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18-0322 Thursday “Daily Bugle”

18-0322 Thursday “Daily Bugle”

Thursday, 22 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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  1. Commerce/BIS Amends EAR, Adds and Removes Certain Persons to the Entity List, and Corrects License Requirements 
  2. State: Defense Trade Advisory Group to Meet on 10 May in Wash DC 
  3. Treasury/OFAC Seeks Comments on Effectiveness of Licensing Procedures for Exportation of Agricultural Commodities, Medicine, and Medical Devices to Sudan and Iran 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Deploys ACE Production PG/ITDS Items, 18 Mar
  4. DHS/CBP Updates ACE CERT Environment with New HTS Records to Support Steel & Aluminum Legislation
  5. Justice: “Waltham Couple and Company Indicted for Conspiracy to Illegally Obtain U.S. Goods for Syria”
  6. State/DDTC: (No new postings.)
  7. President Posts Memorandum on Actions Related to the Section 301 Investigation of China’s Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and Innovation
  8. EU Amends Restrictive Measures Concerning Libya, and Terrorist Persons and Entities
  1. Expeditors News: “The European Union and United Kingdom Reach Agreement Certain Aspects of the Withdrawal Agreement”
  2. Global Trade News: “Steel and Aluminum Tariffs Effective Tomorrow”
  1. D.L. Vieira, J. Ho & N.A. Klein: “House Committee Holds Hearing on Export Control Reform Bill”
  2. M. Henson: “Protecting Export Controlled Data: Shulman’s Outgoing Guidance, DFARS, and What It Means for Your Trade Compliance Program”
  1. Dennis Burnett Moves to LMI Advisors 
  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 (22 Mar 2018), FACR/OFAC (19 Mar 2018), FTR (20 Sep 2017), HTSUS (14 Mar 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11. Commerce/BIS Amends EAR, Adds and Removes Certain Persons to the Entity List, and Corrects License Requirements
(Source: Federal Register, 22 Mar 2018.) [Excerpts.]
 
83 FR 12475-12483: Addition of Certain Persons to the Entity List and Removal of Certain Persons From the Entity List; Correction of License Requirements
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: This final rule amends the Export Administration Regulations (EAR) by adding twenty-three persons to the Entity List. These twenty-three persons have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States and will be listed on the Entity List under the destinations of Pakistan, Singapore and South Sudan. This rule also removes one person under the destination of Ecuador and one person under the destination of the United Arab Emirates (U.A.E.) from the Entity List. Both removals are the result of requests for removal received by BIS pursuant to the section of the EAR used for requesting removal or modification of an Entity List entry and a review of information provided in the removal requests. Lastly, this rule corrects the license requirement for twelve entities that were added under the destination of Russia as part of a recent BIS rule.
* DATES: This rule is effective March 22, 2018.
* FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Email: ERC@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
   This rule implements the decision of the ERC to add twenty-three persons to the Entity List. These twenty-three persons are being added on the basis of Sec. 744.11 (License requirements that apply to entities acting contrary to the national security or foreign policy interests of the United States) of the EAR. The twenty-three entries added to the Entity List consist of seven entities located in Pakistan, one entity in Singapore and fifteen entities in South Sudan.
   The ERC reviewed Sec. 744.11(b) (Criteria for revising the Entity List) in making the determination to add these twenty-three persons to the Entity List. Under that paragraph, persons for whom there is reasonable cause to believe, based on specific and articulable facts, that they have been involved, are involved, or pose a significant risk of being or becoming involved in, activities that are contrary to the national security or foreign policy interests of the United States, along with those acting on behalf of such persons, may be added to the Entity List. Paragraphs (b)(1) through (b)(5) of Sec. 744.11 provide an illustrative list of activities that could be contrary to the national security or foreign policy interests of the United States. …
     This rule implements a decision of the ERC to remove the following two entries from the Entity List on the basis of removal requests received by BIS, as follows: Corporacion Nacional de Telecommunicaciones (CNT), located in Ecuador, and Talaat Mehmood, located in the U.A.E. The entry for CNT was added to the Entity List on June 4, 2015 (see 80 FR 31836). The entry for Talaat Mehmood was added to the Entity List on May 26, 2017 (see 82 FR 24245). The ERC decided to remove these two entries based on information received by BIS pursuant to Sec. 744.16 of the EAR and review conducted by the ERC. …
     On February 16, 2018, BIS published a final rule, Russian Sanctions: Addition of Certain Entities to the Entity List (83 FR 6949) (the February 16 rule), which added twenty-one entities to the Entity List under the destinations of Georgia, Poland, and Russia. Of the twenty-one entities added in the February 16 rule, twelve were added based on activities described in Executive Order 13662 (79 FR 16169), Blocking Property of Additional Persons Contributing to the Situation in Ukraine, issued on March 20, 2014. The preamble of the February 16 rule described the imposition of a license requirement for twelve Russian entities: Kaliningradnefteprodukt OOO; Kinef OOO; Kirishiavtoservis OOO; Lengiproneftekhim OOO; Media-Invest OOO; Novgorodnefteprodukt OOO; Pskovnefteprodukt OOO; SNGB AO; SO Tvernefteprodukt OOO; Sovkhoz Chervishevski PAO; Strakhovove Obshchestvo Surgutneftegaz OOO; and Surgutmebel OOO, for activities described in Sec. 746.5 of the EAR. Specifically, the preamble stated that a license is required for exports, reexports, or transfers (in-country) of all items subject to the EAR, when the exporter, reexporter or transferor knows that the item will be used directly or indirectly in exploratinon for, or production of, oil or gas in Russian deepwater (greater than 500 feet) or Arctic offshore locations or shale formations in Russia, or is unable to determine whether the item will be used in such projects. However, the February 16 rule’s amendments to the EAR adding these twelve entities incorrectly specified in the entry for each entity a license requirement that read as follows: “For all items subject to the EAR. (See Sec. 744.11 of the EAR).” This final rule corrects the license requirement column in the entry for each of the twelve entities to clarify that the Entity List’s license requirements apply to all items subject to the EAR when used in projects specified in Sec. 746.5 of the EAR, as stated in the February 16 rule’s preamble. The full name of each entity, along with any aliases, and accompanying addresses, is as follows: …
 
