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18-0426 Thursday “Daily Bugle”

18-0426 Thursday “Daily Bugle”

Thursday, 26 April 2018

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The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. Commerce/BIS Announces MPETAC Meeting on 15 May in Washington DC 
  2. Commerce/BIS Announces MTAC Meeting on 10 May in Washington DC 
  3. Commerce/BIS Announces TRETAC Meeting on 9 May in Washington DC 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: “FedEx Express of Memphis, TN, to Pay $500,000 to Settle Alleged Export Violations”
  3. Commerce/BIS: “Weiming Zhang and Seasia Enterprises (USA), Inc. Denied Export Privileges for 5 Years, to Pay Civil Monetary Penalty of $100,000”
  4. Commerce/BIS to Hold 2018 Annual Conference on Export Controls and Policy on 14-15 May in Washington DC
  5. DHS/CBP Creates Harmonized System Update 1806
  6. State/DDTC: (No new postings.)
  7. EU Extends and Strengthens Arms Embargo Against Burma, Adopts Legal Framework for Targeted Sanctions Against Burmese Human Rights Violators
  8. EU Publishes Implementing Regulation Concerning Aluminum Imports
  1. Reuters: “FLIR Systems to Pay $30 Million to Settle U.S. Allegations: State Department”
  2. South China Morning Post: “Chinese Tech Company Huawei Investigated for Violating Iran Sanctions by U.S. Department of Justice”
  3. WorldECR: “Sweden Introduces Sanctions Fees”
  1. J.A. Lewis: “ZTE and Building America’s Competitors”
  2. R. Zissimos: “Export Control Reform: Better Late than Never”
  3. Gary Stanley’s EC Tip of the Day
  4. R.C. Burns: “Well, That Didn’t Last Long: DDTC Finds Backdoor to Reimpose Access Rule”
  1. Amanda DeBusk and Melissa Duffy Move to Dechert LLP 
  1. ECS Presents “Mastering ITAR/EAR Challenges,” 22-23 May in Annapolis, MD 
  1. J.E. Bartlett: “New Edition of BITAR Available” 
  2. Bartlett’s Unfamiliar Quotations 
  3. 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 (25 Apr 2018), ITAR (14 Feb 2018) 
  4. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1.
Commerce/BIS Announces MPETAC Meeting on 15 May in Washington DC

(Source: 
Federal Register, 26 Apr 2018.) 
 
83 FR 18274-18275: Materials Processing Equipment Technical Advisory Committee; Notice of Partially Closed Meeting
 
  The Materials Processing Equipment Technical Advisory Committee (MPETAC) will meet on May 15, 2018, 9:00 a.m., Room 3884, in the Herbert C. Hoover Building, 14th Street between Pennsylvania and Constitution Avenues NW, Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to materials processing equipment and related technology.
 
Agenda –
– Open Session
 
(1) Opening remarks and introductions.
(2) Presentation of papers and comments by the Public.
(3) Discussions on results from last, and proposals from last Wassenaar meeting.
(4) Report on proposed and recently issued changes to the Export Administration Regulations.
(5) Other business.
 
Agenda — Closed Session
 
(6) Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
 
  The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at 
Yvette.Springer@bis.doc.gov, no later than May 8, 2018.
  A limited number of seats will be available for the public session. Reservations are not accepted. To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate the distribution of public presentation materials to the Committee members, the Committee suggests that presenters forward the public presentation materials prior to the meeting to Ms. Springer via email.
  The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on February 13, 2018, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 10(d)), that the portion of the meeting dealing with matters the premature disclosure of which would be likely to frustrate significantly implementation of a proposed agency action as described in 5 U.S.C. 552b(c)(9)(B) shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
 
  For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

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

EXIM_a2

2.
Commerce/BIS Announces MTAC Meeting on 10 May in Washington DC

(Source: 
Federal Register, 26 Apr 2018.)
 
83 FR 18274: Materials Technical Advisory Committee; Notice of Partially Closed Meeting
 
  The Materials Technical Advisory Committee (MTAC) will meet on May 10, 2018, 10:00 a.m., Herbert C. Hoover Building, Room 3884, 14th Street between Constitution & Pennsylvania Avenues NW, Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to materials and related technology.
 
Agenda — 
Open Session
 
(1) Introductions and opening remarks by senior management.
(2) Presentation on ThreatSEQ (a program to analyze DNA sequences of concern)
(3) Report by regime representatives.
(4) Public Comments.
 
