18-1017 Wednesday “Daily Bugle”

18-1017 Wednesday “Daily Bugle”

Wednesday, 17 October 2018

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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  1. DHS/CBP Seeks Comments on Form 3173, Application for Extension of Bond for Temporary Importation 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Announces ACE Certification Scheduled Maintenance for Tonight, 17 Oct
  4. DoD/DSCA Posts Policy Memo 18-43
  5. State/DDTC: (No new postings.)
  6. EU Commission Posts 2018 Update of the EU Control List of Dual-Use Items
  1. Defense News: “Calls Grow Louder for European Arms Embargo against Saudi Arabia”
  2. ST&R Trade Report: “Trade Agreements with EU, UK, Japan Up Next for U.S.”
  1. The Export Compliance Journal: “JPMorgan OFAC Sanctions Violations: Why Proactive Due Diligence Matters”
  2. M. Volkov: “Successful Compliance Officers – A Balancing Act”
  1. Bartlett’s Unfamiliar Quotations 
  2. 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 (11 Oct 2018), ITAR (4 Oct 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 



1. DHS/CBP Seeks Comments on Form 3173, Application for Extension of Bond for Temporary Importation

(Source: Federal Register, 17 Oct 2018.) [Excerpts.]
83 FR 52498-52499: Agency Information Collection Activities: Application for Extension of Bond for Temporary Importation
* AGENCY: U.S. Customs and Border Protection (CBP), Department of Homeland Security.
* ACTION: 60-Day notice and request for comments; extension of an existing collection of information. …
* DATES: Comments are encouraged and must be submitted (no later than December 17, 2018) to be assured of consideration.
* ADDRESSES: Written comments and/or suggestions regarding the item(s) contained in this notice must include the OMB Control Number 1651-0015 in the subject line and the agency name. To avoid duplicate submissions, please use only one of the following methods to submit comments:
  (1) Email. Submit comments to: CBP_PRA@cbp.dhs.gov.
  (2) Mail. Submit written comments to CBP Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 90 K Street NE, 10th Floor, Washington, DC 20229-1177.
* FOR FURTHER INFORMATION CONTACT: Requests for additional PRA information should be directed to Seth Renkema, Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, 90 K Street NE, 10th Floor, Washington, DC 20229-1177, Telephone number (202) 325-0056 or via email CBP_PRA@cbp.dhs.gov. Please note that the contact information provided here is solely for questions regarding this notice. Individuals seeking information about other CBP programs should contact the CBP National Customer Service Center at 877-227-5511, (TTY) 1-800-877-8339, or CBP website.
  – Title: Application for Extension of Bond for Temporary Importation.
  – OMB Number: 1651-0015.
  – Form Number: CBP Form 3173.
  – Abstract: Imported merchandise which is to remain in the customs territory for a period of one year or less without the payment of duties is entered as a temporary importation, as authorized under the Harmonized Tariff Schedule of the United States (19 U.S.C. 1202). When this time period is not sufficient, it may be extended by submitting an application on CBP Form 3173, “Application for Extension of Bond for Temporary Importation.” This form is provided for by 19 CFR 10.37 and is accessible here.
  – Current Actions: CBP proposes to extend the expiration date of this information collection with no changes to the burden hours or to Form 3173. …
  Dated: October 11, 2018.
Seth D. Renkema, Branch Chief, Economic Impact Analysis Branch, U.S. Customs and Border Protection.

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

[No items of interest noted today.]

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CSMS #18-000611, 17 Oct 2018.)
There will be ACE CERTIFICATION Scheduled Maintenance this evening, Wednesday, October 17, 2018 from 1700 ET to 2000 ET for ACE Infrastructure maintenance.

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DoD/DSCA, 17 Oct 2018.)
* DSCA Policy Memo 18-43
Cancellation of Foreign Military Sales (FMS) Delivery Performance Metric has been posted. As required by section 887(b)(1) of the Fiscal Year (FY) 2018 National Defense Authorization Act (Public law 115-91), the Office of the Secretary of Defense for Acquisition and Sustainment, in coordination with DSCA and the IAs, has established new milestones and and standard timelines to track FMS acquisitions.

