;

18-1004 Thursday “Daily Bugle”

18-1004 Thursday “Daily Bugle”

Thursday, 4 October 2018

TOP
The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
here for free subscription. Contact us
for advertising inquiries and rates. 

  1. State Amends ITAR, Revises Several Entries on USML and Part 123
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. EU Amends Certain Specific Restrictions Concerning Iraq
  1. BBC: “International Court of Justice Orders U.S. to Ease Iran Sanctions”
  2. Reuters: “U.S. Judge Says China’s ZTE Violated Probation; Extends Monitor’s Term”
  3. Reuters: “U.S. Sanctions Turkish Firm, North Korean Diplomat for Weapons Trade”
  4. ST&R Trade Report: “USMCA Provision Could Deter Trade Agreements with China”
  1. G.R. Tuttle III: “NAFTA is Out and the USMCA is In – Maybe”
  2. M. Volkov: “What Happens When a CFO Fails to Listen to the CCO?”
  1. Bartlett’s Unfamiliar Quotations 
  2. New Edition of the BITAR is Available Today 
  3. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (19 Sep 2018), DOD/NISPOM (18 May 2016), EAR (26 Sep 2018), FACR/OFAC (29 Jun 2018), FTR (24 Apr 2018), HTSUS (14 Aug 2018), ITAR (4 Oct 2018) 
  4. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1.
State Amends ITAR, Revises Several Entries on USML and Part 123; Effective Today
(Source: 
Federal Register, 4 Oct 2018.) [Excerpts.] 
 
83 FR 50003-50007: Regulatory Reform Revisions to the International Traffic in Arms Regulations 
 
* AGENCY: Department of State.
* ACTION: Interim final rule; request for comments.
* SUMMARY: In response to public comments, the Department of State removes certain notification requirements from the International Traffic in Arms Regulations and revises several entries on the United States Munitions List to remove items that do not warrant continued inclusion. Specifically, this rule adds notes to USML Category IV and V, revises control text in USML Categories VIII, XI and XV, and revises a section of the regulations.
* DATES:
  – Effective date: 
This rule is effective on October 4, 2018.
  – Comments due date: Interested parties may submit comments by November 19, 2018.
* ADDRESSES: Interested parties may submit comments by one of the following methods:
  – Email: 
DDTCPublicComments@state.gov with the subject line, “Regulatory Reform Revisions”
  – Internet: At 
www.regulations.gov, search for this notice using Docket DOS-2018-0020. … 
* SUPPLEMENTARY INFORMATION: 
 
