Dec

22

How the OFAC Gave Back Christmas


Posted by at 8:19 am on December 22, 2016
Category: Cuba SanctionsOFAC

Santa Flanked by F-16

Before leaving for the holidays, I thought it would be appropriate to repost the good news that we received earlier this year regarding Santa’s annual toy delivery being finally released from OFAC restrictions on his route.

FOR IMMEDIATE RELEASE
MEDIA CONTACT: Elf E. McElfface, eemcelfface@gmail.com or (951) 262-3062

Santa’s Village, North Pole – Santa Claus today, on behalf of himself, Mrs. Claus and the 40,000 elfployees of the Santa Foundation, expressed his gratitude to the Office of Foreign Assets Control for its timely revision of its rules to grant Santa clear authority this year to visit children both in the United States and Cuba. For years, Santa’s efforts to bring holiday cheer to children of both countries has been thwarted by section 515.207 of the Cuba regulations which would prohibit Santa’s sleigh from landing in the United States while toys for Cuban children remained in the sleigh or in landing in the United States if those toys had been delivered to Cuban children first.

Today’s action waives these restrictions if Santa’s sleigh only carries items that would, if they were subject to the EAR, be EAR99 or controlled only for AT reasons. This ends the long struggle over whether teddy bears and other toys — which are not food, medicine, or personal communications devices — could only be delivered to Cuban children in wrapped parcels with the child’s name and address written on the outside and with the statement “GIFT—Export License Not Required” also marked on the parcel package. Notwithstanding the diligence and timely efforts of Santa’s elfployees, compliance with these requirements for each non-naughty child in Cuba has heretofore been impossible.

News of the OFAC announcement led to loud cheers and applause throughout Santa’s Village. Elf E. McElfface, Santa’s spokeself, wiped a tear of joy from his eye as he said to the elves in one of Santa’s workshops that he never believed that this would occur in his lifetime, which was saying a lot given that the average life expectancy of an elf on the North Pole is currently just over 500 years.

As Christmas approaches, Santa said that he was looking forward to this year’s delivery of toys and goodies to the nice children throughout the world more than ever before and reminded children everywhere, both in Cuba and the United States, that they could call his hotline at +1 (951) 262-3062 to leave their Christmas wishes and toy requests.

This press release may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent the Santa Foundation’s current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this press release. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

I hope all Export Law Blog readers are able to take some time off and enjoy the holidays with their family and friends. See you in 2017!

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Copyright © 2016 Clif Burns. All Rights Reserved.
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Dec

20

Merry Snapback! Bah! Humbug!!


Posted by at 6:24 pm on December 20, 2016
Category: Iran SanctionsOFAC

Ebeneezer Scrooge via Wikipedia https://en.wikipedia.org/wiki/Ebenezer_Scrooge [Public Domain - Copyright Expired]

Chestnuts roasting on an open flame.

Jack Frost nipping at your shoes.

Iran Sanctions coming back all the same.

So OFAC dressed up its FAQs

Ah, yes, nothing says Christmas cheer quite like the possibility that the JCPOA will be put on Santa’s naughty list and everyone will find the old Iran sanctions back under their Christmas tree.  This is why, of course, OFAC, full of the holiday spirit, just amended its JCPOA FAQs to answer the question on everyone’s mind:  what happens when Santa brings the sanctions back?

Not wanting to be too much of a Grinch, on December 15, OFAC revised JCPOA FAQs M4 and M5 to reassure the exporters in Whoville that they’ll have 180 days to wind-down their dealings with Iran after snapback or US withdrawal from the JCPOA.  But if this is a Christmas gift, it’s like the “Sea Monkey Circus” that you begged for from your parents — you know, those worms in a water bag that didn’t look anything like monkeys or a circus once you actually got the gift.

