Archive for the ‘Sudan’ 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.)

Feb

4

Don’t Just Stand There Doing Nothing, People Will Think You’re a Supervisor!


Posted by at 9:46 pm on February 4, 2016
Category: OFACSudan

Meroe (49) by joepyrek [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://https://flic.kr/p/dD4ue9 [cropped]The Office of Foreign Assets Control (“OFAC”) announced today that it had issued a “notice of violation” (but no fine) to Johnson and Johnson (Middle East), Inc. (“JJME”), a New Jersey Corporation, in connection with five shipments by Johnson and Johnson (Egypt) S.A.E. (“JJE”) to Sudan in violation of the Sudanese Sanctions Regulations. No description was given of the shipped goods other than that they were worth $227,818.

Not surprisingly, the violation involved “facilitation” by JJME of the shipments by JJE to Sudan in violation of section 538.206 of the Sudanese Sanctions Regulations. OFAC did not detail how JJME facilitated the shipments other than by saying that it did so by “coordinating and supervising” those shipments. It’s hard to discern exactly what is meant by “coordinating” a shipment and perhaps some things that might be called “coordination” might also be facilitation.

But the use of the word “supervising” is a bit odd. The Sudanese Sanctions Regulations, in section 538.407, provide the only clarification in all of OFAC’s regulations of the meaning of the slippery term “facilitation.” That section says:

Activity of a purely clerical or reporting nature that does not further trade or financial transactions with Sudan or the Government of Sudan is not considered prohibited facilitation. For example, reporting on the results of a subsidiary’s trade with Sudan is not prohibited, while financing or insuring that trade or warranting the quality of goods sold by a subsidiary to the Government of Sudan constitutes prohibited facilitation.

Supervising the shipments could simply be keeping track of the shipments and perhaps reporting their progress, and that would fall clearly on the side of reporting the trade with Sudan, which is not facilitation according to this definition. Who among us has not been “supervised” by someone sitting on a sofa while we perform some task? And how did that ever “facilitate” that task?

It’s no secret that OFAC has consciously tried to leave the scope of facilitation vague in order to have exporters over-regulate themselves out of fear of transgression and the attendant punishment. By suggesting that supervising is somehow facilitating it contributes to this regulatory ambiguity. If OFAC truly wanted to provide guidance on what it means by facilitation, it would would have described exactly what JJME did with respect to the shipments rather than fall back on vague terms that might not really even describe facilitation as anyone understands it.

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Nov

24

Egyptair Shot Down by BIS for Sudan Airways Lease


Posted by at 9:58 pm on November 24, 2015
Category: Sudan

Tasty Meal on Sudan Air via http://www.sudanair.com/uploads/photos/97226DSC00043.JPG [Fair Use]
ABOVE: A Tasty Meal on
Sudan Air


Today the Bureau of Industry and Security (“BIS”) announced that Egyptair has agreed to pay a penalty of $140,000 to settle charges that Egyptair leased two Boeing 737-566 commercial aircraft to Sudan Airways.  The penalty is payable in four equal installments every three months starting on February 1, 2016. The Settlement Agreement further provides that should Egyptair not make any of these payments in a timely fashion, BIS can enter a one-year export denial order. Since such an order, which would forbid any U.S. person to export any item to the airline, would be a one-year kiss of death, it seems likely that Egyptair will make each $35,000 payment in a timely fashion.

It was hardly a secret that Egyptair had leased these aircraft to Sudan Airways. BIS hardly had to use its secret decoder rings and shoe phones to uncover the deal. It was publicly reported in various aviation databases such as this one here. The highly public nature of the transaction also suggests that Egyptair thought the lease was permissible and simply was unaware of the meglomaniacal position of BIS and the U.S. government that the U.S. has jurisdiction over anyone anywhere in the world who touches any item that was ever in the United States.

One more thing: Sudan Airways is on the Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control, so it should not be too long before OFAC chimes in and gets more cash from Egyptair for leasing these aircraft not just to Sudan but to an SDN in Sudan.

