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17-1018 Wednesday “Daily Bugle”

17-1018 Wednesday “Daily Bugle”

Wednesday, 18 October 2017

TOP
The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. Commerce/BIS: ISTAC to Meet on 1-2 Nov in Wash DC  
  2. DHS/CBP Posts Quarterly IRS Interest Rates Related to Customs Duties, No Changes 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. Commerce/Census: “Guidance on Exports for Humanitarian Relief to Hurricane-Affected Areas”
  4. DHS/CBP Announces ACE CERTIFICATION Outage Tonight Between 5-8 PM
  5. DHS/CBP Posts Updated ACE Export Manifest Implementation Guides
  6. State/DDTC Posts Name Change for L-3 Micreo
  7. Hong Kong TID Posts List of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates
  1. Defense News: “DSCA Head Looking at Creating Security Cooperation University, among Other Ideas”
  1. D. Jacobson, G. Kelley and M. Burton: “Impact of President Trump’s Iran Policy Announcement: No Changes for Now, but the Future of the JCPOA Remains Uncertain”
  2. K.C. Georgi, R.K. Alberda & L. Hardaway: “So Long Sudan Sanctions: The Final Wrap”
  3. M. Volkov: “ISO 37001: The Good, The Bad and the Ugly (Part II of V)”
  4. Gary Stanley’s ECR Tip of the Day
  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_a1

1. Commerce/BIS: ISTAC to Meet on 1-2 Nov in Wash DC

(Source: Federal Register) [Excerpts.]
 
82 FR 48482: Information Systems; Technical Advisory Committee; Notice of Partially Closed Meeting
  The Information Systems Technical Advisory Committee (ISTAC) will meet on November 1 and 2, 2017, 9:00 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to information systems equipment and technology.
 
Wednesday, November 1
 
Open Session:
  (1) Welcome and Introductions
  (2) Working Group Reports
  (3) Old Business
  (4) Industry Presentations: Quantum Computing
  (5) New business
 
Thursday, November 2
 
Closed Session:
  (6) Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 Sec. Sec. 10(a)(1) and 10(a)(3).
 
  The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov, no later than October 25, 2017. …
  For more information, call Yvette Springer at (202)482-2813.
 
Yvette Springer, Committee Liaison Officer.

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EXIM_a2

2. DHS/CBP Posts Quarterly IRS Interest Rates Related to Customs Duties, No Changes

(Source: Federal Register) [Excerpts.]
 
82 FR 48523-48525: Quarterly IRS Interest Rates Used in Calculating Interest on Overdue Accounts and Refunds on Customs Duties
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security.
* ACTION: General notice.
* SUMMARY: This notice advises the public that the quarterly Internal Revenue Service interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties will remain the same from the previous quarter. For the calendar quarter beginning October 1, 2017, the interest rates for overpayments will be 3 percent for corporations and 4 percent for non-corporations, and the interest rate for underpayments will be 4 percent for both corporations and non-corporations. This notice is published for the convenience of the importing public and U.S. Customs and Border Protection personnel.
* DATES: The rates in this notice are applicable from October 1, 2017, through December 31, 2017.
* FOR FURTHER INFORMATION CONTACT: Shandy Plicka, Revenue Division, Collection and Refunds Branch, 6650 Telecom Drive, Suite #100, Indianapolis, Indiana 46278; telephone (317) 298-1717.
* SUPPLEMENTARY INFORMATION: …
   In Revenue Ruling 2017-18, the IRS determined the rates of interest for the calendar quarter beginning October 1, 2017, and ending on December 31, 2017. The interest rate paid to the Treasury for underpayments will be the Federal short-term rate (1%) plus three percentage points (3%) for a total of four percent (4%) for both corporations and non-corporations. For corporate overpayments, the rate is the Federal short-term rate (1%) plus two percentage points (2%) for a total of three percent (3%). For overpayments made by non-corporations, the rate is the Federal short-term rate (1%) plus three percentage points (3%) for a total of four percent (4%). These interest rates are subject to change for the calendar quarter beginning January 1, 2018, and ending March 31, 2017.
   For the convenience of the importing public and U.S. Customs and Border Protection personnel the following list of IRS interest rates used, covering the period from July of 1974 to date, to calculate interest on overdue accounts and refunds of customs duties, is published in summary format. …
 
   Dated: October 5, 2017.
Sean M. Mildrew, Acting Chief Financial Officer, Office of Finance.

