The Consolidated Screening List Isn’t
Posted by Clif Burns at 9:01 pm on August 20, 2014
Category: BIS • Compliance Programs and Procedures • DDTC • Debarred List • Denied Party List • Entity List • OFAC • Russia Sanctions • Sanctions • SDN List • Unverified List
The U.S. Government, over at export.gov, provides a so-called Consolidated Screening List, which you might think would be a one-stop shopping list for your screening needs, something that might be useful if you or your company does not subscribe to or implement one of the commercial screening solutions. Unfortunately, the Consolidated Screening List doesn’t consolidate all the lists you should review and has other significant limitations.
The good news is that the list now does include the Foreign Sanctions Evaders List, which was not included for some time after the list was adopted by Treasury back in February of this year. The description of the list still does not mention the FSE list, but the entries on that list have been quietly added.
However, two other Treasury Department lists are still not included. The relatively new Sectoral Sanctions Identifications List is missing as action. U.S. persons are forbidden from engaging certain transactions with entities on this list, including providing credit in excess of ninety days. Part of the reason for this is probably that the “consolidated” list is infrequently updated. The last update of the list was almost two months ago, on June 26, 2014.
In addition, the Palestinian Legislative Council List, adopted back in 2006, is not included. U.S. financial institutions must reject (not block) transactions with people on the PLC list.
Not only is the “consolidated” list not complete or consolidated, but also it is dangerous to rely on it alone for another significant reason. The search page for the list only retrieves literal matches and does not allow address searching. In addition to searching the consolidated list, you should also rely on OFAC’s sanction list search tool. That tool uses, fairly successfully, “fuzzy logic” to retrieve similarly spelled names. Because many of the names on the list are transliterated versions of Arabic names, meaning that there are many alternate spellings, the “fuzzy logic” will be somewhat more successful in identifying alternate spellings.
BIS Announces Future Restrictions on Exports of Unspecified Items to Russia
Posted by Clif Burns at 8:12 pm on July 30, 2014
Category: BIS • Russia Sanctions
As the sanctions pile up on Russia, the Bureau of Industry and Security (“BIS”) announced new sanctions yesterday. Of course, what exactly is covered by the sanctions isn’t quite clear, but as they say on birthdays and in diplomacy, it’s the thought that counts.
The sanctions were announced on the BIS website but were not accompanied by any Federal Register notices or EAR amendments. Indeed, the announcement deals with future sanctions at an unspecified date on a broad, but not clearly defined, category of goods:
BIS will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia’s energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.
Although what this means is not entirely clear, several things can be fairly safely assumed. First, the sanctions will target goods already on the Commerce Control List inasmuch it talks about a policy denying export and therefore seems to target goods for which licenses would currently be required. Second, and as a corollary to the first, it does not appear that new items will be added to the CCL as part of these new sanctions. Third, the items targeted will be a subset of those items currently requiring licenses and not all items on the CCL requiring licenses. This is analogous to previous BIS sanctions on Russia which covered not all items on the CCL but those that required licenses to Russia and which were “high technology items … that contribute to Russia’s military capabilities.”
The rub of course is figuring out how to define the subset of CCL items controlled for export to Russia that “may be used for exploration of production” of oil. I suppose that clearly excludes some items on the CCL, like electric chairs (ECCN 0A981.b) and African Swine Fever virus (ECCN 1C352.a.1), but everything else is probably up for grabs, particularly given that we are talking about items that “may be used” for oil exploration. Fortunately, this is announcement deals with a denial policy that “BIS will institute,” so we can all hope that when the policy goes into force there will be some itemization of the ECCNs involved.
Be Careful What You Like on Facebook
Posted by Clif Burns at 4:40 pm on July 23, 2014
Category: BIS • Criminal Penalties
ABOVE: Viacheslav Zhukov
A Savannah resident, Viacheslav Zhukov, has been charged in a superseding indictment with export violations and false statements in connection with rifle scopes that he mailed from Savannah, Georgia, to Russia without the required license from the Bureau of Industry and Security (“BIS”). He is being held without bond awaiting trial.
As this blog has often noted, a frequent challenge in export prosecutions is establishing that the defendant knew that his unlicensed export was illegal. U.S. export laws are, as we all know, complicated; and a Russian immigrant might not know that mailing rifle scopes to Russia without a license would be illegal.
