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18-0809 Thursday “Daily Bugle”

18-0809 Thursday “Daily Bugle”

Thursday, 9 August 2018

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here for free subscription. Contact us for advertising inquiries and rates
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  1. State: DTAG to Meet on 25 Oct in Wash DC
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Releases Policy Memo Concerning NC Charge Revision for F-35 A/B/C Aircraft and Engines
  4. State Imposes Chemical and Biological Weapons Control and Warfare Elimination Act Sanctions on Russia
  5. State/DDTC: (No new postings.)
  6. India DGFT Posts Updated Rates for Certain HS Codes under MEIS
  1. Business Insider UK: “Trump Gives European Countries ‘The Willies’ About Buying U.S. Weapons, But He’s Not Their Only Concern”
  2. CNN: “Trump Administration Slaps More Sanctions on Russia After Skripal Poisonings”
  3. Defense News: “How Should One Grade Trump’s Export Reform Policy?”
  4. Expeditors News: “China Implements Changes to Customs Declaration Forms and Filling Rules”
  1. G.R. Tuttle III: “And Here It Is – The Final List 2”
  2. K. Brockman: “3D-Printable Guns and Why Export Controls on Technical Data Matter”
  3. K.C. Georgi, M.M. Hassoun & R.K. Alberda: “President Trump Re-Imposes First Wave of Sanctions Against Iran and EU Expands Blocking Regulation to Cover US Secondary Sanctions Legislation on Iran”
  4. R.C. Burns: “Sanctions in Name Only Imposed on Russia for Nerve Gas Attack”
  1. ECTI Presents “United States Export Control (EAR/OFAC/ITAR) Seminar” in Amsterdam, 15-18 Oct
  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 (3 Aug 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
. State: DTAG to Meet on 25 Oct in Wash DC

(Source: Federal Register, 9 Aug 2018.)
 
83 FR 39492-39493: Defense Trade Advisory Group; Notice of Open Meeting
  The Defense Trade Advisory Group (“DTAG”) will meet in open session from 1:00 p.m. until 5:00 p.m. on Thursday, October 25, 2018 at 1777 F Street NW, Washington, DC 20006. Entry and registration will begin at 12:30 p.m. The membership of this advisory committee consists of private sector defense trade representatives, appointed by the Assistant Secretary of State for Political-Military Affairs, who advise the Department on policies, regulations, and technical issues affecting defense trade. The purpose of the meeting will be to discuss current defense trade issues and topics for further study. The following agenda topics will be discussed and final reports presented:
 
  (1) Oversight of technical data under the ITAR and NISPOM;
  (2) Challenges regulated entities face in advising the Department of ownership changes that implicate existing licenses and foreign persons, and processes the Department may implement to facilitate the provisions of this information;
  (3) Possible schedule for future ongoing periodic review of USML categories;
  (4) Developing a definition for common carrier; and
  (5) Issues that exist with licensing of defense articles, including intelligence related products, related technical data, and defense services to the “Five Eyes” countries of the U.S., UK, Australia, Canada and New Zealand.
 
Members of the public may attend this open session and will be permitted to participate in the question and answer discussion period following the formal DTAG presentation on each agenda topic in accordance with the Chair’s instructions. Members of the public may also, if they wish, submit a brief statement (less than 3 pages) to the committee in writing for inclusion in the public minutes of the meeting. As seating is limited to 125 persons, each member of the public that wishes to attend this plenary session must provide: His/her name and contact information such as email address and/ or phone number and any request for reasonable accommodation to the DTAG Alternate Designated Federal Officer (DFO), Anthony Dearth, via email at DTAG@state.gov by COB Monday, October 8, 2018. If notified after this date, the Department might be unable to accommodate requests due to requirements at the meeting location. One of the following forms of valid photo identification will be required for admission to the meeting: U.S. driver’s license, passport, U.S. Government ID or other valid photo ID.
* FOR FURTHER INFORMATION CONTACT: Ms. Barbara Eisenbeiss, PM/DDTC, SA-1, 12th Floor, Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, U.S. Department of State, Washington, DC 20522-0112; telephone (202) 663-2835 or email DTAG@state.gov.
 
  Anthony M. Dearth, Alternate Designated Federal Officer, Defense Trade Advisory Group, Department of State.

