17-1019 Thursday “Daily Bugle”

17-1019 Thursday “Daily Bugle”

Thursday, 19 October 2017

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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[No items of interest noted today.] 

  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: Whirlpool Europe Srl (Italy), to Pay $72,450 to Settle Alleged Antiboycott Violations
  3. Commerce/BIS: Whirlpool Corporation, to Pay $9,000 to Settle Alleged Antiboycott Violations
  4. Commerce/Census: “Tips on How to Resolve AES Fatal Errors”
  5. DoD/DSCA Posts DSCA Policy Memos, 15-21 Oct
  6. OMB/OIRA Reviews of Proposed Ex/Im Regulations
  7. State/DDTC: (No new postings.)
  8. UK Government Introduces Post-Brexit Sanctions and Anti-Money Laundering Bill to Parliament
  1. ST&R Trade Report: “NAFTA Talks to Extend Into 2018 as Partners Express Frustration”
  1. D. Garrod, S. Casselbrant-Multala & J. Helder: “New UK Regime for National Security and Infrastructure Investments”
  2. M. Volkov: “ISO 37001: Board, Top Management and Anti-Bribery Compliance Responsibilities (Part III of V)”
  3. S. Brown Cripps, K. Zelnick & N. Yousef: “What Happens to the Iran Deal Now?”
  4. S.W. Pelak, J.E. Prince & G.S. Green: “Why Is Sudan Not Subject to the Same ITAR Prohibitions as Other State Sponsors of Terrorism?”
  5. R.C. Burns: “OFAC Designates the IRGC for the Fourth Time”
  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 



[No items of interest noted today.]

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

* Commerce; Industry and Security Bureau; NOTICES; Export Privileges; Denials [Publication Date: 20 October 2017.]:
  – Adrian Manuel Hernandez
  – Jimmy Rojas a/k/a Jim Rojas
  – Marleen Rochin
  – Martin Jan Leff
  – Rodrigo Chico-Rodriguez
* Commerce; Industry and Security Bureau; NOTICES; Performance Review Board Memberships [Publication Date: 20 October 2017.]
* Defense; Defense Acquisition Regulations System; NOTICES; Memorandum of Understanding with the Ministry of Defence of the United Kingdom of Great Britain and Northern Ireland and with the Republic of Finland [Publication Date: 20 October 2017.]
* Defense; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Federal Acquisition Regulation Buy American, Trade Agreements, and Duty-Free Entry [Publication Date: 20 October 2017.]
* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Declaration for Free Entry of Returned American Products [Publication Date: 20 October 2017.]

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* Respondent: Whirlpool Europe Srl (Italy)
* Case No: 14-02(A)
* Charges:
  – Three Violations of 15 CFR 760.2(a), Refusal to do Business
  – Ten Violations of 15 CFR 760.2(d), Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons
 – Eight Violations of 15 CFR 760.5, Failing to Report the Receipt of a Request to Engage in a Restrictive Trade Practice or Foreign Boycott Against a Country Friendly to the United States
* Fine or Civil Settlement: Civil Settlement of $72,450
* Debarred or Suspended from Export Transactions: Not if penalty is paid as agreed.
* Date of Order: 25 September 2017
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* Respondent: Whirlpool Corporation
* Case No: 14-02(B)
* Charges:
– Three Violations of 15 CFR 760.2(d), Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons
* Fine or Civil Settlement: Civil settlement of $9,000
* Debarred or Suspended from Export Transactions: Not if penalty is paid as agreed.
* Date of Order: 25 September 2017

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4. Commerce/Census: “Tips on How to Resolve AES Fatal Errors”

(Source: census@subscriptions.census.gov, 19 Oct 2017.)
When a shipment is filed to the AES, a system response message is generated and indicates whether the shipment has been accepted or rejected. If the shipment is accepted, the AES filer receives an Internal Transaction Number (ITN) as confirmation. However, if the shipment is rejected, a Fatal Error notification is received.
To help you resolve AES Fatal Errors, here are some tips on how to correct the most frequent errors that were generated in AES for this month.
Fatal Error Response Code: 128
 – Narrative: Port of Export Unknown
 – Reason: The Port of Export Code reported is not valid in AES.
 – Resolution: The Port of Export Code must be valid in AES. Valid Port of Export Codes reportable in AES are contained in Appendix D – Export Port Codes. Verify the Port of Export Code, correct the shipment and resubmit.
Fatal Error Response Code: 147
 – Narrative: Routed Export Indicator Missing
 – Reason: The Routed Export Indicator is missing.
 – Resolution: A routed export transaction is a transaction in which the Foreign Principal Party in Interest (FPPI) authorizes a U.S. agent to facilitate the export of items from the United States and to prepare and file Electronic Export Information (EEI). You must report the Routed Export Indicator as Yes or No. Verify whether or not this is a routed export transaction, correct the shipment and resubmit.
For a complete list of Fatal Error Response Codes, their reasons, and resolutions, see Appendix A – Commodity Filing Response Messages.
It is important that AES filers correct Fatal Errors as soon as they are received in order to comply with the Foreign Trade Regulations. These errors must be corrected prior to export for shipments filed predeparture and as soon as possible for shipments filed postdeparture but not later than five calendar days after departure.
For further information or questions, contact the U.S. Census Bureau’s Data Collection Branch.
 – Telephone: (800) 549-0595, select option 1 for AES
 – Email: askaes@census.gov
 – Online:

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OGS_a66. OMB/OIRA Reviews of Proposed Ex/Im Regulations
* Amendments to Implement United States Policy Toward A Certain Destination
  – STAGE: Final Rule
  – RECEIVED DATE: 10/18/2017
  – RIN: 0694-AH47
  – STATUS: Pending Review

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. State/DDTC: (No new postings.)

