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19-0424 Wednesday “Daily Bugle'”

19-0424 Wednesday “Daily Bugle”

Wednesday, 24 April 2019

  1. State Updates Cuba Restricted List
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  1. Defense News: “Competition with China Requires New Technology Transfer Rules for US Allies and Silicon Valley”
  2. Deutsche Welle: “German Arms Exports Decline in 2019 First Quarter
  3. Swissinfo: “Court Orders Swiss Authorities to Publish Arms Export Data”
  1. C. Cultis: “Export Licensing: Tips U.S. Exporters Shouldn’t Overlook”
  2. G. Grammas, J.Haxby & L. Kasulke: “U.S. and EU Release Preliminary Tariff Lists Amid WTO Aircraft Subsidies Disputes”
  3. K. C. Georgi, M.M. Hassoun & R.K. Alberda: “The New 126.4 ITAR Exemption for Transfers by or for USG: Six Things You Need to Know”
  4. M. Volkov: “Acteon Pays $441,000 to Settle Two OFAC Enforcement Actions”
  1. FCC Presents “Designing an Internal Compliance Program for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands
  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 (11 Apr 2019), 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 Apr 2018), DOT/FACR/OFAC (15 Mar 2018), HTSUS (18 Apr 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11
. State Updates Cuba Restricted List

(Source: 
Federal Register
, 24 Apr 2019.) [Excerpts.]
 

84 FR 17228-17230: Updating the State Department’s List of Entities and Subentities Associated With Cuba (Cuba Restricted List)

* ACTION: Updated publication of list of entities and subentities; notice.
* SUMMARY: The Department of State is publishing an update to its List of Restricted Entities and Subentities Associated with Cuba (Cuba Restricted List) with which direct financial transactions are generally prohibited under the Cuban Assets Control Regulations (CACR). This Cuba Restricted List is also considered during review of license applications submitted to the Department of Commerce’s Bureau of Industry and Security (BIS) pursuant to the Export Administration Regulations (EAR).
* DATES: The Cuba Restricted List is updated as of April 24, 2019.
* FOR FURTHER INFORMATION CONTACT: Erica Magallon tel: 202-453-8458; Office of Economic Sanctions Policy and Implementation, tel.: 202-647-7489; Office of the Coordinator for Cuban Affairs, tel.: 202-453-8456, Department of State, Washington, DC 20520.
* SUPPLEMENTARY INFORMATION: …
On June 16, 2017, the President signed National Security Presidential Memorandum-5 on Strengthening the Policy of the United States Toward Cuba (NSPM-5). As directed by NSPM-5, on November 9, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) published a final rule in the Federal Register amending the CACR, 31 CFR part 515, and the Department of Commerce’s Bureau of Industry and Security (BIS) published a final rule in the Federal Register amending, among other sections, the section of the Export
Administration Regulations (EAR) regarding Cuba, 15 CFR 746.2. The regulatory amendment to the CACR added Sec. 515.209, which generally prohibits direct financial transactions with certain entities and subentities identified on the State Department’s Cuba Restricted List. The regulatory amendment to 15 CFR 746.2, notes BIS will generally deny applications to export or re-export items for use by entities or subentities identified on the Cuba Restricted List. The State Department is now updating the Cuba Restricted list, as published below and available on the State Department’s website
   This update includes five additional subentities. This is the third update to the Cuba Restricted List since it was published November 9, 2017 (82 FR 52089). The first update of 26 additionalsubentities and five amendments was published November 15, 2018 (see 83 FR 57523), and the second update of five additional subentities was publish March 9, 2019 (see 84 FR 8939). The State Department will continue to update the Cuba Restricted List periodically.
   The publication of the updated Cuba Restricted List further implements the directive in paragraph 3(a)(i) of NSPM-5 for the Secretary of State to identify the entities or subentities, as appropriate, that are under the control of, or act for or on behalf of, the Cuban military, intelligence, or security services or personnel, and publish a list of those identified entities and subentities with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba. …
   Below is the U.S. Department of State’s list of entities and subentities under the control of, or acting for or on behalf of, the
Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba. For information regarding the prohibition on direct financial transactions with these entities, please see 31 CFR 515.209. All entities and subentities were listed effective November 9, 2017, unless otherwise indicated. …
 
   Dated: April 17, 2019.

