ExportLawBlog » Clif Burns

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Oct

20

Blame Canada!

Posted by Clif Burns at 8:49 pm on October 20, 2011

Lie Detector Here I had thought that we had shamed most companies from issuing those grandiloquent press releases claiming that ITAR registration from DDTC constitutes incontrovertible proof that the company can leap tall buildings in a single bound, synthesize gold from base metals and recite the entire text of the International Traffic in Arms Regulations by heart. Backwards.

Then comes along Toronto-based SMTC announcing its registration with this whopper:

Companies receiving this certification must have the knowledge and understanding to fully comply with ITAR regulations and demon-
strate that they have implemented corporate procedures and controls to ensure compliance.

Maybe it’s because they are a Canadian company and just don’t know any better?

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Oct

19

Would U.S. Export Laws Hinder Efforts To Mitigate Cuban Oil Spills?

Posted by Clif Burns at 7:38 pm on October 19, 2011

Offshore Oil Platform The Senate Energy and Natural Resources Committee held a hearing yesterday, reported here by the Oil & Gas Journal, on the possible impact of exploratory oil drilling by non-U.S. companies in Cuban territorial waters in the Gulf of Mexico. Michael R. Bromwich, Director of the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) tried to assure the Committee that U.S. companies could respond quickly to an oil spill in Cuban waters notwithstanding the U.S. embargo on Cuba.

He said that the US Departments of Commerce and the Treasury have a long-standing practice of providing licenses to address environmental challenges in Cuban waters, and that DOCâ€™s Bureau of Industry and Security has issued a number of them for booms, skimmers, dispersants, pumps, and other equipment and supplies to minimize environmental damage from a spill. â€œI believe the Commerce and Treasury departments would move quickly to approve more licenses if needed,â€ he said.

Not all witnesses before the Committee shared Bromwich’s rosy view of our ability to respond to a Cuban spill:

Paul A. Schuler, president of Clean Caribbean & Americas, an international spill response cooperative operating in the region, said only three US companies have such licenses that must be renewed every 1-2 years. â€œIt needs to be handled in advance, and not as an ad hoc action as part of a response to an oil spill,â€ Schuler said. â€œOthers would have to go through the entire licensing process, and my experience has been that it has not been quick.â€

I suspect that exporters with experience obtaining licenses from BIS and OFAC might also share Schuler’s scepticism about whether the agencies could move quickly on licenses by U.S. companies to provide clean-up services in Cuban waters (which would require an OFAC license) and export equipment to be used in that clean-up effort (which would require a BIS license).

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Oct

17

Nice Work If You Can Get It

Posted by Clif Burns at 7:35 pm on October 17, 2011

Category: Arms Export • Criminal Penalties

eBay If you are annoyed by co-workers who spend the day on eBay and still get paid, you may be even more annoyed to find out that the U.S. government actually pays federal agents on purpose to hang out on eBay and look for export violators. James Pendzich, who had only a junior college degree and no prior criminal history, was targeted by federal agents because his eBay page offered “worldwide” shipment of body armor. The ICE agents then set up a sting and had Pendzich ship protective inserts to undercover agents in Colombia.

Pendzich, of course, had little choice but to plead guilty to one count of violating the Arms Export Control Act (“AECA”). An article that appeared last week in the Knoxville News reported on the sentencing hearing at which the judge gave Pendzich a 46-month sentence for the illegal exports.

The applicable federal sentencing guideline for an AECA violation allows the judge to take into account national security considerations in determining the appropriate sentence. The defense argued that since the plates were shipped to federal agents there had been no adverse impact on national security. The prosecution reached deep into its bag of hypotheticals and argued:

Although not intended by the defendant, had he been successful, the bulletproof vests and body armor he attempted to export could possibly have ended up in the hands of narco-terrorists.

And if the plates had been made of highly-enriched uranium the narcos could have built and exploded a nuclear bomb. Unfortunately for Pendzich, the sentencing judge bought this coulda-shoulda-woulda line of argumentation and threw the book at him.

