20-0917 Thursday “Daily Bugle”

20-0917 Thursday “Daily Bugle”

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Thursday, 17 September 2020

  1. Commerce/BIS: “Information Collection Activities; Comment Request – Rated Orders Under the Defense Priories and Allocations System (DPAS)”
  1. Items Scheduled for Future Federal Register Edition
  2. Commerce/BIS: (No new postings)
  3. State/DDTC: (No new postings)
  4. EU External Action: “Arms Exports: Remarks by The High Representative/Vice-President Josep Borrell at the EP Plenary”
  5. Singapore Customs Updates of Interest: “Changes to The Strategic Goods Control List”
  1. Defense News: “State Department Defends Firing of Watchdog Who Probed Saudi Arms Sales”
  2. Reuters: “Bytedance Says Tiktok Proposal Will Need Both Chinese and U.S. Approval”
  1. Husch Blackwell: “D.C. Federal Judge Rules EAR Does Not Infringe FedEx’s Rights”
  2. Lowenstein Sandler: Internet Businesses Are Targeted by OFAC for Sanctions Violations: How to Reduce Risk
  1. FCC Academy Presents 3 Webinars: The ABC of FMS | Designing an ICP | Implementing an ICP
  1. Bartlett’s Unfamiliar Quotations 
  2. How to Publish Your Article in the Daily Bugle 
  3. Are Your Copies of Regulations Up to Date? Find the Latest Amendments Here. 
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85 FR 58016: Proposed Rule
* AGENCY:Bureau of the Census, Commerce Department.
* ACTION:Advance notice of proposed rulemaking.
* SUMMARY:The Bureau of the Census (Census Bureau) is seeking public comments on its consideration to remove the Electronic Export Information (EEI) filing requirement for shipments between the United States and Puerto Rico and the U.S. Virgin Islands. For many years, the Census Bureau has received requests, from both the government of Puerto Rico and members of the international trade community, to eliminate the requirement to file EEI for shipments between the United States and Puerto Rico in the Automated Export System. One of the reasons for requesting removal of the filing requirement is that it seems to treat Puerto Rico like a foreign country, when in fact Puerto Rico is a U.S. territory and part of the U.S. customs area. Arguments have also been made that the requirement imposes a burden on what should be treated as interstate commerce, discourages manufacturers in the 50 states to ship to Puerto Rico, and impedes economic development on the island. However, removal of the filing requirement could impact the quality and availability of key federal statistics. The Census Bureau is requesting information to assess potential impacts of a regulatory change in the filing requirements and to identify stakeholder priorities for data quality and availability.
* DATES:Written comments must be received on or before November 16, 2020.

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* Treasury/OFAC; NOTICES; Blocking or Unblocking of Persons and Properties; [Pub. Date: 18 Sep 2020]

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OGS_a23. Commerce/BIS: (No new postings)

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(Source: European Union External Action, 15 Sep 2020) [Excerpts]
“Decisions on arms export receive great attention and are politically sensitive because, indeed, trade in arms may potentially carry the risk of serious breaches for human rights, humanitarian law and regional stability. Most of the times the three things together. A strict implementation by Member States of the agreed Common Position on arms export is, therefore, essential to uphold European Union values and strategic objectives. As you state in you Report, this is also crucial for our credibility as a geopolitical player.  A high level of convergence as regards its full application will indeed more effectively ensure respect for human rights and international law by all parties involved.
I think we can say that we, the European Union, are moving fast in the field of defence: European Defence Fund (EDF) and European Peace Facility (EPF) will serve to strengthen internal collaboration on defence matters to make the European Union a more capable security provider at the global level. Our defence industries will become ever closer intertwined, they will strength our strategic autonomy, the protection of our citizens, while fostering innovation and saving costs. All that is right, but at the same time, in this context, further convergence of arms export policies becomes still more important.
As mentioned in your draft resolution, maintaining a vibrant and innovative defence industry in the European Union is a key component of our strategic autonomy and our European defence. It serves to ensure our capabilities and reduce dependency, while the defence industry is also a major source of technological innovation.
I may give you more examples: in 2018, it generated more €100 billion of revenues and supported more than 400,000 jobs in Europe. To ensure a thriving defence industry, exports are essential.
Of course, the defence industry is different from other industrial sectors and deserves a special consideration, taking into account its obvious links to national and international security, human rights and humanitarian values. That is why the European Union Member States have also exported control rules in place for military equipment, since 2008.  … In your own assessment on the Common Position on arms export control, you stress three key objectives: the need for increased control, convergence and transparency.   
First, on your support for an increased control. Let me start by saying that I am grateful your report welcomes Operation IRINI’s objective to implement the United Nations arms embargo on Libya. This is a concrete example of what the European Union does to prevent arms ending up in the wrong hands.  Further, as a global actor, the European Union supports outreach activities to assist countries in the European neighbourhood and beyond, in setting up arms export control mechanisms and implementing the Arms Trade Treaty.
Second, on transparency. The European Union Member States are already among the most transparent countries, including in arms export. Still, in order to increase the possibility for further scrutiny and accountability, I am glad to say that, this year, the European External Action Service will launch a public searchable database on its website, to allow all stakeholders to consult and analyse Member States’ arms exports in a user-friendly way. So, everybody will be able to know what the Member States arms export is about in a way that everybody could know whatever data they want about it.
Third and last, increased convergence. Member States are holding regular exchanges to share information on policies, denial of licenses and possible measures. As a concrete result, a new initiative has been launched and the Working Party on Arms Export is currently preparing a Council Decision to set rules on end-user certificates for the export of small arms and light weapons and their ammunition. … 
The next annual European Union arms export report on 2019 will become available shortly; probably next month, in October -two months earlier than in previous years. It will bring a lot of precious information about these developments. … ” 

