Feb

23

OFAC Sends “SOS” to Norks: Sanctions On Ships


Posted by at 6:28 pm on February 23, 2018
Category: North Korea SanctionsOFAC

Image via https://home.treasury.gov/news/press-releases/sm0297 [Public Domain]

Today OFAC designated one individual, 27 shipping companies and 28 ships that it asserts have been involved in circumventing sanctions against North Korea, principally by engaging in ship-to-ship transfers where prohibited goods are transferred in mid-ocean to North Korean vessels which then carry those goods to North Korean ports. The picture on the right, released by Treasury today, shows such a ship-to-ship transfer.

The President characterized these as the “largest ever” imposed on North Korea, a reference, I suppose, to the number of entities sanctioned rather than the likely actual impact of these sanctions.  Executive Order 13570, issued in 2011 by the previous administration, forbids all imports from North Korea. As a result, since 2011, North Korean ships, including those designated today and those still undesignated, cannot call in U.S. ports. Thus, it’s not clear what impact designating a bunch of Nork ships will have.

Moreover, the designation does not prohibit non-US companies — such as those from Russia, which escaped any designations today — from dealing with these newly designated ships. Of course, if detected, such non-US vessels and shippers might themselves be sanctioned, so there may be some deterrent effect. But it’s hard to say how significant that deterrent effect will be. After all, the 11 non-Nork shipping companies caught up today in OFAC’s new designations certainly knew that they were running that risk when they decided to offload cargo to North Korean vessels in mid-ocean or otherwise try to skirt sanctions on North Korea. Moreover, they did so despite UN Security Council Resolution 2375, section 11 of which prohibits ship-to-ship transfers of goods bound for North Korea.  And the 16 North Korean shipping companies singled out in OFAC’s announcement, which could not deal with the United States even before the designation, are unlikely to be affected by their new status as SDNs.

So while I certainly applaud these designations, I don’t think their impact should be oversold.

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Feb

21

Oxycodone, Testosterone, Night Vision and eBay Do Not Mix


Posted by at 5:17 pm on February 21, 2018
Category: Criminal PenaltiesDDTCNight Vision

SkeetIR Micro Mono Sight via https://www.baesystems.com/en-us/product/oasys-thermal-imaging-and-aiming#ske[Fair Use]Last week a criminal indictment against Arkansas resident Scott Douglas Browning was unsealed after he was arrested on a number of charges including receiving property stolen from Fort Bragg, possessing testosterone and oxycodone, and exporting image intensification tubes and a thermal imaging monocular (pictured at left) to the Netherlands without a license.  According to the indictment, Browning listed the items on eBay and sold them to a buyer or buyers in the Netherlands. The items were all allegedly listed on the USML and would have required a license from DDTC.

I’ve said so many times that it almost goes without saying, but the Government, in order to convict Browning on the export charges, must prove that he knew that the export of these items required prior authorization and were illegal without such an authorization. We’ll leave aside what someone tweaked out on testosterone and whacked out on oxycodone would know about the legality of his exports. Still, it seems likely, at least to me, that this is going to an uphill battle for the prosecution. It’s not like the guys who stole the stuff from Fort Bragg gave it to him with a warning that the items were export controlled. And it’s not like the guy was trying to sell this stuff in secret. He listed the items on eBay after all. Last time I checked, that wasn’t exactly a dark web site. And although the indictment is sparse on details, there is nothing to suggest that any of the normal indicia of a guilty conscience — false description of the item on shipping documents, confessions of guilt to undercover agents, etc. — are present here.  Of course, the export charges may be the least of his worries here.

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Feb

16

UBS to World Chess Federation: White Knight Takes Black Pawn


Posted by at 10:15 am on February 16, 2018
Category: OFACSyria

Visita Ilyumzhinov by Federació d'Escacs Valls d'Andorra [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via https://commons.wikimedia.org/wiki/File:Kirsan_Ilyumzhinov_2014.jpg[cropped]
ABOVE: Kirsan Ilyumzhinov
UFO Abductee

Things have not been going particularly well for Kirsan Ilyumzhinov, president of the World Chess Federation.  First, he was abducted by aliens.  Then he was designated by OFAC under Executive Order 13582 for “materially assisting and acting for or on behalf of the Government of Syria.”  Now, UBS in Switzerland has closed the accounts of the World Chess Federation, having tired of Ilyumzhinov’s repeated claims that he was about to be removed from the SDN List.

Of course, UBS in Switzerland is not subject to OFAC’s blocking rules and was not required to block or freeze the account. Rather, UBS closed these accounts based on a white money strategy of not dealing with customers subject to U.S. sanctions.  It is not clear whether this is a result of any representations or agreement made by UBS to OFAC.  In 2015 UBS settled with OFAC over charges that UBS had opened U.S. dollar accounts for another individual on the SDN list.

Of course, as we know from the Exxon case, Ilyumzhinov’s position as President of the World Chess Federation poses difficulties for any U.S. person dealing with the Federation.  Each U.S. person dealing with the Federation will need to make sure that Ilyumzhinov is not involved. Allegedly, Ilyumzhinov has claimed that he has removed himself from the “legal, financial and business operations” of the Federation until he is removed from the SDN List. Of course, he also claimed, almost two years ago, that he was going to sue OFAC, something that has yet to happen. Oh, and he also has claimed that he was whisked away in a UFO by aliens to visit a distant star. So, in my view, U.S. persons deal with the World Chess Federation at their own peril and risk.

