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18-1107 Wednesday “Daily Bugle”

18-1107 Wednesday “Daily Bugle”

Wednesday, 7 November 2018

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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 Posts Notice on Customs Broker User Fee Payment for 2019 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. Commerce/Census: “Submitting a Voluntary Self-Disclosure: Let’s Work Together!”
  4. DHS/CBP Announces Scheduled Maintenance for Tonight
  5. DHS/CBP Posts Reminder on ACE Customer Satisfaction Survey
  6. DoD/DSS Posts Secure VTC Schedule for 2019
  7. State/DDTC: (No new postings.)
  8. Treasury/OFAC Releases 2017 Terrorist Assets Report
  9. EU Amends Restrictive Measures Concerning Venezuela and North Korea
  10. EU Posts Reminder on Single Window Environment for Customs Consultation
  1. Expeditors News: “Canada and Australia Ratify the CPTPP”
  2. The Globe and Mail: “Ottawa Rejects Senators’ Demand to Give Greater Weight to Human Rights in Arms Deals”
  3. ST&R Trade Report: “Drawback, Customs Broker, Importer ID Regulations Could be Advanced in Coming Months”
  1. F.M.S. Guerrero, S. Yablon & S.R. Anderson: “Iran Sanctions Back in Force November 5”
  2. J.G. Richardson: “The ‘Emerging and Foundational’ Impact of the Export Control Reform Act”
  3. M. Volkov: “Justice Department Recalibrates Corporate Monitors and DOJ Compliance Position”
  4. T. Murphy: “CBP’s Section 301 Enforcement Push”
  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 (1 Nov 2018), FACR/OFAC (5 Nov 2018), FTR (24 Apr 2018), HTSUS (2 Nov 2018), ITAR (4 Oct 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. DHS/CBP Posts Notice on Customs Broker User Fee Payment for 2019
(Source: Federal Register, 7 Nov 2018.) [Excerpts.]
 
83 FR 557733: Customs Broker User Fee Payment for 2019
* AGENCY: U.S. Customs and Border Protection, Department of Homeland Security.
* ACTION: General notice.
* SUMMARY: This document provides notice to customs brokers that the annual user fee that is assessed for each permit held by a broker, whether it may be an individual, partnership, association, or corporation, is due by January 25, 2019. Pursuant to fee adjustments required by the Fixing America’s Surface Transportation Act (FAST Act) and CBP regulations, the annual user fee payable in calendar year 2019 will be $144.74.
* DATES: Payment of the 2019 Customs Broker User Fee is due by January 25, 2019.
* FOR FURTHER INFORMATION CONTACT: Julia Peterson, Broker Management Branch, Office of Trade, (202) 325-6601. …
 
   Dated: November 1, 2018.
Brenda B. Smith, Executive Assistant Commissioner, Office of Trade.

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

OGSOTHER GOVERNMENT SOURCES

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

 

* Justice; Alcohol, Tobacco, Firearms, and Explosives Bureau; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: List of Responsible Persons  [Publication Date: 8 November 2018.]

* Treasury; Foreign Assets Control Office; NOTICES; Blocking or Unblocking of Persons and Properties [Publication Date: 8 November 2018.]  

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

OGS_a2
3. 
Commerce/BIS: (No new postings.)

(Source: 
Commerce/BIS)

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

 
What is a Voluntary Self-Disclosure (VSD)?
 
A VSD is a narrative account, submitted by a party to the export transaction or their representative, with supporting documentation that sufficiently describes suspected violations of the Foreign Trade Regulations (FTR). A VSD reflects due diligence in detecting and correcting potential violations when required information was not reported or when incorrect information was reported.
 
Benefits of a VSD
 
A VSD can benefit both the company and the U.S. Census Bureau. When a company makes a mistake by unintentionally filing incorrect Electronic Export Information (EEI) or failing to file EEI, a company can submit a VSD. This process reflects a company’s due diligence in correcting its mistakes and strengthens its export compliance because it compels the company to evaluate its business practices, and at the end of the process, the disclosed shipments may be mitigated. The benefit for the Census Bureau is that we now have more accurate export statistics. Depending on the timing of your correction, the Census Bureau has a process for applying the updates in the annual revisions. These corrections are applied to the statistics that were published in the FT-900, also known as the U.S. International Trade in Goods and Services Report. The FT-900 is one of the principal economic indicators for the United States, and having accurate export data is critical to reflect the true health of the U.S. economy and trade. To find out more information about the revision process and trade data, feel free to contact the Economic Indicators Division’s Macro Analysis Branch at 1-800-549-0595 and select Option 4.
 
