18-0814 Tuesday “Daily Bugle”

18-0814 Tuesday “Daily Bugle”

Tuesday, 14 August 2018

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 3229, Certificate of Origin 
  2. USTR Seeks Comments on and Announces Public Hearing Concerning Russia’s Implementation of Its WTO Commitments 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Clarifies SO Message, Bill Deleted After Arrival
  4. DHS/CBP Posts Harmonized System Update 1812
  5. DHS/CBP Updates Implementation Guides for ACE Manifest and ABI Queries
  6. Justice: “California Man Pleads Guilty to Conspiring to Violate U.S. Sanctions Against Syria”
  7. State/DDTC: (No new postings.)
  8. EU Amends for the 289th Time Restrictive Measures Against ISIL and Al-Qaida
  1. Foreign Policy: “Trump Blocks Fighter Jet Transfer Amid Deepening U.S.-Turkey Rift”
  2. Reuters: “Erdogan Says Turkey Will Boycott U.S. Electronics, Lira Steadies”
  1. K.J. Wolf: “The CFIUS Reform Legislation-FIRRMA-Will Become Law on 13 Aug 2018 [Part 2 of 2]”
  2. Torres Law: “New Changes to the United States Foreign Investment Laws: What Foreign Investors Need to Know”
  1. ECS Presents “Boot Camp: Achieving ITAR/EAR Compliance” in Orlando, FL on 6-7 Feb 2019
  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 Aug 2018), FACR/OFAC (29 Jun 2018), FTR (24 Apr 2018), HTSUS (14 Aug 2018), ITAR (14 Feb 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 



1. DHS/CBP Seeks Comments on Form 3229, Certificate of Origin
(Source: Federal Register, 14 August 2018.) [Excerpts.]
83 FR 40306-40307: Agency Information Collection Activities: Certificate of Origin
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 30-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 13, 2018) to be assured of consideration.
* ADDRESSES: Interested persons are invited to submit written comments on this proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the OMB Desk Officer for Customs and Border Protection, Department of Homeland Security, and sent via electronic mail to dhsdeskofficer@omb.eop.gov.
* 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.
  – Title: Certificate of Origin.
   – OMB Number: 1651-0016.
  – Form Number: CBP Form 3229. …
  – Type of Review: Extension (without change).
  – Abstract: CBP Form 3229, Certificate of Origin, is used by shippers and importers to declare that goods being imported into the United States are produced or manufactured in a U.S. insular possession from materials grown, produced or manufactured in such possession. This form includes a list of the foreign materials included in the goods, and their description and value. CBP Form 3229 is used as documentation for goods entitled to enter the U.S. free of duty. This form is authorized by General Note 3(a)(iv) of the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202) and is provided for by 19 CFR part 7.3. CBP Form 3229 is accessible here. …
  Dated: August 9, 2018.
Seth D. Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

