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18-0111 Thursday “Daily Bugle”

18-0111 Thursday “Daily Bugle”

Thursday, 11 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 
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  1. Commerce/BIS: ISTAC to Meet on 24-25 Jan in Wash DC 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Posts ACE Deployment G3B Issue Tracker Update
  4. DHS/CBP Posts Reminder on ACE Reports Deployment
  5. State/DDTC: (No new postings.)
  6. EU Posts Restrictive Measures Concerning Situation in Guinea-Bissau
  7. Hong Kong TID Posts List of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates
  1. Global Trade News: “CBP Postpones Date for In-Bond Regulatory Changes”
  2. Wash Post: “Trump Expected to Keep Sanctions Relief for Iran but May Add Some Penalties”
  3. WorldECR News Alert of 11 Jan 2018
  1. K.C. Georgi & R.K. Alberda: “Trump Administration to Begin Enforcing GLOMAG: Here’s What It Means for International Business”
  2. L. Connell: “Three Simple Steps to Improve Your Corporate Culture”
  3. N.A. Baylis, R. Dereskeviciute & A. Di Mario: “EU and UK Sanctions and Export Controls Update – Winter 2017”
  4. Gary Stanley’s ECR Tip of the Day
  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 Amendments: ATF (15 Jan 2016), Customs (8 Dec 2017), DOD/NISPOM (18 May 2016), EAR (8 Jan 2018), 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

1. Commerce/BIS: ISTAC to Meet on 24-25 Jan in Wash DC

(Source: Federal Register, 11 Jan 2018.) [Excerpts.]
 
83 FR 1328: Information Systems Technical Advisory Committee; Notice of Partially Closed Meeting
  The Information Systems Technical Advisory Committee (ISTAC) will meet on January 24 and 25, 2018, 9:00 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Avenues NW, Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to information systems equipment and technology.
 
Wednesday, January 24
 
Open Session
 
  (1) Welcome and Introductions
  (2) Working Group Reports
  (3) Old Business
  (4) Industry Presentation: Learnings from Semiconductor and Device Roadmaps: 10, 7, 5nm and beyond
  (5) Industry Presentation: Fab Process Overview/Walkthrough
  (6) Industry Presentation: SQL Injection
  (7) Industry Presentation: State-of-the-Art in Supercomputing and the TOP500 systems
 
Thursday, January 25
 
Closed Session
 
  (8) Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
 
  The open sessions will be accessible via teleconference to 25 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, January 17, 2018. …
  For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer. 

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OGSOTHER GOVERNMENT SOURCES

OGS_a12. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register

 
[No items of interest noted today.]

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(Source:
CSMS #18-000037, 11 Jan 2018.)
 
Following the January 6th ACE Deployment G, Release 3B, please find an update on all deployment-related issues here.
 
For more information on the deployment, including information on the daily Deployment Support Call, please go here.
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OGS_a45. DHS/CBP Posts Reminder on ACE Reports Deployment

(Source: CSMS #18-000034, 11 Jan 2018.)
 
As a reminder, no later than January 13, 2018, CBP will deploy ACE Statements reports with the Statements universe, which replaces the Account Revenue universe.
 
Details are available in the ACE Reports Information Notice, which has been updated with additional information on a new AD/CVD universe that will be available in parallel with the current AD/CVD universe for a period of one month.
 
The information notice may be accessed here.
 
  – Related CSMS No. 17-000807, 18-000015.

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OGS_a56. State/DDTC: (No new postings.)

(Source: State/DDTC)
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OGS_a67. EU Posts Restrictive Measures Concerning Situation in Guinea-Bissau
(Source: Official Journal of the European Union, 11 Jan 2018.)
 
Regulations:
* Council Implementing Regulation (EU) 2018/31 of 10 January 2018 implementing Article 11(1) of Regulation (EU) No 377/2012 concerning restrictive measures directed against certain persons, entities and bodies threatening the peace, security or stability of the Republic of Guinea-Bissau
 
Decisions:
* Council Implementing Decision (CFSP) 2018/36 of 10 January 2018 implementing Decision 2012/285/CFSP concerning restrictive measures directed against certain persons, entities and bodies threatening the peace, security or stability of the Republic of Guinea-Bissau
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OGS_a78. Hong Kong TID Posts List of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates
(Source: Hong Kong TID, 10 Jan 2018.)
 
