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19-0129 Tuesday “Daily Bugle'”

19-0129 Tuesday “Daily Bugle”

Tuesday, 29 January 2019

[No items of interest noted today.]  

  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS Denies Export Privileges to 8 Individuals
  3. Commerce/BIS Fines Ithaca-based Company $80,000 for Engaging in Prohibited Conduct
  4. DHS/CBP Posts Reminder Concerning Monthly Call and Resources for TFTEA Drawback
  5. DoD/DSCA Policy Memos of Interest
  6. Justice: “Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Sanctions and Fraud Violations”
  7. State/DDTC Returns to Full Operational Status
  8. Treasury/OFAC Issues a New Venezuela-related Executive Order and General Licenses
  9. White House Releases Executive Order Concerning Venezuela
  10. EU Amends Restrictive Measures Concerning Tunisia
  1. Bloomberg: “U.S. Sanctions on PDVSA Look Like a De Facto Oil Embargo”
  2. Expeditors News: “U.S. Government Reopens and is Funded Through February”
  3. Financial Times: “How China Acquired Mastery of Vital Microchip Technology”
  4. Reuters: “Deutsche Telekom Reviews Procurement Plans Amid Huawei Concerns”
  5. Reuters: “Huawei Lawyer Says CFO Meng a ‘Hostage’ After U.S. Presses Charges”
  6. ST&R Trade Report: “Import and Export Controls Continued on Synthetic Cannabinoid”
  1. M. Volkov: “Touting Corporate Culture to Excuse a Commitment to Compliance”
  2. T. Murphy: “Review of 2018 Import Data”
  1. ECS Presents “Boot Camp: Achieving ITAR/EAR Compliance” on 11-12 Feb in Orlando, FL
  1. Memorial Service for Jill Garrison, Former SIA Business Manager, will be held Saturday, 2 Feb
  2. Bartlett’s Unfamiliar Quotations 
  3. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (14 Jan 2019), 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) 
  4. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1
  [No items of interest noted today.]
* * * * * * * * * * * * * * * * * * * *

OGSOTHER GOVERNMENT SOURCES

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

  

* President; EXECUTIVE ORDERS; Venezuela; National Emergency, Additional Steps To Address (EO 13857) [Pub. Date: 30 Jan 2019. Published in today’s Daily Bugle, item #9.]

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OGS_a2
2. 
Commerce/BIS Denies Export Privileges to 8 Persons

(
Source: 
Commerce/BIS
, 29 Jan 2019.) 
 
* Charges: Fishenko was convicted of violating the Internal Emergency Economic Powers Act (50 U.S.C. 1701, et seq. (2012)) and section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)) (“AECA”). Specifically, Fishenko was convicted of knowingly and intentionally exporting from the U.S. to Russia microelectronics without the required U.S. Department of Commerce licenses. Fishenko was also convicted of knowingly, intentionally, and willfully exporting from the U.S. to Russia power amplifiers designated as defense articles on the U.S. Munitions List, namely five TriQuint parts TGA2517, without the required U.S. Department of State licenses, in violation of the AECA. Fishenko was sentenced 120 months in prison, three years of supervised release, and a $1,900 assessment, and forfeited over $500,000 in criminal proceeds in the United States. Fishenko was also placed on the U.S. Department of State Debarred List.
* Debarred: 10 years from the date of Fishenko’s conviction.
* Date of Order: 31 Dec 2018.
 
* Respondent (2): 
Asim Fareed of Boca Raton, FL
* Charges: 
  – 15 C.F.R. Part 764.2(d) – Conspiracy.  Specifically, Fareed conspired to export a Humboldt Bending Beam Rheometer and a Humboldt Pressure Aging Vessel subject to the EAR from the United States to Iran, via the United Arab Emirates, without the required U.S. Government authorization.
* Penalty:
  – Fareed shall provide two annual reports of all export and reexport transactions involving items subject to the EAR in which he participates in any way. 
* Debarred: 3 years from the date of the order.
* Date of Order: 19 Dec 2018.
 
* Charges: 
  – Vazquez was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, knowingly and willfully aided and abetted the export, and attempt to export, two 7.62x39mm rifles and a 5.56mm rifle, items designated as defense articles on the U.S. Munitions List, from the U.S. to Mexico, without the required U.S. Department of State licenses. Vazquez was sentenced 38 months in prison, three years of supervised release, and a $100 assessment.
* Debarred: 10 years from the date of the order.
* Date of Order: 31 Dec 2018.
 
