The recent addition by OFAC of two South African individuals and one company to the SDN list illustrates the perils that may face companies engaged in Internet services and commerce. OFAC designated Farhad and Junaid Dockrat, both alleged to be Al-Qaeda financiers, as Specially Designated Global Terrorists. OFAC also designated the company Sniper Africa, in which Junaid Dockrat holds a seventy-percent interest. Sniper Africa, which sells camouflage gear to hunters in South Africa, has a website, and this website is specifically cited in the OFAC designation.

The problem occurs because the domain name for the site, www.africasniper.com, was registered by Tucows, Inc., a U.S.-based domain name registrar. This registration service provided by Tucows permits Sniper Africa to reserve its website address for its own use and also provides the routing service necessary for the domain name to point to web servers designated by Sniper Africa. Typically a name is registered to an individual or company by a completely automated process that takes place over the Internet without any human intervention by the registrar.

Once a company or individual has been designated by OFAC as a Specially Designated Global Terrorist, OFAC regulations §§ 594.406 and 594.407 forbid U.S. companies from providing services, in the United States or abroad, to the designated company. Specifically the U.S. company may not provide:

legal, accounting, financial, brokering, freight forwarding, transportation, public relations, educational, or other services

The provision of domain name registration services to a designated individual appears to possibly run afoul of these prohibitions, potentially subjecting Tucows to substantial civil and criminal penalties. Nevertheless, Tucows continues to provide the domain registration services to Sniper Africa, without which the website would disappear from the face of the Internet.

Tucows provides its domain name services through resellers, but this doesn’t seem to provide a valid defense here. The whois record clearly shows that, although Tucows may be selling the services through a reseller, it is providing the services to the name registrant and not the reseller. Perhaps Tucows might find some solace in this case because the named registrant here is HQ Clothing Enterprises, although the fact that the name of the designated company, the name of the website and the website address are all Sniper Africa suggest that this might not be such a strong defense.

Another possible defense might be that provided by § 594.508 which exempts the provision of “telecommunications” services. That exemption, however, seems to cover only traditional telecommunications services, such as the provision of telephone service, rather than the provision of domain name registration services.

Notwithstanding the possibility that Tucows may have run afoul of OFAC’s Global Terrorism Sanctions regime, it is clear that Tucows is in an awkward position. Companies that provide domain name registration services are not often well-positioned to determine whether the ultimate party to whom the service is provided is on the SDN list or not. The transaction takes place completely over the Internet which provides only limited ability for the registrar to verify the identity of its customer. As the joke goes, you can be anyone you want on the Internet.

Last Friday BIS issued its new and final rule in the war of the iPods pursuant to which the U.S. has proposed to ban export of “luxury items” to North Korea. These sanctions were allegedly directed at the power elite of North Korea and sought to deny them access to Segway scooters, iPods, leather coats, plasma TVs and other luxury goods craved by the Pyongyang powerati.

A provisional list of such items had been developed, and BIS was widely expected to refine that list and ban the export of items on the list to North Korea, particularly since lip service had been paid — unique in the sanctions arena — to a supposed desire not to do anything that would harm the ordinary people of North Korea since, clearly, they had suffered enough under the rule of their Divine Leader and his minions.

So, of course, it was more than a little surprising to see that the final rule adopted by BIS went far beyond what was expected and required a license not just for the luxury items but for all items exported to North Korea other than food and medicine. Luxury goods would be subject to a general policy of denial and non-luxury goods would be subject to a general policy of approval. Of course, non-luxury goods would now require the expense and delay of a license application. So much for those crocodile tears about the people of North Korea.

And rather than define luxury items, the new rule adopts the Justice Stewart Rule on Pornography — “I can’t define it but I know it when I see it.” The notice explicitly states that the list is “illustrative” and that “whether an item is a luxury good will be made on a case-by-case basis.” The rule goes far out on the limb by offering three (yes, only three) examples of things that aren’t luxury goods: “blankets, basic footwear [and] heating oil.” Whether an umbrella is a luxury item will be determined deep in the bowels of BIS if anyone tries to export them to Pyongyang.

(On a side note, what BIS Federal Register notice would be complete without an obvious error? In this instance, no one at BIS read the notice to catch bad cross references. So, the new Supplement No. 1 to Part 746 set forth in the notice says:

The following further amplifies the illustrative of list luxury goods set forth in § 746.4(c):

In fact, the illustrative list is in § 746.4(b)(1), not 746.4(c). This shouldn’t have been hard to check since § 746.4(b)(1) is on the same page as, and only a few inches away from, the erroneous cross-reference.)

