;

19-0131 Thursday “Daily Bugle'”

19-0131 Thursday “Daily Bugle”

Thursday, 31 January 2019

  1. NRC Welcomes Industry Feedback Concerning Export and Import of Nuclear Equipment and Material 
  2. U.S.-China Economic and Security Review Commission Announces Public Hearing on 7 Feb in Washington DC 
  1. Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Policy Memos of Interest
  4. State/DDTC: (No new postings.)
  5. Treasury/OFAC Announces Settlement Agreement with e.l.f. Cosmetics, Inc. of Oakland, CA
  6. EU Publishes Updated “Anti-Torture Regulation”
  7. German BMWI Publishes 2017 Military Equipment Export Report
  1. Expeditors News: “CBP Releases Section 201, 232, and 301 Reports in ACE for Importers and Brokers”
  2. Kyiv Post: “Ukraine’s State Security Service Prevents Illegal Export of Helicopter Engines”
  3. Reuters: “U.S. Sees No Impact from EU Trade Mechanism for Iran”
  1. International Trade Compliance Blog: “U.S. President Delegates Export Interagency Dispute Resolution Process to Commerce”
  2. K.C. Georgi, M.M. Hassoun & L. Hardaway: “OFAC Sanctions Venezuela State-owned Oil Giant PDVSA”
  3. M. Volkov: “Tying Mitigation to Third Party Risks”
  1. Dave Hanke Moves to Arent Fox
  1. ECTI Presents “Cornerstones of ITAR Compliance: Administration, Documentation and Shipping” Webinar on 20 Mar
  1. Bartlett’s Unfamiliar Quotations 
  2. 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) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11. 
NRC Welcomes Industry Feedback Concerning Export and Import of Nuclear Equipment and Material

(Source: Federal Register, 31 Jan 2019.) [Excerpts.] 
 
84 FR 820-821: Information Collection: Export and Import of Nuclear Equipment and Material
 
* AGENCY: Nuclear Regulatory Commission.
* ACTION: Renewal of existing information collection; request for comment.
* SUMMARY: The U.S. Nuclear Regulatory Commission (NRC) invites public comment on the renewal of Office of Management and Budget (OMB) approval for an existing collection of information. The information collection is entitled, “Export and Import of Nuclear Equipment and Material.”
* DATES: Submit comments by April 1, 2019. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date.
* ADDRESSES: You may submit comments by any of the following methods:
  – Federal Rulemaking Website: Go to http://www.regulations.gov and search for Docket ID NRC-2018-0229. Address questions about docket IDs in Regulations.gov to Krupskaya Castellon; telephone: 301-287-9221; email: Krupskaya.Castellon@nrc.gov. For technical questions, contact the individual listed in the FOR FURTHER & INFORMATION CONTACT section of this document.
  – Mail comments to: David Cullison, Office of the Chief Information Officer, Mail Stop: T6-A10M, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001.
  – For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the SUPPLEMENTARY INFORMATION section of this document. … 
* SUPPLEMENTARY INFORMATION: … 
    – The title of the information collection: 10 CFR part 110, “Export and Import of Nuclear Equipment and Material.”
    – OMB approval number: 3150-0036.
    – Type of submission: Extension.
    – The form number, if applicable: NRC Form 830, NRC Form 830A, NRC Form 831, and NRC Form 831A.
    – How often the collection is required or requested: On occasion.
    – Who will be required or asked to respond: Any person in the U.S. who wishes to export or import (a) nuclear material and equipment subject to the requirements of a specific license; (b) amend a license; (c) renew a license; (d) obtain consent to export Category 1 quantities of materials listed in Appendix P to 10 CFR part 110; or (5) request an exemption from a licensing requirement under part 110. … 
    – Abstract: Persons in the U.S. who export or import nuclear material or equipment under a general or specific authorization must comply with certain reporting and recordkeeping requirements under 10 CFR part 110. … 
 
  The NRC is seeking comments that address the following questions:
  (1) Is the proposed collection of information necessary for the NRC to properly perform its functions? Does the information have practical utility?
  (2) Is the estimate of the burden of the information collection accurate?
  (3) Is there a way to enhance the quality, utility, and clarity of the information to be collected?
  (4) How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology?
 