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OGSOTHER GOVERNMENT SOURCES

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. Items Scheduled for Publication in Future Federal Register Editions
 

(Source:
Federal Register)
* DHS/CBP; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Free Trade Agreements [Publication Date: 10 Aug 2018.]

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4.
DoD/DSCA Releases Policy Memo Concerning NC Charge Revision for F-35 A/B/C Aircraft and Engines
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5.
State Imposes Chemical and Biological Weapons Control and Warfare Elimination Act Sanctions on Russia

(Source: 
State, 8 Aug 2018.)
 
Following the use of a “Novichok” nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal, the United States, on August 6, 2018, determined under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act) that the Government of the Russian Federation has used chemical or biological weapons in violation of international law or has used lethal chemical or biological weapons against its own nationals.
 
Following a 15-day Congressional notification period, these sanctions will take effect upon publication of a notice in the Federal Register, expected on or around August 22, 2018.

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6. State/DDTC: (No new postings.)
(Source: State/DDTC)
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7. 
India DGFT Posts Updated Rates for Certain HS Codes under MEIS

(Source: 
India Directorate General of Foreign Trade (DGFT), 9 Aug 2018.) 
 

The updated rates for the HS codes in Appendix 3B, Table 2 under the Merchandise Exports from India Scheme (“MEIS”) can be found here.

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NWSNEWS

NWS_a08. 
Business Insider UK: “Trump Gives European Countries ‘The Willies’ About Buying U.S. Weapons, But He’s Not Their Only Concern”

(Source: 
Business Insider UK, 9 Aug 2018.) [Excerpts.] 
 
President Donald Trump’s broadsides against NATO are stoking resentment among the US’s European allies. … 
 
Trump’s actions have helped build “a narrative in Europe where European leadership says, ‘We do need to spend more money on defense. We do need to build up our military capability because we feel we can’t depend on the United States,'” said Jim Townsend, [adjunct senior fellow in the Transatlantic Security Program at the Center for a New American Security] who also worked in foreign military sales at the U.S. Defense Security Cooperation Agency. … 
 
Other decisions by the U.S have led some in Europe to believe they need a non-U.S. avenue through which to develop their defense industries.
 
In France – one of the 
biggest arms exporters in the world – frustration has grown over the US withholding clearance for the sale of the Scalp cruise missile, which includes U.S.-made components. The U.S.-made parts are critical for the long-range weapon, and Washington’s decision not to authorize the transfer upended a deal for France to sell Rafale fighter jets to Egypt.
 
The ability to block the sale came through the International Traffic in Arms Regulations, an export-control regulation overseen by the U.S. government.
 
In response, French officials have said they’re looking for a way around ITAR – and to gain more autonomy.
 
  “It is true that we depend on this (US International Traffic in Arms Regulations) mechanism: We are at the mercy of the Americans when our equipment is concerned,” French Armed Forces Minister Florence Parly told legislators in early July, 
according to Defense News. … 
 
  “Those kind of things – the F-35 to Turkey, the U.S. under ITAR, the U.S. saying to the French, ‘Sorry, we’re not going to let you export to Egypt,’ and then all this stuff with Trump – all of that is doing nothing but increasing the motivation within Europe to build up their own military capabilities, based on their own industries, and screw the U.S.,” said Townsend, referring to a move by Congress that would 
withhold the transfer of F-35 fighter jets to Turkey.
 … 

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(Source: 
CNN, 9 Aug 2018.) [Excerpts.] 
 
The Trump administration will impose more sanctions on Russia under a chemical and biological warfare law following the poisoning of a former Russian agent and his daughter in the UK earlier this year, the State Department announced Wednesday.
 
In a statement Wednesday, State Department spokeswoman Heather Nauert said the US had made this decision on Monday, and accused Russia of violating international law. The statement anticipated the sanctions would go into effect around Aug. 22 in line with the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991. … 
 
The State Department notified Congress on Wednesday of the first of two potential tranches of sanctions required under the 1991 law. Unless Russia takes certain steps, a second set of penalties — more stringent than this first round — must follow, according to the law. … 

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(Source: 
Defense News, 8 Aug 2018.) 
 
An increase in defense exports will be key for judging the effectiveness of 
President Donald Trump’s efforts to 
make the arms sales process more efficient, but that shouldn’t be the only measure of success, said a panel of U.S. government officials, arms control advocates and industry on Aug. 8.
 
