Archive for the ‘General’ Category



Why Is Foreign Policy Still on the Internet?

Posted by at 4:47 pm on February 6, 2018
Category: General

Ramzan Kadyrov and Cat via his Instagram account [Fair Use]
ABOVE: Ramzan Kadyrov 

In an article in Foreign Policy titled “Why Is This Man Still on Twitter?” Emily Tamkin and Elias Groll get all confused about sanctions. And they are aided and abetted in this confusion by Peter Harrell from the Center for New American Security (whatever that is). The resulting mess is why I wonder, at least partly in jest, why Foreign Policy is still on the Internet.

The article attempts to answer the question I posed in this post in early January: why is Putin crony and Chechin strongman Ramzan Kadyrov blocked by some social media sites while Bashar Al-Assad and Nicolás Maduro, both of whom are also SDNs, are not? Tamkin and Groll quote Harrell’s supposed answer to this question:

Peter Harrell … explains that the difference might come down to something called the Berman Amendment.

The Berman Amendment, Harrell says, is an amendment to the International Emergency Economic Powers Act, or IEEPA, that states nothing in that law can be used to constrain publication.

“If you have a sanctions designation based on IEEPA, it’s very clear that that cannot be used to prohibit publication activities,” Harrell says.

The Berman Amendment applies only to IEEPA sanctions and not other sanctions programs, such as the separate legal provisions outlining the Global Magnitsky Act. “There is a legal argument that because Kadyrov was sanctioned under Magnitsky, rather than under IEEPA sanctions, the Berman Amendment does not apply,” Harrell says, meaning the U.S. government could conceivably sue Facebook to force Kadyrov’s removal, a risk the company may have not wanted to take.

Let’s leave aside for the moment Heller’s bizarre summary of the Berman Amendment, which deals with import and export of informational materials rather than “publication activities.” Instead, I have to point out, as I did in my earlier post, that Section 584.206(b) of the Magnitsky Sanctions Regulations clearly states:

The prohibitions contained in this part do not apply to the importation from any country and the exportation to any country of any information or informational materials, as defined in §584.304, whether commercial or otherwise, regardless of format or medium of transmission

So, okay, I guess Heller, Tamkin and Groll couldn’t be bothered to actually read the regulations that they were trying to rely on.  Reading regulations, after all, is hard.

But let’s also look at Heller’s inaccurate statement that the Berman Amendment would not apply to sanctions adopted under the Magnitsky Act rather than IEEPA. Once again, Heller, Tamkin and Groll could not be bothered to read the Magnitsky Act, which, if they had, would have revealed the bankruptcy of their argument. Section 406(a)(1) of the Act provides the authority under which the President may block and add to the SDN list human rights violators in Russia:

The President shall exercise all powers granted by the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) … to the extent necessary to freeze and prohibit all transactions in all property and interests in property of a person who is on the list required by section 404(a) of this Act if such property and interests in property are in the United States, come within the United States, or are or come within the possession or control of a United States person.

By explicitly linking Magnitsky Act sanctions to those “powers granted by” IEEPA, it certainly means that the limitations on those powers, like the Berman Amendment, would apply to Magnitsky Act sanctions. That, of course, is why OFAC adopted the section of the Magnitsky Sanctions Regulations cited above that carves out the import and export of informational materials.

So both questions remain unanswered.

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OFAC Fines Foreign Company for Following Applicable Foreign Law

Posted by at 8:41 am on December 1, 2017
Category: Cuba SanctionsForeign CountermeasuresGeneralOFAC

American Express Office in Rome, image by User Mattes [CC-BY-3.0] (], via Wikimedia Commons Office of Foreign Assets Control (“OFAC”) recently announced that it has extracted $204,277 from American Express as a result of 1,818 credit card transactions in the amount of $583,649.43 for purchases made in Cuba. At issue were Mastercard and Visa corporate credit cards issued by BCC Corporate SA to corporations for use by the employees of those corporations, which cards were then used by those employees to make the Cuban purchases that were at issue.. BCC is a wholly-owned Belgian subsidiary of Alpha Card Group, another Belgian company  and a 50/50 joint venture of BNP Paribas Fortis and American Express.

