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17-0228 Tuesday “The Daily Bugle”

17-0228 Tuesday “The Daily Bugle”

Tuesday, 28 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. DoD/DSS Seeks Comments on Form 232, National Industrial Security Program Cost Collection Survey 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. DHS/CBP Sends Out COAC Trade Efficiency Survey Invitation 
  4. State/DDTC: (No new postings.)
  5. Treasury/OFAC Posts Settlement Agreement with United Medical Instruments, Inc.
  6. Australia Department of Foreign Affairs and Trade Expands Sanctions Against North Korea
  7. Council of the European Union Publishes Press Releases on Restrictive Measures Concerning North Korea and Belarus
  8. EU Amends Restrictive Measures Against North Korea and Belarus
  1. The Guardian: “Man Charged in NSW Town of Young Over Alleged Missile Advice to ISIS” 
  2. Reuters: “North Korea Spy Agency Runs Arms Operation Out of Malaysia, U.N. Says” 
  3. ST&R Trade Report: “Federal Agencies Ordered to Create Regulatory Reform Teams” 
  1. D. Kyle: “Freight Forwarding as Brokering Activity” 
  2. G. Husisian & C.M. Swift: “New Administration Ramps up Enforcement Efforts” 
  3. R. Stohl: “Trump’s Opportunity to Support Transparency, Accountability on the Conventional Arms Trade” 
  4. Gary Stanley’s ECR Tip of the Day 
  1. ECTI Presents United States Export Control (EAR/OFAC/ITAR) Seminar in London, 15-18 May 
  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 (24 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

 
82 FR 12084: Submission for OMB Review; Comment Request
* ACTION: Notice. …
* DATES: Consideration will be given to all comments received by March 30, 2017.
* FOR FURTHER INFORMATION CONTACT: Fred Licari, 571-372-0493.
* SUPPLEMENTARY INFORMATION:
  – Title, Associated Form and OMB Number: National Industrial Security Program Cost Collection Survey; DSS Form 232; OMB Control Number 0704-0458.
  – Needs and Uses: The collection allows the Defense Security Service (DSS) to account each year for the costs associated with implementation of the National Industrial Security Program. It also allows DSS to report those costs to the Director of the Information Security Oversight Office, as required by Executive Order 12829, “National Industrial Security Program.” …
  – Written requests for copies of the information collection proposal should be sent to Mr. Licari at WHS/ESD Directives Division, 4800 Mark Center Drive, East Tower, Suite 03F09, Alexandria, VA 22350-3100.
 
   Dated: February 23, 2017.
Aaron Siegel, Alternate OSD Federal Register Liaison Officer, Department of Defense.
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OGS
OTHER GOVERNMENT SOURCES

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

(Source: Federal Register)
 

* President; EXECUTIVE ORDERS; Government Agencies and Employees; Regulatory Reform Agenda; Enforcement Procedures [Publication Date: 1 March 2017.]
 
* Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 1 March 2017.]

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

(Source:
Commerce/BIS)

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OGS_a3
4. DHS/CBP Sends Out COAC Trade Efficiency Survey Invitation

(Source:
CSMS# 17-000109, 28 February 2017.)
 
Trade Policy Updates
 
In an effort to collect feedback from the Industry, please click on the following link to complete the 2017 Commercial Customs Operations Advisory Committee (COAC) survey. The survey will close on Friday, March 3, 2017 at 3:00 pm EST.
 
Information gathered in this survey will be used to obtain facilitation priorities by industry, assess the economic impact of specific trade initiatives, and assist in creating metrics that explain the key benefits of partnerships with U.S. Customs and Border Protection (CBP) and its Partner Government Agencies (PGA).
 
Office of Trade Relations
U.S. Customs and Border Protection

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OGS_a56.

Treasury/OFAC Posts Settlement Agreement with United Medical Instruments, Inc.

