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18-1128 Wednesday “Daily Bugle”

18-1128 Wednesday “Daily Bugle”

Wednesday, 28 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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[No items of interest noted today.] 

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Posts Reminder on MQ Trade External Gateway Migration
  4. DHS/CBP Updates Drawback Trade Issue Tracker Document
  5. State/DDTC: (No new postings.)
  6. Treasury/OFAC: “Cobham Holdings, Inc. Settles Potential Civil Liability for Apparent Violations of the Ukraine Related Sanctions Regulations”
  7. Treasury/OFAC Posts Two New FAQs on Digital Currency and Cyber-Related Designations
  8. President Declares National Emergency and Blocking Property of Certain Persons Contributing to the Situation in Nicaragua
  1. Reuters: “U.S. Senators Ask White House to Probe ZTE Work in Venezuela”
  2. SIPRI Posts Film Series on the Security Risks of Newly Emerged Technologies
  1. M. Volkov: “OFAC Completes Re-Imposition of Iran Sanctions”
  2. R. Burke, F. Jalinous & K. Mildorf: “Department of Commerce Review of Export Controls on Emerging Technologies”
  1. Jeremy Huffman Moves to Northrop Grumman Law Department
  2. Suzanne Reifman Moves from Northrop Grumman to General Dynamics
  1. ECS Presents “Seminar Level I – Boot Camp: Achieving ITAR/EAR Compliance” in Seattle, WA on 10-11 Jul 2019
  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 (2 Nov 2018), FACR/OFAC (15 Nov 2018), FTR (24 Apr 2018), HTSUS (1 Nov 2018), ITAR (4 Oct 2018) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

 
[No items of interest noted today.]

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OGSOTHER GOVERNMENT SOURCES

OGS_a11. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* President; EXECUTIVE ORDERS; Nicaragua; Blocking Property of Certain Persons (EO 13851) [Publication Date: 29 November 2018.]

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OGS_a2
2. 
Commerce/BIS: (No new postings.)

(Source: 
Commerce/BIS)

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(Source:
CSMS #18-000697, 27 November 2018.)
 
This is a REMINDER of the MQ Trade External Gateway Migration in the PRODUCTION environment scheduled for this Saturday evening, December 1, 2018 from 2200 EST to 0200 EST. During this time, CBP will migrate the MQ Gateway off of the mainframe. The following applications will be affected: ACE, AES and ACS.
 
During the migration activities, CBP will NOT be able to receive any transactions and consequently they will NOT be held in any CBP queues. Trade messages transmitted to CBP will receive MQ connection errors. As a result, TRADING PARTNERS AND PGA’s WILL NEED TO HOLD ALL MESSAGES IN THEIR SYSTEMS UNTIL AFTER THE DOWNTIME. For transactions received prior to the downtime, any outgoing messages from CBP will be held in queues and sent after the downtime.
 
There will be no additional data coming to ACE, AES and ACS via EDI for the duration of the outage.
 
The ACE Portal will not be affected; however, no new data will be displayed nor received.
 
CBP will send out a CSMS when this Migration has completed so that Trade can transmit messages to CBP again.
 
  – Related CSMS No. 18-000684

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(Source:
CSMS #18-000699, 28 Nov 2018.)
 
Attached is the latest Drawback Trade Issue Tracker document. As a reminder, questions relating to policy for Drawback should be emailed to the OT Drawback inbox at OTDRAWBACK@cbp.dhs.gov.
 
Note that supplemental information to this message is available in the form of one or more file downloads.
 
 

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OGS_a66. Treasury/OFAC: “Cobham Holdings, Inc. Settles Potential Civil Liability for Apparent Violations of the Ukraine Related Sanctions Regulations”
(Source: Treasury/OFAC, 27 Nov 2018.)
 
Cobham Holdings, Inc. (“Cobham”), a company based in Arlington, Virginia, on behalf of its former subsidiary, Aeroflex/Metelics, Inc. (“Metelics”), has agreed to pay $87,507 to settle potential civil liability for three apparent violations of the Ukraine Related Sanctions Regulations, 31 C.F.R. part 589 (the URSR). Specifically, between July 31, 2014 and January 15, 2015, Metelics appears to have violated § 589.201 of the URSR when it sold 3,400 LM 102202-Q-C-301 switch limiters, 6,900 MSW 2061-206 switches, and 20 silicon diode switch limiter samples through distributors in Canada and Russia to a person whose property and interests in property are blocked pursuant to Executive Order 13661 of March 17, 2014, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine” (collectively referred to hereafter as the “Apparent Violations”).
 
