16-1013 Thursday “The Daily Bugle”

16-1013 Thursday “Daily Bugle”

Thursday, 13 October 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 
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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. Commerce/Census: “ACE AESDirect Scheduled Outage” 
  4. State/DDTC Presents Industry IT System Modernization Webinar Tomorrow, 14 Oct 
  5. EU Posts Corrections Regarding North Korean Restrictive Measures 
  6. UK/BIS ECO Updates SPIRE Website and Email Addresses 
  1. Optics.org: “Optics Societies Welcome Changes to US Export Regulations”
  1. R.C. Burns: “DOJ to Exporters: Confession Is Good for the Soul” 
  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 (12 Oct 2016), FACR/OFAC (18 May 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (12 Oct 2016) 



[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)

* Commerce; Industry and Security Bureau; RULES; Export Administration Regulations: Optional Electronic Filing of Reports of Requests for Restrictive Trade Practice or Boycott [Publication Date: 14 October 2016.]

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 14 October 2016.]

* U.S. Customs and Border Protection; PROPOSED RULES; Electronic Notice of Liquidation [Publication Date: 14 October 2016.]

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OGS_a22. Commerce/BIS: (No new postings.)

(Source: Commerce/BIS)
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OGS_a63. Commerce/Census: “ACE AESDirect Scheduled Outage”

(Source: census@subscriptions.census.gov, 12 Oct 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, October 15 – 4:00am EST Sunday, October 16.
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 10/15/2016
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
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OGS_a34. State/DDTC Presents Industry IT System Modernization Webinar Tomorrow, 14 Oct

(Source: State/DDTC)
The webinar will provide a demonstration of the new Commodity Jurisdiction (CJ) (DS-4076) interface and is scheduled for Friday, October 14, 2016 from 2:00 p.m. (EST) to 3:00 p.m. (EST). Click here to view invitation
To join the webinar go here, enter your Name and click Enter Room.
Note: The webinar will allow for 100 participants. If you are unable to join the webinar session but would like to join via the conference line call 877-336-1829; Access Code: 730 766 
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OGS_a45. EU Posts Corrections Regarding North Korean Restrictive Measures

  – Corrigendum to Council Regulation (EU) 2016/841 of 27 May 2016 amending Regulation (EC) No 329/2007 concerning restrictive measures against the Democratic People’s Republic of Korea (OJ L 141, 28.5.2016)


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OGS_a56. UK/BIS ECO Updates SPIRE Website and Email Addresses

(Source: UK/BIS ECO)
Some aspects of Spire, the Export Control Organisation’s (ECO’s) online export licensing system, have been amended to reflect the fact that ECO is now part of the Department for International Trade, which was created on 14 July 2016.
The following website addresses are now live:
(Spire home page)
(ECO reports and statistics)
(Goods and OGEL checker)
Email addresses for individual staff have also been updated to:
What will this mean for exporters?
Please note that any licences or other documents that were issued by BIS and which carry the BIS name/logo will continue to have legal effect as if they were issued by DIT.
All documentation, including licences and letters, have been updated to reflect the new DIT identity.
Internet searches for the old web addresses (www.spire.bis.gov.uk, www.exportcontroldb.bis.gov.uk and www.ecochecker.dit.gov.uk) will be redirected for the short term. But we recommend that you use the new ‘trade’ addresses from now, as the redirects are only temporary.
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Industry representatives in the US have welcomed a change to export rules governing products caught up in the International Traffic in Arms Regulations (ITAR) category covering lasers and other photonics technologies.
publisher SPIE and OSA both say that the amended “Category XII” part of the ITAR rules – published October 12 and effective from December 31 – allays some of the fears raised when new ITAR rules were proposed by the US Department of State in May 2015.
Category XII rules

Category XII of ITAR covers “fire control, laser, imaging, and guidance equipment”, incorporating a wide range of optics and photonics products that could in theory be used in weapons, but which in practice are overwhelmingly deployed in civilian applications.
In its amendment, the Department of State states that the revised Category XII rules introduce a new concept that has not been used in the other revised categories, explicitly controlling certain items based on the original intended end user. In key sections of the amendment, these are identified as defense “articles” if they are specially designed for a military end user.  