* Respondent (4): 
Joel Prado, Jr. of Beaumont, TX
* Charges: Prado was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, conspired to knowingly and willfully export and cause to export from the U.S. to Mexico .223 caliber rifles, items designated as defense articles on the U.S. Munitions List, without the required U.S. Department of State licenses. Prado was sentenced to 96 months in prison, three years of supervised release, and an assessment of $200.
* Debarred: 10 years from the date of respondent’s conviction.
* Date of Order: 31 Dec 2018.
 
* Charges: Campos-Flores was convicted of violating section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, the respondent knowingly exported and attempted to export from the U.S. to Mexico firearms designated on the U.S. Munitions List, without the required U.S. Department of State licenses. Campos-Flores was sentenced to 36 months in prison, three years of supervised release, and a $100 assessment.
* Debarred: 7 years from the date of Campos-Flores’ conviction.
* Date of Order: 31 Dec 2018.
 
* Charges: 
  – Abdullaev was convicted of violating the Internal Emergency Economic Powers Act (50 U.S.C. 1701, et seq. (2012)). Specifically, Abdullaev was convicted of knowingly and intentionally exporting from the U.S. to Russia microelectronics without the required U.S. Department of Commerce licenses. Abdullaev was sentenced to 36 months in prison, two years of supervised release, and a $400 assessment. 
* Debarred: 5 years from the date of the order.
* Date of Order: 31 Dec 2018. 
 
* Respondent (7): 
Veronica Trujillo of Phoenix, AZ
* Charges: 
  – Trujillo violated section 38 of the Arms Export Control Act (22 U.S.C. Part 2778 (2012)). Specifically, Trujillo attempted to willfully and knowingly export and cause to be exported from the U.S. to Mexico 2000 rounds of Wolf 7.62x39mm ammunition and 1,000 rounds of Wolf 9MM luger ammunition, items designated on the U.S. Munitions List, without the required U.S. State Department licenses. Trujillo was sentenced 46 months in prison, with credit for time served, three years of supervised release, and a $100 assessment. Trujillo was also placed on the U.S. Department of State Debarred List.
* Debarred: 7 years from the date of Trujillo’s conviction.
* Date of Order: 31 Dec 2018.
 
* Charges: 
  – Charge 1: 15 C.F.R. 764.2(b) – Causing, Aiding, or Abetting a Violation.  Specifically, respondent caused, aided and/or abetted one or more violations of the EAR in connection with the export of handcuffs and leg cuffs, subject to the EAR, to Nigeria. Respondent filed no Electronic Export Information (“EEI”) for the export of the items, nor was a license sought or obtained for export.
* Penalty: Civil penalty in the amount of $10,000.
* Debarred: 3 years from the date of this Order.
* Date of Order: 17 Jan 2019.

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OGS_a33. 
Commerce/BIS Fines Ithaca-based Company $80,000 for Engaging in Prohibited Conduct

(Source: 
Commerce/BIS, 29 Jan 2019.)
 
* Charges: BIS has notified the respondent of its intention to initiate an administrative proceeding pursuant to EAR Part 766.3. Specifically, BIS believes that Multiwire committed the following two violations:
  – Charge 1-2: 15 C.F.R. Part 764.2(a): Engaging in Prohibited Conduct.  Specifically, Multiwire exported Real-Time Back Reflection Laue Camera Detectors and Accessories, designated EAR99, to the University of Electronic Science and Technology China in Chengdu, China, without the required BIS licenses. The Chinese entity was at all relevant times listed on the EAR’s Entity List. Multiwire did not have an export control compliance program.
* Penalty: Civil penalty of $80,000.
* Date of Order: 16 Jan 2019.

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OGS_a44. 
DHS/CBP Posts Reminder Concerning Monthly Call and Resources for TFTEA Drawback

(Source: 
CSMS# 19-000021, 29 Jan 2019.)

Filing of Trade Facilitation and Trade Enforcement Act (TFTEA) drawback claims has been available in ACE since February 24, 2018, and will become mandatory on February 24, 2019, at which time all drawback claims must be filed electronically in ACE and pursuant to TFTEA legislation.

Resources are available to users who have begun filing or who wish to start filing TFTEA drawback claims. These resources include:

-Drawback Monthly Trade Call (Next call is January 30, 2019)  

   1:00 PM ET – 2:00 PM ET

   Call-In Number: 1-877-873-8017

   Access Code: 6215791

-The Modernized Drawback Final Rule: 
here.

-ACE Drawback CATAIR Guidelines: 
here.

-Drawback Error Dictionary: 
here.

-Drawback Frequently Asked Questions: 
here.

More information on the monthly call and other TFTEA Drawback support resources are available 
here. For all other drawback related issues, please contact 
OTDrawback@cbp.dhs.gov.

