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18-0104 Thursday “Daily Bugle”

18-0104 Thursday “Daily Bugle”

Thursday, 4 January 2018

TOP
The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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: (No new postings.)
  3. Justice: “Turkish Banker Convicted of Conspiring to Evade U.S. Sanctions Against Iran and Other Offenses”
  4. State/DDTC: (No new postings.)
  5. USITC Updates HTS for 2018
  6. UK DIT/ECO Revokes Prior Versions of Five OGELs
  7. UK/OFSI Updates Financial Sanctions List Concerning North Korea
  8. Hong Kong TID Will Temporarily Suspend all E-Services on 19 Jan
  1. WorldECR News Alert of 4 Jan 2018
  1. E.R. Schrantz: “ITAR and the FCPA: Strange but Not Uncommon Bedfellows”
  2. G. Kreijen: ” Shipping Criminal Liability: The Difficult Position of the Transportation & Logistics Sector”
  3. L.P. Feldman: “The Top Five Customs and Trade Issues for 2018”
  4. M. Volkov: “2017 FCPA Year in Review (Part I of II)”
  5. T. Murphy: “Intercompany Customs Valuation Issue – India”
  6. Gary Stanley’s ECR Tip of the Day
  1. Jack Bartlett Receives Customs Broker License
  2. Rolls-Royce Posts Position for Export Control Specialist
  1. Full Circle Compliance and the Netherlands Defense Academy Will Present “Winter School at the Castle”, 5-9 Feb 2018 in Breda, the Netherlands
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (8 Dec 2017), DOD/NISPOM (18 May 2016), EAR (27 Dec 2017), FACR/OFAC (28 Dec 2017), FTR (20 Sep 2017), HTSUS (1 Jan 2018), ITAR (3 Jan 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

 
[No items of interest noted today.]

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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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(Source:
Justice, 3 Jan 2018.) [Excerpts.]
 
Mehmet Hakan Atilla was found guilty today of conspiring with others, including Reza Zarrab, aka Riza Sarraf, who previously pleaded guilty to evading U.S. sanctions among other offenses, to use the U.S. financial system to conduct transactions on behalf of the Government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature. …
 
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
 
Beginning in or about 1979, the President, pursuant to the International Emergency Economic Powers Act (IEEPA), has repeatedly found that the actions and policies of the government of Iran constitute an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States and declared a national emergency to deal with the threat. In accordance with these presidential declarations, the United States has instituted a host of economic sanctions against Iran and Iranian entities. This sanctions regime prohibits, among other things, financial transactions involving the United States or United States persons that were intended for the Government of Iran or Iranian entities.
 
Atilla, Zarrab, and others used deceptive measures to provide access to international financial networks, including U.S. financial institutions, to the Government of Iran, Iranian entities and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (SDNs). They did so by, among other things, using the Turkish bank at which Atilla acted as Deputy General Manager of International Banking (Turkish Bank-1) to engage in transactions that violated U.S. sanctions against Iran. In particular, they took steps to protect and hide Zarrab’s supply of currency and gold to the Government of Iran, Iranian entities, and SDNs using Turkish Bank-1, and in doing so, shielded Turkish Bank-1 from U.S. sanctions. Atilla, Zarrab, and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime. As a result of this scheme, the co-conspirators induced U.S. banks to unknowingly process international financial transactions in violation of the IEEPA.  
 
————-
Mehmet Hakan Atilla, 47, is a resident and citizen of Turkey. Atilla was convicted of conspiracies to defraud the United States, to violate the IEEPA, to commit bank fraud and to commit money laundering, as well as a substantive count of bank fraud. The conspiracy to defraud the United States count carries a maximum term of imprisonment of five years. The conspiracy to violate the IEEPA and money laundering conspiracy counts each carry a maximum term of imprisonment of 20 years. The bank fraud counts each carry a maximum term of imprisonment of 30 years. The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. Atilla is scheduled to be sentenced on April 11, before Judge Berman.
 
