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17-0822 Tuesday “Daily Bugle”

17-0822 Tuesday “Daily Bugle”

Tuesday, 22 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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[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. Commerce/Census: “Tips on How to Resolve AES Fatal Errors”
  4. DoD/DSS Announces Knowledge Center PCL Inquiries Closed on 25 Aug
  5. GAO: “Foreign Military Sales, DOD Needs to Improve Its Use of Performance Information to Manage the Program”
  6. State/DDTC Announces DTAS Information Systems Unavailable on 23 Aug
  1. The Guardian: “Arms Manufacturers Allowed to Bypass Discrimination Laws in NSW”
  1. A.W.H. Gourley: “ITA/USTR Request for Comments on Trade Agreements and Government Procurement”
  2. J.D. Rosener & G.C. Dorris: “Foreign Investment in the U.S.: How the Trump Presidency Could Change Things”
  3. M.A. Goldstein: “Is There Such a Thing as ‘Attempted’ Arms Brokering?”
  4. SIPRI Releases Concept Paper and Good Practice Guides Concerning Implementation of Effective Internal Compliance Programs
  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 (15 Aug 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

 

[No items of interest noted today.] 

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OGSOTHER GOVERNMENT SOURCES

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

* Commerce; Industry and Security Bureau; NOTICES; Meetings: Materials Technical Advisory Committee [Publication Date: 23 August 2017.]

 
* State; NOTICES; Designations as Global Terrorists [Publication Date: 23 August 2017.]
  – Abu Yahya al-Iraqi, aka Ayad Hamed Mohal al-Jumail, aka Ayad Hammed Muhal Shuab,et al.
  – Ahmad Alkhald, aka Yassine Noure, aka Mohammed Nawar Mohammed Alqadhi, et al.

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When a shipment is filed to the AES, a system response message is generated and indicates whether the shipment has been accepted or rejected. If the shipment is accepted, the AES filer receives an Internal Transaction Number (ITN) as confirmation. However, if the shipment is rejected, a Fatal Error notification is received.
 
To help you resolve AES Fatal Errors, here are some tips on how to correct the most frequent errors that were generated in AES for this month.
 
Fatal Error Response Code: 120
 
  – Narrative: Carrier Unknown
  – Reason: The Carrier ID (SCAC/IATA) reported is not known in AES.
  – Resolution: If the Carrier ID (SCAC/IATA) as known at the time of filing is not valid in AES and a valid Carrier ID (SCAC/IATA) cannot be obtained from the carrier, as a last resort, report the Carrier ID as UNKN for vessel, rail or truck shipments. For an unknown air carrier, report one of the acceptable “unknown” codes as follows:
 
*F or 99F for Unknown Foreign Air Carrier
*U or 99U for Unknown U.S. Air Carrier
*C or 99C for Unknown Canadian Air Carrier
** or 99O for flyway aircraft reported under Chapter 88.
 
  Verify the Mode of Transportation Code and the Carrier ID (SCAC/IATA), correct the shipment and resubmit.
 
Fatal Error Response Code: 643
 
  – Narrative: Quantity 2 Must Be Greater Than Zero
  – Reason: The Schedule B/HTS number reported requires a second Quantity to be reported and the Quantity 2 is missing or reported as zero.
  – Resolution: Quantity 2 must be greater than zero. Verify the Quantity 2, correct the shipment and resubmit.
 
For a complete list of Fatal Error Response Codes, their reasons, and resolutions, see Appendix A – Commodity Filing Response Messages.
 
It is important that AES filers correct Fatal Errors as soon as they are received in order to comply with the Foreign Trade Regulations. These errors must be corrected prior to export for shipments filed predeparture and as soon as possible for shipments filed postdeparture but not later than five calendar days after departure.
 
For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.
 
  – Telephone: (800) 549-0595, select option 1 for AES
  – Email: askaes@census.gov
  – Online:
www.census.gov/trade

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OGS_a44. DoD/DSS Announces Knowledge Center PCL Inquiries Closed on 25 Aug

(Source: DoD/DSS)
 
Personnel Security (PCL) inquiries (option #2) to include e-QIP authentication resets of the DSS Knowledge Center will be closed on Friday, August 25, 2017, for the purpose of conducting internal training to deliver the highest quality customer service to Industry and Government callers. Normal operations for PCL and e-QIP inquiries will resume on Monday, August 28, 2017. Reminder, the PCL portion of the DSS Knowledge Center typically closes on the last Friday each month.

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OGS_a55. GAO: “Foreign Military Sales, DOD Needs to Improve Its Use of Performance Information to Manage the Program”

 
The Department of Defense administers the Foreign Military Sales program, which sells military equipment and services to foreign partners and allies to help them improve their national security-and by extension, U.S. national security.  
Congress has been concerned about how long foreign partners are waiting for the items and services they need.  
While DOD has improved its responsiveness, it continues to fall short of its goals and has not assessed why. DOD also doesn’t collect data on how long it takes to deliver the first item.
 
 
What GAO Found
 
The Department of Defense’s (DOD) performance on Foreign Military Sales (FMS) has improved, but DOD is not meeting two out of three performance metrics for the timely processing of FMS requests and does not collect data for the third metric. The first metric tracks the time taken from the receipt of a country’s request for an item to when a Letter of Offer and Acceptance (LOA) is sent to the partner country for approval. As shown in the table, this metric is based on the complexity of the requests, and although DOD’s timeliness has improved, it is still short of the 85 percent goal. The second missed metric is the time the Defense Security Cooperation Agency (DSCA) takes to review and approve FMS cases. The review time in 2016 was more than the 1 day goal. The third metric is the time DOD takes to deliver the first item to the recipient country; however, DSCA does not collect data on this metric and therefore does not know if it is meeting the goal. DOD officials cited several factors that adversely affect their ability to meet the timeliness goals, such as changing customer requirements or delays due to policy concerns regarding particular sales. However, because DOD has not collected data on one metric and has not identified the underlying causes for not meeting its goals, it does not know the extent to which these or other factors are impacting program delivery.
 
