THIS MONTH'S TOP TRADE DEVELOPMENTS

1) Treasury Issues Guidance Clarifying that U.S. FIs May Provide Services to State-Licensed Marijuana Related Businesses

The Financial Crimes Enforcement Network (FinCEN) issued, on February 14, 2014, Guidance for financial institutions (FIs) on how to, consistent with Bank Secrecy Act obligations, enhance anti-money laundering compliance programs in order to provide services to marijuana-related businesses in the 20 states (and the District of Columbia) that have legalized certain marijuana-related activity. The Guidelines complement the August 2013 memorandum from U.S. Department of Justice Deputy Attorney General James M. Cole (the "Cole Memo"), which provided guidance and priorities (the "Cole Priorities") to law enforcement that addressed the inherent contradictions between the Controlled Substances Act (CSA) and new state laws legalizing marijuana in various forms. Taken together, these two documents (including the Supplement to the Cole Memo) chart a risk-based course for those who choose to work with marijuana-related businesses. Consistent with FIs role as gatekeepers for the U.S. financial system, FinCEN and the Department of Justice continue to expect FIs to ensure transactions flowing through their systems are consistent with laws and regulations. The guidance, while imposing enhanced due diligence obligations, provides some assurances with respect to the potential for transgressing federal laws (like the Controlled Substance Act).

Enhanced Due Diligence Obligations

The enhanced due diligence expected of FIs providing services to a marijuana-related business will focus on ensuring compliance with the Cole Memo priorities and compliance with local and states laws. The Cole Priorities focus on the prevention of marijuana use by minors and criminal enterprises, as well as its cultivation on public lands and possession or use on federal property. State law compliance will involve verifying that potential marijuana business customers are appropriately licensed and developing typologies for permissible marijuana business activities in order to appropriately detect illicit activity.

SAR Filing Obligations

The compliance burden for FIs seeking to provide services to state-licensed marijuana businesses also mandates that the FIs will file suspicious activity reports tailored for that business line. First, any FI providing services to a marijuana-related business reasonably believed to be acting within the law must file a "Marijuana Limited" Suspicious Activity Report (SAR); continuing SARs should be filed consistent with existing guidance. Second, if during customer due diligence or ongoing monitoring for red flags, an FI believes a business potentially implicates one of the Cole Priorities or violates state law, a "Marijuana Priority" SAR with comprehensive detail is required. Finally, if an FI decides to terminate a relationship with a marijuana-based business, a "Marijuana Termination" SAR is necessary. Such SAR shall include the basis for the termination. Consistent with FinCEN's emphasis on information sharing pursuant to Section 314, the Guidance also encourages an FI to utilize 314(b) authorities if the FI is aware of a second FI's role in any relevant transactions.

New Red Flags

The newly issued Guidance contains marijuana business-specific "Red Flags" to help FIs distinguish priority SARs. These indicators are similar to those an institution would watch for from any other type of business, such as laundering money derived from criminal activity, but also include several focused on legalized marijuana. For example, red flags include: seeking to conceal or disguise involvement in a marijuana-based business, an owner or manager living outside the state in which the business is located, or a business being located on federal property.

Currency Transaction Reports

Finally, currency transactions in connection with marijuana-based businesses should be treated as they would in any other context, consistent with existing regulations and with the same thresholds applying. Businesses engaged in marijuana-related activity may not be treated as a non-listed business under 31 § C.F.R. 1020.315(e)(8).

Institutions handling customers with this added level of detail will likely have additional questions or require clarification on the guidance. Clients should not hesitate in contacting Crowell for assistance in what will likely become a burgeoning and profitable marketplace.