Agenda — Closed Session
 
(6) Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
 
  The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at 
Yvette.Springer@bis.doc.gov, no later than May 3, 2018.
  A limited number of seats will be available during the public session of the meeting. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. Written statements may be submitted at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the materials should be forwarded prior to the meeting to Ms. Springer via email.
  The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on February 13, 2018, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 10(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and the U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
  For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

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

EXIM_a3

3. 
Commerce/BIS Announces TRETAC Meeting on 9 May in Washington DC

(Source: 
Federal Register, 26 Apr 2018.)
 
83 FR 18275: Transportation and Related Equipment; Technical Advisory Committee; Notice of Partially Closed Meeting
 
  The Transportation and Related Equipment Technical Advisory Committee (TRETAC) will meet on May 9, 2018, 9:30 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution & Pennsylvania Avenues, NW Washington, DC The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to transportation and related equipment or technology.
 
Agenda — 
Public Session
 
(1) Welcome and Introductions.
(2) Status reports by working group chairs.
(3) Public comments and Proposals.
 
Agenda — Closed Session
 
(4) Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 Sec. Sec.  10(a)(1) and 10(a)(3).
 
  The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at 
Yvette.Springer@bis.doc.gov, no later than May 2, 2018.
  A limited number of seats will be available during the public session of the meeting. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the Committee suggests that presenters forward the public presentation materials prior to the meeting to Ms. Springer via email.
  The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on February 13, 2018, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 Sec.  (10)(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 Sec. Sec. 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
  For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

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

OGSOTHER GOVERNMENT SOURCES

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

* DHS/CBP; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
  – Certificate of Origin; and 
  – Free Trade Agreements [Publication Dates: 27 Apr 2018.]

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

OGS_a25. Commerce/BIS: 
“FedEx Express of Memphis, TN, to Pay $500,000 to Settle Alleged Export Violations”

(Source: 
Commerce/BIS, 26 Apr 2018.) [Excerpts.]
 
* Respondent: Federal Express Cooperation, d/b/a FedEx Express, of Memphis, TN
* Charges: 
15 C.F.R. Part 764.2(b) — Causing, Aiding or Abetting Exports to Entities on the Entity List without the Required Licenses
  – On 53 occasions between on or about 1 Jul 2011, and on or about 19 Jan 2012, FedEx caused, aided or abetted acts prohibited by the Regulations when it facilitated the export of civil aircraft parts and equipment used for electron microscope manufacturing, items subject to the Regulations and classified under ECCN 9A991 or 7A994 and controlled for Anti-Terrorism (“AT”) reasons, or designated as EAR99 from the United States to Aerotechnic France SAS in France, or to the Pakistan Institute for Nuclear Science and Technology (“PINSTECH”) in Pakistan, without the required BIS licenses.
* Penalty: 
  – Civil Penalty in the amount of $500,000. 
  – External audits of export compliance program covering fiscal years 2017-2010.
* Debarred: Not if penalty is paid as agreed.

* Date of Order: 24 Apr 2018.

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

OGS_a36. 
Commerce/BIS: “Weiming Zhang and Seasia Enterprises (USA), Inc. Denied Export Privileges for 5 Years, to Pay Civil Monetary Penalty of $100,000”

(Source: 
Commerce/BIS, 26 Apr 2018.) [Excerpts.]
 
* Respondent: Weiming Zhang, a.k.a John Zhang, of Beijing, China, Englewood, NJ, and Huntington, NY; and Seasia Enterprises (USA), Inc., of Huntington, NY.
* Charges: 
15 C.F.R. Part 764.2(d) – Conspiracy to Export Items Controlled for National Security Reasons from the United States to China without the Required BIS Licenses.
  – Beginning no later than in or around April 2013, and continuing through at least in or around April 2014, Zhang/Seasia conspired and acted in concert with others, known and unknown, to bring about or to do an act or acts constituting a violation of the Regulations. The purpose of the conspiracy was to evade the Regulations in connection with the export from the United States to China of electronic equipment that was controlled under the Regulations on national security grounds and required an export license from BIS pursuant to Section 742.4 of the Regulations. At no point did Zhang/Seasia seek or obtain a license from BIS.
* Penalty: 
  – Civil Penalty in the amount of $100,000. 
* Debarred: For a period of 5 years from the date of this Order.

* Date of Order: 24 Apr 2018. 

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

(Source: 
Commerce/BIS, 26 Apr 2018.)
 
