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18-0517 Thursday “Daily Bugle”

18-0517 Thursday “Daily Bugle”

Thursday, 17 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. Commerce/BIS Amends EAR, Adds Thirty-Three Persons to Unverified List 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Updates ACE CATAIR Appendix PGA 
  4. Justice: “Turkish Banker Sentenced to 32 Months for Conspiring to Violate U.S. Sanctions Against Iran and Other Offenses”
  5. State/DDTC: (No new postings.)
  6. EU Takes Reactionary Measures Following U.S. Tariff Increase on Imports of Certain Steel and Aluminum Products
  1. NPR: “Companies Face A Tough Choice After Trump Pulls Out of Iran Nuclear Deal”
  2. Reuters: “EU to Start Iran Sanctions Blocking Law Process on Friday”
  3. WorldECR News Alert 17 May 2018
  1. D.M. Edelman: “New Export Rules for Firearms and Ammunition – Opening the Door for More Commercial Sales”
  2. G. Husisian: “The Twelve Compliance Steps Every Multinational Corporation Should Undertake in Light of Recent Trump Administration Enforcement Activity” (Part III of IV)
  3. M. Volkov: “Corporate Attitudes: When Speak Up Means Keep Quiet”
  4. Gary Stanley’s EC Tip of the Day
  5. R.C. Burns: “DDTC’s Buzzer Beater to Save Brokering Authority over Firearms Misses the Hoop”
  1. ECS Presents “ITAR/EAR Boot Camp (Seminar Level I)” on 12-13 Sep 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 (17 May 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. Commerce/BIS Amends EAR, Adds Thirty-Three Persons to Unverified List
(Source: Federal Register, 17 May 2018.) [Excerpts.]
 
83 FR 22842-22846: Revisions to the Unverified List (UVL)
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: The Bureau of Industry and Security (BIS) is amending the Export Administration Regulations (EAR) by adding thirty-three (33) persons to the Unverified List (“UVL”) and adding an additional address for one (1) person currently listed on the UVL. The thirty-three persons are being added to the UVL on the basis that BIS could not verify their bona fides because an end-use check could not be completed satisfactorily for reasons outside the U.S. Government’s control. A new address is added for one person as BIS has determined that this person is receiving exports from the United States at an additional address.
* DATES: This rule is effective May 17, 2018.
* FOR FURTHER INFORMATION CONTACT: Kevin Kurland, Director, Office of Enforcement Analysis, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-4255 or by email at UVLRequest@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
  This rule adds thirty-three (33) persons to the UVL by amending Supplement No. 6 to Part 744 of the EAR to include their names and addresses. BIS adds these persons in accordance with the criteria for revising the UVL set forth in Sec. 744.15(c) of the EAR. The new entries consist of eleven persons located in China, twelve in Russia, five in the United Arab Emirates, two in Canada, and one person located in each of the following countries: Estonia, Finland, and Pakistan. Each listing is grouped within the UVL by country with each party’s name(s) listed in alphabetical order under the country; each entry includes available alias(es) and address(es), as well as the Federal Register citation and the date the person was added to the UVL. The UVL is included in the Consolidated Screening List, available at www.export.gov.
  This rule also adds one additional address for one person currently listed on the UVL, Ling Ao Electronic Technology Co. Ltd, a.k.a. Voyage Technology (HK) Co., Ltd., a.k.a. Xuan Qi Technology Co. Ltd., as BIS has determined that this person is receiving exports from the United States at an additional address. …
 
   Dated: May 12, 2018.
Richard E. Ashooh, Assistant Secretary for Export Administration.

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OGSOTHER GOVERNMENT SOURCES

OGS_a12. 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: 18 May 2018.]
 
* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Foreign-Trade Zone Admission and/or Status Designation, and Application for Foreign-Trade Zone Activity Permit [Publication Date: 18 May 2018.]

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(Source:
CSMS #18-000347, 17 May 2018.)
 
The Appendix PGA has been updated. For PG10 commodity Qualifier Code, added “X” to the “Commodity – Animal” list for US Fish and Wildlife. In the PG26 Unit of Measure, added ‘IN’ to the FDA base unit list.
 
Please visit go here for more information.
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(Source:
Justice, 16 May 2018.) [Excerpts.]
 
