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17-0413 Thursday “Daily Bugle”

17-0413 Thursday “Daily Bugle”

Thursday, 13 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 
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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. GAO Posts Report “Information on U.S. Agencies’ Monitoring and Enforcement Resources for International Trade Agreements” 
  4. State/DDTC: (No new postings.) 
  5. Canada Prepares to Join the Arms Trade Treaty  
  1. Bloomberg: “U.S. Lawmakers Push to Widen Iran Sanctions Probe Beyond China’s ZTE” 
  2. The Gazette: “Lebanese Man Convicted of Buying Guns in Lebanon Smuggled from Cedar Rapids” 
  3. Reuters: “Malaysia Central Bank to Support Agencies Probing Flow of Funds to North Korea” 
  4. The Stack: “New Chinese Regulation Requires Security Assessment for Data Export” 
  5. ST&R Trade Report: “Enforcement Against Unfair Trade Practices Takes New Turn” 
  6. ST&R Trade Report: “In the News: Customs, FCPA, Conflict Minerals, Port Development, China” 
  1. M. Laden: “What Does ‘LOL’ Really Mean? 
  2. M. Schaake: “Al-Jazeera Documentary Proves Need for Stronger Export Control for Dangerous Technology” 
  3. M. Volkov: “The Axe Falls on Wells Fargo – A Scathing Independent Report (Part II of III)” 
  4. Z. Chapman: “Contortions in the UK’s Arms Export Regime-and Costs of the Yemen War” 
  1. ECTI Presents 19 Essential Ways Export and Security are Partners in Compliance Webinar, 11 May 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (27 Jan 2017), DOD/NISPOM (18 May 2016), EAR (6 Apr 2017), FACR/OFAC (10 Feb 2017), FTR (15 May 2015), HTSUS (7 Mar 2017), ITAR (11 Jan 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

[No items of interest noted today.
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OGS
OTHER GOVERNMENT SOURCES

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

(Source: Federal Register)

[No items of interest noted today.]

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

(Source: Commerce/BIS

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OGS_a33. GAO Posts Report “Information on U.S. Agencies’ Monitoring and Enforcement Resources for International Trade Agreements”

 
WHAT GAO FOUND
 
     Eleven U.S. agency offices and bureaus have responsibilities for monitoring and enforcing international trade agreements; however, they do not have information that allows for a definitive count of the staff resources and related funding used to carry out these responsibilities. This is because many of the staff who conduct trade monitoring and enforcement activities at these agencies do so as part of a broader portfolio of activities, and none of the agencies routinely tracks staff time at this level of detail. 
     In response to GAO’s request for information, the 11 offices and bureaus used a variety of methods to develop estimates of the number of full-time equivalent (FTE) staff they believe worked on trade monitoring and enforcement activities in 2016 and the approximate costs associated with salaries and benefits for these FTEs. The estimates suggest that in fiscal year 2016, these 11 offices and bureaus dedicated over 700 FTEs at a cost of more than $100 million to monitor and enforce trade agreements. However, the estimates do not fully include all related costs (such as overhead costs) and, in some cases, may not represent all staff who conducted trade monitoring and enforcement activities.  . . .
 
WHY GAO DID THIS STUDY
 
     Monitoring and enforcing trade agreements is a key element of the U.S. government’s efforts to boost exports of U.S. goods and services. The vast majority of U.S. exports, which totaled $2.26 trillion in 2015, are covered by at least one trade agreement to which the United States is a party. These agreements include multilateral World Trade Organization agreements and bilateral or regional FTAs with 20 countries. The Office of the U.S. Trade Representative and several other federal agencies share responsibility for monitoring and enforcing partner countries’ compliance with trade agreements. The U.S. government also provides trade capacity-building assistance, which includes goals to help partner countries meet their obligations under trade agreements.
 
     The Trade Facilitation and Trade Enforcement Act of 2015, Public Law 114-25, includes a provision for GAO to examine federal agencies’ resources to monitor and enforce international trade agreements. This report (1) examines agencies’ resources and activities for monitoring and enforcing international trade agreements in fiscal year 2016 and (2) identifies agencies’ trade capacity-building projects, active in fiscal year 2016, to assist FTA partner countries in meeting their obligations under these agreements. GAO reviewed agency documents, interviewed agency officials, and analyzed agencies’ estimates of resources used to monitor and enforce trade agreements.
 
GAO is making no recommendations in this report.
 
For more information, contact Kimberly Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov.
 
[Editor’s Note: The full report can be found here.]

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OGS_a4
4. State/DDTC: (No new postings.)

