Burma Sanctions Die and Dead Man Gets a Reprieve

Posted by at 10:58 am on October 10, 2016
Category: Burma SanctionsOFAC

Bagan by Staffan Scherz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/aAeXsZ [cropped and processed]On October 7, 2016, President Obama issued an executive order finding that the situation that led to national emergency declared in Executive Order 13047, and which led to the imposition of sanctions on Burma, had terminated. As a result of this expected action, all of the Burma sanctions appear to have been removed effective immediately as of the date of that order. The order revoked the various previous orders that implemented the finding of a national emergency and imposed sanctions. Additionally, it waived the sanctions in section 5(b) of the Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008 (Public Law 110-286) (the “JADE Act”). Finally, the President set aside the visa ban and entry restrictions imposed on certain persons in Burma under Presidential Proclamation 8693

As I noted in an earlier post, the Office of Foreign Assets Control (“OFAC”) had previously indicated that the Burmese Sanctions Regulations would no longer be in effect as of the date of the executive order terminating the national emergency with respect to Burma. Even so, the order has now been issued but the regulations are still sitting on the OFAC website as if they were in effect. There is another web page, however, which says that the Burmese Sanctions Regulations are now no longer in effect.

That same web page says that the restrictions on the import of jade and rubies from Burma has been lifted, but it’s not quite clear why (or if) that is the case. The Executive Order just released only waived the provisions of section 4(b) of the Jade Act but not those of section 6 which implements the import ban on jade and rubies. The President has the power to waive the ban in section 6 on import but only after forwarding certifications to the Ways and Means and Foreign Affairs Committees in the House and the Finance and Foreign Relations Committees in the Senate. There is nothing to indicate that this has been done yet, although it is reasonable to assume that this will happen at some point. So it would seem to me that until that certification is made to Congress and an executive order is issued waiving section 6, the import ban is legally still in effect.

At the same time as the executive order, OFAC removed from the SDN List all the individuals and entities that had been designated under the Burma Sanctions. This includes individuals, such as Steven Law, that were designated under the Burma sanctions as a result of narcotics related activities.

Probably the person who was happiest over being removed from the SDN List was Law’s father, Lo Hsing Han, although Mr. Lo may not be able to express his happiness to those of among the living, Mr. Lo having died in 2013. The removal of dead people from the SDN List long after they have rotted in their graves would, I suppose, be a humorous anecdote illustrating agency ineptitude were it not for the fact that live people with similar names continue to feel the ill effects of SDN List designations. The least that OFAC could decently do to prevent the collateral impact of SDN List designations on innocent people is to scrub corpses from that list in a timely fashion.

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The Strange Case of Marc Turi

Posted by at 8:18 am on October 6, 2016
Category: Criminal PenaltiesDDTCPart 129

Marc Turi via http://a57.foxnews.com/images.foxnews.com/content/fox-business/politics/2015/06/27/exclusive-arming-benghazi/_jcr_content/image.img.jpg/0/0/1452210054914.jpg?ve=1 [Fair Use]
ABOVE: Marc Turi

Two days ago, on October 4, a federal district court in Arizona dismissed a criminal indictment brought in 2014 against Marc Turi that accused him of lying in two brokering applications that Turi had submitted to the Directorate of Defense Trade Controls (“DDTC”) in 2011. The dismissal was based on a motion to dismiss filed the day before by the prosecution noting that a consent agreement had been reached between Turi and DDTC.  Under that consent agreement, released by DDTC yesterday,  Turi agreed that for four years he will not engage in any “activities subject to the ITAR.”

The Turi case is, to say the least, an odd case, not the least because it involves an arms deal with the Libyan rebels which everyone — DDTC, the prosecutors, and Turi — concede never took place.

The story begins with the revolt in Libya that broke out in February 2011. Near the end of that month, the rebels attempted to establish an interim government under the banner of organization known as the Libyan National Transitional Council (“NTC”). On February 26, 2011, the UN imposed an arms embargo on Libya, which DDTC finally got around to implementing some three months later on May 24, 2011, when it amended Part 126 to include Libya. The NTC was ultimately recognized as the government of Libya by the United Nations on September 16, 2011.