The Bureau of Industry and Security (BIS) will hold the 31st annual BIS Annual Conference on Export Controls and Policy in Washington, D.C. May 14-15, 2018. This major outreach activity draws business and government representatives from around the world to learn and exchange ideas about export control issues. It is one of the Department’s most notable international trade events.
 
BIS Annual Conference 2018 will be at the Marriott Marquis Hotel. A conference room rate is available to attendees. For registration and program information please click on the links below.
 

For additional, information on BIS Annual Conference 2018, you may contact the Outreach and Educational Services Division at:

 UpdateConference@bis.doc.gov or (202) 482-6031.
* * * * * * * * * * * * * * * * * * * * 

OGS_abc8
DHS/CBP Creates Harmonized System Update 1806
(Source: 
CSMS# 18-000306, 26 Apr 2018.)

Harmonized System Update (HSU) 1806 was created on April 25, 2018 and contains 5,993 ABI records and 1,287 harmonized tariff records.

Changes include those mandated in Presidential Proclamation 9687, To Take Certain Actions Under the African Growth and Opportunity Act for Other Purposes. The modifications made are listed in Annex III, Modifications on the Eligibility of Certain Articles the Product of Ukraine for Purposes of the Generalized System of Preferences, effective April 26, 2018. The Proclamation can be accessed using 
this link.

In addition, class code 672 was added to thirteen HTS codes to support additional duties on coffee imports into Puerto Rico (19 USC 1319).  

Further information can be found on our 
website.

Adjustments required by the verification of the 2018 Harmonized Tariff Schedule (HTS) are included also.

The modified records are currently available to all ABI participants and can be retrieved electronically via the procedures indicated in the CATAIR. For further information about this process, please contact your client representative. For all other questions regarding the HTS changes, please contact Jennifer Keeling via email at 
Jennifer.L.Keeling@cbp.dhs.gov

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

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

(Source: 
Council of the European Union, 26 Apr 2018.) [Excerpts.]
 
On 26 April, the EU Council imposed further restrictive measures on Myanmar/Burma, strengthening the EU’s arms embargo and targeting the Myanmar/Burma army and border guard police officials.
 
The Council extended the existing embargo on arms and equipment that can be used for internal repression for one year. In addition, it prohibited the export of dual-use goods for use by the military and border guard police and imposed restrictions on the export of equipment for monitoring communications that might be used for internal repression. The Council also prohibited the provision of military training to and military cooperation with the Myanmar/Burma army.
 
The Council also adopted a legal framework for targeted restrictive measures against certain persons from the Myanmar Armed Forces (Tatmadaw) and the border guard police. It will make it possible, should crimes continue to go unpunished, to impose a travel ban and an asset freeze on individuals responsible for:
 
  – serious human rights violations, for example inciting violence, for discrimination and acts of violence against persons belonging to minorities in Rakhine and for obstructing the voluntary and safe return process of displaced persons from Rakhine State to their place of origin;
  – for obstructing the conduct of independent investigations into alleged serious human violations or abuses;
  – for obstructing the rapid and unimpeded passage of humanitarian assistance for civilians in need. … 
 
The legal acts were adopted by the Council by written procedure. 
They will be published in the Official Journal of 27 April. … 

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

 
Regulations
 

Commission Implementing Regulation (EU) 2018/640 of 25 April 2018 introducing prior Union surveillance of imports of certain aluminum products originating in certain third countries

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

NWSNEWS

NWS_a1
12.
Reuters: “FLIR Systems to Pay $30 Million to Settle U.S. Allegations: State Department”

(Source: 
Reuters, 25 Apr 2018.) 
 
FLIR Systems Inc will pay $30 million to settle government allegations it violated a U.S. law restricting military-related exports, the U.S. State Department said on Wednesday.
 
FLIR Systems, which makes infrared cameras and thermal imaging systems, allegedly violated the Arms Export Control Act by transferring defense items to dual national employees of Iran, Iraq, Lebanon and Cuba, which are restricted from receiving U.S. arms exports, the department said in a statement.
 
Under the terms of the four-year consent agreement Oregon-based FLIR Systems will pay a civil penalty of $30 million, conduct two external audits and improve its compliance program, the statement said.
 
  “We accept responsibility for our actions leading to these penalties,” FLIR Systems Chief Executive Officer James Cannon said in a statement, adding that the company is “fully committed to complying with U.S. export control laws.”

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

NWS_a2
13.
South China Morning Post: “Chinese Tech Company Huawei Investigated for Violating Iran Sanctions by U.S. Department of Justice”

(Source: 
South China Morning Post, 25 Apr 2018.) [Excerpts.]
 
