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18-0829 Wednesday “Daily Bugle”

18-0829 Wednesday “Daily Bugle”

Wednesday, 29 August 2018

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here for free subscription. Contact us for advertising inquiries and rates
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  1. Commerce/BIS Seeks Comments Concerning CWC Provisions of the EAR
  2. Justice/ATF Seeks Comments Concerning Application for Explosives License or Permit
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. Singapore Customs Releases Notice Concerning TradeXchange
  1. AD: “Dutch Customs Never Stopped Shipment for Controversial Russia-Crimea Bridge”
  2. Popular Mechanics: “Defense Distributed Is Selling 3D Printed Gun Files — Through the Mail”
  3. ST&R Trade Report: “U.S., Mexico Announce Trade Agreement; Talks with Canada Expected Soon”
  4. The Verge: “Inside the United Nations’ Effort to Regulate Autonomous Killer Robots”
  1. E. McClafferty, L. van der Meer & R. Slack: “Preparing for the Worst: Licenses Needed for UK Export of Dual Use Items”
  2. M. Padovan, M. Zinzani & V. Picchiassi: “Iran: The First Package of U.S. Extraterritorial Sanctions and the Update of the EU Blocking Statute”
  3. R.C. Burns: “Newsweek Gets Confused by OFAC Travel Rules”
  1. 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 (3 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

1.
Commerce/BIS Seeks Comments Concerning CWC Provisions of the EAR

(Source: Federal Register, 29 Aug 2018.) [Excerpts.] 
 
* AGENCY: 
Bureau of Industry and Security.
* ACTION: 
Notice.
* SUMMARY: 
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
* DATES: 
Written comments must be submitted on or before October 29, 2018.
* ADDRESSES: 
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, 1401 Constitution Avenue NW, Room 6616, Washington, DC 20230 (or via the internet at docpra@doc.gov.
* FOR FURTHER INFORMATION CONTACT: 
Requests for additional information or copies of the information collection instrument and instructions should be directed to Mark Crace, BIS ICB Liaison, (202) 482-8093 or at mark.crace@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: … 
The Chemical Weapons Convention (CWC) is a multilateral arms control treaty that seeks to achieve an international ban on chemical weapons (CW). The CWC prohibits, the use, development, production, acquisition, stockpiling, retention, and direct or indirect transfer of chemical weapons. This collection implements the following export provision of the treaty in the Export Administration Regulations (EAR):
  Schedule 1 notification and report:
 Under Part VI of the CWC Verification Annex, the United States is required to notify the Organization for the Prohibition of Chemical Weapons (OPCW), the international organization created to implement the CWC, at least 30 days before any transfer (export/import) of Schedule 1 chemicals to another State Party. The United States is also required to submit annual reports to the OPCW on all transfers of Schedule 1 Chemicals.
  Schedule 3 End-Use Certificates:
 Under Part VIII of the CWC Verification Annex, the United States is required to obtain End-Use Certificates for exports of Schedule 3 chemicals to States that are not Party to the CWC to ensure the exported chemicals are only used for the purposes not prohibited under the Convention. … 
  Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency’s estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
 

 Sheleen Dumas, Departmental Lead PRA Officer, Office of the Chief Information Officer.

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EXIM_a2

2. 
Justice/ATF Seeks Comments Concerning Application for Explosives License or Permit

(Source: Federal Register, 29 Aug 2018.) [Excerpts.] 
 
* AGENCY: 
Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice
* ACTION: 
30-Day notice.
* SUMMARY: 
The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995.
* DATES: 
The comment period for the proposed information collection published on June 28, 2018 (83 FR 30457) is reopened. Comments are encouraged and will be accepted for an additional 30 days until September 28, 2018. … 
* SUPPLEMENTARY INFORMATION: 
The proposed information collection was previously published in the Federal Register, on June 28, 2018 (83 FR 30457), allowing for a 60-day comment period. Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. 
 