Manisha Singh, Assistant Secretary, Bureau of Economic and Business Affairs, Department of State. 

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OGSOTHER GOVERNMENT SOURCES

OGS_a12. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

 

* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Tax Exempt Transfer and Registration of Firearm [Pub. Date: 25 Apr 2019.]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Tax Paid Transfer and Registration of Firearm [Pub. Date: 25 Apr 2019.]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application to Make and Register a Firearm [Pub. Date: 25 Apr 2019.]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: National Firearms Act Responsible Person Questionnaire [Pub. Date: 25 Apr 2019.]
 
* Commerce/BIS; NOTICES; Meetings: Materials Technical Advisory Committee [Pub. Date: 25 Apr 2019.]

 
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NWSNEWS

NWS_a15
. Defense News: “Competition with China Requires New Technology Transfer Rules for US Allies and Silicon Valley” 

(Source:  
Defense News, 23 Apr 2019.) [Excerpts.]
 
If the U.S. is truly in a great power competition with China, it must realize that now more than ever it needs its allies – and in different ways than in the past.
 
Our current industrial relationship with our allies is grounded in the Cold War experience, where a technologically dominant U.S. decides whether to grant the privilege of industrial cooperation in exchange for everlasting control of whatever evolves from that relationship, through a labyrinth of a technology transfer system.
 

As U.S. technological dominance diminishes and the threat from China and Russia grows stronger, a true allied partnership will need to be formed – one that comes with fewer U.S.-mandated controls in order to incentivize greater defense-industrial collaboration. The establishment of such a partnership should not be not based on some muddle-headed call for cooperation for cooperation’s sake, but because it is in the United States’ national security interest to do so. …

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NWS_a2
6. Deutsche Welle: “German Arms Exports Decline in 2019 First Quarter” 

(Source:
Deutsche Welle, 24 Apr 2019.) [Excerpts.]
 
German exports decreased again in the first quarter of this year – a decrease of 7.4 percent from the same point last year. Germany’s Economy Ministry cites a “restrictive and responsible” export policy as the reason.
 
The German government approved arms exports worth €1.12 billion ($1.3 billion) in the first quarter of 2019, Germany’s Economy Ministry reported on Tuesday.
 
The value is a 7.4 percent decrease from the same period in 2018 and €100 million below last year’s quarterly average. The industry last reported an increase in 2015, when it recorded exports of €7.86 billion.
 

Among the 20 main customers cited by the ministry, none are directly involved in the Yemen war. The German government partially banned exports to countries involved in the war in Yemen. That ban was further tightened in November following the murder of journalist Jamal Khashoggi in the Saudi consulate. …

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NWS_a3
7. Swissinfo: “Court Orders Swiss Authorities to Publish Arms Export Data” 

(Source:
Swissinfo, 24 Apr 2019.) [Excerpts.]
 
Switzerland’s highest court has ruled that the State Secretariat for Economic Affairs (SECO) must give a Swiss journalist company data on arms exports.
 
The Federal Court rejected an appeal by SECO which had refused to transfer detailed information to a journalist from the WOZ newspaper on companies that had filed arms exports requests in 2014.
 
In a decision published on Wednesday, the court backed an earlier ruling by the Federal Administrative Court on behalf of the WOZ journalist, who had filed a freedom of information request.
 

Last March, the Federal Administrative Court had ruled in favor of the journalist, stating that it was public interest to ensure greater transparency and information on arms exports and that the media played an important role in holding the authorities to account in this regard. …

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COMMCOMMENTARY

COM_a18. C. Cultis: “Export Licensing: Tips U.S. Exporters Shouldn’t Overlook”

(Source:
Marine Technology News, 23 Apr 2019.) [Excerpts.]
 
