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17-0419 Wednesday “The Daily Bugle”

17-0419 Wednesday “Daily Bugle”

Wednesday, 19 April 2017

TOP
The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. Commerce/Census Amends FTR, Clarifies Filling Requirements 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS Accelerates Payment Schedule for Streit USA Armoring, LLC’s Agreed Civil Penalty 
  3. Commerce/BIS Posts Support Document Requirements with Respect to Hong Kong and Updated FAQs 
  4. DHS/CBP Announces ACE Certification Outage, 19 April 
  5. State/DDTC: (No new postings.) 
  6. EU Amends Restrictive Measures Concerning ISIL and Al-Qaida 
  7. UK/DIT ECO Publishes Strategic Export Controls Licensing  
  1. Asia News Network: “Beijing Urges US to Change Export Policies to Diminish its Trade Deficit” 
  2. Expeditors News: “Reminder: BIS Releases Hong Kong Support Documentation Requirements” 
  3. Reuters: “U.S. Says Iran Complies with Nuke Deal but Orders Review on Lifting Sanctions” 
  4. ST&R Trade Report: “Foreign Trade Regulations Revised to Reflect New Export Reporting Requirements” 
  1. C.E. Holder & K.T. Scarlott: “Exporters Must Comply With Hong Kong Import and Export Controls” 
  2. M. Volkov: “Corporate Culture and Whistleblowers: A Reliable Barometer of a Company’s Culture” 
  3. Gary Stanley’s ECR Tip of the Day 
  4. R.C. Burns: “Indictment of SDN Ignores OFAC’s 50 Percent Rule” 
  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 (18 Apr 2017), FACR/OFAC (10 Feb 2017), FTR (19 Apr 2017), 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

1
. Commerce/Census Amends FTR, Clarifies Filling Requirements

(Source: Federal Register) [Excerpts.]
 
82 FR 18383-18393: Foreign Trade Regulations: Clarification on Filing Requirements
* AGENCY: Bureau of the Census, Commerce Department.
* ACTION: Final rule.
* SUMMARY: The Bureau of the Census (Census Bureau) issues this Final Rule amending the Foreign Trade Regulations (FTR) to reflect new export reporting requirements. Specifically, the Census Bureau is making changes related to the implementation of the International Trade Data System (ITDS), in accordance with the Executive Order 13659, Streamlining the Export/Import Process for American Businesses. The ITDS was established by the Security and Accountability for Every (SAFE) Port Act of 2006. The changes also include the addition of the original Internal Transaction Number (ITN) data element in the Automated Export System (AES). Lastly, the Census Bureau is making remedial changes to improve clarity of the reporting requirements. These changes are discussed in detail in the SUPPLEMENTARY INFORMATION section.
* DATES: This Final Rule is effective 18 July 2017.
* FOR FURTHER INFORMATION CONTACT: Dale C. Kelly, Chief, International Trade Management Division, U.S. Census Bureau, Washington, DC 20233-6010, by phone: (301) 763-6937, by fax: (301) 763-8835, or by email: dale.c.kelly@census.gov.
* SUPPLEMENTARY INFORMATION: …
  The Census Bureau is adding a new original Internal Transaction Number (ITN) data element. The original ITN is an optional data element that can be used if a previously filed shipment is replaced or divided and for which a new EEI record(s) must be filed. The addition of the original ITN will assist the export trade community and enforcement agencies in verifying that a filer completed the mandatory filing requirements for the original shipment and any additional shipment(s).
  The revised timeframes for split shipments addressed in FTR Letter #6, Notice of Regulatory Change for Split Shipments, are incorporated into the regulatory text of this final rule. …
 
  After consideration of the comments received, the Census Bureau revised and added certain provisions in the Final Rule to address the concerns of commenters and to clarify the requirements of the rule. The changes made in this Final Rule are as follows:
 
