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Archive for the ‘BIS’ Category

Oct

10

You’ll Shoot Your Eye Out, Kid!

Posted by Clif Burns at 2:58 pm on October 10, 2007

Category: BIS

Red Ryder

Oh good grief.

Daisy Manufacturing just agreed to pay $20,400 to settle charges that it exported “rifle scopes” without a license. The Bureau of Industry and Security charged that the “rifle scopes” were classified under ECCN 0A987.

Most guys, particularly guys my age, are quite familiar with Daisy Manufacturing. Hell, anyone who has ever seen A Christmas Story is probably familiar with Daisy. The company makes BB guns and air rifles — like the Official Red Ryder Carbine-Action Two-Hundred-Shot Range Model Air Rifle featured in the film.

And export folks of any age are probably familiar with ECCN 0A987 which controls:

Optical sighting devices for firearms (including shotguns controlled by 0A984); and parts, n.e.s.

That’s right — optical sighting devices for firearms. Now the Export Administration Regulations don’t bother to define firearms, but it would seem reasonable to look at the definition of firearm in the Federal Gun Control Act of 1968. A firearm is defined in that act, at 18 U.S.C. Â§Â§921(a)(3) and (4), to cover only weapons which “expel a projectile by the action of an explosive” or, if expelling the projectile by other means, have a rifle bore of greater than one-half inch in diameter. The Daisy air rifles do not meet either criterion.

And the scopes manufactured by Daisy, like this one, all appear to be made for Daisy’s air rifles and, therefore, not properly classified under ECCN 0A987 as claimed by BIS. The BIS charging and settlement documents don’t provide sufficient detail as to the types or model numbers of scopes being exported. Once again, those documents refer to a schedule of violations which is missing from the documents posted on the BIS website. So there remains the possibility, albeit unlikely, that Daisy was exporting scopes for other rifles that could properly be defined as firearms.

All that notwithstanding, does anyone else feel that a scope on a BB gun is, well, cheating? What next? Laser designators?

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Oct

4

BIS Denies Export Privileges for Dutch Aircraft Parts Company

Posted by Clif Burns at 11:27 pm on October 4, 2007

We have previously reported on the recent criminal complaint filed against the Dutch company Aviation Services International B.V. and its owner Rob Kraaipoel. The complaint alleged, among other things, that Aviation Services purchased aircraft parts in the United States, exported them to the Netherlands and then later shipped them to Iran. The Bureau of Industry and Security (“BIS”) has now issued an Order temporarily denying export privileges to Aviation Services, Kraaipoel and related entities that had been involved in the transactions subject to the complaint. In this case, it seems to me, the BIS order is both an appropriate remedy and the only remedy in this case.

Nothing in the criminal complaint suggests that Aviation Services or any of its officers or employees, including Rob Kraaipoel, ever set foot in the United States in connection with these transactions. Nor is there even a scintilla of evidence that Kraaipoel or any of the other employees even went to Disneyland or anywhere else in the United States on a family vacation or for any other reason. A basic principle of international law is that a jurisdiction must have some minimum contact with a foreign citizen before it has the right to prosecute that foreign citizen for the laws of the prosecuting jurisdiction. We can be certain that the United States would assert this principle if the Netherlands sought to indict a U.S. citizen for exporting Dutch goods in violation of Dutch Law.

The Export Controls and Economic Sanctions Committee of the American Bar Association Section of International Law took that position quite clearly when it issued a recommendation that U.S. sanctions laws should not be imposed on foreign corporations where the only jurisdictional basis for doing so was that the articles involved are U.S. origin goods. The Committee explained its position as follows:

The most widely accepted basis in international law for prescribing legal rules of conduct is the territorial principle – that a sovereign may prescribe and apply its laws to conduct that takes place within its territory. … Foreign transaction controls that purport to regulate, proscribe or sanction conduct that takes place entirely outside the territory of a state do not satisfy the general formulation of the territorial principle.

Beyond that, of course, is the question as to whether the U.S. can extradite an individual from The Netherlands in connection with this criminal complaint. The Extradition Treaty between the United States and the Netherlands provides that an extradition may occur for conduct occurring outside the territory of the state being asked for extradition only if the party being extradited is a national of the requesting country or

The courts of the Requested State would be competent to exercise jurisdiction in similar circumstances

This provision permits a Dutch court to deny extradition by saying that, due to principles of international law, it would not be competent to exercise jurisdiction over a U.S. citizen who exported Dutch Goods from the United States.

