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17-1010 Tuesday “Daily Bugle”

17-1010 Tuesday “Daily Bugle”

Tuesday, 10 October
2017

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe 
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  1. DHS/CBP Seeks Comments on Form 26, Report of Diversion
  2. DHS/CBP Seeks Comments on Forms 1302, 1302A, 7509, and 7533; Cargo Manifest/Declaration, Stow Plan, Container Status Messages and Importer Security Filing
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. EU Strengthens North Korea Sanctions in Line with Latest UN Security Council Resolution
  5. EU Amends for the 279th Time Sanctions Against ISIL and Al-Qaida
  1. Expeditors News: “Argentina Establishes a Simplified Export Program”
  2. Global Trade News: “NAFTA Talks Round 4: Expect U.S. Demands Regarding Auto Sector”
  1. B.D. Linney & C. Griffin: “OFAC Set to Terminate Most Sanctions Against Sudan”
  2. C. Knipfer: “It’s Time to Reevaluate Export Controls on Commercial Spacecraft”
  3. W.H. Segall, J.C. Poling & M.J. Schwartz: “Implementing CAATSA – OFAC Issues Amended Russian-Related Sectoral Sanctions Under Directives 1 and 2”
  1. ECS Presents “Establishing an Export Compliance Program” on October 17-18 in Charleston, SC 
  2. Global Trade Controls Conference on 6-8 Nov in London 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (28 Sep 2017), DOD/NISPOM (18 May 2016), EAR (3 Oct 2017), FACR/OFAC (16 Jun 2017), FTR (20 Sep 2017), HTSUS (25 Jul 2017), ITAR (30 Aug 2017) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11
. DHS/CBP Seeks Comments on Form 26, Report of Diversion

 
82 FR 47015-47016: Agency Information Collection Activities: Report of Diversion
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 30-Day notice and request for comments; Extension of an existing collection of information. …
* ADDRESSES: Interested persons are invited to submit written comments on this proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the OMB Desk Officer for Customs and Border Protection, Department of Homeland Security, and sent via electronic mail to dhsdeskofficer@omb.eop.gov.
* FOR FURTHER INFORMATION CONTACT: Requests for additional information should be directed to the CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE., 10th Floor, Washington, DC 20229-1177, or via email CBP_PRA@cbp.dhs.gov. Please note that the contact information provided here is solely for questions regarding this notice. Individuals seeking information about other CBP programs should contact the CBP National Customer Service Center at 877-227-5511, (TTY) 1-800-877-8339, or CBP Web site.
* SUPPLEMENTARY INFORMATION: …
  – Title: Report of Diversion.
  – OMB Number: 1651-0025.
  – Form Number: CBP Form 26. …
  – Abstract: CBP Form 26, Report of Diversion, is used to track vessels traveling coastwise from U.S. ports to other U.S. ports when a change occurs in scheduled itineraries. This form is initiated by the vessel owner or agent to notify and request approval by CBP for a vessel to divert while traveling coastwise from a U.S. port to another U.S. port, or a vessel traveling to a foreign port having to divert to a U.S. port when a change occurs in the vessel itinerary. CBP Form 26 collects information such as the name and nationality of the vessel, the expected port and date of arrival, and information about any related penalty cases, if applicable. This information collection is authorized by 46 U.S.C. 60105 and is provided for in 19 CFR 4.91. CBP Form 26 is accessible here. …
 
   Dated: October 4, 2017.
Seth Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

