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18-0419 Thursday “Daily Bugle”

18-0419 Thursday “Daily Bugle”

Thursday, 19 April 2018

TOP
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. Commerce/ITA: “Are you Export Savvy? Get the Edge on Exporting with New Export.gov Resources”
  4. State/DDTC: (No new postings.)
  5. White House Releases National Security Memorandum Regarding U.S. Conventional Arms Policy
  1. The Jerusalem Post: “Belgium Companies Sold Deadly Chemicals to Assad in Violation of Sanctions”
  2. Reuters: “Trump Launches Effort to Boost U.S. Weapons Sales Abroad”
  3. Reuters: “ZTE Removed Chief Compliance Officer Before U.S. Sanction – Source”
  4. The Wall Street Journal: “U.S. Says Huawei Is a Security Threat, So It’s Backing Off”
  5. WorldECR: “EU Takes New Measures to Deny Terrorists ‘Space to Act'”
  1. International Trade Compliance Update: “UK – Export (Penalty) (Amendment) Regulations 2018”
  2. S. Simons & S. Sukpanich: “Export Control in Thailand: Preparation is the Key”
  3. R.C. Burns: “ZTE Snapback Order Based on Condition Not in Original Order”
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (12 Apr 2018), DOD/NISPOM (18 May 2016), EAR (5 Apr 2018), FACR/OFAC (19 Mar 2018), FTR (20 Sep 2017), HTSUS (16 Apr 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

 

[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

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

[No items of interest noted today.]

 
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OGS_a22. 
Commerce/BIS: (No new postings.)
(Source: 
Commerce/BIS)

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OGS_a33. 
Commerce/ITA: “Are you Export Savvy? Get the Edge on Exporting with New Export.gov Resources”

(Source: Tradeology, 19 Apr 2018.) 
 
Setting your compass in international trade can be rewarding, but challenging. Are you wondering “What is my firm’s potential for international sales?” or “How do I find greater success abroad?” We have two new online tools that can help you chart a course: export.gov’s exporter (self) assessments and export business tip emails.
 
Exporter Assessments Point the Way Forward
 
The U.S. Commercial Service’s exporter assessments can help improve your export planning while pointing to helpful resources. With expert input from our global network of trade professionals, the quick and easy-to-use assessments are customized to different levels of experience: new-to-export companies, exporters expanding into new markets, or experienced exporters in more challenging markets.
 
There are many questions to consider. Here is a brief overview of questions that are answered in the assessments:
  – Does your firm have sufficient production capacity that can be committed to the export market?
  – Does your company have capabilities to modify ingredients and product packaging to meet foreign import regulations, cultural preferences, and survive competition?
  – Will financing be required for any expansion?
  – Has your business considered pursuing U.S. free trade agreement countries as part of a broader export strategy?
  – Is your company familiar with U.S. Department of Commerce resources to help resolve trade issues and problems?
 
Moreover, each assessment provides important links to additional information, including the informative Exporting Basics videos series.
New “Export Today” Emails Give You Tips for Success 
 
To continue developing your exporting competency, subscribe to our new email tip service, Export Today. You will receive biweekly emails from the U.S. Commercial Service, and get pointers on exporting issues relevant to your company’s experience level. Whether it’s shipping issues, trade finance assistance, researching the market, or a separate issue, Export Today will provide you with insights and connect you with the best content on export.gov. Sign up today.
 
Get Started Today on Export.gov
 
With our decades of experience in helping U.S. companies sell abroad, we bring you the most useful information and tools on export.gov. Companies that take the time to think through an export plan tend to have greater international success. The effort can make the difference between generating a few international sales and achieving real business growth. Get export savvy and on the path to new export sales by taking your own exporter assessment and signing up for Export Today email tips.

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OGS_a4
4. 
State/DDTC: (No new postings.)

(Source: 
State/DDTC)

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OGS_a5
5
White House Releases National Security Memorandum Regarding U.S. Conventional Arms Policy 

(Source: The White House, 19 Apr 2018.) [Excerpts.] 
 
… 
Section 1.  Purpose.  The security of the United States and the defense of our interests require a strong military, capable allies and partners, and a dynamic defense industrial base, which currently employs more than 1.7 million people.  Strategic conventional arms transfers lie at the intersection of these interests and play a critical role in achieving our national, economic security, and foreign policy objectives.
 
