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19-0815 Thursday “Daily Bugle”

19-0815 Thursday “Daily Bugle”

Thursday, 15 August 2019

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The 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. President Continues National Emergency with Respect to Export Control Regulations 
  2. State Department Sanctions Chinese entity Zhuhai Zhenrong Company Limited 
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS: (No new postings.)
  3. State/DDTC: (No new postings.)
  4. Australia DEC: “Working with Defence Industry Becomes Easier”
  1. Defense News: “Tension Between South Korea And Japan Could Hurt US Goals in The Pacific – And China Is Watching”
  1. G.R. Tuttle: “CBP Floats New Plan for Customs Broker Verification of an Importer’s Identity”
  2. G.W. Thompson: “Technology Controls and the Trade War with China”
  3. J. Hackenbroich & M. Leonard: “A Fistful of Dollars: Europe and US Sanctions”
  4. M. Hieber: “European Defense Debate on German Export Controls and Possible Solutions”
  1. ECTI Presents United States Export Control (ITAR/EAR/OFAC) Seminar Series in Phoenix, AZ
  2. 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 Aug 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 2019), DOT/FACR/OFAC (7 Aug 2019), HTSUS (22 Jul 2019) 
  3. Weekly Highlights of the Daily Bugle Top Stories 

EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11. President Continues National Emergency with Respect to Export Control Regulations

(Source: Federal Register, 15 August 2019.) [Excerpts.]
 
84 FR 41879: Notice of August 14, 2019 – Continuation of the National Emergency with Respect to Export Control Regulations
 
Continuation of the National Emergency with Respect to Export Control Regulations
 
On August 17, 2001, the President issued Executive Order 13222 pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.). In that order, the President declared a national emergency with respect to the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States related to the expiration of the Export Administration Act of 1979, as amended (50 U.S.C. 4601 et seq.). Because the implementation of certain sanctions authorities, including sections 11A, 11B, and 11C of the Export Administration Act, consistent with section 1766(b) of Public Law 115-232 (50 U.S.C. 4601 note), is to be carried out under the International Emergency Economic Powers Act the national emergency declared on August 17, 2001, must continue in effect beyond August 17, 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 13222, as amended by Executive Order 13637 of March 8, 2013. …

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EXIM_a22. State Department Sanctions Chinese entity Zhuhai Zhenrong Company Limited

(Source: Federal Register, 15 August 2019.) [Excerpts.]
 
84 FR 41802-41803: Notice of Department of State Sanctions Actions Pursuant to Executive Order 13846 of August 6, 2018
 
* SUMMARY: The Secretary of State has determined, in consultation with the heads of relevant agencies, that the Chinese entity Zhuhai Zhenrong Company Limited (Zhuhai Zhenrong), has knowingly, on or after November 5, 2018, engaged in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran. The Secretary of State has selected certain sanctions to be imposed upon Zhuhai Zhenrong and Youmin Li, Zhuhai Zhenrong’s Executive Director and General Manager, who has been determined to be (i) a corporate officer or principal of Zhuhai Zhenrong and (ii) a principal executive officer of Zhuhai Zhenrong, or to perform similar functions with similar authorities as such an officer.
* DATES: The Secretary of State’s determination that Zhuhai Zhenrong has knowingly, on or after November 5, 2018, engaged in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran, and the Secretary of State’s selection of certain sanctions to be imposed upon Zhuhai Zhenrong and Youmin Li, are effective on September 16, 2019.
* FOR FURTHER INFORMATION CONTACT: Taylor Ruggles, Director, Office of Economic Sanctions Policy and Implementation, Bureau of Economic and Business Affairs, Department of State, Washington, DC 20520, tel.: (202) 647-7677, email: RugglesTV@state.gov.  . . .

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OGSOTHER GOVERNMENT SOURCES

OGS_a13. Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register, 15 August 2019.)

 

[No Items of Interest.] 

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OGS_a24
.
Commerce/BIS (No new postings.)

(Source: Commerce/BIS)

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

OGS_a35. 
State/DDTC: (No new postings.)
(Source: State/DDTC)

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OGS_a46.
Australia DEC: “Working with Defence Industry Becomes Easier”
(Source: Australia DEC, 15 Aug 2019.)
 
Businesses in the defence industry are now able to more easily access security services to help them become ‘Defence ready’.
 
