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18-0717 Tuesday “Daily Bugle”

18-0717 Tuesday “Daily Bugle”

Tuesday, 17 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. DHS/CBP Seeks Comments on Form 7507, General Declaration 
  2. DHS/CBP Seeks Comments on Transfer of Cargo to a Container Station 
  3. DHS/CBP Posts Quarterly IRS Interest Rates Used in Calculating Interest on Overdue Accounts and Refunds on Customs Duties 
  4. USTR Seeks Comments on Proposed Section 301 Action 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. DoD/DSS Posts Notice on Hierarchy Change Request Form
  4. State/DDTC Posts FAQ Concerning Public Domain Definition
  5. EU Adopts Restrictive Measures in View of the Situation in the Maldives
  6. EU Imposes Additional Restrictive Measures Against ISIL and Al-Qaeda
  7. UK ECJU Posts Licensing Data for January to March 2018
  1. Defense News: “Trump Advances ‘Buy American’ Arms Sales Plans”
  2. Epoch Times: “Chinese National Pleads Guilty to Stealing US Military Technology”
  3. ST&R Trade Report: “U.S., UK Anticipate Post-Brexit FTA”
  1. M. Volkov: “Four Current FCPA Enforcement Trends”
  2. R.L. Magielnicki, R. Whitten & M. Levarlet: “Reform of Foreign Investment in the U.S.: France and Other Allied Countries Might be Exempt”
  3. R.C. Burns: “Chronicle of a Death Foretold”
  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

1
. DHS/CBP Seeks Comments on Form 7507, General Declaration

(Source: Federal Register, 17 July 2018.) [Excerpts.]
 
83 FR 33234-33235: Agency Information Collection Activities: General Declaration
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 60-Day notice and request for comments; extension of an existing collection of information. …
* DATES: Comments are encouraged and will be accepted (no later than September 17, 2018) to be assured of consideration. …
* FOR FURTHER INFORMATION CONTACT: Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email CBP_PRA@cbp.dhs.gov. Please note that the contact information provided here is solely for questions regarding this notice. Individuals seeking information about other CBP programs should contact the CBP National Customer Service Center at 877-227-5511, (TTY) 1-800-877-8339, or CBP website.
* SUPPLEMENTARY INFORMATION: …
  – Title: General Declaration (Outward/Inward) Agriculture, Customs, Immigration, and Public Health.
  – OMB Number: 1651-0002.
  – Form Number: Form 7507.
  – Action: CBP proposes to extend the expiration date of this information collection with no change to the burden hours. There is no change to the information collected or CBP Form 7507. …
  – Abstract: An aircraft commander or agent must file CBP Form 7507, General Declaration (Outward/Inward) Agriculture, Customs, Immigration, and Public Health at the time of arrival for all aircraft required to enter pursuant to 19 CFR 122.41 and at the time of clearance for all aircraft departing to a foreign area with commercial airport cargo pursuant to 19 CFR 122.72. This form is used to document clearance and inspections by appropriate regulatory agency staffs. CBP Form 7507 collects information about the flight routing, the number of passengers embarking and disembarking, the number of crew members, a declaration of health for the persons on board, and details about disinfecting and sanitizing treatments during the flight. This form also includes a declaration attesting to the accuracy, completeness, and truthfulness of all statements contained in the form and in any document attached to the form.
  CBP Form 7507 is authorized by 42 U.S.C 268, 19 U.S.C. 1431, 1433, and 1644a; and provided for by 19 CFR 122.43, 122.52, 122.54, 122.73, 122.144, 42 CFR 71.21 and 71.32. This form is accessible here. …
 
  Dated: July 12, 2018.
Seth D. Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

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EXIM_a2

2
. DHS/CBP Seeks Comments on Transfer of Cargo to a Container Station

(Source: Federal Register, 17 July 2018.) [Excerpts.]
 