When should a company submit a VSD?
 
A company should consider submitting a VSD if they have discovered systematic errors, failed to file for high-value shipments, or shipments involving licensed goods. When licensed goods are involved, we also recommend submitting a VSD to the licensing agency as well.
 
Types of VSD Submissions
 
There are two types of VSD submissions that the Census Bureau typically receives, which are an initial notification and a narrative account. Both are described below:
 
  (1) An initial notification includes the name and contact information of the person making the disclosure and a brief description of the suspected violation(s). It also gives the general nature, circumstances and the extent of the violation(s). After the initial notification has been submitted, the company should undertake a review of their export transactions over a five-year period and make the necessary corrections or filings in the Automated Export System (AES) before submitting the narrative account. The initial notification is optional and is typically submitted when the company has identified suspected violations and wants to notify the Census Bureau of its finding, but needs additional time to finalize the narrative account and corrections.
  (2) A narrative account is a comprehensive description of the nature of the suspected violation and measures taken to lessen the possibility of the violations occurring again in the future.  The company should review and correct or file the shipment information in the AES before submitting the narrative account. The complete information required for a VSD is outlined in Section 30.74 of the FTR. The Trade Regulations Branch (TRB) also has a webinar titled “Roadmap to a Successful Voluntary Self-Disclosure” available here.
 
How can a company submit a VSD?
 
VSDs must be submitted on company letterhead, signed by a senior manager, and addressed to:
 

Chief, International Trade Management Division 
U.S. Census Bureau 
4600 Silver Hill Road, Room 5K158 
Suitland, MD 20746 (if sent by courier) or Washington, DC 20233 (if sent by USPS)

 
How does a company submit the Internal Transaction Numbers (ITN)?
 
We recommend submitting the ITNs in a password protected spreadsheet. Therefore, in the narrative account, you can state, “The ITNs of the missed and/or corrected shipments will be provided in a spreadsheet to the TRB analyst separately.” When creating the spreadsheet, it is important to include relevant information such as the ITNs, incorrect and corrected data elements. Keep in mind, during the audit process we will check the ITNs to ensure the information has been corrected, filed and/or deleted. An example of a spreadsheet is below.
 
Need further assistance?
 
We hope this information was helpful, but if you have additional questions on the VSD process feel free to reach out to the TRB with any questions at 1-800-595-0595, Option 3 or through email at itmd.askregs@census.gov.  
 

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

(Source:
CSMS #18-000662, 7 Nov 2018.)
 
There will be ACE CERTIFICATION Scheduled Maintenance this evening, Wednesday, November 7, 2018 from 1700 ET to 2000 ET for the following ACE Deployments: 

ACE Entry Summary Query   

 
Entry Summary (ES) Query JE records (the JE record consists of ES estimated amount fields) were not being included in Block Control Y record’s Output Image/Record Count.

ACE Import Truck Manifest   

 
Fixed issues with Truck In-bond arrivals and exports when the SCAC for the Trip and the Shipment Control Number (SCN) were different. User received a ‘BL Not On File or Deleted’ reject when they sent the X.12 353 transaction to arrive or export the in-bond.

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

(Source:
CSMS #18-000661, 7 Nov 2018.)
 
This is a reminder that the 2018 ACE Customer Satisfaction Survey is open. CBP encourages all importers, brokers, carriers and other trade community users of ACE to take the 5-10 minute survey. The survey is voluntary and anonymous. Your response will help CBP understand users’ satisfaction with and impact of ACE capabilities, as well as identify areas where improvements are needed. A large number of responses will ensure more accurate representation across the import and export industries. The survey will remain open through midnight, November 9, 2018.

To access the survey, please click on the following link
*:
https://www.surveymonkey.com/r/2018trade

Please note you may need to copy and paste the URL into your web browser.

*DISCLAIMER: You are now leaving a DHS website and are going to a website created and maintained by a public and/or private organizations. For more information to the DHS Redirection linking policy go to 
https://www.dhs.gov/redirect
.

  – Related CSMS No. 
18-000637
18-000627
18-000620

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

(Source:
DoD/DSS, 7 Nov 2018.)
 