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2. USTR Seeks Comments on and Announces Public Hearing Concerning Russia’s Implementation of Its WTO Commitments
(Source: Federal Register, 14 Aug 2018.) [Excerpts.]
83 FR 40383-40384: Request for Comments and Notice of Public Hearing Concerning Russia’s Implementation of Its WTO Commitments
* AGENCY: Office of the United States Trade Representative.
* ACTION: Request for comments and notice of public hearing.
* SUMMARY: The interagency Trade Policy Staff Committee (TPSC) will convene a public hearing and seek public comment to assist the Office of the United States Trade Representative (USTR) in the preparation of its annual report to Congress on Russia’s implementation of its obligations as a Member of the World Trade Organization (WTO).
   September 25, 2018 at midnight EST: Deadline for submission of written comments and for filing requests to appear and a summary of expected testimony at the public hearing.
   October 4, 2018: The TPSC will convene a public hearing in Rooms 1 & 2, 1724 F Street NW, Washington, DC 20508 beginning at 9:30 a.m.
* ADDRESSES: USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal. Follow the instructions for submitting comments in section III below. The docket number is USTR-2018-0028. For alternatives to online submissions, please contact Yvonne Jamison at (202) 395-3475 before transmitting a comment and in advance of the relevant deadline.
* FOR FURTHER INFORMATION CONTACT: For procedural questions concerning written comments, contact Yvonne Jamison at (202) 395-3475. Direct all other questions to Betsy Hafner, Deputy Assistant United States Trade Representative for Russia and Eurasia, at (202) 395-9124.
   USTR invites written comments and/or oral testimony of interested persons on Russia’s implementation of the commitments made in connection with its accession to the WTO, including, but not limited to, commitments in the following areas:
  (a) Import regulation (e.g., tariffs, tariff-rate quotas, quotas, import licenses).
  (b) Export regulation.
  (c) Subsidies.
  (d) Standards and technical regulations.
  (e) Sanitary and phytosanitary measures.
  (f) Trade-related investment measures (including local content requirements).
  (g) Taxes and charges levied on imports and exports.
  (h) Other internal policies affecting trade.
  (i) Intellectual property rights (including intellectual property rights enforcement).
  (j) Services.
  (k) Government procurement.
   (l) Rule of law issues (e.g., transparency, judicial review, uniform administration of laws and regulations).
  (m) Other WTO commitments. …
The TPSC will convene a public hearing on Thursday, October 4, 2018, in Rooms 1 & 2, 1724 F Street NW, Washington, DC 20508. Persons wishing to testify at the hearing must provide written notification of their intention no later than September 25, 2018 at midnight EST. The intent to testify notification must be made in the “Type Comment” field under docket number USTR-2018-0028 on the www.regulations.gov website and should include the name, address, and telephone number of the person presenting the testimony. You should attach a summary of the testimony by using the “Upload File” field. The name of the file also should include who will be presenting the testimony. Remarks at the hearing will be limited to no more than five minutes to allow for possible questions from the TPSC.
  Edward Gresser, Chair of the Trade Policy Staff Committee, Office of the United States Trade Representative.

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OGS_a13. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* President; PROCLAMATIONS; Trade: Steel; Adjusting Imports Into the U.S. (Proc. 9772) [Publication Date: 15 August 2018.]
[Editor’s Note: The President’s proclamation was already included in yesterday’s Daily Bugle, item #7.]
* State; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Statement of Political Contributions, Fees, and Commissions Relating to Sales of Defense Articles and Defense Services [Publication Date: 15 August 2018.]

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CSMS #18-000481
, 14 Aug 2018.)
Please be advised, when an SO message is received following the Release of an Entry which states BILL DELETED AFTER ARRIVAL, no action should be taken in response to this notice. Taking action (such as an SE Update) will Suspend the Release on the entry. This SO disposition is purely informational.
If you have any questions, please contact your assigned Client Representative.

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CSMS #18-000479, 14 Aug 2018.)
Harmonized System Update (HSU) 1812 was created on August 13, 2018 and contains 27 ABI records and 6 harmonized tariff records.
This update includes modifications made as a result of a Presidential Proclamation issued on August 10, 2018, regarding additional duty of imports of steel articles under Section 232 of the Trade Expansion Act of 1962; Steel articles from the Republic of Turkey.
The Federal Register Notice can be found here.
Adjustments required by the verification of the 2018 Harmonized Tariff Schedule (HTS) are included also.
The modified records are currently available to all ABI participants and can be retrieved electronically via the procedures indicated in the CATAIR. For further information about this process, please contact your client representative. For all other questions regarding this message, please contact Jennifer Keeling via email at Jennifer.L.Keeling@cbp.dhs.gov.

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CSMS #18-000480, 14 Aug 2018.)
The following implementation guides (IG’s) have been recently updated:
  – Output WN1 (Arrival, Destination, Diversion, Load port and date) records for Air waybills.
  – Now available in the ACE Certification environment for Trade testing, with a proposed Production date of 9/15/2018.
  – Error 127 (Correction Part Ind Not =Equal Original) has been added back. It was erroneously removed previously.
  – Corresponding 2018 Record of Changes is at: https://www.cbp.gov/document/guidance/2018-record-changes-ansi-x12-and-unedifact
  – SN121 (Request for In-bond Diversion Granted) notification are generated at the shipment level ERC (0660) segment, and not the trip level ERC (0210) segment.
  – Removed F112 (Import Specialist Team Assignment) input and output records and errors.
  – Added error 005 (Street Address Not on File) for F111 (FIRMS) query.

