In upgrading to WordPress 2.9.1 today, I had a bit of a problem and lost some of the files that control how this blog looks. I’ve recreated most of them, but the blog is still looking a little odd and behaving a bit strangely. I should have time to get everything back in working order over the next few days and while I’m doing that I’ll try to add some new features like a search box.
Archive for January, 2010
Upgrade Blues
Sunday, January 31st, 2010A Metaphysical Question
Thursday, January 28th, 2010
ABOVE: The ADE-651
On Tuesday my colleague in our London Office, Anita Esslinger, forwarded to me a directive from British export authorities adding “electro-statically powered explosive detectors” to its list of export-controlled items, otherwise known as the 2008 Export Control Order. Anita wondered if the U.S. was planning on doing the same thing. I wrote back that I didn’t think it would need to since explosive detectors were already covered under ECCN 1A004.d.
In fact, I was wrong, because these “electro-statically powered” explosive detectors aren’t covered by ECCN 1A004.d, but not for the reason that you might imagine, but rather for what might be called a metaphysical reason. These detectors aren’t covered by the ECCN because they don’t work, and, thus, aren’t really bomb detectors. At this point, before you accuse of me having read too much Aristotle, hear the rest of the story.
The British order is directed at the ADE-651, a device marketed by a British company named ATSC, which is run by Jim McCormack from a former dairy farm in Somerset. The device, according to ATSC, can detect explosives from a distance of 1 kilometer. It can also, allegedly, detect other items such as elephants and dollar bills from the same distance, depending upon whether a card programmed to detect elephants or dollar bills is inserted into the device’s card reader. As a further miracle of modern technology, the device has no power supply but is powered by the static electricity generated by the user, hence, the reference to them as “electro-statically powered” in the amendment to the 2008 Export Control Order.
A BBC Newsnight investigative report (video embedded at the end of this post) examined the device and found that the inside of the device was empty (as in being filled with nothing but air . . . literally). The report also discovered that the cards “used” by the device were no more than RFID tags used to deter shoplifting and not specially programmed cards designed to whiff out the essence of elephant or anything else for that matter.
This would be humorous were it not for the fact that the use of these devices may have resulted in death and injury. A recent wave of successful car-bomb attacks in Baghdad has led even some Iraqis to question the efficacy of the device even though Iraq has bought $85 million dollars worth of the non-functional plastic shells at $40,000 to $60,000 per pop.
Jim McCormack has been arrested for fraud and is out on bail.
This Isn’t the Transparency You Were Hoping For?
Wednesday, January 27th, 2010
My colleague Stan Marcuss points out that the Office of Foreign Assets Control (“OFAC”) appears to have changed course in treating Freedom of Information Act (“FOIA”) requests and has decided to hand out OFAC license applications willy-nilly to anyone who can afford a postage stamp. Several years ago, after someone requested copies of all licenses to ship food, medicine and medical devices to Iran, OFAC sent letters to the affected parties asking them if they wished to assert protection under Exemption 4 of the FOIA which exempts from disclosure confidential commercial information. If a licensee asserted the exemption, OFAC normally would withhold the license from disclosure.
Now, citing the new administration’s policy of transparency, OFAC has sent letters indicating that these licenses will be released to the public. The filing of such a license, and the contents thereof, will be freely disclosed over the objection of the licensee even though such disclosure may discourage some from filing these licenses in the future, clearly in contravention of the Trade Sanctions Reform and Export Enhancement Act of 2000 which clearly sought to encourage the export of such humanitarian supplies to sanctioned countries. Even if we don’t like the government of Iran, Congress passed TSRA because it did not want to see the people of Iran deprived of food and life-saving medicines and medical devices. Those requesting TSRA licenses, of course, don’t really have those interests in mind.
At least two things make OFAC’s new position more than a little absurd. OFAC is still using FOIA Exemption 6 to black out the names of any individuals mentioned in disclosed documents. The absurdity here is that this policy is even used to withhold the names of terrorist and other specially designated nationals (“SDNs”) when releasing information on enforcement actions against companies that have engaged in transactions with SDNs. That means, of course, that Osama Bin Laden has more protections under OFAC’s interpretation of the FOIA than an exporter shipping food to a sanctioned country.
