16-1228 Wednesday “The Daily Bugle”

16-1228 Wednesday “Daily Bugle”

Wednesday, 28 December 2016

The 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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  1. Commerce Posts Civil Monetary Penalty Adjustments for Inflation 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC Posts Reminder on DTAS System Outage on 28 Dec 
  1. Reuters: “U.S. Senator Says Russia Can Expect Sanctions after Cyber Attacks” 
  2. SC Media UK: “Wassenaar Arrangement Talks Collapse” 
  3. ST&R Trade Report: “BIS Info Collection on Exports of U.S.-Origin Technical Data Under Review” 
  1. P. Burnson: “Global Logistics 2017: Customs & Regulations Update: Micro-deals May Prevail in World Order” 
  1. ECTI Presents Export Control Changes Recap…And What’s Next for 2017? – Webinar, 11 Jan 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (20 Dec 2016), DOD/NISPOM (18 May 2016), EAR (27 Dec 2016), FACR/OFAC (23 Dec 2016), FTR (15 May 2015), HTSUS (16 Dec 2016), ITAR (5 Dec 2016) 



. Commerce Posts Civil Monetary Penalty Adjustments for Inflation

(Source: Federal Register) [Excerpts.]
81 FR 95432-95435: Civil Monetary Penalty Adjustments for Inflation
* AGENCY: Office of the Chief Financial Officer and Assistant Secretary for Administration, Department of Commerce.
* ACTION: Final rule.
* SUMMARY: This final rule is being issued to adjust for inflation each civil monetary penalty (CMP) provided by law within the jurisdiction of the United States Department of Commerce (Department of Commerce). The Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, requires the head of each agency to adjust for inflation its CMP levels in effect as of November 2, 2015, under a revised methodology that was effective for 2016 which provided for initial catch up adjustments for inflation in 2016, and under a revised methodology for each year thereafter. The initial catch up adjustments for inflation to CMPs to the Department of Commerce’s CMPs were published in the Federal Register on June 7, 2016 and became effective July 7, 2016, and, as required, did not exceed 150 percent of the amount of the CMP on the date of enactment of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (November 2, 2015). The revised methodology for agencies for 2017 and each year thereafter provides for the improvement of the effectiveness of CMPs and to maintain their deterrent effect. Effective 2017, agencies’ annual adjustments for inflation to CMPs shall take effect not later than January 15. The Department of Commerce’s 2017 adjustments for inflation to CMPs apply only to CMPs with a dollar amount, and will not apply to CMPs written as functions of violations. The Department of Commerce’s 2017 adjustments for inflation to CMPs apply only to those CMPs, including those whose associated violation predated such adjustment, which are assessed by the Department of Commerce after the effective date of the new CMP level.
* DATES: This rule is effective January 15, 2017.
* FOR FURTHER INFORMATION CONTACT: Stephen Kunze, Deputy Chief Financial Officer and Director for Financial Management, Office of Financial Management, at (202) 482-1207, Department of Commerce, 1401 Constitution Avenue NW., Room D200, Washington, DC 20230. The Department of Commerce’s Civil Monetary Penalty Adjustments for Inflation are available for downloading from the Department of Commerce, Office of Financial Management’s Web site.
   This regulation adjusts for inflation CMPs that are provided by law within the jurisdiction of the Department of Commerce. The actual CMP assessed for a particular violation is dependent upon a variety of factors. For example, the National Oceanic and Atmospheric Administration’s (NOAA) Policy for the Assessment of Civil Administrative Penalties and Permit Sanctions (Penalty Policy), a compilation of NOAA internal guidelines that are used when assessing CMPs for violations for most of the statutes NOAA enforces, will be interpreted in a manner consistent with this regulation to maintain the deterrent effect of the CMPs. The CMP ranges in the Penalty Policy are intended to aid enforcement attorneys in determining the appropriate CMP to assess for a particular violation. The Penalty Policy is maintained and made available to the public on NOAA’s Office of the General Counsel, Enforcement Section Web site. …
  (b) Bureau of Industry and Security.
    (1) 15 U.S.C. 5408(b)(1), Fastener Quality Act (1990), violation, maximum from $44,539 to $45,268.
    (2) 22 U.S.C. 6761(a)(1)(A), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $36,256 to $36,849.
    (3) 22 U.S.C. 6761(a)(l)(B), Chemical Weapons Convention Implementation Act (1998), violation, maximum from $7,251 to $7,370.
    (4) 50 U.S.C. 1705(b), International Emergency Economic Powers Act (2007), violation, maximum from $284,582 to $289,238. …

