Apr

27

Heat, Don’t Leave Home Without It


Posted by at 10:07 pm on April 27, 2015
Category: Arms ExportCustomsDDTC

Airport Firearms Declaration by Nick Holland [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/nic1/2569359725 [cropped]Customs and Border Protection has decided that it needs to make it easier for you to travel abroad with a gun, at least assuming that you aren’t planning to use it to create any harm or to give it to a nefarious overseas organization. So they have announced that they will help travelers with firearms fill out CBP Form 4457 “to ensure that no traveler attempting to legally take their firearm out of the country experiences significant delays.” Form 4457 is a registration of exported goods designed to permit them to be returned to the United States without payment of duties or complying other regulatory requirements.
righ
And CBP is so concerned about the difficulties of packing heat in your luggage that they’ve even taken a swipe at the Automated Export System and the State Department requirement for filing an EEI through AES before taking lugging a Lugar abroad.

Additionally, CBP is working with our other government partners to modify the AES system and the reporting process to make a more user-friendly experience for individual travelers.

I certainly agree that the AES should be made more user-friendly; I’m just not so sure that it needs to be made more friendly just for people traveling with their weapons.

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Apr

22

Houston CEO Indicted For Not Having an Export License That He Didn’t Need


Posted by at 7:23 pm on April 22, 2015
Category: BISCriminal PenaltiesIran SanctionsOFAC

Smart Power Systems and Bahram Mechanic via http://www.smartpowersystems.com/content/main/corporateinformation.html [Fair Use]Houston-based Smart Power Systems and its CEO Bahram Mechanic (as well as various other individuals) were indicted last week on charges that they exported certain export-controlled items to Iran without a license. The indictment alleges that certain uninterruptible power supplies, microcontrollers and digital signal processing chips, all allegedly classified as ECCNs 3A991,  were transshipped through third countries to a company in Tehran, allegedly controlled by Mechanic.

Not surprisingly, the indictment tries to make the case that these run-of-the-mill electronic items are critical military goods that Iran can use to launch missiles and build nuclear bombs. Of course, the government’s credibility in its assessment of the alleged capabilities of these items is rather diminished by its claim that these items are classified as ECCN 3A991, one of the least stringent export controls under the Export Administration Regulations. At best, however, the microcontrollers are 3A991.a, which covers microprocessors meeting certain computational benchmarks. The uninterruptible power supplies are not covered at all by 3A991 and are almost certainly EAR99.

Worse, for the government, if the uninterruptible power supplies are EAR99,  then the government’s theory of what laws were broken by their exports to Iran completely collapses. The indictment alleges that the defendants violated the International Emergency Economic Powers Act because no license was obtained from the Bureau of Industry and Security (“BIS”). Apparently, no one at the DOJ looked at EAR Section 746.7, which indicates that a BIS license is required only for certain items. EAR99 items are not among them.

Of course, a license from the Office of Foreign Assets Control (“OFAC”) is required to export EAR99 items from the United States to Iran. But the government is not alleging Mechanic and Smart Power needed an OFAC license; instead, it is saying they  didn’t have a BIS license even though they did not need that license. If the government can’t get the law it is enforcing right, it should not try to send people to jail for violating it.

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Apr

21

Texas Judge Indicted For Illegal Firearm Exports


Posted by at 10:38 pm on April 21, 2015
Category: Arms ExportCriminal PenaltiesDDTC

Judge Tim Wright [Credit: Williamson County][Fair Use]
ABOVE: Judge Tim Wright


Well, it is probably safe to say that not many (if any) judges have been indicted on allegations of illegally exporting firearms. But that’s what happened to Judge Tim Wright, a judge in Williamson County, Texas, who was charged with various firearm charges, including illegal exports of firearms. There are few details in the indictment beyond alleging that Judge Williams, which the indictment rather oddly insists on calling “Timothy L. Wright, III, aka ‘The Judge,’” sold guns to a person without an export license knowing that the guns were intended for export.

This is a strangely odd locution: it alleges that Judge Wright knew that the guns were for export but does not allege that the Judge knew that the purchaser did not have an export license or that the Judge knew that his sale or the export were illegal. This probably explains why Judge Wright was charged under the Anti-Smuggling Statute, 18 U.S.C. § 554, and not under the Arms Export Control Act, 22 U.S.C. § 2278. There is well-established precedent under the Arms Export Control Act that a conviction can only be had if the defendant knew that his export was in violation of law. On the other hand, it appears hat prosecutors believe, as I have said previously, that they can establish a criminal violation of 18 U.S.C. § 554 simply by proving the defendant knew that the item was to be exported without any requirement that they prove he knew that the export was illegal.

