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18-0821 Tuesday “Daily Bugle”

18-0821 Tuesday “Daily Bugle”

Tuesday, 21 August 2018

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

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. Commerce/ITA: “What Small Businesses Should Know About Tariffs”
  4. DHS/CBP Releases Update Concerning Section 301 Trade Remedies Assessed on Certain Products from China
  5. State/DDTC: (No new postings.)
  6. Treasury/OFAC Updates List of SDN and Blocked Persons
  7. UK ECJU Releases New Export Control Training Bulletin
  1. American Shipper: “Customs Modernizing De Minimis Entry Type 86 Will Be Integrated into The Automated Broker Interface Early Next Year”
  2. Reuters: “U.S. Imposes Fresh Sanctions For Russian Cyber-Related Activity”
  3. ST&R Trade Report: “Rule of Relative Specificity Invoked in Classification Case”
  1. B. Egan, E.T. Abrams & Z. Wang: “Changes Afoot for CFIUS and U.S. Export Controls as the Dust Settles on FIRRMA” (Part II of II)
  2. E. McClafferty & S. Wise: “BIS Proposed Expansion of Export Controls of Spraying and Fogging Systems Could Affect Agriculture Industry and Spray Equipment Used in Other Industries”
  3. K.J. Nunnenkamp & S. Reisinger: “Medical Device Exports to Iran After Resumption of Sanctions”
  1. ECS Presents “ITAR/EAR Symposium & Boot Camp” in Annapolis, MD on 11-13 Sep
  2. FCC to Present U.S. Export Controls Awareness Training Course for Non-U.S. Organizations, 2 Oct in Bruchem, the Netherlands
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (12 Jun 2018), DOD/NISPOM (18 May 2016), EAR (6 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 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

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

[No items of interest noted today.]

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(Source: 
Tradeology, 13 Aug 2018.) [Excerpts.] 
 
What are tariffs?
 
Tariffs are a taxes, levies, or duties on a particular category of imports. These fees are charged as a percentage of the price of an imported good paid for by a U.S. buyer. These charges are collected by U.S. Custom and Border Protection agents at all U.S. ports of entry.
 
How can I obtain a tariff waiver on my foreign purchases?
 
U.S. businesses may request that individual imported products be excluded from the new tariff charges; and U.S. producers may also comment on why certain exclusions should be denied. The Department of Commerce and the U.S. Trade Representative (USTR) have separate application procedures based on the actions taken by their organizations.  Decisions are case by case and require separate individual applications for each item to be imported.
 
Where can I find out more information?
 
SBA directs small businesses to visit the following U.S. Government resources for more information, to receive answers to frequently asked questions, and to request a tariff exclusion on imported products … 

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(Source: 
CSMS #18-000493, 21 Aug 2018.) [Excerpts.] 
 
UPDATE: Section 301 Trade Remedies Assessed on Certain Products from China; Additional List of Products Subject to Section 301 Remedy. … 
 
GUIDANCE:
 
Products Covered by the June 20, 2018 List for the Section 301 Action
  The additional import duties for Chinese goods covered by the June 20, 2018 list were effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Daylight Time on July 6, 2018.
  In addition to reporting the Chapters 1-97 HTSUS classification of the imported merchandise, importers shall also report the 9903.88.01 special tariff number for goods subject to the additional duty assessment of 25% ad valorem as a result of the Section 301 trade remedy.
  9903.88.01: 25% ad valorem additional duty for articles the product of China
  Products Covered by the August 16, 2018 List for the Section 301 Action
  The additional import duties for Chinese goods covered by the August 16, 2018 list of products subject to the Section 301 action are effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Daylight Time on August 23, 2018.
  Any article classified in a subheading covered by the August 16 list that is a product of China is subject to a 25% ad valorem duty rate, in addition to the general (Column 1) rate of duty for that particular subheading.
  