For 2019, the Secure Video Teleconferences (“SVTCs”) will be held on January 17, February 21, March 21, April 18, May 16, June 20, July 18, August 15, September 19, October 17, and November 21. All SVTCs will be held from 1-2:30 p.m. Eastern Time. Topics will be announced monthly, based on DSS and interagency priorities.

More information is available by emailing the DSS Strategic Engagement Division at:
dss.quantico.dss-hq.mbx.ci-sed@mail.mil.

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

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

(Source:
Treasury/OFAC, 7 Nov 2018.)   
 
The Office of Foreign Assets Control has released its 2017 Terrorist Assets Report.

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

 
Regulations:
* Council Implementing Regulation (EU) 2018/1653 of 6 November 2018 implementing Regulation (EU) 2017/2063 concerning restrictive measures in view of the situation in Venezuela
* Council Implementing Regulation (EU) 2018/1654 of 6 November 2018 implementing Regulation (EU) 2017/1509 concerning restrictive measures against the Democratic People’s Republic of Korea
 
Decisions:
* Council Decision (CFSP) 2018/1656 of 6 November 2018 amending Decision (CFSP) 2017/2074 concerning restrictive measures in view of the situation in Venezuela
* Council Implementing Decision (CFSP) 2018/1657 of 6 November 2018 implementing Decision (CFSP) 2016/849 concerning restrictive measures against the Democratic People’s Republic of Korea

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

(Source:
European Commission, 7 Nov 2018.)
 
Target group
 
This consultation is addressed to the following groups of stakeholders:
  – National customs administrations in European Member States and other national authorities that rely on customs to control or implement their policies at the border;
  – Economic operators dealing with cross-border movement of goods;
  – National, European and/or international trade and business associations;
  – IT experts;
  – Data protection authorities and officers;
  – Academia, research institutes and think tanks;
  – International organisations related to international trade and customs;
  – Professional consultancies;
  – Non-governmental organisations;
  – Citizens.
 
Objective of the consultation
 
The consultation aims to provide the stakeholders involved in the cross-border movement of goods and the wider public with the opportunity to express their views on all elements covered by the impact assessment: problem definition and respective drivers/root causes; the issue of subsidiarity and the added value of an EU level intervention; preliminary options for measures/policy packages; likely impacts of each option.
Both qualitative (opinions, views, perceptions, suggestions) and quantitative information (data, statistics) will be sought from stakeholders.
 
How to submit your response
 
You can reply to the questionnaire by clicking on the box ‘Answer the questionnaire’, below.
 
The questionnaire takes about
30 minutes to complete. The questionnaire is accessible in all official EU languages.
 
Some questions require expert knowledge and you are welcome to answer only some of the questions included. At the end of the questionnaire you will have the possibility to upload a document/position paper.
 
View the questionnaire

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

NWSNEWS

NWS_a0
12. Expeditors News: “Canada and Australia Ratify the CPTPP”

(Source: Expeditors News, 6 Nov 2018.)
 
Last week, the governments of Canada and Australia announced the ratification of the Trans-Pacific Partnership (CPTPP). Canada ratified the CPTPP on October 29, 2018 and Australia on October 31, 2018.
 
According to the Canadian Minister of International Trade Diversification, Jim Carr, “With the CPTPP, Canada will be the only G7 country with trade agreements with all other members of the G7.”
 
Canada’s ratification marks the fifth country and Australia’s ratification marks the sixth country to ratify the CPTPP. With six out of the eleven countries that signed the CPTPP ratifying it, the CPTPP will take effect on December 30, 2018, 60 days after Australia’s ratification.
 
  – The Canadian press release may be found
here.
  – The Australian press release may be found
here.

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

(Source:
The Globe and Mail, 6 Nov 2018.) [Excerpts.]
 
The Trudeau government, which is still weighing whether to suspend shipments in the $15-billion sale of armoured vehicles to Saudi Arabia, has rejected a call from Canadian senators to give human rights and international humanitarian law greater weight in the arms-export control system.
 
Foreign Affairs Minister Chrystia Freeland, in a letter to the Senate human rights committee, said she could not agree to this or another recommendation that would place additional controls on the end use of Canadian goods by foreign customers to ensure they are not part of serious violations of rights or international humanitarian law.
 
Ms. Freeland wrote in the letter, dated Nov. 2, that if Canada instituted new export controls unilaterally, it would be out of step with its allies and place Canadian exporters at a disadvantage.
 
