Yesterday the Office of Foreign Assets Control (“OFAC”) released its civil penalties report for January. Among the settlements announced was one under which Stena Bulk LLC, the Houston-based subsidiary of the Swedish oil tanker company, agreed to pay OFAC $426,486 for “providing transportation related services for the transportation of oil to Sudan and the exportation of Sudanese-origin oil without an OFAC license.” Stena Bulk voluntarily disclosed the matter to OFAC.

OFAC’s policy of providing as little information as possible with respect to settlements leaves some nagging questions unanswered here. Stena Bulk, the parent company in Sweden, is not a U.S. person as defined by the Sudan regulations and couldn’t violate the sanctions. Stena’s U.S. subsidiary in New York and and Stena Bulk LLC, its subsidiary in Houston, aren’t liable for the parent company’s dealings with Sudan unless they participated in some way in the oil shipment transactions. It certainly would be useful for OFAC to reveal what actions by the subsidiaries were sufficient to lead to a fine of this magnitude, although in this case I can posit a reasonable speculation.

Stena Bulk’s involvement in oil shipments to Sudan arises from the unique nature of Stena Bulk’s fleet, most of the ships in which are designed to maximize oil cargo capacity and yet maintain low drafts necessary for ports, harbors and canals, such as the Suez Canal, with draft limitations. Stena Bulk has a number of Suezmax ships in its fleet. These ships can traverse the shallow Suez Canal to reach the Red Sea, where Sudan is located, from the Mediterranean. These ships should also be able to make calls at the Port of Sudan, where berths in the harbor range from 9 to 13 meters.

Interestingly, all of the company’s Suezmax fleet is managed from Stena Bulk’s Houston subsidiary, which may explain how the American subsidiary wound up in deep and hot water with OFAC. And while I am engaging in ripe, if not rank, speculation it also seems reasonable to assume that the Stena Bulk employees in Houston probably thought, incorrectly of course, that the Sudan sanctions wouldn’t apply to a foreign-flag ship owned by a foreign company that wasn’t making a call at any U.S. ports.

On January 22, the Bureau of Industry and Security (“BIS”) issued a temporary denial order (“TDO”) purportedly to prevent the export of a Bladerunner 51, a “go-fast boat” favored by drug smugglers, from South Africa to Iran.

Although the boat is manufactured in Great Britain by Ice Marine International, the BIS premised its jurisdictional hook over the boat on its two U.S.-origin Caterpillar C18 engines and two Arneson surface drives. According to the TDO, BIS has evidence to believe that the vessel is destined for the Iranian Revolutionary Guard Corps for use as an attack craft.

[T]he Respondents are about to engage in conduct prohibited by the EAR by re-exporting U.S.-origin items, which are subject to the Regulations and classified as Export Control Classification Number (“ECCN”) 8A992.f and .g, from South Africa to a Specially Designated National (“SDN”) [the Iranian Revolutionary Guard Corps] located in Iran using a specially designated blocked vessel, owned by a Specially Designated National [the Islamic Republic of Iran Shipping Lines], to complete the transaction.

Given that U.S. persons are already prohibited from doing business with the Islamic Republic of Iran Shipping Lines (“IRISL”) and the specially designated blocked vessel, it’s completely unclear what the TDO actually accomplishes. Certainly IRISL is not going to pay any attention to BIS’s order that it not engage in the export of the Bladerunner 51, nor is IRISL likely to be swayed by the TDO’s denial of export privileges since that has already been effectively accomplished by its SDN status. The other two respondents — Tadbir Sanaat Sharif Technology Development Center (TSS), based in Tehran, Iran, and Icarus Marine (Pty) Ltd. of Cape Town, South Africa — are unlikely to try to block the transaction, even if they could, based on the TDO’s provisions forbidding exports to them.

Even though BIS based the TDO on fears that the vessel will be used as an attack craft, the folks at the United States Naval Institute, a private think tank, suspect something much more sinister is going on — namely that the Bladerunner 51 is merely an expensive wrapping package for South African yellowcake uranium. Here is their full-tin-foil-cap reasoning:

Why are the Iranians looking to get this 51-foot asset from South Africa? Isn’t there lots of cross-gulf smuggling going on? Plenty of big, roomy fast boats transit from UAE to Iran every single night! Why go through all the trouble of shipping something from South Africa? In a big Iranian ship, a known proliferation tool? Wouldn’t it be easier to look closer to home? Nab a cigarette smuggler and take ownership from there? Or find some nearby disenfranchised recipient of oil proceeds and encourage the fellow to, ah, buy and transfer his fine vessel?