In addition to reporting the Chapter 1-97 HTSUS classification of the imported merchandise, importers shall also report the 9903.88.02 special tariff number for goods subject to the additional duty assessment of 25% ad valorem as a result of the Section 301 trade remedy.
  9903.88.02: 25% ad valorem additional duty for articles the product of China
  All Products Covered by Section 301 Duties
  The Section 301 duties only apply to products of China, and are based on the country of origin, not country of export.
 
CHAPTER 98
 
The USTR’s August 16, 2018 notice of action has provided updated instructions in respect to the use of Chapter 98 provisions for all merchandise on the June 20, 2018 and August 16, 2018 lists covered by the Section 301 remedy. 
  The additional duties imposed by headings 9903.88.01 and 9903.88.02 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under headings 9802.00.40, 9802.00.50, 9802.00.60, and 9802.00.80.  For headings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable heading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.    
  The provisions related to goods entered under headings 9802.00.40, 9802.00.50, 9802.00.60, and 9802.00.80 are effective with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 AM Eastern Daylight Time on August 23, 2018.
 
CHAPTER 98 FILING INSTRUCTIONS
 
When submitting an entry in which a heading or subheading in Chapter 98 is claimed on merchandise covered by the Section 301 remedy, the following instructions will apply.
  When submitting an entry using a Chapter 98 provision that normally requires the reporting of a secondary Chapter 1-97 HTSUS classification, a filer must first report subheading 9903.88.01 or 9303.88.02, as applicable, followed by the applicable Chapter 98 subheading, and the Chapter 1-97 HTSUS classification for the commodity being imported.
  
When submitting an entry using a Chapter 98 provision that does not normally require the reporting of a secondary Chapter 1-97 HTSUS classification, neither 9903.88.01/02 nor the Chapter 1-97 HTSUS should be reported. 
  When submitting an entry for a Temporary Importation under Bond (TIB), a filer must first report the applicable subheading in Chapter 98 (i.e., in heading 9813), followed by subheading 9903.88.01/02, and the Chapter 1-97 HTSUS for the commodity being imported.
  
TRADE PREFERENCE PROGRAMS AND TEMPORARY REDUCTIONS IN RATES OF DUTY
 
Products of China that are covered by the Section 301 remedy and that are eligible for special tariff treatment under general note 3(c)(i) to the tariff schedule, or that are eligible for temporary duty exemptions or reductions under subchapter II to chapter 99, shall be subject to the additional 25 percent ad valorem rate of duty imposed by headings 9903.88.01 and 9903.88.02.
 
FOR FURTHER INFORMATION:
 
For further information, please refer to the USTR’s Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 FR 28710 (June 20, 2018); and the August 16, 2018 Notice of Action Pursuant to Section 301, 83 FR 40823 (August 16, 2018).
  Questions related to Section 301 entry filing requirements should be emailed to traderemedy@cbp.dhs.gov. Questions from the importing community concerning ACE rejections should be referred to their Client Representative.

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(Source: 
Treasury/OFAC, 21 Aug 2018.)    
 
The Specially Designated Nationals (SDN) list has recently been updated.  Please visit this page to access the latest version of the SDN list.  Check this page periodically as it may also be updated if a new list-related format or product is offered. For more information on today’s action, please follow this link

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OGS_a77. 
UK ECJU Releases New Export Control Training Bulletin

(Source: UK ECJU, 21 Aug 2018.) 
 
The UK Export Control Joint Unit (ECJU) has released Export control training bulletin, March to December 2018.
 
This bulletin contains details of courses, seminars and workshops from the Export Control Joint Unit to increase your understanding of the UK’s strategic export controls.
 
Events are aimed at exporting and trading individuals or companies of all sizes, as well as government organizations and cater for a wide range of knowledge levels.

This bulletin
 includes all details, charges, and an application form. 
It covers new courses from March to December 2018.