Like the Sea Monkey Circus, what the wind-down means is not what you might think.  You have 180 days to get paid for goods already delivered to Iran.  But what if you have goods in production that were destined to Iran but not completed when the sanctions are reimposed? Do you have 180 days to finish them, deliver them and get paid?  Nope.  You’re out of luck. All you can do is pray to find someone willing to buy the goods at something above salvage value.  Or that OFAC gives you a special license to finish and deliver the goods.

Grandma getting run over by a reindeer seems, well, not so bad by comparison to the JCPOA getting stolen by the Grinch.

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Dec

15

Sanctions Paranoia Strikes Again: YouTube Shutters Nork Channel


Posted by at 10:19 pm on December 15, 2016
Category: North Korea SanctionsOFAC

KimThe Washington Post reports that YouTube has removed Korean Central Television’s channel, fearing that it needed to do so to avoid breaching U.S. sanctions on North Korea. The removed channel was a Nork propaganda outlet that broadcast both unintentional comedies, such as outings by the super-sized dictator, Kim Jong Un, as well as Nork fake news broadcasts. Researchers and Nork watchers found the channel to be an invaluable resource in keeping track of what is going on North Korea, even if much of these broadcasts needed to be taken not with a grain of salt but with an entire salt mine.

Although Google is mum about why the channel was killed, the Post quotes a supposed explanation from somebody named Josh Stanton, a  blogger who appears to work for the U.S. government in his spare time.  Josh said that the reason was “YouTube and Google probably realized there was a problem with money changing hands.” Er, no, Josh.

The issue with respect to the Nork YouTube channel arises from Executive Order 13722, issued in March 2016, which prohibits exports of services to North Korea. Prior to that there were restrictions, enforced by BIS, on exports of goods to North Korea, and restrictions, enforced by OFAC, on dealing with blocked North Koreans. Providing distribution of Korean Central Television’s broadcasts over YouTube would clearly be the export of a service to North Korea in violation of Executive Order 13722.

But, and this is a big but, there is the information exception, enacted by the Berman amendment and ignored by Mr. Stanton and the Washington Post. The information exception prevents the President from prohibiting the “importation from any country … whether commercial or otherwise, regardless of format or medium of transmission, of any information.” See 50 U.S.C. § 1702(b)(3)(emphasis supplied). The italicized language is pretty much game over for the arguments by Mr. Stanton and the Post that ad money was the problem.

What would be a problem is if there were any indications (and there are not) that Google and YouTube were editing or marketing the content. OFAC has been quite clear that it does not think that such services are covered by the information exception (although it does allow those services, through various general licenses, for private individuals in sanctioned countries). If the Norks upload their nonsense and YouTube permits it to be downloaded, there is no violation of the sanctions even if somehow ad revenue makes its way back to North Korea (which itself seems doubtful).

While waiting (don’t hold your breath) for the return of Korean Central Television to YouTube, you might want to watch this riveting North Korean news broadcast showing the Dear Leader visiting an amusement park, a kitchen (with hamburgers! which he doesn’t eat!!) and a zoo.

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Dec

7

Economic Sanctions and War


Posted by at 8:08 pm on December 7, 2016
Category: SanctionsTrading with the Enemy Act

via https://en.wikipedia.org/wiki/National_Pearl_Harbor_Remembrance_Day#/media/File:Pearl_harbour.png

As the year (and the current administration) draws to an end, there has not been much news on the export front.  So, I’m using today, which is Pearl Harbor Day, to raise the question as to whether U.S. sanctions on Japan for its aggression in China were effective at anything other than forcing the Japanese to attack the United States.   Economic sanctions are usually seen as a diplomatic alternative short of war without remembering that, at least on one occasion, many think economic sanctions may have precipitated war.

In 1939 the United States, concerned about Japanese aggression in China, terminated the 1911 commercial treaty with Japan, which laid the groundwork for cutting of exports to Japan. On July 31, under the authority of the Export Control Act passed earlier that month, exports of fuels, lubricant, certain metals  to Japan were prohibited.   Effective October 16 of that year, exports of scrap iron and steel to Japan were cut off.  Finally, on July 26, 1941, Roosevelt, utilizing the provisions of the Trading with the Enemy Act, froze all Japanese assets in the United States.