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82 FR 47016-47018: Agency Information Collection Activities: Cargo Manifest/Declaration, Stow Plan, Container Status Messages and Importer Security Filing
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 30-Day notice and request for comments; revision of an existing collection of information. …
* ADDRESSES: Interested persons are invited to submit written comments on this proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the OMB Desk Officer for Customs and Border Protection,
Department of Homeland Security, and sent via electronic mail to dhsdeskofficer@omb.eop.gov.
* FOR FURTHER INFORMATION CONTACT: Requests for additional information should be directed to the CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE., 10th Floor, Washington, DC 20229-1177, or via email CBP_PRA@cbp.dhs.gov. Please note that the contact information provided here is solely for questions regarding this notice. Individuals seeking information about other CBP programs should contact the CBP National Customer Service Center at 877-227-5511, (TTY) 1-800-877-8339, or CBP Web site.
* SUPPLEMENTARY INFORMATION: …
  – Title: Cargo Manifest/Declaration, Stow Plan, Container Status Messages and Importer Security Filing.
  – OMB Number: 1651-0001.
  – Form Numbers: CBP Forms 1302, 1302A, 7509, 7533.
  – Abstract: This OMB approval includes the following existing information collections: CBP Form 1302 (or electronic equivalent); CBP Form 1302A (or electronic equivalent); CBP Form 7509 (or electronic equivalent); CBP Form 7533 (or electronic equivalent); Manifest Confidentiality; Vessel Stow Plan (Import); Container Status Messages; and Importer Security Filing, Electronic Ocean Export Manifest; Electronic Air Export Manifest; Electronic Rail Export Manifest; and Vessel Stow Plan (Export). CBP is proposing to add a new information collection for the Air Cargo Advance Screening (ACAS) Pilot Program.
  CBP Form 1302: The master or commander of a vessel arriving in the United States from abroad with cargo on board must file CBP Form 1302, Inward Cargo Declaration, or submit the information on this form using a CBP-approved electronic equivalent. CBP Form 1302 is part of the manifest requirements for vessels entering the United States and was agreed upon by treaty at the United Nations Inter-government Maritime Consultative Organization (IMCO). This form and/or electronic equivalent, is provided for by 19 CFR 4.5, 4.7, 4.7a, 4.8, 4.33, 4.34, 4.38, 4.84, 4.85, 4.86, 4.91, 4.93 and 4.99 and is accessible here.
  CBP Form 1302A: The master or commander of a vessel departing from the United States must file CBP Form 1302A, Cargo Declaration Outward With Commercial Forms, or CBP-approved electronic equivalent, with copies of bills of lading or equivalent commercial documents relating to all cargo encompassed by the manifest. This form and/or electronic equivalent, is provided for by 19 CFR 4.62, 4.63, 4.75, 4.82, and 4.87-4.89 and is accessible here.
  Electronic Ocean Export Manifest: CBP began a pilot in 2015 to electronically collect ocean export manifest information. This information is transmitted to CBP in advance via the Automated Export System (AES) within the Automated Commercial Environment (ACE).
  CBP Form 7509: The aircraft commander or agent must file Form 7509, Air Cargo Manifest, with CBP at the departure airport, or respondents may submit the information on this form using a CBP-approved electronic equivalent. CBP Form 7509 contains information about the cargo onboard the aircraft. This form, and/or electronic equivalent, is provided for by 19 CFR 122.35, 122.48, 122.48a, 122.52, 122.54, 122.73, 122.113, and 122.118, and is accessible here.
  Air Cargo Advance Screening (ACAS): CBP began a pilot in 2012 announced via a notice published in Federal Register on October 24, 2012 (77 FR 65006). The ACAS pilot is a voluntary test in which participants agree to submit a subset of the required 19 CFR 122.48a data elements at the earliest point practicable prior to loading of the cargo onto the aircraft destined to or transiting through the United States. The ACAS pilot data is transmitted to CBP via a CBP-approved electronic data interchange system. Currently, the ACAS pilot data consists of:
 
  (1) Air waybill number
  (2) Total quantity based on the smallest external packing unit
  (3) Total weight
  (4) Cargo description
  (5) Shipper name and address
  (6) Consignee name and address
 
