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18-0307 Wednesday “Daily Bugle”

18-0307 Wednesday “Daily Bugle”

Wednesday, 7 March 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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[No items of interest noted today.]

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS Announces 2018 Update Conference, 14-15 May in Washington DC
  3. DoD/DSS Publishes Notice Concerning DISS
  4. State/DDTC: (No new postings.)
  5. EU Releases Statements Concerning ATT Implementation
  6. UK Updates Consolidated List to Reflect Latest Amendments to Export Control Order 2008
  7. Hong Kong Updates Overview of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates
  1. Middle East Eye: “Exclusive: UK Approves $42m in Spyware Sales to Middle East ‘Regimes'”
  2. Reuters: “U.S. Sanctions North Korea for Killing of Leader’s Half-Brother with VX Chemical”
  1. The Export Compliance Journal: “Heaviest Sanctions Clamped on North Korea as Dozens Added to OFAC Screening Watch Lists”
  2. M. Volkov: “A New Holistic Model for Internal Controls Management (Part II of II)”
  3. Gary Stanley’s EC Tip of the Day
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (22 Feb 2018), DOD/NISPOM (18 May 2016), EAR (16 Feb 2018), FACR/OFAC (5 Mar 2018), FTR (20 Sep 2017), HTSUS (27 Feb 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

[No items of interest noted today.

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OGSOTHER GOVERNMENT SOURCES

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

[No items of interest noted today.]

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OGS_a22.

Commerce/BIS Announces 2018 Update Conference, 14-15 May in Washington DC

(Source:
Commerce/BIS, 7 Mar 2018.)
 
The Bureau of Industry and Security (BIS) will hold the 31st annual BIS Update Conference on Export Controls and Policy in Washington, D.C. May 14-15, 2018. This major outreach activity draws business and government representatives from around the world to learn and exchange ideas about export control issues. It is one of the Department’s most notable international trade events.
 
BIS Update 2018 will be at the Marriott Marquis Hotel. A conference room rate will be available to attendees. Detailed registration and program information will be available in the coming days.
 
For additional, information on BIS Update 2018, you may contact the Outreach and Educational Services Division at:
UpdateConference@bis.doc.gov or (202) 482
6031.

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OGS_a33.

DoD/DSS Publishes Notice Concerning DISS

(Source:
DoD/DSS, 6 Mar 2018.)
 
In May 2018, the Personnel Security Management Office for Industry is slated to transition to the Defense Information System for Security (DISS). With the advent of the new system of record for Personnel Security Clearance (PCL) processing, there will be changes to existing processes for Industry. One of the primary changes affect the handling and processing of Classified Information Nondisclosure Agreements (SF-312). 
Click
here for more information. 

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OGS_a5
5.

EU Releases Statements Concerning ATT Implementation

 
The European Union has released 2 statements concerning the Arms Trade Treaty (ATT) Working Group on Effective Treaty Implementation.
 
The statements are available
here (concerning Articles 6 and 7) and
here (concerning Article 11). 

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OGS_a6
6.

UK Updates Consolidated List to Reflect Latest Amendments to Export Control Order 2008

(Source:
UK DIT/ECJU
, 6 Mar 2018.) 
 
The Export Control Joint Unit (ECJU) of the UK Department of International Trade (DIT) has updated the 
consolidated control list of strategic military and dual-use items that require export authorization. The changes reflect amendments to the Export Control Order 2008, which came into force on 5 March 2018.
 
The 
Export Control (Amendment) Order 2018 (S.I. 2018 No.165) made a small number of changes to schedule 2 to the main order, which lists the military goods, software and technology subject to export controls. For more information, see: ”
Notice to exporters 2018/04: Export Control Order 2008 amended, also 4 OGELs.” 

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OGS_a7
7.

Hong Kong Updates Overview of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates

(Source:
Hong Kong TID, 6 Mar 2018.)
 
The Trade and Industry Department (TID) of Hong Kong has updated its overview of “Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates under Import and Export Ordinance, Cap 60 Import and Export (Strategic Commodities) Regulations.”
 
The overview is available
here.