(Source: State/DDTC)

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OGS_a55. Canada Prepares to Join the Arms Trade Treaty

(Source: Canada GA)
 
Canada believes that regulating the international arms trade is essential for the protection of people and human rights, and is strengthening its existing practices.
 
As part of Canada’s support for a stronger and more rigorous export control system, the Honourable Chrystia Freeland, Minister of Foreign Affairs, today delivered on the government’s commitment to introduce legislation so Canada can accede to the Arms Trade Treaty (ATT).
 
The ATT is about protecting people from arms. It ensures countries effectively regulate the international trade of arms, so they are not used to support terrorism, international organized crime, gender-based violence, human rights abuses, or violations of international humanitarian law.
 
To implement necessary changes, in March 2017 Canada announced an investment of $13 million to further strengthen the country’s export control regime. These resources will be used to implement new brokering controls, improve transparency, and support enhancements to Canada’s export controls.
 
Canada also recognizes the importance of promoting the ATT and is contributing $1 million to the UN Trust Facility Supporting Cooperation on Arms Regulation, in order to help other countries accede to the ATT.
 
 “The Arms Trade Treaty can set a real global standard, and thereby help prevent human rights abuses and protect lives. Canada’s existing system of export controls meets most of the treaty’s thresholds, and this legislation will set our standards in law. We must continue to encourage other countries to join this treaty, and we must ensure it is properly implemented globally. We committed to introduce this legislation, and I am very pleased that we will in turn raise the bar with a stronger and more rigorous system for our country.”
  — Hon. Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs
 

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NWSNEWS

NWS_a16. Bloomberg: “U.S. Lawmakers Push to Widen Iran Sanctions Probe Beyond China’s ZTE”

(Source: Bloomberg) [Excerpts.]
 
A group of Republican lawmakers is pushing the Trump administration to investigate and unmask a company that may have violated Iran sanctions laws in the same way as Chinese mobile-phone maker ZTE Corp.
 
ZTE agreed last month to pay as much as $1.2 billion after pleading guilty to shipping U.S.-origin products to Iran in violation of U.S. laws restricting the sale of American technology to the country. In a letter Tuesday, Republican Congressman Robert Pittenger of North Carolina, Alabama’s Mike Rogers and eight other lawmakers, called on Commerce Secretary Wilbur Ross to probe the actions of an unidentified company that ZTE has said also evaded U.S. export controls.
 

The rival is referred to only as “F7” in a ZTE document posted on the Commerce Department’s website. The lawmakers in their letter note that news reports have highlighted the similarities between the company described in the documents and Huawei Technologies Co., which is the largest Chinese networking equipment maker followed by ZTE. … 

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NWS_a27. The Gazette: “Lebanese Man Convicted of Buying Guns in Lebanon Smuggled from Cedar Rapids”

(Source: The Gazette)
 
A Lebanese man pleaded guilty Wednesday in federal court to buying guns in Lebanon that were shipped from Cedar Rapids by family members convicted of gun smuggling last year.
 
Fadi Yassine, 42, pleaded to one count of conspiring to violate the Arms Export Control Act – not having a license to export guns.
 
Yassine was arrested on a warrant when he arrived on an international flight Feb. 6 in New York City, court documents show. Following a federal hearing in Brooklyn, he waived further proceedings in New York and a judge transferred him back to U.S. District Court in Cedar Rapids.
 
During the plea, Yassine admitted to conspiring with one or more people to broker guns, and shipping and transporting firearms without a license between late 2013 and May 12, 2015.
 
Court documents show Yassine purchased guns in Lebanon that had been shipped from the United States by Ali Al Herz, 51, his son Adam Al Herz, 23, his brother Bassem Herz, 31, and Bassem’s wife, Sarah Zeaiter, 24.
 
A Homeland Security Investigation special agent reviewed Facebook account records and determined Yassine was advising Bassem Herz on purchasing firearms, court documents show. In the Facebook messages, the two men referenced the fact that a certain Glock model was the newest firearm on the market. Yassine also advised Bassem Herz not to buy Kimber guns or ammunition.  
The affidavit also shows Yassine gave $30,000 in cash to Ali Al Herz in Lebanon for him to acquire more guns in the United States.
 
The Al Herz family members were convicted last year for smuggling guns from Iowa to Lebanon and are all serving federal prison terms.  . . .
 
The initial investigation of the Al Herz family led to the March 2015 seizure of 53 guns and thousands of rounds of ammunition concealed inside Bobcat skid loaders within a shipping container at the Norfolk, Virginia, seaport bound for Lebanon. A subsequent investigation led to the May 2015 seizure of a second shipping container, loaded at Midamar Corp. in Cedar Rapids, also destined for Lebanon, with 99 guns and ammunition concealed inside skid loaders.
 
