Aug
5
Texas Company Settles Antiboycott Charges for $30k
Posted by Clif Burns at 6:57 pm on August 5, 2010
Category: General
The over-burdened Office of Antiboycott Compliance (“OAC”) at the Bureau of Industry and Security, which engaged in all of three enforcement actions in 2009, is gunning for a record this year having just released its tenth settlement agreement for 2010. The lucky victim is Dallas-based Multicam, Inc., which agreed to pay $28,800 to settle allegations of eight violations of BIS’s anti-boycott regulations.
As usual, the settlement documents are crafted so as to provide as little guidance as possible to other exporters as to the exact nature of the violations. This is probably because OAC is so overwhelmed with enforcement actions that it really doesn’t have the time to fuss with such administrative diversions as exporter education. Of course, this blog is only to happy to take up the slack from the OAC and to try to explain the nature of the violations that cost Multicam almost $30,000.
Four of the violations were for engaging in prohibited boycott activities by furnishing information about business relationships with boycotted countries in violation of 15 C.F.R. § 760.2(d). Based on a table in the settlement documents, it appears that Multicam provided to its purchasers in the U.A.E. four “agent vessel certificates” that the vessel carrying the goods was eligible to enter U.A.E ports or, in one instance, “Arab ports.”
The OAC has always considered language as to eligibility to enter ports of individual countries engaged in the Arab League boycott or alternatively to enter “Arab ports” as a coded affirmation of compliance with the boycott. An interpretation in Supplement 1 to part 760 makes clear the owner, master or charterer of the ship can supply that certificate pursuant to an exception in section 760.3(c) permitting compliance with the documentation requirements of the boycotting country. But no one else can make that certification. And here it looks like an agent for the vessel, and possibly Multicam itself, made the certification. Moreover, certification of eligibility to enter “Arab ports” rather than U.A.E. ports would fall outside the 760.3(c) exception.
The four remaining counts were for failing to report receipt of boycott requests in violation of section 760.5. According to the table attached to the charging letter, one of the documentary requirements of three letters of credit was a certificate from the “shipping company or its agents” that the vessel could enter U.A.E. ports. Section 760.5(a)(5)(viii) exempts from the reporting requirements a request for a certificate from the “owner, master or charterer” of the vessel. The “shipping company” may not be any of these three things and an agent is certainly not any of those three things. Accordingly these were reportable requests. The fourth letter of credit at issue required as documentation a certificate by the “carrier/master” or its agent that the ship could enter “Arabian ports.” Here the carrier may not be the owner of the ship. Additionally, the 760.5(a)(5)(viii) exception doesn’t apply to certifications relating to “Arabian ports” as opposed to specific countries or groups of countries. For reasons known only to OAC, “Arabian” is not a reference to a group of countries. Go figure.
For those wondering what the logic is behind the relatively low fines imposed by OAC in these cases, notwithstanding that the office has the power to impose fines of p to $250,000 per violation, it’s simple. OAC wants to keep the fines sufficiently low that the fine is less than what it would cost to litigate the fine. There is considerable question whether the antiboycott regulations are still in force after the failure of Congress to renew the Export Administration Act. The regulations could only be in force if they can be extended by the President pursuant to the provisions of the International Emergency Economic Powers Act. And it’s hard to see how the Arab League boycott is an “unusual and extraordinary threat … to the national security, foreign policy, or economy of the United States.” OAC clearly doesn’t want to have to argue this in court.
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7 Comments:
Clif: While I certainly agree that it is questionable, at the very best, whether the expiration of the Export Administration Act pursuant to a clear and unambiguous provision of the statute constitutes an unusual and extraordinary threat originating from outside the United States sufficient to invoke IEEPA, there is a more fundamental problem: As Eric Hirschhorn himself has written in the old Boycott Law Bulletin, the Berman Amendment excludes from IEEPA any prohibition on the provision of information unless the information is controlled under sections 5 or 6 of the EAA. The prohibition on furnishing presumed boycott related information is found in Section 8. Thus even if the rest of the EAR may be extended under the authority of IEEPA, the prohibitions on furnishing boycott-related information cannot. I note that the Berman Amendment was expanded in 1994, i.e., after Eric wrote his articles in the BLB, by the Free Trade in Ideas Act, so now there can be no doubt that IEEPA cannot serve as statutory authority for the information furnishing prohibitions. Furthermore, the information furnishing prohibitions can no longer withstand Constitutional scrutiny: The “commercial speech exception” to the First Amendment upon which the Eigth Circuit based its decision in the Baldridge case, which upheld the antiboycott regulations against a First Amendment challenge, has been significantly restricted by a series of Supreme Court cases since then (e.g., Rubin v. 44 Liquors).
