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17-0404 Tuesday “The Daily Bugle”

17-0404 Tuesday “Daily Bugle”

Tuesday, 4 April 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 
here
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[No items of interest noted today.] 

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. DHS/CBP Announces ACE Certification Outage on 5 Apr 
  4. DHS/CBP Reopens Neche Port of Entry 
  5. State/DDTC: (No new postings.) 
  6. EU Amends Restrictive Measures Concerning Yemen, ISIL, and Al-Qaeda 
  7. EU Posts Decisions Concerning EU Strategy Against WMD Proliferation, and Support of UN Program Against Illicit Trade in Small Arms 
  1. Journal Star: “Caterpillar Raid Resurrects U.S. Sanctions Questions” 
  2. ST&R Trade Report: “BIS Clarifies New Requirements on Exports To, Through Hong Kong” 
  1. C. Tinaves: “Exporting to Hong Kong? Don’t Be Caught Flat Footed Come April 19” 
  2. D.M. Edelman: “New ITAR Rules Possible: DDTC Rulemaking Unaffected By Trump Executive Order Limiting New Regulations” 
  3. L.M. Friedman: “Ruling of the Week: 2017.8: To Drawback, And Beyond!” (Update) 
  4. M.A. Goldstein: “The Anarchist Cookbook is Alive and Well” 
  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 (29 Mar 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
* * * * * * * * * * * * * * * * * * * * 

OGS
OTHER GOVERNMENT SOURCES

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

(Source: Federal Register)
* President; EXECUTIVE ORDERS; Trade; Antidumping and Countervailing Duties and Violations of Trade and Customs Laws; Enhanced Collection and Enforcement Efforts (EO 13785) [Publication Date: 5 April 2017.]
* State; NOTICES; Designations as Global Terrorists [Publication Date: 5 April 2017.]:
  – Anjem Choudary, aka Abu Luqman
  – El Shafee Elsheikh also known as Shaf also known as Shafee
  – Sami Bashur Bouras also known as Wakrici also known as Khadim
* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals [Publication Date: 5 April 2017.]:
  – CBP Regulations Pertaining to Customs Brokers
  – Cost Submission

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

(Source: Commerce/BIS

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OGS_a33. DHS/CBP Announces ACE Certification Outage on 5 Apr

(
Source: CSMS# 17-000194, 4 Apr 2017.)
 
ACE Reports
 
Please be advised that there will be an ACE CERTIFICATION Outage Wednesday evening, April 5, 2017 from 1700 ET to 2000 ET for infrastructure maintenance activities.

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OGS_a44DHS/CBP Reopens Neche Port of Entry

(Source:
CSMS# 17-000193, 4 April 2017.)
 
U.S. Customs and Border Protection would like to inform the traveling public that the Neche, North Dakota Port of Entry has reopened on Tuesday, April 4th.
 
U.S. Highway 18 south of the Neche Port of Entry had previously been closed because of overland flooding. The North Dakota Department of Transportation has determined the roadway to be safe and has reopened the highway for travel.
 
The Neche Port of Entry is open seven days a week, 8:00 a.m. to 10:00 p.m.
 
For up to date road conditions go to the following websites:
 
  –
www.511mn.org

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

OGS_a55State/DDTC: (No new postings.)

(Source:
State/DDTC)

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OGS_a66EU Amends Restrictive Measures Concerning Yemen, ISIL, and Al-Qaeda

 
Regulations:
  –
Council Implementing Regulation (EU) 2017/628 of 3 April 2017 implementing Article 15(3) of Regulation (EU) No 1352/2014 concerning restrictive measures in view of the situation in Yemen
  –
Commission Implementing Regulation (EU) 2017/63
0 of 3 April 2017 amending for the 264th time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the ISIL (Da’esh) and Al-Qaeda organisations
 
Decisions:
  –
Council Implementing Decision (CFSP) 2017/634 of 3 April 2017 implementing Decision 2014/932/CFSP concerning restrictive measures in view of the situation in Yemen

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OGS_a77EU Posts Decisions Concerning EU Strategy Against WMD Proliferation, and Support of UN Program Against Illicit Trade in Small Arms

 
Decisions:
  –
Council Decision (CFSP) 2017/632 of 3 April 2017 amending Decision 2014/129/CFSP promoting the European network of independent non-proliferation think tanks in support of the implementation of the EU Strategy against Proliferation of Weapons of Mass Destruction
  –
Council Decision (CFSP) 2017/633 of 3 April 2017 in support of the United Nations Programme of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons in All Its Aspects

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

NWSNEWS

NWS_a18Journal Star: “Caterpillar Raid Resurrects U.S. Sanctions Questions”

(Source:
Journal Star) [Excerpts.]
 
