17-0123 Monday “The Daily Bugle”

17-0123 Monday “Daily Bugle”

Monday, 23 January 2017

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/BIS Amends EAR, Updates Statements of Legal Authority
  2. Commerce/BIS: Information Systems Technical Advisory Committee to Meet on 25-26 Jan in Wash DC
  3. Commerce/BIS: Sensors and Instrumentation Technical Advisory Committee to meet on 1 Feb in San Francisco
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: Milwaukee Electric Tool Corp. of Brookfield, WI, to Pay $301,000 to Settle Alleged Export Violations 
  3. State/DDTC: (No new postings.) 
  4. Australia DECO: Publication of DEC’s Quarterly Performance Statistics 
  1. Reuters: “Mexico Set To ‘Mirror’ Policy On Any U.S. Trade Tax Change: Minister” 
  2. ST&R Trade Report: “Export Restrictions Eased on Certain EAR-Controlled Goods” 
  1. A. Kuntamukkala & S.G. Handler: “Managing Global Telecom Supply Chains – What Telecommunications Companies Need To Know About Trade Control Laws” 
  2. D.M. Edelman: “Trade Watch – Understanding U.S. Trade Policy in the New Trump Administration” 
  3. J. Vankerckhoven & G. Kreijen: “Modernization of the EU export Control System: What’s Next? (Part II)” 
  4. M. Volkov: “Lessons Learned and Compliance Trends from the VW and Takata Scandals” 
  5. T.J. McCarthy, D.F. Feldman & R.M. Jones: “U.S.-India Partnership: BIS Establishes Licensing Policy of General Approval, Expands Validated End-User Program” 
  1. Kevin Wolf Moves from Commerce/BIS to Akin Gump 
  2. Monday List of Ex/Im Job Openings: 107 Jobs Posted 
  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 (23 Jan 2017), FACR/OFAC (17 Jan 2017), FTR (15 May 2015), HTSUS (1 Jan 2017), ITAR (11 Jan 2017) 



. Commerce/BIS Amends EAR, Updates Statements of Legal Authority

(Source: Federal Register) [Excerpts.] 
82 FR 7641-7642: Updated Statements of Legal Authority for the Export Administration Regulations
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: This rule updates the Code of Federal Regulations (CFR) legal authority citations in the Export Administration Regulations (EAR) to cite the most recent Presidential notice continuing an emergency declared pursuant to the International Emergency Economic Powers Act. This is a non-substantive rule that only updates authority paragraphs of the EAR. It does not alter any right, obligation or prohibition that applies to any person under the EAR.
* DATES: The rule is effective January 23, 2017.
* FOR FURTHER INFORMATION CONTACT: Nancy Kook, Regulatory Policy Division, Bureau of Industry and Security, Telephone: (202) 482-2440.
This rule revises the authority citations for the affected parts of the EAR to cite the most recent such notice, which the President signed on November 8, 2016.
    This rule is purely non-substantive and makes no changes other than to revise CFR authority citations for the purpose of making the authority citations current. It does not change the text of any section of the EAR, nor does it alter any right, obligation or prohibition that applies to any person under the EAR. …
    Dated: January 6, 2017.
Kevin J. Wolf, Assistant Secretary for Export Administration.

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EXIM_a22. Commerce/BIS: Information Systems Technical Advisory Committee to Meet on 25-26 Jan in Wash DC

Federal Register) [Excerpts.]
82 FR 7797: Information Systems Technical Advisory Committee; Notice of Partially Closed Meeting
    The Information Systems Technical Advisory Committee (ISTAC) will meet on January 25 and 26, 2017, 9:00 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to information systems equipment and technology. …
    The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
Yvette.Springer@bis.doc.gov, no later than January 18, 2017.
    A limited number of seats will be available for the public session. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the Committee suggests that public presentation materials or comments be forwarded before the meeting to Ms. Springer. …
    For more information, call Yvette Springer at (202) 482-2813.
    Dated: January 17, 2017.
Yvette Springer, Committee Liaison Officer.

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3. Commerce/BIS: Sensors and Instrumentation Technical Advisory Committee to meet on 1 Feb in San Francisco
(Source: Federal Register) [Excerpts.]
82 FR 7797-7798: Sensors and Instrumentation Technical Advisory Committee; Notice of Partially Closed Meeting
    The Sensors and Instrumentation Technical Advisory Committee (SITAC) will meet on February 1, 2017, 9:30 a.m., (Pacific Standard Time) at the SPIE Photonics West, The Moscone Center South, 747 Howard Street, Room 102 South Hall (Exhibit Level), San Francisco, CA 94103. Registration for an exhibit-only pass is required and is available for free. Attendees can register for an exhibit-only pass in advance here or sign up onsite at the registration booth. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to sensors and instrumentation equipment and technology. …
    The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov no later than January 25, 2017.
    A limited number of seats will be available during the public session of the meeting. Reservations are not accepted. To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to the Committee members, the Committee suggests that the materials be forwarded before the meeting to Ms. Springer. …
    For more information contact Yvette Springer on (202) 482-2813.
    Dated: January 17, 2017.
Yvette Springer, Committee Liaison Officer.
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OGS_a14. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

Commerce; Industry and Security Bureau; RULES; Entity List [Withdrawn: 23 January 2017.]

* Commerce;
Industry and Security Bureau; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Voluntary Self-Disclosure of Violations of the Export Administration Regulations [Publication Date: 24 January 2017.]

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 24 January 2017.]

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Commerce/BIS: Milwaukee Electric Tool Corp. of Brookfield, WI, to Pay $301,000 to Settle Alleged Export Violations

(Source: Commerce/BIS)
* Respondent: Milwaukee Electric Tool Corporation, Brookfield, WI
* Charges: 25 Charges of 15 C.F.R. § 764.2(a) – Engaging in Prohibited Conduct:
  On 25 occasions between April 2012 and May 2014, Milwaukee Electric Tool Corporation (“Milwaukee Electric”) engaged in conduct prohibited by the EAR by exporting thermal imaging cameras, items subject to the EAR, from the United States to various countries, including Hong Kong, Colombia, Ecuador, El Salvador, and Mexico, without the required Department of Commerce export licenses. The items are classified under Export Control Classification Number (“ECCN”) 6A003.b.4, controlled for National Security and Regional Stability reasons, and valued in total at approximately $129,284. Pursuant to Sections 742.4 and 742.6 of the EAR, a BIS export license is required before the items can be exported to each of the destinations at issue. By exporting these items without the required export licenses, Milwaukee Electric committed 25 violations of Section 764.2(a) of the EAR.
* Penalty: Milwaukee Electric shall be assessed a civil penalty in the amount of $301,000. 
* Debarred: Not if penalty is paid as agreed.
* Date of Order: 19 January 2017. 

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Australia DECO: Publication of DEC’s Quarterly Performance Statistics

Defence Export Controls (DEC) has published statistics on our workload and key performance indicators for the second quarter of Financial Year 2016-17. The statistics include details on applications assessed by DEC including application totals, processing times and application outcomes. These statistics are published on a quarterly basis and can be accessed here.
DEC publishes performance statistics as part of our commitment to transparency and accountability in assessing applications. We are committed to completing assessments in a timely manner by finalizing non-sensitive applications within 15 business days and sensitive/complex applications within 35 business days.
DEC seeks to work closely with clients to enable the responsible export of defense and strategic goods and technologies and we welcome feedback on our performance. You can contact DEC by phone at 1800 66 10 66 (open 8.30 am – 4.30 pm, Monday – Friday except on public holidays) or by email.

