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19-0516 Thursday “Daily Bugle”

19-0516 Thursday “Daily Bugle”

Thursday, 16 May 2019

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, DOE/NRC, Customs, NISPOM, EAR, FACR/OFAC, FAR/DFARS, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe here. Contact us for advertising  

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  1. Commerce/BIS Welcomes New Members for Technical Advisory Committees
  2. State/DDTC Imposes Waiver of Sanctions Concerning Visas to PLO and Palestinian Authority Officials
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce Announces Addition of Huawei Technologies Co. Ltd. to EAR Entity List 
  3. Commerce/BIS: (No new postings.)
  4. State/DDTC: (No new postings.)
  5. White House: U.S. President Issues Executive Order on Securing the Information and Communications Technology and Services Supply Chain
  1. Financial Times: “Trump Puts Huawei on Exports Blacklist” 
  2. NLTimes: “Dutch Government Will No Longer Be ‘Gullible’ Towards China in New Strategy” 
  3. Polygon: “Employee of Flight Sim Developer Arrested for Attempting to Smuggle Jet Fighter Manuals” 
  1. M. Volkov: “OFAC Framework for Sanctions Compliance Programs – Review of Lessons Learned from Enforcement Actions (Part IV of IV)” 
  1. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Amendments: DHS/Customs (5 Apr 2019), DOC/EAR (14 May 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 2019), DOS/ITAR (19 Apr 2019), DOT/FACR/OFAC (29 Apr 2019), HTSUS (13 May 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1
.
Commerce/BIS Solicits New Members for Technical Advisory Committees

(Source:
Federal Register, 16 May 2019.)
 
84 FR 22110-22111: Technical Advisory Committees; Notice of Recruitment of Members
* DATES: Please submit nominations by June 15, 2019.
* SUMMARY: The Bureau of Industry and Security (BIS), Department of Commerce is announcing its recruitment of candidates to serve on one of its seven Technical Advisory Committees (“TACs” or “Committees”). TAC members advise the Department of Commerce on the technical parameters for export controls applicable to dual-use items (commodities, software, and technology) and on the administration of those controls. The TACs are composed of representatives from industry, academia, and the U.S. Government and reflect diverse points of view on the concerns of the exporting community. Industry representatives are selected from firms producing a broad range of items currently controlled for national security, non-proliferation, foreign policy, and short supply reasons or that are proposed for such controls. Representation from the private sector is balanced to the extent possible among large and small firms.
  Six TACs are responsible for advising the Department of Commerce on the technical parameters for export controls and the administration of those controls within specified areas: Information Systems TAC: Control List Categories 3 (electronics), 4 (computers), and 5 (telecommunications and information security); Materials TAC: Control List Category 1 (materials, chemicals, microorganisms, and toxins); Materials Processing Equipment TAC: Control List Category 2 (materials processing); Sensors and Instrumentation TAC: Control List Category 6 (sensors and lasers); Transportation and Related Equipment TAC: Control List Categories 7 (navigation and avionics), 8 (marine), and 9 (propulsion systems, space vehicles, and related equipment); and the Emerging Technology TAC (identification of emerging and foundational technologies that may be developed over a period of five to ten years with potential dual-use applications). The seventh TAC, the Regulations and Procedures TAC, focuses on the Export Administration Regulations (EAR) and procedures for implementing the EAR. TAC members are appointed by the Secretary of Commerce and serve terms of not more than four consecutive years. TAC members must obtain secret-level clearances prior to their appointment. These clearances are necessary so that members may be permitted access to classified information that may be needed to formulate recommendations to the Department of Commerce. Applicants are strongly encouraged to review materials and information on each Committee website, including the Committee’s charter, to gain an understanding of each Committee’s responsibilities, matters on which the Committee will provide recommendations, and expectations for members. Members of any of the seven TACs may not be registered as foreign agents under the Foreign Agents Registration Act. No TAC member may represent a company that is majority owned or controlled by a foreign government entity (or foreign government entities). TAC members will not be compensated for their services or reimbursed for their travel expenses.
  If you are interested in becoming a TAC member, please provide the following information: (1) Name of applicant; (2) affirmation of U.S. citizenship; (3) organizational affiliation and title, as appropriate; (4) mailing address; (5) work telephone number; (6) email address; (7) summary of qualifications for membership; (8) An affirmative statement that the candidate will be able to meet the expected commitments of Committee work.
Committee work includes: (a) Attending in-person/teleconference Committee meetings roughly four times per year (lasting 1-2 days each); (b) undertaking additional work outside of full Committee meetings including subcommittee conference calls or meetings as needed, and (c) frequently drafting, preparing or commenting on proposed recommendations to be evaluated at Committee meetings. Finally, candidates must provide an affirmative statement that they meet all Committee eligibility requirements.
  The Department of Commerce is committed to equal opportunity in the workplace and seeks diverse Advisory Committee membership.
  To respond to this recruitment notice, please send a copy of your
resume to Ms. Yvette Springer at
Yvette.Springer@bis.doc.gov.
* FOR FURTHER INFORMATION CONTACT: Ms. Yvette Springer on (202) 482-2813.
 