* Author: Curt Cultice, Senior Communications Specialist, U.S. Commerce Department.
 
Each year, the U.S. Department of Commerce receives thousands of inquiries from businesses looking to export, many of which involve licensing questions. The Commerce Department’s Bureau of Industry and Security (BIS), together with other USG agencies, is responsible for export licensing and controls. BIS export licenses may be required for items (commodities, software, or technology) with proliferation, military, or terrorist uses, or which warrant control for other reasons. Export licensing requirements can apply to a wide array of products, including marine technologies.
 
A license may also be required because of the end use or end user. Items not licensed by BIS may still require a license from other agencies, including the State Department for defense articles and services subject to the International Traffic in Arms Regulations which are listed on the United States Munitions List (USML). When it comes to determining whether your export might need a license, there are a few sometimes overlooked aspects that U.S. businesses should be aware of before they export. After reading, go to our video web page to find out more about export licensing.
 
  – Don’t make any assumptions. For example, just because you are exporting a small amount of a commodity, sending it to a friendly country or e-mailing software doesn’t mean you shouldn’t check to see if an export license is needed. Screen all the parties to your transaction.
  – Review the control lists carefully. The USML and the BIS-administered Commerce Control List (CCL) include not only complete systems and key parts and components, but also raw materials, production equipment, and other related items. For marine technology exporters, key entries can be found in USML categories VI (surface vessels of war), XI (underwater electronics and acoustic systems), XII (optical and inertial sensors) and XX (submersible vessels); and CCL categories 5 (telecommunications), 6 (acoustic sensors), 7 (inertial sensors and navigation), and 8 (marine).
  – Different levels of technology can affect where you can export. The level of a product’s technology and market destination can be important factors as to whether an export license might be needed. For example, BIS authorized one U.S. exporter of high-end infrared technology to sell a certain level of its technology to Country A, but denied the company’s request for a license to export the same level of technology to Country B. The company received authorization to export a less technologically sophisticated product to Country B instead.
  – Be aware of “deemed” export licensing requirements. Transferring technology to a foreign person in the United States is just like exporting to a foreign country. If an export license is required to export that technology to a specific country, a license requirement will also apply to transfer the technology to a citizen of that country while that person is in the United States. Persons with U.S. permanent residence, and persons granted status as “protected individuals” are exempt from the “deemed” export rules.
  – Don’t forget about re-exports. For U.S.-origin items, U.S. export regulations extend beyond the initial export out of the United States. A re-export of a U.S.-origin item from one foreign destination to another, including use aboard a vessel in multiple territorial waters, can also trigger a license requirement. Such scenarios can be built into an export license, so when applying for export licenses, remember to keep the larger picture in mind, rather than only the initial export.
  – Protect your items against transfer and transshipment. Foreign buyers are not allowed to resell a controlled item without prior authorization, so protect your company by filling out the destination control statement on your commercial invoice. This legal statement signifies the exports are destined to the end-user indicated in all the shipping documents, and cannot be transferred or transshipped by the foreign buyer without permission from the U.S. government agency with jurisdiction over the licensed item. If you find out that the item has been resold, you should report that fact to the U.S. Government agency with jurisdiction over the item.
  – Be aware of criteria for transactions agreed upon under the Incoterm “Ex Works.” Under Ex Works, the foreign buyer only becomes responsible for determining licensing requirements and obtaining any required licenses when a specific writing has been obtained first by the U.S. seller from the foreign buyer stating they (the foreign buyer) assume this responsibility. Simply stating the sale is being completed under “Ex Works” does not comply with this requirement. See Section 758.3(b) of the Export Administration Regulations for more details on this requirement.
  – Remember that help is available. BIS has counseling desks, located in Washington, DC and California, which are staffed Monday through Friday during business hours by BIS personnel. …
 
Does your U.S. product or service require an export license? Learn more about the export licensing process by viewing our export regulations video and web page which links to the Bureau of Industry and Security, U.S. Commercial Service, and other key resources. For more on exporting, view the Exporting Basics video series
here.

