18-0613 Wednesday “Daily Bugle”

18-0613 Wednesday “Daily Bugle”

Wednesday, 13 June 2018

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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[No items of interest noted today.] 

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Publishes 2 New Policy Memos
  4. Justice: “California Residents Plead Guilty to Scheme to Illegally Export Components for Production of Night Vision Rifle Scopes”
  5. State/DDTC Posts Comments on Review of USML Categories V, X, and XI
  6. Canada Amends Regulations Concerning the Determination of Country of Origin for the Purpose of Marking Goods
  7. EU Adopts Comprehensive Approach to “Scourge of Illicit Weapons”
  8. Singapore Customs Revises Application Procedures for Customs E-Services, Effective 20 Jun
  1. Global Trade News: “EU Set to Impose Rebalancing Duties on U.S. Products in July”
  2. The Guardian: “UK Accused of Failing to Pass on Fears over Saudi Arabia Arms Deal”
  3. NOS: “Dutch OM: Rotterdam-based Company Exported Acetone to Syria Without License”
  4. Reuters: “Latvian Banking Regulator Approves Liquidation of ABLV Bank”
  5. ST&R Trade Report: “15 June Deadline for Comments on Scope of Canadian Retaliatory Duties”
  1. A. Trevor Thrall & C. Dorminey: A New Framework for Assessing the Risks from U.S. Arms Sales”
  2. The Export Compliance Journal: “U.S. Export Sanctions Impact Iran’s World Cup Team as Nike Cuts Ties with Country”
  1. Bob Duerr Moves from NGC to TechCEL  
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (12 Jun 2018), DOD/NISPOM (18 May 2016), EAR (6 Jun 2018), FACR/OFAC (19 Mar 2018), FTR (24 Apr 2018), HTSUS (8 Jun 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 



[No items of interest noted today.]

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OGS_a11. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:Report of Multiple Sale or Other Disposition of Pistols and Revolvers [Publication Date: 14 Jun 2018.]
* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Two items; Publication Date: 14 Jun 2018.]

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Commerce/BIS: (No new postings.)


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DoD/DSCA Publishes 2 New Policy Memos  
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Justice, 12 Jun 2018.) [Excerpts.] 
Naum Morgovsky, 69, and Irina Morgovsky, 66, both of Hillsborough, California, pleaded guilty today for their respective roles in a scheme to export components for the production of night vision and thermal devices in violation of the Arms Export Control Act. Naum Morgovsky also pleaded guilty to laundering the proceeds of from the scheme. …  
According to their guilty pleas, Naum Morgovsky and Irina Morgovsky admitted that from April 2012 until Aug. 25, 2016, they conspired to export without the necessary license to a company in Moscow, Russia, numerous scope components, including image intensifier tubes and lenses.  They further admitted a coconspirator in Russia communicated to them lists of components necessary for the Russian business to manufacture certain night vision devises.  The couple used their U.S. business, Hitek International, to purchase these components and misrepresented to the sellers that the products would not be exported.  The couple then shipped the products to Russia and other countries in Europe where an associate arranged for them to be hand-carried into Russia.  … 
In addition to exporting the components, Naum Morgovsky admitted he took steps to conceal his crimes so that the couple could continue to run the illegal export business undetected.  Specifically, he admitted he laundered the proceeds of the export crimes and used the name of a deceased person to conceal the fact that he was the source and owner of a U.S.-based account. …
On Nov. 10, 2017, Judge Chhabria severed the case to allow the illegal export charges to be handled separately from the allegations regarding the bank fraud scheme alleged in the April 27, 2017, indictment.  … 
On July 25, 2017, Migdal pleaded guilty to his part in the conspiracy and to two counts of making false statements on loan and credit applications. On April 24, 2018, Judge Chhabria sentenced Migdal to 18 months in prison and ordered him to pay a $1,000,000 fine, to pay $460.215 in restitution, and to serve 3 years of supervised release.
The … sentencing of the defendants will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
A sentencing hearing for today’s guilty pleas is scheduled for Sept. 18.  No date has been scheduled yet to resolve the remaining charges against Naum Morgovsky. … 

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State/DDTC Posts Comments on Review of USML Categories V, X, and XI

State/DDTC, 13 Jun 2018.)
The Directorate of Defense Trade Controls (“DDTC”) has posted a document with comments on the review of the U.S. Munitions List (“USML”) Categories V, X, and XI. 
The document can be downloaded by clicking 

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Canada Amends Regulations Concerning the Determination of Country of Origin for the Purpose of Marking Goods 

Canada Gazette, 13 Jun 2018.)
has published “
Regulations Amending the Determination of Country of Origin for the Purpose of Marking Goods (Non-NAFTA Countries) Regulations and the Determination of Country of Origin for the Purposes of Marking Goods (NAFTA Countries) Regulations.

