Archive for the ‘OFAC’ Category


Jan

22

The Auto Sound and the OFAC Fury Part II


Posted by at 9:54 pm on January 22, 2015
Category: Iran SanctionsOFAC

Soundstream Audio Car http://www.soundstream.com/images/intl-team/pic/england/england/images/new/UK%20(1).jpg [Fair Use - Soundstream is Epsilon sub]This blog previously reported the $4,073,000 fine imposed by the Office of Foreign Assets Control (“OFAC”) on Epsilon Electronics for selling automobile stereo equipment to a company in the UAE that resold the items to Iran. OFAC documents indicated that the reseller’s website made clear that it only sold its products to Iran, that Epsilon had attempted to conceal its dealings with Iran by eliminating a web page showing its products and labelled Iran, and that Epsilon under a prior business name had shipped a monitor to Iran for which it had received a cautionary letter from OFAC.

Epsilon has now filed a complaint in the United States District Court for the District of Columbia challenging the fine, alleging, among other things, that the fine violates the Eighth Amendment to the United States Constitution which prohibits cruel and unusual punishment. Epsilon is invoking specifically the language in the Eighth Amendment which prohibits “Excessive Fines” from being imposed. It’s an odd claim given the Supreme Court’s statement in Browning-Ferris Industries v. Kelco Disposal, 492 U.S. 257 (1989), one of the Supreme Court’s few cases on the Excessive Fines clause, that the amendment “places limits on the steps a government may take against an individual.” No court, to my knowledge, has applied the clause to a civil penalty against a corporation. And, even if a court decided to apply the clause to a corporate fine, the principal of proportionality embodied by the clause would not likely be offended by a $4 million fine for the shipment of $3.5 million in goods to Iran.

The complaint further claims that OFAC properly failed to consider mitigating circumstances, namely that Epsilon had no idea that its distributor was shipping to Iran and engaged in no acts of concealment. The complaint includes as exhibits the OFAC documents stating Epsilon knew, or had reason to know, that all of its distributor’s business was conducted solely with Iran and that Epsilon had removed a web page on its site associating its products with Iran.  So it is more than a little odd, given that a reviewing court is going to give a great deal of deference to the findings of the agency under review, that the complaint makes these claims without even attempting to address these unfavorable findings by OFAC clearly set forth in the complaint’s own exhibits.

I said in my original post that, as a matter of policy, I thought OFAC had better things to worry about than pimped out cars cruising the streets of Tehran. But, sadly, I don’t think this complaint has the firepower to convince a court to force OFAC to spend more time on centrifuges and less on subwoofers.

Permalink Comments (0)

Bookmark and Share



Jan

20

No Cigar for You!


Posted by at 10:13 pm on January 20, 2015
Category: BISCuba SanctionsOFAC

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663The recent revisions to the U.S. sanctions on Cuba has generated a great deal of press coverage and, not surprisingly, more enthusiasm than accuracy. Here are a few bloopers I’ve seen recently.

The NBC outlet in Miami announced that the new regulations, released on January 15, would permit “South Florida cigar shops [to] soon be able to carry cigars from Cuba.” The only delay would be the time it will take those shops to “stock up” on the cigars. Nope. The amended section 515.560(c)(3) can bring back these products “for personal use only.”

It comes as less of a shock that the online news outlet Havana Times would say this:

The only thing you have to do to go to Cuba is book your travel. No government forms, no permissions, no licences. Just go.

Nope, again. U.S. travelers have to qualify for one of the twelve general licenses set out in 515.560. The only change is that you don’t need to wait for a specific license from OFAC. But you can’t get on a plane to go sip mojitos on the beach since, at least at the moment, there is no general license for drinking or sunbathing.

It comes as more of a shock, that the Huffington Post would suggest that Americans should get on a plane to “soak up some sun at Tropicoco Beach.” To give HuffPost some benefit of the doubt, let’s suppose they meant taking time off from an activity eligible for a general license to spend a little beach time. Whether you can or not, depends on what is meant by a “full-time schedule” since these general licenses normally require a “full-time schedule” devoted to the eligible activity. In the past, OFAC has said that missionaries that took a few hours off to visit a beach violated this requirement.

The situation may be a little more favorable for journalists than missionaries because the amended regulations say that the journalist’s activities schedule of activities” cannot include “recreation in excess of that consistent with a full-time schedule.” The same language does not appear in the general license for missionaries or in the other general licenses.

And I’ve saved the best for last. A columnist for the Charlotte Observer, for reasons that are not entirely clear, wants to export Bruce Jenner to Cuba. Of course former U.S. Olympic athletes whose appearance offends a columnist in Charlotte is not among the category of items authorized for export to Cuba under the new BIS regulations. Besides, if we’re going to start shipping off celebrities to Cuba, my vote goes for sending Justin Bieber.

