16-1103 Thursday “The Daily Bugle”

16-1103 Thursday “Daily Bugle”

Thursday, 3 November 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 Posts Updated 2016 Conference Documentation 
  3. State/DDTC: (No new postings.) 
  1. Expeditors News: “FTC and DOJ Seek Comments on Proposed International Antitrust Guideline Revisions”
  2. Philippine Star: “Understanding US Laws”
  3. ST&R Trade Report: “International Export Control Regimes Active in 2016, U.S. Official Reports”
  4. ST&R Trade Report: “New IPR Import Restrictions Sought on Optical Fiber Coating”
  1. B. Peters, A. Dukic & L.T. Yeh: “Hiring Foreign Persons Export Compliance Update and Anti-Discrimination Considerations”
  2. G. Novalis: “Export Compliance in 11 Words (Parts 5 & 6 of 12): DOCUMENT & COMMUNICATE: Small Stuff That Matters!”
  3. Gary Stanley’s ECR Tip of the Day
  1. ECTI Presents U.S. Export Controls for Academia: How Universities and Research Institutions Can Ensure Export Compliance While Fostering Academic Freedom Webinar, 15 Nov
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (28 Oct 2016), DOD/NISPOM (18 May 2016), EAR (17 Oct 2016), FACR/OFAC (17 Oct 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: Update of Arms Embargoes on Cote d’Ivoire, Liberia, Sri Lanka and Vietnam, and Recognition of India as Member of Missile Technology Control Regime [Publication Date: 4 November 2016.]

* Defense Acquisition Regulations System; RULES; Defense Federal Acquisition Regulation Supplements: Pilot Program on Acquisition of Military Purpose Nondevelopmental Items [Publication Date: 4 November 2016.]

* Defense Acquisition Regulations System; PROPOSED RULES; Offset Costs [Publication Date: 4 November 2016.]

* Justice; Alcohol, Tobacco, Firearms, and Explosives Bureau; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application and Permit for Permanent Exportation of Firearms [Publication Date: 4 November 2016.]

* State; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Statement of Material Change, Merger, Acquisition, or Divestment of a Registered Party [Publication Date: 4 November 2016.]

* Treasury; Foreign Assets Control Office; RULES; Former Liberian Regime of Charles Taylor Sanctions Regulations [Publication Date: 4 November 2016.]

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 4 November 2016.]

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OGS_a22. Commerce/BIS Posts Updated 2016 Conference Documentation

(Source: Commerce/BIS)


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OGS_a33. State/DDTC: (No new postings.)

(Source: State/DDTC)
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. Expeditors News: “FTC and DOJ Seek Comments on Proposed International Antitrust Guideline Revisions”

On November 1, 2016 the Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division announced that they are seeking public comments on the proposed Antitrust Guidelines for International Enforcement and Cooperation, which were last updated in 1995.
According to the release, “[t]he proposed guidelines…reflect the growing importance of antitrust enforcement in a globalized economy and the Agencies’ commitment to cooperating with foreign authorities on both policy and investigative matters.”
Interested parties may submit comments electronically until December 1, 2016. Comments will be posted to the Agencies’ websites.
The release can be accessed here.

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5. Philippine Star: “Understanding US Laws”

(Source:  The Philippine Star) [Excerpts.]
Our friends at the Philippine National Police have expressed disappointment at the decision of the US State Department to stop the sale of some 27,000 assault rifles to the PNP following the opposition expressed by Maryland Sen. Ben Cardin, who happens to be the top Democrat in the US Senate Foreign Relations Committee.  

The planned purchase of the M4 assault rifles, which was conceived during the past administration, was conducted through public bidding under the procurement service of the Department of Budget and Management, with the contract awarded to the winning bidder last July.
Under the US Arms Export Control Act of 1976, the US State Department has a major role in approving major arms sales. However, Section 36(b) provides for notification of the Senate Foreign Relations Committee and the House Foreign Affairs Committee (including briefings on how it will serve US interests) regarding foreign military sales or an international sale of firearms and weapons.  