Photo Credit: Visita Ilyumzhinov by Federació d’Escacs Valls d’Andorra [CC-BY-SA-2.0], via https://commons.wikimedia.org/wiki/File:Kirsan_Ilyumzhinov_2014.jpg [cropped]. Copyright 2014 Federació d’Escacs Valls d’Andorra

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Feb

9

2 Bad Ideas ≠ 1 Good Idea: EU Considers Blocking Rules If US Exits Iran Deal


Posted by at 4:15 pm on February 9, 2018
Category: Foreign CountermeasuresIran SanctionsOFAC

Denis Chaibi via http://www.mei.edu/profile/denis-chaibi[Fair Use]
ABOVE: Denis Chaibi

In response to the current administration’s hourly threats to pull out of the nuclear deal with Iran, it appears that the EU might not only remain in the deal but also adopt blocking regulations prohibiting E.U. firms from complying with any resurrected U.S. sanctions on Iran.  This idea was floated by Denis Chaibi, head of the Iranian task force of the EU’s external action service, at a Euromoney conference in Paris.

Chaibi cited the Cuban embargo blocking regulations as an example of what they were thinking about. The problem, of course, is that the folks at OFAC do not care about silly E.U. laws. If a European subsidiary of a U.S. company tells OFAC that it was required by European law to ignore U.S. sanctions, the response from OFAC has always been terse and brutal: do we look like we care? The U.S. rules the world, our laws apply everywhere and to everyone, and instead of obeying European laws that conflict with U.S. laws you have two choices: break the law in Europe or get the heck out of Europe.

Don’t believe me? Ask American Express. Ask Carlson Wagonlit. Or American Honda Finance Corporation.

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Feb

8

The Trials and Tribulations of Used Part Exporting – UPDATED


Posted by at 12:40 pm on February 8, 2018
Category: BISCCL

MHz HQ via https://mhzelectronics.com [Fair Use]Last month the Bureau of Industry and Security fined Phoenix-based used equipment and part dealer MHz Electronics $10,000 in connection with its exports of two pressure transducers classified as ECCN 2B230 to China and Taiwan. The fine was suspended contingent upon MHz behaving itself during a two-year “probationary period.”

Pressure transducers meeting the specifications in ECCN 2B230 can be used for blast measurement and are therefore controlled because of the role that they can allegedly play in nuclear testing and proliferation. The two items involved were sold for the eye-popping amounts of $280 and $1,100. Even though the fine imposed here was low, BIS’s miff factor was quite high, with the settlement documents noting that MHz did not have an “export compliance program.” In addition, MHz apparently brushed off a visit by FBI agents that had been trolling MHz’s (now-closed) eBay store and told them that one item (not either of these transducers) listed by them on eBay would require an export license if shipped internationally.

Under the circumstances, MHz got off lightly. But even so, this case raises some interesting questions and difficulties for export compliance for businesses like MHz. Like thousands of other small businesses, MHz bought and sold used electronic and testing equipment. With a 96,000 square foot warehouse, it no doubt had a staggering number of different kinds and types of parts and equipment.

How would it obtain ECCNs for all those items? Oh, you say, easy peasy: call the original manufacturer and ask. Uh-huh. Have you ever tried that before? Particularly if you’re selling used parts in an aftermarket competing with the original manufacturer. “You say you need the ECCN of our Model 2370C snarkle widget puffinator? Sure thing. Give me your phone number and someone will get right back to you by, say, April 1, 2032. Does that work?” Click.

And, I’m sure it should come as no surprise that many original manufacturers have no clue as to the ECCNs of their products, particularly if they are foreign. Try calling China and asking (in English or, even, Cantonese or Mandarin) for an ECCN.

Even if spec sheet for the product is published by the manufacturer, it rarely aligns with the control parameters in the relevant ECCN. I challenge you to figure out the classification of a CNC-machine, a computer, or almost anything else from published specification sheets.

The bottom line here is that compliance challenges effectively foreclose used parts companies (except, I suppose, companies exclusively devoted to selling used knitting supplies or antique fountain pens) from participating in the export market at all. And given that the parts that they sell are usually readily available outside the United States, there’s not much of a real justification for shutting this market down for them. BIS says that these bargain-basement priced items could be used for nuclear bomb testing. Does anyone really think that aspiring nuclear powers could not lay their hands on these (and probably better) items outside the United States?  And, if you can use a $280 sensor in nuclear testing, well, we’re in a lot more trouble than I imagined.

UPDATE:  An alert reader, who knows way more about nuclear bombs than I ever will, points out that pressure transducers covered by ECCN 2B230 are used for uranium enrichment in centrifuges, not for blast measurement.   Specifically, the reader notes:  “While 13 kiloPascal sounds like a big number, atmospheric pressure is 101 kPa, so 13 kPa is closer to a vacuum level.”    I’m going to point some finger of blame at BIS itself, which in the charging documents said: “Items classified under ECCN 2B230 … can be of significance for nuclear explosive purposes,” which suggests that the enforcement folks at BIS made the same mistake. Imagine that. In any event, if these small, readily available and inexpensive parts can be used for centrifuge uranium enrichment, we’re still in a whole lot of trouble.

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