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18-0405 Thursday “Daily Bugle”

18-0405 Thursday “Daily Bugle”

Thursday, 5 April 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, Imposes License Requirements on Transfers of Specified Target Assemblies and Components for the Production of Tritium, and Related “Development” and “Production” Technology
  2. Justice/ATF Revises Information Collection Activities Concerning Report of Firearms Transactions-Demand 2 (ATF Form 5300.5)
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Releases Notice Concerning Section 232 and Immediate Transportation Entries
  4. DoD/DSS Posts Guidance for Cleared Contractors Concerning SEAD 4 Implementation
  5. OMB/OIRA Reviews of Proposed Ex/Im Regulations
  6. State/DDTC: (No new postings.)
  1. CNBC: “China Announces New Tariffs on 106 U.S. Products, Including Soy, Cars and Chemicals”
  2. Reuters: “U.S. Seeks About 20 Years Prison for Turkish Banker in Iran Sanctions Case”
  3. ST&R Trade Report: “Short Deadline for Comments on Chinese Goods to be Hit with Higher Import Duties”
  1. A. Magnus, M. Dean & C. Munro: “UK Merger Control Thresholds to be Reduced to Protect National Security”
  2. M. Volkov: “The State of Whistleblowing”
  3. O. Torres: “The STA License Exception by the Numbers”
  4. Gary Stanley’s EC Tip of the Day
  1. ECS Announces “Mastering ITAR/EAR Challenges”, 22-23 May in Annapolis, MD 
  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 (5 Apr 2018), FACR/OFAC (19 Mar 2018), FTR (20 Sep 2017), HTSUS (30 Mar 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. 
Commerce/BIS Amends EAR, Imposes License Requirements on Transfers of Specified Target Assemblies and Components for the Production of Tritium, and Related “Development” and “Production” Technology

(Source: Federal Register, 5 Apr 2018.) [Excerpts.]
 
83 FR 14580-14583: Reclassification of Targets for the Production of Tritium and Related Development and Production Technology Initially Classified Under the 0Y521 Series
 
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: In this rule, the Bureau of Industry and Security (BIS) amends the Export Administration Regulations (EAR) to impose a license requirement on exports and reexports of specified target assemblies and components for the production of tritium under new Export Control Classification Number (ECCN) 1A231, and for the related “production” technology for 1A231 commodities covered under ECCNs 1E001 and 1E201. The items identified in this rule are controlled for nuclear nonproliferation (NP) Column 1 and anti-terrorism (AT) Column 1 reasons. These new classifications are the result of a U.S. Government proposal submitted and agreed to by members of the relevant multilateral regime, the Nuclear Suppliers Group (NSG), in June 2017. This final rule, as required under the 0Y521 procedure and in fulfillment of multilateral commitments, implements the multilateral control for the items adopted by the NSG.
* DATES: This rule is effective April 5, 2018. …
* SUPPLEMENTARY INFORMATION:
 
Targets for the Production of Tritium and Related “Development” and “Production” Technology Initially Classified Under the 0Y521 Series Reclassified to a Nuclear Nonproliferation Multilateral Control Under the EAR
 
* LICENSE REQUIREMENTS: In this rule, BIS amends the EAR to add a new ECCN, 1A231, for specified target assemblies and components for the production of tritium, and to impose a license requirement on exports and reexports of items classified thereunder. ECCN 1A231 will be inserted between ECCNs 1A227 and 1A290 on the CCL. Specifically, this rule imposes a license requirement on exports and reexports of such items if they are either (a.) target assemblies made of or containing lithium enriched in the lithium-6 isotope “specially designed” for the production of tritium through irradiation, including insertion in a nuclear reactor; or (b.) components “specially designed” for the target assemblies specified in Item paragraph a. of new ECCN 1A231. A Technical Note to paragraph b. provides that components “specially designed” for target assemblies for the production of tritium may include lithium pellets, tritium getters, and specially-coated cladding.
 
In addition, pursuant to this rule, the related “production” technology for the items controlled under the new ECCN 1A231 entry is classified under existing ECCNs 1E001 and 1E201. Consequently, a reference to ECCN 1A231 has been added to the headings of ECCN 1E001 and ECCN 1E201 and to the License Requirements section of ECCN 1E001. The items classified under new ECCN 1A231 and under existing ECCNs 1E001 and 1E201 in this rule are controlled for nuclear nonproliferation (NP) Column 1 and anti-terrorism (AT) Column 1 reasons.
 
