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17-0518 Thursday “Daily Bugle”

17-0518 Thursday “Daily Bugle”

Thursday, 18 May 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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  1. President Continues National Emergency Concerning the Stabilization of Iraq 
  2. Justice/ATF Seeks Comments on Form F 5300.11, Annual Firearms Manufacturing and Exportation Report 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS Updates Encryption Section on Website to Reflect Sept 2016 Changes to Encryption Regulations 
  3. DHS/CBP Investigates ACE Cargo Release (SE) Transaction Failing 
  4. DHS/CBP Releases Message on Air Split Entry Processing 
  5. State/DDTC Publishes Name Change Announcement 
  1. Expeditors News: “First Meeting of Committee on Trade Facilitation Agreement Meets” 
  2. Fifth Domain: “NIST Releases Cybersecurity Framework Guidance in Support of Cyber EO” 
  3. Reuters: “U.S. Extends Sanctions Relief Under Iran Nuclear Deal” 
  4. ST&R Trade Report: “Tougher Federal Charging and Sentencing Policy Could Affect Trade Violations” 
  1. Balloon One Ltd.: “How Will Brexit Affect Your Distribution Operation?” 
  2. D.M. Edelman: “Trump Administration Stays the Course on Practical Export/Import Regulatory Reforms” 
  3. ECFR Publishes Report on the Impact of Europe’s Export Controls on Military Security in East Asia 
  4. S.L. Fredericksen, J.B. Guerrero & G. Husisian: “The Foreign Corrupt Practices Act and the New Trump Administration: Your Top Ten Questions Answered” (Part II of III) 
  5. Gary Stanley’s ECR Tip of the Day 
  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 (26 Apr 2017), ITAR (11 Jan 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11. President Continues National Emergency Concerning the Stabilization of Iraq

(Source: Federal Register)
 
82 FR 22877: Continuation of the National Emergency With Respect to the Stabilization of Iraq
 
On May 22, 2003, by Executive Order 13303, the President declared a national emergency pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States posed by obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in the country, and the development of political, administrative, and economic institutions in Iraq.
 
The obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in the country, and the development of political, administrative, and economic institutions in Iraq continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States. For this reason, the national emergency declared in Executive Order 13303, as modified in scope and relied upon for additional steps taken in Executive Order 13315 of August 28, 2003, Executive Order 13350 of July 29, 2004, Executive Order 13364 of November 29, 2004, Executive Order 13438 of July 17, 2007, and Executive Order 13668 of May 27, 2014, must continue in effect beyond May 22, 2017. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to the stabilization of Iraq declared in Executive Order 13303.
 
(Presidential Sig.)
THE WHITE HOUSE,
May 16, 2017.

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EXIM_a2
2. Justice/ATF Seeks Comments on Form F 5300.11, Annual Firearms Manufacturing and Exportation Report

(Source: Federal Register) [Excerpts.]
 
82 FR 22847: Agency Information Collection Activities; Proposed eCollection eComments Requested; Annual Firearms Manufacturing and Exportation Report
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 30-Day notice. …
* DATES: Comments are encouraged and will be accepted for an additional 30 days until June 19, 2017.
* FOR FURTHER INFORMATION CONTACT: Jodie Trovinger, Federal Firearms Licensing Center, Firearms and Explosives Services Division either by mail at 244 Needy Road, Martinsburg, WV 25405, by email at Jodie.Trovinger@atf.gov, or by telephone at 304-616-4673. Written comments and/or suggestions can also be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington, DC 20503 or sent to OIRA_submissions@omb.eop.gov.
* SUPPLEMENTARY INFORMATION: …
  – The Title of the Form/Collection: Annual Firearms Manufacturing
and Exportation Report Under 18 U.S.C. Chapter 44, Firearms.
  – Form number: ATF F 5300.11.
  – Component: Bureau of Alcohol, Tobacco, Firearms and Explosives,
U.S. Department of Justice. …
  – Primary: Business or other for-profit.
  – Other: Federal Government, State, Local, or Tribal Government.
  – Abstract: The information collected is used to compile statistics on the manufacture and exportation of firearms. The furnishing of this information is mandatory under 18 U.S.C. 923(g)(5)(A). This form must be submitted annually for every Type 07 and Type 10 Federal Firearms License (FFL), even if no firearms were exported or distributed for commerce. …
  If additional information is required contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE., 3E.405A, Washington, DC 20530.
 
  Dated: May 15, 2017.
Melody Braswell, Department Clearance Officer for PRA, U.S. Department of Justice.

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OGS
OTHER GOVERNMENT SOURCES

OGS_a13. Ex/Im Items Scheduled for Publication in Future Federal Register Editions

(Source: Federal Register)


* U.S. Customs and Border Protection; NOTICES; Country of Origin Determinations; Certain Visitor Management System [18 May 2017.]

