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20-0513 Wednesday “Daily Bugle”

20-0513 Wednesday “Daily Bugle”

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Wednesday, 13 May 2020

  1. Justice/ATF: “Information Requested on the Application for Restoration of Firearms Privileges-ATF Form 3210.1
  2. USTR: “Annual Review of Country Eligibility for Benefits Under the African Growth and Opportunity Act” 
  3. USTR Announces Notice of Product Exclusions of China 
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  1. Militaryaerospace: “U.S. Department of Commerce Tightens Controls on Exports to China, as Technology Could See Military Use”
  2. WSJ: “Biomin America Fined for Alleged Sanctions Violations”
  1. CTP: “Overcoming Compliance Transitions”
  2. EU Sanctions: “OFAC Lifts Sanctions on Nynas AB”
  3. Midwest Trade Law: “PPP Loans and Buy American Requirements”
  4. ST&R Trade Report: “Efforts to Combat Trade-Based Money Laundering Could be Better, GAO Says”
  1. Personnel Changes at ATF 
  1. ECTI Presents: e-Seminar sale – 20% off all e-Seminar Trainings
  2. ECTI Presents: Hitting the Mark – Classification under the Harmonized System & Schedule B Code Webinar: 14 May
  3. FCC Academy Presents Webinars: “U.S. Export Controls: ITAR, EAR, and FMS”
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
  3. Weekly Highlights of the Daily Bugle Top Stories 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source:
Federal Register,
13 May 2020) [Excerpts]
 
85 FR 28664: Notice
 
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 60-Day notice.
* SUMMARY: The Department of Justice (DOJ), Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), will submit the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The proposed information collection (IC) is also being published to obtain comments from the public and affected agencies.
* DATES: Comments are encouraged and will be accepted for 60 days until July 13, 2020. …

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

(Source: Federal Register, 13 May 2020) [Excerpts]
 
85 FR 28695: Notice
 
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of initiation of review and request for comments.
* SUMMARY: The Office of the U.S. Trade Representative (USTR) is announcing the initiation of the annual review of the eligibility of the sub-Saharan African countries to receive the benefits of the African Growth and Opportunity Act (AGOA). The AGOA Implementation Subcommittee of the Trade Policy Staff Committee (AGOA Subcommittee) is developing recommendations for the President on AGOA country eligibility for calendar year 2021. The AGOA Subcommittee requests comments for this review. Due to COVID-19, the AGOA Subcommittee will foster public participation via written submissions rather than an in-person hearing. This notice includes the schedule for submission of comments and responses to questions from the AGOA Subcommittee related to this review. …

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

(Source: Federal Register, 13 May 2020) [Excerpts]
 
85 FR 28691: Notice
 
* AGENCY: Office of the United States Trade Representative.
* ACTION: Notice of product exclusion amendments.
* SUMMARY: Effective August 23, 2018, the U.S. Trade Representative imposed additional duties on goods of China with an annual trade value of approximately $16 billion as part of the action in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation. The U.S. Trade Representative’s determination included a decision to establish a product exclusion process. The U.S. Trade Representative initiated the exclusion process in September 2018, and stakeholders have submitted requests for the exclusion of specific products. In July, September, and October 2019, and February 2020, the U.S. Trade Representative issued determinations to grant certain exclusion requests on a rolling basis. This notice announces the U.S. Trade Representative’s determination to make certain technical amendments to previously granted exclusions.
* DATES: The technical amendments announced in this notice are retroactive to the date the original exclusions were published and do not further extend the period for the original exclusions. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation. …

 
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OGS OTHER GOVERNMENT SOURCES

Justice/ATF; NOTICES; Application for Restoration of Explosives Privileges; [Pub. Date: 14 May 2020] [PDF]

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

(Source: Commerce/BIS)

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

OGS_a3
6. S
tate/DDTC: (No new postings)

(Source: State/DDTC)   

 
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COM NEWS

NWS_a17. Militaryaerospace: “U.S. Department of Commerce Tightens Controls on Exports to China, as Technology Could See Military Use”

(Source: Militaryaerospace, 13 May 2020)
 
The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has announced new rules that will tighten the export of certain sensitive technologies to end-users in China on fears that they might find their way into use by the Chinese armed forces. The Diplomat reports.
 
