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17-0411 Tuesday “The Daily Bugle”

17-0411 Tuesday “Daily Bugle”

Tuesday, 11 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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  1. Commerce/BIS: ISTAC to Meet on 26 Apr in Wash DC 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.) 
  3. DHS/CBP Announces SCAC Code Changes 
  4. DoD/DSS Releases Update on Transition Process 
  5. State/DDTC: (No new postings.) 
  6. Council of the EU Extends Iran Sanctions By One Year 
  7. EU Commission Consults Public on the Evaluation of Regulation 258/2012 
  8. UK/DIT Releases New Blog Post: “Application Management: Not a Dashboard” 
  1. Al Jazeera: “Exclusive: Spyware Firms in Breach of Global Sanctions” 
  2. FAIR Trade Group: “ATF Grants Petition to Extend Validity of Law Letter to Import ‘Post-1986’ Machineguns” 
  3. ST&R Trade Report: “Restrictions on Exports to Russia to be Further Eased” 
  1. J.C. Fuller: “Are Siemens’ FCPA Compliance Efforts Public Information?” 
  2. M.R. Littenberg, J.L. Chen & E.K. Burke: “Case Closed! – The Conflict Minerals Rule Litigation Is Over, but the Drama Continues” 
  1. Alphonso Hughes Appointed Division Chief of New ATF NFA Division  
  1. Note on “International Trade Frequently Asked Questions” (Part II and III) 
  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 (6 Apr 2017), FACR/OFAC (10 Feb 2017), FTR (15 May 2015), HTSUS (7 Mar 2017), ITAR (11 Jan 2017) 
  4. Weekly Highlights of the Daily Bugle Top Stories 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11.

Commerce/BIS: ISTAC to Meet on 26 Apr in Wash DC

 
82 FR 17410: Notice of Partially Closed Meeting of the Information Systems Technical Advisory Committee
 
  The Information Systems Technical Advisory Committee (ISTAC) will meet on April 26 and 27, 2017, 9:00 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to information systems equipment and technology. …
  The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
Yvette.Springer@bis.doc.gov, no later than April 19, 2017.
  A limited number of seats will be available for the public session. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the Committee suggests that public presentation materials or comments be forwarded before the meeting to Ms. Springer.
  The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on February 27, 2017, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 Sec.  (10)(d))), that the portion of the meeting concerning trade secrets and commercial or financial information deemed privileged or confidential as described in 5 U.S.C. 552b(c)(4) and the portion of the meeting concerning matters the disclosure of which would be likely to frustrate significantly implementation of an agency action as described in 5 U.S.C. 552b(c)(9)(B) shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 Sec. Sec.  10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
  For more information, call Yvette Springer at (202) 482-2813.
 
  Dated: April 6, 2017.
Yvette Springer, Committee Liaison Officer.

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OGS
OTHER GOVERNMENT SOURCES

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

(Source: Federal Register)
* Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 12 April 2017.]
 
* State Department; NOTICES; Designations as Global Terrorists: Abu Anas al-Ghandour, aka Ahmed Ghandour, aka Ahmad Ghandour, aka Ahmad Naji al-Ghandur, aka Abu-Anas [Publication Date: 12 April 2017.] 

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

(Source: Commerce/BIS

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OGS_a34. DHS/CBP Announces SCAC Code Changes

(Source:
CSMS #17-000204, 10 Apr 2017.)
 
CBP recently deployed changes to reject “UNKN” as a Standard Carrier Alpha Code (SCAC) for both AMS and non-AMS bill types in ACE cargo release.
 
When entering a non-AMS bill without a SCAC code, filers can bypass this validation with use of “ZZZZ” in the SCAC field in lieu of UNKN.  Use of “ZZZZ” is a temporary feature and future programming will allow the field to be blank when manually entering a non-ABI entry with a non-AMS bill.  Another CSMS will be issued when the temporary use of “ZZZZ” is discontinued.  Please note that ZZZZ is not authorized for in use in manifest or in-bond transactions.
 
For further questions please contact Jim Swanson, Director, Cargo Security and Controls at Telephone (202) 325-1257.

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OGS_a4
5. DoD/DSS Releases Update on New Approach

(Source:
DoD/DSS)
 
The world is rapidly changing and DSS is changing too. Where the agency once concentrated on schedule-driven National Industrial Security Program Operating Manual (NISPOM) compliance, DSS is now moving to an intelligence-led, asset-focused, and threat-driven approach to industrial security oversight.
 