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

OGS_a24. Commerce/BIS Updates Encryption Section on Website to Reflect Sept 2016 Changes to Encryption Regulations

(Source: Commerce/BIS)
 
BIS has updated the encryption section of its website to reflect the changes to the encryption regulations from September 2016.
 
The encryption section of the BIS website can be found here.

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OGS_a3
5. 
DHS/CBP Investigates ACE Cargo Release (SE) Transaction Failing

(Source: CSMS# 17-000282, 18 May 2017.)
 
The CBP ACE technical team is investigating an issue with ACE Cargo Release transactions (SE) that include EPA Vehicles and Engines program data or disclaims.
 
The reject being sent is P00 PGA DATA MISSING PER PGA FLAG.
 
As a work-around, the filer is able to submit the ACE Entry Summary with ACE Cargo Release on the AE transaction with the required EPA data. The only transaction incorrectly rejecting with the EPA Vehicles and Engines data is the stand-alone ACE Cargo Release (SE).
 
Please note that the enforcement of EPA tariff flagging began today, May 18, 2017. If you are not sending any EPA data or disclaim on an entry or entry summary for ACE Cargo release that has an EPA tariff flag, the P00 reject would be correctly sent.
 
The only scenario we have identified that is in issue is specifically the SE transaction with EPA Vehicle and Engine data or disclaim being sent.
 
Another CSMS will be posted when this situation is resolved. If you have questions about ACE, contact your assigned CBP client rep. If you have questions specific to EPA compliance, refer to the CSMS 17-000253.

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

OGS_a46. 

DHS/CBP Releases Message on Air Split Entry Processing

(Source:
CSMS# 17-000279, 17 May 2017.)
 
CBP regulations require that all cargo arriving on split conveyances be entered in the air manifest system. The carrier is required to manifest the air waybill, in accordance with the CAMIR, as a split with the data for each conveyance and any in-bond transaction to move the cargo to the same entry port.
 
Cargo moving on the same air waybill but not declared in the ACE air manifest system as a split, is not eligible for split entry processing. As such, one entry per conveyance is required. This applies to a single house air waybill split across multiple master air waybills.
 
ACE currently does not have an edit to enforce this policy. ABI filers can determine if a carrier’s air waybill was split by submitting a cargo manifest entry release query (CQ transaction). Split air waybills will have a part indicator A, B, C, etc. in the response message.
 
It is the filer’s responsibility to ensure that cargo on a single bill of lading, moving on multiple conveyances, and not declared as a split are entered separately.

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OGS_a57.

State/DDTC Publishes Name Change Announcement

(Source:
State/DDTC) [Excerpts.]
 
The Directorate of Defense Trade Controls (DDTC) has published the following name change announcement.
 
 
Effective immediately, Systematic Software Engineering Ltd., The Coliseum Riverside Way, Camberley, Surrey GU15 3YL, United Kingdom will change as follows: Systematic Software Engineering Ltd., Meadow Gate, Farnborough Airport, Farnborough, Hampshire GU14 6XA, United Kingdom. Due to the volume of authorizations requiring amendments to reflect this change, the Deputy Assistant Secretary for Defense Trade Controls is exercising the authority under 22 CFR 126.3 to waive the requirement for amendments to change currently approved license authorizations. The amendment waiver does not apply to approved or pending agreements. … 

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NWSNEWS

NWS_a18.

Expeditors News: “First Meeting of Committee on Trade Facilitation Agreement Meets”

 
On May 16, 2017 members of the World Trade Organization (WTO) met for the inaugural meeting of the Committee on Trade Facilitation. This committee will manage the implementation of the WTO’s recently passed Trade Facilitation Agreement (FTA).

The TFA entered into force on February 22, 2017 after meeting the two-thirds WTO member ratification requirement. The committee will meet to discuss matters related to TFA procedures and the progress of its objectives. They will also develop a standard for distributing pertinent information and best practices among the committee.
 
The notice also advises, “Since its entry into force, six additional WTO members – Dominican Republic, Guatemala, Armenia, Fiji, Costa Rica and Sierra Leone – have submitted their instruments of TFA acceptance to the WTO.”
 
The notice can be accessed here.

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NWS_a29.

Fifth Domain: “NIST Releases Cybersecurity Framework Guidance in Support of Cyber EO”

 
New draft guidance from the National Institute of Standards and Technology has been released to offer federal agencies best practices in support of President Trump’s May 11 executive order on strengthening cybersecurity. 
 
NIST Interagency Report 8179, “The Cybersecurity Framework: Implementation Guidance for Federal Agencies,” outlines ways agencies can comply with the new mandate stating they must implement a NIST-developed framework for securing federal networks and critical infrastructure. 
 