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Copyright © 2015 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Apr

16

Thursday Grab Bag


Posted by at 8:05 am on April 16, 2015
Category: Crimea SanctionsCriminal PenaltiesCuba SanctionsIran SanctionsOFACSudanSyria

Grab BagHere are a few recent developments that you may have missed:

  • Last month we criticized the Department of Justice for conspiring with foreign luxury car makers to jail U.S. citizens who exported luxury cars to China to arbitrage the difference between U.S. and Chinese prices for these vehicles. Apparently, the DoJ now is having second thoughts about wasting taxpayer money and its resources on this nonsense. According to the  New York Times, settlements have recently been reached in nine states where prosecutors have agreed to return seized cars to, and drop charges against, luxury car exporters. Good.
  • On Monday we reported that Obama was going to drop Cuba from the list of state sponsors of terrorism, a move we thought was largely symbolic. Yesterday he did just that, and provided the 45-day notice required under the three acts that provide the basis for the list: § 6(j)(4)(A)(i)-(iii) of the Export Administration Act of 1979; § 40(f)(1)(A)(i)-(iii) of the Arms Export Control Act; and § 620A(c)(1)(A)-(C) of the Foreign Assistance Act of 1961. The linked New York Times article wrongly states that Congress can block this action with a joint resolution. Only the Arms Export Control Act provides for this blocking mechanism, and, as we noted, there’s no way that the White House will remove Cuba from the current arms embargo. So a joint resolution under the AECA would be, like the removal itself, largely symbolic
  • The Office of Foreign Assets Control (“OFAC”) revised its rules on Monday to amend the Syrian Sanctions Regulations to permit certain activities with respect to written publications, including the ability to pay advances and royalties, to substantively edit manuscripts and to create marketing campaigns. These activities have been permitted for Cuba, Sudan and Iran since 2004. Don’t try this yet in Crimea which remains, bizarrely and incomprehensibly, the most heavily sanctioned place on the face of the planet
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Feb

25

Two Agencies Are Never Better Than One


Posted by at 10:06 pm on February 25, 2015
Category: BISOFACSudan

Church of the Granite Columns CC-BY-2.0 [http://creativecommons.org/licenses/by/2.0], via Wikimedia Commons http://commons.wikimedia.org/wiki/File:Church_of_the_Granite_Columns_2007-10-03_02.jpg#mediaviewer/File:Church_of_the_Granite_Columns_2007-10-03_02.jpg [Cropped]

One of the most indefensible parts of the U.S. export control regime, and one that is not even addressed by the export control reform initiative, is the overlapping jurisdiction of two separate agencies — the Bureau of Industry and Security (“BIS”) and the Office of Foreign Assets Control (“OFAC”) — over sanctioned countries. No one has ever articulated a rationale for this other than the need to gouge federal taxpayers by hiring multiple people in multiple agencies to do exactly the same thing and to keep private lawyers employed to explain to baffled exporters which agency needs to bless a particular export. And nowhere has the insanity of this overlapping jurisdiction been made more clear than in the recent amendments by both agencies (and an accompanying tsunami of ink in the Federal Register) to permit the export of communications hardware and fee-based personal communications hardware and software to Sudan.

To understand what is going on, you must first understand that both BIS and OFAC assert jurisdiction over Sudan (unlike say Cuba and Iran where they have called a truce and agreed that one agency would be responsible for export licensing). Section 538.205 of the Sudanese Sanctions Regulations requires licenses for all exports by anyone from the United States to Sudan, all exports by United States persons from anywhere to Sudan, and all re-exports to Sudan from foreign countries by foreign persons of goods originally exported from the United States. This broad prohibition also necessarily covers by its terms exports or re-exports by U.S. persons of items “subject to the EAR” and which are on the CCL with an AT reason for control.  Such exports of course, will therefore also require a BIS license in addition to the OFAC license.  The language of 538.205 also covers exports of EAR99 items and items not “subject to the EAR” which would not require a BIS license and, thus, require only an OFAC license. Re-exports by foreign persons of foreign manufactured items on the CCL with more than de minimis U.S. content to Sudan are covered by the EAR and not 538.205 and, thus, would be licensed by BIS alone. Items that are EAR99 or foreign manufactured with less than 10 percent U.S. content, are outside the United States and are re-exported to Sudan by foreign persons are not within the scope of sections 538.205 or 538.507 of the SSR or the EAR and would, therefore, not require a license by either agency. Got that? I thought so.

