;

19-0326 Tuesday “Daily Bugle'”

19-0326 Tuesday “Daily Bugle”

Tuesday, 26 March 2019

[No items of interest noted today.] 

  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: Arnoldo Antonio Arredondo of Beaumont, TX, Denied Export Privileges for Ten Years
  3. DHS/CBP Posts Harmonized System Update 1904
  4. DoD/DSCA Posts Policy Memo 19-18
  5. State/DDTC: (No new postings.) 
  6. Singapore Customs Circulars of Interest: ASEAN Single Window
  1. Reuters: “U.S. Sanctions Firms Accused of Helping Fund Iran’s Revolutionary Guards”
  2. ST&R Trade Report: “Still No Exclusion Request Process for China List 3 Goods”
  1. A. McGregor and C. Whitehouse: “What Are the Circumstances in Which Acting in Breach of EU Sanctions Will Kill a Claim?”
  2. Johanna Reeves Testifies Before Congress on Proposed Revision of ITAR/USML Cats I, II, and III
  3. K. Lampe and T. Lateef: “What Does a No-Deal Brexit Mean for any Future UK Sanctions Regime?”
  4. V. Gilinski and H. Sokolski: “America’s Nuclear Export Controls are Fundamentally Flawed”
  1. ECS Presents “Mastering ITAR/EAR Challenges” on 30 Apr – 1 May in Nashville, TN
  2. ICPA Presents “2019 EU Conference”, 15-17 May in London
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (12 Mar 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 (14 Mar 2018), DOS/ITAR (19 Mar 2018), DOT/FACR/OFAC (15 Mar 2018), HTSUS (25 Mar 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1 
* * * * * * * * * * * * * * * * * * * *

OGSOTHER GOVERNMENT SOURCES

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

 

* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Country of Origin Marking Requirements for Containers or Holders [Pub. Date: 27 Mar 2019.]

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

(Source:
Commerce/BIS, 26 Mar 2019.)
 
* Respondent: Arnoldo Antonio Arredondo, Selmer, TN
* Charges: On 28 November 2017, in the U.S. District Court for the Southern District of Texas, Arnoldo Antonio Arredondo (“Arredondo”) was convicted of violating Section 38 of the Arms Export Control Act (22 U.S.C. § 2778 (2012)) (“AECA”). Arredondo was convicted of violating Section 38 of the AECA by conspiring and agreeing with others to knowingly and willfully export and cause to be exported, from the United States Munitions List, without the required U.S. Department of State licenses. Arredondo was sentenced to 46 months in prison, three years of supervised release, and an assessment of $100.
* Debarred: Denied export privileges for ten years from the date of Arredondo’s conviction, until 28 November 2027.
* Date of Order: 25 Mar 2019
* * * * * * * * * * * * * * * * * * * *

(Source:
CSMS #19-000160, 26 Mar 2019.)
        
Harmonized System Update (HSU) 1904 was created on March 25, 2019 and contains 1,015 ABI records and 194 harmonized tariff records.

This update contains changes made to support PGA message set functionality. Some, not all, of the associated HTS codes for composite wood products, flagged with an EP7 (TSCA certification ‘may be required’) code, are included. 

In addition, adjustments include those made as a result of the USTR’s Notice of Modification to Section 301 Action: China’s Acts Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. The Notice can be found in the Federal Register dated March 25, 2019, Vol. 84 No. 57, page 11152. It can be retrieved here.


Modifications required by the verification of the 2019 Harmonized Tariff Schedule (HTS) are included as well.

The modified records are currently available to all ABI participants and can be retrieved electronically via the procedures indicated in the CATAIR. For further information about this process, please contact your client representative. For all other questions regarding this message, please contact Jennifer Keeling via email at Jennifer.L.Keeling@cbp.dhs.gov.  

  – Related CSMS No. 19-000082, 19-000155.

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

(Source:
DoD/DSCA, 26 Mar 2019.)
 
  – On February 15, 2019, Macedonia was renamed the Republic of North Macedonia, as reflected by the U.S. Board of Geographic Names precipitated by ratification of the 2018 Prespa Agreement. Effective immediately, SAMM Table C4.T2A. Security Cooperation (SC) Customer and Regional Codes and FMS Eligibility (Regions), is updated to indicate the new name and maintain the historical reference to the former name.