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COM_a29. K. C. Georgi, M.M. Hassoun & R.K. Alberda: “The New 126.4 ITAR Exemption for Transfers by or for USG: Six Things You Need to Know”

(Source: Arent Fox, 23 Apr 2019.)
 
* Authors: Kay C. Georgi, Esq., 202.857.6293, kay.georgi@arentfox.com; Marwa M. Hassoun, Esq., 213.443.7645, marwa.hassoun@arentfox.com; Regan K. Alberda, Esq., 202.775.5771, regan.alberda@arentfox.com. All of Arent Fox.
 
After years and years of waiting, it popped out of the hat like a Bunny just in time for Easter. The new 22 CFR 126.4 ITAR license exemption for transfers of defense articles and defense services by or for the US Government (USG) went into effect on April 19, 2019.
There is a lot in the revised 22 CFR 126.4 exemption for exporters to cheer about, but there are also a few new boxes to check. We have reprinted the New and Improved 126.4 below, followed by the Old and Tortured 126.4 so you can look for yourself. Be forewarned: any attempt to use a redline program to compare the two will be painful.
 
Let’s take an old-fashioned read of the BEFORE and AFTER and identify the key differences. For those of you who are contractors and just want to understand how to use the thing you can skip down and just read (3) and (4).
 
1) Yes! You no longer have to explain to your company what a Government Bill of Lading Is/Was. The requirement in the old 126.4(a) that “all aspects of a transaction (export, carriage, and delivery abroad) are affected {sic} by a United States Government agency or when the export is covered by a United States Government Bill of Lading” is gone. The many of us who have spent hours googling to find a Government Bill of Lading to show others what it looks like are ecstatic. (A few are sad because they can no longer look so sage and knowledgeable.)
 
2) Don’t try to use 126.4(a) unless you are actually a US Government agency or department. The new exemption is carved into two parts – 126.4(a) covers transfers by a US Government department or agency. So companies and anyone who is not the USG – don’t try to use 126.4(a). The section does allow USG contractors to use it but only for official use by a USG department or agency; and ONLY in three circumstances:
– Within a USG-controlled facility;
 
– When an employee of the USG is empowered and responsible to ensure that the defense article is not diverted and is only used within the scope of the contractual relationship; or
 
– When use of the exemption is authorized by the Deputy Assistant Secretary of State for DDTC at the request of a department or agency of USG.
 
In other words, 126.4(a) is of limited use to most USG contracts.
 
3) So can you use 126.4(a)(1) as a USG contractor? Yes if you are very careful, but why bother because….There is a new 126.4(b) that actually works for USG contractors provided you get it in writing! Section 126.4(b) authorizes USG contractors to export, reexport, retransfer, or temporary import a defense article or perform a defense service:
– To a department or agency of USG at its request; or
 
– To an entity other than USG at the written direction of a USG department or agency or pursuant to an international agreement or arrangement.
 
4) What is the catch? There is no requirement that the USG effect the export (note proper use of the verb effect) or that you get a Government Billing of Lading. Or that it’s an emergency and you tried to get a license but couldn’t (under old 126.4(c)).
 
So the new 126.4(b) is excellent news – but there are some very important boxes to check before you can use the exemption:
 
– If it’s not going to USG, you need it in writing and don’t think just anyone at the agency can sign that writing. DDTC says ominously in its preamble “Each department or agency will determine for itself who is authorized to issue such written directions.” That means that contractors will still be getting written directions and executing them before realizing the wrong person gave the direction. As such, this is an important box to check before using the 126.4(b) exemption to export.
 
– If it’s not going to the USG, it also needs to be for one of the activities set forth in (a)(1)-(4).1 Luckily these are very broad, but you will need to check this box before using the exemption.
 
– You have to file your Electronic Export Information (EEI) referencing the exemption unless the export is going by a US diplomatic pouch or in a US Government aircraft, vehicle, or vessel.
 