Responses to Regulatory Reform Comments and Other Feedback
 
On January 30, 2017, the President issued Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs. On February 24, 2017, the President issued Executive Order 13777, Enforcing the Regulatory Reform Agenda.
  On July 14, 2017, the Department published a Request for Comments in the Federal Register (82 FR 32493) to get feedback from the public on how it could achieve meaningful burden reduction while continuing to achieve the Department’s statutory obligations. The Department sought comments on the Department regulations, guidance documents, and collections of information that members of the public believe should be removed or modified to alleviate unnecessary burdens. The Department also requested economic data to support any proposed changes.
  In response to the July 14, 2017 request for comments, the Department received several comments related to the International Traffic in Arms Regulations (ITAR). The Department has concluded its review of two of the comments and has accepted one of the changes suggested. The Department received several additional comments, which we are beginning to review. Any response to these additional comments, none of which are relevant to this rulemaking, will be done via a separate rule. These comments and the Department’s responses are set forth below. The Department has also received feedback from the public, the regulated industry, and other government and private sector experts, through a variety of formal and informal channels, that several entries on the United States Munitions List (USML) are controlling items that are, or soon will be, in normal commercial use. The Department has determined that it can revise certain entries in a manner consistent with the objectives set forth in Executive Order 13777 to remove the controls on these items, while maintaining control on those items that warrant continued control on the USML.
  One commenter requested that the Department eliminate the requirement to return licenses for tech data, in §123.22(b)(3)(i) and (c)(2) (all citations are to 22 CFR). Exporters are required to return licenses for the export of technical data to the Department after the initial export of all of the approved technical data. Exporters are also required to return all licenses that are exported against, but not electronically decremented. The Department has reviewed the comments and the use of the returned licenses and has determined that it can garner the necessary information via other means. The Department accepts these changes and will remove the relevant language in §123.22(b)(3)(i) and (c)(2).
  Two commenters requested that the Department eliminate the Initial Export Notification in §123.22(b)(3)(ii). The Department does not accept these changes. Section 123.22(b)(3)(ii) requires that prior to the initial export of any technical data or defense services under an Agreement, the Agreement holder inform DDTC that exports are beginning. These notifications are for exports of defense articles and defense services that are generally not reported to the U.S. government through the Automated Export System and as such, these notifications are often the only way that the Department knows that the export has occurred.
  Two commenters requested that the Department eliminate the notification of termination in §124.6. The Department does not accept these changes. Section 124.6 requires that an Agreement holder inform DDTC of the impending termination of the agreement not less than 30 days prior to the expiration date of such agreement. The Department uses this notification as part of its compliance assessment practices. However, the Department is undertaking a modernization of its IT systems for export licensing and will review whether an IT solution can be put in place to allow the elimination of this notification requirement.
  Two commenters requested that the Department eliminate the annual status letter on agreements in §124.4(a). The Department does not accept these changes. Section 124.4(a) requires that if the agreement is not concluded within one year of the date of approval, the applicant notify DDTC in writing and provide the status of the agreement, unless and until the agreement is concluded, or a decision is made not to conclude the agreement. The Department uses this notification as part of its compliance assessment practices.
  Two commenters requested that the Department eliminate the requirement in §123.1(c)(4) that purchase documents be submitted with licenses in furtherance of agreements. The Department does not accept these changes. Submitting purchase documentation with a license application is an important tool to ensure only bona fide transactions are approved and to minimize the risk of diversion of approved exports.
  One commenter requested that the Department eliminate the requirement that defense articles be U.S. origin to use the temporary import exemption in §123.4(a)(1). The Department does not accept this change. Non-U.S.-origin defense articles sent to the United States for repair and maintenance do not require approval from the U.S. government for future reexports and retransfers, the way that U.S.-origin defense articles do. Therefore, the Department does not allow non-U.S. origin defense articles to be sent to the United States for servicing without individually approving the end-use and end-user.
  One commenter requested that the Department create an exemption for temporary exports of defense articles for repair/replacement by foreign Original Equipment Manufacturer (“OEM”). The Department believes that it may be possible to implement such an exemption in a way that maintains U.S. foreign policy and national security interests. The Department is working on this effort and any change to the ITAR to this effect will be published separately.
  One commenter requested that the Department streamline the Canadian Exemption in §126.5 by integrating the excluded technologies list (ETL), currently in Supplement No. 1 to part 126, into §126.5. The Department does not accept this change. The ETL applies to the Canadian Exemption, as well as the Defense Trade Cooperation Treaties with Australia and the United Kingdom; therefore, the utility of the ETL would be reduced if it were moved out of Supplement No. 1 to part 126 and the Department were required to recreate it in the sections for the treaties as well.
  One commenter requested that the Department implement certain definitions that were proposed in the Department’s June 6, 2015 Federal Register proposed rule (80 FR 31525). The Department continues to work on the definitions that were not included in the June 3, 2016 interim final rule (81 FR 35611) or the September 8, 2016 final rule (81 FR 62004). Any change to the ITAR to this effect will be published separately.
