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19-0509 Thursday “Daily Bugle'”

19-0509 Thursday “Daily Bugle”

Thursday, 9 May 2019

  1. Commerce/BIS Announces ISTAC Meeting on 22-23 May in Washington DC 
  2. Commerce/BIS Announces TRETAC Meeting on 22 May in Washington DC 
  3. USTR Modifies Section 301, Increases tariffs on $200 Billion Worth of Goods (List 3 Goods) Imported from China from 10 Percent to 25 Percent
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. DHS/CBP Announces Change in Effective Date of Duty Increase of Section 301 (Tranche 3) Duties, Posts Updated Collections Draft CATAIR Chapter
  4. Justice: “North Korean Cargo Vessel Connected to Sanctions Violations Seized by U.S. Government”
  5. State/DDTC: (No new postings.)
  6. Treasury/OFAC Publishes New FAQs Related to 8 May EO “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran”
  7. President Continues National Emergency Concerning Syria, Central African Republic
  1. ST&R Trade Report: “Tariff Increase on Imports from China Set for May 10; Exclusion Process Coming”
  2. WorldECR: “European Parliament Passes Act on Cultural Goods”
  1. A. L. Riella & B. D. Schnapp: “Updated DOJ Guidance Provides Useful Roadmap for Implementing and Enhancing Corporate Compliance Programs” (Part II of II)
  2. B.J. Fleming, P. O’Toole & A.S. Hussain: “Trade Compliance Flash: New Sanctions Compliance Guidance from OFAC after Upward Enforcement Trend in 2019”
  3. D. Kyle & M. Alonso: “Due Process Challenges to U.S. Government Agency List Designations: Lessons from KindHearts and Deripska”
  4. J. Reeves & K. Heubert: “Important Updates from State, Treasury, and More”
  1. 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 (29 Apr 2018), HTSUS (18 Apr 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1
1.
Commerce/BIS Announces ISTAC Meeting on 22-23 May in Washington DC
(Source: Federal Register, 9 May 2019.)
 
84 FR 20326: Information Systems Technical Advisory Committee; Notice of Partially Closed Meeting
 
The Information Systems Technical Advisory Committee (ISTAC) will meet on May 22 and 23, 2019, 9:00 a.m., in the Herbert C. Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Avenues NW, Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to information systems equipment and technology.
 
Wednesday, May 22 – Open Session
 
1. Welcome and Introductions
2. Working Group Reports
3. Old Business
4. Wassenaar Proposals for 2020
5. New business
 
Thursday, May 23 – Closed Session
 
6. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
 
The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov, no later than May 15, 2019.
 
A limited number of seats will be available for the public session. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the Committee suggests that public presentation materials or comments be forwarded before the meeting to Ms. Springer.
 
The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on May 3, 2019, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 (10)(d))), that the portion of the meeting concerning trade secrets and commercial or financial information deemed privileged or confidential as described in 5 U.S.C. 552b(c)(4) and the portion of the meeting concerning matters the disclosure of which would be likely to frustrate significantly implementation of an agency action as described in 5 U.S.C. 552b(c)(9)(B) shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
 
For more information, call Yvette Springer at (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

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EXIM_a2
2.
Commerce/BIS Announces TRETAC Meeting on 22 May in Washington DC
(Source: Federal Register, 9 May 2019.)
 
84 FR 20325-20326: Transportation and Related Equipment Technical Advisory Committee; Notice of Partially Closed Meeting
 
The Transportation and Related Equipment Technical Advisory Committee (TRETAC) will meet on May 22, 2019, 9:30 a.m., in the Herbert C. Hoover Building, Room 6087B, 14th Street between Constitution & Pennsylvania Avenues NW, Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration with respect to technical questions that affect the level of export controls applicable to transportation and related equipment or technology.
 
Agenda – Public Session
 
1. Welcome and Introductions.
2. Status reports by working group chairs.
3. Public comments and Proposals.
 
Closed Session
 
4. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
 
The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at Yvette.Springer@bis.doc.gov no later than May 15, 2019.
 
A limited number of seats will be available during the public session of the meeting. Reservations are not accepted. To the extent time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to Committee members, the Committee suggests that presenters forward the public presentation materials prior to the meeting to Ms. Springer via email.
 
The Assistant Secretary for Administration, with the concurrence of the delegate of the General Counsel, formally determined on April 19, 2019, pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2(10)(d)), that the portion of the meeting dealing with pre-decisional changes to the Commerce Control List and U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
 
For more information, call Yvette Springer at (202) 482·2813.
 
Yvette Springer, Committee Liaison Officer.

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EXIM_a3
3.
USTR Modifies Section 301, Increases
tariff on $200 Billion Worth of Goods (List 3 Goods) Imported from China from 10 Percent to 25 Percent
(Source: Federal Register, 9 May 2019.)
 
84 FR 20459-20460: Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation
 
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of modification of action.
* SUMMARY: In accordance with the direction of the President, the U.S. Trade Representative (Trade Representative) has determined to modify the action being taken in this Section 301 investigation by increasing the rate of additional duty from 10 percent to 25 percent for the products of China covered by the September 2018 action in this investigation. The Trade Representative has further determined to establish a process by which interested persons may request that particular products classified within a tariff subheading covered by the September 2018 action be excluded from the additional duties.
* DATES: The rate of additional duty will increase to 25 percent with respect to products covered by the September 2018 action on May 10, 2019.
* FOR FURTHER INFORMATION CONTACT: For questions about this notice, contact Associate General Counsel Arthur Tsao, Assistant General Counsel Philip Butler, or Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For questions on customs classification or implementation of additional duties on products covered by the September 2018 action, contact traderemedy@cbp.dhs.gov.
* SUPPLEMENTARY INFORMATION:
 
A. September 2018 Action
 
For background on the proceedings in this investigation, please see the prior notices issued in the investigation, including 82 FR 40213 (August 23, 2017), 83 FR 14906 (April 6, 2018), 83 FR 28710 (June 20, 2018), 83 FR 33608 (July 17, 2018), 83 FR 38760 (August 7, 2018), and 83 FR 40823 (August 16, 2018).
 
In a notice published on September 21, 2018 (83 FR 47974), the Trade Representative, at the direction of the President, announced a determination to modify the action being taken in the investigation by imposing additional duties on products of China with an annual trade value of approximately $200 billion. The rate of additional duty initially was 10 percent. Those additional duties were effective starting on September 24, 2018, and currently are in effect. Under Annex B of the September 21 notice, the rate of additional duty was set to increase to 25 percent on January 1, 2019. In the September 21 notice, the Trade Representative stated that he would continue to consider the actions taken in this investigation, and if further modifications were appropriate, he would take into account the extensive public comments and testimony previously provided in response to the notices published on July 17, 2018 (83 FR 33608) and August 7, 2018 (83 FR 38760).
 