* LICENSE EXCEPTIONS: License Exception availability for items specified under new ECCN 1A231, and the related technology specified under existing ECCNs 1E001 and 1E201, is consistent with Category 1 NP controlled end items and related technology and provisions, as described in §
742.3 of the EAR.
 
* LICENSING POLICY: Applications for licenses to export and reexport the target assemblies and components covered under ECCN 1A231 and the related technology controlled under ECCNs 1E001 and 1E201 will be reviewed using the factors described in paragraph (b)-Licensing policy-of §
742.3 of the EAR, which include: The appropriateness of the stated end-use, including specifically for the stated end-user; the items’ significance for nuclear purposes; whether the items are to be used in certain specified types of research; the types of assurances or guarantees given against use for nuclear explosive purposes or proliferation; whether any party to the transaction has been engaged in clandestine or illegal procurement activities; whether an application for a license to export or reexport to the end-user has previously been denied or whether the end-user has previously diverted items to unauthorized activities which were received under a license, a license exception, or shipped with no license required; whether the transaction would present an unacceptable risk of diversion to a nuclear explosive activity or unsafeguarded nuclear fuel-cycle activity, as described in §
744.2(a) of the EAR; and consideration of factors related to the nonproliferation credentials of the importing country.
 
* CONFORMING AMENDMENT: Finally, in this rule, BIS amends the EAR to make a conforming change. Specifically, BIS amends supplement No. 5 to part 774-Items Classified Under ECCNs 0A521, 0B521, 0C521, 0D521 and 0E521-to remove the existing references to the targets under “0A521. Systems, Equipment and Components.”, and the related technology under “0E521. Technology.” …
 
  Dated: March 30, 2018.
 
Matthew S. Borman, Deputy Assistant Secretary for Export Administration.

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

EXIM_a2

2. 
Justice/ATF Revises Information Collection Activities Concerning Report of Firearms Transactions-Demand 2 (ATF Form 5300.5)

(Source: Federal Register, 5 Apr 2018.) [Excerpts.]
 
83 FR 14671: Agency Information Collection Activities; Proposed eCollection eComments Requested; Revision of a Currently Approved Collection Report of Firearms Transactions-Demand 2 (ATF Form 5300.5)
 
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 60-Day notice.
* SUMMARY: The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection OMB 1140-0024 (Report of Firearms Transactions-Demand 2-ATF Form 5300.5) is being revised due to a reduction in burden, since there is a decrease in the number of respondents, responses, and total burden hours from the previous renewal in 2015. The proposed information collection is also being published to obtain comments from the public and affected agencies.
* DATES: Comments are encouraged and will be accepted for 60 days until June 4, 2018. …
* SUPPLEMENTARY INFORMATION: …
 
Overview of This Information Collection
 
  – Type of Information Collection check justification or form 83): Revision of a currently approved collection.
  – The Title of the Form/Collection: Report of Firearms Transactions – Demand 2. …
  – Form number (if applicable): ATF Form 5300.5. …
  – Abstract: The ATF Form 5300.5 is used when the Bureau of Alcohol, Tobacco, Firearms and Explosives Official has determined that the Federal Firearms Licensee (FFL) has met the Demand 2 reporting requirements. The Demand 2 Program requires FFLs with 25 or more traces, with a time to crime of 3 years or less in a calendar year, to submit an annual report followed by quarterly reports of used firearms acquired by the FFL. …
 
  Dated: April 2, 2018.
 
Melody Braswell, Department Clearance Officer for PRA, U.S. Department of Justice.

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OGSOTHER GOVERNMENT SOURCES

OGS_a13. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce/BIS; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Statement by Ultimate Consignee and Purchaser [Publication Date: 6 Apr 2018.]
 
* Justice/ATF; NOTICES: Agency Information Collection Activities; Proposals, Submissions, and Approvals: Federal Explosives License/Permit Renewal Application [Publication Date: 6 Apr 2018.]
 
* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 6 Apr 2018.]

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

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OGS_a35.

DHS/CBP Releases Notice Concerning Section 232 and Immediate Transportation Entries

(Source:
CSMS# 18-000258, 5 Apr 2018.)
 