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NWSNEWS

NWS_a1
8Middle East Eye: “Exclusive: UK Approves $42m in Spyware Sales to Middle East ‘Regimes'”

(Source:
Middle East Eye, 7 Mar 2018.) [Excerpts.]
 
UK approved sale of surveillance gear to Saudi Arabia, UAE, Bahrain and Israel, among others, according to figures from rights campaigners.
 
Britain has approved the export of more than $40m of surveillance equipment to the Middle East since 2015, prompting fears it is being used to track political dissidents and activists, Middle East Eye can reveal.
 
The
figures show millions of dollars of exports were approved to Gulf states who are criticized by rights campaigners of spying on and repressing dissidents and opposition leaders. …
 
The vast majority of export licences are for “software for telecommunications interception equipment” or telecommunications interception equipment. …
 
The surveillance equipment ranges from software to access emails and phone records to kit to turn smartphones into covert microphones.
 
Included in UK exports are devices known as “IMSI catchers” that can masquerade as normal mobile phone masts but are actually used to identify phone users and direct malware – software used to allow its operator to covertly control a targets handset.
 
It was once the preserve of US and European intelligence services, but now is affordable on the global security market. …
 
Andrew Smith, a spokesman for the Campaign Against Arms Trade, which compiled the figures, told MEE: “It is not just conventional weapons that can be used for oppression, it is also surveillance equipment. It is totally irresponsible for the government to be promoting and selling phone-tapping equipment to regimes that have a record of cracking down on dissent.
 
  “Events like Security and Policing only strengthen the UK’s ties to dictatorships and entrench the government’s role as a global arms dealer. They undermine the UK’s claims to be promoting human rights and strengthen the position of repressive regimes.”
 
Lloyd Russell-Moyle MP, a Labour MP who sits on the influential arms export controls select committee (CAEC), said: “With the notable exception of people suspected of terrorism offences, Britons, while subject to blanket state eavesdropping, are safe from arbitrary arrest, torture or extrajudicial execution. The same cannot be said for the citizens of dozens of states to which Britain is approving sales of spy equipment. …
 
Last year, the BBC revealed that BAE Systems, the UK’s largest arms exporter, secretly sold mass surveillance technology to six Middle East states that have been criticized for repressing their citizens. …
 
International Trade Secretary Liam Fox, responsible for arms and security export licensing, has previously said his department has “robust” rules and takes regulating spy equipment “seriously”, but has been accused of complicity in state-sponsored violence and repression.
 
A spokesperson for the Department for International Trade said: “The UK government takes its export control responsibilities very seriously and operates one of the most robust export control regimes in the world. We rigorously examine every application on a case-by-case basis against the Consolidated EU and National Arms Export Licensing Criteria, with risks around human rights abuses being a key part of our licensing assessment.
 
  “We will not grant a license if doing so would be inconsistent with these criteria and have suspended or revoked licenses when the level of risk changes.

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NWS_a29Reuters: “U.S. Sanctions North Korea for Killing of Leader’s Half-Brother with VX Chemical”

(Source:
Reuters, 7 Mar 2018.)
 
The United States has determined Pyongyang used the chemical warfare agent VX to assassinate the half-brother of North Korean leader Kim Jong Un in Malaysia in 2017 and has imposed sanctions in response, the U.S. State Department said on Tuesday.
 
The prohibitions appeared largely symbolic, such as sales to North Korea under the Arms Export Control Act and barring the export of national security-sensitive goods and technology to North Korea, which has no relations with the United States.
 
State Department spokeswoman Heather Nauert said in a statement the U.S. government made the formal determination about the use of VX on Feb. 22 under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991.
 
The additional sanctions on Pyongyang went into effect on March 5 after the finding was formally published in the Federal Register, the official journal of the U.S. government, Nauert said.
 
Secretary of State Rex Tillerson determined North Korea had “used chemical weapons in violation of international law or lethal chemical weapons against its own nationals,” the department said in the Federal Register.
 

