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18-0912 Wednesday “Daily Bugle”

18-0912 Wednesday “Daily Bugle”

Wednesday, 12 September 2018

TOP
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  1. Commerce/BIS Corrects EAR Concerning Entity List
  2. NRC Seeks Comments on Form 7, Application for NRC Export/Import License, Amendment, Renewal or Consent Request(s)
  3. President Continues the Exercise of Certain Authorities Under the Trading with the Enemy Act
  4. President Continues National Emergency with Respect to Certain Terrorist Attacks
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. Hong Kong/TID Suspends E-Services Due to System Maintenance
  1. Expeditors News: “CBP Issues Instructions on Possible Diversions Due to Hurricane Florence”
  2. Reuters: “U.S. Lawmakers Back Sanctions over China’s Muslim Crackdown”
  1. Global Trade News: “Weise Wednesday: Can an Agreement on NAFTA Be Reached?”
  2. K.J. Wolf, T.J. McCarthy & S.C. Emme: “The Export Control Reform Act of 2018 and Possible New Controls on Emerging and Foundational Technologies” [Part I of III]
  3. M. Volkov: “FCPA Risks and Merger and Acquisitions: The Evolving Policies (Part I of III)”
  4. O. Torres & D. Kyle: “Department of Commerce Makes Changes to the Steel and Aluminum Tariff Exclusion Request Process”
  1. James Min Moves from DHL to LimNexus LLP
  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 (12 Sep 2018), FACR/OFAC (29 Jun 2018), FTR (24 Apr 2018), HTSUS (14 Aug 2018), ITAR (30 Aug 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1
. Commerce/BIS Corrects EAR Concerning Entity List

(Source: Federal Register, 12 Sep 2018.) [Excerpts.]
 
83 FR 46103-46104: Addition of Certain Entities to the Entity List, Revision of Entries on the Entity List and Removal of Certain Entities From the Entity List
 
Correction
  In rule document 2018-18766 beginning on page 44821 in the issue of Tuesday, September 4, 2018, make the following correction:
  (1) On page 44824, in the third column, amendatory instruction number 2e is corrected to read as follows:
   “2. * * *
   e. Under Russia,
   i. By removing the entity “Joint Stock Company Mikron”;
   ii. By adding in alphabetical order two entities “Joint Stock Company (JSC) NIIME” and “PJSC Mikron”;
  (2) On page 44825, in the table, under the country heading for Hong Kong, the Joinus Freight Systems entry should read as follows: …

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EXIM_a2

2
. NRC Seeks Comments on Form 7, Application for NRC Export/Import License, Amendment, Renewal or Consent Request(s)

(Source: Federal Register, 12 Sep 2018.) [Excerpts.]
 
83 FR 46199-46200: Information Collection: NRC Form 7, Application for NRC Export/Import License, Amendment, Renewal or Consent Request(s)
* AGENCY: Nuclear Regulatory Commission.
* ACTION: Notice of submission to the Office of Management and Budget; request for comment.
* SUMMARY: The U.S. Nuclear Regulatory Commission (NRC) has recently submitted a request for renewal of an existing collection of information to the Office of Management and Budget (OMB) for review. The information collection is entitled, “NRC Form 7, Application for NRC Export/Import License, Amendment, Renewal or Consent Request(s).”
* DATES: Submit comments by October 12, 2018.
* ADDRESSES: Submit comments directly to the OMB reviewer at: OMB Office of Information and Regulatory Affairs (3150-0027), Attn: Desk Officer for the Nuclear Regulatory Commission, 725 17th Street NW, Washington, DC 20503; email: oira_submission@omb.eop.gov.
* FOR FURTHER INFORMATION CONTACT: David Cullison, Office of the Chief Information Officer, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-2084; email: INFOCOLLECTS.Resource@nrc.gov.
* SUPPLEMENTARY INFORMATION: …
  The NRC published a Federal Register notice with a 60-day comment period on this information collection on April 26, 2018, pp. 18356-18357. No comments were received.
   – The title of the information collection: NRC Form 7, Application for NRC Export/Import License, Amendment, Renewal or Consent Request(s).
   – OMB approval number: 3150-0027.
   – Type of submission: Extension.
   – The form number if applicable: NRC Form 7. …
   – Abstract: Persons in the U.S. wishing to export or import nuclear material or equipment, who are required to obtain a specific license, amendment, license renewal, obtain consent to export Category 1 quantities of byproduct material listed in Appendix P to 10 CFR part 110 or request an exemption from a licensing requirement under Part 110. The NRC Form 7 application will be reviewed by the NRC and by the Executive Branch, and if applicable statutory, regulatory, and policy considerations are satisfied, the NRC will issue an export, import, amendment or renewal license.
 