The need for change is clear. The United States is now facing the most significant foreign intelligence threat it has ever encountered. Adversaries are successfully attacking cleared industry at an unprecedented rate. They are using multiple avenues of attack, varying their methods, and adjusting their priorities based on the targeted information they need. As a result, they are upgrading their military capabilities and competing against our economy using the very same information they stole from cleared industry.
 
DSS has recognized this fact and is now moving forward in partnership with industry to design, develop, and pilot a multidimensional approach to industrial security oversight. Our goal is to help cleared industry ensure that contracted capabilities, technologies, and services are delivered uncompromised.
 
To learn more about this new approach, please review the DSS in Transition:
Industry Information Sheet,
Infographic, and
PowerPoint Presentation.

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OGS_a56State/DDTC: (No new postings.)

(Source:
State/DDTC)

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OGS_a67. Council of the EU Extends Iran Sanctions By One Year

 
On 11 April 2017, the Council extended until 13 April 2018 its restrictive measures responding to serious human rights violations in Iran. These measures consist of:
 
  – A travel ban and an asset freeze against 82 people and one entity.
  – A ban on exports to Iran of equipment which might be used for internal repression and of equipment for monitoring telecommunications.
 
These measures were first put in place in 2011. The legal acts are published in the Official Journal of 12 April 2017. They were adopted by written procedure.
 

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OGS_a78. EU Commission Consults Public on Evaluation of Regulation 258/2012

 
Public Consultations
 
* Title: Consultation on the evaluation of Regulation 258/2012 on export, import and transit licensing or authorization systems of firearms, their parts and components.
* Deadline:
Wednesday, 24 May, 2017.
* Policy field(s)s: Borders and Security, Customs, Trade.
* Target group(s): Contributions to this public consultation are sought from individuals, public authorities as well as civil society, academic institutions, international organisations, and the private sector. The Commission would in particular like to encourage firearms producers and dealers, importers and exporters of firearms to participate.
* Period of consultation: From 01.03.2017 to 24.05.2017
* Objective of the consultation: This consultation takes place in the framework of an overall evaluation of Regulation 258/2012. Regulation 258/2012 was adopted by the Parliament and Council on 14 March 2012 to establish export authorisation, and import and transit measures for firearms, their parts and components and ammunition in compliance with Article 10 of the UN Firearms Protocol.
   
The Regulation addresses the illicit manufacturing of and trafficking in firearms, their parts and components and ammunition. It applies only to firearms, their parts and essential components and ammunition for civilian use and not to those intended specifically for military purposes. Furthermore, it only addresses trade with and transfers from or to third countries. It does not concern possession, acquisition or transfers within the Union, which is governed by Firearms Directive, which has been recently evaluated and is subject to a proposal for revision.
  On that basis, the Commission will make recommendations with a view to enhance the fight against firearms trafficking. For more information on this consultation, please read the
background document Search for available translations of the preceding and the
roadmap. The evaluation will assess in particular:
  – With respect to external trade, the economic situation, competitiveness and structure of the firearms sector in the EU including major trends and developments and international comparisons;
  – Possible full, partial, mistaken or non-implementation of the provisions of the Regulation;
  – The division of responsibilities between the responsible bodies and information sharing between them;
  – Export procedures; and
  – The relevance of the categories of weapons and the consistency with the amended legal framework for firearms in the Single Market (revised Firearms Directive and Implementing regulation on deactivation standards).
  For more information on this consultation, please read the background document and the roadmap.
* How to submit your contribution: You can contribute to this public consultation by filling out the
online questionnaire. You may find it useful to refer to the background document which are published alongside this consultation.
  Replies may be submitted in any EU official language. Given possible delays in translating comments submitted in some languages, contributions in English, French, German and Italian are welcome, as they will help the Commission to process the survey more swiftly.
  As part of the European Transparency Initiative, the Commission asks organisations (including NGOs, trade associations, enterprises etc.) who wish to participate in public consultations to provide the Commission and the public with information about whom and what they represent, their objectives, funding and structures, by registering in the Transparency Register and subscribing to its Code of Conduct.
  – If you are a Registered organisation, please fill in your Register ID number in the questionnaire. Your contribution will then be considered as representing the views of your organisation.
  – If your organisation is not registered, you have the opportunity to register
here. Then return to this page to submit your contribution as a Registered organisation.
  If an organisation decides not to provide this information, it is the Commission’s stated policy to list the contribution as part of the individual contributions (Consultation Standards, see
COM (2002) 704, and Communication on ETI Follow-up, see
COM (2007) 127 of 21/03/2007). These replies will be published separately.
 