During fiscal years 2009 through 2016, the FMS workload increased and while the three military services’ FMS workforces generally increased, DSCA’s FMS workforce decreased. DSCA officials do not believe the size of their workforce has impacted timeliness; but the data provided to GAO shows that DSCA’s timeliness has decreased as the size of its FMS workforce has decreased. A key principle of strategic workforce planning is that an agency’s workforce must be aligned with its workload. However, DSCA lacks workload measures for its FMS workforce as a whole, and therefore cannot ensure that its workforce is sufficient to meet programmatic goals. Moreover, despite a DOD requirement, DSCA has not yet developed a workforce plan that could help identify any skill or competency gaps in its workforce. Officials said they planned to do so by the end of May 2018.
 
DOD has a taken some steps to address recommendations to improve the FMS process, but additional actions are still needed. For example, DOD implemented three of GAO’s prior recommendations, such as establishing performance metrics, but has yet to establish a metric to assess timeliness of the acquisition phase. DOD has partially implemented several of the recommendations made by an internal DOD task force. For example, DOD has partially implemented the recommendations to enhance the skills of the FMS workforce. In addition, DSCA’s efforts to standardize data that are maintained separately by the military services on a new information system have fallen behind schedule.
 
Why GAO Did This Study
 
U.S. national security benefits from the timely provision of military equipment and services that enable foreign partners and allies to build or enhance their security capability. State has overall responsibility for the FMS program, while DOD administers the program through DSCA and implementing agencies in the military departments. Since 2009, DSCA has taken steps to improve the timeliness of the FMS process, but concerns remain that the delivery of FMS equipment is not timely, leaving foreign partners waiting for items needed to achieve security objectives.
 
House and Senate committees requested that GAO assess the FMS process. This report assesses (1) the extent to which DOD has met FMS timeliness goals, (2) FMS workload and workforce trends, and (3) actions DOD has taken to address recommendations to improve the FMS process made by GAO and others. GAO analyzed performance data for FMS from 2012 to 2016; workforce and workload data from the military departments; reviewed relevant DOD regulations and policies for FMS; and interviewed DOD officials.
 
What GAO Recommends
 
GAO recommends that DSCA (1) collect data on delivery of items or services, (2) analyze FMS performance metric data to determine why goals have not been met, (3) develop a DSCA workforce plan, and (4) develop DSCA workload measures. DOD partially concurred with the first two recommendations, concurred with the third, and did not concur with the fourth. GAO continues to believe action is needed as discussed in the report.
 
For more information, contact Thomas Melito at (202) 512-9601 or
MelitoT@gao.gov.

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OGS_a66. State/DDTC Announces DTAS Information Systems Unavailable on 23 Aug
(Source: State/DDTC)
 
The DTAS information systems will be unavailable from 6:00PM through 10:00PM on August 23rd 2017 due to scheduled routine maintenance.
 

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NWSNEWS

(Source:
The Guardian
, 22 August 2017) [Excerpts.]
 
The New South Wales government has been accused of “trashing” anti-discrimination laws by allowing at least six arms manufacturers to discriminate against workers to comply with US export restrictions.
 
Some of the world’s biggest defence companies – including Northrop Grumman, Raytheon and BAE Systems – have been given lengthy exemptions from the state’s racial discrimination laws in the past three years.
 
In doing so, the NSW government has allowed companies to reject job applicants, or sack or transfer employees simply because they are foreigners.
 
Employees can have their access to sensitive information restricted solely because they are foreign citizens, and be forced to wear a coded “badge” indicating a lower level of security clearance.
 
Similar forms of discrimination are being allowed across the country. Arms manufacturers have recently been given exemptions to racial discrimination laws in Western Australia, Queensland, Victoria, the ACT, and South Australia.
 
The exemptions are given so the companies can comply with US export restrictions, designed to protect American weapons technology and knowledge – a law known as the International Traffic in Arms Regulations (ITAR). …
 
Simon Rice, a law and discrimination expert at the University of Sydney, has been campaigning against the exemptions for years. Rice described them as the “worst kind of cultural imperialism”, which in effect make Australian law subservient to US regulations.
 
He said there were other ways to ensure information about American weapons technology was safeguarded. “It’s a blanket rule, which is unsophisticated and heavy handed,” Rice told Guardian Australia. “The normal approach to any rights limitation is to search for a proportional accommodation. What is the actual evil you want to guard against?” he said.
 
The shadow NSW attorney general, Paul Lynch, said the exemptions in effect “trashed our longstanding principles of anti-discrimination” and urged the state government to lobby the federal government for change.
 
  “Relying on country of origin or citizenship to decide whether a future employee is reliable or trustworthy seems remarkably stupid – to say nothing of being a pretty basic breach of our anti-discrimination provisions,” Lynch told Guardian Australia.
 
  “There is something very wrong about this insertion of foreign US law into our society,” he said.
 
The NSW attorney general, Mark Speakman, said there were safeguards that ensured the exemptions did not allow “unwarranted discrimination”.
 
He said the powers have existed since the Anti-Discrimination Act was enacted by the Wran Labor government in 1977.
 
Speakman said the exemptions were “common sense” and precautionary, and granted by the president of the anti-discrimination board. …
 
The arms manufacturers are placed in a difficult position. If they are unable to obtain exemptions, they will be unable to properly operate in Australia and risk prosecution or heavy fines for breaching US regulations.
 
They have previously warned a failure to grant the exemptions would “compromise Australia’s defence capabilities and in some cases may impact on the readiness of Australia’s defence forces”. … 

 

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COMMCOMMENTARY

COMM_a018
. A.W.H. Gourley: “ITA/USTR Request for Comments on Trade Agreements and Government Procurement”

 
* Author: Alan W. H. Gourley, Esq., Crowell & Moring LLP, agourley@crowell.com, 202-624-2561.
 
Implementing the President’s direction in the Buy American Hire American Executive Order, the Department of Commerce’s International Trade Administration and the United States Trade Representative have issued a request for comments from industry on how U.S. government procurement obligations affect U.S. companies’ participation in the U.S. and foreign government procurement markets. This request presents a significant opportunity for companies to provide input on how such agreements have positively affected their global supply chains as well as the extent to which the public procurement markets of participating governments are important to U.S. industry and jobs. Unfortunately, the notices provide a very short 30-day period in which to respond (until 11:59 pm EDT on September 18, 2017), particularly given the end of summer timing. 