Yvette Springer, Committee Liaison Officer.

 
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EXIM_a22. 
State/DDTC Imposes Waiver of Sanctions Concerning Visas to PLO and Palestinian Authority Officials
(Source:
Federal Register, 16 May 2019.)
 
84 FR 22222: Public Notice; Determination on Imposition and Waiver of Sanctions Under Sections 603 and 604 of the Foreign Relations Authorization Act, Fiscal Year 2003
 
Consistent with the authority contained in section 604 of the Foreign Relations Authorization Act, Fiscal Year 2003 (Pub. L. 107-228) (the “Act”), the Presidential Memorandum dated April 30, 2009, and Department of State Delegation of Authority 245-2, and with reference to the determinations set out in the Report to Congress transmitted pursuant to section 603 of the Act, regarding the extent of noncompliance by the Palestine Liberation Organization (PLO) or the Palestinian Authority with certain commitments, I hereby impose the sanction set out in section 604(a)(1), “Denial of Visas to PLO and Palestinian Authority Officials.” This sanction is imposed for a period of 180 days from the date that the report under section 603 of the Act is transmitted to Congress or until such time as the next report under section 603 is required to be transmitted to Congress, whichever is later.
  Furthermore, I hereby determine that it is in the national security interest of the United States to waive this sanction, pursuant to section 604(c) of the Act. This waiver shall be effective for a period of 180 days from the date hereof or until such time as the next report under section 603 of the Act is required to be transmitted to Congress, whichever is later. This Determination shall be reported to Congress promptly and published in the Federal Register.
 
  Dated: April 12, 2019.
 
John J. Sullivan, Deputy Secretary of State.
 
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OGSOTHER GOVERNMENT SOURCES

OGS_a13
. Items Scheduled
for Publication in Future Federal Register Editions

(Source:
Federal Register
)
 

* President;

EXECUTIVE ORDERS; Information and Communications Technology and Services, Supply Chain Security; Effort to Enhance (EO 13873) [Pub. Date: 17 May 2019; included in today’s Daily Bugle under “Other Government Sources” section.]; and
– ADMINISTRATIVE ORDERS; Defense and National Security: National Defense Authorization Act for Fiscal Year 2012 (Presidential Determination No. 2019-12 of April 29, 2019) [Pub. Date: 17 May 2019.]
 
* USTR; NOTICES; Request for Comments: Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation [Pub. Date: 17 May 2019.]

 
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OGS_a24. Commerce Announces Addition of Huawei Technologies Co. Ltd. to EAR Entity List

(Source:
Commerce, 16 May 2019.) [Excerpts.]
 
Today, the Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced that it will be adding Huawei Technologies Co. Ltd. and its affiliates to the Bureau’s Entity List. This action stems from information available to the Department that provides a reasonable basis to conclude that Huawei is engaged in activities that are contrary to U.S. national security or foreign policy interest. This information includes the activities alleged in the Department of Justice’s public superseding indictment of Huawei, including alleged violations of the International Emergency Economic Powers Act (IEEPA), conspiracy to violate IEEPA by providing prohibited financial services to Iran, and obstruction of justice in connection with the investigation of those alleged violations of U.S. sanctions.
 
