Author Archive


Jan

10

More Tiers Are Shed Over Answered Prayers


Posted by at 7:14 pm on January 10, 2011
Category: BISExport Control Proposals

Kevin Wolf
ABOVE: Kevin Wolf


Today’s edition of the Washington Tariff & Trade Letter has an article (paid subscription required) quoting Kevin Wolf at the Bureau of Industry and Security as to the impact that foreign availability will have on the classification of dual use items in the export reform process.

“To be clear, availability will not be the determining factor in any particular decision,” he said. Rather, “it will be factored in as part of the government’s ultimate decision about how to tier items.”

Even though foreign availability will be one factor in the decision as to what tier the item would classified in, Wolf stressed that the ultimate decision would not overturn existing statutory and multilateral control obligations:

The only caveat to this, again, to the extent not otherwise inconsistent with existing statutory obligations or multilateral obligations, that’s a standing rule in this entire effort. We’re not trying to undo or unwind existing multilateral obligations or statutory obligations

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Copyright © 2011 Clif Burns. All Rights Reserved.
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Jan

6

Sixth Circuit Dismisses Professor Roth’s Appeal


Posted by at 8:45 pm on January 6, 2011
Category: Arms ExportCriminal Penalties

Professor John Roth
ABOVE: Professor Reece Roth


On Wednesday, January 5, the Sixth Circuit dismissed the appeal of Professor J. Reece Roth, a professor emeritus at the University of Tennessee who had been convicted of violating the Arms Export Control Act (“AECA”). The conviction was based on, among other things, Professor Roth permitting access by a foreign graduate student to technical data relating to an Air Force military drone project.

Professor Roth argued in his appeal that the technical data was not export-controlled under the International Traffic in Arms Regulations because the next phase of the project involved testing his research on commercial aircraft. The Sixth Circuit dismissed this by noting that the project ultimately contemplated a military application of the research.

In reaching this result, the Sixth Circuit cited the Seventh Circuit’s decision in United States v. Pulungan, 569 F.3d 326, 328 (7th Cir. 2009). That decision held that although the AECA banned judicial review of a decision to place a category of items on the United States Munitions List {“USML”), it did not prohibit judicial review of the question as to whether a particular item fell within a category of items designated by the USML.

In addition, Roth argued that the lower court’s jury instruction on the “wilfulness” standard required for a conviction under the AECA was incorrect. According to Roth, the court should have given the jury an instruction that he could only be convicted if he was aware that the controlled technology was on the USML. The Sixth Circuit rejected this contention and held that the lower court properly instructed the jury that Roth could be convicted simply if he was aware that his conduct was unlawful. Although the Eight Circuit in United States v. Gregg, 829 F.2d 1430, 1437 & n.14 (8th Cir. 1987) appeared to hold that the defendant needed to be aware that the exported item was on the USML, the Sixth Circuit followed the looser rules of the First, Second, Third and Fourth Circuits which only require that the defendant knew that the export was unlawful.

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Copyright © 2011 Clif Burns. All Rights Reserved.
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Jan

5

Census Blog Miffs Export Rules


Posted by at 5:15 pm on January 5, 2011
Category: DDTCITAR

Census Jobs AvailableThis may look like U.S. Government blog week on ExportLawBlog, but it’s purely a coincidence. Yesterday we highlighted the Treasury blog and today the subject is the U.S. Census blog with the somewhat enigmatic title of Global Reach. Because not much was popping in the Census world — something I imagine is more or less always the case — the industrious bloggers at Census thought that they would educate their readers about the mysteries of defense exports and the International Traffic in Arms Regulations with a post* titled “Understanding Basic Directorate of Defense Trade Controls (DDTC) License Requirements.”

As you continue to file shipments against your DDTC license, your license will become ‘decremented’ with each additional filing. This simply means that your license balance will decrease by the value of each accepted shipment. When the license balance is fully exhausted, an informational message will be sent stating:

176 DDTC LIC NOW EXHAUSTED:

At this time, your company must apply for an amendment to add more value onto the license or apply for a new license.

Um, no. There is so much wrong with the statement quoted above, it’s hard to know where to start. But I’ll start with the statement that decrementing means decreasing the balance by the “value” of each accepted shipment. Decrementing reduces the remaining quantity and the remaining value, not just the remaining value. If you are entitled to export 5 widgets with a value of $50 and you export 5 with a value of $35, the quantity on your license is decremented to zero and the license is kaput. You can’t export $15 more of widgets. You’re done.

Second, you can’t amend a license to increase quantity or value. Section 123.25(c) of the ITAR makes that perfectly clear as to increases in licensed quantities. You need a new license for the additional quantities. This notice posted on the DDTC website indicates that a new license is needed to add additional value to the license.

Here’s an idea: in the unlikely event that DDTC ever starts a blog, it should agree that it won’t post anything on the procedures for challenging population estimates if Census agrees not to post anything ever again on the ITAR.