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COMM_a2
9. J.D. Rosener & G.C. Dorris: “Foreign Investment in the U.S.: How the Trump Presidency Could Change Things”

(Source:
Pepper Hamilton LLP
)
 
* Authors: James D. Rosener, Esq.,
rosenerj@pepperlaw.com
; and Gregory C. Dorris, Esq.,
dorrisg@pepperlaw.com
. Both of Pepper Hamilton LLP, New York and Washington DC, respectively.
 
Though CFIUS already is shining a bright light on Chinese covered transactions, that light likely will only intensify and be brighter with the Trump administration.
 
Twelve years have passed since publication of the article Uncle Sam Watches Nervously: Foreign Investment in U.S. Industries in 2004. [FN/1] That article discussed the review process under the Exon-Florio Amendment delegated to the Committee on Foreign Investment in the United States (CFIUS). [FN/2] The article highlighted several recent CFIUS reviews, and stressed that the evolving war on terrorism would have implications on U.S. policy governing foreign investment in the United States. The warning was of stricter scrutiny most focused on the individuals and companies making the investment, with more transactions included in CFIUS oversight involving companies engaged in the provision of critical infrastructure as opposed to just the production and provision of defense-related goods and services. And, as we have seen as recently as the end of 2016, that scrutiny applies to transactions between companies located outside the territorial wall of the United States.
 
The projections bore out over the years, as the United States Treasury Department soon after issued “new” regulations and guidance on CFIUS that outlined review of critical infrastructure and specific industries. The U.S. Congress motivated by terrorist and other global policy concerns has developed a growing interest in CFIUS. In particular, the rise of China and its economic strength have caused anxiety at the same time China has become the largest growing source of foreign investment in the United States. Since President Trump has taken office, there is a heightened awareness of China’s rise and perhaps a will to curb it not seen in previous U.S. Administrations. The only question is whether investment would be encouraged to bring jobs to the U.S. or discouraged for fear that key industries might be exported.
 
The article twelve years ago cautioned that change is not always progress, and warned against change toward too tight security over more transactions that could return the United States to an even broader Cold War suppression of foreign investment. That same cautionary bell needs to be struck again, as foreign companies, especially Chinese companies, should be vigilant of CFIUS, but not deterred from pursuing their own goals for U.S. investments. Nor should CFIUS or the U.S. Congress discourage such investment, but rather welcome it (after the appropriate vetting) as the best means of growing and strengthening the U.S. defense industrial base and general economy.
 
Treasury’s New Guidance
 
What was “new” guidance in 2008 may not seem so new now in 2017, but it still prevails today. As the CFIUS Chair, Treasury on November 21, 2008 issued new CFIUS regulations, and on December 8, 2008 issued a notice providing guidance on this CFIUS reform and the national security considerations. [FN/3] Initially, the guidance describes that the purpose of CFIUS reviews is to allow CFIUS to identify and address any national security risk that arises as a result of a “covered transaction,” and if necessary to request that the President determine whether to suspend or prohibit a covered transaction or take other action. A “covered transaction” generally is any merger, acquisition, or takeover by or with a foreign person which could result in control of a U.S. business by a foreign person. A U.S. business is not, however, a corporation located in the U.S.; it could be any business, wherever located, that engages in commerce with the U.S. The new regulations themselves provide several explicit examples of what is and what is not a covered transaction.
 
The new regulations retained many of the basic features of the earlier regulations, with voluntary notices to CFIUS by parties to transactions, although CFIUS also has the authority to review a transaction that has not been voluntarily notified. [FN/4] The guidance reiterates that the CFIUS review is focused on national security risk, which focuses on the interaction between threat and vulnerability. CFIUS reviews all the national security considerations, though not all such considerations are found to present a national security risk. The guidance makes clear that the review process is voluntary and that, once successfully through the process, a covered transaction receives a “safe harbor” from any future review or challenge. In contrast, any deal that involves a covered transaction remains subject to possible CFIUS review for national security risk (meaning a done deal is not ever really done, and can be undone by the President, if it involves a covered transaction with unacceptable national security risks).
 
The guidance is most useful in that it provides specific illustrations of the types of covered transactions reviewed. These types are discussed in two broad categories – (1) the nature of the business and (2) the identity of the foreign person. [FN/5]
 
With respect to the nature of the business, the guidance identifies such national security considerations as foreign control of U.S. businesses that provide products and services (either prime contractors or as subcontractors or suppliers to prime contractors) to U.S. Government agencies and also state and local authorities (and may or may not be sole source or involve access to classified information). As would be expected, the government contracts typically would be in the defense, security, and national security-related law enforcement sectors, and involve industry segments such as weapons and munitions manufacturing, aerospace, and radar systems. In some cases, however, the government contracts might “involve information technology (consulting, hardware, or software), telecommunications, energy, natural resources, industrial products, and a range of goods and services that affect the national security-relevant functions of the U.S. Government agency or create vulnerability to sabotage or espionage.” [FN/6]
 
Other types of covered transactions with national security considerations based on the nature of the U.S. businesses have no government contracts, but still involve operations, or production or supply of products or services, that may have implications for U.S. national security. The examples provided include covered transactions in (1) the energy sector at various stages of the value chain (“[t]he exploitation of natural resources, the transportation of these resources (e.g., by pipeline), the conversion of these resources to power, and the provision of power to U.S. Government and civilian customers”) [FN/7]; (2) the U.S. transportation system (“including maritime shipping and port terminal operations and aviation maintenance, repair, and overhaul”) [FN/8]; (3) the U.S. financial system; (4) the advanced technology sector (those technologies useful in defending, or in seeking to impair, U.S. national security, such as the design and production of semiconductors and other equipment or components that have both commercial and military applications or “the production or supply of goods and services involving cryptography, data protection, Internet security, and network intrusion detection”) [FN/9]; (5) research and development, production, or sale of technology, goods, software, or services that are subject to U.S. export controls; and (7) the infrastructure that may constitute U.S. critical infrastructure (including major energy assets). What constitutes “critical infrastructure” is determined on a “case-by-basis, depending on the importance of the particular assets involved in the transaction.” [FN/10]
 