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NWSNEWS

NWS_18. American Shipper: “Customs Modernizing De Minimis
Entry Type 86 Will Be Integrated into The Automated Broker Interface Early Next Year”

(Source: 
American Shipper, 20 Aug 2018.) [Excerpts.] 
 
U.S. Customs and Border Protection plans to roll out entry type 86 in the Automated Broker Interface (ABI) for de minimis shipments involving partner government agencies (PGAs) in early 2019.    CBP Executive Director for Trade Policy and Programs John Leonard said Tuesday during the agency’s 2018 Trade Symposium in Atlanta that an official announcement is planned for late this fall.

  “This vehicle would allow for an ABI … transaction that would give us certain information on a small package-type of shipment,” he said. “Of course, it’s de minimis, [Section] 321, so it’s no duties, no fees, no bond required. Like most of the prototypes that we work on, we will take baby steps. We will test this first, implement and amend.” … 

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(Source: 
Reuters, 21 Aug 2018.) [Excerpts.] 
 
The United States on Tuesday imposed sanctions on two Russians, one Russian company and one Slovakian firm for what Washington said were their actions to help another Russian company avoid sanctions over the country’s malicious cyber-related activities.
 
The U.S. Treasury said in a statement that the sanctioned companies – Saint Petersburg-based Vela-Marine Ltd and Slovakia-based Lacno S.R.O. – and the two individuals helped Divetechnoservices evade previously imposed sanctions.
 
In June, the United States sanctioned Divetechnoservices, also based in Saint Petersburg, for procuring underwater equipment and diving systems for Russian government agencies, including Russia’s FSB intelligence agency.
 
The Obama administration sanctioned the FSB in December 2016, citing the Russian government’s aggressive harassment of U.S. officials and cyber operations aimed at the 2016 U.S. presidential election.
 

In its statement, the U.S. Treasury said the two individuals sanctioned on Tuesday – Marina Igorevna Tsareva and Anton Aleksandrovich Nagibin – had both helped Divetechnoservices attempt to circumvent U.S. sanctions. …  

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The Court of International Trade has ruled that artichoke antipasto and green olive tapenade are properly classified as sauces under HTSUS 2103.90.90 rather than as other prepared or preserved vegetables under HTSUS 2005.99.80 or HTSUS 2005.99.97.
 
The subject antipasto consists of quartered artichokes, artichoke juice, canola oil, and other ingredients. The tapenade consists of preserved sliced green olives; diced tomatoes, red peppers, carrots, and onions; and other ingredients. In both cases the ingredients are blended in a food processor, cooked, and then rendered commercially sterile after being cooked again in a retort process. The finished products, which have a chunky consistency, are sold as-is without the intention that they will undergo further processing by the purchaser.
 
The CIT states that these goods are classifiable as vegetable products under heading 2005 and that the preparation procedures do not change the essence of the goods from predominantly artichoke and olive products to make them new items. However, they are also classifiable as sauces under heading 2103 because they are mixtures of ingredients in semisolid form that add flavoring to food.
 
The CIT concludes that the requirements of heading 2103 are more difficult to satisfy because preparing a sauce involves some degree of processing or adding ingredients. As a result, under the rule of relative specificity, the subject goods are classified under heading 2103.
 
In addition, because the subject goods were subject to a change in tariff classification under the HTSUS when processed in Canada, they are eligible for duty-free treatment under NAFTA rule of origin preference.

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COMMCOMMENTARY

COMM_a0
11. 
B. Egan, E.T. Abrams & Z. Wang: “Changes Afoot for CFIUS and U.S. Export Controls as the Dust Settles on FIRRMA” (Part II of II)

(Source: Steptoe & Johnson LLP, 16 Aug 2018.)
 
* Authors: Brian Egan, Esq., began@steptoe.com; Evan T. Abrams, Esq., eabrams@steptoe.com; and Zhu (Judy) Wang, Esq., zwang@steptoe.com.  All of Steptoe & Johnson LLP.
 
