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Dec

23

How the OFAC Stole Christmas

Posted by Clif Burns at 12:11 pm on December 23, 2010

Category: General

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. Â§ 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. Â§ 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow Fidel Castro’s regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children.

Congressional leaders did not return our calls.

This post is an annual tradition and appeared previously in 2007, 2008 and 2009 in slightly altered form. Export Law Blog would like to take the opportunity of this post to extend its best holiday wishes to all of its readers. Posting will be light between now and the end of the holidays.

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Dec

22

The Dandle Gets Spanked

Posted by Clif Burns at 2:00 pm on December 22, 2010

Category: Iran Sanctions

Dandle, to most of you, is a verb meaning to dance a small child up and down on one’s knee. Others, particularly regular readers of this blog, will recognize it as the surpassingly odd name of an Islamic Republic of Iran Shipping Lines (“IRISL”) cargo ship formerly known as Twelfth Ocean, which was rechristened the Dandle by the Iranians after the vessel was placed by the Office of Foreign Asset Controls (“OFAC”) on its Specially Designated Nationals and Blocked Persons List (“SDN List”).

The news media was all over yesterday’s announcement by OFAC of new sanctions against various entities in Iran, but it was baffled by, and largely ignored, a General License issued at the same time yesterday by OFAC with respect to the Dandle and its equally oddly named sister ship, the Decritive. The General License states:

effective December 21, 2010, all transactions are authorized related to the arrest, detention, and judicial sale of the MV Dandle (a.k.a. Twelfth Ocean, IMO No. 9209348), and the MV Decretive (a.k.a. Sixth Ocean, IMO No. 9349679), which were identified as blocked property on September 10,2008, under the names Twelfth Ocean and Sixth Ocean, respectively (the “Vessels”), pursuant to Executive Order 13382 of June 28,2005 (70 FR 38567, July 1,2005) (“E.O. 13382”). Such transactions include, but are not limited to, bidding on the purchase of the vessels; paying deposits; providing financing, insurance, or funding in connection with the purchase; and, in furtherance of the arrest, detention, and judicial sale of the Vessels, providing vessel management services; providing port agency services; purchasing of bunkers; repairing or modifying the Vessels for commercial use; providing crewing; and hiring surveyors to inspect the vessels.

With a little snooping around I learned from a Financial Times article (free registration required) that five IRISL ships have been arrested by creditors over loan disputes in Singapore, Hong Kong and Malta. And according to this screen grab from tracking site marinetraffic.com, the Dandle appears to be sitting in Malta at the moment. I can’t locate the Decretive.

Dandle Location

Without this General License, which expires on January 31, 2012, no U.S. person could participate in any judicial sale by the creditors of the arrested vessel due its being on the SDN list and blocked as a result. The General License also indicates that after the judicial sale the new owner may show evidence of its ownership of the vessel to have it unblocked. Why there is no license permitting participation of U.S. persons in the judicial sales of the other three vessels is, at least to me, completely unclear.

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Dec

20

Do As I Say Not As I Do

Posted by Clif Burns at 6:31 pm on December 20, 2010

Category: ITAR

ABOVE: NASA Computers Seized
by OIG

A report released earlier this month by the Office of Inspector General (“OIG”) criticized NASA’s efforts to control sensitive data when disposing of computers and other components of its IT systems. Significantly, the OIG found that computers from the Kennedy Space Center were being released to the public even though they still contained sensitive NASA data. One computer about to be sold to the public, pictured in the group to the right, still contained ITAR-controlled data relating to the Space Shuttle.

Of course, ITAR does not prohibit the release of ITAR-controlled data to U.S. persons in the United States. But it seems doubtful that NASA, which didn’t know this information was still on the computer, had procedures in place to assure that the computer was only transferred to a U.S. citizen or legal permanent resident inside the United States. It’s hard for the government to insist that private companies assure that ITAR-controlled technical data isn’t illegally exported when companies dispose of their own equipment when NASA doesn’t take steps to guarantee that the government won’t inadvertently export such data.