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OGSOTHER GOVERNMENT SOURCES

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

[No items of interest noted today.]  

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The following guidelines apply per Title 15, Part 30, Foreign Trade Regulations (FTR) when exporting goods for humanitarian relief to hurricane-affected areas.
 
Questions regarding filing requirements for shipments to hurricane-affected areas can be answered by the U.S. Census Bureau’s International Trade Management Call Center at 1-800-549-0595; select option 1 for Automated Export System inquiries, option 2 for commodity classification inquiries, or option 3 for trade regulation questions. For further guidance, please view the Census Bureau’s Export Training Videos here.
 
Shipments donated for relief or charity that are valued over $2,500 per the designated Schedule B numbers listed below or shipments requiring a license must be filed in the Automated Export System (AES). Shipments of donated food, medicine and clothing do not require a license. Shipments less than $2,500 are exempt from filing and the low value exemption, No Electronic Export Information (NOEEI) 30.37(a), will be used. The four Schedule B numbers filers use for these shipments are found in Chapter 98 of Schedule B: Statistical Classification of Domestic and Foreign Commodities Exported from the United States are as follows:
 
Schedule B Numbers
  – 9802.10.0000: Commingled food products, donated for relief or charity by individuals or private agencies.
  – 9802.20.0000: Medicinal and pharmaceutical products donated for relief or charity by individuals or private agencies.
  – 9802.30.0000: All wearing apparel (including footwear and headwear) donated for relief or charity by individuals or private agencies, and used wearing apparel donated for relief or charity by government agencies.
  – 9802.40.0000: Articles donated for relief or charity by individuals or private agencies, not elsewhere specified or included.
 
Export Information Code
The code to identify the type of export shipment or condition of the donated goods is CH- Shipments of goods donated for charity.
 
Determining the Value
Since the goods are not being sold, the value to be reported in the AES is the market value for the goods. If the customer is unsure of the value, considerations should be given to cost if sold. This can be an estimated value. The value should closely align with what is being exported to avoid delays in shipping. Please see section 30.6(a)(17) of the FTR regarding regulatory requirements for determining value.
 
Determining the U.S. Principal Party in Interest (USPPI)
The USPPI is the person or legal entity in the United States that receives the primary benefit, monetary or otherwise, from the export transaction. The USPPI is responsible for filing or authorizing an agent to file the shipment information in the AES. Organizations such as Red Cross, churches, etc., requesting donation of goods for export to hurricane-affected areas are considered the USPPI for AES filing purposes. Individuals directly exporting goods for humanitarian relief can also be the USPPI and are responsible for the AES filing.
 
Obtaining an Employer Identification Number (EIN) to register and file in AES
In order to file or authorize the filing of an AES record an EIN must be obtained from the Internal Revenue Service for identification purposes. (See Federal Register Notice, Volume 74, Number 149, published Wednesday, August 5, 2009, pp. 38914.) A Social Security Number (SSN) cannot be used in the AES as an identification number. Therefore, if the exporter has an SSN he/she must obtain an EIN prior to registering and/or filing to the AES. However, if a foreign entity is in the United States when the items are purchased or obtained for export, and does not have an EIN, it shall report a Dun & Bradstreet number, border crossing number, passport number or any other number assigned by the U.S. Customs and Border Protection. For instructions on how to obtain an EIN, see here. The approximate timeframes for receiving an EIN are as follows:
 
 
Method
How
Process Timeframe
Online
Go to <www.irs.gov>, under “Online Services,” click on “Apply for an Employer Identification Number (EIN) Online”
Approximately 15 minutes
Toll-free call
800-829-4933
Approximately 15 minutes
Apply by FAX
859-669-5760
4 business days
Apply by mail
Internal Revenue Service Attn: EIN Operation Cincinnati, OH 45999 (Need Form SS-4)
4 weeks
 
How to access Automated Commercial Environment (ACE) AESDirect and submit the Electronic Export Information
 
  (1) Register for an ACE account.
Register for an ACE account with your EIN here. For additional guidance, please review How to Apply for An ACE Exporter Account.
 