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Justice, 14 Aug 2018.) [Excerpts.]
Rasheed Al Jijakli, 57, a Syrian-born naturalized U.S. citizen of Walnut, California, pleaded guilty yesterday to a charge of conspiring to export U.S.-origin tactical gear to Syria in violation of the International Emergency Economic Powers Act and Syria Sanctions. Jijakli’s guilty plea was accepted by United States District Judge James V. Selna of the United States District Court for the Central District of California. …
In the factual basis filed as part of the plea agreement, Jijakli admitted that from April 2012 through March 2013, he conspired with other individuals to export tactical gear, including U.S.-origin laser boresighters, day and night vision rifle scopes, and other items (Tactical Gear) from the United States to Syria. From June through July 2012, Jijakli and one of the co-conspirators (Co-conspirator 1) purchased the Tactical Gear. On July 17, 2012, Jijakli traveled from Los Angeles, California to Istanbul, Turkey with the Tactical Gear, with the intent that it would be provided to Syrian rebels training in Turkey and fighting in Syria. Jijakli provided some of the Tactical Gear, specifically the laser boresighters, to a second co-conspirator who Jijakli learned was a member of Ahrar Al-Sham. Jijakli also provided the goods to other armed Syrian insurgent groups in Syria and Turkey. In total, Jijakli and co-conspirators knowingly provided at least 43 laser boresighters, 85 day rifle scopes, 30 night vision rifle scopes, tactical flashlights, a digital monocular, 5 radios, and 1 bulletproof vest to Ahrar Al-Sham and other Syrian rebels in Syria, or with knowledge that the Tactical Gear was going to Syria. Also, in August and September 2012, Jijakli directed co-conspirators to withdraw thousands of dollars from Palmyra Corporation, where Jijakli was the Chief Executive Officer, to pay for Tactical Gear for Syrian rebels.
Jijakli was indicted by a federal grand jury on July 14, 2017. He faces a maximum sentence of 20 years in prison when sentenced on December 3, 2018. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of Jijakli will be determined by the court based on the advisory sentencing guidelines and other statutory factors. …

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OGS_a79. State/DDTC: (No new postings.)

(Source: State/DDTC)

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OGS_a810. EU Amends for the 289th Time Restrictive Measures Against ISIL and Al-Qaida
(Source: Official Journal of the European Union, 14 Aug 2018.)
Commission Implementing Regulation (EU) 2018/1138 of 13 August 2018 amending for the 289th time Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the ISIL (Da’esh) and Al-Qaida organisations

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Foreign Policy, 13 Aug 2018.) [Excerpts.]
U.S. President Donald Trump has signed into law a defense policy bill that will hold up the transfer to Turkey of 100 F-35 fighter jets, deepening a rift between the two countries over the ongoing imprisonment of an American pastor in Turkey.
The move amounts to a sharp blow to Ankara, which is already reeling from Trump’s decision last week to double down on tariffs on Turkish aluminum and steel. Turkey planned to take possession of the jets over the next decade, which would make it the
third-largest operator of F-35s in the world.
But its cancellation will also complicate matters for the United States. Several key components of the jet are manufactured by Turkish companies, and the U.S. Defense Department estimates it will take two years to find and qualify new suppliers to replace any Turkish firms that are kicked out of the program. Meanwhile, the main European hub for the F-35’s engine repair and overhaul is in Eskisehir, in northwestern Turkey. …
The legislation blocks the transfer of F-35s to Turkey until the Pentagon submits an impact assessment, particularly regarding U.S. military operations from Incirlik Air Base but also focusing on overall U.S.-Turkish relations. Lawmakers also want the Pentagon to assess the ramifications of Ankara’s planned purchase of the S-400 system.
A provision in a draft version of the defense appropriations bill, which is expected to move forward in the next few weeks, would expressly prohibit funding for the transfer.