  Dated at Rockville, Maryland, on September 7, 2018.
  For the Nuclear Regulatory Commission.
David C. Cullison, NRC Clearance Officer, Office of the Chief Information Officer.

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EXIM_a3

3
. President Continues the Exercise of Certain Authorities Under the Trading with the Enemy Act

(Source: Federal Register, 12 Sep 2018.)
 
83 FR 46347: Continuation of the Exercise of Certain Authorities Under the Trading With the Enemy Act
 
Memorandum for the Secretary of State [and] the Secretary of the Treasury
 
Under section 101(b) of Public Law 95-223 (91 Stat. 1625; 50 U.S.C. 4305 note), and a previous determination on September 8, 2017 (82 FR 42927, September 13, 2017), the exercise of certain authorities under the Trading With the Enemy Act is scheduled to expire on September 14, 2018.
 
I hereby determine that the continuation of the exercise of those authorities with respect to Cuba for 1 year is in the national interest of the United States.
 
Therefore, consistent with the authority vested in me by section 101(b) of Public Law 95-223, I continue for 1 year, until September 14, 2019, the exercise of those authorities with respect to Cuba, as implemented by the Cuban Assets Control Regulations, 31 C.F.R. part 515.
 
(Presidential Sig.)
THE WHITE HOUSE,
Washington, September 10, 2018

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EXIM_a4

4
. President Continues National Emergency with Respect to Certain Terrorist Attacks

(Source: Federal Register, 12 Sep 2018.)
 
83 FR 46067: Continuation of the National Emergency With Respect to Certain Terrorist Attacks
 
Consistent with section 202(d) of the National Emergencies Act, 50 U.S.C. 1622(d), I am continuing for 1 year the national emergency previously declared on September 14, 2001, in Proclamation 7463, with respect to the terrorist attacks of September 11, 2001, and the continuing and immediate threat of further attacks on the United States.
 
Because the terrorist threat continues, the national emergency declared on September 14, 2001, and the powers and authorities adopted to deal with that emergency must continue in effect beyond September 14, 2018. Therefore, I am continuing in effect for an additional year the national emergency declared on September 14, 2001, in response to certain terrorist attacks.
 
(Presidential Sig.)
THE WHITE HOUSE,
September 10, 2018.

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OGSOTHER GOVERNMENT SOURCES

OGS_a15. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce; Industry and Security Bureau; RULES; Addition of Certain Entities to the Entity List, Revision of Entries on the Entity List and Removal of Certain Entities from the Entity List: Correction [Publication Date: 13 September 2018.]

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OGS_a4
8. Hong Kong/TID Suspends E-Services Due to System Maintenance
(Source: Hong Kong Trade and Industry Department, 10 Sep 2018.)
 
All e-services of our website will be suspended as scheduled below due to system maintenance.
 
  – from 19:00 on 14 September 2018 (Friday) until 18:00 on 15 September 2018 (Saturday);
  – from 18:30 on 21 September 2018 (Friday) until 14:00 on 23 September 2018 (Sunday);
  – from 19:30 on 26 September 2018 (Wednesday) until 00:00 on 27 September 2018 (Thursday);
  – from 18:30 on 28 September 2018 (Friday) until 22:00 on 30 September 2018 (Sunday);
  – from 18:30 on 5 October 2018 (Friday) until 22:00 on 7 October 2018 (Sunday).
 
We apologize for any inconvenience caused.

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NWSNEWS

(Source:
Expeditors News, 11 Sep 2018.)
 