The list provides an overview of specimen signatures of officers in the Hong Kong Trade and Industry Department (“TID”) who are authorized to sign on and issue Delivery Verification Certificates and import and export licenses covering strategic commodities under the Import and Export Ordinance.
 
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NWSNEWS

NWS_a1
9. Global Trade News: “CBP Postpones Date for In-Bond Regulatory Changes”

(Source: Integration Point Blog, 8 Jan 2018.)
 
U.S. Customs and Border Protection (CBP) has announced the agency is postponing initial implementation of changes to its in-bond regulations for several months–after it had planned to end a flexible enforcement period on 25 February 2018.
 
The original date of the new regulations was 27 November 2017. CBP’s announcement extends the period of leniency.
 
The agency is also indefinitely postponing the implementation of a provision in the 27 November 2018, final in-bond rule to require the inclusion of the six-digit HTS number on Immediate Transportation (IT) in-bond transportation entries. IT entries allow merchandise, upon U.S. arrival, to be transported to another U.S. port, where a subsequent entry will be filed.
 
On 2 July 2018, CBP will no longer accept paper CBP Form 7512 (Transportation Entry and Manifest of Goods Subject to CBP Inspection and Permit), according to the announcement.
 
On 6 August 2018, electronic reporting of all transactions will be mandatory for carriers, and CBP will not accept paper copies of CBP Form 7512 for arrival and export functionality.
 
Also on that date, electronic reporting of bonded cargo location and of diversion to a port “other than reported on the original in-bond” will be required. The Automated Commercial Environment will reject arrival if neither of these reports is performed, CBP said.

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NWS_a2
10. Wash Post: “Trump Expected to Keep Sanctions Relief for Iran but May Add Some Penalties”

(Source: The Washington Post, 10 Jan 2018.) [Excerpts.]
 
President Trump is expected to agree this week to continue granting Iran a reprieve from sanctions over its nuclear program, while again signaling his displeasure with the international nuclear deal that lifted the penalties, U.S. and European officials, congressional aides and others said.
 
He also is expected to announce new sanctions linked to human rights and other issues that would not directly affect the nuclear agreement but would ­underscore U.S. concerns about Iran’s response to recent anti-government protests and other actions, officials and others said.
 
The decision, first reported by the Associated Press, keeps the United States in the Iran deal, at least for the time being, despite Trump’s suggestion last year that he was inclined to walk away from it. Most of Trump’s national security advisers, including Secretary of State Rex Tillerson and Defense Secretary Jim Mattis, have urged him to waive the sanctions again. …

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NWS_a3
11. WorldECR News Alert of 11 Jan 2018

(Source: WorldECR, 11 Jan 2018.)
 
  – US sanctions Iranian companies for links to ballistic weapons programme
  – EU imposes further sanctions on North Korea
  – Bulgarian president blocks anti-corruption bill
  – Unified or bifurcated? Export controls at a crossroads
  – Vietnam’s anti-corruption crackdown causes tension with Germany
 
[Editor’s Note: Visit 
https://worldecr.com/ to subscribe to WorldECR, the journal of export controls and sanctions.]

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COMMCOMMENTARY

COMM_a01
12. K.C. Georgi & R.K. Alberda: “Trump Administration to Begin Enforcing GLOMAG: Here’s What It Means for International Business”
(Source: Arent Fox LLP, 10 Jan 2018.)
 
* Authors: Kay C. Georgi, Esq., kay.georgi@arentfox.com, 202.857.6293; and Regan K. Alberda, Esq., regan.alberda@arentfox.com, 202-775-5771. Both of Arent Fox LLP.
 
Right before the holidays, President Trump and his Administration took significant steps toward using economic sanctions to tackle international human rights abuses and corruption. The Administration’s actions underline the ever-growing importance of know your customer (KYC) and anti-corruption due diligence and compliance procedures for international business. In particular, companies doing business in high-risk countries and in high-risk industries, such as mining and government contracts, should consider expanding KYC to include a review of any public reports of human rights abuses or corruption by customers and vendors alike.
 