83 FR Agency Information Collection Activities: Transfer of Cargo to a Container Station
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 60-Day notice and request for comments; extension of an existing collection of information. …
* FOR FURTHER INFORMATION CONTACT: Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email CBP_PRA@cbp.dhs.gov. Please note that the contact information provided here is solely for questions regarding this notice. Individuals seeking information about other CBP programs should contact the CBP National Customer Service Center at 877-227-5511, (TTY) 1-800-877-8339, or CBP website.
* SUPPLEMENTARY INFORMATION: …
  – Title: Transfer of Cargo to a Container Station.
  – OMB Number: 1651-0096.
  – Current Actions: CBP proposes to extend the expiration date of this information collection with no change to the burden hours or to the information collected. …
  – Abstract: Before the filing of an entry of merchandise for the purpose of breaking bulk and redelivering cargo, containerized cargo may be moved from the place of unlading to a designated container station or may be received directly at the container station from a bonded carrier after transportation in-bond in accordance with 19 CFR 19.41. This also applies to loose cargo as part of containerized cargo. In accordance with 19 CFR 19.42, the container station operator may make a request for the transfer of a container to the station by submitting to CBP an abstract of the manifest for the transferred containers including the bill of lading number, marks, numbers, description of the contents and consignee. …
 
  Dated: July 12, 2018.
Seth D. Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

* * * * * * * * * * * * * * * * * * * * 

EXIM_a3

3
. DHS/CBP Posts Quarterly IRS Interest Rates Used in Calculating Interest on Overdue Accounts and Refunds on Customs Duties

(Source: Federal Register, 17 July 2018.) [Excerpts.]
 
83 FR 33232-33233: Quarterly IRS Interest Rates Used in Calculating Interest on Overdue Accounts and Refunds on Customs Duties
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security.
* ACTION: General notice.
* SUMMARY: This notice advises the public that the quarterly Internal Revenue Service interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties will remain the same from the previous quarter. For the calendar quarter beginning July 1, 2018, the interest rates for overpayments will be 4 percent for corporations and 5 percent for non-corporations, and the interest rate for underpayments will be 5 percent for both corporations and non-corporations. This notice is published for the convenience of the importing public and U.S. Customs and Border Protection personnel.
* DATES: The rates announced in this notice are applicable as of July 1, 2018.
* FOR FURTHER INFORMATION CONTACT: Shawn Kaus, Revenue Division, Collection Refunds & Analysis Branch, 6650 Telecom Drive, Suite #100, Indianapolis, Indiana 46278; telephone (317) 614-4485.
* SUPPLEMENTARY INFORMATION:
  In Revenue Ruling 2018-18, the IRS determined the rates of interest for the calendar quarter beginning July 1, 2018, and ending on September 30, 2018. The interest rate paid to the Treasury for underpayments will be the Federal short-term rate (2%) plus three percentage points (3%) for a total of five percent (5%) for both corporations and non-corporations. For corporate overpayments, the rate is the Federal short-term rate (2%) plus two percentage points (2%) for a total of four percent (4%). For overpayments made by non-corporations, the rate is the Federal short-term rate (2%) plus three percentage points (3%) for a total of five percent (5%). These interest rates used to calculate interest on overdue accounts (underpayments) and refunds (overpayments) of customs duties are the same from the previous quarter. These interest rates are subject to change for the calendar quarter beginning October 1, 2018, and ending December 31, 2018.
  For the convenience of the importing public and U.S. Customs and Border Protection personnel the following list of IRS interest rates used, covering the period from July of 1974 to date, to calculate interest on overdue accounts and refunds of customs duties, is published in summary format. …
 
  Dated: July 11, 2018.
Samuel D. Grable, Assistant Commissioner and Chief Financial Officer, Office of Finance.

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EXIM_a4

4
. USTR Seeks Comments on Proposed Section 301 Action Concerning China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

(Source: Federal Register, 17 July 2018.) [Excerpts.]
 