On 11 September 2018, U.S. Customs and Border Protection (CBP) issued Cargo Systems Messaging Service (CSMS) #18-000526, providing guidance for port operations in anticipation of vessel or cargo diversions due to Hurricane Florence.
Per the CSMS, a hurricane warning is in effect for the Carolinas, Virginia, and Maryland. Owners or agents of a vessel requesting a diversion, “…shall immediately give notice of the diversion to the port that granted the permit or clearance, identifying the new destination of the vessel.”
 
The CSMS also contains procedures for ACE Cargo Release. In the case that the Port of Entry (POE) is transmitted by the filer, including:
 
  – If the bill of lading has not been arrived, the filer may update the POE on the entry or remove it from the transaction;
  – The filer must make the POE update before the release can occur for the new port;
 
CBP has also provided procedures for cases wherein the POE is not provided on the entry by the filer.
 
CBP advises, “All diverted cargo is subject to normal CBP processes, including targeting, enforcement examination and large-scale non-intrusive inspection at the actual port of discharge.”
 
CSMS #18-000526 may be found
here.

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NWS_a2
10. Reuters: “U.S. Lawmakers Back Sanctions over China’s Muslim Crackdown”

(Source:
Reuters, 12 Sep 2018.)
 
The Republican leaders of a U.S. congressional commission on China urged President Donald Trump’s administration on Wednesday to broaden sanctions on Chinese officials over its treatment of minority Muslims in the Xinjiang region.
 
In a letter on Wednesday, Senator Marco Rubio, chairman of the Congressional-Executive Commission on China, and Representative Chris Smith, the co-chairman, asked Secretary of Commerce Wilbur Ross to expand the list of Chinese entities barred from purchasing equipment that could be used for surveillance.
 
  “Given the national integration of China’s state security apparatus, we believe there should … be a presumption of denial for any sale of technology or equipment that would make a direct and significant contribution to the police surveillance and detection system (in the Xinjiang Uighur Autonomous Region),” Rubio and Smith said.
 
The U.S. State Department on Tuesday expressed deep concern over China’s “worsening crackdown” on minority Muslims in the Xinjiang region, as the Trump administration considered sanctions against Chinese senior officials and companies linked to allegations of human rights abuses.
 
Discussions have gained momentum within the U.S. government over possible economic penalties in response to reports of mass detentions of ethnic Uighurs and other Muslims, which has prompted a growing international outcry.

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COMMCOMMENTARY

(Source:
Integration Point Blog, 12 Sep 2018.)
 
Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to
AskGeorge@IntegrationPoint.com.
 
Q. Where do we currently stand on NAFTA renegotiations?
 
A. As discussed in my last Weise Wednesday, the United States and Mexico had launched bilateral negotiations to modify NAFTA and were close to reaching an agreement. These negotiations did not include Canada, however, and it was not clear what steps would be taken to bring Canada into the discussions.
 
On August 27, it was announced that the U.S. and Mexico had reached an agreement. According to a fact sheet released by the Office of the U.S. Trade Representative (USTR), some of the key features of the bilateral agreement are:
 
  – New rules of origin requirements to incentivize billions a year in vehicle and automobile parts production in the U.S., supporting high-wage jobs
  – Stronger, fully enforceable labor standards
  – New commitments to reduce trade-distorting policies for agricultural goods
  – Improvements enabling food and agriculture to trade more fairly
  – Strong and effective intellectual property protections
  – Stronger disciplines on digital trade
 
There was a sense of urgency to these bilateral talks because of the political situations in Mexico and the U.S. As a result of recent elections in Mexico, a new administration was taking office in 2019, and the United States was facing mid-term elections in November that could dramatically change the make-up of the Congress next year. Consequently, both countries had a strong desire to see any modifications to NAFTA implemented by the end of 2018. Due to the requirement in the U.S. that USTR notify the Congress ninety days before entering into an agreement, a targeted deadline of August 31 emerged.
 
Immediately after the bilateral agreement was announced on August 27, Canada re-engaged in the discussions with the U.S. and Mexico in an effort to reach a trilateral agreement and preserve the broad concept of NAFTA. The hope was that an agreement could be reached between the three parties by August 31, but that proved to be impossible.
 