A federal raid of Caterpillar Inc. offices last month drew instant connections between the global headquarters in Downtown Peoria and the company’s Swiss subsidiary in Geneva – the entity at the center of the company’s controversial strategy to avoid paying U.S. taxes.
 
But recent comments by a Caterpillar official and the mission of one of the federal agencies investigating the company also lend new significance to years-old questions about Caterpillar’s business dealings in countries deemed state sponsors of terrorism by the U.S. State Department.
 
Since 2010, Caterpillar has faced pointed inquiries from investors, activists and the Securities and Exchange Commission (SEC) into its business interests in three sanctioned countries: Sudan, Syria and Iran.
 
And the company’s dealings in those countries have a direct connection to its embattled tax strategy. The linchpin of the plan that a congressional investigation found helped Caterpillar avoid $2.4 billion in U.S. taxes is the company’s Swiss subsidiary, Caterpillar SARL – the same entity that records all Caterpillar sales in Europe, Africa and the Middle East.
 
The complex corporate bureaucracy Caterpillar established to execute the tax strategy represents the type of internal structures that can put multinational corporations in danger of violating U.S. foreign policy, said Ryan Fayhee, the former national export control coordinator in the National Security Division of the Department of Justice who is now a partner with Baker & McKenzie LLP in Washington, D.C.
 
“U.S. persons can’t engage in financial support of any countries subject to sanctions. … Transactions involving Iran, for example, are kryptonite to U.S. persons,” Fayhee said. “There are innocent mistakes made, because people sometimes don’t appreciate the complex internal systems by which companies are run, and they don’t understand the technical processes by which the system interacts with export rules.”
 
Ever since Caterpillar’s former global tax strategy manager, Daniel Schlicksup, filed an employment lawsuit seeking whistleblower protections in 2009, the company’s complex offshore structures created to reduce its U.S. income tax liability have been extensively scrutinized by federal investigators.
 
The company is still fighting a proposed $2 billion fine for back taxes and penalties that resulted, so the presence of Internal Revenue Service agents during the execution of search warrants on March 2 at the headquarters and two other nearby facilities probably wasn’t as shocking as the raid itself.
 
The participation of investigators from a different federal law enforcement agency in the raid, one with far less name recognition, may have been more unexpected.
 
Window placards in unmarked vehicles lining Northeast Jefferson Avenue outside Caterpillar’s headquarters identified the other agents as members of the U.S. Department of Commerce Bureau of Industry and Security Office of Export Enforcement.
Government documents usually refer to the agency as BIS or OEE – not exactly household acronyms. The scope of the agency’s duties, when viewed in the context of the scant public information available on the Caterpillar investigation in the leaked March 2 search warrants, presents different implications than a tax inquiry alone.
 
Amy Campbell, Caterpillar’s director of investor relations, acknowledged as much in comments at a
March 22 industrials conference in London.
 
“The search warrant was broader than just the matters related around the IRS issue, so it included export filings among other things,” Campbell said. “We’re still trying to gain an understanding of the complete picture of why the authorities came in the way they did.”
 
Caterpillar Inc. declined to comment for this article.
 
The most recent agency guidelines in the Federal Register characterize the mission of the OEE as: “to enforce the provisions of the Export Administration Regulations (EAR), secure America’s trade, and preserve America’s technological advantage by detecting, investigating, preventing, and deterring the unauthorized export and reexport of U.S.-origin items to parties involved with: (1) Weapons of mass destruction programs; (2) threats to national security or regional stability; (3) terrorism; or (4) human rights abuses.”
 
Since 2010, the OEE has successfully prosecuted more than
340 export violation cases either through administrative adjudications or criminal proceedings undertaken with the Department of Justice.
 
Less than a week after the March 2 Caterpillar raid, newly confirmed Secretary of Commerce Wilbur Ross announced the largest ever export-related
settlement – $1.19 billion in combined criminal fines and administrative penalties for ZTE Corp., a Chinese telecommunications giant with U.S. operations that pleaded guilty to violating U.S. economic sanctions against North Korea and Iran.
 
