18-1213 Thursday “Daily Bugle”

18-1213 Thursday “Daily Bugle”

Thursday, 13 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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[No items of interest noted today.]

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. GAO Ex/Im Reports and Testimonies of Interest
  4. State/DDTC Publishes FAQ Concerning BOX and ITAR Compliance
  5. Germany BAFA Publishes New Export Control Documents, Updates ICP Guidance
  1. ABC News: “Documents Reveal Australia’s Secret Arms Deals with Nations Fighting Yemen’s Bloody War”
  2. Industry Europe: “More Companies Digitizing Their Customs Processes”
  3. South China Morning Post: “Hong Kong ‘Not Obliged to Enforce Sanctions Imposed by U.S. Alone’, Says Senior Official on Case of Huawei’s Sabrina Meng Wanzhou”
  1. Jones Day Publishes White Paper Concerning Proposed Rulemaking Under Export Control Reform Act
  2. J. Rogin: “Washington Must Wake Up to the Abuse of Software That Kills”
  3. M. Volkov: “Fraud Detection: New Technologies and Analytics (Part II of III)”
  4. M. Schaake: “A Magnitsky Act for Europe Would Punish Human Rights Abusers and Despots”
  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 



[No items of interest noted today.]

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

* Commerce/BIS; NOTICES; Proposed Rules; Review of Controls for Certain Emerging Technologies [Concerning extension of “Review of Controls for Certain Emerging Technologies” comment period until 10 Jan 2018.
Pub. Date: 14 Dec 2018.]

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Commerce/BIS: (No new postings.)


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GAO Ex/Im Reports and Testimonies of Interest

GAO Reports and Testimonies, 13 Dec 2018.)
* Long-Range Emerging Threats Facing the United States as Identified by Federal Agencies. GAO-19-204SP: Published: Dec 13, 2018. Publicly Released: Dec 13, 2018.
Fast Facts: Threats to U.S. national security continue to evolve with technological, economic, and social changes. Federal agencies identified 26 long-term threats within 4 categories:
  (1) Adversaries’ Political and Military Advancements-e.g., China’s increasing ability to match the U.S. military’s strength.
  (2) Dual-Use Technologies-e.g., self-driving cars might be developed for private use, but military can use them too.
  (3) Weapons-advances in weapons technology,
e.g., cyberweapons.
  (4) Events and Demographic Changes-e.g., infectious disease outbreaks.

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State/DDTC Publishes FAQ Concerning BOX and ITAR Compliance

State/DDTC, 13 Dec 2018.)
DDTC has posted the below FAQ on its website:
Q: Is Box ITAR compliant or is there a Gov Cloud for it? How can smaller companies get into a Gov Cloud, meaning all data is stored on servers strictly in the US and not replicated on foreign soil?

A: Box has been assessed at a FedRAMP Moderate baseline, which ensures that US Government data stored in Box resides exclusively in their US-based Federal Data Centers.  Additionally, with certain box features engaged that DDTC is in the process of implementing, Box has been authorized for storage of DISA Impact Level 4 data (see here) which includes Controlled Unclassified Information, Privacy, Protected Health Information, and Export Control data. For companies that choose to leverage Box internally for their export control data, view the Box Zones product offering.

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Germany BAFA Publishes New Export Control Documents, Updates ICP Guidance 

(Source: Full Circle Compliance, 13 Dec 2018.)  
The German Federal Office of Economics and Export Control (BAFA) has published new export control-related documents:
  (1) Update: Export Controls and BAFA – 
Exportkontrolle und das BAFA(5th Edition / November 2018) (in German)
  (2) Update: Internal Compliance Programmes (ICP) 
(English Translation of the German version ”
Firmeninterne Exportkontrolle“)
  (3) NEW: Optimized License Applications – 
Optimierte Antragstellung (in German)
  (4) NEW: Global Export Licenses for Dual-Use Goods – 
Sammelgenehmigungen für Dual-Use-Güter (in German)
Download the documents 

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ABC News: “Documents Reveal Australia’s Secret Arms Deals with Nations Fighting Yemen’s Bloody War”

ABC News, 13 Dec 2018.) [Excerpts.] 
The Australian Government has approved the export of dozens of shipments of military items to Middle Eastern countries embroiled in the bloody Yemen war, a conflict dogged by accusations of war crimes and indiscriminate civilian killings.
Internal Defense Department documents obtained under Freedom of Information (FOI) and from parliamentary hearings reveal since the beginning of 2016, Canberra has granted at least 37 export permits for military-related items to the United Arab Emirates, and 20 to Saudi Arabia. … 
The Government has tried to keep details of the exports secret, but New South Wales lawyer and human rights activist Ms. Kellie Tranter has spent a year trying to shed light on the sales. … 
It was Ms. Tranter’s work that uncovered the scale of the export certificates to the UAE and Saudi.

