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17-0803 Thursday “Daily Bugle”

17-0803 Thursday “Daily Bugle”

Thursday, 3 August 2017

TOP
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. CINTAC Announces Meetings on 12 Oct and 14 Dec 2017 in Washington DC
  2. COAC Announces Meeting on 23 Aug in San Diego, CA
  3. Justice/ATF Continues to Seek Comments Concerning FFL Renewal Application, ATF F 8 (5310.10) Part 11
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS Enhances Electronic System for License Application Submissions
  3. DHS/CBP Releases ACE System Update Amidst Technical Issues
  4. OMB/OIRA Reviews of Proposed Ex/Im Regulations
  5. State/DDTC: (No new postings.)
  6. EU Amends Restrictive Measures Concerning ISIL (Da’esh) and Al-Qaida
  7. UK/DIT Announces Name and Location Change of MoD Unit Managing Crown Exemption Letters, Publishes Related Guidance
  1. Defense News: “Trump Administration Launches Review of Drone Export Regulations”
  2. Senate Confirms Commerce Department Nominees Ricardel and Ashoo
  3. ST&R Trade Report: “No Changes to International Boycott Country List”
  4. U.S. News: “Lebanese Man Sentenced to Prison in Gun Smuggling Case”
  1. D. Tsuruoka: “Can the U.S. Really Stop China’s Access to American AI Tech?”
  2. E. McClafferty: “OFAC Penalizes Singaporean Communications Provider $12 Million For Iranian Transactions Conducted in U.S. Dollars”
  3. R. Whitten & J. Blanquart: “In the Chaos of (Trade) War, Where Does Your Company Find Peace?”
  4. Gary Stanley’s ECR Tip of the Day
  1. NAITA Presents 2017 Export Control Update (ITAR/EAR/OFAC) on 18-19 September in Huntsville, AL
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (28 Jul 2017), DOD/NISPOM (18 May 2016), EAR (7 Jul 2017), FACR/OFAC (16 Jun 2017), FTR (19 Apr 2017), HTSUS (25 Jul 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. CINTAC Announces Meetings on 12 Oct and 14 Dec 2017 in Washington DC

(Source:
Federal Register, 3 August 2017.) [Excerpts.]
 
82 FR 36125-36126: Meeting of the Civil Nuclear Trade Advisory Committee and 82 FR 36127-36128: Meeting of the Civil Nuclear Trade Advisory Committee
 
* AGENCY: International Trade Administration, U.S. Department of Commerce.
* ACTION: Notice of Federal Advisory Committee Meeting.
* SUMMARY: This notice sets forth the schedule and proposed agenda for a meeting of the Civil Nuclear Trade Advisory Committee (CINTAC).
* DATES: The meeting is scheduled for Thursday, October 12, 2017, from 9:00 a.m. to 4:00 p.m. Eastern Daylight Time (EDT). 
A second meeting is scheduled for Thursday, December 14, 2017, from 9:00 a.m. to 4:00 p.m. Eastern Standard Time (EST). [For details, click
here
.]
* ADDRESSES: Both meetings will be held at the U.S. Department of Commerce, Herbert C. Hoover Building, Room 1412, 1401 Constitution Ave. NW., Washington, DC 20230. …
* SUPPLEMENTARY INFORMATION:
 
Background: The CINTAC was established under the discretionary authority of the Secretary of Commerce and in accordance with the Federal Advisory Committee Act (5 U.S.C. App.), in response to an identified need for consensus advice from U.S. industry to the U.S. Government regarding the development and administration of programs to expand United States exports of civil nuclear goods and services in accordance with applicable U.S. laws and regulations, including advice on how U.S. civil nuclear goods and services export policies, programs, and activities will affect the U.S. civil nuclear industry’s competitiveness and ability to participate in the international market. …
 
  Dated: June 22, 2017.
Adam O’Malley Director, Office of Energy and Environmental Industries.

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EXIM_a22.

COAC Announces Meeting on 23 Aug in San Diego, CA

(Source:
Federal Register, 3 August 2017.) [Excerpts.]
 
