No, not the Pittsburgh Pirates. Real pirates, as in the Somali pirates that seized the Ukrainian merchant vessel Faina off the coast of Somalia. But before you get all excited, don pirate gear, break out a bottle of rum and start talking like a pirate, you only get to root for the pirates here because it appears that — accidentally, of course — the seizure of the Ukrainian ship might have been in the best interests of the United States, not that the pirates knew that or cared when they seized the arms-laden vessel.

According to Lt. Nathan Christensen, a deputy spokesman for the U.S. Navy’s Bahrain-based 5th Fleet, the ship’s cargo, consisting of tanks, grenade launchers, and ammunition, was ultimately destined for Sudan not for Kenya. For what it’s worth, the pirates also say the arms are headed for Sudan. Of course, they also say that the $20 million that they are demanding is not a ransom, but a “fine for unlawfully transporting weapons on Somali waters.”

Sudan is subject to both U.S. and U.N. arms embargoes. Some sources have suggested that the arms are more specifically destined to Southern Sudan. The U.S. arms embargo, which doesn’t strictly apply to this shipment, has been lifted for non-lethal military assistance and equipment for Southern Sudan, although the Ukrainian cargo can hardly be described as non-lethal. The semi-autonomous region of Southern Sudan is not subject to the U.N.arms embargo which covers only Darfur.

Even so, Kenya is still claiming that the arms are not destined for Sudan, north, south, east or west.

On Monday, a government spokesman, Alfred Mutua, said: “We buy weapons all the time. I don’t see what the big deal is.” …

Ukrainian tanks, though, are a relative anomaly in Kenya, which has been a close ally of the United States and Britain for decades and has been equipped with Western-made weapons. Mr. Mutua acknowledged this, saying most of Kenya’s tanks were “old British tanks.”

But, he added, the Ukrainian tanks were cheaper.

Cheaper, of course, if you don’t include the cost of retraining Kenyan troops to use the new tanks. Or cheaper if they were headed to Sudan, including Darfur

A federal district court in Washington, D.C., issued an opinion* last Friday awarding significant compensatory and punitive damages in a law suit against Syria brought by relatives of Jack Armstrong and Jack Hensley. Armstrong and Hensley were two U.S. civilian engineers who were kidnapped and beheaded in Iraq in 2004 by al-Tawhid wal-Jihad (“al-Qaeda in Iraq”). This incident gained worldwide notoriety after the terrorists released a gruesome video of the beheadings on the Internet.

Normally the sovereign immunity doctrine prohibits claims in U.S. courts against foreign nations. The Foreign Sovereign Immunities Act (”FSIA”), 28 U.S.C. § 1602 et seq., however, permits such actions arising out of acts of terrorism where the foreign nation through official action has provided material support for extrajudicial killings, where the foreign nation was a designated state sponsor of terrorism at the time, and where the victim was a U.S. national. The court found that all these conditions were met with respect to Syria and the two beheadings at issue by al-Qaeda in Iraq. The court entered judgment against Syria in the amount of $412,909,587. This total award included separate awards for loss of income from the two decedents, pain and suffering by the two decedents, solatium to the immediate family members, and punitive damages. The award for punitive damages made up $300,000,000 of the total award.

The issue after such an award is how the plaintiffs might be able to collect these sums. Obviously the chance of this award being enforced in a Syrian court is roughly equal to the chance of winning the same amount in the lottery. Instead, these sums can only be recovered, as a practical matter, by judicial execution on Syrian assets in the United States. As readers of this blog will know, all Syrian assets in the United States are blocked. (And I’ll bet you were wondering what the export law connection would be for this case.)

Enter the Terrorism Risk Insurance Act of 2002, which permits execution against blocked assets. Section 201 of that act permits execution of blocked assets to satisfy judgments arising from acts of terrorism “to the extent of any compensatory damages for which such terrorist party has been adjudged liable.” And that’s the rub: only “compensatory” damages are included which means that punitive damages, which constitute the bulk of the award in the Armstrong and Hensley case, can’t be obtained from the blocked assets. Of course, the plaintiffs could apply for a license from OFAC or wait for the assets to be unblocked.

UPDATE: Although Executive Order 13399 states that the assets of entities in Syria engaged in the material support of terrorism are blocked, no specific order blocking the assets of the Syrian government has yet been issued, so the TRIA is not strictly applicable here until such time as those assets are specifically blocked. When writing this post I had momentarily confounded the comprehensive export ban with blocking of governmental assets. Thanks to Ex-OFAC in the comments for pointing this out.

*Francis Gates v. Syrian Arab Republic, 2008 WL 4367284 (D.D.C. 2008)(Westlaw subscription required). Slip opinion also available without Westlaw by clicking here.

