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Jul

6

Lime Juice – $0.25; Two Ounces Rum – $1.00; Paying with a Credit Card: Priceless

Posted by Clif Burns at 9:13 pm on July 6, 2016

Category: General

Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [cropped and processed] An announcement by a Florida company that it will issue a MasterCard that American travelers can use in Cuba has, not surprisingly, caused the usual suspects on the Hill as well as all the pro-embargo bloggers to have a major conniption fit. The claim is that if the card is used in connection with confiscated property it will violate section 103 of the Helms-Burton Act. Buy a mojito made with Havana Club and pay with a credit card, and, they claim, the credit card company hasÂ violated the Act.

So, according to these folks, credit card companies must put procedures in place to prevent that from happening, knowing full well that there are no possible procedures that could ensure that. Not surprisingly, the Office of Foreign Assets Control (“OFAC”),Â which is in charge of enforcing the Helms-Burton act and the Cuban embargo, thinks this argument is bunk, writing to El Nuevo Herald: OFAC “does not consider the use of credit cards by authorized travelers in Cuba to be transactions subject to the prohibition in Section 103.”

Section 4(13)(B)(iii) of the Helms-Burton act exempts from the definition of “traffic” all “transactions â€¦ incident to lawful travel to Cuba.” Whether this limits the application of section 103 is not entirely clear, since section 103 does not prohibit trafficking in confiscated property, rather it prohibits “financing transactions involving any confiscated property.”

Embargo cheerleader-in-chief Rep. Lincoln Diaz-Balart told the Miami Herald thatÂ “the use of credit cards by authorized travelers is allowed, but would violate Section 103 of the 1996 Helms-Burton law if the transactions involve properties seized by the Cuban government from U.S. owners.” But he is leaving out a key part of section 103 which only prohibitsÂ doing thisÂ “knowingly â€¦ for the purpose of financing transactions involving any confiscated property.” Of course, there is no way that MasterCard, or any other credit card company, is going to know what is being purchased when it authorizes the transaction, much less whether it is confiscated property or not.

Photo Credit: Havana Club on the Road to Havana by Richard Smallbone [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/nxC2Pr [cropped and processed]. Copyright 2013 Richard Smallbone

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Jun

28

ZTE Gets Last Minute Reprieve (Sort Of)

Posted by Clif Burns at 10:33 pm on June 28, 2016

ZTE Stand 6 via http://www.zte.com.cn/cn/events/ces2013/show/201301/t20130110_381605.html [Fair Use] The Bureau of Industry and Security today announced that it was extending the Temporary General License which permitted exports to ZTE from June 30 all the way to August 30. ZTE, as this blog reported here, was placed on the Entity List because of elaborate shenanigans by the company by which it bought U.S. goods and resold them to Iran.

Two weeks after bringing the ban hammer down on ZTE, BIS issued a temporary general license which covered March 24 to June 30, more thanÂ three months. The new temporary license expires on August 30, one day short of two months from June 30. Why this temporary license is shorter than the previous one was not disclosed but one can only suspect that ZTE may not be minding its manners in the way that BIS would like to see.

The problem for U.S. exporters is that such a short license, with the real possibility, given its shortened length, that it may not be renewed beyond August 30, opens up the possibility that the exporter will sell items to ZTE that itÂ may not later be able to service even though the warranty on those items is still in force. If the temporary general license is not renewed and ZTE stays on the list, the ability of the U.S. exporter to send replacement parts to ZTE or, alternatively, to repair the item in the United States and return it to ZTE will be in question. It would not surprise me if the temporary general license does not get much use.

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Jun

24

A Brief Brexplanation of Brexit and Brexport

Posted by Clif Burns at 11:37 am on June 24, 2016

Category: Brexit • Economic Sanctions • EU • OFAC

Boatleave-12 by Gary Knight [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/J5K8dc [cropped]

Although Brexit is unlikely to be in effect for almost two years or more, there are some questions as to what impact Brexit might have on British export controls and economic sanctions. Â Any prediction here is risky beyond my speculation that the UK will be unlikely to alienate the U.S. and other allies by significantly altering its export and sanctions regimes.

At this point, and in the wake of the vote last night, you may find it useful to understand the legal background under which Brexit will affect U.K. export controls and sanctions. Â Given that all your Facebook friends have suddenly become experts on Brexit (soon to be known as Brexperts), you can now impress them as a Brexport Brexpert.

Let’s start with the Wassenaar Arrangement. Â The European Union is not a party to the Wassenaar Arrangement. Â Rather all member states of the E.U. (other than Cyprus) are individual members of the Wassenaar Arrangement. Â Accordingly, Brexit will have absolutely no impact on Britain’s obligations under Wassenaar. Â The Wassenaar Agreement is the source, viaÂ Council Regulation (EC) No 428/2009 (and associated legal amendments) of the UK Control Lists. Â AlthoughÂ the intermediate authority for the lists will go away on Brexit, no alteration in those control lists will occur by virtue of Brexit alone.