  Dated at Rockville, Maryland, this 3rd day of January 2019.
 
  For the Nuclear Regulatory Commission.
David C. Cullison, NRC Clearance Officer, Office of the Chief Information Officer.

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

EXIM_a2
2. U.S.-China Economic and Security Review Commission Announces Public Hearing on 7 Feb in Washington DC
(Source: 
Federal Register, 31 Jan 2019.) [Excerpts.] 
84 FR 884: Notice of Open Public Hearing
 
* AGENCY: U.S.-China Economic and Security Review Commission.
* ACTION: Notice of open public hearing.
* SUMMARY: Notice is hereby given of the following hearing of the U.S.-China Economic and Security Review Commission.
  The Commission is mandated by Congress to investigate, assess, and report to Congress annually on “the national security implications of the economic relationship between the United States and the People’s Republic of China.” Pursuant to this mandate, the Commission will hold a public hearing in Washington, DC on February 7, 2019 on “What Keeps Xi Up at Night: Beijing’s Internal and External Challenges.”
* DATES: The hearing is scheduled for Thursday, February 7, 2019 from 9:30 a.m. to 3:20 p.m.
* ADDRESSES: Dirksen Senate Office Building, Room 106, Washington, DC 20002. A detailed agenda for the hearing will be posted on the Commission’s website at www.uscc.gov. Also, please check the Commission’s website for possible changes to the hearing schedule. Reservations are not required to attend the hearing. … 
* SUPPLEMENTARY INFORMATION: Background: This is the first public hearing the Commission will hold during its 2019 report cycle. This hearing will examine the growing internal and external challenges the Chinese Communist Party (CCP) faces in its attempts to consolidate power at home and increase its influence abroad. The first panel would be designed to explore the implications of President Xi and the CCP’s tightening control over economic and security policy making. The second panel would examine China’s domestic challenges, considering China’s economic weakness and financial sector risks, the risks and benefits of China’s state-led economic policies, and the country’s reliance on key foreign technologies. The third panel would examine China’s external challenges, focusing on the People Liberation Army’s shortcomings and the limits of Chinese soft, sharp, and hard power. The hearing will be co-chaired by Senator Carte Goodwin and Senator James Talent. Any interested party may file a written statement by February 7, 2019, by mailing to the contact above. A portion of each panel will include a question and answer period between the Commissioners and the witnesses.
  Authority: Congress created the U.S.-China Economic and Security Review Commission in 2000 in the National Defense Authorization Act (Pub. L. 106-398), as amended by Division P of the Consolidated Appropriations Resolution, 2003 (Pub. L. 108-7), as amended by Public Law 109-108 (November 22, 2005), as amended by Public Law 113-291 (December 19, 2014).
 
  Dated: January 28, 2019.
Daniel W. Peck, Executive Director, U.S.-China Economic and Security Review Commission.

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

OGSOTHER GOVERNMENT SOURCES

OGS_a13. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

  

* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 1 Feb 2019.]

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

OGS_a2
4. 
Commerce/BIS: (No new postings.)

(Source: 
Commerce/BIS)

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

OGS_a35. 
DoD/DSCA Policy Memos of Interest 

(Source: 
DoD/DSCA, 31 Jan 2019.)
 
* DSCA Policy Memo 19-05 
Security Assistance Management Manual (SAMM) Administrative Changes has been posted.
  This memorandum updates the SAMM with clerical and administrative changes. This memorandum does not contain contextual policy changes.

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

OGS_a46. 
State/DDTC: (No new postings.)

(Source: 
State/DDTC)

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

(Source: 
Treasury/OFAC, 31 Jan 2019.)
 