With respect to the identity of the foreign person, the factors identified in the guidance that would be considered “include whether a transaction is a foreign government controlled transaction, and, particularly in the case of foreign government controlled transactions, what the record of the country of the investor is with regard to nonproliferation and other national security-related matters.” [FN/11] CFIUS also takes into account “the track record or intentions of the foreign person and its personnel with regard to actions that could impair U.S. national security, including whether the foreign person acquiring control of the U.S. business had plans to terminate contracts between the U.S. business and U.S. Government agencies for goods and services relevant to national security.” [FN/12]
 
As noted in the guidance, the question of whether a covered transaction is a ‘foreign government-controlled transaction” is one of the national security factors listed in section 721 for consideration by CFIUS. [FN/13] The new regulations define a foreign government-controlled transaction as “any covered transaction that could result in control of a U.S. business by a foreign government or a person controlled by or acting on behalf of a foreign government.” [FN/14] Such foreign government-controlled transactions can involve control by foreign government agencies, state-owned enterprises, government pension funds, and sovereign wealth funds, among others. The guidance stresses that the fact that a transaction is a foreign government-controlled transaction does not, by itself, mean that it poses national security risk. CFIUS in its review of foreign government-controlled transaction has considered “the extent to which the basic investment management policies of the investor require investment decisions to be based solely on commercial grounds; the degree to which, in practice, the investor’s management and investment decisions are exercised independently from the controlling government, including whether governance structures are in place to ensure independence; the degree of transparency and disclosure of the purpose, investment objectives, institutional arrangements, and financial information of the investor; and the degree to which the investor complies with applicable regulatory and disclosure requirements of the countries in which they invest.” [FN/15]
 
Growing Congressional Oversight
 
The Congressional Research Service (CRS) released a report dated August 12, 2016 detailing the history of CFIUS and the subsequent oversight by Congress. [FN/16] This CRS report emphasized that many members of Congress claimed that the economic and national security concerns of the United States needed to change as a result of the September 11, 2001 terrorist attacks, especially with respect to the role of foreign investment in the economy and in the nation’s security. The CRS report summarized the reaction of Congress to several proposed purchases subject to CFIUS review. In particular, the report highlighted the proposed sale by the British-owned Peninsular and Oriental Steam Navigation Company of the commercial port operations in six U.S. ports to Dubai Ports World (DP World). This proposed deal was subject to much Congressional criticism and anxiety over CFIUS reviews. The Congressional and public outcry led to DP World officials announcing that they would sell off the U.S. port operations to a U.S. company (a unit of AIG Global Investment Group, a New York-based asset management company), despite the prior approval of the deal by CFIUS.
 
Similar Congressional focus and industry objection was brought to bear in 2013 regarding a proposed purchase of U.S. pork producer Smithfield Foods by Hong Kong-based Shuanghui International Holdings, Ltd. U.S. Sen. Debbie Stabenow claimed the deal deserved special scrutiny on the basis that the acquisition threatened the U.S. food supply, a novel addition as a U.S. national security issue. The Senate Agriculture Committee held a hearing on the merger at the direction of its Chairman, Senator Stabenow. Despite the considerable pressure, CFIUS approved the deal and it proceeded as planned. The $4.7 billion takeover was the largest purchase of a U.S. company by a Chinese company at that time.
 
The application of Congressional pressure likely will continue to be applied to other deals reviewed by CFIUS based on alleged national security concerns, especially Chinese acquisitions. It has been reported that a group of 44 Republican members of Congress and one Democrat sent a letter in February 2016 to the Treasury Department demanding that CFIUS “conduct a full and rigorous investigation” of a bid by a company in Chongqing, China, to acquire the small but historic Chicago Stock Exchange. [FN/17] The fear apparently was that the proposed deal would give China direct access to America’s financial infrastructure.
 
Most recently the U.S.-China Economic and Security Review Commission (Commission) issued an advisory report to Congress dated November 16, 2016 where it recommended that Congress prohibit U.S. acquisitions by China state owned entities by changing the mandate of CFIUS. [FN/18] According to the Commission, the Chinese Communist Party has used state-backed enterprises as the primary economic tool to advance and achieve its national security objectives. [FN/19] Though only advisory, the Commission’s report adds fuel to the Congressional fire and could lead to legislative efforts to change the law governing CFIUS to restrict approval of investments by both China state-owned companies as well as privately held Chinese companies.
 
China’s Rise and Fall?
 
CFIUS released a public version of its most recent classified annual report to Congress on covered transactions in Current Year 2014 on February 19, 2016. [FN/20] The report shows a substantial increase in the number of transactions notified to CFIUS, with both a decline in the percentage of cases taken to a 45-day investigation and in the percentage of cases for which CFIUS imposed mitigation measures. China led all countries represented in CFIUS reviews for the third year in a row, but European investors resurged following a decrease in activity in 2013. These trends are in themselves unremarkable, as Chinese companies have looked to the United States for new investments as the Chinese economy has itself grown, and parties have filed voluntary notices for CFIUS reviews as a prophylactic measure for transactions with minimal national security issues that results in more 30-day decisions.
 
In all, 24 Chinese investor transactions were reviewed in 2014, an increase from 21 in 2013. Despite this increase in the number of Chinese deals, the actual percentage of Chinese deals as compared to all other countries declined. This decline probably was the result of the significant increase in the total number of reviewed transactions. This trend in Chinese investment and reviews of covered transactions has likely continued since then.
 
