18-0425 Wednesday “Daily Bugle”

18-0425 Wednesday “Daily Bugle”

Wednesday, 25 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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  1. State Debars AECA and ITAR Violators 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS
  3. State/DDTC: “FLIR Systems Inc. of Wilsonville, OR, Fined $30 million to Settle Alleged AECA and ITAR Violations”
  4. UK HMRC Prosecutes Carbosynth Limited for Unlicensed Exports of Controlled Chemicals
  1. 4-Traders.com: “FLIR Systems Inc. Enters Consent Agreement with DDTC to Resolve Alleged Export Control Violations
  2. CNN: “This Woman Carried Her in-Flight Snack off the Plane and it Cost Her $500”
  3. EMSNow: “Dual-Use Export Controls Regulation: One to Watch for the Electronics Industry, Says IPC”
  4. Reuters: “U.S. Probing Huawei for Possible Iran Sanctions Violations: Sources”
  5. ST&R Trade Report: “CBP Announces Modification of Timeframes to Reject Entry Summaries”
  6. The Wall Street Journal: “In ZTE Battle, U.S. Suppliers Are Collateral Damage”
  1. D.M. Edelman: “Tariff Trade War with China?”
  2. E. Lin-Greenberg: “Why Washington’s New Drone Export Policy is Good for National Security”
  3. N.A. Baylis, R. Dereskeviciute & A. Di Mario: “EU and UK Sanctions and Export Controls Update”
  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 



State Debars AECA and ITAR Violators 

(Source: Federal Register, 25 Apr 2018.) [Excerpts.] 
83 FR 18112-18115: Title: Bureau of Political-Military Affairs; Statutory Debarment Under the Arms Export Control Act and the International Traffic in Arms Regulations
* ACTION: Notice.
* SUMMARY: Notice is hereby given that the Department of State has imposed statutory debarment under the International Traffic in Arms Regulations (“ITAR”) on persons convicted of violating, or conspiracy to violate, Section 38 of the Arms Export Control Act (AECA).
* DATES: Debarment imposed as of April 25, 2018. … 
* SUPPLEMENTARY INFORMATION: Section 38(g)(4) of the AECA, 22 U.S.C. 2778(g)(4), restricts the Department of State from issuing licenses for the export of defense articles or defense services where the applicant, or any party to the export, has been convicted of violating certain statutes, including section 38 of the AECA. . . .
  Statutory debarment is based solely upon conviction in a criminal proceeding, conducted by a United States court, and as such the administrative debarment procedures outlined in Part 128 of the ITAR are not applicable.
  It is the policy of the Department of State that statutory debarment lasts for a three-year period following conviction. Unless export privileges are reinstated, however, the person remains debarred. . . . 
  Pursuant to Section 38(g)(4) of the AECA and Section 127.7(c) of the ITAR, the following persons, having been convicted in a U.S. District Court, are statutorily debarred as of the date of this notice (Name; Date of Judgment; Judicial District; Case No.; Month/Year of Birth): [The entire list is available here.] 
  As noted above, at the end of the three-year period following the date of this notice, the above named persons/entities remain debarred unless export privileges are reinstated.  . . .
  This notice is provided for purposes of making the public aware that the persons listed above are prohibited from participating directly or indirectly in activities regulated by the ITAR, including any brokering activities and any export from or temporary import into the United States of defense articles, technical data, or defense services in all situations covered by the ITAR. Specific case information may be obtained from the Office of the Clerk for the U.S. District Courts mentioned above and by citing the court case number where provided.
Tina S. Kaidanow, Principal Deputy Assistant Secretary, Bureau of Political-Military Affairs, Department of State.