Although Canada reportedly accepted many of the provisions worked out between the U.S. and Mexico, several stumbling blocks – particularly the U.S. effort to eliminate or modify the Chapter 19 dispute settlement provision – kept Canada from accepting the agreement reached between the U.S. and Mexico. Talks with Canada broke off, and on August 31, President Trump officially notified the Congress of his intention to enter into the bilateral agreement with Mexico.
 
At this point, it is not clear where all of this will end up. Some have questioned whether U.S. law would even allow NAFTA to be replaced by the new bilateral agreement reached with Mexico. Mexico has also made it clear that it is not comfortable moving forward with the agreement reached with the U.S. unless it includes Canada. Furthermore, the U.S. business community and many members of Congress have stated publicly that the final agreement must include Canada.
 
The good news is that talks with Canada have resumed this week, and there is still hope that consensus can be reached between the three parties. Stay tuned for further developments.

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COMM_a0112. K.J. Wolf, T.J. McCarthy & S.C. Emme: “The Export Control Reform Act of 2018 and Possible New Controls on Emerging and Foundational Technologies” [Part I of III]

(Source:
 
Akin Gump Strauss Hauer & Feld LLP
, 12 Sep 2018.)
 
* Authors: Kevin J. Wolf, Esq., kwolf@akingump.com, +1 202-887-4051; Thomas J. McCarthy, Esq., tmccarthy@akingump.com, +1 202-887-4047; and Steven C. Emme, Esq., semme@akingump.com, +1 2020887-4368. All of Akin Gump Strauss Hauer & Feld LLP.
 
Key Points
 
  – ECRA became law on August 13, 2018. It is the permanent statutory authority for the EAR, which is administered by the U.S. Department of Commerce’s BIS. The new law codifies long-standing BIS policies and does not require changes to the EAR, such as to its country-specific licensing requirements.
  – However, as part of the larger effort to reform the authorities governing CFIUS, the law effectively requires BIS to lead an interagency, regular order process to identify and add to the EAR controls on “emerging” and “foundational” technologies that are “essential to the national security of the United States.”
  – Although the types of emerging and foundational technologies to be identified are not yet publicly known, anyone involved in emerging and foundational technology areas, such as artificial intelligence, driverless vehicle technology, advanced computing, additive manufacturing or microelectronics, should begin preparing comments on possible new controls in line with the standards in the new law. Commerce will likely soon publish a notice seeking such comments, and the formal comment period will likely be short relative to the complexity and the significance of the issue. The submission of thoughtful and well-supported industry comments will be absolutely critical to the creation of properly scoped and clearly described controls that are consistent with the statutory standards.
 
I. Introduction
 
The Export Control Reform Act of 2018 (ECRA) and the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) became law on August 13, 2018, as part of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA). One of the primary policy motivations behind both acts was the need to enhance U.S. export and investment controls to address concerns regarding the release of critical technologies to end uses, end users and destinations of concern, primarily China. (FIRRMA is described in a prior alert.)
 
Another motive behind ECRA was the creation of permanent statutory authority for the Export Administration Regulations (EAR). The EAR primarily control the export, reexport, and transfer of commercial, dual-use and less sensitive military items to end users, end uses and destinations of concern. They also include the antiboycott regulations that the Bureau of Industry and Security (BIS) administers. Part I of ECRA is titled “Export Controls Act of 2018” (ECA) and is the authority for the administration of the export controls that BIS administers. Part II of ECRA is titled “Anti-Boycott Act of 2018” and is the authority for the antiboycott regulations that BIS administers.
 
For most of the last two decades, the statutory authority for the EAR-the Export Administration Act of 1979-has been defunct. The EAR have been kept in effect through Executive Orders and an emergency declaration issued under the authority of the International Emergency Economic Powers Act (IEEPA) that was renewed by annual presidential notices. (A description of this issue, the export control system generally and the issues motivating the introduction of the legislation can be found in the March 2018 testimony of Kevin Wolf before the House Foreign Affairs Committee.)
 
The new law essentially codifies existing written and unwritten BIS practices, policies and definitions as they have evolved since 1979. It also gives BIS enforcement officials more authority to investigate possible violations of the EAR. Because the new law essentially preserves the status quo from an exporter’s perspective and does not, for example, change any country-specific licensing policies, it is primarily of interest to export control practitioners. It, however, includes one section, Section 1758, that should be of particular interest to those who do not normally consider themselves affected by the EAR (i.e., those involved in the development or export of emerging and foundational technologies that are not now identified in the EAR or other export control regulations).
 
