17-0524 Wednesday “The Daily Bugle”

17-0524 Wednesday “Daily Bugle”

Wednesday, 24 May 2017

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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[No items of interest noted today.]  

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. DHS/CBP Posts Notice Concerning CR-007 Cargo Release Entry Status Report 
  4. DHS/CBP Posts Update Concerning Quota Opening Moment Procedures 
  5. DHS/CBP Releases Reminder Concerning Biweekly ACE Status Update Call with the Trade 
  6. DHS/ICE: “Los Angeles-Area Woman Arrested on Federal Charges Alleging a Scheme to Smuggle Restricted Space Communications Technology to China” 
  7. State/DDTC: (No new postings.) 
  8. EU Amends Directive 91/477/EEC, Control of the Acquisition and Possession of Weapons 
  1. Reuters: “EU to Impose Sanctions on More Congo Officials: Diplomats” 
  1. B. Feldman: “The Lesson We Should Learn from WannaCry” 
  2. M. Gajewski Barnhill & R. Backhaus: “Applicability of U.S. Export Controls on Emerging Technology” 
  3. R. Edens: “Risk Governance & Trade Compliance Risk Management: Reducing Strategic Risks Across Your Organization” 
  1. Are You Joining the Fully Accredited Executive Masters in International Trade Compliance Degree Program? 
  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 



[No items of interest noted today.]

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

* Justice; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals [Publication Date: 25 May 2017.]:
  – Federal Firearms License RENEWAL Application
  – Federal Firearms Licensee Firearms Inventory Theft/Loss Report
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CSMS #17-000298, 23 May 2017.)
Effective immediately the Automated Commercial System (ACS) B35 Unresolved Entry Report is no longer utilized to reconcile unresolved entries. In its place the CR-007 Cargo Release Entry Status report has been deployed to the Cargo Release workspace in ACE Reports. This report lists cargo entries that have been filed, but not released and/or cancelled. The report sorts the entries by the number of days since the entry was filed and provides an “entry status” for each entry.
The CR-007 report can be manipulated to provide an assortment of cargo related data depending on the parameters selected by the user. The report provides the following information:
  – Provides the status of all open/unresolved entries in all modes of transport for a specific port/location and time frame.
  – Provides guidance on actions that may be required and/or utilized to resolve the entry and move it to a released status when appropriate.
  – Unlike the former B35 Report, entries that are in “Pending” status in the Ocean, Air, and Rail environments, will “drop” off the report after 30 days automatically, reducing the reconciliation time expended to process cancellation requests from filers. Truck entries that are in Pending status will not drop off the report, regardless of the entry status and/or the number of days unresolved. All truck entries will need to be reconciled accordingly.
The CR-007 Cargo Release Entry Status Report should be generated weekly, as was past practice with the B35. Reconciliation of each entry should be completed within sixty days, however, entries that are identified on the report as “Document Required” and/or “Intensive status” may indicate that the cargo is in port being held pending receipt of a document and/or reconciliation of an “Intensive” examination requirement. Those entries should be reconciled as expeditiously as possible.
To quickly access ACE reports training and user guides please go here.

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. DHS/CBP Posts Update Concerning Quota Opening Moment Procedures

CSMS #17-000300, 24 May 2017.)
Filers may transmit quota opening entry summaries in ACE quota module, on opening day from 12 O’clock midnight until 12 O’clock noon Eastern Time Zone only. Entries must be submitted timely and in proper form (error free) to take advantage of the in quota low duty rate. Filers who transmit entry summaries late after 12 noon Eastern time will have entry summaries accepted into quota module, but may not receive opening moment status. Further processing for late submissions will not occur unless the quota does not fill.
Filers experiencing transmission problems should contact the ABI client representative and immediately notify the Headquarters Quota Branch at HQQUOTA@cbp.dhs.gov or 202-863-6560. Entry summaries with transmission issues submitted late will be reviewed and handled by Headquarters Quota Branch on a case by case basis.