  – Amend the proposed rule to remove the definition and filing requirement for the used electronics indicator.
  – Section 30.1(c) is amended to revise the definition of “Carrier” to include a Non Vessel Operating Common Carrier (NVOCC) as an example of a carrier because the Automated Export System Trade Interface Requirements allows the Standard Carrier Alpha Code of a NVOCC to be reported.
  – Section 30.1(c), is amended to add the definition of “U.S. Postal Service customs declaration form” to identify the shipment document used for exports by mail.
  – Section 30.1(c), is amended to revise the definition of “Commercial loading document” to include the U.S. Postal Service customs declaration form as an example of a commercial loading document.
  – The note to Sec. 30.2(a)(1)(iv) is amended to add Country Group E:2 to ensure consistency with the Export Administration Regulations (EAR).
  – Section 30.2(c) is amended to clarify the application and certification process by dividing the section based on the filing method, AESDirect or methods other than AESDirect. As a result, the title was amended to read as “Application and Certification Process” as opposed to “Certification and Filing Requirements.”
  – Section 30.3(e)(2) is amended to add language requiring the authorized agent to provide the filer name in addition to the Internal Transaction Number (ITN) and date of export as proposed in the NPRM, when requested by the U.S. Principal Party in Interest in a routed transaction.
  – Section 30.4(b)(2)(v) is amended to read “mail” rather than “mail cargo” and the phrase “filing citation or exemption legend” will be revised to read “proof of filing citation, postdeparture filing citation, AES downtime filing citation, exemption or exclusion legend.”
  – Section 30.8(a) is amended to more accurately reflect U.S. Postal Service operations.
  – Section 30.16(d) is amended to add Country Group E:2 to ensure consistency with the EAR.
  – Section 30.28 is amended to add language removed from 30.28(c) to the opening paragraph.
  – Section 30.29(a)(2) is amended by clarifying that a license value is only required to be reported for shipments licensed by a U.S. Government agency.
  – Section 30.29(b)(2) is amended to replace the term “commercial document” with the defined term “commercial loading documents”.
  – Section 30.37(y) is amended to add Country Group E:2 to ensure consistency with the EAR.
  – Delete Appendices B, C, E and F because the Appendices were initially created to assist the trade in transitioning from the Foreign Trade Statistics Regulations (FTSR) to the FTR and are no longer necessary. As a result of deleting Appendices B, C, E, and F, Appendix D is redesignated as Appendix B.
 
  Dated: April 10, 2017.
John H. Thompson, Director, Bureau of the Census.

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OGSOTHER GOVERNMENT SOURCES

OGS_a12. 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_a23.

Commerce/BIS Accelerates Payment Schedule For Streit USA Armoring, LLC’s Agreed Civil Penalty

(Source:
Commerce/BIS) [Excerpts.]
 
On 1 September 2015, an Order approving the terms of the Settlement Agreement entered into in late August 2015, between the Bureau of Industry and Security, U.S. Department of Commerce (“BIS”), and Streit USA Armoring, LLC (“Streit USA”), of North Charleston, South Carolina, was signed.    
     Pursuant to the Settlement Agreement and Order, the sanctions imposed against Streit USA included a civil penalty totaling $1,600,000. The Settlement Agreement and Order provide that of the $1,600,000 civil penalty, “$850,000 shall be paid in five installments as follows:$170,000 no later than 27 September 2015; $170,000 no later than 27 April 2016; $170,000 no later than November 27, 2016; $170,000 no later than 27 June 2017; and $170,000 no later than 27 January 2018.” Payment of the remaining $750,000 was suspended for a period of three years from the date of the 1 September 2015 Order and would thereafter be waived, provided, inter alia, ”that during this three-year probationary period . . . [Streit USA] made full and timely payment of the $850,000 set forth above. …
     The Settlement Agreement and Order also include a three-year suspended denial of Streit USA’s export privileges. The suspension of the denial order was conditioned on, inter alia, Streit USA’s full and timely payment of each installment payment. The Settlement Agreement and Order provided, furthermore, that “[i]f any of the five installment payments is not fully and timely made, any remaining scheduled installment payments and any suspended penalty may become due and owing immediately.”
     The ability to pay the $850,000 in installments rather than one lump sum was specifically sought by Streit USA during the settlement negotiations. Under the installment plan that Streit USA negotiated for and was agreed to and approved by BIS, Streit USA was obligated to make timely payment of its civil penalty payments. It is undisputed that Streit USA failed to do so and that Streit USA did not make the 27 November 2016 installment payment in a timely manner. …
     In addition, OEE determined that while Streit USA did not timely make its 27 November 2016 installment payment, Streit USA’s president, Eric Carlson, who entered into a settlement agreement with BIS on related charges that also was approved by order dated 1 September 2015, has been making his payments in a full and timely fashion. Similarly, Streit USA’s parent company, Streit Group FZE, and another Streit Group FZE subsidiary, Streit Middle East FZCO, have been making their installment payments in full and timely fashion in accordance the terms of their settlement agreement with BIS, which also was approved on 1 September 2015.  Guerman Goutorov, the chairman, chief executive officer, and sole or majority owner of Streit USA, Streit Group FZE, and Streit Middle East FZCO, also entered into a settlement agreement with BIS approved on 1 September 2015. Mr. Goutorov, whose civil penalty payment was due in one lump sum, paid his penalty in full and timely fashion. …
 
