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18-0508 Tuesday “Daily Bugle”

18-0508 Tuesday “Daily Bugle”

Tuesday, 8 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 
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  1. President Announces Eligibility of the Organisation Conjointe de Cooperation en Matiere d’Armement To Receive Defense Articles and Defense Services 
  2. President Posts Determination on Proposed Agreement with UK Concerning Cooperation in Peaceful Uses of Nuclear Energy 
  3. President Posts Determination on Proposed Agreement with Mexico Concerning Cooperation in Peaceful Uses of Nuclear Energy 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. President Ends U.S. Participation in Iran Deal
  4. State/DDTC Announces Registration Dates for In-House Seminar on 19 Sep
  5. Treasury/OFAC Posts Information on the President’s Decision with Respect to the JCPOA
  6. EU Amends Restrictive Measures Concerning Situations in Central African Republic and Yemen
  7. EU Posts P2P Newsletter, Issue 6
  8. Hong Kong/TID Posts Circular on Licensing Requirements for the Import and Export of Encryption Products
  1. Reuters: “French Government Faces Legal Pressure over Arms Sales to Saudi, UAE”
  2. Washington Post: “Trump Announces Plans to Pull out of Iran Nuclear Deal despite Pleas from European Leaders”
  1. Global Trade News: “Latest Changes to Steel and Aluminum Tariffs under Section 232”
  2. L.M. Capaccio & H. Sandick: “Second Circuit Affirms Constitutionality of Arms Export Control Act”
  3. M. Lester: “UK Provides for New DPRK and Burma Sanctions”
  4. Gary Stanley’s EC Tip of the Day
  1. Christine McGinn Moves to Arizona
  1. ECS Presents “Mastering ITAR/EAR Challenges” on 14-15 Jun 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 (4 May 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. President Announces Eligibility of the Organisation Conjointe de Cooperation en Matiere d’Armement To Receive Defense Articles and Defense Services
(Source: Federal Register, 8 May 2018.) [Excerpts.]
 
83 FR 20707: Eligibility of the Organisation Conjointe de Cooperation en Matiere d’Armement To Receive Defense Articles and Defense Services Under the Foreign Assistance Act of 1961, as Amended, and the Arms Export Control Act, as Amended
 
Memorandum for the Secretary of State
 
By the authority vested in me as President by the Constitution and the laws of the United States, including section 503(a) of the Foreign Assistance Act of 1961, as amended, and section 3(a)(1) of the Arms Export Control Act, as amended, I hereby find that the furnishing of defense articles and defense services to the Organisation Conjointe de Cooperation en matiere d’Armement will strengthen the security of the United States and promote world peace. …
 
(Presidential Sig.)
THE WHITE HOUSE,
Washington, April 20, 2018

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

EXIM_a2

2. President Posts Determination on Proposed Agreement with UK Concerning Cooperation in Peaceful Uses of Nuclear Energy
(Source: Federal Register, 8 May 2018.) [Excerpts.]
 
83 FR 20711: Presidential Determination on the Proposed Agreement Between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for Cooperation in Peaceful Uses of Nuclear Energy
 
Memorandum for the Secretary of State [and] the Secretary of Energy
 
I have considered the proposed Agreement between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for Cooperation in Peaceful Uses of Nuclear Energy (the “Agreement”), along with the views, recommendations, and statements from interested departments and agencies.
 
I have determined that the performance of the proposed Agreement will promote, and will not constitute an unreasonable risk to, the common defense and security.
 
By the authority vested in me as President by the Constitution and the laws of the United States, including section 123 b. of the Atomic Energy Act of 1954, as amended (42 U.S.C. 2153(b)), I hereby approve the proposed Agreement and authorize the Secretary of State to arrange for its execution. …
 
(Presidential Sig.)
THE WHITE HOUSE,
Washington, April 30, 2018

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

EXIM_a3

3. President Posts Determination on Proposed Agreement with Mexico Concerning Cooperation in Peaceful Uses of Nuclear Energy
(Source: Federal Register, 8 May 2018.) [Excerpts.]
 
83 FR 20709: Presidential Determination on the Proposed Agreement Between the Government of the United States of America and the Government of the United Mexican States for Cooperation in Peaceful Uses of Nuclear Energy
 
Memorandum for the Secretary of State [and] the Secretary of Energy
 
I have considered the proposed Agreement between the Government of the United States of America and the Government of the United Mexican States for Cooperation in Peaceful Uses of Nuclear Energy (the “Agreement”), along with the views, recommendations, and statements from interested departments and agencies.
 
I have determined that the performance of the proposed Agreement will promote, and will not constitute an unreasonable risk to, the common defense and security.
 
By the authority vested in me as President by the Constitution and the laws of the United States, I hereby approve the proposed Agreement and authorize the Secretary of State to arrange for its execution, pursuant to section 123 b. of the Atomic Energy Act of 1954, as amended (42 U.S.C. 2153(b)). …
 
(Presidential Sig.)
THE WHITE HOUSE,
Washington, April 30, 2018

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

OGSOTHER GOVERNMENT SOURCES

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

* State; NOTICES; Imposition of Nonproliferation Measures Against Rosoboronexport, Including a Ban on U.S. Government Procurement [Publication Date: 9 May 2018.]

