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16-1122 Tuesday “The Daily Bugle”

16-1122 Tuesday “Daily Bugle”

Tuesday, 22 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 here for free subscription. Contact us for advertising inquiries and rates

  1. Commerce/BIS: President’s Export Council Subcommittee on Export Administration to Meet on 7 Dec in Wash DC 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. DoD/DSCA Posts SAMM and Policy Memoranda, Week 20-26 Nov 
  4. State/DDTC Posts Notice on USML Categories VIII/XIX Transition 
  5. State/DDTC Experiences Paper Case Backlog 
  6. Australia DECO System Offline Due to Maintenance on 25 Nov 
  1. Reuters: “Russian Tankers Defy EU Ban to Smuggle Jet Fuel to Syria – Sources”
  2. WSJ: “Terror Finance Abroad Touches Thanksgiving at Home”
  1. O. Torres & D. Kyle: “2016 Exports Year-End Review”
  2. W. Root: “DoD May Withhold EAR and ITAR Controlled Technical Data from Public Disclosure”
  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 (21 Nov 2016), FACR/OFAC (4 Nov 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (21 Nov 2016)

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. Commerce/BIS: President’s Export Council Subcommittee on Export Administration to Meet on 7 Dec in Wash DC

(Source: Federal Register) [Excerpts.]
 
81 FR 83799-83800: President’s Export Council Subcommittee on Export Administration; Notice of Open Meeting
   The President’s Export Council Subcommittee on Export Administration (PECSEA) will meet on December 7, 2016, 10:00 a.m., at the U.S. Department of Commerce, Herbert C. Hoover Building, Room 3884, 14th Street between Pennsylvania and Constitution Avenues NW., Washington, DC. The PECSEA provides advice on matters pertinent to those portions of the Export Administration Act, as amended, that deal with United States policies of encouraging trade with all countries with which the United States has diplomatic or trading relations and of controlling trade for national security and foreign policy reasons. …
   The open session will be accessible via teleconference to 25 participants on a first come, first served basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov no later than November 30, 2016. …
   For more information, call Yvette Springer at (202) 482-2813.
 
   Dated: November 16, 2016.
Kevin J. Wolf, Assistant Secretary for Export Administration.

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OGSOTHER GOVERNMENT SOURCES

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

* Commerce; Industry and Security Bureau; NOTICES; Meetings [Publication Date: 23 November 2016.]:
  – Emerging Technology And Research Advisory Committee
  – Regulations and Procedures Technical Advisory Committee

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 23 November 2016.]

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On Monday, November 21st, 2016, DDTC published a final rule implementing revisions to Categories VIII and XIX of the United States Munitions List (USML), pursuant to the President’s Export Control Reform initiative (see 81 Fed.Reg. 83,126). This final rule affects, inter alia, a narrow range of articles subject previously to the Export Administration Regulations (EAR) but which will become subject to the International Traffic in Arms Regulations (ITAR) as of December 31st, 2016, the effective date of the final rule. The impacted articles relate primarily to next-generation platforms and will be controlled principally in USML paragraphs VIII(h)(29) and XIX(f)(12). DDTC offers the following guidance regarding licenses or authorizations pertaining to these articles:
  –
Effective December 31st, 2016, for articles subject previously to the EAR but now subject to the ITAR under this rule, any unshipped balance under a Department of Commerce authorization will be null and void.
  –
Effective December 31st, 2016, the ITAR will regulate the reexport or retransfer of articles subject previously to the EAR but now subject to the ITAR under this rule.

DDTC expects the scope of impacted authorizations to be limited and will assist exporters in expeditiously obtaining appropriate authorizations under the ITAR. Impacted exporters are encouraged to contact the Office of Defense Trade Controls Licensing through the DDTC Response Team at (202) 663-1282 or
DDTCResponseTeam@state.gov.
as soon as possible to discuss specific transition impacts.

