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18-0626 Tuesday “Daily Bugle”

18-0626 Tuesday “Daily Bugle”

Tuesday, 26 June 2018

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here for free subscription. Contact us for advertising inquiries and rates
.

[No items of interest noted today.]

  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. EU Amends Restrictive Measures Concerning Myanmar/Burma, Venezuela
  1. Inkstone: “How China Steals the ‘Crown Jewels’ of American Tech, According to the U.S.”
  2. Reuters: “EU, Canada Sanction Myanmar Generals Over Rohingya; Myanmar Says Two Are Fired”
  3. South China Morning Post: “U.S. Lawmakers Call on Commerce Department to Clarify How ZTE Ban Affects U.S. Companies Buying its Products”
  1. B. McGrath: “UK Government Introduces New National Security Merger Review Thresholds”
  1. ECS Presents “ITAR/EAR Boot Camp (Seminar Level I)” on 10-11 Jul in Long Beach, CA
  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 Jun 2018), FTR (24 Apr 2018), HTSUS (8 Jun 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1


[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

OGS_a11
. Items Scheduled for Publication in Future Federal Register Editions
 

(Source:
Federal Register)
[No items of interest noted today.]

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OGS_a22
Commerce/BIS: (No new postings.)
(Source: Commerce/BIS)

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OGS_3
3.
State/DDTC: (No new postings.)

(Source: 
State/DDTC)

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OGS_a44
.
EU Amends Restrictive Measures Concerning Myanmar/Burma, Venezuela

(Source: 
Official Journal of the European Union, 26 Jun 2018.)
 
Regulations
 

Council Implementing Regulation (EU) 2018/898 of 25 June 2018 implementing Regulation (EU) No 401/2013 concerning restrictive measures in respect of Myanmar/Burma

Council Implementing Regulation (EU) 2018/899 of 25 June 2018 implementing Regulation (EU) 2017/2063 concerning restrictive measures in view of the situation in Venezuela
 
Decisions 
 

Council Decision (CFSP) 2018/900 of 25 June 2018 amending Decision 2013/184/CFSP concerning restrictive measures against Myanmar/Burma 

Council Decision (CFSP) 2018/901 of 25 June 2018 amending Decision (CFSP) 2017/2074 concerning restrictive measures in view of the situation in Venezuela

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NWSNEWS

NWS_a015
Inkstone: “How China Steals the ‘Crown Jewels’ of American Tech, According to the U.S.”

(Source: 
Inkstone, 26 Jun 2018.) [Excerpts.] 
 
President Trump is expected this week to announce new restrictions on Chinese investment in U.S. industries deemed vital to national security.
 
Treasury Secretary Steven Mnuchin acknowledged that 
new measures, to be announced by June 30, will take aim at ”
countries that are trying to steal our technology,” an accusation that Trump had repeatedly leveled at China. (China has always denied such accusations.)
 
The White House recently released a 
35-page document, detailing its view that China is seeking to boost its own industry by capturing the “crown jewels” of American technology.
 
The allegation that China’s industrial policies and practices threaten the U.S. economy is a key reason why Trump began in March a 
trade offensive that has now turned into a clash with China, unnerving markets and businesses around the world.
Here are the five reasons why the U.S. is picking a fight with China, according to the White House … 

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(Source: 
Reuters, 25 Jun 2018.) [Excerpts.] 
 
The European Union and Canada imposed sanctions on seven senior military officials from Myanmar on Monday, including the general in charge of an operation accused of driving more than 700,000 Rohingya Muslims to flee to Bangladesh.
 
Within hours of the EU announcement, the Myanmar military announced that one of the sanctioned generals had been fired on Monday and another had left the army last month after being removed from his post.
 
The seven face asset freezes and are banned from traveling to the EU, after the bloc extended an arms embargo and prohibited any training of, or cooperation with, Myanmar’s armed forces.
 