  “Export controls are most effective when they are adopted and implemented multilaterally and in co-ordination with our allies,” the minister wrote in response to a June, 2018, report the Senate human rights committee.
 
  “Taking unilateral measures not aligned with the export controls of our allies and partners could severely limit the impact we can have in protecting international human rights and humanitarian law, while putting legitimate Canadian exporters at a significant competitive disadvantage,” Ms. Freeland wrote.
 
Canada and other countries are considering measures to censure Saudi Arabia over the murder of dissident Saudi journalist Jamal Khashoggi. Prime Minister Justin Trudeau has said Canada is considering suspending export permits in the sale of light armoured vehicles to Riyadh. The Harper government signed the 14-year deal, but the Trudeau Liberals approved the export permits.
 
Ms. Freeland also noted that the Liberal government is already strengthening export controls by amending the Export and Import Permits Act. The bill to make the changes has not been enacted into law yet. Ottawa argues it would tighten supervision over foreign military sales by obliging the Foreign Affairs Minister to withhold export permits if there is a substantial risk the goods or technology could be used to commit or facilitate a violation of international human-rights law or other acts, including violence against women and children.
 
The Senate committee’s report called on Ottawa to insert “respect for internationally recognized humanitarian rights and international humanitarian law” into the section of the act that lists the main purposes for which Canada controls exports of goods and technology. The report noted that this would give greater weight to these concerns than the current system, in which guidelines ask Ottawa to consider human rights and international humanitarian law in its export permit assessments, but leave the Foreign Affairs Minister broad discretion to approve exports.
 
The committee also recommended Ottawa set up more controls over how foreign customers use exported goods or technology.
 
Senator Thanh Hai Ngo, a member of the committee, said the recommendations are crucial. “If Canada wishes to remain a leader, our export-control regime will need to realistically consider human-rights concerns and international humanitarian law while supporting responsible defence exports.”
 
Arms control advocate Cesar Jaramillo also expressed disappointment. “It is hard to understand how a government that claims to be committed to more stringent arms-exports controls can reject a measure that is patently compatible with that objective,” said Mr. Jaramillo, executive director of Project Ploughshares. “The argument that Canada’s prerogative to strengthen its arms-exports regulations is somehow contingent upon the legislation elsewhere is not convincing.” …

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

NWS_a2
14. ST&R Trade Report: “Drawback, Customs Broker, Importer ID Regulations Could be Advanced in Coming Months”

 
Implementing changes to drawback, modernizing the customs broker regulations, and changes concerning importer identification are among U.S. Customs and Border Protection’s regulatory goals over the next few months. These and other proposed and final rules are included in the semiannual regulatory agendas of the departments of 
Homeland Security 
and 
the Treasury, which list the following regulations affecting international trade that could be issued within the next year. The expected timeframes for issuance of these rules are indicated in parentheses.
 