83 FR 33608-33728: Request for Comments Concerning Proposed Modification 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: Request for comments and notice of public hearing.
* SUMMARY: On June 20, 2018 (83 FR 28710), the U.S. Trade Representative (Trade Representative) provided notice of an initial action in the Section 301 investigation of the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation. The initial action was the imposition of an additional 25 percent ad valorem duty on products of China with an annual trade value of approximately $34 billion, effective July 6, 2018. The June 20 notice also sought public comment on another proposed action, in the form of an additional 25 percent ad valorem duty on products of China with an annual trade value of approximately $16 billion. The public comment process in connection with the proposed additional action is ongoing. On July 6, 2018, China responded to the initial action by imposing increased duties on goods of the United States. In light of China’s decision to respond to the investigation by imposing duties on U.S. goods, the Trade Representative proposes a modification of the action taken in this investigation. The proposed modification is to maintain the original $34 billion action and the proposed $16 billion action, and to take further action in the form of an additional 10 percent ad valorem duty on products of China with an annual trade value of approximately $200 billion. The products subject to this proposed supplemental action are classified in the HTSUS subheadings set out in the Annex to this notice. The Office of the U.S. Trade Representative (USTR) is seeking public comment and will hold a public hearing regarding this proposed modification of the action in the investigation.
* DATES: To be assured of consideration, you must submit comments and responses in accordance with the following schedule:
  – July 27, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing, and for filing pre-hearing submissions.
  – August 17, 2018: Due date for submission of written comments.
  – August 20-23, 2018: The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 a.m.
  – August 30, 2018: Due date for submission of post-hearing rebuttal comments.
* ADDRESSES: USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments in sections D and F below. The docket number is USTR-2018-0026.
* FOR FURTHER INFORMATION CONTACT: For questions about the ongoing investigation or proposed action, contact Arthur Tsao, Assistant General Counsel, or Justin Hoffmann, Director of Industrial Goods, at (202) 395-5725. For questions on customs classification of products identified in the Annex to this notice, contact Traderemedy@cbp.dhs.gov.
* SUPPLEMENTARY INFORMATION: …
USTR requests comments with respect to any aspect of the proposed supplemental action, including:
  – The specific tariff subheadings to be subject to increased duties, including whether the subheadings listed in the Annex should be retained or removed, or whether subheadings not currently on the list should be added.
  – The level of the increase, if any, in the rate of duty.
  – The appropriate aggregate level of trade to be covered by additional duties.
  – In commenting on the inclusion or removal of particular tariff subheadings listed in the Annex, USTR requests that commenters address specifically whether imposing increased duties on a particular product would be practicable or effective to obtain the elimination of China’s acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product would cause disproportionate economic harm to U.S. interests, including small- or medium-size businesses and consumers. …
 
  Robert E. Lighthizer, United States Trade Representative. …

* * * * * * * * * * * * * * * * * * * * 

OGSOTHER GOVERNMENT SOURCES

OGS_a15. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

[No items of interest noted today.]
* * * * * * * * * * * * * * * * * * * *

* * * * * * * * * * * * * * * * * * * *

(Source:
DoD/DSS, 17 July 2018.)
 
The Personnel Security Management Office for Industry has provided a direct link to download the Hierarchy Change Request (HCR) form, which can be found
here.

* * * * * * * * * * * * * * * * * * * * 

(Source:
State/DDTC, 17 July 2018.)
 
Q: I found some information in a book at a library and I think it might be technical data. Do I need authorization from DDTC to republish this information?
 
A:
No. Information that is available in printed books, newspapers, journals, and magazines that you can buy in a physical bookstore or newsstand, check out from a public library, or receive in the mail through a subscription or 2nd class U.S. mail does not need any approval from DDTC for republication. The Department is providing this guidance to clarify the preamble of the June 3, 2015 Notice of Proposed Rulemaking (80 FR 31525) International Traffic in Arms: Revisions to Definitions of Defense Services, Technical Data, and Public Domain; Definition of Product of Fundamental Research; Electronic Transmission and Storage of Technical Data; and Related Definitions (Proposed Rule). The Department received public comments and other feedback from the public that raised questions about whether it was necessary to obtain the Department’s approval prior to republishing information found in books and academic journals.