The EU sanctions, first reported by Reuters in April, also mark a shift in diplomacy by the European bloc, which suspended its restrictive measures on Myanmar in 2012 to support its partial shift to democratic governance in recent years. … 
 

Canada sanctioned the same seven officers shortly after the EU announcement. Its sanctions impose asset freezes and bar Canadians and people in Canada from dealing with the listed officers “or providing financial or related services to them”. … 

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NWS_ax
7
South China Morning Post: “U.S. Lawmakers Call on Commerce Department to Clarify How ZTE Ban Affects U.S. Companies Buying its Products”

(Source: 
South China Morning Post, 26 Jun 2018.) [Excerpts.] 
 
A group of lawmakers behind a campaign to reinstate the US ban on ZTE Corp have called on the Commerce Department to clarify how the sanctions affect American companies using products made by the Chinese telecom giant.
 
In a letter sent to the Commerce Department on Monday, Republican Senators Marco Rubio and Tom Cotton, together with Democrat senator Chris Van Hollen, asked the department to provide guidance on whether the US companies using ZTE software, hardware or technology are violating the current ban on the Chinese telecoms company.
 
They also asked the department to provide guidance to US companies wanting to replace ZTE products and services with other suppliers.
 

The US banned ZTE from buying any American electronics parts after the company violated US trade laws by selling products to US-sanctioned Iran and North Korea, then covering it up and lying about it. …  
 

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COMMCOMMENTARY

(Source: 
FinancialDirector, 26 Jun 2018.) 
 
* Author: Becket McGrath, Esq., 
bmcgrath@cooley.com, Cooley LLP, London.
 
Financial directors should be aware that the UK government has introduced new rules to make it easier to intervene in 
mergers that potentially raise national security concerns due to the target’s ownership of sensitive technology. Under the new rules, acquisitions of companies that produce or own intellectual property relating to military and dual-use products or ‘advanced computer technology’ will be reviewable by the government.
 
This is for the purpose to assess their potential impact on national security if the target has UK revenues of at least £1 million or a ‘share of supply’ of more than 25%. This is a significant change from the previous regime, under which a transaction was reviewable only if the target had UK revenues of more than £70 million or if 
both parties supplied the same product and together had a UK share of supply of more than 25%.
 
Intended as a short-term measure, the amendments are due to be followed by more far-reaching reforms, possibly including the introduction of a mandatory filing regime for all transactions involving foreign investors that could impact national security.
 
Military and Dual Use Technology
 
The new rules apply to businesses that:
  – develop or produce ‘restricted goods’, meaning “goods, software or information” that are subject to export control; or
  – hold information that is “capable of use in connection with the development or production of restricted goods”.
 
Categories of restricted goods are set out in export control lists, many of which reflect the UK’s international export control obligations. The government has advised companies that are unsure whether their products are listed to use its online 
Goods Checker Tool. The government has also said that it will endeavor to provide “clear, informal (non-binding) advice” as quickly as possible.
 
Advanced Computer Technology
 
The expansion of the national security regime to ‘advanced computing technology’ is another important change. The government’s primary concern in this area appears to be the scope for hostile actors to acquire technology that can be used to engage in cyberwarfare against the UK.
 
This could include taking control over connected products, which may be widely dispersed in homes, businesses, public institutions or utilities, to cause harm to businesses, critical national infrastructure or other public services.  Reflecting this objective, the new regime is intended to catch a wide range of technology businesses, including those involved in the design of chips, Internet of Things products and connected home devices and the development of certain security products and services, including the design of firmware with cryptographic functionality.
 
The regime also covers companies that are involved in quantum computing, including businesses supplying quantum technology components or offering services (such as consultancy or data analysis) which use quantum-based technology.
It is not necessary that the target is actually involved in producing such products – ownership of relevant IP is sufficient.
 
Additional Thresholds
 
Even if a party to a transaction is within the scope of the new rules, it does not necessarily follow that the transaction will be reviewable. The expanded regime will continue to apply only to qualifying mergers, which arise where one business acquires control or material influence over another one. While the boundaries are blurred, a passive minority investment in a relevant business should therefore not be caught by the new regime.
 