 
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $515,400 settlement with United Medical Instruments, Inc. (“UMI”), a company incorporated in California. UMI agreed to settle its potential civil liability for 56 alleged violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560. The alleged violations occurred between 2007 and 2009 when UMI made sales of medical imaging equipment with knowledge or reason to know that the goods were intended specifically for supply or re-exportation to buyers located in Iran, and when it facilitated the sales of medical imaging equipment from a company located in the United Arab Emirates to Iran.  OFAC determined that UMI did not voluntarily self-disclose the apparent violations to OFAC, and that the alleged violations constitute a non-egregious case.
 
For more information on this action, please visit the following
web notice.

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OGS_a67.

Australia Department of Foreign Affairs and Trade Expands Sanctions Against North Korea

 
Australian Minister for Foreign Affairs, The Hon Julie Bishop MP, is proposing new and expanded autonomous sanctions in response to North Korea’s reckless and dangerous nuclear and ballistic missile programs.
 
The Australian Government joined the international community in condemning North Korea’s latest ballistic missile test on 12 February 2017. It followed an unprecedented rate of provocations in 2016 including two nuclear tests and more than 20 ballistic missile tests.
 
The proposed new sanctions will target North Korea’s extractives industry and its vessels, building on the tough sanctions we already have in place.
 

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OGS_a78.

EU Publishes Press Releases on Restrictive Measures Concerning North Korea and Belarus

 
On February 27, the Council of the European Union has published the below two press releases concerning North Korea and Belarus:
 
 
(1) North Korea
 
On 27 February 2017, the Council adopted legal acts imposing further restrictive measures against the Democratic People’s Republic of Korea (DPRK).  These legal acts transpose the additional restrictive measures imposed by United Nations Security Council resolution (UNSCR) 2321 adopted on 30 November 2016.
 
The measures include restrictions on transactions in coal, iron and iron ore from the DPRK, and a ban on imports of copper, nickel, silver, zinc as well as statues from the DPRK. The measures also include a ban on export of new helicopters and vessels to the DPRK, the tightening of existing restrictions in the transport sector as well as in the financial sector, like a prohibition for a DPRK diplomatic mission and for a DPRK diplomat to have more than one bank account in the EU and restrictions on the use of real estate property by the DPRK in the EU.
 
The legal acts also provide for member states to take further measures to prevent specialised teaching or training of DPRK nationals in disciplines which would contribute to the DPRK’s nuclear or ballistic-missile programmes; as well as to suspend scientific and technical cooperation involving persons or groups officially sponsored by or representing the DPRK except for medical exchanges.
 
Like existing sanctions, these restrictive measures are designed in such a way as to avoid adverse humanitarian consequences for the country’s civilian population. They therefore include exemptions for livelihood and humanitarian purposes, where appropriate.
 
The UNSCR also added 11 persons and 10 entities to the list of those subject to asset freeze as well as travel restrictions for persons. This addition was transposed into EU law by a Council decision adopted on 8 December 2016.
 
EU restrictive measures against North Korea were introduced on 22 December 2006. The existing measures implement all UNSC resolutions adopted in response to the DPRK’s nuclear tests and launches using ballistic missile technology and include additional EU autonomous measures. They target North Korea’s nuclear weapons and nuclear programmes, other weapon of mass destruction and ballistic missile programmes. The measures include prohibitions on the export and import of arms, goods, services and technology that could contribute to these programmes.
 
 
(2) Belarus
 
On 27 February 2017, the Council decided to prolong the restrictive measures against Belarus for one year, until 28 February 2018. These measures include an arms embargo and an asset freeze and a travel ban against four people listed in connection with the unresolved disappearances of two opposition politicians, one businessman and one journalist in 1999 and in 2000. The Council also introduced an exemption to the restrictive measures to allow export of biathlon equipment to Belarus, which will remain subject to prior authorisation by national competent authorities on a case by case basis.
 
Tangible steps taken by Belarus to respect universal fundamental freedoms, rule of law and human rights will remain key for the shaping of the EU’s future policy towards Belarus, as stated in Council conclusions of 15 February 2016.
 