82 FR 36152-36153: Commercial Customs Operations Advisory Committee (COAC)
 
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security (DHS).
* ACTION: Committee Management; Notice of Federal Advisory Committee Meeting.
* SUMMARY: The Commercial Customs Operations Advisory Committee (COAC) will hold its quarterly meeting on Wednesday, August 23, 2017, in San Diego, California. The meeting will be open to the public.
* DATES: The COAC will meet on Wednesday, August 23, 2017, from 9:00 a.m. to 1:00 p.m. PDT. …
* ADDRESSES: The meeting will be held at the Omni Hotel, 675 L Street, San Diego, CA 92101. …
* SUPPLEMENTARY INFORMATION: … The Commercial Customs Operations Advisory Committee (COAC) provides advice to the Secretary of Homeland Security, the Secretary of the Treasury, and the Commissioner of U.S. Customs and Border Protection (CBP) on matters pertaining to the commercial operations of CBP and related functions within the Department of Homeland Security and the Department of the Treasury. …
 
  Dated: July 27, 2017.
Bradley Hayes, Executive Director, Office of Trade Relations.

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

(Source:
Federal Register, 3 August 2017.) [Excerpts.]
 
82 FR 36155: Agency Information Collection Activities; Proposed eCollection eComments Requested; Federal Firearms License (FFL) RENEWAL Application–ATF F 8 (5310.11) Part 11
 
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department
of Justice.
* ACTION: 30-Day notice.
* SUMMARY: The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection was previously published in
the [Federal Register, on May 25, 2017, allowing for a 60-day comment period].
* DATES: Comments are encouraged and will be accepted for an additional 30 days until September 5, 2017. …
* SUPPLEMENTARY INFORMATION: … 

Overview of This Information Collection
 
  – Type of Information Collection: Extension, without change, of a currently approved collection.
  – The Title of the Form/Collection: Federal Firearms License (FFL) RENEWAL Application.
  – Form number: ATF F 8 (5310.11) Part 11.
  – Abstract: The form is filed by the licensee desiring to renew a Federal firearms license. It is used to identify the applicant, locate the business/collection premises, identify the type of business/collection activity, and determine the eligibility of the applicant. …
 
  Dated: July 31, 2017.
Melody Braswell, Department Clearance Officer for PRA, U.S. Department of Justice.

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

OGSOTHER GOVERNMENT SOURCES

OGS_a14. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register

* DOJ/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Release and Receipt of Imported Firearms, Ammunition and Defense Articles [Publication Date: 4 August 2017.]
 
* USTR/TPSC; NOTICES; Meetings: Trade Policy Staff Committee [Meeting concerning Russia’s implementation of its obligations as a member of the World Trade Organization (WTO); Publication Date: 4 August 2017.] 
* * * * * * * * * * * * * * * * * * * *

OGS_a25.

Commerce/BIS Enhances Electronic System for License Application Submissions  

 
BIS is pleased to introduce the first in a series of updates to the Single Network Application Process – Redesign (SNAP-R), BIS’s electronic system for the submission of license applications, commodity classification requests, License Exception AGR notifications and License Exception STA eligibility requests. These updates, which BIS is implementing at industry’s request, are designed to make SNAP-R more user-friendly and efficient. Additional updates will be implemented in the future. This batch of updates includes the following:
 
Security Questions
: BIS is introducing security questions to SNAP-R to allow individual SNAP-R users to reset their passwords and login IDs and to receive a reminder of their company identification number (CIN), by themselves, without having to request assistance from either company SNAP-R account administrators or BIS. Current SNAP-R users can chose to answer four of ten security questions, which BIS will use to verify the user’s identity and automate the resetting of passwords and login IDs and/or the sending of with the user’s CIN. Existing users who chose not to answer the questions will be prompted to do so at future logins and, in the interim, need to continue to work with their company SNAP-R account administrators or call or e-mail BIS for assistance. Starting today, all new SNAP-R registrants will be required to select security questions as part of the SNAP-R registration process.
 
Instructions for existing SNAP-R account holders to set up security questions are here
 
Resetting Forgotten Passwords
: SNAP-R account holders who have set up security questions and who remember their login ID and CIN will be able to reset forgotten passwords remotely, without help from company SNAP-R account administrators or calling or e-mailing BIS for assistance. Guidance on remotely resetting passwords is here
 
Forgotten Login ID
: SNAP-R account holders who have set up security questions and who remember their CIN will be able to request and receive their login ID remotely, without calling or e-mailing BIS for assistance. Guidance on the remote receipt of login IDs is here.
 