 

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OGS_a56. State/DDTC Experiences Paper Case Backlog

(Source: State/DDTC)
 
The Directorate of Defense Trade Controls is currently experiencing IT related issues which are causing a delay in the processing of paper case submissions. We apologize for any inconvenience or delays, and appreciate your patience while we work to improve DDTC services. If you need assistance, please contact the DDTC Service Desk at (202) 663-2838, or email at
DtradeHelpDesk@state.gov
.

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OGS_a67. Australia DECO System Offline Due to Maintenance on 25 Nov

(Source: Australia DECO)
 
The Defence Export Controls System (DECS) which supports Defence Export Controls for processing your applications will be offline for maintenance on Friday 25 November and, as a result, Defence Export Controls will not be assessing applications or issuing permits on that day. We will recommence assessing applications and issuing permits from Monday 28 November. If you require an assessment or permit urgently, please contact us at
exportcontrols@defence.gov.au
before 25 November.

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NWSNEWS

NWS_a18
. Reuters: “Russian Tankers Defy EU Ban to Smuggle Jet Fuel to Syria – Sources”

 
Russian tankers have smuggled jet fuel to Syria through EU waters, bolstering military supplies to a war-torn country where Moscow is carrying out air strikes in support of the government, according to sources with knowledge of the matter.
 
At least two Russian-flagged ships made deliveries – which contravene EU sanctions – via Cyprus, an intelligence source with a European Union government told Reuters. There was a sharp increase in shipments in October, said the source who spoke on condition of anonymity due to the sensitivity of the matter.
A separate shipping source familiar with the movements of the Russian-flagged vessels said the ships visited Cypriot and Greek ports before delivering fuel to Syria.
 
The Russian defence and transport ministries did not initially respond to requests for comment. The defence ministry later said EU sanctions on fuel supplies to Syria could not be applied to the Russian air group in that country.
 
A spokeswoman for EU foreign affairs and security policy said the implementation of EU restrictions lay with member states. “We trust that competent authorities are complying with their obligation to ensure respect of the restrictive measures in place and to pursue any circumvention attempts,” she added.
 
Greece’s foreign ministry referred questions to the shipping ministry, which was not immediately available to comment.
 
The Cypriot government said its authorities had not approved the docking of any Russian tankers carrying jet fuel bound for Syria. “We would welcome any information that may be provided to us on any activity that contravenes U.N. or EU restrictive measures,” the Cypriot foreign ministry added.
 
Syria’s civil war, which began in 2011, has become a theatre for competing global powers, with Russia and Iran supporting President Bashar al-Assad, and the United States, Gulf Arab and European powers backing rebels who want to depose him.
 
Russia changed the course of the conflict in favour of Assad’s government last year when it intervened with air strikes. Moscow says it targets only Islamic State militants and other jihadist fighters.
 
EU Council Regulation 1323/2014, introduced two years ago, bans any supply of jet fuel to Syria from the EU territories, whether or not the fuel originated in the European Union.
 
Over one two-week period in October, Russian tankers delivered 20,000 metric tonnes of jet fuel to Syria – worth around $9 million at today’s world prices – via the European Union, according to the EU government intelligence source.
 
  “The jet fuel shipments from these vessels have played a vital role in maintaining Russian air strikes in the region,” said the source. “This points to a sustained Russian build-up of resources needed to support their military operation and ambitions in Syria.”
 
Some of the shipped fuel also went to the Syrian military, helping to “keep Assad’s air assets operational”, the source added.
The shipping source and a third person, an intelligence consultant specialising in the Mediterranean area, also said the fuel was likely intended for Russian and Syrian military use.
 
TRANSPONDERS OFF
 
Publicly available ship-tracking data confirms that at least two Russian tankers, the Yaz and Mukhalatka, made one trip each between September and October, stopping in Greece and Limassol in Cyprus. In Greece, the Yaz stopped at Agioi Theodoroi port but it is unclear where the Mukhalatka stopped.
From Cyprus, they sailed towards Syria and Lebanon. Their tracking transponders were switched off near the coasts of those countries, according to the data.
 
