Archive for the ‘Iran Sanctions’ Category


Apr

7

Save the Fokkers


Posted by at 11:40 pm on April 7, 2016
Category: Burma SanctionsCriminal PenaltiesEconomic SanctionsGeneralIran SanctionsSudan

Fokker Services Building in Hoofddorp via http://www.fokker.com/sites/default/files/styles/carousel_innovations/public/media/Images/Services/Contact_Fokker_Services_Location_Hoofddorp_637x286.jpg?itok=NYP0cc2k [Fair Use]

The United States Court of Appeals for the District of Columbia Circuit just reversed the decision of a lower federal district court which tossed out the deferred prosecution agreement between the Department of Justice and Fokker Services B.V.  Fokker had admitted, in a voluntary disclosure to the Office of Foreign Assets Control (“OFAC”), that  it had obtained U.S. origin aircraft parts which it then re-exported to Iran, Sudan and Burma without the required licenses. This blog has previously criticized both the highly unusual decision of the DoJ to turn a voluntary disclosure to OFAC into a criminal prosecution and the district court’s decision to toss aside the DPA as too lenient, apparently in the belief that Iran was somehow involved in the 9/11 terrorist attacks.

The Court of Appeals decision, which restores the DPA and reverses the lower court, is based simply on its interpretation of the Speedy Trial Act. Because a DPA starts the Speedy Trial Act’s seventy-day clock running, the Act provides, in 18 U.S.C. § 3161(h)(2), that a DPA can turn off this clock “with the approval of the court.” Otherwise, of course, the defendant could escape prosecution after seventy days, despite provisions of the DPA that prosecution would be avoided only upon good behavior by the defendant during a longer period, typically one to three years.

The Court of Appeals held that this requirement of approval did not give the district court the authority to question the leniency of the DPA, the charges brought by the government or the parties prosecuted under those charges. Rather the court reviewing a DPA is limited to determining if the DPA is

geared to enabling the defendant to demonstrate compliance with the law, and is not instead a pretext intended merely to evade the Speedy Trial Act’s time constraint.

The only other authority of the lower court, according to the Court of Appeals, would be to reject “illegal or unethical provisions” of the DPA, noting that the District Court had not argued that anything in the DPA was either illegal or unethical.

The Court of Appeals opinion is, thus, good news and bad news. The bad news is that a court can’t refuse to approve a DPA on the grounds that it was unfair for the government to turn a voluntary disclosure to an administrative agency into a criminal prosecution. The good news is that if the exporter does agree to a DPA, it can have a high degree of certainty that the district court cannot condition approval of the DPA on the insertion of more onerous provisions.

Photo Credit: Fokker Services Building in Hoofddorp via Fokker http://bit.ly/23bmktC [Fair Use] [cropped]

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

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.
(No republication, syndication or use permitted without my consent.)

Mar

31

OFAC May Make a U-Turn on Its U-Turn Ban


Posted by at 10:39 am on March 31, 2016
Category: Iran SanctionsOFAC

Freedom Triumphant by takomabibelot [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/4Au9Zg [cropped and processed]An AP story today suggests that the White House may be considering the return of “U-turn” transactions for permitted sales to Iran. Those transactions, which were eliminated in 2008, allowed, under former section 560.516(a)(1), transactions with Iran to be cleared in U.S. Dollars by permitting non-U.S. banks to use their correspondent banks in the United States. In order to qualify for the exception, both the originating and beneficiary banks had to be non-Iranian foreign banks. In addition, no Iranian banks on the SDN List could be involved and, of course, the underlying transaction could not be one prohibited under U.S. law. So, if an Iranian customer wanted to buy goods from France and pay dollars, the Iranian customer would direct its bank in London to use its correspondent account in a New York bank to send the purchase price in U.S. dollars to the seller’s bank in France.

Of course, even if U-turn transactions are permitted once again by OFAC, there is no guarantee that banks will be willing to process them.   After all, no one has forgotten that the New York Department of Financial Services, believing the it understood OFAC regulations better than OFAC, went after Standard Chartered bank for legal U-turn transactions involving Iran.