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

(Source: 
DoD/DSCA, 29 Jan 2019.)
  
The CTEF authority was first enacted by the FY 2015 National Defense Authorization Act (NDAA). Section 1231 of the FY 2019 NDAA extends the CTEF program authority until December 31, 2020, outlines the limitations on the use of funds and mandates an initial and quarterly progress reports to Congress. Program Code “QH” is assigned to track Fiscal Year (FY) 2019/2020 funds appropriated for the Counter-ISIL Train and Equip Fund (CTEF) program in Syria and “QI” is assigned to track FY 2019/2020 funds appropriated for the CTEF program for Iraq.

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OGS_a66.
Justice: “Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Sanctions and Fraud Violations
(Source: 
Justice, 28 Jan 2019.) [Excerpts.] 
 
  Chinese Telecommunications Conglomerate Huawei and Huawei CFO Wanzhou Meng Charged with Financial Fraud
  Huawei Device USA Inc. and Huawei’s Iranian Subsidiary Skycom Also Named Defendants 
  Other Charges Include Money Laundering, Conspiracy to Defraud the United States, Obstruction of Justice and Sanctions Violations
 
A 13-count indictment was unsealed earlier today in federal court in Brooklyn, New York, charging four defendants, [FN/1] all of whom are affiliated with Huawei
 Technologies Co. Ltd. (Huawei), the world’s largest telecommunications equipment manufacturer, with headquarters in the People’s Republic of China (PRC) and operations around the world.  The indicted defendants include Huawei and two Huawei subsidiaries – Huawei Device USA Inc. (Huawei USA) and Skycom Tech Co. Ltd. (Skycom) – as well as Huawei’s Chief Financial Officer (CFO) Wanzhou Meng (Meng).
 
The defendants Huawei and Skycom are charged with bank fraud and conspiracy to commit bank fraud, wire fraud and conspiracy to commit wire fraud, conspiracy to defraud the United States, conspiracy to violate and substantive violations of the International Emergency Economic Powers Act (IEEPA), and conspiracy to commit money laundering.  Huawei and Huawei USA are charged with conspiracy to obstruct justice related to the Grand Jury investigation in the Eastern District of New York.  Meng is charged with bank fraud, wire fraud, and conspiracy to commit bank and wire fraud. … 
 
  “Today we are announcing that we are bringing criminal charges against telecommunications giant Huawei and its associates for nearly two dozen alleged crimes,” stated Acting Attorney General Whitaker.  “As I told Chinese officials in August, China must hold its citizens and Chinese companies accountable for complying with the law.  I’d like to thank the many dedicated criminal investigators from several different federal agencies who contributed to this investigation and the Department of Justice attorneys who are moving the prosecution efforts forward. They are helping us uphold the rule of law with integrity.”
 
  “As charged in the indictment, Huawei and its subsidiaries, with the direct and personal involvement of their executives, engaged in serious fraudulent conduct, including conspiracy, bank fraud, wire fraud, sanctions violations, money laundering and the orchestrated obstruction of justice,” stated United States Attorney Donoghue.  “For over a decade, Huawei employed a strategy of lies and deceit to conduct and grow its business.  This Office will continue to hold accountable companies and their executives, whether here or abroad, that commit fraud against U.S. financial institutions and their international counterparts and violate U.S. laws designed to maintain our national security.”  Mr. Donoghue thanked the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, U.S. Department of Commerce Office of Export Enforcement and the Defense Criminal Investigative Service agents who are investigating this case for their tireless work and dedication.
 
  “These charges lay bare Huawei’s blatant disregard for the laws of our country and standard global business practices,” stated FBI Director Wray.  “Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat. Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice, or jeopardize national and economic well-being.”
 
  “As charged in the indictment, Huawei and its Chief Financial Officer broke U.S. law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States,” stated U.S. Department of Homeland Security Secretary Nielsen.  “They willfully conducted millions of dollars in transactions that were in direct violation of the Iranian Transactions and Sanctions Regulations, and such behavior will not be tolerated.  The Department of Homeland Security is focused on preventing nefarious actors from accessing or manipulating our financial system, and we will ensure that legitimate economic activity is not exploited by our adversaries.  I would like to thank ICE Homeland Security Investigations for their exceptional work on this case.”
 
  “For years, Chinese firms have broken our export laws and undermined sanctions, often using the U.S. financial systems to facilitate their illegal activities,” stated U.S. Department of Commerce Secretary Ross.  “This will end.  The Trump Administration continues to be tougher on those who violate our export control laws than any administration in history. I commend the Department’s Office of Export Enforcement, and our partners in the FBI, Justice Department, Department of Defense, and Department of Homeland Security for their excellent work on this case.”
 
