18-1205 Wednesday “Daily Bugle”

18-1205 Wednesday “Daily Bugle”

Wednesday, 5 December 2018

The Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events.  Subscribe 
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[Federal Register Not Published Due to Federal Holiday.] 

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Announces ACE Certification Scheduled Maintenance for Tonight
  4. State/DDTC: (No new postings.)
  5. Hong Kong Publishes List of Officers Authorized to Sign on Strategic Commodities Licenses and Delivery Verification Certificates
  1. European Sanctions: “UK Chemicals Company Fined £7k for Violating Export Controls”
  2. Expeditors News: “ITA Releases New Market Diversification Tool for Exporters”
  1. International Trade Compliance Update: “CBP Revises Vessel Repair Regulations”
  2. J. Paner: “The $1.3 Billion OFAC Sanctions Penalty Against SocGen has Lessons for All Businesses”
  3. M. Volkov: “Episode 67 – Conducting Compliance Audits”
  4. Y. Aiche: “The Traps of a CFIUS Like EU FDI Screening Mechanism”
  1. ECS Presents “Web Meeting Series – Managing Foreign Nationals in the Workplace: Be Confident, Competent, and Compliant” on 11 Dec
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: ATF (15 Jan 2016), Customs (29 Nov 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 


[The Federal Register was not published today, as today is a U.S. Federal holiday in observance of a National Day of Mourning for President George H.W. Bush.]
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OGS_a11. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)  

* Commerce/ITA; NOTICES; Meetings: Civil Nuclear Trade Advisory Committee [Pub. Date: 6 Dec 2018.]

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Commerce/BIS: (No new postings.)


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CSMS #18-000713, 4 Dec 2018.)
There will be ACE CERTIFICATION Scheduled Maintenance Wednesday evening, December 5, 2018 from 1700 ET to 2000 ET for an internal ACE Deployment.

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The Trade and Industry Department (TID) of Hong Kong has published the following circular on its website:

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European Sanctions, 4 Dec 2018.)
A Leicestershire-based company, VWR International Ltd, has been fined a total of £7,039 at City of London Magistrates Court after pleading guilty to 4 counts of exporting goods contrary to a prohibition or restriction. Specifically, VWR illegally shipped 4 consignments of controlled chemicals and metal to foreign jurisdictions without the required export license. VWR shipped the first consignment days after being denied the necessary license and failed to apply for the required license in relation to the other three consignments. The case was investigated and prosecuted on behalf of Her Majesty’s Revenue & Customs (HMRC).

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NWS_a37. Expeditors News: “ITA Releases New Market Diversification Tool for Exporters”

(Source: Expeditors News, 4 Dec 2018.)
On November 15, 2018, U.S. Secretary of Commerce, Wilbur Ross, announced the release of the International Trade Administration’s (ITA) new Market Diversification Tool (MDT).
The MDT produces a ranked list of recommended markets in a report. The MDT allows users to select multiple markets or regions, and it links to other Commerce applications.
According to Secretary Ross, the MDT uses “…data resources and analytics available to the Department of Commerce…” and “…can help companies explore previously untapped markets, strengthening U.S. companies’ competitiveness and overseas presence.”
The Department of Commerce’s press release may be found
The MDT may be found here.

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International Trade Compliance Update, 30 Nov 2018.)
On November 29, 2018, US Customs and Border Protection (CBP) published in the 
Federal Register a 
final rule (technical amendment) [CBP Dec. 18-12] amends the CBP regulations to update provisions relating to the declaration, entry and dutiable status of repair expenditures made abroad for certain vessels to reflect the port of New Orleans, Louisiana as the only Vessel Repair Unit (VRU) location. The amendment will improve the efficiency of vessel repair entry processing, ensure the proper assessment and collection of duties, and make the regulations more transparent.