Kim’s estranged half-brother, Kim Jong Nam, was killed at the airport in Kuala Lumpur on Feb. 13, 2017. Two women, Indonesian Siti Aisyah and Vietnamese Doan Thi Huong, are on trial on charges of murdering Kim by smearing his face with VX.

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COMMCOMMENTARY

COMM_a01
10. The Export Compliance Journal: “Heaviest Sanctions Clamped on North Korea as Dozens Added to OFAC Screening Watch Lists”

(Source:
The Export Compliance Journal, 1 Mar 2018.)
 
The U.S. has announced new sanctions against North Korea, adding 56 entities to watch lists maintained by the Department of Treasury’s Office of Foreign Assets Control (OFAC), and freezing assets held by those entities in the United States.
 
The entities named-one individual, 27 shipping companies and 28 ships-allegedly aided the rogue Pyongyang regime circumvent existing U.S. and United Nations trade embargoes on North Korea. They operate in multiple countries including China, Singapore, Taiwan, Marshall Islands, Tanzania, Panama and Comoros, as well as North Korea. [FN/1]
 
The move is aimed at putting further pressure on North Korea to give up is program to develop weapons of mass destruction. President Trump described the latest sanctions as the “heaviest” ever, adding he hoped that “something positive can happen.” [FN/2]
 
The OFAC statement said that sanctions-busting tactics employed by the North Koreans consisted of engaging in ship-to-ship transfer of cargo (mainly in the Yellow Sea), falsifying cargo and vessel documentation, and disabling the ship’s automatic identification system to hide its location from authorities.
 
The individual named was a Taiwanese citizen living in Taiwan who had coordinated coal exports from North Korea. It is said that coal is Pyongyang’s principal commodity, which it sells on the black market to fuel its nuclear ambitions.
 
The advisory also warns U.S. citizens against helping Pyongyang in any way. For businesses, this means continuing to screen trade chain partners at home and abroad against OFAC watch lists, and denied and restricted parties lists and to make sure the lists they screening against to be up to date.
 
The OFAC statement reinforced that advisory by saying that “persons that violate U.S. sanctions with respect to North Korea can be subject to civil monetary penalties equal to the greater of twice the value of the underlying transaction or $289,238, per each violation.”
 
——– 
  [FN/1] 
Sanctions Risks Related to North Korea’s Shipping Practices
. U.S. Department of Treasury. Advisory. Available
here
. Accessed February 26, 2018.  See also
Treasury Announces Largest North Korean Sanctions Package Targeting 56 Shipping and Trading Companies and Vessels to Further Isolate Rogue Regime. U.S. Department of Treasury. Press Release. Available
here. Accessed February 26, 2018

  [FN/2] Trump announces new North Korea sanctions. CNN.com. Article. Available
here. Accessed February 25, 2018.

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COMM_a211.

M. Volkov: “A New Holistic Model for Internal Controls Management (Part II of II)”

(Source:
Volkov Law Group Blog, 6 Mar 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
[Editor’s Note: Part I was published in the Daily Bugle of 6 Mar 2018.]
 
Companies have to embrace a holistic management approach to their internal controls.  In the corporate governance world, a new approach is needed to develop a more rational and consistent method for managing your company’s internal controls.
 
This is not a radical proposal but a rational response to the enforcement risks and the need for consistency across an organization.
 
Let’s start with a basic set up.  An internal controls committee should be created consisting of key stakeholders to ensure consistent design, drafting and management.  Compliance is a key stakeholder.  Legal should be included as well.
 
The design of internal controls requires the balancing of two competing interests: first, managers and employees want to know how to complete various tasks, follow company rules, and comply with applicable rules; second, the company needs to draft its controls in a manner that does not expose the company and individual actors to possible civil and criminal enforcement for circumventing or failing to follow its internal controls.
 
This is a difficult balancing act but is an important consideration for companies, especially those that are operating under a rules-based culture.
 
The first hurdle to overcome, as always, is acknowledgement that a new approach is needed. The stakeholders include specific functions responsible for operating within the internal controls: finance, operations, procurement, compliance and legal.
 
The second step in this process is the collection of every internal control maintained by the company. This will take time because some will be hard to find and others may be rarely used or even unknown to many employees.
 