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

(Source: 
Commerce/BIS
)

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

(Source:
White House, 8 May 2018.)
 
PROTECTING AMERICA FROM A BAD DEAL: President Donald J. Trump is terminating the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) with Iran and re-imposing sanctions lifted under the deal.
 
* President Trump is terminating United States participation in the JCPOA, as it failed to protect America’s national security interests.
 
* The JCPOA enriched the Iranian regime and enabled its malign behavior, while at best delaying its ability to pursue nuclear weapons and allowing it to preserve nuclear research and development.
 
* The President has directed his Administration to immediately begin the process of re-imposing sanctions related to the JCPOA.
 
* The re-imposed sanctions will target critical sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors.
  – Those doing business in Iran will be provided a period of time to allow them to wind down operations in or business involving Iran.
 
* Those who fail to wind down such activities with Iran by the end of the period will risk severe consequences.
 
* United States withdrawal from the JCPOA will pressure the Iranian regime to alter its course of malign activities and ensure that Iranian bad acts are no longer rewarded.  As a result, both Iran and its regional proxies will be put on notice.  As importantly, this step will help ensure global funds stop flowing towards illicit terrorist and nuclear activities.
 
IRAN’S BAD FAITH AND BAD ACTIONS: Iran negotiated the JCPOA in bad faith, and the deal gave the Iranian regime too much in exchange for too little.
 
* Intelligence recently released by Israel provides compelling details about Iran’s past secret efforts to develop nuclear weapons, which it lied about for years.
  – The intelligence further demonstrates that the Iranian regime did not come clean about its nuclear weapons activity, and that it entered the JCPOA in bad faith.
 
* The JCPOA failed to deal with the threat of Iran’s missile program and did not include a strong enough mechanism for inspections and verification.
 
* The JCPOA foolishly gave the Iranian regime a windfall of cash and access to the international financial system for trade and investment.
  – Instead of using the money from the JCPOA to support the Iranian people at home, the regime has instead funded a military buildup and continues to fund its terrorist proxies, such as Hizballah and Hamas.
  – Iran violated the laws and regulations of European countries to counterfeit the currency of its neighbor, Yemen, to support the Islamic Revolutionary Guard Corps (IRGC) Quds Force’s destabilizing activities.
 
ADDRESSING IRANIAN AGGRESSION: President Trump is committed to ensuring Iran has no possible path to a nuclear weapon and is addressing the threats posed by the regime’s malign activities.           
 
* President Trump will work to assemble a broad coalition of nations to deny Iran all paths to a nuclear weapon and to counter the totality of the regime’s malign activities.
  – Nations must work together to halt the Iranian regime’s destabilizing drive for regional hegemony.
> In Syria, the Iranian regime supports the Assad regime and is complicit in Assad’s atrocities against the Syrian people.
>In Yemen, the regime has escalated the conflict and used the Houthis as a proxy to attack other nations.
> In Iraq, Iran’s IRGC sponsors Shia militant groups and terrorists.
> In Lebanon, the Iranian regime enables Hizballah to play a highly destabilizing role and to build an arsenal of weapons that threatens the region.
  – The Administration’s actions are directed against the malign behavior of the Iranian regime, not against the Iranian people, who are the regime’s longest-suffering victims.
 
* President Trump is making clear that, in addition to never developing a nuclear weapon, the Iranian regime must:
  – Never have an ICBM, cease developing any nuclear-capable missiles, and stop proliferating ballistic missiles to others.
  – Cease its support for terrorists, extremists, and regional proxies, such as Hizballah, Hamas, the Taliban, and al-Qa’ida.
  – End its publicly declared quest to destroy Israel.
  – Stop its threats to freedom of navigation, especially in the Persian Gulf and Red Sea.
  – Cease escalating the Yemen conflict and destabilizing the region by proliferating weapons to the Houthis.
  – End its cyber-attacks against the United States and our allies, including Israel.
  – Stop its grievous human rights abuses, shown most recently in the regime’s crackdown against widespread protests by Iranian citizens.
  – Stop its unjust detention of foreigners, including United States citizens.

 

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

(Source:
State/DDTC, 8 May 2018.)
 
Registration for The Directorate of Defense Trade Controls (DDTC) In-House Seminar for Wednesday, September 19th, 2018 opens August 10th and closes August 31st. Attendees will be identified on a first-come, first-serve basis. Preference will be given to new registrants and small-businesses. A completed registration form must be sent to the DDTC In-House Seminar email, as an attachment, DDTCInHouseSeminars@state.gov.

For more information, please visit the DDTC Outreach Programs page and click the “In-House Seminars” tab.
* * * * * * * * * * * * * * * * * * * * 

(Source:
Treasury/OFAC, 8 May 2018.)
 