Sen. Cardin is opposing the firearms sale due to alleged human rights violations in the Philippines – the same issue raised by Sen. Patrick Leahy who warned about putting “further conditions” on US aid after the US State Department gave its commitment to provide P320 million assistance to boost the country’s law enforcement efforts.  
Sen. Leahy happens to be the principal author of the Leahy Law (or Leahy Amendment) that was first introduced in 1997 as part of the Foreign Operation Appropriations Act involving counter-narcotics efforts. This was eventually expanded to cover all funding assistance from the State Department and the Department of Defense.  Under the Leahy Law, the US is prohibited from providing military assistance to “any unit of the security forces of a foreign country if the Secretary of State has credible information that such unit has committed a gross violation of human rights.” 

The same prohibition is also observed in the Arms Export Control Act.  Leahy said the law “makes it clear that when credible evidence of human rights violations exists, US aid must stop,” adding that governments that condone extrajudicial killings sow the seeds of instability – a sentiment Cardin had echoed, citing reports of extrajudicial killings, detentions and lack of respect for international commitment to human rights.  …

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6. ST&R Trade Report: “International Export Control Regimes Active in 2016, U.S. Official Reports”

Ann Ganzer, director of conventional arms threat reduction at the State Department, provided the following information on international nonproliferation export control regime activities at the Bureau of Industry and Security’s annual Update conference Nov. 1.
Wassenaar Arrangement
. The Wassenaar Arrangement promotes transparency and greater responsibility in international transfers of conventional arms and dual-use goods and technologies, and its control lists underpin the U.S. dual-use export control system. This year the WA’s 41 members are conducting an assessment of the arrangement’s processes and effectiveness and increasing their focus on terrorist access to small arms and balancing the broader benefits with the potential security risks of emerging technologies. Fifty-one proposals for changes to the Wassenaar control lists were agreed by the Experts Group this year and will be sent to the plenary meeting for approval in December.
Missile Technology Control Regime
. The MTCR seeks to prevent the proliferation of unmanned delivery systems capable of delivering weapons of mass destruction and related equipment and technology. Key developments at the group’s most recent annual plenary include the adoption of several changes to the MTCR annex, such as the addition of controls on ultra high temperature ceramic composite materials, aerothermodynamic test facilities (such as arc jet facilities and plasma wind tunnels), gel propellants, propellant tanks, combustion chambers, and nozzles for gel propellants. Other changes to the annex were to clarify controls on re-entry vehicles, flow-forming machines, inertial measurement equipment, and software necessary to convert a manned aircraft to an unmanned aerial vehicle. India became the newest regime member this past summer.
Nuclear Suppliers Group
. The NSG develops and implements guidelines for the control of nuclear and related dual-use exports and consists of most of the largest suppliers of nuclear and related dual-use technology, equipment, and material. This year the NSG discussed requests by India and Pakistan to open a dialogue on their membership and considered clarifications on software controls in the part 1 guidelines and revisions to the part 2 guidelines. The NSG plenary meeting this past summer adopted six new technical changes to the part 1 and part 2 lists.
Australia Group
. The AG seeks to harmonize export controls to prevent the proliferation of chemical and biological weapons. At the plenary meeting this year members agreed to intensify the group’s focus on emerging technologies that can be used for chemical and biological weapons and on impeding chemical and biological terrorism. Members also agreed to continue sharing approaches to challenges posed by intangible technology transfers, proliferators’ procurement of unlisted items, proliferation financing, online procurement, and transshipment.