The sale or transfer of American technology to a company or person on the Entity List requires a license issued by BIS, and a license may be denied if the sale or transfer would harm U.S. national security or foreign policy interests. The listing will be effective when published in the Federal Register.
 
“This action by the Commerce Department’s Bureau of Industry and Security, with the support of the President of the United States, places Huawei, a Chinese owned company that is the largest telecommunications equipment producer in the world, on the Entity List. This will prevent American technology from being used by foreign owned entities in ways that potentially undermine U.S. national security or foreign policy interests,” said Secretary of Commerce Wilbur Ross. “President Trump has directed the Commerce Department to be vigilant in its protection of national security activities. Since the beginning of the Administration, the Department has added 190 persons or organizations to the Entity List, as well as instituted five investigations of the effect of imports on national security under Section 232 of the Trade Act of 1962.”
 
Additions to the Entity List are decided by the End-User Review Committee which is comprised of officials from the Department of Commerce, Department of Defense, State Department, and Department of Energy. Under § 744.11(b) of the Export Administration Regulations, persons or organizations for whom there is reasonable cause to believe that they are involved, were involved, or pose a significant risk of becoming involved in activities that are contrary to the national security or foreign policy interests of the United States, and those acting on behalf of such persons, may be added to the Entity List. …

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OGS_xy
6
.
State/DDTC: (No new postings.)

(Source:
State/DDTC)

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(Source: The White House, 15 May 2019.)
 
By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.), and section 301 of title 3, United States Code,
 
I, DONALD J. TRUMP, President of the United States of America, find that foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services, which store and communicate vast amounts of sensitive information, facilitate the digital economy, and support critical infrastructure and vital emergency services, in order to commit malicious cyber-enabled actions, including economic and industrial espionage against the United States and its people. I further find that the unrestricted acquisition or use in the United States of information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries augments the ability of foreign adversaries to create and exploit vulnerabilities in information and communications technology or services, with potentially catastrophic effects, and thereby constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States. This threat exists both in the case of individual acquisitions or uses of such technology or services, and when acquisitions or uses of such technologies are considered as a class. Although maintaining an open investment climate in information and communications technology, and in the United States economy more generally, is important for the overall growth and prosperity of the United States, such openness must be balanced by the need to protect our country against critical national security threats. To deal with this threat, additional steps are required to protect the security, integrity, and reliability of information and communications technology and services provided and used in the United States. In light of these findings, I hereby declare a national emergency with respect to this threat.
 
Accordingly, it is hereby ordered as follows:
 
Section 1. Implementation. (a) The following actions are prohibited: any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service (transaction) by any person, or with respect to any property, subject to the jurisdiction of the United States, where the transaction involves any property in which any foreign country or a national thereof has any interest (including through an interest in a contract for the provision of the technology or service), where the transaction was initiated, is pending, or will be completed after the date of this order, and where the Secretary of Commerce (Secretary), in consultation with the Secretary of the Treasury, the Secretary of State, the Secretary of Defense, the Attorney General, the Secretary of Homeland Security, the United States Trade Representative, the Director of National Intelligence, the Administrator of General Services, the Chairman of the Federal Communications Commission, and, as appropriate, the heads of other executive departments and agencies (agencies), has determined that:
 
(i) the transaction involves information and communications technology or services designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary; and
  (ii) the transaction:
 
   (A) poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of information and communications technology or services in the United States;
    (B) poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the digital economy of the United States; or
    (C) otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.
(b) The Secretary, in consultation with the heads of other agencies as appropriate, may at the Secretary’s discretion design or negotiate measures to mitigate concerns identified under section 1(a) of this order. Such measures may serve as a precondition to the approval of a transaction or of a class of transactions that would otherwise be prohibited pursuant to this order.
 
(c) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.
 
