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17-0607 Wednesday “The Daily Bugle”

17-0607 Wednesday “Daily Bugle”

Wednesday, 7 June 2017

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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. DHS/CBP Seeks Applicants for Appointment to COAC  
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.) 
  3. DHS/CBP Announces ACE Certification Outage, Tonight 5-8 PM EDT 
  4. DHS/CBP Announces ACE CERTIFICATION CQ, 8 Jun  
  5. State/DDTC: (No new postings.) 
  1. Expeditors News: “Free Trade Agreement between MERCOSUR Members and the Arab Republic Egypt” 
  1. Global Trade News: “Weise Wednesday: How Important Is Cross-Department Compliance Training?” 
  2. M. Volkov: “‘The Future is Now’ – Compliance and Technology” 
  3. R.C. Burns: “Epsilon, The Unvanquished: Pt. 2” 
  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 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. DHS/CBP Seeks Applicants for Appointment to COAC

(Source: Federal Register) [Excerpts.]
 
82 FR 26504-26505: Request for Applicants for Appointment to the Commercial Customs Operations Advisory Committee (COAC)
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security (DHS).
* ACTION: Committee management; request for applicants for appointment to the COAC.
* SUMMARY: U.S. Customs and Border Protection (CBP) is requesting that individuals who are interested in serving on the Commercial Customs Operations Advisory Committee (COAC) apply for appointment. COAC provides advice and makes recommendations to the Secretaries of the Department of the Treasury (Treasury) and Department of Homeland Security (DHS) on all matters involving the commercial operations of CBP and related functions.
* DATES: Applications for membership should be submitted to CBP at the address below on or before 24 July 2017. …
* FOR FURTHER INFORMATION CONTACT: Ms. Florence Constant-Gibson, International Trade Liaison, U.S. Customs and Border Protection, 1300 Pennsylvania Avenue NW., Room 3.5A, Washington, DC 20229. Email: florence.v.constant-gibson@cbp.dhs.gov; telephone 202-344-1440; facsimile 202-325-4290.
* SUPPLEMENTARY INFORMATION:
   The COAC meets at least once each quarter, although additional meetings may be scheduled. Generally, every other meeting of the COAC may be held outside of Washington, DC, usually at a CBP port of entry. The members are not reimbursed for travel or per diem.
   Application for COAC Appointment: Any interested person wishing to serve on the COAC must provide the following:
 
  – Statement of interest and reasons for application;
  – Complete professional resume;
  – Home address and telephone number;
  – Work address, telephone number, and email address;
  – Statement of the industry you represent; and
  – Statement agreeing to submit to pre-appointment background and tax checks (mandatory). …
 
   Dated: 2 June 2017.
Kevin K. McAleenan, Acting Commissioner.

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OGSOTHER GOVERNMENT SOURCES

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

* U.S. Customs and Border Protection; NOTICES; Automated Commercial Environments: Sole CBP-Authorized Electronic Data Interchange System for Processing Electronic Drawback and Duty Deferral Entry and Entry Summary Filings [Publication Date: 8 June 2017.]
 
* U.S. Customs and Border Protection; NOTICES; National Customs Automation Program Tests: Reconciliation, Post-Summary Corrections, and Periodic Monthly Statements [Publication Date: 8 June 2017.]
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(Source:
CSMS #17-000331, 7 June 2017.)
 
There will be an ACE CERTIFICATION Outage this evening, Wednesday, 7 June 2017 from 1700 ET to 2000 ET.
 
Infrastructure maintenance and the following ACE Deployment will take place during this time:
 
ACE Import Manifest
 
  – CAOM-11009: Fix for A3 (FDA PN Rejected) and A1 (FDA PN Advisory) messages sometimes getting sent to Trade in wrong sequence.

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OGS_a45
. DHS/CBP Announces ACE CERTIFICATION CQ, 8 Jun

(Source:
CSMS #17-000332, 7 June 2017.)
 
There will be an ACE CERTIFICATION CQ deployment on Thursday morning,
 
8 June 2017, starting at 0700 ET., impacting ACE Cargo/Manifest/Entry Release Query (CQ Query) results. The deployment is expected to take under 30 minutes.
 
To be deployed:
 
  – CAOM-9506: Fix for CQ Query failures due to BOL Number size larger than response can support (12 characters). If BOL number is greater than 12 characters, it will be truncated.
  – CQ infrastructure work

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

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NWSNEWS

NWS_a17
. Expeditors News: “Free Trade Agreement between MERCOSUR Members and the Arab Republic Egypt”

 
On 31 May the Importers Chamber of the Republic of Argentina posted Law 27361 of which Article 1 establishes the approval of a Free Trade Agreement (FTA) between MERCOSUR members and the Arab Republic of Egypt. This agreement was approved by the Argentinian Senate and Chamber of Deputies.
 