What Happened
 
On December 20, 2017, President Trump signed an Executive Order (EO 13818) that declared that the prevalence and severity of human rights abuse and corruption threatens the stability of international political and economic systems. EO 13818 blocked the assets of the 13 persons listed in the Annex of the Order, hailing from 13 different countries around the world, and laid the framework for applying blocking and US visa restrictions on additional persons in future. EO 13818 is based on the authority provided to the President under the International Emergency Economic Powers Act (IEEPA) and the Global Magnitsky Human Rights Accountability Act (Public Law 114-328), signed into law by President Obama On December 23, 2016 in his last days in office.
On December 21, the Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions on an additional 39 individuals and entities affiliated with the 13 designated in the newly issued Order, bringing the total sanctioned individuals and entities to 52 under the OFAC SDN designator [GLOMAG].[FN/1] A Treasury Department
press release
details the reasons why these persons and entities were sanctioned. OFAC also published
FAQs
on the Executive Order and a
webpage
for the Global Magnitsky sanctions.
 
The same day, the Administration issued its fifth annual report on the US government’s actions to implement the Sergei Magnitsky Rule of Law Accountability Act[FN/2] and added five names to the list of 49 Russian sanctioned under that Russia-specific law (under OFAC SDN designator [MAGNIT]).
 
In addition to adding many names to OFAC’s current list, the President’s signing of EO 13818 authorizes future blocking and US visa restrictions by OFAC (acting in consultation with the Secretary of State and the Attorney General). Pursuant to EO 13818, OFAC can sanction foreign persons:
 
  (1) Who are responsible for or complicit in, or have directly or indirectly engaged in, serious human rights abuse;
  (2) Who are current or former government officials, or persons acting for or on behalf of such an official, who is responsible for or complicit in, or has directly or indirectly engaged in (i) Corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; or (ii) The transfer or the facilitation of the transfer of the proceeds of corruption.
 
The activities described in (1) and (2) – human rights abuses, corruption, and the transfer or facilitation of the proceeds of corruption by foreign persons – are the targeted activities at the heart of the Executive Order. However, the Executive Order reaches beyond those who are “responsible for,” “complicit in,” or “directly or indirectly engaged” in the targeted activities. It also authorizes the US Administration to block the assets and apply visa restrictions to:
 
  – Foreign persons who are part of the same government that conducted the targeted activities[FN/3] and foreign persons who have attempted to commit the targeted activities.
  – Any person, US or foreign, who materially assists, sponsors, or provides financial, material, or technological support[FN/4] for, or goods or services to, the targeted activities or designated persons.[FN/5]
 
What Does GLOMAG Mean for International Business?
 
Under the Executive Order, the US Administration can sanction not only those directly involved in human rights abuses and corruption, but also those who materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to, the targeted activities or designated persons.
 
The first GLOMAG targets were, understandably, the alleged bad actors themselves. A read of OFAC’s press release explaining the actions for why the original 13 persons were in the EO Annex and added to the OFAC [GLOMAG] SDN list is informative, showing a wide range of misconduct in many countries. For example, Mukhtar Hamid Shah is a Pakistani surgeon who “Pakistani police believe to be involved in kidnapping, wrongful confinement, and the removal of and trafficking in human organs.”
 
One hopes that the international business community is not trafficking in human organs. But other [GLOMAG] designations are related to key global business sectors, such as Dan Gertler, an international businessman and billionaire who, according to OFAC, has “amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals in the Democratic Republic of the Congo (DRC).” OFAC designated no fewer than 18 affiliated entities and one individual together with Mr. Gertler.  
 
Several others on the [GLOMAG] list are there for international corruption; one (Slobodan Tesic) is there for dealing arms and munitions in the Balkans, while Maung Maung Soe “oversaw the military operation in Burma’s Rakhine State responsible for widespread human rights abuse against Rohingya civilians.”
US persons (including US companies, US citizens and permanent residents, and anyone in the United States) are prohibited from engaging in transactions with a [GLOMAG] SDN, and with entities owned 50% or more by [GLOMAG] SDNs. Additionally, non-US persons who engage in transactions with a [GLOMAG] SDN risk also being designated as an SDN. This underlines the need to do due diligence on all customers, vendors, and business partners, and their beneficial owners, internationally. This alone is not new, as other laws and Executive Orders have authorized to imposition of blocking sanctions on those providing material assistance to SDNs.
 
