Archive for the ‘BIS’ Category


Apr

5

Slow Boat From Batam


Posted by at 11:17 pm on April 5, 2016
Category: BISCriminal PenaltiesExtraditionIran Sanctions

  1. User:Abelard Fuah, via Wikimedia https://en.wikipedia.org/wiki/File:Batam_City_Mix.jpg#/media/File:Batam_City_Mix.jpg licensed under CC BY-SA-3.0 [http://creativecommons.org/licenses/by-sa/3.0/][cropped]On Monday, according to a DOJ press release published on the Bureau of Industry and Security website, the United States finally extradited Steve Lim, a Singaporean national who had been languishing in a jail in Batam, Indonesia. As we reported here and as noted in the DOJ press release, Lim was under indictment in the United States for shipping radio modules from the United States to Iran. In October 2014, Lim had hopped a ferry from Singapore to Batam to attend a trade show and was nabbed at the ferry terminal. An Indonesian judge ultimately permitted, in July 2015, Lim’s extradition notwithstanding the absence of an extradition treaty between Indonesia and the United States

What the DOJ press release fails to mention is that a court in Singapore had refused to extradite Lim in 2011. Singapore, which does have an extradition treaty with the United States, has a dual criminality requirement for extradition. Because the export of the radio modules from Singapore to Iran was not illegal under the law of Singapore, the request by the U.S. for extradition was refused. Lim would still be in Singapore had he not made that trip to Indonesia. What this illustrates is that although U.S. law enforcement authorities claim jurisdiction over foreign nationals who, without ever setting foot in the United States, export items from the U.S., the assertion of this jurisdiction is not without international controversy.

Photo Credit:User:Abelard Fuah, via Wikimedia http://bit.ly/23fG242 licensed under CC BY-SA-3.0 [http://creativecommons.org/licenses/by-sa/3.0/][cropped]

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Copyright © 2016 Clif Burns. All Rights Reserved.
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Mar

22

Easy Come, Easy Go, Easy Return: ZTE Temporary General License Issued


Posted by at 11:28 am on March 22, 2016
Category: BISEntity List

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]According to the Federal Register public inspection files, BIS will publish on March 24, a temporary general license authorizing exports to ZTE Corporation and ZTE Kangxun under the same terms and conditions as were in place prior to the order placing those two companies on the Entity List. This means that, effective March 24, licenses won’t be required for exports to these two entities unless licenses are otherwise required based on the exported item or the proposed end use. The temporary general license, which expires on June 30, 2016, does not include Beijing 8-Star or ZTE Parsian, which were included in the initial designation of ZTE entities.

The problem with the temporary general license is that there is no assurance that BIS will extend the license beyond that date. If an exporter relying on this license, exports an item to ZTE before June 26 but the license is then revoked, the exporter will be effectively excluded from warranty service on that item. Exporters shipping to ZTE during this regulatory limbo would be well advised to make sure that their contracts with ZTE are modified to prevent warranty claims by ZTE if the general license should, at any time, be revoked.

Photo Credit: ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

17

Fat Man Sanctioned over Little Boy


Posted by at 11:16 pm on March 17, 2016
Category: BISNorth Korea SanctionsOFAC

Fat Man and Little Boy via KCNA [Fair Use]Yesterday, the White House released an Executive Order ramping up U.S. sanctions on North Korea as a result of a recent ballistic missile test by the Norks and, it can be reasonably assumed, as a result of the Fat Man‘s recent claim to have his own Little Boy (or is it vice versa?). The new sanctions impose a complete ban on all exports of goods and services to North Korea, and as usual, with any executive order that gets drafted over at OFAC, the order, whether due to sloppy drafting or purposeful ambiguity, raises more questions than it answers.

Here’s the relevant provision that needs to be parsed:

Sec. 3. (a) The following are prohibited:

(i) the exportation or reexportation, direct or indirect, from the United States, or by a United States person, wherever located, of any goods,
services, or technology to North Korea;

(b) The prohibitions in subsection (a) of this section apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order or pursuant to the export control authorities implemented by the Department of Commerce, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.

Prior to this order licenses have been required by the Bureau of Industry and Security for all items subject to the EAR other than food or medicine. BIS would license, on a case-by-case basis, EAR99 items (other than luxury goods) to North Korea. Items on the Commerce Control List subject to NP or MT controls are subject to a presumption of denial.

The new provision, due to the “notwithstanding” clause of subsection (b), appears to invalidate all existing specific licenses for exports to North Korea. Whether this Order changes the existing policy of BIS for future licenses is unclear and depends on what is meant by “export control authorities implemented by the Department of Commerce,” which is anybody’s guess. What is clear is that items not subject to the EAR, which previously could be exported to North Korea, cannot now be exported to the North Korea by U.S. persons unless such items are transshipped through the United States and a license is obtained from BIS or an OFAC license is obtained if the items are not shipped back to the United States first.

At the same time as the Executive Order, OFAC issued nine new general licenses, such as General License No. 7 which authorizes mail and telecommunications services to North Korea. Other general licenses permit most of the usual exceptions to bans on exports of services such as emergency medical services, legal services, intellectual property services, and personal financial remittances. Oddly, the normal exception for services related to Internet-based communications is not included. So, you can send snail mail to the Norks but sending email is not allowed.

One nagging question is whether the travel and information exceptions in the Berman Amendment remain in place. Neither OFAC’s existing North Korea regulations nor the order contain a travel exemption, such as the one contained in section 560.210(d) of the Iranian Transactions and Sanctions Regulations. Nor does the order or those regulations contain an exemption for informational materials such as is found in section 542.211(b) of the Syria Sanctions Regulations.

