Apr

18

Updates on Bird Flu and Nail Polish


Posted by Clif Burns at 5:35 pm on April 18, 2012
Category: Deemed ExportsIran SanctionsOFAC

Gregory Schulte
ABOVE: H5N1 virus

Civil disobedience and export laws: those are two concepts not often linked together. But it appears that a Dutch researcher on the H5N1 avian virus is planning to tell Dutch authorities to take a hike and will submit his research to a U.S. journal even though the Dutch government has declared that the research is export-controlled.

This issue was discussed in an earlier post on this blog that discussed how decisions by U.S. researchers to restrict dissemination of some research on the bird flu virus might disqualify the research from the fundamental research exception and make it difficult to share the research with colleagues in other countries. Those restrictions were ultimately removed and the research is not considered export controlled in the United States. Dutch authorities have relied on those initial restrictions to declare the research controlled and have told the researcher that he could not submit the research to foreign journals for publication.

Now Fouchier [the Dutch researcher] says that he is prepared to defy the government and submit the work anyway, an action that could cost him up to 6 years in prison or a $102,000 fine. …

“We simply will never apply for an export permit on a scientific manuscript for publication in a journal. We do not want to create a precedent here,” he told Nature. “We might end up in court indeed if they insist on censorship.”

As an unrelated update, this blog yesterday posted on the $450,000 fine levied on Essie Cosmetics for exports of nail polish to Iran. Several readers have emailed me to suggest that the high fine was based not on the strategic implications of nail polish exports but on, shall we say, an uncooperative attitude by Essie in dealing with OFAC. That’s not hard to believe because, notwithstanding Essie’s expensive dust-up with OFAC, the cosmetic company’s website still has Iran in the drop-down list of countries in forms on its website.

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Apr

17

OFAC Strikes Another Blow Against Iran’s Nuclear Ambitions


Posted by Clif Burns at 6:51 pm on April 17, 2012
Category: Iran SanctionsOFAC

Happy 25!In the last release of civil penalty information, the Office of Foreign Assets Control (“OFAC”) announced that it whacked Essie Cosmetics Ltd. with a whopping $450,000 fine for exports the company made to Iran in violation of the U.S. embargo on Iran. So what did Essie export to merit such an enormous fine? Uranium enrichment centrifuges? Missile guidance systems? No. Nail polish. Yes, you read that correctly: nail polish

The apparent violations relate to Essie and Individual’s knowing sale and export of nail care products on or about September 17, 2009, December 8, 2009 and February 23, 2010, to an Iranian distributor pursuant to an Exclusive Distributorship Agreement in apparent violation of § 560.204 of the ITR.

Well, it must have been boatloads of nail polish, right? No.

The total transaction value for the three transactions settled with OFAC was $33,299.

I guess the thinking was that it is pretty hard to enrich uranium, build nuclear weapons, threaten our allies, and engage in general terrorist activities if you aren’t wearing nail polish. I don’t know about you, but I’ll sleep better tonight knowing that a few people with unpolished nails are sitting at home rather than working on nuclear bombs.

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Apr

16

MTCR Celebrates The Big Twenty-Five


Posted by Clif Burns at 5:28 pm on April 16, 2012
Category: General

Happy 25!The State Department’s Bureau of International Security and Non-Proliferation released today a fact sheet celebrating the twenty-fifth anniversary of the Missile Technology Control Regime, a multilateral initiative to control the export and dissemination of certain missile related technology. The MTCR was initially adopted by the G-7 countries in 1985 and now boasts 27 additional member countries.

Instead of breaking out the cake and the champagne to fête the MTCR, we have decided at Export Law Blog to use this opportunity instead to ask why the State Department, instead of sending a birthday card to the MTCR, does not spend the time more productively to fix section 121.16 of the International Traffic in Arms Regulations. That section bears the misleading header “Missile Technology Control Regime Annex,” even though it bears as much resemblance to the current MTCR Annex as Ron Howard does to Opie Taylor. Since that section was added to the USML in 1993 items have come and gone on the MTCR annex like rock singers in rehab clinics and yet nary an amendment has been made to that section.

This, of course, opens up plenty of possibilities for confusion and unintentional hilarity (if you think that sloppy regulations are humorous). Recently, I had a client notice that a rather ubiquitous item was listed in section 121.16 which the client (and many others) had been exporting freely and without even thinking of a license for quite some time. The item had been removed from the MTCR Annex when the Annex was a mere toddler and only taking its first steps. The client had a legitimate query: is this item on the USML or not?

