About the only thing the current partisanly-split Congress can agree on is sanctions legislation: first Iran and now Russia. So the Ukraine Aid bill passed yesterday contains the obligatory sanctions provisions. The problem is, however, that even though both sides of the aisle love economic sanctions, neither side understands them, and, as a result, the bill is a mess.
Mostly the new sanctions mandate the President to impose sanctions on people he finds have done bad things: “undermin[ing] the peace, security, stability, sovereignty, or territorial integrity of Ukraine” or “ordering, controlling, or otherwise directing, acts of significant corruption in Ukraine” or the Russian Federation. Of course, it’s up to the President to determine who these folks are, and this is a power he already has under the International Emergency Economic Powers Act (“IEEPA”) as evidenced by the last two rounds of designations. But, hey, this allows Congress to get in the game too and tell the voters at home they stood up for Ukraine, even if it is, more or less, an empty gesture.
The problem comes with respect to the particular sanctions that Congress tells the President to impose on those who have engaged in undermining security of Ukraine or directing corruption in Ukraine or the Russian Federation. At first, these look pretty standard: asset blocking and visa bans. But then we get to the exception:
The requirement to block and prohibit all transactions in all property and interests in property under paragraph (1)(A) shall not include the authority to impose sanctions on the importation of goods.
What this means is far from clear. Let’s say that the White House sanctions Alexei Kirillovich Vronsky (we’ll call him Captain Vronsky for convenience). Now let’s say that he’s short of cash after having all of his assets blocked, so he decides to sell $300 million dollars of Oblonsky Vodka to the United States. In a normal blocking scenario, the $300 million destined to Captain Vronsky would be blocked by the U.S. banks before they could be wired. Does this contravene the exception? The vodka can still be imported into the United States without problem as long as Captain Vronsky isn’t paid. On the other hand, doesn’t the blocking in this case effectively prohibit the importation of the vodka into the United States? Who knows? Certainly no one on the Hill does.
But there’s an even more hilarious mistake. The bill doesn’t define importation. Does it mean importation into the United States or Russia? Or anywhere else for that matter? An exportation from the United States is, after all, an importation somewhere else, whether Russia or some place else. So can Captain Vronsky import a shiny new Corvette into Russia from Detroit? Does the exception prohibit blocking the funds he uses to pay for the imported/exported Corvette?
Of course, the only thing clear as a result of this mess of an exception is that Captain Vronsky, even if he can buy a car from Detroit, can’t buy a condo in Detroit, since there would clearly be no importation (whichever way you define it) in that case. I also predict the Office of Foreign Assets Control (“OFAC”), which will administer these sanctions, will take the narrow view of the exception and say that blocking payment for the goods does not prohibit their importatiion, which can still occur as long as no payments are made.
Copyright © 2014 Clif Burns. All Rights Reserved.
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