A court in Bangkok this week denied a U.S. request to extradite Jamshid Ghassemi, an Iranian national. Ghassemi had been indicted by a federal grand jury in San Diego in 2006 in connection with an alleged attempt by Ghassemi to purchase and export 12 accelerometers from Honeywell International, Inc. to Iran.

The Thai court decision is not public, but the AP obtained a defense filing which asserted three arguments against extradition. First, the defense argued that the extradition papers were not timely filed. Second, it was asserted that Ghassemi would be tortured in the United States if extradited. Finally, the defense pleading relied on the “military offense” exception in the extradition treaty between the United States and Thailand.

It is, of course, somewhat speculative, but it seems likely that the court relied on the “military offense” exception rather than the other two arguments. Under Article 7 of the Extradition Treaty, a request is still timely if the statute of limitations hasn’t expired, which in this case it had not. The torture argument has little factual basis.

But reliance on the military offense exception, set forth in Article 3 of the treaty, seems tenuous as well. The defense argument in support of the exemption was that Ghassemi was a military officer and that he attempted to purchase the accelerometers under orders from his immediate military superior. The military offense exception is widely thought to refer to military offenses such as desertion and mutiny, offenses that are outside the ordinary scope of criminal laws. See, for example, In the Matter of the Requested Extradition of Carlos Guillermo Suarez-Mason, 649 F. Supp. 676 (N.D. Cal. 1988). The Italian Extradition Treaty, Art. V, §3, 35 U.S.T. 3029 (1984), provides a more detailed definition of military offenses as “offenses under military law which are not offenses under ordinary criminal law.” Violations of export laws do not fit readily within such a definition of a “military offense.”

Actually, the penalty that freight forwarder Demetrios International Shipping recently agreed to pay was only $6,000, but it was for export of two Raptor 100K stun guns to Algeria without a license from the Bureau of Industry and Security (”BIS”). My apologies for the bad pun.

Stun guns, all of them, even those built by hobbyists from disposable cameras, are classified under ECCN 0A985 and require BIS licenses for exports to all destinations mostly because of concerns that they can be used as implements of torture. The Raptor 100k stun guns involved here, which retail at around $12 each, are relatively benign. Here’s an undeniably inane video (with some language that may not be safe for work) posted on YouTube by some dimwitted teenagers using a 100k stun gun on themselves to no apparent ill effect. These low end stun guns are probably not the first choice of Algerian police officers or Middle Eastern terrorists as implements of torture.

And, of course, it goes without saying that stun guns are readily available outside the United States. They are also easy to build from commonly-available electronic components using schematics readily available on the Internet. (WARNING: these schematics are controlled by ECCN 0E982. If you live outside the United States or are not a U.S. citizen or permanent resident, clicking the preceding link to those schematics will violate U.S. law and subject you to civil and criminal penalties, including imprisonment.)

Of course, none of these considerations are defenses to the violation by Demetrios. But it does suggest that there are good policy reasons for a review of ECCN 0A985 to restrict its application to stun guns that people might find, shall we say, more shocking.

An article in today’s Miami Herald provides more details about the settlement agreement that we previously reported and under which freight forwarder Cargoland Air and Ocean Cargo, Inc. agreed to pay a fine of $36,000 to the Bureau of Industry and Security (”BIS”). The fine was paid in connection with an unlicensed shipment of police helmets to Venezuela. These new details, however, may raise more questions than they answer.

According to the article, Susan Olmo, the owner of Cargoland, had no idea a license was necessary:

Doral freight forwarder Susana Olmo shipped 210 riot helmets to Venezuela two years ago as a favor to a customer who had won a contract to outfit some of the country’s police.

It was only after the goods were on their way that Olmo learned that U.S. law required her to have a license to export the helmets. Olmo stopped the shipment and had the helmets returned to the United States, but that wasn’t enough to prevent her company from being fined $36,000 by the Commerce Department

Several things can be gleaned from this. First, it seems likely from this account that Olmo never bother to even consult the Commodity Control List before exporting the helmets. Accordingly, although our previous post on this complained that the ECCN involved might not give reasonable notice to a freight forwarder of what was covered, Olmo can’t claim that defense. Indeed, it is likely that BIS’s decision to whack her company even though she made every effort to get the helmets back was based on the absence of any evidence of an attempt to comply with BIS’s export rules.

I’m not quite sure what to make of Olmo’s claim that the export was “a favor to a customer.” Does Olmo export stuff with charge for customers she likes? And even if she did, I can’t find a personal favor defense in the Export Administration Regulations.

A settlement agreement with BIS doesn’t require that the exporter show remorse for the illegal shipment, and Olmo isn’t about to show any:

Olmo … is riled that she was fined $36,000. She said she lost about $20,000 shipping the helmets back to Miami. And she’s been stuck with about $15,500 worth of helmets she doesn’t know what to do with.