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Reuters, 14 Aug 2018.) [Excerpts.]
President Tayyip Erdogan said on Tuesday Turkey would boycott electronic products from the United States, retaliating in a row with Washington that helped drive the lira to record lows. …
The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a U.S. evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports. …
Erogan also said Turkey was boycotting U.S. electronic products. “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose five percent. …

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13. K.J. Wolf: “The CFIUS Reform Legislation-FIRRMA-Will Become Law on 13 Aug 2018 [Part 2 of 2]”

(Source: Akin Gump Strauss Hauer & Feld LLP, 10 Aug 2018.)
* Author: Kevin J. Wolf, Esq., Akin Gump Strauss Hauer & Feld LLP, kwolf@akingump.com, +1 202-887-4051.

[Editor’s Note: Due to its length this item is divided into two parts. The first part was included in yesterday’s Daily Bugle, item #12.]
V. Countries Affected-There Is Neither a White List nor a Black List
Under current CFIUS regulations, the nationality of the foreign person investing in a U.S. business does not affect whether the investment is a covered transaction (i.e., whether it could result in control of a U.S. business). FIRRMA does not change this jurisdictional authority over controlling investments.
The Senate bill would have applied CFIUS jurisdiction over the real estate and other newly covered noncontrolling investments by foreign persons from any country, unless excluded by regulations
a “white list” approach. The House bill would have applied CFIUS jurisdiction over such transactions only if they involved, directly or indirectly, foreign persons from countries of special concern (primarily China and Russia)
a “black list” approach. After much debate, Congress left it to the Treasury to draft regulations limiting the applicability of the new real estate and “other investment” provisions to “certain categories of foreign persons.” In promulgating such regulations, FIRRMA requires CFIUS to consider how a foreign person is connected to a foreign country or government, and whether the connection may affect the national security of the United States.
Given the policy motivations for FIRRMA’s introduction, the Treasury is likely to propose regulations stating that investments, directly or indirectly, involving China, Russia and other countries of concern, and nationals thereof, will be within the scope of the new provisions. If the Treasury wants to exclude countries from the scope of the new provisions as leverage to encourage them to adopt foreign investment regimes similar to CFIUS, then the country exclusions would be relatively limited. If, however, the Treasury focuses its concerns on activities involving countries and the types of entities that primarily gave rise to FIRRMA, the list likely will not affect most, if not all, investments involving North Atlantic Treaty Organization (NATO) and non-NATO allies.
CFIUS is authorized to apply its regulations to “certain categories of foreign persons,” not just specific countries. Thus, CFIUS may propose regulations to include or exclude from the new provisions those involved with various sectors of the economy. Industry groups will likely want to follow CFIUS’s proposed regulations closely and comment on them because the outcome will significantly affect the number of newly covered noncontrolling transactions that will become subject to CFIUS jurisdiction.
VI. Alternative Short-Form Voluntary and Mandatory Declarations
Under current regulations, CFIUS filings are voluntary unless CFIUS directs a filing in a particular case. The only type of filing is a full written notice, which is an extensive document filed jointly by the parties to a transaction. FIRRMA, however, requires CFIUS to allow for short-form filings that would not exceed five pages. CFIUS would be required to respond within 30 days that (i) the parties should file a full notice, (ii) CFIUS wants to begin its own review of the transaction or (iii) CFIUS has completed its review of the proposed transaction. The new filing fees would not apply to short-form filings.
The use of such light filings would generally be optional. They would be mandatory, however, for an investment that results in the acquisition of a “substantial interest” in certain U.S. businesses by a foreign person in which a foreign government has a “substantial interest.” (The regulations will need to define “substantial interest.”) The parties to such a transaction may elect to file the full notice as currently required. Alternatively, the parties may seek a waiver from the mandatory filing requirement, which CFIUS may grant if it determines that the investment is not directed by a foreign government and the foreign person has a history of cooperating with CFIUS. One reason motivating this mandatory requirement is that foreign governments, and related entities, may make investments for foreign policy reasons unrelated to economic considerations that warrant U.S. government review.