This policy will be implemented consistent with requirements of the Arms Export Control Act of 1976, as amended (22 U.S.C. 2751 et seq.).
 
By better aligning our policy regarding conventional arms transfers with our national and economic security interests, the approach outlined in this memorandum will serve several functions.  It will help us maintain a technological edge over potential adversaries; strengthen partnerships that preserve and extend our global influence; bolster our economy; spur research and development; enhance the ability of the defense industrial base to create jobs; increase our competitiveness in key markets; protect our ability to constrain global trade in arms that is destabilizing or that threatens our military, allies, or partners; and better equip our allies and partners to contribute to shared security objectives and to enhance global deterrence.  These security objectives include countering terrorism, countering narcotics, promoting regional stability, and improving maritime and border security.
When a proposed transfer is in the national security interest, which includes our economic security, and in our foreign policy interest, the executive branch will advocate strongly on behalf of United States companies.  The executive branch will also streamline procedures, clarify regulations, increase contracting predictability and flexibility, and maximize the ability of the United States industry to grow and support allies and partners.
 
Sec. 2.  Policy.  With respect to arms transfers, it shall be the policy of the executive branch to:
  (a)  bolster the security of the United States and our allies and partners, including by defending against external coercion, countering terrorism, and providing capabilities in support of shared security objectives;
  (b)  maintain technological advantages of the United States military, including by ensuring that there are appropriate protections on the transfer of United States military technologies;
  (c)  increase trade opportunities for United States companies, including by supporting United States industry with appropriate advocacy and trade promotion activities and by simplifying the United States regulatory environment;
  (d)  strengthen the manufacturing and defense industrial base and lower unit costs for the United States and our allies and partners, including by improving financing options and increasing contract flexibility;
  (e)  facilitate ally and partner efforts, through United States sales and security cooperation efforts, to reduce the risk of national or coalition operations causing civilian harm;
  (f)  strengthen relationships and enhance military interoperability where doing so serves national security and foreign policy interests of the United States;
  (g)  prevent proliferation by:
    (i)    exercising restraint in transfers that may be destabilizing, be dangerous to international peace and security, involve materials that may be used as delivery systems for weapons of mass destruction, or result in potential adversaries obtaining capabilities that could threaten the superiority of the United States military or our allies and partners;
    (ii)   continuing United States participation in and support for multilateral arrangements that contribute to the objectives and interests outlined in this memorandum, including the United Nations Register of Conventional Arms, the United Nations Standardized Instrument for Reporting Military Expenditures, regional initiatives that enhance transparency in conventional arms transactions, the Missile Technology Control Regime (MTCR), and the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies;
    (iii)  continuing to use multilateral arrangements to promote shared national policies of restraint against the acquisition of armaments and sensitive dual-use goods and technologies for military end uses by states whose behavior is cause for serious concern; and
    (iv)   working bilaterally and multilaterally to assist other state suppliers of conventional arms in developing effective export control mechanisms in support of responsible export policies that align with those of the United States; and
  (h)  continue to meet the requirements of all applicable statutes, including the Arms Export Control Act, the Foreign Assistance Act, the International Emergency Economic Powers Act, and the annual National Defense Authorization Acts.  Arms transfer decisions will be consistent with the requirements of all applicable export control regulations and international commitments and obligations of the United States.  These laws and regulations will apply, as appropriate, regardless of whether transfers are accomplished through direct commercial sales, government-to-government transfers, United States assistance programs, approvals for the retransfer of arms, changes of end use, or upgrades.
 