Zarrab, 34, also a resident and citizen of Turkey, pleaded guilty Oct. 26, 2017, to one count of conspiring to defraud the United States, which carries a maximum sentence of five years in prison; one count of conspiracy to violate the IEEPA, which carries a maximum sentence of 20 years in prison; one count of bank fraud, which carries a maximum sentence of 30 years in prison; one count of conspiring to commit bank fraud, which carries a maximum sentence of 30 years in prison; one count of money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; and one count of conspiring to bribe a U.S. public official and possessing contraband in a federal detention center, which carries a maximum sentence of five years in prison. Zarrab’s sentencing date has not been scheduled.

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OGS_a55
. USITC Updates HTS for 2018

(Source:
USITC
, 1 Jan 2018)
 
On 1 January 2018, the U.S. International Trade Commission (“USITC”) posted the updated Harmonized Tariff Schedule (“HTS”) for 2018.
 
The updated HTS can be found
here
.

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OGS_a77
. UK/OFSI Updates Financial Sanctions List Concerning North Korea

(Source:
UK/OFSI
, 3 Jan 2018.)
 
The Office of Financial Sanctions Implementation (“OFSI”) publishes a list of all those subject to financial sanctions imposed by the UK which it keeps updated.
 
The details of those subject to sanctions are also categorized and available in
specific regime lists
.
 
To receive an email alerting you to any changes to the list, you can subscribe to our
e-alert
.
 
Downloading the List
 
A full list of designated persons/entities is available in various formats
here
. This includes a format that allows you to download the information on to your own system.
 
Using the List
 
The list provides information to help you decide whether you are dealing with someone who is subject to sanctions. It lists:
 
  – Full name
  – Any known aliases
  – Honorary, professional or religious titles
  – Date of birth
  – Place of birth
  – Nationality
  – Passport details
  – National identification numbers (e.g. ID cards, Social Security Numbers, etc.)
  – Address
  – Any additional information that may be useful (e.g. nicknames, details of family, etc.)
  – Title of the financial sanctions regime under which the designated person is listed
  – The date when the designated person was added to the list by HM Treasury
  – When the information regarding the designated person/entity was last updated by HM Treasury
  – A unique ID reference number relating to the designated person/entity

 

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OGS_a88
. Hong Kong TID Temporarily will Suspend all E-Services on 19 Jan

(Source:
Hong Kong TID
, 4 Jan 2017.)
 
All e-services of our website will be suspended from 18:30 to 22:30 on 19 January 2018 (Friday) due to system maintenance.

We apologize for any inconvenience caused.

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NWSNEWS

NWS_a1
9. WorldECR News Alert of 4 Jan 2018

(Source:
WorldECR
, 4 Jan 2018.)
 
  – OFAC ends 2017 with sanctions medley
  – Japan’s CISTEC publishes China export control concerns
  – Hong Kong publishes updated Air Transhipment Cargo Exemption Scheme list
  – UK updates financial sanctions list
  – Moneygram-Ant Financial merger fails to clear CFIUS
 
[Editor’s Note: Visit
http://worldecr.com/
to subscribe to WorldECR, the journal of export controls and sanctions.]

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COMMCOMMENTARY

COMM_a01
10. E.R. Schrantz: “ITAR and the FCPA: Strange but Not Uncommon Bedfellows”

(Source:
The Spotlight, Jenner & Block Litigation Monitor
, Vol. 9, Issue 5, Dec 2017.)
 
* Author: Erin R. Schrantz, Esq., Jenner & Block,
eschrantz@jenner.com
, +1 312-840-8674.
 
Airbus Group SE, a European multinational corporation that designs, manufactures and sells aeronautical products worldwide, announced in a company release that it has discovered “inaccuracies” in filings it made to the U.S. State Department under the International Traffic in Arms Regulations (ITAR). The ITAR
imposes reporting requirements
on defense contractors that export defense-related “articles and services.”
Part 130 of the ITAR
requires defense contractors to report all fees and commissions paid related to the sale of the same.
 
Recent history and high-profile investigations reveal how a company’s suspected or actual noncompliance with the ITAR can serve as a prelude to the discovery of FCPA violations (or vice versa).  In 2010, for example, military contractor 
BAE pled guilty
 to a conspiracy that involved both violations of the ITAR and making false statements regarding its FCPA compliance program.  Among other misfeasance, BAE “made a series of substantial payments to shell companies and third-party intermediaries” without due diligence or proper corporate controls.  In some instances, BAE concealed the identities of so-called “marketing advisors” on its payroll.  After entering its guilty plea, BAE was ordered to pay a $400 million criminal fine.
 