The restrictive measures against Belarus were first introduced in 2004 in response to the disappearance of the four persons referred to above The Council later adopted further restrictive measures against those involved in the violation of international electoral standards and international human rights law, as well as in the crackdown on civil society and democratic opposition.  The arms embargo was introduced in 2011. On 15 February 2016, the Council decided to lift the restrictive measures against 170 individuals and three companies, while maintaining the arms embargo and the sanctions against the four persons. This decision was taken while acknowledging the steps taken by Belarus that have contributed to improving EU-Belarus relations.
 
 
Press Contacts
 
Virginie Battu, 
Press officer
+32 22815316
+32 470182405

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OGS_a89.

EU Amends Restrictive Measures Against North Korea and Belarus

 
Regulations:
  –
Council Regulation (EU) 2017/330 of 27 February 2017 amending Regulation (EC) No 329/2007 concerning restrictive measures against the Democratic People’s Republic of Korea
  –
Council Regulation (EU) 2017/331 of 27 February 2017 amending Regulation (EC) No 765/2006 concerning restrictive measures in respect of Belarus
 
Decisions:
  –
Council Decision (CFSP) 2017/345 of 27 February 2017 amending Decision (CFSP) 2016/849 concerning restrictive measures against the Democratic People’s Republic of Korea
  –
Council Decision (CFSP) 2017/350 of 27 February 2017 amending Decision 2012/642/CFSP concerning restrictive measures against Belarus

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COMMNEWS

NWS_a110. The Guardian: “Man Charged in NSW Town of Young Over Alleged Missile Advice to ISIS”

(Source:
The Guardian) [Excerpts.]
 
A man arrested in the New South Wales, Australia, town of Young for allegedly seeking to advise ISIS on how to develop weapons systems has been charged with terrorism offences.
 
Haisem Zahab, 42, appeared in Young local court on Tuesday charged with two foreign incursion offences which carry a maximum penalty of life imprisonment. He was also charged with failing to comply with an order to assist in the access of data.
 

Zahab, an Australian-born citizen, did not apply for bail and it was formally refused. He was remanded in custody and is next due to appear in Parramatta local court on 8 March. … 

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NWS_a211
Reuters: “North Korea Spy Agency Runs Arms Operation Out of Malaysia, U.N. Says”

(Source:
Reuters) [Excerpts.] 
 
It is in Kuala Lumpur’s “Little India” neighborhood, behind an unmarked door on the second floor of a rundown building, where a military equipment company called Glocom says it has its office.
 
Glocom is a front company run by North Korean intelligence agents that sells battlefield radio equipment in violation of United Nations sanctions, according to a United Nations report submitted to the Security Council seen by Reuters.
 
Reuters found that Glocom advertises over 30 radio systems for “military and paramilitary” organizations on its Malaysian website, glocom.com.my.
 
Glocom’s Malaysian website, which was taken down late last year, listed the Little India address in its contacts section. No one answers the door there and the mailbox outside is stuffed with unopened letters.
 
In fact, no company by that name exists in Malaysia. But two Malaysian companies controlled by North Korean shareholders and directors registered Glocom’s website in 2009, according to website and company registration documents.
 
And it does have a business, the unreleased U.N. report says. Last July, an air shipment of North Korean military communications equipment, sent from China and bound for Eritrea, was intercepted in an unnamed country. The seized equipment included 45 boxes of battlefield radios and accessories labeled “Glocom”, short for Global Communications Co.
 
Glocom is controlled by the Reconnaissance General Bureau, the North Korean intelligence agency tasked with overseas operations and weapons procurement, the report says, citing undisclosed information it obtained.  
A spokesman for North Korea’s mission at the U.N. told Reuters he had no information about Glocom.
 
U.N. resolution 1874, adopted in 2009, expanded the arms embargo against North Korea to include military equipment and all “related materiel”.  
But implementation of the sanctions “remains insufficient and highly inconsistent” among member countries, the U.N. report says, and North Korea is using “evasion techniques that are increasing in scale, scope and sophistication.”
 
Malaysia is one of the few countries in the world which had strong ties with North Korea. Their citizens can travel to each other’s countries without visas. But those ties have begun to sour after North Korean leader Kim Jong Un’s estranged half-brother was murdered at Kuala Lumpur’s international airport on Feb 13.
 