Sec. 3.  Arms Transfer Decisions.  In making arms transfer decisions, the executive branch shall account for the following considerations:
  (a)  The National Security of the United States.
    (i)    The appropriateness of the transfer in responding to United States security interests.
    (ii)   The degree to which the transfer contributes to ally and partner burden-sharing and interoperability in support of strategic, foreign policy, and defense interests of the United States.
    (iii)  The transfer’s consistency with United States interests in regional stability, especially when considering transfers that involve power projection, anti-access or area denial capability, or the introduction of a capability that may increase regional tensions or contribute to an arms race.
    (iv)   The transfer’s effect on the technological advantage of the United States, including the recipient’s ability to protect sensitive technology; the risk of compromise to United States systems and operational capabilities; and the recipient’s ability to prevent the diversion of sensitive technology to unauthorized end users.
    (v)    The recipient’s nonproliferation and counterproliferation record.
    (vi)   The transfer’s contribution to efforts to counter terrorism, narcotics trafficking, transnational organized crime, or similar threats to national security.
  (b)  The Economic Security of the United States and Innovation.
    (i)   The transfer’s financial or economic effect on United States industry and its effect on the defense industrial base, including contributions to United States manufacturing and innovation.
    (ii)  The recipient’s ability to obtain comparable systems from competing foreign suppliers.
  (c)  Relationships with Allies and Partners.
    (i)    The degree to which the transfer meets the objectives of bolstering the security and counterterrorism capabilities of our allies and partners and contributes to international peace and security.
    (ii)   The degree to which the transfer increases access and influence in ways that support our strategic, foreign policy, and defense interests.
    (iii)  The recipient’s ability to field, support, and employ the requested system effectively and appropriately in accordance with its intended end use.
    (iv)   The likelihood of the transfer reducing ally and partner dependence on United States adversaries.
    (v)    The risk that the transfer will have adverse economic, political, or social effects within the recipient country.
  (d)  Human Rights and International Humanitarian Law.
    (i)   The risk that the transfer may be used to undermine international peace and security or contribute to abuses of human rights, including acts of gender-based violence and acts of violence against children, violations of international humanitarian law, terrorism, mass atrocities, or transnational organized crime.
    (ii)  Whether the United States has actual knowledge at the time of authorization that the transferred arms will be used to commit:  genocide; crimes against humanity; grave breaches of the Geneva Conventions of 1949; serious violations of Common Article 3 of the Geneva Conventions of 1949; attacks intentionally directed against civilian objects or civilians who are legally protected from attack; or other war crimes as defined in section 2441 of title 18, United States Code.  If the United States has such knowledge, the transfer shall not be authorized.
  (e)  Nonproliferation. The risk that the transfer could undermine the integrity of international nonproliferation agreements and arrangements that prevent proliferators, programs, and entities of concern from acquiring missile technologies or other technologies that could substantially advance their ability to deliver weapons of mass destruction, or otherwise lead to a transfer to potential adversaries of a capability that could threaten the superiority of the United States military or our allies and partners.
 
Sec. 4.  Implementation
  (a)  Within 60 days of the date of this memorandum, the Secretary of State, in coordination with the Secretaries of Defense, Commerce, and Energy, shall submit to the President, through the Assistant to the President for National Security Affairs (APNSA), a proposed action plan to implement the policy set forth in sections 2 and 3 of this memorandum.
  (b)  The proposed action plan shall include actions that the United States Government should take in the short term and long term to improve its ability to identify, communicate, pursue, and support arms transfers in the manner most beneficial to the national security interests of the United States, including economic security, the broader economy, and United States foreign policy interests.  The proposed action plan should account for the competitive environment in which the United States must operate and the need to protect and expand our technological advantages and our defense industrial base.  The proposed action plan should include an outline of the financial and personnel resources necessary to implement the roadmap with minimal increase in the total of otherwise budgeted funds, with offsets identified if necessary.
  (c)  Within 60 days of the date of this memorandum, the Secretary of State, in coordination with the Secretaries of Defense, Commerce, and Energy, shall submit to the President, through the APNSA, a proposed initiative to align our unmanned aerial systems (UAS) export policy more closely with our national and economic security interests.  The initiative should address the status of, and recommend next steps for, MTCR adoption of revised controls for MTCR Category I UAS, consistent with the UAS export policy.
 
Sec. 5.  Earlier Presidential Actions.  This memorandum supersedes and replaces Presidential Policy Directive-27 of January 15, 2014 (United States Conventional Arms Transfer Policy).
 
Sec. 6.  General Provisions
  (a)  Nothing in this memorandum shall be construed to impair or otherwise affect:
    (i)   the authority granted by law to an executive department or agency, or the head thereof; or
    (ii)  the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.  
  (b)  This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.
  (c)  This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
 
  DONALD J. TRUMP

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NWSNEWS

NWS_a1
6.
The Jerusalem Post: “Belgium Companies Sold Deadly Chemicals to Assad in Violation of Sanctions”

(Source: 
The Jerusalem Post
, 19 Apr 2018.) [Excerpts.] 
 
The Belgium city of Antwerp’s criminal court opened cases against three Flemish companies for alleged violations
of EU sanctions barring the sale of illegal chemical to the Syrian regime, according to a Wednesday report from the Belgium news weekly Knack.

