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18-0726 Thursday “Daily Bugle”

18-0726 Thursday “Daily Bugle”

Thursday, 26 July 2018

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

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Revises Section 2.8 of LOA Standard Terms and Conditions
  4. State/DDTC: (No new postings.)
  1. Breaking Defense: “Mattis Makes New Plea to HASC For Russian Sanctions Relief”
  2. Expeditors News: “CBP Releases Section 301 Trade Remedies FAQ”
  3. Reuters: “U.S. Threatens Sanctions Unless Turkey Releases American Pastor”
  4. Washington Examiner: “Treasury: Massachusetts Smugglers Helped Assad’s Chemical Weapons Program
  1. American Shipper: “Talking Trade with Former BIS Chief Eric Hirschhorn”
  2. M. Volkov: “Artificial Intelligence, Hype and Financial Misconduct”
  3. R.C. Burns: “Tinker, Tailor, Dinner Planner, Spy”
  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

[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

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

* DoD; Defense Security Service; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Certificate Pertaining to Foreign Interest [Publication Date: 27 July 2018.]    

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OGS_33. DoD/DSCA Revises Section 2.8 of LOA Standard Terms and Conditions

(Source:
DoD/DSCA
, 26 July 2018.
)
 
  – In correspondence with Defense Procurement Acquisition Policy’s (DPAP) revision of the DFARS, the DSCA 18-35 will amend Standard Terms and Conditions (STC) 2.8 by removing specific reference to the DFARS by clause and referring to the general USG offset policy that “although offset agreements, as defined in the Defense Federal Acquisition Regulation Supplement, are not within the scope of the DoD contracts entered into to fulfill the requirements of this LOA, offsets may be reimbursed through such contracts.” STCs will continue to reflect the USG law and policy on offsets and direct the foreign partner to seek information from Industry.

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NWSNEWS

(Source:
Breaking Defense, 25 July 2018.) [Excerpts.]
 
Defense Secretary James Mattis fired off a new letter to House Armed Services leadership on Tuesday, asking lawmakers again to vote in favor of waivers for certain countries Washington is trying to sway into its orbit, but who continue to do business with Russian defense firms.
 
The letter was delivered to House Armed Services Committee (“HASC”) chairman Rep. Mac Thornberry and Ranking Member Rep. Adam Smith on Tuesday, a day before the full House was set to vote on the 2019 National Defense Authorization Act containing language broadly supporting the waivers.
 
In the missive (which can be found here) obtained by Breaking Defense, Mattis asked for the Secretary of State to be given the ability to waive sanctions so the United States could “sell military equipment and enable countries pulling away from the Russian orbit.” He wrote that the waivers “would not benefit Russia; it will only benefit the U.S. and countries willing to pursue a security relationship with us.”
 
The House is expected to vote on the bill Wednesday night, while the Senate is slated to vote next month on the $716 billion defense spending package.
 
But any waivers would give the green light to countries such as India and Vietnam – who have long relied on Russian weapons – to avoid American sanctions. It would, in the end, benefit segments of the Russian defense industry since it would remove any economic pain from continuing the relationship.
 
For India in particular, the waivers would be a huge boon to the modernization of their armed forces, which use an often motley mix of Russian, American, and European-made weapons. …

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(Source:
Expeditors News, 25 July 2018.)
 
On July 24, 2018, U.S. Customs and Border Protection (“CBP”) posted a list of Frequently Asked Questions (FAQ) on Section 301 trade remedies.
 
CBP breaks up the FAQ into three sections: general, bonds, and harmonized tariff questions. In these sections, CBP provides answers on such topics as:
 
  – Drawback;
  – Foreign Trade Zones;
  – Section 321;
  – Product exclusions;
  – Temporary Importation Bonds;
  – Sets packaged for retail sale;
  – Chapter 98.
 
CBP directs any further inquiries to the U.S. Trade Representative’s (“USTR”) Notice of Action regarding Section 301; any questions related to Section 301 entry filing requirements should be emailed to
traderemedy@cbp.dhs.gov.
 
The FAQ may be found here.
 
The USTR’s Notice of Action may be found
here.

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(Source:
Reuters, 26 July 2018.)
 
U.S. President Donald Trump on Thursday threatened to slap “large sanctions” on Turkey unless Ankara freed an American pastor whose detention has further strained relations between the NATO allies.
 
The Trump administration escalated the pressure campaign to free Andrew Brunson a day after a court ordered that he be moved to house arrest after 21 months in detention. He is on trial for terrorism charges.
 
  “The United States will impose large sanctions on Turkey for their long-time detainment of Pastor Andrew Brunson, a great Christian, family man, and wonderful human being,” Trump wrote in a tweet.

