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17-1101 Wednesday “Daily Bugle”

17-1101 Wednesday “Daily Bugle”

Wednesday, 1 November 2017

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  1. Commerce/BIS Clarifies Use of EAR License Exceptions GOV and STA
  2. Commerce/BIS: Materials Technical Advisory Committee to Meet on 16 Nov in Wash DC
  3. DHS/CBP Modifies and Clarifies NCAP Tests Pertaining to PSC Claims and PMS
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSS Releases ISL 2017-01
  4. State/DDTC Posts Name Change for Icon Polymer
  5. State/DDTC Posts Notice on Category XIV(f)(7) Includes Chemical Agent Resistant Coatings (CARC)
  6. EU Classifies Portable Battery-Operated Apparatus under the Combined Nomenclature
  7. UK/DIT ECO Revises and Updates OGTCL Maritime Anti-Piracy, and Associated Approved Companies List
  1. Bloomberg: “U.S. to Sanction Russian Companies After Missing Oct. 1 Deadline”
  2. Expeditors News: “USTR Announces New Enforcement Efforts for GSP”
  3. Foreign Policy: “State Department Scraps Sanctions Office”
  4. Reuters: “Factbox: What Are the Rules Airbus Admits to Breaking in U.S.?”
  5. ST&R Trade Report: “Customs User Fees Adjusted for Inflation”
  1. C. Greene, C.N. Stinebower & C. Monahan: “Sudan Sanctions Revocation: The Key Takeaways”
  2. D.M. Edelman: “Cuba Policy Shift Stalls as Businesses Await OFAC Implementation”
  3. L. Chvosta Sr., N. Colin & D. Lew: “Alternatives to Prosecution in an Age of Global Enforcement”
  4. M. Volkov: “Anti-Corruption Risks: Global Enforcement Means Global Detection”
  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 (1 Nov 2017), FACR/OFAC (31 Oct 2017), FTR (20 Sep 2017), HTSUS (20 Oct 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 Clarifies Use of EAR License Exceptions GOV and STA
(Source: Federal Register) [Excerpts.]
 
82 FR 50511-50517: Clarifications to the Export Administration Regulations for the Use of License Exceptions
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: This final rule makes clarifications to the Export Administration Regulations (EAR) to provide guidance based on existing agency understanding and practice on the use of two license exceptions. Specifically, this final rule makes three clarifications to License Exception Governments, International Organizations, International Inspections under the Chemical Weapons Convention, and the International Space Station (GOV) and adds five notes, along with making other minor clarifications, to License Exception Strategic Trade Authorization (STA). These revisions respond to questions BIS has received about the use of these two EAR license exceptions and provide the general public answers to frequently asked questions based on existing agency interpretive practice. Therefore, the clarifications in this final rule do not change the EAR requirements for the use of the license exceptions but are intended to assist exporters new to the EAR.
* DATES: This rule is effective November 1, 2017.
* FOR FURTHER INFORMATION CONTACT: Timothy Mooney, Regulatory Policy Division, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-2440, Fax: (202) 482-3355, Email: rpd2@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
 
(A) Clarifications for License Exception GOV
   This final rule revises License Exception GOV, Sec. 740.11, to make three clarifications. Specifically, this final rule revises paragraph (b)(2)(ii); adds a new note to paragraph (b)(2)(iii)(C); and adds a new note to paragraph (c)(1). These clarifications do not change the applicability or any other requirements of License Exception GOV and are limited to providing guidance on how BIS interprets these paragraphs of License Exception GOV in response to questions from the public. …
 
(B) Clarifications for License Exception STA
   This final rule revises License Exception STA, Sec. 740.20, to add five new clarification notes, along with making other minor clarifications. Specifically, this final rule adds the following notes to License Exception STA: Note 1 to paragraph (a) for applicability of transfers (in-country) under STA; Note 1 to paragraphs (b)(2) and (b)(3) for staying within the scope of the original authorization; Note 1 to paragraph (d)(2) for multiple consignees on a single prior consignee statement and minor clarifications to the text of paragraph (d)(2); and Note 2 to paragraph (d)(2) for exclusion for government consignees from prior consignee statement; and Note 1 to paragraph (d)(3) for exclusion for intangible exports, reexports or transfers (in-country). These new notes, along with the other minor clarifications, do not change the applicability or any other requirements of License Exception STA and simply provide guidance on how BIS interprets these provisions of License Exception STA. These new notes are consistent with the agency’s responses to questions at numerous outreach events and in the Frequently Asked Questions (FAQs) available on the agency’s Web site. …
 
   Dated: October 26, 2017.
Richard E. Ashooh, Assistant Secretary for Export Administration.

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EXIM_a2

2. Commerce/BIS: Materials Technical Advisory Committee to Meet on 16 Nov in Wash DC
(Source: Federal Register) [Excerpts.]
 
82 FR 50612: Materials Technical Advisory Committee; Notice of Open Meeting
   The Materials Technical Advisory Committee will meet on November 16, 2017, 10:00 a.m., Herbert C. Hoover Building, Room 3884, 14th Street between Constitution & Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to materials and related technology.
 
