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20-0123 Thursday “Daily Bugle”

20-0123 Thursday “Daily Bugle”

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Thursday, 23 January 2020

  1. Commerce/BIS Amends EAR to Transfer Items from the USML to the CCL 
  2. State/DDTC Amends ITAR to Revise Categories I, II, and II 
  1. Items Scheduled for Publication in Future Federal Register Editions 
  2. Commerce/BIS (No new items.)
  3. State/DDTC: (No new items.) 
  1. Cape May Herald: “Fight Continues Against Federal Government’s Efforts to Make 3-D Printable Guns Readily Accessible”
  2. Defense News: “A Slippery Slope: Will Foreign Companies Start Ditching American Dual-Use Tech?”
  3. Statesman: “Appeals Court Declines to Revive Lawsuit Supporting 3D-printed Guns”
  1. Australian Defense: “Navigating the Compliance Dilemma of Defence Export Controls”
  2. Tuttle Law: “USTR Announces New Round of Section 301 Duty Exclusions for List 3”
  3. Volkov Law: ” 2019 OFAC Sanctions Enforcement Review (Part I of II)”
  1. ECS Presents “ITAR/EAR Boot Camp: Achieving Compliance” on 11-12 Feb in Tampa, FL
  2. Full Circle Compliance Presents: Export Compliance Training Seminars 
  1. New Edition of the BITAR is Available Today
  2. Bartlett’s Unfamiliar Quotations 
  3. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here.
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EXIMITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a11
.
Commerce/BIS Amends EAR to Transfer Items from the USML to the CCL
(Source: Federal Register, 23 Jan 2020.) [Excerpts.]
 
85 FR 4136-4188: Control of Firearms, Guns, Ammunition and Related Articles the President Determines No Longer Warrant Control Under the United States Munitions List (USML); Final Rule
 
* AGENCY: Bureau of Industry and Security, Department of Commerce.
* ACTION: Final rule.
* SUMMARY: On May 24, 2018, the Department of Commerce published a proposed rule in conjunction with a Department of State proposed rule to revise Categories I (firearms, close assault weapons and combat shotguns), II (guns and armaments), and III (ammunition/ordnance) of the USML and transfer items that no longer warrant control on the USML to the Commerce Control List (CCL). This final rule responds to and adopts changes based on the comments received on the Commerce proposed rule and is being published simultaneously with a final rule by the Department of State that will revise Categories I, II, and III of the USML to describe more precisely the articles warranting continued control on that list. These revisions complete the initial review of the USML that the Department of State began in 2011 and the conforming changes made to the EAR to control these items not warranting control under the International Traffic in Arms Regulations (ITAR).
* DATES: This rule is effective March 9, 2020.
* FOR FURTHER INFORMATION CONTACT: Steven Clagett, Office of Nonproliferation Controls and Treaty Compliance, Nuclear and Missile Technology Controls Division, tel. (202) 482-1641 or email steven.clagett@bis.doc.gov.
* SUPPLEMENTARY INFORMATION:
 
Background
 
On May 24, 2018, the Department of Commerce (referred to henceforth as “the Department”) published the proposed rule, Control of Firearms, Guns, Ammunition and Related Articles the President Determines No Longer Warrant Control Under the United States Munitions List (USML) (83 FR 24166) (referred to henceforth as the “Commerce May 24 rule”) in conjunction with a Department of State proposed rule to revise Categories I, II, and III of the USML (referred to henceforth as the “State May 24 rule”). The Department of Commerce is issuing this final rule that describes how articles the President determines no longer warrant control under USML Category I–Firearms, Close Assault Weapons and Combat Shotguns; Category II–Guns and Armament; and Category III–Ammunition/Ordnance will be controlled on the CCL of the Export Administration Regulations (EAR) and is being published in conjunction with a final rule on Categories I, II, and III from the Department of State, Directorate of Defense Trade Controls (DDTC), completing the initial review of the USML that began in 2011 and making conforming changes to the EAR to control these items on the Commerce Control List (CCL).
   The changes described in this final rule and in the State Department’s companion final rule on Categories I, II, and III of the USML are based on a thorough interagency review of those categories, after which the Department of State concluded that the items added to the CCL in this final rule do not provide a critical military or intelligence advantage to the United States and, in the case of firearms, do not have an inherently military function. The Departments of Defense, State, and Commerce have, therefore, determined that the EAR is the appropriate source of authority to control these firearms, ammunition, and other articles previously controlled under Categories I-III of the USML. There is a significant worldwide market for items in connection with civil and recreational activities such as hunting, marksmanship, competitive shooting, and other non-military activities.
   This final rule does not deregulate the transferred items. BIS will require authorization to export or reexport to any country a firearm or other weapon that is being moved from the USML to the CCL by this final rule, including releases of related technology and software to foreign persons in the United States. Rather than decontrolling firearms and other items, in publishing this final rule, BIS, working with the Departments of Defense and State, is continuing to ensure that appropriate regulatory oversight will be exercised over exports, reexports, and transfers (in- country) of these items while reducing the procedural burdens and costs of export compliance on the U.S. firearms industry and allowing the U.S. Government to make better use of its export control resources.
   Certain software and technology capable of producing firearms when posted on the internet under specified circumstances is being controlled under this final rule in order to protect important U.S. national security and foreign policy interests; however, communication of ideas regarding such software or technology is freely permitted. Moreover, nothing in this final rule prohibits U.S. persons within the United States from acquiring firearms of any type–there are other laws and regulations that control the acquisition of firearms in the U.S.
 