  Electronic Air Export Manifest: CBP began a pilot in 2015 to electronically collect air export manifest information. This information is transmitted to CBP in advance via ACE’s AES.
  CBP Form 7533: The master or person in charge of a conveyance files CBP Form 7533, Inward Cargo Manifest for Vessel Under Five Tons, Ferry, Train, Car, Vehicle, etc, which is required for a vehicle or a vessel of less than 5 net tons arriving in the United States from Canada or Mexico, otherwise than by sea, with baggage or merchandise. Respondents may also submit the information on this form using a CBP-approved electronic equivalent. CBP Form 7533, and/or electronic equivalent, is provided for by 19 CFR 123.4, 123.7, 123.61, 123.91, and 123.92, and is accessible here.
  Electronic Rail Export Manifest: CBP began a pilot in 2015 to electronically collect the rail export manifest information. This information is transmitted to CBP in advance via ACE’s AES.
  Manifest Confidentiality: An importer or consignee (inward) or a shipper (outward) may request confidential treatment of its name and address contained in manifests by following the procedure set forth in 19 CFR 103.31.
  Vessel Stow Plan (Import): For all vessels transporting goods to the United States, except for any vessel exclusively carrying bulk cargo, the incoming carrier is required to electronically submit a vessel stow plan no later than 48 hours after the vessel departs from the last foreign port that includes information about the vessel and cargo. For voyages less than 48 hours in duration, CBP must receive the vessel stow plan prior to arrival at the first port in the U.S. The vessel stow plan is provided for by 19 CFR 4.7c.
  Vessel Stow Plan (Export): CBP began a pilot in 2015 to electronically collect a vessel stow plan for vessels transporting goods from the United States, except for any vessels exclusively carrying bulk cargo. The exporting carrier is required to electronically submit a vessel stow plan in advance.
  Container Status Messages (CSMs): For all containers destined to arrive within the limits of a U.S. port from a foreign port by vessel, the incoming carrier must submit messages regarding the status of events if the carrier creates or collects a container status message (CSM) in its equipment tracking system reporting an event. CSMs must be transmitted to CBP via a CBP-approved electronic data interchange system. These messages transmit information regarding events such as the status of a container (full or empty); booking a container destined to arrive in the United States; loading or unloading a container from a vessel; and a container arriving or departing the United States. CSMs are provided for by 19 CFR 4.7d.
  Importer Security Filing (ISF): For most cargo arriving in the United States by vessel, the importer, or its authorized agent, must submit the data elements listed in 19 CFR 149.3 via a CBP-approved electronic interchange system within prescribed time frames. Transmission of these data elements provide CBP with advance information about the shipment. …
 
  Dated: October 4, 2017.
Seth Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

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OGS
OTHER GOVERNMENT SOURCES

OGS_a13. Ex/Im Items Scheduled for Publication in Future Federal Register Editions

(Source: Federal Register)

 
* State; NOTICES; 
Positive Actions by Government of Sudan [Publication Date: 11 October 2017.]  

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OGS_a24Commerce/BIS: (No new postings.)

(Source: Commerce/BIS)

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OGS_a4
6. EU Strengthens North Korea Sanctions in Line with Latest UN Security Council Resolution

 
The Council further strengthened its restrictive measures against the Democratic People’s Republic of Korea (DPRK) by transposing the sectoral sanctions imposed by UN Security Council resolution 2375 (2017). That resolution was adopted on 11 September 2017 in response to the DPRK’s ongoing nuclear weapons and ballistic missiles-development activities, in violation and flagrant disregard of previous UN Security Council resolutions.
 
The measures introduced by UNSC resolution 2375 (2017) include a ban on the sale of natural gas liquids to the DPRK, and on the importation of its textiles. The new measures also include limitations on the sale of refined petroleum products and crude oil to the DPRK.
 
In addition, member states will not provide new work authorisations to DPRK nationals to enter and work in their territory as they are suspected of generating revenue which is used to support the country’s illegal nuclear and ballistic missile programmes.
 
The legal acts also transpose the exemptions provided by the UN Security Council for humanitarian and livelihood purposes.
The Council had already transposed on 15 September the additional listings imposed by the UN Security Council resolution, adding three entities and one individual supporting the illicit programmes to the lists of those subject to an asset freeze and travel restrictions. The total number of persons under restrictive measures against the DPRK is 63 individuals and 53 entities as listed by the UN. In addition, 38 individuals and 4 entities have been designated by the EU autonomously.
 
As agreed by EU foreign ministers in Tallinn on 7 September, the Council is currently working on possible additional EU autonomous measures to complement and reinforce the UN Security Council sanctions.
 
The EU is implementing all UN Security Council resolutions adopted in response to the DPRK’s nuclear weapons and ballistic missile programmes. In addition, the EU has imposed autonomous restrictive measures against the DPRK, complementing and reinforcing the UN sanctions regime.
The legal acts will be published in the Official Journal of 11 October.
 

  EU- Democratic People’s Republic of Korea (DPRK) relations, factsheet 

 
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OGS_a5
7. EU Amends for the 279th Time Sanctions Against ISIL and Al-Qaida


 
Regulations:
  – Commission Implementing Regulation (EU) 2017/1834 of 9 October 2017 amending for the 279th 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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NWSNEWS

(Source:
Expeditors News, 9 Oct 2017.)
 