The new Defence Industry Security Program (DISP) went live in April and has received positive feedback from industry and defence contract managers.
 
DISP membership provides the industry with the tools it needs to protect Australia’s sensitive and classified information, as well as its own intellectual property.
 
Prior to going live, Defence piloted the DISP reforms, which allowed engagement with industry members on what mattered most to their business, and to understand the missing links between industry and Defence.
 
The biggest change for industry is they can now apply for DISP membership without having a contract with Defence.
 
Developing this reform has been done with extensive consultation with contract managers, industry and peak bodies to ensure Defence got it right, Assistant Secretary for Security Policy and Services Steven Scanlan said.
 
“We have streamlined processes to become a DISP member and companies can now sponsor their own security-cleared workforce needs,” Mr Scanlan said.
 
“We have redesigned the DISP, to suit the current security environment, while also giving industry more flexibility in how they manage their contracts with Defence; this is pivotal to ensuring a greater engagement between Defence and industry.”
 
Protecting industry also helps protect Defence, he said. The changes to DISP will also ensure industry members protect themselves against current security threats that may impact their business.
 
For further information, visit www.defence.gov.au/dsvs/industry or get in touch with the DISP team at DISP.Info@defence.gov.au

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NWSNEWS

NWS_a17
.
Defense News: “Tension Between South Korea And Japan Could Hurt US Goals in The Pacific – And China Is Watching”
(Source: Defense News, 15 Aug 2019.) [Excerpts.]
 
The tweet came Aug. 2, following an emergency meeting of the South Korean government. It was a photo of President Moon Jae-in, sent out from the government’s official Twitter feed, with text plastered over it and a succinct message:
 
“We will never again lose to Japan.”
 
In what the U.S. has declared to be an era of great power competition, part of the plan to blunt Chinese influence in the region comes from relying on Japan and South Korea, two key American partners, to focus on shared threats in the region. But since October, new rifts have formed in the Japan-South Korea relationship, with the two countries in the last few weeks trading major economic blows and neither side dialing down the rhetoric. …
 
Then on Aug. 1, Japan removed Seoul from its “white list,” the first time a country has been removed from Tokyo’s list of trade partners with minimum export regulations. Two weeks later, South Korea returned fire by announcing it would remove Japan from its own white list. …

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COMMCOMMENTARY

COM_a18
.
G.R. Tuttle: “CBP Floats New Plan for Customs Broker
Verification of an Importer’s Identity”
(Source: Author, 15 Aug 2019.) [Available by subscription via here.]
 
* Author: George R. Tuttle III, Law Offices of George R. Tuttle, LLP, geo@tuttlelaw.com or 415-986-8780.
 
In a Federal Register Notice published August 14, 2019 (84 FR 40302), Customs and Border Protection (CBP) released its long-awaited proposed rule to fight importer identity fraud, and CBP’s solution is to place the burden on customs brokers. The new rules are meant to crack down on importer fraud and present customs brokers with arguably unrealistic vetting procedures and potentially steep penalties, including loss of a license for failure to comply or to maintain the required records.
 
The proposed rule also impacts importers, particularly where the importer has multiple customs brokers, because each customs broker will be required to annually update its client information.
 
The 54-page document sets forth proposed requirements for customs brokers to collect certain information from importers to verify their identity, including that of nonresident importers, before engaging in “customs business” for them. By making these requirements mandatory, CBP believes that the proposed rule would also eliminate the ability of prospective clients to “broker shop.”
 
Comment Due Date: Comments must be received on or before October 15, 2019, unless CBP grants industry additional time to comment.
 
Summary
 
CBP proposes these amendments, pursuant to section 116 of the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA), which directs CBP to promulgate regulations to require brokers to verify the identity of the importers who are their clients.
 
Section 116 of TFTEA, Customs Broker Identification of Importers, specifically requires the Secretary to promulgate regulations setting minimum standards to:
 
(1) Identify the information that an importer, including a nonresident importer, is required to submit to a customs broker and that a broker is required to collect in order to verify the identity of the importer;
 
(2) Identify reasonable procedures that a broker is required to follow in order to verify the authenticity of the information collected from the importer; and
 
(3) Require the broker to maintain records of the information collected by the broker used to substantiate the importer’s identity.
 
