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17-0214 Tuesday “The Daily Bugle”

17-0214 Tuesday “The Daily Bugle”

Tuesday, 14 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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  1. Commerce/ITA: Advisory Committee on Supply Chain Competitiveness to Meet on 8 Mar in Conference Call 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. DoD/DSS Posts Notice on e-FCL NISP PSI Data Collection 
  4. State/DDTC Posts Name Change and Acquisition Information
  5. UK/DIT ECO Posts Revoked OGEL 16-39
  1. D. Kornbacher & S. Scott: “U.S. Court Orders Google to Produce Customer Data Stored on Overseas Servers” 
  2. M. Volkov: “Focus on the Issue of ‘Corrupt Intent'” 
  3. T. Murphy: “Customs Valuation Implications of Year-End Transfer Price Adjustments” 
  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 (10 Feb 2017), FTR (15 May 2015), HTSUS (10 Feb 2017), ITAR (11 Jan 2017) 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1
1. Commerce/ITA: Advisory Committee on Supply Chain Competitiveness to Meet on 8 Mar in Conference Call 
 

 
82 FR 10564: Advisory Committee on Supply Chain Competitiveness: Notice of Public Meeting
* AGENCY: U.S. Department of Commerce.
* ACTION: Notice of open meeting. …
* DATES: This conference call meeting will be held on Wednesday, March 8, 2017, from 11:00 a.m. to 12:00 p.m. Eastern Daylight Time. The deadline for members of the public to register to participate in or listen to the meeting is 5:00 p.m., Friday, March 3, 2017.
   Call in Information: The meeting will be held by conference call with webinar capabilities. The Web site, call-in number and passcode will be provided by email to registrants. Requests to register and any written comments should be submitted to: Richard Boll and John Miller, Office of Supply Chain, Professional & Business Services, International Trade Administration by email: john.miller@trade.gov and richard.boll@trade.gov. Members of the public are encouraged to submit registration requests and written comments via email to ensure timely receipt.
* FOR FURTHER INFORMATION CONTACT: John Miller and Richard Boll, Office of Supply Chain, Professional & Business Services, International Trade Administration by email: john.miller@trade.gov and richard.boll@trade.gov or phone 202-482-1316 and 202-482-1135.
* SUPPLEMENTARY INFORMATION: …
   Matters to be Considered: Committee members are expected to deliberate and vote on a Committee letter outlining its priority recommendations for this Administration and a Committee letter outlining its recommendations for NAFTA negotiations. These letters will highlight the important issues that the Committee recommends that the Secretary of Commerce, in coordination with the Administration, address to improve the competitiveness of U.S. supply chains, facilitate new job growth within the United States, and increase U.S. exports. …
 
   Dated: February 8, 2017.
Maureen Smith, Director, OSCPBS.

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OGS
OTHER GOVERNMENT SOURCES

OGS_a12. Ex/Im Items Scheduled for Publication in Future Federal Register Editions

(Source: Federal Register)
 
* Commerce; Economic Analysis Bureau; NOTICES; Surveys [Publication Date: 15 February 2017.]:

  – Foreign Direct Investment in the United States

  – Foreign Direct Investment in the United States–Transactions of U.S. Affiliate With Foreign Parent

  – Transactions in Selected Services and Intellectual Property with Foreign Persons

  – U.S. Direct Investment Abroad

  – U.S. Direct Investment Abroad – Transactions of U.S. Reporter With Foreign Affiliate

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OGS_a23. Commerce/BIS: (No new postings.)

(Source:
Commerce/BIS)

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OGS_a34. DoD/DSS Posts Notice on e-FCL NISP PSI Data Collection

(Source: DoD/DSS)
 
The Defense Security Service (DSS) data collection of National Industrial Security Program (NISP) Personnel Security Investigation Projections will be opened on March 13, 2017 ending April 7, 2017 and can be accessed through the Electronic Facility Clearance (e-FCL) system.
 
DSS is responsible for projecting Personnel Security Investigations (PSI) requirements each year. Annual projections acquired from Industry through this collection are the key component in Department of Defense program planning and budgeting for NISP security clearances.
 
Please note that submitting the PSI projections is independent of e-FCL package submissions; submitting information related to the facility clearance is not required as part of the PSI data collection.
 
A 12-minute tutorial video can be found here, under “Alerts”, to assist in completing the PSI projections. For the best viewing of this video, hover your cursor over the link on the webpage, right-click and “save target as …”, so that you’re saving the video to your computer. It can be viewed using Windows Media Player, QuickTime, and VLC Player.
 
