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Feb

22

OFAC Protects US From Sarasota-Havana Regatta For Another Year

Posted by Clif Burns at 5:41 pm on February 22, 2011

Sarasota-Havana Regatta File this under the category of all the ways that OFAC helps me sleep better at night. The Sarasota Yacht Club, which was probably founded by Che Guevara, cooked up a scheme to threaten U.S. national security by having a bunch of wealthy yacht owners sail some boats in May to Cuba, something that had wisely not been permitted since 1994. As proof of their devious intentions, the yacht club asked the Office of Foreign Assets Control for permission to conduct this revolutionary regatta. Well, you will be pleased to know that OFAC bravely acted on this request by sitting on it until the deadline for organizing the regatta expired. You can breathe that sigh of relief now.

The club had signed up 184 boats and had hoped that the regatta would provide a little boost to the Sarasota economy. Now they’re going to Miami instead.

Interestingly the previously-linked article on OFAC’s refusal to permit the regatta to proceed, made no mention of any request by the boat owners to get approval from the Bureau of Industry and Security (“BIS”) for the exports of the 184 boats to Cuba. (Sailing a U.S. vessel into Cuban waters, even if only temporarily, is considered an export of that boat to Cuba.) OFAC licenses travel to Cuba and BIS licenses exports of U.S. goods to Cuba. As this blog reported a few years back, BIS fined one boat owner for exporting his boat to Cuba in connection with the ill-fated Conch Republic Regatta from Key West to Havana. So not only did OFAC’s inaction protect the U.S. from the Cuban threat to our national security, but also it may have protected boat owners who thought they could blithely sale to Cuba just because OFAC had said so, if it had in fact said so.

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Feb

16

Proposed Legislation Seeks To Strengthen Iran Sanctions

Posted by Clif Burns at 9:36 pm on February 16, 2011

Category: Iran Sanctions

Mahmoud Ahmadinejad U.S. Senators Kirsten Gillibrand (D-NY) and Mark Kirk (R-IL), and U.S. Representatives Ted Deutch (D-FL) and Dan Burton (R-IN) today introduced the Iran Transparency and Accountability Act designed to strengthen U.S. unilateral sanctions against Iran. Although the text of the bill is not yet on Thomas, the bill is described by a press release from Senator Gillibrand.

The bill has two major provisions. First, the bill would require publicly-traded companies to report to the SEC any dealings that the companies have with Iran including, presumably, dealings that are licensed and permissible under existing rules and legislation such as trade in agricultural and informational products. Further, the bill would require the SEC to post these dealings on its website.

The second part of the bill would deal with an unresolved issue from the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (â€œCISADAâ€). Part of CISADA, which this blog reported on here, required the Office of Foreign Assets Control (“OFAC”) to promulgate regulations requiring U.S. financial institutions with foreign bank correspondent accounts to undertake one or more of four activities designed to determine whether the foreign banks are providing services to Iran in aid of its proliferation goals. These include audits and â€œdue diligenceâ€ on the foreign banks. No time limit was imposed by CISADA within which OFAC had to adopt these regulations, and there is no indication that has taken any steps at this point to adopt the required regulations. The proposed legislation would require audit rules to be promulgated within 90 days of enactment of the proposed law.

Needless to say, rules requiring U.S. banks to perform audits on its foreign correspondent banks to determine if they are dealing with Iranian banks will be costly and burdensome and could threaten U.S. trade with our allies and trading partners. Moreover, requiring these rules to be rushed through OFAC in 90 days or less is likely to lead to poorly thought-out rules which would exacerbate this negative impact on U.S. trade with countries other than Iran.

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Feb

15

OFAC Fines Bank for Facilitating Foreign Transaction with Iran

Posted by Clif Burns at 9:24 pm on February 15, 2011

Trans Pacific National Bank recently agreed pay $12,500 penalty to the Office of Foreign Assets Control (“OFAC”) to settle charges that it had facilitated transactions by a foreign person where the transactions by the foreign person would be prohibited if performed by a United States person. The facilitation consisted of initiating two wires for one of its account holder relating to a transaction between a foreign person and Iran. The foreign transaction itself did not violate U.S. law.

