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17-0315 Wednesday “The Daily Bugle”

17-0315 Wednesday “Daily Bugle”

Wednesday, 15 March 2017

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

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: Access USA Shipping, LLC of Sarasota, FL, to Pay $27,000,000 to Settle Alleged Export Violations 
  3. Commerce/BIS: Eyad Farah of Fort Worth, TX, Denied Export Privileges for Five Years 
  4. DHS/CBP Announces Ace Certification Outage on 15 Mar 
  5. DHS/CBP Announces ACE PRODUCTION Cargo Release & Entry Summary Deployment on 16 Mar 
  6. DHS/CBP Updates PGA Filing Status Document 
  7. DoD/DSCA Posts SAMM and Policy Memoranda, Week 12-18 Mar 
  8. Justice: “Israeli Executive Pleads Guilty to Defrauding the Foreign Military Financing Program” 
  9. State/DDTC: (No new postings.) 
  10. EU Amends Annex to the Agreement on Trade in Civil Aircraft 
  11. EU Amends Directive EC 2009/43/EC on Intra-EU-Transfers of Defense-Related Products 
  12. UK/DIT ECO Posts Notice on Changes to Export Control Legislation
  13. UNODA and CITS Publish New “1540 Compass” Issue
  1. 360 Law: “DC Circuit Says Firm Faces No Threat from ITAR Broker Rule” 
  2. ST&R Trade Report: “Comprehensive Plan for Reorganizing Executive Branch Unveiled” 
  1. Global Trade News: “Weise Wednesday: What Are the Key Areas of a Focused Assessment?” 
  2. M. Volkov: “Managing Your Ethical Culture: Measure, Intervene, and Remediate” 
  3. K. Krebel: “Creating an Anti-Corruption Program” 
  4. S. Halford: “Export Controls in Ireland” 
  5. Gary Stanley’s ECR Tip of the Day 
  1. ECS Presents ITAR/EAR Critical Compliance on 28-29 Mar in Scottsdale AZ 
  2. ECTI Presents Worldwide Sanctions and Export Control Update: Russia, Iran, Cuba and More Webinar on 13 Apr 
  1. Bob Vander Lugt Leaves NGC, forms Little, Rothwell & Vander Lugt, PLLC 
  1. Oops! Paul R. Ehrlich is Alive! 
  2. Bartlett’s Unfamiliar Quotations 
  3. 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 (7 Mar 2017), ITAR (11 Jan 2017) 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1


[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

OGS_a11. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce; Bureau of Industry and Security; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals; Five-Year Records Retention Requirement for Export Transactions and Boycott Actions [Publication Date: 16 March 2017.]

* Commerce; International Trade Administration; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals; Request for Duty-Free Entry of Scientific Instruments or Apparatus [Publication Date: 16 March 2017.]

* Justice; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:Annual Firearms Manufacturing and Exportation Report [Publication Date: 16 March 2017.]

* President; EXECUTIVE ORDERS; Government Agencies and Employees: Executive Branch Reorganization; Comprehensive Plan (EO 13781) [Publication Date: 16 March 2017.]

* * * * * * * * * * * * * * * * * * * *

(Source:
Commerce/BIS) [Excerpts.] 
 
