18-0410 Tuesday “Daily Bugle”

18-0410 Tuesday “Daily Bugle”

Tuesday, 10 April 2018

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

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Posts Policy Memo 18-18
  4. Justice: “Waterville Man Sentenced 2 Years for Illegal Receipt and Shipment of Firearms”
  5. State/DDTC Gives Tips for a Successful CJ Application
  6. EU Publishes Implementing Regulation Concerning the Classification of Certain Goods in the Combined Nomenclature
  1. ST&R Trade Report: “Trump Considers More Tariffs on Imports from China”
  1. J. Pin: “The EU’s Dual-Use Catch-All Clause”
  2. M. Volkov: “Internal Testing and Monitoring of a Compliance Program”
  3. S. Kao: “New General Licenses to Wind Down Operations with Sanctioned Russian Entities”
  4. Gary Stanley’s EC Tip of the Day
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (22 Feb 2018), DOD/NISPOM (18 May 2016), EAR (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 




[No items of interest noted today.]

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

* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 11 Apr 2018.] 
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OGS_a33. DOD/DSCA Posts Policy Memo 18-18

DoD/DSCA, 10 Apr 2018.) 
* DSCA Policy Memo 18-18 (8-14 Apr 2018) 
Prior Coordination before Advising Foreign Military Sales Customers of Negative Impacts has been posted. This policy memo identifies situations that require Case Managers to provide prior notice to DSCA of any response to inform a foreign partner of USG inability to meet its commitments under the terms of a Letter of Offer and Acceptance. 

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Justice, 5 Apr 2018.) [Excerpts.] 
United States Attorney Halsey B. Frank announced that Iulian Petre, a/k/a “Julian Petre,” 51, of Waterville, was sentenced today in U.S. District Court by Judge John A. Woodcock, Jr. to two years in prison and three years of supervised release for illegally receiving and shipping firearms.  He was convicted of these charges on August 28, 2017, following a six-day jury trial. 
Court records and trial evidence revealed that in 2012 and 2013, Petre purchased and received firearms from out-of-state sellers intending to unlawfully export them.  He shipped some of these firearms to Romania.  The export of these firearms required authorization from the U.S. Department of State, which the defendant knowingly failed to obtain. … 

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State/DDTC Gives Tips for a Successful CJ Application

State/DDTC, document not dated.) 
A good commodity jurisdiction (CJ) application tells a story. It is the biography of your product – where it came from, what it was designed to do, and how it is actually being used. What can you tell us about its genesis? Is it the heir to a distinguished lineage, being derived from earlier products? Or is it a brand-new, cutting-edge concept and a revolutionary approach? Is it produced to serve a single purpose or solve a specific problem, or is it versatile across a variety of functions and industries? Is it designed for military or commercial applications, or both? In addition, in some cases, it might be helpful to explain what the product is not, and what it cannot do.
Bear in mind that your story has two distinct audiences. On the one hand are the engineers, who will pore over your product’s technical drawings and assess its scientific properties and capabilities. On the other hand are the regulators, who must determine whether, and where, your product is controlled on either the U.S. Munitions List (USML) or the Export Administration Regulations (EAR). The first group would appreciate technical precision and completeness. The second group would be grateful for a thorough layman’s description of the product laid out in clear, grammatically correct prose. A successful CJ application will leave both audiences satisfied.
Support documentation is vital in all CJ cases. If your commodity is a physical piece of hardware, you should at a minimum provide technical drawings. While including all the technical data required by the engineers to understand your commodity, you should avoid submitting duplicative or extraneous material. Try to hit that Goldilocks sweet-spot between too little information on the one hand, and reams of irrelevant data on the other. If you don’t give us enough information on which to base a jurisdiction determination, your application will be returned without action, or delayed while we ask you to track down the additional information we need.
If it’s not self-evident why you have submitted a particular support document, please explain somewhere in your application. Do not leave us guessing why you included certain documentation, or which attachment is which. Label them, and explain (if it’s not self-evident) why you are providing them.
Please complete all blocks on your DS-4076 form, using “N/A” sparingly and only as appropriate. To avoid unnecessary delays in the processing of your request, you should provide all information you deem relevant at the outset, as it is better to err on the side of providing too much information than too little.
Finally, in order to make the story of your commodity as compelling as possible, provide us with a cover letter that ties all the relevant information together into a single narrative. Conclude your application (both the DS-4076 form and the cover letter) with a regulatory analysis of your product, Including where it might potentially fall on both the USML and the EAR. We will evaluate your application based on the USML and EAR orders of review; you should do likewise in the course of preparing your submission. If you think through your application enough to do your own informal regulatory analysis, then you will probably provide us sufficient information to do a formal jurisdiction determination.
[Editor’s Note: More information concerning CJ’s is available 