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OGS_a12. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce/BIS; NOTICES; Meetings:
  – Materials Processing Equipment Technical Advisory Committee
  – Materials Technical Advisory Committee
  – Transportation and Related Equipment Technical Advisory Committee [Publication Dates: 26 Apr 2018.]
* * * * * * * * * * * * * * * * * * * *

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State/DDTC: “FLIR Systems Inc. Fined $30 million to Settle Alleged AECA and ITAR Violations”

, 25 Apr 2018.) [Excerpts.] 
FLIR Systems, Inc. settled allegations that it violated the International Traffic in Arms Regulations (ITAR) in connection with unauthorized exports of defense articles, including technical data; the unauthorized provision of defense services; violation of the terms of provisos or other limitations of license authorizations; and the failure to maintain specific records involving ITAR-controlled transactions. FLIR’s alleged unauthorized exports also included the retransfer of ITAR-controlled technical data and provision of defense services to dual-national employees of Iran, Iraq, Lebanon, and Cuba to which the United States restricts exports of defense articles and defense services.

Respondent: FLIR Systems Inc., of Wilsonville, OR.
  – Unauthorized exports to Foreign-Person Employees at 22 Respondent’s Non-U.S. Facilities (charges 1-219)
  – Failure to export Defense Articles in accordance with the ITAR (charges 220-326).
  – Failure to Disclose Payments under ITAR Part 130 (charges 327-347)
Civil Settlement: $30 million — 
with $15 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures.
Debarred or Suspended from Export Transactions: Not if penalty is paid and corrective actions are completed as agreed.
* Result of Voluntary Self-Disclosure: 
Date of Order: 24 Apr 2018.
Available Documents:
  – Order
Mitigating Factors: The Respondent:
  – Submitted 18 Voluntary Disclosures.
  – Entered into agreement with DDTC.
  – Instituted a number of self-initiated compliance programs.
Aggravating Factors
  – A significant compliance program and internal control deficiencies that directly contributed to the violations;
  – Deficient ITAR expertise and senior leadership oversight during time periods covered by voluntary disclosures in this letter;
  – Failure to effectively investigate, uncover, and disclose violations;
  – Frequency and repetitive nature of the same violations; and
  – Failure to implement remedial compliance measures represented to the State Department.
* Corrective Actions:
  – Ensure adequate resources are dedicated to ITAR compliance; 
  – Appoint a designated official for Consent Agreement Compliance and Oversight, and appoint a Special Compliance Officer (for a minimum of 3 years from the signing of the Order) or Internal Special Compliance Officer;
  – Establish and strengthen policies and procedures for all employees, specifically for:   
     (i) identification and classification of defense articles and defense services;
     (ii) identification of technical data and marking thereof;
     (iii) maintenance and protection of and access to technical data on computer networks or other electronic methods of storage and transfer;
     (iv) ensuring physical security of facilities where ITAR-regulated activity occurs;
     (v) screening and control of persons who are not authorized for access to ITAR-controlled defense articles and defense services;
     (vi) obtaining, managing, and complying with the scope of ITAR authorizations, particularly for business development;
     (vii) maintaining appropriate records; 
     (viii) shipping departments responsible for exporting, reexporting, or retransferring defense articles;
     (ix) employment and management of foreign persons, to include dual national/third country nationals, who may be engaged in ITAR-regulated activity, or have access to ITAR-regulated technical data;
     (x) compliance with ITAR Part 130;
     (xi) procurement, to include using known and unknown U.S. suppliers with foreign manufacturing facilities;
     (xii) incorporating AECA and ITAR compliance into management business plans at the senior executive level;
     (xiii) using overseas representatives who will be involved with temporary exports;
     (xiv) preventing, detecting, and reporting AECA and ITAR violations;
     (xv) submitting voluntary disclosures to the State Department
     (xvi) meeting and maintaining adequate AECA and ITAR compliance staffing levels at all divisions and facilities that involve ITAR-regulated activities;
  – Strengthened training (procedures), including recordkeeping related to training;
  – Implement a comprehensive automated export compliance system;
  – Perform 2 audits, and draft an audit plan;
  – Select an outside consultant with expertise in AECA/ITAR compliance

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, Notice to Exporters 2018/10, 25 Apr 2018.)
Her Majesty’s Revenue & Customs (HMRC) recently prosecuted Carbosynth Limited for unlicensed exports of controlled chemicals.
This was pursuant to section 68(1) of the Customs and Excise Management Act 1979 in relation to The Export Control Order 2008 and the EU Dual Use Controls (Council Regulation (EC) No 428/2009).
Carbosynth made unlicensed exports of ‘dual use’ chemicals:
  – R-(-)-3-quinicludinol
  – 2(diethyamino) ethanethiol
  – benzillic acid
Carbosynth also exported military list chemicals 1, 2, 4, butanetriol and decaborane. 
The chemicals were exported variously to Japan, India, South Korea, Israel, USA, Germany and Canada.
On 18 April 2018, at City of London Magistrates’ Court, the company entered a guilty plea against the 6 counts and was ordered to pay £4,269.96.