According to the indictment, on March 11, 2011 and before the US imposed the arms embargo on Libya in May, Marc Turi filed an application seeking to broker the sale of certain arms from Eastern Europe to the NTC. This application was denied by DDTC on March 22, 2011, by DDTC.

A week later, on March 29, 2011, Turi filed another application with DDTC requesting permission to broker to the government of Qatar a list of arms which the indictment, in paragraph 24(ee), described as “nearly identical” to the arms detailed in the previous application relating to the NTC. That application was granted by DDTC on May 5, 2011. On June 11, 2011, Turi filed an application to broker the same arms listed in the Qatar application to the U.A.E. government instead.

On June 29, 2011, Turi sent a letter, apparently never signed, to Mustafa Abdul Jalil, the Chairman of the NTC, by which the NTC agreed to reimburse the government of UAE for the arms described in the brokering applications filed by Turi with respect to Qatar and UAE. That letter was never signed, the arms never went to the NTC and the U.S. government indicted Turi for lying in the UAE and Qatar brokering applications by failing to reveal that the arms were destined ultimately to the NTC.

Turi’s defense, as revealed in his Motion to Compel Discovery, was that he was, in fact, acting on behalf of the CIA which sought to arm the NTC notwithstanding the UN embargo. Turi and the government then wrangled over these discovery requests, which the government claimed sought classified information, until the DDTC deal was reached and the government requested the dismissal of the indictment.

With these facts in mind, let’s look at the documents released by DDTC relating to the settlement.  These documents are, to say the least, odd. To begin with DDTC does not charge Turi with lying in the brokering applications he made with respect to Qatar and the UAE.

Instead, DDTC in its proposed charging letter first accuses Turi of making an unapproved proposal to the NTC in violation of section 126.1(e) of the International Traffic in Arms Regulations, citing the June 29 letter to Chairman of the NTC. Apparently no one at DDTC actually read section 126.1(e) because there is no way that this letter violated that section. That section only prohibits proposals “made to any country referred to in this section (including the embassies or consulates of such a country), or to any person acting on its behalf.” Given that the NTC was not recognized as the legitimate government of Libya until September 2011, the letter to the NTC in June, when NTC was simply a rebel organization, was not made to Libya or anyone acting on its behalf and so could not violate section 126(e).

The second violation in the DDTC charging letter is that Turi acted as a broker for Libya without authorization. This is problematic on two counts. The first is that if Qatar hires Turi to send arms to Libya the Turi is brokering for Qatar and not for Libya. Perhaps there’s a problem that Qatar’s intentions with respect to Libya weren’t revealed in the application, but DDTC isn’t charging Turi with violating the prohibition on false statements in applications. Besides, that was the charge DOJ made, and they dropped that.

But the second, and larger, problem with the brokering charge is this: DDTC had to know when it approved the Qatar brokering application where the arms were headed. That application was filed exactly one week after the Libya application was denied and covered a list of arms nearly identical to the ones in the Libya application. DDTC isn’t that stupid, nor is everyone else as stupid as DDTC must imagine.

Consider this: say you’re a compliance officer and an employee asks to ship some flowers to Iran. You, of course, say no. Five minutes later he’s back in your office saying he decided to send the exact same flowers to the UAE instead. No problem, you say. Does anyone honestly think that DDTC or BIS or OFAC would look the other way? Or would they have your head on a platter?

DDTC and that State Department almost certainly were fine with letting Qatar arm the rebels in Libya; they just could not admit that in writing.


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Copyright © 2016 Clif Burns. All Rights Reserved.
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Export Control Reform For and By Dummies

Posted by at 10:34 pm on October 4, 2016
Category: DDTCUSML

Blue Hour Capitol Building

Having ignored the export control reforms initiated by the executive branch over the last seven or so years, the geniuses on the Hill have now decided to wade into the field with, as you might imagine, not entirely salubrious results. At the end of September, a bill was introduced in the House (with a companion bill in the Senate) to move most of Category I on the United States Munitions List (“USML”) over to the Commerce Control List (“CCL”). Specifically, it would move every firearm other than combat shotguns and firearms with special military application to the CCL.