For more information, contact: Cari Stinebower, Edward Goetz

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2) International Trade Data System Set To Be in Place by December 31, 2016

To expedite the development of the International Trade Data System (ITDS), President Obama signed Executive Order 13659: "Streamlining the Export/ Import Process for America's Businesses" on February 19, 2014, mandating the government to complete the ITDS by December 31, 2016. The ITDS, established by section 405 of the Security and Accountability for Every Port Act of 2006, will function as a "single window" for the collection and distribution of electronic import and export data required by participating federal agencies. According to the ITDS Fact Sheet issued by the White House, the ITDS promises to cut processing and approval times for moving shipment across the border from "days to minutes." The Executive order follows the Trade Facilitation Agreement reached at the World Trade Organization's 9th Ministrial Conference in December 2013. Provisions of the Trade Facilitation Agreement aim to speed and create more efficient customs procedures and the Executive Order shares the same goal. 

By December 31, 2016, participating agencies must have the systems in place to use the ITDS as the primary means of receiving certain data and other relevant documentation required for the release of imported cargo and clearance of cargo for export. By December 31, 2016, the Department of Homeland Security must also confirm that the ITDS has the operational capabilities to enable users to transmit a harmonized set of import and export data to fulfill U.S. government requirements for the release and clearance of goods and to transition from paper-based requirements and procedures to electronic submissions and communications by that same date. 

In addition, the Executive Order directs the ITDS Board of Directors to 1) define the standard set of data to be collected, stored, and shared in the ITDS and update those data elements accordingly; 2) assist the Secretary of Treasury in overseeing the implementation of and participation in the ITDS; and 3) publish a timeline outlining the development and delivery of the secure ITDS capabilities as well as agency implementation plans and schedules. 

The Executive Order also formally establishes and tasks the Border Interagency Executive Council (BIEC) with, among other functions, developing management procedures to encourage compliance with relevant regulations, streamline Federal Government systems to reduce cost, engage with stakeholders to improve supply chain management, and assess opportunities to facilitate electronic payments of duties and fees. BIEC is made up of senior executives from 10 different federal agencies to coordinate government enforcement, and improve international trade compliance and clearance processes. The BIEC must deliver a report on the implementation of its various functions by July 1, 2014 and then annually until July 2016.

For more information, contact: John Brew, Nancy Cruz

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3) With Whom Do You File Suspicious Activity Reports with if You're a Housing Government Sponsored Enterprise? Answer: FinCEN

The Financial Crimes Enforcement Network (FinCEN) finalized a rule on February 20th requiring Housing Government Sponsored Enterprises (GSE) to develop anti-money laundering programs and to file more comprehensive Suspicious Activity Reports (SAR), which will be sent directly to FinCEN.  Changing the reporting from the Federal Housing Financing Agency (FHFA) to FinCEN is designed to give regulators a more comprehensive depiction of suspected mortgage fraud and money laundering nation-wide. These changes are somewhat cushioned as the final rule was not significantly changed from the regulatory provisions of FinCEN's November 2011 Notice of Proposed Rulemaking. GSE's are not required to comply with other record keeping provisions within the Bank Secrecy Act reporting or record keeping regulations, such as currency transaction reporting. 

The changes impact the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Banks (Banks). Collectively, FinCEN's final rule finds, these Housing GSEs are in a unique position to provide valuable information to law enforcement and regulators in the investigation and prosecution of mortgage fraud and other financial crimes. With more detailed reporting, FinCEN anticipates they also can support efforts to combat financial crimes consistent with the Bank Secrecy Act. 

The affected financial institutions must be in compliance with the changes 180 days after publication in the Federal Register. The changes themselves are effective 60 days after being published. 

For more information, contact: Cari Stinebower, Edward Goetz

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4) Canada Aligns Effort with the U.S. – Proposes Regulations to Implement eManifest Program

On February 15, 2014, the Canadian Government published draft regulations to implement the first phase of its eManifest program requiring electronic manifests for goods shipped by rail and truck across the U.S.-Canada border. According to the Canada Border Services Agency (CBSA), this program would assist with cross-border movement of goods as well as improve border security by reducing costs and delays of clearance processes. The CBSA stated that "receiving electronic information about commercial goods in advance of their arrival in Canada allows the CBSA to assess risks associated with goods and make informed decisions about those goods, thereby increasing predictability for stakeholders and minimizing delays at the border."