Forgotten CIN
: SNAP-R account holders who have set up security questions and who remember their login ID will be able to request and receive their CIN remotely, without help from company SNAP-R account administrators or calling or e-mailing BIS for assistance. Guidance on the remote receipt of CINs is here.
 
Work Item Reference Numbers
: SNAP-R account holders are no longer limited to the previously required format (i.e., AAA####) for Work Item reference numbers. Additional information on this change is here.
 
Line Item Value Calculation
: When listing the information for an export item on a license application, SNAP-R account holders can now choose to calculate the value of the item by multiplying the unit value by the quantity of items or to enter the total price of the item independent of the item’s quantity and unit value. Guidance on this change is here.     
 
Other SNAP-R Features
: Did you know that SNAP-R:
 
  – Can be used on browsers other than Internet Explorer®?
  – Has a spell check function?
  – Allows a previously created Work Item (e.g., a license application) to be used again when preparing a new Work Item for submission?
 
Information on these features may be found here, as well as in the SNAP-R manual.
 
Updated SNAP-R Manual
: The SNAP-R manual has been revised and updated to incorporate the changes above as well as to clarify the tools available to SNAP-R system users. The revised SNAP-R manual is here.

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OGS_a36.

DHS/CBP Releases ACE System Update Amidst Technical Issues

(Source:
CSMS# 17-000451, 3 August 2017.)
 
CURRENT STATUS at 11:30 ET August 3, 2017 – The ACE System continues to be stable and processes are operating normally. CBP technical staff will continue to actively monitor.
 
At approximately 21:00 ET, August 2, 2017, the ACE System was RESTORED for ACE Portal functionality, as well as all ACE EDI message processing for all modes of transportation of Manifest (including Truck), ACE Cargo Release, ACE Entry Summary and ABI Queries. Statement processing and other Automated Commercial System (ACS) applications were not impacted by the ACE issues experienced yesterday.
 
TRADE FILERS are advised that any messages (manifest, entry and summary) that were transmitted between 07:00 ET and 09:00 ET, August 2, 2017, that did not receive a response should be retransmitted.
 
Further, if filers are receiving unexpected error messages please retransmit the message. If the error persists, please contact your Client Rep.
 
Due to this ACE system issue, all filers will be granted an additional day without penalty on a national basis for August 2, 2017. CBP is extending one (1) additional day without penalty for any late filed entry summaries and payments of duties that were due on August 2, 2017, nationwide.
 

Throughout today, August 3, 2017, users may experience delays, especially during peak processing times. CBP has deployed additional resources to closely monitor processing and quickly take action as needed. CBP appreciates your support and patience as we have been working through this critical issue. 

 

 

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OGS_a47
. 
OMB/OIRA Reviews of Proposed Ex/Im Regulations

(Source:
OMB/OIRA
)     
 
* Foreign Trade Regulations (FTR): Request for Public Comments Regarding Standard and Routed Export Transactions
– AGENCY: DOC-CENSUS
– STAGE: Prerule
– RECEIVED DATE: 29 July 2017
– RIN: RIN: 0607-AA56    
– STATUS: Pending Review

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

OGS_a58
State/DDTC: (No new postings.)

(Source: State/DDTC)
 

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

OGS_a69.
 EU Amends Restrictive Measures Concerning ISIL (Da’esh) and Al-Qaida

(Source: Official Journal of the European Union, 3 August 2017.)
 
  Regulations
 
* Commission Implementing Regulation (EU) 2017/1411 of 2 August 2017 amending for the 273rd time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the ISIL (Da’esh) and Al-Qaida organisations 

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OGS_a710.

UK/DIT Announces Name and Location Change of MoD Unit Managing Crown Exemption Letters, Publishes Related Guidance

 
The Export Control Organisation (ECO) of the UK Department of International Trade (DIT) has published the following notice.
 
Following the establishment of the Export Control Joint Unit, the team managing Crown exemption letters for the MOD has changed name and location.
 
The UK Crown is not bound by the provisions of the Export Control Act 2002 for goods specified by schedule 2 of the Export Control Order 2008 (ie the UK Military List which forms part of the UK Strategic Export Control Lists).
 
Where the Crown owns the controlled military goods, technology or software being exported, and at all times hold disposal rights, then an exporter may carry out the export on behalf of the MOD without a licence. This Crown exemption for goods, technology or software owned by MOD UK/UK armed forces is subject to the issuing of an approval letter. Crown exemption does not apply if the goods are owned privately.
 