  (2) Obtain username and password.
You will receive an email to obtain your account’s username and password. Please note that the Shared Secret Value is the Account ID.
 
  (3) Disable your pop-up blocker before accessing ACE AESDirect.
For additional guidance on how to disable your pop-up blocker, please verify your web browser’s Help section.
 
  (4) Access the ACE AESDirect portal.
After obtaining your username and password, please log in to ACE here. Click on the Accounts tab. Change the View to Exporter and click GO. Under Select Task, click on “Submit AESDirect Filings.” Read through and agree to the Certification Statements to access ACE AESDirect.
 
  (5) Download the ACE AESDirect User Guide and sample shipment.
The ACE AESDirect User Guide provides all the information necessary to get acquainted with the system. Also available is the sample shipment document, a screen-by-screen depiction of a mock shipment reported through the ACE AESDirect system. You can obtain additional reference resources, including walkthrough videos here.

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(Source:
CSMS #17-000657, 17 Oct 2017.)
 
There will be an ACE CERTIFICATION Outage Wednesday evening, October 18, 2017 from 1700 ET to 2000 ET.
 
Infrastructure maintenance activities and the following ACE Deployment will take place during this time:
 
ACE Import Manifest
 
  – CAOM-13155, Ticket# 9019696: CATAIR QP Short: fixed inability to arrive a 62 (T&E) inbond, where it had first been added as a 63 (IE) inbond, deleted, then re-added as a 62 inbond. Arrival of the 62 inbond kept rejecting with an ‘Invalid Destination Port’ error.
  – CAOM-13153: MEDPID Create/Update Driver EDI message validation to prevent a driver Invalid Date of Birth (future date or more than 100 years old).

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OGS_a57. DHS/CBP Posts Updated ACE Export Manifest Implementation Guides

(Source: CSMS #17-000659, 18 Oct 2017.)
 
U.S. Customs and Border Protection (CBP) has updated ACE Export Manifest Implementation Guides (IGs) posted on CBP.gov. Information regarding the updated document can be found below:

  – Rail Manifest X12 – 309 Customs Manifest Implementation Guide

The changes for the updated IG are listed in the Rail Manifest Summary of Changes document referenced here.

  – Rail Manifest Summary of Changes

To review the updated ACE Export Manifest IGs, please visit the “ACE Export Manifest Implementation Guides” page on CBP.gov/ACE. You may also click on the hyperlinks above.

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OGS_a68
. State/DDTC Posts Name Change for L-3 Micreo

(Source: State/DDTC)
 
Effective immediately, L-3 Micreo will change as follows: L3 Micreo Pty Limited. Due to the volume of authorizations requiring amendments to reflect this change, the Deputy Assistant Secretary for Defense Trade Controls is exercising the authority under 22 CFR 126.3 to waive the requirement for amendments to change currently approved license authorizations. The amendment waiver does not apply to approved or pending agreements.

 

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OGS_a79
. Hong Kong TID Posts List of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates

(Source: Hong Kong TID)
 
The list provides an overview of specimen signatures of officers in Trade and Industry Department who are authorized to sign on and issue Delivery Verification Certificates and import and export licenses covering strategic commodities under the Import and Export Ordinance.

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NWSNEWS

NWS_a1
10. Defense News: “DSCA Head Looking at Creating Security Cooperation University, among Other Ideas”

(Source: Defense News, 18 Oct 2017.)
 