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

* State; NOTICES; Designations as Foreign Terrorist Organizations: Lashkar-e-Tayyiba (and Other Aliases) [Publication Date: 30 December 2016.] 
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The DTAS information systems will be unavailable on December 28th from 6:00-8:00PM EST due to scheduled routine maintenance.

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. Reuters: “U.S. Senator Says Russia Can Expect Sanctions after Cyber Attacks”

Reuters) [Excerpts.]
Russia and its president Vladimir Putin should expect tough sanctions after cyber attacks during the presidential election won by Donald Trump, U.S. Republican Senator Lindsey Graham said on Wednesday.
Earlier this month, Republican and Democratic senators including Graham called for a bipartisan panel to investigate cyber attacks against the United States by foreign countries, with a focus on Russia’s alleged efforts to influence the U.S. presidential election.
  “There will be bipartisan sanctions coming that will hit Russia hard, particularly Putin as an individual,” Graham said in the Latvian capital.  . . .
He did not elaborate further on what the sanctions could entail.  . . .

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6. SC Media UK: “Wassenaar Arrangement Talks Collapse”

SC Media UK
Uncertainty reigns as the Wassenaar cyber weapons control pact renegotiations is rejected*
A two-year attempt to change the language used in relation to export controls around surveillance software and other hacking tools has collapsed after the US government failed to renegotiate parts of the Wassenaar Arrangement.
The Wassenaar Arrangement is an arms control pact between 41 countries. While most of this refers to conventional arms, in 2013 it was broadened in scope to include surveillance software-or intrusion software as it’s branded in the agreement. This wording banned the export of software that could be used to conduct cyber warfare, in particular, tools to exploit and attack vulnerable IT infrastructure.
These changes were set to be implemented by member countries last year in a bid to prevent repressive regimes from gaining access to commercial malware.
Critics have labelled the current language in the agreement as too broad as it includes tools that IT professionals use on a daily basis, such as penetration testing tools and other legitimate security software. It also includes proof-of-concept exploits used during vulnerability research and disclosure. As it stands, the rules as written have not been implemented in the US.
With the talks collapsing, it will now be up to the incoming Trump administration to decide whether to continue renegotiations. It was hoped that the talks would have clarified matters allowing security researchers to participate in events such as Pwn2Own and share research among professionals and academics.
In the US, the bipartisan Congressional Cybersecurity Caucus has urged the incoming administration to continue talks.
Congressman Jim Langevin (D-RI), cofounder and co-chair of the Congressional Cybersecurity Caucus and a senior member of the House Committees on Armed Services and Homeland Security, said in a
that he was “deeply disappointed that Wassenaar member states declined to make needed updates to the intrusion software controls, particularly those related to technologies necessary for their development.”
  “For over a year, I have led my colleagues in Congress in calling for a careful review of these controls, which could harm our nation’s cybersecurity by making it more difficult to quickly share defensive tools and close vulnerabilities. The small changes clarifying the role of ‘command and control’ functionality that were made at the annual meeting, while needed, are simply insufficient to address the broader flaws in the language.”
Stephen Gates, chief research intelligence analyst at NSFOCUS, told SC Media UK it’s well known in cybersecurity circles that ethical hackers, researchers, penetration testers, and security vendors often have tools that can be used to hack, loaded on virtual machines, running on the very laptops they carry.
   “These tools are used for ethical purposes to demonstrate how hacks work, and what defences can defeat the various hack tools,” he said.