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

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

 
Singapore Customs has released the following document(s) on its website:
 
Notices
 

* Notice No: 03/2019: Updates to Customs Circular No. 15/2017 Live Operation of the ASEAN Single Window (ASW) for the Electronic Exchange of Form D under the ASEAN Trade in Goods Agreement of the ASEAN Free Trade Area (“ATIGA”)

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


NWSNEWS

NWS_a1
7. Reuters: “U.S. Sanctions Firms Accused of Helping Fund Iran’s Revolutionary Guards”
(Source: Reuters, 26 Mar 2019.)
 
The United States on Tuesday imposed fresh sanctions on a network of companies and people in Iran, Turkey and the United Arab Emirates it said was helping to raise billions of dollars to fund the operations of Iran’s elite Revolutionary Guards.
 
The U.S. Treasury blacklisted 25 people and organizations, including a clutch of front companies based in the three countries, that were working on behalf of Iran’s Islamic Revolutionary Guards Corps (IRGC) and Iran’s defense ministry to raise money for their activities.
 
The targeted institutions include banks and other financial institutions such as Ansar Bank, Atlas Exchange, Iranian Atlas Company, the U.S. Treasury said in a statement. …
 
  “They created front companies to access the U.S. financial system on their own,” said Hook, adding that Tehran was feeling the pressure from U.S. sanctions and created the network to look for a way around the restrictions.
 
He said the Ansar front companies had raised $800 million over the last year and a half to buy military vehicles and to fund the IRGC’s and Quds Force operations.
 
Additionally, Hook said the United States was sanctioning Iran’s defense ministry “for its support for terrorism” and providing logistics support to the Revolutionary Guards.
 
A U.S. official said the sanctions were not related to the U.S. State Department’s labeling of groups as so-called foreign terrorist organizations, known as FTOs. The defense ministry was blacklisted in 2007 for its role in weapons of mass destruction proliferation, Hook added. …

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

NWS_a2
8. ST&R Trade Report: “Still No Exclusion Request Process for China List 3 Goods”

 
The Trump administration has yet to comply with a congressional directive to allow requests for exclusions from the Section 301 additional tariffs for most of the Chinese goods subject to such tariffs. Companies interested in seeking such exclusions should consider backing legislation that would require the administration to accept requests.
 
Imports of so-called List 3 goods from China, with an annual import value of about $200 billion, were assessed an additional 10 percent tariff as of Sept. 24, 2018. (Click here for a list of affected goods and details on all actions taken in this Section 301 case.) While the Office of the U.S. Trade Representative has accepted requests for tariff exclusions for List 1 ($34 billion) and List 2 ($16 billion) goods, it has not provided for exclusions for List 3 goods. Congress directed USTR to do so in an explanatory statement accompanying appropriations legislation signed into law in February and requested a report on the nature and timing of this process no later than March 17.
 
However, no such report has been submitted and USTR Robert Lighthizer has continued to assert that no exclusion process will be developed until tariffs on List 3 goods are increased from 10 percent to 25 percent. That was supposed to occur March 1 but in late February President Trump delayed it indefinitely.
 
In the meantime, lawmakers have introduced legislation that would require the establishment of a tariff exclusion request process for goods on List 3 and any future lists. As with the existing exclusion process for List 1 and List 2 goods, refunds could be sought for duties paid on any List 3 goods granted an exclusion. Additionally, efforts are underway to amend this legislation to include an appeals process for goods denied tariff exclusions, with the review possibly being conducted by the International Trade Commission.

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

COMMCOMMENTARY

COM_a1
9. A. McGregor and C. Whitehouse: “What Are the Circumstances in Which Acting in Breach of EU Sanctions Will Kill a Claim?”

(Source: Reynolds Porter Chamberlain, 21 Mar 2019.)
 
* Authors: Andy McGregor, Esq., andy.mcgregor@rpc.co.uk, +44 20 3060 6188; and Christopher Whitehouse, Esq., christopher.whitehouse@rpc.co.uk, +44 20 3060 6024. Both of Reynolds Porter Chamberlain LLP.  
 
An Iranian oil company was defrauded in a failed attempt to circumvent EU sanctions – does its claim survive the Patel v Mirza illegality test?
 
The Transaction
 
The claimant, Iranian Offshore Engineering and Construction Company or IOEC, was a contractor in the offshore oil and gas sector. In 2012, to purchase an oil rig it paid US$87 million to a company established in the BVI and controlled by one of the defendants (“Dean”). Arrangements had been made for Dean to acquire the relevant oil rig from a Maltese subsidiary of the Romanian company Grup Servicii Petroliere SA (“GSP”). Ultimately Dean failed to acquire the relevant oil rig from GSP and IOEC’s payment was misappropriated by several of the defendants including IOEC’s managing Director at the time, Dr Taheri. As a result, IOEC brought proceedings for breach of fiduciary duty, knowing receipt, dishonest assistance, conspiracy and deceit.
 