These draft regulations form the first of two rounds of regulatory amendments aimed at fully implementing the eManifest program. These regulations would support current electronic manifest requirements for air and marine modes, require pre-arrival information in the rail and highway modes, and add non-compliance with eManifest requirements to the CBSA's administrative monetary penalties. The specific proposed regulatory changes would affect Canadian rail and highway carriers, freight forwarders, and customs sufferance warehouse operators. Five existing regulations under the Customs Act would be amended, including the Reporting of Imported Goods Regulations, the Customs Sufferance Warehouses Regulations, the Designated Provisions (Customs) Regulations, the Transportation of Goods Regulations, and the Presentation of Persons (2003) Regulations:

• Reporting of Imported Goods Regulations—highway carriers must provide the CBSA with cargo and conveyance information electronically at least one hour before the conveyance arrives at the border. Rail carriers must provide cargo and conveyance information at least two hours before the train is expected to cross the border as well as submit an electronic arrival message after a train crosses the border into Canada. Air and marine carriers must provide an electronic arrival message on arrival in Canada. In addition, the exemption for "break-bulk" goods, which are goods that are neither transported within a cargo container nor in bulk, will be eliminated. Commercial carriers and freight forwarders will also be required to hold a valid carrier code, and freight forwarders in all modes of transportation will need to provide secondary or supplementary information electronically within specified timeframes.
• Customs Sufferance Warehouses Regulations—sufferance warehouse operators must submit an electronic arrival message to acknowledge the receipt of goods.
• Transportation of Goods Regulations—there will be an extension of recordkeeping requirements to freight forwarders on commercial goods shipments for three years in addition to the current year.
• Designated Provisions (Customs) Regulations—there will be an extension of the existing administrative monetary penalty system regarding failure to provide pre-arrival cargo and conveyance information, failure to provide information electronically or within specified timeframes, failure to notify the CBSA of a change in commercial information that was provided in advance, failure to comply with the CBSA notifications, and failure to hold a valid carrier code.
• Presentation of Persons (2003 Regulations)—there will be amendments to standardize provisions with those in the Reporting of Imported Goods Regulations and with the new Section 12.1 of the Customs Act, which gives the Federal Cabinet authority to issue regulations regarding advance commercial information in all modes of transportation.

The eManifest program will also align Canadian requirements for electronic submission of advance cargo and conveyance data with the Automated Commercial Environment system operated by U.S. Customs and Border Protection. Furthermore, it will meet commitments made by the U.S. and Canadian governments in the Beyond the Border Action Plan on regulatory harmonization, which was announced in December 2011. The second package of regulatory amendments is expected to be introduced in 2015 or 2016 and will mainly consist of provisions to address advance information requirements for Canadian importers.

According to the CBSA, implementation of these regulatory changes is expected to help save a total of $356 million for Canadian businesses over 12 years mainly due to fewer shipment delays at the U.S.-Canada border. Additionally, there will be efficiencies created by the use of electronic manifests instead of paper processes. Small Canadian businesses, however, may face increased costs that total about $50 million over 12 years due to the transition to electronic manifests, although it will be mitigated with the option of using the CBSA's eManifest internet portal.

For more information, contact: John Brew, Jini Koh, Carolyn Esko

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5) Latin America Trade Deal Eliminates Tariffs on 92 Percent of Goods

On February 11, 2014, the four members of Latin America's Pacific Alliance (Pacific Alliance), comprised of Chile, Colombia, Mexico and Peru, signed a trade protocol to eliminate tariffs on 92 percent of goods trade within the member countries. This alliance was formally launched in June 2012 and is the first initiative created in Latin America aimed at attaining full trade liberalization. The agreement was first announced last May but was delayed due to continued debate over agricultural products. The remaining eight percent of items are in the agricultural sector and its tariffs will disappear gradually in the coming years. Sugar has been exempt from the agreement altogether and it may take up to 17 years for an agreement on sensitive products such as corn. This agreement will also create a fund that will finance infrastructure investments within the four member countries as well as establish a joint system to control medicine prices.