  “Ethical hackers and the like must be made aware of the fact, if they travel internationally, and enter a country where these tools are identified as ‘weaponry’, these individuals could face criminal charges and other possible penalties.   Best to remove the tools, before you travel.”
The Wassenaar arrangement governs the export of arms, and in this case, cyber weapons

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7. ST&R Trade Report: “BIS Info Collection on Exports of U.S.-Origin Technical Data Under Review”

The Bureau of Industry and Security is seeking comments no later than February 27 on an information collection entitled “Technical Data Letter of Explanation.” Such letters assure BIS that U.S.-origin technical data will be exported only for authorized end-uses, end-users, and destinations. The information contained in the letters describes the transaction and fixes the scope of technology to be exported, the parties to the transaction and their roles, the purpose for the export, and the methods authorized to be used in exporting the technology. The letters also place the foreign consignee on notice that the technical data is subject to U.S. export controls and may only be reexported in accordance with U.S. law.

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8. P. Burnson: “Global Logistics 2017: Customs & Regulations Update: Micro-deals May Prevail in World Order”

* Author: Patrick Burnson, Executive Editor Supply Chain Management Review,
While logistics managers may expect to see fewer proposed mega-trade deals under the new administration, analysts say that there will still be new markets opening up for both U.S. imports and exports this year. Regulatory obstacles remain, however, and logistics managers will have to remain vigilant when it comes to evaluating adaptive strategies.
With the Trans-Pacific Partnership (TPP) now a distant memory, and prospects of the Transatlantic Trade and Investment Partnership (T-TIP) fading fast, shippers face new challenges when considering doing business in Asia and what remains of the EU.
Still, free trade agreements (FTAs) have proven to be one of the best ways to open up foreign markets to U.S. importers and exporters, as they continue to reduce barriers to entry, protect U.S. interests and enhance the rule of law in the FTA partner country.
According to the Office of the
United States Trade Representative (USTR)
, the reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to import and export their products and services to trading partner markets.
According to USTR analyst Lamont DeChance, 47% of U.S. goods went to FTA partner countries last year, while U.S. merchandise exports to the 20 FTA partners with agreements in force totaled $710 billion. “The United States also enjoyed a trade surplus in manufactured goods with our FTA partners totaling $12 billion in 2016,” he says.
However, with some policy analysts suggesting that the U.S. may be entering a new “cold war” with former trading partners, it might be best to remember the words President Reagan when he was dealing with belligerents in the 1980s: “trust but verify.”
To that end, the
Broker Known Importer Program (BKIP)
establishes a process for licensed, permitted U.S. customs brokers to identify importers in connection with their import related activities. Two years ago,
The National Customs Brokers and Forwarders Association of America, Inc. (NCBFAA)
has developed this Customs and Border Protection (CBP)-approved review list that the customs broker can use to identify eligible clients.
  “The review list enables the customs broker to verify the importer’s identity and confirm the importer’s understanding of its compliance obligations in areas such as entry declarations, valuation and preference programs,” explains Alan Klestadt, NCBFAA’s customs counsel. “The review also addresses documentation and information requirements for customs clearance, record keeping and drawback.”
According to Klestadt, CBP wants to use the relationship between brokers and their importer customers to assist with its current mission. “The NCBFAA has developed this BKIP program to provide a way for CBP to benefit from this relationship,” he says “The thought behind this program is that there are a limited number of importers who will avail themselves of the Importer Self-Assessment (ISA) and Trusted Trader Programs.”
That being said, the customs brokerage community can augment existing relationships to become a “force multiplier” for CBP. According to the NCBFAA, customs brokers can leverage their relationships with the importing community to identify those importers who are reputable but may or may not qualify for or otherwise elect to participate in the ISA or Trusted Trader programs.