These actions had a significant impact on Japan.  An intercepted and decrypted cable between Foreign Minister Teijiro Toyoda  to Ambassador Kichisaburo Nomura on July 31 said this:

Commercial and economic relations between Japan and third countries, led by England and the United States, are gradually becoming so horribly strained that we cannot endure it much longer. Consequently, our Empire, to save its very life, must take measures to secure the raw materials of the South Seas.

The economic impact of the embargo forced Japan to seize the missing resources and the U.S. naval presence in the Pacific was seen by them as something that could hinder that.  That is the germ of the argument that in the case of Japan sanctions may have provoked war rather than deterred it.

Here’s an article with an opposite view.  It argues that Japanese aggression caused the sanctions.

I think the truth is somewhere in the middle of these two arguments. Sanctions alone did not force Japan to war. It was probably headed down that road prior to the imposition of economic sanctions. But it certainly was a factor that increased the chance of war and accelerated its onset.

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Dec

2

Prosecutors’ Flood of Crocodile Tears Drown the Wind


Posted by at 8:43 am on December 2, 2016
Category: Criminal PenaltiesIran SanctionsOFAC

Reza Zarrab via Facebook https://www.facebook.com/reza.zarrab.9 [Fair Use]
ABOVE: Reza Zarrab

This blog recently reported on the Iran sanctions case against Reza Zarrab in which Judge Berman misread and misquoted the International Emergency Economic Powers Act to hold that the United States has criminal jurisdiction over anyone on the planet who touches a dollar bill or, more accurately, knows that someone else anywhere on the planet might touch a dollar bill. Recently, the prosecution requested a Curcio hearing seeking to disqualify Zarrab’s lawyers at Kirkland & Ellis because they also represent banks that were involved, albeit without knowledge, in the wire transfers to Iran at issue.

A Curcio hearing is one where the prosecution, overcome with a flood of crocodile tears and concern for the defendant, seeks to assure that the defendant receives effective representation of counsel from a lawyer free of any conflict. The irony is that prosecution’s goal is to deprive the defendant of counsel of choice and throw him or her into the arms of brand new counsel all, of course, in the name of protecting the defendant. A further irony here is that Zarrab is represented by top-notch lawyers at Kirkland and that everyone — all the banks and Zarrab —  consented to Kirkland’s representation of Zarrab.

But the real kicker here is the breathtakingly terrible argument that the prosecutors use in their request for a Curcio hearing — namely that the banks are “victims” of Zarrab’s offense:

K&E’s simultaneous representation of Zarrab and at least two victims in this matter,
Deutsche Bank and Bank of America, presents a conflict. The Government has charged Zarrab with defrauding these and other financial institutions by duping them into processing financial transactions that they would not otherwise have engaged in, and in doing so, exposing them to the possibility of substantial harm.

This argument falls apart after only a moment’s scrutiny. The banks at issue either knew that the transactions they processed were destined for Iran or they did not. If they knew, they were co-conspirators and not victims. If they did not know, they did not do anything wrong by processing the transactions and were not victims. And the fact that they are not being fined or prosecuted in this case makes clear that they did not know, that they weren’t exposed to the possibility of harm, that they did not suffer any actual harm, and that they weren’t victims in any sense in which normal people use that word.

An additional problem with this “victim” argument is that, as with any statute or rule protecting the foreign policy interests of the United States, the actual victims of violations of such statutes are the citizens of the United States.  In that case, the only lawyer who could possibly represent Zarrab is a lawyer whose only client is Zarrab and who has not ever represented any U.S. citizens.   For as much as the prosecution might welcome having Zarrab represented by a sole practitioner from a small village in Turkmenistan, I doubt that there are many others who think that might be an acceptable outcome.

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