The MOD team in the Export Control Joint Unit is the only entity which is authorised to issue Crown exemption letters on behalf of the UK MOD. Their contact details are:
 
  Export Control Joint Unit – MOD Team
  Department for International Trade
  2nd floor
  3 Whitehall Place
  London SW1A 2AW
 
  Action for Exporters
 
Exporters should familiarise themselves with the changes to the MOD body which issues Crown exemption letters. 

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NWSNEWS

NWS_a111
.

Defense News: “Trump Administration Launches Review of Drone Export Regulations”

(Source:
Defense News, 3 August 2017.)
 
The Trump administration has officially launched a review of an Obama-era drone export policy, with expectations in industry that the administration will make it easier to export U.S.-manufactured systems.
 
For months, rumors have floated among both the defense industry and arms control communities that the Trump administration plans to change the 2015 export law that controls what unmanned aerial vehicles can be sold to allies.
 
There was even speculation that changes could be announced during a June visit from Indian Prime Minister Narendra Modi. But until recently, administration sources denied such a move was formally underway.
 
Now, an administration official confirmed to Defense News that there is an ongoing review of the 2015 UAV export policy as part of a broader look at the “spectrum at ways we can modernize and seek smarter new approaches to U.S. defense trade policy.”
 
However, the official emphasized that no decision about the future of the UAV policy has been decided, and that the review is in the early stages.
 
  “While these discussions remain ongoing, I can tell you that a key goal is to ensure we strike the right balance among delivering top-shelf U.S. defense articles to our allies and partners, safeguarding the technological edge of U.S. industry, and preserving America’s global leadership in promoting international security and nonproliferation,” the official said.
 
For American UAV manufacturers, any changes can’t come fast enough. Producers in the U.S. have argued for years that they are handicapped on the global marketplace by restrictions that other drone exporters, most notably China and Israel, are not.
 
Those complaints have taken on an additional edge in the last year, as Chinese-made systems, including replicas of American unmanned designs, have begun appearing on the runways of strategic allies such as the United Arab Emirates, Jordan and Egypt.
 
Reviewing the export policy is a “sensible approach,” according to Michael Horowitz, a former Pentagon official and unmanned expert now with the University of Pennsylvania.
 
  “Making it easier for the U.S. to export advanced drones to responsible allies and partners can help the U.S. build the capacity of those countries and avoid the risk that China steps in in America’s absence,” he said.
 
The timetable for changing the drone export policy is unclear. One industry source said initial indications were for a September-October time frame, but the source now believes that is unrealistic in part because of the ever-changing nature of President Donald Trump’s White House.
 
  “My concern is that the administration has 100 things going on at once and they are constantly distracted, so I don’t know how much attention this is getting, if the people who care are able to keep pushing it despite the chaos,” the source said.
 
For a Trump administration that has emphasized creating American jobs, changing the export rules could net clear benefits and represent a fairly easy win domestically.
 
The industry source estimated changing the export rules could result in “thousands” of jobs and “billions” of dollars worth of sales – which could potentially include the creation of commercial and civil versions of military drones.
 
  “Right now, I don’t think any U.S. company is incentivized to look seriously at commercial and civil applications if we can’t export them,” the source said.
 
What changes under the Trump administration may come down to how the U.S. decides to interpret what is known as the “presumption of denial” for unmanned system sales.
 
The Missile Technology Control Regime restricts exports of missiles and delivery vehicles capable of carrying 500-kilogram payloads for more than 300 kilometers, which fall under the “category-1” heading. Under the MTCR, there is a “presumption of denial” for category-1 systems. In other words, they need to have a very compelling case to sell them.
 
That restriction has historically applied to drones, but industry figures and analysts such as Horowitz have pushed for the MTCR to be reformed, saying restrictions designed for cruise missiles should not apply to unmanned systems.
 
  “Drones aren’t missiles – and moving away from treating them as missiles for the purposes of defense exports is a rational approach,” Horowitz said. “While the Obama administration policy was a step in the right direction towards more drone exports to responsible countries, individual cases still got hung up for too long in the bureaucracy, without a clear way to move forward.”
 
While the U.S. could push for changes to the MTCR, doing so requires consensus among the 33 other states in the agreement, making it much easier to simply tweak the U.S. export policy.
 