[Editor’s Note: Part 1 was published in the Daily Bugle of yesterday.]
 
Mandatory Declarations
 
FIRRMA mandates, for the first time, that CFIUS filings will become mandatory for certain transactions. This has not been true of CFIUS filings to date. Although there are already significant incentives to notify CFIUS of covered transactions, and significant risks when parties do not submit a notice, from its outset the CFIUS process has been voluntary. Under FIRRMA, parties will be required to notify CFIUS of transactions in which a “foreign person in which a foreign government has, directly or indirectly, a substantial interest” acquires a “substantial interest” in a critical technology or critical infrastructure company, or a company that handles large amounts of sensitive US person personal data.
 
CFIUS will be required to issue regulations defining “substantial interest” for purposes of this requirement. FIRRMA directs that transactions that do not meet the definition of “other investments” (discussed above) and those in which the interest of the foreign person is less than a 10% voting interest shall not be considered to meet the “substantial interest” definition. CFIUS can waive this mandatory declaration requirement if the Committee determines the investments are not directed by the foreign government and the investor has a history of cooperation with the Committee.
 
The Committee may by regulation also require declarations for other types of covered transactions. 
 
Timing for Reviews and Investigations
 
FIRRMA formally extends the time period for CFIUS review in two ways. Prior to FIRRMA’s passage, notices accepted by CFIUS entered a 30-day “review” phase, which could be extended into an additional 45-day investigation phase for transactions that CFIUS determined merited further examination. FIRRMA extends the initial review phase to 45 days, and it permits the Committee chairperson to extend the 45-day investigation phase for one 15-day period in “extraordinary circumstances.” The legislation does not appear to prohibit the practice of withdrawing and re-filing a notice, which has become increasingly common in complex cases where additional time is needed, particularly in situations where complex mitigation agreements need to be negotiated.
 
Filing Fees
 
Prior to FIRRMA there were no filing fees for submitting a notice to CFIUS. FIRRMA authorizes the Committee to assess and collect a filing fee, not to exceed an amount equal to the lesser of one percent of the value of the transaction or $300,000 (adjusted annually for inflation).
 
China-Specific Provisions
 
FIRRMA itself does not create any restrictions explicitly targeted at China.  However, the administration has already announced its intent to use FIRRMA to increase scrutiny of Chinese investments in the United States. A number of the features of FIRRMA discussed above (such as the expanded jurisdiction of CFIUS over transactions involving certain “foreign persons” to be defined by regulation) could be implemented by the Executive Branch in a manner that could disproportionately impact Chinese investments.
 
Additionally, the “sense of Congress” section of FIRRMA notes that CFIUS should consider “whether a covered transaction involves 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 United States leadership in areas related to national security.” While the sense of Congress provisions are not operative law, the above language appears to be clearly targeted at China and intended to signal to the Committee that closer scrutiny of Chinese investments is warranted.
 
Export Controls
 
The NDAA also includes comprehensive export control reform legislation, the Export Control Reform Act of 2018 (ECRA), to replace the Export Administration Act of 1979, which lapsed in 1994 and has been “kept alive” through the International Emergency Economic Powers Act (IEEPA). The export control reform legislation, as well as additional anti-boycott reform legislation, was originally introduced under the House version of the bill.
 
The most important provisions of ECRA with regard to foreign investment are the provisions establishing a mechanism to identify and control the export of “emerging and foundational technologies,” meaning technologies “essential” to US national security and which are not presently controlled. Previous versions of FIRRMA also sought to empower CFIUS to review certain outbound investments and other transactions potentially involving the transfer of export controlled or other sensitive technology. Those provisions did not make it into the final bill. However, CFIUS and ECRA are linked in that emerging and foundational technologies identified and controlled under the ECRA mechanism will be considered critical technologies under the CFIUS regime.
 