Sec. 2. Authorities. (a) The Secretary, in consultation with, or upon referral of a particular transaction from, the heads of other agencies as appropriate, is hereby authorized to take such actions, including directing the timing and manner of the cessation of transactions prohibited pursuant to section 1 of this order, adopting appropriate rules and regulations, and employing all other powers granted to the President by IEEPA, as may be necessary to implement this order. All agencies of the United States Government are directed to take all appropriate measures within their authority to carry out the provisions of this order.
 (b) Rules and regulations issued pursuant to this order may, among other things, determine that particular countries or persons are foreign adversaries for the purposes of this order; identify persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries for the purposes of this order; identify particular technologies or countries with respect to which transactions involving information and communications technology or services warrant particular scrutiny under the provisions of this order; establish procedures to license transactions otherwise prohibited pursuant to this order; establish criteria, consistent with section 1 of this order, by which particular technologies or particular participants in the market for information and communications technology or services may be recognized as categorically included in or as categorically excluded from the prohibitions established by this order; and identify a mechanism and relevant factors for the negotiation of agreements to mitigate concerns raised in connection with subsection 1(a) of this order. Within 150 days of the date of this order, the Secretary, in consultation with the Secretary of the Treasury, Secretary of State, the Secretary of Defense, the Attorney General, the Secretary of Homeland Security, the United States Trade Representative, the Director of National Intelligence, the Administrator of General Services, the Chairman of the Federal Communications Commission and, as appropriate, the heads of other agencies, shall publish rules or regulations implementing the authorities delegated to the Secretary by this order.
 
(c) The Secretary may, consistent with applicable law, redelegate any of the authorities conferred on the Secretary pursuant to this section within the Department of Commerce.
 
Sec. 3. Definitions. For purposes of this order:
 
(a) the term “entity” means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;
 
(b) the term “foreign adversary” means any foreign government or foreign non-government person engaged in a long

term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons;  

 (c) the term “information and communications technology or services” means any hardware, software, or other product or service primarily intended to fulfill or enable the function of information or data processing, storage, retrieval, or communication by electronic means, including transmission, storage, and display;
 (d) the term “person” means an individual or entity; and
 
 (e) the term “United States person” means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.
 
Sec. 4. Recurring and Final Reports to the Congress. The Secretary, in consultation with the Secretary of State, is hereby authorized to submit recurring and final reports to the Congress on the national emergency declared in this order, consistent with section 401(c) of the NEA (50 U.S.C. 1641(c)) and section 204(c) of IEEPA (50 U.S.C. 1703(c)).
 
Sec. 5. Assessments and Reports. (a) The Director of National Intelligence shall continue to assess threats to the United States and its people from information and communications technology or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary. The Director of National Intelligence shall produce periodic written assessments of these threats in consultation with the heads of relevant agencies, and shall provide these assessments to the President, the Secretary for the Secretary’s use in connection with his responsibilities pursuant to this order, and the heads of other agencies as appropriate. An initial assessment shall be completed within 40 days of the date of this order, and further assessments shall be completed at least annually, and shall include analysis of:
   (i) threats enabled by information and communications technologies or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary; and
   (ii) threats to the United States Government, United States critical infrastructure, and United States entities from information and communications technologies or services designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the influence of a foreign adversa
  (b) The Secretary of Homeland Security shall continue to assess and identify entities, hardware, software, and services that present vulnerabilities in the United States and that pose the greatest potential consequences to the national security of the United States.The Secretary of Homeland Security, in coordination with sector-specific agencies and coordinating councils as appropriate, shall produce a written assessment within 80 days of the date of this order, and annually thereafter.This assessment shall include an evaluation of hardware, software, or services that are relied upon by multiple information and communications technology or service providers, including the communication services relied upon by critical infrastructure entities identified pursuant to section 9 of Executive Order 13636 of February 12, 2013 (Improving Critical Infrastructure Cybersecurity).
  (c) Within 1 year of the date of this order, and annually thereafter, the Secretary, in consultation as appropriate with the Secretary of the Treasury, the Secretary of Homeland Security, Secretary of State, the Secretary of Defense, the Attorney General, the United States Trade Representative, the Director of National Intelligence, and the Chairman of the Federal Communications Commission, shall assess and report to the President whether the actions taken by the Secretary pursuant to this order are sufficient and continue to be necessary to mitigate the risks identified in, and pursuant to, this order.
 