Evidence presented during hearings showed the containers were bound for southern Lebanon, which is controlled by Hezbollah, a terrorist organization. But the evidence showed none of the family was part of the terrorist group. Prosecutors said the motive for the crime was greed, as the guns could be sold for 10 times their value in Lebanon than in the United States.

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NWS_a38. Reuters: “Malaysia Central Bank to Support Agencies Probing Flow of Funds to North Korea”

(Source: Reuters) [Excerpts.]
 
Malaysia’s central bank said on Thursday it will support law enforcement agencies investigating the possible flow of funds to North Korea, after Reuters reported the North Korean head of a Malaysian firm had for years sent money to Pyongyang’s leadership.  . . . .
 
Malaysia’s deputy home minister had said in response that the reports could damage Kuala Lumpur’s reputation as a financial hub and called on the central bank to investigate the alleged transfer of funds to North Korea.
 
  “Should there be any offence relating to the laws administered by Bank Negara Malaysia, an investigation will be conducted,” the central bank said in its statement Thursday.
 
Malaysia’s historically close ties with North Korea have come under scrutiny following the assassination of Kim Jong Nam, the estranged half-brother of North Korea’s ruler.
 
Reuters reported in February that North Korea’s spy agency was running an arms export operation out of Malaysia.
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NWS_a49. The Stack: “New Chinese Regulation Requires Security Assessment for Data Export”

(Source: The Stack)
 
The Chinese data protection law, due to be implemented in June 2017, requires that data on Chinese consumers be stored within the country, requiring multinational corporations to set up data centers within Chinese borders.
 
A new article of the law, drafted by the Cyberspace Administration of China, sets forth regulations for exporting data outside of China. Should the draft be accepted, it will be enforced as part of the overall Chinese data regulation program.
 
According to the latest revision, all firms that export data must undergo a random security assessment by the Cyberspace Administration, as well as periodic assessments related to the transfer of data packets. Should a firm wish to export any data packet over 1,000 GB, or affecting more than 500,000 users, it must undergo an additional security assessment to determine whether the transferred data has the potential to harm national interests. Companies must obtain the consent of users prior to exporting personal data overseas.
 
The proposed law would also ban the export of economic, technological or scientific data that could threaten national security or public interest. Sensitive geographic and ecological data would also have to be reviewed for impact before export.
 
In most cases, though, data generated in China must be stored within Chinese borders. Every multinational company hoping to do business in China is therefore required to have a data center within Chinese borders.
 
Should a company store Chinese data outside of China, or export data without first undergoing a security assessment, the government may impose fines on the company and on individual employees who are deemed to be responsible for the violation. It may also, at its discretion, revoke or cancel permits or licenses, suspend operations, and/or shut down a company’s website.
 
When companies collect user data, the government requires that users provide real names and true identities. Foreign companies operating in China must also provide the authorities with wiretap access in the case of a criminal or national security investigation.
 
The Chinese government sees the data protection regulation and attendant data export requirements as a necessary step toward safeguarding against threats such as hacking and terrorism. However, some have protested the laws as unfairly targeting foreign businesses.
 
The draft of data export regulations is open for public comment until May 11. If accepted, it will be put into effect in June.

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NWS_a510. ST&R Trade Report: “Enforcement Against Unfair Trade Practices Takes New Turn”

 
Commerce Secretary Wilbur Ross announced April 11 an “unprecedented action” as part of the Trump administration’s effort to “take swift action against harmful trade practices from foreign nations attempting to take advantage of our markets, workers, and businesses.”
 
A Department of Commerce press release states that in the final results of its annual administrative review of the antidumping duty order on oil country tubular goods from Korea the International Trade Administration concluded that domestic Korean prices of the hot-rolled coil used to produce OCTG, as well as Korean electricity prices, are distorted. According to the press release, this was the first time the ITA exercised its new authority under section 504 of the Trade Preferences Extension Act of 2015 to address market distortions in the production of foreign goods and to calculate dumping margins “that more accurately account for the unfair pricing practices of foreign exporters.”
 
Mark Ludwikowski, who leads Sandler, Travis & Rosenberg’s trade remedies practice, said the ITA’s final determination reversed its earlier decision that there was insufficient evidence of market distortion after direct intervention from the White House on the eve of the final determination.
 