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(Source: Singapore Customs, 15 Sep 2020) [Excerpts]
Updates to the Strategic Goods Control List
(1) Singapore Customs would like to inform you that the new Strategic Goods (Control) Order 2020 (“SGCO 2020”) has been gazetted on 15 September 2020 and will come into effect from 16 November 2020. You may access the SGCO 2020 via our website at www.customs.gov.sg > Businesses > Strategic Goods Control > Strategic Goods Control List.
(2) The SGCO 2020 brings Singapore’s strategic goods control list up to date with the 2019 Wassenaar Arrangement’s Munitions List, and the 2019 European Union’s List of Dual-Use Items (“EUDL”).
The EUDL contains dual-use items controlled by the four multilateral export control regimes (the Australia Group, the Missile Technology Control Regime, the Nuclear Suppliers Group and the Wassenaar Arrangement).
(3) The SGCO 2020 will incorporate revisions such as new controls, as well as editorial changes for consistency and clarity of controls.
A document on the amendments can be found via our website at www.customs.gov.sg > Businesses > Strategic Goods Control > Resources. Amendment to the Strategic Goods (Control) Brokering Order 2019
(4) An amendment will be made to the Strategic Goods (Control) Regulations to reflect its reference to the new SGCO 2020. There are no changes to the scope of brokering controls.
(5) The Strategic Goods (Control) (Brokering) (Amendment) Order 2020 will come into effect from 16 November 2020. Amendment to the Strategic Goods (Control) Regulations
(6) An amendment will be made to the Strategic Goods (Control) Regulations to reflect its reference to the new SGCO 2020. There are no changes to the scope of transhipment and transit controls.
(7) The Strategic Goods (Control) (Amendment) Regulations 2020 will come into effect from 16 November 2020.
Hard Copies of the Subsidiary Legislation
(8) You may purchase copies of the subsidiary legislation from Toppan Leefung Pte Ltd: Toppan Leefung Pte Ltd 1 Kim Seng Promenade #18-01/06 Great World City (East Tower) Singapore 237994 Tel: (65) 6826 9685 / (65) 6826 9629 E-mail: legalpub@toppanleefung.com

Website: www2.toppanleefung.com/webshop  

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(Source: Defense News, 16 Sep 2020) [Excerpts]
U.S. State Department officials defended Secretary of State Mike Pompeo’s firing of the agency’s independent watchdog, telling angry lawmakers that it had nothing to do with a probe of U.S. arms sales to Saudi Arabia and the United Arab Emirates. In a tense hearing, lawmakers questioned State Department officials over the firing of State Department Inspector General Steve Linick in May as his office was probing last year’s $8 billion arms sale to Saudi Arabia, UAE and Jordan, which skirted Congress by means of an emergency declaration.  . . . 

(Source: Reuters, 17 Sep 2020) [Excerpts]
ByteDance’s proposal for U.S. software firm Oracle Corp ORCL.N to become a technology partner in its TikTok app will ultimately need approval from both Chinese and U.S. officials, the company said on Thursday.
The proposal, submitted to the Trump administration over the weekend, envisages Oracle becoming a “trusted” technology partner and making TikTok Global a U.S.-headquartered company. A person with knowledge of the matter told Reuters that ByteDance is to hold majority ownership of TikTok.
U.S. President Donald Trump has ordered ByteDance to divest TikTok amid U.S. concerns user data could be passed to China’s Communist Party government. He has said he would ban TikTok in the United States as early as Sunday if ByteDance does not comply. Reuters has reported that the Oracle deal would not require ByteDance to apply to Chinese authorities for an export license for TikTok’s algorithm.