ACCORDINGLY, IT IS HEREBY ORDERED that pursuant to the acceleration clause contained in the 1 September 2015 Final Order in this matter, and the corresponding provision contained in the BIS-Streit USA Settlement Agreement, the 1 September 2015 Final Order is amended to move forward the due dates for the two remaining $170,000 installment payments from June 27, 2017, and January 27, 2018, respectively, to May 15, 2017, and September 30, 2017, respectively.
  The order is effective immediately, issued on 14 April 2017.
 
  Signed by
Richard R. Majauskas, Acting Assistant Secretary of Commerce 
for Export Enforcement 

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OGS_34.

Commerce/BIS Posts Support Document Requirements with Respect to New Hong Kong Rule — Effective Today — and Updated FAQs

 
On January 19, 2017, BIS published a regulatory requirement for exporters and reexporters of items controlled under the multilateral regimes to have a Hong Kong license, if one is required, prior to exporting or reexporting under a BIS export license or license exception. For additional information, please review the
rule [effective today, 19 April 2017] or the
Frequently Asked Questions.
 
Licensing Policy
 
The Hong Kong Special Administrative Region (HKSAR) and the People’s Republic of China (the PRC or Mainland China) are treated as two separate destinations under U.S. law for export control purposes (see Hong Kong’s separate entry on the
Commerce Country Chart in Supplement No. 1 to Part 738 of the Export Administration Regulations.  The United States-Hong Kong Policy Act of 1992 (Public Law 102-383, 106 Stat. 1448, Oct. 5, 1992) allows the United States to continue to treat Hong Kong separately from Mainland China for matters concerning trade and export control. Hong Kong administers its own import and export systems and, owing to its status as a cooperating country with multilateral export control regimes, receives favorable treatment with regard to U.S. export licensing and regulations.
 
In most cases, a license issued for an export to Hong Kong is valid only for export to Hong Kong. Certain items subject to the EAR that do not require an individual validated license for export from the United States to Hong Kong require a license for reexport from Hong Kong to China. However, , if an item is going to Hong Kong on its way to China, you must determine license requirements based on China as the destination.
 
Tiananmen Square Sanctions
 
Following the 1989 military assault on demonstrators by the PRC in Tiananmen Square, the U.S. Government imposed constraints on the export to the PRC of certain items on the
Commerce Control List (CCL). Pursuant to Section 902(a)(4) of the Foreign Relations Authorization Act for fiscal year 1990-1991, Public Law 101-246 (February 16, 1990), better known as the U.S. Tiananmen Square Sanctions, BIS reviews applications for the export or reexport to China of items controlled for Crime Control (CC) reasons under a general policy of denial. However, under the “one country, two systems” principle, BIS reviews applications for the export or reexport to Hong Kong Government end-users, or in certain cases to private end-users, on a case-by-case basis.
 
License Exceptions
 
A license exception is an authorization to export or reexport certain items under stated conditions without a license, even though such exports or reexports would otherwise require a license. There are certain limited circumstances in which a license exception may be available for export to Hong Kong, or for reexport from Hong Kong to China, based on a number of factors, including the Export Control Classification Number (ECCN), the end-user and the end-use. You should consult
Part 740 of the EAR for details on whether or not a license exception is available for export to Hong Kong or reexport from Hong Kong to China.
 
Hong Kong Best Practices
 
Hong Kong has promulgated a set of “Best Practices” and BIS encourages you to ensure that your company, as well as all of the parties in the transaction chain, adheres to best practices. Your Hong Kong consignees may commit a violation of Hong Kong export controls if they fail to follow Hong Kong’s best practices. You can view TID’s best practices here, and are encouraged to share them with your overseas counterparts.
 
If you would like to know more about an entity in Hong Kong, all companies doing business in Hong Kong are required to register with the Hong Kong Inland Revenue Department. Information about registered companies is available to the public. Basic company information is available for free at their
Cyber Search Center, and more detailed information is available for a nominal fee.

