ExportLawBlog

Archive for the ‘BIS’ Category

Dec

5

Don’t Go Giving BIS Any Ideas

Posted by Clif Burns at 6:04 pm on December 5, 2011

Category: BIS • DDTC

Department of Commerce Oh, the things you’ll learn when you read the documents that companies file with the Securities and Exchange Commission:

In March 2011, BlastGard’s management team officially assumed operational control of HighCom. Since this time we have accomplished a number of key compliance tasks and finalized manufacturing agreements with several key partners. As stated in the paragraph above, BlastGard has received official communication from the U.S. State Department that HighCom’s export authority has been reinstated. In addition to this, BlastGard has completed registration through both the Directorate of Defense Trade Controls as well as the Bureau of Industry and Security (“BSI”). The purpose of these registrations is to allow BlastGard control over the export management and compliance program moving forward.

Completing registration with the Bureau of Industry and Security is quite an accomplishment — considering the BIS (or is it BSI?) doesn’t have a registration process. Perhaps they mean that they’ve gotten a PIN for the SNAP-R system? And we’ll award the coveted “Reader of the Week” prize to anyone who can figure out what the last sentence in that quotation means.

All kidding aside, I still am somewhat surprised that BIS hasn’t gotten on the needless user fee gravy train yet along with DDTC. It’s probably only a matter of time before BIS realizes that there’s gold in them registration hills, and then companies will be able to boast in press releases that they’ve been certified as export-compliant and super cool by BIS in addition to having been certified by DDTC.

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Nov

17

Ingrate

Posted by Clif Burns at 6:50 pm on November 17, 2011

Love Fest This blog reported back in January on the removal of various Indian companies and organizations from the Entity List. This removal eliminated the requirement for licenses for certain exports to the removed companies that might not have otherwise required licenses.

An Indian website today quoted an executive of one of these removed groups who was, it seems, unenthused about the impact of the removal:

“I do not think removal of some DRDO labs from the Entity List by the U.S. has changed anything for us. The American export regulations for dual-use technologies and items need stringent clearances from their commerce and defence departments,” Saraswat [Chief of the Defence Research and Development Organisation (“DRDO”)] said when asked if the American policy announced during US President Barack Obama’s visit last November and implemented in January this year had helped India in anyway.

“Whether or now we are with Missile Technology Control Regime (MTCR), the export rules and regulations apply for us. We have to go through the process. It is not an easy process and it becomes difficult to acquire them,” he said.

“Our experience has been these regulations make it more difficult,” he added.

If that’s the case, perhaps Saraswat won’t mind if the U.S. puts DRDO back on the Entity List.

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Nov

15

Pound of Flesh Demanded From Export Defendant

Posted by Clif Burns at 10:30 pm on November 15, 2011

Category: BIS

Chasma Nuclear Power Plant There was more fallout from the PPG case today. Xun Wang, who was the former manager of the Shanghai subsidiary of PPG, pleaded guilty to one count of conspiring to violate the International Emergency Economic Powers Act in connection with the unlicensed export of EAR99 paint to a party on the Entity List maintained by the Bureau of Industry and Security (“BIS”). As a result of the plea, Wang faces a possible sentence of five years in jail and a $250,000 fine.

At the same time, Wang settled civil penalty charges brought against her by BIS for the same exports. Under that agreement, Wang has agreed to a civil penalty of $200,000 and a five-year denial order. Under the denial order, Wang will be forbidden from engaging in any transactions involving the export of items from the United States. Of course, a five year jail sentence will also accomplish the same goal, since I doubt that federal prisoners can engage in export transactions from jail.

Whatever one thinks of the seriousness of the charges against Wang, wacking her, or anyone else, with both criminal and civil penalties seems to be overkill. There used to be this quaint notion that jail time was the ultimate penalty and was designed to assure that the defendant paid his or her debt to society. But now that is just the starting point, with every other penalty piled on top for good measure. Frankly, I won’t be surprised when I read of an export defendant subjected to jail time, criminal fines, civil fines, denial of export privileges, permanent suspension of his or her driver’s license, three thousand push-ups, five weeks in the stocks in Times Square, eight weeks in a re-education camp, and a pound of flesh.

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Nov

2

Well That Didn’t Take Long, Did It?

