Jan
24
Bye Bye, TSRA?
Posted by Clif Burns at 6:34 pm on January 24, 2012
Category: Iran Sanctions • OFAC
Yesterday, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) added Iran’s Bank Tejerat to the list of Specially Designated Nationals and Blocked Persons List (the “SDN List”). This means that no U.S. person may engage in financial transactions with Bank Tejerat and all assets of Bank Tejerat that come into the possession or control of U.S. persons must be blocked.
The real impact of this is that this may well signal the end of legal exports of agricultural products, medicine and medical devices to Iran under the authority of the Trade Sanctions Reform and Export Enhancement Act of 2000, or TSRA (tis’-ruh) in Exporteranto, the lingua franca of export professionals. Exports to Iran licensed by OFAC require that the exporter must deal directly with a non-Iranian bank and that the non-Iranian banking intermediary may not use an Iranian bank on the SDN List to complete the financial aspects of the transaction.
Here is a link to a comprehensive list of Iranian financial institutions on the SDN List. As you can see, the U.S. has now designated what I believe to be all Iranian banks that are involved in international financial transactions. Here is a list on Wikipedia purporting to be all the private banks in Iran, but I am unaware of whether any of these other banks are able to engage in international transactions, although the website of EN Bank suggests that it may be able to handle international financial transactions.
That may mean, I’m afraid, that as a practical matter, TSRA exports to Iran will be cut off because there is no way for the U.S. exporter to be paid. If anyone is aware of any other banks that can be used for TSRA exports to Iran and that are not on the SDN List, please share that in the comments section.
Couple this with OFAC’s recent action putting most (and perhaps all) shipping ports in Iran on the SDN List when it designated Tidewater Marine, the executive branch has now effectively nullified the intent of Congress when it passed TSRA. This nullification could easily have been avoided if OFAC issued (or issues) general licenses that permit licensed TSRA transactions to use Iranian banks even if they are on the SDN List and to use ports on the SDN List for licensed TSRA transactions. But there is no indication that this is going to happen.
Of course, in the present environment, it is unlikely that Congress will protest this de facto executive repeal of the act.
Jan
23
Massachusetts Man Pleads Guilty to Illegal Export Charges
Posted by Clif Burns at 8:00 pm on January 23, 2012
Category: Criminal Penalties • DDTC
Rudolf Cheung, who is the head of the Research & Development department of Microwave Engineering Corporation in North Andover, Massachusetts, pleaded guilty on January 20, 2012, to charges that he violated the Arms Export Control Act in connection with unlicensed exports of military antennae to Singapore. A copy of the criminal information detailing the charges can be found here.
The story begins in June 2006 when an unnamed company in Singapore sought to order certain military antennae from Microwave Engineering. In preparation for requesting an export license, Microwave Engineering asked the Singapore company to execute a Form DSP-83 (Nontransfer and Use Certificate). When the company, citing its own internal policies, refused to sign the DSP-83, the sale and export were cancelled by Microwave Engineering’s export compliance officer.
When Cheung learned of the cancellation of the sale, he contacted another Massachusetts company, and agreed with that local company that it would purchase the military antennae and ship them to the company in Singapore. Thereafter, the local company purchased antennae from Microwave Engineering and exported them without license to the company in Singapore. The local company also purchased antennae from Microwave Engineering for export to another company in Singapore, Corezing International. Corezing is subject to another indictment, and the U.S. is seeking extradition, in connection with its role in the exports of radio modules from the United States to Iran which were later found in improvised explosive devices in Iraq.
The criminal information alleges that Cheung was aware that the purchases by the unnamed local company were destined for the customer in Singapore and that he took no action to stop these exports or to obtain the required licenses from the Directorate of Defense Trade Controls (“DDTC”).
Moral of the story: if your export compliance officers stops a sale, it is probably not a good idea to try to find another way to make the sale.
Jan
19
Would You Like a Side of Sanctions with Your Pad Thai?
Posted by Clif Burns at 7:37 pm on January 19, 2012
Category: OFAC
ABOVE: Nalinee Taveesin
Any U.S. companies doing business with the Thai government are going to have to exercise some additional caution after Thailand’s Prime Minister Yingluck Shinawatra appointed Nalinee Taveesin as PM’s Office Minister. Ms. Taveesin is on the SDN List maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”). U.S. persons are forbidden by law to engage in any transactions with individuals on the SDN List.