Sec. 6. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:
   (i) the authority granted by law to an executive department or agency, or the head thereof; or
   (ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
 (b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
 (c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
 
  DONALD J. TRUMP
 
THE WHITE HOUSE,
May 15, 2019.

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NWSNEWS

NWS_a01
8.
Financial Times: “Trump Puts Huawei on Exports Blacklist”

(Source:
Financial Times, 16 May 2019.) [Excerpts.]
 
The Trump administration has launched a dramatic attack on Huawei by requiring US companies to obtain licenses to sell critical technology to the Chinese telecoms company.
 
The White House and US Department of Commerce took dual actions on Wednesday that will effectively ban Huawei from selling technology into the American market, and could also prevent it from buying semiconductors from Qualcomm in the US that are crucial for its production.
 
Donald Trump issued an executive order declaring a “national emergency” in relation to threats against US telecommunications, in a move that authorized the commerce department to “prohibit transactions posing an unacceptable risk” to national security.
 
In a potentially much more significant development, the commerce department put Huawei on the so-called Entity List – a move that means US companies will now have to apply for a license to sell technology to the Shenzhen-based telecoms company. …

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NWS_a29.
NLTimes: “Dutch Government Will No Longer Be ‘Gullible’ Towards China in New Strategy”

(Source:
NLTimes
, 15 May 2019.) [Excerpts.]

 
Collaboration with China is of great importance to the Netherlands, but with that cooperation the Netherlands must pay attention to the ideological differences that exist between the two countries, the Dutch government said in its new ‘China strategy’. The 100-page long document outlines economic opportunities, but also concerns, NOS reports.
 
  “If you ask me ‘Should we be afraid of China?’, my answer is no. But we must be realistic. We must base ourselves on facts and knowledge. Not on feelings and images. But we have been too good-natured and gullible in the past”, Minister Stef Blok of Foreign Affairs said.
 
  “It is logical for China to take its place in the world, but the government believes that this should be done fairly, on a level playing field and according to internationally agreed rules”, the strategy states. The Netherlands wants to cooperate with China in areas such as “climate, trade, agriculture and transport”. But must also keep an eye out for “cyber espionage and influencing of our values and norms.” …
 
Early in April intelligence service AIVD warned against Dutch dependence on Chinese technology. Countries such as China and Russia have an offensive cyber strategy against Dutch interest, the service warned. Dutch parliament previously also said that it would prefer to
keep Chinese companies out of crucial infrastructure. While there is no official Dutch stance on Huawei’s involvement in a 5G network in the Netherlands, KPN already said that it will
only use the Chinese company for non-critical parts of the network.  
 
Employers’ organization VNO NCW (the largest employers association in the Netherlands, ed.) called the government’s China strategy balanced, but also points out that it is missing some things. “The new policy line must be further elaborated on in the coming period. For example, there is no offensive vision of how we ourselves will retain our competitiveness in the light of the rise of China”, chairman Hans de Boer said to NOS. It is also not entirely clear how the government plans to guard Dutch interest against China. “At this point I think there is still too little attention for preventing unfair competition with cheap state capital.”

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NWS_a310.
Polygon: “Employee of Flight Sim Developer Arrested for Attempting to Smuggle Jet Fighter Manuals”

(Source:
Polygon
, 15 May 2019.) [Excerpts.]
 
Eagle Dynamics, makers of the DCS series, denies it was involved
 
An employee of Eagle Dynamics, the developer behind flight simulators such as
DCS Warthog A-10C and the
DCS World series, has been indicted on charges including conspiracy and smuggling. The United States government alleges that Oleg Mikhaylovich Tishchenko, a Russian national, was trying to smuggle U.S. military documents into his home country. His employer says that the charges have nothing to do with his duties at the company, which makes games about modern combat aircraft.
 