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Mexico’s economy minister (Guajardo Villarreal, ed.) said his country was ready to renegotiate trade rules with the United States and that any change in U.S. tax policy that affected imports would have to be countered with a “mirror action” in Mexico.
U.S. President Donald Trump told a meeting with U.S. executives on Monday that companies would face a “major border tax” if they shifted jobs outside the United States. Such a measure could affect Mexico’s exports to the United States, its top trading partner.
  “If there is any action that punishes imports to the North American market and encourages U.S. exports, you have to reflect it in a mirror action to counteract the change of incentives that this would make for activity and investment in Mexico,” Economy Minister Ildefonso Guajardo said in an interview in the newspaper El Universal on Monday.
Trump said on Sunday he planned talks soon with the leaders of Canada and Mexico to begin renegotiating the North American Free Trade Agreement (NAFTA). He was expected to issue an executive order to start the process as early as Monday, NBC News reported, citing an unidentified White House official.
Guajardo said Mexico was ready to renegotiate NAFTA with Trump, but it was not possible to detail what Mexico would seek in the talks until Trump’s administration had made its own plans clear.
  “The dialogue has not yet begun, we cannot get ahead of ourselves,” he said.
Mexican President Enrique Pena Nieto, who is facing a deep slump in popularity, is set to meet Trump on Jan. 31 following meetings between senior officials of both administrations in Washington this week.

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9. ST&R Trade Report: “Export Restrictions Eased on Certain EAR-Controlled Goods”

Entity List.
The Bureau of Industry and Security has issued a final rule removing four persons in Germany, one person in Hong Kong, one person in India, one person in Singapore, one person in Switzerland, and two persons in the United Arab Emirates from the list of entities restricted from receiving U.S. exports of goods controlled under the Export Administration Regulations. These changes eliminate the associated licensing requirements and limitations on the use of license exceptions for exports, reexports, and transfers (in-country) to these entities. However, they do not eliminate the need to apply for export, reexport, or in-country transfer licenses required by other provisions of the EAR or other obligations under other parts of the EAR.  [Editor’s Note: this final rule was withdrawn today from the Federal Register.] 
BIS has issued a final rule establishing a licensing policy of general approval for exports or reexports to or transfers within India of items subject to the EAR (including 600 series military items) for civil or military end-uses in India or for ultimate end-use by the government of India, for reexport to a Country Group A:5 country, or for return to the U.S. so long as such items are not for use in nuclear, missile, or chemical or biological weapons activities.
This rule also allows items obtained under authorization VEU (validated end-user) in India to be used for either civil or military end uses other than those that are for use in nuclear, missile, or chemical or biological weapons activities.
BIS is making these changes pursuant to a June 2016 U.S.-India joint statement that recognized the two countries as major defense partners.

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A. Kuntamukkala & S.G. Handler: “Managing Global Telecom Supply Chains – What Telecommunications Companies Need To Know About Trade Control Laws”

(Source: Hogan Lovells)
* Authors: Ajay Kuntamukkala, Esq., ajay.kuntamukkala@hoganlovells.com; and Stephenie Gosnell Handler, Esq., stephenie.gosnellhandler@hoganlovells.com. Both of Hogan Lovells.
Maintaining a global supply chain brings its share of commercial, financial, and regulatory risks. Increasingly, telecommunications companies with global operations and suppliers are finding that U.S. trade control laws affect their operations. For instance, telecommunications companies can inadvertently breach export control or economic sanctions laws when critical suppliers are designated on U.S. or non-U.S. government restricted parties lists, engage in prohibited transactions with sanctioned countries, or re-export U.S. origin items to prohibited destinations, end users, or end uses. In an interconnected world, even companies that primarily provide products and services within the U.S. can be exposed under trade control laws if they have a global supply chain. This article highlights the three areas of U.S. trade control laws that can affect the operations of U.S. telecommunications companies: export controls, economic sanctions, and anti-boycott restrictions. With U.S. and non-U.S. trade control laws constantly evolving as U.S. foreign and national security policies react to global developments, U.S. telecommunications companies need to remain alert to potential risks in their global activities and implement robust compliance programs to be prepared for sudden shifts in U.S. policy and/or legal requirements.
U.S. Export Controls Laws
U.S. export controls laws govern how U.S. companies may export and re-export items to specified destinations and end-users around the world. These rules apply to dealings with third parties, as well as intra-company transfers. The export, re-export, and transfer of certain U.S. origin commodities, software, and technology requires authorization by the U.S. government and other procedures, even for transfers to U.S. company’s own affiliates and suppliers outside the United States. While most commercial telecommunications items are not highly controlled, there are certain items that require prior authorization. Therefore, it is critical for telecommunications companies to understand how their commodities, software, and technology are controlled. Major companies in the global supply chain for telecommunications and computer networking equipment have been targeted by export enforcement agencies, raising legal risks for U.S. companies who rely on their products and services.
U.S. commercial and dual-use items are governed by export control rules set forth in the Export Administration Regulations (EAR), which are administered by the Commerce Department’s Bureau of Industry and Security (BIS). The list of items controlled by the EAR is extensive, covering commodities and software as well as technology, which includes specific information necessary for the production, development, or use of a commodity or software (e.g., blueprints, drawings, photographs, plans, diagrams, models, formulae, tables, engineering specifications, and documentation such as manuals, written instructions, or recorded on devices such as a disk, tape, or read-only memories). Technical collaboration and testing data is also controlled by the EAR. The EAR applies to U.S. origin 
items wherever they are located, items that transit the U.S., and non-U.S. origin items that contain greater than a de minimis amount of controlled U.S. origin content. Product-based controls will depend on an item or technology’s Export Classification Control Number (ECCN) as determined by review of the Commerce Control List (CCL) in the EAR. Items that are not specifically listed on the CCL, including many telecommunications products, are classified in the “basket” category of EAR99 and are subject to minimal export controls limiting their transfer to sanctioned countries or restricted parties. However, certain telecommunications equipment, software and technology are specifically listed on the CCL and may require export licenses to transfer across borders:
  – Certain advanced electronics, such as analogue to digital converters and semiconductor manufacturing equipment, are specifically listed on the CCL because their export implicates national security concerns. Depending on the final destinations of these goods and services, exports of these items – and technology for their development or production – require a license from the Commerce Department.
  – Certain telecommunications devices that are specially designed to withstand electromagnetic pulse effects or hardened against radiation are controlled and requires export licenses for certain countries.
  – Certain devices primarily useful for the surreptitious interception of wire, oral, or electronic communications are controlled and require export licenses for certain countries.
  – Encryption devices, software, source code and technology, especially those employing algorithms that exceed 64-bit in key length, are subject to export controls, and exports of such items may require notification or prior authorization.
The release of controlled U.S. origin technology or source code to foreign persons in the U.S. counts as a “deemed export,” even if it happens inside the U.S.. Accordingly, software patches or transfers of technical data may need a license, depending on the controls on the underlying technology and who is on the other side of the transaction. An oral exchange of information or visual inspection of an item or data may count as a “deemed export” under Commerce Department regulations.
The EAR also imposes controls on certain end uses or end users, regardless of the level of control of the item at issue; therefore, companies have to be alert to who will receive their items and why. For instance, items may not be exported or re-exported for illicit uses, such as when a company has reason to know that they will be used in nuclear, missile, chemical, and/or biological weapons activities.
The Commerce Department also imposes restrictions on who may receive U.S. exports. The Department of Commerce adds entities or individuals to the Entity List, Denied Persons List and the Unverified List when the U.S. government determines they pose a significant risk to U.S. national security or foreign policy interests, or pose a significant risk of diversion. If an international business partner is listed, engaging in certain transactions with these partners immediately may become violations of U.S. law. Companies generally may not export or re-export to such restricted parties without an export license from the Commerce Department.
For instance, when a foreign company is listed on the Entity List, the Commerce Department may specify that licenses are only necessary for exports of specific items controlled under the EAR. More often, though, all exports of items subject to the
EAR to the listed entities will need a license-a requirement that can reach farther than one might expect. If a company knows there is a listed entity in their supply chain that will receive their products or technology, they will need to get a license for the export. If companies continue to export or re-export controlled items to listed entities without a license, they risk criminal and/or civil penalties. 

