BIS Announces Future Restrictions on Exports of Unspecified Items to Russia

Posted by at 8:12 pm on July 30, 2014
Category: BISRussia Sanctions

By Russian.dissident (Own work) [CC0], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ALUN-A.jpgAs the sanctions pile up on Russia, the Bureau of Industry and Security (“BIS”) announced new sanctions yesterday. Of course, what exactly is covered by the sanctions isn’t quite clear, but as they say on birthdays and in diplomacy, it’s the thought that counts.

The sanctions were announced on the BIS website but were not accompanied by any Federal Register notices or EAR amendments. Indeed, the announcement deals with future sanctions at an unspecified date on a broad, but not clearly defined, category of goods:

BIS will institute a policy denying export, reexport or foreign transfer of certain items for use in Russia’s energy sector that may be used for exploration or production from deepwater, Arctic offshore, or shale projects that have the potential to produce oil.

Although what this means is not entirely clear, several things can be fairly safely assumed. First, the sanctions will target goods already on the Commerce Control List inasmuch it talks about a policy denying export and therefore seems to target goods for which licenses would currently be required. Second, and as a corollary to the first, it does not appear that new items will be added to the CCL as part of these new sanctions. Third, the items targeted will be a subset of those items currently requiring licenses and not all items on the CCL requiring licenses. This is analogous to previous BIS sanctions on Russia which covered not all items on the CCL but those that required licenses to Russia and which were “high technology items … that contribute to Russia’s military capabilities.”

The rub of course is figuring out how to define the subset of CCL items controlled for export to Russia that “may be used for exploration of production” of oil.   I suppose that clearly excludes some items on the CCL, like electric chairs (ECCN 0A981.b) and African Swine Fever virus (ECCN 1C352.a.1), but everything else is probably up for grabs, particularly given that we are talking about items that “may be used” for oil exploration. Fortunately, this is announcement deals with a denial policy that “BIS will institute,” so we can all hope that when the policy goes into force there will be some itemization of the ECCNs involved.

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OFAC and the Passion Fruit of the Poisoned Tree

Posted by at 5:07 pm on July 29, 2014
Category: Narcotics SanctionsOFAC

By A_Flama (Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/a_flama/4886978114Processadoro Campofresco, Inc., a Puerto Rican fruit juice processor and packager, has agreed to pay to OFAC $27,000 in connection with its purchase of passion fruit juice and pulp from a Colombian company designated under OFAC’s narcotics trafficking sanctions. This may represent the only time someone has been broken the law by buying fruit juice from a drug dealer.

Of course, when you look into this further, it’s not clear that “Frutas Exoticas Colombiana S.A.” — the Specially Designated Narcotics Trafficker (“SDNT”) involved — is in fact a drug dealer. Leaving aside that the OFAC notice announcing the settlement botched the name of the SDNT involved, which is actually (and more grammatically) Frutas Exoticas Colombianas S.A., the drug dealers in question have been out of the picture since 2005, when the Colombian Government kicked out Lorena Henao Montoya, the widow of narcotics trafficker Ivan Urdinola Grajales, and took over their holdings in Frutas Exoticas.  The Colombian government did this in response to OFAC’s designation order several months before in an effort to keep the company alive and to protect its innocent workers and their families. So, in fact, this case involves getting fined for buying passion fruit juice from the Colombian government.

OFAC knows this, of course, and issued a release stating that it would consider licenses on a case-by-case basis for dealings with Frutas Exoticas. This doesn’t help Campofresco, which, of course, did not apply for a license in the first place. Still it raises a number of questions. To begin with, what would OFAC look at on this case-by-case basis now that the government owns Frutas Exoticas? The type of fruit juice involved? Pineapple versus passion fruit? (Passion fruit, I suppose, being presumptively evil for the name, if nothing else.) The party of the President of Colombia? His birthdate and astrological sign?

The biggest question, of course, is this: what remains to be served by keeping a company once owned by narcos, but now seized and owned by the government, on the list at all? The answer appears to be that nothing is served unless the idea is to punish the Colombian workers who harvest the fruit and mash the pulp for the bad judgment of having been employed by a company once owned by a narcotics trafficker.

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New Russia Sanctions

Posted by at 4:19 pm on
Category: OFACRussia Designations

OFAC just announced the addition of the three banks to the Sectoral Sanctions Identifications List (“SSIL”). As with the banks previously added to the SSIL, U.S. companies and individuals are prohibited in dealing in loans longer than 90 days or equity for these three banks.

