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Nov

9

It Could Happen To You

Posted by Clif Burns at 10:41 pm on November 9, 2011

Category: OFAC

ATM I’m not quite sure what to make of this story of a Fulbright scholar in Norway who appears to get caught up in an OFAC-screening imbroglio and can’t pay her rent. Fortunately, the problem mysteriously disappeared before she winds up sleeping in Oslo’s famed Frogner Park.

The student was trying to wire money to herself from her account in the United States when she was told by her bank that the funds were blocked and that perhaps she should take a gander at the SDN list. She did that and, unable to find her name on the list, optimistically wrote to OFAC for some assistance. (Hey, I heard you back there. Stop snickering at the poor idealistic student.)

Miraculously enough she gets an anonymous response from OFAC, asking for more information, which she sends.

Two days later comes another message from OFAC, this time signed by â€œMichael Z.â€ Like Afghans, or spies, he evidently has only one name, but my hopes that he might be an actual person inexplicably rise anyway â€” only to sink again when he claims OFAC needs yet more information. All this so that Michael Z., presumed person, may help me â€œmore effectively.â€ (More than what, I wonder?) He is, he insists, trying to locate my money with the help of my bank, which by the way is now blocking me from seeing information about my own account online.

Somewhat later, without explanation, the student’s funds are unblocked, giving a happy, if not particularly satisfying, ending to this odd story.

But here’s the rub. I haven’t mentioned her name yet. I haven’t done so on purpose. This story might make sense if her name was something like Aisha Qadhafi. But it wasn’t. It was Ann Jones.

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Nov

8

Skip to My Loo

Posted by Clif Burns at 6:43 pm on November 8, 2011

Category: DDTC • USML

Toilet My inbox this morning had several, er, heads up alerting me to news that the Directorate of Defense Trade Controls (“DDTC”) has removed toilets from the United States Munitions List (“USML”). Needless to say, this was a blogging opportunity that I could not let go to waste.

More specifically, DDTC removed chemical toilets manufactured by MAG Aerospace Industries for use in military aircraft. The toilet in question was initially manufactured for the Lockheed C-130 and was subsequently modified for other military aircraft.

In explaining why these specially configured military aircraft components are being removed from the USML, DDTC said this:

The core functionality of the toilet remains the same as a model used for commercial aircraft.

That may be my favorite example of bureaucrat-ese ever. It translates, of course, into plain English as this: “The purpose of both models is to …” I bet you are relieved I didn’t finish that sentence, aren’t you?

For those that may not be privy to all aspects of export law, the DDTC adds at the end of the notice that the removal of the toilets from the USML does not mean that they can now be exported to Iran or other embargoed countries. Those poor mullahs will simply have to settle for ordinary flush toilets, I guess.

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Nov

3

Tidewater Sanctions Force Exporters to Play a Guessing Game

Posted by Clif Burns at 11:33 pm on November 3, 2011

Category: Iran Sanctions • OFAC

ABOVE: Bandar Abbas Port, Iran

I had an inquiry recently to list all of the Iranian ports managed by Tidewater Middle East which was recently placed on the list of Specially Designated Nationals and Blocked Persons List (the “SDN List”) by the Office of Foreign Assets Control (“OFAC”). U.S. exporters legally shipping items such as food to Iran under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) need to know this because, as a result of the recent sanctions, such licensed shipments cannot go through ports managed by Tidewater. Only TSRA exports licensed prior to June 23, 2011, could transit those ports pursuant to a general license that expired on August 23, 2011.

OFAC, when announcing the sanctions, provided the a list of Tidewater ports affected by the sanctions not in the SDN list itself but in a separate press release:

Bandar Abbas (Shahid Rajaee Container Terminal)
Bandar Imam Khomeini Grain Terminal
Bandar Anzali
Khorramshahr Port (one terminal)
Assaluyeh Port
Aprin Port
Amir Abad Port Complex

The southern ports of Bushehr and Chabahar do not appear to be operated by Tidewater currently and, in theory, could be used for TSRA exports. I did, however, find other evidence, such as this, that suggested that Tidewater also operated at those two ports.

Interestingly, however, the Tidewater website appears to have disabled the pages that specify which ports it operates. The menu link for “Ports and Terminals Mng” is, oddly, dead and does not supply a list of ports operated by Tidewater. Presumably the only reason Tidewater would kill that link is to make compliance with the OFAC sanctions more difficult.

Frankly, there is no reason why the SDN list should name Tidewater only and not the specific ports that are sanctioned. Leaving such uncertainty with respect to available ports for TSRA exports improperly interferes with Congress’s direction in TSRA that OFAC was to permit exports of agricultural products, medicine and medical devices to Iran.

UPDATE (11-4-11):An alert reader (Bradley Allen at ATTUS Technologies) found an earlier version of the Tidewater site on the Wayback Machine before Tidewater scrubbed the names of the ports it operated. Click on the tabbed link for “Port and Terminals Mng” and you’ll get, in this older version, a list of Tidewater’s ports. This confirms that one of Tidewater’s responses to the U.S. sanctions was to try to obscure and conceal which ports it operated.