SPIE CEO Eugene Arthurs said: “The changes will help enhance international commerce in optics and photonics, and will assist research universities trying to provide educational opportunities for both US- and foreign-born students.”
His OSA counterpart Liz Rogan added that the new Category XII export rules would reduce the cost of ITAR compliance for business and universities, and help smaller US-based firms stay competitive against foreign firms not subject to such restrictions.

Ambiguous wording of some elements within the Category XII proposals has also been problematic, something that the US Department of State acknowledged and sought to rectify after a recent consultation period with the industry. Specific details of those discussions can be found in the official amendment document here.
Strong response

SPIE says that the photonics industry’s response to the original proposals were the largest for any single category in the export control reform (ECR) process, with 120 companies, associations, and universities submitting statements to the Department of State detailing why its May 2015 plan represented a backwards step in terms of reforming the system.
An interim proposal incorporating what is referred to as the “specially designed” criterion, requested by SPIE and the industry, has in the meantime helped to ensure that so-called “dual-use” technologies were not automatically considered to be munitions items under ITAR.
The final rule now released retains this interim proposal, which is used to describe the many photonics technologies where performance parameters that are unique to military items could not be found, or agreed upon.
New Notice of Inquiry

However, the Department of State has also said that it plans to release a so-called Notice of Inquiry (NOI) via the federal register in the next few months, to seek public opinion about whether some performance parameters should be inserted back into the Category XII rules covering “specially designed” technologies.

Jim McNally, chair of the SPIE committee on Engineering, Science, and Technology Policy and VP of strategic development at Applied Technology Associates, believes that this is a wrong move:
“It is disappointing that some within the agencies are once again requiring the public to respond to a federal register comment period in order to make clear that performance parameters do not work for some of the technologies listed in Category XII,” he said.
“This approach of performance parameters was soundly rebuked by industry during the comment period to the first proposed rule in favor of a ‘specially designed’ approach for certain technologies.”
McNally added: “Even if the proposed parameters do not directly capture dual-use technologies currently in production, unless parameters are clearly unique to the military, growth in that technology area is artificially capped for US industry.”
New call for responses


The NOI means that, once again, those in the photonics industry and related partners will be called upon to ensure that burdensome regulations do not become re-introduced. McNally said:
“In order to prevent this NOI from turning into a more formal proposed rule next year, once again SPIE will be asking companies and universities to respond to the federal register notice when it is released in order to ensure that the Category XII final rule released today stands as written in the coming year.”
For its part, OSA stopped short of criticizing the planned NOI. CEO Rogan said in the society’s official release:
“The specially designed criteria for defense-related technologies provide the flexibility for US industry to export products that are commercially available from foreign companies while protecting our national security.”

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R.C. Burns: “DOJ to Exporters: Confession Is Good for the Soul”