  One commenter requested that the Department establish a definition of manufacturing. The Department believes that the implementation of a definition for manufacturing is a matter that should be subject to public review and comment. Any change to the ITAR to this effect will be published separately.
  One commenter asserted that the definition of U.S. person in the ITAR does not include U.S. citizens. This is incorrect. Section 120.15 defines U.S. persons to include protected individuals as defined by 8 U.S.C. 1324b(a)(3). This provision includes all U.S. citizens within the scope of protected individuals. 
  One commenter asserted that there is an inconsistency between the definition of defense service in §120.9 and the definition of export in §120.17 and requested that the Department revise them. The Department does not accept this change. The definition of defense service defines when a defense service occurs. The definition of export, in part, describes when the performance of a defense service constitutes an export and requires approval from the Department prior to performance.
  One commenter noted that there is an inconsistency between the text in USML Category IV(i) and XV(f) related to mission integration and launch failure analysis, as the text in Category IV(i) includes the limiter “to a foreign person,” which the text in Category XV(f) does not. The commenter suggested resolving this inconsistency. The Department accepts this change, and revises USML Category XV(f) to achieve consistency between the provisions. However, the Department notes that this does not change the scope of the controls. The definition of export, as detailed above, provides that an export of a defense service occurs when it is performed for, or on behalf of, a foreign person.
  One commenter requested that the Department remove the record-keeping requirement in §125.6(a) and (b), asserting that they are duplicative of the record keeping requirement in §123.22(b)(3)(ii). The Department does not accept this change. The requirement in §123.22(b)(3)(ii) is only to maintain records that exist. The requirement in §125.6 is to create documents that provide the necessary assurance against diversion and information about the transaction to allow these exports to occur under exemptions, without individual licenses for each export.
  One commenter requested that the Department implement an IT system that includes a single input and single output, to reduce compliance burdens. The Department is undertaking to modernize its IT systems for export licensing and will review whether an IT solution can be put in place to allow a single output document that sufficiently protects U.S. foreign policy and national security interests.
  The Department received feedback from industry that industry is not certain as to the jurisdiction of certain satellites and spacecraft thrusters. Some manufacturers reclassified satellites and spacecraft thrusters, formerly controlled under USML Category XV, as rocket engines under USML Category IV(d), following the revisions to USML Category XV in 2014 and 2017. Some manufacturers reclassified these same, or similar, thrusters as subject to the Export Administration Regulations (EAR) under ECCN 9A515. Thrusters for satellites and spacecraft may meet certain USML Category IV(d) controls, such as based on total impulse, but such thrusters are not rocket or missile power plants per se. Therefore, the Department is adding Note 2 to USML Category IV(d) to clarify that it does not control such thrusters. For controls on satellite and spacecraft thrusters, exporters should review USML Category XV(e)(12) and ECCN 9A515.
  The Department received feedback from industry that, as currently structured, USML Category V maintains control over the items described in the EAR on the Commerce Control List (CCL) in Export Control Classification Number (ECCN) 1C608, if they include a material described in USML Category V. The Department added a new Note 3 to USML Category V to clarify that for materials described in USML Category V, except for the materials described in paragraph (c)(6), (h), or (i), approval from the Department is not required for any export, reexport, or retransfer when the defense articles are incorporated into an item subject to the EAR and classified under ECCN 1C608.
  The Department received feedback from industry that commercial drone technologies have progressed to the state where the industry is developing flight control systems for cooperative operations, and there is concern that the control text in USML Category VIII(h)(12), for unmanned aerial vehicle (UAV) flight control systems and vehicle management systems with swarming capability, will capture these commercial drone flight control systems and vehicle management systems. The Department believes that swarming is a military capability that continues to warrant control on the USML. However, the current text describes swarming capabilities as UAVs interacting with each other to avoid collisions and stay together, or, if weaponized, coordinate targeting. The Department believes that this control could be more precise.
  Swarming is not simply the ability to avoid collisions, maintain formation, and work cooperatively. Swarming requires the ability to adapt in real-time to changes in operational/threat environment or to deliver munitions on a target. Therefore, the Department updated USML Category VIII(h)(12).
  The Department received feedback from industry that commercial drones will make use of airborne radars that are currently described by the control text in USML Category XI(a)(3)(i) and XI(a)(3)(xii). The Department recognizes the importance of commercial drones to the U.S. economy and the importance that those drones have effective detect-and-avoid radar to minimize collisions. Therefore, the Department has added a note to USML Category XI(a)(3)(i), to allow commodity jurisdiction reviews for radars, such as those meeting the criteria of the forthcoming Federal Aviation Administration (FAA) Minimum Operational Performance Standards (MOPS) to support sense and avoid operations of UAVs, and revised the Note to USML Category XI(a)(3)(xii) to increase the power threshold of articles that are not controlled by the paragraph.
  The Department received feedback from industry that the control text in USML Category XI(c)(4) will capture electronic components required for 5G wireless technology. The Department does not intend the USML to include civil communications systems. Therefore, the Department revised USML Category XI(c)(4) to implement power thresholds that will exclude those components necessary for 5G wireless technology, but maintain control on those items that do provide the United States a critical military or intelligence advantage.
 