The judge found in favor or IOEC in almost all respects. Dr Taheri had been central to the fraud and the other defendants in the proceedings had provided wide-ranging assistance.
 
Role of Sanctions in the Defense
 
As a final line of defense, some of the defendants argued that IOEC should not succeed due to the sanctions on trading with Iran in place at the time. They ran the argument that IOEC’s claim arose from a contract which was prohibited by the regulation imposing the EU Iran sanctions regime (Regulation EU/267/2012, “the Regulation”) in which IOEC was specifically identified (although it ceased to be a sanctioned entity by the time it issued proceedings). The effect of that regulation was for it to be prohibited for any person subject to it to sell, supply, transfer or export drilling equipment to IOEC. The defendants contended that the entire set of arrangements taken together was entered into for the purpose of circumventing the sanctions regime.
 
The judge found that the use of BVI-based Dean as an intermediary was an attempt to circumvent the sanctions regime so as to allow an EU company (GSP) to sell to a sanctioned Iranian entity. This brought into play considerations of illegality and of public policy, and required the court to ask itself whether such considerations defeated the otherwise good claims brought by IOEC.
 
To determine this, the court applied the test in the Supreme Court case of Patel v Mirza. That test requires the court to consider whether it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system. In assessing if the public interest would be harmed, the must court consider;
 
  – the underlying purpose of the prohibition that has been breached,
  – the relevant public policy on which the denial of the claim may have an impact and
  – whether denial of an otherwise valid claim would be a proportionate response to the illegality.
 
On the basis of the points above and applying the criteria set out in Patel v Mirza, the judge considered that it would not be contrary to the public interest to enforce IOEC’s relevant claims. The denial of those claims:
 
  – would not enhance the purpose of the sanctions, given that enforcement of the claims would not provide IOEC with a rig, and the purpose of the prohibition was never to prevent the recovery of money obtained by fraud
  – would adversely impact the public policy of preventing and deterring fraud and that of the victims of fraud being able to take steps to recover money and property of which they have been defrauded; and
  – would be a disproportionate response to any illegality involved.
 
The following factors were at the heart of the judge’s assessment:
 
  (a) IOEC’s claims were not to enforce the sale agreement with Dean and IOEC did not and would not actually obtain the GSP Fortuna
  (b) IOEC was not, by the date of issue of proceedings, a sanctioned entity and had the transaction taken place at the date it would not have involved a breach of the sanctions regime
  (c) IOEC’s complaints related to serious wrongs, which were independent of the intended breach of the sanctions regime, which only provided the opportunity for them to take place.
 
Accordingly, IOEC’s otherwise successful claims succeeded.
 
Comment
 
This case provides an interesting example of the extent to which entities complicit in the breach of EU sanctions are still able to bring legal proceedings relating to matters arising out of those breaches. However, it is difficult to draw any broad principles from this case given the specific factual circumstances.
 
Of particular interest is the judge’s analysis that it was considered material that the relevant activity beaching sanctions at the time was no longer prohibited. This reasoning might be criticized in so far as it seems odd to evaluate the severity of illegality in retrospect rather than at the time it was committed. It is also curious that the judge omits explicit consideration in the judgment of the public interest in ensuring that EU sanctions are enforced.

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

 
Testimony prepared for presentation by Johanna Reeves, Executive Director, F.A.I.R. Trade Group, to the U.S. House Committee on Foreign Affairs on March 26, 2019: “Proposed Small Arms Transfers: Big Implications for U.S. Foreign Policy”
 
Chairman Bera, Ranking Member Zeldin, and other distinguished members of the House Foreign Affairs Committee’s Oversight and Investigations Subcommittee, thank you for inviting the F.A.I.R. Trade Group to testify today on this important issue of reform to our export control regulations, and the perceived impact such reform may have on our national security and foreign policy. …
 
Almost a year ago, the Administration published the last in a series of proposed rules to reform the U.S. export control system; which reform initiative began in 2010 under the Obama Administration. The proposed rules that are at the heart of today’s hearing are to transition commercially available firearms from the export controls of the U.S. Department of State’s International Traffic in Arms Regulations (ITAR) to the controls of the U.S. Department of Commerce known as the Export Administration Regulations (EAR). It is interesting to note that when the Obama Administration launched the Export Control Reform (ECR) initiative, the ITAR U.S. Munitions List (USML) Categories I, II, and III, the Categories that control firearms and ammunition, were the first categories to be revised. The fact that the rules were not rolled out until May 2018 does not make it a creation of President Trump.
 