The FTA was originally incorporated as Common Market Council Decision 16/04 by MERCOSUR, which consists of Argentina, Brazil, Paraguay, and Uruguay. Argentina was the final country to ratify the agreement.
 
The agreement consists of five chapters and several annexes and is available in both English and Spanish.
 
Additional information can be accessed here.
 
Documents relating to the negotiations can be accessed here.

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COMMCOMMENTARY

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8. Global Trade News: “Weise Wednesday: How Important Is Cross-Department Compliance Training?”

(Source: Integration Point Blog)
 
Welcome to Weise Wednesday! Every week we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. Please send questions to AskGeorge@IntegrationPoint.com.
 
Q: How important is cross-department compliance training?
 
A: First of all, companies heavily involved in shipping goods globally should have a formal, written compliance program. For such programs to be successful, it is essential that a comprehensive, cross-department training program be implemented to ensure that all parties throughout the organization understand their roles and responsibilities.    
 
One of the biggest mistakes companies make is failing to recognize that a number of organizational units have roles to play in ensuring compliance with trade rules and regulations. Departments such as sourcing/procurement, engineering, sales, transportation, finance, legal, and even the executive team can have information relevant to the shipment of products that directly impacts trade compliance – but the trade compliance team is unaware of that information.
 
For example, to properly value imported goods, it is essential that all elements of dutiable value be included, such as “assists.” An assist is anything that the buyer provides to the manufacturer or seller, directly or indirectly, either free of charge or for less than the arm’s length price, and for which the manufacturer/seller would otherwise have to charge the buyer if not so provided. Examples include: materials or parts included in the manufacture of the product; tools, dies or molds; materials consumed in production; and certain engineering or design work undertaken outside of the U.S. Often, the trade compliance team in a company is not even aware that assists were provided for an imported product, resulting in an under declaration of the customs value of the goods on the entry.
 
It is important to recognize that while implementing a comprehensive, cross-department compliance training program, not all internal departments or organizations need to receive the same level of training. You should tailor the training to the needs of the various departments to ensure optimal compliance. To address the situation described above, for example, it is important that all parts of the organization which have information relating to assists understand 1) what an assist is and 2) how to provide such information to the compliance team in a timely fashion.
 
Finally, since requirements in the global arena are constantly changing, it is important that the training is recurring, and not a “one-time” effort to ensure that stakeholders remain up-to-date.

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(Source:
Volkov Law Group Blog. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
This posting is not a “pie in the sky” outline of compliance in the future, when technology works seamlessly with compliance functions. My focus today is on what is happening now in the compliance world when it comes to technology. Unfortunately, this is not a column that is limited to compliance.
 
I am repeatedly struck by the failure of Fortune 500 companies to embrace and implement basic technology tools. The number of companies still relying on paper, spreadsheets and other hand-driven mechanisms to record critical business information is probably much larger than we all would acknowledge.
 
The United States has always been a productivity leader. But when it comes to basic technology functions that permit information sharing, automation and efficient storage of data, I am not so sure.
 
In the compliance world, I still observe companies relying on paper systems for procurement, due diligence and contract management systems. Believe it or not but there still are Fortune 500 companies that pay money to vendors without verifying that the amount charged correctly matches a purchase order or a specific contract. You find that hard to believe?
 
Chief compliance officers often complain about the lack of resources to conduct due diligence, monitor third parties, and organize compliance records. Sharepoint has become invaluable to many companies as a common repository for important compliance documents and way to access documents across corporate functions.
 
With the increasing interdependency of financial controls and compliance functions, we can expect to see greater demand for information sharing and access to records among compliance, finance, human resources, procurement and inter-related functions that depend on coordination. That is where technology has to come in and come in now.
 
The era of stovepipes and silos has been breaking down rapidly over the last ten years. The pace of technology will increase quickly and any remnants of stovepipes and silos should be obliterated in the next five years.
 
Technology – cloud-based programs, blockchain (distributed ledgers, and other automation tools) – is developing rapidly and in time, will become universally available at affordable costs. The next five years will be transformative. Those companies pushing paper and clinging to the past to avoid incurring moderate cost improvements beyond paper are in for a shock.
 
Companies that rely on outdated technologies will lose in the competitive marketplace. A compliance program without technology reflects a company reluctant to innovate. Such an attitude is bound to influence the company’s basic business operations and overall profitability.
 
Technology is the future – more so than ever. No longer are we bound by bulky PCs that hold individual software systems – a cloud-based system permits grater sharing, networking and increased accessibility to shared functions. The first step in this transformative process is breaking down silos and inefficiencies internal to a company – the next step will be increasing accessibility and efficiency for companies when interacting with business partners, support functions (e.g. banks), and other third party relationships that require duplication of record-keeping and data.
 
