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16-1206 Tuesday “The Daily Bugle”

16-1206 Tuesday “Daily Bugle”

Tuesday, 6 December 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

[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. State/DDTC Posts Name Change of Thales Geodis Freight & Logistics 
  1. Expeditors News: “FDA Issues Final Rule Regarding ACE Submissions”
  2. Reuters: “U.N. Nuclear Watchdog Confirms Iran Shipped Sensitive Material Abroad: Diplomat”
  3. ST&R Trade Report: “ITDS, Defense Exports, Wildlife Trade Among Topics of Upcoming Rules”
  4. Washington Post: “As Trump Vows to Stop Flow of Jobs Overseas, U.S. Plans to Make Fighter Jets in India”
  1. D.C. Schwartz, J. Kies Mammen & R.C. Burns: “President Applies Authority under CFIUS to Prohibit Acquisition of the U.S. Business of A German Technology Company by A Chinese-owned Entity”
  2. P.E. Jeydel, J.R. Hayes & M. Rathbone: “UN Tightens the Screws on North Korea with Additional Trade and Banking Sanctions”
  1. University of Central Florida Seeks Export Control Analyst 
  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 (5 Dec 2016), FACR/OFAC (4 Nov 2016), FTR (15 May 2015), HTSUS (30 Aug 2016), ITAR (5 Dec 2016)

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1


[No items of interest noted today.]
 

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OGSOTHER GOVERNMENT SOURCES

OGS_a11. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 7 December 2016.]

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OGS_a33
. State/DDTC Posts Name Change of Thales Geodis Freight & Logistics

(Source:
State/DDTC) [Excerpts.]
 
Effective immediately, Thales Geodis Freight & Logistics will change as follows: SCO Aerospace and Defence. Due to the volume of authorizations requiring amendments to reflect this change, the Deputy Assistant Secretary for Defense Trade Controls is exercising the authority under 22 CFR 126.3 to waive the requirement for amendments to change currently approved license authorizations. The amendment waiver does not apply to approved or pending agreements. …

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NWSNEWS

NWS_a14
. Expeditors News: “FDA Issues Final Rule Regarding ACE Submissions”

 
In a Federal Register Notice (FRN) published on December 5, 2016 the U.S. Food and Drug Administration (FDA) issued a final rule regarding certain data elements that will need to be present in electronic filings for Customs and Border Protection (CBP) and FDA to process the filing and determine admissibility.
 
According to the FRN these data elements will be required to, “facilitate automated “May Proceed” determinations by us for low-risk FDA-regulated products which, in turn, will allow the Agency to focus our limited resources on products that may be associated with a greater public health risk.”
 
Each of the below categories will require specific data elements to be included in the electronic filing:
 
  – Food
  – Human and Animal Drugs
  – Medical Devices
  – Radiation-Emitting Electronic Products
  – Biological Products, Human Cells, Tissues, and Cellular and Tissue-based Products
  – Tobacco Products
  – Cosmetics
 
The FDA final rule will be effective December 29, 2016.
 
The FRN can be accessed here.

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NWS_a2
5. Reuters: “U.N. Nuclear Watchdog Confirms Iran Shipped Sensitive Material Abroad: Diplomat”

(Source: Reuters)
 
Iran has shipped 11 tonnes of heavy water abroad to bring its stock back under a limit set by its landmark nuclear deal with major powers, according to a diplomat citing a confidential U.N. nuclear watchdog report.
 
The shipment is a step toward resolving a dispute with Western powers including the United States that are keen to prevent Iran from testing the deal’s terms. The report substantiated an Iranian statement last month about a transfer to Oman but does not identify the destination, the diplomat said on Tuesday.
 
The International Atomic Energy Agency, which is policing the restrictions placed on Iran’s atomic activities under the July 2015 deal, said in a report last month that Iran’s stock of heavy water had for the second time exceeded a soft limit of 130 tonnes, and the IAEA expressed its concerns to Tehran.
 
  “On 6 December the agency verified the quantity of 11 metric tonnes of the nuclear-grade heavy water at its destination outside Iran,” the diplomat quoted the five-paragraph report by the IAEA to member states as saying.
 