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Nov

2

Well That Didn’t Take Long, Did It?

Posted by Clif Burns at 10:58 pm on November 2, 2011

Category: BIS • Cuba Sanctions

ABOVE: Ileana Ros-Lehtinen

On October 19 this blog reported on a hearing held by the Senate Energy and Natural Resources Committee with respect to efforts that the U.S. government and U.S. companies are taking to respond to and mitigate potential ecological disasters that might stem from planned exploratory drilling by non-U.S. companies in Cuban territorial waters. The chairs in the hearing room had barely cooled off before Ileana Ros-Lehtinen, Chair of the House Foreign Relations Committee, fired off a letter to the Obama administration criticizing any efforts by the federal government to minimize the impact of the Cuban drilling on the ecology of nearby U.S. coastal waters. Because the drilling is going to occur in all events, complaining about damage containment on U.S. shores seems to be a classic case of cutting off our own nose to spite Cuba’s face.

Chairwoman Ros-Lehtinen’s tenure on the Foreign Relations Committee has, sadly, not caused her to learn much about U.S. export laws, as we’ve noted before, and this letter on Cuban drilling continues to demonstrate her confusion about applicable export and sanctions laws. For starters, the Chairwoman seems to believe that the lapsed Export Administration Act is still in force when she demands an investigation by the Bureau of Industry and Security (“BIS”) as to whether use of a Chinese-built rig in the drilling violates the “Export Administration Act.”

The de minimis rule also appears to have confused Ros-Lehtinen:

We are concerned by reports that the Scarabeo 9 may have been designed specifically to avoid U.S. economic sanctions against Cuba. While the EAA and the Export Administration Regulations (EAR) generally prohibit virtually all exports and reexports of U.S.-origin goods, software and technology to Cuba, we need clarity on how the Administration is applying the sanctions and EAR to foreign produced items incorporating 10 percent or less controlled U.S. content

That is not a difficult question to answer: the sanctions and the EAR do not apply to restrict export to Cuba of foreign-produced items incorporating 10 percent or less controlled U.S. content. There’s no need to write a letter to President Obama to get that answer; it’s clearly stated in the EAR.

But the Chairwoman saves the best for last:

The Export Administration Regulations clearly state that the only items allowed to be exported to Cuba are donations of medical equipment, agricultural exports, and telecommunications equipment. Thus, even if the de minimis rule does not [sic] apply, the broader prohibitions against exports to Cuba must still be enforced.

Where exactly to start with this? Section 746.2(a)(1) of the EAR permits many more exports other than the three mentioned by Ros-Lehtinen, including medicine, computers, disk drives, digital cameras, televisions, radio receivers, recording devices, baggage, gifts, humanitarian donations, aircraft on temporary sojourn, spare parts for foreign-made equipment and much more. More importantly, any listing of permissible exports in section 746.2(a)(1) does not overrule the explicit provisions of the de minimis rule found in section 734.4 of the EAR which specifically permits re-exports to Cuba of items with 10 percent or less U.S.-origin controlled content.

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Oct

31

Freight Forwarder Settles Anti-Boycott Charges

Posted by Clif Burns at 8:13 pm on October 31, 2011

Category: BIS

JAS Freight forwarder JAS Worldwide recently agreed to pay $19,200 to the Bureau of Industry and Security to settle charges that it provided prohibited information relating to the Arab League boycott of Israel. Two of the charges relate to invoices that contained a “Shippers Declaration” that the goods in the invoice are not of Israeli origin and do not contain Israeli materials.

Although these statements are fairly unambiguous violations of the anti-boycott regulations, it is significant that BIS is going after the freight forwarder here and not the shipper. According to the company’s website, the company moves annually over 100 million kilos by air and 260,000 containers by ocean. The BIS settlement suggests that freight forwarders need to scour through all shipping documents to see whether any of them contain information prohibited by the anti-boycott regulations, a burdensome, time-consuming, and, frankly, pointless task given that BIS can fine the shipper who presumably does read all of the relevant shipping documents.

Of course, BIS fines for anti-boycott violations remain well below an amount that would give an incentive to those hit with the fines to mount an administrative and judicial challenge. This is understandable given that there is considerable question as to whether the anti-boycott regulations, enacted under the now-lapsed Export Administration Act, can be validly extended by an executive order under the International Economic Emergency Powers Act (“IEEPA”), which is the only argument for their continued validity.

The third charge against JAS is, frankly, puzzling. The offending statement, as quoted in the charging documents, is this statement in the Certificate of Insurance:

The undersigned does hereby certify on behalf of the above insurance company, that the said company has a duly qualified and appointed agent or representative in Kuwait, whose name and address appear below.

Yep. That’s the offending statement. Apparently now it is illegal to tell other companies that you have an agent in Kuwait. Or maybe to reveal the agent’s address. Go figure.

One can only assume that the Certificate of Insurance said something naughty other than the quoted statement; you’ll just have to guess what it was. I suppose when you’re only able to get about $20,000 in each enforcement action, BIS doesn’t really feel it’s worth it to fuss around with the documents too much to guarantee their accuracy.

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