The EU intelligence source said the Mukhalatka went on to deliver jet fuel to Syria, while the other two sources said the Yaz almost certainly carried fuel to the country. All the people declined to be named due to the sensitivity of the matter.
 
It was unclear where the fuel might have originated.

Alexander Yaroshenko, general director of the owner of the Yaz and Mukhalatka ships, St Petersburg-based Transpetrochart, declined to comment when asked by Reuters about the shipments. Transpetrochart asked for written questions, which were supplied, but did not provide an immediate response.
 
Transpetrochart says on its website that it was founded in 2002 and specialises in shipping crude oil, fuel oil, diesel oil, gasoline and other oil products. It operates seven oil tankers.
 
The intelligence consultant said the Yaz was investigated by Greek authorities for possible EU sanctions violations during its stay in the port of Agioi Theodoroi in September, but that it was allowed to leave bound for Turkey.
 
The Greek coastguard service said in September that it had investigated the Yaz for possible breaches of EU regulations regarding Syria and had pressed charges against the ship’s captain. A spokesman did not give further details about the investigation when contacted by Reuters.
 
One coastguard official said separately the captain was charged and released pending trial.
 
The EU government intelligence source said Russia was also using ships flying the flags of other countries to carry jet fuel to Syria. Reuters was unable to corroborate that allegation with other sources, or with ship-tracking data.

 

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NWS_a2
9. WSJ: “Terror Finance Abroad Touches Thanksgiving at Home”

(Source: Wall Street Journal) [Excerpts of subscription article.]
 
U.S. companies are barred from doing business with people and entities named on the government’s designated-terrorist list. The firm that touts the Butterball turkey is being investigated over such alleged ties.
 
An American food producer that counts Butterball turkeys among its brands has done millions of dollars of business in Africa with a company blacklisted by U.S. authorities for supporting terror, The Wall Street Journal has found.  The Justice Department, as part of a broad criminal probe, is investigating whether Kansas-based
Seaboard
Corp. tried to mask wheat-flour sales to firms linked to a Lebanese businessman and his family in the years after he and two brothers were put on the government’s terror blacklist in 2009 and 2010.  The brothers have allegedly given tens of millions of dollars to Hezbollah, the Shiite militant group backed by Iran, U.S. officials said. Penalties for companies working with anyone on the list range from fines to prison under laws intended to starve terror groups of cash to carry out attacks.
 
U.S. multinational companies are responsible for seeing past middlemen, corporate shells and newly formed firms to spot links with more than 1,000 individuals, companies and entities named on the government’s designated-terrorist list. Prosecutions are rare, but companies risk civil penalties for even unintentional work.
 
  “Doing business with bad actors is like touching the third rail,” said Christopher Swift, a lawyer who helped enforce sanctions against blacklisted terrorists at the Treasury Department before entering private practice. “If you deliberately do it, then that falls into the criminal domain-and that’s very dangerous.”
 
A milling subsidiary of Seaboard in central Africa worked with a company tied to the Tajideen family after it was blacklisted, according to corporate documents and interviews with former U.S. officials and Seaboard employees. While aware of the Justice Department investigation, the company said it didn’t enter into any flour contracts with the firm after it was added to the U.S. blacklist. Seaboard said through a lawyer that it “has specific policies that prohibit doing business with companies and individuals designated” as terrorist organizations. It said the allegation arose from a competitor it didn’t name.  …
 
The Journal’s findings underscore the complexity of policing the global economy, which relies on relatively unrestricted movements of goods and capital. Laws are porous, allowing U.S. firms to legally do business with a company linked to a blacklisted terror suspect who doesn’t hold a majority stake. 
 