Comment Submissions
 
Interested parties may submit comments within 45 days of the date of publication. Comments received after that date may be considered if feasible, but consideration cannot be assured. Those submitting comments should not include any personally identifying information they do not desire to be made public or information for which a claim of confidentiality is asserted because those comments and/or transmittal emails will be made available for public inspection and copying after the close of the comment period via the Directorate of Defense Trade Controls website at 
www.pmddtc.state.gov. Parties who wish to comment anonymously may do so by submitting their comments via 
www.regulations.gov, leaving the fields that would identify the commenter blank and including no identifying information in the comment itself. … 
 
  Andrea Thompson, Under Secretary for Arms Control and International Security, U.S. Department of State.

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

OGSOTHER GOVERNMENT SOURCES

OGS_a12. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce/BIS; Agency Information Collection Activities; Proposals, Submissions, and Approvals: 
  – Chemical Weapons Convention Provisions of the Export Administration Regulations; and 
  – Procedures for Submitting Rebuttals and Surrebuttals Requests for Exclusions from and Objections to the Section 232 National Security Adjustments of Imports of Steel and Aluminum [Pub. Dates: 5 Oct 2018.]
 
* State; Notices; Sanctions Against Chinese Entity:
Equipment Development Department of the Central Military Commission [Pub. Date: 5 Oct 2018.]
 
* Treasury/OFAC; Notices; Blocking or Unblocking of Persons and Properties [Pub. Date: 5 Oct 2018.]

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

(Source:
Commerce/BIS)

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

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

 

Commission Implementing Regulation (EU) 2018/1476
 of 3 October 2018 amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions on economic and financial relations with Iraq.

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

NWSNEWS

(Source: 
BBC, 3 Oct 2018.) [Excerpts.] 
 
The International Court of Justice (ICJ) has ordered the U.S. to ease sanctions it re-imposed on Iran after abandoning a nuclear deal in May.
 
Judges ruled that the U.S. had to remove “any impediments” to the export of humanitarian goods, including food, medicine and aviation safety equipment. … 
 
The rulings of the ICJ are binding but the court has no power to enforce them. … 
 
Iran said the sanctions violated the 1955 Treaty of Amity, Economic Relations, and Consular Rights between Iran and the U.S., which grants the ICJ jurisdiction over disputes. 
 
It also said the reasons cited by President Donald Trump for re-imposing the sanctions were unfounded because the International Atomic Energy Agency (IAEA) had repeatedly confirmed that Iran was complying with the terms of the 2015 nuclear accord signed by Tehran and six world powers.
 
U.S. lawyers argued that the ICJ should not have jurisdiction and that Iran’s assertions fell outside the bounds of the treaty. …

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

(Source: 
Reuters, 4 Oct 2018.) [Excerpts.]
 
A U.S. judge on Wednesday issued an order finding that China’s ZTE Corp violated probation imposed in March 2017 when the company pleaded guilty for conspiring to evade U.S. sanctions by illegally shipping U.S. goods and technology to Iran.
 
In his order, U.S. District Judge Ed Kinkeade in Dallas extended until 2022 the term of a monitor he appointed to assess ZTE’s compliance with U.S. export control laws. The monitorship originally was scheduled to end in 2020.
 
ZTE is China’s second-largest telecommunications equipment maker and relies on U.S. components for its smart phones and networking equipment.
 
Sponsored
 
The probation violation cited by the judge involves the same conduct the U.S. Department of Commerce penalized in April by imposing a ban on U.S. companies selling goods to ZTE.
 