On September 28, 2018 (83 FR 49153), the Trade Representative issued a conforming amendment and modification of the September 21 notice. The current notice refers to the September 21 notice, as modified by the September 28 notice, as the `September 2018 action.’
 
On December 19, 2018 (83 FR 65198), in accordance with the direction of the President, the Trade Representative determined to modify the September 2018 action by postponing until March 2, 2019, the increase in the rate of additional duty to 25 percent. The Annex to the December 19 notice, which superseded Annex B to the September 21 notice, amended the Harmonized Tariff Schedule of the United States (HTSUS) to reflect this postponement of the increase in the rate of duty applicable to the September 2018 action.
 
On March 5, 2019 (84 FR 7699), in accordance with the direction of the President, the Trade Representative determined to modify the September 2018 action by postponing until further notice the increase in the rate of additional duty to 25 percent. Annex B of the September 21 notice (83 FR 47974) and the Annex to the December 19 notice (83 FR 65198) were rescinded. In accordance with Annex A of the September 21 notice, the rate of additional duty under the September 2018 action remained at 10 percent until further notice.
 
B. Determination to Further Modify September 2018 Action
 

The United States is engaging with China with the goal of obtaining the elimination of the acts, policies, and practices covered in the investigation. The leaders of the United States and China met on December 1, 2018, and agreed to hold negotiations on a range of issues, including those covered in Section 301 investigation (available here).
Since the meeting on December 1,
the United States and China have engaged in additional rounds of negotiation on these issues, including meetings in March, April, and May of 2019. In the most recent negotiations, China has chosen to retreat from specific commitments agreed to in earlier rounds. In light of the lack of progress in discussions with China, the President has directed the Trade Representative to increase the rate of additional duty to 25 percent.

 
Section 301(b) of the Trade Act of 1974, as amended (Trade Act), provides that the Trade Representative “shall take all appropriate and feasible action authorized under [Section 301(c)] to obtain the elimination of [the] act, policy, or practice [under investigation].” Section 307(a)(1) of the Trade Act authorizes the Trade Representative to modify or terminate any action being taken under Section 301, subject to the specific direction, if any, of the President if “the burden or restriction on United States commerce . . . of the acts, policies, and practices, that are the subject of such action has increased or decreased, or such action is Start Printed Page 20460being taken under Section [301(b)] of this title and is no longer appropriate.” In light of the lack of progress in the additional rounds of negotiations since March 2019, and at the direction of the President, the Trade Representative has determined that it is appropriate for the rate of additional duty under the September 2018 action to increase to 25 percent on May 10, 2019.
 
The Trade Representative’s decision to modify the September 2018 action takes into account the extensive public comments and testimony, as well as advice from advisory committees, concerning the actions proposed in the notices issued in advance of the September 2018 action (83 FR 33608 and 83 FR 38760). Those notices, among other things, requested comments on whether the rate of additional duties should be 10 percent or 25 percent. The Trade Representative’s decision also reflects the advice of the interagency Section 301 Committee.
 
The Annex to this notice amends the Harmonized Tariff Schedule of the United States to provide that the rate of additional duties for the September 2018 action will increase to 25 percent on May 10, 2019.
 
Pursuant to Sections 301(b), 301(c), 304(a), and 307(a) of the Trade Act, the Trade Representative has determined that the Office of the United States Trade Representative (USTR) will establish a process by which interested persons may request that particular products classified within an HTSUS subheading covered by the September 2018 action be excluded from the additional duties. USTR will publish a separate notice describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request.
 
Annex
 
Effective with respect to goods (i) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (ii) exported to the United States on or after May 10, 2019, subchapter III of chapter 99 of the Harmonized Tariff Schedule of the United States is modified:
 
  (1) By amending U.S. Note 20(e) to subchapter III of chapter 99 by deleting “10 percent” each place that it appears, and inserting “25 percent” in lieu thereof;
  (2) by amending U.S. Note 20(g) to subchapter III of chapter 99 by deleting “10 percent” each place that it appears, and inserting “25 percent” in lieu thereof;
  (3) by amending the Rates of Duty 1-General column of heading 9903.88.03 by deleting “10%”, and inserting “25%” in lieu thereof; and
  (4) by amending the Rates of Duty 1-General column of heading 9903.88.04 by deleting “10%”, and inserting “25%” in lieu thereof.
 
Joseph Barloon, General Counsel, Office of the U.S. Trade Representative.

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OGSOTHER GOVERNMENT SOURCES

OGS_a14. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

 


* President; EXECUTIVE ORDERS; Iran; Implementation of U.S. Sanctions on Iranian Iron, Steel, Aluminum, and Copper Sectors (EO 13871) [Pub. Date: 10 May 2019.]
 
* President; ADMINISTRATIVE ORDERS;
  – Syria; Continuation of National Emergency (Notice of May 8, 2019); and
  – Central African Republic; Continuation of National Emergency (Notice of May 8, 2019) [Pub. Dates: 10 May. Both items are included in today’s Daily Bugle under “Other Government Sources” section.]


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OGS_a36.
DHS/CBP Announces Change in Effective Date of Duty Increase of Section 301 (Tranche 3) Duties, Posts Updated Collections Draft CATAIR Chapter

(Source: CSMS #19-000236, 9 May 2019, and
CSMS# 19-000233
, 8 May 2019.) [Excerpts.]
 
Change in Effective Date of Duty Increase of Section 301 (Tranche 3) Duties
 
On August 18, 2017, the Office of the United States Trade Representative (USTR) initiated an investigation under Section 301 of the Trade Act of 1974 into the government of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. On June 20, 2018, the USTR published a Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301(83 Federal Register (FR) 28710), imposing additional import duties on a list of Chinese products. On August 16, 2018, the USTR published a Notice of Action (83 FR 40823) providing for the imposition of additional import duties on a second list of Chinese Products.
 
On September 21, 2018, the USTR published a Notice of Modification of Action in the Section 301(83 FR 47974) investigation providing for the imposition of additional import duties on over 5,700 full and partial eight-digit subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) on goods imported from the People’s Republic of China (China). The September 21, 2018 list of products can be found in Annex A to the USTR’s September 21, 2018 Notice, and was amended on September 28, 2018 (83 FR 49153). The rate of additional duties was initially 10 percent and the duties were effective starting on September 24, 2018. The duty rate on these imports was originally scheduled to increase to 25 percent, but the increase was subsequently postponed.
 
On May 9, 2019, the USTR published a Notice of Modification of Action (84 FR 20459) in the Section 301 investigation increasing the duty rate to 25 percent on imports from China on the over 5,700 full and partial eight-digit subheadings of the HTSUS listed in Annex A to the USTR’s September 21, 2018 Notice, as amended.
 
GUIDANCE: The increase in additional import duties for Chinese goods covered by the September 21, 2018 Federal Register notice, as amended, is now effective on May 10, 2019. Effective with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States on or after May 10, 2019, the rate of additional duties on imported articles classified in a subheading covered by the September 21, 2018 Federal Register notice, as amended, will be 25 percent ad valorem.
 