Agenda
 
Open Session
  (1) Introductions and opening remarks by senior management
  (2) Presentation by Gerard Horner and Anna Bruse on Automated Export System
  (3) Presentation by Rocco Casagrande on “Overview of Synthetic Biology”
  (4) Open session report by regime representatives
  (5) Update on plans for 2018/Public Comments/New Business
 
   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 November 9, 2017. …
   For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

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EXIM_a3

3. DHS/CBP Modifies and Clarifies NCAP Tests Pertaining to PSC Claims and PMS

(Source: Federal Register) [Excerpts.]
 
82 FR 50656-50659: Modification and Clarification of the National Customs Automation Program Tests Regarding Post-Summary Corrections and Periodic Monthly Statements
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security.
* ACTION: General notice.
* SUMMARY: This document announces U.S. Customs and Border Protection’s (CBP’s) modification and clarification to the National Customs Automation Program (NCAP) tests pertaining to the processing of post-summary correction (PSC) claims and periodic monthly statements (PMS). Except to the extent expressly announced or modified by this document, all aspects, rules, terms and conditions announced in previous notices regarding the PSC and PMS tests remain in effect.
* DATES: As of November 1, 2017, the modification and clarification to the PSC and PMS tests will be operational.
* ADDRESSES: Comments concerning this test program may be submitted via email to Monica Crockett at ESARinfoinbox@dhs.gov with a subject line identifier reading, “Post-Summary Corrections and Periodic Monthly Statements.”
* FOR FURTHER INFORMATION CONTACT: For policy-related questions, contact Randy Mitchell, Director, Commercial Operations, Revenue and Entry, Trade Policy and Programs, Office of Trade, via email at Randy.Mitchell@cbp.dhs.gov. For technical questions related to ABI transmissions, contact your assigned client representative. Interested parties without an assigned client representative should direct their questions to the Client Representative Branch at (703) 650-3500.
* SUPPLEMENTARY INFORMATION: …
 
Clarification of the PSC Test
   CBP announced in the December 12th notice that the types of entries that may be corrected by filing a PSC were expanded to additional entry types, one of them being entry type 23 (TIB). This notice clarifies that a PSC concerning a TIB may be filed only to correct data elements of a TIB that do not change a TIB entry to another entry type; in addition, this notice clarifies that a PSC may not change data elements that change another entry type to a TIB entry. For example, a PSC may correct the value declared on a TIB entry, but it may not change the classification of the article to a classification that is not entitled to be filed as a TIB entry, as that classification change would necessarily change a TIB entry to another entry type.
 
Modification of the PMS Test
   The proposed modification, published in the January 9, 2017 notice, considers a PMS as paid, in the event the importer uses the Automated Clearing House (ACH) debit process, when CBP receives notification from the Treasury Department that funds are available and transferred to CBP from the financial institution designated by the importer for payment of the ACH debit authorization. This modification reverses the proposed modification because ACE cannot accommodate the proposed change at this time due to technical constraints. Therefore, CBP will continue to consider a PMS as paid when CBP transmits the debit authorization to the designated financial institution. See 69 FR 5362 (February 4, 2004). …
 
   Dated: October 26, 2017.
Brenda B. Smith, Executive Assistant Commissioner, Office of Trade.

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OGSOTHER GOVERNMENT SOURCES

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

* President; ADMINISTRATIVE ORDERS; Sudan; Continuation of National Emergency (Notice of October 31, 2017) [Publication Date: 2 November 2017; White House release included in the Daily Bugle of Tuesday, 31 October 2017, item #6.]
 
* State; NOTICES; Designations as Foreign Terrorist Organizations [Publication Date: 2 November 2017.]:
  – Abdallah Azzam Brigade
  – Abdallah Azzam Brigades
 
* State; NOTICES; Designations as Specially Designated Global Terrorists: Abdallah Azzam Brigades [Publication Date: 2 November 2017.]
* * * * * * * * * * * * * * * * * * * *

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DSS released ISL 2017-01, dated October 24, 2017, to add the Privacy and Civil Liberties Oversight Board (PCLOB), to NISPOM Paragraph 1-103.b., Agency Agreements, updating the list of Federal agencies that have entered into an agreement with DoD for industrial security services. Click here for the new ISL.

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OGS_a47
. State/DDTC Posts Name Change for Icon Polymer

(Source:
State/DDTC) [Excerpts.]
 
Effective immediately, Icon Polymer has changed as follows: Icon Aerospace Technology Ltd. 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_a58
. State/DDTC Posts Notice on Category XIV(f)(7) Includes Chemical Agent Resistant Coatings (CARC)

 
Consistent with 81 FR 49531 (July 28, 2016), Category XIV(f)(7) defense articles are designated as Significant Military Equipment. Accordingly, any application to export Category XIV(f)(7) defense articles requires a DSP-83 non-transfer and use certificate.