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ST&R Trade Report: “Trump Considers More Tariffs on Imports from China” 

Sandler, Travis & Rosenberg Trade Report, 10 Apr 2018.)
President Trump has raised the prospect of increasing tariffs on additional $100 billion worth of imports from China in an escalating trade dispute. However, he also held open the possibility the two sides could work out an agreement to avoid the tariffs.
The Office of the U.S. Trade Representative has proposed a list of more than 1,300 goods imported from China that could be subject to an additional 25 percent duty in response to a section 301 investigation concluding that China is coercing U.S. companies into transferring their technology and intellectual property to Chinese enterprises. Imports of such goods are currently valued at approximately $50 billion, the amount of damage the U.S. claims China’s policies have caused. USTR is accepting comments on this list by May 11 and will hold a public hearing May 15.
In response, China announced its own plans for a 25 percent tariff hike on 106 goods imported from the U.S., largely in politically sensitive industries such as agriculture and automobiles. No specific dates have been set for implementation of the tariffs by either side.
A statement from the White House said that because China has chosen this course of action “instead of addressing its misconduct” Trump has directed USTR to “determine if an additional $100 billion worth of tariffs would be appropriate under section 301.” The statement noted that any additional tariffs would be subject to a similar review and public comment period as the initial list, and USTR added that no tariffs will go into effect until this process is complete. Chinese officials said Beijing would “fight back resolutely” if the U.S. goes forward with Trump’s threat.
The White House statement said the U.S. “is still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people.” However, despite some reports to the contrary, the two sides do not appear to have held or scheduled any such talks.
The House Ways and Means Committee will hold a hearing April 12 to review the effect of the Section 301 tariffs, as well as the Section 232 duty increases on steel and aluminum imports, on the U.S. economy and jobs. Comments for the hearing record are due by April 26. Committee Chairman Kevin Brady, R-Texas, said in response to the latest threat of tariff increases on China that “it is in both our countries’ interest – and frankly, the world’s – to find a new path forward on unfair trade practices.”

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J. Pin: “The EU’s Dual-Use Catch-All Clause” 

Tradewin, 2 Apr 2018.) 
* Author: Jerome Pin, Tradewin. 
Dual-use goods are defined as goods, equipment, technology, and knowledge that may have either civilian or military use or may contribute to the proliferation of weapons of mass destruction.
As part of their global strategy, most countries have regulations in place to control the export of dual-use goods. National authorities issue the lists of products for which they want to control the exports and for which a license is required.
Every exporter should understand that they are responsible for checking if the goods they want to export are on these lists and if so, to apply for the proper export license.
And yes, this may prove complex and difficult depending on the products. Some components may not be controlled under the dual-use regulations of the EU based on their technical characteristics.
However, they may be upgraded in the future after exportation and used in improper activities.
To prevent that from happening, the EU has implemented a “catch-all” clause. This clause allows national authorities to control any product not listed, but in which exportation is suspected to go against non-proliferation policy due to different factors as the identity of the importer, country of destination, or new potential use of the goods.
EU Article 4 of Regulation 1334/2000 defines the “catch-all” clause. 
Paragraph 1 states that an authorization shall be required if, while not listed, “the items in question are or may be intended, in their entirety or in part, for use” at any stage of development of chemical, biological, or nuclear weapons.
Paragraph 2 extends this clause to all non-listed items that “are or may be intended, in their entirety or in part, for a military end-use”, exported to countries subject to an arms embargo, or intended for use as a component of listed military items exported without authorization.
Finally, paragraph 4 is very important as it sets the responsibility of the exporter to report to the authorities any awareness that the item he wants to export, even if non-listed, is intended for use as per paragraphs 1, 2, or 3.
This regulation thus states that exporters are legally required to assist countries in dual-use export control and can be prosecuted for not doing so: whether by not applying for the appropriate export license of a non-listed item, or for not reporting awareness of end-use of an item contrary to the paragraphs 1, 2, 3 above.
This is an EU-wide regulation, with penalties dictated by a member state.
In France for example, the maximum penalty for noncompliance is three times the value of the goods and up to five years in prison. Additional penalties may be levied by the US if the goods fall within the US re-export rules.
The “catch-all” clause requires the exporter to report any transaction that they “know or have reasons to know” can be contrary to the dual-use goods regulations.
Yet, the problem is to define what is “having knowledge”.  
There are no texts in the regulation defining the measures a company should adopt to comply with this obligation.
Exporters must demonstrate their “due diligence” through engaging in denied party screening, end-user verifications, implementing procedures with their service providers, and building compliance manuals. 