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Trade Sanctions Blog, 30 Nov 2018.)
* Author: Jeremy Paner, Esq.,
jppaner@hollandhart.com, Holland & Hart.
On November 19, 2018, French international financial institution Société Générale entered into a global settlement agreement with several United States federal and state regulators and prosecutors [FN/1] to resolve criminal and civil investigations into the bank’s alleged violations of U.S. economic sanctions.  This agreement required Société Générale to enter into Deferred Prosecution Agreements, Consent Orders, and an OFAC Settlement Agreement, and to pay $1.34 billion in total criminal and civil penalties.
The Société Générale violations arise from the practice of “stripping,” or the systematic removal or omission of references to parties subject to U.S. sanctions from payment instructions sent to or through the U.S. financial system.  Similar schemes by other European banks resulted in massive economic sanctions penalties. [FN/2] Those widely reported settlements reflect OFAC’s enforcement priority toward willful circumvention of sanctions prohibitions.  In addition to further demonstrating this well-known prioritization, the Société Générale settlement contains several sanctions compliance lessons applicable across all industries. 
Timely Disclose Apparent Violations
The OFAC and SDNY settlement announcements reflect disagreement within the U.S. government as to whether Société Générale timely disclosed its apparent violations.  OFAC concluded that the bank submitted a voluntary self-disclosure of the Cuba, Sudan, and Iran sanctions violations.  Such disclosures reduce the applicable statutory maximum penalty by 50 percent in cases of egregious violations.
According to its press announcement, the SDNY concluded that Société Générale failed to timely disclose the Cuba-related violations, because it did not disclose those apparent violations “to OFAC or any other U.S. regulator or law enforcement agency until well after the commencement of the Government’s investigation.”  The timeline of events as set forth in the settlement agreements and announcements supports this position.
  (1) March 2012 – the U.S. government begins investigation after an unidentified third-party U.S. financial institution blocks two Sudan-related transactions processed by Société Générale.
  (2) May 2012 – Société Générale submits an initial notification of apparent Sudan-related sanctions violations.
  (3) February 2013 – Société Générale submits a voluntary self-disclosure of apparent Sudan-related sanctions violations, which identifies additional potential Sudan, Iran, and Cuba sanctions violations.
  (4) Early 2014 – Société Générale agrees to expand the scope of its review of U.S. dollar transactions.
  (5) October 2014 – Société Générale discloses its Cuban Credit Facilities, which total nearly 2,000 U.S. dollar transactions cumulatively worth about $10.3 billion.
According to the SDNY, the bank’s senior management and sanctions compliance department knew prior to March 2012 that the $10.3 billion Cuban Credit Facilities violated U.S. law.  The bank did not disclose those violations, however, until late 2014 following a “detailed forensic analysis” of the transactions.
Businesses seeking to reduce monetary penalties through voluntary self-disclosures should disclose violations upon discovery in the form of initial notifications.  If during the course of a lengthy internal investigation significant violations unrelated to those identified in the initial notification are discovered, the business should file additional notifications.
Monitor and Identify Previously Rejected Transactions
OFAC’s Settlement Agreement indicates that the New York branch of the bank properly rejected a $1.4 million payment from a German bank involving an Iranian credit facility.  Following this rejection, however, Société Générale New York accepted a payment from the German bank in that same amount.  The German bank simply resubmitted the rejected payment.
Banks generally use their automated anti-money laundering transaction monitoring systems to identify these evasion attempts.  While this automation facilitates sanctions compliance for banks, a fully functioning sanctions compliance program will monitor and identify transactions that are resubmitted following a rejection, irrespective of the industry.
Centralize Sanctions Compliance
The OFAC Settlement Agreement notes that stripping violations continued after the bank rescinded the circumvention procedures.  Apparently, several units within the bank did not receive the instruction to cease the stripping/obfuscation practice.  A properly centralized sanctions compliance program mitigates the risk of such communication failures, which is crucial to maintaining enterprise-wide sanctions compliance.
  [FN/1] Société Générale entered separate agreements with the United States Department of the Treasury, Office of Foreign Assets Control (OFAC), the Federal Reserve Board of Governors and the Federal Reserve Bank of New York, the New York State Department of Financial Services, the U.S. Attorney’s Office for the Southern District of New York (SDNY), and the New York County District Attorney’s Office.
  [FN/2] U.S. federal and state regulatory agencies and prosecutors previously settled economic sanctions violations against other major European financial institutions for stripping or otherwise systemically obscuring the involvement of sanctioned parties in transactions processed through the U.S. banking system.  ABN AMRO, ING Bank, Credit Suisse, Lloyd’s TSB Bank, Barclays, Standard Chartered Bank, BNP Paribas, Commerzbank, and Crédit Agricole Corporate and Investment Bank all paid hundreds-of-millions to billions of dollars to settle civil and or criminal liability for stripping-related sanctions violations.