The possible interplay between violations of the ITAR and the FCPA could be an issue for Airbus, which has since 2016 been embroiled in a criminal investigation run by the United Kingdom Serious Fraud Office.  That investigation is looking into allegations of fraud, bribery, and corruption related to “third party consultants.”  At present, no U.S. authority has announced opening a formal investigation into Airbus.  Airbus said on October 31st that it is cooperating with U.S. authorities generally.

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COMM_a2
11. G. Kreijen: “
Shipping Criminal Liability: The Difficult Position of the Transportation & Logistics Sector”

(Source:
World Trade Controls Blog
, 4 Jan 2018.)
 
* Author: Gerard Kreijen, Esq.,
Gerard.Kreijen@loyensloeff.com
, Loyens & Loeff, Amsterdam.
 
On 23 November 2017, the Court of Amsterdam handed down its decisions in the
case concerning the Dutch transportation company
charged with breaching the military embargo against the Russian Federation. These decisions are the latest in a string of Dutch enforcement cases relating to the transit of military goods which have raised concerns within the transportation & logistics sector. In the case that was brought against the transportation company, the court ruled that the company was guilty of willfully transiting military goods to an entity in Russia in breach of the applicable military embargo (
Rechtbank Amsterdam, nr. 13/994046-17, 23 November 2017
). In a second decision, the court acquitted the managing director of the company of having actually directed the breach. (
Rechtbank Amsterdam, nr. 13/994045-17, 23 November 2017
).
 
Facts
 
Amsterdam Airport Customs had stopped a shipment from Malaysia destined to the Russian Federation on 17 March 2015. The consignor was the Royal Malaysia Air Force. The consignee was Ural Optical & Mechanical Plant in Yekaterinburg, Russia (“Ural Optical”). Inspection revealed that the shipment contained two OMB-Units. Such units are part of the optical radar station 36SH-01 used by the Russian-developed Sukhoi 30MKI fighter jet. The Sukhoi 30MKI is flown by the Malaysian air force which has entered into maintenance contracts with Russian (military) manufacturers, one of these being Ural Optical.
 
The two OMB-Units, designed for military use and application, were being sent to Russia for repair. They categorize as ML11.a.g. (guidance and navigation equipment) on the EU Common Military List. The transportation company had no transit license for the shipment. If requested, such a license would have been refused because the Dutch 2014 Sanction Regulation Territorial Integrity Ukraine (in Dutch:
Sanctieregeling territoriale integriteit Oekraïne 2014
) prohibits the transit of military goods to Russia.
 
The Fine for the Transportation Company
 
The defense had pleaded for acquittal of the company. It had argued amongst others that there was no transit, at least not a ‘complete’ transit: Dutch customs had stopped the forwarding of the goods which therefore had never reached Russia. The court, however, disagreed. Pursuant to the Dutch Strategic Goods Order (in Dutch: Besluit strategische goederen) transit through the Netherlands means the transportation of military goods which are being brought into Dutch territory solely for the purpose of transporting such goods to a destination outside Dutch territory. Since it was clear that the presence of the goods at Amsterdam airport served the sole purpose of shipping them to Russia, the court found that the transit was completed – a transit for which normally a license would have been required.
 
It is worth noting that according to the definition of territory in international law the transit was complete and, therefore, the license required at the very moment that the shipment entered Dutch airspace.
 
The court also rejected the argument that the charges lacked a legal basis. According to the defense, Ural Optical was not a listed entity on the annex to Council Regulation (EU) 269/2014. In the view of the defense this meant that there was no prohibition to ship the goods to Ural Optical. The court considered this irrelevant. Regulation 269/2014 lists persons and entities that are subject to asset freezes and the prohibition to provide economic resources. The prohibition to transit military goods to Russia rests on the Sanction Regulation Territorial Integrity Ukraine 2014. This is a blanket prohibition covering all persons and entities in Russia.
 
As in the earlier enforcement cases, the court found evidence of willfulness in the simple fact that the defendant had performed the transit (‘blanc’ willfulness criterion). It reiterated the irrelevance of any willful intent to breach the law. The court emphasized that the defendant, as a professional party, knew that its acts and omissions were governed by the sanction regulations. A lack of intent to breach the regulations or a lack of knowledge of the prohibition has no meaning for the proof of blanc willfulness. It cannot exculpate the defendant.
 
