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18-0628 Thursday “Daily Bugle”

18-0628 Thursday “Daily Bugle”

Thursday, 28 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
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  1. Justice/ATF Seeks Comments on Form ATF F 5400.13/5400.16, Application for Explosives License or Permit 
  2. Treasury/OFAC Amends Iranian Transactions and Sanctions Regulations 
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Deploys Quota Updates to CERT to Accommodate Hourly Absolute Quota Allocation
  4. DHS/CBP Updates ACE DIS Implementation Guide
  5. DHS/CBP Updates Drawback Trade Issue Tracker Document
  6. State/DDTC: (No new postings.)
  7. Treasury/OFAC Posts Global Magnitsky Sanctions Regulations
  8. Treasury/OFAC Removes Sudan Regulations and Amends Terrorism List Government Sanctions Regulations
  1. Reuters: “U.S. Charges Chinese University Tied to Army with Export Scheme”
  2. ST&R Trade Report: “Trump Eases Threat of Foreign Investment Restrictions as Congress Advances Reform Bill”
  3. WorldECR News Alert, 28 June 2018
  1. The Export Compliance Journal: “Trade Compliance 101: An Introduction to Restricted Party Screening, Part 2”
  2. M. Volkov: “Is Your Compliance Program Adrift?”
  3. R.C. Burns: “US to China: No Robots for You!”
  1. ECS Presents “ITAR/EAR Boot Camp (Seminar Level I)” on 10-11 Jul in Long Beach, CA
  2. ECTI Presents “Export Compliance Essentials for Shipping” Webinar – 19 Aug
  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 (27 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

1. Justice/ATF Seeks Comments on Form ATF F 5400.13/5400.16, Application for Explosives License or Permit
(Source: Federal Register, 28 June 2018.) [Excerpts.]
 
83 FR 30457-30458: Agency Information Collection Activities; Proposed eCollection eComments Requested; Extension Without Change of a Currently Approved Collection: Application for Explosives License or Permit–ATF F 5400.13/5400.16
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 60-day notice. …
* DATES: Comments are encouraged and will be accepted for 60 days until August 27, 2018.
* FOR FURTHER INFORMATION CONTACT: If you have additional comments, particularly with respect to the estimated public burden or associated response time, have suggestions, need a copy of the proposed information collection instrument with instructions, or desire any additional information, please contact Shawn Stevens, Federal Explosives Licensing Center, either by mail at 244 Needy Road, Martinsburg, WV 25405, by email at Shawn.Stevens@atf.gov, or by telephone at 304-616-4400.
* SUPPLEMENTARY INFORMATION: …
  – The Title of the Form/Collection: Application for Explosives License or Permit. …
  – Form number (if applicable): ATF F 5400.13/5400.16.
  – Component: Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Department of Justice. …
  – Abstract: Chapter 40, Title 18, U.S.C., provides that any person engaged in the business of explosive materials as a dealer, manufacturer, or importer shall be licensed (18 U.S.C. 842 (a) (1)). In addition, provisions are made for the issuance of permits for those who wish to use explosive materials that are shipped in interstate or foreign commerce. …
   If additional information is required contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE, 3E.405A, Washington, DC 20530.
 
   Dated: June 25, 2018.
Melody Braswell, Department Clearance Officer for PRA, U.S. Department of Justice.

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EXIM_a2

2. Treasury/OFAC Amends Iranian Transactions and Sanctions Regulations
(Source: Federal Register, 28 June 2018.) [Excerpts.]
 