Overview of This Information Collection
 
  – Type of Information Collection: Extension, without change, of a currently approved collection.
  – The Title of the Form/Collection: Application for Explosives License or Permit. … 
  – Form number:
 ATF F 5400.13/5400.16.
  – Component:
 Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Department of Justice. … 
  – Abstract:
 Chapter 40, Title 18, U.S.C., provides that any person engaged in the business of explosive materials as a dealer, manufacturer, or importer shall be licensed (18 U.S.C. 842(a)(1)). In addition, provisions are made for the issuance of permits for those who wish to use explosive materials that are shipped in interstate or foreign commerce. … 
 
If additional information is required contact: Melody Braswell, Department Clearance Officer, United States Department of Justice, Justice Management Division, Policy and Planning Staff, Two Constitution Square, 145 N Street NE, 3E.405A, Washington, DC 20530.
 
  Dated: August 24, 2018.
Melody Braswell, Department Clearance Officer for PRA, U.S. Department of Justice.

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OGSOTHER GOVERNMENT SOURCES

OGS_a13
. Items Scheduled for Publication in Future Federal Register Editions
 

(Source:
Federal Register)
* Commerce/BIS; 
  – RULES; Revisions to Export Administration Regulations Based on 2017 Missile Technology Control Regime Plenary Agreements; and
  – NOTICES; Meetings: Regulations and Procedures Technical Advisory Committee [Publication Dates: 30 Aug 2018.]
 
* State; RULES; Continued Temporary Modification of Category XI of the United States Munitions List [Publication Date: 30 Aug 2018.]    

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

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

OGS_3
5
State/DDTC: (No new postings.)

(Source: 
State/DDTC)

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

OGS_a4
6. 
Singapore Customs
 Releases Notice Concerning TradeXchange

(Source: Singapore Customs, Notice 16/2018, 27 Aug 2018.) 
 
Singapore Customs has announced that all TradeXchange services have been fully migrated and made available on the National Trade Platform (NTP) since May 2018. As such, TradeXchange will be decommissioned on 28 October 2018 at 2359 hours, and access to TradeXchange services will only be available on the NT. 
 
For existing TradeXchange users who have yet to set up your NTP account, please do so immediately. Information on how to set up your NTP account can be found 
here
.
 
Businesses are required to use their CorpPass to access the NTP and hence you will need to select the “Singapore Customs NTP” e-Service in CorpPass. Find out more and register today 
here
.

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NWSNEWS

(Source: 
AD, 29 Aug 2018.) [Excerpts; translation by editor.]
 
The EU sanctions concerning the Russia-Crimea Bridge were easy to circumvent. Dutch Customs never intercepted shipments, but is now investigating ten to twenty Dutch companies that may have violated EU sanctions regulations.
 
The European Parliament is concerned. The EU implements sanctions more often, but they seem to lose their strength. “The credibility is at stake”, says Member of Parliament Marietje Schaake (D66). For example, a Belgian company previously provided prohibited components of chemical weapons to Syria.
 
In recent months, Dutch customs authorities carried out an investigation among a total of “ten to twenty” companies based in the Netherlands concerning possible involvement in the construction of the controversial bridge between Russia and Crimea, according to the Gelderlander. … 
 
Whether shipments for the Crimean Bridge are not or not properly controlled via an intermediary in another country or another region, Customs does not want to say. However, a spokeswoman says: “Dutch Customs does not… have any influence on the use or forwarding of these goods after they have reached the specified destination.” Companies are obliged to investigate the end-use and end-user of a controlled item. … 

The fact that consignments for the Russia-Crimea Bridge were never stopped can in theory mean Dutch companies are export compliant, according to MEP van D66 Marietje Schaake. However, she finds it “worrisome” that an increasing number of companies acted contrary to the sanctions rules. “The question is whether [these] companies deliberately circumvented the sanctions or whether [regulatory] supervision failed.”

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(Source: 
Popular Mechanics, 28 Aug 2018.) [Excerpts.] 
 
Becoming the iTunes of gun files instead of the Napster.
 
Cody Wilson, founder of Defense Distributed, has announced that while his site will comply with federal orders to halt internationally publishing CAD files of firearms on his website, such compliance comes with a catch. The site will begin selling the files via snail mail instead.
 