For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States on or after May 10, 2019, report the following HTS numbers and duty rates:
 
HTS                                                         Duty Rate
9903.88.03 and 9903.88.04                       25 percent
                              
For subject goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on May 10, 2019, and exported to the United States before May 10, 2019, the 10 percent duty rate will still apply. CBP is working with USTR on additional guidance on the entry filing requirements for these imports.
 
In the meantime, for goods entered on or after May 10, 2019, importers can pay the 25 percent duty and file a Post Summary Correction when filing instructions are available for the 10 percent duty. Alternatively, importers can delay filing their entry summary within the standard ten-day entry summary filing period until additional filing instructions are available for the 10 percent duty.
 
The Section 301 duties only apply to products of China, and are based on the country of origin, not country of export. ..
 
Updated Collections Draft CATAIR Chapter
 


An updated ACE Collections Release 1 Draft CATAIR Chapter for PF Daily Statement is now posted on CBP.gov under the “Chapters: Drafts for Future Capabilities” tab via
https://www.cbp.gov/trade/ace/catair.

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OGS_a47.
Justice: “North Korean Cargo Vessel Connected to Sanctions Violations Seized by U.S. Government”

(Source:
Justice, 9 May 2019.) [Excerpts.]
 
Assistant Attorney General for National Security John C. Demers, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Assistant Director John Brown of the FBI’s Counterintelligence Division and Assistant Director William F. Sweeney Jr. of the FBI’s New York Field Office announced today the filing of a civil forfeiture complaint against M/V Wise Honest (the “Wise Honest”), a 17,061-ton, single-hull bulk carrier ship registered in the Democratic People’s Republic of Korea (“DPRK” or “North Korea”). The Wise Honest, one of North Korea’s largest bulk carriers, was used to illicitly ship coal from North Korea and to deliver heavy machinery to the DPRK. Payments for maintenance, equipment, and improvements of the Wise Honest were made in U.S. dollars through unwitting U.S. banks. This conduct violates longstanding U.S. law and United Nations Security Council resolutions.
 
“This sanctions-busting ship is now out of service,” said Assistant Attorney General Demers. “North Korea, and the companies that help it evade U.S. and U.N. sanctions, should know that we will use all tools at our disposal – including a civil forfeiture action such as this one or criminal charges – to enforce the sanctions enacted by the U.S. and the global community. We are deeply committed to the role the Justice Department plays in applying maximum pressure to the North Korean regime to cease its belligerence.”
 
“Today’s civil action is the first-ever seizure of a North Korean cargo vessel for violating international sanctions,” said U.S. Attorney Berman. “Our Office uncovered North Korea’s scheme to export tons of high-grade coal to foreign buyers by concealing the origin of their ship, the Wise Honest. This scheme not only allowed North Korea to evade sanctions, but the Wise Honest was also used to import heavy machinery to North Korea, helping expand North Korea’s capabilities and continuing the cycle of sanctions evasion. With this seizure, we have significantly disrupted that cycle. We are willing and able to deploy the full array of law enforcement tools to detect, deter, and prosecute North Korea’s deceptive attempts to evade sanctions.”
 
“Although barred from doing business in this country, North Korea continues to violate U.S. and international sanctions while simultaneously taking advantage of unwitting U.S. companies,” said Assistant Director Brown. “The FBI is committed to ensuring that North Korea be held responsible for their blatant disregard for U.S. law. I am proud of the work done by the many men and women of the FBI who pursued this case.”
 
“Working with our law enforcement and intelligence partners around the world gives the FBI the ability to interdict illicit activity globally,” said Assistant Director in Charge Sweeney. “Our counterintelligence efforts are squarely focused on protecting the American people. This seizure should serve as a clear signal that we will not allow foreign adversaries to use our financial systems to fund weapons programs which will be used to threaten our nation.”
 
According to the documents filed today in Manhattan federal court:
 
Pursuant to the International Emergency Economic Powers Act and the North Korea Sanctions and Policy Enhancement Act of 2016, North Korea and other individuals or entities that the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has determined are involved in the facilitation of proliferation of weapons of mass destruction are prohibited from engaging in transactions with U.S. persons, involving U.S.-origin goods, or using the U.S. financial system. The United Nations Security Council has similarly prohibited the provision of goods, technology, and services to North Korea, including the sale, supply, or transfer of coal.
 
From at least November 2016 through April 2018, the Wise Honest was used by Korea Songi Shipping Company, an affiliate of Korea Songi General Trading Corporation (a.k.a. “Songi Trading Company”), to export coal from North Korea to foreign purchasers and import machinery to North Korea (the “Korea Songi Scheme”). On June 1, 2017, OFAC designated Songi Trading Company pursuant to Executive Order 13722 for its involvement in the sale, supply, or transfer of coal from North Korea. OFAC also determined that Songi Trading Company was a subordinate of the Korean People’s Army.
 
On or about March 14, 2018, the Wise Honest was loaded with coal in Nampo, North Korea. On or about April 2, 2018, foreign maritime authorities intercepted and detained the Wise Honest. Maritime regulations require vessels like the Wise Honest engaged in international voyages to operate an automatic identification system (“AIS”) capable of providing information about the vessel to other ships and coastal authorities. However, despite its March 2018 voyage from North Korea, the Wise Honest had not broadcast an AIS signal since August 4, 2017.
 
Participants in the Korea Songi Scheme attempted to conceal the Wise Honest’s DPRK affiliation by falsely listing different countries for the Wise Honest’s nationality and the origin of the illicit coal in shipping documentation.
 
In connection with the Korea Songi Scheme, Kwon Chol Nam, one of Korea Songi Shipping Company’s representatives, paid for numerous improvements, equipment purchases, and service expenditures for the Wise Honest in U.S. dollars through unwitting U.S. financial institutions. Such transfers constitute a provision of services by U.S. banks to both the sender and recipient of the funds, and longstanding U.S. law prohibits banks from providing such services to North Korean parties. Payments totaling more than $750,000 were transmitted through accounts at a U.S. financial institution in connection with the March 2018 shipment of coal on board the Wise Honest.
 
The Wise Honest is currently in the custody of the United States, having previously been seized pursuant to a warrant issued in the Southern District of New York. …

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OGS_a69. 
Treasury/OFAC Publishes New FAQs Related to 8 May EO “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran”

(Source:
Treasury/OFAC
, 8 May 2019.)
 
Today, the President issued a new
Executive Order (E.O.) [to be published in the Daily Bugle of 10 May, ed.], “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran”.  In connection with the issuance of this E.O., the Department of the Treasury’s Office of Foreign Assets Control (OFAC) is publishing related
new FAQs.

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OGS_a7
10
.
President Continues National Emergency Concerning Syria, Central African Republic

(Source:
The White House, 8 May 2019.)
 
