18-0116 Tuesday “Daily Bugle”

18-0116 Tuesday “Daily Bugle”

Tuesday, 16 January 2018

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

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: MHz Electronics, Inc. of Phoenix, AZ, to Pay $10,000 to Settle Alleged Export Violations
  3. DHS/CBP Announces ACE Certification Outage for Tonight
  4. DHS/CBP Announces Local Closure Day for Ports 2101, 5301, 5309, 5310, 5311, 5506, and 5507
  5. DHS/CBP Clarifies Batch & Block A & B Output Records Date Fields
  6. DHS/CBP Deactivates Port Code 2871 for Exports
  7. DoD/DSCA Releases Policy Memo 18-03
  8. State/DDTC: (No new postings.)
  9. Australia DoD/DEC Closed 19-22 Jan
  10. UK DIT/ECO Updates Strategic Export Controls Licensing Statistics
  1. Army Times: “US Army Howitzer Shipment Halted by German Police”
  2. Expeditors News: “Canada Border Services Agency Publishes Trade Compliance Target Areas”
  1. E.L. Hirschhorn: “Will Proposed Law Improve CFIUS’s Ability to Protect National Security?”
  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 



[No items of interest noted today.]

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

[No items of interest noted today.]

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Commerce/BIS, 16 Jan 2018.) [Excerpts.]
* Respondent: MHz Electronics, Inc., Phoenix, AZ
* Charges: Two charges of 15 C.F.R. 764.2(a) – Engaging in Prohibited Conduct:
  On two occasions between on or about 15 January 2013, and on or about 3 October 2013, MHz Electronics engaged in conduct prohibited by the EAR when it exported pressure transducers, items subject to the EAR and classified under Export Control Classification Number (“ECCN”) 2B230, to China and Taiwan without the BIS export licenses required pursuant to Section 742.3 of the EAR. Item classified under ECCN are controlled under the EAR for nuclear nonproliferation reasons and can be of significance for nuclear explosive purposes. …
* Penalty:
  – Civil penalty of $10,000, which shall be suspended for two-years and afterwards waived if no further violations are committed.
  – Complete an external audit of its export control compliance program. The results of the audits, including any relevant supporting materials, shall be submitted to Commerce/BIS.
* Debarred: Not if the audit is completed and submitted as agreed.
* Date of Order: 11 January 2018.

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CSMS #18-000049, 16 Jan 2018.)
There will be an ACE CERTIFICATION Outage this evening, Tuesday, January 16, 2018 between 1700 ET and 1830 ET for ACE Infrastructure maintenance.

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CSMS #18-000048, 16 Jan 2018.)
Commercial trade operations at the Ports of 2101 (Port Arthur), 5301 (Houston Seaport), 5309 (Houston Airports), 5310 (Galveston), 5311 (Freeport), 5506 (Austin), and 5507 (San Antonio) are temporarily suspended for Tuesday, January 16, 2018, due to inclement weather conditions.
On January 16, 2018, a local closure day is granted to all who file entries at the Ports of 2101 (Port Arthur), 5301 (Houston Seaport), 5309 (Houston Airports), 5310 (Galveston), 5311 (Freeport), 5506 (Austin), and 5507 (San Antonio). CBP is extending an additional day, without penalty, for any entry summaries and payment of duties that will be due on January 16, 2018 in Ports 2101, 5301, 5309, 5310, 5311, 5506, and 5507.
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CSMS #18-000046, 16 Jan 2018.)
Clarification of the dates being reported for the A and B output records for ACE PF and MS Statements:
For ACE Final PF and MS statements the “A” record Transmission Date field will reflect the date ACE prepares the statement batch for transmission to the trade. Final statements are transmitted the day after the acceptance of the preliminary statement payment.
For ACE Final PF and MS statements the “B” record Preliminary Statement Print Date field will reflect the date the Preliminary Statement was generated to the trade.  
ACE is following the ACE CATAIR guidelines in the ACE Batch & Block Control Chapter.  
For ACS Final QR statements the previous day’s date was reflected for the transmission date. The trade was using this as the paid date.
For ACS Final QR statements the “B” record Preliminary Statement Print Date field was also reflecting the date the Preliminary Statement was generated to the trade.  