– No 126.1 proscribed countries (such as Afghanistan, Iraq, China, etc.). However, in true ITAR fashion, there is an exception to that requirement (see below).
 
– Also, if you change the end-use or end-user of a defense article (once exported under the 126.4 exemption) to any party or use not authorized by the exemption, you will need to get a license or other approval from DDTC. What this means is you still need to keep track of those night vision goggles (NVGs) and personal protective equipment (PPE) that have been exported using this exemption: they cannot simply disappear or be transferred in-country without proper authorization.
 
5) So DDTC, you said no 126.1 proscribed countries BUT…There are three 126.4 exemptions that CAN go to 126.1 countries but only when it is truly to the USG or exported BY the USG for cooperative projects and programs. The new regulation amended section 126.1 to read as follows:
 
The exemptions provided in this subchapter, except § 123.17 of this subchapter and §§ 126.4(a)(1) or (3) and (b)(1) and 126.6, or when the recipient is a US Government department or agency, do not apply with respect to defense articles or defense services originating in or for export to any proscribed countries, areas, or persons.
 
So if the recipient is the US Government in (for example) Iraq or Afghanistan (126.4(a)(1) and (b)(1)), or it is to carry out a cooperative project, program, or other activity in furtherance of an agreement or arrangement AND the US Government is the one doing the export, then you can use the exemption for a 126.1 proscribed country.
 
Dollars to donuts someone will get these mixed up and will export to the Afghan forces at the direction of the US Government under the 126.4(b)(2) exemption, and then be required to “immediately” disclose to the US Government because Afghanistan is still a 126.1 proscribed country.
 
6) For those of you who care about words actually making sense, the new exemption makes more sense – it covers “the export, reexport, retransfer, or temporary import of a defense article or the performance of a defense service” made by or for the US Government, not just the “temporary import, or temporary export, of any defense article, including technical data or the performance of a defense service.” We all know that exports of technical data are permanent not temporary. The new regulation is correctly worded.
 
Is 126.4 better? Yes, this is a huge and long awaited improvement. But when it comes to those who export to 126.1 countries on behalf of the US Government and you are delivering to someone who is NOT the US Government, you will still need to get a license or other approval in most cases. And outside the 126.1 countries, make sure you get written direction from the right person in the USG agency and check all boxes. Good luck!!!
 
[1] (a)(1)-(4) activities are as follows:
 
(1) For official use by a department or agency of the US Government ….
(2) For carrying out a cooperative project, program, or other activity in furtherance of an agreement or arrangement that provides for the export, reexport, retransfer, or temporary import of the defense article, or the performance of activities that constitute the defense service, and is one of the following:
 
       (i) A binding international agreement to which the United States or any agency thereof is a party; or
       (ii) An arrangement with international partners authorized by Title 10 or 22 of the United States Code or pertinent National Defense Authorization Act provisions.
 
(3) For carrying out any foreign assistance or sales program authorized by law and subject to control by the President by other means.

(4) For any other security cooperation programs and activities of the Department of Defense authorized by law and subject to control by the President by other means.

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COM_a310
. G. Grammas, J.Haxby & L. Kasulke: “U.S. and EU Release Preliminary Tariff Lists Amid WTO Aircraft Subsidies Disputes”

 
* Authors: George Grammas, Esq.,george.grammas@squirepb.com; Jane Haxby, Esq., jane.haxby@squirepb.com; Ludmilla Kasulke, Esq., ludmilla.kasulke@squirepb.com. All of Squire Patton Boggs
 
On April 17, 2019, the European Commission launched a public consultation period on a preliminary list of products from the US to be considered for countermeasures in its own separate case against the US. The announcement comes following a ruling by the World Trade Organization’s (WTO) Appellate Body, finding that the illegal US subsidy support for Boeing continues to cause harm to Airbus’ market opportunities, and is the latest development in an escalating trade dispute between the US and the EU. In a press release, EU Trade Commissioner Cecilia Malström pressed for dialogue to resolve the tensions: “We must continue to defend a level-playing field for our industry. But let me be clear, we do not want a tit-for-tat. While we need to be ready with countermeasures in case there is no other way out, I still believe that dialogue is what should prevail between important partners such as the EU and the US, including in bringing an end to this long-standing dispute. The EU remains open for discussions with the US, provided these are without preconditions and aim at a fair outcome.”
 