(Source: State/DDTC)

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UK Government Introduces Post-Brexit Sanctions and Anti-Money Laundering Bill to Parliament


The Sanctions and Anti-Money Laundering Bill ensures that when the UK leaves the EU, we can continue to impose, update, and lift sanctions and AML regimes.
The UK needs to be able to impose and implement sanctions in order to:
  – comply with our international obligations, including those under the United Nations (UN) Charter
  – support our wider foreign policy and national security goals
Many of our current sanctions regimes are established via powers in the European Communities Act 1972 (ECA). We will need new legal powers to replace these once the ECA is repealed. The European Union (Withdrawal) Bill will not provide the powers necessary to update, amend or lift sanctions after exit day in response to fast moving events. This would leave us in breach of our international obligations and unable to work effectively with our European and international partners to tackle shared challenges.
Experts from the Foreign and Commonwealth Office, HM Treasury, Department for International Trade, Home Office, and the Department for Transport currently administer sanctions and anti-money laundering (AML) regimes. These include:
A range of departments implement and enforce these sanctions and anti-money laundering regimes, including:
The Bill in Parliament
The Sanctions and Anti-Money Laundering Bill was introduced to the House of Lords on Wednesday 18 October 2017.
Impact assessment
The impact assessment is published with its Regulatory Policy Committee opinion.

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9. ST&R Trade Report: “NAFTA Talks to Extend Into 2018 as Partners Express Frustration”

The U.S., Canada, and Mexico are extending their ongoing NAFTA modernization negotiations in an effort to find ways to resolve disagreements on a number of contentious issues. The next round is now planned for Nov. 17-21 in Mexico City and additional rounds will be scheduled through the first quarter of 2018. The three partner countries had been seeking to conclude an updated agreement by the end of 2017 to avoid political difficulties associated with election cycles that will ramp up early next year.
A trilateral statement said the fourth round, which took place Oct. 11-17 outside of Washington, D.C., saw progress in several negotiating groups, including customs and trade facilitation, digital trade, good regulatory practices, and certain sectoral annexes. Substantially all initial text proposals have now been put forward on nearly 30 agreement chapters.
However, the statement acknowledged that new proposals “have created challenges.” These were primarily offered by the U.S. and include increasing the regional content requirements for automobiles, adding a provision to automatically terminate NAFTA every five years unless it is specifically renewed, significantly revamping the dispute settlement system, making it easier to bring trade remedy cases against seasonal fruits and vegetables, and reducing the amount of U.S. government procurement open to NAFTA partners. These proposals highlight “significant conceptual gaps” among the three parties, the statement said, and the longer intersessional period before the fifth found is designed to give negotiators time to “explore creative ways to bridge these gaps” and ensure that an updated NAFTA “provides a solid framework to create jobs, economic growth and opportunity for the people of North America.”
The three trade ministers, however, were noticeably frustrated with the current status and future prospects of the negotiations. “Frankly, I am surprised and disappointed by the resistance to change from our negotiating partners,” said U.S. Trade Representative Robert Lighthizer in a statement read at the concluding press conference. There has been “some headway” on the objective of updating NAFTA to reflect the modern economy, he said, but “even here we have sometimes seen a refusal to accept what is clearly the best text available in spite of the countries having agreed to it in the past” (e.g., in the Trans-Pacific Partnership negotiations). He suggested this has prevented negotiators from closing chapters on digital trade, telecommunications, anticorruption, and several sectoral annexes.
In addition, Lighthizer said he has seen “no indication” that Canada and Mexico “are willing to make any changes that will result in a rebalancing and a reduction” of the “huge” U.S. trade deficits he said NAFTA had caused. He attributed this position to Canadian and Mexican companies being “reluctant to give up unfair advantage” conferred by NAFTA’s “special preferences,” which has resulted in “many years of one-sided benefits.” He also warned that national manufacturing policies that are “largely dependent on exports to the United States without balance cannot long continue” and that “it is unreasonable to expect that the United States will continue to encourage and guarantee U.S. companies to invest in Mexico and Canada primarily for export to the United States.”
Lighthizer said his fellow trade ministers “must understand” these things and “be reasonable if there is any chance for these negotiations to be successful.” However, Mexico Secretary of Economy Ildefonso Guajardo countered that “we must understand that we all have limits.” Guajardo indicated that Mexico’s priorities include designing trade rules for the modern digital economy rather than “the 20th century economy,” providing certainty for investments, maintaining access for “affordable high-quality food products that meet the highest safety standards,” keeping government procurement open to all NAFTA-area companies, and keeping the trilateral trade relationship updated “by cooperation under the NAFTA umbrella, not by eliminating it completely.” He expressed confidence that negotiators can “find the necessary balances” in these areas and reiterated Mexico’s willingness to “continue at the negotiating table.”