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OGS_a69
. EU Classifies Portable Battery-Operated Apparatus under the Combined Nomenclature

 
Regulations:
  – Commission Implementing Regulation (EU) 2017/1977 of 26 October 2017 repealing Implementing Regulation (EU) No 876/2014 concerning the classification of certain goods in the Combined Nomenclature

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OGS_a710
.
UK/DIT ECO Revises and Updates OGTCL Maritime Anti-Piracy, and Associated Approved Companies List

(Source:
UK/DIT ECO
)
 
The Export Control Joint Unit (ECJU) has revised and updated the following open general trade control licence (OGTCL):
 
 
The maximum number of weapons that licence holders are allowed to store in any approved armoury at any time has been increased. See Section 2g of the terms and conditions of the licence.
 

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NWSNEWS

NWS_a1
11. Bloomberg: “U.S. to Sanction Russian Companies After Missing Oct. 1 Deadline”

(Source: Bloomberg, 27 Oct 2017.) [Excerpts.]
 
The U.S. State Department said it would sanction dozens of Russian companies in the country’s defense and intelligence industry, after coming under criticism from lawmakers for missing an Oct. 1 deadline Congress set to punish Russia for its 2016 election meddling.
 
Under the new sanctions, the U.S. will ban “significant” transactions with the Russian companies, senior administration officials told reporters on a conference call Friday. The officials insisted on anonymity to explain the sanctions regime.
 
Among the companies named are arms trader Rosoboronexport, missile manufacturer Almaz-Antey PAO and United Shipbuilding Corp., according to a list published by the State Department. Weapons manufacturer Kalashnikov Concern and Sukhoi Aviation Holding Co., maker of a Russian fighter jet, were also on the list, which included companies already subject to separate restrictions. …

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NWS_a2
12. Expeditors News: “USTR Announces New Enforcement Efforts for GSP”

(Source: Expeditors News, 31 Oct 2017.)
 
On 25 October 2017, U.S. Trade Representative (USTR) Robert Lighthizer announced new efforts toward enforcement of eligibility criteria for beneficiary countries on the Generalized System of Preferences (GSP) program.
 
The new efforts will focus on closing outstanding GSP cases, and assessing the eligibility of beneficiary countries through a new interagency process. Additionally, the new process will include a triennial assessment by USTR on the eligibility of beneficiary countries. Currently, eligibility for a beneficiary country requires that a beneficiary country “meet 15 eligibility criteria established by Congress, including respecting arbitral awards in favor of U.S. citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access.”
 
The GSP beneficiary countries will be assessed over a three-year period, starting with beneficiary countries in Asia. GSP beneficiary countries from other geographic locations will be assessed during the second and third years of the process.
 
The USTR announcement can be found here.

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NWS_a3
13. Foreign Policy: “State Department Scraps Sanctions Office”

(Source: Foreign Policy, 26 Oct 2017.) [Excerpts.]
 
The State Department shuttered an office that oversees sanctions policy, even as the Donald Trump administration faced criticism from lawmakers over its handling of new economic penalties against Russia.
 
Secretary of State Rex Tillerson eliminated the Coordinator for Sanctions Policy office, which had been led by a veteran ambassador-rank diplomat with at least five staff, as part of an overhaul of the department, former diplomats and congressional sources told Foreign Policy.
 
Instead, the role of coordinating U.S. sanctions across the State Department and other government agencies now falls to just one mid-level official – David Tessler, the deputy director of the Policy Planning Office. The Policy Planning Office, which previously operated as a small team providing strategic advice to the secretary but did not manage programs or initiatives, has grown in power under Tillerson’s “redesign” of the department.
 
While the sanctions office was dissolved, the administration missed a key 1 October deadline to implement new penalties against Russia adopted by Congress in August. The move reinforced concerns among both Democratic and Republican lawmakers that the Trump White House is mismanaging the State Department and undercutting the role of U.S. diplomacy. …
 
Another former government official familiar with sanctions said, without the office, there’s a danger of bureaucratic turf battles cropping up inside the State Department and with other agencies on sanctions. “This could be a real problem,” the former official said.
 
The Treasury Department takes the lead on the technical aspect of sanctions, but implementing punitive measures requires elaborate coordination with allies, particularly the European Union, to build diplomatic support and to ensure a unified approach. As a result, the State Department plays a crucial role in making sanctions effective. …
 
The move, critics say, both cuts off department-wide input on key policy decisions and bottlenecks the department’s overall work as policy planning staff are stretched to the brink with an array of new responsibilities.
 
Sanctions have become a pillar of U.S. foreign policy, and the Trump administration has touted them as a pivotal tool to counter regimes in North Korea and Iran. Wherever sanctions policy is managed inside Foggy Bottom, the State Department has a pivotal role in determining whether sanctions actually work.
 
  “You can churn out all the sanctions you want,” Fishman said. “But if you don’t have diplomats around the world pounding the pavement every day to get allies on board, they won’t be effective.”

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NWS_a4
14. Reuters: “Factbox: What Are the Rules Airbus Admits to Breaking in U.S.?”

(Source: Reuters, 31 Oct 2017.)
 
Airbus says it has discovered and reported to U.S. authorities’ certain inaccuracies in past declarations to the State Department over the sale of defense goods and services under the International Traffic in Arms Regulations (ITAR).
 
ITAR is the official name for a 40-year-old set of rules governing the export of defense goods and data perceived to have implications for U.S. national security.
 
The rules were conceived in the Cold War mainly to prevent sensitive U.S. arms technology being sold or re-exported to countries deemed to be a risk, or covered by arms embargoes.
 
