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Archive for February, 2011

Feb

15

OFAC Fines Bank for Facilitating Foreign Transaction with Iran

Posted by Clif Burns at 9:24 pm on February 15, 2011

Trans Pacific National Bank recently agreed pay $12,500 penalty to the Office of Foreign Assets Control (“OFAC”) to settle charges that it had facilitated transactions by a foreign person where the transactions by the foreign person would be prohibited if performed by a United States person. The facilitation consisted of initiating two wires for one of its account holder relating to a transaction between a foreign person and Iran. The foreign transaction itself did not violate U.S. law.

The recipient of the wire was not located in Iran. In fact, the only reference to Iran with respect to the wires were entries in the instructions that in one case referenced “Iran materials” and in the other referenced “Iranian materials.” The lesson to be learned here is that all parts of a wire must be screened for any reference, no matter how oblique, to a sanctioned country. In citing mitigating factors, OFAC noted that the bank had enhanced its screening procedures to require that the “memorandum information of each wire transfer also be reviewed for OFAC sanctions references.”

(I missed this latest round of OFAC civil penalties information on February 1 because OFAC has inexplicably stopped announcing the monthly release of civil penalty information on the “Recent Actions” page of its website. Concomitantly, OFAC appears to have stopped sending email announcements of the release of this information, or at least I didn’t get that email this month.)

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Feb

14

More APO/FPO Export Confusion

Posted by Clif Burns at 9:34 pm on February 14, 2011

Category: AES • DDTC

APO Postmark If there is anything that qualifies as a true urban legend in the export areas, it’s the surprisingly widespread belief that shipments to overseas APO and FPO addresses aren’t exports. Of course, that’s no more true than the belief that the fate of a rider on an equestrian statute can be determined by the position of the horse’s hooves. (Not.)

The International Traffic in Arms Regulations (“ITAR”) aren’t uniformly clear in all aspects, but the definition of export is pretty clear in this respect. Section 120.17(a) defines export as “sending or taking a defense article out of the United States in any manner.” It doesn’t say “in any manner except by mail to an APO or FPO address.” And if you ask DDTC this question, they will tell you that an APO address outside the U.S. requires an export authorization by license or exemption like any other shipment that leaves the United States.

This urban legend is sufficiently widespread that even one government agency has propagated this bogus notion. And not just any agency but an agency itself intimately involved in dealing with exports — the U.S. Census Bureau — has said that APO and FPO shipments aren’t exports. As recently as December 22, 2010, Census said on its own blog, in a post that has now been flushed down the memory hole, that the “State Department does not license shipments to APO or FPO addresses.”

But we’ve heard from another exporter that it gets worse. According to that exporter, the mandatory Automated Export System does not allow you to enter an ITAR license number when shipping an item to an APO address. Part 523 of the USPS’s International Mail Manual says this:

Goods mailed to APO/FPO/DPO addresses are not subject to the Foreign Trade Regulations. Accordingly, customers are not required to file electronic export information via the U.S. Census Bureauâ€™s Automated Export System or AESDirect Web site for such mailings, and they do not need to present a Proof of Filing Citation, AES Downtime Citation, or Exemption and Exclusion Legend.

The same exporter says that DDTC is saying in such a case that the exporter must provide its own notification of the export to DDTC when it can’t be done through AES. Although this is a nice courtesy to DDTC, there is nothing in the ITAR that requires the exporter to provide this notice to ITAR in these cases.

But there’s a larger point here: if the government can’t figure out its own export regulations, why should it expect anyone else to figure them out?

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Feb

10

Oh Where, Oh Where, Has My CCL Gone?

Posted by Clif Burns at 9:23 pm on February 10, 2011

Category: BIS • CCL

Waah Let’s say that you were an agency like the Bureau of Industry and Security (“BIS”) and you had a huge and complex list of sensitive items that needed a license for export. Now, unless your administrative goal was to collect a bunch of fines for illegal exports, you would make that list easily and readily available, wouldn’t you? You would think.