 
On May 11, 2004, pursuant to his authority under the International Emergency Economic Powers Act, 50 U.S.C. 1701-1706, and the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003, Public Law 108-175, the President issued Executive Order 13338, in which he declared a national emergency with respect to the actions of the Government of Syria. To deal with this national emergency, Executive Order 13338 authorized the blocking of property of certain persons and prohibited the exportation or reexportation of certain goods to Syria. The national emergency was modified in scope and relied upon for additional steps taken in Executive Order 13399 of April 25, 2006, Executive Order 13460 of February 13, 2008, Executive Order 13572 of April 29, 2011, Executive Order 13573 of May 18, 2011, Executive Order 13582 of August 17, 2011, Executive Order 13606 of April 22, 2012, and Executive Order 13608 of May 1, 2012.
 
The President took these actions to deal with the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States constituted by the actions of the Government of Syria in supporting terrorism, maintaining its then-existing occupation of Lebanon, pursuing weapons of mass destruction and missile programs, and undermining United States and international efforts with respect to the stabilization and reconstruction of Iraq.
 
The regime’s brutality and repression of the Syrian people, who have been calling for freedom and a representative government, not only endangers the Syrian people themselves, but also generates instability throughout the region. The Syrian regime’s actions and policies, including with respect to chemical weapons, supporting terrorist organizations, and obstructing the Lebanese government’s ability to function effectively, continue to foster the rise of extremism and sectarianism and pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. As a result, the national emergency declared on May 11, 2004, and the measures to deal with that emergency adopted on that date in Executive Order 13338; on April 25, 2006, in Executive Order 13399; on February 13, 2008, in Executive Order 13460; on April 29, 2011, in Executive Order 13572; on May 18, 2011, in Executive Order 13573; on August 17, 2011, in Executive Order 13582; on April 22, 2012, in Executive Order 13606; and on May 1, 2012, in Executive Order 13608, must continue in effect beyond May 11, 2019. Therefore, in accordance with section 202(d) of the National Emergencies Act, 50 U.S.C. 1622(d), I am continuing for 1 year the national emergency declared with respect to the actions of the Government of Syria.
 
In addition, the United States condemns the Assad regime’s use of brutal violence and human rights abuses and calls on the Assad regime to stop its violence against the Syrian people, uphold existing ceasefires, enable the delivery of humanitarian assistance, and allow a political transition in Syria that will forge a credible path to a future of greater freedom, democracy, opportunity, and justice.
 
The United States will consider changes in the composition, policies, and actions of the Government of Syria in determining whether to continue or terminate this national emergency in the future.
 
This notice shall be published in the
Federal Register and transmitted to the Congress.
 
DONALD J. TRUMP
 
THE WHITE HOUSE,
May 8, 2019.
 
 
On May 12, 2014, by Executive Order 13667, the President declared a national emergency pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701
et seq.) to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States constituted by the situation in and in relation to the Central African Republic, which has been marked by a breakdown of law and order, intersectarian tension, widespread violence and atrocities, and the pervasive, often forced recruitment and use of child soldiers, threatens the peace, security, or stability of the Central African Republic and neighboring states.
 
The situation in and in relation to the Central African Republic continues to pose an unusual and extraordinary threat to the national security and foreign policy of the United States. For this reason, the national emergency declared on May 12, 2014, to deal with that threat must continue in effect beyond May 12, 2019. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency declared in Executive Order 13667.
 
This notice shall be published in the
Federal Register and transmitted to the Congress.
 
DONALD J. TRUMP
 
THE WHITE HOUSE,
May 8, 2019.

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NWSNEWS

NWS_a111
. 
ST&R Trade Report: “Tariff Increase on Imports from China Set for May 10; Exclusion Process Coming”
(Source:
Sandler, Travis & Rosenberg Trade Report, 9 May 2019.) [Excerpts.]
The Office of the U.S. Trade Representative has issued a formal notice confirming that the additional tariff on $200 billion worth of goods (List 3 goods) imported from China will be increased from 10 percent to 25 percent as of May 10. The notice also reiterates USTR’s intention to implement a process for requesting exclusions from this tariff but makes no mention of a possible additional tariff on hundreds of billions of dollars’ worth of other imports from China not already subject to higher tariffs under the Section 301 process (List 4 goods). …
 
Effective Date
 
The USTR notice amends the Harmonized Tariff Schedule of the U.S. to provide that the tariff increase for List 3 goods will be effective with respect to goods (a) entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on May 10, 2019, and (b) exported to the U.S. on or after May 10, 2019.
 
USTR confirmed verbally to ST&R trade attorney David Cohen that the use of “and” in the language above is intentional, which would provide a brief respite from the tariff increase for goods exported before 12:01 a.m. EDT on May 10. However, ST&R will continue to monitor government notices and instructions for consistency with this intent.
 
Exclusion Requests
 
USTR also states that it will publish a separate notice describing a process by which interested persons may request the exclusion of specific products from the additional tariff on List 3 goods, including procedures for submitting requests and opposition to requests. While it is unclear when this process may get underway, importers of List 3 goods can start preparing now to file exclusion requests for their products.
 
Negotiations Ongoing
 
According to the notice, the president elected to increase the additional tariff on List 3 goods due to a lack of progress since March in negotiations toward a bilateral trade agreement and because “China has chosen to retreat from specific commitments agreed to in earlier rounds.” In particular, Beijing reportedly reversed course on codifying those commitments in law and said it would instead implement them through regulatory and administrative actions, which seems to have raised questions of enforceability for the U.S.
 
Senior Chinese officials are due in Washington May 9 to resume negotiations and U.S. officials have said progress in those talks could play a role in whether the additional tariff increase proceeds as planned.

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NWS_a2
12
. 
WorldECR: “European Parliament Passes Act on Cultural Goods”
(Source: WorldECR, 9 May 2019.)
 
Key features include introduction of a licensing system for the import of cultural goods known to be most at risk.
 
Legislation has been passed by the European Parliament which tightens the law on importing ‘cultural goods’ into the European Union.
 
While publication of the legislation (2017/0158 (COD)) is pending, a backgrounder published by the EU explains that key features of the law are: “A new common EU definition for “cultural goods” at importation which covers a broad range of objects including archaeological finds, ancient scrolls, the remains of historical monuments, artwork, collections and antiques.”
 
The new rules will apply only to cultural goods which are at least 250 years old at the moment of importation. The introduction of a new licensing system for the import of cultural goods which are known to be most at risk, such as archaeological objects, parts of monuments and ancient manuscripts and books.
 
It says that importers “will have to obtain import licenses from the competent authorities in the EU country where the goods are imported, before bringing such goods into the EU,” while for other categories of cultural goods, importers will have to submit a signed statement or affidavit “as proof that the goods have been exported legally from the third country.”
 
