Archive for the ‘General’ Category


Jul

23

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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Jun

23

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 (www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AK_Street_NW_at_19th_Street.jpg

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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Apr

21

Oh, The Errors You’ll Make!


Posted by at 8:04 am on April 21, 2014
Category: General

By Thomas Erdbrink/The New York Time via http://www.nytimes.com/2014/04/18/world/middleeast/mystery-shrouds-american-plane-at-tehran-airport.html [Fair Use - Commentary on News Story Using Picture]Yesterday the New York Times followed up on its article about the mysterious U.S. plane seen on the runway of an airport in Tehran. According to the follow-up article, the plane was leased by the Bank of Utah by a Ghanaian mining company owned by a brother of Ghana’s president. Naturally, this story was an opportunity for the New York Times to quietly correct the mistake we pointed out in the first article but to go on and make yet another mistake about U.S. sanctions laws. All the news that fits to mess up could be the new slogan for the Times.

As we pointed out in our post on the first article, the Times mistakenly claimed that a license from the Department of Commerce was required for the plane to land in Iran. In the latest story, and without acknowledging the previous error, the Times gets this part right:

To travel to Iran, the aircraft would typically need a license from the Treasury Department’s Office of Foreign Assets Control, the primary enforcer of American sanctions against Iran.

(What do you want to bet they saw our post?)

Of course, fixing one mistake didn’t stop the Times from making a brand new, and even bigger, mistake:

While the Ghanaian company is not subject to the patchwork of sanction rules constricting trade between Iran and the United States, the Utah bank, based in Ogden, is bound by sanctions.

The Ghanaian company isn’t subject to U.S. sanctions? Really? Maybe Times reporters should, you know, pick up the phone and call a sanctions lawyer before opining incorrectly on the scope of U.S. sanctions against Iran. I mean, after all, that’s what that shiny little iPhone in your pocket is for.

Because the plane is classified as ECCN 9A991, it needs an OFAC license in order to be re-exported by a foreign person to Iran. That, after all, is the whole point of 31 C.F.R. § 560.205, which I’ll cite in full here for the benefit of the Times reporters who might not otherwise be able to find it on their own:

(a) Except as otherwise authorized pursuant to this part, and notwithstanding any contract entered into or any license or permit granted prior to May 7, 1995, the reexportation from a third country, directly or indirectly, by a person other than a United States person, of any goods, technology, or services that have been exported from the United States is prohibited, if:

(1) Undertaken with knowledge or reason to know that the reexportation is intended specifically for Iran or the Government of Iran; and

(2) The exportation of such goods, technology, or services from the United States to Iran was subject to export license application requirements under any United States regulations in effect on May 6, 1995, or thereafter is made subject to such requirements imposed independently of this part (see §560.414).

http://www.exportlawblog.com/wp-content/uploads/2014/04/IRAN-master675.jpg

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Apr

8

The Best Question on Burma Sanctions Is Still Unanswered


Posted by at 6:28 pm on April 8, 2014
Category: Burma SanctionsCompliance Programs and ProceduresEconomic SanctionsGeneralOFACSDN ListZimbabwe Sanctions

By Bild von Stefan Grünig, CH-3752 Wimmis (de:Benutzer:Sgruenig)Sgruenig at de.wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABurma06.jpg

OFAC announced last week that it issued additional Frequently Asked Questions and respective answers relating to what remain of U.S. sanctions against Burma.  None of the additional questions or answers is surprising or resolves an issue that is not otherwise answered by other OFAC guidance or applicable general licenses.

The questions and answers are, for the most part, a helpful recitation of the current landscape of sanctions involving Burma that summarize in one place the state of sanctions based on an assortment of scattered statutes, executive orders, regulations and licenses.  But one question stands out along with its non-responsive answer, in part, as follows:

What are the plans to update the SDN List for Burma?

Listings and any potential delistings under our Burma authorities will be pursued as appropriate to meet changing conditions in Burma.