Prior to December 14, 2015, Metelics was a subsidiary of Cobham, a global provider of technology and services in aviation, electronics, communications, and defense. During negotiations to sell Metelics, the purchaser identified a July 31, 2014 shipment of silicon diode switches and switch limiters to a Metelics distributor in Canada for end-use by Almaz Antey Telecommunications LLC (“AAT”) in Russia. Cobham investigated the shipment and discovered that in December 2014 and January 2015, Metelics made two additional shipments through a Russian distributor for end-use by AAT. At all relevant times, although AAT was not explicitly identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”), it was 51 percent owned by Joint-Stock Company Concern Almaz-Antey (“JSC Almaz-Antey”), which OFAC had blocked and added to the SDN List on July 16, 2014, two weeks before the July 31, 2014 shipment. As a result, AAT was blocked pursuant to §§ 589.201 and 589.406 of the URSR at the time Metelics engaged in the three shipments described below. These shipments arose out of two separate transactions – one taking place between June and July 2014, and the other taking place between October 2014 and January 2015.
 
On June 18, 2014, Metelics agreed to ship an order of 6,900 switches and 6,900 switch limiters through a Canadian distributor to AAT. The total value of the order was $1,123,182. On June 19, 2014, Metelics performed a denied party screening for the order that returned warnings for Russia generally but not AAT specifically, as JSC Almaz-Antey had not yet been added to the SDN List. Metelics did not have sufficient stock to fill the order, so it arranged to split the order into two shipments.
 
Metelics prepared the first shipment associated with the June 18, 2014 order for June 27, 2014 and performed another denied party screening that day with similar results to the first screening. Knowing the shipment was destined for Russia, Metelics forwarded the end-use certificates to its Director of Global Trade Compliance to confirm that required compliance procedures had been followed and for final approval. After completing its global trade compliance review, Metelics shipped the first part of the order on June 27, 2014. The value of the shipment was $377,860.
 
On July 16, 2014, OFAC designated JSC Almaz-Antey and added it to the SDN List.
 
Metelics prepared the second shipment on July 31, 2014 and again performed a denied party screening. Although OFAC had designated JSC Almaz-Antey and added it to the SDN List approximately two weeks before, and despite the inclusion of two uncommon terms in the names of both the SDN and the specific end-user for the subject transaction (“Almaz” and “Antey”), Metelics’ denied party screening produced no warnings or alerts for AAT. After the Director of Global Trade Compliance, in reliance on the results of the screening software, approved the transaction, Metelics shipped the second part of the order on July 31, 2014. The total value of the second shipment was $745,322.
 
In October 2014, Metelics received an order for 10 samples of two different silicon diode switch limiters from a Russian distributor for end-use by AAT. On October 27, 2014, Metelics performed a denied party screening for the parties involved in the transaction (including AAT) which did not return any matches. Metelics subsequently shipped the samples in two separate shipments following the same procedures of performing a denied party search just prior to shipment and seeking approval from its Director of Global Trade Compliance (similar to the July 2014 transaction). The first shipment occurred on December 19, 2015 and the second on January 15, 2015. The value for each of these two shipments listed on the commercial invoices was $10.
 
Cobham determined that its screening software failed to generate an alert because JSC Almaz- Antey (the entity identified on the SDN List) did not include the word “telecom.” The third- party screening software relied on by Cobham used an all word match criteria that would only return matches containing all of the searched words, even though Cobham had set the search criteria to “fuzzy” to detect partial matches. This meant that the software failed to match “Almaz Antey” when Cobham searched for “Almaz Antey Telecom.”
 
OFAC determined that Cobham voluntarily self-disclosed the Apparent Violations on behalf of Metelics, and that the Apparent Violations constituted a non-egregious case. The statutory maximum civil monetary penalty applicable in this matter is $1,990,644. The base civil monetary penalty amount for the Apparent Violations is $125,010.
 