The regulations are available HERE.

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EU Adopts Comprehensive Approach to “Scourge of Illicit Weapons”

European Union External Action, 13 Jun 2018.) [Excerpts.]  
… The proposal, or “Joint Communication”, tabled today sets out 
clear objectives and concrete measures to tackle the problem. It recognizes the many actors, issues and cross-border dimensions that play a role in the context of illicit arms trade and therefore recommends a full set of action points to tackle the issue from all sides in a comprehensive way. 
A multitude of different stakeholders need to be considered and involved such as police, customs, border guards, armed forces, export control bodies, manufacturers or judicial authorities. Addressing the trade of illicit arms effectively means that all of these need to exchange information and cooperate closely. Also, the issues do not just concern individual countries but all relevant countries as a group. Trade in illicit arms is indeed often transnational in nature with national, regional and global dimensions. It needs to be tackled at all of these levels. In addition, it is crucial that measures address all phases in the life cycle of firearms: manufacture, trade, export, stockpiling and disposal.
Against this background, the Joint Communication constitutes an important step forward. It proposes a set of objectives and actions for an EU Strategy against illicit firearms, small arms, light weapons and their ammunition. Once adopted by the EU Member States, the new strategy will replace an earlier but in many aspects by now outdated EU Strategy of 2005. The EU Strategy will be closely connected with the United Nations Program of Action against the illicit trade in small arms and light weapons that will be discussed in New York in the last two weeks of June 2018.
The initiative to counter illicit arms is one element in the EU’s toolbox to tackle today’s complex security challenges. High Representative Mogherini presented in 2016 an overarching EU Global Strategy for Foreign and Security Policy that foresees an integrated and joined-up approach across internal and external policy dimensions, between Member States and EU Institutions as well as with regional and international institutions. Since then, a multitude of different initiatives in the areas of security and defense have been launched, including enhanced cooperation with NATO and the beefing-up of EU autonomous security and defense capabilities. 

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Singapore Customs Revises Application Procedures for Customs E-Services, Effective 20 Jun 

Singapore Customs, Notice No. 12/2018, 12 Jun 2018.) 
Singapore Customs has announced revised application procedures for Customs E-Services, which will go into effect on 20 June 2018. To read the related notice (No. 12/2018), click 

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Global Trade News: “EU Set to Impose Rebalancing Duties on U.S. Products in July” 

Integration Point Blog, 12 Jun 2018.) 
The EU will likely implement additional tariffs on certain imports from the United States in July in response to tariffs imposed on steel and aluminum from the bloc, Canada, and Mexico. The announcement came on Wednesday.
EU member states widely supported the European Commission’s plan to impose tariffs on 2,800 million euros of U.S. exports in response to what it sees as an illegal action by Washington.
  “The new duties start applying in July,” European Commission Vice President Maros Sefcovic told reporters. “It is a measured and proportionate response to the unilateral and illegal decision taken by the United States.”
On Wednesday, the EU taxed American products such as tobacco, bourbon, jeans, and motorcycles in response to the tariffs imposed by Washington on steel and aluminum.
Although the list of products that will have tariffs by the EU was announced on May 18, it will become effective as of June 20. There are 327 EU TARIC numbers that will have the additional 25% duty across 17 chapters.
  “The EU’s reaction is fully in line with international trade law. We regret that the United States left us with no other option than to safeguard EU interests,” Trade Commissioner Cecilia Malmstrom said in a statement.
You can read more about EU’s retaliatory tariffs on the 
European Commission and 

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The Guardian: “UK Accused of Failing to Pass on Fears over Saudi Arabia Arms Deal”

The Guardian, 10 Jun 2018.) [Excerpts.]
Government ‘turning blind eye’ to arms exports that are diverted to terrorists or criminals. 
An arms sales watchdog has accused the UK government of a serious failure to disclose intelligence that could save the lives of thousands of people involved in ongoing global conflicts. 
The Balkan Investigative Reporting Network (Birn) highlighted the dangers of the “diversion” of arms and ammunition legally supplied to Saudi Arabia but then passed on to third-party “proxy fighters” including terror groups, and said the practice was fuelling conflicts. … 
The Labour MP Lloyd Russell-Moyle told the Observer: “At best the UK government is turning a blind eye to arms exports to Islamist groups in Syria; at worst it is complicit in these transfers. Despite the government’s boiler-plate comments that it is robust, something is very badly wrong with Britain’s arms control regime.” … 

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NOS: “Dutch OM: Rotterdam-based Company Exported Acetone to Syria Without License”