Overview of the Indictment
 
The charges in this case relate to a long-running scheme by Huawei, its CFO, and other employees to deceive numerous global financial institutions and the United States government regarding Huawei’s business activities in Iran.  Beginning in 2007, Huawei employees misrepresented Huawei’s relationship to an unofficial subsidiary in Iran called Skycom, and as a result falsely claimed that Huawei had only limited operations in Iran and that Huawei did not violate U.S. or other laws or regulations related to Iran.  Most significantly, after news publications in late 2012 and 2013 disclosed that Huawei operated Skycom as an unofficial subsidiary in Iran and that Meng had served on the board of directors of Skycom, Huawei employees, and in particular Meng, continued to lie to Huawei’s banking partners about Huawei’s relationship with Skycom, falsely claiming that Huawei had sold its interest in Skycom to an unrelated third party in 2007 and also that Skycom was merely Huawei’s local business partner in Iran.  In reality, Skycom was Huawei’s longstanding Iranian subsidiary, and Huawei orchestrated the 2007 sale to appear as an arm’s length transaction between two unrelated parties although Huawei actually controlled the company that purchased Skycom. 
 
As part of this scheme to defraud, Meng personally made a presentation in August 2013 to an executive of one of Huawei’s major banking partners in which she repeatedly lied about the relationship between Huawei and Skycom. 
 
Huawei relied on its global banking partners for banking services that included processing U.S.-dollar-denominated transactions through the United States.  U.S. laws and regulations generally prohibited these banks from providing U.S.-dollar transactions related to Iran through the United States.  The banks could have faced civil or criminal penalties for processing transactions that violated U.S. laws or regulations.  Relying on the repeated misrepresentations by Huawei, banking partners continued their banking relationships with Huawei.  One banking partner cleared more than $100 million worth of Skycom-related transactions through the United States between 2010 and 2014.
 
As a further part of this scheme to defraud, Huawei and its principals repeatedly lied to U.S. government authorities about the relationship between Huawei and Skycom in submissions to the U.S. government, and in responses to government inquiries.  For example, Huawei provided false information to the U.S. Congress regarding whether Huawei’s business in Iran violated any U.S. law.  Similarly, as indicated in the indictment, in 2007 – months before Huawei orchestrated the purported sale of Skycom to another Huawei-controlled entity – Huawei’s founder falsely stated to FBI agents that Huawei did not have any direct dealings with Iranian companies and that Huawei operated in compliance with all U.S. export laws. 
 
After one of Huawei’s major global banking partners (identified as Financial Institution 1 in the indictment) decided to exit the relationship in 2017 because of Huawei’s risk profile, Huawei allegedly made additional misrepresentations to several of its remaining banking partners in an effort to maintain and expand those relationships.  Huawei and its principals are alleged to have repeatedly and falsely claimed that Huawei had decided to separate from Financial Institution 1, and not that Financial Institution 1 had decided to cause the separation.  On the basis of these misrepresentations, those other banking partners continued their banking relationships with Huawei.
 
In 2017, when Huawei became aware of the government’s investigation, Huawei and its subsidiary Huawei USA tried to obstruct the investigation by making efforts to move witnesses with knowledge about Huawei’s Iran-based business to the PRC, and beyond the jurisdiction of the U.S. government, and by destroying and concealing evidence of Huawei’s Iran-based business that was located in the United States.
 
In December 2018, Canadian authorities apprehended Meng in Vancouver pursuant to a provisional arrest warrant issued under Canadian law.  The U.S. government is seeking Meng’s extradition to the United States.
 
The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
The indictment unsealed today is assigned to U.S. District Judge Ann M. Donnelly of the Eastern District of New York.
 
The government’s investigation is ongoing.  Individuals and companies with information about additional misconduct by these defendants or their related entities and principals should contact their local FBI field office. … 
The Defendants:
 
Huawei Technologies Co. Ltd.
Huawei Device USA Inc.
Skycom Tech Co. Ltd.
Meng Wanzhou, also known as “Cathy Meng” and “Sabrina Meng”

Age: 46
Residence: People’s Republic Of China
E.D.N.Y. Docket No. 18-CR-457 (AMD)
 
—— 
  [FN/1] The indictment charges other individuals who have not yet been apprehended and whose names will not be publicly released at this time.

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OGS_a77. 
State/DDTC Returns to Full Operational Status 
(Source: 
State/DDTC, 29 Jan 2019.)
Effective Monday, January 28, 2019, the Directorate of Defense Trade Controls (DDTC) has returned to full operational status with all electronic application systems placed in normal operational mode and the 3pm daily pick-up and drop-off service restored. Priority will be placed on issuance of licenses in the system at the time of implementation of lapse of funding operations on December 22, 2018. New licenses will be accepted; however, industry is advised of the likelihood of longer than normal processing times due to the high volume of licenses DDTC expects to receive.

