17-0711 Tuesday “Daily Bugle”

17-0711 Tuesday “Daily Bugle”

Tuesday, 11 July

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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[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: ACE CERTIFICATION Outage on 12 July
  4. State/DDTC: (No new postings.)
  5. EU Amends Restrictive Measures Concerning Syria
  6. EU Parliament News: EU’s Arms Export Control Needs an Upgrade, Say Foreign Affairs MEPs
  7. Hong Kong TID Releases Circular Concerning Activities Involving Scheduled Chemicals Controlled by the Chemical Weapons Convention Ordinance
  1. Expeditors News: “Canada Customs Publishes Trade Compliance Target Areas”
  2. ST&R Trade Report: “Self-Disclosure, Disgorgement, Remedial Measures Help Company Avoid Bribery Prosecution”
  1. E. Manzares & M. Schulz: “Beware Export Controls On Software, Encryption, Technology”
  2. Flemish Peace Institute Publishes Report on EU Member States’ Arms Export Control Systems
  3. M. Volkov: “‘Too Important to Jail,’ the Yates Memorandum and FCPA Criminal Prosecutions”
  1. Tina Seale Moves to ANSYS
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (30 Jun 2017), DOD/NISPOM (18 May 2016), EAR (7 Jul 2017), FACR/OFAC (16 Jun 2017), FTR (19 Apr 2017), HTSUS (28 Jun 2017), ITAR (11 Jan 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 


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

(Source: Federal Register)

* U.S.-China Economic and Security Review Commission; NOTICES; Meetings [Publication Date: 12 July 2017.] 

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OGS_a22Commerce/BIS: (No new postings.)

(Source: Commerce/BIS)

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CSMS# 17-000399, 11 July 2017.)
There will be an ACE CERTIFICATION Outage Wednesday evening, 12 July 2017 from 1700 ET to 2000 ET due to ACE infrastructure maintenance.
In addition, as announced per CSMS# 17-000398 of 11 July 2017, 
the CBP Middleware group will be performing MQ Maintenance activities on 12 July 2017 in the 1am to 5am ET window, that will impact ACE inbound and outbound trade message transmissions in the ACE CERTIFICATION environment.

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4. State/DDTC: (No new postings.)

(Source: State/DDTC)

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5. EU Amends Restrictive Measures Concerning Syria

(Source: Official Journal of the European Union, 11 July 2017.)

* Council Implementing Regulation (EU) 2017/1241 of 10 July 2017 implementing Regulation (EU) No 36/2012 concerning restrictive measures in view of the situation in Syria
* Council Implementing Decision (CFSP) 2017/1245 of 10 July 2017 implementing Decision 2013/255/CFSP concerning restrictive measures against Syria 

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6. EU Parliament News: EU’s Arms Export Control Needs an Upgrade, Say Foreign Affairs MEPs

EU Parliament News, 11 July 2017.)
Key Points:
* Lack of uniform implementation of EU’s arms export control
* Need for supervisory body and sanctions mechanism
* Saudi Arabia should face EU arms embargo
The EU’s arms export control should be upgraded by setting up a supervisory body and sanctions mechanism for those member states not following minimum requirements, said Members of the European Parliament (MEPs) on Tuesday.
Foreign affairs committee MEPs are alarmed at arms races in the world and at military approaches to solve political conflict. They urge the EU member states to improve the implementation of the
Common Position, which sets the minimum requirement on arms export control, in order to enhance the security of civilians suffering from conflicts and human rights abuses in third countries.
MEPs criticise member states for violating their common arms export control system and taking conflicting decisions on arms export, though weapons to be exported are essentially alike and reach similar destinations and end-users. They also regret that only 20 member states fully reported on their arms export.
To remedy the situation foreign affairs MEPs advocate:
  – setting up of an arms control supervisory body under the auspices of the High Representative;
  – creating a mechanism which sanctions those member states which do not comply with the Common Position;
  – expanding the list of arms export criteria, by adding the risk of corruption amongst them;
  – increasing the transparency on arms export reporting by providing more and timely information on export licences and turning the EU annual report into a searchable online database by the end of 2018;
  – creating effective post-shipment controls to ensure that arms are not being re-exported to unauthorised end users.
Foreign affairs MEPs also say that arms export to Saudi Arabia breaches EU’s common position. They repeat European Parliament’s call on the EU foreign policy chief Federica Mogherini to impose an EU arms embargo on Saudi Arabia.
Parliaments’ rapporteur
Bodil Valero (Greens, SV) said:
The Parliament calls on Member States to better comply with the EU criteria on arms exports, not only when it comes to preventing internal repression in recipient countries or avoiding armed conflict, but also for the sake of the security of the EU and its citizens. Among other things, we call for increased exchange of information on arms exports between Member States, more transparency and the possibility of sanctions against Member States not complying with the rules.
  Next steps
The resolution on arms export was approved by 36 votes to 14, with 14 abstention. The full House is to vote on it at the September plenary session in Strasbourg.
  Quick Facts
The EU28 is the second largest arms supplier in the world (26% of global arms export), after the USA (33 %) and before Russia (23 %).
The EU’s Common Position on arms exports is the only legally binding region-wide arrangement on conventional arms exports. It list eight criteria which member states have to apply when taking a decision on arms export licence: respect for the international obligations and commitments, particularly sanctions; respect for human rights and international humanitarian law by the recipient country; the internal situation in the recipient country; risks to regional peace, security and stability; national security of the Member States as well of their friends and allies; behaviour of the buyer country towards the international community, including its attitude to terrorism and respect for international law; risk of diversion towards an unauthorised end-user or end-use; and compatibility of the arms exports with sustainable development in the recipient country.