Section 116 also empowers the Secretary to assess a monetary penalty (up to $10,000) for each violation for a broker that fails to collect the information, as well as revoke or suspend the license or permit of the broker.
 
Under the proposed rule, for any prospective client, the customs broker would be required to perform this verification before transacting customs business on the client’s behalf. For existing clients with a POA issued by a partnership, brokers would have two years to verify this information and three years for all other existing clients.
 
Thereafter, the expectation is that customs brokers will update their records annually with any changes to the client, POA, or the information in the records, and reverify the client’s identity through either the client or through the broker’s independent research. Customs brokers must update their information on an annual basis about any client and its business to ensure that the information they have is timely, accurate, complete, and relevant, and they must reverify the client’s identity annually using the procedures set forth in proposed section 111.43(d) discussed below.
 
The Proposal
 
CBP is proposing to add a new section, 111.43, entitled Importer Identity Verification, to title 19 of the CFR to establish the identity collection criteria and to create a required verification process of importer and nonresident importer clients.
 
A. Minimum Information that the Customs Broker is Required to Collect from the Client
 
Proposed paragraph (c) of section 111.43 identifies the information that the customs broker is required to collect from the client at the time the POA is obtained by the broker. The broker collects this information to verify the client’s identity.
 
At the time the POA is obtained by the broker, the broker must collect, at a minimum, the following information from the client, if applicable:
 
(1) The client’s name;
(2) For a client who is an individual, the client’s date of birth;
(3) For a client that is a partnership, corporation, or association, the grantor’s date of birth;
(4) For a client that is a partnership, corporation, or association, the client’s trade or fictitious names;
(5) The address of the client’s physical location (for a client that is a partnership, corporation, or association, the physical location would be the client’s headquarters) and telephone number;
(6) The client’s email address and business website;
(7) A copy of the grantor’s unexpired government-issued photo identification;
(8) The client’s Internal Revenue Service (IRS) number, employer identification number (EIN), or importer of record (IOR) number;
(9) The client’s publicly available business identification number (e.g., Data Universal Numbering System (DUNS) number, etc.);
(10) A recent credit report;
(11) A copy of the client’s business registration and license with state authorities; and
(12) The grantor’s authorization to execute power of attorney on behalf of client.
 
The broker must collect all the information that is applicable to that particular client. Some information might not be applicable to a client depending on whether the client is an individual, partnership, corporation, or association. For example, a small business might not have a business website; or a client who is an individual would not have a business registration and license with state authorities or a publicly available business identification number.
 
B. Procedures that a Customs Broker is Required to Perform to Verify the Information Collected
 
CBP is proposing procedures for a customs broker to use to verify the authenticity of the information collected from its clients. Proposed paragraph (d) of section 111.43 requires customs brokers to verify the information collected from the client under proposed paragraph (c).
 
The means of verification that CBP recommends for each data point are set forth in the proposal, and include in-person verification, review of the proper evidence of the grantor’s authorization to execute the POA, and/or research performed using various federal agency, state government, and publicly available data sources. The broker must use as many of the recommended verification means as necessary to be reasonably certain of the client’s identity.
 
In addition to verifying each data point collected, the broker would be required to check if the client is a sanctioned or restricted person or entity, or if the client is suspended or debarred from doing business with the U.S. government.
 
Suggestions offered by CBP include:
 
Obtaining a recent credit report. To check the client’s credit report, the broker would check with a nationally recognized credit reporting entity. When checking the client’s credit report, warning signs could include declarations of bankruptcy and any delayed payment history. If the client informs the broker that a credit report cannot be provided because its jurisdiction does not provide credit reports, the broker must verify this by checking the address of the client’s physical location.
 
Client’s business registration and license with state authorities. A broker could use individual state databases to verify the business registration and license.
 
The grantor’s authorization to execute power of attorney on behalf of client. A broker is required to confirm that the grantor has the authority to execute the POA. When a representative appears on behalf of the client, the representative would be required to provide evidence of his or her authorization to sign the POA. This evidence should be notarized whenever possible.
 