Telecommunications companies with supply-chain relationships with the U.S. subsidiaries of foreign companies need to be particularly cautious about how those U.S. subsidiaries relate to their foreign parent. If the foreign parent is listed on the Entity List or the product is subject to export controls, companies should understand the flow of technology and items between the U.S. subsidiary and the foreign parent to confirm there are no potential export control violations as part of the intra-company supply chain and ensure no prohibited foreign persons are involved at any stage of the U.S. subsidiaries’ operations (e.g., a listed foreign parent has employees working in U.S. laboratories or manufacturing facilities run by its U.S. subsidiaries).
There are also certain circumstances that the Commerce Department identifies as “red flags” requiring additional investigation and due diligence. Under the EAR’s Know Your Customer Guidelines, if a buyer or business partner is reluctant to offer information about the end use of an item or is evasive about whether the product is for domestic use, export, or re-export, a company is required to take additional steps to confirm their reliability before proceeding with the transaction. Other red flags include counterparties willing to pay cash when the terms of the sale call for financing, vague delivery dates, out-of-the-way destinations, and abnormal shipping routes. The current complete list of circumstances that should be viewed as “red flags” is available on BIS’ website.
U.S. Economic Sanctions Laws
U.S. economic sanctions laws prohibit U.S. companies from engaging in transactions and dealings with certain countries, entities and individuals for foreign policy reasons. However, because of the special role of the internet and mobile devices in promoting free speech and democratic values, the U.S. government permits telecommunications companies to engage in certain limited activities with sanctioned country markets.
There are currently six countries or regions subject to comprehensive U.S. sanctions: the Crimea region, Cuba, Iran, North Korea, Sudan, and Syria. More than twenty other U.S. sanctions regimes administered by the Treasury Department’s Office of Foreign Assets Control (OFAC) impose targeted prohibitions on transactions with certain countries, sectors, or persons. Under the comprehensive sanctions regimes, U.S. persons are broadly prohibited from transacting or dealing, directly or indirectly, with a sanctioned country and nationals of such country. The U.S. government provides for a series of exceptions or general licenses for certain limited activities that are in the interest of U.S. foreign policy, including humanitarian or democracy-promoting activities. Some sanctions regimes, like the Cuba embargo, have exceptions and general licenses that allow for more substantial U.S. involvement in the local market. Others, like the sanctions on Iran or Crimea, limit exceptions to narrow humanitarian and communications needs.
Each program is different, creating its own pitfalls and potential opportunities. Companies seeking to directly engage in sanctioned markets must ensure their proposed activities strictly adhere to the bounds of the relevant licenses, or they risk civil or criminal penalties.
There are also certain individuals and entities with which U.S. companies may not transact. The Treasury Department maintains a list identifying certain persons and entities because they are affiliated with sanctioned countries or because they acted against U.S. interests in some way, such as supporting terrorism or violating human rights. U.S. persons risk criminal and/or civil penalties if they transact with Specially Designated Nationals (SDNs), Foreign Sanctions Evaders (FSEs), or Sectoral Sanctions Identifications List (SSIL) designees without a license from OFAC. SDNs, FSEs, and SSIL designees may be located in any country in the world, not just sanctioned countries. In addition to persons and entities expressly identified on these lists, entities owned 50% or more by persons and entities on the lists are also subject to restriction, making it imperative for U.S. companies to fully understand who their customers and business partners are.
Special Considerations For Telecommunications Companies
Telecommunications companies may be eligible for certain licenses set forth in OFAC’s sanctions regulations. A number of the sanctioned countries have governments that repress freedom of expression and civil liberties, and the U.S. government sees foreign policy benefits to expanding personal communications with these countries in the hope of spurring democratic development. General licenses allow specified transactions for internet or telecommunications purposes under all the territorial sanctions regimes except North Korea. For example, even though most U.S. persons are prohibited from engaging in virtually any transaction with Iran, General License D-1 authorizes certain services, software, and hardware incident to personal communications, provided that such services and items are not intended for use by the Government of Iran or persons whose property or interests in property are blocked. Specifically, General License D-1 authorizes the export of certain fee-based services such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging, certain fee-based software necessary to enable such services, and certain other software and hardware including mobile phones, consumer modems, WiFi access points, laptops, tablets, anti-virus software, anti-censorship tools and related software, and Virtual Private Network (VPN) client software-provided that such hardware and software have been designated under specified categories of the EAR’s CCL. U.S. companies utilizing General License D-1 must strictly adhere to the terms of the license.
Similarly, as part of President Obama’s new policy direction for Cuba, OFAC has authorized certain telecommunications services, including data, telephone, internet connectivity, radio, television, and news wire feeds, provided to individuals in Cuba, so long as such individuals are not prohibited Cuban government officials
or prohibited members of the Cuban Communist Party. This general license authorizes transactions to establish facilities for the purpose of establishing commercial telecommunications services between Cuba and third countries, as well as authorizing U.S. companies to provide certain internet-based services to Cuba, including certain web hosting, software design, business consulting, information technology management services, and installation and repair services.
As discussed above, general licenses for the provision of telecommunications services exist for other countries and regions, such as Sudan and Crimea. Each region comes with a slightly different set of rules. Some general licenses allow exports of social media applications but not devices; others allow exports but not marketing. Importantly, the general licenses still prohibit transactions with persons on the Treasury Department restricted party lists, such as SDNs and FSEs-the same persons who are sometimes key players in the local telecommunications sector.

Telecommunications companies seeking to take advantage of the general licenses should:
  (1) Carefully review the general license terms to confirm the specific requirements for compliance under that specific program.
  (2) Fully vet all of their counterparties to ensure no prohibited persons or entities are involved.
  (3) If a general license does not cover the proposed activity or if there is some question about whether 
an activity will expand beyond the scope of a general license, companies may apply for a specific license. 
Licensing under U.S. sanctions regimes is usually controlled by OFAC. OFAC will often seek input on requests from the U.S. State Department, which will take into account whether the proposed activity promotes U.S. foreign policy goals like democracy promotion.
U.S. Anti-Boycott Laws
Under U.S. anti-boycott laws, which are implemented both by the Commerce Department and the Internal Revenue Service, U.S. companies may not agree to cooperate with international boycotts that the United States does not support, such as the boycott of Israel by the Arab League. For example, U.S. companies may not enter into contracts, whether oral or written, that prohibit shipments on vessels that call at Israeli ports or certify that goods are not of Israeli origin. Other prohibited terms include agreeing not to do business with a distributor with Jewish employees or confirming that a company has no Israeli operations or Jewish board members. Boycott- related requests may appear as provisions in a proposed bid invitation, contract, purchase order, letter of credit or other agreement. Even agreeing to comply with the laws of a boycotting country can violate U.S. anti-boycott laws.
Companies that receive requests for such commitments may be required to report the request to the U.S. government under certain circumstances, even if they do not respond to the request. While receipt of boycott-related language or requests will not necessarily prohibit a transaction from progressing, additional steps like amending the contract or reporting to the U.S. government may be required to process the transaction.

In sum, especially when doing business in the Middle East, U.S. companies must be aware of and sensitive to boycott-related requests from customers, suppliers and other business partners.
As supply chains and product development become more and more globalized, telecommunications companies, including those that are focused on the U.S. market, are increasingly subject to a range of trade control laws that affect their operations and activities. Given the complexity of the export control, economic sanctions and anti-boycott laws, it is critical that telecommunications companies consider their trade control risks and implement robust compliance programs to manage these risks.