In light of this determination the ITA calculated dumping margins of 2.76 percent to 24.92 percent. AD duties based on these rates will be assessed on OCTG from Korea entered during the period of review (July 2014 to August 2015), which was valued at an estimated $1.1 billion (nearly 25 percent of total U.S. imports of OCTG during that period). In addition, AD cash deposits at these rates will be required for new entries of OCTG from Korea for the foreseeable future.

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COMMCOMMENTARY

* Author: Michael Laden, President of Trade Innovations, Info@tradeinnovations.com.

 

In the world of Internet Slang, the abbreviation “LOL” means “Laughing Out Loud”. But, in the highly complex and regulated world of global trade compliance, it has a completely different meaning – “Letter of the Law”! This is essentially how U.S. Customs and Border Protection (CBP) interprets the intricate world of global trade. While it’s sometimes confusing and laced with “legalese”; it’s all right there in black and white; the Tariff Act of 1930 (as amended), and the Customs Regulations of the United States. Companies engaged in foreign commerce need one or more individuals on their staff who can successfully interpret those regulations and laws and apply them to the company’s business model. Without such expertise on staff a company must solely rely on its customs broker which is a very dangerous recipe for non-compliance. Why? Because first and foremost, without a trade compliance manager or department, the company has little or no oversight of their import or export program and processes. This does not constitute “reasonable care” in the minds of CBP. Importers and exporters cannot outsource or otherwise abdicate the liability for trade compliance. The importer owns 100% of it; plain and simple.

The other reason it’s a bad idea to solely rely on your customs broker for trade compliance is that they cannot possibly keep up with the changes occurring in your business. Unless of course, they position one of their employees on-site; and brokers only typically do this for large and mega clients. For smaller importers, total and absolute reliance on your broker as your single line of trade compliance defense is a bad idea. As an importer (or exporter for that matter) your company needs at least one person whose part-time job is to manage the broker and represent the company on matters related to customs. The broker’s work needs to be routinely audited and scrutinized for errors. That individual also needs to be included in any major business changes, acquisitions, new product lines and other business operations that may affect trade compliance. Without that representation at the table, the company may unwittingly and errantly violate customs laws.
 
On Friday, March 31, 2017, President Trump signed an Executive Order titled, “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws”. The Order asserts that as of May 2015, $2.3 billion in antidumping and countervailing duties owed to the Government remained uncollected, often from importers that lack assets located in the United States. The Order then directs the Secretary of the Department of Homeland Security (DHS) to develop a plan within ninety (90) days that would require importers, based on a risk assessment conducted by CBP, to provide security for antidumping and countervailing duty liability through bonds and other legal measures.
The Order also directs the DHS Secretary (through the CBP Commissioner) to develop and implement a strategy and plan for combating violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise entering through any mode of transportation, to the extent authorized by law.

The Order also directs the Secretaries of the Treasury and DHS to ensure that CBP can, consistent with law, enforce and protect Intellectual Property Rights (IPR) holders from the importation of counterfeit goods.
Lastly the Order directs the U.S. Attorney General, in consultation with the Secretary of DHS, to develop recommended prosecution practices and allocate appropriate resources to ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of trade laws.
While it is abundantly clear that this Executive Order is primarily directed as importers of goods covered by antidumping or countervailing orders and IPR goods; it’s important to note that the Order specifically says, “…plan for combating violations of United States trade and customs laws for goods…” And, under the Priority Enforcement section it instructs the, “…high priority prosecution of significant offenses related to violations of trade laws.” In this instance, it does not limit priority prosecution to antidumping, countervailing and IPR only.

Remember, CBP is well-known for literal interpretation and this Executive Order gives them vast new authority to track down companies with trade compliance issues. Any company, not just those importing goods covered by dumping orders or IPR protection. This new authority, when combined with CBP’s Centers for Excellence and Expertise and their new data mining/analytics capability, results in a strong force multiplier for identifying and combating trade fraud.

The savvy trade compliance professional will take heed and stock of this new Executive Order ensuring that their Senior Executives fully understand its depth and breadth. They will also use this opportunity to review the company’s trade compliance protocols and, if necessary, update them. Woe be to the company who is not prepared for this new era of trade compliance.

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* Author: Marietje Schaake, Member of the European Parliament (D66/Group of the Alliance of Liberals and Democrats for Europe), marietje.schaake@europarl.europa.eu.
 
Undercover research by Al-Jazeera shows that European companies actively try to circumvent European export controls and tried to sell spying technology to Iran and South Sudan.
 