Defense Distributed has undergone a legal battle for years with its publishing of gun-related CAD files. Under President Obama in 2013, the State Department accused Wilon and Defense Distributed of violating the International Traffic in Arms Regulations (ITAR), which are meant to prevent the exporting of defense technology. 
 
Defense Distributed and the State Department wrangled for years over issues of defense and free speech until July 10, 2018, when the federal government offered Defense Distributed a settlement in with the Department of Justice would pay $40,000 of Defense Distributed’s legal fees and allow it to restart its business as usual.  …  

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The presidents of the U.S. and Mexico announced Aug. 27 a preliminary agreement in principle on a bilateral free trade agreement that President Trump indicated will replace NAFTA. The deal is expected to be signed in late November following a 90-day congressional review period. Trump said the U.S. will also begin “pretty much immediately” trade negotiations with Canada that will result in either a separate bilateral FTA or Canada’s addition to the U.S.-Mexico agreement.
 
Companies importing from Mexico should act now to assess the possible impact of these changes on their supply chains. Sandler, Travis & Rosenberg can help companies review their operations and import data to evaluate potential effects and responses.
 
Arguing that NAFTA has contributed to the growing U.S. goods trade deficit and includes many provisions that do not reflect modern standards, new technologies, or the 21st century global economy, the Office of the U.S. Trade Representative states that the U.S.-Mexico agreement includes the following provisions, among others.
 
Rules of Origin and Market Access
 
  – 75 percent of auto content must be made in the U.S. and Mexico
  – 40-45 percent of auto content must be made by workers earning at least $16 per hour
  – stronger rules of origin, including for industrial products such as chemicals, steel-intensive products, glass, and optical fiber
  – procedures that streamline certification and verification of rules of origin and new cooperation and enforcement provisions to help prevent duty evasion before it happens
  – new provisions for transparency in import licensing and export licensing procedures
  – prohibition on (a) requirements to use local distributors for importation, (b) restrictions on the importation of commercial goods that contain cryptography, and (c) import restrictions on used goods to remanufactured goods
  – updated provisions for duty-free temporary admission of goods to cover shipping containers or other substantial holders used in the shipment of goods
  – new provisions covering trade in specific manufacturing sectors, including information and communication technology, pharmaceuticals, medical devices, cosmetic products, and chemical substances
 
Textiles and Apparel
 
  – limit on rules that allow for some use of non-NAFTA inputs in textile and apparel trade
  – requirement that sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in apparel and other finished products, be made in the region for those finished products to qualify for trade benefits
  – textile-specific verification and customs cooperation provisions that provide new tools for strengthening customs enforcement and preventing fraud and circumvention
 
Agriculture
 
  – agreement to not use export subsidies or World Trade Organization special agricultural safeguards for products exported to each other’s market
  – improved commitments to increase transparency and consultation regarding the use of export restrictions for food security purposes
  – when supporting producers, agreement to consider using domestic support measures that have minimal or no trade distorting or production effects
  – improved transparency for import checks
  – new provisions on geographical indications
  – first-ever agreement to protect the confidentiality of proprietary formulas for food products in the same manner for domestic and imported products
 
IPR
 
  – enforcement authorities must be able to stop goods suspected of being pirated or counterfeited at all areas of entry and exit
  – enforcement against counterfeits and piracy occurring on a commercial scale
  – first U.S. FTA to require all of the following to protect U.S. rights holders from trade secret theft, including by state-owned enterprises: civil remedies, criminal remedies, prohibition on impeding licensing of trade secrets, protections for trade secrets during the litigation process, and penalties for government officials who wrongfully disclose trade secrets
  – full national treatment for copyright and related rights
  – minimum copyright term extended to 75 years for works like song performances
  – ten years of data protection for biologic drugs and expanded scope of products eligible for protection
 
Digital Trade
 
  – prohibition on application of customs duties and other discriminatory measures to digital products distributed electronically (e-books, videos, music, software, games, etc.)
  – limit on government ability to require disclosure of proprietary computer source code and algorithms
 