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European Commission, 17 Oct 2018.)
On 10 October 2018, the Commission adopted the annual Delegated Regulation that updates the EU dual-use export control list in Annex I to Regulation (EC) No 428/2009 and brings it in line with the decisions taken within the framework of the international non-proliferation regimes and export control arrangements in 2016.
The majority of the changes this year result from amendments that were agreed at the 2017 Plenary of the
Wassenaar Arrangement, including:
  – Change of controls on measuring and inspection equipment (2B006) and now including angular measuring equipment;
  – Deletion of control on robots with 3D image processing (2B007a);

   – Deletion of controls on technology for numerical control units (2E003b) and machine tool instruction generators (2E003d);

   – New control entry for electro-optic modulators (3A001i);

   – New entry for semiconductor manufacturing mask substrate blanks (3B001j);

   – New decontrols for ‘upgrade’ intrusion software (4D004);

   – New decontrol for technology for ‘vulnerability disclosure’ and ‘cyber incident response’ (4E001);

   – New control for Focal Plane Array (FPA) readout integrated circuits (ROIC) (6A002f);

   – Deletion of controls on high speed cinema film recording and mechanical cameras (6A003a);

   – New parameter for ‘corrected specific fuel consumption’ added to the control on marine gas turbine control (9A002);

   – Increase of controls for ground based spacecraft control equipment (9A004); o Change of software controls for testing aero gas turbines engines (9D004b).
Missile Technology Control Regime in 2017 decided to add new parameters for controls on batch and continuous mixers (1B117), to limit the scope of control for flow-forming machines (2B109) to missile production, to amend the control on satellite navigation systems (7A105) to include regional as well as global systems and to add dry weight and rotor diameter parameters for the control on turbojet/fan engines (9A101).
Nuclear Suppliers Group agreed in 2017 to add a new control for lithium target assemblies (1B235) to reflect the dual-use NSG entry 2.A.4, and to delete controls for water hydrogen sulphide exchange tray columns (1B229).
Australia Group in 2017 agreed to add a CWC schedule organic molecule to 1C350, re-write control on genetic elements and make certain additions to the controls on both chemical and biological manufacturing equipment.
The Commission Delegated Regulation will enter into force upon its publication approximately 2 months after its adoption, provided that the Council and the European Parliament raise no objections within this period. The planned publication date, in case of successful completion of the non-objection period, is foreseen for 14 December 2018.
The Comprehensive Change Note Summary 2018 provides a detailed overview of all technical changes compared to the 2017 EU Dual-Use Control List across all 10 categories.
The 2018 Commission Delegated Regulation including Explanatory Memorandum.

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Defense News, 17 Oct 2018.)
Pressure is growing on the European Union and its member states to stop arms sales to Saudi Arabia following the alleged murder of Saudi journalist Jamal Khashoggi.
An arms embargo is supported in a new resolution by the European Parliament, the latest attempt in a string of actions compelling EU foreign policy chief Federica Mogherini to act against the Middle-Eastern country. This also includes a letter signed by European lawmakers from several countries.
One senior Member of the European Parliament, Linnea Engstrom, is among those now demanding demanding an embargo, declaring, “It is time to stop doing business with this regime.”
  “The Khashoggi case bluntly shows what kind of regime we’re talking about. Doing business with these corrupt regimes which constantly violates human rights is a huge mistake,” she said.
  “All new (arms) sales should not be allowed to Saudi Arabia at the moment,” said Bodil Valero, another MEP from Sweden who sits on the Parliament’s subcommittee on security and defence.
Saudi Arabia is being urged to give a full explanation of what happened to Khashoggi. Turkish officials believe Khashoggi was murdered by Saudi agents after entering the Saudi consulate in Istanbul, but the Saudis have denied this.
While some individual member nations have already curbed or cut exports, an EU-wide ban would severely hit the lucrative arms trade to the Saudis for some member states, particularly those whose trade links with the country are deep-seated, such as the UK.
Last month, Spain became the latest country to halt an arms deal with Saudi Arabia when its government cancelled a sale of 400 laser-guided bombs to Riyadh. A down payment of $11 million was reportedly returned to the Saudi government. According to the Stockholm International Peace Research Institute, Spain sold $352 million worth of weaponry to Riyadh between 2014 and 2017.
In January, Germany said it would no longer sell arms to parties fighting in Yemen, though critics now argue that Berlin has since softened its stance. Regardless, some German arms manufacturers, such as gun-maker Heckler and Koch, have reportedly found it difficult to secure export permits for sales to the Middle East.
At the same time, countries like the UK and France show little interest in curbing their lucrative deals with Gulf countries.
Valero sees the UK and France as the “biggest problem” when it comes to Saudi arms sales. He said the UK has “the most to lose” if an embargo were put in place, citing the figure of 48 percent of London’s arms sales going to the kingdom.
France is another key player in the Saudi arms game. In April, the two countries agreed a new intergovernmental accord to conclude weapons deals. France, the world’s third-biggest arms exporter, counts Saudi Arabia among its biggest purchasers, and defense firms like Dassault and Thales have major contracts there.
Five EU countries feature among the top 10 arms exporters: France, Germany, the UK, Spain and Italy. In 2015 the EU countries taken together were the world’s second-largest arms supplier with 26 percent of global exports of major conventional weapons, behind the United States with 33 percent and before Russia with 26 percent.
One EU official said, “This illustrates how much the prosperity of the EU’s defense industries is tied to exports outside the EU. The Middle East was by far the most important destination for EU arms exports in 2015.”
On the Khashoggi case, UK Conservative MEP Charles Tannock said, “I still recognize the West has large commercial interests in bilateral trade deals with Saudi Arabia and diaspora communities living and working there, so we must maintain friendly relations whilst remaining critical at the brutality and lack of fundamental human rights in that strategic Middle Eastern country.”