Structure of 600 Series
 
BIS has created Export Control Classification Numbers (ECCNs), referred to as the “600 series,” to control items that will be removed from the USML and controlled under the CCL, or items from the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual Use Goods and Technologies Munitions List (Wassenaar Arrangement Munitions List or WAML) that are already controlled elsewhere on the CCL.
   These ECCNs are referred to as the “600 series” because the third character in each of the new ECCNs is “6.” The first two characters of the “600 series” ECCNs serve the same function as any other ECCN as described in Sec. 738.2 of the EAR. The first character is a digit in the range 0 through 9 that identifies the Category on the CCL in which the ECCN is located. The second character is a letter in the range A through E that identifies the product group within a CCL Category. With few exceptions, the final two characters identify the WAML category that covers items that are the same or similar to items in a particular “600 series” ECCN. Category II of the USML and category ML2 of the WAML cover large caliber guns and other military weapons such as: Howitzers, cannon, mortars, anti-tank weapons, projectile launchers, military flame throwers, and recoilless rifles.
   Items that are currently controlled in Category II of the USML will be controlled on the CCL under four new “600 series” ECCNs. Placement of the items currently in USML Category II into the CCL’s 600 series is consistent with existing BIS practice of using 600 series ECCNs to control items of a military nature.
   Items currently controlled in Categories I and III of the USML will be controlled in new ECCNs in which the third character is a “5.” These items are not appropriate for 600 series control because, for the most part, they havecivil, recreational, law enforcement, or other non-military applications. As with 600 series ECCNs, the first character represents the CCL category, the second character represents the product group, and the final two characters represent the WAML category that covers items that are the same or similar to items in the ECCN.
 
Relation to USMIL
 
Pursuant to section 38(a)(1) of the Arms Export Control Act (AECA), all defense articles controlled for export or import, or that are subject to brokering controls, are part of the USML under the AECA. All references to the USML in this final rule are to the list of defense articles that are controlled for purposes of export, temporary import, or brokering pursuant to the ITAR, 22 CFR parts 120 through 130, and not to the list of AECA defense articles on the United States Munitions Import List (USMIL) that are controlled by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for purposes of permanent import under its regulations at 27 CFR part 447. All defense articles described in the USMIL or the USML are subject to the brokering controls administered by the U.S. Department of State in part 129 of the ITAR. The transfer of defense articles from the ITAR’s USML to the EAR’s CCL for purposes of export controls does not affect the list of defense articles controlled on the USMIL under section 38 of the AECA, 22 U.S.C. 2778, for purposes of permanent import or brokering controls. …

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EXIM_a12
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State Amends ITAR to Revise Categories I, II, and II
(Source: Federal Register, 23 Jan 2020.) [Excerpts.]
 
