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18-0503 Thursday “Daily Bugle” (Delayed 4 May delivery)

18-0503 Thursday “Daily Bugle”

Thursday, 3 May 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 
here for free subscription. Contact us
for advertising inquiries and rates
. [Editor’s note: We were unable to distribute the Wednesday and Thursday editions due to technical difficulties. Those problems have been resolved, and we are back on our regular schedule.]

[No items of interest noted today.]

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Announces Partial Ukraine-GSP Suspension
  4. State/DDTC Launches Redesigned Website
  5. UK DIT/EJCU Amends Open General Transshipment License Following Venezuela Sanctions
  6. Japan METI Revises End-User List
  1. Washington Times: “Trump Officials to Roll Back Rules on Some Gun Exports”
  2. WorldECR News Alert 3 May 2018
  1. M. Volkov: “FLIR Systems Pays $15 Million Civil Penalty for AECA and ITAR Violations and Earns First DTCC Monitor (Part I of II)”
  2. Gary Stanley’s EC Tip of the Day
  1. ECS Presents “Mastering ITAR/EAR Challenges” on 22-23 May in Annapolis, MD
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (12 Apr 2018), DOD/NISPOM (18 May 2016), EAR (5 Apr 2018), FACR/OFAC (19 Mar 2018), FTR (24 Apr 2018), HTSUS (25 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)

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 4 May 2018.]

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(Source: 
Commerce/BIS
)

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(Source:
CSMS #18-000320, 3 May 2018.)
 
In accordance with Presidential Proclamation 9687 of December 22, 2017 (Federal Register/Vol. 82, No. 247/Wednesday, December 27, 2017), articles of Ukraine listed in Annex III and entered or withdrawn from warehouse on or after April 26, 2018 have had their GSP eligibility suspended, and should not be entered with the benefit of the Generalized System of Preferences (GSP) benefits.
 
The complete Federal Register Notice, including Annex III, is available at here.
 
ACE programming has been completed.
 
Questions should be addressed to the Trade Agreements Branch at FTA@dhs.gov.
 
Attachment(s):
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(Source: Editor, 30 Apr 2018.)
 

The State Department’s Directorate of Defense Trade Controls (DDTC) has launched a
redesigned website
. The updated website features a number of improvements including navigation, searchability, and accessibility, with a consistent, full-featured experience across mobile devices. Updates to DDTC’s website will continue.  DDTC staff is available at (202) 663-1282 or 
DDTCResponseTeam@state.gov
 
for assistance.
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OGS_a55. UK DIT/EJCU Amends Open General Transshipment License Following Venezuela Sanctions
(Source:
UK DIT/EJCU, 3 May 2018.)
 
The Export Control Joint Unit (ECJU) has amended and republished its open general transshipment license (OGTL) following an inadvertent omission when updating a number of licenses in response to the introduction of Venezuela sanctions.

The sanction measures were summarized in notice to exporters 2017/25.
 
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(Source:
METI, 2 May 2018.)
 
The End User List has been revised based on the latest information to contain 529 entities (increased by 21 entities from the previous version) in 13 countries and regions.
 
The Ministry of Economy, Trade and Industry (METI) has issued the End User List, providing exporters with information on foreign entities for which concern cannot be eliminated regarding involvement in activities such as the development of weapons of mass destruction (WMDs) and other items, for the purpose of enhancing the effectiveness of the catch-all control* on cargos and other loads relating to WMDs and other items. METI hereby announces that it has revised the End User List based on the latest information.
 
For the purpose of enhancing the effectiveness of the catch-all control, the End User List provides exporters with referential information on foreign entities for which concern cannot be eliminated regarding involvement in activities such as the development of WMDs or other items. It is not an embargo list. If the user of the cargos and other items to be exported is found in the list, exporters are required to submit an application for an export license except in the case where it is evident that the cargos or other items will not be used for activities such as the development of WMDs and other items. The list has been issued since the catch-all control was introduced in April 2002.
 
————–
* Catch-all control is a system that obliges exporters to submit an application for an export license for goods that may be used for the development of WMDs even if they are not subject to export restrictions under international agreements.

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NWSNEWS

NWS_a1
7. Washington Times: “Trump Officials to Roll Back Rules on Some Gun Exports”
(Source: Washington Times, 1 May 2018.)
 
The Trump administration is preparing to deliver a long-sought win to the gun industry by loosening restrictions on certain commercially available firearms and ammunition exports.

The proposal would put the Commerce Department in charge of overseeing exports of handguns and sporting rifles, separating those personal protection firearms from military-grade weaponry such as aircraft and missile exports, which will still be governed by the State Department.
 
Firearms industry officials say the change will help cut down on the hurdles businesses and even individuals face.
 
  “It’s very onerous,” said Larry Keane of the National Shooting Sports Foundation. “[It’s] very important to the industry – something we’ve been pursuing for many years.”
 
The new rules could also nix an annual fee of $2,250 or more that gunmakers are required to pay to register with the State Department. That rule ends up snaring even some mom-and-pop operations, Mr. Keane said.

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NWS_a2
8. WorldECR News Alert 3 May 2018
(Source: WorldECR, 3 May 2018)
 
  (1) Myanmar: EU extends embargo as UK amends licences, removing country as a permitted destination
  (2) Huawei investigated by US for suspected sanctions breaches
  (3) Oregon company settles alleged breaches of US export laws
  (4) UK court fines company for unlicensed exports of controlled chemicals
  (5) OFAC designates fentanyl trafficking network
 
[Editor’s Note: Click on the source link below the item title to subscribe to WorldECR, the journal of export controls and sanctions.]