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Dec

16

A Defense That Won’t Fly

Posted by Clif Burns at 10:24 pm on December 16, 2010

Category: Arms Export • Criminal Penalties

F-5 Freedom Fighter Marc Knapp, a 36 year old California man, was arrested on charges that, among other things, he attempted to export a military surplus F-5 fighter jet and other export-controlled defense articles. to Iran. The recently unsealed criminal complaint alleges a number of interesting details including a new entry in the Futile Justifications Hall of Fame.

The complaint alleges that Knapp and an undercover agent discussed in great detail the plans to export the F-5. The aircraft, which was stored at an airport in Van Nuys, California, would be flown to Delaware where it would be crated, then shipped to Hungary for transshipment to Iran. During these conversations, a remarkable interchange allegedly occurred:

UCA1 [the undercover agent] then informed KNAPP that Iran was trying to obtain F-4 and F-14 fighter jets and accompanying items, and that so long as KNAPP did not care about the end destination, they could make some money. KNAPP stated that he was able to “compartmentalize,” and that the United States would “shoot down” anything (referring to aircraft, etc.) provided to Iran.

In Knapp’s view, apparently, it was okay to sell fighter jets and other defense items to Iran as long as they were pieces of junk that the U.S. could easily shoot out of the sky. Calling this a futile justification probably involves stretching the meaning of justification beyond the breaking point.

As jaw dropping as Knapp’s “justification” was, the story gets worse. Knapp’s defense attorney has apparently decided that Knapp is his best resource on export law rather than, say, the International Traffic in Arms Regulations (“ITAR”) or the court cases involving the Arm Export Control Act set out in the Annotated United States Code. There is no other reasonable explanation than that for this:

The F-5 Tiger was sold as surplus years ago to a California man who rented it to movie studios. … Knapp’s lawyer â€¦ said it would have done the Iranians no good to buy it.

“If the plane were used against the U.S., it would likely be shot down in minutes or seconds,” he said.

I went back and checked the ITAR and was unable to find an exemption for ineffective defense articles.

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Dec

15

Proposed Category XII Reforms Leaked — But Not By WikiLeaks

Posted by Clif Burns at 11:10 pm on December 15, 2010

Category: DDTC • Export Reform

laser WikiLeaks has gotten the State Department so flustered that it is leaking its own documents. Today DDTC posted a working document discussing proposed changes to Category XII of the United States Munitions List (“USML”). The document had emblazoned on each page “For DTAG Discussion only, not for release outside of the DTAG.” Fortunately, there was no discussion of voluptuous Ukrainian nurses traveling with a certain flamboyant dictator. Instead, the only things of even remotely prurient interest in the document are things that would only cause the most hard-core export geeks to break a sweat.

Category XII(b) currently controls:

Lasers specifically designed, modified or configured for military application including those used in military communication devices, target designators and range finders, target detection systems, and directed energy weapons.

The DTAG working document would substantially narrow this category. Naturally the “specifically designed, modified or configured for military application” language would go the way of VHS recorders and CRT televisions. Instead three specific classes of lasers would be called out and placed in Tier 2:

a. (ITAR T2) Lasers designed exclusively for directed energy weapons.

b. (ITAR T2) Lasers for target designators containing standard or encoded designator pulse formats

c. (ITAR T2) Lasers specifically designed for infrared countermeasures.

Under this formulation, military communications lasers and target detection systems would not be controlled by the USML and directed energy weapon lasers would only be covered if the laser was exclusively designed for directed energy weapons. And since these lasers would be in Tier 2, these lasers would be exempt from license requirements to countries that are allies and strategic partners.

Even more interesting is the language relating to the proposed new controls on Gen3 night vision:

5. (ITART2) Gen3 image intensification tubes with a FOM of XXXX or more.

6. (ITAR T3) Gen 3 image intensification tubes with a FOM of XXXX or less.

You can spend all day looking for “FOM” in the current controls for night vision set forth in the USML, so it’s interesting to see this concept, long a mainstay of provisos for night vision export licenses, take a step out of the closet and take a bow. “FOM” stands for Figure of Merit which is a performance-based measure calculated from the number of line pairs per millimeter multiplied by the signal-to-noise ratio of the image intensifier tube. Although the FOM number is left blank in the draft, it is likely to around 1600 FOM. This will eliminate most controls on night vision with an FOM under 1600 by placing it in Tier 3 where licenses will only be required for the most sensitive destinations

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