Knack magazine reported that the Belgian companies – AAE Chemie, Danmar Logistics, and the shut-down Anex Customs – exported the chemicals to Syria’s regime, including isopropanol, a chemical that can be manufactured for the use of sarin nerve gas. … 


According to Knack and the website Syrian Archive, “Belgian companies exported 96 tonnes of isopropanol, a sarin precursor, to Syria between 2014 and 2016.”

The joint media report said: “UN Comtrade statistics show that Belgium was the only EU member state that continued to export (iso)propanol to Syria since EU sanctions were imposed in 2013.”

The report showed that Belgium also sold deadly chemicals to Lebanon. The criminal trial in Antwerp involving the companies is slated for May 15. Belgium customs authorities filed the criminal case against the companies. The French wire service APA reported that the Belgium finance ministry said the criminal case involve” making false customs declaration, as the companies had not listed isopropanol on the shipping documents.” Isopropanol can also be used for paint products. … 

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NWS_a2
7.
Reuters: “Trump Launches Effort to Boost U.S. Weapons Sales Abroad”

(Source: 
Reuters
, 19 Apr 2018.)
 
The Trump administration rolled out a long-awaited overhaul of U.S. arms export policy on Thursday aimed at expanding sales to allies, saying it will bolster the American defense industry and create jobs at home.
 
The White House aims to cut the time it takes to approve arms deals, lowering the hurdle to bigger sales and sales of more powerful weapons, and increasing the role of senior U.S. officials in shepherding deals across the finish line, as earlier reported by Reuters.
 
The initiative builds on President Donald Trump’s efforts to personally boost arms sales on calls with foreign heads of state.
 
Companies that stand to benefit from the new policy most include Boeing Co (BA.N) and the other top U.S. defense contractors, Lockheed Martin Corp (LMT.N), Raytheon Co (RTN.N), General Dynamics Corp (GD.N) and Northrop Grumman Corp (NOC.N).
 
The plans have been in the works for a year, with White House trade adviser Peter Navarro playing a major role in driving the project forward.
 
Navarro said in a statement the new policies “will create American manufacturing jobs, strengthen our allies and partners, support a robust defense industrial base at home, and promote American economic and security interests abroad.”
 
Human rights will now carry equal weight alongside other considerations in planned arms sales including the needs of allied nations and the economic loss if the U.S. contractor does not win the sale when decisions are made on whether to approve an arms deal.
 
  “This is a balanced policy,” said Ambassador Tina Kaidanow, an official with the State Department who oversees arms export agreements. “We absolutely look at human rights as one of a set of considerations that we look at.”
 
The planned revision of U.S. weapons export policy also includes a new drone export policy that allows smaller lethal drones that can fire missiles and surveillance drones of all sizes will soon become more widely available to U.S. allies, Reuters reported in March.
 
Two potential beneficiaries of the rule changes, Textron Inc (TXT.N) and Kratos Defense and Security Solutions Inc (KTOS.O), currently market smaller armed drones internationally.
 
The full text of the drone policy will remain classified along a list of potential buyers being given fast-track treatment is expanding to include more countries, a State Department official told Reuters this week.
 
Previously, U.S. government sources had said that more NATO members, Saudi Arabia and other Gulf partners as well as treaty allies such as Japan and South Korea would be given the favorable treatment regarding drone sales.
 
Trump has pressed foreign governments to buy more U.S.-made weapons in nearly every call he has had with a head of state of major allies, a State Department official said earlier this week.
 
The new policy will go well beyond a relaxation of rules for foreign military sales under President Barack Obama in 2014 that enabled U.S. arms contractors to sell more overseas than ever before.

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NWS_a3
8.
Reuters: “ZTE Removed Chief Compliance Officer Before U.S. Sanction – Source”

(Source: Reuters, 19 Apr 2018.) 
 
ZTE Corp’s chief compliance and chief legal officer was removed from his posts more than a month before the Chinese telecom equipment maker was slapped with U.S. sanctions this week, a company source with direct knowledge of the situation told Reuters. 
 
The United States this week imposed a ban on American companies selling parts and software to ZTE for seven years, saying it had broken a settlement agreement with repeated false statements – a move that threatens to cut off the Chinese firm’s supply chain. 
 