[Editor’s note: the rule, effective today, was published in the Federal Register and included in the Daily Bugle of Thursday, 19 January 2017, item #2, and is available here.]

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OGS_aa45. 
DHS/CBP Announces ACE Certification Outage, 19 April

(Source:
CSMS# 17-000222, 19 April 2017.)
There will be an ACE CERTIFICATION Outage Wednesday evening, April 19, 2017 from 1700 ET to 2000 ET for the following ACE Deployment:
 
ACE Import Air Manifest
 
  – CAOM-9549: Automatically close BOL after an approved in-bond and local transfer movement to an International Mail Facility FIRMS – AIR ONLY
 
ACE Portal
 
  – CAOM-10326: Update to Terms & Conditions link on Portal login
page.

  – CAOM-10489: Create Exporter Account portal page: Update to verbiage in the Privacy Statement that appears on the page before the applicant hits the “Submit” button.

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

OGS_a56. 
State/DDTC: (No new postings.)

(Source:
State/DDTC)

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OGS_a6
7. 
EU Amends
Restrictive Measures Concerning ISIL and Al-Qaida 
 

 
Regulations:
  –
Commission Implementing Regulation (EU) 2017/700 of 18 April 2017 amending for the 266th time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the ISIL (Da’esh) and Al-Qaida organisations.

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OGS_a7
8. UK/DIT ECO Publishes Strategic Export Controls Licensing Statistics

(Source: UK/DIT ECO)   
 
The Export Control Organisation (ECO) of the UK Department of International Trade (DIT) has published various strategic export controls licensing statistics. Data is released for the following years: 2013, 2015 and 2016.
 
For an overview of the published statistics, click 
here

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NWSNEWS

NWS_a19.

Asia News Network: “Beijing Urges US to Change Export Policies to Diminish its Trade Deficit”

Beijing urged Washington on Wednesday to “adjust its outdated policies” on exports to China in light of a recent analysis saying US policy in areas like high-tech goods “significantly contributes” to its trade deficit with China.
 
Foreign Ministry spokesman Lu Kang said it is hoped Washington will “create conditions for handling its trade deficit”. China is “willing to expand imports from the US based on the actual needs of the domestic market”, Lu said, responding to a question about the analysis at Wednesday’s daily news conference in Beijing. …
 
  “A significant amount of US potential exports to China were blocked by its political barriers,” according to an analysis published on April 10 on the
website of the Carnegie Endowment for International Peace …
 
Huang Songping, head of General Administration of Customs, said on April 13 that “US restrictions on high-tech exports to China is one of the factors behind the US trade deficit with China”. … 

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NWS_a210.

Expeditors News: “Reminder: BIS Releases Hong Kong Support Documentation Requirements Effective Today”

 
In a Federal Register Notice (FRN) published on January 19, 2017 the Bureau of Industry and Security (BIS) announced updated support documentation requirements necessary for certain shipments to and from Hong Kong.
 
certain commodities exported from the U.S. to Hong Kong or reexported to Hong Kong from a country other than the U.S. will require the exporter or reexporter to obtain a copy of the Hong Kong import license or, if no license is required, a statement from the Hong Kong government attesting to this prior to export or reexport to Hong Kong.
 
The rule also applies to certain commodities reexported from Hong Kong. The re-exporter in Hong Kong must have in its possession a valid export license from the Hong Kong government, or a statement from the Hong Kong government stating that no export license is required prior to reexport.
 
Commodities subject to this rule include any commodities regulated by the U.S. Export Administration Regulations (EAR), wherever located, that have an Export Control Classification Number (ECCN) and are controlled for the following reasons:
 
   – National Security (MS)
   – Missile Technology (MT)
   – Nuclear Nonproliferation (NP column 1)
   – Chemical and Biological Weapons
 
As a reminder, this rule became effective today, April 19, 2017.
 
The FRN can be accessed
here.

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NWS_a311.

Reuters: “U.S. Says Iran Complies with Nuke Deal but Orders Review on Lifting Sanctions”

(Source:
Reuters) [Excerpts.]
 
The Trump administration said on Tuesday it was launching an inter-agency review of whether the lifting of sanctions against Iran was in the United States’ national security interests, while acknowledging that Tehran was complying with a deal to rein in its nuclear program.
 
In a letter to U.S. House of Representatives Speaker Paul Ryan, the top Republican in Congress, on Tuesday U.S. Secretary of State Rex Tillerson said Iran remained compliant with the 2015 deal, but said there were concerns about its role as a state sponsor of terrorism.
 
