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18-0711 Wednesday “Daily Bugle”

18-0711 Wednesday “Daily Bugle”

Wednesday, 11 July 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. USTR Posts Exclusion Requests Procedures Concerning China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Posts New ACE Reports Information Notice
  4. DoD/DSCA Posts Policy Memo 18-33
  5. State/DDTC: (No new postings.)
  6. USTR Posts Statement by U.S. Trade Representative Robert Lighthizer on Section 301 Action
  1. Defense One: “Hacker Caught Selling Maintenance Manuals for Military Drones”
  2. USA Today: “Trump Administration Threatens China with $200 Billion in Additional Tariffs”
  3. Wired: “A Landmark Legal Shift Opens Pandora’s Box for DIY Guns”
  1. B. Mulier, S.M. Werner & S. Du: “Will China’s Upcoming Export Controls Impact Your Business?” (Part II of II)
  2. L. Feldman: “The Art of the Trade Deal – Top Five Strategies to Avoid or Reduce Section 232 and 301 Duty Increases”
  3. M. Volkov: “Lessons Learned from Credit Suisse Corrupt Hiring Scheme and FCPA Settlement (Part II of II)”
  4. T. Murphy: “Section 301 — US Imposes Duties on $200 Billion Worth of Chinese Imports”
  1. Full Circle Compliance Presents “Awareness Course U.S. Export Controls: ITAR & EAR from a Non-U.S. Perspective “, 2 Oct in Bruchem, the Netherlands 
  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 (29 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

(Source:
Federal Register, 11 July 2018.) [Excerpts.]
 
83 FR 32181-32184: Procedures to Consider Requests for Exclusion of Particular Products From the Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice and request for comments.
* SUMMARY: In a notice published on June 20, 2018, the U.S. Trade Representative (Trade Representative) determined that appropriate action to obtain the elimination of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation includes the imposition of an additional ad valorem duty of 25 percent on products from China classified in certain enumerated subheadings of the Harmonized Tariff Schedule of the United States (HTSUS). See 83 FR 28710. The June 20 notice also announced that the Trade Representative would establish a process by which U.S. stakeholders may request that particular products classified within a covered tariff subheading be excluded from the additional duties. Today’s notice sets out the specific procedures and criteria related to requests for product exclusions, and opens up a docket for the receipt of exclusion requests.
* DATES: USTR must receive requests to exclude a particular product by October 9, 2018. Responses to a request for exclusion of a particular product are due 14 days after the request is posted in docket number USTR-2018-0025 on www.regulations.gov. Any replies to responses to an exclusion request are due 7 days after the close of the 14 day response period.
* ADDRESSES: USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting requests for exclusion and responses to requests in section B below. The docket number is USTR-2018-0025.
* FOR FURTHER INFORMATION CONTACT: For questions about the product exclusion process, contact USTR Assistant General Counsel Arthur Tsao or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For questions on customs classification or implementation of additional duties, contact Traderemedy@cbp.dhs.gov.
* SUPPLEMENTARY INFORMATION: …
  USTR invites interested persons, including trade associations, to submit requests for exclusion from the additional duties of a particular product classified within a HTSUS subheading set out in Annex A of the notice published at 83 FR 28710 (June 20, 2018). As explained in more detail below, each request must specifically identify a particular product, and provide supporting data and the rationale for the requested exclusion. USTR will evaluate each request on a case-by-case basis, taking into account whether the exclusion would undermine the objective of the Section 301 investigation. Any exclusion will be effective starting from the July 6, 2018 effective date of the additional duties, and extend for one year after the publication of the exclusion determination in the Federal Register. In other words, an exclusion, if granted, will apply retroactively to the July 6 date of the imposition of the additional duties. USTR periodically will announce decisions on pending requests. …
 
  Robert E. Lighthizer, United States Trade Representative.

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OGSOTHER GOVERNMENT SOURCES

OGS_a12. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

[No items of interest noted today.]

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OGS_abc23. 
Commerce/BIS: (No new postings.)
(Source: 
Commerce/BIS)

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(Source:
CSMS #18-000431, 11 July 2018.)
 