Disclaimer and data protection
 
The objective of this consultation is to gather the views of stakeholders and others, possibly for publication on the internet. The questions do not reflect the European Commission’s official position and in no way prejudge any decisions it may take in future on the framework for labour migration. As this online service collects and further processes personal data, it is subject to
Regulation (EC) No 45/2001 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data.
  Received contributions will be published on the Internet, unless you provide a substantial justification for your opposition to the publication of your contribution. It is important to read the
specific privacy statement attached to this consultation for information on how your personal data and contribution will be dealt with.
  The Commission stores personal data securely and does not share it with other parties. It will be entered in a list of contact details shared internally among Commission staff for the purpose of contacting you in the context of the Commission’s activities in the future. If you do not agree to this, please send an explicit objection to the Controller using the contact information included in the privacy statement.
* Reference documents and other, related consultations:  
* Results of consultation and next steps: The results of the public consultation will be taken into consideration for the preparation of the Commission report. Explanations about how the contributions have been taken into account will be provided.
* Contact details:
  – Responsible service: European Commission, DG Migration and Home Affairs, Unit HOME D3 – Organised crime and Drugs Policy – Task-force Firearms
  – Postal address: European Commission, Directorate General for Migration and Home Affairs (DG HOME), Unit HOME D3 – Organised crime and Drugs Policy, Rue du Luxembourg 46, B-1049 Brussels, Belgium. 

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OGS_a89. UK/DIT Releases New Blog Post: “Application Management: Not a Dashboard”

(Source:
UK/DIT Blog)
 
Our design team have just started looking at another strand of the new licensing service. For the last few months we’ve been colloquially calling this a ‘dashboard’, but the idea of a simple page of buttons and levers doesn’t do justice to the complexity involved. So from now on: application management.
 
And before we go too far down the road with it, we’re once again asking for your input.
 
SPIRE and the Workbasket
 
Managing applications in SPIRE isn’t a fun-filled task, but it definitely works. It might take a little time to get used to the various processes involved in resuming drafts, cloning previous applications and so on, but everything an exporter needs in relation to previous or current applications can be found in SPIRE’s Workbasket.
 
Or can it? These are a few of our big questions:
 
  – Can you think of anything you want to be able to do with your licence applications, but that SPIRE currently doesn’t allow?
  – Do you need more application status information, or new ways to reply to requests for information?
  – Do you need any existing functions to be placed differently so you can more easily access one from the other?
 
Plucking things out of the air a little there, but there might be some things SPIRE’s developers missed out that we’re at risk of forgetting as well, so let us know where you think the current service is lacking.
 
Beyond that, what do you dislike about the way SPIRE does work now? If anything’s cumbersome, time-consuming or flat-out annoying, we need to know at this early stage so clear pitfalls are avoided.
 
We’re not making a replacement for SPIRE that just looks a bit better – we want to make application management less onerous in whatever way we can.
 
Onto a Prototype
 
Our aim will be to produce a prototype of the new application management functionality in the next couple of months, depending on how other elements of the new service progress.
 
It’s important to make clear at this stage that our initial development and prototype will focus on the important functions we need to pull across from SPIRE, before we develop anything more advanced. We’ll make the basics work first, but we need ongoing guidance on where to take development beyond that.
 
When we have the prototype we’ll be making it available to our beta testers. If you haven’t yet registered as a tester, we’re still looking for volunteers so if you’re keen to get involved please read our last
blog entry to find out about our registration survey.
 
Goodbye ‘userresearchforlite’
 
lite.feedback@digital.trade.gov.uk is also the address for suggestions for new features not currently provided by SPIRE, and to let us know what we should definitely keep, definitely improve or definitely scrap from how online licence applications work now.
 
Followers of these updates may notice that we have a new email address. It’s true, the famous
userresearchforlite@digital.beis.gov.uk has been honourably discharged as the project has moved over to the new Department for International Trade. The old address still works, but the new one’s better.
 
And that’s the directive we’ve held to throughout this project: ‘the new one’s better’. Please do help us with your insights so we can make sure that turns out to be right!