85 FR 3819-3833: International Traffic in Arms Regulations: U.S. Munitions List Categories I, II, and III
 
* AGENCY: Department of State.
* ACTION: Final rule.
* SUMMARY: The Department of State (the Department) amends the International Traffic in Arms Regulations (ITAR) to revise Categories I–firearms, close assault weapons and combat shotguns, II–guns and armament, and III-ammunition/ordnance of the U.S. Munitions List (USML) to describe more precisely the articles that provide a critical military or intelligence advantage or, in the case of weapons, perform an inherently military function and thus warrant export and temporary import control on the USML. These revisions complete the initial review of the USML that the Department began in 2011. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the Export Administration Regulations.
* DATES: This rule will be effective March 9, 2020.
* FOR FURTHER INFORMATION CONTACT: Sarah Heidema, Office of Defense Trade Controls Policy, Department of State, telephone (202) 663-2809; email DDTCPublicComments@state.gov. ATTN: Regulatory Change, USML Categories I, II, and III.
* SUPPLEMENTARY INFORMATION: The Directorate of Defense Trade Controls (DDTC), U.S. Department of State, administers the International Traffic in Arms Regulations (ITAR) (22 CFR parts 120 through 130). On May 24, 2018, DDTC published a proposed rule, 83 FR 24198, for public comment regarding proposed revisions to Categories I, II, and III of the ITAR’s U.S. Munitions List (USML) (22 CFR 121.1). After review of received comments and with the revisions to the proposed rule further described below, DDTC now publishes this final rule to amend the ITAR.
   The articles and related technical data subject to the jurisdiction of the ITAR, i.e., “defense articles,” are identified on the USML. With few exceptions, items not subject to the export control jurisdiction of the ITAR are subject to the jurisdiction of the Export Administration Regulations (EAR, 15 CFR parts 730 through 774, which includes the Commerce Control List (CCL) in Supplement No. 1 to part 774), administered by the Bureau of Industry and Security (BIS), U.S. Department of Commerce. Both the ITAR and the EAR impose license requirements on exports and reexports. Items not subject to the ITAR or to the exclusive licensing jurisdiction of any other set of regulations are subject to the EAR. The Department of Commerce is publishing a companion rule in this edition of the Federal Register.
   Pursuant to section 38(a)(1) of the Arms Export Control Act (AECA), all defense articles controlled for export or import are part of the USML under the AECA. All references to the USML in this rule, however, are to the list of AECA defense articles that are controlled for purposes of export or temporary import pursuant to the ITAR, and not to the list of AECA defense articles on the United States Munitions Import List (USMIL) that are controlled by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) for purposes of permanent import under its regulations at 27 CFR part 447. References to the USMIL are to the list of AECA defense articles controlled by ATF for purposes of permanent import.
   Section 38(b)(1)(A)(ii) of the AECA, requires, with limited exceptions, registration of persons who engage in the business of brokering activities with respect to the manufacture, export, import, or transfer of any defense article or defense service designated by the President as such under section 38(a)(1) and licensing for such activities. Through Executive Order 13637, the President delegated the responsibility for registration and licensing of brokering activities to the Department of State with respect to defense articles or defense services controlled either for purposes of export by the Department of State or for purposes of permanent import by ATF. Section 129.1 of the ITAR states this requirement. As such, all defense articles described in the USMIL or the USML are subject to the brokering controls administered by the U.S. Department of State in part 129 of the ITAR. The transfer of jurisdiction from the ITAR’s USML to the EAR’s CCL for purposes of export controls does not affect the list of defense articles controlled on the USMIL under the AECA for purposes of permanent import or brokering controls for any brokering activity, including facilitation in their manufacture, export, permanent import, transfer, reexport, or retransfer. This rule adds two new paragraphs, (b)(2)(vii) and (viii), to Sec. 129.2 to update the enumerated list of actions that are not brokering. This change is a conforming change and is needed to address the transfer from the USML to the CCL of USMIL defense articles that remain subject to the brokering controls, and to ensure that the U.S. government does not impose a double licensing requirement on the export, reexport, or retransfer of such items subject to the EAR or continue to require registration with the Department solely based on activities related to the manufacture of these items.
   The Department of State is engaged in an effort, described more fully below, to revise the USML so that its scope is limited to those defense articles that provide the United States with a critical military or intelligence advantage or, in the case of weapons, have an inherently military function. The Department has undertaken these revisions pursuant to the President’s delegated discretionary statutory authority in section 38(a)(1) of the AECA to control the import and export of defense articles and defense services in furtherance of world peace and the security and foreign policy of the United States and to designate those items which constitute the USML. The Department determined that the articles in USML Categories I, II, and III that are removed from the USML under this final rule do not meet this standard, including many articles that are widely available in retail outlets in the United States and abroad (such as many firearms previously described in Category I, paragraph (a), including, for example, a .22 caliber rifle).
   The descriptions below describe the status of the subject categories of the USML and CCL as of the effective date of this rule and the companion rule published by the Department of Commerce in this Federal Register issue. Any reference in the preamble to this final rule to transfer from the USML to the CCL reflects the combined effects of removal of the defense article from the controls of the ITAR by virtue of the removal of an item (i.e., enumerated control text) from the USML by this rule and the corresponding adoption of the former defense article as an item subject to the EAR by action of the companion rule. Comments regarding the overall rule are addressed immediately below, while comments specific to a Category or amended section of the ITAR are addressed in the relevant discussion of revisions to Categories I, II, or III, or in the discussion under the title of “Conforming ITAR Changes.” …