Mehmet Hakan Atilla, 47, a resident and citizen of Turkey, was sentenced today to 32 months for his participation in a scheme to violate U.S. economic sanctions imposed on the Islamic Republic of Iran involving billions of dollars’ worth of Iranian oil proceeds held at Atilla’s employer (Turkish Bank-1). On Jan. 3, after a five-week jury trial, Atilla was convicted of conspiring with others to use the U.S. financial system to conduct transactions on behalf of the government of Iran and other Iranian entities, which were barred by U.S. sanctions, and to defraud U.S. financial institutions by concealing these transactions’ true nature. …
 
Atilla and others conspired to provide access to restricted oil revenues through international financial networks, including U.S. financial institutions, to the government of Iran, Iranian entities, and entities identified by the Department of the Treasury Office of Foreign Assets Control as Specially Designated Nationals (SDNs). They did so by, among other things, using Turkish Bank-1, at which Atilla served as Deputy General Manager of International Banking, to engage in transactions involving billions of dollars’ worth of petroleum revenues held by the Central Bank of Iran and the National Iranian Oil Company. In particular, they facilitated and protected Turkish Bank-1 customer, international gold trader Reza Zarrab’s, ability to supply currency and gold to, and facilitate international financial transactions for, the Government of Iran, Iranian entities, and SDNs using Turkish Bank-1. Many of those financial transactions involved unwitting U.S. financial institutions, in violation of U.S. sanctions against Iran. The elaborate scheme established by Atilla and others also shielded Turkish Bank-1 from U.S. sanctions.    
 
Atilla in particular lied to and deceived U.S. Treasury officials about Turkish Bank-1’s activities and its purported compliance efforts in order to avoid subjecting the bank to U.S. sanctions. Additionally, Atilla, Zarrab and others conspired to create and use false and fraudulent documents to disguise prohibited transactions for Iran and make those transactions falsely appear as transactions involving food, thus falling within humanitarian exceptions to the sanctions regime. As a result of this scheme, Atilla and his co-conspirators induced U.S. banks unknowingly to process international financial transactions in violation of the IEEPA, and to launder through the U.S. financial system funds promoting the scheme.
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Regulations:
* Commission Implementing Regulation (EU) 2018/724 of 16 May 2018 on certain commercial policy measures concerning certain products originating in the United States of America
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NWSNEWS

(Source:
Federal Register, 16 May 2018.) [Excerpts.]
 
The 2015 nuclear deal with Iran was heralded as the reopening of the country’s battered economy, and big foreign companies such as Airbus, Siemens and Samsung rushed to take advantage of the opportunity.
 
Now that President Trump has effectively closed the door again, those same companies have to choose between remaining in Iran and staying on the good side of the U.S. government.
 
The risks they run are sizable. Over the weekend, National Security Adviser John Bolton told CNN’s State of the Union that the U.S. was willing to impose sanctions on foreign companies that continue to do business in Iran. …
 
European officials have insisted that the Iran deal is very much alive and say pushing back against Washington’s threats is a matter of protecting their sovereignty. …
 
As a practical matter, however, Washington has a powerful weapon to punish foreign companies that won’t toe the line: It can bar them from ever doing business in the United States.
 
The European airplane company Airbus, for instance, has a contract to provide some 100 aircraft to Iran Air, which is operating with an aging fleet of planes.
 
Because the U.S. is the source of many of the parts used in Airbus planes, being barred from the American market would be almost impossibly disruptive.
 
“They would have to strip out all the U.S. components in their airplanes. I don’t know whether that’s technically possible, but I think it would be very, very difficult,” says Danforth Newcomb, a sanctions lawyer at Shearman & Sterling.
 
More important, Washington could bar foreign companies from the U.S. market, which is still the largest in the world. That’s something very few multinational firms want to see happen.
 
“Faced with the decision to risk what is in almost all cases major business in the U.S., as opposed to a little bit of business in Iran, I would imagine most companies would probably decide not to continue their Iranian business connections,” Wolfgang Ischinger, former German ambassador to Washington, told NPR’s Morning Edition on Tuesday.
 
“The European economies and Asian economies have a lot more trade with the United States. So, ultimately, they cannot completely ignore U.S. demands,” says Nader Habibi, a professor of the economics of the Middle East at Brandeis University.
 