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. DHS/CBP Releases Reminder Concerning Biweekly ACE Status Update Call with the Trade

(Source: CSMS# 17-000293, 22 May 2017.)
To assist the trade community with technical issues surrounding the Automated Commercial Environment (ACE), the ACE Business Office (ABO) holds a biweekly (every other week) ACE Status Update Call for all trade participants. Scheduled from 2-3pm ET every other Thursday, this call includes representation from the ACE Cargo Release, Entry Summary, and Export process teams, providing support for all trade process questions concerning ACE.
To join, please use the call-in information below:
  – Phone: (877) 336-1828 or (404)-443-6396
  – Access Code: 6124214
In addition, if you would like to receive a calendar invitation for the ACE Status Update Call, including the call schedule going forward, please send a request to AskACE@cbp.dhs.gov.
Note: The call for this Thursday, 25 May, has been cancelled due to the CBP Trade Symposium. Calls will resume on Thursday, 8 June.

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. DHS/ICE: “Los Angeles-Area Woman Arrested on Federal Charges Alleging a Scheme to Smuggle Restricted Space Communications Technology to China”

(Source: DHS/ICE) [Excerpts.]
A Pomona woman was arrested Tuesday morning on federal charges that accuse her of conspiring to procure and illegally export sensitive space communications technology to her native China.
Si Chen, also known as Cathy Chen, 32, is expected to be arraigned Tuesday afternoon in U.S. District Court on charges contained in an indictment that was returned by a federal grand jury April 27 and unsealed following her arrest.      
The 14-count indictment accuses Chen of violating the International Emergency Economic Powers Act (IEEPA), which controls and restricts the export of certain goods and technology from the United States to foreign nations. Chen is also charged with conspiracy, money laundering, making false statements on an immigration application, and using a forged passport.
According to the indictment, from March 2013 to December 2015, Chen purchased and smuggled sensitive items to China without obtaining licenses from the U.S. Department of Commerce that are required under IEEPA. Those items allegedly included components commonly used in military communications “jammers” from which Chen removed the export-control warning stickers prior to shipping. Additionally, Chen is suspected of smuggling communications devices worth more than $100,000 that are commonly used in space communications applications. On the shipping paperwork Chen falsely valued the items at $500. The indictment further describes how Chen received payments for the illegally exported products through an account held at a bank in China by a family member. …
Chen was taken into custody without incident Tuesday morning by special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), the U.S. Department of Commerce’s Office of Export Enforcement (OEE); and the Defense Criminal Investigative Service (DCIS). …
In addition to the export violations, Chen is also charged with employing several aliases and using a forged passport in an effort to conceal her alleged smuggling activities on behalf of unnamed co-conspirators in China. The indictment alleges the defendant used a Chinese passport bearing her photo and a false name – “Chunping Ji” – to rent an office in Pomona where she took delivery of the export-controlled items. After receiving the goods, the indictment alleges Chen shipped the devices to Hong Kong in parcels that bore her false name, along with false product descriptions and monetary values, all done in an effort to avoid attracting law enforcement scrutiny. …
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If convicted of the 14 charges in the indictment, Chen would face a statutory maximum penalty of 150 years in prison. …

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. State/DDTC: (No new postings.)

(Source: State/DDTC)

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. EU Amends Directive 91/477/EEC, Control of the Acquisition and Possession of Weapons

  – Directive (EU) 2017/853 of the European Parliament and of the Council of 17 May 2017 amending Council Directive 91/477/EEC on control of the acquisition and possession of weapons

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. Reuters: “EU to Impose Sanctions on More Congo Officials: Diplomats”

The European Union is poised to impose sanctions against more Congolese officials, sources in Brussels said, amid worsening violence in the resource-rich country since President Joseph Kabila overstayed his mandate and pushed back elections.
One source said the EU will add nine names to its Congo blacklist of people subjected to asset freezes and travel bans. They join seven others, including members of the Congolese army and police, the bloc put on its list in December citing “serious violations of human rights”.
The bloc’s 28 member states are expected to approve the enlarged sanctions list at a meeting in Brussels later on Wednesday, the source said.
Kabila, in power since 2001, struck a deal in December with Congo’s main opposition bloc to stay on after his mandate expired provided he held elections by the end of 2017. But talks to implement the deal broke down in March when Kabila refused to commit to the bloc’s choice of prime minister.
Political tensions are high after security forces killed dozens during protests over election delays last year. Worsening militia violence in recent months has also raised fears of a backslide toward the civil wars of the turn of the century that killed millions.
The Congo government has repeatedly denounced earlier sanctions imposed by the EU and United States as unjustified and illegal, and has threatened diplomatic retaliation.
Congo mines significant amounts of cobalt, gold, diamonds, copper and tin but remains one of Sub-Saharan Africa’s poorest countries. …