Examples of recent Chinese covered transactions that were reviewed by CFIUS varies both in type, industry, and result. The best-known example is a little stale and did not involve a voluntary notice, but rather a self-initiated review and Presidential action. SANY Group Co., Ltd., which controls Ralls Corp., was blocked for national security reasons in 2010 in the purchase of four wind farms in Oregon. CFIUS ordered Ralls to stop construction of turbines on land close to a U.S. Navy weapons-testing facility. President Obama later ordered Ralls to sell its stake in the wind farms based on security issues. SANY filed an unsuccessful lawsuit against the Obama Administration over the CFIUS decision, which was the first public case decided solely on proximity grounds. [FN/21]
 
In an earlier case in 2009, CFIUS opposed an attempt by China’s Northwest Non Ferrous International Investment to acquire Firstgold Corp., which had property near Fallon Naval Air Station in Nevada; it is reported the Chinese company pulled out of the deal. [FN/22] While CFIUS approved the acquisition of the U.S. assets of Canadian energy company Nexen Inc. by Cnooc Ltd., Cnooc was barred from operating oilfields in the Gulf of Mexico under the accord, due to their proximity (around 50 miles) to the U.S. Naval Air Station Joint Reserve Base at Belle Chasse, Louisiana. [FN/23]
 
The most prominent recent China CFIUS review ended successfully. CFIUS approved state-owned China National Chemical Corp.’s takeover bid of Swiss seeds and pesticides group Syngenta AG in August 2016. [FN/24] Trumpeted as the “biggest cross-border deal involving a Chinese buyer” that would “mark an acceleration of a shakeup in the global agrochemicals industry,” [FN/25] this deal caused considerable anxiety in the financial markets. U.S. interests were particularly piqued that Syngenta earlier had spurned a takeover by Syngenta last year spurned approaches from the U.S.-based seed company, Monsanto. U.S. Representative Michael Conaway, a Texas Republican who chairs the House Agriculture Committee closely monitored the deal. [FN/26] Objections tried to be raised that food safety and supply were issues of critical infrastructure and therefore a national security concern, but as with the approval of the Smithfield covered transaction discussed earlier, these concerns have not appeared to take hold with CFIUS.
 
Generally, it is rare for CFIUS to halt a deal, but in January 2016 it did block the Dutch company Royal Philips NV’s sale of high-end lights to China’s GO Scale Capital, a Chinese-backed private equity firm, based on undisclosed national security concerns. [FN/27] This covered transaction highlights the extraterritorial impact of CFIUS, in that it is the “tail wagging the dog” that nixes what essentially is a much larger transaction between companies in foreign countries.
 
A similar (very recent) covered transaction with extraterritoriality playing a role is the voluntary public takeover offer of Chinese investor Fujian Grand Chip Investment Fund LP (FGC) (part owned by the Chinese government), through its indirect German subsidiary Grand Chip Investment GmbH (GCI), for German chip maker Aixtron SE. CFIUS apparently “informed Grand Chip Investment and Aixtron that there are unresolved US national security concerns and the two companies should abandon the transaction.” [FN/28] Germany also has its own national security concerns with this transaction, which to date is still ongoing. President Obama on December 2, 2016 issued an order barring FGC from buying Aixtron, following CFIUS’ recommendation. [FN/29] The question remains whether the larger part of that deal will still go through. [FN/30]
 
The targeting of certain industries by Chinese companies may eventually lead to CFIUS looking not only at the national security interest of the particular transaction, but the overall investment takeover in that industry. This broader consideration is most likely to take place in critical infrastructure cases, such as telecommunications, but also in high technology industry sectors, such as semiconductors. The high profile CFIUS review in February, 2016, when Fairchild Semiconductor International turned down an offer by China Resources Microelectronics Ltd. and Hua Capital Management Co. Ltd. allegedly due to the near certainty that CFIUS would not approve the deal. [FN/31] In a similar technology deal shortly after Fairchild, U.S. hard drive maker Western Digital revealed that China state-owned Tsinghua Unisplendour had pulled out of a deal to acquire 15 percent of the company, a transaction valued at $3.78 billion. [FN/32] It is reported that Unisplendour took advantage of an investment agreement provision allowing either party with a 15-day window to walk away from the transaction if, after an initial review, CFIUS determined that it would conduct a formal investigation. As discussed above, prior to these failed technology deals, in the summer of 2015, China Resources, a giant state-owned conglomerate, was forced to rescind its offer for Micron, the U.S. memory chip manufacturer, reportedly because of worries that the deal would not clear CFIUS review.
 
So from being just an upstart several years ago to becoming the fastest growing investor in the United States, China may now soon drop in the foreign investor race in the United States due to CFIUS concerns. Certainly, there will be increased focus and scrutiny by CFIUS on China deals as it exercises what appears to be an extraterritorial oversight of mega foreign party deals with relatively insignificant U.S. interest at play. China state-owned enterprises will cause particular concern for CFIUS, especially in the areas of telecommunications and high technology. Chinese investors need to be aware and active in gaining CFIUS approval before consummating any covered transactions in the United States.
 
The Trump Administration and Beyond
 
Though CFIUS already is shining a bright light on Chinese covered transactions, that light likely will only intensify and be brighter with the Trump administration. The press has publicized well President Trump’s intentions to confront China across the board on public policy and commercial matters, especially trade and investment issues. Strongly criticizing China throughout the U.S. election campaign, President Trump made pledges to impose 45 percent tariffs on imported Chinese goods and to label China a currency manipulator. His recent phone call after being elected with president Tsai Ing-wen of Taiwan also may signal his apparent desire to confront China wherever he can. [FN/33]
 
For now at least, CFIUS is grounded in legal framework that offsets unfounded hostility to new China investment. While there will be Congressional antagonism to some new China deals, such resistance should not prevail unless there are legitimate national security interest at stake. Regardless, the uncertainty itself have led to warnings to Chinese investors to move more slowly and cautiously in the transitioning to the new environment. [FN/34]
 
As discussed above with respect to the 2016 CRS report and the 2016 Commission report, Congress is under pressure from many sources to act more aggressively in repudiating Chinese takeovers of U.S. companies for a variety of reasons. While the Committee’s report as noted is purely advisory, it may be referenced and relied on by President Trump in formulating the new trade and foreign policy agenda. There is no doubt voicing concern and projecting strong opposition to more Chinese investment in the United States will win friends in the Trump Administration. Adding a new Executive opposition to the clearly growing Congressional opposition, may lead to a CFIUS agency oversight that is very hard on any new Chinese investments for years to come.
 