We look forward to your participation. If you have any questions, please contact the PSI team at: dss.ncr.dss.mbx.psiprogram@mail.mil.
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OGS_a45. State/DDTC Posts Acquisition and Name Change  Information for Multiple Entities

 
  – Acquisition of Airbus DS Electronics and Border Security GmbH Expected to Acquired by Kohlberg Kravis Roberts & Co., L.P.; and 
  – OEI Opto AG Changes Name to Thales Alenia Space Switzerland Ltd.
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OGS_a56. UK/DIT ECO Posts Revoked OGEL 16-39

(Source: UK/DIT ECO)

The UK/DIT Export Control Organisation has posted the following revoked OGEL on its website:
 
 
Ref:
16-39

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COMMCOMMENTARY

COMM_a47. D. Kornbacher & S. Scott: “U.S. Court Orders Google to Produce Customer Data Stored on Overseas Servers”

 
* Authors: Devika Kornbacher, Esq., dkornbacher@velaw.com, 713-758-2757; and Sydney Scott, Esq., sscott@velaw.com, 713-758-3584. Both of Vinson & Elkins LLP.
 
On February 3, 2017, a federal magistrate judge in the Eastern District of Pennsylvania broke with Second Circuit precedent and ordered Google to produce electronic data stored on its servers located overseas. The case,
In re Search Warrant No. 16-960-M-01 to Google (hereinafter “Google“), concerned two search warrants issued pursuant to Section 2703 of the Stored Communications Act (“SCA” or “Act”). The SCA was passed in 1986 “to extend to electronic records privacy protections analogous to those provided by the Fourth Amendment.”  The Act prohibits unauthorized third parties from, among other things, accessing, obtaining, or altering electronically-stored information. Relevant here, it also authorizes government authorities to compel disclosure of user data or records by seeking a warrant. Google historically complied with warrants for customer data located on its servers located outside of the United States. However, after the Second Circuit’s opinion in Microsoft v. United States, Google took the position that it need only disclose data stored on servers located in the United States.
 
In Microsoft, the government sought to compel Microsoft to disclose user data associated with a web-based email address allegedly connected to a narcotics case. Microsoft complied with the government’s warrant for user data stored in the United States, but refused to produce user data that was stored on its server located in Dublin, Ireland. Microsoft contended that the warrant, bound by certain territorial limitations, could not compel it to import data from Ireland to produce to government authorities in the United States. The Second Circuit Court of Appeals agreed that the case concerned the extraterritorial reach of domestic law, but focused on the extraterritorial application of the SCA rather than of the warrant that it authorized. To resolve this issue, the court applied the two-step analysis contained in the Supreme Court’s decision in Morrison v. National Australia Bank Ltd. First, the court held that there was no evidence to rebut the presumption against extraterritorial application of the SCA. Second, after determining that the “focus” of the SCA was the protection of user privacy, the court held that compelling Microsoft to comply with the warrant would constitute an unlawful extraterritorial application of the SCA. The court reasoned that the Act’s focus – user privacy – would be invaded once the user’s content was seized, which would occur outside of the United States. 
 
In direct conflict with the Microsoft opinion, the court in Google held that execution of the warrant did not constitute an unlawful extraterritorial application of the SCA. Like the Second Circuit in Microsoft, the court in Google first held that there was no evidence to rebut the presumption against extraterritorial application of the SCA. The magistrate judge disagreed, however, with the Second Circuit’s determination that accessing user data abroad constituted a seizure, concluding that the transfer of a customer’s data from one data center to another does not interfere with the customer’s access to or possessory interest in its data. Unlike in Microsoft, where user content data was statically stored in one data center, Google regularly transfers data from one data center to another without a customer’s knowledge. The magistrate judge noted this fact and found that the user’s privacy – again the focus of the SCA – would be invaded only when the government searched the customer’s data by viewing it. Because this search would occur in the United States, the court held that execution of the warrant would not result in the extraterritorial application of the SCA.
 
What This Means for You
 
For now, the Second Circuit’s opinion in Microsoft remains binding precedent within that Circuit and persuasive authority in others. Indeed, an evenly split Second Circuit recently denied rehearing the case en banc. While it remains to be seen whether Congress will answer the call to “revise a badly outdated statute,” both Microsoft and Google provide practitioners with solid analytical frameworks within which to craft persuasive arguments that may turn on the unique facts of each case, including how user data is transferred and maintained in data centers. 

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COMM_a18. M. Volkov: “Focus on the Issue of ‘Corrupt Intent'”
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
Legal and compliance practitioners are often asked to review a set of facts and determine whether the actors will potentially violate the FCPA. A lot has been written on the vagueness or lack of clarity surrounding the FCPA. Those opinions are not very persuasive and ignore common sense, legal concepts and good faith.
 
A legal and compliance professional knows the importance of good faith. They also know what a good faith legal analysis looks like and what a bad faith (or rationalization) looks like. Drawing the lines around FCPA behavior is not as hard as many claim. Those that make such baseless claims are only justifying their own existence or engaging in a transparent marketing ploy.
 
My point is not that all FCPA issues are easy. To the contrary, some can be complex and take time to figure out. However, most can be solved with good faith reviews and analyses.
 