* Respondent: Access USA Shipping, LLC, Sarasota, FL
* Charges:
  – Charges 1-129: 15 C.F.R. §764.2(h) – Evasion:
    On one hundred twenty-nine (129) occasions beginning on or about 21 April 2011, and continuing through on or about 7 January 2013, Access USA Shipping, LLC (“Access”) engaged in transactions or took other actions to evade the Export Administration Regulations (“EAR” or “Regulations”). Specifically, Access took actions that enabled foreign customers to purchase items subject to the EAR through Access without U.S. merchants knowing the items were intended for export and that were designed at least in part to avoid detection by the U.S. Government and law enforcement. These actions included mis-describing and undervaluing the items in false export control documents; undervaluing the items improperly to avoid the filing of the required export control documents; allowing foreign customers to place orders through Access employees to avoid export scrutiny; destroying or altering export control documents; and failing to maintain records related to export transactions. …
  – Charges 130-146: 15 C.F.R. §764.2(a) – Engaging in Conduct Prohibited by the Regulations by Exporting or Attempting to Export Crime Control Items without the Required License:
    On seventeen (17) occasions between on or about 23 August 2011, and or about 24 January 2013, Access engaged in conduct prohibited by the EAR when it exported or attempted to export items classified under Export Control Classification Number (“ECCN”) 0A987 and controlled for Crime Control reasons without the BIS export licenses required pursuant to Section 742.7 of the EAR. The destinations included Argentina, Austria, Hong Kong, Indonesia, Libya, South Africa, and Sweden. …
  – Charges 147-150: 15 C.F.R. §764.2(a) – Engaging in Conduct Prohibited by the Regulations by Exporting or Attempting To Export Items Subject to the Regulations to a Listed Entity Without the Required License:
    On four occasions between on or about 17 October 2012, and on or about 15 February 2013, Access engaged in conduct prohibited by the EAR when it exported or attempted to export items subject to the Regulations from the United States to Transsphere Oy in Finland without the BIS license required pursuant to Section 744.11 and Supplement No. 4 to Part 744 of the Regulations. The items were classified under ECCN 5A991 and controlled for anti-terrorism reasons, or were designated as EAR99. Transsphere Oy is a Finish entity listed on the Entity List …
* Penalty: Civil penalty of $27,000,000, of which $17,000,000 shall be suspended for two years from the date of this Order, and waived provided that during this two year payment probationary period, Access has committed no violations of the Export Administration Act, or any regulation, order, license or authorization issues thereunto, has made full and timely payment of the $10,000,000, and has complied with all the other terms of its Settlement Agreement, and has committed no violation of the Non-Prosecution Agreement that Access has entered with U.S. Attorney’s Office for the Middle District of Florida
* Debarred: Not if penalty is paid as agreed, Access has complied with all the other terms of its Settlement Agreement, and has not failed to comply with the terms of the Non-Prosecution Agreement.
* Date of Order: 9 February 2017

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(Source:
Commerce/BIS) [Excerpts.] 
 
* Respondent: Eyad Farah, Fort Worth, TX
* Charges: On December 15, 2015, in the U.S. District Court, Middle District of Florida, Eyad Farah (“Farah”), was convicted of violating Section 38 of the Arms Export Control Act (22 U.S.C. § 2778 (2012)). Specifically, Farah knowingly and willfully attempted to export from the United States a defense article on the U.S. Munitions List without having first obtained a license from the Department of State or written prior authorization for such export. Farah was sentenced to 37 months in prison, with credit for time served, 36 months of supervised release, and a $300 assessment.
* Debarred: Farah is denied export privileges for a period of five years from the date of his conviction, until 15 December 2020. It is also decided to revoke all licenses issued pursuant to the Export Administration Act or Export Administration Regulations in which Farah had an interest at the time of his conviction.
* Date of Order: 13 March 2017.

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(Source:
CSMS# 17-000141, 15 March 2017.)
 
New ACE Programming
 
Please be advised that there will be an ACE CERTIFICATION Outage Wednesday evening, March 15, 2017 from 1700 ET to 2000 ET.
 
Infrastructure maintenance activities for the following stories will take place during this time:
 
  – ACE Air Import and Export Manifest
 
CAOM-9385,10186: For users of both Air Import and Air Export Manifest, EDI message responses will be sent to the appropriate import or export message queues, respectively, on the trade side.
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(Source:
CSMS# 17-000144, 15 March 2017.)
 
Please be advised that there will be an ACE PRODUCTION deployment of ACE Cargo Release and ACE Entry Summary on Thursday morning, March 16, 2017, from 0500 – 0700 ET, which will impact ACE Cargo Release and ACE Entry Summary processing.
 
To be deployed:
 
Entry Summary EDI Processing
 
  – CES-6317: Issue with validation “QUANTITY CONTAINS NON-NUMERICS” on AE 50 record. When on the 50-rec if the UOM2/3 is filled in but QTY2/3 is blank, or vice versa, an E50 ACE System Failure (ASF) error code was being generated. This condition will no longer generate the E50 ASF and will result in the entry summary processing successfully.
 
  – CES-6921: Issue with “REMOTE PREPARER NOT AUTHRZD FOR PORT”. A recurring issue in Prod, users received a X31-REMOTE PREPARER NOT AUTHRZD FOR PORT error (from validation of the ABI Message Header) and when resubmitted a few minutes later, with no data modification, the AE was successful. This has been fixed.
 