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The Trump administration notified Congress Oct. 16 of its intent to negotiate separate trade agreements with the European Union, the United Kingdom, and Japan. The Office of the U.S. Trade Representative will next consult with Congress and gather public input on the direction, focus, and content of these agreements as part of a process set forth under the trade promotion authority law to ensure that any final agreements receive expedited consideration by lawmakers. Negotiations will begin no earlier than Jan. 14, 2019, with the EU and Japan, while talks with the UK will begin “as soon as it is ready” after it exits from the EU on March 29, 2019.
One of the reasons USTR gave for pursuing agreements with the EU and Japan is the “chronic” trade deficits the U.S. runs with them, which in 2017 were $151.4 billion and $55.5 billion, respectively. As a result, the notification letters state, USTR will seek to address both tariff and non-tariff barriers and achieve “fairer, more balanced trade” with these partners. The agency said it may seek to pursue these negotiations in stages but “will only do so based on consultations with Congress.”
By contrast, the U.S. ran a $15.9 billion trade surplus with the UK in 2017. USTR thus explained that its aims in negotiating a trade agreement with the UK include “developing cutting edge obligations for emerging sectors where U.S. and UK innovators and entrepreneurs are most effective” and achieving “free, fair, and reciprocal trade.”
The announcement was welcomed by congressional trade leaders, many of whom have expressed concern that the Trump administration’s approach to trade policy could damage U.S. relationships with key trade partners and harm domestic businesses and consumers. Senate Finance Committee Chairman Orrin Hatch, R-Utah, said “a trade agenda that prioritizes free trade and open markets is the best ways to defend American interests and strengthen our economy.” House Ways and Means Committee Chairman Kevin Brady, R-Texas, added that trade agreements would not only boost U.S. exports to, but also “deepen our partnership with, these close trading partners and vital allies.”
Senate Finance Ranking Member Ron Wyden, D-Oregon, praised the administration’s “shift to focus on additional markets where there are barriers to U.S. exports and opportunities for made-in-America manufactured goods, agricultural products and services” but cautioned the administration to take its time in the forthcoming negotiations in order to “set a high bar in areas like labor rights, environmental protection and digital trade.” House Ways and Means Committee Ranking Member Richard Neal, D-Mass., agreed and added his hope that at a time when “many sectors of the U.S. economy [are] seized with anxiety over the impact of the president’s trade policies, perhaps these notices indicate that the Trump administration will finally try to create new economic opportunities for U.S. workers and businesses through constructive engagement with important U.S. trading partners and allies.”

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On October 5, 2018, JPMorgan Chase Bank (JPMC) reached a $5.26M settlement with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) for apparent OFAC violations dating between January 2008 and February 2012.
Included in the announcement was notification of separate OFAC vioations related to the Foreign Narcotics Kingpin and Syrian Sanctions Regulations that took place between August 2011 and April 2014.
Details about the earlier violations suggest that there were gaps in JPMC’s reporting and escalation processes (and that despite red flags, staff members allowed transactions to proceed). What’s noteworthy about second case, however, is not that JPMC staff allowed 85 prohibited transactions from six customers (and Specially Designated Nationals) to occur. Rather, it was the following:
  (1) That the institution’s screening system failed to “identify customer names with hyphens, initials, or additional middle or last names as potential matches to similar or identical names on the SDN List,” and
  (2) That JPMC employees did not further vet results despite similarities in name, addresses and dates of birth.
On the positive side, JPMorgan Chase self-identified the weakness in its screening tool and took remedial actions to correct-ultimately moving to a new screening system in 2013. Once implemented, they rescreened close to 200 million customer records, discovered the transactions in question, and ultimately reported the violations to OFAC.
Due diligence when it comes to risk is worth it
For an organization the size of JPMorgan Chase, a $5M financial settlement probably isn’t going to break the bank (no pun intended!). But the same may not be true for businesses without a similar bottom line to fall back on.
The later violation could have been avoided altogether if JPMC had set procedures in place — a match resolution workflow, for example. And some education that staff had a responsibility to take extra steps to further vet information in the event one or more search terms came back positive.
Despite the screening tool lacking the ability to recognize hyphens, initials, and additional middle or last names-though a good restricted and denied party screening solution should be able to account for this information-there was still enough readily-available data (e.g., matching dates of birth, etc.) that, upon review, would have indicated that the six account holders, and those on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List, were potentially one and the same.
One sentence lesson
Screening everyone and every transaction isn’t enough to be compliant with OFAC and other U.S. export, trade and financial compliance laws-positive matches should always be fully vetted and cleared before a transaction can take place, ideally in an environment with set procedures and systems in place.

