Archive for the ‘BIS’ Category


Sep

22

Don’t Forget Croatia


Posted by at 7:43 am on September 22, 2016
Category: BISEncryption

Sea view. Rovinj, Croatia by Andrey[CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5oVXCk [cropped and processed]

Yesterday, the Bureau of Industry and Security (“BIS”) announced various amendments to the encryption rules. I realize that the encryption rules are a sprawling mess, scattered through various sections of the EAR and written in an incomprehensible jargon that sounds like they were translated into English from a Vulcan paraphrase of the original Sanskrit. I also realize that your eyes understandably glazed over when you saw the word “encryption.” So I’ll try to make this as painless and entertaining as possible.

Let’s start with the really big news. Croatia has been added to the list of Supplement 3 Countries! Woohoo! For those of you aren’t really excited about this, that is probably because you forgot that if you are not a Supp. 3 country, there is a 30 day waiting period after a review request has been filed before encryption items described in 740.17(b)(2) and (b)(3) such as source code and high-performance network equipment can be exported to that country. And if those items were going to government end users in  country not on the Supp. 3 list, a license was required. So, today was declared a national holiday in Croatia and papier-mâché effigies of key BIS officials were draped with garlands and paraded through town squares across the country.

While we’re on the subject of government end users, the amendments create a new kind of government end user — “less sensitive government end users.” These are government agencies that are the toughest of their kind and at which you can hurl the most frightening insults — say, “you cabal of pointy-headed bureaucrats!” — without hurting their feelings. No, I’m just kidding with you. “Less sensitive government end users” are government agencies that are less likely to use encryption for evil purposes, like museums, water treatment plants and census bureaus.

The reason for identifying “less sensitive government end users” is that high performance network infrastructure equipment used to require a license to go to any government on the Naughty List (i.e., not on the Supp. 3 Nice list). Now these items can be exported 30-days after a review request is filed provided that it’s a less sensitive government end user.

The best news I’ve saved for last.  No more encryption registration numbers!  For the 50 or so companies out there who still don’t have an ERN, you’re off the hook.  Annual self-classification reports will still have to be filed; and the new format for the report, which is detailed in an amended Supplement 8 to Part 742, incorporates some of the information that used to be required by the ERN application.

For a summary of the remaining changes, including a long-needed update of the performance parameters for high performance network infrastructure equipment subject to higher encryption controls, you can read this excellent summary, which is mostly clear and more or less written in English, helpfully provided by the nice people at BIS.

Photo Credit: Sea view. Rovinj, Croatia by Andrey [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5oVXCk [cropped and processed]. Copyright 2008 Andrey

 

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Sep

2

Export Defendant Pays for Requesting Jury Trial


Posted by at 12:05 pm on September 2, 2016
Category: BISCriminal Penalties

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has closely followed the case involving Alexander Fishenko and his company ARC Electronics, mostly because the government larded the export charges against Fishenko with bogus “spying” charges premised on an alleged charge that he failed to register under the Foreign Agent Registration Act.  Those charges were bogus because the act makes clear that selling goods to a foreign government is not an activity that requires registration.

A number of the employees of ARC were also indicted on export charges in connection with the exports to Russia without the required BIS licenses. One of them, Anastasia Diatlova, the most junior sales clerk in the organization, is now apparently facing harsher sentencing than other sales clerks at ARC because she ticked off the government by making them go to trial, or at least that’s the claim made in the Sentencing Memorandum filed by Ms. Diatlova’s attorneys. That memo argues that she should get the same sentence of time served as the other sales clerks in the organization. (Fishenko, who owned Arc and ran the operation, pleaded guilty and was sentenced to ten years.)

Apparently time served was offered in the plea deal but Diatlova went to trial anyway.  That decision was premised on the reasonable belief that someone who had only an eighth grade education, received little if any compliance training, and had previously refused to sell parts where she knew them to be restricted was unlikely to have known that the one export with which she was involved and charged was illegal.

But, juries being juries, and with the prosecutors no doubt screaming “spy” and “Russia” at every available opportunity, the jury convicted her anyway. And now the government wants revenge and has taken the offer of a sentence of time served off the table. That is, of course, their right, but it seems petty and almost despicable in the case of a $15/hour sales clerk who sold an item that probably would have been licensed if one had been requested. One has to wonder why the government was chasing her anyway other than as potential low-hanging fruit that could result in another notch on their holsters.

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Aug

12

Friday Round-Up


Posted by at 4:28 pm on August 12, 2016
Category: BISDDTCOFACSDN List

Bumper Cars on the Boardwalk

Here are a few recent odds and ends that are worth a mention (and to catch up on a few things I missed while on vacation):

  • The Directorate of Defense Trade Controls (“DDTC”) issued guidance as to which activities are “gunsmithing” that do not require registration under part 122 and which are “manufacturing” and do require registration. This guidance defines “gunsmithing” and “manufacturing” completely differently from the definitions used by the Bureau of Alcohol, Tobacco and Firearms (“ATF”). For example, assembling kits into guns is “manufacturing” according to ATF but not according to DDTC. On behalf of lawyers everywhere: Thanks, DDTC, for keeping us busy!
  • More revisions to the TAA Guidelines, which are longer and less interesting than all six volumes of Proust, were announced. These mostly take into account the new definitions of export, re-export and retransfer that were recently adopted as an interim final rule by DDTC. I’ve said it before, and I’ll say it again, true export reform would get rid of the ridiculous TAA process entirely and make it similar to the  process used by the Bureau of Industry and Security (“BIS”) for licensing technology exports.
  • The United States Marshals Service (“USMS”) is auctioning off 2,719.32669068 bitcoins. You will be, I’m sure, relieved to know that the auction notice explicitly states that the USMS won’t accept any bids from anyone on OFAC’s SDN List. I wouldn’t want Eliot Ness going after Rooster Cogburn, even if it would make a better movie than Batman v. Superman.