  – CES-6321: The E50 ACE System Failure (ASF) error code will no longer be generated upon a missing constraint validation on an Entry Summary, such as a blank/missing 30-record. Processing will continue, validating for further error conditions or message acceptance to be generated for the AX response message.
 
  – CES-6862: Entry Summary Validation (ESV): HTS not found for Line Action Date Exception. An E42 ACE System Failure (ASF) error code was generated if ESV finds no HTS number for a given action date. Now a meaningful error message will be returned instead.
 
ACE Cargo Release
 
  – SE-8619: Store bill number with upper case even if submitted in lower case (lower case bill numbers caused processing inconsistencies)
 
  – SE-8418: Ticket# 3100535 – Split Bills – Certain scenarios where a split bill is deleted and re-added as non-split caused ACE Cargo Release to process the bill as if still split, sometimes causing “No Bill Match” errors on the SO50 record. Fix to allow entries to be associated to most recent non split bills transmitted in SE.
  
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(Source:
CSMS# 17-000142, 15 March 2017.)
 
An updated version of the PGA Filing Status document has been posted to
 
cbp.gov/ace. Changes have been made to clarify where PGA data is available to be filed through ACE.
  

The document may be accessed through
 
https://www.cbp.gov/ace-pga

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  – This policy memorandum updates the Security Assistance Management Manual (SAMM) by identifying the procedures to be followed upon receipt of Letters of Request (LORs) and requests for information for defense articles, defense services, and/or training that are managed by the United States Special Operation Command (USSOCOM) (i.e., Special Operations-Peculiar (SO-P) defense items). This memo updates Chapter 5 – FMS Case Development by adding section C5.1.3.4. LORs that include Defense Articles, Defense Services, and/or Training, managed by United States Special Operations Command (USSOCOM), i.e., (Special Operations-Peculiar (SO-P) Defense Items).
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OGS_a88. Justice: “Israeli Executive Pleads Guilty to Defrauding the Foreign Military Financing Program”
(Source: Justice) [Excerpts.]
 
A former executive of an Israel-based defense contractor pleaded guilty for his role in multiple schemes to defraud a multi-billion dollar United States foreign aid program, the Department of Justice announced today.
 
Yuval Marshak pleaded guilty to one count of mail fraud, two counts of wire fraud and one count of major fraud against the United States in U.S. District Court for the District of Connecticut today. He was previously charged in an indictment returned by a federal grand jury in the District of Connecticut on Jan. 21, 2016, and then extradited from Bulgaria in October.
 
According to court documents, Marshak carried out three separate schemes between 2009 and 2013 to defraud the Foreign Military Financing program (FMF). Marshak and others falsified bid documents to make it appear that certain FMF contracts had been competitively bid when they had not. Marshak further caused false certifications to be made to the U.S. Department of Defense (DoD) stating that no commissions were being paid and no non-U.S. content was used in these contracts, when, in fact, Marshak had arranged to receive commissions and to have services performed outside the United States, all in violation of the DoD’s rules and regulations. Marshak arranged for these undisclosed commission payments to be made to a Connecticut-based company that was owned by a close relative to disguise the true nature and destination of these payments. …
 
The United States spends billions of dollars each year through the FMF program to provide foreign governments, including Israel, with money which must be used to purchase American-made military goods and services. The rules and regulations of the FMF program require the disclosure of and approval for any FMF-funded commissions and require that all goods and services be of United States origin to qualify for FMF funding. These same rules also strongly encourage the use of competitive bidding in the award of all FMF contracts. American vendors who receive FMF funded contracts are required to certify their compliance with these regulations to the DoD. …

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OGS_a99. State/DDTC: (No new postings.)
(Source: State/DDTC)

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OGS_a1010. EU Amends Annex to the Agreement on Trade in Civil Aircraft
 
International Agreements
  – Council Decision (EU) 2017/446 of 3 March 2017 on the conclusion on behalf of the European Union of the Protocol (2015) amending the Annex to the Agreement on Trade in Civil Aircraft.
  – Protocol (2015) amending the Annex to the Agreement on Trade in Civil Aircraft.

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OGS_a1111. EU Amends Directive EC 2009/43/EC on Intra-EU-Transfers of Defense-Related Products

 
Directives
  – Commission Directive (EU) 2017/433 of 7 March 2017 amending Directive 2009/43/EC of the European Parliament and of the Council as regards the list of defense-related products [FN/1]
 
——-
  [FN/1] Text with European Economic Area relevance.