There appear to be two motivations for this. First, this is an effort to exempt all gun manufacturers from the registration requirement (and associated fees) set forth in Part 122 of the United States Munitions List. Second, this is an apparent response to recent guidance by DDTC that tried to draw a distinction between manufacturing, which requires registration, and gunsmithing, which does not. Some critics claimed that some activities defined as manufacturing should be treated as gunsmithing instead.

The proposed legislation simply moves the items to the CCL but allows BIS the discretion to determine where on the CCL these items would go. BIS would be free to designate, and likely would designate, these moved items as 600 series items, which would result in a license requirement for all destinations. BIS would also be free to determine which, if any, license exceptions would be available. This means that it is unlikely, or at least possible, that the proposed legislation would not necessarily make it any easier to export arms; rather, it would only reliably eliminate the registration and fee requirement. Calling this the Export Control Reform Act, as the legislation styles itself, seems inapposite; a better name would be the Gun Manufacturer Financial Relief Act.

Photo Credit: Blue Hour Capital Building by Clif Burns, via www.clifburns.net. Copyright 2016 Clif Burns

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I’ll See You in C.U.B.A.

Posted by at 9:41 pm on September 29, 2016
Category: Cuba SanctionsOFAC

Image via https://pixabay.com/p-1202440/?no_redirect [Public Domain]Several people have been wondering if I would write something about the allegation that Trump may have violated the Cuban embargo back in 1998. This blog expresses no opinion on political campaigns or figures, so I hesitate to wade into this other than as an opportunity to talk about how the Cuban sanctions are structured. So, for purposes of this post, I will take as hypothetically true for discussion the allegation, which has not been admitted by the Trump campaign, that in 1998 Trump asked consultants to go to Cuba on his company’s behalf to explore business opportunities there and that he later reimbursed their travel.

To begin with, it has to be observed that there is a five year statute of limitations on criminal and civil penalties related to the Cuba embargo. As a result, the possibility of a criminal prosecution or civil penalties if there was a violation, has long past.

The relevant prohibition of the Cuba sanctions is the oddly phrased prohibition in section 515.201 of the Cuban Assets Control Regulations. That section prohibits any person “subject to the jurisdiction of the United States” from engaging in specified transactions that “involve property in which [Cuba], or any national thereof, has at any time on or since the effective date of this section had any interest of any nature whatsoever, direct or indirect.” Those specified transactions are transfers through banking institutions, foreign exchange transactions, dealings in property and transfers of property outside the United States.

So the first question is whether asking consultants to go to Cuba to explore business opportunities there for your company violates that. Certainly when in Cuba, those consultants will have dealings in property in which Cubans have an interest — they’ll do that the minute they check into a hotel or drink a mojito. But does the U.S. person who simply asks them to go to Cuba by that request transfer anything through banks, engage in a foreign exchange transaction, deal in property or transfer property outside the United States? It would not seem so, which makes it hard to see a violation of this rule as written by sending consultants to Cuba.

The second question is whether the language in section 515.201 prohibits somebody from reimbursing the travel expenses of someone who has traveled to Cuba. It seems to me that there is a good argument that it does not. Unlike the mere travel request, this reimbursement transaction does involve dealing in property as well as a banking transaction.  But it’s hard to see that it involves any property in which a Cuban has or had an interest. No Cuban has any interest in the money paid to the traveler after he has left Cuba and has already made payments to hotels and restaurants in Cuba.  And that money seems to be the only property involved in the transaction. Clearly, the consultants engaged in one of the specified transactions involving Cuban property when they paid the hotel bill in Cuba, but it’s not so clear that, once the hotel was paid, any Cuban has or had any interest in the money used later to reimburse the traveler.

