended the economic sanctions on the basis that the Minsk agreements would not be completely implemented by 31 December 2015 and then extended them again on 1 July 2016 for a further six months in order to enable the Council to further assess their implementation.
 
The new amendment extends the restrictive measures until 31 January 2017.
 
What will this mean for exporters?
 
As a reminder to exporters, the restrictive measures include:
 
  – an arms embargo
  – a prohibition on supply of dual-use items which are or may be intended for military end-use or for a military end-user in Russia

   – requirement of an export licence for the export of certain energy-related equipment and technology to Russia (or any other country if such equipment or technology is for use in Russia)

* * * * * * * * * * * * * * * * * * * *

NWSNEWS

 
U.S. Customs and Border Protection announced Sept. 7 that the mandatory transition of the following post-release capabilities to the Automated Commercial Environment has been postponed from Oct. 1 to Oct. 29.
 
  – liquidation
  – drawback
  – reconciliation
  – duty deferral
  – collections
  – statements
  – automated surety interface
 
CBP states that all capabilities included in the Oct. 29 transition that are planned for but not yet deployed to the certification environment will be operational in CERT, and all known prioritized issues will be resolved, no later than Sept. 30.
 
Further, CBP will stand up an operations center to ensure the quick resolution of any issues that may arise following the Oct. 29 deployment. Trade users will continue to contact their assigned client representative as the first point of contact, and client representatives will escalate trade issues as needed to the operations center. Additional information on support during the transition will be published prior to Oct. 29.
 
CBP adds that while it has implemented the capability for most partner government agency data to be filed electronically in ACE, trade users may continue to file a combination of CBP electronic data and PGA paper forms where that is currently permitted.
 
  – Animal and Plant Health Inspection Service (Lacey Act), National Highway Traffic Safety Administration, Food and Drug Administration, and (as of Sept. 20) National Marine Fisheries Service data is required to be filed electronically in ACE
  – for PGA data that is not required to be filed electronically in ACE, filers may file using options currently specified as available for those PGAs
  – CBP will continue to coordinate and communicate as required the conclusion of PGA pilots via public notices
* * * * * * * * * * * * * * * * * * * *

NWS_a212. WorldECR News Alert 8 September 2016

(Source: WorldECR)
 
  (1) Dual-use goods comprise 20% of total EU exports, report says
  (2) U.S. updates sanctions and publishes new Ukraine licence
  (3) Revealed: OFAC’s enforcement approach to foreign banks
  (4) Ukraine extends Russia sanctions
  (5) EU de-lists four Iraqi companies

* * * * * * * * * * * * * * * * * * * *

COMMCOMMENTARY

COMM_a1
13. D.M. Edelman: “ITAR and EAR Changes Take Effect in September and November”

 
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com
 
The Department of State and the Department of Commerce have revised several provisions of the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR). Many of the changes are part of an ongoing effort to increase consistency between the terms used in the ITAR and the EAR.
 
One set of revisions has been in effect since September 1, while the other will take effect in November. Below is a brief summary of the changes.


undefined

* * * * * * * * * * * * * * * * * * * *

COMM_a214. J.E. Bartlett III:  “ITAR Amended Again Today.  Is Your Copy of the ITAR Up to Date?”
(Source: Author)
 
* Author: James E. Bartlett III, Esq., Partner, FCC Advisory B.V., Bruchem, Netherlands and Washington, DC; JEBartlett@JEBartlett.com, 202-802-0646.
 
Today’s ITAR amendments contain the following changes that went into effective today:
 
  (1) Revisions to the definition of “retransfer” in §120.51 to clarify that temporary transfers to third parties and releases to same-country foreign persons are within the scope of the definitions;
  (2) Addition of a new paragraph (f) in §125.1 to mirror the new sections of the ITAR in §§ 123.28 and 124.1(e) detailing the scope of licenses;
  (3) Revising §126.16(a)(1)(iii) and §126.17(a)(1)(iii) to reflect the definitions of reexport and retransfer in the Defense Trade Cooperation Treaties with Australia and the United Kingdom, respectively, and to make appropriate revisions to the definitions of reexport in §120.19 and retransfer in §120.51 to reflect that these definitions do not apply in the treaty context;
  (4) Revisions to §126.18(d)(1) to clarify that the provisions include all foreign persons who meet the definition of regular employee in §120.39; and
  (5) Revisions to §130.2 to ensure that the scope of the Part 130 requirements does not change due to the revised and new definitions.
 