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OGSOTHER GOVERNMENT SOURCES

OGS_a13
. Items Scheduled
for Publication in Future Federal Register Editions
 
* Commerce/BIS; NOTICES; Order Temporarily Denying Export Privileges [Pub. Date: 24 Jan 2020.]
 
* Commerce/BIS; NOTICES; Order: Marjan Caby [Pub. Date: 24 Jan 2020.]
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OGS_a24
.
Commerce/BIS: (No new postings.) 

(Source: Commerce/BIS)

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COMNEWS

NWS_a16.
Cape May Herald: “Fight Continues Against Federal Government’s Efforts to Make 3-D Printable Guns Readily Accessible”

(Source: Cape May (NJ) Herald, 22 Jan 2020.) [Excerpts.] 
 
TRENTON – Attorney General Gurbir S. Grewal announced he is joining a coalition of states in suing to stop the Trump Administration from trying, once again, to enact rules to weaken federal oversight of certain firearm-designing software files, which would make it easier for anyone with access to such files and a 3D printer to create a gun.  
 
According to a release, the multistate coalition, which expects to file its suit later this week, is opposing new rules that would remove from the U.S. Munitions List software and technology that enables the design and production of certain firearms. That proposed removal is accompanied by a transfer of authority over such printable gun files from the U.S. State Department to the Department of Commerce, where the coalition explains there will be no “meaningful regulation” of the printable firearm files.  
 
These files pose a serious risk to public safety. With digital firearm files, anyone with a computer and access to a 3D printer – including minors, convicted felons, domestic abusers and the mentally ill – can make a working gun.  To make matters worse, the guns are printed with serial numbers, meaning that law enforcement cannot trace these weapons when they are used in a crime, and the printed guns are potentially also undetectable by standard metal detectors, posing a risk to sensitive locations.  . . .
 
Earlier this year, the State Department sought to loosen the regulations covering on 3D-printable gun files by removing them from the U.S. Munitions List, but a federal court blocked the move after a legal challenge by the states, including New Jersey.   Among other things, the court ruled that federal officials had violated the Arms Export Control Act (AECA) by failing to consider how removing printable gun files — which were subject to federal export controls as long they remained on the U.S. Munitions List – “would impact world peace, national security and foreign policy.” The court also held that the State Department failed to provide Congress with adequate notice of its plan to remove 3D-printable gun files from the Munitions List.
 
In its latest action, the federal government has issued two Final Rules that together would (1) remove from the U.S. Munitions List digital firearms files for non-automatic weapons up to .50 caliber and (2) transfer regulatory authority for such 3D-printable gun files from the Department of State to the Department of Commerce.   Once removed from the U.S. Munitions List and State Department oversight, the coalition asserts, digital firearm files will no longer be subject to federal export controls under the AECA and “firearm files will instantly become easily accessible both within the United States … and outside the United States.”
 
Under the new rules, the Department of Commerce ostensibly retains jurisdiction over firearm files available on the Internet in electronic formats that are ready for insertion into a computer. Today’s lawsuit, however, contends that such regulatory authority is mostly window dressing. If the firearm files are disseminated by any means other than publication over the Internet – for example, e-mail, direct file transfer or hard drive transmission – Commerce will not exercise regulatory authority over them.
 
The coalition argues that the new federal rules “effectively deregulate 3D-printable gun files entirely” and, if allowed to stand, will make printable guns “widely available” around the world through online posting, file sharing, etc.  The impending multi-state lawsuit is the latest in a series of actions by Attorney General Grewal to protect New Jerseyans from the threat of gun violence.
 