The NIST document can assist agencies in vetting vendors and aligning cybersecurity practices to the acquisition process; managing cybersecurity requirements and assigning responsibilities throughout an organization; and assessing how well the agency is complying with the Federal Information Security Management Act, among other data protection laws and needs.
 
NIST is looking for agencies to give feedback on their implementation of the guidance. Feedback will be collected at the Federal Computer Security Managers’ Forum Annual Offsite Meeting, held June 20 and 21 at NIST’s Gaithersburg, Md., campus, and public comment will be accepted until June 30.
 
The implementation guidance can be found on the NIST’s website.

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NWS_a310.

Reuters: “U.S. Extends Sanctions Relief Under Iran Nuclear Deal”

 
U.S. President Donald Trump on Wednesday extended wide sanctions relief for Iran called for under a 2015 international nuclear deal even as he imposed narrow penalties on Iranian and Chinese figures for supporting Iran’s ballistic missile program.
 
The dual actions, announced by the Departments of State and Treasury, appeared intended to signal a tough stance on Iran even as Trump continued predecessor President Barack Obama’s pact under which Iran agreed to limit its nuclear program in return for sanctions relief.
 
While Trump criticized the nuclear agreement as a presidential candidate – at one point saying he would “dismantle the disastrous deal with Iran” – Wednesday’s actions demonstrated that he has decided, at least for now, to keep it.
 
  “The United States continues to waive sanctions as required to continue implementing U.S. sanctions-lifting commitments in the Joint Comprehensive Plan of Action,” the State Department said in a statement, referring to the deal by its formal name.
 
The United States brands Iran a “state sponsor of terrorism.” It says Tehran’s support for Syrian President Bashar al-Assad in Syria’s civil war, Houthi rebels in Yemen’s civil war and the Hezbollah Shi’ite political party and militia in Lebanon, have helped destabilize the Middle East.
 
Separately, the Treasury Department said it had sanctioned two senior Iranian defense officials, an Iranian company, a Chinese man and three Chinese companies for supporting Iran’s ballistic missile program.
 
The designation of the seven Iranian and Chinese people and companies blocks any assets they might have in the United States and bars Americans and non-Americans from doing business with them, at the risk of being blacklisted by the United States.
 
IRANIAN ELECTION ON FRIDAY
 
The decision on the sanctions waiver represented a major early policy choice on the nuclear deal for the Trump administration, which has said that it is engaged in a wider policy review on how to deal with Iran.
 
Iran holds a presidential election on Friday with President Hassan Rouhani, a pragmatist cleric whose administration reached the nuclear deal, battling a conservative challenger and trying to convince voters he can deliver economic growth.
 
The Iranian government and some Iranian citizens have been disappointed that U.S., European Union and United Nations sanctions relief provided so far under the nuclear deal has failed to spark an economic renaissance.
 
The United States on Wednesday renewed a waiver of the key, and most punitive, sanctions that it imposed on Iran before the nuclear deal was ultimately struck.
 
Under these sanctions, tucked into Section 1245 of the 2012 National Defense Authorization Act, the United States threatened to sanction the banks of Iran’s main oil customers if they did not significantly reduce their purchases of Iranian crude.
 
Under the law, these sanctions can be waived for a maximum of 120 days. The Obama administration did so in mid January, forcing the Trump administration to decide by Wednesday whether to renew them or to put the wider Iran deal at risk.
 
Richard Nephew, a former U.S. negotiator with Iran now at Columbia University, called the renewal an “important step” in maintaining the deal but said it was still threatened by “congressional pressure, Republican politics, and the views of many people” in the Trump administration.
 
Mark Dubowitz, chief executive of the Foundation for Defense of Democracies nonprofit policy group and an opponent of the Iran nuclear deal, argued that the Trump administration was pursuing a “waive and slap” approach that temporarily suspends some sanctions while imposing others.
 

  “It’s a clear message to foreign banks and companies looking to do business with Iran: You will be taking significant risks if you deal with a regime engaged in continued malign conduct and still covered by a web of expanding non-nuclear sanctions,” he said.

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NWS_a411.

ST&R Trade Report: “Tougher Federal Charging and Sentencing Policy Could Affect Trade Violations”

 
Penalties imposed in some trade-related cases could increase under a tougher federal charging and sentencing policy announced recently by Attorney General Jeff Sessions.
 
The policy directs federal prosecutors to charge and pursue the most serious, readily provable offenses, which are defined as those that carry the most substantial sentences under federal guidelines. Any deviation from this “core principle” would have to be justified by unusual facts and approved by senior leadership. Prosecutors are also directed to seek reasonable sentences, which in most cases will mean recommending a sentence within the advisory guideline range.
 
