17-0209 Thursday “The Daily Bugle”

17-0209 Thursday “The Daily Bugle”

Thursday, 9 February 2017

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe 
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[No items of interest noted today.]  

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. State/DDTC: (No new postings.) 
  4. Treasury/OFAC: Implementation of the Federal Civil Penalties Inflation Adjustment Act
  5. Australia DECO Closed on Fri 10 Feb 2017
  6. EU Amends Restrictive Measures Concerning ISIL (Da’esh) and Al-Qaida
  7. UK/DIT ECO Posts Information on Export Control Symposium 2017
  1. Reuters: “Post-Brexit Customs Barriers Threaten End of Seamless UK-EU Supply Chains”
  1. C.T. Cherniak: “What Should Canadian Companies Take Away From The New U.S. Sanctions Against Iran?” 
  2. J.C. Allen: “Cross-Referenced List of U.S. Government Authority for DoD, Export Controls, Technology Cooperation, and Consensus-Building” 
  3. Shap Talk: “Iron Fist in a Powdered Gove? FDS Bans Imports of Powered Gloves” 
  4. R.C. Burns: “OFAC Radically Expands Its Extraterritorial Jurisdiction with B Whale Ruling” 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (27 Jan 2017), DOD/NISPOM (18 May 2016), EAR (1 Feb 2017), FACR/OFAC (17 Jan 2017), FTR (15 May 2015), HTSUS (1 Jan 2017), ITAR (11 Jan 2017) 


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OGS_a11. Ex/Im Items Scheduled for Publication in Future Federal Register Editions

(Source: Federal Register)
* Foreign Assets Control Office; Rules; Inflation Adjustment of Civil Monetary Penalties [Publication Date: 10 February 2017.]
U.S. Customs and Border Protection; NOTICES; Meetings: Commercial Customs Operations Advisory Committee [Publication Date: 10 February 2017.]

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OGS_a22. Commerce/BIS: (No new postings.)


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


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Treasury/OFAC: Implementation of the Federal Civil Penalties Inflation Adjustment Act

(Source: Treasury/OFAC)
On February 9, 2017, the Department of the Treasury
issued regulations to implement the Federal Civil Penalties Inflation Adjustment Act of 1990
.  These regulations, which will be effective February 10, 2017, adjust for inflation the maximum amount of the civil monetary penalties that may be assessed under relevant Office of Foreign Assets Control (OFAC) regulations.

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OGS_a55. Australia DECO Closed on 10 Feb 2017

Australia DEC)
Reminder: The Defence Export Controls (DEC) will be closed on Friday 10 February 2017 to conduct organisational planning. Please note applications will not be assessed on this day. DEC will re-open on Monday 13 February 2017. Please contact us if you have any queries in relation to this closure.
Contact Details DEC
Phone: 1800 661066, or +61 2 626 67222 from outside Australia
E-mail: ExportControls@defence.gov.au
Postal Address:
  Department of Defence
  Defence Export Controls
  R1-1-A037 PO Box 7901

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OGS_a66EU Amends Restrictive Measures Concerning ISIL (Da’esh) and Al-Qaida

  – Commission Implementing
Regulation (EU) 2017/221 of 8 February 2017 amending for the 259th time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the ISIL (Da’esh) and Al-Qaida organisations. 

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OGS_a77UK/DIT ECO Posts Information on Export Control Symposium 2017

This year’s export control symposium will take place on Tuesday, 21 March, at the Westminster Conference Centre, 1 Victoria Street, London SW1H 0ET.
Please fill out the booking form and send to Denise Carter,
Denise Carter
Export Control Organisation
3rd floor
Department for International Trade
1 Victoria Street
London SW1H 0ET

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Reuters: “Post-Brexit Customs Barriers Threaten End of Seamless UK-EU Supply Chains”