On March 22, 2018, in CSMS message # 18-000240, CBP provided entry summary filing instructions for imports of steel and aluminum subject to the March 8 and March 22 Presidential Proclamations on Adjusting Imports of Steel and Aluminum into the United States.
  
U.S. Customs and Border Protection has received numerous questions about the entry date of imports of steel and aluminum articles entered for consumption, which were also covered by an entry for immediate transportation.
 
  Pursuant to the Presidential Proclamations, duties are due on goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on March 23, 2018.
 
19 CFR 141.69(b) states:
 
Merchandise which is not subject to a quantitative or tariff-rate quota and which is covered by an entry for immediate transportation made at the port of original importation, if entered for consumption at the port designated by the consignee or his agent in such transportation entry without having been taken into custody by the port director for general order under section 490, Tariff Act of 1930, as amended ( 19 U.S.C. 1490), shall be subject to the rates in effect when the immediate transportation entry was accepted at the port of original importation.
  For such entries covered by an entry for immediate transportation, and with a country of origin and Harmonized Tariff Schedule classification subject to the Presidential Proclamations, such entries shall be subject to the duty rates in effect when the immediate transportation entry was accepted at the port of original importation.
  Accordingly, entries of steel and aluminum articles covered by an entry for immediate transportation accepted at the port of original importation before March 23, may have been incorrectly rejected by CBP and/or incorrectly filed with a Chapter 99 steel or aluminum HTS classification.
  CBP is working to address the incorrectly filed entries to alleviate the need for the trade to resubmit entry summaries, submit post summary corrections (PSC), or file protests. CBP is aware that some entry summaries incorrectly submitted with the Chapter 99 HTS classification may have a deadline approaching to pay the associated duties. CBP will fully consider the issues associated with these entries in enforcing the duty deadline and CBP will be addressing these entries promptly. Importers who incorrectly paid duties pursuant to the Presidential Proclamations on an AD/CVD entry, and want to request an administrative refund of these duties prior to liquidation, may file a PSC to request an administrative refund of these duties prior to liquidation.
  Importers filing steel and aluminum entry summaries and PSCs without the Chapter 99 HTS classifications may receive reject messages. See CSMS 18-000249 for the procedures to follow when receiving these messages.
  Importers may file a protest if they believe an entry was incorrectly liquidated.
 
* FOR FURTHER INFORMATION: For more information, please refer to Presidential Proclamations 9704 (aluminum) and 9705 (steel) on Adjusting Imports of Steel and Aluminum into the United States, Federal Register, 83 FR 11619 and 83 FR 11625, dated March 15, 2018; and the March 22, 2018 Presidential Proclamations on Adjusting Imports of Steel and Aluminum into the United States.
  For questions about the status of an individual entry, contact personnel at the corresponding Center of Excellence and Expertise.
 
  – Related CSMS No. 18-000240, 18-000249

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OGS_a4
6.

DoD/DSS Posts Guidance for Cleared Contractors Concerning SEAD 4 Implementation

(Source:
DoD/DSS, 4 Apr 2018.)
 
DSS provides updated guidance for cleared contractors on the implementation of Security Executive Agent Directive 4 (“SEAD 4”) in relation to the disposition of foreign passports belonging to cleared employees

On December 10, 2016, the Director of National Intelligence signed SEAD 4, “National Security Adjudicative Guidelines,” which became effective on June 8, 2017. SEAD 4 establishes the single common adjudicative criteria for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position. The guidelines reflected in the SEAD 4 supersede all previously issued national security adjudicative criteria or guidelines. The SEAD 4 guidelines may be found 
here

 
This guidance provides for Industry implementation of the SEAD 4 Adjudicative Guidelines related to the disposition of foreign passports belonging to cleared employees that have been retained by contractors in accordance with prior DoD directions or decisions under the former Adjudicative Guidelines. In accordance with SEAD 4, cleared contractors will not be asked by the DoD Consolidated Adjudications Facility (CAF) to routinely retain or destroy foreign passports and/or identity cards as a means of mitigating security concerns for individuals who maintain dual citizenship with other countries. 

In order to implement SEAD 4, cleared contractors who have retained a cleared employee’s foreign passport or identity card based on prior DoD directions or personnel security adjudicative decisions should return the foreign passport or identity card to the cleared employee.

Upon returning the foreign passport or identity card to the cleared employee, the facility security officer, or designated JPAS user acting on behalf of the contractor, will remind the cleared employee of their responsibility to enter and exit the United States using a U.S. passport.