In June 2018, Attorney General Grewal sent cease-and-desist letters to “ghost gun” companies across the United States,  ordering them to stop advertising and selling partially-built firearms, including assault weapons, in New Jersey. Then in November 2018, Governor Phil Murphy signed into law new restrictions on ghost guns.   In light of the new law, Attorney General Grewal sent additional cease-and-desist letters in December 2018, promising to sue any ghost gun companies that failed to comply. As a result, over a dozen companies agreed to block all New Jersey sales. 
 
When one company, U.S. Patriot Armory, failed to comply, Attorney General Grewal filed suit, marking the first such lawsuit against a ghost gun distributor in the nation.  That same month, Grewal also announced this year the indictment of nine men who had allegedly participated in a Camden-County-based criminal network that trafficked “ghost guns” in the form of untraceable assault rifles.   Grewal also took steps to tackle the risk posed by large capacity magazines. In June of this year, Attorney General Grewal filed suit against a Nevada company – New Frontier Armory – after it ignored a cease-and-desist letter and allegedly sold six LCMs to an undercover state investigator, including a 100-round magazine, a 30-round magazine and a 15-round magazine.
 
The state also remains in the appellate court in two states (Texas and New Jersey) with Defense Distributed, the Texas-based company that has sought to make its 3D-printable ghost gun and other firearm files widely available to the public, and has challenged New Jersey’s statutory restrictions on the dissemination of such weapons.

NWS_a27.
Defense News: “A Slippery Slope: Will Foreign Companies Start Ditching American Dual-Use Tech?”

(Source: Defense News, 22 Jan 2020.) [Excerpts.]
 
Largely the result of European space and defense manufacturer design outs, the “U.S. International Trade in Arms Regulations-free” movement began in the 1990s. Since that time, the ITAR-free movement has diffused into other industry sectors and regions. For example, in 2017, the German Ministry of Defence announced tenders for new assault rifles for the German armed forces. The tender included an “ITAR-free” exclusion criterion not only for the rifles but for supplies as well. India’s space program is working with vendors on the basis of ITAR-free systems.
 
The ITAR is a government regulation administering the export, re-export and import of defense-related articles, services and technology on the U.S. Munitions List, or USML. ITAR controls are highly stringent, so much so that the Obama administration in 2010 initiated the Export Control Reform Initiative to streamline controls to make them both effective and to increase American competitiveness.
 
As the U.S. government controls the re-export of USML items, the ITAR is an internationally well-known quantity. In many instances, foreign defense product producers and consumers know the ITAR more intimately than their U.S. counterparts. Transferring or re-exporting U.S. defense items requires U.S. government approval no matter how seemingly trivial the part or mundane the transfer. The practical effect of ITAR requirements makes U.S. defense items very sticky and cumbersome; therefore: the ITAR-free movement.
 
In terms of other strategic items, the U.S. Department of Commerce licenses the exports of dual-use components in a similar manner, albeit to a much more nuanced degree. The Export Administration Regulations, or EAR, requires consumers of U.S.-origin dual-use items to seek licenses for re-exports and transfers of said items depending upon the amount of U.S.-origin technology/components and/or the proposed destination of the transfer. In contrast to ITAR controls, EAR re-export and retransfer controls are simultaneously more complicated, but more flexible. . . .

NWS_a18.
Statesman: “Appeals Court Declines to Revive Lawsuit Supporting 3D-printed Guns”

(Source: The Statesman, 22 Jan 2020.) [Excerpts.]

 
In the continuing fight over the legality of publishing schematics for making mostly plastic guns on 3D printers, a federal appeals court has rejected efforts to revive a lawsuit that sought to allow distribution of the do-it-yourself plans. [Defense Distributed, et al., v. U.S. Dep’t of State, et al; No. 18-50811.]
 
That lawsuit was originally filed in 2015 after the U.S. State Department, which enforces federal law on exporting military weaponry, ordered Austin-based Defense Distributed to remove from its website plans for building the Liberator, a 3D-printed, single-shot pistol.  
 
Defense Distributed dismissed its lawsuit in 2018 after the State Department, under President Donald Trump, agreed to let the plans be published.  However, the company moved to revive that lawsuit after publication was again blocked – this time by a federal judge in Seattle. Responding to a lawsuit by Washington and 18 other states, U.S. District Judge Robert Lasnik issued a restraining order blocking the State Department agreement in 2018, then followed with a November 2019 ruling that voided the agreement.
 
Lasnik said the policy change was not reported to Congress as required by federal law. He also said the administration failed to offer any justification for changing a policy that banned the publication of schematics for 3D-printed guns as “a threat to world peace and the security and foreign policy of the United States.”   . . .
 