  “This transfer of heavy water out of Iran brings Iran’s stock of heavy water to below 130 tonnes,” it said, adding that Iran had told the agency that the shipment left the country on Nov. 19.
 
Though the United States and its allies will see the shipment as a move in the right direction, it is not enough to satisfy them. Washington has underlined that the deal says excess heavy water must be delivered to a foreign buyer, and Iran has made clear Oman is not the final destination.
 
Heavy water is used as a moderator in nuclear power stations like Iran’s unfinished one at Arak that has had its core removed under the deal, which also lifted international sanctions against the Islamic Republic.
 
U.S. President-elect Donald Trump originally vowed to scrap the nuclear accord, describing it as “the worst deal ever negotiated” but later backed down, saying he would “police that contract so tough they (the Iranians) don’t have a chance”.
 
Iranian President Hassan Rouhani said on Tuesday he would not let Trump rip up the deal, warning of unspecified repercussions if Washington reneged on it.

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NWS_a3
6. ST&R Trade Report: “ITDS, Defense Exports, Wildlife Trade Among Topics of Upcoming Rules”

 
Readying for deployment of the International Trade Data System, defense exports, and wildlife trade are among the topics of proposed and final regulations set forth in the semiannual regulatory agendas recently issued by a number of federal agencies, including the departments of State, Justice, and the Treasury, the Fish and Wildlife Service, and the Food and Drug Administration. These online resources list the following regulations affecting international trade that could be issued within the next year. The expected timeframes for issuance of the rules are indicated in parentheses.
 
  – a Fish and Wildlife Service proposed rule revising the general permitting regulations, primarily to increase fees for applying for permits that allow otherwise prohibited activities under the Lacey Act, the Convention on International Trade in Endangered Species of Wild Fauna and Flora, and other laws (December; unchanged)
  – a Drug Enforcement Administration proposed rule to update regulations for the import and export of controlled substances and listed chemicals to allow for the implementation of the International Trade Data System (December; previously May)
  – a Bureau of Alcohol, Tobacco, Firearms, and Explosives proposed rule replacing the term “specifically designed” with the term “specially designed” to align with terminology in the U.S. Munitions Import List, the International Traffic in Arms Regulations, and the Commerce Control List (December; previously July)
  – an FWS proposed rule to rewrite a substantial portion of the regulations on the importation, exportation, and transportation of wildlife, including changes to the port structure and inspection fees (December; previously July)
  – a Food and Drug Administration proposed rule to remove essential use exemptions from the ban on ozone-depleting substances for sterile aerosol talc administered intrapleurally by thoracoscopy for human use, metered-dose atropine sulfate aerosol human drugs administered by oral inhalation, and anesthetic drugs for topical use on accessible mucous membranes of humans where a cannula is used for approved versions that contain ODSs (December; previously August)
  – an Alcohol and Tobacco Tax and Trade Bureau proposed rule to amend the regulations on the importation of distilled spirits, wine, beer, and tobacco products to update import procedures and implement ITDS (December; proposed rule issued in June 2016)
  – an FDA final rule banning powdered surgeons’ gloves, powdered patient examination gloves, and absorbable powder for lubricating surgeons’ gloves (January 2017; proposed rule published in March 2016)
  – a State Department final rule amending the International Traffic in Arms Regulations to clarify the requirements for the licensing and registration of U.S. persons providing defense services while in the employ of foreign persons (June 2017; previously January 2017)
  – an FWS rule finalizing prohibitions on imports of 201 salamander species (June 2017; previously January)
  – an FDA proposed rule establishing a requirement for foreign establishment registration and listing for manufacturers of tobacco products (August 2017; previously March 2017)
 