“We are putting the world on notice: the games are over,” Ross said. “Those who flout our economic sanctions and export control laws will not go unpunished – they will suffer the harshest of consequences. Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.” …
 
TAX STRATEGY
 
In 1999, Caterpillar began working with its external auditor, PricewaterhouseCoopers (PwC), and a Chicago-based law firm that specializes in tax issues, McDermott, Will & Emery, to develop an offshore subsidiary to reduce its U.S. tax liability.
 
Geneva-based Caterpillar SARL was the result.
 
The Swiss company negotiated a tax rate far lower than in the United States, and the parent company shifted some non-U.S. sales to that subsidiary’s books to keep more profit.
 
The strategy focused on replacement part sales, though Caterpillar SARL also was responsible for all sales of Caterpillar-branded and related products in Europe, Africa and the Middle East.
 
The Swiss subsidiary became the company’s “global parts purchaser” and the entity that recorded all parts sales in the world outside of the United States – about 85 percent of Caterpillar’s total parts sales. According to Schlicksup’s lawsuit, which was dismissed in 2012 after a series of depositions laid out the company’s tax strategy in public for the first time, parts sales generated $5.6 billion in profit over several years.
 
Prior to the initiation of the tax strategy in 1999, Caterpillar owned all of the replacement parts in the United States before selling them to its marketing companies, according to a report by the U.S. Senate Permanent Subcommittee on Investigations that reviewed the matter in 2014.
 
The subcommittee found not much changed after 1999, except the country where Caterpillar’s parts sales and profit were reported.
 
An essential element of the strategy was the Inventory Tax Accounting System (ITAS) created by Caterpillar and its consultants, according to the Senate report. The system established “virtual parts bins” where parts stored in the United States could be assigned ownership to the Swiss subsidiary when they were sold and shipped.
 
Establishing Caterpillar SARL ownership at some point in the supply chain was critical to claiming a tax exemption for non-U.S.-subsidiary-owned parts stored in U.S. warehouses.
 
“At the same time, Caterpillar did not want to incur the expense and inconvenience of formally segregating the CSARL parts from the other parts owned by Caterpillar Inc.,” the Senate report found.
 
The report continued: “The end result was that instead of segregating the Caterpillar versus CSARL parts, Caterpillar warehouse personnel stored all of the replacement parts together, pulled parts to fill orders the same way they always had, without regard to CSARL’s ownership, and then shipped the parts to the dealers or customers who had ordered them.”
 
Parts delivered all over the world with Caterpillar SARL invoices largely originated in the United States, with significant volumes from Caterpillar Logistics Services in Morton – one of the other company facilities raided March 2. The Senate report noted that the Morton warehouse is Caterpillar’s central hub for stocking replacement parts and is twice the size of the company’s next largest warehouse.
 
Dealers, distributors and customers from around the world look for hard-to-get parts in the Morton warehouse, which also stores about 40 percent by value of Caterpillar SARL-owned parts destined for sale abroad, according to the report.
 
“Caterpillar’s parts business has been and continues to be led and managed primarily from the United States. Nearly all the senior leadership of the parts business has been and remains in Illinois,” the report concluded.
 
“Caterpillar’s U.S. warehouses continue to operate in the same way as in the past. Caterpillar continues to manage the parts inventory and parts forecasting on a worldwide basis and manage the supplier base in the United States, just as it did before the transaction. CSARL continues to pay Caterpillar to keep doing the same work, which CSARL continues to be unequipped to perform.”
 
Three years before the Senate report published, however, Caterpillar attempted to legitimize sales in countries subject to U.S. sanctions by claiming to the SEC that the sales – including replacement parts – had been made by Caterpillar SARL and other non-U.S. subsidiaries “as permitted under U.S. economic sanctions and export controls.”
 
SYRIA, SUDAN, AND IRAN
 
In 2011, U.S. financial watchdogs began a campaign to lift the curtain on well-known companies’ business dealings in Iran, Sudan and Syria, all then considered state sponsors of terrorism and subject to economic sanctions.
 
Among the companies faced with demands from the SEC were Sony, Xerox, AIG, Siemens – and Caterpillar. Many of the U.S. companies provided correspondence indicating they believed they were within the letter of the law while still conducting business in those countries through a sanctions loophole that granted certain allowances for non-U.S. subsidiaries.
 
