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Dec

5

So Who’s Your Pirate Now?

Posted by Clif Burns at 3:11 pm on December 5, 2008

Pirate Want A Cracker? Private security company Blackwater is, apparently, pitching itself to shipping companies as their solution to all their pirate problems. They’ve even got a 183-foot ship that can carry two helicopters and a shipload, so to speak, of rigid-hull inflatable boats. The ship can carry 30 pirate hunters in addition to its crew of 15. No word yet of any takers.

Of course, Blackwater’s proposal may look better on parchment than it does in practice. This being a blog about export law, I can’t resist wondering initially if Blackwater needs any approval from the Directorate of Defense Trade Controls (“DDTC”) before it sets off on the high seas. Certainly it will need licenses from DDTC for any weapons being taken on the boat, except for non-automatic firearms exempted by section 123.17 of the International Traffic in Arms Regulations (“ITAR”). (I tend to doubt, however, that non-automatic firearms are much use in pirate-hunting). I also don’t think that a Technical Assistance Agreement with Blackwater’s foreign clients will need to be approved by DDTC, since Blackwater won’t be performing a defense service for it’s clients as that is defined by section 120.9 of the ITAR — namely, providing assistance in the design, maintenance and use of defense articles or the provision of military training.

But dealing with the DDTC seems to be the least of Blackwater’s worries here. Rather it seems that well-established principles of international law may result in Blackwater getting all dressed up and having no place to go. Worse yet, if Blackwater takes any actions against suspect pirates, that may well constitute itself an act of piracy and subject Blackwater’s employees and their craft to seizure on the high seas by foreign, or even U.S., military forces.

Articles 100 through 107 of the U.N. Convention on the Law of the Sea (“UNCLOS”) cover piracy. Most significantly, Article 107 would prevent Blackwater’s ship or its crew from seizing any suspected pirate craft as that right is reserved under that article to “warships and military aircraft,” i.e. vessels and aircraft under the control of the military service of a State. And if the Blackwater ship fired upon or attempted to board a suspected pirate craft that would likely constitute and act of piracy as defined by Article 101 of UNCLOS. That article defines “piracy” as

any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed … on the high seas, against another ship or aircraft, or against persons or property on board such ship or aircraft.

Of course, once Blackwater’s attack on the other craft becomes an act of piracy, then, under Article 105 of UNCLOS, any State that is a member of UNCLOS can seize Blackwater’s ship and its crew and punish the crew under its own laws. Although the United States has not ratified UNCLOS it is still a party to the 1958 U.N. Convention on the High Seas which has virtually identical provisions governing piracy and which would permit the United States as well to seize Blackwater’s vessel and crew if Blackwater fired upon a suspected pirate craft.

Blackwater is free, however, to open fire on any pirate craft that fire on or try to hijack Blackwater’s ship under customary principles of international law that permit reasonable and proportionate acts of self-defense. But who is going to pay Blackwater to go put a ship in the Gulf of Aden that can only fire at the pirates when they try to hijack Blackwater’s ship and must sit and watch when the pirates go after its client’s ship? Perhaps the Blackwater ship could accompany its client’s ship and fire on a pirate vessel that attacked the client ship as an extension of the client ship’s right of self-defense, but the legality of that would be clearer if Blackwater employees were on the attacked vessel rather than on Blackwater’s own ship.

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Dec

4

BIS Clarifies Aircraft Part Rules

Posted by Clif Burns at 10:03 pm on December 4, 2008

Category: BIS • DDTC

Fish Story The saga over conflicts between the Department of State and the Department of Commerce regarding which agency has jurisdiction over exports of aircraft parts continues with the latest Final Rule issued by the Commerce’s Bureau of Industry and Security. The new rule amends section 770.2(i) of the Export Administration Regulations (“EAR”), which had otherwise been known as “Interpretation 9” and which purported to describe, among other things, which aircraft parts and components were subject to regulation by the State Department and which were subject to regulation by the Commerce Department. The jurisdictional issue is concerned in particular with aircraft parts that can be used on both civil and military aircraft.