But the Executive Order also authorizes blocking sanctions to those who materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to, the targeted activities even absent the presence of an SDN. This means that companies or individuals involved with parties that may be engaged in human rights violations or corrupt activities, even if not designated an SDN, run the risk of potentially being designated themselves under this broad authorization. In order to mitigate this risk, in addition to checking for SDNs, KYC procedures, as well as vendor and other business partner diligence procedures, should also in appropriate cases check public records for evidence of (i) Human rights abuses; and (ii) Corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery; particularly in high risk countries and in high risk industries, such as mining and government contracts. The more involved the business relationship, the greater the level of diligence in this area should be conducted.[FN/6] Multinational publicly-traded companies with best practice KYC, supply chain, and business partner due diligence programs were already doing this, but [GLOMAG] reinforces the need for this to become standard practice.
 
————-

  [FN/1] See
here for a complete list of the designations.

  [FN/2] The Sergei Magnitsky Rule of Law Accountability Act of 2012 (Public Law 112-208) is a prior law, which targets persons for gross violations of internationally recognized human rights in Russia while the Global Magnitsky Act targets persons for violations of human rights and corruption globally.
  [FN/3] Foreign persons who are or have been a leader or official of (i) an entity, including any government entity, that has engaged in, or whose members have engaged in, any of the above activities relating to the leader’s or official’s tenure; or (ii) an entity whose property and interests in property are blocked pursuant to this order as a result of activities related to the leader’s or official’s tenure.
  [FN/4] While the use of the phrase “materially assists” would tend to mean that it would require assistance or significant support, goods, or services to result in sanctioning of secondary or supporting actors, neither the Global Magnitsky Human Rights Accountability Act nor EO 13818 provide guidance on what degree of assistance or support would trigger sanctions. To date, OFAC has not published guidance on this topic in its FAQs.
  [FN/5] These include: (i) Any person having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of: (a) any the above activities; or (b) any person whose property and interests in property are blocked pursuant to this order; or (ii) Any entity, including any government entity, that has engaged in, or whose members have engaged in, any of the above activities, where the activity is conducted by a foreign person; (iii) Any entity owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order; or (iv) Anyone who has attempted to engage in any of the targeted activities.
  [FN/6] On the reverse, it may be impractical or even impossible for some companies to do the necessary level of due diligence on their customers (e.g. internet-based companies). Other industries (e.g. sales of consumer household products or office supplies) may have such a low risk of designation that the high cost of the added due diligence into the ultimate consumer purchasers is simply not worth the benefit.
 

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COMM_a2
13. L. Connell: “Three Simple Steps to Improve Your Corporate Culture”

(Source: Volkov Law Group Blog, 10 Jan 2018. Reprinted by permission.)
 
* Author: Lauren Connel, Esq., Volkov Law Group, lconnell@volkovlaw.com.
 
What exactly does “corporate culture” mean? Compliance professionals often talk about how important “tone from the top” or the “mood in the middle” is, but what does that really mean?
 
Improving corporate culture has been directly tied to higher profits and a wide range of benefits to all stakeholders. A recent study by NBER (Here) found that 91% of executives consider corporate culture to be “very important” or “important” at their firm, and 79% rank culture as at least a “top 5” factor among all of the things that make their firms valuable. A strong company culture is correlated with higher employee retention rates, increased creative thinking and more collaborative work, a decreased likelihood of whistleblowing, and, at the end, a more profitable company. Statistical research and empirical studies support these conclusions.
 
But building culture requires a paradigm shift from compliance departments. Traditionally the ethics and compliance function has been focused on program components – such as training or policies and procedures, but research has shown again and again that we must shift our focus to include corporate culture and the underlying values held by your organization. This will improve not only compliance with legal and regulatory requirements, but also build a foundation where employees make decisions and act on your organizations values, even when no one is looking.
 
An example of the paradigm shift compliance departments need to make is asking ourselves why we slow down at school crossings – is it to avoid a ticket or protect nearby children? As a society, we want the answer to be the latter. Your company should seek to build a similar mindset with its own culture. Employees, managers, and executives should seek to make the ethical choice, which is also compliance with relevant laws and regulations. In the FCPA context, “we don’t bribe because it is against the law” should be replaced by “we don’t bribe because it is not ethical.”
 