This brings us to Council Regulation (EC) No. 428/2009, which establishes the E.U. framework for export controls. Here it is important to understand that the regulation did not create a centralized EU export control regime. Rather it left principal authority with Member States to implement their own control regimes in accord with principles set forth in the regulation. Britain’s Export Control Order of 2008 implements 428/2009 and related EU authorities. Although it will become untethered from 428/2009 on Brexit, there is no reason that it should not remain in place post-Brexit.

The situation with sanctions is somewhat more complicated and depends on the particular EU sanction. The JCPOA, which lifted many international sanctions on Iran, for example, will not be affected because the U.K. is an independent signatory to the JCPOA. Â Other E.U. sanctions, such as the Russia/Ukraine sanctions, have direct legal effect in the U.K., although it is up to the member state to establish and enforce penalties. In these instances, there is no independent legal authority in the U.K. for that sanction, and its status after Brexit becomes uncertain. It is, of course, likely that Britain will not seek to alienate its allies by walking away from these sanctions, but it will have to enact domestic legislation to implement them before or after Brexit.

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Jun

23

Delay in Filing Voluntary Disclosure Costs Company $100k

Posted by Clif Burns at 9:00 am on June 23, 2016

Category: Criminal Penalties • DDTC • Voluntary Disclosures

Microwave Engineering Corporation Four years ago, this blog last reported on Microwave Equipment Corporation (“MEC”) in North Andover, Massachusetts, when its President, Rudolf Cheung, pleaded guilty to exporting a military antenna to Singapore without a license. MEC is back in the spotlight again having just agreed to pay the Directorate of Defense Trade Controls (“DDTC”) $100,000 in connection withÂ MEC’sÂ unlicensed provision of ITAR-controlled technical data to a Chinese national employee without a license. According to the Proposed Charging Letter, Cheung “repeatedly provided Employee with ITAR-controlled â€¦ technical data â€¦ between December 2009 and June 2010 â€¦ in relation to five discrete research and manufacturing projects.”

The charging letter specifically noted MEC’s “exceptional cooperation” during the investigation, but still decided to whack the company with a large fine, citing the fact that the employee was Chinese and, apparently more significantly, the delay by MEC in filing the voluntary disclosure after discovering the violation:

Respondentâ€™s Export Compliance Officer became aware that specific projects were being discussed with Employee in or around May 2010, and took steps to limit such conversations. Respondent did not, however, submit a disclosure to DDTC reporting the unauthorized transfer of ITAR-controlled information to Employee until January 20, 2012. The disclosure was submitted by the company on the same day that Dr. Cheung pleaded guilty to an unrelated criminal violation of the AECA.

This seems harsh, to say the least. It is obviously not a coincidence that the voluntary disclosure was not filed until Cheung, the president of the company, pleaded guilty to his own export charges. Clearly, Cheung, no doubt for his own reasons, was blocking the disclosure, and it seems unfair to penalize those left behind for these additional violations by Cheung because he delayed their disclosure. Still, this underlines the conventional wisdom that voluntary disclosures should be filed promptly after the discovery of the violation.

As an interesting footnote, Cheung has still not been sentenced, almost four years after his guilty plea. A sentencing hearing was scheduled for April 24, 2015, but it did not take place. Since that time, various deadlines and hearings were reset by the court. The last docket entry is a call for a joint status report which was due to be filed on January 29, 2016, but appears to have never been filed.

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Jun

22

DDTC Solicits Public Comment on New Application System Sight Unseen

Posted by Clif Burns at 8:03 am on June 22, 2016

Category: DDTC

So, I’ve decided to give you the contents of this box over here. Of course, the deal is you must keep the contents whatever they are. So, please tell me what you think about what’s in the box and whether you will like whatever it is. Nope, no peeking. You tell me whether you like what’s in the box and then I’ll give it to you. That way if the box contains an 80-foot Burmese python, you can’t say I didn’t give you a chance to object before saddling you with your new pet.

On Monday, the Directorate of Defense Trade Controls did just that when it announced that it is overhauling its export licensing system. No more DSP-5s. No more DSP-83s. Instead, according to the agency

licensing operations will move from the current, largely form-based submissions to an intuitive system which will allow bothÂ industry users and DDTC staff to smoothly and securely navigate the submission and review process.

DDTC is giving the public 60-days to comment on this new system. No details on the system have been provided beyond what’s quoted above. So the box that DDTC is proposing to drop on your doorstep may have a cute puppy inside. Or maybe a hungry python. So, speak up now. Tell us what you think!

Of course, if DDTC revises the utterly ridiculous mess surrounding agreement submissions (where, among other things the transmittal letter is longer than the agreement and where the submission process is described in a constantly changing 223-page document that rivals War and Peace for prolixity and Finnegan’s Wake for obscurity) there will be general rejoicing all around. But there isn’t a scintilla of a suggestion in the notice that this monstrosity is going away.

So, which will it be? Puppy or python?

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