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a statement and Frequently Asked Questions relating to the President’s decision with respect to the JCPOA.
* * * * * * * * * * * * * * * * * * * * 

 
Regulations:
  – Council Implementing Regulation (EU) 2018/698 of 8 May 2018 implementing Article 17(3) of Regulation (EU) No 224/2014 concerning restrictive measures in view of the situation in the Central African Republic
  – Council Implementing Regulation (EU) 2018/689 of 7 May 2018 implementing Article 15(3) of Regulation (EU) No 1352/2014 concerning restrictive measures in view of the situation in Yemen
 
Decisions:
  – Council Implementing Decision (CFSP) 2018/694 of 7 May 2018 implementing Decision 2014/932/CFSP concerning restrictive measures in view of the situation in Yemen
  – Council Implementing Decision (CFSP) 2018/699 of 8 May 2018 implementing Decision 2013/798/CFSP concerning restrictive measures against the Central African Republic
* * * * * * * * * * * * * * * * * * * * 

(Source:
European Union, 8 May 2018.)
 
Since our last newsletter in September 2017, a number of new developments have taken place under all different projects implemented in the framework of the European Union Partner to Partner Programme (EU P2P). Indeed, this Newsletter covers a period (September 2017 – April 2018) marked by new initiatives and new beginnings for previous projects.
 
To begin with, concerning the dual-use strand of the Programme, the EU has initiated two new projects of a very innovative nature. Under the leadership of the International Science and Technology Centre in Kazakhstan, Astana (ISTC) and the Science and Technology Centre in Ukraine, Kiev (STCU), two Targeted Initatives (TIs) for strategic trade controls have been launched. The first Initiative targets ten countries from Central Asia (Kazakhstan, Uzbekistan, Mongolia, Afghanistan, Pakistan, Tajikistan, Kyrgyzstan, Turkmenistan, Armenia and Georgia with a mentor- ship role) which are presently members of the ISTC and/or of the EU CBRN Centre of Excellence of Central Asia based in Tashkent, Uzbekistan. The TI, led by STCU, targets the GUAM countries (Georgia, Ukraine, Azerbaijan and Moldova). The objective is to create or enhance capacities in the area of dual-use export controls by seeing up programmes for the academic world in cooperation with industry, State services in charge of controls and other economic actors. Tailor-made trainings for industry, banks, other finance partners and State services (licensing, customs and other law enforcement actors), as well as specialised master programmes for universities, will be developed and set-up in the various countries. In addition, ISTC and STCU will allocate one PhD grant per Centre to eligible students wishing to prepare a specialised thesis on trade control issues. The PhD scholarships will provide an opportunity to students from the countries concerned by the TIs to conduct research from a University in the country of their origin and an EU University and/or other stakeholders (e.g. firms, EU research centres) based in the EU.
 
The European Commission has also decided to con-nue the organisation of the P2P summer university; this event will take place each summer in the country having the EU Presidency (this year Austria, Finland in 2019).
 
The present issue of the P2P newsletter brings also the latest news on the other EU P2P projects for dual-use controls, whose implementation has been renewed during the reference period. Last but not least, this Issue offers an in-depth insight into the experience of the Long-Term Expert with dual-use outreach in Jordan and some broader conclusions on the implementation of CoE project No. 38 in Jordan and Kazakhstan.
 
On the conventional arms export side, since the last newsletter, we are pleased to report the approval by the Foreign Affairs Council on 11 December 2017 of the 19th Annual Report on Arms Exports and its subsequent publication in the Official Journal on 14 February 2018. The Foreign Affairs Council also approved the updated Common Military List (CML) on 26 February 2018, and this was published in the Official Journal on 15 March 2018. Both documents are also available on the EEAS website.
 
The Annual Report is required by Article 8(2) of Council Common Position 2008/944/CFSP: “An EU Annual Report, based on contributions from all Member States, shall be submitted to the Council and published in the ‘C’ series of the Official Journal of the European Union”. The report provides extensive information on: arms sales authorised by EU Member States in 2016; activities of the Council Working Party on Conventional Arms Exports (COARM) in 2016 and 2017; and assistance and outreach activities carried out by the EU in support of effective arms export control systems in third countries The annual update of the CML is prepared in accordance with the updates agreed by the relevant technical international export control regime: the Wassenaar Arrangement on Export Con­trols for Conventional Arms and Dual-­Use Goods and Technologies (WA). This updated Common Military List of the EU lays down the scope of reference for Member States’ arms export control regimes. It therefore covers the full scope of military items that have to be licenced by national authorities before being possibly exported.
 
On 22 January 2018, the Foreign Affairs Council approved a Council Decision on support for arms export control capacity building in third countries under the EU Common Position 2008/944/CFSP (called the Council Decision on COARM Outreach). This is the fourth such programme to be approved and, as with its predecessors, it will cover a two-year period, from 2018­2020. It is aimed at outreach to countries in the broad EU neighbourhood.
 