The ACE Reports Information Notice has been published to provide details on the upcoming July 12, 2018 reports deployment, to include:

  – A New Liquidations Report;
  – Planning to Transition to the Entry Summary (ES) Universe and Reports; and
  – ADCVD Universe Updates.

More information can be found in the ACE Reports Information Notice.

 

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OGS_a35
. DoD/DSCA Posts Policy Memo 18-33
 

(Source: DoD/DSCA, 11 July 2018.)
 
* DSCA Policy Memo 18-33
Force Closure of Building Partner Capacity (BPC) Funded Cases has been posted.

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OGS_a56. 
State/DDTC: (No new postings.)

(Source: 
State/DDTC)

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OGS_a67. USTR Posts Statement by U.S. Trade Representative Robert Lighthizer on Section 301 Action

(Source: USTR, 10 July 2018.) [Excerpts.] 
 
  “On Friday, in response to unfair Chinese practices, the United States began imposing tariffs of 25 percent on approximately $34 billion worth of Chinese imports.  These tariffs will eventually cover up to $50 billion in Chinese imports as legal processes conclude.  The products targeted by the tariffs are those that benefit from China’s industrial policy and forced technology transfer practices.
 
  “China has since retaliated against the United States by imposing tariffs on $34 billion in U.S. exports to China, and threatening tariffs on another $16 billion.  It did this without any international legal basis or justification.
 
  “As a result of China’s retaliation and failure to change its practices, the President has ordered USTR to begin the process of imposing tariffs of 10 percent on an additional $200 billion of Chinese imports. This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies. USTR will proceed with a transparent and comprehensive public notice and comment process prior to the imposition of final tariffs, as we have for previous tariffs.
 
  “On August 14, 2017, President Trump instructed USTR to begin the Section 301 process.  For many years, China has pursued abusive trading practices with regard to intellectual property and innovation.  USTR conducted a thorough investigation over an 8-month period, including public hearings and submissions.  In a
detailed 200-page report, USTR found that China has been engaging in industrial policy which has resulted in the transfer and theft of intellectual property and technology to the detriment of our economy and the future of our workers and businesses. 
 
  “USTR’s Section 301 report found that Chinese policies and practices force U.S. innovators to hand over their technology and know-how as the price of doing business in China.  China also uses non-economic means to obtain U.S. technology, such as using state-owned funds and companies to buy up American businesses and imposing burdensome intellectual property licensing requirements in China.  USTR’s report also found that the Chinese government sponsors the outright theft of U.S. technology for commercial benefit.  These practices are an existential threat to America’s most critical comparative advantage and the future of our economy: our intellectual property and technology. … 
 
The proposed list and process for the public notice and comment period is set out in a Federal Register notice, which will be published within the next few days.  To view the notice, including the list of proposed tariffs on $200 billion of Chinese imports, click
here.

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NWSNEWS

(Source:
Defense One, 10 July 2018.) [Excerpts.]
 
A poorly configured router allowed the theft of drone manuals, a list of maintainers, material on the Abrams tank, and more.
 
Until last week, you could have purchased one of the U.S. military’s training manuals for the MQ-9 Reaper drone, along with a maintenance manual for the Abrams tank, a guide to defeating IEDs, and other sensitive materials, thanks to a hacker who put the stolen materials up for sale online.
 
Top of Form
Bottom of Form
The theft and attempted sale were brought to light by cybersecurity and threat intelligence group Recorded Future, which published a report about the incident and is working with law enforcement personnel on it.
 
Recorded Future officials said they got involved last week when they noticed a suspicious-looking online advertisement for the manuals, a list of airmen within a unit assigned to the drone’s maintenance, and more. They contacted the thief, who said that he had hacked his way to the materials after an Air Force captain with the 432d Aircraft Maintenance Squadron at Creech Air Force Base in Nevada failed to properly set transfer protocol settings on his NETGEAR router,
a widely-known vulnerability. The hacker used a search engine called
Shodan that allows users to search unsecured Internet of Things devices and happened upon the captain’s router by chance, whereupon they used the vulnerability to exfiltrate the docs from the captain’s computer, including-awkwardly-his certificate of completion for
Cyber Awareness Challenge training.
 