Of course, the BIS order denying export privileges is an exercise of jurisdiction over U.S. companies and individuals and would impose sanctions on such companies and individuals for exporting items to Aviation Services and Mr. Kraaipoel. This is well within the jurisdictional authority of the United States and, it seems to me, is the appropriate course to be taken when foreign individuals, outside the jurisdiction of the United States, re-export U.S. origin items in violation of U.S. law.

I would, however, advise Mr. Kraaipoel to cancel any plans to vacation in the U.S.

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Oct

2

The Mysterious Case of the Missing Medical Devices

Posted by Clif Burns at 9:19 pm on October 2, 2007

Category: BIS • Sanctions

Invitrogen and the Bureau of Industry and Security (“BIS”) recently signed a settlement agreement pursuant to which Invitrogen agreed to pay $30,000 for three shipments and one attempted shipment of human leukocyte antigen tissue typing trays to Syria without a license. The shipments and attempted shipments had been made, and voluntarily disclosed, by Dynal Biotech, which Invitrogen acquired in 2005. The charging documents allege that these shipments and alleged shipments violate General Order No. 2 of Part 736 of the Export Administration Regulations which forbids exports of all items “except food and medicine” to Syria.

HLA tissue typing trays are used, among other things, to determine whether tissue or organs are compatible for transplantation into a particular individual. Clearly this product isn’t food or medicine within the exemptions provided by General Order No. 2.

But the trays are arguably medical devices under the Trade Sanctions Reform Act of 2000 (“TSRA”) which prohibits unilateral sanctions affecting medical devices. TSRA defines “medical devices” by referencing the definition of “medical devices” under the Federal Food, Drug and Cosmetic Act. Section 201 of that Act defines a medical device to include:

an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including any component, part, or accessory, which is … (2) intended for use in the … the cure, mitigation, treatment, or prevention of disease, in man or other animals … .

This, of course, raises the question as to why General Order No. 2 exempts food and medicine but not medical devices. By failing to exempt medical devices it appears to run afoul of TSRA’s prohibition on unilateral sanctions on exports of medical devices. This is even more clear in this case because section 906(a)(2) notes that medical devices can be shipped to Syria notwithstanding any determination that Syria is a state sponsor of terrorism.

Of course, this was not the case to litigate the issue with BIS. Counsel for Invitrogen wisely decided that it would cost much more than the $30,000 agreed fine to litigate the matter. But BIS should know better.

Of course, perhaps there’s a reason I’ve missed for not including medical devices in the General Order No. 2 exemption. I haven’t had the time to fully research the matter, so if you can explain the mysterious case of the missing medical devices, please leave a comment enlightening everyone.

UPDATE: A reader points out that Section 5(a)(2)(A) of the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 permits the President to impose, as one of the sanctions on Syria, a prohibition on “the export of products of the United States (other than food and medicine) to Syria.” However, there is nothing in the legislation that suggests that Congress explicitly intended to overturn the language of TSRA which permits the unlicensed export of medical devices to Syria. There is no reference at all in the Syria Accountability Act to TSRA. In that context, then, “food and medicine” should be seen as referring to the “agricultural commodities,” “medicines,” and “medical devices” as defined in TSRA.

Of course, I am not recommending that this argument be used by anyone as a basis for not applying for a license for a medical device to be exported to Syria, since BIS will certainly seek to penalize such an export. Rather, I am suggesting that BIS should amend General Order No. 2 to make it consistent with TSRA.

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Sep

19

BIS Rules Don’t Consider the Safety of U.S. Contractors in Iraq

Posted by Clif Burns at 10:39 pm on September 19, 2007

Category: BIS

Iraq Bomb Bethesda-based USAID contractor Development Alternatives, Inc (DAI) recently agreed to pay the Bureau of Industry and Security a $7,500 fine for attempted exports in July 2004 of concealable vests, body armor and bomb blast blankets to Iraq without a license. During that time period, DAI was performing a $72 million USAID contract in Iraq to “restore the capacity of small and medium agro-enterprises to produce, process, and market agricultural goods and services.”

