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Jan

24

OFAC Fines ORC for Using Data from Libya

Posted by Clif Burns at 5:59 pm on January 24, 2007

Category: OFAC

Treasury on the Money OFAC has released its monthly civil penalty report for January. As usual, OFAC seems to be in competition with BIS to provide even less information about penalties imposed by the agency. Only two penalties are listed: one for “an individual” who traveled to Cuba and another for the human resources consulting firm Organization Resource Counselors. According to the report, “ORC imported services from Libya without an OFAC license.”

The OFAC report is typically silent on what services ORC imported from Libya. Frankly, that caused me to wonder as to what services anyone would import from Libya and, worse yet, break the law to do so. It is not like Libya is a hotbed of consultants and service providers. But with a little investigation (and the requisite speculation), I think I have a pretty good idea of what got ORC in trouble (assuming that a fine of $746.35 can really be considered “trouble.”)

One of the services provided by ORC is to advise companies on appropriate compensation levels for expatriate executives. You can see the page describing that service by clicking here. And, it would appear that ORC is offering information on cost-of-living and related data for Tripoli, Libya, information which no doubt had to be provided from Libya and is the imported service at issue.

The page also offers to provide that information for Cuba, which raises the question as to why OFAC might have penalized ORC for paying for someone in Libya to provide that information. Of course, the Cuban Assets Control Regulations provide, in 31 C.F.R. Â§ 515.545, for an exemption for the import and export of informational materials whereas the Libyan Sanctions Regulations did not. An important caveat, of course, is that ORC could import under the Cuban regulations information that was already in existence concerning cost of living in Havana, but it could not pay for a report to be specifically created for its own needs or engage consulting services on these matters.

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Jan

23

The Boycott Woes of Cairo

Posted by Clif Burns at 2:36 pm on January 23, 2007

Category: Anti-Boycott • BIS

BIS issued the first anti-boycott penalty of the year last week to the National Bank of Egypt (warning: linked Bank web site has migraine-inducing animated gifs). As a result, BIS wrangled a settlement agreement and payment of $22,500 from the Bank. True to BIS form, the charging letter, the settlement agreement and the order provide minimal detail about the alleged violation, but still enough that something smells fishy, and it’s not a Nile Perch.

The charging letter notes that NBE has a branch in New York and then alleges that the bank “engaged in transactions involving the sale and/or transfer of goods or services (including information) from the United States to Syria.” Specifically, the charging letter references four commercial invoices either to or from Al Issar Trading Company which contained language certifying that no Israeli goods were “used for the production or preparation of the goods mentioned in this invoice.”

I think it is safe to say that the NBE in branch in New York was neither selling goods nor buying goods from Al Issar Trading Company. More likely, indeed almost certainly, what was involved here was that the Bank was issuing or confirming a letter of credit relating to that transaction. In a typical instance, a commercial invoice would be one of the documents to be presented for payment of the credit and would be used to determine the amount payed. The issuing or confirming bank would not read all the terms and conditions of the invoice, including any warranties relating to the country of origin of the goods or their component parts.

This is not unlike BIS’s penalizing a freight forwarder for a prohibited boycott term buried in the shipping documents, which we have complained about before. EAR Â§ 760.1(e)(3) makes clear that intent is required for each anti-boycott violation and not merely the intent to perform the act that constituted the violation but also the â€œintent to comply with, further, or support an unsanctioned foreign boycott.â€ Since the Bank likely did not read the entire commercial invoice, it almost certainly didn’t have the requisite intent. Nor does there seem to be any sound policy basis to force banks to read every word of all customer export documents to ferret out anti-boycott violations.

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Jan

22

Compliance and Rejection Division

Posted by Clif Burns at 4:08 pm on January 22, 2007

Category: DDTC

Part 129 Last week DDTC posted a notice on its website warning license applicants that their license applications would be returned if the applicant’s name on the license application did not exactly match the name on the applicant’s registration. Unsure of your exact name as registered? Don’t call DDTC, because they won’t tell you. A “mass-mailing” in January 2007 is promised in which everyone will be told their DDTC approved names. If Internet gambling were allowed, I might make a book on the likelihood of that actually occurring in January.

Even more ominous is a sentence slipped in at the very end of the notice:

Subsequent Web site notices which will be posted shortly on the following related matters:

. . .

2. Implementation of new procedures in the Office of Defense Trade Controls Compliance (Compliance & Registration Division) to reject deficient registration submissions.