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Volkov Law Group Blog, 2 Dec 2018. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
Corporate compliance departments are rapidly implementing their own internal audit function – operating their own internal compliance monitoring and audit function. No longer can compliance departments rely on internal audit to report on the compliance department’s operations. Companies have to implement internal (or external) audit procedures.
In this episode, Michael Volkov discusses how to conduct a compliance audit.

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Global Trade Law Blog, 29 Nov 2018.)
* Author: Yannis Aiche, Esq.,
yaiche@sheppardmullin.com, Sheppard Mullin, Brussels.
Finally, the much-awaited harmonized screening framework of foreign investments into the EU (Regulation 2017/0224) has been agreed upon on 20 November 2018 by the EU Parliament, the Council and the Commission.
The agreed package will ensure that the EU and its Member States are equipped to protect their “essential interests” while remaining “one of the most open investment regimes” in the world. Protecting an open economy may sound like a comical oxymoron, but the press release of the European Commission on this topics does make for an amusing read!
Before discussing the proposed framework, let’s talk about the elephant (or should we say panda) in the room, which is China. Here are some facts about recent Sino-European economic developments. The EU is today China’s largest trading partner with over EUR 1.5 billion in daily bilateral trade. In this balance the EU is seeing a massive deficit of EUR 180 billion. European companies in search for cheap production have, for decades, been the prime investors in China. However, since 2014, the flow of investments has turned, as China is now positioning itself as one of the world’s largest exporters of capital. A depressed European economy – post euro crisis – has sparked a Chinese shopping spree for assets on the cheap. From wineries in Bordeaux, to the Piraeus in Athens, Hinkley Point in the UK to the top German tech giant Kuka, Chinese investments are multiplying and European governments often feel defenseless.
Germany recently initiated its own FDI screening mechanism and France and the UK quickly followed suit. Some 14 Member States have some kind of foreign investment screening mechanisms in place. Countries like Italy, France and Germany have increased their pressure on the EU Commission in 2017 to act swiftly and to adopt stricter, harmonized screening rules across the EU. Their main concerns are (1) the increase in Chinese acquisitions in security sensitive industries; (2) the asymmetrical investment restrictions, or a lack of reciprocity in market openness by China; (3) the prominent role of Chinese state-owned enterprises fueling oversees investments; (4) anxiety related to the potential economic harm by Chinese investments, and more broadly; (5) a renewed realism in the relations with China.
Not all EU Member States share those concerns. As a matter of fact, many were quite eager to receive badly needed Chinese investments. Other Member States were more principled about not following the US protectionist example. This EU – Chinese investment dilemma within the EU has now given birth to what we might call a rather watered down FDI review process.
The Commission was originally reluctant to institute a CFIUS-like approach to foreign investments in the EU, for fear of “sending the misleading signal that the EU is stepping back from its commitment to an open investment regime”. During the 19th EU-China Summit in 2017, however, it became clear that EU leaders adopted a more assertive tone, notifying China of their discomfort. And EU Trade Commissioner Cecilia Malmström joined their more belligerent statements by adding that “Trade cannot simply be free. It must also be fair”.
So what is the new EU screening framework of foreign direct investments into the EU?
The idea behind the new Regulation is that the EU and its Member States should have a say and retain the control over:
  – strategic assets such as nuclear power plants;
  – the production of critical defense inputs (such as military chips)
  – the transfer of sensitive technology or know-how to a foreign country whose hostile intent cannot be excluded; and
  – espionage, sabotage or other actions of a disruptive nature.
The Regulation does not
require EU Member States to implement a foreign investment screening mechanism. However, where such a mechanism exists or is to be adopted at the Member State level, the Regulation aims to ensure that it meets certain basic screening requirements, such as judicial review of decisions, non-discrimination between different third countries and transparency. Furthermore, the new Regulation establishes a cooperation mechanism between Member States and the Commission in case a foreign investment could affect the security or public order. It also allows the EU Commission, on the same grounds, to initiate a screening if it deems it necessary to protect against threats posed by the investment to projects or programs of “Union interest”. The latter may introduce uncertainty for investors – similar to CFIUS- as the EU Commission will have the authority to review and block investments, and even potentially unwind, closed investment transactions.