We also expect a new Federal Register within the next two weeks to revise ITAR Part 126.  Then on November 15st, the August 17, 2016, amendments will take effect, followed by the amendments that take effect on December 31st.  Caution: Today’s on-line e-CFR is still displaying the ITAR as was effective on September 6, 2016. The only available copy of the ITAR that is always current is Bartlett’s Annotated ITAR (“The BITAR”).  The current 8 Sep 2016 edition of the BITAR contains all the above amendments, plus 756 footnotes to the sections that have been amended, but do not take effect until 15 November and 31 December, as well as the history of the sections, citations to errors in the official ITAR, and practical tips for compliance.  The BITAR also contains an appendix including a list of all ITAR amendments since 2007, a list of all DDTC Consent Agreements, and other features, plus a 33-page Index, which is not available in any other ITAR version.  The BITAR is a Word version of the ITAR plus all the additional goodies, emailed to subscribers with every amendment.  Subscribe at www.FullCircleCompliance.eu.
* * * * * * * * * * * * * * * * * * * *

COMM_a315. M. Lester: “UN Calls for Stricter Enforcement of Sanctions on N Korea”

 
* Author: Maya Lester, Esq., Brick Court Chambers, maya.lester@brickcourt.co.uk, +44 20 7379 3550.
 
The UN Security Council has condemned North Korea’s launch of 3 ballistic missiles on Monday, in violation of UN sanctions, and called on Member States to “redouble their efforts to implement fully” the sanctions that are currently in force.  President Obama also indicated that the UN’s initial response will focus on stricter implementation of existing sanctions on North Korea, which he described as “the most intense sanctions regime ever”, rather than introducing new ones.  The UN introduced strict new sanctions on North Korea in March, which imposed a range of trade and economic restrictions and targeted several new people and entities with asset freezes and travel bans (see previous blog).
 
The Security Council’s press release is here.

* * * * * * * * * * * * * * * * * * * *

COMM_a416. S.L. Bell: “US Prohibits Imports Made with Forced Labor: New Law is a Force to be Reckoned With
(Source: Excerpt from forthcoming article in Global Trade & Customs Journal, V.11, No. 11 & 12, 2016)
 
* Author: Sandra Lee Bell
, DLA Piper, Esq., sandra.bell@dlapiper.com, 202-799-4294
 
Your latest shipment of imports is detained at the border. You are told that your goods are not being allowed admission to the US because they were produced, in whole or in part, with forced labor. But these are the same products you’ve been importing, in pretty much the same way, for years. What is happening? Is this even possible?   The answer is yes. It is very possible. Companies are starting to feel the effects of a significant 2016 amendment to the Smoot-Hawley Tariff Act of 1930, and, in its wake, stepped up enforcement activity by Customs and Border Protection.  To help convey an understanding of how this change came about, this article explores how we arrived at this point and suggests some steps businesses may consider to address the new law’s implications.
 
The prohibition on imports involving forced labor
 
Section 307 of the Tariff Act of 1930, as amended, essentially prohibits the importation into the US of any goods mined, produced or manufactured with the use of convict labor or “forced labor.” What is very clear in the statute today regarding what is covered by the “forced labor” term of art actually was the subject of a long debate during the course of legislating the amendments to this provision of the 1930 Tariff Act.
 
During that debate, the Senate amendments were accepted; but the House Conference responded by adding in the so-called “consumptive demand” exception, which was created to “prevent the application of these provisions to articles such as rubber and tea, which are not produced in the United States, and [for]… which our domestic production does not satisfy our consumptive needs.” As a result, the amendments to section 307 under the Tariff Act of 1930 expanded the scope of the definition of forced labor, but at the same time created  an exception that would swallow up the entire prohibition covered by the expanded definition.
 