In fact, a lot of companies began turning their backs on Iran when Trump was elected, and that’s one reason why Iran’s much-touted economic revival has proven to be a disappointment within the country, Habibi says. …
 
Meanwhile, most American firms have steered clear of the Iranian market from the beginning. The 2015 nuclear deal lifted sanctions for foreign companies, but U.S. firms, with a few exceptions, were always barred from doing business in Iran.  
 
Whether the U.S. government would really follow through on its threat to punish Asian and European companies doing business in Iran is unclear. …
 

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(Source:
Reuters, 17 May 2018.)
 
The European Commission will launch on Friday the process of activating a law that bans European companies from complying with U.S. sanctions against Iran and does not recognize any court rulings that enforce American penalties.
 
  “As the European Commission we have the duty to protect European companies. We now need to act and this is why we are launching the process of to activate the ‘blocking statute’ from 1996. We will do that tomorrow morning at 1030,” European Commission President Jean-Claude Juncker said.
 
  “We also decided to allow the European Investment Bank to facilitate European companies’ investment in Iran. The Commission itself will maintain its cooperation will Iran,” Juncker told a news conference after a meeting of EU leaders.

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(Source:
WorldECR, 17 May 2018.)
 
  (1) JCPOA countries meet against background of US secondary sanctions threat
  (2) OFAC issues general licences for dealing with sanctioned Russian companies
  (3) OFSI publishes new guidance for import/export sector
  (4) US imposes sanctions on Iran/UAE currency exchange network
  (5) EU sanctions five involved in Russian elections in Crimea/Sevastopol
 
[Editor’s Note: Click here to find information on how to subscribe to WorldECR, the journal of export controls and sanctions.]

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COMMCOMMENTARY

COMM_a0
11. D.M. Edelman: “New Export Rules for Firearms and Ammunition – Opening the Door for More Commercial Sales”
(Source: Export Compliance Matters, 17 May 2018.)
        
* Author: Doreen M. Edelman, Esq., Baker Donelson LLP, 202-508-3460, dedelman@bakerdonelson.com
.
 
On May 14, the Department of Commerce’s Bureau of Industry and Security (BIS) in conjunction with the Department of State’s Directorate of Defense Trade Controls (DDTC) issued newly proposed rules regarding export classifications of firearms, guns, ammunition and related articles.  BIS and DDTC determined that certain articles previously controlled by the U.S. Munitions List (USML) and regulated under the International Traffic in Arms Regulations (ITAR) should be transferred to the Commerce Control List (CCL) and regulated by the Export Administration Regulations (EAR).  The stated goals of the proposed rules are to reduce procedural burdens and costs of export compliance on the U.S. firearms industry, while allowing the Commerce and State Departments to more efficiently enforce their relevant export controls.
 
The BIS proposal describes certain articles determined to no longer warrant control under the USML in Category I (Firearms, Close Assault Weapons and Combat Shotguns), Category II (Guns and Armament), and Category III (Ammunition/Ordnance), that would be transferred to control under the CCL.  BIS and DDTC concluded that these articles were either not inherently for military use or do not warrant the obligations imposed under the ITAR. In addition, articles subject to the transfer were determined to not provide a critical military advantage to the U.S., are not the types of weapons that are almost exclusively available from the U.S., and are manufactured from technology that is widely available.
 
The scope of the items subject to change are mostly commercial items widely available in retail outlets, and were described as having commercial and other non-military characteristics that distinguish them from articles subject to control under the ITAR.  For example, the proposal would transfer all non-automatic and semi-automatic firearms, as well as their parts and components, from the USML to the CCL.  However, the USML will continue to control fully automatic firearms and their parts and components, including guns up to .50-caliber, as well as firearms that fire caseless ammunition.  In addition, silencers, mufflers, and sound suppressors will still be subject to the USML.
 
The BIS proposal would create 17 new Export Control Classification Numbers (ECCNs) to control the items proposed for removal from the USML, and would further revise seven existing ECCNs and remove nine ECCNs to help make it easier to identify and classify your articles for export.  It is important to note that the articles moved to the CCL are not being “de-controlled,” and BIS would still require a license to export/reexport the articles subject to the new ECCNs.  While the proposed rules will contain license exceptions that will permit certain components and other items to be exported without a license, exports of complete firearms will still require licensing under the EAR.
 