De Minimis
 
  – Mexico will increase from $50 to $100 the value of shipments that may enter free of customs duties or taxes and with minimal formal entry procedures
 
Financial Services
 
  – prohibition on local data storage requirements when a financial regulator has the access to data it needs to fulfill its regulatory and supervisory mandate
  – updated provisions to allow for the cross-border transfer of data
  – a separate annex on commitments relating to cross-border trade, including application of the national treatment and market access obligation to an expanded list of cross-border services
 
Labor
 
  – all labor provisions brought into core of the agreement and made enforceable
  – commitment by Mexico to specific legislative actions to provide for the effective recognition of the right to collective bargaining
  – agreement to take measures to prohibit the importation of goods produced by forced labor, to address violence against workers exercising their labor rights, and to ensure that migrant workers are protected under labor laws
 
Environment
 
  – all environment provisions brought into core of the agreement and made enforceable
  – prohibition on some of the most harmful fisheries subsidies, such as those that benefit vessels or operators involved in illegal, unreported, and unregulated fishing
  – new protections for marine species like whales and sea turtles, including a prohibition on shark-finning
  – obligations to enhance the effectiveness of customs inspections of shipments containing wild fauna and flora at ports of entry and ensure strong enforcement to combat IUU fishing
  – first-ever articles to improve air quality, prevent and reduce marine litter, support sustainable forest management, and ensure appropriate procedures for environmental impact assessments

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NWS_a4
10
The Verge: “Inside the United Nations’ Effort to Regulate Autonomous Killer Robots”

(Source: The Verge, 27 Aug 2018.) [Excerpts.] 
 
Amandeep Gill has a difficult job, though he won’t admit it himself. As chair of the United Nations’ Convention on Conventional Weapons (CCW) meetings on lethal autonomous weapons, he has the task of shepherding 125 member states through discussions on the thorny technical and ethical issue of “killer robots” – military robots that could theoretically engage targets independently. It’s a subject that has attracted a glaring media spotlight and pressure from NGOs like Campaign to Stop Killer Robots, which is backed by Tesla’s Elon Musk and Alphabet’s Mustafa Suleyman, to ban such machines outright. … 
 
There are some governments and NGOs that would like to see a ban of lethal autonomous weapons. Do you see that as a possibility or likelihood?
 
The Convention on Conventional Weapons provides a range of possibilities for controlling weapons use, either banning systems in advance or accepting their inevitability but proscribing their use in certain scenarios, or prescribing some ways of exchanging information or warning people on their use, etc. So banning LAWs is one of the possibilities among the options. But there could be yet another option. There are some states that are quite content with leaving this to national regulations, to industrial standards. So at this point in time, there is no consensus on any option. … 
 
Unlike nuclear weapons, an issue you’ve also worked on, the tools to build autonomous weapons are relatively accessible. Does that pose a challenge to controlling this technology?
 
Any military system today uses a number of technologies that are available off the shelf. But the international community has found ways to regulate these systems, to control their proliferation, whether it is through technology export control or treaties and conventions that have broader applicability or other ways of working with industry – such as in the area of nuclear security, for example – of managing the risks and unattended consequences.
 
So AI is perhaps not so different from these earlier examples. What is perhaps different is the speed and scale of change, and the difficulty in understanding the direction of deployment. That is why we need to have a conversation that is open to all stakeholders. If we set out to govern these through only one level, let’s say the international treaty-making level, ignoring what is done at the national level or by industry, then our chances of success would be not that great. That is my experience of the past couple of years. But if all these different levels move in sync, move in full cognizance of what the other levels are attempting, then we have a better chance of succeeding in managing some of the risks that are associated with AI. …. 
 
[Editor’s Note: To read the entire interview, click on the source link below the item title.]

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COMMCOMMENTARY

 
* Authors: Eric McClafferty, Esq., emcclafferty@kelleydrye.com; and Laura van der Meer, Esq. lvandermeer@kelleydrye.com; and Robert Slack, Esq., rslack@kelleydrye.com. All of Kelley Drye & Warren LLP.
 