Whether a court will send someone to jail on such a flimsy showing of criminal intent remains to be seen.

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Apr

16

Thursday Grab Bag


Posted by at 8:05 am on April 16, 2015
Category: Crimea SanctionsCriminal PenaltiesCuba SanctionsIran SanctionsOFACSudanSyria

Grab BagHere are a few recent developments that you may have missed:

  • Last month we criticized the Department of Justice for conspiring with foreign luxury car makers to jail U.S. citizens who exported luxury cars to China to arbitrage the difference between U.S. and Chinese prices for these vehicles. Apparently, the DoJ now is having second thoughts about wasting taxpayer money and its resources on this nonsense. According to the  New York Times, settlements have recently been reached in nine states where prosecutors have agreed to return seized cars to, and drop charges against, luxury car exporters. Good.
  • On Monday we reported that Obama was going to drop Cuba from the list of state sponsors of terrorism, a move we thought was largely symbolic. Yesterday he did just that, and provided the 45-day notice required under the three acts that provide the basis for the list: § 6(j)(4)(A)(i)-(iii) of the Export Administration Act of 1979; § 40(f)(1)(A)(i)-(iii) of the Arms Export Control Act; and § 620A(c)(1)(A)-(C) of the Foreign Assistance Act of 1961. The linked New York Times article wrongly states that Congress can block this action with a joint resolution. Only the Arms Export Control Act provides for this blocking mechanism, and, as we noted, there’s no way that the White House will remove Cuba from the current arms embargo. So a joint resolution under the AECA would be, like the removal itself, largely symbolic
  • The Office of Foreign Assets Control (“OFAC”) revised its rules on Monday to amend the Syrian Sanctions Regulations to permit certain activities with respect to written publications, including the ability to pay advances and royalties, to substantively edit manuscripts and to create marketing campaigns. These activities have been permitted for Cuba, Sudan and Iran since 2004. Don’t try this yet in Crimea which remains, bizarrely and incomprehensibly, the most heavily sanctioned place on the face of the planet
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Apr

13

White House May Take Cuba off Terrorism List


Posted by at 8:35 pm on April 13, 2015
Category: BISCuba SanctionsDDTC

Cuba - Havana - Car by Didier Baertschiger [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/didierbaertschiger/11785935544[cropped]

There have been news reports suggesting that Obama is contemplating, as part of the thaw in U.S.-Cuba relations, to remove Cuba from the list of countries that are state sponsors of terrorism. Beyond the symbolic significant of such a move, what would be the real consequences?

Of course, one consequence of being on the list is that, under section 40 of the Arms Export Control Act, 22 U.S.C. § 2780, any country put on the list of state sponsors of terrorism is automatically subject to an arms embargo. Of course, even if Cuba is removed from the list, I would not count on arms shipments from the U.S. to Havana in the foreseeable future.

Second, section 6(j) of the defunct Export Administration Act, 50 App § 2405, requires a license for exports to state sponsors if the export could make a “significant contribution to the military potential of such country” or if it could “enhance the ability of such country to support acts of international terrorism.” And, in those instances, Congress must be given notice of such exports thirty days in advance. Of course, the Export Administration Act is no longer in force and is only even in the appendix to Title 50 of the U.S.C. because the President breathes life into it every year using the superpowers bestowed on him by the International Economic Emergency Economic Powers Act. So the White House could end any license requirement for Cuba and end the notification requirement using the same superpowers that resurrected those provisions in the first place.

You might also think that removing Cuba from the list might make it easier to ship agricultural products, medicine and medical devices to Cuba under the Trade Sanctions Reform and Export Enhancement Act of 2000. After all, the Act, in section 7205, imposes a license requirement for shipping those goods to a sanctioned country if that country is also on the state sponsor of terrorism list. However, that section specifically identifies Cuba as a state sponsor of terrorism and imposes the license requirement on exports of agricultural products, medicines and medical products to Cuba. So, removing Cuba from the terrorism list will not eliminate the need for exporters to Cuba to continue to file the export notifications required to utilize License Exception AGR for TSRA exports to Cuba.

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