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OGS_a1212. UK/DIT ECO Posts Notice on Changes to Export Control Legislation
(Source:
UK/DIT ECO
)
 
On 23 November 2016 the European Union adopted new rules concerning goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment. The Department for International Trade (Export Control Organisation) has amended the Export Control Order 2008 to reflect these changes.
 
The list of these goods was most recently amended in July 2014. Read the current versions of Annex II and Annex III.
 
The newly revised EU rules are contained in regulation (EU) 2016/2134 of the European Parliament and of the council, amending council regulation (EU) No. 1236/2005 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment.
 
Changes to UK legislation are contained in the Export Control (Amendment)(No.2) Order 2017 (S.I. 2017/193) which will come into force on 17 March 2017.
 
As a result of these changes there are new prohibitions on:
 
  – transit within the customs territory of the EU of Annex II goods and, in certain circumstances, Annex III and Annex IIIa goods
  – the provision of brokering services related to Annex II goods
  – the provision of training related to Annex II goods
  – the display or offering for sale of any Annex II goods at an exhibition or fair taking place within the EU (unless such – display/sale does not promote the sale or supply of the goods to a person or entity in a third country)
  – the sale or purchase of advertising time or space for Annex II goods
 
The new legislation also allows for:
 
  – more flexible licensing of Annex III goods as they may have legitimate uses
  – more flexible licensing of drugs primarily used in medicines but which are controlled because they may potentially be used for execution by lethal injection; such goods were previously listed under Annex III and are now listed in a separate Annex IIIa
  – a new general export authorisation (or ‘EU GEA’), which is a pre-published form of licence, to all destinations that have prohibited capital punishment. This licence is contained in the new Annex IIIb of the regulation
  – the option to grant a ‘global authorisation’ for repeat exports of Annex III and Annex IIIa goods (which are referred to as open individual export licences (OIELs) under the UK’s export control procedures)

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OGS_a1313. UNODA and CITS Publish New “1540 Compass” Issue

(Source: UNODA)
 
The UN Office for Disarmament Affairs (UNODA), in cooperation with the Center for International Trade and Security (CITS) of the University of Georgia, USA, has published the latest issue (Nr. 11) of their electronic journal “The 1540 Compass.” Launched in 2012, The 1540 Compass is an interactive online publication for Member States, IROs, as well as civil society and the private sector to share practical implementation information and effective practices in the context of resolution 1540 (2004).
 
Note: In resolution 1540 (2004), the Security Council decided that all States shall refrain from providing any form of support to non-State actors that attempt to develop, acquire, manufacture, possess, transport, transfer or use nuclear, chemical or biological weapons and their means of delivery, in particular for terrorist purposes. The resolution requires all States to adopt and enforce appropriate laws to this effect as well as other effective measures to prevent the proliferation of these weapons and their means of delivery to non-State actors, in particular for terrorist purposes.
 
  – The latest issue of “The 1540 Compass” is available here.

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NWSNEWS

NWS_a114
. 360 Law: “DC Circuit Says Firm Faces No Threat from ITAR Broker Rule”

(Source:
360 Law) [Excerpts; subscription required.]
 
The D.C. Circuit on Tuesday rejected a law firm’s challenge to a State Department rule on arms export “brokering activities” that the firm claimed could wrongly force it to reveal confidential client information, saying there was no credible threat of the rule being enforced against the firm.
 
Between the text of a 2013 U.S. Department of State rule on “brokering activities” under the International Traffic in Arms Regulations and subsequent representations made by the agency, it was clear that law firm Matthew A. Goldstein PLLC would not …
 
  – The court case is available here.

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President Trump issued March 13 an executive order intended to improve the efficiency, effectiveness, and accountability of the executive branch by directing the Office of Management and Budget to propose a plan to reorganize governmental functions and eliminate unnecessary agencies, components of agency, and agency programs.
 
According to the EO, agency heads have until around mid-September to submit to OMB a proposed plan to reorganize their agency, if appropriate, in order to improve its efficiency, effectiveness, and accountability. OMB will also publish a notice in the Federal Register seeking public input regarding improvements in the organization and functioning of the executive branch.
 