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OGS_a88.
Treasury/OFAC Issues a New Venezuela-related Executive Order and General Licenses
(Source: 
Treasury/OFAC, 28 Jan 2019.) 
 
Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designating Petróleos de Venezuela, S.A. (PdVSA) pursuant to Executive Order (E.O.) 13850 for operating in the oil sector of the Venezuelan economy, following a determination by Secretary of the Treasury Steven T. Mnuchin, in consultation with Secretary of State Michael Pompeo, that persons operating in Venezuela’s oil sector are subject to sanctions pursuant to E.O. 13850.  In addition, OFAC is amending 
General License 3  “Authorizing Transactions Related to, Provisions of Financing for, and Other Dealings in Certain Bonds,” and issuing the following eight new Venezuela-related general licenses in connection with this designation: 
General License 7 “Authorizing Certain Activities with PDV Holding, Inc. and CITGO Holding, Inc.,” 
General License 8 “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Prohibited by Executive Order 13850 for Certain Entities Operating in Venezuela,” 
General License 9 “Authorizing Transactions Related to Dealings in Certain Debt,” 
General License 10 “Authorizing the Purchase in Venezuela of Gasoline from Petróleos de Venezuela, S.A. (PdVSA),” 
General License 11 “Authorizing Certain Activities Necessary to Maintenance or Wind Down of Operations or Existing Contracts with Petróleos de Venezuela, S.A. (PdVSA),” 
General License 12 “Authorizing Certain Activities Necessary to Wind Down of Operations or Existing Contracts with Petróleos de Venezuela, S.A. (PdVSA),” 
General License 13 “Authorizing Certain Activities Involving Nynas AB,” and 
General License 14 “Official Business of the United States Government.”
 
OFAC expects to publish in the near term new FAQs and update existing FAQs, in connection with today’s action and the issuance of these general licenses. 
 
In addition, on January 25, 2019, the President signed an 
Executive Order “Taking Additional Steps to Address the National Emergency with Respect to Venezuela.” OFAC is publishing a 
frequently asked question in connection with the issuance of the Executive Order.
 
OFAC has also updated its SDN List today.  Please visit 
this URL for specific information on this action. 
 
For more information on this specific action, please visit our 
Recent Actions page.

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OGS_a99
White House Releases Executive Order Concerning Venezuela
(Source: 
The White House, 28 Jan 2019.)
 
Executive Order on Taking Additional Steps to Address the National Emergency with Respect to Venezuela
 
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.), the National Emergencies Act (50 U.S.C. 1601 et seq.), and section 301 of title 3, United States Code,
 
I, DONALD J. TRUMP, President of the United States of America, in order to take additional steps with respect to the national emergency declared in Executive Order 13692 of March 8, 2015, and relied upon for additional steps taken in Executive Order 13808 of August 24, 2017, Executive Order 13827 of March 19, 2018, Executive Order 13835 of May 21, 2018, and Executive Order 13850 of November 1, 2018, particularly in light of actions by persons affiliated with the illegitimate Maduro regime, including human rights violations and abuses in response to anti-Maduro protests, arbitrary arrest and detention of anti Maduro protestors, curtailment of press freedom, harassment of political opponents, and continued attempts to undermine the Interim President of Venezuela and undermine the National Assembly, the only legitimate branch of government duly elected by the Venezuelan people, and to prevent the Interim President and the National Assembly from exercising legitimate authority in Venezuela, hereby order:
 
Section 1.  (a)  Subsection (d) of section 6 of Executive Order 13692, subsection (d) of section 3 of Executive Order 13808, subsection (d) of section 3 of Executive Order 13827, subsection (d) of section 3 of Executive Order 13835, and subsection (d) of section 6 of Executive Order 13850, are hereby amended to read as follows:
 
“(d) the term “Government of Venezuela” includes the state and Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela and Petroleos de Venezuela, S.A. (PDVSA), any person owned or controlled, directly or indirectly, by the foregoing, and any person who has acted or purported to act directly or indirectly for or on behalf of, any of the foregoing, including as a member of the Maduro regime.”
 
Sec. 2.  (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,
January 25, 2019

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OGS_a1010
EU Amends Restrictive Measures Concerning Tunisia 
(Source: 
Official Journal of the European Union, 29 Jan 2019.)
 
