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17-0720 Thursday “Daily Bugle”

17-0720 Thursday “Daily Bugle”

Thursday, 20 July 2017

TOP
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  1. President Continues National Emergency With Respect to Transnational Criminal Organizations
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. Treasury/OFAC Assesses a Civil Monetary Penalty Against ExxonMobil Corporation
  5. EU P2P Posts Summary of Activity
  6. UK/DIT ECO Publishes Strategic Export Controls Annual Report 2016
  1. The Japan Times: “Defense Ministry’s Push to Fund Research into Dual-Use Technologies Sparks Ethics Debate Among Scientists”
  2. Reuters: “U.S. Fines Exxon Mobil over Russia Sanctions Violations”
  3. SwissInfo.ch: “Official: Internal Review Clears Swiss Arms Shipments”
  1. J.W. Boscariol, R.A. Glasgow & K. Thompson: “Major Changes to Canada’s Export and Technology Transfer Controls Coming into Force Shortly”
  2. M. Volkov: “Should You Record Internal Investigation Interviews?”
  3. R.C. Burns: “Why One of the Swapped Prisoners Did Not Return to Iran”
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (13 Jul 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 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1
1.

President Continues National Emergency With Respect to Transnational Criminal Organizations

 
82 FR 33773: Notice of July 19, 2017; 
Continuation of the National Emergency With Respect to Transnational Criminal Organizations
 
On July 24, 2011, by Executive Order 13581, the President declared a national emergency with respect to transnational criminal organizations pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by the activities of significant transnational criminal organizations.

Significant transnational criminal organizations continue to threaten the safety of the United States and its citizens through the scope and gravity of their actions. Such organizations derive revenue through widespread illegal conduct and overwhelmingly demonstrate a blatant disregard for human life through acts of violence and abuse. These organizations often facilitate and aggravate violent civil conflicts and increasingly facilitate the activities of other dangerous persons. As the sophistication of these organizations increases, they pose an increasing threat to the United States.
 
The activities of significant transnational criminal organizations continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. For this reason, the national emergency declared in Executive Order 13581 of July 24, 2011, and the measures adopted on that date to deal with that emergency, must continue in effect beyond July 24, 2017. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to transnational criminal organiza- tions declared in Executive Order 13581.
 
This notice shall be published in the Federal Register and transmitted to the Congress.
 
  (Presidential Sign.)
 
THE WHITE HOUSE,
July 19, 2017 

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OGSOTHER GOVERNMENT SOURCES

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

* State Department; NOTICES; Meetings; Defense Trade Advisory Group (DTAG) [Publication Date: 21 July 2017.]

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

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OGS_a45
.
Treasury/OFAC Assesses a Civil Monetary Penalty Against ExxonMobil Corporation

(Source:
Treasury/OFAC)

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has assessed a $2,000,000 civil monetary penalty against ExxonMobil Corp. of Irving, Texas, including its U.S. subsidiaries ExxonMobil Development Co.and ExxonMobil Oil Corp. (collectively, “ExxonMobil”), for violations of § 589.201 of the Ukraine-Related Sanctions Regulations, 31 C.F.R. part 589 (Ukraine-Related Sanctions Regulations).
 
Between on or about May 14, 2014 and on or about May 23, 2014, ExxonMobil violated § 589.201 of the Ukraine-Related Sanctions Regulations when the presidents of its U.S. subsidiaries dealt in services of an individual whose property and interests in property were blocked, namely, by signing eight legal documents related to oil and gas projects in Russia with Igor Sechin, the President of Rosneft OAO, and an individual identified on OFAC’s List of Specially Designated Nationals and Blocked Persons.
 
OFAC determined that ExxonMobil did not voluntarily self-disclose the violations to OFAC, and that the violations constitute an egregious case. 
 
OFAC’s web notice is included below.
 
—–
 
ENFORCEMENT INFORMATION FOR JULY 20, 2017
 
Information concerning the civil penalties process is discussed in the Office of Foreign Assets Control (OFAC) regulations governing each sanctions program; the Reporting, Procedures, and Penalties Regulations, 31 C.F.R. part 501; and the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. These references, as well as recent final civil penalties and enforcement information, can be found on OFAC’s website.
 
