Archive for the ‘OFAC’ Category


Aug

29

Let No Such Man Be Trusted


Posted by at 8:46 pm on August 29, 2016
Category: Cuba SanctionsOFAC

Send a Piano to Cuba by Cubanos en UK via Cubanos en UK Facebook Page per http://www.telesurtv.net/english/news/UK-Effort-to-Donate-Piano-to-Cuba-Runs-Afoul-of-US-Blockade-20160822-0008.html [Fair Use]Some Cubans in London wanted to send a piano to Conservatory Amadeo Roldan in Havana. They raised money for this gift by holding a classical music concert and sold tickets for the event through the U.S. company Eventbrite. Things immediately went downhill for that poor piano.

Not surprisingly, Eventbrite confiscated the money from the ticket sales and refused to send it to Cubanos en UK. Daniesky Acosta, the head of that group, tried to tell Eventbrite that, as the group and the concert were in London, the confiscation of the funds was “outside U.S. law.” Except of course Eventbrite isn’t.

So Acosta tried a different tack, citing the E.U. blocking regulation that prohibits people in the E.U. from complying with the U.S. embargo on Cuba. Unfortunately, Eventbrite is in San Francisco and not subject to the directive. Cubanos en UK has sought to enlist the U.K. government on its side, again without much success given the location of Eventbrite.

Cubanos en UK then, oddly, talked to the Attorney General of the State of Iowa:

Cubanos en UK sought legal advice from the … attorney general of Iowa, Tom Miller, who has years of experience working on OFAC regulations with regards to the Cuba blockade. Miller told the organization that the transaction was legal, but Eventbrite continues to insist that it is in violation of OFAC regulations.

I’m not quite clear why the Attorney General of Iowa is an OFAC expert in the first place, but his alleged claim that the export of the piano to Cuba would be perfectly legal suggests that he might not in fact have profited much from his “years of experience” working on OFAC’s rules on the Cuba embargo. The closest exemption in the Cuba regulations would be the section which permits humanitarian donations to “projects involving formal or non-formal educational training.” This, without more, might cover the donation of piano to a music conservatory. The problem is the further qualification: the covered eductation training is limited to

Entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by §515.208; and projects to meet basic human needs.

Although “civil education” is somewhat vague, it presumably means the sort of things taught in a civics class, and although you and I might agree that music is a basic human need, I think OFAC means more basic needs like food, water and shelter. So, for as much as I favor sending pianos to Cuba, it seems that a specific license would be needed.

[Title of this post is taken from here.]

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Aug

16

Yes, We Have No Bananas!


Posted by at 5:33 pm on August 16, 2016
Category: Economic SanctionsOFAC

Bananas by Anthony Easton [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5NmyCf [cropped and processed]

The problem with many economic sanctions, particularly those aimed at drug lords, is that they wind up hurting the wrong people. Consider the case of the designation of the inaccurately named John Angel Zabaneh by the Office of Foreign Assets Control (“OFAC”) as detailed in this excellent Reuters news story. OFAC put Zabaneh on the SDN List based on its belief that Zabaneh is connected with Joaquin “El Chapo” Guzman, head of Mexico’s Sinaloa drug cartel, although Zabaneh denies this.

Because drug lords do not live by drugs alone, targeted narcotics kingpins in Central America often have other, and sometimes quite significant, legitimate business interests. In this case, Zabaneh was also a banana farmer in Belize and his farms contributed a significant portion of Belize’s banana exports. It should probably come as no surprise that bananas constitute about 20 percent of all of Belize’s exports.

So when OFAC designated Zabaneh, it ultimately resulted in shutting down his banana farms when his customers became unwilling to deal with him. This resulted, according to the Reuters article, in a 13.5 percent plunge in banana exports from Belize and the loss of 900 jobs previously held by workers on the Zabaneh farms.

There is no evidence that this caused Mr. Zabaneh to exit the drug trade, if he ever was in it, or crimped his lifestyle in any fashion. The only effects, it would appear, of the OFAC sanctions was that it allowed the U.S. government to feel good about itself and caused a bunch of people in Belize, with no connection to any drug trade, to wonder where there next meal might be coming from.

Photo Credit: Bananas by Anthony Easton [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5NmyCf [cropped and processed]. Copyright 20xx Sami Keinanen

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Aug

12

Friday Round-Up


Posted by at 4:28 pm on August 12, 2016
Category: BISDDTCOFACSDN List

Bumper Cars on the Boardwalk

Here are a few recent odds and ends that are worth a mention (and to catch up on a few things I missed while on vacation):

  • The Directorate of Defense Trade Controls (“DDTC”) issued guidance as to which activities are “gunsmithing” that do not require registration under part 122 and which are “manufacturing” and do require registration. This guidance defines “gunsmithing” and “manufacturing” completely differently from the definitions used by the Bureau of Alcohol, Tobacco and Firearms (“ATF”). For example, assembling kits into guns is “manufacturing” according to ATF but not according to DDTC. On behalf of lawyers everywhere: Thanks, DDTC, for keeping us busy!
  • More revisions to the TAA Guidelines, which are longer and less interesting than all six volumes of Proust, were announced. These mostly take into account the new definitions of export, re-export and retransfer that were recently adopted as an interim final rule by DDTC. I’ve said it before, and I’ll say it again, true export reform would get rid of the ridiculous TAA process entirely and make it similar to the  process used by the Bureau of Industry and Security (“BIS”) for licensing technology exports.
  • The United States Marshals Service (“USMS”) is auctioning off 2,719.32669068 bitcoins. You will be, I’m sure, relieved to know that the auction notice explicitly states that the USMS won’t accept any bids from anyone on OFAC’s SDN List. I wouldn’t want Eliot Ness going after Rooster Cogburn, even if it would make a better movie than Batman v. Superman.