It is unacceptable that European companies breach international sanctions and export advanced and dangerous technologies to countries with dreadful human rights records. These kinds of technologies are used to spy on citizens and track down dissidents and the trade in them is said to be worth billions. The Italian authorities must start a criminal investigation into the activities of the companies AREA and IPS.
 
Companies need to obey the law, but the law also needs to be enforced properly by European governments. In the past, export licenses have been given for dangerous products going to problematic countries, such as British spying technology to Saudi Arabia and Egypt. Weak enforcement allows such exports to continue. This must stop. All companies need to be equal before the law. If one Member State refuses a license, that same company must not be able to export the same technology from another Member State.
 
[Editor’s Note: The Al-Jazeera documentary ‘Spy Merchants’ will be aired next Monday evening at 20:00 GMT and is available
here.]

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COMM_a314. M. Volkov: “The Axe Falls on Wells Fargo – A Scathing Independent Report (Part II of III)”

(Source: Volkov Law Group Blog. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
In a scathing report (available here), the independent directors at Wells Fargo released their findings and actions based on a comprehensive internal investigation of Wells Fargo’s sales abuses.
 
Based on its findings, Wells Fargo’s independent board took steps to clawback an additional $75 million from former CEO Stumpf and head of Community Banking Carrie Tolstedt for sales abuses resulting from the sales incentives program.
 
The investigation report is worth reading. The directors found that the root cause of the sales practice failures was a decentralized management structure, coupled with an aggressive sales program directed and controlled by senior management in the Community Banking operation. As a result, employees sold unwanted and even unauthorized accounts to customers to meet management sales targets.
 
While the report lays blame in Wells Fargo’s decentralized management structure, a closer read shows how senior corporate executives, including Carrie Tolstedt were able to resist oversight and accountability, while CEO Stumpf and the board of directors failed to exercise proper oversight and accountability to uncover and prevent the disturbing sales practices, the termination of numerous employees for failures to meet stringent standards or engaging in misconduct to reach applicable targets.
 
CEO Stumpf in the end is called out on his failures to intervene, to blindly rely on Carrie Tolstedt, and avoid meaningful oversight and review of relevant information. CEO Stumpf’s attitude was overly optimistic and reflected a wholesale denial in the face of real and serious questions about problems created by the sales incentives program. His failure to act is perhaps the most damning portrait of all.
 
Carrie Tolstedt is described along with her executive colleagues is described as a leader who resisted inquiries, management oversight, and questioning of her authority. She deliberately mislead the board by understating problems resulting from teh sales incentive program.
 
The independent directors report, however, casts fair criticism on the Risk Management Committee of the board, the nascent and immature oversight of risk within the bank, and failures to delve into information about the number of terminated employees in response to the sales incentives program. The Risk Committee’s failure to ask for basic information was highlighted by one simple and glaring omission – it never knew the number of terminations of employees, which was over 5,000 and a major red flag, in response to the sales incentives program, until Wells Fargo settled its initial enforcement action.

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COMM_a415. Z. Chapman: “Contortions in the UK’s Arms Export Regime-and Costs of the Yemen War”

(Source: Just Security)
 
* Author: Zoë Chapman, Assistant News Editor at Just Security, and Legal Researcher at UK-based human rights organization, JUSTICE, lte@justsecurity.org.
 
Since the outset of Saudi Arabia’s intervention in Yemen, the UK has demonstrated that it is willing to go to great lengths to maintain its arms sales to Saudi Arabia.  This includes contorting the language of the UK’s own arms export control regime, and possibly even revising the regime, to allow for the provision of arms to a state against whom the evidence of widespread breaches of international humanitarian law (IHL) is mounting. This is possibly unsurprising even if it does fly directly in the face of public opinion (demonstrated most recently during the Saudi coalition spokesperson Maj Jen Ahmed al-Asiri’s visit to London). Saudi Arabia is a crucial market for UK defense exports (and has been for over 40 years), with more than £3.3 billion ($4,120,380,000) of exports since the outset of the Saudi-led coalition’s intervention in Yemen. For U.S. and European countries, the British case foregrounds what steps, noble and ignoble, government officials and politicians are willing to take in this space.
 
