Archive for the ‘BIS’ Category


Feb

4

Crimea River: BIS Muddies the Water


Posted by at 9:04 pm on February 4, 2015
Category: BISCrimea SanctionsOFAC

The Swallows Nest by Vyacheslav Argenberg [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/argenberg/199746052 [cropped]The Bureau of Industry and Security (“BIS”) has issued rules governing exports to Crimea and there’s good news and bad news. The bad news (for exporters): the BIS rule is incomprehensibly written and, arguably, may require you to have a license both from OFAC and BIS for the same export.  The good news (for lawyers):  the BIS rule is incomprehensibly written and, arguably, may require you to have a license both from OFAC and BIS for the same export.

Let’s start with the easy part: BIS amended part 746 of the Export Administration Regulations to add a new section 746.6 to establish a license requirement for exports to the Crimea region of all goods subject to the EAR other than food and medicine.  Note: basic medical supplies, because they are not either food or medicine, are not exempt, apparently on the grounds that the best way to get Putin where it hurts is to make sure that U.S.-origin bandages, hearing aids and hospital beds are kept out of Crimea.  That’ll show him.

But wait a minute.  Didn’t OFAC issue General License 4 permitting the unlicensed export of all items on its list of medical supplies without a license to Crimea?  OFAC, SCHMOFAC — here’s what BIS has to say about that:

The rule establishes a presumption of denial for all such exports or reexports to the Crimea region of Ukraine and transfers within the Crimea region of Ukraine, except with respect to items not exempt from the license requirement but authorized under the Department of the Treasury’s Office of Foreign Assets Control (OFAC) General License No. 4 (discussed in greater detail in the next paragraph) which BIS will review on a case-by-case basis.

And unlike, as is the case with, say, the Iran rules, where BIS says in section 746.7(a)(2) that if an item is authorized by OFAC no license from BIS will be necessary, the new Crimea rules say no such thing. So, what BIS appears to be saying is that OFAC General License No. 4 is nothing more than guidance that BIS will use when it decides whether to grant a license to export medical supplies to Crimea.

There is one contorted interpretation of General License No. 4 and the BIS statements that would avoid this result. General License No. 4 covers exports by U.S. persons or from the United States. Arguably, this may not cover re-exports of medical supplies with more than a de minimis (25%) U.S. controlled content. Such exports would then be licensed by BIS and these license applications would be considered on a case by case basis (rather than under a presumption of denial) for foreign manufactured medical supplies on the list. The problem with this reading is that the foreign manufactured items would not be “authorized under . . . General License No. 4″ and thus would fall back under the presumption of denial.

The bottom line: even if you have an item on the list of medical supplies and eligible for General License No. 4 that you want to export from the United States, you probably should also file a license application with BIS rather than relying on the general license. Better safe than sorry.

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Jan

29

The Case of the Missing Cuba Embargo Regulations


Posted by at 9:25 pm on January 29, 2015
Category: BISCrimea SanctionsCuba SanctionsOFAC

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663The recent OFAC amendments to the Cuba embargo regulations, and related statements by OFAC, went to great pains to make clear that, notwithstanding these changes, the embargo was still in place. That being said, it is somewhat perplexing that the Cuba Assets Control Regulations have disappeared, or at least most of the Cuba Assets Control Regulations have disappeared from OFAC’s website.

If you go to OFAC’s page on the Cuba sanctions, and then scroll down to the bottom, you will see under “Code of Federal Regulations” a link for “31 CFR Part 515 – Cuban Assets Control Regulations.” Click on that link, and it will take you here, which is the Federal Register notice with just the amended regulations. The other regulations are nowhere to be found. Maybe OFAC did repeal the Cuba embargo after all?

In another example of epic Web fail, BIS today promulgated new regulations relating to the Crimea Sanctions, which can be found here in the Federal Register. But if you go to the BIS website, the new rules are nowhere to be found. They are not mentioned in the slider at the top listing other current developments. They are not even mentioned in the BIS Newsroom where the latest entry is — seriously — July 22, 2014. What? No news at all for 6 months??

As to the new Crimea regulations themselves, I am not at all sure what they mean. I’ll post on them once I figure that out.

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Jan

20

No Cigar for You!


Posted by at 10:13 pm on January 20, 2015
Category: BISCuba SanctionsOFAC

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663The recent revisions to the U.S. sanctions on Cuba has generated a great deal of press coverage and, not surprisingly, more enthusiasm than accuracy. Here are a few bloopers I’ve seen recently.

The NBC outlet in Miami announced that the new regulations, released on January 15, would permit “South Florida cigar shops [to] soon be able to carry cigars from Cuba.” The only delay would be the time it will take those shops to “stock up” on the cigars. Nope. The amended section 515.560(c)(3) can bring back these products “for personal use only.”

It comes as less of a shock that the online news outlet Havana Times would say this:

The only thing you have to do to go to Cuba is book your travel. No government forms, no permissions, no licences. Just go.

Nope, again. U.S. travelers have to qualify for one of the twelve general licenses set out in 515.560. The only change is that you don’t need to wait for a specific license from OFAC. But you can’t get on a plane to go sip mojitos on the beach since, at least at the moment, there is no general license for drinking or sunbathing.