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10. D. Garrod, S. Casselbrant-Multala & J. Helder: “New UK Regime for National Security and Infrastructure Investments”

(Source: Akin Gump Strauss Hauer & Feld LLP, 18 Oct 2017.)
* Authors: Davina Garrod, Esq., davina.garrod@akingump.com,
+44 20.7661.5480; Sebastian Casselbrant-Multala, Esq., sebastian.casselbrant-multala@akingump.com, +44 20.7012.9697; and Jasper Helder, Esq., jasper.helder@akingump.com, +44 20.7661.5308. All of Akin Gump Strauss Hauer & Feld LLP.
Key Points:
  – The Department for Business, Energy and Industrial Strategy published a Green Paper consulting on amendments to UK merger control and public interest intervention legislation to cover gaps in the current framework for reviewing transactions from a national security perspective.
  – The proposal includes immediate short-term measures to lower merger control thresholds to just £1 million in revenues to capture additional transactions involving companies active in the military and dual-use as well as advanced technology sectors.
  – The long-term proposal involves wholesale reform of the UK’s investment review regime and considers both expanding the current voluntary notification system, and introducing mandatory notification for investments into essential infrastructure.
On Thursday, October 17, 2017, the UK’s Department for Business, Energy and Industrial Strategy published a proposal for national security and infrastructure investment review (the “Proposal”). The Proposal consults on both short-term and long-term measures for reforming the UK’s investment review powers. The short- and long-term consultations have separate deadlines for response. The deadline for comments relating to the short-term reforms is November 14, 2017, and the long-term reforms deadline is January 9, 2018.
The UK government has promised reform of its national security review powers ever since its review of EDF and China General Nuclear’s bid to construct a nuclear reactor at Hinkley Point, which was finally cleared by Theresa May’s government in September 2016 despite reported concerns about Chinese involvement in critical energy infrastructure.. The Proposal explains that reform is necessary because the UK’s current powers of review have been outpaced by developments to the UK’s national security risk profile. The Proposal highlights new national security threats, including cumulative investments in industries allowing espionage, new risks associated with greenfield investments, the use of technology in cyber terrorism and investments in assets in physical proximity to critical infrastructure. The Proposal notes the need to strike a balance between greater review powers and the UK’s desire to remain open and investment-friendly.
Critical infrastructure
‘Critical infrastructure’ has been a key phrase used by the government to describe the scope of the forthcoming changes to investment review. It mirrors the open-ended language used in the EU-level foreign direct investment regime currently proposed by the European Commission, as well as the EU Network Information Security Directive However, ‘critical infrastructure’ is neither defined (there is a reference to the UK’s 13 national infrastructure sectors in this context, followed by an admission that not everything within a sector will be deemed ‘critical’) nor used consistently in the Proposal (the terms ‘essential functions’, ‘critical businesses’, ‘essential services’, ‘essential national security interests’, ‘critical sectors’ and ‘critical assets’ all make appearances).
Current review powers
The UK government has identified gaps in its power to review investments with a national security element. Its current powers derive from a patchwork of legislation, various sector regulators, the Takeover Panel (which is currently consulting on amendments to the process and timetable for takeovers) and contractual terms in agreements with private undertakings. According to the Proposal, this patchwork of powers harms business certainty and transparency and is unsophisticated compared to the US, Canadian and French regimes.
Critically, the government can currently only intervene on public interest grounds in ‘relevant merger situations’, i.e. where the Enterprise Act 2002 (either £70 million annual turnover or an increase of a 25 percent share of supply on any given market) or EU merger control threshold is met. Below these thresholds, it has very limited ‘special public interest’ intervention powers, which it can use in respect of government contractors only.
The Proposal argues that developments in technology and the global security context have given rise to national security concerns in new settings, including in smaller businesses. The government may see the announcement by Chinese-backed Canyon Bridge of an intention to acquire UK technology company Imagination Technologies (a transaction which is not caught by UK merger control thresholds and thus difficult to catch for the purposes of a public interest review) as an example of such a transaction.
Short-term reform
The government is looking to close these gaps “immediately” following the current consultation, and proposes to do so through secondary legislation (which could be passed in a matter of days). The amendments would lower the threshold in the target turnover limb from £70 million to £1 million and remove the need for an increment (competitive relationship between the parties) in the market share limb for transactions involving the (i) military and dual-use and (ii) advanced technology sectors.
The Proposal suggests using the current Strategic Export Control Lists to determine the scope of military and dual-use concerns, while technology would catch a broad range of companies involved in “multi-purpose computing hardware” (including as designers or as owners of related intellectual property) as well as quantum-based technology.
The Competition and Markets Authority’s (CMA) guidance on voluntary notifications will continue to apply to these transactions, meaning that the parties are to self-assess whether a filing is needed. Similarly, the CMA will continue to assess any notifications under the same procedure it currently uses for public and special public interest interventions.
Long-term reform
The government’s proposals for the long-term include one or either of: (i) a voluntary notification regime featuring an expanded ‘call-in’ power modeled on the existing Enterprise Act 2002 power (but which would allow the government to scrutinize a broader range of transactions for national security concerns, including new projects and bare asset sales) with a three-month ‘call-in window’ and (ii) a mandatory notification regime applicable to only certain parts of key sectors (although these would include, as a minimum, civil nuclear, defense, energy, telecommunications and the transport sector as well as the manufacture of military and dual-use items and advanced technology).
The government emphasizes that the national security review will be distinct from the CMA’s competition review and that the review powers would not extend beyond the public interest in national security to other public interests. The government also proposes to offer guidance and engagement for businesses considering whether their merger might raise national security issues.

