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18-0207 Wednesday “Daily Bugle”

18-0207 Wednesday “Daily Bugle”

Wednesday, 7 February 2018

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The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. Commerce/Census Announces C-SAC Meeting on 29-30 Mar in Suitland, MD  
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  1. Business Insider: “China is Building Up its Military and European Arms Dealers Could Start Cashing In”
  2. Defense News: “U.S. Looks to Increase Weapons Exports to Vietnam, Decrease Russian Influence”
  3. Pakistan Observer: “Monitoring of Export Control, Formation of License Review Committee Approved”
  1. M. Volkov: “Resources, Resources, and More Resources – The True Test of an Effective Ethics and Compliance Program”
  2. R.C. Burns: “Why Is Foreign Policy Still on the Internet?”
  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 (26 Jan 2018), FACR/OFAC (28 Dec 2017), FTR (20 Sep 2017), HTSUS (1 Feb 2018), ITAR (19 Jan 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. 
Commerce/Census Announces C-SAC Meeting on 29-30 Mar in Suitland, MD

(Source:
Federal Register, 7 Feb 2018.) [Excerpts.]
 
83 FR 5400-5401: Census Scientific Advisory Committee
 
* AGENCY: Bureau of the Census, Department of Commerce.
* ACTION: Notice of public meeting.
* SUMMARY: The Bureau of the Census (Census Bureau) is giving notice of a meeting of the Census Scientific Advisory Committee (C-SAC). The Committee will address policy, research, and technical issues relating to a full range of Census Bureau programs and activities, including communications, decennial, demographic, economic, field operations, geographic, information technology, and statistics. The C-SAC will meet in a plenary session on March 29-30, 2018. Last minute changes to the schedule are possible, which could prevent giving advance public notice of schedule adjustments. Please visit the Census Advisory Committees website for the most current meeting agenda
here. The meeting will be available via webcast
here. Topics of discussion will include the following items:
  – 2020 Census Systems and Operations
  – Updates on Formal and Informal 2017 Outreach Activities
  – Internet Self-Response Updates
  – Administrative Records Updates
  – New Annual Business Survey
  – C-SAC Working Groups Progress Reports
* DATES: March 29-30, 2018. On Thursday, March 29, the meeting will begin at approximately 8:30 a.m. and end at approximately 5:00 p.m. On Friday, March 30, the meeting will begin at approximately 8:30 a.m. and end at approximately 3:00 p.m.
* ADDRESSES: The meeting will be held at the U.S. Census Bureau Auditorium, 4600 Silver Hill Road, Suitland, Maryland 20746. …
 
  Dated: January 31, 2018.
Ron S. Jarmin, Associate Director for Economic Programs, Performing the Non-Exclusive Functions and Duties of the Director, Bureau of the Census. 

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OGSOTHER GOVERNMENT SOURCES

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

* Trade Representative, Office of United States; NOTICES; Technical Corrections to the Harmonized Tariff Schedule of the United States [Publication Date: 8 Feb 2018.]  
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NWSNEWS

NWS_a1
5. Business Insider: “China is Building Up its Military and European Arms Dealers Could Start Cashing In”

(Source:
Business Insider, 7 Feb 2018.) [Excerpts.]
 
As Asia is arming, Europe is selling equipment to states in the Indo-Pacific while maintaining strict restrictions on transfers of military technology to China. It looks like taking sides, but it is more complicated than that.
 
European exporters seek commercial opportunities and operate in a set of political constraints, but no clear strategic vision guides Europe’s approach to arms sales and controls over critical technologies…
 
Could Europe move to a catch-all approach that would seek to prevent all transfers of dual-use technology to China? It is unlikely. The EU’s goals towards China stay focused on rebalancing the bilateral trade and investment relationship and developing cooperation on global governance.
 
But the investment screening discussion in Europe is to a large degree about protecting Europe’s critical technology. And the re-emergence of the idea of quadrilateral cooperation between Australia, Japan, India and the United States to contain the growth of Chinese influence may well result in Europe having to think more strategically about its approach to arms transfers and export controls.

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NWS_a26. Defense News: “U.S. Looks to Increase Weapons Exports to Vietnam, Decrease Russian Influence”

(Source:
Defense News, 7 Feb 2018.) [Excerpts.]
 
The U.S. State Department wants to see Vietnam distance itself from Russian arms deals and
buy more weapons from the United States, but experts say the cost and complication of American-made technologies could make that transition hard fought.
 
Between 2005 and 2014, Vietnam increased its military spending by almost 400 percent, according to the U.S. Department of Commerce-run website
export.gov. However, the country hasn’t considerably stepped up purchases of American-made weapons, even after the United States
lifted its lethal weapons ban on Vietnam in 2016, a State Department official told reporters. …
 
Vietnam is interested in U.S. military technology, as evidenced by the transfer of a Hamilton-class cutter from the U.S. Coast Guard in 2016 and a recent sale – partially through U.S. grant funding – of Boeing-Insitu ScanEagle drones for maritime surveillance, the State Department official said.
 
