The Daily Bugle Weekly Highlights: Week 31 (29 July – 2 August 2019)

Every Monday we post the highlights out of last week’s FCC Export/Import Daily Update (“The Daily Bugle”). Send out every business day to approximately 6,500 readers of changes to defense and high-tech trade laws and regulations, The Daily Bugle is a free daily newsletter from Full Circle Compliance, edited by James E. Bartlett III, Sven Goor, and Alex Witt.

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Last week’s highlights of The Daily Bugle included in this edition are:

Last week’s highlights of The Daily Bugle included in this edition are:

  1. President Continues National Emergency Concerning Lebanon; The Daily Bugle; Wednesday 31 July 2019, Item #1;
  2. DoD/DSCA Posts Policy Memos of Interest 19-22 and 19-36; The Daily Bugle; Thursday, 1 August 2019, Item #4;
  3. GAO Publishes New Report “DLA: Small Businesses Participate in Reverse Engineering of Spare Parts”; The Daily Bugle; Thursday 1 August 2019, Item #5;
  4. EU Amends Restrictive Measures Concerning Libya; The Daily Bugle; Friday 2 August 2019, Item #7;
  5. Japan METI: “The Cabinet Approved Partial Amendment to the Export Trade Control Order”; The Daily Bugle; Friday, 2 August 2019, Item #8;

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1. President Continues National Emergency Concerning Lebanon

(Source: Federal Register, 31 July 2019.)

84 FR 37559: ADMINISTRATIVE ORDERS; Lebanon; Continuation of National Emergency

On August 1, 2007, by Executive Order 13441, the President declared a national emergency with respect to Lebanon pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States constituted by the actions of certain persons to undermine Lebanon’s legitimate and democratically elected government or democratic institutions; to contribute to the deliberate breakdown in the rule of law in Lebanon, including through politically motivated violence and intimidation; to reassert Syrian control or contribute to Syrian interference in Lebanon; or to infringe upon or undermine Lebanese sovereignty. Such actions contribute to political and economic instability in that country and the region.

Certain ongoing activities, such as Iran’s continuing

arms transfers to Hizballah–which include increasingly sophisticated weapons systems–serve to undermine Lebanese sovereignty, contribute to political and economic instability in the region, and continue to constitute an unusual and extraordinary threat to the national security and foreign policy of the United States. For this reason, the national emergency declared on August 1, 2007, and the measures adopted on that date to deal with that emergency, must continue in effect beyond August 1, 2019. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency with respect to Lebanon declared in Executive Order 13441.

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2. DoD/DSCA Posts Policy Memos of Interest 19-22 and 19-36

(Source: DoD/DSCA, 1 August 2019.)

  – DSCA Policy Memo 19-22 Update to Interim Clarification on 10 USC § 333has been posted.

Effective immediately, this memo updates the referenced DSCA policy regarding the use of funds. This modification allows a Section 333 proposal to be conditionally approved and congressionally notified one fiscal year (no more than one) in advance of an available appropriation.

  – DSCA Policy Memo 19-36 Security Assistance Management Manual (SAMM), Administrative Changeshas been posted.

This memorandum updates the SAMM with clerical and administrative changes. This memorandum does not contain contextual policy changes.

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3. GAO Publishes New Report “DLA: Small Businesses Participate in Reverse Engineering of Spare Parts”

(Source: GAO, 31 July 2019.) [Excerpts.]

What GAO Found

The Defense Logistics Agency (DLA) is responsible for providing logistics support to the warfighter, including spare parts for military assets. From fiscal years 2015 through 2018, DLA initiated over 1,600 reverse engineering projects for spare parts at three of its commands—Aviation, Land and Maritime, and Troop Support. DLA uses reverse engineering to identify potential new sources for spare parts that are available from only one source and to achieve savings. DLA funded about 1,000 of the reverse engineering projects, while contractors funded the remaining 600 projects. Nearly two-thirds of all reverse engineering projects involved parts in five categories, with examples of the three largest categories illustrated in the figure.

GAO found that the majority of contractors conducting reverse engineering for DLA were small businesses. Specifically, DLA identified 124 contractors that conducted reverse engineering projects from fiscal year 2015 through 2018, 103 of which GAO determined were small businesses. According to small business representatives and DLA officials, reverse engineering is beneficial for small businesses and can help provide opportunities for additional business with DLA.

GAO found that the three DLA commands had processes to safeguard certain intellectual property in their reverse engineering efforts. Specifically:

Officials from all three commands stated they do not release drawings with limited data rights to contractors interested in reverse engineering parts.

Aviation and Land and Maritime officials stated that they check for patent markings on parts to ensure patented parts are not reverse engineered. Troop Support officials stated they do not check for patent marks because the parts they supply are often too old to have valid patents.

The small businesses GAO met with did not identify concerns with how DLA handles intellectual property. Further, DLA officials stated that they had not received any complaints from small businesses about their intellectual property being used inappropriately.

Why GAO Did This Study

The Department of Defense spends tens of billions of dollars annually to sustain military assets including aircraft, ships, and missiles. In support of this effort, DLA strives to maintain a competitive supplier base through reverse engineering—the process of examining an item, such as a spare part, with the intent of replicating its design. Contractors consider intellectual property, such as their technical data and patented material, essential to their success. DLA also takes steps to safeguard contractors’ intellectual property during reverse engineering.

The Senate Armed Services Committee report accompanying a bill for the fiscal year 2018 National Defense Authorization Act included a provision for GAO to review DLA’s reverse engineering efforts, including the protection of small businesses’ intellectual property. This report describes (1) DLA’s reverse engineering programs and the extent to which small businesses participated in these programs from fiscal years 2015 through 2018; and (2) how DLA safeguards certain intellectual property within its reverse engineering efforts.

GAO analyzed data from three DLA commands—Aviation, Land and Maritime, and Troop Support, those that conduct reverse engineering—from fiscal years 2015 through 2018. GAO reviewed a nongeneralizable sample of 19 reverse engineering projects involving 13 parts, selected to include a variety of characteristics, such as the size of the contractors involved. GAO reviewed DLA’s guidance and interviewed DLA officials and representatives from small businesses about safeguarding intellectual property as part of reverse engineering.

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4. EU Amends Restrictive Measures Concerning Libya

(Source: Official Journal of the European Union, 2 August 2019.)

Regulations

* COUNCIL IMPLEMENTING REGULATION (EU) 2019/1292; implementing Article 21(2) of Regulation (EU) 2016/44 concerning restrictive measures in view of the situation in Libya.

Decisions

* COUNCIL IMPLEMENTING DECISION (CFSP) 2019/1299; implementing Decision (CFSP) 2015/1333 concerning restrictive measures in view of the situation in Libya.

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5. Japan METI: “The Cabinet Approved Partial Amendment to the Export Trade Control Order”

(Source: METI, 2 August 2019.) [Excerpts.]

The Cabinet approved today the Order to remove the Republic of Korea (ROK) from the Appended Table III of the Export Trade Control Order to revise the status of ROK with regards to security export control statutes. The Ministry of Economy, Trade and Industry (METI) hereby reemphasizes both its willingness to take strict measures against circumventions and other illicit exports, and the importance for exporters to exercise self-discipline in undertaking internal export control measures, regardless of export destinations or items to be exported. …

Details can be found here.

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