Last month, the president signed off on an implementation plan for the new Conventional Arms Transfer policy, which is aimed at 
cutting down the red tape associated with the foreign military sales process.
 
To do that, the U.S. government must move to a more proactive posture, working with Congress and industry to make sure that its export processes are as efficient as possible, said Tina Kaidanow, the State Department’s acting assistant secretary of state for political-military affairs, at the Center for Strategic and International Studies.
 
What all this really ultimately means and what the imitative makes clear is that under this administration, there will be no more active advocate for U.S. sales than the U.S. government itself,” she said.
 
One of the most important metrics, and one that Trump himself will be watching, is whether arms sales continue to grow, said Alex Gray, special assistant to the president for the defense industrial base at the White House Office of Trade and Manufacturing Policy.
 
  “He would like to see sales that meet the requirements that are laid out in this policy, that are evaluated with all the criteria that the State Department and the interagency deem appropriate. And he would like to see an increase in our defense exports,” he said during the 
panel discussion at CSIS. “He has been a vigorous advocate of doing that.” 
 
The president may be able to claim a short term victory this year, as the United States is poised to 
beat its record for government-to-government arms sales. Lt. Gen. Charles Hooper, head of the Defense Security Cooperation Agency, 
told Defense News in July. He said that the the U.S. has signed $46.9 billion worth of sales in the first half of fiscal year 2018 – putting it near FY2015’s record of $47 billion.
 
In FY17, the State Department approved 
$41.9 billion in sales.
Others on the panel said the measure of success needs to be more nuanced than simply looking at the sales statistics.
While boosting the number and value of FMS cases is crucial, the State and Defense departments see that as secondary in importance is making sure that U.S. allies and partners have the technologies they need to be interoperable with the United States, said Laura Cressey, the State Department’s deputy director for regional security and arms transfers.
 
  “We want to make sure that our partners and allies are more capable and able to work with us when we need them to, to be more able to effectively defend themselves,” she said. “It’s hard to quantify that, and that can be very squishy […] but it’s something that we do need to do.”
 
Cressey also repeated at multiple points during the panel that the State Department wants to continue engaging with industry and other stakeholders to ensure it is making progress.
Last week, for example, was the first meeting of an interagency working group looking at offset policies around the globe.
 
  “In our first meeting, we said one of the first things we wanted to do is reach back out to industry and through the [industry advocacy] associations to find out what is the perception of offsets, what is the perception out there of what the US government should be doing as its offset policy?” she said. “What are the countries out there where offset policies are perceived to be really incredibly onerous, such that our companies cannot effectively compete?”
 
It’s hard to judge whether a new export policy is successful after just a couple months, said Jeff Abramson, a senior fellow at the Arms Control Association. But it’s important to evaluate the right metrics, and that should include looking at how foreign nations are using those new weapons and whether U.S. efforts to decrease civilian casualties – for instance – are working.
Abramson argued that the current administration may be over-prioritizing the economic benefits of selling American-made weapons at the expense of human rights considerations.
 
  “We have this sort of belief that if we’re partnered with a country, we’re going to have control over what they do, but oftentimes, that isn’t the case,” he said. “I would argue that the Saudis have not been good actors, however much influence we try to have on them, as they are reacting to the situation in Yemen.”
 
Dak Hardwick, assistant vice president for international affairs at the Aerospace Industries Association, ultimately took an optimistic view of the new arms transfer policies.
 
  “Where does all of this lead, ultimately? This is a very competitive market,” he said. Foreign countries are looking to take market share away from American companies, but they’re also trying to decrease American influence.
 
  “The race we are actually running is a race for global influence,” he said. “The question that we have […] is who is going to make the rules for global influence over the next 50 years? And as an industry, as a country and as a government, we feel like the United States is poised to continue to set the standard to make the rules for the next 50 years.”

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(Source: 
Expeditors News, 8 Aug 2018.)
 
On August 1, 2018, the General Administration of Customs of China (GACC) implemented two previously announced changes to the import and export customs declaration forms, and their filing rules.
 
The two announcements focused on the filing rules and declaration templates. Some of the critical changes to the requirements include:
 
   – Changing the HTS code from 10-digits to 13-digits, to fulfill a requirement by the China Inspection and Quarantine (CIQ) division;
   – A reduction in declaration lines per page from 8 to 6 to accommodate the declaration orientation;
   – A requirement for shipping marks and container loading information;
   – A requirement for packing details on the declaration;
   – The addition of an overseas consignee/consignor field.
 