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CSMS #18-000051, 16 Jan 2018.)
The following Port of Export code has been DEACTIVATED from the AES effective immediately:
Port Code Description    
The Automated Export System (AES) AESTIR Appendix D will be updated as soon as possible.

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OGS_a77. DoD/DSCA Releases Policy Memo 18-03

(Source: DoD/DSCA, 16 Jan 2018.)

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OGS_a88. State/DDTC: (No new postings.)

(Source: State/DDTC)

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OGS_a99. Australia DoD/DEC Closed 19-22 Jan
(Source: Australia DoD/DEC, 16 Jan 2018.)
Defence Export Controls (“DEC”) is relocating to new office space between 19-22 January. To complete this relocation DEC will be closing at 2pm on Friday, 19 January, and reopening at 10am on 22 January.
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OGS_a1010. UK DIT/ECO Updates Strategic Export Controls Licensing Statistics
, 16 Jan 2018.)
UK DIT/ECO has updated its strategic export controls licensing statistics to reflect amendments made to existing licenses since their previous publication for the period 2013 – 2017. The updated licensing statistics can be found here.
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11. Army Times: “US Army Howitzer Shipment Halted by German Police”
(Source: Army Times, 13 Jan 2018.)
Police in Germany halted a shipment of self-propelled howitzers for the U.S. Army after determining they lacked proper documentation and had been loaded on unsuitable trailers.
They said the howitzers were being loaded onto replacement vehicles Thursday two days after a police patrol stopped the trucks carrying them near the town Bautzen, not far from the Polish border.
Saxony state police say an examination of the convoy of six M109 Howitzers showed the shipment lacked the necessary paperwork and that the load was both too wide and two heavy for the trailers.
In addition, they say the convoy lacked the necessary accompanying vehicles and that some drivers had been driving for longer than legally permissible.
Police said it’s up to the private transport company to resolve the problem.

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NWS_a212. Expeditors News: “Canada Border Services Agency Publishes Trade Compliance Target Areas”
(Source: Expeditors News, 15 Jan 2018.)
Canada Border Services Agency (CBSA) has published a list of Trade Compliance Verifications. The document is published twice a year, and lists all compliance verification priorities for the next six months.
CBSA states that they manage trade compliance related to Tariff Classification, Valuation and Origin through the following two post-release verification processes: 
  – Random Verifications: “designed to measure compliance rates and revenue loss”;
  – Verification Priorities: targets are established by a risk-based process, with possible additions throughout the year and holdovers from previous years.
The CBSA targeted areas can be found here.

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(Source: Author)