UK Arms Export Control Regime
 
The UK’s Export Control Act 2002 controls the export of various goods, including arms. Arms and other specified products can only be legally exported under a license issued by the Secretary of State.  Section 9 of the 2002 Act allows the Secretary of State to give guidance about any matter relating to his licensing powers and requires him to set out general principles to be followed. The current guidance on arms exports was laid before Parliament on March 2014, called the Consolidated EU and National Arms Export Licensing Criteria (Consolidated Criteria). The Consolidated Criteria incorporates EU export control law including the EU’s adoption of Council common position 2008/944/CFSP on December 8, 2008, and the International Arms Trade Treaty, ratified by the UK on June 3, 2013. Although the incorporation of these international developments in export control law did not constitute any substantive change in the UK’s arms export policy as set out in previous guidance, explicit reference to international humanitarian law was incorporated into criterion 2(c) of the Consolidated Criteria, which sets out that the UK shall not grant an export license if there is “a clear risk that the items might be used in the commission of a serious violation of international humanitarian law.”
 
Separately, following a review of defense and security export policy by the then-Foreign Secretary in 2011, and in order to further strengthen what was assessed to be an already-strong strategic export licensing system, a “suspension mechanism” was introduced to allow for the immediate suspension of pending licence applications to countries “experiencing a sharp deterioration in security or stability,” to be triggered on a case-by-case basis where, for example, “conflict or crisis conditions change the risk suddenly, or make conducting a proper risk assessment difficult.”
 
The Saudi Intervention in Yemen: UK Support and Possible IHL Violations
 
Saudi Arabia intervened in the conflict in Yemen on March 26, 2015, with the aim of restoring President Abd Rabbuh Mansour Hadi, who had been ousted by the Houthi rebels and forces loyal to former ruler Ali Abdullah Saleh. The UK strongly supported the Saudis from the outset, then-Foreign Secretary Philip Hammond promising support “in every practical way short of engaging in combat.” In fact, the UK’s support for the Saudi-led intervention in Yemen is such that Professor Philippe Sands QC has argued (para. 78) that the UK is effectively involved in the conflict.
 
The Saudi intervention in Yemen is backed by UN Security Council Resolution 2216 and at the invitation of the recognized government still led by President Hadi.  However, since the start of the conflict, there have been widespread reports of potential IHL violations by the Saudi-led coalition (as well as the Houthis) in Yemen.
 
Consider the following record at the time:
 
  – In April 2015, Amnesty International called for the urgent investigation of “the killing of hundreds of civilians” by “relentless” coalition airstrikes.
   – In June 2015, Human Rights Watch (HRW) identified subsequent coalition airstrikes in apparent violation of the laws of war and denounced Saudi Arabia’s designation of the entire Yemeni city of Saada as a military target.
   – In August 2015, Amnesty International called on the international community to “halt arms transfers to any parties to the conflict where there is a risk that the arms could be used to commit or facilitate serious violations of human rights or international humanitarian law.”
   – In October 2015, another report repeated that call, this time specifically for the benefit of the UK and the US on the basis of specific “serious violations of international humanitarian law, including war crimes.”
   – In November 2015, Amnesty and HRW found the remains of a UK-made cruise missile among the rubble of a civilian factory hit by the Saudi-led coalition.
 
In addition to these reports from NGOs, concern at the Saudi-led coalition’s indiscriminate bombing in Yemen was also expressed by the UN High Commissioner for Human Rights (June 15, 2015), the UN Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator (August 19, 2015), the European Parliament (July 27, 2015).
 
Despite all this, in October 2015, the UK Minister for Middle East and Africa, Tobias Ellwood MP, on behalf of the government, denied that he was aware of any evidence of human rights violations on the part of the Saudi-led coalition in Yemen.  Then, in January 2016, a leaked report by a UN panel investigating the Saudi campaign confirmed a pattern of “widespread and systematic” attacks on civilian targets and documented “119 coalition sorties relating to violations of international humanitarian law.”
 
The UK Continues to Export Arms to Saudi Arabia Despite Calls for Suspension
 
In February 2016, the European Parliament voted for an immediate arms embargo for Saudi Arabia on the basis that the export of arms to the Saudis for use in Yemen violated Common Position 2008/944/CFSP (incorporated into the UK’s Consolidated Criteria).
 
Yet the UK government essentially did nothing, despite calls from major opposition parties for a full review of arms sales to Saudi Arabia and the suspension of sales while that review was ongoing, maintaining that there “has not been a breach of IHL by the coalition.”
 
On February 2, the Parliament’s International Development Committee called for the suspension of arms sales to Saudi Arabia. As it turns out, around that time the head of the UK’s Export Control Organisation warned then-Business Secretary Sajid Javid that arms sales to the Saudis should be suspended over IHL concerns, a warning Javid decided to disregard pending “new” evidence of a “clear risk” of IHL breaches. He asked for the support of the then-Foreign Secretary and then-Defense Secretary, bearing in mind that an upcoming judicial review would likely scrutinize the government’s decision-making process.
 