The official announcements from China Customs may be found here: 
 
– 
GACC Announcement No. 60 of 2018 Amending the Regulations for the Customs Import and Export Declaration Filing Rules and Requirements                                                          
– 
GACC Announcement No. 61 of 2018 Amending the Customs Declaration Template for Import and Export Goods.

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COMMCOMMENTARY

 
* Author: George R. Tuttle III, Esq., Law Offices of George R. Tuttle, 
geo@tuttlelaw.com, +1 415-986-8780 
 
On August 7, 2018, the 
USTR released the 2nd list of HTS numbers to be subject to the additional Section 301 25% sanctions. This 
list compromises approximately $16 billion worth of imports from China and contains 279 of the original 284 tariff lines. List 2 duty rates will go into effect on 
August 23, 2018
A formal notice will be published shortly in the Federal Register and will announce the process by which interested parties may request an exclusion.  
 
Update for List 3
 
There is a change of date for submission of comments and rebuttal comments. These are now due on September 6, 2018 (83 FR 38760 of August 7, 2018).
 
Section 232 Sanction Exclusion Requests
 
Section 232 sanction exclusion requests can still be submitted at 
www.regulations.gov, BIS-2018-002 (aluminum) and BIS-2018-006 (Steel).
 
List 1/Annex A
 
List 1/Annex A exclusion requests can be submitted up to October 9, 2018 at 
www.regulations.gov, USTR-2018-0025.
You can review our previous newsletters on these lists and submission dates at our 
publications
 
page.

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13. 
K. Brockman: “3D-Printable Guns and Why Export Controls on Technical Data Matter” 
(Source: 
SIPRI, 1 Aug 2018. Reprinted with permission.) 
 
* Author: Kolja Brockmann, Research Assistant in the Stockholm International Peace Research Institute (SIPRI) Dual-Use and Arms Trade Control program. 
 
New developments in the 3D-printable gun case have revived the debate on the dangers of 3D-printing of firearms and the sharing of their electronic blueprints online. While these developments may only have a limited immediate impact on the proliferation of small arms, this approach has the potential to undermine controls on 3D printing and export controls on technical data more broadly.
 
In 2013, Cody Wilson, an American law student and gun rights activist and his non-profit firm ‘Defense Distributed’, 
developed and tested the first 3D-printable gun. The so-called ‘Liberator’ gun, is made entirely from 3D-printable plastic, a bullet and a nail. When Defense Distributed published the computer-aided design (CAD) files online for anyone to download, the US Department of State 
ordered the firm to take the files off its website. They argued that making such files available constitutes an export of technical data required for the production or manufacture of an export controlled item on the United States Munitions List (USML). After complying with the order and multiple unsuccessful attempts to obtain the required license, Wilson and other gun-rights advocates 
sued the Department of State for violating their freedom of speech and right to bear arms under the first and second amendments to the US constitution. In a move that surprised many export control experts, 
the US Government settled the case in June. The Department of State committed to introduce legislation to amend the existing regulations, while in the meantime enacting a temporary amendment that allows Wilson to publish the files in question without further restraints and to make a payment of nearly US $40 000 to the plaintiffs. 
 
Background to Export Controls
 
In general, the manufacturing of small arms for personal use is legal in the United States. However, the export of firearms requires registration with the Department of State and an export license under the International Traffic in Arms Regulation (ITAR). This licensing requirement applies to assembled guns, key parts like the lower receiver, as well as to the technical data required to develop, produce, operate or repair an item that is described in the USML. 
 
The USML is based on the 
Munitions List of the 
Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, an international regime that prescribes the military items to be covered by export controls in all participating states. Controls on technology have been a central part of export controls dating back to the cold war export control arrangements. Today’s Munitions List (ML) of the Wassenaar Arrangement covers technology that is required, among others, for the development, production, operation or repair of an item on the list.  As the 3D-printable guns in question fall under Category I of the USML, the digital build files Defense Distributed wishes to share on its website are covered as technical data required for the production or manufacture of controlled defense articles. 
 