Countries currently on the ITAR blacklist include Belarus, China, Cuba, Iran, North Korea, Syria and Venezuela.
 
A further set of countries including Afghanistan and Iraq generally face restrictions, but may have ITAR-friendly export licenses issued on a case-by-case basis.
 
TRANSPARENCY
 
Aside from this main function, the ITAR rules impose secondary requirements for transparency and disclosure.
 
Companies dealing in ITAR-controlled goods must declare the use of sales agents or the payment of political contributions over $5,000 or commissions over $100,000 to the State Dept’s Directorate of Defense Trade Controls (DDTC).
 
These are set out in Part 130 of the ITAR regulations, the section of the rules that Airbus says it may have breached.
 
PENALTIES
 
Civil penalties for breaking the ITAR rules – usually as the result of an error – can reach $500,000 per violation but are typically relatively small and rarely make headlines, said Reid Whitten, managing partner and expert on international trade controls at the London office of U.S. law firm Sheppard Mullin.
 
There are bigger penalties for criminal or willful violations of the ITAR rules.
 
Criminal penalties can involve fines up to $1 million or up to 20 years’ imprisonment, or both, for each violation. But experts say sanctions in cases that do not involve a breach of national security were unlikely to be nearly as severe.
 
DEBARMENT
 
Violations can also lead to a company being debarred from all export from the United States of goods covered by ITAR, usually for at least three years.
 
For a foreign company like Airbus this could cause significant disruption to its business, because it would deprive it of access to U.S.-supplied parts for a range of platforms.
 
Unlike France’s Dassault Aviation, which avoids key U.S. technology to market its warplanes as “ITAR-free”, Airbus uses sensitive U.S. components across its non-civil business from small transport planes to helicopters, fighters and satellites.
 
  “The penalty that a company like Airbus would be most concerned about would be the possibility of debarment,” Whitten said.
 
MITIGATION
 
Airbus said it had brought the ITAR issue to the attention of the State Dept. ITAR rules say the State Dept may consider a voluntary disclosure as a “mitigating factor” in determining the administrative penalties, if any, that should be imposed.
 
An Airbus spokesman said the company submitted its initial notification of potential issues in November 2016.
 
An internal review led to a formal voluntary disclosure and results of Airbus’s investigation at the end of July 2017.
 
FCPA
 
The anti-corruption portion of the ITAR regulations differ from the main U.S. anti-bribery legislation, the Foreign Corrupt Practices Act, in the consequences.
 
Aside from maximum penalties, which are broadly similar, the FCPA allows for the “disgorgement” of past profits related to corruption, which can significantly raise the financial burden.
 
In 2008, Siemens agreed to pay $350 million in disgorgement and a $450 million fine to settle U.S. bribery charges.
 
By contrast, large-scale enforcement of the Part 130 rules under ITAR is relatively rare, Whitten said.

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NWS_a5
15. ST&R Trade Report: “Customs User Fees Adjusted for Inflation”

 
U.S. Customs and Border Protection has issued a final rule adjusting customs user fees and limitations for inflation for fiscal year 2018, including the following.
 
  – Commercial vessel arrival: $437/$5,955 annual cap
  – Barge and other bulk carrier arrival: $110/$1,500 annual cap
  – Commercial truck arrival: $5.50/$100 annual cap
  – Rail car arrival: $8.25/$100 annual cap
  – Private vessel or aircraft first arrival/calendar year prepayment: $27.50
  – Dutiable mail: $5.50
  – Commercial vessel or aircraft passenger arrival: $5.50
  – Customs broker permit: $138
  – Express consignment carrier/centralized hub facility, per individual waybill/bill of lading: $0.35 minimum, $1 maximum
  – Merchandise processing: minimum $25, maximum $485
  – Surcharge for manual entry or release: $3
  – Informal entry or release not prepared by CBP personnel: $2 automated, $6 manual
  – Informal entry or release prepared by CBP personnel: $9

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COMMCOMMENTARY

COMM_a01
16. C. Greene, C.N. Stinebower & C. Monahan: “Sudan Sanctions Revocation: The Key Takeaways”

(Source: Crowell & Moring LLP, 1 Nov 2017.)
 
* Authors: Carlton Greene, Esq., cgreene@crowell.com, 202-624-2818; Cari N. Stinebower, Esq., cstinebower@crowell.com, 202-624-2757; and Christopher Monahan, Esq., cmonahan@crowell.com, 202-624-2529. All of Crowell & Moring LLP.
 
On October 6, 2017, the U.S. Department of State announced the revocation of economic sanctions on Sudan and the Government of Sudan under Executive Orders 13067 and 13412. The State Department cited “the Government of Sudan’s sustained positive actions to maintain a cessation of hostilities in conflict areas in Sudan, improve humanitarian access throughout Sudan, and maintain cooperation with the United States on addressing regional conflicts and the threat of terrorism” as the basis for the revocation. The revocation became effective on October 12, 2017.
 