ENTITIES-31CFR501.805(d)(l)(i)
 
ExxonMobil Corporation Assessed a Penalty for Violating the Ukraine-Related Sanctions Regulations
: ExxonMobil Corp., of lrving, Texas, including its U.S. subsidiaries ExxonMobil Development Company and ExxonMobil Oil Corp. (collectively, “ExxonMobil”), has been assessed a civil monetary penalty of$2,000,000 for violations of the Ukraine-Related Sanctions Regulations, 31 C.F.R. part 589 (Ukraine-Related Sanctions Regulations). Between on or about May 14, 2014 and on or about May 23, 2014, ExxonMobil violated§ 589.201 of the Ukraine- Related Sanctions Regulations when the presidents of its U.S. subsidiaries dealt in services of an individual whose property and interests in property were blocked, namely, by signing eight legal documents related to oil and gas projects in Russia with Igor Sechin, the President of Rosneft OAO, [FN/1] and an individual identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”) (referred to hereinafter as an “SDN”).
 
  Background
 
On March 16, 2014, the President issued Executive Order 13661, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” 79 Fed. Reg. 15,535 (Mar. 19, 2014) (“E.O. 13661”). E.O. 13661, among other things, granted the Secretary of the Treasury the authority to designate officials of the Russian Government, and blocked any property and interests in property, and prohibited any dealing in any property and interests in property, of a person so designated. Section 4(b) of E.O. 13661 expressly states that U.S. persons are prohibited from the receipt of any contribution or provision of funds, goods, or services from the designated person. In response to multiple media inquiries from March to April 2014, the White House issued press guidance or held press calls in which Senior Administration officials stated that the focus of sanctions against high-level Russian cronies at the time was to identify individuals and target their assets instead of the companies they manage and that U.S. persons are prohibited from doing business with persons who had been designated under E.O. 13661.
 
On April 28, 2014, OFAC designated Igor Sechin pursuant to E.O. 13661 and added him to its SDN List. The Department of the Treasury stated in a press release announcing the action that “[a]s a result of today’s action…transactions by U.S. persons or within the United States involving the individuals and entities designated today are generally prohibited.”
 
On May 8, 2014, before ExxonMobil signed the legal documents, but after the above-referenced White House statements were made, OFAC issued the Ukraine-Related Sanctions Regulations that included definitions of “property” and “property interest” that, along with the prohibitions in E.O. 13661 and the public statements made by the White House and the Department of the Treasury, made clear U.S. persons may not deal with any persons designated pursuant to E.O. 13361, including Igor Sechin or receive, deal in, or benefit from any service a designated person might provide. [FN/2]
 
Despite these prohibitions and ExxonMobil’s global market and sophistication, ExxonMobil moved forward with signing the legal documents with designated person Igor Sechin between on or about May 14, 2014 and on or about May 23, 2014.
 
  Warning Signs That the Conduct at Issue Constituted a Violation of OFAC Regulations
 
ExxonMobil claims that it interpreted press statements as establishing a distinction between Sechin’s “professional” and “personal” capacity, in part citing to a news article published in April 2014 that quoted a Department of the Treasury representative as saying that a U.S. person would not be prohibited from participating in a meeting of Rosneft’ s board of directors. However, that brief statement did not address the conduct in this case.
 
Furthermore, the plain language of the Ukraine-Related Sanctions Regulations (which were issued after the Executive branch statements) and E.O. 13661 do not contain a “personal” versus “professional” distinction, and OFAC has neither interpreted its Regulations in that manner nor endorsed such a distinction. The press release statements provided context for the policy rationale surrounding the targeted approach during the early days of the Ukraine crisis, which was to isolate designated individuals who were targeted as a result of the crisis in Ukraine, rather than imposing blocking sanctions on the large companies that they managed. No materials issued by the White House or the Department of the Treasury asserted an exception or carve-out for the professional conduct of designated or blocked persons, nor did any materials suggest that U.S. persons could continue to conduct or engage in business with such individuals.
 
Separately, there was a Frequently Asked Question (FAQ) publicly available on the OFAC website at the time of the violations that specifically spoke to the conduct at issue in this case, though framed in the context of the Burma sanctions program. FAQ #285, which OFAC issued in 2013 and was publicly available on OFAC’s website at the time of Exxon Mobil’s violations, stated that U.S. parties should “be cautious in dealings with [a non-designated] entity to ensure that they are not providing funds, goods, or services to the SDN, for example, by entering into any contracts that are signed by the SDN.” In rebuttal to this guidance, ExxonMobil has pointed out that OFAC’s regulations state that different interpretations may exist among and between the sanctions programs that it administers, but FAQ #285 clearly signaled that OFAC had, in a sanctions program also involving SDNs, viewed the signing of a contract with an SDN as prohibited, even if the entity on whose behalf the SDN signed was not sanctioned. OFAC acted consistently with that approach in this case.
 