Most violations of trade and related laws are remedied through civil penalties but some are met with criminal penalties as well. These include price fixing, foreign bribery, illegal exports, and economic sanctions violations. Criminal penalties have also been assessed for duty evasion prosecuted under the False Claims Act. The new policy could yield higher penalties in these cases.
 
However, the policy could have a broader effect as well. The Trump administration has moved quickly to increase enforcement in a number of areas, including trade. For example, U.S. Customs and Border Protection officials have emphasized their intent to implement the tougher provisions of the Trade Facilitation and Trade Enforcement Act enacted two years ago. If this initiative results in more criminal cases against trade violations, the new charging and sentencing policy could yield bigger fines and longer prison terms for those found liable.

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COMMCOMMENTARY

COMM_a112.

Balloon One Ltd.: “How Will Brexit Affect Your Distribution Operation?”

(Source:
Balloon One Ltd.) [Excerpts.]
 
Until the final details of the Brexit negotiations are completed, UK businesses will continue to operate under somewhat uncertain economic conditions.
 
But we know enough to have an understanding of some of the effects that leaving the EU will have on businesses in the UK. So what does Brexit really mean for British wholesale and distribution operations?
 
INCREASED EXPORTS
 
To make money, British companies are going to have to export more.  Forecasts from a number of financial institutions, including The Bank of England, predict that the UK economy will grow this year. Morgan Stanley’s projections of up to 2.5% growth may seem bullish, but they say growth will come partly as a result of a boost in British exports.
 
With the continuing weakness of sterling against the euro and dollar, British goods are currently cheap and so offer an attractive possibility to foreign buyers. So now is a great opportunity to start forging new international relationships and developing overseas markets.
 
Of course, UK companies can’t rely on devaluation alone, so it would be unwise to depend on European and US markets. However, the burgeoning economies of Asia and Latin-America represent huge new business prospects for growth.
 
INCREASED COSTS
 
Since the result of the Brexit referendum, many companies have been feeling the effect of rising costs. One of our own customers has seen their costs rise by 40% since then, leaving them in urgent need of a mass cost-cutting exercise.
 
Components, products and labour are all going to cost more and distributors will undoubtedly have to undertake cost reductions to offset these costs.
 
It will be difficult to cut costs by reducing headcount though, because with increasing orders in the distribution sector, a larger workforce is needed, not a smaller one.
 
One area in which costs can be reduced is by improving business automation. This can be achieved, for example, by implementing Electronic Data Interchange (EDI), which brings faster and more accurate trading with partners.
 
Global carriers are also gearing up for more automated export processes, introducing order consolidation services for different countries. These services minimise export costs and streamline the customs procedures across multiple countries. It will be increasingly important for any distribution organisation to be able to quickly integrate and automate with these new carrier services as new trading borders come into play. …
 
NEED FOR BETTER EXPORT PROCESSES
 
Distribution businesses that take advantage of the boost in exports will almost certainly need to improve their export processes. Meeting customs formalities and having the right documentation when shipping across international borders is crucial.
 
Getting your export control processes right and integrating them into your ERP system is fundamental to having a smooth export process. If you get things wrong, the sanctions can range from a fine right up to the loss of export privileges.
 
WHAT SHOULD DISTRIBUTORS DO BEFORE BREXIT?
 
If you’re a wholesale or distribution business and you want to continue to grow and succeed after Brexit, then there are some clear opportunities for you. Ramping up the export side of your business, making necessary cost reductions and improving business automation and export processes will all help turn Brexit to your advantage and ensure your business is still booming after 29th March 2019.

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COMM_a0213.

D.M. Edelman: “Trump Administration Stays the Course on Practical Export/Import Regulatory Reforms”

 
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com.
 
The Trump Administration has implemented regulatory changes to continue its predecessors’ decade-long efforts to streamline requirements for exporters and importers. One such project, dubbed the International Trade Data System or ITDS, seeks to modernize and streamline procedures and required government paperwork for exporters and importers while eliminating redundant requirements. This process began in 2006 under George W. Bush when legislation was passed calling for the creation of a single electronic system that would serve as a one stop shop for the government agencies and businesses involved in international trade to exchange necessary documentation.
 
In 2014, President Obama signed an Executive Order creating a new online system called the Automated Commercial Environment or ACE. Continuing this trend under President Trump, the U.S. Census Bureau recently issued a Final Rule amending the regulations and implementing a system of tracking numbers (Internal Transaction Numbers or ITNs) to help businesses track shipments that undergo scheduling or port changes more efficiently. The Final Rule also includes revised timeframes governing split shipment filings and additional language clarifying the specifics of such split shipment filing requirements. The Census Bureau Final Rule makes over twenty amendments to the Foreign Trade Regulations. These changes should make life easier for exporters and importers, lessening the reporting burden, and speeding up processing times.
 