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a settlement of
$996,080 with e.l.f. Cosmetics, Inc. (“ELF”) of Oakland, California.  ELF has agreed to settle its potential civil liability for 156 apparent violations of the North Korea Sanctions Regulations, 31 C.F.R. part 510 (NKSR).  The apparent violations involved the importation of false eyelash kits from two suppliers located in the People’s Republic of China that contained materials sourced by these suppliers from the Democratic People’s Republic of Korea.  OFAC determined that ELF voluntarily self-disclosed the apparent violations and that the apparent violations constitute a non-egregious case.
 
For more information, see the related 
web notice below.
 
ENTITIES – 31 CFR 501.805(d)(1)(i) 
 
e.l.f. Cosmetics, Inc. Settles Potential Civil Liability for Apparent Violations of the North Korea Sanctions Regulations. e.l.f. Cosmetics, Inc. (“ELF”), a cosmetics company headquartered in Oakland, California, has agreed to pay $996,080 to settle its potential civil liability for 156 apparent violations of the North Korea Sanctions Regulations, 31 C.F.R. part 510 (NKSR). Specifically, ELF appears to have violated § 510.201(c) [FN/1] of the NKSR by importing 156 shipments of false eyelash kits from two suppliers located in the People’s Republic of China that contained materials sourced by these suppliers from the Democratic People’s Republic of Korea (DPRK). ELF imported the false eyelash kits from on or about April 1, 2012 to on or about January 28, 2017. The total value of the shipments equaled $4,427,019.26.

 
Throughout the time period in which the apparent violations occurred, ELF’s OFAC compliance program was either non-existent or inadequate. The company’s production review efforts focused on quality assurance issues pertaining to the production process, raw materials, and end- products of the goods it purchased and/or imported. Until January 2017, ELF’s compliance program and its supplier audits failed to discover that approximately 80 percent of the false eyelash kits supplied by two of ELF’s China-based suppliers contained materials from the DPRK.
 
OFAC determined that ELF voluntarily self-disclosed the apparent violations to OFAC, and that the apparent violations constitute a non-egregious case. The statutory maximum civil monetary penalty amount for the apparent violations was $40,833,633, and the base civil monetary penalty amount for the apparent violations was $2,213,510.
 
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.
 
OFAC found the following to be aggravating factors in this case: (1) the apparent violations may have resulted in U.S.-origin funds coming under the control of the DPRK government, in direct conflict with the program objectives of the NKSR; (2) ELF is a large and commercially sophisticated company that engages in a substantial volume of international trade; and (3) ELF’s OFAC compliance program was either non-existent or inadequate throughout the time period in which the apparent violations occurred, and appears not to have exercised sufficient supply chain due diligence while sourcing products from a region that poses a high risk to the effectiveness of the NKSR. 
 
OFAC found the following to be mitigating factors in this case: (1) ELF’s personnel do not appear to have had actual knowledge of the conduct that led to the apparent violations in this investigation; (2) ELF has not received a Penalty Notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations; (3) the apparent violations do not appear to constitute a significant part of ELF’s business activities; and (4) ELF cooperated with OFAC by immediately disclosing the apparent violations, signing a tolling agreement, and submitting a complete and satisfactory response to OFAC’s request for additional information. 
 
ELF stated the company has terminated the conduct which led to the apparent violations and has taken the following steps to minimize the risk of recurrence of similar conduct in the future: 
 
  – Implemented supply chain audits that verify the country of origin of goods and services used in ELF’s products; 
  – Adopted new procedures to require suppliers to sign certificates of compliance stating that they will comply with all U.S. export controls and trade sanctions; 
  – Conducted an enhanced supplier audit that included verification of payment information related to production materials and the review of supplier bank statements
 – Engaged outside counsel to provide additional training for key employees in the United States and in China regarding U.S. sanctions regulations and other relevant U.S. laws and regulations; and 
 – Held mandatory training on U.S. sanctions regulations for employees and suppliers in China and implemented additional mandatory trainings for new employees, as well as, regular refresher training for current employees and suppliers based in China. 
 