The 2016 removal of the exception
 
In February 2016, the legal loophole was finally closed when President Barack Obama signed into law the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). Tucked away in the last title of the TFTEA, under a heading that reads Title IX-Miscellaneous Provisions, was Section 910, Elimination of Consumptive Demand Exception to Prohibition on Importation of Goods Made With Convict Labor, Forced Labor, or Indentured Labor”; Report.”  The title of the section, indeed, was longer than the legislative text itself, which reads: “Section 307 of the Tariff Act of 1930 is amended by striking ‘The provisions of this section’ and all that follows through ‘of the United States.'”
 
With these spare words, after 86 years, the original purpose of the 1930 Senate amendment could at last be realized.
 
Here comes CBP
 
As Customs and Border Protection now advises in its Forced Labor Enforcement Fact Sheet, “merchandise mined, produced or manufactured, wholly or in part, in any foreign country by forced labor – including forced child labor… is subject to exclusion and/or seizure, and may lead to criminal investigation of the importer(s).” 
 
While it may be entirely coincidental, in the three months following the passage of TFTEA this year, CBP issued three Withhold Release Orders (WROs) covering the following goods coming from identified manufacturers in China: (a) soda ash- calcium chloride- caustic soda; (b) potassium- potassium hydroxide -potassium nitrate and (c) stevia and related products. Some observers may be wondering whether more WROs, involving other categories of imports, are coming soon.
 
This flurry of activity suggests that importers must begin to take notice and act. What can you do as an importer in the wake of the reinvigorated Forced Labor statute? 
 
First,
you can take steps to avoid products that already have been identified by CBP
as being subject to a WRO.  CBP has announced on its website that it does not target entire product lines or industries in problematic countries or regions, but rather acts on specific information relating to specific manufacturers/exporters and specific merchandise. CBP also publishes on its website a list of all WROs and “findings” (which also are published in the Federal Register) that have been issued by the Commissioner. This is sufficient information on which to base precautionary measures for an importer to avoid the covered product.
 
Second,
even if you fail to identify goods that are covered by an outstanding WRO and they are detained by CBP at the ports of entry, there is still a chance that your goods may be allowed entry. Congress may have removed the consumptive demand exception with the amendment of the Forced Labor statute under TFTEA, but it did not otherwise amend the forced labor statute in such a way that voided pre-existing CBP Regulations which allow importers of goods detained under a WRO to provide “proof of admissibility.”  19 CFR 12.43 provides direct guidance on the information and evidence that one can provide to CBP for consideration as “proof of admissibility” of your detained shipment. Furthermore, if your proffered proof of admissibility (as outlined in the CBP Regulations) is not convincing to CBP, and the goods are finally denied admission, i.e., “excluded” from entry into the US, you still may appeal that decision by filing a protest.
 
Third,
you may seek even further redress in the Court of International Trade if CBP denies the protest under US Law and CBP Regulations (19 U.S.C. 1514 and 19 CFR Part 174).
  
Recommendations
 
So, in the wake of the revised Forced Labor statute (and possible fallout), we offer two suggestions for importers to consider:
 
  (1)
Avoid
the importation entirely by using the  information that CBP publishes on its website  in connection with products already identified as having been produced or manufactured with the use of forced labor; or
  (2)
If avoidance is not possible, defend the importation using the legal tools provided in the CBP Regulations to support your position that your shipment was not produced with the use of forced labor as defined under section 307 of the Tariff Act.

If, however, you cannot follow or implement either of these two suggestions, you may find that, with the strikeout of a single sentence, the Forced Labor statute in the Tariff Act of 1930, as most recently amended by TFTEA, is now, indeed, a force to be reckoned with. 
* * * * * * * * * * * * * * * * * * * *

COMM_a517. R.C. Burns: “Brace Yourself: OFAC Fines Orthodontic Device Company”
(Source:
Export Law Blog
. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, 202-624-3949,
Clif.Burns@bryancave.com
)
 
Yesterday the Office of Foreign Assets Control (“OFAC”) fined Oregon orthodontic device manufacturer World Class Technology Corporation $43,200 for seven shipments of orthodontic devices valued at $59,886 to Iran. The shipments in question were transshipped through Germany, UAE and Lebanon.
 