[Editor’s Note: The entire newsletter can be found here.]
* * * * * * * * * * * * * * * * * * * * 

 
  (1) This circular reminds traders of the licensing requirements for the import and export of encryption products. Circular No. 7/2009 dated 12 May 2009 of the same subject is hereby superseded.

(I) The Legal Basis
 
  (2) The legal basis for imposing licensing control over strategic commodities in Hong Kong is the Import and Export (Strategic Commodities) Regulations (to be referred as “the Regulations” hereafter) made under the Import and Export Ordinance, Chapter 60, Laws of Hong Kong. Articles contained in the Schedules to the Regulations are regarded as strategic commodities, the import and export of which must be covered by valid licences issued by the Director-General of Trade and Industry. The Regulations contain four Schedules. Schedule 1 is the full list of strategic commodities subject to import and export licensing control. Schedule 2 contains products which, in addition to being subject to import and export control, are controlled even if they are in transit through Hong Kong. Schedules 3 and 4 are items and activities subject to end-use control (also read paragraph 17 below).

(II) Control on Encryption Products
 
  (3) In implementing licensing control on strategic commodities, Hong Kong follows closely the controls adopted by the international control regimes. Encryption products are controlled under the Wassenaar Arrangement, an international control regime overseeing the controls over the transfer of both munition items and dual-use goods and technology. Accordingly, encryption products may fall under “Category 5, Part 2 – Information Security” of the Dual-use Goods List of Schedule 1 to the Regulations. Import and export of the encryption products so specified are subject to licensing control.

(III) Exemptions of Control
 
  (4) While the Regulations impose control over encryption products with a symmetric key length above 56-bits, exemptions are granted for products, of whatever key length provided that they are under either one of the following scenarios:
 

i.
accompanying the user, for the user’s personal use; or

ii.
meeting all of the following conditions:

  (a) Generally available to the public by being sold, without restriction, from stock at retail selling points by means of any of the following :
    – Over-the-counter transactions;
    – Mail order transaction;
    – Electronic transactions; or
    – Telephone call transactions;
  (b) The cryptographic functionality cannot easily be changed by the user;
  (c) Designed for installation by the user without further substantial support by the supplier; and
  (d) When necessary, details of the items are accessible and will be provided, upon request, to the appropriate authority in the exporter’s country in order to ascertain compliance with conditions described in paragraphs (a) to (c) above.
   

(Classification advice by the Trade and Industry Department (“TID”) is required to determine if the product meets the criteria in paragraph 4 (ii) above.
Details please refer to paragraph 6 (d) below)

For details of the above exemptions as well as further information on other exemptions provided for certain products, traders may refer to Notes 2 or 3 (also known as the Cryptography Note) and the Note for “Category 5, Part 2 – Information Security” of Schedule 1 to the Regulations. This part of legislation can also be found at the Strategic Commodities Control System Website (the “SC Website”).


(IV) Licensing Procedures    

(A) Paper Application Forms

 
  (5) Licence applications should be made on Import Licence (Strategic Commodities) Application Form [TID 501 (Rev 2015)] (Annex A) (fillable pdf format) or Export Licence (Strategic Commodities) Application Form [TID 502 (Rev 2015)] (Annex B) (fillable pdf format)  respectively. These forms are free of charge and available at the Customer Service Center of Strategic Trade Controls Branch at Room 1619, 16/F, Trade and Industry Tower, 3 Concorde Road, Kowloon City, Hong Kong. They can also be downloaded from the SC Website at http://www.stc.tid.gov.hk. Licence applications should be submitted to the Customer Service Center of Strategic Trade Controls Branch.  A numbered receipt will be issued for each licence application.
 
(B) Declaration and Supporting Documents
 
  (6) In addition to basic application particulars, the following information/documents will also be required to support a licence application covering encryption products: 
  (a) the name and full address of end-user;
  (b) the specific end-use of the goods concerned;
  (c) if the shipment is supported by an export/re-export authorization issued by the supplier (originating) country/place: essential details of the licence or licence exception and a copy of the export/re-export authorization issued by the supplier (originating) country/place of the goods giving explicit approval to the export/re-export concerned. If the licence/authorization is written in languages other than English or Chinese, a translated version (either in English or Chinese) prepared by a registered translation company in Hong Kong or certified correct by the relevant consulate offices in Hong Kong will be essential to the processing of the case;
  (d) the technical specifications and/or the completed Cryptography Questionnaire (Annex C) (fillable pdf format). This questionnaire is for ascertaining whether the products can meet the criteria listed in paragraph 4(ii) and giving the general technical features of the products; and
(e) depending on the circumstances of individual cases, the following documents may also be required for certain applications:
  1. the original End-user Statement duly completed by the end-user (Annex D (fillable pdf format) for import licence application or Annex E (fillable pdf format) for export licence application); and/or
  2. original of the Importer/End-user Statement for supporting import licence applications covering the goods (for imports from the UK only) (Annex F) (fillable pdf format); and/or
  3. a copy of the valid business registration certificate of the applicant or local end-user.