  “While such course books are not classified materials on their own, in unfriendly hands, they could provide an adversary the ability to assess technical capabilities and weaknesses in one of the most technologically advanced aircrafts,” notes Recorded Future’s report on the incident. Such materials are covered by trade restrictions. Their distribution is limited to military personnel and contractors.
 
It’s not clear where the hacker acquired the non-drone-related files but they were from a different source within the military, says the report.
 
The incident is hardly the first-time user error has left military data exposed to hackers. Last year, a Booz Allen Hamilton contractor
accidently left a cache of 60,000 sensitive files on a publicly accessible Amazon server.
 
Recorded Future isn’t disclosing the name or origin of the hacker but did say that he was an English speaker. They’re currently helping law enforcement with an investigation. “We cannot provide specific details, but we directly contacted [Defense Security Services], which, to the best of our knowledge, handles this type of information for DoD. We also contacted several other government customers, but cannot go into the details of who that may be,” the company told
Defense One in an email.
Defense One reached out to officials at Creech Air Force Base for comment. A public affairs officer told us that he had not heard about the breach before receiving reporters’ calls on Tuesday who referred us late Tuesday to Air Force press operations. We’ll update when we hear back from them.

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(Source:
USA Today, 10 July 2018.) [Excerpts.]
 
President Donald Trump fired another shot in an ongoing trade war with China on Tuesday, as his administration released a list of $200 billion in Chinese goods subject to 10% tariffs.
 
  “This is an appropriate response under the authority of Section 301 to obtain the elimination of China’s harmful industrial policies,” said U.S. Trade Representative Robert Lighthizer, claiming that Chinese trade policies represent a national security threat to the United States.
 
China, which has denied U.S. accusations of unfair trade policies, has retaliated against previous tariffs with levies on U.S. goods, and can be expected to do so again.
 
The proposed tariff list that President Trump ordered last month ranges from Chinese air conditioners to leather goods.
 
The proposed tariffs do not go into effect immediately, but will undergo a two-month review process as officials from both countries negotiate settlements to their trade disputes. …

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NWS_a310
. Wired: “A Landmark Legal Shift Opens Pandora’s Box for DIY Guns”

(Source:
Wired
, 10 July 2018.) [Excerpts.]
 
Five years ago, 25-year-old radical libertarian Cody Wilson stood on a remote central Texas gun range and pulled the trigger on the world’s first fully 3-D-printed gun. When, to his relief, his plastic invention fired a .380-caliber bullet into a berm of dirt without jamming or exploding in his hands, he drove back to Austin and uploaded the blueprints for the pistol to his website, Defcad.com.
 
He’d launched the site months earlier along with an anarchist video manifesto, declaring that gun control would never be the same in an era when anyone can download and print their own firearm with a few clicks. In the days after that first test-firing, his gun was downloaded more than 100,000 times. Wilson made the decision to go all in on the project, dropping out of law school at the University of Texas, as if to confirm his belief that technology supersedes law.
 
The law caught up. Less than a week later, Wilson received a letter from the US State Department demanding that he take down his printable-gun blueprints or face prosecution for violating federal export controls. Under an obscure set of US regulations known as the International Trade in Arms Regulations (ITAR), Wilson was accused of exporting weapons without a license, just as if he’d shipped his plastic gun to Mexico rather than put a digital version of it on the internet. He took Defcad.com offline, but his lawyer warned him that he still potentially faced millions of dollars in fines and years in prison simply for having made the file available to overseas downloaders for a few days. “I thought my life was over,” Wilson says.
 
Instead, Wilson has spent the last years on an unlikely project for an anarchist: Not simply defying or skirting the law but taking it to court and changing it. In doing so, he has now not only defeated a legal threat to his own highly controversial gunsmithing project. He may have also unlocked a new era of digital DIY gunmaking that further undermines gun control across the United States and the world-another step toward Wilson’s imagined future where anyone can make a deadly weapon at home with no government oversight.
 
Two months ago, the Department of Justice quietly offered Wilson a settlement to end a lawsuit he and a group of co-plaintiffs have pursued since 2015 against the United States government. Wilson and his team of lawyers focused their legal argument on a free speech claim: They pointed out that by forbidding Wilson from posting his 3-D-printable data, the State Department was not only violating his right to bear arms but his right to freely share information. By blurring the line between a gun and a digital file, Wilson had also successfully blurred the lines between the Second Amendment and the First.
 