BANK OF MOSCOW (f.k.a. AKTSIONERNY KOMMERCHESKI BANK BANK MOSKVY, OTKRYTOE AKTSIONERNOE OBSCHCHESTVO; a.k.a. JOINT STOCK COMMERCIAL BANK – BANK OF MOSCOW, OPEN JOINT STOCK COMPANY), 8/15 Korp. 3 ul. Rozhdestvenka, Moscow 107996, Russia; Bld 3 8/15, Rozhdestvenka St., Moscow 107996, Russia; SWIFT/BIC MOSW RU MM; Website www.bm.ru; Email Address holmogorov_ss@mmbank.ru; alt. Email Address info@mmbank.ru; BIK (RU) 044525219; Registration ID 1027700159497; Government Gazette Number 29292940; [UKRAINE-EO13662].

RUSSIAN AGRICULTURAL BANK (f.k.a. OTKRYTOE AKTSIONERNOE ROSSISKI SELSKOKHOZYAISTVENNY BANK; a.k.a. ROSSELKHOZBANK; a.k.a. ROSSIYSKI SELSKOKHOZYAISTVENNY BANK OAO; a.k.a. RUSSIAN AGRICULTURAL BANK OAO), 3, Gagarinsky Pereulok, Moscow 119034, Russia; 3 Gagarinsky per., Moscow 119034, Russia; SWIFT/BIC RUAG RU MM; Website http://www.rshb.ru; Email Address office@rshb.ru; Registration ID 1027700342890; Government Gazette Number 52750822; [UKRAINE-EO13662].

VTB BANK OAO (f.k.a. BANK VNESHNEY TORGOVLI ROSSIYSKOY FEDERATSII, CLOSED JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY TORGOVLI RSFSR; f.k.a. BANK VNESHNEY TORGOVLI, JOINT-STOCK COMPANY; f.k.a. BANK VNESHNEY TORGOVLI, OPEN JOINT-STOCK COMPANY; a.k.a. BANK VTB OAO; a.k.a. BANK VTB, OPEN JOINT-STOCK COMPANY; a.k.a. JSC VTB BANK; f.k.a. VNESHTORGBANK; f.k.a. VNESHTORGBANK ROSSII, CLOSED JOINT-STOCK COMPANY; a.k.a. VTB BANK, OPEN JOINT-STOCK COMPANY), 29, Bolshaya Morskaya str., St. Petersburg 190000, Russia; 37 Plyushchikha ul., Moscow 119121, Russia; 43, Vorontsovskaya str., Moscow 109044, Russia; SWIFT/BIC VTBRRUMM; Website www.vtb.com; Registration ID 1027739609391 (Russia); Tax ID No. 7702070139 (Russia); Government Gazette Number 00032520 (Russia); License 1000 (Russia); [UKRAINE-EO13662].

In addition, one entity was added to the SDN List under the Ukraine sanctions. U.S. companies and individuals are prohibited from all transactions with this company.

UNITED SHIPBUILDING CORPORATION (a.k.a. OBEDINENNAYA SUDOSTROITELNAYA KORPORATSIYA OAO; a.k.a. OJSC UNITED SHIPBUILDING CORPORATION; a.k.a. UNITED SHIPBUILDING CORPORATION JOINT STOCK COMPANY; a.k.a. “OSK OAO”), 90, Marata ul., St. Petersburg 191119, Russia; 11, Sadovaya-Kudrinskaya str., Moscow 123242, Russia; Website http://www.oaoosk.ru/; Email Address info@oaoosk.ru [UKRAINE2].

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Mugabe’s Scottish Castle in the Sky

Posted by at 6:16 pm on July 24, 2014
Category: Economic SanctionsOFACSanctionsZimbabwe Sanctions

By User:Bigwikiaal (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AEilan_Donan_Castle%2C_Scotland_2013-09-12_12-29.jpg

The Herald, a Mugabe mouthpiece owned by the Zimbabwean government, recently criticized former British Prime Minister Tony Blair in two articles for reported comments the UK made to justify the imposition of sanctions against Zimbabwe.  Referring to “illegal sanctions,” The Herald cited an article in the “Journal of African Studies” that quoted former South African president Thabo Mbeki as saying that UK officials told him, presumably sometime in the early 2000s, that Zimbabwean president Robert Mugabe owned a Scottish castle and had UK bank accounts that the UK intended to freeze, only to allegedly tell Mbeki later that the UK could not locate the Scottish castle or the accounts but still intended to impose sanctions in any event. (Perhaps the UK momentarily confused Mugabe with Idi Amin who once offered to be the King of Scotland.)