NOS, 12 Jun 2018.) [Excerpts; translation by editor.] 
The Dutch Public Prosecution (“Openbaar Ministerie,” or “OM”) suspects a Rotterdam-based wholesale company of illegally exporting acetone to Syria. Acetone can be used as a raw material for chemical weapons. Whether the export indeed took place has not yet been determined.
  “The Dutch customs investigated the company in Rotterdam on 18 April,” confirms the Public Prosecution Service. The company may have sold 38,400 liters of acetone without authorization in November 2016 and exported those to a person in Syria, via the port of Antwerp. After a tip from Belgian Customs, a second suspicion was added: the delivery of 200,000 liters of acetone via a detour, namely via Russia, to Syria.
A criminal investigation is also ongoing in Belgium into three Belgian companies that may have been involved in similar deliveries. The companies explain in the Belgian weekly magazine, 
Knack,that they have been supplying raw materials for printing ink, cosmetics and window sprays for over ten years. The Belgian magazine came with the scoop of the suspected illegal conduct of the Dutch company.
No License
Since July 2003, companies within the EU are required to apply for a license for the export of chemicals to Syria. The restrictions are implemented in order to avoid the “brutal violation of human rights by the regime in Syria,” the European Council stated.
The company from Rotterdam, of which the Public Prosecutor does not want to mention the name, has not applied for a license and will be summoned. … 

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Reuters: “Latvian Banking Regulator Approves Liquidation of ABLV Bank”

Reuters, 12 Jun 2018.)  
Latvia’s banking regulator on Tuesday approved the self-liquidation of ABLV Bank, the country’s third-largest financial institution.
The U.S. Treasury Department’s Financial Crimes Enforcement Network has accused ABLV of institutionalizing money laundering, violating sanctions imposed on North Korea and using bribery to influence Latvian officials.
In February, ABLV – which has been focusing on serving non-resident clients – was ruled failing or likely to fail by the European Central Bank.
  “The FCMC’s Board has approved the bank’s application (plan) for self-liquidation and tomorrow the process begins,” Peters Putnins, head of the Financial and Capital Market Commission, told a press conference.
The regulator said that compared to other forms of liquidation, a self-imposed liquidation allowed it better control over the entire process and was a more appropriate way to ensure that the bank’s assets were preserved.
  “Of course, we will control everything that is connected with the AML (Anti-Money Laundering) side and the bank itself will have to think about it internally very hard,” said Putnins.
The privately held bank denies any wrongdoing and it turned to the European Court of Justice, asking it to review decisions of the ECB and the Single Resolution Board at the start of May.
The U.S. sanction proposal against ABLV and investigation by the police into possible bribery of the governor of the country’s central bank Ilmars Rimsevics, who denies any wrongdoing, are Latvia’s worst financial troubles in a decade.
The Latvian government has adopted an action plan for cleaning up the non-resident banking sector and has already banned financial institutions from cooperating with shell companies that fulfil certain criteria. 

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ST&R Trade Report: “15 June Deadline for Comments on Scope of Canadian Retaliatory Duties” 

Sandler, Travis & Rosenberg Trade Report, 13 Jun 2018.) 
Canada is accepting comments through June 15 on the U.S. products on which additional tariffs should be imposed in retaliation for higher U.S. import duties on steel and aluminum products. Other major U.S. trading partners are preparing to take similar measures.
On June 1 the U.S. rescinded the exemptions from the steel and aluminum tariffs it had temporarily provided to the European Union, Canada, and Mexico. Canada plans to impose an additional duty of 10 percent or 25 percent on U.S. products effective from July 1 but is still considering which products will be affected.
The EU anticipates that its additional 25 percent duties will be applied beginning in July and until the U.S. lifts its tariffs against EU steel and aluminum products. U.S. goods affected will include textile, apparel, and footwear items, orange juice, bourbon whiskey, tobacco products, cosmetic products, steel and aluminum products, playing cards, sailboats, and motorcycles. The EU has also set forth a second group of products on which duties could be increased by up to 50 percent in March 2021 if the U.S. has not rescinded its steel and aluminum tariffs by then.
Mexico’s Ministry of Economy said its countermeasures will apply to U.S. products such as flat steel (hot and cold foil, including coated and various tubes), lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, and various cheeses.

India and Turkey have also prepared retaliation lists while Japan, Korea, and Russia have notified their intention to retaliate but have yet to release more details on the product coverage. … 

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A. Trevor Thrall & C. Dorminey: A New Framework for Assessing the Risks from U.S. Arms Sales” 

War on the Rocks, 13 Jun 2018.) [Excerpts.] 
* Authors: A. Trevor Thrall, associate professor, George Mason University’s Schar School of Policy and Government, and senior fellow at the Cato Institute’s Defense and Foreign Policy Department; and Caroline Dorminey, policy analyst, Cato Institute’s Defense and Foreign Policy Department.
In the past two years, Congress has 
tried (and failed) twice to halt American arms sales to Saudi Arabia in response to that country’s intervention in Yemen’s civil war. This level of concern is historically unusual. Arms sales rarely spur much debate in Washington, where they are viewed as a critical tool of American foreign policy. The traditional refrain holds that arms sales promise leverage over recipient countries, help the United States support allies and manage regional balances of power, and generate economic benefits to boot. With 
exceptions, few have challenged the wisdom of American arms sales practices.