The new OFAC amendments to the Sudan Sanctions Regulations (“SSR”) and the BIS amendments to License Exception CCD are designed to expand to Sudan the previous authorizations for exports to Iran (by OFAC) and Cuba (by BIS) of certain services, software and hardware for personal communications. How these two sets of rules now apply to exports to Sudan and the overlapping jurisdiction of OFAC and BIS is, not surprisingly, is a needlessly complex matter.

Let’s start by looking at certain hardware exports that can require authorization by both agencies, namely exports by U.S persons of items that are subject to the EAR and are not EAR99 that U.S. persons wish to export. Take, for example, a television receiver with encryption functionality classified as 5A992. Because the item is 5A992 it may require a license to be exported by a U.S. person to Sudan. However, such an item is listed in License Exception CCD at section 740.19(b)(14) and therefore does not require a BIS License. Under section 538.533(a)(3)(i) of the SSR, only hardware items on Appendix B to Part 538 are exempt from OFAC’s license requirement. Television receivers, however, are not on Appendix B. Digital cameras classified as 5A992 are included in CCD but not in Appendix B. Why OFAC and BIS would have differing views on whether these items are personal communications devices and why OFAC would still require a license for an item covered by CCD is, of course, anyone’s guess.

The analysis becomes a bit more confusing for software. Consider publicly-available free (or at cost) software with encryption functionality which, because it meets the mass market criteria, is classified as 5D992. Under EAR section 734.3(b)(3) that software is not subject to the EAR and could be freely exported by a U.S. person to Sudan without a BIS license even prior to the latest amendments. If, on the other hand, it is not free (or at cost), then it is subject to the EAR and, because it is 5D992, would require a BIS license to Sudan unless it is listed on CCD. (The basic change by adding Sudan to CCD was, in fact, to capture mass market software that was not free or at cost.)

Now let’s look at this software from the OFAC perspective since you have to look at both OFAC and BIS rules for goods that are not EAR99. Prior to the amendment, section 538.533(a)(2) of the SSR permitted the export if the software was not subject to the EAR which, under EAR 734.3(b)(3), this would not be, and was for personal communication over the Internet. If the software was not free, then the old section 538.533 would not apply, and an OFAC license would have been required in addition to the BIS license. Under the amended version of 538.533, section (a)(2) would permit software, whether or not mass market and/or free, to be exported by U.S. persons or from the United States to Sudan if it was necessary for personal communications over the Internet. Software not related to personal communications over the Internet and that is either not subject to the EAR because it is free or at cost and publicly available or because it is outside the United States, would still not need an OFAC license if it is on Appendix B, which includes things like anti-virus, anti-tracking and VPN software.

As you can see, because of the overlapping (and unnecessarily duplicative) jurisdiction of both agencies over Sudan exports, both OFAC and BIS regulations must be consulted for most exports to Sudan, making the process difficult and confusing. If you have a headache after reading the analysis above, then start clamoring for real export control reform which would involve merging the export control functions of BIS and OFAC into one agency.

Oh, and one more even bigger headache before we wrap up this post: OFAC itself apparently cannot figure out how it shares jurisdiction with BIS. In the FAQ on the new amendments, OFAC now says this:

427. May a non-U.S. person export, reexport, or provide to Sudan hardware and software that is subject to the EAR pursuant to § 538.533?

The Department of Commerce, Bureau of Industry and Security (BIS), has jurisdiction over non-U.S. persons’ exportation and reexportation to Sudan of items subject to the EAR. Please consult BIS, www.bis.doc.gov, for guidance on such transactions.

Now go back and re-read section 538.205 of the SSR, which clearly forbids exports to Syria by non-U.S. persons of hardware and software located in the United States. Now try to find a rule in the SSR that says that if such exports from the United States by non-U.S. persons are licensed by BIS no OFAC license is required. Nope, not there. When even the agencies themselves cannot figure out which agency is in charge, there is no conceivable remaining excuse to have both agencies regulating these exports.

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Copyright © 2015 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)