Iranian Transactions and Sanctions Regulations
* AGENCY: Office of Foreign Assets Control, Treasury.
* ACTION: Final rule.
* SUMMARY: The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is amending the Iranian Transactions and Sanctions Regulations (ITSR) to implement the President’s May 8, 2018 decision to end the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) on Iran’s nuclear program, as outlined in National Security Presidential Memorandum-11 of May 8, 2018 (NSPM-11). Specifically, OFAC is amending the ITSR to: Amend the general licenses authorizing the importation into the United States of, and dealings in, Iranian-origin carpets and foodstuffs, as well as related letters of credit and brokering services, to narrow the scope of such general licenses to the wind down of such activities through August 6, 2018; add a new general license to authorize the wind down, through August 6, 2018, of transactions related to the negotiation of contingent contracts for activities eligible for authorization under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services, which was rescinded following the issuance of NSPM-11; and add a new general license to authorize the wind down, through November 4, 2018, of certain transactions relating to foreign entities owned or controlled by a United States person.
* DATES: Effective Date: June 27, 2018.
* FOR FURTHER INFORMATION CONTACT: OFAC: Assistant Director for Licensing, tel.: 202-622-2480; Assistant Director for Regulatory Affairs, tel.: 202-622-4855; Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490; or the Department of the Treasury’s Office of the Chief Counsel (Foreign Assets Control), Office of the General Counsel, tel.: 202-622-2410.
* SUPPLEMENTARY INFORMATION: …
   Today, OFAC is amending the ITSR to implement the wind-down authorizations for the above-referenced activities involving Iran that were previously authorized by OFAC pursuant to the ITSR in connection with the U.S. sanctions relief provided for under the JCPOA.
   First, OFAC is amending Sec. 560.534 to narrow the scope of that general license to authorize, through 11:59 p.m. eastern daylight time on August 6, 2018, only the wind down of transactions related to the importation into the United States of, and dealings in, certain Iranian-origin foodstuffs and carpets. U.S. persons will be authorized to engage in all transactions and activities that are ordinarily incident and necessary to the wind down of transactions that were previously authorized under Sec. 560.534. After 11:59 p.m. eastern daylight time on August 6, 2018, no further transactions are authorized under amended Sec. 560.534.
   OFAC is also amending Sec. 560.535 to narrow the scope of that general license to authorize, through 11:59 p.m. eastern daylight time on August 6, 2018, only the wind down of transactions related to letters of credit and brokering services relating to certain Iranian-origin foodstuffs and carpets. U.S. persons will be authorized to engage in all transactions and activities that are ordinarily incident and necessary to the wind down of transactions that were previously authorized under Sec. 560.535. After 11:59 p.m. eastern daylight time on August 6, 2018, no further transactions are authorized under amended Sec. 560.535.
   In addition, OFAC is adding Sec. 560.536 to authorize, through 11:59 p.m. eastern daylight time on August 6, 2018, all transactions and activities that are ordinarily incident and necessary to the wind down of transactions related to the negotiation of contingent contracts for activities that were, at the time of the negotiation, eligible for authorization under the JCPOA SLP. This wind-down authorization enables U.S. persons to wind down, through August 6, 2018, activities that were previously authorized pursuant to General License I. In conjunction with this action, OFAC has revoked General License I and has posted an archived version of General License I on its website (www.treasury.gov/ofac) for reference purposes. After 11:59 p.m. eastern daylight time on August 6, 2018, no further transactions are authorized under Sec. 560.536.
   Finally, OFAC is adding Sec. 560.537 to authorize, through 11:59 p.m. eastern standard time on November 4, 2018, all transactions and activities that are ordinarily incident and necessary to the wind down of transactions relating to foreign entities owned or controlled by a United States person that were previously authorized under General License H. In conjunction with this action, OFAC has revoked General License H and has posted an archived version of General License H on its website (www.treasury.gov/ofac) for reference purposes. After 11:59 p.m. eastern standard time on November 4, 2018, no further transactions are authorized under Sec. 560.537. …
 
   Dated: June 25, 2018.
Andrea Gacki, Acting Director, Office of Foreign Assets Control.

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OGSOTHER GOVERNMENT SOURCES

OGS_a13
. Items Scheduled for Publication in Future Federal Register Editions
 

(Source:
Federal Register)
 
* Defense; Defense Acquisition Regulations System; RULES; Defense Federal Acquisition Regulation Supplement: Offset Costs [Publication Date: 29 June 2018.]
 