The issuance of E.O. 13661 and the publication of the Ukraine-Related Sanctions Regulations prior to the violations at issue here; press statements by the White House and the Department of the Treasury regarding prohibited transactions with persons designated under E.O. 13661; and previous OFAC precedent published in 2013 and available on OFAC’s website at the time of the violations all clearly put ExxonMobil on notice that OFAC would consider executing documents with an SDN to violate the prohibitions in the Ukraine-Related Sanctions Regulations.
 
  OFAC Determinations and Analysis
 
OFAC determined that ExxonMobil did not voluntarily self-disclose the violations to OFAC and that the violations constitute an egregious case. Both the base civil monetary penalty and the statutory maximum civil monetary penalty amounts for the violations were $2,000,000.
 
OFAC thoroughly considered the arguments ExxonMobil set forth in its submissions to OFAC, and the penalty amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.
 
OFAC considered the following to be aggravating factors: (1) ExxonMobil demonstrated reckless disregard for U.S. sanctions requirements when it failed to consider warning signs associated with dealing in the blocked services of an SDN; (2) ExxonMobil’s senior-most executives knew of Sechin’s status as an SDN when they dealt in the blocked services of Sechin; (3) ExxonMobil caused significant harm to the Ukraine-related sanctions program objectives by engaging the services of an SDN designated on the basis that he is an official of the Government of the Russian Federation contributing to the crisis in Ukraine; and (4) ExxonMobil is a sophisticated and experienced oil and gas company that has global operations and routinely deals in goods, services, and technology subject to U.S economic sanctions and U.S. export controls.
 
OFAC considered the following to be a mitigating factor: ExxonMobil has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the first transaction giving rise to the violations.
 
For more information regarding OFAC regulations, please go here

——
  [FN/1] Rosneft OAO is on the Sectoral Sanctions Identifications List as subject to Directives 2 and 4 under Executive Order 13662 of March 20, 2014, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” but those authorities are not implicated in this action. Rosneft OAO is not subject to blocking sanctions.
  [FN/2] “The terms property and property interest include, but are not limited to, … services of any nature whatsoever, contracts of any nature whatsoever, and any other property, real, personal, or mixed, tangible or intangible, or interest or interests therein, present, future, or contingent.” 31 C.F.R. § 589.308. 

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OGS_a56
. EU P2P Posts Summary of Activity

(Source: EU P2P)
 
The EU Partner-to-Partner (EU P2P) has published the following summary of an activity in July:
 
  – 17-20 July 2017: Ho Chi Minh City, Vietnam: Seminar on Export Controls of Dual-Use Goods for Vietnamese Officials

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OGS_a67
. UK/DIT ECO Publishes Strategic Export Controls Annual Report 2016

(Source:
UK/DIT ECO
)
 
The Export Control Organisation (ECO) of the UK Department of International Trade (DIT) has published the Export Controls Annual Report 2016. 
 
The report includes sections on UK and EU policy developments, international policy, export licensing case studies, export licensing data and performance, compliance and enforcement 
gifted equipment, and government to government exports. 
It also contains detailed information about the UK’s export licensing processes and procedure.
 
The report was presented to Parliament pursuant to Section 10 of the Export Control Act 2002 and ordered by the House of Commons to be printed 20 July 2017.  The full report is available here

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NWSNEWS

NWS_a18
.

The Japan Times: “Defense Ministry’s Push to Fund Research into Dual-Use Technologies Sparks Ethics Debate Among Scientists”

(Source:
The Japan Times, 20 July 2017.) [Excerpts.]
 
After losing World War II, Japan decided to pursue pacifism under a war-renouncing Constitution, and its scientists vowed to avoid military research in repentance for cooperating with the military.
 
But this long-held position is being complicated by Prime Minister Shinzo Abe’s policy of luring universities into developing dual-use technologies at a time when regional security is undergoing rapid changes.
 
To push universities in that direction, the Defense Ministry’s technology agency set up the National Security Technology Research Promotion Fund with ¥300 million ($2.7 million) in fiscal 2015 to finance basic research into technologies with both civil and military applications. … 

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NWS_a29
.

