Name That Country!
Posted by Clif Burns at 6:31 pm on December 18, 2013
Category: BIS • DoJ • Sanctions • Syria
The Securities and Exchange Commission just released on Monday, according to this article, correspondence that it had with Dell regarding an on-going investigation by Dell, the DOJ, and the Bureau of Industry and Security (“BIS”) regarding sales of Dell computers to Syria. These sales were made by a Dell distributor based in the U.A.E. In that correspondence, Dell indicated that it was conducting an internal investigation with outside counsel into sales by one of its Dubai-based distributors, was regularly communicating with the U.S. Attorney regarding that investigation, and had responded to a BIS subpoena requesting information about the sales in question. The company said that the investigation was not yet complete so that the company could not yet respond to the SEC’s questions as to whether Dell had any liability under U.S. export and sanctions law arising from the distributor’s sales to Syria.
The company, however, did try to suggest that it might not be liable because of a clause it cited in its distribution agreement:
Distributor acknowledges that Products licensed or sold hereunder or in respect of which services (including Dell Branded Services) are provided, which may include software, technical data and technology, are subject to the export control laws and regulations of the USA, the European Union, the Territory in which Distributor operates and the territory from which they were supplied, and that Distributor will abide by such laws and regulations. Distributor confirms that it will not export, re-export or trans-ship the Products, directly or indirectly, … to … any countries that are subject to the USA’s or those other relevant territories’ export restrictions or any national thereof … .
To paraphrase someone else, I guess you go to war with the language you have — that is to say, this language is hardly ideal. It relies on the distributor to know what countries are subject to U.S. export restrictions. Do you really think that a distributor in the U.A.E. is aware of the details of U.S. sanctions programs or even which countries are on the current U.S. bad country list? Probably not.
I certainly do not mean to imply that Dell has criminal or civil liability because of this drafting issue. Rather, my point only is that companies should be explicit in these clauses about which countries are subject to sanctions and to affirmatively advise distributors in writing when those countries change. Don’t count on your distributor to know who the U.S. has sanctioned anymore than you would count on him to know the name of last year’s winner of American Idol.
Syria Sanctions Loosened To Benefit Rebels and Civilian Population
Posted by Clif Burns at 9:04 pm on June 13, 2013
Category: BIS • OFAC • Syria
ABOVE: Destruction in Homs, Syria
Just as the Assad government appears to be gaining ground back from the rebels, the White House announced certain measures loosening the sanctions on Syria. Yesterday, BIS issued a notice on its website that it would begin processing licenses for exports of certain goods related to reconstruction of infrastructure in areas held by the rebels. Specifically, the agency indicated that license applications would be accepted for commodities, technology and software related to
water supply and sanitation, agricultural production and food processing, power generation, oil and gas production, construction and engineering, transportation, and educational infrastructure. . . .
BIS promised that implementing regulations “shortly” but indicated that applications could be filed “immediately.”
Similarly, OFAC released a Statement of Policy permitting the export of a somewhat narrower group of services. The Statement of Policy indicates that OFAC will consider on a case-by-case basis applications to permit services in the Syrian telecommunication industry to enable private persons to better access the Internet and in the agricultural sector. Certain petroleum transactions benefiting the rebel forces may also be authorized. Finally, OFAC revised Syria General License 11 and replaced it with General License 11A authorizing NGOs to engage in certain activities designed to preserve the cultural heritage of Syria including museums, historic buildings and archaeological sites.
On the Internet, Nobody Knows You’re a Syrian
Posted by Clif Burns at 7:59 pm on May 14, 2013
Category: OFAC • Syria
According to this report, Network Solutions in April seized over 700 domain names relating to Syria. Among these were sites used by the Syrian Electronic Army, a pro-Assad hacker group that has achieved some notoriety for taking over the AP’s Twitter account and pushing out a false tweet about alleged explosions at the White House. They also hacked The Onion’s Twitter account which led to this memorable story and headline on the satire site: “Syrian Electronic Army Has A Little Fun Before Inevitable Upcoming Death At Hands of Rebels.” All of the domains now show the owner as “OFAC Holding.” A complete list can be found here.
Frequent readers of this blog will no doubt be aware that OFAC has issued a series of general licenses permitting provision in sanctioned countries of services incident to personal communications over the Internet. However, General License No. 5 for Syria explicitly excludes from the General License “domain name registration services.”