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11. D.M. Edelman: “Trade Watch – Understanding U.S. Trade Policy in the New Trump Administration”

(Source: Baker Donelson)
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com.
[Editor’s Note: This is the first part in a quarterly series of alerts that address the possible impact of trade and compliance matters in the new administration.]
Summary of Possible Changes in U.S. Trade Policy During President Trump’s First 100 Days
Our first alert, “President Trump’s First 100 Days,” provides a brief summary of the changes that may be expected during the President’s first days in office. During his campaign, President Trump promised to renegotiate, and if unsuccessful, to withdraw from North American Free Trade Agreement (NAFTA); to withdraw from the proposed Trans-Pacific Partnership Agreement (TPP); to get tough with China, including threatening imposition of a 45 percent tariff on all Chinese goods and labeling China a currency manipulator; to impose a 35 percent duty on U.S. companies that relocate their manufacturing facilities abroad; and to “use every tool under American and international law to end [foreign trade] abuses immediately.” In early December, his transition team said that he was considering up to a ten percent general tariff on imports. In addition, the President-elect has promised to reconsider the lifting of sanctions against Iran and Cuba, in addition to suggesting a change of policy toward Russia.
Yet, as the President-elect’s cabinet falls into place, it is still unclear exactly what a Trump administration means for international trade. However, there are four areas in which businesses should be anticipating changes:
  (1) enhanced enforcement of existing trade law and retaliatory tariffs;
  (2) possible renegotiation of NAFTA and a shifting of negotiation priorities from large regional trade agreements to smaller bilateral trade agreements;
  (3) possible imposition of an import or border adjustment tax; and
  (4) tightening of sanctions and export control laws with regard to some countries and relaxation of these laws with regard to others.
Enforcement and Retaliatory Tariffs
President-elect Trump is likely to take advantage of existing trade laws to bring enforcement actions against China and other countries. Antidumping and countervailing duty investigations are likely to continue to increase. Additionally, under the 2015 Trade Facilitation and Trade Enforcement Act (TFTEA), the Commerce Department and Customs and Border Protection (CBP) have considerably more power that will make it easier for domestic producers to bring antidumping and countervailing duty cases, including new powers to bring enforcement actions for evading antidumping and countervailing duties. Further, under the 2015 Trade Preferences Extension Act, the Department of Commerce now has increased latitude when using “adverse facts available,” which will likely increase antidumping and countervailing duty rates. Under a Trump administration, the Commerce Department may also begin to self-initiate dumping and subsidies investigations, which could mean an uptick in cases.
Additionally, there is the possibility that President-elect Trump will initiate temporary tariff hikes on products from certain countries. At the beginning of his administration, President George W. Bush initiated such tariffs on certain steel products. Although the tariffs (called “safeguards”) were ultimately successfully challenged at the World Trade Organization (WTO), they caused a significant shakeup in the steel industry and other industries dependent on steel while they were in place. Given President-elect Trump’s cabinet appointments, the use of similar safeguards during his administration is a very real possibility. In addition, the President may use Section 301 to unilaterally raise tariffs. Although Section 301 has not been used in this way since the creation of the WTO, it is possible that the President could initiate a retaliatory tariff against another country if the U.S. determines that the country has violated the terms of a trade agreement.
Free Trade Agreements
Businesses that claim preferential tariff rates under NAFTA should be particularly aware of changes that may occur should NAFTA be renegotiated. Although withdrawal from NAFTA is unlikely because its tariffs are statutory in nature and would likely require an Act of Congress to change, renegotiation of NAFTA could include other changes, such as termination of the Chapter 11 investor-state dispute settlement mechanism on which several investors rely and the termination of Chapter 19 binational panels used to bring challenges in dumping and subsidies cases. Further, changes in tariff rates and stricter rules of origin are not out of the question if renegotiation does occur. While several Presidents have promised in the past to renegotiate NAFTA, including President Obama, and while several changes may benefit the U.S., such as modernization of NAFTA’s rather stringent verification procedures, renegotiation could also lead to additional trade hindrances that could hurt business that rely on the Agreement.
Furthermore, business should not count on either the TPP or the Transatlantic Trade and Investment Partnership (TTIP) to be ratified soon. Rather than concluding large regional trade agreements, it is more likely that the Trump administration will pursue the negotiation of much smaller, bilateral trade agreements. While there has been discussion of pursuing a bilateral trade agreement with a post-Brexit United Kingdom, business should know that such an agreement is unlikely to be concluded in the next four years since the United Kingdom is not in a position to enter into trade agreements until it has withdrawn from the European Union, which it cannot do for at least another two years.
Import Taxes
In recent weeks, Capitol Hill has been rife with discussion of a possible tax of up to ten percent on imports or, alternatively, a border adjustment tax that would tax U.S. companies’ imports while exempting exports. The former was put forward by President Trump’s team in December while the House Ways & Means Committee has floated the latter as a possibility since last summer. Although it is unclear what will become of either proposal, both would have a significant impact on the ability of U.S. manufacturers to acquire intermediate goods from foreign countries. Both proposals are vulnerable to legal challenge, particularly a ten percent general import tax, which would be a particularly clear violation of tariff commitments that the United States has made to other WTO members. Importers would be wise to watch the issue.
Sanctions and Export Controls
As is the case with any administration, sanctions and export control laws are shaped by the direction of U.S. foreign policy. As a result, changes are likely to numerous sanctions programs, particularly with regard to Iran, Cuba and Russia. President Trump continues to make his disapproval of the Iran nuclear deal, or Joint Comprehensive Plan of Action (JCPOA), very clear. While it is less clear that the sanctions relief afforded under the Iran deal will be removed, there is certainly reason to be flexible when conducting business with Iran. The same is true with Cuba, the relaxation of sanctions against which President-elect Trump has called “one-sided.” Because changes to both the Iran Transactions and Sanctions Regulations (ITSR) and the Cuban Asset Control Regulations (CACR) were created by executive action, it would be very easy for the new administration to remove the exceptions allowing for U.S. business activity. With regard to Russia, however, sanctions could possibly be relaxed. Although it is unclear whether President Trump would include sanctions relief as part of his promise to reset United States-Russia relations, the possibility could reopen recently closed opportunities for U.S. businesses.

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 J. Vankerckhoven & G. Kreijen: “Modernization of the EU Export Control System: What’s Next? (Part II)”
* Authors: Jochen Vankerckhoven, Esq., Loyens & Loeff Brussels, jochen.vankerckhoven@loyensloeff.com; Gerard Kreijen, Esq., Loyens & Loeff Amsterdam, gerard.kreijen@loyensloeff.com, +31-(0)20-578-5395.
[Editor’s Note: This is the second part in a series of items concerning this subject. Part I was posted in The Daily Bugle of Friday 20 January 2017.]
As discussed in our earlier post on the modernization of the EU Dual-Use Regulation, it is the revised ‘catch-all’-provision that most worries exporters. The inclusion of human rights criteria, the corner stone of the new ‘human security’ approach in the Dual-Use Regulation, risks to lead to new uncertainties for exporters (and their national regulators).
Catch-all controls are a sort of fall-back for the national export control authorities which enables them to control items which do not (yet) qualify as dual-use (i.e. not listed as such in the Dual-Use Regulation), but may be used for weapons of mass destruction (“WMD”) (or nuclear purposes) or – in case the final destination is an arms embargoed country – for military purposes. It is a useful tool for Member States in a rapidly changing environment – both technically and politically. For businesses however it potentially implies an increased compliance burden and – worse – legal uncertainty.
The European Commission now intends to broaden the scope of the catch-all control by adding new end-uses; violation of human rights and acts of terrorism.
Catch-all: The Current State of Play
In deviation of the general rule of Article 3 of the Dual-Use Regulation which requires an authorization for listed dual-use items, Article 4 constitutes the so-called ‘catch-all provision’ of the Regulation, which is used to control non-listed items that are or may be intended for the following end-uses:
  – in connection with chemical, biological or nuclear weapons or other nuclear explosive devices or missiles capable of delivering such weapons (Article 4.1);
  – for a military end-use if these items will be shipped to a country on which an arms embargo is imposed (Article 4.2);
  – for use as parts or components of listed [FN/1] military items that have been exported from the a Member State without authorization or in violation of an authorization prescribed by the national legislation of that Member State (Article 4.3).
The catch-all provision is in fact a legal instrument for the export control authorities to control lower-level dual-use items (not included in the Annexes) or any other non-listed items, when there is reason to believe such items can have one of the aforementioned end-uses. Catch-all controls generally focus on the (potential) end-use, rather than on the item itself. Nonetheless, in order to make the assessment whether a certain item could be controlled because of the end-use, the technical characteristics remain of importance (e.g. not every machine or equipment can be used in a nuclear plant because of the levels of the radiation). In principle, manufacturers of those items should be capable of making this assessment themselves, but this is obviously much harder for other parties in the supply chain.
The obligation to obtain an export license will be triggered if the competent authority has informed the exporter. The notion of ‘being informed‘ is not further defined in the Regulation, nor is it explained in any additional guidance from the Commission. In practice this so-called notification to the exporter may differ from Member State to Member State and even within one Member State sometimes from case to case.
The catch-all within the catch-all is however paragraph 4 whereby an exporter who is aware of an intended end-use as mentioned in paragraph 1, 2 and 3 of Article 4, must inform the competent national export control authority which may then decide to subject the envisaged export to a licensing obligation. The responsibility to assess the potential diversion hereby clearly lies with the exporter. The term ‘being aware‘ is not defined, but the wording makes it clear that there should be clear evidence in the hands of the exporter that the items will not be used for their usual application, but in the framework of one of the uses in paragraphs 1, 2 or 3. The wording of paragraph 5 (e.g. the so-called ‘suspicion clause’), which is optional for the Member States, confirms this.
Apart from the catch-all provision of Article 4, the Dual-Use Regulation already indirectly implemented public security and human rights concerns in Article 8 whereby these concerns can be taken into account upon deciding on the issuance of a license for listed items. National authorities, however, have been rather reluctant to use this provision in practice (see our previous post “Export controls as a toolbox for human rights policy“).
Previous Proposals to Widen the Scope of the Catch-all Controls
The introduction of human rights in the catch-all provision was already proposed in 2012. [FN/2] The proposal to amend Article 4 was to include the following paragraph:

