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May

28

DoJ Miffs Description of Iran Sanctions

Posted by at 6:09 pm on May 28, 2014
Category: Criminal Penalties • DoJ • Iran Sanctions

By Another Believer (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADepartment_of_Justice%2C_Washington%2C_D.C._2012.JPGIn a recent DoJ press release correcting a previous press release that incorrectly stated that the DoJ had indicted someone on export charges that they hadn’t actually indicted him on (oops!), the DoJ took the opportunity to try to explain the scope of the U.S. sanctions on Iran. Unfortunately the DoJ got it wrong. Of course, when an exporter makes a mistake about the scope of the Iran sanctions, it’s a big deal; but when the DoJ makes a mistake, oh well, we all make mistakes.

At issue are charges against Pennsylvania-based Hetran, Inc. which allegedly shipped a horizontal lathe to Iran via a company in Dubai. This gives the DoJ the opportunity to say this:

American companies are forbidden to ship dual use items – such as the peeler – to Iran without first obtaining a license from the U.S. Department of Commerce

Oh dear, where to start with this? Really, it’s just wrong in so many ways. Let’s start with section 746.7 of the Export Administration Regulations which sets forth the controls by the Department of Commerce’s Bureau of Industry and Security on exports to Iran. That would have been a good place for the DoJ to start as well before attempting to explain U.S. sanctions on Iran.

Subsection (e) says this

No person may export or reexport any item that is subject to the EAR if such transaction is prohibited by the Iranian Transactions Regulations (31 CFR part 560) and not authorized by OFAC.

Subsection (a) says this:

[I]f OFAC authorizes an export or reexport, such authorization is considered authorization for purposes of the EAR as well.

So, where does that leave us?

Error 1: Licenses aren’t just required for exporting dual use items to Iran. OFAC rules forbid all exports to Iran except for certain limited items such as food, medicine, medical devices, informational products and personal telecommunications devices. Plenty of things that aren’t dual use (i.e. listed on the Commerce Control List) require licenses.

Error 2: the requirement for exports to Iran is a license from OFAC, not from BIS. A license from BIS is required only if no license from OFAC has been obtained and the matter is “not subject to OFAC regulatory authority.”  EAR 746.7(a)(2).

Here’s an idea: maybe people in the DoJ should be required to attend BIS’s annual Update Conference before they are allowed to say things about export law.

 

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May

27

Universal Jurisdiction: Export Denial Order Edition

Posted by at 8:07 pm on May 27, 2014
Category: BIS • Syria

Aramex Employee via http://www.aramex.com/content/uploads/109/243/46240/MainBanner_EXP.jpg [Fair Use]BIS recently announced a consent agreement with Aramex Emirates under which Aramex agreed to cough up $125,000 in connection with its export of network equipment from the U.A.E. to Syria. Of course, for the few of us remaining that do not believe that the U.S. Government can exercise jurisdiction over everyone anywhere in the world whenever it wants, the interesting question is this: why did a company in the U.A.E. get tangled up over a shipment from the U.A.E. to Syria that was legal under U.A.E. law?

At issue were network devices and software classified as ECCN 5A002 and 5D002. In the Order, BIS then has this to say:

Under the widely-known U.S. trade embargo against Syria, no item subject to the Regulations may be exported or re-exported to Syria without a Department of Commerce license, with the exceptions of certain medicines and food, as set forth at all times pertinent hereto in General Order No. 2.

General Order No. 2 notes that the prohibitions of the embargo on Syria are described in section 746.9 of the EAR, which indeed prohibits all exports and re-exports except “food and medicine” by everyone in the universe. (Don’t get confused by section 742.9 which describes another set of restrictions on Syria which would permit exports of certain EAR99 items but which have been superseded by 746.9 and is just kept in the EAR to confuse ordinary people and to keep lawyers employed.)

So, even though the EAR says that foreign persons can’t re-export items from their own country to Syria, why would anyone pay any attention to this, particularly where the export was not illegal under the laws of their own country? An attempt by the U.S. to extradite someone for such an export might not be entertained by his local courts simply because the U.S. asserts that the item originally came from the United States.