The Director-General of Trade and Industry at all times reserves the right to request additional information and further documentary proof to substantiate the licence applications. Applications that are not properly completed or not accompanied by all the necessary documentation will be deferred/rejected. Blank forms for Annexes A to F can be downloaded from the SC website.
 
(C) General Electronic Applications
 
 
 (7) Companies can also apply licences electronically (“E-Applications”). The E-Applications for import and export licences can be made through companies’ E-Accounts in the SC Website at http://www.stc.tid.gov.hk > Login Your E-Account > E-Applications > Import /Export Licence Applications. E-Applicants should provide requisite supporting documents as set out in paragraph 6 above. The forms mentioned in paragraph 6(d) and (e) can be downloaded for completion if necessary. Afterwards, E-applicants should scan, upload and lodge the duly completed forms together with the related E-Import/Export Licence Application.  Upon successfully lodging the application, E-Applicant should follow the instructions to print out by themselves the receipts for future collection of the approved licences. For applications which are subject to the requirement of End-user Statements, and/or Importer/End-user Statements  as set out in paragraph 6 (e) above, the provision of scanned copy will only serve to facilitate TID in processing their applications more expeditiously. Applicants should, after making the E-Applications, make sure to deliver the original signed End-user Statements and/or Importer/End-user Statements to TID as soon as possible. TID will withhold the issuance of licences unless and until the original End-user Statement(s)/ Importer/End-user Statement(s) are received.

  (8) To make E-Applications, companies are required to complete a special registration with TID in advance. Details of the special registration and other requirements for the use of E-Applications can be found in the specific sections in the SC Website.   

(D) Electronic Applications made under the Approval-in-Principle Arrangement (AIP)

  (9) Companies which frequently import encryption products from the same supplier or frequently export encryption products to the same consignee may apply to join the Approval-in-Principle Arrangement (AIP). For further information on AIP for encryption products, please refer to Strategic Trade Controls Circular No. 9/2009.
 
(V) Export Control of Originating/Supplier/Foreign Exporting Country (Place) on Encryption Products

  (10) Traders should note that the originating/supplier/exporting country (place) of encryption products, especially if it is a member of the Wassenaar Arrangement*, may impose export control over the products by ways of individual licence, general licences, licence exceptions or other mechanisms. Since it is the policy of Hong Kong to maintain a licensing system complementary to the export control arrangement of our trading partners, TID will only approve licences to cover shipments that are in full compliance with the export control regulations of the originating/supplier/exporting country (place). To ascertain such compliance, licence applicants are required to provide additional supporting documents that may include, but shall not necessarily be confined to: the relevant government authorities’ determination/ classification result indicating that the goods have been reviewed and classified to be eligible for export to the proposed destination(s)/end-user(s), individual export licence, the review request/notification submitted by the product’s manufacturer to the relevant government authorities, manufacturer’s certification letter etc.

  (11) For U.S.-origin encryption products, traders should be aware that the U.S. Department of Commerce (DoC) revises their control over encryption products from time to time. In addition to individual licences, U.S. Licence Exception ENC might be applicable to certain products subject to prior authorization from the DoC. Exports of certain type of encryption goods to specific type of end-users or countries (places) might not require prior review. For details of the U.S.’ latest regulations, we would advise traders to consult their U.S. exporters/manufacturers direct or to visit the relevant U.S. Government’s website at: http://www.bis.doc.gov.  

(VI) Issuance of Licence

  (12) For paper and general electronic licence applications, paper licences will be issued upon licence approval. Under normal circumstances, applications duly completed and supported by the documents required will be processed within 2.5 clear working days after the date of receipt of the licence application. They are ready for collection at Room 1619, 16/F of Trade and Industry Tower. For cases with complications or if additional technical details, other documents and information and/or clarifications are necessary, it may take longer time to process the applications. Applicants may check whether their applications have been processed and are ready for collection by visiting the SC website at http://www.stc.tid.gov.hk. In any event, applicants are advised to lodge their applications well in advance of shipments. Approved import and export licences are valid for six months and three months respectively.
 
(VII) Licence Conditions
 
  (13) The Director-General of Trade and Industry may, depending on the circumstances of individual cases, impose special and additional conditions on approved licences. At the time of receiving the licences, companies are advised to read the designated part, “Conditions of Licence”, for the imposition of both the standard and special conditions.

Special Licence Condition and Resale/Transfer Application for U.S.-origin Encryption Products 

  (14) For U.S.-origin encryption products, one very common special licence condition is that “This licence only authorises import of the goods for civil end-use by non-government end-users.  Any further re-export, resale or transfer of the goods for the use by government end-user(s) requires prior notice to and approval from the Director-General of Trade and Industry”.

 
Licensees imposed with this condition should carefully handle any subsequent resale/transfer of the goods covered by the licence.  An Important Note shall be attached to the licences concerned and traders are required to pass on the Note to the new recipient of the goods whenever the goods are transferred in Hong Kong.