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7. ST&R Trade Report: “New IPR Import Restrictions Sought on Optical Fiber Coating”

The International Trade Commission received Oct. 31 on behalf of DSM Deso Tech Inc. and DSM IP Assets B.V. a petition requesting that it institute a Section 337 investigation regarding UV curable coating for optical fibers, coated optical fibers, and products containing same. The proposed respondents are located in China and the U.S.
Section 337 investigations primarily involve claims regarding intellectual property rights violations by imported goods, including the infringement of patents, trademarks, and copyrights. Other forms of unfair competition involving imported products, such as misappropriation of trade secrets or trade dress and false advertising, may also be asserted. The primary remedy available in Section 337 investigations is an exclusion order that directs U.S. Customs and Border Protection to stop infringing imports from entering the U.S. In addition, the ITC may issue cease and desist orders against named importers and other persons engaged in unfair acts that violate Section 337, including selling infringing imported articles out of U.S. inventory.

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COMM_a18. B. Peters, A. Dukic & L.T. Yeh: “Hiring Foreign Persons Export Compliance Update and Anti-Discrimination Considerations”

(Source: Hogan Lovells)
* Authors: Beth Peters, Esq., beth.peters@hoganlovells.com, 202-637-5837; Aleksandar Dukic, Esq., aleksandar.dukic@hoganlovells.com, 202-637-5466; and Lucinda T. Yeh, Esq., lucinda.yeh@hoganlovells.com, 510-524-4241. All of Hogan Lovells.
It is generally understood that shipments or transfers of good or data from the United States to another county represent an export that is subject to U.S. export regulations and may potentially require a license or other authorization. What is less widely understood, however, is that the release of data even within U.S. borders is deemed by U.S. export control laws to be an export to the recipient’s country of nationality or citizenship. Similarly, the delivery of data in a foreign country to a national or citizen from a third country can be deemed a re-export to that third country. It is important to remember that rules for exports of technology are separate from rules related to deemed exports and re-exports. [FN/1]
Consequently, to avoid exposure to significant civil liability – as well as damage to the organization’s reputation and good standing, and, potentially criminal liability – companies, universities and other organizations (collectively hereinafter companies) should exercise caution in their management and release of export controlled information and technology both inside and outside the territorial United States and implement appropriate policies and procedures.
The export control law regulations govern deemed exports (and re-exports). Export screening must be conducted consistent with anti-discrimination and privacy laws, both in the U.S. and abroad. Due to the nature and complexity of this topic, this update does not address all aspects of technology transfers, and such transfers should be assessed on a case-by-case basis. This note provides an update of the anti-discrimination provisions.
The Office of Special Counsel (OSC) for Immigration-Related Unfair Employment Practices at the Department of Justice (DOJ) is responsible for enforcing the anti-discrimination provision of the Immigration and Nationality Act (INA), which protects work authorized individuals from employment discrimination on the basis of citizenship status or national origin discrimination, including discrimination in hiring and the employment eligibility verification (Form I-9) process. The OSC has from time to time issued determinations and rulings that have provided guidance on the request and collection of such information.
Overview of Export Control Law Considerations
For the purposes of the deemed export regulations, “U.S. Persons” are those who qualify as “protected individuals” under the Immigration Reform and Control Act (IRCA) of 1986. These individuals are U.S. citizens, U.S. legal permanent residents (green card holders), refugees, asylees, and temporary residents under specific IRCA amnesty provisions. U.S. Persons may be exposed to unclassified export-controlled information without triggering deemed export regulations. Anyone who is not a U.S. Person is a “foreign national” (under the Export Administration Regulations (EAR)) or a foreign person (under the International Traffic in Arms Regulations (ITAR)), which are legally equivalent terms.
The EAR and ITAR have historically differed in their determination of foreign person status in one crucial respect: the identification of the relevant nationality or citizenship of the foreign person. The Commerce Department’s Bureau of Industry and Security (BIS) guidance on this matter has stated that the agency looks only at a person’s latest citizenship or legal permanent resident alien status in determining restrictions. The State Department’s Directorate of Defense Trade Controls (DDTC), under the ITAR, however, historically has taken into account all of the person’s nationalities and citizenships and imposed controls that correspond to the most restrictive nationality of citizenship, and continues to do so. So, for example, a Chinese citizen who subsequently became a Canadian citizen generally will be treated as Canadian by the EAR and as Chinese and Canadian by the ITAR. The Department of Energy (DOE) takes into account all of a person’s nationalities and citizenships, similar to the approach taken by DDTC, which the DOE documented in its 2015 rule making.
On September 8, 2016, the DDTC issued a new rule which in part addressed deemed export compliance. As noted above, transfers among U.S. persons (regardless of dual citizenship) generally do not trigger licensing with respect to unclassified export controlled technology. With respect to foreign persons who are not U.S. persons, DDTC historically has considered all nationalities, including place of birth and any subsequent or former citizenships. 