An authorization shall also be required for the export of dual-use items not listed in Annex I if the exporter has been informed by the authorities referred to in paragraphs 1 and 2, or by the Commission, that the items in question are or may be intended, in their entirety or in part,
for use in connection with a violation of human rights, democratic principles or freedom of speech as defined in the Charter of Fundamental Rights of the European Union,
by using interception technologies and digital data transfer devices for monitoring mobile phones and text messages and targeted surveillance of internet use, such as via monitoring centers or lawful interception gateways. [FN/3]

This proposal was triggered by the Arab Spring events, but was far too specific taking into account the rapid evolution of new technologies. Besides that it seemed a contradictory that a ‘catch-all’-provision would be updated with a list of very specific items and end-uses. At least from a legislative perspective it makes more sense to include specific items in the definition of ‘dual-use’ items and its Annexes (see our previous post “Modernization of the EU export control system: What’s next? (I)”). The proposal was however never adopted.
Within the framework of the modernization of the Dual-Use Regulation, the European Commission has taken a broader approach whereby on the one hand the definition of dual-use items and the list of controlled items have been updated covering items that are subject to human rights violation concerns, and on the other hand also the update of the catch-all provision with human rights concerns. Thanks to the leaking of one of the draft proposals earlier this year we were able to get an insight in the drafting process of this particular provision. In this July 2016 version of the Recast proposal, the catch-all provision was extended to items:
(d) for use by persons complicit in or responsible for directing or committing serious violations of human rights or international humanitarian law in situations of armed conflict or internal repression in the country of final destination, and where there is evidence of the use of this or similar items for directing or implementing such serious violations by the proposed end-user;
(e) for use in connection with acts of terrorism.
By adding ‘human rights violations’ and ‘acts of terrorism’ as an end-use to the catch-all provision and erasing any reference to specific items or destinations, exporters will have to implement complicated (and subjective …) assessments in their export compliance system, without any further guidelines from the export control authorities on key concepts such as ‘human rights violations’ and ‘acts of terrorism’. With a view to legal certainty and foreseeability, it is mandatory for the export control authorities to at least describe the threat which they envisage or, list “sensitive” destinations (e.g. the military end-use of the current Article 4.2 is also restricted to arms embargoed countries) or even to provide a ‘white list’. However, both lists could evidently result in ‘de-risking’ policies whereby an exporter would cancel certain destinations, simply because the compliance risk (and costs) do not outweigh the benefits of trade. A clear description of the threat by the authorities would obviously also enable companies to anticipate and include appropriate end-use(r) provisions in their contracts and commercial documentation.
Adopted Proposal to Amend Article 4 of the Dual-Use Regulation
In the adopted proposal of the European Commission, some additional wording has been added compared to the ‘leaked’ draft. It seems that the European Commission took some of the concerns raised by the business into account. This led to the below insertions in the following amendment of the catch-all provision:

(d) for use by persons complicit in or responsible for directing or committing serious violations of human rights or international humanitarian law in situations of armed conflict or internal repression in the country of final destination,
as identified by relevant public international institutions, or European or national competent authorities, and where there is evidence of the use of this or similar items for directing or implementing such serious violations by the proposed end-user; [FN/4]

(e) for use in connection with acts of terrorism.
Unfortunately the reference to ‘international, institutions, or European or national competent authorities’ does not in itself provide much guidance for the exporters. Taken into account the different practices in the Member States whereby exporters are ‘being informed’ of unintended use of their exported items (e.g. from individual notifications to general publications in the ‘national gazette’) and the obligation for exporters themselves to notify the competent authorities when they are ‘aware’ of such potential unintended use, exporters will definitely need more guidance on how to apply these provisions.
When exactly is a jurisdiction identified by the relevant public international institutions, or European or national competent authorities as a jurisdiction that is affected by armed conflict or international repression? One could easily make a list of jurisdictions that could qualify as such based on Human Right Watch’s and other reports (and which are currently nowhere listed as sensitive countries), but this should not be the exporter’s call.
Apart from that, the EU legislator should also provide more guidance on what is exactly meant by ‘directing or committing serious violations of human rights or international humanitarian law’? Which human rights violations are actually envisaged? It goes without saying that where the “right to life” or “freedom from torture” is as such covered by multiple provisions, i.e. military or dual-use list-based controls as well as catch-all controls related to the military or WMD-end use, the “right to a fair trial” is not likely to benefit from more thorough controls on the flow of dual-use items.
Based on the discussions and debates preceding this proposal it is seems however that this new provision especially targets the freedom of speech and freedom of thought. Human rights and humanitarian law remain however very broad concepts which are difficult to implement in a companies’ compliance program.
The same goes for the introduction of a catch-all for items used in connection with acts of terrorism. No one will object to this additional control which should be differentiated from WMD or military end uses, but also here it remains difficult to assess the exact impact of this new provision.
According to the proposal itself, an act of terrorism shall mean a terrorist act within the meaning of Article 1(3) of Common Position 2001/931/CFSP. The definition of terrorism acts in this Position seems to be more of a political nature, stating that the acts should be “intimidating a population” or “destabilizing or destroying the fundamental political, constitutional, economic or social structures“. Here also additional guidance would be welcome.
Convergence of EU Catch-all Controls
The assessment whether a non-listed item may require an authorization, is the exclusive competence of the individual Member States. Additional EU guidance on the new provisions will certainly result in a more efficient harmonization of the controls among the EU Member States. Besides that the new proposal already includes some targeted measures that should lead to a better harmonization of the catch-all controls. It introduces among other things the obligation for the Member State which is imposing an export licensing obligation based on the catch-all provision, to inform the other Member States (and the European Commission). As of that moment, the other Member States could make objections against such authorization obligation for that specific case. If no objections are received, Member States should then impose authorizations requirements for all ‘essentially similar transactions’.
If however, objections are received, the requirement for authorization imposed by the export control authority of the Member State will be revoked unless that Member State considers that an export might prejudice its essential security interests. Practice will learn whether or not that will effectively be a workable procedure for the 28 (27) Member States.
What Will Be the Actual Impact of These Changes?
It remains at this stage difficult to assess the actual impact of these changes on the catch-all provision. Potentially it can certainly lead to more controlled items and – worse – to more (legal) uncertainties, but it must be said that at least under the current Regulation the different national export control authorities have used their power to impose a license based on the catch-all provision, with great prudence and caution.
Nonetheless, the broadening of the catch-all provision will likely increase the administrative burden on exporters, including revisions of an exporter’s internal compliance program and a review of its contracts and other commercial documentation.
As mentioned earlier, it can also not be excluded that exporters would adopt de-risking policies that could cut off entire jurisdictions from certain (essential) items and technologies. This has in recent years certainly been the effect of comprehensive economic sanctions against certain jurisdictions, but has also more and more been the result of soft law considerations such as Corporate Social Responsibility rules (CSR) whereby an operator adopts a self-regulatory mechanism based on certain ethical standards and national or international norms. As such the inclusion of human rights and humanitarian law considerations may ultimately not require a huge effort from an exporter. In this respect it can be worthwhile to refer to the OECD guidelines for Multinational Enterprises [FN/5] which states the following: “Enterprises should […] [c]arry out human rights due diligence as appropriate to their size, the nature and context of operations and the severity of the risks of adverse human rights impacts.
  [FN/1] Not specified, but it is generally accepted that the EU Common Military List is the list which art. 4.2 Dual-Use Regulation refers to.
  [FN/2] European Parliament legislative resolution of 23 October 2012 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 428/2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual-use items (COM(2011)0704 – C7-0395/2011 – 011/0310(COD)).
  [FN/3] Emphasis added.
  [FN/4] Emphasis added.
  [FN/5] OECD Guidelines For Multinational Enterprises, see Chapter IV. Human Rights at here.