The article in question appeared in the June 2014 edition of the Journal of Southern African Studies and was by Blessing-Miles Tendi a frequent writer on UK-Zimbabwe relations and lecturer at Oxford.  Professor Tendi did in fact cite to a discussion he had with Mbeki in 2011, during which Mbeki said that “Britain” and “Tony’s people” made such statements about Mugabe’s assets and that the British later admitted to finding no castle in Scotland or Mugabe accounts in the UK.  Tendi went on to describe a UK decision to freeze Mugabe’s assets as “devoid of rationality” inasmuch as the UK knew these assets did not exist.  (Interestingly, Tendi also asserts that Mbeki claims that British plans to invade Zimbabwe were thwarted by Mbeki’s decision not to let Britain use South Africa as a staging point for the invasion.)

Tendi and The Herald are misinformed about the UK sanctions.  In addition to freezing any current or future Mugabe’s assets in the UK, the sanctions also prohibit anyone from making any economic resources available to Mugabe or his co-sanctioned cronies.  If the UK believed that Zimbabwe was engaged in human rights abuses and suppression of democracy, as most countries and international organizations still believe, it would not be “devoid of rationality” to conclude that prohibiting financial assistance and freezing future assets are warranted to end such abuses and suppression.

Although Tendi and The Herald are misinformed as to the scope of UK economic sanctions law, the more important take-away from this curious vignette is the allegation that a country like the UK may have hastily taken to other countries its case for sanctions, even in small part, based on its own misinformation.  Imposing economic sanctions on identified targets are swift government decisions with immediate effects that are many times based on information that the target itself can’t readily confirm or deny.  The only administrative due process afforded to a foreign sanctions target in the United States is an “administrative reconsideration” of OFAC’s decision by … OFAC.  As we noted earlier this year, OFAC reconsiderations are no easy task and some petitioners are taking claims to U.S. courts to obtain removal from the SDN list.  Although Mugabe does not have a strong case for reconsideration and not likely to make one, other sanctions targets may, and should at least try, if the circumstances warrant.


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Be Careful What You Like on Facebook

Posted by at 4:40 pm on July 23, 2014
Category: BISCriminal Penalties

Facebook Profile Photo of Viacheslav Zhukov https://www.facebook.com/viacheslav.zhukov.7[Fair Use]
ABOVE: Viacheslav Zhukov

A Savannah resident, Viacheslav Zhukov, has been charged in a superseding indictment with export violations and false statements in connection with rifle scopes that he mailed from Savannah, Georgia, to Russia without the required license from the Bureau of Industry and Security (“BIS”). He is being held without bond awaiting trial.

As this blog has often noted, a frequent challenge in export prosecutions is establishing that the defendant knew that his unlicensed export was illegal. U.S. export laws are, as we all know, complicated; and a Russian immigrant might not know that mailing rifle scopes to Russia without a license would be illegal.

As the false statement count suggests, there is some evidence that Zhukov may have known that the exports required a license from the U.S. government.  Zhukov allegedly filed a Customs Declaration with the U.S. Postal Service saying that the boxes contained a “cardboard box, a model battle tank, and men’s jeans.” Telling customs that you’re mailing a “cardboard box” to Russia probably is more or less an open invitation to having your shipment detained and inspected, which may well be how he was caught.

Of course, there may be other reasons that Zhukov fibbed about the contents of the box. Perhaps he was hoping to avoid Russian import license requirements or duties. At this point, we have no idea what his explanation will be for providing an incorrect description of the items being exported.

One interesting digression: Mr. Zhukov has a Facebook page (although he’s not able to update it at the moment), and the only thing at all that he says that he likes is an album by Murder Death Kill appealingly titled “F*** With Us And Find Out.”  (The asterisks are not part of the original album title.) That album features songs such as “Kill Yourself,” “People Will Die,” and “Hostility.” I’m sure he now wishes that he liked (at least on Facebook) something more innocuous like Tchaikovsky’s Greatest Hits or the Cole Porter Songbook.

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