19-0409 Tuesday “Daily Bugle'”

19-0409 Tuesday “Daily Bugle”

Tuesday, 9 April 2019

No items of interest noted today.
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. DoD/DSCA Policy Memos of Interest: Foreign Military Sales
  4. DoD/DSS Releases Assessment and Authorization Process Manual (DAAPM) Version 2.0
  5. Justice: “Standard Chartered Bank Admits to Illegally Processing Transactions in Violation of Iranian Sanctions and Agrees to Pay More Than $1 Billion”
  6. State/DDTC: (No new postings.)
  7. Treasury/OFAC Announces Settlement with Standard Chartered Bank for Apparent Violations of Multiple Sanctions Programs
  8. EU Extends Restrictive Measures Against Iran
  1. Defense News: “Top U.S. Lawmakers Demand Turkey Choose: America’s F-35, Or Russia’s S-400”
  2. Reuters: “In Unprecedented Move, U.S. Names Iran’s Revolutionary Guards Terrorist Group”
  3. Reuters: “More Than 100 Dismissed in Airbus Compliance Crackdown: Sources”
  1. G.W. Thompson: “Comments Invited on International Tariff Nomenclature”
  2. M. Volkov: “Five Signs Your Company Lacks Integrity”
  3. S. Kohn Ross & F.P. Glucoft: “Warning to Employers when Staffing Special Projects”
  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 (5 Apr 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 (2 Apr 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 



[No items of interest noted today.]   

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


* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application and Permit for Importation of Firearms, Ammunition and Defense Articles [Pub. Date: 10 Apr 2019.]
* State; NOTICES; Blocking or Unblocking of Persons and Properties [Pub. Date: 10 Apr 2019.]

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Commerce/BIS: (No new postings.)
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DoD/DSCA Policy Memos of Interest: Foreign Military Sales

DoD/DSCA, 9 Apr 2019.)
  DSCA will assist the Implementing Agencies to identify any cases requiring surcharge rate adjustments as a result of this policy clarification as well as to communicate these changes to the international partner. Effective immediately, DSCA Policy Memo 18-48, Foreign Military Sales (FMS) Administrative Surcharge Rate Change Clarification is rescinded. Additionally, the attached implementation guidance replaces the guidance that accompanied DSCA policy memorandum 18-27.

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DoD/DSS Releases Assessment and Authorization Process Manual (DAAPM) Version 2.0
DoD/DSS, 8 Apr 2019.)

The NISP Authorization Office (NAO) released the DSS Assessment and Authorization Process Manual (DAAPM) Version 2.0. The updated version is posted on the NAO Risk Management Framework site (here) under “Policy and Guidance”. DAAPM Version 2.0 becomes effective on May 6, 2019, and supersedes all previous versions of the DAAPM and ODAA Process Manuals. If you have questions or concerns, contact your assigned Information Systems Security Professional (ISSP). If you have specific questions about the format, content, or want to provide general comments, send those to dss.quantico.dss hq.mbx.odaa@mail.mil.