Author: Eric L. Hirschhorn, Esq.,
ELHirschhorn@gmail.com.  (Mr. Hirschhorn served as Under Secretary of Commerce for Industry and Security from 2010 until 2017.) 
In an article published 8 Jan 2018 in the BNA International Trade Daily Bulletin, Mr. Hirschhorn outlined the current CFIUS process, some shortcomings of that process, and his view that Senator John Cornyn’s Foreign Investment Risk Review Modernization Act (FIRRMA) would ameliorate some of those shortcomings but create significant new problems.
Shortcomings of the existing process noted by Hirschhorn include:
  – CFIUS doesn’t cover “greenfield” transactions.  That is, only purchases of existing U.S. businesses are subject to the Exon-Florio Act, which creates CFIUS and authorizes the President to block any foreign takeover of a U.S. entity if he finds that it may compromise national security.
  – CFIUS considers each submitted transaction separately, which means that it does not look at patterns of transactions.  Sometimes, innocent-appearing purchases are less so when viewed as part of a foreign government’s overall strategy.
  – Some contend that CFIUS’s jurisdiction should extend even to situations where the foreign party doesn’t acquire “control” of the U.S. party, if potential acquisition of technology or other national security threats are present.
  – It also has been argued that CFIUS should review foreign takeovers that lack national security implications, if such takeovers have potential implications for an important U.S. economic sector.
  – The Exon-Florio Act doesn’t define “national security,” creating the possibility that transactions may be blocked even where there are no apparent national security implications.  That is, in practice, the term means whatever CFIUS decides it means in a given case.
  – Staff of the CFIUS agencies sometimes lack a comprehensive understanding of considerations that underlie mergers and acquisitions.  This can lead to misunderstandings, such as assuming incorrectly that a transaction whose commercial or tax implications aren’t understood by the reviewers has a sinister purpose.
  – The statutory timetable for CFIUS consideration is too short.  This often leads to unduly hurried consideration by CFIUS or to pressure on parties to withdraw and refile their applications.
  – CFIUS waits too long to apprise parties of concerns being expressed within the committee.  Late in the Obama administration, CFIUS began reaching out to parties earlier in the process as well as bringing senior agency officials into the process sooner.
  – Where the target company is a multinational, the U.S. government needs to be able to discuss the transaction with allied governments, but Exon-Florio’s confidentiality provisions make it difficult to do so.
  – Exon-Florio expresses a preference for mitigation over blocking a transaction but ongoing government oversight of a company can be costly and funding is not available.
Hirschhorn notes that in an open society like ours, it’s difficult to close every conceivable avenue for technology leakage.  FIRRMA, which is numbered S. 2098 in the Senate and H.R. 4311 in the House, would expand CFIUS jurisdiction to cover (1) foreign purchases of real estate near sensitive military facilities, (2) certain foreign investments in “critical technology” companies even if the investment would not produce “control” of the target, and (3) a broad range of outbound investments by U.S. companies if they involve access by foreign persons to intellectual property-even if that intellectual property is not subject to U.S. export controls.  Hirschhorn finds the first expansion appropriate, the second questionable and overbroad, and the third vastly overreaching.
To compound the problem, FIRRMA would create “a parallel export control system that is broader than the existing one” and that-unlike the existing one-would not be administered by those having technical expertise about the covered technologies.
CFIUS already is overworked.  Broadening its jurisdiction without providing adequate funding will lead to delays at best and failed transactions at worst.
FIRRMA is not without its positive points, Hirschhorn states.  It would lengthen the time for the first (“review”) stage and permit extensions of the second (“investigation”) stage.  It would create a shortcut process for transactions that the parties believe will easily pass muster, thus husbanding limited CFIUS resources for more controversial cases.  The bill would permit sharing of CFIUS information with foreign governments if suitable arrangements for protecting the confidentiality of the information have been made.  Finally, FIRRMA would create a more favorable climate for bringing about adequate appropriations for CFIUS’s work, including mitigation arrangements that require post-closing monitoring by the federal government.
Mr. Hirschhorn’s full article appears in the January 8, 2018, edition of BNA’s International Trade Daily Bulletin, available HERE (available by free trial subscription.)

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Full 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.

Registration & Information: please, complete the seminar registration form and send a copy to events@fullcirclecompliance.eu. More information is available 
at the Full Circle Compliance website or via events@fullcirclecompliance.eu

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Robert W. Service (Robert William Service; 16 Jan 1874 – 11 Sep 1958; was a British-Canadian poet and writer who has often been called “the Bard of the Yukon”. He is best known for his poems “The Shooting of Dan McGrew” and “The Cremation of Sam McGee”, from his first book, Songs of a Sourdough. His vivid descriptions of the Yukon made it seem that he was a veteran of the Klondike gold rush, instead of the late-arriving bank clerk he actually was.
  – “It isn’t the mountain ahead that wears you out; it’s the grain of sand in your shoe.”
  – “No man can be a failure if he thinks he’s a success; If he thinks he is a winner, then he is.”

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

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 8 Dec 2017: 82 FR 57821-57825: Civil Monetary Penalty Adjustments for Inflation

  – Last Amendment: 18 May 2016: Change 2
: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary 

: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last Amendments: 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

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 28 Dec 2017: 
82 FR 61450-61451: Iraq Stabilization and Insurgency Sanctions Regulations

: 15 CFR Part 30
  – Last Amendment:
20 Sep 2017:
82 FR 43842-43844
: Foreign Trade Regulations (FTR): Clarification on Filing Requirements; Correction
  – HTS codes that are not valid for AES are available
  – The latest edition (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.
, 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.

  – 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 

, by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.
 The BITAR is available by annual subscription from the Full Circle Compliance
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, 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.

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