Citing an internal memo dated March 8, the source said ZTE’s chief compliance and chief legal officer, Cheng Gang, was “removed from his posts” although that the memo did not give a reason for the action. 
  
  “We had sensed something was wrong with Cheng’s unexplained removal, but did not expect something so serious,” said the source, referring to the news of the U.S. sanctions. The source added that employees now feared for their jobs. 
 
It was not clear if Cheng was still with the company, according to the source, who declined to be identified as the information in the memo was confidential. 
 
Cheng did not respond to an email and a LinkedIn message seeking comment. Reuters was unable to obtain a phone number for Cheng. ZTE did not respond to calls and emails seeking comment. 
 
News of the memo was first reported by the South China Morning Post. 
 
China’s No.2 telecoms equipment maker admitted in March 2017 to illegally shipping U.S. technologies to banned countries including Iran and paid a record $890 million fine to settle the case. 
As part of the agreement, Shenzhen-based ZTE promised to dismiss four senior employees and discipline 35 others by either reducing their bonuses or reprimanding them but had failed to fully carry out those actions, U.S. government officials told Reuters this week. 
 
The ban could be catastrophic for ZTE, the fourth-largest smartphone vendor in the United States, as it is estimated to rely on U.S. firms for nearly a third of crucial components such as chips in its products. 
 
ZTE has delayed its earnings results, originally scheduled for Thursday, saying it needs time to assess the impact of the U.S. sanctions. 
 
Its shares in Shenzhen and Hong Kong remain suspended.

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NWS_a4
9.
The Wall Street Journal: “U.S. Says Huawei Is a Security Threat, So It’s Backing Off”

(Source: 
The Wall Street Journal
, 17 Apr 2018.) [Excerpts.]
 
Chinese tech firm has laid off five U.S.-based employees, including its top spokesman in Washington
 
Huawei Technologies Co. said it plans to refocus on existing markets, following a series of setbacks in the U.S. and as the technology industry gets caught up in the spiraling trade spat between Washington and Beijing. 
  
  “It is beyond myself to clearly explain what is going on between the two countries,” Eric Xu, one of the Chinese telecom giant’s three rotating CEOs, said at an annual meeting in Huawei’s home city of Shenzhen. He said Huawei will spend more effort serving existing customers. 
 
The U.S. government has called Huawei, the world’s largest provider of telecom equipment such as base stations and routers, a national-security threat and has cited its potential dominance of next-generation 5G technologies. National-security fears were also behind the U.S. decision in March to block the takeover of chip maker Qualcomm Inc. by then Singapore-based Broadcom Ltd. on grounds that the deal could endanger American technological prowess. Huawei has long denied its products pose a security threat. … 

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NWS_a510
.
WorldECR: “EU Takes New Measures to Deny Terrorists ‘Space to Act'”

(Source: 
WorldECR News
, 19 Apr 2018.) 
 
An update of the rules on export and import of civilian firearms is among the measures being taken.
 
The European Commission is proposing a series of measures to improve security and close loopholes that aid terrorism. The move follows the launch of the EU’s anti-terrorism package in October. The measures include increasing the security of identity cards to prevent document fraud; enabling law enforcement and judicial authorities to access electronic evidence and financial information; restricting terrorists’ access to explosive precursors and strengthening controls on the export and import of firearms.

These proposals go far beyond existing information-sharing mechanisms and beyond those envisaged in the much-awaited fifth money laundering directive and could be a game changer for law enforcement agencies in Europe,’ said Jo Torode, a financial crime lawyer at Ropes & Gray.
 
Key points of the proposals are:
 
  – Increasing the security of identity cards

Biometric data will become mandatory for those countries which have ID cards, together with stronger safeguards on who can access the biometrics. Non-compliant cards will be phased out.
  – Greater access for law enforcement authorities

A new directive will give law enforcement authorities direct access to bank account information in specific cases of serious crime or terrorism. It will also provide for greater co-operation between Member States in requesting and exchanging data on financial transactions.
  – Restrictions on materials used for homemade explosives

Chemicals that could be used to make homemade explosives will be added to the list of banned substances. Current registration systems whereby the purchase of some restricted substances can be made in certain Member States by presenting an ID card will be substituted by a ‘careful’ licensing and screening process. The Commission will also introduce an obligation for businesses to report any suspicious transactions within 24 hours.
  – Rules on export and import of civilian firearms to be updated

The EU rules on the export and import of civilian firearms will be updated to include improved control procedures, such as the introduction of ‘systematic’ background checks on all individuals applying for export authorisations, using the European Criminal Records Information Exchange system (‘ECRIS’) and the Conventional arms export control information system (‘COARM’). Member States should update COARM and keep a national database of authorisations and refusals, as well as providing detailed statistics to the Commission each year.
 