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COMM_a039. M
. Volkov: “Internal Testing and Monitoring of a Compliance Program”

Volkov Law Group Blog, 5 Apr 2018. Reprinted by permission.) 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com, 240-505-1992. 
Compliance is a dynamic subject and a profession that “never sits still.”  Compliance professionals are always developing new ideas, strategies and approaches to solve problems, and increase efficiency and effectiveness. It is a fast-growing profession that is quickly gaining greater acceptance as a critical member of the corporate governance team.
As compliance gains a greater foothold, compliance professionals hopefully will gain access to increased resources.  It is a critical issue that companies have to monitor to ensure that the compliance function is not strangled or restricted in effectiveness by lack of resources.
In those companies committed to ethics and compliance, I have observed increasing interest in creating a self-monitoring and review function internal to the compliance function. It is a welcome idea and has the potential to increase the ability of a company to assess, monitor and improve their compliance programs.
Many companies depend on internal audit and outside consultants/law firms (such as The Volkov Law Group (here)) to test, assess and evaluate their compliance programs. Internal audit functions, however, are usually stretched thin and rarely, if ever, have adequate opportunities to conduct a wholesale review of a company’s compliance program.  In most cases, an internal audit function can review a specific office’s adherence to the ethics and compliance program.
To the extent that companies rely on outside law firms/consultants to conduct ethics and compliance program evaluations, these reviews rarely provide ongoing monitoring and usually are conducted periodically (every 2 to 3 years).  The absence of continuous monitoring or assessments is a glaring deficiency in this option.
Companies are exploring creating in-house assessment, audit and review teams that are dedicated to monitoring, auditing and testing compliance programs.  Like an audit function, these review teams schedule different reviews of compliance programs by geography, function, and other relevant topics.  The professionals assigned to the function are well familiar with the company’s compliance program and within a year or two they can conduct timely and efficient testing and reviews of compliance programs.
A small staff of five or six members can make a real difference in the operation of a compliance program.  The reviews can include not only compliance controls but extend to financial controls that are relevant to the compliance function.
The internal review function can operate in addition to existing internal audit reviews and outside counsel/consultant assessments of a compliance program.  The new function can easily report information and recommendations for remediation to compliance program leadership.  Compliance improvements can be quickly implemented based on these focused and timely reviews.
The independence of the internal review function is important to maintain.  While the small unit may report to senior compliance leadership or a compliance committee, the team should be permitted to conduct independent reviews, free from any influence from other compliance staff or other corporate functions.  The credibility and authority of the compliance review team will depend on its strict adherence to independence and the unit’s reputation as an honest broker of compliance issues.
The creation of an independent review function may not be the highest priority of a compliance program. There may be other projects that are more important.  Nonetheless, if possible, a compliance review team can be an effective adjunct to other important compliance functions.

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S. Kao: “New General Licenses to Wind Down Operations with Sanctioned Russian Entities”

Deloitte, 9 Apr 2018.) 

* Authors: Suzanne Kao, Global Export Controls & Sanctions Lead, 
, 703-251-1498; Holland Keerikatte; and Sarah Oliai, all of Deloitte Tax LLP-Global Trade Advisory.
New General Licenses to Wind Down Operations with Sanctioned Russian Entities
OFAC sanctions several Russian oligarchs and issues two general licenses to end operations and divest from sanctioned entities.
On April 6, 2018, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on seven Russian oligarchs, 12 companies they control, 17 Russian government officials, and a state-owned Russian weapons trading company and its bank subsidiary (
press release