Thus far ACE has made advances in trade facilitation, minimizing processing and approval times from days to minutes. While such changes are in line with President Trump’s pledge to slash overly-burdensome regulations for businesses, they also are a continuation of efforts that stretch back three presidential terms. The President so far has chosen to stay the course on this practical initiative, as well as on more controversial issues like relations with Cuba, Iran and China. With USTR Lighthizer confirmed we will see what happens next.

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COMM_a0314.

ECFR Publishes Report on the Impact of Europe’s Export Controls on Military Security in East Asia

 
The European Council on Foreign Relations (ECFR) has published a 15-page report on the Impact of European Export Controls on Military Security in East Asia, entitled “Influence by Default: Europe’s Impact on Military Security in East Asia. The report is written by Mathieu Duchâtel (ECFR Senior Policy Fellow) and Mark Bromley (Co-Director of the SIPRI Dual-Use and Arms Trade Control Programme), and is available here. A summary of the report and the authors’ policy recommendations are included below.
 
Summary
 
The much-discussed notion of an ‘Asian arms race’ is an exaggeration. Instead, since no country can match Chinese military expenditure, several Asian states are acquiring asymmetric capabilities to try to prevent an excessive unbalance with China.
 
Through arms exports, transfers of technology, and arms and dual-use export controls, Europe’s impact on Asian armaments trends and security is larger than is usually acknowledged.
 
European states and firms are providing arms to several states as they seek to avoid such excessive unbalance with China. But this action is not guided by clear policy and is often driven by commercial interests and political constraints.
 
The EU arms embargo on China has not prevented the Chinese arms industry from making rapid progress: it is now a major export competitor. Europe is contributing to this progress through transfers of dual-use items and intangible technology transfers.
 
A more coherent approach will ensure Europe’s impact on Asia’s military balance is not destabilizing and that export control gaps are closed.
 
Policy Recommendations
 
The EU needs to instil greater coherence into its approach to military transfers and their impact on East Asian security.
 
  – Exports and export restrictions should be recognised as an important element of Europe’s influence. The EU can use existing policy coordination institutions to bridge differences between member states on the question of the Asian military balance.
  – At the minimum, member states should refine the existing mechanisms to ensure that no member state will take advantage of an export denial in another member state to push for their own exports.     
  – At the maximum, member states should formulate clear policy goals attached to their arms exports and export control practices towards specific regions.
  – The EU needs a policy on intangible technology transfers. The tools for sharing information about strategic acquisitions are too weak, and a shared definition of strategic acquisitions is needed.
  – The EU needs to anticipate the risk of post-Brexit Britain leveraging its arms industry for commercial gains in ways that undermine Asian security. It needs to make sure that Britain will remain aligned to European practices on arms transfers and intangible transfers.

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COMM_a3b15.

S.L. Fredericksen, J.B. Guerrero & G. Husisian: “The Foreign Corrupt Practices Act and the New Trump Administration: Your Top Ten Questions Answered” (Part II of III)

 
* Authors: Scott L. Fredericksen, Esq.,
sfredericksen@foley.com
; Jaime B. Guerrero, Esq.,
jguerrero@foley.com
; and Gregory Husisian, Esq.,
ghusisian@foley.com
. All of Foley & Lardner LLP, Washington DC, Los Angeles, and Washington DC, respectively.  
 
[Editor’s note: This client alert is part of a series of “top ten” articles on the future of key international trade and regulatory issues expected to change under the Trump administration. Due to space limitations, this alert is divided into three parts. Part I was posted in yesterday’s Daily Bugle. Part III will be posted tomorrow.]
 
5. “In addition to these regulatory developments, what areas do you see as being likely new areas of focus under the new administration?”
 
The U.S. Government is taking an increasingly broad look at potential violations, seeking to punish all related conduct. This is manifested in combined AML and economic sanctions enforcement actions, export controls and economic sanctions actions, and so forth. It is likely the U.S. government will emphasize these types of combined enforcement actions in coming years, including with regard to the FCPA. In the FCPA context, this implies a focus on whether the object of the bribes was itself illegal under other laws.
 
Companies in bribery investigations should also be aware of the fact that enhanced sharing of information between the U.S. government and foreign governments may not be one way. As foreign governments become increasingly active in their own anti-corruption efforts, the chances that companies will face enforcement actions in multiple countries increase. The previous assumption, which was that only the U.S. government would prosecute bribe-related activity over which it has jurisdiction, has become increasingly tenuous.
 
6. What can we do to ensure integrity in our business partners or to reassure our own partners that we have vigorous compliance? What about this new ISO 37001 program?
 