Uh, maybe she could send the helmets back to her customer. And what does she mean that she’s stuck with the helmets? Did she buy them? Was she the exporter of record or, in the current jargon, “U.S. principal party in interest”? Maybe what happened here is that her customer, knowing that a license to ship riot helmets to Venezuela would be difficult to obtain, duped her into buying and exporting the helmets, hence her claim that it was a favor.

‘They want to make an example of a small company,” Olmo said. “I don’t think it was fair. I didn’t make any money.”

She’s vowed she’ll never export anything again.

Her company is a freight forwarder and a non-vessel owning common carrier (”NVOCC”) that ships container loads to foreign countries. Is she saying that she’s shutting down her company? Or again, maybe this is consistent with my speculation that perhaps she was duped by her customer to be the exporter of record here. Even so, someone ought to tell Olmo that even where she is just the freight forwarder she is still involved in an export and required to comply with U.S. export laws.

While some in the export community have charged the Bureau of Industry and Security (”BIS”), the Office of Foreign Assets Control (”OFAC”) and the Directorate of Defense Trade Controls (”DDTC”) of being overzealous in their enforcement activities, it is a rare day that an agency enforcing export rules is accused of being to lackadaisical in its enforcement of those rules. Well, that rare day is today, or rather last Thursday, when the Government Accountability Office (”GAO”) released a report criticizing the Environmental Protection Agency (”EPA”) for lax enforcement of its rules on the export of cathode ray tubes.

The so-called CRT rule prohibits commercial export of used CRTs, both broken and intact, for recycling unless the exporter provides notice of export to the EPA, and the country of destination provides to the EPA it’s consent to receive the CRT shipment. Criminal and civil penalties may be imposed for violations of the rule.

The GAO report revealed that the EPA had done little to enforce the CRT rule since it went into effect in January 2007. Since that time, Hong Kong has returned 26 containers of CRTs on the ground that imports violated its own hazardous waste rules. If the CRT rule had been complied with, Hong Kong would have withheld consent after the export was notified to the EPA, and the export would not have been allowed. Indeed the first and only enforcement action under the CRT rule, a $32,500 administrative proceeding against Jet Ocean Technology, occurred in July of this year and was the result of GAO’s uncovering the violation and bringing it to the EPA’s attention.

The EPA, of course, was not pleased by GAO’s smackdown, expressing its belief that the best way to enforce the CRT rule is to continue doing what it was doing before the GAO started meddling in EPA’s business. According to the report:

In commenting on a draft of this report, EPA generally disagreed with our recommendations, stating, among other things, that (1) it did not want to build an “extensive compliance monitoring and enforcement program” around the CRT rule … and (2) it preferred nonregulatory, voluntary approaches to address the problems discussed in this report.

I’m certain that many exporters would like to hear similar words from BIS, OFAC or DDTC, but, of course, that would be a foolish expectation since those agencies, unlike the EPA, are actually interested in stopping the exports at issue.

. . . the United Arab Emirates. With the publication today by the Bureau of Industry and Security (”BIS”) of the additions to the Entity List announced on Wednesday, the UAE moves into first place in terms of the single country with the most entries on the Entity List. The tiny emirate, just a short boat-ride from Iran, now has 36 entries on the Entity List after today’s addition of 34 more companies and individuals.

By today’s action BIS added 108 entities to the list, 33 of which were already on General Order No. 3, Because of the transfer of those entities from General Order No. 3 to the Entity List, that general order is now being repealed and removed from Supplement No. 1 to Part 736 of the Export Administration Regulations. Entities that were previously listed in General Order No. 3 are designated with asterisks.

Entities from a total of thirteen countries were named to the Entity List. Those countries were Canada (2), PRC (3), Egypt (3), Germany (4), Hong Kong (19), Iran (25), Kuwait (2), Lebanon (2), Malaysia (14), Singapore (3), South Korea (1), Syria (3), UAE (34). (Seven entities were located in two countries, which accounts for the total of 115 new entries shown in the preceding list.)

A license is required for all exports to, or involving, any individual or country on the Entity List. No license exceptions are available for such exports, and BIS will apply a policy of denial to license requests.

As of time this entry was posted, BIS had not yet updated the “List to Check” portion of its website to reflect the new additions.

The defense trade cooperation treaties signed by the United States with the United Kingdom and Australia may have just become victims of election year politics. The Senate Foreign Relations Committee announced today, according to this report in Defense News, that further consideration of Senate ratification of these treaties would be deferred until next year, i.e., until after the November elections. This could entail even further delays if the Democrats take the White House and decide to rewrite the treaty in order to put their own stamp on, and take credit for, the treaty.