Open Investment Policy
 
The sense of Congress section of FIRRMA states that “maintaining the commitment of the United States to an open investment policy encourages other countries to reciprocate and helps open new foreign markets for United States businesses.” Thus, FIRRMA reaffirms Congress’s commitment to open investment and directs that CFIUS continue to view transactions on the basis of US national security considerations. This no doubt will be considered “weak tea” to some in light of the administration’s broad and expansive approach to “national security” in other areas of international economic law.
 
The Path Ahead
 
The effective dates for various provisions within FIRRMA range considerably. Certain provisions, such as those related to the timing for reviews, took effect immediately upon passage. Other provisions – such as CFIUS’s expanded jurisdiction over real estate transactions and critical technology, critical infrastructure, and personal data company investments – do not take effect until 30 days after the issuance of updated regulations, the details of which will be critical to many of the modifications of the CFIUS process. We will continue to monitor developments and provide updates as that process unfolds. 

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COMM_a01
12. 
E. McClafferty & S. Wise: “BIS Proposed Expansion of Export Controls of Spraying and Fogging Systems Could Affect Agriculture Industry and Spray Equipment Used in Other Industries”

(Source: Trade and Manufacturing Monitor, 17 Aug 2018.)
 
* Author: Eric McClafferty, Esq., emcclafferty@kelleydrye.com; and Scott Wise, Esq. swise@kelleydrye.com. Both of Kelley Drye, Washington DC.
 
Earlier this week, the Bureau of Industry and Security (“BIS”) published a request for public comment regarding a proposed expansion of export controls under the Export Administration Regulations (“EAR”) for certain spraying or fogging systems, which are controlled under Export Control Classification Number (“ECCN”) 2B352.i.  Currently, the ECCN controls only spraying or fogging equipment that is specially designed or modified for use on certain aircraft that also meet certain technical specifications related to droplet size and flow rate.[FN/1]
 
BIS is considering expanding the rule by including ground-based systems, eliminating the performance specifications related to droplet size, and reducing the specification related to flow rate, among other potential changes.  This would significantly increase export compliance burdens on manufacturers of agricultural products and spray equipment used in other industries, which currently are subjected to relatively low levels of export licensing requirements and related compliance exposure.  The products controlled under this ECCN would require specific authorization – an export license from BIS – to most destinations outside the U.S.  Implementation of the rules would also create controls over international transfers of development, production, and certain use information and also limit releases of that information to foreign persons (including employees) in the U.S., unless a specific BIS license for release of information to that employee is in place.
 
BIS is seeking public comment on these proposed changes, including the extent to which the proposed expansion describes items in normal commercial use.  Comments are due to BIS on October 12, 2018. 
 
———–
  [FN/1] Specifically, the ECCN controls, “Spraying or fogging systems and “parts” and “components” therefor, as follows:
  i.1. Complete spraying or fogging systems, “specially designed” or modified for fitting to aircraft, “lighter than air vehicles,” or “UAVs,” capable of delivering, from a liquid suspension, an initial droplet “VMD” of less than 50 microns at a flow rate of greater than 2 liters per minute;
  i.2. Spray booms or arrays of aerosol generating units, “specially designed” or modified for fitting to aircraft, “lighter than air vehicles,” or “UAVs,” capable of delivering, from a liquid suspension, an initial droplet “VMD” of less than 50 microns at a flow rate of greater than 2 liters per minute;

  i.3. Aerosol generating units “specially designed” for fitting to the systems as specified in paragraphs i.1 and i.2 of this ECCN.

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COMM_a3
13. 
K.J. Nunnenkamp & S. Reisinger: “Medical Device Exports to Iran After Resumption of Sanctions”

(Source: Morgan Lewis, 17 Aug 2018.)
 
* Authors: Kenneth J. Nunnenkamp, Esq., kenneth.nunnenkamp@morganlewis.com; and S. Reisinger, Esq., stefan.reisinger@morganlewis.com. Both of Morgan Lewis.
 