This enforcement action highlights the risks for companies that do not conduct full-spectrum supply chain due diligence when sourcing products from overseas, particularly in a region in which the DPRK, as well as other comprehensively sanctioned countries or regions, is known to export goods. OFAC encourages companies to develop, implement, and maintain a risk-based approach to sanctions compliance and to implement processes and procedures to identify and mitigate areas of risks. Such steps could include, but are not limited to, implementing supply chain audits with country-of-origin verification; conducting mandatory OFAC sanctions training for suppliers; and routinely and frequently performing audits of suppliers. 
 
For more information regarding OFAC regulations, please go to: 
www.treasury.gov/ofac.  
 
——– 
  [FN/1] 1 This reflects the NKSR as written during the time period of the transactions (2012-2017). OFAC amended and reissued the NKSR effective March 5, 2018. Please see 
www.treasury.gov/ofac for the most up-to-date regulations. 

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

OGS_a68.
EU Publishes Updated “Anti-Torture Regulation”

(Source: 
Official Journal of the European Union, 31 Jan 2019.) 
 
Regulations

Regulation (EU) 2019/125 of the European Parliament and of the Council of 16 January 2019 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment. 

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

OGS_a79.
German BMWI Publishes 2017 Military Equipment Export Report

(Source: 
German BMWI, 29 Jan 2019.)
 
The German Federal Ministry for Economic Affairs and Energy (BMWI) has published its 2017 Military Equipment Export Report on its 
website.
 
The Federal Government’s report on exports of military equipment provides the Bundestag and the public with a comprehensive picture of German policy on the export of military equipment – including in the international context – and furnishes information about the licenses issued for the export of military equipment and the actual exports of war weapons in the reference year. In the Military Equipment Export Reports, which are published periodically, the Federal Government makes an important contribution towards an objective and informed debate on the issue of exports of military equipment.

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

NWSNEWS

NWS_a110
Expeditors News: “CBP Releases Section 201, 232, and 301 Reports in ACE for Importers and Brokers” 

(Source: 
Expeditors News, 30 Jan 2019.)
 
On January 29, 2019, U.S. Customs and Border Protection (CBP) made available new Section 201, 232, and 301 reports to importers and brokers in the Automated Commercial Environment (ACE) Portal as announced in Cargo Systems Messaging Service (CSMS) #19-000020.
 
The new reports are:
  • TR-001 Section 232 Aluminum – provides data on entries subject to Section 232 duties for aluminum;
  • TR-002 Section 232 Steel – provides data on entries subject to Section 232 duties for steel;
  • TR-004 Section 301 Totals – provides aggregate data on entries subject to Section 301;
  • TR-005 Section 301 Details – provides line-level data on entries subject to Section 301;
  • TR-006 Section 201 Totals – provides aggregate data on entries subject to Section 201;
  • TR-007 Section 201 Details – provides line-level data on entries subject to Section 201.
 
CBP directs any comments or questions to 
ace.reports@cbp.dhs.gov
The CSMS may be found 
here
.

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

NWS_a211.
Kyiv Post: “Ukraine’s State Security Service Prevents Illegal Export of Helicopter Engines”

(Source: 
Kyiv Post, 30 Jan 2019.) [Excerpts.] 
 
Ukraine’s State Security Service (“SBU”) under the procedural guidance of the Vinnytsia Regional Prosecutor’s Office has blocked the illegal export of aircraft engines from the country. The engines are subject to mandatory state export control.
 
The SBU’s website on Jan. 28 said operatives of the special services established that, within the framework of official agreements, a Middle East country sent four Mi-24 engines to a Ukrainian commercial entity for repairs. In connection with the refusal of the customer to pay the cost of the work performed, the property became the property of the state and was transferred to a commercial entity for sale.
 
SBU agents said two Zaporizhia entrepreneurs found buyers for engines from a country that is under the sanctions of the UN Security Council, assessing the cost of the goods at nearly $1 million. They also guaranteed customers the production of a package of fake documentation for the unhindered removal of units from Ukraine under the guise of civilian products. … 

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

NWS_a312
Reuters: “U.S. Sees No Impact from EU Trade Mechanism for Iran” 

(Source: 
Reuters, 31 Jan 2019.) 
The U.S. embassy in Germany said on Thursday it was seeking additional details about a new European mechanism to facilitate non-dollar trade with Iran, but did not expect it to affect its effort to apply maximum economic pressure on Tehran. 
 