The current delay seems to be prompted by the Senate panel’s concern that the State Department would need to amend the International Traffic in Arms Regulations in order for the treaty to be enforceable. Although the Foreign Relations Committee had repeatedly asked for such amendments, they had not been forthcoming, and apparently the committee became frustrated with the last response it received from State on September 15 and which the committee deemed incomplete.

According to the Defense News article, the members of the Foreign Relations Committee aren’t the only ones expressing frustration — U.K. officials are reportedly peeved as well:

In Britain, there has been mounting frustration that the measures have stalled, and the delay infuriated U.K. officials who were counting on securing approval before the end of the Bush administration.

“All the U.K. government wants is clarity of message from the U.S. government on what’s happened and whether they are motivated to get this ratified as soon as their processes are completed,” said one British official. “Right now, we’re getting all sorts of messages from each of the three strands of government.”

The Australians, being somewhat more patient than their colonial forebears, are reported to have put another prawn on the barbie, cracked open another tinny of Foster’s, and gone back to watching a game of footy on the telly. (In fact, I imagine that the Australians aren’t pleased with this development either, but I couldn’t find any reported reaction from the Australian government.)

The winner of today’s breathlessly exaggerated headline contest goes to the Bureau of Industry and Security (”BIS”) for this:

COMMERCE DEPARTMENT, GOVERNMENT PARTNERS, BREAK UP IRANIAN RING CHARGED WITH PROCURING IED COMPONENTS

Although this headline conjures up a Eliot Ness raid with the culprits being led off in shackles and at gunpoint never to export again, the reality is a bit more mundane. In fact, the headline refers, in part, to a federal grand jury indictment unsealed in Miami today against eight individuals and eight corporations, all allegedly part of the Mayrow General Trading Company network. The defendants were charged in connection with dual-use exports that wound up in Iran, including exported items which could be used in the manufacture of IEDs deployed against U.S. troops in Iraq.

None of the eight individuals or corporations are located in the United States. Whether Britain, Germany, Iran and Malaysia, where the defendants are located, will permit the extradition and prosecution of the individual defendants is a close question, particularly if the defendants’ only contacts with the United States were the purchase of U.S.-origin goods and if the exports to Iran did not break the laws of their countries of residence. (For those individuals located in Iran, of course, it’s not even a close question, and these individuals will be subject to prosecution only if they decide to visit, say, Disneyland or the Grand Canyon or travel to a country that will allow rendition or extradition.)

In addition, the Commerce Department release indicated that 75 companies and individuals had been added to the Entity List in connection with the Mayrow network exports. (The State Department release on the indictment, however, states that there were 100 additions to the Entity List). All exports of U.S.-origin goods to companies and individuals on the Entity List will require a license from the Department of Commerce. Naturally such licenses will generally be denied.

As of this writing, however, the BIS website doesn’t indicate any additions to the Entity List, but it can reasonably be assumed that these additions will appear sooner rather than later. Unlike indictments of foreigners over which the U.S. has precarious criminal jurisdiction, putting members of the network involved in these exports on the Entity List is much more likely to be effective in shutting down the troublesome exports. Once these additions are made, I’ll post a link identifying the companies and individuals involved.

The common wisdom is that the Directorate of Defense Trade Controls (”DDTC”) has a “see-through” rule for exports of defense articles, but that the Bureau of Industry and Security (”BIS”) does not have a see-through rule for exports of dual use items regulated by it. A “see-through” rule will impose export controls on an item if one of its parts is export controlled.

Well, as the recently released Settlement Agreement with Nalco Company illustrates, it is not strictly the case that BIS doesn’t have “see-through” rules. Nalco agreed to a $115,000 fine for thirteen unlicensed exports of water hardness testing kits to the Bahamas, the Dominican Republican, and Angola. One of the reagents in those kits contained triethanolamine, a chemical weapons precursor classified as ECCN 1C350.

The reason for the “see-through” rule here can be found in the ECCN’s “License Requrement Notes” which indicate that “mixtures” (as opposed to “compounds”) with specified percentages of the listed chemical weapons precursor are controlled by 1C350. Although there is no definition of “compound” or “mixture” in the Export Administration Regulations, it seems reasonable to assume that a “compound” refers to a new substance created by a chemical reaction of the component compounds, whereas a “mixture” refers to a separable commingling of various components. In layman’s (and somewhat simplistic) terms, bread is a “compound” of flour, yeast and water and salad dressing is a “mixture” of oil and vinegar. In the case of triethanolamine, the relevant percentage is 30 percent.

Mixtures containing 30 percent or more of chemical weapons precursors that are used as reagents in testing kits are excluded from 1C350 but are instead classified under ECCN 1C395. Items classified under ECCN IC395 require licenses to any country not a member of the Chemical Weapons Convention. Those countries are listed on Supplement 2 to Part 745 of the EAR and, needless to say, do not include the Bahamas, the Dominican Republic and Angola, the destinations for the exports by Nalco.