The new rule is prefaced with a detailed discussion of the Note that the State Department’s Directorate of Defense Trade Controls (“DDTC”) added in August of 2008 to Category VIII(h) of the United States Munitions List (“USML”) in which it tried to clarify this jurisdictional conundrum. The touchstone for the Note was section 17(c) of the Export Administration Act which provided that “standard equipment certified by the Federal Aviation Administration (FAA), in civil aircraft and is an integral part of such aircraft, and which is to be exported to a country other than a controlled country, shall be subject to export controls exclusively under” the Export Administration Act.

Under the Note, which is not necessarily consistent with section 17(c), DDTC states that parts that are “exclusively” designed for civil aircraft are covered by the EAR. Parts designed for military aircraft would be covered by the USML. Parts that can be used on both civilian and military aircraft are subject to the EAR if they meet the standards of 17(c). In the case of aircraft parts that are designated Significant Military Equipment but could be used on both civil and military aircraft, an exporter would be required to file a commodity jurisdiction request before availing itself of the benefits of section 17(c).

The new rule adopted by BIS attempts to bring Interpretation 9 and the Note to Category VIII(h) of the USML into harmony. The prior version of Interpretation 9 asserted jurisdiction over:

Parts, accessories and components (including propellers), designed exclusively for aircraft and engines described in paragraphs (i)(1), (i)(2), (i)(3) and (i)(4) of this section.

The aircraft described in those referenced sections are civil aircraft.

The new version of Interpretation 9 asserts jurisdiction over the following aircraft parts:

Any aircraft tires as well as any components, parts, accessories, attachments and associated equipment that are not specifically designed or modified for aircraft on the Munitions List and all components and parts not on the Munitions List by virtue of the criteria set forth in the note to Category VIII(h) of 22 CFR part 121.

Clearly the intent is to broaden EAR jurisdiction from parts “exclusively” designed for civil aircraft to parts “not specifically designed” for military aircraft, a subtle but important difference that brings Interpretation 9 into line with the Note to Category VIII(h) of the USML. But what’s up with the new reference to tires?

The language of Interpretation 9 could be read to commit all tires to EAR jurisdiction or only tires “not specifically designed” for military aircraft. There doesn’t seem any reason for the regulation to call out tires and then exclude tires “specifically designed” for military aircraft. The regulation could accomplish the same thing by excluding from the EAR all parts “specifically designed” for military aircraft. But one also has to wonder why tires were singled out for special treatment.

UPDATE: As Tom deButts pointed out in a comment left on another post, USML Category VIII(h) specifically excludes tires and propellers used with reciprocating engines even if they are specifically designed for military aircraft and can’t be used on civilian aircraft, something I should have noticed. The revised Interpretation 9 appears to reflect that although I still maintain it could have been more carefully worded.

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Dec

2

What Was Your First Clue That Naftiran Might Be Iranian?

Posted by Clif Burns at 9:52 pm on December 2, 2008

Category: Iran Sanctions

ABOVE: Mansoor Rad
Finance Director
Naftiran

Just before Thanksgiving, the Office of Foreign Asset Controls (“OFAC”) designated a Swiss corporation and a U.K. corporation as entities controlled by the Government of Iran. The two companies involved were Naftiran Intertrade Co. (NICO) SARL, located in Pully, Switzerland, and Naftiran Intertrade Company Ltd., located in Jersey, Channel Islands. Both are subsidiaries of Naftiran Intertrade Company, which in turn is a subsidiary of the National Iranian Oil Company, an agency of Iran’s Ministry of Petroleum.

Of course, the Iranian Transaction Regulations prohibit transactions with any entity owned by the Government of Iran, wherever located and whether or not the entity has been specifically identified by OFAC as owned by the Government of Iran. A non-exhaustive list of such entities is contained in Appendix A to the Iranian Transaction Regulations which, prior to these two latest additions, contained only financial institutions. The appendix is described by OFAC as a “tool to assist … in complying” with the regulations. Thus, the addition of the Naftiran subsidiaries to that appendix does not have any substantive effect.

Because Appendix A is not exhaustive, it’s not in fact a particularly useful compliance tool. Failing to find a company on the list doesn’t mean that it isn’t owned by the Iranian Government. Nor does the addition of these two companies to the appendix provide any information that is otherwise difficult to obtain. The first result of a Google search on the term “Naftiran” is a website that readily shows the connection of Naftiran Intertrade to the Government of Iran.