A proposed plan will have to be submitted to the president by around this time next year. Such a plan must include, as appropriate, recommendations to eliminate unnecessary agencies, components of agencies, and agency programs, and to merge functions, as well as recommendations for any legislation or administrative measures necessary to achieve the proposed reorganization.
 
In developing the plan OMB will have to consider the following factors, in addition to any other relevant factors:
 
  – Whether some or all of the functions of an agency, a component, or a program are appropriate for the federal government or would be better left to state or local governments, or to the private sector through free enterprise;
  – Whether some or all of the functions of an agency, a component, or a program are redundant, including with those of another agency, component, or program;
  – Whether certain administrative capabilities necessary for operating an agency, a component, or a program are redundant with those of another agency, component, or program;
  – Whether the costs of continuing to operate an agency, a component, or a program are justified by the public benefits it provides; and
  – The costs of shutting down or merging agencies, components, or programs, including the costs of addressing the equities of affected agency staff.
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COMMCOMMENTARY

COMM_a116
. Global Trade News: “Weise Wednesday: What Are the Key Areas of a Focused Assessment?”

 
Welcome to Weise Wednesday! Every week we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. Please send questions to AskGeorge@IntegrationPoint.com.
 
Q:  In a Focused Assessment, what are the key areas on which CBP typically focuses its attention?
A:  In a Focused Assessment, CBP is conducting a risk analysis to ensure that the importer has sufficient processes and internal control measures in place to achieve compliance with applicable trade rules and regulations.  Although each Focused Assessment is tailored to the particular circumstances of the importer being audited –  in virtually all cases, the importer should be prepared to respond to the following inquiries.
 
What CBP will typically ask in a Focused Assessment?
 
  – Are there documented internal controls in place to ensure that merchandise is properly classified and valued?
  – Are there procedures to properly validate duty preference claims?
  – Are your written policies and procedures approved by management?
  – Are written policies and procedures reviewed and updated periodically?
  – Are your internal controls relating to valuation tested, and are the results documented?
  – When weaknesses are found, did you implement corrective actions?
  – Is there adequate interdepartmental communication?
  – Are there procedures to ensure pro forma invoices are reconciled?
  – Are there procedures to link specific purchase orders, invoices, and payment records to CBP entry numbers?
 
Potential outcomes of a Focused Assessment
 
If the importer can demonstrate to CBP that it has processes and procedures in place to respond affirmatively to all of these questions, there is a strong likelihood that the Focused Assessment will go well, and CBP will determine the risk of noncompliance to be “acceptable.”   Under such circumstances, no follow-up action is likely on the part of CBP, and the importer is given the opportunity to transition to CBP’s Importer Self-Assessment (ISA) program.
 
On the other hand, if significant problems are found in these areas, CBP is likely to determine that the importer poses an “unacceptable” risk of noncompliance. My next “Weise Wednesday” will provide more detail on the consequences an importer faces when CBP determines their risk of noncompliance is “unacceptable.”
 
Stay tuned!

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COMM_a217
. M. Volkov: “Managing Your Ethical Culture: Measure, Intervene, and Remediate”

(Source:
Volkov Law Group Blog. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
In the wake of ever-constant business scandals (e.g., ZTE, VW, Takata, Odebrecht), chief compliance officers (“CCOs”) must refresh their approach and strategy. Everyone agrees, or at least I think they should agree, that a company’s most effective control is its culture.
 
For CCOs, selling the board and senior executives on this point should not be very hard. The research and common sense often come together to the same conclusion – an ethical company is more profitable in the long run. Just start with some basic “facts” (not alternative facts but research driven ones) – employees who work at ethical companies are more productive and less likely to leave the company; misconduct rates among employees are lower at ethically-driven companies; and employee reporting rates are higher at companies committed to a culture of ethics.
 
With these basic building blocks, a company with an ethical culture has a competitive advantage in the marketplace. Consumers, competitors, vendors, their communities and government institutions each have favorable views of the company, its leadership and its overall contribution to the economy and the community.
 
LRN Research has put out some brilliant research and analysis in this area. Here are links to two important papers released by LRN. (Here and Here). LRN’s analysis reveals the importance of culture and values-based principles as guideposts for corporate compliance programs and overall performance. Its work is a must-read on these important topics.
 
CCOs must take a new approach – or at least adjust their existing approach. All too often, I see CCOs who attend to program elements, making sure that each is followed and working properly. Not enough attention is being paid to the most important control – a company’s culture.
 