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13. M. Volkov: “Lessons Learned and Compliance Trends from the VW and Takata Scandals”

(Source: Volkov Law Group. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.  
[Editor’s Note: This is the third and final part of Michael Volkov’s trilogy of articles on the VW and Takata scandals. Part I, on Volkswagen, is available at here and Part II, on Takata, is available at here.]
When unraveling a major corporate scandal, especially multi-year schemes involving senior executives, the blame game or lessons learned approach can easily turn into a fruitless exercise.
The VW and Takata scandals are important reminders of basic compliance and governance requirements. If carefully considered, they underscore the reasons why compliance programs exist and why an effective program is so critical in today’s global economy.
My list of significant observations will not surprise you but take them to heart and hopefully use them to advance your own compliance strategies and projects:
C-Suite Misconduct:
Multi-year scandals that are as pervasive as the VW and Takata schemes remind us all that when senior executives engage in misconduct, the impact can be devastating and difficult for a compliance program to detect. In both VW and Takata, senior executives, who were eventually indicted, were able to carry out and maintain massive fraudulent schemes, and even were able to overcome internal questioning and resistance to continuing the scheme.
CCOs have to include C-Suite misconduct in their risk assessments and design of compliance controls. At a minimum, senior executives have to participate in annual training, provide regular certifications, and subjected to internal audits and compliance reviews/audits.
The Yates Memo Bears Fruit:
The indictment of nine senior executives on criminal charges, with the arrest of one in Miami, demonstrates that DOJ’s Yates Memo is bearing fruit. The FCPA Unit still lags in this area because of internal reluctance to take on what are perceived as challenging cases and some early round losses in some cases. DOJ did the Yates Memo proud with the indictment of the VW and Takata executives, even though many of them may never be extradited from Germany or Japan to face the charges. Nonetheless, it sends an important message of deterrence and consequences. The executives may never stand in a US courtroom but they will find travel and other movements in the global marketplace to be restrictive.
Maintaining a Speak Up Culture:
Surprisingly, VW and Takata engineers and staff raised concerns about the respective schemes with senior executives. Unfortunately they were complaining to the perpetrators who were not about to pull the plug on the ongoing schemes. If, on the other hand, VW and Takata had a speak up culture that promoted alternative reporting avenues, the result may have been different. A responsive compliance program officer may have fielded the concern and acted. It is hard to say what would have happened but the facts demonstrate not only the importance of promoting a speak up culture, but ensuring that there are multiple avenues to report employee concerns especially when such concerns are not adequately addressed in the first instance.
The Absence/Complicity of the Board and an Ethical Culture:
Both companies were dominated by ongoing criminal schemes and the need to prevent detection of the scheme. The board of directors (or management) was completely absent in the overall management and supervision of the company. As a consequence, the company’s culture was more than defective – it was toxic. When the board is absent to reinforce the priority of ethical conduct and the need to adhere to standards, a pure drive for money, without any constraints, can easily drive ethical conduct underground. Takata and VW were committed to profit and solving problems the easy way – with good old fashioned fraud, lies and cover-up.
In the case of VW, the absence of any commitment to ethics and compliance was demonstrated by the full-scale obstruction of justice that occurred after the scheme was uncovered. A litigation hold turned into a call to destroy documents and numerous actors furthered the obstruction scheme by destroying documents. Such blatant disregard for the law only confirms what was at the bottom of VW’s corporate operations – a rotten corporate culture.

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14T.J. McCarthy, D.F. Feldman & R.M. Jones: “U.S.-India Partnership: BIS Establishes Licensing Policy of General Approval, Expands Validated End-User Program”