Both the travel and informational material exceptions in the Berman Amendment may not be applicable because the Berman Amendment only applies to actions taken under the International Emergency Economic Powers Act (“IEEPA”). This latest executive order relies not only on IEEPA but also on the North Korea Sanctions and Policy Enhancement Act of 2016 (Public Law 114-122). Whether or not section 3 of the new order is authorized by the North Korea Sanctions and Policy Enhancement Act is not clear.  If section 3 is authorized under that statute, services related to travel to North Korea and the provision of informational services to North Korea would not be permitted unless OFAC specifically authorizes such services in its regulations or provides for specific licenses which, so far, it has not done.

Photo Credit: KCNA

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Mar

7

ZTE Zells ZTE Zhells by the Zeashore


Posted by at 5:57 pm on March 7, 2016
Category: BISIran Sanctions

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use]

The Bureau of Industry and Security (“BIS”) is placing Chinese telecom giant ZTE (and three related companies) on the Entity List tomorrow according to this pre-release version of the Federal Register notice announcing the action. As a result, all items subject to the EAR will require an export license prior to any export to ZTE. Under this action, all applications for such licenses will be subject to a policy of denial.

The action is taken as a result of the diversion by ZTE of certain U.S. origin products to Iran. More important, perhaps, than the diversion itself is that BIS caught ZTE playing a shell game and ZTE lost. Somehow or other, BIS got its hands on a ZTE internal document, labelled “Top Secret Highly Confidential” and titled, innocently enough, “Proposal for Import and Export Control Risk Avoidance.” In fact, this incriminating document might be better titled “Everything You Wanted to Know about Shells but Were Afraid to Ask.” It sets out, in excruciating detail, a plan for setting up a chain of shell companies through which the U.S. goods would pass with the hope that it would throw the U.S. government off the scent of what was really going on. Under this plan, a Chinese company owned by an allegedly independent Chinese investor would buy U.S. parts, sell them to another Chinese company, owned by another allegedly independent Chinese investor, which would sell those to another single “independent” Chinese investor company in Dubai, which would then sell the goods to Iran.

Two juicy quotes from the report will give you the idea of what ZTE had in mind:

However, the detached [shell] companies … are invested by natives of [the People’s Republic of China] and not only does our company need to make [the detached shell companies] operate independently, [our company] also needs to effectively control them.

Yea, sure, that works … if you believe in oxymorons and unicorns.

The biggest advantage of [this] Model is that it is more effective, [because it’s] harder for the U.S. Government to trace it or investigate the real flow of the controlled commodities; and in formality, our company is not participating in doing business with [Iran].

Right, “in formality” it’s not doing business with Iran because its being done by those companies that look like they operate independently but which ZTE “effectively control[s].” Game over.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jan

13

BIS Still Mulling Over Cybersecurity Export Rules


Posted by at 11:30 pm on January 13, 2016
Category: BISCyber WeaponsCybersecurity

Untitled by Kevin Wolf via https://scontent.fash1-1.fna.fbcdn.net/hphotos-xfa1/t31.0-8/12471591_10208490792490184_1220994233873918423_o.jpg [Public Domain - Work of U.S. Government]Yesterday Kevin Wolf, the Assistant Secretary of Commerce for Export Administration, testified before the House Subcommittee on Cybersecurity, Infrastructure Protection, and Security Technologies on the much reviled controls in the Wassenaar Arrangements on exports on certain software and technology. His testimony provides detailed insight into the interaction between the Bureau of Industry and Security, which is charged with implementing the Wassenaar Arrangement controls, and the technology and cybersecurity industry and community which was concerned about the overbreadth of the Wassenaar controls of “intrusion” software. This blog has previously articulated some of these concerns, particularly the extent to which the Wassenaar controls on “intrusion” software could reach auto-updating software, Address Space Layout Randomization (ASLR) security measures, and hot-patch programs.

Assistant Secretary Wolf’s testimony reveals that Commerce’s concerns about the potential overbreadth of the Wassenaar controls on intrusion software led the agency to take the “unprecedented step” of releasing the controls as a proposed rule and soliciting industry comments. Such a step is “unprecedented” because normally Commerce simply adopts and adds to the CCL all changes adopted by the Wassenaar Arrangement. The result of the request for industry comment, according to the testimony, was more than 260 comments, “virtually all of them negative.” The negative reaction was echoed in outreach meetings held by Commerce with industry. Assistant Secretary’s testimony summarizes these concerns, including the concerns we have expressed about how they would reach certain auto-updating and hot-patching programs.

Most importantly, Assistant Secretary Wolf’s testimony says this:

Neither the Commerce Department nor the Administration has reached a conclusion about how to respond to the public comments. We are still reviewing and considering them. … The commenters had many suggestions regarding how to address their concerns. The Administration will be reviewing all of them and many other ideas for how to address the policy objectives of the control but without unintended collateral harms. As I have said many times in response to questions about the rule, the only thing that is certain about the next step is that we will not be implementing as final the rule that was proposed.

The moral of this story is clear, even if the shape of the ultimate rule is not. The export industry, as demonstrated conclusively throughout the export control reform initiative, has been loath to comment on proposed rules, whether from fear of standing out from the crowd or because of a belief that such comments will have no effect. As a result, Assistant Secretary Wolf has been known to remark that industry gets the rules they deserve. The response of Commerce here to the issues raised in the comments and industry outreach, however, shows that there are times when public input will have an impact. So the moral of the story is simple: you may not get everything you ask for, but you’ll almost never get what you want if you don’t even ask for it.

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)