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC determined the following to be aggravating factors: (1) Metelics failed to recognize warning signs when exporting goods on multiple occasions through distributors to the subsidiary of a blocked person with nearly the same name as the blocked person; (2) the Director of Global Trade Compliance reviewed and approved the transactions constituting the apparent violations; (3) the apparent violations resulted in harm to the sanctions program objectives of the URSR by conferring an economic benefit to a blocked person tied to Russia’s defense industry; (4) Metelics and Cobham are large and sophisticated entities operating in a sensitive industry; and (5) Cobham and its compliance personnel were involved in prior apparent violations of the Iranian Transactions and Sanctions Regulations administered by OFAC and Metelics was subject to a consent agreement for violations of the International Traffic in Arms Regulations administered by the U.S. Department of State resulting from recurring compliance failures.
 
OFAC determined the following to be mitigating factors:
 
  (1) Metelics has not received a penalty notice or finding of violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the Apparent Violations;
  (2) Cobham cooperated with OFAC by submitting a detailed disclosure;
  (3) Cobham implemented certain remedial measures, including those described in more detail below; and
  (4) that the primary transaction underlying the Apparent Violations straddled changes in the URSR such that a portion of the transaction occurred prior to it being prohibited.
 
Additionally, Cobham has confirmed to OFAC that it has terminated the violative conduct and taken the following steps to minimize the risk of recurrence of similar conduct in the future:
 
  – Cobham acquired and implemented new and enhanced sanctions screening software which, according to Cobham, does not possess the same deficiency as its prior sanctions screening software and that is capable of identifying and flagging potential matches to persons with close name variations to parties identified on the SDN List;
  – Cobham acquired and implemented a screening and business intelligence tool with the capability of identifying and flagging persons known to be owned by parties identified on the SDN List, and has developed a process for employing the business intelligence tool to conduct enhanced due diligence on high-risk transactions from an OFAC sanctions perspective, to include any transaction involving a Cobham U.S. entity and any party in either Russia or Ukraine; and
  – Cobham circulated a lessons learned bulletin to all U.S.-based international trade compliance personnel that described the apparent violations, reiterated that U.S. law may prohibit transactions with unlisted entities owned or controlled by listed parties, and urged personnel to alert Cobham’s compliance team whenever a proposed transaction involves an entity who they have reason to believe may be owned or controlled by a prohibited party.
 
This case demonstrates the importance of companies operating in high-risk industries (i.e., defense) to implement effective, risk-based compliance measures, especially when engaging in transactions involving high-risk jurisdictions. Persons employing sanctions screening software should take steps to ensure it is sufficiently robust and that appropriate personnel are trained on its functionality. Furthermore, it is essential that companies engaging in international transactions maintain a culture of compliance where front line staff are encouraged to follow up on sanctions issues, including by promptly reporting to compliance personnel transactions suspected to involve sanctioned parties.
 
OFAC expects companies settling apparent violations of its regulations to ensure their compliance units receive adequate resources, including in the form of human capital, information technology, and other resources, as appropriate.
 
For more information regarding OFAC regulations, please go to: www.treasury.gov/ofac.

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OGS_a77. Treasury/OFAC Posts Two New FAQs on Digital Currency and Cyber-Related Designations

(Source: Treasury/OFAC, 28 Nov 2018.) [Excerpts.]
 
Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing two new Frequently Asked Questions (FAQs) to provide guidance on digital currency.
 
In addition, the following changes to the Specially Designated Nationals List occurred today: …

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OGS_a88. President Declares National Emergency and Blocking Property of Certain Persons Contributing to the Situation in Nicaragua
(Source: White House, 27 Nov 2018.)
 
By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.) (NEA), section 212(f) of the Immigration and Nationality Act of 1952 (8 U.S.C. 1182(f)), and section 301 of title 3, United States Code,
 
I, DONALD J. TRUMP, President of the United States of America, find that the situation in Nicaragua, including the violent response by the Government of Nicaragua to the protests that began on April 18, 2018, and the Ortega regime’s systematic dismantling and undermining of democratic institutions and the rule of law, its use of indiscriminate violence and repressive tactics against civilians, as well as its corruption leading to the destabilization of Nicaragua’s economy, constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat. I hereby determine and order:
 
Section 1.
   (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:
  (i) to be responsible for or complicit in, or to have directly or indirectly engaged or attempted to engage in, any of the following:
 (A) serious human rights abuse in Nicaragua;
 (B) actions or policies that undermine democratic processes or institutions in Nicaragua;
 (C) actions or policies that threaten the peace, security, or stability of Nicaragua;
 
