Archive for the ‘BIS’ Category



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 [CC-BY-3.0 (], via Wikimedia Commons

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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BIS Takes the Gloves Off

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

Nitrotough Gloves [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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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 [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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Export Reform Brings More Red Tape for Exporters

Posted by at 6:16 pm on January 14, 2014
Category: BIS

By Daderot (Own work) [CC0], via Wikimedia Commons I have good news and bad news. Let’s take the bad news first. Starting on January 21, new rules of the Bureau of Industry and Security (“BIS”) with respect to exports to persons on the mysterious “Unverified List” will require more red tape, including extra license requirements and more paperwork. Now for the bad news. On January 21, everyone on the current Unverified List will be removed from the list. But, don’t get all excited there: BIS starts planning to add people back to the list and will announce the changes in the Federal Register so you’ll be sure to know who’s on the new Unverified List. (You read the Federal Register every day like a good exporter, don’t you?)

Prior to the adoption of the new rules, the presence of a party on the Unverified List meant that BIS had some difficulty with respect to an end-user check for that party and that you, as an exporter, were supposed to treat the presence of that party on the list as a red flag. When the rule goes into effect on January 21, you will need to file an AES statement for every export to a party on the list without regard to whether a license was required or the value of the shipment. (And for those of you who rely on your freight forwarder to file your AES entries, this is going to be fun.) Second, no license exceptions will apply for shipments that require licenses. Third, you’re going to need to get the Unverified party to sign an “Unverified List Statement” for all transactions that don’t require a license. The new rules don’t provide a form for the Unverified List Statement t but just a laundry list of things that you must include in the Statement, including a promise by the Unverified Party to be very, very good and not violate anything in the Export Administration Regulations. Good luck with that, as the kids say.

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Be Careful What You Post on Facebook

Posted by at 6:58 pm on January 9, 2014
Category: BISIran Sanctions

Pouya Airlines IL 76 at Antalya Airport via [Fair Use]We’ve all heard the story of exuberant youngsters who find their career hopes dashed because they posted on Facebook pictures of themselves half-clothed and glassy-eyed with a margarita in one hand and a bong in the other. It’s a cautionary tale, for sure, and has certainly meant that many people have realized that they perhaps should confine pictures of their latest bacchanalian orgy to a more discrete mode of distribution among friends than Facebook. If you wouldn’t send it to your grandmother, don’t post it on your Facebook page, right?

So, you’re wondering, what does this have to do with export law? Well, believe it or not, it relates to a possible explanation of a recent temporary denial order issued by the Bureau of Industry and Security (“BIS”) on January 3 against 3K Aviation and others related to the planned export on January 7 of U.S.-origin aircraft engines by 3K from Turkey to Iran via the Iranian cargo carrier Pouya Airline. Many people have expressed surprise that a TDO would be issued that forbade all export related activity by 3K rather than an order forbidding the export of the engines at issue given that the order was issued before the export at issue had even taken place. Typically, as in the Mahan Air case, the TDO is issued after the forbidden export has occurred and prohibits all export-related activity during the effective period of the TDO.

On 3K’s Facebook page, you can (still) find a photo gallery titled “IL 76 Engine Loading” and dated December 27. 2012, long before the TDO. The IL 76 is the Ilyushin cargo aircraft operated by Pouya Airlines. Here is a screen capture of the Facebook page showing the Pouya IL 76 sitting at the Antalya Airport in Turkey. And here is a screen capture from the page of the happy pilots in the IL 76 about to carry their engines back to Iran. (You can easily find images of the IL 76 cockpit on-line if you want to verify that this is an IL 76 cockpit.) In other words, the planned January 7 shipment of U.S aircraft engines to Iran was possibly not the first time that 3K had exported U.S. items to Iran.

For its part, 3K is saying that it’s now planning to ship the engines back to the seller in Germany. Of course, under the denial order they can’t export the engines back to Germany without BIS authorization. And here’s a Catch-22: under the TDO they can’t even store the engines without violating the order.  Whatever 3K does, it will violate the order.

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