Additionally, FIRRMA gives CFIUS the discretionary authority to draft regulations to require declarations for “other investments” in U.S. businesses that produce, design, test, manufacture, fabricate or develop critical technologies.
Investors from closely allied countries and those dealing in relatively benign industries may be able to use the short-form declaration-or “light filing” -to get a CFIUS safe harbor response more quickly than under the current notice system. Those involved, or potentially involved, with foreign governments and critical technology companies will want to follow how the final regulations evolve in order to know whether CFIUS filings for investments that were once voluntary or not covered would become mandatory. Failure to comply with the new requirements could result in penalties.
VII. Timing of Reviews
Under the current regime, CFIUS has 30 days to complete its review, and it may initiate a 45-day investigation at the end of the review period. If CFIUS cannot make a determination during this 75-day period, parties often voluntarily withdraw and then refile their notice so that CFIUS has more time to continue its review and address concerns. FIRRMA extends the review period to 45 days and maintains the existing 45-day investigation period. CFIUS may extend the investigation by one 15-day period in extraordinary circumstances. (As discussed below, CFIUS will have the authority to use mitigation agreements and other conditions to address national security concerns when parties choose to abandon a transaction before CFIUS completes its review.)  These changes to the timelines apply to filings made after FIRRMA becomes law (i.e., August 13, 2018). Parties contemplating a covered transaction should factor them into their deal clearance timelines.
The submission to CFIUS of a draft notice-a “pre-filing” -is a standard procedure to get an initial response from CFIUS on issues, such as whether more information is required on a topic, before filing a final, full notice. Once implementing regulations become effective, CFIUS will be required to provide comments on, or accept, written notices within 10 days of a prefiling if the parties stipulate that the transaction is covered. This deadline could result in significantly shorter CFIUS reviews since the prefiling stage can drag out for a month or more under the current regime.
VIII. CFIUS’s Authority
To address national security concerns associated with covered transactions, FIRRMA explicitly gives CFIUS the authority to:
  (1)  suspend a proposed or pending transaction that poses a risk to national security while it is under review by the committee;
  (2)  refer transactions to the President for action at any time during the review or investigation;
  (3) use mitigation agreements, including, when needed, to address situations where the parties have voluntarily abandoned a transaction before CFIUS completes its review;
  (4) impose interim mitigation agreements;
  (5) require plans for monitoring compliance with mitigation agreements;
  (6) review older agreements and conditions to determine whether they are no longer warranted;
  (7) unilaterally initiate a review of a previously reviewed transaction if the parties, intentionally or unintentionally, materially breach terms and conditions of CFIUS clearance; and
  (8) allow for the use of independent parties to monitor agreements.
FIRRMA does not suggest that such actions were not authorized under previous authorities, only that they are now explicitly authorized for CFIUS to consider.
IX. National Security Factors for CFIUS to Consider
CFIUS is limited to making decisions based on whether there is an unresolved national security risk, as opposed to using its authority, for example, to make decisions for reasons relating to industrial policy or trade protectionism. Indeed, FIRRMA’s “sense of Congress” provision states that CFIUS “should not consider issues of national interest absent a national security nexus.” Although CFIUS and its member agencies are not constrained in defining “national security” as they see fit, Congress nonetheless identified the following types of national security issues that CFIUS should consider when making its determinations:
  (1) A covered transaction involving a country of special concern that has a demonstrated or declared strategic goal of acquiring a type of critical technology or critical infrastructure that would affect U.S. leadership in areas related to national security. Although FIRRMA does not identify China in this regard, it is clearly referring to China and the technology acquisition plans described in its “Made in China 2025” plan.
  (2) The potential national security-related effects of the cumulative control of, or pattern of recent transactions involving, any one type of critical infrastructure, energy asset, critical material, or critical technology by a foreign government or foreign person. Until FIRRMA, CFIUS has been limited to reviewing the transaction before it. This provision effectively authorizes CFIUS to look beyond the transaction at issue to determine whether the “cumulative” impact of the foreign investments would have an impact national security. This leaves open the possibility that CFIUS may block or apply mitigation measures to an investment that itself is benign, but, for example, is the latest in a string of foreign investments in the same industry where foreign ownership of the sector would present a national security concern.
  (3) Whether any foreign person engaging in a covered transaction with a U.S. business has a history of complying with U.S. laws and regulations.
  (4) The control of U.S. industries and commercial activity by foreign persons as it affects the capability and capacity of the United States to meet the requirements of national security, including the availability of human resources, products, technology, materials, and other supplies and services. FIRRMA specifies that CFIUS should construe the phrase “availability of human resources” to include “potential losses of such availability resulting from reductions in the employment of United States persons whose knowledge or skills are critical to national security, including the continued production in the United States of items that are likely to be acquired by the Department of Defense or other Federal departments or agencies for the advancement of the national security of the United States.” Although FIRRMA is not an employment-related law as such, Congress is nonetheless explicitly leaving open the possibility that the loss of key personnel or skills to foreign acquisition can be a national security issue.
  (5) The extent to which a covered transaction is likely to expose, either directly or indirectly, personally identifiable information, genetic information, or other sensitive data of United States citizens to access by a foreign government or foreign person that may exploit that information in a manner that threatens national security. This is a slightly broader standard than the “sensitive personal data” standard in the new “other transactions” provisions described above.
  (6) Whether a covered transaction is likely to have the effect of exacerbating or creating new cybersecurity vulnerabilities in the United States or is likely to result in a foreign government gaining a significant new capability to engage in malicious cyber-enabled activities against the United States, including such activities designed to affect the outcome of any election for federal office.
Most of these issues are not new to CFIUS and have been factored into many past CFIUS decisions. Nonetheless, this listing may be of use to parties to covered transactions in better knowing the types of issues that CFIUS may consider when reviewing their filing.
X. Fees and Funding
A common comment in the CFIUS reform debate was that CFIUS and its member agencies needed more resources. There were more filings, and more filings that were complex. This caused backlogs and delays, or the perception of delays, which could inhibit benign foreign investment. Furthermore, member agencies needed more resources to research and review nonnotified transactions for potential national security concerns. To address such issues, FIRRMA:
  (1) authorizes, with respect to full filings (as opposed to the short-form declarations to be created), CFIUS to impose a filing fee of 1 percent of the transaction or $300,000 (to be adjusted for inflation), whichever is less;
  (2) creates a CFIUS fund for agencies and authorizes a $20 million appropriation each year until 2023;
  (3) requires a study on a “prioritization fee” that would allow parties to pay for an expedited response from CFIUS to a draft or formal written notice;
  (4) requires a report to Congress with an implementation plan and a description of additional staff and resources that CFIUS needs, including whether the President has determined that additional resources are needed;
