Archive for the ‘BIS’ Category


Jun

15

DOJ Issues Misleading Press Release in Connection with Export Guilty Plea


Posted by at 11:47 pm on June 15, 2016
Category: BISCriminal PenaltiesIran SanctionsOFAC

All in a Day's Work by Damian Gadal via Flickr https://flic.kr/p/5xQkWj [Fair Use]
ABOVE: Erdal Kuyumcu

This blog reported earlier on the case against Erdal Kuyumcu in connection with exports of an EAR99 Cobalt Nickel powder (CoNiCrAIY) to Iran. In that initial post, I questioned the government’s evidence that Mr. Kuyumcu knew that his sales of this powder to a customer in Turkey were destined to Iran, noting that the criminal complaint based its allegations on the “training and experience” of an investigating agent who felt that unrelated emails discussing Iran covered these shipments. (I also mocked the agent’s claim that a “[b]ased on my training and experience … [a] colon followed by a close parenthesis … represents a smiley face.”)

Yesterday the Department of Justice issued a press release stating that Mr. Kuyumcu had pleaded guilty to the charges against him. Of course, the DoJ, as usual, could not restrain itself from misleading hyperbole in the process of patting itself on its own back:

Kuyumcu, a United States citizen, conspired to export from the United States to Iran a metallic powder composed of cobalt and nickel without having obtained the required license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The metallic powder can be used to coat gas turbine components, such as turbine blades, and can also be used in aerospace, missile production, and nuclear applications. Such specialized metals are closely regulated by the U.S. Department of Commerce to combat nuclear proliferation and protect national security, and exporting them without an OFAC license is illegal.

Why, you ask, if CoNiCrAIY powder is “closely regulated” by the U.S. Department of Commerce was its export a violation of OFAC rules? Good question. CoNiCrAIY powder is EAR99 and its export is not regulated, either “closely” or otherwise, by the Department of Commerce. Perhaps the DoJ has gotten confused, innocently or otherwise, by ECCN 2E003.f which controls certain “technology” for application of certain specified inorganic compounds, including CoNiCrAIY and similar compounds, on non-electronic substrates. But even this is not tantamount to close regulation of the powder because other inorganic compounds covered within these controls of deposition technology include tungsten and oxides like, er, carbon dioxide. By this logic, if Kuyumcu exported a carbonated soft drink to Iran, the DoJ could claim that he exported a product to Iran “closely regulated” by the Department of Commerce.

Once again, we see that the government can misinterpret export laws and regulations with immunity while everyone else does so at their peril.

Permalink Comments Off on DOJ Issues Misleading Press Release in Connection with Export Guilty Plea

Bookmark and Share


Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

1

Russian Export Case Larded with Bogus Spying Charges: Part 3


Posted by at 8:02 am on June 1, 2016
Category: BISCriminal PenaltiesGeneral

Alexander Fishenko
ABOVE: Alexander Fishenko


This blog has been covering the export prosecution of Alexander Fishenko for quite some time. Previous posts on this case can be found here and here. Most of my interest has been in the trumped-up Foreign Agents Registration Act charge brought by the government to allow Fishenko to be characterized, inaccurately, as a Russian “spy.”

Fishenko, who pleaded guilty to all counts in the indictment, is scheduled to be sentenced on June 3. The sentencing memorandum prepared by his lawyers provides more insight into the “spy” nonsense and the government’s motivations in bringing these charges. (I am not linking to the memorandum, even though it is publicly available through PACER, because it contains detailed information on some unrelated private matters relating to Fishenko’s medical history.)

As was detailed in the preceding posts, it was undisputed that Fishenko was buying things at the request of the Russian government. But that alone does not make him a foreign agent required to register under FARA. Section 3(d) exempts “private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal.” There was no allegation or evidence that Fishenko acted for the Russian government in any other capacity, meaning that he was not a “foreign agent” under FARA and, therefore, was under no obligation to register as one.

Apparently, Fishenko was anxious to plead guilty after the indictment, but the government was not willing to take his plea. The hold-up was that Fishenko, although he was willing to plead guilty to all the other charges, did not want to plead guilty to the bogus FARA charge for precisely the reason the government included it: namely, that those charges had been widely, indeed universally, interpreted as charges that he was a Russian spy, something the government well knew and was intentionally using to poison the well.  Fishenko thought that such a plea would permanently damage the reputation of his family members.

Leaving aside for the moment that Fishenko’s activities were exempt under section 3(d) of FARA, it is also undeniable that there is a significant difference between being an “unregistered foreign agent” and being a Russian spy. You can be an unregistered foreign agent in violation of FARA even if you run around wearing a banner saying you work for the Russian government, behavior essentially incompatible with being a spy. Nor was Fishenko charged with espionage under the relevant provisions in 18 U.S.C. §§ 793 – 798, something that certainly would have happened if Fishenko was really a Russian spy.

The only conclusion behind the government’s intransigence on the fake FARA charges is that it wants to keep this weapon in its arsenal for future, and equally illegitimate, use. It’s much easier to convict export defendants once they have been branded in the press as spies. Sadly, such behavior — intentionally bringing unfounded charges for their negative publicity value — turns the word “Justice” in the Department of Justice to Orwellian double-speak.