The proposed list includes a variety of agri-food products, aircrafts and chemicals, among others, that represent about US$20 billion in US exports to the EU. Ultimately, the exact amount of countermeasures will be determined by a WTO-appointed arbitrator. Once that number is finalized, the EU will produce a final list of products to match that amount. Stakeholders are invited to submit their comments to the European Commission on the proposed list through May 31, 2019.
 
Background
 
For many years, Boeing and the US government have cried unfair and illegal trade practices over EU subsidies of Airbus aircraft. Likewise, Airbus has alleged unfair US subsidies of Boeing planes. The two sides took their cases to the World Trade Organization (WTO), where the fight continues to this day – and a wide range of US and European products could soon find themselves in the crosshairs of this fight.
 
While the US’ case against support for Airbus is expected to conclude this summer – and the EU’s proceedings will be resolved later on – the US has proposed US$11 billion in preliminary tariffs on EU goods. This is the amount that the Office of the United States Trade Representative (USTR) estimates the US has incurred in damages as a result of the subsidies. A final ruling on damage is expected from the WTO this summer.
 
Although the preliminary list includes a wide range of consumer goods, such as cheese and wine, according to US Trade Representative Robert Lighthizer, the ultimate focus is on European aircrafts: “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”
The European Commission responded a day later, with a spokesperson for the commission confirming that it will prepare to respond in kind in its proceedings: “The Commission is starting preparations so that the EU can promptly take action based on the arbitrator’s decision on retaliations rights in this case.”
 
Impact
 
The preliminary list released by USTR on April 8 includes two sections. The first section would apply only to France, Germany, Spain and the UK, and is seemingly focused squarely at Airbus. Notably, this section includes various types of aircrafts and their parts, including:
 
Product name (Harmonized Tariff Schedule (HTS) statistical reporting number)
 
Helicopters not exceeding 998kg (8802.11.0030); Helicopters between 998kg and 2,000kg (8802.11.0045); Helicopters exceeding 2,000kg (8802.12.0040); New aircraft, passenger transports, exceeding 15,000kg (8802.40.0040); New aircraft, cargo transport, exceeding 15,000kg (8802.40.0060); Undercarriages (8803.20.0030)
;
Fuselages and fuselage sections (8803.30.0030)
 
The second section includes various consumer goods from all 28 member states of the EU. This list includes a wide range of foods, drinks and textiles, notably:
 
Product name (HTS subheading)
 
Swordfish steaks (0303.57.00); Salmon fillets (0304.41.00; Trout fillets (0304.42.00)
;
Crabmeat (0306.14.20); Yogurt (0403.10.50)
;
Butter (0405.10.10, 0405.10.20)
;
Several types of cheese
;
Chocolate milk (2202.99.10); Various types of wine
;
Various essential oils
;
Articles of cotton (5609.00.10)
;
Articles of vegetable fibers (5609.00.20)
;
Carpets made of wool or fine animal hair (5701.10.40, 5701.10.90)
 
This list could also represent a sizable threat to US-EU trade more broadly – dramatically raising the costs for US consumers of these goods, affecting the European suppliers’ bottom lines – and risking that US products could face similar tariffs when the EU prepares its retaliation list in response to its pending case against the US.
 
Next Steps
 
USTR is launching a process to receive comments on the potential impacts of these tariffs, and to amend the list as needed.
 
