ExportLawBlog

Archive for the ‘DDTC’ Category

Mar

8

Did Undercover Agent Give Legal Lecture to Defendant on Export Law or Not?

Posted by Clif Burns at 10:07 am on March 8, 2017

ABOVE: Kolar Rahman

Several law enforcement officials have saidÂ to me that what often makes their jobs so easy is that many criminals are several forks short of a kitchen utensil drawer. Â With that in mind, we bring you the story ofÂ Kolar Rahman Anees Ur Rahman, who, if the criminal complaint is to be believed, was pretty stupid. Â But maybe not. Â You decide.

Mr. Rahman is an Indian national living in the UAE who just received five years probation in connection with a scheme to ship sniper rifles to Belarus. After an associate of Rahman’s contacted a gun manufacturer in the United States with a request to buy guns for Belarus, a federal undercover agent got in contact with Rahman in the UAE to continue the purchase negotiations. The undercover (or UCA in fedspeak)Â lured Rahman to Chicago, which was Rahman’s second mistake, the first of course having been trying to ship rifles from the US to Belarus in the first place.

Now what follows as described in the criminal complaint is astonishing, if true:

The UCA reminded RAHMAN that all of the .308 Caliber sniper rifles are exportÂ controlled in the U.S. by ITAR and could not be exported to certain countriesÂ without a license. The UCA reminded RAHMAN, due to the policy of denial inÂ place by the U.S. government against Belarus, that it was not possible to obtain theÂ required export licenses needed to legally export the .308 Caliber sniper rifles. TheÂ UCA explained that in order to export the firearms, they would need to makeÂ misrepresentations on the paperwork as to where the rifles would be shipped.Â RAHMAN informed the UCA he understood and still wanted to continue with theirÂ business transaction. The UCA informed RAHMAN he wanted to make sureÂ RAHMAN understood the risks and that they would both go to jail if they wereÂ caught illegally exporting the rifles and ammunition. RAHMAN informed theÂ UCA he understood the risk and that he desired to complete their businessÂ transaction as planned.

Seriously? This lengthy lecture on the law didn’t set off alarm bells, warning signals, blaring sirens, flashing lights and abject fear in Rahman? What real criminal ever gives a lengthy lecture to his associates about criminal law before embarking on the planned conduct? “Hey, Rufus, ya know robbing banks is illegal, right? And if we carry guns the penalty is increased to 30 to life? If we do this, we can both go to jail for at least thirty years or more. You know that, right? Speak up. I can’t hear ya. Okay, so you are absolutely, positively certain without any equivocation that you still want to rob this bank and you’re doing so of your own free will even though you might wind up in jail for a very long time? Don’t nod, Rufus, I need to hear you say yes.”

The UCA, if he in fact said all this, was making sure he could establish the necessary criminal intent for an export violation. This is critical where an Indian national living in the UAE might not know the ins and outs of U.S. export laws or about the U.S. arms embargo on Belarus. (I bet even a bunch of Americans don’t know about the Belarus embargo.) But you have to wonder why Rahman when (and if) he got this five-minute spiel on U.S. law didn’t run out the door of the hotel room in Chicago and hop on the next flight back to the UAE.

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Mar

1

Assassination In Malaysia Leads To Calls to Redesignate DPRK As A Terrorist State

Posted by Clif Burns at 9:14 pm on March 1, 2017

Category: BIS • DDTC • North Korea Sanctions

Kim Jong Un Smoking via KCNA [Fair Use] The assassination by the Norks of Kim Jong Un’s brother in a Malaysian airport with the help of gullible stooges and some VX nerve agent has reignited the debate as to whether the State Department should redesignate the DPRK as a state sponsor of terrorism. The DPRK was first put in the list after it bombed a Korean Air Flight in 1987, killing 115 people. The country was removed in 2008 in return for shutting down its plutonium plant and permitting inspections.

In order to designate a country as a state sponsor of terrorism, a determination must be made that the country “repeatedly provided support for acts of international terrorism.” See, e.g., section 6(j) of the (zombie) Export Administration Act. None of the statutes that invoke that phrase define “acts of international terrorism,” although section 40(d) of the Arms Export Control Act states that the term includes activities that “aid or abet the efforts of an individual or group to use â€¦ chemical, biological, or radiological weapons.” I suppose that might cover the murder of an individual with a chemical weapon in an airport, although terrorism seems more readily to mean an act that indiscriminately targets multiple civilians in order to instill fear in a population or community.