The Sudanese Sanctions Regulations (SSR), first issued in 1998, have greatly restricted business involving Sudan for almost two decades. The sanctions blocked transactions by U.S. persons with the Government of Sudan and prohibited U.S. persons from exporting goods, technology, or services to Sudan. The regulations further prohibited the performance by any U.S. person of a contract “in support of an industrial, commercial, public utility, or governmental project in Sudan” as well as transactions related to the petroleum or petrochemical industries there. Consequently, dealings involving Sudan entailed high regulatory risk.  
 
As a result of the revocation, effective, October 12, 2017, U.S. persons are no longer prohibited from engaging in transactions previously prohibited under the SSR. The State Department’s announcement represents the culmination of a process that began with a general license on January 17, 2017, providing relief from the SSR based on progress made by Sudan on the issues noted above, and was coupled with a process set forth in a new Executive Order, 13761 (and later amended by Executive Order 13804), for a permanent revocation of sanctions if progress was sustained. Although the revocation of these sanctions eliminates many risks involved with dealings in Sudan, some risks still remain. These include:
 
  – Risks under other sanctions programs.
The revocation does not affect sanctions imposed under Executive Orders other than 13067 and 13412, including sanctions relating to Darfur, South Sudan, or Global Terrorism. This means that various Sudanese persons, and persons that operate in Sudan, designated under other programs remain designated. Vigilant screening remains important. Furthermore, because Sudan remains designated as a “State Sponsor of Terrorism” (SST), the Terrorism List Governments Sanctions Regulations (TLGSR) prohibit U.S. persons from engaging in transfers from the Government of Sudan that would constitute a donation to a U.S. person, or with respect to which a U.S. person knows, or has reasonable cause to believe, would pose a risk of furthering terrorist acts in the United States. A general license in the TLGSR authorizes U.S. persons to engage in financial transactions with respect to stipends and scholarships covering tuition and related educational, living, and travel expenses provided by the Government of Sudan to Sudanese nationals who are enrolled as students in an accredited educational institution in the United States. Likewise, OFAC regulations continue require a license for the export of agricultural commodities, medicine, or medical devices to the Government of Sudan or to entities there. OFAC has provided a new general license to allow such exports. 
 

  – Export control risks.
Goods, technology, and software subject to the Export Administration Regulations (EAR) enforced by the Department of Commerce that are controlled for anti-terrorism purposes still require a license for export, re-export, or transfer to Sudan. The effect of this is that nearly any item on the Commerce Control List (CCL) requires a license for export to Sudan. Items not listed on the CCL but which are subject to the EAR (known as EAR99 items) also will require a license for certain end uses or end users. In addition to the licensing requirements for items subject to the EAR, any item subject to the International Traffic in Arms Regulations (ITAR) administered by the Department of State also requires a license to export to Sudan or South Sudan. Because the ITAR lists Sudan (not the Republic of South Sudan) as a proscribed destination pursuant to a United Nations Security Council arms embargo, the U.S. does not grant such licenses.
 
  – Risk that sanctions will be re-imposed.
The State Department’s decision to keep Sudan listed as a State Sponsor of Terrorism and its identification of many areas of continued concern there are a reminder that the U.S. government could choose at a later date to re-impose sanctions should Sudan backslide on its progress to date. In particular, the State Department has said that it will be looking to Sudan to fully implement U.N. resolutions relating to North Korea’s nuclear program. Sudan’s continued listing as a State Sponsor of Terrorism also carries a continued risk of negative publicity and reputational harm for companies conducting business with Sudan. Reporting of such transactions by public companies is monitored, and may be requested, by the Office of Global Security Risk at the Securities and Exchange Commission.
 
  – Outstanding judgments against Sudan.
Plaintiffs with outstanding judgments against the government of Sudan related to its support of terrorism, such as the recent $10.2 billion judgment against the nation for harboring terrorists responsible for the 1998 U.S. embassy bombings, could seek to attach any of Sudan’s interests in property that enters into the United States.

 

In addition to these risks, U.S. persons remain liable for violations of the SSR that predate January 18, 2017.
 
In sum, the revocation of economic sanctions against Sudan under Executive Orders 13067 and 13412 represents a substantial easing of commercial restrictions and an opportunity for new business, but significant risks remain. Companies considering dealings with Sudan should be aware of the various “rump” restrictions that remain in place and should maintain a vigilant screening process given the many sanctioned parties that still may operate there. They also may wish to consider whether any past dealings they may have had with Sudan before January 18, 2017 complied with the SSR, as there remains the possibility that OFAC may bring enforcement actions for older activity that predates the loosening of sanctions.

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COMM_a2
17. D.M. Edelman: “Cuba Policy Shift Stalls as Businesses Await OFAC Implementation”

(Source: Export Compliance Matters, 1 Nov 2017.)
        
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com
.
 
On June 16, 2017, President Trump issued a National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba.  The Memorandum outlined a framework for agencies such as the Treasury Department’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) to update and implement an expanded range of sanctions directed at Cuba and the Castro regime.  The most significant changes concern authorized individual travel and transactions with entities related to Cuban military or intelligence services. While the current administration seeks to roll back Obama-era Cuba policy that was geared towards reducing sanctions and normalizing relations, OFAC has yet to implement any regulatory amendments called for in the June Memorandum. For more information on the practical effect of the Presidential Memorandum and the future of Cuba sanctions, see our Cuba Sanctions 2017 update in Global Trade Magazine.