Although no longer branded “ECR,” the proposed rules to revise Categories I, II and III are a continuation of the U.S. Government’s effort to modernize U.S. export controls and better focus ITAR controls over those weapons or articles that are inherently for military use or that provide the United States with a critical military or intelligence advantage. The purpose of the proposed revisions to the USML is to adjust the scope of the Department of State’s jurisdiction to focus on those weapons or articles that are inherently for military use, or that provide the United States with a critical military or intelligence advantage. All other items will transition to the export controls of the Department of Commerce, as has happened for all previously implemented reform efforts. What is being proposed for USML Categories I, II, and III is nothing new.
 
Since the publication of the proposed rules for USML Categories I, II, and III, there has been a plethora of misinformation and mischaracterizations of the proposed rules. Indeed, these distortions, many of which are politically motivated, have given rise to the current attempts to prevent the President from exercising authority which Congress originally granted under the Arms Export Control Act. The fact is, the proposed transition rules are not a decontrol over the manufacture, transfer, or export of firearms or ammunition. The proposed changes are an effort to reform outdated regulations and right-size our export control system. The proposed shift in oversight responsibility is long overdue and will help strengthen the national security of the United States by ensuring that export licensing authorities can focus on those items that warrant control under the ITAR rather than waste resources on export licensing for springs and bolts for items that are abundant throughout the world. In addition, this reform is absolutely necessary to ensure “America’s ability to engage effectively with the rest of the world and keep our most sensitive technology away from those who would do us harm.”
 
These are not my words. These are the words of Defense Secretary Gates in 2010, when President Obama issued the directive to overhaul the overly complicated U.S. export controls system, a system with too many redundancies to effectively support the national security and foreign policy interests of the United States. By modernizing U.S. export controls, we could more effectively account for emerging critical technologies, whose exports would be subject to closer scrutiny than those items readily available at Walmart or hardware stores.
 
Items that Have Already Transitioned from State to Commerce Export Controls
 
Since the Obama Administration first rolled out ECR in 2010, several items once classified as defense articles and subject to ITAR licensing controls of the Department of State have moved over to the licensing controls of the Department of Commerce. The following USML categories were revised under the Obama Administration:
 
  – Launch vehicles and missiles;
  – Explosives and propellants
  – Vessels of War
  – Tanks and military vehicles
  – Military aircraft
  – Training equipment
  – Personal protective equipment
  – Military electronics
  – Fire control
  – Toxicological agents
  – Spacecraft and satellites
  – Nuclear weapons
  – Directed energy weapons
  – Gas turbine engines
  – Submersible vessels
 
The list of items that have already moved off the U.S. Munitions List and over to the Commerce Control List is extensive. Every single one of these items is subject to the same set of controls that commercially available firearms and ammunition would be, including the treatment of information published on the Internet.
 
Military Weapons Will Stay Controlled Under ITAR
 
Under the proposed transition rules, military weapons will remain under the State Department licensing authority. As I stated earlier, fully automatic firearms will remain under USML Category I. A fully automatic firearm includes those firearms that have the option to select either a semiautomatic function, a two or three-round burst function (in other words it fires two or three rounds with a single pull of the trigger), and also a fully automatic function. These firearms, known as “select-fire” firearms, are well recognized as military weapons. These should not be confused with purely semi-automatic firearms. To that end, some argue the AR15 rifle, a purely semi-automatic rifle, is a military-style weapon. It is not, and it should not be conflated with a rifle that has full automatic capabilities. AR15-type rifles are not used in the military, and to say there is little difference between a semi-automatic firearm and a fully automatic firearm is disingenuous. Congress itself recognized this substantial difference when it established the National Firearms Act of 1934, which imposed significant restrictions on civilian possession of fully automatic firearms, but not on semi-automatic firearms.
While it is true that soldiers in combat may use fully automatic firearms in semi-automatic mode, this is dependent on the situation and threat level. In close quarters, the military trains shooters to engage targets with controlled pairs (two shots). If fire suppression is needed, then full auto is more effective at keeping the enemy down and permits freedom of movement by friendly forces. The use of semi or single shot or controlled pair is more prevalent but it is mostly a matter of ammunition consumption so as not to waste ammunition. For the soldier, the full auto option offers reassurance and a tactically sound choice. It provides lethality overmatch and makes a smaller fighting force more effective.
 