  “If code is speech, the constitutional contradictions are evident,” Wilson explained to WIRED when he first launched the lawsuit in 2015. “So what if this code is a gun?”
 
The Department of Justice’s surprising settlement, confirmed in court documents earlier this month, essentially surrenders to that argument. It promises to change the export control rules surrounding any firearm below .50 caliber-with a few exceptions like fully automatic weapons and rare gun designs that use caseless ammunition-and move their regulation to the Commerce Department, which won’t try to police technical data about the guns posted on the public internet. …

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COMMCOMMENTARY

COMM_a0
11. B. Mulier, S.M. Werner & S. Du: “Will China’s Upcoming Export Controls Impact Your Business?” (Part II of II)

(Source: Bird & Bird, 9 Jul 2018.)
 
* Authors: Brian Mulier, Esq.,
brian.mulier@twobirds.com; Sven-Michael Werner, Esq.,
svenmichael.werner@twobirds.com; and Serena Du, Esq.,
serena.du@twobirds.com.  All of Bird & Bird, Europe and China, respectively.
 
[Editor’s Note: Part I of this article was published in yesterday’s Daily Bugle.]
(4) Who is to comply?
 
As depicted above, the draft ECL has an extraterritorial character having authority and effect and beyond the normal territorial boundaries of China. The ECL applies and impacts any individual or business in- or outside China dealing with Chinese controlled items. [FN/3]
 
If the current version of the ECL is adopted, the ECL will apply also to agencies, freight forwarders, customs brokers, third-party electronic trading platform (e-commerce) providers and financial service providers.
 
(5) What are the penalties?
 
Any violations of the ECL could result in a warning or a penalty up to 10 times the illegal business revenue. Usually a fine up to RMB 500,000 could be imposed if the illegal business revenue is less than RMB 50,000. In addition, any illegal income would be confiscated.
 
Several non-financial penalties can also be imposed on businesses, including suspension or revocation of export licenses as well as being blacklisted in China’s social credit system.
 
For individuals, the personal liability for those directly responsible for breaching the ECL could include fines up to RMB 300,000.
And last but not least, criminal charges may also be brought in case of any serious violations.
 
(6) Will the ECL impact business in- and outside China?
 
If the current version of the ECL is adopted, the earlier stipulated export control elements having extraterritorial reach will have significant impact for businesses – active in China as well as outside China – dealing with Chinese controlled items. The importance and impact of the ECL will also increase as the goals of the “Made in China 2025” initiative come within reach for China.
 
Moreover, in the light of the recent trade discussions and measures between the United States and China, ECL’s incorporated elements dealing with “competitiveness of trade and industry”, “international market supply” and “equal principle”- which are open for interpretation – could also add additional layers to uncertainty in the international trade arena of controlled items.
 
In summary, businesses should gain awareness and understand the potential changes the draft ECL (if adopted in its current form) is to bring along to their operations in view of being adequately and timely prepared to i) ensure compliance with the China’s upcoming new export control framework and ii) secure continuance of their business operations and activities in China as well as outside China.
 
——–
  [FN/3] On a comparative note, the case of Chinese company ZTE shows the possible consequences (high fines and export ban) of non- compliance with extraterritorial re-export controls following United States export control legislation. See for example:
here (last accessed: 5 May 2018).

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COMM_a01
12. L. Feldman: “The Art of the Trade Deal – Top Five Strategies to Avoid or Reduce Section 232 and 301 Duty Increases”
(Source: Sandler, Travis & Rosenberg Trade Report, 11 July 2018.)
 
* Author: Lenny Feldman, Esq., Sandler, Travis & Rosenberg, P.A, lfeldman@strtrade.com, +1 305-894-1011.
 
U.S. importers, exporters, and manufacturers are looking for ways to mitigate the impact of the 10 to 25 percent additional tariffs the U.S. has levied on tens of billions of dollars’ worth of imported goods, including steel and aluminum from all global sources and hundreds of products from China, as well as the retaliatory tariffs U.S. trading partners have begun to impose on U.S. exports. There are a number of proven and legitimate ways to avoid or reduce these duties that have been used for many years with great success. This article highlights five duty-busting strategies that companies can use in structuring their own trade deals.
 