As the false statement count suggests, there is some evidence that Zhukov may have known that the exports required a license from the U.S. government. Zhukov allegedly filed a Customs Declaration with the U.S. Postal Service saying that the boxes contained a “cardboard box, a model battle tank, and men’s jeans.” Telling customs that you’re mailing a “cardboard box” to Russia probably is more or less an open invitation to having your shipment detained and inspected, which may well be how he was caught.
Of course, there may be other reasons that Zhukov fibbed about the contents of the box. Perhaps he was hoping to avoid Russian import license requirements or duties. At this point, we have no idea what his explanation will be for providing an incorrect description of the items being exported.
One interesting digression: Mr. Zhukov has a Facebook page (although he’s not able to update it at the moment), and the only thing at all that he says that he likes is an album by Murder Death Kill appealingly titled “F*** With Us And Find Out.” (The asterisks are not part of the original album title.) That album features songs such as “Kill Yourself,” “People Will Die,” and “Hostility.” I’m sure he now wishes that he liked (at least on Facebook) something more innocuous like Tchaikovsky’s Greatest Hits or the Cole Porter Songbook.
BIS Slaps Defunct Company with Suspended Export Denial Order
Posted by Clif Burns at 5:00 pm on July 8, 2014
Back in April, the Bureau of Industry and Security announced a $45,000 fine imposed on C.A. Litzler Co., Inc., based on an unlicensed export of a 24 Inch Hot Melt Prepreg Machine, which sounds vaguely naughty but is indeed covered by ECCN 1B001.e. The machine (I’m not repeating that name again) was in fact exported in 2005 by Western Advanced Engineering Company (“WAECO”), a company that ceased operations when Litzler acquired its assets in 2011. Under BIS’s “substantial continuity” rule announced in the Sigma-Aldrich decisions, Litzler became liable for WAECO’s export violations. (And that, my friends, is why export due diligence is necessary before any acquisition).
Well, all taxpayers will be delighted to learn that nothing escapes BIS, which has worried itself sick about what to do about WAECO even though WAECO is an empty shell that had ceased all operations once it sold all of its assets to Litzler. So, because WAECO still had a corporate existence on paper, BIS recently announced a settlement agreement imposing a three-year export denial order on WAECO, which denial order was immediately suspended as long as the defunct company committed no further export violations during the next three years.
You never know what kind of trouble a defunct company can get itself into. Why wasn’t it only just a few months ago that TWA got caught trying to sell souvenir junior pilot wing badges to a toy shop in Khartoum?
The Unverified List Rises Again
Posted by Clif Burns at 7:01 pm on June 19, 2014
Category: BIS • Russia Sanctions • Unverified List
As we reported back in January of this year, in a sort of Christmas amnesty, the Bureau of Industry and Security(“BIS”) freed all current prisoners on the Unverified List (“UVL”) and announced that it was building a bigger and more uncomfortable jail for the next set of UVL inmates. Under the rules of the new jail, all exports to parties on the UVL, regardless of the value of the export, would require an AES filing. If the export to the UVL party required a license, no license exceptions could be used. And, most importantly, UVL parties would have to sign a lengthy statement promising to obey the Export Administration Regulations, revealing the end use and end user of the item (including the address, favorite ethnic food and Facebook password for each end user), committing to cooperate in all future end use checks and swearing on a religious book of choice that they would be home and in bed by 9:00 p.m. every night, no exceptions. (I exaggerate, of course, but the required statement is lengthy, contains most of the things I’ve listed and must be signed even if the U.S. exporter is planning to send a set of steak knives or other EAR99 item to the UVL party.)
On Monday, the gates of the new prison opened and 29 new UVL inmates were welcomed to the new and improved UVL correctional facility. I scanned the list and did not see any former entities on the UVL on this new list, although it’s possible I might have missed a few. The announcement of the new list does not reveal the particular crimes committed by each entity on the list but under BIS rules they would have had to have failed an end-use check in one way or other, either by not submitting to it, not being where they were supposed to be, or not being able to explain what happened to an item previously exported to them.
Five Russian companies were added to the UVL, and this was probably unconnected to recent sanctions on Russia over the Crimea and Ukraine issues. Given that BIS has suspended issuing licenses for Russia, being on the list may be somewhat more burdensome for the Russian parties. Although licenses might in theory be available as a fall-back option to UVL parties outside Russia who could no longer use license exceptions, this fall-back option will not be available to the Russian entities on the UVL.