Photo Credit: Bumper Cars on the Boardwalk by Clif Burns, via Flickr https://flic.kr/p/JXGCgz. Copyright 2016 Clif Burns

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Aug

9

Gone Fishin’ (Again)


Posted by at 11:49 pm on August 9, 2016
Category: BISCuba SanctionsOFAC

Boat in Ernest Hemingway International Billfishing Tournament via http://www.internationalhemingwaytournament.com/images/stories/fish/DSC_6712.jpg [Fair Use]Longtime friend and blog reader Pat had a good catch (so to speak) with respect to yesterday’s post on the Ernest Hemingway International Billfishing Tournament in Cuba. The post noted that participation in the tournament by U.S. persons might be covered by the new OFAC General License in section 515.567(b) relating to participation in competitions in Cuba. Whether that license would apply depends upon whether Cubans could participate in the tournament, something which I thought was perhaps affected by the high cost of participation in the tournament.

Even if the OFAC license applied, U.S. participants who wanted to take their own boats into Cuban waters would need to deal with the temporary export of the boat into Cuban territorial waters, an export controlled by BIS. I noted that BIS had granted such licenses, but Pat pointed out in a comment to yesterday’s post that last September BIS amended license exception AVS to permit temporary sojourns of less than 14 days by U.S. recreational boats in Cuban waters as long as it was pursuant to travel authorized by a general or specific license from OFAC.

That’s a great point, and I had forgotten about the amendment to License Exception AVS. It also, given the 14 day sojourn limitation, raises the issue of the OFAC rule in section 515.207 that prohibits a boat that has entered Cuban waters and purchased goods (in this case, think live bait) from entering a U.S. port for 180 days.

OFAC does have an exception in section 515.550 for return in advance of this date by “vessel used solely for personal travel (and not transporting passengers)” and where the export was covered by BIS’s license exception AVS. As usual, OFAC’s drafting leaves much to be desired given that the distinction between personal travel and transporting passengers may not always be clear. Probably the distinction rests on whether the other passengers are paying or not, excluding, I suppose, personal friends sharing expenses. But I’m not sure I would want to run the risk of overstepping this not very well drawn line.

What about chartering a fishing boat in Miami to participate in the tournament? Although that would still probably be a “recreational vessel” covered by license exception AVS, it’s not clear whether that would be personal travel (by the charterers) or transporting passengers (by the captain and crew). I, for one, would want specific guidance from OFAC before getting on that boat.

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Aug

8

Gone Fishin’


Posted by at 8:12 pm on August 8, 2016
Category: BISCuba SanctionsOFAC

Camellia George via http://www.kansascity.com/sports/outdoors/article94168762.html [Fair Use]
ABOVE: Messrs. Wilkins and
Whitlock in Cuba

[See update to this post here.]

Every year Cuba has an internationally famous sport fishing tournament. Fisherman from the United States have always cast envious eyes at the tournament just a short hop a way from U.S. territorial waters, but, obviously, the U.S. embargo on Cuba poses just a few tiny problems.

Stan Wilkins, a Kansas City lawyer just published an article in the Kansas City Star detailing his participation in the tournament with his friend Bob Whitlock, both pictured to the right with Havana in the background. This provides a good opportunity to discuss the regulatory requirements in play, particularly since Mr. Wilkins says little about how he actually managed to fish the tournament, other than to say, quite incorrectly, that “[f]ishermen may qualify for travel under the new ‘general license’ category.”

Given that there is no general license for “fishermen,” the general license that would most likely be relevant and available here is the one set forth in section 515.567(b). That general license covers “athletic and other competitions.” No offense to any fisherman out there, but I’d say that the fishing tournament is an “other.” (This is probably because when I go fishing it’s not terribly athletic. My arms mostly get used to carry the beer can to my mouth and almost never to pull an actual fish out of the water. For some reason, incomprehensible to me, fish always turn their noses up at my bait and lures.) Certainly, the people-to-people general license won’t work unless Cuban fish count.

There is, however, a significant qualification to the General License for athletic and other competitions: the competition must be “open for attendance, and in relevant situations participation, by the Cuban public.” I’d say that since you can’t attend a fishing tournament by, say, sitting in lawn chairs on the beach, this is one of those “relevant situations” where the tournament must be open to participation by Cubans.

The official website registration form does have “Cuba” listed as a country in its drop down list, so Cubans can, at least in theory, register and participate. But the site also lists a registration fee of 450 CUC (or about US$450). Given the average salary of Cubans is approximately $20 CUC per month, it seems fair to wonder if an event that requires an amount equal to 2 years salary is really open to Cubans. But I suppose setion 515.567(b) could be read to say that putting Cuba in the drop down list on the registration form is enough.

Readers of this blog, particularly those who remember the sad saga of a ship called Lethal Weapon, probably recognize another procedural hurdle to participation by U.S. fishermen, at least fishermen who want to use their own boats and equipment (which is, of course, more or less the point). Sailing into Cuba for the tournament is an export, albeit temporary, of the boat and requires a license from BIS. BIS has granted them in the past, with conditions, so this part is doable, even if it is another layer of red tape.

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