Instead one has to suspect that this latest order is simply a part of the ongoing public relations campaign of the U.S. government against Iran. The designation — and this post — should serve as a reminder, however, that Google is an exporter’s best friend. No exporter should ever deal with a foreign company otherwise unknown to it without conducting due diligence on the Company. Part of that due diligence is a Google (or other Internet) search which would have, in the case of Naftiran, revealed the Iranian connection, even without OFAC’s latest order.

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Dec

1

You Shoulda Seen the One That Got Away

Posted by Clif Burns at 8:21 pm on December 1, 2008

Category: DDTC

Fish Story Regular readers of this blog know that an occasional feature is highlighting press releases by companies that have received their registration number from the Directorate of Defense Trade Controls (“DDTC”) and that can’t resist engaging in, shall we say, a little creative elaboration on the significance of registration. Hey, we’ve spent all that money on the registration fee, we ought to get something from it, right?

The latest installment in this feature comes from EPE Corporation, which issued this press release:

EPE Corporation, an EMS provider, announced that they have received their official International Traffic in Arms Regulations (ITAR) registration from the US Department of State, Bureau of Political-Military Affairs. … Companies receiving this certification demonstrate that they have knowledge and understanding to fully comply with the AECE and ITAR as well as having corporate procedures and controls in place to ensure compliance.

Has DDTC started administering a test for potential registrants? When is the next one being held?

But wait, there’s more:

To EPE, ITAR registration represents our ongoing commitment to supporting the continued success of our homeland security and defense customers by providing the most secure environment possible.

Why stop there? Why not go the whole nine yards and claim that registration permits the company to give a free pony to each of its customers?

All kidding aside, registration is required for all manufacturers and exporters of defense articles, but obtaining that registration does not represent any endorsement by DDTC that the registrant meets any standard other than the ability to fill out a short form and send it in with the required fees. At most, registration proves that the registrant was aware of the registration requirement. I suppose one might say that this elevates the registrant a little bit above those companies that aren’t even aware of that requirement, but it’s a far cry from demonstrating that the company has “corporate procedures and controls in place to ensure compliance.”

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Nov

25

BIS Proposes Ending De Minimis Exception for Avionics

Posted by Clif Burns at 9:34 pm on November 25, 2008

Category: General

ABOVE:A380 Cockpit

The Bureau of Industry and Security (“BIS”) has asked for comment on a proposal to eliminate the de minimis rule, in certain instances, with respect to products classified under Category 7A of the Commerce Control List and controlled for missile technology (“MT”) reasons. The de minimis rule permits re-exports of foreign manufactured goods containing U.S. origin components when those components constitute only de minimis content, as defined by the rule, of the final product.

The concern which has prompted the proposed limitation is that the avionics and navigational items controlled by Category 7A for MT reasons might be diverted by foreign governments and be used for missile proliferation. The proposed rule excepts U.S.-origin components incorporated into “standard equipment in FAA (or national equivalent) certified civilian transport aircraft.” The reason for this exception is that in that case there is less likelihood of diversion because, in large part, it seems unlikely that foreign companies or governments would buy civilian aircraft simply to strip out the navigation and avionics in order to incorporate such items into a national missile program. In the case of aircraft components, however, the likelihood of diversion into missile programs is thought to be higher.

The proposed exception is not clearly explained by BIS, but I think it would work like this. If a U.S.-origin Category 7A item controlled for MT reasons is exported to be incorporated in an aircraft component, that component can’t then be re-exported to a third country even if it is to incorporated as standard equipment in an FAA-certified aircraft. However, if the U.S.-origin component is incorporated into the aircraft component and that component is incorporated as standard equipment in an FAA-certified civilian aircraft in the same country, then the de minimis rule would apply to exports of the aircraft.

Comments are requested on what impact this would have on, among other things, the decision by foreign manufacturers to use U.S. components and estimates of U.S. jobs that might be affected by the rule. The deadline for comments, which can be filed by email at [email protected], is January 20, 2009.

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