People working in global trade say the rules are a challenge. Before doing deals, Ilona Kogan, vice president of Globex International, said her New York City trading firm checks new partners against the U.S. blacklist, but seeing past front companies can be difficult. “What am I supposed to do?” Ms. Kogan said. “Ask if they are Hezbollah?” Hezbollah, which also is a political organization in Lebanon that provides social services, has been designated a terror group since 1995 for allegedly carrying out kidnappings and bombings that killed hundreds of Americans. Its military wing is fighting in Syria alongside President Bashar al-Assad ‘s regime.
 
The Journal found other U.S. companies, in addition to Seaboard, that have done business with firms controlled by Tajideen family members, including Kassim Tajideen, the eldest brother. Some of those companies traded in poultry, others in lumber. The family’s long experience in Africa makes them valuable partners to handle the complex logistics of ferrying goods over international borders to destinations hobbled by corruption, political turmoil and violence.
 
In the Democratic Republic of Congo, for instance, U.S. companies sent commodities, including poultry, valued at more than $80 million to Tajideen-tied companies in the three years after Kassim Tajideen was blacklisted, import logs for one of the country’s ports show. No U.S. company was named.
 
Federal agents last year talked to a U.S. lumber company about imports from a Tajideen firm in Congo. “Everything has been cleared up,” said Wayne Rogers, president of East Teak Fine Hardwoods Inc. He said the wood-an exotic species called afrormosia-was purchased through a company in Europe.  Kassim Tajideen denied any wrongdoing and said he had never heard of Seaboard Corp. “I’m 100% sure I didn’t do anything wrong,” he said in a recent interview. “I have nothing to do with any terrorist group.”  …

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COMMCOMMENTARY

COMM_a110. O. Torres & D. Kyle: “2016 Exports Year-End Review”

(Source: Torres Law, PLLC)
 
* Authors: Olga Torres, Esq., Torres Law, PLLC,
214-593-7120, info@torrestradelaw.com; and Derrick Kyle.
 
2016 has been another year full of developments in the export world. We saw the advancement of the Export Control Reform (“ECR”) initiative, other revisions to the International Traffic in Arms Regulations (“ITAR”) and the Export Administration Regulations (“EAR”), and changes in the export control enforcement outlook.
 
Below is a brief summary of many of the developments that have occurred in exports over the past year.
 
EXPORT CONTROL REFORM
 
For the fourth consecutive year, the ECR initiative has continued the transition of items from the State Department’s Directorate of Defense Trade Control’s (“DDTC”) United States Munitions List (“USML”) to the Commercial Control List (“CCL”) of the Department of Commerce’s Bureau of Industry and Security (“BIS”). The BIS and DDTC have also undertaken the task of harmonizing important terms and concepts in the EAR and ITAR.
 
ITAR Category Revisions
 
On July 28, DDTC and BIS concurrently published final rules, amending the ITAR’s USML and the EAR’s CCL. [FN/1] These final rules revised two Categories of the USML: Category XIV, pertaining to toxicological agents, and Category XVIII, pertaining to directed energy weapons. On October 12, the agencies published another final rule, this time revising Category XII of the USML, pertaining to fire control, laser, imaging, and guidance equipment. [FN/2] All of these revisions attempt to more precisely describe articles warranting control on the USML and to establish a “bright line” between the USML and the CCL regarding control of these items. The revisions to all three Categories will become effective on December 31, 2016.
 
Category XIV of the USML regulates chemical and biological agents and associated equipment. The recent revisions remove certain toxicological agents and associated equipment from control under the USML to the CCL’s control. Among the items removed from the USML to the CCL are riot control agents (e.g., tear gas), test facilities, and equipment for the destruction of chemical and biological agents. These items new to the CCL were given new ECCNs in Category 1 (1×607).
 