Worse, when an agency promises transparency, one might reasonably assume that transparency would extend to providing information on export enforcement cases that might actually assist exporters in trying to interpret and to understand the scope of OFAC’s vaguely worded regulations. Not so. OFAC continues to release as little information as possible about enforcement actions. That sort of transparency would prevent the OFAC from being able to use ambiguities in its own regulations to deter certain exports — a practice I like to call in terrorem regulation.
Apparently, what’s transparent for the goose isn’t really transparent for the gander.
BIS Is from Mars and DDTC Is from Venus
Monday, January 25th, 2010
There has never been a seriously-advocated rational reason for the U.S., unlike most other countries, to have one export agency regulating exports of weapons and a separate export agency regulating exports of dual use items. A new regulation adopted by the Bureau of Industry and Security (“BIS”) last May, and which I hadn’t noticed at the time but which was pointed out today by an astute reader, is a perfect example of the confusion sown by this split personality approach to export regulation.
The regulation created a new, and frankly obtuse, ECCN designated as 0A919 which, to the extent any sense can be made of it, covers military items produced outside the United States which incorporate certain thermal imaging devices and which are “not subject to the International Traffic in Arms Regulations.” Don’t go rushing now to your copy of the ITAR to find a definition of items “subject to the ITAR,” because you won’t find it. The Export Administration Regulations (“EAR”) administered by BIS talks about “items subject to the EAR” but the ITAR at times focuses instead on what people are subject to its jurisdiction, particularly in respect to Part 129’s brokering regulations which intersect uncomfortably with the new ECCN.
Let’s now look at a specific example and see what happens. Consider a military vehicle which incorporates a thermal imaging camera controlled by BIS and which was manufactured outside the United States. If a U.S. person sought to export that vehicle from its country of manufacture to another country, that person (depending on the value of the vehicle and its export destinations) could be required to get permission from the Directorate of Defense Controls (“DDTC”) which regulates brokering in Part 129 of the ITAR. And given the new ECCN, that person might also require an export license from BIS (depending, of course, on the destination of the exported vehicle).
BIS tries unsuccessfully to avoid this overlapping jurisdiction with an awkwardly worded note to the new ECCN:
Brokering activities (as defined in 22 CFR 129.9) of military commodities that are subject to the ITAR are under the licensing jurisdiction of the Department of State.
That note doesn’t work because under part 129 all defense articles, irrespective of U.S. content, “are subject to the ITAR.” The brokering regulations in part 129 cover U.S. persons and foreign persons in the United States or otherwise subject to U.S. jurisdiction if they engage in brokering a defense article even if not one single component of that article was produced in the United States.
The note, and indeed the entire ECCN, only makes sense if whether something was subject to the ITAR depended on U.S. content in the same way that “subject to the EAR” under the EAR’s definition depends on the amount of U.S. content. And that’s apparently what somebody at BIS was thinking. If we had one export agency handling both dual use items and military items, this kind of basic confusion would be much less likely to occur.
DDTC Updates Firearms and Ammunition Export Guideline
Thursday, January 21st, 2010
On Tuesday, the website of the Directorate of Defense Trade Controls announced that it had updated its “Guidelines for the Permanent Export, Temporary Export and Temporary Import of Firearms and Ammunitions.” Although DDTC did not identify or explain the changes in the guidelines, the changes appear to be restricted to one paragraph marked in red. That paragraph, which can be found on page 7, reads:
Where the exporter uses an in–transit point (or points) in a country other than that of the ultimate destination, an authorization issued by the foreign government of the transit country authorizing the transit of the specified items must also accompany each application to export. Where items are temporarily imported into the U.S. for the purposes of transit or transshipment to other OAS countries, an Import Authorization, comprised of either a permit or a certificate issued by the foreign government authorizing the import of specified items, must accompany each application to import.
This paragraph requires that temporary import of firearms through the United States for another member of the Organization of the American States (“OAS”) be accompanied by an import authorization from the destination state. This is clearly an effort to conform to the requirement of Article IX(2) of the OAS Firearms Convention.
The other requirement, that an export license application for firearms that transit another country prior to the ultimate destination must be accompanied by a transit permit from the transiting country, is not restricted to OAS members, although that requirement conforms to Article IX(3) of the OAS convention. It also conforms to the requirement of Article 10(2)(b) of the U.N. Firearms Protocol which hasn’t been signed or ratified by the United States, largely based on fears, unfounded by the text of the Protocol, that the Protocol is an effort by the U.N. to regulate purely domestic sales of firearms in the United States.