  “As the president has made clear, entities that continue to engage in sanctionable activity involving Iran risk severe consequences that could include losing access to the U.S. financial system and the ability to do business with the United States or U.S. companies,” a spokesman for the embassy said. 
 
  “We do not expect the SPV (Special Purpose Vehicle) will in any way impact our maximum economic pressure campaign,” he added. 

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

COMMCOMMENTARY

COM_a113. 
International Trade Compliance Blog: “U.S. President Delegates Export Interagency Dispute Resolution Process to Commerce”

(Source: International Trade Compliance Blog, 25 Jan 2019.)
 
On January 22, 2019, the Federal Register published Presidential
Memorandum of January 15, 2019 – Delegation of Authorities and Responsibilities Under Section 1763 of the National Defense Authorization Act for Fiscal Year 2019
, which delegates to the Secretary of Commerce (in coordination with executive departments and agencies through the National Security Presidential Memorandum-4 process), the functions and authorities vested in the President by section 1763 of the National Defense Authorization Act for Fiscal Year 2019 (NDAA 2019; Public Law 115-232).
 
Section 1763, which is part of the Export Controls Act of 2018 (part I of the NDAA 2019), provides that:
 
SEC. 1763 REVIEW OF INTERAGENCY DISPUTE RESOLUTION PROCESS
  
  (a) IN GENERAL. – The President shall review and evaluate the interagency export license referral, review, and escalation processes for dual-use items and munitions under the licensing jurisdiction of the Department of Commerce or any other Federal agency, as appropriate, to determine whether current practices and procedures are consistent with established national security and foreign policy objectives.
  
  (b) REPORT. – Not later than 180 days after the date of the enactment of this Act, the President shall submit to the appropriate congressional committees a report that contains the results of the review carried out under subsection (a).
 
  (c) OPERATING COMMITTEE FOR EXPORT POLICY. – In any case in which the Operating Committee for Export Policy established by Executive Order 12981 (December 5, 1991; relating to Administration of Export Controls) is meeting to conduct an interagency dispute resolution relating to applications for export licenses under the Export Administration Regulations, matters relating to jet engine hot section technology, commercial communication satellites, and emerging or foundational technology may be decided by majority vote.
 
  (d) APPROPRIATE CONGRESSIONAL COMMITTEES DEFINED. – In this section, the term “appropriate congressional committees” means-
 (1) the Committee on Armed Services and the Committee on Foreign Affairs of the House of Representatives; and
 (2) the Committee on Armed Services and the Committee on Banking, Housing, and Urban Affairs of the Senate.

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

COM_a214. 
K.C. Georgi, M.M. Hassoun & L. Hardaway: “OFAC Sanctions Venezuela State-owned Oil Giant PDVSA”  

(Source: 
Arent Fox, 29 Jan 2019.) 
 
* Authors: Kay C. Georgi, Esq., 
kay.georgi@arentfox.com; Marwa M. Hassoun, Esq., 
marwa.hassoun@arentfox.com; and Lamine Hardaway, Esq., 
lamine.hardaway@arentfox.com.
 
With the escalating political turmoil in Venezuela over the past few weeks, the Trump Administration responded – at least in part – with the imposition of additional sanctions.
On January 23, 2019, Juan Guaidó, the President of Venezuela’s legislative body, the National Assembly, and for whom the Trump Administration has declared its support, took the oath to serve as Venezuela’s interim president in opposition to what he and his allies view as the illegitimate presidency of Nicolás Maduro. While many nations, including the United States, have recognized and expressed support for Guaidó’s temporary ascension to power, some nations such as Russia and China have rejected it.
 