The cleared contractor will submit incident reports if any cleared employees report use of a foreign passport to enter or exit the United States.

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

OGS_a5
7.

OMB/OIRA Reviews of Proposed Ex/Im Regulations

(Source:
OMB/OIRA, 5 Apr 2018.)    
 
* TITLE: International Traffic in Arms Regulations: Exports Made To or On Behalf of a U.S. Government Agency
– AGENCY: STATE
– STAGE: Finale Rule
– RECEIVED DATE: 17 Mar 2018
– RIN:
1400-AE24
– STATUS:
Pending Review

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

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

NWSNEWS

NWS_a1
9
CNBC: “China Announces New Tariffs on 106 U.S. Products, Including Soy, Cars and Chemicals”

(Source:
CNBC, 4 Apr 2018.) [Excerpts.]
 
China announced additional tariffs on 106 U.S. products on Wednesday, in a move likely to heighten global concerns of a tit-for-tat trade war between the world’s biggest economies.
 
The effective start date for the new charges was not announced, though China’s Ministry of Commerce said the tariffs are designed to target up to $50 billion of U.S. products annually.
 
The 25 percent levy on U.S. imports includes products such as soybeans, cars and whiskey, Beijing said. The full list can be found
here. … 
 
The move comes less than 24 hours after President Donald Trump unveiled a list of Chinese imports that he aims to target as part of a crackdown on what he deems as unfair trade practices.
 

Sectors covered by Trump’s proposed tariffs include products used for robotics, information technology, communication technology and aerospace. … 

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

NWS_a2
10
Reuters: “U.S. Seeks About 20 Years Prison for Turkish Banker in Iran Sanctions Case”

(Source:
Reuters, 4 Apr 2018.) [Excerpts.]
 
U.S. prosecutors on Wednesday asked a federal judge to sentence a Turkish banker convicted of helping Iran evade U.S. sanctions to about 20 years in prison, in a case that has strained diplomatic ties between the United States and Turkey.
 
Mehmet Hakan Atilla, 47, a former deputy general manager at Turkey’s state-controlled Halkbank, had been found guilty by a federal jury in Manhattan in January.
 
Lawyers for Atilla did not immediately respond to requests for comment on the sentencing request.
 
Prosecutors said Atilla conspired with Turkish-Iranian gold trader Reza Zarrab and others from 2010 to 2015 in using fraudulent gold and food transactions to help Iran evade sanctions, which targeted the movement of oil proceeds and U.S. bank note and precious metals transactions.
 
  “At a time when the United States and the community of nations were engaged in the momentous undertaking of depriving the Government of Iran of funding for its malign and deadly activities,” including its alleged pursuit of nuclear weapons and support for terrorist groups, “Atilla was a key player in massively undermining those efforts,” prosecutors said in a court filing.
 

Atilla is to be sentenced on April 11 by U.S. District Judge Richard Berman in Manhattan. … 

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NWS_a3
11
ST&R Trade Report: “Short Deadline for Comments on Chinese Goods to be Hit with Higher Import Duties”

 
The Trump administration has announced a
list of approximately 1,300 goods from China on which an additional 25 percent import duty could be imposed. These tariffs are part of the U.S. response to a Section 301 investigation concluding that China is coercing U.S. companies into transferring their technology and intellectual property to Chinese enterprises. Affected companies now have a limited time to submit comments on the list and prepare for the impact of the new tariffs.
 
According to the Office of the U.S. Trade Representative, the additional tariffs are designed to target products that benefit from China’s industrial plans, including its “Made in China 2025” initiative, while minimizing the impact on the U.S. economy. The proposed list currently covers about $50 billion in Chinese goods in the following HTSUS headings.
 
29 – chemicals
30 – medicines
40 – some rubber, tires, and conveyor belts
72 – iron/non-alloy steel
73 – alloy steel
76 – aluminum
84 – machinery and mechanical appliances, including machinery used in manufacturing textiles and apparel
85 – electrical machinery, television image and sound recorders and reproducers
86 – railway/tramway
87 – motor vehicles
88 – planes and helicopters
89 – boats
90 – glass and microscopes
93 – guns
 
This list will now undergo further review. Interested parties may submit written comments by May 11, USTR will hold a public hearing May 15 in Washington, D.C., and post-hearing rebuttal comments are due by May 22. USTR is particularly interested in comments on (a) the specific products to be subject to increased duties, including whether the listed products should be retained or removed or whether products not currently on the list should be added; (b) the level of the increase, if any, in the rate of duty; and (c) the appropriate aggregate level of trade to be covered by additional duties.
 