   Dated: March 16, 2018.
Richard E. Ashooh, Assistant Secretary for Export Administration.
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EXIM_a22. State: Defense Trade Advisory Group to Meet on 10 May in Wash DC
(Source: Federal Register, 22 Mar 2018.) [Excerpts.]
 
83 FR 12636: Defense Trade Advisory Group; Notice of Open Meeting
   The Defense Trade Advisory Group (DTAG) will meet in open session from 1:00 p.m. until 5:00 p.m. on Thursday, May 10, 2018 at 1777 F Street NW, Washington, DC 20006. Entry and registration will begin at 12:30 p.m. The membership of this advisory committee consists of private sector defense trade representatives, appointed by the Assistant Secretary of State for Political-Military Affairs, who advise the Department on policies, regulations, and technical issues affecting defense trade. The purpose of the meeting will be to discuss current defense trade issues and topics for further study.
   The following agenda topics will be discussed, and final reports presented:
     (1) Address one remaining task not briefed as final by the IT working group at the February 1 plenary meeting. Pass any remaining work by way of recommendations for further study;
     (2) Provide recommended changes to ITAR Sec. 123.17 exemption that would cover other commonly carried Government Furnished Equipment (GFE); and
     (3) Further discussion and recommendations with regards to the Defense Services Working Group. …
     As seating is limited to 125 persons, each member of the public or DTAG member that wishes to attend this plenary session should provide: His/her name and contact information such as email address and/or phone number and any request for reasonable accommodation to the DTAG Alternate Designated Federal Officer (DFO), Anthony Dearth, via email at DTAG@state.gov by COB Monday, April 30, 2018. If notified after this date, the Department might be unable to accommodate requests due to requirements at the meeting location. One of the following forms of valid photo identification will be required for admission to the meeting: U.S. driver’s license, passport, U.S. Government ID or other valid photo ID.
   For additional information, contact Ms. Barbara Eisenbeiss, PM/DDTC, SA-1, 12th Floor, Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, U.S. Department of State, Washington, DC 20522-0112; telephone (202) 663-2835 or email DTAG@state.gov.
 
Anthony Dearth, Alternate Designated Federal Officer, Defense Trade Advisory Group, Department of State.
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EXIM_a33. Treasury/OFAC Seeks Comments on Effectiveness of Licensing Procedures for Exportation of Agricultural Commodities, Medicine, and Medical Devices to Sudan and Iran
(Source: Federal Register, 22 Mar 2018.) [Excerpts.]
 
