Mar

17

Sailing to Cuba on the General License May Not Be Smooth Sailing


Posted by at 11:51 pm on March 17, 2015
Category: Cuba SanctionsOFAC

Charlotte under full sale by Nat Benjamin [Fair Use]Here’s a bad idea: apply to the Office of Foreign Assets Control for a license to sail from Martha’s Vineyard to Cuba, have it denied, apply again, never hear back, then decide to go anyway and have the Martha’s Vineyard Times publish a story on your trip. Well, that’s what a guy named Nat Benjamin did and you can read all about it here in the Martha’s Vineyard Times.

Although he timing of the trip is not entirely clear, it appears that Benjamin, who set sail for Cuba in November 2014, arrived in Cienfuegos, Cuba, perhaps luckily for him and his crew, after the new Cuban sanctions rules went into effect on January 15, 2015. According to the Martha’s Vineyard Times article. Mr. Benjamin decided to head for Cuba without the license required at the time of his departure “in hopes that the humanitarian nature of his trip would trump any troubles.”

The question then is whether Mr. Benjamin’s trip fits within the new general license for humanitarian visits set forth in section 515.575 of the Cuban sanctions regulations.

While in Cuba, Mr. Benjamin traveled throughout the country and shared his boatbuilding experience. He was able to contact wooden boatbuilders in the Cuban city of Trinidad.

Mr. Benjamin said Cuba’s wooden boatbuilding industry is not well known outside the country. He partnered with some boatbuilders, hoping to learn about their work, and donated much-needed tools.

Section 515.575 sets forth fairly specifically the sorts of projects that qualify as humanitarian projects, and learning about the work of Cuban boatbuilders, seems to be on the outside edges at best. Here’s what is permitted:

The following projects are authorized by paragraph (a) of this section: medical and health-related projects; construction projects intended to benefit legitimately independent civil society groups; environmental projects; projects involving formal or non-formal educational training, within Cuba or off-island, on the following topics: entrepreneurship and business, civil education, journalism, advocacy and organizing, adult literacy, or vocational skills; community-based grassroots projects; projects suitable to the development of small-scale private enterprise; projects that are related to agricultural and rural development that promote independent activity; microfinancing projects, except for loans, extensions of credit, or other financing prohibited by §515.208; and projects to meet basic human needs.

Maybe this was non-formal educational training on vocational skills, but, even if it does, Mr. Benjamin also needs to be able to prove that he and everyone else devoted a full-time schedule in Cuba to these activities. Having set sail for Cuba before the new sanctions were in effect and with only a vague humanitarian purpose, Mr. Benjamin may not be able to provide this documentation. Perhaps Mr. Benjamin, his wife and his crew are in the clear on this, but this illustrates the potential difficulty in relying on the new general licenses for travel to Cuba without careful preparation and documentation.

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Mar

10

Maryland Pizza Shop Owner Pleads to Export Charges


Posted by at 11:06 pm on March 10, 2015
Category: Arms ExportCriminal PenaltiesDDTC

Da Dan Xia Weapons Cache by Colombia Prosecutor's Office [Fair Use]The owner of a Jerry’s Subs and Pizza franchise in Upper Marlboro, Maryland, pleaded guilty to shipping various rifles and rifle parts, including magazines, receivers, and sights, to Pakistan without the required license from the Directorate of Defense Trade Controls. According to the DOJ press release announcing the plea deal, Kamran Malik, the defendant, shipped the goods in packages with false return addresses and false descriptions of the contents. There is no indication as to  the intended recipients of the firearms and parts in Pakistan. As part of the plea deal, the Government has agreed to argue for a reduction in the offense level from 26 to 23, which would reduce the maximum penalty from 78 to 57 months.

Something else is going on here. There is also a sealed plea agreement supplement. That normally means that the defendant will be a cooperating witness and that the sealed supplement contains a cooperation agreement.  The purpose of sealing that information is to protect the cooperating defendant. Of course, since such supplements pretty much signal that the defendant is going to cooperate with the government, that purpose is largely lost. I suspect this means that the recipients of the items in Pakistan are of more than passing interest to the United States Government.

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Mar

9

Slow Boat From China: Keep Cuba in Arms Evermore


Posted by at 5:23 pm on March 9, 2015
Category: Arms ExportChinaCuba Sanctions

Da Dan Xia Weapons Cache by Colombia Prosecutor's Office [Fair Use]Colombia recently detained the Chinese vessel Da Dan Xia after it entered the port of Cartagena to unload part of its cargo. Based on an anonymous tip, Colombian officials searched the boat and found a boatload, so to speak, of weapons: 100 tons of gunpowder, just under three million detonators, 99 projectiles and approximately 3,000 cannon shells. All destined for Cuba. The ship’s documentation listed none of these goodies correctly, instead calling them spare parts and chemicals, and so the captain of the ship was hauled off the boat and arrested.

The Cubans aren’t saying anything and the Chinese are saying stupid things.

China’s foreign ministry said on Wednesday that the ship had been involved in “normal trade co-operation”. Hua Chunying said the ship was carrying ordinary military supplies to Cuba and was not in violation of any international obligations.

Of course, this does not explain why the items were not accurately described. But I can tell you the likely reason for that: Colombia is a signatory to the Inter-American Convention Against the Illicit Manufacturing and Trafficking in Firearms, Ammunition, Explosives and Other Related Material. That means that a transit permit would have been required for the ship to enter a Colombian port loaded up with this cargo. And, guess what? China did not want to bother getting a transit permit, largely, I suppose, because it did not want the United States, or anyone else, to know that it was selling this stuff to Cuba.