Pan Systems
 
According to the “WHOIS” database, which discloses website ownership, Glocom.com.my was registered in 2009 by an entity called International Global System using the “Little India” address. A similarly named company, International Golden Services is listed as the contact point on Glocom’s website.
 
Glocom registered a new website, glocom-corp.com, in mid-December, this one showing no Malaysian contacts. Its most recent post is dated January, 2017 and advertises new products, including a remote control system for a precision-guided missile.
 
Glocom is operated by the Pyongyang branch of a Singapore-based company called Pan Systems, the U.N. report says, citing an invoice and other information it obtained.  
Louis Low, managing director of Pan Systems in Singapore said his company used to have an office in Pyongyang from 1996 but officially ended relations with North Korea in 2010 and was no longer in control of any business there.
 
  “They use (the) Pan Systems (name) and say it’s a foreign company, but they operate everything by themselves,” Low told Reuters referring to the North Koreans at the Pyongyang office.
 
Pan Systems Pyongyang utilized bank accounts, front companies and agents mostly based in China and Malaysia to buy components and sell completed radio systems, the U.N. report says. Pan Systems Pyongyang could not be reached for comment.
 
One of the directors of Pan Systems Pyongyang is Ryang Su Nyo. According to a source with direct knowledge of her background, Ryang reports to “Liaison Office 519”, a department in the Reconnaissance General Bureau. Ryang is also listed as a shareholder of International Global System, the company that registered Glocom’s website.
 
Reuters has not been able to contact Ryang. … 

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NWS_a312. ST&R Trade Report: “Federal Agencies Ordered to Create Regulatory Reform Teams”

 
President Trump issued Feb. 24 an executive order directing federal agencies to take additional actions as part of an effort to lower regulatory burdens on U.S. businesses. This order follows previous directives freezing the issuance of new regulations for 60 days and ordering agencies to eliminate two regulations for every new regulation proposed.
 
Under the new EO each federal agency will have to designate within 60 days a regulatory reform officer responsible for overseeing the implementation of regulatory reform initiatives and policies, including the termination of programs and activities that derive from or implement EOs, guidance documents, policy memoranda, rule interpretations, and similar documents that have been rescinded.
 
Each agency will also have to establish a regulatory reform task force to evaluate existing regulations (using input from significantly affected entities including small businesses and trade associations) and make recommendations on whether they should be repealed, replaced, or modified. At a minimum each task force must attempt to identify regulations that (1) eliminate jobs or inhibit job creation, (2) are outdated, unnecessary, or ineffective, (3) impose costs that exceed benefits, (4) create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies, (5) rely in whole or in part on data, information, or methods that are not publicly available or are insufficiently transparent, or (6) derive from or implement EOs or other presidential directives that have been subsequently rescinded or substantially modified. 
Each task force must report on its progress within 90 days and at regular intervals thereafter.

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COMMCOMMENTARY

COMM_a113. 
D. Kyle: “Freight Forwarding as Brokering Activity”

(Source:
Torres Law PLLC)
 
* Author: Dick Kyle, Esq., Torres Law PLLC.  Contact: 214-593-7120,
info@torrestradelaw.com.
 
This article briefly discusses the types of activities that trigger the brokering registration requirement under the International Traffic in Arms Regulations for freight forwarders.
 