The DDTC’s proposed rule revises Categories I, II, and III of the USML to more precisely describe the articles warranting control on that list, limiting their scope to defense articles that provide the U.S. a critical military or intelligence advantage or are inherently for a military end use. The proposed rules establish bright lines to help exporters distinguish between USML- and CCL-controlled articles. The proposed rules are expected to soon be published in the Federal Register, at which point they will be subject to a 45-day public comment period.  The full Commerce proposal is available here, and the State Department proposal is available here.
 
Bottom line- Manufacturers, brokers, and exporters of these items and components will need to document any classification changes and should have compliance procedures to correctly classify each product. Your checklist could start with an ITAR decision tree and then proceed to the 600 series or other ECCN and then complete your EAR licensing determination. Don’t forget restricted party and OFAC compliance requirements.  Yes, this may mean more work to do but you only have to perform the classification analysis once and it offers new exporting opportunities.  Keep your documentation of your review for at least 5 years.  These changes also trigger new training requirements.
 

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COMM_a01
12. G. Husisian: “The Twelve Compliance Steps Every Multinational Corporation Should Undertake in Light of Recent Trump Administration Enforcement Activity” (Part III of IV)
(Source:
Foley & Lardner LLP
, 14 May 2018.)
 
* Gregory Husisian, Esq., 
ghusisian@foley.com
, Foley & Lardner LLP, Washington DC.
 
[Editor’s Note: due to space limitations, this article has been divided into four parts. We will post one part every day, from Tuesday, 15 May until Friday, 18 May 2018.]
 
Step 5: Assess Local Oversight
 
One of the key compliance considerations for organizations that operate in multiple countries is how the organization will oversee compliance outside the United States. The state of compliance, as envisioned at corporate headquarters, and the actual state of compliance, as implemented in the field, far too often diverge. This natural tendency is exacerbated when the organization operates in numerous countries, which makes Step 5 a key stop on the path to effective international compliance.
 
It often is a mistake to assume compliance can be managed solely from a central location. While compliance initiatives can originate from a central legal or compliance department, and often are best managed in a centralized fashion, implementation and oversight often require on-the-ground attention. It accordingly is often necessary to set up a compliance infrastructure that includes compliance liaisons.
 
Establishing compliance liaisons has several advantages. First, managing full compliance centrally is difficult. There are just too many things to take care of (conducting training, monitoring red flags, conducting investigations, and so forth). Second, local personnel often have a better understanding of the regional or local environment and culture. Third, by being closer to operations, local personnel often are in a better position to identify and monitor red flags. Fourth, language issues often make local compliance issues a better direct interface for local employees. For all these reasons, it is a good idea to have compliance liaisons in place, at least where the organization is dealing with substantial, non-U.S. operations.
 
In assessing the adequacy of local oversight, it is necessary to consider areas of risk that may lie outside the organization. Relevant considerations include the state of oversight for non-entity risk points, including foreign subsidiaries, joint ventures, agents, distributors, consultants, and others. The review should be multifaceted and include a review of relevant contractual arrangements (to ensure the appropriate compliance-related provisions are in place), review of compliance certifications and updates to same, and consideration of any known red flags that have arisen regarding these third-entity risk points.
 
At most organizations, there are a variety of good options for compliance liaisons. Relevant local actors, who often are already in place and who can be harnessed for compliance oversight, include divisional or regional HR personnel, in-house attorneys, and auditors. If the compliance need is great enough, the organization can hire a new person dedicated solely to compliance. What is essential is that the compliance liaison be someone who is independent of business pressures. It should be someone who has the respect of local business people and who has the institutional authority and independence to follow up on potential compliance lapses, regardless of who is involved.
 
One item that should be assessed is the completeness of the local compliance oversight. The assessment should cover both the impact of U.S. and non-U.S. laws. However, the oversight is locally managed, the organization should consider both the operation of extraterritorial U.S. laws and such local laws as local work rules, data protection and privacy laws (particularly in the European Union), competition laws, and laws regarding labor rights. The aim is to have local oversight of all potential sources of significant regulatory risk, regardless of the governmental entity imposing the underlying legal obligations.
 