83 FR 12513-12514: Effectiveness of Licensing Procedures for Exportation of Agricultural Commodities, Medicine, and Medical Devices to Sudan and Iran; Comment Request
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Request for comments.
* SUMMARY: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is soliciting comments on the effectiveness of OFAC’s licensing procedures for the exportation of agricultural commodities, medicine, and medical devices to Sudan and Iran. Pursuant to section 906(c) of the Trade Sanctions Reform and Export Enhancement Act of 2000, OFAC is required to submit a biennial report to the Congress on the operation of licensing procedures for such exports.
* DATES: Written comments should be received on or before April 23, 2018 to be assured of consideration. …
* FOR FURTHER INFORMATION CONTACT: Requests for additional information about these licensing procedures should be directed to Davin Blackborow, Assistant Director, Licensing Division, Office of Foreign Assets Control, Department of the Treasury, Freedman’s Bank Building, 1500 Pennsylvania Avenue NW, Washington, DC 20220, telephone: (202) 622-2480. Additional information about these licensing procedures is also available at www.treasury.gov/tsra.
* SUPPLEMENTARY INFORMATION: The current procedures used by OFAC pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (Title IX of Pub. L. 106-387, 22 U.S.C. 7201 et seq.) (the “Act”) for authorizing the export of agricultural commodities, medicine, and medical devices to Iran are set forth in 31 CFR 560.530 through 560.533. Effective October 12, 2017, sections 1 and 2 of Executive Order (E.O.) 13067 of November 3, 1997 and all of E.O. 13412 of October 13, 2006 were revoked, pursuant to E.O. 13761 of January 13, 2017, as amended by E.O. 13804 of July 11, 2017. As a result of the revocation of these sanctions provisions, effective October 12, 2017, U.S. persons are no longer prohibited from engaging in transactions that were previously prohibited under the Sudanese Sanctions Regulations, 31 CFR part 538. However, pursuant to the Act, an OFAC license is still required for exports and reexports to the Government of Sudan or any other entity in Sudan of agricultural commodities, medicine, and medical devices as a result of Sudan’s inclusion on the State Sponsors of Terrorism List. These exports and reexports are generally licensed by OFAC. Under the provisions of section 906(c) of the Act, OFAC must submit a biennial report to the Congress on the operation, during the preceding two-year period, of the licensing procedures required by section 906 of the Act for the export of agricultural commodities, medicine, and medical devices to Sudan and Iran. This report is to include:
   (1) The number and types of licenses applied for;
   (2) The number and types of licenses approved;
   (3) The average amount of time elapsed from the date of filing of a license application until the date of its approval;
   (4) The extent to which the licensing procedures were effectively implemented; and
   (5) A description of comments received from interested parties about the extent to which the licensing procedures were effective, after holding a public 30-day comment period.
  This document solicits comments from interested parties regarding the effectiveness of OFAC’s licensing procedures for the export of agricultural commodities, medicine, and medical devices to Sudan and Iran for the time period of October 1, 2014 to September 30, 2016. Interested parties submitting comments are asked to be as specific as possible. In the interest of accuracy and completeness, OFAC requires written comments. All comments received on or before April 23, 2018 will be considered by OFAC in developing the report to the Congress. Consideration of comments received after the end of the comment period cannot be assured. …
 
  John E. Smith, Director, Office of Foreign Assets Control.
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OGSOTHER GOVERNMENT SOURCES

OGS_a14. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* State; NOTICES; Specially Designated Global Terrorists: Joe Asperman [Publication Date: 23 March 2018.]
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(Source:
CSMS #18-000239, 22 Mar 2018.)
 
The following PGA/ITDS items deployed to ACE PRODUCTION this past Sunday morning, March 18, 2018:
 
PGA/ITDS:
 
  – FDA – Three rules need to be coded to process NSF correctly
  – SO is incorrectly sending ’13’ Reason code.
  – Comment out two EPA bucket 2 business rules
  – NMFS – PK6 error incorrectly firing on ‘HBA’ source type
  – FWS – remove edit that only runs FWS rules if processing code = ‘EDS’
  – FWS_EDS_011 incorrectly rejecting when valid state code is provided.

* * * * * * * * * * * * * * * * * * * * 

(Source:
CSMS #18-000238, 22 Mar 2018.)
 
The ACS CERT environment has been updated with the new HTS records necessary to support the recent steel and aluminum modifications mandated in Presidential Proclamations 9704 and 9705.
* * * * * * * * * * * * * * * * * * * * 

(Source:
Justice, 21 Mar 2018.) [Excerpts.]
 
A Waltham couple, their company, and a Syrian national were indicted today in federal court in Boston in connection with a scheme to smuggle goods out of the United States and to supply services to Syria. The company and the defendants also conducted business with EKT Electronics, which was involved in the acquisition and/or development of improved explosive devices used against U.S. troops in Iraq and Afghanistan.
 
Anni Beurklian, a/k/a Anni Ajaka (“Beurklian”), 49, a naturalized U.S. citizen from Lebanon who resided in Waltham; her husband, Antoine Ajaka, a/k/a Tony Ajaka (“Ajaka”), 50, a lawful permanent resident from Lebanon who resided in Waltham; Amir Katranji, a/k/a Amir Hachem Katranji, a/k/a Amir Hachem Alkatranji, a/k/a Amir Katra (“Katranji”), 52, a Syrian national; and Top Tech US Inc., a U.S. company, which operated out of the Ajaka/Beurklian residence in Waltham, were indicted on conspiracy to violate U.S. export laws and regulations, conspiracy to defraud the United States, smuggling U.S. goods out of the United States, conspiracy to obstruct justice, and obstruction of justice.  Beurklian, Ajaka, and Top Tech US Inc. are also charged with illegally providing services to persons located in Syria and mail fraud. Beurklian and Ajaka previously fled the U.S. and have not returned.
 
