Archive for the ‘BIS’ Category


Apr

27

The Gray Lady Seems Pretty Gray About Export Law


Posted by at 5:51 pm on April 27, 2017
Category: BISOFAC

Huawei HQ by Brücke-Osteuropa Ditzel [Public Domain], via https://commons.wikimedia.org/wiki/File:Huawei_1.JPGThe New York Times yesterday reported that it had, somehow or other, laid its hands on an administrative subpoena sent last December by the Office of Foreign Assets Control (“OFAC”) to Chinese telecom manufacturer Huawei. The subpoena, according to the newspaper, asks for information on the company’s dealings with “Cuba, Iran, Sudan and Syria over the past five years.”

The article notes that a similar subpoena had been issued earlier last summer by the Department of Commerce, presumably a reference to the Bureau of Industry and Security (“BIS”). This appears to have caused the Times to become perplexed over why OFAC was now sticking its nose into the matter. So they asked someone whom they imagined to be an expert what was going on and he came up with this humdinger:

The most likely thing happening here is that Commerce figured out there was more to this than dual-use commodities, and they decided to notify Treasury.

Nope. Let’s hope for this guy’s sake that he’s been misquoted. Our expert here seems to be unaware that BIS is concerned with more than the export of dual use items. Maybe Part 746 was ripped out of his copy of the Export Administration Regulations or, possibly, his dog ate that part. That part regulates exports of all items “subject to the EAR” to Cuba, Syria, North Korea and Crimea, not just dual-use items.

And, of course, OFAC has rules that prohibit exports of goods to Cuba, North Korea, Sudan, Crimea and Iran and the export of services to Syria as well as the five previously mentioned locations. So the real answer here as to why OFAC is piling on here is because it can, not because there were concerns by BIS about transactions outside its jurisdiction.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

28

Commerce Export Award Winner Fined $27 Million for Export Violations


Posted by at 8:08 pm on March 28, 2017
Category: BIS

Access USA Facebook Page photo via https://www.facebook.com/myuscom/photos/a.10150689214007268.416222.88639537267/10154158962337268/?type=3&theater [Fair Use]

Access USA Shipping, which runs the website MyUS.com, was once the darling of the Commerce Department.  According to the company’s website, the company won that agency’s “President’s ‘E’ Award” for exporters. Do they still get to keep that award after agreeing to pay the Department of Commerce’s Bureau of Industry and Security (“BIS”) a $27 million for 150 export violations?

The allegations contained in the BIS Charging Documents, if true, are pretty harrowing. According to BIS, Access USA changed values and item descriptions in export documents to avoid export scrutiny, describing, for example, guns and weapons parts as “sporting goods accessories,” “fishing tools and spare parts,” or “tailoring tools.” In another case, employees described exported rifle stocks and grips as “toy accessories.” And then, according to BIS, the company had a “personal shopper program” not to help busy executives pick out the best ties or dresses but to have employees pose as the foreign customer, using the employee’s own personal credit cards and home addresses, where the U.S. seller had refused to sell export controlled goods to that foreign customer. There’s plenty more, but you get the gist.

Not surprisingly, the charging documents point out at length that BIS had made “outreach” visits to explain the export laws to Access Shipping. The purpose of these references, apparently, was to bolster the case, as if that were needed, that the company knew what it was doing was on the dark side of the shady line. It strikes me that when guns are described as fishing tools — hey look, it’s a barrel of fish! — you’ve pretty much got the intent issue covered.

This reference to “outreach” visits reinforces the point I’ve made before that these “outreach” visits are not as much made out of the agency’s altruistic desire to educate as they are made to build future cases when the “outreach” victim makes a mistake — although this particular case, admittedly, seems pretty far from an innocent mistake.  Just say no to “outreach” visits.  They will provide less information than sending employees to real training conferences and seminars and will only come back to haunt you.

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Mar

24

About That Laptop Ban


Posted by at 5:31 pm on March 24, 2017
Category: BISDDTC

Qatar Airways - Airbus A380 by Glynn Lowe Photoworks [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/mDLaXv [cropped and processed]The United States and the United Kingdom just announced that laptops (and other electronic devices larger than a cellphone) would have to be checked as luggage and could not be carried by passengers into cabins when traveling on non-stop flights from certain destinations in the Middle East and North Africa, including Istanbul, Cairo and Doha, among others. I’m sure that some readers wondered how they were going to work on such flights while another (possibly much larger) group wondered how they would watch “Batman v. Superman” or “Bad Santa 2” during their flights home.

Of course, I wondered whether you would be arrested when you landed if you put in the hold a laptop with export controlled technical data, technology or software. That’s because I’m always looking out for my readers.

The issue, at least as far as BIS is concerned, is whether License Exception TMP or BAG still applies if you separate yourself from the laptop with controlled technology or software at check-in. TMP covers company laptops and BAG will cover personal laptops owned by the passenger.

Under section 740.9(a)(1) of License Exception TMP, items that are exported as “tools of the trade,” which includes software and hardware, “must remain under the “effective control” of the exporter or the exporter’s employee.” I would take this to mean that if the laptop or software on it is controlled for the destination from which the employee is returning, it may not be checked. This is somewhat odd since that same provision allows that laptop and software to be shipped “unaccompanied” within one month prior to the employee’s arrival in the foreign country.

On the other hand,  TMP does not impose the “effective control” on technology on a laptop that would require a license for the traveler’s destination. Instead, section 740.9(a)(3) speaks only of access controls such as a password for the device on which the technology is controlled.