But measuring and building culture is not simple. It is not as easy to report on as a 99% training completion rate. It is also not as easy to communicate success or problems with corporate culture as with other metrics. The NBER study notes that “corporate culture is a difficult-to-observe force within companies,” and focuses closely on the process it uses to collect and analyze data. That is putting it mildly, corporate culture is difficult to observe… and measure, and change, and establish.
 
Corporate culture must be conscientiously built – this is where ethics and compliance departments and professionals must take the lead. Corporate culture must be communicated through simple messages about the values a company believes in and, at the same time, leverage corporate governance mechanisms, such as the program components mentioned earlier, to strengthen and reinforce these values. For example, including values-based metrics in employee performance reviews that, ultimately, will lead to increased compensation. These can be, for example, whether or not the employee collaborates with colleagues or acts as an ethics leader. Another example is structuring compensation to reward long-term success instead of short-term profits. Here are three simple steps to start integrating corporate culture into your compliance program:
 
  (1) First, you have to understand where corporate culture is now. Using tools like surveys, interviews, and focus groups allows you to measure what your employees and managers value now and what your workplace norms are. Use simple questions in surveys to increase participate rates and save more in-depth discussions for interviews and focus groups. Ask questions about what their values are and how they act workplace.
  (2) Next, work to define what values should guide your organization. These will form the basis for the corporate culture you want to build and your compliance program as a whole. Use the information you gathered in the first step to understand where your weak points are. Most importantly, set a message that will be understood across your organization, taking into account cultural or location differences.
  (3) Finally, you put the two together and design an implementation process to build and improve on what you have – through not only your policies and procedures and training programs, but also the entire compliance communication structure. Use meetings, emails, social media, and any other chance you have to emphasize corporate values. Your ultimate goal is to ensure that corporate values are reflected within the daily activities of your employees, managers, and executives.
 
To get the process started, it is important to get the support and buy-in of senior executives and company leaders. Their message has the greatest impact on company values as perceived by employees and mid-level managers. Involving them in the first steps will build buy-in and ongoing support. To do that, start with the same message about improving profitably and corporate performance as I did here… it works.

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COMM_a3
14. N.A. Baylis, R. Dereskeviciute & A. Di Mario: “
EU and UK Sanctions and Export Controls Update – Winter 2017″
(Source:
K&L Gates
, 10 Jan 2018.)
 
* Authors: Neil A. Baylis, Esq., neil.baylis@klgates.com,

+44.(0)20.7360.8140; Raminta Dereskeviciute, Esq., raminta.dereskeviciute@klgates.com, +44.(0)20.7360.8264; and Alessandro Di Mario, Esq., alessandro.dimario@klgates.com, +32.(0)2.336.1938. All of K&L Gates LLP.

 
The EU and UK sanctions regimes have seen significant change during the last few months. Discussions are ongoing regarding the UK’s plans for its post-Brexit sanctions policy but uncertainty and division dominates the headlines. Outside of the UK, the world of sanctions is ever-changing, with the EU continuously reviewing and/or revising many of the sanctions it imposes on individuals, entities and governments. In addition, the past few months have seen the Trump administration undermine the Iran nuclear deal, the EU and UN expand sanctions imposed on North Korea, Lithuania introduce its own Magnitsky Act and French authorities carry out a dawn raid against LafargeHolcim for alleged terrorist financing. Below is a summary of some of the main updates since our last alert (see here) for sanctions and export controls across the UK and EU.
 
UK Updates
 
The Sanctions and Anti-Money Laundering Bill
Since our last update, the Government’s plans for the UK’s post-Brexit sanctions policy have come under significant scrutiny in various sub-committee meetings and reports, including a review of the new Sanctions and Anti-Money Laundering Bill (the “Sanctions Bill”), the text of which was published on the 19 October 2017.

The Sanctions Bill introduces the framework through which the UK will be able to legislate to impose sanctions once it has left the EU. It allows the UK Government to impose sanctions through secondary legislation, without the approval of Parliament, as well as issue licences to permit sanctioned conduct. However, it is worth noting that the UN currently influences a large proportion of the EU’s and UK’s sanctions policy and, pursuant to the UK’s continued membership of the UN, will carry on doing so post-Brexit.

In addition, the current version of the Sanctions Bill extends the obligation to report sanctioned entities (addressed in our last update) to all legal persons, for which a failure to comply is a criminal offence. If this provision remains, it will increase the burden of compliance for businesses, which will need to address their sanctions escalation processes.