It has always been a possibility that the United Kingdom would crash out of the European Union on 30 March 2019 but “no deal” preparation is now highly recommended by both sides.  For organizations that export dual-use items, the possibility of the UK becoming a “third country” vis-à-vis the EU without an exit agreement or transition period means an overnight need for export licenses where none are required today.
 
Seasoned international businesses understand that dual use items, which can be used for both civil and military purposes, include far more products than one might assume.  In addition to the more obvious goods that may be used to produce or develop military items, such as machine tools and equipment used for chemical manufacturing, computers, drawings, technology, software, raw materials, and components also may be subject to dual use controls.   Even seemingly mundane items such as protective clothing used in medical laboratories, certain commonly used chemicals, certain ball bearings, and a wide variety of other products are controlled for export and they need to be properly classified to determine if a license would be needed to ship to a UK that has left the EU.  Many entities that have been operating exclusively within the EU could soon be confronted with dual use licensing requirements for the first time and global businesses may be faced with a potentially significant increase in the number of items that need be licensed.
 
While the export of military items, firearms and goods that may be usable for torture or capital punishment from the UK have been and will continue to be subject to specific licensing requirements, the movement of most dual use items between the 28 Member States of the European Union is possible today without any license. If the UK and EU fail to reach agreement on the UK’s exit from the EU or if either the UK or European Parliament rejects the proposed EU-UK deal, the UK will no longer be part of the EU as of 11.00 GMT 30 March 2019 and a license would be needed to export many dual use items from the UK to the EU.  In addition, existing licenses for exports issued by the UK or issued by the EU27 would no longer be valid for exports from the others’ territories.
 
In a series of technical notices released on 23 August 2018 by the UK, exporters are advised to determine what licenses may be needed should the talks fail.  Exporters were advised to put programs and procedures in place to ensure compliance. Importantly, the UK has announced that it will issue a new Open General Export License (OGEL) in advance of leaving the UK that will cover many dual use items, thus reducing the need for individual export licenses. Businesses seeking to use the new OGEL will need to register at a later stage.  The UK further advises that exporters will be able to apply for and obtain any individual licenses that may be needed prior to the end of March 2019. Unfortunately, however, it is unknown how many additional businesses will be affected and whether regulators will be able to keep pace with the demand.  Further information will be forthcoming but action can and should be taken by businesses now to examine their potential exposure and prepare contingency plans to avoid business disruption.

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COMM_a02
12. 
M. Padovan, M. Zinzani & V. Picchiassi: “Iran: The First Package of U.S. Extraterritorial Sanctions and the Update of the EU Blocking Statute”

(Source: Studio Legale Padovan, 20 Aug 2018.) 
 
* Authors: Marco Padovan, mpadovan@studiopadovan.com; Marco Zinzani, Esq., mzinzani@studiopadovan.com; and 
Valerio Picchiassi, 
Esq.,
vpicchiassi@studiopadovan.com
. All of Studio Legale Padovan, Milan and Rome. 
 
The first of the so called ‘wind down period‘ stated by the US administration has expired on Monday 6 August 2018. These wind down periods were established as a result of Trump’s pulling out from the Joint Comprehensive Plan Of Action, the ‘Iran nuclear deal’, on 8 May this year. The original sanctions, which were suspended by effect of the JCPOA, will as consequence revive on 7 August 2018. The new Executive Order “Reimposing certain Sanctions With Respect to Iran“, also called “the New Iran E.O.“, restores the sanctions which were lifted by the E.O. 13176 of 16 January 2016 and brings to an end the wind-down general licenses (GLs). Notably, as asserted by the FAQ 1.2 Frequently Asked Questions Regarding the Re-Imposition of Sanctions Pursuant to the 8 May 2018 National Security Presidential Memorandum Relating to the Joint Comprehensive Plan of Action (JCPOA) and by the FAQs 598, 601 and 606, which form part of the additional FAQs “Regarding Executive Order of 6 August 2018, “Reimposing Certain Sanctions With Respect to Iran“, published simultaneously with the new Executive Order, sanctions are restored and extended for the following activities:
 