In August 2013, the Directorate of Defense Trade Controls (“DDTC”) published an interim final rule that clarified some aspects of the requirement for broker registration under the International Traffic in Arms Regulations (“ITAR”). [FN/1] 
The rule provides that a broker is any person that engages in the business of “brokering activities” and is 1) a U.S. person, 2) a foreign person in the U.S., or 3) a foreign person outside of the U.S. under the control of a U.S. person, e.g., a foreign subsidiary controlled by a U.S. parent corporation. [FN/2] 
“Brokering activities” means “any action on behalf of another to facilitate the manufacture, export, permanent import, transfer, reexport, or retransfer of a U.S. or foreign defense article or defense service, regardless of its origin.” [FN/3] Examples of brokering activity include financing, insuring, transporting, or freight forwarding defense articles and defense services. 
Based on these examples of brokering activities, it would seem that a freight forwarder would be engaged in brokering activities and would therefore be required to register with DDTC. However, there is an exemption in the rule at § 129.3(b)(2) that states the registration requirement does not apply to “Persons exclusively in the business of financing, insuring, transporting, customs brokering, or freight forwarding, whose activities do not extend beyond financing, insuring, transporting, customs brokering, or freight forwarding.” The exemption states, as an example, that an air carrier or freight forwarder that merely transports or arranges transportation for defense articles is a person that would not have to register as a broker.
 
But what if a freight forwarder’s business extends beyond mere freight forwarding to include multiple activities such as insurance or customs brokering in addition to freight forwarding? The rule is less clear on this point.
 
A freight forwarder is able to engage in multiple activities, like insuring and transporting defense articles, as long as it does not go beyond the scope of those activities to the point of facilitating the manufacture, export, permanent import, reexport or retransfer of U.S. or foreign defense articles or services. Occasionally, freight forwarders engage in the types of activities that would trigger the registration requirement for forwarders. An example of such activity is a freight forwarder acting as an intermediary that brings two parties together in a sale transaction of ITAR-controlled defense articles. Another example would be if a freight forwarder or its employees are directly involved in arranging transactions involving defense articles or hold title to defense articles for financing purposes.
 
The determination of whether a freight forwarder has “gone beyond” exclusively engaging in the exempted activities of §129.3(b)(2) is highly fact-specific. The main focus is whether the activity constitutes the “facilitation” of a deal. It is rarely the case that a freight forwarder acts as the broker for an arms deal, so only a very small subset of freight forwarders need to register with DDTC as brokers of defense items. 
Finally, section 129.9 provides a method by which freight forwarders (and others) can obtain guidance as to whether certain activities undertaken in the performance of a contract will be considered brokering activities such that registration with the DDTC is required. [FN/4] To obtain this guidance from DDTC, a person must request it in writing, provide the name of the applicant and registration code and fully describe the contemplated activities. The applicant should also include a copy of any agreement or documentation between the requester and other persons who will be involved in the activity. DDTC is anticipating further revisions to the ITAR brokering regulations, possibly at some point in 2017, so continue to keep abreast of any changes in the ITAR over the next year.
——-
  [FN/1] Amendment to the ITAR: Registration and Licensing of Brokers, Brokering Activities, and Related Provisions, 78 Fed. Reg. 52,680 (Aug. 26, 2013) (to be codified at 22 CFR §129).
  [FN/2] 22 CFR §129.2(a).
  [FN/3] 22 CFR §129.2(b).
  [FN/4] 22 CFR §129.9(a).

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COMM_a0214G. Husisian & C.M. Swift: “New Administration Ramps up Enforcement Efforts”

 
* Authors: Gregory Husisian, Esq.,
ghusisian@foley.com, 202-945-6149; and Christopher Madison Swift, Esq.,
cswift@foley.com.  Both of Foley & Lardner LLP.
 
The Trump administration has vowed to bring jobs back to the states. One of the methods it appears it’ll take advantage of is continued, aggressive enforcement of U.S. laws governing exports and international conduct.
 
Up to now, the U.S. government has undertaken a strategy of aggressively enforcing U.S. laws governing extraterritorial conduct. These include the Foreign Corrupt Practices Act (
FCPA), economic sanctions largely administered by the Office of Foreign Assets Control (
OFAC), and export controls on U.S. goods. These laws underscore the premium that all multinational companies need to place on aggressively identifying and managing regulatory risk, particularly for their international operations.
 
The automotive sector is a high-profile industry, resulting in amplified risks and a higher level of special enforcement and regulatory attention. High-profile FCPA investigations involving prominent original equipment manufacturers (OEM), and special OFAC sanctions that target the automotive sector and any such operations in Iran, underscore the risks that automotive suppliers incur when selling or operating overseas. Similar developments are evident in the domestic domain as well, where the growing frequency and intensity of antitrust, False Claims Act, and government contract investigations present new challenges for manufacturers, suppliers, and service providers of all kinds.
 