Completed Rulemakings
 
  – an FDA final rule requiring food facilities to submit registrations in an electronic format and codifying the requirement for facilities to renew their registrations every two years
  – an FDA final rule allowing for the inclusion of certain stand-alone symbols in the labeling of medical devices
  – a State Department final rule amending the ITAR to update the definitions of “defense services,” “technical data” and “public domain;” create a definition of “product of fundamental research;” revise the definition of “export” to stipulate that the electronic transmission of unclassified technical data abroad is not an export provided the data is sufficiently secured to prevent access by unauthorized parties; and create a new exemption to allow for the electronic storage of unclassified technical data abroad provided it is secured to prevent access by unauthorized parties
  – a TTB final rule updating and reissuing the regulations pertaining to minimum manufacturing, marking, and importer permit requirements for tobacco products and cigarette papers and tubes

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NWS_a4
7. Washington Post: “As Trump Vows to Stop Flow of Jobs Overseas, U.S. Plans to Make Fighter Jets in India”

(Source: Washington Post)
 
As a new American president bent on retaining American jobs prepares to take office, the Obama administration and the U.S. defense industry are working on a deal with the Indian government to build iconic U.S. combat aircraft in India.
 
In recent months, Lockheed Martin and Boeing have made proposals to the Indian government to manufacture fighter jets – the F-16 Fighting Falcon and the F/A-18 Super Hornet – in India as the country seeks to modernize its rapidly aging fleet of largely Russian-built airplanes.
 
In both cases, the aviation companies would be building production facilities in India; Lockheed Martin proposes to move its entire F-16 assembly line from Texas to India, making India the sole producer of the single-engine combat aircraft.
 
The U.S. military is phasing out the F-16 for its own use, but other countries remain as likely customers.
 
The proposals have the strong backing of the Obama administration, which has sought a closer connection with the Indian military in recent years. Air Force Secretary Deborah Lee James said she was “optimistic” about the prospect of a deal after a visit to New Delhi in August, and Defense Secretary Ashton B. Carter is set to return to India this week, with procurement high atop the list of discussion topics.
 
But the election of a billionaire businessman focused on keeping jobs at home, rather than creating them overseas, has brought a measure of uncertainty to the talks.
 
  “What will be the U.S. policy posture now that the new president-elect is in the mix?” said one high-level official at an American defense firm in India, who spoke on the condition of anonymity to discuss internal negotiations. “Is he going to continue the policy of engaging in India on co-production and co-development? All of those are unknown at this point.”
 
On Thursday, President-elect Donald Trump appeared at a Carrier plant in Indiana, where his team had brokered a deal to save about 1,000 jobs, and on Sunday he let fire a series of tweets that implied a new tax penalty on goods produced by companies that leave the United States.
 
  “Please be forewarned prior to making a very expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS,” he tweeted.
 
On the campaign trail he railed against job losses to Asia and Mexico.
 
  “We are living through the greatest jobs theft in the world,” Trump said last month, citing American companies that have laid off workers and moved jobs to India, Singapore and Mexico. “It’s getting worse and worse and worse.”
 
Officials at Lockheed Martin and Boeing said that any partnership to manufacture jets in India would not result in a net loss of American jobs but would create Indian employment – about 1,000 positions in the case of Lockheed Martin.
 
About 300 mechanics on the Fort Worth assembly line would be moved to the F-35 assembly line at the same plant. Others would be given an opportunity to apply for other jobs on the newer F-35, Lockheed officials said, although they concede that some positions would be lost in the move because of attrition or retirements.
 
  “I see this as a great opportunity for all parties involved,” said Randy Howard, director of business development for Lockheed’s integrated fighter group. “It doesn’t take jobs away from the U.S., it extends existing jobs, and not just for Fort Worth but for many other companies around the U.S. that build parts for the F-16.”
 
Nevertheless, workers in Fort Worth say they are worried about the future.
 
  “Wouldn’t you be?” said Earnest Boone, president of the District Lodge 776, International Association of Machinists and Aerospace Workers, which represents Lockheed employees.
 
In October, the Indian government sent a letter to foreign missions and aerospace manufacturers inquiring about single-engine fighter aircraft that could be manufactured locally.
 
India wants to co-produce the fighter jets as part of its Make in India program, which has the lofty goal of expanding the manufacturing base to 25 percent of the gross domestic product in the next six years.
 