* May 6: Deadline for requesting to appear at the public hearing (including summary of testimony)
* May 15: The inter-agency Section 301 Committee is scheduled to hold a public hearing

* May 28: Deadline for submitting written comments, including post-hearing rebuttal comments

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COM_a4
11
.
M. Volkov: “Acteon Pays $441,000 to Settle Two OFAC Enforcement Actions”
(Source:
Volkov Law Group Blog, 23 Apr 2019. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
We can add Acteon to the list of OFAC settlements for 2019, which is quickly turning into a robust sanctions’ enforcement year. Acteon is a UK based company, which provides subsea services in the oil and gas industry. (Acteon recently announced the acquisition of Benthic, an Australian owned subsea company, which operates out of Houston, Texas).
 
In the first enforcement action, Acteon and its operating company 2H Offshore Engineering, agreed to pay $227,500 to settle an OFAC enforcement action for seven apparent violations of the Cuban Sanctions program. Between 2011 and 2012, 2H Offshore’s Malaysian affiliate (2H Offshore KL) produced analytical reports, and sent employees to Cuba to present these reports relating to oil exploration projects in Cuban territorial waters. The reports were prepared in connection with a project managed by Petronas, Repsol, PDVSA Cuba, and JSC Zarebezhneft.
 
2H Offshore’s violations involved misconduct by its former Global Director who was responsible for oversight of its Technical Director who supervised day-to-day operations. On November 13, 2008, the Technical Director asked the Global Director for guidance on an email from an 2H Offshore Brazil director stating that 2H Offshore could not participate in an offshore project in Cuba’s territorial waters because 2H Offshore was a US company. The Global Director sent the Technical Director a copy of 2007 guidance from Acteon, the parent company, prohibiting any work or trade involving Cuba.
 
Despite this Acteon policy, the Global Director stated that he/she did not want to turn away potential work involving Petronas, and he/she wanted to find a way around the Acteon prohibition. The Global Director contacted the Acteon Finance Director seeking approval to work on the Petronas project for Repsol. Subsequent messages made it clear that the drilling operation would occur in Cuba. The Finance Director told the Global Director and Technical Director that Acteon’s prior US-owner, KKR, approved the work but imposed conditions that the report be marked confidential and not provided to anyone else.
 
In 2010, 2H Offshore KL began providing services for the Petronas project in Cuba, and in 2011, the Technical Director proposed to the Global Director to present at a workshop (and conveniently omitted the name of the country, Cuba from the request). With respect to this project, the Global Director later advised an administrative employee to replace the words “Cuba” or “Cuban” with “Central America” or “Central American” in post-expense reports. After the project was completed, the Technical Director also advised changing identifying terms from “Cuba” to “Petronas.”
 
In October 2011, the Global Director emailed the Technical Director regarding a business opportunity with PDVSA Cuba, and stated that PDVSA must understand that 2H Offshore KL was doing this work “under cover so if things can be done over the phone or video conference will be best thus avoiding a trip to Cuba.” The Global Director and Technical Director avoided executing a contract directly with PDVSA Cuba and substituted a Venezuelan affiliate. The Technical Director removed references to “Cuba” in the letter of intent. 2H Offshore KL also provided work relating to another oil rig in Cubas territorial waters for Zarubezhneft. The Technical Director entered this contract without informing the Global Director.
 
In a second enforcement action issued as part of the same notice, Acteon agreed to pay $213,866 to settle an OFAC enforcement action for 13 violations of the Cuba sanctions program, and a separate action for KKR & Co.’s three violations of the Iran sanctions program. Three Acteon subsidiaries were involved, including Seatronics (UK), Seatronics (Texas) and Seatronics (Singapore). KKR-affiliated investment funds acquired a controlling interest in Acteon in November 2012 and KKR was not directly involved in the Iran violations. The Cuba sanctions violations predated KKR’s ownership.
 
In October 2007, Acteon issued sanctions compliance guidance to its Seatronics locations directing them not to engage in any transactions with Cuba. Despite receiving this guidance, Seatronics rented, sold or received a commission for referring shipments of equipment for projects in Cuban territorial waters on 10 separate occasions, and sent company engineers to service this equipment in Cuban territorial waters on three occasions.
 