The Federation of American Scientists has received, pursuant to an FOIA request, a complete list of the unfavorable determinations from the “end-use” or “Blue Lantern” checks conducted by the State Department during FY 2002 through 2004. Under the Blue Lantern program, U.S. embassy personnel (and sometimes DDTC personnel) engage in investigations overseas to investigate suspicious export license requests and post-shipment reports of misuse or diversion.

Annual reports from DDTC have provided some information relating to unfavorable “Blue Lantern” determinations including an analysis of unfavorable determinations by region and commodity. These reports, however, did not single out individual countries. The FOIA disclosures provide data on specific countries for FY 2002 through 2004, and the results are interesting:

Additionally, the report showed one unfavorable determination for each of the following countries: Bosnia, Botswana, Chile, Colombia, Cyprus, Czech Republic, Dominica. Grenada, Guyana, Haiti, Macau, Monaco, Morocco, Netherlands, Nicaragua, Panama, Slovenia, Spain, Suriname, Sweden, Turkey and Uruguay.

Obviously, Malaysia and Bolivia have won awards that no country would particularly want to win. In Malaysia’s case most of the unfavorable determinations related to aircraft parts. For Bolivia, the determinations involved firearms and riot control agents. Additionally, the appearance of Hong Kong as third on the list would appear to rebut the notion, frequently expressed by BIS at least, that Hong Kong has an exemplary export control program.

Now, here’s an inquiry for our readers. I am pretty sure that during a presentation on Blue Lantern by a DDTC official I heard the origin of the term “Blue Lantern” for the program. For the life of me, I can’t remember it, nor can I find it anywhere. A blue lantern is a signal, for railroad workers, that a car is being worked on and should not be moved, but that doesn’t seem a likely candidate. Nor does the use of a blue lantern by the Confederate submarine Hunley to signal that it sank the USS Housatonic seem an appropriate reference. So, does anyone know what “Blue Lantern” signifies?

OFAC has released its monthly civil penalty report for January. As usual, OFAC seems to be in competition with BIS to provide even less information about penalties imposed by the agency. Only two penalties are listed: one for “an individual” who traveled to Cuba and another for the human resources consulting firm Organization Resource Counselors. According to the report, “ORC imported services from Libya without an OFAC license.”

The OFAC report is typically silent on what services ORC imported from Libya. Frankly, that caused me to wonder as to what services anyone would import from Libya and, worse yet, break the law to do so. It is not like Libya is a hotbed of consultants and service providers. But with a little investigation (and the requisite speculation), I think I have a pretty good idea of what got ORC in trouble (assuming that a fine of $746.35 can really be considered “trouble.”)

One of the services provided by ORC is to advise companies on appropriate compensation levels for expatriate executives. You can see the page describing that service by clicking here. And, it would appear that ORC is offering information on cost-of-living and related data for Tripoli, Libya, information which no doubt had to be provided from Libya and is the imported service at issue.

The page also offers to provide that information for Cuba, which raises the question as to why OFAC might have penalized ORC for paying for someone in Libya to provide that information. Of course, the Cuban Assets Control Regulations provide, in 31 C.F.R. § 515.545, for an exemption for the import and export of informational materials whereas the Libyan Sanctions Regulations did not. An important caveat, of course, is that ORC could import under the Cuban regulations information that was already in existence concerning cost of living in Havana, but it could not pay for a report to be specifically created for its own needs or engage consulting services on these matters.

BIS issued the first anti-boycott penalty of the year last week to the National Bank of Egypt (warning: linked Bank web site has migraine-inducing animated gifs). As a result, BIS wrangled a settlement agreement and payment of $22,500 from the Bank. True to BIS form, the charging letter, the settlement agreement and the order provide minimal detail about the alleged violation, but still enough that something smells fishy, and it’s not a Nile Perch.

The charging letter notes that NBE has a branch in New York and then alleges that the bank “engaged in transactions involving the sale and/or transfer of goods or services (including information) from the United States to Syria.” Specifically, the charging letter references four commercial invoices either to or from Al Issar Trading Company which contained language certifying that no Israeli goods were “used for the production or preparation of the goods mentioned in this invoice.”

I think it is safe to say that the NBE in branch in New York was neither selling goods nor buying goods from Al Issar Trading Company. More likely, indeed almost certainly, what was involved here was that the Bank was issuing or confirming a letter of credit relating to that transaction. In a typical instance, a commercial invoice would be one of the documents to be presented for payment of the credit and would be used to determine the amount payed. The issuing or confirming bank would not read all the terms and conditions of the invoice, including any warranties relating to the country of origin of the goods or their component parts.