The new head of the Defense Security Cooperation Agency is seriously considering the creation of a security cooperation university, as he looks for ways to speed the famously deliberate foreign military sales system.
 
Lt. Gen. Charles Hooper, who took over DSCA in August, is intrigued by expanding the current education options for those in the security cooperation world into “a genuine university, a security cooperation university if you will.”
 
Hooper said he has been studying how the Defense Acquisition University was stood up and how it has evolved as a potential model for this new venture, which he described as a place that would “not only provide courses for people going to the field, but a genuine font of learning and knowledge, specifically focused on security cooperation. And we’ve already taken steps in that direction.”
 
The issue was raised at the annual AUSA conference Oct. 10, where Hooper appeared as part of a broader panel on building allied capabilities and was asked about his near-term areas of focus.
 
One major one is education of the workforce, something that Hooper’s predecessor, Vice Adm. Joseph Rixey had also made a priority. That is easier said than done, however, with Hooper noting that his office could not provide an actual number of how many people work in the career field.
 
  “We just didn’t know. So the first step that we’ve taken is, to go out and conduct what we call a ‘data call,’ to identify the population of people who are actually working in security cooperation, so that we can start to determine how many people we have, where they are, how we would craft a career field in order to move forward and create that cadre of security cooperation professionals,” he said.
 
His other near-term priority involves ensuring greater dialogue between DSCA and the service components, in order to align priorities with the services and combatant commands. As a result, Hooper’s office is now hosting monthly meetings with stakeholders in order to make sure “we’re all on the same page and we all have the same information.”
 
Both those changes will likely be welcome to industry and allied nations, both of which routinely complain that the American system for foreign weapon sales moves too slowly. Speaking to reporters after the panel, Hooper articulated what he sees as the five big-picture challenges that could be done differently in order to speed the process up.
 
The first is working early with partners on defining requirements before a request is submitted, something those familiar with the FMS process often highlight as a key early issue. After all, if a country is going to be disallowed from purchasing a piece of equipment, there is no point in letting them ask for it and then starting that process. In addition, countries often do not know what piece of American gear would be best for a specific mission set.
 
Second is looking at what Hooper called “non-standard, non-programs of record requests, special requests,” with the DSCA head pointing out that the various equipment in the U.S. inventory are easier to clear more quickly. The third issue is the question of technology transfer and the rules over what nations can and cannot have access too. More broadly, the fourth issue is what Hooper called “policy and politics,” which he said he is “continuing to take a look at.”
 
  “Often there are policy dimensions of our security cooperation programs and those are issues that must be taken into consideration as we look to improve the security cooperation processes and reform security cooperation,” Hooper said.
 
The final issue is industrial capacity, or as he put it, “making sure that our industrial partners have sufficient heads up so that they can fulfill whatever requirement are identified by our partners and we can get it to them as quickly as possible.”
 
Overall, Hooper said he is trying to drill down in those five focus areas, with an “eye towards how can we collectively address those to make our efforts more efficient, more effective, and more agile and responsive.”

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COMMCOMMENTARY

COMM_a01
11. D. Jacobson, G. Kelley and M. Burton: “Impact of President Trump’s Iran Policy Announcement: No Changes for Now, but the Future of the JCPOA Remains Uncertain”

(Source:
International Trade Law News
, 17 Oct 2017.)
 
* Authors: Douglas N. Jacobson, Esq.,
djacobson@jacobsonburton.com
, 202-431-2407; Glen N. Kelley, Esq.,
gkelley@jacobsonburton.com
, 212-658-0601; and Michael L. Burton, Esq.,
mburton@jacobsonburton.com
, 202-957-8009. All of Jacobson Burton Kelley PLLC.
 
On October 13, 2017 President Trump announced the long-awaited results of his Administration’s Iran policy review. The key aspect of the announcement was that President Trump will not renew certification of Iranian compliance with the Joint Comprehensive Plan of Action (“JCPOA”) as required by the Iran Nuclear Agreement Review Act of 2015 (“INARA”), a law passed by the US Congress to provide oversight of the JCPOA. President Trump stated that his decision was made because Iran “has committed multiple violations of the JCPOA” and “has not lived up to the spirit of the agreement.” 