For these reasons, the court found that the defendant had willfully transited the military goods in breach of the military embargo against Russia. It imposed a fine of 50,000 euros, half of the amount being conditional with a probation of two years.
 
The public prosecution had demanded a penalty of 80,000 euros. In determining the fine, however, the court considered as mitigating factors that (i) the defendant had not been previously convicted for similar facts, (ii) counsel for the defendant had stated during the hearings that the defendant would adjust its internal procedures and controls to prevent future breaches, and (iii) judgment had not been passed within two years of the reasonable term.
 
The Acquittal of the Managing Director
 
In the separate case brought against the managing director of the transportation company, the public prosecution had demanded that the director be sentenced to a two months provisional prison term for having instructed and/or actually directed the prohibited transit.
Under Dutch law, the actual direction (in Dutch: feitelijk leidinggeven) of criminal acts, includes the situation wherein a managing director – although competent and obliged to do so – fails to take measures to prevent the acts, thereby deliberately accepting the significant risk that the criminal acts will occur.
 
According to the public prosecution the defendant had knowledge of the transit of the military goods to Russia. By failing to intervene (while competent and obliged to do so) the defendant had instructed and/or actually directed the unlawful transit. The defense principally argued that the court file showed no correspondence that referred to the military nature of the goods and that the defendant did not know that the transit concerned military goods.
 
The court found that it had been insufficiently shown that the defendant knew that a shipment was being transited to Russia and the shipment contained military goods. There was an email in the court file which included the House Airway Bill. The email also showed that the consignor of the goods was the Royal Malaysian Air Force. There was no proof, however, that the defendant was aware of this email, since neither from the court file nor from the court hearings it followed that it had ever reached him. In addition, the court noted that there were no circumstances that could lead to the conclusion that the defendant should have been aware of the intended transit. Thus, the defendant could not be blamed for not having intervened.
 
Because there was no proof that the defendant knew of the criminal acts there was also no proof that the defendant had deliberately accepted the significant risk that the criminal acts would occur. For these reasons, the court acquitted the defendant of having instructed and/or actually directed the breach.
 
The Challenge for the Transportation & Logistics Sector
 
These decisions vividly illustrate the risks of transporting military equipment. The single transit of a military item may result in the criminal liability of transportation companies and their managers. The main challenge is to align commercially viable business models for handling cargo with ever stricter compliance requirements.
 
The central question is whether this can be done without sacrificing the business. In practice, logistic service providers handle thousands of shipments on a daily basis. It seems impossible to sort out for each shipment whether or not it concerns military goods. If, for whatever reason, crucial information is not disclosed and the consignor merely provides a vague description, only physical inspection can reveal the true nature of the goods. And there are other complicating factors. Itineraries are often decided under the wire depending on the availability of flights and fuel prices. In the event of transit in particular, goods will often be on ground in a certain jurisdiction for a few hours only. It is unclear, at this stage, whether the Dutch courts are sufficiently aware of these practical difficulties. But even so, compliance under these circumstances is hardly an easy task …

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COMM_a3
12. L.P. Feldman: “The Top Five Customs and Trade Issues for 2018”

 
* Author: Lenny P. Feldman, Esq., Sandler, Travis & Rosenberg, P.A,
lfeldman@strtrade.com
, +1 305-894-1011.
 
Importers, customs brokers, and supply chain service providers are likely to see important changes affecting customs and trade policy in 2018. Tighter regulation of e-commerce, tougher enforcement of laws, and new developments in trade preferences, supply chain security, and other areas will all pose challenges to even the most experienced operators. This article highlights five issues that might affect your business this year and how you can successfully respond to each.
 
E-Commerce – Develop Your Strategy
 
As online sales continue to skyrocket, so too does U.S. Customs and Border Protection’s interest in stanching the resulting increase in illicit small-package trade while facilitating legal shipments. As a result, CBP and other government agencies are expected to start establishing a framework for the automation, data, processes, and liabilities pertaining to e-commerce handlers and fulfillment enablers.
 