The Commission has also proposed new tools to gather electronic evidence across borders in criminal proceedings.
 
More information on the Commission’s proposals can be found 
here

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COMMCOMMENTARY

COMM_a0
11.
International Trade Compliance Update: “UK – Export (Penalty) (Amendment) Regulations 2018”

(Source: International Trade Compliance Update, 18 Apr 2018.) 

 
On 17 April 2018, the UK Government posted SI 2018/484 – The Export (Penalty) (Amendment) Regulations 2018. These Regulations amend the Export (Penalty) Regulations 2003 (S.I. 2003/3102) (‘the 2003 Regulations’). The 2003 Regulations provide in part for penalties for contravention of rules on exports set out in EU legislation. These Regulations replace references to the Community Customs Code and associated legislation which have lapsed with references to the Union Customs Code and associated legislation that are currently in force.
 
  – Regulation 1 introduces these Regulations and sets out when they come into force.
  – Regulation 2 provides that the 2003 Regulations are amended.
  – Regulation 3 amends Regulation 2 of the 2003 Regulations so that they make accurate reference to the current provisions.
  – Regulation 4 amends the Schedule to the 2003 Regulations so that they make reference to the current provisions as well as make any consequential amendments necessary as a result of the changes in the relevant EU legislation.

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COMM_a01
12.
S. Simons & S. Sukpanich: “Export Control in Thailand: Preparation is the Key”

(Source: 
The Nation
, 19 Apr 2018.) 
 
* Authors: Stuart Simons, Tax Partner, ssimons@deloitte.com; and Sujitra Sukpanich, Director, Tax & Legal Services, ssukpanich@deloitte.com. Both of Deloitte, Bangkok, Thailand. 
 
With growing fears over the use of weapons of mass destruction (WMD) and the proliferation of international terrorism, governments are increasingly taking precautions against exports that could be used in WMDs.
 
The Thai government joined this trend when it announced in 2015 that it would implement new legislation that controls the export of goods related to WMD including dual-use items (DUIs); goods that have a civilian purpose, but which can also be used for military ends. This legislation, in the form of the Trade Controls on WMD Act (TCWMD Act), is nearly completed and is expected to come into force beginning of 2019. 
 
What to watch out for in the new legislation?
 
Goods which the Thai government considers to be DUIs will be subject to strict controls and are required to go through an approval procedure prior to being exported. Specifically, goods classified under the DUI list (List I) would require an export license, while goods which fall under the designated HS code list (List II) would need to be self-certified that they are not a dual-use item.
 
The exporter will be required to request for a license or self-certify every shipment. Nonetheless, this Act also provide an opportunity for the exporter who operate the Internal Compliance Program (ICP), a program for self-screening and monitoring trade transactions, to apply for an annual export license. During the annual license period, an annual license holder will not be required to request for a license for every shipment. The annual license’s application period is expected to begin in September 2018. 
 
For the purpose of DUI classification, an exporter will need to provide details of goods by responding to questionnaires on the e-TCWMD system operated by the Ministry of Commerce. This system will classify whether the goods require an export license, self-certification or such goods are non-DUI items which are not on any of the aforementioned lists. Thus, the details of goods, including the HS code and CAS No. (for chemical products), will play a significant part in classification of dual-use items process. Inputting wrong information may lead to incorrect classification and the consequent risk of non-compliance with the regulations. 
 
The Department of Foreign Trade (DFT) recently announced that they will issue another controlled list that will cover all weapons controlled under the TCWMD Act, the Military list (ML List). 
 
In addition to the mentioned three lists and similar to the European and US regimes, Thailand will also impose catch-all controls. Even though goods destined for export are not mentioned on any of the three lists, they can still be subject to control, if authorities suspect that they will be used in making WMD or for terrorism purposes. The catch-all control obliges exporters to always perform sufficient due diligence on its exports concerning the final use of the goods, the destination, and the recipient. As an exporter, you are required to prove that the goods will not be used for any of the suspected reasons. 
 