The ITAR will continue to control “Tier 1” pathogens and toxins, as established by the Department of Health and Human Services and the United States Department of Agriculture select agents and toxins regulations (42 C.F.R. pt. 73 and 9 C.F.R. pt. 121), meeting specific capabilities. Tier 1 pathogens and toxins that do not meet the enumerated capabilities will be listed in the CCL. Other enumerated items that will be listed in the USML include chemical agents adapted for use in warfare; antibodies, recombinant protective antigens, polynucleotides, and biopolymers funded exclusively by a Department of Defense (“DoD”) contract; and some vaccines exclusively funded by a DoD contract.
 
Category XVIII, which covers directed energy weapons, was revised to more specifically describe the controlled items as those articles that “other than as a result of incidental, accidental, or collateral effect, achieve [certain] effects described in [paragraph (a)] by way of non-acoustic techniques.” The revisions transfer to the CCL certain tooling, production equipment, test and evaluation equipment, test models and other articles related to directed energy weapons. The new EAR-controlled items will be listed under new ECCNs 6×619.
 
The revisions to Category XII of the USML introduced a concept that has not been used in other revisions to the USML: identifying certain items as defense articles if they were “specially designed for a military end user.” The final rule removes some fire control, laser, imaging, and guidance equipment and related software and technology from the USML to CCL ECCN 7A611 and newly-created ECCNs 7B611, 7D611, and 7E611. The rule also amends Categories VIII, XIII, and XV to reflect that certain items previously controlled under those Categories are now controlled under the revised Category XII or the CCL.
 
ITAR and EAR Definition Harmonization
 
On June 3, BIS and DDTC issued a final rule and an interim final rule, respectively, for the purpose of harmonizing the definitions of many of the terms found in the ITAR and EAR. [FN/3] The purpose of the rules is to increase clarity and consistency between key terms used in the regulations. Some of the terms that were revised or introduced in these rules include “export,” “reexport,” “release” and “retransfer.” Important conceptual changes include the ITAR formally adopting the “deemed export” concept previously only found in the EAR -although in practice the ITAR had long regulated technology transfers to foreign nationals. Notably, for purposes of deemed exports under the ITAR, DDTC will continue to review all citizenships of foreign employees whereas BIS will only look at the last country of residence or citizenship. 
 
The following changes to the regulations are also noteworthy:
 
  (1) In the context of cloud computing, the BIS rule provides a carve-out from the “export” definition for certain unclassified technology or software that is secured using end-to-end encryption and certain cryptographic modules compliant with FIPS 140-2. [FN/4] In order for the carve-out to apply, the encrypted technology cannot be intentionally stored in a country listed in Country Group D:5 or the Russian Federation. (The DDTC rule contains no such carve-out for encrypted data, although one could be included in a future rule.)
  (2) For in-country transfers, both the EAR and the ITAR have been modified to clarify that an in-country transfer, sometimes requiring additional authorization, occurs if there is a change in end user or end use in the same foreign country.
  (3) Under the EAR and ITAR, for technology to be released to a foreign person, it must actually be “revealed.”
  (4) Both sets of regulations have clarified exemptions related to when foreign employees of U.S. companies or U.S. persons are permitted to receive technical data without a license when travelling abroad on a temporary assignment. To achieve this, BIS revised License Exception TMP, and DDTC revised its technical data exemption. [FN/5]
 
Harmonization of the Destination Control Statement
 
As part of the initiative to harmonize as much as possible between the ITAR and the EAR, on August 17 both BIS and DDTC published final rules that harmonized the Destination Control Statement (“DCS”) required by each agency.[FN/6] Inclusion of a DCS in shipping documentation is mandatory in certain situations under both sets of regulations. Previously, exporters and freight forwarders raised concerns regarding which DCS to use on shipping documentation and claimed the rules were inconsistent and unclear. The new rules, which become effective November 15, 2016, address this problem by creating a single DCS with common language [FN/7] that can be used whether shipping items controlled by the ITAR or the EAR.
 