The rules cover goods that will require review by regulators before being approved for overseas export. In addition to China, the rules cover Russia and Venezuela.
 
The latest update expands the licensing requirements for export to China to cover all military use, the Commerce Department rule’s summary notes. The Commerce Department notes that the annual license applications for military end-user approval from Russia, China, and Venezuela are already very low.
 

Expanded restrictions for exports to potential military end-users will cover chemicals, microorganisms, and toxins; materials processing; electronics design, development, and production; computers; telecommunications; sensors and lasers; marine technologies; and propulsion systems, space vehicles, and related equipment. 

NWS_a28. WSJ: “Biomin America Fined for Alleged Sanctions Violations”

(Source: WSJ, 11 May 2020) [Excerpts]
 
The U.S. division of a global maker of animal feed additives reached a settlement with the Treasury Department over possible sanctions violations-a case that underscores the importance of maintaining a compliance program and seeking guidance from regulators.
 
Biomin America, which agreed to pay about $258,000 in the settlement, and its foreign affiliates allegedly coordinated 30 sales of agricultural products to a Cuban company, Alfarma SA, between 2012 and 2017, according to the Treasury’s Office of Foreign Assets Control.
 
Biomin America, a division of Getzersdorf, Austria-based Erber Group, set up a transaction structure to process orders worth about $17.4 million from Alfarma, according to the agreement released Wednesday. Through the structure, Biomin America would coordinate and receive commission on the sales and its foreign affiliates would fulfill the orders, according to the agreement.
 
The U.S. has a broad trade embargo on Cuba, and Biomin America completed the transactions without authorization from OFAC, according to the agreement. …

COM COMMENTARY

(Source:
CTP Blog,
3 Oct 2019)
 
* Author: Rick Phipps, Director, CTP
 
Compliance is a constant challenge. Once you have invested the time and money to develop or update an Export Compliance Program (ECP) — complete with commodity classification, comprehensive policies, effective procedures, and tailored training — you must persistently guard your system against the potential damage of external and internal transitions. To understand these risks, let’s look at the differences.
 
Internal transitions
are events inside your company that impact your compliance system, including:
 
  (1) Loss of key employees that have export control responsibilities. All such experts should have trained back-ups so there is no single point of failure.
 
  (2) Development of new products that might require export licensing, particularly if they involve controlled technology. All new products should be classified prior to possible sale but the latter category, that is, technologies, introduces numerous additional complications:
 
      (a) Hiring of non-U.S. persons may require compliance authorizations (licenses) or firewalling their access to licensable information on the company intranet.
 
      (b) Existing and new collaborations with 3rd party companies or organizations will undoubtedly be complicatedright from the outset — if they involve licensable technologies.  
 
      (c) Hiring subcontractors, such as the experts who provide your IT services, cleaning crews, or physical security, will require an additional level of advance and ongoing diligence.
 
  (3) Mergers and acquisitions pose challenges in the diligence phase, due to successor liability, and eventually in the integration phase when the two compliance systems must be combined and calibrated into one system.
 
External transitions
are events outside your company that affect your compliance situation. You or your appointed compliance experts should keep your eyes and ears open, tracking these issues as they emerge and morph into reality, usually in the form of laws, regulations, and restrictions. Examples of such external transitions include:
 
  (1) Regulatory changes occur for a variety of reasons. The most common is technological innovation, causing some items to be added to the control lists and other things to be removed or controlled less strictly. Changes come also under the label of “reform” as we have seen over past six years with numerous items moving from the USML to the CCL. This challenge requires ongoing attentiveness for all, particularly those in sensitive sectors such as newly designated “emerging and foundational” technologies.
 