* * * * * * * * * * * * * * * * * * * * 

(Source:
Official Journal of the European Union, 17 July 2018.)
 
Regulations:
* Council Regulation (EU) 2018/1001 of 16 July 2018 concerning restrictive measures in view of the situation in the Republic of Maldives
 
Decisions:
* Council Decision (CFSP) 2018/1006 of 16 July 2018 concerning restrictive measures in view of the situation in the Republic of Maldives

* * * * * * * * * * * * * * * * * * * * 

(Source:
Official Journal of the European Union, 16 July 2018.)
 
Regulations:
* Council Implementing Regulation (EU) 2018/999 of 16 July 2018 implementing Regulation (EU) 2016/1686 imposing additional restrictive measures directed against ISIL (Da’esh) and Al-Qaeda and natural and legal persons, entities or bodies associated with them.
 
Decisions:
* Council Decision (CFSP) 2018/1000 of 16 July 2018 amending Decision (CFSP) 2016/1693 concerning restrictive measures against ISIL (Da’esh) and Al-Qaeda and persons, groups, undertakings and entities associated with them.

* * * * * * * * * * * * * * * * * * * * 

(Source:
UK ECJU, 17 July 2018.)
 
The added licensing data for January to March 2018 can be found here.
 

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NWSNEWS

NWS_a112. Defense News: “Trump Advances ‘Buy American’ Arms Sales Plans”

(Source:
Defense News, 17 July 2018.)
 
U.S. President Donald Trump has approved the State Department’s implementation plan for the administration’s “Buy American” push for boosting weapons exports that emphasizes the U.S. economy, the State Department announced Monday.
The Trump administration is undertaking an effort to support U.S. defense trade overseas to strengthen security partnerships, encourage interoperability, and protect American economic security and jobs, said the State Department’s Tina Kaidanow, who was in London leading the
U.S. delegation at the Farnborough Airshow.
 
  “The point is that it is exactly reflected in a place like Farnborough, where we are supporting U.S. economic security, and we are also achieving a number of national security goals in conjunction with our important partners and allies overseas,” the principal deputy assistant secretary of state for political-military affairs said in a call with reporters.
 
The implementation plan for the rule changes, announced in April, are in part meant to reverse the perception that the State Department is a frequent site of logjams in the Foreign Military Sales process.
 
Officially called the Conventional Arms Transfer policy, it’s intended to help private U.S. defense firms directly sell some types of weapons and unmanned drones to allies without the firms having to go through the U.S. government.
 
Since April, the U.S. government has been working on implementation plans with industry, which hailed Monday’s move.
 
Aerospace Industries Association CEO Eric Fanning said its recommendations for a strategic focus, whole-of-government coordination and enhanced accountability feature prominently in the implementation plan.
 
“It is absolutely essential for our government and our industry to get to the right answers on defense trade with our allies sooner so that we can continue to ‘outpartner’ our adversaries,” Fanning said. “Going forward, we commit to expanding our already robust dialogue and partnership with the government’s security cooperation enterprise to sustain and grow the competitiveness of U.S. defense exports.”
 
The U.S. already leads the world in arms transfers. In 2017, the State Department approved $42 billion in government-to-government sales; and so far this year, 2018 is on track to beat last year at $46 billion.
 
The State Department, under its plans outlined Monday, would help allies to identify critical capability requirements and employ a whole-of-government effort to expedite transfers.
 
In February, Kaidanow led a large U.S. delegation to Asia’s largest air show to pitch U.S. arms sales as China’s military footprint and political influence are surging. What’s spelled out in State’s plans is competition with adversaries by “providing allies and partners with alternatives to foreign defense articles in order to maintain U.S. influence in key regions.”
 
The plans also call for State to work with the defense industry to build exportability into its designs and development efforts, expanding support for non-program-of-record systems, and by incentivizing increased production capacity and timely delivery.
The State Department would tweak relevant rules, like the International Traffic in Arms Regulations framework; expand and enhance government advocacy and trade promotion in support of the American defense industry; and avoid offsets that imperil domestic jobs or reduce America’s technological edge.
 