II. ECA Section 1758 Requires the Administration to Identify and Control in the Export Control Regulations Emerging and Foundational Technologies of Concern
 
BIS has always had the authority to impose unilateral controls on items for national security and foreign policy reasons. (Unilateral controls are those that only the United States imposes, as opposed to controls that BIS publishes to implement agreements of the multilateral export control regimes.) In 2012, BIS provided more structure around the process of identifying and imposing unilateral controls when it created the “0Y521” series. As further described in this notice, BIS has the authority to impose controls over the export of any previously uncontrolled commodity, software or technology that provides the United States with at least a significant military or intelligence advantage, or for any foreign policy reason, so long as the government works to make the controls multilateral within three years (i.e., to get our regime allies to control the same item). The 2012 notice stated that such items are “typically emerging technologies.”
 
Section 1758 of the ECA essentially codifies this regulatory process and gives the administration a statutory mandate to make the effort a priority. This statutory instruction evolved in response to concerns about a key element of the Committee on Foreign Investment in the United States (CFIUS) reform legislation, FIRRMA, which, as introduced, would have given CFIUS jurisdiction over outbound investments, such as overseas joint ventures, by U.S. critical technology companies that would involve the transfer of intellectual property and associated support. The sponsors’ policy objective with this provision was to give the U.S. government the opportunity to determine and, if necessary, alter or block such outbound investments if they could result in the release of critical emerging or foundational technologies not controlled by the export control system. (More detail about this issue can be found here.)
 
Over the course of many congressional hearings and other discussions, a consensus emerged that addressing the concern through CFIUS would result in both over-controls and under-controls. The approach would have been an over-control because many benign outbound investments would become subject to CFIUS jurisdiction, which would have placed unnecessary burdens on CFIUS and U.S. industry, and would likely have discouraged welcome foreign investments. It would have been an under-control because it would have regulated only the transfer of the newly identified critical technologies in connection with a covered investment, meaning that the identical technologies could have been legally transferred without government oversight to a foreign person as part of any other type of transaction, such as a simple purchase-and-sale arrangement. The solution was to require the already existing dual-use export control system to put more effort into identifying emerging and foundational technologies of concern and to control their export to end uses, end users and destinations of concern regardless of the nature of the underlying investment.
 
A. Technologies Likely to Be Considered “Emerging” or “Foundational”
 
Congress did not define the terms “emerging” or “foundational” technologies “essential to national security,” but the public debate over the legislation provided hints as to the general areas of concern. During the discussions about CFIUS and export control reform bills, and related public discussions about CFIUS cases and China’s plans to acquire technologies pursuant to its “Made in China 2025” plan, emerging and foundational technologies, such as the following, were informally cited as warranting consideration for possible new controls:
 
  – artificial intelligence and machine learning
  – augmented reality
  – automated machine tools
  – additive manufacturing
  – autonomous vehicles
  – advanced battery technology
  – “big data”
  – biotechnology
  – gene editing
  – high-temperature superconducting technology
  – hydrogen and fuel cells
  – integrated circuits, semiconductors and microelectronics
  – intelligent mobile terminals
  – nanotechnology
  – robotics
 
Neither Congress nor the administration has published any sort of list of technologies that are under review or that should be studied. BIS, however, is likely to publish a notice soon, seeking information from the public about broad categories of technologies that potentially warrant control and how the controls could be worded to satisfy the requirements of Section 1758. Consistent with past BIS practice, this notice would not be a proposed rule. Rather, it would be a formal tool for the government to solicit industry input as part of its efforts to identify what technologies should and should not be the subject of possible new controls in a proposed rule to be published later. Industry’s role in this process is critical. Thoughtful and well-supported comments will likely have a positive influence on the government’s efforts to identify which emerging and foundational technologies are and are not essential to our national security and otherwise within the scope of Section 1758.
 