The Commerce Department said ZTE made false statements about disciplining 35 employees involved in the illegal shipping of U.S.-origin goods to Iran.
 
The ban was lifted in July after ZTE reached a settlement with the Commerce Department.
 
As part of that settlement, ZTE agreed to another monitor to who will report directly to the Commerce Department for 10 years.
 
ZTE announced the probation modifications in Asia on Thursday morning on the Hong Kong Exchange. In addition to extending the monitor’s term, it noted that the company must provide the court-appointed monitor with the same access as the Commerce Department monitor.
 
ZTE ceased major operations after the ban was ordered in April. The company got back into business in July after paying a $1 billion penalty, putting $400 million in escrow, installing a new board and senior management, and agreeing to the new monitor for a 10-year term.
 
The $1 billion came on top of $892 million in penalties ZTE paid the United States last year in connection with its 2017 settlement and guilty plea.
 

The ZTE ban was a source of friction between Washington and Beijing, as the world’s two largest economies were engaged in a trade dispute.

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

(Source: 
Reuters, 4 Oct 2018.) [Excerpts.] 

 
The United States on Thursday imposed sanctions against a Turkish-based company, its top directors, and a North Korean diplomat, accusing them of trading in weapons and luxury goods with Pyongyang in violation of international sanctions. 
 
The latest sanctions come as Washington maintains pressure on Pyongyang to dismantle its missile and nuclear programs. U.S. sanctions have targeted North Korea’s trade routes in an effort to choke off funding for the weapons programs.
 
The U.S. Treasury said in a statement that SIA Falcon International Group, which also has a branch in Latvia, would be blacklisted for exporting weapons into or from North Korea. 
 
It also listed SIA Falcon Chief Executive Huseyin Sahin and its general manager, Erhan Culha, for having “acted or purported to act for or on behalf of, directly or indirectly SIA Falcon.”
 
Additionally, the U.S. Treasury imposed sanctions on Ri Song Un, the economic and commercial counselor at North Korea’s embassy in Mongolia. It said SIA Falcon officials hosted Ri earlier this year in Turkey to negotiate weapons deals with him.
 

Calls to SIA Falcon’s offices in Istanbul seeking comment went unanswered, and calls to its office in Latvia were met with a pre-recorded message in Arabic. …  

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

NWS_a4
9. 
ST&R Trade Report: “USMCA Provision Could Deter Trade Agreements with China” 
(Source: 
Sandler, Travis & Rosenberg Trade Report, 4 Oct 2018.)
 
A provision in the updated NAFTA concluded this past weekend could make it more difficult for Canada and Mexico to pursue potential free trade agreements with China. Observers say the Trump administration could look to insert a similar provision in possible FTAs with the European Union and Japan as part of its effort to pressure Beijing to advance economic reforms.
 
According to press sources, the U.S.-Mexico-Canada Agreement contains a provision requiring any of the three partner countries who wish to negotiate a free trade agreement with a non-market economy country such as China to give the other two members three months’ notice. If such an FTA then takes effect, the other two countries would be able to withdraw from the USMCA in six months and form a bilateral pact.
 

Reuters article states that the clause “fits in with U.S. President Donald Trump’s efforts to … prevent Chinese companies from using Canada or Mexico as a ‘back door’ to ship products tariff-free to the United States,” but it is unclear how likely such a scenario might have been. Canada discussed a potential FTA with China relatively recently but Beijing reportedly balked at the terms Ottawa was seeking. Mexico appears to have relatively little interest in a deal with China, which is an important trade partner but still less so than the U.S.
 
However, this restriction could have a more wide-ranging impact if the White House seeks to replicate it elsewhere. Politico notes that the provision “is expected to serve as a template for future U.S. trade agreements with other countries,” including Japan (which recently announced it would launch talks with the U.S.) and possibly the EU and United Kingdom post-Brexit.

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

COMMCOMMENTARY

 
* Author: George R. Tuttle III, Esq., Law Offices of George R. Tuttle, 
geo@tuttlelaw.com, +1 415-986-8780.
 