Step 6: Create a Written Compliance Policy
 
It is an unfortunate fact that Step 6 – the drafting of the compliance manual – is often Step 1 for many companies. As shown, however, there is considerable groundwork to cover before the organization should begin the actual drafting of the compliance manual. The goal is not just to have a written compliance policy; it is to have an effective policy that, through tailoring to the risk profile, operational needs, and culture, represents a workable compliance solution for the organization.
 
Although the actual contents of the compliance program should be tailored to the organization, usually the written program will include:
 
  – A Written Policy Statement. A policy statement is just as the name implies. It succinctly sets out the company’s commitment to comply with the law. The organization should draft the policy statement in clear, straightforward language, and should state that it is the responsibility of each employee to abide by the company’s compliance policies.
  – A Written Compliance Program. One of the most important elements of a good compliance program is a well-constructed written manual. The written manual should accurately summarize the regulations, using plain language that employees without legal training can readily follow. Many companies require that their employees sign certifications stating they have read the program and understand their compliance responsibilities, that they understand the law and the company’s compliance procedures, and that they have communicated to the compliance department any information regarding any potential violations of the law or company policy. These certifications serve the purpose of reminding personnel about the legal standards and the company’s compliance policies. They represent useful evidence of the importance of compliance in any enforcement action, and could become important if a disgruntled employee blows the whistle regarding information or actions he previously certified he did not know about.
  – Supplemental Materials. Depending on the risk-informed view of the area, it may be appropriate to distribute supplemental compliance materials to individuals either at high risk of potential violations or who need specialized training to oversee or comply with the relevant legal regime. All of the major international compliance areas (anticorruption, export controls, economic sanctions, international antitrust, anti-money laundering, and even anti-boycott) may warrant this treatment, depending upon the company’s risk profile. Items to include in such materials include in-depth lists of red flags (along the lines of those found in the Appendices to this International Compliance Guide), lists of sample contractual language to use when hiring third-party intermediaries, in-depth summaries of the relevant legal requirements, frequently asked questions, descriptions of compliance missteps that have occurred at the organization (including how they were handled), and other compliance-related materials. Such in-depth compliance resources should be distributed as needed, rather than to the organization as a whole.
  – Internal Controls. Any internal controls that are implemented to help serve compliance goals should be memorialized. This topic is covered in Step 7.
 
Companies should give careful thought as well to the length of the written program. Some companies undermine the effectiveness of their program by establishing a drawn-out policy that covers every nuance in applying the law. This is a mistake, because employees will ignore a long and cumbersome compliance program. Instead of taking this approach, the program should focus on providing key points from the regulations, informed by useful examples relevant to the company and its industry. The goal is not to turn the workforce into law professors who fully understand every nuance of the law; rather, it is to give people enough knowledge, so they can recognize a potential problem and notify the appropriate compliance personnel of the potential issue. If desired, supplemental guidance can be distributed to persons most likely to need more detailed compliance information on a need-to-know basis.
 
Step 7: Establish Internal Controls
 
Although internal controls are one of the three pillars of compliance (along with the written policy and training), they often are neglected. This neglect can be costly. Internal controls often are one of the main mechanisms by which the compliance policy is implemented. They accordingly merit as much attention as the written compliance policy.
 
The purpose of internal controls is both to provide procedures that implement the dictates of the compliance program and to create a self-reinforcing cycle of compliance improvement. Compliance policies set the standard, while internal controls implement and reinforce that standard. Through this mechanism, it is possible to enhance compliance in a positive fashion and to strengthen it over time.
 
In creating internal controls, it often is possible to harness existing processes. A good example of this lies in the anti-corruption realm. It is common for companies to take existing internal controls, such as those governing disbursements and reimbursements, and graft on procedures intended to track potential payments to foreign officials and personnel who work at state-owned companies. Similarly, some companies use customer-intake and credit-check procedures as mechanisms to screen new customers against OFAC and EU lists of blocked persons. Doing so minimizes the time necessary to implement a functioning set of internal controls and the effort needed to oversee its operation.
 
