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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 (], via[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 [cropped]. Copyright 2014 Federació d’Escacs Valls d’Andorra

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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[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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The Trials and Tribulations of Used Part Exporting – UPDATED

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

MHz HQ via [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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Why Is Foreign Policy Still on the Internet?

Posted by at 4:47 pm on February 6, 2018
Category: General

Ramzan Kadyrov and Cat via his Instagram account [Fair Use]
ABOVE: Ramzan Kadyrov 

In an article in Foreign Policy titled “Why Is This Man Still on Twitter?” Emily Tamkin and Elias Groll get all confused about sanctions. And they are aided and abetted in this confusion by Peter Harrell from the Center for New American Security (whatever that is). The resulting mess is why I wonder, at least partly in jest, why Foreign Policy is still on the Internet.

The article attempts to answer the question I posed in this post in early January: why is Putin crony and Chechin strongman Ramzan Kadyrov blocked by some social media sites while Bashar Al-Assad and Nicolás Maduro, both of whom are also SDNs, are not? Tamkin and Groll quote Harrell’s supposed answer to this question:

Peter Harrell … explains that the difference might come down to something called the Berman Amendment.

The Berman Amendment, Harrell says, is an amendment to the International Emergency Economic Powers Act, or IEEPA, that states nothing in that law can be used to constrain publication.

“If you have a sanctions designation based on IEEPA, it’s very clear that that cannot be used to prohibit publication activities,” Harrell says.

The Berman Amendment applies only to IEEPA sanctions and not other sanctions programs, such as the separate legal provisions outlining the Global Magnitsky Act. “There is a legal argument that because Kadyrov was sanctioned under Magnitsky, rather than under IEEPA sanctions, the Berman Amendment does not apply,” Harrell says, meaning the U.S. government could conceivably sue Facebook to force Kadyrov’s removal, a risk the company may have not wanted to take.

Let’s leave aside for the moment Heller’s bizarre summary of the Berman Amendment, which deals with import and export of informational materials rather than “publication activities.” Instead, I have to point out, as I did in my earlier post, that Section 584.206(b) of the Magnitsky Sanctions Regulations clearly states:

The prohibitions contained in this part do not apply to the importation from any country and the exportation to any country of any information or informational materials, as defined in §584.304, whether commercial or otherwise, regardless of format or medium of transmission

So, okay, I guess Heller, Tamkin and Groll couldn’t be bothered to actually read the regulations that they were trying to rely on.  Reading regulations, after all, is hard.

But let’s also look at Heller’s inaccurate statement that the Berman Amendment would not apply to sanctions adopted under the Magnitsky Act rather than IEEPA. Once again, Heller, Tamkin and Groll could not be bothered to read the Magnitsky Act, which, if they had, would have revealed the bankruptcy of their argument. Section 406(a)(1) of the Act provides the authority under which the President may block and add to the SDN list human rights violators in Russia:

The President shall exercise all powers granted by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) … to the extent necessary to freeze and prohibit all transactions in all property and interests in property of a person who is on the list required by section 404(a) of this Act if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person.

By explicitly linking Magnitsky Act sanctions to those “powers granted by” IEEPA, it certainly means that the limitations on those powers, like the Berman Amendment, would apply to Magnitsky Act sanctions. That, of course, is why OFAC adopted the section of the Magnitsky Sanctions Regulations cited above that carves out the import and export of informational materials.

So both questions remain unanswered.

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Leaving on a Jet Plane (for Masikryong)

Posted by at 9:32 am on February 1, 2018
Category: BISNorth Korea SanctionsOFAC

Joint Press Corps vi [Fair Use]The Olympics are, in theory, a time when foreign policy should be put aside and world athletes simply compete in the probably vain hope that peaceful athletic games might have a spill-over effect into the stormier regions of international relations.   That being said, UN and US sanctions have gotten tangled up in the upcoming Winter Games in South Korea.

First, the International Olympic Committee, following its checkered past, ignored UN sanctions by shipping recreational sports equipment to the Nork athletes for training.   If any of that equipment was U.S. origin, the IOC would have violated U.S. sanctions all well.  Both prohibit the export of “recreational sports equipment” to North Korea.

Recently, an obscure provision in Executive Order 13810 reared its ugly head. Section 2(a) prohibits foreign aircraft that have landed in North Korea from visiting the United States for 180 days after the aircraft has departed North Korea. When the Executive Order came out, it was hard to imagine that this would ever apply to anything.  Who flies into Nork airports that would want to later fly those planes to the United States?  But now, it turns out, the South Korean ski team had chartered an Asiana aircraft to fly to North Korea’s Masikryong Ski Resort for training with the North Korean team.  The plane would then to return to South Korea on the following day with the North Korean skiers who would remain in South Korea to participate in the Winter Games. Oops.

Apparently, according to this source, OFAC was initially reluctant to waive section 2(a) for the chartered Asiana flight, which would have pretty much put the kibosh on the flight to the joint training session. But minutes before the flight was to take off on 10:40 a.m. Wednesday time, Korea time, OFAC had a change of heart and the airplane left for North Korea.

The Bureau of Industry and Security (“BIS”) was not involved, even though BIS has said that the Airbus 321 is subject to the EAR as a result of havingU.S. origin engines which constitute more than 10 percent of the value of the aircraft. Presumably everyone felt that License Exception AVS would cover the temporary sojourn of the A321 in North Korea, even though the regulations are poorly written in this regard and do not clearly cover foreign manufactured aircraft subject to the EAR flying from a foreign country to North Korea.

License Exception AVS covers (1) foreign registered aircraft on temporary sojourn in the United States departing for foreign destinations, (2) U.S. registered aircraft departing for a temporary sojourn in a foreign destination, and (3) “[c]ivil aircraft legally exported from the United States.” Section 764.4(c)(6) says that AVS may be used for North Korea to the extent that it involves civil aircraft legally exported from the United States. Asiana’s A321 was not itself exported from the United States, although the U.S. origin engines that make the aircraft subject to the EAR were. To reach the result that AVS applies here, you have to interpret “civil aircraft legally exported from the United States” to cover aircraft where U.S. origin parts which make the aircraft subject to the EAR were legally exported, a plausible (if not certain) reading, I suppose, of that language.

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Copyright © 2018 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)