  “This voluntary program, both for brokers and importers, is targeted for the shipper who is a regular importer into the United States,” says Klestadt. “The program is an opportunity to identify and address compliance issues with the importer prior to entry, alerts CBP to the fact that the broker has performed a review and provides the importer with some benefit for having engaged in the process.”
NCBFAA notes that the participating broker can use the CBP-approved template to conduct the review with an importer. The broker alerts CBP to the fact that this activity had occurred through an electronic flagging at the time of entry. CBP may offer benefits to the importer that might impact the importer’s risk profile in CBP’s targeting system. Additional benefits may also be extended to importers under this program.
Finally, the benefits extended to an importer under this program are unique to a specific importer-broker relationship-that is, each broker has to independently review the importer, and the broker may not rely upon a review performed by another broker.
  “Brokers have to periodically re-confirm the importer’s compliance and, upon request, have to demonstrate to CBP that the review was conducted according to established guidelines,” says Edward Greenberg, NCBFAA’s transportation and general counsel. “This review is considered ‘customs business’ as it is an activity that relates to the preparation of documents/data that is transmitted to CBP in furtherance of the clearance process.”
Remain Ever Vigilant
Taking extreme precautions sounds like good advice to Karen Quintana, Customs compliance director for
Yusen Logistics (Americas) Inc
Quintana notes that The Trade Facilitation and Trade Enforcement Act, which was signed into law by President Obama last year, has since renewed enforcement focus and given CBP “some teeth” in certain areas such as intellectual property rights, post-release, revenue, health and safety, agriculture, forced labor and most importantly antidumping and countervailing dumping evasion.
  “CBP will hammer in those areas in 2017 and will also remain on task with its ‘primary mission set’ that aims to protect against terrorism and enforcement and facilitation,” Quintana says. “This includes the enforcement of immigration laws, narcotics smuggling and agriculture enforcement.”
Quintana concludes that some challenges CBP will face are the larger vessels and aircraft bringing in bigger volumes. Last fiscal year, CBP processed 12 million containers and volumes are expected to rise.
Meanwhile, CBP will continue to strengthen its Centers of Excellence and Expertise (CEE) through January, 2017, say Customs officials. Full implementation of Automation Commercial Environment (ACE) is on track with outstanding deployments, post release capabilities, reconciliation, collection statements, drawback, and duty deferral expected to fold in by the end of the first quarter of this year.
Compliance as an Advantage
For Beth Peterson, president of the global trade consultancy BPE, worldwide political upheaval has “profound implications” for today’s logistics manager. These include new trade agreements; tariffs on offshoring; currency manipulation; U.S. sanctions programs; and export controls.
  “We’re advising shippers to adapt best practices and take an active role in quantifying the risks and the cost of mitigation strategies,” says Peterson. “If they automate and continuously measure high-risk operations, shippers can turn trade compliance into a strategic advantage.”
For Peterson, the most urgent concern U.S. exporters should address this year is related to initiatives mandated by the
Bureau of Industry and Security (BIS)
. Managed by the U.S. Department of Commerce, the BIS mission is to advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership.
According to Peterson, the BIS conducts two types of outreach. “One is by the Office of Export Enforcement [OEE] and the other is a compliance outreach event by the Export Management Compliance Division, Office of Exporter Services [OExS]. “The OEE outreach events are driven by a variety of reasons. This Hot Topic will focus on the latter type of outreach event.” BIS’ OExS has been doing these compliance outreach events since 2015. The intent is to discuss export compliance procedures generally and get an understanding of how different organizations handle export control compliance.
  “This helps BIS OExS better appreciate the different approaches employed by companies and assists BIS in conducting compliance training for the public,” says Peterson. “It has also been extremely beneficial for BIS to learn firsthand what areas of the Export Administration Regulations are not well understood to help in their other OExS outreach seminars.”
As logistics managers prepare for the compliance outreach visit, the first thing they should do is run their ACE export report and look for any inconsistencies or errors, advises Peterson.