Is the client a sanctioned or restricted person or entity? The broker would be required to check to determine if the client is a sanctioned or restricted person or entity, or if the client is suspended or debarred from doing business with the U.S. Government. The broker could check this information through any of the following websites: https://www.sam.gov, a U.S. government website that may be used to search public records for company registrations; https://www.treasury.gov/resource-center/sanctions/Pages/default.aspx, which is a U.S. Department of Treasury website identifying Office of Foreign Assets Control (OFAC) sanctioned companies and individuals; or https://build.export.gov/main/ecr/eg_main_023148, which is a consolidated screening list identifying entities that have been sanctioned by the U.S. Department of Commerce, International Trade Administration.
 
C. Requirement to Implement Policies, Procedures and Internal Controls
 
Proposed paragraph (e) of section 111.43 requires customs brokers to implement policies, procedures, and internal controls to verify a client’s identity before transacting customs business on behalf of that client. This requirement is to ensure that all brokers implement these policies, procedures, and internal to collect the required information from the client, and to ensure that the broker has established policies and procedures to verify and reverify the information.
 
D. Recordkeeping Requirements
 
Section 116 of TFTEA requires that the regulations also set minimum standards for customs brokers to maintain records of the information used to substantiate the client’s identity. Accordingly, proposed paragraph (f) requires all customs brokers to make, retain, and update records containing the information the brokers collected to verify the client’s identity. The proposed regulations add additional records to 19 CFR part 111 that the customs broker must make, retain, update, and have readily available for CBP examination.
 
At a minimum, customs brokers will be expected to retain the information required by proposed paragraph (c), including any identification records, which consists of the information presented to the broker used to identify the client, as well as any certifications the client makes. Customs brokers must also retain verification records of the means and documents relied on to verify the client’s identity as required by proposed paragraph (d) and each record must indicate which information required pursuant to proposed paragraph (c) was verified by those means and documents.
 
At a minimum, for the verification records, customs brokers must retain descriptions of any documents relied upon, any non-documentary methods, any results of measures undertaken, and any resolution of discrepancies as well as who performed the verification and the date the verification was performed. Brokers must indicate in the verification records which information required pursuant to proposed paragraph (c) was not collected from the client because it was inapplicable to that particular client.
 
E. Penalties for Failure to Meet the Requirements
 
Proposed paragraph (g) sets forth the conditions under which CBP may assess a monetary penalty and the maximum amount that a penalty may be assessed for. Section 116 of TFTEA provides that CBP may hold any customs broker liable for a monetary penalty not to exceed $10,000 if the broker fails to collect the required information and/or to revoke or suspend a license or permit of the customs broker.
 
F. Timing of Verifications
 
Proposed paragraph (h) of section 111.43 provides different timing requirements for verifications based on whether it is a prospective or existing client. This is to allow customs brokers that are not already collecting, verifying, and maintaining the information, additional time to start complying with the requirements for existing clients.
 
For prospective clients, customs brokers would be required to comply with proposed 19 CFR 111.43 as of the effective date of the final rule. A customs broker would not be permitted to begin transacting customs business on behalf of that client until the broker collected the required information and verified the client’s identity. The broker would also be required to reverify the client’s identity on an annual basis.
 
For existing clients, the broker would be expected to collect the required information and verify the client’s identity within two or three years, depending on whether the client is an LLC or not. For all other existing clients, customs brokers would have three years from the effective date of the final rule to verify the client’s identity, and to update the necessary identification and verification records. Thereafter, the broker would also be required to reverify the client’s identity on an annual basis.

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COM_a29
.
G.W. Thompson: “Technology Controls and the Trade War with China”
(Source: Thompson & Associates, PLLC, 15 Aug 2019.)
 
* Author: George W. Thompson, Esq., Thompson & Associates, PLLC, gwt@gwthompsonlaw.com, +1 202-772-2039.
 
Although the spiral of tariff increases keeps grabbing the headlines, there’s another trade war battlefront that may have greater long-term effect. To put it simply, the Trump Administration hopes to use expanded export controls to stymie China’s development of advanced technologies. Whether this effort is ultimately successful or not as a political gambit, it will have consequences for cross-border investment and technology transfers involving the United States, China and third countries. U.S. exporters should pay attention.
 
Section 301 and Intellectual Property Theft
 
You’ll recall that the Section 301 investigation was commenced in response to China’s allegedly massive theft of intellectual property and forced technology transfers. In fact, the initial tariff increase was intended to remedy the abusive practices documented in the investigation. The subsequent tariff expansions were styled as counter-retaliation against China’s response to the Round 1 duties, as well as the bogged-down negotiations to resolve the original issues.
 