The immediate question here, which OFAC can’t be bothered to answer, is how OFAC has the authority to fine a Belgian company for its dealings with Cuba. The Cuban Assets Control Regulations prohibit Cuba transactions by persons “subject to the jurisdiction of the United States.” Section 515.329 of the CACR define persons subject to the jurisdiction of the United States to include companies “owned or controlled” by a corporation organized under the laws of the United States

The CACR does not define “owned or controlled.”  That’s probably because everyone — except apparently OFAC — understands what that means, namely that the U.S. company owns 100 percent of the company or some lesser amount coupled with de jure or de facto control. In the case of a 50/50 joint venture neither party owns or controls the venture.  (Owned in this context cannot mean any interest, no matter the size, since that would render the addition of “or controlled” unnecessary).

To make matters worse, OFAC is — yet again — punishing a company for complying with applicable foreign law.   Anyone who reads this blog knows that I have pointed out time and time again that it is illegal for companies doing business in the European Union. Council Regulation (EC) No 2271/96 of 22 November 1996 prohibits companies incorporated in the E.U., such as BCC Corporate SA, from complying with the U.S. embargo on Cuba. OFAC does not, of course, mention BCC’s obligation to comply with local law or even cite it as a mitigating factor here. This is particularly egregious where the company at issue is not even subject to U.S. jurisdiction.

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OFAC Repeals, IPSA Facto, Iran General License H.

Posted by at 6:29 pm on August 15, 2017
Category: GeneralIran SanctionsOFAC

IPSA Phoenix Office via Google Maps [Fair Use]
ABOVE: IPSA Phoenix Office

Last Thursday, the Office of Foreign Assets Control (“OFAC”) announced that IPSA International had agreed to pay a fine of  $259,200 to settle charges that it violated the Iranian Transactions and Sanctions Regulations (“ITSR”)  in connection with background investigations conducted on Iranian nationals by IPSA’s foreign subsidiaries.  In order to support the charges against IPSA, OFAC unnecessarily concocted a theory which effectively repeals Iran General License H and substantially increases the risk that U.S. companies will be fined for what had previously thought to be legal activities by foreign subsidiaries involving Iran.

At issue are two contracts entered into by IPSA: one with a foreign government (“Contract #1”) and the other by IPSA’s Canadian subsidiary with a foreign government-owned financial institution (“Contract #2).  Both contracts required background checks on various individuals, some of whom were in Iran.   Those background checks, including the ones in Iran, were conducted not by IPSA but by its Canadian subsidiary and another subsidiary in Dubai.  OFAC concedes that both subsidiaries “managed and performed” the background investigation contracts involving the Iranian nationals.  Significantly, OFAC does not allege or claim that the results of these investigations were ever communicated by either foreign subsidiary to IPSA in the United States.   Nevertheless, OFAC claims the conduct of these investigations in Iran constituted a violation of the ITSR.

In the case of Contract # 2, OFAC alleges that IPSA violated the prohibition against facilitation in section 560.208 of the ITSR when it “reviewed, approved, and initiated the foreign subsidiaries’ payments to providers of the Iranian-origin services.”  That, if true, would make out a fairly clear-cut facilitation violation by IPSA.

Things get problematic, however, in the case of Contract #1. OFAC asserts that in that case  IPSA imported Iranian-origin services into the United States in violation of section 560.201 of the ITSR.  This was not because the results of the background checks were communicated to IPSA in the United States because, as we’ve noted, OFAC has not alleged that occurred.  It was because the background checks in Iran were conducted “for the benefit of” IPSA.

This is a troubling rationale because everything done by foreign-incorporated subsidiary of a U.S is company is “for the benefit” of the parent company in the United States.    Under this benefit theory, General License H, which permits certain activities by foreign subsidiaries, is completely eviscerated.  IPSA’s  signing and entering into the contract performed by the subsidiaries clearly facilitated those activities in violation of section 560.208 of the ITSR, so there was no need to suggest a violation based on a benefit theory.  It is unclear why OFAC would have chosen in the case of Contract #1 to argue importation of services under a benefit theory rather than facilitation unless it intended to create uncertainty about the proper scope of General License H.



