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20-0520 Wednesday “Daily Bugle”

20-0520 Wednesday “Daily Bugle”

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Wednesday, 20 May 2020

  1. International Trade Commission Extends Postponement of all In-Person Section 337 Hearings until July 10, 2020
  2. State/DDTC Rescinded the Policy of Denial Concerning BAES SAL
  3. State/DDTC Imposed Statutory Debarment under the ITAR on Section 38 of the Arms Export Control Act (AECA)
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. Treasury/OFAC: “Treasury/OFAC Designates Shanghai Saint Logistics Limited as SDN”
  1. The Economic News: “US Includes Huawei India in its Export Control Entity List”
  1. EU Sanctions: “US Extradites from UK Iranian CEO Charged with Violating US Sanctions”
  2. Steptoe: “How to Keep Up with Export Controls in Times of Change”
  3. Volkov: “Addressing Beneficial Ownership Requirements in Your Compliance Program” (Part I of IV)
  1. ECTI Presents: e-Seminar Sale – 20% Off all e-Seminar Training
  2. FCC Academy Presents June 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 
  4. Submit Your Job Opening and View All Job Openings 
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EXIM ITEMS FROM TODAY’S FEDERAL REGISTER

(Source:
Federal Register,
20 May 2020) [Excerpts]
 
85 FR 30734: Notice
 
* AGENCY: U.S. International Trade Commission.
* ACTION: Notice.
* SUMMARY: Notice is hereby given that the U.S. International Trade Commission has determined to extend postponement of all in-person hearings under section 337 of the Tariff Act of 1930 until July 10, 2020.
*FOR FURTHER INFORMATION CONTACT: Lisa R. Barton, Secretary to the Commission, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, telephone (202) 205-2000. General information concerning the Commission may also be obtained by accessing its internet server at United States International Trade Commission (USITC) at https://www.usitc.gov. The public record for section 337 investigations may be viewed on the Commission’s Electronic Document Information System (EDIS) at https://edis.usitc.gov. Hearing-impaired persons are advised that information on this matter can be obtained by contacting the Commission’s TDD terminal on (202) 205-1810.

 
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(Source:
Federal Register,
20 May 2020) [Excerpts]
 
85 FR 30783: Notice
 
* ACTION: Notice.
* SUMMARY: Notice is hereby given that the Department of State has rescinded the policy of denial concerning BAES SAL, a subsidiary of BAE Systems plc, included in Federal Register notice of May 23, 2011 (76 FR 29814).
* DATES: This notice is effective on May 20, 2020.
* FOR FURTHER INFORMATION CONTACT:

Jae Shin, Director, Office of Defense Trade Controls Compliance, Bureau of Political-Military Affairs, Department of State (202).

 
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(Source:
Federal Register, 20 May 2020) [Excerpts]

 
85 FR 3078: Notice
 
* ACTION: Notice.
* SUMMARY: Notice is hereby given that the Department of State has imposed statutory debarment under the International Traffic in Arms Regulations (“ITAR”) on six persons convicted of violating, or conspiracy to violate, Section 38 of the Arms Export Control Act (AECA).
* DATES: Debarment imposed as of May 20, 2020.
* FOR FURTHER INFORMATION CONTACT:
Jae Shin, Director, Office of Defense Trade Controls Compliance, Bureau of Political-Military Affairs, Department of State (202) 632-2107.

 
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OGS OTHER GOVERNMENT SOURCES

* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
Application for Registration of Firearms Acquired by Certain Governmental Entities – ATF F 10 (5320.10); [Pub. Date: 21 May 2020] [PDF]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
National Firearms Act – Special Occupational Taxes – ATF Form 5630.7, ATF Form 5630.5R, and ATF Form 5630.5RC; [Pub. Date: 21 May 2020] [PDF]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
Notice of Firearms Manufactured or Imported – ATF Form 2 (5320.2)
[Pub. Date: 21 May 2020] [PDF]
 
* Justice/ATF; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals:
Records of Acquisition and Disposition, Collectors of Firearms [Pub. Date: 21 May 2020] [PDF]

 
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OGS_a25.
Commerce/BIS: (No new postings)

 
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OGS_a3
6. 
State/DDTC: (No new postings)

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(Source:
Treasury/OFAC,
19 May 2020) [Excerpts]
 
Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is designating China-based Shanghai Saint Logistics Limited for acting as a general sales agent (GSA) for or on behalf of Iranian airline Mahan Air. This is the seventh designation of a GSA to Mahan Air since 2018. Mahan Air is designated under counterterrorism authorities for providing support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), as well as under a counter proliferation authority that targets weapons of mass destruction proliferators and their supporters. …

 
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COM NEWS

NWS_a18. The Economic News: “US Includes Huawei India in its Export Control Entity List”

(Source: The Economic News, 20 May 2020) [Excerpts]
 

The Trump administration in recent months has increased its action against Huawei, China’s first global tech brand and a maker of network equipment and smartphones, preventing it from doing business in the US, as it believes the company known for its technological advancement in 5G is being used by the Chinese leadership to serve their interest.  

COM COMMENTARY

COM_a19. EU Sanctions: “US Extradites from UK Iranian CEO Charged with Violating US Sanctions

(Source: EU Sanctions, 19 May 2020) [Excerpts]
 
* Author: Maya Lester, Esq., 44-20-7379-3550, Brick Court
 
Mr. Seyed Sajjad Shahidian, CEO of Payment24, Pty, Ltd, a South African registered Iranian online financial services company with offices in the United States, was arrested in and extradited from the UK to the United States.  Mr. Shahidian was arraigned on 18 May 2020 for violations of U.S. export laws, wire fraud, money laundering, and identity theft. He pleaded not guilty to the charges.
 