I admit to being a novice in this area, so have queries more than comments. can anyone who contributes to this blog help?
If I read IEEPA correctly, it appears that both a national emergency must be declared AND an unusual and extraordinary threat must exist related to that declared national emergency before the President may permissibly exercise the powers granted to him under that Act:
1701(b) The authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose. Any exercise of such authorities to deal with any new threat shall be based on a new declaration of national emergency which must be with respect to such threat.
Later clauses allow or require the Presidential authority to expire in conjunction with the national emergency subsiding, such that an extant national emergency seems to be a condition precedent to every exercise of the President’s authority under IEEPA.
Without addressing whether there is an unusual and extraordianry threat, is there now in effect a declared national emergency relating to anti-boycott measures such that continuing enforcement by the President is authorized? Is there a declared national emergency with respect to any of the other measures addressed by the EAA ?
@Corporate Adviser: Executive Order 13,222, as renewed by a Presidential Notice issued on August 14, 2009, 74 Fed. Reg. 41,325, is the relevant document and it specifically references the anti-boycott rules. However,whether the Arab League boycott is a national emergency posing a threat to the U.S. within the meaning of IEEPA seems unlikely.
@Corporate Adviser: Clif is too generous to the government. While EO 13222 and its progeny do indeed declare that the expiration of the EAA by its express terms is a national emergency necessitating its resurrection by executive branch and administrative agency fiat, it is clearly not an event originating outside the United States within the meaning of 50 USC 1701, unless you consider the District of Columbia and Capitol Hill to be foreign territory (which some folks in these parts in fact do and have for the past 150 years). The two Circuits sustaining EO13222 both hang their hat on a couple of sentences in the House report. This runs contrary to a clear line of Supreme Court cases holding that legislative history can not empower an agency without a textual statutory basis. “We are not aware of any case . . . in which we have given authoritative weight to a single passage of legislative history that is in no way anchored in the text of the statute.†Shannon v. United States, 512 U.S. 573, at 583 (1994). Other Circuits have followed Shannon in the context of other statutes. I should note that there are passages in in the mark up session of the EAA in which the floor manager said he meant for the sunset provisions of the EAA to have real effect, so the legislative history ain’t so clear as the Yankee government makes it out to be.
Nor is foreign demand for our product an sudden or extraordinary event. It is a constant that the Framers considered to be a good thing. That’s why they made it unconstitutional for either states of the federal government to tax exports. I note that the Supremes in Regan v. Wald recognized that the change in the Cuban travel regulations issued by the Reagan Administration could not be sustained as an emergency, and could be sustained only on the basis of the grand-father clause for past sanction issued under TWEA. Of course, DoJ regularly misrepresents some dicta as the holding in Wald, even though the Wald Court itself stated that its ruling was limited to the facts of that case.
If the foregoing comments are on target (and I believe they are), perhaps – at long last – enough members of Congress will figure out that the EAA should be renewed.
I won’t try to weigh in on the viability of the antiboycott provisions of the EAR under IEEPA, though the arguments presented here are intriguing and thoughtful.
Rather, I wanted to say that I cut my teeth in export controls at OAC, my first job after law school. I was there from 1991 – 1994, arguably during the office’s heyday, and I was involved heavily in some of their more significant cases, including Martin Brothers, Baxter, and L’Oreal.
All other considerations aside, it was great experience for a novice practitioner, handling extremely esoteric (almost Talmudic) questions of interpretation, and taking cases all the way from initial investigations to on-site audits to pre-charging letters through to negotiated settlements.
I worked for Bill Skidmore and Dexter Price, two wonderful gentlemen who took the time to mentor me. Ned Weant, the current director, was a colleague back then and also is a solid guy, with the right temperament for such a politically intriguing position. I can also say that I enjoyed my colleagues there, some of whom remain close friends.
Whatever else you could say about the antiboycott rules, I always perceived them as a sign of political support for Israel. And in that context, I’m glad they’re still viable to some degree.
That said, I agree with the notion that OAC stays under the radar to avoid the prospect of litigating some of the thornier issues.
Sorry, just reminiscing…. But I appreciate the thought that goes behind the legal analysis here in the comment section.
Regarding Bill Skidmore and Dexter Price: Amen.