Each round of tariffs provides a process whereby U.S. parties can seek exclusion of products based on non-availability of alternative sources or other hardships. Items that are covered by the “Made in China 2025” industrial development program are generally ineligible for exclusion.
 
The reasoning appears to be that China’s progress in advanced technologies will be impeded by increasing the effective cost of purchasing the products they produce. Likewise, if the intellectual property issues get resolved through Section 301, China’s advanced industries will no longer benefit from purloined technology. Tariffs seem to be a blunt tool to achieve these goals, however, since they do not block China’s access to other markets or stop non-coerced technology transfers. At the same time, they raise costs for U.S. companies that have a Chinese supply chain.
 
Proposed Controls on Emerging Technologies
 
A more focused means of limiting China’s access to advanced technologies is by blocking their export from the United States. That is the goal of the Review of Controls for Certain Emerging Technologies undertaken by the Bureau of Industry and Security.
 
We’ve already covered this initiative in detail, so suffice it to say here that it presents a preliminary list of the industry sectors viewed as cutting-edge by the U.S. government in which Chinese competition will be unwelcome. If adopted, we can expect them to be placed on the Commerce Control List, with restrictions on information flows from the United States to China. The license review policy will be the wild card in determining how restrictive the controls turn out in practice. For now, though, I think we can expect a heavy brake on technology transfers once the review is completed.
 
The Entity List as a Technology Control Tool
 
As described in 15 C.F.R. § 744.16, the Entity List “identifies persons reasonably believed to be involved, or to pose a significant risk of being or becoming involved, in activities contrary to the national security or foreign policy interests of the United States.” For the most part, the list traditionally has included foreign weapon of mass destruction proliferators and, more recently, parties engaged in political misbehavior, such as Russian-owned companies in the Crimea.
 
The designation of ZTE as an “entity”
expanded the list’s use to punish violations of the Export Administration Regulations. That was followed by Huawei’s placement on the list as well. Both companies had been accused of massive violations of the EAR and Treasury Department sanctions regulations.
 
I found it interesting and curious that BIS used Entity List designations rather than seeking an export denial order for such alleged violations, but the broad practical impact was the same: two telecommunications industry leaders were cut off from advanced U.S. technology and competitively disabled as a consequence. The violations could reasonably be seen as activities contrary to U.S. policy and security interests that warranted their designation.
 
Now, however, BIS has added parties to the Entity List seemingly because of their leading competitive positions in “China’s development of exascale high performance computing.” Certain of the designated companies provide support for the Chinese military, and others have ownership stakes in them. The designations’ impact will likely go far beyond the military activities of ostensible concern, and instead affect all aspects of the companies’ businesses.
 
Procurement Restrictions as a Competitive Measure
 
Finally, the General Services Administration is poised to announce prohibitions on Federal procurement of telecommunications equipment produced by ZTE or Huawei, along with “video surveillance and telecommunications equipment produced by Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, or Dahua Technology Company.” These will be reflected in an interim final rule amending the Federal Acquisition Regulations, to be effective on August 13, 2019.
 
Once again, while the rationale is couched in security terms, the effect will be to exclude equipment produced by highly-competitive Chinese companies from the Federal market. I’m not sure how significant this will be, given the existing restrictions on Federal procurement of Chinese-origin supplies in general, but it is noteworthy that the prohibition applies to “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system . . .” Limited exceptions are available.
 
To comply with GSA’s interim final rule, suppliers to the Federal government will have to ensure that their telecommunications and video surveillance end-products and components are not manufactured by one of the named Chinese companies or any of their subsidiaries or affiliates, or that an exception applies. To the extent that the same systems are supplied to both Federal and non-Federal purchasers, this may mean that the same restrictions will get applied in practice to commercial systems too, further reducing the named companies’ competitive position in the United States.
 
Longer-Term Consequences
 
Huawei’s Entity List designation, and the imminent GSA procurement restrictions, have an immediate impact on U.S. companies’ ability to conduct business with the affected Chinese parties. The more far-reaching effect will be on their ability to share CCL-covered information with China regarding emerging technologies. Aside from the compliance challenge they will place on U.S. companies, they could well stunt China’s participation in such technologies. In that respect, the trade war may have continuing consequences long after the tariff disputes are finally settled.