Culture is not so tangible or easily defined, but it can be measured, monitored and remediated. CCOs are very familiar with these latter concepts. CCOs and human Resource professionals know how to survey employees. They typically will coordinate an employee survey every two years to measure employee morale and overall culture. While those efforts are laudable, there needs to be a new approach taken that reflects a greater focus on the importance of culture.
 
To that end, I have often encouraged CCOs to consider conducting narrowly tailored culture surveys that may be restricted to certain regions, countries or areas where compliance concerns may be on the rise. Alternatively, there is no reason to require surveys of all employees, when targeted surveys could be designed to middle managers and their abilities to communicate the company’s cultural message, listen and respond to employee concerns, and coordinate their efforts with compliance officers.
 
I know such an approach requires companies to break out into a new mold where traditional surveys are replaced with a more comprehensive approach that includes not only targeted surveys, but conducting focus groups, interviews and other ways to encourage employee communications about company values, culture and overall morale.
 
Once a company collects more culture data (e.g., surveys, focus groups, interviews), the company has the ability to measure the results over time, monitor the results and design remediation strategies to address weaknesses in its culture. This is not the most exact science but CCOs should start somewhere. CCOs should measure the impact of their current strategies, such as CEO statements, CEO messages, newsletters and other attempts to promote corporate culture. It is not enough to videotape a CEO speaking generally about the company’s culture and commitment to values-based principles – more must be done to establish and promote a real commitment to a culture of ethics.
 

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COMM_a318
. K. Krebel: “Creating an Anti-Corruption Program”

 
* Author: Katherine Krebel, Vice President, Corporate Counsel, Leonardo DRS Inc.
 
Corruption-based allegations can be crippling for any company. Compliance in this area of the law is of particular importance to companies who regularly use international consultants and sales representatives, commonly referred to as “intermediaries,” to develop business opportunities.
 
Legal and compliance professionals across the world recognize this as a significant area of risk, and the normal course of action is to develop a robust infrastructure around vetting foreign intermediaries.
 
Several of the largest enforcement actions of all time involve the use of third party intermediaries, including Justice Department and Securities and Exchange Commission settlements with Siemens for $800 million in 2008, BAE for $400 million in 2010, Total SA for $245 million in 2013, and Alstom S.A. for $772 million in 2014. The danger has only increased as a result of the declining U.S. defense budget which has resulted in industry focus on growing international business.
 
Any number of sources can be found to provide guidance on developing a strong risk-based intermediary compliance program. In particular, the 2012 Resource Guide to the U.S. Foreign Corrupt Practice Act issued by the Justice Department’s criminal division and the SEC’s enforcement division, which includes a section titled “Hallmarks of an Effective Compliance Program,” and can help businesses understand the need for a risk-based program.
 
Other sources for best practices and benchmarking can be found by referencing the U.S. Sentencing Guidelines, which contain a section titled “Effective Compliance and Ethics Programs,” and the Organization for Economic Co-operation and Development’s “Good Practice Guidance on Internal Controls, Ethics and Compliance.” The International Organization for Standardization has released ISO 37001 covering anti-bribery management systems, which may be a good place to start for businesses who are in the initial stages of program development, and where additional best practices can be added over time. There are a variety of other sources for guidance and resource tools related to foreign law, policy development, monitoring and evaluation as well as training.
 
While a compliance infrastructure related to intermediary vetting is critical to the success of any international program, if inefficient, it can conflict with the constant need to stay agile and competitive. Compliance professionals face the challenge of reacting to this dichotomy by coming up with thoughtful and effective ways to strike the correct balance and streamline infrastructure where possible. The goal is to build a solid anti-corruption program that eliminates material risk, yet avoids unnecessary resource drain.
 
Leonardo DRS Inc. developed a program which leverages efficiencies created through an electronic data collection and management platform, along with a process which creates a touch point for executive engagement on the front end of each proposed intermediary opportunity. Its various diligence requirements are based on a number of risk factors, which include the amount of compensation being proposed, the level of interaction with foreign government officials and the perceived corruption within the contemplated territory.
 
In order to achieve a competitive posture and avoid wasted effort, it is critical that upper and executive level management are engaging in the initial and renewal screening of providers.
 