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11. M. Volkov: “ISO 37001: Board, Top Management and Anti-Bribery Compliance Responsibilities (Part III of V)”

(Source: Volkov Law Group Blog. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
[Editor’s Note: Part 1 and 2 of this series were included in in the 17 Oct and 18 Oct Daily Bugles, respectively.]
In Part III of my continuing series on ISO 37001, today I examine the board and top management’s respective responsibilities in the implementation and oversight of an anti-bribery management system.
ISO 37001 defines a “governing body” to include a supervisory board or board committee as having the ultimate responsibility for company activities, governance and policies of its anti-bribery management system. “Top management” is responsible for reporting to the governing board and held accountable for its responsibilities in implementing the company’s anti-bribery management system. A person or group of persons responsible for the operation of the anti-bribery management system carries out the anti-bribery compliance function.
The company’s anti-bribery management system shall include measures designed to identify and evaluate the risk or, and to prevent, detect and respond to, bribery.
Under Section 5 of ISO 37001, the roles and responsibilities of each constituency are outlined. While many of these appear to restate existing practices, the standards themselves create specific obligations for compliance program actors.
The governing body “shall demonstrate leadership and commitment” to the company’s anti-bribery management system by: approving the company’s anti-bribery policy; ensuring that the strategy and policy are aligned; receiving and reviewing information, at planned intervals, about the operation of the anti-bribery management system; requiring assignment of adequate and appropriate resources to the compliance program; and exercising reasonable oversight of the company’s anti-bribery management system.
ISO 37001 requires that top management shall “demonstrate leadership and commitment” to the company’s anti-corruption management system by:
   – ensuring that the program is established, implemented, maintained and reviewed to address the company’s bribery risks;
   – deploying adequate and appropriate resources to operate the system;
   – communicating internally and externally concerning the anti-bribery management system;
   – emphasizing the importance of the anti-bribery management system to internal audiences;
   – ensuring the system is appropriately designed to achieve its objectives; directing and supporting personnel to contribute to the effectiveness of the system;
   – promoting an appropriate anti-bribery culture; promoting continual improvement; supporting other relevant management roles to demonstrate leadership in preventing and detecting bribery as it applies to their areas of responsibility;
   – encouraging the reporting for suspected and actual bribery;
   – ensuring that no personnel suffer retaliation, discrimination or disciplinary action for reports made in good faith or on the basis of a reasonable belief of a violation, or for refusing to engage in bribery; and
   – reporting to the governing body, at planned intervals, on the operation of the management system and any allegations of serious or systemic bribery.
Top management shall ensure that the responsibilities and authorities for relevant roles are assigned and communicated throughout the organization. Managers at every level are responsible for ensuring that anti-bribery management system requirements are complied with in their department or function.
The anti-bribery compliance function shall possess the responsibility and authority for:
Overseeing the design and implementation of the anti-bribery management system by the company; providing advice and guidance to personnel on the management systems and issues relating to bribery; ensuring that the anti-bribery management system conforms to requirements of ISO 37001; reporting to the governing body and top management as appropriate; maintaining direct and prompt access to the governing body and top management if any issue or concerns needs to be raised; and ensuring that the anti-bribery risk management system is adequately resourced and assigned to person(s) who have the appropriate competence, status, authority and independence.
Section 9.3 of ISO 37001 sets out review requirements for top management, the governing body and the compliance function person(s).
Top management is required to review the anti-bribery management system, at planned intervals, to ensure its continuing suitability, adequacy and effectiveness. A specific list of subject areas is included for such reviews. The governing body is required to conduct periodic reviews of the anti-bribery management system. The responsible anti-bribery compliance function is required to “assess on a continual basis” whether the system is adequate and effectively implemented. The anti-bribery compliance function shall report to top management and the governing body at planned intervals and an ad hoc basis, as appropriate but at least annually. Each constituency is required to document its review process, the results of its review and specific follow up actions.
ISO 37001 includes a lengthy Informative Guidance as an annex to the document. The Informative Guidance contains important additions and suggestions in each of the topic areas and addresses some other issues as well (e.g. facilitation payment prohibition).
ISO 37001’s Informative Guidance directs that the governing body should be “knowledgeable about the content and operation of the management system,” and “should exercise reasonable oversight with respect to the adequacy, effectiveness and implementation of the management system.” Further, the governing board “should regularly receive information [directly from the anti-bribery compliance function] regarding the performance of the management system through the management review process.”
The anti-bribery compliance function must be staffed by individual(s) who have the appropriate “competence, status, authority and independence.” In addition, the anti-bribery function should have direct access to top management and the governing body to communicate relevant information. In other words, the anti-bribery compliance function should not report to another manager, who in turn, reports to top management or the governing body.
[Editor’s Note: The other parts in this series will be included when they are released by the author.]

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12. S. Brown Cripps, K. Zelnick & N. Yousef: “What Happens to the Iran Deal Now?”