The recipient of the wire was not located in Iran. In fact, the only reference to Iran with respect to the wires were entries in the instructions that in one case referenced “Iran materials” and in the other referenced “Iranian materials.” The lesson to be learned here is that all parts of a wire must be screened for any reference, no matter how oblique, to a sanctioned country. In citing mitigating factors, OFAC noted that the bank had enhanced its screening procedures to require that the “memorandum information of each wire transfer also be reviewed for OFAC sanctions references.”

(I missed this latest round of OFAC civil penalties information on February 1 because OFAC has inexplicably stopped announcing the monthly release of civil penalty information on the “Recent Actions” page of its website. Concomitantly, OFAC appears to have stopped sending email announcements of the release of this information, or at least I didn’t get that email this month.)

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Feb

14

More APO/FPO Export Confusion

Posted by Clif Burns at 9:34 pm on February 14, 2011

Category: AES • DDTC

APO Postmark If there is anything that qualifies as a true urban legend in the export areas, it’s the surprisingly widespread belief that shipments to overseas APO and FPO addresses aren’t exports. Of course, that’s no more true than the belief that the fate of a rider on an equestrian statute can be determined by the position of the horse’s hooves. (Not.)

The International Traffic in Arms Regulations (“ITAR”) aren’t uniformly clear in all aspects, but the definition of export is pretty clear in this respect. Section 120.17(a) defines export as “sending or taking a defense article out of the United States in any manner.” It doesn’t say “in any manner except by mail to an APO or FPO address.” And if you ask DDTC this question, they will tell you that an APO address outside the U.S. requires an export authorization by license or exemption like any other shipment that leaves the United States.

This urban legend is sufficiently widespread that even one government agency has propagated this bogus notion. And not just any agency but an agency itself intimately involved in dealing with exports — the U.S. Census Bureau — has said that APO and FPO shipments aren’t exports. As recently as December 22, 2010, Census said on its own blog, in a post that has now been flushed down the memory hole, that the “State Department does not license shipments to APO or FPO addresses.”

But we’ve heard from another exporter that it gets worse. According to that exporter, the mandatory Automated Export System does not allow you to enter an ITAR license number when shipping an item to an APO address. Part 523 of the USPS’s International Mail Manual says this:

Goods mailed to APO/FPO/DPO addresses are not subject to the Foreign Trade Regulations. Accordingly, customers are not required to file electronic export information via the U.S. Census Bureauâ€™s Automated Export System or AESDirect Web site for such mailings, and they do not need to present a Proof of Filing Citation, AES Downtime Citation, or Exemption and Exclusion Legend.

The same exporter says that DDTC is saying in such a case that the exporter must provide its own notification of the export to DDTC when it can’t be done through AES. Although this is a nice courtesy to DDTC, there is nothing in the ITAR that requires the exporter to provide this notice to ITAR in these cases.

But there’s a larger point here: if the government can’t figure out its own export regulations, why should it expect anyone else to figure them out?

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Feb

10

Oh Where, Oh Where, Has My CCL Gone?

Posted by Clif Burns at 9:23 pm on February 10, 2011

Category: BIS • CCL

Waah Let’s say that you were an agency like the Bureau of Industry and Security (“BIS”) and you had a huge and complex list of sensitive items that needed a license for export. Now, unless your administrative goal was to collect a bunch of fines for illegal exports, you would make that list easily and readily available, wouldn’t you? You would think.

But sometime in the past several days our friends at BIS removed the old Commerce Control List (“CCL”) that was linked on their site, and replaced it with a new one that is, kindly put, an unusable mess. Imagine the CCL as one big file with all the ECCN’s smushed together with no index, no table of contents, no links, no page numbers, no bookmarks, nothing but a gigantic run-on webpage. Well, you don’t have to imagine. Click here and behold the new format of the CCL on the BIS website

One mortified exporter, who was kind enough to bring this mess to my attention called BIS, imagining that this was just some temporary mistake that would soon be fixed. The exporter spoke with a BIS Export Counselor who explained that the new format was here to stay. He also conceded that the new format was less easy to use for people trying to classify items. Oh, great.

However, all is not lost. You can find the CCL in its original online format here at Export Law Blog by clicking on the link to the EAR in the right column or clicking here. We can’t guarantee how long the GPO will keep this version of the EAR up-to-date, but for the moment you can still consult the CCL in the format you’ve come to know and love. You can also, for a paltry $191, buy the 2010 dead tree edition from GPO here. Having a hard copy of the entire EAR in your office is sure to impress your friends who probably have no idea just exactly how large it is.

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