(D) any transaction or series of transactions involving deceptive practices or corruption by, on behalf of, or otherwise related to the Government of Nicaragua or a current or former official of the Government of Nicaragua, such as the misappropriation of public assets or expropriation of private assets for personal gain or political purposes, corruption related to government contracts, or bribery;
  (ii) to be a leader or official of an entity that has, or whose members have, engaged in any activity described in subsection (a)(i) of this section or of an entity whose property and interests in property are blocked pursuant to this order;
  (iii) to be an official of the Government of Nicaragua or to have served as an official of the Government of Nicaragua at any time on or after January 10, 2007;
  (iv) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of; or
  – in property are blocked pursuant to this order; or
  – of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.
   (b) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the date of this order.
 
Sec. 2. The unrestricted immigrant and nonimmigrant entry into the United States of aliens determined to meet one or more of the criteria in section 1 of this order would be detrimental to the interests of the United States, and the entry of such persons into the United States, as immigrants or nonimmigrants, is hereby suspended, except where the Secretary of State determines that the person’s entry is in the national interest of the United States. Such persons shall be treated as persons covered by section 1 of Proclamation 8693 of July 24, 2011 (Suspension of Entry of Aliens Subject to United Nations Security Council Travel Bans and International Emergency Economic Powers Act Sanctions).
 
Sec. 3. I hereby determine that the making of donations of the type of articles specified in section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to section 1 of this order would seriously impair my ability to deal with the national emergency declared in this order, and I hereby prohibit such donations as provided by section 1 of this order.
 
Sec. 4. The prohibitions in section 1 of this order include:
(a) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and
(b) the receipt of any contribution or provision of funds, goods, or services from any such person.
 
Sec. 5.
  (a) Any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited.
  (b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.
 
Sec. 6. For the purposes of this order:
  (a) the term “person” means an individual or entity;
  (b) the term “entity” means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;
  (c) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States; and
  (d) the term “Government of Nicaragua” means the Government of Nicaragua, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Nicaragua, and any person owned or controlled by, or acting for or on behalf of, the Government of Nicaragua.
 
Sec. 7. For those persons whose property and interests in property are blocked pursuant to this order who might have a constitutional presence in the United States, I find that because of the ability to transfer funds or other assets instantaneously, prior notice to such persons of measures to be taken pursuant to this order would render those measures ineffectual. I therefore determine that for these measures to be effective in addressing the national emergency declared in this order, there need be no prior notice of a listing or determination made pursuant to section 1 of this order.
 
Sec. 8. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to take such actions, including promulgating rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to implement this order. The Secretary of the Treasury may, consistent with applicable law, redelegate any of these functions within the Department of the Treasury. All agencies of the United States Government shall take all appropriate measures within their authority to carry out the provisions of this order.
 
Sec. 9. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to submit the recurring and final reports to the Congress on the national emergency declared in this order, consistent with section 401(c) of the NEA (50 U.S.C. 1641(c)) and section 204(c) of IEEPA (50 U.S.C. 1703(c)).
 
Sec. 10.
  (a) Nothing in this order shall be construed to impair or otherwise affect:
  (i) the authority granted by law to an executive department or agency, or the head thereof; or
  (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
  (b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
  (c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
 
DONALD J. TRUMP
 
THE WHITE HOUSE,
November 27, 2018.

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NWSNEWS

NWS_a0
9. Reuters: “U.S. Senators Ask White House to Probe ZTE Work in Venezuela”
(Source: Reuters) [Excerpts.]
 
Two U.S. senators on Wednesday will ask the Trump administration to investigate whether ZTE Corp, the Chinese telecommunications company, violated U.S. sanctions by helping Venezuela set up a database that monitors the behavior of its citizens.
 
In a letter, Senators Chris Van Hollen and Marco Rubio will ask the U.S. secretaries of state, treasury and commerce to determine whether ZTE worked with individuals cited by U.S. sanctions, used U.S. components unlawfully or helped Venezuela’s government flout democratic processes or human rights.
 
The letter, following a Reuters investigation of the database and an associated Venezuelan identity card program published Nov. 14, will go to the cabinet officials on Wednesday, according to aides to the two senators.
 
