In an earlier post, we took the Bureau of Industry and Security (“BIS”) to task for filing a default motion against William Kovacs to deny his export privileges even though he was in jail for his export violation and his ability to respond to BIS’s default motion would be, well, limited. We also felt pretty sure that BIS knew where he was, because BIS’s own reports on the case indicated that Kovacs had been incarcerated.

Well, maybe BIS doesn’t really know where Kovacs is. Today BIS updated the Denied Party List (the “DPL”) and here is the entry for Kovacs:

That’s his old home address.

We might give BIS for some slack over its confusion about the real location of William Kovacs were it not for the Bureau of Prisons Inmate Locator which you can find here. Enter Mr. Kovacs’s name and the Inmate Locator will serve up a result page showing that he is currently inmate 24999-038 at the Fort Dix Federal Correctional Institute in New Jersey.

So, here’s my question. William Kovacs is a fairly common name. Suppose that an international courier service got a package from Mr. Kovacs with a gift for his favorite aunt in London. The courier checks the DPL and finds only a William Kovacs at a street address in Boxford, Massachusetts, so the courier goes ahead and ships the package. Has the courier violated BIS rules?

Now, I have suggested before that a prison address might be a red flag. But in other instances, BIS has gone out of its way to list, even to correct, prison addresses and inmate numbers on the DPL. There certainly seems no reason that they haven’t done that here.

The prior post “BIS Continues to Stack Deck Against Voluntary Disclosures” has been updated and revised to reflect the fact that there were two transactions, not one, involved in that case.

Yesterday the Bureau of Industry and Security (“BIS”) published in the Federal Register an Advance Notice of Proposed Rulemaking. In the Notice, BIS proposed to fill in Country Group C of Supplement 1 to Part 740. Under the BIS proposal, the countries in Group C would be called “Destinations of Diversion Concern.”

BIS says in the Notice that licensing policy would “likely change” for exports going to countries listed in the new Group C. I think BIS is just being a little coy with the “likely” business — you can pretty much bet that licensing policy will certainly change. Why else bother with the list?

The Notice lists the factors that will be considered before a country is admitted to the new club:

• Transit and transshipment volume;

• Inadequate export/reexport controls;

• Demonstrated inability to control diversion activities in this destination;

• Government not directly involved in diversion activities; and

• Government unwilling or unable to cooperate with the U.S. in interdiction efforts.

So, who do we think is going to be on the list? BIS won’t say in this “Advance Notice.” But we think that BIS has at least one country in mind and that this “Advance” Notice is a shot across the bow aimed at the UAE. It’s only been several months since Assistant Secretary Padilla of BIS and Undersecretary Abdulla Bin Ahmed Al-Saleh of the UAE engaged in a war of words over diversion of shipments from the UAE to Iran and other places of concern.

Any other ideas? Leave them in the comments where I suspect that they just might be seen by BIS.

Magnetic Shield Corporation, the company that made the magnetic shield vault in which the Watergate tapes are stored, filed a voluntary disclosure with the Bureau of Industry and Security (“BIS”), something it probably now regrets. According to a Charging Letter just posted on the BIS site, Magnetic Shield exported magnetic shielding in 2001 to the Indira Gandhi Centre for Atomic Research, which is on BIS’s Entity List, without the required license. The company also forgot to fill out item 27 on the Shipper’s Export Declaration for the 2001 export. Exporters are required to put the license number, license exception or NLR (“No License Required”) in Item 27. Finally, it appears that the company attempted to export magnetic shielding to the Indira Gandhi Centre in a separate transaction in 2004.

According to the Settlement Agreement entered into with respect to these transactions, Magnetic Shielding voluntarily disclosed “certain” of these transactions. The Settlement Agreement doesn’t disclose which of the transactions were voluntarily disclosed, but it’s reasonable to suppose that the completed transaction in 2001 was the subject of the voluntary disclosure after the attempted export in 2004 led to a BIS inquiry.

Magnetic Shield agreed to pay $19,000 in settlement of the BIS charges. Considering that Magnetic had a maximum liability of $33,000 for one export violation in 2001, one technical SED violation relating to the 2001 export, and one attempted export in 2004, BIS didn’t really do Magnetic Shield much of a favor here for the voluntary disclosure. The issue here is why BIS charged the SED violation other than to increase the ultimate penalty. There is no allegation that the failure to fill out Item 27 was anything other than a simple clerical error. The only reason to charge the failure to fill out Item 27 in the SED appears to have been to justify collecting a higher fine for the voluntary disclosure.

(Note: post and comments updated to reflect that two transactions rather than one were involved.)