Archive for June, 2008


Jun

9

LRAD: Ear Splitter or Communications System?


Posted by at 9:31 pm on June 9, 2008
Category: General

Long Range Acoustic DeviceThe export classification of recently-devised forms of non-lethal weaponry can be a tricky business, and nowhere more so than in the case of Long Range Acoustical Devices (“LRAD”). This interesting article in Der Spiegel Online states that the Bureau of Industry and Security (“BIS”) is considering adding LRADs to the Commerce Control List. What is apparently motivating the review of the LRAD is concerns that the Chinese, who have a number of LRADs manufactured by American Technology Corporation, may use them on human rights demonstrators during the Beijing Olympics.

The LRAD, according to the Der Spiegel article, was developed in the wake of the attack on the USS Cole in order to enforce exclusion zones around naval vessels. That would certainly seem to put the equipment in Category XI of the USML. American Technology Corporation argues otherwise:

But the American Technology Corp. (ATC) says the device is designed to “influence behavior and determine intent.” Robert Putnam, in charge of media and investor relations with the San Diego, California-based company, says it is “a directed sounds communications system, not a weapon.”

And the company’s website describes the ability of LRAD to communicate over long distances “with authority.”

But the device can also direct over long distances ear-splitting sounds that are painful and potentially dangerous to hearing. So it seems somewhat dicey to say that the device is just a long-distance communication device.

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Copyright © 2008 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

5

Lloyd’s TSB To Pay Record Fine to OFAC


Posted by at 9:29 pm on June 5, 2008
Category: General

Lloyds TSBAccording to this article in The Times, Lloyd’s TSB expects to pay a £180 million fine, or about $350 million, to the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) for transactions with companies and individuals in embargoed countries. No detail is given on the specific payments involved, but it’s reasonable to speculate that it involves a number of payments to Cuba and Iran given the size of the anticipated penalty. The anticipated £180 million fine outpaces the $80 million payment made by ABN Amro in 2005 and the $100 million fine paid by UBS to the Federal Reserve in 2004 for transactions with sanctioned countries.

The Times reporter, however, seems to have more or less made up her description of the applicable OFAC regulations rather than speaking with anyone who was actually familiar with them:

America banned banks from carrying out transactions in the US in dollars for people or businesses from the countries on its blacklist in the hope that this would starve terrorists of funding.

Er, no. Transactions in foreign currencies are covered as are transactions carried out by branches of U.S. companies outside the United States. Perhaps I shouldn’t be so critical since I’d probably have as much trouble with the rules of cricket as the Times reporter had with OFAC’s much more complex rules.

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Copyright © 2008 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

4

Boeing Subsidiary Fined for Anti-Boycott Violations


Posted by at 5:31 pm on June 4, 2008
Category: General

Aviall BuildingThe Bureau of Industry and Security (“BIS”) recently released a settlement agreement pursuant to which Aviall Pte Ltd agreed to pay $3600 for violation of BIS’s antiboycott regulations. Aviall Pte Ltd. is a Singapore-based subsidiary of U.S.-based Aviall, Inc., which is, in turn, a wholly-owned subsidiary of Boeing.

According to the charging letter, Aviall Pte. received a purchase order in November 2002 from a customer in Bahrain with the following language:

9. ISRAELI BOYCOTT: In the case of overseas suppliers, this order is placed subject to the Suppliers being NOT on the Israeli Boycott list published by the Central Arab League.

Aviall fulfilled the order without deleting or otherwise taking exception to this condition in violation of section 760.2(a) of the Export Administration Regulations. Furthermore, and in violation of section 760.5 of the EAR, Aviall Pte. failed to report the boycott request to BIS.

This case is a good occasion to remind exporters and companies with foreign subsidiaries that the anti-boycott regulations apply fully and directly to controlled foreign subsidiaries of U.S. companies under sections 760.1(b) and 760.1(c) of the EAR. Under section 760.1(b)(1) a U.S. person includes a “controlled in fact” foreign subsidiary of a U.S. company. Section 760.1(c)(2) a company is “controlled in fact” if the U.S. company owns more than 50 percent of the stock of the foreign subsidiary or owns 25 percent or more of the stock of the foreign subsidiary if no other person owns or controls an equal or larger percentage of the foreign subsidiary. Here Aviall Pte. was a wholly-owned subsidiary of Aviall, Inc., which is a U.S. company incorporated in Delaware.

Although the fine here was relatively small, larger fines are a distinct possibility, meaning that U.S. companies should impress the need upon their foreign subsidiaries doing business in the Middle East to carefully read contracts for anti-boycott language, and to delete and report such language when found.

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Copyright © 2008 Clif Burns. All Rights Reserved.
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Jun

3

California Firm Agrees to $31,000 Fine for Deemed Export Violation


Posted by at 9:08 pm on June 3, 2008
Category: Deemed Exports

TFC Manufacturing
ABOVE: TFC Manufacturing

California-based machining facility, TFC Manufacturing, recently agreed to pay $31,500 in fines to settle “deemed export” allegations made by the Bureau of Industry and Security. According to BIS’s charging letter, TFC disclosed “technology for the production of aircraft parts” to an Iranian national in the United States. According to BIS, the technology was classified under ECCN 9E991.

Those familiar with the logic of the Commerce Control List, will immediately note that the ECCN involved is one of the xx99x ECCNs. These are typically broad catch-all categories of items that are called, in BIS-speak, “n.e.s.,” or “not elsewhere specified.” (What additional costs would be incurred by BIS to eliminate “n.e.s.” as an acronym in the Commerce Control List and simply print out “not elsewhere specified”? Certainly not enough to justify this ridiculous acronym.) And these xx99x n.e.s items are generally controlled only for anti-terrorism (“AT”) reasons, meaning that licenses are only required to the AT countries such as Iran. In this case ECCN 9E991 refers to technology relating to ECCN 9A991 which simply covers aircraft parts “n.e.s.”

The President of TFC that signed the Settlement Agreement had an Iranian surname and it is likely, if not certain, that the employee involved was an Iranian refugee and not someone likely to transfer aircraft part technology to the government of Iran. Nevertheless, an “deemed export” of controlled technology to the Iranian refugee is equivalent, under BIS rules, to an export directly to Iran. The company was subject to the new $250,000 maximum penalty in this case, and so it is reasonable to assume that the $31,000 fine imposed on TFC was an implicit recognition that the violation was a technical violation that did not greatly impinge on the security interests of the United States.

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Copyright © 2008 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)