Posted by Clif Burns at 10:58 pm on November 2, 2011

Category: BIS • Cuba Sanctions

ABOVE: Ileana Ros-Lehtinen

On October 19 this blog reported on a hearing held by the Senate Energy and Natural Resources Committee with respect to efforts that the U.S. government and U.S. companies are taking to respond to and mitigate potential ecological disasters that might stem from planned exploratory drilling by non-U.S. companies in Cuban territorial waters. The chairs in the hearing room had barely cooled off before Ileana Ros-Lehtinen, Chair of the House Foreign Relations Committee, fired off a letter to the Obama administration criticizing any efforts by the federal government to minimize the impact of the Cuban drilling on the ecology of nearby U.S. coastal waters. Because the drilling is going to occur in all events, complaining about damage containment on U.S. shores seems to be a classic case of cutting off our own nose to spite Cuba’s face.

Chairwoman Ros-Lehtinen’s tenure on the Foreign Relations Committee has, sadly, not caused her to learn much about U.S. export laws, as we’ve noted before, and this letter on Cuban drilling continues to demonstrate her confusion about applicable export and sanctions laws. For starters, the Chairwoman seems to believe that the lapsed Export Administration Act is still in force when she demands an investigation by the Bureau of Industry and Security (“BIS”) as to whether use of a Chinese-built rig in the drilling violates the “Export Administration Act.”

The de minimis rule also appears to have confused Ros-Lehtinen:

We are concerned by reports that the Scarabeo 9 may have been designed specifically to avoid U.S. economic sanctions against Cuba. While the EAA and the Export Administration Regulations (EAR) generally prohibit virtually all exports and reexports of U.S.-origin goods, software and technology to Cuba, we need clarity on how the Administration is applying the sanctions and EAR to foreign produced items incorporating 10 percent or less controlled U.S. content

That is not a difficult question to answer: the sanctions and the EAR do not apply to restrict export to Cuba of foreign-produced items incorporating 10 percent or less controlled U.S. content. There’s no need to write a letter to President Obama to get that answer; it’s clearly stated in the EAR.

But the Chairwoman saves the best for last:

The Export Administration Regulations clearly state that the only items allowed to be exported to Cuba are donations of medical equipment, agricultural exports, and telecommunications equipment. Thus, even if the de minimis rule does not [sic] apply, the broader prohibitions against exports to Cuba must still be enforced.

Where exactly to start with this? Section 746.2(a)(1) of the EAR permits many more exports other than the three mentioned by Ros-Lehtinen, including medicine, computers, disk drives, digital cameras, televisions, radio receivers, recording devices, baggage, gifts, humanitarian donations, aircraft on temporary sojourn, spare parts for foreign-made equipment and much more. More importantly, any listing of permissible exports in section 746.2(a)(1) does not overrule the explicit provisions of the de minimis rule found in section 734.4 of the EAR which specifically permits re-exports to Cuba of items with 10 percent or less U.S.-origin controlled content.

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Oct

31

Freight Forwarder Settles Anti-Boycott Charges

Posted by Clif Burns at 8:13 pm on October 31, 2011

Category: BIS

JAS Freight forwarder JAS Worldwide recently agreed to pay $19,200 to the Bureau of Industry and Security to settle charges that it provided prohibited information relating to the Arab League boycott of Israel. Two of the charges relate to invoices that contained a “Shippers Declaration” that the goods in the invoice are not of Israeli origin and do not contain Israeli materials.

Although these statements are fairly unambiguous violations of the anti-boycott regulations, it is significant that BIS is going after the freight forwarder here and not the shipper. According to the company’s website, the company moves annually over 100 million kilos by air and 260,000 containers by ocean. The BIS settlement suggests that freight forwarders need to scour through all shipping documents to see whether any of them contain information prohibited by the anti-boycott regulations, a burdensome, time-consuming, and, frankly, pointless task given that BIS can fine the shipper who presumably does read all of the relevant shipping documents.

Of course, BIS fines for anti-boycott violations remain well below an amount that would give an incentive to those hit with the fines to mount an administrative and judicial challenge. This is understandable given that there is considerable question as to whether the anti-boycott regulations, enacted under the now-lapsed Export Administration Act, can be validly extended by an executive order under the International Economic Emergency Powers Act (“IEEPA”), which is the only argument for their continued validity.

The third charge against JAS is, frankly, puzzling. The offending statement, as quoted in the charging documents, is this statement in the Certificate of Insurance:

The undersigned does hereby certify on behalf of the above insurance company, that the said company has a duly qualified and appointed agent or representative in Kuwait, whose name and address appear below.

Yep. That’s the offending statement. Apparently now it is illegal to tell other companies that you have an agent in Kuwait. Or maybe to reveal the agent’s address. Go figure.

One can only assume that the Certificate of Insurance said something naughty other than the quoted statement; you’ll just have to guess what it was. I suppose when you’re only able to get about $20,000 in each enforcement action, BIS doesn’t really feel it’s worth it to fuss around with the documents too much to guarantee their accuracy.

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