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7. Hong Kong TID Releases Circular Concerning Activities Involving Scheduled Chemicals Controlled by the Chemical Weapons Convention Ordinance

(Source: Hong Kong TID)
The Trade and Industry Department (TID) of Hong Kong has released Circular No. 10/2017, inviting facilities which foresee that they would be engaged in specified activities involving Scheduled Chemicals controlled by the Chemical Weapons (Convention) Ordinance (“the Ordinance”) in 2018 to report details of their anticipated activities to the Director-General of Trade and Industry (“the Director”) by completing and returning the reply slip at Annex A on or before 17 July 2017.
The circular is available here.  

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Expeditors News: “Canada Customs Publishes Trade Compliance Target Areas”

Expeditors News, 10 July 2017.)
On 1 July 2017, the Canada Border Services Agency (CBSA) published a list of their Trade Compliance Verifications, which are published twice a year, in which they list all compliance verifications priorities for the next six months.
CBSA manages trade compliance through the following two verification processes:
  – Random Verifications: “designed to measure compliance rates and revenue loss”
  – Verification Priorities: established on a risk-based process, with possible additions throughout the year and hold overs from previous years
The list of the Trade Compliance Verification can be accessed

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ST&R Trade Report: “Self-Disclosure, Disgorgement, Remedial Measures Help Company Avoid Bribery Prosecution”

The Department of Justice has declined to criminally prosecute a U.S. engineering and construction firm for bribery of foreign officials, citing the company’s self-disclosure, remedial measures, and other factors. This decision appears consistent with an ongoing DOJ pilot program designed to motivate companies to voluntarily self-disclose Foreign Corrupt Practices Act-related misconduct and remediate flaws in their controls and compliance programs.
A DOJ investigation found that the company paid approximately $1.18 million in bribes to government officials in India in exchange for contracts resulting in approximately $4 million in net profits. All senior management at the company’s India subsidiary were aware of the bribes and approved or participated in the misconduct.
However, the DOJ decided to close its investigation without prosecution based on a number of factors, including the company’s (1) timely, voluntary self-disclosure; (2) thorough and comprehensive investigation; (3) full cooperation, including provision of all known relevant facts about the individuals involved in or responsible for the misconduct; (4) steps to enhance its compliance program and internal accounting controls; and (5) full remediation, including terminating all of the responsible executives and employees. In addition, the company agreed to disgorge $4.04 million in profits from the illegal behavior.

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E. Manzares & M. Schulz: “Beware Export Controls On Software, Encryption, Technology”

Law360, subscription required.) [Excerpts.]
* Authors: Elza Manzares, Esq., emanzanares@gardere.com; and Michelle Schulz, Esq., mschulz@gardere.com. Both of Gardere Wynne Sewell LLP, Dallas and Houston.
Executives routinely travel abroad with company-issued or personal laptops, tablets and handheld devices. It is common to carry product information, presentations and other information on these devices. For example, a sales executive may have a proposal that includes detailed product specifications as well as information on pricing and delivery. The device itself may contain software that is controlled for export to the destination country, or it may contain encryption items. … 
There is a common misconception that only military or very sensitive technology is subject to export controls. In fact, government controls are more common than one would expect – covering some oil and gas related product specifications, electronics information, chemical formulas, design software, and a variety of other everyday items. Software (in object code and source code) that contains a certain level and type of encryption will also be controlled for export. …

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COMM_a211. Flemish Peace Institute Publishes Report on EU Member States’ Arms Export Control Systems

The Flemish Peace Institute (FPI) has published a new report, entitled “Towards Europeanised arms export controls? Comparing control systems in EU Member States.” Written by Diederik Cops, Nils Duquet, Gregory Gourdin, researchers of the FPI, the report aims to answer the question to what extent the EU has succeeded in harmonizing its member states’ arms export control systems. The report compares the arms export control systems of Belgium, Germany, France, Hungary, the Netherlands, Portugal, the United Kingdom, and Sweden.
The full 199-page report is available here.  