Reuters: “U.S. Fines Exxon Mobil over Russia Sanctions Violations”

(Source:
Reuters, 20 July 2017.)
 
The U.S. Treasury Department on Thursday said it was fining global oil company Exxon Mobil Corp $2 million for violating sanctions on Russia in May 2014.
 
The heads of the company’s U.S. subsidiaries signed eight documents between May 14 and May 23, 2014 with Igor Sechin, the head of Russia’s largest oil producer, Rosneft, Treasury’s Office of Foreign Assets Control said in a statement on its website.
 
Sechin had been blacklisted by the United States just weeks earlier.
 
The Treasury unit, which enforces sanctions, found ExxonMobil had not voluntarily self-disclosed the violations, “and that the violations constitute an egregious case.”
 
Rex Tillerson, ExxonMobil’s chief executive at the time of the dealings, is now U.S. secretary of state. The State Department referred questions about the fine and Tillerson’s knowledge of the dealings to Exxon Mobil.
 
Exxon said it fully complied with sanctions guidelines in 2014 from former President Barack Obama’s administration that ongoing oil and gas business activities with Rosneft were allowed, but not personal dealings with Sechin.
 
The oil company cited a May 2014 Treasury Department spokesman’s comments that BP Plc Chief Executive Bob Dudley – an American citizen – would be allowed to remain on Rosneft’s board so long as he did not discuss personal business with Sechin.
 
The Treasury Department “is trying to retroactively enforce a new interpretation of an executive order that is inconsistent with the explicit and unambiguous guidance from the White House and Treasury issued before the relevant conduct and still publicly available today,” Exxon Mobil spokesman Alan Jeffers said in a statement.
 
On April 28, 2014, the Treasury announced it was sanctioning Sechin as part of a package of measures aimed at pressuring Russia over its intervention in Ukraine, and said he had shown “utter loyalty to Vladimir Putin,” Russia’s president.
 
The sanctions prohibit U.S. citizens or those located in the United States from dealing with those on the blacklist.

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NWS_a310
.

SwissInfo.ch: “Official: Internal Review Clears Swiss Arms Shipments”

(Source:
SwissInfo.ch, 20 July 2017.) [Excerpts.]
 
The head of a Swiss federal office says its handling of export permits for arms manufacturers is improving in the wake of a criminal probe into past shipments.
 
An internal review cleared a federal employee of wrongdoing after prosecutors questioned the handling of a Bernese arms manufacturer’s requests to ship weapons to Kazakhstan in 2008 and to New Zealand in 2009, said Marie-Gabrielle Ineichen-Fleisch, director of the State Secretariat for Economic Affairs, or SECO.
 
Three years ago, SECO switched its approval process from paper to an electronic system that “has led to an increase in the transparency of export controls”, Ineichen-Fleisch said in an interview with Swiss newspaper Neue Zürcher Zeitung published on Thursday.
 
SECO also insists that “the four-eyes principle applies to all transactions”, she said, adding that the employee who was reviewed no longer deals with requests from the Bernese arms manufacturer. …. 

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COMMCOMMENTARY

COMM_a01
11. J.W. Boscariol, R.A. Glasgow & K. Thompson: “Major Changes to Canada’s Export and Technology Transfer Controls Coming into Force Shortly”

 
* Authors: John W. Boscariol, Esq., jboscariol@mccarthy.ca;  Robert A. Glasgow, Esq. rglasgow@mccarthy.ca; and Kirsten Thompson, Esq., kthompson@mccarthy.ca. All of McCarthy Tétrault LLP, Toronto.
 
The Government of Canada has announced that a new version of the Guide to Canada’s Export Controls (the “Guide”) will come into effect on August 11, 2017. The Guide lists the goods and technology subject to export and technology transfer controls. The transfer from Canada of any items listed in the Guide must be made under the authority of an export permit, including transfers via physical export, telephone discussions, email, server access, upload and download, technical assistance and services, and other forms of information transmission. Companies doing business abroad, whether in connection with sales, sourcing or research and development, should be carefully reviewing the latest changes to the Guide to ensure full compliance with Canada’s export control regime.
 
The new version of the Guide, referred to as the December 2015 Guide, reflects additions, deletions and clarifications regarding items subject to export control, incorporating Canada’s commitments and obligations under various multilateral export control regimes up to December 31, 2015. This latest version replaces the December 2013 Guide which had been in effect since December 5, 2014.
 