The Act will apply to exports, re-exports of goods, as well as transit, transshipments, and transfer of technology. Offshore brokers will also be subject to the obligations if the goods are classified under ML List. 
 
What are the consequences of non-compliance? 
 
In case of non-compliance with the Act, authorities can impose both criminal charges and civil penalties on the exporter. Exporting goods without the proper DUI license may lead to imprisonment of up to 30 years and fines to a total of Bt30 million [approx. $960,750] or both in case where the goods end up in WMD which cause death. In a worst case scenario for companies, the Thai government has the authority to decide to suspend all export activities of a company. 

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COMM_a2
13. 
R.C. Burns: “ZTE Snapback Order Based on Condition Not in Original Order”

(Source: 
Export Law Blog
, 18 Apr 2018.) Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Washington DC, 
Clif.Burns@bryancave.com
, 202-508-6067).
 
Earlier this week, the Bureau of Industry and Security re-imposed on Chinese telecom giant ZTE a seven-year export denial order which the agency imposed and suspended on March 23. 2017. That March 2017 order noted that the suspension could be lifted and the order reimposed if various probationary conditions detailed in the order were not met.
 
This week’s order re-imposing the previously suspended export denial order is premised on misrepresentations made in two letters sent by ZTE to BIS. The first, sent on November 30, 2016, and before the March 23, 2017 order itself, referred to “employee disciplinary measures” that ZTE had taken or would take in the future. The second, sent on July 20, 2017, said it was sent “to confirm that the measures detailed by ZTE with respect to discipline have been implemented.” In fact, according to BIS, the promised letters of reprimand were not sent out when these letters were written and the employees at issue had received their full 2016 bonus.
 
Now, of course, lying to BIS is a very bad thing. But, honestly, are these two letters enough for BIS to back out of the deal and rescind the suspension of the export denial order?
 
In fact, if you look at how the new order justifies this action, it is clearly playing fast and loose with the facts, leaving the undeniable impression that U.S. trade policy and our broader disagreements with China had more to do with this action than these two letters. Here is the relevant language from the new order:
 

The Settlement Agreement and March 23, 2017 Order require that during the probationary period, ZTE is to, among other things, complete and submit six audit reports regarding ZTE’s compliance with U.S. export control laws. The Settlement Agreement and March 23, 2017 Order also include a broad cooperation provision during the period of the suspended denial order. This cooperation provision specifically requires that ZTE make truthful disclosures of any requested factual information. The Settlement Agreement and March 23, 2017 Order thus, by their terms, 
essentially incorporate
 the prohibition set forth in Section 764.2(g) of the EAR against making any false or misleading representation or statement to BIS during, inter alia, the course of an investigation or other action subject to the EAR.

 
Of course, the whole game is given away by the statement that certain provisions “essentially incorporate” section 764.2(g) of the EAR. “Essentially incorporates” means, of course, that the probationary conditions did not include 764.2(g) but BIS firmly wishes that they had.
 
The “Tenth” section of the Order clearly indicates that suspension is premised on compliance with the “probationary conditions set forth above.” So that doesn’t include the “cooperation provision” which is referenced in the above quoted language of the order and which is contained in the “Twelfth” section.  Last time I checked, “Twelfth” is below not above the “Tenth” Section. And even if you suspend the laws of geometry and physics to put it above the “Tenth” section, that provision requires ZTE “to continue to cooperate.” There’s nothing in it at all that says anything about statements made before the order was even entered such as those in the November 2016 letter.
 
In fact, the probationary conditions are in the “Third,” “Fourth,” and “Fifth” sections of the Order. These deal with the monitor’s reports, compliance training, maintaining a compliance program, and retention of records in a fashion accessible in the United States. You won’t find in these sections, which are the probationary conditions “above” the “Tenth” section, any requirement that ZTE send reprimand letters, dock bonuses, comply in the future with section 764.2(g) of the EAR, or have fully complied with that section in the past.
 
As I said, lying to federal agencies is bad. But so is not abiding by the rule of law.

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ENEDITOR’S NOTES


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EN_a315
. 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: 12 Apr 2018: 83 FR 15736-15740: CBP Decision No. 18-04; Definition of Importer Security Filing Importer (ISF Importer)
 
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: 
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: 
16 Apr 2018: 
Harmonized System Update 1805 
[contains 267 ABI records and 60 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_a0316
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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