This is not unlike BIS’s penalizing a freight forwarder for a prohibited boycott term buried in the shipping documents, which we have complained about before. EAR § 760.1(e)(3) makes clear that intent is required for each anti-boycott violation and not merely the intent to perform the act that constituted the violation but also the “intent to comply with, further, or support an unsanctioned foreign boycott.” Since the Bank likely did not read the entire commercial invoice, it almost certainly didn’t have the requisite intent. Nor does there seem to be any sound policy basis to force banks to read every word of all customer export documents to ferret out anti-boycott violations.

Last week DDTC posted a notice on its website warning license applicants that their license applications would be returned if the applicant’s name on the license application did not exactly match the name on the applicant’s registration. Unsure of your exact name as registered? Don’t call DDTC, because they won’t tell you. A “mass-mailing” in January 2007 is promised in which everyone will be told their DDTC approved names. If Internet gambling were allowed, I might make a book on the likelihood of that actually occurring in January.

Even more ominous is a sentence slipped in at the very end of the notice:

Subsequent Web site notices which will be posted shortly on the following related matters:

. . .

2. Implementation of new procedures in the Office of Defense Trade Controls Compliance (Compliance & Registration Division) to reject deficient registration submissions.

This seemingly innocent promise should be filed in the “I Told You So” Folder. DDTC’s new informal guidelines under Part 129 expanded the scope of overseas sales representatives that will now be required to file registration applications. Most of these sales reps are foreign nationals for whom English is not their first language and for whom correctly filing out a Form DS-2032 is complicated by DDTC’s confusing and inconsistent instructions as we’ve pointed out before. So we predicted a wave of deficient registration applications and it now seems we were probably right.

According to one website, accommodations in Juba, the regional capital of Southern Sudan, are “not for the faint-hearted.” Of the eleven “hotels” in Juba listed by the site , most are tent camps. Some huts are available if you want to splurge. Most people will pray for a room at the Equatoria which actually boasts a restaurant.

Many lucky defense contractors will soon be learning first hand the pleasures of Juba because the State Department, effective January 17, has partially lifted the arms embargo against Sudan. Under the determination published today in the Federal Register, the State Department has authorized the provision of

non-lethal military equipment and related defense services (hereafter ‘‘assistance’’) to the Government of Southern Sudan for the purpose of constituting a professional military force. . . .

The Bush White House had, on October 13, 2006, exempted Southern Sudan from the sanctions that had been imposed on Sudan by President Clinton in 1997. Both today’s action and the October action were outgrowths of the December 31, 2004 peace accord between the Sudan People’s Liberation Army and the government of Sudan in Khartoum. Under the peace accords, Southern Sudan is granted autonomy for six years with a referendum on independence after that six year period. The Bush administration had held out the possibility of the lifting of sanctions as an inducement to the peace accords. The civil war between the SPLA was premised, at least in part, on the efforts of the Muslim government in Khartoum to impose sharia on the predominantly Christian south.

Probably the first Americans to arrive in Juba will be Blackwater USA, the Virginia-based private military corporation that, before today’s notice, already had a license pending to train a military force in Southern Sudan. My guess is that the Blackwater guys are used to living in tents.

Oh, and for everyone else headed for Juba, I hear the restaurant at the Equatoria is excellent. Try the Kajaik.^*

________

^*A stew made of dried fish and sorghum porridge.

Earlier this month, the Scandic Edderkoppen Hotel in Oslo, Norway, canceled reservations that had been made by a Cuban delegation to an Oslo travel fair. The hotel, a subsidiary of Hilton Hotel Corp., said that it was forced to do so in order to comply with the U.S. embargo on Cuba.

This created an uproar in Norway, at least to the extent that the Norway can ever be said to be in an uproar. One national labor union called for a boycott of Hilton Hotels and another asked for the government to bar Scandic from continuing to do business in Norway. One union spokesman justified the boycott on the grounds that it was “unacceptable for the U.S. to dictate to the whole world.”

Christina Karlegran, a regional spokesperson for Hilton, defended the hotel’s actions:

We have to follow American law. We can’t see that we have broken any Swedish or Norwegian law. If it turns out to be illegal, we will address that.