Under the deal, the State Department must notify Congress every 90 days on Iran’s compliance under the so-called Joint Comprehensive Plan of Action (JCPOA). It is the first such notification under U.S. President Donald Trump.
 
  “The U.S. Department of State certified to U.S. House Speaker Paul Ryan today that Iran is compliant through April 18 with its commitments under the Joint Comprehensive Plan of Action,” Tillerson said in a statement.
 
  “President Donald J. Trump has directed a National Security Council-led interagency review of the Joint Comprehensive Plan of Action that will evaluate whether suspension of sanctions related to Iran pursuant to the JCPOA is vital to the national security interests of the United States,” Tillerson added.
 

He did not say how long the review would take but said in the letter to Ryan that the administration looked forward to working with Congress on the issue. … 

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NWS_a412.

ST&R Trade Report: “Foreign Trade Regulations Revised to Reflect New Export Reporting Requirements”

 
The Census Bureau has issued a final rule that, effective July 18, will amend the Foreign Trade Regulations to reflect new export reporting requirements related to the implementation of the International Trade Data System. These changes also include the addition of a new data element in the Automated Export System and amendments to provide clarity on existing reporting requirements.
 
Reporting. This rule requires U.S. principal parties in interest or authorized agents in the U.S. to file export information to AES for all shipments where an electronic export information record is required under the FTR.
 
New Data Element. The original internal transaction number field is being added in AES. This optional data element may be utilized if a previously filed shipment is replaced or divided and a new EEI record must be filed. Adding this field will assist the export trade community and enforcement agencies in identifying that a filer completed the mandatory filing requirements for the original shipment and any additional shipment(s).
 
In light of numerous concerns from the trade community, Census has decided not to require reporting of the used electronics indicator. The UEI was intended to improve the availability and quality of information on the trade and handling of used electronics to ensure compliance with Executive Order 13693, which aims to employ environmentally sound practices with respect to federal agency disposal of all excess or surplus electronic products to reduce the likelihood of negative impacts to health and the environment in developing countries.
 
Split Shipments. Census is incorporating into the FTR the revised timeframes for split shipments that were addressed in FTR Letter #6. Census is also clarifying that succeeding parts of a split shipment that are exported within the specified time frames do not require an additional EEI record.
 
Other Changes. In response to comments on its proposed rule, Census is making the following changes.
 
  – Revising the definition of “carrier” to reference non-vessel-operating common carriers because the AES Trade Interface Requirements allow the standard carrier alpha code of an NVOCC to be reported.
  – Requiring the filer name, in addition to the date of export and ITN, to be provided to the U.S. principal party in interest upon request in a routed transaction (Census will issue a separate proposed rule on possibly requiring the filer address, filer ID, and shipment reference number to be provided as well).
  – Clarifying that the license value is only required for shipments licensed by a U.S. government agency (not those exported under a license exemption).
  – Removing appendices B, C, E, and F, which are no longer necessary because they were created to assist with a transition from the Foreign Trade Statistics Regulations to the FTR that took place in 2008.
  – Adding a definition for “U.S. Postal Service customs declaration form” to identify the shipment document used for exports by mail.
  – Revising the definition of “commercial loading document” to include the USPS customs declaration form as an example.
  – Revising the rule to more accurately reflect USPS operations.
  – Changing the phrase “filing citation or exemption legend” to “proof of filing citation, postdeparture filing citation, AES downtime filing citation, exemption or exclusion legend”.

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COMMCOMMENTARY

COMM_a113.

C.E. Holder & K.T. Scarlott: “Exporters Must Comply With Hong Kong Import and Export Controls”

 
* Authors: Casey E. Holder, Esq.,
cholder@bakerlaw.com; Kerry T. Scarlott, Esq.,
kscarlott@bakerlaw.com. Both of Baker & Hostetler LLP, Houston and Washington D.C. 
 
Beginning today, April 19, 2017, individuals and companies planning to export to or re-export from Hong Kong will need to obtain certain paperwork prior to shipping. This new rule was published earlier in 2017, by the Department of Commerce’s Bureau of Industry and Security (BIS), expanding compliance requirements for persons intending to export to or re-export from Hong Kong any items controlled under the Export Administration Regulations (EAR), specifically, items controlled for national security (NS), missile technology (MT), nuclear nonproliferation (NP column 1), or chemical and biological weapons (CB) reasons.
 