In a strike at Maduro and his closest supporters, the Trump Administration announced a new executive order on January 28, 2019, broadening the scope and definition of the Government of Venezuela to include persons that have acted, or have purported to act, on behalf of the Government of Venezuela, including members of the Maduro regime. This action was likely taken with the hope of spurring defections or at least to deter support for the regime among key officials and other persons within and potentially outside Venezuela.
 
Although it was quite clear that the imposition of additional sanctions targeting the Maduro regime would form part of the United States response, there was much speculation about what those sanctions would look like and how far the Trump Administration would go. On January 28, 2019, OFAC also announced the designation of Petróleos de Venezuela, S.A. (PDVSA), Venezuela’s state-owned oil company, pursuant to Executive Order (EO) 13850, for operating in Venezuela’s oil sector. President Trump issued EO 13850 in November 2018 prohibiting US persons from dealing with any person designated under the EO 13850, including the blocking of property of any such person. The purpose of the EO 13850 is to target rampant corruption within the Venezuelan government, which according to the US government has exacerbated “the economic and humanitarian crises afflicting the Venezuelan people.”
 
As a result, US persons are now broadly prohibited from engaging in transactions with PDVSA, including its majority-owned subsidiaries. Previously, PDVSA had only been subject to limited sanctions imposing restrictions on certain debt and equity transactions.
 
In light of the impact the blacklisting of an entity such as PDVSA would have on the United States and beyond, OFAC rolled out a slew of general licenses (summarized below) authorizing US persons to engage in certain transactions involving PDVSA and its majority-owned subsidiaries – two of which PDV Holding, Inc. (PDVH) and CITGO Holding Inc. (CITGO) are US entities. The general licenses are particularly important as Venezuela is the United States’ third largest source of oil imports. The authorizations provided in the general licenses cross-reference one another, so it is essential to closely evaluate potential transactions to determine which authorization applies to a specific transaction.
 
General Licenses
 
General License 3A. Authorizes all transactions related to the provision of financing for, and other dealings in certain bonds prohibited by EO 13808 and listed in the GL 3A’s Annex, and all transactions related to the provision of financing for, and other dealings in bonds issued prior to August 25, 2017, by US person entities owned or controlled by the Government of Venezuela other than Nynas AB, PDVH, CITGO and any of their subsidiaries. GLs 7, 9, and 13, described below, authorize, at least on a temporary basis, certain transactions with Nynas AB, PDVH, CITGO, and their subsidiaries.
 
General License 7. Section (a) authorizes all transactions prohibited by EO 13850 related to PDVH and CITGO (including their subsidiaries) where the only PDVSA entities involved are PDVH and CITGO. This particular authorization expires on July 27, 2019. Section (b) further authorizes PDVH and CITGO (including their subsidiaries) to engage in all transactions prohibited by EO 13850 that are ordinarily incident and necessary to the purchase and importation of petroleum and petroleum products from PDVSA and its majority-owned subsidiaries. This particular authorization expires on April 28, 2019. Any related payments for the direct or indirect benefit of a blocked person other than PDVH and CITGO (including their subsidiaries) must be paid into an blocked, interest-bearing account in the United States.
 
General License 8. Authorizes all transactions and activities ordinarily incident and necessary to the operations of the following US companies in Venezuela involving PDVSA: Chevron Corporation; Halliburton; Schlumberger Limited; Baker Hughes (a GE company); and Weatherford International. However, it does not however authorize the exportation or reexportation of diluents from the United States to Venezuela. This general license expires on July 27, 2019.
 
General License 9. Authorizes all transactions prohibited by Section 1(a)(iii) EO 13808 and EO 13850 that are ordinarily incident and necessary to dealings in any PDVSA debt (including its majority-owned subsidiaries and certain bonds in GL 9’s Annex) issued prior to August 25, 2017, provided that any divestment or transfer of any holdings in such debt must be to a non-US person. GL 9 also authorizes all transactions prohibited by Section 1(a)(iii) EO 13808 that are ordinarily incident and necessary to dealings in any bonds issued by PDVH, CITGO or Nynas AB prior to August 25, 2017. GL 9 does not authorize US persons to sell PDVSA-related debt to, to purchase or invest in debt of, or to facilitate such transactions with, directly or indirectly, entities blocked by EO 13850, including PDVSA and its majority-owned subsidiaries, other than that ordinarily incident and necessary to the divestment or transfer of PDVSA-related debt.
 