In a small factory in a suburb of Birmingham in central England, family-owned Brandauer manufactures a tiny metal component used in the control panel of a car airbag.
From raw material to electrical connector pin in the airbag of a finished car, it will travel between Britain and the European continent as many as five times during the production process — without encountering any customs barriers.
But when Britain leaves the European Union, and likely the bloc’s customs union, such cross-border supply chains could see substantially increased costs and time delays due to tariffs and administrative burdens.
The EU’s customs union allows goods to circulate freely between member states without facing any duties, quotas or customs controls, and applies a common tariff at its external border to goods coming from outside the bloc.
British Prime Minister Theresa May has said she wants to have some kind of customs agreement with the EU in order to have trade that is “as frictionless as possible”.
  “Whether that means we must reach a completely new customs agreement, become an associate member of the customs union in some way, or remain a signatory to some elements of it, I hold no preconceived position,” May said in a speech last month setting out her priorities for upcoming Brexit negotiations.
For the boss of Brandauer, a 155-year-old business which began life as a pen-nib manufacturer and now makes 8 million of the airbag components every month, the goal is clear.
  “We do need tariff-free trading with the eurozone,” Rowan Crozier told Reuters, speaking over the whir of the large machines nearby which suck in coils of metal at one end and spit out tiny precision-cut components at the other.
Crozier, who voted to remain in the EU, says the government has not provided enough information for him to predict what impact EU tariff barriers might have on the company, which employs 54 staff and produces parts used in everything from plumbing to kettles.
  “We have to wait and see, I can’t second guess what might happen. I don’t think we have a plan from the government … They have got a wish list. If they get 50 percent of what they want they will be doing well,” he said.
  “It is very difficult to plan for that … It will affect our competitiveness, or our customer’s competitiveness, which will then affect people’s strategies of buying.”
Seamless Trade
The copper alloy for the airbag part is made in Germany before being imported to Britain on a large coil where it is stamped into shape by a press at Brandauer’s factory in Birmingham and then plated in a semi-precious coating at a site in nearby Coventry.
That material could face an import duty of 4.8 percent under World Trade Organization rules, if Britain does not agree a more favourable rate with the EU as part of a free trade deal.
It could then be hit with this duty again when the stamped copper is shipped back to Brandauer’s customer in Germany where it is assembled into a control box and connector.
That control box part is sent around the world, including to a subsidiary back in Britain, to be finished off before it ends up in cars assembled on the European continent, including by VW and Fiat.
Safety airbags and their component parts could face average duties of 3.7 percent, while the final vehicles they are used in may then be hit by tariffs of up to 10 percent if they are sold to consumers back in Britain.
It is just one example of the many complex, cross-border supply chains which could be impacted by Brexit.
Analysis of the latest available data from the World Input-Output Database by Credit Suisse last year found that in 2011 around a third of UK exports to the EU were part of EU exporters’ supply chains, a steadily rising proportion.
Future customs arrangements are among the top concerns of British manufacturers, according to industry body EEF, 80 percent of whose members are small businesses and many of whom are in supply chains to larger manufacturing firms.
  “They are part of integrated supply chains sewn up in the ecosystem of seamless trade between the UK and EU countries,” said Fergus McReynolds, director of EU Affairs at EEF, which is gathering information from its members on what elements of the current arrangement are most crucial.
  “The priority remains as little change to our current trading relationships and as little disruption as possible to supply chains that are essential for the sector.”
More Cautious
Crozier hopes the specialised nature of his business — which operates within tolerances less than the thickness of a human hair — means customers will pay any extra cost rather than look elsewhere, at least in the short-medium term.
The airbag connector pin, for example, is 1 millimetre thick and is made in eight sizes ranging from 20-40 millimetres long.
While day-to-day sales of existing products have remained busy, in some cases boosted by the weaker pound making them more competitive, the longer term is less predictable.
There can be a 4-6 year lead time between a customer enquiry and a product producing meaningful revenue for the company.
  “Uncertainty is definitely driving a little bit of a slowing down,” he said. “The half of the business which is about winning new orders, new customers … it is those ones that people are becoming a little bit more cautious about.”
One U.S. company who put an order on hold ahead of the EU referendum last June has not yet come back to say they will go ahead with it, despite the weaker pound making Brandauer much cheaper than their current supplier, he said.
Brandauer exports around a third of its 7.5 million pound annual turnover to China and 15 percent to the United States. Greater trade barriers in Europe could see it switch its focus away from trying to grow the 15 percent it exports to the EU.
  “I think it is unlikely that it would affect current programmes but it would affect longer term strategy, no doubt,” he said. “It is more about down the line … it affects our children and our children’s children, who knows what it means for them.”

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COMM_a49. C.T. Cherniak: “What Should Canadian Companies Take Away From The New U.S. Sanctions Against Iran?”