There are a few options for how the Trump administration could open up drone sales, though two stick out as the easiest. With one, it could essentially tweak the language of the 2015 export rules, but interpreting them in a different way – say, by emphasizing political-military benefits over nonproliferation goals for category-1 systems.
 
Or the administration could go further and explicitly state in new policy that the U.S. is prepared to overcome the presumption of denial for allied countries that could pass the normal weapon sale criteria. It is possible the U.S. could even state that any MTCR member nation could expect to overcome the presumption of denial, perhaps as a way to draw more countries into that agreement.
 
What is to come remains unclear, but civil society experts such as Rachel Stohl, an analyst with the Stimson Center, will be keeping a close eye.
 
  “The concept of providing partners and allies with technology and safeguarding the technological edge of U.S. industry – which to be honest I’m not sure exists in this space – and nonproliferation are all worthy causes,” Stohl said. “The devil is in the details and the specific policy changes or development that will occur as a part of this review.”

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NWS_a212.

Transparency Register Will Affect Many German Companies

On 26 June 2017 the new German anti-money laundering act has entered into force. This law is based on the Fourth Money Laundering Directive of the EU (No 2015/849; the 4MLD). Besides inter alia meeting increased risk demands and the intensified financial penalties, the 4MLD prescribes a transparency register in the foreseeable future.
 
The register is based on Art. 30 of the 4MLD and shall allow more transparency inside of the companies with the intention to complicate the abuse of the financial system by terrorists, money launderers and other persons having controlling power. The European Union wants to create a European network of registers via the Central European Platform.
 
Its basic goal is to centrally store information about the beneficial owners of all entities and partnerships as well as of foundations and trusts and to make such information accessible to governmental authorities, the people who need to perform customer due diligence and any other person who shows a legitimate interest in having such information.
 
What is the content of the transparency register?
 
The transparency register gives information about every beneficial owner, who has a direct or indirect financial stake or controls the company. The register will be in electronic form and the information will be presented in a chronological order.

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NWS_a3
13. 
ST&R Trade Report: “No Changes to International Boycott Country List”

(Source: Sandler, Travis & Rosenberg Trade Report, 3 August 2017.)
 
The Treasury Department has published its quarterly list of countries that require or may require participation in, or cooperation with, an international boycott. This list comprises Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and Yemen and is unchanged from the previous list.
 
U.S. law prohibits U.S. companies and their foreign affiliates from participating in foreign boycotts that the U.S. does not sanction. The Arab League boycott of Israel is the principal foreign economic boycott that U.S. companies must be concerned with today, but the anti-boycott laws apply to all boycotts imposed by foreign countries that are unsanctioned by the U.S.
 
The U.S. maintains two anti-boycott laws that are enforced by the Commerce Department through the Export Administration Regulations and the Treasury Department through the Internal Revenue Code. Under the anti-boycott provisions of the EAR, companies are prohibited from the following actions.
 
  – refusing to do business with or in Israel or with blacklisted companies
  – furnishing information about relationships with or in Israel or with blacklisted companies
  – discriminating against others based on race, religion, sex, national origin, or nationality
  – furnishing information about the race, religion, sex, or national origin of another person
  – implementing letters of credit containing prohibited boycott terms or conditions
 
The EAR also require U.S. persons to report each quarter requests they have received to take certain actions to comply with, further, or support an unsanctioned foreign boycott. Maximum civil penalties under the EAR for anti-boycott violations are the greater of $250,000 per violation or twice the value of the transaction. For criminal violations, penalties of up to $1 million and/or 20 years’ imprisonment may be imposed.
 
The anti-boycott provisions of the Internal Revenue Code require U.S. taxpayers to report annually to the Internal Revenue Service their operations in boycotting countries. These provisions also penalize taxpayers who participate in or cooperate with an unsanctioned foreign boycott by denying them the right to claim certain tax benefits. Willful violations of the IRS anti-boycott requirements can lead to a criminal fine of up to $25,000 and/or imprisonment for one year.

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NWS_a5
14.

U.S. News: “Lebanese Man Sentenced to Prison in Gun Smuggling Case”

(Source:
U.S. News, 2 August 2017.)
 
A Lebanese man accused of helping smuggle guns bought in Iowa to his home country has been sentenced to nearly five years in prison to violating the federal Arms Export Control Act.
 
