Archive for the ‘BIS’ Category


Mar

13

Daily News Attempts Export Humor; Bombs


Posted by at 4:25 pm on March 13, 2014
Category: BISCCLNorth Korea Sanctions

By Jared Kofsky (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADaily_News_Building-_WPIX_CW_11.JPGIt must have been a slow news day on Tuesday for the New York Daily News, because the aging tabloid decided to try its hand at export humor. As you might imagine, things did not go well for the paper.

The attempt occurred in a feature called “Your Cheat Sheet,” which appears in a blog called “The Swamp” and looks at important events in DC. You know, so-and-so is testifying on the Hill, Prime Minister Muckety-Muck of Lower Lithovakia meets with USDA officials, etc.   With that in mind, we present the joke in full:

Breaking News, so let’s parachute Anderson Cooper into: the Commerce Department’s Bureau of Industry and Security holds a meeting of the Materials Processing Equipment Technical Advisory Committee to “discuss technical questions that affect the level of export controls applicable to materials processing equipment and related technology.”

[Insert sad trombone sound here.]

Okay, so see the Daily News writer thought it was just hilarious that somebody would meet about “materials processing equipment and related technology.” That’s like a meeting, you know, on polynomial equations or plasma actuators or other silly egghead stuff for nerdy bureaucrats. Losers!!!  Bring in that Anderson Cooper fellow to cover this really groundbreaking story, etc., etc.

One person who doesn’t think exports controls on “materials processing equipment and related technology” is a laughing matter is the Nork Dictator Kim-Jong Un. The UN Panel Report discussed in yesterday’s post noted that a key obstacle to Nork nuclear ambitions, and a key incentive for the country’s efforts to evade international sanctions, is that “it lacks sufficient domestic precision machine tool manufacturing capability” needed for building missiles and uranium enrichment facilities. That’s the equipment that’s in — yep, you got it — Category 2 of the Commerce Control List which covers “materials processing equipment and technology.”

The morale of this story is, of course, that export control humor should be left to the professionals.

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Feb

28

There’s a Nice Knock-Down Argument for You


Posted by at 5:16 pm on February 28, 2014
Category: BISDeemed Exports

Intevac HQ http://www.waymarking.com/gallery/image.aspx?f=1&guid=0efe8498-3735-4754-b1d9-e8e56cea9333 [Fair Use]It should come as little surprise that federal agencies, whether they sit on a wall or not, believe that a word means what they “choose it to mean — neither more nor less.” So when the Bureau of Industry and Security (“BIS”) says that “visual inspection” and “oral exchanges” mean “giving a system password,” well, you can wring your hands about the violence to the English language involved in such a semantic contortion and you can make obscure references to Humpty Dumpty. But that’s about it.

In a recently announced civil penalty imposed by BIS against Santa Clara based Intevac, the enforcement folks at BIS trampled over their own definitions in order to justify a $115,000 fine against the Company for giving a password to a foreign national employee that would allow him to access hard disk technology controlled by ECCN 3E001. Specifically at issue were drawings, blueprints and part numbers that resided on a company server. According to the charging documents

Intevac released the technology . . . by providing the Russian national employee with a login identification code and a password that enabled him to view, print and create attachments.

Now let’s take a moment to do something adventurous; let’s actually look at BIS’s definition in § 734.2(b)(3) of the EAR for “release of technology of software:”

Technology or software is “released” for export through:

(i) Visual inspection by foreign nationals of U.S.-origin equipment and facilities;

(ii) Oral exchanges of information in the United States or abroad; or

(iii) The application to situations abroad of personal knowledge or technical experience acquired in the United States.

Clearly, simply giving out a password that enables access to a technology is neither a visual inspection or oral exchange of the technology. Unless the password is actually used by the foreign national to access the technology itself, something the charging documents rather coyly refuse to assert, there has been no release of technology. Granted the language here is ambiguous and perhaps the Russian national did see the technology at issue, but saying that the password “enabled him to view, print and create attachments” is an odd way of saying that.

The background here is that the Directorate of Defense Trade Controls (“DDTC”) has, at least since the Consent Agreement in the General Motors case, taken the position that with respect to ITAR-controlled technical data the “ability to access” such data is a deemed export whether actually accessed or not. This does equal violence to the definition of export in § 120.17 of the ITAR which refers to “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person.” Again, to ordinary speakers of the English language permitting access and disclosing are two different things. Perhaps BIS in the Intevac case is just exhibiting a bad case of me-too-itis and does not want anyone to think that DDTC is rougher and tougher on deemed export issues than BIS.

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Feb

11

With All Eyes on Sochi, Russian Ears Are on Ukraine


Posted by at 8:49 pm on February 11, 2014
Category: BISCCLExport ReformSurreptitious Listening Devices

Kremlin.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commonshttp://commons.wikimedia.org/wiki/File%3AVladimir_Putin_at_the_Millennium_Summit_6-8_September_2000-19.jpg

The continuing violence and political instability in Ukraine have raised concerns around the world, especially within the United States and the EU.  Whether some form of sanctions against current officials in the Ukrainian government should be imposed has been debated over the past several weeks, including reports that the Obama administration began preparing financial sanctions against current Ukrainian government officials last month.

Sanctions against Ukrainian officials are, of course, a delicate diplomatic endeavor for EU countries that not only trade extensively with Ukraine but also recognize the effects to EU-Russian relations with any rancor that develops by proxy in former Soviet states.  Such targeted EU or U.S. sanctions, moreover, amount to blocking funds that are unlikely to be found in large amounts in Western banks and a travel ban on individuals who were not likely to travel to the West in the near future in any event.

