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May

23

Toilet Training


Posted by at 4:12 pm on May 23, 2007
Category: DDTC

Zodiac's Evac 90 Military ToiletWhat do missiles and toilets have in common? Both are on the United States Munitions List.

Zodiac Group apparently learned this the hard way. Zodiac, best known for its inflatable water craft, also makes toilets for boats and airplanes. According to this article in Defense News, Zodiac told the European Institute’s Transatlantic Roundtable on Defense and Security yesterday that it found out that a toilet might be on the USML when it tried to export toilets for use on military aircraft.

Now before we all get out our pitchforks and storm DDTC, let’s look at the situation a little more closely. The item apparently in question is the rather descriptively named Evac 90 Kandre. That product can be found here on the company’s website, which describes the toilet as follows:

Evac 90 Kandre, with shock and vibration proof design, has been developed for navy/military use. It is equipped with proven fully pneumatic Evac 900 mechanism with flush memory and vacuum sensor technology. For spare parts Evac grants a lifetime support. Evac 90, Kandre, has passed the MIL-SPEC 901D (Navy) Grade B, Class 1, Type A shock test.

Not even a close question here. That stainless steel “shock-proof” baby needs a license, and Zodiac shouldn’t have been surprised that it did.

UPDATE: A reader sends in an image of another toilet that is on the USML:

ITAR toilet
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Copyright © 2007 Clif Burns. All Rights Reserved.
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May

22

NASA Reveals Purported Solution to Its ITAR Problems


Posted by at 4:02 pm on May 22, 2007
Category: DDTC

Automated Transfer Vehicle Arrives at International Space StationThe “Jules Verne,” the automated transfer vehicle (“ATV”) being designed by NASA and the European Space Administration (“ESA”) to ferry supplies to the International Space Station is, by definition, a defense article covered by Category XV of the United States Munitions List (“USML”). As such, technical assistance agreements must be in place for each transfer of technical data on the ATV from U.S. contractors to their European counterparts.

NASA has long complained about these requirements in relation to the International Space Station. In December 2006, NASA requested relief from ITAR requirements for transfers of technical data relating to the International Space Station but this request has not yet been acted on by State. The final report by the International Space Station Independent Safety Task Force, released in February of this year, concluded that these requirements jeopardize the safety of the International Space Station.

At the Washington Space Business Roundtable last week, William Gerstenmaier, NASA’s associate administrator for space operations, revealed what NASA believed to be a “feasible workaround” if the State Department fails to act on NASA’s request. According to Gerstenmaier:

We are actually training civil servants as a workaround. It’s not truly training unique civil servants, but we are utilizing civil servants more than we would have … if we had some of these restrictions removed.

According to Gerstenmaier, civil servants could, under existing rules, interact more freely with their non-U.S. counterparts.

It’s difficult to understand Gerstenmaier’s position here. There is no exemption for civil servants to export technical data. Perhaps what he means is that the private contractors, aware of the restrictions, will refuse to share information with the Europeans whereas a government employee will either be unaware of the restrictions or will believe that the “I was just following orders” defense will shield him or her from liability for export violations. I’m not so sure I would call that a feasible workaround.

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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

May

21

OFAC Withdraws Cuba Penalty Imposed on Church Group


Posted by at 5:09 pm on May 21, 2007
Category: Cuba SanctionsOFAC

Cuban Travel PosterA while back we reported on a fine that OFAC imposed on the Alliance of Baptists, a church group which obtained a license for its member churches to travel in Cuba. Some of the member churches had apparently engaged in tourist activities such as visiting museums and other tourist attractions. Licenses for missionary activity in Cuba require that the missionaries devote their entire time in Cuba to a religious program and forbid groups from engaging in any tourist activities while in Cuba.

According to this article from Associated Baptist Press, OFAC withdrew the penalty on May 17, finding that none of the trips in question involved any improper tourist activities. This finding was allegedly premised on a submission that the group made to OFAC which can be found here. That submission, however, seems to be a fairly direct confession that the groups did, in fact, devote time to tourism, making OFAC’s actions here a bit hard to understand without assuming that the decision was based more on politics than policy.

The problem for the Alliance of Baptists started when it submitted to OFAC in June 2005 an itinerary for a March 2005 trip to Cuba. After analyzing that itinerary, OFAC suspended the Alliance’s travel license and stated the following in the Notice of License Suspension:

The itinerary included approximately four hours of religious activities each day, on average. The rest of the time was filled with walking and driving tours, sightseeing and beach time in Varadero, and visits to farms, museums and craft markets.