The U.S. Attorney’s Office for the Northern District of Iowa says 42-year-old Fadi Yassine was sentenced Wednesday for a conviction of one count of conspiracy for brokering firearms shipments to Lebanon in 2014 and 2015. Yassine had pleaded guilty in April.
 
Yassine was arrested Feb. 5 in New York as he entered the U.S. from Lebanon.
 
Four Cedar Rapids residents with ties to Lebanon were sentenced to prison last year for their role in the gun-smuggling scheme.

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COMMCOMMENTARY

COMM_a01
15D. Tsuruoka: “Can the U.S. Really Stop China’s Access to American AI Tech?”

(Source: Asia Times, 29 July 2017.) [Excerpts.]
 
* Author: Doug Tsuruoka, Editor at Large of Asia Times.
 
Reports suggest moves are afoot to stop Chinese investments in Silicon Valley firms, but AI may become too pervasive to control. Moreover, China is already emerging as an industry leader.
 
Washington is buzzing with reports that the U.S. plans to heighten scrutiny of Chinese efforts to access artificial intelligence (AI) and other sensitive technology by acquiring or taking stakes in cutting-edge Silicon Valley firms.
 
The worry is that China, or others, will use acquired American AI tech to ramp up their military and economic power. The Pentagon is said to have a report under wraps that says China is dodging U.S. security reviews by engaging in outwardly harmless joint ventures, investing in early-stage startups or gaining minority shareholdings in US tech companies.
 
But a larger question is whether it’s practical or even possible for the Committee on Foreign Investment in the United States (CFIUS) – the inter-agency committee that reviews foreign acquisition of U.S. firms on national security grounds – to restrict Chinese access to AI, especially given that AI is on the verge of becoming an integral part of many mainstream technologies. Another issue is whether Beijing, which already invests heavily in the sector, is really making a concerted effort to steal stateside AI tech while skirting U.S. oversight.
 
Former U.S. officials and defense analysts say that Washington has no choice but to act. They note precedents set by past U.S. efforts to control outflows of sensitive technology. Their hope is that this can be done in the case of AI, though signs are that the technology may become too prevalent to effectively police. …
 
[Editor’s Note: Due to copyright restrictions, we are not authorized to include the entire article. Please, click on the source link below the title to read the remaining sections of the article.] 

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COMM_a2
16. E. McClafferty: “OFAC Penalizes Singaporean Communications Provider $12 Million For Iranian Transactions Conducted in U.S. Dollars”

 
* Author: Eric R. McClafferty, Esq., emcclafferty@kelleydrye.com, Kelley Drye & Warren LLP.
 
Global communications solutions provider, CSE TransTel, a subsidiary of CSE Global Limited (both based in Singapore), recently agreed to settle Iran sanctions charges leveled by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) for $12 million.  The charges involve 104 violations of the Iran sanctions between June 2012 and March 2013.  The case involved an independent U.S. government investigation, not a voluntary self-disclosure.
 
The charges related to TransTel causing six different financial institutions to provide unauthorized financial services relating to transactions with Iran.  The funds transfers were processed in part in the U.S. and they involved the supply of goods or services handled by a variety of vendors and service providers with connections to Iran.  None of the transactions referred to Iran, Iranian parties, or Iranian projects, yet they were still sufficient to trigger a U.S. government investigation and charges.  Note that the U.S. financial institutions were not involved in this enforcement matter at this time, but rather a non-U.S. company was accused of “causing” U.S. companies subject to OFAC jurisdiction to violate the Iran sanctions.  This “causation” approach creates a broader scope of OFAC jurisdiction and enforcement than many non-U.S. companies expect, and its use is expanding.  Moreover, many non-U.S. companies believe they are beyond the reach of U.S. sanctions penalties, but charges and forced settlements involving non-U.S. companies are relatively common for the agency.  Companies that are charged with violations, including causation violations, face difficult choices.  If they don’t settle the accusations with OFAC, they may well find themselves listed as specially designated nationals (SDN), which would render them virtually unable to conduct business in the U.S., or with most U.S. companies and subsidiaries.  In addition to heightened restrictions on dealing with SDN’s many non-U.S. companies use denied party screening programs that include OFAC SDN designations, and those companies will very often refuse to deal with a listed SDN.
 