Companies should place a priority on developing and implementing an e-commerce strategy that will address importer of record/right to make entry requirements, data and information receipt and dissemination, filing opportunities and restrictions, and terms and conditions with business partners.
 
NAFTA and GSP – Consider the Alternatives
 
As negotiations to update NAFTA stumble, there is increasing concern that the U.S. may actually withdraw from this foundational free trade agreement, which would have significant ramifications for sourcing for numerous industries. In addition, the recent expiration of the Generalized System of Preferences has once again halted duty breaks on imports of thousands of products from more than 100 countries, with no clear indication as to when those benefits might be restored.
 
Traders should carefully examine how their goods may qualify for duty-free treatment under other available agreements or programs. In particular, importers should take a closer look at using the First Sale Rule, which yields a 10-20 percent average tariff reduction by basing the dutiable value on the first sale, rather than the last, in a multi-tiered import transaction.
 
Trusted Trader – Position Yourself for Benefits
 
Companies focused on return on investment should act now to refocus on or recalibrate their participation in trade partnership programs. Membership in CBP’s CTPAT (supply chain security) and ISA (import compliance) programs has plateaued, prompting CBP to launch efforts to enhance these initiatives by updating requirements and providing more benefits. For example, with CBP’s ten Centers of Excellence and Expertise now fully operational, trusted accounts can expect not only fast track and front of the line privileges at border crossings but also greater penalty mitigation in enforcement actions.
 
To take advantage of benefits under the updated CTPAT and ISA programs, importers will have to demonstrate effective processes and procedures that meet the reasonable care standard on issues like classification and valuation while addressing admissibility standards related to other government agencies, intellectual property, and forced labor.
 
Trade Remedies – Look Carefully at Your Supply Chain
 
The Trade Facilitation and Trade Enforcement Act enacted in 2015 revved up federal efforts to enforce trade remedy laws, including by giving CBP a bigger role in investigating efforts to circumvent antidumping and countervailing duty orders. However, the Trump administration put the pedal to the metal in 2017 by issuing executive orders calling for enhanced or supplemental bonding to secure the payment of AD/CV duties after billions of dollars in such revenues were lost in recent years. The administration also took the unusual step of self-initiating national security and global safeguard investigations on products such as steel, aluminum, and clothes washers, introducing an element of uncertainty that has required importers to carefully weigh sourcing options to avoid supply chain disruptions.
 
In this environment companies are well-advised to consider tactics such as availing themselves of AD/CV duty rates for specific manufacturers and shippers (which are generally lower than the country-wide or “all others” rates), properly identifying and declaring manufacturers and shippers (and combinations thereof), and intentionally increasing import volumes during gap periods between the effective dates of orders.
 
In-Bond Movements – Map Out the Data Flows
 
Last fall CBP overhauled the requirements of its in-bond program, which allows imported goods to be entered at one port of entry without appraisement or payment of duties and transported to another destination for entry or exportation. Changes include requiring carriers to file in-bond applications (CBP Form 7512) electronically in most cases, specifying a 30-day window for transportation of in-bond shipments, and revising the timeframe for reporting or updating in-bond records. However, a requirement to submit additional data elements, including the six-digit classification number under the Harmonized Tariff Schedule of the U.S., has sparked major concerns.
 
CBP has indicated a willingness to initially allow for an informed compliance period for the HTSUS number requirement, but in the meantime companies need to make any necessary adjustments to their processes and controls to ensure they have HTSUS numbers and other required information. Failure to adequately prepare could result in cargo delays, holds, and liquidated damages claims. 
 
All parties involved in global supply chains will feel the impact of the legal, regulatory, and policy changes anticipated in the coming months. Particularly in the areas of e-commerce, NAFTA and GSP, trusted trader, trade remedies, and in-bond movements, taking the right steps now to adjust and enhance internal controls, policies, and procedures will help companies address new challenges while taking advantage of new opportunities.

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COMM_a4
13. M. Volkov: “2017 FCPA Year in Review (Part I of II)”

(Source:
Volkov Law Group Blog
, 2 Jan 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com
, 240-505-1992.
 
With the close of 2017, FCPA enforcement continues as a major priority for the US Department of Justice.  Notwithstanding fears and concerns that the new administration would turn its back on FCPA enforcement, the Justice Department’s work continues unabated and unhindered.  All the doomsayers have to admit that no big changes have occurred in the Justice Department’s commitment to battle global corruption.
 