Upcoming Regulations
 
  – a CBP final rule implementing changes to the 
drawback laws contained in the Trade Facilitation and Trade Enforcement Act by requiring claims to be filed electronically, extending and standardizing timelines for filing claims, modifying recordkeeping requirements, and establishing a new standard for substituting merchandise based on its tariff classification (December 2018;
proposed rule issued July 2018)
  – a CBP proposed rule to update, modernize, and streamline the process for enforcing the prohibition against the importation of goods mined, produced, or manufactured in any foreign country by 
convict or forced labor or indentured labor under penal sanctions (December 2018; previously August 2018)
  – a CBP proposed rule to modernize the 
customs broker regulations, including by allowing national permit holders to conduct customs business in all districts within the U.S. customs territory, removing the requirement to have a district permit in each district where the broker conducts customs business, removing the requirement that brokers maintain physical offices in the districts in which they conduct customs business, and updating the requirements on responsible supervision and control (December 2018; previously September)
  – a CBP final rule to give effect to certain liberalized changes to the 
NAFTA preference rules of origin that have been agreed to by the U.S., Canada, and Mexico (December 2018; previously October 2018; 
proposed rule issued July 2016)
  – a CBP final rule making technical corrections to the 
rules of origin for goods imported under NAFTA and the Morocco and Bahrain FTAs and for textile and apparel goods (December 2018; unchanged)
  – a CBP proposed rule that would require customs brokers to verify the 
identity of importers and non-resident importers and would create a process for doing so that is contemporaneous with obtaining power of attorney (December 2018; unchanged)
  – a CBP interim final rule eliminating a restriction pertaining to CBP’s authority to refund excessive duties, taxes, fees, or interest imposed on distilled spirits, wine, and beer to facilitate implementation of the
Craft Beverage Modernization Act (December 2018; first time published)
  – a CBP proposed rule to create a procedure for the disclosure of information otherwise protected by the Trade Secrets Act to a trademark owner when goods bearing suspected 
counterfeit trademarks have been voluntarily abandoned (January 2019; previously July 2018)
  – a CBP proposed rule amending the regulations pertaining to the importation of goods that violate or are suspected of violating the 
copyright laws in accordance with TFTEA and certain provisions of the Digital Millennium Copyright Act (February 2019; previously June 2018)
  – a CBP proposed rule that would exempt portions of the
CTPAT system of records from one or more provisions of the Privacy Act because of criminal, civil, and administrative enforcement requirements (February 2019; first time published)
  – a CBP proposed rule seeking to promote the speed, accuracy, and transparency of administrative rulings concerning the importation of articles that may be subject to 
exclusion orders issued by the International Trade Commission under section 337 of the 1930 Tariff Act (March 2019; previously December 2018)
  – a CBP final rule raising from $200 to $800 the 
de minimis value of articles that may be imported by one person on one day free of duty and tax (March 2019, previously December 2018; 
interim final rule published in August 2016)
  – a CBP final rule clarifying the circumstances under which a notice of arrival must be filed for 
imported pesticides and pesticidal devices, codifying existing required NOA data elements, requiring the submission of additional NOA data elements for unregistered pesticides that are currently optional, and permitting the NOA to be filed electronically in the Automated Commercial Environment (March 2019, unchanged; 
interim final rule published in September 2016)
  – a CBP proposed rule to update and modify the 
(a)(1)(A) list in the appendix to 19 CFR Part 163 (March 2019; unchanged)
  – a CBP final rule shifting authority to make certain decisions regarding customs transactions from port directors to directors of the 
Centers of Excellence and Expertise (May 2019; previously November 2018)
  – a CBP final rule reflecting that the 
Automated Commercial System is being phased out as a CBP-authorized electronic data interchange system for the processing of electronic entry and entry summary filings (June 2019, previously December 2018; 
interim final rule issued October 2015)
  – a CBP final rule on procedures for investigating 
evasion of antidumping and countervailing duty orders (June 2019, previously December 2018; 
interim final rule published in August 2016)
  – an Alcohol and Tobacco Tax and Trade Bureau proposed rule to update procedures for 
exports of distilled spirits, wine, beer, and tobacco products and implement the International Trade Data System (September 2019; previously September 2018)
 
Regulations Completed
  – a CBP interim final rule to implement a mandatory 
Air Cargo Advance Screening program for inbound aircraft with commercial cargo

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

COMMCOMMENTARY

 
* Authors: Francesca M.S. Guerrero, Esq., fguerrero@winston.com, +1 202-282-5647; Staci Yablon, Esq., syablon@winston.com, +1 212-294-4703; and Sean R. Anderson, Esq., sranderson@winston.com, +1 212-294-5388. All of Winston & Strawn LLP.
 
On November 5, 2018, the Trump Administration re-imposed the remaining sanctions against Iran that were previously lifted as part of the Joint Comprehensive Plan of Action (“JCPOA”), more commonly referred to as the Iran nuclear deal.
 
As previously briefed here, on May 8, 2018, the Trump Administration announced the withdrawal of the United States from the Iran nuclear deal and the concomitant re-imposition of sanctions against Iran. The Office of Foreign Assets Control (“OFAC”) then promulgated wind-down regulations to allow U.S. persons and U.S.-owned or -controlled foreign companies to withdraw from Iran-related transactions. The first 90-day wind-down period elapsed on August 6; for more information, please see our previous briefing. The second 180-day wind-down period ended November 4.
 
As of November 5, all sanctions against Iran that were previously lifted as part of the Iran nuclear deal are re-imposed.
 
Revocation of General License H and its Wind-down
 
The previously issued General License H and the wind-down provisions that replaced it have now been terminated. Outside of specific exceptions, U.S.-owned or -controlled foreign companies are no longer permitted to engage in Iran-related transactions, including the wind-down operations that were permitted between May 8 and November 5.
 