Permalink Comments (2)

Bookmark and Share


Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

28

Two Heads Are Not Always Better Than One


Posted by at 9:22 am on April 28, 2016
Category: BISCuba SanctionsOFAC

Havana by Bryan Ledgard [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nwFDPh [cropped and processed]

The Office of Foreign Assets Control (“OFAC”) last week updated its Cuba FAQs with this perplexing little blurb that can only charitably actually be called an “answer” or the “A” in FAQ.

68. May a person subject to U.S. jurisdiction export or reexport to Cuba items that include U.S.-origin content, but are not 100 percent U.S.-origin?

Persons subject to U.S. jurisdiction may engage in all transactions ordinarily incident to the exportation or reexportation of 100 percent U.S.-origin items from a third country to Cuba, consistent with the export licensing policy of the Department of Commerce. Items that are not 100 percent U.S.-origin would require OFAC authorization, which would be subject to certain statutory restrictions.

This is nothing more than a paraphrase of section 515.533(a)(1) of the Cuban Assets Control Regulations. In fact, the FAQ might have been more clearly stated and just as useful if it was written this way:

68. Do you really mean what you say in section 515.533(a)(1)?

Yes.

Of course, the FAQ neatly dodges the ugly truth that if the item is 99 percent U.S.-content, then you will need a license from both BIS and OFAC to reexport that item from a foreign country to Cuba. You want real export reform? Here’s where you start. There is no need in this instance, or ever in any other instance, for two federal agencies to decide whether something can be exported. Of course, you could avoid the double license requirement by shipping the item from the third country to the U.S. before exporting it to Cuba in which case you will only need the BIS license. This workaround further illustrates how absurd the double licensing requirement is here.

There is a second ugly truth that the FAQ dodges. Both the FAQ and section 515.533(a)(1) imagine that the phrase “100 percent U.S.-origin items” actually means something and can be determined to be true or false with respect to any given product. Nowhere in OFAC’s rules, or FAQs, or website, or presumably even on scraps of paper on the floor of OFAC’s basement is there any guidance as to how to determine U.S. content. Anyone who has ever struggled with this issue in its many contexts (including customs country of origin rules) will realize that there are a number of ways to analyze such a question, based on tariff shift rules, substantial transformation rules or the FTC’s “substantially produced in” rule. And often, if not almost always, each of these rules will result in a different country of origin for a product.

Take this example: apples grown and packaged in the United States are packaged in boxes made in the United States with cardboard imported from Canada. A substantial transformation rule might say that the box was U.S. origin; a tariff shift rule might say that it was not; and the substantially produced test would also probably say that it was not. Under the tariff shift rule, BIS licenses the reexport; using the others then both may have to license the re-export.

Here’s a harder case: take the same example above but with the box made in the United States with U.S. cardboard made from U.S. trees and printed with ink made in the United States, although one of the chemicals in the ink is imported from China. Probably under all the tests described above, the packaged apples would be 100 percent origin. Still, there is a Chinese chemical in the ink on the box. Without BIS or OFAC committing to any of the three tests described above, this is not a 100 percent origin U.S. product.

That being said, there are probably no 100 percent origin U.S. products (short of unpackaged agricultural produce without foreign-produced pesticide residue). In that case, you always need both licenses for re-exports and there was really no need at all — unless there was some desire to confuse — for Cuba FAQ 68.

Photo Credit: Havana by Bryan Ledgard [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nwFDPh [cropped and processed]

Permalink Comments (1)

Bookmark and Share


Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

25

Woman Indicted for Failure to File Electronic Export Information Forms


Posted by at 11:19 am on April 25, 2016
Category: BISChinaCriminal Penalties

Harbin Engineering University via http://english.hrbeu.edu.cn/skin/default/images/officer_r8_c61.jpg [Fair Use]
ABOVE: Harbin Engineering
University


Amin Yu bought things for Harbin Engineering University (“HEU”) in China — all EAR99 items, none of which required an export license. She listed an incorrect value for the items on documents that she gave to UPS, FedEx and various freight forwarders. As a result, none of them filed Export Electronic Information forms for the shipments. The federal government has now indicted Yu, accusing her of being a Chinese spy and indicting her for failure to file the required EEIs. This is the first and only indictment of anyone for failing to file EEIs for EAR99 items. It’s rather like accusing someone who put the wrong postage on a letter with being a terrorist.

The first count of the indictment (in case newspaper crime reporters get bored and don’t read the whole thing) is for failure to register as a foreign agent under the Foreign Agents Registration Act (“FARA”). This is catnip for reporters who quiver with excitement each and every time they can give their editors a story with the word “spy” in it. Even the once venerable Newsweek fell for this ploy, referring to Yu in its headline as a “Chinese Spy.”

These FARA counts are also, as we’ve seen before, a sure sign that the government has a lousy case that it can only win with a generous dollop of press-induced hysteria about the defendant.