———-
  [FN/1] James D. Rosener & Gregory C. Dorris, Uncle Sam Watches Nervously: Foreign Investment in U.S. Industries, 15 The J. of Corp. Acct. & Fin. 31 (Jan./Feb. 2004).
  [FN/2] Section 721 of the Defense Production Act of 1950 (50 U.S.C. app. 2170), enacted by section 5021 of the Omnibus Trade and Competitiveness Act of 1988, Pub. L. No. 100-418, 102 Stat. 1107 (1988) (commonly known as the Exon-Florio Amendment because of its two primary sponsors, then-Sen. James Exon [D-Nebraska] and then-Rep. Jim Florio [D-New Jersey]). President Ford with Executive Order 11,858 established CFIUS in 1975 to evaluate the general impact of foreign investment in the United States. Exec. Order No. 11,858, 3 C.F.R. § 990 (1971-1975), reprinted in 15 U.S.C. § 78b. President Reagan in 1988 by Executive Order 12,661 delegated to the CFIUS the express task of carrying out the national security investigations under the Exon-Florio Amendment and reporting its findings to the President. Exec. Order No. 12,661, 3 C.F.R. § 630 (1993), reprinted in 15 U.S.C. § 78b.
  [FN/3] See Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons, 73 Fed. Reg. 70702 (Nov. 21, 2008); Office of Investment Security; Guidance Concerning the National Security Review Conducted by the Committee on Foreign Investment in the United States, 73 Fed. Reg. 74567 (Dec. 8, 2008) (“Guidance“).
  [FN/4] The purpose of this article is not to detail the CFIUS voluntary notice process, which was described in the prior article and remained very similar following the new regulations. The new regulations at 31 C.F.R., Part 800 set forth the process for filing a voluntary notice, and the timing and how that notice will be reviewed by CFIUS.
  [FN/5] The guidance also clarifies that since “a corporate reorganization normally involves the realignment of a company’s structure to achieve some legal, financial, or other business objective, . . . only in exceptional cases” will a corporate reorganization present national security considerations.” Guidance, 73 Fed. Reg. at 74571. This point remains true “even where a corporate reorganization results in a new foreign person obtaining control over a U.S. business-by becoming, for example, an intermediate parent of the U.S. business” because “that corporate reorganization usually would not result in a change in the ultimate parent of the U.S. business.” Id. The one example give of an exceptional case is where “[c]ontrol of a U.S. business is transferred from Corporation A, a foreign person, to Corporation B, another foreign person, both of which are wholly-owned subsidiaries of Corporation C,” because “[a]lthough Corporation C continues to be the ultimate parent of the U.S. business, the facts and circumstances related to the actions, policies, and personnel of the new intermediate controlling entity, Corporation B, raise national security considerations that were not raised by the facts and circumstances related to control of the U.S. business by Corporation A, the previous intermediate controlling entity.” Id.
  [FN/6] Guidance, 73 Fed. Reg. at 74570.
  [FN/7] Id.
  [FN/8] Id.
  [FN/9] Id., at 74571.
  [FN/10] Id., at 74570.
  [FN/11] Id., at 74571.
  [FN/12] Id.
  [FN/13] Section 721 of the Defense Production Act of 1950, 50 U.S.C. § 2170.
  [FN/14] 31 C.F.R. § 800.214.
  [FN/15] Guidance, 73 Fed. Reg. at 74571.
[FN/16] James K. Jackson, Cong. Research Serv., RL 33388, The Committee on Foreign Investment in the United States (CFIUS) (2016).
  [FN/17] Political Backlash Grows in Washington to Chinese Takeovers, The New York Times (Feb. 16, 2016), available
here
.
  [FN/18] U.S.-China Economic And Security Review Commission, 2016 Annual Report to Congress (Nov. 2016), available
here
.
  [FN/19] Id., see also, Congressional Panel Wants to Ban Chinese State Ownership of U.S. Companies, Fortune (Nov. 17, 2016), available
here
.
[FN/20] CFIUS Annual Report To Congress, CY 2014:
available
here. Section 721(m) of the Defense Production Act of 1950 (50 U.S.C. App. 2170), as amended by the Foreign Investment and National Security Act of 2007 (Pub. L. No. 11 0-49), requires the annual report on covered transactions to provide:
    (A) A list of all notices filed and all reviews or investigations completed during the period, with basic information on each party to the transaction, the nature of the business activities or products of all pertinent persons, along with information about any withdrawal from the process, and any decision or action by the President under this section.
    (B) Specific, cumulative, and, as appropriate, trend information on the numbers of filings, investigations, withdrawals, and decisions or actions by the President under this section.
    (C) Cumulative and, as appropriate, trend information on the business sectors involved in the filings which have been made, and the countries from which the investments have originated.
    (D) Information on whether companies that withdrew notices to the Committee in accordance with subsection (b)(1 )(C)(ii) have later re-filed such notices, or, alternatively, abandoned the transaction.
    (E) The types of security arrangements and conditions the Committee has used to mitigate national security concerns about a transaction, including a discussion of the methods that the Committee and any lead agency are using to determine compliance with such arrangements or conditions.
    (F) A detailed discussion of all perceived adverse effects of covered transactions on the national security or critical infrastructure of the United States that the Committee will take into account in its deliberations during the period before delivery of the next report, to the extent possible.
  [FN/21] Sany apparently made a subsequent and successful investment in a Colorado wind farm after structuring the investment through direct ownership by U.S. citizens and not Chinese. See Ralls CFIUS block alters Sany’s future investment strategy in US, Financial Times (Mar. 1, 2013), available
here
.
  [FN/22] U.S. Security Concerns Could Stand in the Way of ChemChina’s Syngenta Bid, Bloomberg (Feb. 2, 2016), available
here
.
  [FN/23] Id.
  [FN/24] See, e.g., Powerful U.S. Panel Clears Chinese Takeover of Syngenta, The Wall Street Journal (Aug. 23, 2016), available
here
.
  [FN/25] UPDATE 4-ChemChina close to striking deal for Syngenta -sources, Reuters (Feb. 2, 2016), available
here
.
  [FN/26] ChemChina, Syngenta to move quickly on U.S. national security review, Reuters (Feb. 4, 2016), available
here
.
  [FN/27] US invokes ‘national security’ to stop sale of Philips LED unit to Chinese, Computerworld (Jan. 25, 2016), available
here
.
  [FN/28] President Obama to rule on Chinese bid to buy Aixtron, EE Times Europe (Nov. 26, 2016), available
here
.
  [FN/29] See, e.g., Obama Blocks Chinese Bid for Technology Firm Aixtron, The Wall Street Journal (Dec. 3, 2016) (quoting a U.S. Treasury statement saying that “[t]he national security risk posed by the transaction relates, among other things, to the military applications of the overall technical body of knowledge and experience of Aixtron, a producer and innovator of semiconductor manufacturing equipment and technology, and the contribution of Aixtron’s U.S. business to that body of knowledge and experience”), available
here
.
  [FN/30] See, e.g., Aixtron could revive takeover despite U.S. block: analysts, Reuters (Dec. 5, 2016), available
here
.
  [FN/31] See Fairchild rejects Chinese offer on U.S. regulatory fears, Reuters (Feb 16, 2016), available
here
; See Fairchild turns down Chinese group’s acquisition offer, Siliconbeat (Feb. 17, 2016 ) available
here
. Fairchild elected instead to go forward with U.S.-owned ON Semiconductor, which presented no CFIUS challenge. This case illustrates well how sometimes just the risk of a CFIUS rejection can cause a Chinese party to lose out to a U.S. rival that while reportedly making a less favorable financial offer did not face the regulatory hurdle of a CFIUS review.
  [FN/32] See Chinese Firm Ends Investment in Western Digital, Complicating SanDisk Tie-Up, The Wall Street Journal (Feb. 23, 2016), available
here
; CFIUS Concerns Halt Unisplendour’s $4B Western Digital Play, Law360 (Feb. 23, 2016), available
here
.
  [FN/33] See, e.g., Trump’s Call with Taiwan: A Diplomatic Gaffe or a New Start?, The New York Times (Dec. 5, 2016), available
here
.
  [FN/34] See, e.g., China Pumps the Brakes on U.S. Dealmaking After Trump Win, Bloomberg (Nov. 13, 2016), available
here
.