In addition, the House of Commons Business, Innovation and Skills and International Development Committee’s September 15, 2016 report, “The Use of UK-Manufactured Arms in Yemen,” called for the suspension of licences for arms exports to Saudi Arabia capable of being used in Yemen “pending the results of an independent, United Nations-led inquiry into reports of violations of IHRL” (para 107). Foreign Secretary Boris Johnson, then-Defense Secretary Michael Fallon, and Trade Secretary Liam Fox issued a joint statement  in response to this, pledging to continue to supply arms to Saudi Arabia and pointing to the Saudi-led coalition’s own Joint Incident Assessment Team, set up to investigate allegations of breaches of IHL made against the Saudi-led coalition itself, as sufficient response to those allegations.
 
However, there was hardly consensus that arms sales to Saudi Arabia should be suspended.  The House of Commons Foreign Affairs Committee published a separate report, with the same title and on the same day, which did not recommend a suspension of export licences (but did say that the courts were the best place to test whether the government is compliant with the law). Explaining the decision on the BBC’s Newsnight, the chairman of the Committee, Crispin Blunt MP, insisted that it would be an act “close to insanity” to enact a blanket ban on arms exports to Saudi Arabia. When asked about selective suspension of those weapons known to have been dropped by Saudi Arabia on civilian targets in Yemen, he suggested that if the UK stopped arming Saudi Arabia, the Saudis would be left to turn to less advanced weaponry from other sources and expose themselves to an even greater likelihood of IHL breaches. He was also quite clear that, if it turned out that the UK was contravening its own export licencing laws, those laws might have to be changed for the sake of the wider context of the UK’s relationship with Saudi Arabia: “if it turned out that the courts decided we were in breach of our law we would have to look – we should then look at the legal framework.”
 
Potential IHL Violations Mount
 
The bombing of a funeral home in Yemen in October 2016 that left more than 140 people dead was cited as an “apparent war crime” by HRW, which again called for the immediate suspension of arms sales while the coalition conducted a credible investigation. In January 2017, UN sanctions monitors mandated by the Security Council reported that the Saudi-led coalition had carried out attacks in Yemen that “may amount to war crimes.” “For all 10 investigations” carried out by the monitors, the report said, “the panel considers it almost certain that the coalition did not meet international humanitarian law requirements of proportionality and precautions in attack.”
In the courts, the Campaign Against Arms Trade, a UK-based NGO, meanwhile brought a legal action. The NGO is challenging the Secretary of State’s failure to suspend existing export licences for the sale or transfer of arms and military equipment to Saudi Arabia for possible use in the Yemen conflict, and the government’s decision to continue to grant new licences, despite mounting allegations – including UN findings – that the Saudi coalition has perpetrated serious violations of IHL in Yemen using UK arms. The court has recognized the organization’s standing to bring suit, and litigation on the merits of the case is ongoing.
 
A “Clear Risk” that Arms Exported to Saudi Arabia Will be Used in “Serious Violations” of IHL
 
Arguments in the court case have focused on the definition of “clear risk” and of “serious violation” of IHL in the context of Criterion 2(c) of the consolidated criteria. According to the Secretary of State, the threshold for engaging a suspension-the trigger of a “clear risk”-was not met by the outside reports of possible breaches of IHL on the part of the Saudi-led coalition, which are relevant only as one element of the assessment undertaken by the Secretary of State based on both open source and confidential material.
 
James Eadie QC on behalf of the Secretary of State, told the court that establishing whether a nation has committed “serious violations” of IHL “may be extremely difficult and indeed possibly inappropriate” and proving wrongdoing at this level requires “focus on the importance of intention or wilfulness.” Even then, he said, it would be impossible to prove Saudi Arabia’s attitude without access to its internal military records.
 
Yet, with reference to the User’s Guide to Council Common Position 2008/944/CFSP, which also contains the phrase “serious violations of international humanitarian law,” the Secretary of State acknowledged in his skeleton argument that “serious violation” includes “war crimes” as defined in Article 8 of the Rome Statute of the International Criminal Court (ICC), and that, “as is evident from these provisions of the ICC Statute and as indicated by international case law, war crimes generally require intentional or reckless conduct” (para 40, emphasis added).
 