Regulations

Council Implementing Regulation (EU) 2019/132 of 28 January 2019 implementing Regulation (EU) No 101/2011 concerning restrictive measures directed against certain persons, entities 
and bodies in view of the situation in Tunisia 
 
Decisions

Council Decision (CFSP) 2019/135 of 28 January 2019 amending Decision 2011/72/CFSP concerning restrictive measures directed against certain persons and entities in view of the situation in Tunisia

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NWSNEWS

NWS_a111
Bloomberg: “U.S. Sanctions on PDVSA Look Like a De Facto Oil Embargo”

(Source: 
Bloomberg, 28 Jan 2019.) [Excerpts.] 
 
The U.S. government’s decision to impose sweeping sanctions on Venezuela’s state oil company appears to be, in essence, a ban on selling the country’s crude to the U.S — and potentially across the world.
 
The Trump administration sanctioned Petroleos de Venezuela SA and the country’s central bank on Monday, the latest move to raise pressure on President Nicolas Maduro after the U.S. recognized opposition leader Juan Guaido as interim president.
 
PDVSA becomes a Specially Designated National, meaning U.S. citizens are generally prohibited from dealing with it. Inclusion on this list is a powerful tool with the potential to curb trade in Venezuelan oil far beyond U.S. borders. … 

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NWS_a212.
Expeditors News: “U.S. Government Reopens and is Funded Through February” 

(Source: 
Expeditors News, 28 Jan 2019.)
 
On January 25, 2019, the U.S. Congress passed H.J. Res. 28 to “provide funding to several government agencies through the earlier of February 28, 2019, or the enactment of the applicable appropriations legislation.” President Trump signed the bill into law on the same day.
 
The passage of the resolution ends the partial government shutdown that began when the previous resolution expired on December 21, 2018.
 
The resolution may be viewed 
here.

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NWS_a313.
Financial Times: “How China Acquired Mastery of Vital Microchip Technology”

(Source: 
Financial Times, 29 Jan 2019.) [Excerpts.] 

There was little fanfare when the private Chinese company NavTech bought Silex Microsystems in 2015, acquiring the Swedish company’s mastery of manufacturing accelerometers, gyroscopes and other microscopic sensors. 

 
NavTech, which specializes in navigation technology for aviation, satellites and defense, announced shortly afterwards that it would build a $300m plant in Beijing “relying on Silex’s technology” in micro-electromechanical systems (MEMS), the components embedded in chips that are increasingly central to everything from mobile phones and medical devices to self-driving cars.
 
But the acquisition of Silex, through a chain of investment holding companies, involved Chinese state-controlled funds. The new plant is located in a state-run industrial park, and has been backed by a state-run semiconductors fund, the Beijing Integrated Circuits fund. … 

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NWS_a414
Reuters: “Deutsche Telekom Reviews Procurement Plans Amid Huawei Concerns”

(Source: 
Reuters, 26 Feb 2019.) [Excerpts.] 
 
Deutsche Telekom said on Tuesday it is reviewing its network equipment procurement plans after the United States moved to restrict China’s Huawei Technologies from accessing its next-generation mobile networks.
 
Huawei is at the center of a diplomatic row after U.S. officials briefed Western allies that Huawei’s network equipment may contain “back doors” which enable cyber espionage. Huawei says such concerns are unfounded.
 
  “Deutsche Telekom takes the global debate surrounding the security of Chinese network equipment very seriously. We have a multi-vendor strategy for network equipment. We are nonetheless reassessing our procurement strategy,” Telekom said on Tuesday. … 

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NWS_a515
Reuters: “Huawei Lawyer Says CFO Meng a ‘Hostage’ After U.S. Presses Charges”

(Source: 
Reuters, 28 Jan 2019.) [Excerpts.] 
 
Huawei’s CFO “should not be a hostage” in Sino-U.S. relations, her lawyer said on Tuesday, after the United States announced criminal charges against herself and the Chinese firm just days before crunch trade talks with Beijing.
 
The Justice Department charged Huawei Technologies Co Ltd and its chief financial officer with conspiring to violate U.S. sanctions on Iran by doing business through a subsidiary it tried to hide and that was reported on by Reuters in 2012 and 2013.
 
In a separate case, the Justice Department charged the telecommunications equipment maker with stealing robotic technology from T-Mobile US Inc. Huawei has said the companies settled their dispute in 2017.
 
CFO Meng Wanzhou, the daughter of Huawei’s founder, was arrested in Vancouver on Dec. 1, a move which was followed by China arresting two Canadians on national security grounds. She is scheduled in court on Tuesday to discuss her bail terms, and is subject to a U.S. extradition request.
 