Sanctions Against Non-US Persons and Companies Re-Imposed as of November 5
 
Non
-U.S. persons and entities that engage in certain transactions with Iranian persons or entities that OFAC has placed on either its Specially Designated Nationals (“SDN”) list or other lists could be subjected to secondary sanctions. Accordingly, non-U.S. persons and entities should be mindful of these sanctions and whether any counterparties appear on OFAC’s SDN or other applicable lists. Non-U.S. persons and entities subject to secondary sanctions might find themselves placed on an SDN list or, for foreign financial institutions, denied access to correspondent or payable-through account services in the U.S. financial system.
 
Specifically, the following secondary sanctions are re-authorized as of November 5, as discussed in our original briefing:
  – Prohibitions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
  – Prohibitions on petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
  – Prohibitions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
  – Prohibitions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
  – Prohibitions on the provision of underwriting services, insurance, or reinsurance; and
  – Prohibitions on Iran’s energy sector.
 
OFAC also added more than 700 individuals, banks, and companies to the SDN List of Specially Designated Nationals. Because most of these additions are “subject to Secondary Sanctions,” non-U.S. businesses can be sanctioned by the U.S. for continuing to trade with these parties.
 
Payment for Goods oR Services Provided by November 4
 
OFAC has clarified in its FAQ guidance that non-U.S., non-Iranian persons who are owed payment after November 4 may still receive payment without being exposed to secondary sanctions risk so long as 1) the goods or services at issue were fully provided or delivered prior to end of the applicable wind-down period, 2) are pursuant to a written contract that was entered into prior to May 8, and 3) were consistent with U.S. sanctions in effect at the time the agreement was made.
OFAC has stated in its FAQ guidance that a U.S.-owned or -controlled foreign company that is owed payment from an Iranian counterpart pursuant to a contract entered into prior to May 8 must obtain a license from OFAC in order to receive payment after November 4. OFAC notes that it will evaluate such requests on a case-by-case basis, analyzing among other things
 
  (1) whether the contracts complied with existing U.S. sanctions when they were made;
  (2) whether the contracts were made before May 8; and
  (3) why the applicant could not receive the payment during the wind-down period.

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

(Source:
Miller Canfield, 30 Oct 2018.)
 
* Author: Jeffrey G. Richardson, Esq.,
richardson@millercanfield.com. Miller Canfield.
 
The Export Control Reform Act of 2018 (ECRA) will have a foundational and emerging impact on the future of U.S. export controls and foreign direct investment.
 
The ECRA sits within the voluminous John S. McCain National Defense Authorization Act for fiscal year 2019 (signed by President Trump on August 3rd, 2018), tucked right behind the Foreign Investment Risk Review Modernization Act (FIRRMA) revising foreign direct investment requirements in the U.S. 
 
As to its foundational impact on export controls, the ECRA codifies existing U.S. export control law by providing permanent statutory authority for the Export Administration Regulations (EAR), which are administered and enforced by the Department of Commerce. The initial authority for the EAR was provided by the Export Administration Act of 1979 (EAA), which lapsed in 2001. Since the 2001 EAA lapse, the President annually reauthorizes and continues the EAR by executive order and annual continuation notice. Although noteworthy, for most exporters the ECRA’s permanent statutory authority function is only a minimally impactful administrative footnote.
 
As to its emerging impact on exports, Section 1758 of the ECRA creates a mandate for the U.S. government to identify and control the export of “emerging and foundational technologies” (E&F Technologies) essential to U.S. national security. ECRA establishes an interagency review process to continually identify E&F Technologies and, if warranted, control any essential E&F Technology under EAR export controls. The Departments of Commerce, Defense, Energy and State will be the lead agencies conducting the interagency review process, with support from other federal agencies as appropriate.
 
The public debate surrounding the enactment of FIRRMA and ECRA suggest that E&F Technologies may focus on technology for the following types of items: autonomous vehicles and automatized driving assistance systems, 5G, hydrogen and fuel cells, and biotechnology, as well as robotics, artificial intelligence and machine learning. [FN/1] The ECRA excludes from review as a potential E&F Technology those items already listed on the United States Munitions List (USML) of the International Traffic in Arms Regulations (ITAR) and the Commerce Control List (CCL) of the EAR. Identified E&F Technologies will drop their default designation as EAR99 items, becoming classified and listed on the CCL and subjected to item-based export controls and license requirements under the EAR. The level of item-based export controls imposed on an E&F Technology by the Department of Commerce will take into account the potential end uses and end users of the technology. At a minimum, Section 1758 of the ECRA directs the Commerce Department to require a license for the export of any E&F Technology destined to a country that is subject to an arms or other U.S. embargo – including the U.S. arms embargo with China. A license application to export an E&F Technology to a U.S.-embargoed country may have a presumption of denial. 
 
