Archive for the ‘General’ Category



When Economists Write Regs, Everybody Loses

Posted by at 9:38 pm on May 7, 2015
Category: General

Brian Moyer via [Public Domain]
ABOVE: Dr. Brian Moyer,
BEA Director

Are you an individual residing in the United States? Do you have no ownership interest in any foreign enterprise? Have you filed yet a Form BE-10 with the Bureau of Economic Analysis (“BEA”) informing them that you don’t have any ownership interest in any foreign business? No, you haven’t? Well if you don’t file that form with the BEA by May 29, 2015, you can be fined $10,000. You’re welcome.

So get to it and get that BE-10 Claim for Not Filing filed. You can file it electronically here. Oh, and where else but in DC would you have to file a claim for not filing?

Now, it may not actually be the case that you have to file, but that is not what BEA’s regulations say. They say clearly that you have to file. The relevant section is 15 C.F.R. § 801.8, which establishes the mandatory filing requirement for U.S. persons with respect to their interests, or lack thereof, in foreign business enterprises. It says this:

(a) Response required. A response is required from persons subject to the reporting requirements of the BE-10, Benchmark Survey of U.S. Direct Investment Abroad—2014, contained herein, whether or not they are contacted by BEA. …

(b) Who must report. (1) A BE-10 report is required of any U.S. person that had a foreign affiliate—that is, that had direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, including a branch—at any time during the U.S. person’s 2014 fiscal year.

(2) If the U.S. person had no foreign affiliates during its 2014 fiscal year, a “BE-10 Claim for Not Filing” must be filed by the due date of the survey.

This couldn’t be much clearer, could it? Everyone must file who is required to report, even if they are not contacted by BEA. And section (b) which defines “who must report” includes in subsection (2) U.S. persons without foreign affiliates and therefore must file a BE-10 Claim for Not Filing.

It is possible, indeed quite likely, that what BEA meant to say, but could not manage to actually say, is that the BE-10 Claim for Not Filing only must be filed by persons contacted by BEA to file and who did not have a 10 percent or greater interest in a foreign enterprise. So even though section (b) purports to define “who must report” that definition only means to cover people described in (b)(1) — who have a 10 percent interest — and not those described in (b)(2) who don’t.

First moral of the story: Economists shouldn’t write regulations and lawyers shouldn’t run the economy

Second moral of the story: If you are a U.S. person (business or individual) and you do have an 10 percent in a foreign enterprise, you have to file a BE-10 by May 29, 2015, something which I suspect many companies don’t know right now

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Happy Halloween!

Posted by at 7:54 am on October 31, 2014
Category: General

ITAR Pumpkin by Kevin Wolf

Another regulatory carve-out by Kevin Wolf. . .

Kevin tells me that he considered carving an EAR pumpkin, but it would have been too complex and, in any event, not spooky enough once it was understood.

(Photograph by Kevin Wolf; used with permission)

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New York Times Futilely Calls for End to Cuba Embargo

Posted by at 9:52 pm on October 16, 2014
Category: General

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (], via Flickr this week the New York Times editorial board called for the end of the fifty-three-year-old embargo on Cuba. There is, of course, nothing unfamiliar or new about the arguments forwarded by the Times for the end of the embargo. The Board noted that Castro used the embargo as an excuse for his own regime’s shortcomings, that the embargo was ineffective in ending the Castro regime, and that it has caused needless suffering among ordinary Cubans.

Of course the chance that Congress will take any action to end the Cuban embargo is about the same as the chance that Castro will shave his beard and join the cast of Dancing with the Stars, and the opinion of the Times editorial board is unlikely to change these odds. The Times acknowledges that Congressional action would be necessary but suggests that the White House could still take some actions.

But there is much more the White House could do on its own. For instance, it could lift caps on remittances, allow Americans to finance private Cuban businesses and expand opportunities for travel to the island.