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COMM_a3
18. L. Chvosta Sr., N. Colin & D. Lew: “Alternatives to Prosecution in an Age of Global Enforcement”

(Source: White & Case LLP, 30 Oct 2017.)
 
* Authors: Luděk Chvosta Sr., Esq., lchvostasr@whitecase.com, +420-255-771-111; Nathalie Colin, Esq., ncolin@whitecase.com, +32-2-239-25-32; and Darryl Lew, Esq., dlew@whitecase.com, 202-626-3674. All of White & Case LLP.
 
Businesses are increasingly becoming global, and so are enforcement actions in response to alleged corporate wrongdoing around the world. The harsh reality is that wherever there is potential corporate criminal wrongdoing, companies and their employees may well find themselves the focus of not just one law enforcement body, but of many across the world. The potential fallout from just one enforcement authority opening a criminal investigation can be devastating, with its potential to inflict crippling fines, debarment and reputational damage. But when a company finds itself in the crosshairs of more than one prosecutor, further complications undoubtedly arise. Given the frequent involvement of more than one country’s enforcement authorities in the investigation and prosecution of the same transactions, companies need to assess the potential consequences of strategies and tactics in multiple jurisdictions and coordinate accordingly.
 
Corporations generally seek to behave consistently (deliberately so, in order to build brands), but the enforcement powers, processes and tools for resolution of corporate wrongdoing differ across the globe. Anti-corruption remains high on the agenda for enforcement bodies worldwide. As well as the US and the UK, France’s recent Sapin II law has shone the spotlight on corporate prosecution. Belgium, Switzerland and the Czech Republic all have the ability to pursue companies criminally for corruption. It is therefore vital that companies understand the alternatives to prosecution across jurisdictions so that a consistent and effective global strategy can be adopted.
 
One of the best things a company can do to avoid prosecution is to implement a robust compliance program, which is regularly reviewed to ensure its continued effectiveness. Such a plan may not stop a determined employee from engaging in wrongdoing, but it may protect the company, and may even help the company avoid a criminal investigation being opened against it.
 
But what if law enforcement does come knocking on the corporate door, and an investigation ensues and identifies wrongdoing attributable to the company itself, what global alternatives are there to resolve the matter short of short of a full-blown prosecution?
 
CIVIL SETTLEMENTS
 
The least intrusive of all the possible alternatives to prosecution is the civil settlement. This alternative avoids much of the reputational damage of a company or individual being publicly sanctioned for ‘criminality’, even if the underlying conduct amounts to criminal behavior. Unfortunately, whilst popular historically, civil settlements are now less likely to be used in cases of serious economic crime.
 
United States
 
Civil settlements in the US are often used in cases where the fundamental underlying behavior is less serious. The consequences of a civil settlement can still be onerous: Corporations, and other business entities, for example, can face a penalty of up to US$16,000 for each anti-bribery violation and be subject to disgorgement of ill-gotten gains, which often dwarfs statutory penalties. Further conditions can be attached to a civil settlement, such as suspending or debarring the company from engaging in specific business activities for a set period.
 
United Kingdom
 
Between 2008 and 2012, the UK’s Serious Fraud Office (SFO) made use of nine Civil Recovery Orders (CROs) against corporates in white collar cases. A CRO enables an enforcement authority to recover property obtained through unlawful conduct. There is no requirement to establish that a specific criminal offence was committed, but only that the property is or represents the proceeds of crime. Civil Recovery powers may be appropriate where the evidence does not support a realistic prospect of conviction, or where the public interest is better served by a civil, rather than criminal disposal.
 
However, the introduction of Deferred Prosecution Agreements in 2014, combined with the arrival of SFO Director David Green QC in 2012, has meant that CROs have now fallen out of favor as a tool to address and resolve white collar criminal conduct. CROs additionally attracted judicial criticism in the past for lacking transparency, despite the fact that CROs are a flexible and straightforward means of achieving resolution between repentant and reformed companies and the SFO. Unless there is a sea change in approach from the next SFO Director (David Green QC’s tenure ends in early 2018), civil recovery orders for cases of serious economic crime are likely, in most cases, to be a thing of the past.
 
NON-PROSECUTION AGREEMENTS
 
United States
 
An option only available in the US, the Non

Prosecution Agreement (NPA) can be used where a company or individual agrees to cooperate with the law enforcement agency, pays a monetary penalty and is subject to some remedial conditions for a time period. Under an NPA, criminal charges are not filed, enabling the company to demonstrate its good conduct, and no court review is required. In some cases (but not all) the enforcement authority does not require an admission of wrongdoing. NPAs can be used in a variety of circumstances, including to resolve allegations of criminal corporate wrongdoing entailing more severe misconduct than civil wrongdoing. Civil enforcement authorities, such as the SEC, can also use NPAs.
 
The penalties for breaching an NPA can be onerous: The law enforcement agency can file criminal charges and use any admissions made as part of the NPA process in the proceedings.
 