The U.S. Justice Department is investigating China’s 
Huawei Technologies, the largest maker of telecom equipment in the world, for violating US sanctions in relation to Iran, 
The Wall Street Journal reported on Thursday, amid growing concern in Washington about Chinese technology companies. 
 
The report follows news last week that the Justice Department 
activated sanctions on another Chinese telecom equipment producer, ZTE, on charges related to its equipment sales in the same Middle Eastern country. 
 
Huawei had previously been subpoenaed by the US Commerce Department and the U.S. Treasury Department’s Office of Foreign Assets Control, the source said. But the Justice Department’s criminal inquiry suggests more serious misconduct – and consequently more serious repercussions.
 

While the commerce and treasury departments can levy sanctions and fines, the justice department can go further, imposing a corporate monitor or criminal penalties, even charging individuals within the company. …

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

NWS_a3
14.
WorldECR: “Sweden Introduces Sanctions Fees”

(Source: 
WorldECR News, 26 Apr 2018.) 
 
Fees of between approximately €300 and €20,000 per violation are on the basis of strict liability.
 
Sweden has updated its legislation and guidelines on the export of military equipment to introduce a system for administrative sanctions fees.
 
The amendments to the Military Equipment Act and the Regulation on Military Equipment came into force on 15 April. The Inspectorate of Strategic Products (‘ISP’) can now impose sanctions fees of between approximately €300 and €20,000 per violation, depending on the value of the business concerned.
 
Violations include non-compliance with rules over cooperation agreements, ownership in foreign legal entities, and notification of use of general authorizations. Government agencies, as well as private entities, can be found liable.
 
Although violations will not be subject to criminal penalties, companies may find their license revoked or a prohibition imposed on using a general authorization. Prior regulations apply to violations which occurred before the administrative sanctions fees came into force.
 

Liability for the sanctions fees is on the basis of strict responsibility: no intent or negligence is required. Mitigating circumstances in each individual case may result in the licensee being partly or wholly exempted from paying the fee, although if the violation is due to inadequate internal compliance procedures, lack of knowledge of regulations, or time shortages the fee is unlikely to be waived.

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

COMMCOMMENTARY

COMM_a0
15.
J.A. Lewis: “ZTE and Building America’s Competitors”

(Source: 
CSIS, 24 Apr 2018.) 
 
* Author: James Andrew Lewis, senior vice president at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
 
Last week’s draconian sanctions on Chinese telecom supplier ZTE follow a long-standing tradition in U.S. export controls: taking actions that help build the United States’ competitors and hurt U.S. companies.
 
To be clear, ZTE had violated the terms of its agreement and deserved to be punished. But the seven-year ban on U.S. components will only encourage foreign suppliers to rush into the space vacated by U.S. companies. It will reinforce the Chinese government’s desire to replace U.S. suppliers with Chinese companies. And it will lead others to begin to make things they did not make before, causing permanent harm to the market share of U.S. companies.
 
This is not the first time this kind of action has backfired. In the Clinton administration, the United States decided it did not want to sell satellites to China or satellite components to European companies that sold satellites to China. It declared that commercial satellites and their components were a munition, a weapon. This meant that any satellite that had a U.S. component, no matter how small, or any sale, no matter how harmless the customer (and most customers were NATO allies), required approval in the form of a license from the United States before export. A multimillion-dollar satellite with a $12 U.S. component now had to go through a cumbersome licensing process for export anywhere in the world. In the case of China, since the United States has a ban on arms sales to China, satellites from U.S. companies, whether made in Europe or the United States, were banned entirely for export.
 
European companies and governments did not take this change lightly. No other country regarded commercial satellites as a munition, nor did the United States try to persuade them otherwise or get the multilateral export control regime (the Wassenaar Arrangement) to treat satellites as weapons. The process of finding replacement suppliers began almost immediately.
 
The U.S. action did not block the development of China’s space program or prevent European satellite exports to China. The immediate effect was to encourage the Europeans to make components that they had previously bought from the United States, and within a few years European companies were advertising “ITAR-free” satellites (ITAR being International Traffic in Arms Regulations, the regulations that govern the export of munitions and that ban exports to China). An ITAR-free satellite could be sold without any need for U.S. approval. A few European governments even subsidized their companies to go into the satellite component business, creating permanent competitors for U.S. companies and damaging their market share without any benefit to U.S. security. An earlier episode involving machine tools, known as “Toshiba Konigsberg,” contributed to the demise to the U.S. machine tool industry, so that the United States ended up depending on foreign suppliers for this key industrial equipment.
 