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NWSNEWS

NWS_a110. Al Jazeera: “Exclusive: Spyware Firms in Breach of Global Sanctions”

(Source:
Al Jazeera) [Excerpts.]
 
Spy equipment producers are breaking laws and circumventing international sanctions by agreeing to sell stock to countries known for human rights abuses, and to clients who do not declare the end user – meaning surveillance tools could easily fall into the hands of armed groups, corporations, governments cracking down on dissent, or opposition leaders, an exclusive investigation by Al Jazeera reveals.
 
During “Spy Merchants”, a four-month undercover operation, Al Jazeera secretly filmed representatives of two Italian companies and one Chinese business agreeing to sell spyware that is capable of tracking millions of people online and able to intercept phone calls and text messages without anyone finding out.
 
The vendors boasted of being able to side-step the law by using sister and shell companies and explained how to possibly circumvent export regulations by lying about the details of shipments and using third countries exempted from certain rules as stopping places. …
 
[Editor’s note: this news item is related to item #5 of the Daily Bugle of Monday, 11 April 2017.  The documentary film “Spy Merchants” (duration: 47 minutes) is available here and via the source link above.]

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NWS_a211. FAIR Trade Group:  “ATF Grants Petition to Extend Validity of Law Letter to Import ‘Post-1986’ Machineguns”

(Source:
FAIR Trade Group)
 
On April 3, 2017, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) granted the FireArms Importer’s Roundtable (F.A.I.R.) petition to extend the term of validity for a law letter submitted as documentation with an import application for “post-1986” machineguns being acquired as dealer sales samples from six months to one year.  The ATF response is as follows:
 
“This is in response to your petition dated December 2. 2016, to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) requesting ATF extend the term of validity for law enforcement demonstration letters required by title 27, Code of Federal Regulations (CFR), § 479.105(d) from six months to one year.  You indicated that restricting the term of validity of law letters to six months for purposes of import imposes a significant hardship on the firearms industry.  Because of long processing times and other factors, many importers must request updated letters from law enforcement customers to obtain an approved Application and Permit for Importation of Firearms, Ammunition and Defense Articles, ATF Form 6.  For the reasons stated below, ATF is extending the term of validity from 6 months to one year.  
 
Machineguns manufactured or imported on or after May 19, 1986, are subject to the provisions of Title 18, United States Code, § 922(0) and are commonly referred to as “post-1986” machineguns throughout the industry.  The transfer of a “post-1986” machinegun requires certain documentation, usually referred to as a “law letter.”  Implementing regulations in 27 CFR 479.105 state that applications to transfer and register “post-1986” machineguns will be approved if it is established by specific information the expected governmental customers who would require a demonstration of the firearm, information as to the availability of the machinegun to fill subsequent orders, and letters from governmental entities expressing a need for a particular model or interest in seeing a demonstration of a particular machinegun.  The regulation further requires that a law letter must be included with an application to transfer or an application to import “post-1986” machineguns as sales samples.
 
The regulations do not set forth the time-period in which the law letter is valid.  On November  10, 1999, ATF issued an open letter clarifying that the term of validity for a law letter submitted as documentation with a transfer application for a “post-1986” machinegun being acquired as a dealer sales sample was one year from the date of the receipt of the application.  However, ATF’s policy on the term of validity for a law letter submitted as documentation with an import application for “post-1986” machineguns being acquired as dealer sales samples remained at six months.
 
After review, ATF agrees that the term of validity for a law letter submitted as documentation with an import application for “post-1986″ machineguns being acquired as dealer sales samples should be extended from six months to one year.  The law letter should ( 1) be written on agency letterhead and signed by the agency head or by someone with delegated authority to sign for the agency head; (2) be dated within one year of the date of the receipt of the application; (3) identify the particular machinegun by type, manufacturer, model and caliber being transferred (for example, M16A2); (4) identify the agency’s interest in the machinegun (for example, purchase, or demonstration); and (5) document the need for more than one machinegun of a particular model (if applicable).”

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NWS_a312. ST&R Trade Report: “Restrictions on Exports to Russia to be Further Eased”

 
U.S. officials said recently they will soon move to further facilitate certain exports to Russia to ease an unintended impact on U.S. businesses from economic sanctions imposed by the U.S.
 