Payment24, which had approximately 40 employees, was reportedly established by Shadidian to help Iranian citizens circumvent US sanctions to conduct transactions with US companies from 2009 to November 2018, in violation of the International Emergency Economic Powers Act (IEEPA). Services offered included a “package” consisting of a PayPal account, a fraudulent ID card, a remote IP address from the UAE, a Visa gift card, and tailored advice. …
 

(Source:
Volkov Law
, 18 May 2020)
 
* Author: Michael Volkov, Esq., Volkov Law LLC
 
We repeatedly hear about the importance of beneficial ownership, and the requirement that companies confirm beneficial ownership of its third-parties, vendors and suppliers. At the same time, there is increasing pressure from regulators and law enforcement to identify and unravel beneficial ownership when dealing with business partners.
 
There is no question that beneficial ownership is a critical issue. I have frequently stated (i.e. repeated myself) on this issue – that third-party due diligence, to be effective, must include beneficial ownership analyses.
 
The Beneficial Ownership Picture
Without belaboring the point, the United States is still behind other countries in tackling this difficult issue. While FinCEN finally implemented customer due diligence regulations in 2018 applicable to “financial institutions,” the United States is definitely behind in imposing legal requirements on disclosure of beneficial owners. The European Union’s 5th AML Directive imposes on member countries specific requirements that they create a beneficial ownership registry similar to the one already established and operating in the United Kingdom. Mind you, the jury is still out on how effective and reliable these registries are but it is a fresh start to address the issue.
 
The United States Congress has several proposals to consider in this area and there is increased interest in strengthening U.S. regulation of beneficial ownership. This would be a welcome development for regulators, law enforcement and prosecutors. For too long, money launderers and other white-collar criminals have taken advantage of the U.S. lax system surrounding shell companies, beneficial ownership and other issues needed to enable transparency and disclosure of real parties in interest. As a result, the United States continues to be a significant player in the money laundering arena.
 
Corruption and Sanctions Risks
As a refresher, and from a compliance officer standpoint, let’s review the basic importance of beneficial ownership requirements. The term “beneficial ownership” means the natural person owner(s) of an entity – e.g., corporation, partnership. As you strip the layers away of a legal entity, eventually you uncover or reach the natural person (or persons) who owns and/or controls the entity.
 
From an anti-corruption perspective, compliance officers have to identify the natural person owner(s) of third parties, vendors and suppliers. In other words, a third-party may contain a hidden foreign government official owner as a means to pay a bribe to the foreign official as part of payments made to the entity.
 
A classic case involved Manual Vicente, the President of Sonangol, the Angolan state-owned oil and gas company, who owned a secret 10 percent ownership interest in a company that in turn was part owner of a drilling operator. Vicente was provided this ownership interest in exchange for his assurance that the partnership would be awarded a valid tract for exploration.
 
A company that joins the drilling partnership has to be aware of the beneficial owners of its joint venture partners. Vicente was able to disguise his ownership interest and escape detection for years. Eventually the company uncovered his ownership interest and disclosed the matter to the DOJ and SEC.
 
To complicate matters for compliance officers, beneficial ownership has direct and significant implications for compliance with OFAC sanctions. Companies are prohibited from transacting business with Specially Designated Nationals (“SDNs”) – either as third parties, vendors, suppliers and customers. OFAC maintains a critical 50 percent rule, which prohibits companies from dealing with any entity that is owner 50 percent or more by one or more SDNs.
 
To translate this rule, if SDN A owns 30 percent of entity C and SDN B owns another 30 percent of entity C, entity C is prohibited entity even though it is not specifically listed on OFAC’s SDN List.
 
Understanding the Risks
Given this risk picture, companies have to tailor their controls differently depending on anti-corruption or sanctions risks. For example, if an SDN owns only a 10 percent interest in Company A, OFAC sanctions would not prohibit your company from conducting business with Company A. For reputational reasons, however, your Company may choose not to deal with Company A. At a minimum, however, your company will have to monitor and refresh inquiries concerning the SDN’s ownership share and ensure that the SDN does not have links or agreements with other owners such that the SDN exercises control over the entity.
 
From the anti-corruption perspective, the SDN’s 10 percent equity interest in the company may reflect a bribery payment to the SDN/government official as a corrupt exchange for increased business or omission of government action. Again, the circumstances will dictate the corruption risks in this situation. At a minimum, it is a large red flag that may ultimately prevent your company from dealing with Company A because of the SDN/government official ownership interest.

TE EX/IM TRAINING EVENTS & CONFERENCES

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EN EDITOR’S NOTES

* Honore de Balzac (20 May 1799 – 18 Aug 1850; was a French novelist and playwright. He wrote nearly 100 novels, short stories, plays, and poems.  The novel sequence La Comédie Humaine,which presents a panorama of post-Napoleonic French life, is generally viewed as his magnum opus.)
  – “It is easier to be a lover than a husband for the simple reason that it is more difficult to be witty every day than to say pretty things from time to time.”
  – “When women love us, they forgive us everything, even our crimes; when they do not love us, they give us credit for nothing, not even our virtues.”

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

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

19 May 2020:
85 FR 29849
: 

Amendments to General Prohibition Three (Foreign-Produced Direct Product Rule) and the Entity List.


 

 

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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