Nitin Wakankar, a spokesman for India’s Ministry of Defense, said that the process of selecting the new jet “has not started yet,” so answering detailed questions would be premature.
 
India’s costly earlier effort to partner with the French company Dassault Aviation for 126 jets unraveled, and the government ended up buying only 36 ready-made Rafale planes this year.
 
Analysts say Lockheed’s main rival in the single-engine sphere is Sweden’s Saab Group and its Gripen fighter. Chicago-based Boeing also has proposed to make its twin engine F/A-18 in India. Boeing recently took a group of Indian defense journalists on a whirlwind tour of Australia and the United States to show off its program.
 
The U.S. Air Force is phasing out the F-16 in favor of the F-35 aircraft in coming years and the company has no orders for the F-16 beyond October 2017, but it is seeking other customers and does not plan to dismantle the assembly line just yet.
 
The F-16 airplane remains one of the most widely used aircraft in the world, and Lockheed is continuing to negotiate deals to sell the fighter to other countries. Those F-16s would be made in India under the deal once the new assembly line was up and running, Howard said. The aircraft has been made in joint ventures with other nations before, but “we’ve never offered our only production line to another country,” Howard said. “It’s unprecedented.”
 
Lockheed has promised that India would not only manufacture and export its jets, but it also would play a “critical role” in supporting a fleet of about 3,200 F-16s in operation around the world, said Jon Grevatt, an Asia Pacific defense industry analyst with IHS Jane’s, a defense analysis firm. “That’s a big carrot,” he noted.
 
A potential stumbling block to the deal is the willingness of the U.S. government to part with enough of its mission system technology to make the package palatable to the Indians. The aircraft is viewed negatively by some in the defense establishment here as a dated platform that first rolled off the assembly line in 1978 – despite its current state-of-the-art avionics. Another strike against it, for some, is that it is the fighter aircraft used by archrival Pakistan.
 
  “The F-16 is a good aircraft, it has lived its life, but its time is over,” said Muthumanickam Matheswaran, a retired Indian air force air marshal and analyst.
 
A greater concern, said Pushan Das, a fellow at the Observer Research Foundation in Delhi, is whether “India wants to be seen as close to the United States and building U.S. fighter aircraft, or does it want to be more politically neutral and choose a partner like Sweden, given the fact that New Delhi needs to manage its relationship with Russia and China. That’s the main thing.”
 
India’s defense procurement typically moves at a glacial pace. Ashley J. Tellis, a scholar for the Carnegie Endowment for International Peace, wrote in a March paper that the Indian air force is in “crisis” and that its troubled acquisition and development programs threaten its air superiority over rapidly modernizing rivals Pakistan and China. The country hopes to expand its fleet from 36.5 squadrons to as many as 45 squadrons by 2027 – an unlikely prospect, the study found, because of budget constraints, slow procurement and other limitations.

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COMMCOMMENTARY

COMM_a18. D.C. Schwartz, J. Kies Mammen &
R.C. Burns: “President Applies Authority under CFIUS to Prohibit Acquisition of the U.S. Business of A German Technology Company by A Chinese-owned Entity”
(Source:
Bryan Cave LLP
)
 
* Authors: Daniel C. Schwartz, Esq.,
dcschwartz@bryancave.com
, 202-508-6025; Jennifer Kies Mammen, Esq.,
jennifer.mammen@bryancave.com
, 202-508-6044; and R. Clifton Burns, Esq.,
Clif.Burns@bryancave.com
, 202-508-6067. All of Bryan Cave LLP.
 
As we discussed in a recent alert, the Committee on Foreign Investment in the United States (CFIUS) refused to approve the proposed $710 million acquisition of Aixtron GE, a German-based technology company, by Grand Chip Investment GmbH (GCI), a German subsidiary of Fujian Grand Chip Investment Fund LP of China. On Friday evening, December 2, 2016, the Department of the Treasury (Treasury) and the White House announced that President Obama had prohibited the acquisition of the U.S. business of Aixtron by GCI, pursuant to his authority under Section 721 of the Defense Production Act, as Amended by The Foreign Investment and National Security Act of 2007 (FINSA).
 