Export Law Blog
. Reprinted by permission.)
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, 202-624-3949,
Apparently the National Security Division at DOJ had a bunch of interns this summer with nothing to do, because this is the only conceivable explanation for the mostly risible “Guidance Regarding Voluntary Disclosures” which the NSD released on October 2. To set the tone for a further discussion of the substance of this Guidance, let’s start with a howler in the Guidance itself. Even if this guidance was written in large part, as it must have been, by eager interns, one would think that a grown-up lawyer would have reviewed this for substance. And, presumably, that grown-up lawyer whose job is to send real people to real jails would understand the laws that he or she is enforcing, right? So how do you explain this statement in the Guidance?
U.S. sanctions regimes and the Department of Commerce’s Export Administration Regulations are currently enforced through IEEPA.
Apparently, no one in the NSD has ever heard of the Trading with the Enemies Act which, as most of this blog’s faithful readers will know, is the statutory basis for the Cuba sanctions and their enforcement.  This is pretty embarrassing mistake about pretty elementary facts.
The thrust of the Guidance is an interagency power grab by which DOJ wants to take away the first responsibility for review of voluntary disclosures from OFAC, DDTC and BIS. The guidance states that voluntary disclosures should be made to the Counterintelligence and Export Section of NSD when the exporter learns that a violation “may have been willful.” Specifically, the Guidance says:
Ordinarily, when an organization voluntarily self-discloses violations of U.S. export controls and sanctions, it presents its VSD to the appropriate regulatory agency under the procedures set forth in the agency’s regulations. … It is not the purpose of this Guidance to alter that practice. However, as discussed further below, when an organization, including its counsel, becomes aware that the violations may have been willful, it should within a reasonably prompt time also submit a VSD to CES.
Actually the purpose is precisely to alter that practice. Remember that the criminal violations involved are violations of the agency regulations themselves. That gives the relevant agencies, and not the DOJ, the principal expertise in determining if a violation has occurred and if it was willful.
The practice until now has been to disclose violations to the relevant agency or agencies with the understanding that the agencies could, if warranted, refer the matter to the DOJ. Once the referral was made,  the prior agency disclosure and continued cooperation with the DOJ investigation would be the basis for credit by the DOJ. No longer. A separate disclosure to DOJ must be made without regard to an agency referral and, if not, the agency disclosure becomes irrelevant to the exercise of prosecutorial discretion if a subsequent referral occurs.
One of the hypotheticals discussed in the Guidance provides ample reason as to why DOJ, which clearly does not understand many of the basics of export control law, should not be usurping the primary role of OFAC, BIS, and DDTC, in export enforcement. In that hypothetical a foreign subsidiary of a U.S. corporation exports U.S. origin items in violation of BIS regulations. Without any suggestion of U.S. participation, the Guidance suggests that the parent would be offered an NPA by DOJ premised on payment of a criminal fine.
However, BIS rules, which have to be the basis of any prosecution in such a case, do not support a theory of vicarious liability by parent corporations. If the parent company did not export the items it could only be held liable, under section 764.2, for causing, aiding or abetting the export. That’s why in the recent Alcon Laboratories case, BIS held the U.S. parent liable for its exports to Iran but not for the exports of its Swiss subsidiary; those exports served only as a basis for a penalty against the Swiss subsidiary.
One last knee-slapper from the Guidance deserves mention. In another hypothetical, the Guidance says this:
Alert customs officers notice a bulky package within a container on a ship at a U.S. port bound to leave on a lengthy voyage overseas. The package contains ITAR-controlled commodities …
Because, you see, all bulky packages are suspicious and probably contain export controlled items. Just remember that when you send a birthday present to your aunt in Slovenia – make sure its just a small package in order to avoid scrutiny by CBP on the way out.

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(Source: Editor)


Notable birthdays:


Lenny Bruce (Leonard Alfred Schneider, 13 Oct 1925 – 3 Aug 1966, was an American stand-up comedian, social critic, satirist, and screenwriter.)

  – “Communism is like one big phone company.”

Edward Blake (Dominick Edward Blake, PC, QC, 13 Oct 1833 – 1 Mar 1912, was the second Premier of Ontario, Canada, from 1871 to 1872 and leader of the Liberal Party of Canada from 1880 to 1887.)

  – “As far as I can judge, not much good can be done without disturbing something or somebody.”

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10. Are Your Copies of Regulations Up to Date? 

(Source: Editor)

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

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

  – Last Amendment: 12 Oct 2016: 81 FR 70320-70339: Revisions to the Export Administration Regulations (EAR): Control of Fire Control, Laser, Imaging, and Guidance Equipment the President Determines No Longer Warrant Control Under the United States Munitions List (USML) 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 18 May 2016: 81 FR 31169-31171: Burmese Sanctions Regulations 
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
  – The latest edition (9 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. 
, 1 Jul 2016: 19 USC 1202 Annex.  (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 30 Aug 2016; Harmonized System Update (HSU) 1612, containing 4,692 ABI records and 935 harmonized tariff records.   
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available

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:
12 Oct 2016: 81 FR 70340-70357: Amendment to the International Traffic in Arms Regulations: Revision of U.S. Munitions List Category XII and associated sections.

  – The only available fully updated copy (latest edition 12 Oct 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, footnotes to amendments that will take effect on 15 November and 31 December, plus a large Index and 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 the essential tool of the ITAR professional. The BITAR is available by annual subscription from the Full Circle Compliance
website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR — please
contact us to receive your discount code.  

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 7,500 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.

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