Archive for the ‘BIS’ Category


Oct

20

Did Ron Jeremy Save This Export Defendant From Jail?


Posted by at 6:31 pm on October 20, 2014
Category: BISCriminal PenaltiesIran Sanctions

Touraj Ghavidel and Ron Jeremy via Ghavidel's Twitter Feed https://twitter.com/MrTouraj [Fair Use]
ABOVE: Touraj Ghavidel and Ron
Jeremy


The Bureau of Industry and Security just released settlement documents resolving allegations that Borna Faizy, Touraj Ghavidel and Signal Microsystems, Inc., illegally exported computer equipment from the United States to Iran. According to the BIS charges, Faizy, Ghavidel and Signal Microsystems transshipped the items through Dubai (where else?), used coded language in emails with Iranian customers to hide their customer’s identities and locations, and falsely stated on their Electronic Export Information filings that the ultimate end users were in Dubai. As a result, over at least 2 years, more than $1 million in computer equipment was shipped by the three to Iran. Under the settlement agreement, no fine is being imposed; rather the three exporters have agreed to a ten-year denial order.

The settlement agreement comes on the heels of a plea agreement entered by Faizy and Ghavidel where they plead to making false statements to federal agents in violation of 18 U.S.C. § 1001. Under the plea, the government and the defendants agree that a fine and one year probation would be an adequate sentence. The basis for the charge under 18 U.S.C. § 1001 is that Faizy and Ghavidel, when questioned by federal investigators, swore up and down that they were absolutely not doing any business with Iran and would never ever even think of doing so, cross their hearts and hope to, etc., etc.

It is hard to tell why such a favorable plea deal was reached here. The false EEIs and the coded emails certainly suggest that the defendants knew that they were breaking the law. And they also managed to ship a boat load, almost literally, of computers to Iran. All I can figure is that the prosecutors saw the picture of Ghavidel with Ron Jeremy, which Ghavidel put on his own Twitter feed, and decided that Ghavidel was too cool to go to jail.

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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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Oct

8

Intel Sub Fined for Encryption Exports


Posted by at 9:14 pm on October 8, 2014
Category: BISEncryption

Wind River Convention Booth via https://twitter.com/WindRiver/media [Fair Use]The Bureau of Industry and Security (“BIS”) announced today that it had convinced Wind River, an Intel subsidiary, to pay a whopping $750,000 to settle charges that it exported products with encryption functionality without required licenses. There were also four unlicensed exports of the items to parties on the BIS Entity List.  This is the first announced fine (at least to my knowledge) involving encryption exports, and it has created a bit of a stir among those of us who handle encryption export matters.

Basically the encryption rules try to prevent the export of technology that every twelve-year-old in Estonia already has. Door to empty barn, meet escaping horses; escaping horses, meet door to empty barn. It is a not-so-well-kept secret that the encryption rules are not really there to protect sensitive U.S. technology but as a means to permit the NSA to see who is using what encryption where in order to better snoop on everyone using encryption.

As usual, details are scarce in the settlement documents as to what exactly went on, with the documents simply saying that Wind River exported items classified as 5D002 to government end users in China, Hong Kong, Russia, Israel, South Africa and South Korea. A little snooping of our own showed that the items involved, mostly real time operating systems, were classified by Wind River as 5D002 “ENC restricted.” All ENC restricted items require licenses to government end users in countries other than those countries listed in Supplement 3 to Part 740 of the EAR. The countries involved in the exports at issue are not Supp. 3 countries and, hence, required a license.

The BIS press release justified the size of the fine, despite Wind River’s voluntary disclosure of the violation, because it would “serve as a reminder to companies of their responsibility to know their customers and, when using license exceptions, to ensure their customers are eligible recipients.” This suggests that Wind River’s problems may have arisen because it was dealing with entities that it did not realize were government end users.

However the BIS definition of government end users is hardly a model of clarity:

A government end-user is any foreign central, regional or local government department, agency, or other entity performing governmental functions; including governmental research institutions, governmental corporations or their separate business units (as defined in part 772 of the EAR) which are engaged in the manufacture or distribution of items or services controlled on the Wassenaar Munitions List. …

Consider the portion of the definition that includes “governmental corporations or their separate business units (as defined in part 772 of the EAR) which are engaged in the manufacture or distribution of items or services controlled on the Wassenaar Munitions List.”   For starters, does the qualifier “engaged in manufacture … of items … on the Wassenaar Munitions List” qualify just “separate business units” or both “governmental corporations” and “separate business units”? And what are government corporations? Companies that have a government charter but private ownership? Companies that have a significant percentage owned by the government? Private companies given a government monopoly and that perform a traditional government function? Who knows? But if you get it wrong, expect to be fined by BIS and to be the object of a snide comment that it’s your own darn fault for not figuring out that the company was a government corporation under an essentially meaningless definition.