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Oct

13

Criminal Export Charges Settled with $1.25M Fine and 10-Year Denial Order

Posted by Clif Burns at 7:55 pm on October 13, 2011

Category: BIS • China

Iran Laptop New-York based electronics wholesaler Earlier this year we reported on an indictment against New-York based electronics wholesaler Sunrise Technologies and Trading Company (â€œST&TCâ€) and its president Jeng â€œJayâ€ Shih for exporting laptops to Iran by transshipping them through the UAE. Last Friday, the Department of Justice, along with officials of the Bureau of Industry and Security (“BIS”) and the Office of Foreign Assets Control (“OFAC”) announced that Shih and his company pleaded guilty to the export charges in exchange for an agreement to pay a $1.25 million criminal fine and to consent to a suspended 10-year export denial order. No jail time is contemplated by the plea agreement.

The suspended export denial order is contained in the BIS settlement documents. The suspension is conditioned on the defendants complying with the plea agreement, i.e., paying the $1.25 million fine, and on the defendants not committing any export violations during the 10-year period of the suspended denial order.

Although the judge could theoretically impose jail time during sentencing scheduled for January 13, 2012, that seems unlikely. The absence of jail time and the suspended denial order are unusual in cases like this. I can only speculate that the relative leniency of the penalty, particularly the absence of jail time, is due to a deficiency in the government’s case which I pointed out in my initial posting on the indictment. Although the government had evidence that Shih knew that the computers that he was shipping to the UAE were ultimately destined for Iran, he also said in conversations with the government’s informant that he believed his actions were legal because he was only exporting the items to the UAE. A criminal export violation requires knowledge by the defendant that his actions are illegal and it appears that was going to be difficult to prove here.

Obviously this is only speculation on my part and there may have been other factors involved in the lenient treatment of Mr. Shih and his company. Still, my speculation seems pretty reasonable in this case.

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Oct

11

General License To Be Issued by OFAC for Food Exports to Iran and Sudan

Posted by Clif Burns at 8:52 pm on October 11, 2011

Category: Iran Sanctions • OFAC

Food A Federal Register notice is scheduled to be published tomorrow in which the Office of Foreign Assets Control (“OFAC”) announces the issuance of a general license for the export of food to Iran and Sudan. Previously, although the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) authorized the export of agricultural products, medicine and medical devices to Iran and Sudan, those exports required specific one-year licenses from OFAC. The general license does not cover sales to military or law enforcement purchasers.

The general license specifically covers “food” which is a subset of agricultural products. The new rules will define food as

items that are intended to be consumed by and provide nutrition to humans or animals … ,
including vitamins and minerals, food additives and supplements, and bottled drinking water, and seeds that germinate into items that are intended to be consumed by and provide nutrition to humans or animals.

Items that are agricultural products but not food will still require licenses.

The rules make some specific exceptions to the definition of food, including, not surprisingly, castor beans. Thriller enthusiasts and news junkies will understand this exception: castor beans are used to manufacture the highly powerful poison ricin (although Iran can easily grow castor beans or import them from other countries other than the United States.) Also excluded are Rosary/Jequirity peas, the source of ricin’s more potent cousin abrin, which although more powerful than ricin is not known, according to the CDC, to have been weaponized or used in terrorist attacks.

My favorite part of the new rule is the exclusion of alcoholic beverages from the general license for Iran. I have not figured out whether this exclusion is made from ignorance, Puritanism or a desire by OFAC to enforce Islamic law. It should probably come as no surprise to anyone with even a passing acquaintance with Iran or Islam that alcoholic beverages are illegal in Iran and that people trying to import them into Iran are subject to being shot or sentenced to prison.

UPDATE: This post has been updated to correct a mistake I made in reading the new rule which does in fact permit export under general license of food to the Government of Iran and to purchasers outside Iran for export to Iran. My apologies for any confusion.

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