The summit held in Cartagena included initiatives to strengthen ties among the four countries members as well as new members expecting to join. Costa Rica will likely become the fifth member later this year and may be followed by Panama and Guatemala. The requirements for joining the alliance include bilateral free trade agreements with all members in addition to having a Pacific coastline. The current members represent 36 percent of Latin America's combined GDP and account for 50 percent of the region's overall trade, exporting $550 billion and importing $561 billion. There are also 28 observers including Finland, India, Israel, Morocco and Singapore, which were admitted on February 10, 2014. The United States joined in July 2013. 

The Pacific Alliance members have already eliminated tourism and business visas, and they aim to further address the free movement of people and capital. A working document of the alliance indicates that discussions for labor mobility have started in order to "guarantee real export of services." Colombian President Juan Manuel Santos who hosted the summit stated that "this alliance has what the world needs: we believe in free trade, we believe in investment and we believe in entrepreneurship, fostering in our countries equality and poverty eradication." 

Additionally, Chile, Colombia and Peru already have joined their national stock markets into an integrated system called Mercado Integrado Latinoamericano. Mexico is expected to join as well, which would make it the largest bourse in Latin America. This "single window" structure brings all the required import and export steps within a central location.

Concrete steps have also been taken for linking trade promotion offices among Pacific Alliance members. The first four-nation office was opened last year in Istanbul, and trade offices—ProChile, Proexport Colombia, ProMexico and PromPeru—participated in 33 global trade fairs together last year. The four member countries also opened a joint embassy in Ghana before the OECD in France, and Colombia and Chile announced on February 9 that they would open a joint embassy in Azerbaijan. Colombia and Peru also have a single embassy in Vietnam.

For more information, contact: John Brew, Jini Koh, Carolyn Esko

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THIS MONTH IN TRADE – OTHER NEWS

Agency Enforcement Actions

Anti-Money Laundering (AML)

• Michigan Man Consents to $12,000 Penalty for BSA Violations.

Bureau of Industry and Security (BIS)

• California Company Settles for $115,000 for EAR Violations Due to Deemed Export. Intevac, Inc., (Intevac), a Santa Clara developer and manufacturer of equipment for the hard disk drive and solar industries, agreed to pay a penalty of $115,000 for five violations of the EAR, including a "deemed export": the unauthorized release of certain manufacturing technology to a Russian national employed at Intevac's U.S. facility.
• Comasec SAS (Comasec), a French manufacturer and seller of specialized protective gloves, allegedly sold and arranged for the transport of 35,000 gloves subject to the EAR and the Iranian Transactions Regulations (ITR) from the U.S. to Iran via the United Arab Emirates. Comasec purchased the gloves from Marigold Industrial USA Inc. (Marigold), a U.S. company, in order to fill an order for Zhabeh Safety Co., of Tehran. Comasec and the successor corporation to Marigold, Ansell Protective Products Inc. (Ansell), were each alleged to have violated the EAR and the ITR because of the exports. Ansell and Comasex each settled for a civil penalty of $190,000. [PDF-1] [PDF-2]

U.S. Immigration and Customs Enforcement (ICE)

• Navy Veteran Convicted of Conspiracy to Export Defense Articles. A New York man deployed in Operation Iraqi Freedom was convicted of conspiracy to export defense articles, including military thermal weapon sights, without a license.

For more information, contact: Richard Massony, Dj Wolff

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OFAC Announces New Foreign Trade Sanctions Evaders List: A Reject Rather than Block Program

Perhaps because the Foreign Sanctions Evaders Sanctions Program is a reject rather than a block program, OFAC has created the new Foreign Sanctions Evaders (FSE) List; this list is separate from the Specially Designated Nationals and Blocked Persons List (SDN List) and is also, as of today, not incorporated within the Consolidated Screening List. As a result, any entity relying on SDN screening as part of OFAC compliance must ensure that the FSE List is also added to the screening protocols.

The FSE List was created pursuant to the May 1, 2012 Executive Order (E.O.) 13608, "Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria" and announced on February 6, 2014. Treasury may use this authority where it appears that a foreign person violated U.S. sanctions targeting Iran or Syria, but does NOT meet criteria for designation under existing Executive Orders (i.e., being listed as an SDN). 