Canada-US Blog)
* Author: Cyndee Todgham Cherniak, Esq., LexSage PC,
cyndee@lexsage.com, 416-307-4168
On February 3, 2017, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed new Iran sanctions by listing
13 individuals and 12 entities on its list of Specially Designated Nationals and Blocked Persons.  What does this mean for Canadian companies? Canadian companies need to determine if they are doing business with the newly listed persons.
Canadians must not only review contracts that they know are with Iran or Iranian entities.  Some of the listed individuals and entities are not Iranian.  For example, 3 individuals are Chinese (Xianhua, Qin (Jack), Yue, Richard, and Zhou, Carol), 1 individual is from the U.A.E. (Rostamian, Kambiz) and 3 of the entities are Chinese (Cosailing Business Trading Company Limited, East Star Company (a.k.a Satereh Shargh Mobin; a.k.a. Satereh Shargh Samin Co., Ltd.) and Ningbo New Century Import and Export Company Ltd. (a.k.a. New Century Import and Export Co., Ltd.) and 4 Lebanese entities (Maher Trading and Construction Company (a.k.a Maher Trading and Engineering; a.k.a. Maher Company), Mirage for Engineering and Trading (a.k.a. Mirage for Engineering), Mirage for Waste Management an Environmental Services SARL) and 1 U.A.E entity (Royal Pearl General T.R.D. (a.k.a. Royal Pearls; a.k.a. Royal Pearls General Trading).  This means that Canadians need to be thinking about the new U.S. sanctions when they do business with (or are doing business with) Chinese persons, Lebanese persons and with the U.A.E.
Based on the fact that some of the listed persons are not Iranians and Iranian entities, this means that future sanctions may also be against persons who are not Iranian. Sanctions that are targeted against Iran may be more global in nature.
Further, speaking about the future, future sanctions may be imposed or re-imposed against Iranian financial institutions. What this means is that Canadian companies doing business with Iranians must be concerned about getting paid.  If, in the future, there is a snap-back of U.S. sanctions against Iranian financial institutions or new sanctions are imposed against Iranian financial institutions, getting paid may become harder.  Canadian companies should consider getting paid up front or quickly.
Speaking about getting paid, one way to avoid a nexus to U.S. law is to not get paid in United States dollars.  Often U.S. dollar transactions are processed through U.S. banks and clearing houses.
Canadian companies need to watch announcements of new sanctions that may come into effect soon or that are announced without prior notice.  The Trump Administration and Congress may take steps to expand U.S. sanctions against Iran further in new ways that have extra-territorial effect.  What that means is that new U.S. sanctions may catch Canadian companies too.

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COMM_a110. J.C. Allen: “Cross-Referenced List of U.S. Government Authority for DoD, Export Controls, Technology Cooperation, and Consensus-Building”

(Source: Author)
* Author: Jamieson C. Allen,
jamieson.allen.ctr@us.af.mil, 530- 852-2675.
This list of authorities — statutes, regulations, executive orders, agency guidance, etc. — is an attempt to clarify the confusion that exists in both the US & international communities’ government and industry in understanding and dealing with international defense technology transfer, export compliance, statutes, regulations, treaties, etc., that have developed over the past 25+ years.  It provides a referral of assorted documents that support the U.S. Department of Defense, et al., regarding Defense Technology Cooperation, Collaboration and Consensus-building.  

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COMM_a211. Shap Talk: “Iron Fist in a Powdered Gove? FDS Bans Imports of Powered Gloves”

Shapiro Shap Talk, Issue 178) [Excerpts.]
On January 18, 2017, FDA issued a final rule to ban all powdered surgeon’s gloves, powdered patient examination gloves, and absorbable powder for lubricating a surgeon’s glove because these products present unreasonable and substantial risk to health care providers, patients and other individuals.
The effective date applies to devices already in commercial distribution and those already sold to the ultimate user, as well as to devices that would be sold or distributed in the future.  Section 501(g) of the FD&C Act (21 U.S.C. 351(g)) deems a device to be adulterated if it is a banned device.
Importers and manufacturers should take note that powdered surgeon’s gloves, powdered patient examination gloves, and absorbable powder for lubricating a surgeon’s glove offered for import into the United States will be subject to refusal of admission.
For more information, please visit the FDA Medical Device Bans webpage

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COMM_a312. R.C. Burns: “OFAC Radically Expands Its Extraterritorial Jurisdiction with B Whale Ruling”