There’s no question, of course, that DAI needed licenses here and that BIS had the right to penalize DAI for these attempted exports. And, I suppose that the slight mitigation of the fine by BIS possibly reflected its sympathy that DAI had a legitimate need for these items to protect its employees in Iraq.

But this situation highlights a difficulty confronted by Iraq contractors in dealing with BIS. Unlike DDTC which has an expedited channel for exports of items being used in Operation Iraqi Freedom, BIS has no procedure to expedite exports by contractors of body armor and protective material to be used by their employees in Iraq. I suspect that if BIS had an office in Iraq, it would be much easier to export body armor to Iraq for use by U.S. employees.

UPDATE: Like every blog, we have our very own troll who comes to try to leave a nasty comment every time we say anything even vaguely negative about BIS. Although the troll won’t leave his or her real name or email address, the IP Address from which he comes suggests that he may be in one of the regional OEEs, although this is by no means certain. The troll took issue with my statement that if BIS had an office in Iraq it would be much easier to export body armor there.

Much easier?? Easier for the US Government to outfit it’s employees?? This would NOT be an export if the USG did it!!! C’mon Cliff…be more conversant!!

Trolls like to use lots of exclamation points and question marks for some reason. And the troll, as trolls often do, missed my point entirely.

My point was that if BIS employees were being shot at in Iraq they would be more sympathetic to the plight of private sector U.S. employees in Iraq running the same dangers and might adopt some procedure to expedite those private sector exports. That might be a hard point for our troll to fathom since I imagine that if he were in Iraq and had his own body armor, the plight of other U.S. citizens wouldn’t be of much concern to him (or her): “I got mine, suckas!” or something like that.

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Sep

10

Yet Another Significant Fine Imposed by BIS After Voluntary Disclosure

Posted by Clif Burns at 5:20 pm on September 10, 2007

Category: BIS • General

Semiconductor Chip The Bureau of Industry and Security (“BIS”) just reported a settlement agreement it entered into with JSR Micro under which JSR Micro agreed to pay a civil penalty of $270,000. JSR Micro had voluntarily disclosed to BIS that it had exported photoresists classified under ECCN 3C002.a without the required licenses from BIS.

A photoresist is a thin material placed between a mask and a substrate, such as a semiconductor, which allows circuits or other patterns to be etched onto the substrate. Light is used to expose the photoresist and then a chemical process is used to remove exposed or unexposed portions of the photoresist. The shorter the wavelength of the light used to expose the photoresist, the higher the resolution of the image achieved on the substrate. Under ECCN 3C002.a, export licenses are required for photoresists optimized for use with light wavelengths that are 350 nm or shorter. (The Wassenaar Arrangement, by contrast, only requires licenses for photoresists optimized for use with wavelengths that are 245 nm or shorter).

According to the documents filed with the settlement agreement, JSR Micro engaged in 45 separate unlicensed exports of the photoresists to Israel, Singapore and Taiwan. These documents, however, charged JSR Micro with 90 separate violations. Each export was deemed a violation of section 764.2(a) of the Export Administration Regulations (“EAR”). Additionally, each export was deemed a violation of section 764.2(g) of the EAR because the Shipper’s Export Declarations filed with the exports stated that no license was required for the exports. Since each violation could result in an $11,000 fine, the charging letter asserted a potential liability of $990,000.

In fact, however, BIS was clearly double-charging the offense to try to extract a higher fine from JSR Micro. In every case where an exporter ships an item without a required license, it will always be the case that the SED states that no license is required, and yet BIS does not consistently add the SED charge in its charging documents for all unlicensed exports. The additional SED charge might seem fair where the exporter knew that a license was required and yet said that one was not on the SED. But there are no allegations here that JSR Micro knew that a license was required.

Even if one thinks that $270,000 is a fair settlement of a $990,000 liability in a voluntary disclosure case, it seems hard to feel the same about the same fine in such a case where only a $495,000 liability is asserted. That’s not even a fifty-percent reduction.

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Archive for the ‘BIS’ Category

You’ll Shoot Your Eye Out, Kid!

BIS Denies Export Privileges for Dutch Aircraft Parts Company

The Mysterious Case of the Missing Medical Devices

BIS Rules Don’t Consider the Safety of U.S. Contractors in Iraq

Yet Another Significant Fine Imposed by BIS After Voluntary Disclosure

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