It says, “[T]he import of cultural goods into the EU can be considered illicit when those goods have been exported from a non-EU country illegally. It is the laws of the exporting country, be it the source country or an intermediate country which is a UNESCO Convention signatory, which will determine this.”
 
“However, for cultural goods exported from a third country which is neither the source country nor an intermediate country having signed and ratified the UNESCO Convention, the importer will have to prove that the initial export from the source country was licit.”
 
See
here and
here.

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COMMCOMMENTARY

COM_a113.
A. L. Riella & B. D. Schnapp: “Updated DOJ Guidance Provides Useful Roadmap for Implementing and Enhancing Corporate Compliance Programs” (Part II of II)

(Source:
Vinson & Elkins, 2 May 2019.)
 
* Authors: Amy Lamoureux Riella, Esq.,
ariella@velaw.com; and Brian D. Schnapp, Esq.,
bschnapp@velaw.com. Both of Vinson & Elkins.
 
Effective Implementation
 
The Guidance instructs prosecutors to consider whether they are faced with an effective compliance program or a mere “paper program.” Factors that they will consider include:
 
  – More than just “tone at the top,” prosecutors are asked to consider the concrete actions that are taken by senior leaders throughout the organization, whether middle-management has demonstrated a commitment to compliance such as being involved in remediation efforts, and whether there is appropriate expertise on and communication with the company’s Board of Directors.
  – Prosecutors will evaluate the structure of a compliance program, considering whether senior and sufficient resources are allocated, and whether there is appropriate autonomy and independence for the compliance function. Prosecutors will consider compensation levels, reporting lines, and titles, for compliance professionals as a gauge for determining whether compliance is on equal footing with other strategic functions.
  – Prosecutors will consider incentives and discipline, asking whether companies publicize disciplinary action if appropriate, advertise incentives and compliance metrics for bonuses and other compensation. The Guidance also indicates that whether human resources is involved in disciplinary actions and the consistency of the company’s disciplinary actions will be considered.
 
Effectiveness in Practice
 
The Guidance notes that, given the hindsight nature in which prosecutors evaluate corporate compliance programs, determining whether a program is or was effective is one of the hardest questions to answer – particularly where a program may have failed to immediately uncover misconduct. The Guidance provides that, in attempting to answer, prosecutors will consider:
 
  – The extent to which a compliance program allowed a company to detect, respond to, and report an issue.
  – Whether a program has improved over time, including whether a company has made significant investments to improve internal controls and compliance functions.  
  – Whether companies can demonstrate periodic testing, including proactively auditing compliance functions and high risk transactions, and explain how the results of such testing are used to continuously improve controls.
  – Whether and to what extent a company attempts to test its culture of compliance, including by seeking input from all levels of employees and management.
  – Whether compliant response and investigation procedures ensure that the company has engaged qualified personnel, has processes in place to allow the company to effectively respond to complaints, identify root cause analysis, and report on any necessary remediations.
  – Finally, whether a company conducted a thorough root cause analysis of the misconduct that brought them before the Department to determine what remedial actions and program enhancements needed to be undertaken.
 
The Guidance reiterates that the existence of misconduct does not necessarily imply that a compliance program did not work or was ineffective.
 
The newly minted Guidance provides a useful summary and expansion on prior Department recommendations in connection with corporate compliance programs, and offers detailed insight into the types of questions that companies should expect to have to answer when they come before the Department. Perhaps more importantly, however, the Guidance serves a reminder to companies that U.S. regulators expect continuous evaluation and enhancement of compliance programs. For companies just venturing into compliance, the Guidance provides a helpful framework for identifying risk areas and program components necessary to design an initial program. In contrast, companies in highly regulated markets and industries with long-standing compliance programs, are well-advised to consider the criteria that prosecutors will consider when determining whether a program has been effectively implemented, and consider whether now may be the time to re-evaluate and re-assess program components, practices, and communication.

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

COM_a2
14
.
B.J. Fleming, P. O’Toole & A.S. Hussain: “Trade Compliance Flash: New Sanctions Compliance Guidance from OFAC after Upward Enforcement Trend in 2019”
(Source:
Miller & Chevalier
, 7 May 2019.)
 
* Authors: Brian J. Fleming, Esq.,
bfleming@milchev.com
, 202-626-5871; Timothy P. O’Toole, Esq.,
totoole@milchev.com
, 202-626-5552; Aiysha S. Hussain, Esq.,
ahussain@milchev.com
, 202-626-1497. All of Miller & Chevalier.
 
The Office of Foreign Assets Control (OFAC)
has issued
its most comprehensive compliance guidance to date, following a period of exceptionally active enforcement to begin 2019. Published on May 2, 2019, the new guidance titled “
A Framework for OFAC Compliance Commitments
” presents a more useful and practical tool for companies and compliance professionals to leverage in both day-to-day and long-term sanctions compliance decision-making than the previously published
OFAC Enforcement Guidelines
. While the Enforcement Guidelines explain the mitigating and aggravating factors critical to OFAC in evaluating its enforcement decisions, the Framework lays out more concrete objectives that organizations can readily translate into their operations and sanctions compliance strategy. U.S. and foreign organizations alike would be well advised to analyze the compliance program priorities that OFAC details in the Framework, as well as the common root causes for sanctions compliance breakdowns. Now that the Framework has been published-and a clear roadmap of best practices has been provided by OFAC-all companies, both U.S. and non-U.S., with any U.S. sanctions exposure have been put on notice by OFAC that they will be held to a higher standard in the future when it comes to defending the strength and effectiveness of their sanctions compliance programs. Failure to adopt and implement the priorities set forth in the Framework, could lead to serious OFAC enforcement risk and is more likely to lead OFAC to determine that apparent sanctions violations should be deemed “egregious” under the Enforcement Guidelines.
 
Our summary below proceeds as follows: First, we set forth the five sanctions program priorities identified in the Framework. Second, we detail the root causes identified by OFAC that commonly occur when sanctions compliance programs suffer lapses or are otherwise deficient. Third, we highlight several recent OFAC enforcement actions to demonstrate how the considerations in the Framework apply to real world scenarios faced by U.S. and foreign companies.
 
Five Sanctions Compliance Program Priorities
 
Initially, OFAC details the five facets of sanctions compliance programs it views as indispensable. If nothing else, organizations should carefully review these priorities and consider whether they may be lacking in any of the critical areas.
  – Management commitment and support: As the first criteria enumerated by OFAC, management’s role in an organization’s compliance program is vital to its success. OFAC lists several ways that management can demonstrate its commitment, such as the allocation of adequate resources, fostering a culture of compliance, appointment and empowerment of compliance officer(s), the quality and experience of selected compliance personnel, and the provision of communication channels including reporting mechanisms.
 
  – Risk assessment: OFAC describes the scope of an effective risk assessment, in order to properly design and maintain a risk-based compliance program. Conducting routine assessments of the potential threats and vulnerabilities specific to an organization is a central tenet of a healthy sanctions compliance program.
 