The Numbers
 
Looking at the scorecard, DOJ brought FCPA enforcement actions against 6 companies (and one non-prosecution agreement), totaling approximately $845 million in fines and penalties, and 13 individual criminal guilty pleas or indictments for FCPA violations (excluding United Nations prosecution case).  The SEC brought enforcement actions against 6 companies, totaling approximately $262 million in penalties, and 3 individuals (one of whom settled).  All in all, the government took in approximately $1.1 billion in fines and penalties for FCPA violations.
 
There is no question that, with the exception of individual prosecutions, 2017 was a decline from the record-setting pace of 2016. Some of that has to be explained based on the transition to a new administration.
 
The Two Big Events:  FCPA Corporate Enforcement Policy and the Rise in Individual Prosecutions
 
First, and most significantly, the new FCPA Corporate Enforcement Policy has put to rest much of the carping and criticizing surrounding FCPA enforcement.  There will always be naysayers, negative forces and pessimists surrounding the Justice Department’s efforts, but the new FCPA Corporate Enforcement Policy has effectively killed FCPA reform efforts, arguments for an unwise and unproven compliance defense and other technical and wordy “reforms” and so-called “ideas” that turn out to be ill-advised, or unworkable in practice.
 
The FCPA Corporate Enforcement Policy is well-thought out, carefully crafted based on years of experience and set in stone.  In practice, it gives companies a way out of prosecution – voluntary disclosure, cooperation and remediation will equal a declination.  If you choose not to disclose, or if you fall under an aggravating circumstance, you will pay a price but you can still earn a significant discount.
 
Second, building on the Yates Memorandum and the new FCPA Corporate Enforcement Policy, the Justice Department revealed its ongoing work and success in focusing on individual prosecutions.  The numbers are beginning to tell the tale, and I expect this trend to continue for the foreseeable future – individuals will be prosecuted for FCPA violations.
 
In the last year, the Justice Department prosecuted a total of 13 individuals.  This is no accident.  The Yates memorandum has had an impact, and the new FCPA Corporate Enforcement Policy will act as a force multiplier to increase this focus because of the requirement that corporations identify culpable individuals and provide specific evidence for each individual.  Any company seeking a declination or a 50 percent discount will have to cough up evidence targeting individuals in the company involved in illegal bribery schemes.
 
Two Less Significant, But Important Trends: Remediation Expectations and Globalization
 
There are two other trends, both of which should be noted, but are not as significant as the two mentioned above.
 
Third, the Justice Department’s expectations as to remediation in the disciplinary prong have reached a crescendo in terms of expectations.  A company seeking benefits under the new FCPA Corporate Enforcement Policy better have used a meat cleaver when it comes to disciplining executives and employees involved in FCPA bribery violations.  This remediation requirement extends not just to firing and disciplining those directly involved, but the Justice Department has made it clear that it expects supervisors should be disciplined when they should have known about misconduct or prevented such misconduct. Companies that “protect’ executives from this standard and impose no penalties on them will be subject to second-guessing by the Justice Department and a potential loss in millions for a reduction under the new enforcement policy.
 
Finally, FCPA enforcement in 2017 reflected the growing maturity of the global anti-corruption enforcement program.  Most FCPA enforcement actions now involve multi-jurisdiction collaboration and coordination with penalty offsets among the participating countries.  This is a positive development that reflects the fairness of reducing the risk of multiple punishments for the same conduct.  This trend is likely to continue since Justice Department officials have sought to address the overlapping enforcement issues involved in a coordinated, global anti-corruption program.
 
[Editor’s Note: Part II in this series will be included in tomorrow’s, 5 Jan 2018, Daily Bugle.]

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COMM_a5
14. T. Murphy: “Intercompany Customs Valuation Issue – India”

(Source: Editor, 4 Jan 2018.)
 
* Author: Ted Murphy, Baker McKenzie, ted.murphy@bakermckenzie.com.
 
We wanted to bring to your attention a recent report out of India involving a customs valuation investigation that could have meaningful consequences for other multinationals who do business there.
 
