Archive for the ‘Syria’ Category


May

2

Snooping on the Snoopers


Posted by Clif Burns at 6:02 pm on May 2, 2013
Category: BISSyria

By DSOA (Own work) [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADubaiSiliconOasisHeadQuarters-exterior2.JPG
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.

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Jun

5

Firm Sues Florida Over State Sanctions on Cuba, Syria


Posted by Clif Burns at 5:17 pm on June 5, 2012
Category: Cuba SanctionsSyria

Odebrecht, Salvador, BrazilOdebrecht 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.

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May

29

NetApp Under Investigation For Spying Equipment Used in Syria


Posted by Clif Burns at 5:44 pm on May 29, 2012
Category: BISSyria

NetApp HeadquartersA recent story from Bloomberg indicates that California-based NetApp, which manufactures and sells network storage solutions, is under investigation by the Bureau of Industry and Security (“BIS”) in connection with one of NetApp’s storage devices winding up in Syria. The NetApp equipment was made part of a massive system built by Syria’s Bashar al-Assad to intercept and review all email sent in Syria.

According to the story, the Italian company Area SpA, which built the surveillance system, bought the NetApp equipment from one of NetApp’s distributors in Italy. Area then exported the equipment to Syria and incorporated it into the surveillance system.

That in and of itself would not have posed problems for NetApp or led to an investigation. However, the Bloomberg story reports, “workers for Area and NetApp communicated directly, e-mailing each other after the sale about configuring the equipment.” That could indicate that NetApp knew of the sale before it occurred. More likely, if true, these emails might be construed as provision of services to the Syrian government which would have been problematic if they occurred after the Executive Order issued on August 17, 2011, banning export of services to Syria.

A NetApp spokesperson indicated that the company was finishing its internal review of the matter and declined to provide a comment to Bloomberg on the investigation.

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Apr

25

Lab Equipment Companies Added to Entity List


Posted by Clif Burns at 7:30 pm on April 25, 2012
Category: BISIran SanctionsSyria

Medical LabLast week the Bureau of Industry and Security (“BIS”) added three parties to the Entity List and imposed license requirements for exports, re-exports and in country transfers to these parties for all items subject to the Export Administration Regulations, i.e., items exported from the United States or with certain percentages of U.S. content. The order adding the parties to the Entity List indicated that there would be a presumption of denial for all license applications involving the three parties.

As is typically the case, BIS provides only scant detail about what got these three parties into hot water beyond saying that they had been involved in the transhipment of items to Iran and Syria. Looking at the identity of the parties allows one to make some more reasonable assumptions about what was going on. One of the designated entities was Canada Lab Instruments in Montréal, which describes itself in a business directory as “supplying a wide range of environmental, laboratory, measuring and analytical instruments for researching and educational purposes from the most famous manufacturers.” The second entity, Abou Elkhir Al Joundi, is an individual who owns Canada Lab Instruments and was educated in Damascus, Syria. The third entity was “Masound [sic] Est. for Medical and Scientific Supplies” in Amman, Jordan, which describes itself in a business directory as involved in the distribution of medical and scientific laboratory equipment.

It seems, therefore, reasonable to assume that the three entities were put on the Entity List in connection with shipment of medical and lab equipment from Canada and through Jordan to Syria and Iran. The quantity and value of the shipments, however, cannot be determined and the BIS order gives no indication. This also does not seem to involve items of particular concern to the interests of the United States in Iran and Syria, particular since the medical equipment probably would have been eligible for licenses. But I guess if we are chasing folks for selling nail polish to Iran, everything is fair game.

As a side issue, if BIS wants to put people in jail for future unlicensed exports to the Jordan company, it at least ought to spell the name of the company correctly on the list establishing this license requirement. It’s “Masoud,” not “Masound.”

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Mar

13

Does Anything Exported to the UAE Ever Stay There?


Posted by Clif Burns at 10:24 pm on March 13, 2012
Category: BISCriminal PenaltiesSyria

Afton, WyomingAn Afton, Wyoming man, Matt Kallgren, was sentenced, on January 23, 2012, to three years probation with the first four months in home confinement on charges that he exported EAR99 diesel truck parts to Syria. Of course, since criminal penalties weren’t enough in this case, the Bureau of Industry and Security (“BIS”) piled civil charges on top of the criminal prosecution. Now BIS has announced a settlement of the civil charges pursuant to which Kallgren agreed to a $75,000 penalty and a three-year denial order, both of which were suspended for three years provided that he commits no further export violations and complies with the terms of his criminal sentence.

According to the charging papers, Kallgren was contacted by a Syrian company in 2006 which was seeking to purchase civilian diesel engine parts. When Kallgren attempted to ship the parts, his “normal freight forwarder” (which according to this local newspaper account was UPS) told him that items couldn’t be shipped to Syria. He then used a freight forwarder recommended by the Syrian buyer to ship the parts to Syria by transshipping them through the UAE.

Miraculously Kallgren was subsequently the, er, beneficiary of an “Outreach” visit from Immigration and Customs Enforcement Agents who, allegedly, advised him on the U.S. laws prohibiting exports to embargoed destinations. (Another case which shows that the appropriate response to an “Outreach” visit is to call your lawyer.) Kallgren shipped a second order of parts via the UAE to Syria which, in a similarly miraculous fashion, were seized by Customs on their way out of the country. Allegedly, Kallgren doubled down and told Customs that the parts really were destined for the UAE. Really. I promise. Pay no attention to those commercial invoices.

Kallgren’s company Powerline Components, which shares Kallgren’s home address, also agreed to settle separate charges relating to these shipments. Under that settlement, Powerline agreed to a $60,000 fine and a three-year denial order. The denial order, but not the fine, was suspended.

Finally, in what appears to be a related case, R.I.M. Logistics agreed to a $50,000 fine to settle charges that it aided and abetted an export of EAR99 diesel parts to Syria via the UAE. Although that settlement does not mention Kallgren or Powerline, the timing and subject matter strongly suggests that these were the same exports that got Kallgren and Powerline in trouble. Interestingly, there is not a single allegation in the charging letter that it had any knowledge that the export to the UAE was ultimately destined to a customer in Syria. One might suspect that R.I.M. was the freight forwarder recommended by the Syrian customer, in which case R.I.M. might have had knowledge of the ultimate destination of the export. But without making that assumption, and based on the face of the charging documents, R.I.M. was held to be absolutely liable for its customer’s misdeeds whether or not it had any knowledge of them.

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