   – Internal controls: Upon a thorough risk assessment, written policies and procedures should address the results in order to better “identify, interdict, escalate, report, and keep records concerning” problematic activity. OFAC outlines the primary objectives of internal controls, emphasizing their practicability and enforcement, and advises that programs be adjusted to reflect changes in sanctions (e.g., list updates, issuance of licenses, etc.).
  – Testing and auditing: In addition to routinely conducting risk assessments of their operations, organizations should regularly test and audit the effectiveness of their compliance program. OFAC makes clear that organizations have a “responsibility to enhance” their compliance programs based on the results of such testing (e.g., updating or recalibrating program-related software).
   – Training: All relevant employees should receive training on a periodic basis, which OFAC considers to be annually at a minimum. OFAC also urges companies to provide information and instruction to other stakeholders, such as clients, suppliers, business partners, and counterparties.
 
Common Root Causes of Sanctions Violations
 
Beyond providing insight into sanctions compliance program priorities, OFAC included an overview of common root causes for sanctions compliance deficiencies, which should be leveraged by organizations in seeking to adjust their programs going forward to avoid these common pitfalls.
   – Lack of formal OFAC sanctions compliance program: While the sanctions regulations do not mandate formal programs, OFAC cites that the lack of one as among the most common root causes of apparent violations that result in civil monetary penalties.
   – Misinterpreting or failing to understand the applicability of OFAC regulations: Misunderstanding of the specific touchpoints that bring an organization and its activities within OFAC’s jurisdiction tend to be particularly problematic. Relevant considerations include status as U.S. person, dealings with U.S. persons, being a U.S.-owned or controlled subsidiary, or the involvement of the U.S. financial system or U.S.-origin goods and technology.
   – Facilitating transactions by non-U.S. persons, including through or by overseas subsidiaries or affiliates: Multi-national organizations’ U.S. locations or personnel often cause compliance issues by referring opportunities to or somehow facilitating dealings between its non-U.S. locations and sanctioned parties/countries.
  – Exporting or re-exporting U.S.-origin goods, technology, or services to OFAC-sanctioned persons or countries: OFAC notes its public enforcement has focused on large, sophisticated companies that engage in a pattern of such behavior over a period of years and that utilize non-routine business practices to conceal the activity. These actions particularly include non-U.S. persons that do so despite contractual language expressly prohibiting such dealings.
   – Utilizing the U.S. financial system, or processing payment to or through U.S. financial institutions, for commercial transactions involving OFAC-sanctioned persons or countries: OFAC stresses that even if no party to a transaction is otherwise subject to U.S. jurisdiction, the inclusion of a U.S. financial institution in associated payments often results in a prohibited activity and a sanctions violation.
   – Sanctions screening software or filter faults: Improper maintenance or use of such tools often results in failures to timely identify prohibited locations, parties or dealings.
   – Improper or incomplete due diligence on customers, clients, the supply chain, intermediaries, and counter parties: Inadvertent violations can often stem from a failure to adequately review product sourcing or pertinent parties’ information, such as ownership information, business dealings, geographic location, etc.
   – De-centralized compliance functions and inconsistent application of a sanctions compliance program: The effectiveness of compliance programs is often undermined by inconsistent application, which OFAC notes has often resulted from the scattering of compliance personnel and decision-makers throughout various offices.
  – Utilizing non-standard payment or commercial practices: Such practices inconsistent with industry norms and practices can appear to OFAC as attempting to evade or circumvent sanctions or conceal prohibited activity.
   – Individual liability: OFAC can take enforcement action against not only organizations engaged in prohibited activity but also individual(s) – particularly in supervisory, managerial, or executive level positions – that play integral roles in causing or facilitating violations. An individual’s efforts to obfuscate and conceal activities from others within organization serve to aggravate such potential liability.
 
Recent OFAC Enforcement Examples
 
Recent OFAC enforcement actions and settlements in 2019 illustrate many of the sanctions compliance program essentials and root causes identified by OFAC in the Framework. Such “real world” applications of OFAC’s enforcement decisions, coupled with the details of sanctions compliance program missteps, are invaluable as companies seek to build and refine their own sanctions compliance programs.
   – The proper scope of due diligence, specifically to include all relevant aspects of one’s supply chain, was at issue in the
January 2019 settlement
for $1 million with e.l.f. Cosmetics, Inc., whose audits of suppliers in China failed to even address the risk of sanctioned North Korean content, much less detect the 156 apparent violations involving its importation of false eyelash kits containing materials illicitly sourced from North Korea.
   – The importance of routine audits of foreign subsidiaries for sanctions compliance, which should reveal management misdirection and non-standard commercial practices, was highlighted in the $1.8 million
settlement
with Stanley Black & Decker in March 2019. Stanley Black & Decker’s newly acquired foreign subsidiary continued to sell products to Iran for at least two years despite the U.S. parent’s warning and policies against it. The subsidiary’s leadership actively participated in Iran business, which entailed non-routine business practices to conceal it, such as utilizing intermediaries in other countries as conduits, fictitious bills of lading with false ports and delivery locations, and even instructing customers not to write “Iran” on any related documents. OFAC noted that Stanley Black & Decker failed to conduct audits of its subsidiary to ensure that any Iranian business permanently ceased after the acquisition.
  – The export or re-export of U.S. origin goods and technology centered in OFAC’s
concurrent enforcement action
with the
U.S. export control authorities
against the China-based Yantai Jereh Oilfield Services Group in December 2018. According to the combined $3.4 million settlements, Yantai Jereh unlawfully shipped oilfield service products with some U.S.-origin content to Iran through an overseas intermediary over a period of several years, and then attempted to mislead U.S. investigating authorities and conceal its Iran business, including falsifying its U.S. export filings.
  – Several other large recent enforcement actions entail the use of the U.S. financial system by non-U.S. entities in transactions with sanctioned parties/countries, which the entities attempted to hide by using non-standard business practices: the
February 2019 settlement
with AppliChem GmbH for $5 million, the
April 2019 settlements
with three UniCredit Group Banks totaling $661 million, and the
April 2019 settlement
with Standard Chartered Bank for $639 million.
   – OFAC’s position on individual liability was demonstrated by its
first-time designation
of an individual as a “Foreign Sanctions Evader,” who was a Turkish national managing director of a newly acquired Turkish subsidiary of Kollmorgen Corp. According to the
OFAC settlement
in February 2019, the manager was primarily responsible for the subsidiary’s conduct that led to several apparent Iran sanctions violations, which he ordered and attempted to conceal. This conduct, which went undetected by the company for a period of time post-merger, led OFAC to designate him in his individual capacity and impose a civil monetary penalty against the company.

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COM_a3
15
.
D. Kyle & M. Alonso: “Due Process Challenges to U.S. Government Agency List Designations: Lessons from KindHearts and Deripska”

(Source:
Torres Trade Law, 19 Apr 2019.)
 