Freshfields Bruckhaus Deringer US LLP
, 16 Oct 2017)
* Authors: Stephanie Brown Cripps, Esq.,
, 212-284-4996; Kimberly Zelnick, Esq.,
, 212-277-4010; and Nabeel Yousef, Esq.,
, 202-777-4563. All of Freshfields Bruckhaus Deringer US LLP.
On October 13, 2017, as part of his administration’s new Iran strategy, US President Donald Trump declined to recertify the Joint Comprehensive Plan of Action (JCPOA) to the US Congress. President Trump stated that he is directing his administration “to work closely with Congress and our allies to address the deal’s many serious flaws so the Iranian regime can never threaten the world with nuclear weapons.” The Trump administration is not seeking to pull out of the JCPOA for the time being, but is looking to Congress to pass new legislation that would trigger the snapback of the nuclear-related sanctions if Iran crosses certain thresholds related to, among other things, its nuclear and ballistic missile programs.
The President’s “decertification” of the JCPOA does not automatically reimpose sanctions and, without further action, should not immediately endanger the nascent business in Iran that has begun to build momentum since the JCPOA was implemented in January 2016. The fate of the United States’ participation in the JCPOA, which has vital implications for the future of the JCPOA overall, currently rests with the US Congress, and it has been reported that a majority in Congress has little appetite for reimposition of US nuclear-related sanctions on Iran, let alone a full termination of the JCPOA.
What is the purpose of certification, and what happens now that President Trump has not certified?
Now that President Trump has chosen not to certify Iran’s compliance with the JCPOA, Congress may decide whether or not to take action against Iran, including whether to reimpose secondary sanctions on Iran. The certification requirement stems from a US law, the Iran Nuclear Agreement Review Act (INARA), [FN/1] which Congress passed prior to the United States accepting the JCPOA.
Pursuant to INARA, the President is periodically required to certify to Congress that (i) Iran is “transparently, verifiably and fully implementing” the JCPOA, (ii) Iran has not committed a material breach, (iii) Iran has not taken any action that could significantly advance its nuclear weapons program, and (iv) the suspension of sanctions is appropriate and proportionate to the measures taken by Iran, and vital to US national security interests. President Trump stated that the JCPOA is no longer in the national security interest of the United States.
As the President has announced that he will not make the certification, Congress may, within 60 days, introduce, consider, and vote on “qualifying legislation,” which will be entitled to expedited consideration. Qualifying legislation is defined in INARA as a bill reinstating statutory sanctions with respect to Iran. But this is only one option available to Congress; Congress could instead seek to pass new, non-nuclear sanctions on Iran (as it did recently), pass a measure threatening Iran with future action, or take no action at all. 
What are waivers, and what does it mean that President Trump extended the waivers?
Separate and apart from the INARA certifications, the President also has the power to reimpose the pre-JCPOA nuclear-related sanctions or to impose entirely new sanctions on Iran. This is because President Obama implemented the JCPOA by issuing waivers of the relevant sanctions statutes. Each of the statutes that set out the US secondary sanctions includes time-limited waivers, which the President must renew at certain specified intervals; otherwise, the statutes automatically reimpose their respective secondary sanctions. [FN/2] 
The waivers are separate from the certification; President Trump could choose not to certify (as he has just done) while continuing to waive the relevant secondary sanctions. Notably, President Trump renewed certain of the waivers as recently as September 2017; this renewal may be an indication that he is not actively seeking to pull out of the JCPOA. Indeed, it has been reported that the Trump administration is not seeking to upend the deal, but to renegotiate certain of its terms, during which time the JCPOA would presumably remain in place. 
What could happen if, because of congressional action or rescindment of waivers, the US secondary sanctions were reimposed?
Secondary sanctions give the US government the ability to impose significant penalties on non-US persons that engage in certain transactions involving Iran, even if those persons have no connections to the United States. For example, one of the suspended secondary sanctions authorizes the President to penalize non-US companies that make certain large investments or conduct certain types of business in Iran’s petroleum or petrochemical sectors. Other secondary sanctions can trigger hefty penalties on non-US banks for financing significant Iranian business.
If secondary sanctions were to be reimposed, non-US banks may decline to engage in, and perhaps terminate existing, Iran-related transactions or financing. Non-US companies doing business with Iran may also reconsider continuing such business. New opportunities could be shelved as a result of the increased sanctions risk profile associated with doing business in Iran, since many corporates and financial institutions may not want to risk being subject to US sanctions. Nevertheless, as discussed below, the effectiveness and durability of US secondary sanctions could depend on non-US governments’ responses to the reimposition of US secondary sanctions.
Are there any other steps the US government could take?
Rather than reimposing secondary sanctions, Congress could take other steps that would disrupt the ability of multinational companies to conduct business involving Iran. For example, Congress could pass legislation that reverses a key feature of the JCPOA (General License H) and prohibit non-US companies with US parents from doing business in Iran. Congress could also impose new sanctions on Iran, including potentially imposing secondary sanctions, that Congress could characterize as being related to Iran’s ballistic missile program, support for terrorism, or human rights violations, that arguably would not directly contradict the United States’ political commitments under the JCPOA.
What steps will Europe take in response to the decertification?
In response to President Trump’s announcement, European leaders have affirmed that the EU and its member states will continue to adhere to the terms of the JCPOA, and have urged the US Congress not to take any steps that might undermine the deal. Their outreach may be successful, as historically unilateral US sanctions – particularly unilateral US secondary sanctions – have not been as effective as harmonized multilateral sanctions. Penalizing EU companies and financial institutions for doing business with Iran could sour relationships between the United States and EU member states, and could politically isolate the United States from its EU allies.
As an alternative, the EU and the E3 (France, Germany and the UK) may consider tightening the JCPOA within its current form. The UK has suggested enforcing the terms of the JCPOA more strictly (while acknowledging that the International Atomic Energy Agency continues to affirm Iran’s material compliance with the terms of the deal). France has referred to plans to enter into talks for a follow-up agreement to enter into force in 2025, when sunset provisions in the JCPOA would otherwise release Iran from several nuclear-related restrictions. The EU may be willing to initiate or participate in sanctions targeting Iranian activities outside the scope of the JCPOA, such as activities related to Iran’s ballistic missile program, and the EU may attempt to calm negative attitudes in Iran toward the JCPOA and seek to convince Iran not to take further provocative actions, such as additional ballistic missile tests. It has in fact already been reported that the EU and Iran have been discussing Iran’s ballistic missile program and support of groups outside of Iran involved with conflicts.
The EU will need to assure European companies that it will remain committed to the JCPOA, and provide guidance on how the JCPOA could continue even without the United States’ participation. We understand this would primarily be accomplished on a political and/or diplomatic level. However, if the United States does reimpose secondary sanctions, the current EU blocking regulation, which prohibits EU persons from complying with certain US sanctions that reach beyond EU sanctions, may be widened in scope. Although an expansion of the EU blocking regulation may prohibit EU persons from complying with reintroduced US secondary sanctions, it is unlikely that this legal mechanism would eliminate the risk for EU companies of being subject to harsh penalties under US rules. 
What does this mean for current and future Iran business, and what should companies do now?
The uncertainty around the future of the Iran deal has intensified now that President Trump has decertified the JCPOA. Even with Europe continuing to encourage and support companies doing business in Iran in compliance with the terms of the JCPOA, if the United States reimposes secondary sanctions, such business could quickly fall apart. The few international banks that are currently willing to enter into Iran-related transactions may cease such activity under the threat of being penalized by the United States, and the potential sting of US sanctions may outweigh the benefits companies are able to obtain from any recent Iran re-entry. If non-US companies stop doing business with Iran, there will likely be little motivation for Iran to continue complying with the terms of the JCPOA. 
Even if Congress does not take action in the next 60 days, the decertification raises questions about the political durability of the JCPOA and amounts to a vote of “no confidence” in the nuclear deal. Now would be a good time for companies that are doing business in Iran to take stock of any exit provisions in contracts with Iranian counterparties, and to understand any steps that may be available in the event US secondary sanctions are reimposed. Companies looking to enter into contracts with Iranian counterparties may wish to consider how quickly and easily they would be able to terminate any Iran business and build in appropriate exit mechanisms (such as sanctions force majeure provisions, termination rights or liquidation rights that can be triggered even if unilateral US secondary sanctions are reimposed).
Updated: The EU has published a press statement stressing its commitment to the “continued full and effective implementation of all parts of the JCPOA,” and stating that the EU “encourages the US to maintain its commitment to the JCPOA and to consider the implications for the security of the US, its partners and the region before taking further steps.” [FN/3]
  [FN/1] See
  [FN/2] The president must waive the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISDA) every 120 days; the President waived the sanctions on September 14, 2017, and the next waiver is due January 2018. The Iran Freedom and Counter-Proliferation Act (IFCA) waiver is every 2810 days, with the next waiver due in January 2018; and the Threat Reduction Act (TRA) has an annual waiver which must be renewed at least 30 days before the waiver expires, making the waiver due December 2017.
  [FN/3] See