However, the country is unfamiliar with the Foreign Military Sales and Direct Commercial Sales programs, two different ways to acquire weapons from either the State or Commerce departments.
 
  “They’re still learning our system, and we’re doing our very best to make sure that they understand what the U.S. system provides and how it works,” [a U.S. State Department official] said. “The U.S. system can be a little daunting sometimes, and so getting them familiar with what the options are, what path you can pursue, you know, what you can get from FMS versus what you can get through DCS.” …
 
  “Hanoi has become increasingly fed up with Russia’s arms sales policy, a lot to do with Russia ‘shifting the goal posts’ where it comes to contractual terms and pricing issues, and significantly Vietnam’s access to technology transfer from Russia,” [Collin Koh Swee Lean, a research fellow at the S. Rajaratnam School of International Studies who specializes in naval affairs in Southeast Asia] said. …  

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NWS_a37. Pakistan Observer: “Monitoring of Export Control, Formation of License Review Committee Approved”

(Source:
Pakistan Observer, 7 Feb 2018.)
 
The federal cabinet has approved the constitution of License Review Committee (LRC) aimed at strict monitoring of export control on goods, technologies, material and equipment and biological weapons and their delivery system, well-informed sources told
Business Recorder [Pakistan’s financial daily newspaper].
 
On January 16, 2018, the federal cabinet, presided over by the Prime Minister Shahid Khaqan Abbasi ,was informed that the export control on goods, technologies, material and equipment and biological weapons and their delivery system Act 2004 was promulgated to show Pakistan’s commitment to the non-proliferation of weapons of mass destruction and in pursuance of binding UN Security Council Resolution 1540; and that Strategic Export Control Division was set up in the Foreign Affairs Division in 2007 as an implementing authority for the Act (SRO(1)/2009).
 
The cabinet was further informed that under section 3 of the Act, goods and technologies notified in the Control List (SRO 1142(1)/2016) were subject to license if intended for export, re-export, transit and trans-shipment to ensure that these were neither deviated nor used in any activity related to the development, production or use of nuclear and biological weapons and their delivery systems.
 
The cabinet was apprised that a permanent coordination and consultation mechanism, i.e. License Review Committee (LRC) was proposed for timely review of license applications and related matters and that the committee would comprise ex-officio members from relevant Ministries/ Departments. Draft notification of the committee had been vetted by the Law and Justice Division.  …
 

After a brief discussion on the issue, the cabinet approved constitution of License Review Committee, to be notified within a couple of days.

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COMMCOMMENTARY

COMM_a2
8. M. Volkov: “Resources, Resources, and More Resources – The True Test of an Effective Ethics and Compliance Program”

(Source:
Volkov Law Group Blog, 6 Feb 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
An effective ethics and compliance program depends on the Chief Compliance Officer’s authority, independence, and resources.  A company’s commitment to a compliance program requires money and employees – there is no question that words of support, organizational status in the C-Suite and a robust board reporting relationship are all important.  However, all those elements are important but, in the end, those principles mean relatively little if the compliance program does not have adequate resources.
 
It is too easy to tell the CEO and the board that they have to put their money where their mouth is.  Instead, a CCO has a responsibility to demonstrate that he/she is using resources efficiently, coordinating and leveraging those resources with related functions, and providing compelling justification for resources.
 
Compliance surveys consistently show that CCOs are suffering from a lack of resources.  By definition, these compliance programs fail to meet the effectiveness standard and the company is at risk.  A 2017 Deloitte Survey
reported that compliance teams “remain relatively lean.” 
 
Nearly three quarters (73 percent of respondents) reported having fewer than 20 full-time resources (or equivalents) to design, implement and maintain the compliance and ethics program.  Half of respondents indicated a compliance team of less than five full-time resources; nearly a quarter had 6 to 20 full-time employees, while 21 percent manage a team of more than 20 employees.
 
Consistent with the relatively small compliance teams, the budgets for compliance functions, including people, processes and technology, are also lean.  Approximately 60 percent of the respondents reported a total budget of less than $5 million.  Nearly a third had budgets of less than $500k, while 11 percent had budgets between $500k and $1 million, and 16 percent had budgets between $1 million and $5 million.  Almost half expect their budgets to increase.
 
Corporate boards and CEOs have to commit to their ethics and compliance program.  Nickle and diming a compliance program is the equivalent of death by a million cuts.  Directors and CEOs are acting irresponsibly when they underestimate the importance of ethics and compliance programs.  Many directors and CEOs continue to cling to the narrow view that compliance programs are important solely to keep the company from getting into trouble.
 
This narrow perspective is reflected in a failure to devote adequate support to the compliance function.  Once established, a compliance program rarely increases significantly in size.  Unfortunately, companies do not focus on ethics and compliance unless and until they are subject to a government investigation and enforcement action.  Under the threat of government enforcement, companies then make the commitment to ethics and compliance with resources and priorities.
 