B. Questions to Answer for Comments to Be Provided to the Administration
 
Given the complexity of the issues associated with such technologies, any formal comment period will be, or will seem, short relative to the complexity and the significance of the issues. Because, as discussed below, Section 1758 foreshadows the questions that will likely be asked in such a notice, those potentially affected by new controls do not need to wait for the notice to be published before internally answering the following questions:
 
  – Which of the company’s technologies that are not now identified on an export control list (a) are essential to national security or (b) might be deemed so by the administration, particularly in light of the debate over FIRRMA?
  – Which such technologies are and are not being developed outside the United States?
  – Would research on, and development of, such technologies in the United States be affected if the government were to impose unilateral export controls on such technologies, including on their release to foreign persons in the United States?
  – Would unilateral controls on the release of such technologies to foreign persons in the United States or to foreign countries be effective at deterring their transfer to countries of concern?
  – Would export control regime allies, such as those in Europe, likely eventually agree to impose controls on the release of such technologies from their countries?
 
Answers to these questions, and supporting documentation and analyses, will be vital to the preparation of quality comments filed in response to a notice.
 
[Editor’s Note: Due to its length this item is divided into three parts. Parts 2 and 3 in this series will be included in the Thursday, 13 September 2018, and Friday, 14 September 2018 editions of the Daily Bugle.]

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COMM_a313. M. Volkov: “FCPA Risks and Merger and Acquisitions: The Evolving Policies (Part I of III)”

(Source: Volkov Law Group Blog, 11 Sep 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
Global companies that grow through a deliberate merger and acquisition strategy continue to face significant anti-corruption risks.  The list of FCPA enforcement actions includes numerous examples of companies that settled FCPA matters because of post-acquisition conduct, which usually reflects inadequate post-acquisition procedures.
 
Despite the obvious risks and the Justice Department’s and SEC’s efforts to afford some flexibility in this area, global companies usually fail to devote adequate attention and resources to mitigating these risks.
 
In a recent speech, Deputy Assistant Attorney General Matt Miner from the DOJ’s Criminal Division, announced the application of the FCPA Corporate Enforcement Policy to anti-corruption issues that may arise when acquiring a company.
 
Before discussing this, it is important to understand how DOJ and SEC policies have evolved over the last ten years.  Starting in 2008, in what has been termed the Halliburton Opinion Letter, No. 08-02 (
Here), Halliburton sought DOJ guidance when Halliburton was legally restricted from completing pre-acquisition due diligence on a target company because of unique country laws applicable to the target company.  Halliburton was concerned that, if it went ahead with the acquisition, that the company could face successor liability for any conduct that was not uncovered in the due diligence that occurred prior to the acquisition.
 
In response, the Justice Department outlined a solution under which it would not prosecute Halliburton for such violations that Halliburton acquired, provided that Halliburton completed with strict post-acquisition audit and reporting requirements. Specifically, Halliburton provided a detailed 180-day work plan pursuant to which it would conduct a robust post-closing anti-corruption compliance review of the target and would inform the DOJ at regular intervals of the review’s findings.  While providing a measure of comfort, the burdens of these requirements turned out to be less than practicable.  Further, in response to growing complaints from the business community around 2010 and efforts to relax the FCPA requirements, DOJ and the SEC took steps to relax the requirements outlined in the Halliburton Opinion Letter 08-02.
 
In the FCPA Guidance issued in November 2012, and in relevant enforcement actions, beginning with Johnson and Johnson in 2011 (
Here), a new approach was outlined.
 
First, the FCPA Guidance affirmed that successor liability could not be applied to create liability where none existed before, meaning that a successor company could not be charged with pre-acquisition conduct where the predecessor company’s activities was not subject to the FCPA.
 
Second, the FCPA Guidance outlines that companies are encouraged: (a) to conduct a thorough risk-based pre-acquisition due diligence on potential acquisitions; (b) ensure that the acquiring company’s code of conduct and compliance policies and procedures regarding the FCPA and other anti-corruption laws apply as quickly as is practicable to newly acquired businesses or merged entities; (c) train the directors, officers, and employees of newly acquired businesses or merged entities, and when appropriate, train agents and business partners, on the FCPA and other relevant anti-corruption laws and the company’s code of conduct and compliance policies and procedures; (d) conduct an FCPA-specific audit of all newly acquired or merged businesses as quickly as practicable; and (e) disclose any corrupt payments discovered as part of its due diligence of newly acquired entities or merged entities DOJ.
 