  Background – Regulatory Context of the Guide
 
Canada retains a vested national interest in controlling the export and transfer of certain goods and technology to parties outside of its borders. To that end, Canada enacted the Export and Imports Permits Act (the “EIPA”), which requires that a permit be obtained by any person or entity seeking to export or transfer such goods and technology. The principal objective of export controls is to ensure that exports of certain goods and technology are consistent with Canada’s foreign and defence policies, such as national security, human rights protection and obligations not to contribute to the development of weapons of mass destruction.
 
The goods and technology which are so controlled are identified on the Export Control List (the “ECL”). The items on the ECL are subdivided into different groups:
 
  – Group 1, so-called “Dual-Use” goods and technology controlled under the Wassenaar Arrangement;
  – Group 2, the munitions list;
  – Groups 3 and 4, goods and technology with nuclear proliferation concerns;
  – Group 5, miscellaneous and strategic goods and technology (including all US-origin items);
  – Group 6, missile technology and components; and
  – Group 7, goods and technology subject to the chemical and biological weapons non-proliferation list.
 
The Guide is incorporated by reference into the ECL and provides detailed information and specifications for the items covered in each group. In addition, the Guide also contains detailed “de-control notes”, that create specific exemptions for certain exports in certain circumstances. For example, many modern aviation engines are controlled under Category 9 of Group 1 (as they can have military uses). However, under the Guide, an engine for use in a civilian aircraft which has been type-certified by a Wassenaar Arrangement country is “de-controlled”.
 
  Overview of the Changes
 
While these latest changes impact every group within the Guide, it is Group 1 which is most significantly affected, with an extensive overhaul including a sizeable number of deletions from the ECL. Many of the definitions and specifications in Group 1 have been significantly refined.
 
Goods and technology have been added to Group 1 and are now subject to export control requirements. These include certain laser materials, technology for flight control systems, satellite and space goods and technology, and various aerospace goods and technologies.
 
The remaining changes have been more peripheral. Most of these have been clarification to specific items in the Guide inserting clarifications, changing cross-references to various new items or to account for removals, and to address typographical changes (such as changes to agency names). The most significant changes outside of Group 1 are the addition of certain types of rocket systems to Group 6 and a large increase in the number of viruses and other agents controlled under Group 7. Other additions include sight control equipment and technology, and the explosive mixture BTNEN.
 
Notably, there have been no changes to Canada’s cybersecurity export and technology transfer controls in respect of intrusion software and IP network communications surveillance systems and related software and technology. This is an important contrast from the United States where these controls are not in place.
 
Certain items have also been removed from the Guide. These include certain items within the following categories: marine goods and technology (marine surface-effect vehicles and associated equipment, hydrofoil vessels and associated equipment), small-waterplane-area vessels and associated equipment, seals and gaskets, hydraulic fluids, polymers made from vinylidene fluoride, unprocessed fluorinated compounds, plasma dry etching equipment, laser-based telecommunication test/inspection equipment, thermopile arrays, and mirrors for terrestrial heliostat installations.
 
  Changes to Canada’s Crypto Controls
 
There have also been changes to Canada’s control of cryptographic goods, technology, and software (so-called “Crypto”) under Group 1, Category 5 – Part 2 (“Information Security”), including a restructuring of the relevant provisions. Crypto has long been a major issue in export controls, and one which surprises many Canadian exporters that suddenly find themselves unexpectedly offside the law. There are a few immediate points of interest.
 
First, there has been a small but important change to the “mass market” exemption under Cryptography Note 3. Previously, for the exemption to apply, the Guide required that price and information on the main functionality of the item had to be available before purchase without the need to consult the vendor or supplier. The new addition clarifies that a simple price enquiry is not considered to be a “consultation”. This small change provides more latitude to include items within the “mass market” exemption.
 
Second, the changes provide for exclusions for routers, switchers or relays where the information security functionality is limited to “Operations, Administration or Maintenance” (“OAM”) tasks which have been implemented using only published or commercial cryptographic standards. This liberalization is accompanied by a similar de-control for all general purpose computing equipment or servers where the information security functionality uses only commercial or published cryptographic standards and uses cryptographic equipment that is (1) subject to the mass market exemption under Note 3; (2) is integral to an operating system that would not otherwise be controlled; or (3) is limited to OAM functions.
 