One key issue that I always harp on – I know, I admit it – is “corrupt intent.” There are a lot of words that surround intent, especially in the white collar world. In many cases, an actor’s liability for a white collar crime does not turn on whether he or she committed an act, but boils down to what was the actor thinking at the time, or what was the actor’s intent.
 
Given the fact that none of us are adept at mind reading, we always look to words, context and surrounding circumstances to infer what was going on in an actor’s head.
 
In the FCPA situation, the requisite intent for an actor is “corrupt intent. Here a simple explanation of this concept is very helpful. If the actor transfers money or something else of value to a foreign government official to influence, persuade or convince a foreign government official to commit an act in violation of that government’s official’s duties or obligations, wallah – we are looking at corrupt intent. (I know I have omitted the business purpose test but assume that we satisfy that with the respective action or omission by the foreign official).
 
A legal or compliance officer tasked with considering a prospective action by a company actor has to examine, in good faith, the presence or absence of corrupt intent, and carefully weight how such conduct in the specific context would be viewed by a regulator or prosecutor.
 
As part of this analysis, a legal and compliance officer knows that creating a contemporaneous document reflecting a good faith analysis of the issue, and why the officer was comfortable with moving forward with the conduct is a sure and reliable way to document the company’s intent. Of course, there are many assumptions and variables – I am assuming that the legal and compliance officer has obtained all of the relevant information from the business. As we saw last year in the VimpelCom enforcement action, lawyers and compliance officers were not able to conduct a good faith analysis because senior executives conspired to withhold such information from them.
 
The “corrupt intent” framework can help to solve what would be otherwise intractable issues. It is an effective strategy to separate the wheat from the chaff when reviewing an FCPA issue. It is not meant to be the surefire solution but it is a helpful way to focus analysis and consider the issues.
 
Legal and compliance practitioners should always ask themselves how would a prosecutor view a piece of evidence or a course of conduct. It is too easy to just write off this way of thinking as aggressive DOJ attorneys will always find a way to make something look wrong. That is a cop out. In fact, DOJ FCPA attorneys, in my experience, carefully consider issues, and are willing to engage in a thoughtful discussion and analysis.
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COMM_a29. T. Murphy: “Customs Valuation Implications of Year-End Transfer Price Adjustments”
(Source: Author)

* Author: Ted Murphy, Esq., ted.murphy@bakermckenzie.com, 202-452-7069, Baker & McKenzie LLP

Just a quick reminder for those of you working at multinational companies which operate on a calendar year basis – do not forget to ask your tax colleagues whether any retroactive transfer pricing adjustments were made at, or before, year end (assuming they do not send this information to you on their own).

If such adjustments were made (whether upward or downward), please be sure to consider the customs valuation implications here in the United States and elsewhere. The failure to declare upward transfer pricing adjustments is a very common enforcement issue in many jurisdictions (largely because the issue is so easy to identify and often involves significant amounts/penalties); whereas downward adjustments could lead to a refund of customs duties, taxes and fees in some jurisdictions (including the US, the EU, and Canada). A quick note to your tax colleagues now could save a potential headache down the line, or put some money back in the company’s pocket.
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ENEDITOR’S NOTES

(Source: Editor)

*
Jack Benny (born Benjamin Kubelsky; 14 Feb 1894 – 26 Dec 1974, was an American comedian, vaudevillian, radio, television and film actor, and violinist. Benny was known for comic timing and the ability to cause laughter with a pregnant pause or a single expression, such as his signature exasperated “Well!”)

  – “It’s not so much knowing when to speak, but when to pause.”

 

*
Frederick Douglass (born Frederick Augustus Washington Bailey; Feb 1818 – 20 Feb 1895, was an African-American social reformer, abolitionist, orator, writer, and statesman. After escaping from slavery in Maryland, he became a national leader of the abolitionist movement in Massachusetts and New York, gaining note for his dazzling oratory and incisive antislavery writings.)

  – “Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them.”

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EN_a211
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 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 

* DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M
  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and canceled Supp. 1 to the NISPOM  (Summary here.)

* EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774 
  – Last Amendment: 1 Feb 2017: 82 FR 8893-8894: Commerce Control List: Removal of Certain Nuclear Nonproliferation (NP) Column 2 Controls

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 10 Feb 2017: 82 FR 10434-10440: Inflation Adjustment of Civil Monetary Penalties.  
 
*
FOREIGN TRADE REGULATIONS (FTR)
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (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.
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)

, 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: 10 Feb 2017: Harmonized System Update 1701, containing 1,295 ABI records and 293 harmonized tariff records.   

  – HTS codes for AES are available
here
.
  – HTS codes that are not valid for AES are available
here.
 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.
  – Latest Amendment: 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
website
.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.  

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 8,000 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.

* CAVEAT: The contents cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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

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