The implementation plan may finally give the Defense Department and military services some much-needed direction on how to better align itself for arms deals.
 
The Air Force was standing by to hear from the White House – through the Defense Department – on how to move forward, its undersecretary, Matt Donovan, told Defense News on the sidelines of Farnborough.
 
  “We are waiting for implementation guidance from the White House,” he said Monday morning, just a couple hours before news hit of the approved plan. The Pentagon “and folks like [Under Secretary of Acquisition and Sustainment] Ellen Lord are getting ready to posture us for when that implementation guidance comes out. But as of right now, we’re still waiting.”

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NWS_a213
. Epoch Times: “Chinese National Pleads Guilty to Stealing US Military Technology”

(Source:
Epoch Times, 16 July 2018.)
 

[Editor’s Note: Cathy Chen was already arrested 23 May 2017, as we reported in the
Wednesday 24 May 2017, Daily Bugle, item #6.]

 
A Chinese national living in California recently pleaded guilty to stealing U.S. military technology on behalf of the Chinese regime.
 
Between 2013 and 2015, Cathy Chen, whose Chinese name is Chen Si, sent “advanced radar, military-grade communications jammers, low-noise amplifiers, and Ka-band space communications” to China via Hong Kong, without seeking approval from the U.S. Department of Commerce, according to a July 12 report by Orange County Weekly, a California newspaper, citing federal prosecutors. Products with sensitive technology are under export control and require special permission to ship overseas.
 
Chen, who used multiple aliases since arriving in the United States in 2007, was able to obtain the technology through her role providing accounting services for aerospace companies, including U.S. defense contractors.
 
She falsified immigration papers in order to continue staying in the country. In 2012, she married a Chinese man who graduated from a Communist Party military training school in China.
 
Chen’s father also has ties to the military, according to OC Weekly.
 
After obtaining the military equipment, Chen conspired with several companies based in Shenzhen in southern China to conceal the true destination and user of the equipment. The companies include Chen Archangel Systems Space, Century Electronic International Co., and Star Aero Investment Ltd.
 
Federal agents obtained records showing that Chen used a disposable cell phone to reach a Chinese contact, who instructed her to, when asked, insist that the technology would not leave the United States.
 
She received more than $200,000 in payments for making the shipments.
 
Chen faces a maximum of 50 years in prison and penalties up to $1.75 million. Her sentence will be announced on Oct. 1.
A number of Chinese nationals have been caught by U.S. authorities stealing military technology in order to support the Chinese regime’s attempts to catch up with U.S. military.
 
In September 2017, Yiheng Percival Zhang, a Chinese professor teaching biological systems engineering at Virginia Tech, was charged with conspiring to defraud the federal government. His research involved the U.S. Army, air forces, and the National Defense University.
 
Two Chinese nationals were charged with economic espionage and theft of trade secrets in 2015, after they conspired to steal source code and other key military technology from their American employers, Avago Technologies in Colorado and Skyworks Solutions in Massachusetts.

* * * * * * * * * * * * * * * * * * * * 

(Source:
Sandler, Travis & Rosenberg Trade Report, 17 July 2018.)
 
The leaders of the U.S. and the United Kingdom said after a July 13 meeting that their countries plan to pursue a bilateral free trade agreement once the UK formally leaves the European Union in March 2019. Lower-level officials met recently to discuss specific trade-related items that could factor into future FTA talks.
 
Prime Minister Theresa May said she and President Trump agreed to pursue an “ambitious” FTA that will build on the UK’s independent trade policy, reduce tariffs, deliver “a gold standard” in financial services cooperation, and “seize the opportunity of new technology.” Trump said his goal is for the two partners to trade without any restrictions, which could “double, triple, quadruple” the current level of two-way trade.
 