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New Administration May Change Landscape of U.S. Trade and Export Policy

Posted by at 1:13 pm on November 9, 2016
Category: General

YM Ningbo seen from the Golden Gate Bridge by Richard Erikkson [CC-BY-SA-2.0 (], via Flickr [cropped and processed]

Although it is impossible to tell whether the new Trump administration will follow through on its campaign promises to irrevocably alter the landscape of U.S. trade with foreign countries, businesses should realize that the new administration’s power to do so is broad and should act accordingly in the coming weeks and months to take steps to limit the impact that these changes could have on their business and foreign trade.  Of course, it remains possible that the views of the new administration’s economic advisers may prevail against the implementation of some of these promises.

1. Trade Agreements

At various times throughout the campaign, candidate Trump promised to withdraw from the WTO, to terminate NAFTA, and to impose retaliatory tariffs on China and Mexico.  Section 301 of the Trade Act of 1974, 19 U.S.C. § 2411 gives the President, acting through the United States Trade Representative, the unilateral power, among other things, to “suspend, withdraw, or prevent the application of, benefits of trade agreement concessions” and to “impose duties or other import restrictions” without further authorization from Congress.

Unapproved trade agreements, including the Trans-Pacific Partnership (“TPP”) and the Trans-Atlantic Trade and Investment Partnership (“T-TIP”), are likely now dead on arrival.   At this point the Obama administration has yet to submit the implementation bill required to start the clock on Congressional action on TPP under fast-track, so the fate of the TPP will be decided by the next Congress and the Trump administration.  If the Trump administration does not submit to Congress a draft implementation bill, as required by fast track, and it seems likely that he will not, TPP will not go into effect.

2. Iran Sanctions

Candidate Trump repeatedly expressed his desire to back out from the Joint Comprehensive Plan of Action (“JCPOA”), otherwise simply known as the Iran nuclear deal.   Since the JCPOA was entered into by the United States by executive action, the Trump administration can withdraw from the deal unilaterally and immediately, and there is a good chance that it will.

If that happens, we can count on the regulatory changes adopted by the Office of Foreign Assets Control (“OFAC”) to implement the JCPOA to be reversed.  These include General License H, which permits foreign subsidiaries of U.S. companies to engage in trade with Iran. They also include the relaxed policy on civil aviation sales to Iran.

The issue here will be both the time frame for such reversal and whether there will be any grandfathering in place.  Historically, OFAC has been slow to act and has included limited grandfathering provisions which either allow certain agreements with the sanctioned country to proceed or provide a wind-down period to terminate those agreements.  Even with these possibilities, U.S. businesses selling civil aircraft to Iran and permitting foreign subsidiaries to trade with Iran should, at a minimum, put those activities on hold and probably begin considering plans to terminate these activities.

3. Cuba Sanctions

Candidate Trump also vowed to roll back the Obama administration’s actions that have relaxed many of the sanctions against Cuba. This would include the removal of Cuba from the list of state sponsors of terrorism.

The removal of Cuba from the list of state sponsors of terrorism was largely symbolic, so putting it back on the list will not have significant impact.

  • Under section 40 of the Arms Export Control Act, 22 U.S.C. § 2780, any country put on the list of state sponsors of terrorism is automatically subject to an arms embargo. Of course, even after Cuba was removed from the list, there was no chance any arms shipments from the U.S. to Havana would be approved in the foreseeable future.
  • Section 6(j) of the defunct Export Administration Act, 50 U.S.C. App § 2405, requires a license for exports to state sponsors if the export could make a “significant contribution to the military potential of such country” or if it could “enhance the ability of such country to support acts of international terrorism.” And, in those instances, Congress must be given notice of such exports thirty days in advance. None of the changes in the Cuba sanctions contemplated any such exports.
  • Section 7205 of the Trade Sanctions Reform and Export Enhancement Act, imposes a license requirement for shipping those goods to a sanctioned country if that country is also on the state sponsor of terrorism list. However, that section specifically identifies Cuba as a state sponsor of terrorism and imposes the license requirement on exports of agricultural products, medicines and medical products to Cuba. So, removing Cuba from the terrorism list did not eliminate the need for exporters to Cuba to continue to file the export notifications required to utilize License Exception AGR for TSRA exports to Cuba.