Some specific internal controls that multinational corporations should consider involve the following high-risk international areas:
 
  – FCPA. Using existing disbursement and reimbursement policies to ensure notification to compliance personnel of potentially troublesome payments; creating special trigger mechanisms for entertaining foreign officials (including people who work for state-owned entities), and gifts, meals, entertainment, and travel expenses that exceed pre-defined limits.
  – Export Controls and Sanctions. Creating internal controls to ensure routine scanning of Specially-Designated Nationals (SDNs and Denied Persons) for all new customers, and the entire customer list and transaction parties on a pre-determined basis; establishing internal controls regarding placing appropriate export control notices on outbound electronic paperwork and shipping documents; developing controls to ensure accurate reporting of information for the Automated Export System and communication of information regarding same to any Customs broker or freight forwarder involved; implementing controls to automatically flag any transactions involving controlled items or defense articles; mandating controls designed to restrict access of non-U.S. nationals to controlled technical data, wherever it may be found at the company.
  – Anti-boycott. Designing controls to ensure that relevant front-line personnel, whether personnel involved in the contracting, procurement, accounting, or line of credit functions, or other functions that are likely to encounter boycott-related activity, monitor and report boycott-related requests; implementing controls designed to ensure that all contracts have superseding language stating the company’s policy of rejecting any requests to participate in the Arab League boycott of Israel.
 
Step 8: Training, Training, Training
 
The importance of training as the foundation of compliance is widely acknowledged. Even the Sentencing Guidelines, which concisely focus on the basics of an effective compliance program, call out training for special attention. The Sentencing Guidelines commentary states that the “organization shall take reasonable steps to communicate periodically and in a practical manner its standards and procedures, and other aspects of the compliance and ethics program, to the [relevant] individuals…by conducting effective training programs and otherwise disseminating information appropriate to such individuals’ respective roles and responsibilities.” [FN/3]
 
The basic task of training is to ensure, in conjunction with a well-written compliance program and appropriate internal controls, that employees and agents have sufficient knowledge to recognize red flags and other problematic situations, and understand what they need to do to comply. The goal is not to create legal experts all across the company; rather, it is to sensitize people to the law, so they know when to seek counsel from the appropriate compliance or legal personnel.
 
The importance of conducting training appropriately is magnified in the international realm. Besides the normal problem of adequately communicating the compliance requirements, the training often will need to address local practices and different cultural norms that may prove contrary to the compliance needs of the organization. Equally important is finding the best way to stress the importance of compliance with U.S. law, which may seem to many foreign nationals to be of limited concern because they are outside U.S. territory. Language difficulties, too, complicate things, making it essential to consider presenting compliance materials and training in languages other than English.
 
Training should occur for all new employees and annually for appropriate longtime employees. [FN/4] Because no firm’s work force is static, the program should include automatic steps to ensure compliance materials are distributed to personnel at the time of hire or when personnel are transferred or promoted into relevant positions that require training. The same is true whenever the company is making acquisitions, setting up new agent relationships, bringing on new distributors, or establishing joint ventures.
 
When preparing training materials, companies typically use a mix of written and training materials that summarize the law, frequently asked questions and answers about the law, training slides, and prepared oral presentations (which are best given in an interactive presentation with audience feedback and participation). The program should use real-world examples whenever possible, such as case studies drawn from actual problems confronted by the company in the past. The educational material should also reiterate the importance of compliance to the company’s culture, and provide other useful information, such as recent enforcement actions against similarly situated companies.
 
Companies also should consider how they can use technology to enhance their compliance programs, including using intranets. Best uses of intranets for compliance include: posting basic training online; publishing the company’s compliance program; providing plain-language summaries of applicable laws; providing real-world examples and frequently asked questions; consolidating and presenting model contract provisions; quickly disseminating updates to the compliance program; establishing links to allow ready reporting of potential problems; and informing employees regarding how the company has resolved tricky issues it has encountered. The company can use its intranet as a mechanism to identify problems quickly, to report potential issues, and to coordinate all of the company’s compliance initiatives. Using these tools can make compliance an ongoing process and give new employees ready access to company procedures at the outset of their employment.
 
Another growing best practice is using automated training software. This software communicates compliance information and can be used to test the user’s knowledge of both the substantive laws and the company’s compliance procedures. Companies can place automated training software on the intranet and make completion of the training a required task for employees, allowing the company to develop a set of standards that employees must meet in a variety of substantive areas, such as export controls and sanctions compliance.
 