The future is now (George Allen’s mantra for the 1970 Washington football team). It equally applies today with significance to business and compliance.

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(Source:
Export Law Blog
. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com
, 202-508-6067)
 
Last week I posted on the D.C. Circuit Court of Appeals’s opinion setting aside the $4 million fine that the Office of Foreign Assets Control (“OFAC”) imposed on Epsilon Electronics for shipping weapons of mass destruction (namely, subwoofers and other car audio pimping items)  to Iran.  As noted in the prior post, the D.C. Circuit came to the somewhat astonishing conclusion that you could violate the prohibition on exporting to Iran if there were red flags that your shipment might be diverted from the country of export to Iran even if that shipment ultimately did not wind up in Iran. Even so, the Court set aside the jaw-dropping fine and sent the case back to OFAC for further consideration.
 
Having found that OFAC did not need evidence of a shipment to Iran to fine someone for exporting to Iran, the Court then took the paradoxical position that OFAC erred by not considering evidence that five of the thirty-nine shipments involved might not have actually gone to Iran. The emails in question were ones that “contemplate[d] [Epsilon] products being sold out of the Asra store in Dubai.” The Court explains this apparent inconsistency by saying that these emails tended to show that Epsilon “did not have reason to know those shipments were specifically intended for reexport to Iran.” Remember, the Court has taken the position that, in the Court’s version of “ordinary English usage,” you are “exporting” something to someone if you have reason to know it might go to that party even if it never does.
 
Leaving aside this metaphysical and linguistic conundrum about un-exported exports, the Court’s discussion of OFAC’s treatment of the ignored evidence is instructive.
 
Government counsel explained at oral argument that OFAC did not consider the emails credible evidence. We can infer as much from the agency’s liability finding. But we lack an explanation, from the record, of why they are not credible, and why they do not counsel against liability for the final five shipments.
 
The only discussion of the credibility of these emails in the record was an internal OFAC memorandum not provided to Epsilon, but the Court dismissed its reasoning. That memo argued that the Asra store opened after all but two of the five shipments in issue had been sent, but the Court noted that this would not rebut an inference that the earlier shipments were meant for sale at the store when it opened. Even more significantly, the Court noted:
 
We also note the low value of the last five shipments, two of which were worth just over one hundred dollars apiece. At the time those shipments were sent, Epsilon knew its dealings with Asra were under OFAC investigation. OFAC did not explain why Epsilon would knowingly risk fines of up to $250,000 per shipment in return for such a small reward.
 
This is, of course, an excellent point and it could go much further than the case at hand. It is, indeed, a legitimate question that can be raised almost any time OFAC or the DOJ go after low-value exports.  Of the many things in the opinion for OFAC to dislike, I bet this part of the opinion is at the top of their list.
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ENEDITOR’S NOTES

* Samuel McChord Crothers (7 Jun 1857 – 10 Nov 1927, was an American Unitarian minister, author, and popular essayist.)
  – “A prose writer gets tired of writing prose, and wants to be a poet. So he begins every line with a capital letter, and keeps on writing prose.”
 
* Paul Gauguin (Eugène Henri Paul Gauguin, 7 Jun 1848 – 8 May 1903, was a French post-Impressionist artist. Underappreciated until after his death, Gauguin is now recognized for his experimental use of color and Synthetist style that were distinctly different from Impressionism. His work was influential to the French avant-garde and many modern artists, such as Pablo Picasso and Henri Matisse.)
  – “Art is either plagiarism or revolution.”
  – “Many excellent cooks are spoilt by going into the arts.”

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EN_a312
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

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

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

* EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774 
  – Last Amendment: 26 May 2017: 82 FR 24242-24248: Addition of Certain Persons and Revisions to Entries on the Entity List

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment:
10 Feb 2017: 82 FR 10434-10440: Inflation Adjustment of Civil Monetary Penalties. 
 
*
FOREIGN TRADE REGULATIONS (FTR)
: 15 CFR Part 30
  – Last Amendment: 19 Apr 2017: 82 FR 18383-18393: Foreign Trade Regulations: Clarification on Filing Requirements 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (19 Apr 2017) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance.  Subscribers receive revised copies every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR.
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jan 2017: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 7 Mar 2017: Harmonized System Update 1702, containing 1,754 ABI records and 360 harmonized tariff records. 
  – HTS codes for AES are available
here
.
  – HTS codes that are not valid for AES are available
here.
 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.
  – Latest Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition 8 Mar 2017) of the ITAR is Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 750 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is available by annual subscription from the Full Circle Compliance website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us to receive your discount code.

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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 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.

* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website.

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