Nov

5

Ya Get What Ya Pay For


Posted by at 11:18 pm on November 5, 2014
Category: BIS

Happy 50th by Cochise College via Cochise College official Instagram account http://instagram.com/p/tTViN5IHPh/ [Fair Use]Let’s see. I have an export question that’s troubling me. So what should I do? I know. Let’s write the local newspaper and ask them! What could possibly go wrong?

Dear M & M: I am interested in exporting a product overseas. This product does not require an export license. I am not sure who the end user will be as they are selling to a third party. Is there something I need to do to make sure I am in compliance with regulations?

— Randy

The “answer” comes from Mark Schmitt, director of the Small Business Development Center at Cochise College; and Mignonne Hollis, executive director at the Sierra Vista Economic Development Foundation. (Please, no Mork and Mindy jokes.) Mark and Mignonne do not even stop for a moment to wonder how Randy, who appears to know almost nothing about exporting, is so certain his item does not require an export license and respond:

Dear Randy: If your item falls under the jurisdiction of the U.S. Department of Commerce and is not listed on the Commercial Control Lists, and it does not require an export license it is designated as EAR99.

Generally the majority of commercial products are designated EAR99 and generally will not require a special license to be exported or imported into this country and later re-exported.

Leaving aside the “Commercial Control Lists” gaffe, the first sentence makes almost no sense to me, and one can imagine what sense it makes to Randy. How is Randy supposed to figure out whether his item “falls under the jurisdiction of the” Commerce Department? And if I have an ECCN that doesn’t require a license to a particular jurisdiction does that make my item EAR99? But forget about all that: most products, they say, are EAR99, so Mark and Mignonne are certain that Randy’s item must be as well. Good thing they didn’t print Randy’s last name.

However, if you plan to export an EAR99 item to an embargoed or sanctioned country, to a party of concern, or in support of a prohibited end-use, you may be required to obtain a license. The Bureau of Industry and Security (BIS) have what they call advisory opinions relating to what they call red flags when exporting to another country. The following link has general topics one should check out if you suspect something is wrong http://www.bis.doc.gov/index.php/policy-guidance/advisory-opinions.

If Mark and Mignonne were teetering off balance in the first two paragraphs, they have gone completely off the rails here. Who knew that the advisory opinions talked about red flags or would help Randy realize that not knowing the end customer might get him in hot water without further investigation and/or contractual undertakings by the intermediate consignee?

Not knowing the end user especially if your product can be refitted to serve another purpose or knowingly suspect a third party reselling your items to a country that the U.S. has sanctioned can get you into trouble.

Of course, not knowing the end user can be a problem whether or not your product can be refitted. And if you know that your intermediate consignee is selling to a sanctioned country, knowing your end user is not going to help at all.

Finally, Mark and Mignonne  say to Randy what they should have said from the outset, indeed, what should have been the only thing they said to Randy

The Export Counselling Division of the Office of Exporter Services can be reached at any of the numbers below …

Next week Mark and Mignonne attempt to explain to a confused reader why string theory is a possible explanation for the commutation rules of quantum mechanics. Stay tuned.

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Nov

4

OFAC to Foreign Airlines: Iran Sanctions Trump Your Safety


Posted by at 8:12 pm on November 4, 2014
Category: Iran SanctionsOFAC

Air France 747-428 by Aero Icarus [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/aero_icarus/5939459613Today the Office of Foreign Assets Control cryptically announced a change in its FAQs relating to foreign aircraft that overfly or make emergency landings in Iran. The agency merely stated that it had revised FAQ 417 without describing the difference between the old and new FAQ or why the change was made. Of course, you might assume that OFAC wanted to make it clear that if your plane was about to fall out of the sky it was okay to make an unscheduled landing in Iran — passenger safety, and all that. But you would be wrong.

The old FAQ, which you can find here, said that non-U.S. airlines could overfly Iran and make emergency landings there as long as no payments were made to or through any of the specifically designated banks in Iran (like Bank Melli) or any entities on the SDN list (other than, of course, agencies and instrumentalities of the Iranian government). The new FAQ, however, adds a new wrinkle: the payments now cannot involve the U.S. financial system if a foreign carrier is involved; the U.S. financial system may only be used for U.S. carriers, which, under 31 C.F.R. § 560.522, are permitted  to overfly and make emergency landings in Iran.

This policy change comes on the heels of news reports (like this one and this one) that foreign carrier overflights over Iran have recently increased. Why? Because no one wants to get blown out of the sky while flying over Iraq or Ukraine. Both Air France and Virgin Atlantic have suspended flights over Iraq.

Of course, you may say, certainly foreign carriers can find non-U.S. financial institutions to handle the payments to Iran. That, of course, may be the case, although given all the recent huge fine on foreign banks for Iran transactions, many of these banks may simply be unwilling to run the risk of further penalties given the small amounts they are likely to make handling these payments.

 

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Oct

31

Happy Halloween!


Posted by at 7:54 am on October 31, 2014
Category: General

ITAR Pumpkin by Kevin Wolf

Another regulatory carve-out by Kevin Wolf. . .

Kevin tells me that he considered carving an EAR pumpkin, but it would have been too complex and, in any event, not spooky enough once it was understood.

(Photograph by Kevin Wolf; used with permission)

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Oct

30

Designation by OFAC Can Be Dangerous to Your Health


Posted by at 8:18 pm on October 30, 2014
Category: Cuba SanctionsOFAC

Bupa booth via http://www.bupa.com/media/704558/bupa-corp-brochure_hires_singles.pdf [Fair Use]Global health care consortium Bupa agreed to cough up (sorry!) $128,704 to the Office of Foreign Assets Control to settle allegations that it provided health insurance to individuals on the SDN List and, in one instance, re-imbursed a policy holder for medical treatment received in Cuba. You might have assumed that there were limits to the injury that OFAC might try to inflict on SDNs or non-SDNs traveling in Cuba but you would, apparently, be wrong.