In a response to the SEC dated May 10, 2011, Caterpillar’s then-Chief Financial Officer Ed Rapp phrased it this way: “Several of Caterpillar’s non-U.S. subsidiaries have sold and continue to sell products to Syria and Sudan as permitted under U.S. economic sanctions and export controls. These sales were made principally to independently-owned and -operated dealers or distributors, who in turn sell or lease products to their own customers.”
 
By then, Caterpillar and its non-U.S. subsidiaries had ceased nearly all business in Iran, the comments continued.
 
The company had been pressured to undertake those actions in 2010 by an activist group United Against Nuclear Iran (UANI). The group publicly shamed Caterpillar with a billboard outside its Peoria headquarters for working in a hostile state with nuclear ambitions. UANI complimented Caterpillar for the decision to terminate sales arrangements that provided equipment to end users in Iran.
 
“We applaud Caterpillar’s decision to prohibit its non-U.S. subsidiaries from doing business in Iran,” said Mark Wallace, UANI president and former American diplomat to the United Nations. “All responsible companies that transact business in Iran through the veil of a foreign subsidiary should take this as a wake-up call.”
 
Caterpillar’s business interests in Sudan and Syria, however, continued through non-U.S. subsidiaries and decades-old relationships with exclusive dealer networks.
 
According to Rapp’s response to the SEC, Caterpillar SARL still had a dealership agreement with Jallad Group for Syria in 2011, though the company claimed no sales had been executed through that agreement since before 2008. The relationship between those entities and their predecessors dates back to 1929, and Jallad remains the exclusive dealer for Lebanon, Jordan and the Palestinian territories.
 
Different Caterpillar non-U.S. subsidiaries also conducted business with dealers and distributors in Syria before and after 2008 – the U.K. subsidiaries Perkins Engines Co. Ltd. and F.G. Wilson Engineering Ltd.
 
The letter explained a more complex situation in Sudan, where a network of distributors such as Earthmoving Services Ltd., Sudanese Tractor Co. Ltd. (Sutrac) and Ezentus FZE all sold Caterpillar equipment. But all of those distributors were owned by DAL Group, the largest holding company in Sudan.
 
In addition to the embargo on trade with Sudan, the U.S. Treasury’s OFAC also singled out one of DAL Group’s other companies for targeted sanctions in May 2007. Al Sunut Development Co. had entered into a joint venture with the Sudanese government to construct a $4 billion development intended to rival the skyscrapers of Dubai. The real estate project subsequently stopped.
 
DAL Group was founded in the 1960s after it won a contract to distribute Caterpillar tractors, according to a 2014 Financial Times interview with group’s current chief, Osama Daoud Abdel-Latif. His father began the company.
 
Caterpillar lost business with DAL Group when Sudanese sanctions were imposed in 1997, according to a trove of diplomatic cables released by Wikileaks. The organization has a long track record of releasing top secret government documents, and experts who sifted through the material said it appeared legitimate.
 
“(Abdel-Latif) noted that when blanket U.S. sanctions first were imposed in 1997, Sudan was forced to drop plans to purchase Caterpillar equipment for the Nile oil pipeline pumping stations,” the September 2007 correspondence noted. “Instead, Rolls Royce equipment was substituted, at a 25 (percent) higher cost.”
 
It’s not clear when Caterpillar sales in Sudan resumed, but the company was regularly recording revenue there, with knowledge of sales to the government, for several years leading up to the 2011 response to the SEC.
 
From 2008 through the first quarter of 2011, the company recorded $256.5 million in sales in Sudan alone.
 
“Sales to Sudan during the same period consisted principally of earthmoving and construction machinery, engines, and generator sets, along with replacement parts sold by CSARL, Perkins, and F.G. Wilson to their respective dealers and distributors,” Rapp wrote to the SEC.
 
Rapp concluded: “The dealers and distributors of Caterpillar’s non-U.S. subsidiaries have in some cases sold products to the government of Sudan or entities controlled by it.”
 
The March 2 raid occurred six years after Rapp’s statement. It could be months or years until the federal investigation concludes.

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NWS_a29ST&R Trade Report: “BIS Clarifies New Requirements on Exports To, Through Hong Kong”

 
A regulatory requirement slated to take effect April 19 imposes new support documentation requirements on exports of specific controlled items to or through Hong Kong. The Bureau of Industry and Security recently provided additional information about these requirements.
 