After the decision to terminate U.S. participation in the Joint Comprehensive Plan of Action, most EAR99 medical devices remain covered by general licenses for export or re-export to Iran, but medical device companies will need to identify financial institutions able to handle export-related transactions.
 
United States sanctions against Iran prior to implementation of the Joint Comprehensive Plan of Action (JCPOA) in January 2016 included secondary sanctions that subjected foreign parties to potential liability for transactions involving Iran, but, thanks to fairly broad general licenses and related exclusions, the sanctions exempted a large number of medical devices from their purview. For humanitarian reasons, US and non-US companies were able to export a number of medical devices to Iran, and engage in the associated dealings necessary to conduct that business. The general licenses and accompanying detailed guidance prior to the JCPOA identified many of the medical devices that could be exported to Iran, and the conditions for those exports.
 
The sanctions relief in the JCPOA did not initially address medical devices, but in a significant move in late 2016 and early 2017, the US Treasury Department’s Office of Foreign Assets Control (OFAC) effectively relaxed the restrictions on exporting medical devices to Iran. OFAC’s action allowed US and non-US companies to export to Iran all medical devices properly classified as EAR99 products under the US Commerce Department’s Commerce Control List (CCL), except those identified on a modified list-the “List of Medical Devices Requiring Specific Authorization.” This action opened the door to exports to Iran of many more medical devices than had been previously authorized, without the need for a specific license from OFAC.
 
The May 2018 decision to reimpose pre-JCPOA sanctions has thus far had limited impact on the scope of medical devices that can be sent to Iran. The Iranian Transaction and Sanctions Regulations (ITSR) provision that implements the general license, 31 CFR 560.530(a)(3)(ii), has not been changed, and therefore medical device manufacturers may continue to take advantage of the general license. The reversion to pre-JCPOA sanctions, while leaving the export authorizations in place, may impact banks’ willingness to process payments, requiring consideration of whether and how to continue conducting this business.
 
The Decision to Terminate U.S. Participation in the JCPOA
 
Following through on both a campaign promise and recent statements, on May 8, 2018, the administration began the process of terminating US participation in the JCPOA. Withdrawing from the JCPOA will result in the United States reimposing those sanctions that were lifted when the JCPOA sanctions relief went into effect in 2016. The US withdrawal includes a wind-down period designed to allow affected entities to extract themselves from unauthorized activities with Iran. 
 
The administration’s reasons for reimposing sanctions are outlined in National Security Presidential Memorandum-11, which determined that the JCPOA has not achieved its intended purpose and that Iran violated the terms of the agreements under the JCPOA with respect to specific actions directed toward the development of nuclear weapons: 
 
On October 13, 2017, consistent with certification procedures stipulated in the Iran Nuclear Agreement Review Act, I determined that I was unable to certify that the suspension of sanctions related to Iran pursuant to the JCPOA was appropriate and proportionate to the specific and verifiable measures taken by Iran with respect to terminating its illicit nuclear program. On January 12, 2018, I outlined two possible paths forward — the JCPOA’s disastrous flaws would be fixed by May 12, 2018, or, failing that, the United States would cease participation in the agreement. I made clear that this was a last chance, and that absent an understanding to fix the JCPOA, the United States would not continue to implement it.
 
That understanding has not materialized, and I am today making good on my pledge to end the participation of the United States in the JCPOA. I do not believe that continuing to provide JCPOA-related sanctions relief to Iran is in the national interest of the United States, and I will not affirm what I know to be false. Further, I have determined that it is in the national interest of the United States to re-impose sanctions lifted or waived in connection with the JCPOA as expeditiously as possible.
 
On the same day that the US decision went into effect, OFAC and the Department of State implemented 90-day and 180-day wind-down periods for activities involving Iran that had been authorized under the JCPOA sanctions relief. The State Department issued certain sanctions waivers for the duration of the relevant wind-down periods, while OFAC revoked or amended, as appropriate, general and specific licenses issued in connection with the JCPOA. OFAC also issued new authorizations specifically and solely to allow for the wind down of transactions and activities that had been authorized pursuant to the general and specific licenses issued when the JCPOA relief began. 
 