Advocates of redesignation haveÂ argued that the cyber attack on Sony (in connection with its distribution of the hilarious and decidedly anti-Nork film The Interview) and other assassinations abroad demonstrate repeated acts of terrorism. But again, it’s hard to argue that these acts, while reprehensible, are designed to instill fear in a community.

In any event, the redesignation would be most symbolic. Once designated, U.S. law prohibits arms sales, which are already prohibited. Licenses would be required for certain specified goods, but section 746.4 of the EAR already requires licenses for all items subject to the EAR other than food and medicine. Being designated as a state sponsor of terrorism means that under the Trade Sanctions and Export Reform Act of 2000 a one-year license is required for exports to that country of agricultural commodities, medicine or medical devices, but North Korea is explicitly exempted from this by section 7205(a)(2)

Given that the redesignation of the loathsome Norks would be mostly symbolic, it seems to be a bad idea to torture the definition of “international terrorism” to include computer hacking and individual murders to get there.

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Feb

21

Unhelpful Suggestion of the Day

Posted by Clif Burns at 6:36 pm on February 21, 2017

Category: BIS • CCL • Customs • DDTC • HTSUS • USML

Jardins Tuliere [sic] Statue by Eksley [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/dRYGik [cropped]

An interesting articleÂ [subscription required] in the Journal of Commerce reports survey results indicating that one-third of all U.S. e-commerce merchants report that they have incurred fines and delays from regulatory agencies in connection with their imports and exports. Â Within that group, 29 percent of the companies surveyed stated that they had been subject to fines in connection with cross-border shipments. With respect to delays, they cited the Bureau of Industry and Security, and the Directorate of Defense Trade Controls, at 32 percent and 30 percent, respectively.Â That’s a surprising figure by any measure, if true and representative.

But more astonishing and surprising is the suggestion that the JoC article author proposes to fix this:

The task of ensuring trade compliance is also becoming more difficult, as 48 percent said they now do business in more than 50 countries.Trade regulations are constantly increasing and growing, necessitating agile and adept global trade management platforms, empowered by a combination of technology, trade compliance intelligence, and automation.

These systems can help properly classify goods based on descriptions from product catalogs, country of export, and country of import. Strong and reliable classification can help avoid hang-ups at Customs agencies. â€¦ In addition to helping avoid run-ins with these agencies, automation is helpful because it allows shippers to track the costs and length of these delays, allowing for better forecasting and business planning.

Don’t get me wrong, automation is often a good idea. But to suggest that the HTSUS, USML Categories or ECCN numbers can be assigned to a product through automation is, well, preposterous. It is something that can only be suggested by someone who has never looked at the USML, the CCL or the HTSUS. Maybe this will be possible sometime in the future when cars fly and robots are butlers. But right now, it’s not a feasible solution.

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Nov

30

Maybe There’s a Good Idea Lurking in Tom Fox’s Stealth Advertorial

Posted by Clif Burns at 4:44 pm on November 30, 2016

Category: BIS • Civil Penalties • Compliance Programs and Procedures • Criminal Penalties • DDTC • FCPA • OFAC

Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]

Over at the excellent FCPA Compliance & Ethics Blog, Tom Fox has a plug for email monitoring software disguised as a blog post. Â He’s even doing a “webinar” with the software developers â€” completely free, of course â€” Â presumably to push the sales of this product.

Notwithstanding what might not be his completely objective take on this software product, Fox raises a good issue that might warrant consideration for incorporation into your export compliance program. Â I assume everyone reading my blog and this post is acutely aware that a robust compliance plan is the best insurance against getting taken to the cleaners by the DoJ and the export agencies after it is discovered that an employee in your Hamburg office has been shipping Â your U.S. origin night vision to Iran. Â But what does your compliance program do proactively to ferret out such problems? Â Fox suggests that companies should consider periodic email sweeps for keywords

The concept is straightforward; at regular intervals you can sweep through your company email database for identified key words that can be flagged for further investigation, if required.

So, should you consider sweeping all emails for keywords such as “Iran” or “Syria”? What other keywords might help pinpoint export compliance problems? “Jail”? “Orange Jumpsuit”? “Export License,” as in “let’s avoid fussing with that stupid export license requirement”? Are there keywords that can identify times when employees say something like “Call me, since we shouldn’t put this in writing”?

While I think such an approach is a nice shiny bauble that can be dangled in front of prosecutors and enforcement agencies and therefore is worth considering, I also wonder whether such sweeps will actually be effective in detecting violations. First, in my experience, most of the problems come from sales employees outside the United States who don’t think U.S. laws should interfere with their commissions. Foreign privacy laws, particularly in the E.U., often pose barriers to rifling through foreign employees’ emails. Second, in my experience, employees, particularly those with mischief in their hearts, are much too savvy to talk openly in emails about their transshipment schemes. They almost always use code of some kind to conceal what they are up to. These employees and their code words are normally not clever enough to fool prosecutors, but those code words â€” like “the country we discussed” or “Middle Earth” â€” will easily evade keyword email sweeps.