For E&F Technologies subject to item-based export controls under the EAR, ECRA permits the Commerce Department to create license exceptions for the provision of technology associated with the following types of transactions:
  (1) the sale or license of a finished item when such technology is generally made available with the finished item;
  (2) integration services or similar services, if the U.S. person supporting the transaction generally makes such services available;
  (3) transfer of equipment and the provision of associated technology to operate the equipment, if the transfer could not result in the foreign person using the equipment to produce critical technologies;
  (4) procurement by the U.S. person of goods or services from a foreign person, if the foreign person has no rights to exploit any technology contributed by the U.S. person; and,
  (5) any contribution and associated support to an industry organization related to an applicable standard or specification by a U.S. person that is a party to the transaction.
 
As a significant note, Section 1758 of the ECRA compels the Department of Commerce to coordinate and work with U.S. allies to subject E&F Technologies (once identified) to global controls under multilateral export control regimes, such as the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies.
 
Finally, FIRRMA imposes multiple requirements on the Committee on Foreign Investment in the United States (CFIUS) to review proposed foreign investments in E&F Technologies located in the U.S. Pointedly, E&F Technologies (once identified) are now included within the FIRRMA definition of critical technologies, thereby subjecting certain covered transactions containing E&F Technologies to CFIUS review.
In the coming months, information on the initial identification of E&F Technologies will be released, so watch for Miller Canfield updates. If you need further assistance to understand how emerging and foundational technologies may affect your transaction subject to CFIUS review under FIRRMA, we invite you to contact Miller Canfield.   
 
———-
  [FN/1] See generally “Foreign Affairs Committee testimony from March 14, 2018 regarding Modernizing Export Controls: Protecting Cutting-Edge Technology and U.S. National Security”, available 
here; and, “FIRRMA Act will give Committee on Foreign Investment a needed update,” Sens. John Cornyn (R-TX) and Dianne Feinstein (D-CA), from 
The Hill on March 21, 2018 available
here.

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(Source:
Volkov Law Group Blog, 6 Nov 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
In a recent speech (
here), Brian Benczkowski, the Assistant Attorney General for the Criminal Division outlined the Justice Department’s new policy governing imposition of a corporate compliance monitor.  (
Here).
 
The Justice Department has faced criticism concerning the circumstances and the manner in which it decides to require a corporate monitor as part of a settlement agreement.
 
Some have suggested that the Justice Department has not been clear about the circumstances requiring imposition of a corporate monitor.  In addition, the Justice Department has suggested that the identity of corporate monitors has been restricted to certain companies and individuals, even though the companies themselves nominate potential corporate monitors under prevailing practices.
 
On another issue, AAG Benczkowski addressed the need to hire a new compliance counsel to replace Hui Chen.  AAG Benczkowski announced that the Justice Department did not plan to replace Hui Chen and instead rely on its existing compliance expertise.  To bolster prosecutors’ understanding of compliance, AAG Benczkowski plans to implement compliance training programs on compliance programs.
 
The Justice Department’s new corporate monitor policy and procedure builds on the former Morford memorandum adopted near the end of the Bush (II) Administration.  DOJ is returning to a stricter standard for imposing corporate monitors based on the weighing of the potential benefits of a corporate monitor (or conversely the nature and extent of the compliance program deficiencies) and the cost of imposing a monitor and impact on its operations.
 
In evaluating the benefits of a corporate monitor, Criminal Division attorneys are required to consider: (a) whether the underlying conduct involved exploitation of an inadequate compliance program or internal controls systems; (b) whether the misconduct was pervasive across the business organization or facilitated by senior management; (c) whether the corporation has made significant investments in, and improvements to, its corporate compliance program and internal controls; and (d) whether remedial improvements to the compliance program and internal controls have been tested to demonstrate they would prevent and detect similar misconduct in the future.
 
The new procedures give companies a fresh opportunity to argue in the context of settlement negotiations that new corporate leadership has implemented remedial enhancements to the company’s compliance program and reduced the applicable risk of recurrence of any misconduct.
 