The SDN involved was designated under the Foreign Narcotics Kingpin sanctions. Unlike the Narcotics Trafficking Sanctions Regulations, the Kingpin Sanctions regulations do not provide an exception even for emergency medical services. (Of course, even though emergency medical services can be provided to SDNs under the Narcotics Trafficking Sanctions, the hospital or doctor cannot be paid for those services without an OFAC license authorizing such payment. Good luck getting treated in those circumstances.)

So the penalties for being a Narcotics Kingpen  extend far beyond simply having your bank account blocked and, potentially, can include dying from lack of needed medical care. I have no special sympathy for narcotics kingpens, but this seems a little harsh.

Trying to interfere with the health care of people traveling Cuba seems even harsher. Moreover, penalizing the reimbursement of a non-Cuban outside Cuba for services previously provided in Cuba seems not to further the U.S. policy of depriving Cuba of resources given that the payment in Cuba was already made. It also illustrates the strained reading that OFAC gives to the Cuban Assets Control Regulations in its effort to penalize anything and everything that has any connection with Cuba.

The fundamental prohibition of the Cuba sanctions prohibits U.S. persons from participating in “transactions [that] involve property in which … [a Cuban] national … has at any time … [or] had any interest of any nature whatsoever, direct or indirect.” Of course, no Cuban national has an interest in the insurance policy under which the reimbursement payment was made. The only such property in that case would have been the funds paid by the policy holder to the Cuban health care provider. To say that the reimbursement transaction “involves” that property obviously stretches the meaning of “involves” to the breaking point, but it shows how broadly OFAC reads these regulations to assure that if you blow your nose and someone in Cuba hears the noise, you’ve violated the rules.

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Oct

28

U.S. Indicts Exporter for Failing to Meet Halal Meat Standards


Posted by at 7:59 pm on October 28, 2014
Category: Agricultural ExportsCriminal Penalties

Midamar Halal Pizza via http://www.midamarhalal.com/Product/Pizza/Halal-Pizza/166/Halal-Beef-Pepperoni-Pizza-12in-bake-Rise.aspx [Fair Use]Who knew that the Islamic Religious Police had an office at Main Justice? You might justifiably wonder that reading this indictment in which an Iowa man, William B. Aossey Jr., is accused of violating federal law by exporting meat from a slaughterhouse not certified as halal to Indonesia and Malaysia, both Muslim countries where the importation of non-Halal meat is forbidden by law. Aossey is the owner of Midamar Corporation, a leading producer and exporter of Halal meat and food products.

Actually, the prosecutors get to this odd result by a familiar route, namely accusing the defendant of making false statements to the federal government in connection with the export. We saw this in the warm chicken case which we reported on back in 2012. In order to encourage U.S. exports, the U.S. Department of Agriculture agrees to certify to foreign governments that agricultural products exported from the United States comply with the importing country’s requirements. As part of that process, the exporter fills out a USDA Food Safety Inspection Service Form 9060-6, which is an application for the required export certificate. In that application, just above the signature line, is the following sentence:

Under penalty of law, I certify that the product covered by this application for export meets the inspection requirements for the country of destination.

If the importing country requires that the animal be slaughtered by a Muslim in a particular manner while invoking the name of the deity and that has not happened, then the statement on the Form 9060-6 is false and a violation of 21 U.S.C. § 611(b)(5), which prohibits false statements in applications for export certificates. Violation of that provision is made criminal by 21 U.S.C. § 676.  The indictment alleges that the defendant’s company represented in the export certificate that the meat came from a Halal-certified slaughterhouse when in fact it came from another, non-Halal slaughterhouse.

It is not quite clear why the charge was under 21 U.S.C.  § 611(b)(5), which provides for a maximum jail term of three years, rather than under 18 U.S.C. § 1001, which penalizes false statements to federal agencies and provides for a maximum jail term of five years. Perhaps it was because the defendant was recently appointed by the U.S. Secretary of Commerce to the position of Vice Chair of the Iowa District Export Council, a fact oddly omitted from the indictment. I suppose that’s worth cutting the guy just a little slack.

UPDATE: We received the following communication from Midamar:

In your article “U.S. Indicts Exporter for Failing to Meet Halal Meat Standards” in your Export Law Blog you state “You might justifiably wonder that reading this indictment in which an Iowa man, William B. Aossey Jr., is accused of violating federal law by exporting non-Halal meat to Indonesia and Malaysia…” Midamar is a company that has built its brand on halal integrity and would never falsely label any product as Halal if it was not Halal. Bill Aossey is not accused of exporting non halal meat to SE Asian countries in violation of federal law. Please see Midamar Statement http://www.midamar.com/News/20141025/49/Midamar-Statement-on-Indictment-of-Founder-Bill-Aossey.aspx and also see: http://youtu.be/sAT7LJKEYsU for some history on Bill Aossey and Midamar.

The indictment alleges that Aossey certified that meat came from a slaughterhouse that was Halal-certified when in fact, it is alleged, it came from another slaughterhouse that was not Halal-certified. The point being made by Midamar’s statement above appears to be that the meat was still Halal even if it came from a slaughterhouse that was not Halal-certified. We have slightly amended the sentence in question to read that Mr. Aossey is accused of “of violating federal law by exporting meat from a slaughterhouse not certified as halal to Indonesia and Malaysia.”

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