In those cases where an acquiring company complies with these five specific requirements, DOJ and the SEC have emphasized that they may decline to bring an enforcement action.  In fact, DOJ and the SEC have only acted against successor companies in situations involving egregious and sustained violations or where the successor company directly participated in the violations or failed to stop the misconduct after the acquisition.
 
The important distinction in these requirements is the requirement that the acquiring company take the required steps “as quickly as practicable,” in contrast to strict deadlines set in the Halliburton situation.  In two important enforcement actions (Johnson and Johnson and Data Systems & Solutions LLC (
here)), DOJ and the SEC included language requiring such affirmative post-acquisition tasks: within 12 months (training and application of compliance policies) and 18 months after closing for completing a post-acquisition FCPA audit (Johnson and Johnson); and  “as soon as practicable” (DSS).  Since the DSS decision, DOJ and the SEC have consistently used the “as soon as practicable” standard.
 
Returning now to DAAG Miner’s speech concerning the application of DOJ’s FCPA Corporate Enforcement Policy to mergers and acquisitions, DAAG Miner outlined how the Policy will apply in this context. Under the FCPA Corporate Enforcement Policy, companies can earn a presumption to a declination, absent aggravating factors, if they: (1) voluntarily disclose the FCPA misconduct; (2) fully cooperate with the DOJ investigation; and (3) implement timely and appropriate remediation to the company’s compliance program.
 
DAAG Miner explained that the Policy would apply to successor companies that voluntarily discloses wrongdoing to the DOJ (typically discovered in pre-closing due diligence or post-closing audits), cooperates with the government investigation and implements remedial measures. By offering a presumption of a declination, DOJ is encouraging “companies with robust compliance programs” taking over “problematic companies” to implement strong compliance practices quickly after acquiring another company.
 
[Editor’s Note: The remaining parts in this series will be included in the Daily Bugle when they are available.]

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COMM_a414
. O. Torres & D. Kyle: “Department of Commerce Makes Changes to the Steel and Aluminum Tariff Exclusion Request Process”

(Source: Torres Law, PLLC, 12 Sep 2018.)
 
* Authors: Olga Torres, Esq., olga@torrestradelaw.com; and Derrick Kyle, Esq., derrick@torrestradelaw.com. Both of Torres Law, PLLC.
 
On September 11, 2018, the Department of Commerce (“Commerce”) issued an interim final rule in the Federal Register updating the process by which companies may request exclusion from additional duties on steel and aluminum articles pursuant to Section 232.
 
By way of background, on March 8, 2018 President Trump issued Proclamations 9704 and 9705 (referred to henceforth as the ”Proclamations”), which imposed 10% duties on imports of aluminum and 25% duties on imports of steel. The Proclamations also authorized Commerce to grant exclusions from the duties in cases where a steel or aluminum article is not produced in the United States in a sufficient quantity or of satisfactory quality, or if the steel or aluminum article should be excluded from the duties based on national security considerations.
 
The original process for requesting an exclusion from the Section 232 duties on steel and aluminum was published as an interim final rule on March 19, 2018 (the “March 19 Rule”).[FN/1] Under the March 19 Rule, parties submitted a product-specific request to exclude a particular steel or aluminum article, then interested parties had 30 days to submit objections to the exclusion request. As of August 20, 2018, Commerce has received more than 38,000 exclusion requests and more than 17,000 objections. After publishing the March 19 Rule, Commerce received 67 public comments, and many commenters raised concerns over a lack of due process, fairness, or transparency.
 
In light of the public comments on the March 19 Rule and based on Commerce’s “experience with managing the exclusion and objection process,” Commerce also published changes to the exclusion process, most notably by adding a rebuttal and surrebuttal process. The changes are made by amending the two supplements to the National Security Industrial Base Regulations that were added on March 19 (the “Supplements”).[FN/2] In paragraph (f) of both Supplements, Commerce describes the new rebuttal process, specifies size and time limitations, and provides criteria that a good rebuttal must address. Only parties that have submitted an exclusion request and received an objection may submit a rebuttal to the objection(s). Importantly, the rebuttal period will last only seven days and will begin after Commerce posts all of the objections received on an exclusion request.
 