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Mar

4

Law Firm Sues DDTC over Application of Brokering Rules to Legal Advice


Posted by at 9:58 pm on March 4, 2015
Category: DDTCPart 129

State Department by Josh [CC-BY-SA-2.0 (https://creativecommons.org/licenses/by-nd/2.0/)], via Flickr https://www.flickr.com/photos/ncindc/2838284991 [cropped]On March 3, 2015, a small DC law firm filed a complaint against the Directorate of Defense Trade Controls (“DDTC”) seeking, inter alia, injunctive relief prohibiting DDTC from applying its brokering rules to the provision of specified types of legal advice. This blog previously has discussed the potential application of part 129 brokering rules to the activities of lawyers on behalf of their clients. As we stated, the broad language of part 129 always arguably covered legal work on behalf of clients, but no lawyers ever registered as brokers and DDTC never complained. When DDTC amended the brokering rules, it arguably then explicitly decided to start covering legal services. The interim rule does exempt legal advice, specifically noting, in the Federal Register notice at least, that legal advice about export compliance was within the exemption. The situation was then muddied when DDTC published FAQs on the brokering rules which said that common legal services, namely, “structuring a transaction” involving defense articles or negotiating contract terms involving defense articles was outside the scope of the exemption.

The plaintiff in the recently filed lawsuit optimistically (and some might say foolhardily) requested from DDTC an advisory opinion stating that certain legal services, such as advising on the structure of transactions involving defense articles and drafting contracts for the sale of defense articles, were outside the scope of Part 129. Not surprisingly, the request for an advisory opinion languished at DDTC for months, despite the plaintiff’s repeated communications with DDTC asking them to act on the advisory opinion request. Finally, according to the complaint, and eleven months after the request was made, a DDTC official called plaintiff and said the rules did not cover the activities specified in the request, and plaintiff, based on those representations, agreed to withdraw the request.

Seven months later, on February 24, 2015, in a plot twist worthy of Franz Kafka, the same DDTC official sent a letter to plaintiff and, incredibly, retracted the previously provided advice:

Please be advised that your letter of August 29, 2013 and our conversation which took place on July 3, 2014, lacked sufficient detail for the Department to make an official determination as to whether the activities discussed constituted brokering activities.

The official asked the plaintiff to submit another advisory opinion request. The understandably frustrated plaintiff filed a lawsuit instead.

There are, of course, a number of problems with applying Part 129 to legal services beyond the provision of legal advice on export compliance. To begin with, lawyers will need prior permission from the State Department under section 129.4 before becoming involved in transactions involving specified defense articles such as night vision equipment. Worse, section 122.5 would require lawyers to make all records relating to these transactions available to DDTC and law enforcement in violation of attorney-client privilege.

The good news, of course, is that DDTC’s bizarre volte-face on the applicability of Part 129 to legal services is unlikely to be favorably viewed by the court and means, I think, that the initial advantage in this lawsuit is with the plaintiff.

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Mar

3

Might As Well Be Hung for a Sheep as a Lamb


Posted by at 9:58 pm on March 3, 2015
Category: Criminal PenaltiesDDTCTechnical Data Export

Mozaffar Khazaee [Credit: Essex County Mug Shot Catalog]
ABOVE: Mozaffar Khazaee


On February 25, Mozaffar Khazaee, a former employee of various defense contractors, pleaded guilty to illegal export of ITAR-controlled technical data to Iran. The case started with an audacious shipment from Connecticut to a freight forwarder in Long Beach, California, by Khazaee of 44 boxes labelled as household goods that, in fact, contained numerous manuals and other technical documents relating to the F35 Joint Strike Fighter and military jet engines. The boxes were intended for ultimate shipment to Iran. Further investigation revealed that these documents had been taken by Khazaee from defense contractors for which he worked and that taking these documents violated the contractors’ rules requiring return of all documents at the end of employment. Khazaee was initially arrested for charges, set forth in the criminal complaint, of illegally transporting stolen property across state lines.

Khazaee’s ultimate plea was for violation of the Arms Export Control Act. The superseding information that served as the basis for the plea, however, alleged the export of only one document (out of the 44 boxes of documents) which was asserted to contain controlled technical data designated under Category XIX(g) of the United States Munitions List.

Two things stand out about this case. First, the superseding information charged, and Khazaee pleaded guilty to, export of the document and not attempted export of the document. The problem is the document was seized in Long Beach and never left the country. Section 120.17 of the ITAR defines export as “taking a defense article out of the United States.” No matter what your feelings may be about Long Beach, California, it is definitively still in the United States last time I checked. There is some evidence that the boxes may have been loaded onto the Panamanian-flagged NYK Libra. But given the definition of United States in section 120.13, it is hard to argue that the document left the United States until the NYK Libra did.

The second thing of interest were statements made by Khazaee, and cited in the superseding information, to potential employers in Iran that his job advancement in the United States had been hindered by his Iranian nationality even though he was an American citizen.

Even though working industry being very exciting, with best pay salary and high-tech events, my original nationality being Iranian (which I am very proud of), has caused me tremendous issue and hindrances towards my progress and goals. I can’t make any publication in current job (everything is very proprietary and restricted, mostly military projects), I was rejected to participate in the new advance engine program (this is beyond F135 engine, it’s called AETD), purely based on my original nationality. This is the primary … reason for my consideration to move to Iran.

Obviously one wrong does not justify another. However, discrimination against a U.S. citizen based on his national origin,if this is what occurred here, is a violation of federal law. And given the unhealthy obsession of the DoD and DDTC on national origin, at least with respect to dual and third-country nationals, it seems at least possible that this may have occurred. It may well be that the best way to encourage loyalty among American citizens is to treat them all equally without respect to where they were born.

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