* Treasury; Foreign Assets Control Office; RULES [Publication Date: 29 June 2018.]:
  – Global Magnitsky Sanctions Regulations
  – Removal of Sudanese Sanctions Regulations and Amendment of Terrorism List Government Sanctions Regulations

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OGS_a24
Commerce/BIS: (No new postings.)
(Source: Commerce/BIS)

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OGS_3
5. DHS/CBP Deploys Quota Updates to CERT to Accommodate Hourly Absolute Quota Allocation
(Source: CSMS #18-000407, 28 June 2018.)
 
A change to accommodate hourly absolute quota allocation was deployed into the CERTIFICATION environment on 6/28/2018 at 0600 EST and is available for testing.
 
A PRODUCTION deployment date for this functionality has not yet been determined. A follow-up CSMS will be sent out with that information once finalized.
 
The allocation of absolute quota commodities will run hourly and the presentation date/time will be determined based on Eastern Standard Time.
 
If you have any additional questions or encounter any issues when testing please contact your CBP Client Representative.
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OGS_a46. DHS/CBP Updates ACE DIS Implementation Guide

(Source: CSMS# 18-000406, 27 Jun 2018.)
 
The ACE DIS Implementation Guide has been updated. Some DIS documents are changing from ‘COMMON’ to ‘CBP.’ This change will be implemented in Production beginning September 15, 2018 and in Certification on August 4, 2018.
 
Also, a future DIS XML schema has been posted in the same location as the existing DIS XML schema. This XSD contains support for submission of vessel documents via XML. This is done to enable development by trade to meet the production deployment date of September 15, 2018.

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OGS_a57
. DHS/CBP Updates Drawback Trade Issue Tracker Document

(Source: CSMS #18-000408, 28 June 2018.)
 
The updated Drawback Trade Issue Tracker document can be found here.

As a reminder, questions relating to policy changes for Drawback should be emailed to the OT Drawback inbox at OTDRAWBACK@cbp.dhs.gov.

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OGS_a68
. State/DDTC: (No new postings.)

(Source: State/DDTC)

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OGS_a79. Treasury/OFAC Posts Global Magnitsky Sanctions Regulations

(Source: Treasury/OFAC, 28 June 2018.)
 
Today, the Office of Foreign Assets Control (OFAC) is announcing the issuance of the Global Magnitsky Sanctions Regulations,
31 CFR part 583.  These regulations implement the Global Magnitsky Human Rights Accountability Act and Executive Order 13818 of December 20, 2017 (“Blocking the Property of Persons Involved in Serious Human Rights Abuse or Corruption”).  The regulations will take effect upon publication in the Federal Register on Friday, June 29, 2018.

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OGS_a810
. Treasury/OFAC Removes Sudan Regulations and Amends Terrorism List Government Sanctions Regulations

(Source: Treasury/OFAC, 28 June 2018.)
 
The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is removing from the Code of Federal Regulations the Sudanese Sanctions Regulations as a result of the revocation of certain provisions of one Executive Order and the entirety of another Executive Order on which the regulations were based.  OFAC is also amending the Terrorism List Government Sanctions Regulations to incorporate a general license authorizing certain transactions related to exports of agricultural commodities, medicines, and medical devices, which has, until now, appeared only on OFAC’s website.

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NWSNEWS

(Source:
Reuters, 26 June 2018.) [Excerpts.]
 
U.S. prosecutors on Tuesday charged a Chinese university linked to China’s army with conspiring to violate U.S. export laws in order to obtain items from the United States that could be used in anti-submarine warfare.
 
An indictment filed in federal court in Boston charged China-based Northwestern Polytechnical University (NWPU), along with Shuren Qin, a Chinese national living in Wellesley, Massachusetts, who was arrested last week.
 