  – sanctions on the purchase or acquisition of US dollar banknotes by the Iranian government, of US Dollars;  
  – sanctions on Iran’s trade in gold and precious metals;
  – sanctions on the direct or indirect sale, supply or transfer from or to Iran of graphite, raw metals or semi-finished products, such as aluminum and steel, coal and software for integrating industrial processes; 
  – sanctions on “significant” transactions related to the purchase or sale of Iranian Rials, or the deposit of funds or the maintenance of significant bank accounts outside the territory of Iran in Iranian Rials currency; 
  – sanctions on the purchase, subscription to, or facilitation of the issuance of sovereign Iranian debt; 
  – sanctions on Iran’s automotive sector; 
  – sanctions for diverting goods intended for the Iranian population, including food, medical and agricultural products, if they are used for facilitating censorship or human rights abuses. 
 
All of the above-mentioned sanctions bear some extraterritorial profiles. They apply to non-US companies and they apply in absence of a lien between the mentioned activities and the US jurisdiction (i.e. by the subjects involved, commodity traded or method of payment). 
 
On November 5, 2018 a second block of US sanctions will be reinstated. These will particularly hit the port operators, and shipping and shipbuilding sectors, petroleum-related transactions and energy sector. The SDN List will grow by a number of Iranian physical and juridical persons, naming among these almost all of the Iranian banks (the so called “13599”). 
 
The European Union’s reply: the updated Blocking Statute, the Implementing Regulation and the Commission’s FAQs

The EU reaffirmed its intention to maintain the JCPOA, clearly opposing the new US position. In particular, the EU considers the extraterritorial effects of US sanctions as a violation of International Law. 
 
The EU published the following documents on September 7, 2018, which have been waited for by business operators in order to understand how to combine the simultaneous application of the Extraterritorial US rules and the EU Blocking Regulation:

  – Commission Delegated Regulation (EU) 2018/1100 of 6 June 2018 amending the Annex to Council Regulation (EC) No 2271/96 “protecting against the effects of extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom”, modifying the Annex to the Regulation (EC) n. 2271/96 of the European Council (‘Blocking Regulation’). The Regulation lists the US Extraterritorial Rules which are considered unlawful by the EU, in order to protect the European operators. On August 7, the new Annex becomes legally binding; 
  – Commission Implementing Regulation (EU) 2018/1101 of 3 August 2018 laying down the criteria for the application of the second paragraph of Article 5 of Council Regulation (EC) No 2271/96, thus authorizing the EU operators to comply in all or in part to the Extraterritorial Sanctions. 
  – Frequent Questions (FAQs) on Blocking Regulation and Implementing Regulation.

At the end of July 2018, after 22 years, the EU finally defined the procedural rules of the Extra- Territorial Legislation Committee as per the article 8 of the Blocking Regulations; the mentioned Rules replicate the standard EU comitology procedures.

The EU also published a standard Template for applications for authorizations under Article 5 paragraph 2 of Council Regulation (EC) No 2271/96 (for a resume of the newly introduced rues, please see here).
 
Our Opinion 
 
The Blocking Regulation was introduced 22 years ago to cancel, neutralize, block and anyway avoid the extraterritorial effect that could affect some European trading operators. It was adopted to protect against restrictive measures imposed by the USA against Cuba, Libya and Iran. In order to keep up to date the Extraterritorial List of US Rules, which cannot be lawfully executed in the EU, and in order to take into account the evolution of US rules along the years, also in light of Trump’s declaration dated May 8, 2018, the EU has now chosen to substitute the whole Annex to the Blocking Regulation. 
 
As we anticipated in our clients’ alert last June 2018, the wording of the Annex to the Regulation is subject to some technical remarks: i.e. it is unclear if the automotive extraterritorial sanctions and those sanctions applying to certain blacklisted entities are actually embedded in the definitions of the new Annex.
 