  (2) Sanctions and entity listing have become much more prominent in recent years, with high profile cases raising the stakes of violation and bringing dramatic attention to these forms of control. These issues are usually in the public eye, but they certainly warrant the purchase of a trustworthy screening solution and the development of procedures, automated or not, to ensure that all parties to your transactions are vetted early and often.
 
  (3) The critical objective is to avoid the sudden or gradual erosion that can be caused by one or more of these transition events. Most will occur, sooner or later, so it behooves the proactive Export Compliance Officer to build flexibility and resilience into the compliance system. Among the recommended steps:


 
     (a) Ensure that all existing and proposed products are classified. If technologies are involved, and they are licensable, then the ECP should have a Technology Control Plan as a subset, dealing very specifically with the risks of technology transfers.
 
     (b) Ensure that all policies and procedures are in writing, assembled in an ECP Manual, updated as needed, and made available to the staff via the company intranet.
 
     (c) Ensure that the compliance system is assessed/audited regularly, ideally by an experienced 3rd party who is knowledgeable and objective.
 
     (d) Ensure that everyone with compliance responsibilities has a back-up, trained in all aspects of the task. Furthermore, a description of those compliance duties should be included in their job descriptions so that continuity is maintained if they are ill or depart.
 
     (e) Ensure that the Executive team has a working knowledge of export control, enough to recognize those junctures where compliance considerations are critical. These would include the development of new product and markets, collaborations, subcontracting, and any M&A activity.
 
     (f) Ensure that experts are monitoring legal and technical developments in export controls, looking for events that might impact your company.  
 
Fortunately, there are numerous newsletters, conferences, and training events to make this task easier.

COM_a2
10. EU Sanctions: “OFAC Lifts Sanctions on Nynas AB”  
 

(Source:
EU Sanctions,
12 May 2020)
 
 
OFAC has announced that the Swedish refiner Nynas AB is no longer subject to US sanctions pursuant to the Venezuelan Sanctions Regulations (31 CFR Part 591) following a restructuring of the company’s ownership. Nynas’ press release says that PdVSA, Venezuela’s state-owned oil company, has reduced its majority shareholding in Nynas to 15%. The 35% divested by PdVSA is now controlled by an independent Swedish foundation, over which PdVSA has no influence.
 
The OFAC Notice confirms that US people/entities no longer require authorisation from OFAC to engage in activities/transactions with Nynas.
 
General Licences 3H “Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds” and 9G “Authorizing Transactions Related to Dealings in Certain Securities” have been issued to remove references to Nynas. 2 FAQs have also been amended to reflect the updated licences.

 
* Author: Valentin. A Povarchuk, Esq., 1-651-237-2173, Midwest Trade Law
 
A curious certification requirement appears in SBA Form 2483, the form distributed by the Small Business Administration (“SBA”) to enable millions of American small businesses affected by the COVID-19 pandemic to apply for forgivable Paycheck Protection Program (“PPP”) loans. On page 2 of the form, in the first set of Certifications and Authorizations, the borrower must certify, among other things, as follows: “To the extent feasible, I will purchase only American-made equipment and products.”
 
The SBA does not provide any guidance on the meaning of this certification and how it would enforce compliance with it. There are several different standards in federal law as to what would qualify as products made in America. What in the world could the words “American-made” mean in this certification?
 
PPP borrowers will be hard-pressed to find many products bearing the unqualified statement “Made in the USA” or “American-made.” Such statements must satisfy a very rigorous Federal Trade Commission “all or virtually all” standard. The FTC guides that “All or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin. The FTC declines to put a number on it, but informally it is considered that at least 98% of the value must be of U.S. origin. Very few products qualify for such an unqualified label, and that is why it is as rare as a full solar eclipse. Most products, aside from cars, textile, wool, and fur products, are not required to have a statement of U.S. content at all. Many manufacturers who do a substantial part of their processing in the United States, however, choose to make qualified claims such as “Assembled in the U.S. with imported materials.”
 