[Editor’s Note: The Shuren Qin case was already discussed in item #6 of 22 June 2018, Daily Bugle, sourced from the
Justice Department website.]

 
The indictment also charged LinkOcean Technologies, a Chinese company headed by Qin, whose clients, according to prosecutors, include Chinese research institutes and the naval warfare branch of the People’s Liberation Army.
 
Lawyers for Qin did not respond to a request for comment. Neither the university nor LinkOcean responded to emails seeking comment. …
 
Qin, 41, was charged with conspiring to commit export violations and visa fraud. He is scheduled to be arraigned on Wednesday, according to court records.
 
The indictment said that from 2015 to 2016, Qin exported 78 hydrophones, devices which can be used to monitor sound underwater, to NWPU, which the indictment described as a Chinese military research institute.
 
Prosecutors have said that because of national security risks, the U.S. Commerce Department requires an export license to be obtained to ship U.S. goods to NWPU, which works with the People’s Liberation Army to advance its military capabilities.

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(Source:
Sandler, Travis & Rosenberg Trade Report, 28 June 2018.)
 
The House of Representatives approved June 26 by a 400-2 vote the Foreign Investment Risk Review Modernization Act (H.R. 5841), which would expand the reviews conducted by the Committee on Foreign Investment in the U.S. President Trump has indicated that if this bill becomes law he may suspend his efforts to impose new investment restrictions and enhanced export controls on China.
 
A press release from the House Financial Services Committee states that CFIUS needs to be modernized to keep pace with the growing number and complexity of foreign investment deals. “CFIUS is authorized to review foreign investment transactions that may threaten our national security, and although these authorities have been wielded carefully, Congress must remain vigilant when delegating additional powers that may have far-reaching effects,” said Committee Chairman Jeb Hensarling, R-Texas.
 
An earlier press release from bill sponsor Rep. Robert Pittenger, R-N.C., said FIRMMA would (a) expand CFIUS jurisdiction, (b) update the CFIUS definition of “critical technologies” to include emerging technologies that could be essential for maintaining the U.S. technological advantage over countries that pose threats, (c) add new national security factors to the review process, and (d) strengthen the government’s ability to protect critical infrastructure from foreign government disruption. At the same time, the press release stated, the bill makes clear that the U.S. must “maintain its enthusiastic support for foreign investment, which is crucial for U.S. jobs, innovation, and productivity.”
 
President Trump has previously announced plans for investment restrictions and enhanced export controls on China in response to a Section 301 investigation concluding that Beijing is coercing U.S. companies into transferring their technology and intellectual property to Chinese enterprises. However, in a June 27 statement Trump indicated that he could put those actions on hold in favor of FIRMMA, which would apply to investments from all countries. Having concluded that this bill “will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said he plans to direct his administration “to implement it promptly and enforce it rigorously, with a view toward addressing the concerns regarding state-directed investment in critical technologies identified in the Section 301 investigation.” On the other hand, if the bill does not pass Congress or is watered down, Trump said he would work to “deploy new tools” to protect U.S. technology and intellectual property.
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(Source:
WorldECR, 28 June 2018.)
 
  (1) EU sanctions senior officials in Myanmar and Venezuela over human rights violations
  (2) US arrests Chinese national for suspected violation of ‘anti-submarine’ items export rules
  (3) Norway increases defence exports despite suspending licences for UAE
  (4) Iran to ban imports of 1,400 items
  (5) UK reinstates control list classification advisory service
 

[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_a114. The Export Compliance Journal: “Trade Compliance 101: An Introduction to Restricted Party Screening, Part 2″

(Source: The Export Compliance Journal, 26 Jun 2018.)
 
In part 1 of Trade Compliance 101: An Introduction to Restricted Party Screening, we discussed some of the basics of export and trade compliance, and the terms and ideas that new trade compliance professionals-and those responsible for restricted party screening-might encounter.
 