Of course, shutting down the sites now does not negate the violation that occurred in providing these web hosting services to Syria in the first place. And a large part of the problem here is that domain services are normally provided without any human involvement. A registrant fills out a web form, hands over a credit card number to pay for the annual fee, and a computer program takes care of the rest. Add to that, as the famous New Yorker cartoon caption suggests, “on the Internet, nobody knows you’re a dog.” It is simply not clear how Network Solutions could screen out every registration from an embargoed country. Instead, it seems the best an Internet registrar can do is shut down the domain names once it learns of the problem.
The big questions, then, are this: does Network Solutions have a voluntary disclosure pending at OFAC on this and what will OFAC’s response be?
Snooping on the Snoopers
Posted by Clif Burns at 6:02 pm on May 2, 2013
Category: BIS • Syria
ABOVE: Computerlinks FZCO
HQ, DSO Building, Dubai
The Dubai subsidiary of Munich-based Computerlinks recently agreed to pay $2.8 million dollars to the Bureau of Industry and Security (“BIS”) to settle charges that the Dubai subsidiary exported sophisticated Internet surveillance software to Syria without the required licenses. BIS had previously placed one individual and one company in the U.A.E. on the entity list in connection with the unlicensed export of these Internet devices to Syria
The charging documents are unusually detailed and reveal what appears to have been a systematic effort by the Dubai subsidiary to lie to Blue Coat, the manufacturer of the devices, about the ultimate destination of the equipment. One of the exports at issue was described as follows:
On or about October 29,2010, Computerlinks FZCO placed an order with Blue Coat for eight devices used to monitor and control web traffic along with accompanying equipment and software. Computerlinks FZCO falsely stated that the items were intended for the Iraq Ministry of Telecom, concealing the fact that the items actually were destined for Syria. Upon receiving the order, Blue Coat reexported the items from its facility in the Netherlands to Computerlinks FZCO in the U.A.E. On or about December 15, 2010, Computerlinks FZCO directed the items’ transfer within the U.A.E. for their subsequent shipment to Syria for use by the state-run Syrian Telecommunications Establishment (STE).
This is one of the highest fines BIS has ever imposed, ranking, by my count, only behind the $15 million imposed on Balli Aviation and related companies in 2010. This is due, in part, to the fact that this violation was not voluntarily disclosed. In fact, judging from the gleeful and somewhat self-serving press release from Blue Coat commending BIS for whacking Computerlinks, it is reasonable to assume that Blue Coat discovered the diversion and dropped the dime on Computerlinks.
No doubt Blue Coat discovered the diversion because the devices that Syria used to snoop on its citizens were probably also snooping on Syria at the same time. And you have to be more than a little surprised that the people at the Dubai subsidiary of Computerlinks were too stupid to realize that this would happen.
Firm Sues Florida Over State Sanctions on Cuba, Syria
Posted by Clif Burns at 5:17 pm on June 5, 2012
Category: Cuba Sanctions • Syria
Odebrecht Construction, Inc., a U.S. subsidiary of the Brazilian firm Odebrecht S.A., filed suit on Monday in federal court asking the court to declare as unconstitutional a Florida law which prohibits the award of state and local contracts to companies with business in Cuba or Syria. The law, signed by Governor Scott last month, goes into force on July 1.
Odebrecht S.A. is currently involved in a massive renovation project for the port in Mariel, Cuba, which is destined to take all the commercial traffic from the port at Havana when the project is completed. The Florida subsidiary has been responsible for, among other things, improvements to the Miami International Airport in Florida.
Of course, the sustainability of the Florida law is in serious question after the U.S. Supreme Court’s decision in Crosby v. National Foreign Trade Council, 530 U.S. 363 (2000). In that case, the Supreme Court struck down, on preemption grounds, a similar law passed in Massachusetts. The court’s analysis focused in large part on the extent to which the Massachusetts law was broader than existing federal sanctions, specifically noting that the federal sanctions only covered new investments while the Massachusetts law targeted existing investments as well. Here, the U.S. sanctions do not cover the activities of Odebrecht, S.A., which is a non-U.S. person, while the Florida sanctions would reach those activities.
The press reports on the Odebrecht complaint indicate that the company is making a constitutional challenge to the law, which is an argument based on Congress’s exclusive power to make U.S. foreign policy. The Crosby court dodged the constitutional issue and was decided solely on the basis of preemption. I have to assume that the Odebrecht complaint makes the preemption argument as well or at least will be ultimately amended to make that argument.