Archive for the ‘BIS’ Category


Oct

7

De Minimis Rule? What De Minimis Rule?


Posted by at 10:40 pm on October 7, 2014
Category: BISCriminal PenaltiesSyria

Robbins & Myers Belgium HQ via Google Maps http://goo.gl/P9oIwo [Fair Use]
ABOVE: Robbins & Meyers Belgium


Robbins & Myers Belgium, a Belgian subsidiary of Robbins & Myers, Inc., which was recently acquired by National Oilwell Varco, pleaded guilty last week to charges that it violated U.S. sanctions on Syria when it exported stators that it manufactured in Belgium to Syria. According to the Bureau of Industry and Security (“BIS”) press release, the Belgian company was charged with violating U.S. criminal law because of the following:

The guilty plea stemmed from actions by Robbins & Myers Belgium that, in 2006, caused four illegal exports, reexports and/or transshipments of stators—important components of oil extraction equipment—that had made [sic] from steel that had been milled in the United States to a customer operating oil fields in Syria.

Say what? Is it really criminal for a foreign company to export an item just because it has some U.S. content in it? What happened to the de minimis rule? How hard would it be to say that the item consisted of more than 10 percent U.S.-origin steel to avoid suggesting that the export was illegal if there was any U.S. content?  Even though BIS used up three paragraphs in the press release patting itself on the back, it could not manage to add a sentence somewhere, anywhere, to correct this misstatement of the law?

The factual proffer that served as a basis for the guilty plea, which is supposed to contain facts sufficient to support the plea, is no better on this issue.

At all times pertinent to this case, the stators shipped by RMB to Company A in Syria were made from steel tube that Company B had milled in the United States.

Nope, being “made from steel tube … milled in the United States” is not enough to support the plea. Section 746.9(a) of the BIS rules forbids exports to Syria of items “subject to the EAR.” And section 734.3(c)(1), otherwise known as the de minimis rule, states that foreign-made items destined for Syria are not “subject to the EAR” if they contain “controlled U.S.-origin commodities … valued at 10% or less of the total value of the foreign-made commodity.” Although the rule is not clear, BIS takes the position that “controlled” here means “controlled for Syria” under section 746.9 and therefore includes any EAR99 item other than food or medicine.  Under that reading the EAR99 steel tubes would be controlled U.S.-origin commodities for purposes of the de minimis rule. We just don’t know if the tubes were more than 10 percent of the value of the foreign-made stators. And we don’t know this because the supposedly completely proffer leaves out this crucial element of the crime.

I do not doubt that in fact the U.S.-origin content here was in excess of de minimis as required by the rule for foreign-made products. My point is, however, that the BIS press release and the proffer incorrectly and misleadingly state that a criminal violation occurred because the stators contained any amount of U.S. origin goods. That is simply not a correct statement of the law, and those charged with enforcing the law should also correctly state it.

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Sep

30

BIS Kicks Dirt in Face of Utah Dirt Bike Dealer


Posted by at 9:35 pm on September 30, 2014
Category: BIS

Xtreme Motors via Google Maps [Fair Use]Like many Washingtonians, I have grown weary of marauding packs of dirtbags on dirt bikes and ATVs that terrorize drivers and pedestrians by speeding down the wrong side of streets and on sidewalks defying the police to chase them down. So it was with a slight frisson of Schadenfreude when I read that BIS today issued a Temporary Denial Order against X-TREME Motors, a dirt bike and ATV dealer in Utah. According to BIS, the TDO was based on a number of unlicensed exports of items requiring licenses, such as rifle scopes, which X-TREME misdescribed in export documents as ATV parts. It seems that the dirt bike and ATV business might have been a cover to smuggle controlled items from Utah to Russia and China, among other places

The dirt bike dealer, as you can still tell from its web site, had a side eBay business in which it sells a number of items that don’t seem particularly related to dirt bikes and ATVs, like rifle stocks, rifle scopes, ammo magazines and rifle barrels, and which will in many cases require export licenses. The BIS press release said that X-TREME was selling “crime control” equipment to China and Russia. It does not say what that equipment was, but I found two pairs of handcuffs for sale on X-TREME’s eBay site. After all, what fun is riding a dirt bike if you don’t have a few pairs of handcuffs along for the ride.

Between when I first looked at X-TREME’s eBay site and just now, someone has added at the top, in big red letters, this legend:

Hello we will not be offering any international shipping at this time. Please check back soon

Duh.  But “soon” might be a tad optimistic.

UPDATE:  As a commenter noted, and as I forgot when I wrote this post, riflescopes are also controlled for crime control reasons.

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Aug

20

The Consolidated Screening List Isn’t


Posted by at 9:01 pm on August 20, 2014
Category: BISCompliance Programs and ProceduresDDTCDebarred ListDenied Party ListEntity ListOFACRussia SanctionsSanctionsSDN ListUnverified List

PortShip by USDA (cropped) via https://www.flickr.com/photos/usdagov/9715983721 [CC BY 2.0 https://creativecommons.org/licenses/by/2.0/]The U.S. Government, over at export.gov, provides a so-called Consolidated Screening List, which you might think would be a one-stop shopping list for your screening needs, something that might be useful if you or your company does not subscribe to or implement one of the commercial screening solutions. Unfortunately, the Consolidated Screening List doesn’t consolidate all the lists you should review and has other significant limitations.