Enforcing controls on intangible transfers of technology, such as the sending of digital files via e-mail or the sharing of data using cloud computing services, is inherently difficult. Making such technical data available for anyone to access and potentially download, including to persons in a different country-rather than actively transferring them-is also covered by export controls. While there has been some debate on the complexity and significance of the technical data necessary to justify the application of controls, CAD files or other digital blueprints that clearly enable the 3D printing of a controlled item have been covered by existing controls. 
 
The Settlement
 
Many news articles have 
characterized the settlement as a ‘loss’ for the US government or as a ‘win’ for the free speech argument brought by Wilson and the other plaintiffs. However, the settlement includes no admission of guilt and at this point it is unclear why the US government decided to settle the case. 
 
Under the 
settlement agreement, the Directorate of Defense Trade Controls (DDTC), the responsible directorate at the Department of State, commits to propose a draft for a new rule and ‘fully pursue’ a final rule ‘revising USML Category I to exclude the technical data that is subject of the action’. While this suggests that the government pursues a permanent change of this regulation in the future, the settlement also included provisions with a more immediate effect. The Department of State approved the immediate public release of the specific technical data subject to the case using a license exemption and later published an announcement on the DDTC website on 27 July, issuing a temporary modification of USML Category I that excludes the technical data subject to the settlement from controls until a final rule is developed. Wilson in turn announced that he will again make the technical data for several small arms and components thereof available in a database from 1 August, also allowing others to upload their own files. Despite this announcement, Defense Distributed has already started to make some of their files available several days prior to 1 August.
 
Several gun-control activists and groups, as well as a number of US politicians and Attorneys General have initiated legal actions and legislative initiatives since the settlement was made public in July. A 
federal judge first dismissed the request submitted collectively by gun-control groups to intervene and stop the provisions of the settlement from coming into effect. Several Attorneys General from US states and cities have 
issued cease and desist orders directing Wilson to block access to the website for their constituents, first resulting in the website being blocked 
for users in Pennsylvania. On 31 July, a Washington district judge 
issued a temporary restraining order against the Department of State, stopping it from implementing the modification of USML Category I until a hearing set for 10 August, forcing Wilson to once again take down the files. While the legal battle over the distribution in the US therefore seems to be far from over, it is worth considering what the developments in this case mean for the control of small arms more generally.
 
Implications For Small Arms Control
 
The potential impact on small arms proliferation depends on how these developments change the current situation and which factors may mitigate its impact. First, although they were no longer hosted in Wilson’s database any more, the build files for the Liberator were still available online. When the files were originally posted in 2013 they were 
downloaded over 100 000 times. After they were removed from the website they continued to be available on many illegal file-sharing websites. Despite their availability, no game-changing developments in the illicit small arms market, terrorist acquisitions, uses in assassinations or for the circumvention of metal-detector controls have been observed. 
 
Second, 
there is still a lack of capabilities, especially of polymer-based 3D-printed small arms or key parts such as receivers or pressure bearing components. The limited durability of the Liberator only enables it to fire a very small number of shots before components need to exchanged. In addition, the poor handling combined with reliability and safety issues provide an abundance of reason for an actor to choose another option. 
Third, the costs of obtaining printers that work with high-quality materials remains high and both the production costs and efforts involved likely still do not provide an adequate substitute for black market acquisitions. Furthermore, illicit small arms in circulation are often neither marked, nor serialized and are thus similarly ‘untraceable’ as 3D-printed guns. New ways of regulating the sale and serialization of 3D-printed guns should nevertheless be developed.
 
Finally, the often-cited advantages regarding undetectability 
only apply for small arms made entirely from plastic and walk-through metal detectors. They do not apply to common X-ray scanners and both ammunitions and necessary metal components make detection more likely. While the availability of 3D-printed gun files may thus only have a limited immediate impact on the proliferation of small arms, it should be considered which implications this approach may have for controls on 3D printing and the control of technical data more broadly, both legally and in terms of the signal it sends.
 