License Exception BAG, under section 740.14(c)(1), only applies to items “owned by the individuals (or by members of their immediate families) … on the dates they depart from the United States.” So this exception would only apply to personally-owned laptops and personally-owned software if they are controlled to the traveler’s destination. Oddly, license exception BAG does not have the “effective control” limitation, so personal laptops could be checked consistently with the license exception even with EAR-controlled software. Additionally, BAG permits export of technology on the laptop, in the hold or the cabin, if there are access controls such as a password.

The ITAR deals with this travel issue in section 125.4(b)(9). As with EAR-controlled technical data, a laptop with ITAR-controlled technical data can be checked and stored in the hold as long as the laptop is protected with a password.

So, the only real issue prohibition under the ITAR or EAR against checking a laptop is when the laptop is not the personal property of the traveler and it contains software that is controlled under the EAR to the traveler’s destination. If there is ITAR-controlled technical data or EAR-controlled technology, a password on the device is sufficient.

Pardon me for a little skepticism here but it seems to me that this electronics ban has more to do with limiting foreign carrier competition in the United States than it does security. To begin with, it covers devices such as Kindles and cameras that are not much different from the size of a cellphone and which certainly do not seem to be more efficient threat vectors. More significantly, a person bent on terror using one of these devices merely needs to change his flight plan to include a stopover (where he won’t be screened again) before continuing to the United States — which is exactly what most travelers will do to avoid being separated from their expensive electronics.

Photo Credit: Mojito by Sami Keinänen [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/4GyGSs [cropped]. Copyright 20xx Sami Keinanen

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

17

Chocolate Bunnies, Marshmallow Peeps and an Easter Surprise from BIS


Posted by at 11:12 am on March 17, 2017
Category: BISChinaHong Kong

Hong Kong International Commerce Center by Bernard Spragg [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/q9tJLV [cropped]The Bureau of Industry and Security is playing Easter Bunny and has left a little Easter egg in the Easter baskets of anyone planning to export certain items to Hong Kong beginning April 19, or two days after Easter Sunday. The Easter egg, er, new rule provides that any export to Hong Kong of an item controlled for NS, MT, NP Column 1, or CB reasons needs an import license from Hong Kong or a statement from Hong Kong that a license is not necessary. These items are not required as part of the BIS license application but must be in the U.S. exporter’s possession before the export is made.

The reason that U.S. exporters need to babysit the compliance by Hong Kong authorities with their own import rules is far from clear. The stated reason for this new rule in the Federal Register notice does not make much sense:

BIS is taking this action to provide greater assurance that U.S. origin items that are subject to the multilateral control regimes noted above will be properly authorized by the United States to their final destination, even when those items first pass through Hong Kong.

Okay, that is what the BIS is licensing process is for and these documents are not even required when applying for the license. So that rationale is, well, not very compelling.

BIS has also published FAQs on the new requirement. These make clear that the requisite documents must be obtained from Hong Kong even if the export is being made pursuant to a license exception.

Who says there are never any surprises in their Easter baskets, just the same old dyed eggs and chocolate bunnies?

Photo Credit: Hong Kong International Commerce Center by Bernard Spragg [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/q9tJLV [cropped]. Copyright 2014 Bernard Spragg

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

1

Assassination In Malaysia Leads To Calls to Redesignate DPRK As A Terrorist State


Posted by at 9:14 pm on March 1, 2017
Category: BISDDTCNorth Korea Sanctions

Kim Jong Un Smoking via KCNA [Fair Use]The assassination by the Norks of Kim Jong Un’s brother in a Malaysian airport with the help of gullible stooges and some VX nerve agent has reignited the debate as to whether the State Department should redesignate the DPRK as a state sponsor of terrorism. The DPRK was first put in the list after it bombed a Korean Air Flight in 1987, killing 115 people. The country was removed in 2008 in return for shutting down its plutonium plant and permitting inspections.

In order to designate a country as a state sponsor of terrorism, a determination must be made that the country “repeatedly provided support for acts of international terrorism.” See, e.g., section 6(j) of the (zombie) Export Administration Act. None of the statutes that invoke that phrase define “acts of international terrorism,” although section 40(d) of the Arms Export Control Act states that the term includes activities that “aid or abet the efforts of an individual or group to use … chemical, biological, or radiological weapons.” I suppose that might cover the murder of an individual with a chemical weapon in an airport, although terrorism seems more readily to mean an act that indiscriminately targets multiple civilians in order to instill fear in a population or community.

Advocates of redesignation have argued that the cyber attack on Sony (in connection with its distribution of the hilarious and decidedly anti-Nork film The Interview) and other assassinations abroad demonstrate repeated acts of terrorism. But again, it’s hard to argue that these acts, while reprehensible, are designed to instill fear in a community.

In any event, the redesignation would be most symbolic. Once designated, U.S. law prohibits arms sales, which are already prohibited. Licenses would be required for certain specified goods, but section 746.4 of the EAR already requires licenses for all items subject to the EAR other than food and medicine. Being designated as a state sponsor of terrorism means that under the Trade Sanctions and Export Reform Act of 2000 a one-year license is required for exports to that country of agricultural commodities, medicine or medical devices, but North Korea is explicitly exempted from this by section 7205(a)(2)

Given that the redesignation of the loathsome Norks would be mostly symbolic, it seems to be a bad idea to torture the definition of “international terrorism” to include computer hacking and individual murders to get there.

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Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)