). These designations follow the Administration’s January 2018 report to Congress on Russian officials and oligarchs for consideration as potential sanctions targets.  Recent escalating actions between Russia and the United States include the United States’ expulsion of Russian diplomats and Russia’s expulsion of US diplomats in response.
General Licenses
Unlike the Ukraine-/Russia-related Sectoral Sanctions Directives that place certain restrictions on doing business with different sectors of the Russian economy, the individuals and entities sanctioned on April 6 have been named Specially Designated Nationals (SDNs). This action imposes stricter prohibitions and blocking measures, such as asset freezes. To facilitate the winding down of operations, contracts, transfers/divestitures, and other business agreements and transactions between the US individuals and companies with the Russian sanctions targets, OFAC issued General Licenses 
 and related FAQs (

). Both General Licenses apply to certain groups of the 12 companies owned by the sanctioned oligarchs. US persons and companies participating in transactions authorized by these General Licenses must submit a detailed report to OFAC within 10 business days after the expiration date of the relevant General License. 
Maintenance and Winding Down of Existing Business and Contracts
To qualify for General License 12, business arrangements must have been in effect before April 6, 2018 and meet specific requirements, including include that divestiture during the wind-down period cannot be made for the benefit of the sanctioned parties. Companies may utilize General License 12 for 60 days (through 12:01 a.m. EDT, June 5, 2018).
Divesting and Transferring Debt, Equity, and Other Holdings
General License 13 authorizes activities necessary to divest or transfer debt, equity, or other holdings in two significant aluminum/power producers and Russia’s leading commercial vehicle manufacturer. Companies may utilize this General License for 31 days (through 12:01 a.m. EDT, May 7, 2018). While General License 13 authorizes certain divestment and transfer activities, it does not authorize US persons to sell debt, equity, or other holdings to purchase or invest in debt, equity, or other holdings in, or facilitate such transactions with any blocked entities, including those in General License 13.
Impact on US Businesses
If you engage in business or have debt, equity, or other holdings and interests in certain newly sanctioned Russian entities, you may need to utilize these General Licenses to wind down your operations with or divest from these companies. Also, it should be noted that these designations are not exhaustive, since companies still must comply with OFAC’s 50% Rule regarding ownership by sanctioned entities and persons.
With these new blocking designations now in place, Deloitte’s Global Trade Advisory team can assist you in reevaluating your trade compliance program to stay up to date with the latest regulatory changes.
For more information, please see FAQs provided by OFAC (


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Gary Stanley’s EC Tip of the Day

(Source: Defense and Export-Import Update; 7 Apr 2018. Available by subscription from 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059, 
EAR Part 754 implements the provisions of section 7, “Short Supply Controls”, of the Export Administration Act (EAA) and similar provisions in other laws that are not based on national security and foreign policy grounds. It sets forth the license requirements and licensing policies for commodities that contain the symbol “SS” in the “Reason for Control” part of “License Requirements” section of the applicable Export Control Classification Number (ECCN) identified on the Commerce Control List (
Supplement No. 1 to part 774 of the EAR). In appropriate cases, it also provides for License Exceptions from the short supply licensing requirements described in 
EAR Part 754.

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Joseph Pulitzer 
(Joseph J. Pulitzer; 10 Apr 1847 – 29 Oct 1911[ was a newspaper publisher of the St. Louis Post Dispatch and the New York World. Pulitzer introduced the techniques of yellow journalism (a type of journalism that presents little or no legitimate well-researched news) to the newspapers he acquired in the 1880s. Today, he is best known for the Pulitzer Prizes, which were established in 1917 as a result of his endowment of Columbia University. The prizes are given annually to recognize and reward excellence in American journalism, photography, literature, history, poetry, music and drama.)
  – “
The power to mould the future of the Republic will be in the hands of the journalists of future generations.” 

William Hazlitt 
(10 Apr 1778 – 18 Sep 1830; was an English writer, drama and literary critic, painter, social commentator, and philosopher. He is now considered one of the greatest critics and essayists in the history of the English language, placed in the company of Samuel Johnson and George Orwell. He is also acknowledged as the finest art critic of his age. Despite his high standing among historians of literature and art, his work is currently little read and mostly out of print.)
  – “A gentle word, a kind look, a good-natured smile can work wonders and accomplish miracles.”
  – “Few things tend more to alienate friendship than a want of punctuality in our engagements. I have known the breach of a promise to dine or sup to break up more than one intimacy.”

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

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

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

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

  – Last 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.]

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

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

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


  – 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 

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

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, 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.

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