Exclusion Requests
. Both the Department of Commerce (for aluminum and steel) and the Office of the U.S. Trade Representative (for China goods) have set forth processes to request that specific products be excluded from the tariffs. These processes offer companies or trade associations an opportunity to explain how and why such imported goods are critical to the U.S. economy and could not be sourced elsewhere. As the DOC has been slow to respond to the thousands of submitted requests and has outright rejected any claims that do not adhere to the specific criteria, we remain cautiously optimistic about the speed and manner with which USTR will review the China-related exclusion requests. Nevertheless, as this process may allow for an outright exclusion from the duties on a per product and per company basis, it is worth serious consideration. 
 
Tariff Engineering
. As much as U.S. Customs and Border Protection has resisted it in the past, the courts have affirmed for years that CBP can only levy tariffs on the condition of goods as imported. This has led importers in a variety of industries where high duties prevail to import products in unfinished or embellished forms to legally take advantage of classification provisions carrying a lower or free rate of duty. For instance, turbine generators are typically imported into the U.S. as large unassembled structures consisting of the turbine and generating components and as such will now likely fall prey to an additional 25 percent tariff. However, if the components are imported separately they would fall into an entirely different tariff provision that is currently excluded from that tariff increase.
 
Operational Engineering
. If you cannot modify the tariff provision for the imported product, consider changing its country of origin. For instance, CBP has found that the assembly of numerous parts to create various modules, and the assembly of these modules to produce aircraft engines, result in a substantial transformation of the parts so that their country of origin would be the country where the engine was produced. So, in the case of the China tariffs, and in some cases the aluminum and steel tariffs, shifting operations away from one country to another may enable your company to escape the duty increase. These concepts are particularly useful for certain U.S. or other products that fall within the special HTSUS Chapter 98 provisions, many of which are wholly or partially exempt from the additional tariffs.
 
Valuation
. A strategy that has proven useful to the apparel and footwear industries, which have been subject to high duties for years, involves first sale valuation. Here importers only pay duty on the price that a trading company pays the manufacturer instead of the higher price the importer pays the trading company. While the additional tariffs would still apply in this scenario the dutiable value is significantly lower, resulting in a lower duty bill.
 
Various criteria must be met to ensure the first sale price reflects a sale that is clearly destined to the U.S. and conducted at arm’s length, but, once validated, a viable first sale value can provide substantial duty savings. It can also serve as a type of long-term annuity; i.e., even once the additional tariffs expire, use of first sale valuation would continue to provide a lower declared value and thus reduce the regular duties assessed on a company’s products.
 
Bonded Facilities
. For those companies involved in manufacturing as well as import for export trade, bonded facilities can provide a safe haven from the additional tariffs. Goods admitted to a foreign-trade zone in privileged foreign status will retain their character and tariff classification as admitted even if they are manufactured into a product affected by the additional tariffs that may be withdrawn from the zone and entered for U.S. consumption. In addition, goods otherwise subject to the additional tariffs could be entered and stored in a bonded warehouse for up to five years to avoid those duties if they are (a) exported directly from the warehouse or (b) entered for U.S. consumption once the additional tariffs have lapsed or a product-specific exclusion has been granted.
 
When assessing particular duty savings models, importers, exporters, and manufacturers need to consider the art of crafting their own trade deals to effectively escape or limit the impact of the section 232 and 301 tariffs. A bit of flexibility and ingenuity can have a profound impact on a company’s bottom line when facing substantial duty exposure.

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COMM_a3
13. M. Volkov: “Lessons Learned from Credit Suisse Corrupt Hiring Scheme and FCPA Settlement (Part II of II)”
(Source: Volkov Law Group Blog, 10 July 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
[Editor’s Note: Part I of this article was published in yesterday’s Daily Bugle.]
 
Credit Suisse has joined the ranks of other banks and companies that have settled FCPA violations involving hiring of government officials’ relatives in exchange for business benefits, including JPMorgan Chase; BNY Mellon, and Qualcomm. There are several banks still under investigation for such practices, including Citigroup, Barclays, Deutsche Bank, HSBC and Goldman Sachs.
 