It comes as more of a shock, that the Huffington Post would suggest that Americans should get on a plane to “soak up some sun at Tropicoco Beach.” To give HuffPost some benefit of the doubt, let’s suppose they meant taking time off from an activity eligible for a general license to spend a little beach time. Whether you can or not, depends on what is meant by a “full-time schedule” since these general licenses normally require a “full-time schedule” devoted to the eligible activity. In the past, OFAC has said that missionaries that took a few hours off to visit a beach violated this requirement.

The situation may be a little more favorable for journalists than missionaries because the amended regulations say that the journalist’s activities schedule of activities” cannot include “recreation in excess of that consistent with a full-time schedule.” The same language does not appear in the general license for missionaries or in the other general licenses.

And I’ve saved the best for last. A columnist for the Charlotte Observer, for reasons that are not entirely clear, wants to export Bruce Jenner to Cuba. Of course former U.S. Olympic athletes whose appearance offends a columnist in Charlotte is not among the category of items authorized for export to Cuba under the new BIS regulations. Besides, if we’re going to start shipping off celebrities to Cuba, my vote goes for sending Justin Bieber.

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Jan

13

Iconic New York Camera Store Agrees to Hefty Export Fine


Posted by at 6:35 pm on January 13, 2015
Category: BIS

B&H Superstore on 9th Avenue via B&H Instagram account http://instagram.com/p/xe7viqg8ct/ [Fair Use]Some of you may know that, when I have spare time, I like to spend it behind the lens of a camera, so I was a bit dispirited to see a recent enforcement action by the Bureau of Industry and Security (“BIS”) against the iconic New York City photography retailer B&H Photo. I have been a loyal Internet customer of B&H pretty much since the beginning of the Internet, and no trip to NYC by me is complete without stopping by their store to drool over expensive photographic gear that I usually cannot justify buying. Sadly, and according to these charging documents, B&H agreed to pay $275,000 to settle charges that it exported $23,000 of rifle scopes and sighting equipment, classified as ECCN 0A987, between 2009 and 2012.

Given the value of the rifle scopes and sights in question, the $275,000 fine seems rather hefty. BIS no longer routinely reveals whether cases started with a voluntary disclosure, largely, I think, to deflect criticism that the agency treats exporters who make voluntary disclosures more harshly than is warranted, so we do not know whether or not the presence or absence of a voluntary disclosure affected the size of this fine. One possibility, of course, is that the exports came to BIS’s attention through a customs seizure; it was likely that B&H accurately described the exported items as rifle scopes or optical sighting devices and, sooner or later, some customs officer at the Port of New York would have taken action since even a CBP rookie would know that these items require export licenses to most destinations. Even so, it seems likely that it was an innocent violation; a camera retail store in New York City was unlikely to have been aware that these items required licenses.

In all events, B&H has certainly found religion on this issue. A trip to their website revealed that if I tried to buy a rifle scope and entered an address in Afghanistan, the site politely informed me that government restrictions would not permit them to ship that item to that destination. In all events, it was an expensive lesson, and I, for one, hope that it will not force them to raise their prices!

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Jan

7

Behind Every Cloud Is Another Cloud


Posted by at 10:51 pm on January 7, 2015
Category: BISCloud ComputingEncryption

Lonely Cloud by Kate Haskell https://www.flickr.com/photos/fuzzcat/32487111/ CC BY 2.0 [https://creativecommons.org/licenses/by/2.0/] (cropped)Breaking News: the Commerce Department has finally figured out how the Internet works. Or, perhaps more accurately, the Commerce Department has figured out that clouds aren’t just fluffy things that float in the sky from time to time.

Readers of this blog will know that I have been arguing for quite some time that the export agencies, including the Commerce and State Departments, need to revisit their absurd position that exports of encrypted technical data are the same thing as export of the technical data in plain text. If a company puts encrypted controlled technical data or technology on a foreign cloud server, then, under current rules and policies, the company will have exported that technical data or technology and will have violated the law if a license was required to export that information to that country.

According to this report (subscription required), BIS Assistant Secretary for Export Administration Kevin Wolf has revealed that this is being rethought

Among the terms to be defined is what constitutes an “export,” and one element of that definition will be that controlled information encrypted “in a certain way” will not constitute an export for purposes of cloud computing, while the unencrypted version would be, Wolf said.

That was the good news. Now for the bad news: according to Wolf, the various stakeholder agencies have not yet been able to agree on just what type of encryption will be sufficient to prevent an “export” of the transferred data.

The irony here is that the Department of Defense itself did not engage in any hand-wringing over encryption standards when it plopped its own, and presumably highly sensitive, communications on Chinese satellite transponders, rebuffing critics by noting simply that everything was encrypted. But — to end on a positive note — Assistant Secretary Wolf, who has been one of the driving forces behind export control reform, clearly understands this issue and I am sure he will do what he can to end this pointless interagency squabbling over the comparative merits and demerits of Blowfish, Triple DES and AES-256.

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