On September 25th, 2017, a notice was published in Argentina’s Boletín Oficial, announcing a simplified export program for exports.  Resolución 725-E/17, also known as “Simple Export,” was established for the purpose of facilitating the export process for small and medium companies. “Simple Export” is a computer-based process that allows companies to export small commercial shipments through postal service providers, with the goal of simplifying and expanding their access to foreign markets. Resolución 725-E/17 entered into force on September 26th, 2017.  
 
For more information please go here.

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(Source:
Integration Point
, 10 Oct 2017.) [Excerpts.]
 
The fourth round of talks to overhaul the North American Free Trade Agreement (NAFTA)–enacted 23 years ago-begins this week on October 11-15, 2017 in Washington, D.C.  
 
Following the third round of talks between Canada, the United States and Mexico earlier this month, industry insiders agreed that the most “contentious issues” have not been introduced by the three countries.
 
In round four, the U.S. is looking for changes to component percentages that Canada, Mexico and even the U.S. auto sector itself are not excited about. The U.S. is also expected to table a dairy proposal related to Canada’s supply management system.
 
If U.S. demands are too strong and out of touch for Mexico and Canada, the talk leading up to round five and six will be about whether the three sides have any chance of coming together.
 
The U.S. Chamber of Commerce announced last week that America’s biggest business group is warning the Trump administration that a withdrawal from NAFTA would be a “political and economic debacle” that would cost hundreds of thousands of U.S. jobs. Comments from a senior official indicated The Chamber would work to rally support for the trade deal and against the administration’s hardline demand for concessions from Canada and Mexico.
 
Following the third round of talks earlier this month in Ottawa, all three NAFTA trade ministers–Mexican Economy Ildefonso Guajardo, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland–touted progress made in one of the most non-controversial areas: supporting small and medium-size enterprises, Indications showed that negotiations in that area are virtually complete.
 
Lighthizer has said that delegates made significant progress on competition policy, digital trade, state-owned enterprises and telecommunications.
 
In total, seven rounds of renegotiations are planned through December, although U.S. trade officials have noted that talks could stretch into early 2018. …

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COMMCOMMENTARY

(Source:
Trade Compliance Flash, Miller & Chevalier, 9 Oct 2017.)
 
* Authors: Barbara D. Linney, Esq., blinney@milchev.com, 202-626-5806; and Collmann Griffin, Law Clerk, cgriffin@milchev.com, 202-626-5836. Both of Miller & Chevalier.
 
Effective October 12, 2017, most sanctions against Sudan will terminate as a result of a finding by the U.S. Department of State that the government of Sudan (GOS) has fulfilled the conditions imposed by an executive order issued in the waning days of the Obama administration.
 
On October 7, 2017, the U.S. Department of State issued a report concluding that the GOS had sustained the positive action that led to the January 17, 2017, relaxation of sanctions by the Obama administration, namely, by: 1) maintaining a cessation of hostilities in Darfur, South Kordofan, and the Blue Nile states; 2) improving humanitarian access throughout Sudan; and (3) maintaining its cooperation with the United States on the conflict in South Sudan, countering the Lord’s Resistance Army, and addressing the threat of terrorism. Notably, the report cited agreement by the GOS to fully implement all U.N. Security Council resolutions on North Korea as an example of positive action during the reporting period.
 
This paved the way for termination of most sanctions against Sudan, which had been suspended since January 17, 2017, pursuant to a general license issued in connection with Executive Order 13761 dated January 13, 2017 (EO 13761). As amended by Executive Order 13804 of July 11, 2017 (EO 13804), the sanctions were set to be terminated effective October 12, 2017, provided that the Department of State had issued a favorable report. This condition has now been satisfied and the requirement for ongoing annual reporting contained in EO 13761 was previously removed by EO 13804.
 
However, it is important to note that not all sanctions against Sudan will be removed.
 
The sanctions that will be removed are the sanctions provided for in sections 1 and 2 of Executive Order 13067 of November 3, 1997 (EO 13067), and Executive Order 13412 of October 13, 2006 (blocking property of the GOS and prohibiting transactions with Sudan, respectively). The Sudan Sanctions Regulations (SSR), which implemented these executive orders and prohibited U.S. persons from engaging in most transactions with Sudan, also will terminate.
 
However, certain sanctions related to Sudan’s ongoing designation as a State Sponsor of Terrorism (SST) will remain in place, although general licenses issued by the Office of Foreign Assets Control (OFAC) will authorize most transactions that would otherwise be prohibited as a result of the SST designation, including exports and reexports to Sudan of agricultural commodities, medicines and medical devices, and financial transactions related to the GOS’s funding of Sudanese nationals enrolled in U.S. accredited educational institutions. Compliance with the terms of these general licenses will continue to be required for affected persons.
 