Permalink Comments (3)

Bookmark and Share



Jan

15

New OFAC Cuba Regs Adopt the “Sicko” Exception


Posted by at 11:50 pm on January 15, 2015
Category: Cuba SanctionsOFAC

Promo Still for SickoBack in 2007, we published a post on OFAC’s inquiry into the Michael Moore film Sicko, a film that, it was safe to assume, was not on the current administrations list of 10 best films of the year. Having learned that filmmaker Moore filmed part of the documentary film Sicko in Cuba without a license claiming he had the right to do so under the general license for journalistic activities, OFAC demanded that Moore provide proof that he was “regularly employed as a journalist by a news-reporting organization.” We found this an odd request given that OFAC had not been similarly miffed when Charlize Theron filmed a documentary on hip-hop in Cuba claiming eligibility under the general license for journalism. Of course, Theron’s film was critical of Castro and Moore’s was not.

Well, the new Cuba regulations, which were released today and which implement the changes previously announced by the White House, have a provision to put to rest whether a documentary filmmaker must be employed by CNN or the like (or at least say nasty things about Castro) in order to qualify for a general license to travel to Cuba. Under the amended section 515.564 relating to professional research, OFAC notes:

The making of a documentary film in Cuba would qualify for the general license in this section if it is a vehicle for presentation of the research conducted pursuant to this section.

This effectively takes the issue of Cuba documentaries out of the journalism general license and put them into the professional research general license, thus eliminating any need for the documentary filmmaker to prove regular employment by a news-reporting organization. Of course, under this analysis, the documentary filmmaker would have to establish that the film, and the research it embodies, relates to the filmmaker’s “area of expertise.” That probably means that Justin Bieber can’t go to Cuba to film a documentary on, say, alternate dispute resolution mechanisms, filmmakers like Michael Moore can go to Cuba to film segments related to their documentary projects.

(I’ll have more to say about the new regulations over the weekend.)

Permalink Comments (0)

Bookmark and Share



Jan

6

OFAC Issues Wind-Down License for Crimea


Posted by at 9:44 pm on January 6, 2015
Category: Crimea SanctionsOFACRussia Sanctions

By Иерей Максим Массалитин (originally posted to Flickr as Ласточкино гнездо) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://http://commons.wikimedia.org/wiki/File:%D0%9B%D0%B0%D1%81%D1%82%D0%BE%D1%87%D0%BA%D0%B8%D0%BD%D0%BE_%D0%B3%D0%BD%D0%B5%D0%B7%D0%B4%D0%BE.jpgRight before the New Year, the Office of Foreign Assets Control (“OFAC”) started some of the inevitable clean-up on the Executive Order sanctioning Crimea that the agency rushed out before the President went on vacation. Not having time to calibrate the sanctions, the order just prohibited all imports and exports (except for the statutorily required exceptions for agricultural products, medicine and medical devices, which, somehow or other, became “medical supplies”). The first of these was General License No. 5 which permits U.S. persons to wind-down operations in Crimea.

But, sadly, the General License is a mess. For starters, although the license permits transactions and activities “normally incident” to “the winding down of operations, contracts, or other agreements that were in effect prior to December 20, 2014,” the General License gives no indication of what types of transactions might be “normally incident” to winding down. The General License does say what is not incident to winding down. New exports of goods and services to Crimea don’t qualify. And, in a masterpiece of useless circular definition, neither are new imports of goods and services from Crimea “except as needed to wind down operations, contracts, or other agreements.” Thanks, that clears everything up.

Let’s take a concrete example. Let’s say that money is owed under a contract for services performed prior to December 20, 2014, in Crimea. Can that money be paid? Who knows. But if you decide that it is, you have to make the payment by February 1, 2015, and file a report within 10 days with OFAC about everything you did to wind down operations. That way OFAC can decide (after the fact, of course) whether what you did was normally incident to winding down and send you a charging letter (too late for a voluntary disclosure) if it decides that it was not.

The February 1, 2015 deadline is pretty unrealistic for certain wind downs that involve divestiture of assets in Crimea. Any potential purchaser who knows about the deadline (and they all will know about it) will, of course, wait until January 31 and offer  the U.S. seller fire-sale prices. So who’s being sanctioned here?

Permalink Comments Off

Bookmark and Share



Dec

23

How the OFAC Stole Christmas


Posted by at 2:03 pm on December 23, 2014
Category: Cuba SanctionsOFAC

Santa Flanked by F-16

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had once again broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. § 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. § 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow the Cuban regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children. We also note that the proposed rule that might in the future allow entry into the United States by sleighs that were on humanitarian missions in Cuba is not yet in effect and may still be overruled by Congress.

Congressional leaders did not return our calls.


This post is an annual tradition and appeared previously in 2007, 2008, 2009, 2010, 2011, 2012 and 2013 in slightly altered form. Alert readers will notice a small addition to this year’s post.

Export Law Blog would like to take the opportunity of this post to extend its best holiday wishes to all of its readers. Posting will be light between now and the end of the holidays.

Permalink Comments Off

Bookmark and Share