ZTE, which this year paid $1 billion to the U.S. government in relation to sanctioned business in Iran and North Korea, didn’t respond to a request for comment for this story. …

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(Source:
SIPRI, 28 Nov 2018.)
 
Based on expert interviews at the 2018 Stockholm Security Conference, Stockholm International Peace Research Institute (“SIPRI”) has produced a new film series- ‘Exploring the security risks posed by newly emerged technologies‘ -that is out today.
 
The series addresses wide-ranging security concerns: what do the technologies mean for armed conflict? For arms control? For society as a whole? The series highlights the most pressing dangers, explores who needs to act and what needs to happen to address the risks ahead.
 
Introduced by Dr Sibylle Bauer, Director of Studies for SIPRI’s Armament and Disarmament Research, the series can be viewed on SIPRI’s YouTube and Facebook channels. The series aims to reduce confusion around a topic that lacks clarity.
 
Dr Bauer highlights the need to better understand the security risks that are created when different technologies are combined. For example: what are the risks if nuclear weapons are combined with cyber developments? Can this create more vulnerabilities and increase the risk of nuclear weapon use? Dr Bauer stresses the need to improve the understanding of these connections in order to more accurately evaluate the security implications for the future.
 
The interviews feature experts from a range fields-including academia, civil society, international law, national armed forces, policy research and the private sector-and illustrate the varied perspectives on the security risks related to emerging technologies.

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COMMCOMMENTARY

(Source:
Volkov Law Group Blog, 27 Nov 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
On November 5, 2018 the Department of Treasury’s Office of Foreign Asset Control (“OFAC”) completed the process to re-impose the Iran sanctions program. The 180-day wind-down period for termination of the United States’ participation in the Joint Comprehensive Plan of Action (“JCPOA”) ended. As part of the re-imposition of U.S. sanctions, OFAC added more than 700 individuals, entities, aircraft, and vessels to the SDN List, including individuals and entities that had been removed from the SDN List in connection with the JCPOA as well as over 300 new targets.
 
The final phase of Iran sanctions targets Iran’s port operators and shipping and ship-building sectors; petroleum-related transactions; financial transactions and specialized messaging services with the Central Bank of Iran; underwriting and insurance services; and Iran’s energy sector. In addition, all activities under General License H will no longer be authorized.
 
OFAC also announced significant reduction exceptions (“SREs”) to eight countries (China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey) to allow those countries to temporarily continue to purchase Iranian oil. The SREs, which must be renewed every six months, with the primary effect that these countries may continue to temporarily import Iranian-origin oil so long as certain conditions regarding the purchases are met.
 
The new executive order also broadens the scope of sanctions in effect prior to the JCPOA dated January 16, 2016. The new Iran sanctions regulations provide new authority to designate SDNs to include any person that on or after November 5, 2018 provides material support or goods or services in support of persons designated for: (1) providing support, or goods or services in support of the purchase or acquisition of U.S. bank notes or precious metals by the Iran government; (2) providing support, or goods or services in support of the National Iranian Oil Company (NIOC), the Nafitran Intertrade Oil Company (NIOC), or the Central Bank of Iran; or (3) being part of the Iranian energy sector, shipping, or shipbuilding sectors, being a port operator in Iran, or providing significant support of persons designated as SDNs.
 
The new Iran sanctions regulations provide OFAC authority to prohibit or restrict correspondent and payable-through accounts of foreign financial institutions that knowingly conduct or facilitate significant transactions with persons designated under the new authorities outlined above.
 
OFAC also expanded the menu of sanctions available to be imposed on persons who knowingly engage in significant transactions related to Iranian petroleum products and petrochemicals, including: (1) Visa restrictions on controlling officers and shareholders; (2) secondary sanctions on principal executive officers of a SDN; and (3) prohibitions on investing in or purchasing debt and equity instruments from a sanctioned person.
 
The re-imposed Iran sanctions program expands restrictions on foreign subsidiaries of U.S. owned or controlled companies by prohibiting transactions with persons blocked for any of the following activities: (1) providing material support for, or goods and services in support of, persons designated pursuant to Iran sanctions; and (2) being part of the Iranian energy sector, shipping or shipbuilding sectors, being a port operators in Iran or providing significant support of SDNs.
 