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13. S.W. Pelak, J.E. Prince & G.S. Green: “Why Is Sudan Not Subject to the Same ITAR Prohibitions as Other State Sponsors of Terrorism?”

(Source: Export Control Blog, 18 Oct 2017.)
* Authors: Steven W. Pelak, Esq., swpelak@hollandhart.com, 202-654-6929; Jason E. Prince, Esq., jeprince@hollandhart.com, 202-654-6937; and Gwen S. Green, Esq., gsgreen@hollandhart.com, 202-654-6913. All of Holland & Hart LLP.
Reflecting the thaw in United States-Sudan diplomatic relations, the U.S. Government announced on October 6, 2017 that it would permanently revoke certain economic sanctions against Sudan, effective October 12, 2017. Following the lifting of those sanctions imposed by the Office of Foreign Assets Control (“OFAC”) which were imposed by the President’s November 1997 Executive Order 13067, U.S. persons are no longer prohibited generally from engaging in transactions that were previously prohibited without an OFAC license under the Sudanese Sanctions Regulations (“SSR”). Sudan remains, however, designated on the U.S. Department of State’s State Sponsors of Terrorism List, along with Iran and Syria. The Trump Administration has not indicated whether the terrorism designation of Sudan will change in the near future.
That being the case, now is a good time to ask: How and why does the Department of State/Directorate of Defense Trade Controls (“DDTC”) (a) treat Sudan differently under the International Traffic in Arms Regulations (“ITAR”) than the other designated state sponsors of international terrorism, and (b) apparently ignore the statutory prohibition on the export of defense articles and defense services to state sponsors of international terrorism as required by Congress under the Arms Export Control Act (“AECA”)?
Unlike the treatment of Iran and Syria for which the ITAR notes a blanket policy of denial (22 C.F.R. 126.1(d)(1)), the ITAR specifies with regard to Sudan that “[i]t is the policy of the United States to deny licenses or other approvals for exports or imports of defense articles and defense services . . . except a license or other approval may be issued, on a case-by-case basis, for” certain broadly defined categories of defense articles and defense services. 22 C.F.R. § 126.1(v). On what authority has DDTC allowed for a case-by-case evaluation of license applications for the export of defense articles and defense services destined for Sudan, given that Congress has expressly prohibited such exports under the AECA, 22 U.S.C. § 2780? The answer to this question is unclear, and it appears that DDTC may have overstepped its statutory and constitutional authority in suggesting that it maintains the authority on a case-by-case basis to license the export of arms and defense services to Sudan.
More than 20 years ago, the U.S. Government first designated Sudan as a state sponsor of terrorism on August 12, 1993 due to mounting concerns about Sudan’s support to international terrorist groups, including the Abu Nidal Organization, Palestine Islamic Jihad, Hamas, and Hezbollah. The August 1993 United States designation of Sudan as a state sponsor of international terrorism followed the discovery that summer of the Government of Sudan’s participation in a conspiracy to bomb a number of landmarks in New York City, including the United Nations Headquarters, the Federal Building in Manhattan at 26 Federal Plaza (which served as the New York headquarters for the Federal Bureau of Investigation (“FBI”)), the Lincoln and Holland Tunnels, and the George Washington Bridge. In addition, the conspirators targeted for kidnapping and assassination government officials, law enforcement officials, and judicial officers of the United States. The conspiracy was unmasked in the summer of 1993 and, if it had not been foiled by the outstanding work of the FBI and law enforcement, was to be a follow-up to the February 1993 World Trade Center bombing. See here. The U.S. Government alleged that the Government of Sudan played an important role in the New York Landmarks conspiracy to murder U.S. citizens and to attack the U.S. Government within the United States. In fact, in connection with the resulting criminal prosecution in the Southern District of New York of Omar Abdel-Rahman (commonly referred to as “The Blind Sheikh”) and others, the United States named the Government of Sudan’s Mission to the United Nations and associated individuals as unindicted co-conspirators in the bombing plot. See 2/2/1995 Notice of Co-Conspirators by the United States in United States v. Rahman, No. 93-Cr.-181.
Countries designated as state sponsors of terrorism face a broad range of U.S. sanctions and legal restrictions, including restrictions on U.S. foreign assistance, prohibitions on arms-related exports and sales, controls over exports and reexports of dual-use items, and miscellaneous other restrictions. Most notably, the AECA, 22 U.S.C. § 2780, prohibits the export and sale of defense articles and defense services to a designated state sponsor of terrorism, whether by the U.S. Government or private U.S. actors except under carefully limited exceptions. In part, Congress 30 years ago enacted the statutory prohibition of Section 2780 in response to the Executive Branch’s decision to deliver arms to Iran in connection with the Iran-Contra affair. See 135 Cong. Rec. H7346-7354 (daily ed. Oct. 23, 1989). This statutory prohibition carries criminal penalties, including a maximum term of imprisonment of 20 years for a willful violation of the AECA (22 U.S.C. § 2780(j)).