Export control legislation is enforced by HMRC, working with the Crown Prosecution Service.

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4-Traders.com: “FLIR Systems Inc. Enters Consent Agreement with DDTC to Resolve Alleged Export Control Violations 

(Source: 4-Traders.com, 25 Apr 2018.) [Excerpts.] 
… On April 24, 2018, [FLIR Systems Inc.] entered into a Consent Agreement with the U.S. Department of State’s Directorate of Defense Trade Controls Office of Defense Trade Controls Compliance (“DDTC”) to resolve various alleged violations of the International Traffic in Arms Regulations (“ITAR”) relating to the unauthorized export of defense articles, including technical data, the unauthorized provision of defense services to dual and third country nationals, violation of the terms of provisos or other limitations of license authorizations, and other alleged violations that resulted from voluntary and directed disclosures the Company filed with DTCC over a ten-year period. 
The Consent Agreement has a four-year term and provides for: 
  (i) a civil penalty of $30 million with $15 million of this amount suspended on the condition that the funds have or will be used for Department-approved Consent Agreement remedial compliance measures, 
  (ii) the appointment of an external Special Compliance Official to oversee compliance with the Consent Agreement and ITAR; 
  (iii) two external audits of the Company’s ITAR compliance program; and 
  (iv) continued implementation of ongoing remedial compliance measures and additional remedial compliance measures related to automated systems and ITAR compliance policies, procedures, and training. 
The Company expects that the $15,000,000 suspension amount will be satisfied by the Company’s past and future compliance program remediation expenditures.
As part of the Consent Agreement, DDTC acknowledged that the Company voluntarily disclosed certain alleged Arms Export Control Act and ITAR violations, which are resolved pursuant to the Consent Agreement, and cooperated in, and instituted compliance program improvements during, DDTC’s review. … 

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CNN: “This Woman Carried Her in-Flight Snack off the Plane and it Cost Her $500” 

, 24 Apr 2018.) [Excerpts.]
An apple and an honest mistake have saddled one Delta passenger with a $500 fine and a big bureaucratic headache. 
Crystal Tadlock got off a plane last week in Minneapolis after an 8½-hour flight from Paris. She was supposed to catch a connecting flight home to Denver, so she decided to save an apple she had been given as part of the in-flight meal service. 
  “I put it in my bag, not thinking anything of it,” Tadlock told CNN.
But before her next flight she had to go through customs, where she was stopped by a Customs and Border Protection Agent.
Anyone who’s ever traveled internationally may know what came next. 
and most forms of fresh produce
, are typically a customs violation and need to be declared on a passenger’s customs form. 
  “Well, what do we have here?” Tadlock said the agent told her. “Well, we have an apple. This is a civil violation.” … 

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EMSNow: “Dual-Use Export Controls Regulation: One to Watch for the Electronics Industry, Says IPC”