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COMM_a312. M. Volkov: “‘Too Important to Jail,’ the Yates Memorandum and FCPA Criminal Prosecutions”

(Source: Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
The Justice Department’s continuing lack of individual criminal prosecutions in the FCPA arena continues to raise serious questions. DOJ’s issuance of the Yates memorandum was seen as a new and important reiteration of DOJ’s commitment to individual prosecutions.
In several significant areas, healthcare and antitrust, individual prosecutions have continued at a significant rate. One could argue that such prosecutions were already occurring in these areas and there was no significant change after the Yates memorandum.
One example, which does not prove the efficacy of the Yates memorandum, was in the car safety prosecutions of General Motors, Volkswagen, and Takada. The GM prosecution included no individuals and occurred shortly after the Yates memo was released. In contrast, the VW and Takada prosecutions, which occurred this year, included a total of nine indicted individuals.
When it comes to the FCPA, there is no justification or explanation for DOJ’s failure to indict individuals. If you read through the facts of the significant enforcement actions, there are culpable individuals who stick out like sore thumbs, who easily could have been prosecuted. Yet, we see no changes against any individuals in these cases. The silence speaks for itself.
One explanation often heard is that FCPA criminal cases are “complex” and “difficult” to bring against individuals. That is not a very persuasive claim. DOJ has been bringing complex criminal cases for years, and there is nothing so unique about the FCPA that would prevent prosecutors from bringing criminal cases.
The Antitrust Division has a strong record, with wins and losses, in bringing criminal cases against executives for collusion in international markets. In fact, the Antitrust Division often argues that it has the unique ability to bring such cases given the complexity of antitrust cartel cases and the difficulty in securing international evidence and cooperation. Indeed, the Antitrust Division indicts three individuals for every corporation prosecuted for illegal cartel activity. The Antitrust Division does not shy away from difficult cases, and has won some significant cases, and lost some high-profile cases as well.
My fear is that the Justice Department has become gun-shy because of some early missteps and losses in the FCPA arena. DOJ suffered some embarrassing losses in the Shot Show sting case, as well as the recent Petro Tiger case. Those cases, however, should not be a justification for sounding a retreat.
To the contrary, DOJ needs to move beyond these past prosecutions and reinvigorate its enforcement program to address this glaring omission. Any prosecutor will candidly admit that losing a case “stings,” but in the end the mark of a strong prosecutor is the ability to accept such defeats while continuing to prosecute cases with a positive attitude. Of course, prosecutors “learn” from such losses, and there are an infinite variety of variables or events that can occur mid-trial that can turn a strong case into a weak one – every prosecutor can tell you about those cases.
The Justice Department continues to suffer perception problems from its failure to prosecute high-level executives involved in the 2008 financial crisis. It was from those controversial events that we started to hear – “Too big to jail,” and “Too big to fail.” DOJ needs to regain its credibility and integrity by resuming its historical record of prosecuting those individual who should be prosecuted, whether they are in the C-Suite, mid-level or lower-levels of the corporate ladder.
The Justice Department’s credibility is at issue, especially after touting the Yates memorandum and the impact it would have on DOJ’s prosecution of culpable individuals. In the FCPA arena, it is almost laughable that we have seen no significant individual prosecutions for foreign bribery after the issuance of the Yates memorandum. DOJ needs to return to its mission and ensure that it abides by its mantra – “equal justice under the law.”

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(Source: Editor)

* E. B. White (Elwyn Brooks “E. B.” White, 11 Jul 1899 – 1 Oct 1985, was an American writer. He was a contributor to The New Yorker magazine and a co-author of the English language style guide, Strunk & White’s The Elements of Style. He also wrote books for children, including Stuart Little, Charlotte’s Web, and The Trumpet of the Swan.)
  – “We should all do what, in the long run, gives us joy, even if it is only picking grapes or sorting the laundry.”
  – “Omit needless words.  Vigorous writing is concise.  A sentence should contain no unnecessary words, a paragraph no unnecessary sentences, for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts.”
* John Quincy Adams (11 Jul 1767 – 23 Feb 1848, was an American statesman who served as a diplomat, United States Senator, member of the House of Representatives, and was the sixth President of the United States from 1825 to 1829. He was the son of President John Adams and Abigail Adams.)
  – “If your actions inspire others to dream more, learn more, do more and become more, you are a leader.”

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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.

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: 30 Jun 2017: 
82 FR 29714-29719
: Modernization of the Customs Brokers Examination [Effective Date: 31 July 2017.] 


  – 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 cancelled Supp. 1 to the NISPOM  (Summary here.)

  – Last Amendment: 7 July 2017: 82 FR 31442-31449: Revisions to the Export Administration Regulations Based on the 2016 Missile Technology Control Regime Plenary Agreements [Effective Date: 7 July 2017.] 


FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
 – Last Amendment: 16 Jun 2017: 82 FR 27613-27614: Removal of Burmese Sanctions Regulations 

  – 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.

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: 28 Jun 2017: 
Harmonized System Update 1704, containing 
2,564 ABI records and 463 harmonized tariff records. 
  – HTS codes for AES are available 
  – HTS codes that are not valid for AES are available 
  – Last Amendment: 11 Jan 2017: 82 FR 3168-3170: 2017 Civil Monetary Penalties Inflationary Adjustment
  – The only available fully updated copy (latest edition: 10 Jun 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 800 footnotes containing amendment histories, 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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. 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 

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is 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 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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