The AR15, a sporting rifle that has been widely available on the commercial market since 1963, cannot and must not be grouped in the same category as the assault weapon described above. The semi-automatic AR15 (or other model) rifle does not have the design features that allows it to accept a full automatic sear that changes its design into a machinegun capable of shooting automatically. Indeed, the current effort to reform our export control laws will allow the U.S. Government to focus more on controlling true military assault weapons.
 
Domestic Controls over Firearms and Ammunition
 
Any reforms to our export control system will not affect in any way domestic controls over firearms and ammunition. The Bureau of Alcohol, Tobacco, Firearms and Explosives is the agency in charge of enforcing the Gun Control Act and the National Firearms Act, and these statutes will continue to regulate the manufacture, transfer and possession of firearms and ammunition.
 
ATF controls over firearms in the United States extends to 3-D printed guns. The Gun Control Act prohibits the manufacture, import, sale, shipment, delivery, possession, transfer and receipt of any handgun that is undetectable by x-ray machines commonly used at airports. Violations of this statute are punishable by up to five years imprisonment and a fine of $250,000. The last time this prohibition was due to sunset in 2013, Congress passed a renewal unanimously by voice vote.
 
U.S. Department of Commerce Export Controls
 
  (1) Export License Requirements. It is important to remember that not all firearms and ammunition are slated to transition to Commerce controls. The firearms that will remain under the Department of State are those that are inherently military, including fully automatic firearms, regardless of the caliber, fully automatic shotguns, magazines and drums with a capacity of 50 rounds or greater, and all specially designed parts and components therefor. The types of ammunition that will remain with the Department of State include ammunition pre-assembled into links or belts, and projectiles with a core or projectile produced from tungsten, steel, or beryllium copper alloys (also referred to as armor piercing ammunition).
 
Contrary to many of the objections that have been voiced about the proposed rules, the transition of firearms and ammunition from State Department’s oversight to the Department of Commerce’s control will NOT result in a decontrol or a deregulation of these articles. Firearms transitioning to the Department of Commerce will be subject to licensing controls under National Security, Regional Stability, Crime Control and Detection, the Firearms Convention, United Nations Sanctions, and Anti-Terrorism. Indeed, the proposed rules make it abundantly clear that the Commerce Department will require U.S. Government authorization to export or reexport firearms or ammunition transitioning from the USML to ANY country, including Canada. The transition will not result in the unlicensed export of firearms and ammunition.
 
It must be emphasized that the proposed changes are to license processing, NOT POLICY. End-use monitoring will continue, including vetting of potential end-users, and contrary to popular belief, the State Department, as well as the Department of Defense will remain very involved in the review of export license applications for national security and foreign policy reasons. Commerce Department will continue to staff license requests to executive agencies for review, just as State Department has done under ITAR. Of course, we must not forget the fact that the Commerce Department, like the State Department today, will not approve any license application if the export will violate the laws of the destination country.
 
  (2) Office of Export Enforcement. Another myth is that the Department of Commerce does not have the capability to control firearms or ammunition exports, or has looser licensing rules and procedures. In reality, the Department of Commerce has an arsenal of tools it can use, and indeed does use already to effectively control exports and enforce against export violations, including those that have not yet occurred. The Department of Commerce, Bureau of Industry and Security (BIS) Export Enforcement consists of the Office of Export Enforcement (OEE), the Office of Enforcement Analysis (OEA), and the Office of Antiboycott Compliance (OAC). The overarching mission is to protect the U.S. national security, homeland security, foreign policy and economic interests through a law enforcement program focused on: sensitive exports to hostile entities or those that engage in onward proliferation; prohibited foreign boycotts; and related public safety laws. BIS’s Export Enforcement is an elite law enforcement organization recognized for its expertise, professionalism, integrity, and accomplishments. It accomplishes its mission through preventative and investigative enforcement activities and then, pursuing appropriate criminal and administrative sanctions against export violators.
 
In particular, the Office of Export Enforcement is dedicated to protecting U.S. national security, foreign policy, and economic interests by investigating violations, prosecuting violators of export control laws, interdicting illegal exports, and educating parties to export transactions on how to improve export compliance practices. To accomplish this, OEE Special Agents work with Commerce Department licensing officials and policy staff to deter the export of items which, in the hands of unreliable users, can prove damaging to U.S. national security and foreign policy interests.
 