Exporters and re-exporters of these items
to Hong Kong must obtain, prior to shipment, either:
 
  – A copy of a valid import license from the Hong Kong importer issued by the Hong Kong government, or;
  – A copy of a written statement issued by the Hong Kong government that no import license is required.
 
Persons intending to re-export these items
from Hong Kong must obtain prior to shipment either:
 
  – A Hong Kong export license; or
  – A statement from the Hong Kong government that such a license is not required.
 
It bears noting that a U.S. exporter is not required to obtain a copy of a Hong Kong export license, even if the exporter knows the item will be subsequently re-exported from Hong Kong. Rather, the Hong Kong re-exporter itself is required to obtain a Hong Kong export license or other documentation prior to the re-export.
 
Indications that no HK import or re-export license is required may be publicly available from the Hong Kong Trade and Industry Department
website. If an item is not identified on the website, the exporter or re-exporter will need to verify the control status of the item with the Hong Kong government. These documents are not required to be included with a BIS license application is submitted (or shared with BIS when a license exception is utilized), but must be obtained prior to shipment of the item to or from Hong Kong. As with other export control documents, exporters and re-exporters will need to maintain copies of these documents for record-keeping purposes for a period of at least five years from the date of export or re-export.
 
The amendments do not impose any new burdens on licensing exports or re-exports with BIS. Rather, they effectively compel compliance with Hong Kong import and export controls by requiring proof of compliance with such controls hen shipping pursuant to an EAR license or license exception. This reflects the United States-Hong Kong Policy Act of 1992, which allows the U.S. to treat Hong Kong as a destination separate from the People’s Republic of China for export control purposes. The rule recognizes, though, that Hong Kong is sometimes used to divert and transship items subject to U.S. export controls to mainland China without the required license.
 
BIS intends that obtaining proof of this documentation will increase assurance that U.S.-origin goods subject to export control regimes are properly authorized to their ultimate destination. BIS has previously published specific exporting guidance on conducting due diligence to prevent unauthorized transshipment from Hong Kong to China. This rulemaking reflects ongoing BIS efforts to combat unauthorized diversions or transshipments to Hong Kong.
 
BIS published a list of Frequently Answered Questions related to its new rule on March 17, 2017, available on the BIS website here. Companies should assess current obligations under Hong Kong import and export law, and implement procedures for obtaining the required documents in order to ensure compliance with U.S. as well as Hong Kong trade laws.

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COMM_a214.

M. Volkov: “Corporate Culture and Whistleblowers: A Reliable Barometer of a Company’s Culture”

(Source:
Volkov Law Group Blog. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com, +1-240-505-1992.  
 
If you want a reliable indication of a company’s culture, just look at how the company treats employee concerns and whistleblowers. Recent events have highlighted serious failures on the part of major companies to address employee concerns and treat whistleblowers with some degree of respect.
 
Barclay Bank’s CEO was disciplined and suffered financial penalties for his improper attempts  to identify a whistleblower who sent an anonymous complaint to the Barclay’s Board.
 
Wells Fargo is alleged to have fired several managers and employees after they raised specific concerns about the sales incentive program.
 
You have to ask yourself – what the heck are these companies doing?
 
Given today’s enforcement environment and focus on protecting whistleblowers and employees who raise concerns, it is surprising to see companies retaliating against whistleblowers and employees.  In general, we have seen little progress in corporate handling of employee concerns and in particular non-retaliation against whistleblowers.  Offending companies deserve every penny of punishment and reputational damage from retaliating against employees.
 
In the Barclay’s case, the CEO enlisted the bank’s security office to identify the anonymous whistleblower who sent two letters to Barclay’s board alleging prior misconduct by a close colleague of the CEO who had worked with the CEO at his former bank.  The CEO explained in his subsequent apology:
 
In my desire to protect our colleague, however, I got too personally involved in this matter. My hope was that if we found out who was sending these letters we could try and get them to stop the harassment of a person who did not deserve that treatment. Nevertheless, I realise that I should simply have the compliance function handle this matter, as they were doing. This was a mistake on my part and I apologise for it.
 
The challenge for companies like Barclays and Wells Fargo is how to start rebuilding a culture of trust where employees feel comfortable raising concerns without fear of retaliation. Without a real commitment to encouraging employee concerns, most employees are suspicious and reluctant to raise concerns.  It is a difficult to overcome employee reluctance.
 