Third, there is a clarification of controls on items, software, and equipment designed or modified to perform “cryptanalytic functions”, which now appear under a new heading, “Defeating, Weakening or Bypassing ‘Information Security'”. The Guide reorganization has added additional clarity on the definition of “cryptanalytic functions” to mean equipment designed to defeat cryptographic mechanisms in order to derive confidential variables or sensitive data, including clear text, passwords or cryptographic keys. This appears to be congruent with Canada’s changes to its copyright regime which criminalized the use of software which was designed to defeat technological protective measures.
 
Fourth, additional clarity has been provided to control systems, equipment, and components, for non-cryptographic “information security”. This confirms the status of such non-cryptographic items, and it remains to be seen the breadth with which this new provision will be enforced by the Canadian government.
 
  Conclusion
 
These new changes bring Canada’s export control regime into compliance with its international obligations as of December 2015. Those engaged in cross-border activities should review the full list of changes, which can be found here to determine whether your products or technology are impacted.
 
As important as what is included here is what is not included. Namely, there is no further significant guidance on cloud access and cloud computing. It remains critical that anyone using controlled goods and who is in possession of controlled technology, including plans, blueprints, or any technical information or data related to such goods, be fully aware of its data storage and backup solutions and how they are impacted by export control requirements. Barring official guidance to the contrary, companies should exercise caution using any backup or storage servers or facilities that are outside of Canada. Special care should also be taken if employees or contractors can access controlled information from abroad while travelling – which may also result in an illegal export or transfer.

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COMM_a2
12M. Volkov: “Should You Record Internal Investigation Interviews?”

(Source: Volkov Law Group Blog. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
As a former federal prosecutor, I noticed a renewed discussion of the important question of whether witness interviews should be recorded (either audio or video). I have always found this issue to be interesting and have welcomed discussion of the pros and cons of recording witness interviews.
 
In this era of focus on prosecutorial misconduct, the issue has taken on greater importance. For example, in response to defense bar and judicial complaints concerning law enforcement and prosecutor conduct, FBI agents are regularly recording interviews of witnesses. This is a significant change in FBI policy and practice. In this CSI-era of criminal investigations and prosecutions, juries (and judges) expect FBI agents to record interviews, especially when interviewing important witnesses and potential targets. If an FBI agent fails to record such an interview, defense counsel use such a failure to raise doubts concerning the integrity of the FBI’s investigation.
 
A company’s internal investigation practice on recording interviews has to be examined based on pros and cons.
 
On the positive side, witness recordings are consistent with a practice of transparency, meaning that the company and its investigators have nothing to hide and rely on open investigative practices to ensure organizational justice. To foster a culture of organizational justice, a company may determine that the fact that its investigators record interviews is an important check against potential abuses by corporate investigators against employees.
 
A large number of corporate internal investigations involve employment issues, a smaller number involve conflict of interest, fraud or theft claims, and an even smaller (i.e. occasional) involve serious misconduct issues that could result in a Justice Department investigation and prosecution of the company and potentially individual employees. Given this fact, the positive upside of such a blanket policy of recording witness interviews will usually involve civil employment claims and a rare criminal prosecution of an individual for fraud or theft. In most economic crime cases, the offending individual is terminated from the company and no litigation occurs.
 
On the con side, against recording witness interviews, there are several significant issues to consider.
 
First, if a company decides to record all witness interviews, it has to make sure it records every witness interview. In serious cases, a company could record senior executives and other important leaders who may have only a small role to play in the matters being investigated. In some cases, such interviews may become potential evidence in unrelated matters, such as shareholder suits or collateral claims against such executives. However, if a company adopts a recording policy it has to apply the policy across-the-board. A company should refrain from creating exceptions that excuse senior managers and executives from such a policy because such actions may feed employee concerns of disparate treatment between senior executives and employees.
 
Second, a company’s decision to record its internal investigation interviews eliminates a potential strategic benefit. When conducting an interview, an investigator may rely on intuitive judgments of credibility based on a witness’ mannerisms, body language and quirks. An investigator may exercise his or her professional judgment based on years of interviewing witnesses either as a law enforcement officer and/or corporate investigator to make important credibility judgments. The investigator’s credibility judgment will be set forth in an investigative memo recounting the interview and the basis for the investigator’s credibility conclusion.
 