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Justice, 9 Apr 2019.) [Excerpts.]
Iranian National Indicted and Former SCB Employee Pleaded Guilty for Criminal Conspiracy to Violate Iranian Sanctions
Standard Chartered Bank (SCB), a global financial institution headquartered in London, England, has agreed to forfeiture of $240 million, a fine of $480 million, and to the amendment and extension of its deferred prosecution agreement (DPA) with the Justice Department for an additional two years for conspiring to violate the International Emergency Economic Powers Act (IEEPA). This criminal conspiracy, lasting from 2007 through 2011, resulted in SCB processing approximately 9,500 financial transactions worth approximately $240 million through U.S. financial institutions for the benefit of Iranian entities. …
The New York County District Attorney’s Office (DANY) is also announcing today that SCB has agreed to amend its DPA with DANY and extend for two additional years, and to pay an additional financial penalty of $292,210,160. Under the amended DPA with DANY, SCB has admitted that it violated New York State law by, among other things, falsifying the records of New York financial institutions. SCB has also entered into separate settlement agreements with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Board of Governors of the Federal Reserve System (the Federal Reserve), the New York State Department of Financial Services (DFS), and the United Kingdom’s Financial Conduct Authority (FCA) under which SCB shall pay additional penalties totaling more than $477 million. The Justice Department has agreed to credit a portion of these related payments and, after crediting, will collect $52,210,160 of the fine, in addition to SCB’s $240 million forfeiture.
In connection with the conspiracy, a former employee of SCB’s branch in Dubai, United Arab Emirates (UAE), referred to as Person A, pleaded guilty in the District of Columbia for conspiring to defraud the United States and to violate IEEPA. A two-count criminal indictment was unsealed today in federal court in the District of Columbia charging Mahmoud Reza Elyassi, an Iranian national, 49, and former customer of SCB Dubai, with participating in the conspiracy.
  “Today’s resolution sends a clear message to financial institutions and their employees: if you circumvent U.S. sanctions against rogue states like Iran-or assist those who do-you will pay a steep price,” said Assistant Attorney General Benczkowski. “When a global bank processes transactions through the U.S. financial system, its compliance program must be up to the task of detecting and preventing sanctions violations-and when it is not, banks have an obligation to identify, report, and remediate any shortcomings. The Justice Department is committed to protecting our U.S. financial system and will continue to hold financial institutions and individuals to account when they violate U.S. sanctions laws.”
  “SCB and the individuals whose charges were unsealed today undermined the integrity of our financial system and harmed our national security by deliberately providing Iranians with coveted access to the U.S. economy,” said U.S. Attorney Liu. “The financial penalty announced today leaves no doubt that repeat corporate offenders with deficient compliance programs will pay a steep price. When bank employees and customers conspire to violate U.S. sanctions and subvert our national security, we will bring them to justice no matter where they reside or operate.”
  “U.S. sanctions laws exist to protect our national security and the integrity of our financial systems,” said FBI Assistant Director in Charge Sweeney. “Global banks that facilitate transactions through our financial institutions have to play by these rules, plain and simple. Allowing hostile nations access to our economy is dangerous business. The deferred prosecution agreement and charges announced today make it abundantly clear that any alleged violation of IEEPA, whether on behalf of an individual or entity, will not be taken lightly.”
  “The financial penalty announced today should dissuade other financial institutions around the world from thinking they can circumvent U.S. sanctions by moving money around the world through various institutions and in various forms,” said IRS-CI Chief Fort. “Following complex money trails is what we do-so too is holding those accountable who try to avoid following the law.”
  “Our office’s unique jurisdiction and expert personnel have again enabled us to deliver hundreds of millions in ill-gotten gains to the People of New York while contributing to America’s longstanding effort to promote democratic values around the world,” said Manhattan District Attorney Vance. “We are honored and privileged to collaborate in this shared endeavor with the supremely talented public servants of the U.S. Departments of Justice and Treasury, the New York Department of Financial Services, and the Federal Reserve Bank of New York.”
A two-count felony criminal information was filed today in the District of Columbia charging SCB with illegally conspiring to violate IEEPA. The first count alleges SCB’s participation in a criminal conspiracy from 2001 through 2007; the United States first charged SCB with this illegal conduct on Dec. 10, 2012, and under the terms of a DPA entered the same day, the government agreed to defer prosecution and SCB agreed to pay a financial penalty of $227 million. The second count alleges SCB’s participation in a criminal conspiracy to violate IEEPA from 2007 through 2011. This latter conspiracy resulted in SCB intentionally processing U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities worth approximately $240 million. In the amended DPA, SCB admitted and accepted responsibility for its criminal conduct, agreed to extend the term of the agreement for an additional two years and, among other things, agreed to additional cooperation, compliance and disclosure obligations.
As part of the amended DPA announced today, SCB admitted that, from 2007 through 2011, two former employees of its branch in Dubai, willfully conspired to help Iran-connected customers conduct U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities. One of these Iran-connected customers was Elyassi, an Iranian national who operated business accounts with SCB’s Dubai branch while residing in Iran. SCB’s former employees helped Elyassi manage these accounts, concealed their Iranian connections, and facilitated foreign currency transactions in U.S. dollars. SCB’s former employees knew that Elyassi’s business organizations operated from Iran and conducted U.S. dollar transactions for the benefit of Iranian interests, and helped Elyassi disguise his Iranian connections to avoid suspicion.
According to the indictment unsealed today, Elyassi and his co-conspirators registered numerous supposed general trading companies in the UAE, and used those companies as fronts for a money exchange business located in Iran. Between November 2007 and August 2011, Elyassi used a business account at SCB’s Dubai branch to cause U.S. dollar transactions to be sent and received through the U.S. financial system for the benefit of individuals and entities ordinarily resident in Iran in violation of U.S. economic sanctions. The charges in the indictment as to Elyassi are merely allegations, and Elyassi is presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
SCB admitted to processing approximately 9,500 U.S. dollar transactions through the United States totaling approximately $240 million on behalf of Elyassi’s companies between 2007 and 2011. More than half of these U.S. dollar transactions were the result of deficiencies in SCB’s compliance program which allowed customers to request U.S. dollar transactions from within sanctioned countries, including Iran.
Since mid-2013, SCB has engaged in significant remediation, including the comprehensive enhancement of its U.S. economic sanctions compliance program and significant improvements to its financial crime compliance program. Once presented with evidence of potential post-2007 sanctions violations, SCB provided substantial cooperation in the government’s investigation, including by producing significant evidence of criminal wrongdoing perpetrated by its employees and customers. …