Executive Order 13400 (authorizing blocking of persons who threaten the peace process in Darfur) and Executive Order 13664 (authorizing blocking of persons who threaten peace, security, or stability in South Sudan), related regulations, and other OFAC programs under which Sudanese persons have been blocked, will remain in force and the national emergency with respect to Sudan declared in EO 13067 will not be terminated. In addition, export and reexport restrictions under the Export Administration Regulations (EAR) may apply and Sudan will remain subject to the U.S. arms embargo, with the International Traffic in Arms Regulations (ITAR) continuing to require a policy of denial except in the case of license applications involving United Nations operations or protection of humanitarian and human rights monitoring personnel.
 
As a result, U.S. persons must continue to exercise due diligence in connection with transactions with Sudan, notwithstanding the lifting of most sanctions.
 
In addition, guidance issued by OFAC emphasizes that neither suspension of sanctions under the January 17, 2017 general license, nor revocation of the sanctions on October 12, 2017, will impact past, present, or future enforcement investigations or actions related to violations of the SSR that predated January 17, 2017, or October 12, 2017, respectively. As stated by OFAC, “apparent sanctions violations are analyzed in light of the laws and regulations that were in place at the time of the underlying activities, and civil and criminal enforcement authorities are applied accordingly.” Thus, while recordkeeping provisions of previously issued general licenses will no longer apply after October 12, 2017, persons who conducted transactions with Sudan under these general licenses should maintain records that will allow them to demonstrate compliance with the terms of the licenses should an investigation of past conduct be initiated in the future.
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COMM_a211. C. Knipfer: “It’s Time to Reevaluate Export Controls on Commercial Spacecraft”

(Source: Fair Observer, 10 Oct 2017.)
 
* Author: Cody Knipfer, Technology and Cybersecurity Fellow, Young Professionals in Foreign Policy, contact here.
 
As America’s commercial space sector blossoms, opportunities abound for private industry to secure a controlling lead in the growing and globalizing space market. However, the US government, wary of the “dual-use” civil-military nature of space systems, restricts the export of many space technologies through tightly-controlled export lists. As the commercialization of outer space continues, the way the government perceives and controls space technology will need to shift.
 
With advanced space systems becoming more common in the commercial and international arenas, a reevaluation of space technology export controls is increasingly warranted. These lists should be gradually reformed to lift the constraints on export and overseas use of emerging systems such as commercial crewed spacecraft – with incorporation of careful exceptions that maintain governance over the proliferation of overtly weapon-related technologies.
 
Stringent export controls is a major point of contention for America’s commercial space sector. Restrictions on the sale and export of space technology enables emerging foreign competitors to develop, sell and capture a significant share of the space system market without American competition. The United States’ industrial competitiveness is weakened as a result, with only marginal national security or foreign policy benefit gained. The government has recognized this before; for example, it gradually loosened control over the export of satellite technologies after years of petition by the industry, though discussions and concerns remain.
 
CREWED SPACECRAFT
 
This issue will soon arise from an important emerging commercial space capability: crewed spacecraft that can transport humans in space. Several companies, such as SpaceX and Virgin Galactic, are steadily working toward putting these vehicles in service in the near future with business models that anticipate access to the international market. While crewed commercial spacecraft are still in the development stage, portions of the US export control regime already on the books will make it prohibitively difficult for companies to sell them or offer their services abroad, effectively limiting these vehicles to the domestic market in America.
 
The US is a party to the voluntary Missile Technology Control Regime (MTCR), which seeks to prevent the proliferation of technologies capable of delivering weapons of mass destruction. To adhere to this regime, the US International Traffic in Arms Regulations (ITAR) – a strict export control regime with a strong “presumption of denial” against applications to sell restricted technology – includes performance-based controls on propulsion technologies like rocket engines.
 
The MTCR and ITAR restrict exports on systems that can send a payload of at least 1,000lb to a distance of at least 186 miles, which includes ballistic missiles and space launch vehicles. However, with similar propulsion capabilities used for maneuvering in space, crewed commercial spacecraft fall within these parameters – even though they are not weapon delivery platforms. While the MTCR has helped make the world safer, American manufacturers of these crewed spacecraft can make a credible case that ITAR restrictions will block them from exporting benign systems to many nations, even those friendly to the US.
 