As is the case with the more traditional SDN designations, a U.S. person is prohibited from engaging in transactions with an identified or listed FSE person, unless the underlying transaction is exempt from regulation under the International Emergency Economic Powers Act (IEEPA) or is authorized by OFAC. Unlike the SDN-style blocking designation, the property and the interests in property of a person listed under FSE sanctions program are not blocked.

While property of an FSE-listed person is not blocked, U.S. persons must have authorization from OFAC before engaging in a transaction in which the FSE-listed person maintains an interest. Like other "reject" programs, transactions involving FSE-listed persons must be rejected and, where a financial institution has rejected a funds transfer, pursuant to 31 C.F.R. 501.604, a report must also be filed with OFAC within 10 business days. 

Consistent with other OFAC sanctions programs, where a U.S. person is involved in a transaction involving a person who becomes sanctioned pursuant to E.O. 13608, the U.S. person must cease the transaction unless the dealings are licensed or otherwise exempt. Also consistent with OFAC's other sanctions programs, OFAC has the authority under the E.O. to license transactions that are consistent with U.S. foreign policy.

Please do not hesitate to contact Crowell & Moring's International Trade Group with any questions regarding the FSE List. It is much better to ask first than disclose later.

For more information, contact: Cari Stinebower, Edward Goetz

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The Department of Treasury Expands the Scope of Authorized Personal Communication Exports to Iran

To further foster the free flow of information to Iranian citizens and to address practical issues exporters had identified with the practical implementation of existing General License D, the Department of the Treasury in consultation with the Departments of State and Commerce released amended General License D-1 (GL D-1) and a corresponding Frequently Asked Questions (FAQs) on February 7, 2014. GL D-1, which supersedes General License D issued on May 30, 2013, authorizes (1) non-U.S. persons located outside the United States to export certain personal communications software, hardware, and related services to Iran; (2) U.S. persons to export certain hardware and software not subject to the Export Administration Regulations (EAR) to Iran; and (3) the Government of Iran to be a recipient of certain publicly available, no cost services and software.

The Provisions of General License D-1

GL D-1 continues to authorize the exportation or reexportation from the United States or by a U.S. person, including U.S.-owned or controlled foreign entities, to Iran of (1) fee-based services incident to the exchange of personal communications over the Internet and (2) consumer-grade Internet connectivity services and the provision, sale, or leasing of capacity on telecommunications facilities incident to personal communications.

To address certain anomalies created by General License D – namely that it authorized U.S. companies to engage in certain actions but continued to restrict the actions of non-U.S. entities and items not subject to the EAR – the new general license clarifies that:

• non-U.S. companies may export fee-based software subject to the EAR such as cloud computing services or items listed in the Annex such as mobile phones, laptops, or tablets to Iran from a third-country;
• U.S. companies may export foreign-made personal communication hardware and software not subject to the EAR;
• U.S. companies or foreign companies located in the United States may export no-cost services incident to the exchange of personal communications over the Internet and no-cost software necessary to enable such services to the Government of Iran; and
• U.S. companies or foreign companies located in the United States may export certain anti-virus and anti-malware software, anti-tracking software, anticensorship tools and related software as further described in categories 6-11 of the Annex to the general license.

Although the Department of Treasury has broadened the scope of the general license, its terms should be narrowly construed. All other prohibitions against U.S. companies and U.S. – owned or controlled companies continue to apply. For example, the FAQs emphasize that the export of parts or components of authorized hardware such as microprocessors are not allowed; a specific license would be needed.  Companies must also be cautious when exporting bundled software to insure it includes only software authorized in GL D-1.

The following is a summary of several of the key provisions:

Fee-based Software – Expanding upon General License D, GL D-1 permits the exportation, reexportation, and provision to Iran of fee-based software subject and not subject to the EAR necessary to enable services incident to the exchange of personal communications. Fee-based software not subject to the EAR, however, may only be exported, reexported, and provided to Iran by U.S. persons. 