Section 204 of the Helms-Burton act purports to put restrictions on the President’s ability to end the embargo on Cuba. But that does not prevent amelioration or change of the scope of the embargo as long as the White House does not abrogate specific legislative restrictions such as the prohibition on investments in telecommunications, the prohibition on investments in confiscated property, or limits on vessels that have visited Cuban ports. Even so, it is far from clear that this or any subsequent White House is or will be willing to take the political hit involved in any major modifications of the embargo.

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Comment Notifications

Posted by at 12:26 am on July 23, 2014
Category: General

For some reason, there was a period of about a week during which I was not getting notifications of comments pending approval, so there were a number that I just discovered and approved. I am trying to figure out why that happened and fix it. In the meantime my apologies to commenters who were stranded in the moderation queue.

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Seeing Through the Smoked-Filled Rooms of Sanctions

Posted by at 6:37 pm on June 23, 2014
Category: Economic SanctionsGeneralOFACRussia SanctionsSanctionsSDN List

By Erifnam at en.wikipedia [GFDL ( or CC-BY-SA-3.0 (], from Wikimedia Commons

The Canadian newspaper The Globe and Mail reported last week that lobbying records made public this month show the CEO and a lobbyist for Kinross Gold Corp., a Canadian gold mining company and one of the world’s largest, “have had numerous communications” with Prime Minister Stephen Harper’s foreign affairs policy adviser, Canada’s deputy minister of foreign affairs and the Canadian ambassador to Russia in order to discuss “policies and regulations related to the imposition of economic sanctions.”

With almost a third of Kinross’s global gold production reportedly coming from its two mines in Russia, Kinross has good reason to to try to find out, to the best extent possible, whether the Canadian government plans to impose sanctions relating to Russia that may affect Kinross business in that country.

Canadian sanctions against Russia, like U.S. and EU laws, involve prohibitions on dealings with targeted persons and give government authorities wide latitude to designate individuals and entities with essentially no public notice or consultation.  Under U.S. law, for example, OFAC can designate an SDN at any time without having to comply with public notice and review requirements imposed on almost all government agencies so long as the person meets the often broad criteria of a sanctions target under an executive order.

Moreover, OFAC deems any entity owned 50% or more by an SDN to be treated as an SDN itself.  As we previously reported, the so-called 50% rule has caused a variety of compliance conundrums relating to Russia as a few individuals, like Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg, own major companies in many sectors of the Russian economy.  To boot, Kinross may have gotten understandably skittish when, south of the border, President Obama issued his latest Russian sanctions-related executive order in late March permitting imposition of sanctions on those operating in various sectors of the Russian economy, including metals and mining.  Under that criteria, Kinross itself might later be designated an SDN.

Sanctioning governments have, of course, reasons for their secrecy.  Intended targets can’t be announced prior to sanctions being imposed and, therefore, given a head start in transferring their property and money to safe haven countries.  But with little guidance and a lot at stake, Kinross has every reason to reach out to government officials to gain any clarity possible and do one’s best to make sure business can continue as usual or, if not, how to adjust its operations to comply with applicable laws.

Kinross is not alone.  U.S. federal lobbying records for this year’s first quarter are now publicly available.  For example, Coca-Cola, Xerox and Citgo are among the variety of companies that have reported lobbying efforts relating to sanctions against Russia.  Because sanctions against Russia weren’t imposed until the end of the first quarter in March, we expect to see disclosures in subsequent quarters from more companies involved in such efforts.

If there are smoke-filled rooms in economic sanctions, the smoke is mostly from government cigars (and maybe Cuban-origin for the Canadians).  The smoke arises where statutes, regulations and executive orders give government agencies dangerously broad discretion in identifying the sanctions targets and enforcing sanctions laws in ways that are not readily apparent from the laws themselves.

Future economic sanctions laws are not likely to be written any clearer.  Much of their effectiveness lies in not knowing who will be targeted and, as a result, the better chance there is that companies and individuals will police themselves in order to avoid possible violation.  In such an uncertain environment, finding people who can get as much information as possible from government officials enforcing sanctions will always be an invaluable resource.

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