For part 2, we discuss some of the real-world scenarios that, while unlikely, drive home the importance of screening for denied and sanctioned parties-and doing further due diligence above and beyond just screening.
 
Restricted Party Screening watch lists-more than just terrorists and money launderers

   

Entering into the process of Restricted Party Screening for the first time, one might think that government watch lists are full of criminals, tyrannical dictators, and terrorists. They include those, yes, but also individuals, organizations and companies less dramatic in nature.
 
Individuals and companies can find themselves on restricted, denied or sanctioned party lists because they have previously committed violations, usually with knowledge of the criminality of their actions. Perhaps they smuggled controlled goods, or intentionally ignored restricted or denied stakeholders involved in the transaction. Or perhaps they ended up on an industry-specific list-a sanctioned medical professionals list, for example-that are not necessarily relevant to trade restrictions in the general sense.
 
Often, there’s a misconception that restricted parties will always mask their names or identities in order to receive shipments or business-making some organizations question why bother screening (and rescreening) in the first place. Many of these parties do try to hide their identity, but often they simply use their real names. Plus, criminal elements aren’t always as clever as they think they are, and watch lists tend to include aliases whenever known. By screening, you’re erring on the side of caution-and your audit trail will tell the authorities as much if they ever come knocking.
 
Yes, terrorists really do use their real names

   

You may think that someone using the name of Al-Qaeda, for example, would surely be a prank-some kid entering an order into an eCommerce system for fun. But a story from a major software provider tells otherwise.
 
Of the tens of thousands of online requests they receive for the personal version of their software, it’s not uncommon to see orders come in from actual names of actual terrorist organizations. Potential prank pulling aside, when they conducted further research into the IP addresses associated with the orders, they quite often discovered that the location indicated a high likelihood of it being the actual party, or an associated party, in question. These were often immediately followed by requests from repeated false names after the initial transaction was denied. These were also denied, due to IP and country restrictions put in place by the U.S. and other governments for the download process. Through the robust compliance checks in place, the company averted what could have been a potential export violation in the making.
 
Fake names for universities

   

Another example comes from the realm of higher education. In this case, an attempt was made by an “apparent” educational institution from another country to send a delegation to tour a US research facility. In this particular case, the attempt was foiled because, despite having created a false organization from which the visitors purported to represent, several of the individuals were on restricted party lists when screened.
 
In addition, the research facility’s screening included an address check, which revealed that the “educational institute’s” address didn’t exist. This caused additional yellow flags to be raised, and the request-and potential deemed export violation-was ultimately denied.
 
When denied party screening prevents legitimate business

   

When it comes to restricted party screening, due diligence usually fails because a debarred person is missed for one reason or another (this is where automating the screening process can come in very handy!). But sometimes, restricted party screening can inadvertently put the brakes on a legitimate business transaction. This often occurs when the name is quite common, or if no additional criteria (e.g., business name, address, etc.) is entered during a search.
 
This happened recently when Company A applied to become a supplier for Company B. When Company B did their due diligence and screened a potential vendor (yes, vendors should be screened), Company A’s owner name appeared on a list. As such Company B denied Company A’s application. However, further research ultimately determined that Company A’s owner was not the individual on the watch list. As such, it would have been perfectly legal for Company B to have engaged Company A, if they’d only done additional due diligence.
 
In other words, just because an individual or entity returns a result, they may not be the same party as the one on a watch list. It’s worth the time and effort to research and vet the results to double-check the two are, in fact, one in the same. Perhaps the date of birth doesn’t match, or the location.
Also consider which list the name appears on. Sometimes it’s only unlawful to do business with someone under industry-specific circumstances. The General Services Administration (GSA) list, or state-wide Medicare/Medicaid debarments lists are good examples.
 
That said, even if your research determines the name on the watch list and the person you screened are not the same, depending on your organization’s risk profile, you may choose not to proceed with the transaction. Many organizations get a match and decide regardless of the circumstances, it’s just not worth it.
 