, 25 Apr 2018.) 
The European Union is currently working to update its legislation on export controls for dual-use items, meaning items that can be used for both civilian and military applications and/or can contribute to the proliferation of Weapons of Mass Destruction (WMD). Most importantly, the proposal for an updated Regulation introduces the following changes:
  – Expansion of list of dual-use items to include cyber-surveillance technologies and those that can be used for human rights violations.
  – Added obligation for exporters, when conducting their due diligence, to notify Member State authorities, if they suspect exported items not listed in the Regulation are used to violate human rights.
  – The European Commission is empowered to amend the list of dual-use items covered by the Regulation, so continuous monitoring of this process will be needed to ensure regulatory compliance.
The new Regulation does not include any specific mentions of printed circuit boards, but is nevertheless a piece of legislation that IPC members must be aware of, as it could create possible regulatory compliance issues. With that in mind, IPC has drafted a briefing note detailing the new provisions introduced by the Regulation, as well as the state of play and next steps in the legislative process. The updated proposal is currently being discussed by representatives of the European Commission, Council and Parliament in informal “trilogues”. It is possible that the updated Regulation will have gone through the legislative process in the course of 2019.
The more detailed briefing note on the new regulation on export controls on dual-use items can be found 
IPC members are invited to share their feedback on this document and any other thoughts and concerns they might have on export controls for dual-use items with Chris Mitchell, IPC’s vice president of global government relations, at 
[Editor’s Note: IPC is the Association Connecting Electronics Industries. It’s aim is to standardize the assembly and production requirements of electronic equipment and assemblies.]

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Reuters: “U.S. Probing Huawei for Possible Iran Sanctions Violations: Sources”

, 25 Apr 2018.) 
Federal prosecutors in New York have been investigating since at least last year whether Chinese tech company Huawei Technologies Co Ltd violated U.S. sanctions in relation to Iran, according to sources familiar with situation.
The prosecutors have been investigating alleged shipping of U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, two of the sources said on condition of anonymity.
The probe, first reported by the Wall Street Journal on Wednesday, is being run out of the U.S. Attorney’s office in Brooklyn, the sources said. John Marzulli, a spokesman for the prosecutor’s office, would neither confirm nor deny the existence of the investigation.
The Department of Justice in Washington declined to comment.
Huawei, which makes handsets and telecommunications network equipment, said it complies with “all applicable laws and regulations where it operates, including the applicable export control and sanction laws and regulations of the UN, US and EU.”
News of the Justice Department probe follows a series of U.S. actions aimed at stopping or reducing access by Huawei and Chinese smartphone maker ZTE Corp to the U.S. economy amid allegations the companies could be using their technology to spy on Americans.
In February, Senator Richard Burr, the Republican chairman of the U.S. Senate Intelligence Committee, cited concerns about the spread of Chinese technologies in the United States, which he called “counterintelligence and information security risks that come prepackaged with the goods and services of certain overseas vendors.”
Republican Senators Marco Rubio and Tom Cotton have introduced legislation that would block the U.S. government from buying or leasing telecommunications equipment from Huawei or ZTE, citing concern the Chinese companies would use their access to spy on U.S. officials.
U.S. authorities last week banned American companies from selling to ZTE for seven years, saying the Chinese company had broken a settlement agreement related to Iran sanctions with repeated false statements – a move that threatens to cut off ZTE’s supply chain.
The ZTE ban was the result of its failure to comply with an agreement with the U.S. Commerce Department reached last year after it pleaded guilty in federal court to conspiring to violate U.S. sanctions by illegally shipping U.S. goods and technology to Iran.
In 2016, the Commerce Department made documents public that showed ZTE’s misconduct and also revealed how a second company, identified only as F7, had successfully evaded U.S. export controls.
In a 2016 letter to the Commerce Department, 10 U.S. lawmakers said they believed F7 to be Huawei, citing media reports.
In April 2017, lawmakers sent another letter to Commerce Secretary Wilbur Ross asking for F7 to be publicly identified and fully investigated.

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ST&R Trade Report: “CBP Announces Modification of Timeframes to Reject Entry Summaries” 

Sandler, Travis & Rosenberg Trade Report
, 25 Apr 2018.)
U.S. Customs and Border Protection states that it has extended the time period for rejecting antidumping or countervailing duty entry summaries from 90 days to 300 days with supervisory approval. CBP has also extended to 300 days, with supervisory approval, the time period for rejecting entry summaries subject to import measures under sections 201 and 301 of the Trade Act of 1974 (safeguards) and section 232 of the Trade Expansion Act of 1962 (national security-related import restrictions). CBP notes that rejecting the entry summaries will unset the liquidation date and transmit the entry summary back to the filer for action. 