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Oct

7

De Minimis Rule? What De Minimis Rule?


Posted by at 10:40 pm on October 7, 2014
Category: BISCriminal PenaltiesSyria

Robbins & Myers Belgium HQ via Google Maps http://goo.gl/P9oIwo [Fair Use]
ABOVE: Robbins & Meyers Belgium


Robbins & Myers Belgium, a Belgian subsidiary of Robbins & Myers, Inc., which was recently acquired by National Oilwell Varco, pleaded guilty last week to charges that it violated U.S. sanctions on Syria when it exported stators that it manufactured in Belgium to Syria. According to the Bureau of Industry and Security (“BIS”) press release, the Belgian company was charged with violating U.S. criminal law because of the following:

The guilty plea stemmed from actions by Robbins & Myers Belgium that, in 2006, caused four illegal exports, reexports and/or transshipments of stators—important components of oil extraction equipment—that had made [sic] from steel that had been milled in the United States to a customer operating oil fields in Syria.

Say what? Is it really criminal for a foreign company to export an item just because it has some U.S. content in it? What happened to the de minimis rule? How hard would it be to say that the item consisted of more than 10 percent U.S.-origin steel to avoid suggesting that the export was illegal if there was any U.S. content?  Even though BIS used up three paragraphs in the press release patting itself on the back, it could not manage to add a sentence somewhere, anywhere, to correct this misstatement of the law?

The factual proffer that served as a basis for the guilty plea, which is supposed to contain facts sufficient to support the plea, is no better on this issue.

At all times pertinent to this case, the stators shipped by RMB to Company A in Syria were made from steel tube that Company B had milled in the United States.

Nope, being “made from steel tube … milled in the United States” is not enough to support the plea. Section 746.9(a) of the BIS rules forbids exports to Syria of items “subject to the EAR.” And section 734.3(c)(1), otherwise known as the de minimis rule, states that foreign-made items destined for Syria are not “subject to the EAR” if they contain “controlled U.S.-origin commodities … valued at 10% or less of the total value of the foreign-made commodity.” Although the rule is not clear, BIS takes the position that “controlled” here means “controlled for Syria” under section 746.9 and therefore includes any EAR99 item other than food or medicine.  Under that reading the EAR99 steel tubes would be controlled U.S.-origin commodities for purposes of the de minimis rule. We just don’t know if the tubes were more than 10 percent of the value of the foreign-made stators. And we don’t know this because the supposedly completely proffer leaves out this crucial element of the crime.

I do not doubt that in fact the U.S.-origin content here was in excess of de minimis as required by the rule for foreign-made products. My point is, however, that the BIS press release and the proffer incorrectly and misleadingly state that a criminal violation occurred because the stators contained any amount of U.S. origin goods. That is simply not a correct statement of the law, and those charged with enforcing the law should also correctly state it.

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Sep

30

BIS Kicks Dirt in Face of Utah Dirt Bike Dealer


Posted by at 9:35 pm on September 30, 2014
Category: BIS

Xtreme Motors via Google Maps [Fair Use]Like many Washingtonians, I have grown weary of marauding packs of dirtbags on dirt bikes and ATVs that terrorize drivers and pedestrians by speeding down the wrong side of streets and on sidewalks defying the police to chase them down. So it was with a slight frisson of Schadenfreude when I read that BIS today issued a Temporary Denial Order against X-TREME Motors, a dirt bike and ATV dealer in Utah. According to BIS, the TDO was based on a number of unlicensed exports of items requiring licenses, such as rifle scopes, which X-TREME misdescribed in export documents as ATV parts. It seems that the dirt bike and ATV business might have been a cover to smuggle controlled items from Utah to Russia and China, among other places

The dirt bike dealer, as you can still tell from its web site, had a side eBay business in which it sells a number of items that don’t seem particularly related to dirt bikes and ATVs, like rifle stocks, rifle scopes, ammo magazines and rifle barrels, and which will in many cases require export licenses. The BIS press release said that X-TREME was selling “crime control” equipment to China and Russia. It does not say what that equipment was, but I found two pairs of handcuffs for sale on X-TREME’s eBay site. After all, what fun is riding a dirt bike if you don’t have a few pairs of handcuffs along for the ride.

Between when I first looked at X-TREME’s eBay site and just now, someone has added at the top, in big red letters, this legend:

Hello we will not be offering any international shipping at this time. Please check back soon

Duh.  But “soon” might be a tad optimistic.

UPDATE:  As a commenter noted, and as I forgot when I wrote this post, riflescopes are also controlled for crime control reasons.

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