The answer to that question is far from clear at least based on the actual language of the ITAR. The only part of the ITAR even bearing on the question is section 120.29(c) which I think says — your guess is as good as mine — that the items in section 121.16 are the list of all items on the MTCR which aren’t on the Bureau of Industry and Security’s Commodity Control List, although that statement is, now, patently untrue.

So more for amusement than anything else, I called the DDTC Response Team to ask the simple question: if an item listed in section 121.16 is no longer on the MTCR is it still export controlled? You would have thought that I posed Bishop Berkeley’s famous question: “If a tree falls in a forest and there is no one to hear it, does it make any sound?” After a stretch of silence, and some mutterings, the Response Team member finally solemnly informed me, somewhat tentatively, that it was. Oh dear. If that’s true, everybody now exporting that item is going to be in for some fun times, I thought.

I was fairly convinced that the best, and only, way to read 121.16 was that it was intended to state what things that were on the Annex in 1993 were controlled by BIS and what things were controlled by DDTC and that it was the Annex which determined what was controlled and what was not. So I escalated the question up through DDTC and I did receive that answer ultimately from the agency: if an item is no longer on the MTCR, it does not require a license from DDTC simply because it is still referenced in section 121.16.

So, Happy 25th Birthday, MTCR! Here’s to hoping that before you turn 30 somebody will finally fix section 121.16.

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Apr

11

Bird Flu Research Flies Into Export Laws, Crashes, Then Burns


Posted by Clif Burns at 10:43 pm on April 11, 2012
Category: BISGeneralTechnical Data ExportWassenaar

Bird FluApparently international research on how best to prevent, contain and treat bird flu is now threatened by international laws restricting export of information relating to potential agents of biological warfare according to this report on NPR. The problem concerns research conducted by researchers in the United States and the Netherlands which resulted in a controversial paper concerning alterations in the virus that would make it more contagious. There was some concern that this information might be useful to terrorists and rogue states interested in biological warfare agents.

To address this concern, the decision was initially made to restrict publication of the study and related materials and to make them available only to designated researchers and government officials with “a need to know.” What apparently no one realized was that this would prevent the research from falling within the fundamental research exception and would, therefore, prevent cross-border discussions or transfer of the information without specific governmental authorization.

Once this was realized, the decision was made to eliminate the “need to know” restrictions and simply to publish the materials so that the research could be considered fundamental research and could be shared freely with researchers in other countries. But the government of the Netherlands is arguing that the publication of the research could not undo the effect of the earlier decision to restrict dissemination and that therefore the research could not be exported from the Netherlands without approval of that government.

This situation illustrates the difficulty in applying the fundamental research in practice. To begin with, there is no easy way to determine what is or is not fundamental research. Export lawyers and export professional at universities have tried to strengthen the case that research is eligible for the fundamental research exception by pointing to whether research was published or, even if not published, was permitted or required to be published under applicable grant contracts or university rules.

The conundrum here is whether sensitive material can be transformed into fundamental research simply by publication. If one group of researchers decides to release the information, does this act of a few individuals instantly transform the information into fundamental research? But if publication isn’t the standard for deciding what is fundamental research, what other standards are available and who should be able to apply those standards? What these questions without answers demonstrate more than anything else is the slippery slope that we head down when we try to apply export controls to information. Rather we should rely on classification rules and procedures to control dissemination of truly sensitive information.

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Apr

10

Iran Fights Back (Or Not?)


Posted by Clif Burns at 6:30 pm on April 10, 2012
Category: Iran SanctionsOFAC

The Internet in IranThis blog reported on March 29 that OFAC had provided guidance on various technologies eligible for export to Iran as incidental to the exchange of personal communication over the Internet. Most significantly, OFAC indicated a willingness to permit certain fee-based services, such as Skype and Google Voice, to Iranians under this exception. I had suggested that given comprehensive sanctions on major Iranian banks, ordinary Iranian citizens would be hard-pressed to actually pay for these services even if licensed.

Now it appears that Iran might even more effectively prohibit U.S. exports of services and software incidental to personal communications over the Internet. According to this story in Ars Technica, the Iranian government is planning to create a national intranet and cut off access to the Internet for ordinary citizens in Iran, possibly as early as October 2012. The source for this story is a report by Reporters Without Borders entitled Enemies of the Internet

After a number of other outlets picked up the story, Iran is now claiming, somewhat bizarrely, that the story of shutting down the Internet in Iran is an April Fool’s day hoax. Seriously, I guess the mullahs sat around and decided it would be hilarious to tell a whopper about the Internet on April Fool’s day. I think the only April Fool is anyone who actually believes the story that the report was an April Fool’s day joke. Iran’s history of pervasive Internet censorship is well detailed in the Reporters Without Borders report, so the idea of a “clean” national intranet in Iran to replace the real Internet hardly strains credibility.

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