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The Wall Street Journal: “
In ZTE Battle, U.S. Suppliers Are Collateral Damage

The Wall Street Journal
, 24 Apr 2018.) [Excerpts; subscription required.]
American companies that supply chips, antennas and other gear to ZTE Corp. are bracing for a sizable revenue loss after the U.S. last week said they no longer would be able to sell components to the Chinese telecommunications giant. 
Several ZTE vendors watched their stock prices stumble in recent days, collateral damage after the Commerce Department imposed a seven-year sales ban, accusing the Chinese company of failing to punish employees who violated U.S. sanctions against North Korea and Iran. 

Tech giants such as San Diego chip maker Qualcomm Inc. and niche companies such as Acacia Communications Inc., ACIA, a Maynard, Mass.-based maker of fiber-optic networking components, are among U.S. companies affected, as national-security and trade issues flare up between the U.S. and China. U.S. chip makers sold about $1.5 billion worth of products to ZTE last year, according to Handel Jones, chief executive of technology consultancy International Business Strategies Inc., which tracks China’s high-tech sector. ZTE made 3.8% of smartphones world-wide in 2017, he estimates. … 

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D.M. Edelman: “
Tariff Trade War with China?

(Source: Export Compliance Matters, 24 Apr 2018.)
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com

The Office of the U.S. Trade Representative published a proposed list of 1,333 Chinese products under consideration for 25% tariffs on April 3 under Section 301 of the Trade Act of 1974, which provides the President and the USTR broad authority to investigate and respond to harmful trade practices in foreign countries found to impair U.S. commerce.
Are your products on the list?
The proposed product list targets strategic Chinese industries, and includes semiconductors, electric vehicles, medical devices, aerospace products, and various emerging technologies in robotics and electronics. The majority of the products fall under Chapters 84, 85 and 90 of the U.S. Harmonized Tariff Schedule for machinery and mechanical appliances, electrical machinery and equipment, and various medical devices.
Will there be a chance for public comment on the proposed list?
Yes.  You can submit comments on the product list by filling out this form through May 11.  There is a public hearing at the International Trade Commission on May 15. There will also be an opportunity to submit post-hearing rebuttal comments that are due by May 22.
How has China responded?
China announced on April 4 it plans to impose a 25% tariff on 106 U.S. products in response to the proposed U.S. tariffs. China’s Ministry of Commerce has posted the product list and it includes major U.S. exports to China, including soybeans, small aircraft, whiskey, chemicals, and certain vehicles.  No date was set for the 25% duties to formally enter into effect.
Key Takeaways
 (1) See if your products or competitors’ products are on one of the lists.
 (2) Review contract provisions for your options.
 (3) Consider supply change alternatives. Think of other available producers and available trade agreements.
 (4) Plan for alternative supply sources. You have time.  It is possible that the actual imposition of these tariffs will not be formalized on either side for months to come, and future negotiations on both sides could significantly reduce the amount of products impacted by the recent proposals.
 (5) Stay tuned for further updates and details to come as the public comment and hearing process gets underway.

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E. Lin-Greenberg: “Why Washington’s New Drone Export Policy is Good for National Security”

War on the Rocks
, 24 Apr 2018.) [Excerpts.] 
* Author: Erik Lin-Greenberg is a Ph.D. Candidate in the Department of Political Science at Columbia University.
Last Thursday, the State Department announced its updated export policy for unmanned aerial systems, popularly known as drones. While the White House framed the new plan as a means to promote American industry, the guidelines – which make it easier for the United States to sell drones to foreign allies – will almost certainly enhance U.S. national security. By exporting drones, which are on the wish lists of militaries around the world, Washington can strengthen ties with allies, enhance burden-sharing and interoperability during coalition operations, and prevent strategic competitors like China from gaining influence among Washington’s security partners.