Ms. Taveesin was placed on the list because of her alleged involvement in various transactions with Grace Mugabe, the wife of Zimbabwe’s President Robert Mugabe. Taveesin claims it’s all a huge misunderstanding, that she never was involved in any business deals with Grace Mugabe, and that she merely had become friends with Grace Mugabe when she came to Thailand for a New Year’s holiday vacation.
The issue now is whether Ms. Taveesin’s presence on the SDN list has any impact on business deals with the Thai government in which she may be involved. The SDN list would seemingly bar transactions with her both in her private and in her official capacity. OFAC has, at least in the case of the Palestinian Authority, held that the presence of sanctioned individuals in a government agency or body could prevent transactions with the government agency itself, effectively eliminating any notion that someone can be sanctioned vis-à-vis their private activities but not their official governmental activities.
I’ll have to be honest and say that I have no idea what the PM’s Office Minister in Thailand does, but U.S. businesses doing business with the government of Thailand should be wary and make sure that Ms. Taveesin has no connection with, or involvement in, the transaction.
Jan
18
Mystery Solved (Maybe)
Posted by Clif Burns at 6:29 pm on January 18, 2012
Category: BIS • DDTC
In a post back in December titled “Imaginary Numbers,” I noted that the list of commodity jurisdiction determinations by the Directorate of Defense Trade Controls had some puzzling entries:
Three entries on the list, two for a high mobility electron transistor (“HMET”) and one for a microwave monolithic integrated circuit (“MMIC”), indicate that the correct classification for these items is ECCN 3A982. The problem is that there is no ECCN 3A982, and there has never been, at least that I could find.
Well today I came across a notice of a final rule by the Bureau of Industry and Security, dated January 9, 2012, and effective on the same date, which creates a new ECCN 3A982 for HMETs and MMICs. Of course, the mystery remains as to how the DDTC could classify something as ECCN 3A982 before the ECCN actually existed, but I suppose that only bothers people concerned about the rule of law and other minor details.
Jan
10
Twenty IED Jammers in a Jam
Posted by Clif Burns at 9:02 pm on January 10, 2012
Category: Criminal Penalties • DDTC
Law students always chuckle at forfeiture cases because they have the best names, such as United States v. 3,462 Cans of Tuna Fish or the like. It always seemed so unfair to those cans of tuna to have the entire juridical apparatus and force of the United States arrayed against them. Poor cans!
So I’m hoping that readers will be equally amused by an export law forfeiture case that is titled United States v. Twenty Miljam 350 IED Jammers and that was recently decided by the Second Circuit Court of Appeals. The twenty jammers at issue were manufactured by an Israeli company called Wireless Avionics. They were seized by Immigration and Customs Enforcement during a criminal proceeding against the CEO of the company for attempting to export these items without a license from the Directorate of Defense Trade Controls. They had been manufactured for sale to NATO, but DDTC had denied an export license claiming that the devices would interfere with radios used by U.S. forces in Afghanistan. The CEO then tried to disassemble them and export them from the U.S. for reassembly and sale elsewhere, which led to the seizure of the jammers, his arrest and a criminal indictment.
Now comes the odd part. For reasons not clearly explained by the Second Circuit opinion, the U.S. dropped all criminal charges provided that the CEO agreed to waive any future claims against the U.S. and the ICE agents for false arrest and to waive any objection to the forfeiture of the devices. The CEO, however, contested the forfeiture claiming that he was forced to sign the release under duress, the duress apparently being the threat of criminal prosecution. He also argued that the items were not on the United States Munitions List and did not require an export license. The Second Circuit dismissed the duress claim in large part based on a letter that the CEO sent after signing the waiver in which he said he had signed it voluntarily. And although the court notes that items on the USML require a license, it does not discuss whether these items were on the USML or not.
The Wireless Avionics website asserts that these devices are covered by “ECCN class 5.A.1.h,” presumably a reference to ECCN 5A001.h. That ECCN has a somewhat cryptic note that says “See also . . . Category XI of the International Traffic in Arms Regulations.” It would seem that whether an IED jammer fits under ECCN 5A001.h or Category XI of the ITAR would depend on whether it was specifically designed, modified or configured for military application.
Here the fact that the products were destined for NATO and were called — of all things — by the model name “Miljam” both suggest the items might well be Category XI. But then it’s hard to understand why the government folded like cheap lawn chairs and tried to get a promise that no one would get sued for false arrest. It also doesn’t help the Wireless Avionics case here that it applied for a license from DDTC which was denied. On the other hand, there is nothing to indicate that these jammers had been ruggedized, shielded or otherwise specifically adapted for military vehicles.
Because all we can do is speculate about the Government’s action here, speculation is welcomed in the comments section.
