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19-0108 Tuesday “Daily Bugle'”

19-0108 Tuesday “Daily Bugle”

Tuesday, 8 January 2019

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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. DoD/DSS Announces DISS Provisioning Now Open to All Facilities
  4. DoD/DSS Posts Reminder on Interim Backlog Mitigation Measures for Entities Cleared by DoD under the National Industrial Security Program Due to an Incorrect Email in Original Posting
  5. State/DDTC: (No new postings.)
  6. Treasury/OFAC Posts Venezuala-Related General License 6
  7. EU Amends Restrictive Measures Concerning Iraq
  1. Reuters: “U.S. Sanctions Venezuelan Insiders for Currency Scheme” 
  1. Contract Centre: “Brexit – Practical Contracting Considerations for Suppliers”
  2. J. Pandya: “The Dual-Use Dilemma of Artificial Intelligence”
  3. M. Volkov: “Sanctions Enforcement and Compliance Year in Review”
  1. ECS Presents “Boot Camp: Achieving ITAR/EAR Compliance” in Orlando on 11-12 Feb 2019
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (18 Dec 2018), DOC/EAR (20 Dec 2018), DOC/FTR (24 Apr 2018), DOD/NISPOM (18 May 2016), DOE/AFAEC (23 Feb 2015), DOE/EINEM (20 Nov 2018), DOJ/ATF (26 Dec 2018), DOS/ITAR (4 Oct 2018), DOT/FACR/OFAC (15 Nov 2018), HTSUS (19 Dec 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)

 

[No items of interest noted today.]  

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

(Source: 
Commerce/BIS)

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(Source:
DoD/DSS, 7 Jan 2019.)
 
The Vetting Risk Operations Center (VROC) is now provisioning users for any facilities that have not yet been provisioned. Please carefully read and follow the
Defense Information System for Security (DISS) JVS Provisioning Instructions. Once you have obtained access to the system, please refer to
DISS Tips and Tricks.

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(Source:
DoD/DSS, 7 Jan 2019.)
 
In early June 2018, the Director of National Intelligence, in his capacity as the Security Executive Agent, and the Director of the Office of Personnel Management, in his capacity as the Suitability & Credentialing Executive Agent (Executive Agents), jointly issued a memorandum directing the implementation of interim measures intended to mitigate the existing backlog of personnel security investigations at the National Background Investigations Bureau (NBIB). These measures include the deferment of reinvestigations when screening results are favorable and mitigation activities are in place, as directed.
 
In accordance with the guidance and direction received from the Executive Agents, Defense Security Service (DSS) will adopt procedures to defer the submission of Tier 3 Reinvestigations (T3Rs) and Tier 5 Reinvestigations (T5Rs) for entities cleared under the National Industrial Security Program. Facility Security Officers should continue to submit completed Standard Form 86 and the reinvestigation request, six years from the date of last investigation for the T5Rs and 10 years from the date of the last reinvestigation for the T3Rs. New reinvestigation requests will be screened by DSS using a risk management approach that permits deferment of reinvestigations according to policy. If the determination is made to defer reinvestigations, individuals will be immediately enrolled into the DoD Continuous Evaluation (CE)/Continuous Vetting (CV) capabilities, as required.
 
The Executive Agents have directed all Federal departments and agencies to reciprocally accept the prior favorable adjudication for deferred reinvestigations that are out of scope (overdue). Existing eligibility remains valid until the individual is removed from CE, no longer has any DoD affiliation, or has their eligibility revoked or suspended.
 
The Office of the Under Secretary of Defense for Intelligence signed a memorandum on December 7, 2016, reminding DoD Components that personnel security clearances do not expire. Individuals with current eligibility in the Joint Personnel Adjudication System (JPAS), or its successor, should not be denied access based on an out-of-scope investigation. That memorandum is provided here for ease of reference. If you encounter any challenges with this process, please email
dss.ncr.dss-isfo.mbx.psmo-i@mail.mil for assistance.
 