Best practices to reduce the risk of an OFAC investigation and associated penalties include very basic steps, such as issuing or updating a company-wide export control and sanctions policy statement and having well-versed specialists provide baseline training.  Given very recent bi-partisan legislation to tighten U.S. sanctions on Iran, Russia and North Korean, now is a good time to renew a policy statement with counsel.
 
Protective compliance measures range from conducting a review and enhancement of the company’s broader export/sanctions compliance program, to a review of company transactions and sales channels to identify potentially risky transactions.  Construction of a more robust compliance program based on the results of such a data review is a path selected by many companies, and should be seriously considered by international telecom companies, which will be under a heightened level of review.

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COMM_a3
17. R. Whitten & J. Blanquart: “In the Chaos of (Trade) War, Where Does Your Company Find Peace?”

 
* Authors: Reid Whitten, Esq., rwhitten@sheppardmullin.com; and Julien Blanquart, Summer Associate. Both of Sheppard Mullin.
 
On July 27, 2017, the U.S. Congress sent to President Trump’s desk a bill that imposes new financial sanctions against Russia, Iran, and North Korea. It appears nearly certain that the president will sign that bill, now called the “Countering America’s Adversaries Through Sanctions Act” (CAATSA).
 
The bill codifies the 2014 sanctions that President Barack Obama imposed in response to the annexation of the Crimean peninsula. The bill also adds new sanctions measures in response to Russian interference in the 2016 U.S. presidential elections. The bill tightens certain existing sanctions and authorizes the President to sanction non-U.S. companies working on certain Russian oil and gas projects.
 
That last point has rankled Russian and EU leaders, who have imposed retaliatory measures and threatened more. Leaving aside the politics – both international and domestic – we examine the risks to U.S. and non-U.S. businesses affected by the heightened tensions.
 
SANCTIONS MEASURES IN PLACE
 
  U.S. Sanctions
 
CAATSA converts the Obama-era executive orders on Russia into statutory law. That means that the President cannot repeal the sanctions on his own (which he would have had the power to do with executive orders). The sanctions contain the following prohibitions, among others:
 
  – U.S. persons are prohibited from dealing in certain types of new debt of Russian companies listed on the Sectoral Sanctions Identifications (SSI) List. Those companies include including major Russian banks and business conglomerates such as Gazprom and the Russian Agricultural Bank.
  – U.S. persons are prohibited from providing services or certain U.S.-origin goods to projects supporting Russian deepwater, arctic, or shale oil exploration or extraction.
 
CAATSA will not only codify these measures into law, it will expand the types of prohibited debt by shortening the prohibited debt periods by about half. CAATSA will also impose sanctions on any persons the President determines were engaged in activities undermining cybersecurity or persons who provide assistance or support to that activity.
 
Finally, the bill authorizes the President to impose sanctions on any company, U.S. or non-U.S., that invests, sells, leases or provides goods, services, technology, information or support to Russia facilitating the enhancement of its ability to construct, maintain, expend, modernize or repair energy export pipelines.
 
That last point raised the hackles of Russian and some EU leaders because it would not only punish Russian interests, it would threaten an important new energy project, Nordstream 2, that may be valuable to the European population and key EU businesses. The project is a new pipeline which would bring liquid natural gas (LNG) from Russia, across the Baltic Sea floor, directly into Germany. Certain EU and Russian commentators view the move as advantageous to U.S. LNG exporters, who would be better positioned to sell LNG to the EU if the Nordstream 2 pipeline is not completed.
 
  Russian Countermeasures
 
As of the date of this publication, Russia has implemented countermeasures closing U.S. diplomatic properties and requiring U.S. embassies and missions to reduce their staff by 755 employees.
 
  EU Proposed Responses
 
It is not clear what precise steps the EU will take, but reports suggest that “within few days” of the adoption of CAATSA, the EU will take some combination of three possible approaches, as follows:
 
  (1) The EU could seek a declaration by President Trump that he will not impose the sanctions measures against European Companies that he is authorized by CAATSA to use;
  (2) The EU could make use of Regulation (EC) 2271/96, known as the “Blocking Regulation,” which aims to prevent enforcement in the EU of extraterritorial legislation adopted by third countries; and
  (3) The EU could decide to engage in retaliatory measures, including outright bans on business with certain U.S. companies. The U.S. bourbon industry has been mentioned as a possible target. [FN/1]
 
  BUSINESS RISKS IN THE ESCALATING ACTIONS
 
Prohibitions and authorizations
. Some measures are prohibitions, others only authorize the president to take action.
 