The Alliance response to OFAC’s subsequent decision to fine the Alliance $34,000 included a number of affidavits from people who were on the trips to Cuba using the Alliance license. In each instance, the affidavits admitted tourist activity occurred but tried to put a religious gloss on those activities.

An affidavit from a member of the Baptist Church of the Covenant in Birmingham, Alabama, admitted that its group took a driving tour of Havana, claiming to be to sick to engage in the religious activities that had been scheduled for the group. The affidavit of the pastor of the First Baptist Church of Washington, D.C., admitted that the group toured Old Havana but claimed that this was part of its “partnership” with a Cuban church. A member of another church admitted in his affidavit that his group, among other things, engaged in a nature hike in a national park, took a tour of the city of Santa Clara, attended the ceremonial closing of a harbor, and spent a morning touring Old Havana. These were all claimed to be religious activities because they were done together with members of Cuban churches.

Regular readers know that I think that OFAC has better things to do than to pore over the itineraries of Baptists in Cuba to make sure that they don’t have any fun while there. But, 31 C.F.R. 555.516 explicitly requires that licensed religious travelers be engaged “in a full-time program of religious activities” while in Cuba. Normal tourist activities can’t be turned into religious activities simply by enlisting a Cuban church member as a tour guide. Without some clarification from OFAC, it certainly looks like its about-face on its proposed penalty had little to do with the merits of the case.

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Copyright © 2007 Clif Burns. All Rights Reserved.
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May

17

OFAC Designates Mexican Day Care Center as a Narcotics Kingpin


Posted by at 9:11 pm on May 17, 2007
Category: OFAC

Not a Picture of Estancia Infantil Niño FelizOn its website today, OFAC designated the Estancia Infantil Niño Feliz (aka “Happy Baby Day Care Center”) in Culiacan, Mexico, as a narcotics playpen kingpin. Undercover agents reported hearing a discussion between two four-year-olds planning to ship 200 kilos of cocaine into the United States.

Actually, the Day Care Center is alleged to be, according to a DEA press release, a front company for Ismael Zambada Garcia, a fugitive from justice designated as a narcotics kingpin (“SDNTK”) in 2002. Needless to say, a day care center seems ill-suited to the demands of a narcotics front company. How exactly would Happy Baby Day Care center explain making ginormous deposits at the local branch of Banamex? But let’s take the DEA and OFAC at their word on this.

The important take-away here is that no assumptions can be made about whether a company is likely to be on the SDN list. If a kindergarten can be an SDNTK, so can a ballet troupe and a provincial petting zoo. Even if you had googled Happy Baby Day Care or, more precisely, Estancia Infantil Niño Feliz, you would have discovered that, in at least one sense, the pre-school is the real deal. The site for the Mexican state of Sinaloa actually lists Happy Baby Day Care as one of the preschools in Culiacan. So, check the list, no matter how innocuous or legitimate the customer seems.

(Note: the picture illustrating this post is not a picture of the Estancia Infantil Niño Feliz in Culiacan)

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May

16

The Boycotts from Brazil


Posted by at 8:04 pm on May 16, 2007
Category: Anti-BoycottBIS

Cooper IndustriesA press release from the Bureau of Industry and Security (“BIS”) this afternoon announced that Cooper Tools Industrial Ltda., a wholly-owned Brazilian subsidiary of Houston-based Cooper Industries, agreed to pay $27,000 to settle anti-boycott violations that had been voluntarily disclosed to BIS. Between June and July of 2004 the Brazilian subsidiary responded to requests for prohibited information about its business relationships with Israel to buyers located in Kuwait and the UAE.

Once again we have an example of a company winding up in the soup because of non-compliance by one of its foreign subsidiaries. It is easy to forget the broad scope of the anti-boycott regulations in Part 760 of the EAR. Section 760.2(d) prohibits “U.S. Persons” from providing information about its relationship with a boycotted country. A “U.S. Person” is defined in Section 760.1(b)(1)(v) as including foreign subsidiaries that are “controlled in fact” by a U.S. company. Section 760.1(c)(2) makes clear that, not surprisingly, a wholly-owned subsidiary will be presumed to be “controlled in fact.”

Violations by foreign subsidiaries can easily occur without anyone really understanding that a violation has occurred. Cooper’s Brazilian subsidiary no doubt understood itself as subject to Brazilian law and not to U.S. law. So it behooves companies, in my view, to spend the extra bucks to send their foreign employees to export compliance training. And, of course, plenty of lawyers are more than happy to fly down to Rio to do the training there.

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Copyright © 2007 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)