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COMM_a3
10. M.A. Goldstein: “Is There Such a Thing as ‘Attempted’ Arms Brokering?”

(Source:
Defense Trade Law Blog
. Reprinted by permission.)
 
* Author:  Matthew A. Goldstein, Esq.,
matthew@goldsteinpllc.com
, 202-550-0040.
 
Is there such a thing as “attempted” arms brokering under the Arms Export Control Act or do the mere acts of soliciting, negotiating, and other discussions regarding the export of defense articles on behalf of a third party constitute a completed offense of arms brokering? Does the Arms Export Control Act provide the State Department with authority to control “attempted” brokering? The defendant in the recent case of U.S.A. v. Man et al. [FN/1] raised these very issues, which apparently led the government to drop an illegal arms brokering count from its indictment.
 
Snapshot of the 1996 Brokering Amendment
 
Congress amended the Arms Export Control Act in 1996 to control the activities of “U.S. persons and foreign persons located in the U.S. involved in defense trade of U.S. and non-U.S. defense equipment or technology.” [FN/2] This amendment added four subsections to the Act that broadly define brokering activities, require registration of all arms brokers, and require prior approval of arms brokering activities, subject to very narrow exclusions and exemptions. [FN/3]
 
Subsection II of the amendment broadly defines brokering activities to “include the financing, transportation, freight forwarding, or taking of any other action that facilitates the manufacture, export, or import of a defense article or defense service.” [FN/4] This definition is implemented with the other subsections of the 1996 Brokering Amendment at Part 129 of the International Traffic in Arms Regulations (“ITAR”).
 
The State Department Broadly Applies Part 129
 
The State Department views the scope of Part 129 in the broadest sense. Among other things, it maintains that brokering activities can occur regardless of whether a prospective transaction is completed and regardless of whether a person actually receives a fee or other consideration.
 
The ITAR also prohibits the act of proposing to engage in brokering activities that involve any country, area or person who is ineligible or subject to arms embargo under ITAR Section 126.1 without first obtaining State Department approval. [FN/5]
 
The government regularly enforces Part 129 brokering restrictions, particularly against brokers in transactions that involve 126.1 arms embargoed countries. Many of these prosecutions are for proposed transactions where no defense articles were actually purchased or exported.
 
The Wenxia Man Case
 
On August 21, 2014, Wenxia Man, a naturalized U.S. citizen, was indicted in the U.S. District Court for the Southern District of Florida for the unlawful brokering of defense articles and conspiracy to export defense articles without State Department authorization in connection with alleged attempts by Man and an alleged co-conspirator to purchase an MQ-9 Reaper Unmanned Aerial Vehicle, F-135 engines, and other U.S.-origin defense articles for export to China. [FN/6]
 
No defense articles were bought, sold or exported by Man or by her alleged co-conspirator. Accordingly, Man moved to dismiss the arms brokering count under Federal Rule of Criminal Procedure 12(b)(3)(B)-arguing that she did not facilitate the manufacture, export or import of a defense article and that the AECA does not authorize a criminal charge for “attempt” to broker:
 
Noticeably lacking from 22 U.S.C. § 2778 is any reference to an attempt to take any action “that facilitates the manufacture, export, or import of a defense article or defense service.” Cf. id. Indeed, the word “attempt” appears nowhere in 22 U.S.C. § 2778. This is particularly important because even if MAN arguably attempted to act as a broker, none of MAN’s actions ultimately facilitated the manufacture, export or import of a defense article. [FN/7]
 
Man’s motion further argued that there is no authority whatsoever for convicting a defendant under the Arms Export Control Act for brokering activities that did not ultimately result in the “manufacture, export, or import of a defense article or defense service.” [FN/8]
 
In its response to Man’s motion, the government argued that proof of intent to facilitate sales of defense articles was sufficient to support the brokering count:
 
Because the requirement is that the defendant must first register with the Department of State before undertaking any brokering activity, and further, that no brokering activities or brokering proposals involving any country referred to in Section 126.1, which includes China, may be carried out by any person without first obtaining the written approval of the Directorate of Defense Trade Controls, the offense is complete upon the undertaking of any brokering activity which is intended to facilitate the export or transfer of a defense article. [FN/9]
 
The government’s response further argued:
 
It is not an element of a violation of engaging in the business of brokering activity in violation of Title 22, United States Code, Section 2778, that the defendant be successful in her brokering activities, or that she actually receive a commission. It is enough that she engaged in prohibited brokering activities without first being registered with the Department of State, Directorate of Defense Trade Controls with the intent to obtain a commission for her efforts in facilitating the sale, transfer and export of a defense article. [FN/10]
 
The court heard oral argument on the motion and denied it. There is no written order explaining the court’s reason for its denial. However, denial of Man’s Motion to Dismiss is not surprising because, in criminal proceedings, courts rarely grant motions to dismiss-no matter how weak in evidence or legally deficient the government’s case.
 