As alleged in the indictment, beginning no later than 2012 and continuing until Jan. 9, 2018, Beurklian and her husband operated an export business, Top Tech US Inc., out of their Waltham residence. The couple used their business to procure goods, including electronics, computer equipment, and electrical switches, from U.S. companies and export those goods out of the United States to customers in Lebanon and Syria. One of their customers was Amir Katranji, a citizen of Syria who operates and manages EKT Electronics (EKT), a company headquartered in Syria. In 2007, EKT and its founder, Mohammad Katranji, Amir Katranji’s father, were added to the Department of Commerce’s Entity List because the U.S. Government had determined that EKT and Mohammad Katranji were involved in activities related to the acquisition, attempted acquisition, and/or development of improvised explosive devices, which were being used against U.S. and Coalition troops in Iraq and Afghanistan. As a result, since 2007, no U.S. person has been permitted to export U.S. goods to EKT without first obtaining an export license from the Department of Commerce. As alleged in the indictment, no one has sought or obtained an export license to export any U.S. goods to EKT or Mohammad Katranji.
 
The indictment further alleges that in or about 2013, Ajaka and Beurklian began doing business with Katranji and supplying U.S. origin goods to EKT using Top Tech US. Ajaka and Beurklian knew that Katranji operated a business in Syria and that they were providing brokering services to Katranji and his Syrian company, EKT, by buying and shipping U.S. origin goods to EKT and its customers. EKT paid Ajaka and Beurklian more than $200,000 through Top Tech US bank accounts for their services. To conceal their illegal activity with EKT and evade the mandatory export filing requirement, Ajaka and Beurklian, with the knowledge and agreement of Katranji, falsified shipping paperwork and undervalued goods being shipped overseas directly to, or on behalf of, EKT.
 
Additionally, the indictment alleges that, in or about 2016, after U.S. Government officials began detaining international shipments made by Top Tech US before they had exited the country, Beurklian, Ajaka, and Katranji conspired to obstruct justice and obstructed justice by manipulating, deleting, and falsifying records regarding shipments of U.S. goods overseas. The indictment further alleges that, on Jan. 9, 2018, after engaging in plea negotiations with the U.S. Government, Beurklian and Ajaka fled the United States to avoid prosecution. To date, they have not returned.  
 
The charge of conspiring to violate U.S. export laws provides for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $1 million. The charges of conspiring to defraud the U.S. and conspiring to obstruct justice each provide for a sentence of no greater than five years in prison, three years of supervised release and a fine of $250,000. The charge of smuggling U.S. goods out of the U.S. provides for a sentence of no greater than 10 years in prison, three years of supervised release and a fine of $250,000. The charges of illegally providing services to persons located in Syria and mail fraud provide for a sentence of no greater than 20 years in prison and three years of supervised release. The fine for violating U.S. Syrian sanctions is $1 million, and the fine for mail fraud is $250,000..
 
The corporate defendant, Top Tech US, faces up to a $500,000 fine if convicted of smuggling goods from the United States, obstructing justice, conspiring to defraud the United States, and mail fraud; and up to a $1 million fine if convicted of conspiring to violate U.S. export laws and violating the U.S. Syrian Sanctions Regulations. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors. …
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(Source:
The White House, 22 Mar 2018.)
 
On August 14, 2017, I directed the United States Trade Representative (Trade Representative) to determine whether to investigate China’s laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development. On August 18, 2017, the Trade Representative initiated an investigation under section 301 of the Trade Act of 1974, as amended (the “Act”) (19 U.S.C. 2411).
 
During its investigation, the Office of the United States Trade Representative (USTR) consulted with appropriate advisory committees and the interagency section 301 Committee. The Trade Representative also requested consultations with the Government of China, under section 303 of the Act (19 U.S.C. 2413). The USTR held a public hearing on October 10, 2017, and two rounds of public written comment periods. The USTR received approximately 70 written submissions from academics, think tanks, law firms, trade associations, and companies.
 
The Trade Representative has advised me that the investigation supports the following findings:
 
First, China uses foreign ownership restrictions, including joint venture requirements, equity limitations, and other investment restrictions, to require or pressure technology transfer from U.S. companies to Chinese entities. China also uses administrative review and licensing procedures to require or pressure technology transfer, which, inter alia, undermines the value of U.S. investments and technology and weakens the global competitiveness of U.S. firms.
 
Second, China imposes substantial restrictions on, and intervenes in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms. These restrictions deprive U.S. technology owners of the ability to bargain and set market-based terms for technology transfer. As a result, U.S. companies seeking to license technologies must do so on terms that unfairly favor Chinese recipients.
 
Third, China directs and facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and to generate large-scale technology transfer in industries deemed important by Chinese government industrial plans.
 
Fourth, China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies. These actions provide the Chinese government with unauthorized access to intellectual property, trade secrets, or confidential business information, including technical data, negotiating positions, and sensitive and proprietary internal business communications, and they also support China’s strategic development goals, including its science and technology advancement, military modernization, and economic development.
 