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State/DDTC: (No new postings.)


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Treasury/OFAC Announces Settlement with Standard Chartered Bank for Apparent Violations of Multiple Sanctions Programs
(Source: Treasury/OFAC, 9 Apr 2019.)  
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $639,023,750 settlement with Standard Chartered Bank (“SCB” or the “Bank”), a financial institution headquartered in the United Kingdom. The bank has agreed to settle its potential civil liability for apparent violations of the now-repealed Burmese Sanctions Regulations (BSR); the Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR); the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR); the now-repealed Sudanese Sanctions Regulations; and the Syrian Sanctions Regulations, 31 C.F.R. Part 542 (SySR), or Executive Order 13582 of August 17, 2011, “Blocking Property of the Government of Syria and Prohibiting Certain Transactions With Respect to Syria” (E.O. 13582).
From June 2009 until June 2014, SCB processed 9,335 transactions totaling $437,553,380 that were processed to or through the United States. All of these transactions involved persons or countries subject to comprehensive sanctions programs administered by OFAC. The majority of the conduct concerns Iran-related accounts maintained by SCB’s Dubai, UAE branches (“SCB Dubai”), including accounts at SCB Dubai held for a number of general trading companies, and a petrochemical company. SCB Dubai processed USD transactions to or through SCB’s branch office in New York (“SCB NY”) or other U.S. financial institutions on behalf of customers that sent payment instructions to SCB Dubai while physically located or ordinarily resident in Iran. OFAC determined that the Bank did not voluntarily self-disclose the apparent violations, and the apparent violations constitute an egregious case.
Separately, the bank has agreed to settle its potential civil liability for apparent violations of the Zimbabwe Sanctions Regulations (ZSR). The bank has agreed to remit $18,016,283. All of the transactions giving rise to the Zimbabwe-Related Apparent Violations involved persons identified on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”) or parties that were owned 50 percent or more, directly or indirectly, by persons on the SDN List at the time the transactions occurred. The designated and/or blocked persons maintained account relationships with SCB’s affiliate in Zimbabwe (“SCBZ”), and engaged in funds transfer or debit/credit card transactions whose net settlement transfers were sent to, and processed by SCB NY or other U.S. financial institutions. SCB NY processed 1,795 transactions totaling $76,795,414, for or on behalf, or that otherwise contained a property interest, of those sanctioned entities.
OFAC determined that SCB voluntarily self-disclosed the Zimbabwe-Related Apparent Violations and that the Zimbabwe-Related Apparent Violations constitute a non-egregious case.
For more information, please visit the following
web notice and
settlement agreement.

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EU Extends Restrictive Measures Against Iran
Council Implementing Regulation (EU) 2019/560 of 8 April 2019 implementing Regulation (EU) No 359/2011 concerning restrictive measures directed against certain persons, entities and bodies in view of the situation in Iran
Council Decision (CFSP) 2019/562 of 8 April 2019 amending Decision 2011/235/CFSP concerning restrictive measures directed against certain persons and entities in view of the situation in Iran

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Defense News: “Top U.S. Lawmakers Demand Turkey Choose: America’s F-35, Or Russia’s S-400”

Defense News, 9 Apr 2019.) [Excerpts.]

