Archive for December, 2014

Dec

23

How the OFAC Stole Christmas

Posted by at 2:03 pm on December 23, 2014
Category: Cuba Sanctions • OFAC
Santa Flanked by F-16

A spokesman for the Treasury Department’s Office of Foreign Assets Control (“OFAC”) told Export Law Blog this morning that discussions between OFAC and the North Pole over Santa Claus’s Christmas Eve itinerary had once again broken down and were not expected to be resumed before Santa’s scheduled departure on December 24 at 10 pm EST.

The dispute arose from a dilemma that the U.S. sanctions against Cuba posed for Santa’s planned delivery of toys to children in Cuba. If Santa delivers toys for U.S. children first, there will be toys destined for Cuba in the sleigh in violation of 31 C.F.R. § 515.207(b). That rule prohibits Santa’s sleigh from entering the United States with “goods in which Cuba or a Cuban national has an interest.” On the other hand, if Santa delivers the toys to Cuban children first, then 31 C.F.R. § 515.207(a) prohibits the sleigh from entering the United States and “unloading freight for a period of 180 days from the date the vessel departed from a port or place in Cuba.”

A press release from the North Pole announced that the OFAC rules left Santa no choice but to bypass the children of the United States this Christmas. A spokesman from OFAC warned that if Santa attempted to overfly the United States, his sleigh would be forced to land and his cargo seized. He continued:

We know that the outcome is harsh, but we cannot allow the Cuban regime to continue to be propped up by Santa’s annual delivery of valuable Christmas toys to Cuban children. We also note that the proposed rule that might in the future allow entry into the United States by sleighs that were on humanitarian missions in Cuba is not yet in effect and may still be overruled by Congress.

Congressional leaders did not return our calls.

This post is an annual tradition and appeared previously in 2007, 2008, 2009, 2010, 2011, 2012 and 2013 in slightly altered form. Alert readers will notice a small addition to this year’s post.

Export Law Blog would like to take the opportunity of this post to extend its best holiday wishes to all of its readers. Posting will be light between now and the end of the holidays.

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Copyright © 2014 Clif Burns. All Rights Reserved.
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Dec

22

A Lump of Coal in Crimea’s Stocking

Posted by at 5:42 pm on December 22, 2014
Category: Russia Sanctions

Foros Church near Yalta by Kiyanka (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3A%D0%A6%D0%B5%D1%80%D0%BA%D0%B2%D0%B0_%D0%92%D0%BE%D1%81%D0%BA%D1%80%D0%B5%D1%81%D1%96%D0%BD%D0%BD%D1%8F_%D0%A5%D1%80%D0%B8%D1%81%D1%82%D0%BE%D0%B2%D0%BE%D0%B3%D0%BE_%D0%A4%D0%BE%D1%80%D0%BE%D1%81_01.jpgLast Friday, the White House tied a ribbon around a big lump of coal and delivered it to Crimea in the form of an executive order that institutes a comprehensive embargo against that region of Ukraine. The order prohibits all exports of goods and services to, and all imports of goods and services from, the Crimea region of Ukraine with the exception of agricultural commodities, medicine, medical supplies, and replacement parts as described in a General License issued at the same time. The Executive Order, however, raises more questions than it answers, leaving aside the obvious policy question of how imposing sanctions on the people of Crimea furthers any legitimate policy interests.

Notably absent from the order are any of the typical exceptions to sanctions regimes, such as the exception for hardware and software for personal communications over the Internet. As of the date of the Executive Order, it is now illegal for Google to provide Gmail to anyone in Crimea. Facebook can’t provide messaging services to and from Facebook members in Crimea. The problem, of course, is how Google or Facebook can determine where a user is located given that IP addresses assigned to Crimea will, in most instances probably, still indicate a location in Ukraine for obvious historical reasons.

This locational ambiguity exists not only in the virtual world of the Internet, but in the brick and mortar physical world as well. Suppose a merchant receives a mail order from Nikolai Gogol, 19 Haharina Street, Sudak, Russia. Do exporters have to look up every address in Russia before sending packages? (Sudak is a resort city in Crimea).

Finally, and not surprisingly, although the Crimea order was immediately effective, not everyone has received the message yet. One U.S. car company was happy to book me a car rental just a few moments ago at the Simferopol Airport in Crimea for mid-January. (I was offered a good rate too!) Needless to say, I did not push the confirm reservation button, so perhaps it was all a tease and I would have gotten the hook if I had actually let them charge my credit card.

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Dec

17

Don’t Light Up Those Cubans Just Yet

Posted by at 8:35 pm on December 17, 2014
Category: Cuba Sanctions

Obama Announces Changes in Cuba Regulations from White House Youtube account [Public Domain]President Obama today announced his intention to make some changes in U.S. sanctions on Cuba. Although these changes fall far short of lifting the embargo completely, the usual suspects on the Hill have already started the wailing and gnashing of teeth, vowing to do whatever they can to thwart these changes, convinced that forcing Cubans to drive 60-year-old cars will cause them, sooner or later, to rise up and throw out the current regime.

The changes, as described in this White House fact sheet, however, hardly seem to justify the fit that Marco Rubio is pitching right now.

  • Remittance levels will raised from $500 to $2000 and the remittance forwarders no longer will require a license to forward money to Cuba
  • Exports of “building materials for private residential construction, goods for use by private sector Cuban entrepreneurs, and agricultural equipment” will be permitted
  • General licenses will be issued for travelers in the 12 current categories of authorized travel (which do not include going to Cuba for the fun of it or for the daiquiris)
  • Travelers can come back with $400 in goods, of which only $100 can be alcohol or tobacco products
  • Banks can open correspondent accounts in Cuban financial institutions to facilitate authorized transactions
  • The rules will be revised to make clear that sales of cash against documents of title (e.g., bills of lading) are permitted for authorized exports and to remove the old rule that cash had to be paid prior to the shipment of the goods.