The company should maintain an attendance log to track all compliance training. Each employee should sign an acknowledgment form showing he or she has reviewed the compliance materials and understands his or her responsibility to comply with the company’s program.
 
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  [FN/3] U.S. Sentencing Guidelines Manual § 8B2.1(b)(4). The individuals in subdivision B are “members of the governing authority, high-level personnel, substantial authority personnel, the organization’s employees and, as appropriate, the organization’s agents.” U.S. Sentencing Guidelines Manual § 8B2(1)(b)(4)(B).
  [FN/4] See, e.g., Hollis v. City of Buffalo, 28 F. Supp. 2d 812, 821 (W.D.N.Y. 1998) (rejecting a company defense based on good faith compliance efforts, due to failure of company to conduct ongoing education or to recirculate compliance materials).
 

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(Source:
Volkov Law Group Blog, 16 May 2018.) Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
 
As parents we all have been through the following scenario – we encourage our children to communicate and voice their concerns and to learn to articulate, reason and understand perspectives. So, our kids start to speak up and we listen, patiently, but at some point, our patience wears thin, and we are not as interested or willing to listen. Our children begin to question our commitment to speak up and listening.
 
This lesson applies with equal force in the corporate context. It is unfortunate but true that a company’s expressed commitment to addressing employee concerns can be tested and eventually limited by its own actions and disregard of employee concerns.
 
I have witnessed this phenomenon. An employee will raise a concern directly with a company’s audit committee chair, and the audit committee initiates its response procedures. A designated contact person reaches out to the employee, assures the employee that the company will investigate the matter, and requests relevant information from the employee.
 
At this preliminary stage, the employee is exhilarated that he/she will be heard and provides detailed information to the designated audit committee contact. After reviewing the information, the contact reaches out to the employee to schedule a meeting.
 
The employee trusts the company’s system and is convinced that he/she is being heard. The employee meets with the audit committee chair and continues to provide information concerning his/her issue of concern. The employee is satisfied that the concern will be addressed.
 
It is here where the positive interactions often break down. How?
 
Two common scenarios occur.
 
First, the audit committee representative goes dark – no contact, no feedback, and no communication. The employee follows up and still hears nothing but crickets from the audit committee designate. What happened?
 
Second, the audit committee designate sends an email to the employee requesting specific answers to a series of follow up questions. Unfortunately, the questions are drafted in a manner to reflect an inherent bias against the employee’s specific concerns. The questions reflect a desire to tilt the inquiry in the company’s favor. The employee fears, at this point, that his/her concerns were not heard but more importantly that the system is “rigged” against the employee. The employee loses trust in the system and will look for alternatives. What happened?
 
Both of these scenarios reflect a common problem. A company’s expressed desire to listen is not backed up by a real commitment to listen, reflect, analyze and resolve. The company has no real commitment to objectivity – instead, the company has committed to one thing only – to go through the motions to defuse employee concerns without maintaining its credibility to listening and responding appropriately to the employee’s concern.
 
Many companies operate at this level and are reluctant to acknowledge employee concerns’ and the need to make changes. A culture that ignores its employees is just as likely to ignore its partners, its customers, its shareholders and other key stakeholders. It is a disease that can infect other areas of corporate operations and eventually undermine a company’s ability to inspire trust and integrity.
 
We all know about the importance of active listening. It is an art and skill that successful individuals are able to employ in their careers and life relationships. A company, like any individual, has to commit to active listening – meaning understanding the employee’s concern, considering the employee’s point from the employee’s perspective and responding with a positive and open attitude. When a company is able to implement such a perspective, employees will trust the system and raise additional concerns, many of which may be valuable and lead to significant improvements.
 
When a company encourages employees to raise concerns and then fails to follow through, the company has not only lost an opportunity to hear and implement meaningful changes, but the company actively harms its employees by destroying any chance of trust that may occur in the process. Companies have to inject mindfulness into the process for listening and responding to employee concerns. Perhaps companies should consider the lessons learned from parenting when we were children communicating to our parents or better yet, when we were parents and listening to our children.

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* Author: Gary Stanley, Esq., Global Legal Services, PC, (202) 352-3059,
gstanley@glstrade.com
.
 