Export permits are needed before companies or the Government can ship military or dual-use items overseas, though sometimes a company receives an export permit and does not ultimately export the item. … 

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7. Industry Europe: “
More Companies Digitizing Their Customs Processes”

Industry Europe, 13 Dec 2018.) [Excerpts.] 
A majority of companies are planning to digitize their customs processes or have already taken the first steps to implement this, according to a new study, “Clear the track for 
Digital Customs Management“, by software company AEB in cooperation with the DHBW University in Stuttgart, Germany. 

Based on a survey that took place this summer, more than 35% of the 435 respondents report that their company had already implemented at least one project to digitize customs operations. Nearly the same number already have such a project in the planning or implementation phase. Read the complete study online. … 

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South China Morning Post: “Hong Kong ‘Not Obliged to Enforce Sanctions Imposed by U.S. Alone’, Says Senior Official on Case of Huawei’s Sabrina Meng Wanzhou”

South China Morning Post, 12 Dec 2018.) [Excerpts.] 
Hong Kong is not obliged to enforce sanctions imposed by the United States, including in the case of Huawei executive Sabrina Meng Wanzhou’s alleged dealings with Iran through a local company, a senior official told legislators on Wednesday.
Vivian Sum Fong-kwang, deputy secretary of the Commerce and Economic Development Bureau, said the city government would only act on sanctions ordered by the UN Security Council, and would not enforce unilateral sanctions by individual jurisdictions, including the US or the European Union.
She was responding to lawmakers’ questions on whether Hong Kong needed to act on Meng’s alleged breach of the sanctions. The Huawei chief financial officer is accused of using a Hong Kong shell company to trade with Iran. … 

  “The Hong Kong government has no obligation or legal authority to enforce these individual sanctions orders.” … 

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Jones Day Publishes White Paper Concerning Proposed Rulemaking Under Export Control Reform Act

Jones Day, Dec 2018.) 
Signed into law in August 2018, the Export Control Reform Act (“ECRA”) significantly alters U.S. export policy by placing new emphasis and potential controls on critical technologies essential to the nation’s security. As part of an effort to identify those technologies, the U.S. Department of Commerce has published an advance notice of proposed rulemaking, initiating a 30-day public comment process.

This White Paper explains some of the ECRA’s key components and offers guidance to companies involved with the affected technologies and industries.

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J. Rogin: “Washington Must Wake Up to the Abuse of Software That Kills”

The Washington Post, 12 Dec 2018.) [Excerpts.]
* Author: Josh Rogin, Columnist covering foreign policy and national security.
Dictators are using spyware to persecute dissidents and journalists at an alarming rate, while the foreign firms that sell these tools assure the public that everything is just fine. It’s time Washington policymakers and lawmakers rein in the proliferation and abuse of software that ends up killing innocent people. This isn’t just a human rights issue. It’s also a matter of U.S. national security. 
Israel-based NSO Group is only one in a growing group of companies that has put powerful spyware tools previously available only to a few governments out on the open market. … 
The company’s operations are based in Israel, although technically NSO is a subsidiary of Luxembourg-based Q Cyber Technologies, of which American investment firm Francisco Partners is the majority stakeholder.
That’s where the American firms come in. Francisco hired a team of firms to advise them on export controls and ethics, including Beacon Global Strategies. … 

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M. Volkov: “Fraud Detection: New Technologies and Analytics (Part II of III)”

Volkov Law Group Blog, 11 Dec 2018. Reprinted by permission.) 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992. 
The battle against fraud is evolving and technology is providing new and important tools to detect and prevent fraud. Companies are using a variety of techniques and include: continuous monitoring; email monitoring; anomaly detection; pattern recognition and artificial intelligence.
Data mining and statistical analysis can be helpful in detecting fraud.  By using sophisticated data mining tools, companies can search millions of transactions to spot patterns and detect fraudulent transactions. These tools include decision trees, machine learning, cluster analysis, association rules, and can generate predictive models to predict fraud.
Before discussing sophisticated techniques for fraud detection, let’s start with basic anti-fraud controls.  These include segregation of duties for authorization, custody of assets and recording or reporting transactions.  In some cases, companies should ensure that their basic controls are in place and re-engineer business procedures to minimize such risks.
Major frauds usually involve senior management, especially those who have the authority to override controls.  Employee fraud schemes often involve theft by exploiting control weaknesses, such as stealing cash before it has been recorded fictitious expense reimbursement claims and/or stealing assets from the organization (e.g. computers, ipads, phones).  On average, fraud schemes last 18 months before being detected.
Fraud awareness training and communications are important aspects of a fraud prevention program. Every employee should be made aware of the risks of fraud and corporate policies prohibiting such activities. Employees who may be considering engaging in theft can be deterred from such conduct when they learn about robust fraud detection and enforcement policies.  Other employees who are committed to honest conduct can be essential allies in reporting suspected fraud to their supervisors.  Employees, customers, vendors and related persons can become important sources of tips and information leading to exposure of fraud schemes.
Data analysis is a straight-forward strategy for detecting fraud.  The objective is to analyze the entire set of data, e.g. transactional data, master vendor data and application control settings) to identify indicators of fraud.  Data analysis techniques can vary from statistical analysis for transactions outside the norm, through analytic tests to identify specific circumstances indicative of fraud.  Statistical analysis identifies transactions for closer examination.  Another type of statistical test is to look for the presence of certain matches – e.g. employees and suppliers identities, addresses, bank accounts.
Fraudsters are adept at taking advantage of weaknesses or gaps in a company’s internal controls.  A perfect example of such a weakness is when business systems do not share or cross-check information.  Specific tests for matches of database fields can be an effective way to uncover potential anomalies.  Some types of analytic procedures are fairly simple – looking for duplicate payments of an invoice.   Data analytic tests, however, have to be carefully designed to avoid an excessive number of exceptions that may overwhelm fraud detectives.
Data analysis software is available for audit, fraud detection and control testing.  They usually include pre-established analytic tests, such as classification stratification, duplicate testing, aging, match and compare.  In implementing a software solution, a company has to ensure that the software logs all procedures performed and audit trails to support fraud investigations.
Data analysis can address control gaps that often exist in ERP systems.  While most ERP systems have certain fraud prevention and detection capabilities, these internal tests are insufficient.  In many cases, an EARP system turns off controls when running certain operations to run more efficiently.  As a result, it is important to conduct independent data analysis to examine transaction details and a broad range of data.  In doing so, an independent examination can include combination and comparison of data from different systems within the company.
After establishing a roster of effective data tests, companies should employ such testing on a continuous or regular basis depending on the nature of the transactions (continuous for daily payments, and periodic for regularly-scheduled payments). Continuous monitoring detection should generate a dashboard and reports.  Most companies maintain fraud detection in business processes (e.g. purchase to pay, payroll, travel and entertainment) or areas that are high-risk.