In the September rule, DDTC stated: “The Department confirms that in circumstances where birth does not confer citizenship in the country of birth, it does not confer citizenship or permanent residency in that country for purposes of the ITAR. One commenter noted that the DDTC Agreement Guidelines refer to the country of origin or birth, in addition to citizenship, as a consideration when vetting DN/TCNs. The Department has updated the Agreement Guidelines consistent with the interim final rule.” Accordingly in certain cases, countries of birth would no longer be considered by DDTC if the country does not grant citizenship based on mere fact of birth within its territory and the person never acquired such citizenship. This development would allow companies to focus on citizenship in the vast majority of factual scenarios rather than country of birth. 

Given the BIS focus on the most recent citizenship or permanent resident alien status, companies could consider changes to their export screening questionnaires depending on their export compliance risk assessment, including whether they have solely EAR technology or both ITAR and EAR technology. However, it is important to review all the guidance by DDTC under the ITAR included in the rule, including the requirement to assess all countries where that person holds or has held citizenship or is a permanent resident, and that such authorization(s) must authorize all applicable designations. This inquiry should include all countries where that foreign person has held citizenship, including citizenships a foreign person has renounced.
Overview of Anti-Discrimination Considerations
Information regarding citizenship and country of birth must be collected in a process separate from the I-9 employment eligibility process. This is done to avoid any inconsistency with anti-discrimination laws, as based on past OSC precedent and existing guidance. The OSC has found that requesting specific documents during the I-9 process constitutes discrimination, and has imposed penalties for doing so. However, DOJ has also stated that employers may implement separate procedures to obtain information regarding citizenship or nationality for compliance with export control laws. Here are a few key points:
2011 – Penalties Imposed Against Subsidiary of BAE:
The DOJ imposed penalties against a subsidiary of BAE Systems (BAE) in 2011, finding that the subsidiary engaged in a pattern or practice of discrimination by imposing unnecessary and additional documentary requirements on work-authorized non-U.S. citizens when establishing their eligibility to work in the United States. The BAE case related to the specific requests for particular documents in the context of the I-9 Form and process. DOJ emphasized that the employee has the right to show appropriate List A, or List B and C documents to the employer for identity and employment eligibility verification during the I-9 process. However, the employer cannot dictate the exact documents presented from these Lists for purposes of Form I-9 compliance. Further, DOJ stated that this case does not prevent companies from determining U.S. person status and citizenship/nationality separately as part of their normal export screening process. For additional information, click here.
2010 DOJ Guidance from OSC:
The BAE decision is consistent with prior guidance issued by DOJ’s OSC on October 6, 2010, which provided that “The anti-discrimination provision of the INA does not prohibit an employer from implementing a separate and distinct verification procedure under the ITAR requiring the presentation of documents establishing citizenship or immigration status necessary to ensure compliance with the ITAR.”
2016 Recent Guidance from OSC:
Most recently, the OSC issued guidance on March 31, 2016 regarding the proposed question below for job applicants or newly-hired employees:
* The following questions are for the sole purpose of ensuring compliance with U.S. rules concerning the export of controlled or protected technologies or information, including but not limited to U.S. State Department regulations at 22 C.F.R. Subchapter M, U.S. Department of Energy regulations found in 10 C.F.R. Part 810, the U.S. Nuclear Regulatory Commission regulations in 10 C.F.R. Part 110, and the U.S. Department of Commerce’s Export Administration Regulations found in 15 C.F.R. Part 730 et seq., as may be amended (collectively, Export Control Laws).