(Source: Husch Blackwell, 16 Sep 2020)
* Principal Author: Cortney O’Toole Morgan, Esq., 1-202-378-2389, Husch Blackwell
District Court for the District of Columbia dismissed FedEx Corporation’s challenge to the U.S. Department of Commerce’s (Commerce) Export Administration Regulations (EAR). Specifically, FedEx challenged the EAR requirements for global couriers to either verify the contents of its packages or to cease business with certain foreign entities, such as Huawei Technologies Co. Ltd., which FedEx described as departmental overreach that infringed upon its Fifth Amendment right to due process.
U.S. District Judge John D. Bates disagreed with FedEx’s assessment of the EAR’s impact on liberty, declaring that “unlike potentially one-off consumers, common carriers are repeat players with the institutional knowledge and scale to navigate the EAR, thus it is reasonable that common carriers might be held to a higher standard.”   
According to Judge Bates, Commerce adequately demonstrated that the EAR is “rationally related to a legitimate government interest,” which satisfied the Fifth Amendment due process clause.  Judge Bates recognized the merit of the fundamental question raised in the complaint-whether the EAR is stricter than necessary to protect national security-but concluded that the court did not need to decide that issue “because FedEx  abandons its initial framing of the ultra vires claim in its opposition brief…”   
Judge Bates’ ruling further solidifies the expectation that large global companies which are more experienced in international trade regulations may be held to a higher standard of compliance under the EAR.

(Source: Homeland Security Today, 15 Sept 2020)
* Principal Author: Doreen M. Edelman, Esq., 1 -202-753-3808, Lowenstein Sandler
Internet businesses are easily able to reach customers around the world. That worldwide reach, however, only increases a company’s risk of violating U.S. economic sanctions that the company might have not even realized applied. Imagine receiving a subpoena asking about customer accounts originating from Cuba that you did not even know existed on your platform. Accounts like these, sales or technology transfers to sanctioned locations, or any number of other seemingly innocuous transactions can lead to costly and unexpected violations and penalties. Many online companies are not aware that although they physically operate wholly within one country, their international online presence necessitates policies and procedures to ensure global sanctions compliance to avoid civil and criminal penalties. And in the sanctions world, a lack of knowledge is not an excuse for noncompliance.
WHAT IS OFAC? An agency of the U.S. Department of the Treasury, the Office of Foreign Assets Control (OFAC) administers and enforces a variety of economic sanctions programs to further U.S. foreign policy and national security objectives. Sanctions programs include:
  • Foreign governments (e.g., Cuba, Iran, North Korea)
  • Individuals (e.g., terrorists, narcotics traffickers)
  • Groups (e.g., drug cartels, organizations supporting terrorist activities)
  • Practices (e.g., cybercrime, rough diamond trade, proliferation of weapons of mass destruction)
Generally, these sanctions programs prohibit business transactions associated with the above targets. Engaging in these transactions can lead to major fines and penalties, even when the transactions themselves are small. This is because OFAC is trying to change the behavior of bad actors and protect U.S. national security concerns by denying those actors such resources as money, currency transfers, assets, technology, the ability to conduct business, and the physical products they need. To further these goals, OFAC applies sanctions that are broad and tend to prohibit export of all goods, technology, and services from U.S. people/businesses to certain designated people or entities, places, or sectors/activities. Many online businesses are providing these types of products or services and could mistakenly make them available to restricted parties or locations.
OFAC JURISDICTION: OFAC exercises wide-ranging jurisdiction to enforce these laws, including over:
  • OFAC has jurisdiction over U.S. citizens and lawful permanent residents, regardless of their physical location, as well as any individuals physically located in the United States.
  • OFAC also has jurisdiction over U.S. companies, including foreign branches; companies physically located in the United States; and, in some cases, foreign entities owned or controlled by persons subject to U.S. jurisdiction.
  • OFAC also maintains jurisdiction over transactions by foreign persons to the extent they involve the United States or have a U.S. nexus, such as using U.S. dollars or products with U.S.-origin technology.
SANCTIONS CHALLENGES: Yes, online businesses face significant challenges in complying with OFAC’s sanction regimes, and right now OFAC is devoting its financial resources to finding sanctions violators online. The global reach afforded by the internet also increases the risk of inadvertent country-based sanctions violations. Additionally, the lack of in-person contacts and the near-immediate nature of online transactions make it difficult to identify customers in order to avoid transactions with restricted individuals and entities.
To comply with OFAC sanctions, online businesses need to adopt procedures that can mitigate risk of violations while minimizing restrictions on their operations. Many online businesses rely on third-party payment-processing businesses to assume the compliance risk, reasoning that the payment would not go through if it were illegal. But the government holds service providers responsible for complying with the sanctions laws for their sales and services, and even for nonpaying customers who access an internet website. Luckily, there are various methods to prevent sales to restricted parties or embargoed countries, including:
  • Internet protocol (IP) address blocks based on geographic location
  • Reliance on credit card authentication to confirm identity
  • Removal of embargoed countries from drop-down menus indicating shipping destination or payment currency
OFAC supports these efforts but finds them insufficient alone to fully address compliance risks. It recommends that e-commerce businesses do their best to know their customers directly, including gathering authentic information to verify identities and to ensure that the business is not transacting with sanctioned entities. OFAC further advises companies to gather purpose-of-payment information on each transaction processed.
AGGRESSIVE ENFORCEMENT: OFAC aggressively investigates suspected violations of its sanctions programs. As an example, the web performance and security company Cloudflare voluntarily disclosed to OFAC in May 2019 that it had provided services to sanctioned entities and individuals. OFAC’s investigation has been ongoing for over a year, and the company continued to respond to investigators’ questions as recently as July 2020.
In addition to the time and expense involved in cooperating with an OFAC investigation, businesses should consider that OFAC can impose significant financial and criminal penalties after it determines a company has violated sanctions programs. A recent settlement agreement between a Swiss company, the Société Internationale de Télécommunications Aéronautiques SCRL (SITA), which provides telecommunications services to the airline industry, illustrates the risks of failing to ensure online services comply with sanctions. While not strictly an online business, SITA provided electronic messaging services and software applications globally to airline customers that included airlines identified by OFAC as Specially Designated Global Terrorists, pursuant to the Global Terrorism Sanctions Regulations.
Those services and applications were either U.S.-origin technology or routed through the United States, allowing OFAC to assert jurisdiction over the company. OFAC determined that the base penalty amounted to around $13,384,000, with a maximum applicable penalty available of nearly $2.5 billion. After taking into account aggravating and mitigating factors, OFAC negotiated a settlement in which SITA agreed to pay around $7,830,000. Thus, companies providing global, internet-based services or technology need to know their customers and take appropriate steps to ensure that they avoid dealing with embargoed countries or restricted parties.
BUSINESS CONSEQUENCES OF SANCTIONS RISKS: In addition to severe legal penalties for sanctions violations, companies also are finding that not having a compliance program can affect the company’s ability to secure future investment and acquisition prospects. As OFAC scrutiny and investigations have increased, investors are wary of investing funds in companies carrying enforcement risks. Consequently, investors now are conducting more extensive due diligence regarding sanctions and other trade controls to ensure that their investment or purchase does not bring with it liability for sanctions violations. That due diligence can include extensive employee, partner, customer, and co-investor screenings, as well as audits of company records for documentary evidence of compliance controls, policies, and procedures. Companies with an existing screening process and other sanctions controls already in place can quickly address these concerns and provide investors or buyers with confidence that the company is in compliance. More and more, we are finding that investors (and third-party insurers) have an expectation that at least some OFAC sanctions compliance procedures are in place when they are looking to invest in or purchase a business.
The bottom line is that any company subject to OFAC requirements needs to review its risk profile. Companies should implement and employ compliance tools that are commensurate with the speed and scale of their business operations. There are many compliance steps that can be taken to minimize risk and reduce violations, including putting in place a policy, verifying information technology configurations, and assessing the cost of restricted-party screenings. Understand that reliance on automated screenings requires companies to take reasonable action to ensure those processes are configured to screen relevant customer information, including spelling variations. Creative counsel can find cost-effective ways to develop a compliance system that protects your company and your investors without hindering your business operations. It all starts with understanding your obligations and your online risk exposure.