Since the text of the Bill was published, the House of Lords Select Committee on the Constitution has criticised the broad powers granted to the ministers to create new sanctions, calling them “constitutionally inappropriate”. It also raised concerns about the ability of ministers to create criminal offences under those same powers. Among others, Lord Pannick QC called for reform of the Sanctions Bill, so that ministers are required to consider necessity and proportionality when imposing new sanctions.

Furthermore, the Joint Committee on Human Rights, in its review of the Bill, has raised concerns about the extent of the delegated powers given to the Government to impose sanctions, as well as the level of safeguards required to ensure the Bill complies with human rights requirements, pointing to a lack of parliamentary scrutiny of measures that can result in criminal offences and a loss of liberty. As such, the committee has called for much of the detail that has been left to be defined in the regulations imposed under the Government’s delegated powers to instead be included in the Bill itself.

It is expected that the Sanctions Bill will receive royal asset in April 2019.

Future relationship between the UK and EU sanctions policies
On 17 December 2017, the House of Lords EU External Affairs Sub-Committee published a report, setting out its views on the UK’s post-Brexit sanctions policy, in which it suggested that the UK should continue to co-ordinate closely on sanctions policy with the EU. The Sub-Committee has recommended that if the UK is unable to continue to participate in a common foreign and security policy with the EU, then the Government ought to propose that a political forum be established between the EU and the UK to coordinate sanctions policy and at the very least, have an informal engagement with the EU on sanctions, similar to the current relationship the EU has with the US. As the UK and EU enter the second stage of negotiations, we will continue to update you on any developments.

Office of Financial Sanctions Implementation guidance for charities and non-government organisations  

 
In reaction to several requests from small charities for clearer information on issues affecting the sector, so that they could ensure compliance, the Office of Financial Sanctions Implementation has provided a factsheet for charities and other non-government organisations that provides guidance on operating in areas where financial sanctions are in force. The guidance addresses issues such as accepting donations from, or giving donations to, individuals and entities in countries subject to sanctions, the licensing regime in relation to financial sanctions and how to deal with financial services organisations.

Export controls update    

In late November 2017, the Export Control Organisation announced that it had updated nine UK open general export licences (“OGELs”), which are pre-published licences to export certain goods on specified terms. The OGELs were updated in light of amendments made by the EU to its control list of dual-use items, the majority of which were agreed under a multilateral export control regime also known as the Wassenaar Arrangement. The 41 participating members of the Wassenaar Arrangement introduced a number of technical changes that are reflected in the updates to the OGELs. In addition, the updated OGELs put in place a number of new controls, for instance two new sub-entry controls for plasma torches and electron beam guns were introduced. These changes came into force on 16 December 2017.

EU Jurisdictional Update

Lithuania & the Magnitsky Act    

On 16 November 2017, the Lithuanian Parliament unanimously passed legislation that allows for sanctions to be imposed against individuals suspected of human rights violations. The legislation is a version of the Magnitsky Act, a law originally passed by the United States under the Obama administration to sanction Russian officials responsible for human rights abuses that led to the death of Russian accountant, Sergei Magnitsky. This law was then extended to cover all human rights abuses across the globe, not just in Russia. Lithuania was the fifth state to pass Magnitsky sanctions laws, with Canada, Estonia and the UK also having introduced similar legislation in the past.

Venezuela    

In November last year, the EU Council imposed an arms and dual-use goods embargo, as well as a prohibition on the export of equipment, technology or software intended primarily for the use of surveillance of telecommunications or internet-based communications. These sanctions were imposed on the Venezuelan government for alleged corruption of its current leader, President Maduro and are, in part, a reaction to the UN report that states that there are extensive human rights violations and abuses being carried out by the current government.

In addition, the EU has established a framework to impose financial sanctions, such as asset freezes, as well as travel bans on individuals or entities involved in the abuse of human rights, democracy or the rule of law. However, currently there are no persons listed under this restrictive measure regime.

The EU Council has commented that the Venezuelan sanctions are being implemented in a gradual and flexible manner, in the hope that it can reverse these sanctions if the Venezuelan government takes credible steps to promote democracy, such as adopting a full electoral calendar and freeing political prisoners. However, if such steps are not taken, the Council has also stated that sanctions may be expanded.