In the 1960s, or even the 1970s, the United States could get away with this kind of blanket proscription. It made technology that no one else could duplicate. That is no longer true. The diffusion of technological capabilities around the work began more than 20 years ago, and the rate of diffusion continues to increase. Just this week, China’s president, Xi Jinping, called for China to redouble its efforts to close the gap with the United States in advanced technologies.
 
There are very few technologies where we still have a monopoly, and though it is in our national interest to prevent exports that improve China’s technological base, we should not delude ourselves that this will frustrate Chinese ambitions. At best it may slow them, but it will not prevent their efforts to close the gap. China may not retaliate directly or immediately, as it still needs some U.S. technology for mobile phones, but it will not allow ZTE to go under. Foreign suppliers will offer ZTE substitute goods if they make them and look to build substitutes if they do not.
 
The U.S. Commerce Department’s anger at ZTE’s violations is understandable and justified, and it fits with the narrative of the Trump administration’s trade and technology dispute with China. But the results of these actions can be counterintuitive. A more strategic course might have been to impose large, additional fines on ZTE without cutting off U.S. suppliers. Fines would punish ZTE and avoid the market distorting risks. U.S. technological leadership is diminishing as other countries become more adept at creating advanced technology, but our actions can affect and limit the pace and scope of this. The goal should not be to accelerate technological competition; ZTE’s punishment, however well deserved, may have the opposite effect.

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

COMM_a01
16.
R. Zissimos: “Export Control Reform: Better Late than Never”

(Source: 
RealClearDefense.com, 25 Apr 2018.)
 
* Authors: Rachel Zissimos, policy analyst, The Heritage Foundation’s Center for National Defense.
 
Processes are no substitute for production.
 
Last Thursday, the Trump administration released a 
Presidential Memorandum that sensibly reforms U.S. conventional arms transfer policy. The memo brings U.S. policy into closer alignment with the economic and security interests of the U.S. and its allies, through changes that reflect the rapid pace of technological innovation and the competitive global environment.
An updated policy was sorely needed. Many regulations and agreements governing U.S. arms transfers date back to when the U.S. maintained a comfortable lead in military innovation. Since that time, globalization has rapidly expanded other nations’ access to advanced technologies and complicated efforts to contain their spread and use.
 
U.S. export controls are intended to limit proliferation of advanced technologies. The idea is to exercise restraint in the transfer and sale of conventional arms, thereby keeping U.S. capabilities out of the hands of our foes and other repressive governments that might use them against their own citizens. Unfortunately, these controls inundate allies and adversaries alike with the same cumbersome licensing requirements and bureaucratic hurdles. These processes inhibit opportunities for trade and cooperation-to the detriment of U.S. industry. 
Meanwhile, foreign militaries have chipped away at the U.S. technological edge, increasing the number of countries willing and able to sell advanced technologies in a burgeoning world market. Governments dismayed by U.S. policy (or prices) can turn to other exporting countries for comparable systems.
The new policy addresses these failings, placing particular emphasis on the domestic and international regulation of unmanned aerial systems (UAS), commonly referred to as drones.
 
The U.S. is one of 35 signatories to the Missile Technology Control Regime (MTCR)-a multinational agreement promoting 
voluntary restrictions on the transfer of missiles and missile technology.  Under the MTCR, unmanned systems (whether armed or unarmed) ”
capable of delivering a payload of at least 500 kg to a range of at least 300 km” are categorized among the most heavily regulated items, for which export requests ”
are subject to an unconditional strong presumption of denial.”
 
As could be expected, the MTCR has been principally effective in limiting the sales of unmanned aerial vehicles (UAVs) by its signatories. The result has been to keep valuable capabilities away from countries with overlapping security interests.  Meanwhile, China has jumped to meet the global market demand, exercising far less restraint and discernment about to whom it will sell both armed and unarmed UAVs. As China expands its share of the global UAV market, it also expands its influence in the regulation and use of autonomous systems.
 
Arms transfers will always carry a level of risk. But the U.S. is no longer the only player in the game. The administration’s new policy recognizes the limitations of previous regulations.
Now, the U.S. must work to eliminate obsolete and bureaucratic barriers to U.S. exports, including inefficient licensing requirements and outdated technology controls. A system that is streamlined and responsive to global economic and security environments will better support U.S. industries, and advances the best interests of the U.S., its partners, and allies.