After a Texas judge declined to revive Defense Distributed’s lawsuit, the company – joined by the Second Amendment Foundation – appealed.  In a ruling released Tuesday evening, the 5th U.S. Circuit Court of Appeals upheld the lower court, saying Defense Distributed cited a rule that allows a judgment to be altered or amended only to correct an error of law or present newly discovered evidence.  “It does not allow a party to revive and initiate further proceedings in a dismissed lawsuit,” Judge James Ho wrote for the appeals court’s three-judge panel.  Ho rejected arguments that the lawsuit should be revived because Defense Distributed could not have foreseen the Washington lawsuit and the resulting nationwide injunction issued by Lasnik. 
Judge Ho stated “Plaintiffs are undoubtedly sincere in their belief that the government interfered with their constitutional rights by forbidding them from publishing information about assembling the Liberator firearm to fellow citizens-as evidenced by the settlement agreement they were able to obtain from the State Department. And they are understandably frustrated by the nationwide injunction that stands in their way today. But established rules of civil procedure do not permit this court to grant the relief they seek here. We affirm.”

COMCOMMENTARY

COM_a19.
Australian Defense: “Navigating the Compliance Dilemma of Defence Export Controls”

(Source: Australian Defense Magazine, 23 Jan 2020.) [Excerpts.]
 
* Author: Kevin Chenney, Senior Consultant, goal@goalgroup.com.au, of Goal Professional Services.

 
The spectre of Defence Export Control Regulations for Australian Defence businesses is ever-present, and there are emerging changes and challenges that will require a renewed focus.
 

Factors such as the 
Cybersecurity Maturity Model Certification (CMMC)

National Technology Industrial Base (NTIB), and the 
2018 Defence Trade Control Act Review have been introduced or reviewed in the past twelve months. They have created a current and impending compliance dilemma for many businesses that will become clearer as 2020 progresses.
 
The challenges for businesses attempting to maintain compliance are increasing, while pressures to maintain work and open new markets remains the core focus. These challenges are even more pertinent when we consider the US International Traffic in Arms Regulations (ITAR) and Export Administration regulations (EAR), which Australian businesses must ensure they factor into any risk assessments linked to Defence business associated with US technology.
 
ITAR is an often confusing and challenging concept for many Defence businesses, particularly SMEs. It requires businesses to be aware of the regulations as they impact their business, and for them to initiate compliance requirements to mitigate the associated risks. Assistance in navigating these regulations is only occasionally given by government, so what do they do to remain compliant?
 
The implementation of the NTIB for Australia indicates that the US Government wish to encourage US Defence business involvement in Australia, leading to exposure to ITAR and EAR products and technical data. Canada is a long established NTIB member as a result of its geographic location, and has an accepted process for assisting their Defence Industry with compliance measures in the field.
 
Australia has the pre-existing Australia-US Defence Trade Cooperation Treaty, which was established in 2013 in order to facilitate the efficient transfer of controlled goods between the members of an Approved Community without the need for export licences. The importance of such a Treaty cannot be denied, but the operation of the Treaty is restricting the ability for Australia SMEs to take advantage of it.
 
Reported difficulties with the Treaty include: Treaty articles authorised for export are limited to those listed on the Defense Trade Cooperation Munitions List 2017; the use of the Treaty is limited to Australian and US Government approved end-use only; and the administrative burden in facilitating changes to projects where items may be required to be exported outside the Treaty boundaries.
 
In comparison, the Canadian Controlled Goods Program is a dual-focussed Export Control and Security Program. Originating from US revocation of ITAR exemptions for Canada in 1999 due to increased security concerns, it was developed to introduce legislative measures to strengthen defence trade controls in Canada. It ensures that Canadian businesses have the necessary measures in place to not only protect Canadian interests, but also those of the US through ITAR. Notwithstanding numerous changes to this policy construct since establishment, the Program remains in force.
 
Using the construct already established under the Australia-US Defence Trade Cooperation Treaty, Australia should look to mirror the Canadian example by doing the following:
   – Requiring all businesses looking to export or handle US goods to be registered for notification to US and Australian Governments;
   – Widening the list of treaty articles to as far as possible mirror the US Munitions List (USML); and
   – the introduction of complementing Defence Industry Security Program (DISP) requirements for businesses to ensure security is maintained.
 