The combination of press releases from Treasury and the White House inform other entities contemplating transactions potentially subject to CFIUS jurisdiction.
 
  (1) While Aixtron and GCI are German entities, and Fujian Grand Chip Investment Fund LP is Chinese, CFIUS claims jurisdiction over any transaction “by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States.” The President’s findings underpinning his objection to the transaction identified the U.S. business of Aixtron as including not just AIXTRON, Inc., its research, technology and sales facility in California, but also “any asset of Aixtron or AIXTRON, Inc. used in, or owned for the use in or benefit of, the activities in interstate commerce in the United States of AIXTRON, Inc., including without limitation any interest in any patents issued by, and any interest in any patent applications pending with, the United States Patent and Trademark Office . . . .” In other words, the existence of U.S. patents, granted or pending may be considered an independent ground for finding sufficient interstate commerce for CFIUS jurisdiction.
 
  (2) As we reported in our recent alert, CFIUS remains very likely to exercise its authority to review covered transactions involving critical technologies or Chinese involvement. In particular, the semiconductor industry remains a high priority of CFIUS and its member agencies. To this end, in its press release regarding the President’s action blocking the transaction, Treasury focused on Aixtron’s role as an equipment manufacturer for the “global semiconductor industry, including Metal-Organic Chemical Vapor Deposition (MOCVD) systems used to build compound semiconductor materials.” Treasury specifically identified the perceived national security risk posed by the transaction as “among other things, … the military applications of the overall technical body of knowledge and experience of Aixtron, a producer and innovator of semiconductor manufacturing equipment and technology, and the contribution of Aixtron’s U.S. business to that body of knowledge and experience.”
 
  (3) Treasury was careful to claim that, despite this decision by the President, the Administration will “continue to ensure that the United States remains the most attractive place for businesses to locate, invest, grow, and create jobs” and ” and this decision is not a determination with regard to any other foreign direct investment from China or any other country.” At the same time, Treasury emphasized that the proposed acquisition was to have been funded in part by a component of China IC Industry Investment Fund, described as “a Chinese government-supported industrial investment fund established to promote the development of China’s integrated circuit industry.”
 
This is the second time President Obama has issued orders prohibiting or requiring unwinding of a transaction under CFIUS. The first was in 2012 when the President ordered Chinese-owned Ralls Corp. to unwind its acquisition of a wind farm near a Navy base in Oregon. Please see our discussion of that transaction here. The only other U.S. President to exercise such authority was George H.W. Bush, who blocked a Chinese-based company from acquiring MAMCO Manufacturing Inc., a manufacturer of aircraft components in 1990.
 
So what happens next? The President’s order prohibits the acquisition by GCI only of Aixtron U.S., but appears to define that broadly to include not just the facility in California, but also “any asset of Aixtron or AIXTRON, Inc. used in, or owned for the use in or benefit of, the activities in interstate commerce in the United States of AIXTRON, Inc., including without limitation any interest in any patents issued by, and any interest in any patent applications pending with, the United States Patent and Trademark Office . . . .” Conceivably, therefore, Aixtron could try to spin-off its California facility in order to sell its remaining assets to GCI, but CFIUS may maintain jurisdiction over any transaction that includes US patents. Furthermore, Aixtron previously announced on October 24, 2016, that the German economics ministry had withdrawn clearance for the transaction over concerns about Chinese takeovers of German companies. As of December 3rd, Aixtron announced the transaction parties are evaluating the impact of the Order and will coordinate with the German Federal Financial Supervisory Authority (BaFin) to examine the consequences of the Order on the takeover process.

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COMM_a2
9. P.E. Jeydel, J.R. Hayes & M. Rathbone: “UN Tightens the Screws on North Korea with Additional Trade and Banking Sanctions”

* Authors: Peter E. Jeydel, Esq., pjeydel@steptoe.com, 202-429-6291; Jack R. Hayes, Esq., jhayes@steptoe.com, 202-429-6491; and Meredith Rathbone, Esq, mrathbone@steptoe.com, 202-429-6437. All of Steptoe & Johnson LLP.
 