Yes, that is right. Over the weekend, the United States, Mexico and Canada reached a compromise agreement regarding changes to NAFTA-the 25-year old North American Free Trade Agreement. To celebrate, NAFTA has been renamed the “United States-Mexico-Canada Agreement (USMCA).  
 
The Whitehouse has published a ”
fact sheet” about the revised agreement, which has been described as “a mashup between the old NAFTA and the new TPP” (the Trans-Pacific Partnership, a 12-country multilateral trade deal from which Trump withdrew the United States).
 
Few actual details are known at this time, particularly about changes in the way the program will be administered and product eligibility. Early comments are focused on dairy, autos and IPR. A big change from NAFTA is the introduction of a “sunset clause.” Under the sunset provisions, the USMCA will expire in 16 years. Mexico, Canada and the United States will conduct a joint review six years after the enactment of USMCA, with an option to extend the deal beyond the 16-year term.
 
Additional information on the new agreement can be found on the US Trade Representative’s (USTR) webpage: 
United States – Mexico- Canada Agreement, and on the Canadian Website: ”
United States-Mexico-Canada Agreement (USMCA).” There are 34 separate sections to the Agreement, including:
 
 
A significant change in the USMCA is the possible elimination of the need for a NAFTA Certificate of Origin (CBP-434). Under the new agreement, the origin declaration will follow procedures that are more closely aligned with more recent FTAs, such as Chile, Singapore, Australia, etc., which place more burden and responsibility on the importer to ensure that the goods qualify. A certification of origin may be completed by the importer of the goods on the basis of the importer having information, including documents, that demonstrate that the origin of the goods. Under the new agreement, each party may: 
 

  a. require that an importer who completes a certification of origin provide documents or other information to support the certification; 

  b. establish in its law conditions that an importer shall meet to complete a certification of origin;

  c. if an importer fails to meet or no longer meets the conditions established under subparagraph (b), prohibit that importer from providing its own certification as the basis of a claim for preferential tariff treatment; or 

  d. if a claim for preferential tariff treatment is based on a certification of origin completed by an importer, prohibit that importer from:  

     i. issuing a certification, based on a certification of origin or a written representation completed by the exporter or producer; and 

     ii. making a subsequent claim for preferential tariff treatment for the same importation, based on a certification of origin completed by the exporter or producer.

 
Mexico, Canada, and the U.S. are expected to sign the deal before the end of November, before outgoing Mexican President Enrique Pena Nieto leaves office. Then the legislatures of each country must ratify the agreement before it can enter into force and write legislation to implement it. If ratified, most of the new agreement’s provisions are expected to go into effect in 2020.

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

(Source: 
Volkov Law Group Blog, 3 Oct 2018. Reprinted by permission.) 
 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com, 240-505-1992. 
 
Chief financial officers are powerful players in the corporate governance landscape.  CFOs play a critical role in the management and oversight of the company’s internal accounting controls.  Sarbanes-Oxley lifted the importance of CFOs and internal auditors as important gatekeepers.  With that important role, CFOs and corporate leaders have to certify as to the accuracy of the company’s financial reports, subject to potential criminal consequences.
 
CFOs naturally sit as leaders of a huge fiefdom.  But CFOs have to open up to other important corporate functions and collaborate. This requirement is very important when it comes to compliance.
 
As compliance officers expand their roles and responsibilities, they inevitably come up against financial controls.  Here, compliance officers work best with internal auditors.  They are natural partners in the corporate mission’s management of financial expenditures.  It is perhaps the most important internal relationship for a chief compliance officer.
 
CFOs are wedded to their singular mission – maintaining effective internal controls.  They are vested in the design and implementation of effective internal controls.  Underlying their internal controls is the concept of “materiality.”  CCOs have a different perspective – they are focused on financial misconduct involving non-material transactions, where such transactions involve misconduct such as theft, bribery, or other misconduct.
 
CCOs also need to focus on compliance controls that implicate financial controls.  For example, a company’s policies and procedures governing gifts, meals, entertainment expenses have to be closely monitored even though these expenditures may fall underneath the “materiality” threshold.  Just as important, CCOs have to attend to the company’s invoice-to-payment process in order to guard against bribery and other misuse in the payment of vendors, suppliers and third-party agents and distributors.
 