  (15) If the goods are to be resold/transferred for the use by any government end-user(s), the importer/owner of the products (i.e., the applicant) should lodge applications with the Strategic Trade Controls Branch in paper or electronically:

  (a)  Paper application(s) are to be made in the designated form SC054 (
Annex G) (fillable pdf format).  To facilitate TID’s consideration of the applications, applicants should enclose in their applications supporting documents like original end-user statement duly completed by the proposed government end-user; technical specification and questionnaire of the products; valid export authorization issued by the U.S. Government giving approval to the proposed resale/transfer, etc.  TID will give due consideration for the application and notify the applicant in writing whether the request can be approved.  Only after TID’s written approval has been obtained should the applicant proceed with the proposed resale/transfer of the goods.

  (b)  E-Applications for resale/transfer can be made through companies’ E-Accounts in the SC Website under the program of “Resale / Transfer / Disposal of Products Under Approved Import Licence” provided at the E-Application menu (At http://www.stc.tid.gov.hk > Login Your E-Account > E-Applications > Resale / Transfer / Disposal of Products Under Approved Import Licence). E-Applicants could efficiently know the results of their applications by checking the application status through their E-Accounts.  Once the application is approved, the applicants can simply print out by themselves the approval status of the application as an evidence of TID’s approval for the resale/transfer request. (At http://www.stc.tid.gov.hk > Login Your E-Account > E-Applications > Resale / Transfer / Disposal of Products Under Approved Import Licence) > Check Previously Submitted Applications for Resale / Transfer / Disposal of Products Under Approved Import Licence).
 
(VIII) Pre-classification Service
 
 (16) For applicants who frequently import or export the same types of encryption products, they are advised to make use of our pre-classification service. In brief, traders will be advised of the control status of a product through this service. Traders may download the pre-classification application form SC013 (Rev 2015) (Annex H) (fillable pdf format) from the SC website, and make applications attached with corresponding technical specifications and where applicable, questionnaire(s) mentioned in paragraph 6(d) above. After pre-classification, the Department will assign a Pre-Classification Reference Number to the product concerned. By quoting this reference number on future licence applications covering the same goods, the requirement to provide the technical specification/data sheets is waived. For details of the pre-classification procedures, please refer to the relevant information in the SC website.

(IX) End-use Control
 
  (17) In addition to the control imposed on specific items as set out in Schedules 1 and 2 to the Regulations, traders are reminded that end-use control are imposed under Schedules 3 and 4 to the Regulations. The Regulations impose licensing requirement on articles specified in Schedule 3 to the Regulations, or any technological document containing information relating to any such article:
  (a)  if the importer/exporter knows that the article or document is intended or likely to be used in any activity related to nuclear, chemical or biological weapons or missiles capable of delivering them as specified in Schedule 4 to the Regulations; or
  (b)  if the importer/exporter has grounds for suspecting that the article or document may be used in any activity specified in Schedule 4.

  (18) Import and/or export licences are required if the end-use of the goods fall under (a) and/or (b) above.
 
(X) Reminder

  (19) Section 6A of the Import and Export Ordinance stipulates that no person shall import or export any article specified in the Schedules to the Import and Export (Strategic Commodities) Regulations except under and in accordance with a licence issued by the Director-General of Trade and Industry. Any person who contravenes the provision commits an offence and is liable :

(a) on summary conviction to a fine of HK$500,000 and to imprisonment for two years; and 
(b) on conviction on indictment to an unlimited fine and to imprisonment for seven years.


  (20) In addition to prosecution, the Department may impose administrative actions against these persons. Such administrative actions may involve but shall not necessarily be confined to, suspension of a licence, refusal to issue a licence, debarment of all licensing facilities, etc.    
(XI) Enquiry
 
  (21) If you have any enquiry concerning licensing requirements for encryption products, please contact our Licensing Section at 2398 5575. For specific technical questions or matters concerning classification of the goods and the pre-classification service, please contact our Classification Section at 2398 5587. Enquiry could also be sent by fax to 2396 3070 (Liscensing Section) or 3525 1526 (Classification Section) or by email to stc@tid.gov.hk.
 
————-
* The Participating States of the Wassenaar Arrangement are: Argentina, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Republic of Korea, Romania, the Russian Federation, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, the United Kingdom and the United States.  
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NWSNEWS

(Source:
Reuters
, 6 May 2018.) [Excerpts.]
 
Two rights groups campaigning for the French government to halt weapons sales to Saudi Arabia and the United Arab Emirates said on Sunday they were taking their case to France’s highest legal authority. 
 
President Emmanuel Macron has come under pressure from rights groups to scale back ties with a Saudi-led coalition that has intervened in Yemen’s civil war, where more than 10,000 people have been killed since 2015. 
 