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

 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059, 
gstanley@glstrade.com.
 
Supp. No. 1 to EAR Part 764 provides that orders denying export privileges may be “standard” or “non-standard.” This Supplement specifies terms of the standard order denying export privilege with respect to denial orders issued after March 25, 1996. Denial orders issued prior to March 25, 1996 are to be construed, insofar as possible, as having the same scope and effect as the standard denial order. All denial orders are published in the Federal Register. The failure by any person to comply with any denial order is a violation of the Export Administration Regulations (EAR) (See EAR § 764.2(k)).

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

COMM_a4
18. 
R.C. Burns: “Well, That Didn’t Last Long: DDTC Finds Backdoor to Reimpose Access Rule”
(Source: 
Export Law Blog, 25 Apr 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, 
Clif.Burns@bryancave.com, 202-508-6067).
 
Yesterday the Directorate of Defense Trade Controls (“DDTC”) and FLIR 
entered into a consent agreement under which FLIR consented to a civil penalty of $30 million, half of which was suspended on the condition that this amount was and would be applied to previous and future compliance costs. The fine was based on a number of export violations in various categories that FLIR voluntarily disclosed.  These violations included instances where disclosed violations continued after their disclosure and where promised remedial actions to cure disclosed violations were not taken.
 
One part of the 
Charging Letter is interesting because it appears to be effectively a reversion to the old DDTC standard, clearly articulated in the 
2013 General Motors Charging Letter, that access to ITAR-controlled information by a foreign national is a deemed export violation even if the controlled information was never in fact seen by the foreign national. As you may recall, back in 2016 DDTC retreated from that position, saying this in the 
Federal Register Notice in which “export” was redefined by DDTC:
 
Several commenters requested that the Department remove the portion of (a)(6) that addressed the provision of physical access to technical data. The Department has removed paragraph (a)(6). However, as described above for paragraph (a)(7), while the act of providing physical access does not constitute an “export,” any release of technical data to a foreign person is an “export,” “reexport,” or “retransfer” and will require authorization from the Department. If a foreign person views or accesses technical data as a result of being provided physical access, then an “export” requiring authorization will have occurred and the person who provided the foreign person with physical access to the technical data is an exporter responsible for ITAR compliance.
 
Now look at this part of the Charging Letter:
 
Approximately 1,350 foreign-person employees had access to all ITAR-controlled technical data (over 1,400 files) located on Respondent’s servers in 22 non-U.S. facilities … While access does not mean that the employees viewed the information, Respondent lacked the IT records which could confirm which employees actually accessed ITAR-controlled files. … It is the Department’s position that Respondent transferred technical data to foreign-person employees that was necessary for their job performance on its servers without authorization.
 

What DDTC is saying here, in effect, is that if you don’t have logs showing every access to the controlled technical data – and who will have that? – then DDTC is just going to assume that the controlled technical data was transferred to everyone who had access to it. So, we’re back where we started and access, not disclosure, is the violation. Sigh.

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MSEX/IM MOVERS & SHAKERS

MS_a119
. 
Amanda DeBusk and
 
Melissa Duffy Move to Dechert LLP

(Source: Arielle Katz,
 Media Relations, Project Manager,
 
Dechert LLP.)
 
F. Amanda DeBusk and Melissa Duffy have joined the 
Dechert
 
firm in Washington as partners in the International Trade and Government Regulation group. Amanda will serve as Chair of Dechert’s Global International Trade practice. They join from Hughes Hubbard & Reed.  Contact Amanda at 1-202 261-3452 or amanda.debusk@dechert.com, and Melissa at 
1-202-261-3300, or melissa.duffy@dechert.com.

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TECEX/IM TRAINING EVENTS & CONFERENCES

TEC_a120
. 
ECS Presents “Mastering ITAR/EAR Challenges”, 22-23 May in Annapolis, MD

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

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

ENEDITOR’S NOTES

(Source: 
Full Circle Compliance, 2
5 Apr 2018.)

www.FullCircleCompliance.eu

+1-
202-802-0646. 
 
A new edition of Bartlett’s Annotated International Traffic in Arms Regulations (“BITAR”) is available for download in Word version to BITAR subscribers, updated to include yesterday’s consent agreement with FLIR, Inc., and dozens of other revisions to footnotes, appendixes, and the Index. 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_a323
. 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: 15 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: 25 Apr 2018: Harmonized System Update 1806
[contains 5,993 ABI records and 1,287 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: 24 Apr 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.

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

EN_a0324
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.


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

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