Archive for the ‘Anti-Boycott’ Category


Oct

13

It’s Déjà Vu All Over Again All Over Again


Posted by at 11:50 am on October 13, 2014
Category: Anti-BoycottBIS

McWane Pipes via http://www.mcwanepipe.com/upl/images/homepage/51269ef106307116cac-a9f28ef2.jpg [Fair Use]The best job at the Bureau of Industry and Security is, without question, working at the Office of Antiboycott Compliance (“OAC”) because all their cases are pretty much the exact same thing, leaving plenty of time to finish the daily crossword puzzle and read the sports pages. If you don’t believe me that they are all the same, just look at the latest enforcement action from OAC against McWane International, an Alabama company that manufacturers water pipes. McWane agreed to a $7,000 fine for providing a certificate that a ship was “allowed by Arab authorities to call at Arabian ports” and failing to report documentary requirements in a letter of credit for a certificate from the “owner, carrier or captain of the vessel or their agent” that the ship could call in Arab ports.

Regular readers of this blog, which obviously did not include anyone at McWane, will immediately see the problems with these certifications. Under BIS rules such certifications can only be made by the “owner, charterer, or master” of the ship. It can’t be made by McWane (which was none of the above) or by an “agent” of the “owner, charterer, or master.” We’ve talked about this identical issue at length here and here.

Fortunately the fine is only $7,000, well below an amount that might lead anyone to challenge the dubious statutory authority of the Office of Antiboycott Compliance to even exist. Disagreements over the antiboycott provisions in the Export Administration Act were one of the reasons that the act lapsed. Whether in that context the existence of the Arab boycott is a national emergency authorizing the President to extend the antiboycott provisions under the International Economic Emergency Powers Act (“IEEPA”) is highly questionable.

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Dec

5

It’s Déjà Vu All Over Again


Posted by at 5:00 pm on December 5, 2013
Category: Anti-Boycott

TMX Shipping [Source: Google Maps]
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.

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Aug

28

What A Difference A Word Makes


Posted by at 6:34 pm on August 28, 2012
Category: Anti-BoycottBIS

Polk Audio HQ
ABOVE: Polk Audio HQ

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. Polk Audio could have saved itself the $8,000 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.

Polk was charged with two violations. The first involved Polk itself certifying, as agent for the carrier, that a vessel was allowed to enter the “ports of Arab States/Oman.” The second involved receiving, and not reporting, a letter of credit that demanded a certification from the “owners, agents or master” that the vessel was allowed to enter the “ports of Arab States/Oman.” Once again, an exporter got in trouble for not knowing that the agent couldn’t supply the information and that a request for an agent 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.

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May

17

One Word Costs a Company $19,800


Posted by at 8:36 pm on May 17, 2010
Category: Anti-Boycott

Arab PortUnited Source One, Inc., a Maryland-based food logistics company specializing in food shipments to restaurants in the Middle East, agreed in March to pay a $19,800 penalty to the Bureau of Industry and Security (“BIS”) for violating BIS’s anti-boycott regulations. The company was charged with failing to report five boycott-related requests, all more or less similar to this request to provide:

[a] [c]ertificate issued by the owners, agents or master of the vessel carrying the goods stating that the vessel carrying the goods is allowed to enter the Arab port as per laws and regulations of such states.

Seasoned readers of this blog who read this post back in 2008 will immediately recognize the problem — the word “agent.” As we noted in that post, 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.

This would prevent a certification from an agent, but since United Source One isn’t accused with complying with the boycott, it is clear that the certificate must have come, if actually supplied, from the owner, charterer or master of the vessel.

But even if United Source One didn’t provide prohibited boycott information, these is still the question as to whether the request was reportable. 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.

Since the request went beyond a certificate by the owner, master, charterer, or any employee and permitted a certification from the agent. The operative logic here (and I use the word “logic” very loosely here) is that if the agent makes the certification this is not a certification that the agent is complying with the laws of the country involved but is instead a certification that the agent isn’t doing business with anyone subject to the boycott.

Don’t try to spend too much time trying to make sense of this distinction unless you want to risk having your brain explode.

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Oct

14

Think Positive


Posted by at 7:31 pm on October 14, 2009
Category: Anti-Boycott

Boycotting the BoycottPerhaps in order to remind everyone that it still exists, the the Bureau of Industry and Security’s Office of Anti-Boycott Compliance (“OAC”) issued a warning letter to CENTRIA, a manufacturer of building enclosure systems based in Moon Township, Pennsylvania. According to the letter, CENTRIA supplied to its freight forwarder a commercial invoice with the following language:

THE GOODS SHIPPED ARE NOT OF ISRAELI ORIGIN NOR DO THEY CONTAIN ANY ISRAELI MATERIALS. THEY ARE NOT DESIGNATED TO VISIT ANY ISRAELI PORTS NOR ARE THEY EXPORTED FROM ISRAEL. THEY ARE OF USA ORIGIN.

The OAC said it was closing the matter with just a warning letter because CENTRIA had voluntarily disclosed the violation.

As usual, the OAC provided little commentary as to why this language was problematic and merely asserted simply that “Section 760.2(d) of the Regulations prohibits providing such information.” OAC’s bare bones explanation is certainly not the result of OAC being too busy to spend the time explaining its reasoning. Perhaps it’s an admission that the Anti-Boycott regulations, with their 101 pages of densely packed legalese and eleventy trillion or so hypothetical examples of what’s naughty and what’s nice, are simply too complex to explain and summarize in any meaningful sense in less than, well, a hundred or so pages.

The problem here is that the absence of such an explanation, even a brief one, might give the wrong impression to exporters. The letter could be read as saying that the regulations prohibit supplying the information that the goods are made in the U.S.A. The warning letter might have at least provided an explanation of the difference between a negative certificate of origin (mostly naughty) and a positive certificate of origin (mostly nice). A positive certificate of origin is generally acceptable unless the person supplying that certificate knows that it is being used to enforce a boycott as, for example, when the request for the positive certificate comes from an anti-boycott compliance office of an Arab League country.

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