17-0531 Wednesday “The Daily Bugle”

17-0531 Wednesday “Daily Bugle”

Wednesday, 31 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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  1. Commerce/BIS: RPTAC to Meet on 13 Jun in Wash DC 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. Commerce/Census: “The Automated Export System (AES) has a New Data Element” 
  4. DHS/CBP Announces ACE Certification Outage, 31 May 
  5. DHS/CBP Posts Update Concerning Mandatory Filing of Contact Name and Phone 
  6. State/DDTC: (No new postings.) 
  1. Defense News: “India Shuffles Power to Issue Defense Licenses among Departments” 
  2. ST&R Trade Report: “Export Control Reform Initiative Needs Review, Possible Changes, Report Says” 
  1. F.P. Bustamante: “Federal Judge Overturns Diatlova Conviction in Export Control Case” 
  2. M. Volkov: “Promoting an Ethical Culture – Actions Not Just Words”  
  3. 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 (26 May 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 



1. Commerce/BIS: RPTAC to Meet on 13 Jun in Wash DC

(Source: Federal Register) [Excerpts.]
82 FR 24941: Regulations and Procedures Technical Advisory Committee; Notice of Partially Closed Meeting
  The Regulations and Procedures Technical Advisory Committee (RPTAC) will meet June 13, 2017, 9:00 a.m., Room 3884, in the Herbert C. Hoover Building, 14th Street between Constitution and Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on implementation of the Export Administration Regulations (EAR) and provides for continuing review to update the EAR as needed. …
  The open session will be accessible via teleconference to 25 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov no later than June 6, 2017. …
  For more information, call Yvette Springer at (202) 482-2813.
Yvette Springer, Committee Liaison Officer.

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

* International Trade Commission; NOTICES; Investigations; Determinations, Modifications, and Rulings, etc.: North American Free Trade Agreement: Advice on Probable Economic Effect of Providing Duty-free Treatment for Currently Dutiable Imports [Publication Date: 1 June 2017.]

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The U.S. Census Bureau published the Final Rule entitled, “Foreign Trade Regulations (FTR): Clarification on Filing Requirements,” April 19.
This rule addresses new export reporting requirements related to the International Trade Data System and includes the addition of a new data element, the original Internal Transaction Number (ITN) that can be reported in the Automated Export System (AES). The original ITN field is an optional data element that can be used when a previously filed shipment is replaced, divided or cancelled.
The Census Bureau decided to add the original ITN data element to address situations when a party involved in an export transaction received penalties for shipments that were originally filed on time, but whose shipments were divided while in transit to the ultimate consignee. This data element makes it possible for U.S. Customs and Border Protection (CBP) to identify AES filings that are associated with previously filed shipments. Prior to the original ITN field, CBP was unable to determine if a shipment, identified as late, was associated with a shipment originally filed in accordance with the FTR. The inclusion of the original ITN field will enable parties in an export transaction to proactively provide CBP with additional information and will allow CBP to conduct a more thorough review of these types of shipments prior to assessing any penalties.
Let’s take a look at an example of how the original ITN field can be used. A foreign buyer in Italy purchases $20,000 worth of jewelry from a U.S. seller. The U.S. seller ships the jewelry to the buyer, but while in transit the seller is contacted by the buyer who now only wants $8,000 worth of jewelry. The seller then finds a new buyer in Sweden for the remaining $12,000 worth of jewelry. The originally filed AES record needs to be updated to reflect the value of $8,000 for the buyer in Italy. Additionally, a new AES record is created for the new buyer in Sweden. This new filing would generate a late filing compliance alert.  However, to ensure CBP is aware that the new shipment was filed prior to exportation in accordance with the FTR, the filer can include the previously filed ITN in the original ITN field.
For more information, contact the International Trade Management Division Call Center at 1-800-549-0595. Select option 3 for the Trade Regulations Branch.

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. DHS/CBP Announces ACE Certification Outage, 31 May

CSMS #17-000313, 30 May 2017.)
There will be an ACE Certification Outage tonight, Wednesday, May 31, 2017 from 1700 ET to 2000 ET for infrastructure maintenance.

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. DHS/CBP Posts Update Concerning Mandatory Filing of Contact Name and Phone

CSMS #17-000315, 31 May 2017.)
On July 20, 2017, CBP will make it mandatory for the trade to provide the Contact Name and Contact Phone information on the SE13 Record for all entries. This will assist the trade community and CBP in facilitating the movement of cargo during the inspection process as well as expedite the release process. Testing for this change is currently available in CERT. Changes to the CATAIR will be made at a later date, and additional messaging will be provided.