Controls On 3d Printing and Sharing Of Technical Data
 
The broader question underlying the case is on the approach to controls on the distribution of technical data for controlled items, the regulation of which forms one of the key aspects of controls on 3D printing and export controls more generally. Controls on 3D printing currently have three main elements: (
a) controls on 3D printers, (
b) controls on materials for 3D printing, and (
c) controls on technical data for the production or manufacture of controlled items using 3D printing. 3D printers are inherently dual-use (usable both for civilian and military purposes) and are rarely covered by controls. Even if controls on a wider range of printers were to be developed, these would not be able to cover the capability range required for small arms production without creating major adverse effects on the growing 3D printing industry. New controls 
would most likely use performance parameters that only apply to a very limited range of high-performance printers, designed for other purposes than small arms production. Access to 3D printing is expected to increase significantly, both in terms of lower prices of printers and increasing capabilities of 3D printing services, further limiting their controllability. The materials used to 3D print small arms are also not covered by current controls and find a wide range of civilian applications. The combination of the limited risks that they pose and the possible adverse effects will likely preclude the introduction of controls. 
 
Export controls on the technical data required for the development, production, operation or repair of a controlled item to date provided the main regulatory measure on 3D printing. From an export controls perspective, the removal of such controls on technical data is a worrying development. While the impact may remain low in the area of small arms, if such rulings were to be extended to other areas, 
such as missile and aerospace technology, the impact could potentially be much more significant. Therefore, retaining controls on electronic transfers and sharing of technical data is an important part of export controls in a broader sense and especially in the context of increasing 3D printing and additive manufacturing capabilities.

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(Source: 
Arent Fox LLP, 8 Aug 2018.)
 
* Authors: Kay C. Georgi, Esq., 
kay.georgi@arentfox.com, +1 202-857-6293; Marwa M. Hassoun, Esq., 
marwa.hassoun@arentfox.com, +1 213-443-7645; and Regan K. Alberda, Esq., 
regan.alberda@arentfox.com, +1 202-775-5771.  All of Arent Fox LLP.
 
The President issued an Executive Order on August 6, 2018, “Reimposing Certain Sanctions With Respect to Iran” (the New Iran EO), which re-imposes relevant provisions of five Iran sanctions EOs (EOs 13574, 13590, 13622, and 13645). Additionally, the New Iran EO implements provisions in two former EOs (EOs 13716 and 13628) and revokes those EOs.
 
Additionally, the 
New Iran EO implements provisions in two former EOs (EOs 13716 and 13628) and revokes those EOs.
August 6, 2018 marked the end of the 90-day wind-down period following the President’s decision to end the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA). Effective 
August 7, 2018, the US government can re-impose secondary sanctions that had been suspended under the Iran nuclear deal on persons who engage in specified transactions involving any of the following sectors/activities:
 
* The purchase or acquisition of US dollar banknotes by the Government of Iran;
* Iran’s trade in gold or precious metals;
* The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
* Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
* The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
* Iran’s automotive sector.
 
Following the end of the 90-day wind-down period on August 6, 2018, the US government is also revoking the below JCPOA-related authorizations under US primary sanctions regarding Iran:
 
* The importation into the United States of Iranian-origin carpets and foodstuffs and certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations;
* Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP); and
* Activities undertaken pursuant to General License I relating to contingent contracts for activities eligible for authorization under the JCPOA SLP.
 
The remaining secondary sanctions can be re-imposed on 
November 5, 2018, following the end of the 180-day wind down period on 
November 4, 2018, on persons who engage in specified transactions involving any of the following sectors/activities:
 
* Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
* Petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company, including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
* Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012;
* The provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010;
* The provision of underwriting services, insurance, or reinsurance; and
* Iran’s energy sector, including a variety of separate specific activities related to the petroleum and petrochemical industries under the Iran Sanctions Act as amended.
 
Additionally, on or by 
November 5, 2018:
 
* The US government will revoke the General License H wind-down authorization that had allowed US-owned or-controlled foreign entities to wind down certain activities with the Government of Iran or persons subject to the jurisdiction of the Government of Iran that were previously authorized by General License H; and
* The US government can re-impose, as appropriate, the sanctions that applied to persons removed from the List of Specially Designated Nationals and Blocked Persons (SDN List) and/or other lists maintained by the U.S. government on January 16, 2016.
 
OFAC’s FAQs about the re-imposition of Iran sanctions can be found on OFAC’s 
website.
 
One question that OFAC answers in its updated 
FAQs (FAQ 601) is whether the New Iran EO expands the scope of sanctions that were in effect prior to January 16, 2016 (Implementation Day of the JCPOA), and the answer is:
– Yes. The New Iran EO broadens the scope of the sanctions that were in effect prior to January 16, 2016 and provides for greater consistency in the administration of Iran-related sanctions provisions.
 