On March 2, the House of Lords Select Committee on International Relations asked the Minister for Middle East and Africa, Tobias Ellwood MP, about the UK government’s response to growing pressure from NGOs, the UN, within Parliament itself, and from the general public, to suspend arms sales to Saudi Arabia in light of mounting evidence of Saudi Arabia’s IHL violations in Yemen.  The Minister suggested that, to meet the threshold for suspension under the UK’s arms export control regime, a breach of IHL has to be “deliberate.”  It has been the UK government’s “consistent” view that Saudi Arabia is not “deliberately” breaching IHL, Ellwood said, but he did acknowledge there have “absolutely” been “grave errors.”  This response begs the question of whether there is a distinction to be drawn between “deliberate” and “reckless” breaches of IHL, and why the latter would not be met by “grave errors.” It seems that through a tortured interpretation by the government, the requirement to suspend arms sales per the UK’s export licencing criteria would not be triggered.  While a grave error may not be the same as recklessness each time, how many honest mistakes can one make before one’s actions become reckless? It would presumably be reckless to maintain a system of military targeting that produces civilian casualties as result of frequently repeated “grave errors.”
 
Since then, HRW has reported that an apparent Saudi-led coalition helicopter attack on a boat carrying Somali refugees, which killed at least 32 civilians, was “the latest likely war crime” in Yemen’s war.
 
On April 2, the Guardian revealed that the Metropolitan police (London’s police force) is “examining allegations of war crimes by Saudi Arabia in Yemen” in order to “assess whether a full-scale investigation is justified.”  Law firm Hickman & Rose reportedly precipitated this “scoping exercise” – per the Crown Prosecution Service’s War Crimes/Crimes Against Humanity Referral Guidelines – to assess whether a full-scale criminal investigation is justified. Lawyer Daniel Machover explained that “the prosecuting authorities are legally obliged to seek out and, where the evidence permits, prosecute (or extradite for prosecution) those in their jurisdiction who are suspected of war crimes.”
 
The Met’s announcement came as Prime Minister Theresa May prepared for her visit to Saudi Arabia, which she has explained on the basis that UK-Saudi ties are important for security and prosperity, and during which “she will make clear that [Saudi Arabia is] a close and important ally” and work to “deepen true strategic partnerships.”   The question remains as to what costs and legal contortions need to be sustained as the price for this relationship.

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TEEX/IM TRAINING EVENTS & CONFERENCES

* What: 19 Essential Ways Export and Security are Partners in Compliance
* When: May 11, 2017; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Rita McCabe
* Register: Here or Danielle McClellan, 540-433-3977, danielle@learnexportcompliance.com.

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ENEDITOR’S NOTES

(Source: Editor)

* Thomas Jefferson (13 Apr 1743 – 4 Jul 1826, was an American Founding Father who was the principal author of the Declaration of Independence and later served as the third President of the United States from 1801 to 1809. Previously, he was elected the second Vice President of the United States, serving under John Adams from 1797 to 1801.)
  – “Determine never to be idle. No person will have occasion to complain of the want of time who never loses any. It is wonderful how much may be done if we are always doing.”
 
* Roger de Rabutin (13 Apr 1618 – 9 Apr 1693), commonly known as Bussy-Rabutin, was a French memoirist.)
  – “Absence is to love what wind is to fire; it extinguishes the small, it enkindles the great.”
 
[Editor’s note:  Several of our eagle-eyed subscribers who faithfully read the Unfamiliar Quotations every day noticed that yesterday we repeated the 5 April quotations rather than providing the expected quotation for 12 April.  So for those eager readers (and all the others who noticed, but didn’t call it to my attention), we include below the quotations intended for publication yesterday.]
 
* Tom Clancy (Thomas Leo “Tom” Clancy Jr., 12 Apr 1947 – 1 Oct 2013, was an American novelist and video game designer who was best known for his technically detailed espionage and military-science story lines set during and after the Cold War.  Seventeen of his novels, including Hunt for Red October (which he sold for $5,000), Patriot Games, Clear and Present Danger, and The Sum of All Fears, were bestsellers, and more than 100 million copies of his books are in print.)
  – “There are two kinds of people: the ones who need to be told, and the ones who figure it out all by themselves.”
  – “Success will ruin your life.”
 
* Henry Clay (12 Apr 1777 – 29 Jun 1852, was an American lawyer and planter, statesman, and skilled orator who represented Kentucky in both the United States Senate and House of Representatives. He served three non-consecutive terms as Speaker of the House of Representatives and served as Secretary of State under President John Quincy Adams from 1825 to 1829.)
  – “Courtesies of a small and trivial character are the ones which strike deepest in the grateful and appreciating heart.
[Another Editor’s note: There is an excellent cigar brand named after Henry Clay, who, like many other esteemed individuals, loved cigars.]

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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)

Review the week’s top Ex/Im stories in “Weekly Highlights of Daily Bugle Top Stories” posted 
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.

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

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

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