The good news is that the list now does include the Foreign Sanctions Evaders List, which was not included for some time after the list was adopted by Treasury back in February of this year. The description of the list still does not mention the FSE list, but the entries on that list have been quietly added.

However, two other Treasury Department lists are still not included. The relatively new Sectoral Sanctions Identifications List is missing as action. U.S. persons are forbidden from engaging certain transactions with entities on this list, including providing credit in excess of ninety days. Part of the reason for this is probably that the “consolidated” list is infrequently updated. The last update of the list was almost two months ago, on June 26, 2014.

In addition, the Palestinian Legislative Council List, adopted back in 2006, is not included. U.S. financial institutions must reject (not block) transactions with people on the PLC list.

Not only is the “consolidated” list not complete or consolidated, but also it is dangerous to rely on it alone for another significant reason. The search page for the list only retrieves literal matches and does not allow address searching. In addition to searching the consolidated list, you should also rely on OFAC’s sanction list search tool. That tool uses, fairly successfully, “fuzzy logic” to retrieve similarly spelled names. Because many of the names on the list are transliterated versions of Arabic names, meaning that there are many alternate spellings, the “fuzzy logic” will be somewhat more successful in identifying alternate spellings.

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Jul

30

BIS Announces Future Restrictions on Exports of Unspecified Items to Russia


Posted by at 8:12 pm on July 30, 2014
Category: BISRussia Sanctions

By Russian.dissident (Own work) [CC0], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ALUN-A.jpgAs the sanctions pile up on Russia, the Bureau of Industry and Security (“BIS”) announced new sanctions yesterday. Of course, what exactly is covered by the sanctions isn’t quite clear, but as they say on birthdays and in diplomacy, it’s the thought that counts.

The sanctions were announced on the BIS website but were not accompanied by any Federal Register notices or EAR amendments. Indeed, the announcement deals with future sanctions at an unspecified date on a broad, but not clearly defined, category of goods:

BIS will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia’s energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.

Although what this means is not entirely clear, several things can be fairly safely assumed. First, the sanctions will target goods already on the Commerce Control List inasmuch it talks about a policy denying export and therefore seems to target goods for which licenses would currently be required. Second, and as a corollary to the first, it does not appear that new items will be added to the CCL as part of these new sanctions. Third, the items targeted will be a subset of those items currently requiring licenses and not all items on the CCL requiring licenses. This is analogous to previous BIS sanctions on Russia which covered not all items on the CCL but those that required licenses to Russia and which were “high technology items … that contribute to Russia’s military capabilities.”

The rub of course is figuring out how to define the subset of CCL items controlled for export to Russia that “may be used for exploration of production” of oil.   I suppose that clearly excludes some items on the CCL, like electric chairs (ECCN 0A981.b) and African Swine Fever virus (ECCN 1C352.a.1), but everything else is probably up for grabs, particularly given that we are talking about items that “may be used” for oil exploration. Fortunately, this is announcement deals with a denial policy that “BIS will institute,” so we can all hope that when the policy goes into force there will be some itemization of the ECCNs involved.

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Jul

23

Be Careful What You Like on Facebook


Posted by at 4:40 pm on July 23, 2014
Category: BISCriminal Penalties

Facebook Profile Photo of Viacheslav Zhukov https://www.facebook.com/viacheslav.zhukov.7[Fair Use]
ABOVE: Viacheslav Zhukov


A Savannah resident, Viacheslav Zhukov, has been charged in a superseding indictment with export violations and false statements in connection with rifle scopes that he mailed from Savannah, Georgia, to Russia without the required license from the Bureau of Industry and Security (“BIS”). He is being held without bond awaiting trial.

As this blog has often noted, a frequent challenge in export prosecutions is establishing that the defendant knew that his unlicensed export was illegal. U.S. export laws are, as we all know, complicated; and a Russian immigrant might not know that mailing rifle scopes to Russia without a license would be illegal.

As the false statement count suggests, there is some evidence that Zhukov may have known that the exports required a license from the U.S. government.  Zhukov allegedly filed a Customs Declaration with the U.S. Postal Service saying that the boxes contained a “cardboard box, a model battle tank, and men’s jeans.” Telling customs that you’re mailing a “cardboard box” to Russia probably is more or less an open invitation to having your shipment detained and inspected, which may well be how he was caught.

Of course, there may be other reasons that Zhukov fibbed about the contents of the box. Perhaps he was hoping to avoid Russian import license requirements or duties. At this point, we have no idea what his explanation will be for providing an incorrect description of the items being exported.

One interesting digression: Mr. Zhukov has a Facebook page (although he’s not able to update it at the moment), and the only thing at all that he says that he likes is an album by Murder Death Kill appealingly titled “F*** With Us And Find Out.”  (The asterisks are not part of the original album title.) That album features songs such as “Kill Yourself,” “People Will Die,” and “Hostility.” I’m sure he now wishes that he liked (at least on Facebook) something more innocuous like Tchaikovsky’s Greatest Hits or the Cole Porter Songbook.

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