After the completion of this process, USTR will issue a final determination on the products that will be subject to the additional duties. However, it remains unclear when those duties may take effect. Typically, they would be expected to be imposed 30 days after a final list is published, but USTR can delay implementation by up to 180 days if the U.S. and China are making sufficient progress toward an agreement on the underlying issues.
 
It should also be noted that these tariffs are in addition to the 10 percent and 25 percent additional tariffs imposed on March 23 on imported aluminum and steel products (some source countries are excepted but China is not among them). As a result, aluminum and steel imports from China would be subject to total additional tariffs of 35 percent and 50 percent, respectively.

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COMMCOMMENTARY

COMM_a01
12. 
A. Magnus, M. Dean & C. Munro: “UK Merger Control Thresholds to be Reduced to Protect National Security”

(Source:
Dentons, 29 Mar 2018.)
 
* Authors: Adrian Magnus, Esq.,
adrian.magnus@dentons.com; Michael Dean, Esq.,
adrian.magnus@dentons.com; and C. Munro, Esq.,
catriona.munro@dentons.com. All of Dentons, London, Glasgow, and Edinburgh, respectively.
 
Lower merger control thresholds will apply to transactions involving enterprises which develop or produce military or dual use items, quantum technology or computing hardware. This is to allow the UK Government to review and potentially block those transactions on the basis of national security.
 
Background
 
At present, the UK Government can generally intervene in mergers only if they meet the turnover or share of supply tests in the Enterprise Act 2002, and then only on the grounds of national security, media plurality or financial stability. [FN/1] The Government considers that recent technological and economic changes mean the existing thresholds no longer effectively safeguard national security, while the UK is facing greater and more complex threats, which could emanate from foreign investment.
 
The Competition and Markets Authority (CMA) and the Department for Business, Energy & Industrial Strategy (BEIS) have therefore taken steps to implement various proposals which were first announced in the Government’s October 2017 Green Paper on national security implications of foreign ownership or control. [FN/2] To widen the Government’s powers to intervene, BEIS has laid a draft Order in Parliament to amend the share of supply test for mergers involving targets in three specific sectors. [FN/3] This will be followed by a second Order [FN/4] to lower the turnover threshold in these sectors.
 
The CMA and BEIS are now consulting [FN/5] on guidance that each has produced about these changes.
 
What’s changing?
 
If the target is active in the development or production of items for military or dual use, quantum technology or computing hardware, the CMA will have jurisdiction to review the transaction (so the Government could intervene on any of the three grounds) if:
 
  – The turnover of the target exceeds £1 million (compared to £70 million in all other sectors); or
  – The target already has a 25% share of supply of the relevant goods or services in the UK or any substantial part of it.  There will be no need for that share to increase as a result of the merger.  This threshold has been introduced to capture mergers involving targets which undertake a unique activity in the UK.  (Mergers which meet the existing threshold of increasing a share of supply to 25% or more will still be caught.)
 
The draft BEIS guidance clarifies the three sectors to which the new thresholds will apply:
 
  – Development or production of items for military or dual use:   this includes arms, military and paramilitary equipment and items which can be used for both military and civil purposes, listed on four Strategic Export Control Lists. [FN/6] Targets which develop or produce these goods or services, or which hold related information, will be within the scope of this sector.
  – Design and maintenance of aspects of computing hardware:  this includes targets which own, create or supply intellectual property relating to the functional capability of computer processing units, the instruction set architecture for such units, or computer code that provides low level control for such units.  It will also bring into scope targets which design, maintain or provide support for the secure provisioning or management of roots of trust of computer processing units, or computer code that provides low level control for such units.
  – Development and production of quantum technology:  this includes: quantum computing or simulation; quantum imaging, sensing, timing or navigation; quantum communications; and quantum resistant cryptography.  The concept of ‘development’ includes design, assembly and testing, as well as the creation of intellectual property.  However, targets providing non-quantum technology-related goods or services to quantum technology businesses are not subject to the new thresholds.
 