These procedures will remain in effect until further notice.  
More information is available in the linked frequently asked questions.

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OGS_a66. Treasury/OFAC Posts Venezuala-Related General License 6
(Source: Treasury/OFAC, 8 Jan 2018.) [Excerpts.]
 
Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing Venezuela-related
General License 6.  General License 6 authorizes U.S. persons to engage in specified transactions related to winding down or maintaining business with Globovision Tele C.A. and Globovision Tele CA, Corp.and their subsidiaries until January 8, 2020. OFAC is
issuing a new FAQ about General License 6.
 
In addition, OFAC has updated its SDN list. …

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OGS_a77. EU Amends Restrictive Measures Concerning Iraq
 
Regulations:
* Commission Implementing Regulation (EU) 2019/23 of 7 January 2019 amending Council Regulation (EC) No 1210/2003 concerning certain specific restrictions on economic and financial relations with Iraq

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NWSNEWS

NWS_a18. Reuters: “U.S. Sanctions Venezuelan Insiders for Currency Scheme”

(Source: Reuters, 8 Jan 2019.) [Excerpts.]
 
The United States imposed sanctions that target a Venezuelan currency exchange network scheme that siphoned off billions of dollars to corrupt insiders of the Venezuelan government, the U.S. Treasury Department said on Tuesday. …
 
The U.S. Treasury said the individuals used favorable foreign exchange transactions through brokerage firms controlled by Gorrin and were among the very few deals that were approved by Venezuela’s treasury. The individuals concealed their profits in U.S. and European bank accounts and investments, it said. …

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COMMCOMMENTARY

(Source:
The Contract Centre GmbH, 6 Jan 2019.)
 
At the time of writing, it would be a brave soul who would now predict the ultimate outcome emanating from the Brexit referendum decision (e.g. hard Brexit, soft Brexit or no Brexit). If Brexit in fact occurs, then after any transition period (currently agreed until 21 December 2020) it is likely to result in import or export customs duties, changes in VAT, significant exchange rate fluctuations, new technical, commercial or financial standards, rules and regulations and additional administrative burdens. Therefore, parties who are considering entering into commercial contracts involving a UK party (whether as Supplier or Customer) should be anticipating potential Brexit scenarios, because the consequences could include extra costs and delay in supplies.
 
1. Risks for Supplier or Customer?
 
Some Customers may seek to force the Supplier to take all Brexit-related risks.However, a prudent Supplier cannot evaluate the exact impact and would have to evaluate the worst case, leading to higher fixed prices and longer delivery times.Therefore, a Customer may also decide that it is better for the Customer to absorb the Brexit risks, so that the Supplier’s offer is not unnecessarily inflated.
 
2. Choice of INCOTERM.
 
There is a trend towards multiple jurisdiction frame agreements in some industries. Be careful if considering the adoption of a single applicable Incoterm. For example, INCOTERMS 2010 DDP would mean that the Supplier is responsible for customs clearance in the Customer’s country, including payment of customs duties (whatever the level) and obtaining the necessary authorizations from the authorities (which might well be subject to delays post-Brexit). A prudent Supplier should therefore avoid committing to DDP for UK-related contracts, at least until any applicable customs duties are known and the new customs regime is fully staffed and operational.
 
3. Compliance with Applicable Laws.
 
It is common for Suppliers to agree to comply with “all applicable laws and regulations” which is important for a Customer, to be sure that the Supplier’s products can be lawfully sold and used. Often it is not specified whether these are the laws and regulations applicable at the date of signature or all future laws and regulations.
 
In the context of Brexit, a Supplier may find itself in the position of being expected to comply with new laws or regulations, but not having a mechanism in the contract permitting compensation for such changes. It would not be prudent to rely on a “force majeure” clause, because this would normally only cover “unforeseeable” events and would only excuse the performance but would not cover the Supplier’s extra costs.
 