If you do not wish to be considered for positions whose activities are subject to the Export Control Laws, then you may skip the following questions. If you do wish to be considered for positions whose activities are subject to the Export Control Laws, then you must answer these questions:
  (1) I am one of the following: (a) a citizen of the United States; (b) a lawful permanent resident of the United States; or (c) a person admitted into the United States as an asylee or refugee: YES or NO
  (2) If you answered “NO” to Question 1, then please indicate your 
a. Citizenship
b. U.S. Immigration Status
* In the most recent guidance from OSC, the office confirmed that, consistent with the 2010 guidance, an employer that implements a document verification process to determine only a new employee’s immigration or citizenship status to comply with export control laws is unlikely to violate the anti-discrimination provision if the document verification process is separate and distinct from the employment eligibility verification process.
* However, OSC cautioned employers that to the extent these separate and distinct processes appear to be integrated, such as due to proximity in time, employees and human resource personnel may have the impression that the documentary requests are for employment eligibility verification purposes.
With respect to the proposed language, OSC stated that the language above implicated several parts of the anti-discrimination provision, and noted the following:
   – The ITAR does not impose requirements on U.S. companies concerning the recruitment, selection, employment, promotion, or retention of a foreign person. Instead, the ITAR requires that employers obtain export licenses for non-U.S. person employees if their positions require access to information governed by the ITAR.
   – Assuming an employer is hiring for at least some positions not subject to export control laws, OSC discourages asking the proposed questions for positions that are not subject to export control laws to avoid generating confusion among applicants or human resources personnel about the need for this information.
   – The term “Admitted” could be confusing to job applicants, as they might have a different understanding of the term than the meaning carries under U.S. immigration laws.
   – If an employer were to reject a protected individual’s application based on that individual’s answers or a staffing agency were to limit the scope of potential assignments based upon a protected individual’s answers, the employer may be engaging in citizenship status discrimination.
   – The questions above could lead to unlawful hiring decisions by HR personnel who make assumptions about an applicant’s eligibility based on his or her country of citizenship or show a preference in hiring based on national origin.
It is important that export screening language and procedures avoid the pitfalls flagged above. For example, if required, the language should simply ask if the employee or applicant is a “U.S. citizen, lawful permanent resident of the United States (“green card holder”), an asylee, or a refugee” and not include any potentially misleading or confusing language. Further, the questionnaire should include an explanatory paragraph that clearly describes that the purpose of the questions is to ensure compliance with U.S. export control laws, thereby distinguishing the questionnaire and making it distinct in substance from the I-9 employment eligibility verification process.
As this is a complex area of law, companies should consult with outside counsel in developing these compliance processes.
  [FN/1] See also: “Compliance Best Practices: Employing, Screening, and Collaborating with Non-U.S. Nationals,” published in the Practicing Law Institute, Commercial Law and Practice Course Handbook Series, Coping with U.S. Export Controls and Sanctions (September 29, 2015); and “Foreign Nationals in U.S. Technology Programs: Complying with Immigration. Export Control, Industrial Security. and Other Requirements.” Immigration Briefings, West Group (October 1, 2000); Complying with Immigration, Export Control, and Industrial Security Requirements When Working Collaboratively with Foreign Nationals: A Case Study.” The International Lawyer, Vol. 35, No. 1 (21 MAY 2001).

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COMM_a29. G. Novalis: “Export Compliance in 11 Words (Parts 5 & 6): DOCUMENT & COMMUNICATE: Small Stuff That Matters!”