UN Security Council Resolution (UNSCR) 2321, adopted on November 30, 2016, pushes the limits of how far international economic sanctions can go in isolating the North Korean regime without causing a collapse of the country’s economy as a whole.  It also sets out a handful of additional legal restrictions that will be relevant for US and international stakeholders that may still have direct or indirect connections with North Korea, and closes some of the gaps left by UNSCR 2270 from March 2016, on which we previously advised.  On December 2, 2016, the US Treasury Department’s Office of Foreign Assets Control (OFAC) announced related sanctions designations of additional individuals, entities and aircraft in North Korea.
 
This marks the culmination of the Obama Administration’s years-long diplomatic push to bring the entire international community on board with an unprecedented effort to squeeze the North Korean government commercially and cut off its access to foreign currency and trade, while trying to strike a delicate balance by not causing a humanitarian catastrophe that would threaten regional stability.  It leaves the incoming Trump Administration with few additional sanctions options, as most of those cards have now been played, but facing the likelihood of an escalation of tensions and instability.  North Korea affairs will be a topic to watch closely over the coming months for any business in Northeast Asia. 
 
With the exception of the additional OFAC designations, most of the restrictions set out in UNSCR 2321 will not change US sanctions on North Korea, which already broadly prohibit exports and reexports of goods, services, and technology to North Korea, along with facilitation, financing, and the like, and any transactions or dealings with the North Korean government.  But it should lead to changes in other countries’ trade regulations, along with more vigilance and enforcement by the UN and national regulators.
 
Coal and non-ferrous metal exports
 
UNSCR 2321 continues the general requirement from UNSCR 2270 that states prohibit the procurement of coal, iron, and iron ore from North Korea.  For iron and iron ore, it continues to exempt transactions that are “exclusively for livelihood purposes,” along with coal from a third country that merely transits the Port of Rajin (Rason).  But it establishes a unique program for the coal trade that acts as a more limited exception to the ban, rather than the general “livelihood” exception from UNSCR 2270.  It sets a cap on total global coal exports by North Korea, with a requirement for member states to report monthly coal trade volumes with North Korea, which the UN will use to announce publicly and “on a real-time basis” the progress towards reaching the cap and when coal imports from North Korea must cease.  This program is designed to cut what North Korea earns from coal exports by approximately $700 million per year from its 2015 total, or more than 60% of its coal export revenue.  This should have a significant impact on the North Korean economy, as coal constitutes about one third of its export revenue. 
 
This new type of UN-run export management program was motivated in part by reports that China has actually increased coal imports from North Korea this year, even after UNSCR 2270 had set strict limits on that trade, with Chinese officials defending that activity as consistent with UNSCR 2270’s open-ended “livelihood” exception.  Now, rather than a subjective and potentially limitless exception, there is a hard, objective cap.  How its impact ripples through the North Korean economy and changes the regime’s already erratic behavior remains to be seen.  It is noteworthy, though, that US officials have publicly warned their Chinese counterparts that the United States will “have no choice” but to impose sanctions on any Chinese entities that fail to comply with the new restrictions. 
 
In addition, the UN now requires its member states to prohibit, with no exceptions, imports of copper, nickel, silver, and zinc from North Korea, which were not included in UNSCR 2270.  This strict ban on non-ferrous metals imports is expected to eliminate another $100 million per year in hard currency revenue for the regime.  It will also likely create supply chain verification challenges for companies once implemented into national legislation, as it applies to “indirect” sourcing from North Korea as well.
 
Other export controls
 
This resolution requires states to prohibit “public and private financial support” for trade with North Korea, including export credits, guarantees, and insurance.  Previously, that ban was limited to circumstances in which such trade would contribute to North Korea’s WMD or missile activity.  It also bans imports and exports of the items listed in Annex III (related to WMDs and missiles), along with the items that will be listed in a new list of dual-use items for conventional arms, like radar and night vision, which the UN’s DPRK Sanctions Committee is required to publish by mid-December, expanding upon the arms embargo that has already been in place for years. 
 