But sometime in the past several days our friends at BIS removed the old Commerce Control List (“CCL”) that was linked on their site, and replaced it with a new one that is, kindly put, an unusable mess. Imagine the CCL as one big file with all the ECCN’s smushed together with no index, no table of contents, no links, no page numbers, no bookmarks, nothing but a gigantic run-on webpage. Well, you don’t have to imagine. Click here and behold the new format of the CCL on the BIS website

One mortified exporter, who was kind enough to bring this mess to my attention called BIS, imagining that this was just some temporary mistake that would soon be fixed. The exporter spoke with a BIS Export Counselor who explained that the new format was here to stay. He also conceded that the new format was less easy to use for people trying to classify items. Oh, great.

However, all is not lost. You can find the CCL in its original online format here at Export Law Blog by clicking on the link to the EAR in the right column or clicking here. We can’t guarantee how long the GPO will keep this version of the EAR up-to-date, but for the moment you can still consult the CCL in the format you’ve come to know and love. You can also, for a paltry $191, buy the 2010 dead tree edition from GPO here. Having a hard copy of the entire EAR in your office is sure to impress your friends who probably have no idea just exactly how large it is.

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Feb

8

Once More Unto the Breach

Posted by Clif Burns at 8:35 pm on February 8, 2011

Category: BIS • Deemed Exports

The Bureau of Industry and Security (“BIS”) previously did battle with cloud computing in an advisory opinion it released in January 2009. Almost two years later BIS charges into battle yet again, and yet again there is no clear victor.

In the 2009 advisory opinion, BIS noted that the provider of cloud computing services was only providing a service and was not exporting data or technology. Only the customer of the service could be the exporter, and only the customer of the service would be in export hot water if the data or technology was transferred in violation of the Export Administration Regulations. This logic seemed a bit at odds with the normal concept that providing access to technical data to foreign nationals was an export, but let’s not trouble ourselves here with minor details. A sly little sentence dropped at the end of the opinion also reminded everyone that the Office of Foreign Assets Control (“OFAC”) might have concerns with the provision of cloud computing services to blocked persons or embargoed destinations even if BIS did not.

Now, two years later, BIS confronts the related and more difficult question of what cloud computing service provides ought to do about their own foreign national IT staff who might have access to controlled technology placed on the cloud by the service’s customers. Not to worry, says the opinion, because the cloud computing service provider isn’t an exporter and thus can’t be a deemed exporter:

Because the service provider is not an “exporter,” [it] would not be making a “deemed export” if a foreign national network administrator monitored or screened, as described above, user-generated technology subject to the EAR.

But the problem with this logic is that the person who gives a foreign national access to controlled technology is a deemed exporter even if he isn’t an exporter. That’s why they call it a “deemed” export.

Of course, none of this addresses the 900-pound gorilla in the room which is, of course, the user of the cloud service and its liability for using a cloud service where foreign IT personnel have access to the controlled data that the user may have placed on the cloud. And don’t think the problem starts and ends with cloud computing. The Internet, is also a cloud of sorts linking various servers together to permit transit of data to its final destination. Any of those servers may have foreign network administrators who could use packet sniffers to see controlled technical data. Worse yet, the routing servers may be located in foreign countries even when the sender and the receiver are both located in the United States.

What I think we’d like to hear is what BIS and DDTC think about this. Or maybe not.

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Feb

7

Time For Your Kid To Have An Export Compliance Program

Posted by Clif Burns at 8:50 pm on February 7, 2011

Category: General

Shuttle Tile As the Space Shuttle is headed for the mothballs, NASA wants to pass out parts of the shuttle as souvenirs. Asbestos-laden tiles as souvenirs. To school kids. ITAR? Oh, don’t bother us with petty little details.

Needless to say, the tiles are in Category XV(e) of the United States Munitions List (“USML”), and giving access to those tiles to anyone who is not a U.S. citizen or permanent resident is a rather big no-no. Not to thumb its nose completely at the ITAR, NASA lawyers have come up with a document for the teacher to sign acknowledging “that all artifacts are subject to Export Control requirements” and further acknowledging “my responsibility for these controls at time of transfer of the artifact.”

Well, I’m glad we’ve taken care of that! I’m sure that most school teachers are intimately acquainted with the ITAR and will make sure that all exchange students are banished from the classroom when the shuttle tile is brought out for show and tell. Oh, and let’s hope we don’t have any kids in the room from China or everybody is going to jail.

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