But what is so interesting about the Man case is that, following the court’s denial of Man’s Motion to Dismiss, the government filed a Superseding Indictment in which it dropped the brokering count.
 
Had the government not dropped the brokering count, it would have invariably faced a Rule 29 Motion for Judgment of Acquittal at trial. Rule 29 Motions are much more difficult for the government to overcome than Rule 12 motions to dismiss.
 
More specifically, to overcome a Rule 29 Motion for Judgment of Acquittal on the brokering count, the government would have been required to present evidence sufficient to prove each element of the brokering count beyond a reasonable doubt-to include presenting evidence that Man took an action that facilitated the manufacture, export, or import of a defense article. By dropping the brokering count, the government sidestepped this factual issue. It also avoided the court ruling on whether there is such a thing as attempted brokering under the Arms Export Control Act.
 
Man was eventually convicted at trial on the Conspiracy count-a criminal charge that requires proof of an agreement to commit an unlawful act but does not require proof of an act that facilitated the manufacture, export, or import of a defense article or defense service. The court sentenced Man to 50 months imprisonment plus two years of supervised release. Man has since appealed the conviction, which is now pending before the United States Court of Appeals for the Eleventh Circuit (Case No. 16-15635).
 
Conclusion
 
Man’s argument against any Arms Export Control Act authority to control attempts to broker defense articles interprets the Act’s use of the term “action that facilitates” as meaning to take an action that actually causes such end results and takes the position that the Act does not control mere attempts to bring about such results. In contrast, the government interprets the term “action that facilitates” as meaning that a person took an action intended to cause such end results and takes the position that the Act controls such actions-regardless of if the intended results occur.
 
The Congressional record for the 1996 Brokering Amendment is scant and does not address the meaning of the term “action that facilitates”. [FN/11] Nor does it specifically discuss “attempts” to broker. Accordingly, the government’s apparent concern over the court’s review of the brokering count against Man was justified.
 
The best legal solution to resolve the issue is for Congress to clarify the scope of the arms brokering prohibitions through amendment of the Arms Export Control Act. In the meantime, the Justice Department will continue enforcing the State Department’s interpretations. We can therefore expect to see other defendants ask courts to decide whether there is such a thing as “attempted” arms brokering. Decisions in these defendants’ favor can significantly narrow the scope of Part 129.
 
———
  [FN/1] United States of America v. Wenxia Man a/k/a Wency Man, Case 0:14-cr-60195-BB (S.D. Fla., June 2016).
  [FN/2] Section 151 of Public Law 104-164 (1996).
  [FN/3] See 22 U.S.C. 22 U.S.C. § Section 2778(A)(ii).
  [FN/4] 22 U.S.C. § Section 2778(A)(ii)(II) (emphasis added).
  [FN/5] 22 C.F.R. §§ 126.1(e)(1) and 129.7(b).
  [FN/6] Indictment, Case 0:14-cr-60195-BB, ECF No. 1 (06/21/2014).
  [FN/7] Defendant’s Motion to Dismiss Count One (1) of the Indictment and Incorporated Memorandum of Law, Case 0:14-cr-60195-BB, ECF No. 61 (03/23/2016).
  [FN/8] Ibid.
  [FN/9] Government’s Response to Defendants Motion to Dismiss Count One of the Indictment, Case 0:14-cr-60195-BB, ECF No. 66 (03/25/2016).
  [FN/10] Ibid.
  [FN/11] See H.R. 3121 accompanying the brokering amendment at Section 151 under See H.R. Rep. No. 104-519, pp. 11-12 (1996).

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COMM_a4
11. SIPRI Releases Concept Paper and Good Practice Guides Concerning Implementation of Effective Internal Compliance Programs

 
SIPRI is pleased to draw attention to a recently published Concept Paper and set of Good Practice Guides examining the challenges facing the establishment and implementation of an effective Internal Compliance Program (ICP) by companies and research institutes subject to dual-use and arms export controls.
 
An ICP is an arrangement that an entity affected by dual-use and arms export controls puts in place to ensure that it is complying with both these controls and its own internal policies. In recent years, the European Union (EU) and national governments have been encouraging companies and other stakeholders to adopt ICPs and to allow those that do so to benefit from reduced administrative requirements. However, while the requirement to have an ICP is being increasingly mainstreamed, the guidance and tools available to companies and other affected stakeholders on how one should be established and maintained is often deficient and not targeted at those most in need of assistance.
 
This SIPRI Concept Paper maps the key challenges faced by many of the sectors and actors most impacted by the EU’s dual-use and arms export controls, and the steps that have been taken-and could be taken-to help those affected to set up and run an effective ICP. The paper builds on past research by SIPRI in this area as well as information collected from export compliance officers, experts affiliated with industry associations and representatives of European licensing authorities.
 
The five accompanying SIPRI Good Practice Guides present available sector and actor-specific compliance-related guidance material. They cover the nuclear, defense and aerospace, and information and communication technology sectors, as well as academic and research, and transport and distribution service providers. Each Guide includes guidance material produced by national governments, the EU and other bodies, as well as publicly available ICPs produced by companies and research institutes.
 

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ENEDITOR’S NOTES

 
* Ray Bradbury (Ray Douglas Bradbury (22 Aug 1920 – 5 Jun 2012; was an American author and screenwriter. Widely known for his dystopian novel Fahrenheit 451 (1953), and his science fiction and horror story collections The Martian Chronicles (1950), The Illustrated Man (1951), and I Sing the Body Electric (1969), Bradbury was one of the most celebrated 20th- and 21st-century American writers.)
  – “Jump, and you will find out how to unfold your wings as you fall.”
  – “You don’t have to burn books to destroy a culture. Just get people to stop reading them.”

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EN_a313
. 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: 15 Aug 2017: 
82 FR 38764-38819: Wassenaar Arrangement 2016 Plenary Agreements Implementation 

  
*
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.

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

EN_a0314. 
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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