OFAC provides a list of added measures, but they are largely in the nature of tweaking the authorities for providing new blocking sanctions and slightly expanding the sanctions that can be imposed for activities involving petroleum and petrochemical sectors in Iran. More specifically, according to OFAC, the new Iran EO:
 
* Provides new authority for: (i) blocking sanctions on persons who provide material support for, or goods and services in support of, persons blocked for various already existing sanction activities, such as being part of the energy, shipping, or shipbuilding sectors of Iran; (ii) correspondent and payable-through account sanctions on foreign financial institutions determined to have knowingly conducted or facilitated any significant financial transaction on behalf of the persons blocked under the new authorities;
 
* Expands the menu of sanctions available to impose on persons determined to have engaged in certain significant transactions relating to petroleum, petroleum products, or petrochemicals from Iran by authorizing the imposition of: 
  – Visa restrictions on corporate officers, principals, or controlling shareholders of a sanctioned person;
  – Additional sanctions on principal executive officers of a sanctioned person; and
  – Prohibitions on US persons investing in or purchasing significant amounts of equity or debt instruments of a sanctioned person.
 
* Expands the prohibition on US-owned or -controlled foreign entities by prohibiting transactions with persons blocked for: 
  – Providing material support for, or goods and services in support of, Iranian persons on the SDN List and certain other designated persons; or
  – Being part of the energy, shipping, or shipbuilding sectors of Iran or a port operator in Iran or knowingly providing significant support to certain other persons blocked or on the SDN List.
 
Since these last activities were already prohibited under Section 218 of the Iran Threat Reduction and Syria Human Rights Act of 2012 and OFAC’s implementing regulations, it is unclear whether in fact this last is a true expansion or an adjustment of authority.
 
EU Reaction – Amendment of Blocking Regulation
 
As anticipated, the EU reacted by publishing, and thereby bringing into effect, an amendment to the 
Annex to Council Regulation No 2271/96 protecting against the effects of extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom.
 
The revised Annex increases the number of laws subject to the blocking regulations, including, notably:
 
* The energy sanctions contained in the Iran Sanctions Act of 1996 as amended;
* The Iran Freedom and Counter-Proliferation Act of 2012;
* The National Defense Authorization Act for Fiscal Year 2012;
* The Iran Threat Reduction and Syria Human Rights Act of 2012; and
* The Iranian Transactions and Sanctions Regulations.
 
According to the 
guidance published by the EU, the Blocking Statute:
 
* Prohibits EU operators from complying with the listed extra-territorial legislation, or any decision, ruling or award based thereon, given that the EU does not recognize its applicability to/effects towards EU operators (Article 5, paragraph 1);
* Requires EU operators to inform the European Commission within 30 days of any events arising from listed extra-territorial legislation or actions based thereon or resulting thereof, that affect, directly or indirectly, their economic or financial interests;
* Nullifies the effect in the EU of any foreign decision, including court rulings or arbitration awards, based on the listed extra-territorial legislation or the acts and provisions adopted pursuant to them (Article 4);
* Allows EU operators to recover damages arising from the application of the listed extra-territorial legislation from the natural or legal persons or entities causing them (Article 6). Damages are defined as ‘any damages, including legal costs, caused by the application of the laws specified in its Annex or by actions based thereon or resulting therefrom’; and
* Allows EU operators to request an authorization to comply with the listed extra-territorial legislation, if not doing so would cause serious harm to their interests or the interests of the EU (Article 5, paragraph 2).
 
The Blocking Regulation applies to the EU subsidiaries of US companies, thereby placing them in a potentially difficult position. Moreover, the EU Guidance specifically states that EU operators cannot, consistent with the EU Blocking Regulations, request licenses from the United States unless they request the European Commission to authorize them to apply for such a license. At the same time, the EU Guidance specifically notes that EU companies remain free to do or not to do business with Cuba and Iran, provided such business decisions are not forced on the EU companies by the listed US legislation.

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(Source: 
Export Law Blog, 8 Aug 2018. Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Washington DC,
Clif.Burns@bryancave.com, 202-508-6067.
 
According to a 
State Department press release released 8 Aug 2018, the United States has made a determination that Russia used novichok, a chemical warfare agent, in an attack on British soil and, as a result, the US will impose sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBWC Act”), 22 U.S.C. § 5601 et seq.  The text of these sanctions was not released.  Instead, the text will be in a Federal Register notice expected to be published on or around August 22.  The sanctions will be effective as of the date of the publication of that notice.
 