The hiring program enforcement actions demonstrate the Justice Department’s and SEC’s broad application of the term “anything of value” in the FCPA to benefits afforded to sons, daughters and relatives of government officials.
 
After reading the respective statement of facts in the DOJ and SEC settlements, you have to scratch your head over the brazen nature of Credit Suisse’s conduct. This is not a very close call as to illegal conduct, notwithstanding the debate surrounding the application of the bribery prohibition to benefits that flow directly to sons, daughters and relatives, and indirect benefit to foreign officials (parents and relatives).
 
Hiring and Employment Risks: The agreed upon facts demonstrate the real and tangible risks that a hiring program can quickly turn into a vehicle to make substantial payments to otherwise unqualified employees on a continuing basis in order to ensure the award of multiple contracts and/or secure required regulatory officials from government officials. Credit Suisse was able to deftly and illegally leverage its relationships with hired relatives to gain valuable contracts from government officials through a variety of techniques beyond just hiring the sons, daughters and relatives. Indeed, Credit Suisse provide these unqualified employees with promotions, bonuses keyed to specific contracts controlled or influenced by the related family member in the government, and other benefits as a way to secure continuing benefits. Think of this as a continuing bribery scheme keyed to leveraging a specific relationship for Credit Suisse’s benefit.
 
Beyond a real teaching moment as to corruption risks from such hiring practices, the Credit Suisse enforcement action reveals a number of important lessons learned:
 
Policy Statements and No Controls: Both the DOJ and SEC noted that Credit Suisse maintained a strong policy statement against hiring practices and referrals of relatives of foreign officials. Notwithstanding such a broad policy prohibition, Credit Suisse failed to implement appropriate controls to implement such a policy. It is easy to make a broad statement but always more difficult to build a system of controls that effectively protect against such conduct.
 
Hiring Procedures and Controls: In designing appropriate hiring practices to protect against corruption risks, the DOJ and SEC settlements noted certain practices, including:
 
  (a) documentation of justification for a hiring decision confirming that hiring was made in accordance with hiring policies and procedures;
  (b) conducting full background checks to confirm absence of any direct or indirect connection to a foreign official who might be involved in or able to influence potential business opportunities or regulatory approvals;
  (c) ensure proper oversight by human resource, legal and compliance staff of hiring activities to ensure that hiring decisions, promotions, bonuses or other benefits are appropriately awarded and tied to objective performance criteria; and
  (d) conduct annual reviews of hiring practices to ensure compliance with procedures and documentation requirements. As part of review, select sample of employees and ensure that there is no connection to foreign officials or, if there is such a connection, that appropriate controls and mitigation measures were implemented to minimize such risks.
 
Remediation and Discipline: Credit Suisse did not earn full remediation credit because it tailed to impose adequate disciplinary measures against managers and employees related to the corrupt hiring program. Such a failure to impose appropriate discipline cost Credit Suisse between 5 to 10 percent credit from the 15 percent credit awarded. It is hard to justify incurring such additional costs to avoid imposing sufficient disciplinary measures against Credit Suisse Hong Kong employees. Whatever you may think about such a tradeoff, Credit Suisse’s notification of policy infractions against three employees certainly does not send a very strong measure about the seriousness of such conduct. Credit Suisse’s weak disciplinary response to the violations suggests a failure to commit to the culture and consequences needed to promote its positive culture of compliance.

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COMM_a4
14. T. Murphy: “Section 301 — US Imposes Duties on $200 Billion Worth of Chinese Imports”
(Source: Author, 10 July 2018.)
 
* Author: Ted Murphy, Ted Murphy, Esq., Baker & McKenzie LLP, ted.murphy@bakermckenzie.com, +1 202 452 7000.
 
The Trump Administration announced on 10 July 2018 that the U.S. is beginning the process to impose an additional 10% duty on a further $200 billion worth of Chinese imports.  
 
As you may recall, when the Administration announced its intent to impose duties on $50 billion worth of Chinese imports, the Chinese government announced an intent to retaliate on a comparable value of U.S. imports. At that time, President Trump announced that if China retaliated on U.S. imports, the United States would impose an additional duty on a further $200 billion worth of Chinese imports (see our June 19th update).
The U.S. imposed an additional 25% duty on a first round of products worth $34 billion on July 6th and China imposed an additional 25% duty on a first round of products also worth $34 billion that same day. Both countries are also considering imposing additional duty on an additional $16 billion worth of merchandise.
 