Photo Credit: Freedom Triumphant by takomabibelot [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/4Au9Zg [cropped and processed]

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

Mar

25

OFAC Issues New General License for Some Aircraft Negotiations with Iran


Posted by at 10:58 am on March 25, 2016
Category: Iran SanctionsOFAC

Iran Air Boeing 747SP-86 by Aero Icarus [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/91vXkv [cropped and processed]Yesterday, the Office of Foreign Assets Control (“OFAC”) published Iran General License I which is designed to permit U.S. persons seeking to sell civil passenger aircraft and parts to Iran to negotiate executory contracts to make such sales provided that all such contracts are expressly contingent upon OFAC approval. Four new FAQs, labelled J.9 through through J.12, were added to explain the general license.

Specifically, the license permits “all transactions ordinarily incident to negotiation of and entry into” contracts for activities eligible for authorization under OFAC’s policy permitting the sale of passenger aircraft and parts to Iran. The general license is needed because the new policy required a license for the sales of those aircraft and parts and, by extension, would require licenses for the negotiations leading to such sales. At least one company had requested and received such licenses, leading OFAC to decide to issue a general license to eliminate the burden of processing such applications.

Not surprisingly, the license excludes any negotiations with “any person whose property and interests in property are blocked pursuant to any part of 31 C.F.R. chapter V other than part 560.” The key language here is “other than part 560.” Some Iranian airlines, and theoretical purchasers of passenger aircraft and parts, are designated under OFAC regulations other than the Iran Transactions and Sanctions Regulations found in part 560. For example, Mahan Air, the éminence noire of Iranian airlines, is sanctioned under part 561 (Iran Financial Sanctions Regulations) and part 594 (Global Terrorism Sanctions Regulations). Iran Air, the great white whale of Iranian airlines, on the other hand, is sanctioned only under part 560 as an entity controlled by the Government of Iran, meaning that negotiations with Iran Air under General License I would be permitted.

The most significant take-away from General License I is less what it specifically permits than what it implies is not permitted.  Many U.S. companies outside the aircraft sector, hoping against hope that all U.S. sanctions against Iran may soon be lifted, are wondering if they can negotiate with potential Iranian customers “just in case” provided any resulting agreement is contingent upon OFAC approval.  The answer now is quite clearly no unless a specific license to do so is obtained from OFAC.

Photo Credit: Iran Air Boeing 747SP-86 by Aero Icarus [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/91vXkv [cropped and processed]]

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

Mar

24

Question of the Day


Posted by at 11:24 pm on March 24, 2016
Category: Iran SanctionsOFAC

Cyan Headquarters via Google Maps [Fair Use]
ABOVE: Cyan Headquarters


Today’s question is this: say you are a UK-based company that manufactures a product with U.S.-origin content which you want to sell to Iran? How do you do it?

According to this article, you sell the stuff to Iran through your subsidiary in India. Yes, seriously, that’s the answer that was given:

Cyan was also required to check if an export license would be required to export its products from both the UK and the US, since there is an element of its product that originates in the US. “UKTI (UK Trade & Investment) was very helpful in assisting us and confirming that no license would be required if we ship our products from our subsidiary in India …,” explains John [Cronin, Chairman of Cyan].

Oh dear. Let’s hope that’s a misquote or a misunderstanding. If you are a foreign person with a product with U.S. origin content, section 560.205 of the Iran Transactions and Sanctions Regulations quite clearly state the circumstances in which that product can be sold to Iran. That export is permissible only if the U.S. content has been “substantially transformed” into a new product or if all such content which would require a license from the United States constitutes less than 10 percent of the total value of the foreign product.

It does not say that the foreign person can, as the article suggests the Cyan chairman says, sell the product with U.S. content to Iran if you simply try to sell it through another non-U.S. subsidiary in India or elsewhere. I suspect that, as European companies rush to exploit the Iran market after Implementation Day, this will not be the first possible misunderstanding of the scope of the remaining U.S. rules and when they apply. (I am, of course, assuming that Cyan, in fact, determined the exceptions in section 560.205 applied and that Cronin was either misquoted or misunderstood the actual reason his exports to Iran passed the test.)

Photo Credit:Cyan Headquarters via Google Maps [Fair Use]

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