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(Source:
Washington Examiner, 25 July 2018.) [Excerpts.]
 
A couple living in Massachusetts exported electronics to aid Syrian dictator Bashar Assad’s chemical weapons program, the Treasury Department said Wednesday in a statement announcing new sanctions. …
 
Treasury took aim Wednesday at the electronics supply for Syria’s Scientific Studies and Research Center, which develops Assad’s chemical weapons. Treasury officials blacklisted eight people and five entities, including Antoine Ajaka and Anni Beurklian. Based in Waltham, Mass., the pair worked for years to circumvent American export controls to provide Assad’s chemical weapons team with high-end electronics from the United States.
 
  “These defendants were key players in a sophisticated scheme to illegally export electronics, computer equipment, and electrical switches to enhance Syria’s capacity to produce weapons of mass destruction,” Special Agent Harold Shaw said in the announcement. “The FBI will continue to work closely with our law enforcement partners to detect, thwart, and bring to justice those who seek to kill innocent people and defraud the United States.”
 
Ajaka and Beurklian were indicted in March, but Justice Department officials at the time accused them of providing parts for improvised explosive devices. Treasury’s announcement identified them as providing support for some of the most egregious war crimes of the 21st century – Assad’s repeated use of chemical weapons on the Syrian people in the course of the ongoing civil war. They fled the United States in January, in the midst of plea deal negotiations. …

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COMMCOMMENTARY

COMM_a0
9.
American Shipper: “Talking Trade with Former BIS Chief Eric Hirschhorn”

(Source: 
American Shipper, July, 2018.)
 
Former Under Secretary of Commerce Eric Hirschhorn, in 
an interview with “The American Shipper,” has expressed the view that BIS’s performance of its expanded duties under Export Control Reform would justify moving all licensing of direct commercial sales of arms to that agency–with full consultation with the Departments of Defense and State. 
Hirschhorn also suggested that export control enforcement could be improved by transferring the ICE agents who currently work on export control enforcement to BIS’s Office of Export Enforcement. There, Hirschhorn argues, they could spend full time on export enforcement and would benefit from the resulting expertise in the complex export regulations and close coordination with BIS’s licensing officers.

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COMM_a01
10. 
M. Volkov: “Artificial Intelligence, Hype and Financial Misconduct”

(Source: 
Volkov Law Group Blog, 25 July 2018. Reprinted by permission.) 
 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com,
 240-505-1992. 
 
The compliance world, like business in general, is being inundated with “trends” and claims of “new technology” that inevitably (is or) will transform our economy.  There is no question that artificial intelligence holds great promise for compliance and our entire economy.
 
When you boil down artificial intelligence, it is built on two significant developments – the creation and collection of large data sets (sometimes called “assets”) and most importantly, advances in computer technology and power.  Over the last ten years, computer technology in terms of speed and computational capabilities has been revolutionary.
 
The developments in data has resulted in the new focus on “big data,” that is the ability of companies to generate, organize and store large amounts of data relating to its business operations.  Coupled with greater computer power and the ease with which such power is distributed among users (e.g. our smartphones), the trend is unmistakable – large amounts of data can be quickly mined or processed to identify a host of data sets, anomalies and other interesting inferences and results.
 
The revolution in this area is initially being advanced by financial institutions because they generate large numbers of transactions and have significant need to identify anomalies or potential fraud.  Credit card fraud is a massive problem that costs the industry as much as 5 percent of its annual revenues.
 
In the corporate compliance space, however, artificial intelligence or machine learning has had an impact in two areas: financial misappropriation and due diligence.
 
Internal audit faces an unending challenge in identify as quickly as possible potential fraud or misappropriation of corporate resources.  It is easy to recognize the threat – money can be accessed and then used for illegal purposes such as paying bribes.  Here, artificial intelligence and data analytics can identify early potential anomalies.  Forensic accountants live for the moment when they are able to identify an “anomaly,” meaning a suspect transaction (or set of transactions).
 
When reviewing a large amount of internal corporate data, finding anomalies is more difficult than locating the proverbial needle in a haystack.   Artificial intelligence – computer powered processing of large data sets – is now feasible for many companies to implement.  As a result, companies will be able to internally monitor financial transactions closer to the occurrence of the transaction. Internal audit can now develop real-time monitoring programs.
 
As companies digitize their processes, they develop real audit trails in their enterprise management systems.  Applying artificial intelligence processes to monitoring and reviewing large collections of financial transaction data results in increased accuracy in identification of anomalies.
 