DEFERRED PROSECUTION AGREEMENTS
 
United States
 
The US has been using Deferred Prosecution Agreements (DPAs) for a number of years as a means to resolve matters involving corporate wrongdoing. Under the terms of a DPA, a company or individual admits to violating the law, and must assist the enforcement agency in its investigation of the underlying wrongful conduct. In addition to levying a monetary penalty, DPAs can often require the company to implement an enhanced compliance program and agree to corporate monitorship. In exchange, the enforcement authority agrees to defer the prosecution of the company for a specific, usually a three-year term. If the company complies with the terms of the agreement for the allotted period, the charges will be dropped. If not, the agency has the option to prosecute the company. DPAs are reached after a formal criminal case has been initiated against a company and official charging documents have been filed in court. Notwithstanding any such resolution with the company, individual representatives of the company may still be prosecuted. Civil enforcement authorities such as the SEC can also avail themselves of DPAs where appropriate.
 
United Kingdom
 
In the UK, DPAs were first introduced in 2014, and they remain a relatively new alternative to prosecution. Unlike their counterparts in the US, UK DPAs are available only in respect of corporates, although their use does not restrict the enforcement agency from prosecuting the individuals deemed responsible for the relevant acts.UK DPAs are typically considered appropriate when a company self-reports any wrongdoing and offers full and extensive cooperation in an investigation, although a self-report is not always the determinative factor-see the recent case of Rolls-Royce. Under the terms of the DPA, the agency agrees not to commence criminal proceedings, provided that the company agrees to a series of terms. As in the US, these terms usually include a combination of financial sanctions, enhanced compliance procedures (possibly including monitoring) and ongoing cooperation. UK DPAs do require court approval.
 
France
 
France’s recent Sapin II law introduced the concept “Judicial Agreement in the Public Interest” as an alternative to criminal prosecution. This means of disposition is available to any company suspected of having committed bribery, influence peddling (“trafic d’influence”) or laundering the proceeds of tax fraud. The agreement may be initiated before the start of criminal proceedings or after the company is indicted, but must be started before the company is called to appear before the French criminal courts. Where an agreement is reached, the fine imposed on the company may be up to 30 percent of the company’s average annual turnover. The agreement must be validated by the President of the relevant French court. In addition, the company can be required to implement a compliance program under the control of the French Anti-Corruption Agency for a period of three years, and indemnify all identified victims.
 
Czech Republic
 
Another jurisdiction where agreements similar to DPAs may be used is the Czech Republic. In 2012, Czech criminal legislation was introduced to create a form of settlement known as the “agreement on guilt and punishment.” Such agreements are reached between the public prosecutor and an accused company, and-as is the case in the US, the UK and France- must subsequently be approved by the competent court. A further prerequisite for entering into such an agreement is a declaration by the accused company that it committed the offence.
 
Amongst the European countries, Switzerland and Belgium have no direct equivalent to the DPA regime but do have a range of settlement options for companies facing allegations of economic crime. In Belgium, the public prosecutor may, in certain circumstances, agree to a financial settlement with a company where the ongoing proceedings are set aside and any identified victims are indemnified. Such a settlement may be entered into at any stage of the proceedings, but must be started before a final judgment has been issued. This type of settlement is currently under scrutiny in Belgium and may face significant changes in the near future. In Switzerland, the authorities have the power to refrain from prosecuting a company when it has made both reparations and every reasonable effort to right the relevant wrong, and where the public interest warrants it. The Swiss also have the power to impose a Summary Punishment Order.
 
In Germany there is no concept of corporate criminal liability. However, German companies may be subject to administrative fines if their directors, officers or managerial staff commit a criminal or administrative offence and either violate that company’s duties or enrich, or even attempt to enrich, the company. A company may also be fined, again administratively, if any of its directors or officers fails to take the organizational and supervisory measures required to prevent the company’s staff from committing business-related offences. Generally, such fines are intended to at least nullify any economic benefits the company has gained from the offence. Independently of this, in certain circumstances German criminal law permits an order to be granted confiscating the proceeds obtained by a company from a crime. On the other hand, Poland’s legislation allows Polish authorities to prosecute companies for economic crimes, but provides no settlement regime as an alternative to prosecution.
 
 
A GLOBAL STRATEGY
 
So where does this leave a company that finds itself under the spotlight of different enforcement authorities? The company’s aim must be to avoid resolving a matter in one jurisdiction that increases the exposure of the company to prosecution in another.
 
To achieve this objective, the company must determine its global strategy before it decides to approach any particular authority. There could be catastrophic consequences if it cooperates with one enforcer and then finds that any admissions it has made are subsequently used to prosecute it in another country. Multi-jurisdictional cases invariably have numerous strands, and one agency might choose to settle in respect of only some of the allegations, leaving another jurisdiction to pursue a completely different part of the case. Since there is no general protection internationally in respect of double jeopardy (although the principle applies in most countries), whether a corporate can avoid being punished by multiple national authorities for the same conduct comes down to negotiation and prosecutorial discretion.
 