In January the Bureau of Industry and Security and the Office of Foreign Assets Control imposed sanctions against Russian entities that included a broad prohibition on engaging in transactions with, or providing technology to, Russia’s Federal Security Service (FSB) without U.S. government approval. The FSB is involved in reviewing and granting licenses, permits, and notifications for the importation of encryption items (which can include consumer items) into Russia, so the BIS/OFAC actions essentially prohibited U.S. companies from seeking the FSB approvals required to import such goods into Russia.
 
In February OFAC issued a general license allowing U.S. companies to work with the FSB to file required notifications or secure required import licenses. Specifically, the GL authorizes all transactions and activities otherwise prohibited pursuant to Executive Order 13694 that are necessary and ordinarily incident to requesting, receiving, utilizing, paying for, or dealing in licenses, permits, certifications, or notifications issued or registered by the FSB for the importation, distribution, or use of information technology products in Russia.
 
However, it has been a challenge for some U.S. exporters to take advantage of this GL because one of its conditions is that any item provided to the FSB must be in compliance with the Export Administration Regulations. Since the FSB is on the BIS’ Entity List, providing the FSB with the technical information necessary to file a notification or secure an import license (which is controlled under the EAR) requires an export license, but BIS reviews applications for such licenses with a presumption of denial.
 
Deputy Assistant Secretary of Commerce for Export Administration Matt Borman told a recent meeting of the BIS Regulations and Procedures Technical Advisory Committee that BIS plans to issue within the next few weeks a regulatory exception mirroring the OFAC GL. This exception would authorize the submission of otherwise restricted technical information to the FSB to file a required notification or secure a required import license.
 
Only such information that is not otherwise restricted for export to Russia would be authorized under this exception. Even so, said Sandler, Travis & Rosenberg export controls practice leader
Steven Brotherton, the forthcoming exception is expected to be a significant benefit for U.S. exporters.

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COMMCOMMENTARY

COMM_a113.

J.C. Fuller: “Are Siemens’ FCPA Compliance Efforts Public Information?”

 
* Author: John Cornell Fuller, Esq.,
jfuller@foxrothschild.com, Fox Rothschild LLP, Philadelphia, PA.
 
In 2008, global technology giant Siemens Aktiengesellschaft (“Siemens”) pleaded guilty to violations of the books and records provision of the Foreign Corrupt Practices Act (“FCPA”).  Siemens paid approximately $450 million in fines for its alleged violations and another $350 million to settle a civil suit brought by the US Securities and Exchange Commission.  In addition, as part of the plea agreement, Siemens agreed to hire Monitor to evaluate and report on its FCPA compliance efforts to the US Department of Justice. The Monitor submitted numerous work plans and annual reports to the DOJ over the next several years.
 
In 2013, 100Reporters LLC (“100Reporters”), a non-profit organization focused on investigative journalism, submitted Freedom of Information Act (“FOIA”) requests seeking the Monitor’s reports and related documents. The DOJ denied the requests and the administrative appeal.  Accordingly, 100Reporters brought suit in the United States District Court for the District of Columbia.  The DOJ subsequently produced some redacted documents but continued to withhold other documents based on certain Exemptions, including privileged and confidential information, attorney-client and attorney work product (“deliberative process”) privileges, personal privacy, and a lack of segregability due to the intertwined nature of the public and protected information.
 
In a recent 73-page
opinion, the D.C. District Court denied, in part, motions for summary judgment filed by the DOJ, Siemens, and the Monitor and requested
in camera review of representative documents.  The Court will now determine what aspects of the Siemens’ post-plea FCPA compliance program should be available for public consumption.  If the Court determines that substantive portions of Siemens’ FCPA compliance efforts should be produced under FOIA, it could offer an unprecedented look inside the FCPA program of a major multi-national corporation.  Further, and while not suggesting that Siemens has anything to hide, the public airing of post-plea compliance efforts could cause a stir if the Monitor’s are less robust than the public might anticipate.   Nevertheless, the mere potential that one’s FCPA compliance efforts could be in the public domain should give companies large and small pause and they should consider whether their policies and training would withstand the trial by public opinion.

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COMM_a214.

M.R. Littenberg, J.L. Chen & E.K. Burke: “Case Closed! – The Conflict Minerals Rule Litigation Is Over, but the Drama Continues”

 
* Authors: Michael R. Littenberg, Esq,
Michael.Littenberg@ropesgray.com; Julia L. Chen, Esq.,
Julia.Chen@ropesgray.com; and Emily K. Burke, Esq.,
Emily.Burke@ropesgray.com. All of Ropes & Gray LLP, New York City, Boston, and San Francisco, respectively.
 
