Egyptair Shot Down by BIS for Sudan Airways Lease

Posted by at 9:58 pm on November 24, 2015
Category: Sudan

Tasty Meal on Sudan Air via [Fair Use]
ABOVE: A Tasty Meal on
Sudan Air

Today the Bureau of Industry and Security (“BIS”) announced that Egyptair has agreed to pay a penalty of $140,000 to settle charges that Egyptair leased two Boeing 737-566 commercial aircraft to Sudan Airways.  The penalty is payable in four equal installments every three months starting on February 1, 2016. The Settlement Agreement further provides that should Egyptair not make any of these payments in a timely fashion, BIS can enter a one-year export denial order. Since such an order, which would forbid any U.S. person to export any item to the airline, would be a one-year kiss of death, it seems likely that Egyptair will make each $35,000 payment in a timely fashion.

It was hardly a secret that Egyptair had leased these aircraft to Sudan Airways. BIS hardly had to use its secret decoder rings and shoe phones to uncover the deal. It was publicly reported in various aviation databases such as this one here. The highly public nature of the transaction also suggests that Egyptair thought the lease was permissible and simply was unaware of the meglomaniacal position of BIS and the U.S. government that the U.S. has jurisdiction over anyone anywhere in the world who touches any item that was ever in the United States.

One more thing: Sudan Airways is on the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control, so it should not be too long before OFAC chimes in and gets more cash from Egyptair for leasing these aircraft not just to Sudan but to an SDN in Sudan.

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BIS Imposes Controls on High-Tech Cloaking Material

Posted by at 7:57 pm on November 19, 2015
Category: BIS

XBS Epoxy System Demo via [Fair Use]On Monday, BIS announced in an “interim final” rule (a top contender for the best oxymoronic regulatory phrase ever) imposing export controls on Harry Potter’s invisibility cloak as well as on tarnhelms, the predecessor technology to the invisibility cloak.   Actually, the control, which was effective immediately upon publication, was placed on a high-tech equivalent of those two items, namely, XBS epoxy systems.

The website of Space Photonics, which is the apparent developer of this technology, explains the technology.  According to that website, XBS epoxy systems are

proven effective in obfuscation of critical technology components against X-Ray and Terahertz Microscopy imaging attempts … developed to conceal critical components from adversaries.

The picture on the left is a visual demonstration of the technology.

One interesting issue of an immediately effective “interim final” rule is a simple commercial issue. Suppose one of the systems was in transit on the date of publication. If it crossed the U.S. border after the rule was published, did the exporter violate the law? The rule has no grandfathering or savings provision, so the apparent answer would be that the exporter did violate the law and could be subject to civil penalties. It seems doubtful that BIS would fine someone in that situation, but it’s hard to see why the immediately effective rule did not address this issue rather than throw any such exporters on the presumed mercy of BIS.

Because it is an “interim not-yet-final but almost and pretty much but not quite final rule,” BIS will permit comments on the rule until January 15, 2016, after which BIS will presumably issue the “final and we really mean final this time final” rule.

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OFAC Debuts New Game Show: Guess That Violation, or Wheel of Misfortune

Posted by at 7:27 pm on November 17, 2015
Category: Cuba SanctionsOFAC

Havana by Bryan Ledgard [CC-BY-SA-2.0 (], via Flickr [cropped]The Office of Foreign Assets Control (“OFAC”) has made sort of a name for itself by issuing cryptic penalty announcements where it is a considerable challenge to figure out what went on and why the unfortunate company that has been whacked with an “agreed” fine got itself tangled up with OFAC in the first place. But the recent penalty slapped on Gil Tours Travel for some vague violation of the Cuba sanctions takes the cake or, I suppose, el pastel.

According to the penalty announcement, Gil was being fined because “dealt in property in which Cuba or Cuban nationals had an interest, by providing Cuba travel-related services involving 191 individuals, without authorization from OFAC,” which is pretty much like saying Gil broke the rules when it broke the rules. But here’s the kicker. In discussing aggravating factors, OFAC says this:

Gil Travel had some awareness that it was providing Cuba-related travel services, and that its conduct could be in violation of the CACR [Cuban Assets Control Regulations]

Say what? It had “some awareness” that it was providing Cuba-related travel service and that this “could” be in violation of the rules? What on earth does that mean? How can you not know whether you are providing Cuba-related services? Close only counts in horseshoes and hand grenades, not rule violations. It’s a binary thing: you either are or are not providing those services and, if you are, you know it. Don’t count on any clarification from OFAC to help anyone figure out what happened here.

Apparently the owner of Gil Tours told (subscription required) Law360 sort of what was going on, although his explanation is not a model of clarity either.