Quite a number of different “Buy American” standards are implemented through federal and state procurement laws and regulations. What “American-made” means under government procurement rules really depends on the product involved, the value of the procurement contract, the time of procurement, and the identity of the procuring government agency. For example:
 
   (1) Under the Trade Agreements Act (“TAA”), which applies to relatively large federal acquisitions, a product is considered to have U.S. origin if it undergoes a “substantial transformation” in the U.S. This is the same subjective test that is generally used by the United States to determine the country of origin of a product, and it considers whether the manufacturing process in a given country was such that it changed the “essential character” of the materials or components into a finished product.
 
   (2) The Buy American Act (“BAA”), which covers smaller federal acquisitions (above the $2,500 micro-purchase threshold and bellow TAA threshold, which is currently $182,000), the government must purchase products “manufactured in the United States substantially all from articles, materials, or supplies mined, produced, or manufactured in the United States.” Pursuant to the BAA “component” test, at least 95% of iron and steel components, and at least 55% of other components, must be of U.S. origin.
 
   (3) The Berry Amendment requires that the Department of Defense purchases of food, textiles, and certain hand or hand or measuring tools, including not only the end items, but also all components and materials, be wholly grown, reprocessed, reused, or produced in the United States.
One can quickly surmise that determining whether a product is American-made under federal law involves a lot of legal complexity and depends on many factors. So what should millions of small business owners applying for PPP loans make of the certification in SBA Form 2483, and how can they comply?
 
Since there is no other guidance available at this time and no clear way for the SBA to enforce the certification, I think it should be treated as encouragement rather than a legal requirement. After all, it begins with the words “to the extent feasible.” Business owners should try to buy American-made products with PPP funds, and if that is not feasible, they may buy foreign products. When they do so, it would be prudent to document that purchasing American-made product was not feasible and why. The reason for feasibility could be lack of availability of American-made products, unacceptably-long lead times, failure of American products to meet the necessary requirements or specifications, or pricing that is far in excess of market prices.
 
That leaves the thorny question of what business owners should consider to be “American-made” at the end of the day. Again, without further guidance from the government, we can only guess. I think, however, that in light of the breadth and the hardly enforceable nature of this certification requirement, it would be unreasonable for the SBA to attempt to apply the FTC’s strict “all or virtually all” standard. Instead, it is more likely that the government would follow the recent trend of applying tighter Buy American standards, which requires both manufacturing in the United States, and sourcing of majority of component value from the United States.

 
* Contact: messages@strtrade.com, 1-305-894-1035
 
The U.S. should take steps to improve the effectiveness of the trade transparency units it has set up to combat trade-based money laundering, according to a new report from the Government Accountability Office.
 
According to the report, different types of criminal and terrorist organizations use TBML to disguise the origins of their illicit proceeds and fund their operations. TBML schemes can rely on misrepresenting the price, quantity, or type of goods in trade transactions; e.g., by under or over invoicing goods or services, issuing multiple invoices for the same goods or services, providing more or less goods or services than the declared amount, or falsely describe the types of goods or services provided. TBML schemes commonly use goods such as textiles, electronics, automobiles, and precious metals. Available evidence indicates that the amount of TBML occurring globally is likely substantial, but it is one of the most difficult forms of money laundering to detect due to the complexities of trade transactions and the sheer volume of international trade.
 
Given the national security threat TBML poses, the report states, it is crucial that the U.S. develop an effective response to combat it. The federal government’s key international effort to do so is the TTU program run by U.S. Immigration and Customs Enforcement. ICE set up TTUs in 17 partner countries with the goal of exchanging and analyzing trade data to identify potential cases of TBML.
 