The Government will offer informal, non-binding advice on whether particular targets fall into one of these sectors.
Transactions involving targets which are only partially involved in one of these three sectors are still subject to the revised thresholds, but the Government will only be able to intervene where a merger involves a change in material influence or control over that particular activity.
 
What’s staying the same?
 
BEIS estimates that the new thresholds will give the CMA the jurisdiction to review up to 29 extra mergers per year.  However, notifying the CMA of a merger will remain (at least in theory) voluntary and the CMA does not anticipate opening any “own-initiative” investigations on the basis of the new thresholds.  The CMA considers that any horizontal mergers raising competition concerns already trigger the existing thresholds, while most non-horizontal mergers do not raise competition concerns. [FN/7]
 
In effect, the Government only expects to intervene in up to six additional mergers each year.  The procedure it uses to intervene will not change.  The Secretary of State will issue a Public Intervention Notice (PIN), requiring the CMA to carry out a Phase 1 report on jurisdictional and competition issues. The Secretary of State will then clear (conditionally or unconditionally) or, following an in-depth Phase 2 investigation, block the merger on one of the three grounds.  But given the nature of the three sectors to which the new thresholds apply, BEIS only expects to issue a PIN in relation to mergers caught by the smaller thresholds on the ground of national security.
 
National security issues in mergers have historically been resolved by undertakings at the end of Phase 1.  Alternatively, BEIS may proactively seek undertakings to protect national security before a relevant merger situation arises.  For example, following Melrose’s bid for GKN, BEIS and Melrose have engaged in discussions resulting in Melrose offering binding commitments (if its bid is successful) to, inter alia, maintain its UK listing and headquarters and maintain or increase GKN’s current level of research and development investment. [FN/8] If BEIS accepts binding commitments at the bidding stage, this should satisfy any national security concerns, so the Government would be unlikely to issue a PIN.  Any merger control assessment would then be based purely on competition issues.
 
When will the changes come into effect?
 
The CMA and BEIS consultations close on 12 April.  BEIS is expected to finalize the draft legislation shortly after the outcomes of the consultations are issued. The new thresholds will only apply to mergers which take place after the amendments come into force.
 
In the longer term, these amendments are likely to be just the first of many in the UK and further afield:
 
  – BEIS has also consulted on reforms to revise the way in which the Government scrutinizes the national security implications of foreign investment.  The consultation closed in January and the Government will set out related proposals in a White Paper in due course; 
  – The Government will continue to assess risks in other sectors, including emerging technologies, and will bring forward further legislation if necessary; and 
  – In September 2017, the European Commission suggested establishing a framework to ensure that Member States can co-ordinate reviews of foreign takeovers endangering security or public order.  The French government has now announced that it plans to update its national security screening rules for foreign investments alongside this framework.
 
———–
  [FN/1] The Government may specify additional grounds by Order. In very limited cases, the Secretary of State can intervene by issuing a Special Intervention Notice where the merger does not meet the turnover or share of supply threshold. See our alert New controls over foreign investment in UK strategic infrastructure? The legal background to the threat of increased state intervention
  [FN/3] Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018
  [FN/4] Enterprise Act 2002 (Turnover Test) (Amendment) Order 2018
  [FN/6] The UK Military List (Schedule 2 to the Export Control Order 2008); the UK Dual-Use List (Schedule 3 to the Export Control Order 2008); the UK Radioactive Source List (Schedule to the Export of Radioactive Sources (Control) Order 2006); and the EU Dual-Use List (Annex I to Council Regulation (EC) No. 428/2009)
  [FN/7] CMA draft guidance on changes to the jurisdictional thresholds for UK merger control, paragraphs 3.4-3.6

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COMM_a2
13.

M. Volkov: “The State of Whistleblowing”

(Source:
Volkov Law Group Blog, 3 Apr 2018.) Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
We continue to read headlines of whistleblowers receiving large, sometimes, multi-million-dollar awards after successful prosecutions of companies for a variety of criminal and civil offenses.  From these headlines, we may be convinced that whistleblowers continue to grow in influence and achieving real results – the improvement of overall corporate performance.  I hate to burst the proverbial bubble, but it is difficult to reach such a conclusion.  Why?
 
Companies continue to fear whistleblowers.  To use a strategy of paradoxical intervention, companies need to change that attitude and change it now.  I am not here to defend every whistleblower, but I am willing to defend the importance of a whistleblowing function – companies need insights and information on potential wrongdoing so that they can affirmatively take steps to stop wrongdoing, remediate the business’ conduct and ensure that the problem does not happen again.
 