In the face of hundreds of government watch lists, most people are law-abiding

   

Despite the scenarios above, the people you’re most likely to come across during the course of your day-to-day operations are not on any watch lists. This is industry-dependent, of course, and will also depend on the goods and services you provide, and where your products are destined (i.e., a sanctioned or embargoed country), but it’s worth understanding that not all scenarios are cut and dry.
When it comes to restricted and denied party screening, if you see a yellow flag, investigate, do your due diligence, and maintain your audit record-you never know when you may need it.
 
A glossary of themes/topics in this Trade Compliance 101 article:
 
Due Diligence: 
The process of reviewing, or vetting, potential restricted party screening matches. This is an important aspect of any restricted party screening program. While the number of matches will be small, and the number of those that are confirmed matches even smaller, research and documentation is key to effective export, trade and financial (OFAC) compliance.
 
Yellow / Red Flag: 
In the context of receiving a positive screening match, this generally indicates that something is out-of-place, and is commonly used in Restricted Party Screening solutions. This might be a name that seems odd, IP addresses not aligning with the apparent business location, addresses that don’t exist and cannot be found, or business names that don’t appear to exist, among other issues.
 
IP Address check: 
An IP address, usually appearing as four strings of up to 3 numbers, separated by a period (i.e. 34.193.172.8, known as IPv4)) or a longer string of letters and numbers (known as IPv6), can provide the actual geographic location of an email sender, or the source location of an online request. In export compliance, this can be combined with Country Sanctions and online forms to give an additional layer of due diligence.
 
Address screening or checking: 
Address screening usually refers to the actual process of having an address (without an individual or organization) screened against the various restricted party lists. Address checking can either be an online or manual process of viewing the location of the party being screened and determining what is actually at the location, if anything.

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COMM_a215
. M. Volkov: “Is Your Compliance Program Adrift?”

(Source:
Volkov Law Group Blog, 26 Jun 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
A compliance program is a continuously evolving process. The lifeblood of a compliance program is its ability to refresh itself, to incorporate new information and data, and adjust to meet new challenges.
 
The culture and compliance loop requires discipline – a company refreshes its risk assessment, designs and implement new policies and procedures to address the risk, adopts new compliance controls, monitors the performance of the new initiative, collects data on program performance, reviews the program, and identifies areas in which to improve and remediate. That is a very general shorthand of the steps involved. Each part of this equation or process has to operate relatively smoothly without delay and mistakes.
 
As a living and ongoing process, a compliance program can suffer a slowdown or slow-moving opposition or frustration. A CEO, for example, can slow a compliance program down by a series of small actions – relatively minor decisions that individually do not indicate a real problem but collectively cast the compliance program adrift.
 
A compliance program engine that stalls can quickly become adrift, meaning the program needs to evolve with changes in the company’s business but does not have the support, the resources, or other important resources needed to operate effectively. Frankly, there are infinite ways in which senior management can derail a compliance program with few fingerprints of responsibility. Senior management has the ability to undermine compliance because of personal prejudices, resource needs or personnel conflicts. It takes very little opposition to suppress a compliance program.
 
The telltale signs of a compliance program that is adrift include:
 
  – Rejection of resource requests for basic automation or employees justified by a significant change in the business;
  – Change in CCOs reporting relationship to the board or board committee;
  – Senior management change in overall status and contact with chief compliance officer, both structurally and informally on day-to-day basis;
  – Failure to address meaningfully new risks and responsibilities such as new sanctions regulations, General Data Protection Rule, or beneficial ownership regulations;
  – Over-reliance on business ownership of compliance program responsibilities; and
  – Unexplained changes in compliance priorities without adequate consultation with chief compliance officer.
 