This seemingly innocent promise should be filed in the “I Told You So” Folder. DDTC’s new informal guidelines under Part 129 expanded the scope of overseas sales representatives that will now be required to file registration applications. Most of these sales reps are foreign nationals for whom English is not their first language and for whom correctly filing out a Form DS-2032 is complicated by DDTC’s confusing and inconsistent instructions as we’ve pointed out before. So we predicted a wave of deficient registration applications and it now seems we were probably right.

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Jan

18

Welcome to Juba!

Posted by Clif Burns at 10:08 pm on January 18, 2007

Category: Arms Export

Celebrating the Southern Sudan Peace Agreement According to one website, accommodations in Juba, the regional capital of Southern Sudan, are “not for the faint-hearted.” Of the eleven “hotels” in Juba listed by the site , most are tent camps. Some huts are available if you want to splurge. Most people will pray for a room at the Equatoria which actually boasts a restaurant.

Many lucky defense contractors will soon be learning first hand the pleasures of Juba because the State Department, effective January 17, has partially lifted the arms embargo against Sudan. Under the determination published today in the Federal Register, the State Department has authorized the provision of

non-lethal military equipment and related defense services (hereafter â€˜â€˜assistanceâ€™â€™) to the Government of Southern Sudan for the purpose of constituting a professional military force. . . .

The Bush White House had, on October 13, 2006, exempted Southern Sudan from the sanctions that had been imposed on Sudan by President Clinton in 1997. Both today’s action and the October action were outgrowths of the December 31, 2004 peace accord between the Sudan People’s Liberation Army and the government of Sudan in Khartoum. Under the peace accords, Southern Sudan is granted autonomy for six years with a referendum on independence after that six year period. The Bush administration had held out the possibility of the lifting of sanctions as an inducement to the peace accords. The civil war between the SPLA was premised, at least in part, on the efforts of the Muslim government in Khartoum to impose sharia on the predominantly Christian south.

Probably the first Americans to arrive in Juba will be Blackwater USA, the Virginia-based private military corporation that, before today’s notice, already had a license pending to train a military force in Southern Sudan. My guess is that the Blackwater guys are used to living in tents.

Oh, and for everyone else headed for Juba, I hear the restaurant at the Equatoria is excellent. Try the Kajaik.^*

________

^*A stew made of dried fish and sorghum porridge.

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Jan

17

No Room at the Inn

Posted by Clif Burns at 2:28 pm on January 17, 2007

Category: Cuba Sanctions

Earlier this month, the Scandic Edderkoppen Hotel in Oslo, Norway, canceled reservations that had been made by a Cuban delegation to an Oslo travel fair. The hotel, a subsidiary of Hilton Hotel Corp., said that it was forced to do so in order to comply with the U.S. embargo on Cuba.

This created an uproar in Norway, at least to the extent that the Norway can ever be said to be in an uproar. One national labor union called for a boycott of Hilton Hotels and another asked for the government to bar Scandic from continuing to do business in Norway. One union spokesman justified the boycott on the grounds that it was “unacceptable for the U.S. to dictate to the whole world.”

Christina Karlegran, a regional spokesperson for Hilton, defended the hotel’s actions:

We have to follow American law. We can’t see that we have broken any Swedish or Norwegian law. If it turns out to be illegal, we will address that.

Unfortunately, Ms. Karlegran is wrong. E.U. Council Regulation (EC) No 2271/96 forbids European subsidiaries of American companies from complying with the U.S. embargo on company and directs the member states to impose sanctions for violations of this rule that are “effective, proportional and dissuasive.” Regulation 2271/96 is binding in Sweden, which is a member of the E.U., and in Norway, which is not a member of the E.U. but which has agreed to extend the effect of that regulation (and others) to Norway through the European Economic Area Agreement.

Additionally, the Anti-Racist Center in Oslo filed a police complaint that the action was discrimination based on citizenship in violation of Norwegian law.

This situation illustrates the untenable situation that the Cuba embargo creates for U.S. companies doing business in Europe and elsewhere. The E/U Directive is no defense to the violation of the U.S. law; neither is the U.S. law a defense to violation of the E/U Directive. Companies, therefore, are forced to pick between penalties, which is rather like being forced to place a bet on a Yankees-Orioles game.

UPDATE: This post has been revised, thanks to reader Anna, to note that the hotel involved was a Scandic hotel in Oslo, Norway, not a Scandic hotel in Stockholm, Sweden, as I mistakenly thought.

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