Just seems odd that Iran is reaching so far afield, when there are plenty of go-fasts within easy reach. But then, if we note that South Africa holds 7 percent of the worlds economically recoverable uranium reserves and is the eleventh biggest producer of uranium, alarm bells start ringing.

Um, okay. Personally, I think it would be easier and safer for Iran to put yellowcake in an unmarked box than in a potential attack vessel with U.S. parts, particularly if Iran wanted to, you know, avoid detection. Stuffing the yellowcake into the go-fast boat is rather like a drug dealer deciding to smuggle heroin in a shoulder-fired rocket launcher.

The indictment in the case of MIchael Zhang, the Chinese American arrested last week for exporting electronic circuits to China has been released. It provides some additional information on the government’s case, but leaves just as many questions unanswered.

According to the indictment, in 2006, Zhang exported on four separate occasions, 602 MIC bus controllers manufactured by Vetronix Research to the PRC. Additionally, on one occasion in 2008, Zhang exported 5 SRAM chips manufactured by Cypress Semiconductors to the PRC.

Of course, in order for this to be a criminal offense, Zhang needed to know that these were export-controlled items, and the indictment provides little information as to the reason that these items were export-controlled or why Zhang was in fact aware that they were export controlled. And, as many export professionals will attest, determining whether electronic circuits such as these are export-controlled is a difficult task at best.

The Vetronix product involved, the MIC bus controller MIC-320GM is no longer listed on the Vetronix website, although the Google cache suggests that as late as October 2008, it was still listed. So I can’t determine whether the now-vanished listing provided sufficient information to determine whether the item was export-controlled or not.

The MIC bus is a protocol that apparently allows solving power/data distribution and management problems under inclement environmental conditions. That would at least make me suspicious that the item might be controlled, but that knowledge alone wouldn’t be enough to support an indictment.

In terms of enforcement policy, one also has to wonder why exports of this product led to a criminal prosecution rather than a civil penalty proceeding. A quick Google search on the part number reveals thousands of these same parts available for sale by Hong Kong parts distributors.

The SRAM chip exported by Zhang was Cypress’s STK14C88-5L45M. No datasheet or specifications for this product are available on the Cypress website, so there is no way to determine whether the item meets the specifications set forth in ECCN 3A001 which is probably the controlling ECCN. Of course, it’s possible that this information was on product-packaging or that the company had otherwise advised Zhang that the items were controlled, but it is not information that is readily-available.

Problems like this obviously have motivated BIS to announce today a project that might make more information available as to the export classification of various items. Under the new project BIS is soliciting manufacturers to provide voluntarily links to classification information on their products. BIS will then make those links available on a BIS web page. Whether or not enough manufacturers will participate to make this a useful resource remains to be seen.

ABOVE:Leo Crowley
Alien Property Custodian

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Prisoner lawsuits generally run the gamut from complaints about lumpy mashed potatoes at dinner to allegations of illegal punishments performed by prison staff. So, it’s a bit unusual to see a prisoner complaint based on the Trading With the Enemy Act, 50 App. U.S.C. § 1 et seq. The TWEA, as many readers will know, is the act that serves as the basis for sanctions imposed by the United States on Cuba and North Korea.

The United States District Court for the District of Columbia recently had the occasion to dismiss just such a case, although the dismissal order provides only a hint at the creative prisoner jurisprudence involved:

Plaintiff, a prisoner at the United States Penitentiary Lee in Jonesville, Virginia, sues the United States under the Trading with the Enemy Act … for “the return of any and all negotiable instruments forwarded to agents of the United States of America and transferred to the Alien Property Custodian and/or deposited in the Treasury of the United States of America.”

Astute history buffs will no doubt know that the office of the Alien Property Custodian was eliminated in 1966 by President Johnson’s Executive Order 11281, so the prisoner’s claims relate to events from over 40 years ago by a now abolished federal office. It is indeed hard to imagine what individual claim he might have had arising under actions by the Alien Property Custodian that long ago. The district court simply called the claim “delusional” and dismissed it.

Still, I have to admit some curiosity over the imaginative process that led the plaintiff prisoner to spin a claim under the TWEA. Section 9 of the TWEA of claims by non-enemies who can demonstrate an interest in property seized under the act. In what seized property could the prisoner possibly have claimed an interest? The Bayer trademark? The Hamburg-American Line Building in Manhattan?