A compliance program is a finely-tuned machine and it takes very little to slow it down and eventually undermine the overall purpose and effectiveness of the program. It is difficult for a CCO to respond to death by a thousand cuts because each cut, by itself, can be explained as a scratch, nothing more, and senior management can maintain deniability and evade accountability for the compliance program.
 
In these circumstances, the company and senior management will eventually suffer the consequences for their actions or failures to act. One thing you can always count on – a deficient compliance program will usually be exposed and when it happens, the company and senior managers will undergo a searing review and questioning of their actions or inaction. If the CCO documents the events, requests for resources, inexplicable changes to the compliance program, and failures to act in the face of clear warnings and communications, senior management will be held accountable – whether by the government or major stakeholders.

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COMM_a316
. R.C. Burns: “US to China: No Robots for You!”

(Source:
Export Law Blog, 27 June 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, Clif.Burns@bryancave.com, 202-508-6067).
 
The Wall Street Journal reports that the White House is cooking up new export controls on China. The idea is to restrict exports to China of technologies that could assist in China’s Made in China 2025 manufacturing upgrade initiative. That initiative focuses on 10 priority industries, which include new advanced information technology; automated machine tools and robotics; aerospace and aeronautical equipment; maritime equipment and high-tech shipping; modern rail transport equipment; new-energy vehicles and equipment; power equipment; agricultural equipment; new materials; and biopharma and advanced medical products.
 
Some of these items and technology might on the Commerce Control List and may already be controlled for export to China. Others clearly are not. Politico reports that the National Security Council is drawing up a list of technologies to be controlled for export to China targeting the priority sectors for Made in China 2025. It is not clear whether “technology” here includes the common usage which would cover goods or only the more technical use of that term by BIS which covers information only. The NSC List is scheduled to be released on Friday, so we should know more then.
 
How this new list will play out in relation to foreign availability determinations under Part 768 of the EAR is also anyone’s guess. Certainly technologies in many of the targeted sectors will remain available to China from other foreign countries, none of which can reasonably be expected to adopt these controls.
 
Another issue, not to suppose that the White House cares about complying with the General Agreement on Tariffs and Trade (“GATT”), is the extent to which these new export restrictions comply with the prohibition on quantitative export restrictions in Article XI of GATT. Certainly, these restrictions will not fit within the stated exceptions to the prohibitions on such restrictions in Article XI – namely, protection of domestic supply of “foodstuffs or other products essential to” the exporting country. Nor do they have any relation to “classification, grading or marketing of commodities in international trade.”
 
Instead, the restrictions can only be justified on the basis of Article XXI’s national security exception which provides the basis in GATT for most export control regimes. The national security exception in Article XII is related to “fissionable materials,” “traffic in arms,” or “war or other emergency in international relations.” Obviously the reference to war in Article XII is not a reference to a trade war, so it seems unlikely that the new export restrictions could survive a WTO challenge.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a317. 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
* 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
.

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* What: Export Compliance Essentials for Shipping
* When: August 9, 2018; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Scott Gearity
* Register: Here or Danielle Hatch, 540-433-3977, danielle@learnexportcompliance.com.

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ENEDITOR’S NOTES

EN_a119
. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 

Jean-Jacques Rousseau (28 Jun 1712 – 2 Jul 1778; was a Genevan philosopher, writer and composer. Born in Geneva, his political philosophy influenced the Enlightenment across Europe, as well as aspects of the French Revolution and the overall development of modern political and educational thought.)
  – “A feeble body weakens the mind.”
  – “Insults are the arguments employed by those who are in the wrong.” 
 
John Wesley (28 Jun 1703 – 2 Mar 1791; was an English cleric and theologian who, with his brother Charles and fellow cleric George Whitefield, founded Methodism.)
  – “Do all the good you can, by all the means you can, in all the ways you can, in all the places you can, at all the times you can, to all the people you can, as long as ever you can.”

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EN_a220. 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:
27 June 2018: 83 FR 30335-30338: Iranian Transactions and Sanctions 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_a321
. 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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