Legitimate questions exist about a crewed spacecraft’s military potential, as they could conceivably be used to tamper with other satellites in orbit. Yet this is a concern inherent with all spacecraft. As can be expected, export regulators see emerging high technologies, especially in a unique and important domain such as space, through the prism of national security and threat. However, the current export control system relies on Cold War-era protection methods and assumes an economic environment based on that previous era.
 
Facing the reality of the new economic environment for space systems, strict export prohibitions that allows foreign manufacturers, who may not share America’s security concerns or values, to dominate is detrimental to both US economic power and national security. Instead, responsibly controlling and monitoring the foreign sale and operation of emerging commercial capabilities such as crewed spacecraft would enable the US to establish and set the norms of their use.
 
There are ways to do this. Regulators should engage in close dialogue with industry and their potential clients about the capabilities of these vehicles and their intended use, laying out strict expectations if exports are to be permitted. The MTCR can be reinterpreted to allow exceptions on in-space use of certain propulsion capabilities for particular crewed vehicles, while still banning the export of more overtly weapon-related, non-crewed rockets. And, as occurs with many weapons systems, permits and exceptions could be made for export to users in friendly countries that have demonstrated adherence to standards of safe conduct in space.
 
Dialogue and consideration need to start now. With these vehicles already in development, constraining export control restrictions threaten to throttle the space sector’s economic potential in the short term. And with foreign space industries developing, it is only a matter of time before they begin to market their own crewed spacecraft capabilities. It would be in nobody’s interest for American regulators and industry to once again find themselves in contention while commercial crews fly overhead on foreign-built spacecraft.

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COMM_a312. W.H. Segall, J.C. Poling & M.J. Schwartz: “Implementing CAATSA – OFAC Issues Amended Russian-Related Sectoral Sanctions Under Directives 1 and 2”

(Source: Akin Gump Strauss Hauer & Feld LLP, 4 Oct 2017.)
 
* Authors: Wynn H. Segall, Esq., wsegall@akingump.com, 202-887-4573; Jonathan C. Poling, Esq., jpoling@akingump.com,
202-887-4029; and Melissa J. Schwartz, Esq., mjschwartz@akingump.com, 202-887-4539. All of Akin Gump Strauss Hauer & Feld LLP.
 
KEY POINTS:
  – On September 29, 2017, OFAC modified Directives 1 and 2 of Executive Order 13662 to reduce the permissible maturity for new debt issued by Russian financial and energy entities designated under these directives, as well as entities owned, directly or indirectly, by 50 percent or more by such entities, either individually or in the aggregate. These modifications become effective on November 28, 2017.
  – To ensure compliance with these changes to U.S. sectoral sanctions relating to new debt, which were required by the Countering America’s Through Adversaries Act (CAATSA), U.S. persons must remain vigilant in reviewing pre-existing financial arrangements and proposed new transactions to ensure that they do not involve new debt issued by designated entities and entities owned 50 percent or more by such entities that have a maturity exceeding 14 days for entities subject to Directive 1 or 60 days for entities subject to Directive 2.
  – Despite a statutory deadline of October 1, 2017, as of the date of this writing, October 4, 2017, the President has not issued regulations or other guidance or designations of “persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation” that are to be subject to mandatory sanctions pursuant to Section 231 of CAATSA. This inaction has not gone unnoticed by certain members of Congress who have advocated for robust enforcement of CAATSA.
 
On September 29, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued amended directives shortening the permissible maturity windows of new debt issued by designated financial and energy companies under Ukraine-/Russia-related Directives 1 and 2 of Executive Order 13662 (“Amended Directives”), pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA). [FN/1]
The Amended Directives become effective on November 28, 2017.
 
