ExportLawBlog

Archive for the ‘BIS’ Category

Oct

19

Would U.S. Export Laws Hinder Efforts To Mitigate Cuban Oil Spills?

Posted by Clif Burns at 7:38 pm on October 19, 2011

Offshore Oil Platform The Senate Energy and Natural Resources Committee held a hearing yesterday, reported here by the Oil & Gas Journal, on the possible impact of exploratory oil drilling by non-U.S. companies in Cuban territorial waters in the Gulf of Mexico. Michael R. Bromwich, Director of the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) tried to assure the Committee that U.S. companies could respond quickly to an oil spill in Cuban waters notwithstanding the U.S. embargo on Cuba.

He said that the US Departments of Commerce and the Treasury have a long-standing practice of providing licenses to address environmental challenges in Cuban waters, and that DOCâ€™s Bureau of Industry and Security has issued a number of them for booms, skimmers, dispersants, pumps, and other equipment and supplies to minimize environmental damage from a spill. â€œI believe the Commerce and Treasury departments would move quickly to approve more licenses if needed,â€ he said.

Not all witnesses before the Committee shared Bromwich’s rosy view of our ability to respond to a Cuban spill:

Paul A. Schuler, president of Clean Caribbean & Americas, an international spill response cooperative operating in the region, said only three US companies have such licenses that must be renewed every 1-2 years. â€œIt needs to be handled in advance, and not as an ad hoc action as part of a response to an oil spill,â€ Schuler said. â€œOthers would have to go through the entire licensing process, and my experience has been that it has not been quick.â€

I suspect that exporters with experience obtaining licenses from BIS and OFAC might also share Schuler’s scepticism about whether the agencies could move quickly on licenses by U.S. companies to provide clean-up services in Cuban waters (which would require an OFAC license) and export equipment to be used in that clean-up effort (which would require a BIS license).

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Oct

13

Criminal Export Charges Settled with $1.25M Fine and 10-Year Denial Order

Posted by Clif Burns at 7:55 pm on October 13, 2011

Category: BIS • China

Iran Laptop New-York based electronics wholesaler Earlier this year we reported on an indictment against New-York based electronics wholesaler Sunrise Technologies and Trading Company (â€œST&TCâ€) and its president Jeng â€œJayâ€ Shih for exporting laptops to Iran by transshipping them through the UAE. Last Friday, the Department of Justice, along with officials of the Bureau of Industry and Security (“BIS”) and the Office of Foreign Assets Control (“OFAC”) announced that Shih and his company pleaded guilty to the export charges in exchange for an agreement to pay a $1.25 million criminal fine and to consent to a suspended 10-year export denial order. No jail time is contemplated by the plea agreement.

The suspended export denial order is contained in the BIS settlement documents. The suspension is conditioned on the defendants complying with the plea agreement, i.e., paying the $1.25 million fine, and on the defendants not committing any export violations during the 10-year period of the suspended denial order.

Although the judge could theoretically impose jail time during sentencing scheduled for January 13, 2012, that seems unlikely. The absence of jail time and the suspended denial order are unusual in cases like this. I can only speculate that the relative leniency of the penalty, particularly the absence of jail time, is due to a deficiency in the government’s case which I pointed out in my initial posting on the indictment. Although the government had evidence that Shih knew that the computers that he was shipping to the UAE were ultimately destined for Iran, he also said in conversations with the government’s informant that he believed his actions were legal because he was only exporting the items to the UAE. A criminal export violation requires knowledge by the defendant that his actions are illegal and it appears that was going to be difficult to prove here.

Obviously this is only speculation on my part and there may have been other factors involved in the lenient treatment of Mr. Shih and his company. Still, my speculation seems pretty reasonable in this case.