The first phase of the intermediary diligence process requires a front-end employee – typically in business development – to notify upper and executive-level management of the proposed provider. For DRS, creating a limited workflow on the front end of the proposed opportunity has all but eliminated a foreseeable rejection of the application for business reasons, as opposed to any adverse diligence which may result in a rejection later in the process.
 
Those employees on the front end of the business are then only able to task responsible functions with diligence collection once the proposed provider has been notionally approved and identified as a value added provider from an operations perspective by upper and executive level leadership. This affords a tailored list of approvers the opportunity to review the business case, and reject the application before critical resources are spent compiling the necessary diligence.
 
That same preliminary notification is used by the compliance team to quickly evaluate threshold issues and provide a response to the requestor outlining the necessary diligence to be collected. This includes verifying that the type of representation, method of compensation, and citizenship of the proposed provider are all in line with the legal requirements in the proposed territory.  
 
Leonardo thus only expends critical resources on vetting those proposed intermediaries who have the greatest potential for success. By cutting back the number of proposed intermediaries to enter the diligence phase of the process, it is able to spend more resources on those select providers. Compliance professionals may also want to encourage management to consider developing criteria to assess international intermediary performance. This type of regular evaluation can more quickly identify poor performing intermediaries who can be phased out of the program altogether.
 
In addition, to streamline the entire process, the company also internally developed an electronic data collection and management tool, an electronic platform to collect additional diligence on the provider by taking a close look at a variety of factors to include their qualifications, that all proper registrations are obtained, multiple business references and an indication of financial stability including a bank reference. It also requires interviews and often requests and reviews third-party supporting information to include international company profiles provided, as well as information from local law firms and other diligence providers such as the non-profit TRACE International, which is dedicated to delivering quality support in this space.

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COMM_a419
. S. Halford: “Export Controls in Ireland”

(Source: Tradewin)
 
* Author: Steve Halford, Trade Compliance Advisor, Tradewin. For contact information, click here.
 
I am often surprised when discussing export processes with Irish businesses how little is known about export controls, meaning the regimes and regulations that are in place controlling dual-use items by the Irish Authorities and the EU. Businesses who have been exporting for years and have strong compliance practices for customs procedures would respond with, “We don’t deal in military goods, so this doesn’t apply to us.” However, they don’t seem to have come across terms such as dual-use or sanctioned parties.

I suppose to help add to the confusion the regulation and enforcement of imports and exports in Ireland is split between different departments. The customs regulations are regulated by the Department of Revenue who administer the customs regime for the control of imports and exports and collection of duties and levies on behalf of the state and the EU.
 
However, the Department of Jobs, Enterprise, and Innovations (DJEI), Export Licensing unit, is responsible for managing controls on exports of dual-use items, military items, and items destined for countries to which trade sanctions apply.
 
A dual-use item refers to goods, including software, technology, documents and diagrams, which can be used for both civil and military applications. The items can range from raw materials to components and complete systems, such as aluminum alloys, bearings, or lasers. They could also be items used in the production or development of military goods, such as machine tools, chemicals, manufacturing equipment, and computers. In order to export certain goods of this type, the exporter must be in possession of a license.
 
Regulations apply to any export of dual-use items from Ireland to a destination outside the EU. There are also some regulations for the most critical dual-use products which are subject to the strictest controls; e.g. radioactive, sonar equipment, and ‘cryptanalytic’ items which are also controlled when exported from Ireland to countries within the EU. The transfer of knowledge, technology, and software are also regulated under the controls.
 
To add further complexity, there is also the catch-all clause as part of the dual-use regulations. An Irish export authorisation may be required for the export of items not listed in the dual-use regulations if the exporter is aware or has been advised that its products may be intended, in their entirety or in part, for use in connection with weapons of mass destruction or in the production of the missiles that could deliver them. This also covers situations where the goods are intended as parts or components of military goods, or if the purchasing country or the country of final destination is subject to an arms embargo or the goods may be intended for a military end-use.
 
Apart from the Irish and EU Export Controls, US control law can also apply to many re-exports of US origin goods from Ireland. US sanctions and trade embargoes can also apply to business in Ireland, particularly when US companies or US individuals are involved.
 
So what does that mean for Irish businesses?
 