To protect themselves, companies should focus on information gathering, to determine the likely scope of the alleged wrongdoing, the areas of the business potentially exposed, the jurisdictions that may be affected and the law enforcement agencies that could ultimately have an interest in the case. Once these facts have been established, the company then needs to consider where its relevant data is located The location of data is important for two reasons: first, there will be a need to formulate a document preservation order, so that the company can retain any relevant material which will need to be handed over to the particular law enforcement agencies in due course. Second, there can be jurisdictional challenges, for example, if a multinational company hosts its data in Switzerland but is likely to want to cooperate with law enforcement in countries such as the US and the UK, certain local laws may prohibit the voluntary disclosure of that data. This has the potential to jeopardize any cooperative relationship if the company has not attempted to think about, and engage meaningfully with, this issue and with other problems that may arise.
 
Consideration should also be given at an early stage to suspending any business activity that might continue to expose the company, regardless of jurisdiction. For example, if the allegations included that a company had made suspicious payments to intermediaries, the company might be sensible to impose a moratorium on such payments pending resolution of the matter.
 
Law enforcement agencies will expect companies to have considered all of these steps before making any meaningful attempt to engage with them. This process is compounded when more than one jurisdiction is involved. Companies are well advised to think strategically and to take independent legal advice from an experienced law firm as early as possible, so that any steps that are taken are made with a global resolution firmly in mind.
 

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COMM_a4
19. M. Volkov: “Anti-Corruption Risks: Global Enforcement Means Global Detection”

(Source: Volkov Law Group Blog, 31 Oct 2017. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
Over the last year, we have seen the Justice Department and SEC’s international coordination efforts bear fruit. DOJ has expended time and efforts to train prosecutors and law enforcement on anti-corruption investigations and prosecutions strategy. These programs inevitably foster cooperation and coordination through personal and professional relationships.
 
In particular, DOJ and the FBI have established working relationships with colleagues in the United Kingdom, France, Germany, Brazil, Canada, Netherlands, Switzerland and Sweden. In addition, the DOJ and the FBI are increasing cooperation with China and other Asian countries, especially in the sharing of information about subjects for investigation and fugitives from China.
 
The evidence of this cooperation appears in a number of enforcement actions, including the Alstom, Odebrecht, Braskem, Telia, and VimpelCom cases, in which prosecutors and law enforcement coordinated their efforts and ultimately the credit for the enforcement actions. The press releases accompanying FCPA enforcement actions always acknowledge the assistance of global anti-corruption partners and provide an important window into the global network of prosecutors and law enforcement agencies.
 
As the global anti-corruption enforcement system matures, I would expect that more countries would want to participate. Countries are revising their anti-corruption laws and allocating resources to enforcement programs. Some countries are moving slowly on this path given political resistance and others are more committed to the program. The OECD recently cited Russia, Chile, Sweden and the Ukraine to improve their anti-corruption laws and/or increase enforcement of existing laws.
 
Given this global framework and trend, global companies need to recognize that anti-corruption compliance is more important than ever before. Why?
 
With the increased focus on global anti-corruption enforcement, the risk of detection and reporting of potential corrupt conduct rises. To put it bluntly, with increased surveillance and monitoring of corporate conduct, there are more potential contacts between law enforcement and corporate actors or employees wishing to report potential violations. Global companies have never faced a riskier environment for potential detection and enforcement.
 
If a company is contacted by law enforcement in one country and potential evidence of a violation is learned, you can rest assured that other countries will be added to the investigation, as needed, to ensure that the investigation covers all relevant jurisdictions.
 
Anti-corruption compliance officers should respond to this by honestly assessing the state of their respective compliance programs, and with specific focus on internal reporting systems. To the extent the company supports its Speak Up culture and encourages internal reporting of potential violations of law, the compliance officer should reassess its reporting avenues and performance. Additional investments in reporting hotlines, and encouragement from senior management should be emphasized.
 
Companies that encourage employee reporting should ensure that there is no hint of retaliation against employees who report problems and concerns. If employees do not trust the company’s internal system, there are plenty of whistleblower attorneys circling a company looking for potential clients and large recoveries against the company.
 
The global enforcement system continues to mature and risks will increase exponentially. There are significant benefits to prosecutors and law enforcement from such coordination in terms of detection and conducting a global investigation in compliance with country-specific laws and practices. These efforts are bound to increase and with this increase the risks for global companies rise.

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ENEDITOR’S NOTES

 

Nicolas Boileau-Despreaux (1 Nov 1636 – 13 Mar 1711, often known simply as Boileau, was a French poet and critic. He did much to reform the prevailing form of French poetry, in the same way that Blaise Pascal did to reform the prose.)
  – “However big the fool, there is always a bigger fool to admire him.”
 
Matthew Hale (Sir Matthew Hale; 1 Nov 1609 – 25 Dec 1676) was an influential English barrister, judge, and lawyer most noted for his treatise Historia Placitorum Coronæ, or The History of the Pleas of the Crown.)
  – “The more business one has, the more you are able to accomplish, for you learn to economize your time.”

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EN_a321
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 28 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: 1 Nov 2017: 82 FR 50511-50517: Export Administration Regulations for Use of License Exceptions; Clarifications 

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 31 Oct 2017: 82 FR 50313-50315: Global Terrorism 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: 20 Oct 2017: Harmonized System Update 1707, containing 27,291 ABI records and 5,164 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_a0322. 
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published 
here

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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