  “Shippers should research every anomaly, and if they do find errors, correct the Automated Export System Electronic Export Information filings as soon as possible. The next preparation task is to review their Export Management and Compliance Program and make sure it is accurate and up to date.”
Peterson also advises shippers to be prepared to share their “product matrix” and provide information on their classification process. “Shippers should be ready to share examples of training materials such as their new hire training, trade compliance training and job specific trade compliance training for engineering, product management and logistics,” she adds. “It’s even better to share your training logs to show that you provide training on a regular basis.”
Be Not Afraid
While caution and risk aversion should remain top of mind with U.S. importers and exporters, prominent industry analysts contend that the global commercial outlook remains fairly positive.
Michael Gravier, an associate professor of supply chain management at Bryant University, says that there’s been only a “temporary stall” in trade since the U.S. Presidential elections. However, some analysts contend that world trade has reached its limits, he says, noting that evidence from the
International Monetary Fund
indicates that whereas trade from 1985 to 2007 grew at twice the rate of GDP, it has barely kept pace over the past four years.
  “But there’s another way to look at the data,” counters Gravier. “Trade grew more rapidly than GDP for many decades because of the initial boost from the implementation of the infrastructure, agreements, and other enabling elements of free trade since the Bretton Woods conference in 1944.”
According to Gravier, there is ample room for trade agreements in the future. Indeed, with 164 countries part of the General Agreement on Tariffs and Trade, most countries have already made at least some basic move to join the global economy. In the meantime, commodity prices have dropped; and once corrected for the change in pricing, volume for many commodities such as oil has actually gone up.
  “Most importantly,” adds Gravier, “many have overlooked that there’s one form of global trade that continues to boom: the digital flows of data and information, this has been growing volume by 45 times since 2005, and may already contribute more value than the flows of goods.”
Gravier adds that data from a variety of sources indicate that these digital flows likely contribute to a “harder-to-measure,” but continued integration of the global economy.
  “Companies that continuously innovate their organizations and invest in talent and knowledge management will be best positioned to benefit from the future world of integrated data flows,” adds Gravier. “This is especially true in an era that may see marked increase in protectionist policies. No amount of protectionism will stop the sharing of ideas and knowledge, making them good investments.”

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TE_a19. ECTI Presents Export Control Changes Recap…And What’s Next for 2017? – Webinar, 11 Jan

(Source: Danielle McClellan, danielle@learnexportcompliance.com)

* What: Export Control Changes Recap…And What’s Next for 2017?
* When: January 11, 2017; 1:00 p.m. (EST)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: John Black
* Register: Here or Danielle McClellan, 540-433-3977, danielle@learnexportcompliance.com

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. 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: 20 Dec 2016: 81 FR 92978-93027: Regulatory Implementation of the Centers of Excellence and Expertise 

  – 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: 27 Dec 2016: 81 FR 94971-94974: Commerce Control List: Updates Based on the 2015 and 2016 Nuclear Suppliers Group (NSG) Plenary Meetings; Conforming Changes and Corrections to Certain Nuclear Nonproliferation (NP) Controls; 81 FR 94962-94963: Burma: Amendment of the Export Administration Regulations Consistent With an Executive Order That Terminated U.S. Government’s Sanctions; and 81 FR 94963-94971: Russian Sanctions: Addition of Certain Entities to the Entity List, and Clarification of License Review Policy 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 23 Dec 2016: 81 FR 94254-94259: Iranian Transactions and Sanctions Regulations  
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
  – The latest edition (9 Mar 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.
, 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: 16 Dec 2016; Harmonized System Update (HSU) 1614, containing 27,913 ABI records and 4,820 harmonized tariff records.
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
  – 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 9 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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* 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 of this newsletter 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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