ExportLawBlog

Apr

16

Export Control Final Transition Plan Announced

Posted by Clif Burns at 11:25 pm on April 16, 2013

Today DDTC released its final transition plan for the first wave of export control reform under which certain items in Category VIII of the USML are transitioned to a new “600 series” of controls in Category 9 of the CCL. Of course, a major concern of exporters has been where to file licenses for the transitioned items between the date of the publication of the rule and its effective date.

This concern was exacerbated by some confusing language in the proposed transition plan released last summer. That was this language:

License applications [for transitioned items] received by DDTC within the 45 days following the final rule’s publication, but before the rule becomes effective, will be adjudicated only when the applicant provides a written statement certifying that the export or temporary import will be completed within 45 days after the effective date of the final rule.

The concern here, of course, was what would happen to licenses for these items that were filed after the 45 days from publication but before the effective date of the rule when, presumably, BIS would be able to issue licenses for the transitioned items. When informal information subsequently suggested that the period between publication and effective date would be 180 days, the concern was magnified: this would create a licensing limbo of 135 days when DDTC would not accept or grant applications and BIS would not grant them.

Under the final version of the transition plan, this problem goes away:

License applications will be accepted by both DDTC and BIS for items moving from the USML to the CCL, but BIS will not issue approved licenses for such items until on or after the applicable effective date.

Licenses for transitioned items granted by DDTC during the 180-day transition period will be valid for two-years unless an earlier expiration date is specified in the license.

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Apr

9

Australian Court Sentences Export Defendant to Good Behavior

Posted by Clif Burns at 6:54 pm on April 9, 2013

Ian Chow https://www.facebook.com/photo.php?fbid=410491802970&set=p.410491802970&type=1&theater (Fair Use)

ABOVE: Ian Chow

Ian Chow, an Australian expatriate living in New Guinea and who is the managing director of the Lae Biscuit Company in Lae, New Guinea,* pleaded guilty to charges in Australia that he illegally exported ammunition components to New Guinea. His sentence may surprise those here in the U.S. used to seeing export defendants walloped with 5 year sentences for export violations. Mr. Chow was ordered to pay $10,000 to a charity and sentenced to a 12-month good behavior bond. (A good behavior bond is an Australian form of probation where the defendant is fined rather than jailed if he misbehaves.)

Apparently the sentence was based on testimony the court heard of the motive for the shipment of the ammunition components to New Guinea:

Chow took a short cut by shipping the items to PNG without permission from authorities, as the shooting club and police officers in Lae were short of ammunition when Chow’s house burnt down in February last year. Chow kept ammunition for the club at his house and it was destroyed in the fire.

You’d think that the Lae police might keep their ammunition somewhere other than the house of the guy who runs the local cookie company, but I have to imagine that many other things are done in an unconventional manner in New Guinea.

*An interesting bit of trivia: the Lae airport was the last place Amelia Earhart was seen alive.

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Apr

3

U.N. Approves Arms Trade Treaty

Posted by Clif Burns at 4:58 pm on April 3, 2013

Category: Arms Export • DDTC

By Stefano Corso http://commons.wikimedia.org/wiki/File:UN_building.jpg (Attribution) Yesterday the United Nations, by a lopsided 154-3 vote, approved the Arms Trade Treaty. The three “no” votes came from Iran, Syria and North Korea. Joining with those three countries in opposing the treaty will likely be the U.S. Congress, seemingly oblivious to the irony of casting its lot with these three rogue nations.

Much of the opposition centers on fears that the treaty will allow a transnational body to impose restrictions on domestic sales of guns in the United States. However, the preamble dismisses this concern at the outset, noting that the treaty acknowledges

the sovereign right of any State to regulate and control conventional arms exclusively within its territory, pursuant to its own legal or constitutional system. …

Moreover, the treaty only impacts exports and imports of arms and has no application to any member state’s purely domestic or internal regulation (or non-regulation) of weapons and firearms.