A company that turns away or avoids whistleblowers is a company that wants to sweep issues under the rug in favor of short-term financial and performance gains.  In the end, the long-term always trumps the short-term, and enlightened companies know the value of sustained profitability rather than short-term performance.
 
Some whistleblowers perceive events and issues in a strange way – they see conspiracies where none exist, and they are convinced they are right now matter what the evidence may show.  On the other hand, some whistleblowers have saved companies millions of dollars, and even saved lives.  I do not intend to sound so dramatic but we have examples of important whistleblowers in our history and we should not diminish the importance and courage of these people.
 
Aside from corporate attitudes of avoidance, compliance surveys continue to reinforce a dangerous trend – the number of incidents of retaliation against whistleblowers is on the rise in the corporate landscape.  Companies are not only avoiding whistleblowers, they are attacking whistleblowers.  This trend is incredibly dangerous and raises a real problem for companies seeking to establish a culture of trust and integrity.
 
Whistleblower retaliation is antithetical to any culture of trust and integrity.  Such conduct committed by anyone in a company undermines any ability of a company to encourage reporting of concerns and problems.  Whistleblowers have to be treated with respect and have to be listened to as a valuable source of information.  A company’s treatment of whistleblowers sets an important example of whether a company is willing to listen, or whether the company has no interest in employee concerns.
 
Companies that retaliate against whistleblowers by definition lack trust and integrity.  It is one of many essential requirements for a company to embed a culture of ethics and compliance.
 
In those instances where a company can prove that an executive, manager or employee retaliated against a whistleblower, the company has to aggressively prosecute the case and publicize the effort (with due consideration for privacy concerns).  An aggressive disciplinary action against an individual who retaliates against a whistleblower can send a strong message and build important trust considerations with its managers and employees.
 
Whistleblowers will continue to stand up against corporate misconduct.  Our history is replete with instances of whistleblowers who displayed courage and fortitude against negative influences and outright threats or instances of physical harm.  Companies have to move past old attitudes and embrace a strategy that encourages whistleblowers, and ensures that employee concerns will be reviewed free of bias.  Those companies that fail to respond appropriately to whistleblowers will suffer harm and their corporate cultures will suffer significant harms.

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COMM_a3
14. 
O. Torres: “The STA License Exception by the Numbers”

(Source:
Torres Law PLLC, 2 Apr 2018.)
 
* Authors: Olga Torres, Esq. Contact information: 214-593-7120,
info@torrestradelaw.com
.
 
Section 22 CFR §740.20 of the Export Administration Regulations (“EAR”) provides for the Strategic Trade Authorization (“STA”) license exception. As the name suggests, STA permits the export of EAR-controlled items which would otherwise require a license to be exported without a license. STA was implemented as part of Export Control Reform (“ECR”). In order to take advantage of the license exception, there are various requirements that must be met including maintaining certain records, such as a Prior Consignee Statement, for a period of five years.[1] In the case of 600-series items, the recordkeeping requirements are even more cumbersome.
 
Audits of STA compliance are common and consist of demands from the Bureau of Industry and Security (“BIS”) for the required STA supporting documentation. Examples of the supporting documentation requested include i) prior consignee statement, ii) written notification to consignee of STA shipment, iii) name of ultimate end user and country of destination, iv) full ECCN with subparagraph, v) description of how you perform your prior authorization approval verification check, and vi) confirmation as to whether any item is 600 series Major Defense Equipment.
Companies typically have 14 days to supply the documents to BIS, although extension requests are frequently granted. BIS reported that, in 2016, fifty-four STA audits were performed, and only three were not compliant. [FN/2] In the event a company is unable to provide the required documentation, BIS can refer the case to the Office of Export Enforcement (“OEE”), and the company would then be subject to potential penalties and fines.
 
It is no surprise then that relatively few exporters use the STA license exception. [FN/3] This is because it is often easier to obtain a license, despite the proponents of the ECR encouraging exporters to use STA. In fact, those who use STA have an abnormally high risk of being audited for those transactions. Between July 2011 and December 2016, 849 companies used license exception STA. [FN/4] During the same time period, BIS conducted 296 STA audits. [FN/5] This means that over 30% of STA users were subject to government review. In addition to higher risks of audit, use of the STA license exception also opens up the possibility of BIS auditing foreign consignees to ensure they have the relevant documentation as well. All of this increases the chances of the exporter’s case being referred to OEE, which would open the door for potential penalties.
 