The new guidelines streamline the sale of both armed and unarmed drones, while still maintaining stipulations that ensure recipients use exported drones in accordance with international law and international human rights law. Specifically, the new policy authorizes direct commercial sales of drone technology, allowing U.S. firms like General Atomics and Northrop Grumman to directly market certain drones to foreign governments, rather than relying on the more cumbersome government-run Foreign Military Sales program. …  

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K&L Gates, 24 Apr 2018.) 
* Authors: Neil A. Baylis, Esq., neil.baylis@klgates.com; Raminta Dereskeviciute, Esq., raminta.dereskeviciute@klgates.com; and 
Alessandro Di Mario, Esq., alessandro.dimario@klgates.com. All of K&L Gates
The sanction regimes of the UK and the EU have seen some important developments since the beginning of 2018. The UK’s draft sanctions bill makes its bumpy way through Parliament and new ‘Magnitsky’ style provisions were transposed into UK law. The EU continues to implement sanctions for human rights abuses, sanction evasion and a wide range of anti-democratic political abuses. Most recently, the political tension between Russia and the EU and US has reached new heights. This is as a result of a nerve agent attack in an EU member state and the continued interference of Russia in Syria and the Ukraine, with all sides implementing political punitive measures. 
UK Updates
Sanctions and Anti-money Laundering Bill (“Bill”)

As discussed in our previous alert, the draft Bill will allow the UK Government to adopt sanctions through secondary legislation after the UK’s withdrawal from the EU. The Bill is currently in the final stages of Parliamentary scrutiny before it receives the “Royal Asset” and becomes law (expected in April 2019).  It is to be considered next at the 3rd ‘reading and report stage’ in the House of Commons.
Both legal and political concerns with respect to certain provisions of the Bill continue while it moves through the legislative procedure in Parliament. Most recently, on 1 March 2018, the UK Joint Committee on Human Rights’ report called for the Government to provide various justifications, such as the rationalization for limiting damages awards to cases of bad faith or negligence; for lowering the current legal threshold for designation from ‘reasonable grounds to believe plus necessary’ to only ‘reasonable grounds to suspect’ and; why designations cannot be reviewed annually rather than every 3 years when there is budget to cover it. No response has been issued to date, but the K&L Gates team will carry on monitoring the progress and will report on any significant developments.
Tighter sanctions on Russia 

In March, following the alleged poisoning of former Russian military intelligence officer and MI6 informant, Sergei Skripal and his daughter Yulia, the UK Government accused Russia of attempted murder. UK Prime Minister, Theresa May outlined the UK’s response, which included:
  – Expelling 23 Russian diplomats identified as “undeclared intelligence officers”;
  – New legislative powers to “harden defenses against all forms of hostile state activity”, including a power to detain those suspected of such, currently only permitted in relation to terrorism (though nothing further has been announced to date);
  – Amendments to the Bill to strengthen sanction powers (no details announced to date);
  – Increased security checks on Russian private flights, customs and freights;
  – Russian-state assets to be frozen where they might be “used to threaten the life or property of UK nationals or residents”;
  – UK efforts to seek a “robust international response” before the UN Security Council (no additional sanctions nor intention to issue sanction have been announced); and
  – UK suspension of high-level diplomatic contact with Russia.
An unprecedented 153 Russian diplomats were also expelled by other countries, including 60 by the US. In reply, Russia expelled 23 UK diplomats and declared 60 US diplomatic staff in Russia along with diplomats from 23 other countries as ‘persona non grata’. The agreement to open the US Consulate General in St Petersburg has also been revoked. 
On 30 March 2018, Russia announced that the UK must reduce the number of diplomatic employees at the UK embassy and consulates in Russia to the same number of Russian equivalents in the UK. It remains to be seen whether the UK will follow this order, but the growing hostilities between the EU and the US and Russia could mean further sanctions will be announced on both sides.

On the 17 February 2018 at the Munich Security Conference, the British Prime Minister, Theresa May stated that the UK “will look to carry over all EU sanctions at the time of our departure” and expressed willingness to cooperate on aligned sanction regimes in the future. This is not the first time Mrs May has stressed the importance of unity in imposing sanctions, and it is therefore expected that there will not be any significant changes to the sanctions regime imposed by the UK post-Brexit. 
The Criminal Finances Act 2017