Of primary significance here, however, is that the treaty does not require the United States to do anything other than what it is required to do, and already does, under its own Arms Export Control Act (“AECA”), namely to establish a control list, to regulate exports of items on that control list, and to assure that export licenses are not granted to permit exports of arms to be used in violation of international agreements or to commit genocide or crimes against humanity. These are arguably not any different from the factors set forth in section 38(a)(2) of the AECA to be considered by DDTC in granting export licenses.

What this means is that the real impact of the treaty will be to require countries that do not now regulate their arms exports to start doing so. This would create a more level playing field for U.S. exporters who must get licenses for all weapons exports but who compete against suppliers in other countries which do not regulate weapons export. It seems hard to argue against that result.

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Mar

29

Apple’s Newest Fanboi?

Posted by Clif Burns at 2:39 pm on March 29, 2013

Category: BIS • North Korea Sanctions

Photo By Korean Central News Agency (derivative work; fair use)

Well, well, well. It seems that North Korea’s well-fed Dear Leader is planning his attack on the United States mainland using a 21.5 inch aluminum unibody iMac. Or perhaps he just uses it to play Call of Duty Mac Edition in between snacks and drawing pictures. It’s hard to tell.

But, you may ask, what’s he doing with an iMac? Don’t we have laws against that? Yes, we do. Currently, exports to North Korea of all items other than food and medicine classified as EAR99 require a license from the Bureau of Industry and Security (“BIS”). An iMac is classified as ECCN 5A992. Under EAR § 742.19(b)(vii), licenses to export 5A992 items to North Korea are subject to a general policy of denial, so I think we can reasonably assume that no license was issued by BIS to export the iMac to our Dear Leader.

So where did he get it? Um, where do you think? China, probably..

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Mar

27

If The Muzzle Fits, Wear It

Posted by Clif Burns at 6:27 pm on March 27, 2013

Category: Iran Sanctions • OFAC

Standard Chartered Bank by Chintunglee http://commons.wikimedia.org/wiki/File:Standard_Chartered_Bank_China_in_Guangzhou_Tianhe.JPG (CC BY-SA 3.0) Back in December, Standard Chartered Bank paid $227 million to settle charges by the Federal Government that it had improperly processed financial transactions destined for Iran. Earlier this month, John Peace, the Chairman of the Bank, said at a year-end results press conference that the whole business with the Iran fine was the result of “clerical errors” and not the result of willful acts by bank employees. Then all hell broke loose.

So last week the company issued a formal stock market announcement in which Peace took it all back, ate his words, and did everything short of donning sackcloth and ashes and walking to Wall Street to be flogged by U.S. government officials. The spelling mavens and junior detectives at The Guardian found the orthographic fingerprints of U.S. influence on this apology:

The statement appeared to demonstrate the influence of the US regulators by containing American spellings “willful” and “apologize.”

In fact, and without need to resort to orthographic peculiarities of American spelling, the reason for Peace’s contrition can be clearly found in the deferred prosecution agreement that Standard Chartered signed. Paragraph 12 of that agreement is a “muzzle” clause and provides:

SCB expressly agrees that it shall not cause to be made, through its attorneys, board of directors, agents, officers, employees, consultants or authorized agents (including, contractors, subcontractors, or representatives), including any· person or entity controlled by any of them, any public statement contradicting the acceptance of responsibility by SCB set forth above or the facts described in the Factual Statement. Any such public statement by SCB, its attorneys, board of directors, agents, officers, employees, consultants, contractors, subcontractors, or representatives, including any person or entity controlled by any of them, shall, subject to the cure rights of SCB set forth below, constitute a willful and material breach of this Agreement as governed by Paragraph 9 of this Agreement, and SCB would thereafter be subject to prosecution pursuant to the terms of this Agreement.

In short, it seems clear that the U.S. threatened prosecution and Standard Chartered exercised its cure rights to avoid being in the unenviable position of having paid $227 million dollars and still be prosecuted for its violations of U.S. economic sanctions laws. Still, you have to wonder what legitimate purpose a muzzle clause has other than to soothe the sensibilities of government regulators.

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