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M. Schaake: “A Magnitsky Act for Europe Would Punish Human Rights Abusers and Despots”

Marietje Schaake, 7 Dec 2018.) 
* Author: Marietje Schaake, Member of the European Parliament, 
marietje.schaake@europarl.europa.eu. Ms. Schaake is coordinator on the EU International Trade Committee.
Sometimes a name means everything. In this case the name Sergei Magnitsky has been globally synonymous with how to fight human rights abuse in the 21st century. His sacrifice resonated with victims of human rights abuse in every corner of the globe. Legislative acts have been passed bearing his name creating serious consequences for human rights abusers around the globe.
Sergei Magnitsky was a Russian lawyer who sacrificed his life at the age of 37 standing up to the corruption of the Putin regime. The way in which the Russian government tried to cover up his murder and exonerate the people involved, became a symbol of impunity and kleptocracy worldwide. That is why Magnitsky’s bold sacrifice crossed national borders and spoke to people everywhere.
The Magnitsky Acts, which impose visa sanctions and asset freezes on human rights violators, have become emblematic of fighting impunity and kleptrocracy around the world. In the 21st century, many human rights abuses are committed for financial gain. Targeting those abusers’ money abroad and their travel is one of the most effective ways of creating consequences. There can be no impunity for generals in Myanmar who haunt down Rohinyas, for arms dealers who breach the weapons embargo against South Sudan, the rapists in the Central African Republic or the killers of the Saudi journalist Khashoggi.
That is why the idea of a Magnitsky Act started with a Russian atrocity but is now global in its scope. Human rights violators in Saudi Arabia, Nicaragua, South Sudan, Burma, and many other countries are already being targeted with Magnitsky sanctions legislation in six countries: the US, Canada, UK, Estonia, Latvia and Lithuania.
We now need to take the next bold step. We need to establish a EU-wide Magnitsky Act. Over the summer, the Dutch government formulated a concrete proposal, which is now in consultation with all EU member states. This draft exactly what is needed, the ability to apply global sanctions — with one glaring omission. The Dutch government has not yet named it a Magnitsky Act. They argue that Magnitsky’s name would somehow make it harder to push for approval of the legislation through the EU because of some EU member states being sympathetic to Russia. We believe that our member states are stronger than this, that they will not veto a human rights bill simply because of its name but will adopt it because of their support to human rights worldwide. Whatever the negotiations will lead to, we will always call it the Magnitsky Act.
Today (7 Dec) is the day European ministers of Foreign Affairs meet to discuss the Dutch proposal. That is why parliamentarians and lawmakers from EU member states urge our governments to strengthen the EU’s position as a beacon for human rights and international law worldwide. We urge our governments to vote for a European Magnitsky act that is global in scope. We urge them to honor Magnitsky in name and fight impunity worldwide. We cannot think of any better way to celebrate this International Day of Human Rights, the 70th anniversary of the Universal Declaration on Human Rights. … 

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Heinrich Heine (Christian Johann Heinrich Heine; 13 Dec 1797 – 17 Feb 1856; was a German-Jewish poet, journalist, essayist, and literary critic. He is best known outside of Germany for his early lyric poetry, which was set to music in the form of lieder (art songs) by composers such as Robert Schumann and Franz Schubert.)
 – “Communism possesses a language which every people can understand — its elements are hunger, envy, and death.”

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

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


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

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

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

  – Last Amendment: 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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