Export Law Blog. Reprinted by permission.)
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com, 202-508-6067)
The recent
decision by the Office of Foreign Assets Control (“OFAC”) to issue a finding of violation, but no fine, against B Whale, a member of the Taiwanese TMT Shipping Group represents a new high (or low, depending on your point of view) for OFAC’s general belief that it has jurisdiction over anyone anywhere in the world.  At issue was the transfer of Iranian oil from an Iranian vessel in international waters to a
Monrovian-registered Liberian-flag ship owned by a Taiwanese company without any branches or business operations in the United States.
OFAC claimed that this was an illegal importation of Iranian goods into the United States in violation of
section 560.201 of the Iranian Transactions and Sanctions Regulations (“ITSR”).  Say what?  According to OFAC, the foreign flagged ship in international waters became a part of the United States once TMT filed a bankruptcy petition in the United States, thereby placing all its assets under the control of the bankruptcy court.  Because, you see, the ITSR defines the United States in
section 560.307 of the ITSR as “the United States, its territories and possessions, and all areas under the jurisdiction or authority thereof.”  I imagine that TMT, and probably the government of Taiwan, will be somewhat surprised to learn that
real property owned by TMT in Taipei is now a part of the United States.  By this logic, a bankrupt’s trucks in foreign countries would become “areas” under the jurisdiction of the United States.  Certainly these absurd results demonstrate that “area” in section 560.307 means geographic areas and not simply any physical space somewhere in the world.
I am unable to find any precedent from OFAC itself or any other court or agency for such an expansive definition of the United States   Interestingly, Congress, when defining the scope of federal criminal law, stops far short of OFAC’s definition.  The definition of “United States” in the federal criminal code is defined as “all places and waters, continental or insular, subject to the jurisdiction of the United States, except the Canal Zone.” See
18 U.S.C. § 5.  To cover ships, which are not “places and waters, continental and insular” the federal criminal codes defines the “special maritime and territorial jurisdiction” of the United States which covers ships on the high seas owned by at least one U.S. citizen or a foreign vessel with a scheduled departure or arrival in the United States “to the extent permitted by international law.” 
See 18 U.S.C. § 7.  Ships owned by bankrupts aren’t either the United States or part of the special maritime jurisdiction as far as Congress was concerned.  It is hard to imagine that OFAC has the statutory authority to expand the scope of its jurisdiction in this fashion by calling every asset of a bankrupt anywhere on the face of the planet a part of “the United States.”
Not only does OFAC stretch the concept of “United States” beyond the breaking point, but also it does the same thing to the definition of “United States person.”  Whale B was found to have violated
section 560.211 when it engaged in a transaction with a blocked Iranian vessel.  The violation occurred because OFAC decided that Whale B was a “United States person.” That term is defined in
section 560.314 to cover a “person in the United States.”  And Whale B, a company organized under the laws of Taiwan and without any physical presence in the United States, was “in the United States” because it filed a bankruptcy case in the United States. It’s difficult to imagine where a principled limit could be drawn if filing a lawsuit in the United States means that a company is “in the United States.”  Is a company with a U.S copyright registration now “in the United States” and fully subject to U.S. sanctions? What if it has a dot com domain name issued by a U.S. registrar? Or it uses an email service that has servers in the United States?  Or it has a pending sales order it made with a U.S. company over the Internet?

And here’s one last comment on the B Whale shipwreck.  OFAC cites this as an aggravating factor: B Whale “took steps to conceal a ship-to-ship transfer of Iranian oil with an Iranian vessel on the SDN List … by … switching off the vessel’s automatic identification system during the time period corresponding with the ship-to-ship transfer.”  Apparently OFAC forgot that, because of the TMT bankruptcy, Whale B was subject to seizure and detention by foreign creditors in jurisdictions not interested in observing the automatic stay arising from the U.S. bankruptcy.  In such a situation, the more likely reason for turning off the AIS was the common practice of doing so to hide from foreign creditors, not from OFAC.

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(Source: Editor)

George Ade (9 Feb 1866 – 16 May 1944, was an American writer, newspaper columnist, playwright, and perhaps the first modern American humorist. In 1915, Sir Walter Raleigh, Oxford professor and man of letters, while on a lecture tour in America, called George Ade “the greatest living American writer.”)
  – “One man’s poison ivy is another man’s spinach.”
  – “Early to bed and early to rise is a bad rule for anyone who wishes to become acquainted with our most prominent and influential people.”
Thomas Paine (9 Feb 1737 – 8 Jun 1809, was an English-American political activist, philosopher, political theorist, and revolutionary. One of the Founding Fathers of the United States, he authored the two most influential pamphlets at the start of the American Revolution, and he inspired the rebels in 1776 to declare independence from Britain.)
  – “A long habit of not thinking a thing wrong gives it a superficial appearance of being right.”

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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: 27 Jan 2017: 82 FR 8589-8590: Delay of Effective Date for Importations of Certain Vehicles and Engines Subject to Federal Antipollution Emission Standards; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions 

  – 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: 1 Feb 2017: 82 FR 8893-8894: Commerce Control List: Removal of Certain Nuclear Nonproliferation (NP) Column 2 Controls

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 17 Jan 2017: 82 FR 4793-4794: Sudanese 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 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 24 Jan 2017) 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, 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
.  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 subscribers to inform readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

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

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