Iran    

The significant update regarding Iranian sanctions over the previous few months has been the Trump administration’s refusal to certify Iran’s compliance with the Joint Comprehensive Plan of Action (“JCPOA”), also known as the Iran nuclear deal. The EU Council and several Member States have released statements reaffirming their commitment to the JCPOA (more details can be found in our alert “Iran Nuclear Deal “Decertified” Although Impact Is Uncertain”). The US has since introduced sanctions relating to Iran’s ballistic missiles programme.

North Korea    

In October 2017, the EU amended the current sanctions imposed on the Democratic People’s Republic of Korea (“DPRK”) in reaction to the DPRK’s continued and accelerated nuclear and ballistics programmes. EU sanctions now include a complete prohibition on investments in any sector within the DPRK (the ban was previously limited to investments in specific sectors) as well as a total ban on the sale of refined petroleum products and crude oil to the DPRK. The amendments also include a reduction of the amount of money an individual can send as a payment or gift from €15,000 to €5,000.

Furthermore, the EU Council froze the assets of and placed travel bans on Kim Jong Sik and Ri Pyong Chol, both senior members of the DPRK Munitions Industry Department as well as Kim Hyok Chan, a representative of Green Pine, a UN listed entity. It also placed asset freezes on six DPRK entities: the Korean People’s Army, Ministry of People’s Armed Forces, Korea International Exhibition Corporation, North Korea Maritime Administration Bureau, Rungrado Trading Corporation and Wonbang Trading Co. It should also be noted that in November, the EU revised the list of luxury goods subject to import and export bans.

In late December 2017, following the DPRK’s ballistic missile tests, the United Nations increased its sanctions on the DPRK. The UN imposed travel bans and asset freezes on an additional 16 individuals and the Ministry of People’s Armed Forces (which is already listed by the EU). In January 2018, these sanctions were implemented by the EU. In addition, the UN extended its sanctions to the purchase of agricultural products, food, machinery, electrical equipment, earth, stone, wood and vessels from the DPRK and the sale of industrial machinery, transportation vehicles, iron, steel and other metals to the DPRK. The new sanctions also require all UN member states to repatriate all North Korean nationals earning income with 24 months. The EU has stated that it will implement these additional sanctions in the near future.

Russia and Ukraine    

The past two months have seen a number of changes to EU sanctions imposed on Russia. The Governor of Sevastopol, Dmitry Vladimirovich Ovsyannikov, has been added to EU sanctions lists for undermining / threatening Ukraine’s territorial integrity, sovereignty and independence. Furthermore, in December the EU extended sanctions on the Russian finance, energy and defence sectors, in response to its role in the current situation in Ukraine, until 31 July 2018.

The EU has also amended its Russian sanctions to allow the provision of technical assistance, financing or financial assistance relating to the trade of hydrazine in concentrations of 70% or more. Such activities are only permitted as long as the hydrazine in question is used in relation to ExoMars 2020, a joint mission between the European Space Agency and Roscosmos State Corporation to deploy a rover on Mars.

Finally, the Russian-owned oil and gas company Rosneft re-launched legal proceedings against EU sanctions affecting it, which were imposed in July 2014. The company will reportedly argue that the EU had not provided significant grounds for imposing sanctions on it as a measure for Russia’s actions in undermining the territorial sovereignty and independence of Ukraine.

Other Jurisdictions    

Between October and December 2017, the Council extended the restrictive measures (travel bans and assets freezes) applicable in view of the situation in Burundi, the Democratic Republic of Congo, Moldova and the Republic of Guinea until October and December 2018.
In early November 2017, the EU renewed the listing of Lynn S, a vessel listed under its Libya sanction regime and in early December, the EU removed Iraq Re-insurance Company from its Iraq sanctions list.

The EU has also revised information on the following people listed on its ISIL and Al-Qaida sanctions: Yazid Sufaat, Yunos Umpara Moklis, Radulan Sahiron, Hilarion Del Rosario Santos III and Umar Patek. The EU has also amended the financial sanctions listing of Al-Aqsa Martyr’s Brigade.

On 13 November 2017, the Council abolished the restrictive measures against the Colombian group “Fuerzas armadas revolucionarias de Colombia” and decided that the group should be deleted from its list of individuals and entities that are subject to specific restrictive measures with a view to combating terrorism.

