Archive for the ‘BIS’ Category



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.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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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 (], via Flickr [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)?


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 (], via Flickr [cropped and processed]

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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 [Fair Use]
ABOVE: Harbin Engineering

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 [Fair Use]

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



No Cuban-Americans Allowed

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

Fathom Cruise Ship via [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]

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Slow Boat From Batam

Posted by at 11:17 pm on April 5, 2016
Category: BISCriminal PenaltiesExtraditionIran Sanctions

  1. User:Abelard Fuah, via Wikimedia licensed under CC BY-SA-3.0 [][cropped]On Monday, according to a DOJ press release published on the Bureau of Industry and Security website, the United States finally extradited Steve Lim, a Singaporean national who had been languishing in a jail in Batam, Indonesia. As we reported here and as noted in the DOJ press release, Lim was under indictment in the United States for shipping radio modules from the United States to Iran. In October 2014, Lim had hopped a ferry from Singapore to Batam to attend a trade show and was nabbed at the ferry terminal. An Indonesian judge ultimately permitted, in July 2015, Lim’s extradition notwithstanding the absence of an extradition treaty between Indonesia and the United States

What the DOJ press release fails to mention is that a court in Singapore had refused to extradite Lim in 2011. Singapore, which does have an extradition treaty with the United States, has a dual criminality requirement for extradition. Because the export of the radio modules from Singapore to Iran was not illegal under the law of Singapore, the request by the U.S. for extradition was refused. Lim would still be in Singapore had he not made that trip to Indonesia. What this illustrates is that although U.S. law enforcement authorities claim jurisdiction over foreign nationals who, without ever setting foot in the United States, export items from the U.S., the assertion of this jurisdiction is not without international controversy.

Photo Credit:User:Abelard Fuah, via Wikimedia licensed under CC BY-SA-3.0 [][cropped]

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