US Persons (i.e., entities organized under US law and their non-US branches; parties physically located in the United States; US citizens and permanent resident aliens wherever located or employed) are prohibited from engaging in transactions involving any person designated as an SDN. Non-US Persons may be subject to US secondary sanctions for engaging in significant transactions involving an Iranian person on the SDN List (other than a non-designated Iranian financial institution) or a person designated in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction.
 
The new Iran sanctions regulations continue exceptions that allow for the sale of agricultural commodities, food, medicine, and medical devices to Iran from the United States or by U.S. persons or U.S.-owned or -controlled foreign entities.   Transactions for the sale of agricultural commodities, food, medicine, or medical devices to Iran are not sanctionable unless they involve persons on the SDN List that have been designated in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction, including designated Iranian financial institutions or the Islamic Revolutionary Guard Corps (IRGC), or activity that is subject to other sanctions.

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* Authors: Richard Burke, Esq., rburke@whitecase.com, +1 202 626 3687; Farhad Jalinous, Esq., farhad.jalinous@whitecase.com, +1 202 626 3691; and Karalyn Mildorf, Esq. karalyn.mildorf@whitecase.com, +1 202 626 6489. All of White & Case LLP.
 
On November 19, 2018, the Department of Commerce (DOC), Bureau of Industry and Security (BIS) published in the Federal Register (FR) an advance notice of proposed rulemaking (ANPRM) titled Review of Controls for Certain Emerging Technologies. [FN/1] This ANPRM seeks public comment on criteria for identifying emerging technologies that are essential to US national security, for example because they have potential conventional weapons, intelligence collection, weapons of mass destruction, or terrorist applications or could provide the United States with a qualitative military or intelligence advantage.
 
The ANPRM was published pursuant to the National Defense Authorization Act (NDAA) for Fiscal Year 2019, which enacted the Export Control Reform Act of 2018 (ECRA). [FN/2] In Section 1758 of the NDAA, the ECRA authorized DOC to establish appropriate controls-including interim controls-on the export, re-export, or transfer (in country) of (1) emerging and (2) foundational technologies. [FN/3] In identifying emerging and foundational technologies, ECRA states that the process must consider:
  – The development of emerging and foundational technologies in foreign countries;
  – The effect export controls may have on the development of such technologies in the United States; and
  – The effectiveness of export controls on limiting the proliferation of emerging and foundational technologies in foreign countries.
 
Objectives of the ANPRM and Guidance on Public Comments
 
According to BIS, the underlying purpose of the November 19 ANPRM is to help inform the ECRA implementation process, and identify certain technologies that are not yet listed on the Commerce Control List (CCL) – which is administered by BIS – or controlled multilaterally, because they are emerging technologies and as such have not yet been evaluated for their national security impacts. Comment on this ANPRM will help inform the interagency process to identify and describe such emerging technologies. This interagency process is anticipated to result in proposed rules for new Export Control Classification Numbers (ECCNs) on the CCL, and more broadly to help DOC and other agencies propose specific emerging technologies for control.
An objective of the ANPRM is to achieve balance between national security and innovation: “Responses to this ANPRM will help Commerce and other agencies identify and assess emerging technologies for the purposes of updating the export control lists without impairing national security or hampering the ability of the US commercial sector to keep pace with international advances in emerging fields.”
 
Please note that DOC will issue a separate ANPRM regarding identification of foundational technologies that may be important to US national security. DOC is seeking comments under the November 19 ANPRM on whether emerging technologies and foundational technologies should be approached separately or together.
 
The public comments are due 30 days after publication of the FR notice, i.e., December 19, 2018. BIS welcomes comments on:
 
  – how to define emerging technology to assist identification of such technology in the future;
  – criteria for determining whether there are specific technologies within the general listed representative
technology categories that are important to US national security;
  – sources to identify such technologies;
  – other general technology categories that warrant review to identify emerging technologies that are important to US national security;
  – the status of development of these technologies in the United States and other countries;
  – the impact that specific emerging technology controls would have on US technological leadership; and
  – any other approaches to the issue of identifying emerging technologies important to US national security, including the stage of development or maturity level of an emerging technology that would warrant consideration for export control.
 