After harmonization, exporters are only required to include the DCS on the commercial invoice. With respect to the shipment of EAR-controlled items, the ECCNs of 9×515 or “600 series” items must also be included on the commercial invoice; a DCS is not required for EAR99 items or items shipped under License Exceptions BAG or GFT; and there is no longer a requirement for a special DCS for items shipped to India having ECCNs controlled for CC column 1 and 3 reasons or RS column 2 reasons. For shipments of ITAR-controlled items, exporters must include the end-user, country of destination, and license or other approval number or exemption citation on the commercial invoice. With respect to mixed shipments, having both EAR and ITAR-controlled items, the State Department rule clarified that items subject to the EAR are not defense articles, even when exported under a license from the State Department, but when exported under such State Department license, the exporter must include the appropriate export classification for each item on the commercial invoice.
 
OTHER DEVELOPMENTS
 
EAR Encryption Changes
 
On September 20, BIS published a rule updating Category 5-Part 2 of the CCL.[FN/8] The amendments include revisions to ECCN 5A002, which was divided into three subsections: 5A002 (Cryptographic information security), 5A003 (Non-cryptographic information security), and 5A004 (Defeating, weakening, or bypassing information security). According to BIS, the revisions are meant to streamline the classification process as the new ECCNs will have more specific, informative headings. Further, ECCNs 5A992/5D992 a&b and 5E992.a were deleted and the items previously controlled under the deleted ECCNs may now be controlled under EAR99 or elsewhere (e.g., 5A991).
 
The revisions also made changes to License Exception ENC. These changes include no longer requiring an Encryption Registration, updating performance parameters under §740.17(b)(2), and moving the mass market provisions to the ENC section (§740.17).
ENFORCEMENT
 
Recent trends show that enforcement actions have stayed relatively level in recent years, but developments in 2016 indicate that they may rise again and be even harsher when they do.
 
Enforcement Trends
 
According to the BIS’ Annual Report to Congress for Fiscal Year 2015 (the most recent year that complete data is available), criminal convictions of businesses and individuals for export violations were down to 31 in 2015 from 39 in 2014 and a four-year high of 52 in 2013. However, both total criminal fines ($156,416,030) and forfeited assets ($84,496,015) were up from 2014, which saw $137,808,756 in total criminal fines and more than $1,318,832 in forfeitures.
 
Regarding civil enforcement in 2015, there were 51 administrative export and antiboycott actions against businesses and individuals resulting in $15,111,200 in civil penalties, whereas in 2014, 48 actions resulted in $60,567,150 in civil penalties. These numbers signal the agencies’ increased focus on intentional violations. Although there were less criminal cases in 2015, the total in penalties issued for these cases increased. In the ITAR enforcement arena, there have been three Consent Agreements entered into between violating companies and the Department of State in 2016, up from zero in 2015 and two in 2014.  Due to the recent publication of the Department of Justice’s Guidance (see below), the criminal enforcement of both EAR and ITAR violations are likely to increase.
 
DOJ Guidance
 
On October 2, the National Security Division (“NSD”) of the Department of Justice (“DOJ”) published its Guidance Regarding Voluntary Self-Disclosures, stating it has made it a top priority to pursue “willful export control and sanctions violations by corporate entities and their employees.”[FN/9] DOJ’s VSD guidance also implements the 2015 “Yates memo,” which emphasizes enforcement against individual corporate defendants. [FN/10]
 
Penalty Inflation
 
Although it is uncertain, though likely, that the number of enforcement actions will trend upward, what is certain is that the amount of potential recovery in civil enforcement actions against individuals and organizations for violations of export controls has increased. The export agencies have recently adjusted export penalties to reflect inflation guidelines pursuant to the Federal Civil Penalties Inflation Adjustment Act (“the FCPIA Act”).11 As a result, the penalty for an EAR violation has risen from $250,000 per violation (or twice the value of the transaction) to $284,582 (or twice the value of the underlying transaction).12 The FCPIA Act also mandated an increase for violations of the Arms Export Control Act, which includes ITAR violations.  The civil penalty for an ITAR violation has more than doubled from $500,000 per violation to $1,094,010 per violation.13 The increases became effective August 1, 2016.
 