  – Related CSMS No. 17-000258

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. State/DDTC: (No new postings.)

(Source: State/DDTC)

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. Defense News: “India Shuffles Power to Issue Defense Licenses among Departments”

Defense News, 31 May 2017) [Excerpts.]
After one year of deadlock in India over the issuance of industrial licenses to private sector defense companies, the government has reverted back to a previous arrangement in which the Department of Industrial Policy and Promotion, or DIPP, will grant licenses, in place of the Ministry of Home Affairs, according to a senior Ministry of Defence official.
However, analysts say the departmental change will do little in improving the private sector production process of defense weapons and could even further add to the confusion.
The change was prompted by delays and confusion over the issuing of licenses, as the Ministry of Home Affairs was the sole entity in charge of granting licenses for the private sector production of weapons.
  “While the immediate logjam about the authority competent to issue the licenses has been resolved, other issues have cropped up, largely because of the conditions subject to which DIPP will exercise this authority,” said Amit Cowshish, a former financial adviser for the MoD. …

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9. ST&R Trade Report: “Export Control Reform Initiative Needs Review, Possible Changes, Report Says”

The Export Control Reform Initiative undertaken by the Obama administration has “tilted the balance more toward increasing exports and trade at the expense of controls and national security,” according to a recent report from the Institute for Science and International Security. The report does not call for a reversal of the reforms but offers a number of recommendations to “repair weaknesses in the system.”
The ECR Initiative planned to create a single export licensing agency, merge commodity control lists into a single list, adopt a common information technology system for exports, and move most export enforcement efforts under the purview of a single agency. These reforms were presented as an effort to fix overregulation of the most innocuous items and allow allies to obtain needed items more easily while more tightly regulating the most sensitive goods.
These objectives were never fully achieved due to a shortage of time and a lack of congressional support for carrying out a bureaucratic restructuring of this scale, the report states, but several important and impactful reforms did occur. For example, a substantial part of the initiative involved an “elaborate bureaucratic and time-intensive process” of moving thousands of items usable in military systems and equipment from the U.S. Munitions List to the Commerce Control List, making them more readily available to longtime U.S. allies as well as to some countries of governance or transshipment concern. On the other hand, the previous administration “appears to have devoted little effort to developing enhanced protection of the items remaining on the USML,” which may have made it easier for U.S. adversaries to obtain sensitive parts and components to outfit their military and other sensitive programs.
In response, the report makes a number of recommendations, including the following:
  – conduct a “serious review” of issues such as whether the freer availability of goods usable in military equipment has damaged national security objectives (the report argues that it has) and whether such goods are remaining with legitimate end-users, being misused in countries favored by export control reforms, or being sent onward to “proliferant states”
  – review the new harmonized definitions in the USML and CCL of goods that are “specially designed” for use in a sensitive piece of equipment, which are controversial and may have weakened enforcement efforts
  – strengthen and broaden the role of the Export Enforcement Coordination Center (e.g., to coordinate pre- and post-shipment verification performed by the various export agencies)
  – advise federal prosecutors that strong criminal enforcement of trade control violations is a national priority and encourage prosecutions of violations not involving traditional U.S. adversary countries or countries of transit concern
  – address the increased overlap of authorities between the Commerce Department’s Office of Export Enforcement and the Department of Homeland Security’s Homeland Security Investigations (e.g., by folding the criminal enforcement sections in OEE into HSI, as originally envisioned under the ECR Initiative)
  – direct the Bureau of Industry and Security to evaluate and, if necessary, reform its voluntary self-disclosure process to operate more like the one maintained by the State Department’s Directorate of Defense Trade Controls, which is “viewed as more lenient toward accidental violations … but levying harsher penalties for egregious or repeat violators”
  – continue efforts by the Defense Technology Security Administration to institute more integrated government IT platforms for export administration and licensing
  – investigate and halt any DOC issuance of general EAR 99 export licenses without first investigating whether the goods are subject to the USML
  – work to establish watch lists for major nuclear, missile, and military technologies based on existing control lists and proliferant state smuggling efforts and distribute them to relevant companies
  – assess whether exporters are still having difficulties determining the export control status of goods under the new system and make any practical changes necessary
  – perform an in-depth sampling and assessment of former USML goods’ status, locations, and end uses, including statistics on license or exception denials, close calls in exporting to unauthorized end users, and the use of pre- and post-shipment and end-use checks and related results
  – conduct a thorough examination of the end uses of license exception STA goods processed since 2011
  – consider whether to implement comprehensive export control legislation and finish the implementation of the ECR Initiative, or update the Export Administration Act and eliminate the current annual renewal requirement
[Editor’s Note: The executive summary of the report referred to in this item was included in the 17 May 2017, Daily Bugle, and can be read in full