Top U.S. lawmakers are threatening to pass legislation that would bar NATO ally Turkey from buying the F-35 fighter jet, and sanction the country if it buys the Russian S-400 air defense system, ratcheting pressure via a
New York Times op-ed on Tuesday.
If Turkey accepts the S-400, “no F-35s will ever reach Turkish soil. And Turkish participation in the F-35 program, including manufacturing parts, repairing and servicing the fighters, will be terminated, taking Turkish companies out of the manufacturing and supply chain for the program,” wrote the bipartisan leaders of the Senate Armed Services Committee and Senate Foreign Relations Committee.
“We are committed to taking all necessary legislative action to ensure this is the case. Turkey is an important partner in the F-35 program, but it is not irreplaceable,” the lawmakers added.
The letter targets Turkish President Recep Tayyip Erdogan’s decision-making calculus, emphasizing economic costs if Turkey loses co-production of the Lockheed Martin-made F-35 and geopolitical costs if Erdogan steps toward Moscow and away from NATO.
The letter is also a signal to Erdogan that he cannot rely on
personal diplomatic efforts by U.S. President Donald Trump, as Congress will stand in the way. …
If Erdogan accepts delivery of the S-400, “Turkey will be sanctioned as required by United States law under the Countering America’s Adversaries Through Sanctions Act. Sanctions will hit Turkey’s economy hard – rattling international markets, scaring away foreign direct investment and crippling Turkey’s aerospace and defense industry,” the lawmakers warn.
Among the “severe consequences” if Turkey abandons (or is forced to abandon) the F-35 program, its $1.25 billion-plus investment “will be squandered” and “it will not receive the more than 100 F-35s it planned to purchase, and it will be forced to settle for a less-capable fighter aircraft that will not arrive for many years,” according to the senators.
  “Turkish companies that produce parts for the F-35 will see their orders dry up completely. Its F-35 engine maintenance, repair, overhaul, and upgrade facility will see all its work go to other facilities in Europe,” they wrote. “President Erdogan’s hope to make the Turkish defense industry a key pillar of economic growth for the future will be dashed.” …

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10. Reuters: “In Unprecedented Move, U.S. Names Iran’s Revolutionary Guards Terrorist Group” 

, 8 Apr 2019.) [Excerpts.]
U.S. President Donald Trump on Monday branded Iran’s elite Islamic Revolutionary Guard Corps a terrorist organization, an unprecedented step that raises the specter of retaliation from Tehran in an increasingly tense Middle East.
It is the first time the United States has formally labeled another country’s military a terrorist group.
  “The IRGC is the Iranian government’s primary means of directing and implementing its global terrorist campaign,” Trump said in a statement.
Iran immediately condemned the decision as an illegal act prompted by Tehran’s regional influence and “success in fighting against Islamic State,” according to state television. …
The announcement comes ahead of a May 2 deadline by the United States on whether or not to extend oil waivers to eight importers of Iranian oil.
Reducing the number of waivers will limit oil exports from Iran, the fourth-largest producer in OPEC, but the United States is unlikely to meet an earlier target of driving Iranian oil exports to zero.

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11. Reuters: “More Than 100 Dismissed in Airbus Compliance Crackdown: Sources”

Reuters, 9 Apr 2019.) [Excerpts.]
Airbus dismissed more than 100 people and issued more than 300 warnings for ethics or compliance reasons in 2018, two people familiar with the company data said, as it conducts a wide-ranging internal crackdown and deals with outside fraud probes.
The aerospace group is being investigated by UK and French authorities over suspected corruption dating back over a decade and is in the fifth year of a sweeping internal probe designed to improve its chances of winning favorable settlements.
An Airbus spokesman declined to comment on the figures or give annual comparisons. The dismissals coincided with a sharp increase in the use of an internal whistleblower system, providing a guide to the trend on compliance issues.
Complaints handled by the system almost doubled last year and mostly involved matters covered by ordinary employment law.
The service also handled close to 40 allegations of fraud and half a dozen accusations of bribery. More than 10 of the reported cases involved suspected breaches of export controls, the two people said. Airbus declined to comment.