It is hereby directed as follows:
 
Section 1. Tariffs.
  (a) The Trade Representative should take all appropriate action under section 301 of the Act (19 U.S.C. 2411) to address the acts, policies, and practices of China that are unreasonable or discriminatory and that burden or restrict U.S. commerce. The Trade Representative shall consider whether such action should include increased tariffs on goods from China.
  (b) To advance the purposes of subsection (a) of this section, the Trade Representative shall publish a proposed list of products and any intended tariff increases within 15 days of the date of this memorandum. After a period of notice and comment in accordance with section 304(b) of the Act (19 U.S.C. 2414(b)), and after consultation with appropriate agencies and committees, the Trade Representative shall, as appropriate and consistent with law, publish a final list of products and tariff increases, if any, and implement any such tariffs.
 
Sec. 2. WTO Dispute Settlement.
  (a) The Trade Representative shall, as appropriate and consistent with law, pursue dispute settlement in the World Trade Organization (WTO) to address China’s discriminatory licensing practices. Where appropriate and consistent with law, the Trade Representative should pursue this action in cooperation with other WTO members to address China’s unfair trade practices.
  (b) Within 60 days of the date of this memorandum, the Trade Representative shall report to me his progress under subsection (a) of this section.
 
Sec. 3. Investment Restrictions.
  (a) The Secretary of the Treasury (Secretary), in consultation with other senior executive branch officials the Secretary deems appropriate, shall propose executive branch action, as appropriate and consistent with law, and using any available statutory authority, to address concerns about investment in the United States directed or facilitated by China in industries or technologies deemed important to the United States.
  (b) Within 60 days of the date of this memorandum, the Secretary shall report to me his progress under subsection (a) of this section.
 
Sec. 4. Publication. The Trade Representative is authorized and directed to publish this memorandum in the Federal Register.
 
DONALD J. TRUMP
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Regulations:
* Council Implementing Regulation (EU) 2018/468 of 21 March 2018 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Implementing Regulation (EU) 2017/1420
 
Decisions:
* Council Decision (CFSP) 2018/475 of 21 March 2018 updating the list of persons, groups and entities subject to Articles 2, 3 and 4 of Common Position 2001/931/CFSP on the application of specific measures to combat terrorism, and repealing Decision (CFSP) 2017/1426
* Council Decision (CFSP) 2018/476 of 21 March 2018 amending Decision (CFSP) 2015/1333 concerning restrictive measures in view of the situation in Libya
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NWSNEWS

NWS_a1
12. Expeditors News: “The European Union and United Kingdom Reach Agreement Certain Aspects of the Withdrawal Agreement”
(Source: Expeditors News, 21 Mar 2018.)
 
Michel Barnier (European Chief Negotiator) and David Davis (Secretary of State for Exiting the European Union) issued a joint press release in Brussels on 19 March 2018 announcing that after intensive negotiations, the EU and UK had come to an agreement on a large portion of the provisions that will make up the international agreement on the UK’s withdrawal from the EU.  Mr. Barnier reiterated that while significant progress had been made, “a lot more work is needed on important topics, in particular Ireland and Northern Ireland” and that “Nothing is agreed until everything is agreed”.
 
Consensus has been reached that the UK will receive full benefit of the EU Single Market and remain part of the Customs Union up until the end of the transition period, which is set to end on 31 December 2020.  As a consequence, no customs border enforcement or the imposition of trade barriers will be implemented until that date. The UK is free to negotiate agreements with third countries during the transition period.
 
The Press Statement can be accessed here.
 
A copy of the draft Withdrawal Agreement with indications as to which aspects have been agreed on can be accessed here.

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NWS_a2
13. Global Trade News: “Steel and Aluminum Tariffs Effective Tomorrow”
(Source: Integration Point Blog, 22 Mar 2018.)
 
Effective March 23, 2018, the United States will impose additional duties on steel and aluminum imported from all countries except Canada and Mexico. As we discussed in a recent blogpost, the U.S. issued a 25% tariff on steel and a 10% tariff on aluminum. Anti-dumping duties (ADD) had also been considered, but it would have been difficult for the U.S. to manage so many new ADD cases.
 
Affected HS numbers
The new tax affects 73 HS numbers for aluminum and 736 HS numbers for steel.
 
The applicable HTS provisions for steel are:
  – 7206.10 through 7216.50
  – 7216.99 through 7301.10
  – 7302.10
  – 7302.40 through 7302.90
  – 7304.10 through 7306.00
  – 9903.80.01
 
Aluminum products covered by the proclamation are:
  – Unwrought aluminum (HTS 7601)
  – Aluminum bars, rods, and profiles (HTS 7604)
  – Aluminum wire (HTS 7605)
  – Aluminum plate, sheet, strip, and foil (flat rolled products in HTS 7606 and 7607)
  – Aluminum tubes and pipes and tube and pipe fittings (HTS 7608 and 7609)
  – Aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70)
  – HTS 9903.85.01
 
Resources
If you would like to request exclusion from these new tariffs, you can read about the formal exclusion process in a recent Federal Register Notice. All exclusion requests are required to be filed at www.regulations.gov.  
Finally, the U.S. Bureau of Industry and Security has provided instructions and forms regarding the exclusion and objection process for aluminum and steel. As more information becomes available, we will be sure to keep you informed.
 