Under Directive 1 and Directive 2 restrictions that are currently in effect, U.S. persons are respectively prohibited from dealing in new debt of (1) longer than 30 days’ maturity issued by certain sanctioned entities in the financial services sector and (2) longer than 90 days’ maturity issued by certain sanctioned entities in the energy sector. As amended by CAATSA, the permitted maturities of new debt were further reduced. As a result, U.S. persons must be diligent to ensure that they do not engage in transactions involving new debt (e.g., bonds, loans, extensions of credit, loan guarantees, extended payment terms) issued on or after November 28, 2017, with a maturity exceeding 14 days if issued by entities subject to Directive 1 or 60 days if issued by entities subject to Directive 2. Under the so-called “50 Percent Rule,” these restrictions apply to designated entities, as well as entities owned, directly or indirectly, by 50 percent or more by those designated entities, either individually or in the aggregate.
In updated FAQs released in conjunction with the amendments, OFAC provided helpful tables to clarify the requirements and maturity limitations applicable to new debt, depending on the date the debt is issued:
 
Amended Directive 1
Date on which the debt was issued
Applicable tenor of prohibited debt
On or after July 16, 2014, and before September 12, 2014
Longer than 90 days’ maturity
On or after September 12, 2014, and before November 28, 2017
Longer than 30 days’ maturity
On or after November 28, 2017
Longer than 14 days’ maturity
 
Amended Directive 2
Date on which the debt was issued
Applicable tenor of prohibited debt
On or after July 16, 2014, and before November 28, 2017
Longer than 90 days’ maturity
On or after November 28, 2017
Longer than 60 days’ maturity
 
Six major Russian banks are currently designated under Directive 1 (Bank of Moscow, Gazprombank, Russian Agricultural Bank, Sberbank, VEB and VTB Bank), and four major Russian energy companies are currently designated under Directive 2 (Novatek, Rosneft, Gazprom Neft and Transneft). Moreover, as a result of the so-called “50 Percent Rule,” each directive also applies to each entity that is directly or indirectly owned by 50 percent or more by entities subject to these directives (either individually or in the aggregate), leading to an important diligence compliance requirement to ascertain the ownership of potential counterparties. To assist with compliance, over the past several years, OFAC has designated a significant number of additional companies that meet this requirement of the “50 Percent Rule” and consequently are also subject to Directive 1 or 2.
 
CAATSA CYBERSECURITY PROVISIONS COME INTO EFFECT
 
October 1, 2017 also marked the effective date of certain cybersecurity sanctions provisions in Section 224 of CAATSA. This measure requires the U.S. President to impose sanctions on any party that he determines “knowingly engages in significant activities undermining cybersecurity against any person, including a democratic institution, or government on behalf of the Government of the Russian Federation,” and agents of such persons. Section 224 also requires the President to impose sanctions on “any person that [he] determines knowingly materially assists, sponsors, or provides financial, material, or technological support for, or goods or services” in support of such activities, and the provisions also target “any person that the President determines knowingly provides financial services” in support of such activities.
 
As of the date of this writing, October 4, 2017, sanctions have not been imposed on any person pursuant to this section. On September 29, 2017, President Trump delegated much of his authority to designate persons under Section 224 to the Secretary of Treasury and the Secretary of State who, to date, also have not imposed sanctions pursuant to this section.
 
OTHER REQUIRED CAATSA SANCTIONS MODIFICATIONS STILL PENDING IMPLEMENTATION
 
A number of other significant changes to U.S. sanctions affecting Russia required by CAATSA have not yet been implemented, including the following:
 
Section 223 of CAATSA requires the Secretary of the Treasury to modify Directive 4 of Executive Order 13662 by October 31, 2017, with effect by January 29, 2018, to prohibit U.S. persons from providing, exporting or re-exporting goods, services (except for financial services) or technology in support of exploration or production for new deepwater, Arctic offshore or shale projects located anywhere in the world (versus current restrictions on only such projects within Russia) that (i) have the potential to produce oil and (ii) involve a person subject to Directive 4, which “has a controlling interest or a substantial non-controlling ownership interest in such a project” of 33 percent or more.
 
Despite a statutory deadline of October 1, 2017, as of the date of this writing, October 4, 2017, the President has not issued regulations or other guidance or designations of “persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation” that are to be subject to mandatory sanctions pursuant to Section 231 of CAATSA. The new law includes provisions for the imposition of U.S. punitive measures against parties that engage in “significant transactions” with such listed entities. The President has delegated authority to designate such entities to the Secretary of State (in consultation with the Secretary of the Treasury) under a presidential memorandum, but,, to date, the Secretary has not imposed sanctions pursuant to this section.
 