The company, which employs around 130,000 people worldwide, is under investigation in the United States over suspected violations of export controls and U.S. officials have also kept a close watch on the European bribery probes. … 

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G.W. Thompson: “Comments Invited on International Tariff Nomenclature – Thompson & Associates, PLLC”

Thompson & Associates PLLC, 5 Apr 2019.)
* Author: George W. Thompson, Esq.,
gwt@gwthompsonlaw.com. Of Thompson & Associates PLLC.
Our friends at the U.S. International Trade Commission are soliciting comments on possible revisions to the International Harmonized Commodity and Coding System. Everyone involved in international trade knows that the HS is the structure on which national tariff nomenclatures are based, including the Harmonized Tariff Schedule of the United States.
Keeping the HS Current
The HS, overseen by the World Customs Organization, undergoes periodic review and revision by WCO member governments. The goal is to simplify the nomenclature, take account of recently developed products and remove unnecessary tariff lines. Any changes adopted are at the international four-digit (heading) and six-digit (subheading) levels and do not affect tariff rates.
With the seventh such review nigh upon us, the Commission seeks public submissions on the following points:
  – The deletion of HS headings or subheadings with low trade volume;
  – The creation of separate 4-digit headings or 6-digit subheadings to identify types of products that are important in international trade but are not adequately classified;
  – The simplification of the HS, whether by the modification of provisions for greater clarity or the elimination of provisions that are difficult to administer; and/or
  – The suggestion of other changes that would improve the classification of products, especially those being exported from the United States, or assist in the administration of the HS and the more uniform classification of goods internationally.
The comments will be taken into account by the United States in formulating any proposed HS changes.
No Time Like Now
There’s a long lead time for submitting comments. The Commission recommends that they be docketed by March 31, 2020, though that’s not a hard deadline. After receiving input from member governments, the WCO will issue recommendations.
Changes at the eight-digit (national) and ten-digit (statistical) levels are outside this review, as are requests to revise the HS Explanatory Notes. Within those constraints, nevertheless, the review process offers an opportunity to clarify the classification of new technologies and eliminate redundant provisions.

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M. Volkov: “Five Signs Your Company Lacks Integrity”