A note on U.S. imports
Do you know where the majority of our aluminum and steel come from? For steel and aluminum imports under Chapters 72, 73, and 76, the main trading partners of the U.S. include Canada, Mexico, China, Russia, the United Arab Emirates, Brazil, South Korea, and Taiwan.

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COMMCOMMENTARY

COMM_a01
14. D.L. Vieira, J. Ho & N.A. Klein: “House Committee Holds Hearing on Export Control Reform Bill”
 
* Authors: Donald L. Vieira, Esq., donald.vieira@skadden.com, +1 202-371-7124; Jennifer Ho, Esq., jennifer.ho@skadden.com, +1 202-371-7266; and Nicholas A. Klein, Esq., nicholas.klein@skadden.com, +1 202-371-7211.  All of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates.
 
On March 14, 2018, the House Committee on Foreign Affairs held a hearing titled “Modernizing Export Controls: Protecting Cutting Edge Technology and U.S. National Security” to examine the proposed Export Control Reform Act (ECRA). Introduced on February 15, 2018, by Committee Chairman Ed Royce, R-Calif., the ECRA is a bipartisan effort to modernize U.S. export control regulations. During the hearing, committee members expressed concern about the attempts of certain nations – particularly China and Russia – to acquire dual-use technologies from the United States, including robotics, artificial intelligence and other emerging technologies. The committee discussed the critical role that the U.S. export control regime plays in securing U.S. national security and the importance of overlapping regulatory jurisdiction with the Committee on Foreign Investment in the United States (CFIUS).
 
If passed, the ECRA would repeal the Export Administration Act of 1979 (EAA) and replace it with a modern, permanent statutory authority to regulate the export, re-export and transfer of U.S. goods, software and technology. This long-awaited legislation is the first attempt to establish a permanent U.S. export control regime since congressional efforts to renew the EAA failed in 2001. Currently, the Department of Commerce’s Bureau of Industry and Security (BIS) administers the Export Administration Regulations (EAR), under a presidential delegation of authority under the International Emergency Economic Powers Act. The ECRA promises to enhance the stability and predictability of U.S. export controls.
 
Although the proposed legislation generally would codify the existing U.S. export control regime, it also would establish new mechanisms, such as an interagency review process and additional congressional oversight, designed to preserve U.S. technological advantages in emerging technologies, science, engineering, manufacturing and other industries critical to U.S. national security and foreign policy.
 
These new provisions, however, may have a significant impact, especially for U.S. companies owned or controlled by foreign entities and companies engaged in the development of new technology. Some of the key provisions in the ECRA include the following:
 
U.S. Subsidiaries of Foreign Companies
. As currently drafted, the ECRA defines a “United States person” to include corporations organized under the laws of the United States if natural U.S. persons own more than 50 percent of the outstanding capital stock of the entity. This definition would treat U.S. subsidiaries of foreign companies as foreign persons, which would restrict their access to certain technology and may impose additional licensing requirements for the conduct of their business.
 
Emerging Technologies
. The ECRA would revise the definition of “technology” to include “foundational information” and “know-how,” broadening the scope of the EAR to cover developmental activities not previously regulated. This expansion of the EAR is aimed at regulating emerging technologies earlier in the development process. Companies engaged in technology development would need to ensure product classification and licensing determinations are made at an earlier stage of development than they do currently.
 
Interagency Review Process
. The legislation would require the president to establish a formal, ongoing interagency process to regularly review and identify key emerging technologies and assign appropriate export controls. The Departments of State, Defense, Commerce and, as appropriate, the Office of the Director of National Intelligence or other federal agencies would advise on the identification of national security threats; review and approve criteria for including and removing items from the list of controlled items; and obtain evaluations regarding the effectiveness of the legislation.
 
Increased Congressional Oversight
. The ECRA would require an annual report analyzing the effectiveness of the ECRA in addressing threats to U.S. national security; its impact on U.S. scientific and technological leadership; its consistency with export controls imposed by other countries; a summary of regulatory changes; and efforts undertaken to identify and control critical technologies. Additionally, the legislation would require congressional notice before amendment of the EAR.
 
Best Practice Guidelines
. The ECRA would require a formal publication of “best practice” guidelines to assist persons in developing and implementing, on a voluntary basis, effective export control programs.
 