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COMMCOMMENTARY

COMM_a0
9. M. Volkov: “FLIR Systems Pays $15 Million Civil Penalty for AECA and ITAR Violations and Earns First DTCC Monitor (Part I of II)”
(Source: Volkov Law Group Blog, 3 May 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
In an extraordinary enforcement action, the US Department of State reached a comprehensive settlement with FLIR Systems, Inc. (FLIR) to resolve violations of the Arms Export Control Act and the International Traffic in Arms Regulations (ITAR).  These acts are administered by the Office of Defense Trade Controls Compliance in the Department’s Bureau of Political-Military Affairs (DTCC).
 
Under the settlement, FLIR will pay a civil penalty of $15 million.  The DTCC agreed to suspend an additional $15 million on the condition that the funds will be used for remedial compliance measures.  In a precedent setting move, the settlement requires FLIR to hire an external Designated Official to oversee the Consent Agreement and requires FLIR to conduct two external audits to assess and improve its compliance program during the three-year term of the Agreement.
 
In 2015, FLIR agreed to a $9.5 million settlement with the SEC to resolve FCPA violations for funding a “world tour” by Saudi government officials to influence their decision to purchase FLIR products.  In November 2014, two former employees in FLIR’s Dubai office agreed to pay the SEC $50,000 and $20,000, respectively for violating the FCPA.
 
During this same time period, FLIR was experiencing a breakdown in its export compliance program and initiated voluntary disclosures to the DTCC.  FLIR manufactures and exports advanced sensors and integrated sensor systems for military and commercial applications to protect birders, gather intelligence and protect critical infrastructure.
 
As outlined in the settlement documents (available here, here and here), FLIR’s violations of the AECA and ITAR involved a range of conduct, including unauthorized exports of defense articles and technical data, unauthorized provision of defense services, violation of license conditions, and failure to maintain required records.  FLIR’s unauthorized exports also included retransfer of ITAR-controlled technical data and providing defense services to dual national employees of Iran, Iraq, Lebanon and Cuba.  FLIR voluntarily disclosed many of the violations, cooperated with the DTCC review and instituted a number of compliance program improvements during the investigation.  As a result, the DTCC determined that an administrative debarment of FLIR was not appropriate.
 
FLIR ultimately agreed to 347 separate charges for violating the AECA and ITAR.  FLIR’s conduct was not limited to any particular part of its operations, geographic region or product line.  As described by the DTCC, FLIR’s misconduct was systemic.  Given the sheer number of violations, the DTCC did not provide a detailed explanation of FLIR’s violations but divided them, in general, into three categories: (1) unauthorized exports to foreign-person employees; (2) failure to apply for and manage licenses and exemptions; and (3) undisclosed payments under Part 130.
 
Over the course of this review, FLIR submitted 14 separate voluntary disclosures to the DTCC. Between 2008 and 2012, FLIR submitted four voluntary disclosures related to unauthorized export of technical data and defense articles; and unauthorized provision of defense services involving the design, manufacture and sale of thermal imaging camera systems to dual nationals and country employees in 15 countries that were prohibited at the time.
 
In June 2014, FLIR notified the DTCC that the initial four voluntary disclosures did not accurately describe the full scope of the violations related to foreign-person employees and had not implemented the corrective measures that it had previously represented that it had completed. As described by FLIR, its internal management system for identifying and restricting access to defense articles had resulted in the unauthorized access by approximately 1,350 foreign-born persons to ITAR-controlled data in 22 non-US facilities.
 
With respect to its ITAR licensing management system, FLIR made various voluntary disclosures describing numerous violations for failure to obtain required licenses, failure to comply with license conditions, misuse of exemptions, inaccurate or missing shipping documents, and failure to obtain proper endorsements for specific products. FLIR also reported the loss or theft of defense articles at international trade shows because of inadequate safeguards and failed to notify the DTCC of the loss or theft of such articles. Additionally, FLI reported one or more violations in every one of its 32 temporary authorizations that it secured during the period of August 2007 to June 2013. The DTCC specifically cited FLIR’s weak license submission practices including confirmation of the parties involved in a proposed transaction and failure to perform end-user monitoring. FLIR submitted six separate applications for transactions involving prohibited entities.
 
In 2011, FLIR notified the DTCC of its failure to report payments of political contributions, fees and commissions as required under Part 130 of Chapter 22 of the CFR. Five years later, FLIR reported it had failed to file required notices for 19 technical assistance agreements and $8 million in commissions paid in relation to 10 of the 19 agreements.

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COMM_a01
10. Gary Stanley’s EC Tip of the Day
(Source: Defense and Export-Import Update; 1 May 2018. Available by subscription from
gstanley@glstrade.com
.)
 
* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
For purposes of the EAR, a “material” is any list-specified crude or processed matter that is not clearly identifiable as any of the types of items defined in § 772.1 under the defined terms, “end item,” “component,” “accessories,” “attachments,” “part,” “software,” “system,” “equipment,” or “facilities.” The exclusion from the definition of material for clearly identifiable items defined in § 772.1, such as for “parts” and “components,” does not apply to the following ECCNs: 1C233, 1C234, 1C235, 1C236, 1C237, 1C239, 1C350, 1C395, 1C991, 1C992, and 1C995.

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MSEX/IM TRAINING EVENTS & CONFERENCES

MS_a211. ECS Presents “Mastering ITAR/EAR Challenges” on 22-23 May in Annapolis, MD

 
* What: Seminar Level III: 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 Martin; Matt McGrath, McGrath Law, Debi Davis, Esterline
* Register Here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com
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ENEDITOR’S NOTES

 
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EN_a313
. 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:
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: 24 Apr 2018: 3 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (30 Apr 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: 25 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.

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EN_a0314
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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