U.S. laws governing exports and international conduct pose unique risks for the automotive sector. From the FCPA to ever-changing sanctions and export controls, companies involved in the automotive supply chain face an increasingly complex universe of requirements governing how and where they conduct business overseas. These regimes also shape business decisions at home, with the so-called “deemed export” rule compelling exclusively domestic companies to seek export licenses before disclosing controlled articles, data, software, and technology to their non-U.S. employees. Combined with disclosure requirements for listed companies and government contractors, the regulatory environment grows more complicated with each passing day.
 
Enforcement trends amplify these risks. In recent years, U.S. government agencies have targeted automotive and automotive supply chain companies under a number of different regulatory regimes. Notable examples include FCPA enforcement actions against AB Volvo, Daimler AG, Fiat, Iveco, Ingersoll-Rand, and Renault. The revelation of ongoing FCPA investigations within the industry, such as the disclosure by Delphi Corporation in its SEC filings that it is investigating potential FCPA violations in China, underscores that the regulatory risks posed by foreign operations are real and not going away any time soon. 
Sanctions enforcement is also on the rise, with Toyota Motor Credit Corporation and Volvo Construction Equipment North America both targeted by the U.S. Treasury Department’s Office of Foreign Assets Control. Automotive companies like GM-Daewoo have even faced government enforcement actions in relatively obscure areas like anti-boycott violations – a little-known legal regime that has both export and tax implications.
 
Faced with these challenges, leading companies make sure to get ahead of the curve and be proactive. This means identifying and addressing the risks that are likely to arise based on the nature of their business, the places where they conduct business, and the customers they serve. It also means evaluating the degree to which foreign parties – whether subsidiaries, joint ventures, or even contractors – engage in activities that expose their U.S. counterparts to civil and criminal liability. The same principles apply in the domestic compliance context. 
Suppliers need to understand their areas of risk and rigorously monitor and enforce their compliance policies, procedures, and codes of conduct. Conducting periodic internal reviews, reviewing and updating written policies and procedures, and updating and enhancing training programs are all components of a robust compliance program. Encouraging your employees to report any improper, unethical, or illegal conduct is critical to uncovering any potential fraud within your organization. Clearly delineating responsibility for compliance with various policies and internal controls ensures accountability.

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COMM_a315. R. Stohl: “Trump’s Opportunity to Support Transparency, Accountability on the Conventional Arms Trade”

(Source:
The Stimson Center
)

* Author: Rachel Stohl, Senior Associate and Director of the Conventional Defense Program at the Stimson Center,
rstohl@stimson.org, +1-202-464-2679.
 
The Challenge
 
As President Trump takes office, there has been a renewed focus on nuclear weapons – particularly with regard to their potential use and modernization of the U.S. nuclear triad. However, Trump will also inherit challenges with regard to numerous conventional conflicts around the world – most notably in the Middle East, Africa, and Asia. In the coming months, President Trump will have to determine the level of U.S. engagement in existing and emerging crises. Thus, in short order the Trump administration will have to determine its own views and policies concerning conventional arms transfers.
 
The Context
 
Trump officials may look to the Obama administration’s record on conventional arms issues to inform their own policies. Arms sales were increasingly used as a tool of the Obama administration’s foreign policy, where U.S. weapons were sent to countries to support allies or influence behavior (though there is clear academic work indicating that arms sales are rarely effective in changing recipient government behavior). Indeed, the Obama administration completed the highest value of Foreign Military Sales agreements since World War II. From 2009-2015, the United States made approximately $245 billion worth of arms agreements. That is more than double the amount of agreements made by the George W. Bush administration, which approved approximately $126.5 billion in arms agreements throughout its tenure. The volume of arms sales was not the only noteworthy aspect of the Obama administration’s policies and practices, but also the continued provision of weapons to recipients with questionable human rights records and poor governance, such as Saudi Arabia, Egypt, and Bahrain.
 