In addition, it adds to the list of luxury goods subject to an export ban to North Korea, rugs and tapestries valued over $500 and porcelain or bone china tableware valued over $100.  It also requires states to prohibit exports of new helicopters and vessels to North Korea -presumably including commercial helicopters and vessels, as there is already a separate arms embargo in place, although the resolution does not specify.
 
Banking restrictions
 
In an impressive display of international determination to cut off North Korea’s global banking activity, this resolution requires states to expel individuals determined to be working on behalf of North Korean financial institutions, with only limited exceptions.  It also requires states to take steps to close existing bank offices, subsidiaries or accounts in North Korea within 90 days, except those used for humanitarian or diplomatic purposes.  UNSCR 2270 had already strictly limited North Korea’s international banking capabilities, but this resolution takes it several steps further.
 
Transportation restrictions
 
UNSCR 2321 takes further action in the transportation sector to prevent North Korea from trading abroad, which will present compliance considerations for companies in related sectors such as insurance, chartering, cargo transportation, port and airport management, and the like.  It requires states to prohibit the provision of insurance or re-insurance services to vessels “owned, controlled, or operated, including through illicit means,” by North Korea, with limited exceptions.  That expands on the previous ban on insuring North Korean-flagged vessels, and appears to set out some kind of due diligence expectation, though how states will implement that remains to be seen. 

It also closes the livelihood exception for leasing and chartering vessels and aircraft to North Korea, providing crew services to North Korea and activities related to registering vessels in North Korea, and requires states to de-register North Korean vessels and prohibit the procurement of vessel and aircraft crewing services from North Korea.  This unprecedented resolution even empowers the UN’s DPRK Sanctions Committee to require states to de-flag, seize, prohibit port entry, and even direct to a specific port, vessels identified as being involved in North Korea’s nuclear or ballistic missile activity.  
 
It also clarifies that the prohibition on providing aviation fuel to North Korea requires states to ensure that no more fuel is provided to North Korean aircraft than is necessary for the flight from that state, and requires inspection of personal luggage and checked baggage of individuals entering or departing North Korea.
 
Education restrictions
 
UNSCR 2321 requires states to suspend scientific and technical cooperation involving persons or groups officially sponsored by, or representing North Korea, except for medical exchanges and other case-by-case exceptions.  It also adds to the list of prohibited disciplines for specialized teaching and training of North Korean nationals that could contribute to its proliferation activities, and clarifies that that list of disciplines is illustrative only.
 
Other measures
 
This resolution includes an expanded list of individuals and entities subject to asset freezes and travel bans, including North Korea’s ambassadors and commercial envoys to Egypt, Sudan, Syria, and Myanmar.  All of the entities are already included on OFAC’s list of Specially Designated Nationals and Blocked Persons (SDNs), as are most (but not all) of the individuals. 

On December 2, 2016, OFAC issued additional SDN designations, not limited to those required under UNSCR 2321.  OFAC designated 16 entities, 16 aircraft and 7 individuals under various authorities related to North Korea, including several commercial enterprises in the coal and energy industries, and numerous North Korean banks.  Also among the designations is Air Koryo, North Korea’s national flag carrier, which had recently been undergoing a series of changes intended to enhance and modernize its facilities, after it had repeatedly been ranked as the world’s worst airline.  Air Koryo was designated under Executive Order 13722 (March 16, 2016) for operating in North Korea’s transportation sector, along with 16 of its aircraft.  Also under that order, OFAC designated entities involved in the exportation of workers from North Korea to Algeria, Angola, Botswana, Benin, Cambodia, Chad, the Democratic Republic of the Congo, Egypt, Equatorial Guinea, Ethiopia, Malaysia, Mozambique, Madagascar, Namibia, Senegal, Syria, Togo, and Zimbabwe, along with other unnamed countries in the Middle East and Asia.  UNSCR 2321 “calls upon States to exercise vigilance over” the use of North Korean nationals as laborers abroad.  
 