The indictment, currently available to the public online, was originally sealed by a federal judge. It was only recently unsealed after Tishchenko was extradited from Georgia (the country). According to the Standard-Examiner, he’s
now sitting in a Utah jail and is considered a flight risk. …

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COMCOMMENTARY

COM_a011
.
M. Volkov: “OFAC Framework for Sanctions Compliance Programs – Review of Lessons Learned from Enforcement Actions (Part IV of IV)”

(Source:
Volkov Law Group Blog, 14 May 2019. Reprinted by permission.)
 
* Author: Michael Volkov, Esq., Volkov Law Group,
mvolkov@volkovlaw.com, 240-505-1992.
 
OFAC’s new compliance framework includes a valuable section on common root causes of OFAC violations. OFAC has included this discussion to assist companies in designing, updating and amending their respective Sanctions Compliance Programs (SCPs). The discussion is broken down into ten basic categories, each of which includes important compliance reminders.
 
Lack of a Formal SCP. OFAC regulations do not require a formal SCP, but the reality is that companies should have a formal SCP as an important protection against an enforcement action and mitigation arguments. In numerous OFAC enforcement actions, OFAC has determined that the root cause of a violation was a lack of an SCP, which can also constitute an aggravating factor in an enforcement calculation.
 
Misinterpreting or Failing to Understand Application of OFAC Regulation. OFAC cited the fact that numerous organizations violated sanctions regulations because of misinterpreting OFAC regulations, particularly in those cases where the organization determined that the transaction or activity was not covered by the specific regulations. As an example, OFAC cited the failure of organizations to appreciate that OFAC sanctions applied because the entity was a US person, a US-owned or controlled subsidiary (Cuba and Iran programs), or dealings in or with US persons, the US financial system or US-origin goods and technology. In this area, OFAC has found instances where red flags were present and ignored by an organization, thereby constituting an aggravating circumstance.
 
Facilitating Transactions by Non-US Persons (Including Through or By Overseas Subsidiaries or Affiliates). OFAC cited organizations with foreign-based operations and subsidiaries have engaged in transactions or activity that violated OFAC’s regulations by facilitating transactions by non-US locations and OFAC sanctions countries or persons. Companies with integrated operations, particularly with US-based headquarters, locations or personnel, should ensure that any activities they engage in (i.e. approvals, contracts, procurement) comply with OFAC regulations.
 
Exporting or Re-exporting US-origin Goods, Technology or Services to OFAC-Sanctions Persons or Countries. Non-US persons have violated OFAC regulations by purchasing US-origin goods with the intent to re-export, transfer or sell the items to a person, country or region subject to OFAC sanctions. These violations occurred despite the presence of warning signs that US sanctions law prohibited the activity, and typically involved large and sophisticated companies that engaged in the practice over the course of years, where the company ignored or failed to respond to warning signs, use non-routine business practices and concealed the activity.
 
Utilizing the US Financial System or Processing Payments through US Financial Institutions for Transactions involving OFAC-Sanctions Persons or Countries. Many non-US persons have violated OFAC’s regulations by processing US dollar transactions involving an OFAC-sanctioned country or person. Although no US organization is involved in the underlying transaction, the involvement of a US financial institution in any payments often results in a prohibited activity. OFAC’s enforcement actions have focused on persons who engaged in willful or reckless conduct, attempted to conceal their activity, engaged in a pattern or practices for several months or years, ignored warning signs, involved actual knowledge or involvement by management, and were large and sophisticated organizations.
 
Sanction Screening Software or Filter Faults. Most companies rely on screening software programs to identify potential violations of OFAC regulations. Companies have to screen their customers, supply chain, intermediaries, counter-parties, commercial and financial transactions for prohibited locations, parties or transactions.
 