Amendment of the Treaty scope and eligibility should allow for the changes and challenges prevalent in the current world geo-political environment.
 
More on this will be available through the year as the effects of recent legislative changes are realised.
  …

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COM_a210.
Tuttle Law: “USTR Announces New Round of Section 301 Duty Exclusions for List 3”
(Source:
Tuttle Law, 22 Jan 2020.)
* Author: George R. Tuttle III, Esq., george.tuttle.iii@tuttlelaw.com, 1-415-986-8780, Law Offices of George R. Tuttle, PC.
 
China List 4A Reduction to 7.5% Effective February 14, 2020
 
The U.S.-China Phase One trade agreement signed on January 15, 2020 announced the reduction of List 4A tariffs from 15% to 7.5%. The USTR published official notice on January 22, 2020 (85 FR 3741) that the reduction is scheduled to enter into force on February 14, 2020. The HTSUS number for List 4A duty sanctions remains as 9903.88.15.
 
Proposed Section 301 Duty Retaliation for France Digital Services Tax
 
The USTR and various news agencies have reported that the U.S. will not move forward on the tariffs on French imports as the two countries work toward a solution on the Digital Services Taxation. France has agreed to suspend a tax on American technology companies in exchange for a postponement of the retaliatory tariff on French goods.

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COM_a311.
Volkov Law: ” 2019 OFAC Sanctions Enforcement Review (Part I of II)”
(Source: Volkov Law Group Blog, 20 Jan 2020. Reprinted by permission.) [Part II will be published tomorrow]
 
While DOJ had its biggest year in FCPA enforcement, OFAC quietly had a record year in enforcement. OFAC collected approximately $1.28 billion (yes, with a B) in 26 separate enforcement actions. That is quite an increase over 2018 when OFAC collected $71 million in 7 separate enforcement actions.
 
OFAC enforcement is maturing, and its relationship with DOJ is coordinated in much the same way that FCPA enforcement is coordinated between the Justice Department and the SEC.
 
In fact, on December 13, 2019, DOJ announced its own corporate enforcement policy for export controls and sanctions cases. No longer will DOJ rely on OFAC referrals of potential criminal cases since it is now encouraging companies to self-report directly to DOJ separately from any self-report to OFAC, depending on the nature of the evidence surrounding potential violations.
 
Under DOJ’s new policy, companies that self-report will receive a non-prosecution agreement, unless aggravating factors are present, and the company fully cooperates and implements timely and appropriate remediation.
 
Given its new policy, DOJ’s prosecution of individual sanctions cases is likely to increase in 2020 and beyond.
 
OFAC’s enforcement program has grown with the accumulation of new and complex sanctions regulations, including Ukraine-Russia Sectoral and Oligarch Sanctions Programs, and Venezuela’s Sanctions Program. Aside from the increase in substantive regulations, OFAC has expanded the targets of its enforcement actions to non-financial institutions, i.e. manufacturing companies, technology companies, service companies and a broad mix of the economy. Notwithstanding this trend, however, OFAC brought two major enforcement actions against financial institutions, each of which exceeded totals of $1 billion (yes, with a B) – Standard Chartered and Unicredit. (OFAC shared these large settlements with DOJ, NY Department of Financial Services, and the Manhattan District Attorney’s Office).
 
OFAC’s enforcement emphasis can be categorized into four basic themes, each of which creates new and significant risks for companies.
 
The most significant trend, which OFAC emphasized in its Sanctions Compliance Guidance, is sanctions liability for supply chain violations. In typical cases, this translates to OFAC violations for supply chain sourcing from prohibited countries or individuals.
 
This was underscored by what I would argue was the most important OFAC case of the year – the E.L.F. Cosmetics case (here) in which a U.S. company was found liable and paid nearly $1 million for sourcing of materials from North Korea, even though the U.S. company was not aware that its supplies were sourced from North Korea.
 
Supply chain risk was specifically noted in OFAC’s Sanctions Compliance Guidance issued in May 2019 in which OFAC identified Supply Chain risks as a specific topic for review in a risk assessment.
 
Aside from supply chain risk, OFAC brought four major enforcement actions focusing on U.S. company acquisition of foreign companies and failure to terminate ongoing business that violated OFAC sanctions programs. Again, this trend was noted by OFAC in its Sanctions Compliance Guidance and companies are under unique pressures now to identify potential OFAC risks when acquiring companies and integrating these companies into existing sanctions compliance programs.
 
