William Dalton, a resident of New Smyrna, Florida, recently agreed to pay a $25,000 fine in connection with misrepresentations he allegedly made to the Bureau of Industry and Security (“BIS”) in connections with efforts to obtain an export classification number for an underwater tracking system. Only $10,000 is immediately payable, with the remainder suspended on the condition that for a period of one year he commits no further export violations.

According to the charging documents, Dalton told BIS licensing officers that the underwater tracking system, which he was seeking to export to China, was a commercial system and that it had not been designed to meet any military specifications. In fact, the charging documents allege, the system was specifically designed to meet specifications provided by the Chinese Navy. There is no indication in the documents that the system was ever in fact exported to China and the fact that the fine was so low seems to suggest this it was not. On the other hand, it’s not clear how BIS became aware of the misrepresentation unless such an export had occurred.

Of course, if the system was exported to China, BIS would be the least of his worries. Rather, his more serious concern would be Directorate of Defense Trade Controls (“DDTC”). If the system was, as alleged, designed for the Chinese Navy, then it would be classified as USML Category XI(a)(1) and export to China would be prohibited by section 126.1 of the International Traffic in Arms Regulations (“ITAR”) and punishable by the DDTC.

You can rest assured that this will probably be the first, last and only Export Law Blog post with a link to a story in a Norwegian Marxist-Leninist-Maoist newspaper called, in English, “The Class Struggle” ( or “Klassekampen” in Norwegian). And it’s not just because we find the concept of a Norwegian Marxist-Leninist-Maoist to be sort of comic, at least in the same sense of say, a Belarusan Scientologist or a North Korean Tory. There is, trust me, a legitimate didactic purpose here.

The article in question (translated here) argues that sanctions enforced by the Office of Foreign Assets Control (“OFAC”) are prohibiting the reconstruction of schools and hospitals destroyed in the January air attacks by Israel on buildings in the Gaza Strip. It’s not at all clear how OFAC sanctions are affecting aid from non-U.S. NGOs. But the article is correct that Hamas’s status as a Specially Designated National (“SDN”) and its control of the government of the Gaza Strip broadly prohibits most transactions, humanitarian or otherwise, by U.S. persons with the Gaza Strip government.

When Hamas gained control of the Palestinian Authority after the January 2006 elections, its status as an SDN led to what I call “constructive sanctions” against the Palestinian Authority — “constructive” in the sense that the Palestinian Authority was not itself listed by OFAC as a sanctioned regime. Thereafter, OFAC issued six general licenses permitting certain humanitarian activities in areas controlled by the Palestinian Authority, provided there were no direct dealings with Hamas. After the takeover of Gaza by Hamas in 2007, the PA, then only in control of the West Bank, formed a new government without Hamas participation, and OFAC permitted all transactions with the West Bank, exclusive of any transactions with any remaining elements of Hamas in the West Bank.

My concern here is with constructive sanctions that require exporters not only to consult OFAC’s lists but also to be aware of complex geopolitical considerations in countries to which they export. Just as an exporter may not know that the CNDD-FDD controls Burundi, it may not know that Hamas controls Gaza. OFAC, of course, knows who’s running Gaza and ought to simply sanction Gaza directly rather than do so indirectly through its sanctions on the controlling political party. It is reasonable to expect exporters to consult a list of sanctioned governments, but not to research the controlling party of a country and then to see whether that party is an SDN or not.