April 4, 2017.  After 1,627 days and enough law firm memos to deforest a small country, the litigation relating to the Conflict Minerals Rule came to an end yesterday. In this Alert, we discuss what this means for calendar year 2016 compliance, as well as the many other moving pieces relating to the Rule.
 
The Court’s Final Judgment
 
Yesterday (3 April 2017), Judge Ketanji Brown Jackson, a District Court Judge in the District of Columbia, entered a final judgment in the Conflict Minerals Rule case. In a short three paragraph opinion, the District Court (1) declared that Section 1502 of Dodd-Frank, Rule 13p-1 thereunder and Form SD violate the First Amendment to the extent that the statute and the rule require companies to report to the SEC and state on their websites that any of their products “have not been found to be ‘DRC conflict free,'” (2) held unlawful and set aside the Rule to the extent that it requires companies to report to the SEC and state on their websites that any of their products “have not been found to be ‘DRC conflict free'” and (3) remands to the SEC, to take action in furtherance of the Court’s decision.
 
Judge Jackson’s decision was expected. On March 10th, the parties submitted a Joint Status Report requesting that the Court enter a final judgment in accordance with the earlier decisions in the case by the Court of Appeals. The appellate court decision is discussed in our earlier Alert available
here.
 
But the Uncertainty Continues
 
Although the litigation has come to a close, the uncertainty surrounding the Conflict Minerals Rule continues:
 
  – The SEC is expected to publish a new Statement that supersedes its April 29, 2014 Statement, which was put out in response to the Court of Appeals’ April 14, 2014 decision. In its 2014 Statement, the SEC indicated that companies are not required to identify products as “DRC conflict free,” having “not been found to be ‘DRC conflict free'” or “DRC conflict undeterminable.” In addition, the Statement indicated that, pending further action, an independent private sector audit will not be required unless a company voluntarily elects to describe a product as “DRC conflict free” in its Conflict Minerals Report. The April 2014 Statement is discussed in our Alert available
here.
 
The $64,000 question is whether the SEC will reinstate the mandatory audit requirement contemplated by the Conflict Minerals Rule. We think that the chances of this occurring for the upcoming calendar 2016 filing are nil. Looking further out, for various reasons, we think that the mandatory audit requirement is unlikely to be reinstated, but it is not impossible if the Rule survives.
 
  – On January 31st, SEC Acting Chairman Piwowar published Statements directing the SEC staff to consider whether the SEC’s 2014 guidance is still appropriate and whether any additional relief is appropriate in the interim, and opening up a comment period on the Rule, which closed during the middle of March. Putting aside form letters, the SEC received approximately 300 comment letters, both supporting and against the Rule, as well as letters taking the middle ground by advocating for modifications to the Rule.
 
Last week, four Democrats on the Senate Banking Committee sent a letter to the SEC’s Inspector General asking him to conduct an investigation into whether this and other unrelated actions taken by Acting Chairman Piwowar were legally permissible.
 
Whether and when the SEC might modify the Rule in response to comments received and the lessons learned from four years of compliance by companies, and whether the letter to the IG might temper its appetite to do so, remain open questions.
 
  – In early February, a draft of a purported Presidential Memorandum that would suspend the Conflict Minerals Rule began to circulate. Under Section 1502 of Dodd-Frank, the SEC is required to revise or temporarily waive the requirements of the Rule if the President transmits to the SEC a determination that doing so is in the national security interest of the United States and the President includes the reasons therefor. Under Section 1502, the revision or waiver can last for up to two years.
 
The draft Memorandum contemplates a two-year waiver. The draft Memorandum also directs the Secretaries of State and Treasury to propose an alternative plan to address problems in the DRC region that takes a targeted approach focused on breaking the link between commodities and armed groups in the region. Thus far, the White House has not commented on the draft Memorandum in circulation.
 
For more information on the draft Memorandum, please see the webinar hosted by Assent Compliance in which we participated, which is available
here.
 
  – On March 27th, the State Department announced that it, along with other agencies and departments, is seeking input from stakeholders to inform recommendations of how best to support responsible sourcing of 3TG. The Department will consider requests and comments received or postmarked by April 28th.
 
  – The Financial Choice Act introduced during 2016 contemplated the repeal of Section 1502 of Dodd-Frank. The chances are high that repeal of Section 1502 will be sought in successor legislation.
 