Noteworthy is the fact that Commerce enforcement of export controls is carried out by Special Agents, sworn federal officers with “authority to bear firearms, make arrests, execute search warrants, serve subpoenas, detain and seize items about to be illegally exported, and order the redelivery to the United States of items exported in violation of U.S. law.” Indeed, OEE is the only federal law enforcement agency exclusively dedicated to the enforcement of export control laws, specifically the EAR, and it works closely with the Department of Justice to prosecute criminal violations, and with the Office of Chief Counsel for Industry and Security for civil enforcement cases.
Under the ITAR, the State Department’s Office of Defense Trade Controls Compliance investigates export violations. This office is comprised of Compliance Specialists who are not law enforcement officers. What does this all mean? Stated plainly, this means that the Commerce Department already has in place the resources to send special agents to investigate suspected violations of the EAR. And they do. This includes investigating suspected export violations by U.S. persons, as well as suspected unauthorized reexports or transfers by foreign persons. As outlined on OEE’s website, OEE Special Agents also conduct end use checks to confirm items are being used in accordance with any license conditions, as well as to assess the suitability of foreign end-users to receive U.S.-origin licensed goods and technology, assess prospective end-users on pending license applications for diversion risk, and conduct educational outreach to foreign trade groups.
 
In a recent Commerce publication, Don’t Let This Happen To You (Nov. 2018), in fiscal year 2017, BIS investigations led to the criminal convictions of 31 individuals and businesses for export violations with penalties of over $287 million in criminal fines, more than $166 million in forfeitures, and 576 months of imprisonment. In addition, OEE and BIS’s Office of Chief Counsel completed 52 administrative export matters, resulting in over $692 million in civil penalties.” In contrast, in 2017 and 2018 combined the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) issued only two consent agreements.
 
Fostering Competitiveness of the American Manufacturer
 
Another unfortunate truth of our current export control system is the unintended harm on our ability to provide weapons to our allies. It is no secret that many foreign governments restrict bidding on supply contracts to non-ITAR-controlled product. This affects U.S. manufacturers from being able to sell firearms and firearm components, all controlled under the ITAR. To illustrate, let me draw your attention to a French tender for semi-automatic pistols. Although it does not specifically reference “ITAR-free,” the governing French legislation requires the applicant offer:
 
  (1) A certification according to which the offeror will be able to meet all obligations in terms of export, import, transfer and transit of defense articles related to the awarded contract, including those obligations contained in any other document related to such tender; and
  (2) The indication of any restrictions resulting from any security or export-control regime applicable to such offeror and/or its defense articles or services and which affects the disclosure, transfer and/or usage of such defense articles and/or defense services (i.e. maintenance services, product support services, etc.).
 
The legislation does not cite to the ITAR precisely. However, because of the inherent controls of the ITAR that affect all U.S.-origin defense articles and services, especially in terms of prior export license and the required prior approvals from the Department of State for reexports or retransfers, the above provisions of the French legislation nearly eliminate any chance for success in proposing US-origin ITAR-controlled defense articles and/or services in response to this tender (and to any tender for defense articles and services issued by the French Government). On the contrary, this situation does not replicate among E.U. Member States to the extent that, E.U. member states have agreed to principles of mutual trust and reciprocity between the Member States’ export control policies and procedures for the defense sector so that once delivered to one Member State, defense articles and/or services from another Member State are controlled onward only by the recipient Member State export control policies and procedures.
 
Another example is the restriction on countries sourcing product made with U.S. – origin components and parts. The ITAR restrictions on reexport attach to each defense article, so that even for ITAR-controlled parts and components that are incorporated into a non-U.S. end-item, the end-item becomes subject to the ITAR requirement for advance U.S. Government approval for nearly all reexports. At this time, all firearm parts and components and accessories are subject to ITAR export and reexport controls, with very few exceptions. Regardless of the size of the part, whether it be a bolt or a spring, or a barrel or a receiver, the part is subject to ITAR restrictions on reexports. In many cases, the process for obtaining such reexport approval has resulted in significant and even detrimental delays, even when the reexport is for ally governments.
 
Consequently, there is a push to reduce U.S.-made components from defense products so as not to be burdened with the reexport restrictions under ITAR. Our allies are shunning U.S. products because of ITAR, both because of unreliable delivery and the inability to reexport. The result is they source their products from other countries, including Russia and China. This poses a significant threat to our national security, because not only is the U.S. removed from the immediate supply chain (including potential U.S. government oversight thereof), but long term we are isolated from the replacement and repair market. This has very significant consequences on the American defense sector, not the least of which is the firearms and ammunition manufacturers.
 