  (5) allows CFIUS to centralize certain CFIUS functions to improve interagency coordination and collaboration;
  (6) creates a new Assistant Secretary position to be primarily responsible for CFIUS; and
  (7) gives the member agencies special hiring authority for new CFIUS staff.
XI. Pilot Programs
For 570 days after the effective date of FIRRMA, CFIUS has the authority to conduct pilot programs to implement FIRRMA authorities after it has published a Federal Register notice describing the scope and procedures of the program. This scope is significantly narrower than pilot program authority proposed in earlier versions of FIRRMA.
XII. Information-Sharing
FIRRMA gives CFIUS the authority to share its national security analyses with allied governments to the extent necessary. Such authority is consistent with a general theme in FIRRMA that the administration should work with allies to coordinate efforts and to help them create or improve their foreign investment review authorities to address common concerns.
XIII. Congressional Reporting Obligations Regarding China
Although FIRRMA does not target new controls against China by name, it specifically requires detailed reports on Chinese investment. Such reports, which the Secretary of Commerce must file every two years with Congress and CFIUS, must break down total direct Chinese investment in various size categories, by type of investment, whether they are government or nongovernment investments, and details about their U.S. affiliates. The reports must also describe patterns of investment by volume, type and sector, and the extent to which such investments align with China’s objectives as set out in its “Made in China 2025” plan.
XIV. New Obligations Regarding the Annual Report to Congress
FIRRMA also requires CFIUS to include significantly more information in its annual reports to Congress, such as:
  (1) a list of all notices filed and all reviews or investigations of covered transactions;
  (2) detailed information about the outcome of the reviews, the parties involved, the nature of the businesses at issue and any withdrawals from the process;
  (3) statistics on compliance plans conducted and related CFIUS actions, assessments of how parties complied with mitigation agreements and actions that CFIUS took to address violations of agreements;
  (4) trend information on filings, CFIUS’s responses to them, and the business sectors and the countries involved in the declarations;
  (5) descriptions of the methods that CFIUS used to identify nonnotified transactions of concern, resources needed to improve this process and the number of nonnotified transactions that were identified for further review;
  (6) a list of waivers granted and a description of the new hiring practices authorized;
  (7) a description of the technologies that the CFIUS chair (Treasury) recommended to be added to the export control lists of “critical technologies; and
  (8) detailed statistics about the processing of CFIUS filings, with explanations for any delays.
These new reporting requirements, which will not become available for several years, will eventually provide significantly more visibility into the CFIUS process, allowing industry to have a better sense for the types of transactions CFIUS considers of national security concern.
The NDAA also requires the Defense Department to identify in a list the technologies that it believes are “critical technologies” and to recommend that they be controlled. This obligation, plus the obligation on the Treasury to identify technologies that it believes should be “critical technologies,” creates the potential for awkward interagency conflicts and congressional second-guessing if the recommendations do not align with the technologies identified for control through the interagency process required by the Export Control Reform Act.
XV. Judicial Review
FIRRMA authorizes civil actions challenging “an action or finding” under FIRRMA in the U.S. Court of Appeals for the District of Columbia. Such authority was not in FIRRMA as introduced. It is slightly broader than the Senate version of the provision, which would have limited judicial review to actions and findings of CFIUS.
XVI. Bankruptcy
During the congressional hearings, several members and witnesses expressed concern about the possibility that foreign acquisition of sensitive technologies and other assets could occur outside the scope of CFIUS’s jurisdiction. To address this issue, FIRRMA requires CFIUS to create regulations to clarify that the term “covered transaction” includes transactions that occur “pursuant to a bankruptcy proceeding or other form of default on debt.”  