On the distribution side of business, OFAC enforcement highlighted several cases in which companies were found liable for failing to ensure that third-party representatives and/or distributors did not conduct business with prohibited countries or individuals. Third-party liability is a major sanctions risk and OFAC’s focus on this fact underscored the fact that contractual representations and warranties in a contract with a distributor are not sufficient, by themselves, to mitigate third-party risks.
 
To round out OFAC’s record-setting enforcement year, OFAC brought a specific enforcement action against a U.S. company for violating the Ukraine-Russia sectoral sanctions, and specifically, the prohibition against debt exceeding specific time limits. In the Haverly case (here), OFAC settled a case in which Haverly extended payment terms for two invoices beyond the then-applicable 90-day limit.
 
[Part II will be published tomorrow]

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TEEX/IM TRAINING EVENTS & CONFERENCES

TE_a112
.
ECS Presents “
ITAR/EAR Boot Camp:  Achieving Compliance
” on 11-12 Feb in Tampa, FL

(Source: ECS)
 
*What:  ITAR/EAR Boot Camp:  Achieving Compliance
*When:  February 11-12, 2020
*Where:  
Double Tree Beach Resort
; Tampa, FL
*Sponsor:  Export Compliance Solutions & Consulting (ECS)
*ECS Speaker Panel: Suzanne Palmer, Mal Zerden
*Register 
here
 or by calling 866-238-4018 or email 
spalmer@exportcompliancesolutions.com

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

TE_a213. Full Circle Compliance Presents: Export Compliance Training Seminars
(Source: Full Circle Compliance)

U.S. Export Controls: ITAR

Tuesday, 7 April 2020 near Amsterdam
More Info

U.S. Export Controls: EAR

Wednesday, 8 April 2020 near Amsterdam
More Info

The ABC of Foreign Military Sales (FMS)

Tuesday, 9 April 2020 near Amsterdam

ENEDITOR’S NOTES

EN_a114.
New Edition of the BITAR is Available Today 

(Source: Editor)
 

We are pleased to release a revised edition of Bartlett’s Annotated International Traffic in Arms Regulations (“The BITAR”) including footnotes to the amendments published today in 85 Fed. Reg 3819, effective March 9, 2020, which contain a final rule amending § 121.1, USML Categories I, II, and III, and numerous related sections. To download your soft copy of the BITAR in Word, please login to your account on our website.  If you are not yet a subscriber, go HERE to subscribe.

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* Stendhal
(Marie-Henri Beyle, better known by his pen name Stendhal; 23 Jan 1783 – 23 Mar 1842; was a 19th-century French writer. Best known for the novels Le Rouge et le Noir (The Red and the Black) and La Chartreuse de Parme (The Charterhouse of Parma), he is highly regarded for the acute analysis of his characters’ psychology and considered one of the early and foremost practitioners of realism.)
  – “Nothing is so hideous as an obsolete fashion.”
  – “In love, unlike most other passions, the recollection of what you have had and lost is always better than what you can hope for in the future.”

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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 are listed below.
 
Agency 
Regulations 
Latest Update 
DHS CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199.
 
 
 
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.

23 Jan 2020: 85 FR 4136-4188: Control of Firearms, Guns, Ammunition and Related Articles the President Determines No Longer Warrant Control Under the United States Munitions List (USML) 
DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   Last Amendment: 24 Apr 2018: 83 FR 17749-17751: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates

DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M. Implemented by Dep’t of Defense.

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. 

23 Feb 2015: 80 FR 9359, comprehensive updating of regulations, updates the activities and technologies subject to specific authorization and DOE reporting requirements. 
DOE EXPORT AND IMPORT OF NUCLEAR EQUIPMENT AND MATERIAL; 10 CFR Part 110.

25 Nov 2019: 84 FR 64740-64754: Rules of Practice in Explosives License and Permit Proceedings; Revisions Reflecting Changes Consistent With the Homeland Security Act of 2002
DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.

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.  23 Jan 2020: 85 FR 3819:

Department of State final rule amending § 121.1, USML Categories I, II, and III, and numerous related sections (effective Mar. 9, 2020).
DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders.
22 Nov 2019:

84 FR 64415-64417: Venezuela Sanctions Regulations
 
 
 
 

  USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA),

1 Jan 2019: 19 USC 1202 Annex.
  – HTS codes for AES are available here.
  – HTS codes that are not valid for AES are available here.
 

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