Conclusion
 
Because of the age and wide-scale availability of the underlying technology, most firearms do not possess characteristics or parameters that provide a critical military advantage to the United States, nor are firearms exclusively available from the United States. In fact, it is these points that make the current system of export controls particularly harmful to U.S. industry, and indeed U.S. national security because of global competition and the inability of U.S. firearms companies to compete with foreign sources.
The policies and regulations currently in place have not prevented firearms or the related technology from going to restricted places. Indeed, to our detriment they have only prevented the U.S. firearms industry from becoming reliable suppliers to our NATO and non-NATO allies, and in general competing effectively in the global market place. Similar to the challenges faced by other defense industries, the firearms trade has been negatively impacted by the incentives of foreign companies and governments to avoid U.S.-origin firearms. Our inability to effectively compete globally will undermine our firearms manufacturing base by inducing U.S. companies to move production offshore. This will affect jobs and domestic production levels, thus weakening the US Defense Industrial base. …
 
We urge Congress to permit the right-sizing of the longstanding one-size-fits-all export policy for firearms and ammunition, and allow the firearms and ammunition sector to be regulated as other defense sectors are. This reform will not result in the decontrol of firearms or ammunition, and is critical to the positioning of our manufacturers in the world market and thus our national security. It is time to control exports of firearms and ammunition as we do all other sectors in the defense industry, and we look to this Committee to ensure this occurs. …

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

 
* Authors: Kristin Lampe, Esq., and Tahleel Lateef, Esq.. Both of Freshfields Bruckhaus Deringer LLP.
 

  (1) No immediate change

 
Following Brexit, the UK will retain its existing sanctions regime. Sanctions currently in place before Exit Day will be implemented in the UK either by the EU (Withdrawal) Act 2018 (the Withdrawal Act) or under new regulations created by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA).
 
The Withdrawal Act carries across EU law into UK law, and enables the Government to address any deficiencies by enacting new statutory instruments. In contrast, SAMLA creates a free standing and unilateral power for the UK to impose its own sanctions.
 
The combined purpose of these Acts is to ensure continuity between the existing EU and new UK sanctions regimes.
 
  (2) Sanctions powers come home
 
As an EU member state, the UK’s power to impose domestic sanctions is limited to certain anti-terrorism related measures.
 
Except certain UN measures, all other sanctions currently in effect in the UK are imposed by EU law and have direct effect in the UK under the 1972 European Communities Act, which is set to be repealed by the Withdrawal Act on Exit Day.
 
Post-Brexit, the UK will be free to impose unilateral sanctions that are not in line with those of the EU. Only time will tell whether the Treasury Committee’s reference to “flexible” sanctions means a more onerous and extensive UK regime. If Brexit is delayed (or if the UK ends up staying in the EU) it remains to be seen how the UK’s powers under SAMLA will interact with the EU’s Common Foreign and Security Policy.
 
  (3) Existing financial sanctions licenses remain valid, for now
 
The Office of Financial Sanctions Implementation (OFSI) has updated its “Post-EU” guidance to confirm that any existing financial sanctions licenses issued by the Treasury will remain valid until they expire, are revoked or are replaced by a license under the UK’s new, post-Brexit regime. This indicates that business can continue as usual immediately following Brexit.
 
Looking ahead, the UK will no longer have to follow the EU regime on sanctions authorizations and exemptions, and new authorizations will be granted under SAMLA. It will be important for businesses to continue to monitor changes to UK sanctions in case these impact on existing licenses and to track any differences between the SAMLA and the EU retained law regimes.
 
Two steps businesses can take to prepare for a no-deal Brexit:
 
  (1) Broaden approach to sanctions law compliance:
 
Currently, the UK and EU sanctions regimes are aligned, so compliance with one typically equates to compliance with the other. Post-Brexit this will no longer be guaranteed.
 
In the future, the UK could be more stringent than its European counterparts, particularly regarding counter-terrorism-related asset freezes. For example, the recent proscription of Hezbollah (including its political wing) as a “Terrorist Organization” could, in the weeks following Brexit, be bolstered by a corresponding asset-freeze measure under the UK’s new counter-terrorism sanctions powers.
 
  (2) Review existing UK financial sanctions licenses used to carry out European activities:
 
The question remains of whether financial sanctions licenses granted by UK authorities will continue to be recognized by the EU in a no-deal scenario. To date, there has been no official announcement from the EU clarifying this issue, or on more general cooperation between the UK and EU on sanctions alignment and enforcement post-Brexit.
 
As the final countdown to a potential no-deal Brexit continues, it is important for businesses to review any UK financial sanctions licenses used to conduct European activities and ensure that such licenses continue to be effective in the future.

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

(Source:
The National Interest, 25 Mar 2019.) [Excerpts.]
 