The ABC of Foreign Military Sales (FMS)
Tuesday, 29 September 2020

More Info

Designing and Implementing
an ICP
Tuesday, 6 October 2020 More Info
Wednesday, 7 October
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EN_a112. Bartlett’s Unfamiliar Quotations

(Source: Editor)


* Warren Burger (Warren Earl Burger (September 17, 1907 – June 25, 1995) was the 15th chief justice of the United States, serving from 1969 to 1986.)
   – “It is indeed an odd business that it has taken this Court nearly two centuries to ‘discover’ a constitutional mandate to have counsel at a preliminary hearing.”
  – “We are more casual about qualifying the people we allow to act as advocates in the courtroom than we are about licensing electricians.” 
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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.
Latest Update 


5 Apr 2019: 84 FR 13499:

Civil Monetary Penalty Adjustments for Inflation. 
27 Aug 2020: 85 FR 52898Additions of Entities to the Entity List and Revisions of entries on the Entity List.

DOC FOREIGN TRADE REGULATIONS (FTR): 15 CFR Part 30.   24 Apr 2018: 83 FR 17749: Foreign Trade Regulations (FTR): Clarification on the Collection and Confidentiality of Kimberley Process Certificates.  

: 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. 

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.


29 Jul 2020: 85 FR 45513 Extension to Certain Temporary Suspensions, Modifications, and Exceptions due to Corona Virus.  The latest edition of the BITAR is 29 July 2020.  

DOT FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR): 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
Inflation Adjustment of Civil Monetary Penalties Related to Reporting and Recordkeeping.

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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