Under a BIS final rule, exporters or reexporters must first obtain a copy of a valid Hong Kong import license (or a written statement from the Hong Kong government that an import license is not required, which may come in the form of a “no license required” notification) before exporting or reexporting to Hong Kong any item subject to the Export Administration Regulations and controlled on the Commerce Control List for national security, missile technology, nuclear nonproliferation, or chemical and biological weapons reasons. The exporter or reexporter must have the copy in its possession and the license must not have expired at the time of the shipment.
 
In addition, reexporters in Hong Kong must first obtain a Hong Kong export license (or a statement from the Hong Kong government that an export license is not required) before reexporting from Hong Kong any item subject to the EAR and controlled for NS, MT, NP column 1, or CB reasons. If a Hong Kong export license is issued, the shipment must be in accordance with the terms and during the validity period of that license.
 
BIS states that this rule aims to provide greater assurance that covered goods will be properly authorized to their final destination even when they first pass through Hong Kong. However, compliance could be burdensome for both U.S. and non-U.S. exporters.
 
BIS officials addressing a recent meeting of the agency’s Regulations and Procedures Technical Advisory Committee noted that there has been much discussion about this rule, as well as some opposition, from affected industry members. In response, BIS has posted to its website a list of frequently-asked questions that provides the following information.
 
  – Exporters can determine whether items require a Hong Kong import or export license using a tool on the Hong Kong Trade and Industry Department’s strategic trade controls website. However, this list is not comprehensive, so exporters should seek confirmation from HKTID as to whether an item not appearing on this list requires a license.
 
  – Statements by a counter party to a transaction that an import license is not needed are not sufficient to allow exports to proceed; such statements must come from the Hong Kong government.
 
  – Parties whose items have been exported to Hong Kong and are subsequently reexported from Hong Kong are not required to obtain a copy of the Hong Kong export license.
 
  – The copy of the Hong Kong import or export license is only required prior to shipment, not prior to applying for a BIS license.
 
  – Shipments en route to Hong Kong prior to April 19 are not subject to the rule’s requirements.
 
  – EAR99 items and items unilaterally controlled by the U.S. are not covered by this rule, although other requirements under the EAR should be considered (e.g., license requirements for an entity on the Entity List or Unverified List).
 
  – An approval-in-principle letter issued by the Hong Kong government (a special program that expedites licensing processing times for frequent shippers) may be treated as a Hong Kong import license under this rule as long as the letter is valid when the shipment takes place and covers the items and parties relevant to the export or reexport. However, an AIP letter may not be used in place of the individual Hong Kong export license for reexports from Hong Kong of multilaterally controlled items subject to the EAR.

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COMMCOMMENTARY

COMM_a110.

C. Tinaves: “Exporting to Hong Kong? Don’t Be Caught Flat Footed Come April 19”

 
* Author: Chalinee Tinaves, Commonwealth Trading Partners (CPT).  Contact CPT via
here.
 
Starting April 19, 2017, U.S. companies and persons intending to export or reexport certain items subject to the Export Administration Regulations (EAR) to Hong Kong should make sure you’ve got your import paperwork in order before shipping. Not familiar with this requirement? In the hubbub of the inauguration and other news, this final rule published in the Federal Register on January 19 by the Bureau of Industry and Security (BIS) at the U.S. Department of Commerce may have slipped past you.
 
Under the
final rule, exporters and reexporters of certain items to Hong Kong are required to obtain a copy of a valid import license from the Hong Kong importer issued by the government of Hong Kong or a copy of a written statement issued by the Hong Kong government that no import license is required. The requirement also applies to persons intending to reexport certain items
from Hong Kong. While this shouldn’t be news for importers and reexporters in Hong Kong, the BIS requirement to obtain written proof from their Hong Kong importers prior to shipment is new.
 
For export control purposes, the U.S. treats Hong Kong and the People’s Republic of China as separate destinations and applies more favorable treatment to the former. However, Hong Kong is a well-known point of diversion and transshipment and many items subject to U.S. export controls end up in mainland China without an export license. According to BIS, the purpose of obtaining proof of this documentation is to provide greater assurance that U.S.-origin items subject to multilateral control regimes are properly authorized to their final destination, even if passing through Hong Kong. It is intended to complement the Hong Kong export control system ,which already requires an import and export license for certain items imported and reexported in Hong Kong.
 
What Items are Covered?
 