Even so, it’s a sensible requirement because failure to obtain a transit license for countries that have signed the U.N. Protocol or which otherwise require transit permits can result in seizures of the firearms as they transit those countries. For other countries that have not signed the U.N. Protocol and which don’t require transit licenses, the provision is a bit more problematic in that it would appear to require obtaining a transit license from countries that don’t issue them. In the case of exports to countries that don’t require import authorizations, the guidelines permit the applicant to submit a statement from the end user or the country of import that no import authorization is required. It’s not clear why a similar procedure doesn’t appear to be available in the case of countries without transit license requirements.
U.S. Extradition Request for Export Defendant Heard by French Court
Wednesday, January 20th, 2010
ABOVE: Majid Kakavand
Amir Ardebili, who we posted on here and here, is not the only Iranian being chased by U.S. prosecutors for activities he committed entirely outside the United States and which were legal in the country where they took place. Majid Kakavand, on whom we previously posted here, used a company of his in Malaysia to order electronic components from U.S. companies and then transshipped those components to Iran. He was provisionally arrested in France in March 2009 at the request of the United States and is currently in France, out of jail but unable to leave France, awaiting the French court’s decision on the U.S. extradition request.
According to this article in the New York Times, a hearing was held last week by a French court on the extradition request. Kakavand’s lawyers argued that Kakavand’s activities did not violate any laws of France or the European Union and that the items were innocuous items that were not useful in the defense industry. Because these items could be legally shipped to Malaysia without an export license and because the U.S. criminal information against Kakavand did not allege that the items in question were on the Commerce Control List or the United States Munitions List, this argument seems to have some force. Another hearing has been scheduled by the French court for February 17.
And as with the Ardebili case, the Iranians were quick to link the fate of Kakavand with an Iranian trial. In this case, the trial in question is a prosecution brought by Iran against a 24-year-old French academic, Clotilde Reiss, in connection with her alleged participation in opposition protests following the Iranian elections last June. Apparently, the concept of a fair trial is so foreign to Iran that it hasn’t occurred to the Iranian government that a French court might actually listen to defense arguments and make a decision based on the rule of law.
Virginia Company Pleads Guilty to Arms Brokering Charges
Thursday, January 14th, 2010
Virginia-based Taipan Enterprises Ltd. pleaded guilty to, and paid a $15,000 fine for, charges that it illegally engaged in arms-brokering without registering with, and obtaining licenses from, the Directorate of Defense Trade Controls (“DDTC”). The Statement of Facts that supported the guilty plea revealed that Taipan’s woes began when its President, Ioannis Papathanassiou, was questioned by U.S. Customs upon returning from Brazil and told the customs agents that he was in Brazil selling farm equipment. An inspection of his luggage revealed product brochures from Agrale for military vehicles which Papathanassiou allegedly falsely stated were for farming purposes.
The Statement of Facts detailed subsequent transactions that involved the attempted sale of night vision goggles, machine pistols, M4 rifles and gas grenades among other items. Significantly, however, there is no allegation in the Statement of Facts that any of the sales ever occurred. Instead, in each instance, the Statement of Facts said that Papathanassiou “attempted” to sell the items. Notwithstanding that the only charges against Papathanassiou related to transactions that were attempted but uncompleted, he was charged with arms brokering without registering with DDTC as an arms-broker or obtaining necessary licenses for arms-brokering. Apparently just discussing a potential transaction requires registration.
The problem with this theory is, of course, the definition of “broker” in Part 129 of the International Traffic in Arms Regulations under which Taipan was charged. Under that definition, found in section 129.2(a), “broker” is defined as:
any person who acts as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee, commission, or other consideration.
It’s probably safe to say that Taipan didn’t receive a fee or commission from the manufacturers of the defense articles for proposed sales that never occurred. Even if Taipan did receive a fee or commission for these attempted sales, the receipt of the fee or commission from the manufacturers is a necessary element of the charged criminal violation and needed to be alleged in the Statement of Facts in order to support the plea.
Cloudy with a Chance of Fines
Tuesday, January 12th, 2010
As enterprises began to confront the issues raised by cloud computing, this article on TMCnet is a good reminder that export issues may be some of the most intractable. Although some clouds, like Amazon’s EC2, provide servers in defined locations, other cloud providers, Google notably, are more secretive about where their clouds are located or on which clouds user data is stored. If ITAR-controlled technical data or CCL-controlled technology is stored by a U.S. company on a cloud outside the United States, an export has occurred. If no license has been obtained it is safe to say that this is going to be a cloud without a silver lining.