With regard to private U.S. actors, Congress prohibited DDTC from licensing or approving the export or sale of defense articles and defense services except in the very rare circumstance in which the President personally acts to waive the prohibition for a specific transaction which is notified and presented to Congress. The President may act to waive the statutory prohibitions of the AECA with respect to a specific transaction which the President (a) “determines . . . is essential to the national security interests of the United States,” (b) consults prior to the export with the Foreign Affairs and Foreign Relations Committees of Congress, and (c) submits a report to Congress not less than 15 days prior to the proposed transaction setting forth details of the transaction and “the reasons why the proposed transaction is essential to the national security interests of the United States and the justification for such proposed transaction.” 22 U.S.C. § 2780(g).
As with Iran and Syria, Sudan is identified on the list of proscribed countries at ITAR Section 126.1. However, unlike Iran and Syria, Sudan is not included in the category of proscribed countries of greatest concern at ITAR Section 126.1(d)(1). Given the potential risks to U.S. national security, it is DDTC’s policy to deny – without any exceptions noted – licenses and other approvals for exports and imports of defense articles and defense services to the countries listed at ITAR Section 126.1(d)(1). Several countries that the Department of State has not placed on the State Sponsors of Terrorism List – Belarus, Burma, China, Cuba, North Korea, and Venezuela – are identified at ITAR Section 126.1(d)(1). Thus, DDTC’s omission of Sudan from ITAR Section 126.1(d)(1) is particularly puzzling.
Instead, DDTC sets forth its restrictions upon the export of defense articles and defense services to Sudan at ITAR Section 126.1(v). ITAR Section 126.1(v) states that DDTC may license the export of defense articles and defense services on a case-by-case basis, for:
“(1) Supplies and related technical training and assistance to monitoring, verification, or peace support operations, including those authorized by the United Nations or operating with the consent of the relevant parties; (2) Supplies of non-lethal military equipment intended solely for humanitarian, human rights monitoring, or protective uses and related technical training and assistance; (3) Personal protective gear for the personal use of United Nations personnel, human rights monitors, representatives of the media, and humanitarian and development workers and associated personnel; or (4) Assistance and supplies provided in support of implementation of the Comprehensive Peace Agreement.” DDTC added Section 126.1(v) in November 2011 “to set out U.S. policy on arms exports to the Republic of the Sudan, in accordance with UN Security Council resolutions imposing an arms embargo and recent political developments in Sudan.”
It is unclear under what statute or other authority DDTC disregards the statutory prohibitions imposed in relation to Sudan under the AECA and allows for an array of exceptions to those prohibitions via the ITAR at Section 126.1(v). The Federal Register Notice publishing the ITAR amendment which added ITAR Section 126.1(v) is in fact silent as to the statutory prohibitions imposed on Sudan under the AECA.
Although the AECA authorizes the President to waive the prohibitions set forth by Congress at 22 U.S.C. § 2780(b) in certain limited circumstances as noted above, it does not appear the President took such action in relation to the addition of ITAR Section 126.1(v). Of course, it is plain that any regulatory provision or administrative rule contrary to statute must fall. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984); 5 U.S.C. §§ 702 and 706. In relatively rare circumstances in the past, the President has acted to waive a statutory prohibition upon the private or commercial export of arms to a foreign nation where Congress has allowed the President to waive a statutory prohibition upon a national security or national interest finding. For instance, federal law prohibits the licensed export of defense articles to China unless (a) the President reports that China has made progress on a program of political reform throughout the country or (b) the President finds that a particular export is in the national interest. To allow for a temporary export of a C-130 cargo aircraft (i.e., a defense article) to China for use in oil spill response operations at sea, President Obama issued a waiver of the statutory prohibition to authorize the export of the defense article to assist in response to the oil spill.
Yet, DDTC appears to have assumed the authority to waive the AECA’s prohibitions upon the export of defense articles and defense services to Sudan on a “case-by-case basis.” Whatever laudable purpose DDTC may seek to assist with such a case-by-case review of arms and defense services being provided to the Sudanese Government, the rule of law compels that it must follow the direction and statutes enacted by Congress. To do otherwise would weaken Congress’ action – in the name of the People – to prohibit the export of arms and military training to nations which have been designated for their repeated acts in support of international terrorism. Except for those narrowly circumscribed instances in which the President alone finds a transaction “essential to the national security interests of the United States” and consults with and provides notification to the Congress, DDTC may not on a “case-by-case” basis or any other administrative prerogative license the commercial export of defense articles to Sudan or any other foreign nation designated for its repeated acts in support of international terrorism.