The US decision to terminate participation in the JCPOA has generated significant concern and discussion regarding renewed obligations for compliance going forward. In the two years between the initial decision by the Obama administration to agree to the JCPOA and the Trump administration’s decision that the JCPOA has not worked, billions of dollars of trade and investment poured into Iran, much of which came from companies in European countries.
 
Prior to the JCPOA, the United States had imposed “secondary” sanctions that prohibited foreign subsidiaries of US companies, as well as foreign companies under certain conditions, from dealings with Iran. The US sanctions in effect before the JCPOA changes also curtailed (and in many cases prohibited) financial dealings with Iranian banks and government entities.
 
Executive Orders 13628 and 13716, which implemented the JCPOA, and a series of general licenses and guidance authorized certain specific dealings with Iran, and generally lifted the secondary sanctions prohibiting foreign subsidiaries of US companies from transactions relating to Iran, along with certain activities of non-US companies otherwise subject to the sanctions. Withdrawal from the JCPOA thus reverts US sanctions policy to the position prior to the implementation of the JCPOA sanctions relief in January 2016.
 
To date, however, the US position with respect to medical devices has not reverted to pre-JCPOA status, and it is not clear whether it will be impacted by the withdrawal from the JCPOA and revert to, or be replaced by, any amendment to the general license. The uncertainty stems in large part from the fact that the December 2016 amendment to 31 CFR § 560.530(a)(3)(ii) was not identified as an action taken pursuant to the JCPOA, but instead was made “to reflect OFAC’s licensing practices and address inquiries from the regulated public.” 81 Fed. Reg. 94254.
 
Medical Device Sales and Exports to Iran Before, During, and After the JCPOA
 
For medical device manufacturers, the JCPOA did not dramatically affect the rules relating to exports to Iran, due in large part to exemptions and general licenses specifically applicable to some medicine and medical devices that were in effect well before the JCPOA was conceived. US sanctions policy had previously exempted (or authorized) significant medicine and medical device exports (and associated dealings) with Iran, subject to enunciated conditions. The JCPOA, while making it easier to transact that business in some ways, did not include any further easing of this aspect of trade with Iran. 
 
The primary US sanctions on Iran, the ITSR, 31 CFR part 560, early on included a general license authorizing the export or re-export of a significant amount of medicine and medical devices to Iran. As part of this general license, OFAC identified a list of medical devices approved for export to Iran, and provided guidance informing banks and others that facilitation of such transactions and the processing of payments related to them was also authorized. Later Iran sanctions legislation and regulations similarly continued these exemptions. For example, the Countering America’s Adversaries Through Sanctions Act (CAATSA), passed as part of the National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 115-44, and the Iranian Financial Sanctions Regulations, 31 CFR part 561, also contain exemptions to allow foreign parties to conduct or facilitate the sale of medicine or medical devices to Iran. 
 
In February 2017, implementing the rule change published in December 2016, OFAC changed the applicable list from one delineating products approved under the general license to the List of Medical Devices Requiring Specific Authorization, noting that this change was consistent with existing licensing policy. In essence, the list relating to medical devices was flipped, from one that identified what could be exported to Iran to one that now identifies what cannot be exported to Iran. All medical devices properly classified as EAR99 items (and properly falling within the definition of medical devices found in 31 CFR § 560.530) have been authorized for export to Iran, and continue to be so under the current general licensing scheme.
 
The only medical devices that are excluded from the general license are those on the List of Medical Devices Requiring Specific Authorization or those that are not classified as EAR99. The requirement for an affirmative classification of EAR99 is relevant because it means that items not subject to the Export Administration Regulation (EAR) at all (i.e., those controlled by the International Traffic in Arms Regulations or US Department of Energy) are not covered by the general license. 
 