Because these sanctions are being imposed under the CBWC Act, we can already get a good idea of what these sanctions will be.   The Act contemplates sanctions being imposed in two stages.  The first stage, described in 
section 5605(a), sets forth the following sanctions, all of which are required to be imposed upon the offending country:
 
  – Termination of all foreign assistance
  – Termination of all arms sales
  – Termination of all foreign military financing
  – Denial of U.S. government credit or assistance
  – Termination of all exports of items controlled on the Commerce Control List for NS reasons
 
To be honest, none of these sanctions will have any significant impact on Russia.  Arms sales to Russia have been prohibited for some time now.   The country chart already has Russia controlled for both columns of NS controls.  Of course, you could say that the new sanctions will mean that NS items will not be considered for licenses under any circumstances.  But I don’t think licenses to export NS items to Russia are being readily granted now.
The second stage, if it happens, would take place on November 8 of this year unless the President determines that Russia is no longer using chemical or biological weapons.  If that determination is not made, the President is required to impose three sanctions from a set of six possible sanctions.  Those six possible sanctions are:
 
  – Opposing multilateral bank financial assistance to Russia
  – Prohibition of U.S. bank loans to the government of Russia
  – Prohibition of all exports of all U.S. goods and technology to Russia
  – Downgrading or suspending diplomatic relations with Russia
  – Termination of all service to and from the United States by Russian airlines
 
Whether the President will make the findings necessary to impose this second stage and which three of the six will be imposed is anyone’s guess, although I suspect that most people likely have a pretty good guess.   The upcoming Federal Register notice will probably not even address the second stage sanctions.   If the United States does in fact impose the three second stage sanctions, the best guess is probably that he will impose the least restrictive of those, i.e., opposing multilateral bank loans, prohibiting U.S. bank loans, and expelling a few more diplomats.

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TEEX/IM TRAINING EVENTS & CONFERENCES

(Source: Jill Kincaid; 
jill@learnexportcompliance.com.)
* What: United States Export Control (ITAR/EAR/OFAC) Seminar Series in Amsterdam, NL (for EU, NL and other non-US Companies)
* When: 
 – ITAR Seminar: October 15-16, 2018; 
 – EAR/OFAC Seminar: October 17-18, 2018
* Where: Park Plaza Victoria Amsterdam, Damrak 1-5, 1012 Lg, Amsterdam, Netherlands
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker Panel: Scott Gearity, Greg Creeser, Marc Binder, Melissa Proctor and Stephan Müller
* Register: Here, or Jessica Lemon, 540-433-3977, jessica@learnexportcompliance.com
* * * * * * * * * * * * * * * * * * * *

ENEDITOR’S NOTES

EN_a117
. Bartlett’s Unfamiliar Quotations

(Source: Editor)
 

* Izaak Walton (1593-1683; was an English writer and fishing enthusiast. Best known as the author of The Compleat Angler, he also wrote a number of short biographies that have been collected under the title of Walton’s Lives. The Izaak Walton League is an American environmental organization founded by a group of sportsmen who wished to protect fishing opportunities for future generations.)
   – “Good company in a journey makes the way seem shorter.”

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EN_a218. 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 Amendments: 3 Aug 2018: 83 FR 38021-38023: Revision of Export and Reexport License Requirements for Republic of South Sudan Under the Export Administration Regulations; and 83 FR 38018-38021: U.S.-India Major Defense Partners: Implementation Under the Export Administration Regulations of India’s Membership in the Wassenaar Arrangement and Addition of India to Country Group A:5
 

 

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:
83 FR 17749-17751
: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates

  – HTS codes that are not valid for AES are available 
here.
  –
The latest edition (30 April 2018) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended.  The BAFTR is available by annual subscription from the Full Circle Compliance 
website
BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu
 
* HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), 1 Jan 2018: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)

  –
Last Amendment: 8 Jun 2018: Harmonized System Update 1809, containing 901 ABI records and 192 harmonized tariff records. 

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

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

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

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

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EN_a319
. Weekly Highlights of the Daily Bugle Top Stories
(Source: Editor)
 

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

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

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, John Bartlett. The Ex/Im Daily Update is emailed every business day to approximately 8,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* CAVEAT: The contents cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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