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Oct

5

Just Because It’s Not Double Jeopardy Doesn’t Mean It’s Fair

Posted by Clif Burns at 9:15 pm on October 5, 2011

Category: BIS • Iran Sanctions • OFAC

ABOVE: Flowserve HQ

The Bureau of Industry and Security (“BIS”) announced on Monday that Texas-based manufacturer Flowserve agreed to pay $2.5 million to settle charges that the company and its foreign affiliates to settle BIS’s allegation of 288 violations of the Export Administration Regulations, including exports of items to Iran, Syria and other sanctioned countries. What makes this a particularly hard kick in the nether regions by BIS is that Flowserve voluntarily disclosed these violations. I suppose this is considered leniency by BIS because it could have fined Flowserve $72 million dollars.

The BIS settlement with Flowserve GB Ltd. (“Flowserve UK”), Flowserve’s British subsidiary, which is one of the dozen Flowserve settlements posted by BIS on its electronic FOIA page, is particularly instructive. Two of the counts against Flowserve GB relate to Flowserve products which Flowserve UK ordered from the U.S. and then transshipped to Iran:

Pursuant to Section 560.204 of the [Iranian Transaction Regulations], maintained by the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), an export to a third country intended for transshipment to Iran is a transaction subject to the ITR and requires OFAC authorization. Pursuant to Section 746.7 of the [Export Administration] Regulations, no person may engage in the exportation of an item subject to both the Regulations and the ITR without authorization from OFAC. No OFAC authorization was obtained for the exports described herein. In so doing, Flowserve UK committed two violations of section 764.2(b) of the Regulations.

The problem with this, at least in terms of simple fairness, is that OFAC, which administers the ITR had already extracted a fine from Flowserve for this very violation of OFAC’s own regulations. When Congress upped the possible fines for export violations to $250,000, it is quite clear that it had no idea that the export agencies would engage in such piling on and that neither of the agencies made clear to Congress that they intended to engage in such behavior.

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Sep

20

BIS Dings Freight Forwarder for Failing to Check Entity List

Posted by Clif Burns at 6:56 pm on September 20, 2011

Category: BIS

Last week the Bureau of Industry and Security (“BIS”) issued a press release, announcing a $40,000 fine that Ram International, a St.-Louis-based freight forwarder, had agreed to pay in connection with two exports of tin scrap to Allied Trading Company in Karachi, Pakistan. Allied is on BIS’s entity list, and a license is required for all exports of items to Allied from the United States. There is, however, a presumption of approval for licenses for EAR99 items such as the tin scrap involved in this case. Neither he press release nor the charging documents disclose the value of the tin scrap that Ram exported.

Not all BIS export settlements have the honor of agency press releases announcing the settlements. It’s not clear why this relatively small settlement was made the subject of a press release other than, perhaps, to send a signal to freight forwarders the BIS is actively pursuing cases not only against the exporting companies but also against their freight forwarders, particularly where the freight forwarder hasn’t bothered to consult the BIS entity list prior to exporting. This should encourage freight forwarders to spend the, oh, five seconds or so it takes to fire up the Internet and to check that list. I’d imagine that there is software that could do that in even less time.

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Aug

17

White House Tries to Extend EAA … Again

Posted by Clif Burns at 8:55 pm on August 17, 2011

Category: BIS • Export Reform

While Washington is as empty as a turkey coop on Thanksgiving, the White House sent up to the abandoned halls of Congress its annual proclamation, under the International Emergency Economic Powers Act (“IEEPA”), declaring a continuation of the national emergency that is claimed to authorize the executive to extend unilaterally all the provisions of the now lapsed Export Administration Act (“EAA”). Without this annual exercise, everyone at the Bureau of Industry and Security (“BIS”) would have to pack up their desks and go home. Also, without this declaration you could freely export uranium enrichment centrifuges to Iran.

Of course, the extent of the President’s authority to, in effect, resurrect an expired legislative scheme that Congress has itself declined to resurrect is open to some degree of question. In the Micei International case, the D.C. Circuit held that the President did not have the authority to extend the direct review provisions of the EAA.

The only way to eliminate the whole question as to what parts, if any, of the EAA can be resuscitated by executive fiat is for Congress to pass export reform legislation. I am not holding my breath.

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