The report states that while TTUs have played a role in some TBML investigations, the program has experienced challenges, including lapses in information sharing between ICE and the partner TTUs, differing priorities between ICE and partner TTUs in pursuing TBML investigations, and limitations in the data system that ICE and the TTUs use. However, ICE has not developed a strategy for the TTU program and thus lacks a guide for its efforts to maximize the effectiveness of its existing TTU partnerships and prioritize efforts to expand the program to other countries. ICE also does not have a performance monitoring framework that tracks the results of its work with partner TTUs.
 

The report recommends that ICE develop a strategy and a performance monitoring framework for the TTU program. ICE responded that it has a strategic plan for fiscal years 2016 through 2020 that addresses the TTU program and plans to develop a complementary document that outlines emerging threats and challenges as well as existing metrics used to track program results. However, ICE did not concur with the recommendation to develop a performance monitoring framework, stating that the TTU program already collects a number of statistics related to its program results each fiscal year. The GAO said that while ICE has identified a few indicators it uses in assessing performance, it has not established any indicators with goals that it can measure results against. 

MS EXPORT/IMPORT MOVERS & SHAKERS

MS_a113. Personnel Changes at ATF

 
This week the Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) instituted the following personnel changes (effective May 11, 2020):
 
* Alphonso Hughes has been chosen as the new Assistant Director for ATF’s Office of Enforcement Programs and Services (“EPS”).
 
* Andrew Graham, formerly the Deputy Assistant Director (“DAD”) for Field Operations, is now the DAD for EPS.
 
* Megan Bennett will serve as the new DAD for Field Operations.
 
* Curtis Gilbert, who was the Acting Assistant Director for EPS, is now the DAD for ATF’s Office of Public and Governmental Affairs.

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TE EX/IM TRAINING EVENTS & CONFERENCES

 
* What: 
e-Seminar Training Sale – 20% off with code: 
stayhome
* When: 
Now through 15 of May
* Where: 
Online training – delivered electronically on USB
* Sponsor: Export Compliance Training Institute (ECTI)
* Register: 
here
, or contact 1-540-433-3977

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

 
* What: Hitting the Mark – Classification under the Harmonized System & Schedule B Code
* When: 14 May, 2020; 1:00 p.m. (EDT)
* Where: Webinar
* Sponsor: Export Compliance Training Institute (ECTI)
* ECTI Speaker: Melissa Proctor
* Register: here or contact Ashleigh Foor, 1-540-433-3977.

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

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

EN EDITOR’S NOTES

EN_a117. Bartlett’s Unfamiliar Quotations

(Source: Editor)
  

*
Daphne du Maurier (Dame Daphne du Maurier, Lady Browning; 13 May 1907 – 19 Apr 1989; was an English author and playwright. Her bestselling works were not at first taken seriously by critics, but have since earned an enduring reputation for narrative craft. Many have been successfully adapted into films, including the novels 
Rebecca, My Cousin Rachel, and 
Jamaica Inn, and the short stories 
The Birds (produced as a film by Alfred Hitchcock), and 
Don’t Look Now/Not After Midnight.)
  – “Women want love to be a novel, men a short story.”
  – “Writers should be read, but neither seen nor heard.”

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

 

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 2019:84 FR 13499: Civil Monetary Penalty Adjustments for Inflation.

DOC EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774.

28 Apr 2020:
85 FR 23470
: Elimination of License Exception Civil End Users (CIV).
 

 

DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   Last Amendment: 24 Apr 2018: 83 FR 17749: 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.

15 Nov 2017, 82 FR 52823: miscellaneous corrections include correcting references, an address and a misspelling.

 

DOJ ATF ARMS IMPORT REGULATIONS: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War.

14 Mar 2019: 84 FR 9239: Bump-Stock-Type Devices.

DOS INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR): 22 C.F.R. Ch. I, Subch. M, Pts. 120-130. 
6 May 2020: 85 FR 26847, Notice (not an amendment) temporarily reducing the registration fee schedule in ITAR 122.3 until April 30, 2021. 

 

 
DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders

10 Apr 2020:
85 FR 20158:

North Korea Sanctions Regulations. 

 
 
 
 
USITC HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA), Revision 8.

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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