The last decade has seen a number of sources of “best practices” in the realm of anticorruption compliance, including: (1) the FCPA Guidance issued by the DOJ and the SEC, which contains a section titled “Hallmarks of Effective Compliance Programs”; (2) the DOJ’s Principles of Prosecution of Business Organizations, which contains a section titled ‘Corporate Compliance Programs”; (3) U.S. Sentencing Guidelines, which contain a section titled “Effective Compliance and Ethics Programs”; (4) Attachment C in many recent DOJ FCPA settlement agreements; (5) The UK Bribery Act Guidance issued by the U.K. Ministry of Justice; and (6) the OECD’s “Good Practice Guidance on Internal Controls, Ethics, and Compliance.” These sources of anticorruption compliance best practices coalesce around sound principles of regulatory risk management, including the necessity for a clear, easy-to-understand compliance program, tailored and repeated training, and regularly audited internal controls.
 
Yet what these many sources of compliance best practices have not offered is a certifiable standard of anticorruption program benchmarking. This gap was filled on October 15, 2016, when the International Organization for Standardization (ISO) adopted ISO 37001 as a certifiable international “
anti-bribery management system
.” [FN/12] While ISO standards are voluntary, in certain areas, such as quality management, its standards have become de facto international benchmarks. The possibility of benchmarking to the standard by third-party certifying parties potentially could make the standard influential – not only with regard to companies seeking ethical partners, but potentially in DOJ and SEC investigations under the new administration as well. [FN/13]
 
At this time, it is not certain how impactful the new ISO 37001 standards will be. Initial indications are that the ISO standard may prove most useful in countries that are marked by a high degree of perceived corruption, as they could provide an objective guidepost and assurance of the presence of an audited anticorruption compliance system. Companies operating in such environments may seek certification as a means of gaining a competitive advantage from business partners who want to minimize bribe-related risk.
 
For many U.S. companies, the receptivity to submitting to an outside ISO audit process will likely turn on how the program is treated in future DOJ and SEC enforcement actions. If it appears that the regulatory agencies are giving extra compliance credit to companies with a certified anticorruption process in place, the program may become coveted by companies at heightened risk of violations. There is precedent for such a result: the DOJ’s “
Principles of Federal Prosecution of Business Organizations
” states that prosecutors should evaluate “the existence and effectiveness of the corporation’s pre-existing compliance program” when determining whether to charge a corporation with a crime,” [FN/14] while the U.S. Sentencing Guidelines state that prosecutors should consider whether the defendant had an “effective compliance and ethics program” in place. [FN/15] The presence of a certified program could help with such requirements.
 
An additional reason to have ISO 37001 certification applies to companies that are subject to the UK Bribery Act of 2010. For these companies, the certification could prove useful because that Act (unlike the FCPA) provides for an “adequate procedures” defense. Because this defense can only be used if the company can “prove [it]
had adequate procedures in place to prevent bribery
,” [FN/16] the ISO 37001 would enhance the company’s ability to argue that it met this standard.
 
7. Sounds Intriguing. What is required to become ISO 37001 compliant?
 
The ISO 37001 standards are ones that undergird effective anti-bribery compliance in general. To be certified as ISO 37001-compliant, an organization must develop systems designed to prevent, detect, and deter bribery while also “comply[ing] with anti-bribery laws and voluntary commitments applicable to its activities.” [FN/17] Any ISO 37001 system must address: (1) bribery of government officials; (2) commercial bribery; (3) bribery in the non-profit sector; (4) both active bribery (outgoing payments) and passive bribery (incoming bribes); and (5) incoming and outgoing indirect bribes through third persons. [FN/18]
 
The ISO 37001 standards recognize that effective anticorruption compliance requires the adoption of a risk-based approach – described as a “reasonable and proportionate” approach – which should be based upon periodic risk assessments. Risk assessments should be used to make decisions about the “allocation of anti-bribery compliance personnel, resources and activities.” [FN/19] Factors companies should consider when determining the breadth of their risk-based compliance response include:
 
  – The size and structure of the company;
  – The locations and sectors where the company operates or anticipates operating;
  – The nature, scale, and complexity of the company’s activities and operations;
  – Entities over which the company has control;
  – The business associates of the company;
  – The ways in which the company interacts with public officials; and
  – Any applicable statutory, regulatory, contractual, or professional obligations or duties, such as arise from medical codes of conduct and so forth. [FN/20]
 
In addition to conducting risk assessments, ISO 37001 requires that companies take the following steps:
 