The question posed by all the noise from Congress is, of course, how far can the President go on his own?  For example, the fact sheet states that the U.S. will permit foreign vessels that enter Cuban ports to engage in humanitarian trade may immediately thereafter enter U.S. ports.  However, section 6005(b) of the Cuba Democracy Act states that vessels that enter into Cuban ports to engage in “trade in goods or services” may not enter a U.S. port for 180 days without a license.  Apparently, the change in vessel policy appears to depend on the argument that vessels that enter Cuban ports for humanitarian trade are not involved in the trade of goods or services.

Of course, the 800-pound gorilla here is section 204 of the Helms-Burton Act which purports to prohibit the President from suspending the economic embargo on Cuba unless a “transitional government” is in place in Cuba.  The Act, however, never defines what constitutes suspending the embargo.  So, in theory, the President can remain in compliance with section 204 if he lifts all restrictions on Cuba other than a ban on exporting Chia Pets and Whoopee Cushions to Cuba.

Needless to say, the ink on the fact sheet was scarcely dry before OFAC released a statement that none of these changes will be effective until OFAC revises its regulations to implement these changes.  No indication was given as to how long this would take, other than that it would occur in the “coming weeks.” But given the agency’s often sluggish pace, the “coming weeks” might be quite far off.  Don’t expect any Cohibas under your Christmas tree this year.

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Dec

16

The Shoot Blanks, Don’t They?

Posted by at 8:39 pm on December 16, 2014
Category: DDTC

Mockingjay Part 1 Publicity Still via http://mockingjay.net/wp-content/uploads/2014/11/15204888-25699313-thumbnail.jpg [Fair Use]In case you were wondering, rifles that shoot blanks are still rifles and are covered by Category I of the United States Munitions List.  So, film producers shooting at foreign locations may need to get from the State Department’s Directorate of Defense Trade Controls licenses to export these movie props to the foreign location.  Apparently, the producers of the Hunger Games, which exported Herstal P90s and F2000s to France and Germany, got tangled up in U.S. export laws and made things unnecessarily difficult for themselves.

According to the Hollywood Reporter:

Due to the U.S. legal restrictions, the guns couldn’t be sent off to Europe and then hop from country to country, causing complications for the multi-national shoot. “We can’t take the firearms and ship them out to France, and then go from France to Germany with them,” says Weschta. “We could do it, but they would have to come back here [to the U.S.] first and then go back out anyway.”

Ultimately, two discrete batches were sent — one to France, and one to Germany. … “The guns from ISS had to go back to the United States because of the temporary export license that was for France only,” [a prop handler for the film] says.

Of course, there is no reason why a temporary export license (DSP-73) can’t cover multiple destinations. The instructions for the DSP-73 application state:

Requests for temporary export of hardware may be submitted for more than one foreign destination. However, when the country(s) of ultimate destination are geographically dispersed, the applicant should submit a separate application for each major geographical region (e.g. Africa, East Asia, Europe, etc.).

Interestingly, the instructions for a DSP-73 application also include a requirement that applications for temporary exports of firearms for use in motion pictures provide “the details of the security arrangements in the foreign country.” Obviously DDTC is apparently used to handling request to export guns to shoot blanks on foreign movie sets.

If the Hunger Games team just obtained a DSP-73 for France, that was their own fault. Perhaps that is what comes from having unpaid interns fill out the license applications.

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Dec

10

Expressio Unius Est Exclusio Alterius: E Pluribus (License Conditions) Unum

Posted by at 9:33 pm on December 10, 2014
Category: BIS

By Daderot (Own work) [CC0], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APatent_quote_-_United_States_Department_of_Commerce_-_DSC05103.JPGThe Bureau of Industry and Security has announced that, starting on December 8, a new license condition will appear on all validated licenses. That condition reads as follows:

Unless limited by a condition set forth below, the export, reexport or transfer (in-country) authorized by this license is for the item(s), end-use(s), and parties described in the license application and any letters of explanation. The applicant is responsible for informing the other parties identified on the license, such as ultimate consignees and end-users, of the license’s scope and of the specific conditions applicable to them. BIS has granted this license in reliance on representations the applicant made in the license application, letters of explanation, and other documents submitted.

The laudable purpose here is to get rid of the silly license conditions that simply reiterate existing requirements of the Export Administration Regulations, such as Part 744’s prohibition on nuclear end uses. BIS is concerned about possibility that the existence of, say, the no nuclear use condition will give someone the idea that it is okay to allow the exported item to be used in the production of chemical weapons in violation of section 744.4 of the EAR. Expressio unius and all that.

But I wonder, and the BIS announcement does not say, whether the language quoted above will replace the following condition that is included, in one form or another, on all licenses:

No resale, transfer, or reexport of the items listed on this license is authorized without prior authorization by the U.S. Government.

The issue here is an odd lacuna in the EAR. If you look through the General Prohibitions, there is no explicit prohibition against in-country transfers of items exported under license. The prohibitions on certain exports and re-exports do not, by definition, reach in-country transfers. Rather the General Prohibitions only address in-country transfers in connection with denial orders (General Prohibition 4) and illegally exported items (General Prohibition 10). Instead, the way that in-country transfers are prohibited is through General Prohibition 9, which prohibits violation of any license condition, such as the one quoted above, which makes clear that no in-country transfer can occur with U.S. Government approval.

The new license condition is worded in such a way that it seems possible that it will replace the standard condition prohibiting resale, transfer or re-export without government approval. But if it does, BIS will have unintentionally opened the door to unlicensed in-country transfer of items exported under license.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

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