First, we note that CAATSA only directly prohibits those activities that were prohibited under the 2014 Crimea-related sanctions, with some adjustments to the time periods of the prohibited debt instruments. By contrast, the other sanctions measures in CAATSA, including those that would affect pipeline projects, merely authorize the President to implement sanctions. That distinction may not provide total comfort for companies whose business is put at risk under CAATSA, but it should be noted as those companies calculate and prognosticate their risks and plan their projects accordingly. We do not currently think it is likely that President Trump would exercise his authority to take extreme measures against Russia under CAATSA.
 
Special caveat: U.S. Companies with Russian customers, suppliers, or partners
. Every company with Russian business should know whether a Russian customer, supplier, or other business partner is listed on the SSI or is owned by a company listed on the SSI.
 
U.S. financial institutions were largely aware of and prepared for the 2014 Russia sanctions, and should be able to readjust compliance protocols to account for timescales in CAATSA. However, some non-banks were caught off guard when their normal invoicing process put them on the wrong side of the 2014 law.
 
As a typical example: where a U.S. Company provided an invoice to a Russian company on the SSI list, and that Russian company took more than 30 days to pay, suddenly the U.S. company was deemed to be dealing in a debt instrument of longer than 30 days. Now that time limit will drop to 14 days. Every company that has Russian business should determine whether the counterparty is listed on the SSI, and adjust accordingly.
 
Oil & gas companies worldwide.
Any company involved in energy projects involving Russia should be tracking the White House’s actions carefully. The Trump administration actively opposed CAATSA as it moved through Congress, and signaled an initial hesitation to sign the bill. For these reasons, we don’t currently expect President Trump to impose the optional sanctions under CAATSA. However, with overwhelming congressional support behind the bill, and a potential trade advantage to be gained for U.S. energy companies, implementing measures against companies involved in Russian pipeline projects may ultimately prove too tempting for the executive to stand passively by.
 
———-
  [FN/1] For which reason this southern American author, now resident in Brussels, will permit himself a moment of subjectivity to note his deep concern on this particular point.

[Editor’s Note: On Wednesday, 2 August, President Trump signed 
the “Countering America’s Adversaries Through Sanctions Act” (CAATSA).

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COMM_a4
18
Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update; available by subscription from
 gstanley@glstrade.com
)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com.
 
The provisions of ITAR § 126.18 exemption on dual/third country nationals apply to ITAR agreements (Manufacturing License Agreements, Technical Assistance Agreements and Warehouse and Distribution Agreements), approved export licenses, other export authorizations, and license exemptions under which a defense article is received. 

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MSEX/IM TRAINING EVENTS & CONFERENCES

MS_a219NAITA Presents 2017 Export Control Update (ITAR/EAR/OFAC) on 18-19 September in Huntsville, AL

(Source: Amanda Berkey; apberkey@madisoncountyal.gov)
 
* What: NAITA 2017 Export Control Update (ITAR/EAR/OFAC) in Huntsville, AL.
* When: 18-19 September 2017.
* Where: The Westin Huntsville; 6800 Governors West, Huntsville, AL 35806.
* Sponsor: North Alabama International Trade Association (NAITA) and Maynard Cooper & Gale PC.
* Speakers Include: Kevin Wolf, Candace Goforth, Michael Laychak, and Jim Bartlett.
* Credits: Approved by the Mandatory Continuing Legal Education Commission of the Alabama State Bar for 12.5 CLEs.
* Register: Click here for details & registration link or contact Amanda Berkey/NAITA at 256-532-3505, apberkey@madisoncountyal.gov or naita@naita.org

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ENEDITOR’S NOTES


* Rupert Brooke (Rupert Chawner Brooke; 3 Aug 1887 – 23 Apr 1915; was an English poet known for his idealistic war sonnets written during the First World War, especially “The Soldier”. He was also known for his boyish good looks, which were said to have prompted the Irish poet W. B. Yeats to describe him as “the handsomest young man in England”.)
 – “A kiss makes the heart young again and wipes out the years.”

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EN_a321
. 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: 28 Jul 2017: 82 FR 35064-35065: Technical Corrections to U.S. Customs and Border Protection Regulations
 
* 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: 25 Jul 2017: Harmonized System Update 1706, containing 834 ABI records and 157 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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EN_a0322. 
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 
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.

* 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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