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14. R.C. Burns: “OFAC Designates the IRGC for the Fourth Time”

Export Law Blog
. Reprinted by permission.)
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
, 202-508-6067).
Last week, Iran’s Islamic Revolutionary Guard Corps (“IRGC”) was sanctioned yet again by the Office of Foreign Assets Control (“OFAC”). I say “yet again” because prior to the latest action the IRGC had already been designated and blocked under Executive Orders 13382, 13553, and 13606. At this point, OFAC has now put the IRGC on the SDN List more more times than the Washington Nationals have been in the National League Division Series (three times) and way more times than they’ve won the NLDS (that would be never).
Which leads to the legitimate question as to what’s going on here? Are OFAC and the White House just trying to stir things up? Or is there some kind of monthly designation quota at OFAC, like the police department daily ticket quotas in Arlington, Fairfax and Falls Church which make driving in Virginia so risky?
Knowing that this issue would arise, OFAC released along with the designation an FAQ to explain why this designation is unlike the other ones.
Today’s action designating the IRGC under E.O. 13224, our counterterrorism authority, carries some additional consequences that will limit certain activities with respect to the IRGC. Persons designated under E.O. 13224, which now includes the IRGC, may not avail themselves of the so called “Berman exemptions” under the International Emergency Economic Powers Act (IEEPA) relating to personal communication, humanitarian donations, information or informational materials, and travel.
That’s right. It is now a federal crime for a U.S. person to give a copy of The Bible to a member of the  Iran’s Islamic Revolutionary Guard Corps.
Aside from the sheer stupidity of this result, it is not quite clear to me that it is actually the case that this new designation sidesteps the Berman Amendment. That amendment, codified in 50 U.S.C. § 1702(b)(3), restricts the actions that the President can take with respect to using the International Emergency Economic Powers Act (“IEEPA”) to limit, among other things, the import and export of informational materials.
The new designation is the result of section 105 of the Countering America’s Adversaries Through Sanctions Act (“CATSACT”) which specifically directs the President to sanction IRGC under Executive Order 13224. Now perhaps OFAC thinks that it can escape the Berman Amendment because these sanctions are under CATSACT and not under IEEPA. The problem is section 105 explicitly cites IEEPA in imposing the obligation to sanction the IRGC under Executive Order 13224. Moreover, the other three executive orders under which IRGC was previously sanctioned cite other statutory authority in addition to IEEPA, so it’s not quite clear why OFAC now says that throwing some statute other than IEEPA into the mix makes the Berman Amendment provisions on informational materials inapplicable. Finally, the result of a designation under Executive Order 13224 is to make the IRGC subject to the Global Terrorism Sanctions Regulations.  Those regulations, in section 594.305, have a definition of “informational materials,” a definition that would be completely unnecessary if OFAC thought that the Berman Amendment’s provisions on “informational materials” did not apply.

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* Arleigh Burke (Arleigh Albert Burke; 19 Oct 1901 – 1 Jan 1996; was an admiral of the United States Navy, who distinguished himself during World War II and the Korean War, and served as Chief of Naval Operations during the Eisenhower and Kennedy administrations.)
 – “Any commander who fails to exceed his authority is not of much use to his subordinates.”
* Leigh Hunt (James Henry Leigh Hunt; 19 Oct 1784 – 28 Aug 1859; was an English critic, essayist, poet, and writer.)
 – “If you are ever at a loss to support a flagging conversation, introduce the subject of eating.”

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. 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.
: 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. 
: 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.]

  – 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 

: 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 

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 16 Jun 2017: 82 FR 27613-27614: Removal of Burmese Sanctions Regulations 
: 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
  – 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.
, 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
  – HTS codes that are not valid for AES are available
  – 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 

, 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
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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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 

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* 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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