It is difficult to understand why corporate leaders continue to ignore ethics and compliance.  In the absence of government mandates, most companies will not devote adequate resources to support their compliance programs.  I am convinced that unless corporate leaders dedicate more attention to ethics and compliance, the government will eventually mandate ethics and compliance program requirements in response to the next set of corporate scandals.

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COMM_a3
9. R.C. Burns: “Why Is Foreign Policy Still on the Internet?”

(Source:
Export Law Blog, 6 Feb 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com, 202-508-6067).
 
In an
article in
Foreign Policy titled “Why Is This Man Still on Twitter?” Emily Tamkin and Elias Groll get all confused about sanctions. And they are aided and abetted in this confusion by Peter Harrell from the Center for New American Security (whatever that is). The resulting mess is why I wonder, at least partly in jest, why
Foreign Policy is still on the Internet.
 
The article attempts to answer the question I posed in
this post in early January: why is Putin crony and Chechin strongman Ramzan Kadyrov blocked by some social media sites while Bashar Al-Assad and Nicolás Maduro, both of whom are also SDNs, are not? Tamkin and Groll quote Harrell’s supposed answer to this question:
 
Peter Harrell … explains that the difference might come down to something called the Berman Amendment.
 
The Berman Amendment, Harrell says, is an amendment to the International Emergency Economic Powers Act, or IEEPA, that states nothing in that law can be used to constrain publication.
 
“If you have a sanctions designation based on IEEPA, it’s very clear that that cannot be used to prohibit publication activities,” Harrell says.
 
The Berman Amendment applies only to IEEPA sanctions and not other sanctions programs, such as the separate legal provisions outlining the Global Magnitsky Act. “There is a legal argument that because Kadyrov was sanctioned under Magnitsky, rather than under IEEPA sanctions, the Berman Amendment does not apply,” Harrell says, meaning the U.S. government could conceivably sue Facebook to force Kadyrov’s removal, a risk the company may have not wanted to take.
 
Let’s leave aside for the moment Heller’s bizarre summary of the Berman Amendment, which deals with import and export of informational materials rather than “publication activities.” Instead, I have to point out, as I did in my earlier post, that
Section 584.206(b) of the Magnitsky Sanctions Regulations clearly states:
 
The prohibitions contained in this part do not apply to the importation from any country and the exportation to any country of any information or informational materials, as defined in §584.304, whether commercial or otherwise, regardless of format or medium of transmission
 
So, okay, I guess Heller, Tamkin, and Groll couldn’t be bothered to actually read the regulations that they were trying to rely on.  Reading regulations, after all, is hard.
 
But let’s also look at Heller’s inaccurate statement that the Berman Amendment would not apply to sanctions adopted under the
Magnitsky Act rather than IEEPA. Once again, Heller, Tamkin, and Groll could not be bothered to read the Magnitsky Act, which, if they had, would have revealed the bankruptcy of their argument. Section 406(a)(1) of the Act provides the authority under which the President may block and add to the SDN list human rights violators in Russia:
 
The President shall exercise all powers granted by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) … to the extent necessary to freeze and prohibit all transactions in all property and interests in property of a person who is on the list required by section 404(a) of this Act if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person.
 
By explicitly linking Magnitsky Act sanctions to those “powers granted by” IEEPA, it certainly means that the limitations on those powers, like the Berman Amendment, would apply to Magnitsky Act sanctions. That, of course, is why OFAC adopted the section of the Magnitsky Sanctions Regulations cited above that carves out the import and export of informational materials.
 
So, both questions remain unanswered.

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ENEDITOR’S NOTES

 

Thomas More
(Sir Thomas More; 7 February 1478 – 6 Jul 1535;
venerated in Catholicism as Saint Thomas More, was an English lawyer, author, statesman, and noted Renaissance humanist. He wrote 
Utopia
, published in 1516, about the political system of an imaginary, ideal island nation. He was also a councilor to Henry VIII, and was Lord High Chancellor of England from 1529 to 1532.  In that office, he opposed the king’s separation from the Catholic Church, refusing to acknowledge Henry as Supreme Head of the Church of England and Henry’s annulment of his marriage to Catherine of Aragon. After refusing to take the Oath of Supremacy, he was convicted of treason and beheaded.)

  – “If honor were profitable, everybody would be honorable.”
  – “Whoever loveth me loveth my hound.”

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EN_a311
. 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: 26 Jan 2018: 83 FR 3577-3583: Addition of Certain Entities; Removal of Certain Entities; and Revisions of Entries on the Entity List

  
*
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 Feb 2018: Harmonized System Update 1801, containing 7,864 ABI records and 1,329 harmonized tariff records.

  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.
  – Last Amendment: 19 Jan 2018: 83 FR 2738: Department of State 2018 Civil Monetary Penalties Inflationary Adjustment; Correction
  – The only available fully updated copy (latest edition: 19 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_a0312
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, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, 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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