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10. F.P. Bustamante: “Federal Judge Overturns Diatlova Conviction in Export Control Case”

(Source: Author) [Summarized by Editor.]
* Author: F. Patrick Bustamante, Wilson Sonsini Goodrich & Rosati, LLP, pbustamante@wsgr.com.
In October 2015, Anastasia Diatlova, who worked at Arc Electronics, Inc. (Arc), a Houston, Texas-based corporation, was convicted of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and to commit wire fraud and violating the IEEPA by shipping an export-controlled microelectronic to Russia without Department of Commerce permission.  See DoJ news release at DOJ Oct 2016 News Release.  A federal judge has overturned Ms. Diatlova’s convictions. A copy of the court’s order is available from the author of this article.

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Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
With an increasing focus on the value of an ethical culture, I have been reading more about chief ethics officers, the separation of ethics and compliance, and the traveling ethics officer who meets with employees to discuss ethics. Forgive me for being a contrarian but everyone is missing the point about an ethical culture.
A company does not instill and promote an ethical culture by spreading “happy talk” about ethical values, principles and the importance of an ethical culture. To the contrary, the words and communications efforts are a small part of what is really much more important – ensuring ethical conduct, measuring ethical values and promoting ethical business decision-making.
What do I mean by all of this?
First, an ethical culture depends on conduct, actions, and controls. A CEO has to act in accordance with the company’s ethical values, and has to demonstrate this commitment in his/her actions. The senior executive team has to make a similar commitment. In this respect, their conduct makes it clear whether the company has a real commitment to ethical business actions. To the extent their decisions or actions have to be communicated to ensure that everyone is aware of these steps or actions, a communications strategy should be adopted to spread the word on their ethical actions.
Take for example, a decision by the business to decline to move forward with an acquisition or a joint venture arrangement based on among other things, compliance and culture concerns – in other words, the potential acquisition or joint venture was not a good fit financially and culture wise. The company’s decision not to move forward should be explained to reinforce the importance of culture as an important factor.
Second, the company has to take affirmative steps to train and require business decisions to include consideration of ethical factors. Does a supply contract with a company that has been prosecuted for environmental, health and safety or labor violations make sense? A company may choose not to do business with a particular supplier or vendor because of reputational concerns created by such a relationship. The company may very well ask as part of its vendor/supplier consideration whether such an alliance is consistent with its ethical culture. Again, this is an issue that should be examined and publicized internally if the reputational concerns are significant enough to cause the company to decline to do business with the offensive vendor/supplier.
Third, a company’ culture has to be measured in order to determine whether the message and requirements are getting through. It is not hard to measure a company’s culture. It can be done across the company, although I favor more targeted surveys along with focus groups, which I recognize are less scientific but still valuable for insights. A survey can quickly uncover the strength of a company’s ethical culture by asking employees questions on a variety of topics, including:
  (1) board’s commitment to ethics;
  (2) top management’s commitment to ethics;
  (3) company’s overall values and principles;
  (4) employee instances of misconduct; and
  (5) willingness to report employee misconduct.
I do not mean to belittle communications efforts by chief ethics officers promoting internally the value of ethics. Nor do I oppose separating ethics and compliance functions. My concern is that ethical values and principles have to be instilled in a company in real and tangible ways. Words are all well and good – but ethics demands actions and commitment, not just feel good affirmations that have neither any bearing nor relationship to the company’s actual business operations.
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* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
The UK exemption has no effect on permanent import license requirements. Importers must continue to seek a permanent import license from the U.S. Department of Justice’s Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) if the article being permanently imported is on the U.S. Munitions Import List and requires an import license.
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* Fred Allen (John Florence Sullivan, 31 May 1894 – 17 Mar 1956, was an American comedian whose absurdist, topically-pointed radio program, The Fred Allen Show (1932-1949), made him one of the most popular and forward-looking humorists in the Golden Age of American radio.)
  – “I always have trouble remembering three things: faces, names, and – I can’t remember what the third thing is.”
* Walt Whitman (31 May 1819 – 26 Mar 1892, was an American poet, essayist, and journalist. Whitman is among the most influential poets in the American canon, often called the father of free verse. His work was very controversial in its time, particularly his poetry collection, Leaves of Grass, which was described as obscene for its overt sexuality.)
  – “We convince by our presence.”

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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: 26 May 2017: 82 FR 24242-24248: Addition of Certain Persons and Revisions to Entries 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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