  – Develop and Maintain Compliance Policies and Internal Controls. “Well-managed organization[s]” are “expected to have compliance polic[ies] supported by appropriate management systems,” including “procedures that are designed to prevent the offering, provision or acceptance of gifts, hospitality, donations and similar benefits where the offering, provision or acceptance is, or could reasonably be perceived as, bribery.” [FN/21] The ISO 37001 Requirements also state that compliance policies and internal controls must be “communicated in appropriate languages” to both employees and relevant third parties. [FN/22]
 
  – Training. Companies must provide employees with “adequate and appropriate anti-bribery awareness and training” while also “retaining documented information on the training procedures, the content of the training, and when and to whom it was provided.” [FN/23]
 
  – Tone at the Top. The “group of people who direct[] and control[] [the] organization at the highest level” should demonstrate commitment to anti-corruption compliance, including by “communicating internally the importance of effective anti-bribery management and of conforming to the anti-bribery management system requirements” and “promoting an appropriate anti-bribery culture within the organization.”24 Required support from the top includes such tasks as “approving the organization’s anti-bribery policy,” “requiring that adequate and appropriate resources … are allocated and assigned,” and “exercising reasonable oversight over the implementation of the organization’s anti-bribery management system by top management.” [FN/25]

  – Risk-Based Due Diligence. Companies should conduct due diligence on “specific transactions, projects, activities, business associates,” and company personnel with more than a “low bribery risk.” [FN/26]
Contractual and Certification Protections. The ISO 37001 Requirements state that companies should require third parties that “pose more than a low bribery risk” to certify they will “commit to preventing bribery … in connection with the relevant transaction, project, activity, or relationship.” [FN/27] These should be backed with termination provisions. [FN/28]
 
  – Compliance Commitments from Employees. Companies must “require [their] personnel to comply with the anti-bribery policy and anti-bribery management system, and give the organization the right to discipline personnel in the event of non-compliance.” [FN/29]
 
  – Implement Internal Controls. Companies must implement both “financial controls” and “non-financial controls” (i.e., “procurement, operational, sales, [and] commercial” measures). [FN/30]
 
  – Reporting Channels and Whistleblower Protections. Companies need to establish systems to allow personnel and third parties to “report in good faith or on the basis of a reasonable belief attempted, suspected and actual bribery, or any violation of or weakness in the anti-bribery management system,” including through “anonymous reporting” and the maintenance of measures that “prohibit retaliation, and protect those making reports from retaliation.” [FN/31]
 
  – Documentation. Companies need to document their ISO 37001 activities, with the degree of documentation being based on the size and complexity of the organization and the nature of its activities. [FN/32]
 
  – Improvement of Anti-Corruption Controls through Constant Assessment. Companies need to assess and review their anti-bribery compliance systems on an ongoing basis to ensure their “suitability, adequacy and effectiveness.” [FN/33]
 
One notable difference between the ISO 37001 standards and U.S. law is that the FCPA allows “facilitation payments” while the ISO 37001 standards do not, on the basis that “they are illegal in most locations” (i.e., under local law). Since it is a best practice to make such payments contrary to company policy, this deviation from the strict requirements of the FCPA is not meaningful for most companies.
 
8. “I am worried about whistleblowers. What can I do to minimize problems in this area?”
 
As discussed above, the SEC whistleblower program has resulted in numerous FCPA penalties and announced settlements. In addition, with studies showing that most whistleblowers are motivated by reasons other than money (i.e., whistleblowing often occurs because employees are disgruntled or terminated, or because an employee believes internal reporting was not taken seriously), even companies that are not publicly traded should be concerned about whistleblower activity.
 
Minimizing whistleblower risk, to a large degree, starts with an effective compliance program. An effective compliance program, supported by a culture of compliance where employees are encouraged to speak up and internally report potential violations of law, is the best weapon to prevent external whistleblower activity. The more effective internal handling of compliance lapses is, the less likely external whistleblowing will occur.
 
Specific compliance measures firms should consider to minimize the risks of external whistleblower activity include:
 
  – Maintaining a Culture of Compliance
Ensuring that there is senior management support for compliance efforts.
Hiring and adequately supporting well-trained staff empowered to independently identify misconduct and thoroughly investigate complaints, hire external counsel, and to report findings directly to senior management and relevant board committees/personnel.
Ensuring that compliance efforts are adequately funded, based upon a clear and objective evaluation of the regulatory risks facing the organization.

  – 
Maintaining Effective Policies
    * Maintaining effective anticorruption policies that cover all forms of bribery-related regulatory risk (both for government officials and commercial bribery).
    * Maintaining anti-retaliation compliance policies to ensure that there is no retaliation for whistleblower activity, and that whistleblowers continue to be evaluated solely based on quality of work and not concerns related to whistleblower activities.
 