OUTLOOK
 
The ECR initiative that started in 2009 is coming to a slow end. With the revisions to Categories XII, XIV, and XVIII, 18 of 21 USML Categories have been revised since 2013. That only leaves Categories I, II, and III without revision. There are currently no published proposed rules with respect to these Categories, most likely because they control firearms, close assault weapons, and combat shotguns; guns and armament; and ammunition and ordnance, respectively.
 
When it comes to dealing with the 2016 revisions to the ITAR and EAR, the removal of items from the more heavily controlled USML to the arguably less restrictive CCL will come as a blessing to some exporters, but the effort and costs of reclassifying multiple items has been burdensome for small businesses. Further, the harmonization of terms, concepts, and definitions may lessen the burden on exporters somewhat, but the definitions are still often different from one another and sometimes true inconsistencies remain.
 
When it comes to enforcement, the DOJ’s Guidance makes it clear that criminal enforcement for export control violations is a priority. By implementing the Yates memo, the Guidance clarifies that criminally culpable corporate individuals will be targeted for prosecution for violations.
 
As the year comes to an end, it would be wise to revisit these latest revisions to ensure you are up-to-date with the ever-changing regulations.
 
If you have any questions regarding any of the changes discussed in this article, please do not hesitate to contact us.
 
————
  [FN/1] Amendment to the ITAR: Revision of USML Categories XIV and XVIII, 81 Fed. Reg. 49,531 (July 28, 2016) (to be codified at 22 C.F.R. pt. 121); CCL: Addition of Items Determined to No Longer Warrant Control under USML Categories XIV or XVIII, 81 Fed. Reg. 49,517 (July 28, 2016) (to be codified at 15 C.F.R. pts 740 & 774).
  [FN/2] Amendment to the ITAR: Revision of USML Category XII, 81 Fed. Reg. 70,340 (Oct. 12, 2016) (to be codified at 22 C.F.R. pt. 121); Revisions to the EAR: Control of Fire Control, Laser, Imaging, and Guidance Equipment That No Longer Warrant Control under the USML, 81 Fed. Reg. 70,320 (Oct. 12, 2016) (to be codified at 15 C.F.R. pts. 734, 740, 742, 744, 772 & 774).
  [FN/3] Revisions to Definitions in the EAR, 81 Fed. Reg. 35,586 (June 3, 2016) (to be codified at 15 C.F.R. pts. 734, 740, 750 & 772); ITAR: Revisions to Definition of Export and Related Definitions, 81 Fed. Reg. 35,611 (June 3, 2016), amended by 81 Fed. Reg. 62,004 (Sept. 8,2016) (to be codified at 22 CFR pts. 120, 123, 124, 125, 126 & 130).
  [FN/4] Federal Information Processing Standards 140-2 or its successors, supplemented by software implementation, cryptographic key management and other procedures and controls that are in accordance with guidance provided in current U.S. National Institute for Standards and Technology publications, or other equally or more effective cryptographic means.
  [FN/5] 15 C.F.R. pt. 740.9(a)(1); 22 C.F.R. pt. 125.4(b)(9).
  [FN/6] Revision to the EAR: Harmonization of the Destination Control Statements, 81 Fed. Reg. 54,721 (Aug. 17, 2016) (to be codified at 15 C.F.R. pt. 758); Amendment to the ITAR: Procedures for Obtaining State Department Authorization to Export Items Subject to the EAR; Revision to the Destination Control Statement; and Other Changes, 81 Fed. Reg. 54,732 (Aug. 17, 2016) (to be codified at 22 C.F.R. pts. 120, 123, 124, 125 & 126).
  [FN/7] “These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations.”
  [FN/8] Wassenaar Arrangement 2015 Plenary Agreements Implementation, Removal of Foreign National Review Requirements, and Information Security Updates, 81 Fed. Reg. 64,656 (Sept. 20, 2016) (to be codified at 15 C.F.R. pts. 730, 734, 738, 740, 742, 743, 758, 770, 772 & 774).
  [FN/9] Department of Justice–National Security Division, Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations (Oct. 2, 2016), available here.
  [FN/10] Department of Justice, Memorandum from Deputy Attorney General Sally Quillian Yates on Individual Accountability for Corporate Wrongdoing (Sept. 9, 2015), available here.
  [FN/11] Federal Civil Penalties Inflation Adjustment Act § 4, 28 U.S.C. § 2461 (2015).
  [FN/12] Civil Monetary Penalty Adjustments for Inflation, 81 Fed. Reg. 36,454 (June 7, 2016) (to be codified at 15 C.F.R. pt. 6).
  [FN/13] Civil Monetary Penalties Inflationary Adjustment, 81 Fed. Reg. 36,791 (June 8, 2016) (to be codified at 22 C.F.R. pts. 35, 103, 127 & 138).