BIS’s hammer here is more likely the export denial order. Even if it has no criminal jurisdiction and no ability to enforce or collect administrative fines in such cases, it does have the power to impose an export denial order which would forbid persons within its jurisdiction from exporting anything to Aramex. That might deliver a significant economic blow to a freight forwarder and logistics provider like Aramex. In that case a $125,000 fine might appear to be a good deal.

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(No republication, syndication or use permitted without my consent.)
May

20

The First Thing We Do, Let’s (Not) Kill All the Lawyers

Posted by at 7:59 pm on May 20, 2014
Category: Economic Sanctions • OFAC • Russia Designations • Russia Sanctions

By VOA [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ASergei_Magnitsky.jpg

ABOVE: Sergei Magnitsky

Today the Office of Foreign Assets Control (“OFAC”) announced more Russia designations, this time under the Magnitsky sanctions. The Sergei Magnitsky Rule of Law Accountability Act of 2012 (H.R. 4405) authorizes sanctions on those individuals responsible for the death and detention of Sergei Magnitsky. Mr. Magnitsky was a Russian lawyer who was investigating corruption and fraud by certain Russian tax officials. The act also authorizes designations of individuals involved in human rights violations against anyone seeking to expose illegal activity by Russian officials or seeking to promote human rights in Russia.

Eighteen people have already been sanctioned under the Act, mostly mid-level law enforcement and tax officials. Those designated under the Magnitsky sanctions are not eligible to enter the United States and their assets must be blocked if they come into the hands of U.S. Persons

Among the newly designated officials, according to the AP, are “four prison officials, a judge, [a] court official, a law enforcement investigator and alleged co-conspirators in the fraud case.”  Dmitry Kratov, who is on the list, was previously acquitted in Russia of charges of negligence brought against him in connection with Magnitsky’s death

The newly designated individuals are the following:

ALISOV, Igor Borisovich; DOB 11 Mar 1968 (individual) [MAGNIT].

GAUS, Alexandra Viktorovna (a.k.a. GAUSS, Alexandra); DOB 29 Mar 1975 (individual) [MAGNIT].

KHLEBNIKOV, Vyacheslav Georgievich (a.k.a. KHLEBNIKOV, Viacheslav); DOB 09 Jul 1967 (individual) [MAGNIT].

KLYUEV, Dmitry Vladislavovich (a.k.a. KLYUYEV, Dmitriy); DOB 10 Aug 1967 (individual) [MAGNIT].

KRATOV, Dmitry Borisovich; DOB 16 Jul 1964 (individual) [MAGNIT].

KRECHETOV, Andrei Alexandrovich; DOB 22 Sep 1981 (individual) [MAGNIT].

LITVINOVA, Larisa Anatolievna; DOB 18 Nov 1963 (individual) [MAGNIT].

MARKELOV, Viktor Aleksandrovich; DOB 15 Dec 1967; POB Leninskoye village, Uzgenskiy District, Oshkaya region of the Kirghiz SSR (individual) [MAGNIT].

STEPANOV, Vladlen Yurievich; DOB 17 Jul 1962 (individual) [MAGNIT].

SUGAIPOV, Umar; DOB 17 Apr 1966; POB Chechen Republic, Russia (individual) [MAGNIT].

TAGIYEV, Fikret (a.k.a. TAGIEV, Fikhret Gabdulla Ogly; a.k.a. TAGIYEV, Fikhret); DOB 03 Apr 1962 (individual) [MAGNIT].

VAKHAYEV, Musa; DOB 1964; POB Urus-Martan, Chechen Republic, Russia (individual) [MAGNIT].

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May

14

The Case of the Missing FLIR

Posted by at 11:23 pm on May 14, 2014
Category: BIS • Criminal Penalties

HRC Series Flir Camera via http://www.flir.com/uploadedImages/CS_EMEA/Products/HRC_series/HRC.png [Fair Use]Last week a federal grand jury in Illinois indicted Bilal Ahmed on charges that he attempted to export a FLIR HRC-U thermal imaging camera, classified as ECCN 6A003.b.4.b, to Pakistan without the required license from the Bureau of Industry and Security (“BIS”).