President Trump also stated that he will “terminate” US participation in the JCPOA unless the parties to the JCPOA agree to make various changes to the JCPOA and that he will request the US Congress to modify INARA to reflect the Administration’s concerns. Following President Trump’s announcement, OFAC designated the Iranian Revolutionary Guard Corps (“IRGC”) as a Specially Designated Global Terrorist (SDGT) as required by Congress in a law passed in August 2017. While there has been much discussion on the designation of the IRGC as a SDGT, in practice the designation was purely symbolic as the IRGC has been listed on OFAC’s Specially Designated National List since 2007 under various Executive Orders.  

Though significant, these announcements do not trigger any changes in the status of the JCPOA or to existing US sanctions. 

Following the President’s announcement, Secretary of State Rex Tillerson indicated that staying in the JCPOA “was in the best interests of the US.” In addition, Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said yesterday that it “is important not to confuse the internal US legal process of certification under INARA with our continued implementation of the JCPOA.”

President Trump’s decision not to certify Iran’s compliance with the JCPOA under Inara now shifts the burden to the US Congress, which could in the coming months reimpose some or all of the secondary sanctions on Iran that were waived on January 16, 2016 when the JCPOA was implemented. In addition, President Trump could in the future refuse to waive the secondary sanctions on Iran that remain suspended and could direct OFAC to terminate OFAC General License H. 

While the US position on Iran should become clearer in the coming months, President Trump’s continued criticism of the JCPOA increases the uncertainty regarding (1) the future of US sanctions relief that was a key part of the nuclear agreement with Iran, and (2) whether non-US companies will continue to be able to conduct business with Iran without fear or being subject to US sanctions. 

Increased Risk of US Withdrawal from JCPOA and “Snap-Back” of US Sanctions on Iran  
It is important to recall that the US has suspended only a small portion of its Iran sanctions for US companies (relating to commercial aircraft), and “US persons” remain prohibited from nearly all transactions involving Iran or its government. 

Nearly all of the suspended US sanctions were “secondary” sanctions primarily directed at non-US companies and individuals. The recent events increase the risk of reimposition or “snap-back” of US sanctions, which could be done in one of the following ways:

  (1) Reimposition of Sanctions Within Next 60 Days – Once the President fails to certify Iran’s compliance with the JCPOA, Congress can pass “qualifying legislation” under INARA in 60 days choosing to reimpose all or some of the Iranian sanctions that have been suspended. However, there does not appear to be significant interest by Congress to proceed in this direction at this time and it is not likely that the necessary votes can be obtained to proceed under this route. 

  (2) Contingent Future Sanctions – Another scenario that is being contemplated by congressional leadership (the Corker-Cotton proposal) is to amend INARA to automatically reimpose US sanctions on Iran’s nuclear program in the future if Iran crosses key thresholds. Among the thresholds being considered is if weapons-grade nuclear material accumulates to the point where there is less than a one-year “breakout” period for obtaining a nuclear weapon. 

  (3) Failure to Waive Suspended Sanctions – Under the JCPOA the President must waive the various sanctions that were suspended. Depending on the underlying law, these waivers must be renewed every 120 days to every six months. It is possible that the Trump Administration could simply choose not to renew one or more of the waivers, which would automatically reimpose the US sanctions. The next waiver deadline is in mid-January 2018. Such action would not require congressional approval and would effectively snap-back sanctions on Iran. 

  (4) Unilateral Withdrawal from JCPOA – The JCPOA does not specifically authorize any party to the agreement to “withdraw.” However, the US could choose to cease implementing its commitments under the agreement, which would effectively lead to US abrogation of the JCPOA. 