  – The final rule applies to exports and reexports of items subject to the EAR and controlled on the Commerce Control List (CCL) for national security (NS), missile technology (MT), nuclear nonproliferation (NP Column 1), or chemical and biological weapons (CB) reasons.
  – This rule applies even if the items may be shipped under a license exception such as License Exception GBS for shipments to destinations in Country Group B.
  – The Hong Kong Trade and Industry Department’s Strategic Trade Controls website provides info regarding whether items require a Hong Kong import or export license. Please note that this list is not comprehensive and should seek additional confirmation if they do not see their item(s) listed.
 
What Documentation Must Be Obtained to Satisfy BIS?
 
  – Copy of a valid import license issued to the Hong Kong importer from the Hong Kong government or copy of the written statement from the Hong Kong government stating that no import license is required.
  – The written statement can come in the following formats:
  (i) a “No License Required” notification in the form of written communication to the Hong Kong importer stating that the item does not require a license; or
  (ii) a statement available to the general public from the Hong Kong government website stating that a license is not required for the item referred to as “website information.”
 
Exporters should note that these copies are not required when applying to BIS for an export license, but rather prior to shipment of the item to Hong Kong. Further, exporters who know that their item(s) will be reexported from Hong Kong are not required to obtain a copy of the export license from Hong Kong. Like other export control documents, exporters and reexporters will need to maintain copies of these import records for recordkeeping purposes and be able to present them if requested by BIS agents.
 

To answer common questions for US exporters, BIS published FAQs on March 17 available here. With a little over two weeks to go, those shipping to clients in Hong Kong need to make sure they’ve got the proper documentation in place come April 19th.

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COMM_a211.

D.M. Edelman: “New ITAR Rules Possible: DDTC Rulemaking Unaffected By Trump Executive Order Limiting New Regulations”

      
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460,
dedelman@bakerdonelson.com
 
The Deputy Assistant Secretary of State for Defense Trade Controls made clear last week that the State Department’s Directorate for Defense Trade Controls (DDTC), which is responsible for the International Traffic in Arms Regulations (ITAR), is exempt from President Trump’s
Executive Order limiting new regulations.
 
At a public meeting of the Defense Trade Advisory Group, the Deputy Assistant Secretary made clear that the Executive Order would not apply to rulemakings for defense services, technical data, public domain and fundamental research, registration and licensing requirements for U.S. Persons operating abroad, or to the 126.4 exemption for temporary exports and imports of defense articles by and for U.S. government agencies.
 
In addition, DDTC will continue to initiate notices of public inquiry on changes to the U.S. Munitions List made pursuant to Export Control Reform (ECR). These notices solicit comments on the regulations from the public.  To date ECR has resulted in new rules for every USML category except Categories I, II, and III which includes firearms.
 
For an analysis of the last big set of definitional changes made pursuant to ECR’s effort to align DDTC definitions with those used by the Department of Commerce’s Bureau of Industry and Security (BIS), click
here.

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COMM_a312. L.M. Friedman: “Ruling of the Week: 2017.8: To Drawback, And Beyond!” (Update)

(Source:
Customs Law Blog)
 
* Author: Lawrence M. Friedman, Esq., Barnes, Richardson & Coburn LLP,
Lfriedman@barnesrichardson.com, 312-297-9554.
 
[Editor’s note: On 22 March 2017, Lawrence M. Friedman wrote the following commentary: “Ruling of the Week: 2017.8: To Drawback, And Beyond!”  Today (4 April), he added the following update.]
 
Yesterday was the brokers exam. I had an opportunity to review the questions and I realized this post might be viewed by some as incomplete. So, let me say that I am aware that
19 U.S.C. § 1484a exempts certain items returned from space from entry requirements.
 
If you took the test, I am referring to Question 39 about whether goods brought into the customs territory of the United States by NASA from space or from a foreign country require an entry. As I read that provision, it applies to items previously launched into space from the customs territory of the United States and which remain in the control of United States persons on United States owned vessels. It does not exempt items obtained in space and brought into the customs territory of the United States nor does it apply to goods that were launched into space from a foreign country and then brought from space to the U.S. I think the question is a bit of a mess. If the goods were obtained in space or launched into space from a foreign country, I think a formal entry is required; probably a type 52 government entry (but I have not checked that). If the goods were launched from the U.S., and the other requirements of the statute are met, no entry would be required.

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COMM_a413. M.A. Goldstein: “The Anarchist Cookbook is Alive and Well”

(Source:
Defense Trade Law Blog. Reprinted by permission.)
 