Section 13 of the Criminal Finance Act 2017 came into force on the 31 January 2018. This section inserts ‘Magnitsky-style’ provisions into UK law. The Magnitsky Act was passed by the Obama administration to sanction officials around the world responsible for human rights abuses. Canada, Lithuania and Estonia have also adopted ‘Magnitsky-style’ provisions as covered by our previous alert
UK implementation expands the current definition of ‘unlawful conduct’ in the Proceeds of Crime Act 2002 to include conduct occurring outside of the UK, which ‘constitutes, or is connected with, the commission of a gross human rights abuse or violation’. The enforcement provisions now permit recovery orders and property freezing orders for property obtained via ‘unlawful conduct’. 
New OFSI Blog

On 1 March 2018, the UK Office of Financial Sanctions Implementation (“OFSI”) launched a new blog, link here. The purpose of the blog is to keep the public informed about financial sanction events and changes to OFSI guidance, and to discuss topical issues. Already posted is a blog entitled ‘Enforcement and Engagement’, which sets out OFSI’s role. The K&L Gates team will monitor the blog and report on any interesting publications.
Export Controls

On the 7 March 2018, the UK Export Control Joint Unit (“ECJU”) amended four military general export licenses (“OGEL”) to reflect amendments made to the EU Common Military List following the Wassenaar Arrangement (a multilateral export control regime discussed in our previous alert). The amendments are minor but include a new definition of biological agents (“pathogens or toxins, selected or modified (such as altering purity, shelf life, virulence, dissemination characteristics, or resistance to UV radiation) to produce casualties in humans or animals, degrade equipment or damage crops or the environment”). On the 11 April 2018, the ECJU released a new OGEL on Information Security Items, to allow ‘low risk’ information security items with encryption to be exported to a wide range of destinations. However, the license itself does not define ‘low risk’.
EU Updates
North Korea

The EU adopted further sanctions against the Democratic People’s Republic of Korea (“DPRK”) in line with the UN Security Council. The measures grow increasingly severe and are imposed primarily due to breaches of sanctions and the DPRK’s continued regime of nuclear and ballistic development.
The EU imposed asset freezes and travel restrictions on 16 individuals and the Ministry of the People’s Armed Forces on 8 January 2018. On 22 January 2018, the EU imposed sanctions against a further 17 individuals including a number of North Korean Embassy diplomats.
On 26 February 2018, the EU: capped the export of all refined petroleum products from 2 million barrels to only 500,000 barrels per year; banned the import of food and agricultural products, machinery, electrical equipment, earth, stone, and wood; banned the export of all industrial machinery, transportation vehicles and all iron, steel and other metals; imposed further restrictions on maritime vessels and; required all North Korean workers abroad repatriated within 2 years.
On 9 April 2018, the EU imposed a travel ban and asset freeze on Tsang Yung Yuan (accused of aiding sanction evasion), and froze the assets of 21 entities (mainly shipping companies) and 15 vessels. The EU also imposed a port entry ban on 25 vessels and ‘deflagged’ 12 vessels (removing the ship from the register).
Russia and Ukraine

In March, the EU maintained its Ukrainian sanctions including freezing the assets of 13 individuals “responsible for the misappropriation of Ukrainian state funds or for the abuse of office causing a loss to Ukrainian public funds” until 6 March 2019. Olena Leonidivna Lukash and Serhii Petrovych Kliuiev were removed from the list.  The EU also extended asset freezes and travel restrictions on 150 people and 38 entities until 15 September 2018 for “actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine”.
It should be noted that the US has strengthened its sanction regime on Russia. For example, on the 4 April 2018, the US imposed asset freezes and travel bans on 7 Russian oligarchs (Vladimir Bogdanov, Oleg Deripaska, Suleiman Kerimov, Igor Rotenberg, Kirill Shamalov, Andrei Skoch, and Viktor Vekselberg) and 12 of their companies, 17 Russian government officials, and the state-owned weapons company Rosoboroneksport and its subsidiary, Russian Financial Corporation Bank. These actions are in line with the US Treasury Report issued on the 30 January 2018, where 96 ‘oligarchs’ and 114 ‘senior foreign political figures’ were listed due to their ‘closeness to the Russian regime and their net worth’.  
However, on the 19 April more than 500 British, French and German parliamentarians signed a letter to their US equivalents calling on them to persuade President Trump to maintain the JCPOA, and, particularly in the face of scheduled US negotiations with North Korea, a further waiver may still be possible. 