May denied reports that her most recent plan for withdrawing the UK from the EU would limit London’s ability to negotiate FTAs with other countries. She asserted that once Brexit is complete the UK will no longer be in the EU customs union and will therefore have an independent trade policy, which it will use to “do a trade deal” with the U.S. and other countries. Although he reportedly said a day earlier that May’s plan “will probably kill” chances for a U.S.-UK FTA, Trump said after talks with May that he has no preference for what the UK-EU relationship ultimately looks like and is only concerned that the UK is “going to be able to trade with the United States.”
 
Ahead of the two leaders’ meeting the U.S.-UK Trade and Investment Working Group met in London July 10-11. According to a press release from the Office of the U.S. Trade Representative, this group is working to provide commercial continuity for businesses, workers, and consumers as the UK leaves the EU and to lay the groundwork for a potential future FTA. Toward that end last week’s meeting covered topics such as industrial and agricultural goods, services and investment, digital trade, intellectual property rights, regulatory issues, and small and medium-sized enterprises.

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COMMCOMMENTARY

COMM_a0
15. M. Volkov: “Four Current FCPA Enforcement Trends”

(Source: Volkov Law Group Blog, 16 July 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
There are two distinct themes in FCPA enforcement – the first is consistency, i.e., that some enforcement actions are relatively consistent across the board and, in the last five to ten years, the FCPA caseload has been fairly steady; the second is variability, meaning that new policies have an impact on FCPA enforcement.  Some minor and some major.  All of this may be another in my series of profound grasps of the obvious.
 
While many have criticized the Justice Department and the SEC over their FCPA enforcement practices, a closer look shows that the most significant impact continues to be allocation of resources.  DOJ and the SEC have devoted significant resources to increase the number of attorneys assigned to the DOJ’s FCPA Unit and the SEC’s FCPA Unit, including leveraging of attorneys in US Attorney’s Offices and SEC attorneys in SEC field offices.  The dedication of three FBI squads has an impact as well.
 
When the government allocates personnel, the attorneys and agents are expected to perform – to open investigations and prosecute cases.  Case numbers ebb and flow each year, some years have more and some lower.  Significantly, the number of cases brought each calendar year really does not reflect the amount of work completed by DOJ and the SEC – the investigations continue at their own pace and re not tied to any calendar year requirements (except when we observed completion of a number of cases at end of Obama Administration).
 
To make myself clear, there has been no significant change in FCPA enforcement during the Trump Administration or, to say it another way, resources always reflects policy.  The current Administration is no different than any other when it comes to FCPA enforcement.  If changes were to occur, the Administration would have to reallocate resources or make a significant policy shift which no one expects to occur.  So, call it what you will, FCPA enforcement is here to stay for the foreseeable future.
 
A second observation relates to the assignment of corporate monitors in FCPA cases.  In 2016, FCPA enforcement hit a highwater mark and assigned corporate monitors in eight separate cases.  This year, we have only had one corporate monitor assigned which was in the Panasonic enforcement action.  To replace this requirement, DOJ and the SEC have pushed specific periodic review and reporting requirements.  Whether this is a good or a bad idea depends on how much scrutiny DOJ and the SEC devote to review of the report.  If such reports are not carefully reviewed and questioned, the self-reporting requirement is unlikely to have any significant impact; on the other hand, if DOJ reviews and questions the company’s report, DOJ and the SEC can advance corporate accountability.
 
Another important area is the impact of the Yates Memorandum.  There is no question that DOJ’s commitment to the yates Memorandum has increased overall its enforcement against individual actors, particularly in the auto safety and emissions fraud prosecutions.  In the FCPA enforcement area, we have seen a “new” trend in the use of non-FCPA charges, such as money laundering, against recipients of foreign bribes.  As for “traditional” FCPA prosecutions of individuals, so far, six individuals have been charged in 2018.
 