In the case of companies that have robust export compliance programs, STA may be a good option. A few tips for compliance to ensure that export issues are avoided include i) designation of a point of contact with the responsibility to determine STA eligibility, ii) maintaining accurate and legible records, iii) prepare for document review and clearly index all the documentation you are maintaining for ease of retrieval and production, iv) properly train your employees, v) adequately monitor your electronic export information filings to ensure STA is actually being declared by your freight forwarder, vi) conduct periodic reviews of your own shipments, vii) communicate with your consignees to ensure they understand the requirements of STA, and viii) create an internal checklist for STA requirements prior to shipment. 
 
In the event you are contacted by BIS about an STA shipment and you realize you may not have been meeting the STA requirements, you should consider escalating the situation to upper management, in-house counsel, or outside trade counsel.
 
———–
  [FN/1] 22 C.F.R. § 740.20.
  [FN/2] Bureau of Industry and Security, Publications, BIS Annual Report to Congress for Fiscal Year 2016, available
here (last visited Mar. 5, 2018).
  [FN/3] Bureau of Industry and Security, BIS License Exception Statistics, available
here. (last visited Mar. 5, 2018).
  [FN/4] Id.
  [FN/5] Bureau of Industry and Security, Publications, BIS Annual Report to Congress for Fiscal Year 2012, available
here (last visited Mar. 5, 2018); Bureau of Industry and Security, Publications, BIS Report to Congress for Fiscal Year 2013, available
here (last visited Mar. 5, 2018); Bureau of Industry and Security, Publications, BIS Report to Congress for Fiscal Year 2014, available
here (last visited Mar. 5, 2018); Bureau of Industry and Security, Publications, BIS Report to Congress for Fiscal Year 2015, available
here (last visited Mar. 5, 2018); Bureau of Industry and Security, Publications, BIS Annual Report to Congress for Fiscal Year 2016, available
here (last visited Mar. 5, 2018). 

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COMM_a4
15. 
Gary Stanley’s EC Tip of the Day

(Source: Defense and Export-Import Update; 3 Apr 2018.  Available by subscription from
gstanley@glstrade.com.) [Excerpts.]
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com.
 
A good way to test the adequacy of your export control compliance manual is to take an audit list like BIS’ 
EMCP Audit Module: Self Assessment … and work backwards. Do you have a policy, procedure, or process in place addressing each of the audit queries?
 

Remember an effective and robust compliance manual does not regurgitate the ITAR and EAR. Parsing those regulations and making their requirements understandable to your employees is part of training. A truly sound manual describes the who, what, how, when, and where with respect to how your particular company goes about complying with the regulatory requirements.


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TECEX/IM TRAINING EVENTS & CONFERENCES

TEC_a116
.

ECS Announces “Mastering ITAR/EAR Challenges”, 22-23 May in Annapolis, MD

(Source: Suzanne Palmer, 5 Apr 2018.)
 
* What: Mastering ITAR
/EAR Challenges, Annapolis, MD
* When:
 May 22-23, 2018
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer; Lisa Bencivenga; Timothy Mooney, Commerce/BIS; Matt Doyle, Lockheed; Matt McGrath, McGrath Law, Debi Davis, Esterline
 
* Register:
 
here
 
or by calling 866-238-4018 or send an email 
to: 
spalmer@exportcompliancesolutions.com

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ENEDITOR’S NOTES

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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(s): 
2 Apr 2018:
83 FR 13849-13862
: Implementation of the February 2017 Australia Group (AG) Intersessional Decisions and the June 2017 AG Plenary Understandings; Addition of India to the AG [Amendment of EAR Parts 738, 740, 745, and 774.]; and 5 Apr 2018: 83 FR 14580-14583: Reclassification of Targets for the Production of Tritium and Related Development and Production Technology Initially Classified Under the 0Y521 Series [Imposes License Requirements on Transfers of Specified Target Assemblies and Components for the Production of Tritium, and Related “Development” and “Production” Technology.]

  
*
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: 30 Mar 2018:
Harmonized System Update 1804, containing 710 ABI records and 166 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.


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

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