Ukraine and Germany have urged the EU to increase Russian sanctions, however, the EU’s current focus is on Syria. No new Russian sanctions were discussed at the EU Summit on 20 March (lead by Britain) or any public statements have been made in that respect. On 16 April, EU ministers instead stated that the EU was considering further sanctions under the Syrian regime as a result of the use of chemical weapons. The K&L Gates team will continue to monitor the announcements and will report on any important developments should the EU decide to introduce new Russian sanctions in line with the US.

On 22 January 2018, the EU imposed sanctions on 7 Venezuelan officials for the first time since adopting an arms embargo and sanctions regime on 13 November 2017 (link to our previous alert). These include Néstor Luis Reverol Torres (Minister for Interior, Justice and Peace), Gustavo Enrique González López (Head of the Bolivarian National Intelligence Service), Tibisay Lucena Ramírez (President of the National Electoral Council), Antonio José Benavides Torres (Chief of the Capital District Government), Maikel José Moreno Pérez (President of the Supreme Court of Justice of Venezuela), Tarek William Saab Halabi (Venezuelan Attorney General), and Diosdado Cabello Rondón (First Vice President of the United Socialist Party of Venezuela)).
In response, the Venezuelan government expelled the Spanish ambassador on 26 January 2018. The EU strongly condemned the move and issued a statement on the 12 February 2018 stressing that “if the human rights situation continues to deteriorate, further diplomatic and economic actions could be explored and adopted, including those related to the state-owned oil company Petróleos de Venezuela, S.A. (PDVSA)”.

On 20 February 2018, the Venezuelan Government’s cryptocurrency ‘Petro’ went on presale, its purpose is to facilitate financial transactions and to overcome international sanctions. On the 20 March 2018, President Trump issued an Executive Order to prohibit US persons from dealing with “any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela”. It remains to be seen whether the EU will issue a similar measure.

On 12 January 2018, President Trump stated it would be the ‘last time’ the US agreed to waive sanctions on Iran as part of the Iran nuclear deal (“JCPOA”) (sanctions must be waived every 120 days to prevent them from being reintroduced) unless the EU and the US worked together to fix “the deal’s disastrous flaws”. US Treasury Secretary Steven Mnuchin stated on the 12 April that the US was considering new sanctions and the reinstatement of previous sanctions waived by JCPOA. The US’s next waive decision is on 12 May 2018. 
On the 13 April 2018, the EU extended travel bans and asset freezes against 82 Iranian individuals and 1 entity (Cyber Police), and maintained the export ban of equipment which could be used for internal repression and telecommunication monitoring equipment until 13 April 2019. 
Other Jurisdictions

At the Conference on Disarmament in Paris on 23 January 2018, 24 countries and the High Representative of the EU agreed to sign the International Partnership against Impunity for the Use of Chemical Weapons, which is aimed at preventing the use of chemical weapons and hold those who use them accountable.

On 30 January 2018, the EU renewed the listings of all persons and entities (and amended one entry) under its Tunisia sanctions list until 31 January 2019.
On 12 February 2018, the EU extended sanctions on Zimbabwe until 20 February 2019, including travel restrictions and asset freezes imposed on 7 people (e.g. Robert Mugabe and his wife Grace).

The EU continues to impose sanctions for people involved with serious human rights violations in South Sudan and Syria, there have been 6 individual listings under both sanction regimes this year. Individuals were also listed under the sanction regimes of the Democratic Republic of Congo, Libya, Yemen, Somalia and Eritrea and the ISIL (Da’esh) and Al-Qaida (the group Khatiba Imam al-Bukhari (KIB) was also added to this list). 

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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: 12 Apr 2018: 83 FR 15736-15740: CBP Decision No. 18-04; Definition of Importer Security Filing Importer (ISF Importer)

  – 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: 
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: 16 Apr 2018: 
Harmonized System Update 1805
[contains 267 ABI records and 60 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.

* 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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