It Wasn’t Me, I Swear
Posted by Clif Burns at 6:52 pm on June 2, 2009
Category: Economic Sanctions
Computerworld posted a story today on Microsoft and the other Internet heavy hitters Google and Yahoo! shutting down instant messaging services to countries subject to U.S. economic sanctions, i.e., Cuba, North Korea, Syria, Sudan and Iran. (I reported the Microsoft story last week). In the course of the Computerworld article, the reporter interviewed an unnamed lawyer who allegedly “advises companies on OFAC compliance” and who gave some advice that frankly I think is questionable. The lawyer said that
while offering communications services such as IM to sanctioned countries such as Iran or Cuba is not restricted by OFAC, offering software is. That’s because software, even free apps downloadable from the Internet, are considered exportable goods, and thus can be banned by OFAC, according to the lawyer, who requested anonymity.
By that reasoning, Web-based e-mail such as gMail or Windows Live HotMail can’t be banned by OFAC, he said. Nor would pure cloud-based services such as Salesforce.com or those hosted by Amazon.com’s EC2 be affected by the ban.
However, Windows Live Messenger, which relies on a user download, can be, he said.
Er, no. I am really hoping that the reporter misunderstood the lawyer, who I assure you wasn’t me, and that a lawyer who is advising people on OFAC matters didn’t really say that. For starters, and this is on the first page of OFAC for Dummies, the sanctions regulation for Cuba, North Korea, Iran, Sudan and Syria, forbid the exports of both goods and services. So the dichotomy between the two drawn by the lawyer requesting anonymity is flat out wrong.
The issue in looking at the provision of Internet content and services to sanctioned countries, then, isn’t whether goods or services are exported but is whether what is being exported to the sanctioned country is subject to an exception in the regulations. As to software, the question is whether such software is exempt as informational materials, both under OFAC rules as well as the rules of the Bureau of Industry and Security, which also forbid exports to these countries. Although perhaps not consistent with the Berman Amendment which required export agencies to exempt informational materials, computer software (other than uncompiled source code) has not been treated as informational material by OFAC or BIS. Exports of software to sanctioned countries have also served as the basis for criminal prosecutions.
The provision of internet services to sanctioned countries would also be prohibited unless covered by a specific exemption or general license. The sanctions regulations do exempt “telecommunication services,” but that exemption is narrowly construed to cover traditional communication by telephone and not other means of communication. An OFAC guidance regarding the provision of internet connectivity to Iran makes clear that such activity required a specific license. The same logic would apply to the provision of email and IM services.
Just a few weeks ago President Obama announced new initiatives under which US telecoms companies would be able to negotiate agreements with the Cuban phone company, ETECSA, to provide roaming services on the island. So this latest move by Microsoft would seem to run counter to the stated aims of US policy today. Alas, it’s not really surprising.
Washington is so very desperate to prevent Cuba from developing its high-tech, information-based economic efforts, that it will try almost anything. And blocking the US of IM isn’t the half of it.
As someone who travels to Cuba regularly as a journalist and researcher, I have observed this in any number of ways.
Here’s an English-language report on Google from a Cuban newspaper, JUVENTUD REBELDE, by its technology correspondent, Amaury E. Del Valle. I know him.
He has a report on this latest round with Microsoft IM, but it’s not out in English just yet:
If you look at Judge Wake’s opinion refusing Defendants motion to dismiss in US v. Alavi, he appears to accept the DoJ/OFAC position that all software is subject to the embargo, notwitstanding language in the ITR to the effect that software may qualify as information. I suggest that this position raises 1st Amendment issues in addition to questions of statutory construction, APA, and whatever remains of the delegation doctrine. Of course, there were other problems with how the district court and DoJ, OFAC, FBI and the US Attorney’s office in Phoenix handled Alavi, but given that poor Mr. Alavi was forced by finances to cop to a plea on the non-IEEPA counts after the jury deadlocked on the IEEPA charges, we’ll never have appellate review of that travesty.
I agree that limitations on software exports to sanctioned countries can raise a variety of issues under the Berman Amendment and, possibly, the First Amendment. But as a compliance matter, I would still advise clients not to send software to embargoed countries or to allow it to be downloaded by users identified as coming from those countries, either by their IP address or their supplied address information.
I wrote on this same thing thing last night on my blog at http://www.sanctionlaw.com. I also left a comment on that article on Computer World’s site.
Exactly right. Services are certainly covered by the sanctions regulations. IM services, in particular, could materially assist in facilitating an unlicensed transaction.
I don’t know who the lawyer was, but I see why he chose to remain Anonymous. Just goes to show that there are still a lot of lawyers out there who are either not aware of what OFAC does and what the regulations cover or just don’t understand the regulations.
I also left a comment on that article on Computer World’s site.
And I sent an email to the reporter about the error, but I haven’t heard anything back.