Any thoughts on this? Share your experiences (anonymously if you wish) in the comments section.

Photo Credit: Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]. Copyright 2003 twitter.com/mattwi1s0n

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Oct

12

DOJ to Exporters: Confession Is Good for the Soul

Posted by Clif Burns at 9:40 pm on October 12, 2016

Category: BIS • Criminal Penalties • DDTC • OFAC • Voluntary Disclosures

Department of Justice by Ryan J. Reilly [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/76Kjf9 [cropped] Apparently the National Security Division at DOJ had a bunch of interns this summer with nothing to do, because this is the only conceivable explanation for the mostly risible “Guidance Regarding Voluntary Disclosures” which the NSD released on October 2. To set the tone for a further discussion of the substance of this Guidance, let’s start with a howler in the Guidance itself. Even if this guidance was written in large part, as it must have been, by eager interns, one would think that a grown-up lawyer would have reviewed this for substance. And, presumably, that grown-up lawyer whose job is to send real people to real jails would understand the laws that he or she is enforcing, right? So how do you explain this statement in the Guidance?

U.S. sanctions regimes and the Department of Commerceâ€™s Export Administration Regulations are currently enforced through IEEPA.

Apparently, no one in the NSD has ever heard of the Trading with the Enemies Act which, as most of this blog’s faithful readers will know, is the statutory basis for the Cuba sanctions and their enforcement. Â This is pretty embarrassing mistake about pretty elementary facts.

The thrust of the Guidance is an interagency power grab by which DOJ wants to take away the first responsibility for review of voluntary disclosures from OFAC, DDTC and BIS. The guidance states that voluntary disclosures should be made to the Counterintelligence and Export Section of NSD when the exporter learns that a violation “may have been willful.” Specifically, the Guidance says:

Ordinarily, when an organization voluntarily self-discloses violations of U.S. exportÂ controls and sanctions, it presents its VSD to the appropriate regulatory agency under theÂ procedures set forth in the agencyâ€™s regulations. … It is not the purpose of this Guidance to alterÂ that practice. However, as discussed further below, when an organization, including its counsel, becomes aware that the violations may have been willful, it should within a reasonably prompt time also submit a VSD to CES.

Actually the purpose is precisely to alter that practice. Remember that the criminal violations involved are violations of the agency regulations themselves. That gives the relevant agencies, and not the DOJ, the principal expertise in determining if a violation has occurred and if it was willful.

The practice until now has been to disclose violationsÂ to the relevant agency or agencies with the understanding that the agenciesÂ could, if warranted, refer the matter to the DOJ. Once the referral was made, Â the prior agency disclosure and continued cooperation with the DOJ investigation would be the basis for credit by the DOJ. No longer. A separate disclosure to DOJ must be made without regard to an agency referral and, if not, the agency disclosure becomes irrelevant to the exercise of prosecutorial discretion if a subsequent referral occurs.

One of the hypotheticals discussed in the Guidance provides ample reason as to why DOJ, which clearly does not understand many of the basics of export control law, should not be usurping the primary role of OFAC, BIS, and DDTC, in export enforcement. In that hypothetical a foreign subsidiary of a U.S. corporation exports U.S. origin items in violation of BIS regulations. Without any suggestion of U.S. participation, the Guidance suggests that the parent would be offered an NPA by DOJ premised on payment of a criminal fine.

However, BIS rules, which have to be the basis of any prosecution in such a case, do not support a theory of vicarious liability by parent corporations. If the parent company did not export the items it could only be held liable, under section 764.2, for causing, aiding or abetting the export. That’s why in the recent Alcon Laboratories case, BIS held the U.S. parent liable for its exports to Iran but not for the exports of its Swiss subsidiary; those exports served only as a basis for a penalty against the Swiss subsidiary.

One last knee-slapper from the Guidance deserves mention. In another hypothetical, the Guidance says this:

Alert customs officers notice a bulky package within a container on a ship at a U.S. port bound to leave on a lengthy voyage overseas. The package contains ITAR-controlled commodities â€¦

Because, you see, all bulky packages are suspicious and probably contain export controlled items. Just remember that when you send a birthday present to your aunt in Slovenia — make sure its just a small package in order to avoid scrutiny by CBP on the way out.

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