Volkov Law Group Blog, 8 Apr 2019. Reprinted by permission.)
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
It is always easy to second-guess or look back with 20-20 hindsight on a compliance breakdown and point out all the problems that were ignored or created by corporate actors. There are common factual scenarios that recur in DOJ and regulatory enforcement actions, some of which fall into certain categories.
While defense counsel (being effective advocates) often argue that bad actors are often “rogue” employees, the reality is rarely limited to a few bad apples – to the contrary, bad apples usually are the result of rot in the barrel or the environment or culture which tolerates (or even encourages) cutting corners, making sales numbers or financial targets.
The trick is to focus on those indicators that may provide an accurate measurement of a company’s culture of trust and integrity and an early warning to responsible officials and legal and compliance officers.
In reviewing government and regulatory enforcement actions, there are some common “traits” or circumstances that appear in those companies that eventually were subject to government intervention.
Here are five common issues or traits I have observed:
Lack of gatekeeper authority (in practice or in policies/procedures): Evidence of a lack of a culture of trust and integrity is often reflected in the role and authority of critical gatekeepers. In a number of recent enforcement actions, risky and even illegal transactions were authorized notwithstanding objections or lack of approval from legal and/or compliance. When legal and compliance oppose or raise questions concerning a specific action or transaction, a company dedicated to trust and integrity will: (1) have a specific control requiring compliance and/or legal approval of the transaction; and (2) enforce the specific control. In many cases, legal and compliance raise concerns, and management responds with arguments why legal and compliance are wrong and attempt to browbeat legal and compliance to approve the transaction or to let it go. In other cases, legal and compliance are allowed to opine but they have no authority to block or delay a transaction.
Another indicator of lack of gatekeeper authority is the role of internal audit and the handling of specific findings of deficiencies that need to be remediated. A company that lacks trust and integrity will not require an audit subject to remediate a specific deficiency by a certain date and not require audit committee monitoring/reporting of such remediation efforts. If the internal auditor only has the authority to “suggest” modifications or improvements, the company, by definition, is sending a message of its lack of trust and integrity.
Culture language as a “feel good” strategy. Companies confuse “ethical culture” with feel good pronouncements of values and principles, coupled with trite sayings that the company “does the right thing.” Not all communications strategies fall into this category, but an important question is whether such communications are followed up in meaningful and tangible efforts. In other words, a company has to translate its culture pronouncements into action, meaning specific conduct so that leaders and employees know how their ethical culture translates into specific job functions and duties. Equally important is a commitment by compliance officers to measure, monitor and report on the company’s culture. A real commitment to an ethical culture, or trust and integrity, requires much more than just words – that is the critical issue for companies committed to trust and integrity.
Lack of (or reduced) commitment to ethics and compliance. We are observing two negative and important trends in the ethics and compliance industry – a reduction in compliance budgets and resources and an increase in retaliation rates against employees that report concerns. These two trends, which will hopefully be reversed, demonstrate the absence of a real and sustained commitment by company leadership and managers to implement and expand robust ethics and compliance programs. Compliance officers have been able to reduce the number of “paper” programs that exist, but they have been slowly losing ground in promoting a sustained commitment to ethics and compliance. Senior managers are quick to reduce or reject compliance budget demands and the results are a strangling of compliance programs.
Rationalization of misconduct implications. A company that uncovers misconduct, conducts a root cause analysis and remediates its compliance program to reflect lessons learned is committed to ethics and integrity. But companies that uncover misconduct and rationalize explanations to limit the inquiry reflect a fundamental absence of integrity – companies committed to trust and integrity do not restrict efforts to uncover misconduct because they recognize the importance of addressing problems and misconduct.
Singular obsession with quarterly financial results and financial targets. Companies have to maintain a healthy balance between sustained growth and quarterly performance. Earnings management is not, by definition, unethical or illegal – to the contrary, businesses have to commit to positive earnings management strategies as an important performance tool. The danger in this are, which is significant, is when a company becomes “obsessed” or solely focused on quarterly financial performance, to the detriment of longer-term growth and sustained performance. Short-term objectives may be balanced against longer-term perspectives and tradeoffs may be needed. Companies that fail to engage in this healthy balancing are at risk, and lack careful attention to value and importance of maintaining a culture of trust and integrity.

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Mitchell Silberberg & Knupp LLP
, 8 Apr 2019.)