Finally (and perhaps most significantly), DOJ and the SEC have raised their expectations with regard to corporate remediation efforts as part of an overall FCPA settlement.  DOJ and the SEC hold companies accountable for imposing strict and aggressive discipline of officers and employees responsible for misconduct, stretching to supervisors who failed to hold employees accountable or who otherwise failed to investigate potential misconduct by staff members.  Companies have to exercise a robust disciplinary response, including senior officers, or face the prospect of negligible credit for remediation.  Even those companies that have designed and implemented effective ethics and compliance programs may earn negligible credit if they do not exact proper disciplinary actions against employees who engage in misconduct.

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COMM_a01
16. R.L. Magielnicki, R. Whitten & M. Levarlet: “Reform of Foreign Investment in the U.S.: France and Other Allied Countries Might be Exempt”

(Source: Sheppard Mullin LLP, 13 July 2018.)
 
* Authors: Robert L. Magielnicki, Esq., rmagielnicki@sheppardmullin.com, +1 202-747-1910; Reid Whitten, Esq., rwhitten@sheppardmullin.com, +44 203.178.7831; Malika Levarlet, Esq., mlevarlet@sheppardmullin.com, +1 202-747-2182. All of Sheppard Mullin LLP.
 
The U.S. House of Representatives passed a bill on Tuesday, July 10, expanding and increasing the powers of the Committee on Foreign Investment in the United States (CFIUS). The bill is called the Foreign Investment Risk Review Modernization Act (FIRRMA).
 
The 400-2 passage in the House shows an overwhelming bipartisan momentum behind FIRRMA and signals that the bill is likely to be on the President’s desk for signature as soon as the House and Senate reconcile their versions. The timing of the actions is not coincidental. It appears that the Trump Administration has decided to let Congress take the lead on increasing scrutiny of foreign investments.
 
We have reported on the proposed content of FIRRMA (here and here), and the list of the bill’s main points have been recited throughout the law-blogging world. However, now that the bill is on the brink of passage, we believe it is worth examining three key elements that will have significant impact on foreign investors and U.S. companies.
 
Exemptions from the CFIUS Process
 
It will come as good news for certain investors that the bill may make it easier for numerous U.S.-allied countries including France to invest in the United States. The draft bill authorizes CFIUS to exempt from its review transactions in which all foreign persons involved are from a country identified by the Committee (i) as having processes which effectively safeguard national security interests the country shares with the U.S.; (ii) is a NATO member country or is a major non-NATO ally; or (iii) as adhering to nonproliferation control regimes. That likely creates a list of candidates for exemption to include:
 
  – The NATO Countries;
  – Australia;
  – New Zealand;
  – South Korea;
  – Japan; and
  – The Philippines
 
Investments from that group of countries comprise the majority of foreign direct investment in the United States, particularly as we understand that Chinese investment in the United States has dropped 90%.
 
Expansion of Covered Transactions
 
FIRRMA will significantly expand CFIUS’s authority to review inbound foreign investments, particularly in technology, even where those investments do not result in control of the U.S. company by a foreign entity. The definition of “covered transactions,” that is, transactions which CFIUS has jurisdiction to review, would be expanded to include any investment (other than a passive investment) by a foreign person in any U.S. critical technology company or U.S. critical infrastructure company, regardless of whether such investment would result in foreign control. It also would include the purchase or lease of real estate located at a land, air or maritime port, or that is in close proximity to a military installation or other sensitive government facility.
 
Enhanced Export Controls
 
Beyond the changes to CFIUS’s mandate, FIRRMA would also require the update and enhancement of U.S. controls on exporting leading-edge technologies. Currently, U.S. export controls lag behind emerging technology. Much of the straight-from-science-fiction developments coming out of Silicon Valley and elsewhere are simply not contemplated by the years-old regulations.
 
FIRRMA would require a group of executive agencies, led by the Secretary of Commerce, to identify “emerging and foundational technologies” that “are essential to the national security of the United States.” The bills do not specifically list technologies to target, but we can expect that robotics, autonomous vehicles, and artificial intelligence will be at the top of the list. None of those technologies are specifically controlled under current U.S. export regulations.
 