The third step is the assignment of primary responsibility for the internal controls. Each function should take responsibility where it is the natural lead – compliance for compliance-related controls; finance for financial controls; operations for operation-related controls and procurement for procurement-related controls.
 
The fourth step is to create a review matrix or a set of key questions for each internal control. These questions include:
 
  – What is the purpose of the control?
  – How does it align with current operations in the company?
  – Does the control accurately reflect existing corporate policy governing the task?
  – What key terms are used in the control and need to be defined?
 
With this frame of reference, the stakeholders should develop revisions or at least recommended changes to an existing control, or adoption of a new control, or combination of existing controls into a single control. The review process is intended to identify potential problems with the existing control in practice and develop proposed solutions.
 
The fifth step is to assign responsibility to a few individuals as the scriveners of the new set of internal controls. A member of the legal team should be involved in this process, preferably one who is known for their writing ability. A group effort should be made to bring together the final review, revision and re-organization of the internal controls.
 
The objective of this final step is to create a concise and thoughtful set of internal controls that adequately addresses specific requirements and uses consistent terminology and defined terms. It is critical that the internal controls are properly crafted to avoid over-broad requirements and terminology that can be used against the company by government prosecutors in situations that were never intended. On the other hand, the internal controls need to accurately capture the intended conduct and applicable requirements that need to be internally regulated.
 

The entire process is a balancing act that requires a collaborative approach built on a common understanding of the company’s operations and policy purposes. It is key to balance internal regulation against external risks from government enforcement agencies. To be sure, the crafting of internal controls means there may be disagreements among stakeholders on specific terms (e.g. the meaning of “is”), but it is better to hash out these issues in the internal stakeholder context.

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COMM_a3
12
Gary Stanley’s EC Tip of the Day

(Source: Defense and Export-Import Update, 6 Mar 2018. Available by subscription from
gstanley@glstrade.com.)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com.
 
A Warehouse and Distribution Agreement (WDA) is an agreement to establish a warehouse or distribution point abroad for defense articles to be exported from the United States for subsequent distribution to entities in an approved sales territory. Pursuant to ITAR § 124.114(c)(6), the parties must agree that an annual report of sales or other transfers under the WDA of the licensed articles. 

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ENEDITOR’S NOTES

 
* Michael Eisner (Michael Dammann Eisner; born March 7, 1942; is an American businessman. Eisner was the Chairman and CEO of The Walt Disney Company from 1984 until 2005.  Before Disney, Eisner was President and CEO of rival movie studio, Paramount Pictures, from 1976 to 1984, and had brief stints at the major television networks: NBC, CBS, and ABC.)
  – “Succeeding is not really a life experience that does that much good. Failing is a much more sobering and enlightening experience.”
  – “My best idea was to not accept my wife’s negative reaction when I asked her to marry me.”
 
Maurice Ravel (Joseph Maurice Ravel; 7 Mar 1875 – 28 Dec 1937[; was a French composer, pianist and conductor. He is often associated with impressionism along with his elder contemporary Claude Debussy, although both composers rejected the term. In the 1920s and 1930s Ravel was internationally regarded as France’s greatest living composer.)

  – “I did my work slowly, drop by drop. I tore it out of me by pieces.”

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EN_a314
. 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: 22 Feb 2018: 83 FR 7608-7610: Technical Amendment to List of User Fee Airports: Name Changes of Several Airports and the Addition of Five Airports
 
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: 
16 Feb 2018:
83 FR 6949-6956
: Russian Sanctions: Addition of Certain Entities to the Entity List [Addition of 21 Entities to Entity List.]

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

  – Last Amendment: 5 Mar 2018:
83 FR 9182-9204: North Korea 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: 27 Feb 2018:
Harmonized System Update 1802
, containing 164 ABI records and 38 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: 14 Feb 2018: 83 FR 6457-6458: Amendment to the International Traffic in Arms Regulations: Addition of South Sudan [Amends ITAR Part 126.] 

  – The only available fully updated copy (latest edition: 14 Feb 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_a0315
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.

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

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