Paragraph (g) of the Supplements has been amended to add the surrebuttal process. The surrebuttal process is only applicable to parties that submitted objections to an exclusion request and received a rebuttal to the objection. The surrebuttal period is also only seven days and opens after the last rebuttal to the objection is posted. In addition to the new rebuttal and surrebuttal processes, the new changes include:
 
  – Makes explicit the procedures for protecting and submitting confidential business information;
  – Clarifies certain confusing aspects of the exclusion request form;
  – Specifies in greater detail the criteria Commerce uses to review exclusion requests;
  – Clarifies the criteria for which parties may submit an objection to an exclusion request and the criteria used to review objections; and
  – Adds a process for a streamlined review of “No Objection” exclusion requests.
 
The above list is not exhaustive and many other minor changes were made to the exclusion request and objection process. For questions regarding the changes to the steel and aluminum tariff exclusion request process, or for any questions on the multiple new tariffs, feel free to contact the attorneys at Torres Law.
 
————-
  [FN/1]
Requirements for Submissions Requesting Exclusions from the Remedies Adjusting Imports of Steel and Aluminum into the United States, 83 Fed. Reg. 12,106 (Mar. 19, 2018) (to be codified at 15 C.F.R. pt. 705), available at https://www.gpo.gov/fdsys/pkg/FR-2018-03-19/pdf/2018-05761.pdf.
  [FN/2]
Supplement Nos. 1 and 2 to 15 C.F.R. Part 705 (2018).

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MSEX/IM MOVERS & SHAKERS

MS_a115. James Min Moves from DHL to LimNexus LLP

(Source: LimNexus LLP, LimNexus.com)
 
T. James Min II has moved from Deutsche Post DHL’s Legal Department to become a partner at the new Washington, DC office of LimNexus LLP, where he will lead the International Trade & Regulatory Practice. Contact James at
james.min@limnexus.com or 1-202-772-1077.

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ENEDITOR’S NOTES

* H.L. Mencken (Henry Louis Mencken; 12 Sep 1880 – 29 Jan 1956; was an American journalist who wrote for several Baltimore newspapers.  He was an essayist, satirist, cultural critic and scholar of American English, known for The American Language, a multi-volume study of how the English language is spoken in the United States.  His satirical reporting on the Scopes trial, which he dubbed the “Monkey Trial”, also gained him attention.
  – “For every complex problem there is an answer that is clear, simple, and wrong.”
 

Jim Bartlett (James E. Bartlett III, born 12 Sep 1952; American trade lawyer and partner of Full Circle Compliance, B.V.  Author, Bartlett’s Annotated ITAR; Bartlett’s Annotated FTR, co-author, U.S. Export Controls; and Editor, The Daily Bugle.)
  – “There’s nothing better than a bad example.”
  – “Success depends not on your great ability, but on your availability.”
  – “The secret to staying young is to live honestly, eat a leisurly breakfast, and lie about your age.”
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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 Amendment: 12 Sep 2018: 83 FR 46103-46104: Addition of Certain Entities to the Entity List, Revision of Entries on the Entity List and Removal of Certain Entities From the Entity List [Correction.]

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

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

 
*
FOREIGN TRADE REGULATIONS (FTR)
: 15 CFR Part 30
  – Last Amendment: 24 Apr 2018: 3 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (30 Apr 2018) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and approximately 250 footnotes containing case annotations, practice tips, Census/AES guidance, and explanations of the numerous errors contained in the official text. Subscribers receive revised copies in Microsoft Word every time the FTR is amended. The BAFTR is available by annual subscription from the Full Circle Compliance websiteBITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR. Government employees (including military) and employees of universities are eligible for a 50% discount on both publications at www.FullCircleCompiance.eu.  
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jan 2018: 19 USC 1202 Annex. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  –
Last Amendment: 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: 30 Aug 2018:
83 FR 44228-44229
, USML Chapter XI(c).

  – The only available fully updated copy (latest edition: 30 Aug 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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