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Volkov Law Group Blog, 16 Oct 2018.) Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group, mvolkov@volkovlaw.com, 240-505-1992.
Compliance officers have a difficult job.
So why are so many people interested in joining the profession?
At bottom, compliance professionals are inspirational professionals and inspired by their mission. Compliance officers have a mission – to embed and promote a culture of ethics and compliance.
When you boil it down, every compliance officer is dedicated to two specific missions: to embed and protect its culture, and to ensure compliance with compliance controls.
The difficult part of the job is achieving these two objectives. Each is reinforcing of the other.
A successful compliance officer recognizes the importance of promoting, measuring and monitoring the company’s culture and that such an objective is not satisfied by sporadic communications or CEO videos touting the company’s values and commitment to principles. Similarly, a CCO that is obsessively focused on rules compliance, to the detriment of a balanced view (predicated on cost-benefit analysis), will undermine a company’s compliance program.
The key here, like everything else in life, is maintaining balance between these two important objectives – promoting your company’s culture and ensuring an effective system of compliance controls.
If a compliance officer focuses on one of these objectives to the detriment of the other, the compliance officer will not succeed. A balanced approach requires careful calibration of design and enforcement.
I am not suggesting in any way that either of the two goals is less important than the other. I have observed compliance programs that reflect a disproportionate focus on either culture versus rules, and vice versa.
A good test for a compliance program is to examine how much time and effort is spent on specific tasks and objectives. A compliance program that devotes a significant amount of time to gifts, meals and entertainment is probably out of balance. On the other hand, I have observed compliance programs dedicated to promoting culture and the communications needed to support such an effort to the exclusion of compliance with third-party risk management. In fact, the company assigned all third-party risk management responsibilities to a single compliance officer who was buried in paper, worried about third-party risks, and frustrated by an inability to devote adequate attention to the issue.
It is a delicate balance between compliance controls and promoting a culture. A compliance officer can quickly develop a reputation as an “enforcer” or a “sheriff” if they are singularly focused on design and compliance with policies and procedures. Such a perception is a dangerous precursor to a compliance program that employees avoid and circumvent.
A compliance officer has to recognize that part of the mission is to inspire, to communicate the company’s values, and to demonstrate such a commitment in their words and their conduct. Of course, corporate leadership has to do the same, and most importantly, show company employees how to conduct themselves as inspired corporate citizens.
In the end, compliance is a balancing act between two mutually reinforcing objectives. Compliance officers have to operate with these two objectives in mind, guide corporate leaders to reinforce these objectives, and coordinate with important stakeholders needed to promote a company’s culture and its compliance with its rules.

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* John Wilkes (17 Oct 1725 – 26 Dec 1797; was an English radical, journalist, and Member of Parliament. During the American War of Independence, he was a strong supporter of the American rebels.)
  – In a famous exchange with John Montagu, 4th Earl of Sandwich, where the latter exclaimed, “Sir, I do not know whether you will die on the gallows or of the pox,” Wilkes is reported to have replied: “That depends, my lord, on whether I embrace your lordship’s principles or your mistress.”

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

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 19 Sep 2018: 83 FR 47283-47284: Extension of Import Restrictions Imposed on Archaeological Material From Cambodia  


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

: 15 CFR Subtit. B, Ch. VII, Pts. 730-774

  – Last 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

: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

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

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

  – Last Amendment: 11 Oct 2018: 
Harmonized System Update 1816
, containing 6,042 ABI records and 1,516 harmonized tariff records.

  – HTS codes for AES are available 
  – HTS codes that are not valid for AES are available 
  – 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
. BAFTR subscribers receive a $25 discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, 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.

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