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17-1205 Tuesday “Daily Bugle”

17-1205 Tuesday “Daily Bugle”

Tuesday, 5 December 2017

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here for free subscription. Contact us for advertising inquiries and rates.

[No items of interest noted today.] 

  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS Amends Denial Order Concerning Shantia Hassanshahi
  3. DHS/CBP Publishes CAMIR and CATAIR Updates
  4. DHS/CBP Splits ACE Deployment G, Release 3 in Two Components
  5. State/DDTC: (No new postings.)
  1. P.F. Linehan: “Use of Testimony Compelled in Foreign Jurisdictions”
  2. Gary Stanley’s ECR Tip of the Day
  3. R.C. Burns: ” OFAC Issues Finding of Violation to Foreign Ship Registry for Dealings with Iran”
  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 (9 Nov 2017), FACR/OFAC (13 Nov 2017), FTR (20 Sep 2017), HTSUS (20 Oct 2017), ITAR (30 Aug 2017)
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

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OGSOTHER GOVERNMENT SOURCES

OGS_a11
. Items Scheduled for Publication in Future Federal Register Editions
 

(Source:
Federal Register)
 
[No items of interest noted today.]  

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OGS_a2
2. Commerce/BIS Amends Denial Order Concerning Shantia Hassanshahi

(Source: Commerce/BIS, 4 Dec 2017.)  
 
* Respondent: Shantia Hassanshahi a/k/a Shahi a/k/a Shantia Haas a/k/a Sean Haas of Woodland Hills, CA.
* Charges: Willfully conspiring to export and cause the export goods and technology from Canada to Iran, as well as services related thereto from the U.S. to Iran, without the required license from the U.S. Department of Treasury, Office of Foreign Assets Control.
* Penalty: Shantia Hassanshahi is denied export privileges for a period of 5 years from the date of his conviction: 28 September 2017.
* Amendment: The 28 September 2017 order is amended to include the updated address information for purposes of the denial of Hassanshahi’s export privileges.
* Date of Order: 4 December 2017.

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OGS_aa33. DHS/CBP Publishes CAMIR and CATAIR Updates
(Source:
CSMS# 17-000752, 5 Dec 2017.)
 
In support of an upcoming deployment on 9 December 2017 to allow both express and non-express air carriers to provide to CBP a shipper’s phone number, the Air CAMIR is being amended for the Shipper (SHP) line. The new data element will be an optional field until further notice. The Summary of Changes and the Message Line Identifiers documents can be found: 
 
  – Here; and
  – Here.

The Appendix PGA document has been updated. For PG14 LPCO, added code ‘FWP’ for US Fish and Wildlife. For PG19 Entity Role codes, removed ‘future use’ remarks for FD1 (since code is in use). For PG23, added ‘LFR’ Affirmation of Compliance code.
 
This information can be found under the “PGA Message Set Documents” here.
 
The document can be accessed directly here.
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(Source:
CSMS #17-000751, 4 Dec 2017.)
 
To allow additional time for ACE statement testing, CBP is splitting ACE Deployment G, Release 3, into two separate components – 3A and 3B.
 
Deployment G, Release 3A (9 December 2017):
 
On 9 December 2017, CBP plans to deliver ACE Deployment G, Release 3A. This deployment will include:
 
  – e214 (electronic Foreign Trade Zone admission)
  – Electronic filing of e214 transactions will be mandatory in ACE on 9 December 2017.
  – Manufacturer ID (MID) Creation
  – Availability in ACE Production environment of the new ACE Statement Reports REV-101, REV-102, REV-103 and REV-104.
 
NOTE: CBP will closely monitor the potential of a government funding lapse at midnight, 8 December 2017, and will provide further communication regarding any impact to this deployment as early as possible.
 
With respect to Statements, for validation purposes, both the new ACE Statement reports and the legacy ACE Account Revenue reports will be available to all members of the trade community in the ACE Reports production environment on 9 December 2017. From 9 December 2017 until 6 January 2018, the new ACE Statement reports will solely be for trade validation/testing and therefore not actionable.
 
The Automated Commercial System (ACS) will remain the system of record for all statements until Deployment G, Release 3B; the trade community will continue to file statements in ACS until 6 January 2018*.
 
Deployment G, Release 3B (6 January 2018):
 
On 6 January 2018, CBP will deliver ACE Deployment G, Release 3B. At this point, ACE will become the system of record for all statements with the exception of Reconciliation statements*.
 
No later than 13 January 2018, CBP will deploy ACE Statement reports with ACE statement data. The legacy ACE Account Revenue reports universe will no longer be available.
 
* CBP will deliver Statements for Reconciliations as part of ACE Deployment G, Release 4 on 24 February 2018. CBP will deliver Statements for all other entries on 6 January 2018.
 