Software and Hardware listed in the Annex – In addition, GL D-1 permits the exportation, reexportation, or provision of (1) items listed in the Annex such as mobile phones, laptops, and tablets; (2) hardware and software not subject to the EAR, but of a type described in the Annex by a U.S. person; and (3) publicly available software described in 15 C.F.R. § 734.3(b)(3) provided it is of a type described in the Annex from the United States or by a U.S. person. This provision as well as the fee-based software provision applies to individuals travelling from the United States to Iran. 

Importation – GL D-1 permits the importation into the United States of hardware and software exported, re-exported, or provided pursuant to the fee-based software and Annex-related provisions.

Government of Iran – GL D-1 authorizes the exportation, re-exportation, or provision from the U.S. or by a U.S. person to the Government of Iran of services incident to the exchange of personal communications over the Internet as described in 31 C.F.R. § 560.540(a)(1) and categories 6-11 of the Annex provided such services are free and widely available to the public. In addition, GL D-1 authorizes the exportation and re-exportation of necessary software related to such services as described in 31 C.F.R. § 560.540(a)(2) and categories 6-11 of the Annex provided such software is free and widely available to the public. 

Transactions Not Authorized – Exporters must still comply with the export license applications requirements of other Federal agencies. Companies may not knowingly or with reason to know export, re-export, or provide services, software, or hardware to the Government of Iran except for the limited authorization relating to publicly-available no cost services and software described above. Finally, the general license does not authorize the export, re-export, or provision of services, software, or hardware to blocked persons.

For more information, contact: Cari Stinebower, Nancy Cruz, Dj Wolff

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Routed Export Transactions – BIS Proposes New Language and Responsibilities

The Department of Commerce Bureau of Industry and Security (BIS) recently proposed changes to the Export Administration Regulations (EAR) that seek to clarify long-standing confusion among exporters as to the roles of parties to a routed export transaction. The proposed rule replaces the term, "routed export transaction" with "Foreign Principal Party Controlled Export Transaction," and imposes additional requirements in order for the Foreign Principal Party in Interest (FPPI) to assume export licensing responsibilities under the EAR.

BIS cites "perceived discrepancies" between the EAR and the Census Bureau's Foreign Trade Regulations (FTR) as a reason for the change. Those perceptions arise because both the EAR and the FTR contain, but define differently, the term "routed export transaction." Although the definitions in each regulation are similarly worded, the requirements each regulation imposes upon the parties to a routed export transaction are not. 

Under both the FTR and the EAR, a routed export transaction is generally defined as a transaction in which the FPPI authorizes a U.S. agent to facilitate the export of items from the U.S. on its behalf. To do so, the FTR require the FPPI provide its agent with written authorization. In contrast, the EAR require an additional writing, one by the FFPI to the U.S. Principal Party in Interest (USPPI) assuming responsibility as the exporter. Consequently, under the current regulatory regimes, an FPPI could authorize its U.S. agent to file Electronic Export Information (EEI) through the Automated Export System without the FPPI assuming responsibility as the exporter under the EAR. As a result the USPPI would remain liable for any potential violations of the EAR for the transaction despite not actually facilitating the export or filing the EEI.

BIS's proposed changes are focused on transactions: in which the FPPI assumes responsibility for facilitating the export under the FTR, but fails to meet the necessary requirements to assume licensing responsibility under the EAR. BIS's proposed solution is to distance its requirements from those of the FTR by replacing the term "routed export transaction" and identifying (and expanding) the specific conditions under which the FPPI may assume export licensing responsibilities when a foreign principal party controlled export transaction exists.