We do not think that it is necessary to develop a Brexit-specific clause for most contracts. However, we do believe that the parties should consider including a generic “change in law” clause. This clause should clearly state that if the Supplier suffers a delay or incurs extra cost due to a change in laws or regulations (whether by repeal, modification of existing ones or the introduction of new ones) the Supplier would be entitled to compensation for such extra cost and/or an appropriate extension of time for performance.
 
4. Existing Contracts.
 
A Supplier should audit existing contracts to avoid “sleep-walking” into problems later. If issues are identified, the Supplier can take the opportunity to terminate or re-negotiate such contracts where possible.

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(Source:
Forbes, 7 Jan 2018.) [Excerpts.]
 
* Author: Jayshree Pandya, CEO, Risk Group LLC, info@riskgroupllc.com.
 
Introduction
 
The rapid progress and development in artificial intelligence (AI) is prompting desperate speculation about its dual use applications and security risks. From autonomous weapons systems (AWS) to facial recognition technology to decision-making algorithms, each emerging application of artificial intelligence brings with it both good and bad. It is this dual nature of artificial intelligence technology that is bringing enormous security risks to not only individuals and entities across nations: its government, industries, organizations and academia (NGIOA) but also the future of humanity.
 
The reality is that any new AI innovation might be used for both beneficial and harmful purposes: any single algorithm that may provide important economic applications might also lead to the production of unprecedented weapons of mass destruction on a scale that is difficult to fathom. As a result, the concerns about artificial intelligence-based automation are growing.
 
With the advances in machine learning, computing power, borderless investment and data availability, AI has potentially universal applications, a fact that exponentially complicates the security risks involved. Moreover, since integration of AI is invisible to the human eye, the ability to cognitize anything and everything fundamentally changes the security landscape. AI’s automation and intelligence bring promise as well as the potential for destruction. …

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(Source:
Volkov Law Group Blog, 7 Jan 2018. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
The Department of Treasury’s Office of Foreign Asset Control (OFAC) has steadily expanded its influence in the enforcement landscape. Global companies now face a complex regime of sanctions that require careful navigation.
 
As the U.S. government expands its reliance on sanctions to influence foreign actors and advance foreign policy interests, global companies have to design and implement robust trade compliance programs. In recognition of this fact, OFAC is planning to issue guidance on compliance programs sometime early in 2019.
 
While OFAC did not have a record-setting year in terms of enforcement actions in comparison to prior years, OFAC has been extremely busy administering the Ukraine-Russia sanctions program and re-imposing the Iran sanctions program. In its boldest move yet in the sanction’s arena, OFAC adopted broad sanctions against Russian Oligarchs, which ultimately led to divestiture of Oleg Daripaska’s interests in several related companies.
 
For 2018, OFAC had only 7 separate enforcement actions, totaling 71.5 million in total civil penalties. Interestingly, OFAC did not announce its first enforcement action until June 2018.
 
OFAC continued to punish global banks for violating OFAC sanctions. This year, Société Genéralé and JP Morgan Chase, reached settlements of $55 and $5 million, respectively, for violating OFAC sanctions.
 
But the most important OFAC sanctions enforcement action, by far, was the resolution of the Epsilon case (
here).  In that case, OFAC was victorious in its appeals position regarding the applicable standard for enforcing third-party liability for violation of sanctions regulations.  As affirmed by the US Court of Appeals for the District of Columbia Circuit, a company violates a sanctions regime if it ships products to a third-party when the company
knows or should have known that the third-party intended to ship the product to a prohibited entity (SDN or country-specific prohibition).  The key point in this decision is the company’s state of mind at the time of the shipment – the government need not prove that the product ultimately was shipped to a prohibited person or entity, only that the company
knew or should have known the third party intended to ship the product to a prohibited entity (SDN or country-specific prohibition).
 
Companies have to focus on their third-party risks, not just in the FCPA context, but in the sanction’s enforcement arena.  This requires companies to commit to more than just “screening” of distributors and companies but proactive compliance strategies that include robust contractual protections, training, monitoring of third parties, and auditing of third parties to ensure compliance with sanctions restrictions.
 