The general license also permits all necessary and associated transactions (entry into contracts, shipping, insurance, receipt of payment) to give effect to the export or re-export of the medical device made pursuant to it. The requirements for payments also have not changed. Payment for authorized exports or re-exports, however, must be made in accordance with one of the specified methods in the 
ITSR, including the following:
 
  (1) Payment by cash in advance 
  (2) Sales on open account
  (3) Financing by third-country financial institutions
  (4) Letter of credit issued by certain Iranian financial institutions
 
Therefore, while the applicability of the ITSR’s general license remains fairly clear, any proposed payment arrangement should be carefully reviewed to ensure it complies with the various nuanced requirements in the ITSR, as now modified after withdrawal from the JCPOA. 
 

While the reimposition of sanctions following US withdrawal from the JCPOA does not rescind the ITSR authorization for exports or re-exports of medical devices to Iran, and the accompanying authorization to handle payments and related issues in accordance with the regulations, arranging for payment terms, insurance, and other actions may not be as easy in this uncertain climate. Some banks have declined to process financial transactions involving Iran, even where that activity is not technically prohibited under the various sanctions regulations. The complexity and enforcement concerns that preceded the JCPOA are effectively back in play, and medical device companies may find many financial institutions reluctant to handle such transactions. 

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TECEX/IM TRAINING EVENTS & CONFERENCES

TEC_a114. 
ECS Presents “ITAR/EAR Symposium & Boot Camp” in Annapolis, MD on 11-13 Sep

(Source: S. Palmer, 
spalmer@exportcompliancesolutions.com.)
 
* What: The ECS ITAR/EAR Symposium & Boot Camp, Annapolis, MD
* When: September 11-13, 2018
* Sponsor: Export Compliance Solutions & Consulting (ECS)
* ECS Speaker Panel:  Timothy Mooney, Commerce/BIS; Matt Doyle, Lockheed; Matt McGrath, McGrath Law, Scott Jackson, Curtiss-Wright, Suzanne Palmer & Mal Zerden. 
* Register 
here for the three-day event or by calling 866-238-4018 or e-mail 
spalmer@exportcompliancesolutions.com

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

TE_a215. 
FCC to Present U.S. Export Controls Awareness Training Course for Non-U.S. Organizations, 2 Oct in Bruchem, the Netherlands

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

 
Register today and get a 10% Early Bird discount on the course fee!

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ENEDITOR’S NOTES

Saint Francis de Sales (21 Aug 1567 – 28 Dec 1622; was a Bishop of Geneva and is honored as a saint in the Catholic Church. He is known for his writings on the topic of spiritual direction and formation, particularly the Introduction to the Devout Life and the Treatise on the Love of God.)
  – “Never be in a hurry; do everything quietly and in a calm spirit. Do not lose your inner peace for anything whatsoever, even if your whole world seems upset.”
  – “Half an hour’s meditation each day is essential, except when you are busy. Then a full hour is needed.”
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EN_a317
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 12 Jun 2018: 83 FR 27380-27407: Air Cargo Advance Screening (ACAS)
 
DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M

  – Last Amendment: 18 May 2016: Change 2
: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and cancelled Supp. 1 to the NISPOM (Summary 
here
.)


EXPORT ADMINISTRATION REGULATIONS (EAR)
: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last 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: 3 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (30 Apr 2018) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance websiteBITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu.  
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jan 2018: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment:
14 Aug 2018: Harmonized System Update 1812, containing 27 ABI records and 6 harmonized tariff records. 

  – HTS codes for AES are available 
here.
  – HTS codes that are not valid for AES are available 
here.
 
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130.

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

  – The only available fully updated copy (latest edition: 25 Apr 2018) of the ITAR with all amendments is contained in Bartlett’s Annotated 
ITAR

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

to receive your discount code.  

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EN_a0318
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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EPEDITORIAL POLICY

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

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

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


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