* Authors: Thomas J. McCarthy, Esq., tmmccarthy@akingump.com, 202-887-4047; Daniel F. Feldman, Esq., dfeldman@akingump.com, 202-887-4035; and Rebekah M. Jones, Esq., rjones@akingump.com, +65-6579-9030 (Singapore). All of Akin Gump Strauss Hauer & Feld LLP.
Key Points 
  – License applications to export to India most military, satellite and other items subject to the EAR will be presumptively approved.
  – The Commerce Department has expanded its VEU program to include the production of military items in India.
  – Neither amendment changes the policies regarding nuclear, missile, or chemical or biological weapons items or activities.
  – These changes reflect the Obama administration’s implementation of India’s status as a “Major Defense Partner.”
On January 19, 2017, the Department of Commerce’s Bureau of Industry and Security (BIS) published new regulations that establish a licensing policy of general approval for exports or reexports to, or transfers within, India for most military, satellite and other items subject to the Export Administration Regulations (EAR) that do not involve weapons of mass destruction. Specifically, the items at issue in the new policy are those that are controlled for “National Security” or “Regional Stability” reasons only, which include most “600 series” military items and most satellite items. Additionally, BIS has significantly expanded the scope of potential license-free exports, reexports and transfers of items to India by allowing military end uses for the first time under the Validated End-User (VEU) program, in addition to civil end uses. This rulemaking follows the Obama administration’s recognition of India as a “Major Defense Partner” on June 7, 2016, and implements various commitments made by the United States related to that unique partnership status. It is the first major change to the India VEU program since July 2009, and the broader policy changes reflect the ongoing expansion of U.S.-India cooperation in civil space, defense and other high-technology sectors since 2010. Importantly, [last Thursday’s] changes create opportunities for more production of military, satellite and controlled dual-use items in India involving U.S.-origin items with fewer regulatory burdens and delays.    
Background on Authorization VEU
BIS created Authorization VEU in June 2007 to facilitate trade with civilian end users located in eligible destinations to which eligible dual-use items could be exported, reexported or transferred without a license. It allows exporters and reexporters to ship certain items on the Commerce Control List (CCL) to pre-approved facilities of validated end users under a general authorization without needing to apply for, and receive, an export license before shipping. India and China are presently the two eligible VEU destinations.
The VEU program is voluntary. Any entity in an eligible destination may apply for the VEU program, or exporters may apply on behalf of entities in eligible destinations. Validated end users are qualified through review by the End-User Review Committee (ERC), a group chaired by the Department of Commerce, with representation from the departments of State, Defense and Energy, and other agencies as appropriate. For each end user qualified by the ERC, approved facilities of that VEU are authorized to receive eligible items without a license. Applicants can choose which of their facilities to include in their applications for VEU status, and the items eligible for shipment to each VEU facility are specified in the individual entries found in Supplement No. 7 to Part 748 of the EAR. These are the only items that may be shipped to a given VEU facility under Authorization VEU.
Changes to the India VEU Program
[Last Thursday’s] changes to the India VEU Program allow items obtained under Authorization VEU in India to be used for military end uses, rather than civil end uses only. (The VEU program for China is still limited to civil end uses only.) In particular, military end uses are now permissible to the extent that they do not involve items controlled for missile technology reasons, or uses in nuclear, missile, or chemical or biological weapons activities.
In evaluating an end user for VEU eligibility, the ERC will consider factors such as the entity’s record of experience and compliance with U.S. export controls, the entity’s consent for the U.S. government to conduct periodic on-site reviews at VEU facilities, and the entity’s relationships with U.S. and foreign companies.
Changes to Licensing Policy
Additionally, [last Thursday’s] rulemaking establishes a presumption of approval for exports and reexports to, and transfers within, India of items subject to the EAR, including “600 series” military items, for civil or military end uses in India or for the ultimate end use by the Government of India, for reexport to a Country Group A:5 country (NATO and other closely allied countries), or for return to the United States, so long as such items are not for use in nuclear, missile, or chemical or biological weapons activities. Previously, BIS maintained a policy of case-by-case review.
Significance of Changes
[Last Thursday’s] rulemaking concludes the Obama administration’s steady efforts toward enhancing defense and security cooperation with India.  In recognizing India as a “Major Defense Partner” on June 7, 2016, the United States pledged “to work toward facilitating technology sharing with India to a level commensurate with that of its closest allies and partners.”1 This commitment came in the context of an ongoing, deepening U.S.-India defense and security relationship, rooted in the 2005 New Framework for the U.S.-India Defense Relationship, the U.S.-India Strategic Dialogue established in 2010, the Defense Technology and Trade Initiative established in 2012, and the 2015 Framework for the U.S.-India Defense Relationship. Congress further reiterated the underlying objectives of these endeavors in the National Defense Authorization Act for Fiscal Year 2017 (Section 1292, “Enhancing Defense and Security Cooperation with India”).
While the new licensing policy does not remove any licensing requirements, it mimics the scope of License Exception Strategic Trade Authorization (STA), a license exception created as part of the President’s Export Control Reform initiative to facilitate trade in most defense and dual-use items by and among the United States and its close allies. India is not eligible for License Exception STA treatment under current U.S. policy because it is not a member of the four multilateral export control regimes. India is, however, seeking membership in the four regimes, an effort the Obama administration has supported.
Although the preparation and submission of an application to become a VEU takes some effort, becoming a VEU can significantly reduce regulatory burdens and delays for those entities that have, or expect to have, a significant volume or regular trade with the United States in controlled items. To date, only one Indian company has applied for VEU status. The U.S. government clearly believes that expanding the VEU program to include the production of military and other items in India will encourage other Indian companies to participate in the program and, thus, further enhance the defense, aerospace, satellite and other trade relationships with the United States. We continue to advise clients doing business in India and recommend that companies assess their opportunities in India in light of [last Thursday’s] regulatory changes.

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15Kevin Wolf Moves from Commerce/BIS to Akin Gump

(Source: Editor)
Kevin Wolf, Assistant Secretary of Commerce for Export Administration, resigned on January 20, 2017 after seven years in that position.  He is now a partner in the international trade practice at Akin Gump Strauss Hauer & Feld LLP.  Kevin can be reached at kwolf@akingump.com or at 202-887-4051.

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MS_a116. Monday List of Ex/Im Job Openings: 107 Jobs Posted