Unfortunately, too many companies believe that screening third parties and customers through open source intelligence is all that is required. Sanctions compliance requires careful design and implementation of the required elements of a compliance program. OFAC’s upcoming guidance will reinforce the need for a robust compliance program, not just a stand-alone system for screening third parties and customers.
 
OFAC intends to hold companies accountable, whether in a voluntary disclosure situation or an OFAC-initiated enforcement action. In doing so, OFAC professionals will review company compliance programs with a keen eye toward each program element, including: tone-at-the-top; policies and procedures; internal investigations and internal complaints; third-party and customer screening; training; auditing and assessment.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a112. ECS Presents “Boot Camp: Achieving ITAR/EAR Compliance” in Orlando on 11-12 Feb 2019

 
* What: Boot Camp: Achieving ITAR/EAR Compliance; Orlando, FL
* When: February 11-12, 2019
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer, Mal Zerden
* Register here or by calling 866-238-4018 or email spalmer@exportcompliancesolutions.com

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ENEDITOR’S NOTES

 
*
 Baltasar Gracian (Baltasar Gracián y Morales, 8 Jan 1601 – 6 Dec 1658; was a Spanish Jesuit and baroque prose writer and philosopher. His novel, Criticón, a lengthy allegory with philosophical overtones, reveals a philosophy, pessimism, with which one of its greatest readers and admirers, the 19th century German philosopher Arthur Schopenhauer, identified.)
  – “Don’t show off every day, or you’ll stop surprising people. There must always be some novelty left over. The person who displays a little more of it each day keeps up expectations, and no one ever discovers the limits of his talent.”  
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EN_a314
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

 
* DHS CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199.  Implemented by Dep’t of Homeland Security, U.S. Customs & Border Protection.
  – Last Amendment: 18 Dec 2018: 83 FR 64942-65067: Modernized Drawback  
 

DOC EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774. Implemented by Dep’t of Commerce, Bureau of Industry & Security.
  – Last Amendment: 20 Dec 2018: 83 FR 65292-65294: Control of Military Electronic Equipment and Other Items the President Determines No Longer Warrant Control Under the United States Munitions List (USML); Correction [Concerning ECCN 7A005 and ECCN 7A105.]
 
* DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.  Implemented by Dep’t of Commerce, U.S. Census Bureau.
  – 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 here.
  – The latest edition (1 Jan 2019) 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 website.  BITAR 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.   

 

DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M. Implemented by Dep’t of Defense.
  – 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.)
 
 
DOE ASSISTANCE TO FOREIGN ATOMIC ENERGY ACTIVITIES: 10 CFR Part 810; Implemented by Dep’t of Energy, National Nuclear Security Administration, under Atomic Energy Act of 1954.
  – Last Amendment: 23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. This rule also identifies destinations with respect to which most assistance would be generally authorized and destinations that would require a specific authorization by the Secretary of Energy.
 
DOE EXPORT AND IMPORT OF NUCLEAR EQUIPMENT AND MATERIAL; 10 CFR Part 110; Implemented by Dep’t of Energy, U.S. Nuclear Regulatory Commission, under Atomic Energy Act of 1954.
  – Last Amendment: 20 Nov 2018, 10 CFR 110.6, Re-transfers.
 

* DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.  Implemented by Dep’t of Justice, Bureau of Alcohol, Tobacco, Firearms & Explosives.
  – 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.  

 

DOS INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130. Implemented by Dep’t of State, Directorate of Defense Trade Controls.
  – 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: 1 Jan 2019) 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.
 
* DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders. 

Implemented by Dep’t of Treasury, Office of Foreign Assets Control.

  – Last Amendment: 15 Nov 2018: 83 FR 57308-57318: Democratic Republic of the Congo Sanctions Regulations
  
* USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), 1 Jan 2018: 19 USC 1202 Annex. Implemented by U.S. International Trade Commission. (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 19 Dec 2018: Harmonized System Update (HSU) 1820, containing 19,061 ABI records and 3,393 harmonized tariff records.
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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EN_a0315
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 6,500 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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