* Authors: Derrick Kyle, Esq. & Maria Alonso, Esq. Both from Torres Trade Law.
 
Among the tools used by the U.S. Government to impose sanctions on both entities and individuals, few are as powerful as “U.S. Denied Party Lists.” Assembled and maintained by different government agencies, these lists contain the names of people and companies that have been ‘blacklisted’ by the U.S. Government.
 
A well-known example is the list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) of Specially Designated Nationals and Blocked Persons (the SDN list). It names U.S. and foreign entities and people with whom U.S. businesses and individuals are prohibited or restricted from engaging in business transactions. (For a general overview about the other U.S. Denied Party Lists see 
our previous article.)
 
Inclusion on a U.S. Denied Party List can have adverse consequences even if the designated parties are ultimately removed from the list, as two recent cases involving lawsuits against OFAC involving due process concerns will demonstrate.
 
The Impact
 
Several U.S. government agencies have broad discretion to designate a party on a U.S. Denied Party List, but whichever agency is involved, the designated party’s business relations and reputation begin to suffer almost immediately after being included, often quickly leading to the loss of millions of dollars. The agency may have the authority to freeze the party’s assets or the party may become ineligible to apply for certain U.S. export and import licenses.
 
There is a process to seek removal or challenge a designation, but it is long and difficult, and rarely achieved. Once a party is included on one of the U.S. Denied Party Lists, they can begin an interagency administrative process to seek removal or appeal the designation, although success varies significantly depending on the agency.
 
Another way to challenge the designation is through the courts, and in some cases, parties have filed suit against the government agencies in federal court on grounds of violating their due process rights.
 
Interagency Administrative Process
 
Each U.S. government agency has its own administrative process for appealing a designation or requesting removal from a U.S. Denied Party List. Procedures vary from agency to agency, and the final decision is subject to the agency’s discretion.
 
The interagency process is very long, complex, and most of the time unsuccessful. Even if the government agency approves the removal of a party from a U.S. Denied Party List, they will not actually be immediately removed from the list: that often requires the agency to publish a notice in the Federal Register updating the specific U.S. Denied Party List, which involves yet another lengthy internal agency process that usually takes several months.
 
Overall, critics claim that the interagency processes are unfair and lack due process because they are not only burdensome-it is very difficult to obtain removal from a U.S. Denied Party List-but even if removal is approved, the party’s reputation and business may continue to be negatively impacted. Most importantly, in most instances, the party that gets listed does not have an opportunity to defend the designation prior to the listing.
 
Despite the low success rates of lawsuits against the U.S. government seeking removal from a U.S. Denied Party List, the wide discretion conferred to government agencies to list individuals and entities and the lack of transparency regarding the designation and the removal process, have driven some parties to file suits against U.S. government agencies and officials for abuse and discriminatory enforcement of the law.
 
Recent Cases: Deripaska and KindHearts
 
The U.S. government usually prevails when individuals or entities file suit against U.S. government agencies, like Treasury and OFAC, challenging designation on any U.S. Denied Party Lists. Below is a brief summary of two recent lawsuits against OFAC.
 
On April 6, 2018, pursuant to Executive Orders 
13661 and 
13662, Oleg Deripaska was identified on the SDN List along with seven companies owned or controlled directly or indirectly by Mr. Deripaska, a Russian citizen and billionaire. He is the founder of Basic Element, a Russian industrial group with interests in aluminum, energy, construction, agriculture, and at one point, was reputed to be the richest man in Russia.
 
Generally, EO 13661 imposes sanctions on persons that are officials of the Government of Russia, are owned or controlled by a Russian government official, or assist or support a Russian government official. Additionally, EO 13662 imposes sanctions on persons that operate in certain specified sectors of the Russian economy. Mr. Deripaska was listed pursuant to allegedly operating in the energy sector of the Russian economy. According to the 
Treasury press release:
 
Oleg Deripaska is being designated pursuant to EO 13661 for having acted or purported to act for or on behalf of, directly or indirectly, a senior official of the Government of the Russian Federation, as well as pursuant to EO 13662 for operating in the energy sector of the Russian Federation economy. Deripaska has said that he does not separate himself from the Russian state.  He has also acknowledged possessing a Russian diplomatic passport, and claims to have represented the Russian government in other countries. Deripaska has been investigated for money laundering, and has been accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering. There are also allegations that Deripaska bribed a government official, ordered the murder of a businessman, and had links to a Russian organized crime group.
 
On March 15, 2019, Mr. Deripaska filed a 
Complaint for Declaratory Relief from Judgment (the Complaint) in the United States District Court for the District of Columbia against the U.S. Department of the Treasury and its Secretary, Steven Mnuchin, and OFAC and its Director, Andrea Gacki.
 
The Complaint challenges Mr. Deripaska’s designation on the SDN List, alleging that Mr. Deripaska’s designation as an SDN under EOs 13661 and 13662: 1) was arbitrary and capricious and did not provide sufficient notice under the Administrative Procedures Act, and 2) violates his right to due process under the Fifth Amendment. Additionally, the Complaint alleges harm resulting from Mr. Deripaska’s designation on the SDN List, including adverse effects to Mr. Deripaska’s wealth, reputation, and economic livelihood.
 
Based on precedent case law, Mr. Deripaska’s lawsuit will likely not prevail.  A review of similar lawsuits shows that parties that sue OFAC are rarely successful, even when using similar arguments to those in the complaint filed by Mr. Deripaska.
 
Although it is much less common, some entities are successful in suing the U.S. government. One example is KindHearts for Charitable Humanitarian Development, Inc., a non-profit charity based in Toledo, Ohio that brought 
action against OFAC challenging a provisional determination by OFAC that the non-profit was a Specially Designated Global Terrorist (“SDGT”).
 
After its provisional designation as an SDGT, OFAC indefinitely froze all of KindHearts’ assets and property pending a full investigation pursuant to 
EO 13224, which empowers the agency to freeze the assets of, and forbade transactions with, persons who commit, threaten to commit, or support terrorism.
 
In 2009, the Court held that the government cannot freeze an organization’s assets without obtaining a warrant based on probable cause, and that OFAC had violated KindHearts’ right to due process by freezing its assets without providing it adequate notice of the basis for the freeze or a meaningful opportunity to defend itself.
 
Significantly, the fact that KindHearts was an American corporation was a determining factor in the outcome of the Court’s opinion because KindHearts also relied on the Fourth Amendment protections against unreasonable seizure. Ultimately, KindHearts was de-listed and a settlement was reached 
per ACLU.
 
Looking at cases similar to that of Mr. Deripaska’s lawsuit, there appears to be a high but not entirely insurmountable bar to overcome designation on the SDN List through a lawsuit. 
KindHearts, on the other hand, involved a U.S. company and was argued-and ultimately was successful-under a different legal theory. Even so, it took six years between the listing of the organization and the conclusion of the settlement with OFAC that led to de-listing KindHearts.
 