Photo Credit: Bumper Cars on the Boardwalk by Clif Burns, via Flickr https://flic.kr/p/JXGCgz. Copyright 2016 Clif Burns

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Aug

9

Gone Fishin’ (Again)


Posted by at 11:49 pm on August 9, 2016
Category: BISCuba SanctionsOFAC

Boat in Ernest Hemingway International Billfishing Tournament via http://www.internationalhemingwaytournament.com/images/stories/fish/DSC_6712.jpg [Fair Use]Longtime friend and blog reader Pat had a good catch (so to speak) with respect to yesterday’s post on the Ernest Hemingway International Billfishing Tournament in Cuba. The post noted that participation in the tournament by U.S. persons might be covered by the new OFAC General License in section 515.567(b) relating to participation in competitions in Cuba. Whether that license would apply depends upon whether Cubans could participate in the tournament, something which I thought was perhaps affected by the high cost of participation in the tournament.

Even if the OFAC license applied, U.S. participants who wanted to take their own boats into Cuban waters would need to deal with the temporary export of the boat into Cuban territorial waters, an export controlled by BIS. I noted that BIS had granted such licenses, but Pat pointed out in a comment to yesterday’s post that last September BIS amended license exception AVS to permit temporary sojourns of less than 14 days by U.S. recreational boats in Cuban waters as long as it was pursuant to travel authorized by a general or specific license from OFAC.

That’s a great point, and I had forgotten about the amendment to License Exception AVS. It also, given the 14 day sojourn limitation, raises the issue of the OFAC rule in section 515.207 that prohibits a boat that has entered Cuban waters and purchased goods (in this case, think live bait) from entering a U.S. port for 180 days.

OFAC does have an exception in section 515.550 for return in advance of this date by “vessel used solely for personal travel (and not transporting passengers)” and where the export was covered by BIS’s license exception AVS. As usual, OFAC’s drafting leaves much to be desired given that the distinction between personal travel and transporting passengers may not always be clear. Probably the distinction rests on whether the other passengers are paying or not, excluding, I suppose, personal friends sharing expenses. But I’m not sure I would want to run the risk of overstepping this not very well drawn line.

What about chartering a fishing boat in Miami to participate in the tournament? Although that would still probably be a “recreational vessel” covered by license exception AVS, it’s not clear whether that would be personal travel (by the charterers) or transporting passengers (by the captain and crew). I, for one, would want specific guidance from OFAC before getting on that boat.

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Aug

8

Gone Fishin’


Posted by at 8:12 pm on August 8, 2016
Category: BISCuba SanctionsOFAC

Camellia George via http://www.kansascity.com/sports/outdoors/article94168762.html [Fair Use]
ABOVE: Messrs. Wilkins and
Whitlock in Cuba

[See update to this post here.]

Every year Cuba has an internationally famous sport fishing tournament. Fisherman from the United States have always cast envious eyes at the tournament just a short hop a way from U.S. territorial waters, but, obviously, the U.S. embargo on Cuba poses just a few tiny problems.

Stan Wilkins, a Kansas City lawyer just published an article in the Kansas City Star detailing his participation in the tournament with his friend Bob Whitlock, both pictured to the right with Havana in the background. This provides a good opportunity to discuss the regulatory requirements in play, particularly since Mr. Wilkins says little about how he actually managed to fish the tournament, other than to say, quite incorrectly, that “[f]ishermen may qualify for travel under the new ‘general license’ category.”

Given that there is no general license for “fishermen,” the general license that would most likely be relevant and available here is the one set forth in section 515.567(b). That general license covers “athletic and other competitions.” No offense to any fisherman out there, but I’d say that the fishing tournament is an “other.” (This is probably because when I go fishing it’s not terribly athletic. My arms mostly get used to carry the beer can to my mouth and almost never to pull an actual fish out of the water. For some reason, incomprehensible to me, fish always turn their noses up at my bait and lures.) Certainly, the people-to-people general license won’t work unless Cuban fish count.

There is, however, a significant qualification to the General License for athletic and other competitions: the competition must be “open for attendance, and in relevant situations participation, by the Cuban public.” I’d say that since you can’t attend a fishing tournament by, say, sitting in lawn chairs on the beach, this is one of those “relevant situations” where the tournament must be open to participation by Cubans.

The official website registration form does have “Cuba” listed as a country in its drop down list, so Cubans can, at least in theory, register and participate. But the site also lists a registration fee of 450 CUC (or about US$450). Given the average salary of Cubans is approximately $20 CUC per month, it seems fair to wonder if an event that requires an amount equal to 2 years salary is really open to Cubans. But I suppose setion 515.567(b) could be read to say that putting Cuba in the drop down list on the registration form is enough.

Readers of this blog, particularly those who remember the sad saga of a ship called Lethal Weapon, probably recognize another procedural hurdle to participation by U.S. fishermen, at least fishermen who want to use their own boats and equipment (which is, of course, more or less the point). Sailing into Cuba for the tournament is an export, albeit temporary, of the boat and requires a license from BIS. BIS has granted them in the past, with conditions, so this part is doable, even if it is another layer of red tape.

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(No republication, syndication or use permitted without my consent.)