Even if adding Cuba back to the list would not have much impact on trade relations with Cuba, it seems likely that the other recent revisions, such as the general licenses for travel and favorable licensing policy for certain exports such as telecommunications equipment, civil aviation equipment, and certain items in support of Cuba’s private sector, have a good chance of reversal.  The regulations permitting entry into executory contracts subject to license approval will likely disappear as well.

Certainly those planning to use the general travel licenses, should do so as soon as possible.  The changes in licensing policy mean that businesses should also seek licenses for contemplated exports to Cuba as soon as possible, with the understanding that those licenses might be terminated at the same time the favorable licensing policy is reversed.

4. Russia Sanctions

At the same time that the new Trump administration is likely to impose stricter controls on Cuba, it may well loosen sanctions on Russia, Cuba’s longtime ally and supporter.   Vladimir Putin has strengthened Russian ties with Cuba and even called for lifting of the U.S. embargo on Cuba.  Although Trump is not likely to heed this request from Putin, there is a stronger chance that Trump’s call for better relations with Russia will lead to the lifting or loosening of the sanctions on the Crimean territory as well as removals from, or elimination of, the Sectoral Sanctions Identifications List.  Restrictions on oil-related exports to Russia could be lifted as well.  Putin supporters that were placed on the List of Specially Designated Nationals and Blocked Persons might also get a reprieve from the Trump administration.

Photo Credit: YM Ningbo seen from the Golden Gate Bridge by Richard Erikkson [CC-BY-SA-2.0 (], via Flickr [cropped and processed]. Copyright 2010 Richard Erikkson

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If It Were Real, It Wouldn’t Be “Deemed”

Posted by at 10:19 pm on September 27, 2016
Category: General

Printed Guns via [Fair Use] The Fifth Circuit last week released an opinion upholding the District Court’s decision not to grant Defense Distributed’s motion for a preliminary injunction.  Defense Distributed had sought a preliminary injunction against enforcement by the Directorate of Defense Trade Controls (“DDTC”) of its order prohibiting the company from posting on the Internet plans for printing guns with 3-D printers.

The majority opinion  did not really reach the merits of the case or whether DDTC had the right to prohibit U.S. citizens from uploading gun plans to the Internet. Rather it turned on a procedural issue: whether Defense Distributed or DDTC would be hurt more by an injunction. The majority opinion weighed that balance in favor of DDTC, arguing that a preliminary injunction would result in untold millions of foreigners printing crappy plastic guns whereas not granting the injunction would just mean that Defense Distributed had to sit on its hands until trial.

The dissenting opinion of Judge Jones, however, dove straight into the merits, arguing that DDTC’s theory of the case was fatally flawed because uploading things to the Internet is not an “export” within the meaning of the Arms Export Control Act. To summarize Judge Jones, “export” means sending stuff across a border for money. As a result, Defense Distributed could not be held to have engaged in an export as a result of “the domestic publication on the Internet, without charge and therefore without any ‘trade,’ of lawful, nonclassified, nonrestricted information.”

Judge Jones does not stop at the notion of mere access as an export, but zeroes in on the “across borders” criterion to take dead aim against “deemed exports.”

Although the majority opinion adopts the State Department’s litigating position that “export” refers only to publication on the Internet, where the information will inevitably be accessible to foreign actors, the warning letter to Defense Distributed cited the exact, far broader regulatory definition: “export” means “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States of abroad.” There is embedded ambiguity, and disturbing breadth, in the State Department’s discretion to prevent the dissemination (without an “export” license) of lawful, non-classified technical data to foreign persons within the U.S. The regulation on its face, as applied to Defense Distributed, goes far beyond the proper statutory definition of “export.”

Or, more succinctly, if it was a real export they wouldn’t have to call it a “deemed” export.

Judge Jones’s opinion is certainly grounded in common sense, something often lacking in export control. In the early days of my practice, I tried to explain to a former military officer who was CEO of a client that disclosing information to a foreign employee in the United States was an export. He paused for a moment and then, with the veins in his neck bulging and his cheeks flushed, he said “That is the dumbest [bad word] thing I’ve ever heard come out of the mouth of a lawyer” and promptly invited me to leave his office immediately.  I still think his assessment of “deemed exports” was dead on.

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