The challenge for companies like Barclays and Wells Fargo is even more daunting when employees who raised concerns are terminated or investigated by the CEO.
 
In the case of Wells Fargo, the Department of Labor is investigating the company for whistleblower violations of Dodd-Frank and Sarbanes-Oxley.  In one case, a Wells Fargo manager was fired within 20 days of raising a complaint. The reason for the firing cited by the bank was a previously discredited complaint about a manager’s alleged drinking behavior.
 
A speak up culture requires the commitment of the board, the CEO and senior executive management. Concrete actions have to be taken to establish credibility for an employee communications program.
 
Barclays has a real credibility program – the offending CEO cannot turn around and tell employees that he wants to hear their concerns. As he demonstrated, he is more interested in the identity of the whistleblower than responding to the substance of the concern.
 
Similarly, Wells Fargo’s firing of employees who complained about the abusive sales incentive program creates a manifest culture of distrust. To repair such a culture will take time, commitment, and specific actions by leadership, mid-level managers and staff. Until such remediation occurs, Wells Fargo will continue to suffer from a culture where employees are reluctant to raise specific concerns.
 

Actions always speak louder than words and companies who have suffered serious retaliation issues can only restore trust with meaningful actions and specific commitments.

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COMM_a315.

Gary Stanley’s ECR Tip of the Day

 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com.
 
Before shipping under License Exception GBS to destinations in Country Group B (Supplement No. 1 to Part 740 of the Export Administration Regulations), the exporter or reexporter must obtain a copy of the requisite Hong Kong import license from the recipient(s) in Hong Kong before exporting or reexporting items to Hong Kong. Otherwise, a copy of a written statement by the Government of the Hong Kong Special Administrative Region issued to the Hong Kong importer stating that no license is required to import the item into Hong Kong is required. This may come in the form of a “NLR Notification” or “website information”. If the item you are exporting or reexporting to Hong Kong is not found on that website, you will need to approach Hong Kong Trade and Industry Department to verify the control status of the item. “NLR Notification” or “website information” may be used for more than one export or reexport to Hong Kong.

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COMM_a416.

R.C. Burns: “Indictment of SDN Ignores OFAC’s 50% Rule”

(Source:
Export Law Blog. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com, 202-508-6067)
 
Prosecutors love to add cute little nicknames to indictments.   In their view,
United States v. John Jones aka Vicious Johnny the Kneecapper sounds much, much better than plain old vanilla
United States v. John Jones.  So, in the
indictment against recently arrested Kassim Tajideen the government makes sure to lead off with a few akas: “Big Haj” and “Big Boss.”  In this case, however, maybe the United States needs its own aka as well: “United States aka United States of Imaginary Laws”
 
Tajideen is on the Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons.   He is being prosecuted for “causing” U.S. persons to violate the rules against transactions with blocked parties.  Charging an SDN for doing business with U.S. persons, rather than charging U.S. persons that do business with the SDN, is unusual but not unprecedented.
 
The problem here, however, is not that the prosecution is unusual.  The problem is that the prosecution is based on a rookie mistake and a careless misinterpretation of governing law.  The theory of the indictment is that Tajideen, by not disclosing that he controlled various companies, caused U.S. persons to transact business with those companies in violation of U.S. sanctions.  Here’s what the indictment says:
 
The business empire utilized different corporate entities over the years, all controlled by KASSIM TAJIDEEN, including Epsilon, ICTC, and Sicam Ltd., to procure and distribute goods throughout the world, including the United States. KASSIM TAJIDEEN was the ultimate owner and chief decision-maker of the business empire, with IMAD HASSOUN acting as confidante and lieutenant. KASSIM TAJIDEEN benefited directly and indirectly from the operation of the business empire.
 
22. At all relevant times during the conspiracy, the defendant KASSIM TAJIDEEN was designated a Specially Designated Global Terrorist by the United States Department of the Treasury, Office of Foreign Assets Control, pursuant to the International Emergency Economic Powers Act, Executive Order 13224, and the Global Terrorism Sanctions Regulations. As discussed above, the SDGT designation resulted in any property in the United States, or in the possession or control of U.S. persons, in which KASSIM TAJIDEEN had an interest, being blocked, and all U.S. persons were generally prohibited from transacting business with, or for the benefit of, KASSIM TAJIDEEN.
 