Items subject to temporary CCL controls are classified under the ECCN 0Y521 series (i.e., 0A521, 0B521, 0C521, 0D521, and 0E521) pursuant to § 742.6(a)(7) of the EAR while a determination is made as to whether classification under a revised or new ECCN, or an EAR99 designation, is appropriate.

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COMM_a415. R.C. Burns: “DDTC’s Buzzer Beater to Save Brokering Authority over Firearms Misses the Hoop”
(Source:
Export Law Blog
, 16 May 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC,
Clif.Burns@bryancave.com
, 202-508-6067).
 
As noted in my
post
yesterday (ed. 15 May 2018, included in the 16 May 2018 Daily Bugle) on the proposed rules to transition certain Category I, II and III items from the United States Munitions List to the Commerce Control List, DDTC attempted to preserve its brokering authority over the transferred firearms and related items by amending the brokering rules to contain items both on the United States Munitions List (“USML”) and the United States Munitions Import List (“USMIL”).  An alert reader pointed out, quite correctly, that this clever regulatory sleight-of-hand was, ahem, not authorized by the Brokering Amendment to the Arms Control Export Act.
22 U.S.C. § 2278(b)(1)(A)(ii)
.
 
The Brokering Amendment provides authority to DDTC to register brokers and license brokering transactions.  The problem is that it authorizes this only with respect to items on the USML.  It makes no reference to the USMIL and provides no authority to regulate brokers of, and brokering transactions related to, items on the USMIL.
 
Section 2278(b)(1)(A)(ii)(I) provides the statutory mandate and authority to require registration of brokers:
 

As prescribed in regulations issued under this section, every person (other than an officer or employee of the United States Government acting in official capacity) who engages in the business of brokering activities with respect to the manufacture, export, import, or transfer of
any defense article or defense service designated by the President under subsection (a)(1), or in the business of brokering activities with respect to the manufacture, export, import, or transfer of
any foreign defense article or defense service (as defined in subclause (IV)), shall register with the United States Government agency charged with the administration of this section.

 
Subclause III requires licensing for “brokering activities described in [the above-cited] subclause (I)”.
 
The relevant language here then is “any defense article … designated by the President under subsection (a)(1)” and “any foreign defense article … as defined in subclause (IV)”.  Both of these are, it turns out, references only to items on the USML
 
Subsection (a)(1), which gives the President the authority to designate defense articles subject to export controls, says this in the last sentence of the subsection:
 
The items so designated shall constitute the United States Munitions List.
 
Subclause IV only references the USML in its definition of “foreign defense article”:
 
For purposes of this clause, the term “foreign defense article or defense service” includes any non-United States defense article or defense service of a nature described on the United States Munitions List regardless of whether such article or service is of United States origin.
 
Not surprisingly, DDTC’s discussion of these proposed rules fails to mention this little problem in relying on the Brokering Amendment or where it believes it can otherwise find statutory authority to extend its brokering rules to items on the USMIL.
 
UPDATE:
I just got off the phone with a spokesperson from DDTC who explained the agency’s theory as to how they could exert brokering authority over USMIL items. According to the spokesperson, section 2278(a)(1) gives the President the authority to “control the import and export of defense articles” and to “to designate those items which shall be considered as defense articles.” The USMIL and the USML are, thus, separate subsets of the broader “statutory” USML referenced in subsection (a)(1).  The USMIL administered by ATF lists those items subject to controls on permanent imports.  The USML administered by DDTC lists items subject to controls on exports and temporary imports. While this argument is at least plausible, it does require taking the facially counter-intuitive position that the USMIL is really the USML and that the USML in the ITAR is not really the entire USML.

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TECEX/IM TRAINING EVENTS & CONFERENCES

 
* What: Seminar Level I: ITAR/EAR Boot Camp, Annapolis, MD
* When: September 12-13, 2018
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register: Here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com. 
* * * * * * * * * * * * * * * * * * * *

ENEDITOR’S NOTES

 


Henri Barbusse
(17 May 1873 – 30 Aug 1935; was a French novelist and a member of the French Communist Party. He was a lifelong friend of Albert Einstein.)
  – “Two armies that fight each other is like one large army that commits suicide.”

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EN_a318
. 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:
17 May 2018: 83 FR 22842-22846: Revisions to the Unverified List (UVL) 

  
*
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_a0319
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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