* Authors: Victor Gilinski, Program Advisor for the Nonproliferation Policy Education Center (NPEC), and Henry Sokolski, Executive Director of NPEC, info@npolicy.org, +1 571-970-3187.
 
Washington must identify countries or regions that ought to not receive significant nuclear goods or technology, starting with the Middle East.
 
Congressional battles over U.S. nuclear exports revolve around terms in civil cooperation agreements intended to protect against their diversion to military uses. The latest example is the whether the proposed agreement with the Kingdom of Saudi Arabia should include a bar to uranium enrichment. It definitely should, but is this enough to keep the kingdom from making bombs?
 
The question applies not only to the kingdom. The civil cooperation agreements with importers are the legal basis of American trade in nuclear technology. The fundamental requirement, the sine qua non, is that such exports be subject to periodic inspection by the International Atomic Energy Agency (IAEA). There are generally additional conditions concerning the disposition of produced plutonium and production of enriched uranium. Such agreements make sense among countries with a history of observing their international commitments. …

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

TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a113. ECS Presents “Mastering ITAR/EAR Challenges” on 30 Apr – 1 May in Nashville, TN

(Source: Suzanne Palmer, spalmer@exportcompliancesolutions.com)
 
* What: Mastering ITAR/EAR Challenges; Nashville, TN
* When: April 30-May 1, 2019
* Sponsor: Export Compliance Solutions (ECS)
* ECS Speaker Panel:  Suzanne Palmer; Lisa Bencivenga; Timothy Mooney, Debi Davis, Matthew McGrath, Matt Doyle
* Register here or by calling 866-238-4018 or email spalmer@exportcompliancesolutions.com 
* * * * * * * * * * * * * * * * * * * *

TE_a214. ICPA Presents “2019 EU Conference”, 15-17 May in London

(Source: ICPA)
 
* What: 2019 EU Conference
  – Import and Export Track (click here for the agenda)
  –
Professional Speakers
  – Hot Industry Topics
* When: 15-17 May 2019
* Where: The Tower Hotel, London, United Kingdom.
* Sponsor: International Compliance Professionals Association (ICPA)
* Information & Registration: Click here.
* * * * * * * * * * * * * * * * * * * *

ENEDITOR’S NOTES

* Robert Frost (Robert Lee Frost; 26 Mar 1874 – 29 Jan 1963; was an American poet. His work was initially published in England before it was published in America. Known for his realistic depictions of rural life and his command of American colloquial speech, Frost frequently wrote about settings from rural life in New England in the early twentieth century, using them to examine complex social and philosophical themes. Frost was honored frequently during his lifetime, receiving four Pulitzer Prizes for Poetry.)
  – “By working faithfully eight hours a day you may eventually get to be boss and work twelve hours a day.”
  – “Education is the ability to listen to almost anything without losing your temper or your self-confidence.”
 
* A. E. Housman (Alfred Edward Housman; 26 Mar 1859 – 30 Apr 1936; was an English classical scholar and poet, best known to the general public for his cycle of poems, A Shropshire Lad. Lyrical and almost epigrammatic in form, the poems wistfully evoke the dooms and disappointments of youth in the English countryside.  Housman was one of the foremost classicists of his age, and has been ranked as one of the greatest scholars who ever lived. He established his reputation publishing as a private scholar and, on the strength and quality of his work, was appointed Professor of Latin at University College London and then at the University of Cambridge. His editions of Juvenal, Manilius and Lucan are still considered authoritative.)
  – “Great literature should do some good to the reader: must quicken his perception though dull, and sharpen his discrimination though blunt, and mellow the rawness of his personal opinions.”
  – “And malt does more than Milton can to justify God’s ways to man.”
 

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

EN_a316
. 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: 12 Mar 2019: 84 FR 8807-8809: Extension of Import Restrictions Imposed on Archaeological and Ecclesiastical Ethnological Material From Honduras
 

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: 14 Mar 2019: 84 FR 9239-9240: Bump-Stock-Type Devices 

 

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: 19 Mar 2019: 84 FR 9957-9959: Department of State 2019 Civil Monetary Penalties Inflationary Adjustment. 
  – The only available fully updated copy (latest edition: 19 Mar 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 Mar 2019: 84 FR: 9456-9458: List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List) 
  
* USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), 1 Jan 2019: 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:

25 Mar 2019: Harmonized System Update 1904, contains 1,015 ABI records and 194 harmonized tariff records 

  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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

EN_a0317
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 7,000 readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOE/NRC, DOJ/ATF, DoD/DSS, DoD/DTSA, FAR/DFARS, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

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

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


* 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