In a recent study for the Cato Institute, however, we argue that the government’s approach to arms sales is misguided. The United States accepts as given the potential benefits of selling weapons while underestimating or simply ignoring the potential risks. The result has been too many arms sales to too many countries where the risks are likely to outweigh the benefits. … 

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The Export Compliance Journal: “U.S. Export Sanctions Impact Iran’s World Cup Team as Nike Cuts Ties with Country”

The Export Compliance Journal, 13 Jun 2018.) 
Who would have thought U.S. export sanctions would have a ripple effect in the world of sports? But President Donald Trump’s decision to renew Iranian export sanctions and pull out of the Iran nuclear deal in May has done just that-and now it’s affecting more than just trade between the two countries.
Nike has voluntarily decided to cut all ties with the country ahead of 2018’s World Cup, citing export compliance and current export sanctions as the main reasons. The company, which supplies over 60 percent of the soccer cleats for the World Cup, made it clear that it would no longer be supplying them to Iran due to the recent revival of export sanctions against the country by Trump.
  “The sanctions mean that, as a U.S. company, we cannot provide shoes to players in the Iran national team at this time,” Nike said in a statement on Friday. [FN/1]
Penalties for Export Compliance Violations

The U.S. Department of the Treasury’s 
Office of Foreign Assets Control
imposes harsh penalties against companies and individuals who openly violate current sanctions, fining violators with up to $1 million and 20 years in prison.
While American financial institutions can face “civil penalties of up to the greater of $250,000 or twice the transaction value.” [FN/2]
Iran’s Response

Although Nike is simply maintaining export compliance given the export sanctions, Carlos Queiroz, head coach of the Iranian national team is furious and called the decision unfair.

Queiroz said in a statement to reporters on Wednesday. 
Queiroz has called on FIFA to address the issue and make a ruling.
  “I haven’t gotten clarity on what legal basis [Nike] is using to say this. They should reference what part of the sanctions they are talking about, since technically they’re not selling anything,” said Trita Parsi, current president of the National Iranian American Council. [FN/3] 
Special Licenses for Export Sanctions

As it stands, Iran will likely have to change their equipment. According to Richard Nephew, a former director for Iran at the National Security Council and an export sanctions expert, special licenses can be granted for humanitarian goods, but in his words, “shoes usually don’t count.” [FN/4]
No major rulings regarding Nike’s decision have been made by any of the major regulatory bodies as of yet, but one wonders what opportunities Nike might loose should Iran pull off a miracle and win the 2018 World Cup! Surely Iran would have the last laugh. … 
  [FN/1] Nike cuts ties with Iran’s World Cup team, citing U.S. sanctions. News Article. NBC News, available 
here. Accessed June 10, 2018.
  [FN/2] Ibid.
  [FN/3] Ibid.
  [FN/4] Ibid.

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William Butler Yeats 
(13 Jun 1865 – 28 Jan 1939; was an Irish poet and one of the foremost figures of 20th-century literature. He was awarded the 1923 Nobel Prize in Literature.)
  – “Do not wait to strike till the iron is hot; but make it hot by striking.”
  – “
The innocent and the beautiful have no enemy but time.”

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. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
: 19 CFR, Ch. 1, Pts. 0-199
Last Amendment: 12 Jun 2018: 
83 FR 27380-27407
: Air Cargo Advance Screening (ACAS); Final Rule

  – Last Amendment: 18 May 2016: Change 2
: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary 

: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last Amendment: 6 June 2018: 83 FR 26204-26205: Unverified List (UVL); Correction

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

  – Last Amendment: 19 Mar 2018:
83 FR 11876-11881: Inflation Adjustment of Civil Monetary Penalties 

: 15 CFR Part 30
  – Last Amendment: 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
  – 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.  
, 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:
8 Jun 2018: Harmonized System Update 1809, containing 901 ABI records and 192 harmonized tariff records. 

  – HTS codes for AES are available 
  – HTS codes that are not valid for AES are available 

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

  – The only available fully updated copy (latest edition: 25 Apr 2018) of the ITAR with all amendments is contained in Bartlett’s Annotated 

, by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.
 The BITAR is available by annual subscription from the Full Circle Compliance
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code. 

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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

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

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

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