OFAC noted that there were three aggravating factors. First, the company did not confess its sins voluntarily to OFAC but instead got caught. Second, company executives knew the orthodontics were going to Iran. Third, the company disrespected OFAC by not having an OFAC compliance program until 2008.
 
There is, of course, more than a little absurdity in the idea that every company in the U.S. must have an OFAC compliance program or bear the wrath of the agency. WCT is estimated to have between 50-99 employees. It has under $20 million in revenue per year currently and, no doubt, much less before it adopted its compliance program in 2008. How many agencies must small businesses bow down to through adopting compliance programs designed to assure that they do not transgress the regulations of that agency? Would any of them ever get any business done if they did?
 
OFAC cited five mitigating factors, which presumably saved WTC from a company crushing $1.75 million fine which OFAC noted was the statutory maximum. First, the transaction would likely have been licensed. Second, WCT had no sanctions history in the previous five years. Third, WCT agreed to toll the statute of limitations – the penalty imposed today covered violations dating back to 2008. Fourth, WCT ultimately adopted a compliance program. Fifth, WCT “lacked commercial sophistication in conducting international sales.”
 
The real face-palm moment here is mitigating factor five. OFAC admits that WCT should be given a break because it didn’t have the commercial savvy to understand that it was violating OFAC regulations. Only a few nanoseconds before OFAC was criticizing the company for not having an OFAC compliance program. How does this add up? Do they cancel each other out? More likely, OFAC wants to have it both ways rather than to confront the ugly fact that it has absolutely no outreach to small businesses like WCT, and itself bears some measure of blame for the exports of unsophisticated companies.  
* * * * * * * * * * * * * * * * * * * *

TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a118. ICPA 2016 ICPA Export/Import Fall Conference, 9-11 Oct

(Source: Ann Lister, anngelfire@yahoo.com)
 
* What: ICPA 2016 ICPA Fall Conference
* When: 9-11 October 2016
* Where: Embassy Suites Grapevine, Grapevine, TX (DFW Airport)
* Sponsor: International Compliance Professionals Association (ICPA)
* Speakers: Approximately 30 speakers; all are industry professionals and/or export/import specialty lawyers.
* Comments: Will feature three tracks of daily presentations that run simultaneously: Import, Export, and “Boot Camp” for beginners.
* Register: On-line at www.icpainc.org or email wizard@icpainc.org.

* * * * * * * * * * * * * * * * * * * *

ENEDITOR’S NOTES

(Source: Editor)

Today’s notable birthdays: 
 
*
August Wilhelm von Schlegel (8 Sep 1767 – 12 May 1845, was a German poet, translator and critic. His translations of Shakespeare turned the English dramatist’s works into German classics.)
  – “Literature is the immortality of speech.”
 
*
Swami Sivananda (Sivananda Saraswati, 8 Sep 1887 – 14 July 1963, was a Hindu spiritual teacher and a proponent of Yoga and Vedanta.)
  – “There is something good in all seeming failures. You are not to see that now. Time will reveal it. Be patient.”
  – “Thinking of disease constantly will intensify it. Feel always ‘I am healthily in body and mind’. “

* * * * * * * * * * * * * * * * * * * *

EN_a220. 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.
 
*
ATF ARMS IMPORT REGULATIONS
: 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  
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 26 Aug 2016: 81 FR 58831-58834: Administrative Exemption on Value Increased for Certain Articles  

* DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M
  – 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.)

* EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774 
  – Last Amendment: 7 Sep 2016: 81 FR 61595-61612: Russian Sanctions: Addition of Certain Entities to the Entity List  

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 18 May 2016: 81 FR 31169-31171: Burmese Sanctions Regulations 
 
*
FOREIGN TRADE REGULATIONS (FTR)
: 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
here.
  – The latest edition (9 May 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, please contact us to receive your discount code. 
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 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
here
.
  – HTS codes that are not valid for AES are available
here.
 
*
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.

* * * * * * * * * * * * * * * * * * * *

EPEDITORIAL POLICY

* 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 subscribers to inform 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 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.

* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website.

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

Scroll to Top