OFAC observed that, at times, companies have failed to update their screening software to include SDN and SSI parties, failed to include pertinent identifiers such as SWIFT Business Identifier Codes or did not account for alternative spellings of prohibited parties or countries. In particular, OFAC cited instances that account for where an organization is domiciled or conducts businesses in locations where alternative spellings may be used (e.g. Habana instead of Havana, Kuba instead of Cuba, Soudan instead of Sudan).
 
Improper Due Diligence on Customers/Clients (e.g. Ownership, Business Dealings). A fundamental component of an effective OFAC risk assessment and SCP is conducting due diligence of an organization’s customers, supply chain, intermediaries and counter-parties. Various OFAC enforcement actions involve improper or incomplete due diligence on ownership, geographic locations, counter-parties and transactions as well as their knowledge and awareness of OFAC sanctions.
 
De-Centralized Compliance Functions and Inconsistent Application of an SCP. OFAC explained that several enforcement actions involved situations where SCP personnel were scattered in different offices or business units, especially where there was a lack of a formal review process for high-risk transactions, absence of an escalation process, an inefficient oversight and audit functions or miscommunications regarding a company’s sanctions policies and procedures.
 
Utilizing Non-Standard Payment or Commercial Practices.


Companies have violated OFAC regulations by attempting to evade or circumvent OFAC sanctions or conceal their activities by relying on non-traditional business methods to complete transactions.


 
Individual Liability. In several instances, individual employees, especially in supervisory, managerial or executive-level positions – have played central; roles in OFAC violations. OFAC has observed situations where US-owned companies operating outside the US, in which higher-level executives or managers facilitated transactions with OFAC-sanctioned entities or persons, despite the fact that the US headquarters maintained a robust sanctions compliance program. OFAC intends to initiate enforcement actions against those individuals in the future.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_1
12
. FCC Presents “Designing an ICP for Export Controls & Sanctions”, 1 Oct in Bruchem, the Netherlands 

 
This training course is designed for compliance officers, managers, and other professionals who aim to enhance their organization’s compliance efforts. The course will cover multiple topics and tackle various key questions, including but not limited to:
– Setting the Scene: ensuring compliance in the export control and sanctions arena
– What is expected from your organization? A closer look at the official frameworks and guidelines from U.S. and European government agencies
– Key elements of an ICP
– Best practice tips for enhancing your current compliance efforts  
– Internal controls samples (policies, procedures, instructions)
– Strategic benefits of having an ICP.
 
* What: Designing an Internal Compliance Program (ICP) 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
* Target Audience:  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 and Marco M. Crombach MSc.
* Information & Registration: click here or contact us at events@fullcirclecompliance.eu or 31 (0)23 – 844 – 9046.   

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ENEDITOR’S NOTES

EN_a113
. Bartlett’s Unfamiliar Quotations

(Source: Editor)

 

Studs Terkel (Louis “Studs” Terkel; 16 May 1912 – 31 Oct 2008; was an American author, historian, actor, and broadcaster. He received the Pulitzer Prize for General Non-Fiction in 1985 for The Good War and is best remembered for his oral histories of common Americans, and for hosting a long-running radio show in Chicago.)
  – “That’s what we’re missing. We’re missing argument. We’re missing debate. We’re missing colloquy. We’re missing all sorts of things. Instead, we’re accepting.”
 
* Douglas Southall Freeman (16 May 1886 – 13 Jun 1953; was an American historian, biographer, newspaper editor, and author. He is best known for his multi-volume biographies of Robert E. Lee and George Washington, for each of which he was awarded the Pulitzer Prize.)
  – “Time alone is irreplaceable. Waste it not.”
  

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EN_a214. Are Your Copies of Regulations Up to Date?

(Source: Editor) 

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  The latest amendments to applicable regulations are listed below.
 

*
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:
 
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: 14 May 2019:
84 FR 21233-21238: Addition of Certain Entities to the Entity List, Revision of an Entry on the Entity List, and Removal of an Entity From the Entity List

 
*
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 the 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 the 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 is a 361-page Word document containing 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 download, 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:
13 May 2019: Harmonized System Update (HSU) 1907

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EN_a315
. Weekly Highlights of the Daily Bugle Top Stories
(Source: Editor)
 

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

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

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