The telephone conversation posted to YouTube late last week between U.S. Assistant Secretary of State Victoria Nuland and Geoffrey Pyatt, U.S. ambassador to Ukraine, however, exposed just how heated a resolution in Ukraine is becoming between the United States and the EU.  In discussing how officials from the United Nations may assist in reaching a resolution between the current Ukrainian government and opposition leaders, Nuland has now infamously said, “f**k the EU,” presumably an expression of her view that EU involvement thus far to address the situation in Ukraine has been inadequate.  As if that were not enough for diplomatic missteps, it has also been reported that Nuland and Pyatt each used unencrypted cell phones during the conversation.

While the fallout of Nuland’s comments and the Obama Administration’s finger-pointing at Russia for its involvement in hacking the phone call will garner the headlines, the issue also presents an interesting juncture for a shadowy subject of U.S. export controls: surreptitious listening devices.

As we first reported over seven years ago, BIS has not always been sufficiently clear on its standards for classifying surreptitious listening devices that are subject to the EAR’s control under section 742.13.  In Export Control Reform materials presented by BIS last year, BIS articulated five questions to assist exporters in answering the ultimate question, “Is my item subject to the 742.13 Communications Interception policy?”  Those questions, however, don’t help advance the ball much in improving a U.S. exporter’s ability in classifiying surreptitious listening devices short of seeking clarification or a license from BIS.

The United States may never determine what devices were involved in intercepting the Nuland-Pyatt conversation.  Moreover, the “tradecraft,” as Nuland described the interception, may very well continue to develop in ways that outpace any technical specifications that BIS affixes to surreptitious listening devices.  Without further clarity, however, U.S. exporters will still be mostly in the dark about what items require a U.S. export license at the same time that BIS will likely crank up the breadth of its controls over exports of surreptitious listening devices.  But if clarity is a hallmark of Export Control Reform, a little more with respect to surreptitious listening devices would go a long way.

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Feb

5

BIS Takes the Gloves Off


Posted by at 10:41 pm on February 5, 2014
Category: BISIran Sanctions

Nitrotough Gloves http://www.marigoldindustrial.com/upload/img/nitrotoughN230B_web_situation_205x205.jpg [Fair Use]New Jersey based Ansell, maker of, among other things, protective gloves and protective, er, intimate apparel, was fined $190,000 in connection with the shipment of $73,700 of protective gloves to Iran. A French company affiliated with Ansell was also fined $190,000 in connection with these shipments.

The most interesting part of this case is the evasion charge under § 764.2(h) that BIS tacked on. Basically BIS charged that evasion occurred because the company transshipped the gloves through the UAE. Of course, most cases involving shipping to embargoed countries involve transhipment through a third country — usually the UAE — and yet BIS does not normally charge evasion in those cases, as it did not in this case. The charging documents here contain an extensive description of communications among the employees involved discussing the need to use a “middle company” in a third country to get around the embargo, so this may have been the motivating factor, although such discussions more normally used as a basis for adding an “acting with knowledge” charge under § 764.2(e)

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Jan

28

Fun BIS Fact: Companies May Actually Know What They Don’t Know


Posted by at 3:41 pm on January 28, 2014
Category: BISCriminal Penalties

Amplifier Research HQ Street View from Google http://www.google.com/permissions/geoguidelines/attr-guide.html [By Permission]
ABOVE: Amplifier Research HQ


There seems to be a recent plague of rogue export control managers with a penchant for forging licenses, making up authorizations, fudging exemptions and exceptions and engaging in other nefarious practices in order to avoid having to do any actual work while on the job they are being paid for. First it was LeAnne Lesmeister who specialized in photoshopping fake export licenses. Now we have Timothy Gormley at Amplifier Research Corporation who among other things falsified paperwork to conceal correct export classifications, listed fake license numbers on export documentation, authorized exports before license applications were granted and lied to other employees at the company about the existence of required export licenses.

The BIS settlement documents assert that Amplifier Research never conducted any compliance audits during the time that Gormley was running the export show. BIS imposed a $500,000 suspended fine on Amplifier Research to settle the violations and required the company to conduct a complete export compliance audit. A federal judge awarded Gormley a 42-month vacation in a federal correctional facility.

This all seems pretty routine until you get to the last count against the Company in which BIS charges Amplifier Research with “acting with knowledge” of the illegal exports at issue. The Export Administration Regulations define knowledge as follows:

Knowledge of a circumstance (the term may be a variant, such as “know,” “reason to know,” or “reason to believe”) includes not only positive knowledge that the circumstance exists or is substantially certain to occur, but also an awareness of a high probability of its existence or future occurrence. Such awareness is inferred from evidence of the conscious disregard of facts known to a person and is also inferred from a person’s willful avoidance of facts.

Neither this definition of knowledge, nor section 764.2 of the EAR, addresses when a company knows something. Additionally, neither addresses the issue as to whether the knowledge of each and every employee can be imputed to the company for purposes of “acting with knowledge” violations under section 764.2. Certainly, Gormley can be said to have acted with knowledge, but should the company also be said to have acted with knowledge unless senior management had “knowledge” as defined above of Gormley’s actions? Certainly those standards of knowledge would not be met simply because the company failed to conduct a compliance audit on Gormley and the export program. Rather, it seems to me, there would need to some red flags that senior management ignored and there is no evidence or assertion by BIS that there were any such ignored red flags.

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