As recently as September 28, 2017, as critical deadlines were approaching, Sens. John McCain and Benjamin Cardin wrote to President Trump emphasizing “how critical it is that the U.S. Government robustly enforce [CAATSA].” Their letter focused on the following areas as top priorities: (1) defense and intelligence sectoral sanctions (mentioning a number of Russian companies by name and noting the October 1 deadline); (2) mandatory energy sanctions for arctic, deepwater and shale projects; and (3) the need for coordination with Europe for “a strong sanctions regime against the Russian Federation.”
 
In the weeks ahead, OFAC and other U.S. federal agencies are slated to issue additional new regulations, directives, guidance and/or designations to implement these additional provisions of CAATSA. Companies doing business with entities in these sectors or in these types of projects should consider and anticipate these further changes in U.S. sanctions, and monitor related developments, as well as broader developments in U.S.-Russia relations that could further affect U.S. and international sanctions regarding Russia.
 
————–

[FN/1] The Russia sanctions provisions were included in the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA), which was passed as Title II of CAATSA. See previous in-depth Akin Gump analysis of CAATSA 
here.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a113. ECS Presents “Establishing an Export Compliance Program” on October 17-18 in Charleston, SC

(Source: Suzanne Palmer, spalmer@exportcompliancesolutions.com)
 
* What: ECS Presents ITAR/EAR Critical Compliance & Agreement Workshop
* When: October 17-18, 2017
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel: Suzanne Palmer, Lisa Bencivenga
* Register Here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com

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TE_a214. Global Trade Controls Conference on 6-8 Nov in London

(Source: KNect365 Maritime)
 
* What: Join an international roster of export compliance professionals, as well as over forty expert speakers, to discuss the implications of Brexit, the modernisation of EU export policy, sanctions under the Trump administration, considerations for exporters in Asia, technology transfers in the cloud, and much more.
   Exchange ideas with your peers in a range of interactive sessions including close knit round-table discussions, networking lunches, and practical case studies on recent developments including ZTE and Epsilon Electronics. On the first day of the conference is the Export Licensing & Trade Controls Seminar, which will provide a comprehensive introduction to trade controls and the process of export licensing.
   As a reader of the Daily Bugle, you’re entitled to a 20% discount off the standard booking price. Quote VIP code FKT3345DAYBUG to claim your discount!
* Where: The Halam Conference Centre, London
* When: 6th – 8th November 2017
* Speakers:
  – Lilian Norwood, IBM
  – Morten Elbjoern Larsen, Danish Business Authority
  – Denis Redonnet, European Commission
  – Ian Stewart, Project Alpha,
  – Laurence Carey, Marshall Aerospace and Defence Group
  – Aleksi Pursiainen, Solid Plan Consulting
  – Katja Stockburger, ZF Friedrichshafen AG
  – Ian Lambert, Thomson Reuters
* Register: Here.
* Find Out More: Here.
* Questions: If you have any queries you can contact the Global Trade Controls team at maritime@knect365.com or on +44(0)20 7017 5511

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ENEDITOR’S NOTES

(Source: Editor)
 

* Fridtjof Nansen (10 Oct 1861 – 13 May 1930; was a Norwegian explorer, scientist, diplomat, humanitarian and Nobel Peace Prize laureate. He led the team that made the first crossing of the Greenland interior in 1888, traversing the island on cross-country skis. He won international fame after reaching a record northern latitude during his North Pole expedition of 1893-96.)
  – “Never stop because you are afraid – you are never so likely to be wrong.”
  – “I demolish my bridges behind me – then there is no choice but forward.”
 
* Giuseppe Verdi (Giuseppe Fortunino Francesco Verdi; 9 or 10 Oct 1813 – 27 Jan 1901; considered one of the greatest Italian opera composer.  Among his 37 complete operas were Rigoletto, Il trovatore, La traviata, Macbeth, Aida, Otello, and Falstaff.)
  – “You may have the universe if I may have Italy.”

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EN_a216
. 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 Sep 2017: 82 FR 45366-45408: Changes to the In-Bond Process [Effective Date: 27 Nov 2017.]
 
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: 3 Oct 2017: 82 FR 4 5959-45962: Updated Statements of Legal Authority for the Export Administration Regulations 

  
*
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:
20 Sep 2017:
 
82 FR 43842-43844
: Foreign Trade Regulations (FTR): Clarification on Filing Requirements; Correction
 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (20 Sep 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: 30 Aug 2017: 82 FR 41172-41173: Temporary Modification of Category XI of the United States Munitions List
  – The only available fully updated copy (latest edition: 12 Sep 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_a317
. 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 cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

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