General License 10. Authorizes US persons in Venezuela to purchase refined petroleum products for personal, commercial, or humanitarian uses from PDVSA and its majority-owned subsidiaries.It does not authorize any commercial resale, transfer, exportation or reexportation of refined petroleum products.
 
General License 11. Authorizes a wind down period for US person employees and contractors of non-US entities located in a country other than the United States or Venezuela to engage in transactions prohibited by EO 13850 that are ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements involving PDVSA and its majority-owned subsidiaries. US financial institutions are authorized to reject, rather than block, funds transfers involving PDVSA and non-US entities located outside the United States and Venezuela, provided that the funds originate and terminate outside the United States and that the originator and/or beneficiary are not US persons, and the funds are not destined for a blocked account held by a US financial institution. This GL does not extend to transactions involving Nicaragua-based PDVSA subsidiary, ALBA de Nicaragua (ALBANISA) or its majority-owned subsidiaries. GL 11expires on March 29, 2019.
 
General License 12. Authorizes a wind down period until April 28, 2019, for all transactions prohibited by EO 13850 that are ordinarily incident and necessary to the purchase and importation into the United States of petroleum and petroleum products from PDVSA and its majority-owned subsidiaries. Any related payments for the direct or indirect benefit of a blocked person must be paid into an blocked, interest-bearing account in the United States. GL 12 also more broadly authorizes all transactions ordinarily incident and necessary to the wind down of operations, contracts, or other agreements, in effect prior to January 28, 2019, including the importation into the United States of goods, services, or technology (beyond petroleum and petroleum products) until February 27, 2019. Note that GL 12 does not authorize exportation or reexportation of any diluents from the US to Venezuela, PDVSA or its subsidiaries or any transactions with ALBANISA.
 
General License 13. Authorizes all transactions prohibited by EO 13850 where the only PDVSA entities involved are Nynas AB (a Swedish PDVSA subsidiary) and its subsidiaries. GL 13 expires on July 27, 2019. Except as authorized by General License 11 (above), any payments for the direct or indirect benefit of a blocked person other than Nynas AB or its subsidiaries that are ordinarily incident and necessary to give effect to authorized Nynas AB-related transactions and that come into the possession of a US person must be paid into an blocked, interest-bearing account in the United States.
 
General License 14. Authorizes all transactions that are for the conduct of the official business of the US Government.
 
We continue to monitor the situation in Venezuela, as well as further information on the general licenses, PDVSA’s designation, and the new executive order. OFAC has indicated that it will be publishing additional guidance in the form of FAQs in conjunction with the designation.

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

COM_a315. 
M. Volkov: “Tying Mitigation to Third Party Risks”

(Source: 
Volkov Law Group Blog, 30 Jan 2019. Reprinted by permission.) 
 
* Author: Michael Volkov, Esq., Volkov Law Group, 
mvolkov@volkovlaw.com, 240-505-1992. 
 
Managing your third-party risks requires a wide-angle view of your third parties.  What do I mean by that?
 
Companies are hyper-focused on identifying risks during the onboarding process, the use of automated platforms to organize and conduct such screening, and continuous monitoring through an automated platform.  Such a perspective, however, is far too narrow in scope and scale. 
 
Too many third-party risk management strategies ignore or downplay the importance of developing risk mitigation strategies.  In other words, once a red flag or risk has been identified, how should the company respond and resolve the red flag?  This is a critical question and process. 
 
Companies are relying on automated solutions that are effective in discovering a potential risk. But such solution do not provide an effective risk mitigation strategy. 
 