Next Steps and Practical Impact 
Because the JCPOA is a multilateral arrangement, a decision by the US to withdraw from the agreement or to reimpose sanctions would have significant ramifications. Iran has threatened to stop complying with its commitments to curtail its nuclear program if the US reimposes sanctions. The costs of Iran’s reinitiating its nuclear program, however, could undercut the sanctions relief it has received from trading partners other than the US. The EU has made clear that if the suspended US sanctions are reimposed, the EU intends to continue to abide by the terms of the JCPOA so long as Iran does. If US sanctions are reimposed, the EU member states would likely support their companies in their Iranian activity and would strongly oppose any US government move to penalize them under reimposed sanctions. There is also the possibility that the EU would expand its sanctions blocking legislation (sometimes referred to in the EU as antiboycott laws) to cover US secondary sanctions on Iran. If Iran stopped complying with the JCPOA, the EU member states would likely withdraw their support for their companies’ activities in Iran, and might even move to the dispute resolution procedures of the JCPOA or a UN Security Council review, which could lead to the reimposition of EU sanctions. 

While we are currently in uncharted waters and are dealing with an unpredictable US Administration, the following is a summary of the possible changes to impact on the JCPOA and US sanctions:

  (1) Incremental non-nuclear additional sanctions are likely, but the reimposition of the suspended US secondary sanctions or other major changes in the near future seem unlikely at this time. It is important to recall that there have been no immediate changes to US sanctions on Iran.

  (2) The Trump Administration could terminate US participation in the JCPOA and reimpose sanctions in the future, if insufficient progress is made with the parties to the JCPOA to address certain concerns relating to Iran. There are early indications that EU leaders might try to find a way to provide these additional assurances from Iran regarding their activities of concern. 

  (3) The US could reimpose the suspended secondary (extraterritorial) sanctions. While appearing dramatic, this may not have much practical impact on many non-US companies. Moreover, if discreet secondary (extraterritorial) sanctions are “snapped-back”, it seems likely the EU and its member states would defend EU-based companies from the adverse economic consequences of a reimposition of sanctions.  

  (4) If US sanctions are reimposed, there is reason to believe that Iran, after protesting, would continue to abide by its JCPOA commitments, particularly if it remains clear that the EU and other countries involved in the JCPOA intend to continue to abide by its terms and authorize business with Iran. Of course it is possible that Iran would follow through on its threat to pull out, and this likely would have a more dramatic practical impact.

Whatever the outcome, the OFAC policy that authorizes the export of US-origin humanitarian products to Iran, including medicine, medical devices, and agricultural products, will remain unchanged, just as it was during the height of US sanctions. However, payments for these transactions remains difficult due to the reluctance of many non-US banks to handle Iran-related payments. 

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COMM_a2
12. K.C. Georgi, R.K. Alberda & L. Hardaway: “So Long Sudan Sanctions: The Final Wrap”

(Source: Arent Fox LLP, 17 Oct 2017.)
 
* Authors: Kay C. Georgi, Esq., kay.georgi@arentfox.com, 202-857-6293; Regan K. Alberda, Esq., regan.alberda@arentfox.com, 202-775-5771; and Lamine Hardaway, Esq., lamine.hardaway@arentfox.com, 202-715-8596. All of Arent Fox LLP.
 
On January 13, 2017, we announced that the Obama Administration had issued a general license allowing most transactions between US persons and the country of Sudan (aka North Sudan), although exports and reexports of items on the Commerce Control List continued to require a license from the Department of Commerce’s Bureau of Industry and Security, unless there was an applicable license exception (of limited availability for Sudan). Although this General License has continued in place since then, the underlying Executive Orders remained in place, thereby allowing a speedy reimposition of sanctions, should the Trump Administration decide to do so. [FN/1] When we last we posted in July, President Trump had just decided to postpone his decision until October 2017.
 
On October 6, 2017, the US Government announced that it will revoke certain sanctions with respect to Sudan, pursuant to Executive Order 13761, as amended by EO 13804, effective October 12, 2017. The State Department report found that the Government of Sudan had sustained the positive developments in its conduct. The announcement and action represent the lifting of the comprehensive embargo on Sudan, although some restrictions and limitations remain.
 