* Author: Gregory Novalis, Export Compliance Solutions LLC,
In a speech called “Elephants Don’t Bite!” motivational speaker Joel Weldon reminds his audiences that in the quest for excellence, it’s almost always the small stuff, the stuff that’s easy to miss, not the big stuff, that trips us up. “Raise your hand if you have ever been bitten by a mosquito,” he says. “Has anyone here been bitten by an elephant? . . . That proves my point! It’s the little things that get you, not the big things. The little things come along and cause big problems!” Then, on a more positive note, Weldon adds, “And it’s the little things you do right that can bring you huge rewards.” The moral: pay attention to details!
Among the myriad government rules and regulations for U.S. exporters, the requirements for recordkeeping and reporting might easily be taken for trivial matters. Evidently many companies do take them that way, because changes in the firm’s registration information that have never been reported to the DDTC-as required by ITAR §122.4, “Notification of Changes in Information Furnished by Registrants”- is one of the most common problems our visiting teams discover when they arrive at a client’s headquarters for an on-site risk assessment. And you can be sure that if folks from the State Department arrive at your firm under the Company Visit Program (CVP), as part of their Outreach efforts, they will spot this right away, too, and label it (correctly) as a failure to comply with the requirements of the ITAR.
Here’s the relevant portion of this regulatory requirement in ITAR §122.4 (as amended on August 26, 2013, effective October 25, 2013):
(a) A registrant must, within five days of the event, provide to the Directorate of Defense Trade Controls a written notification, signed by a senior officer (e.g., chief executive officer, president, secretary, partner, member, treasurer, general counsel), if . . .
  (2) There is a change in the following information contained in the Statement of Registration:
    (i) Registrant’s name;
    (ii) Registrant’s address;
    (iii) Registrant’s legal organizational structure;
    (iv) Ownership or control.
When this section was last revised, in 2013, the State Department also revised ITAR §129.8, which deals with the registration and licensing requirements for brokers, to include some further notification requirements. Here’s the relevant portion of that part of the regulations:
(d) A registrant must, within five days of the event, provide to the Directorate of Defense Trade Controls a written notification, signed by a senior officer (
e.g., chief executive officer, president, secretary, partner, member, treasurer, general counsel), if . . .