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COM_a3
10

J. Hackenbroich & M. Leonard: “A Fistful of Dollars: Europe and US Sanctions”
(Source:
ECFR, 15 Aug 2019.)
 
* Authors: Jonathan Hackenbroich, Research Assistant, Jonathan.Hackenbroich@ecfr.eu; and Mark Leonard, Director, mark.leonard@ecfr.eu, both of The European Council on Foreign Relations (ECFR).
 
The European Union needs an Office for Financial Asset Control to defend its home industry against sanctions.
 
There is a bipartisan bill in Congress right now that could have dire consequences for Germany. Both Democrats and Republicans would like to sanction companies that are involved in the construction of the Nord Stream 2 pipeline, which will deliver natural gas from Russia directly to Germany.
 
If it becomes law, these companies will be targeted with sanctions by the Office for Foreign Assets Control (OFAC) at the US Department of the Treasury. They will be barred from any trade with the US and from using the US dollar for payments.
 
It is clear that the United States is behaving not like a partner but like a rival of Germany and Europe in its new trade war. Washington has demonstrated to Europeans how a big power can blackmail them in this new era: either you do what we want or your economy will suffer. The most recent example of this is Europe’s trade with Iran: US sanctions forced companies around the globe to stop engaging with anyone in the country. These so-called secondary sanctions hit everybody alike, no matter whether they were friend or foe. In essence, then, it is people in Washington – not in Berlin, Frankfurt, or Stuttgart – who, by leveraging the power of the US dollar, decide which countries and entities Germans do business with.
 
The European Union is unprepared for this kind of economic statecraft – which China will probably soon put into practice, too, leveraging its gigantic market. This is odd because, in other areas, the EU has been capable of defending itself fairly well. When US President Donald Trump threatened to put destructive tariffs on German car manufacturers, the EU responded with counter-tariffs and thereby spared BMW, Volkswagen, Daimler, and the like high costs. But, when it comes to sanctions, the EU lacks the capacity to respond.
 
So, how can Europe better protect itself? First of all, the EU should make clear that sanctioning European companies comes at great economic cost. This would alter the cost-benefit calculations of great powers. Europe needs an almost automatic mechanism that it can trigger when European companies are denied market access. This would require the EU to identify market sectors in which the US, China, and other countries asymmetrically depend on Europe – as well as key individuals operating in these sectors. By doing so, the EU would signal that it was ready to take action, if necessary. In the event of sanctions against European firms, it could quickly react with countermeasures. To do so, Europe needs its own OFAC, a body that brings together economic and security policy experts to devise the right responses in this geo-economic age.
 
Berlin and its partners should also quickly prove that the new Instrument in Support of Trade Exchanges – which is designed to facilitate trade with Iran and to circumvent the dollar system and US sanctions – can indeed function well. Europe should also conduct more trade in euros.
 
All this requires Germany and Europe to come to terms with the fact that, rather than being separate domains, economic policy and geopolitics are as closely intertwined as ever. Europeans struggle with this idea. Having been built as an economic entity, the EU lacks the capacity to handle geopolitical challenges. Germany – unlike, for instance, the United Kingdom – lacks a central agency or task force that combines foreign and economic policy expertise to devise strategic sanction regimes.
 
Many people in Berlin will tell you that trade with Russia is too important to just bow to US sanctions. But it is unclear how Berlin would react if the US did impose such measures – and Germany has no credible deterrent.
 
Considering the current powerlessness of Berlin and Brussels, it is unclear how they would react to sanctions against Nord Stream 2. That could well mean that the US – rather than Europeans – will decide whether Germany can receive natural gas from Russia.

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COM_a3
11
.
M. Hieber: “European Defense Debate on German Export Controls and Possible Solutions”
(Source:
Berlin Global Advisors, 15 Aug 2019.) [Excerpts.]
 
* Author: Mathias Hieber, Senior Consultant, Berlin Global Advisors, matthias.hieber@bga.global.
 
Speed Read
 
– The current German arms export policy restrictions is being intensely debated in the European foreign policy community as Berlin risks to endanger joined defense projects. After the murder of journalist Jamal Khashoggi, the German Grand Coalition imposed arms export restrictions, affecting also military equipment produced by German companies and other European member states or products, containing German components.
 
– French and other European defense companies are increasingly encountering difficulties in obtaining the necessary export licenses as soon as German components are contained in French and other European products. This can lead to companies having to compensate the buyers for default penalties or claims for recourse and thus threatens their economic existence.
 