Artificial intelligence is not the magic bullet for financial accountants but it is and will be a valuable tool in every company’s arsenal in the battle against fraud. Companies need to explore artificial intelligence capabilities, the application of such processes to their activities, and develop a strategy for implementing artificial intelligence on a cost-effective basis.  By 2021, most companies will incorporate artificial intelligence – machine learning into their internal applications.  Organizations that face large fraud risks will have greater need for implementing artificial intelligence solutions.
 
It is important to remember, however, that artificial intelligence fraud detection strategies should never be the only solution used by a company.  Relying on predictive fraud detection may be helpful but should never be the only means to detect suspect transactions.  Anomaly detection requires flexible approaches and strategies as fraudsters employ new or different schemes to carry out their crimes.
 
Fraud detection requires a holistic approach to harness artificial intelligence and detection strategies.  A multi-layered approach may be an effective way to balance a company’s strategy.  The challenge is to translate artificial intelligence into actionable intelligence.

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COMM_a3
11. 
R.C. Burns: “Tinker, Tailor, Dinner Planner, Spy”

(Source: 
Export Law Blog, 25 July 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Wash DC, 
Clif.Burns@bryancave.com, 202-508-6067).
 
Prosecutions for violations of the Foreign Agents Registration Act (“FARA”) might kindly be thought of as press ops for prosecutors and catnip for reporters.  And the recent indictment of Maria Butina certainly fits that description:  Spies!  Sex!  Twitter exchanges!  Red Sparrow!  A duped “boyfriend”!!!  Sell me the movie rights now.
 
On the other hand, economic sanctions prosecutions are boring.  Specially Designated Nationals . . . yawn.  The International Emergency Economic Powers Act . . . big yawn.
 
But the, ahem, sex appeal of a FARA case as opposed to an IEEPA case may well be a possible explanation for why Butina was indicted under FARA rather than under IEEPA for having performed services in the United States on behalf of a Russian SDN.  It seems to me that the FARA case has some significant difficulties whereas the IEEPA case approaches being a slam dunk.
 
To simplify matters somewhat, to prosecute Butina for failing to register as a foreign agent, the government needs to prove that she engaged in political activities on behalf of a foreign person in the United States.   The Act defines “political activities” as
 
any activity that the person engaging in believes will, or that the person intends to, in any way influence any agency or official of the Government of the United States or any section of the public within the United States with reference to formulating, adopting, or changing the domestic or foreign policies of the United States or with reference to the political or public interests, policies, or relations of a government of a foreign country or a foreign political party.
 
But the 
affidavit in support of the criminal complaint against Butina, which provides the most detailed statement of the government’s case, summarizes Butina’s activities in the United States as follows:
 
BUTINA’s efforts in the United States to promote the political interests of the Russian Federation were diverse and multifaceted, including BUTINA’s efforts to organize a series of “friendship and dialogue” dinners, some of which are believed to have taken place in the District of Columbia, as well as BUTINA’s attendance at two National Prayer Breakfasts in the District of Columbia.
 
It certainly seems to me that going to two prayer breakfasts and arranging dinners probably don’t constitute “political activities.”  But perhaps the government thinks that if it can put a Russian in the dock and yell “Spy!” enough times, the jury won’t be bothered with such legal niceties as the proper outlines of “political activities” under the law.
 
On the other hand, the criminal complaint provides detailed information on Butina’s interactions with her handler in Moscow, who was not named, but is 
almost certainly Alexander Torshin.  Torshin was placed on OFAC’s SDN List on April 6, 2018.  To prove a violation of the Ukraine sanctions, it would only be necessary to show that Butina provided “funds, goods, or services by, to, or for the benefit of” Torshin.  The definition of providing services is, of course, significantly broader than the definition of “political activities” in FARA.
 
Now although the actions in the criminal complaint pre-date Torshin’s designation in April 2018, there is no reason to believe that Butina was not continuing to act on Torshin’s behalf after his designation.   The complaint details actions by Butina in cooperation with Torshin as late February 8, 2017. Of course, there is a chance that government has no evidence after the designation or has reasons not to reveal such evidence, but I still think that a sanctions case, if there were services performed after April 6, 2018, would be a much easier case to win.

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ENEDITOR’S NOTES


George Bernard Shaw (26 Jul 1856 – 2 Nov 1950; was an Irish playwright, critic, polemicist, and political activist. He wrote more than sixty plays, including major works such as 
Man and Superman (1902), 
Pygmalion
(1912), and 
Saint Joan (1923). With a range incorporating both contemporary satire and historical allegory, Shaw became the leading dramatist of his generation, and in 1925 was awarded the Nobel Prize in Literature.)
  – “Silence is the most perfect expression of scorn.”
  – “We don’t stop playing because we grow old; we grow old because we stop playing.”

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EN_a313
. 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_a0314
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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