Archive for the ‘Sudan’ Category



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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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 [], via Wikimedia Commons [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,, 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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Maybe Their Phones Aren’t Working

Posted by at 3:27 pm on September 12, 2014
Category: Iran SanctionsOFACSudanSyria

By CFTC via [Public Domain]Both the Commodity Futures Trading  Commission and the Office of Foreign Assets Control announced settlement agreements under which they imposed fines of $150,000 and $200,000 respectively on the oddly named Zulutrade, an online foreign exchange broker.  Zulutrade has nothing to do with Africa but is located in Pireaus, Greece, incorporated in Delaware and registered with the CFTC (which is how OFAC and CFTC got their hooks into a company located in Greece). The OFAC announcement is here and the CFTC announcement is here.

The reason for the fines is that Zulutrade allegedly maintained accounts for over 400 persons in Iran, Sudan, and Syria. On this much, the CFTC and OFAC agree. Beyond that the two agencies have different stories about how the violations, which were not voluntarily disclosed by Zulutrade, occurred. OFAC’s explanation is simply that Zulutrade had no idea it needed to comply with U.S. sanctions, perhaps not surprising in the case of a company sitting in Greece even if incorporated in Delaware.

Zulutrade failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. This failure was the result of a lack of awareness regarding U.S. sanctions regulations.

But to listen to CFTC the problem was that Zulutrade was aware of its responsibilities, tried to comply with them and botched it.  The Zulutrade compliance program, according to CFTC, provided that Zulutrade

may delegate implementation to third party service providers or agents. The procedure also says that if implementation is delegated, “Zulutrade shall have a written agreement with the other entity outlining the other entity’s responsibilities, and shall actively monitor the delegation to assure that the procedures are being conducted in an effective manner.” However, Respondent did not follow its procedure for OF AC screening. Specifically, Respondent relied entirely upon third parties to implement its procedures but Respondent did not have written agreements with all such third parties and OF AC screening was not performed.

I do not see any way to read these two narratives as consistent. OFAC says Zulutrade had no idea it needed to comply, but CFTC says that Zulutrade knew it need to comply but delegated the responsibility to third parties, although not in the fashion required by its compliance program and, apparently, without checking to see if the third parties were in fact screening. It’s hard to explain these two different accounts of what happened other than by the fact that OFAC and CFTC are in different parts of Washington and their telephones must not be working.

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It’s A Small World After All, Even For Economic Sanctions

Posted by and at 8:02 pm on June 16, 2014
Category: ChinaEconomic SanctionsEURussia SanctionsSanctionsSudan

It's A Small World by Darren Wittko CC BY 2.0 [] (cropped)G-7 countries recent meeting in Brussels understandably grabbed global headlines for their unified message that they “stand ready to intensify targeted sanctions and to implement significant additional restrictive measures to impose further costs on Russia should events so require.”

While sanctions imposed by G-7 countries, as well as the EU, drive the engine of global sanctions enforcement, there are almost 200 other countries in the world and many of them want to have their position on sanctions known.  Last week, for example, Serbian President Tomislav Nikolić surprised no one on Earth (or anywhere else for that matter) when he told Serbian media, “It’s impossible to imagine Serbia imposing sanctions on Russia.”  Of course, Nikolić’s pronouncement is hardly going to cause the E.U. to rethink, even for a fraction of a nanosecond, its position on Russian sanctions.  On the other hand, the E.U. sanctions may cause Serbia, given that Russia is one of it’s largest trading partners, to rethink the wisdom of its application to become a member of the E.U.

Besting Serbia’s population by over a billion, China is emerging as a critical Russian ally and the most important country that is not imposing sanctions against it.  As with Serbia, economic self-interest and the volume of China’s trade with Russia may be at the heart of this.  In fact, reports on the recent $400 billion, 30-year deal for Gazprom to supply natural gas to China suggest the deal would be based on a ruble-yuan exchange and bypass Western financial systems altogether.

With developed countries like China and Serbia using economic self-interest to justify trading with Russia despite its shenanigans in Ukraine, some developing countries may be acting against their own economic self-interest in imposing sanctions to deal with regional conflicts.  Reuters reported this week, for example, that members of the Intergovernmental Agency for Development, an East African trade group made up of Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda, have threatened sanctions against South Sudan if warring factions do not cooperate to end conflict in that country.  The United States imposed sanctions in early May against military leaders involved in the conflict, but they likely will provide no meaningful impact.  However, when everyday trade with your neighboring countries starts to become restricted, sanctions are far more likely to achieve the goal of ending conflict.  If East African sanctions succeed against South Sudan while E.U and U.S. sanctions have no impact on Ukraine,  then we will certainly have a situation where it’s the mice that roar while the elephants squeak.

Sanctions news runs on the front page when it involves the United States and Europe but also on the back pages as it involves the rest of the world.  You have to read the whole paper to make sure you have the full story.

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OFAC: Keeping Us Safe from MOOCs

Posted by at 5:24 pm on March 25, 2014
Category: Cuba SanctionsEconomic SanctionsIran SanctionsSudanSyria

By Aristóteles Sandoval [CC-BY-SA-2.0 (], via Wikimedia Commons blog previously reported on the impact of OFAC sanctions on the Massive Open Online Courses, quaintly known as MOOCs, offered by the for-profit Coursera. The sanctions have led Coursera to block students with IP addresses from Iran, Cuba and Sudan, a half-hearted attempt by the company to comply with U.S. sanctions.   Those sanctions, in general, prevent providing services to nationals of blocked countries even outside their home countries, so offering MOOCs to Iranians in, say, Germany, would be equally problematic. (Coursera gave Syrian students a reprieve relying, rather questionably, on an exemption in Syria General License 11A for educational exports by NGOs).

Last week, the Office of Foreign Assets Control gave Iranian students, both inside and outside Iran, a partial reprieve from the ban on MOOCs when it issued Iran General License G. That license permits enrollment of Iranians, both in and out of Iran, in MOOCs

provided that the courses are the equivalent of courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business, or are introductory undergraduate level science, technology, engineering, or math courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business.

Sadly, there was no happiness in Coursera-ville, because the license is restricted to “accredited graduate and undergraduate degree-granting academic institutions.” Not all of Coursera’s courses are offered by accredited academic institutions, so some of its course offering will not benefit from this general license.

Another beneficiary of the new general license would appear to be EdX, the MOOC platform founded by Harvard and MIT. EdX partners with other accredited academic institutions that provide the various offerings made available by EdX. One significant difference between EdX and Coursera is that EdX sought and obtained a license to provide MOOCs to students in  Cuba, Iran and Sudan. Apparently that license did not cover provision of STEM courses, i.e., courses in science, technology, engineering and mathematics, without specific approval by OFAC, according to this Harvard Crimson article.  That article went on to note the refusal of OFAC to permit a MOOC entitled “Flight Vehicle Aerodynamics” taught by MIT faculty.

This would mean that EdX and Coursera no longer need specific licenses for Iranian students to participate in courses taught by accredited institutions other than certain advanced STEM courses. However, licenses will still be required to initiate Cuban and Sudanese students into the intricacies of George Eliot’s Middlemarch or the structure of French symbolist poetry. (It is well known that familiarity with Eliot and Valéry are mere stepping stones to terrorist and anti-American activity, so we will be safe from literary Cuban and Sudanese terrorists, at least for the moment.) This General License, however, probably has no effect on the “Flight Vehicle Aerodynamics” course, because although it is far from clear what is meant by STEM courts “ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business,” it is probably safe to assume that “Flight Vehicle Aerodynamics” is not among them.

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