Most readers here will immediately see the problem with the prosecutor’s case.  In effect, the prosecution is asserting, wrongly, that it is illegal for a U.S. person to deal with an entity in which an SDN has
any interest. Alternatively, the prosecutors might be asserting above that it must be at least a controlling interest.  But whichever the case, that is just not true.
OFAC has issued clear
guidance, easily found by anyone with access to the Internet (which presumably includes the prosecutors here) that describes the circumstances in which any entity in which an SDN has an interest is itself also blocked by operation of law.  This guidance makes clear that it takes more than “any interest” or even a “controlling interest” for ownership by an SDN result in the owned entity being itself blocked.
 
Here is what that guidance says:
 
Persons whose property and interests in property are blocked pursuant to an Executive order or regulations administered by OFAC (blocked persons) are considered to have an interest in all property and interests in property of an entity in which such blocked persons own, whether individually or in the aggregate, directly or indirectly, a 50 percent or greater interest. Consequently, any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person.
 
The guidance makes it perfectly clear that control alone does not result in the SDN’s company being blocked:
 
U.S. persons are advised to act with caution when considering a transaction with a non-blocked entity in which one or more blocked persons has a significant ownership interest that is less than 50 percent or which one or more blocked persons may control by means other than a majority ownership interest. Such entities may be the subject of future designation or enforcement action by OFAC.
 
There’s good reason for this rule. Although majority ownership of an entity is something on which information can be easily gathered, it is difficult, if not impossible, for a party to a transaction to determine every owner of that entity or even the person who might ultimately exercise
de facto control over that entity. So, under the OFAC guidance, it was not illegal for U.S. persons to transact business with these entities in which Tajideen had some interest, maybe even a controlling one. If those transactions were not illegal, then Tajideen did not cause any illegal transactions and the bottom drops out of the government’s case.
 
What the government had to allege here, and what it somehow was unable to do, is that Tajideen had a “50 percent or greater” interest in Epsilon, ICTC, and Sicam Ltd.  Even saying, as the indictment does, in one place that Tajideen was the “ultimate owner and chief decision-maker of the business empire” is not the same as saying that he had an interest of 50 percent or more in the three companies at issue.
 
Indeed the government’s silence here, like the dog’s silence in
The Adventure of Silver Blaze, says all you need to know.

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ENEDITOR’S NOTES

*
Maria Sharapova (Maria Yuryevna Sharapova, born 19 April 1987, is a Russian professional tennis player. A United States resident since 1994, Sharapova has competed on the WTA tour since 2001. She has been ranked world No. 1 in singles by the WTA on five separate occasions, for a total of 21 weeks.  She is one of ten women, and the only Russian, to hold the career Grand Slam.)
  – “When you look good, you feel good. Confidence with what you’re wearing is very important. If you feel good, you will always perform your best without worrying about anything.”
 
*
Eliot Ness (19 Apr 1903 – 16 May 1957, was an American Prohibition agent, famous for his efforts to enforce Prohibition in Chicago, Illinois, bringing down Al Capone, and the leader of a famous team of law enforcement agents nicknamed “The Untouchables.” His co-authorship of a popular autobiography,
 
The Untouchables,
 which was released shortly after his death, launched several television and motion picture portrayals that established Ness’s posthumous fame as an incorruptible crime fighter.)
 
 
– “Doubts raced through my mind as I considered the feasibility of enforcing a law which the majority of honest citizens didn’t seem to want.”

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EN_a318
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 27 Jan 2017: 82 FR 8589-8590: Delay of Effective Date for Importations of Certain Vehicles and Engines Subject to Federal Antipollution Emission Standards; and 82 FR 8590: Delay of Effective Date for Toxic Substance Control Act Chemical Substance Import Certification Process Revisions.

* DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M
  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and canceled Supp. 1 to the NISPOM  (Summary here.)

* EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774 
  – Last Amendment: 18 Apr 2017: 82 FR 18217-18220: Revision to an Entry on the Entity List

  
*
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: 19 Apr 2017: 82 FR 18383-18393: Foreign Trade Regulations: Clarification on Filing Requirements 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (19 Apr 2017) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance.  Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jan 2017: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 7 Mar 2017: Harmonized System Update 1702, containing 1,754 ABI records and 360 harmonized tariff records. 
  – HTS codes for AES are available
here
.
  – HTS codes that are not valid for AES are available
here.
 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.
  – Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition 8 Mar 2017) of the ITAR is Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 750 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is available by annual subscription from the Full Circle Compliance website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us to receive your discount code.

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

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