CCOs have to coordinate closely with CFOs in these important areas.  But what happens when the CFO fails to listen or collaborate?
 
CFOs are proud of their accounting controls.  Sometimes they are not open to discussing their controls with their CCO counterparts. This is unfortunate.
 
CCOs are not seeking to upset the company’s financial controls – by definition CCOs have a narrow, less than material, perspective.  Yet, a defensive CFO may be unwilling to acknowledge issues with financial controls related to important compliance functions.
 
When a CFO fails to listen or collaborate with the CCO, the company is losing a real opportunity to protect the company from financial and potential reputational harm.  CFOs need to adjust their attitudes and collaborate with CCOs on these important issues.  CFOs have to embrace such collaboration recognizing that the CCO is not threatening the CFO’s internal controls.  To the contrary, the CCO is seeking to avoid potential misconduct that could eventually impact the materiality of the company’s controls.
 
Corporate actors can sometimes cling to old silos of operation.  Such a perspective reflects insecurity and a failure to embrace the internal coordination and collaboration to advance the corporate mission. CCOs face this challenge each day and have to develop political and interpersonal skills to bring corporate leaders together.  Education and senior management support are critical to this objective.  It is a simple fact of corporate behavior and it is up to corporate leaders to break down these old and frustrating attitudes.

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

ENEDITOR’S NOTES

*  
Denis Diderot (4 Oct 1713 – 31 Jul 1784; was a French philosopher, art critic, and writer, best known for serving as co-founder, chief editor, and contributor to the
Encyclopédie along with Jean le Rond d’Alembert. He was a prominent figure during the Enlightenment.)
  – “Watch out for the fellow who talks about putting things in order! Putting things in order always means getting other people under your control.”
 

Ray Kroc (Raymond Albert “Ray” Kroc; 5 Oct 1902 – Jan 1984; was an American businessman. He joined the California company McDonald’s in 1954, just a few months after the McDonald brothers had branched out from their original 1940 operation in San Bernardino, with Kroc turning the chain into a nationwide and eventually global franchise, making it the most successful fast food corporation in the world.)
  – “Are you green and growing or ripe and rotting?”
  – “The two most important requirements for major success are: first, being in the right place at the right time, and second, doing something about it.”

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

EN_a413. New Edition of the BITAR is Available Today

(Source: Editor)
 
Today’s amendment to the ITAR (see Item # 1 above) is included in the October 4, 2018 edition of Bartlett’s Annotated International Traffic in Arms Regulations, more commonly known as “The BITAR”. It is a significant amendment, as it amends USML Categories IV, V, VIII, XI, and XV; and ITAR sections 123.22(b)(3)(i) and 123.22(c)(2). This new edition also contains many new or revised footnotes. If you maintain a paper copy of the BITAR, you may save paper by reprinting only Parts 121 and 123 rather than the entire 357 pages. If you are a subscriber, please login to your account on the FCC website to download the new edition of the BITAR.  
 
If you are not yet a subscriber, you should be! The BITAR contains all ITAR amendments to date plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, a list of all Consent Agreements since 1978, DDTC guidance, and explanations of errors in the official ITAR text. The BITAR is revised and distributed as a new edition to subscribers within 24 hours after every ITAR amendment. To subscribe, click 
here
.

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

EN_a314
. 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: 19 Sep 2018: 83 FR 47283-47284: Extension of Import Restrictions Imposed on Archaeological Material From Cambodia  

 
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: 26 Sep 2018: 83 FR 48532-48537: Addition of Certain Entities to the Entity List, Revision of an Entry on the Entity List and Removal of an Entity From the Entity List

  
*
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: 4 Oct 2018: 
83 FR 50003-50007: Regulatory Reform Revisions to the International Traffic in Arms Regulations

  – The only available fully updated copy (latest edition: 4 Oct 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_a0315
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

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

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 6,000 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.


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

* BACK ISSUES: An archive of Daily Bugle publications from 2005 to present is available HERE.

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

Scroll to Top