Gil’s president and CEO Igal Hami told Law360 on Wednesday by email that … its only involvement with the trips under investigation was in referring nonprofit agencies that had OFAC licenses to arrange Cuban travel to another tour operator that also had a license.

So, apparently (if this is true), OFAC thinks you violate the CACR if you refer someone to a licensed tour operator unless you have a license to make that referral. In other words, if I included a link here to a licensed provider of people-to-people tours to Cuba, I would be breaking OFAC rules because I don’t have a license to make that referral. No wonder OFAC didn’t want to let on what happened here.

(I’m really, really, really hoping someone at OFAC clicked the link above to see if I had committed this violation. Explanation here.)


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Banks’ Fear of OFAC Blocks Travel to Cuba

Posted by at 9:15 pm on November 11, 2015
Category: Cuba SanctionsOFAC

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (], via Flickr

With the corpses of banks skewered by OFAC strewn around everywhere you look, it is not altogether surprising that banks are terrified of the agency and are scared to death that the slightest misstep might bring the wrath of the agency down upon them. The latest instance of acute ofacaphobia, reported here in an excellent Miami Herald article, involves banks in a panic that travelers to Cuba on one of the general licenses might be fibbing and might really be going to Cuba to drink mojitos in Old Havana and hang out on the beach.

Before travelers can arrive in Cuba, the airline or charter company needs to pay $194 per passenger for landing fees and mandatory health insurance. According to the article, now that passengers self-certify their eligibility under the twelve categories covered by the general license for travel, banks are trying to verify that these self-certifications are accurate, asking for itineraries and other information to assure themselves that they won’t be the next cow in the OFAC abbatoir.

Meanwhile, analysts said perhaps the biggest reason banks are wary of Cuba business are the huge — and recent — fines aimed at banks that have done business with sanctioned countries. Just last month, France’s Crédit Agricole bank paid nearly $800,000 [sic – $800,000,000] to U.S. state and federal agencies to settle allegations it tried to hide or obscure references to transactions involving U.S.-sanctioned nations, including Cuba.

The result has been that travelers arrive at the airport only to learn that they aren’t going to Cuba, that the flight has been cancelled, and that they have to go home because necessary fees had not been transferred by the U.S. banks. Apparently they are so irritated that charter companies have gone to the airport with “police escorts” to deliver the bad news.

This should come as no surprise to OFAC. And there is a simple solution: issue guidance to the banks that they can rely on the traveler’s self-certification of their eligibility under the general license. If Justin Whiteshoes says he’s going to Cuba on a people-to-people tour and is, in fact, going on a bar-to-bar tour, it is going to be Justin Whiteshoes who gets whacked and not the bank that wired his $194 fee to Cuba.

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I’m from the Government and I’m Here to Fine You (Twice)

Posted by at 12:25 am on November 6, 2015
Category: BISSDN List

PPI via [Fair Use]

Back in August, we detailed the sad story of Production Products,  a small family-run business in Maryland that sent OFAC into a tizzy and received a $78,5000 fine because, heaven forfend, the company had never heard of the SDN list and sent HVAC duct manufacturing worth $500,000 to an SDN in China, which equipment is now probably being used to make bombs and missiles and stuff. We took the occasion to suggest that, rather than pitch a fit, OFAC should engage in a bit of reflection and wonder why a small mom-and-pop company in Maryland might never have heard of its SDN list.

Well, Production Products’s woes were scarcely over because BIS, equally annoyed that Production Products doesn’t have someone read the Federal Register cover-to-cover every day, has decided it ought to pile on with its own $50,000 fine for the same violation, as well punishing the company with a year in detention or the equivalent, namely requiring three officials to attend export school and report back to BIS Special Agents with “attendance certificates.”

BIS gets to attend this punching party as a result of section 744.8 of the Export Administration Regulations which makes it a violation of the EAR to deal with any SDN that is listed “with the bracketed suffix [NPWMD].” And that was the case here. The Chinese company on the list has the “bracketed suffix [NPWMD]” which means (for those of you who don’t speak the Low Middle Inflected Dialect of the Exportish language) that they were put on the list for reasons having to do with their involvement in nuclear proliferation and/or weapons of mass destruction.

Like OFAC, BIS was miffed that Precision Products had never heard of the SDN and, as a result, imposed a fine and the requirement that the miscreants take course at Export School and bring back proof of attendance. But, also as was the case with OFAC, this was less an opportunity for BIS to get lathered up than it was an opportunity for self-reflection. What has BIS done to make sure that small businesses know about its arcane and complex regulations?


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