Specifically the proposed rule will:

• Amend § 748.4(a)(2) of the EAR to clarify that, unless authorized by § 758.3, the USPPI will be the "exporter" and the party responsible for applying for licenses when required, even if the FPPI is responsible for exporting items out of the U.S. under FTR.
• Add three subsections to §758.3 detailing under what conditions an FPPI may assume responsibility for licensing requirements and licensing authority, creating a "foreign principal party controlled export transaction." These provisions require:
  • The USPPI, in writing, assign licensing responsibility to the FPPI and the FPPI must accept and identify in writing the U.S. agent for export.
  • The FPPI provide the USPPI with the U.S. agent's identification and power of attorney or other written authorization to act on the FPPI's behalf.
  • The USPPI produce, upon the FPPI's or U.S. agent's request, the ECCN or sufficient technical information and any information that the USPPI knows will affect license requirements. The FPPI or its U.S. agent must also produce, at the USPPI's request, specific information pertaining to the export of the items.

From an exporter's perspective, BIS's solution provides more clarity, and enhances the perception that the EAR and FTR requirements are distinct. From a compliance perspective, the important lesson is that if the proposed rule becomes final in this form, exporters will still have to analyze their transactions under both regulations. Exporters should also be aware that under both the current language and the proposed language, no matter how the exporter manages and documents the transaction under the FTR, the USPPI will be responsible for export clearance unless it meets the writing requirement in the EAR. 

Companies should review and submit comments on the proposed regulations to BIS by April 7, 2014.

This alert is not meant to be legal advice; rather it is a summary of the proposed rules. If you have further questions you are encouraged to seek legal counsel. As always, Crowell & Moring is here to assist with your questions and needs.

For more information, contact: Chris Monahan, Michael Appel, Lindsay Denault

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Treasury Issues Guidance to Financial Institutions Related to the Departure of Victor Yanukovych and Other Ukrainian Officials

The Financial Crimes Enforcement Network (FinCEN) issued, on February 25, 2014, Guidance for financial institutions (FIs) on recent events related to the departure of Viktor Yanukovych and other Ukrainian officials. 

Enhanced Due Diligence Obligations

FinCEN reminds FIs of their responsibility to apply enhanced scrutiny to private banking accounts held by or on behalf of senior foreign political figures of the Yanukovych government. FIs should also monitor transactions that could potentially represent misappropriated or diverted state assets, the proceeds of bribery or other illegal payments, or public corruption proceeds. 

Red Flags

When assessing risk related to particular customers and transactions, FIs should be aware of the impact that public reports of high-level corruption and other illicit activity by members of the Yanukovych administration may have on patterns of financial activity.

SAR Filing Obligations

FIs are reminded of their responsibility to file Suspicious Activity Reports (SAR) if they know, suspect, or have reason to suspect that a transaction relating to senior foreign political figures involves any violation of law or regulation, or if the transaction appears to have no business or lawful purpose or has a purpose inconsistent with the customer's known business.

FinCEN emphasizes this guidance is not intended to affect the maintenance of normal relationships between FIs in the United States and Ukraine; only to prevent illegal activity by members of the previous government during this time of internal turmoil. The European Union has also issued guidance to member states regarding Ukraine on a number of topics to include finance, exports, and human rights.

For more information, contact: Cari Stinebower, Edward Goetz

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CROWELL & MORING SPEAKS

John Brew will be speaking at the International Compliance Professionals (ICPA) Association Annual Conference on March 24, 2014 for the Bootcamp session on Customs Valuation and Assists. Crowell & Moring will be hosting a dinner on Monday, March 24, which is open to Crowell & Moring clients and friends. Please contact John Brew at jbrew@crowell.com - (202) 624-2760 if you would like to attend.

John Brew and John Fuson will be speaking at the "FSMA and Foreign Suppliers: Managing New Customs Obligations and Responsibilities" session during the Grocery Manufacturers Association's Science Forum in National Harbor, MD on April 6, 2014. 

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CROWELL & MORING WELCOMES

We are pleased to welcome Julia Rieper to the International Trade group. Julia earned her J.D. from American University Washington College of Law, M.A. in international politics from American University School of International Service, and B.A. in political science from the University of Kansas. She joins us from the U.S. Customs and Border Protection's Office of International Trade, Regulations and Rulings where she served as the attorney advisor for the Privacy Act Policy and Procedures Branch as well as the Entry Process and Duty Refunds Branch.

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