The Blocking Regulation – which was applied for by our Firm in the event of the 2014 sanctions imposed by the US State Department’s against Dettin S.p.A. in relation to activities which were wholly and perfectly lawful according to the National and UE regulations – provides for penalties against any European entity which, in absence of a previous authorization by the European Commission, would give execution to extraterritorial US sanctions (article 5). Furthermore, it prescribes the right to recover any damages, including legal costs, caused by the application of the extraterritorial laws specified in the Annex or by actions based thereon or resulting therefrom (Article 6). In Italy, the administrative sanction is that of the Legislative Decree n. 346 of 1998, with a maximum cap of 92.962,00 Euros. 
 
The combined provisions of Article 5 and 6, in fact, provide that if a European company intends to pull out from a contract with European counterparts for supplies in Iran or, in absence of an agreement with the counterparts, modifies the contract terms and conditions on the basis of the sole US Regulations without any authorizations from the European Commission, the company might face a civil action for damages plus the administrative sanction. In Italy, this sanction is imposed by the Ministry for Economic Development (MISE). Therefore, it is advisable to take prudent care in continuing contractual relations with Iranian counterparts that are subject to US sanctions, or in suspending or terminating them. 
 
Pursuant to Article 2 of the Blocking Regulation, whenever the economic and/or financial interests of an European operator are affected, directly or indirectly, by the measures listed in the Annex to the Blocking Regulation, or by actions based thereon or derived therefrom, the operator shall inform the European Commission within thirty days from the event, directly or through the Member States competent authorities. 
 
Subparagraph 2 of Article 5 allows the European Commission to authorize the European operators to comply, fully or in part, with the US extraterritorial sanctions, to the extent that non-compliance would seriously damage their interests or those of the Community. 
 
It is clarified in the FAQs that such authorization is only agreed by way of waiver to the general rule and only in specific and duly motivated circumstances. The request has no suspensive effects. The authorization, granted by an implementing decision, becomes effective by the date of notification to the applicant. Until then, the EU operators are compelled to apply the Blocking Regulation. 
 
Pursuant to Article 3 of the Implementing Regulation of the Commission (EU) n. 2018/1101, applications for an authorization as per Article 5, Subsection 2, of the Regulation (EC) n. 2271/1996 shall be in writing and shall include the name and contact details of the applicants, shall indicate the precise provisions of the listed extra-territorial legislation or the subsequent action at stake, and shall describe the scope of the authorization that is being requested and the damage that would be caused by non-compliance. In their application, the applicants shall also provide sufficient evidence that non-compliance would cause serious damage to at least one protected interest. 
 
Where necessary, the Commission may request additional evidence from the applicants, which shall provide it within a reasonable period set by the Commission. The Commission shall inform the Committee on Extra-territorial Legislation as soon as it receives applications.
 
It is important to highlight that the Implementing Regulation (EU) n. 2018/1101 establishes the criteria to be considered by the Commission to decide on the seriousness of the damage (for the operators and the EU) in relation to non-compliance with US extraterritorial rules. The non- cumulative criteria include, by way of example:
 
  – the existence of an ongoing administrative or judicial investigation against the applicant from, or a prior settlement agreement with, the third country which is at the origin of the listed extra- territorial legislation;
  – the existence of a substantial connecting link with the third country which is at the origin of the listed extraterritorial legislation or the subsequent actions; for example the applicant has parent companies or subsidiaries, or participation of natural or legal persons subject to the primary jurisdiction of the third country which is at the origin of the listed extra-territorial legislation or the subsequent actions;
  – whether measures could be reasonably taken by the applicant to avoid or mitigate the damage; – the adverse effect on the conduct of economic activity, in particular whether the applicant would face significant economic losses, which could for example threaten its viability or pose a serious risk of bankruptcy;
  – whether the applicant’s activity would be rendered excessively difficult due to a loss of essential inputs or resources, which cannot be reasonably replaced;
  – whether there is a threat to safety, security, the protection of human life and health and the protection of the environment;
  – the consequences for the internal market in terms of free movement of goods, persons, services and capital, as well as financial and economic stability or key Union infrastructures;
  – the systemic implications of the damage, in particular as regards its spill-over effects into other sectors.
 