By recording witness interviews, the company opens itself to defense challenges against such credibility determinations. As a result, the company may not be able to rely on credibility determinations, some of which may be critical to resolving conflicting evidence. A company has to think long and hard before it decides to foreclose this strategic tool.
 
Based on my discussion, it is clear there is no easy answer to this important question. A company should consider its risks, its case profile, and the importance of investigative transparency to its corporate culture when weighing the pros and cons of recording witness interviews.

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COMM_a3
13R.C. Burns: “Why One of the Swapped Prisoners Did Not Return to Iran”

(Source:
Export Law Blog
. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com
, 202-508-6067).
 
In January 2016 the United States and Iran engaged in a prisoner swap. None of the freed prisoners returned to Iran, instead they all chose to
remain in the United States
, including Nima Golestaneh,
the only Iranian national
in the group. (The remainder were dual U.S.-Iranian citizens). Golestaneh, who had been
nabbed
in, and extradited from, Turkey, had been convicted of a scheme to hack into Arrow Tech in Vermont and send its ITAR-controlled software back to Iran.
 
Now we have a pretty good idea why he may have been selected for a pardon and why he decided that going back to Iran might not have been such a good idea. Yesterday, two Iranians, Mohammed Ajily and Mohammed Rezakhah were
added
by OFAC to the Specially Designated Nationals and Blocked Persons List (the “SDN List”) and the Department of Justice
announced
that an
indictment
against the two had been unsealed. The indictment reveals that Ajily and Rezakhah were Golestaneh’s co-conspirators in the hacking scheme, and it seems certain that Golestaneh made a deal and dropped the dime on Ajily and Rezakhah.
 
Both Ajily and Rezakhah are currently in Iran and probably have no current plans to
visit Disneyland
or anywhere else outside Iran. It’s also safe to assume that Golestaneh would not be welcomed with open arms should he turn up in Iran. In fact, that would be an instance of going from the frying pan (a U.S. jail) into the fire (an Iranian one).
 
The indictment details Golestaneh’s role in the hacking conspiracy. Apparently his job was to procure servers in Canada and the Netherlands. These enabled Rezakhah to download the Arrow Tech software without using an IP address from Iran, which likely would have been blocked by Arrow Tech. The software would not run without a hardware dongle from Arrow Tech, and Arrow Tech informed foreign customers that they would need an export license to obtain the dongle. That dongle not doubt contained the digital key needed to decrypt the program and allow it to run. It looks like Rezakhah hacked into Arrow Tech’s servers to obtain the digital key needed to decrypt the program.
 
Of course, it’s not just Rezakhah who has a problem in this scenario. If in fact, if Arrow Tech allowed foreign download of ITAR-controlled encrypted software without a license, that was arguably problematic. DDTC has taken the position that items are exported even if encrypted. And, if there is support for that position by DDTC, it can be found in this case, which demonstrates that there is always some possibility that the encryption will be broken. (It now appears that Arrow Tech distributes the software only by optical media and not by download). One has to wonder if the failure of DDTC to adopt rules like those adopted by BIS which exempt encrypted items from the definition of export is, at least in part, the result of what happened in this case.
 
One other thing bears noting here, namely, the most amusing irrelevant statement ever put in a criminal indictment. For some reason, the indictment notes that Ajily, Rezakhah’s co-conspirator “received certificates of appreciation for his work from several of the Iranian government and military entities.”   Seriously, he got certificates he could frame and hang on his office wall.  Awesome.  That was a clear violation of the law that forbids receiving certificates of appreciation from Iran.  I have to imagine that this factoid comes from Golestaneh who, when he was singing to the DOJ, said something on the order of “Ajily got certificates and all I got was this lousy jumpsuit.” 

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ENEDITOR’S NOTES

* Petrarch (Francesco Petrarca, 20 Jul 1304 – 19 Jul 1374, was an Italian scholar and poet in Renaissance Italy, who was one of the earliest humanists. His rediscovery of Cicero’s letters is often credited with initiating the 14th-century Renaissance.)
  – “Rarely do great beauty and great virtue dwell together.”

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EN_a315
. 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: 13 Jul 2017: 82 FR 32232-32241: Electronic Information for Cargo Exported from the United States; Technical Amendments


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


EXPORT ADMINISTRATION REGULATIONS (EAR)
: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – 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. 

  
*
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 
 
*
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 (18 July 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, Census/AES guidance, and to many errors contained in the official text. 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
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.
  – 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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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., 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.

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