In the end, DOJ will likely reduce the number of corporate monitors imposed in corporate settlements, but there still will be situations where a corporate monitor will be required. In those cases where the company experiences serious misconduct across the organization, companies will still likely face imposition of a monitor. On the other hand, the new policy creates real and significant incentives for companies to design and implement robust ethics and compliance program controls as a means to prevent and detect misconduct, and eliminate any potential for recurrence after misconduct occurs.
 
On the issue of replacing the DOJ Compliance Counsel, most prosecutors who work at the Justice Department believe they are familiar with current practices relating to ethics and compliance programs. Prosecutors have extensive experience reviewing corporate compliance programs and the availability of training resources and programs will enhance DOJ’s existing expertise in this area.

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

(Source: Author, 6 Nov 2018.)
 

 
As companies consider mitigation strategies to offset the impact of the Section 301 duties, we wanted to share an important update regarding enforcement priorities at the border.  Further to recent reports, CBP’s Office of Regulatory Audit has confirmed that it will be ramping up enforcement of “various types” of imported electronics (i.e., products classified in chapters 84 and 85 of the Harmonized Tariff Schedule of the United States).  In connection with these efforts, Regulatory Audit is adding staff, including managers and auditors.  For instance, CBP is adding 60 new auditors across Regulatory Audit’s 10 field offices.  Our contacts in Regulatory Audit have informed us that, as part of this effort, a first “wave” of CF-28s (Requests for Information) since the imposition of the Section 301 duties will be issued in 2-4 weeks.  
 
There are several reasons for CBP to focus its enforcement on imported electronics.  Most importantly, billions of dollars in revenue are at stake for the U.S. government, and CBP is intent on collecting that revenue (the Trump administration expects CBP to collect “record-setting revenues”).  Also, given that electronics have generally been entitled to be entered duty free (or subject to very low duty rates), CBP recognizes that importers are under pressure to reduce the Section 301 impact and, therefore, may (intentionally or unintentionally) act in a manner contrary to U.S. customs laws and regulations.  Last, targeting electronics is justifiable given the conclusions of the Section 301 investigation, namely that the Government of China engages in intellectual property theft and forced technology transfers to support its industrial advancement goals.  Stated differently, targeting electronics aligns with the legal basis for the Section 301 duties and the administration’s messaging around China’s unfair policies.  
 
While CBP has confirmed that an enforcement push will be made with respect to electronics, we understand that CBP is increasing enforcement activities on all fronts.  As such, companies pursuing Section 301 mitigation strategies should tread cautiously.  Re-classifying products, changing the country of origin, and/or decreasing the customs valuation (for example, by declaring the “first sale” price in a multi-tiered transaction, rather than the price the U.S. importer pays), is likely to draw scrutiny from CBP.  As such, it is important that companies be able to demonstrate that they exercised reasonable care in carrying out these activities (not exercising reasonable care can lead to steep penalties, in addition to owing unpaid duties).  To demonstrate that a company is exercising reasonable care, we recommend having on file contemporaneously drafted documentation that substantiates the legal basis for any changes (e.g., documentation explaining that, based on changes to the supply chain, the product is no longer Chinese origin, since it is now last substantially transformed origin somewhere else).  Further, any company that receives a CF-28 or CF-29 (Notice of Action) should escalate the matter to the company’s legal department before responding and/or engage outside trade counsel, if appropriate.    

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ENEDITOR’S NOTES

Albert Camus (7 Nov 1913 – 4 Jan 1960; was a French philosopher, author, and journalist. His views contributed to the rise of the philosophy known as absurdism. He wrote in his essay The Rebel that his whole life was devoted to opposing the philosophy of nihilism while still delving deeply into individual freedom. He won the Nobel Prize in Literature at the age of 44 in 1957, the second youngest recipient in history.)
  – “Integrity has no need of rules.”
  – “I would rather live my life as if there is a God and die to find out there isn’t, than live as if there isn’t and to die to find out that there is.”

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EN_a320
. 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: 2 Nov 2018: 
83 FR 55099: Wassenaar Arrangement 2017 Plenary Agreements Implementation [Correction to 24 Oct EAR Amendment Concerning Supplement No. 1 to Part 774, Category 3.]

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

  – Last Amendment: 5 Nov 2018: 
83 FR 55269-55271: Iranian Transactions and 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: 1 Nov 2018: 
Harmonized System Update 1819, containing 1,200 ABI records and 245 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_a0321
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 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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