As a result of the prohibitions in sections 1 and 2 of EO 13067 and EO 13412 being revoked, US persons are no longer be subject to the prohibitions of the Sudanese Sanctions Regulations, 31 C.F.R. 538, although this section of the OFAC regulations has not yet been removed from volume 31 of the Code of Federal Regulations. On October 12, OFAC removed a long list of SDNs which were only designated under the [SUDAN] designation.     
 
Despite the broad opening to engage Sudan, US persons and non-US persons are still required, as applicable, to obtain licenses from BIS to export or reexport certain items (i.e., commodities, software, and technology) that appear on the CCL, as well as for transactions involving EAR99 items that do not appear on the CCL, if they will be used for restricted end uses such as certain nuclear, missile/rocket, and chemical and biological weapon end uses, or are for restricted end-users.
 
In addition, US persons taking advantage of the lifting of the Sudanese embargo must bear in mind that the revocation of prohibitions under the SSR and EOs 13067 and 13412 has no impact on other Sudan-related sanctions programs, namely the Darfur Sanctions Regulations, 31 C.F.R. part 546 and South Sudan Sanctions Regulations, 31 C.F.R. 558.
 
Moreover, numerous Sudanese entities and individuals remain blocked under EOs not impacted by the revoked embargo. Although US persons are no longer prohibited from engaging in transactions with persons on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List, which appear with the [SUDAN] tag – indicating a Government of Sudan designation – which were removed on October 12, 2017 from the SDN list, it is important to note that transactions with SDNs designated for other reasons, including terrorism and Darfur-related sanctions, remain prohibited.  
 
General License A: Agricultural Commodities, Medicine & Medical Devices

The export and reexport of agricultural commodities, medicine, or medical devices to Sudan remains subject to certain limitations.
 
Along with the October 6 announcement, OFAC issued a new general license authorizing certain transactions pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000. Despite the broad revocation of the comprehensive embargo on Sudan, a license is still required for certain exports and reexports to Sudan of agricultural commodities, medicine, and medical devices; this is a work-around to generally authorize TSRA exports to Sudan, while Sudan remains on the State Sponsor of Terrorism List. General License A, which goes into effect on October 12, 2017, provides that:
 

[A]ll exports and reexports of agricultural commodities, medicine, or medical devices to the Government of Sudan or to any entity in Sudan or to any person in a third country purchasing specifically for resale to any of the foregoing are authorized, provided that the exports and reexports are shipped within the 12-month period beginning on the date of the signing of the contract for export or reexport.

General License replaces the need for any existing general or specific licenses currently issued to authorize conduct otherwise prohibited under the Sudan sanctions program. OFAC will re-evaluate whether to renew General License A on an annual basis.

 
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[FN/1] On January 13, 2017, then President Obama issued EO 13761, “Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions,” thereby revoking the prohibitions in sections 1 and 2 of EO 13067 – which comprehensively embargoed Sudan – and all of EO 13412, provided that the Government of Sudan sustained certain positive developments, including the cessation of hostilities in conflict areas, continued improvement of humanitarian access throughout Sudan, and maintaining cooperation with the United States on addressing regional conflicts and the threat of terrorism. Section 10 of EO 13761 required that the Secretary of State provide the President a report describing the actions taken by the Government of Sudan between January 13, 2017 and July 12, 2017, and assessing whether the Government of Sudan satisfied the standard of conduct described above.

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COMM_a3
13. M. Volkov: “ISO 37001: The Good, The Bad and the Ugly (Part II of V)”

(Source: Volkov Law Group Blog, 17 Oct 2017. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
[Editor’s Note: Part 1 of this series was included in yesterday’s, 17 Oct., Daily Bugle.]
 
In Part II of my continuing series, I identify in broad strokes some of the more significant positive and negative aspects of ISO 37001. While it is easy to second-guess the ISO 37001 authors, there are some interesting issues that are addressed and some missed opportunities to advance ethics and compliance systems.
 