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TE_a112. ECS Presents “Web Meeting Series – Managing Foreign Nationals in the Workplace: Be Confident, Competent, and Compliant” on 11 Dec

(Source: Suzanne Palmer,
* What: Web Meeting Series – Managing Foreign Nationals in the Workplace: Be Confident, Competent, and Compliant
* When: December 11, 2018; 1:00-2:30 p.m. EST
* Where: Online
* Sponsor:  Export Compliance Solutions & Consulting (ECS)
* ECS Instructors: Suzanne Palmer, Melva Exner

* Register 
here or by calli
ng 866-238-4018 or by emailing
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Martin Van Buren (5 Dec 1782 – 24 Jul 1862; was the eighth President of the United States from 1837 to 1841. A founder of the Democratic Party, he previously served as the ninth Governor of New York, the tenth U.S. Secretary of State, and the eighth Vice President of the United States.)
  – “The less government interferes with private pursuits, the better for general prosperity.”
Walt Disney (Walter Elias Disney; 5 Dec 1901 – 15 Dec 1966; was an American entrepreneur, animator, voice actor and film producer. A pioneer of the American animation industry, he introduced several developments in the production of cartoons. As a film producer, Disney holds the record for most Academy Awards earned by an individual, having won 22 Oscars from 59 nominations.)
 – “The way to get started is to quit talking and begin doing.”
 – “All the adversity I’ve had in my life, all my troubles and obstacles, have strengthened me… You may not realize it when it happens, but a kick in the teeth may be the best thing in the world for you.”

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

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm. 
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 29 Nov 2018: 83 FR 61318-61320: Technical Corrections to the Vessel Repair Unit Regulations  


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

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

  – Last Amendment: 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.]

: 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

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

  – Last Amendment: 1 Nov 2018: 
Harmonized System Update 1819, containing 1,200 ABI records and 245 harmonized tariff records.

  – HTS codes for AES are available 
  – HTS codes that are not valid for AES are available 
  – Last Amendment:
4 Oct 2018: 83 FR 50003-50007: Regulatory Reform Revisions to the International Traffic in Arms Regulations.

  – The only available fully updated copy (latest edition: 4 Oct 2018) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR contains all ITAR amendments to date, plus a large Index, over 800 footnotes containing amendment histories, case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text. Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.
The BITAR is available by annual subscription from the Full Circle Compliance
. BAFTR subscribers receive a $25 discount on subscriptions to the BITAR, please
contact us
to receive your discount code.

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Alexander P. Bosch and Vincent J.A. Goossen; and Events & Jobs Editor, Alex Witt. The Ex/Im Daily Update is emailed every business day to approximately 6,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission, provided attribution is given to “The Export/Import Daily Bugle of (date)”. Any further use of contributors’ material, however, must comply with applicable copyright laws.  If you would to submit material for inclusion in the The Export/Import Daily Update (“Daily Bugle”), please find instructions here.

* CAVEAT: The contents of this newsletter cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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