Anti-Boycott Regulations
. The ECRA also provides permanent authority for existing anti-boycott regulations. These regulations prohibit U.S. persons from taking or agreeing to take actions with the intent to comply with or support a foreign boycott that is contrary to U.S. national security or foreign policy interests.
 
Missile Proliferation Controls
. The ECRA would authorize the president to impose substantial sanctions targeting trade in missile equipment and technology. U.S. and foreign persons that illegally export, conspire or facilitate an export of certain items related to missile equipment or technology may face a two-year license debarment. Sanctions may also be imposed against both U.S. and foreign persons that knowingly and materially contribute to the use, development, production, stockpile, or acquisition of chemical or biological weapons through the export of goods and technology.
 
Penalties for Violations
. The legislation would codify civil and criminal penalties for violations of export controls or anti-boycott regulations. Violations may be subject to civil penalties of $250,000 or an amount that is twice the value of the transaction, whichever is greater, and/or a revocation of export privileges. A knowing violation may lead to criminal fines of up to five times the amount or value of the transaction or $500,000, whichever is greater, and imprisonment for up to five years. A willful violation may lead to criminal fines of up to five times the amount or value of the transaction or $1 million, whichever is greater, and imprisonment for up to 10 years. A conviction could also lead to criminal forfeiture and a bar to licensing for up to 10 years.
 
Key Takeaways
 
The ECRA is a “critical element of the national security policies underlying the laws and regulations governing foreign direct investment in the United States,” according to language in the bill. The updated export control regime is meant to work in tandem with the foreign investment review process to identify emerging and critical technologies that may be of interest to U.S. national security. Similar to the Foreign Investment Risk Review Modernization Act – the proposed legislation to reform the CFIUS review process, which is also working its way through Congress – there is a substantial interest in maintaining U.S. leadership in science, engineering and technology vital to national security.
 
In contrast to the EAA, which has been criticized for its rigidity, the ECRA places a heavy emphasis on flexibility and efficiency in the U.S. export control system. The proposed interagency process is intended to facilitate the identification of emerging critical technologies to provide comprehensive and accurate export controls in response to the fast-paced demands of industry and U.S. national security. Flexibility in export controls is also essential to addressing new threats and facilitating intelligence sharing among U.S. national security and foreign policy agencies.
 
Should the ECRA become law, it would grant the president broad authority to establish and enforce export controls and anti-boycott regulations. Given the substantial civil and criminal penalties that may arise if export control laws are violated, it is in companies’ best interests to develop robust export control compliance policies and procedures. Implementing an export control compliance program is a mitigating factor in a civil penalty action and is likely to reduce any such penalty imposed for a violation.

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(Source:
LinkedIN, 20 Mar 2018.)
 
The November 2, 2017, edition of Jim Bartlett‘s Daily Bugle carried an article detailing guidance provided by Arthur Shulman, who was then the Acting Director, Office of Defense Trade Controls Compliance (DTCC). Mr. Shulman, speaking at Sheppard Mullin’s “Trends and Directions in the Aerospace and Defense Market,” noted that protecting technical data is one of industry’s most challenging tasks. As many of you know, Mr. Shulman has since accepted a position with The Boeing Company (congratulations to both), but his comments are worth examining. 
 
One of the key points stressed in the article concerns hacking. Mr. Shulman indicated that DDTC wants to be notified if a compromise results in the unauthorized access to technical data. As attribution is often difficult in a hacking event, companies may not be able to determine if a hacking event resulted in unauthorized exports. However, my recommendation is that, unless definitively proven otherwise, unauthorized exports should be assumed in a hacking event involving ITAR Export Controlled Data (ECD) and reported to DTCC. 
 
In the article, Mr. Shulman also commented on the quality of disclosures received, noting that many lacked evidence of a thorough investigation and clear plan for implementing corrective actions. When it comes to cyber incidents, thorough investigations and effective corrective actions cannot be accomplished without IT’s direct involvement. Readers should also note that any hacking event involving an IT ecosystem subject to DFARS 7012 must be reported to the Dibnet as part of a comprehensive security plan required by the regulation. Scott Edwards, President of Summit 7 Systems, a leading industry expert in DFARS 7012 and NIST 800-171 requirements, provides his thoughts on Mr. Shulman’s comments here. For anyone looking for more information on DFARS 7012, I highly recommend you follow Scott’s blog
 
Mr. Shulman also provided recommendations on what companies should be doing to protect ITAR-controlled ECD within their environments, which were summarized in the article as follows: (1) know what you have (proper classification), (2) know where you have it, and (3) know who has access to it. 
 
Knowing what data you have is dependent upon robust Jurisdiction, Classification, and Marking (JCM) capabilities. Mr. Shulman citied data tagging as a best practice in this area, which is spot-on. There are several products on the market that allow users to identify technical data, assign export classification, apply visual markings, and apply machine-readable metadata tags. To automate access and transfer controls, companies must have the ability to electronically identify ECD. This capability, and how it is implemented to ensure proper controls of ECD, which is a form of CUI under DFARS 7102, should be documented in the SSP. 
 