BIS did issue an advisory opinion in January 2009 on cloud computing. The advisory opinion was requested by an unnamed provider of cloud computing service and fails to address the export issues relating to users of such cloud computing services. In the advisory opinion, BIS stated, among other things, that the provision of cloud computing services is not an export subject to the EAR and that the cloud provider is not considered to be the exporter of any data that users place on and retrieve from the cloud.
The TMCnet article focuses unduly on the location of the server while neglecting that even if the cloud is wholly within the United States an export could occur if foreign nationals employed by the cloud provider in the United States have access to controlled technology or technical data. The same article also neglects to point out that export issues are raised in other Internet contexts. If an email contains controlled technology or technical data an illegal export will have occurred if the email transits a foreign server even if the email is sent from a server in the United States and is addressed to a server in the United States. The same issue could exist for VOIP voice communications if the VOIP provider utilizes any servers located outside the United States.
The BIS advisory opinion shows a laudable effort to understand and accommodate issues posed by cloud technology, at least from the perspective of the cloud provider. Hopefully, it will show the same practical considerations for users of cloud technology. Whether OFAC and DDTC will demonstrate similar understanding of the technology remains to be seen.
The Pentagon Will Get to It When It Gets to It.
Monday, January 11th, 2010
We previously reported a change announced by the Directorate of Defense Trade Controls (“DDTC”) adding a sixth exception to National Security Presidential Directive–56 which mandated a 60-day processing time for export license applications. Sharp-eyed reader Robin noted that there was more in that notice than meets the eye, or at least met my eye.
Although the notice announcing the change characterized the change as simply adding a sixth exception, in fact the notice also changed, without any mention, the fourth exception to the processing guidelines. Previously, the fourth exception read as follows:
(4) Department of Defense has notified the Directorate of Defense Trade Controls that an overriding national security exception exists.
But now take a look at exemption 4 in the DDTC notice announcing the sixth exception:
(4) The Department of Defense has not yet completed its review.
Sneaky. I suppose DDTC didn’t really want to highlight that the Pentagon feels that it’s above such silly civilian nonsense as processing deadlines. Or that the last time DDTC asked the Pentagon about where it was on an application, the Pentagon told DDTC to “take a hike” although it likely did so using somewhat more “colorful” terms.
DDTC Tells Exporters To Maintain Outdated Computer Systems
Thursday, January 7th, 2010
For reasons known only to the IT folks at the Directorate of Defense Trade Controls (“DDTC”), the agency’s electronic export licensing system (D-Trade) adopted the quirky, non-standard PureEdge Viewer as the software required to fill out and digitally sign export license applications forms rather than the industry standard (and widely installed) Adobe Acrobat. It’s probably safe to assume that no one had ever heard of PureEdge before it became a mandatory part of D-Trade.
Well, an interesting notice that appeared at the end of December should have raised a few eyebrows about DDTC’s choice of PureEdge Viewer. It seems that PureEdge isn’t compatible with Windows 7 and that PureEdge forms can’t be digitally signed by exporters who have upgraded their computers to Windows 7. And, as you may know, if you can’t digitally sign a license application, you can’t submit it to DDTC. (Can you sign an Adobe form in Windows 7? You bet your bippy you can.)
DDTC’s solution would make a Luddite, but not anyone else, smile:
Industry is strongly encouraged to maintain a Windows XP system with Internet Explorer versions 6 or 7 to use for all DTrade transactions at this time.
Another solution that DDTC says might work is to upgrade to IBM’s Lotus Forms Viewer 3.5.1. IBM bought PureEdge in 2005, so that Lotus Forms Viewer 3.5.1 is, in essence, the newest version of the PureEdge Viewer. Of course, Lotus Forms Viewer, although it has a trial version that can be used for free for 60 days, comes at a hefty price. The price is particularly hefty since Lotus Forms largely duplicates the functionality of Adobe Acrobat which most companies have already purchased.
Prior to Adobe Acrobat becoming the standard solution for filling out government agency forms, many companies kept a sad-looking IBM Selectric hidden away for those few forms that could still only be typewritten. Well, move over typewriter and make way for a new neighbor — an XP computer that’s being kept around for filling out DDTC export licenses, including, ironically, licenses to export cutting-edge technology.
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