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COMM_a211
. W. Root: “DoD May Withhold EAR and ITAR Controlled Technical Data from Public Disclosure”

(Source: Author)
 
* Author: William Root, billroot23@gmail.com.
 
A DoD October 31 proposal in the Federal Register to revise 32 CFR 250 would, contrary to its 10 USC 130 statutory authorization, contrary to EO 13556 on controlled unclassified information, and contrary to President Reagan’s NSDD 189 to use classification to control federally funded fundamental research, give DOD authority to determine what unclassified EAR or ITAR controlled technical data must, rather than may, be withheld from public disclosure, including what is “not subject to the EAR” per 734; “no license required” per 738; EAR license exceptions per 740; excluded from the ITAR definition of technical data per 120.10(b); ITAR exemptions in 124, 125, and 126; and public domain unless approved by a USG official. It would also give DoD authority to determine what is an EAR or ITAR violation and to rule on EAR or ITAR appeals.
 
Will BIS and DDTC join forces to protect their respective turfs from the four doubles becoming the four triples, rather than making progress toward the four singles?

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ENEDITOR’S NOTES

EN_a112. Bartlett’s Unfamiliar Quotations

(Source: Editor)

* Rodney Dangerfield (born Jacob Cohen, 22 Nov 1921 – 5 Oct 2004, was an American stand-up comedian, actor, producer, screenwriter and comedian known for the catchphrase “I don’t get no respect!” and his monologues on that theme. He is also remembered for his 1980s film roles, especially in Easy Money, Caddyshack, and Back to School.)
  – “My psychiatrist told me I was crazy and I said I want a second opinion. He said, Okay, you’re ugly too.”
 
* George Eliot (born Mary Ann Evans, 22 Nov 1819 – 22 Dec 1880; known by her pen name George Eliot, was an English novelist, poet, journalist, translator and one of the leading writers of the Victorian era.  She is the author of seven novels, including Silas Marner.)
  – “It is never too late to be what you might have been.” 

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EN_a213. 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:
28 Oct 2016: 81 FR 74918: New Mailing Address for the National Commodity Specialist Division, Regulations and Rulings, Office of Trade; Technical Correction

* 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: 21 Nov 2016 (effective 31 Dec 2016): 81 FR 83114-83126: Clarifications and Revisions to Military Aircraft, Gas Turbine Engines and Related Items License Requirements  

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 4 Nov 2016: 81 FR 76861-76863: Amendments to OFAC Regulations To Remove the Former Liberian Regime of Charles Taylor Sanctions Regulations and References to Fax-on-Demand Service 
 
*
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 (15 Nov 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
  – Latest Amendment: 21 Nov 2016 (effective 31 Dec 2016): 81 FR 83126-83135: Amendment to the International Traffic in Arms Regulations: Revision of U.S. Munitions List Categories VIII and XIX
  – The only available fully updated copy (latest edition 21 Nov 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 on 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 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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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 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission. Any further use of contributors’ material, however, must comply with applicable copyright laws.

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