*The original post disappeared from the Census blog a little while ago, apparently after Census received one or more emails pointing out the howler in the post. Of course, thanks to the miracle of the Google cache, nothing ever really dies on the Internet, and the link to the Census post above is a link to it in the Google cache. In case that ever disappears, here is a pdf version of the post for posterity.

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Jan

4

OFAC Uses Blog to Respond to NYT Critique


Posted by at 8:43 pm on January 4, 2011
Category: OFAC

Cupcake of Mass DestructionThe Treasury Department has a blog. Who knew? Well, if you look at it, you’ll understand the reason why no one knew. One reason might be today’s post reporting the exciting news that the tax filing season has just started. Or the recent post titled “Holiday Cheer in Kabul.” No, seriously. That’s the actual title. Apparently, Treasury doesn’t know that Afghanistan is a Muslim country and that Christmas isn’t celebrated there.

But the real reason for my bringing the Treasury blog, scintillatingly titled “Treasury Notes,” to your attention is that the newly-minted blog was used by Treasury’s Office of Foreign Assets Control (“OFAC”) to respond to the preposterous article recently published in the New York Times assailing OFAC for licensing exports of cake sprinkles and popcorn to Iran. The blog post from OFAC stated, quite correctly, that OFAC has no discretion under TSRA to refuse to license agricultural products, medicine and medical devices to Iran on the grounds that they aren’t humanitarian relief items.

Apparently, this post was also sent to the New York Times as a letter to the editor. Shockingly, the newspaper hasn’t gotten around to publishing it.

Of course, blog entries from OFAC would be particularly welcome if they were used to provide guidance to exporters in difficult and confusing areas. I scanned the few articles that have been posted so far and, sadly, did not see anything of that nature. If OFAC is only going to use the blog to respond to criticisms of the agency, well, I’m not going to bookmark it and neither should you. But the blog is in its relative infancy, so I will withhold judgment. And if I do discover any helpful posts from OFAC on it, you’ll hear about it here first.

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Copyright © 2011 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Dec

24

NYT Assails Export of Cupcake Sprinkles to Iran


Posted by at 6:12 am on December 24, 2010
Category: Iran Sanctions

Cupcake of Mass DestructionAt last, on Christmas Eve, a federal holiday, the New York Times finally releases its analysis of documents it received from the Office of Foreign Assets Control (“OFAC”) as a result of its Freedom of Information Act request relating to licenses granted for exports to sanctioned countries such as Iran. The result? The reporters throw themselves on the fainting couch because a company has exported cupcake sprinkles to Iran, presumably on the notion that this will enrich the Iranian government and aid its nuclear program. I suspect that this conclusion may have prompted the Times editors to publish the story on a federal holiday when five people besides myself will be reading the newspaper. It keeps the laughter down.

The principal problem with Jo Becker’s story is her complete misunderstanding of the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”), legislation which permits a wide variety of exports to sanctioned countries. She seems to believe that the act restricts such exports to humanitarian aid and then uses that misconception to criticize OFAC for licensing the aforementioned cake sprinkles as well as — and this is not a joke — popcorn, hot sauce, chewing gum, cigarettes, food coloring and sugar.

The problem is that TSRA isn’t restricted to humanitarian aid. It permits the exports of agricultural commodities, medicine and medical devices without reference to whether the New York Times or Ms. Becker thinks the product is humanitarian aid. All of the aforementioned products seem to fit clearly within the definition of agricultural commodities. Even if food coloring might not, does Red Dye No. 2 have some role in uranium enrichment which nuclear scientists have so far missed?

I’ll be writing more about the article over the coming days. I still have Christmas shopping to finish. But two other things deserve immediate comment.

First, the article is oddly silent about the large volume of licensed exports to Cuba under TSRA. This, at a very minimum, suggests an odd ideological bent by Ms. Becker. The article argues that food sales to Iran indirectly benefit the government of Iran, an argument that has traditionally also been made to support the Cuba blockade. The new foreign policy adopted by the Times would appear to be “Castro good, mullahs bad.”

Second, a note at the end of the article states, without any apparent realization of the hypocrisy involved, that “Ron Nixon contributed reporting from Washington, and William Yong from Tehran.” Unless Mr. Yong works for free, lives under a bridge in Tehran, and subsists solely on air, the New York Times is doing business in Iran at the same time it is whipping up a tsunami of outrage about other companies doing business there.

There is, however, one good side to the Times reporting. As part of the article, the Times includes a detailed summary of a number of the licenses granted and the reason they were granted. This information, which has heretofore been zealously guarded by OFAC, which prefers to operate under cover of darkness, will be of immense use to export compliance officers and lawyers because they reveal a number of broader rationales that the agency has used to grant non-TSRA licenses.

FULL DISCLOSURE: Both my law firm and I have represented companies named in the story and have obtained licenses permitting those companies to export items to Iran under TSRA.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)