The fourteen general representative technology categories, for which BIS currently seeks to determine whether there are specific emerging technologies that are essential to the national security of the United States, include the following categories and subcategories:
 
Category Subcategory
Biotechnology
  • Nanobiology
  • Synthetic biology
  • Genomic and genetic engineering, or
  • Neurotech
Artificial intelligence (AI) and machine learning technology
  • Neural networks and deep learning (e.g., brain modelling, time series prediction, classification)
  • Evolution and genetic computation (e.g., genetic algorithms, genetic programming)
  • Reinforcement learning
  • Computer vision (e.g., object recognition, image understanding)
  • Expert systems (e.g., decision support systems, teaching systems)
  • Speech and audio processing (e.g., speech recognition and production)
  • Natural language processing (e.g., machine translation)
  • Planning (e.g., scheduling, game playing)
  • Audio and video manipulation technologies (e.g., voice cloning, deepfakes)
  • AI cloud technologies, or
  • AI chipsets
Position, Navigation, and Timing (PNT) technology
None provided
Microprocessor technology
  • Systems-on-Chip (SoC), or
  • Stacked Memory on Chip
Advanced computing technology
  • Memory-centric logic
Data analytics technology
  • Visualization
  • Automated analysis algorithms, or
  • Context-aware computing
Quantum information and sensing technology
  • Quantum computing
  • Quantum encryption, or
  • Quantum sensing
Logistics technology
  • Mobile electric power
  • Modeling and simulation
  • Total asset visibility, or
  • Distribution-based Logistics Systems (DBLS)
Additive manufacturing
  • 3D printing
Robotics
  • Micro-drone and micro-robotic systems
  • Swarming technology
  • Self-assembling robots
  • Molecular robotics
  • Robot compliers, or
  • Smart Dust
Brain-computer interfaces
  • Neural-controlled interface
  • Mind-machine interfaces
  • Direct neural interfaces, or
  • Brain-machine interfaces
Hypersonics
  • Flight control algorithms
  • Propulsion technologies
  • Thermal protection systems, or
  • Specialized materials (for structures, sensors, etc.)
Advanced Materials
  • Adaptive camouflage
  • Functional textiles (e.g., advanced fiber and fabric technology), or
  • Biomaterials
Advanced surveillance technologies
  • Faceprint and voiceprint technologies
 
Conclusion
 
Interested members of the public may submit comments to BIS on how to develop these criteria for defining and identifying emerging technologies, and BIS (or other agencies, if applicable) will use them in drafting any subsequently proposed rules.
 
If proposed rules are issued as a result of the ANPRM, DOC/BIS (or other agencies, if applicable) would have to go through the rulemaking process specified under the Administrative Procedure Act (APA). This means, among other things, publication of a Notice of Proposed Rulemaking (NPRM) in the FR, another round of public comments, and possibly a public hearing.
 
————
  [FN/3] The NDAA also included the Foreign Investment Risk Review Modernization Act (FIRRMA), which added “emerging and foundational technologies” to the list of critical technologies in the Committee on Foreign Investment in the United States (CFIUS) regulations. In October 2018, CFIUS released an interim rule establishing a pilot program implementing portions of FIRRMA. Our client alert on this subject can be found here, and our virtual tool for helping determine whether a transaction is subject to the CFIUS pilot program under FIRRMA can be found here.

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MSEX/IM MOVERS & SHAKERS

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(Source: Editor)
 

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TEEX/IM TRAINING EVENTS & CONFERENCES

 
* What: Seminar Level I – Boot Camp: Achieving ITAR/EAR Compliance; Seattle, WA
* When: July 10-11, 2019
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register here or by calling 866-238-4018 or e-mail spalmer@exportcompliancesolutions.com

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ENEDITOR’S NOTES

* John Bunyan (30 Nov 1628 – 31 Aug 1688; was an English writer and Puritan preacher best remembered as the author of the Christian allegory The Pilgrim’s Progress. Bunyan wrote nearly sixty titles, many of them expanded sermons.)
  – “He who bestows his goods upon the poor shall have as much again, and ten times more.”
 
* William Blake (28 Nov 1757 – 12 Aug 1827; was an English poet, painter, and printmaker. Largely unrecognised during his lifetime, Blake is now considered a seminal figure in the history of the poetry and visual arts of the Romantic Age.)
  – “In seed time learn, in harvest teach, in winter enjoy.”
  – “A truth that’s told with bad intent beats all the lies you can invent.”
 

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EN_a317
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 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: 15 Nov 2018: 83 FR 57308-57318: Democratic Republic of the Congo 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.

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EN_a0318
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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EPEDITORIAL POLICY

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