The Obama administration also completed the first review of U.S. arms export policy in January 2014 – the first time such a review had taken place in 19 years. Presidential Policy Directive 27 (PPD-27) articulates U.S. conventional arms transfer policy goals, outlines the process and criteria that guide U.S. arms transfer decisions, clarifies the ways in which U.S. policy on conventional arms transfers supports arms control and arms transfer restraint, and explains how the United States supports responsible arms transfers around the globe. The Obama administration also took on reform of the export control process, reviewing the contents of the U.S. Munitions List, moving items to the Commerce Control List, and restructuring some of the bureaucratic machinery surrounding arms sales, amongst other reforms.
 
So, what will the conventional arms landscape look like under the Trump administration? Thus far, it is unclear what Trump’s view towards arms sales may be, as little was articulated on the subject during the campaign or transition. However, we can draw some prognostications based on Trump’s personal and his appointees’ attitudes and with regard to relations with allies and national security priorities.
 
For example, it is unlikely that President Trump will call for a review and revamping of the U.S. Conventional Arms Transfer Policy. It took 19 years to update the policy, and the new policy reflects the current security environment – with a focus on counterterrorism. Indeed, the policy provides enough flexibility to support Trump’s economically focused interests, and given that Trump has expressed other, more pressing priorities, the administration likely will not find it necessary to spend time and resources on a comprehensive review. However, Trump may move to streamline some of the bureaucracy responsible for arms transfer decisions and eliminate key offices or positions within the State Department.
 
Additionally, given Trump’s views on job creation and the importance of supporting U.S. industry, it is likely that the new administration will continue the practice of sending arms to U.S. allies to support U.S. interests. But, he also could make such sales contingent on certain behaviors or actions and challenge the reliability of the United States as a supplier. Some U.S. customers are concerned about a transactional approach to arms sales under the Trump administration, which could undermine defense relationships and reliability. Signs also point to the continuation of the export control reform process under Trump, particularly with regard to Foreign Military Sales and the International Traffic in Arms Regulations (ITAR). This could be a positive sign for industry, which has favored a more streamlined and predictable approach to arms sales, though critics argue current export control reform efforts have undermined oversight, transparency, and accountability.
 
Overall, in the short-term, arms sales are likely to continue at the high levels seen in the Obama administration. This could be particularly true with regard to countries in the Middle East, which have historically been major purchasers of U.S. weapons. Indeed, the Obama administration made over $115 billion worth of arms sales agreements to Saudi Arabia alone, as part of 42 separate deals, since 2009, which according to expert William Hartung is “more than any U.S. administration in the history of the U.S.-Saudi relationship.” One could also argue U.S. arms sales could go down, as Trump has repeatedly expressed disinterest in getting involved in Middle East affairs, and his call to governments to take the lead in attending to their own security concerns, and not always relying on the United States. However, on the flipside those same words could indicate a possible increase in U.S. arms sales, as Trump could trade the provision of weapons for minimal political engagement.
 
Based on Trump’s past statements, including support for known dictators and human rights abusers such as Russia’s Vladmir Putin and the Philippines’ Rodrigo Duterte, as well as Secretary of State Rex Tillerson’s testimony during his confirmation hearing, human rights violations are unlikely to be major criteria in determining arms sales authorizations. Allowing weapons to flow unimpeded to human rights abusers opens the door for U.S. arms sales to human rights abusing governments in the Middle East, Latin America and Asia, and allows the United States to compete with Russia and Iran for arms sales to the world’s worst dictators. The Trump administration will have to decide if that is the legacy it wants to leave at the end of its term.
 