  – Maintaining Effective Procedures
    * Implementing procedures to evaluate the significance of claims quickly, determine the priority of investigation, and appropriate follow up based on the potential seriousness of the issue.
    * Creating procedures to ensure that any compliance lapses are remedied, such that issues identified as a result of whistleblower activity (or that are otherwise discovered) are not repeated.
    & Maintaining procedures to document all claims received, how they were handled, and their resolution, tracking all complaints from initial report to ultimate resolution.
    * Maintaining procedures to report back to whistleblowers regarding how their claims were handled while sanitizing the report of any confidential data.
    * Maintaining procedures for determining when outside investigative resources, including law firms and forensic specialists, need to be brought onto investigations.
    * Implementing special procedures related to the handling of complaints related to senior management, board of directors, audit committee members, and compliance committee members.
    * Drafting procedures to ensure confidential treatment of materials related to internal investigations, including procedures designed to preserve attorney-client communication and attorney work product privileges
 
  – Encouraging Effective Reporting
    * Creating multiple ways to report potential misconduct, including independent 24-hour telephone hotlines with multiple language capability, web-based reporting, and email.
    * Creating ways for external compliance stakeholders to report misconduct.
    * Creating pre-existing procedures regarding how to properly engage whistleblowers, investigate allegations of misconduct, and otherwise manage whistleblowers.
 
  – Encouraging Effective Follow Up
    * Properly documenting the results of investigations, including the persons involved, the allegations, how they were investigated, and any remedial measures adopted in response.
 
———
  [FN/12] See “ISO 37001:2016, Anti-bribery management systems – Requirements with guidance for use,” available
here
(“ISO 37001 Requirements”).
  [FN/13] Although the ISO had previously issued anticorruption compliance in ISO 19600, that Type B standard provided only guidance for companies to consider in their anticorruption efforts. The ISO 37001 Requirements are a Type A standard, which means that contain objective criteria designed to allow independent auditors to render determinations regarding the fealty of a company to the new ISO standards.
  [FN/14] US Dep’t of Justice, §§ 9-28.300, 9-28.800, available
here
.
  [FN/15] U.S. Sentencing Guidelines, § 8B2.1
  [FN/16] UK Ministry of Justice, The Bribery Act 2010: Guidance 6 (Mar. 2011), available
here
.
  [FN/17] ISO 37001 Requirements at Introduction.
  [FN/18] ISO 37001 Requirements § 1.
  [FN/19] ISO 37001 Requirements, Annex, § A.4.1.
  [FN/20] ISO 37001 Requirements, § 4.4.
  [FN/21] ISO 37001 Requirements, Introduction and § 8.7.
  [FN/22] ISO 37001 Requirements § 5.2.
  [FN/23] ISO 37001 Requirements § 7.3.
  [FN/24] ISO 37001 Requirements § 5.1.2.
  [FN/25] ISO 37001 Requirements § 5.1.1.
  [FN/26] ISO 37001 Requirements, Annex, § A.10.3.
  [FN/27] ISO 37001 Requirements § 8.6.
  [FN/28] ISO 37001 Requirements § 8.6.
  [FN/29] ISO 37001 Requirements § 7.2.2.1.
  [FN/30] ISO 37001 Requirements § 8.4.
  [FN/31] ISO 37001 Requirements § 8.9.
  [FN/32] ISO 37001 Requirements § 7.5.1.
  [FN/33] ISO 37001 Requirements § 10.2.

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COMM_a416.

Gary Stanley’s ECR Tip of the Day

 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com.
 

Under section 30.4(c) of the U.S. Census’ Foreign Trade Regulations (FTR) a postdeparture filing is a privilege granted to approved U.S. Principal Parties in Interest to file Electronic Export Information (EEI) up to 5 calendar days after the date of export. Currently, there is a moratorium on accepting new applications for postdeparture filing. 

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ENEDITOR’S NOTES

(Source: Editor)

*
Bertrand Russell (Bertrand Arthur William Russell, 3rd Earl Russell, 18 May 1872 – 2 Feb 1970, was a British philosopher, logician, mathematician, historian, writer, social critic, political activist and Nobel laureate. He is widely held to be one of the 20th century’s premier logicians.)
  – “The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.”

*
Omar Khayyam (born Ghiyāth ad-Dīn Abu’l-Fat

ʿOmar ibn Ibrāhīm Khayyām Neīshāhpurī, 18 May 1048 – 4 Dec 1131, was a Persian polymath, scholar, mathematician, astronomer, philosopher, and poet, widely considered to be one of the most influential thinkers of the Middle Ages. He wrote numerous treatises on mechanics, geography, mineralogy, and astronomy.)
  – “Be happy for this moment. This moment is your life.”

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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:
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: 26 Apr 2017: Harmonized System Update 1703, containing 2,512 ABI records and 395 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 last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published 
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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