The devil surrounding this issue is, of course, in the details.  Let’s start by identifying potential solutions from a general standpoint. In response to a red flag identified in a basic due diligence review, a CCO can:
 
  (1) Conduct an enhanced due diligence to learn more about the third-party and the particular red flag;
  (2) Analyze the issue to determine the nature and extent of the risk (e.g. adverse media of an affiliated company);
  (3) In-person or follow up interviews of third-party officials to collect additional information about candidate and red flag;
  (4) Crafting of specific representations, warranties and certifications to address specific issue (e.g. alleged government official owner or affiliation);
  (5) Additional training on risk issues;
  (6) Robust monitoring program including sampling of specific business transactions;
  (7) Refresh due diligence; and
  (8) Modification of business relationship (e.g. scope of business relationship altered to reduce risks).
 
In many cases, a company can design and implement a risk mitigation program for a specific third-party. The CCO has to identify and assess the risk and develop appropriate tools to mitigate the risk.  When crafting such a solution, the company has to document its analysis and its strategy in case it has to respond to a government (or auditor) inquiry.
 
Often, a red flag can be addressed by asking the candidate about the issue and assessing the response. There is no harm in asking and a candidate may already be familiar with the issue and can provide the candidate’s perspective.  A red flag on paper usually looks worse than under careful scrutiny.  Of course, if the candidate provides a misleading or false response, the company may face significant hurdles to justifying engagement of the third party.  A careful balance has to be considered when conducting a further inquiry.  In most situations, it is best to collect as much information as possible about the red flag and then speak to the third party about the issue.
 
A company also has to consider the extent to which a specific risk can be addressed by securing contractual representations concerning the issue as part of the engagement agreement.  For example, if a company has questions concerning the potential involvement of a family member who is a government official, the company may be able to craft contractual certifications to confirm the exclusion of the family member from any business interactions involving the third party and the company. 
 
In other situations, and depending on the nature and extent of the risk, a company can implement a sampling system for high-risk transactions designed to monitor transactions with the third-party. 
 
These are just examples of solutions that may be used to address the risk exposed in the due diligence process.  From the list above, a company can mix and match solutions, target the specific risk and then document the strategy it is implementing to mitigate the risk. 

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


TEEX/IM TRAINING EVENTS & CONFERENCES

MS_a116. 
Dave Hanke Moves to Arent Fox

(Source: Jessica DuBrock, 
jdubrock@greentarget.com
.)

David Hanke, previously a staff member on the US Senate Select Committee on Intelligence and policy advisor to Senator John Cornyn, has joined Arent Fox’s Washington, D.C. office as Partner in the firm’s International Trade and National Security practice groups.  Contact David at 
david.hanke@arentfox.com
 
or +1 202-857-6176.

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

TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a117. 
ECS Presents “Managing ITAR/EAR Complexities” on 26-27 Mar in Scottsdale, AZ

(Source: S. Palmer, spalmer@exportcompliancesolutions.com.)
 
* What: Managing ITAR/EAR Complexities; Scottsdale, AZ
* When: March 26-27, 2019
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel: Suzanne Palmer, Lisa Bencivenga
* Register here or by calling 866-238-4018 or e-mail 

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

ENEDITOR’S NOTES


Gouverneur Morris (30 Jan 1752 – 6 Nov 1816; was an American statesman, a Founding Father of the United States, and a signatory to the Articles of Confederation and the United States Constitution. He wrote the Preamble to the United States Constitution and has been called the “Penman of the Constitution.” In an era when most Americans thought of themselves as citizens of their respective states, Morris advanced the idea of being a citizen of a single union of states. He represented New York in the United States Senate from 1800 to 1803.)
 – “Americans need never fear their government because of the advantage of being armed, which the Americans possess over the people of almost every other nation.”

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

EN_a319
. 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.

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

EN_a0320
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

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

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.


* SUBSCRIPTIONS: Subscriptions are free.  Subscribe by completing the request form on the Full Circle Compliance website

* BACK ISSUES: An archive of Daily Bugle publications from 2005 to present is available HERE.

* TO UNSUBSCRIBE: Use the Safe Unsubscribe link below.

Scroll to Top