Pragmatic Steps
 
The Obama administration had a proven track record of using conventional arms sales to support national security and foreign policy priorities, including counterterrorism interests. The Trump administration will need to decide to what extent it will use conventional arms sales to achieve its objectives. During its first 100 days in office, the Trump administration would do well to take the following steps on the conventional arms trade:
 
  (1) Review all pending and future arms sales to consider potential human rights risks. Although considering the human rights impact of U.S. arms sales is mandated by U.S. law, human rights often take a back seat to other policy considerations when determining whether to authorize an arms sale. Indeed current Chair of the Senate Foreign Relations Committee, Senator Bob Corker, announced recently that human rights concerns do not belong in arms transfer decisions and could be dealt with in other ways. However, conditioning arms sales to ensure that human rights are protected helps uphold U.S. foreign policy values, protects U.S. industry from complicity in human rights abuses, and ultimately serves key strategic interests.
 
  (2) Consider long(er)-term regional/international stability implications of potential arms sales in addition to short-term economic benefits. President Trump has thus far demonstrated and economic cost/benefit analysis to policy decisions. However, arms sales, while potentially providing an economic benefit in the short-term, can result in longer-term costs in terms of risks to U.S. soldiers on the ground – through blowblack – as well as risks in exacerbating and prolonging armed conflicts, and potentially contributing to a need for U.S. intervention. It is wise to look at the full potential impact of a U.S. arm sale, ensuring it is fully compliant with existing U.S. policy and regulations – and makes good business sense.
 
  (3) Support transparency and accountability of global arms transfers. Although the United States has a robust arms transfer system, including public reporting of U.S. arms sales and security assistance, other countries are less transparent. The United States should be concerned with the global trends in the arms trade – to identify potentially destabilizing build-ups or increased transfers to/from a particular country and/or region. The Trump administration cannot simply take a transactional approach to arms sales, but rather must examine arms sales in context. To acquire this global picture, the United States must ensure that it provides information and data to global arms transfer transparency instruments and encourage other governments to participate as well.
 
— Note: This analysis is part of 2017 Presidential Inbox – an ongoing Stimson Center series examining the major global challenges and opportunities the Trump administration faces during its first 100 days in office. Click
here to read the full series.

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COMM_a416. Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update; available by subscription from
gstanley@glstrade.com)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
 
The term “subject to the EAR” should not be confused with licensing or other requirements imposed in other parts of the EAR. Just because an item or activity is subject to the EAR does not mean that a license or other requirement automatically applies. A license or other requirement applies only in those cases where other parts of the EAR impose a licensing or other requirement on such items or activities.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a117. ECTI Presents United States Export Control (EAR/OFAC/ITAR) Seminar in London, 15-18 May

(Source: Jill Kincaid; jill@learnexportcompliance.com)

* What: United States Export Control (EAR/OFAC/ITAR) Seminar Series in London, United Kingdom (for EU, UK and other non-US Companies)
* When: EAR/OFAC Seminar: May 15-16, 2017; ITAR Seminar: May 17-18, 2017
* Where: Hilton London Olympia, 380 Kensington High Street, London W14 8NL, United Kingdom
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker Panel: Scott Gearity, Greg Creeser, Stephan Müller and Anne Borkavic
* Register: Here, or Jessica Lemon, 540-433-3977, jessica@learnexportcompliance.com

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ENEDITOR’S NOTES

(Source: Editor)

*
Bernadette Peters (born Bernadette Lazzara; 28 Feb 1948, is an American actress, singer and children’s book author. Over the course of a career that has spanned five decades, she has starred in musical theater, films and television, as well as performing in solo concerts and recordings.)

  – “You’ve gotta be original, because if you’re like someone else, what do they need you for?”

 

*
Montaigne (Michel Eyquem de Montaigne, 28 Feb 1533 – 13 Sep 1592, was one of the most significant philosophers of the French Renaissance, known for popularizing the essay as a literary genre. His work is noted for its merging of casual anecdotes and autobiography with serious intellectual insight; his massive volume
Essais (translated literally as ”
Attempts” or ”
Trials“) contains some of the most influential essays ever written.)

  – “Don’t discuss yourself, for you are bound to lose; if you belittle yourself, you are believed; if you praise yourself, you are disbelieved.” 

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EN_a219
. 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: 24 Feb 2017: 82 FR 11505-11506: Temporary General License: Extension of Validity

  
*
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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