* Author:  Matthew A. Goldstein, Esq.,
matthew@goldsteinpllc.com, 202-550-0040.
 
A recent New York Times article reported that William Powell, the author of The Anarchist Cookbook, died last year at the age of 66. [FN/1]
 
The article noted:
 
“William Powell was a teenager, angry at the government and the Vietnam War, when he walked into the main branch of the New York Public Library in Manhattan in 1969 to begin research for a handbook on causing violent mayhem.”
 
The Anarchist Cookbook was published in 1971. [FN/2] It provides instructions on how to manufacture defense articles described on the International Traffic in Arms Regulations (“ITAR”) United States Munitions List (“USML”), such as a silencer for a submachine gun and a grenade launcher. It also provides recipes for a variety of explosives, to include tetryl, a high explosive specifically described at USML Category IV(a)(29).
 
The ITAR existed in 1971 and the F.B.I. investigated Powell and The Anarchist Cookbook shortly after initial publication of the book. Questions regarding access to the book by foreign persons outside the United States were raised in the investigation. [FN/3] However, no charges were filed because the Justice Department advised the F.B.I. that publishing the book was not a crime. [FN/4]
 
J. Edgar Hoover even responded to a citizen letter with the following:
 
“while I can readily understand your concern, the FBI has no control over either the publishing of any book or information disseminated through the news or mass media.” [FN/5]
 
Later, in 1986, when alerted to foreign availability of the book by its field office in Paris, France, the F.B.I. advised:
 
“As the publication of this book is not a violation of any laws in the United States, investigation can not be conducted to identify foreign contacts.” [FN/6]
 
Considering the above, it is interesting to note the State Department’s more recent claim that publishing technical data is an export and the agency’s June 3, 2013 Federal Register notice that claims “one must seek and receive a license or other authorization from the Department or other cognizant U.S. government authority to release ITAR controlled ‘technical data’…” [FN/7]
 
The State Department’s prior restraint on public speech is the subject of litigation pending before the federal courts. Yet, Powell’s Anarchist’s Cookbook is alive and well-available online for sale and for free from a variety of sources. An updated, corrected, and annotated version of the book is also available online. Nevertheless, the State Department continues to claim that persons publishing technical data without prior approval from the cognizant U.S. government agency may be subject to civil and criminal penalties.
  
———
  [FN/1] Richard Sandomir, “William Powell, ‘Anarchist Cookbook’ Writer, Dies at 66,” New York Times, March 19, 2017.
  [FN/2] William Powell, “The Anarchist Cookbook,” New York: Lyle Stuart, 1971.
  [FN/3] See
here.
  [FN/4] See July 14, 1971 Letter from Robert C. Mardian, Department of Justice, to J. Edgar Hoover, FBI Director, available 
here
.
  [FN/5] See March 10, 1971 Letter from J. Edgar Hoover, available
here.
  [FN/6] See F.B.I. March 31, 1986 Cable, available
here.
  [FN/7] 80 Fed. Reg. 31525, 31528 (June 3, 2015).

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

ENEDITOR’S NOTES

(Source: Editor)


Comte de Lautreamont (
pseudonym
 of 
Isidore-Lucien Ducasse,
 
4 Apr 1846 – 24 Nov 1870, a French poet born in 
Uruguay
. His only works, 
Les Chants de Maldoror
 and 
Poésies
, had a major influence on modern literature, particularly on the 
Surrealists
 and the 
Situationists
. He died at the age of 24.
)


  – “Arithmetic! Algebra! Geometry! Grandiose trinity! Luminous triangle!  Whoever has not known you is without sense!” 

Margaret Oliphant (
née Margaret Oliphant Wilson
, 4 Apr 1828 – 25 Jun 1897, was a Scottish novelist and historical writer, who usually wrote as “Mrs. Oliphant”. Her fictional works encompass domestic realism, the historical novel and tales of the supernatural.)

  – “Temptations come, as a general rule, when they are sought.” 

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

EN_a215
. 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 [New effective date: 21 March 2017.]; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions [New effective date: 21 March 2017.]

* 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: 
29 Mar 2017:
82 FR 15461-15463
: Removal of Certain Persons From the Entity List; and
82 FR 15458-15461
: Removal of Certain Persons From the Entity List; Addition of a Person to the Entity List; and EAR Conforming Change.   

  
*
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 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.  

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

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.

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* 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.

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