What do these cases tell us? Most importantly, that a U.S. government agency’s decision to list a party on one of the U.S. Denied Party Lists may cause extreme hardship, even after the agency approves the removal of the party from the list.
 
And second, that the U.S. government needs clear interagency administrative processes for the listing as well as the challenging of a designation on a U.S. Denied Party List while adequately addressing national security concerns and affording due process rights.

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COM_a4
16
.
J. Reeves & K. Heubert: “Important Updates from State, Treasury, and More”

(Source: Reeves & Dola Alert, 7 May 2019.) [Available by subscription via 
info@reevesdola.com
.] 
 
* Authors: Johanna Reeves, Esq.,
jreeves@reevesdola.com
; and Katherine Heubert, Esq.,
kheubert@reevesdola.com
. Both of Reeves & Dola LLP.
 
(I) U.S. Senate Confirms New Assistant Secretary of State, Bureau of Political-Military Affairs
 
On April 30, 2019, the U.S. Senate confirmed R. Clarke Cooper as the new Assistant Secretary of State for Political-Military Affairs. His term began on May 2, 2019. The following biography is available on 
the Department of State’s website
:
 
Immediately prior to taking on his present role in the Trump Administration, Cooper served as the Director of Intelligence Planning for Joint Special Operations Command’s Joint Inter-Agency Task Force – National Capital Region.
 
Mr. Cooper brings to Political Military Affairs over two decades of experience in both diplomatic and military roles. In the Bush Administration, Cooper served as U.S. Alternate Representative to the United Nations Security Council, U.S. Delegate to United Nations Budget Committee, Senior Advisor in the Bureau of Near Eastern Affairs, and Advisor at U.S. Embassy-Baghdad. His active duty military assignments include tours with Joint Special Operations Command, U.S. Africa Command, Special Operations Command Africa, Joint Special Operations Task Force Trans-Sahara, and Special Operations Command Central.
 
An outdoor enthusiast, he served as an Assistant Director of the National Park Service early in his career, and was an Eagle Scout in his youth.
 
Mr. Cooper is a graduate of The Florida State University with a bachelor’s degree in history, and he maintains a field grade commission with the U.S. Special Operations Command. He is married to fellow combat veteran, Michael Marin.
 
(II) DDTC Revises “By or For the U.S. Government” Exemption (ITAR Section 126.4)
 
On April 19, 2019, the U.S. Department of State, Directorate of Defense Trade Controls (DDTC) 
published a final rule
 amending the International Traffic in Arms Regulations (ITAR) (27 C.F.R. Parts 120-130) to make changes to the license exemptions available for transfers by or for an agency or department of the U.S. Government. The changes were effective immediately upon publication. 
 
In this revision, DDTC expands the scope of the existing exemption in ITAR § 126.4 to include temporary and permanent exports, temporary imports, reexports, and retransfers. It also allows for transfers by third parties under specific criteria.
 
The first subparagraph (a) covers activities undertaken by a U.S. government department or agency, and retains the prohibition that the exemption cannot be used when the U.S. government is merely acting as a transmittal agent for a private entity as a convenience or to satisfy certain security requirements. While the exemption in subparagraph (a) has been fleshed out and its scope broadened and clarified, it remains usable for exports affected by the U.S. government only.
 
Subparagraph (b), on the other hand, lists the exemptions for non-governmental third parties who export, reexport, retransfer, temporarily import, or provide a defense service for the U.S. government in two specific scenarios:
 
(1) When the activity is to a department or agency of the U.S. Government, at its request. Do note that DDTC makes it clear in the Supplementary Information of the Federal Register notice that “under no circumstances” can subparagraph (b)(1) be used to authorize an export to non-U.S. government entity. DDTC leaves it up to the respective department or agency to determine who is authorized to use the exemption and to issue the appropriate written direction. 
 
(2) When the activity is to an entity other than the U.S. Government at the written direction of the U.S. Government, or pursuant to an international agreement or arrangement so long as the activity would have been authorized under subparagraphs (a)(1)-(4). Again, DDTC leaves it up to the respective department or agency to determine who is authorized to use the exemption and to issue the appropriate written direction.
 
It is important to note, “transfers by third parties to anyone other than the U.S. Government, including directly to any contractors, must be conducted pursuant to written direction from the U.S. Government department or agency, such as through contractual documents, or pursuant to an international agreement or arrangement. For example, transfers by a company to itself may be authorized by written direction from the U.S. Government department or agency requiring the transfer. Under no circumstances shall a transfer to any non-U.S. Government entity be authorized under paragraph (b)(1).” 84 Fed. Reg. 16398, 16399 (Apr. 19, 2019).
 
In addition to the two major changes outlined above, the revisions add a new subparagraph (c) to allow for the return of defense articles to the United States without a license if the following conditions are met: (1) the defense articles were exported pursuant to § 126.4 and not reexported or retransferred other than pursuant to § 126.4; and (2) the articles are being brought into the United States for return to either the U.S. Government or to the person who originally exported the item.
 
This revision to the “by or for” exemption is a welcome change and should allow industry to better and more quickly support U.S. Government operations overseas, as well as international agreements and arrangements. However, like most ITAR exemptions, this one also has restrictions for §126.1 countries. If your transaction involves one of those countries, be sure to review the exemption carefully to make sure it applies.
 
(III) OFAC Publishes “A Framework for OFAC Compliance Commitments”
 
On May 2, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published new guidance on sanctions compliance programs. In the document, OFAC identifies at least five essential components for an effective compliance program: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. The guidance document is available 
here
.
 
(IV) Justice Department Issues “Evaluation of Corporate Compliance Programs” Guidance Document
 
Also on May 2, the U.S. Department of Justice, Criminal Division updated its guidance on evaluating corporate compliance programs. While this document is issued to guide DOJ prosecutors in the context of criminal investigations, it is a useful resource to review when preparing or updating internal compliance programs. DOJ’s guidance is available 
here
.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a117. 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


James M. Barrie (Sir James Matthew Barrie, 1st Baronet, OM; 9 May 1860 – 19 Jun 1937; was a Scottish novelist and playwright, best remembered today as the creator of 
Peter Pan. Before his death, he gave the rights to the Peter Pan works to Great Ormond Street Hospital for Children in London, which continues to benefit from them.)
  
– “Temper is a weapon that we hold by the blade.”
  – “Shall we make a new rule of life from tonight: always to try to be a little kinder than is necessary?”

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EN_a319
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

 

*
DHS CUSTOMS REGULATIONS: 19 CFR, Ch. 1, Pts. 0-199.  Implemented by Dep’t of Homeland Security, U.S. Customs & Border Protection.

  – Last Amendment: 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: 29 Apr 2019: 84 FR 17950-17958: Foreign Interference in U.S. Elections Sanctions Regulations [amendment of 31 CFR Part 579 to implement EO 13848] 
  
* 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_a0320
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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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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