Trade users are encouraged to review the applicable Information Notices posted to CBP.gov/ACE. The Reports Information Notice includes details on the Statement reports, including the validation between the legacy and new statement reports.
 
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COMMCOMMENTARY

COMM_a16
. P.F. Linehan: “Use of Testimony Compelled in Foreign Jurisdictions”

 
* Author: Patrick F. Linehan, Esq., plinehan@steptoe.com, Steptoe & Johnson LLP, Washington DC.
 
In November, the US Circuit Court for the Second Circuit declined to rehear
 
en banc
 
its 19 July 2017 decision in
 
United States v. Allen
, which recognized the testimony of a criminal defendant that is compelled by law in a foreign jurisdiction cannot be used, either directly or indirectly, as evidence against him at trial. The Second Circuit’s decision has far-reaching consequences for individuals involved in criminal investigations with a multijurisdictional dimension in both the United States and countries where testimony can be compelled. This includes investigations inherently transnational in character, such as FCPA investigations, as well as investigations that can arise in other areas of cross-border activity, such as those involving civil agencies like the SEC and CFTC.
 
Allen
 
resulted from a decision by the US District Court, Southern District of New York regarding the conviction of two individuals on charges stemming from alleged manipulation of the London Interbank Offered Rate (LIBOR). The conviction was based in significant part on evidence arising from compelled testimony the defendants, both Rabobank employees and British citizens, gave to the United Kingdom’s Financial Conduct Authority (FCA).  Under UK law the defendants could have faced criminal penalties for failing to respond to the FCA’s inquiry.  During the US government’s investigation, another Rabobank employee interviewed by the FCA reviewed the defendants’ FCA testimony before deciding to cooperate with the US government, and later testified both before the grand jury and at the defendants’ US trial.  The district court rejected the defendants’ argument that the government’s use of the cooperating witness’s testimony at trial, because it was tainted by his review of defendants’ compelled FCA testimony, violated the defendants’ Fifth Amendment rights.  Although the government argued that the Fifth Amendment does not preclude its use of testimony compelled by a foreign sovereign, the district court declined to address the issue and held that the cooperating witness’s testimony had not been tainted by his review of the defendants’ compelled testimony. 
 
In July, the Second Circuit reversed the district court’s decision.  The court held that because the defendants’ testimony was compelled by UK law, the government’s use of it in securing an indictment and at the trial violated their Fifth Amendment right against self-incrimination.  The court emphasized that the Fifth Amendment’s self-incrimination clause applies even where the defendant’s testimony was compelled “pursuant to foreign legal process.” The court ruled the Fifth Amendment prohibited the use of the compelled testimony because the United States was the “prosecuting sovereign” seeking to use it. The court concluded the compelled testimony tainted both the cooperator’s grand jury and trial testimony and vacated the defendants’ convictions and dismissed the indictment. 
 
The court’s refusal to rehear the case confirms that
 
Allen
 
is now the controlling law in the Second Circuit, and is in general accord with decisions of the DC Circuit and the Fourth, Fifth, Ninth, and Tenth Circuits (though those circuits have not addressed this specific issue squarely). As such, foreign nationals under investigation in the United States and elsewhere can take some degree of comfort testimony that is truly compelled in a non-US jurisdiction will not be able to be used against them in a US prosecution. 
 
We expect in future cases addressing this issue, one topic that will likely be hotly contested involves whether testimony taken by the foreign authority at issue was truly “compelled.”  It will be interesting to see whether non-US enforcement agencies will re-evaluate laws and policies that require the provision of other witness’s testimony to “targets” of their investigation, and whether US prosecutors will work with their international counterparts in seeking to limit this type of information-sharing with witnesses, so as to avoid the type of tainting of witness testimony that occurred here. In its motion for rehearing
 
en banc
, the government made clear its view that
 
Allen
“will discourage the commitment of resources necessary to bring close cases, due to the possibility that prosecutions will be dismissed,” and that it “has already elected to forgo cross-border investigations that, absent the panel’s decision, it would have vigorously pursued.” Given these concerns, it is a virtual certainty the government will seek certiorari review of the Second Circuit’s decision.

 

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* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
Information subject to U.S. export controls, a category in the National Archives and Record Administration’s 
Controlled Unclassified Information (UCI) Registry
, is considered 
covered defense information
 
when it is (1) marked or otherwise identified in the contract, task order, or delivery order and provided to the contractor by or on behalf of DoD in support of the performance of the contract; or (2) collected, developed, received, transmitted, used, or stored by or on behalf of the contractor in support of the performance of the contract. When DoD contractors hold information that is export controlled, but it is not “provided to the contractor by or on behalf of DoD in support of the performance of the contract” or “collected, developed, received, transmitted, used, or stored by or on behalf of the contractor in support of the performance of the contract,” the information is not covered defense information as defined in the DFARS. If the export controlled information is related to the DoD activity, it requires protection as covered defense information under 
DFARS Clause 252.204-7012
.
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(Source:
Export Law Blog
, 5 Dec 2017. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com
, 202-508-6067.
 