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14. Torres Law: “New Changes to the United States Foreign Investment Laws: What Foreign Investors Need to Know”

(Source: Torres Law, 14 Aug 2018.)
On August 13, 2018, President Trump signed the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA) into law. The NDAA contains the Foreign Investment Risk Review Modernization Act (FIRRMA), which makes significant changes to the Committee on Foreign Investment in the United States (CFIUS). This article briefly summarizes a number of changes to the current CFIUS process that will significantly impact foreign companies seeking to invest in U.S.-based businesses. The changes introduced by FIRRMA are the most significant changes made to CFIUS in over a decade.

As discussed in previous articles published by Torres Law,[1] CFIUS is an interagency body with authority to assess the national security implications of investment transactions that could result in control of U.S. businesses by foreign persons. CFIUS is comprised of nine members from the federal executive branch, two ex officio members, and other members as appointed by the president.  Chaired by the U.S. Department of the Treasury, CFIUS reviews for national security concerns transactions in which a foreign entity acquires control of a U.S. business. CFIUS reviews have typically focused on deals involving national security such as defense, transportation infrastructure, telecommunications, technology, and most recently financial services and personally identifiable information.

FIRRMA impacts the CFIUS process in several ways and expands CFIUS applicability to the following types of “Covered Transactions”:

  (1) Real estate transactions. Real estate transactions where a foreign person leases or purchases real estate in close proximity to U.S. military or other sensitive U.S. government locations, or where the property is located in or will function as part of an air or maritime port and if such property could reasonably facilitate the collection of intelligence, expose the property to the risk of foreign surveillance, or otherwise expose national security activities at such U.S. government site.
  (2) Non-controlling investments involving “critical infrastructure,” “critical technology,” or “sensitive personal data” of U.S. persons. Transactions where foreign persons invest in critical technology and critical infrastructure will be subject to CFIUS jurisdiction if the foreign person could gain access to material nonpublic technical information possessed by the U.S. business; if the investment could provide the foreign person the right to observe or join the board or nominate board members; or allow the foreign person to be involved in any substantive decision making related to sensitive personal data of U.S. persons, critical technologies, or critical infrastructure.
  (3) Change in Rights. Changes to a foreign person’s rights if they result in control of a U.S. business or critical technology and critical infrastructure companies (or any of the other types of investments described above).
  (4) Evasion. Any transaction designed or intended to evade or circumvent CFIUS jurisdiction.
Other important changes include modifications to the CFIUS review and investigation process, including the modification of CFIUS timelines to expedite certain reviews while strategically targeting others for more in-depth review (e.g., Chinese transactions); new filing fees up to $300,000 per transaction and potential “fast track” fees to presumably expedite filings for parties who pay an additional fee; additional resources for CFIUS staffing; more authority for CFIUS to investigate transactions for which it was not notified; and the introduction of “light” CFIUS filings,[2] which will streamline the CFIUS notification process and aim to reduce the resources and costs involved in conducting the filing. Further, certain transactions will now be subject to a mandatory CFIUS filing (i.e., transactions where a foreign government obtains a substantial interest (more than 10%) in critical infrastructure or critical technology or a company that maintains sensitive data about U.S. persons). Notably, CFIUS is now instructed to review the foreign person’s history of compliance with U.S. laws and also evaluate whether the proposed transaction could create cybersecurity risks for the United States. FIRRMA will also require CFIUS to establish formal plans to monitor mitigation plans imposed on approved transactions and is now empowered to impose penalties if the parties fail to comply with mitigation plan conditions imposed by the CFIUS clearance process.
FIRRMA will apply to all pending and future transactions on or after August 13, 2018. Although some of the FIRRMA provisions will become effective immediately, others will not go into effect until the implementing regulations are rolled out over the next 18 months. The public will have an opportunity to comment on proposed rulemakings, so it is important to monitor for any new developments.
Olga Torres and Jonathan Creek, 2018 Trends for CFIUS Reviews, Torres Law Insights (Feb. 20, 2018); also see Andrea Fraser-Reid, CFIUS, Foreign Investment and Trade Relations in the New Administration, Torres Law Insights (May 3, 2017).
Whereas the traditional written CFIUS notification is often 30 or more pages, FIRRMA introduces a short form declaration of no more than 5 pages.

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* What: Boot Camp: Achieving ITAR/EAR Compliance; Orlando, FL
* When: February 6-7, 2019
* Sponsor: Export Compliance Solutions (ECS)
* ECS Instructors:  Suzanne Palmer; Mal Zerden
* Register here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com

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Letitia Elizabeth Landon (14 Aug 1802 – 15 Oct 1838; English poet and novelist.)
  – “An apt quotation is like a lamp which flings its light over the whole sentence.” 
Steve Martin (Stephen Glenn Martin; born August 14, 1945; is an American actor, comedian, writer, producer, playwright, author, and musician. Martin came to public notice in the 1960s as a writer for The Smothers Brothers Comedy Hour, and later as a frequent guest on The Tonight Show, and appeared 27 time on Saturday Night Live, performing offbeat, absurdist comedy routines. Since the 1980s, having branched away from comedy, Martin has become a successful actor, as well as an author, playwright, pianist, and banjo player, eventually earning him an Emmy, Grammy, and American Comedy awards, among other honors.)
 – “When I finally retire, I just want to go away so no one has to listen to me.”
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. 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.
: 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. 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 12 Jun 2018: 83 FR 27380-27407: Air Cargo Advance Screening (ACAS)

  – 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 

: 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

: 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 

: 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
  – 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.  
, 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:
14 Aug 2018: Harmonized System Update 1812, containing 27 ABI records and 6 harmonized tariff records. 

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

  – 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 

, 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
. BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please
contact us

to receive your discount code.  

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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 

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

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* 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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