Unfortunately, Ms. Karlegran is wrong. E.U. Council Regulation (EC) No 2271/96 forbids European subsidiaries of American companies from complying with the U.S. embargo on company and directs the member states to impose sanctions for violations of this rule that are “effective, proportional and dissuasive.” Regulation 2271/96 is binding in Sweden, which is a member of the E.U., and in Norway, which is not a member of the E.U. but which has agreed to extend the effect of that regulation (and others) to Norway through the European Economic Area Agreement.

Additionally, the Anti-Racist Center in Oslo filed a police complaint that the action was discrimination based on citizenship in violation of Norwegian law.

This situation illustrates the untenable situation that the Cuba embargo creates for U.S. companies doing business in Europe and elsewhere. The E/U Directive is no defense to the violation of the U.S. law; neither is the U.S. law a defense to violation of the E/U Directive. Companies, therefore, are forced to pick between penalties, which is rather like being forced to place a bet on a Yankees-Orioles game.

UPDATE: This post has been revised, thanks to reader Anna, to note that the hotel involved was a Scandic hotel in Oslo, Norway, not a Scandic hotel in Stockholm, Sweden, as I mistakenly thought.

Back in the 1970s when the Shah was on his throne and Iran was our friend, the U.S. sold Iran a fleet of F-14 Tomcat fighter jets. Iran is still flying them and needs parts. In fact, F-14 parts were on the top of the list of the parts delivered to Iran as part of the Iran-Contra deal. So where is Iran getting parts today? From the Pentagon apparently.

Anyone familiar with the Defense Reutilization and Marketing Service (DRMS) and its commercial partner Government Liquidation LLC will not find it surprising in the least that surplus F-14 parts sold by them are winding up in Iranian hands. All USML surplus parts are required to be sold with an End User Certificate that informs the buyer of export restrictions. Certain sensitive USML surplus parts are required to be demilitarized or “demilled” before sale. In more than a few instances the processing personnel at DRMS fail to do either.

According to an Associate Press story which hit the wires today, surplus F-14 Tomcat parts have been sold to middlemen acting on behalf of Iran:

In one case, convicted middlemen for Iran bought Tomcat parts from the Defense Department’s surplus division. Customs agents confiscated them and returned them to the Pentagon, which sold them again - customs evidence tags still attached - to another buyer, a suspected broker for Iran.

The AP report provides a number of other instances of military surplus winding up in the hands of the Iranians and the Chinese.

You may also wonder what happens if someone buys a surplus USML item that doesn’t have an EUC and then exports it. Well, the exporter could go to jail. The government can be mistaken about whether an item is USML; an exporter can’t.

(Hat tip to Kevin Wolf at Bryan Cave who pointed me to the AP story.)

Six months after the State Department removed Libya from the list of state sponsors of terrorism, the Nuclear Regulatory Commission got around to changing its regulations to reflect this removal. In a Federal Register notice issued Friday the NRC amended its rules and changed Libya’s status from an “embargoed country” under 10 C.F.R. § 110.28 to a “restricted country” under 10 C.F.R. § 110.29.

The effect of that designation is that certain nuclear materials for which general export licenses are available under NRC rules may now be used to export those materials to Libya. For example, small quantities of americium-241 may now be exported to Libya under the general license provided in § 110.23.

Although exporting americium-241 sounds rather sinister, you should realize that small amounts of americium-241 are used in certain industrial applications such as equipment used to measure the rate of production of oil wells. Tiny amounts (less than 37 kBq) of americium-241 are also used in the ionization chambers of many residential and commercial smoke detectors. Ionization smoke detectors are, in fact, the principal use of americium-241.

People in Tripoli, however, shouldn’t expect to be getting American smoke detectors anytime soon. Under § 110.23 americium-241 can be exported under the general license to restricted countries such as Libya only when “contained in industrial process control equipment or petroleum exploration equipment.” I suppose we are still concerned that Qaddafi might dismantle a hundred million or so smoke detectors, extract the americium-241 and make a dirty bomb or two.

I suppose I should acknowledge that a terrorist cell that couldn’t shoot straight did try to make a dirty bomb from smoke detectors. A recently declassified intelligence report to Congress contained this statement:

British authorities announced the August 2004 arrest of members of an Islamic terrorist cell in the UK that may have attempted to produce an RDD [radiation dispersal device] using a radioactive isotope of americium taken from smoke detectors. The knowledge base and competence of this cell was low.

Uh, yeah. Do the math on how many smoke detectors it would take, at 37 kBq of americium-241 per smoke detector, to make a useful dirty bomb and saying that the competence of this cell was low is an understatement.