ABOVE: TMX Shipping Office
Here’s the thing: you can save yourself money if you read this blog. You can certainly avoid paying money to the Office of Antiboycott Compliance (“OAC”) at the Bureau of Industry and Security (“BIS”) if you read this blog. TMX Shipping could have saved itself the $36,800 penalty, announced here, that it paid OAC if it had read this blog.
The OAC is a vestigial appendage over at BIS which arguably had no further right to exist after the expiration and non-renewal of the Export Administration Act. It is doubtful that the President can rely on any emergency to justify resurrecting OAC from the dead by an executive order under IEEPA as each president has done since the EAA expired. Accordingly, OAC keeps a low profile and never fines anyone enough to make it financially worthwhile for an exporter to pop into court and challenge its statutory authority. And, it seems that OAC fines exporters for one simple, but obscure, violation over and over and over. We have reported on this many times, including here and here.
The grave sin at issue involves certifications that ships are entitled to enter certain ports. Some Arab League countries don’t permit ships to enter their ports if the ship has previously entered a port in Israel. The thing is there are exceptions from the non-compliance and reporting requirements precisely for such certifications. Under Supplement 1 to the antiboycott rules:
the owner, charterer, or master of a vessel may certify that the vessel is “eligible” or “otherwise eligible” to enter into the ports of a boycotting country in conformity with its laws and regulations.
And under section 760.5(a)(5)(viii) of the antiboycott rules, an exporter need not report:
A request to supply a certificate by the owner, master, charterer, or any employee thereof, that a vessel, aircraft, truck or any other mode of transportation is eligible, otherwise eligible, permitted, or allowed to enter, or not restricted from entering, a particular port, country, or group of countries pursuant to the laws, rules, or regulations of that port, country, or group of countries.
The catch here is that only an owner, master or charterer of the vessel may supply that information. An agent of the owner, master or charterer may not supply that information and a request that an agent supply that information (even if it is ultimately supplied by the owner, master, or charterer) must be reported.
TMX Shipping was charged with two violations. The first involved TMX itself certifying, as a freight forwarder, on four occassions that a vessel was allowed to enter the ports of Kuwait, the ports of Bahrain, all Arab Ports, and the “port of destination.” The second involved receiving, and not reporting, eleven letters of credit that demanded a certification from the “captain, owner or agent” (or similar language) that the vessel was allowed to enter various ports of boycotting countries. Once again, the company got in trouble for not knowing that a freight forwarder couldn’t supply the information and that a request for an agent of the ship owner to supply the information was reportable.
This is just about all that OAC nails people for anymore, so repeat after me: “Agents can’t certify that ships are allowed to enter Arab Ports.” Now say that to everyone in your company. If everybody gets this message, the folks at OAC will have nothing left to do but play Words With Friends and update their Facebook pages.
And just to make my point that this vessel certification anti-boycott issue is one that occurs over and over again, you may have the feeling that you read this post already. And you have: this is an exact copy of a post that appeared on August 28, 2012 with the exception of the paragraph above in italics where the facts surrounding the identical Polk Audio violation described in the 2012 post have been changed to the facts surrounding the TMX Shipping violation recently reported by OAC. I’ve said it before and I’ll say it again (and again). “Agents and freight forwarders cannot certify that ships are allowed to enter boycotting Arab ports; only the owner, charterer or master can.” Here’s an idea: at this year’s holiday party, don’t give anyone a drink unless they first memorize and repeat that sentence to the bartender, okay?
UPDATE: My colleague Stan Marcuss astutely pointed out that while BIS provides that under its rules the “owner, charterer or master” of a vessel may certify that a vessel is eligible to enter into the port of a boycotting country, such a certification might in fact violate IRS rules under Section 999 of the Internal Revenue Code. (See Guideline M-10 of the IRS’s guidelines relating to international boycotts.) In those cases, companies making the certification permitted by BIS might be deprived of certain tax benefits under IRS rules. So remember this: just because one agency says you may do something does not mean another agency might not punish you for doing it.