UNSCR 2321 also requires states to prohibit North Korea from using its real property abroad for commercial purposes.  Oddly, it requires states to prohibit imports of statues from North Korea, which reportedly generate tens of millions of dollars in revenue for the government, such as the statue of Laurent Kabila in the Democratic Republic of the Congo and two statues for which Robert Mugabe of Zimbabwe reportedly paid $5 million.

Unlike recent North Korea resolutions, this one “emphasizes the importance” of states’ “taking the necessary measures to ensure” that no claims by North Korea or related parties will be valid if premised on actions required by the UN, which may lead to changes in national law and should simplify enforcement and compliance.
 
UNSCR 2321 also requires states to limit North Korean diplomatic posts and personnel to one bank account each, and “calls upon” them to reduce the number of staff at North Korean diplomatic posts.  Interestingly, as the US Ambassador stated, this resolution points out for the first time that, under Article 5 of the UN Charter, “if DPRK continues on its current path, systematically and flagrantly violating its Charter obligations, it could see some or all of its rights and privileges here at the UN suspended.”
 
Conclusion
 
This resolution will not require significant changes in US law, which already prohibits nearly all activity in or involving North Korea.  Nor will it have a major impact on international trade, from which North Korea is already quite isolated.  It will, however, have an important impact in the few areas where North Korea does still have some presence abroad, such as transportation, insurance, banking, and the commodities trade.  From a practical point of view, the very strict obligations on states to cut off banking relationships with North Korea, except in narrow areas such as humanitarian assistance and diplomatic activity, will make it difficult for foreign banks to maintain any presence in North Korea, which will have a ripple effect in complicating the continuation of lawful activity there.
 
As the international community takes one more step towards tightening the screws on North Korea, the big questions are whether the economy as a whole can withstand the pressure, and how the regime will react.  The implications for security and stability in Northeast Asia could be significant, and it remains to be seen if these will be positive or negative.

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MSEX/IM MOVERS & SHAKERS

MS_a110. University of Central Florida Seeks Export Control Analyst
(Source: Mike Miller, Michael.Miller@ucf.edu) [Apologies to UCF.  We forgot to add this one to Monday’s job list.]
 
* Title: Export Control Analyst, University of Central Florida, Orlando
* Description: Position will manage institutional compliance with laws and regulations related to export control, international trade and technology transfer. This position will manage the day-to-day operational, administrative, communication, database, and record-keeping functions of the Office of Export Controls Compliance.
* Additional info, qualifications, and contact information: http://www.jobswithucf.com/postings/47633.
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ENEDITOR’S NOTES

EN_a111. Bartlett’s Unfamiliar Quotations

(Source: Editor)

* Steven Wright (Steven Alexander Wright, born December 6, 1955, is an American comedian, actor, writer, and an Oscar-winning film producer, known for his distinctly lethargic voice and slow, deadpan delivery of ironic, philosophical, and sometimes nonsensical jokes.)
  – “What’s another word for Thesaurus?”
  – “Whenever I think of the past, it brings back so many memories.”
 
* Max Müller (Friedrich Max Müller, 6 Dec 1823 – 28 Oct 1900, was a German-born philologist and Orientalist. He was one of the founders of the western academic field of Indian studies and the discipline of comparative religion.)
  – “A flower cannot blossom without sunshine, and man cannot live without love.” 

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EN_a212. 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: 5 Dec 2016: 81 FR 87426-87427: Amendment to the Export Administration Regulations: Removal of Semiconductor Manufacturing International Corporation From the List of Validated End-Users in the People’s Republic of China (effective 5 Dec 2016); and 81 FR 87424-87426: Amendment to the Export Administration Regulations: Removal of Special Iraq Reconstruction License (effective 4 Jan 2017) 

  
*
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: 5 Dec 2016 (effective 5 Dec 2016): 81 FR 87427-87430: Corrections & Additions to ITAR Parts 120, 121, 122, 124, 126 and 127
  – The only available fully updated copy (latest edition 5 Dec 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 2016, plus a large Index, 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.

* 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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