Acquisitions of businesses that are purely involved in research and development activities which don’t generate any income yet, should not be caught. This should also be the case for companies acquiring IP rights in isolation, although the inclusion of additional assets or personnel would probably take a transaction across the line.
 
The very low level of the new UK turnover threshold for transactions involving relevant enterprises means that a large number of mergers may still be caught by the new regime. While only a small number of these transactions may raise actual national security concerns, the new regime introduces the potential for government scrutiny of such transactions that did not exist before and therefore introduces an element of political uncertainty for such transactions.
 
The Way Ahead
 
Potential buyers of UK-based technology companies will need to undertake an assessment to determine whether their targets are within the scope of the new regime. While it may be possible to exclude some companies based on a cursory check, others may require a detailed examination of the specific characteristics of the technology concerned alongside the lengthy definitions in the relevant legislation.
 
If a target is within the scope of the regime then an informal notification to government may be advisable, especially if the acquirer is established in a sensitive jurisdiction.  This process should enable parties to establish whether national security concerns arise and, where possible, provide comfort that there will be no ministerial intervention.
 
A notification to government for a national security assessment will remain distinct from any merger notification that the parties may choose to make to the CMA for a competition assessment and there will be no need to notify the CMA purely on the grounds that the parties have made a national security notification to government.
 

It will take some time for the regime to bed down and for companies and their advisers to assess the risk of intervention in individual cases and the analysis will be highly fact-specific.  It remains to be seen whether ministers will seek to expand the scope of ‘national security’ to protect British technology companies from foreign acquisition but officials are likely to resist any such move, given the likely adverse impact this would have on inward investment.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a39
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ECS Presents “ITAR/EAR Boot Camp (Seminar Level I)” on 10-11 Jul in Long Beach, CA

(Source: S. Palmer, 
spalmer@exportcompliancesolutions.com.)  
 
* What: ITAR/EAR Boot Camp (Seminar Level I), Long Beach, CA
* When: July 
10-11, 2018
* Where: 
Hilton Long Beach
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register: 
Here
 or by calling 866-238-4018 or e-mail

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ENEDITOR’S NOTES

EN_a110
. Bartlett’s Unfamiliar Quotations

(Source: Editor)


Lord Kelvin 
(William Thomson, 1st Baron Kelvin; 26 Jun 1824 – 17 Dec 1907; was a Scot-Irish mathematical physicist and engineer who was born in Belfast in 1824. At the University of Glasgow he did important work in the mathematical analysis of electricity and formulation of the laws of thermodynamics, and did much to unify the emerging discipline of physics. Absolute temperatures are stated in units of kelvin in his honor. Lord Kelvin is widely known for determining the value of absolute zero as −273.15 degrees Celsius or −459.67s degree Fahrenheit.
  – “In science there is only physics; all the rest is stamp collecting.”

  – “Heavier-than-air flying machines are impossible.”

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EN_a211. 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 Jun 2018: 83 FR 27380-27407: Air Cargo Advance Screening (ACAS)
 
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: 6 June 2018: 83 FR 26204-26205: Unverified List (UVL); Correction 

 

FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

  – Last Amendment:
 19 June 2018: 83 FR 28370-28375: Rough Diamonds Control Regulations

 

FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30  

  – Last Amendment: 24 Apr 2018:
83 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 April 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 
website
BITAR 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: 8 Jun 2018: Harmonized System Update 1809, containing 901 ABI records and 192 harmonized tariff records. 

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

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

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

  – The only available fully updated copy (latest edition: 25 Apr 2018) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR
(“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.
 The BITAR is available by annual subscription from the Full Circle Compliance 
website
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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EN_a312
. Weekly Highlights of the Daily Bugle Top Stories
(Source: Editor)
 

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

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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.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* CAVEAT: The contents 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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