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10. B. Feldman: “The Lesson We Should Learn from WannaCry”

(Source: New York Magazine) [Excerpts.]
The WannaCry ransomware – which overtook hundreds of thousands of computers at hospitals, universities, and telecommunications companies around the world this weekend – marks the arrival in the present of a terrifying and once-distant future. Over the last few years, aided by the development of instantaneous and relatively difficult-to-trace block-chain payments, ransomware has grown in power, with occasional one-off attacks hitting hospitals and governments, and even private individuals unfortunate enough to make an ill-fated click. It was only a matter of time before someone combined it with the self-propagating powers of a computer worm. For years, cybersecurity experts have been preaching the necessity of strong security across the web and throughout consumer technology – not just on servers and hard drives where vital records are stored, but also on every other part of the network. WannaCry is why.  ….
In a way, WannaCry’s spread hearkens back to the debate over weak and strong encryption two decades ago – now known as the Crypto Wars. Though public-key encryption systems like PGP were available to normal consumers, strong encryption technology was classified as “military-grade,” and subject to outdated regulations concerning its export to other countries. The U.S. government wanted its people to have the strongest encryption possible, and to not share it with anyone else. The problem was that this inadvertently caused computer users to default to weak encryption. What use was strong encryption if you could only use it with certain recipients? By trying to limit the encryption capabilities of people outside the country, the export controls also limited the security of computer users within the United States. American regulations were no match for the internet’s decentralized distribution network, and realizing the regulations were quickly becoming unenforceable, the government gradually relaxed such restriction throughout the final decade of the 20th century. …

