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.
Posted by Clif Burns at 9:18 am on June 13, 2014
Gun and sporting equipment retailer Bass Pro agreed to pay to the Bureau of Industry and Security (“BIS”) a $25,000 fine for exporting nine rifle sighting devices classified as ECCN 0A987 to China, Cyprus and Canada.
Wait, did you say Canada? Canada??? As in the 51st state? Surely this must be a mistake. Is that even an export? I thought you could export everything but Justin Bieber to Canada.
Of course, that’s a common misconception, and this case is an object lesson in one of the few things that can’t be exported to Canada. Items covered under ECCN 0A987, such as rifle scopes and sighting devices, have Firearms Convention (FC) as a reason for control and require BIS licenses for exports to all signatories to the Convention, including Canada.
The convention in question is the OAS’s Inter-American Convention Against the Illicit Manufacturing of and Trafficking in Firearms, Ammunition, Explosives, and Other Related Materials. All members of the OAS except Cuba have signed the convention. The United States, mostly as a result of the NRA’s desire to protect the right of Mexican drug lords to own automatic weapons, has signed but not ratified the treaty.
So even though you can ship a rifle scope to France without an export license from BIS, under the OAS Firearms Convention you can’t ship one to Canada without that license.
Universal Jurisdiction: Export Denial Order Edition
Posted by Clif Burns at 8:07 pm on May 27, 2014
Category: BIS • Syria
BIS recently announced a consent agreement with Aramex Emirates under which Aramex agreed to cough up $125,000 in connection with its export of network equipment from the U.A.E. to Syria. Of course, for the few of us remaining that do not believe that the U.S. Government can exercise jurisdiction over everyone anywhere in the world whenever it wants, the interesting question is this: why did a company in the U.A.E. get tangled up over a shipment from the U.A.E. to Syria that was legal under U.A.E. law?
At issue were network devices and software classified as ECCN 5A002 and 5D002. In the Order, BIS then has this to say:
Under the widely-known U.S. trade embargo against Syria, no item subject to the Regulations may be exported or re-exported to Syria without a Department of Commerce license, with the exceptions of certain medicines and food, as set forth at all times pertinent hereto in General Order No. 2.
General Order No. 2 notes that the prohibitions of the embargo on Syria are described in section 746.9 of the EAR, which indeed prohibits all exports and re-exports except “food and medicine” by everyone in the universe. (Don’t get confused by section 742.9 which describes another set of restrictions on Syria which would permit exports of certain EAR99 items but which have been superseded by 746.9 and is just kept in the EAR to confuse ordinary people and to keep lawyers employed.)
So, even though the EAR says that foreign persons can’t re-export items from their own country to Syria, why would anyone pay any attention to this, particularly where the export was not illegal under the laws of their own country? An attempt by the U.S. to extradite someone for such an export might not be entertained by his local courts simply because the U.S. asserts that the item originally came from the United States.
BIS’s hammer here is more likely the export denial order. Even if it has no criminal jurisdiction and no ability to enforce or collect administrative fines in such cases, it does have the power to impose an export denial order which would forbid persons within its jurisdiction from exporting anything to Aramex. That might deliver a significant economic blow to a freight forwarder and logistics provider like Aramex. In that case a $125,000 fine might appear to be a good deal.