Droit Solidarite, a legal NGO, and Aser, which specializes in armament issues, demanded in March that export licenses to Saudi Arabia and the UAE be withdrawn. They gave Prime Minister Edouard Philippe a two-month ultimatum. 
 
They have had no response, so the groups said they would present a legal challenge on Monday to the Conseil d’Etat, France’s highest legal authority, which advises the government on legislative matters and arbitrates on public policy issues. 
 
  “It will be up to (Council of State) to decide on the legality of the export license authorizations issued by the prime minister,” ASER et Droit Solidarite said in a statement. 
 
The two argue that France is violating national and international law by selling arms that are being used in the conflict in Yemen. The United Nations and rights groups accuse the coalition of targeting civilians, which amounts to a war crime, a charge the coalition denies. 
 
The French government was not immediately available for comment.  …
 
Unlike many if its allies, in France – the world’s third-biggest arms exporter – export licensing procedures have no parliamentary checks or balances, and are approved through a committee headed by the prime minister. 
 
Some European states, including Germany, have curtailed links with the Saudi-led military coalition, though France, Britain and the United States have not followed suit.  

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(Source:
Washington Post, 8 May 2018.) [Excerpts.]
 
President Trump on Tuesday announced that he is withdrawing from the international nuclear deal with Iran and reimposing U.S. sanctions against Tehran, according to people familiar with the matter.
 
Trump’s decision, announced at the White House, follows the failure of last-ditch efforts by Britain, France and Germany to convince him that his concerns about “flaws” in the accord could be addressed without violating its terms or ending it altogether.

  “This was a horribly one sided deal that never, ever should have been made,” Trump said.
 
The U.S. president, who has called the agreement weak and poorly negotiated, announced that he will no longer withhold U.S. sanctions related to Iran’s nuclear program that were set aside under the 2015 deal, effectively taking the United States out of the agreement among Iran and six world powers.
Vice President Pence briefed members of Congress about the decision Tuesday, and Trump spoke with French President Emmanuel Macron, who has served as an emissary for European allies that want the United States to remain in the agreement.
 
It was not immediately clear whether Trump will immediately reinstate all of the sanctions or just a large and significant set of banking-related penalties that are due for review by Saturday. Another set is due for review in July, and Macron had hoped to use this period to continue efforts to negotiate a U.S.-European agreement.
 
A congressional official said Pence had told lawmakers the United States will no longer participate in the deal, known formally as the Joint Comprehensive Plan of Action, or JCPOA. The United States will restore sanctions with 90- and 180-day wind-down periods for various aspects, the official said.
Pence did not speak to reporters.
 
A decision to immediately reinstate all nuclear-related sanctions would be the most extreme step Trump could take now. People familiar with the decision said Trump remains open to the possibility of a supplemental agreement to “fix” the deal, but prospects for that approach appeared dim.
 
The three European allies have vowed to remain in the agreement and while the deal itself contains no provisions for withdrawal, Iran has threatened to reactivate suspended elements of its nuclear program if the United States reneges on any of its obligations under the pact’s terms. …

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COMMCOMMENTARY

COMM_a0
14. Global Trade News: “Latest Changes to Steel and Aluminum Tariffs under Section 232”

(Source: Integration Point Blog, 8 May 2018.)
 
U.S. Customs and Border Protection (CBP) recently published CSMS #18-000317, an update on the steel and aluminum tariffs under Section 232.
 
Importers should be aware of these changes
 
Effective date
. The steel and aluminum tariffs have been delayed until May 31, 2018. Argentina, Australia, Brazil, and South Korea will continue to be exempt after June 1.
 
South Korea
. The country now has an absolute quota on steel. Interestingly enough, this is the only absolute quota merchandise that exists at this time. It means that there is a limit to how much steel can be imported. Once the limit, or quota, is reached, no further imports of the product can be made. Any steel shipped to the United States after the quota is filled would have to be exported, destroyed, or placed in a foreign-trade zone (FTZ) or bonded warehouse. For South Korea, aluminum products must also be reported on a quota entry, though they are not subject to a quota.
 
Drawback
. Drawback cannot be claimed on any steel and aluminum imports under Section 232. However, if you were considering drawback as a cost-reducing strategy, then you can still look into U.S. foreign-trade zones, which allow merchandise to be exported into a foreign country without duty payment.
 
GSP and AGOA
. Goods that qualify for GSP or AGOA and are subject to Section 232 tariffs are no longer able to claim GSP or AGOA. All other free trade agreements can be used, but importers are still required to pay the Section 232 tariffs.
 
Foreign-trade zones.
FTZs that import components not subject to Section 232 tariffs, but manufacture the raw materials into finished goods that are subject to Section 232, do not have pay the Section 232 tariffs. This is great news for companies operating zones.

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COMM_a01
15. L.M. Capaccio & H. Sandick: “Second Circuit Affirms Constitutionality of Arms Export Control Act”
(Source: Second Circuit Criminal Law Blog, 8 May 2018.) [Excerpts.]
 