– European industry-partners consider removing German components from their products in order to make them German-free and therefore less susceptible to subsequent export restrictions. This increases the pressure on the German and the entire European defense market. Policy makers and industry leaders argue that Germany’s export policy needs to be more transparent. Germany needs to remain a trustworthy and predictable partner.
 
– Germany and France have a long history in joint defense cooperation and, over the last decades, have pushed forward with European integration in foreign and defense policy. This thriving relationship needs to continue and must be re-enforced.
 
Three scenarios:
 
(a) Most likely the German moratorium will be prolonged again under the current Grand Coalition, which will create more insecurity amongst its partners and only adjourn the situation.
 
(b) Since non-agreement could seriously damage the Franco-German relationship, an agreement with France will be reached, where no veto-right will be applied up to a certain percentage of the total product. With Ursula von der Leyen as President of the European Commission, the issue will become a top priority on European level.
 
(c) Or, worst case scenario, but very unlikely to happen, no agreement is reached on export control, leading to unforeseen consequences for the Franco-German relationship and industrial cooperation.
 
Solutions:
 
– A dialogue between industries and the two governments must aim to restore confidence in the respective arms export policies. A new edition of the Schmidt-Debré agreement could be a desirable solution.
– If one considers the European defense market as a whole, there is a clear need of a common European approach. Further steps should be based on a common arms export policy, as set out in the Council Common Position.
– A general export ban on military equipment to non-EU countries would be counterproductive and detrimental to domestic industries. Importing countries of military equipment could be categorized according to a bilaterally agreed or EU-wide index, which would be reviewed and adjusted on a regular basis. At the same time, supplies of certain arms and weapon types could be linked to this risk index.

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a112.
ECTI Presents United States Export Control (ITAR/EAR/OFAC
)
 
Seminar Series in Phoenix, AZ
(Source: Jill Kincaid; jill@learnexportcompliance.com)
 
* What: United States Export Control (ITAR/EAR/OFAC) Seminar Series in Phoenix, AZ
* When: ITAR Seminar: October 28-29, 2019; EAR/OFAC Seminar: October 30-31, 2019
* Where: Sheraton Crescent Hotel
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker Panel: Scott Gearity, Greg Creeser, Melissa Proctor, and Marc Binder
* Register here, or Jessica Lemon, 540-433-3977.

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TE_a213. 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

 
* Napoleon Bonaparte
(15 Aug 1769 – 5 May 1821; was a French statesman and military leader of Italian descent who rose to prominence during the French Revolution.  He was Emperor of the French as Napoleon I from 1804 until 1814 and again briefly in 1815 during the Hundred Days. Napoleon dominated European and global affairs for more than a decade while leading France against a series of coalitions in the Napoleonic Wars. He won most of these wars and the vast majority of his battles, building a large empire that ruled over much of continental Europe before its final collapse in 1815. He is considered one of the greatest commanders in history, and his wars and campaigns are studied at military schools worldwide.)
 – “The first virtue in a soldier is endurance of fatigue; courage is only the second virtue.”
  – “If you wish to be a success in the world, promise everything, deliver nothing.”

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EN_a315
. Are Your Copies of Regulations Up to Date?
(Source: Editor)

 

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

  – Last Amendment: 5 Apr 2019:
84 FR 13499-13513: Civil Monetary Penalty Adjustments for Inflation
 


DOC EXPORT ADMINISTRATION REGULATIONS (EAR)
: 15 CFR Subtit. B, Ch. VII, Pts. 730-774. Implemented by Dep’t of Commerce, Bureau of Industry & Security.


 
* 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 (4 July 2019) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR is a 152-page Word document containing 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: 4 July 2019) of the ITAR with all amendments is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III. The BITAR is a 371-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 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: 7 August 2019:
84 FR 38545
– August 2019 Amendments to Iranian Financial Sanctions Regulations and Iranian Human Rights Abuses Sanctions Regulations [amendment of 31 CFR Parts 561 and 562.]  

  

* 
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: 22 July 2019: Harmonized System Update (HSU) 1913  
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.

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EN_a0316
Weekly Highlights of the Daily Bugle Top Stories

(Source: Editor) 

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

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EPEDITORIAL POLICY

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