While the expansion of CFIUS powers would likely be implemented fairly directly through regulation, FIRRMA’s export control changes would be promulgated through changes to the Export Administration Regulations already in place. Because the export control changes would require changing or adding to complex and nuanced rules, as well as years of established practice by exporters, it is possible, even likely, that changes by that route may take years to take any major effect.
 
The Takeaway
 
A wide variety of companies will be affected by FIRRMA. U.S. companies developing new technology or exporting controlled items, and non-U.S. companies considering investments in the United States will need to make planning adjustments based on the changes we see coming out of Congress this Summer.

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COMM_a3
17.
R.C. Burns: “Chronicle of a Death Foretold”

(Source: Export Law Blog, 17 July 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, Clif.Burns@bryancave.com, 202-508-6067).
 
Of course, the Interwebs are all abuzz with the news that the Directorate of Defense Trade Controls (“DDTC”) settled the Defense Distributed case as if that were somehow remarkable.  Of course, it was about as remarkable as 100-degree days in DC in August or the All-Star Game being a pointless, mind-numbing bore.  DDTC’s position in this case was on life support, if not already dead, since last May when DDTC and BIS finally announced export control reform which would result in the transfer of most firearms and related technical data, including the types of firearms described in the 3-D printing plans at issue in the  case, from the jurisdiction of DDTC to that of the Bureau of Industry and Security (“BIS”).
 
It is no secret that BIS and DDTC have radically different ideas about the consequences of putting something of the Internet.   As far as DDTC is concerned, putting anything of the Internet is an export of that item to every foreign country with access to the Internet, i.e., everywhere but the outer reaches of Mongolia.  BIS, on the other hand, takes the position that publication on the Internet means that an item is no longer subject to export controls.  As BIS said in its proposed notice of rulemaking:
 
[I]f a gun manufacturer posts a firearm’s operation and maintenance manual on the Internet, making it publicly available to anyone interested in accessing it and without restrictions on further dissemination (i.e., unlimited distribution), the operation and maintenance information included in that published operation and maintenance manual would no longer be “subject to the EAR.”
 
So once the Category I transition is complete, the fat tenor has sung and the game is over.
 
DDTC, of course, could have waited until the last notes of Nessun Dorma, but instead agreed to move ahead. To do that before the transition of the firearms in question to BIS was complete, there are several housekeeping matters that the settlement agreement needed to address. First, DDTC agreed to continue with the announced proposed rules and to adopt a final rule that would remove the plans at issue from Category I of the USML. Second, DDTC would announce a temporary modification of the rules to exempt the plans prior to the transition from the USML to the Commerce Control List becoming effective. Third, DDTC agreed to issue a letter saying that the plans had been approved for public release – something not really necessary in light of the temporary modification of the rules to exempt the plans. Fourth, an acknowledgment that the letter permitted people to do whatever they wanted with those plans – again something not really necessary in light of the temporary modification and the letter itself.
 
What comes as a surprise to me was not that DDTC dropped the case, or that it did so before the guns at issue were removed from the USML, but that it agreed to fork over $39,581 to the plaintiffs. Granted that’s not a huge sum. Still, DDTC has not conceded that its position that putting USML technical data on the Internet is an export is wrong. Indeed, that will continue to be the case for items remaining on the USML. Well, I guess lawyers have to eat too.

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TECEX/IM TRAINING EVENTS & CONFERENCES

(Source: Full Circle Compliance,
events@fullcirclecompliance.eu.)
 
Our next academy course is specifically 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

 

Isaac Watts (17 Jul 1674 – 25 Nov 1748; was an English Christian minister (Congregational), hymn writer, theologian, and logician. He was a prolific and popular hymn writer and is credited with some 750 hymns, including Joy to the World, O God Our Help in Ages Past, and When I Survey the Wondrous Cross.  Watts is recognized as the “Godfather of English Hymnody;” many of his hymns remain in use today and have been translated into numerous languages.)
  – “Learning to trust is one of life’s most difficult tasks.”

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EN_a320
. 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_a0321
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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