* Authors: Lauren M. Capaccio, Esq., lcapaccio@pbwt.com, +1 212-336-2192; and H. Sandick, Esq., hsandick@pbwt.com, 1-212-336-2723; both of Patterson Belknap Webb & Tyler LLP.
 
In United States v. Mark Henry, the Second Circuit (Jacobs, Cabranes, and Wesley, Js.) affirmed that the Arms Export Control Act (“AECA”), 22 U.S.C. § 2751 et seq., does not constitute an unconstitutional delegation of legislative authority to the executive branch, in addition to addressing various issues of trial procedure.  The defendant, Mark Henry, appealed his 2014 conviction following a jury trial of violating and attempting to violate the AECA by exporting “ablative materials”-military-grade technology used in rockets and missiles-and microwave amplifiers to customers in Taiwan and China.  . . .   
 
    On appeal, the defendant challenged his conviction principally on the grounds that the AECA violates the non-delegation doctrine, a constitutional principle grounded in precepts of separation of powers that prohibits Congress from delegating its law-making powers to the President or executive-branch administrative agencies.  . . . . 
 
 
Commentary
 
On the question of the constitutionality of the statute, the Court was confronted with a legal rule-the non-delegation doctrine-that has only been invoked selectively and never in the area of national security statutes.  It would have been a surprising result if the Court required Congress to legislate with detailed particularity where the subject to be regulated is one that changes over time due to technology and requires expertise to regulate.  Also, the Court’s prior ruling that IEEPA was a constitutional delegation of authority seems to have forced the conclusion reached here.   . . . .

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

 
North Korea:
 
On 22 December 2017, the UN Security Council imposed its latest round of sanctions against North Korea by adopting Resolution 2397 (see previous blog here). Among other things, that Resolution expanded sectoral sanctions by introducing a ban on North Korean exports of food and agricultural products, machinery, electrical equipment, earth and stone, wood and vessels. It also introduced a ban on the supply, sale or transfer to North Korea of all industrial machinery, transportation vehicles, iron, steel and other metals.
 
The UK has provided for these new measures by passing the North Korea (United Nations Sanctions) (Amendment) Order 2018, SI 2018/523, and the Democratic People’s Republic of Korea (Sanctions) (Overseas Territories) (Amendment) Order 2018, SI 2018/524. Both Orders will come into force on
22 May 2018
.
 
Burma/Myanmar:
 
On 26 April 2018, the EU adopted (inter alia) a legal framework to impose targeted measures in relation to its Burma/Myanmar sanctions, see Council Decision (CFSP) 2018/655 and Council Regulation (EU) 2018/647 (previous blog here).

The UK has provided for this legal framework by passing the Burma (European Union Financial Sanctions) Regulations 2018, SI 2018/539. The Regulations will come into force on 21 May 2018.

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* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
ITAR § 129.10 provides that a broker must submit its annual report with the registrant’s annual renewal submission or, if not renewing, within 30 days after expiration of registration. The report must identify the broker’s name, address, and registration code and be signed by an empowered official who shall certify that the report is complete and accurate. The report must describe each of the brokering activities, including the number assigned by the Directorate of Defense Trade Controls to the approval or the exemption claimed. or each of the brokering activities, the report shall identify all persons who participated in the activities, including each person’s name, address, nationality, and country where located and role or function; the quantity, description, and U.S. dollar value of the defense articles or defense services; the type and U.S. dollar value of any consideration received or expected to be received, directly or indirectly, by any person who participated in the brokering activities, and the source thereof. If there were no brokering activities, the report shall certify that there were no such activities.

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MSEX/IM MOVERS & SHAKERS

MS_a218. Christine McGinn Moves to Arizona

 
Christine McGinn has moved InterGlobal Trade Consulting, Inc., from Florida to Scottsdale, AZ.  Contact Christine at
cmcginn@interglobaltradeconsulting.com
, or phone (571) 331-8888.
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TECEX/IM TRAINING EVENTS & CONFERENCES

 
* What: Seminar Level III: Mastering ITAR/EAR Challenges, Annapolis, MD
* When: June 14-15, 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

 

* F. A. Hayek (Friedrich August von Hayek; 8 May 1899 – 23 Mar 1992; was an Austrian-British economist and philosopher best known for his defense of classical liberalism. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for his “pioneering work in the theory of money and economic fluctuations and … penetrating analysis of the interdependence of economic, social and institutional phenomena”.)
  – “A claim for equality of material position can be met only by a government with totalitarian powers.”

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EN_a321
. 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: 4 May 2018: Harmonized System Update 1807, containing 289 ABI records and 60 harmonized tariff records.
  – HTS codes for AES are available 
here.
  – HTS codes that are not valid for AES are available 
here.

 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.

  – Last Amendment: 14 Feb 2018: 83 FR 6457-6458: Amendment to the International Traffic in Arms Regulations: Addition of South Sudan [Amends ITAR Part 126.] 

  – The only available fully updated copy (latest edition: 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. 

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

EN_a0322
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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