  (2) There is a change in the following information contained in the Statement of Registration (form DS-2032):
    (i) Registrant’s name;
    (ii) Registrant’s address;
    (iii) Registrant’s legal organization structure;
    (iv) Ownership or control;
    (v) The establishment, acquisition or divestment of a U.S. or foreign subsidiary or other affiliate who is engaged in brokering activities or otherwise required to be listed in registrant’s Statement of Registration; or
    (vi) Board of directors, senior officers, partners and owners.
And finally, here’s what the DDTC is currently saying on their web site about what the agency expects from registrants regarding notifications of changes “as part of the registration renewal process”:
[Registrants are instructed to] notify the Department of the following material changes as part of the registration renewal process: 1) consolidation of a broker registration with a manufacturer/exporter registration; 2) removal of entities not owned or otherwise controlled from registration; and 3) deletions or additions of U.S. Munitions List categories. However, if notification of change is the subject of an internal reorganization, merger, acquisition, or divestiture registrants must notify the Department of all changes in information within five days of the event, including where applicable, the three changes specified above.
The third type of change mentioned in this web notice, “deletions or additions of U.S. Munitions List categories,” is not specifically mentioned in the sections of the ITAR quoted above, but if the change your company is reporting is one involving an internal reorganization, merger, acquisition, or divestiture, you would be well advised to include any such changes in your within-five-days notification to the DDTC as well.
We trust you noted the requirement in all the above citations that these notifications need to be made to the DDTC
within five days of the event. If you’re wondering whether that phrase means what it appears to mean, the answer is that it does.
If you’ve been thinking while reading the above that “within five days of the event” seems like an awfully narrow time window for notifying the DDTC of a change at your company, consider this: some required notifications must be made
in advance of the event. One such prior reporting requirement-a critically important one, too, and an all-too-common source of violations, in our experience-is found in ITAR §122.4(b). This paragraph applies to any intended (that is, prospective or planned) sale, or transfer of ownership/control, of your business, or of “any entity thereof,” to a foreign party or parties. Here is the relevant passage (we’ve underlined for you a couple of crucial sentences that you might easily have missed, imagining perhaps (incorrectly) that they were “small stuff”):
A registrant must notify the Directorate of Defense Trade Controls by registered mail at least 60 days in advance of any intended sale or transfer to a foreign person of ownership or control of the registrant or any entity thereof. Such notice does not relieve the registrant from obtaining the approval required under this subchapter for the export of defense articles or defense services to a foreign person, including the approval required prior to disclosing technical data. Such notice provides the Directorate of Defense Trade Controls with the information necessary to determine whether the authority of § 38(g)(6) of the Arms Export Control Act regarding licenses or other approvals for certain sales or transfers of defense articles or data on the U.S. Munitions List should be invoked (see §§ 120.10 and 126.1(e) of this subchapter).
  (c) The new entity formed when a registrant merges with another company or acquires, or is acquired by, another company or a subsidiary or division of another company shall advise the Directorate of Defense Trade Controls of the following:
    (1) The new firm name and all previous firm names being disclosed; 
    (2) The registration number that will survive and those that are to be discontinued (if any); 
    (3) The license numbers of all approvals on which unshipped balances will be shipped under the surviving registration number, since any license not the subject of notification will be considered invalid; and
    (4) Amendments to agreements approved by the Directorate of Defense Trade Controls to change the name of a party to those agreements. The registrant must,
within 60 days
of this notification, provide to the Directorate of Defense Trade Controls a signed copy of an amendment to each agreement signed by the new U.S. entity, the former U.S. licensor and the foreign licensee. Any agreements not so amended will be considered invalid.
Prior approval by the Directorate of Defense Trade Controls is required for any amendment making a substantive change.
We hope you noticed that, in addition to the mandatory notification that must be made to the State Department
60 days in advance (“must” and “shall” are such little words that they can easily be missed – “small stuff,” right? – but in government regulations they always translate as “mandatory” and “legally required”), there is also mention of a mandatory follow-up submission required by State
no later than
60 days after the first. Any regulatory language that translates as “deadline,” whether the period specified is “before” or “after,” deserves to be underlined or highlighted; it comes under the heading of “small stuff that matters.”
“COMMUNICATE” is one of the 11 key words that we chose to summarize the essentials of export compliance in this blog series. A few synonyms for
communicate are
report, and
otifying the State Department within 5 days of changes in your registration information is only one of the multiple notifications that are mandatory and must be made in a timely manner.
Reporting semi-annually on your company’s use of the Canadian Exemption (ITAR §126.5), as specified in Supplement No. 1 to Part 126 of the ITAR, Note 14(c), is another example of a mandatory communication. (Don’t let that word “exemption” mislead you here; exemption from a license requirement
doesn’t mean you are exempt from reporting and recordkeeping requirements!)
Disclosing information to the DDTC or BIS about
a potential or actual export control violation (see ITAR §127.12) is
sometimes legally mandatory-in which case neglecting to file such a disclosure would constitute an additional violation. But even when such disclosures are not mandated by law, and when they haven’t been “directed” or ordered by a government agency, they are very strongly encouraged by all the agencies and highly advisable in most cases, since voluntary disclosures will generally be a mitigating factor in determining what administrative penalties, if any, will be imposed.
Whatever synonym is used for it, the failure to communicate critical compliance information to the DDTC, BIS, or OFAC within a specified deadline is one of the most common sources of export violations, and the penalties that can result from such violations are by no means “small stuff”!
“DOCUMENT,” another of our 11 key compliance words, is closely related to what we have been talking about here. A synonym for
documenting is
creating and
keeping records of your
exports. Some very specific kinds of recordkeeping for export transactions are mandated by the ITAR, the EAR, and the various OFAC Sanctions programs. Not only do the legally required transaction and licensing records need to be complete, accurate, and secure, they need to kept for a certain time (in most cases, five years)
and maintained in a certain way.
For example, ITAR §122.5 states that the information ”
must be stored in such a manner that none of it may be altered once it is initially recorded without recording all changes, who made them, and when they were made.” Have you checked to see whether your company’s current order processing or ERP software supports this critical ITAR requirement? And, if the software you use does have this tracking and recording capability, have you checked to verify that the feature is appropriately configured and “turned on”?
Another detail worth checking: ITAR §122.5 also says that your export records need to be “available at all times for inspection and copying” in case of a compliance audit or other official visit or investigation.
Have you checked lately to see how “available” the legally mandated records are at your company? Which employees know how to access and retrieve them for inspection, if the occasion arises?
The DDTC, BIS, and OFAC most certainly do not consider a company’s failure to keep accurate and complete records of its export transactions, as required by law, to be a trivial matter, or “small stuff.”
In our experience, many companies have not clearly understood that compliance with these recordkeeping requirements is ultimately
their responsibility, as the U.S. exporter, or USPPI, and that they
cannot simply hand it off to a freight forwarder or shipping agent, and then forget about it. Even if you do employ the services of a third-party freight forwarder to ship your commodities,
you still need to make sure that you receive and keep on file copies of all shipping documents, AES/ACE entries, supporting documents, special certifications, and all other required documentation for every export transaction. You should also be periodically checking and comparing the freight forwarder’s records against your purchase orders, invoices, export licenses, agreements, reports of exemption use, etc., to make sure that your exports are fully compliant with U.S. export laws and regulation. In the event of an official visit or compliance audit from one of the regulatory agencies, when the agents request the records of one of your export transactions, “I’m afraid I can’t help you with that; I imagine our freight forwarders must keep that sort of information on file somewhere” will not be an acceptable answer; you might be told that it is a synonym for “export violation.”
(Editor’s note: See the complete series at the above Source URL.)