The question itself has a colloquial quality to it as if the frequently asked question really put to OFAC has been along the lines of “What’s going on here?”

As other questions and answers describe, a number of banks remain on the SDN List but General License 19 authorizes U.S. persons to conduct most transactions with the banks.  In a similar situation about a year ago dealing with Zimbabwean banks, we posted about OFAC’s decision to keep those banks on the SDN List but, through a general license, to authorize almost all transactions with them.  At that time, I termed both the Burmese and Zimbabwean banks as SDN-lite designations and warned of the potential compliance difficulties such situations presented.

Keeping an entity on the SDN List would have the effect of blacklisting it from possible business with U.S. persons who rely solely on software to screen names on the SDN List to decide with whom to do business.  The results, of course, would create false positives because most transactions with these Burmese and Zimbabwean entities are permissible under U.S. law.  In fact, running these banks through OFAC’s SDN Search tool produces hits with no mention of any general license permitting dealings with them.

Delisting would, of course, be one option to correct the problem, but that would unblock any currently blocked assets, something OFAC might not wish to do.  Failing that, OFAC should at least put some annotation on the SDN List to denote that these very few entities are to be treated very differently than the thousands of others on the SDN List with whom U.S. persons may have no dealings.  At the moment, the question is back to OFAC, “What are the plans to update the SDN List?”

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Feb

26

O, Canada! The Harper Government Solidifies Position as a Sanctions Hawk


Posted by at 6:17 pm on February 26, 2014
Category: General

By Jamie McCaffrey from Ottawa, Canada (RCMP Sunset Ceremony 2012) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARoyal_Canadian_Mounted_Police_(RCMP)_Sunset_Ceremony_2012.jpg

Canadian Citizenship and Immigration Minister Chris Alexander suggested this week on Canadian television that Canadian sanctions against Russia were a possibility if Russia was to support violent strife in Ukraine.  Although Alexander has since declined to comment on specific sanctions against Russia and other “hypothetical scenarios,” the idea that Canada would sanction Russia in some form should not come as a surprise.

Canada has quietly developed an economic sanctions regime that may be the world’s most aggressive outside the United States.  Case in point is Iran.  While the United States and the EU are at the negotiation table with Iran, Canada has stood steadfastly by its sanctions, which now include a comprehensive trade embargo as of last May.

Some in the Canadian press have pointed out that Canadian Prime Minister Stephen Harper’s alliance with Israel and its Prime Minister Benjamin Netanyahu, who called Harper a “great friend,” is the reason for increasing sanctions against Iran.  But Canadian sanctions remain aggressive in other parts of the world as well.  Canada, unlike the EU, has a comprehensive trade embargo against North Korea.  Canada also has strong sanctions remaining against Burma as well as some of the strongest global sanctions against Syria.

The glaring omission is, of course, sanctions against Cuba, which Canada does not have.  In fact, Canada is Cuba’s largest export destination. Canada’s Foreign Extraterritorial Measures Act, moreover, has long created a transnational dilemma because it prohibits any business in Canada from complying with U.S. sanctions against Cuba.  Businesses subject to both U.S. and Canadian laws will violate someone’s law in deciding whether or not to do business with Cuba.  As aggressive as Canada is in imposing sanctions against some countries, it is also aggressive in countering sanctions which it does not support.

But why shouldn’t Canada have a leading role in developing global sanctions policy?  Canada is the second-largest country in the world and one of the few countries with over a trillion dollars in GDP.  Eastern Canada’s traditional ties to Europe and western Canada’s increasing ties to China, Japan and the rest of the Pacific Rim make Canada one of the most globally connected countries.

For exporters with business in the United States, EU and Canada that presume that U.S. sanctions set the bar for your global compliance efforts, you may increasingly need to think again with respect to Canada.  Remember the Canadians can beat us at our own game: the Blue Jays won the World Series (twice)!

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