Notably, the Commission’s FAQs, which are just an interpretative guideline and not a legal act, dwell about the controlled/subsidiaries of American companies in the EU territory and, vice-versa, about the European subsidiaries in US Territory, distinguishing three situations:
 
When EU subsidiaries of U.S. companies are formed in accordance with the law of a Member State and have their registered office, central administration or principal place of business within the Union, they are considered EU operators. This implies that they enjoy all the rights and are subject to all the obligations under Union law, including the Blocking Statute.
Branches of U.S. companies in the Union do not fall under the previous paragraph as they do not have distinct legal personality from their parent company. They are not considered EU operators. Therefore, they are not subject to the Blocking Statute.
 
Subsidiaries of EU companies in the U.S. are subject to the law under which they are incorporated, which is generally that of the U.S. Therefore, they are not considered to be EU operators and are not subject to the Blocking Statue. Nevertheless, their parent company incorporated in the Union is an EU operator and, as such, it is subject to the provisions of the Blocking Statute.
 

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(Source: 
Export Law Blog, 29 Aug 2018.) Reprinted by permission.)
 
* Author: R. Clifton Burns, Esq., Bryan Cave LLP, Washington DC,
Clif.Burns@bryancave.com
, 202-508-6067.
 
Last week the State Department changed its travel advisory on Cuba from “reconsider travel” to “exercise increased caution.” The “reconsider travel” warning was apparently based on the sonic attacks on diplomats in Cuba.  The decision to change to “exercise increased caution” came after the State Department concluded that sonic attacks on private U.S. citizens was unlikely.
 
Still this business of travel warnings appear to have little, if any, relation to the actual safety of the destination. There are no warnings about the safety of travel to Belize even though between 2009 and 2016, 16 Americans were murdered in Belize. That put Belize as the seventh most dangerous country for Americans as measured by its death rate of 1.02 per 100,000 American tourists.  During that same period, only two people were killed in Cuba giving it a death rate of 0.08 per 100,000 American tourists, approximately 12 times lower than that of Belize. Of course, given the U.S. homicide rate of 5.3 per 100,000, it’s probably safer to travel to Cuba, or even Belize, than to stay home in the United States.
 
A number of news sites commented on this change. But one of them, namely Newsweek, caught my eye when it decided to add this statement about travel to Cuba:
 
The only legal way for U.S. citizens to travel there is by applying to the Treasury Department’s Office of Foreign Assets Control for a license under one of 12 categories of travel.
 
Good grief.  Is Google not working at Newsweek these days? Those twelve categories mentioned in the quote are for general licenses, you know, the ones that do not require a specific OFAC license application.  In case the Newsweek reporter wanders by and reads this post, here is the link to the OFAC regulation noting that general licenses are available for each of those categories.
 
So, as you’ve heard before, don’t believe everything you read on the Internet unless, of course, you read it here.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a1
14
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 before 2 September and get a 10% Early Bird discount on the course fee!
* * * * * * * * * * * * * * * * * * * *

ENEDITOR’S NOTES

EN_a115
. Bartlett’s Unfamiliar Quotations

(Source: Editor)

John Locke (29 Aug 1632 – 28 Oct 1704; was an English philosopher and physician, widely regarded as one of the most influential of Enlightenment thinkers and commonly known as the “Father of Liberalism”.)
  – “New opinions are always suspected, and usually opposed, without any other reason but because they are not already common.”
  – “What worries you, masters you.”

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EN_a216. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
 


ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 
81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 

CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199
  – 
Last Amendment:
12 Jun 2018: 83 FR 27380-27407: Air Cargo Advance Screening (ACAS)
 
DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M

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


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

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

 

FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

  – Last Amendment:
29 June 2018: 83 FR 30541-30548: Global Magnitsky Sanctions Regulations; and 83 FR 30539-30541: Removal of the Sudanese Sanctions Regulations and Amendment of the Terrorism List Government Sanctions Regulations 

 

FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30  

  – Last Amendment: 24 Apr 2018:
83 FR 17749-17751
: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates

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

  –
Last Amendment: 
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.
 

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

EN_a317
. Weekly Highlights of the Daily Bugle Top Stories
(Source: Editor)
 

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

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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, 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 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.

* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website.

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