The problem with these bogus FARA “spy” counts is that it is not illegal to buy stuff for foreign governments (or foreign government-run universities as was the case here.) A significant exclusion is set forth in section 3(d) of the act for certain “non-political” activities, including “engaging … in private and nonpolitical activities in furtherance of the bona fide trade or commerce of such foreign principal.” In other words, acting as a commercial agent for foreign governments, foreign companies and foreign individuals by buying stuff for them does not make the person engaged in that activity a foreign agent required to register under the act. (The requirement that the trade be bona fide is to prevent the foreign principal from trying to spread influence in the United States by having its agents buy items that it doesn’t need.) And when you read the indictment that is all that Yu did: she bought things for HEU.

As to the EEI-related counts, things are not much better with the government’s case. It appears that in some instances the EEIs weren’t filed because the amounts declared for the exported goods were too low. Whether this was anything other than an attempt to reduce Chinese import duties when the items arrived in China is unclear. In some instances, it is not clear at all why the forwarders and shipping companies did not file EEIs because the declared values where above the EEI exemption limit of $2500. The indictment also focuses on an instance where the shipping documents did not use Yu’s full name and another where the address of HEU was missing.

What appears to have gotten the DOJ all worked up here is that the items involved could be used for unmanned submersible vehicles. But so far the federal government has put no controls on these items, which at the moment are mostly being used for oceanography, deep-sea exploration, underwater oil prospecting, and meteorology. If the government doesn’t want the Chinese developing underwater submersibles with U.S. origin goods, it knows how to do it and, for some reason, hasn’t.

Photo Credit: Harbin Engineering University via http://english.hrbeu.edu.cn/skin/default/images/officer_r8_c61.jpg [Fair Use]

Permalink Comments (1)

Bookmark and Share


Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

14

No Cuban-Americans Allowed


Posted by at 10:10 pm on April 14, 2016
Category: Anti-BoycottBISCuba Sanctions

Fathom Cruise Ship via https://www.fathom.org/wp-content/uploads/2016/03/Adonia-500x325.jpg [Fair Use]

On Tuesday of this week two Cuban-born residents of Florida filed a lawsuit against Carnival cruise lines and its subsidiary Fathom Travel for violating their civil rights by refusing to book passage for them on a cruise ship from Miami to Cuba. The companies based the decision on the plaintiffs’ national origin: both were born in Cuba and Cuba currently prohibits anyone born in Cuba from traveling to Cuba from the United States (or anywhere else) by boat. Persons of Cuban origin may only travel to Cuba by air. (If you wonder about the reason behind this policy, it’s obviously because you are unaware that Castro’s slogan “Socialismo o Muerte!” was originally simply “Viaje Aéreo o Muerte!“)

As the ruckus commenced in Little Havana in Miami, the cruise line defended its actions by arguing that it was only complying with Cuban law. Delving into the intricacies of the Civil Rights Act of 1964, which prohibits discrimination in public accommodations based on national origin, is a bit out of the scope of this blog, but not completely. The Department of Transportation, in a somewhat similar recent situation, held that Kuwait Airways violated 49 U.S.C. § 41310 when it refused to book a ticket for an Israeli wishing to travel between New York and London. The airline’s argument that Kuwait law forbade it from selling tickets to Israeli passport did not overcome the prohibition of § 41310 against “unreasonable discrimination” given that the passenger was traveling not to Kuwait, but to London where it would be legal for him to disembark the plane. The fact that the Kuwait case did not involve travel to a place where disembarkation was forbidden effectively distinguishes this case from the one against Carnival.

More interestingly, and more within the scope of this blog, the Department of Transportation further based its action on the antiboycott provisions in the Export Administration Regulations. Section 760.2(b) of the EAR prohibits U.S. companies from discriminating against anyone based on national origin “with intent to comply with, further, or support an unsanctioned foreign boycott.”

So, are Carnival and Fathom violating these regulations by refusing to book travel for Cubans wishing to take boats to Cuba? Although the antiboycott regulations go into excruciating detail on many of its definitions and prohibitions, nowhere do they bother to define or to elucidate the meaning of “unsanctioned foreign boycotts” even though nothing in these rules is violated unless somehow related to an unsanctioned foreign boycott. That leaves open the question whether Cuba’s law prohibiting Cuban-born persons from traveling to Cuba by boat from any country in the world is an unsanctioned foreign boycott.

The EAR gives as an example of prohibited discrimination an agreement by a U.S. company to comply with a boycotting country’s local law forbidding employment persons of a certain religious faith in projects in that country. This would be a violation, the example states, because the majority of the citizens of the boycotted country are of the prohibited faith. On the other hand, the next example says that an agreement to comply with a local law of that country not to employ women would not violate the antiboycott provisions because it would not be “boycott-based.” This suggests, at least to me, that the Cuban restriction is not a foreign boycott. The restriction is only on Cuban-born persons and the only place with a majority of citizens born in Cuba is, obviously, Cuba. I’m not sure anyone, even Cuba, can boycott itself.

 

Photo Credit: Fathom Cruise Ship via Fathom [Fair Use]

Permalink Comments (1)

Bookmark and Share


Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)