Reading the criminal complaint, which is the most detailed statement of facts in the case, reveals a few somewhat strange holes in the government’s case. Basically, the only evidence that the government has that Bilal Ahmed exported or even attempted to export anything was a box that they searched at a UPS store addressed to a company in Pakistan that had an invoice for the camera and, apparently, nothing else.

The complaint starts by describing the negotiations between Ahmed and a used-goods seller to buy an HRC-series thermal imaging camera. After payment was made, the camera was shipped to the address of Ahmed’s company Trexim Corporation, in Schaumburg, Illinois. Federal agents then followed Ahmed from his home in Bolingbrook, Illinois, to a FedEx office in Bolingbrook, Illinois. The complaint does not indicate what, whether a box or a letter or anything else, Ahmed took the FedEx store and there is absolutely no indication of what he might have shipped from there. Going to a FedEx store can hardly constitute evidence of an illegal export

Subsequently Ahmed contacted the seller and indicated that he had received the camera, that it was in bad condition, and that he wanted a case for it. An agreement was made to send him the case. The case was shipped to Schaumburg and agents then followed Ahmed again, this time from his office in Schaumburg to a UPS store in Elk Grove village. After Ahmed left, the agents inspected the contents of the box, which was addressed to Pakistan and labeled NLR, and found an invoice for the HRC camera. No other contents of the box were mentioned in the criminal complaint beyond the invoice. If the camera case was in there, you would think that the criminal complaint would, perhaps, mention it since it would be the only solid evidence that the camera, for which the case would have been destined, had been shipped to Pakistan.

So, you may wonder, where is the camera or any evidence that it was exported? The agents apparently failed to inspect the package at the Bolingbrook FedEx, and when they did get around to looking at the box at the Elk Grove Village UPS all they found of any interest was an invoice. That is apparently why Ahmed is charged only with attempted export, but there doesn’t seem to be any evidence of any attempted export of the camera either. I guess the idea is that sending the invoice alone was an attempted export, a far-fetched notion at best.

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(No republication, syndication or use permitted without my consent.)
May

7

Incorporating in Delaware Leads to Huge OFAC Fine for Argentinian Company

Posted by at 11:51 pm on May 7, 2014
Category: Cuba Sanctions • OFAC

By Almonroth (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AU.S._Treasury-3.jpgYesterday the Office of Foreign Assets Control (“OFAC”) announced that it had imposed a $2,809,800 fine on Argentina-based Decolar.com, Inc. Decolar is an online travel agency and attracted the ire of OFAC for booking trips by non-U.S. persons to Cuba, trips for 17,836 people to be precise. This made OFAC very, very angry:

Decolar demonstrated reckless disregard for U.S. sanctions requirements when it failed to ascertain the U.S. sanctions requirements applicable to its business operations, relying instead upon a third party’s oral assurances that Decolar’s conduct did not require an OFAC license. With the exercise of appropriate due diligence, Decolar’s senior
management reasonably should have been aware of the applicable prohibitions under the CACR. Based upon the number of apparent violations and the length of time over which they occurred, the apparent violations also appear to have resulted from a pattern or practice of conduct

So, you’re no doubt wondering where OFAC gets the right to fine a company based in Argentina for violating the U.S. sanctions on Cuba. Simple. Even though the company was based in Argentina, it was incorporated in Delaware. This was probably the most expensive incorporation in Delaware ever.

One thing that  is odd about the OFAC release is its coy reference to the “third party” that told Decolar that it had nothing to worry about. My guess, particularly due to OFAC’s reluctance to identify this party, is that it was likely a lawyer. Saying that relying on a lawyer is “reckless” is harsh, even by OFAC standards, but it seems that if this mysteriously anonymous third party had been, say, the company janitor, OFAC could not have resisted mentioning that. After all, that would indeed be reckless. And, of course, the company was even more reckless for not ignoring their legal counsel and doing the research themselves. You know, by looking at the Spanish version of the Cuba sanctions which OFAC keeps on its website. Oh wait, there isn’t a Spanish version.

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(No republication, syndication or use permitted without my consent.)

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