In another notice, in December 2013, Acteon issued updated compliance guidance to all Seatronics locations directing them not to conduct business with Iran. Notiwthstanding thius guidance, Seatronics’s UAE Dubai branch rented or sold equipment to customers who embarked the equipment on vessels that operated in Iranian territorial waters. One of thes transaction violated US sanctions because the equipment originated in and was exported from the US.
 
With respect to both enforcement actions, OFAC noted the following remedial measures taken by 2H Offshore and Seatronics: Acteon imposed appropriate discipline against 2h Offshore and Seatronic employees, conducted sanctions training for each 2H Offshore and Seatronics office and distributed written guidelines on US sanctions and export restrictions. Further, 2H Offshore and Seatronics have implemented new procedures and processes to ensure sanctions compliance Also 2H Offshore and Seatronics are developing a compliance audit process, including appropriate mechanisms for reporting audit findings and implementing corrective actions. Acteon is assigning appropriate personnel with responsibility for monitoring and periodically assessing 2H Offshore’s and Seatronics’ compliance with applicable export control and sanctions laws and reporting the results of such assessment. Acteon has appointed a Head of Trade Compliance with responsibility for monitoring and ensuring 2H Offshore’s and Seatronics’ ongoing compliance, and a Group General Counsel who will provide ultimate oversight of the compliance monitoring function,
 
OFAC summarized the importance of each enforcement action as demonstrating the importance of: “(1) implementing risk-based controls, such as regular audits, to ensure subsidiaries are complying with their obligations under OFAC’s sanctions regulations; (2) performing heightened due diligence, particularly with regard to affiliates, subsidiaries, or counter-parties known to transact with OFAC-sanctioned countries or persons, or that otherwise pose high risks due to their geographic location, customers, or suppliers, or products and services they offer; and (3) appropriately responding to derogatory information regarding the sanctions compliance efforts of persons subject to the jurisdiction of the United States.”

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a112. FCC Presents “Designing an Internal Compliance Program for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands

 
* What: Designing an Internal Compliance Program for Export Controls & Sanctions”
* Date: Tuesday, 1 Oct 2019
* Location: Full Circle Compliance, Landgoed Groenhoven, Dorpsstraat 6, Bruchem, The Netherlands
* Times:
  – Registration and welcome: 9.00 am – 9.30 am
  – Training course hours: 9.30 am – 4.30 pm
* Level: Intermediate
* Who Should Attend:  the course provides valuable insights for both compliance professionals, employees and (senior / middle) management working in any industry subject to U.S. and/or EU (member state) export control laws and sanctions regulations.
* Instructors: Drs. Ghislaine C.Y. Gillessen RA (Managing Director) and Marco M. Crombach MSc (Senior Manager).
* Information & Registration: click
here or contact us at 
events@fullcirclecompliance.eu or 31 (0)23 – 844 – 9046.  

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TE_a213.
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.

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ENEDITOR’S NOTES

* Anthony Trollope (24 Apr 1815 – 6 Dec 1882; was an English novelist of the Victorian era. Among his best-known works is a series of novels collectively known as the Chronicles of Barsetshire. He also wrote novels on political, social, and gender issues, and other topical matters.)
  – “Never think that you’re not good enough. People will take you very much at your own reckoning.”
  – “Poverty, to be picturesque, should be rural. Suburban misery is as hideous as it is pitiable.”

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EN_a315
. 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: 11 Apr 2019: 84 FR 14608-14614: Revisions to the Unverified List (UVL) 
 
* 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 Apr 2019: 84 FR 16398-16402: International Traffic in Arms Regulations: Transfers Made by or for a Department or Agency of the U.S. Government   
  – The only available fully updated copy (latest edition: 19 Apr 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: 18 Apr 2019: Harmonized System Update (HSU) 1906

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

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EN_a0316
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., compiled by: Editor, James E. Bartlett III; Assistant Editors, 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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