On 1 December 2017, the UK Office of Financial Sanctions Implementation renewed financial sanctions on the Popular Front for the Liberation of Palestine.

Enforcement   

In November 2017, French and Belgian authorities raided the offices of LafargeHolcim, a Swiss-French cement company and GBL, one of its major shareholders, as part of their investigation into allegations that the company helped finance terrorism in Syria.

In early December 2017, French investigators extended the investigation to three individuals. Two of the individuals, Bruno Pescheux and Frédéric Jolibois, are former directors of the Syrian arm of LafargeHolcim. The third individual accused is Jean-Claude Veillard, a former head of security who is still currently employed by the company. Under French law, in placing these individuals under investigation, the French authorities are indicating that they have serious or consistent evidence that could result in a prosecution.

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COMM_a4
15. Gary Stanley’s ECR Tip of the Day
(Source: Defense and Export-Import Update; available by subscription from
gstanley@glstrade.com
)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 

The Order of Review process in ITAR § 121.1(b)(1) allows for more than one category on the USML to apply to a defense article, and as such, you should review all potentially relevant USML entries. As a general rule, in cases where an item is described in multiple entries, an enumerated entry takes precedence over an entry controlling the item by virtue of a specially designed catch-all. The exception to this rule is where a SME entry is involved. In all situations, a SME entry will take precedence over a non-SME entry. Thus, a classified guidance system for a missile should be listed under Category IV(h)(30), which is SME, and not IV(h)(1).

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TEEX/IM TRAINING EVENTS & CONFERENCES

TEC_01
16Full Circle Compliance and the Netherlands Defense Academy Will Present “Winter School at the Castle”, 5-9 Feb 2018 in Breda, the Netherlands

 
The Netherlands Defense Academy presents a winter seminar, “Compliance and Integrity in International Military Trade,” 5-9 February 2018, in the charming town of Breda, the Netherlands, an hour’s drive south of Amsterdam. Many hotels and restaurants are within walking distance of the Defense Academy, which is the Dutch equivalent of the U.S. military academies. The course is designed for NATO+ military officers, government employees, and employees of NATO+ defense contractors. Participants will receive certificates of completion from the Academy.
 
* Course Contents:
  – Day 1: International Trade in Defense Markets and Relevance of Trade Compliance.
  – Day 2: U.S. Export Control Regulations (International Traffic in Arms Regulations), and the EU Perspective.
  – Day 3: U.S. Export Control Regulations (Export Administration Regulations), and EU Export Control Regulations (Military and Dual-Use).
  – Day 4: Compliance & Integrity / Ethics, and Setting up an Internal Compliance Program.
  – Day 5: Setting up an Internal Compliance Program
* When: 5-9 February 2018.
* Where: the Netherlands Defense Academy (“The Castle”), Breda, the Netherlands.
* Event Sponsors: Full Circle Compliance & the Netherlands Defense Academy, Faculty of Military Sciences.
* Speakers include: Prof. dr. J.M. Beeres; Col. Dr. Robert M.M. Bertrand, RA RC RO; Drs. Ghislaine C.Y. Gillessen, RA; James E. Bartlett III, JD, LL.M; Michael E. Farrell; and Drs. Alexander P. Bosch.
* Registration & Information: please, complete the seminar registration form and send a copy to events@fullcirclecompliance.eu. M
ore information is available
here
or via 
events@fullcirclecompliance.eu

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ENEDITOR’S NOTES

 

* William James (11 Jan 1842 – 26 Aug 1910; was an American philosopher and psychologist who was also trained as a physician. The first educator to offer a psychology course in the United States, and is often referred to as the “Father of American psychology.”)
  – “Success or failure depends more upon attitude than upon capacity. Successful men act as though they have accomplished or are enjoying something. Soon it becomes a reality. Act, look, feel successful, conduct yourself accordingly, and you will be amazed at the positive results.”

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EN_a318
. 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.  The latest amendments 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(s): 8 Jan 2018: 83 FR 709-711: Revisions, Clarifications, and Technical Corrections to the Export Administration Regulations; Correction; and 83 FR 706-709: Civil Monetary Penalty Adjustments for Inflation

  
*
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_a0319
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, provided attribution is given to “The Export/Import Daily Bugle of (date)”. 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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