CFO Meng Wanzhou, the daughter of Huawei’s founder, was arrested in Vancouver on Dec. 1, a move which was followed by China arresting two Canadians on national security grounds. She is scheduled in court on Tuesday to discuss her bail terms, and is subject to a U.S. extradition request.
 
Her lawyer Reid Weingarten, partner at Steptoe & Johnson, pointed to “complex” Sino-U.S. relations.
 
  “Our client, Sabrina Meng, should not be a pawn or a hostage in this relationship. Ms. Meng is an ethical and honorable businesswoman who has never spent a second of her life plotting to violate any U.S. law, including the Iranian sanctions.” … 

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NWS_a616
ST&R Trade Report: “Import and Export Controls Continued on Synthetic Cannabinoid” 

(Source: 
Sandler, Travis & Rosenberg Trade Report, 29 Jan 2019.)
 
The Drug Enforcement Administration has issued a final rule that, effective Jan. 29, places the synthetic cannabinoid 
N-(1-amino-3,3-dimethyl-1-oxobutan-2-yl)-1-(cyclohexylmethyl)-1
H– indazole-3-carboxamide (MABCHMINACA; ADB-CHMINACA), including its salts, isomers, and salts of isomers whenever the existence of such is possible, into schedule I of the Controlled Substances Act.
 
This substance was previously placed into schedule I temporarily; as a result, this rule permanently continues the regulatory controls and administrative, civil, and criminal sanctions applicable to schedule I controlled substances on persons who handle (import, export, manufacture, distribute, engage in research, conduct instructional activities or chemical analysis, or possess) this substance. These include the following.
 
– all importation and exportation of this substance must be in compliance with 21 USC 952, 953, 957, and 958 and in accordance with 21 CFR part 1312
– any activity involving this substance that is not authorized by, or is in violation of, the Controlled Substances Act or its implementing regulations is unlawful and may subject the person to administrative, civil, or criminal sanctions
– any person who handles or desires to handle this substance must be registered with the DEA to conduct such activities
– all labels and labeling for commercial containers of this substance must comply with 21 USC 825 and 958(e) and be in accordance with 21 CFR part 1302
– only registered manufacturers are permitted to manufacture this substance in accordance with an assigned quota
– every DEA registrant that possesses any quantity of substance must take an inventory of all stocks on hand as of Jan. 29

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COMMCOMMENTARY

COM_a117. 
M. Volkov: “Touting Corporate Culture to Excuse a Commitment to Compliance”

(Source: 
Volkov Law Group Blog, 28 Jan 2019. Reprinted by permission.) 
 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com, 240-505-1992. 
 
There is no question that corporate leaders, senior executives, legal and compliance staff, and internal auditors recognize the value of an ethical corporate culture. It is the latest “fad” in corporate governance, and it is a welcome development.  I have written extensively on this important trend and the value of a company’s culture of ethics and compliance.
 
CEOs and corporate executives, however, have embraced this important objective.  But there are some CEOs and senior executives who may be embracing or spouting a commitment to a company’s culture without follow through and meaningful allocation of resources and strategies. 
 
If you ask every senior executive to assess their company’s culture, they will invariably respond with positive comments and assessments.  Some CEOs and senior executives are being honest, some do not really know the answer, and some are spouting hopeful comments in a meaningless collection of words.  CEOs and senior executives know the words they have to say but they do not know (and sometimes do not care) to make sure that a company really does maintain a culture of ethics.
 
The Justice Department and compliance professionals know that a company’s culture requires action not just words.  Some CEOs and senior executives are unwilling to dedicate time and effort to design, implement, monitor and measure a company’s culture.
 
Recently, some CEOs and senior executives are relying on positive messages of corporate culture to avoid responsibility for nuts-and-bolts compliance strategies. Some CEOs and senior executives proffer a company’s culture as a means to avoid allocating money and people to advance a corporate compliance program.  It is a false dichotomy – a company’s culture depends on effective compliance controls and vice versa.  One cannot live without the other. 
 
A company that touts its culture of ethics without maintaining effective compliance programs, policies and controls will inevitably suffer harm.  A reasonable assessment of such a program will focus on the lack of controls, gaps in policies and procedures, and inadequate resources. This is a recipe for disaster.
 
Corporate leaders often embrace a company’s culture as a “feel good” and positive message for employees, shareholders and stakeholders.  Unless these leaders commit to follow through with a real and tangible commitment to measuring and monitoring a company’s culture and its complement of corporate compliance controls, the senior leaders are doing little more than offering words to surround what is otherwise a “paper compliance program.”
 
I know this sounds pessimistic and cynical, but a realistic assessment of corporate  leadership is critical.  CCOs have to maintain objectivity and avoid being convinced or sold on whether senior leaders are really committed to an ethical culture and compliance. 
 