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* Author: Megan Gajewski Barnhill, Esq., megan.gajewskibarnhill@bryancave.com, 202-508-6302; and Roland Backhaus, Esq. roland.backhaus@bryancave.com. Both of Bryan Cave LLP.
As discussed in
our previous post
, the report published earlier this year by the EASME regarding the dual-use potential of certain Key Enabling Technologies (KETs) highlights the importance for companies in this area to be aware of the possibility of such technologies being or becoming subject to control under the EU Dual Use Regulation.  
Companies involved in emerging technologies with potential dual-use applications should also be aware of the potential for control under the U.S. export control regulations, including for items, software and technology which are not currently described on the Commerce Control List (“CCL”).  Beginning with the April 13, 2012, final rule issued by the U.S. Department of Commerce (“DOC”) establishing the ECCN 0Y521 series, a temporary holding classification was created for items that warrant control under U.S. export controls but which are not currently covered by an existing entry on the CCL.
Items are added to ECCN  0Y521 when the DOC determines, in conjunction with the U.S. Department of Defense and U.S. Department of State, that an item not listed on the CCL “provides at least a significant military or intelligence advantage to the United States or because foreign policy reasons justify such control.”  Such items, which are subject to control for export or re-export to all countries except Canada, are designated for an initial one-year period, during which time the U.S. Government must determine whether the item will be classified under a different ECCN (which may be developed in conjunction with other multilateral regimes) or will return to an EAR99 classification.  The temporary 0Y521 classification may be extended for two subsequent one-year terms.
The DOC, with input from other federal agencies, will identify those items that warrant control under the 0Y521 series.  The DOC will rely on input from Technical Advisory Committees (“TACs”) in drafting the final rules adding items to the 0Y521 series to allow for industry input to that process.  Exporters are not required to seek a determination from the DOC as to whether an item that is not identified on the CCL should be classified as an ECCN 0Y521 item.
Items classified as ECCN 0Y521 are provided in Supplement 5 to Part 774 of the EAR.  Currently, targets made of or containing lithium “specially designed” for the production of tritium by insertion in the core of a nuclear reactor, XBS Epoxy systems designed to obfuscate critical technology components against x-ray and terahertz microscopy imaging attempts, and the “technology” required for the “development” or “production” of those items are classified as ECCN 0Y521.
Unlike the EU, the U.S. Government has not published a summary of the industries or technologies that are considered of high importance or which may become targets of future designation under ECCN 0Y521.  Such controls may be applied at any time, from development through post-production.    Hence, developers of new and emerging technologies (particularly those with potential military or intelligence applications) should be mindful that such items, even if not currently identified on the CCL, may become subject to control.
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* Author: Regan Edens, Chief Operations Officers of Globaleyes; and Brooke Butler, Founder & CEO Globaleyes.
The Board of Directors and CEO nervously waited for the decision from the Department of State’s Directorate for Defense Trade Controls Office. Would they receive a charging letter describing the details of their violations and then be assigned Civil penalties not to exceed $1,094,010 per violation, in accordance the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR)? Would they be prohibited from engaging in business opportunities related to the violations? How would the company’s violations impact the security of our Nation? How would the members of the Board, stockholders, customers, and the public view over 200+ violations? How would that impact our stock value, our employees, their jobs, our current contracts, and future business? Will I have a job tomorrow?
The consequences of companies not “owning” trade compliance risks are far reaching. Organizations do not “own” risk very well. Leaders within these organizations require knowledge, visibility, and resources to manage their organizational risks. As U.S. company’s globalize, good corporate governance must include trade compliance risk within their strategic risk management process. Trade Compliance Risk Management (TCRM) is a business imperative. As enterprise risk management frameworks recognize common organizational risks, “‘Strategic risks’ are those risks that are most consequential to the organization’s ability to execute its strategies and achieve its business objectives. These are the risk exposures that can ultimately effect shareholder value or the viability of the organization. Strategic risk management is focused on those most consequential and significant risks to shareholder value, an area that merits the time and attention of Executive management and the Board of Directors.” …
[Editor’s Note: Due to author’s restrictions, we are not allowed to reprint the entire article. To read the remaining parts of the article, click on the source link above.]
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[Editor’s Note: Full Circle Compliance partners Jim Bartlett, Mike Farrell, and Ghislaine Gillessen, are primary lecturers in this program. Other visiting lecturers have included Paul Beach, Giovanna Cinelli, Candace GoforthJoshua Fitzhugh, David Hayes, Beth Ann Johnson, Thomas KonetschnyKevin Lombardo, Beth Mersch, David Laufman, and Torsten Roeser.] 
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* Bob Dylan (born Robert Allen Zimmerman, 24 May 1941, is an American poet, songwriter, singer, painter, writer, and Nobel prize laureate. He has been influential in popular music and culture for more than five decades. Much of his most celebrated work dates from the 1960s, when his songs chronicled social unrest.)
  – “All this talk about equality. The only thing people really have in common is that they are all going to die.”
  – “People seldom do what they believe in. They do what is convenient, then repent.”

* Queen Victoria (Alexandrina Victoria, 24 May 1819 – 22 Jan 1901, was Queen of the United Kingdom of Great Britain and Ireland from 1837 until her death. Her reign of 63 years and seven months was longer than that of any of her predecessors, and is known as the Victorian era. It was a period of industrial, cultural, political, scientific, and military change within the United Kingdom, and was marked by a great expansion of the British Empire.)

  – “The important thing is not what they think of me, but what I think of them.”

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. 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.
: 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. 
: 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.

  – 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.)

  – Last Amendment: 18 Apr 2017: 82 FR 18217-18220: Revision to an Entry on the Entity List)

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment:
10 Feb 2017: 82 FR 10434-10440: Inflation Adjustment of Civil Monetary Penalties. 
: 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
  – 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.
, 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
  – HTS codes that are not valid for AES are available
  – 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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Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published

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* 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.

* 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 of this newsletter 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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