There are many ways employers may run afoul of the anti-discrimination provisions in U.S. immigration law. As a very clear starting point, the general rule for a long time has been and remains an employer may not make hiring, firing, or recruitment / referral decisions based on a worker’s citizenship status. However, there are notable exceptions and the one relevant here relates to controlled goods.
For these purposes, the definition of controlled goods includes their documentation – typically referred to a technical data – and means those goods which are subject to either the International Traffic in Arms (ITAR) or Export Administration Regulations (EAR) laws and regulations. ITAR is the export license restrictions which regulate military and defense articles, whereas BIS controls other higher tech exports which are subject to export license restrictions. As part of their regulatory regimes, both agencies (and some others of more limited scope) regulate when and how non-U.S. persons may gain access to either the actual good, the technical data or both, and require some form of notice to and pre-approval by the agency.
Two recent settlements serve as a reminder why a proper plan is key not just to getting through the project successfully, but also staffing it properly. To begin with, ITAR and EAR both require that access to the controlled goods and/or the related technical data must be denied to those who do not qualify as U.S. persons unless there is prior agency approval. Most employers readily conclude that if someone is a U.S. citizen, they are permitted access. A similar conclusion is usually reached when it comes to green card holders, but that is not the end of the analysis and it is these other nuances that are the cause for the settlements in question.
The relevant definition of a U.S. person can be found at 8 U.S.C. 1324b and 28 CFR 44.101(k):
   An individual who is —
       – a citizen or national of the United States,
       – an alien who is lawfully admitted for permanent residence,
       – granted the status of an alien lawfully admitted for temporary residence as seasonal agriculture worker or pre-1962 lawful resident,
       – admitted as a refugee, or
       – granted asylum; BUT
       – excludes an alien who fails to timely apply for lawful permanent residence or naturalization or is not timely granted such status.
One settlement was announced on February 1, 2019 and involved Honda Aircraft Company LLC (HAC) which manufactures and sells business jet aircraft. According to the Dept. of Justice, HAC issued 25 job postings that limited applicants to the specific status of citizen or green card holder. The settlement involved payment of a civil penalty of $44,626, the removal of all specific citizenship requirements from current and future job postings unless they are authorized by law, to go along with the additional training of certain staff so the law is administered correctly.
Equally notable, and certainly a reminder that even sometimes the lawyers cannot get it right, is the August 2018 settlement with Clifford Chance US LLP arising out of its staffing of a client document review project. This situation involved 36 positions and the failure to hire both U.S. persons, but also dual U.S. citizens, to staff the project. The settlement involved Clifford Chance “offering to pay” lost wages to three individuals who were removed from the project, paying a $132,000 civil penalty, training relevant employees, informing clients who request citizenship restrictions and being “subject to departmental monitoring and reporting requirements for two years.”
The fact there is a reference to “informing clients who request citizenship restrictions” would seem to suggest a client made a request and the law firm failed to properly counsel the client as well as staff the project. However, the settlement language is unclear and leaves one thinking that perhaps the law firm itself was having its own difficulty properly defining a U.S. person. You decide for yourself:
Within forty-five (45) days of the Effective Date and thereafter during the Term of this Agreement, Respondent shall keep a log of client requests to attorneys, paralegals, and office managers in Respondent’s D.C. location/office, whose practice includes or whose work supports Respondent’s Litigation and Dispute Resolution practice, to place restrictions on hiring or assignment based on citizenship status. The log shall reflect the following: (1) date of the client’s request, (2) identity of Respondent employee or official receiving the request, (3) number of positions restricted, (4) dates of the project or task, (5) basis for the restriction including a citation to the pertinent rule, law, or executive order or quoting the pertinent language of the government contract, (6) that Respondent, per its client notification procedure, provided the client with information about employer non-discrimination obligations under 8 U.S.C. § 1324b, and, if applicable, (7) identity of the staffing agency or e-discovery vendor to whom Respondent made the request to staff any project based on the client’s request.
There are two other contexts where an inquiry about citizenship may be proper. First, if a company is looking at two candidates of equal qualification and the position is not otherwise limited to being filled by U.S. persons, those making hiring decisions should keep in mind 28 CFR 44.200(b)(2) which states that “[n]otwithstanding any other provision of this part, it is not an unfair immigration-related employment practice for a person or entity to prefer to hire an individual, or to recruit or refer for a fee an individual, who is a citizen or national of the United States over another individual who is an alien if the two individuals are equally qualified.” However, if the company is relying on this exception, keeping the supporting documentation in good order is, of course, key.
Second, if you are seeking an H-1 specialty (professional worker) or Trade NAFTA professional visa, there is the I-129 provision which requires disclosure of whether an export license is required. See Part 6 of the I-129 form.

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TE_a115. ECS Presents “Mastering ITAR/EAR Challenges” on 30 Apr-1 May in Nashville, TN

(Source: S. Palmer,
* 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 
or by calling 866-238-4018 or email  
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ICPA Presents “2019 EU Conference”, 15-17 May in London

* 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

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* James William Fulbright (9 April 1905 – 9 February 1995; was a U.S. Senator representing Arkansas from 1945 until his resignation in 1974. A Southern Democrat and a staunch multilateralist who supported the creation of the United Nations, Fulbright opposed McCarthyism, and later became known for his opposition to American involvement in the Vietnam War. His efforts to establish an international exchange program eventually resulted in the creation of a fellowship program which bears his name, the Fulbright Program).
   – “In the long course of history, having people who understand your thought is much greater security than another submarine.”
   – “The Soviet Union has indeed been our greatest menace, not so much because of what it has done, but because of the excuses it has provided us for our failures.”

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. 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: 5 Apr 2019:
84 FR 13499-13513: Civil Monetary Penalty Adjustments for Inflation

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.   


  – 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: 2 Apr 2019:
Harmonized System Update (HSU) 1905
[contains 792 ABI records and 176 harmonized tariff records].

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

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Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

Review last week’s top Ex/Im stories in “Weekly Highlights of the Daily Bugle Top Stories” published 

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* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, Vincent J.A. Goossen and Alexander Witt; and Events & Jobs Editor, Sven Goor. 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.

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