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COMM_a310. Gary 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 Country Chart is a chart, found in Supplement No. 1 to EAR Part 738, that contains certain licensing requirements based on destination and reason for control. In combination with the CCL, the Country Chart indicates when a license is required for any item on the CCL to any country in the world under General Prohibition One (Exports and Reexports in the Form Received), General Prohibition Two (Parts and Components Reexports), and General Prohibition Three (Foreign Produced Direct Product Reexports). See part 736 of the EAR.
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TE_a111. ECTI Presents U.S. Export Controls for Academia: How Universities and Research Institutions Can Ensure Export Compliance While Fostering Academic Freedom Webinar, 15 Nov
(Source: Danielle McClellan, danielle@learnexportcompliance.com)

* What: U.S. Export Controls for Academia: How Universities and Research Institutions Can Ensure Export Compliance While Fostering Academic Freedom
* When: November 15, 2016; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Melissa Proctor
* Register: Here or Danielle McClellan, 540-433-3977, danielle@learnexportcompliance.com.
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(Source: Editor)

* Dennis Miller (born 3 Nov 1953, is an American stand-up comedian, talk show host, political commentator, sports commentator, actor, and television and radio personality, who rose to fame as a cast member of Saturday Night Live in 1985.)
  – “Washington, DC is to lying what Wisconsin is to cheese.”
* Mahatma Gandhi (Mohandas Karamchand Gandhi, 2 Oct 1869 – 30 Jan 1948; was the preeminent leader of the Indian independence movement in British-ruled India.)
  – “Anger and intolerance are the enemies of correct understanding.” 

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13. 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 Oct 2016: 81 FR 74918: New Mailing Address for the National Commodity Specialist Division, Regulations and Rulings, Office of Trade; Technical Correction 

  – 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: 17 Oct 2016: 81 FR 71365-71367: Cuba: Revisions to License Exceptions 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 17 Oct 2016: 81 FR 71372-71378: Cuban Assets Control 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.

* 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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