Well, civil and criminal penalties for violating export control/sanctions rules may be imposed both on companies and individuals, depending on the nature of the breach. Penalties for breach of the Export Act (and any statutory instruments issued pursuant to the terms of the Act) could mean a summary conviction, a fine of up to €5,000 and/or six months in prison or on conviction or indictment, a fine of up to €10,000,000 or three times the value of the goods or technology concerned and/or up to five years in prison. The Export Act includes additional enforcement rights for the Irish Customs and Excise service and the Ministry for Jobs, Enterprise and Innovation to ensure compliance with the Export Act.
 
Furthermore, the consequences of being subject to an audit or enforcement action can be significant. Relationships with suppliers and customers can be damaged and customs seizures and prosecutions can attract high levels of negative publicity. Existing relationships with the competent government departments may also be damaged, making future export license applications more difficult to attain.
 
Having a competent and comprehensive Export Controls program or manual in place is the cornerstone for keeping Irish companies fully compliant.

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COMM_a520
. 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 definition of “brokering activities” in ITAR § 129.2(b) excludes activities performed by an affiliate, as defined in ITAR § 120.40, on behalf of another affiliate.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a121
. ECS Presents ITAR/EAR Critical Compliance on 28-29 Mar in Scottsdale AZ

(Source: Suzanne Palmer, spalmer@exportcompliancesolutions.com)
 
* What: ITAR/EAR Critical Compliance, Scottsdale AZ
* When: March 28-29, 2017
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel: Suzanne Palmer, Lisa Bencivenga

* Register: Here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com

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TE_a222. ECTI Presents Worldwide Sanctions and Export Control Update: Russia, Iran, Cuba and More Webinar on 13 Apr

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

* What: Worldwide Sanctions and Export Control Update: Russia, Iran Cuba and More
* When: 13 April 2017; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Scott Gearity
* Register: Here or Danielle McClellan, 540-433-3977, danielle@learnexportcompliance.com.

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MSEX/IM MOVERS & SHAKERS

MS_a123. Bob Vander Lugt Leaves NGC, forms Little, Rothwell & Vander Lugt, PLLC

(Source: Editor)

Robert D. Vander Lugt, formerly Director of International Trade Compliance, Northrop Grumman Corporation, has left NGC to form a new law firm, Little, Rothwell & Vander Lugt, PLLC, with Kathy Little and Rob Rothwell (both formerly with Vinson & Elkins). Contact Bob at bob.vanderlugt@lrvlaw.com or 202 869-3867.
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ENEDITOR’S NOTES

(Source: Editor)

Many sharp-eyed subscribers (the first, less than 3 minutes after publication, was 

Steve Johnson, of Cincinatti, OH),

 let us know yesterday that Dr. Paul Ralph Ehrlich, who wrote The Population Bomb, was born May 29, 1932, and is still alive. It was a different Dr. Paul (NMN) Ehrlich who died in 1915, and was a German physician and scientist.  Shall we say the Ehrlich biographies were mixed in Item #15 of yesterday’s Daily Bugle. Such are the dangers of quick copy-paste from Wikipedia!

* * * * * * * * * * * * * * * * * * * *

(Source: Editor) 

 
*
William Lamb Melbourne (William Lamb, 2nd Viscount Melbourne, 15 Mar 1779 – 24 Nov 1848, English member of the House of Lords, served as Home Secretary and Prime Minister. He is best known for his mentoring of Queen Victoria in the ways of politics from her age 18 to 21.)

  – “It is safest to take the unpopular side in the first instance. Transit from the unpopular is easy… but from the popular to the unpopular is so steep and rugged that it is impossible to maintain it.”  

*
Cesare Beccaria (Cesare Bonesana-Beccaria, 15 Mar 1738 – 28 Nov 1794, was an Italian criminologist jurist, philosopher, and politician, who is widely considered as the most talented jurist and one of the greatest thinkers of the Age of Enlightenment.  He is well remembered for his treatise
On Crimes and Punishments, which condemned torture and the death penalty.)

  – “Nothing could be more dangerous than following the popular maxim whereby it is the spirit of the law that must be consulted. This is an embankment that, once broken, gives way to a torrent of opinions.” 

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EN_a326
. 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: 7 Mar 2017: Harmonized System Update 1702, containing 1,754 ABI records and 360 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 8 Mar 2017) of the ITAR is Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 750 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is available by annual subscription from the Full Circle Compliance website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us to receive your discount code.

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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 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

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

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

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