A compliance program depends on real and tangible commitment thru appropriate levels of authority, communications, resources, and controls.  Words alone mean little and CCOs should not fall for corporate leaders who spout the importance of ethical culture.  Instead, CCOs have to demand real and tangible commitment, backed by independence, authority and resources.

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COM_a218. 
T. Murphy: “Review of 2018 Import Data”

(Source: Author, 28 Jan 2019.)
 
* Author: * Author: Ted Murphy, Esq., Baker & McKenzie LLP, 
ted.murphy@bakermckenzie.com.
 
Just a quick note to remind you that now is the time to review your 2018 import data. 
 
The goal of any internal control program is to effectively mitigate the risk associated with the company’s activities.  In order for the controls to be effective, however, they must be tailored to the risk involved.  One way to understand your risk profile from a customs perspective is to review the company’s import data (the same data that U.S. Customs and Border Protection looks at to select audit candidates).  The import data (whether ITRAC data obtained from CBP HQ, or ACE reports you are able to download) includes general entry information, such as tariff classifications, values, duties paid (including any Section 232 or Section 301 duties) preferential tariff programs used, etc.; as well as information regarding CBP’s review of a company’s import shipments (e.g., whether a CBPF-28 or CBPF-29 was issued).  It also identifies each of the links in the company’s international supply chain (i.e., foreign manufacturers, carriers, customs brokers and sureties).  In short, the import data is a useful tool for monitoring the effectiveness of your import compliance program, identifying areas of potential cost and duty savings, customs valuation reconciliation and identifying links in the international supply chain for security purposes (i.e., C-TPAT-related information).  
 
Given how useful this information is, we recommend that all clients obtain their import data and review it at least annually.  Due to the volume of data involved, and the way it is presented by CBP, we have developed simple macros that can extract the most relevant data and summarize it in a table format so that trends, issues and opportunities can be more easily identified.  If you would like to have us obtain the data and/or run it through those macros and provide the summaries, please let us know.  If not, no problem, but please review it yourself and confirm that your controls are working effectively (e.g., your data does not know show the use of unapproved brokers, unauthorized preference claims, incorrect tariff classifications, etc.).  The business is always evolving.  You need to make sure your controls are keeping pace!

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a119. 
ECS Presents “Boot Camp: Achieving ITAR/EAR Compliance” on 11-12 Feb in Orlando, FL

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

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ENEDITOR’S NOTES

EN_a020

Memorial Service for Jill Garrison, Former SIA Business Manager will be held 2 Feb 2019
(Source: Eric Fleming, 
eric.fleming@airbus.com.) 
 

A Celebration of Life memorial service for Jill Garrison, who passed away on January 21st, will be held Saturday, February 2, 2019, from 1:30-4:30 pm at the Riverside Dinner Theater, 95 Riverside Parkway, Fredericksburg, VA 22406.  (There will not be a separate SIA event.)  

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Anton Chekhov (Anton Pavlovich Chekhov; 29 Jan 1860 – 15 Jul 1904; was a Russian playwright and short-story writer, who is considered to be among the greatest writers of short fiction in history. His career as a playwright produced four classics, and his best short stories are held in high esteem by writers and critics. Along with Henrik Ibsen and August Strindberg, Chekhov is often referred to as one of the three seminal figures in the birth of early modernism in the theatre. Chekhov practiced as a medical doctor throughout most of his literary career: “Medicine is my lawful wife”, he once said, “and literature is my mistress.”)
  – ‘Remove everything that has no relevance to the story. If you say in the first chapter that there is a rifle hanging on the wall, in the second or third chapter it absolutely must go off. If it’s not going to be fired, it shouldn’t be hanging there.’
  – “Any idiot can face a crisis – it’s day to day living that wears you out.”
  – “If you are afraid of loneliness, do not marry.”
 
* 
Thomas Paine (born Thomas Pain; 29 Jan 1736 – 8 Jun 1809; was an English-born American political activist, philosopher, political theorist and revolutionary. One of the Founding Fathers of the United States, he authored the two most influential pamphlets at the start of the American Revolution and inspired the patriots in 1776 to declare independence from Britain.
)
  – “A long habit of not thinking a thing wrong gives it a superficial appearance of being right.”

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EN_a322
. 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: 14 Jan 2019: 84 FR 112-116: Extension of Import Restrictions Imposed on Certain Archaeological and Ecclesiastical Ethnological Material from Bulgaria; and 84 FR 107-112: Extension of Import Restrictions Imposed on Certain Archaeological Material From China 
 

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_a0323
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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