In response to China’s retaliation, the U.S. Trade Representative issued a press release and advance copy of a Federal Register notice this afternoon. The notice states that the U.S. is considering imposing an additional 10% duty on $200 billion worth of Chinese imports. Before doing so, the USTR will accept public comments and testimony at a hearing. The notice includes the schedule, as well as the list of the 6,031 tariff subheadings covered by the $200 billion. In coming up with the list of covered HTS provisions, the notice provides as follows:
 
“In developing the list of tariff subheadings included in this proposed supplemental action, trade analysts considered products from across all sectors of the Chinese economy. The tariff subheadings considered by the analysts included subheadings that commenters suggested for inclusion in response to the April 6 notice. The selection process took account of likely impacts on U.S. consumers, and involved the removal of subheadings identified by analysts as likely to cause disruptions to the U.S. economy, as well as tariff lines subject to legal or administrative constraints.”
 
It is clear that the U.S.-China trade war is real and that the Trump Administration is willing to accept meaningful U.S. casualties (i.e., harm to U.S. businesses with interests in China). It is also clear that the range of imports impacted by the duties is growing (by necessity).
All companies that import articles from China should be developing short, medium, and long-term plans for coping with this trade war. We are assisting numerous clients with this and would be happy to discuss options with you further.

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TECEX/IM TRAINING EVENTS & CONFERENCES

TEC_a115

Full Circle Compliance Presents “Awareness Course U.S. Export Controls: ITAR & EAR From a Non-U.S. Perspective “, 2 Oct in Bruchem, the Netherlands

(Source: Full Circle Compliance, events@fullcirclecompliance.eu.)
 
Our next academy course is designed for beginning compliance officers and professionals who want to enhance their knowledge on the latest ITAR/EAR requirements and best practices.  The course will cover multiple topics regarding U.S. export controls that apply to organisations outside the U.S., such as: the regulatory framework, including the latest and anticipated regulatory amendments, key concepts and definitions, classification and licensing requirements, handling (potential) non-compliance issues, and practice tips to ensure compliance with the ITAR and EAR.
 
* What: Awareness Course U.S. Export Controls: ITAR & EAR From a Non-U.S. Perspective 
* When: Tuesday, 2 Oct 2018, 9 AM – 5 PM (CEST)
* Where: Landgoed Groenhoven, Bruchem, the Netherlands
* Sponsor: Full Circle Compliance (FCC)
* Instructors: Ghislaine Gillessen, Mike Farrell, and Alexander P. Bosch 
* Information & Registration: HERE or via 
events@fullcirclecompliance.eu
 

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ENEDITOR’S NOTES

 

* E. B. White
(Elwyn Brooks White; 11 July 1899 – 1 Oct 1985; was an American writer, who for more than fifty years was a contributor to The New Yorker magazine. He was also a co-author of the English language style guide, Strunk & White’s Elements of Style.  In addition, he wrote books for children, including Stuart Little (c. 1945), Charlotte’s Web (c. 1952), and The Trumpet of the Swan (c. 1970). In a 2012 survey of School Library Journal readers, Charlotte’s Web was voted the top children’s novel.)
  – “There is nothing more likely to start disagreement among people or countries than an agreement.”
 
* John Quincy Adams (11 Jul 1767 – 23 Feb 1848; was an American statesman who served as the sixth President of the United States from 1825 to 1829 at the peak of a political career during which he served in various capacities as diplomat, United States Senator, United States Secretary of State, and U.S. Representative from Massachusetts. He was the eldest son of second president John Adams (served 1797-1801) and his wife, Abigail Adams.)
  – “Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost.”

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EN_a317
. 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: 29 June 2018: 83 FR 30541-30548: Global Magnitsky Sanctions Regulations; and 83 FR 30539-30541: Removal of the Sudanese Sanctions Regulations and Amendment of the Terrorism List Government Sanctions Regulations 

 
*
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:
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_a0318
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.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* 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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