Last Tuesday the Office of Foreign Assets Control (“OFAC”) issued a “finding of violation” (but not a fine) against the Dominica Maritime Registry (“DMR”) for entering into a “Binding Memorandum of Understanding” with the National Iranian Tanker Company (“NITC”), an Iranian government entity listed on OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”). Because this was a “contingent contract” in which a blocked party had an interest, DMR’s entry into the contract, according to OFAC, violated section 560.211 of the Iranian Transactions Sanctions Regulations.
 
The wrinkle in this case is that the Dominica Maritime Registry is located in Fairhaven, Massachusetts, the Government of Domenica having subcontracted its governmental maritime registry functions in 1999 to the Northeast Maritime Institute in Fairhaven, which is why, I suppose, OFAC thought it could sink its teeth into DMR. Subcontracting maritime registry functions is an unusual, although not unprecedented, situation. The Republic of the Marshall Islands has also subcontracted its maritime registry functions to International Registries, Inc. in Reston, Virginia.
 
OFAC noted a number of aggravating factors in its decision. DMR, according to OFAC, did not voluntarily disclose the violation; it “knew” that NITC was on the SDN list; it failed to exercise a “minimal degree of caution” in signing the contract with NITC; and DMR executives “actively participated” in negotiating and executing the contract. As mitigating factors OFAC noted that DMR was a small company with no prior penalties and that it recently hired trade counsel to assist in OFAC compliance issues.
 
So here we have what appears to be an intentional violation that was not voluntarily disclosed and yet the only penalty is a finding of violation – or, in more colloquial terms, a half-hearted slap on the wrist followed by a beat-down with a few wet noodles. This is likely because the real mitigating factor was one that OFAC did not want to mention much less admit: sovereign immunity. If OFAC wanted to collect any fine imposed on DMR, it would have been forced to resort to an action in federal court, where is would have run up against the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq.
 
Of course, the FSIA issue here is whether the maritime registry function is a commercial activity exempted from the jurisdictional restrictions of the FSIA. The Supreme Court in Republic of Argentina v. Westover spelled out the test for making this determination
 
the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in “trade and traffic or commerce.
 
Dominica’s International Maritime Act of 2000 sets forth the various conditions for registration of vessels entitling them to fly a Dominican flag, including a determination of seaworthiness and compliance with various other regulatory requirements, including vessel marking. Once registered the vessel is accorded certain rights by the Dominican government, including the right to freely enter its ports. It seems beyond doubt that maritime registration, even if subcontracted to a U.S. corporation, is a governmental and not a commercial function.
 
Based on this, the real mitigating factor in this case had nothing to do with this being a first violation or that DMR was small and agreed to hire trade counsel. No, the real mitigating factor was that OFAC probably could not have collected any fine that it imposed.
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ENEDITOR’S NOTES

EN_a19
. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 
* George Armstrong Custer (5 Dec 1839 – 25 Jun 1876) was a United States Army officer and cavalry commander in the American Civil War and the American Indian Wars. On June 25, 1876, while leading the 7th Cavalry Regiment at the Battle of the Little Bighorn in Montana Territory against a coalition of Native American tribes, he and all of his detachment-which included two of his brothers-were killed. The battle is popularly known in American history as “Custer’s Last Stand.” Custer and his regiment were defeated so decisively at the Little Bighorn that it has overshadowed all of his prior achievements.
  – “There are not enough Indians in the world to defeat the Seventh Cavalry.”
 
* Martin Van Buren (born Maarten van Buren; 5 Dec 1782 – 24 July 1862; was an American statesman who served as the eighth President of the United States from 1837 to 1841. A founder of the Democratic Party, he was 8th president of the United States. Van Buren was the first President of the United States to be born a United States citizen. Of Dutch ancestry, he is however the only President in American history who spoke English as a second language.
  – “The less government interferes with private pursuits, the better for general prosperity.”

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EN_a210. 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:
9 Nov 2017: 82 FR 51983-51986: Amendments to Implement United States Policy Toward Cuba

  

FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

  – Last Amendment:
13 Nov 2017: 82 FR 52209-52210: Removal of Côte d’Ivoire 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, and Census/AES guidance.  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, c
ontaining 
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: 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: 19 Nov 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_a311
. Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor)
 

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

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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 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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