The article published in The Indian Express earlier this week details a customs investigation by the Directorate of Revenue Intelligence (“DRI”) (as you may know, DRI is a group within the Central Board of Excise and Customs responsible for investigating and pursuing violations of India’s Customs Act) into the intercompany pricing of a multinational enterprise. DRI alleged that the Indian subsidiary of this multinational undervalued goods purchased/imported from related parties over a 6-year period and, as a result, failed to pay approximately $96 million (Rs. 612.72 crore) in customs duties.
 
There are several interesting/important takeaways from this article.  
 
The first is the substantive customs valuation issue involved, as it may be a common one among multinationals. From the article, it appears that the intercompany distribution agreement required the Indian distributor to spend a certain amount in the Indian market advertising and promoting the product (which is not unusual). DRI took the position that that the amounts the distributor spent on advertising and promotion in the local market were for the benefit of the seller and, therefore, were part of the “price actually paid or payable” (i.e., part of the customs value) for the imported goods. What is interesting is DRI’s characterization of normal distributor expenses as being for the benefit of the seller, rather than being for the benefit of the distributor (i.e., the amount the distributor spends advertising promoting the product helps justify the margin the distributor earns on resale of that product). This characterization has a major impact on how the expenses are treated for customs purposes.
 
The second take-away is to remember that DRI is quite aggressive, particularly when it comes to multinationals, and even more particularly when it comes to intercompany customs valuation issues. We are currently assisting several clients with customs-related disputes with DRI and can attest to this personally.
 
While the article does not say whether DRI’s conclusions are being further challenged in court (one would expect/hope so), all multinationals that do business in India should take this as a warning and review their intercompany agreements/practices to identify any additional customs risk.

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COMM_a6
15. Gary Stanley’s ECR Tip of the Day

(Source: Defense and Export-Import Update, 4 Jan 2018; available by subscription from
gstanley@glstrade.com
)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
If a foreign entity received ITAR-controlled technical data via DSP-5 or an expired agreement, ITAR § 123.9 is the appropriate vehicle to seek approval for retransfer/reexport. However, if the foreign entity received the data via a Technical Assistance Agreement (TAA) and the TAA is still in effect, then a retransfer request pursuant to ITAR § 123.9 may not be used. Instead, the TAA scope must be increased via an amendment.

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MSEX/IM MOVERS & SHAKERS

MS_a1
16. Jack Bartlett Receives Customs Broker License

(Source: Editor)
 
Congratulations to John W. (“Jack”) Bartlett, Assistant Editor of
Bartlett’s Annotated ITAR (“BITAR”), 
Bartlett’s Annotated FTR (“BAFTR”), and the
Daily Bugle Events & Jobs columns, for receiving his U.S. Customs Broker license from CBP.  Contact Jack at 1-703-994-0546 or
Jack@JEBartlett.com.

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MS_a2
17. Rolls-Royce Posts Position for Export Control Specialist

(Source: Rolls Royce)
 
* Company: Rolls-Royce
* Position: Export Control Specialist
* Location: Indianapolis, IN
* Summary: 
As an Export Control Specialist within Rolls-Royce reporting to the Director of Strategic Export Control Americas, you will play an integral role as part of the Rolls-Royce core function.  You will be responsible for preparing, reviewing, and submitting export/import licenses, agreements, and subsequent amendments within requirements of U.S. Government regulations.
You will also act as a centralized point of contact for all export licenses and agreement requests for assigned programs and/or customers.

* See job posting HERE.

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TEEX/IM TRAINING EVENTS & CONFERENCES

(Source: Editor)
 

  
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ENEDITOR’S NOTES

 
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EN_a320
. 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: 8 Dec 2017: 82 FR 57821-57825: Civil Monetary Penalty Adjustments for Inflation
 
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: 27 Dec 2017: 
82 FR 61153-61162
: Revisions, Clarifications, and Technical Corrections to the Export Administration Regulations

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 28 Dec 2017: 
82 FR 61450-61451: Iraq Stabilization and Insurgency 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 (1 Jan 2018) 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 2018: 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: 1 Jan 2018: Updated HTS for 2018 

  – 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: 3 Jan 2018: 83 FR 234-237: Department of State 2018 Civil Monetary Penalties Inflationary Adjustment

  – The only available fully updated copy (latest edition: 3 Jan 2018) 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_a0321
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.

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

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

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