That being said, let me say that OFAC, which enforces these rules, takes the position that the reimbursement somehow or other does “involve” the Cuban hotel, which is, by my view, something like saying the butterfly that spreads its wings in Africa is involved in the hurricane that slams into the Outer Banks. In the end, of course, OFAC’s opinion, even if I think it stretches the meaning of “involve,” will control.

But, you say, since the consultants are violating the Cuban embargo, would Trump, if he sent them to Cuba and reimbursed them, have violated the embargo by conspiring with them or by aiding and abetting them in the violation of the sanctions? That is not clear either. The penalties established for violations of the Cuban embargo are set forth in section 501.701  That section prohibits and penalizes violations of the rules but does not include a penalty for aiding and abetting a violation, conspiring with someone to violate or causing a violation. This is in contradistinction to the parallel provision in the Iran sanctions, for example, which punishes anyone who “violates, attempts to violate, conspires to violate, or causes a violation” of the rules.

Again, I have to be clear that OFAC is not troubled by the niceties of the language of the Cuban embargo rules themselves, but would unambigously take the position that both sending the consultants to Cuba and the reimbursement of their travel expenses after they return, if that in fact occurred, would violate the Cuban sanctions.  So, kids, don’t try this at home.

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If It Were Real, It Wouldn’t Be “Deemed”

Posted by at 10:19 pm on September 27, 2016
Category: General

Printed Guns via http://defdist.tumblr.com/post/85127166199/i-have-often-been-asked-who-the-first-person-to-be [Fair Use] The Fifth Circuit last week released an opinion upholding the District Court’s decision not to grant Defense Distributed’s motion for a preliminary injunction.  Defense Distributed had sought a preliminary injunction against enforcement by the Directorate of Defense Trade Controls (“DDTC”) of its order prohibiting the company from posting on the Internet plans for printing guns with 3-D printers.

The majority opinion  did not really reach the merits of the case or whether DDTC had the right to prohibit U.S. citizens from uploading gun plans to the Internet. Rather it turned on a procedural issue: whether Defense Distributed or DDTC would be hurt more by an injunction. The majority opinion weighed that balance in favor of DDTC, arguing that a preliminary injunction would result in untold millions of foreigners printing crappy plastic guns whereas not granting the injunction would just mean that Defense Distributed had to sit on its hands until trial.

The dissenting opinion of Judge Jones, however, dove straight into the merits, arguing that DDTC’s theory of the case was fatally flawed because uploading things to the Internet is not an “export” within the meaning of the Arms Export Control Act. To summarize Judge Jones, “export” means sending stuff across a border for money. As a result, Defense Distributed could not be held to have engaged in an export as a result of “the domestic publication on the Internet, without charge and therefore without any ‘trade,’ of lawful, nonclassified, nonrestricted information.”

Judge Jones does not stop at the notion of mere access as an export, but zeroes in on the “across borders” criterion to take dead aim against “deemed exports.”

Although the majority opinion adopts the State Department’s litigating position that “export” refers only to publication on the Internet, where the information will inevitably be accessible to foreign actors, the warning letter to Defense Distributed cited the exact, far broader regulatory definition: “export” means “disclosing (including oral or visual disclosure) or transferring technical data to a foreign person, whether in the United States of abroad.” There is embedded ambiguity, and disturbing breadth, in the State Department’s discretion to prevent the dissemination (without an “export” license) of lawful, non-classified technical data to foreign persons within the U.S. The regulation on its face, as applied to Defense Distributed, goes far beyond the proper statutory definition of “export.”

Or, more succinctly, if it was a real export they wouldn’t have to call it a “deemed” export.

Judge Jones’s opinion is certainly grounded in common sense, something often lacking in export control. In the early days of my practice, I tried to explain to a former military officer who was CEO of a client that disclosing information to a foreign employee in the United States was an export. He paused for a moment and then, with the veins in his neck bulging and his cheeks flushed, he said “That is the dumbest [bad word] thing I’ve ever heard come out of the mouth of a lawyer” and promptly invited me to leave his office immediately.  I still think his assessment of “deemed exports” was dead on.

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