On the positive side, ISO 37001 is keyed to a valuable concept of “reasonable and proportionate” responses and strategies to mitigate bribery risk. I acknowledge that “reasonable and proportionate” is not so easy to define but with time and precedent, such a concept will become a helpful benchmark for companies to use in designing and implementing an effective anti-bribery risk management system.
 
ISO 37001 is replete with requirements that anti-bribery management systems document their compliance programs. As everyone knows and has heard me repeat over and over, documentation is a critical aspect of every compliance program. If an action or decision is not documented, then prosecutors are unlikely to believe that the event occurred. A compliance program without documentation is by definition an ineffective compliance program.
 
ISO 37001 also establishes, for the first time, a focus on due diligence and hiring of employees as a key control to mitigate bribery risks. This is a sound requirement and long overdue. So much attention has been paid to third party bribery risks that internal hiring, employee monitoring and associated risks have been ignored. Going forward, companies should look to its internal systems for screening and hiring or transferring employees to positions where they will encounter bribery risks.
 
On the negative side, ISO 37001 missed an important opportunity to define the relationship between anti-bribery risk management systems and financial controls. ISO 37001 includes only a general, one-line requirement that a company implement financial controls to mitigate bribery risks. That requirement is so general that it is in reality meaningless. Instead, compliance officers need a seat at the financial table when it comes to designing effective accounting controls. CCOs need visibility into the financial controls in order to cull out important data and information needed to monitor an anti-bribery system. After all, bribery requires unauthorized access to money and this is where bribery risks meet with the reality of corporate financial operations.
 
Too often in the corporate governance world, financial management systems operate separately from other parts of the company. Much of this reflects the historical impact of Sarbanes-Oxley that generated a much-needed improvement of internal controls, financial reporting and enhancement of the role of internal auditors. In the end, financial executives and staff created an internal monolith of financial controls and surrounding compliance with such controls.
 
The compliance function was not included in this revamp of corporate financial reporting. As a consequence, CCOs did not have a seat at the table. With the rise of the CCO and attendant responsibilities, CCOs have to inject themselves into the financial controls given the obvious connection between unauthorized access to money for theft, bribery and other illegal schemes. It is impossible for CCOs to complete their responsibilities without entry into the financial silo.
 
Unfortunately, ISO 37001 ignored this trend and failed to address this critical opportunity to transform the CCO into a major play when it comes to anti-bribery risk management systems.
 
Nonetheless, ISO 37001 is a step forward and a valuable contribution to the ethics and compliance field. As noted in my original post, there are still many remaining questions about the ultimate impact that ISO 37001 will have on anti-corruption enforcement and on the ethics and compliance field in general.
 
[Editor’s Note: The other parts in this series will be included when they are released by the author.]

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COMM_a4
14. Gary Stanley’s ECR Tip of the Day
(Source: Defense and Export-Import Update; available by subscription from
gstanley@glstrade.com
, 17 Oct 2017.) 
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
Pre-contract activities undertaken in support of potential foreign assistance or sales program conducted by a company that owns the defense article are not considered brokering activity. The company is taking action on its own behalf. Ultimately the potential foreign assistance or sales program would potentially result in a secondary sales contract between the USG and one or more companies and when ITAR 129.5(2)(i) and (ii) exemption from requirement for approval provisions are met such activity would be exempt from broker approval.

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ENEDITOR’S NOTES

* Henri Bergson (Henri-Louis Bergson; 18 Oct 1859 – 4 Jan 1941; was a French philosopher, influential in the early 1900’s and after WWII in continental philosophy. Bergson is known for his arguments that processes of immediate experience and intuition are more significant than abstract rationalism and science for understanding reality. He is also known for having engaged in a debate with Albert Einstein about the nature of time, a debate which contributed to a partial diminishment of Bergson’s reputation, until most of his fundamental contributions to French Philosophy were vindicated by the discovery of Quantum Physics.
 – “There is no greater joy than that of feeling oneself a creator. The triumph of life is expressed by creation.”

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EN_a316
. 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_a0317. 
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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