(Source: Editor)  
Published every Monday or first business day of the week.  Send openings in the following format to
#” New listing this week:
* Aerospace Industries Association; Arlington VA;
International Affairs Director
* Amazon; London, UK;
Senior Trade Compliance Program Manager (M/F)
; Requisition ID: 429019
* Amazon; Luxembourg, Luxembourg;
Trade Compliance Project Integration Manager (M/F)
; Requisition ID: 479077
* Amazon; Mexico City, Mexico;
Mexico Trade Compliance Program Manager
; Requisition ID: 481541
* Amazon; Mexico City, Mexico;
Mexico Trade Compliance Program Manager
; Requisition ID: 481542
* Amazon; Seattle WA;
Compliance Investigator
; Requisition ID: 432564
* Amazon; Seattle WA;
Sanctions Compliance Specialist
; Requisition ID: 467576
* Amazon; Seattle WA;
NA Compliance Analyst
; Requisition ID: 256357
* Amazon; Seattle WA;
Prime Air Trade Compliance Program Manager
; Requisition ID: 395658
* Amazon; Seattle WA;
Senior Compliance Audit Specialist
; Requisition ID: 473466
* Amazon; Seattle WA;
Sr. Trade Compliance PM, Fashion
; Requisition ID: 475927
* Amazon; Singapore;
Sr. Trade Compliance Manager
; Requisition ID: 441734
* Amazon; Tokyo, Japan;
JP Export Compliance Manager
; Requisition ID: 464733
* Amazon; Tokyo, Japan;
Trade Compliance Specialist
; Requisition ID: 481891
American Science & Engineering – Billerica, MA;
Sr. Trade Compliance Analyst
Requisition ID: 10799
* Apple; Singapore;
APAC Trade Compliance Analyst / Manager
; Requisition ID: 52327703
* AstraZeneca; Wilmington DE;
Sr. Import Analyst
; Requisition ID: R-001528
* Avigilon; Plano, TX;
Global Trade Compliance Manager
; Requisition ID: 2016-2551
* Bank of America; London, UK;
Trade Control Analyst
; Requisition ID: 16046883
* Bayer; Leverkusen, Germany;
Head of Customs & International Trade Classification (m/f)
; Requisition ID: 0000180456
* Choice Logistics; New York NY;
Manager, Global Trade Operations
* Ciena; Hanover MD;
Global Logistics Cost Leader
; Requisition ID: R005158
* Colony Brands, Inc.; Monroe WI;
Assistant Trade Compliance Manager
; Requisition ID: 16-0954
* Crane Aerospace and Electronics; Chandler AZ;
Sr. Export Compliance Analyst
; Requisition ID: 4725
* Crane Aerospace and Electronics, West Caldwell NJ;
Export Compliance Manager
; Requisition ID: 5411
* Cummins Inc.; Daventry, United Kingdom;
Lead Export Controls Analyst
* DRS Technologies; Germantown MD;
Senior Trade Compliance Manager
; Requisition ID: 54749
* Edgewell Personal Care; Milford CT; 
Export Compliance And Security Lead
; Requisition ID: NAM00808
* Emerson; Cluj, Romania;
International Trade Compliance Assistant
; Requisition ID: 16006899
* Esterline Technologies Corporation; Bellevue WA;
Audit Manager – Compliance
; Requisition ID: 8215BR
* Esterline Technologies Corporation; Bellevue WA;
Sr. Trade Compliance Manager – Sensors & Systems (Engineering)
; Requisition ID: 8791BR
* Esterline Technologies Corporation; Brea CA;
Sr. Trade Compliance Manager;
Requisition ID: 7333BR
* Esterline Technologies Corporation; Brea CA;
Trade Compliance Specialist
; Requisition ID:
* Esterline Technologies Corporation; Frankenmuth MI;
Trade Compliance & Contracts Administrator
; Requisition ID: 9307BR
* Esterline Technologies Corporation; Paso Robles CA;
Trade Compliance Manager
; Requisition ID: 6148BR
* Expeditors; Manila, The Philippines;
Regional Trade Compliance Manager – Indochina & Philippines
* Expeditors; Roma, Italy;
Ocean Export Manager
* Expeditors; San Francisco CA;
Export Compliance Specialist
* Expeditors; Sunnyvale CA;
Customs Compliance Specialist
* Export Solutions Inc.; Melbourne FL; Trade Compliance Specialist;
* Facebook; Menlo Park CA;
Head of Global Trade Compliance Operations
* Facebook; Singapore;
Export Compliance Manager, APAC
# FLIR; Arlington VA;
Manager of Defense Trade Licensing
; Requisition ID: 8121
FLIR; Billerica MA; 
Sr. Defense Trade Licensing & Compliance Analyst
; Requisition ID: 8008
* General Dynamics; South Wales, UK;
Senior Trade Compliance Officer
; Requisition ID: 6079
* Givaudan; Bogor, Indonesia;
Compliance Manager
; Requisition ID: 68063
* Honeywell; Moscow, Russia;
Integrity & Compliance Manager
; Requisition ID: 00330983
* Illumina; San Diego CA;
Import/Export Analyst
; Requisition ID: 6294BR
* Illumina; San Diego CA;
SAP Business Solution Analyst, Trade Compliance & Logistics
; Requisition ID: 6890BR
Ingersoll Rand; San Diego, CA;
Latin America Trade Compliance Manager (Trilingual: English, Spanish, and Portuguese)
; Requisition ID: 1610632
* Intel; Santa Clara, CA;
Global Export Compliance Specialist
; Requisition ID: JR0814909
* Intel; Santa Clara, CA;
Export Compliance Specialist
; Requisition ID: JR0005160
L3 Technologies, Platform Integration Division; Waco TX;
Export/Import Administrator 3
; Requisition ID 086435
* Lam Research Corporation; Fremont CA:
Foreign Trade Analyst 6
; Requisition ID: 12079BR
# LORD Fly-by-Wire; Saint-Vallier, France; Trade Compliance and Customs Manager  
* Lumber Liquidators; Toano VA;
Intern, Compliance
; Requisition ID: 2227
* Lutron; Coopersburg PA;
Trade Manager-Export
; Requisition ID: 2926
* Lutron; Coopersburg PA;
Trade Compliance Coordinator
; Requisition ID: 2834
* Medtronic; Heerlen, The Netherlands;
Trade Compliance Analyst
; 16000DYY
* Meggitt Control Systems; North Hollywood CA;
Trade Compliance Officer
; Requisition ID: 23720
* Meggitt PLC; Los Angeles CA;
Export Control/Trade Compliance Administrator
; Requisition ID: 22591
* Meggit PLC; Los Angeles CA;
Trade Compliance Officer
* Merck & Co, Inc.; West Point PA;
Assoc. Director Global Trade Compliance – Export Control, Exports and US Foreign Trade Zones
; Requisition ID: 8728162
* Moog; East Aurora NY;
Export Compliance Manager
; Requisition ID: 161913
* Northrop Grumman Corporation; Annapolis Junction MD;
International Trade Compliance Analyst 4
; Requisition ID: 16028623
* Northrop Grumman Corporation; Falls Church VA;
International Trade Compliance Analyst 3/4
; Requisition ID: 16026961
* Northrop Grumman Corporation; Falls Church VA;
International Trade Compliance Analyst 3/4
; Requisition ID: 16027133
* Northrop Grumman Corporation; Herndon VA;
International Trade Compliance Analyst 2
; Requisition ID: 17000653
* Northrop Grumman Corporation; Herndon VA;
International Trade Compliance Analyst 3/4
; Requisition ID: 17001180
* Northrop Grumman Corporation; Redondo Beach CA;
International Trade Compliance Analyst 4
; Requisition ID: 16024309
* Northrop Grumman Sperry Marine; New Malden, UK;
Trade Compliance Coordinator
* NXP Semiconductors; Nijmegen, The Netherlands;
Export Control Officer, Requirements Manager
; R-10001504
Orbital ATK; Mesa AZ;
International Trade Compliance Specialist
; Requisition ID: MGK20162212-37731
* Pall Corporation; Portsmouth, UK;
Trade Compliance Specialist
; Requisition ID: SHA000201
# Parexel; Kiev, Ukraine;
Global Trade Compliance Specialist
; Requisition ID: pare-10056329
* Questrade; Toronto ON, Canada;
Compliance Analyst, Trade Conduct Compliance
; Requisition ID: 724
* Roanoke Insurance Group; Schaumburg IL;
Carnet Service Representative
; Requisition ID: 1019
* Raytheon; Arlington VA;
Export Licensing Manager I
; Requisition ID: 87321BR
* Raytheon; Fullerton CA;
Global Trade Compliance Manager
; Requisition ID: 85521BR
* Raytheon; Indianapolis IN;
Principal SC Compliance Specialist
; Requisition ID: 84932BR
* Raytheon; Los Angeles CA, Dallas TX, Boston MA, or Washington DC;
Sr. Manager Global Export-Import Control
; Requisition ID 91932BR
# Raytheon Space & Airborne Systems; Cambridge MA;
Sr. Exp. License & Compliance Adv
; 310-334-7499; Requisition ID: 91503BR
* Raytheon Space & Airborne Systems; McKinney TX;
Sr Exp License & Compliance Adv
; 310-334-7499; Requisition ID: 91155BR
* Raytheon Space & Airborne Systems; McKinney TX;
Sr Exp License & Compliance Adv
; 310-334-7499; Requisition ID: 91155BR
* Smith and Wesson; Springfield MA;
International Sales Administrator
; Requisition ID: SCB-1223
* State Department; Wash DC;
Supervisory Compliance Specialist
; Requisition ID: HRSC/T/PM-2017-0003
* Tenneco; Edenkoben, Germany;
Global Trade Compliance Manager (m/w)
; Requisition ID: 176871-846
* Tesla Motors; Fremont CA;
International Tax Lead/Senior International Tax Counsel
; Requisition ID: 35593
* Tesla Motors; Fremont CA;
Global Trade Compliance Analyst
; Requisition ID: 40738
* Tesla Motors; Fremont CA;
Global Supply Manager – Logistics
; Requisition ID: 38153
* Tesla Motors; Fremont CA;
Group Manager – Logistics Sourcing
; Requisition ID: 38574
* Textron Systems; Wilmington MA;
Principal Export Compliance Analyst
; Requisition ID: 242857
* ThermoFisher Scientific; Matamoros, Mexico;
Import/Export Supervisor
; Requisition ID: 39750BR
* ThermoFisher Scientific; Shanghai, China;
Compliance Director, Greater China
; Requisition ID: 38520BR
* ThermoFisher Scientific; Shanghai, China;
Trade Compliance Specialist
; Requisition ID: 42875BR
* ThermoFisher Scientific; Shanghai, China;
Trade Compliance Specialist – CMC
; Requisition ID: 42143BR
* Tractor Supply Company; Brentwood TN;
Customs Process Manager
; Requisition ID: 16-986
* United Technologies Corporation, UTC Aerospace Systems; Charlotte NC;
International Trade Compliance Auditor
; Requisition ID:
* United Technologies Corporation, UTC Aerospace Systems; Charlotte NC;
* United Technologies Corporation, UTC Aerospace Systems; Charlotte NC;
* United Technologies Corporation, UTC Aerospace Systems; Charlotte NC;
Program Manager, Customs
; Requisition ID:
* United Technologies Corporation, UTC Aerospace Systems; Charlotte NC;
Sr Mgr, Intl Trade Compl
; Requisition ID: 30525BR
* United Technologies Corporation, UTC Aerospace Systems; Windsor Locks CT;
* XPO Logistics; Greenwich CT;
Global Trade Compliance Analyst
* * * * * * * * * * * * * * * * * * * *


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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: 23 Jan 2017: 82 FR 7641-7642: Updated Statements of Legal Authority for the Export Administration Regulations 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 17 Jan 2017: 
82 FR 7641-7642: Updated Statements of Legal Authority for the Export Administration 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 Jan 2017: 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: 1 Jan 2017: 2017 Basic HTS 
  – HTS codes for AES are available
  – HTS codes that are not valid for AES are available
  – Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition 15 Jan 2017, released 13 Jan) of the ITAR is Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, 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.

* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website.

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