Knowing where ECD is in an environment requires companies to identify which applications in their environment contain ECD (e.g. file shares, email, SharePoint, PDM/PLM, ERP, etc.). Trade Compliance professionals should work with IT to ensure applications containing ECD are captured in the SSP. The SSP, or documents referenced therein, should define how these applications will either prevent exports (e.g. US Person only access) or ensure authorized exports occur via these applications, which gets to Mr. Shulman’s third point.  
 
Preventing
unauthorized exports in IT environments is much easier than enabling authorized exports. To prevent unauthorized exports, simple rules can be enforced that prevent non-US Persons from gaining access to applications containing ECD or that prevent ECD from being transferred (e.g. emailed) to non-US Persons. Enabling authorized exports in IT applications requires more fine-grained capabilities, which evaluate data classification and user attributes (e.g. employer, nationality, physical location) against the attributes of Prior Authorizations (e.g. licenses, agreements, exemptions, and exceptions). Where a match exists, the transaction can be automatically approved and logged against the corresponding authority. Where a match does not exist, the transaction must be blocked. If these capabilities exist within a company today, they should be reflected in the SSP. If not, the action to implement such controls should be defined in the POA&M. 
 
Bottom Line:
 
US regulators are focused on your company’s ability to protect ECD. The cross-over between DFARS and ITAR requirements necessitates Trade Compliance and IT Security work hand-in-hand. Trade Compliance professionals should be engaging IT to investigate/report incidents, identify gaps, and address these gaps through the SSP and POA&M. 
 
Key Takeaways for Trade Compliance Professionals:
 
  – If you’re not already, get engaged with your company’s efforts to comply with DFARS;
  – Familiarize yourself with NIST 800-171 controls, work with IT to understand the SSP and POA&M, and ensure these documents account for export compliance requirements. If you’re a Trade Compliance professional and aren’t familiar with DFARS 7012, Scott’s blog is an excellent starting point.
  – Trade Compliance personnel should be included in IT security incidents involving Export Controlled Data (ECD);
  – IT security personnel should be included in Trade Compliance incidents involving IT systems;
  – Unless definitively proven otherwise, unauthorized exports should be assumed in a hacking event where ITAR ECD is compromised, or likely to have been compromised;
  – Trade Compliance should be submitting Voluntary Disclosures when IT ecosystems containing ITAR ECD are hacked/compromised; 
  – When drafting Voluntary Disclosures involving electronic data, make sure IT is engaged. Leverage IT resources in the investigation, make sure controls are accounted for in the SSP, and corrective actions defined/planned/implemented through the POA&M. Use the POA&M to track implementation of corrective actions involving IT;
  – When implementing capabilities to identify ECD and ensure the location, access, and transfer of ECD is in compliance with export regulations, Trade Compliance should be working directly with IT security to ensure the capabilities are implemented through the POA&M and institutionalized in the SSP.   

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MSEX/IM MOVERS & SHAKERS

MS_a116. Dennis Burnett Moves to LMI Advisors
(Source: Editor)

Dennis Burnett, formerly VP of Trade Policy and Export Control with EADS North America, and Chief Counsel, Government & Regulatory Affairs, at Kymeta, has associated with LMI Advisors in Washington, DC. Contact Dennis at 1-703-944-9126 or dburnett@lmiadvisors.com.
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ENEDITOR’S NOTES

Marcel Marceau (born Marcel Mangel; 22 Mar 1923 – 22 Sep 2007; was a French actor and mime most famous for his stage persona as “Bip the Clown”. He referred to mime as the “art of silence”, and he performed professionally worldwide for over 60 years.  He was friends with Michael Jackson for nearly 20 years, and Jackson said he would use some of Marceau’s techniques in his own dance steps.)
  – “To communicate through silence is a link between the thoughts of man.”
  – “It’s good to shut up sometimes.”
 
 

Louis L’Amour (Louis Dearborn L’Amour; 22 Mar 1908 – 10 Jun 1988; was an American novelist and short story writer. His books consisted primarily of Western novels (though he called his work ‘frontier stories’). Many of his stories were made into films.  He published 89 novels, 14 short-story collections, and two full-length works of nonfiction.)
  – “A great book begins with an idea; a great life, with a determination.”
  – “Victory is won not in miles but in inches. Win a little now, hold your ground, and later, win a little more.”

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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: 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:
22 Mar 2018: 83 FR 12475-12483: Addition of Certain Persons to the Entity List and Removal of Certain Persons from the Entity List; Correction of License Requirements 

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

  – Last Amendment: 19 Mar 2018:
83 FR 11876-11881: Inflation Adjustment of Civil Monetary Penalties 

 
*
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 (16 March 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 approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance websiteBITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu.  
 
*
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: 14 Mar 2018: Harmonized System Update 1803, containing 449 ABI records and 92 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_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, 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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