  – Finally, Jay Clayton, the President’s nominee for SEC Chairman, is moving closer to being seated. The Senate Banking Committee is scheduled to vote today, after which he will move to confirmation by the full Senate. As SEC Chairman, he will drive many aspects of the SEC’s agenda, including conflict minerals regulation.
 
Compliance in the Near Term
 
So where does all of the above leave companies? For the time being, the status quo is maintained. Except as modified by the SEC’s April 2014 Statement, the Conflict Minerals Rule continues in effect and calendar year 2016 filings continue to be due on May 31st.
 
But, stay tuned. The roller coaster ride continues.
 
Meanwhile, in the EU
 
In other news, yesterday, the European Council voted to approve the pending EU conflict minerals regulation. The regulation was previously approved by the EU Parliament and follows on the November 22, 2016 political agreement reached by the Parliament and the Council.
 
The EU conflict minerals regulation, which places mandatory obligations on importers of 3TG but not product manufacturers and sellers, takes effect on January 1, 2021. Please see our earlier Alert for a summary of the EU regulation.  . . .

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COMMEX/IM MOVERS & SHAKERS

MS_a115.

Alphonso Hughes Appointed Division Chief of New ATF NFA Division  

(Source: ATF NFA Division Chief Alphonso Hughes)
 
Notice from the new NFA Division Chief Alphonso Hughes:
 
  “As some of you may know, on April 3, 2017, ATF – Office of EPS [Office of Enforcement Programs and Services] underwent a reorganization separating the operations of NFA Branch out into a standalone Division to better provide oversight, address performance indicators, and give the operations of this important industry functional area increased individual management control over specified NFA business lines.  I will be leading the NFA Division as Division Chief and transitioning the operations of the former Firearms & Explosives Services Division (which includes Imports Branch, and both licensing centers) to Division Chief Gary Taylor. Gary Taylor’s contact number for FESD will be 304-616-4566.
 
  “Within the NFA Division, two distinct branches and a Division Staff Program Office have been formed:
 
  – The Industry Processing Branch (NFA IPB) – led by IPB Branch Chief, Amy L. Stely (304-616-4522) will oversee the daily operations of industry forms processing at all levels and work with me and all of you to provide the best experience we can for the supply chain. This will include an effort to continually leverage technology enhancements and refine current operations.
  – The Government Support Branch (NFA GSB) – led by GSB Branch Chief, David Howell (304-616-4546) will oversee the daily processing of SOT applications, ATF Form 10 processing, 479.33 exemptions processing, handling of industry expedite requests for Gov’t and LE, complex issues requiring policy evaluation or re-evaluation with FEID & FIPB, and addressing Industry general requests such as 479.26 alternate procedure requests that are not policy related. Policy related requests will be handled by FIPB. GSB will directly support Federal, state, and local entities with acquisitions and overall LE support.
 
I do have one request of you, and that is – if you had any pending requests (over 60 days old) into the former NFA Branch that has not been addressed or answered, can you please send the respective branch chief with a cc: to me a carbon copy of what was forwarded previously, in an effort to ensure continuity and our stride to ensuring customer service. Please only send inquiries that were sent directly to NFA Branch and not those spearheaded by other program areas (e.g. FATD or FIPB) that NFA may be assisting with in their execution” …

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ENEDITOR’S NOTES

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(Source: Editor)

*
Charles Evans Hughes (11 Apr 1862 – 27 Aug 1948, was an American statesman, lawyer, and Republican politician from New York. He served as the 36th Governor of New York, Associate Justice of the Supreme Court of the United States, United States Secretary of State, a judge on the Court of International Justice, and the 11th Chief Justice of the United States).
  – “I believe in work, hard work, and long hours of work. Men do not breakdown from overwork, but from worry and dissipation.”
 
*
George Canning (11 Apr 1770 – 8 Aug 1827, was a British statesman and Tory politician who served in various senior cabinet positions under numerous Prime Ministers, before himself serving as Prime Minister for the final four months of his life.)
  – “Indecision and delays are the parents of failure.”

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EN_a218
. 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:
6 Apr 2017: 82 FR 16730-16733: Revisions to the Unverified List (UVL)

  
*
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.  

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EN_a319
. Weekly Highlights of the Daily Bugle Top Stories
(Source: Editor)

Stay up to date with the week’s top stories by checking the “Weekly Highlights of the Daily Bugle Top Stories” 
here
.

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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.

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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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